A.C.I.T.RANGE 9(2), MUMBAI V. HALDYN GLASS GUJARAT LTD, MUMBAI

ITA 1902/MUM/2011

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8039 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Next Hearing Date: 30-07-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 08-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH J, MUMBAI !' , # $% & & & & , , $% ' BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER, AND SHRI VIVEK VARMA, JUDICIAL MEMBER ITA NO. : 1902/MUM/2011 (ASSESSMENT YEAR: 2007-08) INCOME-TAX OFFICER (TDS)-2(2), ROOM NO. 707, SMT. K.G. MITTAL, AYURVEDIC HOSPITAL, CHARNI ROAD, MUMBAI VS M/S HALDYN GLASS GUJARAT LTD., ORIENTAL HOUSE, 4 TH FLOOR, 7, J. TATA ROAD, CHURCHGATE, MUMBAI - 400 020 %( # .: PAN: AAACH 1434 J (+ (APPELLANT) ,-(+ (RESPONDENT) APPELLANT BY : SHRI MAURYA PRATAP RESPONDENT BY : SHRI PIYUSH CHATURVEDI ./0# /DATE OF HEARING : 30-07-2014 123 ./0#/ DATE OF PRONOUNCEMENT : 08-08-2014 $ 5 $ 5 $ 5 $ 5 O R D E R , . . . . . .. . PER VIVEK VARMA, J.M. : INSTANT APPEAL IS FILED BY THE DEPARTMENT AGAINST T HE ORDER OF CIT(A)-20, MUMBAI, DATED 28.12.2010, WHEREIN, THE F OLLOWING GROUNDS HAVE BEEN RAISED: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT THE ASSESSEE I S ENTITLED TO DEDUCTION U/S 80IA OF THE I.T. ACT, 1961, OVERLOOKING THE FINDING OF THE ASSESSING OFFICER THAT ASSESSEE HAS NOT FULFI LLED THE CONDITIONS OF SECTION 80IA(4)(IV). 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT THE CAPTIVE PO WER PLANT IS AN INDEPENDENT INDUSTRIAL UNDERTAKING ELIGIBLE FOR DEDUCTION U/S 80IA OF THE I.T. ACT, 1961, DESPITE THE PRINCIPLE LAI D DOWN, MUTATIS MUTANDIS, IN THE CASE OF M/S UNIVERSAL ELEC TRIC LTD. (1992) (63 TAXMAN 213 (CAL.) ) TO THE EFFECT THAT A CAPTIVE POWER PLANT AS IN THE INSTANT CASE IS NOT A SEPARATE UNDE RTAKING. 3. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RE STORED. 4. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUNDS OR ADD A NEW GROUND WHICH MAY BE NECESSARY. M/S. HALDYN GLASS GUJARAT LTD. ITA NO. 1902/MUM/2011 2 2. THE FACTS ARE THAT THE ASSESSEE IS IN THE BUSINE SS OF MANUFACTURE OF GLASS BOTTLES AND CONTAINERS. THE MA NUFACTURING FACILITY OF THE ASSESSEE RUNS ON POWER. FOR CONSTAN T AND UNINTERRUPTED POWER SUPPLY, THE ASSESSEE INSTALLED DG SETS FOR IT S SELF CONSUMPTION. 3. IT WAS IN THE PRECEDING YEAR THAT THE ASSESSEE S ET UP DG SETS, RUN ON GAS, FOR SMOOTH GENERATION OF POWER. CONSEQU ENTLY, THE ASSESSEE CLAIMED DEDUCTION U/S 80IA(4)(IV), AS THE POWER BEING GENERATED WAS BEING USED BY IT. 4. THE AO IN THE ORDER ADMITS THAT THE INSTANT YEAR IS THE SECOND YEAR WHEN THE CLAIM HAD BEEN MADE FOR DEDUCTION, BU T BEING FIRST YEAR FOR REGULAR ASSESSMENT, THE ISSUE IS TAKEN UP IN TH E INSTANT YEAR. THE AO, ON THE BASIS OF HIS JUDGMENT, DENIED THE CLAIM OF DEDUCTION U/S 80IA(4)(IV). AGGRIEVED, THE ASSESSEE APPROACHED THE CIT(A), WHO AFTER CONSIDERING THE ENTIRE ISSUE, OBSERVED, 6.3 IN THE INSTANT CASE, THE NEW UNIT ESTABLISHED BY THE APPELLANT IS ENGAGED IN ENTIRELY NEW ACTIVITY EVEN THOUGH THE SERVICES OUT OF THE NEW ACTIVITY ARE UTILIZED B Y THE EXISTING UNIT. TILL THE APPELLANT SET UP THE CPP, I T WAS USING THE POWER FROM OUTSIDE SOURCE LIKE STATE ELEC TRICITY BOARD. IN ORDER TO AUGMENT THE POWER SUPPLY, IT HAS COMMISSIONED THE CPP RUN BY GAS FIRED GENERATORS. E VEN SUB-SECTION (8) OF SECTION 80-IA ENVISAGES SUCH A S ITUATION OF CAPTIVE USE OF PRODUCTS OR SERVICES OF AN ELIGIBLE BUSINESS THERE UNDER. THE SUB-SECTION PRESCRIBES THAT WHERE ANY GOODS OR SERVICES HELD FOR THE PURPOSES OF THE ELIG IBLE BUSINESS ARE TRANSFERRED TO ANY OTHER BUSINESS CARR IED ON BY THE ASSESSEE AND THE CONSIDERATION, IF ANY, FOR SUCH TRANSFER AS RECORDED IN THE ACCOUNTS OF THE ELIGIBL E BUSINESS DOES NOT CORRESPOND TO THE MARKET VALUE OF SUCH GOODS OR SERVICES AS ON THE DATE OF THE TRANSFER, T HEN, FOR THE PURPOSES OF THE DEDUCTION UNDER THIS SECTION, T HE PROFITS AND GAINS OF SUCH ELIGIBLE BUSINESS SHALL BE COMPUT ED AS IF THE TRANSFER HAD BEEN MADE AT THE MARKET VALUE OF S UCH GOODS OR SERVICES AS ON THAT DATE. THE NEW UNIT OF THE APPELLANT CAN SURVIVE ON OWN BY SELLING THE POWER I N THE OPEN MARKET. SIMPLY BECAUSE NO OUTSIDERS ARE CONSUMING OR ALLOWED AT PRESENT TO CONSUME THE POWE R GENERATED BY IT DOES NOT CEASE TO MAKE THE CPP AS T HE NEW UNDERTAKING INDEPENDENT IN OPERATION WHICH CAN SURV IVE BY ITSELF BY SELLING THE POWER TO OUTSIDERS. THUS IN T HE COMMERCIAL SENSE THE CPP IS AN UNDERTAKING WITH A S EPARATE BUSINESS CAPABLE OF SURVIVING INDEPENDENT OF THE AP PELLANT'S OTHER BUSINESSES AND PROVIDING IDENTIFIABLE SERVICE S AND MAKING ITSELF A REVENUE GENERATING CENTRE. THIS IS WHAT HAS M/S. HALDYN GLASS GUJARAT LTD. ITA NO. 1902/MUM/2011 3 BEEN HELD IN THE DECISION OF THE ITAT IN THE CASE O F WEST COAST PAPER MILLS LTD (SUPRA) RELIED UPON BY THE AP PELLANT. THE AO HAS, THEREFORE, ERRED IN HOLDING THAT THE CP P IS NOT AN INDEPENDENT UNIT ELIGIBLE FOR DEDUCTION U/S 80-I A(4)(IV)(A). IN SUM, THE APPELLANT IS ENTITLED TO DEDUCTION OF T HE PROFITS DERIVED FROM THE UNDERTAKING RUNNING THE CPP UNDER SECTION 80- IA OF THE ACT. 5. THE CIT(A), THEREFORE, REVERSED THE FINDING OF T HE AO AND ALLOWED THE CLAIM OF DEDUCTION U/S 80IA(4)(IV). 6. AGAINST THIS ORDER, THE DEPARTMENT IS IN APPEAL BEFORE THE ITAT. 7. BEFORE US, THE DR PLACED RELIANCE ON THE ORDER O F THE AO, WHEREAS THE AR PLACED RELIANCE ON THE ORDER OF THE CIT(A). 8. HAVING HEARD THE RIVAL CONTENTIONS, TWO ISSUES E MERGE, (A) WHETHER SETTING UP OF DG SETS TO AUGMENT POWER A CA PTIVE POWER PLANT (CPP) AND (B) WHETHER TO BECOME ELIGIBLE FOR CLAM O F DEDUCTION U/S 80IA(4)(IV) IN THE INSTANT CASE, IT COULD BE ACCEPT ED THAT POWER SO GENERATED IS USED BY ANOTHER UNIT. 9. WE FIND THAT BOTH THE QUESTIONS HAVE BEEN ANSWER ED BY THE CIT(A) IN HIS OBSERVATIONS IN PARA 6.3 (AS REPRODUCED HERE ABOVE). 10. WE ALSO FIND THAT THE SIMILAR ISSUE HAS BEEN DE ALT WITH BY VARIOUS FORA. IN THE CASE OF CIT VS TANFAC INDUSTRI ES LTD. IN SLP NO. 18537 OF 2009, THE HONBLE SUPREME COURT DISMISSED THE SLP FILED AGAINST THE ORDER OF HONBLE MADRAS HIGH COURT, WHE REIN THE HIGH COURT HAD SUSTAINED THE DECISION OF THE CO-ORDINATE BENCH IN CHENNAI. THE IDENTICAL ISSUE CAME UP BEFORE COORDINATE BENCH AT MUMBAI IN THE CASE OF WEST COAST PAPER MILLS LTD. VS. ACIT, REPOR TED IN 103 ITD 19 (MUM), WHEREIN, IT WAS HELD, IN VIEW OF VARIOUS DECISIONS OF THE SUPREME COURT AND THE HIGH COURTS ON THE ISSUE OF ALLOWANCE OF DEDUCTION UNDER SECTION 80-IA, THE CLAIM OF THE ASSESSEE COULD NOT B E DENIED ONLY ON THE GROUND THAT THE DG SETS MANUFACTURED PO WER ONLY FOR THE CAPTIVE CONSUMPTION OF THE ASSESSEE. THE TR IBUNAL IN THE ASSESSMENT YEARS 1997-98 AND 1998-99, HAD ALREADY G RANTED M/S. HALDYN GLASS GUJARAT LTD. ITA NO. 1902/MUM/2011 4 RELIEF TO THE ASSESSEE UNDER SECTION 80-IA IN RESPEC T OF DG SETS, WHICH WERE ESTABLISHED FOR THE PURPOSE OF CAPTIVE C ONSUMPTION. MOREOVER, THE PROVISION OF SECTION 80IA(8) ITSELF S AYS THAT WHERE ANY GOODS OR SERVICE OF THE ELIGIBLE BUSINESS ARE T RANSFERRED TO ANY OTHER BUSINESS CARRIED ON BY THE ASSESSEE AND T HE CONSIDERATION, IF ANY, FOR SUCH TRANSFER RECORDED I N THE ACCOUNTS OF THE ELIGIBLE BUSINESS DOES NOT CORRESPOND TO THE MARKET VALUE OF SUCH GOODS OR SERVICES AS ON THE DATE OF TRANSFE R, THEN FOR THE PURPOSE OF DEDUCTION UNDER THAT SECTION, THE PROFIT AND GAIN FOR SUCH TRANSFERRED BUSINESS SHALL BE COMPUTE D AS IF THE TRANSFER HAS BEEN MADE AT MARKET VALUE AS ON TH AT DATE. IN OTHER WORDS, THE PROVISIONS OF SECTION 80IA THEMSELV ES PROVIDE AN ANSWER AND GIVE A SOLUTION WHERE THERE IS A CAPT IVE CONSUMPTION OF THE FINISHED GOODS OF THE ELIGIBLE U NITS. THEREFORE, THE ORDER OF THE COMMISSIONER (APPEALS), GRANTING RELIEF UNDER SECTION 80-IA IN RESPECT OF DG UNITS, WAS JUSTIFIED. 11. IN THE CASE OF ADD. CIT VS ULTRA TECH CEMENT LT D., ITA NO. 1831/MUM/2012 (WHERE ONE OF US WAS A PARTY) , THE ISSUE WAS HELD TO BE IN FAVOUR OF THE ASSESSEE, IN WHICH CASE ALSO, T HE ASSESSEE HAD SET UP DG SETS FOR CPP. 12. IN THESE CIRCUMSTANCES, WE FIND THAT DIFFERENT FORA HAS DELVED ON THE ISSUE, WHICH IS IDENTICAL TO THE ISSUE, THAT OF THE ASSESSEE. IN THE INSTANT APPEAL, THEREFORE, IN OUR OPINION, THE ISSU E RAISED BY THE DEPARTMENT IN THE INSTANT APPEAL, DESERVES TO BE RE JECTED. 13. WE, THEREFORE, SUSTAIN THE ORDER OF THE CIT(A) AND REJECT THE APPEAL AS FILED BY THE DEPARTMENT. EVEN OTHERWISE, THE APPEAL DESERVES TO BE REJECTED ON THE CONSISTENCY OF APPROACH. THE AO HAD CLEARLY OBSERVED THAT THIS WAS THE SECOND YEAR OF CLAIM OF DEDUCTION, THOUGH FIRST YEAR OF SCRUTINY. IF THE AO FOUND MERIT IN DI STURBING THE ISSUE WHICH IS COMING FROM PRECEDING YEAR, THEN IN THAT C ASE, THE CORRECT APPROACH WOULD HAVE BEEN TO REOPEN THE PRECEDING YE AR(S). THE LAW DOES NOT APPRECIATE THE DISTURBANCE OF ACCEPTED PRO POSITION AND BREAKING THE CONSISTENCY WITHOUT ANY REASONABLE CAU SE, AS HELD BY HONBLE KARNATAKA HIGH COURT IN CIT VS SRIDEV ENTER PRISES, REPORTED IN M/S. HALDYN GLASS GUJARAT LTD. ITA NO. 1902/MUM/2011 5 192 ITR 165 (KAR), WHEREIN THE HONBLE KARNATAKA HI GH COURT OBSERVED, CONSISTENCY AND DEFINITENESS OF APPROACH IS NECESSARY. 14. IN THE RESULT, THE APPEAL FILED BY THE DEPARTME NT IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 8 TH AUGUST, 2014. SD/- SD/- ( !' ) ( ) # $% $% (N.K. BILLAIYA) (VIVEK VARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 8 TH AUGUST, 2014 ,// COPY TO:- 1) (+/ THE APPELLANT. 2) ,-(+/ THE RESPONDENT. 3) THE CIT (A)-20, MUMBAI. 4) 6 9 , MUMBAI / THE CIT-9, MUMBAI. 5) 78,/ , THE D.R. J BENCH, MUMBAI. 6) 89: COPY TO GUARD FILE. $5 / BY ORDER / / TRUE COPY / / [ ;/< , DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI *>?< .. * CHAVAN, SR. PS