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Income Tax Appellate Tribunal, “E” BENCH, MUMBAI
IN THE INCOME TAX APPELLATE TRIBUNAL “E” BENCH, MUMBAI BEFORE SRI MAHAVIR SINGH, JM AND SRI ASHWANI TANEJA, AM (A.Y:2005-06) M/s Sajjan India Ltd. Principal Commissioner of C/0. Shankarlal Jain & Income Tax Associates, 12, Engineer 8, Aaykar Bhavan, Queens Road, Vs. Building, 265, Princess Street Mumbai-20 Mumbai-400002 PAN No.AAACS6498M Appellant .. Respondent .. Shri. Shankarlal Jain, AR Assessee by Revenue by .. Shri. Sunil K Jha, CIT DR Date of hearing .. 14-12-2016 Date of pronouncement .. 14-12-2016 O R D E R PER MAHAVIR SINGH, JM:
This appeal by the assessee is arising out of the revision order passed u/s 263 Income Tax Act, 1962 ( hereinafter ‘the Act’) by PCIT-8, Mumbai dated 12-02-2015. The Assessment was framed by DCIT-7(2), Mumbai for the A.Y. 2005-06 vide order dated 03- 03-2014 u/s 143(3) r. w. s. 254 of the Act.
The only issue in this appeal of assessee is against the order of PCIT revising the assessment order u/s 263 of the Act passed by the AO u/s 143(3) r. w. s. 254 of the Act dated 03-03-2014, holding the same as erroneous and pre-judicial to the interest of Revenue for allowing of deduction u/s 80 IA(4) of the Act on its income derived out of captive power plant. For this assessee has raised following four grounds: - “1. The Learned Principal Commissioner of Income Tax erred in holding that order passed by the Ld. AO u/s.143(3) r. w. s. 254 dtd. 03.03.2014 is erroneous and prejudicial to the interest of revenue without properly appreciating the facts of the case and law applicable thereto and thereby holding that appellant is not entitled for deduction u/s.80IA(4) on its income derived out of its captive power plant. 2. The Learned Principal Commissioner of Income Tax erred in holding the order as passed by the Assessing Officer is erroneous, as the Assessing Officer failed to refute the findings under original assessment order as well as appellate order as passed by the CIT(A), failed to examine various approvals and permissions granted for setting up captive power plant and order passed is a creptic order without demonstrating how the conclusion of independent undertaking has been arrived at.
3. The Learned Principal Commissioner of Income Tax erred in not properly appreciating the submissions and evidences filed during proceedings u/s. 263 as well as before Ld. Assessing Officer.
4. The Learned Principal Commissioner of Income Tax erred in holding that order as passed by the Ld. Assessing Officer is prejudicial to the interest of revenue as the appellant has been held to be entitled for necessary deduction u/s.80IA(4) for A.Y. 05-06 and it also affects the Department's appeal as pending before High Court of Bombay for subsequent Assessment Years without properly appreciating the facts of the case and law applicable thereto.” 3. At the outset, the learned Counsel for the assessee drew our attention to the Tribunal’s order for A.Y. 2005-06 (the year under consideration) in vide order dated 10-08-2012, wherein, the Tribunal has set aside the issue vide para 8 as under: -
8. As seen from the above, it is clear that assessee has purchased one imported Gas Genset as part of its 10B Unit for supplementing the power being drawn from Gujarat State Electricity Board. Nothing was brought on record to verify whether assessee has taken any separate license or permission for generation of electricity from the concerned authorities and further whether assessee had separately claiming the cost for production of electricity as commented by AO. Even though the Hon'ble High Court of Madras in the case of Tamil Nadu Petro Products Ltd vs. ACIT 338 ITR 643 has held that assessee is entitled to deduction in respect of notional income from generation of electricity which was captively consumed by it, the requirement of ‘industrial undertaking’ cannot be established on the facts as placed before us. Assessee should satisfy the requirement under section 80IA that it is an independent undertaking, necessary details/documents and necessary permissions obtained in this regard so as to establish that it is an independent undertaking eligible for claiming deduction under section 80IA. Since nothing was brought on record by assessee to counter findings of AO, which are also upheld by the CIT (A), except relying on legal principles, we in the interest of justice restore the issue to the file of AO for fresh examination on facts whether the said DG Unit can be considered as independent undertaking eligible for deduction under section 80IA. AO is also directed to keep in mind the principles established by the Hon'ble Madras High Court (Supra) and the ITAT Mumbai Bench in the case of West Cost Paper Mills Ltd, 103 ITD 19 wherein the DG Unit which generated power for captive consumption was allowed deduction under section 80IA. AO is directed to examine the issue on facts as well as on law and if assessee is eligible for deduction directed to allow the same. Accordingly, the issue in assessment year 2005-06 is restored to the file of AO for fresh determination. Ground is considered allowed.
In view of the above directions of the Tribunal, the AO allowed deduction and the AO allowed the claim of the assessee in respect of captive power consumption in its units u/s 80 IA (4) of the Act i.e. on captive power consumption vide Para 3 & 4 as under: -
During the course of original assessment proceedings, assessee claimed deduction U/s.80IA on its CPP unit established for production of power for consumption in its 10B unit on 11/12/2002. Hon'ble ITAT under its order held that the said unit is entitled for deduction u/s.80IA(4), however, the assessee was required to satisfy that an independent undertaking has come into existence and necessary permissions were obtained in that regard so as to establish that it is an independent undertaking eligible for deduction u/s.80IA. Assessee has submitted that during the course of original assessment proceedings, it filed Audit Report u/s.80IA along with computation of income arising to such CPP unit of Rs.33,65,304/- . It has stated that it is an independent unit having its own plant, factory building, electric installation piping, other instruments and accessories. It has also submitted that the said unit was registered with Collector of Electricity Duty under their letter dtd.07/04/2003. The unit was assigned Registration No. ELD/Gen-set/Bharuch/249G/G. The unit was also given excise duty exemption by Chief Auditor under letter dtd.30/04/2004. Necessary inspection was carried out of the generating set of CPP by Chief Electric Inspector on 23/11/2002 as per letter dtd.02/12/2002. A fresh Registration No. 1600014-004-00333 was allowed under letter dtd. 04/10/2006.On the basis of these facts, it is submitted that assessee has set up a new industrial undertaking in the form of Captive Power Plant was setup on 11/12/2002. The said unit is entitled for deduction u/s.80IA(4) for a period of 10 years out of a period of 15 years.
4. I have duly considered the order of ITAT and submissions made by assessee along with various permissions obtained by assessee for its CPP unit from the appropriate authorities. In view of this it is held that assessee is entitled for necessary deduction u/s.80IA(4) for its CPP unit.” 5. The learned Counsel for the assessee then took us through the impugned order i.e. the order passed by PCIT revising the assessment u/s 263 of the Act dated 12-02-2015 wherein, vide Para 19, he directed the AO to disallowed the claim of deduction of captive power generation claimed and allowed u/s 80IA(4) of the Act as under:-
19) It has already been held that the order of the A.O u/s.143(3) r. w. s 254 dated 03.03.2014, is erroneous in so far as it is prejudicial to the interest of revenue. As regards merits of assessee's claim, it may be stated that from queries raised by this office, it is clear that this office has enquired into this aspect and come to the conclusion that assessee has miserably failed to discharge burden of proof cast upon it to support its claim that it derived income from captive power plant within the meaning of Section80IA(4) of the Income-tax Act, 1961. As already explained above, the assessee is not entitled for deduction u/s.80IA(4) on the notional income derived from the business of generation of power. Therefore, the order of the A.O relating to this issue is modified to the extent that the assessee will not be eligible for any deduction u/s.80IA(4) on the profits derived from generation of power. The A.O is directed to give effect to this order and withdraw the deduction granted u/s.80IA(4) and take necessary action in this regard. Issue demand notice and challan. Charge interest u/s.234B and 2340 as applicable.”
In view of the above, the learned Counsel for the assessee submitted that assessee’s power plant is independent and assessee is eligible for deduction u/s 80 IA(4) of the Act. But on the other hand the learned CIT DR stated that genset is not an independent power unit and consequently not a power plant therefore, not eligible for deduction u/s 80 IA(4) of the Act. According to him the genset is not an independent undertaking rather it runs on gas fuel and accordingly, the assessee cannot claim any deduction u/s 80IA of the Act in any of the assessment years as the assessee was claiming exemption u/s 10B of the Act. The learned Counsel for the assessee in his counter reply stated that there was specific direction by the Tribunal to the AO whether the said DG unit can be considered as an independent undertaking eligible for deduction u/s 80IA(4) of the Act or not and also directed to follow the principal laid down by Hon’ble Madrass High Court in the case of Tamilnadu Petro Products Ltd. Vs ACIT 338 ITR 643 (Mad) and co-ordinate bench decision in the case of West Cost Paper Mills Ltd. Vs. JCIT 100 TTJ (Mum) 833. According to him, the AO has not examined the issue and even PCIT while revising the assessment has not examined the issue in proper perspective and simply directed the AO to disallow the deduction. The learned Counsel for the assessee stated that he has no objection in case revision is sustained but directions of the PCIT should be modified and issue be remand back to the file of the AO for making full enquiry as directed by the Tribunal and after examining the issue, the AO can take the decision. On this the learned CIT DR has not objected.
We have heard the rival contentions and gone through the facts and circumstances of the case. We find from the facts as narrated by the Tribunal, wherein the issue was remanded back to the file of the AO and also the directions of PCIT revising the assessment, wherein AO was directed to disallow the claim of deduction u/s 80IA (4) of the Act on the profit derived from captive power production. After going through the facts of the case, we are of the view that the AO has not examined the issue and hence, this order is erroneous and also pre-judicial to the interest of the Revenue. Even PCIT has not examined this issue because he has not considered certain facts regarding the registration of generation set by Collector of electricity duty dated 07-04-2003, Generating sets exemption from payment of Electricity Duty by Electricity Duty Officer dated 30-04-2004 and permission to energized CPP u/s 47 A of Indian Electricity Rules 1956 by Chief Electrical Inspector dated 02-12-2002 and registration of new CPP dated 04-10-2006 by collector of electricity duty and approval of drawings by Chief Electrical Inspector dated 01-11-2002. Even test certificate by Gujarat Electricity Board dated 28-11-2002 was not examined. In Page 4 of 5
AO and direct him to decide the issue after examining of these details and after allowing reasonable opportunity of being heard to the assessee. Appeal of the assessee is partly allowed as indicated above.
In the result, the appeal of the assessee is partly allowed for statistical purpose. Order pronounced in the open court on 14-12-2016.