TaxTMI 
TaxTMI 
2022 (8) TMI 440
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.... points of law and on facts & circumstances of the case, in context of computation of deduction u/s.80IA(8) of the I.T.Act,1961, the Ld. CIT(A) was justified in holding that the market value of the power is the rate of power available in the open market namely the price charged by the Electricity Board?" c. Whether on points of law and on facts & circumstances of the case, in context of computation of deduction u/s.80IA(8) of the I.T. Act, 1961, the Ld. CIT(A) was justified in holding that the goods of one unit of a company can be transferred to another unit at a notional figure of what it might cost if purchased from outside rather than at cost of production?" d. "Whether on points of law and on facts & circumstances of the case, the Ld. CIT(A) was justified in deleting the disallowance of Rs.5,73,515/- made u/s 14A of the Income Tax Act r.w.r 8D of the IT Rules made by the AO?" e. "Whether on points of law and on facts & circumstances of the case, the Ld. CIT(A) was justified is not considering the extent provisions of section 14A(3) of the IT Act while deleting the addition of Rs.5,73,515/- made by the AO?" f. "Whether on points of laws and on....
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.....4,38,73,880/- ; and (ii) disallowance u/s.14A : Rs.5,73,515/-. 5. The department being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before us. 6. We shall first deal with the grievance of the department that the CIT(Appeals) had gravely erred in law and facts of the case in vacating the disallowance of the assessee's claim for deduction u/s.80IA(4)(iv)(a) of the Act amounting to Rs.4,38,73,880/-. Controversy involved qua the present issue lies in a narrow compass, i.e., triggering of Section 80IA(8) of the Act by the A.O for declining the assessee's claim for deduction u/s. 80IA(4)(iv)(a) of Rs.4,38,73,880/-. Shorn of unnecessary details, the assessee company which is engaged in the business of manufacturing and trading of sponge iron, steel ingots and generation of power has two divisions, viz. (i) steel division; and (ii) power division. The profit of the power division is eligible for deduction u/s.80IA(4)(iv)(a) of the Act. This is the sixth year of claim of deduction by the assessee u/s.80IA(4)(iv)(a) of the Act. 7. During the course of the assessment proceedings, it was observed by the A.O that the assessee company had transferred el....
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....it could safely be adopted/taken as the "market value" within the meaning of Section 80IA(8) of the Act. It was, thus, the claim of the assessee that as it had transferred/sold electricity units produced by its power division to its steel plant and associate concerns at a rate lower than that at which same was being sold by CSEB to similarly placed units, therefore, no adverse inferences qua the alleged transfer/sale of the power units generated by the assessee company to its steel division and associate concerns were liable to be drawn. However, the A.O was not persuaded to subscribe to the aforesaid explanation of the assessee. Observing that the assessee was never under any obligation to sell electricity to CSEB, the A.O held a conviction that the assessee company had artificially inflated the rates at which it had sold the power units to its steel division and thus, by so doing reduced its overall tax liabilities. In order to support his aforesaid conviction the A.O had observed that a consortium of companies led by M/s. Sunflag Iron & Steel Company limited and India Bulls Power Generation Limited had offered to supply electricity to CSEB at the rate of Rs. 0.81 per unit. Also,....
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....f the Tribunal in the assessee's own case for the assessment year 2008-09, i.e. ACIT-1(2) Vs. Mahindra Sponge and Power Limited in ITA No.159/BLPR/2011, dated 19.06.2015. In its aforesaid order the Tribunal had after drawing support from the judgment of the Hon'ble High Court of Chhattisgarh in the case of CIT Vs. Godawari Power & Ispat Ltd. (supra), found favor with the claim of the assessee and observed, that the "market value" of the power supplied by the assessee to its steel division was rightly computed by considering the rate at which power was available in the open market, namely, the price that was charged by the electricity board. For the sake of clarity the relevant observations of the Tribunal in the assessee's own case for A.Y. 2008-09 are culled out as under: "6. At the outset, it is informed that the issue is squarely covered by the decision of Bilaspur Bench of the Tribunal in the case of ACIT V/s Godavari Power &Ispat Ltd. [2011] 133 ITD 502 (Bilaspur). In the compilation of the assessee at page 12, the respondent-assessee has also placed reliance on the order of Hon'ble High Court of Chhattisgarh at Bilaspur in the Tax case No.31, 34,32 of 2012 dated 2nd ....
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.... their orders. 35. In view of above, the question is decided against the Department and in favour of the Assessee. The tax appeals have no merit. They are dismissed 7. Since, this issue has already been decided by Hon'ble Jurisdictional High Court as discussed hereinabove, therefore, we find no force in this ground of Revenue. Before we conclude this judgment it is also worth to mentioned that the ld. CIT(A) has taken into consideration "market price" and thereafter granted part relief by sustaining the disallowance of Rs.11,76,763/-. The relevant paragraph of ld. CIT(A) has already been reproduced above. The ld. AR has stated at BAR that the assessee has not challenged the said partial relief and no appeal was preferred. Thus, under the totality of the facts an circumstance of the case, as also law pronounced by the Hon'ble Jurisdictional High Court, we hereby reject this ground of revenue." 11. As the facts and issue involved in the present appeal of the assessee remains the same as were there before the Tribunal in its own case for AY 2008-09, therefore, we are unable to comprehend as to on what basis the A.O had declined to follow the same. At this stage, w....
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....ed to corelate the interest paid by the assesee company on borrowed funds with the investments made in the exempt income yielding shares. On the contrary, it was noticed by the CIT(Appeals) that the various interest bearing loans were raised by the assessee company to meet out its working capital requirements and maintaining its current assets level for running the business smoothly. It was also observed by the CIT(Appeals) that the AO while dislodging the assessee's claim that no expenditure was incurred for earning of exempt income had failed to comply with the mandate of law as per which he was obligated to record his dissatisfaction before triggering the mechanism contemplated u/r.8D. It was further observed by the CIT(Appeals) that the assessee had not earned any exempt income from the investments during the year under consideration. On the basis of his aforesaid observations the CIT(Appeals) vacated the disallowance of Rs.5,73,515/- made by the A.O u/s.14A r.w Rule 8D. ITA No. 197/RPR/2017 15. We have given a thoughtful consideration to the aforesaid issue in hand, i.e., sustainability of the disallowance made by the A.O u/s.14A r.w Rule 8D(2)(ii) & (iii) of Rs.5,73,515/-.....