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2016 DIGILAW 1401 (GUJ)

Commissioner of Income Tax-1 v. Alembic Ltd.

2016-07-20

G.R.UDHWANI, K.S.JHAVERI

body2016
JUDGMENT : K.S. Jhaveri, J. 1. By way of these appeals under section 260A of the Income-tax Act, 1961, the appellant-revenue has challenged the order of the Income-tax Appellate Tribunal (hereinafter referred to as "the Tribunal") whereby the Tribunal has held the issues in favour assessee. We, therefore, decide the appeals by way of this common judgment. 2. These appeals were admitted by this court for consideration of the following substantial questions of law: "Tax Appeal No. 1133 of 2011: "(A) Whether, the Appellate Tribunal is right in law and on facts in allowing deduction under section 80-IA (4) of the Income-tax Act, 1961, for generating power for captive consumption? (B) Whether the Appellate Tribunal is right in law and on facts in allowing withdrawal from the revaluation reserve from the book profit under section 115JB of the Act?" Tax Appeal No. 912 of 2010: "Whether, on the facts and in the circumstances of the case, the Tribunal was right in law and on facts in not considering the case and decision of the Appellate Tribunal, Chennai Chettinad Cement Corporation Ltd., in the ITA No. 1026 (MDS)/2005 for A.Y. 2001-02, brought to its notice vide the additional ground raised by the Department, according to which the deduction u/s. 80-IA(4) is not allowable to the assessee for generating power for captive consumption?" Tax Appeal No. 913 of 2010: "(A) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law and on facts in not considering the case and decision of the Tribunal, Chennai Chettinad Cement Corporation Ltd., in ITA No. 1026 (MDS)/2005 for A.Y. 2001-02, brought to its notice vide the additional ground raised by the Department, according to which the deduction u/s. 80-IA(4) is not allowable to the assessee for generating power for captive consumption? (B) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in dismissing the revenue appeal on the ground that the amount set aside by the assessee to provide for meeting liabilities other than ascertained liabilities, while computing the book profit u/s. 115JB of the Act?" Tax Appeal No. 914 of 2010: "Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in allowing deduction of claim of interest of Rs. 811.99 lacs payable to ONGC, disregarding the fact that during the year assessee has not paid any amount towards this liability?" 3. So far as question (A) in Tax Appeal No. 1133 of 2011 is concerned, the learned counsel for the revenue has contended that the assessee has claimed deduction under section 80-IA(4) of the Income-tax Act on COGEN plants by applying market rate. The Assessing Officer has disallowed the claim of the assessee on the ground that there was no income in respect of these plants. On appeal before the Commissioner (Appeals), following the decision in assessee's own case, the claim of the assessee was allowed by the Commissioner (Appeals). In further appeal by revenue, the Tribunal upheld the decision of the Commissioner (Appeals). Hence the revenue is before us. 4. Learned counsel for the assessee Mr. Soparkar has submitted that this question is covered by the decision of this court in question (C) of Tax Appeal No. 471 of 2009 in the case of Commissioner of Income-tax v. Alembic Limited decided on 20.7.2016 where this court has decided the question in favour of the assessee and against the revenue. Relevant paragraphs are reproduced herein below: "10. The learned counsel for the assessee has supported the order of the Tribunal and contended that the Tribunal has not committed any error in allowing the claim of the assessee. So far as the raising additional ground before the appellate authority is concerned, he has relied on the decisions of this court in the case of Commissioner of Income-tax v. Mitesh Impex reported in 270 CTR 66 and New India Industries Ltd. v. Commissioner of Income-tax reported in (1994) 207 ITR 1010 where this court has held in favour of the assessee that additional ground can be raised in appeal before the Commissioner (Appeal) and the appellate authority has power to admit the appeal. 10.1 Regarding eligibility and rate for the purpose of granting benefit, learned counsel for the assessee has contended that the assessee is entitled to claim market value of the eligible unit. 10.1 Regarding eligibility and rate for the purpose of granting benefit, learned counsel for the assessee has contended that the assessee is entitled to claim market value of the eligible unit. In support of this contention, he has relied on the decisions of this court in Tax Appeal No. 1646 of 2010 - A.C.I.T., Bharuch Circle, Bharuch, through Commissioner v. Pragati Glass Works Pvt. Ltd. decided on 30.1.2012; Tax Appeal No. 1493 of 2011 - Commissioner of Income-tax-IV v. Shah Alloys Ltd., decided on 25.9.2012 and Tax Appeal No. 2092 of 2010 - Commissioner of Income-tax-IV v. Shah Alloys Ltd., decided on 22.11.2011. He has further relied on the decision of Calcutta High Court in the case of Commissioner of Income-tax, Kolkata-IV, Kolkata v. Kanoria Chemicals & Industries Ltd., reported in, (2013) 35 taxmann.com 566 (Calcutta) where the court has held as under: "It is price at which assessee transferred electricity generated by it eligible business to its other business which would be considered for purpose of computation of profits and gains of eligible business in terms of section 80-IA(8) and not lesser price at which surplus electricity was sold to Electricity Board." 10.2 The learned counsel for the assessee has further relied on the decision in the case of Commissioner of Income-tax, Raipur v. Godawari Power & Ispat Ltd., reported in (2014) 42 taxmann.com 551 (Chhattisgarh) where the court has held thus: "Where the assessee had established a captive power plant in State of Chhattisgarh to supply electricity to its steel division, for purpose of section 80-IA deduction market value of power supplied by assessee to steel division should be computed considering rate of power charged by Chhattisgarh State Electricity Board for supply of electricity to industrial consumers." 10.3 The learned counsel for the assessee has submitted that the assessee is eligible for deduction under section 80-IA of the Act for captive power plant. In this regard, he has relied on the decision of Delhi High Court in the case of Commissioner of Income-tax v. Orient Abrasive Ltd., reported in 49 taxmann.com 174 (Delhi) where it is held as under: "Profit and gain from captive consumption of electricity supplied only to assessee by power plant of assessee will qualify for deduction under section 80-IA". In this regard, he has relied on the decision of Delhi High Court in the case of Commissioner of Income-tax v. Orient Abrasive Ltd., reported in 49 taxmann.com 174 (Delhi) where it is held as under: "Profit and gain from captive consumption of electricity supplied only to assessee by power plant of assessee will qualify for deduction under section 80-IA". 10.4 Further reliance has been placed on the decision in the case of Commissioner of Income-tax v. Cethar Ltd., reported in 228 Taxman 139 (Madras) (Mag.) where it is observed as follows: "Assessee was entitled to claim deduction under section 80-IA in respect of income relatable to power generated by its own wind mill that was consumed by assessee." 10.5 Lastly, the learned counsel for the assessee has relied on the decision of Madras High Court in the case of Tamil Nadu Petro Products Ltd. v. Assistant Commissioner of Income-tax reported in 338 ITR 643 where it is held as under: "The revenue's contention had no application to the case on hand. Inasmuch the issue was to be dealt with in the light of section 80-IA and in particular sub-clause (iv) of the said section which provides for the benefit even in respect of electricity generation plant established by the assessee and the income derived from such enterprise of the assessee, it would have to be held that the assessee fully complied with the requirements prescribed under section 80-IA in order to avail the benefits provided therein. Therefore, the contention based on the interpretation of the expression 'derived from' could have no application to the case where the provisions of section 80-IA got attracted." 5. We have considered the submissions of learned counsel for the revenue and the assessee. So far as question (A) is concerned, this will be governed by the answer in question (C) of Tax Appeal No. 471 of 2009 Commissioner of Income-tax v. Alembic Limited where we decided the issue in favour of the assessee and against the revenue. In that view of the matter, we answer the question in favour of the assessee and against the revenue. 6. In that view of the matter, we answer the question in favour of the assessee and against the revenue. 6. As regards ground (B) of Tax Appeal No. 1133 of 2011, since this question is covered by the decision of this court in Tax Appeal No. 393 of 2008 in the case of Commissioner of Income-tax-I v. Alembic Glass Industries Limited decided on 11.8.2008 where following the decision in Tax Appeal No. 391 of 2008, the question is answered in favour of the assessee, we answer this question in favour of the assessee and against the revenue. Relevant paragraph No. 3 of Tax Appeal No. 393 of 2008 is reproduced below: "So far as question (B) is concerned, we have already dismissed Tax Appeal No. 391 of 2008 wherein a similar question was involved. Hence, this Tax Appeal is admitted in terms of question (A) only." 7. As regards the question in Tax Appeal No. 912 of 2010, in Tax Appeal No. 471 of 2009 in the case of Commissioner of Income-tax v. Alembic Limited, we have answered questions (C) and (D), after considering in detail the decisions cited by the learned counsel for the assessee, in favour of the assessee. Following the same, we answer this question in favour of the assessee and against the revenue. 8. As far as question (A) of Tax Appeal No. 913 of 2010 is concerned, this question is identical to the questions (C) and (D) in Tax Appeal No. 471 of 2009 in the case of Commissioner of Income-tax v. Alembic Limited, where we have held the issues in favour of the assessee and against the revenue. In that view of the matter, we answer question (A) in favour of the assessee and against the revenue. 9. So far as question (B) of Tax Appeal No. 913 of 2010 is concerned, this will be governed by the decision in Tax Appeal No. 472 of 2009 in the case of Commissioner of Income-tax v. Alembic Limited. Hence we answer this question in favour of the assessee and against the revenue. 10. 9. So far as question (B) of Tax Appeal No. 913 of 2010 is concerned, this will be governed by the decision in Tax Appeal No. 472 of 2009 in the case of Commissioner of Income-tax v. Alembic Limited. Hence we answer this question in favour of the assessee and against the revenue. 10. As regards the question in Tax Appeal No. 914 of 2010, this will be governed by the decision of this court in Tax Appeal No. 729 of 2011 in the case of Commissioner of Income-tax v. Alembic Glass Industries Limited decided on 2.5.2011 where this court held in favour of the assessee and against the revenue. This court, while dismissing the said Tax Appeal, in paragraph No. 8 of the order has observed as under: "8. In the present case, however, we find that the assessee's liability to pay interest to the ONGC was finally decided by the Supreme Court in its judgment dated 12.4.2004. The Supreme Court directed the assessee to pay simple interest to ONGC for a certain period. Based on the directions of Supreme Court, the assessee estimated its liability and made provision for discharging such a liability, which according to the assessee, had crystallized with the decision of the Supreme Court. The assessee's liability to pay interest and other charges to the ONGC, clearly achieved finality. The said liability, therefore, the Tribunal found to have arising. In our view, rightly so, it is in this background that the decision in the case of Bharat Earth Movers v. CIT (supra) can be appreciated. In the said case, the Apex Court observed as under: "The law is settled: if a business liability has definitely arisen in the accounting year, the deduction should be allowed although the liability may have to be quantified and discharged at a future date. What should be certain is the incurring of the liability. It should be capable of being estimated with reasonable certainty though the actual quantification may not be possible. If these requirements are satisfied the liability is not a contingent one. The liability is in praesenti though it will be discharged at a future date. It does not make any difference if the future date on which the liability shall have to be discharged is not certain." 10.1 In view of above decision, we answer the question in favour of the assessee and against the revenue. 11. The liability is in praesenti though it will be discharged at a future date. It does not make any difference if the future date on which the liability shall have to be discharged is not certain." 10.1 In view of above decision, we answer the question in favour of the assessee and against the revenue. 11. In the result, all the revenue appeals are dismissed.