Jay Bharat Dyg. & Ptg. Mills Pvt.Ltd., Surat V. The Dy. CIT., Circle-1(1)(2), Surat

ITA 1387/AHD/2016

• Counselvise Citation: [2019] 111 COUNSELVISE.COM (IT) 9893 (ITAT-SURAT)
• Duration Of Justice: 3 year(s) 4 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 23-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Transfer pricing

Judgement Text

JAY BHARAT DYG. & PRTG. MILLS PVT. LTD., VS. DCIT, CIR-1(1)(2), SURAT/ITA NO.1387/AHD/2016 FOR A.Y. 2009-10 PAGE 1 OF 6 , , IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH, SURAT BEFORE SHRI AMARJIT SINGH, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER . . ./ I.T.A NO.1387/AHD/2016 [ [ / ASSESSMENT YEAR: 2009-10 JAY BHARAT DYEING & PRINTING MILLS PVT. LTD., P-126, KADODARA CHAR RASTA, SURAT 394 327. [PAN: AAACJ 7428 C] V S. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1(1)(2), SURAT 395002. / APPELLANT /RESPONDENT [ /ASSESSEE BY SHRI RASESH SHAH CA /REVENUE BY MRS. ANUPAMA SINGLA SR.DR / DATE OF HEARING: 21.10.2019 /PRONOUNCEMENT ON: 10.12.2019 /O R D E R PER O.P.MEENA, AM: 1. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD.COMMISSIONER OF INCOME TAX(APPEALS)-1, SURAT DATED 31.03.2016 FOR THE ASSESSMENT YEAR 2009-10. 2. GROUNDS RAISED BY THE ASSESSEE READ AS UNDER: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THE LEARNED CIT(A) HAS ERRED IN DIRECTING ASSESSING OFFICER TO GRANT PARTIAL DEDUCTION U/S. 80IA(4)(IV) BY WORKING OUT THE TOTAL REVENUE/SALES OF POWER UNIT SOLD TO PROCESSING DIVISION AT THE RATE OF RS. 3.85/- PER UNIT INSTEAD OF AVERAGE MARKET RATE OF RS. 5.41/- PER UNIT WHICH IS LESS THAN THE RATE CHARGED BY DAKSHIN GUJARAT VIJ CO. LTD. IN RESPECT OF EXCESS ELECTRICITY CONSUMED AND PURCHASED BY THE ASSESSEE FROM THE SAID COMPANY. JAY BHARAT DYG. & PRTG. MILLS PVT. LTD., VS. DCIT, CIR-1(1)(2), SURAT/ITA NO.1387/AHD/2016 FOR A.Y. 2009-10 PAGE 2 OF 6 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THE LEARNED CIT(A) HAS ERRED IN NOT FOLLOWING HIS OWN EARLIER YEARS DECISION IN GRANTING THE FULL DEDUCTION U/S. 80IA(4)(IV) AS CLAIMED BY THE ASSESSEE BY WRONGLY HOLDING THAT PRINCIPLE OF RES JUDICATA IS NOT APPLICABLE IN INCOME TAX PROCEEDINGS WHEN HE HIMSELF DISCUSSED THE ISSUE IN HIS EARLIER APPELLATE ORDER FOR A.Y. 2008-09 IN DETAIL EVEN ON ASPECT OF CHARGING THE PRICE PER UNIT FROM THE PROCESSING DIVISION AND WHEN THE DEDUCTION U/S. 80IA(4)(IV) HAS ALSO ALLOWED IN FULL AT ASSESSMENT STAGE N A.Y. 2011-12 AND A.Y. 2012-13. 3. IT IS THEREFORE PRAYED THAT DEDUCTION U/S. 80IA(4)(IV) AS CLAIMED BY THE ASSESSEE MAY PLEASE BE ALLOWED. 3. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSEE HAS FILED ITS RETURN OF INCOME FOR A.Y. 2009-10 DECLARING THE TOTAL INCOME OF RS.1,50,37,250/- ON 26.09.2009 AND REVISED THE SAME ON 01.06.2010 WHEREIN ASSESSEE REVISED ITS INCOME TO RS.35,13,040/- AFTER CLAIMING THE DEDUCTION U/S.80IA(4) OF RS.1,15,24,212/-. THE ASSESSING OFFICER(AO) VIDE ORDER DATED 20.12.2011 DISALLOWED THE DEDUCTION OF RS.1,15,24,212/-, THOUGH, THE AO WAS SATISFIED THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S. 80IA(4) AS ASSESSEE IS ENGAGED IN THE BUSINESS OF POWER GENERATION. HOWEVER, THE AO DISALLOWED THE DEDUCTION U/S. 80IA(4) RS.1,15,24,212/- ON THE GROUND THAT UNOBSERVED DEPRECIATION AND BUSINESS LOSS OF THE ELIGIBLE UNIT PERTAINING TO THE PERIOD PRIOR TO INITIAL ASSESSMENT YEAR IS REQUIRED TO BE CARRIED FORWARD ON NOTIONAL BASIS TO SUBSEQUENT YEARS FOR SET OFF AGAINST THE PROFIT ON ELIGIBLE UNIT. 4. THE LD.CIT(A) HAS ALLOWED THE CLAIM OF THE ASSESSEE IN THE SET-ASIDE PROCEEDINGS. HOWEVER, THE LD.CIT(A) OBSERVED THAT THE ASSESSEE HAS ADOPTED RS.5.36 PER UNIT AS MARKET RATE POWER UNIT TRANSFERRED TO ITS PROCESSING UNITS FOR WHICH CREDIT WAS ALLOWED BY GUJARAT ELECTRICITY BOARD(GEB), HOWEVER WHILE ARRIVING AT MARKET RATE OF 5.24 OR 5.64 AS THE JAY BHARAT DYG. & PRTG. MILLS PVT. LTD., VS. DCIT, CIR-1(1)(2), SURAT/ITA NO.1387/AHD/2016 FOR A.Y. 2009-10 PAGE 3 OF 6 CASE MAY BE THE ASSESSEE HAS WRONGLY CONSIDERED CERTAIN CHARGES I.E. TIME OF USE CHARGES @0.75 PER UNIT, FUEL COST ADJUSTMENT CHARGES @0.91 PER UNIT, 15% ELECTRICITY DUTY AND DEMAND CHARGES ETC., OVER AND ABOVE RS.3.85 PER UNIT AS THE ENERGY CHARGES. HOWEVER, THE DECISION OF ITAT RELIED BY THE ASSESSEE DOES NOT SAY THAT RATES AT WHICH POWER WAS PURCHASED BY THE ASSESSEE SHOULD BE ADOPTED AS MARKET VALUE WHO HAS NOT SPECIFIED AS TO WHAT COMPONENT SHOULD BE CONSIDERED WHILE ARRIVING AT SUCH RATE. THEREFORE, THE ASSESSEE COMMITTED AN ERROR IN ADOPTING HIGHER VALUE INSTEAD OF ADOPTING BASIC PRICE OF ENERGY I.E. RS.3.85 PER UNIT WHICH IS THE REAL ARMS LENGTH PRICE AND THEREFORE THE AO WAS DIRECTED TO POINT OUT REVENUE / SALES OF POWER UNIT SOLD TO PROCESSING DIVISION ON THE BASIS OF RS.3.85 PER UNIT AND ACCORDINGLY DIRECTED THE AMOUNT OF ELIGIBLE DEDUCTION. THE LD.CIT(A) FURTHER OBSERVED THAT THE CONTENTION OF THE ASSESSEE THAT THE ISSUE THE TOTAL IN FAVOUR OF THE ASSESSEE BY HIS APPELLATE ORDER FOR A.Y. 2008-09 IS NOT CORRECT AS THE SUCH ISSUE WAS NEVER INVESTIGATED IN DETAIL AND WERE DECIDED SUMMARILY. FURTHER RES-JUDICATA IS NOT APPLICABLE IN INCOME TAX PROCEEDINGS, SO DECISION FOR A.Y. 2008-09 CANNOT HAVE ANY BEARING ON A.Y. 2009-10 ESPECIALLY, WHEN WITHOUT ITAT HAS RESTORED THE ISSUE OF QUANTIFICATION OF DEDUCTION TO THE FILE OF THE LD.CIT(A). 5. BEING AGGRIEVED, THE ASSESSEE HAS FILED THIS APPEAL BEFORE THIS TRIBUNAL. THE LD.COUNSEL SUBMITTED THAT THE LD.CIT(A) HAS ERRED IN JAY BHARAT DYG. & PRTG. MILLS PVT. LTD., VS. DCIT, CIR-1(1)(2), SURAT/ITA NO.1387/AHD/2016 FOR A.Y. 2009-10 PAGE 4 OF 6 TAKING RATE OF POWER UNIT SOLD TO PROCESSING DIVISION @3.85 PER UNIT INSTEAD OF RS.5.41 PER UNIT AS PER ASSESSEES VERSION AND THEREBY ERRED IN RESTRICTING THE DEDUCTION U/S. 80IA(4). THE LD.COUNSEL HAS RELIED ON THE FOLLOWING CASES WHEREIN IT WAS HELD THAT THE RATE ON WHICH GEB SUPPLIES THE POWER TO CONSUMERS INCLUDES DEMAND CHARGES THE TIME USE CHARGED AND OTHER CHARGES AND THEREFORE THE RATES CHARGED BY GEB ARE HIGHER THAN THE RATE ON WHICH POWER UNIT SUPPLIES POWER TO THE GEB: CIT VS. ALEMBIC LIMITED TAX APPEAL NO.1249 OF 2014V (GUJ HC) CIT VS. SHAH ALLOYS LIMITED TAX APPEAL NO.2092 OF 2010 (GUJA HC) GARDEN SILK MILLS LTD. VS. ADD. CIT (2013) 35 CCH 0135 (AHD. TRIB) WEST COAST PAPER MILLS LTD., VS. ADD. CIT (2014) 33 ITR 0560 (MUM TRIB.) DCW LTD., VS. ADD. CIT (2010) 37 SOT 0322 (MUM TRIB.) 6. FURTHER, THE LD.CIT(A) HAS ALLOWED FUEL CLAIM IN THE PRECEDING YEAR FOR A.Y. 2008-09 AND HAS WRONGLY HELD THAT RES JUDICATA IS NOT APPLICABLE THE INCOME TAX PROCEEDINGS WHEN HE HIMSELF DISCUSSED THE ISSUE IN HIS EARLIER PART OF ORDER FOR A.Y. 2008-09 AND DETAILS EVEN ON ASPECT OF CHARGING THE PRICE PER UNIT FROM THE PROCESSING DIVISION AT THE BOTTOM OF PARA 6.15. IT WAS FURTHER SUBMITTED THAT THE DEDUCTION U/S. 80IA(4) HAS BEEN ALLOWED IN FUEL IN THE SUBSEQUENT ASSESSMENT SUCH IN A.Y. 2011- 12 AND A.Y. 2012-13 MADE UNDER SCRUTINY. 7. PER CONTRA, THE LD.SENIOR DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER OF LD.CIT(A). 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE GEB PURCHASES POWER UNIT @2.6, JAY BHARAT DYG. & PRTG. MILLS PVT. LTD., VS. DCIT, CIR-1(1)(2), SURAT/ITA NO.1387/AHD/2016 FOR A.Y. 2009-10 PAGE 5 OF 6 PURCHASE PRICED FIXED AT WHICH GEB PURCHASED POWER FROM ITS SUPPLIERS FOR ONWARD DISTRIBUTION TO ITS CUSTOMERS AND GEB FURTHER INCURS EXPENSES ON TRANSACTIONS, MAINTENANCE COST, OVERHEAD ETC., WHICH ARE COST COMPONENT INCURRED BY GEB IN ADDITION TO RS.2.60 PER UNIT. FURTHER, THE ASSESSEE HAS ARRIVED AT A MARKET RATE OF 5.41 PER UNIT ON THE BASIS THAT CERTAIN CHARGES I.E. TIME OF USE CHARGES @ 0.75 PER UNIT, FUEL COST ADJUSTMENT CHARGES @ 0.91 PER UNIT 15% ELECTRICITY DUTY AND DEMAND CHARGES OVER AND ABOVE RS.3.85 PER UNIT AS ENERGY CHARGES. THUS, THE MARKET RATE ADOPTED BY THE ASSESSEE GETS SUPPORT FROM VARIOUS DECISION OF ITAT AS RELIED ON BY THE LD.COUNSEL MENTIONED ABOVE. WE, FURTHER FIND THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF CIT(A) FOR A.Y. 2008-09. FURTHER, THE SUCH DECISION OF THE ITAT HAS BEEN UPHELD BY THE ITAT IN ITA NO.800/AHD/2016 FOR A.Y. 2008-09 DATED 12.07.2019 VIDE PARA 9, 10 11 WHICH IS BEING REPRODUCED AS UNDER: 9. FURTHER, AT PARA NO.6.15 HAS NOTED THE FOLLOWING : I AGREE WITH THE CONTENTION OF THE LD.AR OF THE APPELLANT THAT THE HON'BLE ITAT HAS RESTORED THE MATTER TO UNDERSIGNED FOR A LIMITED ISSUED I.E.WHETHER ASSESSEE IS ENGAGED IN THE BUSINESS OF GENERATION OF POWER AND IF IT IS FOUND THAT THE ASSESSEE IS ENGAGED IN THE GENERATION POWER, THE CLAIM OF DEDUCTION IS TO BE ALLOWED AS PER LAW. THUS, THE SCOPE OF PRESENT PROCEEDINGS IS A LIMITED ONE. HOWEVER, IT IS SEEN THAT ON ISSUE OF NOTIONAL PROFIT EARNED IN RESPECT OF CAPTIVE POWER, THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE CASE LAWS REFERRED IN WRITTEN SUBMISSION DATED 21.12.2015. AS REGARDS TO RATES TO BE CHARGED ON TRANSFER OF POWER UNITS TO PROCESSING DIVISION OF THE ASSESSEE, THE AR OF THE ASSESSEE COULD SUCCESSFULLY DEMONSTRATED THAT RATES WERE AT MARKET RATE I.E. THE RATE CHARGED BY GEB FROM ASSESSEE FOR POWER UNITS PURCHASED BY THE ASSESSEE. HENCE, I AM SATISFIED WITH THE EXPLANATION OF THE AR OF THE ASSESSEE WHO COULD SATISFACTORILY ANSWERED THE QUERIES RAISED BY THE ERSTWHILE CIT(A), THOUGH THE SAME ARE NOT REQUIRED TO BE ANSWERED. HOWEVER, ON PROPRIETY OF THE MATTER, THE LD.AR DISCHARGED HIS ONUS. JAY BHARAT DYG. & PRTG. MILLS PVT. LTD., VS. DCIT, CIR-1(1)(2), SURAT/ITA NO.1387/AHD/2016 FOR A.Y. 2009-10 PAGE 6 OF 6 10. BEING AGGRIEVED, THE REVENUE FILED APPEAL BEFORE THIS TRIBUNAL, THE LD.CIT-DR SUPPORTED THE ORDER OF THE ASSESSING OFFICER. 11. PER CONTRA, THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN GROUND NO.2 THE REVENUE HAS RAISED THE POINT THAT ISSUE OF THE POWER GENERATION WAS NOT AT ALL EXAMINED BY THE LD.CIT(A) FOR THE YEAR UNDER CONSIDERATION. HOWEVER, THIS GRIEVANCE OF THE REVENUE IS NOT AT ALL TENABLE AS LD.CIT(A) HAS PASSED THE DETAILED SPEAKING ORDER ON THIS ISSUE EVEN THE ASSESSING OFFICER HAS ACCEPTED OF THIS FACT IN THE STATEMENT OF FACTS MENTIONED BY HIM. THEREFORE, THIS GROUND OF REVENUE IS REQUIRED TO BE REJECTED. 9. THEREFORE, RESPECTFULLY FOLLOWING THE SAME, THE REVENUE IS DIRECTED TO ALLOW THE FUEL DEDUCTION CLAIMED U/S.80IA(4)(IV) OF THE ACT, ACCORDINGLY, THE APPEAL OF THE ASSESSEE ON THE ABOVE GROUND IS ALLOWED. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. 11. ORDER PRONOUNCED IN THE OPEN COURT ON 10-12-2019. SD/- SD/- (AMARJIT SINGH) (O.P.MEENA) ( /JUDICIAL MEMBER) ( /ACCOUNTANT MEMBER) / SURAT, DATED : 10 TH DECEMBER , 2019/ S.GANGADHARA RAO, SR.PS COPY OF ORDER SENT TO- ASSESSEE/AO/PR. CIT/ CIT (A)/ ITAT (DR)/GUARD FILE OF ITAT. BY ORDER / / TRUE COPY / / ASSISTANT REGISTRAR, SURAT