Appeal details
Counselvise Citation
[2019] 116 COUNSELVISE.COM (IT) 8861 (ITAT-AHMEDABAD)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
3 year(s) 6 month(s) 20 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
28-06-2019
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
Not Allotted
Assessment Year
2012-2013
Appeal Filed On
08-12-2015
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH (BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER & SHRI WASEEM AHMED, ACCOUNTANT MEMBER) ITA. NO: 3408/AHD/2015 & 17/AHD/2016 (ASSESSMENT YEAR: 2012-13) RAINBOW PAPERS LTD. 801, AVDHESH HOUSE, OPP. GURUDWARA, THALTEJ, S.G. HIGHWAY, AHMEDABAD DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-3(1)(2), AHMEDABAD V/S V/S DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-3(1)(2), AHMEDABAD RAINBOW PAPERS LTD. 801, AVDHESH HOUSE, OPP. GURUDWARA, THALTEJ, S.G. HIGHWAY, AHMEDABAD (APPELLANT) (RESPONDENT) ITA. NO: 3081/AHD/2016 & 3201/AHD/2016 (ASSESSMENT YEAR: 2013-14) RAINBOW PAPERS LTD. 801, AVDHESH HOUSE, OPP. GURUDWARA, THALTEJ, S.G. HIGHWAY, AHMEDABAD DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-3(1)(2), AHMEDABAD V/S V/S DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-3(1)(2), AHMEDABAD RAINBOW PAPERS LTD. 801, AVDHESH HOUSE, OPP. GURUDWARA, THALTEJ, S.G. HIGHWAY, AHMEDABAD (APPELLANT) (RESPONDENT) ITA NOS. 340 8/AHD/15 & 17/AHD/16 . A.Y. 2012-13 -2013-14 2 PAN: AAACR5415K APPELLANT BY : SHRI SULABH PADSHAH, AR RESPONDENT BY : SHRI ALOK SINGH, CIT/ D.R. ( )/ ORDER DATE OF HEARING : 26 -06-201 9 DATE OF PRONOUNCEMENT : 28 -06-2019 PER MAHAVIR PRASAD, JUDICIAL MEMBER 1. THESE FOUR APPEALS HAVE BEEN FILED BY THE ASSESSEE AND THE REVENUE AGAINST EACH OTHER. THEREFORE FOR THE SAKE OF CONVENIENCE, WE WOULD LIKE TO DISPOSE OF THESE APPEALS BY WAY OF A COMMON ORDER. FIRST OF AL L, WE WOULD TAKE UP IN ITA NO. 3408/AHD/2015 FOR A.Y. 2012-13 (ASSESSEES APPE AL). ASSESSEE HAS TAKEN FOLLOWING GROUNDS OF APPEAL: 1. THE LEARNED C.I.T.(APPEALS) HAS ERRED IN CONFIRM ING THE DISALLOWANCE OF RS. 11,81,25,616/- IN RESPECT OF DEDUCTION CLAIMED U/S. 80IA OF THE ACT ON GENERATION OF POWER. IT IS SUBMITTED THAT ON THE FACTS AND CIR CUMSTANCES OF THE CASE AND BASED ON THE MATERIALS AND EVIDENCES FILED THE APPE LLANT IS ENTITLED TO DEDUCTION OF INCOME GENERATED FROM NEW INDUSTRIAL UNDERTAKING BY WAY OF GENERATING AND DISTRIBUTING POWER, I.E. BY WAY OF ELECTRICITY AND THE SAME BE ALLOWED NOW. 1.1 THE LEARNED C.I.T. (APPEALS) HAS ERRED IN INCOR RECTLY AND ILLEGALLY WORKING OUT THE TOTAL COST OF STEAM FOR GENERATION OF POWER AT RS. 52,09,45,079/- BY APPLYING HIS OWN FORMULA, WHICH IS CONTRARY TO THE STANDARD FORMULA AND TABLES PUBLISHED BY AUTHORITIES.' IT IS SUBMITTED THAT WHILE WORKING OUT THE PROFIT U/S. 80IA, THE COST OF STEAM FOR POWER GENERATION AS WORKED OUT BY THE APPELLANT AT RS. 49,24,49,173/- BE ACCEPTED AND THE REVISED WORKING OF THE C.I.T.(APPEALS), WHICH IS WITHOUT ANY BASIS OR SOUND MATERIAL BE REPLACED OR SUBSTITUTED. 1.2 THE LEARNED C.I.T. (APPEALS) HAS ERRED IN REDUC ING THE SELLING PRICE OF THE POWER I.E. ELECTRICITY WORKED OUT FOR DERIVING THE PROFIT FROM INDUSTRIAL UNDERTAKING BY REDUCING THE SURCHARGE AND TAXES AT RS.2.99 PER UNIT INSTEAD OF THE CORRECT AVERAGE SELLING PRICE OF THE POWER BEIN G CHARGED BY THE POWER ITA NOS. 340 8/AHD/15 & 17/AHD/16 . A.Y. 2012-13 -2013-14 3 GENERATING UNITS / UGVCL AT RS. 5.43 PER UNIT ( AVG . PRICE ) FOR THIS YEAR. IT IS SUBMITTED THAT BASED ON VARIOUS DECISIONS AND ON FA CT, THE COST OF POWER SUPPLIED TO APPELLANT'S PAPER PLANT MUST BE TAKEN AT THE SEL LING PRICE OF UGVCL / SELLING PRICE AT WHICH OTHER POWER GENERATING PLANTS SELL T HE POWER. IT IS SUBMITTED THAT THE SELLING PRICE FOR WORKING OUT THE PROFIT U/S. 8 0IA AS ADOPTED AND WORKED OUT BY THE APPELLANT BE ACCEPTED AND NOT RS.2.99 PER UN IT AS INCORRECTLY WORKED OUT BY THE LEARNED C.I.T. (APPEALS). 2. THE LEARNED C.I.T. (APPEALS) HAS ERRED IN HOLDIN G THAT WHILE WORKING OUT THE PROFIT U/S. 80IA FOR ELIGIBLE UNIT THE EARLIER YEAR S' CARRIED FORWARD LOSS MUST BE SET OFF BEFORE GRANTING DEDUCTION. IT IS SUBMITTED THAT POWER GENERATING UNIT IS AN INDEPENDENT UNIT AND THERE ARE NO CARRIED FORWARD L OSSES CLAIMED OR SET OFF BY THE APPELLANT. IT IS THEREFORE SUBMITTED THAT THE F INDING AND DECISION OF THE C.I.T.(APPEALS) BEING INCORRECT AND ILLEGAL BE SET ASIDE; AS IT WAS NOT ARISING OUT OF ASSESSMENT ORDER AND ALSO FACTUALLY APPELLANT HAS N O CARRIED FORWARD LOSS OF THIS UNIT. 2. GROUND NO.1 WITH REGARD TO THAT LD. CIT(A) HAS ERRE D IN CONFIRMING THE DISALLOWANCE OF RS. 11,81,25,616/- BY NOT GRANTING DEDUCTION U/S. 80IA OF RS. 11,81,25,616 AS CLAIMED BY THE APPELLANT ON GENERAT ION OF POWER AND GROUND NO. 1.1 IS THAT LD. CIT(A) HAS ERRED IN INCORRECTLY AND ILLEGALLY WORKING OUT THE TOTAL COST OF STEAM FOR GENERATION OF POWER AT RS. 52,09,45,079/- BY APPLYING HIS OWN FORMULA. SINCE BOTH THE GROUNDS ARE INTERCO NNECTED AND FOR THE SAKE OF BREVITY, WE WOULD LIKE TO DISPOSE OF TOGETHER. 3. THE ASSESSEE HAS CLAIMED DEDUCTION U/S.80-IA (4)( I V) OF THE ACT AMOUNTING TO RS.LL,81,25,616/-IN RESPECT OF SALE OF POWER AND SA LE OF STEAM OF ITS 5MW AND INITIAL ASSESSMENT YEAR FOR 10 MW POWER PLANT. THE ASSESSEE IS CLAIMING THE DEDUCTION U/S. 80-IA ON BOTH THE POWER PLANTS FOR T HE GENERATION OF POWER AND SALE OF STEAM DURING THE YEAR. 4. ASSESSEE STATED THAT ABOUT 48 % OF THE STEAM IS USE D FOR POWER GENERATION SEGMENT AND REMAINING 52% OF THE STEAM IS USED FOR CONSUMPTION IN THE ITA NOS. 340 8/AHD/15 & 17/AHD/16 . A.Y. 2012-13 -2013-14 4 ASSESSEE'S OWN PAPER PLANT FOR DRYING THE PAPERS. I T WAS ALSO CONFIRMED THAT THE CALCULATION SUBMITTED BY THE ASSESSEE WAS BASED ON ABSOIUTEANDRCTUAL CORRECT CONSUMPTION OF COAL, ALL INPUTS, EXACT CUBIC METER OF STEAM PRODUCED (CALCULATED ON THE BASIS OF METER READING), STEAM U SED FOR PAPER PLANT, STEAM NOT USED IN PAPER PLANT BUT KILLED BY WAY OF TRANSF ERRING INTO WATER BY WAY OF TRANSFERRING INTO COOLING TOWER/ CONDENSER AND AGAI N REGENERATED IN BOILER AND FURTHER USED FOR POWER. 5. THE ASSESSEE ALSO CONTENDED THAT IT IS ELIGIBLE FOR DEDUCTION U/S 80IA ON SALE OF STEAM GENERATED DURING THE PROCESS OF POWER GENE RATION BECAUSE STEAM IS ALSO A FORM OF ENERGY. AND IT IS ANOTHER FORM OF PO WER AND THEREFORE, IT WOULD QUALIFY FOR THE DEDUCTION UNDER SECTION 80-IA. FOR THIS CONTENTION, THE ASSESSEE RELIED ON THE DECISION OF HONTDLE ITAT IN THE CASE OF SIAL SBEC BIO ENERGY LTD V/S DY. COMMISSIONER, (DELHI)(2004) 4 SOT 730( DELHI). BUT LD. A.O. WAS NOT AGREE WITH THE CONTENTION OF THE ASSESSEE AND M ADE ADDITION OF RS. 11,81,25,616. 6. AGAINST THE SAID ORDER, ASSESSEE PREFERRED FIRST ST ATUTORY APPEAL BEFORE THE LD. CIT(A) WHO CONFIRMED THE ACTION OF THE LD. A.O. 7. NOW APPELLANT HAS COME BEFORE US AND HAS FILED ITS SECOND STATUTORY APPEAL . ASSESSEE CITED AN ORDER OF OUR BENCH WHEREIN MATTER WAS PARTLY DECIDED IN FAVOUR OF THE APPELLANT IN ITS OWN CASE IN ITA NO. 101 TO 103/AHD/2013 FOR A.YS. 2008-09 TO 2010-11 DATED 11.07.2017 WITH FOLL OWING OBSERVATION: 14.4. ADVERTING TO THE ISSUE CONCERNING COST OF POWER AS NOTED EARLIER, THE AO HAS ALLOCATED THE TOTAL COST INCURRED BETWEEN COST OF STEAM AND COST OF POWER AT RS.1,20,38,775/- AND RS.17,84,94,630/- RESPECTIVEL Y. THE CIT(A) HAS REALLOCATED THE AFORESAID COST AT RS.7,36,75,904/- AND RS.11,6 8,57,552/- RESPECTIVELY HAVING ITA NOS. 340 8/AHD/15 & 17/AHD/16 . A.Y. 2012-13 -2013-14 5 REGARD TO THE PRESSURE DIFFERENCE AS WELL AS ENERGY NEEDED TO PRODUCE POWER AND STEAM. THE COST OF POWER IS ATTRIBUTABLE TO THE DE EMED SALE VALUE OF POWER. IN THIS REGARD, WE OBSERVE THAT THE CIT(A) HAS MADE SC IENTIFIC ANALYSIS AS PER PARA-9 OF ITS ORDER (REPRODUCED IN THE PRECEDING PARAS) AN D CAME TO THE CONCLUSION THAT RATIO OF ENERGY(HEAT) USABLE WITH CORRESPONDING PRE SSURE WOULD BE 105 : 66.2 INSTEAD OF 810 : 705. WE NOTICE THAT THE ASSESSE E HAD FAILED TO ALLOCATE THE TOTAL COST OF STEAM TOWARDS ELIGIBLE BUSINESS (POWER G ENERATION) AND NON-ELIGIBLE BUSINESS (DRYING PROCESS IN PAPER UNIT) IN A FAIR MANNER WHILE DETERMINING THE ELIGIBLE PROFIT UNDER S.80IA(4) OF THE ACT AT THE T IME OF RETURN. THE AO MODIFIED THE COST OF STEAM ATTRIBUTABLE TO POWER AT A HIGHE R AMOUNT ON THE BASIS OF USE OF STEAM FOR POWER GENERATION CLAIMED IN THE RATIO OF 48 (POWER) 52 (STEAM) AND THEREAFTER MADE FURTHER ADJUSTMENTS IN THE COST OF STEAM ON ACCOUNT OF PRESSURE FACTOR (5/42) ATTRIBUTABLE TO USE OF RESIDUAL STEAM FOR THE PURPOSE OF DRYING PAPER AS PROCESSED STEAM. IN FIRST APPEAL, THE CIT(A) HAS FURTHER TAKEN INTO ACCOUNT THE ENERGY RATIO AS WELL WHILE READJUSTING THE TOTA L COST IN GENERATING STEAM AND POWER AND THUS GRANTED PARTIAL RELIEF. BEFORE US, THE ASSESSEE HAS DISPUTED THE ENERGY RATIO ADOPTED BY CIT(A) FOR WHICH WE DO NOT FIND ANY OBJECTIVE REASONS IN ITS SUPPORT. NOTABLY, IN THE WORKING FILED IN BY P APER-BOOK ALSO, THE ASSESSEE WAS BROADLY ACCEPTED THE COST ALLOCATION BY CIT(A). T HE REVENUE HAS ALSO NOT BEEN ABLE TO REBUT THE COST ALLOCATION OF STEAM CARRIED ON BY CIT(A). THUS, WE ADOPT THE REASONINGS GIVEN BY THE CIT(A) IN ARRIVING AT I TS CONCLUSION TOWARDS COST ALLOCATION AND DECLINE TO INTERFERE THEREWITH. 8. SINCE IN ABOVE SAID APPEALS, SIMILAR ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE FOR THE A.YS. 2008-09 TO 2010-11. THEREFOR E, IN PARITY WITH THE ABOVE SAID ITAT ORDER, WE ALLOW BOTH THE GROUNDS IN FAVOU R OF THE ASSESSEE. 9. NOW WE COME TO GROUND NO. 1.2 THAT LD. CIT(A) HAS E RRED IN REDUCING THE SELLING PRICE OF THE POWER AT RS. 2.99 PER UNIT INS TEAD OF THE CORRECT AVERAGE SELLING PRICE OF THE POWER BEING CHARGED BY POWER G ENERATING UNIT/UGVCL AT RS. 5.43 PER UNIT. ITA NOS. 340 8/AHD/15 & 17/AHD/16 . A.Y. 2012-13 -2013-14 6 10. IN SUPPORT OF ITS CONTENTION, LD. A.R. CITED AN ORD ER OF OUR BENCH IN ITA NO. 101 TO 103/AHD/2013 FOR A.YS. 2008-09 TO 2010-11 IN PARA NO. 16 TO 16.4 ON PAGE 35 TO 36 WITH FOLLOWING OBSERVATION: 16. WE NOW SEEK TO DWELL ON OTHER ASPECT OF CONT ROVERSY I.E. INCLUDIBILITY FOR OTHERWISE OF SURCHARGE IN THE DEEMED SELLING PRI CE. THE CONTROVERSY CONCERNS AS TO WHETHER SURCHARGE AND DUTY LEVIED BY THE POWER GENERATION AND DISTRIBUTION COMPANIES TO ITS CONSUMER WILL FORM PA RT OF SELLING PRICE OR NOT FOR THE DETERMINATION OF MARKET VALUE UNDER S.80IA(8) F OR CALCULATION OF ELIGIBLE PROFITS UNDER S.80IA(4) OF THE ACT. 16.1. IN THIS REGARD, WE REFER TO THE ELECTRICITY ACT, 2003 AND NOTE THAT SURCHARGE IS APPLIED WITH AN OBJECT OF MEETING THE REQUIREM ENT OF CURRENT LEVEL CROSS SUBSIDY. THE AFORESAID ACT CLEARLY PROVIDES THAT S URCHARGE SHALL NOT BE LEVIABLE IN CASE OPEN ACCESS IS PROVIDED TO A PERSON WHO HAD ES TABLISHED A CAPTIVE GENERATING PLANT FOR HIRING ELECTRICITY TO THE DEST INATION OF HIS OWN USE. IN PARITY, THE CAPTIVE POWER GENERATING PLANT IS NOT ENTITLED TO RECOVER SURCHARGE WHILE TRANSFERRING THE POWER FOR CAPTIVE USE BY OPERATION OF LAW. THIS BEING SO, THE DEEMING SELLING PRICE SHOULD ALSO NOT INCLUDE THE C OMPONENT OF SURCHARGE WHICH IS NOT CHARGEABLE AT THE FIRST PLACE IN THE FACTS O F THE CASE. 16.2. THE DECISION IN THE CASE OF PRAGATI GLASS ( SUPRA) ALSO PROVIDES EXCLUSION OF EXCISE DUTY FOR THE PURPOSES OF DETERMINATION OF MA RKET VALUE OF ELECTRICITY GENERATED. THE DUTY BEING EXCLUDED, SURCHARGE ME ANT FOR SPECIFIC PURPOSES CANNOT FORM PART OF PROFITS OF THE ELIGIBLE BUSINES S. WE ALSO TAKE NOTE OF SIMILAR OBSERVATIONS HAVE BEEN MADE BY THE COORDINATE BENCH OF THE TRIBUNAL IN WEST COAST PAPER MILLS LTD. VS. ACIT 103 ITD 19 (MUM.) R EFERRED TO AND RELIED UPON BY THE REVENUE TO SUPPORT OUR VIEW. 16.3. IN PARITY, WE HOLD THAT BOTH SURCHARGE AND DUTY SHALL NOT FORM PART OF THE DEEMED SALE PRICE BEING EXTRANEOUS CHARGES FOR DETERMINATION OF MARKET VALUE IN TERMS OF S.80IA(8) OF THE ACT. 16.4. THUS, WE ARE OF THE VIEW THAT WHILE AVERA GING OF SELLING PRICE AS PER PRICES OF VARIOUS DISTRIBUTION COMPANIES IS NOT WARRANTED, THE AVERAGE STANDARD SALE PRICE CHARGED BY ELECTRICITY BOARD EXCLUDING SURCH ARGE, DUTY AND TAXES ETC. IS ITA NOS. 340 8/AHD/15 & 17/AHD/16 . A.Y. 2012-13 -2013-14 7 RELIABLE BENCHMARK FOR COMPUTATION DEEMED SALE PRIC E AND MARKET VALUE OF GOODS/SERVICES SUPPLIED. 11. THUS, IN PARITY WITH THE ABOVE SAID ORDER, WE ALLOW THIS GROUND OF APPEAL OF THE ASSESSEE. 12. NOW WE COME TO NEXT GROUND THAT LD. CIT(A) HAS ERRE D IN HOLDING THAT WHILE WORKING OUT THE PROFIT U/S. 80IA FOR ELIGIBLE UNIT THE EARLIER YEARS CARRIED FORWARD LOSS MUST TO BE SET OFF BEFORE GRANTING DED UCTION. 13. AT THE OUTSET, LD. A.R. CITED AN ORDER OF THIS BENC H WHEREIN ASSESSEES OWN CASE IN ITA NO. 101 TO 103/AHD/2013 FOR A.YS. 2008-09 TO 2010-11 PARA NO. 19 ON PAGE NO. 37 OF THE ORDER WHEREIN ON SIMILAR GROU ND, RELIEF WAS GRANTED TO THE ASSESSEE WITH FOLLOWING OBSERVATION: 19. APART FROM THE QUANTUM OF PROFIT ELIGIBLE FOR DEDUCTION UNDER S.80IA(4)(IV), THE ASSESSEE HAS ALSO CHALLENGED THE ACTION OF THE CIT(A) THAT WHILE WORKING OUT THE ELIGIBLE PROFITS UNDER S.80IA(4), THE EARLIER Y EARS CARRIED FORWARD LOSS MUST BE SET OFF BEFORE GRANTING DEDUCTION. THE ASSESSEE CL AIMS THAT NO LOSSES OF THE EARLIER YEARS ARE PENDING FOR SET OFF. WE DO NOT H AVE ANY FACTUAL DATA TO APPRECIATE THE FACTS ON THE ISSUE RAISED. WE THERE FORE CONSIDER IT EXPEDIENT THAT THE ISSUE OF SET OFF TOWARDS CARRIED FORWARD LOSSES AGAINST THE ELIGIBLE PROFIT, IF ANY, SHALL BE DECIDED DE NOVO BY THE AO IN ACCORDAN CE WITH LAW HAVING REGARD TO THE DECISION OF THE HONBLE RAJASTHAN HIGH COURT I N THE CASE OF EASTMAN EXPORTS(SUPRA) AND ITAT DECISION IN HAMAILTON HOUSE WARE (SUPRA) AND ALSO HAVING REGARD TO THE CBDT CIRCULAR NO.1/2016 DATED 15/02/2016. 14. THUS, IN PARITY WITH THE ITAT ORDER, WE ALLOW THIS GROUND OF APPEAL OF THE ASSESSEE. 15. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLO WED. ITA NOS. 340 8/AHD/15 & 17/AHD/16 . A.Y. 2012-13 -2013-14 8 16. NOW WE COME TO REVENUES APPEAL IN ITA NO. 17/AHD/2 016 FOR A.Y. 2012- 13. REVENUE HAS TAKEN FOLLOWING GROUNDS OF APPEAL: 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN ALLOWING THE APPEAL OF THE ASSESSEE WITH REGARD TO PROPORTIONATE DEPRECIATION OF RS.10,59,719/- FOLLOWING THE LAST YEAR'S ORDER OF CIT(A) FOR AY 2011-12. 2. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRE CTING THE AO TO ADOPT COST OF STEAM FOR POWER GENERATION AT RS.52,09,45,079/-I NSTEAD OF RS.84,93,88,548/-. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX (A) OUGHT TO HAVE UPHELD THE ORDER OF TH E ASSESSING OFFICER. 4. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE L D. COMMISSIONER OF INCOME TAX (A) MAY BE SET-ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 17. AT THE OUTSET, LD. A.R. CITED AN ORDER OF THIS BENC H IN ASSESSEES OWN CASE IN ITA NO. 767 TO 769/AHD/2013 FOR A.Y. 2008-09 TO 201 0-11 IN PARA NO. 23 AND 31 ON PAGE NO. 40 & 46 OF THE ORDER AND WITH THE FO LLOWING OBSERVATION: 23. REVENUE HAS RAISED THE FOLLOWING GROUNDS IN ITS CROSS-APPEAL. 1. THE LD.CIT(A) ERRED IN LAW AND ON FACTS IN DIRE CTING TO ALLOW DEPRECIATION ON THE MEASUREX QUALITY MACHINE PURCHASED AND INSTA LLED DURING THE A.Y. 2009- 10. 2. THE LD.CIT(A) ERRED IN LAW AND ON FACTS IN ALL OWING DEPRECIATION ON THE HONEY WELL MEASUREX EQUIPMENT CONSIDERING THE VALUE OF MACHINE AT RS.1,07,33,188/-. 3. THE LD.CIT(A) ERRED IN LAW AND ON FACTS IN WORK ING OUT THE COST OF STEAM FOR POWER GENERATION AT RS.11,20,59,887/- INSTEAD O F RS.18,27,10,978/- AS WORKED OUT BY THE A.O. 4. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE C IT(A) BE SET ASIDE AND THAT OF THE A.O. BE RESTORED TO THE ABOVE EXTENT. 31. IN THIS CONTEXT, WE NOTE THAT THE PARTY NAMELY CONTECH SOFTWARE LTD. HAS TRANSFERRED ITS HONEY WELL MEASURES MACHIN E WHICH WAS SHOWN AT WRITTEN DOWN VALUE OF RS.1,07,33,188/- IN ITS BO OKS. PLACING RELIANCE UPON THE WRITTEN DOWN VALUE SHOWN IN THE BOOKS OF T HE SELLER, THE COST WAS ASSIGNED AT RS.1,07,33,188/- AS ON 31/03/2008. THE CIT(A) ALSO ITA NOS. 340 8/AHD/15 & 17/AHD/16 . A.Y. 2012-13 -2013-14 9 RELIED UPON THE FACT THAT AFTER USING THE AFORESAID MACHINE SO ACQUIRED FOR A SHORT PERIOD, THE ASSESSEE HAS SOLD IT TO ONE KAL RA OVERSEAS PVT.LTD. FOR A SUM OF RS.73,53,000/-. THE CIT(A) ACCORDINGLY FELT THAT IN A SITUATION WHERE THE SELLER IS SHOWING THE WRITTEN DOWN VALUE AT RS.1.07 CORES AND THE ASSESSEE RESOLD THE SAID COMPUTER AT RS.73.53 L ACS IN A SHORT INTERVAL, THE COST OF ACQUISITION SHOULD BE ASSIGNED AT RS.1. 07 CRORES ONLY. WE NOTE THAT THE REASONS ASSIGNED BY THE CIT(A) FOR REPLACE MENT OF PURCHASE COST IS TENUOUS AND DOES NOT HAVE LEGALLY SOUND BASIS. WHILE UPHOLDING THE PURCHASE AS PER THE FINDINGS NOTED (SUPRA), THE CIT (A) HAS DOUBTED THE GENUINENESS OF THE PRICE/VALUE. WE FIND THAT MARKE T VALUE OF MACHINE ON THE DATE OF SALE TO THE ASSESSEE DETERMINED AT RS.1 .07 CRORES IS BASED ON OBSERVATIONS AS NOTED ABOVE WHICH ARE IN THE REALM OF CONJECTURES AND SURMISES AND NOT SUSTAINABLE IN LAW. HAVING ADMIT TED THE FACT OF PURCHASE THE COST THEREOF COULD NOT HAVE BEEN REPLA CED BY THE CIT(A) WITHOUT ANY SOUND BASIS. THUS, WE FIND MERIT IN TH E CLAIM OF THE ASSESSEE. THEREFORE, GROUND NO.1 OF ASSESSEES APPEAL IS ALLO WED, WHILE GROUND NOS.1 & 2 OF REVENUES APPEAL ARE DISMISSED. 18. THUS, IN PARITY WITH THE ITAT ORDER, WE DISMISS THI S GROUND OF APPEAL OF THE REVENUE. 19. NOW WE COME TO GROUND NO. 2 THAT LD. CIT(A) HAS ERR ED IN LAW AND FACTS IN DIRECTING THAT ADOPT COST OF STEAM FOR POWER GENERA TION AT RS. 52,09,45,079/- INSTEAD OF RS. 84,93,88,548/-. 20. AT THE OUTSET, LD. A.R. CITED AN ORDER OF OUR OWN B ENCH IS ASSESSEES OWN CASE IN ITA NO. 767 TO 769/AHD/2013 FOR A.Y. 2008-09 TO 2010-11IN PARA NO. 25 ON PAGE NO. 40 OF THE ORDER WITH THE FOLLOWING OBSE RVATION: 25. BOTH THE SIDES CONSENTED THAT IDENTICAL ISSU ES ARE INVOLVED IN THESE TWO APPEALS TOO. THUS, FOR PARITY OF REASONS NOTED ABOV E, OUR VIEW IN ITA NO.IT(SS)A NO.101/AHD/2013 FOR AY 2008-09 ABOVE SHALL APPLY MU TATIS MUTANDIS TO BOTH THE GROUNDS CAPTIONED ABOVE. AS A RESULT, GROUND NO. 2 OF ASSESSEES APPEAL IS PARTLY ALLOWED AND GROUND NO.3 OF REVENUES APPEAL IS DISMISSED. ITA NOS. 340 8/AHD/15 & 17/AHD/16 . A.Y. 2012-13 -2013-14 10 21. THUS, IN PARITY WITH THE ABOVE SAID ITAT ORDER, WE DISMISS THIS GROUND OF APPEAL OF THE REVENUE. 22. IN THE APPEAL, APPEAL FILED BY THE REVENUE IS DISMI SSED. 23. NOW WE COME TO ITA NO. 3081/AHD/2016 FOR ASSESSEES APPEAL IN A.Y. 2013- 14. THE ASSESSEE HAS TAKEN FOLLOWING GROUNDS OF APP EAL: 1. THE LEARNED C.I.T.(APPEALS) HAS ERRED IN CONFIRM ING THE DISALLOWANCE OF RS. 15,55,55,213/- IN RESPECT OF DEDUCTION CLAIMED U/S. 80IA OF THE ACT ON GENERATION OF POWER. IT IS SUBMITTED THAT ON THE FACTS AND CIR CUMSTANCES OF THE CASE AND BASED ON THE MATERIALS AND EVIDENCES FILED THE APPE LLANT IS ENTITLED TO DEDUCTION OF INCOME GENERATED FROM NEW INDUSTRIAL UNDERTAKING BY WAY OF GENERATING AND DISTRIBUTING POWER, I.E. BY WAY OF ELECTRICITY AND THE SAME BE ALLOWED NOW. 1.1 THE LEARNED C.I.T. (APPEALS) HAS ERRED IN INCOR RECTLY AND ILLEGALLY WORKING OUT THE TOTAL COST OF STEAM FOR GENERATION OF POWER AT RS. 55,96,72,0717- BY APPLYING HIS OWN FORMULA, WHICH IS CONTRARY TO THE STANDARD FORMULA AND TABLES PUBLISHED BY AUTHORITIES.' IT IS SUBMITTED THAT WHILE WORKING OUT THE PROFIT U/S. 80IA, THE COST OF STEAM FOR POWER GENERATION AS WORKED OUT BY THE APPELLANT AT RS. 51,67,00,1887- BE ACCEPTED AND THE REVISED WORKING OF THE C.I.T.(APPEALS), WHICH IS WITHOUT ANY BASIS OR SOUND MATERIAL BE REPLACED OR SUBSTITUTED. 1.2 THE LEARNED C.I.T. (APPEALS) HAS ERRED IN REDUC ING THE SELLING PRICE OF THE POWER I.E. ELECTRICITY WORKED OUT FOR DERIVING THE PROFIT FROM INDUSTRIAL UNDERTAKING BY REDUCING THE SURCHARGE AND TAXES AT RS.2.99 PER UNIT INSTEAD OF THE CORRECT AVERAGE SELLING PRICE OF THE POWER BEIN G CHARGED BY THE POWER GENERATING UNITS / UGVCL AT RS. 5.43 PER UNIT ( AVG . PRICE ) FOR THIS YEAR. IT IS SUBMITTED THAT BASED ON VARIOUS DECISIONS AND ON FA CT, THE COST OF POWER SUPPLIED TO APPELLANT'S PAPER PLANT MUST BE TAKEN AT THE SEL LING PRICE OF UGVCL / SELLING PRICE AT WHICH OTHER POWER GENERATING PLANTS SELL T HE POWER. IT IS SUBMITTED THAT THE SELLING PRICE FOR WORKING OUT THE PROFIT U/S. 8 0IA AS ADOPTED AND WORKED OUT BY THE APPELLANT BE ACCEPTED AND NOT RS.2.99 PER UN IT AS INCORRECTLY WORKED OUT BY THE LEARNED C.I.T. (APPEALS). 2. THE LEARNED C.I.T. (APPEALS) HAS ERRED IN HOLDIN G THAT WHILE WORKING OUT THE PROFIT U/S. 80IA FOR ELIGIBLE UNIT THE EARLIER YEAR S' CARRIED FORWARD LOSS MUST BE SET OFF BEFORE GRANTING DEDUCTION. IT IS SUBMITTED THAT POWER GENERATING UNIT IS AN ITA NOS. 340 8/AHD/15 & 17/AHD/16 . A.Y. 2012-13 -2013-14 11 INDEPENDENT UNIT AND THERE ARE NO CARRIED FORWARD L OSSES CLAIMED OR SET OFF BY THE APPELLANT. IT IS THEREFORE SUBMITTED THAT THE F INDING AND DECISION OF THE C.I.T.(APPEALS) BEING INCORRECT AND ILLEGAL BE SET ASIDE; AS IT WAS NOT ARISING OUT OF ASSESSMENT ORDER AND ALSO FACTUALLY APPELLANT HAS N O CARRIED FORWARD LOSS OF THIS UNIT. 24. SINCE FACTS OF THE CASE HAVE BEEN DISCUSSED IN CONN ECTED APPEAL NO. 3408/AHD/2015. GROUND NO. 1 IS THAT LD. CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 15,55,55,213/- BY NOT GRANTING DEDUCTION U/S. 80IA OF RS. 15,55,55,213/- AS CLAIMED BY THE APPELLANT ON GENER ATION OF POWER. 25. AT THE OUTSET, LD. A.R. CITED AN ORDER OF ITAT IN A SSESSEES OWN CASE IN ITA NO. 101 TO 103/AHD/2013 FOR A.YS. 2008-09 TO 2010-1 1 WHEREIN PARA NO. 14 ON PAGE 29 WITH THE FOLLOWING OBSERVATION. 14. THE PROFIT ON GENERATION OF POWER FROM CAPTIVE POWER PLANT IS ELIGIBLE FOR DEDUCTION UNDER S.80IA(4)(IV) READ WITH SECTION 80I A(8) OF THE ACT. SECTION 80IA(4)(IV) PROVIDES THAT UNDERTAKING OF AN ASSESS EE ENGAGED IN THE GENERATION AND DISTRIBUTION OF POWER IS QUALIFIED FOR CLAIM OF DEDUCTION. IN THIS BACKGROUND, THE ASSESSEE CLAIMED DEDUCTION UNDER S. 80IA(4) AMOUNTING TO RS.3,51,13,522/- IN THE ORIGINAL RETURN WHICH AMOUN T WAS REVISED TO RS.3,51,17,060/- IN THE RETURN FILED UNDER S.153A P URSUANT TO SEARCH. THE CLAIM UNDER S.80IA(4) WAS MADE BOTH ON ACCOUNT OF (I) PRO FITS ON DEEMED SALE OF ELECTRICITY TO ITS MANUFACTURING UNIT AS WELL AS (I I) PROFIT ON SALE OF RESIDUAL STEAM (TO MANUFACTURING UNIT) TOWARDS DRYING PROCESS. HO WEVER, IN THE COURSE OF APPELLATE PROCEEDINGS BEFORE CIT(A), THE CLAIM OF D EDUCTION TOWARDS PROFIT ON SALE OF STEAM WAS WITHDRAWN. THUS, THE CONTROVERSY IS CONFINED TO QUANTUM OF DEDUCTION UNDER S.80IA(4) FROM PROFIT ARISING IN CA PTIVE POWER UNIT ONLY. THE AO WHILE EXAMINING THE CLAIM OF AFORESAID DEDUCTION RE CALCULATED THE COST OF STEAM (WHICH IS OUT OF MAJOR COMPONENTS FOR GENERATION O F POWER) ON THE BASIS OF PRESSURE AND THUS RE-BIFURCATED THE CONSOLIDATED CO ST OF RS.19,05,33,456/- ITA NOS. 340 8/AHD/15 & 17/AHD/16 . A.Y. 2012-13 -2013-14 12 BETWEEN STEAM AND POWER COST AT RS.1,20,38,775 AND RS.17,84,94,680/- RESPECTIVELY. SIMULTANEOUSLY, THE SALE PRICE OF P OWER WAS ALSO CALCULATED WITHOUT DUTY AND SURCHARGE AT RS.13,12,72,088/-. T HE SALE PRICE OF STEAM WAS CALCULATED AT RS.1,32,42,654/- BY APPLYING 10% MARK -UP TO THE COST OF STEAM). AS A RESULT OF THESE ADJUSTMENTS, THE AO FOUND THAT TH ERE IS A LOSS OF RS.4,60,18,714/- IN THE UNDERTAKING GENERATING POWE R WHICH IS FURTHER SUBJECT TO ALLOCATION OF OTHER INDIRECT EXPENSES AND DEPRECIAT ION ETC. THUS, IN THE ABSENCE OF ANY ELIGIBLE PROFIT PER SE THE CLAIM UNDER S.80I A(4)(IV) OF THE ACT WAS DENIED. 26. THE PROFIT OF GENERATION OF POWER FROM CAPTIVE POWE R PLANT IS ELIGIBLE FOR DEDUCTION U/S. 80IA(4)(IV) READ WITH SECTION 80IA(8 ) OF THE INCOME TAX ACT. 27. THUS, IN PARITY WITH THE AFORESAID ORDER, WE ALLOW THIS GROUND OF APPEAL OF THE ASSESSEE. 28. NOW WE COME TO NEXT GROUND IS THAT LD. CIT(A) HAS E RRED IN INCORRECTLY AND ILLEGALLY WORKING OUT THE TOTAL COST OF STEAM FOR G ENERATION OF POWER AT RS. 55,96,72,071/- BY APPLYING HIS OWN FORMULA. 29. THIS GROUND OF APPEAL IS CONNECTED WITH GROUND NO. 2 OF THE DEPARTMENTS APPEAL IN (ITA NO. 3201/AHD/2013) FOR THE YEAR. TH E APPELLANT RELIES ON THE DETAILED SUBMISSION FILED BEFORE HONBLE CIT(A), WH ICH IS REPRODUCED ON PAGE 11 TO 13, PARA 4.1 OF CIT(A) ORDER. HOWEVER, THE IS SUE IS DECIDED AGAINST THE APPELLANT IN ITS OWN CASE BY THE ITAT VIDE ITS ORDE R DATED 11.07.2017 IN ITA NO. . 101 TO 103/AHD/2013 FOR A.YS. 2008-09 TO 2010 -11 WHEREIN IN PARA NO. 14 ON PAGE 32, IT IS HELD THAT NOTABLEY, IN THE WO RKING ACCEPTED THE COST ALLOCATION BY CIT(A). THE REVENUE HAS ALSO NOT BEEN ABLE TO REBUT THE COST ITA NOS. 340 8/AHD/15 & 17/AHD/16 . A.Y. 2012-13 -2013-14 13 ALLOCATIONOF STEAM CARRIED ON ARRIVING AT ITS CONCL USION TOWARDS COST ALLOCATION AND DECLINE TO INTERFERE HEREWITH.. 30. THUS, IN PARITY WITH THE ABOVE SAID ORDER, THIS GRO UND OF APPEAL IS DISMISSED. 31. NOW WE COME TO NEXT GROUND THAT LD. CIT(A) HAS ERRE D IN REDUCING THE SELLING PRICE OF THE POWER AT RS. 2.99 PER UNIT INSTEAD OF THE CORRECT AVERAGE SELLING PRICE OF THE POWER BEING CHARGED BY POWER GENERATIN G UNIT/UGVCL AT RS. 5.43 PER UNIT. 32. SINCE IN CONNECTED APPEAL IN ITA NO. 3408/AHD/2015, WE HAVE ALLOWED THIS GROUND OF APPEAL IN FAVOUR OF THE ASSESSEE. THUS, I N PARITY WITH THE ABOVE SAID ORDER, WE ALLOW THIS GROUND OF APPEAL OF THE ASSESS EE. 33. NOW WE COME TO NEXT GROUND IS THAT LD. CIT(A) HAS E RRED IN HOLDING THAT WHILE WORKING OUT THE PROFIT U/S. 80IA FOR ELIGIBLE UNIT THE EARLIER YEARS CARRIED FORWARD LOSS MUST TO BE SET OFF BEFORE GRANTING DED UCTION. 34. IN CONNECTED APPEAL ITA NO. 3408/AHD/2015, WE HAVE GRANTED RELIEF TO THE ASSESSEE. ON THE BASIS OF ITAT EARLIER ORDERS IN AS SESSEES OWN CASE IN ITA NO. 101 TO 103/AHD/2013 FOR A.YS. 2008-09 TO 2010-11. T HUS IN PARITY WITH THE CONNECTED APPEAL, WE ALLOW THIS GROUND OF APPEAL OF THE ASSESSEE AS WELL. 35. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLO WED. 36. NOW WE COME TO ITA NO. 3201/AHD/2016 FOR REVENUES APPEAL IN A.Y. 2013- 14. THE REVENUE HAS TAKEN FOLLOWING GROUNDS OF APPE AL: ITA NOS. 340 8/AHD/15 & 17/AHD/16 . A.Y. 2012-13 -2013-14 14 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRECTING TO ALLOW THE DEPRECIATION 14,88,61,711/- AS PER CLAIM MADE BY TH E ASSESSEE AND NOT APPRECIATING THAT THE QUALITY CONTROL MACHINERY WAS INSTALLED IN THE SECOND QUARTER WITHOUT WHICH THIS MACHINE ALSO COULD NOT H AVE BEEN PUT TO USE. 2. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRE CTING THAT ADOPT COST OF STEAM FOR POWER GENERATION AT, RS.55,96,72,071/- INSTEAD OF RS,91,25,31,986/-. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX (A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSES SING OFFICER, 4. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE L D. COMMISSIONER OF INCOME TAX (A) MAY BE SET-ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 37. SINCE FACTS OF THE CASE HAVE BEEN NARRATED IN CONN ECTED APPEAL IN ITA NO. 3408/AHD/2015 FOR THE SAKE OF BREVITY, WE DO NOT WA NT TO REPEAT HERE. 38. AT THE OUTSET, LD. A.R. CITED AN ORDER OF CO-ORDINA TE BENCH IN ASSESSEES OWN CASE IN ITA NO. 767 TO 769/AHD/2013 FOR A.Y. 2008-0 9 TO 2010-11 ORDER DATED 11.07.2017 IN PARA NO. 23 -31 ON PAGE NO. 40- 46 OF THE ORDER. THIS GROUND RAISED BY THE REVENUE HAS ALREADY BEEN DISMI SSED IN ASSESSEES OWN CASE. THUS, IN PARITY WITH THE ABOVE SAID CO-ORDINA TE BENCH ORDER, WE DISMISS THIS GROUND OF APPEAL OF THE REVENUE. 39. NOW WE COME TO NEXT GROUND THAT LD. CIT(A) HAS ERRE D IN LAW AND FACTS IN DIRECTING THAT ADOPT COST OF STEAM FOR POWER GENERA TION AT RS. 55,96,72,071/- INSTEAD OF RS.91,25,31,986/-. 40. AT THE OUTSET, LD. A.R. CITED AN ORDER OF CO-ORDINA TE BENCH IN ASSESSEES OWN CASE IN ITA NO. 767 TO 769/AHD/2013 FOR A.Y. 2008- 09 TO 2010-11 IN PARA NO. 25 ON PAGE NO. 40 WHERE SIMILAR GROUND RAISED B Y THE REVENUE HAS ALREADY ITA NOS. 340 8/AHD/15 & 17/AHD/16 . A.Y. 2012-13 -2013-14 15 BEEN DISMISSED IN ASSESSEES OWN CASE. THUS, IN PAR ITY WITH THE ABOVE SAID ORDER, WE DISMISS THIS GROUND OF APPEAL OF THE REVE NUE. 41. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMI SSED. ORDER PRONOUNCED IN OPEN COURT ON 28- 06- 2019 SD/- SD/- (WASEEM AHMED) (MAHAVIR PRASAD) ACCOUNTANT MEMBER TRUE COPY JUDICIAL MEMBER AHMEDABAD: DATED 28/06/2019 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD
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