M/S. THE WEST COAST PAPER MILLS LTD, MUMBAI V. THE JCIT RG 1(3), MUMBAI

ITA 5269/MUM/2008

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78937 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 9 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 08-04-2014
• Assessment Year: 2003-2004
• Appeal Filed On: 18-08-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K C P PATNAIK
• Keywords: Capital asset; Business income; Depreciation; Transfer pricing; Principle of natural justice; Earning of tax free income; Source of fund; Proportionate interest; Retrospective amendment; Fair market value; Speculation loss; Revised return; Revenue expenditure; Capital expenditure
• Section: 43B; 143(3); 80HHC; 234B; 14A; 115JB; 68; 145

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI . . , , , BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA , JUDICIA L MEMBER . / ITA NO. 3802 /MUM./ 2006 ( / ASSESSMENT YEAR : 2002 03 ) THE WEST COAST PAPER MILLS LTD. SHREENIWAS HOUSE HAZARIMAL SOMANI MARG FORT, MUMBAI 400 001 .. / APP ELLANT V/S ADDL. C OMMISSIONER OF INCOME TAX RANGE 1(3), AAYAKAR BHAVAN 101, M.K. ROAD, MUMBAI 400 020 .... / RESPONDENT ./ PERMANENT ACCOUNT NUMBER AAACT4179N . / ITA NO. 3752 /MUM./ 2006 ( / ASSESSMENT YEAR : 200 2 03 ) JT. COMMISSIONER OF INCOME TAX (OSD) RANGE 1(3), AAYAKAR BHAVAN 101, M.K. ROAD, MUMBAI 400 020 .. / APP ELLANT V/S THE WEST COAST PAPER MILLS LTD. SHREENIWAS HOUSE HAZARIMAL SOMANI MARG FORT, MUMBAI 400 001 .... / RESPONDENT ./ PERMANENT ACCOUNT NUMBER AAACT4179N THE WEST COAST PAPER MILLS LTD. 2 . / ITA NO. 5269 /MUM./ 2008 ( / ASSESSMENT YEAR : 2003 04 ) THE WEST COAST PAPER MILLS LTD. SHREENIWAS HOUSE HAZARIMAL SOMANI MARG FORT, MUMBAI 400 001 .. / APP ELLANT V/S JT. COMMISSIONER OF INCOME TAX RANGE 1(3), AAYAKAR BHAVAN 101, M.K. ROAD, MUMBAI 400 020 .... / RESPONDENT ./ PERMANENT ACCOUNT NUMBER AAACT4179N . / ITA NO. 5707 /MUM./ 2008 ( / ASSESSMENT YEAR : 2003 04 ) ASSTT. COMMISSIONER OF INCOME TAX RANGE 1(3), AAYAKAR BHAVAN 101, M.K. ROAD, MUMBAI 400 020 .. / APP ELLANT V/S THE WEST COAST P APER MILLS LTD. SHREENIWAS HOUSE HAZARIMAL SOMANI MARG FORT, MUMBAI 400 001 .... / RESPONDENT ./ PERMANENT ACCOUNT NUMBER AAACT4179N . / ITA NO. 5270 /MUM./ 2008 ( / ASSESSMENT YEAR : 2004 05 ) T HE WEST COAST PAPER MILLS LTD. SHREENIWAS HOUSE HAZARIMAL SOMANI MARG FORT, MUMBAI 400 001 .. / APP ELLANT V/S ADDL. COMMISSIONER OF INCOME TAX RANGE 1(3), AAYAKAR BHAVAN 101, M.K. ROAD, MUMBAI 400 020 .... / RESPONDENT ./ PERMANENT ACCOUNT NUMBER AAACT4179N THE WEST COAST PAPER MILLS LTD. 3 . / ITA NO. 5708 /MUM./ 2008 ( / ASSESSMENT YEAR : 2004 05 ) ASSTT. COMMISSIONER OF INCOME TAX RANGE 1(3), AAYAKAR BHAVAN 101, M.K. ROAD, MUMBAI 400 020 .. / APP ELLANT V/S THE WEST COAST PAPER MILLS LTD. SHREENIWAS HOUSE HAZARIMAL SOMANI MARG FORT, MUMBAI 400 001 .... / RESPONDENT ./ PERMANENT ACCOUNT NUMBER AAACT4179N . / ITA NO. 5271 /MUM./ 2008 ( / ASSESSMENT YEAR : 2005 06 ) THE WEST COAST PAPER MILLS LTD. SHREENIWAS HOUSE HAZARIMAL SOMANI MARG FORT, MUMBAI 400 001 .. / APP ELLANT V/S ADDL. COMMISSIONER OF INCOME TAX RANGE 1(3), AAYAKAR BHAVAN 101, M.K. ROAD, MUMBAI 400 020 .... / RESPONDENT ./ PERMANENT ACCOUNT NUMBER AAACT4179N . / ITA NO. 5709 /MUM./ 2008 ( / ASSESSMENT YEAR : 2005 06 ) ASSTT. COMMISSI ONER OF INCOME TAX RANGE 1(3), AAYAKAR BHAVAN 101, M.K. ROAD, MUMBAI 400 020 .. / APP ELLANT V/S THE WEST COAST PAPER MILLS LTD. SHREENIWAS HOUSE HAZARIMAL SOMANI MARG FORT, MUMBAI 400 001 .... / RE SPONDENT ./ PERMANENT ACCOUNT NUMBER AAACT4179N THE WEST COAST PAPER MILLS LTD. 4 / ASSESSEE BY : MR. VIJAY MEHTA / RE VE NUE BY : MR. K.C.P. PATNAIK / DATE OF HEARING 08.04.2014 / DATE OF ORDE R 30.05.2014 / ORDER / PER BENCH THE CROSS APPEALS FOR THE ASSESSMENT YEAR 2002 03 ARE DIRECTED AGAINST THE IMPUGNED ORDER DATED 31 ST MARCH 2006, CROSS APPEALS FOR THE ASSESSMENT YEAR 2003 04 , 2004 05 AND 2005 06 AR E DIRECTED AGAINST THE IMPUGNED ORD E R S OF EVEN DATE 12 TH JUNE 2008, PASSED BY THE LEARNED COMMISSIONER (APPEALS) XX I , MUMBAI, FOR THE QUANTUM OF ASSESSMENT PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (FOR SHORT 'THE ACT' ). 2 . SINCE ALL THESE APPE ALS PERTAIN TO THE SAME ASSESSEE INVOLVING COMMON ISSUES ARISING OUT OF IDENTICAL SET OF FACTS AND CIRCUMSTANCES, THEREFORE, AS A MATTER OF CONVENIENCE, THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY WAY OF THIS CONSOLIDATED ORDER. WE FIR ST PROCEED TO DISPOSE OFF THE ASSESSEES APPEAL IN ITA NO.3802/MUM./2006, FOR THE ASSESSMENT YEAR 2002 03. THE WEST COAST PAPER MILLS LTD. 5 3 . GROUND NO.1, READS AS UNDER: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) WAS NOT JUSTIFIED IN HOLDING THAT THE APPELLANT IS NOT ELIGIBLE F O R DEDUCTION UNDER SECTION 80IA IN RESPECT OF POWER UNIT NO.2, 3, 4 AND 5. 4 . BRIEF FACTS, QUA THE ISSUE INVOLVED ARE THAT, T HE ASSESSEE IS A PUBLIC LIMITED COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING OF PAPER AND PAPER BOARD S, OPTIC FIBER CABLES, JELLY FI L L E D CABLES, FROM ITS UNITS SITUATED AT DANDELI, UTTARA KANNADA, MYSORE, KARNATAKA. IT IS ALSO ENGAGED IN OPERATION OF WIND MILL AT TAMIL NADU. THE ASSESSEE HAS ALSO SET UP VARIOUS UNITS OF POWER GENERATION VIZ. 4 D.G. SETS O F POWER IN UNIT NO.1 IN THE ASSESSMENT YEAR 1996 97; 4 D.G. SETS OF POWER IN UNIT NO.2 IN ASSESSMENT YEAR 1997 98; 2 MULTI FUEL POWER BASED PLANT OF 3.8 MW AND 4 MW CAPACITY IN POWER UNIT NO.3 AND 4 RESPECTIVELY WHICH STARTED IN ASSESSMENT YEAR 1999 2000. ONE MORE MULTIFUEL BASED POWER PLANT OF 4.04 MW CAPACITY IN POWER UNIT NO.5 DURING THE ASSESSMENT YEAR 2000 01. ALL THESE UNITS WERE INSTALLED AT DANDELI IN THE STATE OF KARNATAKA. BESIDES THIS, IN THE ASSESSMENT YEAR UNDER CONSIDERATION I.E., ASSESSMENT Y EAR 2002 03, THE ASSESSEE HAS INSTALLED CHEMICAL RECOVERY BOILER WHICH WAS POWER UNIT NO.6. THE SAID UNIT WAS ENGAGED IN THE GENERATION OF POWER IN THE FORM OF STEAM AND ELECTRICITY. THE POWER GENERATION FROM ALL THE SIX UNITS WAS TRANSFERRED THE WEST COAST PAPER MILLS LTD. 6 AND CONSUMED MOSTLY BY THE PAPER DIVISION OF THE ASSESSEE. THE ASSESSEE HAS CLAIMED DEDUCTION UNDER SECTION 80IA IN RESPECT OF POWER UNIT NO.3 AT ` 4,69,97,342; POWER UNIT NO.4 AT ` 7,51,92,287; POWER UNIT NO.5 AT ` 6,51,73,746; POWER UNIT NO.6 AT ` 17,60,91,098. THUS, THE ENTIRE CLAIM UNDER SECTION 80IA AGGREGATED TO ` 36,34,54,473. IN RESPECT OF POWER GENERATED IN UNIT NO.1 AND UNIT NO.2, NO DEDUCTION UNDER SECTION 80IA WAS CLAIMED SINCE THERE WAS A LOSS. AS REGARDS THE CLAIM OF DEDUCTION UNDER SECTION 80IA, IN RESPEC T TO UNIT NO.1 TO 4, THE ASSESSING OFFICER FOLLOWED EARLIER YEARS ASSESSMENT ORDER FOR DENYING THE CLAIM. THE SUM AND SUBSTANCE OF THE CONCLUSION DRAWN BY THE ASSESSING OFFICER BASED ON THE EARLIER ASSESSMENTS WAS THAT; (I) THESE ARE CAPTIVE POWER CONSUMP TION UNITS, HENCE, NOT ENTITLED FOR DEDUCTION UNDER SECTION 80IA; (II) IN UNITS NO.2, 3 AND 4, THE ASSETS WERE TAKEN ON LEASE FROM IFCI, THEREFORE, IT IS NOT THE OWNER OF THE ASSET AND, CONSEQUENTLY, NO CLAIM OF DEDUCTION UNDER SECTION 80IA CAN BE ALLOWED; (III) REGARDING POWER UNITS NO.3, 4 AND 5, THE ASSESSEE CANNOT CLAIM DEDUCTION UNDER SECTION 80IA SINCE THE CONTRACT FOR THE OPERATION AND MAINTENANCE SERVICES WERE GIVEN TO POWERICA AND WARTSILA; AND IT WAS NOT RUN BY THE ASSESSEE; AND (IV) THE ASSESSEE HAS NOT MAINTAINED SEPARATE BOOKS OF ACCOUNT FOR INDIVIDUAL UNITS. THE WEST COAST PAPER MILLS LTD. 7 5 . THE LEARNED COMMISSIONER (APPEALS), FOLLOWING THE EARLIER YEAR ORDER OF THE LEARNED COMMISSIONER (APPEALS) FOR THE ASSESSMENT YEAR 2001 02, DECIDED THE ISSUE OF CLAIM OF DEDUCTION UNDER SE CTION 80IA, WHEREIN ONLY RELIEF FOR CLAIM OF DEDUCTION UNDER SECTION 80IA WAS GIVEN WITH RE SPECT TO UNIT NO.1, ONLY AND FOR OTHER UNITS, IT WAS DENIED. 6 . BEFORE US, THE LEARNED COUNSEL, MR. VIJAY MEHTA, ON BEHALF OF THE ASSESSEE, SUBMITTED THAT RIGHT FROM T HE ASSESSMENT YEAR 1997 98 TO 2001 02, THE TRIBUNAL, IN ASSESSEES OWN CASE, HAVE DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE WHEREIN THE CLAIM FOR DEDUCTION UNDER SECTION 80IA, IN RESPECT OF THE POWER UNITS NO.1 TO 5, HAVE BEEN RESPECTIVELY ALLOWED. THE COMPILATION OF THE TRIBUNAL DECISIONS HAS BEEN PLACED IN THE PAPER BOOK FROM PAGE 567 TO 607. HE POINTED OUT THAT IN THE TRIBUNAL ORDER DATED 31 ST JANUARY 2007, FOR THE ASSESSMENT YEAR 2001 02 IN ITA NO.8275/MUM./2005 , THIS CLAIM FOR DEDUCTION NU/S 80IA , H AS BEEN CONSIDERED IN RESPECT OF ALL THE UNITS INCLUDING UNIT NO.5, WHICH WAS INSTALLED IN THE ASSESSMENT YEAR 2001 02. 7 . THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, ADMITTED THAT INSOFAR AS THE CLAIM FOR DEDUCTION UNDER SECTION 80IA FOR UNI T NO.1 TO 5 IS CONCERNED, THE SAME ARE COVERED BY THE DECISION OF THE EARLIER YEARS OF THE TRIBUNAL, HOWEVER, HE REITERATED THE FINDING AND THE CONCLUSION DRAWN BY THE ASSESSING OFFICER IN THE ASSESSMENT THE WEST COAST PAPER MILLS LTD. 8 ORDER I.E., THESE ASSETS WERE TAKEN ON LEASE AND WE RE OUT SOURCED TO DIFFERENT AGENCY AND NO SEPARATE BOOKS OF ACCOUNT WERE MAINTAINED IN RESPECT OF THESE UNITS. THEREFORE, THE CLAIM HAS RIGHTLY BEEN DENIED BY THE ASSESSING OFFICER AS WELL AS LEARNED COMMISSIONER (APPEALS). 8 . WE HAVE CONSIDERED THE RIVAL CO NTENTIONS, PERUSED THE RELEVANT FINDINGS OF THE AUTHORITIES BELOW AND THE TRIBUNAL DECISIONS OF EARLIER YEARS. AS REGARDS THE CLAIM OF DEDUCTION FOR UNIT S NO.2, 3, 4 AND 5 ARE CONCERNED, WE FIND THAT THE SAME IS SQUARELY COVERED BY THE DECISION OF THE TRIB UNAL RENDERED IN ASSESSEES OWN CASE RIGHT FROM THE ASSESSMENT YEAR 1997 98 TO 2001 02 RESPECTIVELY . IN THIS YEAR, THE CLAIM FOR DEDUCTION IS MAINLY WITH REGARD TO UNIT NO.3, 4 AND 5 WHICH HAS ALREADY BEEN CONSIDERED BY THE TRIBUNAL ON SIMILAR SET OF FACTS AND SIMILAR REASONS GIVEN BY THE ASSESSING OFFICER AND THE LEARNED COMMISSIONER (APPEALS) IN THE EARLIER YEARS. FOR THE SAKE OF READY REFERENCE, THE RELEVANT FINDINGS OF THE TRIBUNAL, WHICH IN TURN IS BASED ON THE EARLIER ORDER OF THE TRIBUNAL, IS REPRODU CED HEREIN BELOW: 3 . WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND FIND THAT THE ISSUE HAS BEEN ELABORATELY DISCUSSED IN PARA 6 OF THE TRIBUNAL ORDER FOR THE ASSESSMENT YEAR 1999 2000, WHICH FOR THE SAKE OF COMPLETENESS IS REPRODUCED BELOW: 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSION AND HAVE GONE THROUGH RECORDS INCLUDING THE VOLUMINOUS PAPER BOOK FILED BY THE ASSESSEE. THE ASSESSEE ALTHOUGH ENGAGED IN THE MANUFACTURE AND THE WEST COAST PAPER MILLS LTD. 9 SALE OF PAPER AND PAPERBOARDS, MULTI LAYER BOARDS, ETC., WAS ALSO INTO T HE BUSINESS OF POWER GENERATION RIGHT FROM THE ASSESSMENT YEAR 1996 97. THE FINDINGS IN THE IMPUGNED ORDER ARE CLEARLY UNASSAILABLE. THE ASSESSEE HAS FROM TIME TO TIME RIGHT FROM THE ASSESSMENT YEAR 1996 97 SET UP FOUR SUCH UNITS TO FACILITATE ITS POWER RE QUIREMENT IN THE PAPER PLANT AT DANDELI IN KARNATAKA STATE. THE ASSESSEE, AS THE RECORDS SHOW, MADE SUBSTANTIAL CAPITAL OUTLAYS FOR THIS P0URPOSE. THIS ONLY CONFIRMS THAT ASSESSEE WAS IN THE BUSINESS OF GENERATION OF POWER. HNOW THE QUESTION IS WHETHER THE ASSESSEES CLAIM FOR DEDUCTION UNDER SECTION 80IA OF THE ACT COULD BE DENIED MERELY O NTHE GROUND THAT THESE D.G. UNITS WERE CATERING TO THE CAPTIVE POWER REQUIREMENT. AS THE ASSESSING OFFICER PUT IT IF THE ASSESSEE HAS NOT REALIZED ANY REVENUE BY SELLING THE POWER TO OUTSIDERS, CAN THE ASSESSEE BE HELD TO BE ENTITLED FOR DEDUCTION UNDER SECTION 80IA OF THE ACT? THE ASSESSING OFFICER WAS OF THE VIEW THAT IT IS ONLY AN INTER DIVISION TRANSFER AND THERE WAS NO REVENUE REALIZED BY IT AND CONSEQUENTLY THERE WA S NO DERIVATION OF PROFIT OR INCOME IN THE BUSINESS OF INDUSTRIAL UNDERTAKING. THE QUESTIONS RAISED BY THE ASSESSING OFFICER HAVE ALL BEEN ANSWERED BY THE SUPREME COURT IN THE CASE OF ORIENT PAPER MILLS LTD., 176 ITR 110. THIS DECISION OF THE SUPREME COURT DOES NOT BRING OUT THE FACTS. IT HAS ONLY AFFIRMED THE DECISION OF THE CALCUTTA HIGH COURT IN CIT V/S ORIENT PAPER MILLS LTD., 94 ITR 73. THE FACTS COULD ONLY BE FOUND IN THE JUDGMENT OF THE CALCUTTA HIGH COURT. THE ASSESSEE IN THAT CASE OWNED A PAPER MIL L. IT SET UP A PLAT FOR THE MANUFACTURE OF CAUSTIC SODA, AN ESSENTIAL CHEMICAL FOR USE IN THE PROCESS OF MANUFACTURE OF PAPER. THE ASSESSEE OBTAINED A SEPARATE LICENSE FOR THE MANUFACTURE OF CAUSTIC SODA AND THE PLANT WAS HOUSED IN A SEPARATE BUILDING. THE INCOME TAX OFFICERS IN THAT CASE HELD THAT THE CAUSTIC SODA PLANT WAS ANCILIARY TO THE MAIN MANUFACTURING UNIT AND NO PART OF CAUSTIC SOLD WAS SOLD TO ANY OUTSIDER AND, THEREFORE, NO RELIEF COULD BE CLAIMED BY THE ASSESSEE UNDER SECTION 15C OF THE 1922 AC T. THE MATERIAL PRODUCED IN THE PLANT WAS USED FOR CAPTIVE CONSUMPTION. BEFORE THE TRIBUNAL, IT WAS CONTENDED BY THE REVENUE THAT THE LANGUAGE USED IN SECTION 15C WAS PROFIT AND GAIN DERIVED THE WEST COAST PAPER MILLS LTD. 10 FROM AN INDUSTRIAL UNDERTAKING. UNLESS THE PROFITS AROSE BY THE SALE OF THE PRODUCT OF THE NEW PLANT, NO PROFIT COULD BE SAID TO HAVE BEEN DERIVED. THE ARGUMENT WAS THAT PROFIT SHOULD BE DIRECTLY DERIVED AND NOT INDIRECTLY OR DEEMED TO BE DERIVED. THE TRIBUNAL DID NOT ACCEPT THESE SUBMISSIONS OF THE REVENUE AND PROCEE DED TO GRANT THE RELIEF. THE HON'BLE CALCUTTA HIGH COURT CONFIRMED THE ORDER OF THE TRIBUNAL AND THE APEX COURT HAS DISMISSED THE APPEAL OF THE REVENUE BY TAKING SUPPORT FROM ITS OWN DECISION IN TEXTILE MACHINERY CORPORATION LTD. V/S CIT, 107 ITR 195 AND C IT V/S INDIAN ALUMINIUM COMPANY LTD. V/S CIT, 107 ITR 195 AND CIT V/S INDIAN ALUMINIUM COMPANY LTD., 108 ITR 367. THEREFORE, THE STAND OF THE ASSESSING OFFICER CANNOT BE ACCEPTED. AGAIN THE CALCUTTA HIGH COURT WAS FACED WITH THE SAME SET OF FACTS IN THE CA SE OF CIT V/S HINDUSTAN MOTORS LTD., 127 ITR 210. THE ASSESSEE IN THAT CASE WAS ENGAGED INT EH MANUFACTURING OF MOTOR CARS. IT ESTABLISHED CERTAIN ANCILLARY UNITS. THE ASSESSING OFFICER REPEATED HIS FINDINGS ON THE SAME LINE AS HE DID IN THE CASE OF ORIENT PAPER MILLS LTD. (SUPRA) AND DENIED THE RELIEF UNDER SECTION 80E OF THE 1961 ACT. THE CALCUTTA HIGH COURT HELD THAT ASSESSEE IS ENTITLED TO SUCH RELIEF IRRESPECTIVE OF WHETHER THE ANCILLARIES MANUFACTURED WERE SOLD BY THE ASSESSEE TO OUTSIDERS OR WERE USE D BY ITS FOR ITS OWN MANUFACTURER OF CARS. SIMILARLY, THE BOMBAY HIGH COURT IN CIT V/S SAHNEY STEEL AND PRESS WORKS LTD., 117 ITR 354, THE ASSESSING OFFICER DENIED SIMILAR CLAIM UNDER SECTION 80J OF THE ACT ON THE GROUND THAT THE NEW UNIT WAS MANUFACTURING ARTICLES TO BE USED AS RAW MATERIAL FOR THE EXISTING BUSINESS OF THE ASSESSEE. THE BOMBAY HIGH COURT HELD THAT THE NEW UNIT MANUFACTURED ARTICLES USED IN THE EXISTING BUSINESS OF THE ASSESSEE WAS NOT RELEVANT AND THE ASSESSEE WAS HELD TO BE ENTITLED FOR R ELIED UNDER SECTION 80J OF THE ACT. IN THE LIGHT OF THESE DECISIONS, WE ARE OF THE OPINION THAT THE CLAIM OF THE ASSESSEE CANNOT BE DENIED ONLY ON THE GROUND THAT THE DG SET MANUFACTURED THE POWER ONLY FOR THE CAPTIVE CONSUMPTION OF THE ASSESSEE. IT MAY BE STATED THAT THE TRIBUNAL IN THE ASSESSMENT YEAR 1997 98 AND 1998 99 HAS ALREADY GRANTED RELIEF IN RESPECT OF UNIT NO. I AND II WHICH WERE ESTABLISHED THE WEST COAST PAPER MILLS LTD. 11 FOR THE PURPOSE CAPTIVE CONSUMPTION. MOREOVER, THE PROVISION OF SECTION 80IA(8) ITSELF SAYS THAT WHERE ANY GOODS OR SERVICES OF THE ELIGIBLE BUSINESS ARE TRANSFERRED TO ANY OTHER BUSINESS CARRIED ON BY THE ASSESSEE AND THE CONSIDERATION, IF ANY, FOR SUCH TRANSFER IS RECORDED IN THE ACCOUNTS OF THE ELIGIBLE BUSINESS DOES NOT CORRESPOND TO THE MARKET VALUE OF SU CH GOODS OR SERVICES AS ON THE PROFIT AND GAIN FOR SUCH TRANSFERRED BUSINESS SHALL BE COMPUTED AS IF THE TRANSFER HAS BEEN MADE AT MARKET VALUE AS ON THAT DATE. IN OTHER WORDS, THE PROVISIONS OF SECTION 80IA THEMSELVES PROVIDE AN ANSWER AND GIVE A SOLUTION WHERE THERE IS A CAPTIVE CONSUMPTION FO THE FINISHED GOODS OF THE ELIGIBLE UNITS. IN THE LIGHT OF THESE DISCUSSION, THE ORDER OF THE LEARNED CIT(A) GRANTING 80IA RELIEF IN RESPECT OF DG UNITS I, II, III AND IV CANNOT BE FOUND FAULT WITH. THE OTHER CONSIDE RATION THAT THE ASSESSEE HAS NOT OPERATED THESE UNITS BY ITSELF BUT GOT THEM OPERATED THROUGH OUTSIDERS AND, THEREFORE, THE ASSESSEE IS NOT ENTITLED FOR 80IA RELIEF IN OUR VIEW, IS NOT A RIGHT APPROACH. SUCH CONSIDERATION IN OUR OPINION, IS NOT A RELEVANT CONSIDERATION. KEEPING IN VIEW THE PURPOSE AND INTENT OF RELIEF UNDER SECTION 80IA, SUCH CONSIDERATION IN OUR OPINION IS NOT GERMANE FROM THE PROVISION OF SECTION 80IA OF THE ACT. IN THE LIGHT OF THE ABOVE, DISALLOWING THE ASSESSEES CLAIM FOR DEDUCTION U NDER SECTION 80IA ON THE GROUND MADE OUT BY THE REVENUE CANNOT STAND. THE ASSESSING OFFICER IS DIRECTED ACCORDINGLY. 9 . THUS, THERE BEING NO DEVIATION OF FACTS AND MATERIAL ON RECORD WE, THEREFORE, RESPECTFULLY FOLLOWING THE EARLIER YEARS PRECEDENCE, HOLD THAT THE CLAIM FOR DEDUCTION UNDER SECTION 80IA WITH RESPECT TO POWER UNITS NO.2, 3, 4 AND 5 WILL CONTINUE TO BE ALLOWABLE AS DEDUCTION. THUS, GROUND NO.1 RAISED BY THE ASSESSEE IS ALLOWED. 10 . GROUND NO.2, 3 AND 4 READ AS UNDER: THE WEST COAST PAPER MILLS LTD. 12 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(AS) WAS NOT JUSTIFIED IN HOLDING THAT POWER UNITS 2 TO 5 ARE MERE EXPANSION OF THE EXISTING POWER UNIT. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND WITHOUT PREJUDICE TO GROUNDS TAKEN HERE IN A BOVE, HAVING HELD IN THE APPELLATE ORDER OF THE AY. 2000 - 01 THAT POWER UNIT NOS. 2 TO 5 ONLY INCREASED THE GENERATING CAPACITY OF POWER UNIT 1 , THE CIT( A ) WAS NOT JUSTIFIED IN TAKING THE VIEW THAT IN THE APPELLATE ORDER FOR THE A.Y 2000 - 01 THERE IS NO FIND ING THAT POWER UNIT 2 TO 5 ARE EXPANSION OF UNIT NO.1. 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND WITHOUT PREJUDICE TO GROUNDS TAKEN HERE IN ABOVE, HAVING HELD THAT POWER UNITS NO.2, 3, 4, 5 ARE MERE EXPANSION OF THE EXISTING POWER UNI T NO.1, THE LD. CIT (A) SHOULD HAVE HELD THAT DEDUCTION UL S .80 IA SHOULD BE ALLOWED IN RESPECT OF POWER UNIT 1 ON THE BASIS OF EXPANDED CAPACITY BY TREATING POWER UNIT NO.1 TO 5 AS ONE UNIT. 11 . THESE GROUNDS RELATE TO VARIOUS ALTERNATE CONTENTIONS AND GROU NDS FOR THE CLAIM OF DEDUCTION UNDER SECTION 80I A IN RESPECT OF UNIT NO.2 TO 5 . SINCE THE CLAIM HAS ALREADY BEEN ALLOWED VIDE GROUND NO.1, THEREFORE, THESE GROUNDS ARE DISMISSED AS INFRUCTUOUS. 12 . GROUND NO.5, READS AS UNDER: 5. THAT ON THE FACTS AND IN TH E CIRCUMSTANCES OF THE CASE, THE LD. CIT(APPEALS) WAS NOT JUSTIFIED IN DENYING THE ALTERNATE CLAIM OF THE APPELLANT FOR DEDUCTION UL S 8O - LA IN RESPECT OF PROFIT OF THE NEW CHEMICAL RECOVERY BOILER, AS A STAND ALONE POWER GENERATING UNDERTAKING. 13 . IN THIS GROUND, THE ASSESSEE HAS MADE AN ALTERNATIVE CLAIM FOR DEDUCTION UNDER SECTION 80IA, IN RESPECT OF UNIT 6, WHICH IS ON ACCOUNT OF PROFIT FROM NEW CHEMICAL RECOVERY BOILER. THE WEST COAST PAPER MILLS LTD. 13 14 . AS STATED ABOVE, THE POWER UNIT 6, WAS SET UP DURING THE PREVIOUS YEAR RELEVANT TO T HE ASSESSMENT YEAR 2002 03, WHEREIN NEW CHEMICAL RECOVERY BOILER WAS INSTALLED WITH A COST OF AROUND ` 23.80 CRORES, WHICH WAS ACQUIRED BY WAY OF LEASE FINANCE FROM ICICI LTD. IT WAS COMMISSIONED ON 14 TH JULY 2001. THE SAID POWER UNIT REQUIRED INSTALLATION OF TURBINES AND FURTHER CAPACITY EXPANSION AND STEAM GENERATION. IN THE REVISED RETURN OF INCOME FILED ON 31 ST MARCH 2004, THE ASSESSEE REVISED ITS CLAIM FOR DEDUCTION NU/S 80IA APART FROM ITS ORIGINAL CLAIM UNDER SECTION 80JJA, IN RESPECT OF POWER UNIT 6 BY WAY OF NOTE WHICH READS AS UNDER: 1. THE ASSESSEE CLAIMED THAT THE CHEMICAL RECOVERY BOILER, WHICH IS ITSELF AN INDEPENDENT UNDERTAKING, IS ENGAGED IN GENERATION OF POWER (IN THE FORM OF STEAM) BY PROCESSING BIODEGRADABLE WASTE (WOOD RESIDUE) AND I S ELIGIBLE FOR DEDUCTION 80JJA. THIS CLAIM OF THE ASSESSEE WAS FINALLY QUANTIFIED VIDE ITS LETTER DATED 30 TH DECEMBER 2004 SUBMITTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 2. IN CASE THE DEDUCTION NU/S 80JJA IS NOT ALLOWED, THE ASSESSEE PREFERRED A N ALTERNATE CLAIM FOR DEDUCTION OF THE PROFITS OF THE NEW CHEMICAL RECOVERY BOILER U/S 80IA, AND ACCORDING TO THE ASSESSEE, THE AFORESAID CHEMICAL RECOVERY BOILER IS ITSELF ELIGIBLE FOR DEDUCTION NAS A NEW UNIT GENERATING POWER IN THE FORM OF STEAM U/S 80I A. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE THE WEST COAST PAPER MILLS LTD. 14 QUANTIFIED THE ALTERNATE CLAIM OF DEDUCTION U/S 80IA VIDE LETTER DATED 30 TH DECEMBER 2004. 3. IN CASE THE ALTERNATIVE CLAIM AS ABOVE WAS ALSO NOT ALLOWED, THE ASSESSEE REITERATED THAT THE INTEG RATED POWER UNIT NO.6 IN ANY CASE IS AN ELIGIBLE UNIT, AS CLAIMED IN THE ORIGINAL RETURN, AND SUCH CLAIM SHOULD BE CONSIDERED. TOWARDS THIS A FRESH AUDITORS REPORT WAS FILED UNDER COVER OF LETTER DATED 30 TH DECEMBER 2004 . 15 . THE ASSESSING OFFICER DISALLOWED THE CLAIM OF DEDUCTION ON THE SAME REASONING AS WAS GIVEN FOR DISALLOWING THE CLAIM WITH REGARD TO UNIT 1 TO 5. THE RELEVANT OBSERVATIONS AND THE FINDING OF THE ASSESSING OFFICER ARE REPRODUCED FROM PAGE 16 TO 18 OF THE ASSESSMENT ORDER. THE SUM AND SUBST ANCE FOR DENYING THE CLAIM WITH REGARD TO THIS UNIT ALSO WAS THAT EVEN THOUGH IT IS A NEW UNIT FOR GENERATION OF POWER, BUT IT IS A LEASED ASSET WHICH CANNOT BE SAID TO BE OWNED BY THE ASSESSEE AS HELD BY THE ASSESSING OFFICER IN THE EARLIER YEARS. 16 . BEFORE THE LEARNED COMMISSIONER (APPEALS), DETAIL SUBMISSIONS WERE MADE BY T HE ASSESSEE IN RESPECT OF POWER UNIT 6, WHEREBY, IT WAS SUBMITTED THAT IT HAD MADE THE CLAIM FOR DEDUCTION UNDER SECTION 80JJA AND ONLY BY WAY OF ALTERATIVE CLAIM , THE ASSESSEE HA D CLAIM ED THE DEDUCTION UNDER SECTION 80IA. THE CHEMICAL RECOVERY BOILER INSTALLED AT THE FACTORY WAS ALL TOGETHER THE NEW ASSET WHICH WAS TAKEN THE WEST COAST PAPER MILLS LTD. 15 ON LEASE AND , THEREAFTER, THE ASSESSEE HAS ALSO MADE SUBSTANTIAL INVESTMENT IN THE BUILDING AND IN THE PLAN T & MACHINE RY FOR THE SAID INSTALLATION. THE POWER UNIT 6 ALSO REQUIRE D INSTALLATION OF TURBINE S AND FURTHER CAPACITY EXPANSION IN STEAM GENERATION. THIS NEW POWER UNIT WAS SET UP IN A PHASED MANNER WHICH IS EVIDENT FROM A SCHEDULE OF FIXED ASSETS FOR THE FINANCIAL Y EAR 2003 04. THE COST OF SAID ASSET INCLUDED FBC II BOILER , WHICH HAD A COST OF ` 4,24,88,919; TRIVENI II TURBINE AT A COST OF ` 20,64,04,519; AS WELL AS INVESTMENT IN BUILDING AT ` 1,23,66,706. FURTHER, THE ASSESSEE HAS NOT GIVEN ANY CONTRACT FOR OPERATIO N AND MAINTENANCE OF CHEMICAL RECOVERY BOILER TO AN OUTSIDER AGENCY. AS A STAND ALONE POWER GENERATING UNDERTAKING, THE ASSESSEE HAD CLAIMED DEDUCTION UNDER SECTION 80IA IN UNIT 6, IN RESPECT OF THE PROFITS OF NEW CHEMICAL RECOVERY BOILER BECAUSE IT WAS A SEPARATE UNDERTAKING FOR GENERATION AND DISTRIBUTION OF POWER. THE INCOME SHOWN FROM THIS UNIT WAS AT A REALIZABLE VALUE OF STEAM OF ` 20,34,28,080. THE ASSESSEE ALSO SUBMITTED THAT SECTION 80JJA AND 80IA USED THE TERM POWER AND NOT ANY SPECIFIC FORM OF POWER . THE POWER IMPLIES SOURCE OF ENERGY AND IT CANNOT BE EQUATED WITH ELECTRICITY ALONE. IN SUPPORT OF THIS CONTENTION, STRONG RELIANCE WAS PLACED ON THE DECISION OF THE TRIBUNAL IN SIAL SBEC BIO ENERGY LTD. V/S DCIT, [2004] 83 TTJ (DEL.) 866. THE LE ARNED COMMISSIONER (APPEALS), HOWEVER, DID NOT AGREE WITH THE ASSESSEES CONTENTION AND HELD THAT THE WEST COAST PAPER MILLS LTD. 16 POWER CANNOT IMPLY SOURCES OF ENERGY BUT ONLY TO ELECTRICITY POWER AS CONTEMPLATED IN SECTION 80IA(4). HE ALSO DISTINGUISHED THE DECISION OF SIAL SBEC BIO ENE RGY LTD. (SUPRA). HIS DETAIL OBSERVATION AND THE CONCLUSION HAVE BEEN GIVEN IN PARA 10 TO 22 OF THE APPELLATE ORDER. 17 . BEFORE US, THE LEARNED COUNSEL, MR. VIJAY MEHTA, ON BEHALF OF THE ASSESSEE, SUBMITTED THAT THE LANGUAGE USED IN SECTION 80IA(4), EXPLANATI ON (IV)(A) IS GENERATION OR GENERATION OF POWER . THE SAID SECTION DOES NOT USE THE WORD ELECTRICITY . THIS PRECISE ISSUE HAS ALSO COME UP FOR CONSIDERATION BEFORE THE TRIBUNAL IN THE FOLLOWING DECISIONS: I ) SIAL SBEC BIO ENERGY V/S DCIT, 83 TTJ (DEL.) 866; II ) DCIT V/S MAHARAJA SHREE UMAID MILLS LTD. AND III ) DCW V/S ACIT, 132 TTJ 442. 18 . HE SUBMITTED THAT IN THESE DECISIONS, SPECIFICALLY IN THE DECISION OF SIAL SBEC BIO ENERGY LTD. (SUPRA), AND ALSO IN THE DECISION AT SR. NO.(II), THE TRIBUNAL HAS ANALYSED VARIOU S DICTIONARY MEANING AND ALSO THE DECISIONS OF THE HON'BLE SUPREME COURT AND HIGH COURT TO COME TO A CONCLUSION THAT IT IS NOT ONLY THE ELECTRICAL FORM OF ENERGY WHICH QUALIFIES FOR DEDUCTION UNDER SECTION 80IA BUT ANY OTHER FORM OF POWER WHICH IS GENERATE D FOR MECHANICAL PURPOSE ALSO. HE FURTHER SUBMITTED THAT THE DEDUCTION UNDER SECTION 80IA IS AVAILABLE IF THE ASSESSEE THE WEST COAST PAPER MILLS LTD. 17 BEGINS TO GENERATE POWER AT ANY TIME DURING THE PERIOD PRESCRIBED UNDER THE STATUTE. IN THIS CASE, THE ASSESSEE HAD STARTED GENERATION OF POWER FROM ITS UNIT NO.6. IN SUPPORT OF THIS CONTENTION, HE ALSO FILED CERTIFICATE FROM KARNATAKA STATE BOILER INSPECTION DEPARTMENT FOR THE USE OF BOILER BETWEEN THE PERIOD FROM 23 RD MAY 2001 AND 26 TH MAY 2002, MOST OF WHICH IS FALLING IN THE ASSESSMENT YEAR 2002 03 ONLY. HE ALSO REFERRED TO THE VARIOUS DICTIONARY MEANING FOR THE WORD POWER TO DEMONSTRATE THAT POWER HAS A REFERENCE TO ENERGY WHICH COULD BE MECHANICAL, ELECTRICAL, THERMAL, ETC., AND CANNOT BE CONFINED TO THE ELECTRICITY PER SE. IN THE PR ESENT CASE, THE BOILER GENERATION STEAM IS NOTHING BUT GENERATION OF POWER AND, THEREFORE, THE ASSESSEE IS ELIGIBLE FOR CLAIMING DEDUCTION UNDER SECTION 80IA. EXPLAINING THE PROCESS, HE SUBMITTED THAT WOOD CHIPS USED IN PULPING ARE COOKED IN THE DIGESTER B Y ADDITION OF CHEMICALS. THESE CHEMICALS ARE RECOVERED BY CHEMICAL RECOVERY BOILER AND IN THE PROCESS WOOD LIGNIN AND CELLULOSE, WHICH IS BIODEGRADABLE WASTE, IS BURNT AND HIGH PRESSURE STEAM IS GENERATED. THIS HIGH PRESSURE STEAM IS USED FOR THE PURPOSE O F ROTATING THE TURBINES. THE LOW PRESSURE AND MEDIUM PRESSURE STEAM IS USED FOR DRYING THE PULP IN THE PAPER MANUFACTURING ACTIVITY, WHEREAS HIGH PRESSURE STEAM WHICH IS USED FOR ROTATION OF TURBINE, ELECTRICITY IS GENERATED. THIS ELECTRICITY GENERATED IS USED IN PAPER THE WEST COAST PAPER MILLS LTD. 18 MANUFACTURI NG ACTIVITY. THUS, IT IS A FULL FLEDGED GENERATION OF POWER ONLY. 19 . THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, SUBMITTED THAT THE ASSESSEE IS ONLY GENERATING STEAM WHICH IS ONLY A MEDIUM AND SOURCE OF ENERGY AND NOT POWER PER SE. HE STRONGLY RELIED UPON THE REASONING AND FINDINGS GIVEN BY THE LEARNED COMMISSIONER (APPEALS). 20 . WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE FINDINGS OF THE AUTHORITIES BELOW AS WELL AS THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEES C LAIM UNDER SECTION 80IA, WITH REGARD TO UNIT NO.6 IS THAT IT HAS INSTALLED A POWER UNIT IN THE FORM OF CHEMICAL RECOVERY BOILER FOR THE GENERATION OF STEAM. THIS STEAM IS USED FIRSTLY, TO ROTATE THE TURBINE WHICH GENERATES ELECTRICAL POWER FOR THE ASSESSEE WHICH IS USED IN THE PAPER MANUFACTURING PROCESS AND SECONDLY, FOR DRYING OF THE PULP. FOR THE FIRST USE, T HE STEAM SO GENERATED BY THE CHEMICAL RECOVERY BOILER HAS A HIGH TEMPERATURE AND PRESSURE WHICH IS THEN TRANSFERRED THROUGH THE INLET TO RUN THE TUR BINE S . THIS TRANSFORMS TO ELECTRICAL ENERGY WHICH IS SUPPLIED TO PAPER DIVISION FOR RUNNING OF THE MACHINE S . THE SECOND USE OF STEAM IS INDEPENDENTLY USING IT FOR EVAPORATING THE MOISTURE FROM THE PAPER PRODUCT OR FOR DRYING PULP BY THE ASSESSEE. ON THESE FACTS, WHETHER IT CAN BE HELD THAT THE SAID THE WEST COAST PAPER MILLS LTD. 19 UNDERTAKING ON A STANDALONE BASIS HAS BEEN SET UP FOR GENERATION OF POWER OR NOT WITHIN THE MEANING OF SECTION 80IA(4)(IV) . THE RELEVANT CLAUSE (IV)(A) OF SECTION 80IA(4), READS AS UNDER: (A) SET UP IN ANY PAR T OF INDIA FOR THE GENERATION AND DISTRIBUTION OF POWER IF IT BEGINS TO GENERATE POWER AT ANY TIME DURING THE PERIOD BEGINNING ON FIRST DAY OF APRIL 1993 AND ENDING ON 31 ST DAY OF MARCH 2006. 21 . THUS, THE STATUTE CONTEMPLATES GENERATION OF POWER OR GENER ATION AND DISTRIBUTION OF POWER . THE MOOT QUESTION BEFORE US IS, WHETHER THE STEAM GENERATED BY THE ASSESSEE , WHICH ROTATES THE TURBINE FOR RUNNING OF MACHINES USED FOR ITS MANUFACTURING PROCESS AND ALSO STEAM ALONE, IS A FORM OF POWER OR NOT. THE CASE OF THE LEARNED COMMISSIONER (APPEALS) IS THAT THE MEANING OF POWER AS CONTEMPLATED IN THE STATUTE IS GENERATION OF ELECTRICITY ALONE, WHEREAS THE CASE OF THE LEARNED COUNSEL BEFORE US IS THAT THE POWER IS A FORM OF ENERGY WHICH CAN BE ELECTRICAL, MECHANICAL, THERMAL OR ANY OTHER FORM OF ENERGY. THE INCOME TAX ACT, 1961, DOES NOT DEFINE THE WORD POWER . THE NEW OXFORD DICTIONARY OF ENGLISH DEFINES THE WORD POWER AS ENERGY THAT IS PRODUCED BY MECHANICAL, ELECTRICAL OR OTHER MEANS WHICH IS USED FOR OPERATIN G DEVI CE . OTHERWISE ALSO, GENERATION OF STEAM IS A KIND OF ENERGY WHICH CAN BE CONVERTED INTO MECHANICAL OR ELECTRICAL ENERGY FROM WHICH POWER IS GENERATED. TO SAY THAT THE GENERATION OF POWER IS THE WEST COAST PAPER MILLS LTD. 20 ONLY RESTRICTED TO GENERATION OF ELECTRICITY ALONE , IS TOO N ARROW A VIEW. THE TERM P OWER ENCOMPASSES A WHOLE RANGE OF ENERGY GENERATED IN VARIOUS FORMS TO RUN MACHINES, DEVICES, ETC . THIS PRECISE ISSUE HAD ALSO COME UP FOR CONSIDERATION BEFORE THE TRIBUNAL IN SEVERAL CASES CITED SUPRA. THE TRIBUNAL IN SIAL SBEC B IO ENERGY LTD. (SUPRA), WHILE DECIDING THE ISSUE WHETHER GENERATION OF STEAM AMOUNTS TO GENERATION OF POWER OR NOT FOR THE PURPOSE OF DEDUCTION UNDER SECTION 80IA, HAS REFERRED CATENA OF DECISIONS AND ALSO THE DICTIONARY MEANING ON THE MEANING AND TERM OF POWER AND THEREAFTER, OBSERVED AND CONCLUDED AS UNDER: THE WORD 'POWER' USED IN S. 80 - IA(LV) HAS NOT BEEN DEF IN ED IN THE STATUTE, THEN THE COMMON PARLANCE MEANING AS PER THE DICTIONARY IS NORMALLY TAKEN INT O ACCOUNT. THE WORD 'POWER' HAS TO BE GIVEN A MEANING WHICH IS IN COMMON PARLANCE AND IN COMMON PARLANCE THE WORD 'POWER' SHALL MEAN THE ENERGY ONLY. THE ENERGY CAN BE OF ANY FORM, BE IT MECHANICAL, BE IT ELECTRICAL, BE I T WIND OR BE IT THERMAL. THE STEAM PRODUCED BY THE ASSESSEE ON THE PRINCIPLE OF INTERPRETATION OF STATUTE SHALL ONLY BE TERMED AS P O WER AND SHALL QUALITY FOR TH E BENEFITS AVAILABLE UNDER S. 80 - IA(IV ). THE ASSESSEE IS INTO THE BUSINESS OF GENERATION OF POWER. THE GENERATION OF POWER TAKES PLACE WHEN BAGASSE IS BURNT IN A BOILER AND HEAT GENERATED IS USE D TO HEAT UP THE WATER IN THE BOILER AND GENERATES STEAM. THE STEAM SO GENERATE D IS AT HIGH TEMPERATURE AND PRESSURE. THIS STEAM IS THEN TRANSFERRED INTO AN INLE T OF STEAM TURBINE THROUGH PIPES. THE ENERGY AVAILABLE IN STEAM IS USED T O ROTAT E THE TURBINE, THE TURBINE THEN ROTATES THE ALTERNATAR WHICH GENERATES ELECTRICAL ENERGY. THE STEAM AFTER BEING USED TO ROTATE TURBINE IS DRAWN FR O M THE TURBINE OUTLET AND THEN FINALLY USED. IN THIS BACKGR O UND, THE STEAM SO THE WEST COAST PAPER MILLS LTD. 21 GENERATED I S GENERATED B Y THE INDUSTRIAL UNDERTAKING AND THE RECEIPT W O ULD BE THE RECEIPT FROM THE BUSINESS OF THE INDUSTRIAL UNDERTAKING WITHIN THE MEANING OF S. 80 - IA WHICH WOULD QUALIFY FOR THIS BENEFIT. THE ASSESSEE, THEREFORE, SUCCEEDS ON THI S ACCOUNT ALSO. THE 'OBSERVATION S OF THE AUTHORITIES BELOW THAT IT IS ONLY TH E ELECTRICAL FORM OF ENERGY WHICH QUALIFIES FOR DEDUCTION UNDER S. 80 - I A, WITH REFERENCE TO THE PROVISIONS OF ELECTRICITY ACT, WAS NOT CORRECT. 22 . SIMILARLY, IN THE DECISION OF DCIT V/S MAHARAJA SHRI UMED MILLS LTD., THE TRIBUNAL HELD THAT LIKE ELECTRICITY, STEAM IS ALSO A FORM OF POWER WHICH IS ELIGIBLE FOR RELIEF UNDER SECTION 80IA(4). THE RELEVANT OBSERVATION AND THE CONCLUSION DRAWN BY THE TRIBUNAL IS REPRODUCED BELOW: 5. CONSIDERING THE ABOVE SUBMISSIONS, WE FIND SUBSTANCE IN THE ARGUMENTS OF THE LEARNED AUTHORISED REPRESENTATIVE THAT LIKE ELECTRICITY, STEAM IS ALSO A FORM OF POWER AS PER THE DICTIONARY MEANING REPRODUCED BY THE LEARNED CIT(A) AT PP. 5 AND 5 (SIC) OF THE FIRST APPELLATE ORDER. WE ALSO CONC UR WITH THE VIEW OF THE LEARNED AUTHORISED REPRESENTATIVE THAT THERE IS LITTLE ROOM FOR ANY DOUBT THAT SCIENTIFICALLY OR IN GENERAL PARLANCE, 'PRODUCTION OF STEAM' AND 'GENERATION OF STEAM'; OR FOR THAT MATTER, 'PRODUCTION OF ELECTRICITY' AND 'GENERATION O F ELECTRICITY', SHALL HAVE THE SAME MEANING WHICHEVER OF THE TWO BE THE ITEM UNDER CONSIDERATION. IN THIS REGARD THE LEARNED AUTHORISED REPRESENTA - TIVE HAS ALSO REFERRED THE DEFINITION OF WORD 'GENERATE' UNDER S. 2(29) OF THE ELECTRICITY ACT, 2003 AS PER W HICH 'GENERATE' MEANS TO PRODUCE ELECTRICITY FROM A GENERATING STATION FOR THE PURPOSE OF GIVING SUPPLY TO ITS ANY PREMISES OR ENABLING A SUPPLIER TO BE SO GIVEN. THE AO HAS TRIED TO POINT OUT THE INTENTION OF THE LEGISLATURES BY REFERRING TO S. 80IA(4)(IV )(B) TO INFER THAT INTENTION IS TO PROVIDE BENEFIT TO THE GENERATION OF ELECTRICITY ONLY, SINCE IN THE SUB - CL. (B) TRANSMISSION AND DISTRIBUTION LINES ARE MENTIONED WHICH CAN BE OF ELECTRICITY ONLY. SUBMISSION OF THE LEARNED AUTHORISED REPRESENTATIVE IN TH IS REGARD TO WHICH WE ALSO AGREE REMAINED THAT SUB - CLS. (A), (B) AND (C) OF S. 80IA(4)(IV) PROVIDE FOR DEDUCTION IN THE CASES OF THREE TYPES OF UNDERTAKING VIZ. THE ONE WHICH IS ENGAGED IN GENERATION OR THE WEST COAST PAPER MILLS LTD. 22 GENERATION AND DISTRIBUTION OF POWER; SECOND, WHICH S TART TRANSMISSION OR DISTRIBUTION LINES; AND THE THIRD, WHICH UNDERTAKES SUBSTANTIAL RENOVATION AND MODERNIZATION OF THE EXISTING NETWORK OF TRANSMISSION OR DISTRIBUTION LINES. ALL THESE THREE CLAUSES DEAL WITH THE THREE DIFFERENT CATEGORIES OF THE UNDERTA KING. THESE THREE TYPES OF UNDERTAKINGS REFERRED TO IN THE SAID SUB - CLS. (A), (B) AND (C) ARE DIFFERENT AND INDEPENDENT OF EACH OTHER. THUS WHILE DEALING (WITH) ONE SUB - CLAUSE, INFERENCE NEED NOT AND CANNOT BE DRAWN FROM THE OTHER SUB - CLAUSE. ON PERUSAL OF THESE PROVISIONS, WE AGREE WITH THE PLEA OF THE LEARNED AUTHORISED REPRESENTATIVE THAT CASE OF THE ASSESSEE FALLS IN SUB - CL. (A) ITSELF AND THE LEGISLATIVE INTENT INFERRED BY THE AO WITH REFERENCE TO SUB - CL. (B) IS SUPERFLUOUS, JUST LIKE THERE IS TRANSMIS SION OR DISTRIBUTION LINES FOR ELECTRICITY THERE ARE TRANSMISSION AND DISTRIBUTION LINES FOR STEAM TOO. THEREFORE, THERE IS NO BASIS WHATSOEVER FOR DRAWING DISTINCTION BETWEEN THE TWO OR A ROOM FOR ANY CONFUSION BETWEEN THE TWO PROPOSITIONS. THE 'POWER' AN D 'ENERGY' ARE SYNONYMOUS, WHICH CAN BE IN SEVERAL TYPES AND FORMS, BE IT HEAT, WHICH IS STEAM OR MECHANICAL OR ELECTRICAL, WIND OR BE IT THERMAL. WE ALSO AGREE WITH THIS PLEA OF THE LEARNED AUTHORISED REPRESENTATIVE THAT IF THE INTENT OF THE LEGISLATURE R EMAINED TO RESTORE THE APPLICATION OF THE BENEFIT OF DEDUCTION UNDER S. 80 - IA TO GENERATION OF ELECTRICITY ONLY, IT WOULD HAVE BEEN SPECIFICALLY SO WORDED BY USING THE CONNOTATION 'ELECTRICAL POWER' ONLY RATHER THAN THE CONNOTATION 'POWER' OMNIBUS. AS PER CHAMBERS TWENTIETH CENTURY DICTIONARY, STEAM - POWER; IS A SPELL OF TRAVEL BY STEAM POWER; ENERGY, FORCE, SPIRIT FOR, USING, WORKED BY STEAM; TO RISE OR PASS OFF IN STEAM OR VAPOUR, OR SMELL; TO BECOME DIMMED WITH CONDENSED VAPOUR (OFTEN WITH UP); TO MOVE BY MEANS OF STEAM. AS PER THE CAMBRIDGE INTERNATIONAL DICTIONARY OF ENGLISH, THE STEAM IS THE HOT GAS THAT IS PRODUCED WHEN WATER BOILS; STEAM CAN BE USED TO PROVIDE POWER, STEAM TURBINES OF A STEAM ENGINE/LOCOMOTIVE OF THE AGE OF STEAM. THUS THERE IS NO DOU BT, LIKE ELECTRICITY, STEAM IS ALSO A FORM OF POWER. THE ARGUMENTS ADVANCED ON BEHALF OF THE ASSESSEE ALSO FIND SUPPORT FROM THE DECISION OF DELHI BENCH OF THE TRIBUNAL IN THE CASE OF SIAL SBEC BIOENERGY LTD. VS. DY. CIT (SUPRA) ON AN IDENTICAL ISSUE WHERE IN DEALING WITH THE MATTER INDETAIL, IT HAS BEEN HELD THAT THE WORD 'POWER' HAS TO BE GIVEN A MEANING WHICH IS IN COMMON PARLANCE AND IN COMMON PARLANCE THE WORD 'POWER' SHALL MEAN THE ENERGY ONLY. THE ENERGY CAN BE OF ANY FORM, BE IT MECHANICAL, BE IT ELE CTRICAL, BE IT WIND OR BE IT THERMAL. THE STEAM PRODUCED BY THE ASSESSEE ON THE PRINCIPLE OF INTERPRETATION OF STATUTE SHALL ONLY BE TERMED AS POWER AND SHALL QUALIFY FOR THE BENEFITS AVAILABLE UNDER S. 80 - IA(IV), HELD THE THE WEST COAST PAPER MILLS LTD. 23 TRIBUNAL. UNDER THESE CIRCUMSTANC ES, WE FULLY CONCUR WITH THE DECISION ON THE ISSUE ARRIVED AT BY LEARNED CIT(A) THAT ASSESSEE IS IN THE BUSINESS OF GENERATION OF POWER AND THAT THE STEAM SO GENERATED BY THE INDUSTRIAL UNDERTAKING AND RECEIPT FROM THE BUSINESS OF INDUSTRIAL UNDERTAKING IS WITHIN THE MEANING OF S. 80 - IA WHICH WOULD QUALIFY FOR THIS BENEFIT. THE FIRST APPELLATE ORDER IS THUS UPHELD. THE GROUND IS THUS REJECTED. 23 . FROM THE AFORESAID DECISION S , IT CAN BE INFERRED THAT THE GENERATION / PRODUCTION OF STEAM IS ALSO A FORM OF POWE R AND THE UNIT 6 WHICH IS AN UNDERTAKING SET UP FOR GENERATION OF STEAM FOR ITS MANUFACTURING PROCESS CAN BE SAID TO BE FOR GENERATION OF POWER. THE BASIS ON WHICH THE LEARNED COMMISSIONER (APPEALS) HAS TRIED TO DISTINGUISH THE DECISION OF SI AL SBEC BIO EN ERGY LTD. (SUPRA) IS VERY SUPERFICIAL . WHAT NEEDS TO BE SEEN IS , WHETHER GENERATION OF STEAM CAN BE SAID TO BE GENERATION OF POWER OR NOT , THEN, THE FINDING AND THE CONCLUSION DRAWN BY THE TRIBUNAL IN THE AFORESAID DECISION AFTER REFERRING TO THE CATENA OF DECISIONS AND VARIOUS OTHER PROVISIONS CLEARLY CLINCHES THE POINT. NOW COMING TO T HE OTHER OBSERVATION OF THE LEARNED COMMISSIONER (APPEALS) THAT THE ASSESSEE HAS NOT UNDERTAKEN THE GENERATION OF POWER IN THIS YEAR ALSO, WE FIND THAT THE SAME IS INCORRECT ON FACTS BECAUSE THE ASSESSEE HAS ALREADY FILED A CERTIFICATE FROM THE KARNATAKA STATE BOILER INSPECTION DEPARTMENT THAT THE ASSESSEE HAS GENERATED STEAM DURING THE PERIOD FROM 3 RD MAY 2001 TO 6 TH MAY 2002 WHICH MOSTLY FALLS IN THIS YEAR ONLY AND THE RATE OF THE WEST COAST PAPER MILLS LTD. 24 QUANTITY GENERATED HAS ALSO BEEN MENTIONED. THIS GENERATION OF STEAM HAS BEEN EVALUATED AT A REALISABLE MARKET VALUE BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT AND THE ASSESSEE HAS ALSO DEBITED EXPENDITURE INCURRED FOR THE GENERATION OF POWER. THUS, ON TH E SE FACTS ITSELF, IT CANNOT BE HELD THAT THE ASSESSEE HAS NOT UNDERTAKEN THE GENERATION OF POWER IN THIS YEAR . THE SECTION PROVIDES THAT THE ASSESSEE MUST BEGIN TO GENERATE POWER DURING THE PERIOD DEFINED UNDER THE STATUE AND THE IMPUGNED ASSESSMENT YEAR D EFINITELY FALLS WITHIN THAT PERIOD. LASTLY, I NSOFAR AS THE OBSERVATION AND THE CONCLUSION OF THE ASSESSING OFFICER, WHICH ARE BASED ON SIMILAR REASONS AS GIVEN FOR UNIT 1 TO 5, THE SAME IS ALSO NOT SUSTAINABLE AS THE TRIBUNAL HAS ALREADY DECIDED THE ISSUE ON THESE REASONING IN FAVOUR OF THE ASSESSEE. THUS, WE SET ASIDE THE IMPUGNED ORDER PASSED BY THE LEARNED COMMISSIONER (APPEALS) ON THIS SCORE AND HOLD THAT THE ASSESSEE IS ELIGIBLE TO CLAIM DEDUCTION UNDER SECTION 80IA WITH REGARD TO UNIT 6 ALSO AS A STAN D ALONE POWER GENERATING UNDERTAKING. GROUND NO.5 RAISED BY THE ASSESSEE IS THUS TREATED AS ALLOWED. 24 . GROUND S NO.6 AND 7 READ AS UNDER: 6. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (APPEALS) WAS NOT JUSTIFIED IN DENYING THE ALTE RNATE CLAIM OF THE APPELLANT FOR DEDUCTION UL S 80IA IN RESPECT OF INTEGRATED POWER UNIT NO.6, THEREBY ERRED IN NOT DIRECTING THE A . O. FOR QUANTIFICATION OF DEDUCTION UL S 80IA. THE WEST COAST PAPER MILLS LTD. 25 7. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(APPEALS) ERRED IN HOLDING THAT PROVISIONS OF SEC. 80 IA(3)(II) ARE SATISFIED IN RESPECT OF POWER UNIT NO.6. 25 . BOTH THE PARTIES ADMITTED BEFORE US THAT THE ISSUES ARISING OUT OF THESE GROUND S ARE PURELY ALTERNATIVE CLAIM FOR DEDUCTION UNDER SECTION 80IA IN RESPECT OF PROFIT FOR THE INTEGRATED POWER UNIT 6 ON OTHER PARAMETERS . SINCE WE HAVE ALREADY ALLOWED THE CLAIM OF DEDUCTION UNDER SECTION 80IA VIDE GROUND NO.5, THEREFORE, NO SEPARATE ADJUDICATION IS REQUIRED. THUS, GROUND NO.6 AND 7 ARE TREATED AS DISMISSED AS I NFRUCTUOUS. 26 . GROUND NO.8 READS AS UNDER: 8. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(APPEALS) WAS NOT JUSTIFIED IN HOLDING THAT THE ELEMENT OF TAX OR LEVY SHOULD BE EXCLUDED FOR CALCULATING 'TRANSFER PRICE' FOR THE PURPOSE OF COMPUTATION OF DEDUCTION U/S 80IA IN RESPECT OF POWER GENERATING UNITS. 27 . THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS WORKED OUT NOTIONAL SALE OF POWER FROM POWER UNIT 5 TO PAPER DIVISION @ ` 5.80 , ON THE BASIS OF AVERAGE ACTUAL GRID CHARGES OF KAR NATAKA ELECTRICITY BOARD , WHICH IS THE TOTAL AMOUNT OF BILL DIVIDED BY THE TOTAL NUMBER OF UNIT CONSUMED. THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO SUBMIT 12 MONTHLY ELECTRICITY BILLS IN THIS REGARD. FROM THESE BILLS, HE GATHERED THAT THE ASSESSEE HAS TO PAY MINIMUM PAYMENT CHARGES OF ` THE WEST COAST PAPER MILLS LTD. 26 10,12,500, PER MONTH IRRESPECTIVE OF THE CONSUMPTION. BESIDES THIS, THE ASSESSEE COMPANY IS PAYING FUEL ESCALATION CHARGES AND TAX @ 0.25 AND 0.20 PER UNIT RESPECTIVELY. BASED ON THESE, HE WORKED OUT THE AVERAGE RATE OF SALE OF POWER PER UNIT AS PER THE PROVISIONS OF SECTION 80IA(8) @ ` 4.09 IN THE FOLLOWING MANNER: (A) (I) TOTAL UNITS OF ELECTRICITY GENERATED BY THE DG SETS ` 7,91,34,216 (II) TOTAL UNITS OF ELECTRICITY GENERATED BY THE STEAM TURBINE (NET OF INTER UNIT TRANSFER) ` 4,66,74,175 (III) TOTAL UNITS OF POWER PURCHASED FROM KEB ` 58,98,480 ` 13,17,06,871 (B) (I) DEMAND CHARGES @ ` 150 FOR 6750 KVA 12 ` 1,25,00,400 (II) ENERGY CHARGES (III) FOR 1 ST 1 LAKH UNITS @ ` 3.25 * 12 ` 39,00,000 (IV) B ALANCE UNITS @ ` 3.75 ` 48,98,80,463 (V) FUEL ESC. CHARGES ` 3,29,58,698 (VI) TAXES & PENALTY @ ` 0.20 PER UNIT NIL TOTAL AMOUNT PAYABLE ` 53,92,39,561 28 . HE FURTHER NOTED THAT THE ASSESSEE HAS NOT APPORTIONED INDIRECT EXPENSES TOWARDS GENERATION OF POW ER AND HELD THAT CERTAIN EXPENDITURES HAVE TO BE INCURRED FOR SUCH ACTIVITY WHICH IS BORNE BY THE PAPER DIVISION. HE ALSO NOTED THAT THE LEARNED COMMISSIONER THE WEST COAST PAPER MILLS LTD. 27 (APPEALS), IN THE APPELLATE ORDER, FOR THE ASSESSMENT YEAR 1999 2000 HAS HELD THAT THE COM M ON EXPE NSES INCURRED BY THE PAPER DIVISION RELATED TO POWER DIVISION SHOULD BE ALLOCATED TO THE POWER DIVISION TO ARRIVE AT THE QUANTUM OF PROFIT AVAILABLE FOR THE PURPOSE OF DEDUCTION. THUS, THE INDIRECT EXPENSES SHOULD BE APPORTIONED ON THE BASIS OF THE TOTAL T URN OVER , WHICH HAS BEEN WORKED OUT BY THE ASSESSING OFFICER AT PAGE 20 OF HIS ORDER. 29 . THE LEARNED COMMISSIONER (APPEALS) HAS DIRECTED THE ASSESSING OFFICER TO WORK OUT THE PRICE OF THE POWER GENERATED BY THE ASSESSEE IN ACCORDANCE WITH THE DIRECTIONS GIVEN BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 1997 98 AND TO FURTHER EXCLUDE ELEMENT OF TAX OF LEVY WHICH MAY FORM PART OF THE TOTAL AMOUNT BILLED AS DIRECTED BY THE LEARNED COMMISSIONER (APPEALS) FOR THE ASSESSMENT YEAR 1999 2000. 30 . BEFOR E US, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE TRIBUNAL, IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 1997 98 AND 1998 99, HAS DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE BY HOLDING THAT THE TAX AND OTHER DUTIES CANNOT BE EXCLUDED FOR DET ERMINING THE RATE OF POWER PER UNIT. AGAINST THIS DECISION, THE DEPARTMENT HAS NOT PREFERRED ANY APPEAL BEFORE THE HIGH COURT. HOWEVER, IN THE ASSESSMENT YEAR 1999 2000, THE TRIBUNAL HAS TAKEN THE WEST COAST PAPER MILLS LTD. 28 SLIGHTLY DIFFERENT VIEW , WHEREIN IT HAS UPHELD THE FINDING OF T HE LEARNED COMMISSIONER (APPEALS) TO THE EXTENT THAT THE TRANSFER PRICE SHOULD BE ON THE BASIS OF AVERAGE PRICE PAID BY THE ASSESSEE DURING THE WHOLE YEAR TO KARNATAKA STATE ELECTRICITY BOARD MINUS CERTAIN EXTRANEOUS CHARGES SUCH AS ELECTRICITY DUTY, ETC., WHICH IS NOT CONNECTED WITH THE BUSINESS OF THE ASSESSEE. HE SUBMITTED THAT THE TRIBUNAL HAS FAILED TO CONSIDER THE CONCEPT OF MARKET VALUE AS ENVISAGED UNDER SECTION 80IA(8). HE FURTHER SUBMITTED THAT THE SAID DECISION OF THE ASSESSEE FOR THE ASSESSMEN T YEAR 1999 2000 HAS BEEN SPECIFICALLY CONSIDERED AND DISTINGUISHED BY THE TRIBUNAL, DELHI BENCH, IN ACIT V/S JINDAL STEELS & POWER LTD., [2007] 16 SOT 509 (DEL.). BESIDES THIS, HE SUBMITTED THAT ONE HAS TO SEE AT WHAT RATE THE KARNATAKA ELECTRICITY BOARD IS SUPPLYING THE ELECTRICITY TO THE ASSESSEE AS WELL AS TO OTHER CUSTOMERS AND THAT RATE ALONE SHOULD BE BENCH MARK ED FOR DETERMINING THE TRANSFER PRICE. TAXES AND DUTIES WHICH ARE LEVIED ARE PART AND PARCEL OF THE COST PER UNIT SUPPLIED BY THE KARNATAKA E LECTRICITY BOARD AND IT CANNOT BE REMOVED FOR THE PURPOSE OF DETERMINING THE MARKET VALUE. THE ASSESSEE HAS SUPPLIED THE POWER FROM ITS POWER UNIT TO PAPER DIVISION ON THE BASIS OF ACTUAL GRID CHARGES PAID TO THE KARNATAKA ELECTRICITY BOARD. TH IS SHOULD BE THE GUIDING FACTOR FOR DETERMINING THE TRANSFER PRICE. IT HAS TO BE SEEN , ULTIMATELY , IF THE PAPER DIVISION HAD TO BUY THE ELECTRICITY FROM THE THE WEST COAST PAPER MILLS LTD. 29 KARNATAKA ELECTRICITY BOARD THEN WHAT PRICE THEY WOULD HAVE PAID TO THEM. THIS DEFINITELY WOULD BE INCLUSIVE OF TAX ES AND DUTY. T HEREF ORE, THE SAME CANNOT BE REMOVED FOR DETERMINING MARKET VALUE OF THE PRICE. 31 . THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, SUBMITTED THAT THIS ISSUE OF TRANSFER PRICE HAS BEEN DISCUSSED IN DETAIL BY THE ASSESSING OFFICER IN HIS ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2005 06. HE ALSO FILED RELEVANT EXTRACT OF THE SAID ASSESSMENT ORDER AND POINTED OUT THAT THE ASSESSING OFFICER HAS TAKEN THE RATE OF ELECTRICITY SUPPLIED BY TAMIL NADU GOVERNMENT IN OPEN MARKET; MARKET RATE AT WHICH KARNATAKA ELECTRICITY BOARD HAS RECEIVED THE POWER FROM VARIOUS OTHER PARTIES. FROM THE SAID ORDER, HE POINTED OUT THAT THE TAMIL NADU GOVERNMENT WAS SUPPLY ING ELECTRICITY IN THE OPEN MARKET @ ` 2.55 PER UNIT . I N MAHARASHTRA , THE PRIVATE PRODUCER S WERE SELLING THE POWER @ ` 2.73 PER UNIT IN THE FINANCIAL YEAR 2004 05. FURTHER, THE KARNATAKA ELECTRICITY BOARD WAS BUYING THE POWER IN THE FINANCIAL YEAR 2004 05 AT AN AVERAGE RATE OF ` 3.50 PER UNIT FROM PRIVATE PARTIES. THUS, THESE RATES SHOULD BE TH E GUIDING FACTOR FOR DETERMINING THE MARKET VALUE. IN FACT, IN THIS YEAR, THE ASSESSING OFFICER HAS ONLY DEDUCTED THE TAX AND DUTY AND OTHER LEVY FOR COMING TO THE AVERAGE PRICE OF ` 4.09 PER UNIT , WHICH IS VERY REASONABLE MARKET VALUE. THE WEST COAST PAPER MILLS LTD. 30 FURTHER, THE TRIBUN AL IN THE ASSESSMENT YEAR 1999 2000, HAS ALSO UPHELD THE EXCLUSION OF TAXES AND DUTIES, ETC. 32 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND ALSO PERUSED THE RELEVANT FINDINGS OF THE AUTHORITIES BELOW AND THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEE HAS WORKED OUT THE NOTIONAL SALE OF POWER SUPPLIED BY ITS POWER UNIT TO ITS PAPER DIVISION @ ` 5.80 PER UNIT. THIS WAS ON THE BASIS OF AVERAGE ACTUAL GRID CHARGES CHARGED BY KARNATAKA ELECTRICITY BOARD FOR SUPPLYING THE ELECTRICITY TO THE ASSESSEE. THIS WAS SHOWN FRO M THE AMOUNT OF THE BILL AND THE TOTAL NUMBER OF UNITS CONSUMED. FROM THE SAID BILLS, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE IS PAYING FUEL EXCAVATION CHARGES, TAXES, ETC., WHICH SHOULD BE REDUCED FOR WORKING OUT THE AVERAGE PRICE PER UNIT FOR WORKI NG OUT THE SALE PRICE OF THE ELECTRICITY SUPPLIED BY ITS POWER UNIT TO THE PAPER DIVISION. BESIDES THIS, HE HAS ALSO APPORTIONED INDIRECT EXPENSES ON THE BASIS OF THE TOTAL TURNOVER FOR QUANTIFYING THE DEDUCTION UNDER SECTION 80IA CLAIMED BY THE ASSESSEE I N RESPECT OF POWER UNITS NO.3, 4 AND 5. THIS APPORTIONMENT OF INDIRECT EXPENSES IS A SEPARATE GROUND WHICH IS GROUND NO.9 AND THE SAME SHALL BE DISCUSSED SUBSEQUENTLY. THE BASIC ISSUE IN GROUND NO.8 IS WHAT SHOULD BE THE TRANSFER PRICE FOR THE PURPOSE OF C OMPUTING THE DEDUCTION UNDER SECTION 80IA WITHIN THE AMBIT AND PARAMETER OF SUB SECTION (8) OF SECTION 80IA. SECTION THE WEST COAST PAPER MILLS LTD. 31 80IA (8), PROVIDES THAT , WHERE ANY GOODS OR SERVICES HELD FOR THE PURPOSE S OF ELIGIBLE BUSINESS ARE TRANSFERRED TO ANY OTHER BUSINESS CARRIE D ON BY THE ASSESSEE, THE CONSIDERATION IF ANY , FOR TRANSFER , DOES NOT CORRESPOND TO THE MARKET VALUE OF SUCH GOODS OR SERVICES AS ON THE DATE OF TRANSFER , THEN THE ASSESSING OFFICER CAN MAKE ADJUSTMENTS IN THE PROFITS AFTER DETERMINING THE MARKET VALUE OF SUCH TRANSFER. THE SAID SECTION IN OTHER WORDS, EMPOWERS THE ASSESSING OFFICER WHERE THE TRANSFER OF GOODS AND SERVICES AS RECORDED IN THE ACCOUNTS OF THE ELIGIBLE BUSINESS DOES NOT CORRESPOND TO THE MARKET VALUE, THEN THE PROFITS DECLARED FOR THE ELIGIBL E BUSINESS CAN BE ADJUSTED BY THE ASSESSING OFFICER ON SUCH BASIS SO AS TO ENSURE THAT THE GOODS AND SERVICES ARE TRANSFERRED TO ITS OWN UNIT AT THE MARKET VALUE OF SUCH GOODS AND SERVICES. IN THE EXPLANATION TO SECTION 80IA(8) , THE MARKET VALUE HAS BEEN DEFINED AS A PRICE THAT SUCH GOODS OR SERVICES WOULD ORDINARILY FETCH IN THE OPEN MARKET. FETCHING OF THE PRICE IN THE OPEN MARKET HAS TO BE SEEN FROM THE FACTOR S WHICH ARE DETERMINED THROUGH NEGOTIATION BETWEEN THE PARTIES AND MUTUAL AGREEMENT AS ARRIVED AT A PRICE WHICH IS ACCEPTABLE BETWEEN THE BUYER AND THE SELLER IN THE OPEN MARKET CONDITIONS I.E., IN AN UNRELATED AND UNCONTROLLED TRANSACTION S . OPEN MARKET CONDITIONS REFERS TO THE CONDITIONS AND PRICE AVAILABLE FOR THE PUBLIC AT LARGE. IN THE PRESENT CASE, THE MARKET VALUE OF SUPPLY OF ELECTRICITY BY POWER UNIT OF THE ASSESSEE TO THE PAPER DIVISION OF THE THE WEST COAST PAPER MILLS LTD. 32 ASSESSEE HAS TO BE SEEN FROM THE ANGLE , IF THE PAPER UNIT HAS TO PURCHASE THE ELECTRICITY DIRECTLY FROM THE KARNATAKA ELECTRICITY BOARD (AS BOTH THE POWER UNITS AS WELL AS THE PAPER UNITS ARE SITUATED IN KARNATAKA), THEN WHAT IS THE PRICE WHICH WOULD BE PAID BY THE PAPER UNIT TO THE KARNATAKA ELECTRICITY BOARD. THE TRANSFER OF THE PRICE AS CONTEMPLATED IN SECTION 80IA(8) HAS TO BE SEEN HAVING REGARD TO THE ARMS LENGTH CONDITION I.E., WHAT WOULD BE THE PRICE UNDER UNCONTROLLED TRANSACTIONS IN THE OPEN MARKET. IF THE PAPER DIVISION HAS BEEN PURCHASING THE ELECTRICITY FORM THE KARNATAKA ELECTRICITY BOARD AT AN AVERAGE COST OF ` 5.80 , WHICH FACT IS NOT IN DISPUTE, THEN THE SAME PRICE SHOULD BE CONSIDERED AS MARKET VALUE FOR BENCH MARKING THE PRICE AT WHICH POWER UNITS ARE SUPPLYING THE ELECTRICITY TO THE PAPER DIVISION. IF THE TAXES AND DUTIES ARE PART OF THE PRICE AT WHICH THE POWER / ELECTRICITY I S SUPPLI ED BY THE KARNATAKA ELECTRICITY BOARD TO THE PAPER DIVISION, THEN THE SAME PRICE IS THE INDICATOR OF THE MARKET VALUE WHICH IS FETCHABLE IN THE OPEN MARKET. WE DO NOT FIND ANY REASON FOR EXCLUDING THE ELEMENT OF TAX AND DUTY WHILE DETERMINING THE MARKET V ALUE OF THE ELECTRICITY PRICE PER UNIT SUPPLIED BY THE POWER UNIT TO THE ASSESSEE AS CONTEMPLATED IN SUB SECTION (8) OF SECTION 80IA. 33 . COMING TO THE ARGUMENTS OF THE LEARNED DEPARTMENTAL REPRESENTATIVE, WHICH IS MOSTLY BASED ON THE FINDINGS OF THE ASSESS ING THE WEST COAST PAPER MILLS LTD. 33 OFFICER IN THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2005 06, THE SAME CANNOT BE ACCEPTED FOR THE REASON THAT FIRSTLY, THE PRICE OF ELECTRICITY PER UNIT SUPPLIED BY THE TAMIL NADU AND PRIVATE PARTIES TO THE MAHARASHTRA GOVERNMENT , CANNOT BE HELD TO BE APPLICABLE IN KARNATAKA AND, SECONDLY , THE RATE AT WHICH PRIVATE PARTIES ARE SELLING THE POWER TO KARNATAKA ELECTRICITY BOARD CANNOT BE THE BENCH MARK FOR DETERMINING THE MARKET PRICE BECAUSE THE TERMS AND CONDITIONS IN WHICH THE KARNATAKA ELECTRICITY B OARD IS PROCURING THE ELECTRICITY FROM SUCH PARTIES IS NOT KNOWN . F URTHER THE MARKET PRICE HAS TO BE SEEN AS A PRICE AT WHICH THE CUSTOMERS ARE GETTING THE ELECTRICITY IN THE OPEN MARKET. THAT SHOULD BE THE CRITERIA FOR BENCH MARKING THE MARKET PRICE UND ER SECTION 80IA(8) . AS POINTED OUT BY THE LEARNED COUNSEL THAT IN THE EARLIER YEARS, THERE ARE TWO DIFFERENT OPINIONS AND CONCLUSIONS DRAWN BY THE TRIBUNAL. FIRST, IN THE ASSESSMENT YEAR 1997 98 AND 1998 99 WHICH ARE IN FAVOUR OF THE ASSESSEE AND HAS ATTAI NED FINALITY AS NO FURTHER APPEAL HAS BEEN FILED BY THE DEPARTMENT AND OTHER IN THE ASSESSMENT YEAR 1999 2000 AND 2000 01. IN THE SUBSEQUENT ORDERS, THE TRIBUNAL HAS NOT TAKEN NOTE OF THE DECISION OF THE EARLIER ORDERS. FURTHER, THE PROVISIONS OF SECTION 8 0IA(8) HAS ALSO NOT BEEN CONSIDERED FOR ARRIVING AT A DIFFERENT CONCLUSION. UNDER THESE FACTS AND CIRCUMSTANCES, WE ARE RENDERING OUR DECISION PURELY ON THE BASIS OF OUR INTERPRETATION OF STATUTORY PROVISIONS, SANS GOING BY ANY THE WEST COAST PAPER MILLS LTD. 34 EARLIER YEAR PRECEDENCE. THU S, IN OUR OPINION, WE HAVE TO FOLLOW THE PROVISIONS AS CONTAINED IN SECTION 80IA(8) FOR DETERMINING THE MARKET PRICE , WHICH CANNOT BE ARRIVED BY REDUCING THE PRICE BY ANY OTHER FACTORS LIKE TAXES, DUTIES, ETC. , AS THE SAME ARE EMBEDDED IN THE PRICE. THUS, WE SET ASIDE THE IMPUGNED ORDER PASSED BY THE LEARNED COMMISSIONER (APPEALS) ON THIS ISSUE AND ALLOW THE GROUND NO.8, IS TREATED AS ALLOWED. 34 . GROUND NO.9, READS AS UNDER: 9. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(APPEALS) WAS NOT JUSTIFIED IN HOLDING THAT FOR COMPUTING DEDUCTION U/S 80I A, THE PRORATED INDIRECT EXPENSES OF THE COMPANY SHOULD BE REDUCED FROM THE PROFIT OF THE POWER UNIT. 35 . AFTER HEARING BOTH THE PARTIES, WE FIND THAT THE PRESENT ISSUE HAS BEEN DECIDED BY THE TRI BUNAL AGAINST THE ASSESSEE RIGHT FROM THE ASSESSMENT YEAR 1999 2000 TO 2001 02. THE ASSESSING OFFICER HAS APPORTIONED INDIRECT EXPENSES WHICH ARE TO BE REDUCED FROM THE PROFITS OF THE POWER UNIT AS WORKED OUT IN DETAIL AT PAGE 20 OF THE ASSESSMENT ORDER. T HIS ALLOCATION OF INDIRECT EXPENSES TO ARRIVE AT THE PROFIT OF POWER UNIT HAS BEEN DECIDED BY THE TRIBUNAL IN THE EARLIER YEARS AND, THEREFORE, CONSISTENT WITH THE VIEW TAKEN THEREIN, WE FIND NO REASON TO DISTURB THE ORDER PASSED BY THE LEARNED COMMISSIONE R (APPEALS) AND, THE WEST COAST PAPER MILLS LTD. 35 ACCORDINGLY, THE SAME IS AFFIRMED ON THIS ISSUE. THUS, THE GROUND NO.9, RAISED BY THE ASSESSEE IS DISMISSED. 36 . GROUND NO.10, 11 AND 12, READ AS UNDER: 10. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(APPEALS) WAS N OT JUSTIFIED IN HOLDING THAT EXPENDITURE ON REPAIRS AND MAINTENANCE OF PLANT AND MACHINERY, BUILDING AND OTHER ASSETS TO THE TUNE OF RS. 65,01,751/ - ARE CAPITAL EXPENDITURE. 11. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (APPEALS ) FAILED TO APPRECIATE THE FACT THAT BY INCURRING SUCH EXPENDITURE OF RS.65,01,751/ - THE APPELLANT DID NOT BRING INTO EXISTENCE ANY NEW ASSETS OF ENDURING BENEFITS IN FUTURE AND HENCE, NO PART OF THE SAID EXPENDITURE CAN BE TREATED AS CAPITAL EXPENDITURE. 12. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT (APPEALS) WAS GROSSLY UNJUSTIFIED AND THEREFORE ERRED IN NOT CONSIDERING THE AFFIDAVIT FURNISHED BY THE APPELLANT, CONFIRMING THAT THE EXPENDITURE ON REPAIRS AND MAINTENANCE DISALLOWED WERE MADE IN RELATION TO EXISTING ASSETS. 37 . THE ASSESSEE HAS CLAIMED REPAIR AND MAINTENANCE CHARGES OF PLANT AND MACHINERY ON THE GROUND THAT THESE EXPENSES INCURRED WAS IN RELATION TO THE ASSETS ACQUIRED EARLIER AND IS IN THE NATURE OF CURRENT REPAIRS. DETA ILED EXPLANATION IN THIS REGARD WAS FURNISHED BEFORE THE ASSESSING OFFICER. THE ASSESSING OFFICER, AFTER VERIFYING THE DETAILS OF REPAIRS AND MAINTENANCE HELD THAT SUMS AGGREGATING TO ` 74,83,857 ARE IN THE NATURE OF CAPITAL EXPENDITURE. THESE DETAILS HAVE BEEN GIVEN FROM PAGES 3 TO 6 OF THE ASSESSMENT ORDER. THE LEARNED COMMISSIONER THE WEST COAST PAPER MILLS LTD. 36 (APPEALS), BASED ON THE REASONING GIVEN IN THE ASSESSMENT YEAR 2001 02, HAS AFFIRMED THE FINDINGS OF THE ASSESSING OFFICER. 38 . BEFORE US, IT HAS BEEN SUBMITTED THAT SIMILAR ISSUE ON ACCOUNT OF DISALLOWANCE UNDER THE HEAD REPAIR AND MAINTENANCE HAD COME UP FOR CONSIDERATION BEFORE THE TRIBUNAL IN THE ASSESSMENT YEAR 2001 02 AND 2001 02. MOST OF THESE EXPENSES OF REPAIRS AND MAINTENANCE WERE INCURRED IN CONNECTION WITH THE ROADS, DRAINAGES, BOUNDARY WALL AND BUILDINGS, PLATFORM, PLANT & MACHINERY, COAL YARD, ETC. THE TRIBUNAL, ON SIMILAR SET OF EXPENDITURES ON ACCOUNT OF REPAIR AND MAINTENANCE, HAS TREATED IT TO BE REVENUE EXPENDITURE AFTER OBSERVING AND HOLDING AS UNDER: 6. THE NEXT DISPUTE IN A.Y. 2000 01 RELATES TO THE EXPENDITURE ON REPAIRS AND MAINTENANCE OF PLANT AND MACHINERY, BUILDING AND OTHER ASSETS TO THE EXTENT OF ` 95,34,778. SUCH SUM FOR A.Y. 2001 02 IS ` 1,42,15,761. THE ASSESSEE HAS EXPLAINED THE NATURE OF THESE E XPENSES IN THE COMPILATION FILED AT PAGES 622 TO 672 OF THE PAPER BOOK. WE HAVE HEARD THE BOTH THE SIDES AND HAVE GONE THROUGH THE RELEVANT ORDERS. WE FIND THAT THESE EXPENDITURE WERE INCURRED IN CONNECTION WITH THE ROADS, DRAINAGES, BOUNDARY WALLS AND BUI LDING, CONCERT PLATFORM, PLANT AND MACHINERY, COAL YARD, BAMBOO YARD ETC. THE REVENUE HAS TREATED ALL THESE EXPENSES AS CAPITAL IN NATURE WHEREAS, THE ASSESSEE CLAIMS IT AS REVENUE EXPENDITURE. THE MAIN SUBMISSION OF THE ASSESSEE IS THAT THE EXPENDITURE IN QUESTION HAVE BEEN INCURRED BECAUSE OF FREQUENT RAINS IN THE ASSESSEES PLACE OF BUSINESS. AS A RESULT OF THESE RAINS AND CONSTANT MOVEMENT OF TRUCKS THE ROADS ARE DAMAGED AND EASILY WASHED AWAY. IT IS THE CONTENTION OF THE ASSESSEE THAT THE EXPENSES INCU RRED ON THE REPAIR OF SUCH ROADS ARE ONLY IN THE NATURE OF CURRENT REPAIRS. THE LEARNED COUNSEL FURTHER PLEADED THAT NONE OF THESE EXPENDITURES HAD RESULTED IN ACQUIRING ANY NEW ASSET OF THE WEST COAST PAPER MILLS LTD. 37 ENDURING NATURE. HENCE THE EXPENDITURE IN QUESTION, ACCORDING TO HIM, SHOULD BE TREATED AS REVENUE EXPENDITURE. THE ASSESSEE HAS FILED THE DETAILS OF THE DISALLOWANCE; IN A SEPARATE STATEMENT FOR A.Y. 2000 01 AND 2001 02. HAVING REGARD TO THESE DETAILS WE ARE UNABLE TO ACCEPT THE VIEW OF THE REVENUE THAT ALL THESE EXPENDITU RES HAVE RESULTED IN ACQUISITION OF ASSET OF PERMANENT OR SEMI PERMANENT NATURE HAVING OVERLASTING VALUES. THE EXPENDITURE WAS INCURRED AS PART OF MAINTENANCE EXPENDITURE ON THE EXISTING ROAD, DRAINAGES, ETC. IN OUR VIEW, HAVING REGARD TO THE DETAILS FURNI SHED, THE EXPENDITURE IN CONNECTION IS TO BE CONSIDERED AS REVENUE IN NATURE. IN FACT, IF WE LOOK AT THE DETAILS OF THE AMOUNT IN QUESTION, IT APPEARS TO BE TALL TREATED. IF WE LOOK AT THE INDIVIDUAL ITEMS OF EXPENDITURE, THEY ARE NOT THAT SIGNIFICANT TO B E TREATED AS EXPENDITURE OF CAPITAL NATURE BUT IS TO BE TREATED OPERATIONAL EXPENSES. THE DISALLOWANCE SUSTAINED BY THE CIT(A) IS DELETED. 39 . AFTER HEARING BOTH THE PARTIES, WE FIND THAT IDENTICAL ISSUE AND SIMILAR SET OF EXPENDITURES, HAD COME UP FOR CONSI DERATION BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR ASSESSMENT YEAR 2001 02 AND 2001 02, WHEREIN THE SAID ISSUE HAS BEEN DECIDED BY THE TRIBUNAL AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE. THEREFORE, CONSISTENT WITH THE VIEW TAKEN THEREIN, WE SET ASIDE THE ORDER PASSED BY THE LEARNED COMMISSIONER (APPEALS) AND TREAT THE EXPENDITURE UNDER THE HEAD REPAIRS AND MAINTENANCE AS REVENUE EXPENDITURE. THUS, THE GROUND NO.10, 11 AND 12 RAISED BY THE ASSESSE E ARE ALLOWED . 40 . GROUND NO.13, READS AS UNDER: 13. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(APPEALS) WAS NOT JUSTIFIED IN HOLDING THAT THE WEST COAST PAPER MILLS LTD. 38 EXPENDITURE IN RESPECT OF BANGALORE OFFICE TAKEN ON LEASE TO THE TUNE OF RS. 50,136/ - ARE CAPITAL EXPENDITURE. 41 . THE ASS ESSEE, DURING THE ASSESSMENT YEAR 1999 2000, HAD ACQUIRED PROPERTY AT BANGALORE ON LEASE . F OR REPAIR AND MAINTENANCE OF THE NEW BANGALORE OFFICE, IT HAD INCURRED A SUM OF ` 2,14,075 DURING THE ASSESSMENT YEAR 2002 03. THE ASSESSING OFFICER, AFTER HOLDING I T TO BE CAPITAL EXPENDITURE, DISALLOWED THE SAID EXPENDITURE. 42 . THE LEARNED COMMISSIONER (APPEALS), WHILE DECIDING THE ISSUE, HAD FOLLOWED THE FIRST APPELLATE ORDER FOR THE ASSESSMENT YEAR 2001 02 IN ASSESSEES OWN CASE AND PARTLY AFFIRMED THE SAID FINDINGS . 43 . BEFORE US, IT HAS BEEN SUBMITTED THAT THIS ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2000 01 AND 2001 02 IN ITA NO. 8243/MUM./ 2004, ETC., ORDER DATED 31 ST JANUARY 2007 . THE RELEVANT O BSERVATIONS AND FINDINGS OF THE TRIBUNAL IN THIS REGARD ARE AS UNDER: 7. THE NEXT DISPUTE RELATES TO THE DISALLOWANCE OF EXPENDITURE IN RESPECT OF NEW BANGALORE OFFICE TAKEN ON LEASE. THE AMOUNT SO SPENT FOR A.Y. 2000 01 IS ` 36,68,591 AND FOR A.Y. 2001 02 IS ` 4,29,052. WE HAVE HEARD BOTH THE SIDES AND HAVE GONE THROUGH THE RECORD. THE ASSESSEE HAD TAKEN OFFICE ON LEASE AND TO MAKE IT FIT FOR USE THE AFORESAID EXPENSES WERE INCURRED ON PLASTERING, POLISHING, FALSE CEILING, ELECTRICAL FITTINGS, FRESH CAR PETS ETC. THESE EXPENSES WERE INCURRED ON THE ASSETS NOT OWNED BY THE ASSESSEE. THE EXPENDITURE IN QUESTION IS TO GIVE A BETTER LOOK TO THE OFFICE PREMISES AND DOES NOT RESULT IN ACQUISITION OF ANY ASSET OF ENDURING NATURE. HENCE, THE THE WEST COAST PAPER MILLS LTD. 39 EXPENDITURE SO INCURR ED IS DIRECTED TO BE ALLOWED AS REVENUE EXPENDITURE. WE MAY ALSO MENTION THAT DEPRECIATION, IF ANY, GRANTED BY THE DEPARTMENT CONSIDERING THE SAID EXPENDITURE AS CAPITAL EXPENDITURE BE WITHDRAWN. 44 . IN VIEW OF THE AFORESAID FINDINGS OF THE TRIBUNAL IN ASSES SEES OWN CASE FOR THE ASSESSMENT YEAR 2000 01 AND 2001 02, WE SET ASIDE THE IMPUGNED ORDER PASSED BY THE LEARNED COMMISSIONER (APPEALS) AND ALLOW THE GROUND NO.13, RAISED BY THE ASSESSEE. 45 . GROUND NO.14, READS AS UNDER: 14. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(APPEALS) WAS NOT JUSTIFIED IN DISALLOWING THE CLAIM U/S 43B OF RS.3,51,71,327/ - BEING EXCISE DUTY PERTAINING TO THE PREVIOUS YEAR RELEVANT TO T HE AY 2003 - 04 PAID DURING THE PREVIOUS YEAR RELEVANT FOR THE AY 2002 - 03. 46 . THE DISALLOWANCE WHICH HAS BEEN MADE UNDER SECTION 43B, IS ON ACCOUNT OF CENVAT CREDIT OF ` 3,26,51,100 AND PLA BALANCE OF ` 25,20,227. 47 . BEFORE US, THE LEARNED COUNSEL SUBMITTED THAT INSOFAR AS THIS ISSUE IS CONCERNED, THE SAME HAS BEEN DECIDED IN FAVOU R OF THE ASSESSEE IN EARLIER ASSESSMENT YEAR 2000 01 AND 2001 02 AND AS REGARDS PLA BALANCE, THE SAME HAS BEEN DECIDED AGAINST THE ASSESSEE. THE ASSESSEES CLAIM HAS BEEN THAT , IT HAS PAID ADVANCE PAYMENT OF EXCISE DUTY OF ` 3,51,71,327 WHICH PERTAIN TO TH E ASSESSMENT YEAR THE WEST COAST PAPER MILLS LTD. 40 2003 04, WHICH SHOULD BE ALLOWED IN THIS YEAR ON THE GROUND THAT THE SAME IS ALLOWABLE AS DEDUCTION ON THE BASIS OF ACTUAL PAYMENT. THE LEARNED COMMISSIONER (APPEALS), RELYING UPON THE EARLIER YEARS ORDER FOR THE ASSESSMENT YEAR 2001 02, HAD DECIDED THIS ISSUE AGAINST THE ASSESSEE. 48 . AFTER HEARING BOTH THE PARTIES, WE FIND THAT THE PRESENT ISSUE HAS BEEN DECIDED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE 2000 01 AND 2001 02 IN ITA NO.8243/MUM./2004, ETC., ORDER DATED 31 ST JANUARY 2007 , WHEREIN THE TRIBUNAL DECIDED THE ISSUE IN THE FOLLOWING MANNER: 9. WE HAVE HEARD BOTH THE SIDES AND HAVE GONE THROUGH THE RECORD. THE FACTS FO THE CASE IN BRIEF ARE THAT THE ASSESSEE HAS BALANCE IN CENVAT AMOUNT AND PLA. IN THE COMPUTATION OF TOTAL I NCOME, THE ASSESSEE HAD CLAIMED DEDUCTION IN RESPECT OF THE SAID SUMS U/S 43B ON PAYMENT BASIS. RELYING ON THE DECISION OF THE TRIBUNAL IN THE CASE OF AMFORGE INDUSTRIES (79 ITD 49), THE ASSESSING OFFICER DISALLOWED THE CLAIM ON THE GROUND THAT THERE IS NO LIABILITY TO PAY THE SUM IN THE ASSESSMENT YEAR UNDER CONSIDERATION. THE LEARNED COUNSEL RELIED ON THE VERY SAME DECISION AND POINTED OUT THAT THE BALANCE LYING IN THE CENVAT ACCOUNT SHOULD BE ALLOWED AS DEDUCTION SINCE IT IS NOTHING BUT ACTUAL PAYMENT AN D AT BEST THE DECISION IN THE CASE OF AMFORGE INDUSTRIES (SUPRA), MAY APPLY TO THE BALANCE LYING IN THE PL REGISTER. THE BALANCE IN THE CENVAT ACCOUNT IS NOTHING BUT THE EXCISE DUTY PAID ON PROCUREMENT OF INPUTS AND THE SAME CANNOT BE TREATED AS ADVANCE. I N THE LIGHT OF THE PROVISIONS OF SECTION 43B, DEDUCTION U/S 43B SHOULD BE ALLOWED ON PAYMENT BASIS IRRESPECTIVE OF THE YEAR IN WHICH THE LIABILITY IS INCURRED. AS A RESULT, WE RESTORE MATTER TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION NTO GIVE RE ASONABLE OPPORTUNITY TO THE ASSESSEE TO SUBMIT THE RELEVANT EVIDENCES.' THE WEST COAST PAPER MILLS LTD. 41 49 . IN VIEW OF THE AFORESAID FINDINGS OF THE TRIBUNAL, INSOFAR AS THE DEDUCTION UNDER SECTION 43B ON ACCOUNT OF CENVAT CREDIT IS CONCERNED, FOLLOWING THE ABOVE FINDINGS OF THE TRIBUNAL, W E HOLD THAT THE DEDUCTION CLAIMED UNDER SECTION 43B ON ACCOUNT OF CENVAT CREDIT IS AN ALLOWABLE EXPENDITURE. WITH REGARD TO THE CLAIM OF DEDUCTION IN RESPECT OF PLA BALANCE, FOLLOWING THE AFORESAID DECISION OF THE TRIBUNAL, WE DECIDED THIS PART OF THE GROU ND AGAINST THE ASSESSEE. THUS, GROUND NO.14, IS PARTLY ALLOWED. 50 . GROUND NO.15, 16 AND 17, READ AS UNDER: 15. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(APPEALS) GROSSLY ERRED IN QUANTIFYING AND / OR DISALLOWING PRORATED INDIRECT EXPENSES U/S 14A. 16. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(APPEALS) FAILED TO APPRECIATE THE FACT THAT THE APPELLANT HAS NOT INCURRED ANY EXPENDITURE WHICH CAN BE ATTRIBUTED TO THE DIVIDEND INCOME AND HENCE QUESTION OF DISA LLOWANCE OF PRORATED INDIRECT EXPENSES DOES NOT ARISE. 17. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(APPEALS) WAS NOT JUSTIFIED IN HOLDING THAT THE APPELLANT HAS INVESTED INTEREST BEARING BORROWED FUNDS IN SHARES AND MUTUAL FUND S. 51 . THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD SHOWN DIVIDEND INCOME OF ` 31,54,683, WHICH WAS CLAIMED AS EXEMPT UNDER SECTION 10(33). THE ASSESSEE HAD NOT SHOWN ANY EXPENDITURE INCURRING FOR EARNING OF SUCH DIVIDEND INCOME. HE WORKED OUT TO DISAL LOW THE THE WEST COAST PAPER MILLS LTD. 42 PROPORTIONATE INTEREST EXPENSES FOR THE PURPOSE OF SECTION 14A. HE WORKED OUT THE DISALLOWANCE OF ` 2,22,43,669 AS PER THE CALCULATION GIVEN AT PAGE 15 OF THE ASSESSMENT ORDER. 52 . BEFORE THE LEARNED COMMISSIONER (APPEALS), IT WAS SUBMITTED THAT THE A SSESSEE HAD NOT INVESTED ANY FUNDS OUT OF THE BORROWED FUNDS BUT FROM THE SURPLUS AND ACCUMULATED FUNDS OF AROUND ` 41.38 CRORES ON ACCOUNT OF RETENTION OF SALES TAX IN TERMS OF DEFERMENT OF SALES TAX SCHEMES OF GOVERNMENT OF KARNATAKA. THIS PLEA WAS ALSO TAKEN BEFORE THE ASSESSING OFFICER WHICH HAS BEEN REJECTED. THE LEARNED COMMISSIONER (APPEALS) HELD THAT SIMILAR ISSUE HAD COME UP BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2000 01 AND 2001 02, WHEREIN THE DISALLOWANCE MADE BY THE ASSESSING OFFICER WAS CONFIRMED. 53 . BEFORE US, THE LEARNED COUNSEL SUBMITTED THAT IN THE EARLIER YEARS, THE TRIBUNAL HAS SET ASIDE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER TO VERIFY THE SOURCE OF FUNDS FOR INVESTMENT AND IN THE SET ASIDE PROCEEDINGS, THE ASSESSING OFFICER ACCEPTED THE ASSESSEES CONTENTION THAT INVESTMENTS HAVE NOT BEEN MADE OUT OF BORROWED FUNDS. HE FURTHER SUBMITTED THAT IN THIS YEAR ALSO, NO INVESTMENTS HAVE BEEN MADE OUT OF BORROWED FUNDS, THEREFORE, THERE IS NO QUESTION OF DISALLO WANCE OF INTEREST. MOREOVER, THIS ISSUE NOW STANDS COVERED BY THE WEST COAST PAPER MILLS LTD. 43 THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN CIT V/S RELIANCE UTILITIES AND POWER LTD., [2009] 313 ITR 340 (BOM.) . 54 . THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, RELIED UPON THE ORDER OF THE ASSESSING OFFICER. 55 . AFTER CONSIDERING THE RELEVANT FINDINGS OF THE ASSESSING OFFICER AND THE LEARNED COMMISSIONER (APPEALS), WE FIND THAT INSOFAR AS THE ASSESSEES PLEA IS CONCERNED THAT IT HAS NOT MADE ANY INVESTMENT WHICH HAS YIEL DED EXEMPT INCOME OUT OF BORROWED FUNDS BUT RATHER HAS BEEN MADE OUT OF ACCUMULATED / SURPLUS FUNDS, HAS NOT BEEN REBUTTED BY THE REVENUE. THE ASSESSEE HAD ALSO PLACED ON RECORD THAT THE SUM OF ` 41.38 CRORES ON ACCOUNT OF RETENTION OF SALES TAX IN TERMS O F DEFERMENT OF SALES TAX SCHEME OF GOVERNMENT OF KARNATAKA WAS ALSO AVAILABLE WHICH HAS NOT BEEN REFUTED. IN THE EARLIER YEAR, THE TRIBUNAL HAS RESTORED THE MATTER TO THE FILE OF THE ASSESSING OFFICER TO VERIFY THE SOURCE OF THE INVESTMENT WHETHER THEY WER E OUT OF BORROWED FUNDS OR OWN FUNDS. IN PURSUANCE OF THIS DIRECTION, THE ASSESSING OFFICER HAS ACCEPTED THE FACT THAT NO BORROWED FUNDS HAVE BEEN UTILISED FOR INVESTMENTS CAPABLE OF EARNING EXEMPT INCOME AND NO DISALLOWANCE OF INTEREST HAS BEEN MADE. THUS , IN VIEW OF THE SIMILAR POSITION IN THIS YEAR ALSO , THEREFORE, WE SET ASIDE THE IMPUGNED ORDER PASSED BY THE LEARNED COMMISSIONER (APPEALS) AND RESTORE THE ISSUE THE WEST COAST PAPER MILLS LTD. 44 BACK TO THE FILE OF THE ASSESSING OFFICER ONLY FOR THE LIMITED PURPOSE OF VERIFICATION AS TO WHETHER THE ASSESSEE HAD UTILISED ITS BORROWED FUNDS FOR THE PURPOSE OF INVESTMENT OR NOT . IF IT IS FOUND THAT THE ASSESSEE HAS MADE INVESTMENT OUT OF ACCUMULATED OR SURPLUS FUNDS, THEN , FOLLOWING THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN RE LIANCE UTILITIES AND POWER LTD. (SUPRA), NO INTEREST SHOULD BE DISALLOWED. ACCORDINGLY, GROUNDS NO.15 16 AND 17 ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. 56 . GROUND NO.18, READS AS UNDER: 18. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD . CIT(A) ERRED IN NOT EXCLUDING SCRAP SALES AMOUNTING TO RS.73,07,924/ - AND INTERNAL CONSUMPTION OF POWER OF RS.73,09,32,679/ - FROM THE TOTAL TURNOVER FOR THE PURPOSE OF COMPUTING DEDUCTION U/S 80HHC. 57 . THE ASSESSING OFFICER HAS NOTED THAT THE ASSESSEE IN FORM NO.10CCAC HAD SHOWN THE TOTAL TURNOVER AFTER EXCLUDING THE INTERNAL CONSUMPTION OF POWER TO THE TUNE OF ` 73,09,32,679 AND SCRAP SALES OF ` 73,00,924. THE A .O. HELD THAT THESE ARE TO BE INCLUDED IN THE TOTAL TURNOVER OF THE BUSINESS WHILE COMPUTING TH E DEDUCTION U /S 80HHC. 58 . THE LEARNED COMMISSIONER (APPEALS), FOLLOWING THE EARLIER YEARS ORDER OF THE FIRST APPELLATE AUTHORITY, DECIDED THE ISSUE AGAINST THE ASSESSEE. THE WEST COAST PAPER MILLS LTD. 45 59 . BEFORE US, IT HAS BEEN SUBMITTED BY THE LEARNED COUNSEL THAT INSOFAR AS THE ISSUE OF E XCLUDING OF INTERNAL CONSUMPTION OF POWER FROM THE TOTAL TURNOVER, THE SAME HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE. WITH REGARD TO THE EXCLUSION OF SALE OF SCRAP, THE SAME HAS BEEN DECIDED AGAINST THE ASSESSEE AS THE TRIBUNAL HAS HELD THAT IT SHOULD BE TAKEN AS A PART OF THE TOTAL TURNOVER. 60 . AFTER CAREFULLY CONSIDERING THE RIVAL SUBMISSIONS, WE FIND THAT THE TRIBUNAL, WITH REGARD TO THE EXCLUSION OF INTERNAL CONSUMPTION OF POWER FOR THE TOTAL TURNOVER , HAD DECIDED THE SAME IN FAVOUR OF THE ASSESSEE BY H OLDING THAT SUCH AN INCLUSION IN THE TOTAL TURNOVER WILL RESULT INTO DOUBLE ADDITION , BECAUSE IT IS ALREADY INCLUDED IN THE COMPUTATION OF THE PR OFIT THUS, RESPECTFULLY FOLLOWING THE EARLIER YEARS ORDER, WE ALSO HOLD THAT THE INTERNAL CONSUMPTION OF POWER WILL NOT FORM PART OF THE TOTAL TURNOVER FOR THE PURPOSE OF COMPUTING THE RELIEF UNDER SECTION 80HHC. INSOFAR AS THE EXCLUSION OF THE SCRAP SALE IS CONCERNED, THOUGH THIS ISSUE HAS BEEN DECIDED AGAINST THE ASSESSEE BY THE TRIBUNAL IN EARLIER YEARS, HOWEVE R, THE HON'BLE SUPREME COURT IN ITS LATEST JUDGMENT IN CIVIL APPEAL NO. 5592 OF 2008, VIDE JUDGMENT AND ORDER DATED 10 TH MAY 2014, RENDERED IN CIT V/S PUNJAB STAINLESS STEEL INDUSTRIES, HAS HELD THAT SALE PROCEEDS OF SCRAP CANNOT BE INCLUDED AS PART OF THE TOTAL TURNOVER FOR THE PURPOSE OF SECTION 80HHC. THE THE WEST COAST PAPER MILLS LTD. 46 HON'BLE SUPREME COURT HAS DISCUSSED THIS EXCLUSION OF THE SCRAP SALES FROM THE TURNOVER IN A VERY DETAIL MANNER. THUS, RESPECTFULLY FOLLOWING THE AFORESAID JUDGMENT OF THE HON'BLE SUPREME COURT, WE SET ASIDE THE IMPUGNED ORDER PASSED BY THE LEARNED COMMISSIONER (APPEALS) AND DIRECT THE ASSESSING OFFICER TO EXCLUDE THE SCRAP SALE FROM THE TOTAL TURNOVER WHILE COMPUTING THE DEDUCTION UNDER SECTION 80HHC. THUS, GROUND NO.18 IS TREATED AS ALLOWED. 61 . GROUND NO .19, READS AS UNDER: 19. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(APPEALS) WAS NOT JUSTIFIED AND GROSSLY ERRED IN REDUCING 90% OF RENTAL INCOME FROM STAFF OF RS. 29,94,721/ - , 90% OF PROCESSING AND OTHER INCOME PERTAINING TO CA BLE DIVISION OF RS. 65,11,861/ - AND 90% OF INTEREST FROM THE BANK AND OTHERS OF RS. 66,61,489/ - FROM THE PROFIT OF THE BUSINESS FOR THE PURPOSE OF COMPUTING DEDUCTION U/S 80HHC. 62 . IT HAS BEEN ADMITTED BY THE LEARNED COUNSEL THAT INSOFAR AS THE EXCLUSION OF 90% FROM THE RENTAL INCOME FROM THE STAFF AND 90% OF INTEREST FROM THE BANKS AND OTHERS FROM THE PROFITS OF THE BUSINESS FOR THE PURPOSE OF COMPUTING DEDUCTION UNDER SECTION 80HHC, THIS HAS BEEN DECIDED AGAINST THE ASSESSEE BY THE TRIBUNAL IN ASSESSEES O WN CASE FOR THE ASSESSMENT YEAR 2000 01 AND 2001 02, WHEREAS THE EXCLUSION OF 90% OF PROCESSING AND OTHER INCOME PERTAINING TO CABLE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL. THE WEST COAST PAPER MILLS LTD. 47 63 . AFTER CONSIDERING THE ORDER OF THE LEARNED COMMISSIONER (APPEAL S), WE FIND THAT THE LEARNED COMMISSIONER (APPEALS) HAS MERELY FOLLOWED THE APPELLATE ORDER FOR THE ASSESSMENT YEAR 2001 02. THE TRIBUNAL, IN THE EARLIER YEARS, HA S DECIDED THE ISSUE OF EXCLUSION OF 90% OF THE INTEREST FROM THE BANK AND OTHERS AND 90% OF T HE RENTAL INCOME FROM THE PROFITS OF TH E BUSINESS AGAINST THE ASSESSEE AND ACCORDINGLY, WE ALSO HOLD THAT 90% OF THE RENTAL INCOME FROM THE STAFF AND 90% INTEREST FROM BANK AND OTHERS SHOULD BE EXCLUDED FROM THE PROFITS OF THE BUSINESS IN VIEW OF THE EXPLA NATION (BAA) FOR THE PURPOSE OF COMPUTING DEDUCTION UNDER SECTION 80HHC. HOWEVER, INSOFAR AS THE 90% OF THE PROCESSING CHARGES AND OTHER INCOME PERTAINING TO THE CABLE, THE SAME HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE , THEREFORE, IN THIS YEAR ALSO, FOLL OWING THE SAME, WE SET ASIDE THE IMPUGNED ORDER PASSED BY THE LEARNED COMMISSIONER (APPEALS) AND DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE HOLDING THAT THE SAME SHOULD NOT BE EXCLUDED FROM THE PROFITS WHILE COMPUTING THE DEDUCTION UNDER SECTION 80HHC. AC CORDINGLY, GROUND NO.19, IS TREATED AS PARTLY ALLOWED. 64 . GROUND NO.20, READS AS UNDER: 20. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND WITHOUT PREJUDICE TO GROUND NO.19, THE LD. CIT(A) ERRED IN REDUCING 90% OF THE GROSS INCOME, INSTEAD OF 90% OF THE NET INCOME, RECEIVED ON ACCOUNT RENT, INTEREST AND PROCESSING AND OTHER INCOME IN ORDER TO COMPUTE PROFITS OF THE BUSINESS FOR THE PURPOSE OF COMPUTATION ULS 80HHC. THE WEST COAST PAPER MILLS LTD. 48 65 . IT HAS BEEN ADMITTED BY BOTH THE PARTIES THAT INSOFAR AS THE ISSUE WHETHER 90% OF THE GROSS INCOME , AS MENTIONED IN GROUND NO.19, I.E., INTEREST INCOME AND RENTAL INCOME, SHOULD BE REDUCED , OR THE 90% OF THE NET INCOME, THE SAME IS NOW COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HON'BLE SUPREME COURT IN ACG ASSOCIATED C APSULES PVT .LTD. V/S CIT, [2012] 343 ITR 89 (SC) . 66 . IN VIEW OF THE LAW UPHELD BY THE HON'BLE SUPREME COURT IN ACG ASSOCIATED CAPSULE PVT. LTD. (SUPRA), WE SET ASIDE THE IMPUGNED ORDER PASSED BY THE LEARNED COMMISSIONER (APPEALS) AND HOLD THAT ONLY 90% OF THE NET AMOUNT OF RECEIPTS IN THE NATURE AS GIVEN IN CLAUSE 1 OF EXPLANATION (BAA) TO SECTION 80HHC SHOULD BE REDUCED FROM THE PROFITS . IN THE PRESENT CASE, THE RECEIPTS , WHICH HA VE BEEN MENTIONED IN GROUND NO.19, WHICH IS INCLUDED IN THE PROFITS OF THE A SSESSEE THEN ONLY THE NET INCOME SAME IS TO BE DEDUCTED FROM THE PROFITS OF THE ASSESSEE FOR DETERMINING THE PROFITS OF THE BUSINESS AND NOT THE GROSS AMOUNT OF 90% OF THE AFORESAID RECEIPTS. IN OTHER WORDS, THE ONLY NET INCOME IS TO BE REDUCED FROM THE RE NTAL INCOME AS WELL AS INTEREST. THUS, THE GROUND NO.20 IS TREATED AS ALLOWED. 67 . GROUND NO.21, READS AS UNDER: 21. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(APPEALS) WAS NOT JUSTIFIED IN HOLDING THAT THE THE WEST COAST PAPER MILLS LTD. 49 DEDUCTION ALLOWABLE ULS 8 0 - IA SHOULD BE REDUCED FROM THE PROFIT OF THE BUSINESS IN VIEW OF THE PROVISION OF SEC 80 - IA(9) FOR THE PURPOSE OF COMPUTING DEDUCTION U/S 80HHC. 68 . BEFORE US, THE LEARNED COUNSEL SUBMITTED THAT THE ISSUE WHETHER DEDUCTION UNDER SECTION 80IA SHOULD BE REDUC ED FROM THE PROFIT OF THE BUSINESS FOR THE PURPOSE OF COMPUTING DEDUCTION UNDER SECTION 80HHC OR NOT, HAVE BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL IN ASSESSEES OWN CASE IN THE ASSESSMENT YEAR 2000 01 AND 2001 02. MOREOVER, THIS ISSUE IS AL SO NOW SQUARELY COVERED BY THE DECISION OF THE JURISDICTIONAL HIGH COURT IN ASSO CIATE CAPSULES PVT .LTD., [ 2011 ] 332 ITR 42 (BOM.) . 69 . THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, SUBMITTED THAT THOUGH THE DECISION OF THE BOMBAY HIGH COURT IS IN FAVOUR OF THE ASSESSEE , BUT CONTRARY DECISIONS OF THE OTHER HIGH COURTS HAVE BEEN RENDERED SUBSEQUENTLY. THEREFORE, SUBSEQUENT DECISIONS OF THE HIGH COURTS SHOULD BE FOLLOWED. 70 . AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE FIND THAT THE BOMBAY HIGH COURT IN ASSOCIATE CAPSULES PVT. LTD. (SUPRA) HAS DECIDED THIS ISSUE AFTER CONSIDERING THE PROVISIONS OF SECTION 80IA(9) AND 80HHC(3) IN FAVOUR OF THE ASSESSEE , BY HOLDING THAT SECTION 80IA(9) DOES NOT AFFECT THE COMP U T A BILITY OF DEDUCTION UNDER VARIOUS OTHER PR OVISIONS THE WEST COAST PAPER MILLS LTD. 50 GIVEN UNDER THE HEAD C I.E., DEDUCTION IN RESPECT OF CERTAIN INCOMES AS ENUMERATED IN CHAPTER VI A . IT CAN ONLY AFFECT THE ALLOWABILITY OF SUCH DEDUCTION UNDER OTHER PROVISIONS SO THAT THE AGGREGATE DEDUCTION UNDER SECTION 80IA AND OTHER PROVISIO NS UNDER HEADING C OF CHAPTER VIA DO NOT EXCEED 100% OF THE PROFIT OF THE BUSINESS. THE HIGH COURT FURTHER HELD THAT THE CONTENTION OF THE REVENUE THAT DEDUCTION ALLOWED UNDER SECTION 80HHC HAS TO BE COMPUTED ON THE PROFITS OF THE BUSINESS AS REDUCED BY THE PROFITS ALLOWED AS DEDUCTION UNDER SECTION 80IA CANNOT BE SUSTAINED. THUS, THE HIGH COURT CATEGORICALLY HELD THAT BOTH THE DEDUCTIONS CAN BE ALLOWED INDEPENDENTLY SO THAT AGGREGATE DEDUCTION UNDER SECTION 80IA AND SECTION 80HHC DO NOT EXCEED THE 100% P ROFIT OF THE BUSINESS. SINCE THE DECISION OF THE BOMBAY HIGH COURT IS BINDING UPON US, THEREFORE, WE ARE NOT DISCUSSING THE RATIO LAID DOWN BY THE OTHER HIGH COURTS ON THIS ISSUE. THUS, RESPECTFULLY FOLLOWING THE AFORESAID BOMBAY HIGH COURT DECISION IN ASS OCIATE CAPSULES PVT .LTD. (SUPRA), WE SET ASIDE THE IMPUGNED ORDER PASSED BY THE LEARNED COMMISSIONER (APPEALS) AND HOLD THAT THE DEDUCTION UNDER SECTION 80IA CANNOT BE REDUCED FROM THE PROFIT OF THE BUSINESS FOR THE PURPOSE OF COMPUTING DEDUCTION UNDER SE CTION 80HHC. THUS, GROUND NO.21 IS TREATED AS ALLOWED. 71 . GROUND NO.22, AND 23, READ AS UNDER: THE WEST COAST PAPER MILLS LTD. 51 22. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(APPEALS) WAS NOT JUSTIFIED IN DISALLOWING THE CLAIM OF DEDUCTION ULS 80JJA IN RESPECT OF C HEMICAL RECOVERY BOILER. 23. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(APPEALS) WAS NOT JUSTIFIED AND GROSSLY ERRED IN HOLDING THAT UNDERTAKING SET UP FOR GENERATION OF STEAM CANNOT BE REGARDED AS ONE SET UP FOR 'GENERATION OF PO W ER' AS LAID DOWN IN SECTION 80JJA . 72 . AFTER HEARING BOTH THE PARTIES, WE FIND THAT THE ISSUE ARISING OUT OF THE AFORESAID GROUND IS AN ALTERNATE PLEA FOR CLAIM OF DEDUCTION UNDER SECTION 80JJA . SINCE WE HAVE ALREADY ALLOWED THE DEDUCTION UNDER SECTION 80IA IN RESPECT OF CHEMICAL RECOVERY BOILER, THEREFORE, THIS CLAIM UNDER SECTION 80JJA BECOMES PURELY ACADEMIC AND THE SAME IS TREATED AS DISMISSED AS INFRUCTUOUS. 73 . GROUND NO.24, READS AS UNDER 24. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE L D. CIT(APPEALS) GROSSLY ERRED IN CONFIRMING THE LEVY AND QUANTIFICATION OF INTEREST ULS 234D. 74 . AS ADMITTED BY THE BOTH THE PARTIES, THIS ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL IN EARLIER YEARS, HOWEVER, IN THE WAKE OF THE RETROS PECTIVE AMENDMENT BROUGHT IN STATUTE BY THE FINANCE ACT, 2012, THIS ISSUE NOW STANDS DECIDED AGAINST THE ASSESSEE. CONSEQUENTLY, WE HOLD THAT IN VIEW OF THE RETROSPECTIVE AMENDMENT, THE WEST COAST PAPER MILLS LTD. 52 THIS GROUND IS DECIDED AGAINST THE ASSESSEE. THUS, GROUND NO.24, RAISED BY THE ASSESSEE STANDS DISMISSED. 75 . THE ASSESSEE HAS ALSO RAISED ADDITIONAL GROUND WHICH READS AS UNDER: THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, WHILE COMPUTING BOOK PROFIT UNDER SECTION 115JB THE PROFITS ELIGIBLE FOR DEDUCTION UNDER SECTIO N 80HHC BE COMPUTED ON THE BASIS OF ADJUSTED BOOK PROFIT UNDER SECTION 115JB AND NOT ON THE BASIS OF PROFITS OF THE BUSINESS COMPUTED UNDER THE PROVISIONS OF THE ACT OTHER THAN SEC. 115JB. 76 . THE LEARNED COUNSEL SUBMITTED THAT IF THE ASSESSMENT HAS BEEN MAD E UNDER SECTION 115JA, THEN THE DEDUCTION CLAIMED BY THE ASSESSEE UNDER SECTION 80HHC HAS TO BE WORKED OUT ON THE BASIS OF ADJUSTED BOOK PROFIT UNDER SECTION 115JA AND NOT ON THE BASIS OF PROFITS COMPUTED UNDER REGULAR PROVISIONS OF THE ACT. THIS ISSUE HAS NOW BEEN SETTLED BY THE HON'BLE SUPREME COURT IN CIT V/S BHARI INFORMATION TECHNOLOGY SYSTEMS PVT. LTD., [2012] 340 ITR 593 (SC). 77 . LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, ALSO ADMITTED THAT THIS ISSUE NOW STANDS COVERED BY THE HON'BLE SUPR EME COURT CITED ABOVE. 78 . AFTER HEARING BOTH THE PARTIES, WE, RESPECTFULLY FOLLOWING THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN BHARI INFORMATION THE WEST COAST PAPER MILLS LTD. 53 TECHNOLOGY SYSTEMS PVT. LTD. (SUPRA), HOLD THAT THE DEDUCTION CLAIMED BY THE ASSESSEE UNDER SECTION 80H HC HAS TO BE WORKED OUT ON THE BASIS OF ADJUSTED BOOK PROFIT UNDER SECTION 115JA AND NOT ON THE BASIS OF PROFITS OF THE BUSINESS COMPUTED UNDER THE NORMAL PROVISIONS OF THE ACT , WHICH ARE APPLICABLE FOR THE COMPUTATION OF PROFIT AND GAIN OF THE BUSINESS. T HUS, THE ADDITION AL GROUND RAISED BY THE ASSESSEE IS ALLOWED. 79 . 2002 03 79. IN THE RESULT, ASSESSEES APPEAL FOR THE ASSESSMENT YEAR 2002 03 IS PARTLY ALLOWED. 80 . WE NOW TAKE UP REVENUES APPEAL IN ITA NO.3752/MUM./ 2006, FOR THE ASSESSMENT YEAR 2002 03, VIDE WHICH, FOLLOWING GROUNDS HAVE BEEN RAISED: ' (1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT CAPTIVE POWER CONSUMPTION FROM GENERATING SET WOULD BE ELIGIBLE FOR DEDUCTION U/S. 80IA.' 81 . THE L EARNED COUNSE L FOR THE ASSESSEE , AT THE OUTSET, SUBMITTED BEFORE US THAT INSOFAR AS THE ISSUE OF DISALLOWANCE UNDER SECTION 80IA WITH REGARD TO UNIT NO.1 IS CONCERNED, THE SAME IS PURELY ACADEMIC AS THERE WAS A LOSS IN THIS UNIT AND THE ASSESSEE HAS NOT CL AIMED ANY THE WEST COAST PAPER MILLS LTD. 54 DEDUCTION IN THIS UNIT FOR THE YEAR UNDER APPEAL. IN ANY CASE, ON MERITS, THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE EARLIER YEARS RIGHT FROM THE ASSESSMENT YEAR 1997 98 TO 2001 02 , WHEREIN IT H AS BEEN HELD THAT CAPTIVE POWER GENERATING UNIT IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA. 82 . LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, RELIED UPON THE ORDER OF THE ASSESSING OFFICER. 83 . AFTER HEARING BOTH THE PARTIES, WE FIND THAT NOT ONLY TH IS ISSUE WHICH IS PURELY ACADEMIC FOR THE YEAR UNDER APPEAL, AS THERE IS A LOSS IN UNIT NO.1 AND ALSO NO DEDUCTION UNDER SECTION 80IA HAS BEEN CLAIMED , OTHERWISE ALSO, WE HAVE DEALT THIS ISSUE WHILE DEALING GROUND NO.1 IN ITA NO.3808/MUM./2006, WHEREIN ON SIMILAR FACTS AND CIRCUMSTANCES, WE HAVE ALLOWED THE CLAIM OF DEDUCTION UNDER SECTION 80IA WITH REGARD TO POWER UNIT NO.2, 3, 4, AND 5 , WHICH IS SQUARELY APPLICABLE FOR UNIT NO.1 ALSO. ACCORDINGLY, GROUND NO.1, IS DISMISSED. 84 . GROUNDS NO.2 AND 3, READ AS UN DER: (2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT THE PROVISIONS OF S. 80IA(3)(II) ARE SATISFIED IN RESPECT OF THE DG SETS.' (3) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, T HE LD. CIT(A) ERRED IN HOLDING THAT THE PROVISIONS OF S. 80IA(3)(I) ARE SATISFIED IN RESPECT OF UNIT NO. I.' THE WEST COAST PAPER MILLS LTD. 55 85 . THE REVENUE IS CHALLENGING THE ALLOWANCE OF CLAIM UNDER SECTION 80IA WITH RESPECT TO UNIT NO.1 ONLY ON THE GROUND THAT THE CONDITIONS MENTIONED IN THE SECTION 80IA(3)(III) IS NOT FULFILLED. THIS ISSUE AGAIN HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL IN THE EARLIER YEARS AND MOREOVER IT IS MERELY AN EXTENSION OF GROUND NO.1 ONLY. THEREFORE, GROUND NO.2 AND 3 ARE ALSO DISMISSED. 86 . GROUN D NO.4, RELATES TO EXCLUSION OF SALES TAX AND EXCISE DUTY FROM THE AMOUNT OF TOTAL TURNOVER FOR THE PURPOSE OF CALCULATION OF DEDUCTION UNDER SECTION 80HHC. 87 . BOTH THE PARTIES ADMITTED BEFORE US THAT THIS ISSUE IS NOT ONLY COVERED BY THE DECISION OF THE TRI BUNAL IN EARLIER YEARS BUT IT IS ALSO COVERED BY THE DECISION OF THE HON'BLE SUPREME COURT IN CIT V/S CATAPHARMA INDIA PVT. LTD., [2007] 292 ITR 641 (SC) AND HOST OF OTHER DECISIONS OF THE HON'BLE SUPREME COURT AS WELL AS HIGH COURTS. THUS, IN VIEW OF THE LAW SETTLED BY THE HON'BLE SUPREME COURT THAT SALES TAX AND EXCISE DUTY DO NOT FORM PART OF THE TOTAL TURNOVER FOR THE PURPOSE OF CALCULATION OF DEDUCTION UNDER SECTION 80HHC , WE UPHOLD THE IMPUGNED ORDER PASSED BY THE LEARNED COMMISSIONER (APPEALS) AS HE HAS RIGHTLY DIRECTED THE ASSESSING OFFICER TO EXCLUDE THE COMPONENT OF EXCISE DUTY AND SALES TAX COMPONENT FROM THE TOTAL TURNOVER FOR THE THE WEST COAST PAPER MILLS LTD. 56 PURPOSE OF CALCULATION OF DEDUCTION UNDER SECTION 80HHC. GROUND NO.4, IS THUS DISMISSED. 88 . GROUND NO.5, RELATES TO LOS S ON SALE OF INVESTMENTS CONSIDERED AS SPECULATIVE LOSS IN VIEW OF THE PROVISIONS OF EXPLANATION TO SECTION 73. 89 . THE FINDINGS OF THE ASSESSING OFFICER ON THIS ISSUE ARE BASED ON THE FINDINGS GIVEN IN THE EARLIER ASSESSMENT YEARS. THE LEARNED COMMISSIONER ( APPEALS), AFTER RELYING UPON THE ORDER OF THE FIRST APPELLATE ORDER FOR THE ASSESSMENT YEAR 2000 01 AND 2001 02, HELD THAT THE EXPLANATION TO SECTION 73 IS NOT APPLICABLE IN THE PRESENT CASE. 90 . AT THE OUTSET, THE LEARNED COUNSEL SUBMITTED THAT THIS ISSUE ST ANDS COVERED BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2000 01 AND 2001 02. 91 . AFTER CONSIDERING THE MATERIAL AVAILABLE ON RECORD, IT IS SEEN THAT THE ASSESSEE COMPANY HAS MADE A CLAIM OF LOSS ON SALE OF INVESTMENTS OF ` 4 4,64,293. THE ASSESSING OFFICER DISALLOWED THE LOSS ON THE GROUND THAT THE ASSESSEES BUSINESS CONSIST OF PAPER MILLS AND CABLE FIBER AND INVESTMENT IN SHARE IS NOT THE BUSINESS ACTIVITY OF THE ASSESSEE AND, THEREFORE, IN VIEW OF THE DEEMING PROVISIONS OF EXPLANATION TO SECTION 73, THE COMPANY IS CARRYING ON SPECULATION BUSINESS TO THE EXTENT OF PURCHASE AND SALE OF SHARES AND, HENCE, THE THE WEST COAST PAPER MILLS LTD. 57 LOSS IN THE INVESTMENT IS A SPECULATION LOSS. THE TRIBUNAL, IN THE ASSESSMENT YEAR 2000 01 AND 2001 02, HAS HELD THAT ON CORRECT INTERPRETATION OF EXPLANATION TO SECTION 73, IS TAKEN INTO CONSIDERATION, THEN THE SAME WILL NOT BE APPLICABLE BECAUSE THE ASSESSING OFFICER HIMSELF HAS STATED IN THE ORDER THAT THE ASSESSEES MAIN BUSINESS IS NOT FOR THE PURCHASE OF SALE OF SHARE S BUT CONSIST OF PAPER MILL AND OPTICAL FIBER CABLES. FROM PLAIN READING OF THE PROVISIONS OF EXPLANATION TO SECTION 73, IT IS EVIDENT THAT THAT ONCE THE ASSESSING OFFICER HIMSELF HA S AGREED THAT THE ASSESSEE IS NOT ENGAGED IN THE BUSINESS WHICH CONSIST OF PURCHASE AND SALE OF SHARES AND IT IS MAINLY AN INVESTOR, THEN THE DEEMING PROVISIONS, AS ENVISAGED IN THE EXPLANATION WILL NOT APPLY. THUS, FOLLOWING EARLIER YEARS PRECEDENCE, GROUND NO.5, IS TREATED AS DISMISSED. 92 . 2002 03 92. IN THE RESULT, REVENUES APPEAL FOR THE ASSESSMENT YEAR 2002 03 IS DISMISSED. WE NOW TAKE UP ASSESSEES APPEAL IN ITA NO.5269/MUM./2008, FOR THE ASSESSMENT YEAR 2003 04. 93 . IN GROUND NO.1, THE ASSESSEE HAS CHALLENGED THE FINDING OF THE LEARNED COMMISSIONER (APPEALS) IN HOLDING THAT EXTRANEOUS CHARGES THE WEST COAST PAPER MILLS LTD. 58 SUCH AS ELECTRICITY DUTY SHOULD BE EXCLUDED FOR CALCULATING THE TRANSFER PRICE OF ELECTRICITY FOR THE PURPOSE OF COMPUTATION OF DEDUCTION UNDER SECTION 80IA. 94 . AFTER HEARING BO TH THE PARTIES, WE FIND THAT THIS GROUND IS SIMILAR TO GROUND NO.8 OF ASSESSEES APPEAL IN ITA NO. 3802/MUM./2006 FOR THE ASSESSMENT YEAR 2002 03, THEREFORE, IN VIEW OF THE FINDINGS GIVEN THEREIN, WE SET ASIDE THE IMPUGNED ORDER PASSED BY THE LEARNED COMMI SSIONER (APPEALS) ON THIS ISSUE AND ALLOW GROUND NO.1, RAISED BY THE ASSESSEE. 95 . GROUND NO.2, RELATES TO ALLOCATION OF INDIRECT EXPENSES IN PRO RATA BASIS FOR COMPUTING THE DEDUCTION UNDER SECTION 80IA BY REDUCING IT FROM THE PROFIT OF THE POWER UNITS. 96 . AF TER HEARING BOTH THE PARTIES, WE FIND THAT THIS GROUND IS SIMILAR TO GROUND NO.9 OF ASSESSEES APPEAL IN ITA NO. 3802/MUM./2006 FOR THE ASSESSMENT YEAR 2002 03, WHEREIN THIS ISSUE HAS BEEN DECIDED AGAINST THE ASSESSEE FOLLOWING THE EARLIER YEARS ORDER OF THE TRIBUNAL. THUS, GROUND NO.2, RAISED BY THE ASSESSEE IS DISMISSED. 97 . GROUND NO.3, RELATES TO THE CLAIM OF DEDUCTION UNDER SECTION 80IA IN RESPECT OF THE PROFIT OF NEW CHEMICAL RECOVERY BOILER AS STANDALONE POWER GENERATING UNIT. THE WEST COAST PAPER MILLS LTD. 59 98 . AFTER HEARING BOTH THE PA RTIES, WE FIND THAT THIS ISSUE IS SIMILAR TO GROUND NO.5 OF ASSESSEES APPEAL IN ITA NO. 3802/MUM./2006, WHEREIN THIS GROUND HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY ALLOWING THE ASSESSEES CLAIM FOR DEDUCTION UNDER SECTION 80IA IN RESPECT OF THIS UNI T. THEREFORE, IN VIEW OF THE FINDINGS GIVEN THEREIN, WE SET ASIDE THE IMPUGNED ORDER PASSED BY THE LEARNED COMMISSIONER (APPEALS) ON THIS ISSUE AND ALLOW GROUND NO.3, RAISED BY THE ASSESSEE. 99 . GROUND NO.4, RELATES TO ALTERNATIVE CLAIM FOR DEDUCTION UNDER S ECTION 80IA IN RESPECT OF INTEGRATED POWER UNIT NO.6. 100 . AFTER HEARING BOTH THE PARTIES, WE FIND THAT THIS GROUND IS SIMILAR TO GROUND NO.6 AND 7 OF ASSESSEES APPEAL IN ITA NO. 3806/MUM./ 2006. SINCE THE CLAIM FOR DEDUCTION UNDER SECTION 80IA WITH REGARD TO UNIT 6 HAS ALREADY BEEN ALLOWED, THEREFORE, NO SEPARATE ADJUDICATION IS REQUIRED. THUS, THIS GROUND NO.7, IS TREATED AS DISMISSED AS INFRUCTUOUS. 101 . IN GROUND NO.5 AND 6, THE ASSESSEE HAS CHALLENGED THE DISALLOWANCE ON ACCOUNT OF EXPENDITURE ON REPAIR AND M AINTENANCE WHICH HAS BEEN TREATED AS CAPITAL EXPENDITURE BY THE LEARNED COMMISSIONER (APPEALS). THE WEST COAST PAPER MILLS LTD. 60 102 . AFTER HEARING BOTH THE PARTIES, WE FIND THAT THIS GROUND IS SIMILAR TO GROUNDS NO.10 TO 12 FOR THE ASSESSEES APPEAL IN ITA NO.3802/ MUM./2006, AND IN VIEW OF THE FINDINGS GIVEN THEREIN, THE GROUNDS NO.5 AND 6 ARE TREATED AS ALLOWED. 103 . GROUND NO.7, RELATES TO THE DIRECTION OF THE LEARNED COMMISSIONER (APPEALS) TO EXCLUDE SCRAP SALE FROM THE TOTAL TURNOVER WHILE COMPUTING THE DEDUCTION UNDER SECTION 80HHC. 104 . AFTER HEARING BOTH THE PARTIES, WE FIND THAT THIS GROUND IS SIMILAR TO GROUND NO.18 OF ASSESSEES APPEAL IN ITA NO. 3802/MUM./2006, WHEREIN THIS GROUND HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE AFTER FOLLOWING THE JUDGMENT OF THE HON'BLE SUPREME COURT. THUS, W E SET ASIDE THE IMPUGNED ORDER PASSED BY THE LEARNED COMMISSIONER (APPEALS) AND ALLOW GROUND NO.7, RAISED BY THE ASSESSEE. 105 . GROUND NO.8, RELATES TO EXCLUSION OF RECEIPTS RELATING TO 90% OF RENTAL INCOME, 90% OF THE INTEREST FROM THE BANK AND 90% OF THE MIS C. INCOME FROM THE PROFITS OF THE BUSINESS FOR THE PURPOSE OF COMPUTING THE DEDUCTION UNDER SECTION 80HHC. 106 . AFTER HEARING BOTH THE PARTIES, WE FIND THAT THIS GROUND IS SIMILAR TO GROUND NO.19 OF THE ASSESSEES APPEAL IN ITA NO.3802/MUM./2006. THE WEST COAST PAPER MILLS LTD. 61 THUS, IN VIEW OF THE FINDINGS GIVEN THEREIN, GROUN D NO.8, RAISED BY THE ASSESSEE IS TREATED AS PARTLY ALLOWED. 107 . IN GROUND NO.9, THE ASSESSEE HAS RAISED A PLEA THAT WHETHER REDUCTION OF 90% OF THE GROSS INCOME SHOULD BE MADE OR 90% OF THE NET INCOME ON THE RECEIPT AS GI VEN IN EXPLANATION (BAA). 108 . AFTER HEARING BOTH THE PARTIES, WE FIND THAT THIS GROUND IS SIMILAR TO GROUND NO.20 OF ASSESSEES APPEAL IN ITA NO. 3802/MUM./2006 FOR THE ASSESSMENT YEAR 2002 03, THEREFORE, IN VIEW OF THE FINDINGS GIVEN THEREIN , WHICH IS BASED ON THE DECISION OF THE HON'BLE SUPREME COURT IN ACG ASSOCIATED CAPSULES PVT .LTD. (SUPRA), WE SET ASIDE THE IMPUGNED ORDER PASSED BY THE LEARNED COMMISSIONER (APPEALS) ON THIS ISSUE AND ALLOW GROUND NO.9, RAISED BY THE ASSESSEE. 109 . GROUNDS NO.10, 11 AND 12, RELATE TO ALTERNATIVE CLAIM OF DEDUCTION UNDER SECTION 80JJA IN RESPECT OF CHEMICAL RECOVERY BOILER. 110 . AFTER HEARING BOTH THE PARTIES, WE FIND THAT THIS GROUND IS SIMILAR TO GROUND NO.22 AND 23 RAISED BY THE ASSESSEE IN ITA NO.2802/MUM./ 2006, WHEREIN IT H AS BEEN HELD THAT THE SAID GROUND IS PURELY ACADEMIC BECAUSE ALREADY THE CLAIM FOR DEDUCTION UNDER SECTION 80IA, HAS BEEN ALLOWED WITH RESPECT TO THIS POWER UNIT. THUS, THE GROUNDS NO.10, 11 AND 12 ARE TREATED AS ALLOWED. THE WEST COAST PAPER MILLS LTD. 62 111 . IN GROUND NO.13, THE ASSESSEE HAS CHALLENGED THE DIRECTION OF THE LEARNED COMMISSIONER (APPEALS) TO EXCLUDE THE PRINCIP A L ELEMENT INCLUDED IN THESE RENTALS. 112 . AFTER HEARING BOTH THE PARTIES, WE FIND THAT, ADMITTEDLY, DEPRECI ATION HAS ALREADY BEEN ALLOWED O N THE LEASED ASSETS IN THE ASSESSME NT YEAR 1996 97 AND 1997 98, HENCE, THIS GROUND BECOMES PURELY ACADEMIC. CONSEQUENTLY, GROUND NO.13, IS TREATED AS DISMISSED AS INFRUCTUOUS. 113 . 2003 04 113. IN THE RESULT, ASSESSEE S AP PEAL FOR THE ASSESSMENT YEAR 2003 04 IS PARTLY ALLOWED. WE NOW TAKE UP REVENUES APPEAL IN ITA NO.5707/MUM./2008, FOR THE ASSESSMENT YEAR 2003 04. 114 . GROUND NO.1, 1.1 AND 1.2, RELATE TO DISALLOWANCE OF DEDUCTION UNDER SECTION 80IA ON CAPTIVE POWER GENERATI NG UNIT. 115 . AFTER HEARING BOTH THE PARTIES, WE FIND THAT THE ISSUE ARISING OUT OF THE AFORESAID GROUNDS IS SIMILAR TO THE ISSUE RAISED IN GROUNDS NO.1, 2 AND 3 BY THE REVENUE IN ITS APPEAL IN ITA NO.3752/MUM./2006, FOR THE WEST COAST PAPER MILLS LTD. 63 THE A.Y. 2002 03. IN VIEW OF THE FINDIN GS GIVEN THEREIN, GROUNDS NO.1, 1.1 AND 1.2, RAISED BY THE REVENUE ARE TREATED AS DISMISSED. 116 . GROUNDS NO.2 AND 2.1, RELATE TO TRANSFER PRICING RATE IN WHICH THE ELECTRICITY HAS BEEN BOUGHT BY THE ASSESSEE FROM ITS POWER UNIT. 117 . AFTER HEARING BOTH THE PARTI ES, WE FIND THAT THE ISSUE ARISING OUT OF THE AFORESAID GROUNDS IS SIMILAR TO THE ISSUE RAISED IN GROUND NO.8, BY THE ASSESSEE IN ITS APPEAL IN ITA NO.2802/MUM./2006. IN VIEW OF THE FINDINGS GIVEN THEREIN, GROUNDS NO.2 AND 2.1, RAISED BY THE REVENUE ARE TR EATED AS DISMISSED. 118 . GROUND NO.3, RELATES TO THE DISALLOWANCE OF CAPITAL EXPENDITURE ON ACCOUNT OF REPAIR AND MAINTENANCE , WHICH HAS BEEN ALLOWED AS REVENUE EXPENDITURE. 119 . AFTER HEARING BOTH THE PARTIES, WE FIND THAT THIS GROUND IS SIMILAR TO GROUNDS NO.10, 11 AND 12, RAISED BY THE ASSESSEE IN ITS APPEAL IN ITA NO.2802/MUM./2006, THEREFORE, CONSISTENT WITH THE VIEW TAKEN THEREIN, GROUND NO.3, RAISED BY THE REVENUE IS TREATED AS DISMISSED. 120 . GROUND NO.4, RELATES TO ALLOWANCE OF DEDUCTION UNDER SECTION 80M CLAIM ED BY THE ASSESSEE. THE WEST COAST PAPER MILLS LTD. 64 121 . THE ASSESSEE HAS EARNED DIVIDEND INCOME FROM INVESTMENTS MADE IN SHARES IN MUTUAL FUNDS. IN THIS ASSESSMENT YEAR, THE ASSESSEE HAS CLAIMED DEDUCTION UNDER SECTION 80M ON THE ENTIRE DIVIDEND INCOME AS EXEMPT. THE ASSESSING OFFICER HELD THAT INTEREST EXPENDITURE HA S TO BE ALLOCATED TOWARDS EARNING OF THE DIVIDEND INCOME WHICH WORKED OUT TO ` 91,82,793 AND SINCE THIS WAS MORE THAN THE CLAIM FOR DEDUCTION UNDER SECTION 80M AT ` 24,75,130, THE ENTIRE DEDUCTION UNDER SECTION 80M WAS DENIED. T HE LEARNED COMMISSIONER (APPEALS) HELD THAT IN THE EARLIER YEARS, SIMILAR DISALLOWANCE WAS MADE AFTER INVOKING THE PROVISIONS OF SECTION 14A AND THE TRIBUNAL IN ASSESSEES OWN CASE HAS HELD THAT IF SUFFICIENT INTEREST FREE FUNDS ARE AVAILABLE, THEN NO INTE REST SHOULD BE DISALLOWED. 122 . BEFORE US, THE LEARNED COUNSEL SUBMITTED THAT THE ASSESSEES OWN FUND AS ON 31 ST MARCH 2003, WAS ` 138,29,27,841, WHEREAS THE INVESTMENT WAS MADE ONLY ` 21,53,14,167. THE LEARNED COUNSEL ALSO POINTED OUT THAT THE LEARNED COMMISS IONER (APPEALS) HAS GIVEN CATEGORICAL FINDINGS THAT THE ASSESSEE HAS SUFFICIENT INTEREST FREE FUNDS IN THE FORM OF SALES TAX DEFERRED LOAN. THUS, IT CANNOT BE HELD THAT THE BORROWED FUNDS HAVE BEEN UTILISED FOR THE PURPOSE OF MAKING THE INVESTMENT. THUS, I N VIEW OF THE DECISION OF THE JURISDICTIONAL HIGH COURT IN RELIANCE UTILITIES AND POWER LTD. (SUPRA) , THE CLAIM FOR THE WEST COAST PAPER MILLS LTD. 65 DEDUCTION CANNOT BE DISALLOWED ON THE BASIS OF NOTIONAL DISALLOWANCE OF INTEREST. 123 . THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAN D, RELIED UPON THE ORDER OF THE ASSESSING OFFICER. 124 . AFTER HEARING BOTH THE PARTIES, WE FIND THAT INSOFAR AS THE FACT THAT THE ASSESSEE HAD HUGE SURPLUS FUNDS AS STATED ABOVE, WHICH WERE INTEREST FREE AND ALSO THERE WERE AVAILABILITY OF INTEREST FREE FUNDS IN THE FORM OF SALES TAX DEFERRED LOAN, THE SAME HAS NOT BEEN DISPUTED. THE ASSESSEES INVESTMENT WHICH HAS GENERATED DIVIDEND INCOME IS FAR LESS THAN THE AVAILABILITY OF INTEREST FREE FUNDS. THUS, THERE CAN BE NO PRESUMPTION THAT BORROWED FUNDS WERE UTILI ZED FOR MAKING THE INVESTMENT, SO AS TO WARRANT ANY KIND OF DISALLOWANCE OF INTEREST. THEREFORE, IN VIEW OF THE DECISION OF THE JURISDICTIONAL HIGH COURT IN RELIANCE UTILITIES AND POWER LTD. (SUPRA) , WE UPHOLD THE FINDINGS OF THE LEARNED COMMISSIONER (APPE ALS) IN ALLOWING THE DEDUCTION UNDER SECTION 80M. GROUND NO.4, RAISED BY THE REVENUE IS TREATED AS DISMISSED. 125 . IN GROUND NO.5, THE ASSESSEE HAS CHALLENGED THE INCLUSION OF INCOME FROM CABLE DIVISION AND LEASE RENTALS FROM THE PROFITS OF THE BUSINESS FOR TH E PURPOSE OF COMPUTING DEDUCTION UNDER SECTION 80HHC. THE WEST COAST PAPER MILLS LTD. 66 126 . INSOFAR AS THE INCOME FROM CA BLE DIVISION IS CONCERNED, THE SAME IS SIMILAR TO GROUND NO.19, RAISED BY THE ASSESSEE IN ITS APPEAL IN ITA NO.3802/MUM./2006, WHEREIN IT HAS BEEN HELD THAT IT IS A PART OF OPERATIONAL INCOME OF THE ASSESSEE AND SHOULD NOT BE EXCLUDED FROM THE PROFITS OF THE BUSINESS FOR THE PURPOSES OF COMPUTATION OF DEDUCTION UNDER SECTION 80HHC. THIS VIEW WAS CONSISTENT WITH THE VIEW TAKEN BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASS ESSMENT YEAR 2000 01 AND 2001 02. 127 . AS REGARDS LEASE RENTAL INCOME OF ` 1,08,19,080, THE LEARNED COUNSEL SUBMITTED BEFORE US THAT IN THIS YEAR THE ASSESSEE HAD UNDERTAKEN LEASING BUSINESS AND THESE RENTALS ARE ON ACCOUNT OF ASSETS WHICH HAS BEEN LEASED AND DEPRECIATION HAS BEEN ALLOWED ON SUCH LEASED ASSETS . THUS, THESE RENTAL RECEIPTS ARE PURELY OPERATIONAL BUSINESS INCOME. THE TURNOVER OF THE LEASING BUSINESS HAS ALSO BEEN INCLUDED IN THE TOTAL TURNOVER BY THE ASSESSING OFFICER, THEREFORE, THE ASSESSING OF FICER CANNOT REDUCE 90% OF THE SAID RECEIPTS. 128 . AFTER GOING THROUGH THE RELEVANT FINDINGS OF THE ASSESSING OFFICER AND THE LEARNED COMMISSIONER (APPEALS), WE FIND THAT IT IS NOT DISPUTED THAT THE LEASE RENTAL INCOME FO R M S PART OF THE OPERATION AL INCOME OF THE ASSESSEE IN THIS YEAR AND IS INCLUDED IN THE TOTAL TURNOVER BY THE ASSESSING OFFICER. ONCE THAT IS SO, THE ASSESSING THE WEST COAST PAPER MILLS LTD. 67 OFFICER CANNOT REDUCE THE 90% FROM THE PROFITS FOR THE PURPOSE OF COMPUTING THE DEDUCTION UNDER SECTION 80HHC. THUS, NEITHER THE INCOME FROM CABLE DIVISION NOR THE LEASE RENTAL INCOME CAN BE EXCLUDED FROM THE PROFITS OF THE BUSINESS AND, ACCORDINGLY, GROUND NO.5, RAISED BY THE REVENUE STANDS DISMISSED. 129 . GROUND NO.6, RELATES TO NETTING OF INTEREST INCOME WHILE COMPUTING DEDUCTION UNDER SEC TION 80HHC. 130 . AFTER HEARING BOTH THE PARTIES, WE FIND THAT THIS GROUND IS SIMILAR TO THE GROUND NO.20, RAISED BY THE ASSESSEE IN ITS APPEAL IN ITA NO.3802/MUM./2006, AND IN VIEW OF THE FINDINGS GIVEN THEREIN, THE GROUND NO.6, RAISED BY THE REVENUE STANDS D ISMISSED. 131 . IN GROUND NO.7, THE REVENUE HAS CHALLENGED THAT THE DEDUCTION UNDER SECTION 80IA SHOULD NOT BE REDUCED FROM THE PROFIT OF THE BUSINESS FOR THE PURPOSE OF COMPUTING DEDUCTION UNDER SECTION 80HHC. 132 . AFTER HEARING BOTH THE PARTIES, WE FIND THAT THI S GROUND IS SIMILAR TO GROUND NO.21, RAISED BY THE ASSESSEE IN ITS APPEAL IN ITA NO.3802/ MUM./2006 , WHEREIN WE HAVE FOLLOWED JURISDICTIONAL HIGH COURT DECISION . CONSISTENT WITH THE VIEW TAKEN THEREIN, GROUND NO.7 RAISED BY THE REVENUE STANDS DISMISSED. THE WEST COAST PAPER MILLS LTD. 68 133 . G ROUND NO.8, RELATES TO INAPPLICABILITY OF THE PROVISIONS OF EXPLANATION TO SECTION 73. 134 . AFTER HEARING BOTH THE PARTIES, WE FIND THAT THIS GROUND IS SIMILAR TO GROUND NO.5, RAISED BY THE ITA NO.3752/MUM./2006, FOR THE ASSESSMENT YEAR 2002 03. CONSISTENT WIT H THE VIEW TAKEN THEREIN, THE GROUND NO.8, RAISED BY THE REVENUE IS TREATED AS DISMISSED. 135 . GROUND NO.9, RELATES TO DELETION OF INTEREST UNDER SECTION 234D. 136 . AFTER HEARING BOTH THE PARTIES, WE FIND THAT THIS ISSUE IS SIMILAR TO THE ISSUE ARISING OUT OF GROU ND NO.24, RAISED BY THE ASSESSEE IN ITS APPEAL IN ITA NO.3802/MUM./2006, FOR THE ASSESSMENT YEAR 2002 03. IN VIEW OF THE RETROSPECTIVE AMENDMENT, TH IS ISSUE IS DECIDED AGAINST THE ASSESSEE. THUS, GROUND NO.9 RAISED BY THE REVENUE IS TREATED AS ALLOWED. 137 . GR OUND NO.10, RELATES TO EXCLUSION OF THE COMPONENT OF EXCISE DUTY, SALES TAX AND TURNOVER TAX FROM THE TOTAL TURNOVER FOR COMPUTING DEDUCTION UNDER SECTION 80HHC. 138 . THIS GROUND IS SIMILAR TO GROUND NO.4, RAISED BY THE REVENUE IN ITS APPEAL IN APPEAL IN ITA N O.3752/MUM./2006, FOR THE ASSESSMENT THE WEST COAST PAPER MILLS LTD. 69 YEAR 2002 03. CONSISTENT WITH THE VIEW TAKEN THEREIN, GROUND NO.10, RAISED BY THE REVENUE STANDS DISMISSED. 139 . GROUND NO.11, RELATES TO EXCLUSION OF INTERNAL POWER CONSUMED FROM THE TOTAL TURNOVER WHILE COMPUTING THE DEDU CTION UNDER SECTION 80HHC. 140 . AFTER HEARING BOTH THE PARTIES, WE FIND THAT THIS GROUND IS SIMILAR TO GROUND NO.18 RAISED BY THE ASSESSEE IN ITS APPEAL IN ITA NO.3802/MUM./2006, FOR THE ASSESSMENT YEAR 2002 03, WHEREIN FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR EARLIER ASSESSMENT YEAR, THIS ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE. THUS, GROUND NO.11, RAISED BY THE REVENUE STANDS DISMISSED. 141 . 2003 04 141. IN THE RES ULT, REVENUES APPEAL FOR THE ASSESSMENT YEAR 2003 04 IS PARTLY ALLOWED. WE NOW TAKE UP ASSESSEES APPEAL IN ITA NO.5270/MUM./2008, FOR THE ASSESSMENT YEAR 2004 05. 142 . IN GROUND NO.1, THE ASSESSEE HAS CHALLENGED THE CALCULATION OF TRANSFER PRICE FOR THE RAT E OF SUPPLYING OF ELECTRICITY FOR THE PURPOSE OF THE WEST COAST PAPER MILLS LTD. 70 COMPUTATION FOR DEDUCTION UNDER SECTION 80IA ON THE GROUND THAT THE ELEMENT OF TAX OR LEVY SHOULD NOT BE EXCLUDED. 143 . THIS GROUND IS SIMILAR TO GROUND NO.8 RAISED BY THE ASSESSEE IN ITS APPEAL IN ITA NO.3802/M UM./2006, AND GROUND NO.1, RAISED BY THE ASSESSEE IN ITS APPEAL IN ITA NO.5269/MUM./2008. CONSISTENT WITH THE VIEW TAKEN THEREIN, GROUND NO.1, RAISED BY THE ASSESSEE IS TREATED AS ALLOWED. 144 . IN GROUND NO.2, THE ASSESSEE HAS CHALLENGED THE ALLOCATION OF INDI RECT EXPENSES ON PRO RATA BASIS FOR REDUCING THE PROFIT OF POWER UNIT FOR THE PURPOSE OF COMPUTATION OF DEDUCTION UNDER SECTION 80IA. 145 . AFTER HEARING BOTH THE PARTIES, WE FIND THAT THIS ISSUE IS SIMILAR TO GROUND NO.9 RAISED BY THE ASSESSEE IN ITS APPEAL IN ITA NO.3802/MUM./2006, AND GROUND NO.2, RAISED BY THE ASSESSEE IN ITA NO.5269/MUM./2008. THUS, CONSISTENT WITH THE VIEW TAKEN THEREIN, GROUND NO.2 RAISED BY THE ASSESSEE STANDS DISMISSED. 146 . GROUND NO.3, RELATES TO DISALLOWANCE OF DEDUCTION UNDER SECTION 80 IA IN RESPECT OF PROFIT OF THE CHEMICAL RECOVERY BOILER AS A STAND ALONE POWER GENERATING UNIT. THE WEST COAST PAPER MILLS LTD. 71 147 . AFTER HEARING BOTH THE PARTIES, WE FIND THAT THIS ISSUE IS SIMILAR TO THE ISSUE RAISED IN GROUND NO.5, RAISED BY THE ASSESSEE IN ITS APPEAL IN ITA NO.3802/MUM. /2006 AND GROUND NO.3, RAISED ASSESSEE IN ITA NO.5269/MUM./2008. IN VIEW OF THE FINDINGS GIVEN THEREIN, GROUND NO.3, RAISED BY THE ASSESSEE IS TREATED AS ALLOWED. 148 . GROUND NO.4, IS AN ALTERNATE CLAIM MADE UNDER SECTION 80IA IN RESPECT OF INTEGRATED POWER UN IT NO.6, ON THE GROUND THAT THE ASSESSING OFFICER HAS NOT QUANTIFIED THE DEDUCTION UNDER SECTION 80IA. 149 . AFTER HEARING BOTH THE PARTIES, WE FIND THAT THIS GROUND IS SIMILAR TO GROUNDS NO.6 AND 7 RAISED BY THE ASSESSEE IN ITS APPEAL IN ITA NO.3802/MUM./2006, AND GROUND NO.4, RAISED BY THE ASSESSEE IN ITS APPEAL IN ITA NO.5269/MUM./2006. CONSISTENT WITH THE VIEW TAKEN THEREIN, WE DISMISS THIS GROUND NO.4, AS INFRUCTUOUS BECAUSE THE CLAIM OF DEDUCTION UNDER SECTION 80IA WITH REGARD TO THE UNIT 6 HAS ALREADY BEE N ALLOWED. 150 . GROUNDS NO.5 AND 6 RELATE TO DISALLOWANCE OF EXPENDITURE ON REPAIR AND MAINTENANCE AS CAPITAL EXPENDITURE. 151 . THE S E GROUND S ARE SIMILAR TO THE GROUNDS NO.10, 11 AND 12 RAISED BY THE ASSESSEE IN ITS APPEAL IN ITA NO.3802/MUM./2006, FOR THE ASSESSM ENT YEAR 2002 03 AND GROUNDS NO.5 AND 6 RAISED BY THE THE WEST COAST PAPER MILLS LTD. 72 ASSESSEE IN ITA NO.5269/MUM./2008. IN VIEW OF THE FINDINGS GIV EN THEREIN, THE S E GROUND S ARE TREATED AS ALLOWED. 152 . GROUND NO.7, RELATES TO INCLUSION OF SCRAP SALE AMOUNTING TO ` 1,76,27,826, FROM THE TOTA L TURNOVER FOR THE PURPOSE OF COMPUTING DEDUCTION UNDER SECTION 80HHC. 153 . AFTER HEARING BOTH THE PARTIES, WE FIND THAT THIS ISSUE IS SIMILAR TO THE ISSUE RAISED IN GROUND NO.18 RAISED BY THE ASSESSEE IN ITS APPEAL IN ITA NO.3802/MUM./2006 AND GROUND NO.7, RA ISED BY THE ASSESSEE IN ITS APPEAL IN ITA NO.5269/MUM./2008. CONSISTENT WITH THE VIEW TAKEN THEREIN, GROUND NO.7, RAISED BY THE ASSESSEE IS TREATED AS ALLOWED. 154 . IN GROUND NO.8, THE ASSESSEE HAS CH ALLENGED THE REDUCTION OF 90% OF THE RENTAL INCOME FROM STAF F OF ` 26,07,513, 90% OF INTEREST OF ` 18,17,863 AND 90% OF MISC. INCOME OF ` 1,525 FROM THE PROFITS OF THE BUSINESS FOR THE PURPOSE OF COMPUTING THE DEDUCTION UNDER SECTION 80HHC. 155 . AFTER HEARING BOTH THE PARTIES, WE FIND THAT THIS ISSUE IS SIMILAR TO THE ISSUE RAISED IN GROUND NO.19 BY THE ASSESSEE IN ITS APPEAL IN ITA NO.3802/MUM./2006, AND GROUND NO.8 BY THE ASSESSEE IN ITS APPEAL IN ITA NO.5269/MUM./2008. IN VIEW OF THE FINDINGS GIVEN THERE, THE GROUND NO.8 RAISED BY THE ASSESSEE IS TREATED AS PARTLY AL LOWED. THE WEST COAST PAPER MILLS LTD. 73 156 . GROUND NO.9, RELATES TO DEDUCTION OF 90% OF THE GROSS INCOME INSTEAD OF 90% OF THE NET INCOME RECEIVED ON ACCOUNT OF RENT IN ORDER TO COMPUTE THE PROFIT OF THE BUSINESS FOR THE PURPOSE OF COMPUTATION OF DEDUCTION UNDER SECTION 80HHC. 157 . AFTER HEARING BOTH THE PARTIES, WE FIND THAT THIS GROUND IS SIMILAR TO GROUND NO.20 RAISED BY THE ASSESSEE IN ITS APPEAL IN ITA NO.3802/MUM./2006 AND GROUND NO.9 RAISED BY THE ASSESSEE IN ITS APPEAL IN ITA NO.5269/MUM./2008. CONSISTENT WITH THE VIEW TAKEN THEREIN, GROU ND NO.9, IS TREATED AS ALLOWED. 158 . GROUND NO.10, 11 AND 12, RELATE TO DENIAL OF DEDUCTION UNDER SECTION 80JJA, IN RESPECT OF PROFITS OF THE CHEMICAL RECOVERY BOILER. 159 . AFTER HEARING BOTH THE PARTIES, WE FIND THAT TH E S E GROUND S ARE SIMILAR TO THE GROUNDS NO.2 2 AND 23 RAISED BY THE ASSESSEE IN ITS APPEAL IN ITA NO.3802/MUM./2006, AND GROUNDS NO.10, 11 AND 12 RAISED BY THE ASSESSEE IN ITS APPEAL IN ITA NO.5269/MUM./2008. CONSISTENT WITH THE VIEW TAKEN THEREIN, THE GROUNDS NO.10, 11 AND 12 RAISED BY THE ASSESSEE ARE TREATED AS ALLOWED . 160 . GROUND NO.13, RELATES TO EXCLUSION OF PRINCIPAL ELEMENT INCLUDED IN LEASE RENTALS. THE WEST COAST PAPER MILLS LTD. 74 161 . THIS GROUND IS SIMILAR TO GROUND NO.13, RAISED BY THE ASSESSEE IN ITS APPEAL IN ITA NO.5269/MUM./2008, AND IN VIEW OF THE FINDINGS GIVEN THEREIN, WE DISMISS THIS GROUND AS INFRUCTUOUS. 162 . 2004 05 162. IN THE RESULT, ASSESSEES APPEAL FOR THE ASSESSMENT YEAR 2004 05 IS PARTLY ALLOWED. WE NOW TAKE UP REVENUES APPEAL IN ITA NO.5708/ MUM./2008, FOR THE ASSESSMENT YEAR 2004 05 . GROUNDS RAISED BY THE REVENUE, READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) ERRED IN HOLDING THAT CAPTIVE POWER CONSUMPTION FROM GENERATING SET WOULD BE ELI GIBLE FOR DEDUCTION U/S 80IA. 1.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT THE PROVISIONS OF SECTION 80 - LA(3)(II) ARE SATISFIED IN RESPECT OF THE DG SETS. 1.2 ON THE FACTS AND IN THE CIRCUMSTANC ES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT THE PROVISIONS OF SECTION 80 - LA(3)(I) ARE SATISFIED IN RESPECT OF UNIT NO.1. 163 . AFTER HEARING BOTH THE PARTIES, WE FIND THAT THE ISSUE ARISING OUT OF THE AFORESAID GROUNDS IS SIMILAR TO THE ISSUE RAISED IN GROUNDS NO.1, 2 AND 3 BY THE REVENUE IN ITS APPEAL IN ITA NO.3752/MUM./2006, FOR THE ASSESSMENT YEAR 2002 03. IN VIEW OF THE FINDINGS GIVEN THEREIN, THE WEST COAST PAPER MILLS LTD. 75 GROUNDS NO.1, 1.1 AND 1.2, RAISED BY THE REVENUE ARE TREATED AS DISMISSED. 164 . GROUND NO.2 AND 2.1 READS AS UNDER: 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DISMISSING THE METHOD ADOPTED BY THE AO IN DETERMINING THE TRANSFER PRICE OF POWER WHILE QUANTIFYING THE AMOUNT ELIGIBLE FOR DEDUCTION U/S 80 I A OF THE ACT IGNORING THE PROVISIONS OF SECTION 80 IA( 8 ) AND 80 IA(10) OF THE I. T. ACT, 1961. 2 .1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN ACCEPTING THE NOTIONAL SALE PRICE OF ELECTRICITY GENERATED FROM DG SET, AT INFLATED RATE (I.E. THE RATE AT WHICH THE COMPANY HAS BOUGHT FROM KARNATAKA ELECTRICITY BOARD) IN CONTRAVENTION OF PROVISIONS OF SECTION 80 IA( 8 ) AND 80 IA(10) READ WITH EXPLANATION 1 WHICH PROVIDES FOR ADOPTING THE MARKET VALUE AS A PRICE WHICH ASSESSEE 'S POWER GENERATED COULD FETCH IN THE MARKET RESTNCTED BY THE GOVERNMENT ACT FOR SELLING POWER THEREBY ALLOWING EXCESS CLAIM OF DEDUCTION U / S. 80 IA OF THE ACT. THE LD. CIT(A) HAS, THEREFORE, ERRED IN ACCEPTING THE PURCHASE PRICE OF POWER AS FAIR MARKET V ALUE (I.E. THE RATE AT WHICH KARNATAKA ELECTRICITY BOARD IS SELLING) AS AGAINST CONTROLLED SALE PRICE OF POWER BY THE ASSESSEE WHICH IS OTHERWISE REQUIRED TO BE TAKEN UNDER THE ACT WHEN THE SAID SALE PRICE IS CONTROLLED BY THE GOVERNMENT REGULATION. 165 . A FTER HEARING BOTH THE PARTIES, WE FIND THAT THE ISSUE ARISING OUT OF THE AFORESAID GROUNDS IS SIMILAR TO THE ISSUE RAISED IN GROUND NO.8, BY THE ASSESSEE IN ITS APPEAL IN ITA NO.2802/MUM./2006. IN VIEW OF THE FINDINGS GIVEN THEREIN, GROUNDS NO.2 AND 2.1, R AISED BY THE REVENUE ARE TREATED AS DISMISSED. THE WEST COAST PAPER MILLS LTD. 76 166 . GROUND NO.3, READS AS UNDER: 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN ACCEPTING THE CAPITAL EXPENDITURE OF RS.45,32,321/ - AS REVENUE EXPENDITURE IGNORING THE NATURE AND MAGNITUDE OF EXPENDITURE INCURRED UNDER EACH HEAD OF EXPENDITURE ON PARTS OF MACHINERY, EXPENDITURE ON REWINDING & RECONDITIONING OF MACHINERY AND RENOVATION OF GUEST HOUSES. 167 . AFTER HEARING BOTH THE PARTIES, WE FIND THAT THIS GROUND IS SIMILA R TO GROUNDS NO.10, 11 AND 12, RAISED BY THE ASSESSEE IN ITS APPEAL IN ITA NO.2802/MUM./2006, THEREFORE, CONSISTENT WITH THE VIEW TAKEN THEREIN, GROUND NO.3, RAISED BY THE REVENUE IS TREATED AS DISMISSED. 168 . GROUND NO.4, READS AS UNDER: 4. ON THE FACTS A ND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CI T(A) ERRED IN DELETING THE DISALLOWANCE OF EXPENDITURE MADE UL S. 14A. 4.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE FINDINGS OF THE CIT(A) THAT THE ASSESSEE HAD SUFFICIENT FUND AVAILABLE AS INTEREST FREE FROM SALES TAX DEFERRAL LOAN TO MEET THE INVESTMENT IN SECURITIES IS ERRONEOUS AND WITHOUT ANY MATERIAL ON RECORD. 4.2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE FINDINGS OF THE CIT(A) IS CONTRARY T O THE ESTABLISHED LAW INASMUCH AS THE ASSESSEE FAILED TO ESTABLISH THE NEXUS BETWEEN AVAILABILITY OF INTEREST FREE FUNDS FOR INVESTMENTS IN THE SECURITIES FROM WHICH THE DIVIDEND WAS EARNED. 169 . BEFORE US, THE LEARNED COUNSEL SUBMITTED THAT THE DISALLOWAN CE OF INTEREST MADE BY THE ASSESSING OFFICER IS ` THE WEST COAST PAPER MILLS LTD. 77 30,20,778. THE ASSESSEE HAD SHOWN DIVIDEND INCOME OF ` 78,86,734. BEFORE THE ASSESSING OFFICER, IT WAS SUBMITTED THAT THE ASSESSEE HAS NOT MADE ANY INVESTMENT OUT OF THE BORROWED FUNDS , BUT ONLY FROM THE AC CUMULATED FUNDS OF ` 63.20 CRORES ON ACCOUNT OF RETENTION OF SALES TAX IN TERMS OF DEFERMENT OF SALES TAX SCHEME OF THE GOVERNMENT OF KARNATAKA. BESIDES THIS, THE ASSESSEE HAD OWN FUNDS IN THE FORM OF SHARE CAPITAL AND RESERVE AND SURPLUS OF ` 1,49,29,71,9 88, AS ON 31 ST MARCH 2004, WHEREAS THE INVESTMENT IS ONLY 49,25,80,978. THUS, NO INTEREST SHOULD BE DISALLOWED OR ALLOCATED FOR THE PURPOSE OF EARNING OF DIVIDEND INCOME IN VIEW OF THE JURISDICTIONAL HIGH COURT IN RELIANCE UTILITIES AND POWER PVT. LTD. (SU PRA). HE FURTHER SUBMITTED THAT THE ASSESSING OFFICER HAS MADE FURTHER DISALLOWANCE OF ADMINISTRATIVE EXPENSES OF ` 14,36,137 ON ACCOUNT OF FOLLOWING HEADS OF EXPENSES. 1. VEHICLE MAINTENANCE ` 71,57,536 2. MISCELLANEOUS EXPENSES ` 6,67,07,528 3. AUDITO RS PAYMENTS ` 5,53,174 4. COST AUDITORS REMUNERATION ` 82,069 5. DIRECTORS FEES & EXPENSES ` 13,00,621 6. CHARITY & DONATION ` 40,50,000 TOTAL: ` 7,98,50,928 THE WEST COAST PAPER MILLS LTD. 78 170 . HE SUBMITTED THAT MOST OF THESE EXPENSES CANNOT BE SAID TO BE ATTRIBUTABLE AT ALL FOR THE PURPOSE OF DISALLOWANCE UNDER THE HEAD ADMINISTRATIVE EXPENSES FOR E.G., VEHICLE MAINTE NANCE , MISC. EXPENSES , COST AUDITORS REMUNERATION , CHARITY AND DONATION . AT THE MOST, IF ANY PROPORTIONATE DISALLOWANCE IS CALLED FOR, THEN THE SAME CAN BE M ADE ONLY WITH REGARD TO THE AUDITORS PAYMENT AND DIRECTORS FEES AND EXPENSES. 171 . LEARNED DEPARTMENTAL REPRESENTATIVE STRONGLY RELYING UPON THE ORDER O F THE ASSESSING OFFICER, SUBMITTED THAT ONCE THERE IS NO DIRECT NEXUS OF THE FUNDS WHICH HAVE BEEN INVEST ED FOR THE PURPOSE OF EARNING DIVIDEND INCOME AND ALSO THE ADMINISTRATIVE EXPENSES, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER SHOULD BE UPHELD. 172 . AFTER CAREFULLY CONSIDERING THE RIVAL SUBMISSIONS, WE FIND THAT INSOFAR AS THE DISALLOWANCE OF INTEREST IS CONCERNED, THE SAME CANNOT BE MADE UNDER S ECTION 14A , ON THE FACTS OF THE PRESENT CASE. T HE ASSESSEE HAS, ADMITTEDLY, HUGE INTEREST FREE SURPLUS FUNDS, WHICH IS EVIDENT FROM THE FACT THAT IT HAS ITS OWN FUNDS OF ` 149.29 CRORES. BESIDES THIS, IT ALSO HAD SUM OF ` 63.20 CRORES ON ACCOUNT OF RETENTION OF SALES TAX THE WEST COAST PAPER MILLS LTD. 79 DIFFERENCE IN THIS YEAR. IN VIEW OF SUCH HUGE SURPLUS FUNDS , THE INVESTMENT TO THE TUNE OF ` 49 CRORES THAT TOO MAJOR PORTION IS COMING FROM THE EARLIER YEARS, IT CAN BE SAID TO BE MADE OUT OF THE SURPLUS FUNDS ONLY. THUS, ACCORDING TO THE PRINCIPLES LAID DOWN BY THE BOMBAY HIGH COURT IN RELIANCE UTILITIES AND POWER PVT. LTD. (SUPRA), NO DISALLOWANCE ON ACCOUNT OF INTEREST CAN BE MADE. 173 . INSOFAR AS THE DISALLOWANCE ON ACCOUNT OF ADMINISTRATIVE EXPEN SES ARE CONCERNED, WE FIND THAT THE ASSESSING OFFICER HAS TAKEN ALL THE ADMINISTRATIVE EXPENSES FOR APPORTIONING THE DISALLOWANCE ON PRO RATA BASIS WITHOUT EVEN LOOKING TO THE NATURE OF EXPENSES. FOR E.G., VEHICLE MAINTENANCE, CHARITY AND DONATION, MISC. E XPENSES, ETC., CANNOT BE SAID TO HAVE BEEN INCURRED FOR THE PURPOSE OF INVESTMENT IN SHARES, ETC. AT THE MOST, DIRECTORS FEES AND EXPENSES AND AUDITORS REMUNERATION CAN BE SAID TO BE ATTRIBUTABLE FOR THE PURPOSE OF DISALLOWING THE ADMINISTRATIVE EXPENSES FOR THE PURPOSE OF EARNING EXEMPT INCOME ON THE INVESTMENTS MADE. FROM THE DETAILS MENTIONED ABOVE, IT IS SEEN THAT THE DIRECTORS FEES AND EXPENSES IS ` 13 LAKHS WHEREAS, AUDITORS REMUNERATION IS ` 5.53 LAKHS. IF THE RATIO ON WHICH THE ASSESSING OFFICER HAS THE WEST COAST PAPER MILLS LTD. 80 WORKED OUT THE DISALLOWANCE ON ENTIRE EXPENDITURE, THEN ON THAT RATIO, THE DISALLOWANCE UNDER THE ADMINISTRATIVE EXPENSES WILL COME DOWN TO ` 33,253. THUS, ON A REASONABLE BASIS, WE HOLD THAT THE SUM OF ` 50,000 IS QUITE REASONABLE FOR ALLOCATING ADMI NISTRATIVE EXPENSES FOR THE PURPOSE OF MAKING THE INVESTMENT ON WHICH THE ASSESSEE HAS EARNED EXEMPT INCOME. CONSEQUENTLY, THE DISALLOWANCE IS RESTRICTED TO ` 50,000. THUS, GROUND NO.4, IS TREATED AS PARTLY ALLOWED. 174 . GROUND NO.5, READS AS UNDER: 5. ON T HE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. C I T(A) ERRED IN DIRECTING THE AO TO INCLUDE INCOME PERTAINING TO CABLE DIVISION AND INCOME FROM LEASE RENTAL IN THE PROFIT OF BUSINESS FOR THE PURPOSE OF COMPUTATION OF DEDUCTION U/ S . 80 HHC . 175 . AFTER HEARING BOTH THE PARTIES, WE FIND THAT THE AFORESAID GROUND IS SIMILAR TO THE GROUND NO.5, RAISED BY THE REVENUE IN ITS APPEAL IN ITA NO.5707/MUM./2008, WHICH WE HAVE DISMISSED FOR THE REASONS GIVEN THEREIN . CONSISTENT WITH THE VIEW TAKEN BY US , THE GROUND RAISED BY THE REVENUE, IN THIS YEAR ALSO, IS TREATED AS DISMISSED. 176 . GROUND NO.6, READS AS UNDER: 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE WEST COAST PAPER MILLS LTD. 81 AND IN LAW, THE LD. CI T(A) ERRED IN DIRECTING THE AO TO ALLOW NETTING OFF OF INTEREST INCO ME WHILE EXCLUDING 90% OF THE SAME FOR THE PURPOSE OF COMPUTATION OF DEDUCTION U / S 80 HHC. 177 . AFTER HEARING BOTH THE PARTIES, WE FIND THAT THIS GROUND IS SIMILAR TO THE GROUND NO.20, RAISED BY THE ASSESSEE IN ITS APPEAL IN ITA NO.3802/ MUM./2006, WHEREIN W E HAVE DISMISSED THIS GROUND FOR THE REASONS GIVEN THEREIN. CONSISTENT WITH THE VIEW TAKEN THEREIN, GROUND NO.6 RAISED BY THE REVENUE STANDS DISMISSED. 178 . GROUND NO.7, READS AS UNDER: 7 . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING THE AO TO INCLUDE THE PROFITS FROM GENERATION OF POWER CLAIMING DEDUCTION U/S 80 - I A FOR THE PURPOSE OF DED . U/S 80 HHC. 179 . AFTER HEARING BOTH THE PARTIES, WE FIND THAT THIS GROUND IS SIMILAR TO GROUND NO.21, RAISED BY THE ASSE SSEE IN ITS APPEAL IN ITA NO.3802/MUM./2006 , AND OTHER SIMILAR GROUND IN THE ASSESSMENT YEAR 2003 04 . CONSISTENT WITH THE VIEW TAKEN THEREIN, GROUND NO.7 RAISED BY THE REVENUE STANDS DISMISSED. 180 . GROUND NO.8, READS AS UNDER: 8. ON THE FACTS AND IN THE CI RCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT EXPLANATION TO SEC. 73 WOULD NOT BE APPLICABLE. THE WEST COAST PAPER MILLS LTD. 82 181 . AFTER HEARING BOTH THE PARTIES, WE FIND THAT THIS GROUND IS SIMILAR TO GROUND NO.5, RAISED BY THE REVENUE IN ITS APPEAL IN ITA NO.3 752/MUM./2006. CONSISTENT WITH THE VIEW TAKEN THEREIN, GROUND NO.8 RAISED BY THE REVENUE STANDS DISMISSED. 182 . GROUND NO.9, READS AS UNDER: 9. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING THE AO TO ALLOW I NCREMENTAL WAGES PAID DURING THE PREVIOUS YEAR NOT RELEVANT TO THE ASST. YEAR 2004 - 05. 183 . FACTS RELATING TO THIS ISSUE ARE THAT THE ASSESSEE HAS ENTERED INTO AN AGREEMENT ON 20 TH APRIL 2004, FOR WAGE REVISION WITH THE UNION OF THE STAFF ON 20 TH APRIL 200 4 FOR THE PERIOD OF FOUR YEARS I.E., FROM 1 ST JANUARY 2003 TO 31 ST DECEMBER 2006. SINCE THE LIABILITY TO PAY DIFFERENTIAL WAGE ACCRUED JUST AFTER THE END OF THE FINANCIAL YEAR AND BEFORE THE BALANCE SHEET DATE, THE INCREMENTAL LIABILITY FOR THE PERIOD FROM 1 ST JANUARY 2003 TO 31 ST MARCH 2004, AMOUNTING TO ` 6,86,90,112, WAS DEBITED TO THE PROFIT & LOSS ACCOUNT FOR THE FINANCIAL YEAR 2003 04. 184 . THE ASSESSING OFFICER HELD THAT OUT OF THE SAID AGREED AMOUNT, THE ASSESSEE IS ENTITLED TO GET DEDUCTION OF ` THE WEST COAST PAPER MILLS LTD. 83 5,49, 52,089, BEING EXPENDITURE PERTAINING TO THE YEAR UNDER CONSIDERATION AND BALANCE AMOUNT OF ` 13738023 BEING INCREMENTAL WAGES FOR THE PERIOD FROM 1 ST JANUARY 2003 TO 31 ST MARCH 2003 WAS DISALLOWED AS EXPENDITURE NOT PERTAINING TO THIS ASSESSMENT YEAR. HOWE VER, HE HELD THAT THE SAME WOULD BE ALLOWED IN THE ASSESSMENT YEAR 2005 06. 185 . BEFORE THE LEARNED COMMISSIONER (APPEALS), IT WAS SUBMITTED THAT THE ENTIRE LIABILITY FOR INCREMENTAL WAGES WAS DEBITED TO PROFIT & LOSS ACCOUNT OF THIS YEAR IN ACCORDANCE WITH T HE AS/4, ISSUED BY THE ICAI. RELIANCE WAS ALSO PLACED ON VARIOUS DECISIONS WHICH HAVE BEEN NOTED BY THE LEARNED COMMISSIONER (APPEALS) AT PARA 6 AND 7 OF THE ORDER. THE LEARNED COMMISSIONER (APPEALS) HELD THAT THERE IS NO DISPUTE REGARDING ALLOWABILITY OF THE CLAIM AND THE ASSESSING OFFICER HAS ONLY HELD THAT THE INCREMENTAL WAGES OF 12 MONTHS SHOULD BE ALLOWED AND NOT FOR THE ENTIRE 15 MONTHS AND 3 MONTHS WOULD BE ALLOWED IN THE SUBSEQUENT YEARS. 186 . LEARNED DEPARTMENTAL REPRESENTATIVE STRONGLY RELIED UPON TH E ORDER OF THE ASSESSING OFFICER AND THE LEARNED COUNSEL SUPPORTED THE ORDER OF THE LEARNED COMMISSIONER (APPEALS). THE WEST COAST PAPER MILLS LTD. 84 187 . AFTER CONSIDERING THE RIVAL SUBMISSIONS AND ALSO THE RELEVANT FINDINGS OF THE LEARNED COMMISSIONER (APPEALS) AND THE ASSESSING OFFICER, WE FIND THAT THERE IS NO DISPUTE THAT THE INCREMENTAL WAGES FROM THE PERIOD FROM 1 ST JANUARY 2003 TO 31 ST MARCH 2004, IS AN ALLOWABLE CLAIM. THE ASSESSEE HAS DEBITED WAGES OF 15 MONTHS IN THIS YEAR IN ACCORDANCE WITH THE AS/4 CONTINGENCIES AND EVENTS OCCUR RING AFTER THE BALANCE SHEET DATE . IN THIS CASE, THE AGREEMENT WITH THE LABOURS WAS ENTERED ON 20 TH APRIL 2004 I.E., AFTER THE CLOSING DATE OF BALANCE SHEET OF 31 ST MARCH 2003. THUS, THE ASSESSEE WAS ENTITLED TO MAKE THE ENTRY IN THIS YEAR AND TO CLAIM SU CH AN INCREMENTAL WAGES EVEN FOR THE PERIOD OF THREE MONTHS IE., 1 ST JANUARY 2003 TO 31 ST MARCH 2003 IN THIS YEAR ONLY. THUS, WE DO NOT FIND ANY REASON TO DEVIATE FROM THE FINDINGS / CONCLUSION GIVEN BY THE LEARNED COMMISSIONER (APPEALS). THUS, GROUND NO.9 RAISED BY THE REVENUE STANDS DISMISSED. 188 . GROUND NO.10, READS AS UNDER: 10. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN EXCLUDING EXCISE DUTY, SALES TAX, TURNOVER TAX FROM THE TOTAL TURNOVER OF THE BUSINESS OF THE ASSESSEE WHILE DETERMINING TOTAL TURNOVER FOR THE PURPOSE OF COMPUTING DEDUCTION U/ S 80HHC IGNORING THE AMENDED PROVISIONS OF SECTION 14A OF THE I.T. ACT, 1961. THE WEST COAST PAPER MILLS LTD. 85 189 . THIS GROUND IS SIMILAR TO GROUND NO.4, RAISED BY THE REVENUE IN ITS APPEAL IN APPEAL IN ITA NO.3752/MUM./2006, FOR THE ASSESSMENT YEAR 2002 03. CONSISTENT WITH THE VIEW TAKEN THEREIN, GROUND NO.10, RAISED BY THE REVENUE STANDS DISMISSED. 190 . GROUND NO.11, READS AS UNDER: 11. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEA RNED CIT(A) ERRED IN EXCLUDING THE VALUE OF INTERNAL CONSUMPTION OF POWER FROM THE TOTAL TURNOVER OF THE BUSINESS OF THE ASSESSEE FOR THE PURPOSE OF COMPUTING DEDUCTION U/S 80HHC. 191 . AFTER HEARING BOTH THE PARTIES, WE FIND THAT THIS GROUND IS SIMILAR TO GR OUND NO.18 RAISED BY THE ASSESSEE IN ITS APPEAL IN ITA NO.3802/MUM. /2006, FOR THE ASSESSMENT YEAR 2002 03, WHEREIN FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR EARLIER ASSESSMENT YEAR, THIS ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE . THUS, GROUND NO.11, RAISED BY THE REVENUE STANDS DISMISSED. 192 . 2004 05 192. IN THE RESULT, REVENUES APPEAL FOR THE ASSESSMENT YEAR 2004 05 IS PARTLY ALLOWED. WE NOW TAKE UP ASSESSEES APPEAL IN ITA NO.5271/MUM./ 2008, FOR THE ASSESSMENT YEAR 2005 0 6. THE WEST COAST PAPER MILLS LTD. 86 193 . GROUND NO.1, READS AS UNDER: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (APPEALS) WAS NOT JUSTIFIED IN HOLDING THAT EXTRANEOUS CHARGES SUCH AS ELECTRICITY DUTY SHOULD BE EXCLUDED FOR CALCULATING 'TRANSFER PRICE OF ELECTRI CITY' FOR THE PURPOSE OF COMPUTATION OF DEDUCTION UL S 80 - IA. 194 . THIS GROUND IS SIMILAR TO GROUND NO.8 RAISED BY THE ASSESSEE IN ITS APPEAL IN ITA NO.3802/MUM./2006, AND GROUND NO.1, RAISED BY THE ASSESSEE IN ITS APPEAL IN ITA NO.5269/MUM./2008. CONSISTENT WITH THE VIEW TAKEN THEREIN, GROUND NO.1, RAISED BY THE ASSESSEE IS TREATED AS ALLOWED. 195 . GROUND NO.2, READS AS UNDER: 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(APPEALS) WAS NOT JUSTIFIED IN HOLDING THAT FOR COMPUTING DEDUCTI ON UL S 80 - IA, THE PRORAT A INDIRECT EXPENSES OF THE COMPANY SHOULD BE REDUCED FROM THE PROFIT OF THE POWER UNITS. 196 . THIS GROUND IS SIMILAR TO GROUND NO. 9 RAISED BY THE ASSESSEE IN ITS APPEAL IN ITA NO.3802/MUM./2006, AND GROUND NO. 2 , RAISED BY THE ASSESSE E IN ITS APPEAL IN ITA NO.5269/MUM./2008. CONSISTENT WITH THE VIEW TAKEN THEREIN, GROUND NO.1, RAISED BY TH E ASSESSEE IS DISMISSED . 197 . GROUND NO.3, READS AS UNDER: 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE WEST COAST PAPER MILLS LTD. 87 THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ACTION OF THE A.O. IN DENYING THE ALTERNATE CLAIM OF THE APPELLANT FOR DEDUCTION UL S 80 - IA IN RESPECT OF PROFIT OF THE CHEMICAL RECOVERY BOILER, AS A ST ANDALONE POWER GENERATING UNIT. 198 . THIS GROUND IS SIMILAR TO GROUND NO. 5 RAISED BY THE ASSESSEE IN ITS APPEAL IN ITA NO.3802/MUM./2006, AND GROUND NO. 3 , RAISED BY THE ASSESSEE IN ITS APPEAL IN ITA NO.5269/MUM./2008. CONSISTENT WITH THE VIEW TAKEN THEREIN, GROUND NO.1, RAISED BY THE ASSESSEE IS ALLOWED. 199 . GROUND NO.4, READS AS UNDER: 4. TH AT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (APPEALS) WAS NOT JUSTIFIED IN DENYING THE ALTERNATE CLAIM OF THE APPELLANT FOR DEDUCTION UL S 80IA IN RESPECT OF INTEGRATED POWER UNIT NO.6 AND THEREBY ERRED IN NOT D IRECTING THE A.O. TO QUA NTIFY DEDUCTION UL S 80IA AVAILAB LE IN RESPECT OF THE SAID UNIT. 200 . THIS GROUND IS SIMILAR TO GROUND NO. 6 AND 7 RAISED BY THE ASSESSEE IN ITS APPEAL IN ITA NO.3802/MUM./2006, AND GROUND NO. 4 , RAISED BY THE ASSESSEE IN ITS APPEAL IN ITA NO.5269/MUM./2008. C ONSISTENT WITH THE VIEW TAKEN THEREIN, GROUND NO.1, RAISED BY THE ASSESSEE IS TREATED AS ALLOWED. 201 . GROUND NO.5 AND 6, READS AS UNDER: 5. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(APPEALS) WAS NOT JUSTIFIED IN HOLDING THAT EXPEN DITURE ON REPAIRS OF FURNITURE TO THE TUNE OF RS. 82,266 / ARE CAPITAL EXPENDITURE. THE WEST COAST PAPER MILLS LTD. 88 6. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (APPEALS) FAILED TO APPRECIATE THE FACT THAT SUCH EXPENDITURE OF RS. 82,2661 - HAS BEEN INCURRED IN TH E REGULAR COURSE OF RUNNING OF EXISTING BUSINESS AND NOT FOR BRINGING INTO EXISTENCE ANY NEW ASSETS OF ENDURING BENEFITS IN FUTURE AND HENCE, NO PART OF THE SAID EXPENDITURE CAN BE TREATED AS CAPITAL EXPENDITURE. 202 . THESE GROUNDS ARE SIMILAR TO GROUND NO . 10 TO 12 RAISED BY THE ASSESSEE IN ITS APPEAL IN ITA NO.3802/MUM./2006, AND GROUND NO. 5 AND 6 , RAISED BY THE ASSESSEE IN ITS APPEAL IN ITA NO.5269/MUM./2008. CONSISTENT WITH THE VIEW TAKEN THEREIN, GROUND NO.5 AND 6, RAISED BY THE ASSESSEE ARE TREATED AS ALLOWED. 203 . GROUND S NO.7 , 8 AND 9, READ AS UNDER: 7. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(APPEALS) WAS NOT JUSTIFIED IN DISALLOWING THE CLAIM OF DEDUCTION U/S 80 JJ A IN RESPECT OF CHEMICAL RECOVERY BOILER WHICH IS ENGAGED IN G ENERATION OF POWER FROM BIO - DEGRADABLE WASTE . 8. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(APPEALS) WAS NOT JUSTIFIED AND GROSSLY ERRED IN HOLDING THAT UNDERTAKING SET UP FOR GENERATION OF STEAM CANNOT BE REGARDED AS ONE SET UP F OR 'GENERATION OF POWER' AS LAID DOWN IN SECTION 80 JJ A. 9. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(APPEALS) WAS NOT JUSTIFIED AND GROSSLY ERRED IN HOLDING THAT STEAM CANNOT BE CONNOTED AS POWER. 204 . AFTER HEARING BOTH THE PARTIE S, WE FIND THAT THESE GROUNDS ARE SIMILAR TO THE GROUNDS NO.22 AND 23 RAISED BY THE ASSESSEE IN ITS APPEAL IN ITA NO.3802/MUM./2006, AND GROUNDS NO.10, 11 AND 12 THE WEST COAST PAPER MILLS LTD. 89 RAISED BY THE ASSESSEE IN ITS APPEAL IN ITA NO.5269/MUM./2008. CONSISTENT WITH THE VIEW TAKEN THEREIN, THE GROUNDS NO.10, 11 AND 12 RAISED BY THE ASSESSEE ARE TREATED AS ALLOWED . 205 . GROUND NO.10, READS AS UNDER: 10. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE NECESSARY DIRECTIONS MAY PLEASE BE GIVEN TO A.O. THAT IN THE UNLIKELY EVENT T HE CLAIM FOR DEDUCTION IN RESPECT OF LIABILITY FOR INCREMENTAL WAGES IS NOT ALLOWED IN A . Y . 2004 - 05 THEN THE SAME BE ALLOWED IN AY 2005 - 06 AS HELD IN THE O RDER U/S 143(3) FOR AY 2004 - 05. 206 . WE HAVE HEARD BOTH THE PARTIES. THE ISSUE ARISING FROM THE ABOVE G ROUND HAS BEEN DEALT BY US WHILE DEALING GROUND NO.9 RAISED BY THE REVENUE IN ITS APPEAL NO.5708/MUM./2008 WHEREIN WE HAVE ALLOWED THE INCREMENTAL WAGES IN THE ASSESSMENT YEAR 2004 05. SINCE WE HAVE ALLOWED THE PART OF INCREMENTAL WAGES IN THE ASSESSMENT Y EAR 2004 05, IN THIS YEAR, THE SAID ISSUE BECOMES INFRUCTUOUS. HENCE, GROUND NO.10, STANDS DISMISSED. 207 . THE ASSESSEE HAS ALSO RAI S ED ADDITIONAL GROUND, WHICH READS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A ) OUGHT TO HAVE HELD THAT THE INTEREST LEVIED BY THE ASSESSING OFFICER U/S 234B AND 234D IS BAD IN LAW AND IN VIOLATION OF PRINCIPLES OF NATURAL JUSTICE. THE APPELLANT PRAYS THAT NO INTEREST UNDER SECTION 234B AND 234D SHOULD BE LEVIED WHEN THE WEST COAST PAPER MILLS LTD. 90 THE ADDITION IS MADE DUE TO RETROSPECTIVE AMENDMENT IN THE ACT AND THE SAME MAY PLEASE BE DELETED. 208 . THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE DISALLOWANCE ON ACCOUNT OF DIVIDEND DISTRIBUTION TAX AND DEFERRED TAX HAS BEEN CONFIRMED BY THE LEARNED COMMISSION ER (APPEALS) WHILE COMPUTING THE BOOK PROFIT UNDER SECTION 115JB. THE ASSESSEE HAS NOT PREFERRED ANY APPEAL ON THIS DISALLOWANCE IN VIEW OF THE AMENDMENT MADE BY THE FINANCE ACT, 2008 WITH RETROSPECTIVE EFFECT FROM 1 ST APRIL 2001. HOWEVER, FOR THE PURPOSE OF LEVYING INTEREST UNDER SECTION 234B, NO INTEREST SHOULD BE CHARGED AS AT THE TIME OF FILING OF RETURN OF INCOME N O SUCH PROVISIONS WAS THERE FOR DISALLOWANCE IN THE STATUTE. HE THUS, SUBMITTED THAT NO INTEREST UNDER SECTION 234B AND 234D, SHOULD BE CHAR GED. IN SUPPORT OF HIS CONTENTION, HE RELIED UPON THE DECISION OF THE CALCUTTA HIGH COURT IN IMAMI LTD. V/S CIT, [2011] 337 ITR 470 (CAL.). HE ALSO RELIED UPON THE DECISION OF THE CO ORDINATE BENCH IN ESSAR STEELS INDIA LTD. V/S ACIT, ITA NO.7013/MUM./2011 , ORDER DATED 27 TH SEPTEMBER 2013. 209 . THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, RELIED UPON THE ORDER OF THE LEARNED COMMISSIONER (APPEALS). 210 . AFTER HEARING THE RIVAL SUBMISSIONS AND ON A PERUSAL OF THE RELEVANT DECISIONS RELIED UPON BY THE LEARNED COUNSEL, WE FIND THAT THIS THE WEST COAST PAPER MILLS LTD. 91 ISSUE STANDS SQUARELY COVERED BY THE DECISION OF THE TRIBUNAL IN ESSAR STEELS INDIA LTD. CITED SUPRA, WHEREIN THE TRIBUNAL, AFTER FOLLOWING THE CALCUTTA HIGH COURT DECISION IN IMAMI LTD. (SUPRA), HELD THAT NO INTEREST UN DER SECTION 234B CAN BE LEVIED ON ACCOUNT OF SUCH RETROSPECTIVE AMENDMENT IN SECTION 115JB. THE RELEVANT OBSERVATIONS AND THE FINDINGS OF THE TRIBUNAL ARE AS UNDER: 15. WE HAVE HEARD THE RIVAL CONTENTION AND ALSO PERUSED THE RELEVANT FINDINGS OF THE AUT HORITIES BELOW. THERE IS NO QUARREL WITH THE PROPOSITION THAT THE PROVISIONS OF SECTION 234B AND 234C ARE MANDATORY IN NATURE ONCE IT HAS BEEN ESTABLISHED THAT THE ASSESSEE HAD LIABILITY TO PAY ADVANCE TAX AS PROVIDED IN SECTIONS 207 AND 208, ON THE BOOK P ROFIT. THE HON'BLE SUPREME COURT IN CIT V/S ROLTA INDIA LTD, [2011] 330 ITR 470, HAS HELD THAT EVEN THE ASSESSMENT UNDER SECTION 115JB, PROVISIONS RELATING TO PAYMENT OF ADVANCE TAX ARE APPLICABLE WHERE BOOK PROFIT IS DEEMED TO BE THE TOTAL INCOME UNDER SE CTION 115JB. HOWEVER, IT HAS TO BE SEEN WHETHER THE LIABILITY TO PAY SUCH ADVANCE TAX EXISTED AT THE TIME OF DUE DATE OF THE PAYMENT OF ADVANCE TAX AS PROVIDED UNDER THE ACT OR NOT. IF SUCH A LIABILITY HAS BEEN FASTENED FOR A FUTURE DATE BY VIRTUE OF ANY R ETROSPECTIVE AMENDMENT THEN THE ASSESSEE CANNOT BE HELD TO FORESEE AND PAY THE ADVANCE TAX. THE EXPLANATION 1 WITH VARIOUS CLAUSES HAVE BEEN BROUGHT IN THE STATUTE BY THE FINANCE ACT, 2008, WITH RETROSPECTIVE EFFECT FROM 1 ST APRIL 2001. THE FINANCIAL YEAR ENDING IN THIS CASE WAS 31 ST MARCH 2007 AND BY THIS TIME NO AMENDMENT WAS BROUGHT IN THE STATUTE FASTENING ANY LIABILITY OR EXPANDING THE SCOPE OF BOOK PROFIT AS STIPULATED IN THE EXPLANATION. AT THE TIME OF MAKING THE ADVANCE TAX, THE ASSESSEE CANNOT BE E XPECTED TO DO IMPOSSIBILITY I.E., LEX NON COGIT AD IMPOSIBILIA. ONCE THE ASSESSEE CANNOT FORESEE THE EXPANSION OF THE SCOPE OF BOOK PROFIT BY A SUBSEQUENT AMENDMENT, HE CANNOT BE HELD TO BE DEFAULTER FOR THE PAYMENT OF ADVANCE TAX, WHEN AT THAT TIME NO S UCH PROVISION EXISTED IN THE STATUTE. THIS PRECISE ISSUE HAS BEEN DEALT AND DISCUSSED IN DETAIL BY THE HONBLE CALCUTTA HIGH COURT IN EMAMI LTD. (SUPRA), WHEREIN, IT IS HELD AS UNDER: THE WEST COAST PAPER MILLS LTD. 92 IN THE CASE BEFORE US, THE LAST DATE OF THE RELEVANT FINANCIAL YEAR W AS 31ST MARCH, 2001 AND ON THAT DAY, ADMITTEDLY, THE APPELLANT HAD NO LIABILITY TO PAY ANY AMOUNT OF ADVANCE TAX IN ACCORDANCE WITH THE THEN LAW PREVAILING IN THE COUNTRY. CONSEQUENTLY, THE APPELLANT PAID NO ADVANCE TAX AND SUBMITTED ITS REGULAR RETURN ON 31ST OCT., 2001 WITHIN THE TIME FIXED BY LAW WHEREIN IT DECLARED ITS TOTAL INCOME AND THE BOOK PROFIT BOTH AS NIL. HOWEVER, CONSEQUENT TO THE AMENDMENT OF THE PROVISIONS CONTAINED IN S. 115JB OF THE ACT BY VIRTUE OF FINANCE ACT, 2002 WHICH WAS PUBLISHED IN THE OFFICIAL GAZETTE ON 11TH MAY, 2002 GIVING RETROSPECTIVE EFFECT TO THE AMENDMENT FROM 1ST APRIL, 2001, THE APPELLANT FIRST VOLUNTARILY PAID A SUM OF RS. 1,55,62,511 ON ACCOUNT OF THE TAX PAYABLE ON BOOK PROFIT AS PROVIDED IN AMENDED PROVISION OF S. 115 JB AND THEN FILED ITS REVISED RETURN OF 31 ST MARCH, 2003 DECLARING ITS BUSINESS INCOME AS NIL BUT THE BOOK PROFIT UNDER S. 115JB AS RS. 20,63,65,711. THE AO ACCEPTED SUCH RETURN OF INCOME BUT IMPOSED INTEREST UNDER SS. 234B AND 234C OF THE ACT AMOUNTING TO RS. 44,00,937 AND RS. 11,78,960 RESPECTIVELY. IN OUR OPINION, THE AMENDED PROVISION OF S. 115JB HAVING COME INTO FORCE W.E.F. 1ST APRIL, 2001, THE APPELLANT CANNOT BE HELD DEFAULTER OF PAYMENT OF ADVANCE TAX. AS POINTED OUT EARLIER, ON THE LAST DATE OF T HE FINANCIAL YEAR PRECEDING THE RELEVANT ASSESSMENT YEAR, AS THE BOOK PROFIT OF THE APPELLANT IN ACCORDANCE WITH THE THEN PROVISION OF LAW WAS NIL, WE CANNOT CONCEIVE OF ANY 'ADVANCE TAX' WHICH IN ESSENCE IS PAYABLE WITHIN THE LAST DAY OF THE FINANCIAL YEA R PRECEDING THE RELEVANT ASSESSMENT YEAR AS PROVIDED IN SS. 207 AND 208 OR WITHIN THE DATES INDICATED IN S. 211 OF THE ACT WHICH INEVITABLY FALLS WITHIN THE LAST DATE OF FINANCIAL YEAR PRECEDING THE RELEVANT ASSESSMENT YEAR. CONSEQUENTLY, THE ASSESSEE CANN OT BE BRANDED AS A DEFAULTER IN PAYMENT OF ADVANCE TAX AS MENTIONED ABOVE. AT THIS STAGE, WE MAY PROFITABLY RELY UPON THE OBSERVATIONS OF THE SUPREME COURT IN THE CASE OF STAR INDIA (P) LTD. VS. CCE (2006) 201 CTR (SC) 63 : (2006) 280 ITR 321 (SC) STRONGLY RELIED UPON BY MR. BAJORIA, WHERE THE APEX COURT IN THE CONTEXT OF IMPOSITION OF SERVICE TAX BY THE FINANCE ACT, 2002 WITH RETROSPECT THE WEST COAST PAPER MILLS LTD. 93 TIVE EFFECT HELD THAT THE LIABILITY TO PAY INTEREST WOULD ARISE ONLY ON DEFAULT AND IS REALLY IN THE NATURE OF QUASI - PUNI SHMENT AND THUS, ALTHOUGH THE LIABILITY TO PAY TAX AROSE DUE TO RETROSPECTIVE EFFECT OF LAW, SAME SHOULD NOT ENTAIL THE PUNISHMENT OF PAYMENT OF INTEREST. ALTHOUGH MR. NIZAMUDDIN, THE LEARNED COUNSEL APPEARING ON BEHALF OF THE REVENUE, IN THIS CONNECTION, STRONGLY RELIED UPON THE DECISION OF THE SUPREME COURT IN THE CASE OF JT. CIT VS. ROLTA INDIA LTD. (SUPRA), WE FIND THAT IN THAT CASE THE QUESTION WAS WHETHER INTEREST UNDER S. 234B OF THE ACT COULD BE CHARGED ON THE TAX CALCULATED ON THE BOOK PROFIT UNDER S. 115JA AND IN OTHER WORDS, WHETHER ADVANCE TAX WAS AT ALL PAYABLE ON BOOK PROFITS UNDER S. 115JA OF THE ACT. THE SUPREME COURT ANSWERED THE SAID QUESTION IN THE AFFIRMATIVE AND FURTHER HELD THAT THE PROVISIONS OF INTEREST ON DEFAULT AS PROVIDED IN SS. 2 34B AND 234C WOULD ALSO APPLY. WE HAVE ALREADY POINTED OUT THAT MR. BAJORIA, AT THE VERY OUTSET, CONCEDED THAT THE SAID DECISION SHOULD BE APPLIED FOR ANSWERING THE FIRST QUESTION FORMULATED IN THIS APPEAL AGAINST HIS CLIENT. IN OUR OPINION, THE SAID DECIS ION IS NOT RELEVANT FOR CONSIDERING THE SECOND AND THE THIRD QUESTIONS AS TO WHETHER AN ASSESSEE CAN BE SAID TO BE A DEFAULTER IN PAYMENT OF ADVANCE TAX IF HE HAD NO LIABILITY TO MAKE PAYMENT OF SUCH TAX ON THE LAST DATE OF A FINANCIAL YEAR PRECEDING THE R ELEVANT ASSESSMENT YEAR AS SUCH QUESTION DID NOT ARISE IN THE SAID CASE BEFORE THE SUPREME COURT. IT APPEARS THAT THE LEARNED TRIBUNAL HAS NOT AT ALL CONSIDERED THE AFORESAID ASPECT AS TO THE LIABILITY OF THE ASSESSEE TO MAKE PAYMENT OF THE ADVANCE TAX ON THE LAST DAY OF THE FINANCIAL YEAR I.E. 31ST MARCH, 2001 WHEN ITS BOOK PROFIT WAS NIL ACCORDING TO THE THEN LAW OF THE LAND. THE VARIOUS DECISIONS OF THE OTHER HIGH COURTS AND THE TRIBUNALS RELIED UPON BY THE TRIBUNAL DID NOT EFFECTIVELY CONSIDER THE QUES TION WHETHER EVEN IN A CASE LIKE THE PRESENT ONE WHERE ON THE LAST DATE OF THE FINANCIAL YEAR PRECEDING THE RELEVANT ASSESSMENT YEAR, THE ASSESSEE HAD NO LIABILITY TO PAY ADVANCE TAX, HE WOULD BE NEVERTHELESS ASKED TO PAY INTEREST IN TERMS OF S. 234B AND S . 234C OF THE ACT FOR DEFAULT IN MAKING PAYMENT OF TAX IN ADVANCE WHICH WAS PHYSICALLY IMPOSSIBLE. WE, THEREFORE, PARTLY ALLOW THE APPEAL BY THE WEST COAST PAPER MILLS LTD. 94 ANSWERING THE FIRST QUESTION IN THE AFFIRMATIVE AND AGAINST THE ASSESSEE AND THE SECOND AND THE THIRD QUESTIONS IN THE NEGATIVE AND AGAINST THE REVENUE. THE ORDER PASSED BY THE TRIBUNAL IS, THUS, SET ASIDE TO THE EXTENT INDICATED ABOVE. THUS, WE HOLD THAT NO INTEREST UNDER SECTION 234B CAN BE LEVIED ON ACCOUNT OF SUCH RETROSPECTIVE AMENDMENT IN SECTION 115JB AND, AC CORDINGLY, THIS GROUND IS TREATED AS ALLOWED. 211 . THUS, RESPECTFULLY FOLLOWING THE DECISION OF THE CALCUTTA HIGH COURT IN IMAMI LTD. (SUPRA), WE HOLD THAT NO INTEREST UNDER SECTION 234B AND 234D CAN BE LEVIED ON THE DISALLOWANCE MADE UNDER SECTION 115JB IN V IEW OF THE RETROSPECTIVE AMENDMENT. ACCORDINGLY, THE ADDITIONAL GROUND RAISED BY THE ASSESSEE IS TREATED AS ALLOWED. 212 . 2005 06 212. IN THE RESULT, ASSESSEES APPEAL FOR THE ASSESSMENT Y EAR 20 05 06 IS PARTLY ALLOWED. WE NOW TAKE UP THE REVENUES APPEAL IN ITA NO. 5709 /MUM./ 2008, FOR THE ASSESSMENT YEAR 2005 06, VIDE WHICH, FOLLOWING GROUNDS HAVE BEEN RAISED: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT( A) ERRED IN HOLDING THAT CAPTIVE POWER CONSUMPTION FROM GENERATING SET WOULD BE ELIGIBLE FOR DEDUCTION U / S. 80 - IA. 1.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT THE THE WEST COAST PAPER MILLS LTD. 95 PROVISIONS OF SECTION 80 - IA(3)(I I) ARE SATISFIED IN RESPECT OF THE DG SETS. 1.2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING T HAT THE PROVISIONS OF SECTION 80 - IA(3)(I) ARE SATISFIED IN RESPECT OF UNIT NO. 1. 213 . AFTER HEARING BOTH THE P ARTIES, WE FIND THAT THE ISSUE ARISING OUT OF THE AFORESAID GROUNDS IS SIMILAR TO THE ISSUE RAISED IN GROUNDS NO.1, 2 AND 3 BY THE REVENUE IN ITS APPEAL IN ITA NO.3752/MUM./2006, FOR THE ASSESSMENT YEAR 2002 03. IN VIEW OF THE FINDINGS GIVEN THEREIN, GROUN DS NO.1, 1.1 AND 1.2, RAISED BY THE REVENUE ARE DISMISSED. 214 . GROUND NO.2, READS AS UNDER: 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DISMISSING THE METHOD ADOPTED BY THE AO IN DETERMINING THE TRANSFER PRICE O F POWER WHILE QUANTIFYING THE AMOUNT ELIGIBLE FOR EDUC A TION U / S 80 IA OF THE ACT IGNORING THE PROVISIONS OF SE CTION 80 IA( 8 ) AND 80 IA(10) OF THE I. T. ACT, 1961. 2.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN ACCEP TING THE NOTIONAL SALE PRICE OF ELECTRICITY GENERATED FROM DG SET, AT INFLATED RATE (I.E. THE RATE AT WHICH THE COMPANY HAS BOUGHT FROM KARNATAKA ELECTRICITY BOARD) IN CONTRAVENE TION OF PROVISIONS OF SECTION 80 IA( 8 ) AND 80 IA(10) READ WITH EXPLANATION 1 W HICH PROVIDES FOR ADOPTING THE MARKET VALUE AS A PRICE WHICH ASSESSEE'S POWER GENERATED COULD FETCH IN THE MARKET RESTRICTED BY THE GOVERNMENT ACT FOR SELLING POWER THEREBY ALLOWING EXCESS CLAIM OF DEDUCTION U / S 80 IA OF THE ACT. THE LD. CIT(A) HAS, THEREFO RE, ERRED IN ACCEPTING THE PURCHASE PRICE OF POWER AS FAIR MARKET VALUE (I.E. THE RATE AT WHICH KARNATAKA ELECTRICITY BOARD IS SELLING) AS AGAINST CONTROLLED SALE PRICE OF POWER BY THE ASSESSEE WHICH IS THE WEST COAST PAPER MILLS LTD. 96 OTHERWISE REQUIRED TO BE TAKEN UNDER THE ACT WHEN THE SAID SALE PRICE IS CONTROLLE D BY THE GOVERNMENT REGULATION. 215 . AFTER HEARING BOTH THE PARTIES, WE FIND THAT THE ISSUE ARISING OUT OF THE AFORESAID GROUNDS IS SIMILAR TO THE ISSUE RAISED IN GROUND NO.8, BY THE ASSESSEE IN ITS APPEAL IN ITA NO.2802/MUM./2006 . IN VIEW OF THE FINDINGS GIVEN THEREIN, GROUNDS NO.2 AND 2.1, RAISED BY THE REVENUE ARE TREATED AS DISMISSED. 216 . GROUND NO.3, READS AS UNDER: 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN ACCEPTING THE CAPITAL E XPENDITURE OF RS.19,49, 8 03 / AS REVENUE EXPENDITURE IGNORING THE NATURE AND MAGNITUDE OF EXPENDITURE INCURRED UNDER EACH HEAD OF EXPENDITURE ON SOFTWARE AND ITS MAINTENANCE, EXPENDITURE ON SMALL COMPUTER SPARES AND OTHER ASSETS, EXPENDITURE ON EXISTING PAR TS OF PLANT & MACHINERY, EXPENDITURE ON NON - RESIDENTIAL BUILDINGS AND EXPENDITURE ON FURNITURE. 217 . AFTER HEARING BOTH THE PARTIES, WE FIND THAT THIS GROUND IS SIMILAR TO GROUNDS NO.10, 11 AND 12, RAISED BY THE ASSESSEE IN ITS APPEAL IN ITA NO.2802/MUM./20 06, THEREFORE, CONSISTENT WITH THE VIEW TAKEN THEREIN, GROUND NO.3, RAISED BY THE REVENUE IS TREATED AS DISMISSED. 218 . GROUND NO.4, 4.1 AND 4.2, READ AS UNDER: 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETIN G THE THE WEST COAST PAPER MILLS LTD. 97 DISALLOWANCE OF EXPENDITURE MADE U / S 14A. 4.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE FINDINGS OF THE CIT(A) THAT THE ASSESSEE HAD SUFFICIENT FUND AVAILABLE AS INTEREST FREE FROM SALES TAX DEFERRAL LOAN TO MEET THE INVEST MENT IN SECURITIES IS ERRONEOUS AND WITHOUT ANY MATERIAL ON RECORD. 4.2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE FINDINGS OF THE CIT(A) IS CONTRARY TO THE ESTABLISHED LAW INASMUCH AS THE ASSESSEE FAILED TO ESTABLISH THE NEXUS BE TWEEN AVAILABILITY OF INTEREST FREE FUNDS FOR INVESTMENTS IN THE SECURITIES FROM WHICH THE DIVIDEND WAS EARNED. 219 . BEFORE US, THE LEARNED COUNSEL SUBMITTED THAT IN THIS YEAR, THE ASSESSING OFFICER HAS ONLY DISALLOWED INTEREST AND NO ADMINISTRATIVE EXPENSE S HAS BEEN DISALLOWED UNLIKE THE APPEAL FOR THE ASSESSMENT YEAR 2004 05 IN ITA NO.5708/ MUM./2008. HE SUBMITTED THAT LIKE IN THE EARLIER YEARS ALSO, THE ASSESSEE HAD HUGE SURPLUS FUNDS IN THE FORM OF SHARE CAPITAL, RESERVE SURPLUS AGGREGATING TO ` 164,66,6 2,800, AS ON 31 ST MARCH 2005, WHEREAS INVESTMENT STOOD AT ` 44,74,99,000. THUS, THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN RELIANCE UTILITIES AND POWER PVT. LTD. (SUPRA) WILL APPLY TO THE FACTS OF THE PRESENT CASE. 220 . THE LEARNED DEPARTMENTAL R EPRESENTATIVE, ON THE OTHER HAND, RELIED UPON THE ORDER OF THE ASSESSING OFFICER. THE WEST COAST PAPER MILLS LTD. 98 221 . AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE FIND THAT THIS ISSUE HAS ALREADY BEEN ADJUDICATED BY US IN THE APPEAL FOR THE ASSESSMENT YEAR 2002 03 AND 2004 05. IT IS UNDISPUT ED FACT THAT THE ASSESSEE HAS HUGE INTEREST FREE AND SURPLUS FUNDS IN THIS YEAR ALSO AS COMPARED TO THE INVESTMENT WHICH STOOD AS ON 31 ST MARCH 2005. IN SUCH A SITUATION, THERE CANNOT BE A NOTIONAL DISALLOWANCE OF INTEREST UNDER SECTION 14A. THE PRINCIPLE LAID DOWN BY THE JURISDICTIONAL HIGH COURT IN RELIANCE UTILITIES AND POWER PVT. LTD. (SUPRA) WILL BE SQUARELY APPLICABLE. THUS, THE GROUND NO.4, 4.1 AND 4.2 ARE TREATED AS ALLOWED. 222 . GROUND NO.5, READS AS UNDER: 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.16,12,20 8/ MADE BY THE AO UNDER THE HEAD SHORT TERM CAPITAL GAIN ARISING OUT OF SALE OF D.G. SETS FROM THE BLOCK OF PLANT & MACHINERY OF POWER UNIT NO.1. 223 . BRIEF FACTS ARE THAT DU RING THE RELEVANT FINANCIAL YEAR, THE ASSESSEE HAS SOLD VARIOUS FIXED ASSETS ON WHICH THE ASSESSEE HAS EARNED PROFIT OF ` 1,52,68,923, WHICH WAS ARRIVED AT AFTER SET OFF OF LOSS OF ` 1,23,21,301, O N THE SALE OF D.G. SET NO.1, 2, 3 AND 4 OF POWER UNIT NO.1. SINCE THE SAID PROFIT WAS COMPUTED AS PER THE PROVISIONS OF THE COMPANIES ACT, 1956, THE WEST COAST PAPER MILLS LTD. 99 IN THE COMPUTATION OF TOTAL INCOME SUBMITTED ALONG WITH THE RETURN OF INCOME, THE ASSESSEE EXCLUDED IT AS SALE PROCEEDS OF THE ASSETS WHICH WERE REDUCED FROM THE RESPECTI VE BLOCK OF ASSETS AND NO SHORT TERM CAPITAL GAIN WAS COMPUTED BECAUSE THE BLOCK EXISTED FOR THE COMPANY AS A WHOLE. THE ASSESSING OFFICER HELD THAT SINCE THE SALE PROCEEDS OF D.G. SET AMOUNTING TO ` 64,69,588 , EXCEEDED THE WDV OF THE BLOCK OF PLANT AND MA CHINERY OF POWER UNIT NO.1, AMOUNTING TO ` 42,89,587, THEREFORE, THE ASSESSEE HAD EARNED SHORT TERM CAPITAL GAIN OF ` 21,80,001. HE FURTHER CALCULATED THE ACTUAL LOSS FROM POWER UNIT NO.1 BY REDUCING THE BOOK LOSS ON THE SALE OF DG SET FROM THE TOTAL LOSS OF POWER UNIT NO.1. HE HELD THAT THE ACTUAL LOSS IS ONLY ` 5,67,393 AND REDUCED IT FROM THE SHORT TERM CAPITAL GAIN OF ` 21,80,001 AND TREATED THE BALANCE AMOUNT OF ` 12,12,208 AS SHORT TERM CAPITAL GAIN LIABLE FOR TAX. 224 . BEFORE THE LEARNED COMMISSIONER (AP PEALS), THE ASSESSEE SUBMITTED THAT SHORT TERM CAPITAL GAIN IN CASE OF DEPRECIABLE ASSETS ARISES ONLY WHEN THE SALE CONSIDERATION EXCEEDS THE AGGREGATE OF OPENING WDV OF THE BLOCK, PURCHASES DURING THE YEAR AND THE EXPENDITURE INCURRED IN RELATION TO THE S ALE OF THE WEST COAST PAPER MILLS LTD. 100 ASSETS. THE ASSESSEE DEMONSTRATED THAT THE SALE CONSIDERA TION WAS ` 64,69,588 WHEREAS THE AGGREGATE OF THE THREE PARAMETERS COMES TO ` 100,72,01,923. IT WAS FURTHER SUBMITTED THAT THE SHORT TERM CAPITAL GAIN ON SALE OF DEPRECIABLE ASSETS HAS TO BE COMPUTED FOR THE ASSESSEE AS A WHOLE AND NOT INDEPENDENTLY FOR EACH UNIT. 225 . THE LEARNED COMMISSIONER (APPEALS) HELD THAT THE ASSESSING OFFICER HAS ERRED IN QUANTIFYING THE SHORT TERM CAPITAL GAIN ON SALE OF PLANT AND MACHINERY OF POWER UNIT NO.1 EVEN THOUGH THE BLOCK OF MACHINE RY OF THE ASSESSEE AS A WHOLE WAS STILL IN EXISTENCE. 226 . THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE ORDER OF THE ASSESSING OFFICER , WHEREAS, THE LEARNED COUNSEL, ON THE OTHER HAND, SUPPORTED THE ORDER OF THE LEARNED COMMISSI ONER (APPEALS). 227 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT FINDINGS OF THE AUTHORITIES BELOW. PROVISIONS OF SECTION 50 PROVIDES FOR SPECIAL PROVISION FOR COMPUTATION OF CAPITAL GAIN IN THE CASE OF DEPRECIABLE ASSETS. THE RELEVANT PROVISI ONS OF SECTION 50, READ AS UNDER: THE WEST COAST PAPER MILLS LTD. 101 50. SPECIAL PROVISION FOR COMPUTATION OF CAPITAL GAINS IN CASE OF DEPRECIABLE ASSETS NOTWITHSTANDING ANYTHING CONTAINED IN CLAUSE (42A) OF SECTION 2, WHERE THE CAPITAL ASSET IS AN ASSET FORMING PART OF A BLOCK OF ASSET S IN RESPECT OF WHICH DEPRECIATION HAS BEEN ALLOWED UNDER THIS ACT OR UNDER THE INDIAN INCOME - TAX ACT, 1922 (11 OF 1922 ), THE PROVISIONS OF SECTIONS 48 AND 49 SHALL BE SUBJECT TO THE FOLLOWING MODIFICATIONS: - (1) WHERE THE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF THE ASSET TOGETHER WITH THE FULL VALUE OF SUCH CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF ANY OTHER CAPITAL ASSET FALLING WITHI N THE BLOCK OF THE ASSETS DURING THE PREVIOUS YEAR, EXCEEDS THE AGGREGATE OF THE FOLLOWING AMOUNTS, NAMELY: - (I) EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH SUCH TRANSFER OR TRANSFERS; (II) THE WRITTEN DOWN VALUE OF THE BLOCK OF ASSETS AT THE BEGINNING OF THE PREVIOUS YEAR; AND (III) THE ACTUAL COST OF ANY ASSET FALLING WITHIN THE B LOCK OF ASSETS ACQUIRED DURING THE PREVIOUS YEAR, SUCH EXCESS SHALL BE DEEMED TO BE THE CAPITAL GAINS ARISING FROM THE TRANSFER OF SHORT - TERM CAPITAL ASSETS; 228 . THUS, THE SHORT TERM CAPITAL GAIN ARISES IN CASE OF DEPRECIABLE ASSETS ONLY IF THE FULL VALUE O F CONSIDERATION EXCEEDS THE EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH SUCH TRANSFER TO BE WDV OF THE BLOCK OF ASSETS AT THE BEGINNING OF THE PREVIOUS YEAR AND THE ACTUAL COST OF ANY ASSET FALLING WITHIN THE BLO CK OF ASSETS ACQUIRED DURING THE PREVIOUS YEAR. IT IS ONLY THEN THE EXCESS CONSIDERATION SHALL BE DEEMED TO BE SHORT TERM CAPITAL GAIN. THE LEARNED COMMISSIONER (APPEALS) HAS GIVEN A CATEGORICAL THE WEST COAST PAPER MILLS LTD. 102 FINDING THAT THE SALE CONSIDERATION IS FAR LESS THEN THE SUM MENTIONED IN THE AFORESAID THREE PARAMETERS. THE LEARNED COUNSEL ALSO POINTED OUT BEFORE US THAT THE AGGREGATE OF THE THREE PARAMETERS GIVEN IN SECTION 50 FAR EXCEEDED THE SALE CONSIDERATION. THUS, ON THESE FACTS, WE DO NOT FIND ANY REASON TO DEVIATE FROM SUCH A FINDING. GROUND NO.5, IS TREATED AS DISMISSED. 229 . GROUND NO.6(I) AND 6(II), READS AS UNDER: 6(I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITIONS MADE BY THE AO ON ACCOUNT OF INCLUDING UNU TILIZED MODVAT CREDIT IN VALUE OF CLOSING STOCK AS PER PROVISIONS OF SECTION 14 5 A OF THE I. T. ACT. 6(II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITIONS MADE BY THE AO ON ACCOUNT OF INCLUDING U NUTILIZED MODVAT CREDIT IN VALUE OF CLOSING STOCK AS PER PROVISIONS OF SECTION 14 5 A OF THE I. T. ACT WHICH THE TAX AUDITOR OF THE COMPANY HIMSELF MENTIONED IN THE AUDIT REPORT. 230 . BEFORE US, THE LEARNED COUNSEL SUBMITTED THAT THE ASSESSING OFFICER HAS HELD THAT THE UNUTILISED MODVAT CREDIT HAS TO BE ADDED IN THE CLOSING STOCK IN VIEW OF THE PROVISIONS OF SECTION 145A. THE ASSESSING OFFICER HAS INCREASED THE VALUE OF CLOSING STOCK, HOWEVER, HE D ID NOT MAKE ANY CORRESPONDING ADJUSTMENT IN THE OPENING STOCK. B EFORE THE LEARNED THE WEST COAST PAPER MILLS LTD. 103 COMMISSIONER (APPEALS), IT WAS SUBMITTED THAT IN THE COMPUTATION, THE ASSESSEE HAS DULLY MADE THE ADJUSTMENT IN THE OPENING AND CLOSING STOCK AND ALSO THE OTHER ADJUSTMENT IN PURCHASES AND SALE. BASED ON THIS FACTUM, THE LEARNED COMMISSIO NER (APPEALS) DELETED THE SAID ADDITION AS THE NET EFFECT WAS NIL . HE ALSO SUBMITTED A COPY OF THE TRIBUNAL ORDER IN MIRC LTD., IN ITA NO.849/MUM./2010, ORDER DATED 13 TH MARCH 2013, IN SUPPORT OF HIS CONTENTION. 231 . THE LEARNED DEPARTMENTAL REPRESENTATIVE R ELIED UPON THE ORDER OF THE ASSESSING OFFICER. 232 . WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RELEVANT FINDINGS OF THE AUTHORITIES BELOW. WE AGREE IN PRINCIPLE THAT CORRESPONDING ADJUSTMENT HAS TO BE MADE IN THE OPENING STOCK AS HELD BY THE JURISDICT IONAL HIGH COURT IN CIT V/S MAHALAXMI GLASS WORKS PVT. LTD. , [ 2009 ] 318 ITR 116 (BOM.). THE FINDING OF FACT AS RECORDED BY THE LEARNED COMMISSIONER (APPEALS) THA T AFTER MAKING THE ADJUSTMENTS MADE BY THE ASSESSEE IN THE OPENING STOCK AND PURCHASE AND SALE, THE NET EFFECT IS NIL APPEARS TO BE BASED ON FACT. THUS, WE DO NOT FIND ANY REASON TO DEVIATE FROM SUCH FINDINGS OF FACT WHICH HAS NOT BEEN REBUTTED AND, HENCE, THE GROUND THE WEST COAST PAPER MILLS LTD. 104 NO.6(I) AND 6(II) RAISED BY THE REVENUE STAND DISMISSED. 233 . GROUND NO.7, READS AS UND ER: 7. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ID. CIT(A) ERRED IN DELETING THE ADDITION OF PROFITS ON SALE OF INVESTMENTS OF FIXED ASSETS IN COMPUTING BOOK PROFIT U / S. 11 5 JB. 234 . AFTER HEARING BOTH THE PARTIES, WE FIND THAT T HIS ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL IN ASSESSEES OWN CASE, HOWEVER, NOW THIS ISSUE STANDS COVERED AGAINST THE ASSESSEE BY THE SPECIAL BENCH DECISION OF THE TRIBUNAL IN RAIN COMMODITIES LTD. V/S DCIT, [ 2010 ] 131 TTJ 514 ( HYD.) . THUS, RESPECTFULLY FOLLOWING THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL, WE CONFIRM THE ADDITION ON ACCOUNT OF PROFIT ON SALE OF INVESTMENT IN FIXED ASSETS WHILE COMPUTING THE BOOK PROFIT UNDER SECTION 115JB. THUS, GROUND NO.7, RAISED BY THE REVENU E IS TREATED AS ALLOWED . 235 . GROUND NO.8, READS AS UNDER: 8. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING THE AO TO ALLOW DEDUCTION U / S 80 HHC WHILE COMPUTING BOOK . 236 . AFTER HEARING BOTH THE PARTIES, WE F IND THAT THIS GROUND IS SIMILAR TOO THE ADDITIONAL GROUND RAISED BY THE ASSESSEE IN ITS APPEAL IN ITA THE WEST COAST PAPER MILLS LTD. 105 NO.3802/MUM./2006, FOR THE ASSESSMENT YEAR 2002 03. HOWEVER, THIS GROUND NOW STANDS COVERED AGAINST THE ASSESSEE IN VIEW OF THE RETROSPECTIVE AMENDMENT BR OUGHT IN STATUTE IN SECTION 115JB BY THE FINANCE ACT, 2011 W.E.F . 1 ST APRIL 2005. SINCE THIS AMENDMENT IS APPLICABLE FROM THE ASSESSMENT YEAR 2005 06 ONLY, HENCE, THIS ISSUE WILL ALSO GO AGAINST THE ASSESSEE. CONSEQUENTLY, GROUND NO.8, RAISED BY THE REVENU E IS TREATED AS ALLOWED. 237 . 2005 06 237. IN THE RESULT, REVENUES APPEAL FOR THE ASSESSMENT YEAR 2005 06 IS PARTLY ALLOWED. 238 . 2002 03, 2003 04, 2004 05 2005 06 239 . TO SUM UP, ASSESSEES APPEALS AND REVENUES APPEALS FOR THE ASSESSMENT YEAR 2002 03, 2003 04, 2004 05 AND 2005 06 ARE PARTLY ALLOWED. 30 TH MY 2014 ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH MY 2014 SD/ - . . N.K. BILLAIYA ACCOUNTANT MEMBER SD/ - AMIT SHUKLA JUDICIAL MEMBER MUMBAI, DATED : 30 TH MY 2014 THE WEST COAST PAPER MILLS LTD. 106 / COPY OF THE ORDER FORWARDED TO : ( 1 ) / THE ASSESS EE ; ( 2 ) / THE REVENUE; ( 3 ) ( ) / THE CIT(A ) ; ( 4 ) / THE CIT, MUMBAI CITY CONCERNED ; ( 5 ) , , / THE DR, ITAT, MUMBAI ; ( 6 ) / GUARD FILE . / TRUE COPY / BY ORDER . / PRADEEP J. CHOWDHURY / SR. PRIVATE SECRETARY / / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI