HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR [1]- D.B. Income Tax Appeal No. 65 / 2010 Commissioner of Income Tax, Ajmer Appellant Versus M/s. RSWM Limited (Formerly known as Rajasthan Spinning & Weaving Mills Ltd.), Kharigram, Gulabpura, Bhilwara. Respondent Connected With [2]- D.B. Income Tax Appeal No. 57 / 2010 Commissioner of Income Tax, Ajmer Appellant Versus M/s. RSWM Limited (Formerly known as Rajasthan Spinning & Weaving Mills Ltd.), Kharigram, Gulabpura, Bhilwara. Respondent For Appellant(s) : Mr. KK Bissa, Sr. Standing Counsel with Mr. HG Chanda & Mr. Gajendra Singh Chouhan For Respondent(s) : Mr. Praful Khurana & Mr. Ankit Sareen HON'BLE MR. JUSTICE GOVIND MATHUR HON'BLE MR. JUSTICE VINIT KUMAR MATHUR Judgment 14/07/2017 These appeals are before us to examine correctness of judgment dated 23.9.2008 passed by Income Tax Appellate Tribunal, Jodhpur Bench, Jodhpur in ITA Nos.422/JU/2007 & 405/JU/2007 against assessment year 2004-05 and ITA (2 of 7) [ ITA-65/2010] Nos.493/JU/2007 & 576/JU/2007 against assessment year 2003-04. By order aforesaid, learned Tribunal while dismissing appeal preferred by Revenue affirmed order passed by learned Commissioner of Income Tax(Appeals). Learned Income Tax Appellate Tribunal after discussing entire issue on merits arrived at conclusion that income from generation of power, may that be in nature of captive generation, make assessee entitled for deduction under Section 80-IA of Income Tax Act, 1961 in respect of notional income from generation of electricity which was captively consumed by assessee itself in another unit of same company. discussion made by learned Tribunal in judgment impugned reads as follows:- 7. On careful analysis of order passed by AO, it is seen that AO has not at all considered intention of provisions contained in Section 115JA(ii) and Section 80IA. Provisions contained in Section 115JA(ii) is only fictional provision to arrive at tax leviable against assessee which is not having any taxable income as per provision contained therein. In contrast thereto, provisions contained in Section 80IA is substantive provision granting tax exemption to companies which are established to generate or generate and distribute (3 of 7) [ ITA-65/2010] power. Provisions contained in Section 115JA(ii) is self contained provision starting with non obstante clause having over riding effect over all other provisions of Act. So, application of analogy of u/s 80IA in toto by considering provisions of sec. 115JA(ii) is not permissible under law. provision contained in Section 115JA(ii) being self contained provision having over riding effect on all other provisions of Act, it is to be strictly construed in its application. provisions contained in clause (4) of Explanation attached to sub- section (2) of sec. 115JA(ii) clearly mandates that book profit is to be reduced by profit derived by industrial undertaking from business of generation or generation and distribution of power. plain reading of this provision clearly indicates that profit derived by industrial undertaking from generating of power or distributing power is to be reduced from book profit arrived as per provision of sec. 115JA(ii). Undisputedly, term business is defined in sec. 2(13) of I.T. Act which is inclusive definition comprehending trade, commerce or manufacture or any adventure or concern in nature of trade, commerce or manufacture. This clause clearly shows that activity of manufacture is also business by applying this definition to provision contained in Explanation (4) to sub-section (2) of sec. 115JA(ii). There is no requirement for sale of commodity in order to constitute business as mentioned therein. Impliedly, manufacture itself is business. Undisputedly, in case in hand, assessee has produced power in two units during period under consideration and supplied entire generated power for running of other units of assessee. So, this is (4 of 7) [ ITA-65/2010] business as contemplated in said provision. It was further found that assessee is maintaining separate books of account for each and every unit and preparing profit and loss account and balance sheet separately and thereafter it is preparing consolidated profit and loss account and balance sheet for purpose of annual report to be placed before general body meeting enclosing thereto unit-wise profit and loss account and balance sheet as certified by authorized person required under law applicable thereto. Therefore, as assessee is found to have NIL tax liability, it has calculated book profit for purpose of levy of minimum alternate tax payable on profit as per consolidated profit and loss account [including profit of all seven units] consisting of power generating units also and reducing therefrom profits of power generating units and dividend income. This claim of assessee is found to be in accordance with language and tenor of provisions contained in sec. 115JA(ii). Hence claim of assessee is found as correct. other view taken by AO has set aside by ld. CIT(A) is incorrect. 8. ld. Departmental representative sought to draw our attention to Apex Court s judgment in case of Appollo Tyres Ltd. Vs. CIT [2002] 255 ITR 273 (SC) wherein it was held that AO, while computing book profits of company has power only to examine whether such books of account are certified by authorities under Company s Act as having been properly maintained in accordance with Company s Act and thereafter he has limited power of making increases and reductions as provided in Explanation below sec.115JAA of Act. In this case, ld. CIT(A), however, did not limit his scope (5 of 7) [ ITA-65/2010] powers as laid down by dictum of Hon ble Apex Court and carried adjustment which was not permitted by sec.115JAA of Act by reducing profits which were not part of book profit on account of sale/transfer of electricity by assessee s two units to other units of company. 9. We have examined aforesaid contention carefully. It is correct that AO and, for that matter, even ld. CIT(A) are not entitled to alter profit and loss account prepared by assessee under provisions contained in Company s Act while arriving at book profit u/s 115JAA of Act as has been laid down by Hon ble Apex Court in case of Appollo Tyres Ltd.[supra]. In present case in appeal, ld. CIT(A) has taken book profit as basis for arriving at deemed income as required to be computed by provisions of sec.115JAA of Act. He is also found to have limited his power of making increases and reductions as provided for in Explanation to Sec. 115JAA of Act. book profit as computed in accordance with provisions of Part 2 and 3 of Schedule 6 of Company s Act, 1966 has been increased in terms of explanation provided under that section and thereafter he has reduced rightly amount of profits derived by industrial undertaking from business of generation or generation and distribution of power in terms of reductions as provided for in same Explanation. This Explanation does not explicitly say that only that amount of profit derived by industrial undertaking is to be reduced that is credited to profit and loss account. Even if amount is not specifically credited to profit and loss account, it was sufficient that such amount of profit found part of consolidated profit and loss (6 of 7) [ ITA-65/2010] account of assessee as he had transferred electricity at cost and by way of commercial accounting to its other units formed part of consolidated profit and loss account drawn by assessee, book profit of which is found to have been taken as basis for computing deemed income for year under consideration. Hence we are of considered opinion that ld. CIT(A) s order is not infirm in any way requiring any interference. Hence same is hereby upheld by finding issue raised by department as devoid of merits and dismiss same. It is submitted by Mr. Praful Khurana, learned counsel appearing on behalf of assessee that issue under adjudication is no more res integra in view of judgment of Hon ble Supreme Court in Civil Appeal No.3461/2010; Commissioner of Income Tax, Delhi Vs. M/s. DCM Shriram Consolidated Ltd. This Court under order dated 22.12.2010 formulated substantial question of law in following terms: whether Tribunal was justified in holding that assessee is entitled to claim deduction as prescribed under Section 80-IA of Income Tax Act? Delhi High Court while dealing with same issue in case of Commissioner of Income Tax Vs. DCM Shriram Consolidated Ltd; IT Appeal No.1187/2005 decided on (7 of 7) [ ITA-65/2010] 21.11.2008, arrived at conclusion that generation of electricity by setting up fully independent and identifiable industrial undertaking and use of that captive power for its own other unit is also required to be dealt with as per provisions of Section 80-IA and is entitled for deduction in same terms. order aforesaid came to be affirmed by Hon ble Supreme Court in bunch of appeals led by Civil Appeal No.3461/2010; Commissioner of Income Tax, Delhi Vs. M/s. DCM Shriram Consolidated Ltd. On perusal of facts and all legal aspects of matter, we are satisfied that issue involved in this appeal is also required to be decided in terms of judgment referred above. In view of it, this appeals preferred by Revenue are dismissed with conclusion that Tribunal rightly declared assessee entitled to claim deduction as prescribed under Section 80-IA of Income Tax Act, 1961 and even for purpose of computing books of account as per Section 115-JA of Income Tax Act, 1961. question is therefore answered in favour of assessee and against Revenue. (VINIT KUMAR MATHUR)J. (GOVIND MATHUR)J. Sanjay Commissioner of Income-tax, Ajmer v. RSWM Limited (Formerly known as Rajasthan Spinning & Weaving Mills Ltd.)