TMI Blog2010 (1) TMI 939X X X X Extracts X X X X X X X X Extracts X X X X ..... on the bill amount at the rate of Re. 0.18 per unit charged by the Tamil Nadu Electricity Board from the consumers on the bill raised was the price ordinarily fetch in the open market, therefore, the CIT(A) was not correct in disallowing claim of assessee under section 80-IA of the Act on this ground Regarding allocation of indirect expenses - Held that:- As for the purpose of deduction under section 80-IA only income derived from industrial undertaking that has to be reckoned in computation as such the income and expenditures which are not directly relatable to that industrial unit cannot but be ignored, in other words, such income and expenditure need not to be considered Regarding miscellaneous income, income from sale of sludge, income from sale of steam - Held that:- The receipt of sale of sludge is the income which is not derived from industrial undertaking. Therefore, deduction under section 80-IA is not allowable. And the steam produced by the assessee is eligible unit is a bye-product and income from sale of steam is the income derived from industrial undertaking, therefore, deduction under section 80-IA is allow-able - IT Appeal Nos. 126 and 394 (Mum.) of 2008, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2) of the Act. 6. The learned AR raised alternate ground claiming that if the claim of the assessee is not allowed as bad debts but the same may be allowed as business loss. The alternate ground raised by the assessee reads as under:- "Without prejudice to the above the ld. CIT(A) failed to appreciate that the appellant had suffered the loss during the course of the business, hence, the same has to be allowed as a business loss. Thus, the disallowance of Rs. 10,12,714 is not at all justified and the same may be deleted." 7. The learned DR objected to admit this alternate ground and submitted that the issue did not raise before the CIT(A). He further submitted that this is a factual matter and requires examination; therefore, such alternate ground cannot be admitted at this stage. The learned AR, on the other hand, submitted that the facts were before the Assessing Officer and CIT(A) that the amount was given to suppliers. He further submitted that it is an alternate legal plea on the same issue. The learned AR submitted that the facts are on record. He referred to page 225 of paper book and submitted that the Assessing Officer has partly disallowed the assessee's claim. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ifying the calculation of the year under consideration in the light of Hawkins Cookers Ltd. cited (supra). 11. Ground No. D is in respect of rejection of claim to modify the value of the opening stock. At the outset, the learned AR submitted that this ground is not required to adjudicate as it becomes infructuous as the Assessing Officer has rectified the order for assessment year 2001-02 and the assessee got relief. In the light of the above facts, we dismiss this ground of the assessee as infructuous. 12. Ground No. E is in respect of enhancement of income under section 251(1) by reducing the deduction under section 80-IA of the Act. 13. The assessee claimed deduction under section 80-IA amounting to Rs. 14,40,13,797 from the captive power plant unit. The said claim of the assessee was allowed by the Assessing Officer. However, the assessee filed appeal before the CIT(A) in respect of other issues. During the appellate proceedings, the CIT(A) noticed that the assessee while transferring the manufactured electricity from C.P.P. unit to other unit the assessee has taken into account the electricity tax levied by the State Government on the bill amount at the rate of Re. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been placed and submitted that the CIT(A) simply called for the details. The learned AR further submitted that since the CIT(A) did not issue enhancement notice in respect of reducing the income under section 80-IA on account of electricity tax, the CIT(A) does not have jurisdiction to enhance the income of the assessee. 14.1 It is also the submission of the learned AR that once it is found that the assessee is eligible for any deduction, liberal construction is required. The learned AR in support of his contention relied upon a judgment, of P.R. Prabhakar v. CIT [2006] 284 ITR 548 (SC). In the said judgment, it was held that section 80HHC was incorporated in the Act for providing incentive to export houses. It is now a well-settled principle of law that although the exemption provisions are to be construed strictly as regards the applicability thereof to the case of the assessee, but once it is found that the same is applicable, the same are required to be interpreted liberally. 14.2 The learned AR further submitted that CIT(A) has wrongly relied upon the decision of Mumbai Bench in the case of West Coast Paper Mills Ltd. (supra) as in that case the facts were different. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 1/3rd. The learned AR submitted that even on turnover basis the 25 per cent of allocation by CIT(A) was not justified. 14.5 As regards miscellaneous income, the learned AR submitted that the CIT(A) disallowed the deduction under section 80-IA in respect of sale of steam for Rs. 44,07,753. The learned AR submitted that the same is generated while running diesel generator sets, which are also one form of power, therefore, the steam is eligible for deduction under section 80-IA. The learned AR in support of his contention, relied upon the decision of Jaipur Bench in the case of Dy. CIT v. Maharaja Shree Umaid Mills Ltd. [2009] 29 SOT 278. The learned AR submitted that similar is position of sludge sale. The learned AR submitted that this is a bye-product and the assessee is entitled for deduction under section 80-IA. The learned AR submitted that the above items are derived from industrial undertaking; therefore, the assessee is entitled for deduction under section 80-IA. He relied upon the following judgments:- (A) CIT v. Sterling Foods [1999] 237 ITR 579 (SC). (B) Pandian Chemicals Ltd. v. CIT [2003] 262 ITR 278 (SC). (C) Liberty India v. CIT [2009] 317 ITR 218 (SC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oast Paper Mills Ltd. (supra) is not applicable to the facts of the case under consideration as the said decision is in respect of adoption of two rates and not the case of market price. He further submitted if the decision of West Coast Paper Mills Ltd.'s case (supra) is accepted on the issue, then, in view of the decision of ITAT Delhi Bench the matter may be referred to Special Bench. 17. We have heard the learned representatives of the parties and perused the record as well as gone through the decisions cited. The first contention of the learned AR is that the CIT(A) cannot acquire jurisdiction of enhancement of income without issue of enhancement notice. This contention of the learned AR is not acceptable as it is evident from the fact that the CIT(A) issued a letter dated 15-11-2006 wherein it is clearly stated that the letter may be treated as notice of enhancement. Further, the assessee while replying the so-called notice did not make any objection before the CIT(A) that the CIT(A) has not issued enhancement notice, therefore, the contention of the learned AR is rejected. 18. Now coming to the merits of the case which is decided as under:- 18.1 The CIT(A) while ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gains on such reasonable basis as he may deem fit. [Explanation:- For the purposes of this sub-section, "market value", in relation to any goods or services, means the price that such goods or services would ordinarily fetch in the open market.]" 18.3 The above section has been examined by the ITAT Delhi Bench in the case of Jindal Steel and Power Ltd. (supra) wherein it was held that section 80-IA(8) authorizes the Assessing Officer that where the transfer as recorded in the accounts of the eligible business does not correspond to the market value, the profits declared of the eligible business can be adjusted by the Assessing Officer on such basis so as to ensure that goods or services are transferred to its own unit at the market value of such goods or services. In that case, the Assessing Officer did not perceive Rs. 3.72 per unit as the market value of the power generated by the assessee and instead adopted Rs. 2.32 per unit as the market value, being the price at which the assessee sold power to the Board. In the Explanation to section 80-IA(8), it is provided that the expression 'market value' for the purposes of sub-section means the price that such goods or service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and verify the average rate calculated by the assessee. The Assessing Officer recalculated the price to be adopted after excluding element of tax. CIT(A) accepted the Assessing Officer's calculation. On appeal, the ITAT held that the Assessing Officer's adoption of the rate at which the assessee sold the power to the Tamil Nadu Electricity Board could not be accepted since the units itself were working at Dandeli in Karnataka was different. The assessee had paid to the Karnataka Electricity Board for purchase of the power and the CIT(A) had come to a reasonable conclusion that the transfer price should be on the basis of average price paid by the assessee during the whole year to the Karnataka Electricity Board minus certain extraneous charges such as electricity duty, etc., which was not connected with business of the assessee. Therefore, the directions of the CIT(A) was justified. On careful reading of the decision of the ITAT in the said case, West Coast Paper Mills Ltd. (supra), we notice that the issue before the ITAT was whether the power sold to Tamil Nadu Electricity Board is to be accepted or the average price after reducing the average rate paid to Karnataka Electricity B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee has taken into account the electricity tax levied by the State Government on the bill amount at the rate of Re. 0.18 per unit charged by the Tamil Nadu Electricity Board from the consumers on the bill raised is market price or not. The market price has been defined by way of Explanation to section 80-IA(8) of the Act that "market value", in relation to any goods or services, means the price that such goods or services would ordinarily fetch in the open market. This can be understood by the simple fact that suppose the assessee did not produce the electricity by himself and it was purchased from Electricity Board; the amount which the assessee was to pay was including the tax. We, therefore, do not find any reason for exclusion of paisa 18 for the purpose of calculation of market price for calculation of deduction under section 80-IA of the Act, we find that the price charged by the assessee while transferring the manufactured electricity from C.P.P. unit to other unit of the assessee including the electricity tax levied by the State Government on the bill amount at the rate of Re. 0.18 per unit charged by the Tamil Nadu Electricity Board from the consumers on the bill raised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come is the income from sale of steam produced by the assessee. Briefly the facts and nature of steam are that the captive power undertaking also has waste heat recovery boiler, which is part of the power undertaking. The power generated by the running of diesel generating set is used in the manufacture of caustic soda. Running of Diesel Generating Sets produce heat, which is recovered from the waste heat recover boiler in the form of steam. During the year ended March, 2003, the total quantity of steam generated is 1,02,295 MT. The said steam is used as power for the manufacture of PVC and Ilmenite and 6,240 MT was used towards internal consumption. During the year 66,990 MT of steam was consumed in the manufacture of PVC and 29,065 MT was consumed in the manufacture of Ilmenite. 18.9 The submission of the learned AR of the assessee is that since power in the form of steam was generated by the captive power plant and consumed in the manufacture of PVC and Ilmenite, therefore, the assessee is entitled for deduction under section 80-IA. Further, the learned AR submitted that on identical set of facts, the department filed Special Leave Petition before Hon'ble Supreme Court again ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been to the employee's canteen as per legal requirement under section 46 of the Factories Act, 1948 and rule 65(2) of the Tamil Nadu Factories Act, 1950 in which it is notified that every factory wherein more than 250 workers were employed shall have an adequate canteen according to the Standard prescribed. The claim of the appellant has been allowed by the ITAT in assessment years 1982-83, 1983-84, 1985-86, 1986-87 and 1987-88. The ld. CIT(A) has also deleted similar disallowances in assessment years 1998-99 and 2001-02. Since the claim of the appellant allowed being business expenditure by the Hon'ble ITAT, the CIT(A) as mentioned above, therefore, the Assessing Officer is directed to allow the claim of the expenses during this year also. The appellant would get relief of Rs. 22,88,000." 23. After hearing the learned representatives of the parties and perusing the record, we are of the view that there is no infirmity in the order of the CIT(A) as the CIT(A) deleted the addition by following the ITAT decisions in the earlier years. Therefore, we confirm the order of the CIT(A) on this issue. 24. Ground No. 2 is against the deletion of addition of Rs. 1,02,90,004 made und ..... X X X X Extracts X X X X X X X X Extracts X X X X
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