DCIT, CHENNAI V. M/s. OPG Energy P. Ltd., CHENNAI

ITA 433/CHNY/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 0941 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 10 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-01-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 07-01-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 04-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIRUDH RAI
• Assessee Lawyers: V RA VICHANDRAN
• Keywords: Depreciation; Search and seizure
• Section: 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI BEFORE N.S. SAINI, ACCOUNTANT MEMBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER ITA NO.433/MDS/2011 (ASSESSMENT YEAR: 2007-08) DEPUTY COMMISSIONER OF INCOME TAX, COMPANY CIRCLE-V(1), CHENNAI. VS. M/S. OPG ENERGY P.LTD., 17, MOOKER NALLAMUTHU STREET, CHENNAI-600 001. PAN:AAACO4724G (APPELLANT) (RESPONDENT) APPELLANT BY : MR. ANIRUDH RAI, CIT DR RESPONDENT BY : MR. V.RAVICHANDRAN, FCA DATE OF HEARING : 7 TH JANUARY, 2013 DATE OF PRONOUNCEMENT : 7 TH JANUARY, 2013 O R D E R PER VIKAS AWASTHY, JM: THE APPEAL HAS BEEN FILED BY THE REVENUE IMPUGNING THE ORDER OF THE CIT(A)-V, CHENNAI DATED 18.11.2010 RELEVANT TO THE ASSESSMENT YEAR 2007-08. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE H AD FILED RETURN OF INCOME FOR THE ASSESSMENT YEAR 2007-08 ON 23.10.2007 CLAIMING DEDUCTION UNDER SECTION 80IA ON PROFITS DERIVED FROM THE UNDERTAKING GENERATING POWER. THE ASSESSING OFFICER VIDE ORDER DATED 14.12.2009 REJEC TED THE DEDUCTION CLAIMED BY THE ASSESSEE UNDER SECTION 80I A ITA NO.433/MDS/2011 2 TOWARDS CAPTIVE CONSUMPTION AND MADE ADDITION TO TH E TUNE OF ` 10,33,87,634/- AS INCOME ATTRIBUTABLE TO THE SALE OF POWER. THE ASSESSING OFFICER ALSO REJECTED THE DEP RECIATION CLAIM OF THE ASSESSEE. THE ASSESSEE HAD CLAIMED DEPRECIATION ON STRAIGHT LINE METHOD. THE ASSESSING OFFICER OBSERVED THAT SECTION 115JB STATES THAT THE ACCOUNT S SHALL BE IN ACCORDANCE WITH THE PROVISIONS OF SCHEDULE VI OF THE COMPANIES ACT, 1956. SEPARATE RATE OF DEPRECIATION HAS BEEN PRESCRIBED IN SCHEDULE VI OF THE COMPANIES ACT, THE REFORE, THE ASSESSEE CAN CLAIM DEPRECIATION AS PER THE PROV ISIONS OF COMPANIES ACT AND NOT UNDER STRAIGHT LINE METHOD. 3. AGGRIEVED AGAINST THE ASSESSMENT ORDER, THE ASSE SSEE PREFERRED AN APPEAL BEFORE THE CIT(A). THE CIT(A) V IDE ORDER DATED 18.11.2010 ALLOWED THE APPEAL OF THE ASSESSE E. WHILE ALLOWING DEDUCTION UNDER SECTION 80IA, THE CIT(A) F OLLOWED THE ORDER OF THE TRIBUNAL IN THE CASE OF WEST COAST PAPER MILLS LTD. VS. ACIT REPORTED AS 103 ITD 19(MUM) AND THE ORDER OF THE HONBLE DELHI HIGH COURT IN THE CASE O F CIT VS. DCM SHRIRAM CONSOLIDATED LTD., 176 TAXMAN 49(DEL). WHILE ALLOWING THE ISSUE RELATING TO DEPRECIATION THE CIT (A) RELIED ON ITA NO.433/MDS/2011 3 THE JUDGEMENT OF THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF MALAYALA MANORAMA CO.LTD. VS. CIT., 169 TAX MAN 471. 4. AT THE OUTSET, THE A.R. APPEARING ON BEHALF OF T HE ASSESSEE SUBMITTED THAT THE ISSUE RELATING TO DEDUC TION UNDER SECTION 80IA HAS ALREADY BEEN DECIDED BY THE TRIBUN AL IN FAVOUR OF THE ASSESSEE IN ASSESSEES OWN CASE FOR T HE ASSESSMENT YEAR 2006-07 AND 2008-09 IN ITA NO.1014/MDS/2010 AND 2072/MDS/2011 RESPECTIVELY. TH E LEARNED AR PLACED ON RECORD COPY OF THE ORDER OF TH E TRIBUNAL DATED 3.6.2011 PASSED IN ITA NO.1014/MDS/2010 AND 8 TH MARCH, 2012 IN ITA NO.2072/MDS/2011 IN ASSESSEES O WN CASE. THE A.R. FURTHER SUBMITTED THAT THE SECOND IS SUE RELATING TO METHOD OF CALCULATION OF DEPRECIATION U NDER SECTION 115JB HAS ALSO BEEN ADJUDICATED BY THE TRIBUNAL IN ITA NO.1014/MDS/2010 RELEVANT TO THE ASSESSMENT YEAR 2 006-07. 5. THE DR APPEARING ON BEHALF OF THE REVENUE FAIRLY CONCEDED THAT BOTH THE ISSUES HAVE BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL IN THE ASSESSMENT YEAR 2006- 07. ITA NO.433/MDS/2011 4 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORDS. A PERUSAL OF THE ORDER OF THE TRIBUNAL DA TED 3.6.2011 IN ITA NO.1014/MDS/2010 SHOWS THAT THE ISSUE RELATI NG TO DEDUCTION UNDER SECTION 80IA ON ACCOUNT OF CAPTIVE CONSUMPTION OF POWER HAS BEEN DECIDED BY THE TRIBUN AL IN FAVOUR OF THE ASSESSEE BY RELYING ON THE JUDGEMENT OF THE HONBLE JURISDICTIONAL HIGH COURT DATED 7-6-2010 IN THE CASE OF COMMISSIONER OF INCOME TAX, MADURAI VS. THIAGAR AJAR MILLS LTD., IN TAX CASE(APPEAL) NOS.68 TO 70 OF 201 0. THE RELEVANT EXTRACT OF THE JUDGEMENT OF THE HONBLE HI GH COURT IS REPRODUCED HEREIN BELOW:- 8. THE CONTENTION THAT ONLY WHATEVER POWER GENERATED FROM THE SALE TO AN OUTSIDER OF THE ELECT RICITY BOARD, AND THE PROFIT OR GAIN DERIVED BY SUCH SALE ALONE CAN BE TA KEN AS PROFIT OR GAINS DERIVED BY THE ASSESSEE AS MENTIONED IN SEC . 8OIA(1) OF THE ACT, HAS BEEN REJECTED BY THE TRIBUNAL IN THE O RDER IMPUGNED. IN OUR CONSIDERED VIEW, THE TRIBUNAL WAS WELL JUSTIFIED IN HAVING REJECTED SUCH A STAND OF THE APPELLANT . HAVING REFERRED TO SEC. 8OIA(1) OF THE ACT, WE ARE ALSO CONVINCED THAT WHAT ARE ALL TO BE SATISFIED IN ORDE R TO BE ELIGIBLE FOR THE DEDUCTION AS PROVIDED UNDER SUB-SEC. (1) OF SEC.8OIA , THE ASSESSEE SHOULD HAVE SET UP AN UNDERTAKING OR AN ENTERPRISE AND FROM AND OUT OF SUCH AN UNDERTAKING OR AN ENTERPRISE SET UP, ANY PROFIT OR GAIN IS DERIVED, FALLING UNDER ;S UB-SEC. COVERED BY SUB-SEC.(4) OF SEC. 8OIA OF THE ACT SUCH PROFIT OR GAIN DERIVED BY THE ASSESSEE CAN BE DEDUCTED IN ITS ENTIRETY FOR A PERIOD OF 10 YEARS STARTING FROM THE DATE OF FUNCTIONING OF THE SET UP. THE CONTENTION THAT PROFIT OR GAINS CAN BE CLAIMED BY T HE ASSESSEE ONLY IF SUCH PROFIT OR GAIN IS DERIVED BY THE SALE OF ITS PRODUCT OR POWER GENERATED TO AN OUTSIDER CANNOT BE THE MANNER IN WHICH ITA NO.433/MDS/2011 5 THE PROVISIONS CONTAINED IN SEC.8OIA(1) CAN BE INTE RPRETED . THE EXPRESSION 'DERIVED'; USED IN THE SAID SEC.8OIA(1) IN THE BEGINNING AS WELL AS IN THE LAST PART OF THE SUB-SEC . (4) MAKES IT ABUNDANTLY CLEAR THAT SUCH PROFIT OR GAIN COULD BE OBTAINED BY ONE ' S OWN CONSUMPTION OF THE OUTCOME OF ANY SUCH UNDERTAKING OR BUSINESS ENTERPRISES AS REFERRED TO IN ;SUB- SEC.(4) OF SEC.8OIA. THE DICTIONARY MEANING OF THE EXPRESSION ' DERIVE ' IN THE NEW OXFORD DICTIONARY OF ENGLISH STATES ' OBTAINING SOMETHING FROM A SPECIFIED SOURCE'. IN SEC.8O/A(1) ALSO NO RESTRICTION HAS BEEN IMPOSED AS REGARDS THE DERIVING OF PROFIT OR GAIN IN ORDER TO STATE THAT SUCH PROFIT OR GAIN DERIVED ONLY THROUGH AN OUTSIDE SOURCE ALONE WOULD MAKE ELI GIBLE FOR THE BENEFITS PROVIDED IN THE SAID SECTION . 9 . THEREFORE, THERE IS NO DIFFICULTY IN HOLDING THAT C APTIVE CONSUMPTION OF THE POWER GENERATED BY THE ASSESSEE FROM ITS OWN POWER PLANTS WOULD ENABLE THE RESPONDENT/ASSESS EE TO DERIVE PROFIT AND GAINS BY WORKING OUT THE COST OF SUCH CONSUMPTION OF POWER INASMUCH AS THE ASSESSEE IS ABLE TO SAVE TO THAT EXTENT WHICH WOULD CERTAINLY BE COVERED BY SEC .8 OIA(1) . WHEN SUCH WILL BE THE OUTCOME OF OWN CONSUMPTION OF THE POWER GENERATED AND GAINED BY THE ASSESSEE BY SETTING UP ITS OWN PO WER PLANT, WE DO NOT FIND ANY LACK OF MERIT IN THE CLAIM OF THE RESP ONDENT/ASSESSEE WHEN IT CLAIMED BY RELYING UPON SEC.80IA(1) OF THE ACT BY WAY OF DEDUCTION OF THE VALUE OF SUCH UNITS OF POWER CONSU MED BY ITS OWN PLANT BY WAY OF PROFIT AND GAINS FOR THE RELEVANT A SSESSMENT YEARS. RESPECTFULLY FOLLOWING THE ORDER OF THE CO-ORDINATE BENCH OF THE TRIBUNAL AND THE LAW LAID DOWN BY THE HONBLE M ADRAS HIGH COURT , WE DISMISS THIS GROUND OF APPEAL OF TH E REVENUE. 7. THE ISSUE REGARDING DEPRECIATION HAS ALSO BEEN D ECIDED BY THE TRIBUNAL IN THE EARLIER APPEAL OF THE ASSESS EE IN ITA ITA NO.433/MDS/2011 6 NO.1014/MDS/2010. THE TRIBUNAL WHILE ADJUDICATING T HE ISSUE HAS HELD AS UNDER:- 21 . WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS . STAND OF THE AO WAS THAT ASSESSEE OUGHT TO HAVE PROVIDED DEPRECIATION AS PER SCH . VI OF THE COMPANIES ACT AND HAVING CHARGED DEPRECIATION ON STRAIGHT LINE METHOD AS ALLOWED FOR POWER GENERATION COMPANIES UNDER SEC. 32(I) OF THE ACT, ITS BOOK PROFIT WAS CONSIDERABLY DEFLATED. WE ARE AFRAID , IN THE FACE OF THE DECISION OF HON ' BLE SUPREME COURT IN THE CASE OF MALAYALA MANAORAMA CO. LTD. (SUPRA), THIS STAND OF THE ASSESSING OFFICER CANNOT BE ACCEPTED . THERE IS NO DISPUTE HERE THAT ASSESSEE WAS CHARGING DEPRECIATION AS PER THE RATES PRESCRIBED IN I . T. RULES FOR POWER GENERATION COMPANIES THOUGH IT WAS ON STRAIGHT LINE METHOD. SEC.32(I) OF THE ACT READ ALONG WITH RULE 5(1A) ALLOW POWER GENERATION COMPANIES TO ADOPT STRAIGHT LINE METHOD FOR CALCULATING DEPRECIATION. THERE IS NO CASE FOR THE REVENUE THAT ASSESSEE WAS MAKING ANY INCONSISTENT CLAIM FROM YEAR TO YEAR. IN THE CASE OF MALAYALA MANORAMA CO.LTD., CITED SUPRA, HONBLE APEX COURT CLEARLY HELD THAT WHERE ASSESSEE WAS CONSISTENTLY CHARGING DEPRECIATION IN ITS BOOKS OF ACCOUNT AT THE RATES PRESCRIBED UNDER I.T.RULES AND ACCOUNTS OF THE ASSESSEE WERE PREPARED AS PER COMPANIES ACT, 1956, A.O. WOULD NOT HAVE ANY JURISDICTION TO ITA NO.433/MDS/2011 7 REWORK NET PROFIT BY SUBSTITUTING RATES PRESCRIBED IN SCHEDULE XIV OF THE COMPANIES ACT, 1956. WE ARE THEREFORE, OF THE OPINION THAT CIT(A) WAS JUSTIFIED IN DELETING THE REWORKING OF DEPRECIATION . NO INTERFERENCE IS CALLED FOR. GROUND NO.4 OF THE REVENUE STANDS DISMISSED. IN VIEW OF THE ABOVE FINDINGS OF THE TRIBUNAL IN AS SESSEES OWN CASE, WE DISMISS THIS GROUND OF APPEAL OF THE R EVENUE AS WELL. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED BEING DEVOID OF MERIT. ORDER PRONOUNCED IN THE OPEN COURT ON MONDAY, THE 7 TH DAY OF JANUARY, 2013 AT CHENNAI. SD/- SD/- ( N.S. SAINI ) (VIKAS AWASTHY) ACCOUNTANT MEMBER JUDICIAL MEMBER CHENNAI, DATED THE 7 TH JANUARY, 2013. SOMU COPY TO: (1) APPELLANT (4) CIT(A) (2) RESPONDENT (5) D.R. (3) CIT (6) G.F.