TaxTMI 
TaxTMI 
2016 (1) TMI 118
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....ng deduction u/s 80-IA, the prorated indirect expenses of the company should be reduced from the profit of the Power Units. 3. That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) ought to have given directions to allow deduction u/s 801A in respect of integrated Power Unit No. 6 if in the unlikely event the claim for deduction u/s 801A in respect of Power Unit No. 6A & 6B is ultimately not allowed in favour of the company. B. Disallowance of Employee's Contribution to Provident Fund & ESI Fund. 4. That on the facts and in the circumstances of the case, the Ld. CIT(Appeals was not justified and grossly erred in confirming the disallowance of employee's contribution to Provident Fund and EST Fund amounting to Rs. 43,23,169/-made after the due date. C. Allocation of notional expenses to income exempt u/s 10(34) & 10(35). 5(a) That on the facts and in the circumstances of the case, the Ld. CIT (Appeals) was not justified and grossly erred in confirming the disallowance u/s 14A on account of expenditure incurred to earn exempt dividend income, by applying the provision of Rule 8D. 5(b) That on the facts and i....
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....year 2002-03 to assessment year 2005-06, except for issue raised in ground no. 4 relating to disallowance of employees contribution to PF, which is covered by the decision of Hon'ble Bombay High Court. 3. The Ld. DR has also admitted that most of the grounds raised by the assessee are covered by the order of the Tribunal for the earlier years. 4. The assessee company is engaged in the business of manufacturing of paper and paper boards, optic cables, Jelly field cables and power generations for captive consumptions. Most of the issues raised in both the appeals have a chequered history, in as much as they stand decided by the Tribunal in earlier years. 5. So far as the issue raised vide ground no.1, whether electricity duty should be excluded while calculating the transfer price of electricity duty for computing the deduction u/s 80IA. 6. This issue has been decided in favour of the assessee by the Tribunal vide order dated 30.05.2014 in assessee's own case for AYs 2002-03 to 2005-06. The relevant conclusion and finding of the Tribunal as given in para 32 and 33 reads as under:- "32. We have heard the rival submissions and also perused the relevant findings of ....
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....e which is acceptable between the buyer and the seller in the open market conditions i.e., in an unrelated and uncontrolled transactions. Open market conditions refer to the conditions and price available for the public at large. In the present case, the market value of supply of electricity by power unit of the assessee to the paper division of the assessee has to be seen from the angle, if the paper unit has to purchase the electricity directly from the Karnataka Electricity Board (as both the power units as well as the paper units are situated in Karnataka), then what is the price which would be paid by the paper unit to the Karnataka Electricity Board. The transfer of the price as contemplated in section 80IA(8) has to be seen having regard to the arm's length condition i.e., what would be the price under uncontrolled transactions in the open market. If the paper division has been purchasing the electricity from the Karnataka Electricity Board at an average cost of Rs. 5.80, which fact is not in dispute, then the same price should be considered as market value for bench marking the price at which power units are supplying the electricity to the paper division. If the taxes and ....
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....ned order passed by the learned Commissioner (Appeals) on this issue and allow the ground no.8, is treated as allowed". 7. Thus, respectfully following the precedence of earlier years, we decide this issue in favour of the assessee. 8. In ground no. 2, the assessee has challenged the calculation of deduction u/s 80IA for reducing the pro-rated indirect expenses of the company from the profit of the power units. 9. This issue has been decided against the assessee by the Tribunal in assessee's own case for the earlier years in the following manner:- 34. Ground no.9 reads as under:- "9. That on the facts and in the circumstances of the case the Ld. CIT(Appeals) was not justified in holding that for computing deduction u/s 80IA, the prorated indirect expenses of the company should be reduced from the profit of the Power Unit." 35. After hearing both the parties, we find that the present issue has been decided by the Tribunal against the assessee right from the assessment year 1999-2000 to 2001-02. The Assessing Officer has apportioned indirect expenses which are to be reduced from the profits of the power unit as worked out in detail at Page-20 of th....
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....d as prescribed in the relevant statute and in any case all the payments were made much before the due date of filling of the return of income. The Ld. CIT(A) too confirmed the said disallowance on the ground that such payments are not governed by section 43B. 16. Before us, the Ld. Counsel submitted that, except for two payments of Rs. 30,827 for the month of April, 2006 and Rs. 30,777/- for the month of May, 2006, the assessee has deposited the entire sum within the grace period, as provided in the relevant statute. So therefore, to the extent of Rs. 42,61,565/- which has been deposited well within the due date, same should not be disallowed. Further, in any case now in view of the decision of Hon'ble Bombay High Court in the case of CIT vs Ghatge Patil Transports Ltd, judgment dated 14.10.2014 passed in ITA No. 1002 of 2012 and 1034 of 2012, the Hon'ble High Court held that both employees and employer's contributions are covered under the amendment to section 43B and therefore, if the payments have been made before the due date of filling of return of income, the they are to be allowed u/s 43B. While arriving to this proposition the Hon'ble court has followed the decision of ....
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.... too major portion is coming from the earlier years, it can be said to be made out of the surplus funds only. Thus, according to the principles laid down by the Bombay High Court in Reliance Utilities and Power Pvt. Ltd. (supra), no disallowance on account of interest can be made. 173. Insofar as the disallowance on account of administrative expenses are concerned, we find that the Assessing Officer has taken all the administrative expenses for apportioning the disallowance on pro-rata basis without even looking to the nature of expenses. For e.g., vehicle maintenance, charity and donation, misc. expenses, etc., cannot be said to have been incurred for the purpose of investment in shares, etc. At the most, directors' fees and expenses and auditor's remuneration can be said to be attributable for the purpose of disallowing the administrative expenses for the purpose of earning exempt income on the investments made. From the details mentioned above, it is seen that the directors' fees and expenses is Rs. 13 lakhs whereas, auditor's remuneration is Rs. 5.53 lakhs. If the ratio on which the Assessing Officer has worked out the disallowance on entire expenditure, then on that r....
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....ed on fact. Thus, we do not find any reason to deviate from such findings of fact which has not been rebutted and, hence, the ground no.6(i) and 6(ii) raised by the Revenue stand dismissed. 233. Ground no.7, reads as under:- "7. On the facts and in the circumstances of the case and in law, the Id. CIT(A) erred in deleting the addition of profits on sale of investments of fixed assets in computing book profit u/s. 115JB." 234. After hearing both the parties, we find that this issue was decided in favour of the assessee by the Tribunal in assessee's own case, however, now this issue stands covered against the assessee by the Special Bench decision of the Tribunal in Rain Commodities Ltd. v/s DCIT, [2010] 131 TTJ 514 (Hyd.). Thus, respectfully following the decision of the Special Bench of the Tribunal, we confirm the addition on account of profit on sale of investment in fixed assets while computing the book profit under section 115JB. Thus, ground no.7, raised by the Revenue is treated as allowed". 24. Thus, following the aforesaid ratio, this issue is decided against the assessee. Accordingly, ground no. 7 is treated as dismissed. 25. Ground no. 8 i....
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....Sec. 145A 4. Whether on the facts and in circumstances of the case and in law, the CIT(A) erred denying of deduction u/s.8OHHC in computing book profit u/s.8OHHC in computing book profit u/s.115JB" 30. At the outset, both the parties admitted that all the grounds raised by the revenue are also covered by the decision of the Tribunal in assessee's own case for the earlier years. 31. Ground no. 1 relates to whether captive power consumption from generation set would be eligible for deduction u/s 80IA. 32. This issue has been decided by the Tribunal in the earlier years, wherein the Tribunal following the precedence of earlier years and had been consistently deciding this issue in favour of the assessee right from AY 1997-98 onwards. Hence, consistent with the view taken in the earlier years, we decide this issue in favour of the assessee and against the revenue. 32. Similarly, the issue raised in ground no. 1.2, whether the conditions of provision of section 80IA(3)(ii) are satisfied in respect of DG sets or not. 33. This issue too has been decided in favour of the assessee right from assessment year 1997-98 onwards up till 2005-06. Thus, consistent with the view ta....
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....rm of energy. The Income Tax Act, 1961, does not define the word "power". The new Oxford Dictionary of English defines the word "power" as "energy" that is produced by mechanical, electrical or other means which is used for operating device. Otherwise also, generation of steam is a kind of energy which can be converted into mechanical or electrical energy from which power is generated. To say that the generation of power is only restricted to generation of electricity alone, is too narrow a view. The term "power" encompasses a whole range of energy generated in various forms to run machines, devices, etc. This precise issue had also come up for consideration before the Tribunal in several cases cited supra. The Tribunal in Sial SBEC Bio Energy Ltd. (supra), while deciding the issue whether generation of steam amounts to generation of power or not for the purpose of deduction under section 80IA, has referred catena of decisions and also the dictionary meaning on the meaning and term of "power" and thereafter, observed and concluded as under:- "The word 'power' used in s. 80-IA(lV) has not been defined in the statute, then the common parlance meaning as per the dictionary is....
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....e same meaning whichever of the two be the item under consideration. In this regard the learned Authorised Representative has also referred the definition of word 'generate' under s. 2(29) of the Electricity Act, 2003 as per which 'generate' means to produce electricity from a generating station for the purpose of giving supply to its any premises or enabling a supplier to be so given. The AO has tried to point out the intention of the legislatures by referring to s. 80IA(4)(iv)(b) to infer that intention is to provide benefit to the generation of electricity only, since in the sub-cl. (b) transmission and distribution lines are mentioned which can be of electricity only. Submission of the learned Authorised Representative in this regard to which we also agree remained that sub-cls. (a), (b) and (c) of s. 80IA(4)(iv) provide for deduction in the cases of three types of undertaking viz. the one which is engaged in generation or generation and distribution of power; second, which start transmission or distribution lines; and the third, which undertakes substantial renovation and modernization of the existing network of transmission or distribution lines. All these three clauses deal ....
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....m produced by the assessee on the principle of interpretation of statute shall only be termed as power and shall qualify for the benefits available under s. 80-IA(iv), held the Tribunal. Under these circumstances, we fully concur with the decision on the issue arrived at by learned CIT(A) that assessee is in the business of generation of power and that the steam so generated by the industrial undertaking and receipt from the business of industrial undertaking is within the meaning of s. 80-IA which would qualify for this benefit. The first appellate order is thus upheld. The ground is thus rejected." 23. From the aforesaid decisions, it can be inferred that the generation / production of steam is also a form of power and the Unit- 6 which is an undertaking set-up for generation of steam for its manufacturing process can be said to be for generation of power. The basis on which the learned Commissioner (Appeals) has tried to distinguish the decision of Sial SBEC Bio Energy Ltd. (supra) is very superficial. What needs to be seen is, whether generation of steam can be said to be generation of power or not, then, the finding and the conclusion drawn by the Tribunal in the afor....
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....lding. 41. This issue is again covered by the decision of the Tribunal in the earlier years wherein this issue has been decided in the following manner:- "40. Ground no.13, reads as under:- "13. That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) was not justified in holding that expenditure in respect of Bangalore office taken on lease to the tune of Rs. 50,136/- are capital expenditure." 41. The assessee, during the assessment year 1999-2000, had acquired property at Bangalore on lease. For repair and maintenance of the new Bangalore office, it had incurred a sum of ' 2,14,075 during the assessment year 2002-03. The Assessing Officer, after holding it to be capital expenditure, disallowed the said expenditure. 42. The learned Commissioner (Appeals), while deciding the issue, had followed the first appellate order for the assessment year 2001-02 in assessee's own case and partly affirmed the said findings. 43. Before us, it has been submitted that this issue has been decided in favour of the assessee by the Tribunal in assessee's own case for the assessment year 2000-01 and 2001-02 in ITA no.8243/Mum./ 2004, etc., ord....