M/s HEG Ltd., v. The ACIT, 1(1),

ITA 117/IND/2007 | misc
Pronouncement Date: 15-03-2010 | Result: Partly Allowed

Appeal Details

RSA Number 11722714 RSA 2007
Assessee PAN AAACH6184K
Bench Indore
Appeal Number ITA 117/IND/2007
Duration Of Justice 3 year(s) 1 month(s) 9 day(s)
Appellant M/s HEG Ltd.,
Respondent The ACIT, 1(1),
Appeal Type Income Tax Appeal
Pronouncement Date 15-03-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted DB
Tribunal Order Date 15-03-2010
Date Of Final Hearing 10-03-2010
Next Hearing Date 10-03-2010
Assessment Year misc
Appeal Filed On 05-02-2007
Judgment Text
1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH INDORE BEFORE SHRI JOGINDER SINGH AND SHRI V.K. GUPTA AM ITA NOS. 117/IND/07 A.YS. 2003-04 HEG LIMITED MANDIDEEP APPELLANT PAN AAACH6184K VS ASSTT. COMMR. OF INCOMETAX 1(1) BHOPAL RESPONDENT AND ITA NO. 211/IND/07 A.Y. 2003-04 ASSTT. COMMR. OF INCOMETAX 1(1) BHOPAL APPELLANT VS HEG LIMITED MANDIDEEP RESPONDENT ASSESSEE BY: SHRI M.C. MEHTA & SHRI H.CHIMN ANI CAS DEPTT. BY : SHRI K.K. SINGH CIT DR O R D E R PER JOGINDER SINGH JM THESE ARE CROSS APPEALS BY THE ASSESSEE AS WELL AS BY THE 2 REVENUE FOR THE ASSESSMENT YEARS 2003-04 AGAINST TH E ORDER OF THE LEARNED CIT(A) DATED 22.12.2006. WE SHALL TAKE UP THE APPEAL OF THE ASSESSEE FIRST WHEREIN THE FIRST GROUND RAISED IS O N THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN REDUCING THE CLAIM OF DEDUCTION U/S 80IA IN RESPECT OF POWER DIVISION (WHRS) DURG AND POWER DIVISION ( TAWA) HOLDING THAT THERE IS NO SALE OF UNITS ABSORBED TOWARDS WHE ELING CHARGES BY POWER DIVISION TO ANOTHER MANUFACTURING DIVISION I N HOLDING THAT ACTUAL SALE OR TRANSFER OF POWER UNIT AS REDUCED BY THE POWER GENERATING DIVISION GETS REDUCED BY WHEELING UNIT A ND DISADVANTAGE OR LOSS HAS TO BE BORNE BY THE POWER DIVISION ERRED I N REDUCING THE TURNOVER OF POWER DIVISION AND FURTHER ERRED IN APP RECIATING THAT EVEN TAKING INTO ACCOUNT THE WHEELING CHARGES THE PROFI T OF POWER GENERATING DIVISIONS WOULD REMAIN THE SAME. 2. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTI ES AND HAVE GONE THROUGH THE MATERIAL AVAILABLE ON THE FILE. AT THE OUTSET IT WAS CLAIMED BY THE LD. COUNSEL FOR THE ASSESSEE THAT TH E IMPUGNED ISSUES ARE COVERED BY THE ORDER OF THE TRIBUNAL DATED 23.1 .2009 (A.Y. 2002- 03). THIS FACTUAL MATRIX WAS NOT CONTROVERTED BY TH E REVENUE. IN VIEW 3 OF THIS ASSERTION WE ARE REPRODUCING HEREUNDER THE RELEVANT PORTION OF THE AFORESAID ORDER DATED 17 TH OCTOBER 2008 :- GROUND NO. 4 THAT THE LD. CIT(A) ERRED ON FACTS AND IN LAW IN R EDUCING THE CLAIM OF DEDUCTION U/S 80IA IN RESPECT OF POWER DIVISION (WHRS) DURG HOLDING THAT THERE IS NO SALE OF UNITS ABSORBED TOW ARDS WHEELING CHARGES BY POWER DIVISION TO OTHER MANUFACTURING DI VISIONS OF THE APPELLANT. GROUND NO. 4.1 THAT THE LD. CIT(A) ERRED ON FACTS AND IN LAW IN H OLDING THAT ACTUAL SALE OR TRANSFER OF POWER UNITS AS RECORDED BY THE POWER GENERATING DIVISIONS GETS REDUCED BY WHEELING UNITS AND DISADV ANTAGE OR LOSS HAS TO BE BORNE BY THE POWER DIVISIONS. GROUND NO. 4.2 THAT THE LD. CIT(A) ERRED ON FACTS AND IN LAW IN RE DUCING THE TURNOVER OF POWER DIVISION BY THE AMOUNT OF UNITS A BSORBED TOWARDS WHEELING CHARGES WITHOUT APPRECIATING THAT SUCH L EVY WAS TO THE ACCOUNT OF THE CONSUMING UNIT(S). GROUND NO. 4.3 THAT THE LD. CIT(A) ERRED ON FACTS AND IN LAW IN AS SUMING WHEELING CHARGES @ 7% OF SOLD UNITS IN RESPECT OF POWER SUPP LIED BY POWER DIVISION (WHRS) DURG TO SPONGE IRON DIVISION DURG WHILE ALLOWING CLAIM OF DEDUCTION U/S 80 IA ON PROFITS OF POWER DIVISION (WHRS) DURG. GROUND NO. 4.4 WITHOUT PREJUDICE THAT THE LD. CIT(A) ERRED ON FA CTS AND IN LAW IN NOT APPRECIATING THAT EVEN TAKING INTO ACCOUNT THE WHEELING CHARGES THE MARKET VALUE FOR SALE OF POWER ADOPTED FOR PURP OSES OF SECTION 80IA WAS LOWER THAN THE COMPOSITE PRICE CHARGED BY MPEB TO INDUSTRIAL CONSUMERS. 21. THE REVENUE HAS ALSO RAISED GROUND NO. 4 ON THIS IS SUE WHICH READS AS UNDER : ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD.CIT(A) HAS ERRED IN (4) DIRECTING TO ALLOW DEDUCTION OF RS.14 79 00 392 /- U/S 80I TO THE ASSESSEE 4 22. THE BRIEF IN NUTSHELL ARE THAT THE ASSESSEE HAD CLAIMED FOLLOWING DEDUCTIONS UNDER SECTION 80IA IN RESPECT OF THREE U NDERTAKINGS ENGAGED IN THE GENERATION OF POWER LOCATED AT THREE DIFFERENT PLACES :- POWER DIVISION DURG - RS.17 83 13 633/- POWER DIVISION RISHABDEV - RS.1 96 17 206/- POWER DIVISION TAWA - RS.NIL (IN VIEW OF LOSSES) THE ELECTRICITY GENERATED BY THE THREE POWER PLANT S WAS MAINLY CAPTIVELY CONSUMED AND SURPLUS ELECTRICITY WAS SOLD TO THE STATE ELECTRICITY BOARD AT THE PRICE FIXED BY STATE ELECT RICITY BOARD TECHNICALLY KNOWN AS INFIRM PRICE. AS PER THE AS SESSEE THE INTER DIVISIONAL TRANSFER OF POWER FROM THE CAPTIVE POWER PLANTS WAS MADE AND RECORDED IN THE SEPARATE BOOKS OF ACCOUNTS AT THE PRICE AT WHICH POWER IS SOLD BY THE STATE ELECTRICITY BOARD TO THE ASSESSEE BEING THE FAIR MARKET VALUE OF POWER. 23 REGARDING DURG AND RISHABDEV DIVISION IN RESPECT O F WHICH DEDUCTION UNDER SECTION 80IA WAS CLAIMED THE ASSES SING OFFICER FOUND OUT THE COST OF PER UNIT SOLD AS UNDER :- DIVISO N NAME TOTAL INCOME IN RS. TOTAL EXPENSES IN RS. NET PROFIT IN RS. NO. OF UNITS SOLD COST PER UNIT SOLD IN RS. DURG 289023142 110709509 178313633 77090109 1.44 RISBAH DEV 122237994 102620788 19617206 28585583 3.59 THE ASSESSING OFFICER FURTHER FOUND THAT THE ELECT RICITY GENERATED BY THE POWER DIVISION DURG IS BEING PROVIDED BY IT T O SPONGE IRON DIVISION DURG AND GRAPHITE DIVISION MANDIDEEP A ND FOR PROVIDING THIS ELECTRICITY THE TRANSMISSION LINES OF MPEB WE RE USED UNDER AN AGREEMENT FOR WHEELING OF POWER BETWEEN THE POWER D IVISIONS AND MPEB. IN CASE MANUFACTURING UNIT (HEREINAFTER REFE RRED TO AS CONSUMING UNIT) WAS NOT ABLE TO CONSUME THE ELECT RICITY FED INTO MPEB GRID BY THE GENERATING UNIT THE EXCESS ELECTR ICITY FED INTO GRID WAS DEEMED TO HAVE BEEN SOLD FOR WHICH MPEB WA S TO PAY THE ASSESSEE AT VALORAM PURCHASE RATE FOR INFIRM POWER OF MPEB ON OVERALL REALIZATION RATE BEING RS.1.64 PER UNIT DUR ING THE YEAR UNDER 5 CONSIDERATION. FOR INDUSTRIAL CONSUMERS MPEB TARI FF RATE WAS RS.3.81 PER UNIT DURING THE YEAR UNDER CONSIDERATIO N. 24 THE ELECTRICITY GENERATED BY RISHABDEV DIVISION (IN RAJASTHAN) WAS BEING PROVIDED BY IT TO THE TEXTILE DIVISION AND SI NCE THE GENERATING UNIT AND CONSUMING UNIT WERE ADJACENT TO EACH OTHER THE ELECTRICITY WAS DIRECTLY SUPPLIED BY TRANSMISSION LINES OF THE COMPANY AND WAS NOT WHEELED THROUGH RAJASTHAN STATE ELECTRICITY BOA RD. SO UNLIKE POWER DIVISION DURG THERE WAS NO AGREEMENT BETWEE N THE ASSESSEE AND RSEB. THE TARIFF RATE OF RSEB FOR ITS INDUSTRI AL CONSUMERS WAS RS. 4.27 PER UNIT. 25 THE ASSESSING OFFICER WAS OF THE VIEW THAT IN VIEW OF THE PROVISIONS OF SECTION 80IA(8) THE MARKET VALUE FOR GENERATING UNITS SHALL BE THE PRICE AT WHICH THE STATE ELECTRICITY BOARD THE ONL Y BUYER HAD PURCHASED THE UNITS. THE ASSESSING OFFICER THEREF ORE ASSUMED THAT FOR GENERATING UNIT SITUATED IN THE THEN STATE OF M ADHYA PRADESH (I.E. BEFORE FORMATION OF CHHATTISGARH RAJYA) THE MARKE T VALUE FOR GENERATING UNIT IS RS. 1.64 PER UNIT. FOR RISHABDE V UNIT AS THE INFORMATION WAS NOT AVAILABLE ON RECORD THE ASSESS ING OFFICER ADOPTED THE MARKET VALUE AT RS.2/- PER UNIT. SINCE FOR RISHABDEV UNIT THE MARKET VALUE ADOPTED BY THE ASSESSEE WAS RS.4.2 7 PER UNIT (COST OF PRODUCTION RS. 3.59 PER UNIT) AS A RESULT OF ASS UMED SALE PRICE AT RS.2/- BY THE ASSESSING OFFICER THERE WAS LOSS AND SO DEDUCTION UNDER SECTION 80IA WAS NOT ADMISSIBLE IN RESPECT OF RISHABDEV UNIT. 26 FOR DURG UNIT THE ASSESSEE HAD TAKEN THE SALE PRIC E OF UNITS SUPPLIED TO CONSUMING UNITS AT RS.3.81 PER UNIT AGAINST THE COST OF PRODUCTION OF RS. 1.44 PER UNIT BUT WITH THE ADOPTION OF SALE PRICE OF RS.1.64 PER UNIT BY THE ASSESSING OFFICER THE PROFIT UNDER SEC TION 80IA FOR UNITS SUPPLIED TO CONSUMING UNITS REDUCED CONSIDERABLY. 27 SO FAR AS THE DEEMED SALE TO MPEB (SURPLUS UNITS TH AT HAD GONE IN THE GRID) THE SALE PRICE WAS TAKEN AT RS. 1.64 PER UNIT WHICH WAS ALSO ADOPTED BY THE ASSESSEE. SO THIS DID NOT MAKE ANY DIFFERENCE IN 80IA COMPUTATION OF PROFIT FOR SUPPLIES/SALES MADE TO MPEB. THERE WAS LOSS OF RS.1 71 59 300/- IN RESPECT OF TAWA DIV ISION. AS SUCH THE QUESTION OF DEDUCTION UNDER SECTION 80IA DID NO T ARISE. 28 IN APPEAL BEFORE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) THE ASSESSEE FILED THE STATISTICAL DETAILS OF THE U NITS SOLD TO THE CONSUMING UNITS AND THE STATE ELECTRICITY BOARD AND THE RATE OF SALE ADOPTED BY THE GENERATING UNIT. 6 29 IT WAS SUBMITTED BEFORE THE LEARNED COMMISSIONER OF INCOMETAX (APPEALS) BY THE ASSESSEE THAT THE ONLY ISSUE FOR C ONSIDERATION WAS WHETHER THE DEDUCTION ALLOWABLE TO THE ASSESSEE UND ER SECTION 80IA OF THE INCOME TAX ACT 1961 SHOULD BE COMPUTED BY T AKING THE INFIRM PRICE AS MARKET VALUE OF POWER OR THE PRICE CHARGED BY T HE STATE ELECTRICITY BOARDS TO THE INDUSTRIAL CONSUME RS INCLUDING THE ASSESSEE. THE ATTENTION OF THE LEARNED COMMISSIONER OF INCOMETAX (APPEALS) WAS ALSO DRAWN TO THE PROVISIONS OF SECTI ON 80IA(8) AND THE MEANING OF MARKET VALUE FOR THE PURPOSE OF SE CTION 80IA(8) WHICH HAS BEEN GIVEN IN THE EXPLANATION AS UNDER :- EXPLANATION FOR THE PURPOSES OF THIS SUB-SECTION MARKET VALUE IN RELATION TO ANY GOODS OR SERVICES MEANS THE PRICE THAT SUCH GOODS OR SERVICES WOULD ORDINARILY FETCH IN THE OPEN MARKET. 30. IT WAS ALSO SUBMITTED BY THE ASSESSEE BEFORE THE LE ARNED COMMISSIONER OF INCOMETAX (APPEALS) THAT AS PER TH E ABOVE EXPLANATION READ WITH SECTION 80IA(8) THE PROFIT O F ELIGIBLE BUSINESS SHOULD BE COMPUTED ON THE BASIS OF INTER UNIT TRANS FER OF GOODS AND SERVICES AT THE PRICE SUCH GOODS WOULD ORDINARILY F ETCH ON SALE IN OPEN MARKET. EXPLAINING THE INTERPRETATION OF THE T ERM MARKET VALUE BY VARIOUS JUDICIAL AUTHORITIES IT WAS SUBMITTED BY THE ASSESSEE THAT IN ORDER TO DETERMINE THE MARKET PRICE OF ANY GOODS OR SERVICES OPEN MARKET CONDITIONS MUST EXIST I.E. THERE SHOULD BE W ILLINGNESS ON THE PART OF THE BUYER TO PURCHASE AND THE SELLER TO SEL L THE GOODS. IN SUCH A SITUATION THE PRICE DETERMINED BY THE MARKET FOR CES OF DEMAND AND SUPPLY IS THE MARKET PRICE OF SUCH GOODS. HOWEVER IN CASE OF ANY TRANSACTION OF PURCHASE AND SALE TAKING PLACE ON AC COUNT OF CERTAIN OBLIGATION ON THE PART OF EITHER SIDE EFFECTING TH E DETERMINING OF THE PRICE OF GOODS SUCH A PRICE CANNOT BE SAID TO BE T HE MARKET PRICE THEREOF. THE EXPRESSION OPEN MARKET NECESSARILY REFERS TO FREE MARKET CONDITIONS. 31. IT WAS FURTHER SUBMITTED BY THE ASSESSEE THAT UNDER THE PROVISIONS OF THE STATE ELECTRICITY ACT 1948 GENERATION AND DIS TRIBUTION OF POWER IS THE MONOPOLY OF THE STATE. THE PRODUCERS OF POW ER ARE NOT ALLOWED TO SELL THE SAME IN THE OPEN MARKET THE PO WER PRODUCED CAN BE CAPTIVELY CONSUMED OR FED IN THE STATE GRID SUBJ ECT TO AGREEMENT WITH THE STATE ELECTRICITY BOARD. AS SUCH THE ASSE SSEE WAS NOT IN A POSITION TO BARGAIN THE RATE AT WHICH THE POWER WOU LD HAVE BEEN OTHERWISE SOLD TO THE STATE ELECTRICITY BOARD. ON T HE CONTRARY THE ASSESSEE WAS OBLIGED TO SELL THE SURPLUS POWER TO T HE STATE ELECTRICITY BOARD AT THE PRICE MENTIONED BY THE SAID BOARD. 7 32. IN THE CASE OF THE ASSESSEE THUS THE POWER GENERAT ED BY THE CAPTIVE POWER PLANTS HAD TO BE NECESSARILY CONSUMED BY THE CONSUMING (MANUFACTURING ) UNIT AND THE ASSESSEE WAS FORBIDDE N TO SELL THE POWER TO OTHER CONSUMERS. IN TERMS OF THE WHEELING AGREEMENT ENTERED INTO BY THE COMPANY WITH MPEB WHERE THE UN ITS CONSUMED ARE LESS THAN UNITS WHEELED/FED INTO TRANSMISSION S YSTEM OF THE BOARD THE EXCESS WAS TREATED AS DEEMED SALE TO MPE B BY THE COMPANY AT THE INFIRM RATE WHICH WAS THE RATE DETER MINED BY THE TERMS ON WHICH PERMISSION FOR SETTING UP THE CAPTIV E POWER PLANT WAS GIVEN. THE SAID RATE WAS DETERMINED AND DICTAT ED BY THE WHEELING AGREEMENT ON A CONDITION PRECEDENT FOR GRA NT OF PERMISSION FOR SETTING UP THE CAPTIVE POWER PLANTS. THE INFIRM POWER RATE IS NOT THE RATE AT WHICH THE POWER IS AVAILABLE IN THE OPE N MARKET. THIS IS ALSO NEITHER THE RATE AT WHICH ELECTRICITY IS SOLD BY MPEB TO THE ULTIMATE CONSUMER AND/OR TO THE ASSESSEE . 33. EXPLAINING THE BILLING BY MPEB RAISED AGAINST THE C ONSUMING UNITS WITH THE HELP OF SAMPLE BILLS FOR APRIL 2000 AND M ARCH 2001 IT WAS SUBMITTED BY THE ASSESSEE BEFORE THE LEARNED COMMIS SIONER OF INCOMETAX (APPEALS) THAT THE UNIT SOLD AND SALE PRI CE TAKEN BY THE GENERATING UNITS WERE IN ACCORDANCE WITH THE BILLIN G OF MPEB I.E. RATE AT WHICH SET OFF OF UNITS CONSUMED AND UNITS F ED TO THE GRID WAS GIVEN AND BALANCE WAS CHARGED ON THE CONSUMING UNIT S AS UNDER :- USE OF ELECTRICITY UNITS SOLD (IN KWH) RATE/UNIT AMOUNT REMARK GRAPHITE DIVN. MANDIDEEP 67578064 3.81 256789886 AT PRICE CHARGED BY MPEB MPEB 2692490 1.64 4415684 AT INFIRM RATE SPONGE IRON DIVN. DURG 68 19 555 3.81 25987278 AT PRICE CHARGED BY MPEB MARAL OVERSEAS LTD. - - 1830294 PREVIOUS YEAR DIFFERENCE TOTAL 77090109 - 289023142 - IT WAS ALSO EXPLAINED BY THE ASSESSEE THAT THE POW ER WAS SUPPLIED TO THE ASSESSEE AND OTHER INDUSTRIAL USERS AT THE INDU STRIAL RATE OF RS. 3.85 PER UNIT AND AS AGAINST THIS MPEB FIXED INFIRM RATE OF POWER AT RS. 2.07 PER UNIT FOR THE FINANCIAL YEAR 2000-01 WH ICH WAS EARLIER 8 PROVISIONALLY FIXED AT RS. 1.64 PER UNIT) AS PER MP EB LETTER DATED 18.11.2003. 34. REGARDING POWER DIVISION RISHABDEV (RAJASTHAN) WHERE GENERATING UNIT AND CONSUMING UNIT WERE ADJACENT TO EACH OTHER THE BILLING WAS DONE AT THE PREVAILING RATE OF RSEB AS UNDER :- POWER DIVISION RISHABDEV USER OF ELECTRICITY UNITS SOLD (IN KWH) RATE/UNIT AMOUNT(RS.) REMARKS TEXTILE DIVISION RISHAB- DEV 28585583 4.27 122060439 AT PRICE CHARGED BY RSEB SALE OF PROCESS WASTE - - 177555 - TOTAL 28585583 122237994 - THE ASSESSEE REITERATED THAT THE INFIRM RATE CANNO T BE TREATED AS MARKET PRICE OF POWER. FURTHER THE ASSESSING OFFI CER IN THE COMPUTATION IN THE ABSENCE OF ANY INFIRM RATE AVAI LABLE FOR RISHABDEV POWER PLANT UNIT ADOPTED A NATIONAL RATE OF RS.2/- PER UNIT INSPITE OF THE FACT THAT AS PER THE AO'S COMPU TATION THE COST PER UNIT COMES TO RS.3.59 PER UNIT. IT WOULD BE ABSURD TO HOLD THAT RS.2/- PER UNIT WOULD BE THE MARKET PRICE OF THE POWER WHE N THE COST PER UNIT COMES TO RS. 3.59 PER UNIT. 35. THE ASSESSEE FURTHER SUBMITTED THAT THE INT ER DIVISION TRANSFER OF POWER FROM THE CAPTIVE POWER PLANTS HAD BEEN MADE AND REC ORDED IN THE SEPARATE BOOKS OF ACCOUNTS AT THE PRICE AT WHICH PO WER IS SOLD BY THE STATE ELECTRICITY BOARD TO THE ASSESSEE AND THE SAI D PRICE BEING THE FAIR MARKET VALUE OF POWER WAS IN CONFORMITY WITH THE PR OVISIONS OF SUB- SECTION (8) OF SECTION 80IA. ATTENTION OF THE LEAR NED COMMISSIONER OF INCOMETAX (APPEALS) WAS ALSO DRAWN TO THE FACT THAT REFERENCE TO SUB- SECTION (10) OF SECTION 80IA WAS NOT RELEVANT IN TH E PRESENT CASE AS THE SAID SUB-SECTION DEALS WITH THE SITUATION OF PURCHA SE AND SALE OF GOODS BETWEEN TWO DIFFERENT ASSESSEES. 36. AS AN ILLUSTRATION THE ATTENTION OF THE LD COMMIS SIONER OF INCOMETAX (APPEALS) WAS ALSO DRAWN TO THE SAMPLE COPIES OF BI LLS RECEIVED BY THE ASSESSEE FROM MPEB (INCLUDED AT PAGES 73 TO 77 OF T HE PAPER BOOK FILED BEFORE THE CIT(A). IT WAS EXPLAINED THAT AS P ER THE BILL FOR THE MONTH OF APRIL 2000 MPEB SUPPLIED 1 18 09 800 UNI TS OF ELECTRICITY POWER TO MANUFACTURING UNITS OF THE ASSESSEE AND TH EREAFTER THE ASSESSEE WAS GIVEN CREDIT OF THE UNITS WHEELED/FED BY THE POWER PLANTS OF THE ASSESSEE IN THE TRANSMISSION SYSTEM OF MPEB. SO THE ASSESSEE 9 WAS GIVEN CREDIT OF 53 46 543 UNITS IN THE BILL ISS UED BY MPEB. THE EXCESS CONSUMPTION OF POWER I.E. 64 63 257 HAS BEEN CHARGED AT THE MARKET RATE BY THE MPEB I.E. @ RS.3.81 PER UNIT. TH E MARKET RATE OF RS.3.81 COMPRISED OF ENERGY CHARGES OF RS.2.81 AND OTHER LEVIES. 37. IT WAS ALSO POINTED OUT BY THE ASSESSEE THAT IN RES PECT OF POWER DIVISION DURG DEDUCTION FOR 80IA WAS NOT CORRECTL Y WORKED OUT BY THE ASSESSING OFFICER. IN CASE THE INFIRM RATE OF RS. 2.07 PER UNIT WAS ADOPTED FOR 7 70 90 109 UNITS SOLD THE ALLOWABLE D EDUCTION WOULD HAVE BEEN RS. 5 06 97 310/- WHEREAS DEDUCTION OF RS .1 54 18 022/- WAS ALLOWED. IF THE INFIRM RATE OF RS. 1.64 WAS TAK EN THE ALLOWABLE DEDUCTION WOULD HAVE BEEN RS. 1 75 28 563/- WHEREAS THE DEDUCTION ALLOWED WAS RS.1 54 18 022/-. REGARDING RISHABDEV DISALLOWANCE WAS OPPOSED BY THE ASSESSEE STATING THAT THE ASSESS ING OFFICER HAD ADOPTED ABSURD INFIRM RATE AS MARKET RATE. 38. IT WAS ALSO SUBMITTED BY THE ASSESSEE THAT THE NEW BASIS FOR COMPUTATION OF DEDUCTION UNDER SECTION 80IA WAS A D EVIATION FROM THE PAST TREATMENT GIVEN BY THE REVENUE WITHOUT JUSTIFI CATION. RELYING ON THE DECISION REPORTED IN 263 ITR 679 IT WAS SUBMITT ED BY THE ASSESSEE THAT THOUGH THE PRINCIPLE OF RES-JUDICATA IS NOT A PPLICABLE TO THE INCOMETAX PROCEEDINGS BUT CONSISTENCY HAS TO BE MAI NTAINED. 39. REGARDING THE MARKET RATE FOR FINISHED PRODUCT OF THE UNIT WHICH WAS RAW MATERIAL FOR ANOTHER FOLLOWING DECISIONS WERE REFERRED TO BY THE ASSESSEE BEFORE THE LEARNED COMMISSIONER OF INCOMET AX (APPEALS) :- (1) CIT VS. AHMEDABAD MFG. & CALICO PRINTING CO. L TD. (1986) 162 ITR 760 (SECTION 80I) (ASSESSEE RUNNING SEVERAL UNI TS PRODUCING DIFFERENT ITEMS PVC RESIN PRODUCED IN UNIT NO. 2 WAS SUPPLIED TO THE ASSESSEES OTHER UNITS AS WELL AS SOLD IN OPEN MARK ET ASSESSEE ENTITLED TO DEDUCTION IRRESPECTIVE OF FACT WHETHER THE PRODUCTS WERE SOLD IN OPEN MARKET OR USED FOR CONSUMPTION IN ITS OTHER UNITS MARKET PRICE OF THE PRODUCT SUPPLIED TO THE OTHER U NITS OF THE ASSESSEE TO BE TAKEN FOR THE PURPOSE OF COMPUTING PROFITS A GAIN FOR ALLOWING DEDUCTION) (2) ANIL STARCH PRODUCTS LTD. V. CIT (1 996) 5 ITR 514 (GUJ.) (SECTION 80J A.Y. 1960-61) (DEDUCTION U /S 15C OF 1922 ACT (S. 80J OF 1961 ACT) COMPUTATION ASSESSEE D OING BUSINESS OF MANUFACTURE OF STARCH SETTING UP NEW UNDERTAKING FOR MANUFACTURE OF DEXTROSE IN WHICH STARCH IS USED AS RAW MATERIAL COST OF STARCH FOR THE PURPOSE OF NEW UNDERTAKING SHOULD BE TAKEN AT M ARKET PRICE AND NOT THE COST PRICE AS COMPUTATION OF PROFITS OF NEW UNDERTAKING FOR THE PURPOSE OF SECTION 15C HAS TO BE DONE ON COMMERCIAL BASIS. IT WAS CLARIFIED BY THE ASSESSEE THAT IN THE ABOVE CASE T HE SALE WAS MADE BY NON-ELIGIBLE UNIT TO ELIGIBLE UNIT AT MARKET PRICE WHEREAS THE ASSESSEES CASE WAS OTHER WAY ROUND I.E. ELIGIBLE UNIT SOLD TH E GOODS TO NON- ELIGIBLE UNIT) 10 40. IT WAS THEREFORE SUBMITTED BY THE ASSESSEE TO THE LEARNED COMMISSIONER OF INCOMETAX (APPEALS) THAT IN VIEW OF THE FACTS OF THE CASE AND THE LEGAL POSITION EXPLAINED ABOVE THE DE DUCTION UNDER SECTION 80IA OF THE INCOMETAX ACT 1961 CLAIMED BY THE ASSESSEE MAY BE ALLOWED. 41. THE LEARNED COMMISSIONER OF INCOMETAX (APPEALS) CON SIDERING THE SUBMISSIONS OF THE ASSESSEE IN THE LIGHT OF THE MAT ERIAL AVAILABLE ON RECORD OBSERVED AS UNDER :- 14.24(I) I HAVE CAREFULLY CONSIDERED THE SUBMISSIO NS MADE BY THE LD. AR. ACCORDING TO ME THE ISSUE BEF ORE ME IS DETERMINATION OF MARKET VALUE OF POWER UNITS ACTUAL LY SOLD TO CONSUMING UNITS BY GENERATING UNITS TAKING INTO ACC OUNT THE AGREEMENT EXECUTED BETWEEN THE ASSESSEE MPEB AND THE PRICE CHARGED BY THE STATE ELECTRICITY BOARDS TO IN DUSTRIAL CONSUMERS INCLUDING THE ASSESSEE. HON'BLE BOMBAY HI GH COURT WHILE DEALING WITH SECTION 80J IN ATUL DRUG HOUSE L IMITED VS. CIT REPORTED IN 211 ITR 604 HAVE HELD THAT AN ITEM PRODUCED BY AN OLD UNIT USED AS A RAW MATERIAL BY THE NEW UN IT IS TO BE TAKEN AT COST PRICE FOR THE PURPOSE OF COMPUTING PR OFITS. THIS RULING WAS HOWEVER RELEVANT FOR THE ASSESSMENT YE ARS PRIOR TO 1976-77 I.E. BEFORE INTRODUCTION OF SUB-SECTION (6B ) OF SECTION 80J W.E.F. 1.4.76 WHICH REFERRED TO TRANSFER OF INT ER UNIT PRODUCTS AT MARKET VALUE FOR THE PURPOSE OF DEDUCTI ON U/S 80J. (II) FURTHER WHILE CLAIMING DEDUCTION UNDER SECTION 80IA IT MAY APPEAR THAT ON ONE HAND THE APPELLANT HAD TAKEN THE BENEFIT OF NOTIONAL INCOME OR PROFIT FOR THE TRANSF ER OF POWER UNITS TO ITS MANUFACTURING UNIT BY ADOPTING THE MAR KET VALUE AND ON THE OTHER HAND THE SAID MANUFACTURING UNIT W OULD HAVE SHOWN LESSER PROFIT IF OUT OF THE POWER UNITS CONSU MED THE ACTUAL UNITS MADE AVAILABLE/TRANSFERRED BY THE GENE RATING UNIT WERE ACCOUNTED FOR AT THE MARKET VALUE. IF THE CASE WAS OTHERWISE I.E. THE MANUFACTURING UNIT HAVING NOT PA ID ANY ACTUAL AMOUNT TO THE GENERATING UNIT FOR THE UNITS CONSUMED (WHICH THE CONSUMING UNIT OTHERWISE WOULD HAVE TO O BTAIN AT RS.3.81 PER UNIT FROM MPEB) YET THE GENERATING UNI T IS CLAIMING PROFIT ON THE ASSUMED SALE PRICE AT THE RA TE OF RS. 3.81 PER UNIT FED TO THE GRID FOR ITS MANUFACTURING UNIT ALONGWITH THE PROFIT ON THE SALE PRICE OF RS. 1.64 PER UNIT T O MPEB ON THE SURPLUS UNITS & ALSO GETTING BENEFIT OF DEDUCTION U NDER SECTION 80IA FROM THE GROSS TOTAL INCOME WHICH WAS NOT REAL LY EARNED. THE APPLICABILITY OF APEX COURT RULING IN THE CASE OF MCDOWELL & CO. LTD. V. COMMERCIAL TAX OFFICER; 154 ITR 148 C OULD HAVE BEEN CONSIDERED. 11 (III)HOWEVER AS A RESULT OF SEC. 80IA(8) THE BENE FIT OF DEDUCTION IN RESPECT OF PROFIT DERIVED FROM INDUSTR IAL UNDERTAKING BY THE APPELLANT CANNOT BE DENIED SO LO NG AS MARKET VALUE OF THE GOODS TRANSFERRED FROM SUCH ELI GIBLE UNIT IS IN ORDER DESPITE THE FACT THAT IT IS A CASE OF CAPT IVE CONSUMPTION. REGARDING CAPTIVE CONSUMPTION OF THE POWER UNIT SO GENERATED IT WILL BE WORTHWHILE TO QUOTE THE OBSERVATION OF H ONBLE MADRAS HIGH COURT IN THE CASE OF CIT V. STANDARD MO TOR PRODUCTS LTD.; 131 ITR 300 WHERE WHILE EXAMINING TH E ISSUE OF INTERNAL COMBUSTION ENGINES SOLD AS SUCH OR USED IN THE AUTOMOBILES PRODUCED BY THE ASSESSEE IT WAS OBSERVE D BY THE HONBLE COURT THAT : THERE IS NO REASON WHY PARLIAMENT SHOULD ENGAGE IT S MANUFACTURE AND SALE AS SUCH AND SHOULD DISCOURAGE THE USE OF THE ARTICLE BY THE ASSESSEE HIMSELF IN PRODUCING OT HER ARTICLES. WE DO NOT FIND ANY LOGICAL BASIS FOR ENCOURAGING T HE SALE BY THE ASSESSEE AND POSSIBLE USE BY ANOTHER MANUFACTURER I N PRODUCING AUTOMOBILES WHILE DISCOURAGING THEIR USE BY THE ASSESSEE HIMSELF FOR THE SAME PURPOSE. (IV) SO THE ONLY QUESTION NOW REMAINS TO BE EXAMINE D IS WHETHER THE ASSESSING OFFICER HAD CORRECTLY TAKEN T HE MARKET VALUE OF THE UNITS SO TRANSFERRED HOLDING THAT THE INFIRM PRICE OFFERED BY THE STATE ELECTRICITY BOARD THE ONLY BU YER HAS TO BE TAKEN OR THE NORMAL MARKET VALUE PAID BY THE INDUST RIAL CONSUMERS (INCLUDING APPELLANT) TO MPEB FOR THE CON SUMPTION OF POWER. 14.25 I ALSO FIND THAT HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V. WIN LABORATORIES (254 ITR 187) IN A BRIEF ORDER GIVEN IN THE CONTEXT OF DEDUCTION U/S 80HH HAVE HEL D THAT TRANSFER OF MATERIAL FROM THE NEW UNIT TO ANOTHER U NIT IS TO BE VALUED AT MARKET VALUE. APART FROM THE ELABORATE RE ASONING GIVEN BY THE LD. AR AND EXPLANATION OF MARKET VALU E GIVEN IN SECTION 80IA(8) THE TERM MARKET VALUE HAS BEEN D EFINED IN BLACKS LAW DICTIONARY (FIFTH EDITION) AS UNDER :- MARKET VALUE THE PRICE PROPERTY WOULD COMMAND IN THE MARKET. THE HIGHEST PRICE A WILLING BUYER WOUL D PAY AND A WILLING SELLER ACCEPT BOTH BEING FULLY INFOR MED AND THE PROPERTY BEING EXPOSED FOR A REASONABLE PERIOD OF TIME. THE MARKET VALUE MAY BE DIFFERENT FROM THE PR ICE A PROPERTY CAN ACTUALLY BE SOLD FOR AT A GIVEN TIME (MARKET PRICE). THE MARKET VALUE OF AN ARTICLE OR PIECE OF PROPERTY IS THE PRICE WHICH IT MIGHT BE EXPECTED T O BRING 12 IF OFFERED FOR SALE IN A FAIR MARKET; NOT THE PRICE WHICH MIGHT BE OBTAINED ON A SALE AT PUBLIC AUCTION OR A SALE FORCED BY THE NECESSITIES OF THE OWNER BUT SUCH A PRICE AS WOULD BE FIXED BY NEGOTIATION AND MUTUAL AGREEMENT AFTER AMPLE TIME TO FIND A PURCHASER AS BETWEEN A VENDOR WHO IS WILLING (BUT NOT COMPELLED) TO SELL A ND A PURCHASER WHO DESIRES TO BUY BUT IS NOT COMPELLED T O TAKE THE PARTICULAR ARTICLE OR PIECE OF PROPERTY. 14.26 (I)THUS MARKET VALUE OF AN ARTICLE IS THE P RICE WHICH IT MIGHT BE EXPECTED TO BRING IF OFFERED FOR SALE IN OPEN MARKET NOT THE PRICE WHICH MIGHT BE OBTAINED ON A SALE AT PUBLIC AUCTION OR A SALE FORCED BY NECESSIT IES OF OWNER BUT SUCH A PRICE AS FIXED BY NEGOTIATIONS AND MUTUAL AGREEMENT. (II) FURTHER HONBLE PATNA HIGH COURT WHILE DEALING WITH SECTION 2(1A)(B)(II) HAD OCCASION TO CONSIDER THE TERM MARKET USED IN THAT SECTION. THE OBSERVATIO N IS RELEVANT FOR THE FACTS OF THE PRESENT CASE ALSO. I T WAS OBSERVED BY HONBLE PATNA HIGH COURT IN THE CASE OF J.M. CASEY V. CIT (AIR 1930 PAT. 44) THAT THE TERM MARKET DOES NOT REFER TO A SINGLE OR A SOLITARY P ERSON WHO MAY BE INTERESTED TO BUY OR MAY NOT BE SO INTERESTED. IT REFERS TO A REAL CENTER OF ECONOMIC EXCHANGE WHERE IF ONE PERSON DOES NOT BUY THERE AR E OTHERS WHO ARE READY AND WILLING TO BUY 14.27(I) CONSIDERING THE MUTUAL AGREEMENT BETWEEN THE APPELLANT & MPEB AND THE MANNER IN WHICH BILLS RAISED BY MPEB TO THE CONSUMING UNIT THERE APPEARS TO MERIT IN LD. AR CONTENTION THAT THE UNITS SOLD TO M PEB WAS AKIN TO DISTRESS SALE. YET AS PER THE AGREEMENT FOR SUCH SALE OF SURPLUS POWER SALE PRICE OF RS. 1.64 P ER UNIT WAS TAKEN IN THE COMPUTATION OF DEDUCTION U/S 80IA. FOR THE UNITS SUPPLIED TO CONSUMING UNIT THE PRICE AS P ER BILLING BY MPEB THE SALE PRICE AT THE RATE OF RS. 3 .81 WAS TAKEN WHICH ALSO APPEARS TO BE IN ORDER CONSIDERING THE COST OF POWER FOR OTHER INDUSTRIAL CONSUMERS. (II) THERE IS HOWEVER ONE RIDER. THE SAME IS DISC USSED AS UNDER :- (A) SECTION 80IA IN THE PRESENT CASE HAS CREATED A FICT ION BY PROVIDING DEDUCTION ON THE NOTIONAL INCOME OF POWER 13 DIVISIONS BECAUSE ONE CANNOT DERIVE A PROFIT FROM H IS OWN INTER UNIT TRANSFERS IN THE NORMAL COURSE. THIS AS PECT HAS ALREADY BEEN DISCUSSED IN THE APPELLATE ORDER DATED 22.01.2004 IN APPELLANTS OWN CASE (SUPRA) FOR A.Y. 2000- 01. (B) THE APPELLANTS CONTENTION APPEARS TO BE THAT ONCE THE POWER UNITS ARE FED INTO GRID THE SALE IS COMPLETE AND THE REST OF THE BOTHERATION IS THAT OF END USER I.E. CO NSUMER. THIS WOULD HAVE MADE SENSE IF AGAINST SUCH SALES TH E GENERATING UNIT ACTUALLY REALIZED THE SALE PRICE BU T IN FACT IN THE ARRANGEMENT FOR TRANSFER OF UNITS THE CONSU MING UNIT IS NEITHER GETTING THE CREDIT OF ENTIRE UNITS FED INTO THE GRID NOR THE SAME IS BEING ACCOUNTED FOR BY IT. THE AGREEMENT BETWEEN MPEB AND APPELLANT REFERS TO THE DEDUCTION FOR WHEELING CHARGE IN TERMS OF POWER UNI TS. SO CONSUMING UNIT ACCOUNTS FOR ACTUAL UNITS CONSUME D BY IT AND GETS SET OFF TO THE EXTENT UNITS FED INTO GR ID AS REDUCED BY THE UNITS IN THE SHAPE OF WHEELING CHARG ES. SO THE ACTUAL SALE OR TRANSFER OF POWER UNITS BY THE GENERATING UNIT GETS REDUCED TO THAT EXTENT AND DISADVANTAGE OR LOSS HAS TO BE BORNE BY IT. (C) THE ACTUAL FIGURES OF CONSUMPTION BY THE CONSUMING/MANUFACTURING UNITS OUT OF THE UNITS GENERATED BY THE GENERATING UNITS WERE NOT AVAILABL E BUT IT WAS EXPLAINED THAT ENTIRE BILLING FOR POWER TRAN SMITTED THROUGH GRID BY THE GENERATING UNITS & THE EXCESS O F POWER CONSUMED OVER AND ABOVE SUPPLIED BY THE GENERATING UNITS WAS PAID BY THE CONSUMING UNITS. AS PER THE AGREEMENT DATED 25.08.99 BETWEEN THE APPELL ANT & MPEB TO ESTABLISH & OPERATE CAPTIVE POWER PLANT W ITH A TOTAL CAPACITY OF 12.8 MW (AT BORAI DISTRICT DUR G) CLAUSE 8(A) & 8(B) OF THE DEED RELATING TO WHEELING & RENTAL CHARGES READ AS UNDER :- (A) WHEELING CHARGES : IN CASE THE COMPANY WANTS TO SUPPLY ITS SURPLUS P OWER TO ITS OWN UNIT AND OTHER COMPANIES BY USING THE TRANSMISSION SYSTEM OF THE BOARD THE COMPANY WILL HAVE TO PAY WHEELING CHARGES APPLICABLE FOR THE CAPTIVE POWER PLANT DEPENDING ON DISTANCE OF PREMISES OF WPC FROM 14 INTERCONNECTION POINT. THE WHEELING CHARGES APPLICA BLE ARE GIVEN BELOW :- PARTICULARS WHEELING CHARGES FOR POWER UPTO 15MW WHEELING CHARGES FOR POWER ABOVE 15 MW I) PERCENTAGE OF QUANTUM OF ELECTRICITY SUPPLY UPTO A DISTANCE OF 40 KM 7% 10% II) PERCENTAGE OF QUANTUM OF ELECTRICITY SUPPLY UPTO A DISTANCE OF 60 KM 9% 12% III ) PERCENTAGE OF QUANTUM OF ELECTRICITY SUPPLY UPTO A DISTANCE OF 100 KM 11% 15% IV) PERCENTAGE OF QUANTUM OF ELECTRICITY SUPPLY ABOVE A DISTANCE OF 100 KM 13% 17% IN CASE WHERE SUPPLY IS WHEELED TO MORE THAN ONE WP C THE SLAB RATE OF WHEELING CHARGES WILL BE CALCULATED ON THE BASIS OF TOTAL COMMITTED POWER (15 MW OR MORE THAN 15 MW) FO R EACH WHEELED POWER CONSUMER SEPARATELY DEPENDING UPON T HE ENERGY WHEELED AND THE DISTANCE. (B) RENTAL CHARGES: WITH THE PERMISSION OF THE BOARD IN CASE THE COMPAN Y FEEDS ELECTRICITY INTO THE POWER SYSTEM OF THE BOARD THRO UGH EXISTING FEEDER THE BOARD SHALL LEVY AN ADDITIONAL RENTAL C HARGE OF 2% PER MONTH OF THE COST OF FEEDER FROM CAPTIVE POWER PLANT TO BOARDS GRID SUBSTATION TILL SUCH TIME THAT AN INDE PENDENT FEEDER FROM POWER PLANT TO SUB-STATION IS CONSTRUCT ED AS PER SPECIFICATIONS PRESCRIBED BY THE BOARD. (D) IN THE PRESENT CASE (FOR POWER DIVISION DURG) THE CAPACITY WAS 12.5 MW. THE DISTANCE WAS MORE THAN 10 0 KM BETWEEN GENERATING UNIT AT DURG & CONSUMING UNIT AT MANDIDEEP. SO 13% OF THE UNITS SUPPLIED WERE TO BE DEDUCTED I.E. FOR EACH 100 UNITS FED IN GRID BY THE GENERATING UNIT THE CONSUMING UNIT AT MANDIDEEP GO T 15 CREDIT OF 87 UNITS ONLY. AFTER ACCEPTING THAT MARK ET VALUE OF POWER UNITS MAY BE TAKEN AT RS. 3.81 AS CHARGED BY MPEB LIKE OTHER INDUSTRIAL CONSUMERS THE QUESTION IS WHETHER THE UNITS FOR WHICH THE CREDIT WAS NOT AVAI LABLE TO THE CONSUMING UNIT HAS TO BE INCLUDED IN THE TUR NOVER OF GENERATING UNIT. (E) THE RISHABDEV POWER DIVISION AND RISHABDEV TEXTILE DIVISION WERE ADJACENT TO EACH OTHER SO THERE IS 1 00% TRANSFER OF UNITS AND THE ADOPTION OF SALE PRICE AT RS. 4.27 PER UNIT FOR SUCH UNITS WAS RIGHTLY TAKEN BY THE APPELLANT. THE ELECTRODE DIVISION AT MANDIDEEP WAS MORE THAN 100 KM AWAY FROM POWER DIVISION DURG & S O AS PER AGREEMENT OUT OF 100 POWER UNITS INTENDED FO R TRANSFER ONLY 87 POWER UNITS WERE ACTUALLY TRANSFER RED. THE SPONGE IRON DIVISION DURG IS ASSUMED TO BE LES S THAN 40 KM AWAY FROM POWER DIVISION DURG SO FAR EVERY 100 UNITS INTENDED FOR TRANSFER THE SPONGE IRON DIVISI ON GOT 93 UNITS AND IN THE ACCOUNTING SYSTEM FOLLOWED THE CONSUMING UNITS WERE REQUIRED TO PAY FOR THE UNITS WHICH WERE ACTUALLY USED BY THEM AFTER GETTING CREDIT OF UNITS AS ABOVE. SO LOGICALLY THE DIFFERENCE HAS TO BE BORNE BY THE GENERATING UNIT(S) IN THE COMPUTATION OF THEIR INCO ME. (F) THUS EFFECTIVELY THERE IS NO SALE OF UNITS ABSORBED TOWARDS WHEELING CHARGES. 14.28 IN VIEW OF DISCUSSION IN THE FOREGOING PARAGRAPHS MODIFICATION IS REQUIRED IN COMPUTATION OF 80IA DEDUCTION IN RESPECT OF POWER DIVISION DURG ONLY. SO FAR AS RISHABDEV UNIT IS CONCERNED I AGREE THAT THE AO HAS ARBITRARILY ADOPTED THE SALE PRICE AT RS.2/- PER UN IT & DEDUCTION OF RS.1 96 17 206 AS CLAIMED HAS TO BE AL LOWED. 14.29 REGARDING PROVISION OF SECTION 80IA(10) I AGREE WIT H THE LD. AR THAT IT WAS NOT RELEVANT FOR THE PRESENT CAS E & REFERENCE OF THE SAME BY THE AO IN THE ASSESSMENT O RDER WAS UNNECESSARY. 14.30 I HOWEVER DO NOT AGREE WITH THE CONTENTION THAT T HE AO WAS NOT JUSTIFIED IN DEVIATING FROM THE EARLIER STA ND. APART FROM THE FACT THAT RES-JUDICATA IS NOT APPLIC ABLE TO THE TAX PROCEEDINGS I HAVE MYSELF ASKED THE AO IN THE APPELLATE ORDER NO. CIT(A)-I/BPL/IT-59/03-04 DATED 22.01.2004 FOR A.Y. 2000-01 THAT THE QUESTION OF DETERMINATION OF MARKET VALUE FOR INTER DIVISION TR ANSFER OF POWER WAS TO BE EXAMINED IN VIEW OF PROVISIONS O F 16 SECTION 80IA(8) TO FIND OUT THE ADMISSIBLE DEDUCTIO N IN THE CASE OF APPELLANTS INDUSTRIAL UNDERTAKING. 14.31 (A) THE COMPUTATION OF ALLOWABLE DEDUCTION IN RESPE CT OF POWER DIVISION DURG WILL THEREFORE BE AS UND ER :- PARTICULARS TURNOVER AS PER APPELLANT MODI FIED TURNOVER AS PER DISCUSSION ABOVE UNITS IN KWH RATE PER UNIT AMOUNT UNITS IN KWH RATE PER UNIT AMOUNT 1.GRAPHITE DIVISION MANDIDEEP 67578064 3.81 256789886 58792916 AFTER DEDUCTING WHEELING CHARGES 13% OF UNITS) 3.81 224001010 2.MPEB 2692490 1.64 4415684 2692490 1.64 4415684 3.SPONGE IRON DIVISION DURG 6819555 3.81 25987278 6342186 (AFTER DEDUCTING WHEELING CHARGES 7% OF UNITS) 3.81 24163729 4.OTHER SALES (PREVIOUS YEARS DIFFERENCE OF MARAL OVERSEAS LTD.) - - 1830294 - - 1830294 TOTAL 289023142 - - 254410717 (B)DIFFERENCE BETWEEN APPELLANT & MODIFIED COMPUTATION OF TURNOVER = RS.34612425 (289023142 254410717) (C) SO THE APPELLANTS CLAIM OF DEDUCTION U/S 80I A WILL BE REDUCED TO THE ABOVE EXTENT. FOR RISHABDEV POWER DIVISION THE CLAIM AS STATED EARLIER WILL BE ACCEPT ED. 17 14.32 SINCE THE APPELLANT HAS CLAIMED 80IA DEDUCTIO N OF RS.197930839 (RS.178313633/- + RS.19617206/-) IN VIEW OF REDUCTION OF RS.34612425 THE ALLOWABLE CLAIM WILL BE RS.163318414. THE DISALLOWANCE WILL BE RS.34612425 . THE ASSESSING OFFICER HAS DISALLOWED RS. 182512817/- (RS.162895611 (POWER DIVISION DURG) + RS.19617206 ( POWER DIVISION RISHABDEV). THE RELIEF TO THE APPELLANT W ILL BE RS. 14 79 00 392/-. 41. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE COMPANY HAD THREE CAPTIVE POWER UNITS SITUATED AT R ISHABDEV (RAJASTHAN) TAWA AND DURG (M.P.). THE RISHABDEV U NIT IS SUPPLYING POWER TO ITS TEXTILE UNIT AT RISHABDEV. BOTH THE POWERS AND TEXTILE UNITS ARE ADJACENT AND THEREFORE THE POINT REGARDING WHEELING CHARGES HAS NOT ARISEN. IN TAWA POWER UNI T THERE WAS LOSS. SO DEDUCTION UNDER SECTION 80IA AND THAT OF WHEELIN G CHARGES HAS NOT ARISEN FOR THAT UNIT. THE POWER UNIT AT DURG H AD SUPPLIED POWER TO THE COMPANIES GRAPHITE UNIT AT MANDIDEEP AND ALS O TO ITS SPONGE IRON UNIT AT DURG AND TO THE MPEB. HE SUBMITTED THA T THE ASSESSING OFFICER WRONGLY RESTRICTED THE RATE OF SUPPLY OF PO WER TO THESE UNITS AT THE INFIRM RATE AS CHARGED FROM THE ELECTRICIT Y BOARD AT RS. 1.64 UNIT AS AGAINST RS. 3.81 CHARGED BY THE ASSESSEE ON GROSS POWER UNITS SUPPLIED BY IT TO THESE UNITS. THE LEARNED COMMISS IONER OF INCOMETAX (APPEALS) MAINTAINED THE RATE CHARGED BY THE POWER UNIT DURG AT RS. 3.81 PER UNIT. HE HAS HOWEVER REDUCE D THE UNIT SUPPLIED TO THESE UNITS I.E. MANDIDEEP AND DURG AT 13% AND 7% RESPECTIVELY TOWARDS WHEELING CHARGES/ TRANSMISSION LOSS AS PER WHEELING AGREEMENT BETWEEN MPEB AND THE ASSESSEE. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE RATES F OR SUPPLY SHOULD NOT HAVE BEEN REDUCED AND THAT WHEELING CHARGES WER E FOR CONSUMING UNITS AND NOT FOR CAPTIVE POWER UNIT IN W HICH DEDUCTION UNDER SECTION 80IA HAS BEEN CLAIMED. HE SUBMITTED THAT THE LEARNED COMMISSIONER OF INCOMETAX (APPEALS) SHOULD NOT HAVE HELD THAT THERE WAS NO SALE OF UNITS ABSORBED TOWARDS WHEELIN G CHARGES BY POWER DIVISION TO OTHER MANUFACTURING DIVISION OF T HE ASSESSEE. HE SUBMITTED THAT THE ACTUAL SALES AND TRANSFER OF POW ER UNITS WERE RECORDED BY THE POWER GENERATING DIVISION OUT OF WH ICH WHEELING CHARGES SHOULD NOT HAVE BEEN REDUCED. HE SUBMITTED THAT THE LEARNED COMMISSIONER OF INCOMETAX (APPEALS) MERELY ASSUMED WHEELING CHARGES @ 7% OF SOLD UNITS IN RESPECT OF POWER SUP PLIED BY THE POWER DIVISION DURG TO SPONGE IRON DIVISION DURG WHICH ARE SITUATED AT THE SAME PLACE. HE SUBMITTED THAT THE R ATES ADOPTED BY MPEB WERE DUE TO THE POWER CAPTIVE UNITS INSTALLED ON SUCH 18 CONDITIONS AND WERE THE RATES UNDER COMPULSION WHIC H SHOULD NOT BE EQUATED WITH THE RATES OF THE SUPPLY AS AVAILABLE IN THE OPEN MARKET. HE SUBMITTED THAT THE INFIRM POWER RATE TO MPEB IS NOT THE RATE AT WHICH POWER IS AVAILABLE IN THE OPEN MARKET. HE SUB MITTED THAT SINCE SPONGE IRON DIVISION DURG AND POWER UNIT DURG B OTH ARE SITUATED ADJACENT TO EACH OTHER AT THE SAME PLACE THEREFORE NO WHEELING CHARGES SHOULD HAVE BEEN ADJUSTED AS WAS DONE IN TH E CASE OF RISHABDEV UNIT. HE SUBMITTED THAT THIS FACT WAS AC CEPTED BY THE LEARNED COMMISSIONER OF INCOMETAX (APPEALS) IN HIS APPELLATE ORDER FOR THE ASSESSMENT YEAR 2005-06 DATED 28 TH APRIL 2008 (COPY FILED AT PB 218 268). HE SUBMITTED THAT AS REGARDS WHEEL ING CHARGES @ 13% IN CASE OF POWER UNITS SUPPLIED BY THE POWER UN IT DURG TO GRAPHITE DIVISION MANDIDEEP IT IS CLAIMED THAT AS PER THE ORDER OF THE ITAT INDORE BENCH IN THE CASE OF THE SAME ASS ESSEE FOR THE ASSESSMENT YEAR 2000-01 IN ITA NO. 231/IND/04 VIDE ORDER DATED 19 TH MARCH 2008 THE DEPARTMENTAL APPEAL WAS DISMISSED. ACCORDINGLY THE POWER UNITS ARE ENTITLED TO CHARGE POWER RATE OF RS. 4.45 UNIT AS EFFECTIVELY CHARGED BY MPEB FROM ITS C USTOMERS AND THE DETAILS ARE FILED AT PAGE 82 OF THE PAPER BOOK WHER EIN IT IS SHOWN THAT IF THE RATE CHARGED ON POWER UNITS SUPPLIED IS TAKE N AT THE RATE ACTUALLY CHARGED BY THE MPEB THERE WILL BE NO EXCE SS BILLING IN RESPECT OF THE UNITS BY THE POWER UNITS FROM THE IN DUSTRIAL UNITS. THE LEARNED COUNSEL FOR THE ASSESSEE REFERRED TO PB 79 TO 81 WHICH ARE DETAILS OF THREE UNITS AT RISHABDEV DIVISION DURG DIVISION AND SUBMITTED THAT IN THE RISHABDEV UNIT THE ASSESSEE TOOK THE RATES @ RS. 4.27 BUT THE ASSESSING OFFICER WRONGLY ADOPTED THE RATES AT RS. 2/- AND THE LEARNED COMMISSIONER OF INCOMETAX (APPE ALS) ACCEPTED THE RATES OF THE ASSESSEE BECAUSE THERE WERE NO WHE ELING CHARGES. HE SUBMITTED THAT THE SAME RATES HAVE BEEN CONFIRME D BY THE ITAT INDORE BENCH IN THE CASE IN ITA NO. 231/IND/04 (SU PRA) WHICH INCLUDES THE CIRCUMSTANCES LEADING TO CHARGING OF L ESSER RATE FROM MPEB. THE LEARNED COUNSEL FOR THE ASSESSEE REFERRE D TO PB 72 AND 73 IN WHICH FOR POWER DIVISION RISHABDEV THE RATE CHARGED WAS RS. 4.27. HE HAS ALSO REFERRED TO PB 74 WHICH IS THE BI LL OF MPEB WHICH CHARGED THE RATE OF POWER UNIT AT 4.27 FROM THE CUS TOMERS AND THE TOTAL OF THE RATES AT 4.27 PER UNIT CONSISTS OF ENE RGY CHARGES FUEL CHARGES AND ELECTRICITY DUTY. HE SUBMITTED THAT FO R DURG DIVISION FOR GRAPHITE DIVISION AND SPONGE IRON DIVISION THE ASS ESSEE CHARGED THE RATE AT 3.81% BUT THE ASSESSING OFFICER WRONGLY REDUCED THE RATE OF SUPPLY TO MPEB @ RS. 1.64. HE HAS ALSO REFERRED TO PB-82 WHICH IS THE BILL OF THE WHOLE OF THE YEAR IN WHICH THE ASSESSEE HAS GIVEN THE DETAILS OF ELECTRICITY PURCHASED FROM MPE B @ 4.45 PER UNIT AND THE SAME IS ALSO SUPPORTED BY SEVERAL BILL S OF THE MPEB. 19 HE SUBMITTED THAT THE ABOVE FACTS CLEARLY PROVED TH AT THE ASSESSEE SHOULD HAVE CHARGED RATE AT 4.45 PER UNIT BUT IT HA S CHARGED ONLY RS. 3.81 AND THAT BOOK RESULTS OF THE ASSESSEE HAVE ALR EADY BEEN ACCEPTED. THEREFORE THERE IS NO BASIS WHATSOEVER TO MAKE THE DISALLOWANCE UNDER THIS HEAD. HE RELIED UPON THE O RDER OF THE ITAT INDORE BENCH IN THE CASE OF DCIT V. BSES LIMITED; 113 TTJ 227 IN WHICH IT WAS HELD THAT FOR THE PURPOSE OF DETERMINI NG PROFIT FROM POWER GENERATION ACTIVITY OF THE ASSESSEE IT HAS B EEN AGREED THAT THE RATE CHARGED BY TATA POWER COMPANY TO THE ASSESSEE SHOULD BE TAKEN THE BASIS. HE SUBMITTED THAT ALL THE DETAILS AND CALCULATIONS ARE FILED AT PB-81(B) OF THE PAPER BOOK TO SUPPORT THIS SUBMISSION AND SUBMITTED THAT THE ITAT HAS ALREADY ACCEPTED THE RA TES AT 3.81%. THEREFORE THE WHEELING CHARGES AS CONSIDERED BY T HE AUTHORITIES BELOW WILL NOT AFFECT THE RATES OF THE ASSESSEE. HE HAS REFERRED TO PB 59 WHICH ARE THE RATES OF POWER DIVISION DURG AND THE BREAK UP OF RATE PER KW AT 3.81%. THE LEARNED COUNSEL FOR THE A SSESSEE SUBMITTED THAT THE ASSESSEE CANNOT SELL THE ELECTRI CITY IN THE MARKET AND IT HAS TO SUPPLY TO MPEB AND THEY FIX THE PRICE /MARKET RATE AND SINCE THE ASSESSEE ITSELF WAS PAYING RS.4.45 TO MPE B THEREFORE THE AUTHORITIES BELOW SHOULD NOT HAVE MADE THE DEDUCTIO N UNDER THIS HEAD. 42. ON THE OTHER HAND THE LD DEPARTMENTAL REPRESE NTATIVE RELIED UPON THE ORDER OF THE ASSESSING OFFICER AND SUBMITTED TH AT IN THE ORDER OF THE TRIBUNAL NO FINDING OF THE RATE HAS BEEN GIVEN AND THE CASE RELIED UPON THEREIN WOULD ALSO NOT SUPPORT THE CASE OF THE ASSESSEE. HE SUBMITTED THAT THE ENERGY CHARGES ARE @ 2.81% AND T HE REMAINING ARE THE OTHER CHARGES. HE SUBMITTED THAT THE ASSES SEE HAS GIVEN SEVERAL ITEMS AT PB-82 ON WHICH THERE IS NO STATEME NT HOW TO CHARGE THE RATES. HE SUBMITTED THAT THE ASSESSEE CANNOT C HARGE MORE THAN WHAT MPEB HAS CHARGED AT RS. 2.59 UNIT (PB-73). TH E LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ASSE SSEE CHARGED NOTIONAL AMOUNT FROM OTHER UNITS THEREFORE THE AC CEPTANCE OF BOOKS OF ACCOUNTS WOULD BE OF NO CONSEQUENCE. THE ASSESSE E IS NOT AN ELECTRICITY GENERATING COMPANY. THEREFORE WHEELIN G CHARGES WERE RIGHTLY DEDUCTED BY THE LEARNED COMMISSIONER OF INC OMETAX (APPEALS) FOR THE PURPOSE OF COMPUTATION OF DEDUCTI ON UNDER SECTION 80IA OF THE ACT. HE SUBMITTED THAT MPEB CHARGES ON THE BASIS OF ACTUAL CONSUMPTION. THEREFORE THE AUTHORITIES BEL OW HAVE RIGHTLY DEDUCTED THE WHEELING CHARGES. 43. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND TH E MATERIAL AVAILABLE ON RECORD. IT IS NOT IN DISPUTE THAT IN THE PRECEDI NG ASSESSMENT YEAR 2000-01 THE ITAT INDORE BENCH IN THE CASE OF THE SAME ASSESSEE WHILE CONSIDERING THE DEPARTMENTAL APPEAL IN ITA NO . 231/IND/04 FOR 20 THE ASSESSMENT YEAR 2000-01 VIDE ORDER DATED 19 TH MARCH 2008 DISMISSED THE DEPARTMENTAL APPEAL ON THE IDENTICAL ISSUE. THE FINDINGS OF THE LEARNED COMMISSIONER OF INCOMETAX ( APPEALS) SUBMISSIONS OF THE PARTIES AND THE FINDINGS OF THE TRIBUNAL ARE REPRODUCED AS UNDER :- 40. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE MATERIAL ON RECORD ALLOWED THE CLAIM OF THE ASSESSEE UNDER SECTION 80IA IN RESPECT OF THE POWER PLANTS. THE FINDINGS OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IN PARAS 15.23 TO 15.32 ARE REPRODUCED AS UNDER :- 15.23 (I) I HAVE CAREFULLY CONSIDERED THE SUBMISSI ONS MADE BY THE LD. AR. THE AO AS CAN BE SEEN FROM THE ORDER HAD UNILATERALLY DISALLOWED THE CLAIM OF DEDU CTION U/S 80IA WITHOUT POINTING OUT WHICH OF THE CONDITI ONS FOR CLAIM IS NOT FULFILLED AND WITHOUT INCORPORATING TH E SUBMISSIONS OF THE APPELLANT. THE POWER PLANTS AS CAN BE SEEN WERE INDUSTRIAL UNDERTAKINGS ON STAND ALONE BA SIS AND THE POWER WAS CONSUMED BY THE MANUFACTURING UNITS. SEC. 80IA DID NOT PRESCRIBE ANY BAR ON CAPTI VE CONSUMPTION OF POWER. IT HAS ALSO NOT BEEN DISPUTE D THAT SEPARATE BOOKS OF ACCOUNTS WHICH WERE DULY AUDITED WERE KEPT IN RESPECT OF EACH OF THE POWER PLANTS. VARIOU S JUDICIAL PRONOUNCEMENTS VIZ. (I) CIT V. STANDARD MO TORS PRODUCTS OF INDIA LTD. (1981) 131 ITR 300 (MAD.) (I I) AHMEDABAD MFG. & CALICO (P) LTD. V. CIT (1986) 162 ITR 800 (GUJRAT) AND (III) CIT V. DALMIA DADRI CEME NT LTD.; 180 CTR 486 (DELHI) SUPPORT THE APPELLANTS CONTENTION ABOUT ADMISSIBILITY OF CLAIM OF DEDUCTIO N U/S 80I DESPITE CAPTIVE CONSUMPTION OF ELECTRICITY GENE RATED BY ITS MANUFACTURING UNITS. THE FACT THAT IN THE PRECEDING A.Y. 99-2000 CLAIM OF DEDUCTION U/S 80IA WAS ALLOWED WEIGHS IN FAVOUR OF THE APPELLANT. PROVISI ON U/S 80IA(8) AND (10) OF THE INCOMETAX ACT 1961 TAKES C ARE OF A SITUATION WHEN GOODS/SERVIES OF THE ELIGIBLE BUSI NESS WERE TRANSFERRED BY THE ASSESSEE TO ITS OTHER BUSIN ESS AND THUS CAPTIVE PRODUCTION AND CONSUMPTION IS RECOGNIS ED. (II) I HOWEVER DO NOT AGREE WITH THE LD. ARS CONTENTION THAT ELIMINATION OF INTER DIVISIONAL TURNOVER WHILE CLAIMING DEDUCTION U/S 80HHC WAS NOT IN CONFLICT WITH CLAIM OF DEDUCTION U/S 80-IA. ACCORDING TO ME 21 SECTION 80HHC REFERRED TO PROFIT OF THE BUSINESS WHICH MAY CONSIST OF ONE OR MORE ACTIVITIES UNITS A ND ANY TURNOVER OF THE UNIT HAVING ELEMENT OF PROFIT W AS TO BE TAKEN INTO ACCOUNT WHILE COMPUTING THE TOTAL TURNOVER. THIS ISSUE HAS BEEN DISCUSSED LATER IN S UB GROUND NO. 11.6 15.24 AT THE APPELLATE STAGE THE APPELLANT WAS ALSO ASKED TO FURNISH THE DETAILS OF POWER GENERATED AND SUPPLIED BY THE CAPTIVE POWER PLANTS TO THE GRAPHITE/SPONGE IRON UNITS AND TO JUSTIFY THAT THE RATE AT WHICH POWER IS SUPPLIED/CHARGED TO SAID UNITS CORRESPONDED TO THE MARKET VALUE AND ALSO THE EXPLANATION FOR RELATIVELY HIGH PROFIT EVEN THOUGH THE ELECTRICITY BOARDS WERE SUFFERING HUGE LOSSES. BASIS OF COMPUTATION OF PROFIT I.E. COST OF INPUTS AND OUTPUT WAS SOUGHT. THE TURNOVER WAS EXPLAINED BY THE LD. AR VIDE COMMUNICATED DATED 26.12.2003. 15.25 IT WAS SUBMITTED THAT POWER WAS SOLD BY DURG PLANT & GRAPHITE AND SPONGE IRON DIVISION @ RS.3.81 PER UNIT. TOTAL UNITS GENERATED WERE 82049600 OUT OF WHICH 69435288 UNITS WERE SOLD AS UNDER :- PARTICULARS TOTAL UNITS SOLD IN KWH RATE PER UNIT GROSS TURNOVER (RS.) (I) TO GRAPHITE DIVISION MANDIDEEP 30 001 995 3.81 114 235 080 (II) TO MARAL OVERSEAS LTD. 5 172 760 3.16 16 353 596 (III) TO MPEB 27 195 238 1.62 44 077 024 (IV) TO SPONGE IRON DIVISION DURG 7 065 295 3.81 26 923 721 TOTAL 69 435 288 201 589 421 15.26 POWER WAS SOLD BY TAWA PLANT TO GRAPHITE DIVISION @ RS.3.96 PER UNIT (INCLUDING DEMAND 22 CHARGE OF RS.0.14 PER UNIT) AND TOTAL UNITS GENERATED AND SOLD WERE 84422750 AND 79737180 RESPECTIVELY (DIFFERENCE BEING AUXILIARY CONSUMPTION) AND DETAILS OF TURNOVER WERE AS UNDER :- PARTICULARS TOTAL UNITS SOLD IN KWH RATE PER UNIT GROSS TURNOVER (RS.) (I) TO GRAPHITE DIVISION MANDIDEEP 75 909 177 3.96 300 565 280 (II) TO MPEB 3 828 003 1.64 6 277 924 TOTAL 79 737 180 306 843 204 15.27 TARIFF STANDARD/COST OF POWER PURCHASED FROM MPEB WAS ALSO SUBMITTED IN SUPPORT OF MARKET PRICE. 15.28 POWER WAS SOLD BY RISHAVDEV POWER PLANT TO TEXTILE DIVISION @ RS. 3.74 PER UNIT AND TARIFF STRUCTURE O F POWER PURCHASED FROM RSEB WAS ALSO FURNISHED. THE GENERATION AND SALES OF UNITS WERE 28131631 AND TURNOVER WAS EXPLAINED AS UNDER : PARTICULARS TOTAL UNITS SOLD IN KWH RATE PER UNIT GROSS TURNOVER (RS.) (I) TO TEXTILE DIVISION RISHABDEV 28 131 631 3.74 105 121 712 (II) SALE OF PROCESS WASTE (SLUDGE OF FURNACE OIL) -- -- 316 219 TOTAL 28 131 631 105 437 931 15.29 REGARDING LOSS TO STATE ELECTRICITY BOARD IT WAS SUBMITTED THAT THE FACTORS RESPONSIBLE WERE HUGE 23 TRANSMISSION LOSS AND TARIFF STRUCTURE DEPENDING UPON POLITICAL COMPULSIONS/WELFARE MEASURES FREE ELECTRICITY TO GOVERNMENT FOR STREET LIGHTS INEFFICIENCY ILLEGAL CONSUMPTION ETC. 15.30 THE COMPUTATION OF PROFIT OF THE POWER PLANTS HAS NOT BEEN EXAMINED BY THE AO THOUGH IT IS SEEN THAT AS COMPARED TO TOTAL TURNOVER THE PROFIT MARGIN (I.E. THE DEDUCTION CLAIMED U/S 80-IA )IS VERY HIGH AND THE SAME COULD HAVE BEEN SCRUTINIZED U/S 80-IA(10). AT THE APPELLATE STAGE THE ISSUE INVOLVED IS WHETHER THE AO WAS JUSTIFIED IN CONCLUDING THAT QUESTION OF PROFIT IN CONSUMPTION OF ELECTRICITY FROM LEARNED COMMISSIONER OF INCOME TAX (APPEALS) CAPTIVE POWER PLANTS DID NOT ARISE. IN VIEW OF THE DETAILED SUBMISSIONS OF THE LD. AR DISCUSSED IN THE PRECEDING PARAGRAPHS THE ANSWER IS IN NEGATIVE I.E. IN FAVOUR OF THE APPELLANT. THE QUESTION OF EXTENT OF PROFIT FOR WAN T OF BASIS & EXAMINATION BY THE AO CANNOT BE ANSWERED & THE PROFIT DISCLOSED HAS TO BE ACCEPTED. 15.31 SO I HOLD THAT THE AO WAS NOT JUSTIFIED IN DENYIN G THE CLAIM OF DEDUCTION U/S 80-IA IN RESPECT OF POWER PLANTS. 15.32 GROUND NO. 10 IS ALLOWED. 41. THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE ORDER OF THE ASSESSING OFFICER. 42. ON THE OTHER HAND THE LEARNED COUNSEL FOR T HE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORIT IES BELOW AND RELIED UPON THE DECISION OF THE ITAT DELHI BEN CH IN THE CASE OF ADDITIONAL CIT V. JINDAL STEEL & POWER LIMI TED; 16 SOT 509 AND SUBMITTED THAT ON THE IDENTICAL FACTS THE CLAIM OF THE ASSESSEE WAS ALLOWED BY THE TRIBUNAL IN WHICH T HE TRIBUNAL HELD: FROM THE AFORESAID AN ANALOGY THAT CAN BE SAFELY DEDUCTED IS THAT THE MARKET VALUE CANNOT BE THE RES ULT OF A TRANSACTION WHICH HAS BEEN ENTERED INTO BETWEEN A BUYER AND A SELLER IN A SITUATION WHERE ONE OF THE PARTIES IS CARRYING THE COMPULSIVE MANDATE OF THE LEGISLATU RE. THE SITUATION BEFORE US IS SUCH WHEREIN THE AFORES AID ANALOGY CAN BE USEFULLY APPLIED. AS WE HAVE SEEN EARLIER THE PRICE AT WHICH THE POWER IS SUPPLIED BY THE ASSESSEE TO THE BOARD IS DETERMINED ENTIRELY BY THE BOARD 24 IN TERMS OF THE STATUTORY REGULATIONS. SUCH A PRIC E CANNOT BE EQUATED WITH THE MARKET VALUE AS UNDERST OOD FOR THE PURPOSES OF SECTION 80-IA OF (8) OF THE ACT . THE STAND OF THE REVENUE TO THE AFORESAID EFFECT CANNO T BE APPROVED. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THOUGH THE CASE OF THE ASSESSEE IS SQUARELY COVERED BY THE ABO VE DECISION BUT ALSO RELIED UPON OTHER DECISIONS IN THE CASE OF ADDL.CIT V. DELHI PRESS PATRA PRAKASHAN; 103 TTJ 578 IN WHICH I T WAS HELD DEDUCTION UNDER S. 80-IA COULD NOT BE REDUCED BY A O BY RECOURSE TO SUB-S. (10) THEREOF MERELY BECAUSE THE PROFIT RATE OF ELIGIBLE UNIT WAS SUBSTANTIALLY HIGHER THA N OVERALL RATE OF PROFIT OF OTHER UNITS OF ASSESSEE MORESO W HEN SEPARATE BOOKS WERE MAINTAINED BY ASSESSEE IN RESPECT OF ITS ELIGIBLE UNIT AND NO DEFECTS WERE FOUND BY AO IN THE BOOKS. THE LEARNED COUNSEL FOR THE ASSESSEE RELIED UPON TH E ORDER OF THE ITAT MUMBAI BENCH IN THE CASE OF MIH IR ENGINEERS LIMITED; 112 TTJ 940 AND THE ORDER OF THE ITAT MUMBAI BENCH IN THE CASE OF WEST COAST PAPER MILLS LIMITED V. ACIT; 286 ITR (AT) 252. HE ALSO RELIED UPON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF TEXTILE MA CHINERY CORPORATION LIMITED V. CIT; 107 ITR 95 IN WHICH IT WAS HELD THAT IF AN UNDERTAKING IS NOT FORMED BY THE RECONST RUCTION OF THE OLD BUSINESS THAT UNDERTAKING WILL NOT BE DENI ED THE BENEFIT OF SECTION 15-C MERELY BECAUSE IT GOES TO EXPAND TH E GENERAL BUSINESS OF THE ASSESSEE IN SOME DIRECTION. 43. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND THE MATERIAL AVAILABLE ON RECORD. THE SUBMISSIONS OF TH E LEARNED COUNSEL FOR THE ASSESSEE ARE NOT REBUTTED BY ANY MA TERIAL ON RECORD. SIMILARLY THE FINDINGS OF THE LEARNED COMM ISSIONER OF INCOME TAX (APPEALS) ARE NOT REBUTTED BY ANY MATERI AL ON RECORD. THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) HAS TAKEN INTO CONSIDERATION ALL THE RELEVANT FACTS AND THE MATERIAL ON RECORD AND CAME TO THE JUST FINDING IN THE MATTE R THAT THE RATES OF MPEB CANNOT BE EQUATED WITH OTHER RATES AS EXPLAINED BY THE ASSESSEE BECAUSE THERE ARE CERTAIN FACTORS W HICH ARE RESPONSIBLE FOR LOW COST IN RESPECT OF CONSUMPTION OF ELECTRICITY. THE SAME POINT IS DECIDED BY THE ITAT DELHI BENCH IN THE CASE OF JINDAL STEEL & POWER LIMITED (SUPRA). IT I S ALSO AN ADMITTED FACT THAT IN THE EARLIER YEAR THE CLAIM OF THE ASSESSEE 25 HAS BEEN ALLOWED BY THE ASSESSING OFFICER HIMSELF G RANTING THE DEDUCTION UNDER SECTION 80IA IN RESPECT OF SAME POW ER PLANTS FOR THE ASSESSMENT YEAR 1999-00. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE MAINTAINED SEPARATE BOOKS OF ACCOUNTS FOR EACH POWER PLANT WHICH ARE ALSO AUDITED. IT IS ALSO NO T IN DISPUTE THAT THE POWER PLANTS ARE INDUSTRIAL UNDERTAKINGS. THESE FACTS ARE SUFFICIENT TO HOLD THAT THE ASSESSEE WAS ENTITL ED TO DEDUCTION UNDER SECTION 80IA OF THE ACT. THE LEARNED DEPARTM ENTAL REPRESENTATIVE MERELY RELIED UPON THE ORDER OF THE ASSESSING OFFICER AND DID NOT BRING ANY MATERIAL ON RECORD TO CONTRADICT THE FINDINGS OF THE LEARNED COMMISSIONER OF INCOMET AX (APPEALS). CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE NOTED ABOVE WE DO NOT FIND ANY INFIRMITY IN THE OR DER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS). WE C ONFIRM HIS FINDINGS AND DISMISS THIS GROUND OF APPEAL OF T HE REVENUE. 44. THERE IS NO DISPUTE THAT RISHABDEV POWER DIVISION I S ADJACENT TO RISHABDEV TEXTILE DIVISION IN WHICH THE ASSESSEE CH ARGED THE RATES AT RS.4.27 PER UNIT. THE ABOVE FACT IS ALSO SUPPORTED BY THE DETAILS FILED AT PB 72 AND 73 OF THE PAPER BOOK. THE MPEB WAS ALS O CHARGING THE POWER RATES @ 4.27 FROM ITS CUSTOMERS. THE DETAILS OF THE SAME ARE FILED AT PAGE 73 OF THE PAPER BOOK WHICH IS SUPPORT ED BY SEVERAL BILLS. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBM ITTED THAT THE ENERGY CHARGES WERE ONLY RS. 2.59 AND REST WERE OTH ER CHARGES. THEREFORE RS.4.27 SHOULD NOT HAVE BEEN ACCEPTED. WE DO NOT FIND ANY MERIT IN THE CONTENTION OF THE LEARNED DEPARTME NTAL REPRESENTATIVE BECAUSE THE POWER CHARGES ARE THE BA SIC CHARGES AND THE ELECTRICITY BOARD MADE FURTHER CHARGES LIKE FUE L SURCHARGE AND ELECTRICITY DUTY WHICH ARE PART AND PARCEL OF BILL OF THE ELECTRICITY AND THE DETAILS OF POWER TARIFF SHOW THAT THE ACTUAL AM OUNT CHARGED BY MPEB WAS RS. 4.27 PER UNIT. THE ENTIRE CHARGES RECE IVED BY MPEB THUS CANNOT BE REDUCED WITHOUT ANY JUSTIFICATION. I TAT INDORE BENCH IN THE CASE OF THE ASSESSEE HAS CONSIDERED T HE IDENTICAL ISSUE IN WHICH THE LEARNED COMMISSIONER OF INCOMETAX (APP EALS) ACCEPTED THE RATES OF SALE OF POWER UNITS TO GRAPHITE DIVISI ON MANDIDEEP AT RS. 3.81 TO SPONGE IRON DIVISION DURG AT RS. 3.8 1 PER UNIT. THE REASONS FOR CHARGING LESSER AMOUNT FROM MPEB ARE AL SO CONSIDERED AND ULTIMATELY THE FINDINGS OF THE LEARNED COMMISSI ONER OF INCOMETAX (APPEALS) HAVE BEEN AFFIRMED AND THE DEPA RTMENTAL APPEAL HAS BEEN DISMISSED. THEREFORE TO THAT EXT ENT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 45. THE ONLY POINT LEFT FOR CONSIDERATION IS THAT OF WH EELING CHARGES. THE LEARNED COMMISSIONER OF INCOMETAX (APPEALS) CON SIDERED THAT THE POWER DIVISION DURG IS SITUATED AT 100 KMS FR OM ELECTRODE 26 DIVISION AT MANDIDEEP AND ACCORDINGLY REDUCED 13% A S PER THE AGREEMENT BETWEEN MPEB AND THE ASSESSEE ON ACCOUNT OF WHEELING CHARGES. THE AUTHORITIES BELOW HAVE NOT CONSIDERED THE FACT THAT THE RATES FOR SUPPLY OF POWER UNITS SHALL HAVE TO BE CO NSIDERED IN THE CASE OF POWER DIVISION WHICH IS SUPPLYING THE ELECT RICITY. THE WHEELING CHARGES ARE FOR THE CONSUMING UNITS. THE INFIRM POWER RATES TO MPEB ARE NOT THE RATES AT WHICH POWER IS A VAILABLE IN THE OPEN MARKET. THE LEARNED COUNSEL FOR THE ASSESSEE HAS DEMONSTRATED THROUGH VARIOUS DOCUMENTS ON RECORD THAT EVEN THE A SSESSEE PURCHASED THE ELECTRICITY FROM MPEB BY PAYING RS. 4 .45 PER UNIT (PB-82). THE MPEB WAS ALSO CHARGING FROM ITS CUSTO MERS THE POWER RATES AT RS. 4.27 WHICH IS SUPPORTED BY THE S EVERAL BILLS. HOWEVER THE ASSESSEE WAS ONLY CHARGING RS. 3.81 F ROM GRAPHITE DIVISION MANDIDEEP SPONGE IRON DIVISION DURG AN D THESE RATES HAVE ALREADY BEEN AFFIRMED BY THE TRIBUNAL IN THE P RECEDING ASSESSMENT YEAR. THEREFORE EVEN THOUGH THE WHEELI NG CHARGES SHOULD NOT BE CONSIDERED IN THE CASE OF POWER SUPPL YING UNITS YET THE RATES ADOPTED BY THE ASSESSEE WERE MORE THAN RE ASONABLE EVEN IF TAKING INTO CONSIDERATION THE WHEELING CHARGES AS C OMPARED TO THE RATES CHARGED BY MPEB. THE LEARNED COUNSEL FOR THE ASSESSEE IS THEREFORE JUSTIFIED IN CONTENDING THAT EVEN THE WH EELING CHARGES WOULD NOT AFFECT THE RATES CHARGED BY THE ASSESSEE AT RS. 3.81. WE MAY ALSO ADD HERE THAT THE AUTHORITIES BELOW WITHOU T BRINGING ANY MATERIAL ON RECORD AS TO HOW WHEELING CHARGES COULD BE JUSTIFIABLY REDUCED FROM THE RATES CHARGED BY THE ASSESSEE HAV E MERELY CONSIDERED THAT SINCE THE DISTANCE WAS 100 KM FROM DURG TO MANDIDEEP THEREFORE 13% SHOULD HAVE BEEN REDUCED/ DEDUCTED. THE AUTHORITIES BELOW HAVE WRONGLY REDUCED 7% AS WH EELING CHARGES IN RESPECT OF SPONGE UNIT DURG BY ASSUMIN G ITS DISTANCE AS LESS THAN 40 KM FROM DURG CAPTIVE POWER DIVISION. T HE SPONGE IRON UNIT DURG AND CAPTIVE POWER DIVISION DURG ARE SI TUATED AT THE SAME PLACE. THEREFORE LIKE IN THE CASE OF RISHABDEV PO WER DIVISION THERE MAY NOT BE ANY JUSTIFICATION FOR DEDUCTING THE WHEE LING CHARGES BECAUSE THE TRANSMISSION LOSSES COULD NOT BE ON SUC H AMOUNT BECAUSE BOTH THE UNITS WERE SITUATED AT THE SAME PL ACE. THE AUTHORITIES BELOW HAVE NOT BROUGHT ANY MATERIAL ON RECORD TO JUSTIFY THEIR FINDINGS WHETHER THERE WAS ANY WHEELING/ TRAN SMISSION LOSS SUFFERED ON THAT COUNT. THE LEARNED COUNSEL FOR THE ASSESSEE ON THE BASIS OF THE MATERIAL ON RECORD HAS RIGHTLY POINTED OUT THAT SINCE THE ASSESSEE WAS PAYING RS.4.45 PER UNIT TO MPEB AND TH E MPEB IS ALSO CHARGING THE SAME RATE FROM ITS CUSTOMERS THEREFOR E THE RATE CHARGED BY THE ASSESSEE AT RS.3.81 WAS THE REASONABLE RATE AND EVEN IF THE WHEELING CHARGES MAY BE TAKEN INTO CONSIDERATION WO ULD NOT AFFECT 27 THE RATES CHARGED BY THE ASSESSEE. THE LEARNED COU NSEL FOR THE ASSESSEE ALSO POINTED OUT THAT THE LEARNED COMMISSI ONER OF INCOMETAX (APPEALS) ACCEPTED IN HIS APPELLATE ORDER FOR THE ASSESSMENT YEAR 2005-06 (SUPRA) THAT THE SPONGE IRO N DIVISION DURG AND POWER UNIT DURG ARE SITUATED ADJACENT TO EACH OTHER AND THEREFORE NO WHEELING CHARGES SHOULD HAVE BEEN DE DUCTED. THE AUTHORITIES BELOW MERELY ON ASSUMPTION OF CERTAIN F ACTS DEDUCTED THE WHEELING CHARGES WITHOUT BRINGING ANY MATERIAL ON R ECORD. THE LEARNED COUNSEL FOR THE ASSESSEE WAS THEREFORE JU STIFIED IN CONTENDING THAT INFIRM POWER RATES TO MPEB ARE NOT THE RATES AT WHICH POWER IS AVAILABLE IN THE OPEN MARKET. THERE WAS THUS NO BASIS TO CHARGE RS. 1.64 FOR POWER UNIT DURG FOR SUPPLY OF POWER TO GRAPHITE DIVISION MANDIDEEP AND SPONGE IRON DIVISI ON DURG. 46. ON CONSIDERATION OF THE ABOVE FACTS AND THE MAT ERIAL ON RECORD AND OUR EARLIER ORDER FOR THE PRECEDING ASSE SSMENT YEAR WE ARE OF THE VIEW THAT THE AUTHORITIES BELOW WERE NOT JUSTIFIED IN MAKING THE DEDUCTION OUT OF THE CLAIM UNDER SECTION 80IA OF THE ACT. THE CLAIM OF THE ASSESSEE WAS CORRECTLY ALLOWED BY THE LEARNED COMMISSIONER OF INCOMETAX (APPEALS). HOWEVER THE LD COMMISSIONER OF INCOMETAX (APPEALS) WAS NOT JUSTIFI ED IN MAKING THE DEDUCTION ON ACCOUNT OF WHEELING CHARGES. WE A CCORDINGLY SET ASIDE THE ORDER OF THE LD COMMISSIONER OF INCOMETAX (APPEALS) TO THAT EXTENT AND DELETE THE ADDITION AS RESTRICTED B Y THE LEARNED COMMISSIONER OF INCOMETAX (APPEALS). 47. AS A RESULT THE DEPARTMENTAL APPEAL FAILS AND IS DISMISSED. HOWEVER THE APPEAL OF THE ASSESSEE ON THIS ISSUE IS ALLOWED. 3. IF THE TOTALITY OF FACTS ARE ANALYSED WE HAVE F OUND THAT THE LEARNED AO HAS DISCUSSED THE ISSUE AT PAGES 6 TO 22 OF THE ASS ESSMENT ORDER (PARAS 8 TO 8.9) AND AT PAGE 21 THE RATES ADOPTED BY HIM HAVE BEEN D ISCUSSED WHICH ARE AS UNDER :- PARTICULARS POWER DIVISION DURG POWER DIVISION RISHABDEV POWER DIVISION TAWA MARKET RATE PER UNIT OF ELECTRICITY SOLD (IN RS.) (A) 1.64 3.31 1.64 28 COST PER UNIT OF ELECTRICITY GENERATED AND SOLD (IN RS.) 1.65 3.31 1.92 PROFIT PER UNIT OF ELECTRICITY SOLD (IN RS.) C=(A) (B) (-)0.01 - (-)0.28 TOTAL NO. OF UNITS SOLD D (EXCLUDING WHEELING UNITS) 73990588 29602716 42978600 TOTAL ELIGIBLE PROFIT (IN RS.) E=(C ) X (D) ** ** ** THE LEARNED CIT(A) HAS DISCUSSED THE ISSUE AT PAGE S 5 TO 20 OF HIS ORDER. THE ACTUAL BILLING BY MPEB IS AS UNDER :- PARTICULARS YTD APR-02 MAY-02 JUNE-02 JUL 02 AUG-02 SEP-02 OCT-02 NOV.-2 DEC-02 JAN-02 FEB-03 MAR-03 BILLING BY MPEB MD CHARGES 49730324 4110000 4110000 4110000 4110000 4110000 4110000 ENERGY CHARGES 412366113 33715876 35974575 34881681 43299549 29522 603 27997821 29114417 17767044 23254022 35903328 44 008824 56926373 ELECTRICITY DUTY 32990058 2697270 2878734 2790 3463964 2361808 22398 26 2329153 1421364 1860322 2872266 3520706 4554110 ENERGY DEVELOPMENT CESS 12710473 1162616 1240503 1202816 1493088 1018021 96 5442 1003945 612657 661106 857136 1080735 1412408 METER RENT PLCC PF REBATE ETC. 93008776 8990663 8718653 8804434 106755686 9022241 9444869 10172757 86210690 6815715 3734260 3932307 4 076122 NET AMOUNT 600855744 50676425 52922465 51789466 630 42287 46034673 44757958 46730272 32532134 36751489 47596990 56772572 71199013 NO. OF POWER UNITS BILLED 127104733 11626164 12405026 12028166 14930879 10180 208 9654421 10039454 6126567 6611060 8571355 108073 46 14124087 RATE PER UNIT 4.73 4.36 4.27 4.31 4 22 4.52 4.64 4. 65 5.31 5.56 5.55 5.25 5.04 NOTE : SECURITY DEPOSIT AND ARREAR DEMAND OF EARLIE R PERIOD NOT CONSIDERED THE DETAILS OF AUDITED ACCOUNTS OF THREE POWER DIVI SIONS ARE AVAILABLE AT PAGES 27 TO 58 OF THE COMPILATION AND THE SUMMARY OF ACTU AL POWER COST PAID TO MPEB ALONG WITH RELEVANT BILLS ARE AVAILABLE AT PAG ES 59 TO 83 OF THE COMPILATION WHEREAS THE ACTUAL RATES CHARGED BY MPE B ARE MENTIONED ABOVE 29 (PAGE 59 OF THE PAPER BOOK). SINCE THE ISSUE IS ALR EADY DECIDED BY THE ITAT INDORE BENCH VIDE THE AFORESAID ORDER THEREFORE T HE AO IS DIRECTED TO FOLLOW THE DIRECTIONS GIVEN THEREIN. THIS GROUND OF THE A SSESSEE IS ACCORDINGLY ALLOWED TO THE EXTENT AS MENTIONED IN THE AFORESAID ORDER. 4. THE NEXT GROUND RAISED IS THAT THE LEARNED CIT(A ) ERRED ON FACTS IN REDUCING THE LOSS ON EXPORT OF TRADING GOODS OF RS. 10 660 936 FROM THE PROFIT OF THE BUSINESS OF RS.33 578 3929 IN COMPUTATION OF AD JUSTED PROFIT WHILE COMPUTING DEDUCTION U/S 80HHC OF THE ACT. 5. ON PERUSAL OF RECORD AND AFTER CONSIDERING THE R IVAL SUBMISSIONS WE HAVE FOUND THAT THE AO HAS DISCUSSED THE ISSUE AT PAGES 22 TO 27 OF THE ASSESSMENT ORDER WHEREIN THE ASSESSEE HAS CLAIMED DEDUCTION U/ S 80-HHC AT RS 12 77 01 401/-. THE ASSESSEE CLAIMED DEDUCTION ON THE BASIS OF DECISION IN THE CASE OF IPCA LABORATORIES V. DCIT. THE LEARNED CIT( A) HAS DISCUSSED THE ISSUE AT PAGES 20 TO 33 OF THE IMPUGNED ORDER. THE LOSS O N TRADING IS CALCULATED AT RS.1 06 609 936/- (PAGE 17 OF THE COMPILATION) AND ACCEPTED BY THE LD. CIT(A). FOR THE PURPOSES OF CALCULATING ADJUSTED PROFIT F OR ALLOWANCE OF DEDUCTION U/S 80HHC FOR AN ASSESSEE WHO EXPORTS GOODS AND MERCHAN DISE MANUFACTURED BY HIM AS WELL AS TRADED BY HIM AS PER PROVISIONS OF S ECTION 80HHC. SUB-SECTION (3) (C) (I) READ WITH EXPLANATION (B) BELOW FIFTH P ROVISO TO SECTION 80HHC READS AS UNDER :- ADJUSTED PROFIT OF THE BUSINESS MEANS THE PROFIT OF BUSINESS AS REDUCED FROM THE PROFITS DERIVED FROM THE BUSIN ESS OF EXPORT 30 OUT OF INDIA AS TRADING GOODS AS COMPUTED IN THE M ANNER PROVIDED IN CLAUSE (B) OF SUB-SECTION (3). THEREFORE NOW ADJUSTED PROFIT FOR CALCULATING PR OFIT FROM EXPORT OF MANUFACTURED GOODS U/S 80HHC SUB-SECTION (3) (I) A S CALCULATED BY THE LEARNED CIT(A) IS AS UNDER :- PROFIT OF BUSINESS MINUS PROFIT OF EXPORT OF TRAD ING GOODS. 33 57 83 929 1 06 60 936 = 32 51 22 983 HOWEVER SINCE THERE IS A TRADING LOSS AND NOT TRAD ING PROFIT THEREFORE TRADING LOSS REQUIRES TO BE ADDED TO THE PROFIT OF BUSINESS TO ARRIVE AT ADJUSTED PROFIT FROM EXPORT OF MANUFACTURED GOODS AS PROVIDED ABOVE I.E. 33 57 83 929 + 1 06 60 936 = 34 64 44 865 . CONSEQUENTLY THE AO IS DIRECTED TO FOLLOW THE ABOVE CALCULATION. THIS GROUND OF THE ASSESSEE IS DISPOSED OF IN THE AFORESAID MANNER. 6. THE LAST GROUND I.E. RESTRICTING THE DEDUCTION U /S 80HHC TO 50% IN TERMS OF CLAUSE (IV) OF EXPLANATION TO SECTION 115JB OF T HE ACT WHILE COMPUTING DEEMED INCOME WAS NOT PRESSED BY THE LD. COUNSEL FO R THE ASSESSEE CONSEQUENTLY THIS GROUND IS DISMISSED AS NOT PRESS ED. THIS APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 7. NOW WE SHALL TAKE UP THE APPEAL OF THE REVENUE I N ITA NO. 211/IND/ 07 WHEREIN THE FIRST GROUND RAISED IS THAT ON THE FACT S AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED COMMISSIONER OF INCOME-TAX (A PPEALS) ERRED IN DELETING THE ADDITION OF RS.1 32 22 329/- MADE ON ACCOUNT OF DEDUCTION CLAIMED FOR 31 PROVISION OF GRATUITY BY HOLDING THAT ASSESSEE HAD THE RELEVANT ACTUARIAL CERTIFICATE REGARDING THE GRATUITY LIABILITY ISSUED BY THE COMPETENT AUTHORITY PARTICULARLY THE DEPARTMENT HAS NOT ACCEPTED THE DE CISION ON THE ISSUE IN EARLIER ASSESSMENT YEARS AND THE APPEAL HAS BEEN FILED BEFO RE THE TRIBUNAL. AT THE OUTSET IT WAS CLAIMED THAT THIS ISSUE IS COVERED AGAINST T HE REVENUE BY THE ORDER OF THE TRIBUNAL DATED 23.1.2009 (ASSESSMENT YEAR 2002-03). THIS FACTUAL MATRIX WAS CONSENTED TO BE CORRECT. THEREFORE WE ARE REPRODU CING HEREUNDER THE RELEVANT PORTION AS CONTAINED IN PARA 16 AND 17 OF THE SAID ORDER :- 16. THE SECOND GROUND OF APPEAL IS THAT THE LD. CI T(A) HAS ERRED IN DELETING THE ADDITION ON ACCOUNT OF GR ATUITY AMOUNTING TO RS.1 38 58 884/-. 17. THE LEARNED COUNSEL FOR THE ASSESSEE AT THE OUT SET SUBMITTED THAT THIS ISSUE IS ALSO CONSIDERED BY THE ITAT INDORE BENCH IN THE CASE OF THE SAME ASSESSEE IN TH E ASSESSMENT YEAR 2000-01 IN ITA NO. 231/IND/2004 AND THE DEPARTMENTAL APPEAL ON THE SAME ISSUE HAS BEEN DISM ISSED VIDE ORDER DATED 19 TH MARCH 2008. THE LEARNED DEPARTMENTAL REPRESENTATIVE DID NOT DISPUTE THE ABO VE FACT. THE ABOVE DECISION HAS ALSO BEEN FOLLOWED IN THE AS SESSMENT YEAR 2001-02. IT IS THEREFORE CLEAR THAT THIS ISS UE IS COVERED BY THE ORDER OF THE TRIBUNAL IN FAVOUR OF THE ASSES SEE. THEREFORE THIS GROUND OF APPEAL IS DISMISSED. IN THE LIGHT OF THE ABOVE AND THE ARGUMENTS ADVANC ED BY THE RESPECTIVE COUNSELS AND ESPECIALLY ACCEPTANCE OF THE LEARNED D R THAT IT IS COVERED BY THE AFORESAID ORDER OF THE TRIBUNAL THIS GROUND OF THE REVENUE IS DISMISSED. 8. THE NEXT GROUND PERTAINS TO ALLOWING DEDUCTION U /S 80IA OF THE ACT AT RS.23 64 52 902/- IN RESPECT OF ELIGIBLE POWER DIVI SION OUT OF TOTAL DISALLOWANCE OF RS.28 93 53 389/- IN RESPECT OF THREE POWER DIVI SIONS. AT THE OUTSET IT WAS 32 CLAIMED THAT THIS ISSUE IS ALSO COVERED BY THE ORDE R OF THE TRIBUNAL DATED 23.1.2009 (ASSESSMENT YEAR 2002-03). THIS FACTUAL M ATRIX WAS ALSO CONSENTED TO BE CORRECT BY THE LEARNED COUNSEL FOR THE REVENUE. 9. WE HAVE FOUND THAT THE TRIBUNAL VIDE ORDER DATED 23.1.2009 HAS FOLLOWED THE DECISION IN THE OWN CASE OF THE ASSESSEE (ITA N OS. 149 AND 243/IND/2005) AS QUOTED ABOVE CONSEQUENTLY THERE IS NO MERIT IN THE STAND OF THE REVENUE. 10. THE NEXT GROUND PERTAINS TO ALLOWING DEDUCTION U/S 80HHC AMOUNTING TO RS.7 68 55 948/- OUT OF NIL DEDUCTION ALLOWED BY TH E AO. AT THE OUTSET IT WAS CLAIMED THAT THE LEARNED CIT(A) IS CORRECT. IT WAS ALSO CLAIMED THAT THIS ISSUE IS COVERED BY THE DECISION IN THE CASE OF DCIT V. PREM IER PROTEINS LIMITED (ITA NO. 223/IND/97) A COPY OF WHICH IS PLACED ON RECOR D. IN VIEW OF THE ABOVE WE ARE REPRODUCING HEREUNDER THE RELEVANT PORTION OF T HE AFORESAID ORDER :- 17. THE FACTS IN BRIEF ARE THAT WHILE COMPUTING DEDUCTION U/S 80HH & 80I THE AO CONSIDERED LOSS ON ACCOUNT OF EXPORT OF TRADING GOODS AT RS. 36 82 91 0/-. THE ASSESSEE IN APPEAL BEFORE THE LD. CIT(A) SUBMITTED THAT WHEN DEDUCTION UNDER THIS HEAD WAS NOT ALLOWABLE ON TRADING PROFIT HENCE LIKEWISE TRADING LOSS HAD TO BE ADDED TO BUSINESS INCOME TO CORRECTLY WORK OUT THE PROFITS OF ELIGIBLE INDUSTRI AL UNDERTAKING. THE ASSESSEE ALSO PLACE RELIANCE ON T HE DECISION OF THE TRIBUNAL IN THE CASE OF DCIT V. M/ S STEEL INGOTS PVT. LTD. THE LD. CIT(A) ACCORDINGLY DIRECTED THE AO TO IGNORE THE LOSS SUFFERED BY THE ASSESSEE ON TRADING OF EXPORTS GOODS FOR ALLOWING DEDUCTION U/S 80HH & 80-I. IN THE LIGHT OF THE ABOVE WE HAVE NOT FOUND ANY IN FIRMITY IN THE STAND OF THE LEARNED CIT(A). THE SAME IS UPHELD. 33 IN THE RESULT THE APPEAL OF THE REVENUE IS DISMIS SED. FINALLY THE APPEAL OF THE ASSESSEE IS PARTLY ALLOW ED AND THAT OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON MARCH 20 10. SD SD (V.K. GUPTA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MARCH 15 TH 2010 COPY TO: APPELLANT RESPONDENT CIT CIT(A) DR G UARD FILE *DBN/