CENTURY TEXTILES AND INDUSTRIES LIMITED,MUMBAI vs. ASST. COMMISSIONER OF INCOME TAX – 6(2)(1), MUMBAI, MUMBAI

1. This appeal in preferred by the Revenue arises out of order passed by the National Faceless Appeal Centre (NFAC) [hereinafter referred to as ld. CIT(A)] in Appeal No. ITBA/IFAC/S/250/2022-23/104308543(i) dated 11.06.2022 against the order passed by the learned Deputy Commissioner of Income Tax Circle – 6(2), Mumbai [ hereinafter referred to as a ld. AO] under section (u/s) 143(3) of the Income Tax Act [hereinafter referred to as the ‘Act’] on 28.03.2014 for the Assessment Year (A.Y.) 2011-12.

The Assessee Company has several units which are located in different parts of the country. The Assessee Company has claimed deduction u/s 80IA of the Act in respect of the following two power plants:- A. Century Cement thermal Power Plant (II)(10 MW) - Rs. 14,98,17117/- B. Maihar Cement thermal Power Plant (II)(15 MW) – Rs. 23,11,39,596/-

Aggrieved the Revenue is in appeal before us. At the outset, we find that the ld. AO in order to arrive at the aforesaid conclusion had nearly relied on the findings of administrative CIT in earlier years. We find, that this tribunal in 3021/Mum/2013, 3022/Mum/2013 for Assessment years 2007-08, 2008-09 & 2009-10 respectively; in ITA No. 3030/Mum/2013 & 3031/Mum/2013 for the 6 & 2085/Mum/2022 Century textile & Industries Ltd. Mumbai Assessment years 2008-09 & 2009-10 respectively dated 14.02.2018 had decided the issue in favour of the Assessee. The relevant operative portion of said order is reproduced is hereunder:- 11. Under this issue the assessee has challenged the confirmation of the finding of the AO in which the claim of the assessee u/s 80-IA of the Act was reduced to the tune of Rs.8,36,47,008/-. The assessee has claimed the deduction u/s 80-1A of the Act in respect of following four power plants namely:- (i)Century Cement Thermal Power Plant (15 MW) Rs.10,47,38,366 (ii) Century Cement Thermal Power Plant 11 (10MW) Rs.6,56,19,618 (iii) Maihar Cement Thermal Power Plant (15.7 MW) Rs. 14,58,24,883 (iv) Maihar Cement Thermal Power Plant II(15.7 MW) Rs 10,20,52,172 Rs.41,82,35,039 12. The Assessing Officer was of the view that the assessee was selling the unit on the basis of Government Electricity Selling Authority and the Government Electricity Selling Authority was purchasing the electricity from the other agencies and distributing agencies was charging after considering the market value of 25% of their cost of purchases, therefore, the claim of the assessee to the extent of 25% mark up to the tune of Rs.8,36,47,008/- was declined and the admissible deduction u/s 80-IA of the Act was assessed to the tune of Rs.3,34,58,803/- The Ld. Representative of the assessee has argued that the AO has recalculating deduction u/s 80-IA by taking adhoc 25% markup price of Power Generating by appellant captively used following CIT directions vide his order dated 22.12.2008 passed u/s 263 of the Act for the A.Y. 2006-07 which has been quashed by Tribunal vide its order dated 14.06.2017. It is also argued that there is no basis for taking adhoc 25% as mark up of cost price of Power Generating Agency for determining market value u/s 80 IA of the Act and appellant was not selling the power to the State Distribution Agency, therefore, the cost at which State Electricity Board purchases power was not relevant to the appellant. It is also argued that the Electricity Board was independent body in different States and different electricity boards purchase power from different generating units according to the requirement which cannot be the basis to determine the cost of power generated by the appellant. The appellant has considered the prevailing market price of power in the area at which the power rate is charged by M.P. Poorv Kshetra Vidyut Vitaran Co. Ltd. (Electricity Board) during the A.Y. 2007-08 u/s 80 IA i.e.,, profit of eligible business has to be determined having regard to Market value of the goods & service that are transferred by eligible business to other business carried on by assessee. It is also argued that The explanation at the foot of Sec. 80 IA(8) also elucidate on the concept of market value in the following such as for the purpose of the Sub-section, market value in relation to any goods & service means the price that such goods & service would ordinarily fetch in the open market. It is also argued that the case of the assessee has duly been covered by the 7 & 2085/Mum/2022 Century textile & Industries Ltd. Mumbai assessee's own case for the AY 2006-07 wherein Hon'ble ITAT in ITA. No. 115/M/2011 dated 14.06.2017 has held that the market value of Electricity sold/supplied as provided u/s 80IA (8) of the Act can be adopted and the rate at which the assessee purchases electricity from the concerned State Electricity Board during the relevant period. There is no other method to find out the market values, it is rational and reasonable to adopt the rate at which the State Electricity Board Supplies electricity to similar types of consumers at the market value. The assessee also relied upon the cases i.e Principal CIT Vs. Gujarat Alkalies & Chemicals Ltd. (395 ITR 247), West Coast Paper Mills Vs. Jt. CIT(100 TTJ 833), ACIT VS. Jindal Steel & Power Ltd. (16 SOT 509) & CIT Vs. Godawari Power & Ispat Ltd., 42 Taxmann.com 551. However, on the other hand, the Ld. Representative of the Department has refuted the said contentions. Taking into account, facts and circumstances of the case, we noticed that the issue in question has duly been covered by the assessee's own case for the A.Y. 2006-07 decided by Hon'ble ITAT in ITA No. 115/M/2009 and 5473/M/2011 vide order dated 14.06.2017 in which it is specifically held that the market value of electricity sold/supplied as provided u/s 80IA(8) can be adopted and the rate at which the assessee purchases electricity from the concerned state electricity board during the relevant period. When there is no other method to find out the market value, it is rational and reasonable to adopt the rate at which the State Electricity Board supplies electricity to similar type of consumers at market value. The other law relied by the ld. Representative of the assessee also speak the same language. Taking into account, all the facts and circumstances of the case of assessee has duly been covered by the assessee's own case (supra). Therefore, the said circumstances, we set aside the finding of the CIT(A) on this issue and allowed the claim of the assessee u/s 80IA of the Act. Accordingly, this issue is being decided in favor of the assessee against the revenue.

Further, we find that this issue is no longer res integra in view of the decision of Hon’ble Jurisdictional High Court in case of CIT vs. Reliance Industries Ltd. reported in 421 ITR 686 (Bombay) wherein it was held as under:- 9. Additionally, we also notice that similar issue came up for consideration before Chhattisgarh High Court in case of CIT v. Godawari Power & Ispat Ltd. [2014] 42 taxmann.com 551/223 Taxman 234, in which the Court held and observed as under: "31. The market value of the power supplied to the Steel-Division should be computed considering the rate of power to a consumer in the open market and it should not be compared with the rate of power when it is sold to a supplier as this is not the rate for which a consumer or the Steel-Division could have purchased power in the open market. The rate of power to a supplier is not the market rate to a consumer in the open market.

Gujarat High Court in case of Pr. CIT v. Gujarat Alkalies & Chemicals Ltd. [2017] 395 ITR 247/88 taxmann.com 722 also had occasion to examine such an issue. It referred to earlier order in case of Asstt. CIT v. Pragati Glass Works (P.) Ltd. [Tax Appeal No. 1646 of 2010, dated 30-1-2012] in which following observations were made:— "7. To our mind, Tribunal has committed no error. Assessing Officer and CIT (Appeals) while adopting Rs. 4.51 per unit as the value of electricity generated by eligible unit of assessee and supplied through its non eligible unit only worked out cost of such electricity generation. In fact CIT (Appeals) in terms recorded that Rs. 4.51 was computed as the reasonable value of the electricity generated by eligible unit of assessee. This amount included Rs. 4.17 per unit which was the cost of electricity generation and Rs. 0.34 per unit which was duty paid by the assessee to GEB for such power generation. Thus the sum of Rs. 4.51 per unit only represented the cost of electricity generation to the assessee. In Section 80IA(8) of the Act what is required to be ascertained is the market value of the goods transferred by the eligible business, when such transfer is by eligible business to another non eligible business of the same assessee and the consideration recorded in the accounts of the eligible business does not correspond to market value of such goods. Term "Market Value" is further explained in explanation to said sub-section to mean in relation to any goods or services, price that such goods or services will ordinarily fetch in the open market. To our mind sum of Rs. 4.51 per unit of electricity only represented cost of electricity generation to the assessee and not the market value thereof. It is not in dispute that the GEB charged Rs. 5 per unit for supplying electricity to other industries including non eligible unit of the assessee itself. Tribunal therefore, while adopting the said base figure and excluding excise duty therefrom to work out Rs. 4.90 as the market value of the electricity generated by the assessee, to our mind, committed no error. It can be easily seen that if the assessee were to supply such electricity or was allowed to do so in the open market, surely it would not fetch Rs. 4.51 per unit but Rs. 5 per unit as was being charged by GEB. Since the excise duty component thereof would not be retained by the assessee, Tribunal reduced the said figure by the nature of excise duty and came to the figure of Rs. 4.90 to ascertain the market value of electricity generated by the eligible unit and supplied to non eligible business of the assessee. No error was committed by the Tribunal. No question of law therefore, arises. Tax Appeal is dismissed."

In our consider opinion, the aforesaid arguments of the ld. DR need not be gone into as the issue in dispute is covered in favour of the assessee by the decision of Hon’ble Jurisdictional High Court referred supra and also the decision of this Tribunal in Assesse’s own case in earlier year. Accordingly, the ground Nos. 1 and 2 raised by the revenues are dismissed.

The ground No.3 raised by the Revenue is challenging the deletion of disallowance made on account of foreign travel expenses spent on the travel of wife of the director and wife of president of the company.

We heard the rival submissions and perused the materials available on record. The Assessee has incurred foreign travelling expenses of Rs.2,05,923/- of Smt. Sarla Devi Birla who accompanied her husband Shri B.K. Birla, Chairman of the company and Smt. Nisha Dalmia Rs. 1,10,688/- who accompanied her husband Shri R.K. Dalmia, President of the company, during the foreign tour. In this regard, the Assessee submitted that aforesaid expenses were incurred wholly and exclusively

We have gone through the said orders of the Jurisdictional High Court referred (Supra) which are enclosed in pages 82-88 of the case law paper book. The question raised before the Hon’ble Jurisdictional High Court was as under:-

It is pertinent to note that the parameters for allowing the deduction which were stated by the Hon’ble Jurisdictional High Court above were satisfied by the assessee in the instant case. This is evident from the fact that the ld.AO had agreed that the foreign travel of Director and President of the company were meant for the purpose of business of the Assessee Company. Respectively, following the aforesaid decision, we do not find any infirmity in the order of ld. CIT(A) granting relief to the Assessee in this regard. Accordingly, the ground No.3 raised by the Revenue is dismissed.

The ground Nos. 4 & 5 raised by the Revenue are general in nature and does not require any specific adjudication.

This appeal of the arises out of order passed by the ld.CIT (A) NFAC in ITBA/NFAC/S/250/2022-23/104,346,1276(i) dated 16.06.2022 for the AY 2009-2010 against the order of ACIT – 6(2) (1)Mumbai giving effect to Tribunal order dated 14.02.2018.

For the sake of convenience, the order giving effect to Tribunal order dated 14.02.2018 passed by the ld. AO on 19.10.2020 is reproduced here under:- Name of the assessee M/s. Century Taxtile And Industries Ltd Century Bhavan, Dr. Annie Besant Road Worli, Mumbai- 400 030 Pan No AAACC2659Q Assessment Year 2009-10 Status Company Date of Order 19-10-2020

From the above, it is evident that the ld. AO had denied deduction u/s 80 IC of the Act to Assessee on sale of pulp. But, we find the Tribunal in Assesse’s own case for AY 2007-08, 2008-09 & 2009-10 vide its order dated 14.02.2018 had directed the Ld. AO to grant deduction on profits derived from eligible business of sale of pulp u/s 80 IC of the Act. We find that the ld. AO had granted deduction u/s. 80 IC of the Act for sale of pulp for AY 2007-08 & 2008-09 while giving effect to Tribunal order. However, for AY 2009-10, the same deduction has been denied to the Assessee on the ground that Assessee had not claimed in the return of income. This is factually incorrect. In fact, Assessee had actually claimed deduction u/s 80 IC of the Act in the return of income and in the original scrutiny Assessment order passed u/s 143(3) of the Act dated 26.12.2011, the ld. AO had elaborately discussed about the said claim in para 10 to 10.3 of his order. In any case, we find that the ld. AO does not have any Jurisdiction to travel beyond the directions of this Tribunal. This Tribunal had directed the ld. AO to grant deduction u/s 80 IC of the Act on sale of pulp. We find that the ld. AO by factually incorrect considerations and factually irrelevant observations had denied deduction u/s 80 IC of the Act to the Assessee on sale of pulp in the instant case for A.Y. 2009-10. This action of the Revenue is strongly condemned and dismissed.

When the matter travelled to ld. CIT Appeal, he upheld the action of the ld. AO on a totally different consideration, forgetting the fact that the Tribunal already allowed relief to the Assessee on the impugned issue. We hold that the action of ld. CIT (A) also require to be equally condemned in the instant case. If at all, the Revenue is having any 16 & 2085/Mum/2022 Century textile & Industries Ltd. Mumbai grievance against the order passed by the Tribunal dated 14.02.2018 on the impugned issue, they should have preferred an appeal before the Hon’ble High Court. Even if the ld. AO/ ld.CIT (A) are not in agreement with the order of this Tribunal, they are duty bound to give effect to the order of the Tribunal in the same letter & spirit as directed by the Tribunal. This is the basic pre-requisite of respect for Judicial Hierarchy. Hence, we have no hesitation to hold that the ld.AO as well as the ld. CIT (A) NFAC, had travelled beyond their briefs without respecting the law of binding precedent in the instant case. Accordingly, the grounds raised by the Assessee are allowed.

To sum up, appeal of the Assessee in For AY- 2009-10 is allowed and the appeal of the Revenue for AY- 2011-12 in ITA No 1967/Mum/2022 is dismissed.