DY. COMMISSIONER OF INCOME TAX, CIRCLE-2(1), HYDERABAD vs. KAKATIYA CEMENTS SUGAR & INDUSTRIES LIMITED, HYDERABAD

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ITA 268/HYD/2019Status: DisposedITAT Hyderabad23 July 2021AY 2014-1510 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the CIT(A)'s order, dismissing the Revenue's appeal. For the issue of the cogeneration power plant's eligibility for Section 80IA deduction, the Tribunal noted that coordinate benches of the ITAT had consistently ruled in favor of the assessee in its own cases for preceding assessment years (2007-08 to 2013-14). These decisions held that the power plant was a distinct and identifiable undertaking, not formed by splitting up or reconstruction of the existing business, and thus eligible for the deduction. The Tribunal found no reason to deviate from this judicial consistency. Regarding the valuation of power tariff, the Tribunal, following its own previous order in the assessee's case for AY 2007-08, directed the AO to adopt the tariff rate as finalized by the Appellate Tribunal of APERC, which was Rs. 2.69 per unit, instead of Rs. 3.48 per unit claimed by the assessee. However, it also directed that if the tariff rate is revised by a higher judicial forum, the AO should consider such revision. The Tribunal affirmed the CIT(A)'s decision to allow the Section 80IA deduction.

What were the facts?

The Revenue appealed the order of the CIT(A) for Assessment Year 2014-15, which allowed the assessee, M/s. Kakatiya Cement Sugar & Industries, a deduction under Section 80IA of the Income Tax Act, 1961, for its cogeneration power plant. The Assessing Officer (AO) had denied this deduction, stating the power plant was integrated with the existing sugar plant and not an independent undertaking. The CIT(A) had allowed the deduction, relying on previous orders of the Income Tax Appellate Tribunal (ITAT) in the assessee's own case for Assessment Years 2007-08 to 2013-14, which held the power plant eligible for the deduction. The Revenue's appeal challenged the CIT(A)'s findings on the eligibility of the cogeneration power plant for Section 80IA deduction and the valuation of LP steam.

What were the issues?

1. Whether the CIT(A) erred in law by holding that the cogeneration power plant is an independent undertaking eligible for deduction under Section 80IA, despite its operations being integrated with the existing sugar plant? 2. Whether the CIT(A) erred in law by equating the generation of LP steam, considered a waste product, with the generation of power, which is eligible for deduction under Section 80IA? Assessee's Contentions: The assessee argued that the power plant is a distinct industrial undertaking, established under a separate license, with separate premises and technology, and that previous ITAT decisions in its own case for Assessment Years 2007-08 onwards have consistently allowed the Section 80IA deduction. The assessee also contended that LP steam has value and is eligible for deduction. Revenue's Contentions: The Revenue contended that the power plant's operations are integrated with the existing sugar plant, questioning its eligibility as an independent undertaking for Section 80IA deduction. It also questioned whether LP steam, described as a waste product, should be treated as power eligible for the deduction, and whether it has a definite market value.

Which sections of the Income-tax Act were involved?

Section 80IA,Section 143(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, HYDERABAD ‘ A ‘ BENCH, HYDERABAD.

Before: SHRI S.S. GODARA & SHRI L. P. SAHU

For Appellant: Smt. N. Esther (D.R.)
Hearing: 31.05.2021Pronounced: 23.07.2021

O R D E R Per Shri S.S. Godara, J.M. : This Revenue’s appeal for Asst. Year 2014-15 arises from the Commissioner of Income Tax (Appeals)-2, Hyderabad’s order dt.18.12.2018 passed in case No.10292/2017-18/CIT(A)-2 in proceedings under Section 143(3) of Income Tax Act, 1961 (‘the Act’).

Case called twice. None appeared on behalf of the assessee. It is accordingly proceeded exparte.

2.

The Revenue has proposed the following substantive grounds in this appeal :

1. In the facts and circumstances of the case, whether the CIT(A) is correct in law in holding that cogeneration power plant is an independent undertaking eligible for deduction u/s.80IA of the Income Tax Act,1961 when the operations are integrated with the existing sugar plant ? 2. In the facts and circumstances of the case, whether the CIT(A) is correct in law in holding that generation of LP steam which is a waste product with no value is equal to generation of power which is eligible for deduction u/s. 80IA of the Income Tax Act ? 3. In the facts and circumstances of the case, whether the CIT(A) is correct in law in holding that LP steam has definite value where as such LP steam has no market value and I fact a marketable commodity ?

3.

We notice with the able assistance of learned department representative that the CIT(A) detailed discussion holding the assessee as eligible for 80IA deduction reads as under :

4.

This tribunal’s co-ordinate bench orders in Assessment Years 2012-13 and 2016-17 involving Revenue’s appeals in ITA 1283/Hyd/2017 and 1598/Hyd/2019 dt.9.4.2021 has already upheld the CIT(A)’s identical action by adopting judicial consistency thereby holding the assessee’s power plant is eligible for 80IA deduction. The Revenue is fair enough in not pin pointing any exception except mentioning tribunal's above cited order (supra) in earlier assessment years. We thus see no reason to adopt a different approach in the impugned assessment year. The CIT(A)’s lower appellate findings stand affirmed therefore.

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