TMI Blog2020 (3) TMI 231X X X X Extracts X X X X X X X X Extracts X X X X ..... enue production of steam is only a byproduct, which is used by the assessee for its manufacturing activity - HELD THAT:- This Court took notice of the fact that the assessee had installed turbine for power generation which relied on the excess steam production capacity of the plant. This Court ultimately took the view that the installation of turbine for power generation could be said to setting up of a new industrial unit and therefore, the assessee would not be entitled for deduction of sum under Section 80IA of the Act. Facts in the case of Commissioner of Income-tax Vs. Atul Ltd. [ 2016 (8) TMI 413 - GUJARAT HIGH COURT] are quite different and the ratio, as propounded in the same, will have no applicability to the case on hand, more particularly, the question No.3 with which we are dealing with. It is difficult for us to take the view as suggested by the learned standing counsel appearing for the Revenue that steam would not amount to power. The word Power used in Section 80IA(4) has not been defined under the Income Tax Act. The word Power should be understood in common parlance as Energy . Energy can be in any form being mechanical, electricity, wind or ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed for scrutiny and the notice under Section 143(2) of the Act was issued on 3rd August, 2012. 4. So far as the first question as proposed by the Revenue is concerned, we take notice of the fact that the Assessing Officer had disallowed the commission paid to the foreign agents taking the view that the income arising on account of the commission payable to the foreign agents could be deemed to have accrued or arose in India and accordingly would be taxable under the provisions of Section 5(2)(b) read with Section 9(1)(i) of the Act. The Assessing Officer took the view that the assessee has failed to comply with the provisions of Section 195(2) of the Act. In such circumstances, the Assessing Officer disallowed the amount of ₹ 2,47,85,500/- for non-deduction of tax on the commission payable to the foreign agents. 5. We take notice of the fact that the CIT(A) deleted the addition, taking the view that similar issue has been decided in the case of the very same assessee for the Assessment Year 2010-11. In this regard, the finding recorded by the Tribunal, in paragraph No.11, reads thus: 11. We have heard the rival contentions. With the assistance of ld. Representative ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is noted that the first instalment of loan was received by the appellant in the month of August 2010 and it has bifurcated the interest by taking into account the percentage of CWIP to CAPEX. For example the percentage of capital work in progress to CAPEX was 69% in the month of August, the interest cost has been proportionately distributed in that ratio. It has been similarly done for other months as well. It is an accepted fact that the appellant has not borrowed money for specifically the assets and therefore, as per the guidelines issued by the ICAI, a copy of which has also been given by the appellant, the allocation of interest shall have to be made by taking into account by applying a capitalisation rate to the expenditure on that asset. The guidelines specifies that the capitalisation rate should be the weighted average of the borrowing cost applicable to the borrowing of the enterprise that is the outstanding during the period. The method of the AO by capitalising the total loan borrowed for CWIP as long as the Cumulative borrowings are less than the CWIP is not correct as there is no specific borrowing for a particular asset and the appellant has also invested its own mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. It appears that during the year under consideration, the assessee had claimed deduction of ₹ 32,51,080/- under Section 80IA(4) of the Act. This claim was on account of the operation of the Captive Power Plant. The assessee showed income from sale of Power to the tune of ₹ 1,23,10,500/- and the sale of vapour of ₹ 6,59,77,170/-. The Assessing Officer took the view that Vapour would not fall within the meaning of Power . The case of the assessee is that steam is also a form of power . 14. The case of the Revenue is that steam is only an intermediate raw material for the manufacturing process. In other words, the production of steam is only a byproduct, which is used by the assessee for its manufacturing activity. 15. In this regard, the CIT (A) recorded the following findings: 2. The appellant has also claimed deduction under Section 80 I-A on account of sale of steam to the chemical plant. The steam was generated by the power plant in the boiler and part of it was also utilised for the chemical process of the non-eligible unit. The AO has held that the appellant was not entitled to the deduction on account of sale of steam to the powe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on sale of such steam to its chemical plant. Accordingly, the decision of the AO in this regard is upheld. 3. For the purpose of calculation the quantum of deduction and allocation of expenditure incurred for production of steam the appellant had given certain information-related to the heat value of steam (Enthalpy). The details given by the appellant were also forwarded to the AO and she has also given her comments on the same. In order to arrive at a logical conclusion it would be useful to understand the process involved. The appellant has installed a boiler which generates high-pressure steam at a very high temperature. The steam is first fed in the turbine where part of the heat energy of the steam is utilized in generating the electricity and the balance energy available in the steam coming out from the turbine is utilised in the chemical process. The appellant is incurring expenses such as coal consumption, boiler running, depreciation of boilder and other machinery and the building in which the whole generation plant is housed. The expenditure for the steam which is utilised in generation of power and the balance steam which is utilised by the chemical plant can be d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated to the expenses of head office as well as interest expenditures are not available before me, the AO is directed to work out the proportionate allocation of the interest expenditure should also be done and added to the cost of generation of steam. Since the details related to the expenses of head office as well as interest expenditure are not available before me, the AO is directed to work out the proportionate allocation of these expenses by obtaining suitable details from the AO. The details of following expenses are readily available from record:- Expenses for generation of steam 9321977 Depreciation on turbine 1289189 Electricity duty 787872 The AO is also directed to verity the above figures. Accordingly the AO is directed to rework the deduction under Section 80I-A claimed by the appellant as indicated in the preceding discussion. 16. The Tribunal, concurred with the aforesaid findings recorded by the CIT (A), by taking support of the decision of a Co-ordinate Bench of the ITAT, Mumbai, in the case of West Cost Paper Mill ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 19. This Court took notice of the fact that the assessee had installed turbine for power generation which relied on the excess steam production capacity of the plant. This Court ultimately took the view that the installation of turbine for power generation could be said to setting up of a new industrial unit and therefore, the assessee would not be entitled for deduction of sum under Section 80IA of the Act. 20. In our view, the facts in the case of Commissioner of Income-tax Vs. Atul Ltd. (Supra) are quite different and the ratio, as propounded in the same, will have no applicability to the case on hand, more particularly, the question No.3 with which we are dealing with. 21. It is difficult for us to take the view as suggested by the learned standing counsel appearing for the Revenue that steam would not amount to power. The word Power used in Section 80IA(4) has not been defined under the Income Tax Act. 22. The word Power should be understood in common parlance as Energy . Energy can be in any form being mechanical, electricity, wind or thermal. In such circumstances, the steam produced by the assessee can be termed as power and would qualify for th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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