TaxTMI 
TaxTMI 
2018 (10) TMI 581
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....ded long term capital gain of Rs. 9,88,867/-. The gross total income was shown at Rs. 46,54,65,157/- from which deduction u/s 80-IA of the I.T. Act, 1961 of Rs. 19,90,99,326/- was claimed and the total income was worked out at Rs. 26,63,65,921/-. Book profit for MAT purposes was shown at Rs. 88,39,67,803/- on which the tax liability worked out to be Rs. 17,61,79,203/- which was more than the tax payable under the normal provisions of the I.T. Act. The case was selected for scrutiny through CASS and the first notice u/s 143(2) dated 07.08.2012 was issued by Assessing Officer and duly served on the assessee through Registered Post on 13.08.2012. Subsequently, a revised return was filed by the assessee on 30.03.2013 declaring total income of Rs. 12,10,79,996/- which included long term capital gain of Rs. 9,88,867/-. The gross total income was shown at Rs. 46,54,65,157/- from which deduction u/s 80-IA of Rs. 34,43,85,162/- was claimed and the total income was worked out at Rs. 12,10,79,996/-. Book profit for MAT purposes was shown at Rs. 88,39,67,803/- on which the tax liability worked out to be Rs. 17,61,79,203/- which was more than the tax payable under the normal provisions of the I....
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.....O. that sale proceeds of carbon credit is not income derived from business of power generations and there by deleting disallowance of Rs. 37,56,76,933/- out of deduction claimed u/s 80IA of the I.T. Act, 1961. b. Whether in law and on facts & circumstances of the case, the learned CIT(A) has erred in deleting the disallowance of Rs. 1,91,79,611/- on account of CSR expenses which have not been laid out wholly and exclusively for the purpose of business? c. Whether in law and on facts & circumstances of the case, the learned CIT(A) has erred in restricting the addition to Rs. 12,57,976/- out of disallowance made by the A.O. on account of charity/Pooja and Festival expenses their by giving relief of Rs. 3,50,000/-? d. Whether in law and on facts & circumstances of the case, the learned CIT(A) has erred in deleting the disallowance of Rs. 2,25,43,398/- u/s 14A of the IT Act, 1961? e. Whether in law and on facts and circumstances of the case, the learned CIT(A) has erred in deleting the addition of Rs. 2,10,551/- made by the A.O. on account of delayed payment of employees contribution to PF and ESI which were deemed as income U/s 2(24)(x) of IT Act, 1961 read with section 3....
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....ble undertaking by observing as under :- "5. I have carefully gone through the assessment order and submissions of the appellant. The A.O. has relied on the decision of Liberty India vs. CIT (2009) 183 Taxman 349 (SC) and stated that the provision of section 80-IA(5) of the Act is applicable to the profit from the eligible business as a whole and the eligible undertaking has not to be seen on a standalone basis of non-eligible business. However, I am in agreement with the submissions of the appellant that on a conjoint reading of sub-sections (1), (4) and (5) of section 80-IA of the Act, it is clear that the deduction under section 80-IA of the Act shall be allowed to an undertaking, which is engaged in the eligible business and the aforesaid deduction shall be computed as if the eligible business of the undertaking is the only source of income of the assessee. 5.2 The appellant has elaborately differentiated in the submission the following judicial pronouncements relied upon by the A.O. CIT vs. Him Teknoforge Ltd. (2013) 256 CTR 393 (HP-HC); IPCA Laboratory Ltd. vs. DCIT (2004) 266 ITR 521 (SC); ITO vs. Induflex Products (P) Ltd. (2006) 280 ITR 1 (SC); A.M. Moosa vs. CIT (2007) ....
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....g the deduction u/s 80-IA, loss of one eligible unit is not to be set off or adjusted against the profit of another eligible unit. Since the order of the ld. CIT(A) is in consonance with the law laid down by various High Courts and various Benches of the Tribunal, therefore, we find no infirmity in the order of the ld. CIT(A). Accordingly, the same is upheld and the ground raised by the Revenue on this issue is dismissed. 14. So far as ground of appeal no.(a)(ii) is concerned, the facts of the case, in brief, are that the power generating eligible units of the assessee company namely, the Unit-1 & Unit-2 sell the electricity to outside parties as well as transfer the electricity to their other divisions for captive consumption. From the various details furnished by the assessee, the Assessing Officer observed that the assessee has shown profit at the rate of 58.9% of Unit-1 and 45.7% in Unit-2 on which deduction u/s 80-IA has been computed. He observed that if the results of the Unit-1 & Unit-2 are compared with that of the Government owned PSUs, it will be found that such high net profit is not prevalent in this line of business. He, therefore, came to the conclusion that the con....
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....t contextual meaning to the term "market value" appearing in section 80- IA of the Act. When the captive power plant directly transfers electricity to the Steel Division and other division, the captive power plant is doing so as a generator and distributor and not as a simple generator of electricity. Hence, it is clear that the market value for the transaction of sale of power from the captive power plant to the Steel Division shall be sale price of CSPDCL to the Steel Division. Further, the appellant in its submission has also relied on various judicial decisions wherein it is stated that the rate at which power was sold by State Electricity Boards should be considered as the market value for the purpose of section 80-IA(8) of the Act. 7.2 Further, in the appellant's own case on identical facts in the AYs 2004-05 to 2006-07 such claim was also accepted by the Hon'ble High Court of Chhattisgarh. In the case of the appellant (Tax Case No.32 of 2012) the Hon'ble High Court has held that:- "The market value of the power supplied to the Steel Division should be computed considering the rate of power to a consumer in the open market and it should not be compared with ....
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....he Assessee, he (the AO) dis-allowed the difference and added it in the income of the Assessee. 25. In Chhattisgarh, a consumer can utilise the power produce by its own captive power generating unit or it can buy power from the Board. No other entity can supply power to any consumer in the State: a consumer cannot purchase electricity from any other person. 26. The Board was charging @ Rs. 3.30/- per unit in the AY 2004-05 and @ Rs. 3.75/- per unit in the AYs 2005-06 and 2006-07 from industrial units. The CPP of the Assessee also charged the same amount from its Steel Division. As both were same, the CIT-A held this is to be the market value. The Tribunal has upheld this finding. 27. The counsel for the Department submits that: * The Chhattisgarh-Company is situate in the same area and the price for which it sold power to the Board was relevant; * The AO rightly compared it for calculating the market value of the power supplied to the Steel-Division; * The rate charged by the Board cannot be taken into account as it includes wheeling and transmission charges. 28. The Chhattisgarh-Company is a company which is generating power. It is neither consumer of the elec....
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....ssing Officer u/s 80-IA by holding that the assessee has not overstated the price of power supplied to its divisions. Further, we find the Assessing Officer in subsequent assessment years i.e. for assessment years 2009-10, 2010-11 and 2012-13 has not made any such disallowance u/s 80-IA on account of power tariff charged to other units of the assessee. Under these circumstances, we do not find any infirmity in the order of the ld. CIT(A) on this issue. The ground raised by the Revenue is accordingly dismissed. 19. Ground of appeal no.(a)(iii) relates to the taxability of the carbon credits. 20. Facts of the case, in brief, are that the Assessing Officer during the course of assessment proceedings observed that the assessee company has shown receipt of Rs. 0.67 crores on account of carbon credit. On being questioned by the Assessing Officer, it was submitted that an amount of Rs. 67,18,544/- has received on account of carbon credit has rightly been credited as income of power unit-1. It was submitted that the ld. CIT(A) has allowed similar claim for the purpose of deduction u/s 80-IA for assessment year 2008-09 in assessee's own case. Without prejudice to the above, it was alterna....
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....wer itself and it satisfies the criteria of the first degree nexus as laid down by the Apex Court in Liberty India (supra). The various decisions relied on by the Assessing Officer were distinguished. 24. Based on the argument advanced by the assessee, the ld. CIT(A) held that the carbon credit could be earned if power is generated and not otherwise and, therefore, gain from sale of carbon credit is a gain derived from the business of generation of power and consequently, eligible for deduction u/s 80-IA(4) of the I.T. Act. Relying on various decisions including the decision of the Hon'ble Madras High Court in the case of Fenner (India) Ltd. vs. CIT reported in 241 ITR 803, decision of the Hon'ble Supreme Court in the case of B. Desraj vs. CIT reported in 301 ITR 439, he allowed the ground raised by the assessee before him. 25. Aggrieved with such order of the ld. CIT(A), the Revenue is in appeal before the Tribunal. 26. The ld. DR heavily relied on the order of the Assessing Officer. 27. The ld. counsel for the assessee on the other hand filed an application under Rule 27 of the Income Tax (Appellate Tribunal) Rules, 1963 and submitted that the issue relating to the taxabi....
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....Yagyashala, Drinking water hut, purchase of PC for Rajnandgaon Collectorate, donation to NGO, expenses for eye camp, donation/ expenses for Gram Panchayat, payment for supply of drinking water payment to Gram Vikas Samiti, development of village pond, beautification of pond and expenses of similar nature. On perusal of the Ledger Account, he observed that the sum of Rs. 11,45,230/- relating to GPIL-RR Ispat includes payments relating to construction expenses for similar work. Similarly, on perusal of Ledger Account, he observed that out of Rs. 61,00,000/- relating to GPIL-IOCD, a sum of Rs. 55,00,000/- represents donation to Akasnsha Lion School for physically handicapped and Rs. 6,00,000/- represents donation to ISKCON. Relying on various decisions, he observed that the above expenses were incurred by the assessee company without any legal obligation and purely as an act of good citizenship and, therefore, it cannot be said to have been laid out wholly and exclusively for the purpose of its business. He accordingly disallowed a sum of Rs. 1,91,79,611/- debited to the Profit & Loss Account. 33. In appeal, the ld. CIT(A) relying on various decisions deleted the addition. While doin....
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....ly dismissed. 37. Ground no.(c) by the Revenue relates to order of the ld. CIT(A) in restricting the addition to Rs. 12,57,976/- on account of charity/pooja and festival expenses to Rs. 3,50,000/-. 38. Facts of the case, in brief, are that the Assessing Officer, during the course of assessment proceedings, observed that the assessee has debited an amount of Rs. 5,94,487/- on account of Pooja & Festival expenses in respect of GPIL-Siltara - Rs. 513184/-, GPIL-RR Ispat - Rs. 65,130/- and GPIL-IOCD - Rs. 16,175/-. He observed that such expenses are regularly being disallowed by the Assessing Officer. Relying on the decision of the Hon'ble Jurisdictional High Court in the case of Hira Ferro Alloys Ltd. reported in 227 CTR 508 (which is a sister concern of the assessee) wherein it has been held that the expenditure incurred on Pooja/Vishwakarma Pooja by a company cannot be treated as expenditure incurred wholly and exclusively for purposes of business or profession of a company, he disallowed the entire sum of Rs. 5,94,487/-. Similarly he noted that the assessee has debited an amount of Rs. 10,13,489/- on account of charity and donation. Since such type of expenses are regularly being....
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....the disallowance of Rs. 4,57,029/- was made u/s 14A in assessment year 2008-09 which was confirmed by the ld. CIT(A). Similarly, in assessment year 2010-11 an amount of Rs. 2,03,73,385/- was disallowed u/s 14A of the I.T. Act. He, therefore, asked the assessee to explain as to why the provisions of section 14A should not be applicable in this year also since the secured loan has increased from 39,14,988/- as on 31.03.2010 to Rs. 607,78,962/- as on 31.03.2011 and the unsecured loan has increased from Nil as on 31.03.2010 to Rs. 36,45,41,838/- as on 31.03.2011 which shows that major part of investment had been made out of borrowed funds. Similarly, the total investment has increased at Rs. 7,15,41,58,000/- as against Rs. 1,20,449/-. 45. The assessee replied that during the year under consideration it has earned cash profit of Rs. 114.96 crores (excluding amalgamating companies) and the net increase in the investment is of Rs. 116.74 crores (excluding amalgamating companies). Therefore, it is evident that the investment made during the year under assessment is out of owned fund. It was further submitted that the loans obtained during the year has been utilized towards fixed assets an....
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....investment, disallowance u/s 14A for interest and administrative expenses is not justified. 51. Referring to the decision of the Hon'ble Bombay High Court in the case of CIT vs. Reliance Utilities & Power Ltd. reported in 313 ITR 340, he submitted that the Hon'ble High Court in the said decision has held that where interest bearing funds are available and the interest free funds are more than investments made, the presumption is that the investment in the tax free securities would have been made out of the interest free funds with the assessee. 52. Referring to the decision of the Hon'ble Chhattisgarh High Court in the case of JCIT vs. Beekay Engineering Copr. reported in 325 ITR 384, he submitted that the Hon'ble High Court in the said decision has held that when there was sufficient funds in the account of HUF partner and substantial profit had accrued to the assessee firm in the relevant year, findings of the Tribunal that the borrowed funds were not diverted as interest free advances to the members of the HUF and thus there was no justification for making part disallowance out of interest paid on borrowed funds are findings of fact and the same did not warrant any int....
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....at 559.12 crores is much more than the investment of Rs. 212.09 crores, the income of which is exempt from tax. The Hon'ble Bombay High Court in the case of Reliance Utilities & Power Ltd. reported in 313 ITR 340 has held that if there were funds available both interest free and overdraft and/or loans taken then a presumption would arise that investments would be out of the interest free funds generated or available with the company, if interest free funds were sufficient to meet the investments. 56. The Hon'ble Chhattisgarh High Court in the case of JCIT vs. Beekay Engineering Corporation reported in 325 ITR 384 has held that when there were sufficient funds in account of the HUF partners and substantial profit had accrued to the assessee firm in the relevant year, findings of the Tribunal that the borrowed funds were not diverted as interest free advances to the members of the HUF and thus there was no justification for making part disallowance out of interest paid on borrowed funds are finding of fact and the same did not warrant any interference. 57. We find the Hon'ble Gujarat High Court in the case of Pr. CIT vs. Sintex Industries Ltd. in Tax Appeal No.291 of 2017 order dat....
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....ered opinion that 2% of the dividend income received during the year may reasonably be estimated towards administrative expenses for earning such exempt income. The Assessing Officer is directed to compute the same and the order of the ld. CIT(A) is accordingly modified to this extent. The ground raised by the Revenue is accordingly partly allowed. 59. In ground of appeal no. (e), the Revenue has challenged the order of the ld. CIT(A) in deleting the addition of Rs. 2,10,551/- made by the Assessing Officer on account of delayed payment of employees' contribution to PF and ESI. 60. After hearing both the sides, we find the Assessing Officer disallowed an amount of Rs. 2,10,551/- being delayed payment of employees' contribution to PF and ESI under the provisions of section 2(24)(x) r.w.s. 36(1)(va) of the I.T. Act. We find the ld. CIT(A) deleted the disallowance made by the Assessing Officer on the ground that such payments were before the due date of filing of the return of income u/s 139(1) and, therefore, cannot be disallowed u/s 43B and u/s 36(1)(va) of the I.T. Act. We find identical issue had come up before the Raipur Bench of the Tribunal in the case of DCIT vs. Hira Ferro A....