TaxTMI 
TaxTMI 
2018 (10) TMI 581
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....otal income of Rs. 26,63,65,921/- 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 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....
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....le unit. ii) Not agreeing with the Assessing Officer who has held that the value of power sufficient to its own unit for captive consumption has been over stated. iii) Not agreeing with the A.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, th....
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....er decisions were brought to the notice of the ld. CIT(A). 8. Based on the arguments advanced by the assessee, the ld. CIT(A) held that the Assessing Officer is not justified in making the adjustment of profit of eligible undertaking with losses of other eligible 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 s....
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.... Officer is not justified in netting off of the profit and losses of the two eligible units and allowing deduction thereon. The relevant finding of the ld. CIT(A) has already been reproduced in the preceding paragraph. It has been held in various decisions that while computing 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 deduc....
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....pply surplus electricity to the CSPDCL, it cannot be ignored that CSPDCL purchases such power as trader / distributor of electricity. It is imperative to appreciate the different capacity and role played by CSPDCL while buying and selling electricity, for the purposes of giving a correct 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 ....
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....the Chhattisgarh Electricity Company Limited, Raipur (the Chhattisgarh-Company) for supply of electricity to the Board and held the market value of the power to be Rs. 2.25/- per unit for the AY 2004-05 and 2005-06; and Rs. 2.32/- per unit for the AY 2006-07. 24. The market 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 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....
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....t and in favour of the Assessee. The tax appeals have no merit. They are dismissed." 18. We find the Raipur Bench of the Tribunal in the case of DCIT vs. Hira Ferro Alloys Ltd. vide ITA No.358 to 360/RPR/2014 order dated 18.01.2018 for assessment years 2009-10, 2010-11 and 2012-12 has also decided identical issue by upholding the decision of the ld. CIT(A) wherein the ld. CIT(A) has deleted the disallowance made by the Assessing 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....
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.... heat energy which is absorbed by the WHRB to an extent of 75%. The fuel gases are utilized to produce steam and the steam is utilized to generate electricity. Accordingly, it was argued that the VER Credit received by the assessee pertains to the power generating unit (Unit- 1) of the company. 23. Relying on various decisions, it was argued that such carbon credit accrues in the hands of the company in the course of generation of power 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....
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....611/- on account of Corporate Social Responsibility (CSR), the details of which are as under :- S.No. Unit Amount in Rs. 1 CPIL-Siltara 1,19,34,381 GPIL-RR Ispat 11,45,230 GPIL-IOCD 61,00,000 Total 1,91,79,611 32. He observed that such expenses are regularly being disallowed in the assessment proceedings in earlier years. Further, the payment of Rs. 1,19,34,381/- relating to GPIL-Siltara includes payments of 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....
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....rate image of the companies incurring such expenditure. We are of the considered opinion that the CIT(A) has rightly considered the decision and deleted the addition made by the Assessing Officer and Ground No.1 of appeal of the revenue is dismissed." 36. Respectfully following the decision of the Tribunal in assessee's own case and in absence of any contrary material brought to our notice, the order of the ld. CIT(A) is upheld on this issue. The ground raised by the Revenue is accordingly 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 All....
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.... order of the Tribunal in assessee's own case for the preceding assessment years 2009-10 and 2010-11 respectively, we do not find any infirmity in the order of the ld. CIT(A). Accordingly, the same is upheld and the ground raised by the Revenue is dismissed. 43. In ground of appeal no.(d), the Revenue has challenged the disallowance of Rs. 2,25,43,398/- made by the Assessing Officer u/s 14A of the I.T. Act. 44. Facts of the case, in brief, are that the Assessing Officer, during the course of assessment proceedings, observed that 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 ....
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....which was stated before the Assessing Officer. It was submitted that share capital and reserves of the assessee was at Rs. 559.11 crores whereas investment was only Rs. 212.09 crores. Thus, there were sufficient interest free funds for making investment. Referring to the decision of the Hon'ble Gujarat High Court in the case of Pr.CIT vs. Sintex Industries Ltd. in Tax Appeal No.268 of 2017 dated 04.05.2017, he submitted that the Hon'ble High Court in the said decision has held that where the assessee had sufficient interest free fund to cover 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 JC....
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....pt income. However, for the impugned assessment year, the ld. counsel for the assessee argued that its own capital and free reserves of Rs. 559.12 crores is much more than the investment of Rs. 212.09 crores, the income on which is exempt from tax. Thus since the assessee has sufficient own capital and free reserves to meet the investment, therefore, no disallowance u/s 14A is called for. 55. We find some force in the above argument of the ld. counsel for the assessee. It is an admitted fact that the own capital and free reserves of the assessee company 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....
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....17 order dated 23.03.2018. Since admittedly the assessee in the instant case has sufficient own capital and free reserves of Rs. 559.12 crores which is much more than the investments of Rs. 212.09 crores, therefore, respectfully following the decisions cited above, we hold that no disallowance of interest is called for. However, since the assessee is holding huge investments, the income of which is exempt from tax, therefore, some disallowance towards administrative expenses is required to be made. Considering the totality of the facts of the case, we are of the considered 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, w....