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TMI Blog2016 (8) TMI 1353X X X X Extracts X X X X X X X X Extracts X X X X ..... te to dispose all of them by this common order. At the very outset, we observe a delay of just one day in the filing of its appeal by Revenue, which though stands suitably explained as per accompanying affidavit by the concerned official of the Revenue. The appeal was accordingly admitted, and the hearing proceeded with. First we take up assessee's appeal in ITA 305/Kol/2008. 3. The assessee has raised the following grounds of appeal :- "1(a) That on the facts and in the circumstances of the case, Ld. CIT(Appeals) was not justified and erred in holding that tax or levy is snot be included in the computation of "Transfer Price" of power for computation of deduction u/s 80- IA in respect of power generating unit. 1(b)That on the facts and in the circumstances of the case, Ld. CIT(Appeals)failed to appreciate the fact that the "Transfer Price" of power adopted by the appellant for computation of deduction u/s. 80-IA in respect of power generating unit was in accordance with the provisions of section 80- IA(8) of the Income Tax Act, 1961. 2(a) That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) erred in allocating common expenditure to the tune of Rs. 1,52 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PB receipt which falls under section 28(iv) also needs to be reduced from the Profit of the Business in terms of Explanation (baa) to section 80HHC. 8. That on the facts and circumstances of the case, and without prejudice to Ground No.6 & 7 here-in above, the Ld. CIT(Appeal) was not justified in not considering the fact that only profits on transfer of DEPB falls within the ambit of section 28(iiid) of the Act. 9. That on the facts and circumstances of the case, the Ld. CIT(Appeals)was not justified and erred in not deleting interest levied u/s. 234D of the Act as th same is bad in law. 10. That the appellant craves leave to add, amend, modify, rescind, supplement or alter any of the grounds stated herein-above either before or at the time of hearing of the appeal." 4. The facts in brief as have been brought on record are that the assessee in the present case is a limited company and engaged in the business of Generation of Power and Manufacturing of Electrodes. The return of income was filed by the assessee on dated 07.11.2003 declaring total income of Rs. 3,47,00,774/- which was subsequently revised at Rs. 2,83,48,680/- on dated 31.3.2005. The total income of the assessee co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he market value is the price that such goods or services would ordinarily fetch in the open market. 3) The assessee in the instant case is itself a buyer and seller of electricity as it is utilized for captive consumption. So the open market rate for buying the power cannot be accepted. It has necessarily to be closed market rate. 4) The selling rate of KEB for the power is higher because it suffers distribution losses though the assessee in the instant case does not suffer any distribution loss. 5) The assessee sales power to third parties at a price ranging between 3.30 to 3.60 per unit and the same price should be accepted. In view of above the AO has taken the sale price of the power at which the electricity was sold to the third parties through KEB for the purpose of deduction u/s 80-IA of the Act. 6. Aggrieved assessee preferred an appeal to ld. CIT(A) who has given the relief to the assessee in part by relying on the orders of earlier years and accordingly directed to adopt the price at which the assessee buys the electricity from the Electricity Board less the element of tax component embodied in the Electricity Board bill. The extract of the order is reproduced below : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion, and it is a moot point whether it can be laid down as law to determine the price of captive use of power so as to result in absurd results. However, following the decision in the earlier years, I direct that in respect of electricity consumed in its own units, the transfer price would be the price charged from it by Sate Electricity Bard less the tax/duty component in the SEB bill." Being aggrieved by the order of ld. CIT(A) - assessee came in second appeal before us on the ground that the element of tax and duty should not be excluded from the value of the electricity. Revenue is also in appeal before us on the amount of relief granted by the ld. CIT(A) for adopting buying rate from the Electricity Board. 7. The Revenue has raised the following ground of appeal no. 1 in ITA 559/Kol/2008. 1. Whether under the facts and circumstances, the ld. CIT(A) was justified in allowing 'Market Value' as defined in sec. 80IA(8) of the I Tax Act at the price at which power was purchased from KEB in place of the price at which the assessee sold surplus power to customers." 8. First we take up the issue raised by the Revenue in its ground no. 1. At the outset, we find this issue is alre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the assessee at the average of the annual landed cost of electricity purchased by the assessee from Karnataka State Electricity Board during the impugned previous year. It may be determined on the basis of payment details available from the bills issued by the Karnataka State Electricity Board, during the year under consideration." 7.3 In the case of Jindal Steel & Power Ltd. (supra) the assessee was receiving Rs. 2.32 per unit for the electricity supplied by it whereas State Electricity Board was selling it at Rs. 3.72 per unit. It computed transfer price under s4ection 80IA (8) of the Act at Rs. 3.72 per unit the rate at which the State Electricity Board supplied power to the industrial consumers. After examining the scope of section 80IA (8) and the expression "market value" appearing therein in para 18 the Tribunal held as under:- 'Having held so, the natural corollary is to ascertain whether the price recorded by the assessee at Rs. 3.72 per unit can be considered to be the market value for the purposes of section 80-IA (8) of the Act. The answer to our mind is in the affirmative. This is for the reason that the assessee as an industrial consumer is also buying power ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d sub section defines to mean the price that such goods would ordinarily fetch in the open market. It cannot be disputed that the amount charged by KSEB for supply of the power to the assessee is the price which is ordinarily charged in the open market. This issue also came up for consideration in several decisions of the Tribunal in the undernoted cases:- (i) Assam Carbon Products Ltd vs. ACIT (2006) 100 TTJ 224 (Kol) (ii) JCIT vs. Cipla Ltd. (2005) 2 SOT 617 (Mum) (iii) West Coast paper Mills Ltd. vs. JCIT (2006) 100 TTJ 883 (Mum) (iv) Addl. CIT vs. Jindal Steel 7 Power Ltd. (2007) 16 SOT 509 (Del) Furthermore, it appears that during the subsequent assessment year also, the learned Tribunal has also accepted such position and the appeal preferred before this court which was not pressed by the appeals at that point of time. Therefore, the law has already been settled by this court. Therefore, in our considered opinion, we do not find that there is any substantial question of law involved in this matter which is to be gone into by this court. Hence, the appeal being ITA No. 733 of 2008 is dismissed." Respectfully following the judgment of Hon'ble jurisdictional High Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt in SLP No. 11106 of 2012 dtd. 16.07.2012 and again in SLP No. 13348 of 2012 dtd. 15.10.2012). IT is a settled principle that in absence of any contrary decision of the high courts, the decision of non-jurisdictional Tribunal & / or Special Bench. [refer Rajamahendri Shipping & Oil Field Services Ltd. vs. Addl CIT (2012) 51 SOT 242 (Vizag & CIT vs.s Godavari Devi Saraf (1978) 113 ITR 589 (Bom). On the other hand the ld. DR vehemently supported the order of the authorities below. 11. From the above discussion, we find that order of the ITAT Mumbai Bench for the earlier years was based on the order of West Coast Paper Mills Ltd. (supra) which has been reversed by the same Hon'ble ITAT. The relevant extract is reproduced below : "Assessee has worked out the notional sale of power supplied by its power unit to its paper division @ Rs. 5.80 per unit. This was on the basis of average actual grid charges charged by Karnataka Electricity Board for supplying the electricity to the Assessee. This was shown from the amount of the bill and the total number of units consumed. From the said bills, the Assessing Officer noted that the Assessee is paying fuel excavation charges, taxes, etc., ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to our mind, would make no difference in so far as the market value is concerned. To a consumer, the price being paid remains 5.40 ps. Per unit. The act that the seller retains only Rs. 5.32 ps. Out of the aid collection and passes on 8 paise per unit to the Government in the form of electricity duty, to our mind, would make no difference. This question, is therefore, not required to be considered." Respectfully follow the judgment of Hon'ble Gujarat High Court in the case of Shah Alloys Ltd. (supra) we allow assessee's ground. 12. The next issue raised by the assessee in ITA No. 305/Kol/2008 A.Y 03-04 its grounds of appeal in. 2(a) & 2(b) is that the ld. CIT(A) erred in allocating common expenditure to the tune of Rs. 1,52,86,622/- to the power generating units. 13. The assessee has shown the cost per unit of electricity generated from diesel generator at Rs. 3.35 per unit and 3.83 per unit at Bangalore and Nasik Factory respectively. However the AO during the assessment proceedings observed that the cost per unit of other companies generating power from diesel generator is ranging Rs. 5.28 to 14.79 per unit. Accordingly the AO opined that the assessee has shown less expense to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perusal of the expenditure allocated, it could be seen that the expenditure incurred by the HO and electrode division does not have any direct and immediate nexus with the power generating unit and hence cannot be considered for allocation for determining profits of the unit eligible for tax holiday. He stated that the use of the expression 'derived from' as used in Sec. 80IA(1) signifies that only income / expenditure directly and inextricably related to eligible undertaking should be considered in computing profit of the eligible undertaking. Indirect expenditure which has no direct nexus or connection with the profit of industrial undertaking should not be considered in computing deduction u/s. 80IA. The aforesaid view is supported by the principle laid down in the following decisions. Liberty India vs. CIT (2009) 317 ITR 218 (SC) CIT vs.Sterling Foods (1999) 237 ITR 579 (SC) Cambay Electric Supply Industrial Co. Ltd. vs. CIT (1978) 113 ITR 84 (SC) Pandian Chemicals Ltd. vs. CIT (2003) 262 ITR 278 (SC) Further, Co-ordinate Bench in the case of Balarampur Chini Mills Ltd. vs. DCIT (2011) 140 TTJ 73 (Kol)(UO) has categorically held that expenditure which does not have first ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orm of tax deductions essentially belong to the category of "profit linked incentives". Therefore, when s. 80-IA/80-IB refers to profits derived from eligible business, it is not the ownership of that business which attracts the incentives. What attracts the incentives under s. 80-IA/80-IB is the generation of profits (operational profits). It is for this reason that Parliament has confined deduction to profits derived from eligible businesses mentioned in sub-ss. (3) to (11A) (as they stood at the relevant time). One more aspect needs to be highlighted. Each of the eligible businesses in sub-ss. (3) to (11A) constitutes a stand-alone item in the matter of computation of profits. That is the reason why the concept of "Segment Reporting" stands introduced in the Indian Accounting Standards (IAS) by the ICAI. Analysing Chapter VI-A, it is found that ss. 80-IB and 80-IA are the Code by themselves as they contain both substantive as well as procedural provisions. Therefore, the Court needs to examine what these provisions prescribe for "computation of profits of the eligible business". It is evident that s. 80-IB provides for allowing of deduction in respect of profits and gains derive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 80 IA of the Act. 20.1 At the outset, we find that issue is covered in favour of Revenue and against the assessee in its own case in ITA No.949/Kol/2005 dated 06.12.2007, wherein the Tribunal has held as under:- "10.1 The claim of the assessee that the business profits for computation under section 80HHC of the Act should not be reduced by the amount of profits for which deduction has been allowed under section 80IA of the Act has to be considered in the light of the provisions of section 80IA(9) of the Act which provides that where any amount of profits or gains of an undertaking or of an enterprise in the case of an assessee is claimed and allowed under the said section for any assessment year, the deduction to the extent of such profits or gains shall not be allowed under any other provision of Chapter VIA. The deduction for the profits under section 80IA has been allowed in respect of the power undertakings. Most of the energy generated therein has been captively used for manufacture of goods profits whereof are part of profits of business. The counsel for the assessee also relied on the decision of Bombay High Court in the case of Godrej Agrovet Ltd. vs. ACIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xt issue raised by the assessee in grounds no. 5 is that ld. CIT(A) erred by holding that sales tax incentive received under the west Bengal Incentive Scheme 1993 for an amount of Rs. 89,44,090/- as revenue in nature. 24. At the outset, we find that coordinate Bench has decided this issue against the assessee in assessee's own case (supra) and relevant extract is reproduced below:- "16.1 However the Calcutta High Court in the case of CIT vs. Chhindwara Fuels reported in (2000) 245 ITR 9 held that sales tax subsidy received from the Government was after commencement of production and was not a capital receipt. The assessee's contention that the subsidy involved in the said case was not under the 1993 Scheme and was different cannot be accepted in view of the decision of the High Court specifically laying down that subsidy on account of sales tax is not a capital receipt. Accordingly the said amount is assessable under the normal provisions of the Act as a revenue receipt. Since the receipt in question is a revenue receipt the question of excluding it from book profits under section 115JB of the Act also does not arise. Accordingly additional ground nos. 1and 2 in the assessee's ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d) of the Act talks about the profit derived on the transfer of DEPB and the face value accrued to the assessee for the DEPB is covered by the provisions of section 28(iiib) of the Act. Hence we conclude that the face value of the DEPB is covered under the provisions of section 28(iiib) of the Act. In this connection we find support from the Judgment of Apex Hon'ble Supreme Court in the case of Topman Exports Vs. CIT (2012) 342 ITR 29 (SC). The relevant extract of the order is reproduced below : "To the figure of profits derived from exports worked out as per the formula under sub-s. (3)(a) of s. 80HHC, the additions as mentioned in first, second, third and fourth provisos under sub-s. (3) are made to profits derived from exports. Under the first proviso, ninety per cent of the sum referred to in cls. (iiia), (iiib) and (iiic) of s. 28 are added in the same proportion as export turnover bears to the total turnover of the business carried on by the assessee. In this first proviso, there is no addition of any sum referred to in cl. (iiid) or cl. (iiie). Hence, profit on transfer of DEPB or DFRC are not to be added under the first proviso. Where therefore in the previous year no DEPB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ately results in computation of a bigger export profit. The High Court, therefore, was not right in coming to the conclusion that as the assessee did have the export turnover exceeding Rs. 10 crores and as the assessee did not fulfill the conditions set out in the third proviso to s. 80HHC(3), the assessee was not entitled to a deduction under s. 80HHC on the amount received on transfer of DEPB and with a view to get over this difficulty the assessee was contending that the profits on transfer of DEPB under s. 28(iiid) would not include the face value of the DEPB. It is a well-settled principle of statutory interpretation of a taxing statute that a subject will be liable to tax and will be entitled to exemption from tax according to the strict language of the taxing statute and if as per the words used in Expln. (baa) to s. 80HHC read with the words used in cls. (iiid) and (iiie) of s. 28, the assessee was entitled to a deduction under s. 80HHC on export profits, the benefit of such deduction cannot be denied to the assessee. Where DEPB accrues to the assessee in one previous year and it transfers the DEPB certificate in another previous year, only ninety per cent of the profits on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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