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2. Without prejudice to ground No. 1 above, the Appellant submits that the disallowance under Section 14A is highly excessive and arbitrary, and requires to be reduced substantially.

3. The learned Commissioner of Income Tax (Appeals) erred in confirming disallowance of the claim of the Appellant for deduction under Section 80IA in respect of its power generation plant Rs.71,69,109/-.

4. The learned Commissioner of Income Tax (Appeals) failed to consider that the case of the Appellant was one of "captive consumption", which is permissible, and recognized within Section 80IA itself. "

8. Facts in brief are that the AO during the course of assessment proceedings, noticed that the assessee has claimed deduction u/s 80IA the Act to the tune of Rs.71,69,109 on account of captive consumption of plant at Ankeleshwar, Gujarat. The AO further observed that in the profit and loss account pertaining to the said power plant the assessee has credited Rs.3,65,09,794/- as savings from captive power plant by the assessee. The said credit in the profit and loss account has been taken for calculating the profit from the undertaking of Rs.69,55,542/-. The assessee filed audit report in Form No.10CCB, wherein at point no.27 pertaining to total sales of the undertaking, Rs.3,65,09,794/- was mentioned. At sr. No.28, it the audit report, it was stated that "No other transaction other than transmitting of power to other plants of the assessee was undertaken. According to the AO, the said claim of the assessee was wrong as being not as per the provisions of the Act and accordingly, he issued show cause notice on I.T.A. No.4316/Mum/2014 and 4234/Mum/2014 13.9.2012 calling upon the assessee to show cause as to why the claim of the assessee should not be disallowed. In reply to the said notice, the assessee vide letter dated 28.11.2011 submitted that savings from captive power plant is nothing but sales revenue. By referring to the provisions of section 80IA(8) of the Act, which deals with the captive consumption of power, the assessee submitted that the sales revenue from the captive consumption of electricity was Rs.3,15,10,892/- while captive consumption of by-product steam from waste heat recovery Boiler and by-product chilled water from vapour absorption machine were Rs.34,35,849/- and Rs.15,63,054/- respectively. AO after considering the submissions of the assessee rejected the same by holding that such arrangement is not permissible under the Act as the saving cannot be construed as sale of the same undertaking and as a result rejected the claim of the assessee of Rs.71,69,109/-. While the ld. CIT(A) affirmed the order of the AO on this issue by holding that the savings cannot be considered as sales of undertaking and accordingly, the profit shown in the profit and loss account attached with form 10CCB are not eligible for deduction u/s 80IA of the Act.

9. The ld. AR vehemently submitted before us that the assessee has set up a captive power generation plant at its Ankeleshwar factory. The power generated in the said plant was supplied by the assessee to its own other I.T.A. No.4316/Mum/2014 and 4234/Mum/2014 units as the requirement of power was far more than the quantum of power generated in the said unit and thus the entire power generated was consumed captively and no power was sold to the third party. The ld. AR while referring to the provisions of section 80IA(8) of the Act submitted that the section itself provides for a situation of captive consumption. The ld. AR further contended that even at the time of contemplation by the legislature, the explanation of captive consumption was specifically provided in the section itself. The ld. AR further stated that during year the total electricity generated by the said plant was 51,65,720/- units. The ld. AR also took us through the various documents to prove payment of the excise duty to Gujarat Electricity Board at the rate of 40Ps per unit and thus total power duty was worked out to Rs.20,66,288/-. The ld. AR in defense of his argument relied upon the following case laws:

11. We have heard the rival submissions and perused the material placed before us including the impugned order and case laws relied upon by the parties. The undisputed facts are that the assessee has set up a power generation plant at Ankleshwar factory and the power being generated in the said unit was supplied to the various projects owned by the assessee, thus, it is a case of captive consumption of power without any sale to any outside party. The assessee calculated the savings from captive consumption at Rs.3,65,09,794/- from the captive power plant and credited the same in the profit and loss account and the net profit from the said unit was worked out at Rs.69,55,542/- as per the profit and loss account. The assessee also filed audit report in form no. No.10CCB in support of its claim with the return of income. Now, the issue before us whether the assessee is entitled to captive consumption of power or not. In the case of Tamil Nadu Petro Products Ltd. (supra), the Hon‟ble Madras High Court has held as under (para 8 and 9):