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2016 (2) TMI 459 - ITAT DELHI

2016 (2) TMI 459 - ITAT DELHI - TMI - Deduction under sec. 80IA rejected - whether the assessee generates and sells the electricity or utilizes it for its manufacturing of other goods for sale - CIT(A) allowed the claim - Held that:- The emphasis for grant of relief is on the manufacture of one or more of the item enumerated in Schedule VI. Whether the items mentioned in Schedule- VI are manufactured and sold by the assessee as such or utilized by the assessee in the manufacture of other goods f .....

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o be done in terms of energy which has to be measured in kcl. In absence of any reason given by the Assessing Officer as to why the formula used by the assessee was wrong, we are of the view that Learned CIT(Appeals) has rightly accepted the above contention of the assessee that observation of the Assessing Officer that the assessee had allocated cost in proportion to temperature was not correct.

CIT(Appeals) has dealt with the issue and observed that the perusal of the submissions of .....

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TAT, we do not find reason to interfere with the findings of the Learned CIT(Appeals) in this regard

The Assessing Officer agreed with the view that State Electricity Board, selling price was ₹ 4.50 per unit and if that be the case then provisions of sec. 80IC(8) cannot be ignored whereby the profit has to be computed by applying the market rate. The market rate has to be the price at which power is being sold in the open market. If the assessee bought power from UP State Electr .....

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soned one we are not inclined to interfere therewith. The same is upheld. - Decided in favour of assessee - ITA No. 1920/Del/2013 - Dated:- 13-1-2016 - SHRI I.C. SUDHIR AND SHRI L.P. SAHU For The Assessee : Ved Jain, CA For The Department : Ms. Richa Rastogi, Sr. DR ORDER PER I.C. SUDHIR: JUDICIAL MEMBER The Revenue has questioned First Appellate Order on the following grounds: 1. Whether in the facts and circumstances of the case, the Learned CIT(Appeals) was justified in allowing the deduction .....

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f further reduction of 15% by the A.O. on the ground that ideal condition rarely exist and even if so it will not be throughout the year? 2. Heard and considered the arguments advanced by the parties in view of orders of the authorities below, material available on record and the decisions relied upon. 3. The facts in brief are that during the year the assessee was operating a husk (fuel) based captive power plant which was used by it by generating electricity for its papers manufacturing units. .....

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ld, power generated by the assessee was primarily to reduce cost of power and fuel expenditure of other unit, profit computed by the assessee for generation of power was not correct, assessee has not submitted project viability report, number of units generated during the year, while computing the profit of the power undertaking is regarding the rate of the electricity etc. Before the Learned CIT(Appeals), the assessee tried to meet these objections of the Assessing Officer and being satisfied t .....

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e set aside to the file of the Assessing Officer to ascertain as to whether assessee has maintained accounts of the two units separately and for the purpose of rate of the electricity unit generated by it. 5. The Learned AR on the other hand tried to justify the First Appellate Order. He submitted that the issues raised in the grounds are fully covered by several decisions cited by the assessee before the Learned CIT(Appeals). He also placed reliance on those decisions while reiterating the subm .....

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t cannot be said to be sale which as per him was in disregard of provisions of sec. 80IA(8) of the Act, the reply of the assessee remained that the benefit of deduction under sec. 80IA is available even to a person who generates, as can be seen that there is a word or between generates or generates and distributes in the provisions under section 80IA of the Act. It was submitted that the Assessing Officer was not correct in stating that the claimed deduction is available to an enterprise which g .....

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f the Act, we concur with the above contentions of the assessee, which is also supported by the decision of Hon'ble Madras High Court in the case of Tamilnadu Petroproducts Ltd. Vs. ACIT - 238 CTR (Mad.) 454 holding that the assessee is entitled to deduction under sec. 80IA in respect of notional income from generation of electricity which was captively consumed by itself. In the case of CIT vs. Orissa Cement Ltd. - 254 ITR 412 (Del.), the assessee had carried on mining operations of lime st .....

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in in the case of CIT vs. Chitran & Co. Pvt. Ltd. - 191 ITR 96 (Madras), it has been held that in order to claim relief under sec. 80I of the Act, the assessee should be engaged in the production of manufacture or one or more or the items enumerated in Schedule-VI to the Income-tax Act, 1961, in which case the assessee should be regard as engaged in a priority industry. The emphasis for grant of relief is on the manufacture of one or more of the item enumerated in Schedule VI. Whether the it .....

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he assessee generates and sells the electricity or utilizes it for its manufacturing of other goods for sale. 7. The Assessing Officer has also rejected the claim on the basis that profit computed by the assessee for generation of power is not correct. The Assessing Officer thereafter had drawn his own trading account on page No. 5 in para 3.1.3 of the assessment order. The contention of the assessee against this objection remained that the Assessing Officer while drawing this trading account ha .....

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ulation of generation of units. As per this, the total rice husk consumption during the year was 37,204 M.T. Each one tone rice husk produced 3.83 M.T. of steam. The steam so produced was at 46 a.t.a and 420 degree centigrade temperature. The calorie value of such steam was 79 kcal/kg. Accordingly the total energy so produced from the rice husk of 37,204 MTs comes to 11,10,00,489 kcl/kg. Out of this total energy so produced was used in the paper plant, details of which were furnished by the asse .....

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to be done in terms of energy which has to be measured in kcl. In absence of any reason given by the Assessing Officer as to why the formula used by the assessee was wrong, we are of the view that Learned CIT(Appeals) has rightly accepted the above contention of the assessee that observation of the Assessing Officer that the assessee had allocated cost in proportion to temperature was not correct. 8. The third contention of the Assessing Officer was that the assessee had not submitted project v .....

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as pointed out that during the course of such inspection, a date-wise chart was also prepared monitoring the consumption of raw-material and power generation, a copy whereof was produced before the Assessing Officer in the inspection report calculation regarding the average power generation and the rice husk consumption was shown. Regarding the number of units generated during the year as raised by the Assessing Officer and his statement that the assessee had given its own calculation of number .....

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e Order has dealt with the issue and observed that the perusal of the submissions of the assessee shows that it had computed its calculation at 85% of the efficiency itself. The assessee considering the efficiency at 8% to 86% had computed the power transferred to paper unit at 39,06,143 units, clearly demonstrating that the assessee himself had computed the efficiency by reducing the same to 85 to 86% and therefore, the Assessing Officer was not justified in further reducing the same by another .....

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uced the same to ₹ 3 per unit on the basis that when power is sent by the State Electricity Board, it had to incur beyond the generating cost, billing charges and distribution charges. On this basis, the Assessing Officer had that the selling price of the power for the assessee should be 2/3rd of ₹ 4.50 i.e. ₹ 3 per unit. The assessee submitted that computation done by the Assessing Officer does not have any scientific basis. The Assessing Officer agreed with the view that Stat .....

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