ACIT, UDAIPUR V. Hindustan Zinc Ltd., UDAIPUR

ITA 455/JODH/2010

• Counselvise Citation: 45523314 RSA 2010
• Duration Of Justice: 3 year(s) 3 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 26-11-2013
• Assessment Year: 2004-2005
• Appeal Filed On: 04-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR DEEPAK SEHGAL
• Assessee Lawyers: K SAMPAT
• Keywords: Depreciation; Question of law
• Section: 143(3); 263; 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER ITA NO.455/JU/2010 ASSESSMENT YEAR: 2004-05 ASSTT. COMMISSIONER OF INCOME TAX, VS. M/S HINDUST AN ZINC LIMITED, CIRCLE-2, UDAIPUR. YASHAD BHAWAN, UDAIPUR. (PAN: AAACH 7354 K). (APPELLANT) (RESPONDENT) APPELLANT BY : DR. DEEPAK SEHGAL, CIT -DR RESPONDENT BY : SHRI K. SAMPAT DATE OF HEARING : 26.11.2013 DATE OF PRONOUNCEMENT : 29.11.2013 ORDER PER HARI OM MARATHA, JUDICIAL MEMBER: THIS APPEAL OF THE REVENUE FOR THE ASSESSMENT YEAR 2004-05 IS DIRECTED AGAINST THE ORDER OF LD. CIT(A), UDAIPUR DATED 12.0 5.2010. 2. THE ONLY ISSUE INVOLVED IN THIS APPEAL READS AS UNDER :- ON THE FACTS AND IN THE PRESENT CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN :- 1) ALLOWING THE CLAIM OF DEDUCTION OF RS.27,89,49,5 35/- MADE U/S 80IA IN RESPECT OF PROFIT OF CPP DEBARI. 2 ITA NO.455/JU/2010 A.Y. 2004-05 3. THE FACTS APROPOS THE SOLE GROUND RAISED IN THIS APPEAL ARE THAT ORIGINALLY THE ASSESSMENT WAS COMPLETED FOR A.Y. 2004-05 UNDER SEC TION 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT FOR SHORT) ON 22.12.2006 A T A TOTAL INCOME OF RS.7,33,72,00,910/- AS AGAINST RETURNED INCOME OF R S.6,92,16,28,568/-. IN THE ASSESSMENT ORDER THE A.O. ALLOWED THE CLAIM OF DEDU CTION MADE UNDER SECTION 80IA OF THE ACT IN RESPECT OF CAPTIVE POWER PLANT A T DEBARI SMELTER WHICH IS RUN BY THE ASSESSEE COMPANY. SUBSEQUENTLY, DURING THE ASSESSMENT PROCEEDINGS UNDER TAKEN FOR A.Y. 2007-08 THE ADDL. CIT DISALLOWED THE CLAIM OF DEDUCTION UNDER SECTION 80IA BY THE ASSESSEE COMPANY IN RESPECT OF TWO CAPTIVE POWER PLANTS NAMELY CPP, CHANDERIYA AND CPP, DEBARI BELONGING TO THE ASSESSEE COMPANY. THE LD. CIT (ADMN) CALLED FOR THE RECORDS OF THIS A SSESSMENT ORDER AND PASSED AN ORDER UNDER SECTION 263 OF THE ACT ON 30.03.2009 VI DE WHICH HE SET ASIDE THE ORDER TO THE EXTENT OF ALLOWABILITY OF DEDUCTION UNDER SE CTION 80IA ON CPP, DEBARI TO THE FILE OF A.O. WITH DIRECTION TO MAKE A DENOVO ORDER AFTER MAKING VERIFICATION AS PER THE PROVISIONS OF THE ACT. THE ISSUE OBTAINING IN A.Y. 2007-08 AND IN A.Y. 2004- 05 IN THIS REGARD ARE IDENTICAL. THE A.O. HAS PASS ED A SET ASIDE ASSESSMENT ORDER UNDER SECTION 263/143(3) DATED 30.12.2009 AND HAS D ISALLOWED THE CLAIM MADE UNDER SECTION 80IA OF THE ACT BY MAKING THE FOLLOWI NG OBSERVATIONS:- I) THE EARNING OF INCOME, IF ANY, CAN BE FROM OTHER PERSON AND NO INCOME CAN BE EARNED BY DEALING WITH ONESELF AS HEL D IN NUMEROUS CASES BY VARIOUS COURTS. IT MAY AT THE MOST BE A SAVING ONLY OR HELPFUL IN SMOOTH AND EFFICIENT RUNNING OF PLANTS OR OTHER PAR TS OF THE PLANTS; 3 ITA NO.455/JU/2010 A.Y. 2004-05 II) THE A.O. HAS FURTHER MENTIONED THAT WHATEVER PR OFIT AND GAINS DERIVED BY AN UNDERTAKING OR ENTERPRISE FROM THE BU SINESS SHOULD BE INCLUDED IN THE GROSS TOTAL INCOME FIRST, THEN ONL Y ENTITLED TO CLAIM SUCH DEDUCTION U/S.80IA OF THE ACT. ON PERUSAL OF RECOR DS, IT IS FOUND THAT THE APPELLANT NOWHERE INCLUDED SUCH POWER GENERATION IN COME OF ABOVE TWO UNITS IN THE GROSS TOTAL INCOME; AND III) THE A.O. HAS CONCLUDED BY MENTIONING THAT THER E IS NO REAL INCOME IN CASE OF THE ASSESSEE AND THE INCOME SHOWN BY IT. IT IS ONLY HYPOTHETICAL ENTRIES OF SALE OR TRANSFER OF UNITS O F POWER GENERATED BY THE ABOVE ALLEGED POWER PLANTS I.E. CPP, DEBARI AND CPP ZAWAR. THE CONTENTION OF THE ASSESSEE THAT PROFIT DERIVED BY I T ON TRANSFER OF ELECTRICITY GENERATED FROM ITS CPP UNITS TO OTHER U NITS WAS EMBEDDED IN THE ULTIMATE PROFIT EARNED ON SALE OF FINAL PRODUCT S, HAS NOT BEEN ACCEPTED BY THE A.O. 4. AGGRIEVED, THE ASSESSEE WENT BEFORE THE LD. CIT( A) WHO FOUND THE CLAIM OF THE ASSESSEE TO BE IN ORDER AND HAS THUS ALLOWED TH E ASSESSEE COMPANYS APPEAL BY DELETING THE IMPUGNED ADDITION. NOW THE REVENUE I S AGGRIEVED. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y PERUSED THE ENTIRE RECORDS. AT THE VERY OUTSET OF THE HEARING OF THIS APPEAL IT WAS BROUGHT TO THE NOTICE OF THIS BENCH THAT THIS ISSUE STANDS COVERED BY THE VARIOUS DECISIONS INCLUDING THAT OF THE APPELLATE TRIBUNAL OF JODHPUR BENCH, INTER ALIA, IN FAVOUR OF THE ASSESSEE. IT WAS STATED THAT THE LD. CIT(A) HA S DELETED THE IMPUGNED ADDITION BY FOLLOWING THE VERY SAME DECISION. APART FROM RE LYING ON THE ORDER OF THE A.O., THE LD. C.I.T. D.R. COULD NOT CONTROVERT THE FACT S AND MATRIX AS WELL AS LEGAL POSITION ON THE ISSUE IN QUESTION. 4 ITA NO.455/JU/2010 A.Y. 2004-05 6. WE HAVE GONE THROUGH THE RIVAL SUBMISSIONS AND T HE DECISIONS CITED BEFORE US. WE FIND THAT THE ASSESSEE HAD SET UP A CAPTIVE POWER PLANT NAMELY CPP DEBARI OF 29.62 MW AND CPP ZAWAR OF 6 MW WHICH STARTED GEN ERATION OF POWER IN THE F.YS. 2002-03 AND 2003-04 RESPECTIVELY. THIS POWER IS CONSUMED IN OTHER UNDERTAKINGS OF THE ASSESSEE. TRANSFER OF POWER FR OM CPP DEBARI & CPPZAWAR ARE RECKONED AT MARKET PRICE WHICH CORRESPONDS TO T HE STATE GRID ELECTRICITY PRICE. THE ASSESSEE HAS CLAIMED DEDUCTION UNDER SECTION 80 IA OF THE ACT IN RESPECT OF PROFIT & GAINS DERIVED FROM BUSINESS OF GENERATION OF POWER FOR CPP, DEBARI (BEING FIRST YEAR OF THE CONSECUTIVE PERIOD OF 10 O UT OF 15 YEARS). REGARDING CPP, ZAWAR, THERE WAS NO PROFIT AVAILABLE FOR DEDUCTION UNDER SECTION 80IA DURING THE YEAR UNDER CONSIDERATION. IN THE ORIGINAL ASSESSME NT ORDER THE A.O. HAD ALLOWED DEDUCTION UNDER SECTION 80IA REGARDING CPP, DEBARI FOR A.YS. 2004-05 TO 2006- 07. THE LD. AUTHORIZED REPRESENTATIVE ARGUED THAT ALL THE REQUISITE CONDITIONS, WHICH ARE NECESSARY AND SINE-QUA-KNOWN FOR CLAIMIN G DEDUCTION IN PAYMENT OF SECTION 80IA(3), STANDS SATISFIED. 7. WE INCORPORATE OR EXTRACT PARAGRAPH NO. 2.2.4 AT PAGE NOS. 4 TO 6 OF CIT(A)S ORDER TO DEMONSTRATE AS TO HOW THE ASSESSEE HAS FUL FILLED THE REQUISITE CONDITIONS: 5 ITA NO.455/JU/2010 A.Y. 2004-05 2.2.4 THE AR HAS FURTHER SUBMITTED THAT THE APPE LLANT HAS FULFILLED THE THREE CONDITIONS AS PRESCRIBED IN SUB-SECTION (3) O F 80IA OF THE ACT. A. THE BRIEF SUBMISSIONS IN RESPECT OF EACH OF THE CONDITIONS ARE AS UNDER: I) PROFITS FROM ELIGIBLE BUSINESS:- THE UNDERTAKING IS ENGAGED IN GENERATION OR GENER ATION AND DISTRIBUTION OF POWER WHICH IS AN ELIGIBLE BUSINE SS IN TERMS OF SECTION 80IA 4(IV)(A). II) UNDERTAKING IS NOT FORMED BY SPLITTING UP OR RECONSTRUCTION OF BUSINESS ALREADY IN EXISTENCE:- THE POWER PLANT WAS NOT FORMED BY SPLITTING OF OR RECONSTRUCTION OF BUSINESS ALREADY IN EXISTENCE. THE WHOLE POWE R PLANTS WERE SET UPRIGHT FROM SCRATCH AND THE CONTRACT FOR SET TING UP OF POWER PLANT WAS INTER ALIA GIVEN TO WARTSILA FOR A TOTA L CONSIDERATION OF RS 69.24 CRORE. IN THE ASSESSMENT ORDER ALSO THERE WAS NO DISPUTE RAISED ON THIS MATTER. (III) NO TRANSFER OF MACHINERY/PLANT FROM OTHER BUSINESS IN EXCESS OF TWENTY PERCENT OF VALUE OF PLANT AND MACHINERY: - SINCE THE CPPS WERE TOTALLY NEW UNDERTAKINGS, WHE RE THE SUPPLIERS INCLUDING WARTSILA WERE REQUIRED TO SUPPL Y ALL THE PLANT AND MACHINERY; HENCE THE ENTIRE PLANT AND MACHINERY WER E NEW AND NOT USED ONE. THESE FACTS WERE NOT DISPUTED BY THE AO IN THE IM PUGNED ORDER. B. OPTION TO CLAIM DEDUCTION IN 10 CONSECUTI VE ASSESSMENT YEARS OUT OF FIFTEEN YEARS BEGINNING FROM THE YEAR IN WHICH UNDERTAKING BEGINS TO GENERATE POWER:- I) CPP DEBARI BEGAN GENERATION OF POWER IN F Y 2002-03. THE DEDUCTION U/S. 80IA COULD BE CLAIMED IN ANY 10 CO NSECUTIVE 6 ITA NO.455/JU/2010 A.Y. 2004-05 ASSESSMENT YEARS OUT OF BLOCK OF 15 YEARS (FROM F Y 2002-03 TO FY 2016-17). THE APPELLANT HAS OPTED TO CLAIM DE DUCTION FOR A PERIOD OF 10 YEARS COMMENCING FROM FY 2003-04 TO FY 2012-13 WHICH IS FALLING UNDER THE BLOCK OF I5 YEAR. IN THE ASSESSMENT ORDER ALSO THERE WAS NO DISPUTE RAISED ON THIS MATTER. II) THE CPP ZAWAR OF THE APPELLANT IS ALSO EL IGIBLE FOR CLAIM OF DEDUCTION U/S.80IA. THE CPP ZAWAR BEGAN GENERATIO N OF POWER IN FY 2003-04. THE DEDUCTION U/S.80IA CAN BE CLAI MED IN ANY 10 CONSECUTIVE ASSESSMENT YEARS OUT OF BLOCK OF 15 Y EARS (FROM FY 2003-04 TO FY 2017-18). HOWEVER, THE APPELLANT H AS NOT OPTED FOR THE 80IA CLAIM FOR CPP ZAWAR, IN VIEW OF NO P ROFITS FOR CPP ZAWAR IN THIS YEAR UNDER CONSIDERATION. THE APPE LLANT HAD OPTED TO CLAIM DEDUCTION OF 80IA FOR THE CPP ZAWAR FOR A PERIOD OF 10 YEARS COMMENCING FROM FY 2004-05 TO FY 2013-04 WH ICH IS FALLING UNDER THE BLOCK OF 15 YEAR PERIOD. IT IS EVIDENT AS PER REPORTS OF THE CHARTERED ACC OUNTANT DULY FILED FOR THE CPP DEBARI AND CPP ZAWAR ALONG WITH THE R ETURN OF INCOME FOR THE RELEVANT YEAR. IN THE ASSESSMENT ORDER ALSO THERE WAS NO DISPUTE RAISED ON THIS MATTER. C. ACCOUNTS OF THE UNDERTAKING TO BE AUDITED BY CHARTERED ACCOUNTANT:- THE ACCOUNTS OF THE CPP DEBARI AND CPP ZAWAR WERE DULY AUDITED BY CHARTERED ACCOUNTANT AS DEFINED IN SECTI ON 288 AND CERTIFICATES IN FORM 10CCB HAVE BEEN ENCLOSED WITH THE RETURN OF INCOME. KIND REFERENCE IS MADE TO PAGE NO 10-16 OF PB-FOR CPP DEBARI AND FOR CPP ZAWAR MINES AT PAGE NO 33-42 OF PB, ENC LOSED WITH THIS SUBMISSION. THESE REPORTS IN THE STATUTORY FORM FU RNISH THE DETAILS AND THE QUANTUM OF DEDUCTION CLAIMED BY THE COMPANY. T HESE REPORTS WERE ACCOMPANIED BY THE PROFIT AND LOSS ACCOUNT AND BAL ANCE SHEET OF THE RESPECTIVE ELIGIBLE UNDERTAKINGS. 7 ITA NO.455/JU/2010 A.Y. 2004-05 IN THE CASE OF CPP DEBARI, THE PROFIT AND LOSS AC COUNT IS AT PAGE NO 15-16 AND BALANCE SHEET AT PAGE NO 14. IN THE CA SE OF CPP ZAWARI, THE RELEVANT INFORMATION OF PROFITABILITY IS AT PAG E NO 38-39 AND BALANCE SHEET AT .PAGE NO 37 OF PB. IN THE CASE OF CPP DEBARI AND CPP ZAWAR MINES, SI NCE THE CLAIM OF 80IA WAS ALLOWED BY THE AO REGULARLY IN TH E ORIGINAL ASSESSMENT, FROM THE AY 2004-05 AND ONWARDS, THE R ELEVANT INFORMATION WAS ATTACHED IN EACH OF THE ASSESSMENT YEARS. KIND REFERENCE IS ALSO MADE TO THE DETAILS ENCLOSED WITH THE SUBMISSIONS FOR THE ASSESSMENT YEARS VIZ. AY 2005-06 AND AY 2006-07 RESPECTIVELY IN RESPECT OF CPP DEBARI AND CPP ZAWAR (PLEASE REFER P AGE NO 52-71 AND 77-98 RESPECTIVELY OF PB). DISCLOSURE IN THE DIRECTORS' REPORT:- FURTHER, KIND ATTENTION OF YOUR HONOUR IS INVITED TO DIRECTORS' REPORT OF THE ANNUAL ACCOUNTS OF THE FY 2002-03 AT PAGE NO 7, WHEREIN IT IS INTER ALIA STATED THAT YOUR COMPANY PLACED SP ECIAL FOCUS ON POWER WHICH IS A MAJOR COST ELEMENT AND APART FROM TAKIN G VARIOUS MEASURES TO CONSERVE ENERGY;.... IN ADDITION, A NE W 29 MW DIESEL GENERATING STATION WAS COMMISSIONED AT DEBARI ZINC SMELTER IN 2003 IN A RECORD TIME OF AROUND 7 MONTHS. THIS WILL REDUCE T HE COST OF ENERGY AND CONSEQUENTLY, COST OF PRODUCTION OF THE DEBARI SMELTER. SIMILAR MENTION WAS ALSO MADE REGARDING CPP INSTALLATION IN THE DIRECTORS' REPORT OF THE ANNUAL ACCOUNTS FOR THE AY 2004-05 AS WELL. 8. IN FACT, THIS ISSUE ALSO STANDS COVERED IN FAVOU R OF THE ASSESSEE. THIS DECISION OF THIS VERY BENCH IN ASSESSEES OWN CASE FOR A.Y. 2004-05 IS RELEVANT. WE EXTRACT THE RELEVANT PORTION OF THIS DECISION WH ICH ARE CONTAINED IN PARAGRAPH NOS.2.11 TO 2.12 OF THIS ORDER DATED 19.08.2011 PAS SED IN ITA NO.229/JU/2009 FOR A.Y. 2004-05 AS UNDER :- 8 ITA NO.455/JU/2010 A.Y. 2004-05 2.11 WE HAVE HEARD BOTH THE PARTIES. IT CANNOT BE ASCERTAINED FORM THE ASSESSMENT ORDER THAT THE AO HAS MADE ENQUIRY A S TO ALLOWABILITY OF DEDUCTION U/S 80IA IN RESPECT OF CAPTIVE POWER PLAN T BECAUSE THE POWER SO PRODUCED HAS BEEN CONSUMED BY THE ASSESSEE IN IT S OTHER UNDERTAKING. HOWEVER, THERE IS A BOARD CIRCULAR THAT DEDUCTION U /S 80IA IS AVAILABLE TO THE CAPTIVE POWER PLANT. THE HON'BLE MADRAS HIGH COURT IN THE CASE OF TAMILNADU PETRO PRODUCTS LTD. VS. ACIT (SUPRA) HAD AN OCCASION TO CONSIDER AS TO WHETHER DEDUCTION U/S 80IA IS AVAILA BLE IN RESPECT OF CAPTIVE POWER PLANT. IT WILL BE USEFUL TO REPRODUC E THE FOLLOWING PARAGRAPH FROM THE ABOVE REFERRED JUDGEMENT. 3. THE ISSUE IS DIRECTLY COVERED BY THE DECISIO N OF THIS COURT DT. 7 TH JUNE,2010 IN TAX CASE (APPEAL NOS. 68 TO 70 OF 2010 . THE SUBSTANTIAL QUESTION OF LAW RAISED IN THESE A PPEALS WAS: WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE TRIBUNAL WAS RIGHT IN HOLDING THAT THE AS SESSEE IS ENTITLED TO DEDUCTION UNDER S, 80-IA OF THE IT ACT IN RESPEC T OF NOTIONAL PROFITS OF ACCOUNT OF POWER GENERATED FROM ITS OWN CAPTIVE POWER PLANT AND UTILIZED BY ITSELF? 4. AFTER CONSIDERING THE ISSUE, THE STATUTORY REQU IREMENT AS PRESCRIBED UNDER S.80-IA(L) HAS BEEN STATED IN PARA S 8 AND 9 OF THE ABOVE SAID JUDGEMENT WHICH READS THUS:- 8. THE CONTENTION THAT ONLY WHATEVER POWER GENERA TED FROM THE SALE TO AN OUTSIDER OR THE ELECTRICITY BOARD, AND T HE PROFIT OR GAIN DERIVED BY SUCH SALE ALONE CAN BE TAKEN AS PROFITS OR GAINS DERIVED BY THE ASSESSEE AS MENTIONED IN S. 80-IA(1 ) OF THE IT ACT, HAS BEEN REJECTED, BY THE TRIBUNAL IN THE ORDER IMP UGNED. IN OUR CONSIDERED VIEW, THE TRIBUNAL WAS WELL JUSTIFIED IN HAVING REJECTED SUCH A STAND OF THE APPELLANT. HAVING REF ERRED TO S. 80- IA(1) OF THE IT ACT, WE ARE ALSO CONVINCED THAT WHA T IS ALL TO BE SATISFIED IN ORDER TO BE ELIGIBLE FOR THE DEDUCTION AS PROVIDED UNDER SUB-S.(L) OF S. 80-IA, THE ASSESSEE SHOULD HAVE SET UP AN UNDERTAKING OR AN ENTERPRISE AND FROM AND OUT OF SUCH AN UNDERT AKING OR AN ENTERPRISE SET UP, ANY PROFIT OR GAIN IS DERIVED, F ALLING UNDER SUB- SECTION COVERED BY SUB-S.(4) OF S.80-IA OF THE IT A CT, SUCH PROFIT OR 9 ITA NO.455/JU/2010 A.Y. 2004-05 GAIN DERIVED BY THE ASSESSEE CAN BE DEDUCTED IN ITS ENTIRETY FOR A PERIOD OF 10 YEARS STARTING FROM THE DATE OF FUNCTI ONING OF THE SET UP. THE CONTENTION THAT PROFIT OR GAIN CAN BE CLAIM ED BY THE 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 THE PROVISIONS CONTAINED IN S.80-IA(1) CAN BE INTERPRETED. THE EXPRESSION DERIVED USED IN THE SAID S.80-1A(1 ) IN THE BEGINNING AS WELL AS IN THE LAST PART OF SUB-S.(4) MAKES IT ABUNDANTLY CLEAR THAT SUCH PROFIT OR GAIN COULD BE OBTAINED BY ONES OWN CONSUMPTION OF THE OUTCOME OF ANY SUCH UN DERTAKING OR BUSINESS ENTERPRISE AS REFERRED TO IN SUB-S.(4) OF S. 80-IA. THE DICTIONARY MEANING OF THE EXPRESSION DERIVE IN T HE NEW OXFORD DICTIONARY OF ENGLISH STATES OBTAINING SOMETHING F ROM A SPECIFIED SOURCE. IN S.80-IA(1) ALSO NO RESTRICTION HAS BEE N IMPOSED AS REGARDS THE DERIVING PROFIT OR GAIN IN ORDER TO STA TE THAT SUCH PROFIT OR GAIN DERIVED ONLY THROUGH AN OUTSIDE SOURCE ALON E WOULD MAKE ELIGIBLE FOR THE BENEFITS PROVIDED IN THE SAID SECT ION. 9. THEREFORE, THERE IS NO DIFFICULTY IN HOLDING THA T CAPTIVE CONSUMPTION OF THE POWER-GENERATED BY THE ASSESSEE FROM ITS OWN POWER PLANT WOULD ENABLE THE RESPONDENT/ASSESSEE TO DERIVE PROFITS AND GAINS BY WORKING OUT THE COST OF SUCH CONSUMPTI ON OF POWER IN AS MUCH AS THE ASSESSEE IS ABLE TO SAVE TO THAT EXT ENT WHICH WOULD CERTAINLY BE COVERED BY S. 80-IA(1). WHEN SUCH WILL BE THE OUTCOME OUT OF WON CONSUMPTION OF THE POWER GENERATED AND G AINED BY THE ASSESSEE BY SETTING UP ITS OWN POWER PLANT, WE DO N OT FIND ANY LACK OF MERIT IN THE CLAIM OF THE RESPONDENT/ASSESSEE W HEN IT CLAIMED BY RELYING UPON S.80-IA(L) OF THE IT ACT BY WAY OF DED UCTION OF THE VALUE OF SUCH UNITS OF POWER CONSUMED BY ITS OWN PL ANT BY WAY OF PROFITS AND GAINS FOR THE RELEVANT ASSESSMENT YEARS . 5. THE DIVISION BENCH ALSO RELIED UPON THE DECISION OF THE HON'BLE SUPREME COURT IN CIT VS. TANFAC INDUSTRIES LTD., AL LOWED FOR STATISTICAL PURPOSES (C) NO.18537 OF 2009 REPORTED IN (2009) 319 ITR (ST) 8 WHEREIN WHILE APPLYING S. 80-IA OF THE I T ACT, THE HON'BLE SUPREME COURT TOOK A VIEW THAT THE VALUE OF STEAM U SED FOR CAPTIVE CONSUMPTION BY THE ASSESSEE WAS ENTITLED TO BE DEDU CTED UNDER S.80-IA OF THE ACT. ON BEHALF OF THE REVENUE, RELIANCE WAS PLA CED UPON THE CIRCULAR OF CBDT DT. 3 RD OCT., 2001 AND CONTENDED THAT THE ASSESSEE WAS NOT ENTITLED FOR THE DEDUCTIONS. AFTER MAKING A DETAILE D REFERENCE TO THE 10 ITA NO.455/JU/2010 A.Y. 2004-05 CONTENTS OF THE SAID CIRCULAR, THE DIVISION BENCH H AS STATED AS UNDER IN PARA 13 OF THE JUDGMENT:- 13. A PERUSAL OF THE ABOVE SAID CIRCULAR WOULD CLE ARLY SHOW THAT IT IS ALSO IN FAVOUR OF THE ASSESSEE. THE SAID CIRCULAR IS VERY SPECIFIC THAT IN A CASE OF CAPTIVE POWER UN IT THE PROVISION OF LAW IS ALSO THE SAME AS IN THE CASE OF THE UNDERTAKING WHICH GENERATES AND DISTRIBUTES THE POW ER TO ANY OTHER CONCERN. FURTHER, IT IS A WELL-ESTABLISHED PR INCIPLE OF LAW THAT A CIRCULAR CAN ONLY BE MADE IN CONSONANCE WITH THE PROVISIONS OF THE ENACTMENT AND THE SAME CANNOT BE DEROGATORY TO THE PURPORT SOUGHT TO BE ACHIEVED. HE NCE WE ARE OF THE OPINION THAT THE CIRCULAR RELIED UPON BY THE LEARNED COUNSEL FOR THE REVENUE IS IN FACT IN FAVOUR OF THE ASSESSEE AND THEREFORE THE SAID CONTENTION ALSO CANNOT BE ACCEPT ED. 6. MR. K. SUBRAMANIAN, LEARNED STANDING COUNSEL FO R THE RESPONDENT WOULD HOWEVER CONTEND THAT THE EXPRESSIO N DERIVED FROM SHOULD BE GIVEN RESTRICTED MEANING IN WHICH E VENT THE CLAIM OF THE APPELLANT CANNOT BE COUNTENANCED. ACCORDING TO THE LEARNED STANDING COUNSEL SINCE THE BUSINESS OF THE APPELLAN T IS MANUFACTURE OF PETRO PRODUCTS AND GENERATION OF ELECTRICITY IS NOT ITS BUSINESS, IT CANNOT BE HELD THAT WHATEVER PROFIT EARNED, EVEN NO TIONAL PROFIT, BY VIRTUE OF CAPTIVE CONSUMPTION, CANNOT BE CONSTRUED AS PROFIT EARNED FROM AND OUT OF THE INCOME DERIVED FROM THE BUSINES S UNDERTAKING. 7. IN OUR CONSIDERED OPINION, THE SAID CONTENTION CAN HAVE NO APPLICATION TO THE CASE ON HAND. IN AS MUCH AS WE DEALT WITH THE ISSUE IN THE LIGHT OF S. 80-IA AND IN PARTICULAR SU B-CL. (IV) OF THE SAID SECTION WHICH PROVIDES FOR THE BENEFIT EVEN IN RESP ECT OF ELECTRICITY GENERATION PLANT ESTABLISHED BY THE ASSESSEE AND TH E INCOME DERIVED FROM SUCH ENTERPRISE OF THE ASSESSEE, IT WILL HAVE TO BE HELD THAT THE ASSESSEE FULLY COMPLIED WITH THE REQUIREMENTS PRESC RIBED UNDER S.80-IA IN ORDER TO AVAIL THE BENEFITS PROVIDED THE REIN. THEREFORE, THE CONTENTION BASED ON THE INTERPRETATION OF THE E XPRESSION DERIVED FROM CAN HAVE NO APPLICATION TO THE CASE WHERE THE PROVISIONS OF S.80-IA GET ATTRACTED. 8. THEREFORE, WE DO NOT FIND ANY SCOPE TO DEVIATE F ROM WHAT WAS HELD BY THIS COURT IN THE DECISION DT, 7 TH JUNE, 2010 IN TAX CASE 11 ITA NO.455/JU/2010 A.Y. 2004-05 (APPEAL) NOS.68 TO 70 OF 2010. THE QUESTIONS OF LAW ARE THEREFORE; ANSWERED IN FAVOUR OF THE APPELLANT. THE APPEALS ST AND ALLOWED AND THE IMPUGNED ORDERS ARE SET ASIDE. CONSEQUENTLY, CO NNECTED MISCELLANEOUS PETITIONS ARE CLOSED. MO COSTS. THE HON'BLE MADRAS HIGH COURT HAS REFERRED TO THE D ECISION OF SLP OF THE DEPARTMENT BY THE HONBLE APEX COURT IN THE CASE OF CIT VS. TANFAC INDUSTRIES LTD., 319 ITR 8 (ST). WE THEREFOR E, MODIFY THE DIRECTION OF THE ID. CIT. THE ASSESSEE IS ENTITLED TO DEDUCTI ON U/S 80IA ON CAPTIVE POWER PLANT. 2.12 THE ASSESSEE WAS REQUIRED TO FILE COPIES OF T HE RETURN FOR THE ASSESSMENT YEAR 2003-04. IN THE RETURN OF INCOME OR IN THE NOTES TO THE RETURN OF INCOME, IT IS NOT MENTIONED THAT THE ASSE SSEE IS NOT CLAIMING DEDUCTION U/S 80IA. IN THE NOTE ATTACHED WITH THE R ETURN OF INCOME FOR THE ASSESSMENT YEAR 2004-05, IT IS MENTIONED THAT CAPTI VE POWER PLANT HAS COMMENCED GENERATION OF POWER DURING THE YEAR UNDER CONSIDERATION. IN THE ORIGINAL RETURN, THE ASSESSEE HAS REDUCED THE B ROUGHT FORWARD LOSSES AND DEPRECIATION OF ASSESSMENT YEAR 2003-04 AND THE AMOUNT IS RS.6,10,03,072/-. IT WILL BE USEFUL TO REPRODUCE TH E RELEVANT NOTE FROM THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2004-05 :- THE CAPTIVE POWER PLANT UNIT AT ZAWAR MINES OF TH E COMPANY IS ALSO-ELIGIBLE FOR DEDUCTION U/S-80IA OF THE ACT WHICH COMMENCED THE GENERATION OF POWER DURING THE YEAR UNDER CONSI DERATION. HOWEVER, AS PER THE ENCLOSED REPORT OF THE CHARTERE D ACCOUNTANT AT ANNEXURE I, THERE ARE NO PROFITS FOR DEDUCTION U/ S 80IA DURING THE YEAR UNDER CONSIDERATION. THE COMPANY WOULD CLAIM T HE SAME WHENEVER THERE ARE PROFITS FROM THIS UNIT. SINCE POWER GENERATION HAS BEEN STARTED DURING THE ASSESSMENT YEAR 2004-05, THEREFORE, THE AO HAS NOT CONSIDERED AS TO WHETHER THE DEPRECIATION FOR EARLIER YEAR WAS ALLOWABLE AGAINST SET OFF OF INCOME OF THE EARLIER YEAR BECAUSE THE COMMENCEMENT OF CAPTIV E POWER PLANT IS FROM ASSESSMENT YEAR 2004-05. THERE HAS BEEN CLEAR CUT LACK OF ENQUIRY FOR ASCERTAINING THE QUANTUM OF DEDUCTION U/S 801A. 12 ITA NO.455/JU/2010 A.Y. 2004-05 9. THEREFORE, IT BECOMES CLEAR FROM THE ABOVE THAT THE ASSESSEE HAS BEEN HELD ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA OF THE AC T IN RESPECT OF CAPTIVE POWER PLANT, DEBARI. RESPECTFULLY FOLLOWING THE ABOVE TR IBUNAL ORDER, WE DO NOT FIND ANY MERIT IN THE GROUND RAISED BY THE REVENUE IN TH IS APPEAL. THEREFORE, WE CONFIRM THE IMPUGNED DELETION AND DISMISS THE APPEA L OF THE REVENUE. 10. IN THE RESULT, APPEAL OF THE REVENUE STANDS DIS MISSED. (ORDER PRONOUNCED IN THE OPEN COURT ON 29.11.201 3) SD/- SD/- (N.K. SAINI) (HARI OM MARATHA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 29 TH NOVEMBER, 2013 PBN/* COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT (APPEALS) CONCERNED 4. CIT CONCERNED 5. D.R., ITAT, JODHPUR BENCH, JODHPUR 6. GUARD FILE. BY ORDER ASSISTANT REGISTRAR INCOME-TAX APPELLATE T RIBUNAL, JODHPUR