Income Tax Appellate Tribunal - Mumbai
Deepak Fertilizers And Petrochemical ... vs Department Of Income Tax on 30 January, 2015
1 आयकर अपीलीय अिधकरण, मुबं ई यायपीठ 'डी ' मुबं ई ।
IN THE INCOME TAX APPELLATE TRIBUNAL " D" BENCH, MUMBAI ी संजय अरोड़ा, लेखा सद य, एवं ी िवजय पाल राव, याियक सद य के सम ।
BEFORE SHRI SANJAY ARORA, ACCOUNTANT MEMBER
AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER
आयकर अपील सं./ I.T.A. No.2116/Mum/2013
( िनधा रण वष / Assessment Year : 2010-11)
DCIT -Central Circle-44, बनाम/
बनाम M/s. Deepak Fertilizers &
6 t h Floor, Aayakar Vs. Petrochemicals
Bhavan, M.K. Road, Corporation Ltd. 10-B,
Mumbai-400 020. Bakhtawar, Nariman Point
Mumbai-400 021.
थायी ले खा सं . /जीआइआर सं . /PAN/GIR No. : AAACD 1388 D (अपीलाथ /Appellant) .. ( यथ / Respondent) आयकर अपील सं./ I.T.A. No.2115/Mum/2013 ( िनधा रण वष / Assessment Year : 2010-11) DCIT -Central Circle-44, बनाम/ बनाम M/s. Deepak Nitrite th 6 Floor,Room No.656, Vs. Limited 9/10, Kunj Society Aayakar Bhavan, M.K. Alkapuri Baroda-390 007.
Road, Mumbai-400 020.
थायी ले खा सं . /जीआइआर सं . /PAN/GIR No. : AAACD 7468 A (अपीलाथ /Appellant) .. ( यथ / Respondent) अपीलाथ ओर से / Assessee by : Shri Manjunatha Swamy -CIT-DR यथ क ओर से/Respondent by : Shri Bhavin Shah - DR सुनवाई क तारीख / Date of Hearing : 19/01/2015 घोषणा क तारीख /Date of 30/01/2015 Pronouncement :
आदेश / O R D E R PER BENCH :- These two appeals by the revenue are directed against two separate orders dated 13/12/2012 and 18.12.2012 respectively passed by the CIT(A) for the assessment year 2010-11. The revenue in ITA No.2116/Mum/2013 has raised the following grounds :-2
2116 & 2115/Mum/13 "1. On the facts and in the circumstances of the case and in law, the Ld CIT(A) erred in allowing deduction u/s 801A amounting to Rs. 37,24,64,460/- in relation to the assessee's Captive Power Plant, ignoring the fact that there is no profit derived from the Power Plant as the power was not sold but stood consumed in manufacturing units of the assessee company.
2. On the facts and in the circumstances of the case and in law, the Ld CIT(A) erred in allowing deduction u/s 801A amounting to Rs. 37,24,64,460/- in relation to its Captive Power Plant by accepting the rate claimed by the assessee @ 4.68 per unit i.e. the rate of power sold by the Electricity Board, without considering that the Electricity Board has to incur costs which are absent in the case of assessee's own Captive Power Plant. This ground is without prejudice to ground no. 1.
3. On the facts and in the circumstances of the case and in law, the Ld CIT(A) erred in allowing deduction u/s 801A in respect of power generated from steam without appreciating that steam is a by-product of the power generated and hence cannot be considered a power."
2. Ground No. 1 and 2 regarding deduction under section 80IA in respect of Captive Power Plant and rate of tariff for computation of deduction. The assessee company is engaged in the business of manufacturing and sale of chemicals and fertilizers including methanol, dilute nitric acid, ammonium nitrate and ammonium nitro phosphate. The assessee has installed a Captive Power Plant to meet its electricity requirement. For the assessment year under consideration the assessee claimed deduction under section 80IA w.r.t. profits from Cogeneration Captive Power Plant amounting to Rs.37,64,460/-. The AO was of the view that the profit claimed of the Captive Power Plant are only notional profits and, therefore, the AO held that the saving in cost cannot be equated with profits. Accordingly, the AO disallowed the claim of deduction under section 80IA. The assessee valued electricity generated by its Captive Power Plant @ Rs.4.68% per unit which is arrived at after deducting Rs.0.95 on account of fixed demand charges received by Electricity Board in its bills for electricity consumption. The AO did not accept the rate at which the assessee had valued the Captive Power generation and held that the adjustment of 40% in the rate of electricity would be adopted to work out the profits which would be realized by the assessee through the operations of captive power plant.3
2116 & 2115/Mum/13 2.1 On appeal the CIT(A) allowed the claim of the assessee regarding eligibility of deduction under section 80IA in respect of Captive Power Plant by following the decision of Settlement Commission for the assessment year 2009-10. CIT(A) has also accepted the claim of the assessee in applying the rate charged by the electricity Board in respect of electricity supplied to the assessee.
2.2 We have heard the ld.AR and the ld. DR and considered the relevant material on record. At the outset we note that an identical issue has been considered by the Ahmedabad Bench of this Tribunal in the case of sister concern of the assessee namely Deepak Nitrate Ltd. in ITA No.819 & 1447/Ahd./2010 for assessment year 2006-07 vide order dated 21.09.2012 para 41 to 44 as under :-
"41. Before us, the Ld. D.R. submitted that the A.O. after considering various factors has rightly disallowed the claim of the assessee, he thus relied on the order of the A.O.
42. On the other hand, the Ld. A.R. submitted that the ratio of the decision in the case of Addl. CIT vs. Jindal Steel & Power Ltd.(16 SOT
509) and West Coast Paper Mills vs. ACIT (103 ITD 19) are applicable to the assessee's case and CIT (A) has rightly allowed the deduction to the assessee. The assessee also relied on the decision in the case of Tamilnadu Petro Products Ltd. vs. ACIT (2011) 338 I TR 643 (Mad.).
43. We have heard the rival contentions and perused the material on record. The A.O. disallowed the claim of the assessee for deduction u/s.80IA for the reason that the deduction was available only where separate business undertaking is put up for generation/distribution of power. Since the assessee has set up the power unit mainly for captive use, the assessee was not entitled to deduction. The A.O. was further of the view that even if the assessee was eligible for deduction, the quantum of deduction was to be worked out with reference to "market rate" of electricity generated and not at the rate claimed. The assessee had worked out the profit on the basis of rate of power at Rs. 5.35 per unit as against that the rate of power at 2.11 per unit being considered by A.O. We find that before Hon'ble Madras High Court in the case of Tamilnadu Petro Products (supra) one of the question before Hon'ble High Court was "whether on the facts and in the circumstances of the case, the Tribunal was right in holding that income derived by the assessee from generation of electricity which was captively consumed is not entitled to relief u/s.4
2116 & 2115/Mum/13 80IA of the Act? The Hon'ble High Court relying on the decision of CIT vs. Thiagaraj Mills Ltd. (Tax case No.68 to70 of 2010) has held as under:-
"8. The contention that only whatever power generated from, the sale to an outsider or the electricity board, and t he profit or gain derived by such sale along can be taken as profits or gains derived by the assessee as mentioned in section 80-IA(1) of the Income Tax Act has been rejected by the Tribunal in the order impugned. In our considered view, the Tribunal was well justified in having rejected such a stand of the appellant. Having referred to section 80-IA (1) of the Income Tax Act, we are also convinced that what is all to be satisfied in order to be eligible for the deduction as provided under sub-section (1) of section 80-IA, the assessee should have set up an undertaking or any enterprise and from and out of such an undertaking or an enterprise set up, any profit or gain is derived, falling under the sub-section covered by sub-section (4) of section 80- IA of the Income tax Act, such profit or gain derived by the assessee can be deducted in its entirety for a period of 10 years starting from the date of functioning of the set up. The contention that profit or gain can be claimed by the assessee only if such profit or gain is derived by the sale of its product or power generated to an outsider cannot be the manner in which the provisions contained in sec tion 80-IA(1) can be interpreted. The expression "derived" used in the said section 80- IA(1) in the beginning as well as in the last part of sub-section (4) makes it abundantly clear that such profit or gain could be obtained by one's own consumption of the outcome of any such undertaking or business enterprise as referred to in sub-section ( 4) of section 80-IA. The dictionary meaning of the expression 'derive' in the New Oxford Dictionary of English states 'obtaining something from a specified source'. In section 80-IA(1) also no restriction has been imposed as regards the deriving of profit or gain in order to state that such profit or gain derived only through an outside source along would make eligible for the benefits provided in the said section."
44. CIT (A) has given a finding that the facts of t he case are identical to that in the case of West Coast Paper Mills and Jindal Power & Steel Ltd. (supra). The Revenue has not been in a position to controvert these facts by bringing any material to the contrary on record. In view of the aforesaid facts and respectfully following the decision of High Court and Co-ordinate Bench, we find no reason to interfere to the order of CIT (A). Thus this ground of the Revenue is dismissed."
2.3 No contrary decision has been brought to our notice by the revenue accordingly following the decision of this Tribunal in the case of sister concern of the assessee we do not find any error or illegality in the order of the CIT(A) qua the issue of deduction 5 2116 & 2115/Mum/13 under section 80IA in respect of captive power plant as well as the valuation of power by applying the tariff charged by the state electricity Board. Accordingly, the ground No. 1 and 2 of the revenue's appeal are dismissed.
3. Ground No.3 is regarding deduction under section 80IA in respect of steam being a bye product of power generation and used in the process of 'other products' by the assessee . The assessee claimed deduction under section 80IA of the Income tax Act in respect of value of steam generated from the captive power plant. The assessee is using the steam in its process of manufacturing of chemical products. The AO held that the assessee is not eligible for the benefits of Section 80IA as this is not equivalent to the power/electricity generated by the captive power plant.
3.1 On appeal, the CIT(A) has allowed the claim of the assessee by following the decision of the Settlement Commission in assessee's own case for the assessment year 2004-05 to 2009-10.
4. We have heard the ld. DR as well as the ld. AR and considered the relevant material on record. We note that the Settlement Commission vide its order dated 2/12/2011 in assessee's own case for the assessment year 2004-05 to 2009-10 has considered and decided this issue in para 6.3 as under :-
"6.3 The other major ground taken is that a distinction has to be drawn between electricity, and steam, as forms of power eligible for deduction u/s.801A(4)(iv). Although the note of the Commissioner fairly admits that this issue has gone in favor of the assessee upto the level of the Tribunal, it is in the absence of decisions of the High Courts or the Apex Court in the matter, the issue has not attained finality. We find that in several cases the Tribunal has held that steam is a form of power covered under the aforesaid beneficial provisions. The applicant has relied on the decisions of the Delhi Bench of the Tribunal in the case of Sial Sbec Bio Energy Limited vs DCIT [2004 TTJ 866 Delhi] and that of Jaipur Bench in the case of Maharaja Shree Umaid Mills Ltd. [2009 TTJ 791 Jai.]. In the former case, it was held as under:6
2116 & 2115/Mum/13 " Assuming that the assessee uses electricity instead of steam and brings the same result, then what is wrong with the assessee when he uses the steam and brings the some results. The basic concept which one must understand is as to how the same end product has been brought- to the deployment of energy that is material and not, the form of energy be it a firm of mechanical, electrical or thermal energies and if the end results are brought through the thermal energy produced through steam, we feel that this is definitely a form of power which would be falling within the ambit of expression power used under section 80IA (4)(iv) of the I. T. Act."
Similarly in Maharaja Shree Utnaid Mills (supra) the issue was with regard to the eligibility of steam for deduction uls 8OIA(4)(iv). In that case the department t ook th e stand that it is only cases of generation of electricity and not cases of production of steam, that qualify for deduction under the aforesaid section. The Bench noted the decision of the Delhi Tribunal in Sial Sbec's case (supra) and held that steam generated by the Industrial Undertaking comes within the meaning of power as per section 801A, and would hence qualify for benefit. The stand of the Department before us is that whereas the above decisions would squarely apply to the facts of the applicant's case, same has not become final in the absence of pronouncements of the Higher Courts. We are not inclined to disregard the current findings of the Tribunal merely because the matter is still pending in further appeal. We entirely agree with the opinions expressed therein that steam has to be equated with electricity in the concept of power as envisaged by section 80IA(4)(iv) of the Act. Accordingly we find little legal merit in this argument advanced by the Commissioner."
4.1 It is clear that the Settlement Commission has followed the decision of Delhi Bench of this Tribunal in the case of Sial Sbec Energy Ltd. vs. DCIT (12 TTJ 866) as well as the decision of Jaipur Bench of this Tribunal in case of Maharaja Shri Umed Mill Ltd. Since no contrary decision has been brought to our notice, therefore, we do not find any error in the impugned order of the CIT(A) in allowing the claim of the assessee by following the decision of the Settlement Commission in assessee's own case. Ground No.3 is dismissed.
5. Appeal of the revenue is dismissed.
72116 & 2115/Mum/13 ITA No.2115/Mum/2013:- The Revenue has raised the following grounds :-
"1. On the facts and in the circumstances of the case and in law, the Ld CIT(A) erred in allowing deduction u/s 801A amounting to Rs. 1,74,66,016/- in relation to the assessee's Captive Power Plant, ignoring the fact that there is no profit derived from the Power Plant as the power was not sold but stood consumed in manufacturing units of the assessee company.
2. On the facts and in the circumstances of the case and in law, the Ld CIT(A) erred in allowing deduction u/s 801A amounting to Rs. 1,74,66,016/- in relation to its Captive Power Plant by accepting the rate claimed by the assessee @ 6.16 per unit i.e. the rate of power sold by the Electricity Board, without considering that the Electricity Board has to incur costs which are absent in the case of assessee's own Captive Power Plant. This ground is without prejudice to ground no. 1.
3. On the facts and in the circumstances of the case and in law, the Ld CIT(A) erred in allowing deduction u/s 801A in respect of power generated from steam without appreciating that steam is a by-product of the power generated and hence cannot be considered a power."
5.1 Since the grounds raised in the above appeal by the Revenue are identical to the appeal in ITA No.2116/Mum/2013, therefore, in view of our finding on these issues in the appeal in ITA No.2116/Mum/2013 the appeal of the Revenue in ITA No. 2115/Mum/2013 for assessment year 2010-11 is dismissed.
6. Both the appeals of the Revenue are dismissed.
Order pronounced in the open court on 30/1 /2015 आदेश क घोषणा खुले यायालय म) *दनांकः 30/01 /2015 को क गई ।
Sd/- Sd/-
( Sanjay Arora ) ( Vijay Pal Rao )
लेखा सद य / ACCOUNTANT MEMBER याियक सद य / JUDICIAL MEMBER
मुंबई Mumbai; *दनांक Dated 30/01/2015
व.िन.स./ Jv, Sr. PS
8
2116 & 2115/Mum/13
आदे श क ूितिल प अमे षत/Copy
षत of the Order forwarded to :
1. अपीलाथ / The Appellant
2. ू यथ / The Respondent.
3. आयकर आयु (अपील) / The CIT(A)-
4. आयकर आयु / CIT
5. वभागीय ूितिनिध, आयकर अपीलीय अिधकरण, मुंबई / DR, ITAT, Mumbai
6. गाड$ फाईल / Guard file.
आदे शानुसार/
ार BY ORDER,
स या पत ूित //True Copy//
उप/सहायक
उप सहायक पंजीकार (Dy./Asstt. Registrar)
आयकर अपीलीय अिधकरण,
अिधकरण मुंबई / ITAT, Mumbai.