AI Drafter 
TaxTMI 
TaxTMI 
2018 (1) TMI 1376
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....f Rs. 13,62,028/- on account of proportionate disallowance of common expenditure be not disallowed for the purpose of calculation of deduction u/s.80IA of the I.T.Act, 1961.' c. Whether in laws and on facts & circumstances of the case, the CIT(A) has erred in deleting the disallowance of Rs. 6,33,941/- u/s.14A of the I.T. Act, 1961." 4. Apropos Ground No.1 of appeal, brief facts of the case are that the assessee company is a limited company deriving income from the business of production of Ferro Alloys and Generation of Power. During the course of assessment proceedings, the Assessing Officer noticed that the assessee has transferred electricity to its Ferro Division @ Rs. 2.97 per unit, whereas, the power has been transferred to CSEB @ Rs. 2.80 per unit. Thus by transferring electricity at higher rate to its other division, the assessee has inflated profit of Power Division, which is, eligible for deduction u/s 801A of the Act. The income of the Ferro Alloys Division has correspondingly gone down which is assessable to tax at normal rate. According to the Assessing Officer, the market rate should be the rate at which the assessee has supplied electricity to CSEB i.e. Rs. 2....
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....on 8Q-1A(8) which deals with the transfer of goods held by eligible business are transferred to any other business carried on by the appellant. If such transfer do not correspond to the market value of such goods or services, the A.O. has right to compute the deduction by adopting market value of such goods or services on that date. Provision of section 80-IA(8) is re-produced as under:- Section 80IA(8) : "Where any goods [or services] held for the purposes of the eligible business are transferred to any other business carried on by the assessee. or where any goods [or services} held for the purposes of any other business carried on by the assessee are transferred to the eligible business and, in either case, the consideration, if any, jar such transfer as recorded in the accounts of the eligible business does not correspond to the market value of such goods [ or services] as on the date of the transfer, then, for the purposes of the deduction under this section, the profits and gains such eligible business shall be computed as if the transfer, in either case, hand been made at the market value of such goods[ or services] as on that date. Provided that where, in t....
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....er from electricity Board at that rate. Thus, the price at which the consumers are able to procure Power from Electricity Board is the market price. This view also gets support from decisions of various Income Tax Appellate Tribunals and jurisdictional High Court of Chhattisgarh. 8. In the present case, the appellant has charged Rs. 2.97 for each unit of electricity supplied to its Ferro Division calculated at the rate on the basis of CSEB tariff applicable to such industries. The Ferro Division had purchased power from CSEB and according to the CSEB tariff, the average purchase price of power was Rs. 20.77 per unit. On the contrary, CSEB purchased power (a: Rs. 2.80 per unit. In the given facts and circumstances- what should be the market price, is a matter for adjudication. I am of the considered opinion that the value of power agreed in PPA is on the basis of certain statutory provisions enacted in the Electricity Act and not based on demand and supply factors prevailing in the market. 9. The identical issue was decided in appellant's favour in its own case as decided in the .Y. 2008-09 (Appeal No.057/2010-11).The case of the appellant certainly derives strength from t....
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....the appellant u/s. 80-IA as claimed. This ground of appeal is hereby allowed". 10. Looking to the facts and circumstances of the case as also decisions cited above, 1 am of the considered opinion that in the present case, the appellant has not over stated the price of power supplied to its Ferro Division and therefore, the disallowance made by the A.O is hereby deleted. " 7. Before us, ld D.R could not controvert the findings of the CIT(A). In the instant case, we find that the CIT(A) has relied on the decision of Hon'ble Jurisdictional High Court in the case of the assessee for the assessment year 2008-09 in I.T.Appeal No.057/2010-2011 to delete the addition made by the Assessing Officer. No contrary decision was placed on record by ld D.R. to take any contrary view. Hence, we see no good reason to interfere with the order of the CIT(A), which is hereby confirmed and ground of appeal of the revenue is dismissed. 8. Adverting to Ground No.2 of appeal, the facts are that the Assessing Officer found that there is certain expenditure like Advertisement, Travelling, Legal and Professional Charges and Director's remuneration, which were debited to the Ferro Alloys....
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.... 12. After hearing ld D.R. and perusing the orders of lower authorities, we find that except supporting the order of the Assessing Officer, ld D.R could not point out any specific error in the above quoted order of the ld CIT(A). Hence, we do not find any good reason to interfere with the order of the ld CIT(A), which is hereby confirmed and the ground No.2 of the revenue is rejected. 13. Apropos Ground No.3 of appeal, the facts of the case are that the Assessing Officer has observed that the assessee has invested Rs. 15.00,03,357/- in shares and dividend income from these investments is exempt from tax. Therefore, the Assessing Officer by invoking the provisions of section 14A of the Act disallowed a sum of Rs. 6.33,941/- and added the same to the income of the assessee. 14. On appeal before the CIT(A), the assessee submitted that the assessee company has not incurred any direct or indirect expenditure in connection with earning of exempt income i.e. dividend. It was pointed out that there must be some direct connection between the earning of exempt income and incurrence of expenditure. Alternately, it was contended that the amount of interest paid towards term loan and work....
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....nd interest bearing funds are available, a presumption would arise that interest free advances have been given out of interest free funds. 15. The CIT(A) after considering the submissions of the assessee held that Section 14A deals with the expenditure incurred in relation to income not includible in total income. It is seen that the disallowance has been made without establishing any nexus between the interest bearing funds and exempted income yielding investment / non-interest bearing advances. It is seen that the assessee had sufficient non-interest bearing funds for making the investment in shares as it had sufficient net worth of its own. The Assessing Officer has not disputed the submission of the assessee that no expenditure was incurred for making the investment. The CIT(A) has relied on the following judicial pronouncements: i) In S. A. Builders Ltd. vs. Commissioner of Income Tax (Appeals) & ANR. 288 ITR 1 (SC), it was held that interest on borrowed funds cannot be disallowed if the assessee has advanced interest-free loan to a sister-concern as a measure of commercial expediency. ii) The Hon'ble Allahabad High Court in CIT vs. Raj Kumar Singh & C....
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.....T.Act, 1961. 21. We find that the addition made for the assessment year under consideration is similar to the ones made by the Assessing Officer for the assessment year 2009-2010, which has been deleted by the CIT (A) and the findings of the CIT(A) is confirmed by us in preceding para. The revenue has not brought anything new to persuade the Bench to differ from the view taken in the assessee's own case for that year. The principles of consistency requires that unless facts or law has undergone a change, the view taken earlier year under similar circumstances needs must be followed. Hence, following our decision for the earlier years, we uphold the findings of the CIT(A) and dismiss this ground of appeal of the revenue. 22. In Ground No.2 of the appeal, the revenue is aggrieved by the deletion of proportionate disallowance of Rs. 86,06,261/- out of interest expenses on account of interest free advance given to sister concern. 23. The Assessing Officer made disallowance on the ground that the assessee did not charge interest on the advances made to sister concern, though substantial interest amounts were paid to bank and others against loans obtained from them. 24. ....
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....sallowance to Rs. 19,81,216/- u/s.37(1) of the Act. 32. The Assessing officer disallowed Rs. 19,81,216/- in respect of expenses on account of fines & penalty, pooja and festivals, charity and donation, etc, on the ground that these are not allowable expenses as per the I.T.Act. 33. On appeal, before the CIT(A), it was submitted by the assessee that amounts of Rs. 117/-, Rs. 16,63,482/-, Rs. 27,160/- and Rs. 1,03,037/- related to debit/credit of earlier year, fines and penalties, income tax of earlier years, pooja and festival expenses. 34. The CIT(A) found that the expenditure of Rs. 16,63,482/- is not substantiated as relatable to infringement of any legal provisions but to lifting of additional coal and, therefore, it cannot be treated as penalty for breach of any law. In view of above, he deleted Rs. 16,63,482/- and confirmed all other disallowances. 35. Before us, ld D.R. could not controvert the above findings of ld CIT(A). Hence, we see no good reason to interfere with the order of the CIT(A), which is hereby confirmed and ground of appeal of the revenue is dismissed. 36. In the result, appeal filed by the revenue is dismissed. ITA No.360/RPR/2014 A.Y. 2011-12.....
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....d and supported the action of the Assessing Officer. 42. We have considered the rival submissions, perused the material on record and have gone through the orders of authorities below as well as the judgment of Hon'ble Jurisdictional High Court in the case of Godawari Power & Ispat Ltd (supra). Ld. D.R. could not point out any material difference in the facts in the present year as compared to the facts in the case of Godawari Power & Ispat Ltd (supra). The facts for the year under consideration being no different from those before the Hon'ble High Court in the case of Godawari Power & Ispat Ltd (supra), we find no reason to differ therefrom. We find that Hon'ble High Court in its judgment, inter alia, held that the CIT(A) and Tribunal had rightly computed the market value of the power after considering it with the rate of power available in the open market namely the price charged by the Board. There is no illegality in their orders. No contrary view has been taken by any superior authority on this issue. Accordingly, the findings of the learned Commissioner of Income- tax (Appeals) stand confirmed. Ground raised by the revenue is dismissed. 43. Ground No.b of ap....
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....sessing Officer and Ground No.1 of appeal of the revenue is dismissed. 48. Ground No.(c) relates to restriction of addition to Rs. 1,01,277/- out of disallowance made by the AO on account of Pooja and festival expenses and charity & donation expenses thereby giving relief of Rs. 71,779/-. 49. The Assessing Officer observed that the assessee has claimed an amount of Rs. 96,041/- and Rs. 80,015/- towards charity and donation and Pooja and festival expenses, which are not allowable in company's case. Therefore, he disallowed the same. 50. On appeal, the CIT(A), the assessee submitted that out of Rs. 80,015/- , an amount of Rs. 71,779/- was expended for purchase of distribution of sweets to all the employees/workers on the auspicious occasion of Viswakarma poooja day, independence day and republic day. The assessee relied on the CBDTG Circular No.17(F.No.27(2)-IT/43) dated 6.5.1983 & circular No.13A/20/68-IT-II dated 3.10.1968, wherein, it was emphasized that expenses incurred on the occasion of Diwali and Muhurat are in the nature of business expenditure. Based on these circulars, the CIT(A) allowed Rs. 71,779/- and disallowed balance of Rs. 1,01,277/-. Hence, the revenue....