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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 ..... -materials was not entitled to deduction u/s 80IA. (iii) in deducting loss in the general unit Rs. 9,37,97,999 from the income derived by CPP Rs. 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) @ Rs. 5.40 paise per unit and should have restricted it to Rs. 5.32 paise per unit. 3 The facts of the case are that the assessee-company is engaged in the business of manufacturing and marketing of SS Flats, SS/MS Rounds, MS/SS Plates, SS Slabs, SS Wire Rods, etc. In addition to this, it is running services of medical stores and pathology laboratory. 4 The first ground is not pressed by the learned AR for the assessee at the time of hearing. Hence, the same is rejected. 5 The second ground relates to claim of deduction u/s 80IA of the Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns 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. (243 ITR 2)fSCJ. (i) The brief facts of the case before the Hon'ble Supreme Court were that the assessee had deposited money to open a Letter of Credit for the purchase of machinery required for setting up its plant in terms of assessee's agreement with the supplier. It was on the money so deposited that some interest has been earned. The assessee's case was that its case was not a case where any surplus share capital money which is lying idle has been deposited in the bank for the purpos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... micals & 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 various decisions relied upon by the parties and the provisions of Sec.80-HH and Sec-.-80-l, we are of the opinion that (i) The decision of Hon'ble Supreme Court in the case of Pandian Chemicals (supra), relied upon by the Revenue being distinguishable on facts is not applicable on the present case. (ii) The issue raised by the assessee in the present case is covered in its favour and against the Revenue by the decision of Hon'ble Jharkhan High Court in the case of CIT vs. Easter Tar P.Ltd. referred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. The assessee claimed deduction u/s.80-IA of the Act on the profit without accounting for the loss, but the Assessing Officer allowed the assessee's claim after setting off of loss suffered in Plate Mill against profit earned in general unit and power unit. 13 The assessee went in appeal before the CIT(Appeals), who confirmed the order of the Assessing Officer as per his findings contained in paragraph No.4.3 of the appellate order, which we have already reproduced in paragraph No. 14 of this order. 14 The assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 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 doubt, has to treat the profits derived from an industrial undertaking as the only source of income in order to arrive at the deduction under Chapter VI-A. However, the non obstante clause in section 80-I(6) is applicable only to the quantum of deduction, whereas, the gross total income under section 80B(5) which is also referred to in section 80-1 (I) is required to be computed in the manner provided under the Act which presupposes that the gross total income shall be arrived at after adjusting the loss of the other division against the profits derived ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ricity 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 Rs. 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 decided by the Tribunal, following the decision of the ITAT Delhi Bench in the case of ACIT vs. Jindal Steel & Power Ltd. (2007) 16 SOT 509 (Del) that the market rate postulated by section 80IA(viii) shall be the price at which the assessee purchases electricity from the Electricity Board. In this regard, we refer to para-32 of the judgment as under:- "We have heard the parties and considered the rival submissions. The controversy in question is squarely decided by the Tribunal, Delhi Bench, in the case of Jindal Steel & Power Ltd. (supra) and Mumbai Bench in the case of West Coast Paper Mills Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of section 80HHC. The AO while computing profits of the Export Business will have to remove from the debit side of the P&L Account the corresponding interest expenditure that has been laid out to earn such income from other sources. Thus, accordingly even in a case where interest income earned by the assessee is treated as business income even then netting will have to be allowed to the extent that the interest expenditure has direct nexus with the interest income earned. 17 In the present case, the AO has allocated the interest income between General Unit and CPP Unit on the basis of turnover a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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