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2016 (1) TMI 117 - ITAT CHENNAI

2016 (1) TMI 117 - ITAT CHENNAI - TMI - Entitlement to deduction u/s.80IA - whether two power generating units situated in the main manufacturing plants producing news print and writing paper, set up for captive consumption as they did not qualify to be considered as separate industrial undertakings within the meaning of clause (iv) of sub-section (4) of sec 80IA? - Held that:- Eligible business were the only source of income during the previous year relevant to initial assessment year and every .....

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re set off against other income of the assessee and the set off against the current income of the eligible business, Once the set off is taken place in earlier year against the other income of the assessee, the Revenue can not rework the set off amount and bring it notionally. Fiction created in sub-section does not contemplate to bring set off amount notionally. Fiction is created only for the limited purpose and the same can not be extended beyond the purpose for which it is created . See Vela .....

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e Act. Accordingly, we agree with the finding of the Commissioner of Income-tax(Appeals) on this ground and dismiss the ground of appeal taken by the Revenue. - Decided against revenue. - ITA No. 259/Mds/2015, C.O.No.42/Mds/2015 - Dated:- 6-10-2015 - SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI V. DURGA RAO, JUDICIAL MEMBER For The Appellant : Shri Joe Sebastian, CIT For The Respondent : Shri R. Vijayaraghavan, Advocate ORDER PER CHANDRA POOJARI, ACCOUNTANT MEMBER The appeal is filed by the .....

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be considered as separate industrial undertakings within the meaning of clause (iv) of sub-section (4) of sec .80IA of the Act. 3. The ld. DR submitted that the assessee was not entitled to deduction u/s.80IA of the Act in respect of the profits relating to captive generation of power which could not be considered as profits derived from an identification industrial undertaking. He further submitted that the two power generating units in the assessee s manufacturing facility producing newsprint .....

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mitted that the CIT(Appeals) failed to take note in the assessee s case that there may be an increase in profits by way of cost reduction and such increase in profits could not be considered as profits derived from an eligible industrial undertaking u/s.80-IA of the Act. Further, the ld. DR submitted that the SLP is pending before the Supreme Court against the High Court s order in ITCA Nos.537 to 540 of 2011 dated 01.02.2012 on this issue in assessee s own case. 4. The ld. AR relied on the orde .....

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0- IA of the Act, on par with the wind farms. Contention of the Revenue is that these two units werean integral part of the main industrial undertaking of the assessee producing paper. A.O. himself at Sl.No.10 of the facing sheet of the assessment order has mentioned the nature of business of the assessee as manufacture and sale of newsprint, paper and generation of electricity. There is no dispute that TG-3 Boiler 4 and TG-4 Boiler 5 were turbo generators. There is also no dispute that such tur .....

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he power generated through such turbo generators, though mainly used for catering to the requirement of power for paper manufacturing activity, the surplus, as per the assessee, was sold to Tamil Nadu Electricity Board. This position has been noted by ld. CIT(Appeals) in his order and is not disputed. In our opinion, this by itself would go to show that such turbo generators producing power though not disparately placed, were undertakings producing power. Clause (iv) of subsection (4) of Section .....

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situated or set up in a part of Indian territory and just because it was placed within the main unit of the assessee producing paper, in our opinion, could not be cited as a reason for denying the claim to the assessee. Whether placed inside the premises or outside, the unit was producing electricity and taking a different view for production of electricity from inside of the premises and outside of the premises would not have any rational meaning nor would it be an intelligible differentiation. .....

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ssee should have set up an undertaking or an enterprise and from and out of which electricity should have been generated whether for captive use or otherwise for being eligible for 80-IA deduction. No doubt, here, it is not coming out of the orders of the authorities below whether the turbo generators where powered by diesel or powered by steam or powered by any other byeproducts produced by the assessee in the course of its main activity of producing paper. But, nevertheless this would not by i .....

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generated and captively used. We are therefore of the opinion that the assessee is bound to succeed in these appeals. Its claim for deduction under Section 80-IA of the Act has to be allowed in respect of its power generated from TG-3 Boiler 4 and TG-4 Boiler 5 units as well. Since the facts of the present case are similar to the facts that considered by this Tribunal in earlier occasion, following the same, we dismiss the ground raised by the Revenue. 6. The next ground raised by the Revenue i .....

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only the first year of the claim of deduction u/s.80IA by the assessee and not the commencement of operation of the eligible undertaking. The ld. DR, further submitted that the Commissioner of Income-tax(Appeals) erred in holding that the unabsorbed depreciation and carried forward losses of the earlier years which had already been set off against the other income could not be notionally carried forward and taken into consideration for the purpose of computation of deduction u/s.80IA stipulatin .....

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in assessee s own case in ITA No.554/Mds/2011 dated 30th June, 2011 for the assessment year 2006-07. 9. We have heard both the sides and perused the material on record. Similar issue was considered in favour of the assessee by this Tribunal in assessee s own case for assessment year 2006-07 vide order dated 30.6.2011. Similarly in the case of Velayudhaswamy Spinning Mills (P) Ltd. v. ACIT(supra), the Jurisdictional High Court has held as under: 13. Sec.80-IA reads as follows: [(1) Where the gro .....

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ars.] (2) The deduction specified in sub-section (1) may, at the option of the assessee, be claimed by him for any ten consecutive assessment years out of fifteen years beginning from the year in which the undertaking or the enterprise develops and begins to operate any infrastructure facility or starts providing telecommunication service or develops an industrial park [or develops [***] a special economic zone referred to in clause (iii) of sub-section (4)] or generates power or commences trans .....

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rity or a board or a corporation or any other body established or constituted under any Central or State Act;] [(b) it has entered into an agreement with the Central Government or a State Government or a local authority or any other statutory body for (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining a new infrastructure facility;] (c) it has started or starts operating and maintaining the infrastructure facility on or after the 1st day of April, 199 .....

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itial assessment year and to every subsequent assessment year up to and including the assessment year for which the determination is to be made. From reading of sub-s (1), it is clear that it provides that where the gross total income of an assessee includes any profits and gains derived by an undertaking for an enterprise from any business referred to in sub-s(4) i.e. referred to as the eligible business, there shall, in accordance with and subject to the provisions of the section, be allowed, .....

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is beginning from the year in which the undertaking or the enterprise develops and begins to operate any infrastructure activity etc. Sub-s(5) deals with quantum of deduction for an eligible business. The words initial assessment year are used in sub-s(5) and the same is not defined under the provisions. It is to noted that initial assessment year employed in sub-s(5) is different from the words beginning from the year referred to in sub-s(2) Important factors are to be noted in sub-s(5) and th .....

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assessment year. From reading the above, it is clear that the eligible business were the only source of income during the previous year relevant to initial assessment year and every subsequent assessment years. When the assessee exercises the option, the only losses of the years beginning from initial assessment year alone are to be brought forward and no losses of earlier years which were already set off against the income of the assessee. Looking forward to a period of ten years from the init .....

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contemplate to bring set off amount notionally. Fiction is created only for the limited purpose and the same can not be extended beyond the purpose for which it is created. Accordingly, the ground raised by the Revenue is dismissed. 10. The next ground raised by the Revenue is that the Commissioner of Income-tax(Appeals) erred in holding that the incentive on carbon credit is capital in nature. 11. The ld. DR submitted that the Commissioner of Incometax( Appeals) failed to observe that the Supre .....

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