Income Tax, Raipur v. Godawari Power & Ispat Ltd., Raipur

HON'BLESHRIYATINDRASINGH, CJ. HON'BLE SHRI PRITINKER DIWAKER, J. I.TaxCase No.31 oF 2012 Appellant Commissioner oF Income Tax, Raipur VERSUS Respondent M/s Godawari Power & Ispat LLd., Raipur

#2. TaxCase No.34 of 2012 i?C! Apoellant Commissioner oF Income Tax, Raipur VERSUS Respondent M/s Godawari Power & Ispat Ltd., Raipur

#3. TaxCase No.32 oF 2012 Appellant Commissioner oF Income Tax, Raipur VERSUS Respondent M/s Godawari Power& IspatLbd., Raipur Appeals under Section 260-A of the Income Tax Act, 1961 Appearance: Shri Anand Dadariya, counsel For fche AppellanL Shri Shashank Dubey, Senior Advocate with Shri Anand Mohan Tiwari, counsel For bhe RespondenL JUDGEMENT (2nciAu9USt,2013)

#1. These cases deal with interprebation oF sub-section (8) oF section 80-IA II arises in bhe aforesaid {80-IA(8)} of the Income Tax Act, 1961 (the Act). three tax appeals under section 260-A oF bhe Acb, Filed againsb the order oF bhe Income Tax Appellate Tribunal, Bilaspur Bench Camp at Raipur (the| Tribunal) dated 04.11.2011 dismissing bhe appeals oF the Income Ta) Department (the Deparfcment:) as welt as oF M/s Godawari Power & Ispa^ Limited, Siltara, Raipur (the Assessee) in respect oF Lhe Assessment: yec (AY) 2004-05 to 2006-07. THE FACTS

#2. The Assessee manufactures iron and steel. Power Plant (the CPP) to supply elecbricity to iLs manufacturing unib (bhe It has established a Captive %A. W J '%^^y .^ ^^:^^-' ^' Steel-Division). The excess power is sold to the Chhatbisgarh State Electricity Board (the Board).

#3. The Assessee Filed its retum For bhe AYs 2004-05 to 2006-07 showing nil,?5,10,92,400/-, ?91,08,876/- income respectivety.

#4. A search was conducted by the DepartmenL ThereaFber, Assessing OfFicer (the AO) issued a nobice to bhe Assessee under secbion 153-A oF the Act: to File revised rebum.

#5. The Assessee Filed its revised retum, again showing nil income For bhe AY 2004-05, but showing ^5,09,91849/- and ?90,66,465/- income for the AYs 2005-06 and 2006-07 respectively.

#6. The AO issued notice under section 143(2) and 142(1) oF the Act: on

18.07.2008 For the purpose of assessmenL ThereaFter, he passed three separate assessment orders on 31.12.2008 assessing'-the income bo T6,38,61,156/- ?13,85,04,890/- and ?12,79,18,784/- respectively For the AYs 2004-05 bo 2006-07.

#7. Among others, the AO computed the market: value oF the power supplied to the Steel-Division and disallowed the diFFerence bebween the market: value claimed by the Assessee and bhe market value assessed by him.

#8. Aggrieved by bhe aForesaid orders, bhe Assessee Filed appeals beFore the Commissioner oF Income Tax (Appeals) (the CIT-A). These appeals were partly allowed by a common order on 19.01.2010.

#9. The CIT-A held bhat: bhe market: value oF bhe power supplied to the Steel-Division bo be bhe same as claimed by bhe Assessee. There were some other points as well that were decided againsL bhe Assessee. -^fc-. ^.^< ^ %^;. ^ im 1 v ^%^y\.^ •^K %.^ • ^•^'•;- ./.••

#10. Aggrieved by the aForesaid order, the Deparbment as welt as the Assessee Filed three appeals each in respecl: oF three AYs beFore the Tribunal.

#11. The Tribunal by a common order dabed dismissed the appeals on

04.11.2011. Hence, the present: three appeals by Lhe Department. POINT FOR DETERMINATION

#12. We have heard counsel for the parties. -.^

#13. Tax case-32 oF 2012 is in respecb of AY 2005-06. This appeal was admitted on 10.12.201 2 on the Following substantial quesbion oF law: 'Whether on the Facbs and in the circumsbances oF the case, "market: would be the same as the value", as spedFied in Section [80-IA (8)] oF bhe Act: price" oF the State Electridty Board when bhe assessee did not incur any transmission loss or "sate administrabive or any other charges which the State Electriciby Board has Eo incur for Ehe same?"

#14. The remaining bwo appeats namely, Tax case-31 and'34 of 2012 are in respecb oF AYs 2004-05 and 2006-07. These appeals are not: admitted, but bhe counsel For the Department: sfcates that: in bhese two appeals also, he is pressing the aForesaid subsfcantial question only.

#15. Considering the statement: oF the Department, these appeals are formally admitfced on the aforesaid substantial question and with consenl: oF the parties, are being decided. THE DECISION: MARKET VALUE IS SAME AS SALE PRICE OF BOARD 'Deducbions

#16. Section 80-IA oF the Act is titled as in respect of proFibs and gains From industrial undertakings or enLerprises engaged in inFrastrucLure development:, ebc'. The CPP oF the Assessee has claimed deducbions under this secfcion. y^^^. 'yi / ^';- '-A^ "^ .4 ;^.. "..-/ - . ;G; \:-^7

#17. Clause (iv) of sub-section (4) of 80-IA {80-IA (4) (iv)} (See Appendix-1) the Act: provides that an undertaking involved in generation or distribution oF power is enbifcled to claim deducbion under secbion 80-IA oF the Act.

#18. It is admilted case that the CPP of the Assessee qualifies for claiming deducbions under this sub-secbion 80-IA (4) (iv) oF bhe AcL

#19. Sub-section (8) of secfcion 80-IA {80-IA (8)} (See Appendix-1) oF the Act: provides that For the purposes oF deduction under Lhis secbion proFik and gains oF eligible business are bo be computed as if the transfer was done on bhe market value on thab date.

#20. The proviso to secfcion 80-IA (8) oF bhe Act: requires fche AO to compute bhe proFits and gains in the manner already proved. And in case the manner presents exceptional difficulties then the AO is empowered to compute proFits and gains on such reasonable basis as he may deem FiL value' to 21. Explanation to section 80-IA (8) oF Lhe Act provides mean Ehe price Ehat such goods would ordinarily fetch on sale in the open markeL 'market

#22. The Assessee had sold power to bhe Steel-Division at the rate oF ?3.30/- per unib for AY 2004-05 and ?3.75/- per unib For AYs 2005-06 and 2006-07

#23. The AO compubed the markeb vatue oF power under section 80-IA (8) ,He considered the rate read wibh its proviso and bhe explanabion. charged by the Chhattisgarh Elecbricity Company Limited, Raipur (the Chhabtisgarh-Company) for supply of elecbricity to bhe Board and held the market value oF bhe power to be ?2.25/- per unib for the AY 2004-05 and 2005-06; and ^2.32/- per unil: For bhe AY 2006-07. •G

#24. The markeb value computed by the AO was less than the value claimed by the Assessee, he (the AO) dis-allowed the difFerence and added it: in the income oF the Assessee.

#25. In Chhaltisgarh, a consumer can utilise bhe power produce by ILs own captive power generating unit: or it can buy power from bhe Board. No other ent:ity can supply power to any consumer in the StaLe: a consumer cannoL purchase electricity From any olher person.

#26. The Board was charging @ T3.30/- per unit: in the AY 2004-05 and @ T3.75/- per unit in the AYs 2005-06 and 2006-07 From indusLrial unibs. The CPP of the Assessee also charged the same amount: from its Steel- Division. As both were same, fche CIT-A held bhis is to be bhe markel: value. The Tribunal has upheld bhis Finding. ,

#27. The counsel for bhe Department submits that: • • The Chhattisgarh-Company is sibuafce in bhe sart-ie area and the price For which it sold power t:o t:he Board was retevant:; The AO righfcly compared it For calculating the markeb value oF fche power supplied to fche Steel-D.ivision; • The rate charged by the Board cannot be baken into account as it: includes wheeling and transmission charges.

#28. The Chhattisgarh-Company is a company which is generating power. is supplying power to a IL is neither consumer oF the elecLricity, nor it: It also cannot sell power to any consumer directly: it: has to consumer. compulsorily sell it: to fche Board.

#29. The power sold by the Chhattisgarh-Company to the Board is a sale It is not sale to a company which ibselF supplies power to the consumers. oF power to the consumer.

#30. The Steel-Division oF bhe Assessee is a consumer. The CPP of bhe Assessee supplies electricity to the Steel-Division. Had the Steel-Division ..Q1 '•^. not: Laken power From the CPP then it had to purchase power From the Board. The CPP has charged the same rate from bhe Steel-Division bhat: Lhe Sfceel-Division had to pay to the Board iF Lhe power was purchased From the Board.

#31. The marketvalue oF bhe power supplied to Lhe Sbeel-Division should be computed considering the rafce oF power to a consumer in the open market: and it should not: be compared wiLh the rate of power when it: is sold bo a supplier as fchis is not: the rate for which a consumer or the Steel- Division could have purchased power in the open market. The rate oF power bo a supplier is nol Lhe markel rate to a consumer in the open markeL

#32. In our opinion, fche AO committed an .illegalifcy in compufcing Lhe markeb value by taking into account: bhe rabe charged to a supplier it: should have been compared wibh bhe market: value of power supplied to a consumer.

#33. It is admitbed by Lhe Department that in Chhabtisgarh the powerwas supplied to bhe indusbrial consumers ab Lhe rafce oF?3.20/- per unit: For bhe AY 2004-05 and ?3.75/- per unib For the AYs 2005-06 and 2006-07. this rate thal: was to be considered while computing bhe market: value oF Ifc was the power.

#34. The CIT-A and the Tribunal had rightly computed the market value oF the power aFfcer considering it wifch the rate of power available in the open market namely bhe price charged by the Board. There is no illegality intheirorders.

#35. In view oF above, the queslion is decided against the Department and in Favour oF the Assessee. The tax appeals have no meriL They are dismissed. Sd/- ChiefJustice Sd/- pritinkerDrwakar ^" Judge APPENDIX-1 The relevantpart ofsection 80-IA ofthe Income TaxAct, 1961 is asfollows: 'Deductions undertakings developmenfc, etc. 80-IA. ... in respecb oF proFits and gains From industrial inFrastructure engaged enterprises (4) This secbioaapplies to— (iv) an undertaking which,— (a) e is set up in any part of India for the generafcion or generation and disbribufcion of power it begins to generate power ab any time during fche period beginning on bhe 1st day ofApril, 1993 and ending on the 31stdayoF March,2011; (8) Where any goods or services held For the purposes oF the eligible business are fcransFerred to any obher business camedon by the assessee, or where any goods or sen/ices held for the purposes oF any other business camed on by the assessee are bransferred to the eligible business and, in eifcher case, bhe consideration, if any, For such bransfer as recorded in the accounbs oF bhe eligible business does nob correspond to the market value oF such goods or services as on the date oF the transfer, bhen, For bhe purposes oF the deducbion under this secbion, fche profits and gains oF such eligible business shall be compubed as if bhe in eifcher case/had been made at bhe markefc value of such transFer, goods or services as on that dabe: in the opinion oF the Assessing OFficer, bhe Provided thafc where, computation oF fche proFifcs and gains oF bhe eligible business in fche manner hereinbefore speciHed presenbs excepbional difficulties, Assessing OFficer may compute such proFits and gains on such reasonable basis as he may deem FiL Explanation—Forthe purpose of bhis sub-secfcion, relabion bo any goods or services, means bhe price that such goods or services would ordinarily Fefcch in bhe open markeL' value", "market ^ 'jaMod jo en]gA ^a>|jeuu si pjeog Aq jeuunsuoD e o^ a]es jo e^ey S3NHOV3H 8 ^ ^