New User   Login      
Tax Management India .com TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2015 (7) TMI 450 - CALCUTTA HIGH COURT

2015 (7) TMI 450 - CALCUTTA HIGH COURT - TMI - Eligibility of deduction u/s 80IA of the Income Tax Act 1961 - Revenue generated or the profit derived by the power undertaking - Dispute in rate at which electricity supplied will be computing the benefit under the section - Held that:- Eligibility of deduction u/s 80IA of the Income Tax Act 1961 - 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ispute - 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 amenable under Sub-Section (6) of Section 260A of the I. T. Act, 1961. Moreover when this Court is satisfied that the case involves the aforesaid ques .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

June, 2006 pertaining to the assessment year 2002-03. The facts briefly stated are that the assessee is engaged, inter alia, in the manufacture of paperboard. For the purpose of supplying uninterrupted power to the manufacturing unit, the assessee installed power-generating plant. The entire production of such plant was supplied to the paperboard manufacturing unit. Question arose (A) whether the assessee is entitled to the benefit under Section 80-IA? (B) If so, whether the benefit can be compu .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ow that the assessee did not make any profit from out of the power-generating plant is as follows:- Without prejudice to the above discussion, the market rate taken by the assessee for determining the revenue of the claimed power undertaking is highly illogical. In the original return the assessee has taken the average rate of power purchased by it during the financial year 2001-02 but in the revised return only the rate charged by APSEB has been taken ignoring the rate charged by APGPCL. As per .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rmined 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 as .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

t or loss of the power undertaking is recomputed and it is noticed that there is a loss in the power undertaking considering the expenses determined by the assessee and consequently, no deduction u/s. 80IA is available to the assessee. In an appeal preferred by the assessee, the CIT(A) held that there was in fact profit from the power-generating plant and he also held that the rate at 77 paise per unit adopted by the assessing officer was incorrect for the following reasons:- In this order, the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

he Grid Corporation of Orissa @ ₹ 0.77 unit and observed that if the same was applied in the case of the appellant and the profit or loss of the Power undertaking was recomputed the same would have resulted in a loss to the power undertaking considering the expenses determined by the assessee and no deduction U/s.80IA of the Income Tax Act 1961 was available to the appellant. The appellant - on the other hand - has pleaded that the Assessing Officer s view regarding the unusually low India .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Sugars Ltd. vs. CIT (223 ITR 432), the appellant has pleaded that the market price should imply the price the appellant would have to pay for getting the power requirement from an unrelated supplier at that particular place. Based on these observations the appellant has pleaded that the market value would have to be 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

t 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

arket value of such goods [ or services ] as on the date of the transfer, then, for the purposes of the deduction under this section, the profits and gains of such eligible business shall be computed as if the transfer, in either case, had been made at the market value of such goods [ or services ] as on that date : Provided that where, in the opinion of the Assessing Officer, the computation of the profits and gains of the eligible business in the manner hereinbefore specified presents exceptio .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

BA. The aforesaid provision contemplates or does not militate against supply of electricity by the eligible unit to any other business of the assessee. Therefore the contention that the unit is not eligible because the assesse has not sold power generated by the power undertaking to any outsider but has consumed 100% generated by its unit does not appear to be logical. The premise for claiming the benefit according to Clause IV of Sub-section 4 of Section 80 IA is a setting up of an undertaking .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

romote 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 80 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ct, 1880 (as amended in Bihar), imposed a local cess in the case of mines and quarries on the annual net profits. The appellant companies which had taken on lease certain mines wherefrom they extracted the ore and utilised it in their factories for the manufacture of the metal and products out of those metals, claimed that they could not be said to have derived annual net profits from the mines when the ore mined by them was not sold as such but was utilised for the production of finished produc .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

modity. There could, therefore, in law be an annual profit from the mines in cases where the ore produced from them was not sold as ore but was utilised as a raw material for the manufacture of other products which were sold. Where a provision like section 6 of the Act brings to tax solely the profit derived from a single activity there has necessarily to be an apportionment of the profit realised by the sale of the end product between what is attributable to that activity and what is attributab .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ould be claimed by the units established by the assessee, major parts of whose production were consumed by the existing business of the assessee. The Apex Court held that the benefit under Section 15C was available to the new businesses for the reasoning given, inter alia as follows:- The principal business of the assessee can be carried on even if the said two additional undertakings cease to function. Again, the converse is also true. The fact that the articles produced by the two undertakings .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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, b .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ally, the restriction on it, too, has to be construed so as to advance the objective of the section and not to frustrate it. Therefore the first question as regards eligibility of the assessee to claim benefit is answered in the affirmative and against the revenue. The other question which requires consideration is whether the rate at which electricity was supplied by the Andhra Pradesh State Electricity Board to the paper board manufacturing unit could be taken into account for the purpose of c .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

to market value in relation to sugarcanes and the following views were expressed:- Held, affirming the decision of the High Court, that it was not disputed that the asesseee utilized sugarcane grown by it in its own field for its factory and also purchased a considerable amount of sugarcane from outside. Therefore, it was not the case of the assessee that sugarcane growers did not sell sugarcane in the ordinary course of their business in the region where the assessee carried on business. The a .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

High Court in Tax Case (Appeal) 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 what is received or what comes in by exploiting the use of a property but also what one saves by using it oneself. Mr. Khaitan, therefore, submitted that the rate at which electricity was purchased by the paper board unit from the Andhra Pradesh State Electricity Board could be taken .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

to any consumer directly : it has to compulsorily sell it to the Board. 29. The power sold by the Chhattisgarh-Company to the Board is a sale to a company which itself supplies power to the consumers. It is not sale of power to the consumer. 30. The Steel-Division of the Assessee is a consumer. The CPP of the Assessee supplies electricity to the Steel-Division. Had the Steel-Division not taken power from the CPP then it had to purchase power from the Board. The CPP has charged the same rate from .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

arket rate to a consumer in the open market. 32. In our opinion, the AO committed an illegality in computing the market value by taking into account the rate charged to a supplier: it should have been compared with the market value of power supplied to a consumer. The last point urged by Mr. Khaitan was that the point as regards computation has not been raised by the appellant and therefore Court should not extend the scope of appeal by bringing in the question not put forward in the appeal. We .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

y 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 it .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

f the electricity sold to the paper unit at the market rate and for that purpose he also gave an opportunity to adduce evidence to the assessee. The assessee did not, however, avail the same and contented itself by disclosing the price at which power was purchased by the paper unit of the assessee from the Andhra Pradesh State Electricity Board. The rate at which electricity was purchased from Andhra Pradesh State Electricity Board by the paper unit of the assessee can by no means be the market .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ase was concerned with the question as to the market value of sugarcane grown by the assessee at home. The Supreme Court was of the opinion that the sugarcane grown at home would be deemed to have been sold to the sugar mill at the same rate at which sugar cane was purchased by the sugar mill. That obviously is correct because if the sugarcane grown at home had not been sold to the sugar mill of the assessee itself, the sugarcane would have been sold in the open market. The rate of sale in the o .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

by the distribution licensee and the rate at which the generating companies can sell electricity to the distribution licensee are governed respectively by Sections 61 and 62 of the Electricity 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 simila .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

on 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 Madras High Court cited by Mr. Khaitan has no manner of application because that judgment is based on the principle that mon .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

unit and not by the electricity unit. We are as such unable to agree with the views rendered by the Madras High Court. Our attention was drawn by Mr. Khaitan to an unreported judgment of this Court in the case of C.I.T. Vs. Graphite India Limited, wherein the assessee had computed the receipts for captively consumed power at the rate at which it had purchased power from the board. That appeal preferred by the revenue was not admitted by this Court and was dismissed at the admission stage without .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version