TMI Blog2012 (10) TMI 1150X X X X Extracts X X X X X X X X Extracts X X X X ..... d COGEN II Unit at the market rate of ₹ 4.86 per unit of power relying on the decision of Hon. ITAT in the case of Alembic Ltd. for A.Y. 2003-04 bearing ITA No. 3594/Ahd/2007 dated 06.06.2008 wherein the Hon. ITAT allowed the appeal of the assessee in respect of claim of the assessee u/s. 80IB(4) by taking the price of electricity supplied by GEB. 2(b). On the facts and circumstances of the case, the ld. CIT(A) as well as the Hon. ITAT erred in not considering the decision of the Appellate Tribunal, Chennai rendered in the case of Chettinad Cement Corporation Ltd. in ITA No. 1026(MAD)/2005 for A.Y. 2001-02, according to which the deduction u/s. 810IB(4) is not allowable to the assessee for generating power for captive consumption. Relief claimed in appeal The order of the CIT(A) to the above extent may be set aside and that of the Assessing Officer be restored. 2. No-one appeared on behalf of the assessee. An application for adjournment is on record. However, no reasonable cause is given for the absence, therefore, the application for adjournment is rejected. The appeal is taken up for hearing in the absence of the assessee. The facts in brief are th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Remarks 1 47,966 Filtering Unit The Appellant has replaced the filtering unit in the Heater. Oil used in the heater passed through the filtering unit. Due to wear and tear the filtering unit was damaged and therefore it was necessary to be replaced. No new asset has been created nor there is benefit of enduring nature. The filtering unit cannot work independently and is useless unless fitted in the heater. Therefore deduction has been rightly claimed by the appellant. 2 1,69,338 Pressure Ring The function of the pressure ring is to withstand the pressure built up in the extrusion press. The pressure rings are a consumable item and are required to be replaced as and when consumed. Since the pressure ring controls the pressure, its life is very small and requires frequent replacement. No enduring benefit is availed by replacing the pressure ring. These are consumable items are therefore revenue in nature. The life of the extrusion press does not increase by incurring the said expenses. 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lled auto leveled forming part of a carding machine, in the following terms: Similarly, in the carding department we have carding machines with autolevelers. If the autoleveler fails, the carding machine becomes nonfunctional If an autoleveler is to be repaired then that repair would come within the connotation of the word current repairs because if is apart of the carding machine. Even if in a given case, replacement of an autoleveler could come within the connotation of the word current repairs if the old part is not available in the market. It is a current repair because the carding machine remains an asset without any change even after repair or replacement of the autoleveler. To give an example, a compressor i.e. an important part of an Air-Condition Machine. Repair of the compressor will come in the connotation of the word current repairs in section 31 (i) of the said Act because the assessee does not replace the Air-Condition Machine. At the highest, he replaces a part of the air-condition machine. So is the case of the picture tube in a television set, when the picture tube is replaced the television set is not replaced, therefore, such repairs alone cart com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he business of textile and textile machinery was replaced and a claim was made on such replacement. The Revenue has not rebutted the finding of the Ld. CIT(A) that the nature of item indicates it is a spare part which may require replacement. Further, the filter does not have any application other than as part of its machine. Similarly, the pressure ring is also to withstand the pressure built up in the extrusion press. It is observed by Ld. C IT(A) that the nature of parts replaced are small parts of large machines which may require replacement on being worn out. By incurring expenditure on purchase of such items, no new assets came into existence which were capable of producing any saleable item. This finding of fact is not controverted by the Revenue. In this view of the matter we do not find any infirmity into the order of Ld. CIT(A). Hence, this ground of Revenue s appeal is dismissed. 6. Next ground is against the allowing the deduction u/s 80IA of the Act as claimed by the assessee. Ld. Sr. D.R. submitted that the deduction was not available to the assessee in view of decision of the Hon ble ITAT Chennai Bench rendered in the case of M/s Chettinad Cement Corporation Ltd v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it and gains derived by an undertaking of an enterprise from business of eligible undertaking only are to be considered for the purpose of allowing deduction. The CIT(A) has allowed deduction u/s 80-IA relying on the Mumbai Bench of ITAT in the case of West Coast Paper Mills vs ACIT (103 ITD 19 ). In view of the Hon'ble ITAT, Chennai's decision in the case of M/s Chettinad Cement: Corporation Pvt Ltd, the Hon'ble ITAT may kindly be restored the disallowance u/s 80-IA made by the Assessing Officer. 7. We have heard the Ld. Sr. D.R. and perused the material available on record. Ld. CIT(A) has decided this issue as under: 6. Ground No. 4 relates to the denial of the claim of deduction u/s 80IA(4) amounting to ₹ 24.83,968/- on COGEN - 1 Unit and COGEN - II Unit. The assessee manufactures aluminum extrusion sections from aluminum ingots. It also generates captive power at its 250 KVA - I and 250 KVA - II power plants being COGEN Unit -I and COGBN Unit - II respectively. The energy generated in the said captive power plants was used by the assessee for its own consumption. The AO objected to the claim of deduction u/s 80IA(4) on the ground that (a) the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e eligible unit starts generation of power. However, it was contended that the initial assessment year is the first year in which the appellant opts to claim deduction u/s, 801A for any period of 10 years from amongst the 15 year period. In view of the AO the unabsorbed losses as well as unabsorbed depreciation beginning from the year of manufacture should be set off for the purpose of computing deduction u/s 8OIA. In the case of the appellant, C0GEN Unit - I started generating power from 26-6-2001 (AY 2002-03), therefore the notional unabsorbed losses of the said unit from AY 2002-03 should be considered for the purpose of computing the profits eligible for deduction u/s. 801A. Similarly the COGEN Unit - II started generation of power from 25-2-2005 (AY 2005-06), therefore the notional unabsorbed losses of the said unit from AY 2005-06 should be considered for the purpose of computing the profits eligible for deduction u/s, 801A. It was submitted that since the appellant has started claiming deduction u/s. 801A from AY 2007-08 being the first year in which the Appellant opted to claim such deduction, unabsorbed losses depreciation subsequent lo the said initial assessment year can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hosen to claim deduction under s. 80-1A. Hence the provisions of s. 80-IA(5) treating undertaking as a separate sole source of income cannot be applied to a year prior to the year in which assesses opted to claim relief under section 80-IA for the first time. Depreciation and carry forward loss relief to the unit which claims deduction under s. 80-IA, cannot he notionally carried forward and set off against the income from the year in which the assessee started claiming deduction under 80-IA. At the cost of repetition, we make it clear that the case law relied on by the Departmental Representative are delivered before the amendment to section by Finance Act. 1999. Before the amendment the initial assessment year way defined in the Act but after the amendment there is no definition for initial assessment year in the Act and there is option to the assessee in selecting the year of claiming relief under section 80IA. In view of this, we are of the opinion that there is no question of setting off notionally carried forward unabsorbed depreciation or loss against the profits of the units and assesses is entitled to claim deduction under s. 80-IA on current assessment year on the current ..... X X X X Extracts X X X X X X X X Extracts X X X X
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