ACIT, CHENNAI V. M/s. Ucal Fuel Systems Ltd., CHENNAI

ITA 2438/CHNY/2005

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 5393 (ITAT-CHENNAI)
• Duration Of Justice: 8 year(s) 3 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 10-02-2014
• Assessment Year: 2002-2003
• Appeal Filed On: 03-11-2005
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N MADHAVAN
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Question of law

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , C B ENCH, CHENNAI . , !' # , $ % BEFORE SHRI A.MOHAN ALANKAMONY ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./I.T.A.NO. 2438/MDS/2005 ( / ASSESSMENT YEAR : 2002-03) ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE-III(3), CHENNAI. VS. M/S. UCAL FUEL SYSTEMS LTD. UNIT 505, DELTA WING RAHEJA TOWERS, 177, ANNA SALAI,CHENNAI-2 PAN:AAACU0541K ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. N.MADHAVAN, JCIT /RESPONDENT BY : MR. R.VIJAYARAGHAVAN, ADVOCATE / DATE OF HEARING : 10 TH FEBRUARY, 2014 ! /DATE OF PRONOUNCEMENT : 27 TH FEBRUARY, 2014 & / O R D E R PER CHALLA NAGENDRA PRASAD, JM: THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-III, CHENN AI DATED 31.08.2005. 2. AT THE TIME OF HEARING, COUNSEL FOR THE ASSESSEE SUBMITS THAT THE HONBLE HIGH COURT BY ORDER DATED 12.4.201 1 RESTORED ITA NO.2438/MDS/2005 2 THIS APPEAL TO THE FILE OF THE TRIBUNAL TO DECIDE T HE ISSUE IN REFERENCE ON MERITS. THE COUNSEL SUBMITS THAT THE I SSUE IN APPEAL BEFORE THE HIGH COURT WAS WHETHER THE ASSESS EE IS ENTITLED FOR DEDUCTION UNDER SECTION 80-IA ON THE G ENERATION OF POWER AND UTILIZED FOR CAPTIVE CONSUMPTION. NOW THI S ISSUE HAS BEEN SETTLED IN FAVOUR OF THE ASSESSEE BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF TAMIL NADU PETRO PRODUCTS VS. ACIT (338 ITR 643) . HE FURTHER SUBMIT S THAT IN THE CASE OF CIT VS. TANFAC INDUSTRIES (319 ITR 8) ( ST), THE HONBLE SUPREME COURT DISMISSED SLP FILED BY THE DEPARTMENT ON SIMILAR ISSUE. 3. WE HAVE PERUSED THE ORDER OF THE HONBLE HIGH CO URT DATED 12.4.2011 IN TAX CASE (APPEAL) NO.1449 OF 201 0 IN THE CASE OF THE ASSESSEE WHEREIN THE HONBLE COURT REST ORED THE APPEAL IN ITA NO.2438/MDS/2005 TO THE FILE OF THE T RIBUNAL AND THE QUESTION RAISED BEFORE THE HIGH COURT WAS A S UNDER:- WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE INCOME TAX APPELLATE TRIBUNAL WAS RIGHT IN LAW IN HOLDING IN FOLLOWING THE DECISIONS IN ITA NO.364/2002-03 DATED 6.8.2004 AS THE ORDER WAS ONLY PASSED BY THE CIT(A) AND ITA NO.2438/MDS/2005 3 NOT THAT OF THE COORDINATE BENCH OF THE APPELLATE TRIBUNAL? 4. WE HAVE ALSO PERUSED THE ORDER OF THE TRIBUNAL IN ITA NO.2438/MDS/2005 FOR THE ASSESSMENT YEAR 2002-03. THE ASSESSING OFFICER WHILE COMPLETING ASSESSMENT DISAL LOWED DEDUCTION CLAIMED UNDER SECTION 80-IA OF THE ACT ON GENERATION OF POWER THROUGH WINDMILL STATING THAT IT IS ONLY TRANSFER OF EB GRID AND THERE IS NO ELEMENT OF SALE . THE COMMISSIONER OF INCOME TAX (APPEALS) DECIDED THE IS SUE IN FAVOUR OF THE ASSESSEEE AND DIRECTED TO ALLOW REL IEF UNDER SECTION 80IA AND WHILE DOING SO, THE COMMISSIONER OF INCOME TAX (APPEALS) FOLLOWED THE DECISION OF HIS PREDECESSOR IN THE ASSESSEES OWN CASE FOR THE ASS ESSMENT YEAR 1996-97 VIDE ORDER IN ITA NO.364/2002-03 DATE D 6.8.2004 OBSERVING AS UNDER:- 5. THE NEXT GROUND OF APPEAL IS AGAINST THE DISALLOWANCE OF DEDUCTION CLAIMED U/S.80-IA. THE ASSESSING OFFICER STATED THAT THE DEDUCTION CLAIMED U/S.80IA FOR ` 76,86,602/- TOWARDS GENERATION OF POWER THROUGH WINDMILL SINCE IT IS ONLY A TRANSFER TO EB GRID AND THERE IS NO ELEMENT OF SALE AND HENCE THE SAME IS DISALLOWED. ITA NO.2438/MDS/2005 4 HOWEVER, THE APPELLANT SUBMITTED THAT THE COMPANY HAS SET UP WIND ELECTRICITY GENERATION UNITS, WHICH HAVE COMMENCED GENERATION OF ELECTRICITY AND THE ELECTRICITY GENERATED IS FED I NTO THE TNEB GRID. FURTHER THE APPELLANT SUBMITTED THAT AS PER SUB-SECTION (2) OF SECTION 80-IA THE DEDUCTION SPECIFIED IN SUB-SECTION (1) AT THE OPTION OF THE ASSESSEE BE CLAIMED FOR ANY TEN CONSECUTIVE ASSESSMENT YEARS OUT OF FIFTEEN YEARS BEGINNING FROM THE YEAR IN WHICH THE UNDERTAKING OR ENTERPRISES BEGINS TO GENERATE POWER OF COMMENCES TRANSMISSION OR DISTRIBUTION OF POWER. THE APPELLANT STATED THAT THE COMPANY HAS EXERCISED ITS OPTION OF CLAIMING DEDUCTION U/S.80IA FOR THE FIRST TIME IN THE F.Y.2001-02 AND THE MARKET VALUE OF THE ELECTRICITY GENERATED IS THE INCOME ON WHICH THE DEDUCTION OF SECTION 80IA IS CLAIMED. THE APPELLANT FURTHER RELIED ON THE DECISION OF CIT(A)-III IN THEIR OWN CASE FOR THE A.Y.1996-97 VIDE ORDER IN ITA NO.364/2002-03 DATED 6.8.2004. 5.1 I HAVE CONSIDERED RIVAL VIEW POINTS. THIS IS A COVERED ISSUED DECIDED BY CIT(A)-III, CHENNAI IN FAVOUR OF THE APPELLANT IN ITA NO.364-2002-03 DATED 6.8.2004 IN WHICH I AM ALSO IN FULL AGREEMENT. FOLLOWING THE SAME I DIRECT THE ASSESSING OFFICER TO ALLOW THE RELIEF U/S.80-IA IN ACCORDANCE WITH THE PROVISIONS OF LAW. THE APPELLANT SUCCEEDS ON THIS GROUND. THE HONBLE HIGH COURT RESTORED THE ISSUE TO THE FI LE OF THE TRIBUNAL TO DECIDE THE ISSUE ON MERITS. ITA NO.2438/MDS/2005 5 5. WE HAVE ALSO PERUSED THE DECISION OF THE JURISDI CTIONAL HIGH COURT IN THE CASE OF TAMIL NADU PETRO PRODUCT S LTD. VS. ACIT (SUPRA) AND FIND THAT THIS ISSUE IN APPEAL I S SQUARELY COVERED BY THE HONBLE JURISDICTIONAL HIGH COURT, W HEREIN IT WAS HELD AS UNDER:- THE ISSUE IS DIRECTLY COVERED BY THE DECISION OF TH IS COURT DATED 7-6-2010 IN TAX CASE (APPEAL) NOS. 68 T O 70 OF 2010. THE SUBSTANTIAL QUESTION OF LAW RAISED IN THESE APP EALS WAS: 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE TRIBUNAL WAS RIGHT IN HOLDING THAT THE ASSESSEE IS ENTITLED TO DEDUCTION UNDER SECTION 80- IA OF THE INCOME-TAX ACT IN RESPECT OF NOTIONAL PROFITS O N ACCOUNT ON POWER GENERATED FROM ITS OWN CAPTIVE POWER PLANT AND UTILISED BY ITSELF ?' AFTER CONSIDERING THE ISSUE, THE STATUTORY REQUIREM ENT AS PRESCRIBED UNDER SECTION 80-IA(1) HAS BEEN STATED I N PARAS 8 AND 9 OF THE ABOVESAID JUDGMENT WHICH READS THUS : '8. THE CONTENTION THAT ONLY WHATEVER POWER GENERAT ED FROM THE SALE TO AN OUTSIDER OR THE ELECTRICITY BOA RD, AND THE PROFIT OR GAIN DERIVED BY SUCH SALE ALONE C AN BE TAKEN AS PROFITS OR GAINS DERIVED BY THE ASSESSEE A S MENTIONED IN SECTION 80-IA(1) OF THE INCOME-TAX ACT , HAS BEEN REJECTED BY THE TRIBUNAL IN THE ORDER IMPUGNED. IN OUR CONSIDERED VIEW, THE TRIBUNAL WAS WELL JUSTIFIED IN HAVING REJECTED SUCH A STAND OF T HE APPELLANT. HAVING REFERRED TO SECTION 80-IA(1) OF T HE INCOME-TAX ACT, WE ARE ALSO CONVINCED THAT WHAT IS ALL TO BE SATISFIED IN ORDER TO BE ELIGIBLE FOR THE DED UCTION AS PROVIDED UNDER SUB-SECTION (1) OF SECTION 80-IA, THE ASSESSEE SHOULD HAVE SET UP AN UNDERTAKING OR AN ENTERPRISE AND FROM AND OUT OF SUCH AN UNDERTAKING OR ITA NO.2438/MDS/2005 6 AN ENTERPRISE SET UP, ANY PROFIT OR GAIN IS DERIVED , FALLING UNDER SUB-SECTION COVERED BY SUB-SECTION (4) OF SEC TION 80-IA OF THE INCOME-TAX ACT, SUCH PROFIT OR GAIN DE RIVED BY THE ASSESSEE CAN BE DEDUCTED IN ITS ENTIRETY FOR A PERIOD OF 10 YEARS STARTING FROM THE DATE OF FUNCTI ONING OF THE SET UP. THE CONTENTION THAT PROFIT OR GAIN C AN BE CLAIMED BY THE ASSESSEE ONLY IF SUCH PROFIT OR GAIN IS DERIVED BY THE SALE OF ITS PRODUCT OR POWER GENERAT ED TO AN OUTSIDER CANNOT BE THE MANNER IN WHICH THE PROVISIONS CONTAINED IN SECTION 80-IA(1) CAN BE INTERPRETED. THE EXPRESSION 'DERIVED' USED IN THE S AID SECTION 80-IA(1) IN THE BEGINNING AS WELL AS IN THE LAST PART OF SUB-SECTION (4) MAKES IT ABUNDANTLY CLEAR T HAT SUCH PROFIT OR GAIN COULD BE OBTAINED BY ONE'S OWN CONSUMPTION OF THE OUTCOME OF ANY SUCH UNDERTAKING OR BUSINESS ENTERPRISE AS REFERRED TO IN SUB-SECTIO N (4) OF SECTION 80-IA. THE DICTIONARY MEANING OF THE EXPRESSION 'DERIVE' IN THE NEW OXFORD DICTIONARY OF ENGLISH STATES 'OBTAINING SOMETHING FROM A SPECIFIE D SOURCE'. IN SECTION 80-IA(1) ALSO NO RESTRICTION HA S BEEN IMPOSED AS REGARDS THE DERIVING OF PROFIT OR GAIN I N ORDER TO STATE THAT SUCH PROFIT OR GAIN DERIVED ONL Y THROUGH AN OUTSIDE SOURCE ALONE WOULD MAKE ELIGIBLE FOR THE BENEFITS PROVIDED IN THE SAID SECTION. 9. THEREFORE, THERE IS NO DIFFICULTY IN HOLDING THA T CAPTIVE CONSUMPTION OF THE POWER GENERATED BY THE ASSESSEE FROM ITS OWN POWER PLANT WOULD ENABLE THE RESPONDENT/ASSESSEE TO DERIVE PROFITS AND GAINS BY WORKING OUT THE COST OF SUCH CONSUMPTION OF POWER INASMUCH AS THE ASSESSEE IS ABLE TO SAVE TO THAT EX TENT WHICH WOULD CERTAINLY BE COVERED BY SECTION 80-IA(1 ). WHEN SUCH WILL BE THE OUTCOME OUT OF OWN CONSUMPTION OF THE POWER GENERATED AND GAINED BY TH E ASSESSEE BY SETTING UP ITS OWN POWER PLANT, WE DO N OT FIND ANY LACK OF MERIT IN THE CLAIM OF THE RESPONDENT/ASSESSEE WHEN IT CLAIMED BY RELYING UPON SECTION 80-IA(1) OF THE INCOME-TAX ACT BY WAY OF DEDUCTION OF THE VALUE OF SUCH UNITS OF POWER CONSUMED BY ITS OWN PLANT BY WAY OF PROFITS AND GAI NS FOR THE RELEVANT ASSESSMENT YEARS.' MR. K. SUBRAMANIAN, LEARNED STANDING COUNSEL FOR THE RESPONDENT WOULD HOWEVER CONTEND THAT THE EXPRESSION 'DERIVED FROM' SHOULD BE GIVEN RESTRICTE D ITA NO.2438/MDS/2005 7 MEANING IN WHICH EVENT THE CLAIM OF THE APPELLANT C ANNOT BE COUNTENANCED. ACCORDING TO THE LEARNED STANDING COUNSEL SINCE THE BUSINESS OF THE APPELLANT IS MANUFACTURE OF PETRO PRODUCTS AND GENERATION OF ELECTRICITY IS NOT ITS BUSINESS, IT CANNOT BE HELD THAT WHATEVER PROFIT EARNED, EVEN NOTIONAL PROFIT, BY VI RTUE OF CAPTIVE CONSUMPTION, CANNOT BE CONSTRUED AS PROFIT EARNED FROM AND OUT OF THE INCOME DERIVED FROM THE BUSINESS UNDERTAKING. IN OUR CONSIDERED OPINION, THE SAID CONTENTION CAN HAVE NO APPLICATION TO THE CASE ON HAND. INASMUCH A S WE DEALT WITH THE ISSUE IN THE LIGHT OF SECTION 80- IA AND IN PARTICULAR SUB-CLAUSE (IV) OF THE SAID SECTION WHIC H PROVIDES FOR THE BENEFIT EVEN IN RESPECT OF ELECTRI CITY GENERATION PLANT ESTABLISHED BY THE ASSESSEE AND TH E INCOME DERIVED FROM SUCH ENTERPRISE OF THE ASSESSEE , IT WILL HAVE TO BE HELD THAT THE ASSESSEE FULLY COMPLI ED WITH THE REQUIREMENTS PRESCRIBED UNDER SECTION 80-IA IN ORDER TO AVAIL THE BENEFITS PROVIDED THEREIN. THEREFORE, THE CONTENTION BASED ON THE INTERPRETATION OF THE EXPRE SSION 'DERIVED FROM' CAN HAVE NO APPLICATION TO THE CASE WHERE THE PROVISIONS OF SECTION 80-IA GET ATTRACTED. 6. RESPECTFULLY FOLLOWING THE DECISION OF THE HON BLE JURISDICTIONAL HIGH COURT IN THE ABOVE CITED CASE, WE DISMISS THE GROUND RAISED BY THE REVENUE. 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON THURSDAY, T HE 27 TH DAY OF FEBRUARY, 2014 AT CHENNAI. SD/- SD/- (A.MOHAN ALANKAMONY) (CHALLA NAGEN DRA PRASAD) ACCOUNTANT MEMBER JUDI CIAL MEMBER CHENNAI, DATED THE 27 TH FEBRUARY, 2014. SOMU ITA NO.2438/MDS/2005 8 COPY TO: (1) APPELLANT (4) CIT(A) (2) RESPONDENT (5) D.R (3) CIT (6) G.F.