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TMI Blog2010 (7) TMI 1173X X X X Extracts X X X X X X X X Extracts X X X X ..... o the order of the CIT(A) in confirming the disallowance of ₹ 5,00,000/- made by the AO u/s.14A. The ld. counsel for the assessee submitted that the assessee does not want to press this ground for which the ld. D.R. has no objection. Accordingly, this ground by the assessee is dismissed as not pressed. 5. Ground of appeal no. C(i) by the assessee relates to the order of the CIT(A) in confirming the order of the AO in disallowing an amount of ₹ 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 assessee during the year under consideration has claimed an amount of ₹ 22,30,19,487/- on account of captive power plant as exempt u/s.80IA. The AO noted that while working out the income the assessee has adopted the rate of electricity unit of ₹ 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 reported in 103 ITD 19 (Mumbai), the AO was of the opinion that 5% of electricity charges are required to be excluded while working out the profits from eligible business. He further noted that the CIT(A), while deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferring the manufactured electricity from C.P.P. unit to other unit, has taken into account the electricity tax levied by the State Government on the bill amount @ ₹ 0.18 per unit charged by the Tamilnadu Electricity Board from the consumers on the bill raised. The CIT (A) was of the view that the electricity tax is a statutory 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. The relevant section 80IA(8) of the IT Act reads as under :- Deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development, 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 carried 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 eligible business and, in either case, the consideration, if any, for such transfer as recorded in the accounts of the eligible business does not correspond to the market value of such goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of the latter situation, the price fixed between the buyer and seller cannot be understood as denoting the market price since the elements of trade and competition are conspicuous by their absence. 18.4 The facts of West Coast Paper Mills Ltd. are that the assessee was engaged in the manufacture and sale of paper and paper boards, multi- layer boards, etc. and in the business of power generation. The assessee had set up four DG 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 assessee s captive power requirement. The AO was of the view that it was only an inter-division transfer and there was no revenue realized by it and consequently there was no derivation of prof it or income in the business of industrial undertaking. The assessee adopted the rate at which the Karnatake Electricity Board supplied power to industrial users. According to the AO, these rates were unrealistic as the Karnataka Electricity Board was not expected to purchase power from the assessee and it was also unrealistic to expect the Karnataka electricity board to purchase pow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on facts. 18.5 In the light of above discussions if we considered the facts of the case under consideration we noticed that the AO did not dispute the price taken by the assessee. The CIT)A( has taken action under section 251(1)(c) of the Act whereas the requirement of the section is that Where any goods held for the purposes of the eligible business are transferred 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 and, in either case, the consideration, if any, for such transfer as recorded in the accounts of the eligible business does not correspond to the market value of such goods as on the date of the transfer, then, for the purposes of the deduction under this section, the prof its and gains of such eligible business shall be computed as if the transfer, in either case, had been made at the market value of such goods as on that date. For this purpose, there must be opinion of the AO, as proviso clearly provides that where, in the opinion of the Assessing Officer, the computation of the prof its and gains of the eligible business in the manner h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation of indirect expenses amounting to ₹ 68,09,675/-. 7.1 Facts of the case, in brief, are that the AO during the course of assessment proceedings noted that the assessee has debited amounts of ₹ 12,92,000/-, ₹ 2,34,92,000/- and ₹ 24,54,699/- on account of Auditor s fee, remuneration to M.D. and traveling expenses respectively. The total of the above amounts worked out to ₹ 2,72,38,699/-. The AO allocated 25% of the above amount as attributable to eligible business. He accordingly disallowed an amount of ₹ 68,09,675/- from the exempt amount. In appeal, the CIT(A) upheld the action of the AO for which the assessee is in appeal before us. 8. After hearing both the sides, we find similar issue had come up before the Tribunal in assessee s own case for the asst. year 2003-04. We find the Tribunal in ITA No.126/Mum/08 order dated 22-01-2010 has decided the issue in favour of the assessee by holding as under : 18.6 2nd reason for disallowance of deduction u/s 80IA is in respect of allocation of indirect expenses. We noticed that for the purpose of deduction under section 80IA only income derived from industrial under taking that has to be re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /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 ₹ 10,09,593, Income from sale of steam ₹ 44,07,753 and Misc. income ₹ 17,567. while deciding the issue related to allocation of indirect expenditure in Para No 15.2 of this order in principle we held that for the purpose of deduction under section 80IA only income derived from industrial under taking that has to be reckoned in computation, as such the income which are not derived from industrial unit is to be ignored. In the light of this principle, on careful consideration, the nature of sludge, which is being generated out of consumed furnace oil and LSHS by diesel generator set. The diesel generating set is one type of plant and machinery and any sludge coming out from the plant and machinery i.e. diesel generating set does not amount to derive income from industrial undertaking. The receipt of sale of sludge is the income which is not derived from industrial undertaking. Therefore, even in accordance with the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the order of CIT(A) on this issue and the claim of the assessee is allowed. The decision of the Tribunal for the asst. year 2003-04 has been followed by the Tribunal in assessee s own case for the asst. year 2004-05 vide ITA No.2580/Mum/08 order dated 22-03-2010. In view of the consistent decision of the Tribunal in assessee s own case and in absence 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 challenged the order of the CIT(A) in confirming the order of the AO levying interest 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 the assessing Officer of ₹ 22,80,000/- u/s.40A(9) being subsidy paid in respect of employees canteen. F ..... X X X X Extracts X X X X X X X X Extracts X X X X
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