TMI Blog2014 (7) TMI 554X X X X Extracts X X X X X X X X Extracts X X X X ..... ligible business does not correspond to the market value of such 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. The provisions of section 80IA themselves provide an answer and give a solution where there is a captive consumption of the finished goods of the eligible units - the order of the CIT(A) granting 80IA relief in respect of DG Units I, II, III and IV cannot be found fault with - the assessee has not operated the units by itself but got them operated through outsiders and the assessee is not entitled for 80IA relief is not a right approach - disallowing the assessee’s claim for deduction under section 80IA on the ground made out by the Revenue cannot stand – Decided in favour of Assessee. Claim of deduction u/s 80IA - Profit of the new Chemical Recovery Boiler – 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 - Held that:- The decision in SIAL SBEC BIOENERGY LTD. Versus DEPUTY COMMISSIONER OF INCOME TAX [2004 (3) TMI 342 - ITAT DELH ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as filed the details of the disallowance – the expenditures 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. - having regard to the details furnished, the expenditure in connection is to be considered as revenue in nature – Decided in favour of Assessee. Expenses on office taken on lease – Capital expenses or not – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that the assessee had taken office on lease and to make it fit for use the expenses were incurred on plastering, polishing, false ceiling, electrical fittings, fresh carpets etc. - The expenses were incurred on the assets not owned by the assessee - The expenditure is to give a better look to the office premises and does not result in acquisition of any asset of enduring nature - the expenditure so incurred is directed to be allowed as revenue expenditure – Decided in favour of Assessee. Claim of excise duty u/s 43B of the Act – CENVAT credit and PLA balance – Held that:- As decided in assessee’s own case for the ear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the profits of the business against the assessee - 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 Explanation (baa) for the purpose of computing deduction under section 80HHC - 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 - the same should not be excluded from the profits while computing the deduction u/s 80HHC – Decided partly in favour of Assessee. Reduction of 90% of gross income instead of net income – Held that:- The decision in ACG Associated Capsules Pvt .Ltd. v/s CIT [2012 (2) TMI 101 - SUPREME COURT OF INDIA] followed – the order of the CIT(A) is set aside and 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 is included in the profits of the assessee 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 receipts - the only net income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an investor, then the deeming provisions, as envisaged in the Explanation will not apply – Decided against Revenue. Deduction u/s 80M of the Act - Dividend income from investments made in shares in mutual funds - Held that:- The assessee had huge surplus funds 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 assessee’s investment which has generated dividend income is far less than the availability of interest free funds - there can be no presumption that borrowed funds were utilized for making the investment, so as to warrant any kind of disallowance of interest – Decided against Revenue. Expenses u/s 14A of the Act - Sufficient fund available as interest free from sales tax deferral loan – Held that:- It cannot be made u/s 14A, assessee has huge interest free surplus funds, which is evident from the fact that it has its own funds of ₹ 149.29 crores - it also had sum of ₹ 63.20 crores on account of retention of sales tax difference in this year - the investment to the tune of ₹ 49 crores that too major portion is coming from the earlier years, it can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as a defaulter in payment of advance tax and it would be nevertheless asked to pay interest in terms of Section 234B and Section 234C of the Act for default in making payment of tax in advance which was physically impossible - no interest u/s 234B and 234D can be levied on the disallowance made u/s 115JB in view of the retrospective amendment – Decided in favour of assessee. STCG on DG sets from block of plant & machinery – Held that:- The short term capital gain arises in case of depreciable assets only if the full value of 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 block of assets acquired during the previous year - It is only then the excess consideration shall be deemed to be short term capital gain – CIT(A) has given a categorical finding that the sale consideration is far less than the sum mentioned in the three parameters – thus, there was no reason to deviate from the order of the CIT(A) – Decided against Revenue. - ITA no. 3802/Mum./2006, ITA no. 3752/Mum./2006, ITA no. 5269/Mum./2008, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 respect to unit no.1 to 4, the Assessing Officer followed earlier year s 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 consumption 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 80 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent 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 reproduced 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 sale of paper and paperboards, multi layer boards, etc., was also into the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 case of CIT v/s Hindustan Motors Ltd., 127 ITR 210. The assessee in that case was engaged in the 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 used 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 fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction. Thus, ground no.1 raised by the assessee is allowed. 10. Ground no.2, 3 and 4 read as under:- 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 above, 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 finding 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 Unit No.1, the Ld. CIT (A) should have held that deduction uls.80IA 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 grounds for the claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... original return, and such claim should be considered. Towards this a fresh auditor s report was filed under cover of letter dated 30th 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 substance 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 the 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 had claimed the deduction under section 80IA. The chemical recovery boiler installed at the factory was all together the new asset which was taken on lease and, thereafter, the assessee has also made substantial investment in the building and in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nary 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 generated for mechanical purpose also. He further submitted that the deduction under section 80IA is available if the assessee 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 23rd May 2001 and 26th 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 present 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 proces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eneration 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 operating device. 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 only restricted to generation of electricity alone, is too narrow a view. The term power encompasses a whole range of energy generated in various forms to run machines, devices, etc. This precise issue had also come up for conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 concur 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 of electricity', shall have the same meaning whichever of the two be the item under consideration. In this regard the learned Authorised Representative has also referred the definition of word 'generate' under s. 2(29) of the Electricity Act, 2003 as per which '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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o provide power, steam turbines of a steam engine/locomotive of the age of steam. Thus there is no doubt, 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 wherein dealing with the matter in detail, 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 electrical, 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 Tribunal. Under these circumstances, 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. That 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 u/s 80IA in respect of integrated Power Unit No.6, thereby erred in not directing the A.O. for quantification of deduction u/s 80IA. 7. That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) erred in holding that provisions of sec. 80IA(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 grounds 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 infructuous. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h is borne by the paper division. He also noted that the learned Commissioner (Appeals), in the appellate order, for the assessment year 1999-2000 has held that the common expenses 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 turnover, 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 assessee s 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. Before us, the learned counsel for the assessee submitted that the Tribunal, in assessee s 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 excl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r parties. From the said order, he pointed out that the Tamil Nadu Government was supplying electricity in the open market @ ₹ 2.55 per unit. In Maharashtra, the private producers 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 the 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. Further, the Tribunal 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 electrici ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nit of the assessee to the paper division of the 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 arm s 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 is supplied 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 whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion u/s 80IA, 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 Tribunal 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. This 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 Commissioner (Appeals) and, 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 not justified in holding that expenditure on repairs and maintenance of Plant and Machinery, Building and Other Assets to the tune of ₹ 65,01,751/ -are capital expenditure. 11. That on the facts an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... building, 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 assessee s 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 incurred 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 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 expenditures have resulted in acquisition of asset of permanent or semi-permanent nature having overlasting values. The expenditure was incurred as part of maintenance expenditure o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00-01 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 carpets 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 expenditure so incurred 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 assessee s 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 ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a result, we restore matter to the file of the Assessing Officer with a direction to give reasonable opportunity to the assessee to submit the relevant evidences. 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, we 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 ground 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 disallowance of prorated indirect expenses does not arise. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of 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 were 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 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 Reliance Uti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... HHC. The 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 ₹ 29,94,721/-, 90% of processing and other income pertaining to cable division of ₹ 65,11,861/- and 90% of interest from the bank and others of ₹ 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, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 have been mentioned in ground no.19, which is included in the profits of the assessee 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 rental 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 deduction allowable u/s 80-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 reduced 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of deduction u/s 80JJA in respect of Chemical 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 power' 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 Ld. CIT(Appeals) grossly erred in confirming the levy and quantification of interest u/s 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 retrospective amendment brought in statute by the Finance Act, 2012, this issue now stands decided against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t no.1 is concerned, the same is purely academic as there was a loss in this unit and the assessee has not claimed any 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 assessee s own case for the earlier years right from the assessment year 1997-98 to 2001-02, wherein it has 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 this 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 under:- (2) On the facts and in the circums ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ₹ 44,64,293. The Assessing Officer disallowed the loss on the ground that the assessee s 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 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 assessee s main business is not for the purchase of sale of shares 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 has agreed that the assessee is not engaged in the business which con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ound is similar to ground no.6 and 7 of assessee s 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 maintenance which has been treated as capital expenditure by the learned Commissioner (Appeals). 102. After hearing both the parties, we find that this ground is similar to grounds no.10 to 12 for the assessee s 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 assessee s 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. Thu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8, 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 generating 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 A.Y. 2002-03. In view of the findings 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 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. 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 ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, 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 (Appeals) 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 the purpose of computing deduction under section 80HHC. 126. Insofar as the income from cable 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 assessee s own case for the assessment 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 leasin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is similar to the issue arising out of ground 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, this issue is decided against the assessee. Thus, ground no.9 raised by the Revenue is treated as allowed. 137. Ground 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 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. 139. Ground no.11, relates to exclusion of internal power consumed from the total turnover while computing the deduction 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 assessee s own case for earlier assessment year, this issue has been decided in favour of the assessee. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regard to the unit-6 has already been allowed. 150. Grounds no.5 and 6 relate to disallowance of expenditure on repair and maintenance as capital expenditure. 151. These grounds 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 assessment year 2002-03 and grounds no.5 and 6 raised by the assessee in ITA no.5269/Mum./2008. In view of the findings given therein, these grounds are treated as allowed. 152. Ground no.7, relates to inclusion of scrap sale amounting to ₹ 1,76,27,826, from the total 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, raised 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 challenged the reduction of 90% of the rental income from staff of ₹ 26,07,513, 90% of interest of ₹ 18,17,863 and 90% of misc. income of ₹ 1,5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pect 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 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, 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 80IA of the Act ignoring the provisions of Section 80IA(8) and 80IA(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 Electrici ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts in the securities from which the dividend was earned. 169. Before us, the learned counsel submitted that the disallowance of interest made by the Assessing Officer is ₹ 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 accumulated 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 ₹ 1,49,29,71,988, as on 31st 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. (supra). 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... even looking to the nature of expenses. For e.g., vehicle maintenance, charity and donation, misc. expenses, etc., cannot be said to have been incurred for the purpose of investment in shares, etc. At the most, directors fees and expenses and auditor s 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, auditor s remuneration is ₹ 5.53 lakhs. If the ratio on which the Assessing Officer has 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 administrative 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 the facts and in the circumstances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the Asst. year 2004-05. 183. Facts relating to this issue are that the assessee has entered into an agreement on 20th April 2004, for wage revision with the union of the staff on 20th April 2004 for the period of four years i.e., from 1st January 2003 to 31st 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 1st January 2003 to 31st 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 ₹ 5,49,52,089, being expenditure pertaining to the year under consideration and balance amount of ₹ 13738023 being incremental wages for the period from 1st January 2003 to 31st March 2003 was disallowed as expenditure not pertaining to this assessment year. However, 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 P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned 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 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 assessee s 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. In the result, Revenue s appeal for the assessment year 2004-05 is partly allowed. We now take up assessee s appeal in ITA no.5271/Mum./ 2008, for the assessment year 2005-06. 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 electricity for the purpose of computation of deduction u/s 80-IA. 194. This ground is similar to ground no.8 raised by the assessee in its appeal in ITA no.3802/Mum. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appreciate the fact that such expenditure of ₹ 82,2661- has been incurred in the 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. Grounds 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 80JJA in respect of Chemical Recovery Boiler which is engaged in generation 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 for 'generation of power' as laid down in section 80JJA. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come no such provisions was there for disallowance in the statute. He thus, submitted that no interest under section 234B and 234D, should be charged. 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 27th 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 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 under 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 authorities be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... April, 2001, the appellant first voluntarily paid a sum of ₹ 1,55,62,511 on account of the tax payable on book profit as provided in amended provision of s. 115JB and then filed its revised return of 31st March, 2003 declaring its business income as nil but the book profit under s. 115JB as ₹ 20,63,65,711. The AO accepted such return of income but imposed interest under ss. 234B and 234C of the Act amounting to ₹ 44,00,937 and ₹ 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 the 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 year 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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, accordingly, 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 view of the retrospective amendment. Accordingly, the additional ground raised by the assessee is treated as allowed. 212. In the result, assessee s appeal for the assessment year 2005-06 is partly allowed. We now take up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 expenditure of ₹ 19,49,803/- 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 parts 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./2006, 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( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elevant 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, on 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, 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 respective 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 machinery 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wn value of the block of assets at the beginning of the previous year; and (iii) the actual cost of any asset falling within the block 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 of 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 block 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 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the addition of profits on sale of investments of fixed assets in computing book profit u/s. 115JB. 234. After hearing both the parties, we find that this issue was decided in favour of the assessee by the Tribunal in assessee s 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 Revenue 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 80HHC while computing book. 236. After hearing both the parties, we find that this ground is similar too the additional ground raised by the assessee in its appeal in ITA 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 broug ..... X X X X Extracts X X X X X X X X Extracts X X X X
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