ACIT 6(3), MUMBAI V. INDIAN ALUMINIUM CO, LTD, MUMBAI

ITA 4930/MUM/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 55507 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-10-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 03-10-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 27-08-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJIV DUTT
• Keywords: Depreciation; Transfer pricing; Opportunity of being heard; Revenue expenditure
• Section: 143(3); 80IB; 37; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, I, MUMBAI BEFORE S/SHRI D.K.AGARWAL (JM) AND B. RAMAKOTAIAH ( A.M ) ITA NO.1373/K/2009 (ASSESSMENT YEAR : 2001-02) INDIAN ALUMINIUM CO.LTD., (SINCE MERGED WITH HINDALCO INDUSTRIES LTD.) 1, MIDDLETON STREET, KOLKATA-700071 PAN: AAACI5375F DY. COMMISSIONER OF INCOME TAX CIRCLE-8, SPECIAL RANGE-13, AAYKAR BHAVAN, P-7, CHOWRINGHEE SQUARE, 5 TH FLOOR, KOLKATA-700069 APPELLANT V/S RESPONDENT ITA NO.4930/MUM/2009 (ASSESSMENT YEAR : 2001-02) ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE -6(3), ROOM NO.522, 5 TH FLOOR, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI-400020. M/S INDIAN ALUMINIUM CO.LTD., 3 RD FLOOR, CENTURY BHAVAN, DR.A.B.ROAD, WORLI, MUMBAI-400018 PAN: AAACI5375F APPELLANT V/S RESPONDENT DATE OF HEARING : 3.10.2011 DATE OF PRONOUNCEMENT : 12.10.2011 ASSESSEE BY : SHRI NARESH JAIN REVENUE BY : SHRI SANJIV DUTT O R D E R PER D.K.AGARWAL (JM) THESE CROSS-APPEALS BY THE ASSESSEE AND REVENUE ARE DIRECTED AGAINST THE ORDER DATED 10.6.2009 PASSED BY THE LD. CIT(A) FOR THE ASSESSMENT YEAR 2001-02. BOTH THESE APPEALS ITA NO.1373/K/2009 ITA NO.4930/MUM/2009 (ASSESSMENT YEAR : 2001-02) 2 ARE DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE O F CONVENIENCE. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE COMPANY IS WIDELY HELD DOMESTIC MANUFACTURING COM PANY ENGAGED IN THE PRODUCTION OF ALUMINUM AND ITS ALL IED PRODUCTS. IT FILED RETURN DECLARING TOTAL INCOME OF RS.68,52,64,050/-. HOWEVER, THE ASSESSMENT WAS COM PLETED AT AN INCOME OF RS.1,03,43,94,570/-, VIDE ORDER DA TED 29.3.2004 PASSED U/S 143(3) OF THE INCOME TAX ACT, 1961(IN SHORT THE ACT). ON APPEAL, THE LD. CIT(A) PARTLY ALLOWED THE APPEAL. 3. BEING AGGRIEVED BY THE ORDER OF THE LD.CIT(A), T HE ASSESSEE AND REVENUE BOTH ARE IN APPEAL BEFORE U S. ITA NO.1373/K/2009 (BY ASSESSEE) 4. GROUND NO.1 IS AGAINST THE SUSTENANCE OF DISALL OWANCE OF REPAIR EXPENSES OF RS.73,54,282/-. 5. BRIEF FACTS OF THE ABOVE ISSUE ARE THAT THE AO NOTED THAT THE ASSESSEE HAS CHARGED TO ITS PROFIT AND LOS S ACCOUNT AN AMOUNT OF RS.73,54,282/- UNDER THE HEAD CURRENT REPAIRS AND REPLACEMENT OF PLANT AND MACHINERY. THE AO ON EXAMINATION OF ITEM-WISE LIST OF THE EXPENDITURE O BSERVED THAT ALMOST THE ENTIRE EXPENDITURE HAS BEEN INCURRE D TOWARDS ITA NO.1373/K/2009 ITA NO.4930/MUM/2009 (ASSESSMENT YEAR : 2001-02) 3 THE REPLACEMENT OF ESSENTIAL PARTS OF PLANT AND MAC HINERY AND NOT FOR ANY REPAIR WORKS. HE FURTHER NOTED THA T NONE OF THE ITEMS CAN IN ANYWAY BE CALLED EXPENSES FOR ROU TINE REPAIRS. THESE ITEMS ARE IN FACT CAPITAL GOODS HAV ING A LONG LIFE AND ARE NOT CONSUMED FREQUENTLY. THERE HAS BEE N RARELY ANY REPETITION OF THESE ITEMS IN PREVIOUS ASSESSMEN T YEARS. IN FACT, IT WILL AN ACCOUNTING FALLACY TO GIVE THE LABEL CURRENT REPAIRS TO THESE ITEMS OF EXPENDITURE. THE ASSES SEE UNDER THE HEAD REPAIRS AND MAINTENANCE PLANT AND MACHI NERY ALREADY DEBITED RS.3677.08 LAKHS IN THE PROFIT AND LOSS ACCOUNT WHICH HAS ALREADY TAKEN INTO ACCOUNT ALL TH E REPAIRS DONE TO THE PLANT AND MACHINERY DURING THE YEAR. T HE ADDITIONAL CLAIM OVER AND ABOVE WHAT THE AUDITORS H AVE ALREADY ALLOWED IN ACCOUNTS IS NOTHING BUT A SUO MO TU EFFORT TO INFLATE EXPENSES WITHOUT THE CONSENT OF THE AU DITORS. THE ASSESSEE TRIED TO ARTIFICIALLY INFLATE EXPENSES BY CLAIMING DEDUCTION OF CAPITAL EXPENSES NOT ALLOWABLE UNDER THE ACT. ACCORDINGLY, THE AO DISALLOWED ALL THESE EXPENSES TREATING THE SAME AS REPRESENTING EXPENSES TOWARDS CAPITAL GOODS. THE AO AFTER OBSERVING THAT THE ASSESSEE WILL GET DEPRECIATION AT THE RATE OF 12.5% ON THE SAME, MADE THE DISALLOWANCE OF RS.73,54,282/-. ON APPEAL, THE LD. CIT(A) AFTER DISCUSSING THE ISSUE AT LENGTH WHILE FOLLOWIN G THE APPELLATE/TRIBUNAL ORDERS FOR THE EARLIER ASSESSME NT YEARS, CONFIRMED THE DISALLOWANCE MADE BY THE AO. ITA NO.1373/K/2009 ITA NO.4930/MUM/2009 (ASSESSMENT YEAR : 2001-02) 4 6. AT THE TIME OF HEARING, THE LEARNED COUNSEL FOR THE ASSESSEE WHILE REITERATING THE SAME SUBMISSIONS AS SUBMITTED BEFORE THE AO AND THE LD. CIT(A) FURTHER SUBMITS THAT THE TRIBUNAL IN ASSESSEES OWN CASE IN INDIAN ALUMINIUM CO.LTD. V/S JCIT AND VICE VERSA IN ITA NOS.459(KOL) 2009 AND 3352/MUM/2009 (AY-2000-01) DA TED 9.2.2011 AFTER CONSIDERING THE EARLIER ORDER OF TH E TRIBUNAL HAS UPHELD THE ORDER OF THE LD. CIT(A) IN DELETING THE DISALLOWANCE MADE BY THE AO. HE, THEREFORE, SUBMIT S THAT THE DISALLOWANCE MADE BY THE AO AND SUSTAINED BY T HE LD. CIT(A) BE DELETED. 7. ON THE OTHER HAND, THE LD. DR WHILE RELYING ON T HE ORDER OF THE AO AND LD. CIT(A) ALSO RELIED ON THE DECISI ON OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2002-03. HE, THEREFORE, SUBMITS THAT THE DISALLOWAN CE MADE BY THE AO AND SUSTAINED BY THE LD. CIT(A) BE UPHEL D. 8. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE AO AFTER EXAMINING THE ITEM-WISE A NALYSIS OF THE DETAILS OF CURRENT REPAIRS AND REPLACEMENT OF PLANT AND MACHINERY EXPENSES HAS DISALLOWED THE SAME ON TH E GROUND THAT THESE ITEMS ARE IN THE NATURE OF CAPIT AL GOODS HAVING A LONG LIFE AND ARE NOT CONSUMED FREQUENTLY AND RARELY ANY REPETITION OF THESE ITEMS IN PREVIOUS ASSESSME NT YEARS. ITA NO.1373/K/2009 ITA NO.4930/MUM/2009 (ASSESSMENT YEAR : 2001-02) 5 BEFORE THE LD. CIT(A), IT WAS INTERALIA CONTENTED BY THE ASSESSEE THAT THE SAID EXPENDITURE RELATES TO THE GENERAL REPAIRS ON VARIOUS ASSETS AND REPLACEMENT OF WORN O UT OR DEFICIENT PARTS FORMING PART OF THE PLANT AND MACHI NERY AND NOT EXPENSES ON REPLACEMENT OF COMPLETE PLANT/MACHI NE. THE LD. CIT(A) AFTER CONSIDERING THE ASSESSEES SUB MISSIONS, TRIBUNAL ORDERS FOR THE ASSESSMENT YEARS 1997-98 AN D 1998- 99 AND FOR THE ASSESSMENT YEAR 2002-03 AND THE APPE LLATE ORDER FOR THE ASSESSMENT YEAR 2000-01 HAS HELD THA T SINCE THE ASSESSEE WAS NOT ABLE TO PROVE THAT THE EXPENDI TURE WAS NOT IN THE NATURE OF REVENUE, CONFIRMED THE DISALLO WANCE MADE BY THE AO. HOWEVER, ON EXAMINATION OF THE D ETAILS OF EXPENSES APPEARING AT PAGE 14 OF THE ASSESSEES PAP ER BOOK, WE FIND THAT THE ASSESSEE HAS MENTIONED DETAI LS AS CURRENT REPAIRS AND REPLACEMENT OF PLANT AND MACHI NERY WHEREAS BEFORE THE LD. CIT(A) THE ASSESSEE HAS CONT ENDED THAT THERE IS NO SUCH EXPENSES ON REPLACEMENT OF CO MPLETE PLANT/MACHINE. WE FURTHER FIND THAT THE TRIBUNAL IN THE APPEAL FOR THE ASSESSMENT YEAR 2000-01 (SUPRA) HAS HELD T HAT THE EXPENSES OF RS.1,31,30,573/- HAVE BEEN INCURRED TOWARDS ROUTINE MAINTENANCE EXPENSES ON TURBO GENERATOR, W HEREAS IN THE YEAR UNDER CONSIDERATION, THERE IS NO SUCH C LAIM OF THE ASSESSEE THAT THE ABOVE EXPENSES HAVE BEEN INCURR ED AS ROUTINE MAINTENANCE EXPENSES. AS A MATTER OF FACT, IT WAS CLAIMED BY THE ASSESSEE THAT SUCH EXPENSES HAVE BEE N ITA NO.1373/K/2009 ITA NO.4930/MUM/2009 (ASSESSMENT YEAR : 2001-02) 6 INCURRED ON REPLACEMENT OF WORN OUT OR DEFICIENT PARTS OF PLANT AND MACHINERY AND THERE IS NO REPLACEMENT ON COMPLETE PLANT /MACHINE. THUS, THE FACTS FOR THE A SSESSMENT YEAR 2000-01 ARE ENTIRELY DIFFERENT THAN THE FACT FOR THE YEAR UNDER CONSIDERATION, THEREFORE, THE DECISION OF TH E TRIBUNAL (SUPRA) RELIED UPON BY THE LEARNED COUNSEL FOR THE ASSESSEE IS DISTINGUISHABLE AND NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. WE FURTHER FIND THAT THERE IS NO EXP RESS FINDING AS TO WHETHER THE EXPENDITURE WAS INCURRED TO PR ESERVE AND MAINTAIN AN ALREADY EXISTING ASSETS OR THE EXP ENDITURE HAVE BEEN INCURRED TO BRING A NEW ASSETS INTO EXIST ENCE OR TO OBTAIN A NEW ADDITION. 9. IN CIT V/S SARVANA SPINNING MILLS P.LTD.(2007) 293 ITR 201 (SC) IT HAS BEEN OBSERVED AND HELD (HEAD NOTES- PAGES 201-202): DURING THE PREVIOUS YEARS RELEVANT TO THE ASSESSME NT YEARS 1993-94 AND 1994-95, THE ASSESSEE, A TEXTILE MILL ENGAGED IN THE MANUFACTURE OF YARN, SPENT CERTAIN AMOUNTS FOR REPLACEMENT OF RING FRAMES WHICH HAD WO RN OUT. IT CLAIMED DEDUCTION OF THE AMOUNTS SPENT FOR REPLACEMENT UNDER SECTION 31(I) OF THE INCOME-TAX A CT, 1961, AS CURRENT REPAIRS. ACCORDING TO THE ASSESSEE THE WHOLE TEXTILE MILL WAS A PLANT AND THE RING FRAME S WERE ONE OF THE 25 MACHINES WHICH CONSTITUTED ONE SINGLE PROCESS AND, THEREFORE, REPLACEMENT OF THE FRAMES H AD TO BE TREATED ONLY AS A REPLACEMENT OF OLD PARTS WHICH HAD BECOME DERELICT AND NOT REPLACEMENT OF A MACHINE. T HE ASSESSING OFFICER HELD THAT BY THE REPLACEMENT THE ASSESSEE HAD OBTAINED AN ENDURING BENEFIT AND THE EXPENDITURE INCURRED CONSTITUTED CAPITAL EXPENDITUR E AND NOT CURRENT REPAIRS. ON APPEAL THE COMMISSIONER (APPEALS) HELD THAT THE REPLACEMENT OF THE RING FRA MES CONSTITUTED AN INTEGRAL PART OF THE PRODUCTION SYST EM IN A TEXTILE MILL AND, THEREFORE, REPLACEMENT OF AN ITEM COULD NOT BE REGARDED AS INSTALLATION OF A SEPARATE MACHI NE ITA NO.1373/K/2009 ITA NO.4930/MUM/2009 (ASSESSMENT YEAR : 2001-02) 7 AND ALLOWED THE EXPENDITURE AS REVENUE EXPENDITURE. THE APPELLATE TRIBUNAL AFFIRMED THE DECISION OF THE COMMISSIONER (APPEALS). ON A REFERENCE, THE HIGH CO URT AFFIRMED THE DECISION OF THE APPELLATE TRIBUNAL. P LACING RELIANCE ON THE REPORT OF THE SOUTH INDIA TEXTILE RESEARCH ASSOCIATION, THE HIGH COURT HELD THAT THE PROCESS OF CONVERTING FIBRE TO YARN WAS ONE CONTINU OUS INTERLINKED PROCESS; THAT THE RING FRAMES COULD NOT WORK INDEPENDENTLY AND COULD WORK ONLY AS A PART OF THE SPINNING UNIT, AND THAT THE EXPENDITURE WAS DEDUCTI BLE UNDER SECTION 31(I). ON APPEAL TO THE SUPREME COURT : HELD, REVERSING THE DECISION OF THE HIGH COURT, (I) THAT THE MANUFACTURING PROCESS IN THE TEXTILE MILL WAS N OT ONE CONTINUOUS INTEGRATED PROCESS ; (II) THAT TO DECIDE THE APPLICABILITY OF SECTION 31 (I) THE TEST WAS NOT WHETHER THE EXPENDITURE WAS REVENUE OR CAPITAL IN NATURE, BUT WHETHER THE EXPENDITURE WAS CURRENT REPAIRS. THE BASIC TEST WAS TO FIND OUT W HETHER EXPENDITURE WAS INCURRED TO PRESERVE AND MAINTAIN AN ALREADY EXISTING ASSET, AND THE EXPENDITURE MUST NO T BE TO BRING A NEW ASSET INTO EXISTENCE OR TO OBTAIN NE W ADVANTAGE. (III) THAT EACH MACHINE INCLUDING THE RING FRAME WA S AN INDEPENDENT AND SEPARATE MACHINE CAPABLE OF INDEPENDENT AND SPECIFIC FUNCTION AND, THEREFORE, T HE EXPENDITURE INCURRED FOR REPLACEMENT THEREOF WOULD NOT COME WITHIN THE MEANING OF CURRENT REPAIRS. THE REPLACEMENT OF THE RING FRAME CONSTITUTED SUBSTITUT ION OF AN OLD ASSET BY A NEW ASSET, AND, THEREFORE, THE EXPENDITURE INCURRED BY THE ASSESSEE DID NOT FALL W ITHIN THE MEANING OF CURRENT REPAIRS IN SECTION 31(I). UNDER SECTION 31(I) THE DEDUCTION ADMISSIBLE IS ONL Y FOR CURRENT REPAIRS. THEREFORE, THE QUESTION AS TO WHET HER THE EXPENDITURE INCURRED BY THE ASSESSEE CONCEPTUAL LY IS REVENUE OR CAPITAL IN NATURE IS NOT RELEVANT FOR DE CIDING THE QUESTION WHETHER SUCH EXPENDITURE COMES WITHIN THE ETYMOLOGICAL MEANING OF THE EXPRESSION CURRENT REP AIRS. IN OTHER WORDS, EVEN IF THE EXPENDITURE IS REVENUE IN NATURE, IT MAY NOT FALL IN THE CONNOTATION OF CURR ENT REPAIRS. ITA NO.1373/K/2009 ITA NO.4930/MUM/2009 (ASSESSMENT YEAR : 2001-02) 8 10. SINCE THE ISSUE HAS NOT BEEN EXAMINED IN THE LI GHT OF THE RATIO LAID DOWN BY THE HONBLE APEX COURT SUPRA , THEREFORE, WE ARE OF THE VIEW THAT IN THE INTEREST OF JUSTICE THE MATTER SHOULD GO BACK TO THE FILE OF THE ASSESSING OFFICER AND ACCORDINGLY WE SET ASIDE THE ORDERS PASSED BY T HE REVENUE AUTHORITIES ON THIS ACCOUNT AND SEND BACK T HE MATTER TO THE FILE OF THE ASSESSING OFFICER TO DECIDE THE SAME AFRESH IN THE LIGHT OF THE PRINCIPLES LAID DOWN BY THE HON BLE APEX COURT IN THE ABOVE CASE AND ACCORDING TO LAW AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. THE GROUND TAKEN BY THE ASSESSEE IS, THEREFORE, PARTLY ALLOWED FOR STATISTICAL PURPOSES. 11. GROUND NO.2 IS AGAINST THE ALLOWANCE OF DEDUC TION U/S 80IB AT RS.8,27,83,275/- AS AGAINST RS.15,55,49,351 /- CLAIMED BY THE ASSESSEE. 12. BRIEF FACTS OF THE ABOVE ISSUE ARE THAT THE AO NOTED THAT THE ASSESSEE HAS CLAIMED DEDUCTION OF RS.33,86,39,374/- U/S 80IA AND 80IB OF THE ACT. HE FURTHER NOTED THAT IT WAS CLAIMED BY THE ASSESSEE THAT THE POWER PLANT UNIT OF THE COMPANY AT HIRAKUD, ORISSA IS ELI GIBLE FOR DEDUCTION U/S 801A WHEREAS ALUMINA PLANT AT BELGAON , KARNATAKA, MULTI LAYER COATER UNIT AT KALWA, MAHARA SHTRA AND S.M.S. 4 HI COLD ROLLING MILL AT BELUR, WEST BE NGAL ARE ELIGIBLE FOR DEDUCTION U/S 80IB. IN RESPECT OF THE CLAIM FOR ITA NO.1373/K/2009 ITA NO.4930/MUM/2009 (ASSESSMENT YEAR : 2001-02) 9 DEDUCTION FOR THESE UNITS, STATEMENTS GIVING THE FI GURES OF TOTAL SALES, TOTAL EXPENSES AND ELIGIBLE PROFIT OF THESE UNITS WERE FILED ALONG WITH THE RETURN OF INCOME. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AUTHORIZED REPRESENT ATIVES OF THE ASSESSEE WERE ASKED TO FILE A COPY OF PRO FIT & LOSS A/C OF THESE UNITS SO AS TO VERIFY THE GENUINENESS OF THE AMOUNT CLAIMED AS DEDUCTION U/S 8OIA AND 80IB. SI NCE THE ASSESSEE-COMPANY HAS A NUMBER OF UNITS SPREAD ALL O VER THE COUNTRY AND HAS A HUGE ESTABLISHMENT AS ADMINISTRAT IVE OFFICE, THE AUTHORIZED REPRESENTATIVES OF THE ASSES SEE WERE ALSO ASKED TO EXPLAIN WHETHER THE EXPENSES OF THE H EAD OFFICE ARE BEING SUITABLY DISTRIBUTED WHILE COMPUTI NG THE PROFIT OF THE INDIVIDUAL UNITS. ON 17TH MARCH,2004, IN THE COURSE OF HEARING IT WAS SUBMITTED BY THE AUTHORIZ ED REPRESENTATIVES OF THE ASSESSEE THAT NO SEPARATE PROFIT & LOSS A/C IN RESPECT OF THE INDIVIDUAL UNITS ARE PRE PARED AND THE TOTAL INDIRECT EXPENSES OF THE BUSINESS IS PROP ORTIONATELY DISTRIBUTED TO ALL THE UNITS IN THE RATIO OF THEIR RESPECTIVE TURNOVER. HOWEVER, NO WORKING SHEET OR ANY OTHER COMPUTATION TO SUBSTANTIATE THIS CLAIM WERE FILED DURING THE COURSE OF HEARING. FROM THE PRINTED AUDITED ACCOUN TS OF THE COMPANY IT IS APPARENT THAT IN THE PROFIT AND LOSS A/C DIRECT AND INDIRECT EXPENSES HAVE NOT BEEN GROUPED SEPARAT ELY. HENCE, IT IS NOT POSSIBLE TO SEGREGATE THE INDIRECT EXPENSES FROM THE DIRECT EXPENSES. FURTHER, IN THE STATEMEN T GIVEN ITA NO.1373/K/2009 ITA NO.4930/MUM/2009 (ASSESSMENT YEAR : 2001-02) 10 FOR U/S 80IA AND 80IB, NO SEPARATE COMPUTATIONS HA VE BEEN MADE SO AS TO IDENTIFY THE DIRECT OR INDIRECT EXPEN SES ATTRIBUTABLE TO THE UNIT OR THE INDIRECT EXPENSES C LAIMED TO HAVE BEEN ALLOCATED PROPORTIONATELY TO THE UNITS ON THE BASIS OF THEIR RESPECTIVE TURNOVERS. IN OTHER WORDS. THE STATEMENT OF THE AUTHORIZED REPRESENTATIVES THAT THE WHOLE INDIR ECT EXPENSES OF THE BUSINESS OF THE COMPANY ARE PROPORT IONATELY ALLOCATED TO THE UNITS OF THE COMPANY IS NOT SUBSTA NTIATED BY ANY OF THE DOCUMENTS AVAILABLE ON RECORD. THE STATE MENT OF THE AUTHORIZED REPRESENTATIVES IS, THEREFORE, VERY GENERAL AND NON-SPECIFIC AND IS NOT QUALIFIED BY ANY SUPPOR TING DOCUMENTS OR COMPUTATION SO AS TO ARRIVE AT THE AMO UNTS OF INDIRECT EXPENSES ALLOCATED TO THE UNITS. THE AO F URTHER OBSERVED THAT IN ORDER TO VERIFY THE GENUINENESS OF THE CLAIM OF THE ASSESSEE IN RESPECT OF PROFITS SHOWN F ROM THESE UNITS, IT WOULD BE PERTINENT TO ANALYZE THE TRADING RESULTS OF THE ASSESSEE-COMPANY AS A WHOLE AND OF THOSE UNITS FOR WHICH DEDUCTIONS HAVE BEEN CLAIMED. FROM THE PROFI T & LOSS A/C IT IS OBSERVED THAT THE TOTAL TURNOVER OF THE C OMPANY IS RS.1,42,567.87 LAKHS WHEREAS THE B OOK PROFIT SHOWN AGAINST THIS TURNOVER IS RS.15,250.07 LAKHS. WHICH MEANS TH AT THE BOOK PROFIT RATIO IN COMPARISON TO THE TURNOVER OF THE BUSINESS IS 10.7%. NOW LET US EXAMINE THE PROFIT RA TIO OF THE UNITS WHICH HAVE BEEN CLAIMED AS ELIGIBLE FOR DEDUC TION U/S 80IA AND 80IB. THE TURNOVER OF THE HIRAKUD UNIT FOR ITA NO.1373/K/2009 ITA NO.4930/MUM/2009 (ASSESSMENT YEAR : 2001-02) 11 COMPUTATION OF DEDUCTION U/S.80IA HAS BEEN SHOWN AT RS.12,242.53 LAKHS WHEREAS ITS ELIGIBLE PROFIT HAS BEEN SHOWN AT RS.6103 LAKHS. THIS SHOWS THAT, IF THE COM PUTATION OF THE ASSESSEE IS TO BE BELIEVED, THE HIRAKUD UNIT IS HAVING A PROFIT RATIO OF 49.8%, WHICH IS 39.1% HIGHER THAN THE AVERAGE PROFIT OF THE BUSINESS OF THE COMPANY. THE ASSESSEE HAS OBVIOUSLY NOT GIVEN ANY EXPLANATION AS TO WHY T HE PROFITS OF THIS UNIT IS SO UNUSUALLY HIGH IN COMPARISON TO THE AVERAGE PROFITS OF THE BUSINESS OF THE ASSESSEE. THE TURNOV ER OF THE BELGAON UNIT TAKEN FOR COMPUTATION OF DEDUCTION U/S 80IB HAS BEEN SHOWN AT RS.5608.05 LAKHS AND THE PROFIT AGAI NST THIS TURNOVER HAS BEEN SHOWN AT RS.2082.95 LAKHS WHICH S UGGEST THAT THE UNIT IS HAVING A PROFIT RATIO OF 37.1%, I. E. 26.4% HIGHER THAN THE AVERAGE BUSINESS PROFIT OF THE COMP ANY. SIMILARLY, IT IS OBSERVED THAT THE BELUR UNIT HAS B EEN SHOWN AS HAVING A PROFIT RATIO OF 16.3% WHEREAS THE KALWA UNIT IS HAVING A PROFIT RATIO OF 12.31%. IT IS OBVIOUS FROM THE ABOVE ANALYSIS THAT ALL THE FOUR UNITS OF THE COMPANY WH ICH ARE ELIGIBLE FOR DEDUCTION U/S 80IA AND 80IB ARE SHOW ING PROFIT RATIOS HIGHER THAN THE AVERAGE PROFIT OF THE BUSINE SS OF THE COMPANY. IN THIS REGARD, IT COULD HAVE BEEN INTERE STING TO ANALYSE THE PROFIT RATIO OF THE OTHER UNITS OF THE COMPANY WHICH ARE NOT ELIGIBLE FOR ANY SUCH DEDUCTION. BUT SINCE IT HAS BEEN CLAIMED THAT THE ASSESSEE IS NOT PREPARING ANY SEPARATE PROFIT & LOSS A/C FOR ANY OF ITS UNITS, ANALYZING T HE TRADING ITA NO.1373/K/2009 ITA NO.4930/MUM/2009 (ASSESSMENT YEAR : 2001-02) 12 RESULTS WITH THIS PERSPECTIVE IS NOT POSSIBLE ON TH E BASIS OF DOCUMENTS AVAILABLE ON RECORD. HOWEVER, A FURTHER A NALYSIS COULD BE DONE IN A WAY THAT THE TURNOVER AND THE PR OFIT OF THESE FOUR UNITS ARE SET-ASIDE WHAT WOULD BE THE PR OFIT RATIO OF THE OTHER UNITS AS A WHOLE. AFTER DEDUCTING THE TURNOVER OF THESE UNITS THE TURNOVER OF THE GROUP WOULD BE RS.1,04,536.15 LAKHS AGAINST WHICH THE PROFIT WOULD BE RS.3,962.09 LAKHS. THIS SUGGESTS THAT IF THE TRADI NG RESULTS OF THE UNITS WHICH ARE ELIGIBLE FOR DEDUCTION ARE TAKEN SEPARATELY THE COMPANY WOULD BE HAVING A PROFIT RATIO OF A MEAGER 3.79%. THE AO AFTER RELYING ON THE RATIO OF THE DECISION OF THE HONBLE SUPREME COURT IN T HE CASE OF BAJAJ TEMPO LTD. V/S CIT (1992) 62 TAXMAN 480 (SC) AND KEEPING IN VIEW THE BASIS AS MENTIONED AT THE PA GES 3 TO 5 OF THE ASSESSMENT ORDER WORKED OUT THE PROFIT RATI O OF THE ASSESSEE COMPANY AT 10.7 % WHICH MEANS THAT THE EXP ENSES SHOWN, ACCORDING TO THE AO, AT 89.3% OF THE TOTA L TURNOVER OF THE COMPANY AND HENCE THE AO HAS TAKEN THIS RAT IO AS QUOTIENT TO BE APPLIED TO THE TURNOVER OF THE RE SPECTIVE UNIT TO COMPUTE THE EXPENSES ATTRIBUTABLE TO THOSE UNITS THE PROFIT AND ACCORDINGLY HE WORKED OUT THE PROFIT AND CONSE QUENTLY PARTLY ALLOWED THE DEDUCTION U/S 80IA AND 80IB OF T HE ACT. ON APPEAL, THE LD. CIT(A) FOLLOWING THE APPELLATE ORD ERS FOR THE ASSESSMENT YEARS 2002-03 AND 2003-04, WHEREIN THE C LAIM OF THE ASSESSEE WAS ALLOWED ON PRO-RATA BASIS RESTRICT ED THE ITA NO.1373/K/2009 ITA NO.4930/MUM/2009 (ASSESSMENT YEAR : 2001-02) 13 DEDUCTION TO RS.8,27,83,275/- AS AGAINST RS.15,55,4 9,351/- CLAIMED BY THE ASSESSEE. 13. AT THE TIME OF HEARING THE LEARNED COUNSEL FOR THE ASSESSEE WHILE REITERATING THE SAME SUBMISSIONS AS SUBMITTED BEFORE THE AO AND THE LD. CIT(A) FURTHER SUBMITS THAT THE ASSESSEE HAS FILED UNIT-WISE STATEMENTS A PPEARING AT PAGES 15 TO 22 OF THE ASSESSEES PAPER BOOK. HO WEVER, THE SAID PROFITABILITY STATEMENT HAVE NOT BEEN CONS IDERED BY THE AO AND THE LD. CIT(A) BEFORE REJECTING THE CLA IM OF THE ASSESSEE. HE FURTHER SUBMITS THAT THE TRIBUNAL IN THE ASSESSEES OWN CASE IN INDIAN ALUMINUM CO.LTD V/S D CIT AND VICE-VERSA IN ITA NO.1212/KOL/2006 AND ITA NO.1045/KOL/2006 (AY 2002-03) DATED 20.10.2006 HAS NOT ALLOWED THE FULL DEDUCTION ON THE GROUND THAT FIN ANCE ACT 2002 BRINGS OUT THAT THE ELIGIBLE PROFIT HAS TO BE DERIVED BY PREPARING THE INDIVIDUAL FINANCIAL ACCOUNTS OF THE INDIVIDUAL INDUSTRIAL UNIT. AS THE ASSESSEE COMPANY DID NOT F URNISH COMPLETE DETAILS OF ACCOUNT TO ENABLE THE AO TO VE RIFY THE CORRECTNESS OF THE CLAIM, THE TRIBUNAL CONFIRMED THE DISALLOWANCE MADE BY THE AO. THE LEARNED COUNSEL FOR THE ASSESSEE WHILE DISTINGUISHING THE DECISION OF THE TRIBUNAL (SUPRA) SUBMITS THAT SINCE THE AMENDMENT WAS BROUGH T BY THE FINANCE ACT, 2002 W.E.F.1.4.2003 RELEVANT TO THE ASSESSMENT YEAR 2003-04, THEREFORE, THE SAME IS NO T ITA NO.1373/K/2009 ITA NO.4930/MUM/2009 (ASSESSMENT YEAR : 2001-02) 14 APPLICABLE FOR THE ASSESSMENT YEAR 2001-02. HE TH EREFORE, SUBMITS THAT SINCE THE PROFITABILITY STATEMENT HA VE NOT BEEN CONSIDERED BY THE AO AND THE LD. CIT(A), THEREFORE , IN THE INTERESTS OF JUSTICE THE ISSUE MAY BE SET ASIDE TO THE FILE OF THE AO. THE RELIANCE WAS ALSO PLACED ON THE DECISI ONS IN THE CASE OF CIT V/S HIND LAMPS LTD. (1991) 92 CTR 2 04 (ALL) AND CIT V/S TECHNOTIVE EASTERN (P) LTD. (2002) 176 CTR (GAU) 422. 14. ON THE OTHER HAND, THE LD. DR WHILE RELYING ON THE ORDER OF THE AO AND LD. CIT(A) SUBMITS THAT THIS ISSUE STANDS COVERED IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN THE A SSESSEES OWN CASE IN INDIAN ALUMINUM CO.LTD V/S DCIT FOR THE ASSESSMENT YEAR 2002-03 (SUPRA), THEREFORE, FOLLOW ING THE SAME THE ISSUE MAY BE DECIDED IN FAVOUR OF THE REVE NUE. 15. HAVING CAREFULLY HEARD THE SUBMISSIONS OF THE R IVAL PARTIES AND PERUSING THE MATERIAL AVAILABLE ON REC ORD WE FIND THAT THERE IS NO DISPUTE THAT DESPITE OPPORTUNITY P ROVIDED TO THE ASSESSEE, THE ASSESSEE HAS NOT FILED WORKING SH EETS OR ANY OTHER COMPUTATION TO SUBSTANTIATE ITS CLAIM. THE AO IN THE ABSENCE THEREOF HAS WORKED OUT THE PROFIT RATIO OF THE ASSESSEE-COMPANY AT 10.7% AND EXPENSES AT 89.3% OF THE TOTAL TURNOVER AND THEREBY WORKED OUT THE DEDUCTIO N U/S 80IA ITA NO.1373/K/2009 ITA NO.4930/MUM/2009 (ASSESSMENT YEAR : 2001-02) 15 AND 80IB. THE LD. CIT(A) FOLLOWING THE APPELLATE ORDER FOR THE ASSESSMENT YEARS 2002-03 AND 2003-04, HOWEVER, RESTRICTED THE DEDUCTION TO RS.8,27,83,275/- AS AGA INST RS.15,55,49,351/- CLAIMED BY THE ASSESSEE. HOWEVER , WE FIND THAT THERE IS NO MATERIAL ON RECORD TO SHOW A S TO WHETHER THE REVENUE AUTHORITIES HAVE CONSIDERED TH E UNIT- WISE STATEMENTS APPEARING AT PAGES 15-22 OF THE ASS ESSEES PAPER BOOK. WE FURTHER FIND THAT THE TRIBUNAL W HILE DECIDING THE SIMILAR ISSUE FOR THE ASSESSMENT YEAR 2002-03 HAS NOTED THE AMENDMENT MADE BY THE FINANCE ACT, 20 02 W.E.F.1.4.2003, WHEREAS THE PRESENT CASE OF THE ASS ESSEE IS FOR THE ASSESSMENT YEAR 2001-02 WHEREIN THE SAID AMENDMENT IS NOT APPLICABLE. IN THIS VIEW OF TH E MATTER AND KEEPING IN VIEW THAT THE ISSUE HAS NOT BEEN EXA MINED IN THE LIGHT OF THE UNIT-WISE PROFITABILITY STATEMENTS FILED BY THE ASSESSEE, WE ARE OF THE VIEW THAT IN THE INTERESTS OF JUSTICE THE MATTER SHOULD GO BACK TO THE FILE OF THE AO AN D ACCORDINGLY, WE SET ASIDE THE ORDER PASSED BY THE AO AND THE LD. CIT(A) ON THIS ACCOUNT AND SEND BACK THE MA TTER TO THE FILE OF THE AO TO DECIDE THE SAME AFRESH IN THE LIGHT OF THE OBSERVATIONS HEREINABOVE AND ACCORDING TO LAW INCLU DING THE DECISION RELIED ON BY THE LEARNED COUNSEL FOR THE A SSESSEE AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEA RD TO THE ASSESSEE. THE GROUND TAKEN BY THE ASSESSEE, IS, TH EREFORE, PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO.1373/K/2009 ITA NO.4930/MUM/2009 (ASSESSMENT YEAR : 2001-02) 16 16. GROUND NO.3 IS AGAINST THE SUSTENANCE OF DISAL LOWANCE OF INTEREST ON BORROWINGS OF RS.67,98,684/-. 17. BRIEF FACTS OF THE ABOVE ISSUE ARE THAT THE AO NOTED THAT IN THE COMPUTATION OF TAXABLE INCOME FILED ALO NG WITH THE RETURN OF INCOME THE ASSESSEE HAS CLAIMED A DEDUCTI ON OF RS.67,98,684/- TOWARDS PREOPERATIVE INTEREST INCURR ED ON THE EXPANSION OF THE EXISTING BUSINESS. IN THE NOTE ANN EXED TO THE RETURN IT HAS BEEN MENTIONED THAT THE ABOVE A MOUNT IS INCURRED IN CONNECTION WITH THE ON-GOING PROJECTS A ND THE EXPENDITURE IS DEDUCTIBLE AS REVENUE EXPENDITURE WI THIN THE MEANING OF SECTION 36(1)(III). FROM THE SAID NOTE T O THE RETURN THE AO OBSERVED THAT IT IS EVIDENT THAT THE ASSESSEE HAS TAKEN UP EXPANSION PROGRAMME AT ITS UNITS AT AL UPURAM. KALWA, BELGAON, HIRAKUD AND MURI. AS PER THE PROVIS IONS OF SECTION 43 OF THE L.T.ACT, THE ACTUAL COST OF ASSET MEANS ACTUAL COST TO THE ASSESSEE REDUCED BY THAT PORTION OF THE COST THEREBY, IF ANY, AS HAS BEEN MADE DIRECTLY OR INDIRECTLY BY ANY OTHER PERSON OR AUTHORITY. FROM THIS IT IS C LEAR THAT THE TOTAL AMOUNT OF EXPENDITURE INCURRED FOR ACQUISITI ON OF ASSETS BY THE ASSESSEE IS THE ACTUAL COST. ACCORDINGLY, IN THE INSTANT CASE THE ASSESSEE HAS RIGHTLY CONSIDERED TH E PRE- OPERATIVE EXPENDITURE AS PART OF COST OF ASSETS IN ITS BOOKS OF ACCOUNT, WHEREAS IN THE COMPUTATION OF THE TOTAL INCOME ITA NO.1373/K/2009 ITA NO.4930/MUM/2009 (ASSESSMENT YEAR : 2001-02) 17 THE SAME HAS BEEN CLAIMED AS REVENUE EXPENDITURE. THE AO IN VIEW OF THE PROVISIONS OF SECTION 37 R.W.S.36(1) (III) AND KEEPING IN VIEW THE RATIO OF THE DECISIONS OF THE HONBLE SUPREME COURT IN THE CASE OF CHALLAPALLI SUGARS LT D. V/S CIT (1975) 98 ITR 167 AND IN THE CASE OF JCT LTD. V/S ACIT 65 ITD 169 (CAL) DISALLOWED THE CLAIM OF INTEREST OF RS.67,98,684/- AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. ON APPEAL, THE LD. CIT(A) AFTER CONSIDERI NG THE AMENDMENT TO SECTION 36 W.E.F.1.4.2004 AND THE VARI OUS DECISIONS INCLUDING THE DECISION IN JCT LTD. V/S D CIT (2005) 276 ITR 115 (CAL), AND CIT V/S VARDHAMAN POLYTEX LTD. (2008) 299 ITR 152 (P&H) UPHELD THE DISALLOWANCE M ADE BY THE AO. 18. AT THE TIME OF HEARING, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITS THAT THIS ISSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF DCIT V/S CORE HEALTH CARE LTD. (20 08) 215 CTR(SC) 1; (2008) 298 ITR 194 (SC), THEREFORE, THE ISSUE MAY BE DECIDED ACCORDINGLY. 19. ON THE OTHER HAND, THE LD. DR SUPPORTS THE ORD ER OF THE AO AND THE LD. CIT(A). 20. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMIS SIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT ITA NO.1373/K/2009 ITA NO.4930/MUM/2009 (ASSESSMENT YEAR : 2001-02) 18 THE FACTS ARE NOT IN DISPUTE INASMUCH AS IT IS ALS O NOT IN DISPUTE THAT THE ASSESSEE HAS PAID INTEREST OF RS.6 7,98,684/- ON THE EXTENSION PROGRAMME OF ITS UNITS AT ALUPURAM . KALWA, BELGAON, HIRAKUD AND MURI. IT WAS DISALLOWED BY THE AO ON THE GROUND THAT THE ASSESSEE HAS CONSIDERED THE SAI D AMOUNT OF INTEREST AS PRE-OPERATIVE EXPENDITURE BEING PAR T OF THE COST OF ASSETS IN ITS BOOKS OF ACCOUNTS WHEREAS IN THE COMPUTATION OF TOTAL INCOME, THE SAME HAS BEEN CLA IMED AS REVENUE EXPENDITURE. SINCE ACCORDING TO THE AO I T IS PRE- OPERATIVE INTEREST, HENCE HE DISALLOWED THE SAME. I T IS WELL SETTLED THAT MAKING OF AN ENTRY OR ABSENCE OF AN E NTRY CANNOT DETERMINE RIGHTS AND LIABILITIES OF THE PAR TIES. 21. IN DCIT V/S CORE HEALTH CARE LTD. (SUPRA) IT H AS BEEN OBSERVED AND HELD (HEADNOTE, PAGE 195): SECTION 36(1)(III) OF THE INCOME-TAX ACT, 1961, HA S TO BE READ ON ITS OWN TERMS : IT IS A CODE BY ITSELF. IT MAKES NO DISTINCTION BETWEEN MONEY BORROWED TO ACQUIRE A CAP ITAL ASSET OR A REVENUE ASSET. ALL THAT THE SECTION REQU IRES IS THAT THE ASSESSEE MUST BORROW CAPITAL AND THE PURPO SE OF THE BORROWING MUST BE FOR BUSINESS WHICH IS CARR IED ON BY THE ASSESSEE IN THE YEAR OF ACCOUNT. UNLIKE SECT ION 37 WHICH EXPRESSLY EXCLUDES AN EXPENSE OF A CAPITAL NA TURE, SECTION 36(1)(III) EMPHASISES THE USER OF THE CAPIT AL AND NOT THE USER OF THE ASSET WHICH COMES INTO EXISTENC E AS A RESULT OF THE BORROWED CAPITAL. THE LEGISLATURE H AS, THEREFORE, MADE NO DISTINCTION IN SECTION 36(1)(III ) BETWEEN CAPITAL BORROWED FOR A REVENUE PURPOSE AN D CAPITAL BORROWED FOR A CAPITAL PURPOSE. AN ASSESS EE IS ENTITLED TO CLAIM INTEREST PAID ON BORROWED CAPITAL PROVIDED THAT THE CAPITAL IS USED FOR BUSINESS PURP OSE IRRESPECTIVE OF WHAT MAY BE THE RESULT OF USING THE CAPITAL WHICH THE ASSESSEE HAS BORROWED. ACTUAL CO ST OF AN ASSET HAS NO RELEVANCY IN RELATION TO SECTION 36(1)(III). ITA NO.1373/K/2009 ITA NO.4930/MUM/2009 (ASSESSMENT YEAR : 2001-02) 19 THE PROVISO INSERTED IN SECTION 36(1)(III) BY THE F INANCE ACT, 2003, WITH EFFECT FROM APRIL 1, 2004, WILL OPE RATE PROSPECTIVELY. HELD, ACCORDINGLY, THAT THE ASSESSEE WAS ENTITLED TO DEDUCTION UNDER SECTION 36(1)(III) PRIOR TO ITS AME NDMENT BY THE FINANCE ACT, 2003, IN RELATION TO MONEY BORR OWED FOR PURCHASE OF MACHINERY EVEN THOUGH THE ASSESSEE HAD NOT USED THE MACHINERY IN THE YEAR OF BORROWING. IN THE ABSENCE OF ANY DISTINGUISHING FEATURE BROUGH T ON RECORD BY THE REVENUE WE RESPECTFULLY FOLLOWING THE AUTHORITATIVE PRONOUNCEMENT OF THE HONBLE APEX COU RT (SUPRA) HOLD THAT SINCE FOR THE YEAR UNDER CONSIDE RATION THE ASSESSEE HAS PAID INTEREST OF RS.67,98,684/- ON THE EXTENSION PROGRAMME OF ITS UNITS AT ALUPURAM. KALWA , BELGAON, HIRAKUD AND MURI UNIT, THE ASSESSEE IS EN TITLED TO DEDUCTION OF INTEREST U/S 36(1)(III) OF THE ACT AN D ACCORDINGLY, THE GROUND TAKEN BY THE ASSESSEE IS AL LOWED. 22. THE ADDITIONAL GROUND TAKEN BY THE ASSESSEE REA DS AS UNDER : THE LOWER AUTHORITIES ERRED IN HOLDING THAT FOR TH E PURPOSE OF COMPUTATION OF DEDUCTION U/S 80HHC, 90% OF THE INTEREST RECEIVED AMOUNTING TO RS.1,82,19,144/- BE REDUCED WITHOUT APPRECIATING THAT NO SUCH REDUCTION OF INTEREST IS NECESSARY ON NETTING PRINCIPLE AS THE I NTEREST PAID AMOUNTED TO RS.36,46,55,000/- FOR THE YEAR UN DER APPEAL. ITA NO.1373/K/2009 ITA NO.4930/MUM/2009 (ASSESSMENT YEAR : 2001-02) 20 23. AT THE TIME OF HEARING, THE LEARNED COUNSEL FO R THE ASSESSEE SUBMITS THAT HE DOES NOT WANT TO PRESS A FORESAID GROUND WHICH WAS NOT OBJECTED TO BY THE LEARNED DR . 24. THAT BEING SO AND IN THE ABSENCE OF ANY OTHER SUPPORTING MATERIALS PLACED ON RECORD BY THE LEARNE D COUNSEL FOR THE ASSESSEE, THE ADDITIONAL GROUND TAKEN BY THE ASSESSEE IS REJECTED BEING NOT PRESSED. ITA NO.4930/MUM/2009 (BY REVENUE) 25. GROUNDS TAKEN BY THE REVENUE READ AS UNDER : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN DIRECTING THE AO TO ADOPT THE PRICE OF POWER CONSUMPTION @ RS.2.73 PER UNIT, BY ACCEPTING ASSESSEES EXPLANATION WITH RESPECT TO TH E TRANSFER PRICE (AS A BASIS ARTIFICIALLY INFLATED T HE PRICE FOR THE PURPOSE OF POWER CONSUMPTION) IN ASSESSEES OWN BUSINESS, INSTEAD OF POWER SOLD TO STATE ELECTRICI TY BOARD BY THE ASSESSEE @ RS.077 PER UNIT FOR CALCULA TING DEDUCTION U/S 80IA OF THE IT ACT. 2. THE APPELLANT PRAYS THAT THE ORDER OF LD. CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE AO BE RESTORED. 26. THE BRIEF FACTS OF THE ABOVE ISSUE ARE THAT IT HAS BEEN INTERALIA OBSERVED BY THE LD.CIT(A) THAT THE SALES MADE TO GRID CORPORATION ARE RECORDED AT 0.77 PAISA PER UN IT, I.E. AT ACTUAL. THE OTHER COST DATA OF PROFITABILITY STATE MENT HAS BEEN PROCURED FROM THE UNIT AT ACTUAL. HE FURTHER O BSERVED THAT THE FACTS WITH RESPECT TO CLAIM OF POWER PRO JECT U/S 80IA HAVE BEEN SAME AS THAT OF IN ASSESSMENT YEARS 2002 -03 AND ITA NO.1373/K/2009 ITA NO.4930/MUM/2009 (ASSESSMENT YEAR : 2001-02) 21 2003-04. IN THE ABOVE TWO ASSESSMENT YEARS THE OBS ERVATION OF THE AO FOR DISALLOWING CLAIM U/S 80IA HAS BEEN SAME AS THAT OF YEAR UNDER APPEAL. ON THE SIMILAR FACTS, TH E LD. CIT(A) IN ASSESSMENT YEARS 2002-03 AND 2003-04, HAS ALLO WED THE CLAIM OF THE ASSESSEE, WITH A DIRECTION OF ADOPTING TRANSFER PRICING FOR POWER AT THE RATE AT WHICH POWER IS SO LD BY ORISSA STATE ELECTRICITY BOARD AFTER VERIFICATION OF EXPE NSES. IN THE APPEAL EFFECT FOR BOTH THE ASSESSMENT YEARS THE AO HAS ALLOWED THE CLAIM U/S 80IA AS PER PROFITABILITY STA TEMENT AS CLAIMED BY THE APPELLANT IN RETURN OF INCOME. THE ORDER OF THE CIT(A) HAS BEEN UPHELD BY THE TRIBUNAL IN TH E ASSESSMENT YEAR 2002-03. THE LD. CIT(A) FOLLOWING THE SAME DIRECTED THE AO TO ADOPT TRANSFER PRICING FOR POWE R AT THE RATE AT WHICH POWER IS SOLD BY ORISSA STATE ELECTR ICITY BOARD AFTER VERIFICATION OF EXPENSES AND ALLOW THE CLAIM U/S 80IA AS PER PROFITABILITY STATEMENT PREPARED BY THE ASSE SSEE. 27. AT THE TIME OF HEARING, THE LD. DR SUPPORTS THE ORDER OF THE AO. 28. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASS ESSEE SUBMITS THAT THIS ISSUE STANDS COVERED AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2 002-03 (SUPRA), THEREFORE, THE ISSUE MAY BE DECIDED ACCOR DINGLY. ITA NO.1373/K/2009 ITA NO.4930/MUM/2009 (ASSESSMENT YEAR : 2001-02) 22 29. HAVING CAREFULLY HEARD THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSING THE MATERIAL AVAILABLE ON REC ORD WE FIND THAT THE FACTS ARE NOT IN DISPUTE. WE FIND MERIT IN THE PLEA TAKEN BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE ABOVE ISSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE ORDER OF THE TRIBUNAL (SUPRA), WHEREIN THE TRIBUNAL HAS HELD AS UNDER (PAGE 3, PARAGRAPH 11): 11..AS REGARDS THE OTHER ISSUE RELATING TO THE CLAIM OF DEDUCTION U/S 80IA OF THE INCOME TAX ACT, 1961 IN RESPECT OF HIRAKUD POWER UNIT THE MAIN ISSUE RELAT ES TO THE PRICE TO BE ADOPTED PER UNIT FOR WORKING OUT TH E PROFIT U/S 80IA OF THE INCOME TAX ACT, 1961. IN HIS ORDER, THE AO HAS ADOPTED THE RATE OF RS.0.77 PAISA PER UNIT O N THE GROUND THAT THIS WAS THE PRICE FIXED BY THE ORISSA STATE ELECTRICITY BOARD. THE CONTENTION OF THE AO THAT TH E PRICE PAID BY THE STATE ELECTRICITY BOARD TO THE APPELL ANT I.E. RS.0.77 PAISA PER UNIT SHOULD BE ADOPTED FOR ARRIVI NG AT THE PROFITS OF THE UNIT IS APPARENTLY NOT CORRECT B ECAUSE THERE IS FORCE IN THE ARGUMENT ADVANCED BY THE ASSE SSEE THAT PRICE CHARGED FROM THE GRID CORPORATION OF IN DIA LTD. WAS DICTATED AND HAD INBUILT COMPENSATION THER EIN FOR THE ASSESSEE BECAUSE WITHOUT AGREEING TO SUCH CONDITIONS, THE PERMISSION FOR SETTING UP OF THE C APTIVE PER UNIT WOULD NOT HAVE BEEN GRANTED. IN VIEW OF T HE ABOVE THE AO IS DIRECTED TO ADOPT THE PRICE PER U NIT AT RS.2.68 AND REWORK THE PROFIT ELIGIBLE FOR DEDUCTI ON U/S 80IA OF THE INCOME TAX ACT, 1961. THE AO IS ALSO DIRECTED TO LOOK INTO THE EXPENSES RELATING TO THE SE PARTICULARS UNITS ACCOUNTED FOR IN THE HEAD OFFICE. IN THE ABSENCE OF ANY DISTINGUISHING FEATURES BROUG HT ON RECORD BY THE REVENUE, WE RESPECTFULLY FOLLOWING TH E ORDER OF THE TRIBUNAL (SUPRA) DIRECT THE AO TO ADOPT THE PR ICE PER UNIT AT THE RATE ON WHICH THE POWER IS SOLD BY O RISSA STATE ELECTRICITY BOARD AND ALLOW DUE DEDUCTION U/S 80I A AS PER ITA NO.1373/K/2009 ITA NO.4930/MUM/2009 (ASSESSMENT YEAR : 2001-02) 23 THE DIRECTION OF THE LD. CIT(A). THE GROUND TAKEN BY THE REVENUE IS, THEREFORE, REJECTED. 30. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSE AND REVENUES APPEAL STAND S DISMISSED.. ORDER IS PRONOUNCED IN THE OPEN COURT ON 12TH OCT. , 2011. SD SD (B. RAMAKOTAIAH) (D.K .AGARWAL) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 12TH OCTOBER, 2011 SRL COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH 6. GUARD FILE. BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI