DCIT Central Circle 1(1), CHENNAI V. TCP Limited, CHENNAI

ITA 1780/CHNY/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 3411 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-05-2019
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 18-07-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B SAGADEVAN
• Assessee Lawyers: S VIDYA
• Keywords: Earning of tax free income; Question of law; Revised return; TDS; Rule 8D; Set aside
• Section: 143(3); 14A; 80IA

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , B BENCH, CHENNAI . , . , BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICIAL MEMBER ./ I.T.A.NO.1780/CHNY/2017 ( / ASSESSMENT YEAR: 2010-11) THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 1(1), CHENNAI. VS M/S. TCP LIMITED, NO.4, OLD NO.10, TCP SAPTHAGIRI BHAVAN, KARPAGAMBAL NAGAR, MYLAPORE, CHENNAI 600 004. PAN: AAACT3615K ( /APPELLANT) ( /RESPONDENT) / APPELLANTS BY : SHRI B. SAGADEVAN, JCIT / RESPONDENT BY : MS. S. VIDYA, CA /DATE OF HEARING : 21.02.2019 /DATE OF PRONOUNCEMENT : 02.05.2019 / O R D E R PER A. MOHAN ALANKAMONY, AM:- THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-18, CHENNAI, DATED 18.04.2017 IN ITA NO.1149/15-16 FOR THE ASSESSMENT YEAR 2010-11, PASSED U/S. 250(6) R.W.S. 143(3) OF THE ACT. 2. THE REVENUE HAS RAISED SEVERAL GROUNDS IN ITS APPEAL HOWEVER THE CRUXES OF THE ISSUES ARE THAT:- 2 ITA NO.1780/CHNY/2017 (I) THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY THE LD.AO AMOUNTING TO RS.1,69,72,859/- TOWARDS DISALLOWANCE U/S.14A R.W.R. 8D OF THE RULES. (II) THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY THE LD.AO AMOUNTING TO RS.37,75,053/- TOWARDS DISALLOWANCE U/S.36(1)(II) OF THE ACT BEING THE COMMISSION PAID TO THE MANAGING DIRECTOR OF THE ASSESSEE COMPANY. (III) THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY THE LD.AO AMOUNTING TO RS.44,62,67,537/- TOWARDS ARREARS OF THE DIFFERENTIAL AMOUNT OF SALE CONSIDERATION TOWARDS THE SALE OF POWER TO TNEB. (IV) THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION MADE BY THE LD.AO AMOUNTING TO RS.3,18,78,052/- TOWARDS DISALLOWANCE OF DEDUCTION U/S.80IA OF THE ACT. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A LIMITED COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING IN CHEMICALS AND GENERATION OF POWER, FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2010-11 ON 26.09.2019 AND SUBSEQUENTLY FILED ITS REVISED RETURN ON 03.06.2011 DECLARING TOTAL INCOME OF 3 ITA NO.1780/CHNY/2017 RS.34,80,95,745/-. THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE U/S.143 (2) OF THE ACT WAS ISSUED. FINALLY ASSESSMENT ORDER WAS PASSED U/S. 143(3) OF THE ACT ON 25.08.2011, WHEREIN THE LD.AO MADE SEVERAL ADDITIONS. 4. GROUND NO.2(I) : DISALLOWANCE U/S.14A R.W.R. 8D OF THE RULES :- DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS IT WAS OBSERVED BY THE LD.AO THAT THE ASSESSEE HAD MADE INVESTMENTS EARNING EXEMPT INCOME AS ON 31.03.2010 AMOUNTING TO RS.118,16,34,971/-. DURING THE RELEVANT ASSESSMENT YEAR, THE DIVIDEND INCOME EARNED BY THE ASSESSEE WHICH IS EXEMPT FROM TAX WAS RS.3,41,880/-. THEREFORE THE LD.AO INVOKED THE PROVISIONS OF SECTION 14A OF THE ACT AND & 8D OF THE RULES AND COMPUTED THE DISALLOWANCE AT RS.1,69,72,859/-. 4.1 BEFORE THE LD.CIT(A), THE LD.AR HAD MADE THE FOLLOWING SUBMISSIONS:- 4 ITA NO.1780/CHNY/2017 (I) THE ASSESSEE HAD COMPUTED THE EXPENDITURE INCURRED FOR EARNING EXEMPT INCOME AS RS.70,517/- AND OFFERED THE SAME FOR DISALLOWANCE VIDE LETTER DATED 26.03.2013. (II) THE LD.AO HAS SIMPLY REJECTED THE COMPUTATION MADE BY THE ASSESSEE WITHOUT EXAMINING THE ACTUAL EXPENDITURE INCURRED BY THE ASSESSEE FOR EARNING EXEMPT INCOME AND WORKED OUT THE DISALLOWANCE AT RS. 1,69,72,859/- BY INVOKING RULE 8D OF THE RULES. (III) THE ENTIRE INVESTMENT WAS MADE OUT OF THE NON-INTEREST BEARING FUNDS OF THE ASSESSEE COMPANY AS ITS SHARE CAPITAL AS ON 31.03.2010 WAS RS.5,03,19,090/-, GENERAL RESERVE RS.168,63,60,491/-, AND SURPLUS FROM P&L ACCOUNT RS.79,30,57,427/- AGGREGATING TO RS.252,97,37,008/-, WHEREAS THE TOTAL INVESTMENT WHICH EARNS EXEMPT INCOME IS ONLY RS.118,16,34,971/-,. THEREFORE NO INTEREST EXPENSES COULD BE ATTRIBUTED TOWARDS THE INVESTMENT MADE FOR EARNING EXEMPT INCOME. 4.2 THE LD.CIT(A) AFTER CONSIDERING THE ABOVE SUBMISSIONS DELETED THE ADDITION MADE BY THE LD.AO INVOKING THE PROVISIONS OF 5 ITA NO.1780/CHNY/2017 SECTION 14A R.W.R.8D OF THE RULES, BECAUSE THE LD.AO HAD MADE SUCH ADDITION WITHOUT ENQUIRING & EXAMINING THE ACTUAL EXPENDITURE INCURRED BY THE ASSESSEE FOR EARNING EXEMPT INCOME BY RELYING ON THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE CIT VS. HERO MANAGEMENT SERVICES PVT. LTD., REPORTED IN 360 ITR 0068. 4.3 BEFORE US THE LD.DR ARGUED IN SUPPORT OF THE ORDER OF THE LD.AO WHILE AS THE LD.AR RELIED ON THE ORDER OF THE LD.CIT(A) AND PRAYED FOR SUSTAINING THE SAME. 4.4 WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY PERUSED THE MATERIALS ON RECORD. PROVISIONS OF SECTION 14A(2) MAKES IT ABUNDANTLY CLEAR THAT THE ASSESSING OFFICER IS EMPOWERED TO COMPUTE THE DISALLOWANCE IN ACCORDANCE WITH RULE 8D OF THE RULES ONLY IF HE IS SATISFIED THAT THE COMPUTATION MADE BY THE ASSESSEE WITH RESPECT TO THE EXPENDITURE INCURRED FOR EARNING EXEMPT INCOME IS NOT APPROPRIATE OR CANNOT BE RELIED UPON. THEREFORE IT IS MANDATORY FOR THE ASSESSING OFFICER TO RECORD SUCH SATISFACTION AS TO WHY THE COMPUTATION MADE BY THE ASSESSEE IS TO BE REJECTED. IN THE CASE OF THE ASSESSEE, IT IS APPARENT THAT THE LD.AO HAD NOT 6 ITA NO.1780/CHNY/2017 EVEN VENTURED TO EXAMINE THE COMPUTATION MADE BY THE ASSESSEE WITH RESPECT TO THE EXPENDITURE INCURRED FOR EARNING EXEMPT INCOME AND FURTHER THE INVESTMENT MADE BY THE ASSESSEE OUT OF NON- INTEREST BEARING FUND IS ALSO NOT IN DISPUTE. THEREFORE FOLLOWING THE DECISION OF THE HONBLE DELHI HIGH COURT, THE LD.CIT(A) HAS HELD THE ISSUE IN FAVOUR OF THE ASSESSEE BY OBSERVING AS UNDER:- 9.2 IN THIS REGARD, AS POINTED OUT BY THE APPELLANT THE FIRST AND FOREMOST PRE-REQUISITE FOR INVOKING THE PROVISIONS OF SECTION 14(A) READ WITH RULE 8D IS THAT THE AO BEFORE EMBARKING ON SUCH AN ACT SHOULD RECORD HIS REASONS FOR INVOKING THE ABOVE PROVISIONS AND THE SAME SHOULD BE CONVEYED TO THE APPELLANT AND ITS OBJECTIONS IF ANY, SHOULD BE OBTAINED. IN AS MUCH AS THIS PRE-REQUISITE CONDITION HAS NOT BEEN FULFILLED THE AO'S ACTION IS LEGALLY NOT TENABLE. IN THIS REGARD RELIANCE IS PLACED ON THE DECISION OF THE HONBLE HIGH COURT OF DELHI IN THE CASE OF CIT VS. HERO MANAGEMENT SERVICES PVT. LTD., REPORTED IN 360 ITR 0068 (DELHI) WHEREIN IT HAS BEEN OBSERVED AS UNDER: FURTHER TO INVOKE RULE 8D, THE ASSESSING OFFICER HAS TO FIRST RECORD A FINDING THAT HE WAS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM FOR EXPENDITURE MADE BY THE ASSESSEE IN RELATION TO INCOME WHICH DID NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. NO SUCH SATISFACTION HAS BEEN RECORDED BY THE ASSESSING OFFICER. 9.3 BASED ON THE ABOVE CITED DISCUSSION THE ADDITION MADE BY THE AO U/S 14A IS HEREBY DELETED. ACCORDINGLY, THE GROUNDS RAISED IN THIS REGARD ARE ALLOWED. SINCE THE LD.CIT(A) HAD FOLLOWED THE DECISION OF THE HONBLE HIGH COURT OF DELHI IN THE CASE CIT VS. HERO MANAGEMENT SERVICES PVT. LTD., REPORTED IN 360 ITR 0068, WHEREIN THE FACTS ARE SIMILAR TO THAT 7 ITA NO.1780/CHNY/2017 EXTENT WE FIND MERIT IN THE ORDER OF LD.CIT(A) HOWEVER THE AMOUNT OF EXPENDITURE DISALLOWED BY THE ASSESSEE OF RS.70,517/- SHALL STANDS DISALLOWED BY VIRTUE OF SECTION 14A OF THE ACT. 5. GROUND NO.2(II) : DISALLOWANCE U/S.36(1)(II) OF THE ACT BEING COMMISSION PAID TO THE MANAGING DIRECTOR OF THE COMPANY. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS IT WAS OBSERVED BY THE LD.AO THAT THE ASSESSEE COMPANY HAD PAID REMUNERATION TO ITS MANAGING DIRECTOR DURING THE RELEVANT ASSESSMENT YEAR IN THE FORM OF COMMISSION AMOUNTING TO RS.37,75,053/-. ON QUERY THE ASSESSEE HAD MADE THE FOLLOWING SUBMISSIONS BEFORE THE LD.AO:- (I) AS PER THE TERMS & CONDITIONS OF THE APPOINTMENT OF MANAGING DIRECTOR WHICH IS IN ACCORDANCE WITH THE PROVISIONS OF SECTION 309 OF THE COMPANIES ACT, 1956, ONE PERCENT OF THE NET PROFIT IS TO BE PAID TO THE MANAGING DIRECTOR AS COMMISSION. (II) THE COMMISSION OF 1% ON NET PROFIT OF THE COMPANY COULD BE DETERMINED ONLY AFTER THE COMPLETION OF THE FINALIZATION OF THE 8 ITA NO.1780/CHNY/2017 ACCOUNTS AND AUDIT OF THE ASSESSEE COMPANYS ACCOUNT WHEREBY THE NET PROFIT IS FINALLY ARRIVED. (III) THE PAYMENT OF COMMISSION IS TREATED AS SALARY PAID TO MANAGING DIRECTOR OF THE COMPANY AND TAX IS DEDUCTED AT SOURCE IN ACCORDANCE WITH SECTION 192 OF THE ACT. HOWEVER THE LD.AO REJECTED THE SUBMISSIONS MADE BY THE ASSESSEE AND OPINED THAT THE PROVISIONS OF SECTION 36(1)(II) OF THE ACT WOULD BE ATTRACTED TOWARDS THE COMMISSION PAYMENT MADE BY THE ASSESSEE COMPANY TO ITS DIRECTOR AND ACCORDINGLY DISALLOWED THE SAME. 5.1 ON APPEAL, THE LD.CIT(A) DELETED THE ADDITION BY RELYING ON THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE AMD METPLAST PVT. LTD., VS. DCIT REPORTED IN 341 ITR 563. THE GIST OF THE DECISION OF THE LD.CIT(A) IS REPRODUCED HEREIN BELOW FOR REFERENCE:- 10.2 ON GOING THROUGH THE SUBMISSIONS MADE BY THE APPELLANT IT IS SEEN THAT THE NECESSITY TO PAY THE COMMISSION TO THE MANAGING DIRECTOR ARISES CONSEQUENT TO THE TERMS AND CONDITIONS, WHEREIN IT HAS BEEN STIPULATED THAT 1% OF THE NET PROFITS SHOULD BE PAID. ACCORDINGLY, THE APPELLANT HAS PAID THE SAID AMOUNT FULFILLING SAID TERMS AND CONDITIONS. IN THE CIRCUMSTANCES, THE ACTION OF THE AO IN DISALLOWING 9 ITA NO.1780/CHNY/2017 THE SAID EXPENDITURE IS NOT JUSTIFIED. FURTHER RELIANCE IS PLACED ON THE DECISION OF THE HONBLE HIGH COURT OF DELHI IN THE CASE OF AMD METPLAST PVT. LTD., VS. DCIT IN 341 ITR 563 (DELHI) WHEREIN IT HAS BEEN AS UNDER: WE FAIL TO UNDERSTAND HOW THE AFORESAID OBSERVATIONS ASSIST AND HELP THE REVENUE IN THE FACTUAL MATRIX OF THE PRESENT CASE. ASHOK GUPTA IS THE MANAGING DIRECTOR AND IN TERMS OF THE BOARD RESOLUTION IS ENTITLED TO RECEIVE COMMISSION FOR SERVICES RENDERED TO THE COMPANY. IT IS A TERM OF EMPLOYMENT ON THE BASIS OF WHICH HE HAD RENDERED SERVICE. ACCORDINGLY, HE WAS ENTITLED TO THE SAID AMOUNT. COMMISSION WAS TREATED AS A PART AND PARCEL OF SALARY AND TDS HAS BEEN DEDUCTED. ASHOK GUPTA WAS LIABLE TO PAY TAX ON BOTH THE SALARY COMPONENT AND THE COMMISSION. PAYMENT OF DIVIDEND IS MADE INTERMS OF THE COMPANIES ACT, 1956. DIVIDEND HAS TO BE PAID TO ALL SHAREHOLDERS EQUALLY. THIS POSITION CANNOT BE DISPUTED BY THE REVENUE. DIVIDEND IS A RETURN ON INVESTMENT AND NOT SALARY OR PART THEREOF. HEREIN THE CONSIDERATION IN THE FORM OF COMMISSION WHICH WAS PAID TO ASHOK GUPTA WAS FOR SERVICES RENDERED BY HIM AS PER TERMS OF APPOINTMENT AS A MANAGING DIRECTOR. IN VIEW OF THE AFORESAID POSITION, WE ANSWER THE QUESTION OF LAW IN NEGATIVE AND IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 10.3 BASED ON THE ABOVE CITED DISCUSSION THE ADDITION MADE BY THE AO U/S.36(1)(II) IS HEREBY DELETED. ACCORDINGLY, THE GROUNDS RAISED IN THIS REGARD ARE ALLOWED. 5.2 SINCE THE LD.CIT(A) HAS FOLLOWED THE DECISION OF THE HONBLE DELHI HIGH COURT WHEREIN THE FACTS ARE IDENTICAL TO THE CASE OF THE ASSESSEE WE DO NOT FIND IT NECESSARY TO INTERFERE IN HIS ORDER ON THIS ISSUE ALSO. ACCORDINGLY THE GROUND RAISED BY THE REVENUE IS DEVOID OF MERITS. 10 ITA NO.1780/CHNY/2017 6. GROUND NO.2(III):DELETING THE ADDITION OF RS.44,62,67,537/- TOWARDS ARREARS OF DIFFERENTIAL AMOUNT OF SALE CONSIDERATION FOR THE SALE OF POWER TO TNEB:- DURING THE SCRUTINY ASSESSMENT PROCEEDINGS IT WAS OBSERVED BY THE LD.AO THAT THE ASSESSEES LITIGATION AGAINST TAMIL NADU ELECTRICITY BOARD WITH RESPECT TO THE ARREARS OF SALE CONSIDERATION TOWARDS GENERATION AND SUPPLY OF ELECTRICITY FOR THE ASSESSMENT YEAR 2006-07 TO 2008-09 AMOUNTING TO RS.45,62,67,537/- HAD REACHED FINALITY ON 14.10.2009 IE., DURING THE RELEVANT ASSESSMENT YEAR 2010-11. THE LD.AO FURTHER OBSERVED THAT THE ASSESSEE HAD NOT DISCLOSED THE SAME AS ITS INCOME IN THE RELEVANT ASSESSMENT YEAR 2010-11 BUT HAD DISCLOSED IT AS ITS INCOME IN THE ASSESSMENT YEAR 2009-10 AND CLAIMED THE BENEFIT OF DEDUCTION U/S.80IA OF THE ACT. HOWEVER THE LD.AO WAS OF THE VIEW THAT IN THE CASE OF THE ASSESSEE THE ENTIRE INCOME OF RS.44,62,67,537/- OUGHT TO HAVE BEEN TREATED AS THE INCOME FOR THE RELEVANT ASSESSMENT YEAR 2010- 11. THE RELEVANT PORTION OF THE ORDER OF THE LD.AO IS REPRODUCED HEREIN BELOW FOR REFERENCE:- 6.4 AFTER CAREFULLY CONSIDERING THE FACTS OF THE CASE, ASSESSEE'S SUBMISSIONS / CONTENTIONS AND KEEPING IN VIEW THE CHRONOLOGY OF EVENTS, ASSESSEE'S CLAIM THAT THE SAME AS RECEIVED ON ACCOUNT OF TNERC'S VERDICT DATED 14.10.2009 AS NOT ACCRUED IN A.Y. 2010-11 IS 11 ITA NO.1780/CHNY/2017 NEITHER ACCEPTABLE / REASONABLE NOR BASED ON ANY PRUDENT ACCOUNTING METHOD / REGULAR ACCOUNTING METHODS FOLLOWED BY THE ASSESSEE COMPANY. THE SAME IS NOT ACCEPTABLE FOR THE FOLLOWING REASONS :- (I) ASSESSEE COMPANY IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND ACCOUNTING ALL ITS RECEIPTS ON THIS BASIS FROM ALL SOURCES. THE ASSESSEE COMPANY HAS ENTERED INTO A POWER PURCHASE AGREEMENT (PPA) WITH TNEB SO AS TO SELL ITS POWER TO TNEB AS ENVISAGED IN THE PPA AS PER THE AGREED UPON PRICE FROM YEAR TO YEAR AND CONSEQUENT CONDITIONS OF AGREEMENT. TRULY, FOLLOWING THIS METHOD, ASSESSEE COMPANY ACCOUNTED ALL ITS POWER SALES RECEIPTS TILL A.Y. 2005-06. THE ENTIRE PROFITS ON ACCOUNT OF THIS POWER PLANT WAS CLAIMED AS ALLOWABLE U/S SOIA AND THE SAME WAS DULY ALLOWED AS PER THE PROVISIONS OF THE IT ACT. (II) HOWEVER, DEVIATING FROM THE REGULAR ACCOUNTING METHOD OF ACCRUAL, FROM A. Y. 2006-07 ONWARDS, ASSESSEE COMPANY COULD NOT CONSIDER ITS ENTIRE SALES AS ACCRUED AS PER THE RATES OF PPA AS ITS INCOME. THIS WAS APPARENTLY CLAIMED ON ACCOUNT OF TNEB'S RESISTANCE NOT TO ADHERE TO THE PPA CLAUSES ON PRICE ESCALATIONS FROM YEAR TO YEAR FROM A.Y. 2006-07. ACCORDINGLY, ASSESSEE COMPANY HAS SHOWN LESSER INCOME THAN WHAT IT OUGHT TO HAVE ACCRUED FOR THE A.Y. 2006-07 ONWARDS. HOWEVER, THE SHORT REFLECTED PROFITS OF POWER GENERATION FROM THIS ELIGIBLE 80IA UNIT WERE ALSO CLAIMED AS EXEMPT FOR A.Y. 2006-07 TO A.Y.2008-09.. ALL THESE EXEMPT YEARS, ASSESSEE COMPANY HAS ONLY TO PAY TAX ON BOOK PROFITS. BY SHORT REFLECTION OF ACCRUED INCOME AS PER PPA AS ITS INCOME. THIS WAS APPARENTLY CLAIMED ON ACCOUNT OF ASSESSEE COMPANY'S TAXABLE MAT PROFIT HAS REDUCED TO THAT EXTENT AND THIS METHOD WAS FOLLOWED BY THE ASSESSEE FROM A.Y. 2006-07 TO TILL REVISION OF TARIFF BY TNERC AS ENVISAGED IN THE PPA CLAUSES. (III) HENCE, THE ASSESSEE HAS FOLLOWED MERCANTILE METHOD IN FULL FOR THIS ISSUE AS PER THE PPA FOR A.Y. 2000-01 TO 2005-06 AND THE SAME HAS NOT BEEN ADOPTED FROM A.Y. 2006-07 TO 2008-09. THIS SHOWS THAT THE ASSESSEE HAS CONVENIENTLY FOLLOWED THE ACCOUNTING METHOD TO LESSEN THE TAX BURDEN UNDER MAT PROVISIONS. IT IS NEITHER FOLLOWING MERCANTILE SYSTEM NOR A CASH METHOD, IT LOOKS LIKE A HYBRID ACCOUNTING 12 ITA NO.1780/CHNY/2017 ON THIS ISSUE WHICH COULD NOT BE ALLOWABLE AS PER THE PROVISIONS OF THE IT ACT. MORE TO SAY, WHEN SUCH PROFITS ARE ALLOWABLE AS EXEMPT UNDER NORMAL PROVISIONS AND THE SAME ARE TAXABLE UNDER MAT. THE ASSESSEE COULD HAVE FOLLOWED THIS APPARENTLY TO REDUCE THE INCIDENCE OF TAX ON THE APPLICABLE BOOK PROFIT WHICH IS NOT ACCEPTABLE FOR A GOING CONCERN TO DEVIATE FROM THE METHOD OF ACCOUNTING. THE SAME IS NOT ACCEPTABLE AS A PRUDENT CORPORATE GOVERNANCE AND IT ALSO GIVES SKEWED REPRESENTATION OF ITS FACTS AND PROFITS TO ITS SHAREHOLDERS. (IV) SUBSEQUENTLY, AS DISCUSSED IN DETAIL ABOVE, ASSESSEE COMPANY APPROACHED TNERC FOR ADJUDICATION AND REVISION OF TARIFF AS ENVISAGED IN THE PPA CLAUSES. ACCORDINGLY, TNERC, A POWER TARIFF REGULATORY COMMISSION FOR THE STATE OF TAMILNADU AS PER THE NEW REGIME UNDER ELECTRICITY ACT, 2003 HAS REVISED THESE TARIFFS AS APPLICABLE FOR A.Y. 2009-10 ONWARDS AND HELD THAT WHY THE PRICE PROVISIONS AS ENVISAGED IN THE ORIGINAL PPA COULD NOT BE FOLLOWED BY BOTH THE PARTIES AS PER LAW. THIS SPEAKS TO STRENGTHEN THAT THE ASSESSEE COULD HAVE ADHERED TO THE PPA AND ACCOUNTED ITS FULL RECEIPTS SO AS TO REFLECT TRUE PROFITS AND TRUE INCOMES WITHOUT DEVIATING ITS REGULAR ACCOUNTING METHODS. ASSESSEE'S DEVIATION ON THIS COUNT IS BASELESS AND FAR STRETCHED AND IMAGINATIVE TO CONCLUDE THAT THE INCOME IS NOT ACCRUED TO THAT EXTENT IN THE A.YS. 2006-07 TO 2008-09. (V) AFTER TNERC'S ORDER, ASSESSEE COMPANY HAS RECEIVED SUBSTANTIAL AMOUNTS TO THE EXTENT OF RS.44,62,67,537/- AS APPLICABLE REVENUE FOR THE ASSESSEE COMPANY PERTAINING TO A.Y. 2006-07 TO 2008-09 AS PER THE ORIGINAL PRICE OF PPA FOR THESE YEARS. ITS ENTIRE RECEIPTS WERE ACCRUED TO ASSEESEE FOR ALL THESE YEARS AS PER THE PPA AND SAME IS RATIFIED AS PER THE CONFIRMATION OF REGULATORY COMMISSION'S ORDERS. (VI) IN VIEW OF ASSESSEE NON-REFLECTION OF THESE RECEIPTS IN EARLIER YEARS, THE SAME NEEDS TO BE REFLECTED AS PER THE DATE OF FRESH ACCRUAL ORDER DATED 14.10.2009 I.E. TO SAY, IT WOULD BE THE INCOME OF THE ASSESSEE FOR THE A.Y. 2010-11 AS IT GOT ACCRUED AND CONFIRMED IN THE A.Y. 2010-11 BY TNERC'S ORDER IN F.Y. 2009-10. THIS STAND HAS TO BE TAKEN IN CONSONANCE WITH THE ASSESSEE'S CONTENTION TO DEFER SUCH CREDIT IN THE RELEVANT ASSESSMENT YEARS AS FOLLOWED TILL A.Y. 2008-09. HENCE, ASSESSEE'S ATTEMPT TO AGAIN TO DEVIATE FROM THIS REGULAR METHOD OF 13 ITA NO.1780/CHNY/2017 ACCOUNTING IS NOT BASED ON THE PRUDENT COMMERCIAL ACCOUNTING SO AS TO REFLECT TRUE PROFITS OF THE ASSESSEE COMPANY FOR THE A.Y. 2009-10 & A.Y. 2010-11. HENCE, THE ASSESSEE'S ATTEMPT TO CONSIDER THIS AS NOT AN INCOME OF A.Y. 2010-11 IS NOT ACCEPTABLE AND THE SAME NEEDS TO BE BROUGHT TO TAX AS IT IS ACCRUED IN A.Y. 2010-11 BY VIRTUE OF REGULATORY COMMISSION'S ORDER DATED 14.10.2009. (VII) ASSESSEE'S ATTEMPT TO ACCOUNT THIS INCOME IN A.Y. 2009-10 IS NOT AT ALL REASONABLE AND ENTERTAINABLE BECAUSE THESE AMOUNTS EITHER PERTAIN TO A.YS. 2005-06 TO A.Y. 2008-09 AS ENVISAGED PPA OR TO A.Y. 2010-11 AS PER PPA READ WITH REGULATORY COMMISSION'S ORDER DATED 14.10.2009. THIS INCOME NO WAY WILL BECOME INCOME OF ASSESSEE FOR A.Y. 2009-10 WHICH WAS HOWEVER NOT ALLOWED BY THE DEPARTMENT IN THE A.Y. 2009-10 AS DISCUSSED SUPRA. (VIII) ASSESSEE'S CONTENTION THAT TNERC'S ORDER DATED 25.02.2009 DIRECTING TNEB TO ADHERE TO PRICES AS ENVISAGED AS APPLICABLE FROM 01.04.2008 ONWARDS IS TO BE CONSIDERED AS NEW DATE OF ACCRUAL OF THESE RECEIPTS FOR A.Y. 2009-10 IS DEVOID OF MERITS AND IS OUT OF CONTEXT TO THE ISSUE UNDER CONSIDERATION. ORDER DATED 25.02.2009 ONLY SPEAKS OF THE REVISION OF TARIFF AS APPLICABLE FROM 01.04.2008 AND DIRECTS BOTH THE PARTIES TO ADHERE TO PPA FIXED RATES AND THE SAME DID NOT SPEAK ANYTHING ABOUT THE AMOUNT OF ADDITIONAL INCOME TO ASSESSEE COMPANY ON ACCOUNT OF POWER SUPPLIED FROM A.Y. 2006-07 TO 2008-09. FOR THESE YEARS, SPECIFIC ADJUDICATION HAS BEEN MADE BY TNERC TO PAY THE SAID AMOUNT AS APPLICABLE FOR THE A.Y. 2005-06 TO A.Y.2008- 09. HENCE, ASSESSEE'S ARGUMENT ON THIS ISSUE IS DEVOID OF MERITS AND NOT RELATABLE TO THE FACTS ON HAND. (IX) FURTHER, ASSESSEE COMPANY HAS BEEN PAID THESE ARREARS ALONG WITH INTEREST AS PER THE TNERC'S ANOTHER ORDER FALLING IN F.Y. 2010- 11 RELEVANT A.Y. 2011-12. THE ENTIRE INTEREST INCOME AS PER THIS ORDER IS OFFERED AS INCOME OF ASSESSEE FOR A.Y. 2011-12. GOING BY THIS ANALOGY ITSELF, ASSESSEE COULD HAVE TRULY REFLECTED THE PRINCIPAL AMOUNTS OF RS.44,62,67,537/- AS INCOME FOR A.Y. 2010-11 AS IT GOT ACCRUED IN A.Y. 2010-11 ON SIMILAR LINES FOLLOWED BY ASSESSEE FOR INTEREST INCOME. 14 ITA NO.1780/CHNY/2017 HENCE, THE ENTIRE RECEIPTS RECEIVED IN A.Y. 2010-11 NEEDS TO BE ASSESSED AND ADDED TO THE INCOME OF THE ASSESSEE FOR THE A.Y. 2010-11 ON SUBSTANTIVE ACCRUAL BASIS IN LINE WITH ASSESSEE'S REGULAR ACCOUNTING METHOD AS FOLLOWED FROM TIME TO TIME. ACCORDINGLY, ENTIRE RECEIPTS OF RS.44,62,67,537/- BROUGHT TO TAX AND ADDED TO THE INCOME OF THE ASSESSEE. 6.1 ON APPEAL THE LD.CIT(A) DELETED THE ADDITION MADE BY THE LD.AO BY OBSERVING AS UNDER:- 11.3 FROM THE MATERIALS ON RECORD IT IS SEEN THAT THE APPELLANT HAD OFFERED THE DIFFERENTIAL INCOME OF RS.44,62,67,537/- IN THE A.Y. 2009- 10 ITSELF AND ASSESSING THE SAME AMOUNT IN THE IMPUGNED ASST. YEAR ONCE AGAIN TANTAMOUNT TO DOUBLE ADDITION WHICH IS NOT CORRECT. EVEN THE HONBLE ITAT IN ITS ORDER CITED SUPRA HAS ACCEPTED THE ARGUMENT OF THE APPELLANT AND REMITTED BACK THE MATTER TO THE FILE OF THE AO ONLY FOR THE LIMITED PURPOSE OF VERIFYING THE AUTHENTICITY OF THE ORDER OF TNERC DATED 25.02.2009. IN THE CIRCUMSTANCES, I AM OF THE CONSIDERED VIEW THAT THE ADDITION OF RS.44,62,67,537/- MADE IN THE INSTANT A.Y. CANNOT BE SUSTAINED. HENCE, THIS GROUND OF APPEAL IS DISMISSED. 6.2 AT THE OUTSET WE DO NOT FIND ANY MERIT IN THE REASONING PENNED IN THE ORDER OF THE LD.CIT(A) FOR DELETING THE ADDITION. THE LD.CIT(A) HAS HELD THAT SINCE THE APPELLANT HAD OFFERED THE DIFFERENTIAL INCOME OF RS.44,62,67,537/- IN THE ASSESSMENT YEAR 2009-10 ITSELF, ASSESSING THE SAME AMOUNT ONCE AGAIN FOR THE ASSESSMENT YEAR 2010-11 TANTAMOUNT TO DOUBLE ADDITION WHICH IS NOT CORRECT. IT IS PERTINENT TO MENTION THAT THE ENTIRE DISPUTE IS WITH RESPECT TO THE YEAR IN WHICH THE INCOME OF RS.44,62,67,537/- HAS 15 ITA NO.1780/CHNY/2017 CRYSTALLIZED I.E., WHETHER IN THE ASSESSMENT YEAR 2009-10 OR IN THE ASSESSMENT YEAR 2010-11, BECAUSE THE INCOME CAN BE ASSESSED ONLY IN THE YEAR IN WHICH IT HAS CRYSTALLIZED. IN THE ASSESSEES OWN CASE AND ON THE VERY SAME ISSUE THE TRIBUNAL FOR THE ASSESSMENT YEAR 2009-10 IN ITA NO.1460/MDS/2013 VIDE ORDER DATED 06.06.2014 HAD HELD THAT THE INCOME OF RS.44,62,67,537/- BEING THE DIFFERENTIAL RATE PER UNIT OF POWER SOLD PERTAINING TO ASSESSMENT YEARS 2006-07,2007-08 AND 2008-09 SHALL BE TREATED AS INCOME ACCRUED FOR THE ASSESSMENT YEAR 2009-10 AND THEREFORE THE ASSESSEE WILL BE ENTITLED FOR DEDUCTION UNDER SECTION 80IA OF THE ACT FOR THE ASSESSMENT YEAR 2009-2010 SUBJECT TO THE VERIFICATION OF THE ORDER OF THE TNERC DATED 25.02.2009 BY THE LD.AO AS THE SAME WAS NOT BEFORE THE LD.AO. THE GIST OF THE RELEVANT PORTION OF THE ORDER OF THE TRIBUNAL DATED 06/06/2014 IS REPRODUCED HEREIN BELOW FOR REFERENCE:- 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY PERUSED THE MATERIALS AVAILABLE ON RECORD. IT IS APPARENT FROM THE ORDER OF THE LD. CIT (A) THAT THERE IS AN ORDER BY THE TNERC DATED 25.02.2009 ALREADY IN EXISTENCE BEFORE THE PASSING OF THE FINAL ORDER OF TNERC DATED 14.10.2009. THE ORDER DATED 25.02.2009 CONFIRMS THE TARIFF RATES AS AGREED BY BOTH THE PARTIES IN ACCORDANCE WITH ORIGINAL POWER PURCHASE AGREEMENT. THE FACTS OF THE CASE ALSO REFLECTS THAT THOUGH THE ORIGINAL POWER PURCHASE AGREEMENT HAD SPECIFICALLY STATED THE TARIFF TO BE PAID BY THE TNEB, TO THE ASSESSEE IN THE YEARS TO FOLLOW; TNEB WAS EXERTING UNDUE PRESSURE AND COHESION TO REDUCE THE TARIFF RATE BY 16 ITA NO.1780/CHNY/2017 DRAWING THE ASSESSEE FOR NEGOTIATIONS. IN ONE SUCH ENDEAVOR, THE MINUTES OF THE MEETING BETWEEN THE TNEB OFFICIALS AND OFFICIALS OF THE ASSESSEE COMPANY DATED 18.05.2007 WERE RECORDED WHICH READ AS FOLLOWS:- MINUTES OF MEETING WITH M/S.TCP LTD ON 18.05.2007 SUB: PRICE NEGOTIATION MEETING ON SALE OF POWER OF 441 MU TO TNEB ON 18.05.2007 MEMBER PRESENT TNEB M/S.TCP LTD 1. SHRI S.KATHIRESAN,M(A) SHRI V.RAJASEKARAN, 2.SHRI S.AROUNASSALAME,M(G) EXECUTIVE DIRECTOR 3.SHRI D.SOLOMON PONNUDURAI, SHRI N.CHAKRAPANI CE/PPP MANAGER(PURCHASE) 4.SHRI D PAUL KARUNAKARAN SE/PP 1) TNEB OFFERED A RATE OF RS.2.32/- PER UNIT FOR FIRM/POWER THE APPROVED RATE FOR THE EXISTING CPPS. 2) FOR THIS THE COMPANY HAVE EXPLAINED THEIR DIFFICULTIES SUCH AS HIGH HEAT RATE AND INCREASED COST OF FUEL TO ACCEPT THE REDUCED RATE AND HAVE REQUESTED TNEB TO CONTINUE THE EXISTING FREEZED RATE OF RS.3.01/- PER UNIT FOR THIS YEAR ALSO I.E. 2007-08 SINCE THE RATE SCHEDULE AS REFERRED IN THE PPA IS DUE FOR REVISION FROM APRIL 2008, REVISED NEGOTIATED RATE COULD BE FIXED FROM NEXT YEAR ONWARDS. BOARD SIDE COMPANY SIDE 1 TO 4 SIGNED EXECUTIVE DIRECTOR SIGNED THE ARGUMENT OF THE LD. ASSESSING OFFICER WAS THAT THE ASSESSEE COMPANY HAD ACCEPTED THE TARIFF RATED OF RS.3.01 PER UNIT FOR THE ASSESSMENT YEAR 2007-08 AND ONWARDS BY VIRTUE OF SIGNING THE MINUTES OF THE MEETING AND THEREFORE PROFIT COMPUTED ON THE BASIS OF SUCH TURNOVER ONLY WILL CRYSTALLIZE AS PROFIT FOR THE ASSESSMENT YEAR 2007-08, 2008-09 & 2009-10. FURTHER LD. ASSESSING OFFICER OPINED 17 ITA NO.1780/CHNY/2017 THAT SINCE THE ENHANCED RATE WAS AWARDED TO THE ASSESSEE BY VIRTUE OF ORDER DATED 14.10.2009 BY TNERC WHICH FALLS IN THE PREVIOUS YEAR 2009-10; SUCH PROFIT DERIVED FROM THE ENHANCED AMOUNT HAS ACCRUED AS INCOME TO THE ASSESSEE ONLY FOR THE ASSESSMENT YEAR 2010-11. WE DO NOT SUBSCRIBE TO THIS VIEW OF THE LD. ASSESSING OFFICER. THE MINUTES OF THE MEETING DT.18.05.2007DOES NOT OVERRIDE THE ORIGINAL PPA ENTERED BETWEEN THE ASSESSEE COMPANY AND THE TNEB BECAUSE THERE IS NO SUBSEQUENT AMENDED AGREEMENT BETWEEN BOTH THE PARITIES FOR GIVING EFFECT TO THE MINUTES OF THE MEETING. THEREFORE LEGALLY THE ORIGINAL PPA AGREEMENT BETWEEN THE ASSESSEE COMPANY AND THE TNEB IS IN EXISTENCE AND VALID. THE ORDER OF THE TNERC DATED 25.02.2009 ONLY AFFIRMS THE LEGAL VALIDITY OF THE ORIGINAL PPA AND ACCORDINGLY HAD DIRECTED THE TNEB TO PAY TO THE ASSESSEE COMPANY IN ACCORDANCE WITH THE STIPULATED RATE OF TARIFF MENTIONED THEREIN. THE RELEVANT PORTION OF THE ORDER OF TNERC DATED 25.02.2009 IS EXTRACTED HEREIN BELOW FOR REFERENCE:- THE ABOVE PPAP NO.3 OF 2008 CAME UP FOR FINAL HEARING BEFORE THE COMMISSION ON 10TH NOVEMBER 2008. THE COMMISSION UPON PERUSING THE PETITION AND OTHER CONNECTED RECORDS AND UPON HEARING BOTH SIDES PASSES THE FOLLOWING ORDER, NAMELY: ORDER DATED 25TH FEBRUARY 2009 1. PRAYER OF THE PETITIONER. THE PRAYER OF THE PETITIONER IS TO DIRECT THE RESPONDENT BOARD TO NEGOTIATE WITH THE PETITIONER IN TERMS OF THE POWER PURCHASE AGREEMENT (HEREINAFTER REFERRED TO AS PPA) DATED 29-1-1999 FOR FIXATION OF TARIFF RATE UNDER CLAUSE 3.26 OF PPA AFTER TAKING INTO CONSIDERATION THE COST INVOLVED. ------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------- ---------------------------------------------------------4. COUNTER OF THE RESPONDENT BOARD (A) --------------------------------- (B) ---------------------------------- 18 ITA NO.1780/CHNY/2017 (C)------------------------------------ ------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------- ----------------------------------------------------------------5.3. SO LONG AS THE PPA BETWEEN THE TWO PARTIES LAID DOWN SPECIFIC RATES FOR EACH YEAR UPTO 2007-08, THE AGREED RATES WOULD CONTINUE TO REMAIN VALID IN TERMS OF SECTION 185 OF THE ACT AND CLAUSE 35(2) OF TARIFF REGULATIONS. THE PPA LEFT THE TARIFF BEYOND 1.4.2008 OPEN FOR NEGOTIATION BETWEEN THE TWO PARTIES. AS PER SECTION 62 OF THE ELECTRICITY ACT, 2003, THE APPROPRIATE COMMISSION SHALL DETERMINE THE TARIFF FOR SUPPLY OF ELECTRICITY BY A GENERATING COMPANY TO A DISTRIBUTION LICENSEE. SINCE THE PPA DID NOT SPECIFY THE RATES OF PURCHASE FOR THE LATER PART OF THE PERIOD IN THE PPA BEYOND 31.03.2008, THAT FUNCTION SHOULD BE ASSUMED BY THE TAMIL NADU ELECTRICITY REGULATORY COMMISSION IN TERMS OF SECTION 62. THE ABOVE ASSUMPTION IS FORTIFIED BY THE FACT THAT THE PETITIONER COMPANY AT PARAGRAPH 7.7. OF THEIR PETITION AND THE RESPONDENT BOARD AT PARAGRAPH 9 OF THEIR COUNTER-AFFIDAVIT HAVE REQUESTED THIS COMMISSION TO FIX THE APPROPRIATE TARIFF. 5.4. THE PETITIONER PLEADS FOR DETERMINATION OF TARIFF AT PAR WITH AN INDEPENDENT POWER PRODUCER. FACTUALLY THE GENERATING COMPANY OF THE PETITIONER IS A CAPTIVE GENERATING PLANT AS PER THE TERMS OF THE PPA BETWEEN THE TWO PARTIES AND THEREFORE THE COMMISSION IS UNABLE TO TREAT THE PETITIONER AS AN INDEPENDENT POWER PRODUCER. 5.5. THE RESPONDENTS HAVE CONTENDED THAT THE PETITIONER BEING A CAPTIVE GENERATING PLANT SHOULD BE SUBJECTED TO ORDER NO.4 DATED 15- 05-2006 OF THE COMMISSION AND THE RELEVANT TARIFF SHOULD BE APPLIED TO THEM. WE REFER TO CLAUSE 4 OF ORDER NO.4 DATED 15- 05-2006 OF THE COMMISSION:- 4.0 APPLICABLITY OF ORDER THIS ORDER SHALL COME INTO FORCE FROM THE DATE OF ITS ISSUE. THIS ORDER SHALL BE APPLICABLE TO ALL FUTURE FOSSIL FUEL BASED CONTINUOUS DUTY GROUP CAPTIVE GENERATING PLANTS AND FOSSIL FUEL BASED COGENERATION PLANTS LOCATED WITH THE STATE OF TAMIL NADU. FOR SUCH OF THOSE CGP EXISTING BUT NOT COVERED BY SPECIFIC AGREEMENTS, THIS ORDER SHALL AUTOMATICALLY APPLY. IT SHOULD BE NOTED THAT THE EXISTING CONTRACTS AND AGREEMENTS IN THE MATTER OF CAPTIVE GENERATING PLANTS BETWEEN THE CGP HOLDERS AND THE DISTRIBUTION LICENSEE SIGNED PRIOR TO THE DATE OF ISSUE OF THIS ORDER WOULD CONTINUE TO REMAIN IN FORCE. HOWEVER, THE CGP HOLDERS AND DISTRIBUTION LICENSEES SHALL HAVE THE OPTION TO MUTUALLY RENEGOTIATE THE EXISTING AGREEMENTS/CONTRACTS, IF ANY, IN LINE WITH THIS ORDER EVEN BEFORE THE EXPIRY OF THE CONTRACTS. ANY RENEWAL OF THE SAID 19 ITA NO.1780/CHNY/2017 CONTRACTS/AGREEMENTS, NEW CONTRACTS/AGREEMENTS SHOULD BE IN LINE WITH THIS ORDER. 5.6. WHILE ORDER NO.4 PROTECTS THE AGREEMENTS FINALIZED BEFORE 15-05- 2006. AT THE SAME TIME, IT ENABLES THE TWO PARTIES TO RENEGOTIATE THE EXISTING AGREEMENT IN ACCORDANCE WITH THE ORDER. IN THIS PARTICULAR CASE, NEITHER THE PETITIONER NOR THE RESPONDENT MOVED FOR RE- NEGOTIATION WITH THE RESULT THAT THE PPA OF 1999 CONTINUED TO OPERATE. THE LIFE OF THE PPA IS FOR A PERIOD OF 15 YEARS UPTO 29-1-2014. THE ONLY OPEN QUESTION IS THE TARIFF APPLICABLE FROM 1-4-2008. 5.7. AS THE PPA HAD BEEN CONCLUDED BEFORE 15.05.2005 AND AS THE PPA WAS NOT RE-NEGOTIATED IN ACCORDANCE WITH ORDER NO.4, THE COMMISSION HOLDS THAT THE CONTENTION OF THE RESPONDENT FOR FIXATION OF TARIFF IN ACCORDANCE WITH THE ORDER NO.4 CANNOT BE ACCEPTED. 5.8. THIS LEAVES THE COMMISSION WITH ONLY ONE OPTION I.E. TO TREAT THE PETITIONER AS A CAPTIVE GENERATING PLANT AND YET DETERMINE A TARIFF CONSISTENT WITH THE PPA. THE PPA PROVIDES FOR ANNUAL ESCALATION OF 5% EVERY YEAR BEGINNING FROM 1998-99. IF THIS FORMULA IS ADOPTED, THE TARIFF FOR THE PERIOD BEYOND 1..4.2008 WILL BE AS FOLLOWS: 2008-09 RS.3.66 PER UNIT 2009-10 RS.3.85 PER UNIT 2010-11 RS.4.04 PER UNIT 2011-12 RS.4.24 PER UNIT 2012-13 RS.4.45 PER UNIT 2013-14 RS.4.67PER UNIT 5.9. THE COMMISSION BELIEVES THAT THIS FORMULA IS JUST AND FAIR FOR BOTH PARTIES WHICH SATISFIES THE SPIRIT OF THE PPA AS WELL AS THE REQUIREMENT OF SECTION 62 OF THE ELECTRICITY ACT 2003. WITH THE ABOVE FINDINGS, PPAP 3 OF 2008 IS FINALLY DISPOSED OF. NO COSTS. THEREFORE, EVEN THOUGH THERE WAS AN AMBIGUITY AND CONFUSION FOR RECOGNIZING THE INCOME OF THE ASSESSEE FOR THE VARIOUS ASSESSMENT YEARS ACCORDING TO THE TARIFF RATE PRESCRIBED IN THE PPA BECAUSE OF THE COHESIVE AND TACTICAL PRESSURE ADOPTED ON THE ASSESSEE COMPANY BY TNEB, DUE TO WHICH THE ASSESSEE COMPANY HAD DECLARED ITS REVENUE ONLY ON THE BASIS OF THE TARIFF RATE OF ` 3.01 PER UNIT (BECAUSE THERE WAS NO CERTAINTY OF REALIZING THIS DIFFERENTIAL RATE PER UNIT OF POWER TO THE TUNE OF RS. 44.62 CRORES), ON PASSING OF THE ORDER BY THE TNERC DATED 25.02.09 THE ENTIRE ARREARS HAS CRYSTALLIZED TO THE ASSESSEE DURING THE 20 ITA NO.1780/CHNY/2017 PERIOD 01.04.2008 TO 31.03.2009, I.E., FOR THE RELEVANT ASSESSMENT YEAR 2009-10. IT IS PERTINENT TO NOTE AT THIS JUNCTURE THAT THE ORDER DATED 25-02-2009 OF THE COMMISSION HAD COME INTO FORCE AFFIRMING THE TARIFF RATE STATED IN THE PPA MUCH BEFORE THE ORDER OF THE COMMISSION DATED 14-10-2009. MOREOVER AS POINTED OUT BY THE LD. A.R., THE REVENUE HAD RIGHTLY INCLUDED THIS ENTIRE INCOME FOR THE PURPOSE OF COMPUTATION OF MAT AND FOR DETERMINING THE PROFIT UNDER THE NORMAL PROVISIONS OF THE ACT FOR THE ASSESSMENT YEAR 2009-10, HOWEVER ERRED BY NOT CONSIDERING THE SAME FOR THE PURPOSE OF GRANTING DEDUCTION U/S.80IA OF THE ACT. THEREFORE, WE DO NOT FIND ANY HESITATION TO CONFIRM THE ORDER OF THE LD. CIT (A). NOW THE ONLY GRIEVANCE OF THE LD. D.R WAS THAT THE ORDER OF TNERC DATED 25.02.2009 WAS NOT BEFORE THE LD. ASSESSING OFFICER FOR CONSIDERATION. CONSIDERING THESE SUBMISSIONS OF THE LD. D.R, IN THE INTEREST OF JUSTICE WE FIND IT APPROPRIATE TO REMIT THE CASE BACK TO THE FILE OF LD. ASSESSING OFFICER FOR THE LIMITED PURPOSE OF VERIFYING THE AUTHENTICITY OF THE ORDER OF TNERC DATED 25.02.2009, NEEDLESS TO MENTION THAT IN THE EVENT, THE ORDER OF THE TNERC DATED 25.02.2009 IF FOUND TO BE GENUINE, THEN THE ORDER OF THE LD. CIT (A) STAND CONFIRMED OTHERWISE THE LD.AO SHALL CONSIDER THE ISSUE AFRESH AFTER PROVIDING ADEQUATE OPPORTUNITY TO THE ASSESSEE OF BEING HEARD. IT IS ORDERED ACCORDINGLY. 6.3 THUS THE TRIBUNAL IN ITS ORDER DATED 06.06.2014 FOR THE ASSESSMENT YEAR 2009-10 IN ITA NO.1460/MDS/2013 IN THE ASSESSEES OWN CASE FOR THE VERY SAME ISSUE HAS HELD THAT, ON PASSING OF THE ORDER BY THE TNERC DATED 25.02.2009, THE ENTIRE ARREARS HAD CRYSTALLIZED TO THE ASSESSEE DURING THE PERIOD 01.04.2008 TO 31.03.2009 I.E., FOR THE ASSESSMENT YEAR 2009-10. HOWEVER SINCE THE LD.DR HAD POINTED OUT THAT THE ORDER BY THE TNERC DATED 25.02.2009 WAS NOT BEFORE THE LD.AO FOR CONSIDERATION, THE TRIBUNAL HAD REMITTED THE MATTER BACK TO THE FILE 21 ITA NO.1780/CHNY/2017 OF LD.AO FOR THE LIMITED PURPOSE OF VERIFYING THE AUTHENTICITY OF THE ORDER OF TNERC DATED 25.02.2009 AND FURTHER DIRECTED THE LD.AO TO COMPLY WITH THE ORDER OF THE LD.CIT(A) AND GRAND RELIEF TO THE ASSESSEE IN THE EVENT THE ORDER OF THE TNERC DATED 25.02.2009 IS FOUND TO BE GENUINE, AND IF FOUND OTHERWISE TO CONSIDER THE ISSUE AFRESH AFTER PROVIDING ADEQUATE OPPORTUNITY TO THE ASSESSEE OF BEING HEARD. 6.3.1 SINCE WE HAVE ALREADY DECIDED THE VERY SAME ISSUE IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2009-10 ITSELF IN ITA NO.1460/MDS/2013 VIDE ORDER DATED 06.06.2014, FOR THE RELEVANT ASSESSMENT YEAR ALSO THE SAME FINDING AND DIRECTIONS HOLDS GOOD AND ACCORDINGLY WE HEREBY SET ASIDE THE ORDER OF THE LD.CIT(A) FOR THE RELEVANT ASSESSMENT YEAR ON THIS ISSUE AND REMIT BACK THE MATTER TO THE FILE OF LD.AO WITH SIMILAR DIRECTION. 7. GROUND NO.2(IV) : DEDUCTION U/S.80IA OF THE ACT FOR RS.3,18,78,052/-:- DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS, IT WAS OBSERVED BY THE LD.AO THAT THE ASSESSEE HAD CLAIMED DEDUCTION 22 ITA NO.1780/CHNY/2017 U/S.80IA OF THE ACT, WITH RESPECT TO THE INCOME EARNED BY THE BIOMASS DIVISION OF THE ASSESSEE FOR GENERATING POWER WHICH INCLUDES RECEIPTS FROM CARBON CREDITS AMOUNTING TO RS.1,97,45,600/- AND RENTAL INCOME RS.1,21,32,452/-. THE LD.AO WAS OF THE VIEW THAT THE INCOME EARNED FROM CARBON CREDIT AND RENTAL INCOME CANNOT BE TREATED AS THE PROFITS DERIVED FROM THE INDUSTRIAL UNDERTAKING GENERATING POWER AND ACCORDINGLY DISALLOWED THE CLAIM OF DEDUCTION U/S.80IA OF THE ACT AGGREGATING TO RS.3,18,78,052/-. ON APPEAL, THE LD.CIT(A) HELD THE ISSUE IN FAVOUR OF THE ASSESSEE BECAUSE IT WAS REVEALED THAT THE ASSESSEE HAD NOT EARNED ANY RENTAL INCOME AND FURTHER THE INCOME ARISING OUT OF THE CARBON CREDIT COULD BE CONSIDERED AS INCOME DERIVED FROM THE POWER GENERATING UNIT OF THE ASSESSEE. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD.CIT(A) ON THIS ISSUE. THE ASSESSEES BIOMASS DIVISION IS ELIGIBLE FOR CARBON CREDIT DUE TO THE EMISSION REDUCTION ACHIEVED BY THE POWER GENERATING PLANT OF THE UNIT. THEREFORE THE INCOME DERIVED FROM CARBON CREDIT IS DIRECTLY ATTRIBUTABLE TO THE POWER GENERATION UNIT OF THE ASSESSEE AND HENCE THE SAME CANNOT BE EXCLUDED WHILE GRANTING DEDUCTION U/S.80IA OF THE ACT. THE LD.CIT(A) HAS ALSO MADE A FINDING THAT THE ASSESSEE 23 ITA NO.1780/CHNY/2017 HAS NOT RECEIVED ANY RENTAL INCOME. THEREFORE WE HEREBY DIRECT THE LD.AO TO GRANT THE BENEFIT OF DEDUCTION U/S.80IA OF THE ACT FOR THE AMOUNT CLAIMED BY THE ASSESSEE FOR RS.3,18,78,052/-. 8. IN THE RESULT THE APPEAL OF THE REVENUE IS PARTLY ALLOWED AS INDICATED HEREIN ABOVE. ORDER PRONOUNCED ON THE 2 ND MAY, 2019 AT CHENNAI. SD/- SD/- ( ) (DUVVURU R.L REDDY) /JUDICIAL MEMBER ( . ) (A. MOHAN ALANKAMONY) / ACCOUNTANT MEMBER /CHENNAI, /DATED 2 ND MAY, 2019 RSR /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. ( )/CIT(A) 4. /CIT 5. /DR 6. /GF