Dy.CIT, Circle-16(1), Hyderabad V. M/s Navagharat Ventures Limited, Hyderabad

ITA 258/HYD/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74453 (ITAT-HYDERABAD)
• Duration Of Justice: 10 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 01-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P SOMASEKHAR REDDY
• Assessee Lawyers: V SIVA KUMAR
• Section: 143(3); 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND S HRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO.258/HYD/2013 ASSESSMENT YEAR 2006-07. DY. CIT, CIR-16(1), -V- M/S . NAVBHARAT VENTURES LIMITED, CIR-16(1), HYDERABAD. SOMAJIG UDA, HYDERABAD. PAN:AAACN7327C (APPELLANT) (RESPONDENT) APPELLANT BY SHRI P. SOMASEKHAR REDDY RESPONDENT BY SHRI V. SIVA KUMAR DATE OF HEARING 07-01-2014 DATE OF PRONOUNCEMENT 10-O1-2014 ORDER PER SAKTIJIT DEY, J.M: THIS APPEAL FILED BY THE DEPARTMENT IS DIRECTED A GAINST THE ORDER DATED 30-11-2012 OF CIT (A)-V, HYDERABAD PASSED IN ITA NO.0349/DC- 16(1)/CIT(A)-V/201-12 PERTAINING TO ASSESSMENT YEA R 2006-07. 2. THE ONLY ISSUE WHICH ARISES OUT OF THE GROUND S RAISED WITH REGARD TO THE CIT (A) DELETING THE ADDITION MADE OF RS.22,05,55,703 ON ACCOUNT OF EXCESS EXPENDITURE CLAIMED BY THE ASS ESSEE. 3. BRIEFLY THE FACTS RELATING TO THE ISSUE ARE, THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS AND MANUFACTURE OF FERRO ALLOYS, SUGAR EQUIPMENT AND GENERATION OF POWER, FILED ITS RETURN OF INCOME 2 ITA NO.258 OF 2013 M/S NAVBHARAT VENTURES LIMITED, HYD. FOR THE YEAR UNDER CONSIDERATION ON 29-11-2006 ADMI TTING A TOTAL INCOME OF RS.1,71,89,000/- UNDER THE NORMAL PROVISI ONS OF THE ACT. THE ASSESSMENT PROCEEDINGS IN THE CASE OF THE ASSES SEE WERE INITIATED AND AN ORDER U/S 143(3) WAS PASSED ON 30- 12-2008 DETERMINING TOTAL INCOME OF RS.39,06,44,900/- WHICH WAS SUBSEQUENTLY MODIFIED IN A CONSEQUENTIAL ORDER DATE D 17-2-2010 IN PURSUANCE TO AN ORDER PASSED BY THE CIT (A) ALLOWI NG DEDUCTION U/S 80IA OF THE ACT. SUBSEQUENTLY, THE ASSESSMENT WAS R EOPENED U/S 147 OF THE ACT ON THE GROUND THAT THERE IS EXCESS E XPENDITURE CLAIMED BY THE ASSESSEE AMOUNTING TO RS.22,04,68,70 9/- IN RESPECT OF POWER CONSUMED IN FERRO ALLOYS PLANT. THE ASSESS EE CONTENDED THAT THERE IS NO SUCH EXCESS EXPENDITURE CLAIMED BY THE ASSESSEE AS THE TAXABLE INCOME WAS COMPUTED TAKING INTO ACCOUNT THE NET PROFIT FOR THE YEAR AS PER ANNUAL ACCOUNT WHICH COMPRISES OF PROFIT FROM ALL THE UNITS PUT TOGETHER. IT WAS SUBMITTED THAT INCOME OF EACH UNIT WAS NOT COMPUTED SEPARATELY AND IT IS ONLY FOR THE PURPOSE OF COMPUTING THE DEDUCTION U/S 80IA, SEPARATE COMPUTAT ION OF INCOMES WERE MADE FOR EACH UNIT WHEREVER DEDUCTIONS ARE ALL OWABLE U/S 80IA OF THE ACT. 4. THE ASSESSEE SUBMITTED THAT THE REDUCED RATE OF POWER IS CONSIDERED ONLY FOR THE PURPOSE OF COMPUTING DEDUCT ION ALLOWABLE U/S 80IA OF THE ACT AND DOES NOT HAVE ANY IMPACT ON THE NET PROFIT OF THE COMPANY AS A WHOLE SINCE THE INCOME OF POWER UNIT WILL BE EXPENDITURE OF FERRO ALLOYS PLANT. IT WAS THUS SUB MITTED THAT INCOME OF POWER PLANT WILL BE LESS, IF LOWER RATE IS ADOPT ED FOR POWER TRANSFERRED BY IT TO FERRO ALLOY PLANT RESULTING IN DECREASE IN EXPENDITURE IN FERRO ALLOYS UNIT BUT WILL NOT HAVE ANY IMPACT ON THE NET PROFIT OF THE COMPANY FOR THE YEAR UNDER CONSID ERATION. 3 ITA NO.258 OF 2013 M/S NAVBHARAT VENTURES LIMITED, HYD. CONVERSELY, IF EXPENDITURE IN FERRO ALLOYS PLANT IS OVERSTATED BECAUSE OF ADOPTING A HIGHER RATE OF POWER CONSUMED BY IT FROM POWER PLANT, INCOME FROM POWER PLANT ALSO WOULD BE OVERSTATED TO THE SAME EXTENT LEAVING NO IMPACT ON THE NET PROFIT OF THE COMPANY FOR THE YEAR. IT WAS THEREFORE CONTENDED BY THE AS SESSEE THAT REDUCTION IN COST OF POWER FOR THE PURPOSE OF COMPU TING DEDUCTION U/S 80IA DOES NOT HAVE ANY IMPACT ON THE NET TAXABL E INCOME OF THE COMPANY FOR THE YEAR AS IT IS ONLY TOTAL INCOME WHI CH IS LIABLE TO TAX BUT NOT THE INCOME OF THE UNITS SEPARATELY. THE AS SESSING OFFICER HOWEVER DID NOT ACCEPT THE CONTENTION OF THE ASSESS EE BY HOLDING THAT ONCE THE EXPENDITURE OF INFLATION IN THE INCO ME OF POWER UNIT I.E. FERRO ALLOYS PLANT HAS BEEN DETERMINED, ITS LO GICAL COROLLARY COULD BE TO REDUCE THE POWER EXPENDITURE IN THE FER RO ALLOYS PLANT I.E., PROFIT CALCULATION. THE ASSESSING OFFICER ACC ORDINGLY WORKED OUT ALLEGED EXCESS EXPENDITURE CLAIMED BY THE ASSESSEE TO THE TUNE OF RS.22,05,55,703/- WHICH WAS DISALLOWED AND ADDED BA CK TO THE INCOME OF THE ASSESSEE. BEING AGGRIEVED OF SUCH AD DITION, THE ASSESSEE CHALLENGED THE SAME IN AN APPEAL BEFORE TH E CIT (A). 5. IN COURSE OF HEARING OF APPEAL BEFORE THE CIT (A ), THE ASSESSEE REITERATED THE STAND TAKEN BEFORE THE ASSESSING O FFICER. THE CIT (A) AFTER CONSIDERING THE CONTENTIONS OF THE ASSESS EE DELETED THE ADDITION BY OBSERVING AS UNDER:- 7.2 I HAVE GONE THROUGH THE SUBMISSIONS OF THE APPE LLANT, COMPUTATION ENCLOSED AND THE RELIANCE PLACED ON THE ORDER OF THE TRIBUNAL IN THEIR OWN CASE FOR ASSESSMENT YEAR 2004-05 ON SIMILAR ISSUE. IN THE REASSESSMENT ORDER, THE A SSESSING OFFICER REJECTED THE CLAIM OF THE ASSESSEE STATING THAT ONCE THE EXPENDITURE OF INFLATION IN THE INCOME OF POWER UNIT, I.E., 4 ITA NO.258 OF 2013 M/S NAVBHARAT VENTURES LIMITED, HYD. FERRO ALLOYS PLANT HAS BEEN DETERMINED, ITS LOGICAL COROLLARY COULD BE TO REDUCE HE POWER EXPENDITURE IN THE FERR O ALLOYS PLANT. HOWEVER, I DO NOT FIND ANY LOGIC IN THE ABO VE STATEMENT OF THE ASSESSING OFFICER MADE IN THE REAS SESSMENT ORDER, ADDING RS.22,05,55,703/-. ONCE THE FINANCIAL RESULTS OF ALL THE UNITS OF THE APPELLANT ARE CLUBBED AND ONLY THE NET INCOME/LOSS ARRIVED AT IS OFFERED TO TAX, INFLATION OF EXPENDITURE OF ONE UNIT WOULD RESULT IN OVERSTATING INCOME OF ANOTHER UNIT OF THE SAME APPELLANT. THE NET RESULT WOULD BE NIL. 7.3 IN VIEW OF THE ABOVE AND ALSO RESPECTFULLY F OLLOWING THE DECISION OF THE JURISDICTIONAL TRIBUNAL IN APPELLAN TS OWN CASE FOR THE ASSESSMENT YEAR 2004-05, THE ADDITION OF RS.22,05,55,703/- IS NOT JUSTIFIABLE AND THE ASSESS ING OFFICER IS DIRECTED TO DELETE THIS ADDITION. 6. WE HAVE HEARD THE SUBMISSIONS OF THE PARTIES AND PERUSED THE MATERIALS ON RECORD AS WELL AS THE FINDING OF THE L OWER AUTHORITIES ON THIS ISSUE. WE DO NOT FIND ANY INFIRMITY IN THE OR DER OF THE CIT (A) IN DELETING THE ADDITION MADE BY THE ASSESSING OFFI CER TO THE TUNE OF RS.22,05,55,703/-. AS CAN BE SEEN, THE ASSESSING OF FICER WITHOUT PROPERLY APPRECIATING THE FACT THAT THE ALLEGED INF LATION IN EXPENDITURE WOULD HAVE NO IMPACT ON THE INCOME OF T HE ASSESSEE HAD MADE A FICTIONAL ADDITION OF RS.22,05,55,703/-. ALL ALONG IT IS THE CONTENTION OF THE ASSESSEE THAT THE SO-CALLED R EDUCTION IN COST OF POWER FOR THE PURPOSE OF COMPUTATION OF DEDUCTION U /S 80IA WILL NOT HAVE ANY IMPACT ON THE NET TAXABLE INCOME OF THE AS SESSEE AS THE TOTAL INCOME OF ALL UNITS PUT TOGETHER IS LIABLE T O TAX AND NOT THE INCOME OF EACH UNIT INDEPENDENTLY. THIS FACT HAS A LSO BEEN DEMONSTRATED BEFORE US BY THE LEARNED AR THROUGH ST ATEMENTS 5 ITA NO.258 OF 2013 M/S NAVBHARAT VENTURES LIMITED, HYD. SUBMITTED INDICATING THE EFFECT OF APPLICATION OF D IFFERENT RATES OF POWER FOR TRANSFER OF POWER FROM POWER PLANTS TO FE RRO ALLOYS PLANT. A PERUSAL OF THE AFORESAID STATEMENTS CLEARLY ESTAB LISHES THE FACT THAT THE REDUCTION OR ENHANCEMENT IN RATES OF POWER ACTUALLY HAS NO IMPACT ON THE PROFIT OF THE ASSESSEE. THIS FACT CO ULD NOT BE CONTROVERTED BY THE LEARNED DR. THIS ORDER IS ALSO IN TUNE WITH THE ORDER OF THE INCOME-TAX APPELLATE TRIBUNAL IN EARLI ER YEAR ON THE SAME ISSUE. IN AFORESAID VIEW OF THE MATTER, WE UPH OLD THE ORDER OF THE CIT (A) BY DISMISSING THE GROUND RAISED BY THE DEPARTMENT. 7. IN THE RESULT, THE APPEAL FILED BY THE DEPARTMEN T STANDS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 10-01-2014. SD/ - (B. RAMAKOTAIAH) ACCOUNTANT MEMBER SD/ - (SAKTIJIT DEY) JUDICIAL MEMBER HYDERABAD, DATED THE 10 TH JANUARY, 2014. JMR* COPY TO:- 1) DCIT, CIR-16(1), AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD. 2) M/S NAVBHARAT VENTURES LIMITED, NAVABHARAT CHAMBERS , RAJBHAVAN ROAD, SOMAJIGUDA, HYDERABAD. 3) CIT(A)-V, HYDERABAD. 4) CIT (A) IV, HYDERABAD. 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDERABA D. 6 ITA NO.258 OF 2013 M/S NAVBHARAT VENTURES LIMITED, HYD. 7 ITA NO.258 OF 2013 M/S NAVBHARAT VENTURES LIMITED, HYD.