Madras High Court
Commissioner Of Income Tax vs Cethar Limited on 26 August, 2014
Bench: R.Sudhakar, G.M.Akbar Ali
In the High Court of Judicature at Madras Dated: 26.08.2014 Coram The Honourable Mr.JUSTICE R.SUDHAKAR and The Honourable Mr.JUSTICE G.M.AKBAR ALI Tax Case (Appeal) No.389 of 2014 Commissioner of Income Tax Trichy. .... Appellant Vs. CETHAR LIMITED No.4, Dindigul Road, Trichy - 620 001. .... Respondent APPEAL under Section 260A of the Income Tax Act against the order dated 21.11.2013 made in I.T.A.No.1052/Mds/2013 on the file of the Income Tax Appellate Tribunal, Madras 'A' Bench. For Appellant : Mr.J.Narayanasamy Standing counsel for Income Tax For Respondent: Mr.M.P.Senthil Kumar ------- J U D G M E N T
(Delivered by R.SUDHAKAR,J.) This Tax Case (Appeal) is filed by the Revenue as against the order of the Income Tax Appellate Tribunal raising the following substantial question of law:
Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee is entitled to the claim of deduction under Section 80IB in respect of the income relatable to the power generated by the Wind Mill that was consumed by the assessee by treating the said income as income derived fromthe eligible undertaking?"
2. The assessee company is a manufacturer of Boilers and in the business of generation of electricity through wind mills. The assessee filed its return of income for the assessment year 2005-06 declaring a total income of Rs.39,69,73,114/-. In the re-assessment proceedings, the Assessing Officer held that the assessee had claimed benefit of deduction under Section 80IA on the amount of Rs.38,79,459/-, whereas the assesee was eligible for deduction under Section 80IA only on actual sale of power to Tamil Nadu Electricity Board, ie., 13,36,848/- and disallowed the remaining amount. As against the said order, the assessee filed an appeal before the Commissioner of Income Tax (Appeals), who concurred with the decision of the Assessing Officer, dismissed the appeal. Aggrieved by the same, the assessee filed a further appeal before the Income Tax Appellate Tribunal. The Tribunal agreed with the contentions of the assessee allowed the appeal holding that the assessee was deriving income from generation of electricity. The Tribunal also held that the assessee instead of getting cash benefit, was getting credit for the units supplied to the Government agency and thus it cannot be said that the income earned by the assessee by supplying the units to the TNEB falls within the meaning of term 'attributable to'. Aggrieved by the order of the Tribunal, the present Tax Case (Appeal) has been filed by the Revenue.
3. Mr.M.P.Senthilkumar, learned counsel takes notice for the respondent/assessee. Both the learned standing counsel appearing for the Revenue and the learned counsel appearing for the assessee fairly submits that the issue involved in this appeal is covered by a decision of this Court reported in (2011) 338 ITR 643 (Mad) (Tamilnadu Petro Products Ltd. V. Assistant Commissioner of Income Tax), wherein this Court, following the decision of this Court dated 07.06.2010 made in T.C.(A)Nos.68 to 70 of 2010 (CIT V. Thiagrarajar Mills Ltd.) held in favour of the assessee, thereby allowed the appeal.
4. In T.C.(A)Nos.68 to 70 of 2010 (CIT V. Thiagrarajar Mills Ltd.), this Court, by order dated 07.06.2010, held as follows:
"8. The contention that only whatever power generated from the sale to an outsider or the electricity board, and the profit or gain derived by such sale alone 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 con-sidered 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 an 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 section 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 mean-ing of the expression 'derive' in the New Oxford Dictionary of English states 'obtaining something from a specified source'. In sec-tion 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 alone would make eligible for the benefits provided in the said section.
9. Therefore, there is no difficulty in holding that captive consumption of the power generated by the assessee from its own power plant would enable the respondent-assessee to derive profits and gains by working out the cost of such consumption of power inasmuch as the assessee is able to save to that extent which would certainly be covered by section 80-IA(1). When such will be the outcome out of own consumption of the power generated and gained by the assessee by setting up its own power plant, we do not find any lack of merit in the claim of the respondent-assessee when it claimed by relying upon section 80-IA(1) of the Income-tax Act by way of deduction of the value of such units of power consumed by its own plant by way of profits and gains for the relevant assessment years."
5. Accordingly, following the above-said decisions of this Court reported in (2011) 338 ITR 643 (Mad) (Tamilnadu Petro Products Ltd. V. Assistant Commissioner of Income Tax) and the order dated 07.06.2010 made in T.C.(A)Nos.68 to 70 of 2010 (CIT V. Thiagrarajar Mills Ltd.), the questions of law are answered in favour of the assessee and against the Revenue. This Tax Case (Appeal) stands dismissed. No costs.
Index :Yes/No (R.S.,J) (G.M.A.,J)
Internet: Yes/No 26.08.2014
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To
1. The Income Tax Appellate Tribunal, Madras 'A' Bench.
2. The Commissioner of Income Tax (Appeals), Tiruchirapalli.
3. The Deputy Commissioner of Income Tax, Company Circle I, Trichy.
R.SUDHAKAR,J.
AND
G.M.AKBAR ALI,J.
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T.C.(A) No.389 of 2014
26.08.2014