DCIT, CHENNAI V. Chettinad Cement Corporation Ltd., CHENNAI

ITA 1492/CHNY/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 7598 (ITAT-CHENNAI)
• Duration Of Justice: 9 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-03-2016
• Appeal Filed By: Department
• Bench Allotted: C
• Next Hearing Date: 14-01-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 22-06-2015
• Court: TRIBUNAL
• Department Lawyers: PATHLAVATH PEERYA
• Assessee Lawyers: A S SRIRAMAN
• Keywords: Depreciation; Additional depreciation; Proportionate interest
• Section: 37

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : CHENNAI . . . , . ! , ' # $ [ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ] ./ I.T.A.NO.1492/MDS/2015 / ASSESSMENT YEAR : 2011-12 THE DY. COMMISSIONER OF INCOME-TAX LARGE TAXPAYER UNIT-2 CHENNAI VS. M/S CHETTINAD CEMENT CORPORATION LTD 4 TH FLOOR, RANI SEETHAI BUILDINGS NO.603, ANNA SALAI CHENNAI 600 006 [PAN AAACC 3130A ] ( %& / APPELLANT) ( '(%& /RESPONDENT) / APPELLANT BY : SHRI PATHLAVATH PEERYA, CIT /RESPONDENT BY : SHR I A.S. SRIRAMAN, ADVOCATE / DATE OF HEARING : 14 - 01 - 2016 ! / DATE OF PRONOUNCEMENT : 24 - 0 3 - 2016 / O R D E R PER N.R.S.GANESAN, JUDICIAL MEMBER THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-VII, CHEN NAI, DATED 17.4.2015 AND PERTAINS TO ASSESSMENT YEAR 2011-12. 2. SHRI PATHLAVATH PEERYA, LD. DEPARTMENTAL REPRESENTA TIVE SUBMITTED THAT THE FIRST ISSUE ARISES FOR CONSIDERA TION IS DEDUCTION U/S 80IA OF THE ACT ON THE POWER GENERATED FROM CAPTIVE POWER PLANT. ITA NO. 1492/15 :- 2 -: ACCORDING TO THE LD. DR, THE CAPTIVE POWER PLANT CA NNOT BE TREATED AS A SEPARATE INDUSTRIAL UNDERTAKING FOR THE PURPOSE O F ALLOWING DEDUCTION U/S 80IA OF THE ACT. THE LD. DR FURTHER SUBMITTED THAT THE INDUSTRIAL UNDERTAKING SHALL BE SEPARATE AND DISTINCT UNDERTAK ING FOR THE PURPOSE OF CLAIMING DEDUCTION U/S 80IA OF THE ACT. THE ASS ESSEE-COMPANY CONSUMED THE POWER GENERATED FOR ITS OWN USE, THERE FORE, THE CAPTIVE POWER PLANT CANNOT BE TREATED AS A SEPARATE INDUSTR IAL UNDERTAKING. THE LD. DR FURTHER SUBMITTED THAT THE CAPTIVE POWER PLANT IS SET UP ONLY TO MEET THE POWER REQUIREMENT OF THE MAIN BUSI NESS ACTIVITIES AND IT IS NOT THE BUSINESS OF THE ASSESSEE TO GENE RATE POWER, THEREFORE, THE ASSESSEE IS NOT ENTITLED FOR DEDUCT ION U/S 80IA OF THE ACT. 3. ON THE CONTRARY, SHRI A.S.SRIRAMAN, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE GENERATES POW ER FOR CAPTIVE CONSUMPTION BY A SEPARATE UNIT, THEREFORE, THE UNIT WHICH GENERATES THE POWER IS ELIGIBLE FOR DEDUCTION U/S 80IA. REF ERRING TO THE DECISION OF THIS TRIBUNAL IN THE CASE OF PRABHU SPINNING MIL LS P. LTD. VS DCIT, [2012] 19 ITR (TRIB) 106, THE LD. COUNSEL SUBMITTED THAT CAPTIVE CONSUMPTION OF THE POWER GENERATED BY THE ASSESSEE FROM ITS OWN PLANT WOULD BE ELIGIBLE FOR DEDUCTION U/S 80IA OF THE ACT. THE LD. COUNSEL FURTHER SUBMITTED THAT THE ASSESSEE OBTAINE D ALL THE RELEVANT APPROVALS FROM CONCERNED AUTHORITIES FOR GENERATING ELECTRICITY. ITA NO. 1492/15 :- 3 -: THEREFORE, ACCORDING TO THE LD. COUNSEL, THE ASSES SEE IS ELIGIBLE FOR DEDUCTION U/S 80IA OF THE ACT. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE ALSO GONE THROUGH THE PROVISIONS OF SEC. 80IA OF THE ACT. SE C. 80IA PROVIDES FOR DEDUCTION FROM THE PROFITS AND GAINS DERIVED FROM A N INDUSTRIAL UNDERTAKING ON THE BUSINESS OF DEVELOPING, OPERATIN G AND MAINTAINING ANY INFRASTRUCTURE FACILITY. ELECTRICITY IS AN INF RASTRUCTURE FACILITY WHICH WAS GENERATED BY THE ASSESSEE. IN THE CASE BEFORE US, THE ASSESSEE CONSUMED THE ELECTRICITY BY ITSELF. THEREFORE, THE REVENUE CONTENDS THAT THE UNIT WHICH GENERATES ELECTRICITY CANNOT BE CONSTRUED AS A SEPARATE INDUSTRIAL UNDERTAKING FOR THE PURPOSE OF ALLOWING DEDUCTION U/S 80IA OF THE ACT. THIS TRIBUNAL IS OF THE CONS IDERED OPINION THAT WHEN THE ASSESSEE GENERATES THE ELECTRICITY WHETHE R IT IS SOLD IN THE OPEN MARKET OR CONSUMED THE SAME FOR ITS OWN USE, T HE UNIT WHICH GENERATES ELECTRICITY HAS TO BE CONSTRUED AS AN IND EPENDENT AND SEPARATE UNDERTAKING AND ELIGIBLE FOR DEDUCTION U/ S 80IA. MERELY BECAUSE THE ASSESSEE CONSUMED ELECTRICITY BY ITSELF FOR ITS OWN MANUFACTURING ACTIVITY, THAT WILL NOT DISENTITLE TH E ASSESSEE FROM DEDUCTION U/S 80IA. THEREFORE, THIS TRIBUNAL DO N OT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A). ACCORDINGL Y, THE SAME IS CONFIRMED. ITA NO. 1492/15 :- 4 -: 5. THE NEXT GROUND OF APPEAL IS WITH REGARD TO ADDITIO NAL DEPRECIATION ON THE CAPTIVE POWER PLANT. 6. SHRI PATHLAVATH PEERYA, LD. DEPARTMENTAL REPRESENTA TIVE SUBMITTED THAT SEC. 32(1)(IIA) OF THE ACT WAS AMEND ED BY FINANCE ACT, 2012 WITH EFFECT FROM 1.4.2013 ENABLING THE ASSESS EE ENGAGED IN THE BUSINESS OF GENERATION OR GENERATION AND DISTRIBUTI ON OF POWER TO CLAIM ADDITIONAL DEPRECIATION. THE ASSESSMENT YEAR UNDER CONSIDERATION IS 2011-12. THEREFORE, ACCORDING TO THE LD. DR, THE ASSESSEE IS NOT ELIGIBLE FOR ADDITIONAL DEPRECIATION. 7. ON THE CONTRARY, SHRI A.S.SRIRAMAN, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE ADMITTEDLY GE NERATED ELECTRICITY BY INSTALLING POWER PLANT. THE ELECTRICITY GENERAT ED IN THE POWER PLANT WAS USED FOR THE ASSESSEES OWN MANUFACTURING ACTI VITY. THE CIT(A), AFTER REFERRING TO THE JUDGMENT OF THE APEX COURT I N THE CASE OF KARNATAKA POWER CORPORATION LTD, 247 ITR 268, FOUND THAT THE AMENDMENT MADE IN SEC. 32(1)(IIA) IS CLARIFICATORY IN NATURE, THEREFORE, APPLICABLE RETROSPECTIVELY. THE CIT(A) HAS ALSO P LACED HIS RELIANCE ON THE DECISION OF THE BANGALORE BENCH OF THIS TRIBUNA L IN DCIT VS HUBLI GOLD MINES CO. LTD, 26 ITR (TRIB) 600, AND FOUND TH AT THE ELECTRICITY GENERATED BY THE ASSESSEE WAS USED IN THE MANUFACT URING ACTIVITY OF THE ASSESSEE, THEREFORE, THE AMENDMENT TO SEC. 32( 1)(IIA) BY FINANCE ITA NO. 1492/15 :- 5 -: ACT, 2012, HAS TO BE TREATED AS CLARIFICATORY IN NA TURE AND HENCE, THE ASSESSEE IS ELIGIBLE FOR ADDITIONAL DEPRECIATION. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE CAREFULLY GONE THROUGH THE PROVISIONS OF SEC. 32(1)(IIA) OF THE AC T. THE PLANT INSTALLED BY THE ASSESSEE WAS IN FACT COMMENCED ITS OPERATIO N AND GENERATED ELECTRICITY. THE QUESTION ARISES FOR CONSIDERATION IS WHETHER THE POWER PLANT INSTALLED BY THE ASSESSEE IS ELIGIBLE FOR AD DITIONAL DEPRECIATION U/S 32(1)(IIA) OF THE ACT OR NOT? THIS TRIBUNAL I S OF THE CONSIDERED OPINION THAT THE NEW MACHINERY INSTALLED BY THE AS SESSEE HAS GENERATED ELECTRICITY WHICH WAS IN TURN USED BY THE ASSESSEE FOR MANUFACTURING ACTIVITY. THEREFORE, THE POWER GENER ATED BY THE ASSESSEE WAS USED FOR PRODUCTION OF AN ARTICLE OR T HING AS PROVIDED IN SEC. 32(1)(IIA) OF THE ACT. THEREFORE, THE CIT(A) HAS RIGHTLY ALLOWED THE CLAIM OF THE ASSESSEE BY PLACING RELIANCE ON T HE DECISION OF THE BANGALORE BENCH OF THIS TRIBUNAL IN HUBLI GOLD MINE S CO. LTD (SUPRA). THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE W ITH THE ORDER OF THE LOWER AUTHORITY. ACCORDINGLY, THE SAME IS CONFIRME D. 9. THE NEXT GROUND OF APPEAL IS WITH REGARD TO DEPRECI ATION ON THE BUILDING. ITA NO. 1492/15 :- 6 -: 10. SHRI PATHLAVATH PEERYA, THE LD. DR SUBMITTED THAT T HE ASSESSEE CLAIMED DEPRECIATION ON THE BUILDING INCLU DED IN THE CAPTIVE POWER PLANT @ 15%. HOWEVER, THE ASSESSING OFFICER ALLOWED DEPRECIATION @ 10% BY TREATING THE SAME AS BUILDING . THE ASSESSEE CLAIMS BEFORE THE LOWER AUTHORITIES THAT THE BUILDI NG WHICH FORMS PART OF THE CAPTIVE POWER PLANT IS A PLANT, THEREFORE, E LIGIBLE FOR HIGHER DEPRECIATION @ 15%. THE CIT(A) BY PLACING RELIANCE ON THE ORDER OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMEN T YEAR 2005-06 IN I.T.A.NO. 1577/MDS/2008 DATED 30.9.2010, FOUND THAT THE POWER GENERATING SYSTEM IS A PLANT AND ELIGIBLE FOR HIGHE R DEPRECIATION. IN FACT, THIS TRIBUNAL PLACED ITS RELIANCE ON THE JUDG MENT OF THE APEX COURT IN THE CASE OF CIT VS KARNATAKA POWER CORPORA TION, 247 ITR 268. ACCORDING TO THE LD. DR, THE BUILDING HAS TO BE CON SIDERED SEPARATELY AND NOT AS FORMING PART OF THE POWER PLANT, THEREFO RE, THE BUILDING WHICH FORMS PART OF THE POWER PLANT CANNOT BE CONST RUED AS A PLANT, HENCE, THE ASSESSING OFFICER HAS RIGHTLY RESTRICTED THE DEPRECIATION AT 10%. 11. ON THE CONTRARY, SHRI A.S.SRIRAMAN, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE BUILDING WHICH FORMS PA RT OF THE POWER PLANT CANNOT BE SEGREGATED FOR THE PURPOSE OF COMPU TING CLAIM OF DEPRECIATION. ACCORDING TO THE LD. COUNSEL, THE BU ILDING HAS TO BE NECESSARILY TREATED AS FORMING PART OF THE POWER PL ANT. THE BUILDING ITA NO. 1492/15 :- 7 -: ALONE CANNOT GENERATE ELECTRICITY. UNLESS AND UNTI L THE BUILDING FORMS PART OF THE POWER PLANT, THE ELECTRICITY CANNOT BE GENERATED. THIS TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEA R 2005-06 BY AN ORDER DATED 30.9.2010, ALLOWED THE CLAIM OF THE AS SESSEE BY FOLLOWING THE JUDGMENT OF THE APEX COURT IN THE CASE OF KARNA TAKA POWER CORPORATION (SUPRA). 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. TH E ONLY QUESTION ARISES FOR CONSIDERATION IS WHETHER THE BUILDING FO RMING PART OF THE POWER PLANT IS ELIGIBLE FOR HIGHER RATE OF DEPRECIA TION @ 15% OR IT IS ELIGIBLE FOR DEPRECIATION ONLY @ 10% AS A BUILDING. AS RIGHTLY SUBMITTED BY THE LD. DR AND THE LD. COUNSEL FOR THE ASSESSEE THE VERY SAME ISSUE WAS EXAMINED BY THIS TRIBUNAL IN ASSESS EES OWN CASE FOR ASSESSMENT YEAR 2005-06. BY AN ORDER DATED 30.9.20 10 THIS TRIBUNAL BY PLACING ITS RELIANCE ON THE JUDGMENT OF THE APEX COURT IN THE CASE OF KARNATAKA POWER CORPORATION(SUPRA) FOUND THAT TH E ASSESSEE IS ELIGIBLE FOR HIGH DEPRECIATION IN RESPECT OF THE BU ILDING WHICH FORMS PART OF THE POWER PLANT. IN VIEW OF THE ABOVE, THI S TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A ). ACCORDINGLY, THE SAME IS CONFIRMED. ITA NO. 1492/15 :- 8 -: 13. THE NEXT GROUND OF APPEAL IS WITH REGARD TO PRIOR P ERIOD EXPENSES IN RESPECT OF FREEHOLD QUARRY LAND. 14. SHRI PATHLAVATH PEERYA, LD. DR SUBMITTED THAT THE A SSESSEE- COMPANY CLAIMED DEPRECIATION ON FREEHOLD QUARRY LAN D. REFERRING TO THE NOTES FORMING PART OF THE ACCOUNTS, THE LD. DR POINTED OUT THAT THERE IS A CHANGE IN THE ACCOUNTING POLICY WHICH HA S RESULTED A REDUCTION IN PROFIT TO THE EXTENT OF ` 612.13 LAKHS WHICH INCLUDES AN AMOUNT OF ` 460.32 LAKHS PERTAINING TO EARLIER YEAR. AFTER C ONSIDERING THE CLAIM OF THE ASSESSEE THAT THE ASSESSEE-COMPA NY IS MINING IN AND AROUND DINDIGUL AND ARIYALUR FOR LIMESTONE QUARRIES , THESE LANDS WERE PURCHASED DURING THE PREVIOUS YEAR AND THE COMPANY WAS EXCAVATING THE LIMESTONE BEING THE RAW MATERIAL FOR PRODUCTION OF CEMENT. THE AMOUNT PAID BY THE ASSESSEE REPRESENT THE COST OF THE RAW MATERIAL. THE ASSESSING OFFICER, HOWEVER, FOUND THAT THE EXPE NDITURE CLAIMED BY THE ASSESSEE IS ELIGIBLE ONLY TO THE EXTENT WHICH PERTAINS TO THE CURRENT ASSESSMENT YEAR. THE CLAIM OF THE ASSESSE E TOWARDS DEPLETION OF LAND INCLUDES THE EXPENDITURE PERTAINE D TO EARLIER YEAR, THEREFORE, THE ASSESSING OFFICER HAS RIGHTLY DISALL OWED THE CLAIM WHICH PERTAINS TO EARLIER ASSESSMENT YEAR. 15. ON THE CONTRARY, SHRI A.S.SRIRAMAN, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THERE IS NO DISPUTE ABOUT T HE ALLOWABILITY OF ITA NO. 1492/15 :- 9 -: SUCH EXPENDITURE IN COMPUTING THE TAXABLE INCOME. THE ONLY OBJECTION OF THE DEPARTMENT IS THAT IT PERTAINS TO EARLIER AS SESSMENT YEAR, THEREFORE, IT CANNOT BE ALLOWED DURING THE YEAR UND ER CONSIDERATION. ACCORDING TO THE LD. COUNSEL, THE ASSESSEE MADE TH E CLAIM FOR THE FIRST TIME ON THE BASIS OF THE EXPERT COMMITTEE OPINION O F THE ICAI, THEREFORE, THE CONCEPT OF PRIOR PERIOD EXPENSES CAN NOT BE IMPUTED ON THE FACTS OF THIS CASE. THE LD. COUNSEL FURTHER CL ARIFIED THAT THE EXPENDITURE QUANTIFIED FOR THE FIRST TIME IN THE FI NANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION IS BASED ON THE GUIDELINES ISSUED BY THE ICAI. THE CLAIM MADE BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2011-12 IN RESPECT OF PULIYUR AND K ARIKKAL FACTORIES WAS ALLOWED BY THE ASSESSING OFFICER. ACCORDING TO THE LD. COUNSEL, THE CLAIM MADE BY THE ASSESSEE WITH REGARD TO DEPL ETION OF FREEHOLD LAND REFLECTS THE TRUE STATE OF AFFAIRS AS ON 31.3. 2011. ACCORDING TO THE LD. COUNSEL, THE DEPLETION VALUE OF THE LAND WAS QU ANTIFIED AS PER THE SUGGESTION MADE BY THE EXPERT COMMITTEE OF ICAI. I N FACT, THE EXPERT COMMITTEE GAVE ITS OPINION FOR THE FINANCIAL YEAR 2 010-11 RELEVANT TO ASSESSMENT YEAR 2011-12. THEREFORE, THE CLAIM MADE BY THE ASSESSEE ON THE BASIS OF THE EXPERT COMMITTEE SUGGESTION WAS RIGHTLY ALLOWED BY THE CIT(A). EVEN OTHERWISE, ACCORDING TO THE LD . COUNSEL, THE CLAIM OF THE ASSESSEE HAS TO BE ALLOWED U/S 37 OF THE A CT. ITA NO. 1492/15 :- 10 -: 16. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. TH E ASSESSEE- COMPANY, ADMITTEDLY, OWNS MINE LAND IN DINDIGUL AND ARIYALUR DISTRICTS. THE RAW MATERIAL FOR PRODUCTION OF CEMENT IS LIMEST ONE. IN FACT, THE ASSESSEE EXCAVATED THE LIMESTONE FROM THESE QUARRIE S. AFTER COMPLETE EXCAVATION OF MINING, THE LAND WOULD NOT BE USEFUL FOR ANY OTHER PURPOSE. THE COMPANY WAS, IN FACT, AMORTIZING THE VALUE OF THE LAND ON THE BASIS OF THE VALUE OF THE ACTUAL QUANTITY O F LIMESTONE MINED TO PROJECT THE TRUE FINANCIAL AFFAIRS. THE DEPLETION ON THE FREEHOLD LAND WAS DETERMINED ON THE BASIS OF THE LIME STONE ACTUA LLY EXCAVATED DURING THE RELEVANT PERIOD. THIS WAS DONE ON THE B ASIS OF THE EXPERT COMMITTEE SUGGESTION. THE CIT(A), AFTER CONSIDERIN G THE SUGGESTION MADE BY THE EXPERT COMMITTEE, FOUND THAT THE METHOD ADOPTED BY THE ASSESSEE REFLECTS THE TRUE STATE OF AFFAIRS AS ON 3 1.3.2011. UNDER THE SCHEME OF THE INCOME-TAX ACT, 1961, THE REAL INCOME SHALL BE SUBJECTED TO TAX. AFTER COMPLETION OF EXCAVATION A ND CONSIDERING THE USAGE OF THE LAND WHICH WAS SUBJECTED TO QUARRY FOR EXCAVATING LIMESTONE, THE CIT(A) FOUND THAT THE SUGGESTION MAD E BY THE EXPERT COMMITTEE OF ICAI REFLECTS THE TRUE STATE OF AFFAIR S OF THE ASSESSEE- COMPANY. THEREFORE, THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY. AS RIGHTLY FOUND BY THE CIT(A), ITA NO. 1492/15 :- 11 -: THE CLAIM OF THE ASSESSEE, EVEN OTHERWISE, HAS TO BE ALLOWED U/S 37 OF THE ACT. ACCORDINGLY, THE ORDER OF THE CIT(A) IS CONFIRMED. 17. THE NEXT GROUND OF APPEAL IS WITH REGARD TO DEDUCTI ON U/S 80IA OF THE ACT IN RESPECT OF WINDMILL. 18. SHRI PATHLAVATH PEERYA, LD. DR SUBMITTED THAT THE C IT(A) ALLOWED THE CLAIM OF THE ASSESSEE BY PLACING HIS R ELIANCE ON THE JUDGMENT OF THE MAERAS HIGH COURT IN THE CASE OF VE LAYUDHASWAMY SPINNING MILLS P. LTD VS ACIT, 340 ITR 477. THE LD . DR SUBMITTED THAT THE REVENUE FILED THE APPEAL SINCE THE SLP AGAINST THE JUDGMENT OF THE MADRAS HIGH COURT IN THE CASE OF VELAYUDHASWAMY SPI NNING MILLS P. LTD(SUPRA) IS PENDING BEFORE THE APEX COURT. 19. ON THE CONTRARY, SHRI A.S SRIRAMAN, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE JUDGMENT OF THE MADRAS HIGH COURT IS BINDING ON ALL AUTHORITIES. MOREOVER, THE CBDT HAS ACCEPTED THE JUDGMENT OF THE MADRAS HIGH COURT IN VELAYUDHASWAMY SPINNING MILLS P. LTD (SUPRA) AND INSTRUCTED ALL ITS OFFICERS TO W ITHDRAW THE APPEALS AGAINST THE JUDGMENT OF THE MADRAS HIGH COURT IN VE LAYUDHASWAMY SPINNING MILLS P. LTD (SUPRA). THEREFORE, THE CI T(A) HAS RIGHTLY ALLOWED THE CLAIM OF THE ASSESSEE U/S 80IA OF THE ACT. ITA NO. 1492/15 :- 12 -: 20. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. AD MITTEDLY, THE CIT(A) HAS ALLOWED THE CLAIM OF THE ASSESSEE BY FOLLOWING THE JUDGMENT OF THE MADRAS HIGH COURT IN VELAYUDHASWAMY SPINNING MI LLS P. LTD.(SUPRA). THE JUDGMENT OF THE MADRAS HIGH COURT IS BINDING ON ALL AUTHORITIES IN THE STATE OF TAMILNADU AND MERELY BE CAUSE THE SLP FILED BY THE REVENUE AGAINST THE JUDGMENT OF THE MADRAS H IGH COURT IS PENDING BEFORE THE APEX COURT, THAT CANNOT BE A REA SON TO TAKE A DIFFERENT VIEW. IT IS NOBODYS CASE THAT THE APEX COURT HAS STAYED OPERATION OF THE JUDGMENT OF THE MADRAS HIGH COURT IN THE ABOVESAID CASE. IN THOSE CIRCUMSTANCES, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE CIT(A) HAS RIGHTLY ALLOWED THE CLA IM OF THE ASSESSEE BY FOLLOWING THE JUDGMENT OF THE MADRAS HIGH COURT IN VELAYUDHASWAMY SPINNING MILLS P. LTD (SUPRA). THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A). ACCORDINGLY, THE SAME IS CONFIRMED. 21. THE NEXT GROUND OF APPEAL IS WITH REGARD TO DISALLO WANCE OF PROPORTIONATE INTEREST BETWEEN ELIGIBLE AND NON-ELI GIBLE UNIT IN COMPUTING DEDUCTION U/S 80IA OF THE ACT. ITA NO. 1492/15 :- 13 -: 22. SHRI PATHLAVATH PEERYA, LD. DR SUBMITTED THAT THE A SSESSING OFFICER DISALLOWED DEDUCTION U/S 80IA OF THE ACT O N THE GROUND THAT THE ASSESSEE HAS FAILED TO ALLOCATE PROPORTIONATE INTEREST EXPENDITURE TO 80IA UNITS. ACCORDING TO THE LD. DR, THE ASSE SSEE HAS OVERSTATED THE PROFIT OF 80IA UNIT WITHOUT ALLOCATING THE INTE REST EXPENDITURE. ACCORDING TO THE LD. DR FOR ALLOWING THE CLAIM OF D EDUCTION U/S 80IA, INTEREST EXPENDITURE HAS TO BE PROPORTIONATELY ALLO CATED ON THE BASIS OF THE SALES TURNOVER. THEREFORE, THE ASSESSING OFFIC ER HAS PROPORTIONATELY DISALLOWED THE INTEREST ON THE LOAN AVAILED BY THE ASSESSEE FOR THE CEMENT PLANT. THE ONLY CLAIM OF T HE ASSESSEE IS THAT LOAN WAS NOT AVAILED FOR POWER PLANT PROJECT. ACCO RDING TO THE LD. DR, IN THE ABSENCE OF ANY NEXUS OF UTILIZATION OF BORRO WED FUNDS, THE CIT(A) IS NOT CORRECT IN SAYING THAT THE LOAN BOR ROWED BY THE ASSESSEE WAS NOT USED FOR POWER PLANT PROJECT. THE REFORE, ACCORDING TO THE LD. DR, THE PROPORTIONATE INTEREST HAS TO BE DISALLOWED WHILE COMPUTING DEDUCTION U/S 80IA OF THE ACT. 23. ON THE CONTRARY, SHRI A.S.SRIRAMAN, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS FILED THE DETAILS OF THE INTEREST EXPENDITURE BEFORE THE ASSESSING OFFICER. ACCORDING TO THE LD. COUNSEL, ALL THE SECURED LOANS WERE AVAILED BY THE COMPANY FOR CEMENT PLANT. NO LOAN WAS BORROWED FOR POWER PLANT PROJEC T. THE ASSESSEE EXCLUSIVELY BORROWED LOAN FOR THE CEMENT PLANT AND NO PART OF THE LOAN ITA NO. 1492/15 :- 14 -: WAS RELATABLE TO POWER PLANT PROJECT. ACCORDING TO THE LD. COUNSEL, THERE IS NO QUESTION OF ANY DISALLOWANCE ON PROPORT IONATE BASIS. THE LD. COUNSEL FURTHER POINTED OUT THAT THE INVESTMENT IN POWER PLANT PROJECT WAS MADE FROM THE PROFIT GENERATED BY THE ASSESSEE FROM THE MANUFACTURING ACTIVITY. THE LD. COUNSEL FURTHER SU BMITTED THAT FOR INSTALLATION OF CAPTIVE POWER PLANT, THE ASSESSEE AVAILED INTEREST FREE SOFT LOAN FROM SIPCOT, THEREFORE, THERE IS NO QUEST ION OF ANY DISALLOWANCE OF PROPORTIONATE INTEREST. 24. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEE BORROWED LOAN FOR THE CEMENT PROJECT AND NO LOAN WAS BORROWE D FOR THE PURPOSE OF POWER PLANT PROJECT. THE ASSESSEE EXCLUSIVELY BORROWED INTEREST FREE SOFT LOAN FROM SIPCOT FOR INSTALLATION OF POWE R PLANT. WHEN THE ASSESSEE BORROWED LOANS FOR DIFFERENT PURPOSES AND THE BALANCE SHEET OF THE ASSESSEE CLEARLY SHOWS THE CLASSIFICATION O F THE SECURED LOAN, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE DISALLOWANCE OF PROPORTIONATE INTEREST BETWEEN THE ELIGIBLE AND NON -ELIGIBLE UNIT IS NOT JUSTIFIED. THEREFORE, THE CIT(A) HAS RIGHTLY ALLOW ED THE CLAIM OF THE ASSESSEE. THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER F THE CIT(A). ACCORDINGLY, THE SAME IS CONFI RMED. ITA NO. 1492/15 :- 15 -: 25. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH MARCH, 2016, AT CHENNAI. SD/- SD/- ( . ! ) (A. MOHAN ALANKAMONY) ' / ACCOUNTANT MEMBER ( . . . ' ) (N.R.S. GANESAN) / JUDICIAL MEMBER #$ / CHENNAI %& / DATED: 24 TH MARCH, 2016 RD &' ()*) / COPY TO: 1 . / APPELLANT 4. + / CIT 2. / RESPONDENT 5. ),- . / DR 3. +/' / CIT(A) 6. -01 / GF