M/s Tamil Nadu Petroproducts Ltd., CHENNAI V. DCIT, CHENNAI

ITA 434/CHNY/2006

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5219 (ITAT-CHENNAI)
• Duration Of Justice: 5 year(s) 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-04-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 24-02-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 21-02-2006
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Section: 80HHC; 80IB

Judgement Text

IN THE INCOMETAX APPELLATE TRIBUNAL: C - BENCH:CHEN NAI (BEFORE SHRI U.B.S. BEDI, JUDICIAL MEMBER & ABRAHAM P. GEORGE. ACCOUNTANT MEMBER) ITA NO. 434/MDS/2006 ASST. YEAR 2002-03 AND ITA NO.725/MDS/2006 ASST. YEAR 2002-03 TAMILNADU PETRO PRODUCTS LTD, MANALI EXPRESS HIGHWAY, MANALI, CHENNAI 6000068 (PANAAACT1295M) (APPELLANT) VS. THE DCIT CO. CIR. III (1), CHENNAI (RESPONDENT) THE ITO, CO. CIR.III(1), CHENNAI (APPELLANT). VS. TAMILNADU PETRO PRODUCTS LTD, MANALI EXPRESS HIGHWAY, MANALI, CHENNAI 6000068 (PANAAACT1295M) (RESPONDENT) ASSESSEE BY: DEPARTMENT BY: SHRI SAROJKUMAR SHRI TAPASKUMAR DUTTA,CIT- DR 434-725/MDS/06 2 ORDER PER SHRI ABRAHAM P.GEORGE, A.M: THESE ARE APPEALS OF THE ASSESSEE AND REVENUE RESPECTIVELY AGAINST THE ORDER DATED 13-12-2005 OF THE CIT(A)-III, CHENN AI. ASSESSEES APPEAL IS TAKEN UP FIRST FOR DISPOSAL 2. GROUND NOS. 1 AND 6 ARE GENERAL IN NATURE NEEDI NG NO ADJUDICATION. 3. VIDE GROUND NO.2 GRIEVANCE OF THE ASSESSEE IS TH AT CIT(A) HELD NETTING PRINCIPLE AS NOT APPLICABLE INSOFAR AS INTE REST WAS CONCERNED, WHILE WORKING OUT DEDUCTION UNDER SEC. 80HHC OF THE INCOM E-TAX ACT, 1961 (THE ACT FOR SHORT). LD. COUNSEL FOR THE ASSESSEE ADMIT TED THAT THIS ISSUE HAS BEEN DECIDED AGAINST IT BY THE HONBLE JURISDICTION AL HIGH COURT IN THE CASE OF CIT VS. DOLLAR APPARELS, REPORTED IN 294 ITR 484 . THUS, THE ADMITTED POSITION IS THAT FOR WORKING OUT DEDUCTION UNDER SE C. 80HHC GROSS INTEREST HAS TO BE CONSIDERED AND THERE CANNOT BE ANY NETTIN G. IN THIS VIEW OF THE MATTER, WE ARE OF THE OPINION THAT NO INTERFERENCE IS CALLED BY US IN THE ORDER OF THE CIT(A) IN THIS REGARD. GROUND NO.2 OF THE ASESSEE THEREFORE STANDS DISMISSED. 434-725/MDS/06 3 4. VIDE ITS GROUND NO.3 GRIEVANCE OF THE ASSESSEE I S THAT DEDUCTION UNDER SEC. 80IA OF THE ACT WAS HELD AS NOT AVAILABL E WITH REFERENCE TO CAPTIVE CONSUMPTION OF POWER. 5. ASSESSEE DURING THE RELEVANT PREVIOUS YEAR MANUF ACTURED POWER THROUGH FOUR GENERATORS WHICH WAS USED CAPTIVELY BY IT FOR ITS OWN PRODUCTION PURPOSES. AO DENIED THE CLAIM OF DEDUCTI ON UNDER SEC 80IA OF THE ACT ON SUCH CAPTIVE CONSUMPTION OF POWER, SINCE , ACCORDING TO HIM, PROFIT ATTRIBUTABLE TO OWN CONSUMPTION OF ELECTRICI TY WOULD NOT BE ELIGIBLE FOR DEDUCTION UNDER SEC. 80IA OF THE ACT. THIS VIEW WAS CONFIRMED BY THE CIT(A). 6. WHEN THE MATTER CAME BEFORE US, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN ASSESSEES OWN CASE IN TC(A) NOS. 896 TO 902 OF 2009 DATED 02-11-2010 IT WAS HELD BY THE JURISDICTIONAL HIGH COURT THAT IT WAS ENTITLED FOR DEDUCTION UNDER SEC. 80IA OF THE ACT I N RESPECT OF NOTIONAL PROFIT ON ACCOUNT OF POWER GENERATED FROM ITS OWN CAPTIVE POWER PLANT. WE FIND THAT HONBLE JURISDICTIONAL HIGH COURT HAS HELD AS UNDER: 7. IN OUR CONSIDERED OPINION, THE SAID CONTENTION CAN HAVE NO APPLICATION TO THE CASE ON HAND. INASMUCH AS WE DEA LT WITH THE ISSUE, IN THE LIGHT OF SEC. 80IA AND IN PARTICULAR SUB-CLAUSE (IV) OF THE SAID SECTION WHICH PROVIDES FOR THE BENEFIT EVEN IN RESPECT OF ELECTRICITY GENERATION PLANT ESTABLISHED BY THE ASS ESSEE AND THE INCOME DERIVED FROM SUCH ENTERPRISE OF THE ASSESSEE , IT WILL HAVE TO BE HELD THAT THE ASSESSEE FULLY COMPLIED WITH THE R EQUIREMENTS PRESCRIBED UNDER SEC. 80IA. IN ORDER TO AVAIL THE B ENEFIT PROVIDED 434-725/MDS/06 4 THEREIN. THUS THE CONTENTION BASED ON THE INTERPRET ATION ON THE EXPRESSION DERIVED FROM CAN HAVE NO APPLICATION T O THE CASE WHERE THE PROVISIONS OF SEC. 80IA GETS ATTRACTED. 8. THEREFORE, WE DO NOT FIND ANY SCOPE TO DEVIATE FROM WHAT WAS HELD BY THIS COURT IN THE DECISION DATED 07-06-2010 IN TC(A) NOS.68 TO 70 OF 2010. THE APPEALS STAND ALLOWED AND THE IM PUGNED ORDERS ARE SET ASIDE. CONSEQUENTLY, CONNECTED MISCELLANEOU S PETITIONS ARE CLOSED. NO COSTS. WE ARE THEREFORE OF THE OPINION THAT ASSESSEES CLA IM WAS TO BE ALLOWED ON CAPTIVE CONSUMPTION OF POWER. GROUND NO. 3 OF THE A SSESSEE THEREFORE STANDS ALLOWED. 7. VIDE ITS GROUND NO.4 GRIEVANCE OF THE ASSESSEE I S THAT WHILE CALCULATING ITS ELIGIBLE DEDUCTION UNDER SEC. 80HHC OF THE ACT ITS CLAIM UNDER SEC. 80IA WAS REDUCED FROM THE PROFITS. 8. WHEN THE MATTER CAME UP BEFORE US, LD. COUNSEL F OR THE ASSESSEE SUBMITTED THAT SIMILAR ISSUE HAD COME UP BEFORE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS, MRF LIMITED [TC(A)NO.1 020/09 DATED 27-10- 2009] AND THEIR LORDSHIPS, FOLLOWING THE DECISION I N SCM CREATIONS V. ACIT (304 ITR 319) HELD THAT DEDUCTION UNDER SEC. 80HHC HAD TO BE WORKED OUT WITHOUT REDUCING THE CLAIM UNDER SEC. 80IB OF THE A CT FROM THE BUSINESS PROFITS. 9. PER CONTRA, LD. DR SUPPORTED THE ORDER OF LD. CI T(A). 10. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. IN OUR OPINION THIS ISSUE WOULD GO IN FAVOUR OF THE ASSESS EE, IN VIEW OF THE 434-725/MDS/06 5 DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN TH E CASE OF MRF LIMITED (SUPRA). THE RELEVANT ASSESSMENT YEAR IN THE CASE O F MRF LIMITED WAS AY 2004-05. HONBLE JURISDICTIONAL HIGH COURT HAS FOLL OWED ITS OWN DECISION IN SCM CREATIONS (SUPRA) AND HELD THAT ASSESSEE WAS EN TITLED FOR WORKING OUT ITS DEDUCTION UNDER SEC.80IB OF THE ACT FROM BUSINE SS PROFITS. THE SAME VIEW HAS BEEN TAKEN BY HONBLE BOMBAY HIGH COURT IN THE CASE OF ASSOCIATED CAPSULES (P) LTD. DCIT (237 ITR 408). WE ARE THEREFORE, OF THE OPINION THAT ASSESSEE HAS TO SUCCEED IN ITS GROUND NO.4. DEDUCTION UNDER SEC.80IA CANNOT BE REDUCED FROM THE BUSINESS PROFIT S WHILE COMPUTING DEDUCTION UNDER SEC.80HHC OF THE ACT. GROUND NO.4 O F THE ASSESSEE THEREFORE, STANDS ALLOWED. 11. VIDE ITS GROUND NO.5 GRIEVANCE OF THE ASSESSEE IS THAT INTEREST UNDER SEC. 234D OF THE ACT WAS LEVIED. LD. COUNSEL FOR TH E ASSESSEE SUBMITTED THAT THE DECISION OF THE SPECIAL BENCH OF THIS TRIB UNAL IN THE CASE OF ITO VS. EKTA PROMOTERS (P) LTD. (305 ITR (AT)) 1 (DELHI ) (SB), GAS BEEN APPROVED BY THE HONBLE DELHI HIGH COURT IN THE CAS E OF DIGT VS. JACABS CIVIL INCORPORATED (2010) 235 CTR (DEL)123. 12. PER CONTRA, LD. DR SUBMITTED THAT HONBLE KERAL A HIGH COURT IN THE CASE OF CIT VS. KERALA CHEMICALS & PROTEINS LTD. (3 23 ITR 584) HAD HELD THAT SEC. 234D WOULD BE APPLICABLE FROM 01-06-2003 BEING THE DATE ON 434-725/MDS/06 6 WHICH THE SAID SECTION CAME INTO FORCE. ACCORDING T O HIM, THEREFORE, FROM 01-06-2003 ONWARDS SUCH INTEREST WAS CHARGEABLE. 13. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL CONTENTIONS. THE QUESTION HERE IS WHETHER SEC. 234D IS APPLICABLE FR OM 01-06-2003 BEING THE DATE OF ITS INTRODUCTION IN THE INCOME-TAX ACT, OR ONLY FROM A.Y 2004-05. HONBLE KERALA HIGH COURT HELD THAT SUCH INTEREST C OULD BE CHARGED FROM 01-06-2003 BEING THE DATE OF INTRODUCTION OF SEC. 2 34D IN THE ACT. HOWEVER, HONBLE DELHI HIGH COURT IN THE CASE OF JA CABS CIVIL INCORPORATED (SUPRA) HELD THAT SEC.234D WAS APPLICA BLE ONLY FROM AY 2004-05 ONWARDS AND NOT FOR ANY EARLIER ASSESSMENT YEAR. IN OTHER WORDS, HONBLE DELHI HIGH COURT AFFIRMED THE VIEW TAKEN BY THE SPECIAL BENCH OF THIS TRIBUNAL IN THE CASE OF EKTA PROMOTERS (P) LTD . CITED SUPRA. SINCE THERE ARE CONFLICTING DECISIONS OF TWO HIGH COURTS, ONE O F WHICH HAS APPROVED THE DECISION TAKEN BY THE SPECIAL BENCH OF THIS TRI BUNAL, WE PREFER TO GO BY THE DECISION OF THAT HIGH COURT WHICH HAS APPROVED THE SPECIAL BENCHS VIEW. HENCE, WE FIND NO ERROR IN THE ORDER OF THE C IT(A) WHEREBY HE HELD THAT INTEREST UNDER SEC. 234D COULD NOT BE CHARGED ON THE ASSESSEE FOR THE IMPUGNED ASSESSMENT YEAR. GROUND NO.5 OF THE AS SESSEE IS THEREFORE, ALLOWED 14. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 434-725/MDS/06 7 15. NOW WE TAKE UP APPEAL OF THE REVENUE. FOUR GROU NDS ARE RAISED BY THE REVENUE. GROUND NOS.1 AND 4 ARE GENERAL IN NATU RE, NEEDING NO ADJUDICATION. 16. VIDE ITS GROUND NO.2 GRIEVANCE OF THE REVENUE I S THAT CIT(A) DIRECTED EXCLUSION OF EXCISE DUTY AND SALES-TAX FRO M TOTAL TURNOVER FOR COMPUTING ELIGIBLE DEDUCTION UNDER SEC. 80HHC. 17. WE FIND THAT THIS ISSUE IS NO MORE RESINTEGRA. HONBLE APEX COURT IN THE CASE OF CIT VS. LAXMI MACHINE WORKS (209 ITR 6 67) HAS HELD THAT EXCISE DUTY AND SALES-TAX COULD NOT BE INCLUDED IN THE TOTAL TURNOVER FOR COMPUTING DEDUCTION UNDER SEC. 80HHC OF THE ACT. GR OUND NO.2 OF THE REVENUE THEREFORE STANDS DISMISSED. 18, VIDE ITS GROUND NO.3 GRIEVANCE OF THE REVENUE I S THAT DEDUCTION UNDER SEC.80IA WAS ALLOWED BY THE CIT(A) ON PRO-RAT A BASIS WITH REGARD O PROFITS ATTRIBUTABLE TO CAPTIVE CONSUMPTION OF ELEC TRICITY BY THE ASSESSEE. 19. AT THE STAGE OF ASSESSMENT AO DENIED ASSESSEE I TS CLAIM OF DEDUCTION UNDER SEC. 80IA OF THE ACT IN RESPECT OF CAPTIVE POWER PLANT G1801. AO REFUSED TO GRANT SUCH DEDUCTION SINCE ACC ORDING TO HIM, FOR OWN CONSUMPTION OF ELECTRICITY SEC. 80IA COULD NOT BE APPLIED. HOWEVER, LD. CIT(A) HELD IN FAVOUR OF THE ASSESSEE AND HELD THAT ASSESSEE WAS ELIGIBLE FOR SUCH DEDUCTION ON PRO-RATA BASIS BASED ON THE WORKING 434-725/MDS/06 8 SUBMITTED BY IT WHEREBY COMMON EXPENSES WERE EXCLUD ED. FOR THIS, HE RELIED ON HIS PREDECESSORS ORDER FOR ASST. YEARS 1 998-99 TO 2000-01. 20. NOW BEFORE US, LD. DR STRONGLY ASSAILED SUCH PR O-RATA DEDUCTION BEING ALLOWED TO THE ASSESSEE, WHEREAS LD. AR SUBMI TTED THAT JURISDICTIONAL HIGH COURT IN THE ASSESSEES OWN CASE IN TC(A) NOS . 896 TO 902 OF 2009 DATED 02-11-2010HAS HELD THE ISSUE IN FAVOUR OF THE ASSESSEE. 21. WE HAVE HELD AT PARA-6 ABOVE THAT ASSESSEE IS E NTITLED FOR DEDUCTION UNDER SEC.80IA OF THE ACT IN RESPECT OF CAPTIVE CON SUMPTION OF ELECTRICITY BASED ON THE DECISIONS OF THE JURISDICTIONAL HIGH C OURT IN ASSESSEES OWN CASE DATED 02-11-2010 (SUPRA). NOTHING HAS BEEN BRO UGHT ON RECORD BY LD. DR BY WHICH HE COULD ESTABLISH THAT THE DECISION RE LIED ON BY LD. CIT(A) IN RESPECT OF ASSESSEES CASE FOR 1998-99 TO 2000-01 H AS BEEN OVERRULED. IN THIS VIEW OF THE MATTER, WE DO NOT FIND ANY LACUNA IN THE ORDER OF LD. CIT(A) IN PLACING RELIANCE ON THE ORDERS FOR ASSESSMENT YE ARS 1998-99 TO 2000- 01. NO INTERFERENCE IS REQUIRED. GROUND NO.3 OF THE REVENUE THEREFORE STANDS DISMISSED. 22. IN THE RESULT, APPEAL OF THE REVENUE STANDS DIS MISSED. 23. TO SUMMARISE THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED, WHEREAS THAT OF THE REVENUE STANDS DISMISSED. 434-725/MDS/06 9 ORDER PRONOUNCED IN OPEN COURT ON 21- 04-2011. SD/- SD/- (U.B.S.BEDI) JUDICIAL MEMBER (ABRAHAM P.GEORGE) ACCOUNTANT MEMBER CHENNAI: 21 ST APRIL, 2011. NBR CC: ASSESSEE/ ASSESSING OFFICER/ CIT(A)/ CIT/ D .R/ GUARD FILE.