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TMI Blog2021 (11) TMI 260X X X X Extracts X X X X X X X X Extracts X X X X ..... see can only claim internal cup when it also sales power to SEB. Here it purchases power from SEB therefore it cannot be used as an internal cup but is rightly held by the learned dispute resolution panel to be an external cup. Whether the learned that TPO has correctly adopted IEX rates for the purpose of benchmarking the transaction of sale of power by Kota eligible unit to non eligible unit? - whether the Indian energy exchange rates are proper external cup or not? - HELD THAT:- Much sanctity is attached to the rates adopted by SEBs. TPO has failed to show the reason of such a wide disparity between the rates of Indian energy exchange which is a spot exchange compared with the rates at which the energy is actually consumed in that geographical region. This does not mean that the quoted price cannot be used for the comparability analysis in cup method. But if the prices are so divergent and the difference between the two external cup becomes irreconcilable, the external cup price which is more reliable should be used. Therefore, in our view, IEX rates for these reasons cannot be said to be an external cup available for invoking the provisions of first proviso to Section 92C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble Delhi High court in ACB India limited [ 2018 (3) TMI 1448 - SC ORDER] . In view of this we direct the ld AO to retain the disallowance offered by assessee as disallowance u/s 14 A of the Act only to the extent of Rs. ₹ 6,399,219/ which is offered by the assessee itself and delete the balance. Accordingly Ground no 4 of the appeal is allowed. Addition made to the income of the assessee Under the head capital gains by invoking the provisions of Section 50 C - HELD THAT:- Provision of section 50C (2) provides that where the assessee claims before the ld AO that stamp duty value exceeds the fair market value, then the Ld AO is duty bound to refer the matter to the DVO for determining fair market value of that property. This fact is also noted by the ld DRP but upheld the action of the ld AO for the reason that assessee objected to adoption of stamp duty value as deemed consideration at a very late stage , so ld AO did not have enough time to refer the matter to DVO. Assessee also disputed that the stamp duty valuation is of the commercial properties where as the assessee has purchased agricultural land only. Therefore even otherwise the stamp duty rates of the property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e) against the order passed by the learned Additional Commissioner Of Income Tax, special range 3, New Delhi (the learned AO) u/s 143 (3) read with Section 144 (C) of The Income Tax Act, 1961 (The Act) dated 31/10/2018 for assessment year 2014 15. 02. Assessee has raised following grounds of appeal:- 1. General Grounds 1.1 The Ld. DRP/AO have erred in law and on facts, and in the circumstances of the appellant s case in making an addition/adjustment of ₹ 1,30,10,43,765/- on account of the order of the TransferPricing Officer (TPO) u/s 92CA(3) and making an addition/disallowance of ₹ 4,12,79,790/- on account of non-transfer pricing additions / disallowances. 1.2 That the final assessment order u/s 143(3) r.w.s. 144C of the Act dated 31 October 2018 is bad in law. 1.3 That the additions/disallowances made by Ld. AO are wholly illegal, untenable and on erroneous grounds. GROUNDS OF APPEALS IN RESPECT OF TRANSFER PRICING ADJUSTMENTS Transfer of power-₹ 26,52,98,490/- 2. That the Ld. DRP/TPO/AO have erred in law and facts and in circumstances of the case in making an adjustment of ₹ 26,52,98,590/- to the arm s lengt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... since assessment year 1997-98. 2.7 It is prayed before Hon'ble ITAT that adjustment made by the Ld. AO in respect of transfer of power may kindly be deleted by upholding the assessee s approach of using internal CUP over IEX rates. Transfer of steam ₹ 1,03,57,45,275/- 3. That the Ld. DRP/TPO/AO have erred in law and facts and in circumstances of the case in making an adjustment of ?103,57,45,275/- to the arm s length price of transfer of steam from eligible units to non-eligible units on wholly illegal and erroneous grounds. 3.1 That Ld. DRP and consequently Ld. AO have grossly erred in law and on facts and in circumstances of the appellant s case in merely confirming the Ld, TPO s action of determining the ALP of transfer of steam at NIL, without providing any reasoning or passing a speaking order on the issue. 3.2 The Ld. TPO/AO have grossly erred in law by proposing transfer pricing adjustment in respect of transaction of transfer of steam without giving any opportunity/issuing a proper show cause notice u/s 92CA(2), thus not following the principle of natural justice. The adjustment made therefore, is prayed to be quashed. 3.3 The Ld. D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bearing investments, in spite of the fact that no such term loans were applied by appellant for making such investments. 4.2 The Ld. DRP and consequently Ld. AO have, while enhancing disallowance u/s 14A of the Act, grossly erred in holding that the entire amount of finance cost of ? 75.02 Crores is indirectly attributable for earning a dividend income, disregarding the fact that no interest expenditure is disallowable as owned funds of the company are much more than the amount of investments and thus clause (ii) of rule 8D(2) is not attracted. 4.3 The Ld. DRP and consequently Ld. AO have erred in making disallowance u/s 14A of the Act disregarding the order of Hon ble Jurisdictional High Court in assessee s own case for AY 2008-09, Hon ble ITAT s order for AY 2009-10 and for AY 2010-11, 4.4 It is prayed before Hon ble ITAT that disallowance u/s 14A r.w.r. 8D(2)(ii) made by the Ld. AO may kindly be deleted. Addition u/s 50C of the Act ₹ 2,57,31,000/- 5. That the Ld. DRP/AO have erred in law and facts and in circumstances of the appellant s case by making an addition of ?2,57,31,000/- u/s 50C of the Act which is against the mandate of law and thus bad in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome tax and book profit remained the same but the revision took place because of the claim of tax deduction at source as per updated form number 26AS. The case of the assessee was picked up for scrutiny and notice u/s 143 (2) of the act was issued on 1/9/2015. 05. During the course of assessment proceedings, ld AO noticed that the assessee company has entered in to International Transactions [IA] in the form of specified domestic transactions (SDT) with Associated Enterprises [AE]. The transactions were either covered u/s 40 A (2) (b) or are covered u/s 80 IA of the act. Mainly specific domestic transactions were with respect to transfer of low-pressure steam from eligible business to other non-eligible businesses and transfer of power from its captive power plants (eligible business for deduction u/s 80 IA of the act) to other non-eligible businesses. Therefore, learned AO referred to the Additional Commissioner of Income Tax, Transfer Pricing Officer 1 (2), New Delhi, [learned Transfer Pricing Officer/TPO] to determine the arm s-length price of the international transactions entered into by the assessee as per the provisions of Section 92CA of the act. 06. As stated, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate which was purchased from DGVCL and rate on which power was purchased from JVVNL in Rajasthan region at ₹ 8.35 per unit. 09. The learned transfer-pricing officer examined the above benchmarking and he was of the view that Indian Energy Exchange (IEX), the main exchange where nearly 95 96 percentage of the power is traded, such quoted rates should be adopted. Therefore, he issued notice u/s 133 (6) of the act to IEX on 6/10/2017 which was replied on 11/10/2017 wherein it was found that the average sale price for the year 2013 14 was per unit of KWH is ₹ 2.55 in UP , ₹ 2 .55 in Rajasthan region and ₹ 2.52 in Gujarat region. Therefore, based on this information the assessee was asked that why external cup should not be applied in this case and sale rate of power could not be taken at the average price of IEX and at the price at which power was purchased and sold by the assessee instead of rate shown by the assessee. 10. Assessee submitted its reply on 30/10/2017 objecting to the adoption of price from Indian energy exchange stating that it is not an appropriate CUP data in comparison with assessee s actual transaction of transfer of power, whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ates of the Indian energy exchange, the learned TPO was of the view that those are required to be adopted and therefore, he adopted the external CUP data for determination of arms length price of those transactions. After considering the submission of the assessee, the learned transfer-pricing officer devised a method to adjust the arm s-length price of the power supplied by the eligible unit to non-eligible unit. For each of the transaction he took the rates at which power was purchased and sold from the respective DISCOMS, he also considered the average of IEX rates i.e. ₹ 2 .55 per unit. He took average price of both the above prices. He took this price as the arm s-length price of the power supplied. He found the difference between the rates charged by the assessee from eligible units to non-eligible units and worked out the difference between the two. He found that in Uttar Pradesh region and Rajasthan region, the prices charged by eligible units to non-eligible units are higher and therefore he proposed an adjustment. Precisely the learned TPO held that the power rate in Uttar Pradesh region has the arm s-length price of ₹ 3.47 per unit and in case of Rajasthan un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee for other purposes but obviously does not have any cost. Entire cost has been utilized for generation of power. He further held that the power plant was not installed for steam production but for power generation. The unutilized steam is only used for other purposes. According to him, As such, entire cost is for power generation and steam being byproduct, does not have any cost. As the assessee has transferred the steam on cost price, he rejected the most appropriate method adopted by the assessee. In the end , He held that the steam is used for generation of electricity thus the cost of electricity absorbs entire cost of production of steam and therefore the resultant cost of excess team is Rs NIL . He further held that the steam is only a byproduct of the process of manufacturing power and it bears no cost. He therefore held that the cost of producing steam is Nil. He held that since cost of steam is already considered while generating power, therefore, the resultant cost is nil and therefore no markup has to be added for transferring the same to the non-exempt unit. In such an eventuality, he considered the arm s-length price of transfer of steam at Rs Nil resulting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ale consideration shown by the assessee. Assessee objected to the same as the learned AO asked the assessee that why the stamp duty rate should not be applied as the deemed sale consideration. Assessee submitted that the land are sold which are located in an agricultural area and further assessee has purchased those land for the purpose of setting up retail stores in the rural areas and later on as such business was not found to be suitable , it decided to close down the business and therefore these properties are sold. Assessee submitted that these properties are agricultural land only. Pursuant to this decision of closing of the business, lands located at various places were disposed of. The stamp duty rates adopted were for the commercial properties whereas the land is situated in agricultural areas. Assessee further submitted, if stamp duty value of agricultural land is adopted the sale consideration is shown by the assessee is much higher and therefore no addition is warranted Under the provisions of Section 50C of the act. The learned assessing officer rejected the contention of the assessee and adopted the stamp valuation rates for the purpose of determination of deemed cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge number 22 of its direction held that since the transfer pricing officer has held that since cost of steam is already considered while generating power and therefore the resultant cost of production of steam is Rs Nil and therefore no markup is to be added for transferring the same to the nonexempt unit. Accordingly, the learned Dispute Resolution Panel held that they are in agreement with the reasons given by the transfer-pricing officer. iii. With respect to the disallowance u/s 14 A of the act, the learned DRP directed the learned assessing officer to compute the indirect interest expenditure Under rule 8D (2) (ii) of the act only with respect to the dividend bearing investment and further for the purpose of rule 8D (2) (iii) the disallowance made by the assessee itself of ₹ 6,399,219 was upheld. iv. With respect to addition u/s 50 C of the act of ₹ 2, 57,31,000 where the sale consideration of the land is lower than the stamp duty valuation rates the learned dispute resolution panel noted that that the reply of the assessee was submitted to the learned assessing officer on 18th/12/2017 and the draft order was passed by the learned assessing officer on 29/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw, it is prayed that the same may please to be admitted in view of aforesaid judgments. 5. It is prayed that in the interest of justice, the additional ground of appeal on education cess may be admitted by the Hon ble ITAT and the same may please be adjudicated along with the other grounds of appeal. 19. Mainly there are only three issues involved in this appeal:- i. the determination of the deduction u/s 80 IA of the income tax act with respect to the transfer price of the power transferred by the assessee from eligible unit to non eligible unit and the transfer price of the steam transferred by the assessee from eligible unit to non eligible unit. (Covered by ground number 2 3) ii. Disallowance confirmed by the learned dispute resolution panel in its direction to the extent of ₹ 1, 55,48,790/ u/s 14 A of the income tax act and consequent adjustment to the book profit u/s 115JB of the act. (Covered by ground number 4 6) iii. addition on account of difference between the market value of the property sold and the actual sale consideration by application of the provisions of Section 50 C of the act whereby the addition of ₹ 2,57,31,000 is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hange only the power is traded and not produced. It further shows only 3% of the total electricity generated data. He further stated that it is a sport exchange and is not comparable to the assessee s case. He further stated that there is no surety in relation to the availability of power. He also objected to the fact that the rates obtained u/s 133 (6) do not qualify as an appropriate comparable that for the application of cup method as these are material. He referred to the provisions of rule 10 B (2) of the income tax rules. He further submitted that Under the exchange by has to pay for the electricity quantity bid rather than the quantity actual used. His main argument was that there is material differences between the terms and conditions of the transactions entered into by the assessee and those published on the exchange. iv. With respect to the exchange base rate and exchange landed cost, he submitted that these rates are further required to be adjusted even otherwise for the electricity duty, other taxes, and variable charges. He submitted that the assessee s transaction is even otherwise are at arm s-length even if actual power purchase price from JVVNL (₹ 8.35) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 22. Therefore, according to him, the order passed by the learned transfer-pricing officer and confirmed by the learned dispute resolution panel to that extent is not sustainable in law. 23. The learned CIT DR vehemently supported the orders of the lower authorities. It was stated that the reliance placed by the learned authorised representative on the rule of consistency need not be followed because of the reason that in those years i.e. assessment year 97, 98 there were no transfer pricing provisions applicable to deduction u/s 80 IA (8) of the act. He further submitted that direction of the learned dispute resolution panel should prevail over the order of the learned CIT A relied upon by the assessee for assessment year 2015 16. In view of this, the learned CIT DR submitted that the order passed by the learned that transfer pricing officer and confirmed by the learned dispute resolution panel deserves to be upheld. 24. We have carefully considered the rival contention and perused the orders of the lower authorities. Brief facts of the case is that assessee has sold power from its eligible units to its non eligible units in Uttar Pradesh, Rajasthan and Gujarat reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The difference in rates Amount of adjustment U P Region Tg 1 Loni 1,86,41,986 4.29 7,99,74,118 4.39 2.55 3.47 0.82 1,52,80,429 TG II Loni 9,23,797 4.20 38,79,947 4.39 2.55 3.47 0.73 6,74,372 TG I Hariawan 1,93,06,294 4.29 8,28,24,001 4.39 2.55 3.47 0.82 1,58,31,161 TG-II Hariawan 8,51,577 4.29 36,53,265 4.39 2.55 3.47 0.82 6,98,293 TG-II Ajabpur 34,83,722 4.24 1,47,70,983 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t that the assessee has sold surplus power generated from the power units at Ajbapur , Hariawan and Loni in UP to SEBs as per agreements with them for sale of surplus power, and in respect of the power unit at Kota in Rajasthan, the assessee has purchased power from the SEB. The assessee has taken both the power sold to the three SEBS in UP as well as power purchased from SEB in Kota as internal cup. This is a fallacious and incorrect method since while the former are internal cup, the latter could only be an external cup. 2.2.7 the assessee has submitted copies of agreement with SEBs in respect of the three power units in UP for sale of surplus power to them. The assessee has entered into separate agreements with Madhaynchal Vidhyut Vitran Nigam Limited in respect of three units at hariwan [ wef 1/3/2006 ] ] Loni [ with effect from 6/12/22006] and Ajbapur from [with effect from 26/12/2006]. The assessee has also submitted the invoices of power bills duly verified by the executive engineer and not all officers of the respective SEB according to which the rate of sale of power by the assessee two SEB at Hariawan is ₹ 4.39 per kilowatt (March 2014), ₹ 4.39 per kilowa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m eligible unit to non eligible unit with respect to UP. This is so for the reason that in UP region assessee sales power to SEBs and therefore it is an internal cup accepted by the learned DRP also. However in Kota, Rajasthan, assessee purchases power but it does not sell the power and in that circumstances it cannot be said to be an internal cup applied by the assessee. Therefore we are in agreement with the learned dispute resolution panel that for the purpose of benchmarking of power transferred from eligible unit to non eligible unit assessee can only claim internal cup when it also sales power to SEB. Here it purchases power from SEB therefore it cannot be used as an internal cup but is rightly held by the learned dispute resolution panel to be an external cup. 29. Now the issue arises is that whether the learned that TPO has correctly adopted IEX rates for the purpose of benchmarking the transaction of sale of power by Kota eligible unit to non eligible unit. We look at the provisions of Section 92C (2) of the act which provides as per the first proviso to that Section that where more than one price is determined by the most appropriate method, the arm s-length price sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roperty associated with the sale, foreign currency risks and alternatives realistically available to the buyer and seller the learned transfer pricing officer has used the average sale price for the financial year 2013 14 available at the Indian energy exchange. Therefore there cannot be much of the grievance when the assessee also charges the same rate for the whole year. However the claim made by the assessee before us which remains uncontroverted is that Indian energy exchange is not the main exchange where the power is traded. As per the Indian power market journey so far and way forward June 2014 report published by Indian energy exchange which is available in public domain has categorically stated that the size of power exchange-based market has grown to 3% approximately of the total electricity generated. Therefore the argument of the learned transfer pricing officer that Indian energy exchange is the main exchange where nearly 95 96% of power is traded is a negative by the report of Indian energy exchange itself. Therefore it is apparent that it is the very minuscule part of the total power traded. Further the Indian energy exchange is a spot exchange and cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... comes irreconcilable, the external cup price which is more reliable should be used. Therefore, in our view, IEX rates for these reasons cannot be said to be an external cup available for invoking the provisions of first proviso to Section 92C (2) of the act. 33. Further in case of the assessee for assessment year 2015 16 , external corporate of purchase price of power from SEB is used as a comparable discarding the Indian energy exchange rate by the learned CIT A, and the same order has not been challenged before the higher forum, it becomes final. This shows that in the subsequent year the learned transfer pricing officer/assessing officer has accepted the methodology of benchmarking the transaction of transfer of power in Rajasthan from eligible unit to non eligible unit at the purchase price of power from SEB. 34. In view of the above facts we do not find any infirmity in the benchmarking analysis of the assessee wherein the assessee has considered rate of ₹ 6.30 per kilowatt against the rate of power purchase paid by the assessee to Jaipur Vidyiut Vitran Nigam Limited at the rate of ₹ 8.35 per kilowatt, using the external cup for comparability. Accordi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... value cannot be taken as a nil. It is further held that the steam is a form of power and hence eligible for deduction u/s 80 IA of the act. vi. It was further stated that the total cost of production is located between electricity and steam based on the scientific basis since inception and which is also substantiated by the Cost sheets is certified by the cost accountant following the cost accounting rules. vii. It was further stated that the entire cost has not been utilized for generation of the power but it is a residual steam as a usable low-pressure steam, which is desired with requisite characteristics used by sugar units for crystallization process. He further submitted that assessee uses both high pressure and low pressure steam for its processes and nothing is left unutilized viii. it was further stated that on careful analysis of the accounts he referred to page number 94 of the submission that the power sale for instance in case of Hariawan TPG is only around 22% of the total cost incurred by the power units. Therefore, the production of steam is not an unintentional but an essential ingredient for both production of power and sugar. ix. He submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed transfer pricing officer objected to the same and initially stated that assessee should have adopted the cost plus method for the benchmarking of transfer of steam. However letter on when the assessee contended that if the assessee would have used the cost plus method, the relevant deduction u/s 80 IA would have been much higher. Thereafter, the learned transfer pricing officer changed its stand and directed the assessee to submit a statement of cost of production of steam manufactured during the period 1/4/2013 231/3/2014. Assessee stated that it is submitted original set of corsets of the cost of production of steam transferred certified by the cost accountant. However letter on the learned transfer pricing officer on examining the process of power generation stated that the power plants are not installed for steam production but for power generation and as steam being byproduct do not have any cost. Therefore he rejected the most appropriate method applied by the assessee he further held that activity regarding production of steam shows that steam is produced as a result of burning of fuel in boiler. This steam is used for generation of electricity. Thus the entire cost of el ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prise water, fuel, power, direct expenses ( such as boiler inspection fee) consumable stores, direct employee cost, repair and maintenance, depreciation, inter utility transfer and factory overhead. For example: Cost of power generation will include cost of fuel such as furnace oil, coal, salaries and wages, consumable stores, repair and maintenance, deprecation and factory overhead. Unit cost is arrived at on the basis of the net aggregate consumption in different departments after adjusting transmission losses. In case of cogeneration (power and steam) where waste heat from TG (Turbine Generation) is recovered in waste heat recovery unit and used for production of steam, due credit should be given to the Power plant and corresponding charge to SGP(Steam Generation Plant). Charging of power to the consuming cost object is generally done at the weighted average of the cost of power purchased , generated and distribution cost at the consuming point. Steam: A separate statement of cost of steam is prepared indicating the quantity of steam generated, cost of fuel, soft water, power, employee cost for operating staff, sundry supplies, chemical additives, deprecation and other works ov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion cost ascertainment and reapportionment of inter utility. This application may be used for determining inter-utility transfer cost. Quantitative records of production and distribution should be recorded for each utility to measure the unit cost of a utility. An illustration of steam cost is at Annexure 2. 39. In the annexure 2 it is given and examples of the total steam cost to be determined in the manner when it is transferred to other units as Under:- Examples of Steam cost Transfer to Other units Steam cost per tonne works out to ₹ 471.09 as illustrated under Annexure 2. If steam is transferred to other unit, distribution cost will be in addition to the above cost as illustrated below 1 Steam generation cost as 5.3.1 above ₹ 471.09 Per MT 2 Distribution cost : Operation Maintenance cost of distribution line Depreciation Other Total Distribution cost Per MT ₹ 1.00 ₹ 0.75 ₹ 0.75 ₹ 2.50 3. Inter Unit transfer cost ₹ 473.59 Cost of a utility determined as per para 5.3.2 plus share of administrative overhead to be charged. 40. Therefore, from the above analysis it is apparent that the learned revenue authorities have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 14. The case of the Revenue is that steam is only an intermediate raw material for the manufacturing process. In other words, the production of steam is only a byproduct, which is used by the assessee for its manufacturing activity. 15. In this regard, the CIT (A) recorded the following findings: 2. The appellant has also claimed deduction under section 80 IA on account of sale of steam to the chemical plant. The steam was generated by the power plant in the boiler and part of it was also utilised for the chemical process of the non-eligible unit. The AO has held that the appellant was not entitled to the deduction on account of sale of steam to the power plant. It has been held by her that steam does not fall within the meaning of power . In this reference she has made reliance on the judgment of honourable ITAT Ahmadabad in the case of N R Agrawal Industries Ltd v. DCIT dated 26/07/2013. The appellant on the other hand has submitted that the value of steam should be considered for arriving the profit as the scheme is being gererated for generation of electricity and after utilising the same for electricity generation the balance steam is used for the chemi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... useful to understand the process involved. The appellant has installed a boiler which generates high-pressure steam at a very high temperature. The steam is first fed in the turbine where part of the heat energy of the steam is utilized in generating the electricity and the balance energy available in the steam coming out from the turbine is utilised in the chemical process. The appellant is incurring expenses such as coal consumption, boiler running, depreciation of boiler and other machinery and the building in which the whole generation plant is housed. The expenditure for the steam, which is utilised in generation of power, and the balance steam which is utilised by the chemical plant can be determined by distributing the same in proportion to the heat value (Enthalpy) of the inlet steam and the outlet steam of the turbine. As per the details available on record the heat value of the inlet steam at 65.5 KG/cm2 is 793 kcal per KG whereas the heat value of the output steam at 3.5 KG/cm2 is 653.7 kcal per KG. The quantity of input and output steam remains the same and only the calorific value of the heat value goes down as part of the energy is utilised for generation of power. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... directed to work out the proportionate allocation of these expenses by obtaining suitable details from the AO. The details of following expenses are readily available from record:- Expenses for generation of steam 9321977 Depreciation on turbine 1289189 Electricity duty 787872 The AO is also directed to verity the above figures. Accordingly the AO is directed to rework the deduction under section 80I-A claimed by the appellant as indicated in the preceding discussion. 16. The Tribunal, concurred with the aforesaid findings recorded by the CIT (A), by taking support of the decision of a Co-ordinate Bench of the ITAT, Mumbai, in the case of West Cost Paper Mills (P.) Ltd. v. CIT, [2014] 52 taxmann.com 268. As regards section 80IA of the Act, strong reliance has been placed on behalf of the Revenue on the decision of this Court in the case of CIT v. Atul Ltd. [2016] 74 taxmann.com 255. In Atul Ltd. (supra), the assessee had established a new power plant by expending a sum of ₹ 14.62 Crore and claimed deduction under section 80IA. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts in the case of Atul Ltd. (supra) are quite different and the ratio, as propounded in the same, will have no applicability to the case on hand, more particularly, the question No. 3 with which we are dealing with. 21. It is difficult for us to take the view as suggested by the learned standing counsel appearing for the Revenue that steam would not amount to power. The word Power used in Section 80IA(4) has not been defined under the Income-tax Act. 22. The word Power should be understood in common parlance as Energy . Energy can be in any form being mechanical, electricity, wind or thermal. In such circumstances, the steam produced by the assessee can be termed as power and would qualify for the benefits available under section 80IA(4) of the Act. 45. Further Hon ble Supreme Court in CIT v. Tanfac Industries Ltd., SLP (C) No. 18537 of 2009 [319 ITR 8 (st)] wherein while applying section 80-IA of the IT Act, the Hon ble Supreme Court took a view that the value of steam used for captive consumption by the assessee was entitled to be deducted under section 80-IA of the Act. 46. Therefore it is apparent that i. steam is a valuable sources of po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring funds for making investment for earning exempt income. He further referred to several judicial precedents on this issue. He further stated that even otherwise interest expenses directly attributable to a particular purpose cannot be considered for the purpose of disallowance u/s 14 A of the income tax act unless there are other compelling reasons. In view of this, he submitted that the assessee has already offered the disallowance of ₹ 6,399,219/ being 0.50 percentage of the average value of investment towards the administrative expenditure against the total dividend income received of ₹ 91,388,245/ . He submitted that the working is based on which the assessee has worked out the disallowance is in line with the several judicial precedents of the honourable High Court. 49. The learned CIT DR vehemently supported the orders of the lower authorities with respect to the disallowance u/s 14 A of the act. 50. We have carefully considered the rival contention and perused the orders of the lower authorities. We have also considered the various judicial precedents cited before us. In fact undeniably the assessee has interest free funds available which are 12.82 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he matter to the valuation Officer with respect to the valuation of the of the said property. He further submitted that when assessee objects before the learned assessing officer about the adoption of stamp duty rate for the purpose of computation of the capital gain by invoking the provisions of Section 50 C of the act, the assessing officer is duty-bound to refer the same to the District valuation Officer for determining the fair value of the property. This has not been done and therefore the addition deserves to be deleted on this count itself. 52. The learned CIT DR submitted that assessee has objected to before the learned assessing officer with respect to the adoption of the fair market value in terms of the market value of the property for computation of capital gain at the fag and of the assessment proceedings and therefore same could not have been referred by the learned assessing officer to the valuation Officer. He otherwise submitted that the assessee does not dispute that transaction value of the sale of the property is less than the market value of the property. He submitted that there is no infirmity in the order of the learned assessing officer as it is mandate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve submitted that that there is an addition of ₹ 1 55,48,798/ made by the learned assessing officer u/s 115JB of the income tax act which was disallowed u/s 14 A of the act. He submitted that there is no provision for making the disallowance u/s 14 A of the act as per the expression to provisions of Section 115JB of the act. Even otherwise, he submitted that the issue is squarely covered in favour of the assessee by the decision of the special bench in case of Vireet Investments. He further submitted that the learned assessing officer has not made any addition/disallowances u/s 115JB of the act at the time of passing of the draft assessment order however, in the final assessment order he has made the adjustment, which is not permissible. 55. The learned CIT DR vehemently supported the order of the learned assessing officer. 56. We have carefully considered the rival contention and perused the orders of the lower authorities. We find that this issue is squarely covered in favour of the assessee by the decision of special bench in case of ACIT V Vireet Investments [P] Ltd [2017] 82 taxmann.com 415 (Delhi - Trib.) (SB)/[2017] 58 ITR(T) 313 (Delhi - Trib.) (SB)/[2017] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /2018 decided on 31st July, 2018 and the Hon ble Bombay High Court (Goa Bench) in the case of Sesa Goa Limited vs. JCIT in Tax Appeal No. 17/2013 vide its judgment dated 28th February, 2020. Further reliance may be placed on the Hon ble ITAT judgment in case of Philips India Limited [TS-326- ITAT-2020(Kol)],Sicpa India Private Ltd. [TS-154-ITAT-2020(DEL)] and Reckitt Benckiser (India) Private Limited [TS-614-ITAT-2020(Kol)] for allowance of claim of education cess u/s 37 of the Act. 62. The Ld DR vehemently opposed the above claim and submitted that i. education cess is an additional surcharge on the tax levied ii. the word cess has not been defined under the Act, however, way back the Hon ble Supreme Court in the year 1967 in the case of Shinde Brothers, (AIR 1967 SC 1512) held that it is a tax only. iii. Hon ble Supreme Court has been referred in India Cement India Ltd. Vs. State of Tamil Nadu (1990) 1 SCC 12; wherein the Hon ble Supreme Court after referring to the judgment in the case of Shinde Brothers (supra) held that ordinarily a cess is also a tax, but is a special kind of a tax. Further, in Union of India v. Mohit Mineral (P) Ltd. [TS512-SC-2018-NT], ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to and not the view expressed in a decision of this Court or the High Court. So far as the clarifications/circulars issued by the Central Government and of the State Government are concerned they represent merely their understanding of the statutory provisions. They are not binding upon the court. It is for the Court to declare what the particular provision of statute says and it is not for the Executive. Looked at from another angle, a circular which is contrary to the statutory provisions has really no existence in law. xiv. It was submitted that above decision is of 5 judges bench and must be considered. xv. law declared by this Court is supreme law of the land under Article 141 of the Constitution of India, 1950 (in short the `Constitution'). The Circulars cannot be given primacy over the decisions. Even the decision of honourable high court should not be followed, if honourable supreme court has decided otherwise. xvi. He extensively referred the provision of section 2 (28A), section 4 of the income tax act. xvii. He otherwise submitted that cess does not accrue during the year as it is determined only at the time of computation which happens in next y ..... X X X X Extracts X X X X X X X X Extracts X X X X
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