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2015 (7) TMI 677 - ITAT HYDERABAD

2015 (7) TMI 677 - ITAT HYDERABAD - TMI - Deduction u/s 80IA to assessee on the power generation plant - CIT(A) allowed claim - Held that:- The issue in dispute is squarely covered by the decision of the ITAT in assessee’s own case for preceding AYs 2007-08 to 2009-10 [2012 (2) TMI 483 - ITAT HYDERABAD] wherein observed that the Tribunal while considering the issue of disallowance of assessee’s claim of deduction u/s 80IA by AO on the allegation that the power generation unit is a continuation o .....

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entifiable premises, under a separate license with manifold increase in capacity with new machinery and buildings without transfer of any portion of the old buildings or machinery which pre-existed. To constitute reconstruction, there must be transfer of assets of the existing business to the new industrial undertaking. In our opinion, generation of power unit is separate and distinct undertaking for which separate approval was obtained and recognised by the IREDA and it cannot be said that spli .....

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respect of steam is only ₹ 11.43 Lakhs. Thus, even assuming that steam is not power as held by the Assessing Officer, at best the department could have treated only ₹ 11.43 lakhs as ineligible profits for the purpose of claiming the deduction under section 80IA of the Act. To hold otherwise, would be a gross error as the expenditure debited to the profit and loss account of the power unit is still being retained by the department while making the computation. The CIT [A] also agrees .....

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e calculation of value of the steam produced by the power plant has to be determined after considering the cost and production record of respective unit and thereafter quantification of deduction has to be done in accordance with the order of the Tribunal cited supra. This issue is remitted back to the file of the Assessing Officer with a direction to the assessee to furnish necessary records for the purpose of determining the value of the steam produced and transferred to sugar unit. - Decided .....

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er judicial forum, AO should consider the same and decide accordingly. - Decided partly in favour of revenue. - ITA No. 346/Hyd/2015 - Dated:- 30-6-2015 - Shri P.M. Jagtap and Shri Saktijit Dey, JJ. For the Petitioner : Shri Rajat Mitra For the Respondent : Shri M.V. Anil Kumar ORDER PER SAKTIJIT DEY: This appeal by the department is directed against the order dated 30/01/2015 of ld. CIT(A) - 2, Hyderabad for the AY 2010-11. 2. The department has raised six grounds in all. Ground Nos. 1 & 6 .....

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rict of A.P. Assessee has also a cement factory in Krishna District of AP. For the AY under consideration, assessee filed its return of income on 24/09/2010 declaring total income of ₹ 20,19,94,997 after claiming deduction u/s 80IA of an amount of ₹ 4,84,48,186. During the assessment proceeding, AO noticed that from its power generation unit assessee has disclosed a total turnover of ₹ 19,37,19,867 which includes sale of electricity to sugar division amounting to ₹ 59.39 .....

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to have been set up by assessee is not a new unit but has been set up by splitting up of earlier business, therefore, being of the opinion that power generation unit has been a continuation of the earlier business, he disallowed the deduction claimed u/s 80IA of the Act. Being aggrieved of such disallowance, assessee preferred appeal before ld. CIT(A). 5. Ld. CIT(A) after considering the submissions of assessee and having found that assessee s claim of deduction u/s 80IA on the power generation .....

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Ys 2007-08 to 2009-10. Copies of the orders were also placed before the Bench. On perusal of the order passed by the coordinate bench in assessee s own case for AY 2007-08 in ITA Nos. 931 & 1051/Hyd/2011, dated 10/02/2012, it is observed that the Tribunal while considering the issue of disallowance of assessee s claim of deduction u/s 80IA by AO on the allegation that the power generation unit is a continuation of the old business and has been set up by splitting up of business in existence, .....

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government agencies like IREDA. The lower authorities are not correct in holding that the power plant was not a distinct unit although all government authorities including the Electricity Regulatory Authority considered it as such. The true principle as laid down by the Apex Court, in the case of Textile Machinery Corporation Ltd., Vs. CIT [supra], directly and squarely applies to the facts of the case. In the instant case, the true test is not whether the new industrial undertaking connotes ex .....

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taken place in the place of existing old technology. Thus, they impliedly agree that the new machinery and plant have been installed under separate licence and premises. Even though the decision of Textile machinery [supra] was concerned with the clause dealing with reconstruction of existing business but the expression 'not formed' was construed to mean that the undertaking should not be a continuation of the old but emergence of a new unit. Therefore, even if the undertaking is establi .....

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he power and steam produced earlier was part of the sugar unit and could service only the sugar unit and hence was at best by-product of the sugar unit manufacturing facility. The new unit had power as the main product and apart from servicing the captive consumption in the sugar unit also serviced the cement unit power requirements, which the old captive power plant was not doing and the surplus power is being supplied to APTRANSCO in terms of an agreement. The pricing of power is also subjecte .....

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s clearly distinguished by the learned counsel for the assessee as referred above. Further, the Supreme Court in the case of Textile Machinery Corporation (cited supra) wherein the Supreme Court categorically held that new unit established by the assessee for manufacturing articles used as intermediate products in the old division, which the assessee was buying from the market earlier, is not reconstruction of business already in existence. To constitute reconstruction, there must be transfer of .....

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. Similar view was again expressed by the Tribunal in assessee s own case in the succeeding AYs 2008-09 and 2009-10 in ITA Nos. 917/Hyd/12, dated 12/10/2012 and ITA No. 1024/Hyd/13, dated 05/02/14. Therefore, there being no difference in the factual position relating to assessee s claim of deduction u/s 80IA in the impugned AY, there is no reason to deny such deduction to assessee in the impugned AY. Accordingly, we do not find any infirmity in the order of ld. CIT(A) in allowing assessee s clai .....

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He was also of the view that steam is only a bye-product, it cannot be said to be income from the business of power generation. AO opined that since no value has been ascribed by APERC in tariff fixation, its value has been taken at nil. He also observed that since the cost of fuel has been fully considered in fixing the tariff no separate addition in respect of fuel cost can be allowed. AO observed that since deduction claimed u/s 80IA is denied to assessee on the amount of ₹ 118.55 lakh .....

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f revenue authorities as well as other materials on record. Both the counsels agreed before us that the issue in dispute is squarely covered in favour of assessee by the decisions of the coordinate bench. The orders by the coordinate bench in this regard in assessee s own case for AYs 2007-08 to 2009-10 were also placed before the bench. On perusal of the orders passed by the coordinate bench in assessee s own case that the coordinate bench in ITA No. 1024/Hyd/13, dated 05/02/2014, while decidin .....

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considered the rival submissions and perused the materials available on record. We find that the lower authorities did not dispute that the profit credited to Profit and Loss Account in respect of steam is only ₹ 11.43 Lakhs. Thus, even assuming that steam is not power as held by the Assessing Officer, at best the department could have treated only ₹ 11.43 lakhs as ineligible profits for the purpose of claiming the deduction under section 80IA of the Act. To hold otherwise, would be .....

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uction under section 80IA of the Act and for the balance sale amount of steam to sugar division, the assessee company is eligible for deduction under section 80IA of the Act. For this proposition, we place reliance on the order of the Tribunal in the case of DCW Ltd.vs. Addl. CIT, ITA No. 126/Mum/2008, AY 2003-04 dated 29th January, 2010 reported in 42 DTR (Mumbai) (Trib.) 369 at page 383 para 18.8 which reads as under: 18.8 the next item of miscellaneous income is the income from sale of steam .....

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e said steam is used as power for the manufacture of PVC and limenite and 6,240 MT was used towards internal consumption. Durng the year 66,900 MT of steam was consumed in the manufacture of PVC and 29,065 MT was consumed in the manufacture of limenite. 18.9 The submission of the learned Authorised Representative of the assessee is that since power in the form of steam was generated by the captive power plant and consumed in the manufacture of PVC and limenite, therefore, the assessee is entitle .....

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e consumption by the assessee. CIT vs. Tanfac Industries Ltd., SLP(C) No. 18537 of 2009 (319 ITR 8 and 9). In the light of above discussion, we find that 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, therefore, deduction under s. 80-IA is allowable. We, accordingly, set aside the order of CIT(A) on this issue and the claim of the assessee is allowed. 22. The ground raised by the assessee with regar .....

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d back to the file of the Assessing Officer with a direction to the assessee to furnish necessary records for the purpose of determining the value of the steam produced and transferred to sugar unit. 16. As the issue under consideration is identical to that of the case decided by the coordinate bench in assessee s own case for AY 2007- 08 and 2008-09, respectfully following the same, we remit the issue back to the file of the Assessing Officer with a direction to decide the issue after examining .....

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last issue raised by the department in ground no. 5 is relating to reduction in power charges. 11. During the assessment proceeding, AO noticed that assessee has adopted a rate of 3.48% in respect of electricity supplies made to AP Transco, sugar and cement divisions. He observed that initially the Govt. of AP vide GO Ms. No. 93 dated 18/11/97 announced uniform incentives to all projects based on renewable sources of energy for purchase of power by APSEB/AP Transco. The rate was fixed at ₹ .....

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r hearing all concerned, commission passed an order dated 20/03/2004 fixing tariffs for various sources of energy. In case of bagasse cogeneration plants, it arrived at two types of tariff, a fixed cost and a variable cost. AO noticed that as assessee is into the sixth year of operations, the fixed cost of tariff is ₹ 1.51 per unit and the variable cost for the year 2007-08 has been fixed at ₹ 1.18 per unit. AO observed that the order of APERC further laid down a condition that no fi .....

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t by AP Transco. AO observed that, though, the matter has not yet reached finality, but, still, assessee company has been raising invoices on AP Transco @ 3.48 per unit, which is the price as on 31/03/2004 as per the old tariff. AO observed that assessee had entered into agreement with NEDCAP on 16/08/2000 as per which it is under an obligation to follow the directions of APERC. Thereafter, AO referring to various judicial precedents, rejected the income shown from power generation unit by reduc .....

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value which would ordinarily fetch in the open market and in case of supply of electricity the fair market value would be the rate at which AP Transco charges its customers. Ld. CIT(A) after considering the submissions of assessee in the light of the observations made by ITAT in assessee s own case held as under: 10. The submissions and the orders of the ITAT and Appellate Tribunal for electricity cited supra have been duly perused. It is opined that the rate fixed by APERC is the fair market va .....

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