M/s. Banco Aluminium Ltd., Baroda V. The Dy.CIT, Circle-1(1), Baroda

ITA 276/AHD/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8436 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-09-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2011-2012
• Appeal Filed On: 05-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V K SINGH
• Assessee Lawyers: SANKET BHAKSHI
• Keywords: Depreciation; Revenue expenditure; Capital expenditure

Judgement Text

P , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD . . , , BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI MAHAVIR PRASAD, JUDICIAL MEMBER ./ ITA NO. 276/AHD/2015 ( / ASSESSMENT YEAR : 2011-12) M/S. BANCO ALUMINIUM LTD. BIL, NEAR BHAILI RAILWAY STATION, PADRA ROAD, BARODA-391410 VS DCIT, CIRCLE 1(1), BARODA - 390007 ./ ITA NO. 282/AHD/2015 / ASSESSMENT YEAR : 2011-12 DCIT, CIRCLE 1(1), VADODARA - 390007 VS M/S. BANCO ALUMINIUM LTD. VADODARA. ./ !'#' ./ PAN/GIR NO. : AAACB 8629 B ( $% & / APPELLANT ) .. ( ' & / RESPONDENT ) ASSESSEE BY : SHRI SANKET BHAKSHI, A.R. REVENUE BY : SHRI V.K. SINGH, SR. D.R. ) * + ,- / DATE OF HEARING 17/08/2017 ./01 + ,- / DATE OF PRONOUNCEMENT 29/09/2017 ' 2 / O R D E R PER SHRI MAHAVIR PRASAD, JUDICIAL MEMBER : THESE ARE TWO APPEALS BY THE ASSESSEE AND DEPART MENT AGAINST THE SEPARATE ORDERS OF THE COMMISSIONER OF INCOME TAX(A PPEALS)-1, VADODARA, IDENTICALLY DATED 28/11/2014 FOR THE ASSE SSMENT YEAR (AY) 2011-12. ITA NOS.276 & 282/A HD/2015 ASST.YEAR 2011-12. - 2 - 2. FIRST WE TAKE UP THE GROUNDS OF APPEAL IN ITA NO .276/AHD/2015 FOR ASST. YEAR 2011-12: I. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-I, VADODARA ['THE CIT(A)'] ERRED IN FACT AND IN LAW IN CONFIRMI NG THE ACTION OF THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE -1 (1), BARODA ('THE AO') IN NOT ALLOWING DEDUCTION U/S.80IA(4) OF THE INCOME TAX ACT, 1961 ('THE ACT') AMOUNTING TO RS.41,22,107 /- ON THE CAPTIVE POWER GENERATION PLANT ('COGEN'). II. THE LEARNED CIT(A) ERRED IN FACT AND IN LAW IN CONF IRMING THE ACTION OF THE AO IN RE-COMPUTING THE PROFITS OF THE UNDERTAKINGS BY ADJUSTING THE SALES VALUE OF THE POWER PRODUCED AND SUPPLIED BY THE UNDERTAKINGS. III. THE LEARNED CIT(A) ERRED IN FACT AND IN LAW IN CONF IRMING THE ACTION OF THE AO IN DISALLOWING THE CLAIM ON THE GR OUND THAT PROFIT OF COGEN UNITS IS UNREASONABLE AND ON A HIGH ER SIDE. IV. THE LEARNED CIT(A) ERRED IN FACT AND IN LAW IN CONF IRMING THE ACTION OF AO IN CHARGING INTEREST U/S.234D OF THE A CT. V. THE LEARNED CIT(A) ERRED IN FACT AND IN LAW IN CONF IRMING THE ACTION OF THE AO IN INITIATING PENALTY PROCEEDING U /S 271(L)(C) OF THE ACT. 3. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERI ALS ON RECORD ARE AS UNDER:- IN THIS CASE, ASSESSEE COMPANY IS ENGAGED IN THE B USINESS OF MANUFACTURE OF ALUMINIUM EXTRUDED SECTION AND CARRY ING OUT JOB WORK FOR OTHERS. 3.2 ASSESSEE, IN ITS COMPUTATION OF INCOME CLAIMED DEDUCTION U/S.80IA(A) OF RS.41,22,107/- IN RESPECT OF CAPTIVE POWER CORPORATION PLANT (750KV). DURING THE COURSE OF ASSESSMENT PROC EEDINGS THE ASSESSEE WAS ASKED TO SUBSTANTIATE ITS CLAIM FOR DEDUCTION U /S.80IA(4) IN RESPECT OF ITA NOS.276 & 282/A HD/2015 ASST.YEAR 2011-12. - 3 - CAPTIVE POWER PLANT. THE ASSESSEE WAS ASKED TO FURN ISH THE REASONS WITH WORKING OF PRICE OF UNIT TO DETERMINING THE CLAIM O F DEDUCTION, AND WAS ASKED TO SHOW CAUSE VIDE ORDER SHEET ENTRY DATED 27 /01/2014 AS TO WHY THE SALEABLE MARKET PRICE SHOULD NOT BE TAKEN IN DE TERMINING THE NOTIONAL SALE VALUE. THE ASSESSEE WAS ASKED TO SUBSTANTIATE GENUINENESS OF UNTHINKABLE LOW ADMINISTRATE AND OTHER EXPENSES CLA IMED TO ACHIEVE PROFIT FOR TAX DEDUCTION. 3.3 ASSESSEE SUBMITTED HIS REPLY, WHICH IS REPRODUC ED AS UNDER: A.1 YOUR OFFICE MAY KINDLY NOTE THAT WE HAVE FULFIL LED THE ABOVE CONDITIONS AS DISCUSS HEREAFTER. A. THE GROSS TOTAL INCOME OF THE UNDERTAKING INCLUDES ANY PROFITS AND GAINS DERIVED FROM THE GENERATION OR GENERATION AND DISTRIBUTION OF POWER B. IT BEGINS TO GENERATE POWER AT ANY TIME DURIN G THE PERIOD BEGINNING ON 01/04/1993 TO 31/03/2010. C. THE UNDERTAKING IS NOT FARMED BY SPLITTING U P OR RECONSTRUCTION OF BUSINESS ALREADY IN EXISTENCE SUBJECT TO CERTAIN EXCEPTIONS. D. IT IS NOT FORMED BY THE TRANSFER TO A NEW BUSI NESS OF MACHINERY OR PLANT PREVIOUSLY USED FOR ANY PURPOSE SUBJECT TO CE RTAIN EXCEPTIONS. E. THE CONSIDERATION OF THE TRANSFER OF GOODS OR SERVICES HELD FOR THE PURPOSE OF THE ABOVE ELIGIBLE BUSINESS SHOULD B E RECORDED IN THE ACCOUNTS OF ELIGIBLE BUSINESS AT THE MARKET VAL UE OF SUCH GOODS OR SERVICES ON THAT DATE AS PROVIDED IN SECTION 80IA(8) OF IT ACT. F. THE ASSESSEE SHOULD GET HIS BOOKS OF ACCOUNTS A UDITED AND SUBMIT THE REPORT IN FORM NO. 10CCB. YOUR OFFICE MAY KINDLY NOTE THAT WE HAVE FULFILLED THE ABOVE CONDITIONS AS DISCUSS HEREAFTER; ITA NOS.276 & 282/A HD/2015 ASST.YEAR 2011-12. - 4 - A. THE GROSS TOTAL INCOME OF THE COMPANY INCLUDES P ROFITS AND GAINS DERIVED FROM THE UNDERTAKINGS VIZ. CAPTIVE POWER GE NERATING PLANT H. THE UNDERTAKINGS IS SEPARATE UNDERTAKING ENGAGED IN THE BUSINESS OF GENERATION OF ELECTRICITY BEING ELIGIBL E BUSINESS TO CLAIM DEDUCTION U/S 80IA OF THE ACT. C. THE UNDERTAKING HAS OBTAINED APPROVAL FROM THE P RESCRIBED AUTHORITY AS PER RULE 47A OF INDIAN ELECTRICITY RULES, 1956 TO ENGAGE IN THE BUSINESS OF GENERATION OF POWER FOR C APTIVE CONSUMPTION. COPY OF APPROVAL LETTER IS ATTACHED MA RKED AS ANNEXURE-10. D. THE UNDERTAKINGS ARE NOT FORMED BY SPLITTING UP OR RECONSTRUCTION OF BUSINESS ALREADY IN EXISTENCE. TH E UNDERTAKINGS ARE NOT FORMED BY THE TRANSFER OF MACHINERY OR PLAN T PREVIOUSLY USED FOR ANY PURPOSE. E. THE ASSESSEE GOT AUDITED ITS BOOKS OF ACCOUNT IN RESPECT OF ABOVE UNDERTAKINGS BY OBTAINING AUDIT REPORT IN THE PRESC RIBED FORM NO.10CCB DATED. THE ASSESSEE HAS FILED AUDITED BOOK S OF ACCOUNT ALONG WITH ABOVE REPORT OBTAINED FROM CHART ERED ACCOUNTANTS CERTIFYING THE CORRECTNESS OF CLAIM OF DEDUCTION. FOR YOUR KIND REFERENCE AUDITED ACCOUNTS OF THE SAID UN DERTAKINGS ALONG WITH NOTES TO ACCOUNTS AND REPORT IN FORM NO. 10CCB IS ENCLOSED MARKED AS ANNEXURE 11. 4. BASED UPON THE ABOVE WE SUBMIT THAT THE ASSESSEE HAS FULFILLED ALL THE NECESSARY AND APPLICABLE CONDITIONS FOR CLA IM OF DEDUCTION U/S.80IA AND WE THEREFORE REQUEST YOUR OFFICE TO AL LOW THE SAID CLAIM. 5. VIDE PARA NO.22(I) YOUR OFFICE HAS ASKED US TO S UBMIT WHETHER THE SALE OR PROFIT OF CAPTIVE POWER PLANT ARE INCLU DED IN THE GROSS TOTAL INCOME OR NOT BEFORE DEDUCTION U/S.80-IA(4) OF THE ACT. IN THIS RESPECT WE SUBMIT THAT THE GROSS TOTAL INCOME INCLUDES THE PROFIT OF TWO CAPTIVE POWER GENERATION UNITS AS DISCUSSED IN THE ABOVE PA RAS. YOUR OFFICE MAY NOTE THAT ALL THESE UNITS ARE ENGAGED IN THE BU SINESS OF GENERATION OF ELECTRICITY. SUCH ELECTRICITY IS CONSUMED BY THE OTHER UNIT OF THE ASSESSES. EACH OF SUCH UNITS IS SEPARATE UNDERTAKIN G UNDER THE ACT THE ASSESSES HAS MAINTAINED SEPARATE BOOKS OF ACCOUNT O F EACH OF SUCH UNDERTAKINGS AND THE SAME IS AUDITED UNDER THE ACT. YOU WOULD KINDLY OBSERVE THAT THE SALES OF CAPTIVE POWER PLANTS FOR CAPTIVE CONSUMPTION, BECOMES THE PURCHASE OF THE UNIT WHICH CONSUMES IT AND ACCORDINGLY THE GROSS TOTAL INCOME OF THE ASSESSEE INCLUDES PROFIT DERIVED BY SUCH UNDERTAKINGS, IT IS MOST RESPECTFULLY SUBMITTED THA T WHEN ON APPLICATION OF SECTION.80IA(8), WHEN THE PRICE OF THE GOODS OR SERVICES USED CAPTIVELY IS ADJUSTED FOR MAKING IT COMMENSURATE WI TH THE MARKET PRICE ITA NOS.276 & 282/A HD/2015 ASST.YEAR 2011-12. - 5 - THEREOF, IT WOULD HAVE AN IMPACT OF INCREASING [WHE N MARKET PRICE IS MORE THAN THE PRICE AT WHICH THESE GOODS OR SERVICE S ARE TRANSFERRED] OR REDUCING [WHEN MARKET PRICE IS LESS THAN THE PRICE AT WHICH THESE GOODS OR SERVICES ARE TRANSFERRED] THE PROFITS OF THE ELI GIBLE UNDERTAKING. WHILE IT INCREASES THE PROFITS OF THE ELIGIBLE UNIT IN A GIVEN CASE, IT CORRESPONDINGLY WILL REDUCE THE PROFITS OF THE UNIT CONSUMING THE GOODS OR SERVICES, GIVING THE SAME GRASS TOTAL INCOME AND THEREFORE WE SUBMIT THAT THE GROSS TOTAL INCOME DOES INCLUDE THE PROFIT S OF THE CAPTIVE POWER PLANTS INCLUDING THE PROFITS RECOMPUTED BY SUBSTITU TING THE PRICE OF THE POWER CONSUMED CAPTIVELY BY OTHER UNITS OF THE COMP ANY. 6. VIDE PARA NO. 22(II) YOUR KIND OFFICE HAS ALSO A SKED TO PROVIDE DETAILS OF PRICE OF UNITS DETERMINING THE CLAIM OF DEDUCTION AND DETAILS OF SALES OF POWER UNITS. IN RESPECT OF THE SAME WE SUBMIT THAT THE SELLING PRICE OF THE POWER UNIT HAS BEEN COMPUTED AS UNDER: I. ELECTRICITY UNITS GENERATED AND TRANSFERRED BY CAPT IVE POWER PLANTS TO OTHER UNDERTAKINGS OF THE COMPANY HAVE BE EN VALUED AT MARKET PRICE, BEING LANDED PRICE OF THE POWER PROCU RED BY THE COMPANY FROM DAKSHIN GUJARAT VIJ COMPANY LIMITED (D GVCL). COMPUTATION OF THE SAME IS ATTACHED AS ANIIEXURE-12 . II. THE ABOVE COMPUTATION OF PRICE IS AS PER THE MEANIN G OF 'MARKET VALUE' AS DEFINED IN EXPLANATION TO SECTION 80 IA(8 ) OF THE ACT. III. WE SUBMIT TO YOUR KIND OFFICE THAT IN OUR CASE WE H AVE VALUED THE UNITS TRANSFERRED AT THE PRICE AT WHICH WE HAVE PUR CHASED THE ELECTRICITY FROM DGVCL. HERE WE INVITE YOUR KIND AT TENTION TO THE DECISION OF ITAT DELHI BENCH IN CASE OF ADDL. C 1T VS. JINDALSTEEL AND POWER LTD. (16 SOT 509). IN THIS CA SE, THE TRIBUNAL HAS HELD THAT THE MARKET VALUE SHALL BE PR ICE AT WHICH THE ASSESSES PURCHASES ELECTRICITY FROM THE ELECTRI CITY BOARD AND NOT THE ONE WHICH IS FIXED BY THE LEGISLATIVE MANDA TE. IN OUR CASE WE HAVE APPLIED THE PROVISION OF SECTION 801A(8) AN D ACCORDINGLY COMPUTED THE SELLING PRICE. 7. VIDE PARA NO.27(III) YOUR OFFICE HAS ASKED US WH Y THE SALABLE MARKET PRICE SHOULD NOT BE TAKEN IN OUR CASE FOR DE TERMINING THE CLAIM OF DEDUCTION U/S.80IA OF THE ACT. IN THIS RESPECT, WE FIRST INVITE YOUR KIND ATTENTION TO SECTION 80IA(8) WHICH PRESCRIBES THE CONCEPT OF 'MARKET PRICE' FOR TRANSFER OF GOODS OR SERVICES FR OM ELIGIBLE BUSINESS TO OTHER BUSINESSES OF THE ASSESSEE. AS PER SECTION 801A(8) OF THE ACT 'WHERE ANY GOODS OR SERVICES HELD FOR THE PURPOSES OF THE ELIGIBLE BUSINESS ARE TRANSFERRED TO ANY OTHER BUSINESS CARR IED ON BY THE ITA NOS.276 & 282/A HD/2015 ASST.YEAR 2011-12. - 6 - ASSESSEE, OR WHERE ANY GOODS OR SERVICES HELD FOR T HE PURPOSES OF ANY OTHER BUSINESS CARRIED ON BY THE ASSESSEE ARE TRANS FERRED TO THE ELIGIBLE BUSINESS AND, IN EITHER CASE, THE CONSIDERATION, IF ANY, FOR SUCH TRANSFER AS RECORDED IN THE ACCOUNTS OF THE ELIGIBLE BUSINES S DOES NOT CORRESPOND TO THE MARKET VALUE OF SUCH GOODS OR SERVICES AS ON THE DATE OF THE TRANSFER, THEN, FOR THE PURPOSES OF THE DEDUCTION U NDER THIS SECTION, THE PROFITS AND GAINS OF SUCH ELIGIBLE BUSINESS SHALL B E COMPUTED AS IF THE TRANSFER, IN EITHER CASE, HAD BEEN MADE AT THE MAR KET VALUE OF SUCH GOODS OR SERVICES AS ON THAT DATE, 8. AS PER EXPLANATION TO SECTION 801A(8) 'MARKET VA LUE IN RELATION TO ANY GOODS OR SERVICE, MEANS THE PRICE THAT SUCH GOODS OR SERVICES WOULD ORDINARILY FETCH IN THE OPEN MARKET' THE COMP ANY PROCURES THE ELECTRICITY FROM TWO ALTERNATIVE SOURCES. ONE FROM ELECTRICITY SUPPLY COMPANY AT WHICH THE ELECTRICITY IS SUPPLIED BY THE M TO THE COMPANY'S MANUFACTURING UNITS. THE SAME MANUFACTURING UNITS A LSO PROCURES ELECTRICITY FROM THE CAPTIVE POWER PLANTS. THEREFOR E, WE HAVE USED THE PURCHASE PRICE OF THE POWER PURCHASED FROM AN UNREL ATED PARTY (ELECTRICITY SUPPLY COMPANY) IS CONSIDERED AS THE M ARKET VALUE OF SUCH GOODS FOR COMPUTING THE PROFITS OF THE UNDERTAKING. THE SAME IS THEREFORE SALEABLE MARKET PRICE UNDER THE ACT. 9. YOUR OFFICE MAY NOTE THAT THE RATE AT WHICH GUVN L PURCHASES ELECTRICITY FROM POWER GENERATING UNITS CANNOT BE C ONSIDERED AS MARKET VALUE BECAUSE THE SAID PRICE IS INFLUENCED BY THE D ECISION OF GOVERNMENT AUTHORITIES. SINCE GUVNL IS SUPPLYING ELECTRICITY T O ALL CUSTOMERS IN GUJARAT, WE HAVE CONSIDERED THE SAME AS MARKET VALU E FOR THE PURPOSE OF COMPUTING THE DEDUCTION U/S.80IA OF THE ACT. THE RATE AT WHICH GUVNL PROCURED ELECTRICITY CANNOT BE CONSIDERED AS MARKET VALUE OF ELECTRICITY TO THE ASSESSEE SINCE THE SAME IS INFLU ENCED BY THE VARIOUS CONDITIONS OF AGREEMENT ENTERED INTO BY VARIOUS POW ER MANUFACTURING COMPANIES AND GUVNL AND THEREFORE CEASES TO BE THE PRICE IN THE 'OPEN MARKET'. 10. TO SUPPORT THE ABOVE CONTENTION WE ALSO RELIED UPON FOLLOWING DECISIONS: A. THIRUAARRON SUGARS LIMITED 2271TR 432 (SC) B. WEST COAST PAPER MILLS LTD. VS.JCIT [2006] 100 TT] 433 (BOM) C. ASSAM CARBON PRODUCTS LTD. VS. ACIT[2006] 100 T T] 224 (CAT) D) JINDAL STEEL AND POWER LTD. VS. ADDL. C1T[2006 ] 10 SOT 106 (DEL) ITA NOS.276 & 282/A HD/2015 ASST.YEAR 2011-12. - 7 - 11. THE RATIO OF ALL THE ABOVE JUDGMENT IS SUMMARIZ ED AS UNDER: I. PRICE SOLD TO GOVERNMENT OR OTHER AUTHORITIES UNDER COMPULSION CANNOT BE CONSIDERED AS THE 'MARKET VALUE' AS THESE CANNOT BE TERMED AS PRICE IN OPEN MARKET. THEREFORE, THE RATE AT WHICH POWER IS SOLD TO THE STATE ELECTRICITY AUTHORITY (S EA) CANNOT BE CONSIDERED TO BE THE 'MARKET VALUE' II. IT WOULD BE MORE RELEVANT TO CONSIDER THE RATE AT W HICH THE POWER IS SUPPLIED TO THE CONSUMERS PLACED IN SIMILA R CIRCUMSTANCES BY THE SEA; III. FOR THIS PURPOSE WHAT IS TO BE CONSIDERED IS THE LA NDED COST OF THE POWER SUPPLIED INCLUDING ALL THE INCIDENTAL COS TS AND TAXES (NET OF TAXES FOR WHICH THE REBATE OR SET OF IS AVA ILABLE); 12. WE FURTHER SUBMIT THAT IT IS ESSENTIAL THAT THE COMPARISON HAS TO BE FOR THE TRANSACTION BETWEEN THE SELLER [POWER PR ODUCER/DEALER] AND THE CONSUMER OF THE POWER AND NOT THAT OF PRODUCER AND THE DEALER / DISTRIBUTOR. IN THE SECOND SCENARIO THE DEALER WOUL D THEN BE INCURRING THE ENTIRE COST OF TRANSMISSION, DISTRIBUTION AND A TTENDANT LOSSES. WHEREAS WHEN THE SALE IS MADE TO ULTIMATE CONSUMER, ALL THE COSTS SO INCURRED ARE INCLUDED IN THE SELLING PRICE AND THER EFORE IS ACTUALLY THE REPRESENTATIVE PRICE FOR COMPARISON PURPOSES. 13. AT THE END WE INVITE YOUR KIND ATTENTION TO REC ENT DECISION OF HON'BLE ITAT, AHMEDABAD IN THE CASE OF ALEMBIC LTD. VS. ACIT, CIRCLE- 1(1), VADODARA ITA NO.3594/AHD./2007 DATED 6 TH JUNE 2009 (NOW REFERRED AS 'THE ORDER'). VIDE THE ORDER ITAT HAS D ECIDED THE IDENTICAL ISSUE AGAINST THE ORDER PASSED BY YOUR OFFICE AND CONFIRMED BY CIT (A) IN THE CASE OF ALEMBIC LTD IN A.Y.2003-04 IN RESPEC T OF THE ABOVE ISSUE. IN THE ORDER, HON'BLE ITAT HAS DISCUSSED THE ABOVE ISSUE IN DETAIL AND ALSO CONSIDERED THE APPLICABILITY OF PROVISION OF S ECTION 80IA(10) FOR COMPUTING PROFIT OF CAPTIVE POWER PLANT BY ADOPTION OF RATE OF GUVNL AS MARKET RATE FOR THE PURPOSE OF COMPUTING DEDUCTI ON U/S.80IA (PARA NO.26 TO 32 OF THE ORDER). THE HON'BLE ITAT HAS CON SIDERED ALL THE ABOVE REPORTED DECISION OF TRIBUNALS AND GIVEN THE JUDGMENT IN FAVOUR OF THE APPELLANT (ALEMBIC LTD.), WE SPECIFICALLY IN VITE YOUR KIND ATTENTION TO CONCLUDING PARA NO. 32 OF THE ORDER. V IDE THE SAID PARA ITAT HAS ALLOWED DEDUCTION U/S.80IA IN RESPECT OF C APTIVE POWER PLANT BY TAKING THE PRICE OF ELECTRICITY SUPPLIED BY GEB (NOW GUVNL) TO ASSESSEE AS A CONSUMER AS MARKET VALUE FOR THE PURP OSE OF COMPUTATION OF DEDUCTION U/S.80IA(8} OF THE ACT. ITA NOS.276 & 282/A HD/2015 ASST.YEAR 2011-12. - 8 - 14. BASED UPON THE ABOVE DISCUSSION AND AFORESAID R EPORTED DECISION HAVING DIRECT APPLICABILITY OVER THE CASE OF THE ASSESSEE, WE MOST RESPECTFULLY SUBMIT THAT THE RATE AT WHICH GUV NL PURCHASES ELECTRICITY FROM POWER GENERATING COMPANIES SHOULD NOT BE TAKEN AS MARKET RATE FOR THE PURPOSE OF COMPUTING DEDUCTION U/S.80IA IN RESPECT OF CAPTIVE POWER PLANT OF THE ASSESSEE. 3.4 THE SUBMISSION OF THE ASSESSEE WERE CONSIDERED BY THE LEARNED AO BUT NOT FOUND TO BE ACCEPTED AND DEDUCTION U/S.80IA (4) TO BE TUNE OF RS.41,22,107/- WERE DISALLOWED. 4. AGAINST THE SAID ORDER, ASSESSEE PREFERRED FIRST STATUTORY APPEAL BEFORE THE LEARNED CIT(A) WHO PARTLY ALLOWED THE AP PEAL OF THE ASSESSEE. 5. WE HAVE GONE THROUGH THE RELEVANT RECORD AND IMP UGNED ORDER. LEARNED AR CITED AN ORDER OF OUR OWN CO-ORDINATE BE NCH IN ITA NO.2313/AHD/2014 FOR ASST. YEAR 2009-10, IN WHICH H ONBLE BENCH HELD THAT IS REPRODUCED AS UNDER: 47. GROUND NO.2(I) CONCERNS THE CLAIM OF DEDUCTION U/S.80IA(4) TOWARDS CAPTIVE POWER PLANT. ASSESSEE CLAIMED DEDUC TION AMOUNTING TO RS.40,78,793/- U/S.80IA ON THIS ACCOUNT WHICH WAS D ENIED BY THE ASSESSING OFFICER. THE COMMISSIONER OF INCOME TAX(A ), HOWEVER, GRANTED RELIEF TO THE ASSESSEE. REVENUE IS IN APPEA L AGAINST THE AFORESAID ACTION OF THE COMMISSIONER OF INCOME TAX( A). 48. AS POINTED OUT ON BEHALF OF THE ASSESSEE, THE I SSUE IS COVERED IN FAVOUR OF THE ASSESSEE IN ITS OWN CASE FOR ASST. YE AR 2007-08 IN ITA NO.1446/AHD/2010. THE RELEVANT PORTION OF THE ORDER OF ITAT DEALING WITH THE ISSUE READS AS UNDER:- 7. GROUND NO.3 IS AGAINST THE DISALLOWANCE OF CLAIM OF DEDUCTION U/S.80IA(4)(IV) OF THE ACT OF RS.3,14,275/-. THE SR .DR SUPPORTED THE ORDER OF THE AO AND SUBMITTED THAT THE LD.CIT(A ) WAS NOT JUSTIFIED IN DELETING THE ADDITION. ITA NOS.276 & 282/A HD/2015 ASST.YEAR 2011-12. - 9 - 7.1. ON THE CONTRARY, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE HAS ALREADY BEEN DECIDED BY THE TRIBUNAL (ITAT 'D' BENCH AHMEDABAD) IN FAVOUR OF ASSESSEE IN THE CASE OF GROUP- CONCERN M/S.ALUMINIUM LTD.- REVENUE'S APPEAL FOR AY 2007-08 IN ITA NO.1106/AHD/2010 DATED 25/10/2012. HE DREW O UR ATTENTION TOWARDS PAGE NOS.175 TO 180 OF THE PAPER- BOOK. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT IN THIS CASE ALSO, THE LD.CIT(A) IN PARA-6 OF HIS ORDER HAS GIVEN AN ELABORATE FINDING AND FOLLOWED THE DECISION(S) OF THE COORDINATE BENCH (ITAT MUMBA I BENCH) RENDERED IN CASE OF WEST COAST PAPER MILLS VS. ACIT (103 ITD 19) AND ITAT CHENNAI BENCH RENDERED IN THE CASE OF MOHAN BREWERIES & DISTILLERIES LTD. VS. ACIT (114 TTJ 532 ) AND OTHER CASE-LAWS. THEREFORE, WE DO NOT ANY INFIRMITY IN TH E FINDING OF THE LD.CIT(A), SAME IS HEREBY UPHELD. 49. IN VIEW OF THE DECISION OF THE CO-ORDINATE BENC H AS NOTED ABOVE AND ALSO THE ISSUE BEING PARI MATERIA WITH GROUND NO.3( I) IN ITA NO.1411/AHD/2014 (SUPRA), WE DO NOT FIND ANY MERIT IN THE GRIEVANCE OF THE REVENUE ON THIS SCORE. 6. IN VIEW OF THE ABOVE OBSERVATIONS, WE ALLOW DEDU CTION U/S.80IA(4) OF THE INCOME TAX ACT, 1961 AMOUNTING TO RS.41,22,1 07/- ON THE CAPTIVE POWER GENERATION PLANT (COGEN). 7. SO FAR GROUND PERTAINING TO CHARGING INTEREST U/ S.234D OF THE ACT IS CONCERNED. SAME IS CONSEQUENTIAL AND NEED NOT TO BE ADJUDICATED. 8. SO FAR GROUND PERTAINING TO INITIATING PENALTY P ROCEEDINGS U/S.271(1)(C) OF THE ACT IS CONCERNED. SAME IS PREM ATURE AND DOES NOT REQUIRE ANY ADJUDICATION. ITA NOS.276 & 282/A HD/2015 ASST.YEAR 2011-12. - 10 - 9. RESPECTFULLY FOLLOWING THE DECISION OF OUR CO-OR DINATE BENCH, WE ALLOW THE APPEAL OF THE ASSESSEE. 10. NOW WE TAKE UP THE GROUNDS OF THE DEPARTMENT IN ITA NO.282/AHD/2015 FOR ASST. YEAR 2011-12. I. (A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT (A) ERRED IN TREATING THE EXPENDITURE OF RS.92,15,447/- ON DIES AND TOOLS AS REVENUE EXPENDITURE INSTEAD OF CAPITAL EXPENDITURE WITHOUT APPRECIATING THAT THESE PARTS O F THE MACHINERY IN VIEW OF THE NATURE OF BUSINESS OF THE ASSESSEE WHEREIN THE ASSESSEE HAS TO KEEP THE DIES FOR CERTA IN SPECIFICATION AND DESIGN AND , THEY DO NOT LOSE ITS IDENTITY AFTER UTILIZATION. I. (B) THE LD.CIT(A) ERRED IN DELETING THE ADDITION ON THE GROUND THAT THESE ARE HAVING SHORT LIFE WITHOUT APPRECIATI NG THAT USEFUL LIFE OF THE ASSETS MAY BE CRITERIA FOR PRESCRIBING THE RATE OF DEPRECIATION, BUT IT CANNOT BE REGARDED TO BE CRITE RIA FOR DECIDING WHETHER THE EXPENDITURE ON THE ASSET IS RE VENUE OR CAPITAL NATURE. II. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(APPEALS) ERRED IN DELETING THE ADDITION OF RS.25,41,611/- ON CONSUMPTION OF SPARES TO MACHINERY HOLDING THIS TO BE REVENUE EXPENDITURE WITHOUT APPRECIATING THE FACT T HAT THE SAME WAS INCURRED FOR PROLONGING THE LIFE OF MACHINERY A ND HAVING ENDURING BENEFIT III. A. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, LD. CIT(APPEALS) HAS ERRED IN HOLDING THAT THE ASSE SSEE IS ELIGIBLE FOR DEDUCTION U/S.80IA(4)(IV) OF THE ACT I N RESPECT OF COGEN UNITS WITHOUT APPRECIATING THAT THE ASSESSEE HAD CAPTIVE POWER GENERATION PLANT AND THEREFORE, THE CLAIM U/S .80 IA (4) OF THE ACT WAS NOT ALLOWABLE AS HELD BY THE HON'BLE IT AT BENCH-A, CHENNAI IN THE CASE OF CHETTINAND CEMENT CORPORATIO N LTD. IN ITA NO. 1026(MDS)/2005. ITA NOS.276 & 282/A HD/2015 ASST.YEAR 2011-12. - 11 - 3(II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(APPEALS) HAS ERRED IN HOLDING THAT EARLIER YEAR S LOSSES OF COGEN UNITS ARE NOT REQUIRED TO BE SET OFF AGAINST INCOME OF THE CURRENT YEAR BEFORE ALLOWING DEDUCTION U/S.80IA OF THE ACT. 11. IN THIS CASE, ADDITION ON ACCOUNT OF CAPITALIZA TION OUT OF REVENUE EXPENSES: CAPITALIZATION OUT OF DIES AND TOOLS: ON VERIFICATION OF DETAILS IT IS OBSERVED THAT AN AMOUNT OF RS.218.53 LAKHS HAS BEEN CLAIMED IN THE PROFIT AND LOSS ACCOUNT IN THE NAME OF STORES, DIES AND TOOLS CONSUMED DURING THE YEAR. THE DETAILS OF STORES, DIES AND TOOLS WERE CALLED FOR AN VERIFIED. SOME OF THE ITEMS FROM TOOLS & DIES AS LISTED BELOW WITH NARRATION, W HICH WERE CLAIMED AS REVENUE EXPENDITURE, IS FOUND TO BE OF NATURE OF CA PITAL EXPENDITURE. DATE NAME OF SUPPLIER VOUCHER REF. DESCRIPTION AMOUNT 30/04/2010 SANDEEP ENTERPRISES PU-184 STEEL BARS 387,310 31/05/2010 SANDEEP ENTERPRISES PU-267 STEEL BARS 462,003 30/06/2010 SAGAR ALLOY & METAL INDUSTRIES PU-351 ALLOYS STEEL FORGED BAR 111,320 30/06/2010 SAGAR ALLOY & METAL INDUSTRIES PU-350 ALLOYS STEEL FORGED BAR 118,320 30/06/2010 SAGAR ALLOY & METAL INDUSTRIES PU-349 ALLOYS STEEL FORGED BAR 238,201 30/06/2010 SAGAR ALLOY & METAL INDUSTRIES PU-551 FORGED ROUND STEEL BAR 299,888 30/06/2010 SANDEEP PU-519 STEEL BAR 475,450 ITA NOS.276 & 282/A HD/2015 ASST.YEAR 2011-12. - 12 - ENTERPRISES 31/08/2010 SAGAR ALLOY & METAL INDUSTRIES PU-955 HOT DIE STEEL 183MM 231,156 31/08/2010 SANDEEP ENTERPRISES PU- 1030/JV2 62 STEEL BAR 242MM 117,976 31/08/2010 SAGAR ALLOY & METAL INDUSTRIES PU-956 HOT DIE STEEL 284MM 325,648 31/08/2010 SAGAR ALLOY & METAL INDUSTRIES PU-1020 HOT DIE STEEL 284MM 355,061 30/09/2010 SANDEEP ENTERPRISES PU-1240 STEEL BAR 120,110 30/09/2010 SAGAR ALLOY & METAL INDUSTRIES PU-1272 ALLOYS STEEL FORGED BAR 205,953 30/09/2010 SAGAR ALLOY & METAL INDUSTRIES PU-1271 ALLOYS STEEL FORGED BAR 592,266 30/11/2010 SANDEEP ENTERPRISES PU-1586 STEEL BAR 112,615 30/11/2010 SANDEEP ENTERPRISES PU-1662 STEEL BAR 172,839 30/11/2010 SAGAR ALLOY & METAL INDUSTRIES PU-1633 ALLOYS STEEL FORGED BAR 302,036 30/11/2010 SAGAR ALLOY & METAL INDUSTRIES PU-1632 ALLOYS STEEL FORGED BAR 379,341 30/11/2010 SANDEEP ENTERPRISES PU-1631 STEEL BAR 484,183 30/11/2010 SANDEEP ENTERPRISES PU-1765 STEEL BAR 629,956 30/11/2010 SANDEEP ENTERPRISES PU-1661 STEEL BAR 805,402 31/12/2010 REFORM TOOLS & DIES PU-2088 EXTRUSION DIE-SECTION NO.1002860/M, 1002862/M, 1001281/L, 1001281/M, 2002817/L, 1002854/M, 1002855/M, 1002859/M 129,200 ITA NOS.276 & 282/A HD/2015 ASST.YEAR 2011-12. - 13 - 31/12/2010 REFORM TOOLS & DIES PU-2086 EXTRUSION DIE-SECTION NO.1002860/M, 1002862/M, 1001281/L, 1001281/M, 2002817/L, 1002854/M, 1002855/M, 1002859/M 139,000 31/12/2010 SAGAR ALLOY & METAL INDUSTRIES PU-2097 ALLOYS STEEL FORGED BAR 467,984 31/12/2010 SAGAR ALLOY & METAL INDUSTRIES PU-1900 ALLOYS STEEL FORGED BAR 771,891 31/01/2011 SAGAR ALLOY & METAL INDUSTRIES PU-2218 ALLOYS STEEL FORGED BAR 510,458 28/02/2011 REFORM TOOLS & DIES PU-2812 EXTRUSION DIE-ART NO. 2002856/M, 2002857/M, 2002858/M 128,000 31/03/2011 FOSHAN NANHAI GRAND CHAMPION TRADING LTD. PU-2970 SOLID DIE AND HOLLOW DIE 172,221 31/03/2011 SAGAR ALLOY & METAL INDUSTRIES PU- 2943/JV3 8 ALLOYS STEEL FORGED BAR 212,610 31/03/2011 SANDEEP ENTERPRISES PU-2928 STEEL BAR 783,588 TOTAL 1,02,42,245 11.2 THE ASSESSEE WAS THEREFORE, ASKED VIDE QUESTIO NNAIRE DATED 24.09.2013 AND ALSO VIDE ORDER SHEET ENTRY DATED 27 .01.2014 TO SHOW CAUSE AS TO WHY THE ABOVE MENTIONED ITEMS SHOULD NO T BE TREATED AS CAPITAL EXPENDITURE. 11.3 ASSESSEES REPLY WAS THAT WE HAVE DEBITED STOR ES, TOOLS AND DIES CONSUMED OF RS.2,18,53,523/- TO THE PROFIT & LOSS ACCOUNT. THE SAID EXPENSES OF THE COMPANY. THEY ARE INTENDED TO THE B ENEFIT THE CURRENT ITA NOS.276 & 282/A HD/2015 ASST.YEAR 2011-12. - 14 - EXPENDITURE ONLY. THESE EXPENSES ARE CHARGED AGAINS T THE OPERATION OF THE COMPANY AND THEREFORE WE HAVE TREATED THE SAME AS R EVENUE EXPENDITURE. 11.4 ASSESSEE FURTHER STATED THAT WE INFORM YOUR KI ND OFFICE THAT THE SAID ISSUE RAISED BY YOUR OFFICE IN EARLIER ASSESSM ENT YEAR 2009-10 AND HAD MADE ADDITION WITH RESPECT TO DIES AND TOOLS BY CONSIDERING IT AS CAPITAL IN NATURE. HOWEVER, THE CIT(A) HAS DELETED THE ADDITION MADE IN EARLIER ASSESSMENT YEAR 2009-10 VIDE HIS ORDER DATE D 23/08/2012 BY CONSIDERING IT AS REVENUE IN NATURE. AND ON THE BAS IS OF THE SAME ASSESSEE HAS CORRECTLY CLAIMED THE EXPENSES OF DIES AND TOOL S AS REVENUE IN NATURE. 12. WE HAVE GONE THROUGH THE RELEVANT RECORD AND IM PUGNED ORDER. SO FAR GROUND NO.1 HAS ALREADY BEEN DECIDED IN FAVOUR OF THE ASSESSEE IN ITA NO.1411/AHD/2014 FOR A.Y.2010-11. THEREFORE, WE DISMISS THIS GROUND OF DEPARTMENT. 13. SO FAR GROUND NO.2 REGARDING DELETING THE ADDIT ION OF RS.25,41,611/- ON CONSUMPTION OF SPARES TO MACHINER Y HOLDING IS CONCERNED. IDENTICAL ISSUE WAS TAKEN BY THE DEPARTM ENT IN ITA NO.1411/AHD/2014 FOR A.Y.2010-11, IN WHICH CO-ORDIN ATE BENCH DECIDED THIS ISSUE AGAINST THE DEPARTMENT AS FOLLOW S: 20. GROUND NO.2 CONCERNS THE DISALLOWANCE OF RS.48, 51,957/- TOWARDS CONSUMPTION OF MACHINERY SPARES WHICH WERE TREATED BY THE ASSESSING OFFICER AS CAPITAL EXPENDITURE. COMMISSIO NER OF INCOME TAX(A) GRANTED RELIEF TO THE ASSESSEE HOLDING THE S AME TO BE ALLOWABLE REVENUE EXPENDITURE. THE REVENUE IS AGGRIEVED BY TH E AFORESAID DECISION OF COMMISSIONER OF INCOME TAX(A). ITA NOS.276 & 282/A HD/2015 ASST.YEAR 2011-12. - 15 - 21. THE LD. DEPARTMENTAL REPRESENTATIVE SOUGHT TO R ELLY UPON THE ORDER OF ASSESSING OFFICER. 22. LD. AUTHORISED REPRESENTATIVE ON THE OTHER HAND SUBMITTED THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANU FACTURING OF ALUMINIUM EXTRUDED SECTIONS. IN ORDER TO MAINTAIN U P-KEEP OF THE MACHINERY, THEY REQUIRE REGULAR REPAIRS AND REPLACE MENT OF VARIOUS WORN OUT SPARES. IT WAS SUBMITTED THAT THE REPAIRS AND MAINTENANCE AND REPLACEMENT OF SPARES HAVE NO ENDURING BENEFITS AND HAVE BEEN CARRIED OUT IN THE NORMAL COURSE OF BUSINESS. NO NEW ASSETS HAVE COME INTO EXISTENCE BY THE AFORESAID CONSUMPTION OF SPARES. L D. AUTHORISED REPRESENTATIVE RELIED UPON THE ELABORATE FINDINGS O F THE COMMISSIONER OF INCOME TAX(A) IN THIS REGARD WHEREBY THE RELIEF WAS GRANTED TO THE ASSESSEE. 23. WE NOTICE THAT THE COMMISSIONER OF INCOME TAX(A ) HAS MADE THREAD-BARE ANALYSIS OF THE FACTUAL ASPECTS, CONCER NING THE ISSUE WITH WHICH WE FULLY AGREE. THE COMMISSIONER OF INCOME TA X(A) OBSERVED IN NUTSHELL THAT THERE WAS NO CREATION OF ANY NEW ASSE T WHICH IS CAPABLE OF WORKING INDEPENDENTLY. NO ENDURING BENEFIT HAS BEEN DERIVED BY THE ASSESSEE BY SUCH EXPENDITURE. WE NOTICE THAT THE CO MMISSIONER OF INCOME TAX(A) HAS FOUND THAT THE EXPENDITURE HAS BE EN INCURRED TO PRESERVE AND TO MAINTAIN AN ALREADY EXISTING ASSETS . ON THESE BROAD FACTS, THE COMMISSIONER OF INCOME TAX(A) CONCLUDED THAT THE EXPENDITURE INCURRED BY THE ASSESSEE ARE IN THE NAT URE OF CURRENT REPAIR ALLOWABLE AS REVENUE EXPENDITURE. WE FIND MERIT IN THE RATIONALE ADOPTED BY THE COMMISSIONER OF INCOME TAX(A). THERE FORE, WE DECLINE TO INTERFERE WITH SUCH FINDINGS OF COMMISSIONER OF INCOME TAX(A). 24. CONSEQUENTLY GROUND NO.2 OF REVENUE'S APPEAL IS DIS MISSED. 13.2 SO FAR GROUND NO.3 IS CONCERNED THAT CIT(A) HA S ERRED IN HOLDING THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S.80I A(4)(IV) OF THE ACT IN RESPECT OF COGEN UNITS. WE HAVE ALREADY DECIDED THI S GROUND IN FAVOUR OF THE ASSESSEE IN CONNECTED APPEAL NO.276/AHD/2015 FOR ASST. YEAR 2011-12. THEREFORE WE DISMISS THIS GROUND OF DEPART MENT. THEREFORE, APPEAL OF THE DEPARTMENT IS DISMISSED. ITA NOS.276 & 282/A HD/2015 ASST.YEAR 2011-12. - 16 - 14. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED AND FILED BY THE DEPARTMENT IS DISMISSED. THIS ORDER PRONOUNCED IN OPEN COURT ON 29/09/2017 SD/- SD/- . . ( ) ( ) ( N.K. BILLAIYA ) ( MAHAVIR PRASAD ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 29/09/2017 PRITI YADAV, SR.PS !'#$ %$' / COPY OF THE ORDER FORWARDED TO : 1. $% & / THE APPELLANT 2. ' & / THE RESPONDENT. 3. 56, ' ' ) 7, / CONCERNED CIT 4. ' ' ) 7, ($%) / THE CIT(A)-1, VADODARA. 5. 89: ,56 , ' $%- $561 , $ / DR, ITAT, AHMEDABAD 6. :; <* / GUARD FILE. & ' / BY ORDER, '8%, , //TRUE COPY// (/' )* ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD TRUE COPY 1. DATE OF DICTATION 27/09/2017 (DICTATION-PAD 8 P AGES ATTACHED AT THE END OF THIS APPEAL-FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 28/09/2017 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S. 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER