DCIT, New Delhi V. M/s K.R. Pulp & Papers Ltd, New Delhi

ITA 1920/DEL/2013

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 2719 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 9 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 15-10-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 03-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RICHA RASTOGI

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH F NEW DELHI) BEFORE SHRI I.C. SUDHIR AND SHRI L.P. SAHU ITA NO. 1920/DEL/2013 ASSESSMENT YEAR: 2009-10 DCIT, VS. K.R. PULP & PAPERS LTD., CIRCLE 5(1), 304- ROOTS TOWER, NEW DELHI. NEW DELHI. (PAN: AAACK5861C) (APPELLANT) (RESPONDENT) ASSESSEE BY: VED JAIN, CA DEPARTMENT BY: MS. RICHA RASTOG I, SR. DR DATE OF HEARING : 15 .10.2015 DATE OF PRONOUNCEMENT: 13 :01.2016 ORDER PER I.C. SUDHIR: JUDICIAL MEMBER THE REVENUE HAS QUESTIONED FIRST APPELLATE ORDER O N THE FOLLOWING GROUNDS: 1. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(APPEALS) WAS JUSTIFIED IN ALLOWING THE DEDUCTIO N OF RS.3,88,42,025 U/S. 80IA IGNORING THE FINDINGS OF T HE A.O. THAT ASSESSEE HAS NOT EARNED ANY ACTUAL PROFIT IN THE PO WER UNIT ? 2. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(APPEALS) WAS JUSTIFIED IN ACCEPTING THE FORMULA OF COST IN THE RATIO OF ENERGY INSTEAD OF COST IN THE RATIO OF STE AM PRESSURE AS ADOPTED BY THE A.O.? 3. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(APPEALS) WAS JUSTIFIED IN ACCEPTING THE EFFICIE NCY OF 85 TO 2 86% INSTEAD OF FURTHER REDUCTION OF 15% BY THE A.O. ON THE GROUND THAT IDEAL CONDITION RARELY EXIST AND EVEN IF SO IT WILL NOT BE THROUGHOUT THE YEAR? 2. HEARD AND CONSIDERED THE ARGUMENTS ADVANCED BY T HE PARTIES IN VIEW OF ORDERS OF THE AUTHORITIES BELOW, MATERIAL AVAILA BLE ON RECORD AND THE DECISIONS RELIED UPON. 3. THE FACTS IN BRIEF ARE THAT DURING THE YEAR THE ASSESSEE WAS OPERATING A HUSK (FUEL) BASED CAPTIVE POWER PLANT WHICH WAS USE D BY IT BY GENERATING ELECTRICITY FOR ITS PAPERS MANUFACTURING UNITS. THE ASSESSEE BEING ELIGIBLE FOR DEDUCTION UNDER SEC. 80IA OF THE ACT CLAIMED A DEDU CTION OF RS.3,88,42,025 FROM THE GROSS TOTAL INCOME. THE ASSESSING OFFICER DID NOT ALLOW THE CLAIMED DEDUCTION BESIDES OTHERS ON THE BASIS OF THE ASSESS MENT ORDER FOR THE ASSESSMENT YEAR 2008-09 WHEREIN A SIMILAR DISALLOWA NCE WAS MADE. THE ASSESSING OFFICER ALSO MADE DISALLOWANCE ON THE BAS IS THAT NOBODY CAN EARN PROFIT OUT OF ONESELF AS TRANSFER OF POWER FROM ONE UNIT TO ANOTHER UNIT CANNOT BE SAID TO BE SOLD, POWER GENERATED BY THE A SSESSEE WAS PRIMARILY TO REDUCE COST OF POWER AND FUEL EXPENDITURE OF OTHER UNIT, PROFIT COMPUTED BY THE ASSESSEE FOR GENERATION OF POWER WAS NOT CORREC T, ASSESSEE HAS NOT SUBMITTED PROJECT VIABILITY REPORT, NUMBER OF UNITS GENERATED DURING THE YEAR, 3 WHILE COMPUTING THE PROFIT OF THE POWER UNDERTAKING IS REGARDING THE RATE OF THE ELECTRICITY ETC. BEFORE THE LEARNED CIT(APPEAL S), THE ASSESSEE TRIED TO MEET THESE OBJECTIONS OF THE ASSESSING OFFICER AND BEING SATISFIED THEREWITH, THE LEARNED CIT(APPEALS) HAS ACCEPTED THE CLAIMED D EDUCTION AGAINST WHICH REVENUE IS IN APPEAL BEFORE THE ITAT ON THE ISSUES RAISED IN THE ABOVE GROUNDS. 4. IN SUPPORT OF THE GROUNDS, THE LEARNED SENIOR DR PLACED RELIANCE ON THE ASSESSMENT ORDER. SHE REITERATED THE OBJECTIONS RAISED BY THE ASSESSING OFFICER JUSTIFYING THE REJECTION OF THE CLAIMED DED UCTION, WHICH HAVE BEEN DISCUSSED HEREINABOVE IN BRIEF WHILE DISCUSSING THE FACTS OF THE CASE. SHE REQUESTED FURTHER THAT THE MATTER MAY BE SET ASIDE TO THE FILE OF THE ASSESSING OFFICER TO ASCERTAIN AS TO WHETHER ASSESSEE HAS MAI NTAINED ACCOUNTS OF THE TWO UNITS SEPARATELY AND FOR THE PURPOSE OF RATE OF THE ELECTRICITY UNIT GENERATED BY IT. 5. THE LEARNED AR ON THE OTHER HAND TRIED TO JUSTIF Y THE FIRST APPELLATE ORDER. HE SUBMITTED THAT THE ISSUES RAISED IN THE G ROUNDS ARE FULLY COVERED BY SEVERAL DECISIONS CITED BY THE ASSESSEE BEFORE T HE LEARNED CIT(APPEALS). HE ALSO PLACED RELIANCE ON THOSE DECISIONS WHILE RE ITERATING THE SUBMISSIONS 4 MADE BEFORE THE AUTHORITIES BELOW. HE SUBMITTED THA T IN THE ASSESSMENT YEAR 2008-09, THE ISSUE HAS BEEN DECIDED IN FAVOUR OF TH E ASSESSEE BY THE FIRST APPELLATE AUTHORITY. 6. CONSIDERING THE ABOVE SUBMISSION, WE FIND THAT T HE ASSESSEE HAS TRIED TO MEET OUT THE OBJECTIONS RAISED BY THE ASSESSING OFFICER JUSTIFYING THE REJECTION OF THE CLAIMED DEDUCTION UNDER SEC. 80IA OF THE ACT TO THE ASSESSEE. ON THE OBJECTION OF THE ASSESSING OFFICER THAT THE TRANSFER FROM THE POWER UNIT TO ANOTHER UNIT CANNOT BE SAID TO BE SALE WHIC H AS PER HIM WAS IN DISREGARD OF PROVISIONS OF SEC. 80IA(8) OF THE ACT, THE REPLY OF THE ASSESSEE REMAINED THAT THE BENEFIT OF DEDUCTION UNDER SEC. 8 0IA IS AVAILABLE EVEN TO A PERSON WHO GENERATES, AS CAN BE SEEN THAT THERE IS A WORD OR BETWEEN GENERATES OR GENERATES AND DISTRIBUTES IN THE PROVI SIONS UNDER SECTION 80IA OF THE ACT. IT WAS SUBMITTED THAT THE ASSESSING OFF ICER WAS NOT CORRECT IN STATING THAT THE CLAIMED DEDUCTION IS AVAILABLE TO AN ENTERPRISE WHICH GENERATES OR GENERATES AND DISTRIBUTE POWERS AND SI NCE ASSESSEE IS NOT DISTRIBUTING POWERS TO ANY THIRD PARTY OR TO THE GR EED AND ACCORDINGLY THE ASSESSEE IS NOT COVERED WITHIN THE SECTION. IT WAS POINTED OUT THAT ELECTRIC TURBINE SET UP BY THE ASSESSEE IS AN UNDERTAKING AN IS GENERATING POWER AND IT FULFILLS ALL THE CONDITIONS WHICH HAVE BEEN PRESCRI BED IN SECTION 80IA OF THE 5 ACT FOR WHICH THERE IS NO DISPUTE IN THE ASSESSMENT ORDER. HAVING GONE THROUGH THE PROVISIONS LAID DOWN UNDER SEC. 80IA OF THE ACT, WE CONCUR WITH THE ABOVE CONTENTIONS OF THE ASSESSEE, WHICH IS ALS O SUPPORTED BY THE DECISION OF HON'BLE MADRAS HIGH COURT IN THE CASE OF TAMILNADU PETRO- PRODUCTS LTD. VS. ACIT 238 CTR (MAD.) 454 HOLDING THAT THE ASSESSEE IS ENTITLED TO DEDUCTION UNDER SEC. 80IA IN RESPECT OF NOTIONAL INCOME FROM GENERATION OF ELECTRICITY WHICH WAS CAPTIVELY CONSU MED BY ITSELF. IN THE CASE OF CIT VS. ORISSA CEMENT LTD. 254 ITR 412 (DEL.), THE ASSESSEE HAD CARRIED ON MINING OPERATIONS OF LIME STONE FOR THE MANUFACTURE OF CEMENT. THE FIRST AND SECOND APPELLATE AUTHORITY FOUND THAT THE PRODUCTION OF LIME STONE WAS DONE AT A STAGE FOR THE PURPOSE OF MANUFA CTURE OF CEMENT AND THAT IT WAS POSSIBLE, FROM THE AUDITED STATEMENT, TO COM PUTE THE PROFITS ON THE BASIS OF TRANSFER OF LIME STONE TO THE INITIAL STAG ES AT THE MARKET PRICE. IT WAS HELD THAT THE ASSESSEE WAS ENTITLED TO BENEFIT OF S PECIAL DEDUCTION UNDER SEC. 80I IN RELATION TO THE PROFITS DERIVED FROM THE PRO DUCTION OF LIME STONES. AGAIN IN THE CASE OF CIT VS. CHITRAN & CO. PVT. LTD . 191 ITR 96 (MADRAS), IT HAS BEEN HELD THAT IN ORDER TO CLAIM RELIEF UNDE R SEC. 80I OF THE ACT, THE ASSESSEE SHOULD BE ENGAGED IN THE PRODUCTION OF MAN UFACTURE OR ONE OR MORE OR THE ITEMS ENUMERATED IN SCHEDULE-VI TO THE INCOM E-TAX ACT, 1961, IN WHICH CASE THE ASSESSEE SHOULD BE REGARD AS ENGAGED IN A PRIORITY INDUSTRY. 6 THE EMPHASIS FOR GRANT OF RELIEF IS ON THE MANUFACT URE OF ONE OR MORE OF THE ITEM ENUMERATED IN SCHEDULE VI. WHETHER THE ITEMS M ENTIONED IN SCHEDULE- VI ARE MANUFACTURED AND SOLD BY THE ASSESSEE AS SUC H OR UTILIZED BY THE ASSESSEE IN THE MANUFACTURE OF OTHER GOODS FOR SALE WILL NOT MAKE ANY DIFFERENCE FOR GRANT OF RELIEF UNDER SEC. 80I, HELD THE HON'BLE HIGH COURT. FOLLOWING RATIOS OF THESE DECISIONS AND THE OTHERS AS DISCUSSED BY THE LEARNED CIT(APPEALS), WE ARE OF THE VIEW THAT THE L EARNED CIT(APPEALS) WAS JUSTIFIED IN ACCEPTING THE CLAIMED DEDUCTION WI TH THIS FINDING THAT IT DOES NOT MAKE DIFFERENCE WHETHER THE ASSESSEE GENERATES AND SELLS THE ELECTRICITY OR UTILIZES IT FOR ITS MANUFACTURING OF OTHER GOODS FOR SALE. 7. THE ASSESSING OFFICER HAS ALSO REJECTED THE CLAI M ON THE BASIS THAT PROFIT COMPUTED BY THE ASSESSEE FOR GENERATION OF P OWER IS NOT CORRECT. THE ASSESSING OFFICER THEREAFTER HAD DRAWN HIS OWN TRAD ING ACCOUNT ON PAGE NO. 5 IN PARA 3.1.3 OF THE ASSESSMENT ORDER. THE CONTEN TION OF THE ASSESSEE AGAINST THIS OBJECTION REMAINED THAT THE ASSESSING OFFICER WHILE DRAWING THIS TRADING ACCOUNT HAS MADE VARIOUS ASSUMPTIONS. HE HA S ALLOCATED 9/10 TH OF THE TOTAL EXPENDITURE TO THE ELECTRICITY GENERATION WIT H THE LOGIC OF RATIOS OF PRESSURE OF STEAM, THE RATIOS OF THE PRESSURE OF ST EAM ENTERING THE TURBINE AND THE PRESSURE OF THE SAME COMING OUT. THE ASSESSING OFFICER ALSO DID NOT 7 AGREE WITH THE ASSESSEE FOR BIFURCATING THE COST. T HE ASSESSEE CONTENDED THAT THE METHOD OF COST ALLOCATION OF THE ASSESSING OFFI CER WAS NOT SCIENTIFIC. THE ASSESSEE HAD FILED BEFORE THE ASSESSING OFFICER THE CALCULATION OF GENERATION OF UNITS. AS PER THIS, THE TOTAL RICE HUSK CONSUMPT ION DURING THE YEAR WAS 37,204 M.T. EACH ONE TONE RICE HUSK PRODUCED 3.83 M .T. OF STEAM. THE STEAM SO PRODUCED WAS AT 46 A.T.A AND 420 DEGREE CE NTIGRADE TEMPERATURE. THE CALORIE VALUE OF SUCH STEAM WAS 79 KCAL/KG. ACC ORDINGLY THE TOTAL ENERGY SO PRODUCED FROM THE RICE HUSK OF 37,204 MTS COMES TO 11,10,00,489 KCL/KG. OUT OF THIS TOTAL ENERGY SO P RODUCED WAS USED IN THE PAPER PLANT, DETAILS OF WHICH WERE FURNISHED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER AND THE SAME HAS ALSO BEEN REPROD UCED BY THE LEARNED CIT(APPEALS) AT PAGE NO. 14 OF THE FIRST APPELLATE ORDER. THE ASSESSEE SUBMITTED THAT THE MEASUREMENT OF ENERGY WAS DONE I N KCAL AND AS SUCH THE CONTENTION OF THE ASSESSING OFFICER THAT THE FORMUL A USED BY THE ASSESSEE FOR THE ALLOCATION OF EXPENSES WAS NOT CORRECT. THE ASS ESSING OFFICER HAD SIMPLY USED THE STEAM PRESSURE FOR ALLOCATION OF THE COST WHICH CANNOT BE A BASIS. IT WAS CONTENDED THAT MEASUREMENT HAS TO BE DONE IN TE RMS OF ENERGY WHICH HAS TO BE MEASURED IN KCL. IN ABSENCE OF ANY REASON GIVEN BY THE ASSESSING OFFICER AS TO WHY THE FORMULA USED BY THE ASSESSEE WAS WRONG, WE ARE OF THE VIEW THAT LEARNED CIT(APPEALS) HAS RIGHTLY ACCEPTED THE ABOVE CONTENTION 8 OF THE ASSESSEE THAT OBSERVATION OF THE ASSESSING O FFICER THAT THE ASSESSEE HAD ALLOCATED COST IN PROPORTION TO TEMPERATURE WAS NOT CORRECT. 8. THE THIRD CONTENTION OF THE ASSESSING OFFICER WA S THAT THE ASSESSEE HAD NOT SUBMITTED PROJECT VIABILITY REPORT. MEETING OUT THIS OBJECTION, THE ASSESSEE SUBMITTED THAT IT HAD FURNISHED TO THE ASS ESSING OFFICER INFORMATION ABOUT THE POWER PLANT AT ANNEXURE TO THE LETTER DAT ED 13.12.2010, A COPY OF WHICH HAS BEEN PLACED AT PAGE NO. 96 TO 100 OF THE PAPER BOOK. IT WAS FURTHER SUBMITTED THAT THE POWER GENERATION IS SUBJ ECT TO THE GOVERNMENT REGULATIONS AND THERE IS REGULAR INSPECTION BY THE GOVERNMENT DEPARTMENT AND A REPORT OF SUCH INSPECTION WAS ALSO FURNISHED TO THE ASSESSING OFFICER. IT WAS POINTED OUT THAT DURING THE COURSE OF SUCH I NSPECTION, A DATE-WISE CHART WAS ALSO PREPARED MONITORING THE CONSUMPTION OF RAW-MATERIAL AND POWER GENERATION, A COPY WHEREOF WAS PRODUCED BEFOR E THE ASSESSING OFFICER IN THE INSPECTION REPORT CALCULATION REGARD ING THE AVERAGE POWER GENERATION AND THE RICE HUSK CONSUMPTION WAS SHOWN. REGARDING THE NUMBER OF UNITS GENERATED DURING THE YEAR AS RAISED BY THE ASSESSING OFFICER AND HIS STATEMENT THAT THE ASSESSEE HAD GIVEN ITS OWN CALCU LATION OF NUMBER OF UNITS OF ELECTRICITY GENERATED, THE EXPLANATION OF THE AS SESSEE REMAINED THAT SUCH CALCULATIONS HAVE BEEN REDUCED BY 15% BY THE ASSESS ING OFFICER ON THE 9 GROUND THAT IDLE CONDITION RARELY EXISTS AND IT WIL L NOT BE SO THROUGHOUT THE YEAR. BASES ON THIS, THE ASSESSING OFFICER REDUCED THE NUMBER OF UNITS OF POWER PRODUCED AS PER THE ASSESSEE FROM 1,39,06,143 TO 1,18,20,222. THUS, THE DISPUTE WAS REGARDING THE DIFFERENCE OF 15%. TH E LEARNED CIT(APPEALS) AT PAGE NOS. 15 AND 16 OF THE FIRST APPELLATE ORDER HAS DEALT WITH THE ISSUE AND OBSERVED THAT THE PERUSAL OF THE SUBMISSIONS OF THE ASSESSEE SHOWS THAT IT HAD COMPUTED ITS CALCULATION AT 85% OF THE EFFICIEN CY ITSELF. THE ASSESSEE CONSIDERING THE EFFICIENCY AT 8% TO 86% HAD COMPUTE D THE POWER TRANSFERRED TO PAPER UNIT AT 39,06,143 UNITS, CLEARLY DEMONSTRA TING THAT THE ASSESSEE HIMSELF HAD COMPUTED THE EFFICIENCY BY REDUCING THE SAME TO 85 TO 86% AND THEREFORE, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN FURTHER REDUCING THE SAME BY ANOTHER 15%. IN ABSENCE OF SPECIFIC REBUTTA L OF THE ABOVE FACTS BY THE REVENUE BEFORE THE ITAT, WE DO NOT FIND REASON TO INTERFERE WITH THE FINDINGS OF THE LEARNED CIT(APPEALS) IN THIS REGARD . 9. REGARDING THE OBJECTION ON THE RATE OF ELECTRICI TY FOR COMPUTING THE PROFIT OF POWER UNDERTAKING RAISED BY THE ASSESSING OFFICER, THE EXPLANATION OF THE ASSESSEE REMAINED THAT THE ASSESSEE HAD TAKE N THE RATE AT 4.50 PER UNIT WHICH HAS NOT BEEN DISPUTED BY THE ASSESSING OFFICE R BUT THE ASSESSING OFFICER HAD REDUCED THE SAME TO RS.3 PER UNIT ON TH E BASIS THAT WHEN POWER 10 IS SENT BY THE STATE ELECTRICITY BOARD, IT HAD TO I NCUR BEYOND THE GENERATING COST, BILLING CHARGES AND DISTRIBUTION CHARGES. ON THIS BASIS, THE ASSESSING OFFICER HAD THAT THE SELLING PRICE OF THE POWER FOR THE ASSESSEE SHOULD BE 2/3 RD OF RS.4.50 I.E. RS.3 PER UNIT. THE ASSESSEE SUBMIT TED THAT COMPUTATION DONE BY THE ASSESSING OFFICER DOES NOT HAVE ANY SCI ENTIFIC BASIS. THE ASSESSING OFFICER AGREED WITH THE VIEW THAT STATE E LECTRICITY BOARD, SELLING PRICE WAS RS.4.50 PER UNIT AND IF THAT BE THE CASE THEN PROVISIONS OF SEC. 80IC(8) CANNOT BE IGNORED WHEREBY THE PROFIT HAS TO BE COMPUTED BY APPLYING THE MARKET RATE. THE MARKET RATE HAS TO BE THE PRICE AT WHICH POWER IS BEING SOLD IN THE OPEN MARKET. IF THE ASSESSEE B OUGHT POWER FROM UP STATE ELECTRICITY BOARD, IT WOULD BE HAVE BEEN REQUIRED T O PAY RS.4.50 PER UNIT. CONSIDERING THESE SUBMISSIONS, THE LEARNED CIT(APPE ALS) HAS COME TO THE CONCLUSION THAT THE ASSESSING OFFICER WAS NOT JUSTI FIED IN REDUCING THE PER UNIT PRICE TO RS. 3 PER UNIT AS AGAINST RS.4.50 PER UNIT. IN THIS REGARD, THE CL HAS ALSO TAKEN STRENGTH FROM THE DECISION OF MUMBAI BENCH OF THE ITAT IN THE CASE OF DCW LTD. VS. ACIT (2010) 132 TTJ (MUM BAI) 442. THE FIRST APPELLATE ORDER IS COMPREHENSIVE AND REASONED ONE W E ARE NOT INCLINED TO INTERFERE THEREWITH. THE SAME IS UPHELD. 10. IN THE PRECEDING PARAGRAPHS, WE HAVE DISCUSSED THAT THE ASSESSEE HAS BEEN ABLE TO SATISFACTORILY MEET OUT THE OBJECTIONS RAISED BY THE ASSESSING 11 OFFICER TO JUSTIFY THE CLAIMED DEDUCTION, ON THE BA SIS OF WHICH THE LEARNED CIT(APPEALS) HAS ACCEPTED THE CLAIMED DEDUCTION UND ER SEC. 80IA OF THE ACT AT RS.3,38,97,680. AS DISCUSSED ABOVE, THE FIRST AP PELLATE ORDER ON THE IS COMPREHENSIVE AND REASONED ONE TO WHICH WE FULLY CO NCUR WITH. THE SAME IS UPHELD. 11. IN RESULT, THE GROUNDS ARE REJECTED. THE APPEAL PREFERRED BY THE REVENUE IS ACCORDINGLY DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13.01.2016 SD/- SD/- ( L.P. SAHU ) ( I.C. SUDHIR ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 13/01/2016 MOHAN LAL COPY FORWARDED TO: 1) APPELLANT 2) RESPONDENT 3) CIT 4) CIT(APPEALS) 5) DR:ITAT ASSISTANT REGISTRAR 12 DATE DRAFT DICTATED ON COMPUTER 13.01.2016 DRAFT PLACED BEFORE AUTHOR 13.01.2016 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. 13.01.20 16 APPROVED DRAFT COMES TO THE SR.PS/PS 13.01.2016 KEPT FOR PRONOUNCEMENT ON 13.01.2016 FILE SENT TO THE BENCH CLERK 13.01.2016 DATE ON WHICH FILE GOES TO THE AR DATE ON WHICH FILE GOES TO THE HEAD CLERK. DATE OF DISPATCH OF ORDER.