Commissioner Of Income Taxtrichy v. Cethar Limitedno

In the High Court of Judicature at Madras Dated: 26.08.2014 Coram The Honourable Mr.JUSTICE R.SUDHAKARandThe Honourable Mr.JUSTICE G.M.AKBAR ALI Tax Case (Appeal) No.389 of 2014 Commissioner of Income TaxTrichy. .... Appellant/Respondent Vs. CETHAR LIMITEDNo.4, Dindigul Road,Trichy - 620 001. . Respondent/Appelant APPEAL under Section 260A of the Income Tax Act against theorder dated 21.11.2013 made in I.T.A.No.1052/Mds/2013 on the file ofthe Income Tax Appellate Tribunal, Madras 'A' Bench. For Appellant : Mr.J.NarayanasamyStanding counsel for Income Tax For Respondent: Mr.M.P.Senthil Kumar-------J U D G M E N T(Delivered by R.SUDHAKAR,J.) This Tax Case (Appeal) is filed by the Revenue as against theorder of the Income Tax Appellate Tribunal raising the followingsubstantial question of law: “Whether on the facts and in the circumstances of thecase, the Tribunal was right in holding that the assesseeis entitled to the claim of deduction under Section 80IB inrespect of the income relatable to the power generated bythe Wind Mill that was consumed by the assessee by treatingthe said income as income derived fromthe eligibleundertaking?" 2. The assessee company is a manufacturer of Boilers and in thebusiness of generation of electricity through wind mills. Theassessee filed its return of income for the assessment year 2005-06 https://hcservices.ecourts.gov.in/hcservices/ declaring a total income of Rs.39,69,73,114/-. In the re-assessmentproceedings, the Assessing Officer held that the assessee had claimedbenefit of deduction under Section 80IA on the amount ofRs.38,79,459/-, whereas the assesee was eligible for deduction underSection 80IA only on actual sale of power to Tamil Nadu ElectricityBoard, ie., 13,36,848/- and disallowed the remaining amount. Asagainst the said order, the assessee filed an appeal before theCommissioner of Income Tax (Appeals), who concurred with the decisionof the Assessing Officer, dismissed the appeal. Aggrieved by thesame, the assessee filed a further appeal before the Income TaxAppellate Tribunal. The Tribunal agreed with the contentions of theassessee allowed the appeal holding that the assessee was derivingincome from generation of electricity. The Tribunal also held thatthe assessee instead of getting cash benefit, was getting credit forthe units supplied to the Government agency and thus it cannot besaid that the income earned by the assessee by supplying the units tothe TNEB falls within the meaning of term 'attributable to'.Aggrieved by the order of the Tribunal, the present Tax Case (Appeal)has been filed by the Revenue. 3. Mr.M.P.Senthilkumar, learned counsel takes notice for therespondent/assessee. Both the learned standing counsel appearing forthe Revenue and the learned counsel appearing for the assessee fairlysubmits that the issue involved in this appeal is covered by adecision of this Court reported in (2011) 338 ITR 643 (Mad)(Tamilnadu Petro Products Ltd. V. Assistant Commissioner of IncomeTax), wherein this Court, following the decision of this Court dated07.06.2010 made in T.C.(A)Nos.68 to 70 of 2010 (CIT V. ThiagrarajarMills Ltd.) held in favour of the assessee, thereby allowed theappeal. 4. In T.C.(A)Nos.68 to 70 of 2010 (CIT V. Thiagrarajar MillsLtd.), this Court, by order dated 07.06.2010, held as follows: 3. Mr.M.P.Senthilkumar, learned counsel takes notice for therespondent/assessee. Both the learned standing counsel appearing forthe Revenue and the learned counsel appearing for the assessee fairlysubmits that the issue involved in this appeal is covered by adecision of this Court reported in (2011) 338 ITR 643 (Mad)(Tamilnadu Petro Products Ltd. V. Assistant Commissioner of IncomeTax), wherein this Court, following the decision of this Court dated07.06.2010 made in T.C.(A)Nos.68 to 70 of 2010 (CIT V. ThiagrarajarMills Ltd.) held in favour of the assessee, thereby allowed theappeal. 4. In T.C.(A)Nos.68 to 70 of 2010 (CIT V. Thiagrarajar MillsLtd.), this Court, by order dated 07.06.2010, held as follows: "8. The contention that only whatever powergenerated from the sale to an outsider or theelectricity board, and the profit or gain derived bysuch sale alone can be taken as profits or gains derivedby the assessee as mentioned in section 80-IA(1) of theIncome-tax Act has been rejected by the Tribunal in theorder impugned. In our con-sidered view, the Tribunalwas well justified in having rejected such a stand ofthe appellant. Having referred to section 80-IA(1) ofthe Income-tax Act, we are also convinced that what isall to be satisfied in order to be eligible for thededuction as provided under sub-section (1) of section80-IA, the assessee should have set up an undertaking oran enterprise and from and out of such an undertaking oran enterprise set up, any profit or gain is derived,falling under the sub- section covered by sub-section(4) of section 80-IA of the Income-tax Act, such profitgenerated from the sale to an outsider or theelectricity board, and the profit or gain derived bysuch sale alone can be taken as profits or gains derivedby the assessee as mentioned in section 80-IA(1) of theIncome-tax Act has been rejected by the Tribunal in theorder impugned. In our con-sidered view, the Tribunalwas well justified in having rejected such a stand ofthe appellant. Having referred to section 80-IA(1) ofthe Income-tax Act, we are also convinced that what isall to be satisfied in order to be eligible for thededuction as provided under sub-section (1) of section80-IA, the assessee should have set up an undertaking oran enterprise and from and out of such an undertaking oran enterprise set up, any profit or gain is derived,falling under the sub- section covered by sub-section(4) of section 80-IA of the Income-tax Act, such profit or gain derived by the assessee can be deducted in itsentirety for a period of 10 years starting from the dateof functioning of the set up. The contention that profitor gain can be claimed by the assessee only if suchprofit or gain is derived by the sale of its product orpower generated to an outsider cannot be the manner inwhich the provisions contained in section 80-IA(1) canbe interpreted. The expression 'derived' used in thesaid section 80-IA(1) in the beginning as well as in thelast part of sub-section (4) makes it abundantly clearthat such profit or gain could be obtained by one's ownconsumption of the outcome of any such undertaking orbusiness enterprise as referred to in sub-section (4) ofsection 80-IA. The dictionary mean-ing of the expression'derive' in the New Oxford Dictionary of English states'obtaining something from a specified source'. In sec-tion 80-IA(1) also no restriction has been imposed asregards the deriving of profit or gain in order to statethat such profit or gain derived only through an outsidesource alone would make eligible for the benefitsprovided in the said section. 9. Therefore, there is no difficulty in holding thatcaptive consumption of the power generated by theassessee from its own power plant would enable therespondent-assessee to derive profits and gains byworking out the cost of such consumption of powerinasmuch as the assessee is able to save to that extentwhich would certainly be covered by section 80-IA(1).When such will be the outcome out of own consumption ofthe power generated and gained by the assessee bysetting up its own power plant, we do not find any lackof merit in the claim of the respondent-assessee when itclaimed by relying upon section 80-IA(1) of the Income-tax Act by way of deduction of the value of such unitsof power consumed by its own plant by way of profits andgains for the relevant assessment years." 5. Accordingly, following the above-said decisions of thisCourt reported in (2011) 338 ITR 643 (Mad) (Tamilnadu Petro ProductsLtd. V. Assistant Commissioner of Income Tax) and the order dated 07.06.2010 made in T.C.(A)Nos.68 to 70 of 2010 (CIT V. ThiagrarajarMills Ltd.), the questions of law are answered in favour of theassessee and against the Revenue. This Tax Case (Appeal) standsdismissed. No costs. Sd/-Assistant Registrar(CS-IV)Dated: 09.09.2014 //True Copy// Sub Assistant Registrar slTo1. The Income Tax Appellate Tribunal, Madras 'A' Bench.2. The Commissioner of Income Tax (Appeals), Tiruchirapalli.3. The Deputy Commissioner of Income Tax, Company Circle I, Trichy.+1cc to M/s. Philip George, Advocate Sr 39641ALA(CO)km/10.9.T.C.(A) No.389 of 2014