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Income Tax Appellate Tribunal, ‘C’ BENCH : CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI ABRAHAM P. GEORGE]
आदेश / O R D E R
PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER This appeal filed by the Revenue is against an order dated 06.06.2016 of ld. Commissioner of Income Tax (Appeals)-17, Chennai.
ITA No. 2356/Mds/2016 :- 2 -:
Revenue has taken altogether three grounds of which 2. grounds No.1 & 3 are general in nature needing no specific adjudication.
Vide its ground No.2 divided into three parts, two grievances have been raised. First is on deletion of a disallowance u/s. 80IA of the Income Tax Act, 1961 (herein after referred to as the ‘’Act’’) for a captive power plant. Second is on direction of ld. Commissioner of Income Tax (Appeals) regarding apportionment of interest expenses between an unit on which assessee was claiming deduction u/s.80IA of the Act and another unit on which no such claim was made.
Facts apropos are that assessee engaged in the business of 4. manufacturing and selling cement had filed its return of income for the impugned assessment year disclosing income of �86,35,08,770/-.
Assessee had claimed deduction u/s.80IA of the Act on a captive power plant which was generating power for all its units. Ld. Assessing Officer did not allow such deduction. According to him, captive power plants were different from stand alone power generating undertakings. As per ld. Assessing Officer output of the captive power plant were for inhouse use, and deduction u/s.80IA of the Act could not be allowed on notional profit of such power plant.
ITA No. 2356/Mds/2016 :- 3 -:
Ld. Assessing Officer also noted that assessee had claimed 5. interest expenditure of �.76,79,38,038/-. As per ld. Assessing Officer such interest expenditure was required to be allocated between units claiming deduction u/s.80IA and other non 80IA units. Assessee did submit that it had not availed any loan for captive power plant and the question of apportionment of interest did not arise. As per the assessee, projects loans availed from Central Bank of India and Canara Bank, on which interest was paid were not used for setting up the captive power plant. Ld. Assessing Officer however did not accept these contentions. As per ld. Assessing Officer interest expenditure claimed had to be apportionment between the 80IA and non 80IA units in the ratio of the turnover.
Aggrieved, assessee moved in appeal before ld. 6.
Commissioner of Income Tax (Appeals). In so far as deduction u/s.80IA of the Act on captive power plant was concerned, Ld. Commissioner of Income Tax (Appeals) relying on a decision of the Co-ordinate Bench of this Tribunal in its own case for assessment year 2007-08 gave relief to the assessee. In so far as apportionment of interest on 80IA unit and non 80IA units were concerned, ld Commissioner of Income Tax (Appeals) considering the Tribunal decision in assessee’s own case for assessment years 2006-07, 2008- 09 and 2010-2011 (in & 448/2012 and 468/2014, dated
ITA No. 2356/Mds/2016 :- 4 -:
04.03.2016) held that loans borrowed for cement project could not be allocated to the captive power plant unit on which assessee had claimed deduction u/s.80IA of the Act.
Now before us, ld. Departmental Representative strongly assailing the orders of the ld. Commissioner of Income Tax (Appeals) submitted that the issue regarding benefit under section 80IA of the Act being given to captive power plants had not reached finality, since the Department had moved Jurisdictional High Court against the decision of the Tribunal relied by the ld. Commissioner of Income Tax (Appeals). As for distribution of the interest cost ld. Departmental Representative strongly relied on the order of the Assessing Officer.
Per contra, ld. Authorised Representative placed on record the decision of the Tribunal in assessee’s own case in assessment year 2011-2012 ( in dated 24.03.2016) and submitted that claim of the assessee was rightly allowed by the Commissioner of Income Tax (Appeals).
We have considered the rival contentions and the orders of the authorities below. In so far as question of deduction u/s.80IA of the Act for captive power plant is concerned, we find that this issue was decided by the Tribunal in assessee’s own case for assessment
ITA No. 2356/Mds/2016 :- 5 -: year 2011-12 (supra) in assessee’s favour. The Tribunal had in its order dated 24.03.2016 held as under:-
‘’4. We have considered the rival submissions on either side and also perused the material available on record. We have also gone through the provisions of sec. 80IA of the Act. Sec. 80IA provides for deduction from the profits and gains derived from an industrial undertaking on the business of developing, operating and maintaining any infrastructure facility. Electricity is an infrastructure facility which was generated by the assessee. In the case before us, the assessee consumed the electricity by itself. Therefore, the Revenue contends that the unit which generates electricity cannot be construed as a separate industrial undertaking for the purpose of allowing deduction u/s 80IA of the Act. This Tribunal is of the considered opinion that when the assessee generates the electricity whether it is sold in the open market or consumed the same for its own use, the unit which generates electricity has to be construed as an independent and separate undertaking and eligible for deduction u/s 80IA. Merely because the assessee consumed electricity by itself for its own manufacturing activity, that will not disentitle the assessee from deduction u/s 80IA. Therefore, this Tribunal do not find any reason to interfere with the order of the CIT(A). Accordingly, the same is confirmed’’.
Coming to the aspect of apportionment of interest, we find that this issue was also considered by the Tribunal in the very same order mentioned above where it was held as under:-
‘’24. We have considered the rival submissions on either side and also perused the material available on record. The assessee borrowed loan for the cement project and no loan was borrowed for the purpose of power plant project. The assessee exclusively borrowed interest free soft loan from SIPCOT for installation of power plant. When the assessee borrowed loans for different purposes and the Balance Sheet of the assessee clearly shows the classification of the secured loan, this Tribunal is of the considered opinion that the disallowance of ITA No. 2356/Mds/2016 :- 6 -: proportionate interest between the eligible and non- eligible unit is not justified. Therefore, the CIT(A) has rightly allowed the claim of the assessee. This Tribunal do not find any reason to interfere with the order of the CIT(A). Accordingly, the same is confirmed’’.
There is no case for the Revenue that any of the interest charged by the assessee was relatable to any loan exclusively raised by the assessee for the captive power plant. In other words, assessee’s contention that loans were not at all used for putting up its power plant stands unrebutted. We therefore find no reason to interfere with the order of ld. Commissioner of Income Tax (Appeals).
In the result, the appeal of the Revenue stands dismissed. 10. Order pronounced on Wednesday, the 23rd day of November, 2016, at Chennai.