TMI Blog2014 (1) TMI 1289X X X X Extracts X X X X X X X X Extracts X X X X ..... Shares and Finance (P).Ltd. [2008 (4) TMI 405 - ITAT AHMEDABAD ] - Assessee has not produced any contrary decisions, there was no reason to interfere in the order of CIT(A) Decided against Assessee. Enhancement of Income chargeable to tax Expenditures diverted Excess coal consumption in Unit II and Unit III claimed - Held that:- The assessee had not co-operated with the CIT(A) during the appellate proceedings satisfactorily by producing all the relevant materials - the CIT(A), after detailed examination of the issue based on the available documents, arrived at the conclusion that the balance cost attributed to HP Steam used in electricity generation in Unit-III would be Rs.41,61,167/-, for which, addition has to be made - the casual attitude of the assessee requires to be discouraged for not co-operating before the Revenue the matter remitted back to the CIT(A) for fresh adjudication Decided in favour of assessee. Depreciation granted on furniture and fixtures of Managing directors residence Held that:- Providing furniture at the residential house of the Managing Director of the assessee company, is nothing but perquisite offered to the Managing Director by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... released, it contains force which is capable of rotating the turbine - By using coal as fuel, two types of steams are generated one being high pressure steam at 495 degree centigrade having steam enthalpy of 815.95 K. CAL/Kg., which is the input for electricity generation and the other being low pressure steam of 270 decree centigrade having steam enthalpy of 718.4 K. CAL/Kg drawn from the plant for utilizing in the paper drying machine for producing paper - The arguments taken up by the revenue were not before the CIT(A) for consideration thus, the matter remitted back to the CIT(A) for fresh adjudication Decided in favour of Assessee. Adoption of rate of electricity produced Held that:- The decision in Assistant Commissioner of Income-tax- 1(2), Raipur Versus Godavari Power & Ispat Ltd [2011 (11) TMI 107 - ITAT, BILASPUR] - The price charged for such transfer should correspond to the market value of such goods or services on the date of transfer, "market value" for this purpose means the price that such goods or services would ordinarily fetch in the open market - price at which the State Electricity Board supplies power to its consumers is to be considered to be the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est expenditure of Rs.29,70,234/-. 2. The learned C.I.T.(A) erred in holding that the assessee had computed the excess value of LP steam byRs.56,71,681/- and thereby claimed the excess deduction u/s 80IA (4) of the Act. The computation made by the C. I. T. (Appeals) resulting into excess of Rs.56,71,681/- is incorrect. 3. The C. I. T. (Appeals) erred in holding that 80IA (4) relief will be reduced by deemed brought forward loss. 4. The C. I. T. (Appeals) erred in enhancing income chargeable to tax by Rs.41,61,167/- by holding that the assessee has diverted expenditure to first half of F. Y. 2006-07. 5. The C. I. T. (Appeals) erred in enhancing income chargeable to tax by Rs.1,16,03,400/- by holding that the assessee has claimed excess coal consumption in Unit III to reduce income chargeable to tax. 6. The C. I. T. (Appeals) ought to have granted telescoping effect of giving the deduction of added expenditure from added income." Assessment Year 2008-09 "1. The learned C.I.T.(A) erred in holding without giving opportunity to the assessee that the assessee will be entitled to deduction u/s. 80IA (4) on the profit that remains after reducing the interest expenditure of Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome chargeable to tax. 4. The C. I. T. (Appeals) ought to have granted telescoping effect of giving the deduction of added expenditure from added income. 5. The C. I. T. (Appeals) ought to have granted depreciation on furniture at the residence of the Managing Director." 3. The above concise grounds of the assessee are further consiced and summarized issue-wise herein below for adjudication:- ISSUE NO.1:- Disallowance of proportionate Interest expenses for the loan extended by the assessee to its 80IA Unit while computing the profit yearned by the 80IA unit. (Grounds No. 1 for A. Y. 2007-08 and 2008-09). ISSUE NO.2:- Disallowance of deduction u/s 80IA (4) of the Act towards the claim of LP Steam. (Ground No.2 for assessment year 2007-08 and 2008-09 and ground No.1 of assessment year 2009-10 and 2010-11). ISSUE NO.3:- Set off of loss worked out by the AO in co-gen power plant against the profit of paper unit. (Ground No.3 for assessment year 2007-08 2008-09, Ground N0.2 for assessment years 2009-10 and 2010-11). ISSUE NO.4:- Enhancement of income chargeable to tax of Rs. 41,61,167/- by the learned CIT(A) holding that the assessee has diverted expenditure to first hal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... while computing profits of the 80 IA units. The learned AR had, further, relied in the decision of the case in CIT Vs Reliance Utilities and Power Ltd., reported in 313 ITR 340, wherein it was held that where the assessee has own funds or interest free funds then the presumption would be that such loans extended by the assessee would be from its own funds/interest free funds. Further, on perusing the balance sheet of the assessee for the assessment year 2007-08 and 2008-09, it is apparent that the share capital and reserves and surplus of the assessee aggregated to Rs.37,52,71,973/- and Rs.43,15,86,742/- respectively. Therefore, following the ratio laid down by the Hon'ble High Court, (supra), we hereby delete the addition of Rs.29,70,234/- for the assessment year 2007-08 and Rs.11,09,755/- for the assessment year 2008-09 made on account of disallowance of interest since the term loan obtained by the assessee company from outside source is comparatively much less than own Capital Reserves. Thus, the ground No.1 for both the assessment year 2007- 08 and 2008-09 are allowed in favour of the assessee. 5. ISSUE NO.2:- Disallowance of deduction u/s 80IA (4) of the Act towards the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... am produced by Captive Power Plants as by-products, but, in the assessee's case, the LP steam produced was not by-product of the Captive Power Plant but the co-gent plant of the assessee was specially designed to produce LP steam for the consumption of its ancillary units. Since this issue in the Revenue's appeal that "Steam" is not "Power", is held in favour of the Revenue on page 22 Para 19.1 herein below, this ground raised by the assessee has become infructuous and, therefore, it is dismissed as such. 6. ISSUE NO.3:- Set off of loss worked out by the AO in co- gen power plant against the profit of paper unit. (Ground No.3 for assessment years 2007-08 2008-09, Ground N0.2 for assessment years 2009-10 and 2010-11):- From the order of the learned CIT(A) it is evident that the learned CIT(A) has directed the learned AO to reduce the income of the eligible undertaking viz., power plant claiming deduction u/s 80IA of the Act by brought forward business losses of that undertaking, if any, in view of the specific provisions of section 80IA(5) of the Act, by placing reliance in the case of ACIT V/s Goldmine Shares and Finance (P).Ltd. reported in 113 ITD 209. Since the learned AR ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctricity generation in Unit-III would be Rs.41,61,167/-, for which, addition has to be made. In this regard, we are of the view that the casual attitude of the assessee requires to be discouraged for not co-operating before the Revenue. However, in the interests of justice, we remit the matter back to the file of the learned CIT(A) to look into the issue afresh, after obtaining remand report from the learned AO. Further, we direct the assessee to co- operate with the revenue in its proceedings by producing all the relevant documents and details of information generated by the ERP solutions/SAP for speedy disposal of the case. It is ordered accordingly. 8. ISSUE NO.5:- Enhancing the income chargeable to tax by the learned CIT(A) by holding that the assessee had claimed excess coal consumption in Unit III to reduce income chargeable to tax (Ground No.5 of A. Y. 2007-08, Ground No.4 of A. Y. 2008- 09, Ground No.3 of A. Y. 2009-10 and Ground No.3 of A. Y. 2010- 11):- During the course of appellate proceedings, the assessee had shown its inability to provide the data for generation of steam for the assessment year 2007-08 and 2010-2011. Further, the assessee had shown its inability to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect to allocation of coal consumption to all the units discussed in issue No.5 supra is remitted back to the file of learned CIT(A), this issue of telescoping becomes infructuous and dismissed as such. However, we must say that this issue has to be looked into keeping in view of the overall accounting procedures and method followed by the assessee coupled with the actual facts of the case Viz., total purchases of coal made by the assessee, actual consumption of coal by each unit and closing stock of coal by maintenance of coal consumption log book for all the relevant Units by taking help of the ERP solutions installed by the appellant company. It is held accordingly. 10. ISSUE NO.7:- Granting depreciation on furniture provided at the residence of Managing Director (Ground No.5 for AYs 2009-10 and 2010-11):- During the course of the search, Mr. Rajendra Agarwal, the Managing Director of the assessee company had disclosed Rs.50 lacs as undisclosed expenditure of the company under the head "furniture and fixtures" for the expenditure incurred for providing furniture and fixtures at his residence. Thereafter, the assessee company had claimed depreciation @ 10% for a period of six mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the revenue are taken from the assessment year 2007-08 and they are reproduced herein under for reference:- "1. The Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.2,00,000/- made on account of inflation of purchases without considering the fact that the purchase parties were not maintaining the stock register and their books of accounts were rejected at the time of assessment u/s 153C of the I. T. Act. 2. The Ld. CIT(A) has erred in law and fact in deleting the interest disallowance of Rs.1,75,27,159/-:- a) On the basis of additional evidences submitted before him and without giving opportunity to the AO in contravention of the provisions of Rule 46A of the I. T. Rules. b) Without considering the fact that the assessee's case falls within the ambit of section 14A of the I. T. Act. 3. On the facts and circumstances of the case, the Ld. CIT(A) erred in law and on the facts in allowing the deduction claimed by the assessee u/s 80IA (4) (iv) of the I. T. Act of Rs.1,09,06,211/- without considering the fact that: a) At the time of search, the assessee did not maintain separate books of accounts as per section 80IA(4) of the I. T. Act. b) The audit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in this case, since the AO has adopted the sale rate of electricity to its own unit at the average rate at which co-gen plants in Gujarat sell the power to the GEB. d) by not considering the fact that the rate of electricity generation @ Rs.5.32 by the GEB includes the generation cost, the distribution cost, the transmission cost and other subsidy costs and these costs are not borne by the assessee while generating power from its co-gen plant and therefore, the Ld. CIT(A) ought to have taken the rate of generation @ Rs.2.62 per unit as adopted by the AO." 14. In addition to the above common grounds, the revenue in its appeal in IT(SS) A No.393/Ahd/2012 for the assessment year 2010- 11 has raised the following two other grounds viz. grounds No.2 and 4 as per appeal form No.36: "2. The Ld. CIT(A) has erred in law and on fact in allowing the interest expenses of Rs.6,00,000/- as no nexus was established between the unaccounted disclosed income of Rs.50,00,000/- and its application in renovation of the bungalow. 4. The Ld. CIT(A) has erred in law and facts in deleting the entire addition of Rs.86,19,041/- as the assessee had already booked all the expenses related to this unre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revenue has become redundant, and, therefore, we dismiss the same for all the relevant assessment years. 19. Ground No.3 (a) to 3 (e):- In the ground No.3, sub-clause (a) to (e) relates to maintenance of books of account:- Learned DR argued in support of the learned AO and re iterated the stand of the AO. On the other hand, the learned AR submitted before us that all the relevant records were maintained in SAP/(ERP) by the assessee and agreed for the case to be remitted back in order to provide one more opportunity to the assessee to present all the relevant documents, books of account maintained in SAP etc. Considering the submission of the learned AR, and facts and circumstance of the case, we also feel it to be appropriate that for such verification the matter is required to be remitted back to the file of the learned CIT(A) for de novo consideration and accordingly remit back these issues to the file of the learned CIT(A) with a direction to consider these issues afresh after obtaining remand report from the learned AO and pass appropriate order as per law and merit. These grounds of appeal of the revenue viz. 3 (a) to 3 (e) are treated as allowed for statistical purpose. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 643 wherein it was held that "profits or gains" derived by in-house consumption would also be eligible for deduction u/s 80IA of the Act and accordingly, we reject this argument of the learned AO.) 19.2 The learned CIT(A) allowed the claim of the assessee stating that steam is power and, therefore, eligible for deduction u/s 80 IA of the Act relying on the following decisions:- (i) DCIT Vs Maharaja Shree Umaid Mills Ltd., 120 TTJ 711 (ii) DCW Limited, 132 TTJ 442 (iii) Sial SBEC Bioenergy Ltd, 83 TTJ 886 19.3 The learned DR agreed before us that in the above mentioned judgments, it has been held that for the generation of steam in co- generation plant, benefit of section 80IA of the Act should be granted. However, the learned DR further pointed out that in all the above decisions the profit derived from the sale of steam was given benefit of Section 80 IA of the Act because steam was the residue by- product of the co-generation plant. The learned DR stated that, from the facts of the present case before us the co-generation plant of the assessee was so designed in order to produce steam in substantial quantity for the benefit of the ancillary object of the assessee c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 (Mad. HC) and the other cases mentioned supra, wherein it was held that the value of steam used for captive consumption by the assessee is eligible for deduction u/s 80IA of the Act. It was, therefore, prayed that deduction may be granted u/s 80 IA of the Act for the value of the steam produced by the assessee. 20. After hearing both the sides and perusing the materials on record, we find that this issue needs consideration. The representative of the assessee company had himself admitted before the learned CIT(A) that the co-generation plant of the assessee is not a simple captive power plant, but it is co- generation plant where Low Pressure Steam is not generated by default, but is generated by design. Thus, it is evident from the facts of the case that the captive power plant of the assessee is not a plant for generating electricity alone, but it is so designed to generate Low Pressure Steam as well in substantial quantity. Therefore, the Low Pressure Steam produced by the assessee's plant is not residue by-product, but a product by itself. On further perusing the facts, it emerges that the assessee company had utilized more quantity of steam in its overall operation with re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndments to section 80 IA of the Act, the relevant part of the speech is reproduced (at the cost of repetition) herein-below for reference:- "57. Electricity is a critical input for the future growth of our economy. I therefore propose to introduce a five-year tax holiday in respect of profits and gains of new industrial undertakings set up anywhere in India for either generation or generation and distribution of power. The five-year tax holiday will begin from the year of generation of power. 58. The five-year tax holiday, in both these cases, will be part of section 80-IA of the Income-tax Act. At the end of the five-year period, these units will be entitled to the existing deduction under section 80-IA for the remaining period." (ii) DCW Ltd. Vs Addl. CIT - 37 SOT 322. The relevant portion of the judgment of the Mumbai bench of the Tribunal is reproduced herein below for reference wherein it could be construed that the steam produced by the plant was by-product:- "18.9 ......In the light of above discussion, we find that the steam produced by the assessee is eligible unit is a by-product and income from sale of steam is the income derived from industrial undertaking, ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mann.com 139 (Mad. HC):- In this case, cited by the learned AR, learned DR stoutly argued stating that the issue was not as to whether steam could be considered as power, but the issue was whether the notional profits on account of power generated from the assessee's own captive power plant and utilized for its own business are entitled for deduction u/s 80 IA of the Act, wherein the Hon'ble Madras High Court held that "the captive power plants are entitled for such deduction." The learned AR could not controvert to the submission of the learned DR and further the decision of the case was not produced before us. 22. From the above, it is evident that in all the above mentioned cases the Tribunal allowed the benefit of section 80 IA of the Act with respect to the residue by-product of steam generated by the co- generation plant in the process of generating electricity. Moreover, the factual aspect is that the co-generation plants are installed in any industry as per the required specification of the concerned industry. The operational process of the co-generation plant is, by heating the water stored in the boilers using fuel, whereby steam is produced, which is condensed at hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rawing information from the specifications of the co-generation plant and the relevant meter recordings embedded in the plant and with the various other records and data maintained by the assessee manually and as well as by SAP, needless to mention that the adaptability of the data contained in the SAP/ERP will further depend on the reliability of the systems/software audit conducted. 24. Ground No.4 (b) to (d):- The revenue is aggrieved by the order of the learned CIT(A) for adopting the rate of electricity produced by the assessee at Rs.5.32 per unit as against Rs.2.62 per unit adopted by the learned AO. Though various contentions were raised by the learned DR on this issue as pointed out by the learned AR, this issue is squarely covered by the decision of the jurisdictional Hon'ble Gujarat High Court in the case Godavari Power Ispat Ltd. reported in 133 ITD 502 which the learned CIT(A) has respectfully followed. Therefore, we do not find it necessary to interfere with the order of the learned CIT(A) on this issue. This ground raised by the revenue is, accordingly, dismissed. 25. After hearing both the sides, we, hereby admit the two additional grounds raised by the revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X
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