TMI Blog2021 (9) TMI 589X X X X Extracts X X X X X X X X Extracts X X X X ..... For the Appellant : Rinku Singh, Sr. D.R. For the Respondents : Premjit Singh Kashyap, C.A. ORDER Per Anil Chaturvedi, AM This appeal filed by the Revenue is directed against the order of the Commissioner of Income Tax (Appeals)-43, New Delhi 07.11.2017 for Assessment Years 2013-14. 2. The relevant facts as culled from the material on records are as under: 3. Assessee is a company stated to be engaged in the business of generation and supply of power. The power generated by the company is supplied to SBEC Sugar Limited (SSL) and Uttar Pradesh State Electricity Board (UPSEB). Assessee electronically filed its return of income for A.Y. 2013-14 on 30.09.2013 declaring loss of ₹ 2,18,00,962/-. The case was selected for scrutiny and thereafter the assessment was framed u/s. 143(3) of the Act vide order dated 17.03.2016 and the total income was determined at ₹ 3,24,93,658/-. Aggrieved by the order of AO, assessee carried the matter before the CIT(A) who vide order dated 07.11.2017 in Appeal No. 323/2016-17 allowed the appeal of the assessee. Aggrieved by the order of CIT(A), Revenue is in appeal before us and has raised the following grounds of appeal: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us, Learned DR supported the order of AO. 7. Learned AR on the other hand reiterated the submissions made before the lower authorities and supported the order of CIT(A). Learned AR also pointed that for A.Y. 2014-15, the Coordinate Bench of Tribunal in ITA No. 6097/Del/2017 order dated 19.03.2021 has decided the issue in favour of the assessee by following the Tribunal order for A.Y. 2007-08. He pointed to the copy of the relevant order in the paper book. He therefore submitted that considering the aforesaid facts, the appeal of Revenue be dismissed. 8. We have heard the rival submissions and perused the material available on record. The issue in the present ground is with respect to the addition made on account of notional receipt from supply of steam. We find that CIT(A) while deciding the issue in favour of the assessee had noted that identical issue arose in assessee's own case in earlier years and the Tribunal has decided the issue in those years in assessee's favour. We also find that identical issue arose in assessee's own case in A.Y. 2014-15. In Revenue's appeal, the Co-ordinate Bench of Tribunal vide order dated 19.03.2021 and by following the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ht of his own findings for the preceding years, the AO added an amount of ₹ 68,284,240/- (289340 x 236) to the income of the assessee. Inter alia, the assessee's claim for deduction u/s. 80IA on sale of steam was also disallowed on the ground that steam was not power within the meaning of provisions of section 80-IA of the Act. Besides, on the basis of his findings in the preceding years, the AO disallowed the claim for deduction u/s. 80IA of the Act on the 50% of the receipts on sale of power to UPSEB, expenditure incurred being higher than the net sale proceeds of power. 3. On appeal, the learned CIT(A) following the decision of the ITAT in the preceding assessment year 2000-01, followed in AYs. 1999-00, 2001-02, 2003-04 to 2006-07, allowed the claims of the assessee in the following terms: 5. Ground No. 2 is against addition of ₹ 6,82,84,240/- being estimated receipts from SSL against supply of exhaust steam. The appellant had admittedly not shown any income from supply of steam to SSL because no real income accrued to or was admittedly received by the appellant. It is noted that similar additions were made in AY 2006-07, AY 2005-06, AY 04-05 and AY 03 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thereafter to ITAT against this rejection. v. ITAT which is the final fact finding authority has mentioned the following facts in its order in ITA No. 5461/Del/2003 1007/Del/2004 dated 26.3.04 as under (copy enclosed as Annexure B): a. The assessee company had entered into a conversion contract dated 1/10/98 with SBEC Sugar Ud (SSL). This agreement was subject to PICUP's approval. b. In view of PICUP's objection, an interim arrangement dated 26th August 99 was agreed. Under this interim arrangement, the parties agreed that they would pay and receive ₹ 236 per metric ton for steam. For electrical energy it was to charge at the same rate at which electricity was supplied to UPSEB. c. Revenue in the books of accounts was recognized on the basis of this interim arrangement. d. The interim arrangement was subsequently revised and under the revised arrangement it was agreed that the receipt from steam would be @ ₹ 75 per metric ton. e. The revenue has not doubted the genuineness of these agreements. f. No material has been placed by the revenue to hold that this agreement of revision was not genuine and was prospective and not ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that although addition on this issue made in earlier years were decided by the appellate authorities in favor of appellant, department had not accepted reduction of price of steam for ₹ 236 per ton to ₹ 75 and has filed further appeal before ITAT in AY 2001-02 High court in AY 2000-01. Hence there was no question of accepting the appellant's contention regarding supply of steam free of cost. In view of this the AD worked out sale proceeds of steam supplied by the appellant to SSL at ₹ 9,93,41,508/-and added to the total income. 2.3 In the appeal proceedings paper book running into 447 odd pages was filed along with written submissions for all the grounds. In the written reply the appellants AR explained the background, facts relating to the dispute between the appellant company and SSL regarding price paper for supply of steam. Correspondence between the appellant and SSL on this issue by way of various letters exchanged was submitted in the paper book. The facts stating to this issue in simple terms were explained like this. The power plant of the appellant company and sugar factory of SSL are located at the same place side by side. SSL supplies bag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t ₹ 236 applied earlier. The rate of ₹ 75 per ton was agreed to retrospectively i.e. from the 1st year of operation. The earlier invoices raised @ ₹ 236 per ton were also revised in view of this retrospective amendment to the interim arrangement. The appellant passed reversal entry in subsequent year and claimed reduction of income from sale of steam in AY 2000-01, before the AO during the assessment proceedings. The AO as also CIT(A) did not allow the reduction of receipt on the ground that it had already accrued. However ITA T Delhi in their order dated 26/3/04 held that the income cannot be said to accrue @ ₹ 236 per ton in view of retrospective amendment to the said agreement. 2.5 Subsequently SSL informed the appellant company by letter dated 2/11/02 the decision not to pay anything for exhaust steam since Oct 2001. It was further followed by another letter dated 21/2/03 wherein the main reasons for this decision were stated to be as under: The Conversion Agreement dated 10/12/98 never came into operation, as PICUP has not approved the contract. The SSL supplies baggase and water free of any Charge to SIAL. Without these SIAL can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the cost of 2,89,340 tons of steam supplied by appellant to SSL is determined @ 236 it would amount to 6.83 crores. Hence it was not that the arguments of SSL in denying any payment for steam supplied by the appellant were without any basis. According to SSL the bagasse supplied by them to appellant did have a marketable value whereas steam supplied by SSL was not of any use as it was not a freely marketable commodity. 2.8 I have carefully considered the submission made on behalf of the appellants. There is no dispute to the fact that the appellant has not credited any sale proceeds in respect of steam supplied to it and has also not actually paid anything for that. The AO has estimated the sale value of steam at the rate of ₹ 236 per metric ton which according to him was the real rate of steam in view of agreement applicable in earlier years. So far as estimating the value of steam @ 236 per ton against ₹ 75 in earlier year is concerned, the issue is covered in favour of appellant by order of ITAT in AY 00-01. Hence the only issue to be decided is whether the appellant was right in not showing any revenue at all from supply of steam to SSL It is to be noted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... matter was discussed by the Board of Directors of the appellant company in their meeting on 8/7/03. A copy of the minutes of the Board Meeting for that day was submitted when asked to do so. It was stated that in the said meeting it was decided not to raise any invoice for supply of steam as it would unnecessarily result into unrealistic receivables. The Board also decided to reverse the billing made in the FY 01-02 and revise the income tax return. The AR was further asked to clarify as to whether apart from not raising any bills, the decision of SSL has been accepted by the company or still the matter was being pursued with them for payment of steam charges. It was then stated that some dispute in respect of allotment of shares to foreign collaborator of the joint venture was pending before Company Law Board. The said matter has been since decided and after that appellant company has confirmed by letter dated 9/1/06 to SSL that no conversion charges in respect of steam would be claimed from them w.e.f 1/10/01. On asking a copy of said letter dated 9/1/06 was filed. 2.10 In view of the clarification above there does not remain any doubt that both the parties to contract have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be risk of liquidation, In those compelling circumstances, a compromise was worked out wherein various unreasonable terms insisted upon by air Liquide and SIDEC had to be accepted to protect the companies from liquidation, to avoid cancellation of the loan sanctioned by IREDA and to enable the two projects to be completed. The terms for the conversion contract then stipulated by air Liquide and SIDEC through the JV Company were totally one sided and in favour of the power company for the sole purpose of ensuring an adequate flow of funds to facilitate the repayment of the investments made by SIAL in the share capital of the JC Company. SIAL had made it clear that it was in fact a lender and not an investor. This is evident from the documents signed then in particular the agreements where under it was agreed that the SIAL shareholdings would be brought out. Please note that it is our decision that on resolution of the controversies with SI-AL Bioenergie, France, SSL will acquire the entire share capital the JV Company and make it its wholly owned subsidiary unless of course it then decided to amalgamate the JV Company with this company and bring the power project also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreements. The appellant's submissions are also on the same lines as in last year. Therefore following the discussion made in AY 2004-05 and subsequent orders, the addition made on this account during the year under consideration is deleted. 6. Ground No. 3 is taken without prejudice to the ground No. 2. In this ground it is claimed that steam was a form of power and therefore even if some income was estimated from sale of steam, it was eligible for 100% deduction u/s. 80IA (4) (iv). It is noted that even these grounds are similar to grounds No. 3 4 in the appeal for AY 2004-05 referred to above. It was pointed out in that order that this issue was decided in appellant's own case by ITAT in AY 2000-01 reported in 83 TTJ 866. In para 34 to 36 of that order the Hon'ble IT AT held that steam was another form of power and income from sale of the same was eligible for deduction u/s. 80 IA (4) (iv). It is also to be noted that the similar issue was decided by ITAT in AY 99-00 and AY 01-02. The ITAT followed its order for AY 00-01 wherein it has been held that steam is a form of power. However, since the estimated addition in respect of sale of steam itself has been ..... X X X X Extracts X X X X X X X X Extracts X X X X
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