The Addl Cit Range 5 Ahmedabad v. M S Rainbow Paper Limited Ahmedabad

In The Income Tax Appellate Tribunal Ahmedabad B Bench Before Shri N K Billaiya Accountant Member Shri S S Godara Judicial Member Ita No 933 1368 Ahd 2015 Assessment Year 2011 12 M S Rainbow Papers Ltd 801 Avdhesh House Opp Shri Guru Gobind Gurudwara S G Highway Ahmedabad Additional Commissioner Of Income Tax Range 5 Ahmedabad V S V S Additional Commissioner Of Income Tax Range 5 Ahmedabad M S Rainbow Papers Ltd 801 Avdhesh House Opp Shri Guru Gobind Gurudwara S G Highway Ahmedabad Appellant Respondent Pan Aaacr 5415 K Appellant By Shri Sulabh Padshah Ar Respondent By Shri S K Dev Cit D R Order Date Of Hearing 12 12 201 7 Date Of Pronouncement 13 12 2017 Ita No 933 1368 Ahd 2015 A Y 2011 12 2 Per N K Billaiya Accountant Member 1 Ita Nos 933 1368 Ahd 2015 Are Cross Appeals By T He Assessee And The Revenue Preferred Against The Order Of The Ld Cit A 9 Ahmedabad Dated 27 02 2015 Pertaining To A Y 2011 12 2 Since Both These Appeals Were Heard Together They Are Disposed Of By This Common Order For The Sake Of Convenience And Brevit Y We Will First Take Up Ita No 933 Ahd 2015 Assessee S Appeal 3 The Assessee Has Raised Two Substantive Grounds Of Appeal Ground No 1 Relates To The Disallowance Of Depreciation On The Ground That The Purchase Of Honeywell Measurex Computer Machines Is A Paper Tra Nsaction And Ground No 2 Relates To The Disallowance Of The Claim Of Deduc Tion U S 80 Ia Of The Act 4 At The Very Outset The Ld Counsel For The Assesse E Stated That The Issues Are Squarely Covered In Favour Of The Assessee And Agai Nst The Revenue By The Decision Of The Tribunal In Assessees Own Case In A Y 2008 09 To A Y 2010 11 The Ld D R Fairly Conceded To This 5 We Have Given A Thoughtful Consideration To The Ord Ers Of The Authorities Below We Have Also Gone Through The Order Of The T Ribunal In Ita Nos 767 To 769 Ahd 2013 And It Ss A Nos 101 To 103 Ahd 201 3 The Relevant Finding Of The Co Ordinate Bench Reads As Under 33 Ground No 1 Of Assessees Appeal Pertains To Co Nsequential Claim Of Depreciation On Honeywell Measurex Computer Ita No 933 1368 Ahd 2015 A Y 2011 12 3 33 1 Ground No 1 Of Assessees Appeal Is Similar T O Ground No 1 Raised By Assessee In It Ss A No 102 Ahd 2013 In Ay 2009 10 Accordingly In Consonance With The Decision Taken In It Ss A No 102 Ahd 2013 Supra We Allow Ground No 1 Of Assessees Appeal Seeking Consequential Rel Ief In This Year Too Consequently Ground No 1 Of The Revenues Appeal I N Ita No 769 Ahd 2013 Is Dismissed 6 Respectfully Following The Findings Of The Co Ordin Ate Bench Ground No 1 Is Allowed 7 The Issue Raised Vide Ground No 2 Have Been Consid Ered By The Tribunal In Its Order Supra The Relevant Findings Of The Co Ordi Nate Bench Reads As Under 14 The Profit On Generation Of Power From Captive Power Plant Is Eligible For Deduction Under S 80 Ia 4 Iv Read With Section 80 I A 8 Of The Act Section 80 Ia 4 Iv Provides That Undertaking Of An Assess Ee Engaged In The Generation And Distribution Of Power Is Qualified For Claim Of Deduction In This Background The Assessee Claimed Deduction Under S 80 Ia 4 Amounting To Rs 3 51 13 522 In The Original Return Which Amoun T Was Revised To Rs 3 51 17 060 In The Return Filed Under S 153 A P Ursuant To Search The Claim Under S 80 Ia 4 Was Made Both On Account Of I Pro Fits On Deemed Sale Of Electricity To Its Manufacturing Unit As Well As I I Profit On Sale Of Residual Steam To Manufacturing Unit Towards Drying Process Ho Wever In The Course Of Appellate Proceedings Before Cit A The Claim Of D Eduction Towards Profit On Sale Of Steam Was Withdrawn Thus The Controversy Is Confined To Quantum Of Deduction Under S 80 Ia 4 From Profit Arising In Ca Ptive Power Unit Only The Ao While Examining The Claim Of Aforesaid Deduction Re Calculated The Cost Of Steam Which Is Out Of Major Components For Generation O F Power On The Basis Of Pressure And Thus Re Bifurcated The Consolidated Co St Of Rs 19 05 33 456 Between Steam And Power Cost At Rs 1 20 38 775 And Rs 17 84 94 680 Respectively Simultaneously The Sale Price Of P Ower Was Also Calculated Without Duty And Surcharge At Rs 13 12 72 088 T He Sale Price Of Steam Was Calculated At Rs 1 32 42 654 By Applying 10 Mark Up To The Cost Of Steam As A Result Of These Adjustments The Ao Found That Th Ere Is A Loss Of Rs 4 60 18 714 In The Undertaking Generating Powe R Which Is Further Subject To Allocation Of Other Indirect Expenses And Depreciat Ion Etc Thus In The Absence Of Any Eligible Profit Per Se The Claim Under S 80 I A 4 Iv Of The Act Was Denied Ita No 933 1368 Ahd 2015 A Y 2011 12 4 14 1 In The First Appeal Allocation Of Total Cost Of Rs 19 05 33 456 Was Bifurcated In The Ratio Of 52 48 Between Power And Steam At The First Stage I E About 52 Is Used For Power Generation And About 48 Of Steam Is Used For Drying In Paper Manufacturing Process The Cost Of Steam Was Thereafter Further Adjusted On The Basis Of Heat At 105 Power 66 2 Steam As Against The Proposal Of The Assessee To Allocate In The Ratio O F 705 810 14 2 The Cit A Thus Recalculated The Cost Of Ste Am In The Ratio Of 105 66 2 At Rs 7 36 75 904 And Balance Cost Of Rs 11 68 57 55 2 Was Allocated Towards Cost Of Generation Of Power The Sale Price Of Po Wer Was Modified At An Average Rate Of Rs 2 99 Per Unit At Rs 10 22 09 383 And E Ligible Profit Under S 80 Ia 4 After Making Adjustments Towards Cost And Sale Pric E Was Reworked By Cit A At Loss Of Rs 1 46 48 169 Working Placed By The Assessee As Per Paper Book As A Sequel There Being Loss In The Undertaking Ge Nerating Power The Benefit Available Under S 80 Ia 4 Was Continued To Be Denie D To The Assessee For Want Of Eligible Profits 14 3 In Short The Ao As Well As Cit A Dispute S The Cost Of Production Of Power As Well As Deemed Sale Price Of Power Per Unit 14 4 Adverting To The Issue Concerning Cost Of Power As Noted Earlier The Ao Has Allocated The Total Cost Incurred Between Cost Of Steam And Cost Of Power At Rs 1 20 38 775 And Rs 17 84 94 630 Respectivel Y The Cit A Has Reallocated The Aforesaid Cost At Rs 7 36 75 904 And Rs 11 6 8 57 552 Respectively Having Regard To The Pressure Difference As Well As Energy Needed To Produce Power And Steam The Cost Of Power Is Attributable To The De Emed Sale Value Of Power In This Regard We Observe That The Cit A Has Made Sc Ientific Analysis As Per Para 9 Of Its Order Reproduced In The Preceding Paras An D Came To The Conclusion That Ratio Of Energy Heat Usable With Corresponding Pre Ssure Would Be 105 66 2 Instead Of 810 705 We Notice That The Assesse E Had Failed To Allocate The Total Cost Of Steam Towards Eligible Business Power Ge Neration And Non Eligible Business Drying Process In Paper Unit In A Fair Manner While Determining The Eligible Profit Under S 80 Ia 4 Of The Act At The T Ime Of Return The Ao Modified The Cost Of Steam Attributable To Power At A Highe R Amount On The Basis Of Use Of Steam For Power Generation Claimed In The Ratio Of 48 Power 52 Steam And Thereafter Made Further Adjustments In The Cost Of Steam On Account Of Pressure Factor 5 42 Attributable To Use Of Residual Steam For The Purpose Of Drying Paper As Processed Steam In First Appeal The Cit A Has Further Taken Into Account The Energy Ratio As Well While Readjusting The Tota L Cost In Generating Steam And Power And Thus Granted Partial Relief Before Us The Assessee Has Disputed The Energy Ratio Adopted By Cit A For Which We Do Not Find Any Objective Reasons In Its Support Notably In The Working Filed In By P Aper Book Also The Assessee Was Broadly Accepted The Cost Allocation By Cit A T He Revenue Has Also Not Been Able To Rebut The Cost Allocation Of Steam Carried On By Cit A Thus We Adopt Ita No 933 1368 Ahd 2015 A Y 2011 12 5 The Reasonings Given By The Cit A In Arriving At I Ts Conclusion Towards Cost Allocation And Decline To Interfere Therewith 8 Respectfully Following The Findings Of The Co Ordin Ate Bench We Order Accordingly 9 In The Result The Appeal Filed By The Assessee Is Partly Allowed Now We Will Take Up Ita No 1368 Ahd 2015 Revenues Appeal 10 Ground No 1 Relates To The Issues Raised Vide Grou Nd No 1 By The Assessee In Its Appeal In Ita No 933 Ahd 2015 Supra For The Rea Sons Given Therein This Ground Is Dismissed 11 Grievance Raised Vide Ground No 2 Are Identical To The Facts Of Ground No 2 In Assessees Appeal In Ita No 933 Ahd 2015 For The Reasons Given Therein This Ground Is Partly Allowed 12 In The Result The Appeal Filed By The Revenue Is P Artly Allowed Order Pronounced In Open Court On 13 12 20 17 Sd Sd S S Godara N K Billaiya Judicial Member True Copy Accountant Member Ahmedabad Dated 13 12 2017 Rajesh Copy Of The Order Forwarded To 1 The Appellant