DCW LIMITED, MUMBAI v. ADDL.CIT RANGE 3(1), MUMBAI

ITA 5969/MUM/2008 | 2005-2006
Pronouncement Date: 29-07-2010 | Result: Partly Allowed

Appeal Details

RSA Number 596919914 RSA 2008
Assessee PAN AAACD0559N
Bench Mumbai
Appeal Number ITA 5969/MUM/2008
Duration Of Justice 1 year(s) 9 month(s) 28 day(s)
Appellant DCW LIMITED, MUMBAI
Respondent ADDL.CIT RANGE 3(1), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 29-07-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted D
Tribunal Order Date 29-07-2010
Date Of Final Hearing 07-06-2010
Next Hearing Date 07-06-2010
Assessment Year 2005-2006
Appeal Filed On 01-10-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D MUMBAI BEFORE SHRI D. MANMOHAN (VICE PRESIDENT) & SHRI R.K. PANDA (ACCOUNTANT MEMBER) I.T.A.NO.5969/MUM/2008 (A.Y. 2005-06) M/S. DCW LTD. NIRMAL 3 RD FLOOR NARIMAN POINT MUMBAI-400 021. PAN: AAACD0559N VS. ADDL.COMMR. OF INCOME-TAX RANGE-3(1) MUMBAI. APPELLANT RESPONDENT I.T.A.NO.5960/MUM/2008 (A.Y. 2005-06) DY.COMMR. OF INCOME-TAX CIR. 3(1) MUMBAI. VS. M/S. DCW LTD. NIRMAL 3 RD FLOOR NARIMAN POINT MUMBAI-400 021. PAN: AAACD0559N APPELLANT RESPONDENT ASSESSEE BY SSHRI SALIL KAPOOR. DEPARTMEMT BY SHRI DR . B. SENTAIL. O R D E R PER R.K. PANDA AM: THESE ARE CROSS APPEALS THE FIRST ONE FILED BY THE ASSESSEE AND THE SECOND ONE FILED BY THE REVENUE AND ARE DIRECTED AGAINST THE ORDER DATED 10-07-2008 OF THE CIT(A)XXVIII MUMBAI RELATING TO ASSTT. YEAR 2 005-06. FOR THE SAKE OF CONVENIENCE THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER. ITA NO.5969/MUM/2008 (BY THE ASSESSEE): 2. GROUND OF APPEAL NO. A BY THE ASSESSEE RELATES T O THE ORDER OF THE CIT(A) IN CONFIRMING THE DISALLOWANCE RS.2 62 40 633/- BY THE AO U/S.145A OF THE I.T. ACT. ITA 5969-5960/M/08 DCW LTD. 2 3. THE LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET SUBMITTED THAT THIS GROUND BECOMES INFRUCTUOUS SINCE THE AO IN THE ORDER PASSE D U/S.154 HAS ALREADY GIVEN THE RELIEF. IN VIEW OF THE ABOVE SUBMISSION BY THE LD. COUNSEL GROUND NO. A IS DISMISSED. 4. GROUND OF APPEAL NO. B BY THE ASSESSEE RELATES T O THE ORDER OF THE CIT(A) IN CONFIRMING THE DISALLOWANCE OF RS.5 00 000/- MAD E BY THE AO U/S.14A. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSE E DOES NOT WANT TO PRESS THIS GROUND FOR WHICH THE LD. D.R. HAS NO OBJECTION. ACC ORDINGLY THIS GROUND BY THE ASSESSEE IS DISMISSED AS NOT PRESSED. 5. GROUND OF APPEAL NO. C(I) BY THE ASSESSEE RELAT ES TO THE ORDER OF THE CIT(A) IN CONFIRMING THE ORDER OF THE AO IN DISALLO WING AN AMOUNT OF RS.4 03 06 140/- U/S.80IA BEING RECEIPT ON ACCOUNT OF ELECTRICITY TAX. 5.1 FACTS OF THE CASE IN BRIEF ARE THAT THE ASS ESSEE DURING THE YEAR UNDER CONSIDERATION HAS CLAIMED AN AMOUNT OF RS.22 30 19 487/- ON ACCOUNT OF CAPTIVE POWER PLANT AS EXEMPT U/S.80IA. THE AO NOTED THAT W HILE WORKING OUT THE INCOME THE ASSESSEE HAS ADOPTED THE RATE OF ELECTR ICITY UNIT OF RS.4.14 INCLUDING ELECTRICITY DUTY OF 5%. IN VIEW OF THE DECISION OF THE ITAT MUMBAI BENCH I IN THE CASE OF WEST COST PAPER MILLS LTD. VS. ACIT RE PORTED IN 103 ITD 19 (MUMBAI) THE AO WAS OF THE OPINION THAT 5% OF ELEC TRICITY CHARGES ARE REQUIRED TO BE EXCLUDED WHILE WORKING OUT THE PROFITS FROM E LIGIBLE BUSINESS. HE FURTHER NOTED THAT THE CIT(A) WHILE DECIDING THE APPEAL OF THE ASSESSEE FOR ASSTT. YEAR 2003-04 HAS ENHANCED THE INCOME BY REDUCING THE EX EMPTION TO THE EXTENT OF ELECTRICITY DUTY IN HIS ORDER BASING ON THE DECISI ON OF THE TRIBUNAL IN THE CASE OF WEST COAST PAPER MILLS LTD. (SUPRA) AND THE DECISI ON OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. LAXMI MACHINE WORKS RE PORTED IN 290 ITR 667. REJECTING THE VARIOUS EXPLANATIONS GIVEN BY THE ASS ESSEE THE AO EXCLUDED 5% OF ITA 5969-5960/M/08 DCW LTD. 3 ELECTRICITY CHARGES AMOUNTING TO RS.4 03 06 140/- A ND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. IN APPEAL THE CIT(A) CONFIRMED THE ACTION OF THE AO. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE AS SESSEE IS IN APPEAL BEFORE US. 6. AFTER HEARING BOTH THE SIDES WE FIND SIMILAR I SSUE HAD COME UP BEFORE THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE ASSTT. YEAR 2004-05. WE FIND THE TRIBUNAL VIDE ITA NO.126/MUM/2008 ORDER DATED 29-01 -2010 FOR THE ASST. YEAR 2003-05 HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSE SSEE BY HOLDING AS UNDER : 17. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF TH E PARTIES AND PERUSED THE RECORD AS WELL AS GONE THROUGH THE DECISIONS CITED. THE FIRST CONTENTION OF THE LEARNED AR IS TH AT THE CIT(A) CANNOT ACQUIRE JURISDICTION OF ENHANCEMENT OF INCOM E WITHOUT ISSUE OF ENHANCEMENT NOTICE. THIS CONTENTION OF THE LEARNED AR IS NOT ACCEPTABLE AS IT IS EVIDENT FROM THE FACT TH AT THE CIT(A) ISSUED A LETTER DATED 15.11.2006 WHEREIN IT IS CLEA RLY STATED THAT THE LETTER MAY BE TREATED AS NOTICE OF ENHANCE MENT. FURTHER THE ASSESSEE WHILE REPLYING THE SO CALLED NOTICE DID NOT MAKE ANY OBJECTION BEFORE THE CIT(A) THAT THE C IT(A) HAS NOT ISSUED ENHANCEMENT NOTICE THEREFORE THE CONTENTION OF THE LEARNED AR IS REJECTED. 18 NOW COMING TO THE MERITS OF THE CASE WHICH IS DECIDED AS UNDER:- 18.1 THE CIT (A) WHILE ENHANCING INCOME BY DISAL LOWING ASSESSEES CLAIM UNDER SECTION 80IA ON FOLLOWING TH REE REASONS:- (I) ELECTRICITY TAX (II) ALLOCATION OF INDIRECT EXPENSES (III) MISCELLANEOUS INCOME 18.2 1 ST REASON FOR DISALLOWANCE OF DEDUCTION U/S 80IA IS I N RESPECT OF ELECTRICITY TAX WHETHER PART OF MARKET P RICE OR NOT. THE CRUX OF THE MATTER TO BE EXAMINED HERE IS WHAT SHOULD BE THE MARKET PRICE OF THE ELECTRICITY WHILE TRANSFERR ING THE MANUFACTURED ELECTRICITY FROM C.P.P. UNIT TO OTHER UNIT FOR THE PURPOSE OF CALCULATION OF DEDUCTION UNDER SECTION 8 0IA(8) OF THE IT ACT. THE ASSESSEE WHILE TRANSFERRING THE MANUF ACTURED ELECTRICITY FROM C.P.P. UNIT TO OTHER UNIT HAS TAK EN INTO ACCOUNT THE ELECTRICITY TAX LEVIED BY THE STATE GOVERNMENT ON THE BILL AMOUNT @ RS. 0.18 PER UNIT CHARGED BY THE TAMILNADU ELECTRICITY BOARD FROM THE CONSUMERS ON THE BILL RA ISED. THE CIT (A) WAS OF THE VIEW THAT THE ELECTRICITY TAX IS A S TATUTORY AND EXTRANEOUS PAYMENT THE SAME CANNOT FORM PART OF THE MARKET PRICE. THE CIT(A) HEAVILY RELIED UPON THE DECISION OF MUMBAI BENCH IN THE CASE OF WEST COAST PAPER MILLS LTD. TH E RELEVANT SECTION 80IA(8) OF THE IT ACT READS AS UNDER :- ITA 5969-5960/M/08 DCW LTD. 4 DEDUCTIONS IN RESPECT OF PROFITS AND GAINS FROM IN DUSTRIAL UNDERTAKINGS OR ENTERPRISES ENGAGED IN INFRASTRUCTURE DEVELOPMEN T ETC 80-IA. [(1).TO (7 ) . (8) WHERE ANY GOODS [OR SERVICES] HELD FOR THE PURPOSES OF THE ELIGIBLE BUSINESS ARE TRANSFERRED TO ANY OTHER BUSINESS CARR IED ON BY THE ASSESSEE OR WHERE ANY GOODS [OR SERVICES] HELD FOR THE PURPOSES OF ANY OTHER BUSINESS CARRIED ON BY THE ASSESSEE ARE TRANSFERRED TO THE E LIGIBLE BUSINESS AND IN EITHER CASE THE CONSIDERATION IF ANY FOR SUCH TR ANSFER AS RECORDED IN THE ACCOUNTS OF THE ELIGIBLE BUSINESS DOES NOT CORRESPO ND TO THE MARKET VALUE OF SUCH GOODS [OR SERVICES] AS ON THE DATE OF THE TRAN SFER THEN FOR THE PURPOSES OF THE DEDUCTION UNDER THIS SECTION THE PROFITS AN D GAINS OF SUCH ELIGIBLE BUSINESS SHALL BE COMPUTED AS IF THE TRANSFER IN E ITHER CASE HAD BEEN MADE AT THE MARKET VALUE OF SUCH GOODS [OR SERVICES] AS ON THAT DATE : PROVIDED THAT WHERE IN THE OPINION OF THE ASSESSING OFFICER THE COMPUTATION OF THE PROFITS AND GAINS OF THE ELIGIBLE BUSINESS I N THE MANNER HEREINBEFORE SPECIFIED PRESENTS EXCEPTIONAL DIFFICULTIES THE AS SESSING OFFICER MAY COMPUTE SUCH PROFITS AND GAINS ON SUCH REASONABLE BASIS AS HE MAY DEEM FIT. [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.] 18.3 THE ABOVE SECTION HAS BEEN EXAMINED BY THE IT AT DELHI BENCH IN THE CASE OF ADDITIONAL COMMISSIONER OF INCOME- TAX V. JINDAL STEEL & POWER LTD. [2007] 16 SOT 509 (DELHI) WHEREIN IT WAS HELD THAT SECTION 80-IA(8) AUTHORIZ ES THE ASSESSING OFFICER THAT WHERE THE TRANSFER AS RECORD ED IN THE ACCOUNTS OF THE ELIGIBLE BUSINESS DOES NOT CORRESPO ND TO THE MARKET VALUE THE PROFITS DECLARED OF THE ELIGIBLE BUSINESS CAN BE ADJUSTED BY THE ASSESSING OFFICER ON SUCH BASIS SO AS TO ENSURE THAT GOODS OR SERVICES ARE TRANSFERRED TO IT S OWN UNIT AT THE MARKET VALUE OF SUCH GOODS OR SERVICES. IN THAT CASE THE ASSESSING OFFICER DID NOT PERCEIVE RS. 3.72 PER UNI T AS THE MARKET VALUE OF THE POWER GENERATED BY THE ASSESSEE AND INSTEAD ADOPTED RS. 2.32 PER UNIT AS THE MARKET VAL UE BEING THE PRICE AT WHICH THE ASSESSEE SOLD POWER TO THE B OARD. IN THE EXPLANATION TO SECTION 80-IA(8) IT IS PROVIDED THA T THE EXPRESSION MARKET VALUE FOR THE PURPOSES OF SUB-S ECTION MEANS THE PRICE THAT SUCH GOODS OR SERVICES WOULD O RDINARILY FETCH IN THE OPEN MARKET. THE MARKET VALUE IS AN EX PRESSION WHICH DENOTES A PRICE ARRIVED AT BETWEEN THE BUYER AND THE SELLER IN THE OPEN MARKET WHEREIN THE TRANSACTIONS TAKE PLACE IN THE NORMAL COURSE OF TRADING AND COMPETITION IN CONTRAST TO A SITUATION WHERE THE PRICE IS FIXED BETWEEN A BUYER AND A SELLER IN A NEGOTIATION DONE UNDER THE SHADOW OF LEGISLATI VELY MANDATED COMPULSION. IN THE CASE OF THE FORMER THE PRICE FIXED BETWEEN THE BUYER AND SELLER CAN BE UNDERSTOOD AS D ENOTING MARKET PRICE SINCE THE ELEMENTS OF TRADING AND CO MPETITION EXIST WHEREAS IN THE CASE OF THE LATTER SITUATION THE PRICE FIXED BETWEEN THE BUYER AND SELLER CANNOT BE UNDERSTOOD A S DENOTING THE MARKET PRICE SINCE THE ELEMENTS OF TRADE AND CO MPETITION ARE CONSPICUOUS BY THEIR ABSENCE. ITA 5969-5960/M/08 DCW LTD. 5 18.4 THE FACTS OF WEST COAST PAPER MILLS LTD. ARE T HAT THE ASSESSEE WAS ENGAGED IN THE MANUFACTURE AND SALE OF PAPER AND PAPER BOARDS MULTI-LAYER BOARDS ETC. AND IN T HE BUSINESS OF POWER GENERATION. THE ASSESSEE HAD SET UP FOUR D G UNITS TO FACILITATE ITS POWER REQUIREMENT IN THE PAPER PLANT AT DANDELI IN KARNATAKA. THE ASSESSEE CLAIMED DEDUCTION U/S 80IA ON THE GROUND THAT THESE DG UNITS WERE CATERING TO THE ASS ESSEES CAPTIVE POWER REQUIREMENT. THE AO WAS OF THE VIEW T HAT IT WAS ONLY AN INTER-DIVISION TRANSFER AND THERE WAS NO RE VENUE REALIZED BY IT AND CONSEQUENTLY THERE WAS NO DERIVA TION OF PROFIT OR INCOME IN THE BUSINESS OF INDUSTRIAL UNDE RTAKING. THE ASSESSEE ADOPTED THE RATE AT WHICH THE KARNATAKE EL ECTRICITY BOARD SUPPLIED POWER TO INDUSTRIAL USERS. ACCORDING TO THE AO THESE RATES WERE UNREALISTIC AS THE KARNATAKA ELECT RICITY BOARD WAS NOT EXPECTED TO PURCHASE POWER FROM THE ASSESSE E AND IT WAS ALSO UNREALISTIC TO EXPECT THE KARNATAKA ELECTR ICITY BOARD TO PURCHASE POWER FROM THE ASSESSEE AT A FUTURE DAT E AT THE SAME RATE AT WHICH IT SUPPLIED POWER TO THE OTHER I NDUSTRIAL USERS AND IT WAS ALSO NOT THE FACT THAT THE ASSESSE E HAD SOLD ANY POWER TO KARNATAKA ELECTRICITY BOARD IN ANY LAT ER YEAR. THE CIT(A) ASKED THE ASSESSEE TO SUBMIT AN ALTERNAT IVE CALCULATION BASED ON THE AVERAGE ACTUAL PER UNIT CO ST OF POWER PURCHASED FROM THE KARNATAKA ELECTRICITY BOARD BY T HE PAPER DIVISION. THE ASSESSEE HAS GIVEN CALCULATION OF THE AVERAGE PRICE OF RS. 4.74 PER UNIT. THE CIT(A) ASKED THE AO TO EXAMINE THE BILL AND VERIFY THE AVERAGE RATE CALCULATED BY THE ASSESSEE. THE AO RECALCULATED THE PRICE TO BE ADOPTED AFTER E XCLUDING ELEMENT OF TAX. CIT(A) ACCEPTED THE AOS CALCULATIO N. ON APPEAL THE ITAT HELD THAT THE AOS ADOPTION OF THE RATE AT WHICH THE ASSESSEE SOLD THE POWER TO THE TAMILNADU ELECTRICIT Y BOARD COULD NOT BE ACCEPTED SINCE THE UNITS ITSELF WERE W ORKING AT DANDELI IN KARNATAKA WAS DIFFERENT. THE ASSESSEE HA D PAID TO THE KARNATAKA ELECTRICITY BOARD FOR PURCHASE OF THE POWER AND THE CIT(A) HAD COME TO A REASONABLE CONCLUSION THAT THE TRANSFER PRICE SHOULD BE ON THE BASIS OF AVERAGE PR ICE PAID BY THE ASSESSEE DURING THE WHOLE YEAR TO THE KARNATAKA ELECTRICITY BOARD MINUS CERTAIN EXTRANEOUS CHARGES SUCH AS ELEC TRICITY DUTY ETC. WHICH WAS NOT CONNECTED WITH BUSINESS O F THE ASSESSEE. THEREFORE THE DIRECTIONS OF THE CIT(A) W AS JUSTIFIED. ON CAREFUL READING OF THE DECISION OF THE ITAT IN T HE SAID CASE WEST COAST PAPER MILLS LTD. V. ACIT 103 ITD 19(MUM ) WE NOTICE THAT THE ISSUE BEFORE THE ITAT WAS WHETHER T HE POWER SOLD TO TAMILNADU ELECTRICITY BOARD IS TO BE ACCEPT ED OR THE AVERAGE PRICE AFTER REDUCING THE AVERAGE RATE PAID TO KARNATAKA ELECTRICITY BOARD MINUS CERTAIN EXTRANEOU S CHARGES AND ITS FAIR MARKET VALUE WAS TO DETERMINE. THE ITA T WAS OF THE VIEW THAT THE AVERAGE RATE MINUS CERTAIN EXTRAN EOUS CHARGES WAS FAIR AND REASONABLE RATE. WE FIND FORCE IN THE SUBMISSION OF THE LEARNED AR THAT THE CASE DECIDED BY THE ITAT AS ABOVE IS NOT APPLICABLE TO THE FACTS OF THE CASE UNDER CONSIDERATION AS THAT CASE DECIDED ON THE ISSUE THA T WHICH RATE IS TO BE ADOPTED OUT OF TWO RATES AVAILABLE ON RECO RD I.E. ONE IS ADOPTED BY THE ASSESSEE AND THE OTHER ADOPTED BY TH E CIT (A). SINCE THERE WAS NO ISSUE TO DECIDE WHETHER MARKET V ALUE OF THE ITA 5969-5960/M/08 DCW LTD. 6 ELECTRICITY UNIT MINUS CERTAIN EXTRANEOUS CHARGES THEREFORE THAT DECISION IS DISTINGUISHABLE ON FACTS. 18.5 IN THE LIGHT OF ABOVE DISCUSSIONS IF WE CONSID ERED THE FACTS OF THE CASE UNDER CONSIDERATION WE NOTICED TH AT THE AO DID NOT DISPUTE THE PRICE TAKEN BY THE ASSESSEE. TH E CIT)A( HAS TAKEN ACTION UNDER SECTION 251(1)(C) OF THE ACT WHE REAS THE REQUIREMENT OF THE SECTION IS THAT WHERE ANY GOODS HELD FOR THE PURPOSES OF THE ELIGIBLE BUSINESS ARE TRANSFERR ED TO ANY OTHER BUSINESS CARRIED ON BY THE ASSESSEE OR WHERE ANY GOODS HELD FOR THE PURPOSES OF ANY OTHER BUSINESS CARRIED ON BY THE ASSESSEE ARE TRANSFERRED TO THE ELIGIBLE BUSINESS A ND IN EITHER CASE THE CONSIDERATION IF ANY FOR SUCH TRANSFER AS RECORDED IN THE ACCOUNTS OF THE ELIGIBLE BUSINESS DOES NOT CORR ESPOND TO THE MARKET VALUE OF SUCH GOODS AS ON THE DATE OF THE T RANSFER THEN FOR THE PURPOSES OF THE DEDUCTION UNDER THIS SECTION THE PROFITS AND GAINS OF SUCH ELIGIBLE BUSINESS SHALL B E COMPUTED AS IF THE TRANSFER IN EITHER CASE HAD BEEN MADE A T THE MARKET VALUE OF SUCH GOODS AS ON THAT DATE. FOR THIS PURPO SE THERE MUST BE OPINION OF THE AO AS PROVISO CLEARLY PROV IDES THAT WHERE IN THE OPINION OF THE ASSESSING OFFICER THE COMPUTATION OF THE PROFITS AND GAINS OF THE ELIGIBLE BUSINESS I N THE MANNER HEREINBEFORE SPECIFIED PRESENTS EXCEPTIONAL DIFFICU LTIES THE ASSESSING OFFICER MAY COMPUTE SUCH PROFITS AND GAIN S ON SUCH REASONABLE BASIS AS HE MAY DEEM FIT. IN THE CASE U NDER CONSIDERATION THERE WAS NO SUCH OPINION OF AO BUT O N THE BASIS OF OPINION OF CIT(A) WHETHER THE CIT (A) WAS HAVING JURISDICTION OR NOT THIS ISSUE IS NOT BEFORE US. THE ISSUE BEFO RE US IS WHETHER THE ASSESSEE WHILE TRANSFERRING THE MANUFAC TURED ELECTRICITY FROM C.P.P. UNIT TO OTHER UNIT THE ASSE SSEE HAS TAKEN INTO ACCOUNT THE ELECTRICITY TAX LEVIED BY THE STAT E GOVERNMENT ON THE BILL AMOUNT @ RS. 0.18 PER UNIT CHARGED BY T HE TAMILNADU ELECTRICITY BOARD FROM THE CONSUMERS ON T HE BILL RAISED IS MARKET PRICE OR NOT. THE MARKET PRICE HAS BEEN DEFINED BY WAY OF EXPLANATION TO SECTION 80IA(8) O F THE ACT THAT MARKET VALUE IN RELATION TO ANY GOODS OR SERVICES MEANS THE PRICE THAT SUCH GOODS OR SERVICES WOULD ORDINAR ILY FETCH IN THE OPEN MARKET. THIS CAN BE UNDER STOOD BY THE SIM PLE FACT THAT SUPPOSE THE ASSESSEE DID NOT PRODUCE THE ELECT RICITY BY HIMSELF AND IT WAS PURCHASED FROM ELECTRICITY BOARD ; THE AMOUNT WHICH THE ASSESSEE WAS TO PAY WAS INCLUDING THE TAX. WE THEREFORE DO NOT FIND ANY REASON FOR EXCLUSION O F PAISA 18 FOR THE PURPOSE OF CALCULATION OF MARKET PRICE FOR CALCULATION OF DEDUCTION UNDER SECTION80IA OF THE ACT. WE FIND THA T THE PRICE CHARGED BY THE ASSESSEE WHILE TRANSFERRING THE MANU FACTURED ELECTRICITY FROM C.P.P. UNIT TO OTHER UNIT OF THE A SSESSEE INCLUDING THE ELECTRICITY TAX LEVIED BY THE STATE G OVERNMENT ON THE BILL AMOUNT @ RS. 0.18 PER UNIT CHARGED BY THE TAMILNADU ELECTRICITY BOARD FROM THE CONSUMERS ON THE BILL RA ISED WAS THE PRICE ORDINARILY FETCH IN THE OPEN MARKET THERE FORE THE CIT (A) WAS NOT CORRECT IN DISALLOWING CLAIM OF ASSESSE E UNDER SECTION 80IA OF THE ACT ON THIS GROUND. ITA 5969-5960/M/08 DCW LTD. 7 WE FIND THE TRIBUNAL FOLLOWING THE ORDER FOR ASST. YEAR 2003-04 HAS AGAIN DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE FOR THE ASST. YEAR 2004-05 IN ITA NO.2580/MUM/08 ORDER DATED 22-03-2010. IN VIEW OF T HE CONSISTENT DECISION OF THE TRIBUNAL ON THIS ISSUE IN FAVOUR OF THE ASSESSE E IN ASSESSEES OWN CASE AND IN THE ABSENCE OF ANY CONTRARY MATERIAL BROUGHT TO OU R NOTICE THIS GROUND BY THE ASSESSEE IS ALLOWED. 7. IN GROUND OF APPEAL NO.C(II) THE ASSESSEE CHALL ENGES THE ORDER OF THE CIT(A) IN CONFIRMING THE ORDER OF THE AO DISALLOWIN G THE CLAIM U/S.80IA ON ACCOUNT OF ALLOCATION OF INDIRECT EXPENSES AMOUNTIN G TO RS.68 09 675/-. 7.1 FACTS OF THE CASE IN BRIEF ARE THAT THE AO DU RING THE COURSE OF ASSESSMENT PROCEEDINGS NOTED THAT THE ASSESSEE HAS DEBITED AM OUNTS OF RS.12 92 000/- RS.2 34 92 000/- AND RS.24 54 699/- ON ACCOUNT OF A UDITORS FEE REMUNERATION TO M.D. AND TRAVELING EXPENSES RESPECTIVELY. THE TO TAL OF THE ABOVE AMOUNTS WORKED OUT TO RS.2 72 38 699/-. THE AO ALLOCATED 25 % OF THE ABOVE AMOUNT AS ATTRIBUTABLE TO ELIGIBLE BUSINESS. HE ACCORDINGLY D ISALLOWED AN AMOUNT OF RS.68 09 675/- FROM THE EXEMPT AMOUNT. IN APPEAL T HE CIT(A) UPHELD THE ACTION OF THE AO FOR WHICH THE ASSESSEE IS IN APPEAL BEFOR E US. 8. AFTER HEARING BOTH THE SIDES WE FIND SIMILAR IS SUE HAD COME UP BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASST. YEAR 2003-04. WE FIND THE TRIBUNAL IN ITA NO.126/MUM/08 ORDER DATED 22-01-2010 HAS DEC IDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY HOLDING AS UNDER : 18.6 2ND REASON FOR DISALLOWANCE OF DEDUCTION U/S 8 0IA IS IN RESPECT OF ALLOCATION OF INDIRECT EXPENSES. WE NOTI CED THAT FOR THE PURPOSE OF DEDUCTION UNDER SECTION 80IA ONLY IN COME DERIVED FROM INDUSTRIAL UNDER TAKING THAT HAS TO BE RECKONED IN COMPUTATION AS SUCH THE INCOME AND EXPENDITURE S WHICH ARE NOT DIRECTLY RELATABLE TO THAT INDUSTRIAL UNIT CANNOT BUT BE ITA 5969-5960/M/08 DCW LTD. 8 IGNORED IN OTHER WORDS SUCH INCOME AND EXPENDITURE NEED NOT TO BE CONSIDERED. IN VIEW OF THIS POSITION THE CIT (A) IS NOT JUSTIFIED IN ALLOCATION 25 % OF SUCH INDIRECT EXPE NSE WHICH ARE NOT DIRECTLY RELATABLE TO THAT INDUSTRIAL UNIT TO ELIGIBLE UNIT FOR THE FOR PURPOSE OF COMPUTATION OF INCOME FOR DEDUCT ION UNDER SECTION 80IA OF THE ACT. THE ORDER OF CIT (A) ON T HE ISSUE IS SET ASIDE. WE FIND THE TRIBUNAL IN THE ASSESSEES OWN CASE FO R THE ASST. YEAR 2004-05 VIDE ITA NO.2580/MUM/08 ORDER DATED 22-03-2010 FOLLOWIN G THE ORDER OF THE TRIBUNAL IN THE PRECEDING ASSESSMENT YEAR HAS ALSO ALLOWED THE CLAIM OF THE ASSESSEE ON THIS ISSUE. IN VIEW OF THE CONSISTENT D ECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE AND IN ABSENCE OF ANY DISTINGUI SHING FEATURES BROUGHT BEFORE US THIS GROUND BY THE ASSESSEE IS ALLOWED. 9. IN GROUND OF APPEAL NO.C (III) THE ASSESSEE HAS CHALLENGED THE ORDER OF THE CIT(A) IN DISALLOWING THE CLAIM U/S.80IA ON THE REC EIPTS AMOUNTING TO RS.53 31 084/- ON ACCOUNT OF SLUDGE AND STEAM. 9.1 FACTS OF THE CASE IN BRIEF ARE THAT THE AO OB SERVED THAT THE ASSESSEE HAS SHOWN AMOUNTS OF RS.6 62 254/- AND RS.46 68 830/- ON ACCOUNT OF SALE OF SLUDGE AND STEAM RESPECTIVELY AND CLAIMED THE SAME AS EXEMPT U/S.80IA OF THE ACT. ACCORDING TO THE AO EXEMPTION U/S.80IA IS AV AILABLE ONLY TO THE INDUSTRIAL UNDERTAKING ENGAGED IN THE BUSINESS OF GENERATION O R GENERATION AND DISTRIBUTION OF POWER. THEREFORE SALE OF SLUDGE AND STEAM ACCO RDING TO THE AO DO NOT FALL UNDER THE AMBIT OF ELIGIBLE BUSINESS IN TERMS OF SE C. 80IA(4)(IV) OF THE I.T. ACT. HE ACCORDINGLY DISALLOWED AN AMOUNT OF RS.53 31 084 /- BY REDUCING THE SAME FROM EXEMPTION CLAIMED U/S.80IA OF THE I.T. ACT AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. IN APPEAL THE LD. CIT(A) C ONFIRMED THE ADDITION MADE BY THE AO FOR WHICH THE ASSESSEE IS IN APPEAL BEFORE U S. 10. AFTER HARING BOTH THE SIDES WE FIND SIMILAR IS SUE HAD COME UP BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASST. YEAR 2003-04. WE FIND THE TRIBUNAL ITA 5969-5960/M/08 DCW LTD. 9 VIDE ITA NO.126/MUM/08 ORDER DATED 29-01-2010 AT PA RAS 18.7 TO 18.9 HAS DECIDED THE ISSUE. IN THE SAID ORDER IT HAS BEEN H ELD THAT DEDUCTION U/S.80IA IS NOT ALLOWABLE ON ACCOUNT FROM SALE OF SLUDGE WHERE AS DEDUCTION U/S.80IA IS ALLOWABLE ON ACCOUNT OF INCOME FROM SALE OF STEAM. THE RELEVANT PORTION OF THE ORDER OF THE TRIBUNAL READS AS UNDER : 18.7 3RD REASON FOR DISALLOWANCE OF DEDUCTION U/S 80IA IS IN RESPECT OF MISCELLANEOUS INCOME INCOME FROM SALE OF SLUDGE RS. 10 09 593 INCOME FROM SALE OF STEAM RS. 44 07 753 AND MISC. INCOME RS.17 567. WHILE DECIDING THE ISSU E RELATED TO ALLOCATION OF INDIRECT EXPENDITURE IN PARA NO 15.2 OF THIS ORDER IN PRINCIPLE WE HELD THAT FOR THE PURPOSE OF DEDUCT ION UNDER SECTION 80IA ONLY INCOME DERIVED FROM INDUSTRIAL UN DER TAKING THAT HAS TO BE RECKONED IN COMPUTATION AS SUCH TH E INCOME WHICH ARE NOT DERIVED FROM INDUSTRIAL UNIT IS TO B E IGNORED. IN THE LIGHT OF THIS PRINCIPLE ON CAREFUL CONSIDERATI ON THE NATURE OF SLUDGE WHICH IS BEING GENERATED OUT OF CONSUMED FURNACE OIL AND LSHS BY DIESEL GENERATOR SET. THE DIESEL GENERA TING SET IS ONE TYPE OF PLANT AND MACHINERY AND ANY SLUDGE COMI NG OUT FROM THE PLANT AND MACHINERY I.E. DIESEL GENERATING SET DOES NOT AMOUNT TO DERIVE INCOME FROM INDUSTRIAL UNDERTA KING. THE RECEIPT OF SALE OF SLUDGE IS THE INCOME WHICH IS NO T DERIVED FROM INDUSTRIAL UNDERTAKING. THEREFORE EVEN IN ACCORDA NCE WITH THE DECISIONS CITED BY THE LEARNED AR IN THE CASE OF CO MMISSIONER OF INCOME-TAX V. STERLING FOODS 237 ITR 579(SC) PAN DIAN CHEMICALS LTD .V. COMMISSIONER OF INCOME-TAX 262 IT R 278(SC) AND LIBERTY INDIA V CIT 317 ITR 218 (SC) SALE OF SLUDGE DOES NOT AMOUNT TO THE INCOME DERIVED FROM INDUSTRIAL UN DERTAKING. THEREFORE DEDUCTION U/S 80 IA IS NOT ALLOWABLE. WE ACCORDINGLY CONFIRM THE ORDER OF CIT(A) ON THIS IS SUE. 18.8 THE NEXT ITEM OF MISCELLANEOUS INCOME IS THE INCOME FROM SALE OF STEAM PRODUCED BY THE ASSESSEE. BRIEFLY THE FACTS AND NATURE OF STEAM ARE THAT THE CAPTIVE POWER UNDERTAKING ALSO HAS WASTE HEAT RECOVERY BOILER WH ICH IS PART OF THE POWER UNDERTAKING. THE POWER GENERATED BY TH E RUNNING OF DIESEL GENERATING SET IS USED IN THE MANUFACTURE OF CAUSTIC SODA. RUNNING OF DIESEL GENERATING SETS PRODUCE HEA T WHICH IS RECOVERED FROM THE WASTE HEAT RECOVER BOILER IN THE FORM OF STEAM. DURING THE YEAR ENDED MARCH 2003 THE TOTAL QUANTITY OF STEAM GENERATED IS 1 02 295 MT. THE SAID STEAM IS U SED AS POWER FOR THE MANUFACTURE OF PVC AND ILMENITE AND 6 240/- MT WAS USED TOWARDS INTERNAL CONSUMPTION. DURING THE Y EAR 66 990 MT OF STEAM WAS CONSUMED IN THE MANUFACTURE OF PVC AND 29 065 MT WAS CONSUMED IN THE MANUFACTURE OF IL MENITE. 18.9 THE SUBMISSION OF THE LEARNED AR OF THE ASSES SEE IS THAT SINCE POWER IN THE FORM OF STEAM WAS GENERA TED BY THE CAPTIVE POWER PLANT AND CONSUMED IN THE MANUFACTURE OF PVC ITA 5969-5960/M/08 DCW LTD. 10 AND ILMENITE THEREFORE THE ASSESSEE IS ENTITLED F OR DEDUCTION U/S 80IA. FURTHER THE LEARNED AR SUBMITTED THAT ON IDENTICAL SET OF FACTS THE DEPARTMENT FILED SPECIAL LEAVE PE TITION BEFORE HONBLE SUPREME COURT AGAINST THE JUDGMENT OF HONB LE MADRAS HIGH COURT IN T.C. NO. 1773 OF 2008 AND VIDE JUDGME NT DATED 6TH NOVEMBER 2008 THE APEX COURT DISMISSED THE DEPARTMENTS APPEAL. IN THE SAID JUDGMENT MADRAS HI GH COURT DISMISSED THE DEPARTMENTS APPEAL AGAINST THE DECIS ION OF TRIBUNAL HOLDING THAT THE ASSESSEE WAS ENTITLED TO CLAIM DEDUCTION U/S 80IA OF THE ACT ON THE VALUE OF STEAM USED FOR CAPTIVE CONSUMPTION BY THE ASSESSEE. CIT VS. TANFAC INDUSTRIES LTD. S.L.P.(C) NO. 18537 OF 2009. (319 ITR 8&9). I N THE LIGHT OF ABOVE DISCUSSION WE FIND THAT THE STEAM PRODUCED B Y THE ASSESSEE IS ELIGIBLE UNIT IS A BYE-PRODUCT AND INCO ME FROM SALE OF STEAM IS THE INCOME DERIVED FROM INDUSTRIAL UNDE RTAKING THEREFORE DEDUCTION U/S 80IA IS ALLOWABLE. WE ACC ORDINGLY SET ASIDE THE ORDER OF CIT(A) ON THIS ISSUE AND THE CLA IM OF THE ASSESSEE IS ALLOWED. THE DECISION OF THE TRIBUNAL FOR THE ASST. YEAR 200 3-04 HAS BEEN FOLLOWED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASST. YEAR 2004-05 VIDE ITA NO.2580/MUM/08 ORDER DATED 22-03-2010. IN VIEW OF T HE CONSISTENT DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE AND IN ABSENC E OF ANY CONTRARY MATERIAL BROUGHT TO OUR NOTICE THIS GROUND BY THE ASSESSEE IS PARTLY ALLOWED. 11. IN GROUND OF APPEAL NO. D THE ASSESSEE HAS CHA LLENGED THE ORDER OF THE CIT(A) IN CONFIRMING THE ORDER OF THE AO LEVYING IN TEREST UNDER SECTIONS 234A 234B 234C AND 234D OF THE ACT. 11.1 AFTER HEARING BOTH THE SIDES WE ARE OF THE OPINION THAT CHARGING OF INTEREST UNDER SECTIONS 234A B C & D IS MANDATORY AND CONSEQUENTIAL IN NATURE. THEREFORE THIS GROUND BY THE ASSESSEE IS DISMISSED . ITA NO.5960/MUM/08 (BY THE REVENUE) : 12. THE ONLY EFFECTIVE GROUND RAISED BY THE REVENUE READS AS UNDER : ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE BY T HE ASSESSING OFFICER OF RS.22 80 000/- U/S.40A(9) BEING SUBSIDY PAID IN RESPECT OF EMPLOYEES CANTEEN. ITA 5969-5960/M/08 DCW LTD. 11 FACTS OF THE CASE IN BRIEF ARE THAT THE AO OBSERV ED FROM ANNEXURE 12 OF THE TAX AUDIT REPORT THAT THE COMPANY HAS CONTRIBUTED AS SU BSIDY TOWARDS EMPLOYEES CANTEEN AT SAHUPURAM AGGREGATING TO RS.22 80 000/- AND THE SAME HAS BEEN CLAIMED AS DEDUCTION FROM THE TOTAL INCOME. REJECTI NG THE VARIOUS EXPLANATIONS GIVEN BY THE ASSESSEE AND FOLLOWING THE ORDERS FOR PRECEDING ASSESSMENT YEARS THE AO DISALLOWED RS.22 80 000/- U/S.40A(9) OF THE I.T. ACT AND ADDED BACK THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. IN APPEAL THE LD. CIT(A) FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR TH E ASST. YEARS 1982-83 TO 1987- 88 AND THE ORDERS OF THE CIT(A) FOR THE ASST. YEAR S 2003-04 AND 2004-05 ALLOWED THE CLAIM OF THE ASSESSEE. AGGRIEVED WITH S UCH ORDER OF THE CIT(A) THE REVENUE IS IN APPEAL BEFORE US. 13. AFTER HEARING BOTH THE SIDES WE FIND SIMILAR I SSUE HAD COME UP BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASST. YEAR 2003-04. WE FIND THE TRIBUNAL VIDE ITA NO.394/MUM/08 ORDER DATED 29-01-2010 HAS D ISMISSED THE GROUND RAISED BY THE REVENUE ON THIS ISSUE. IT HAS BEEN HELD IN THE SAID DECISION THAT THERE IS NO INFIRMITY IN THE ORDER OF THE CIT( A) WHO DELETED THE ADDITION BY FOLLOWING THE ORDERS OF THE ITAT IN THE EARLIER YEA R. WE FIND THE TRIBUNAL VIDE ITA NO.2412/MUM/08 ORDER DATED 22-03-2010 FOR THE ASST. YEAR 2004-05 FOLLOWING THE ORDER OF THE TRIBUNAL IN THE ASSESSEES OWN CAS E FOR THE ASST. YEAR 2003-04 HAS DISMISSED THE GROUND RAISED BY THE REVENUE ON T HIS ISSUE. RESPECTFULLY FOLLOWING THE CONSISTENT VIEW OF THE CO-ORDINATE BE NCHES OF THE TRIBUNAL IN ASSESSEES OWN CASE AND IN ABSENCE OF ANY CONTRARY MATERIAL BROUGHT TO OUR NOTICE AGAINST THE ORDERS OF THE TRIBUNAL THIS GRO UND BY THE REVENUE IS DISMISSED. 14. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED AND THE APPEAL FILED BY THE REVENUE IS DISMISSED. ITA 5969-5960/M/08 DCW LTD. 12 ORDER PRONOUNCED ON THE 29TH DAY OF JULY 2010. SD/- SD/- (D. MANMOHAN) (R.K. PANDA) VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI: 29TH JULY 2010. NG: COPY TO : 1. ASSESSEE. 2.DEPARTMENT. 3 CIT(A)-XXVIII MUMBAI. 4 CIT-3 MUMBAI. 5.DR D BENCH MUMBAI. 6.MASTER FILE. (TRUE COPY) BY ORDER ASST.REGISTRAR ITAT MUMBAI. ITA 5969-5960/M/08 DCW LTD. 13 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 26-07-2010 SR.PS/ 2 DRAFT PLACED BEFORE AUTHOR 27-07-2010 SR.PS/ 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/ 6. KEPT FOR PRONOUNCEMENT ON SR.PS/ 7. FILE SENT TO THE BENCH CLERK SR.PS/ 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER