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TMI Blog2010 (1) TMI 1175X X X X Extracts X X X X X X X X Extracts X X X X ..... he same falls within the definition of profits and gains derived by an undertaking or an enterprise from any business , as referred to in sub-section (4) of section 80IA and, therefore, entitled to deduction u/s 80IA. Respectfully following the judgment, we decide the issue in favour of the assessee. Accordingly, this ground of the assessee is allowed. Deducting loss incurred in the General Unit against the income derived by CPP Unit - AO reduced the loss incurred in General Unit against the income earned in CPP Unit and thereby reduced the available deduction u/s 80IA in CPP Unit - HELD THAT:- This issue has been decided against the assessee by the Tribunal in AY 2001-02. Relying on the latest decision of Hon ble Supreme Court in the case of Synco Industries Ltd. [ 2008 (3) TMI 13 - SUPREME COURT] held that gross total income of the assessee has first got to be determined after adjusting losses etc., and if the gross total income of the assessee is nil the assessee would not be entitled to deductions under Chapter VI-A - This ground of the assessee is rejected. Deduction u/s 80IA - adjustment of electricity price charged by CPP Unit from General Unit - CPP Unit is generating elect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l: 1. On the facts and in the circumstances of the case, for computing the amount of deduction u/s 80IA for the Captive Power Plant (CPP) the CIT(A) has erred: (i) in not accepting the assessee's contention that dividend in a sum of ₹ 16,913 was pertaining to the income of general unit and not of the CPP. (ii) in holding that interest earned ₹ 86,66,390 on margin money deposit with the bank for obtaining Letter of Credit (LC) for importing raw-materials was not entitled to deduction u/s 80IA. (iii) in deducting loss in the general unit ₹ 9,37,97,999 from the income derived by CPP ₹ 14,48,24,504. (iv) in not appreciating the position that the computation of amount of deduction u/s 80IA for CPP was required to be done separately and the loss shown in general unit was not to be deducted from that profit particularly because CPP was entitled for deduction u/s 80IA at 100% and the general unit at 30% meaning thereby that they were different categories. (v) in holding that the assessee was not justified in charging price of electricity (supplied by the CPP to the general unit) @ ₹ 5.40 paise per unit and should have restricted it to ₹ 5.32 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be covered by the aforesaid decision of Hon'ble Supreme Court. 7.2. Decision of Hon'bte Supreme Court in the case of Pandian Chemicals Ltd. So far as decision in the case of Pandian Chemicafs Ltd. is concerned, the Hon'ble Supreme Court was seized 'with the| matter for the purpose of deduction u/s.80-HH of the Act and as per the provisions of section 80 HH of the Act, the relief was allowable if gross total income of an assessee includes "any profits and gains derived from an industrial undertaking or the business of a hotel"..... and, therefore, it was in the context of these provisions that the Hon'ble Supreme Court after considering the meaning of "derived from" came to the conclusion that the interest derived by the Industrial undertaking on deposits made with the Electricity Board for the supply of Electricity for running the industrial undertaking could not said to flow directly from the industrial ( undertaking itself and was not profit or gains derived by the undertaking for the purpose of deduction u/s.80-HHC of the Act. 7.3. Decision of Hon'ble Supreme Court in the case of CIT vs. Karnal Co-operative Sugar Mills Ltd. (24 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat some interest has been earned. This is, therefore, not a case where any surplus share capital money which is lying idle has been deposited in the bank for the purpose of earning interest. The deposit of money in the present case is directly linked with the purchase of plant and machinery. Hence, any income earned on such deposit is incidental to the acquisition of assets for the setting up of the plant and machinery. In this view of the matter the ratio laid down by this Court in Tuticorin Alkali Chemicals & Fertilizers Ltd. vs. CIT (1997) 141 CTR (SC) 387 : (1997) 227 ITR 172 (SC) : TC S38.3460, will not be attracted. The more appropriate decision in the factual situation in the present case is in CIT vs. Bokaro Steel Ltd. (1999) 151 CTR (SC) 276: (1999) 236 ITR 315 (SC). The appeal is dismissed. There will be no order as to costs." 7.4 The next decision relied upon by the assessee is the decision Hon'ble Jharkhand High Court in the case of CIT vs. Easter Tar P. Ltd. [2008J (301 ITR 427) Jharkhand] which we have already reproduced in paragraph No.3.3 of this order. 8. After careful consideration of the rival submissions, facts and circumstances of the case and var ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of the CIT(A) on this issue, therefore, reversed and assessee's claim is allowed." Respectfully following the above judgment, we decide the issue in favour of the assessee. Accordingly, this ground of the assessee is allowed. 7 The third ground relates to deducting loss incurred in the General Unit against the income derived by CPP Unit. The AO reduced the loss incurred in General Unit against the income earned in CPP Unit and thereby reduced the available deduction u/s 80IA in CPP Unit. 8 The learned CIT(A) held that deduction u/s 80IA is available to the net income after adjusting the loss in the General Unit against the profit derived from CPP Unit. This is in accordance with section 80AB. For this decision, the learned CIT(A) followed his decision in the Assessment Year 2001-02. 9 We have heard the learned AR and the learned DR. This issue has been decided against the assessee by the Tribunal in AY 2001-02. In this regard, we refer to paras-12 to 16 of the above order, as under:- 12 The brief facts as have been revealed from the records are that the assessee was having profit from general unit and Captive Power Plant but had suffered loss in unit known as Plate Mill. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee was not entitled to claim deductions under Chapter VI-A which included sections 80HH and 80I. The effect of clause (5) of section SOB of the Income-tax Act. 1961. is that "gross total income" will be arrived at after making the computation as follows: (i) making deductions under the appropriate computation provisions: (ii) including the incomes, if any, under sections 60 to 64 in the total income of the individual; (Hi) adjusting infra-head and/or inter-head* losses; and (iv) setting off brought (forward unabsorbed losses and unabsorbed depreciation, etc. Only if the gross total income so determined is positive the question of allowing the deductions under Chapter VI-A would arise, not otherwise. It is well settled that where the predominant majority of the High Courts have taken a certain view on the interpretation of certain provisions, the Supreme Court (should lean in gavour of that view. The words "includes any pro/its" in section 80-1(1) are important and indicate that the gross total income of an assessee shall include profits from a priority undertaking. While computing the quantum of deduction under section 80-I(6) the Assessing Officer, no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estricted the deduction u/s 80IA. 12 The learned CIT(A) held that Gujarat Electricity Board [GEB] is supplying electricity at an average rate of ₹ 5.40 per unit which is inclusive of 8 paise per unit for the electricity duty. Since the assessee is not required to charge electricity duty, therefore, applicable rate would be ₹ 5.32 paise per unit. In this regard the learned AR submitted that the electricity is generated and does not come within the mischief of section 80IA(viii) which covers only goods and services which are produced by one unit and acquired by the other unit. Electricity is neither goods nor services. Further, rates charged by GEB is not a landmark. In any case, if General Unit was to purchase electricity from GEB, it would have paid ₹ 5.40 paise per unit, therefore, it cannot be said that the electricity sold by the CPP Unit to General Unit was at a price which is more than market rate. In fact, the market price is what the GEB charges. The learned AR further submitted that similar issue had arose before the ITAT, Ahmedabad Bench-B in ITA No.3594/Ahd/2007 and others in the case of Alembic Limited, decided on 06-06- 2008. In this case it has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts and in the circumstances of the case the CIT(A) has erred in not accepting the book figure of the rate of electricity charged by the CPP Unit to the General Unit. 15 The first ground is general in nature and does not require any specific adjudication. 16 The second ground relates to assessee's claim in netting of interest income against the expenditure. The assessee has earned interest on deposits made with the banks for opening LCs. It has also incurred an expenditure on loan borrowed for the purpose of business. According to the assessee, adjustment of netting of interest is permissible in view of the decision of the Hon'ble Supreme Court in the case of Keshavji Ravji & Co. vs. CIT (1990) 183 ITR 1 (SC) as well as the decision of the Hon'ble Delhi High Court in the case of CIT vs. Sri Ram Honda Power Equip & Ors. 289 ITR 475 (Delhi). Therein it has been held that interest in clause (baa) of Explanation to section 80HHC refers to net interest. It is also held by the Delhi High Court that where surplus funds are parked with the bank and interest is earned thereon, it can only be categorized as income from other sources. It goes entirely out of reckoning for the purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X
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