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TMI Blog2015 (7) TMI 677X X X X Extracts X X X X X X X X Extracts X X X X ..... with new machinery and buildings without transfer of any portion of the old buildings or machinery which pre-existed. To constitute reconstruction, there must be transfer of assets of the existing business to the new industrial undertaking. In our opinion, generation of power unit is separate and distinct undertaking for which separate approval was obtained and recognised by the IREDA and it cannot be said that splitting of existing business structure. Therefore, in our considered opinion, the lower authorities are not correct in denying the deduction under section 80IA of the Act. - Decided in favour of assessee. Deduction u/s 80IA claimed by assessee on cost of steam sold to sugar unit - Held that:- Similar issue came up for consideration in AY 2007-08 and 2008- 09 in assessee’s own case wherein held that lower authorities did not dispute that the profit credited to Profit and Loss Account in respect of steam is only ₹ 11.43 Lakhs. Thus, even assuming that steam is not power as held by the Assessing Officer, at best the department could have treated only ₹ 11.43 lakhs as ineligible profits for the purpose of claiming the deduction under section 80IA of the Act. To ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eduction u/s 80IA to assessee on the power generation plant. 4. Briefly, the facts relating to the issue are, assessee a company is engaged in the business of manufacture of cement and sugar. It also has a power generation unit for generating power. Assessee has its sugar manufacturing unit along with co-generation plant in Khammam District of A.P. Assessee has also a cement factory in Krishna District of AP. For the AY under consideration, assessee filed its return of income on 24/09/2010 declaring total income of ₹ 20,19,94,997 after claiming deduction u/s 80IA of an amount of ₹ 4,84,48,186. During the assessment proceeding, AO noticed that from its power generation unit assessee has disclosed a total turnover of ₹ 19,37,19,867 which includes sale of electricity to sugar division amounting to ₹ 59.39 lakh and sale of electricity to cement division amounting to ₹ 831.31 lakhs. Besides, assessee has also sold electricity to AP Transco at ₹ 927.93 lakhs. Assessee also disclosed an amount of ₹ 118.55 lakhs towards sale of steam to sugar division. It was found by AO that assessee generates electricity using Bagasse as fuel which is a residu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as laid down by the Apex Court, in the case of Textile Machinery Corporation Ltd., Vs. CIT [supra], directly and squarely applies to the facts of the case. In the instant case, the true test is not whether the new industrial undertaking connotes expansion of the existing business of the assessee but whether it is all the same a new an identifiable undertaking separate and distinct from the existing business of the assessee but whether it is all the same a new and identifiable undertaking separate and distinct from the existing business. The lower authorities agrees that from 2002-03, a new cogeneration plant was put up and also they agrees that installation of sophisticated and high capacity machinery to produce steam and electricity has taken place in the place of existing old technology. Thus, they impliedly agree that the new machinery and plant have been installed under separate licence and premises. Even though the decision of Textile machinery [supra] was concerned with the clause dealing with reconstruction of existing business but the expression 'not formed' was construed to mean that the undertaking should not be a continuation of the old but emergence of a new uni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... correct in denying the deduction under section 80IA of the Act. Hence, we decide this issue in favor of the assessee company and against the Revenue. Similar view was again expressed by the Tribunal in assessee s own case in the succeeding AYs 2008-09 and 2009-10 in ITA Nos. 917/Hyd/12, dated 12/10/2012 and ITA No. 1024/Hyd/13, dated 05/02/14. Therefore, there being no difference in the factual position relating to assessee s claim of deduction u/s 80IA in the impugned AY, there is no reason to deny such deduction to assessee in the impugned AY. Accordingly, we do not find any infirmity in the order of ld. CIT(A) in allowing assessee s claim of deduction u/s 80IA after following the decision of ITAT on the issue. We, therefore, uphold the order of ld. CIT(A) by dismissing the ground raised. 7. The next issue, which is common in ground nos. 3 4 is, with regard to deduction claimed by assessee on cost of steam sold to sugar unit. 8. Briefly, the facts relating to this issue are, in course of assessment proceeding, AO while denying assessee s claim of deduction u/s 80IA also held that steam is not a power as envisaged u/s 80IA. He was also of the view that steam is only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the deduction under section 80IA of the Act. To hold otherwise, would be a gross error as the expenditure debited to the profit and loss account of the power unit is still being retained by the department while making the computation. The CIT [A] also agrees that steam has no value as no price was charged for the same in the earlier year but ignores the fact that in the absence of gross total income in the earlier year no exemption could have been claimed. Therefore, we direct that only ₹ 11.43 lakhs is to be treated as ineligible profits for the purpose of deduction under section 80IA of the Act and for the balance sale amount of steam to sugar division, the assessee company is eligible for deduction under section 80IA of the Act. For this proposition, we place reliance on the order of the Tribunal in the case of DCW Ltd.vs. Addl. CIT, ITA No. 126/Mum/2008, AY 2003-04 dated 29th January, 2010 reported in 42 DTR (Mumbai) (Trib.) 369 at page 383 para 18.8 which reads as under: 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 wast ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... back to the file of the Assessing Officer with a direction to the assessee to furnish necessary records for the purpose of determining the value of the steam produced and transferred to sugar unit. 16. As the issue under consideration is identical to that of the case decided by the coordinate bench in assessee s own case for AY 2007- 08 and 2008-09, respectfully following the same, we remit the issue back to the file of the Assessing Officer with a direction to decide the issue after examining the records that will be furnished by the assessee before him. The assessee is directed to furnish necessary records for the purpose of determining the value of the steam produced and transferred to sugar unit. This ground is allowed for statistical purposes. Since the facts in dispute in the present appeal are materially same and the order passed by ld. CIT(A) is fully in terms with the order of the Tribunal, we have no hesitation in upholding the same by dismissing the ground raised. 10. The last issue raised by the department in ground no. 5 is relating to reduction in power charges. 11. During the assessment proceeding, AO noticed that assessee has adopted a rate of 3.48 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. Being aggrieved of such revision in price of power by AO, assessee preferred appeal before ld. CIT(A). 12. Before ld. CIT(A), it was submitted by assessee that the appellate tribunal before which power tariff fixed by APERC was challenged, has given a decision in favour of the power units. Assessee referring to provisions of section 80IA(8) also submitted that as per the said provision the market value is the value which would ordinarily fetch in the open market and in case of supply of electricity the fair market value would be the rate at which AP Transco charges its customers. Ld. CIT(A) after considering the submissions of assessee in the light of the observations made by ITAT in assessee s own case held as under: 10. The submissions and the orders of the ITAT and Appellate Tribunal for electricity cited supra have been duly perused. It is opined that the rate fixed by APERC is the fair market value as far as sale to AP Transco, hence, the same rate may be applied for the sale of cement and sugar division also. Respectfully following the decision of ITAT in appellant s case, the AO is directed to adopt the rate as finalized by the appellate tribunal of the APREC. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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