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2016 (8) TMI 413 - GUJARAT HIGH COURT

2016 (8) TMI 413 - GUJARAT HIGH COURT - TMI - Rectification of mistake - Tribunal in its original judgment held that the assessee had not established a new power plant so as to qualify for deduction under section 80IA of the Act but recalled this order in exercise of powers of rectification on the ground that this view is not in consonance with in case of Gujarat Alkalies and Chemicals Ltd. (2012 (3) TMI 267 - GUJARAT HIGH COURT ) - Held that:- High Court in case of Gujarat Alkalies and Chemical .....

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ion, without generation of steam. When the High Court in case of Gujarat Alkalies and Chemicals Ltd. (supra) referred to the issue depending on the nature of technology and mechanism of production, it left this question open to be judged case specific. This was therefore not a case where by virtue of the judgment of the case of High Court in case of Gujarat Alkalies and Chemicals Ltd. (supra), it can be stated that the Tribunal had committed an error apparent on record which needed rectification .....

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il Kureshi ) 1. Since appeals involve the same assessee and similar issues, we may refer to facts arising in Tax Appeal No.635 of 2012. Revenue is in appeal against the order of the Income Tax Appellate Tribunal dated 11.05.2012. On 04.09.2013, the Court noticing that the issue arises out of the rectification application by the respondent assessee had issued notice for final disposal. For the purpose of this Tax Appeal, we frame following substantial question of law. Whether the Income Tax Appel .....

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sing Officer framed scrutiny assessment on 26.03.2004 assessing total income at ₹ 4.9 crores (rounded off). This included addition of ₹ 15.68 crores made on account of disallowance of the assessee's claim under section 80IA of the Income Tax Act, 1961, on setting up of a new power generation plant. 3. The claim of the assessee was that during the year under consideration, the assessee had established a new power plant by expending a sum of ₹ 14.56 crores. The assessee had c .....

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out that in the existing power plant, the assessee had excess steam production capacity which was utilised by the turbine, which was installed in the new plant. The assessee contended that even otherwise, the assessee could have purchased steam from market and utilized for production of generation of electricity through the turbine installed in the new industry. The Assessing Officer did not agree with the contentions of the assessee that the turbine should be treated as an independent power gen .....

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ng independently and depended on the transfer of steam from the existing plant. He therefore rejected the assessee's appeal. 5. The assessee carried the matter further in appeal before the Tribunal. 6. The Tribunal by a judgment dated 16.05.2008 on this issue rejected the appeal of the assessee making following observations: 9. We have carefully considered the rival submissions and perused the material on record along with the order of the tax authorities below. The deduction u/s 80IA is ava .....

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gins to generate power at any time during the period beginning on the 1st day of April, 1993 and ending on the 31st day of March, 2010. Subsection (3) of section 80IA requires that such undertaking must fulfill the conditions laid down therein. The first condition therein is that the undertaking should not be formed by splitting up, or the reconstruction, of a business already in existence. The second condition states that the undertaking is not formed by the transfer to a new business of machin .....

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deemed to have been complied with. This is an undisputed fact that in this case the assessee has not transferred the existing boiler to the new undertaking for generating the power but the contention of the assessee is that the same very boiler is being used for supplying the steam to both the turbine which was already in existence and the new one established by the assessee. The claim of the assessee is that the new turbine established by him itself is a new undertaking engaged in the business .....

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the boiler are installed. The assessee has not installed boiler but it is part of existing undertaking generating the power. This, in our opinion, is merely an expansion of the existing undertaking. If the existing boiler is carved out from the new turbine installed by the assessee, the new turbine claimed to be eligible undertaking itself cannot generate the power. No material or evidence was brought to our knowledge which may prove that the new turbine installed by the assessee can independent .....

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n the business as has been stipulated u/s. 80IA independently. It is not the case of the assessee that the new unit established by the assessee has taken the boiler from the existing unit for its exclusive use and generation of power. It is only in the existing unit the assessee has added new turbine which, in our opinion, cannot be regarded to be establishing the new undertaking qualifying for deduction u/s 80IA. We, therefore, do not find any illegality or infirmity in the order of the CIT(A) .....

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f the High Court in case of Gujarat Alkalies and Chemicals Ltd. (supra) to contend that the Tribunal had committed an error apparent on the face of the record which required rectification. This application was strongly opposed by the Revenue contending that the judgment of the Tribunal did not suffer from any error apparent on the record and the same therefore did not require any rectification. The Tribunal by the impugned order dated 11.05.2012, allowed the application for rectification, recall .....

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n. This view was not opposed to the decision of the Gujarat High Court in case of Gujarat Alkalies and Chemicals Ltd. (supra), the judgment did not lay down a ratio which could be automatically applied to the case of the assessee. Such decision therefore could not have been a ground for recalling the order of the Tribunal by way of rectification. In this context, counsel relied on the judgment of the Supreme Court in case of T.S. Balram, IncomeTax Officer, Company Circle IV, Bombay v. Volkart Br .....

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e up for consideration. 9. On the other hand, learned counsel Shri Soparkar for the assessee opposed the appeal contending that the judgment of the Tribunal dated 16.05.2008 was not in consonance with the view of the case of the decision of the High Court given in case of Gujarat Alkalies and Chemicals Ltd. (supra). Merely because new industry depended on the existing industry, would not be a ground to deny deduction under section 80IA of the Act. Since the Tribunal had proceeded only on this ba .....

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the record" occurs in section 154. It also finds place in section 254(2). The purpose behind enactment of section 254(2) is based on the fundamental principle that no party appearing before the Tribunal, be it an assessee or the Department, should suffer on account of any mistake committed by the Tribunal. This fundamental principle has nothing to do with the inherent powers of the Tribunal. In the present case, the Tribunal in its Order dated 10.9.2003 allowing the Rectification Applicati .....

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based on a mistake apparent from the record. 10. From the facts on record, it emerges that the Tribunal in its original judgment dated 16.05.2008 had held that the assessee had not established a new power plant so as to qualify for deduction under section 80IA of the Act. The Tribunal recalled this order in exercise of powers of rectification on the ground that this view is not in consonance with in case of Gujarat Alkalies and Chemicals Ltd. (supra). It is undisputed that under section 254(2) o .....

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It was therefore not even the argument of the Revenue that merely because the judgment of the Gujarat High Court in case of Gujarat Alkalies and Chemicals Ltd. (supra) was delivered subsequent to the judgment of the Tribunal, the same would not form a ground to hold that the Tribunal's judgment suffered from an apparent mistake. However, the Revenue argued that the said judgment did not clinch the issue and at any rate, it was debatable whether by virtue of the judgment of Gujarat High Court .....

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ment of section 254(2) is based on the fundamental principle and no party appearing before the Tribunal should suffered on account of the mistake committed by the Tribunal and that power of rectification of the Tribunal is granted to see that no prejudice is caused to either of the parties by the decision of the Tribunal based on the mistake apparent from the record. Section 254 (2) itself refers to a mistake apparent on record, which can be rectified. The concept of mistake apparent on record w .....

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hange Ltd. (supra). 14. In view of such settled legal position, we may examine the facts on hand. As noted, the assessee had installed a turbine for power generation, which relied on the excess steam production capacity of the plant. The assessee claimed that it had thus, set up a new power plant which qualify for deduction under section 80IA of the Act. The Tribunal by its original judgment, upheld the view of the Revenue authorities holding that turbine itself would not be sufficient to genera .....

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nd a new letter of intent for substantial expansion of the production capacity of the caustic soda, by which, its existing capacity was nearly doubled. The assessee had made sizable investment in acquiring new machinery and plant. The assessee therefore claimed that this was a new industrial undertaking and the profit in respect of which would qualify for deduction under section 80IA of the Act. The claim was rejected by the Revenue authorities and the Tribunal on the ground that this is a case .....

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ion independently of the existing industrial undertaking. On the question of satisfying the test of a separate and distinct identity of the industrial unit set up, the Court was of the opinion that only because to a certain extent, the new undertaking is dependent on the existing unit, will not deprive the new undertaking status of a separate and distinct identity. It all depends on the nature of technicality and the mechanism of production. 15. Thus while discarding the theory of the test of se .....

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