2012 (3) TMI 665 - AT - Income Tax

Summary

Issues Involved:
1. Deletion of addition on account of sale value of exhaust steam supplied to SSL.
2. Eligibility of steam as a form of power for deduction u/s 80IA.
3. Eligibility of 50% of receipts from UPSEB for computation of deduction u/s 80IA.

Summary:

Issue 1: Deletion of addition on account of sale value of exhaust steam supplied to SSL
The Assessing Officer (AO) added an amount of Rs. 6,82,84,240 to the income of the assessee for the sale of steam to SBEC Sugar Ltd. (SSL) at Rs. 236 per tonne, despite the assessee not showing any income from this supply. The assessee argued that no real income accrued as SSL had decided not to pay for the exhaust steam since October 2001. The CIT(A) deleted the addition, following the ITAT's decisions in preceding years (AY 2000-01, AY 1999-00, AY 2001-02, AY 2003-04 to AY 2006-07), which held that only real income could be taxed and not notional income. The CIT(A) emphasized that the transaction between the assessee and SSL was part of a barter system where bagasse and water were supplied free of charge by SSL, and thus, no income should be recognized for the steam supplied.

Issue 2: Eligibility of steam as a form of power for deduction u/s 80IA
The AO disallowed the claim for deduction u/s 80IA on the sale of steam, arguing that steam was not considered power within the meaning of the section. However, the CIT(A) held that steam is a form of power and eligible for deduction u/s 80IA, citing the ITAT's decision in AY 2000-01 and subsequent years (AY 1999-00, AY 2001-02). The ITAT had consistently held that steam qualifies as a form of power and thus, income from its sale is eligible for deduction u/s 80IA.

Issue 3: Eligibility of 50% of receipts from UPSEB for computation of deduction u/s 80IA
The AO disallowed the claim for deduction u/s 80IA on 50% of the receipts from the sale of power to UPSEB, arguing that the expenditure incurred was higher than the net sale proceeds. The CIT(A) allowed the claim, following the ITAT's decisions in AY 1999-00 and AY 2001-02, which held that the AO was not justified in reducing the amount received from UPSEB for the purpose of deduction u/s 80IA. The CIT(A) noted that this issue had been consistently decided in favor of the assessee in earlier years.

Conclusion:
The ITAT upheld the CIT(A)'s decision on all three issues, noting that the CIT(A) had merely followed the ITAT's decisions from preceding years. The Revenue's appeal was dismissed as no contrary decision or material was presented to warrant a different view.