M/s. Rainbow Papers Limited, Ahmedabad V. The Addl.CIT, Range-5, Ahmedabad

ITA 933/AHD/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7959 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 7 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-12-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 16-04-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K DEV
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH (BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER & SHRI S. S. GODARA, JUDICIAL MEMBER) ITA. NO: 933 & 1368/AHD/2015 (ASSESSMENT YEAR: 2011-12) M/S. RAINBOW PAPERS LTD. 801,AVDHESH HOUSE, OPP. SHRI GURU GOBIND GURUDWARA, S.G. HIGHWAY, AHMEDABAD ADDITIONAL COMMISSIONER OF INCOME-TAX, RANGE-5, AHMEDABAD V/S V/S ADDITIONAL COMMISSIONER OF INCOME-TAX, RANGE-5, AHMEDABAD M/S. RAINBOW PAPERS LTD. 801,AVDHESH HOUSE, OPP. SHRI GURU GOBIND GURUDWARA, S.G. HIGHWAY, AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AAACR5415K APPELLANT BY : SHRI SULABH PADSHAH, AR RESPONDENT BY : SHRI S. K. DEV, CIT/ D.R. ( )/ ORDER DATE OF HEARING : 12 -12-201 7 DATE OF PRONOUNCEMENT : 13-12-2017 ITA NO.933 & 1368/AHD/2015 . A.Y. 2011-12 2 PER N.K. BILLAIYA, ACCOUNTANT MEMBER 1. ITA NOS. 933 & 1368/AHD/2015 ARE CROSS APPEALS BY T HE ASSESSEE AND THE REVENUE PREFERRED AGAINST THE ORDER OF THE LD. CIT( A)-9, AHMEDABAD DATED 27.02.2015 PERTAINING TO A.Y. 2011-12. 2. SINCE BOTH THESE APPEALS WERE HEARD TOGETHER, THEY ARE DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE AND BREVIT Y. WE WILL FIRST TAKE UP ITA NO. 933/AHD/2015 ASSESSEE S APPEAL 3. THE ASSESSEE HAS RAISED TWO SUBSTANTIVE GROUNDS OF APPEAL. GROUND NO. 1 RELATES TO THE DISALLOWANCE OF DEPRECIATION ON THE GROUND THAT THE PURCHASE OF HONEYWELL MEASUREX COMPUTER MACHINES IS A PAPER TRA NSACTION AND GROUND NO. 2 RELATES TO THE DISALLOWANCE OF THE CLAIM OF DEDUC TION U/S. 80IA OF THE ACT. 4. AT THE VERY OUTSET, THE LD. COUNSEL FOR THE ASSESSE E STATED THAT THE ISSUES ARE SQUARELY COVERED IN FAVOUR OF THE ASSESSEE AND AGAI NST THE REVENUE BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE IN A.Y. 2008-09 TO A.Y. 2010- 11. THE LD. D.R. FAIRLY CONCEDED TO THIS. 5. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ORD ERS OF THE AUTHORITIES BELOW. WE HAVE ALSO GONE THROUGH THE ORDER OF THE T RIBUNAL IN ITA NOS. 767 TO 769/AHD/2013 AND IT(SS)A NOS. 101 TO 103/AHD/201 3. THE RELEVANT FINDING OF THE CO-ORDINATE BENCH READS AS UNDER:- 33. GROUND NO.1 OF ASSESSEES APPEAL PERTAINS TO CO NSEQUENTIAL CLAIM OF DEPRECIATION ON HONEYWELL MEASUREX COMPUTER. ITA NO.933 & 1368/AHD/2015 . A.Y. 2011-12 3 33.1. GROUND NO.1 OF ASSESSEES APPEAL IS SIMILAR T O GROUND NO.1 RAISED BY ASSESSEE IN IT(SS)A NO.102/AHD/2013 IN AY 2009-10. ACCORDINGLY, IN CONSONANCE WITH THE DECISION TAKEN IN IT(SS)A NO.102/AHD/2013( SUPRA), WE ALLOW GROUND NO.1 OF ASSESSEES APPEAL SEEKING CONSEQUENTIAL REL IEF IN THIS YEAR TOO. CONSEQUENTLY, GROUND NO.1 OF THE REVENUES APPEAL I N ITA NO.769/AHD/2013 IS DISMISSED. 6. RESPECTFULLY FOLLOWING THE FINDINGS OF THE CO-ORDIN ATE BENCH, GROUND NO. 1 IS ALLOWED. 7. THE ISSUE RAISED VIDE GROUND NO. 2 HAVE BEEN CONSID ERED BY THE TRIBUNAL IN ITS ORDER (SUPRA). THE RELEVANT FINDINGS OF THE CO-ORDI NATE BENCH READS AS UNDER:- 14. THE PROFIT ON GENERATION OF POWER FROM CAPTIVE POWER PLANT IS ELIGIBLE FOR DEDUCTION UNDER S.80IA(4)(IV) READ WITH SECTION 80I A(8) OF THE ACT. SECTION 80IA(4)(IV) PROVIDES THAT UNDERTAKING OF AN ASSESS EE ENGAGED IN THE GENERATION AND DISTRIBUTION OF POWER IS QUALIFIED FOR CLAIM OF DEDUCTION. IN THIS BACKGROUND, THE ASSESSEE CLAIMED DEDUCTION UNDER S. 80IA(4) AMOUNTING TO RS.3,51,13,522/- IN THE ORIGINAL RETURN WHICH AMOUN T WAS REVISED TO RS.3,51,17,060/- IN THE RETURN FILED UNDER S.153A P URSUANT TO SEARCH. THE CLAIM UNDER S.80IA(4) WAS MADE BOTH ON ACCOUNT OF (I) PRO FITS ON DEEMED SALE OF ELECTRICITY TO ITS MANUFACTURING UNIT AS WELL AS (I I) PROFIT ON SALE OF RESIDUAL STEAM (TO MANUFACTURING UNIT) TOWARDS DRYING PROCESS. HO WEVER, IN THE COURSE OF APPELLATE PROCEEDINGS BEFORE CIT(A), THE CLAIM OF D EDUCTION TOWARDS PROFIT ON SALE OF STEAM WAS WITHDRAWN. THUS, THE CONTROVERSY IS CONFINED TO QUANTUM OF DEDUCTION UNDER S.80IA(4) FROM PROFIT ARISING IN CA PTIVE POWER UNIT ONLY. THE AO WHILE EXAMINING THE CLAIM OF AFORESAID DEDUCTION RE CALCULATED THE COST OF STEAM (WHICH IS OUT OF MAJOR COMPONENTS FOR GENERATION O F POWER) ON THE BASIS OF PRESSURE AND THUS RE-BIFURCATED THE CONSOLIDATED CO ST OF RS.19,05,33,456/- BETWEEN STEAM AND POWER COST AT RS.1,20,38,775 AND RS.17,84,94,680/- RESPECTIVELY. SIMULTANEOUSLY, THE SALE PRICE OF P OWER WAS ALSO CALCULATED WITHOUT DUTY AND SURCHARGE AT RS.13,12,72,088/-. T HE SALE PRICE OF STEAM WAS CALCULATED AT RS.1,32,42,654/- BY APPLYING 10% MARK -UP TO THE COST OF STEAM). AS A RESULT OF THESE ADJUSTMENTS, THE AO FOUND THAT TH ERE IS A LOSS OF RS.4,60,18,714/- IN THE UNDERTAKING GENERATING POWE R WHICH IS FURTHER SUBJECT TO ALLOCATION OF OTHER INDIRECT EXPENSES AND DEPRECIAT ION ETC. THUS, IN THE ABSENCE OF ANY ELIGIBLE PROFIT PER SE THE CLAIM UNDER S.80I A(4)(IV) OF THE ACT WAS DENIED. ITA NO.933 & 1368/AHD/2015 . A.Y. 2011-12 4 14.1. IN THE FIRST APPEAL, ALLOCATION OF TOTAL COST OF RS.19,05,33,456/- WAS BIFURCATED IN THE RATIO OF 52:48 BETWEEN POWER AND STEAM AT THE FIRST STAGE I.E. ABOUT 52% IS USED FOR POWER GENERATION AND ABOUT 48 % OF STEAM IS USED FOR DRYING IN PAPER MANUFACTURING PROCESS. THE COST OF STEAM WAS THEREAFTER FURTHER ADJUSTED ON THE BASIS OF HEAT AT 105 (POWER) : 66. 2 (STEAM) AS AGAINST THE PROPOSAL OF THE ASSESSEE TO ALLOCATE IN THE RATIO O F 705/810. 14.2 THE CIT(A) THUS RECALCULATED THE COST OF STE AM IN THE RATIO OF 105/66.2 AT RS.7,36,75,904/- AND BALANCE COST OF RS.11,68,57,55 2/- WAS ALLOCATED TOWARDS COST OF GENERATION OF POWER. THE SALE PRICE OF PO WER WAS MODIFIED AT AN AVERAGE RATE OF RS.2.99 PER UNIT AT RS.10,22,09,383/- AND E LIGIBLE PROFIT UNDER S.80IA(4) AFTER MAKING ADJUSTMENTS TOWARDS COST AND SALE PRIC E WAS REWORKED BY CIT(A) AT LOSS OF RS.1,46,48,169/- (WORKING PLACED BY THE ASSESSEE AS PER PAPER-BOOK). AS A SEQUEL, THERE BEING LOSS IN THE UNDERTAKING GE NERATING POWER, THE BENEFIT AVAILABLE UNDER S.80IA(4) WAS CONTINUED TO BE DENIE D TO THE ASSESSEE FOR WANT OF ELIGIBLE PROFITS. 14.3. IN SHORT, THE AO AS WELL AS CIT(A) DISPUTE S THE COST OF PRODUCTION OF POWER AS WELL AS DEEMED SALE PRICE OF POWER PER UNIT. 14.4. ADVERTING TO THE ISSUE CONCERNING COST OF POWER AS NOTED EARLIER, THE AO HAS ALLOCATED THE TOTAL COST INCURRED BETWEEN COST OF STEAM AND COST OF POWER AT RS.1,20,38,775/- AND RS.17,84,94,630/- RESPECTIVEL Y. THE CIT(A) HAS REALLOCATED THE AFORESAID COST AT RS.7,36,75,904/- AND RS.11,6 8,57,552/- RESPECTIVELY HAVING REGARD TO THE PRESSURE DIFFERENCE AS WELL AS ENERGY NEEDED TO PRODUCE POWER AND STEAM. THE COST OF POWER IS ATTRIBUTABLE TO THE DE EMED SALE VALUE OF POWER. IN THIS REGARD, WE OBSERVE THAT THE CIT(A) HAS MADE SC IENTIFIC ANALYSIS AS PER PARA-9 OF ITS ORDER (REPRODUCED IN THE PRECEDING PARAS) AN D CAME TO THE CONCLUSION THAT RATIO OF ENERGY(HEAT) USABLE WITH CORRESPONDING PRE SSURE WOULD BE 105 : 66.2 INSTEAD OF 810 : 705. WE NOTICE THAT THE ASSESSE E HAD FAILED TO ALLOCATE THE TOTAL COST OF STEAM TOWARDS ELIGIBLE BUSINESS (POWER GE NERATION) AND NON-ELIGIBLE BUSINESS (DRYING PROCESS IN PAPER UNIT) IN A FAIR MANNER WHILE DETERMINING THE ELIGIBLE PROFIT UNDER S.80IA(4) OF THE ACT AT THE T IME OF RETURN. THE AO MODIFIED THE COST OF STEAM ATTRIBUTABLE TO POWER AT A HIGHE R AMOUNT ON THE BASIS OF USE OF STEAM FOR POWER GENERATION CLAIMED IN THE RATIO OF 48 (POWER) 52 (STEAM) AND THEREAFTER MADE FURTHER ADJUSTMENTS IN THE COST OF STEAM ON ACCOUNT OF PRESSURE FACTOR (5/42) ATTRIBUTABLE TO USE OF RESIDUAL STEAM FOR THE PURPOSE OF DRYING PAPER AS PROCESSED STEAM. IN FIRST APPEAL, THE CIT(A) HAS FURTHER TAKEN INTO ACCOUNT THE ENERGY RATIO AS WELL WHILE READJUSTING THE TOTA L COST IN GENERATING STEAM AND POWER AND THUS GRANTED PARTIAL RELIEF. BEFORE US, THE ASSESSEE HAS DISPUTED THE ENERGY RATIO ADOPTED BY CIT(A) FOR WHICH WE DO NOT FIND ANY OBJECTIVE REASONS IN ITS SUPPORT. NOTABLY, IN THE WORKING FILED IN BY P APER-BOOK ALSO, THE ASSESSEE WAS BROADLY ACCEPTED THE COST ALLOCATION BY CIT(A). T HE REVENUE HAS ALSO NOT BEEN ABLE TO REBUT THE COST ALLOCATION OF STEAM CARRIED ON BY CIT(A). THUS, WE ADOPT ITA NO.933 & 1368/AHD/2015 . A.Y. 2011-12 5 THE REASONINGS GIVEN BY THE CIT(A) IN ARRIVING AT I TS CONCLUSION TOWARDS COST ALLOCATION AND DECLINE TO INTERFERE THEREWITH. 8. RESPECTFULLY FOLLOWING THE FINDINGS OF THE CO-ORDIN ATE BENCH, WE ORDER ACCORDINGLY. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. NOW WE WILL TAKE UP ITA NO. 1368/AHD/2015 REVENUES APPEAL 10. GROUND NO. 1 RELATES TO THE ISSUES RAISED VIDE GROU ND NO. 1 BY THE ASSESSEE IN ITS APPEAL IN ITA NO. 933/AHD/2015 (SUPRA). FOR THE REA SONS GIVEN THEREIN, THIS GROUND IS DISMISSED. 11. GRIEVANCE RAISED VIDE GROUND NO. 2 ARE IDENTICAL TO THE FACTS OF GROUND NO. 2 IN ASSESSEES APPEAL IN ITA NO. 933/AHD/2015. FOR THE REASONS GIVEN THEREIN, THIS GROUND IS PARTLY ALLOWED. 12. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS P ARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 13 - 12- 20 17 SD/- SD/- (S.S. GODARA) (N. K. BILLAIYA) JUDICIAL MEMBER TRUE COPY ACCOUNTANT MEMBER AHMEDABAD: DATED 13/12/2017 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT.