TMI Blog2015 (7) TMI 450X X X X Extracts X X X X X X X X Extracts X X X X ..... t of Section 80IA cannot hope to get any benefit more than what has been contemplated by the Act. It was a fortuitous circumstance that the entrepreneur in this case has a home consumption of electricity which any other entrepreneur engaged in the generation of electricity would not have. But that cannot be a reason why two entrepreneurs engaged in the same business will get benefit at rates computed differently. In order to avoid any such discrimination, the legislature has taken care to provide that the price which can be charged has to be the same, which electricity would fetch in the open market. The last submission, advanced by Mr. Khaitan that this point was not taken by the appellant, has not impressed us. The point is certainly involved in the appeal because the CIT (A) reversed the finding of the assessing officer that the rate at which electricity was supplied by the Andhra Pradesh State Electricity Board “cannot be taken as the market rate within the meaning of Section 80IA”. The learned Tribunal has upheld that finding. The revenue is in appeal. The decision to reverse the finding is based on a wrong determination of a substantial question of law and is therefore ame ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee has not taken the rate which would have been received by it, had it sold the power to outsiders. The purchase rate of power by the assessee cannot be taken as the market rate within the meaning of Section 80IA because the market value of the goods is to be determined on the basis of rate on which the goods/services can be sold in the open market. As the assessee has not sold the power generated by it to any outsider the market rate is not available. The assessee was requested to furnish the rate at which the power could have been sold to outsiders but the assessee has not furnished the same. M/s. Indian Aluminium Co. Ltd. is assessed under this Circle and it also has a power undertaking in Orissa. During the course of assessment proceedings for the assessment year 2002-03 the said company submitted that it has sold power to the Grid Corporation of Orissa Ltd. at 0.77 paisa per unit. As the assessee has not submitted the market rate, i.e. the rate at which the power could have been sold to an outsider, the rate received by M/s. Indian Aluminium Co. Ltd. for its power undertaking can be taken as a comparable market rate at which the assessee could have sold the same in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... computed @4.45 per unit being the rate at which power was supplied by the Andhra Pradesh State Electricity Board. The contention of the appellant has been examined. A perusal of the records show that based on the Andhra Pradesh State Electricity Board Rates the total fixed charges (in the nature of Demand Charges and additional Demand charges) are ₹ 5,98,64,526/- and variable charges amount to ₹ 56,25,94,466/- aggregating to ₹ 62,24,58,992/- after taking into consideration the amount of cost incurred by the appellant shown at ₹ 17,53,44,000/- (after rounding off), the revenue generated or the profit derived by the said power undertaking would work out to ₹ 44,71,14,992/- (i.e.Rs.62,24,58,992/- minus ₹ 17,53,44,000/-). As such, the deduction claimed u/s.80IA of the Income Tax Act 1961 is allowed to the extent of ₹ 44,71,14,000/- (rounded off). This ground of appeal is partly allowed. The learned Tribunal has affirmed the order of the CIT (A). Therefore, the revenue is once again before us in appeal. In so far as the question as regards the eligibility of the assessee to claim the benefit is concerned, reference may be made to sub-Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be supplied by the existing distribution undertakings to the public at large. The object of the legislature was to promote infrastructure for generating power, if the instant undertaking had not been set up the other business of the assessee would naturally have depended for its demand in its entirety upon the supply by the Andhra Pradesh State Electricity Board. Shortage of power throughout the country is a well-known phenomenon. The overall shortage of power to the extent of the power generated by the undertaking has, therefore, been reduced. We are, as such, unable to hold that the benefit under Section 80IA is not available to the assessee because the power generated was consumed at home or by other business of the assessee. It is now well-settled that a statute granting incentives for promoting growth and development should be construed liberally so as to advance the objective of the provision and not to frustrate it. In the case of Tata Iron Steel Company Ltd. and Ors. Vs- State of Bihar reported in (1963) 48 ITR (S.C.) 123 the question arose as follows:- Sections 5 and 6 of the Bengal Cess Act, 1880 (as amended in Bihar), imposed a local cess in the case of mines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e articles produced by the two undertakings are used by the boiler division of the assessee will not weigh against holding that these are new and separate undertakings. On the other hand, the fact that a portion of the articles produced in these two new industrial undertakings had been sold in the open market to others is a circumstance in favour of the assessee that the new industrial units can function on their own. Use of the articles by the assessee is not decisive to deny the benefit of section 15C. Reference may also be made to the judgement in the case of Bajaj Tempo Limited Vs- CIT reported in (1992) 62 Taxman 480 (SC) wherein the following views were expressed:- The section, read as a whole, was a provision, directed towards encouraging industrialisation by permitting an assessee setting up a new undertaking to claim of not paying tax to the extent of six per cent in a year on the capital employed. But the legislature took care to restrict such benefit only to those undertakings which were new in form and substance, by providing that the undertaking should not be, formed in any manner provided in clause (i) of sub-section (2) of Section 15-C. Each of these requi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l) Nos.68 to 70 of 2010, wherein the following views were taken:- 9. Therefore, there is no difficulty in holding that captive consumption of the power generated by the assessee from its own power plant would enable the respondent/assessee to derive profit and gains by working out the cost of such consumption of power inasmuch as the assessee is able to save to that extent which would certainly be covered by Section 80-IA(1). When such will be the outcome out of own consumption of the power generated and gained by the assessee by setting up its own power plant, we do not find any lack of merit in the claim of the respondent/Assessee when it claimed by relying upon Section 80-IA (1) of the Income Tax Act by way of deduction of the value of such units of power consumed by its own plant by way of profit and gains for the relevant assessment years. The aforesaid judgment of the Madras High Court, Mr. Khaitan pointed out, is based on a judgment of the Apex Court in the case of Bhagwan Dass Jain Vs. Union of India And Others reported in (1981) 128 ITR 315 wherein the following views were taken:- Even in its ordinary economic sense, the expression income includes not merely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The benefit under Section 80IA was intended to encourage the business of generating power. An entrepreneur who wants to avail the benefit of Section 80IA cannot hope to get any benefit more than what has been contemplated by the Act. It was a fortuitous circumstance that the entrepreneur in this case has a home consumption of electricity which any other entrepreneur engaged in the generation of electricity would not have. But that cannot be a reason why two entrepreneurs engaged in the same business will get benefit at rates computed differently. In order to avoid any such discrimination, the legislature has taken care to provide that the price which can be charged has to be the same, which electricity would fetch in the open market. It is true that at the relevant point of time the explanation added to sub-section 8 of Section 80 IA quoted above was not there in the statute. But this fact by itself does not advance the case of the assessee because what was already there during the relevant assessment year reads as follows:- 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 woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lectricity Act 2003. There is tariff regulatory commission which fixes both the rates for sale and purchase of electricity by the distribution licensee. There are provisions in Section 62 so that the generating companies can recover expected revenue on the basis of the tariff fixed by the commission. There are similarly provisions in Section 61 so that the distribution licensee can derive reasonable return. There is thus an in-built mechanism to ensure permissible profit both to the generating companies and the distribution licensees. The assessee s generating unit cannot as such claim any benefit under Section 80 IA of the I. T. Act computed on the basis of rates chargeable by the distribution licensee from the consumer. The benefit can only be claimed on the basis of the rates fixed by the tariff regulation commission for sale of electricity by the generating companies. Therefore, the view taken both by the Tribunal and the C.I.T. (A) on the basis of the judgment of Thiru Arooran Sugars Ltd. (supra) is altogether incorrect. The judgment of the Chhattisgarh High Court in the case of Godawari Power Ispat Ltd. cannot be followed for the same reasons. The judgment of the Madr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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