DCIT, CHENNAI V. M/s. Chettinad Cement Corporation Ltd., CHENNAI

ITA 2356/CHNY/2016

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3963 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-11-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 16-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S SRIDHAR
• Keywords: Proportionate interest

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : CHENNAI . . . , ! . '#'$ , % !& ' [BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER ] ./I.T.A. NO. 2356/MDS/2016. / ASSESSMENT YEAR : 2010-2011. THE DEPUTY COMMISSIONER OF INCOME TAX, LARGE TAXPAYER UNIT-2, CHENNAI 600 101. VS. M/S. CHETTINAD CEMENT CORPORATION LIMITED, 4 TH FLOOR, RANI SEETHAI BUILDING, NO.603, ANNA SALAI, CHENNAI 600 006. [PAN AAACC 3130A] ( () / APPELLANT) ( *+() /RESPONDENT) / APPELLANT BY : MR. B. KOTESWARA RAO, CIT /RESPONDENT BY : SHRI. S. SRIDHAR, ADVOCATE /DATE OF HEARING : 16-11-2016 !' /DATE OF PRONOUNCEMENT 23-11-2016 / O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER THIS APPEAL FILED BY THE REVENUE IS AGAINST AN OR DER DATED 06.06.2016 OF LD. COMMISSIONER OF INCOME TAX (APPEA LS)-17, CHENNAI. ITA NO. 2356/MDS/2016 :- 2 -: 2. REVENUE HAS TAKEN ALTOGETHER THREE GROUNDS OF WHICH GROUNDS NO.1 & 3 ARE GENERAL IN NATURE NEEDING NO S PECIFIC ADJUDICATION. 3. VIDE ITS GROUND NO.2 DIVIDED INTO THREE PARTS, TWO GRIEVANCES HAVE BEEN RAISED. FIRST IS ON DELETION OF A DISALLO WANCE U/S. 80IA OF THE INCOME TAX ACT, 1961 (HEREIN AFTER REFERRED TO AS T HE ACT) FOR A CAPTIVE POWER PLANT. SECOND IS ON DIRECTION OF LD. COMMISSIONER OF INCOME TAX (APPEALS) REGARDING APPORTIONMENT OF INT EREST EXPENSES BETWEEN AN UNIT ON WHICH ASSESSEE WAS CLAIMING DEDU CTION U/S.80IA OF THE ACT AND ANOTHER UNIT ON WHICH NO SUCH CLAIM WAS MADE. 4. FACTS APROPOS ARE THAT ASSESSEE ENGAGED IN THE BUSI NESS OF MANUFACTURING AND SELLING CEMENT HAD FILED ITS RET URN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR DISCLOSING INCOME OF E 86,35,08,770/-. ASSESSEE HAD CLAIMED DEDUCTION U/S.80IA OF THE ACT ON A CAPTIVE POWER PLANT WHICH WAS GENERATING POWER FOR ALL ITS UNITS. LD. ASSESSING OFFICER DID NOT ALLOW SUCH DEDUCTION. A CCORDING TO HIM, CAPTIVE POWER PLANTS WERE DIFFERENT FROM STAND ALON E POWER GENERATING UNDERTAKINGS. AS PER LD. ASSESSING OFFICER OUTPUT O F THE CAPTIVE POWER PLANT WERE FOR INHOUSE USE, AND DEDUCTION U/S.80IA OF THE ACT COULD NOT BE ALLOWED ON NOTIONAL PROFIT OF SUCH POWER PLA NT. ITA NO. 2356/MDS/2016 :- 3 -: 5. LD. ASSESSING OFFICER ALSO NOTED THAT ASSESSEE HAD CLAIMED INTEREST EXPENDITURE OF E.76,79,38,038/-. AS PER L D. ASSESSING OFFICER SUCH INTEREST EXPENDITURE WAS REQUIRED TO BE ALLOCA TED BETWEEN UNITS CLAIMING DEDUCTION U/S.80IA AND OTHER NON 80IA UNIT S. ASSESSEE DID SUBMIT THAT IT HAD NOT AVAILED ANY LOAN FOR CAPTIVE POWER PLANT AND THE QUESTION OF APPORTIONMENT OF INTEREST DID NOT A RISE. AS PER THE ASSESSEE, PROJECTS LOANS AVAILED FROM CENTRAL BANK OF INDIA AND CANARA BANK, ON WHICH INTEREST WAS PAID WERE NOT USED FOR SETTING UP THE CAPTIVE POWER PLANT. LD. ASSESSING OFFICER HOWEVER DID NOT ACCEPT THESE CONTENTIONS. AS PER LD. ASSESSING OFFICER IN TEREST EXPENDITURE CLAIMED HAD TO BE APPORTIONMENT BETWEEN THE 80IA A ND NON 80IA UNITS IN THE RATIO OF THE TURNOVER. 6. AGGRIEVED, ASSESSEE MOVED IN APPEAL BEFORE LD. COMMISSIONER OF INCOME TAX (APPEALS). IN SO FAR AS DEDUCTION U/S.80IA OF THE ACT ON CAPTIVE POWER PLANT WAS CO NCERNED, LD. COMMISSIONER OF INCOME TAX (APPEALS) RELYING ON A DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN ITS OWN CASE FOR ASSESSMENT YEAR 2007-08 GAVE RELIEF TO THE ASSESSEE. IN SO FAR AS A PPORTIONMENT OF INTEREST ON 80IA UNIT AND NON 80IA UNITS WERE CONCE RNED, LD COMMISSIONER OF INCOME TAX (APPEALS) CONSIDERING TH E TRIBUNAL DECISION IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR S 2006-07, 2008- 09 AND 2010-2011 (IN ITA NOS.1085 & 448/2012 AND 46 8/2014, DATED ITA NO. 2356/MDS/2016 :- 4 -: 04.03.2016) HELD THAT LOANS BORROWED FOR CEMENT PRO JECT COULD NOT BE ALLOCATED TO THE CAPTIVE POWER PLANT UNIT ON WHICH ASSESSEE HAD CLAIMED DEDUCTION U/S.80IA OF THE ACT. 7. NOW BEFORE US, LD. DEPARTMENTAL REPRESENTATIVE STRO NGLY ASSAILING THE ORDERS OF THE LD. COMMISSIONER OF INC OME TAX (APPEALS) SUBMITTED THAT THE ISSUE REGARDING BENEFIT UNDER S ECTION 80IA OF THE ACT BEING GIVEN TO CAPTIVE POWER PLANTS HAD NOT RE ACHED FINALITY, SINCE THE DEPARTMENT HAD MOVED JURISDICTIONAL HIGH COURT AGAINST THE DECISION OF THE TRIBUNAL RELIED BY THE LD. COMMISS IONER OF INCOME TAX (APPEALS). AS FOR DISTRIBUTION OF THE INTEREST COS T LD. DEPARTMENTAL REPRESENTATIVE STRONGLY RELIED ON THE ORDER OF THE ASSESSING OFFICER. 8. PER CONTRA, LD. AUTHORISED REPRESENTATIVE PLACED ON RECORD THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ASSESSMENT YEAR 2011-2012 ( IN ITA NO.1492/2015, DATED 24.03.2016) AND SUBMITTED THAT CLAIM OF THE ASSESSEE WAS RIGHTLY ALLOWED BY T HE COMMISSIONER OF INCOME TAX (APPEALS). 9. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND THE OR DERS OF THE AUTHORITIES BELOW. IN SO FAR AS QUESTION OF DE DUCTION U/S.80IA OF THE ACT FOR CAPTIVE POWER PLANT IS CONCERNED, WE FI ND THAT THIS ISSUE WAS DECIDED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT ITA NO. 2356/MDS/2016 :- 5 -: YEAR 2011-12 (SUPRA) IN ASSESSEES FAVOUR. THE TRI BUNAL HAD IN ITS ORDER DATED 24.03.2016 HELD AS UNDER:- 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EI THER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON REC ORD. WE HAVE ALSO GONE THROUGH THE PROVISIONS OF SEC. 80 IA OF THE ACT. SEC. 80IA PROVIDES FOR DEDUCTION FROM T HE PROFITS AND GAINS DERIVED FROM AN INDUSTRIAL UNDERT AKING ON THE BUSINESS OF DEVELOPING, OPERATING AND MAINTAINING ANY INFRASTRUCTURE FACILITY. ELECTRICIT Y IS AN INFRASTRUCTURE 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 INDUS TRIAL UNDERTAKING FOR THE PURPOSE OF ALLOWING DEDUCTION U/S 80IA OF THE ACT. THIS TRIBUNAL IS OF THE CONSID ERED OPINION THAT WHEN THE ASSESSEE GENERATES THE ELECTR ICITY WHETHER IT IS SOLD IN THE OPEN MARKET OR CONSUMED T HE SAME FOR ITS OWN USE, THE UNIT WHICH GENERATES ELECTRICITY HAS TO BE CONSTRUED AS AN INDEPENDENT A ND SEPARATE UNDERTAKING AND ELIGIBLE FOR DEDUCTION U/S 80IA. MERELY BECAUSE THE ASSESSEE CONSUMED ELECTRIC ITY BY ITSELF FOR ITS OWN MANUFACTURING ACTIVITY, THAT WILL NOT DISENTITLE THE ASSESSEE FROM DEDUCTION U/S 80IA. THEREFORE, THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A). ACCORDINGLY , THE SAME IS CONFIRMED. COMING TO THE ASPECT OF APPORTIONMENT OF INTEREST, WE FIND THAT THIS ISSUE WAS ALSO CONSIDERED BY THE TRIBUNAL IN THE VE RY SAME ORDER MENTIONED ABOVE WHERE IT WAS HELD AS UNDER:- 24. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON E ITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON REC ORD. THE ASSESSEE BORROWED LOAN FOR THE CEMENT PROJECT A ND NO LOAN WAS BORROWED 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 DIFFERE NT PURPOSES AND THE BALANCE SHEET OF THE ASSESSEE CLEA RLY SHOWS THE CLASSIFICATION OF THE SECURED LOAN, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE DISALLOWANCE OF ITA NO. 2356/MDS/2016 :- 6 -: PROPORTIONATE INTEREST BETWEEN THE ELIGIBLE AND NON - ELIGIBLE UNIT IS NOT JUSTIFIED. THEREFORE, THE CIT( A) HAS RIGHTLY ALLOWED THE CLAIM OF THE ASSESSEE. THIS TRI BUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A). ACCORDINGLY, THE SAME IS CONFIRMED . THERE IS NO CASE FOR THE REVENUE THAT ANY OF THE IN TEREST CHARGED BY THE ASSESSEE WAS RELATABLE TO ANY LOAN EXCLUSIVELY RAISED BY THE ASSESSEE FOR THE CAPTIVE POWER PLANT. IN OTHER W ORDS, ASSESSEES CONTENTION THAT LOANS WERE NOT AT ALL USED FOR PUT TING UP ITS POWER PLANT STANDS UNREBUTTED . WE THEREFORE FIND NO REASON TO INTERFERE WITH THE ORDER OF LD. COMMISSIONER OF INCOME TAX (A PPEALS). 10. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DIS MISSED. ORDER PRONOUNCED ON WEDNESDAY, THE 23 RD DAY OF NOVEMBER, 2016, AT CHENNAI. SD/- SD/- ( . . . # ) (N.R.S. GANESAN) / JUDICIAL MEMBER ( ! . '#'$ ) (ABRAHAM P. GEORGE) % / ACCOUNTANT MEMBER $% / CHENNAI &' / DATED:23RD NOVEMBER, 2016 KV '( )*+* / COPY TO: 1 . / APPELLANT 3. ,-# / CIT(A) 5. *./ 0 / DR 2. / RESPONDENT 4. , / CIT 6. /12 / GF