DCIT, Circle-2(1), Hyd, Hyderabad V. Kakatiya Cement Sugar & Industries Ltd., Hy, Hyderabad

ITA 346/HYD/2015

• Counselvise Citation: 34622514 RSA 2015
• Duration Of Justice: 2 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 11-06-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 06-04-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITRA
• Assessee Lawyers: M V ANIL KUMAR
• Keywords: Fair market value

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 346/HYD/2015 ASSESSMENT YEAR: 2010-11 DY. COMMISSIONER OF INCOME- TAX, CIRCLE 2(1), HYDERABAD. VS. KAKATIYA CEMENTS SUGAR & INDUSTRIES LTD., HYDERABAD PAN AABCK 1868J (APPELLANT) (RESPONDENT) REVENUE BY : SHRI RAJAT MITRA ASSESSEE BY : SHRI M.V. ANIL KUMAR DATE OF HEARING 11-06-2015 DATE OF PRONOUNCEMENT 30-06-2015 O R D E R PER SAKTIJIT DEY: THIS APPEAL BY THE DEPARTMENT IS DIRECTED AGAINST THE ORDER DATED 30/01/2015 OF LD. CIT(A) - 2, HYDERABAD FOR T HE AY 2010-11. 2. THE DEPARTMENT HAS RAISED SIX GROUNDS IN ALL. GR OUND NOS. 1 & 6 BEING GENERAL IN NATURE DO NOT REQUIRE ANY SPECIF IC ADJUDICATION, HENCE, THEY ARE DISMISSED. 3. IN GROUND NO. 2, DEPARTMENT HAS RAISED THE ISSUE OF ALLOWANCE OF DEDUCTION U/S 80IA TO ASSESSEE ON THE POWER GENE RATION PLANT. 4. BRIEFLY, THE FACTS RELATING TO THE ISSUE ARE, AS SESSEE A COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURE OF CEMENT AND SUGAR. IT ALSO HAS A POWER GENERATION UNIT FOR GENERATING POW ER. ASSESSEE HAS ITS SUGAR MANUFACTURING UNIT ALONG WITH CO-GENERATI ON PLANT IN KHAMMAM DISTRICT OF A.P. ASSESSEE HAS ALSO A CEMENT FACTORY IN 2 ITA NO. 346 /HYD/2015 KAKATIYA CEMENTS SUGAR & INDUSTRIES LTD. KRISHNA DISTRICT OF AP. FOR THE AY UNDER CONSIDERAT ION, ASSESSEE FILED ITS RETURN OF INCOME ON 24/09/2010 DECLARING TOTAL INCOME OF RS. 20,19,94,997 AFTER CLAIMING DEDUCTION U/S 80IA OF A N AMOUNT OF RS. 4,84,48,186. DURING THE ASSESSMENT PROCEEDING, AO N OTICED THAT FROM ITS POWER GENERATION UNIT ASSESSEE HAS DISCLOSED A TOTAL TURNOVER OF RS. 19,37,19,867 WHICH INCLUDES SALE OF ELECTRICITY TO SUGAR DIVISION AMOUNTING TO RS. 59.39 LAKH AND SALE OF ELECTRICITY TO CEMENT DIVISION AMOUNTING TO RS. 831.31 LAKHS. BESIDES, ASSESSEE HA S ALSO SOLD ELECTRICITY TO AP TRANSCO AT RS. 927.93 LAKHS. ASSE SSEE ALSO DISCLOSED AN AMOUNT OF RS. 118.55 LAKHS TOWARDS SAL E OF STEAM TO SUGAR DIVISION. IT WAS FOUND BY AO THAT ASSESSEE GE NERATES ELECTRICITY USING BAGASSE AS FUEL WHICH IS A RESIDUE OBTAINED F ROM SUGARCANE. WHILE EXAMINING ASSESSEES CLAIM OF DEDUCTION U/S 8 0IA OF THE ACT, AO OBSERVED THAT POWER GENERATION UNIT CLAIMED TO H AVE BEEN SET UP BY ASSESSEE IS NOT A NEW UNIT BUT HAS BEEN SET UP B Y SPLITTING UP OF EARLIER BUSINESS, THEREFORE, BEING OF THE OPINION T HAT POWER GENERATION UNIT HAS BEEN A CONTINUATION OF THE EARLIER BUSINES S, HE DISALLOWED THE DEDUCTION CLAIMED U/S 80IA OF THE ACT. BEING AGGRIE VED OF SUCH DISALLOWANCE, ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A). 5. LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF ASSESSEE AND HAVING FOUND THAT ASSESSEES CLAIM OF DEDUCTION U/S 80IA ON THE POWER GENERATION UNIT HAS BEEN ALLOWED BY ITAT, HYD ERABAD BENCH IN AYS 2007-08 TO 2009-10, FOLLOWING THE SAME, ALLOWED ASSESSEES CLAIM OF DEDUCTION U/S 80IA OF THE ACT. BEING AGGRI EVED BY THE ORDER OF LD. CIT(A), REVENUE IS BEFORE US. 6. WE HAVE HEARD THE PARTIES AND PERUSED THE ORDERS OF REVENUE AUTHORITIES AS WELL AS OTHER MATERIALS ON RECORD. L D. COUNSELS FOR BOTH THE PARTIES HAVE AGREED BEFORE US THAT THE ISSUE IN DISPUTE IS SQUARELY COVERED BY THE DECISION OF THE ITAT IN ASSESSEES O WN CASE FOR PRECEDING AYS 2007-08 TO 2009-10. COPIES OF THE ORD ERS WERE ALSO PLACED BEFORE THE BENCH. ON PERUSAL OF THE ORDER PA SSED BY THE COORDINATE BENCH IN ASSESSEES OWN CASE FOR AY 2007 -08 IN ITA NOS. 3 ITA NO. 346 /HYD/2015 KAKATIYA CEMENTS SUGAR & INDUSTRIES LTD. 931 & 1051/HYD/2011, DATED 10/02/2012, IT IS OBSERV ED THAT THE TRIBUNAL WHILE CONSIDERING THE ISSUE OF DISALLOWANC E OF ASSESSEES CLAIM OF DEDUCTION U/S 80IA BY AO ON THE ALLEGATION THAT THE POWER GENERATION UNIT IS A CONTINUATION OF THE OLD BUSINE SS AND HAS BEEN SET UP BY SPLITTING UP OF BUSINESS IN EXISTENCE, NEGATI VED THE FINDING OF AO AND ALLOWED ASSESSEES CLAIM OF DEDUCTION OBSERV ING AS UNDER: 17. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT THE ASSESSEE COMPANY UNDER LI CENSE OBTAINED FROM APERC COMMENCED A DISTINCT INDUSTRIAL UNDERTAKING FOR TH E GENERATION OF POWER. IT IS AN UNDISPUTED FACT THAT THE PREMISES OF THE UNDERTAKI NG ARE DISTINCT FROM THE SUGAR UNIT. SEPARATE TECHNOLOGY IS USED AND LOAN WAS ALSO OBTA INED AT CONCESSIONAL RATE FROM GOVERNMENT AGENCIES LIKE IREDA. THE LOWER AUTHORIT IES ARE NOT CORRECT IN HOLDING THAT THE POWER PLANT WAS NOT A DISTINCT UNIT ALTHOUGH A LL GOVERNMENT AUTHORITIES INCLUDING THE ELECTRICITY REGULATORY AUTHORITY CONSIDERED IT AS SUCH. THE TRUE PRINCIPLE AS LAID DOWN BY THE APEX COURT, IN THE CASE OF TEXTILE MAC HINERY CORPORATION LTD., VS. CIT [SUPRA], DIRECTLY AND SQUARELY APPLIES TO THE FACT S OF THE CASE. IN THE INSTANT CASE, THE TRUE TEST IS NOT WHETHER THE NEW INDUSTRIAL UNDERT AKING CONNOTES EXPANSION OF THE EXISTING BUSINESS OF THE ASSESSEE BUT WHETHER IT I S ALL THE SAME A NEW AN IDENTIFIABLE UNDERTAKING SEPARATE AND DISTINCT FROM THE EXISTIN G BUSINESS OF THE ASSESSEE BUT WHETHER IT IS ALL THE SAME A NEW AND IDENTIFIABLE UNDERTAKING SEPARATE AND DISTINCT FROM THE EXISTING BUSINESS. THE LOWER AUTHORITIES AGREES THAT FROM 2002-03, A NEW CO- GENERATION PLANT WAS PUT UP AND ALSO THEY AGREES T HAT INSTALLATION OF SOPHISTICATED AND HIGH CAPACITY MACHINERY TO PRODUCE STEAM AND ELECT RICITY HAS TAKEN PLACE IN THE PLACE OF EXISTING OLD TECHNOLOGY. THUS, THEY IMPLIEDLY A GREE THAT THE NEW MACHINERY AND PLANT HAVE BEEN INSTALLED UNDER SEPARATE LICENCE A ND PREMISES. EVEN THOUGH THE DECISION OF TEXTILE MACHINERY [SUPRA] WAS CONCERNE D WITH THE CLAUSE DEALING WITH RECONSTRUCTION OF EXISTING BUSINESS BUT THE EXPRES SION 'NOT FORMED' WAS CONSTRUED TO MEAN THAT THE UNDERTAKING SHOULD NOT BE A CONTINUA TION OF THE OLD BUT EMERGENCE OF A NEW UNIT. THEREFORE, EVEN IF THE UNDERTAKING IS ES TABLISHED BY TRANSFER OF BUILDING, PLANT OR MACHINERY, IT IS NOT FORMED AS A RESULT O F SUCH TRANSFER, IN OUR CONSIDERED VIEW; THE ASSESSEE COULD NOT BE DENIED THE BENEFIT . WE ALSO FIND THAT A NEW UNDERTAKING FOR MANUFACTURE OF POWER WITH STEAM AS BY-PRODUCT WAS FORMED OUT OF FRESH FUNDS, IN SEPARATELY IDENTIFIABLE PREMISES, UNDER A SEPARATE LICENSE WITH MANIFOLD INCREASE IN CAPACITY WITH NEW MACHINERY AND BUILDI NGS WITHOUT TRANSFER OF ANY PORTION OF THE OLD BUILDINGS OR MACHINERY WHICH PRE-EXISTE D. THE POWER AND STEAM PRODUCED EARLIER WAS PART OF THE SUGAR UNIT AND COULD SERVI CE ONLY THE SUGAR UNIT AND HENCE WAS AT BEST BY-PRODUCT OF THE SUGAR UNIT MANUFACTURING FACILITY. THE NEW UNIT HAD POWER AS THE MAIN PRODUCT AND APART FROM SERVICING THE CAPT IVE CONSUMPTION IN THE SUGAR UNIT ALSO SERVICED THE CEMENT UNIT POWER REQUIREMENTS, WHICH THE OLD CAPTIVE POWER PLANT WAS NOT DOING AND THE SURPLUS POWER IS BEING SUPPL IED TO APTRANSCO IN TERMS OF AN AGREEMENT. THE PRICING OF POWER IS ALSO SUBJECTED TO THE VARIOUS POWER TARIFF PRESCRIPTIONS. IT CAN BE CLEARLY SEEN THAT THE NEW UNDERTAKING IS THEREFORE NOT FORMED BY THE SPLITTING UP OF THE OLD UNDERTAKING. THE OL D UNDERTAKING FOR THE MANUFACTURE OF POWER STILL EXISTS. THERE IS NO CASE ALSO MADE OUT BY THE LOWER AUTHORITIES THAT THE NEW UNDERTAKING IS FORMED BY THE SPLITTING UP OF THE E XISTING BUSINESS. THE LEANED DR REFERS TO THE JUDGMENT OF THE KERALA HIGH COURT IN THE CA SE OF CHEMBRA PEAK ESTATES LTD VS 4 ITA NO. 346 /HYD/2015 KAKATIYA CEMENTS SUGAR & INDUSTRIES LTD. CIT REPORTED IN 85 ITR 401 WHICH IS CLEARLY DISTIN GUISHED BY THE LEARNED COUNSEL FOR THE ASSESSEE AS REFERRED ABOVE. FURTHER, THE SUPREME C OURT IN THE CASE OF TEXTILE MACHINERY CORPORATION (CITED SUPRA) WHEREIN THE SU PREME COURT CATEGORICALLY HELD THAT NEW UNIT ESTABLISHED BY THE ASSESSEE FOR MANU FACTURING ARTICLES USED AS INTERMEDIATE PRODUCTS IN THE OLD DIVISION, WHICH T HE ASSESSEE WAS BUYING FROM THE MARKET EARLIER, IS NOT RECONSTRUCTION OF BUSINESS ALREADY IN EXISTENCE. TO CONSTITUTE RECONSTRUCTION, THERE MUST BE TRANSFER OF ASSETS O F THE EXISTING BUSINESS TO THE NEW INDUSTRIAL UNDERTAKING. IN OUR OPINION, GENERATION OF POWER UNIT IS SEPARATE AND DISTINCT UNDERTAKING FOR WHICH SEPARATE APPROVAL W AS OBTAINED AND RECOGNISED BY THE IREDA AND IT CANNOT BE SAID THAT SPLITTING OF EXIS TING BUSINESS STRUCTURE. THEREFORE, IN OUR CONSIDERED OPINION, THE LOWER AUTHORITIES ARE NOT CORRECT IN DENYING THE DEDUCTION UNDER SECTION 80IA OF THE ACT. HENCE, WE DECIDE TH IS ISSUE IN FAVOR OF THE ASSESSEE COMPANY AND AGAINST THE REVENUE. SIMILAR VIEW WAS AGAIN EXPRESSED BY THE TRIBUNAL IN ASSESSEES OWN CASE IN THE SUCCEEDING AYS 2008-09 AND 2009-10 IN I TA NOS. 917/HYD/12, DATED 12/10/2012 AND ITA NO. 1024/HYD/1 3, DATED 05/02/14. THEREFORE, THERE BEING NO DIFFERENCE IN T HE FACTUAL POSITION RELATING TO ASSESSEES CLAIM OF DEDUCTION U/S 80IA IN THE IMPUGNED AY, THERE IS NO REASON TO DENY SUCH DEDUCTION TO A SSESSEE IN THE IMPUGNED AY. ACCORDINGLY, WE DO NOT FIND ANY INFIRM ITY IN THE ORDER OF LD. CIT(A) IN ALLOWING ASSESSEES CLAIM OF DEDUCTIO N U/S 80IA AFTER FOLLOWING THE DECISION OF ITAT ON THE ISSUE. WE, TH EREFORE, UPHOLD THE ORDER OF LD. CIT(A) BY DISMISSING THE GROUND RAISED . 7. THE NEXT ISSUE, WHICH IS COMMON IN GROUND NOS. 3 & 4 IS, WITH REGARD TO DEDUCTION CLAIMED BY ASSESSEE ON COST OF STEAM SOLD TO SUGAR UNIT. 8. BRIEFLY, THE FACTS RELATING TO THIS ISSUE ARE, I N COURSE OF ASSESSMENT PROCEEDING, AO WHILE DENYING ASSESSEES CLAIM OF DEDUCTION U/S 80IA ALSO HELD THAT STEAM IS NOT A PO WER AS ENVISAGED U/S 80IA. HE WAS ALSO OF THE VIEW THAT STEAM IS ONL Y A BYE-PRODUCT, IT CANNOT BE SAID TO BE INCOME FROM THE BUSINESS OF PO WER GENERATION. AO OPINED THAT SINCE NO VALUE HAS BEEN ASCRIBED BY APERC IN TARIFF FIXATION, ITS VALUE HAS BEEN TAKEN AT NIL. HE ALSO OBSERVED THAT SINCE THE COST OF FUEL HAS BEEN FULLY CONSIDERED IN FIXIN G THE TARIFF NO SEPARATE ADDITION IN RESPECT OF FUEL COST CAN BE AL LOWED. AO OBSERVED THAT SINCE DEDUCTION CLAIMED U/S 80IA IS DENIED TO ASSESSEE ON THE 5 ITA NO. 346 /HYD/2015 KAKATIYA CEMENTS SUGAR & INDUSTRIES LTD. AMOUNT OF RS. 118.55 LAKHS REPRESENTING THE VALUE O F STEAM SOLD, BUT, THE VALUE OF STEAM HAS BEEN ARRIVED AT NIL, INCOME OF THE SUGAR DIVISION IS TO BE INCREASED TO THE EXTENT OF RS. 11 8.55 LAKHS. BEING AGGRIEVED OF SUCH ADDITION, ASSESSEE PREFERRED APPE AL BEFORE LD. CIT(A). LD. CIT(A) FINDING THAT SIMILAR ISSUE HAS BEEN DECIDED IN FAVOUR OF ASSESSEE BY ITAT IN ASSESSEES OWN CASE F OR AYS 2007-08, 2008-09 AND 2009-10, DELETED THE ADDITION. 9. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIE S AND PERUSED THE ORDERS OF REVENUE AUTHORITIES AS WELL AS OTHER MATERIALS ON RECORD. BOTH THE COUNSELS AGREED BEFORE US THAT THE ISSUE I N DISPUTE IS SQUARELY COVERED IN FAVOUR OF ASSESSEE BY THE DECIS IONS OF THE COORDINATE BENCH. THE ORDERS BY THE COORDINATE BENC H IN THIS REGARD IN ASSESSEES OWN CASE FOR AYS 2007-08 TO 2009-10 W ERE ALSO PLACED BEFORE THE BENCH. ON PERUSAL OF THE ORDERS PASSED B Y THE COORDINATE BENCH IN ASSESSEES OWN CASE THAT THE COORDINATE BE NCH IN ITA NO. 1024/HYD/13, DATED 05/02/2014, WHILE DECIDING IDENT ICAL ISSUE, HELD AS UNDER: 15. AFTER HEARING THE PARTIES AND PERUSING THE RE CORD WE FIND THAT THE SIMILAR ISSUE CAME UP FOR CONSIDERATION IN AY 2007-08 AND 2008- 09 IN ASSESSEES OWN CASE. IN AY 2008-09, THE COORDINATE BENCH HELD AS FOLLOWS: 6. AFTER HEARING BOTH THE PARTIES ON THIS, WE AR E OF THE OPINION THAT THE SAME ISSUE WAS CONSIDERED BY THIS TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2007-08 IN ITA NO. 931/HYD/2011. THE TRIBUNAL VIDE ORDER DATED 1 0.2.2012 HELD AS FOLLOWS: 21. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT THE LOWER AUTHOR ITIES DID NOT DISPUTE THAT THE PROFIT CREDITED TO PROFIT AND LOSS ACCOUNT IN RESPECT OF STEAM IS ONLY RS. 11.43 LAKHS. THUS, EVEN ASSUMING THAT STEAM IS NOT POWER AS HELD BY T HE ASSESSING OFFICER, AT BEST THE DEPARTMENT COULD HAVE TREATED ONLY RS. 11.43 LAKHS AS INELIGIBLE PROFITS FOR THE PURPOSE OF CLAIMING THE DEDUCTION UNDER SECTION 80 IA OF THE ACT. TO HOLD OTHERWISE, WOULD BE A GROSS ERROR AS THE EXPENDITURE DEBITED TO THE PROFIT AND LOSS ACCOUNT OF THE POWER UNIT IS STILL BEING RETAINED BY THE DEPARTMENT WHILE MAKING THE COMPUTATION. THE CIT [A] ALSO AGREES T HAT STEAM HAS NO VALUE AS NO PRICE WAS CHARGED FOR THE SAME IN THE EARLIER YEA R BUT IGNORES THE FACT THAT IN THE ABSENCE OF GROSS TOTAL INCOME IN THE EARLIER YEAR NO EXEMPTION COULD HAVE BEEN CLAIMED. THEREFORE, WE DIRECT THAT ONLY RS.11.43 LAKHS IS TO BE TREATED AS INELIGIBLE PROFITS FOR THE PURPOSE OF DEDUCTION UNDER SECTIO N 80IA OF THE ACT AND FOR THE BALANCE SALE AMOUNT OF STEAM TO SUGAR DIVISION, T HE ASSESSEE COMPANY IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA OF THE ACT. FOR THIS PROPOSITION, WE PLACE 6 ITA NO. 346 /HYD/2015 KAKATIYA CEMENTS SUGAR & INDUSTRIES LTD. RELIANCE ON THE ORDER OF THE TRIBUNAL IN THE CASE OF DCW LTD.VS. ADDL. CIT, ITA NO. 126/MUM/2008, AY 2003-04 DATED 29TH JANUARY, 2010 REPORTED IN 42 DTR (MUMBAI) (TRIB.) 369 AT PAGE 383 PARA 18.8 WHICH R EADS AS UNDER: 18.8 THE NEXT ITEM OF MISCELLANEOUS INCOME IS TH E INCOME FROM SALE OF STEAM PRODUCED BY THE ASSESSEE. BRIEFLY THE FACTS AND N ATURE OF STEAM ARE THAT THE CAPTIVE POWER UNDERTAKING ALSO HAS WASTE HEAT RE COVERY BOILER, WHICH IS PART OF THE POWER UNDERTAKING. THE POWER GENERATED BY THE RUNNING OF DIESEL GENERATING SET IS USED IN THE MANUFACTURE OF CAUS TIC SODA. RUNNING OF DIESEL GENERATING SETS PRODUCE HEAT, WHICH IS RECOVERED FROM THE WASTE HEAT RECOVERY BOILER IN THE FORM OF STEAM. DURING THE YEAR ENDED MARCH, 2002, THE TOTAL QUANTITY OF STEAM GENERATED IS 1,02,295 MT. THE SAID STEAM IS USED AS POWER FOR THE MANUFACTURE OF PVC AND LIMENITE AND 6,240 MT WAS USED TOWARDS INTERNAL CONSUMPTION. DURNG THE YEAR 66,9 00 MT OF STEAM WAS CONSUMED IN THE MANUFACTURE OF PVC AND 29,065 MT WAS CONSUMED IN THE MANUFACTURE OF LIMENITE. 18.9 THE SUBMISSION OF THE LEARNED AUTHORISED REP RESENTATIVE OF THE ASSESSEE IS THAT SINCE POWER IN THE FORM OF STEAM WAS GENERATED BY THE CAPTIVE POWER PLANT AND CONSUMED IN THE MANUF ACTURE OF PVC AND LIMENITE, THEREFORE, THE ASSESSEE IS ENTITLED FOR DEDUCTION UNDER S. 80IA. FURTHER, THE LEARNED AUTHORISED REPRESENTATIVE SU BMITTED THAT ON IDENTICAL SET OF ACTS, THE DEPARTMENT FILED SLP B EFORE HONBLE SUPREME COURT AGAINST THE JUDGEMENT OF HONBLE MADRAS HIGH COU RT IN TAX CASE NO. 1773 OF 2008 AND VIDE JUDGEMENT DT. 6TH NOVEMBER, 2008, T HE APEX COURT, DISMISSED THE DEPARTMENTS APPEAL AGAINST THE DECISION OF T RIBUNAL HOLDING THAT THE ASSESSEE WAS ENTITLED TO CLAIM DEDUCTION UNDER S. 80-IA OF THE ACT ON THE VALUE OF STEAM USED FOR CAPTIVE CONSUMPTION BY THE ASSE SSEE. CIT VS. TANFAC INDUSTRIES LTD., SLP(C) NO. 18537 OF 2009 (319 IT R 8 AND 9). IN THE LIGHT OF ABOVE DISCUSSION, WE FIND THAT STEAM PRODUCED BY THE ASSESSEE IS ELIGIBLE UNIT IS A BY-PRODUCT AND INCOME FROM SALE OF STEAM IS THE INCOME DERIVED FROM INDUSTRIAL UNDERTAKING, THEREFORE, DEDUCTION UNDE R S. 80-IA IS ALLOWABLE. WE, ACCORDINGLY, SET ASIDE THE ORDER OF CIT(A) ON THI S ISSUE AND THE CLAIM OF THE ASSESSEE IS ALLOWED. 22. THE GROUND RAISED BY THE ASSESSEE WITH REGARD TO DEDUCTION U/S. 80IA IN RESPECT OF SALE OF STEAM TO THE SUGAR UNIT IS PA RTLY ALLOWED.' 7. IN VIEW OF THE ABOVE ORDER OF THE TRIBUNAL, IN PRINCIPLE, WE AGREE WITH THE FINDINGS OF THE CIT(A). HOWEVER, THE CALCULATION OF VALUE OF THE STEAM PRODUCED BY THE POWER PLANT HAS TO BE DETERMINED AFTER CONSID ERING THE COST AND PRODUCTION RECORD OF RESPECTIVE UNIT AND THEREAFTER QUANTIFI CATION OF DEDUCTION HAS TO BE DONE IN ACCORDANCE WITH THE ORDER OF THE TRIBUNAL CITE D SUPRA. THIS ISSUE IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO THE ASSESSEE TO FURNISH NECESSARY RECORDS FOR THE PURPOSE OF DETER MINING THE VALUE OF THE STEAM PRODUCED AND TRANSFERRED TO SUGAR UNIT. 16. AS THE ISSUE UNDER CONSIDERATION IS IDENTICAL TO THAT OF THE CASE DECIDED BY THE COORDINATE BENCH IN ASSESSEES OWN CASE FOR AY 20 07- 08 AND 2008-09, RESPECTFULLY FOLLOWING THE SAME, WE REMIT THE ISSU E BACK TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO DECIDE THE I SSUE AFTER EXAMINING THE RECORDS 7 ITA NO. 346 /HYD/2015 KAKATIYA CEMENTS SUGAR & INDUSTRIES LTD. THAT WILL BE FURNISHED BY THE ASSESSEE BEFORE HIM. THE ASSESSEE IS DIRECTED TO FURNISH NECESSARY RECORDS FOR THE PURPOSE OF DETER MINING THE VALUE OF THE STEAM PRODUCED AND TRANSFERRED TO SUGAR UNIT. THIS GROUN D IS ALLOWED FOR STATISTICAL PURPOSES. SINCE THE FACTS IN DISPUTE IN THE PRESENT APPEAL AR E MATERIALLY SAME AND THE ORDER PASSED BY LD. CIT(A) IS FULLY IN TERM S WITH THE ORDER OF THE TRIBUNAL, WE HAVE NO HESITATION IN UPHOLDING TH E SAME BY DISMISSING THE GROUND RAISED. 10. THE LAST ISSUE RAISED BY THE DEPARTMENT IN GROU ND NO. 5 IS RELATING TO REDUCTION IN POWER CHARGES. 11. DURING THE ASSESSMENT PROCEEDING, AO NOTICED TH AT ASSESSEE HAS ADOPTED A RATE OF 3.48% IN RESPECT OF ELECTRICI TY SUPPLIES MADE TO AP TRANSCO, SUGAR AND CEMENT DIVISIONS. HE OBSERVED THAT INITIALLY THE GOVT. OF AP VIDE GO MS. NO. 93 DATED 18/11/97 A NNOUNCED UNIFORM INCENTIVES TO ALL PROJECTS BASED ON RENEWAB LE SOURCES OF ENERGY FOR PURCHASE OF POWER BY APSEB/AP TRANSCO. THE RATE WAS FIXED AT RS. 2.25 PER UNIT WITH 5% ESCALATION PER A NNUM WITH 1997-98 AS BASE YEAR. AO OBSERVED THAT APERC WAS CONSTITUTE D ON 03/04/1999 IN PURSUANCE TO AP ELECTRICITY REFORM AC T, 1998. THE PURCHASE AGREEMENTS SIGNED BY AP TRANSCO WITH NON-C ONVENTIONAL ENERGY DEVELOPERS INCLUDED A PROVISION FOR REVIEW O F INCENTIVES BY THE APERC WITH EFFECT FROM 01/04/2004. AO OBSERVED THAT IN PURSUANCE WITH THE POWERS CONFERRED UNDER THE ELECTRICITY ACT , 2003, APERC INVITED PROPOSALS FOR TARIFF FIXATION FROM 01/04/20 04. AFTER HEARING ALL CONCERNED, COMMISSION PASSED AN ORDER DATED 20/03/2 004 FIXING TARIFFS FOR VARIOUS SOURCES OF ENERGY. IN CASE OF B AGASSE CO- GENERATION PLANTS, IT ARRIVED AT TWO TYPES OF TARIF F, A FIXED COST AND A VARIABLE COST. AO NOTICED THAT AS ASSESSEE IS INTO THE SIXTH YEAR OF OPERATIONS, THE FIXED COST OF TARIFF IS RS. 1.51 PE R UNIT AND THE VARIABLE COST FOR THE YEAR 2007-08 HAS BEEN FIXED AT RS. 1.1 8 PER UNIT. AO OBSERVED THAT THE ORDER OF APERC FURTHER LAID DOWN A CONDITION THAT NO FIXED TARIFF WILL BE APPLICABLE IF PLANT LOAD FA CTOR EXCEEDS 55% AS THE VARIABLE TARIFF WOULD TAKE CARE OF THE COSTS. H OWEVER, THEY HAVE 8 ITA NO. 346 /HYD/2015 KAKATIYA CEMENTS SUGAR & INDUSTRIES LTD. BEEN COMPENSATED WITH AN INCENTIVE OF 21.5 PAISE PE R UNIT FOR DELIVERY IN EXCESS OF 55% PLF. AO NOTICED THAT IN CASE OF AS SESSEE AS THE PLF IS BELOW 55%, ASSESSEE IS ENTITLED TO A PRICE O F 2.69 PER UNIT. AO OBSERVED THAT TARIFF FIXED BY APERC WAS CHALLENGED BEFORE THE TRIBUNAL AND THEREAFTER THE ORDER OF THE TRIBUNAL W AS CHALLENGED BEFORE THE HONBLE SUPREME COURT BY AP TRANSCO. AO OBSERVED THAT, THOUGH, THE MATTER HAS NOT YET REACHED FINALITY, BU T, STILL, ASSESSEE COMPANY HAS BEEN RAISING INVOICES ON AP TRANSCO @ 3 .48 PER UNIT, WHICH IS THE PRICE AS ON 31/03/2004 AS PER THE OLD TARIFF. AO OBSERVED THAT ASSESSEE HAD ENTERED INTO AGREEMENT WITH NEDCA P ON 16/08/2000 AS PER WHICH IT IS UNDER AN OBLIGATION T O FOLLOW THE DIRECTIONS OF APERC. THEREAFTER, AO REFERRING TO VA RIOUS JUDICIAL PRECEDENTS, REJECTED THE INCOME SHOWN FROM POWER GE NERATION UNIT BY REDUCING IT BY AN AMOUNT OF RS. 4,12,84,308 BY TREA TING PER UNIT PRICE AT RS. 2.69. BEING AGGRIEVED OF SUCH REVISION IN PR ICE OF POWER BY AO, ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(A). 12. BEFORE LD. CIT(A), IT WAS SUBMITTED BY ASSESSEE THAT THE APPELLATE TRIBUNAL BEFORE WHICH POWER TARIFF FIXED BY APERC WAS CHALLENGED, HAS GIVEN A DECISION IN FAVOUR OF THE P OWER UNITS. ASSESSEE REFERRING TO PROVISIONS OF SECTION 80IA(8) ALSO SUBMITTED THAT AS PER THE SAID PROVISION THE MARKET VALUE IS THE VALUE WHICH WOULD ORDINARILY FETCH IN THE OPEN MARKET AND IN C ASE OF SUPPLY OF ELECTRICITY THE FAIR MARKET VALUE WOULD BE THE RATE AT WHICH AP TRANSCO CHARGES ITS CUSTOMERS. LD. CIT(A) AFTER CONSIDERIN G THE SUBMISSIONS OF ASSESSEE IN THE LIGHT OF THE OBSERVATIONS MADE B Y ITAT IN ASSESSEES OWN CASE HELD AS UNDER: 10. THE SUBMISSIONS AND THE ORDERS OF THE ITAT AND APPELLATE TRIBUNAL FOR ELECTRICITY CITED SUPRA HAV E BEEN DULY PERUSED. IT IS OPINED THAT THE RATE FIXED BY APERC IS THE FAIR MARKET VALUE AS FAR AS SALE TO AP TRANSCO, HENCE, THE SAME RATE MAY BE APPLIED FOR THE SALE OF CEMENT AND SUG AR DIVISION ALSO. RESPECTFULLY FOLLOWING THE DECISION OF ITAT IN APPELLANTS CASE, THE AO IS DIRECTED TO ADOPT THE RATE AS FINA LIZED BY THE APPELLATE TRIBUNAL OF THE APREC. 9 ITA NO. 346 /HYD/2015 KAKATIYA CEMENTS SUGAR & INDUSTRIES LTD. 13. WE HAVE HEARD THE PARTIES AND PERUSED THE MATER IALS ON RECORD. BOTH THE COUNSELS STATED BEFORE US THAT THIS PARTIC ULAR ISSUE HAS ALSO BEEN DEALT BY THE ITAT IN ASSESSEES OWN CASE FOR A Y 2007-08. ON GOING THROUGH THE ORDER OF THE TRIBUNAL IN ITA NO. 931 & 1051/HYD/2011, DTD. 10/02/2012, IT IS OBSERVED THAT THE BENCH WHILE DECIDING THE ISSUE HELD AS UNDER: 30. IN VIEW OF THE ABOVE ORDER OF THE TRIBUNAL, WE ARE INCLINED TO HOLD THAT THE POWER TARIFF RATE SHOULD BE CONSIDERED AT RS. 2.67 PER U NIT INSTEAD OF RS. 3.48 PER UNIT AS DECIDED BY THE TRIBUNAL IN THE CASE OF SHRI BALAJI BIO-MASS POWER PROJECT LTD. (SUPRA). ACCORDINGLY, WE ALLOW THE GROUND TAKEN BY THE REVE NUE. HOWEVER, IN THE EVENT OF TARIFF RATE REACHED FINALITY BY THE JUDGEMENT OF H IGHER JUDICIAL FORUM, THE ASSESSING OFFICER IS DIRECTED TO CONSIDER THE SAME AND DECID E ACCORDINGLY. 14. SINCE THE FACTS AND ISSUE INVOLVED IN THIS APPE AL IS MATERIALLY, SAME, FOLLOWING THE SAID DECISION OF THE TRIBUNAL, THOUGH WE UPHOLD THE POWER TARIFF RATE AT RS. 2.69 PER UNIT AS ADOPT ED BY AO INSTEAD OF RS. 3.48 PER UNIT AS ADOPTED BY ASSESSEE, BUT, AT T HE SAME TIME, WE DIRECT THAT IN THE EVENT THE TARIFF RATE GETS REVIS ED EITHER BY VIRTUE OF JUDGMENT OF HONBLE SUPREME COURT OR ANY OTHER JUD ICIAL FORUM, AO SHOULD CONSIDER THE SAME AND DECIDE ACCORDINGLY. 15. IN THE RESULT, DEPARTMENTS APPEAL IS PARTLY AL LOWED. PRONOUNCED IN THE OPEN COURT ON 30 TH JUNE, 2015. SD/- SD/- (P.M. JAGTAP) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED:30 TH JUNE, 2015 KV 10 ITA NO. 346 /HYD/2015 KAKATIYA CEMENTS SUGAR & INDUSTRIES LTD. COPY TO:- 1) DCIT, CIRCLE 2(1),8 TH FLOOR, B BLOCK, IT TOWERS, AC GUARDS, HYDERABAD. 2) M/S KAKATIYA CEMENT SUGAR & INDUSTRIES LTD., H. NO. 1-10-140/A, GURUKRUPA, ASHOKNAGAR, HYDERABAD 3 CIT(A)-2, HYDERABAD 4) CIT-2, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD.