TaxTMI 
TaxTMI 
2024 (12) TMI 545
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....ment order u/s 144C(1) of the Act, which was passed and served on 31.03.2023. The assessee being aggrieved with the draft assessment order has filed objections before the Dispute Resolution Pannel (DRP). The objections of the assessee, after affording opportunities of being heard were disposed of by the Ld. DRP vide their order u/s 144C(5) of the Act on 30.12.2023. The directions accorded by the Ld. DRP have been incorporated by the Ld. AO in the impugned order, making certain disallowances. Being dissatisfied with such additions the assessee has filed the present appeal. 2. The grounds of appeal raised by the assessee are as under: A. Ground No. 1 - Disallowance of deduction under sec 80-IA of the Act on account of downward adjustment in arm's length price for transfer of power from captive power unit ('eligible unit') to stee manufacturing unit ('non-eligible unit') [ INR 17,15,69,527/-1] 1.0 That on the facts and in the circumstances of the case and in law, the Learned Transfer Pricing Officer ('Ld. TPO') / AO / Hon'ble Dispute Resolution Panel ('DRP') erred in reducing claim for deduction under sec 80-IA of the Act by....
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....ax payable under normal provisions of the Act [to the extent of difference between tax under normal provisions and MAT] without adducing any reasons for the same. E. Ground No. 5 - Short Grant of interest under sec 244A of the Act. 5.0 That on the facts and in the circumstances of the case and in law, the Ld. AO erred in computing interest under section 244A of the Act for a period of 15 months instead of 46 months (i.e. April 2020 to January 2024) without adducing any reasons for the same. F. Ground No. 6 - Difference in total income as per assessment order & computation sheet. 6.0 That on the facts and in the circumstances of the case and in law and without prejudice to preceding ground, the Ld. AO erred in computing tax on total income of INR 8,52,84,930/- instead of total income of INR 8,52,70,750/- computed in the assessment order. G. Ground No. 7: Initiation of penalty proceedings under sec 271AA & Sec 270A of the Act 7.0 That on the facts and in the circumstances of the case and in law, Ld. AO erred in initiating penalty proceedings under sec 27 IAA & 270A of the Act. H. Ground No. 8 - General 8.0 That o....
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....ible unit (B) 42,14,95,059/- Downward Adjustment (B-A) 17,15,69,527/- 5. The aforesaid downward adjustment for Rs. 17,15,69,527/- was added to the income of the assessee for the AY 2020-21, accordingly a draft assessment order u/s 144C(1) was passed on 31.03.2023. To challenge the said draft assessment order, the assessee has filed its objections before the Dispute Resolution Pannel (herein after referred to as "DRP") u/s 144C(2) of the Act within the stipulated time. After due consideration to the objections raised by the assessee, the DRP has passed an order u/s 144C(5) of the Act on 30.12.2023, wherein the view taken by the Ld. TPO was approved and the Ld. AO was directed to give effect of the downward adjustment by bringing down the deduction claimed u/s 80IA as per the downward adjustments proposed by the Ld. TPO. 6. Another observations of the Ld. AO was pertaining to claim of deduction by the assessee u/s 80G of the Act for Rs. 4 lacs (Being 50% of Rs. 8 lac). It is noticed by the Ld. AO that the assessee has added back the amount of CSR and donation of Rs. 24,30,309/-, and has further claimed deduction u/s 80G of Rs. 4.00 lacs, which was spend out of th....
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....the Act dated 15-12-2022 suggested a downward adjustment of Rs. 17,15,69,527/- w.r.t the value of power sold by the assessee to its steel division which is as under: Particulars Amount (INR) Transaction value @Rs.5.77/unit 42,14,95,059 Transaction value @Rs. 3.42/unit 24,99,25,532 ALP Adjustment 17,15,69,527 1.5 After receiving the order of the TPO u/s. 92CA(3) of the Act, dated 15-11-2022, the A.O passed the draft assessment order under sec 144C(1) dated 31-03-2023 giving effect to the aforesaid downward adjustment and treated the entire deduction under sec 80-IA of the Act as income and also disallowed its claim for deduction u/s. 801A of the Act. The assessee filed an objection before the Dispute Resolution Panel (DRP) which vide its order dated 30-12- 2023 upheld the contentions of the TPO / AO. 1.6 Basis the directions of the DRP, the AO passed the final assessment order dated 29-01-2024 computing the total income under normal provisions at INR 8,52,70,750/-. Being aggrieved with the aforesaid order, the assessee filed before the Raipur Bench of the Hon'ble ITAT. 2.0 Case laws in favour of the assessee on the aforesaid iss....
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....iple that emanates from the judgement is that the said rate should be considered as arm's length price for the purpose of transfer pricing. The said decision of Apex Court has approved decisions of multiple high courts including jurisdictional high court in the case of CIT, Raipur -vs.- Godawari Power & Ispat Limited (2014) 42 taxmann.com 551 (Chhattisgarh). [Refer Page Nos. 127 - 132] DCIT -vs.- M/S. IFB Agro Industries Ltd (I.T.A. Nos. 490 & 491/kol/2019) dated 08-02- 2024. [Refer Page Nos. 133 - 150] 2013-14 & 2014-15 Kolkata ITAT while dealing with issue relating to determination of arm's length price for transfer of power from eligible unit to non- eligible unit relied on the decision of Apex Court in the Jindal Steel & Power Limited (supra) and held that power tariff maintained by WBSEB for selling of power to its consumers shall be the arm's length price for transfer of power from eligible unit to non-eligible unit. The said decision clearly shows that the decision of Supreme Court in the case of Jindal Steel & Power Limited (supra) even applies to cases post introduction of provisions of specified domestic transaction in case of transfer price ....
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....wer (P.) Ltd. in ITA NO. 299/RPR/2023 reported in (2024) 159 taxmann.com 147(Raipur-Trib). Dated 30.01.2023, wherein the relevant observations of the tribunal pertaining to the computation of ALP of power transferred for the purpose of claim u/s 80IA has been discussed at length and was decided in favour of the assessee in terms of judgments and principle of law laid down by Hon'ble Apex Court and Hon'ble Jurisdictional High Court, are as under: 11. We have thoughtfully considered the issue in hand in the backdrop of the contentions advanced by the Ld. authorized representatives of both the parties. As stated by the Ld. AR, and rightly so, the issue involved in the present appeal is squarely covered by the aforementioned orders passed by the Tribunal in assessee's own cases, viz. in ITA No. 159/BLPR/201 1 dated 19-6 2015 for A.Y. 2008-09, ITA No. 197/RPR/2017 dated 29-7-2022 for A.Y. 2013-14 and ITA No. 196/RPR/2019 dated 5- 8-2022 for A.Y. 2014-15 as well as the by the judgment of the Hon'ble High Court of Chhattisgarh in the case of Godawari Power and [spat Ltd (supra). We find that the Tribunal vide its order passed in the case of Mahendra Sponge & Power Ltd. (S....
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.... 31-10-2017 did not find favour with the benchmarking carried out by the assessee of its specified domestic transactions with its AE. Accordingly, the TPO on the basis of the reasoning recorded in his aforesaid order adopted the rate of Rs. 1.88/- per unit, i.e, the rate at which electricity was sold by the assessee to CSEB and determined the ALP of the assessee's specified domestic transaction at Rs. 1.88/- per unit. On the basis of his aforesaid observations, the TPO proposed a downward adjustment of Rs. 1 1,47,00,658/- and advised a revision of the assessee's claim for deduction u/s. 801B of the Act. Accordingly, the A.O after receiving the order passed by the TPO u/s. 92CA(3) of the Act, dated 31-10-2017, therein vide his order passed u/s 143(3), dated 26-12-2017 reduced the assessee's claim for deduction u/s. 801A(4)(iv) to Rs. Nil. 10. Before us, it is the claim of the Ld. Authorized Representative (for short 'AR') for the assessee that the issue involved in the present appeal is squarely covered by the order passed by the Tribunal in its own case for the immediately preceding assessment year 201314 in ITA No. 197/RPR/2017, dated 29-7-2022, wherei....
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....pat Ltd. wherein on this very fact that the said assessee was a manufacturer of Iron steel and captive power plant has supplied electricity to its manufacturer unit which was at higher rate than the power supplied to Chhattisgarh State Electricity Board; the Hon'ble High Court has held as under : "28. The Chhattisgarh-Company is a company which is generating power. It is neither consumer of the electricity, nor it is supplying power to a consumer. It also cannot sell power to any consumer directly: it has to compulsorily sell it to the Board. 29. The power sold by the Chhattisgarh-Company to the Board is a sale to a company which itself supplies power to the consumers. It is not sale of power to the consumer. 30. The Steel-Division of the Assessee is a consumer. The CPP of the Assessee supplies electricity to the Steel-Division. Had the Steel-Division not taken power from the CPP then it had to purchase power from the Board. The CPP has charged the same rate from the Steel Division that the Steel-Division had to pay to the Board if the power was purchased from the Board. 31. The market value of the power supplied to the Steel-Division should ....
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.... a fact nor the case of the department that the aforesaid order of the Tribunal had either been set-aside or stayed by the Hon'ble High Court which would have otherwise justified the declining on its part to follow the same. Apart from that, we find absolutely no justification on the part of the A.O. in not following the binding judgment of the Hon'ble High Court in the case of CIT v. Godawari Power & [spat Ltd. (supra) which seizes the issue under consideration. Admittedly, the Department had assailed the aforesaid judgment of the Hon'ble High Court by filing a SLP before the Hon'ble Apex Court but again, as long as the said judicial pronouncement is not set-aside or stayed by the Hon'ble Apex Court the same holds the ground and have to be ritually followed by the lower authorities. We, thus, in terms of our aforesaid observations finding no merit in the declining of the assessee's claim for deduction u/s.801A(4)(iv)(a) of Rs. 4,38,73,880/- by the A.O. which had rightly been vacated by the CIT(Appeals), uphold the latter's order. Thus, the Grounds of appeal Nos. (a) to (c) raised by the Revenue are dismissed in terms of our aforesaid observations." ....
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....tive power generating unit. No other entity could supply electricity to any consumer. A private person could set up a power generating unit having restrictions on the use of power generated and at the same time, the tariff at which the said power plant could supply surplus power to the State Electricity Board was also liable to be determined in accordance with the statutory requirements. In the present case, as the electricity from the State Electricity Board was inadequate to meet power requirements of the industrial units of the assessee, it set up captive power plants to supply electricity to its industrial units. However, the captive power plants of the assessee could sell or supply the surplus electricity (after supplying electricity to its industrial units) to the State Electricity Board only and not to any other authority or person. Therefore, the surplus electricity had to be compulsorily supplied by the assessee to the State Electricity Board and in terms of Sections 43 and 43A of the 1948 Act, a contract was entered into between the assessee and the State Electricity Board for supply of the surplus electricity by the former to the latter. The price for supply of such elec....
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....y the assessee to the State Electricity Board was determined entirely by the State Electricity Board in terms of the statutory regulations and the contract. Such a price cannot be equated with the market value as is understood for the purpose of Section 80IA (8). On the contrary, the rate at which State Electricity Board supplied electricity to the industrial consumers would have to be taken as the market value for computing deduction under section 80-IA of the Act. 30. Thus on a careful consideration, we are of the view that the market value of the power supplied by the State Electricity Board to the industrial consumers should be construed to be the market value of electricity. It should not be compared with the rate of power sold to or supplied to the State Electricity Board since the rate of power to a supplier cannot be the market rate of power sold to a consumer in the open market. The State Electricity Board's rate when it supplies power to the consumers have to be taken as the market value for computing the deduction under section 80-IA of the Act. 9.4 In view of aforesaid observations, we are unable to comprehend and concur with the impugned order of Ld. AO....
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....g has been approved by the Co-ordinate Bench of the Tribunal in the following cases: ▪ Power Mech Projects Ltd. -vs. DCIT [20231 156 taxmann.com 575 (Hyd. - Trib.) ▪ Optum Global Solutions (India) (P.) Ltd. -vs.- DCIT [20231 154 taxmann.com 651 (Hyd.- Trib.) ▪ Sling Media Pvt. Ltd. vs DCIT [20221 135 taxmann.com 164 (Bangalore - Trib.) ▪ First American (India) Pvt. Ltd -vs.- ACIT (ITA No.1762/Bang/2019) ▪ JMS Mining Pvt. Limited Vs PCIT [20211 130 taxmann.com 118 (Kolkata - Trib.) ▪ FNF India Pvt. Limited Vs ACIT [20211 133 taxmann.com 251 (Bangalore - Trib.) ▪ Goldman Sachs Services (P) Ltd. v. JCIT [20201 (117 taxmann.com 535) (ITAT Bangalore) 10.2 Apropos, the aforesaid issue regarding allowability of expenditure incurred for donation out of the amount designated for CSR expenses which were disallowed by the assessee as per provisions of section 37 of the Act, it is the submission of Ld. AR that as per recent decision by the various coordinate benches of Income Tax Appellate Tribunal, the assessee is eligible to claim deduction u/s 80G in respect of donations which form pa....
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....f business or profession in sections 28 to 44DB of the Act. By this, the assessee seeks compliance with Explanation-2 of section 37 of the Act and, therefore, the Revenue shall not have any grievance. Whether or not the assessee sue moto disallowed the spend towards the CSR while computing the business income is a verifiable fact. 11. After computing the business income, while computing the total income of the assessee, the assessee is invoking the benefit under chapterVIA by claiming deduction of the sums under section 80G of the Act. According to the Revenue, when once such sum went to satisfy the requirement of section 135 of the Companies Act, the benefit gets exhausted and such an amount is no more available for the purpose of claiming deduction under section 80G of the Act. 12. Coming to the Income Tax Act, 1961, there is no express provision to support the contention of Revenue. On the other hand, section 80G(2)(iiihk) and (iiihl) of the Act expressly provide that such sums donated for Swatch Bharath Kosh and Clean Ganga Fund shall be the amounts other than the sums spent by the assessee in pursuance of CSR, meaning thereby the donations made towards Swatch....
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....e related to Swachh Bharat Kosh and Clean Ganga Fund. So if an assessee makes some donation to these projects and include/classify it as CSR expenditure while claiming deduction u/s. 80G of the Act then it will be allowed only the amount that is other than the sums spent by the assessee in pursuance of CSR u/s. 135 of the Companies Act. In other words, if an assessee company spends only the mandatory expenditure of 2% of net profit for CSR activity, which includes the amount of donation to Swach Bharat Kosh & Clean Ganga Fund (iiihk) and (iiihi) of clause (a) of sub-section (2) of section 80G of the Act, then deduction u/s. 80G of the Act is not allowable, which can be illustrated by giving certain examples (infra). However, in a case scenario, wherein the assessee expends the mandatory expenditure and gives donation to these two projects i.e. over and above the mandatory CSR expenditure u/s. 135 of Companies Act, that sum donated to Swach Bharat Kosh & Clean Ganga Fund will be eligible for 100% deduction u/s. 80G of the Act [refer section 80G (1)(i) and subject to section 80G (4)]. However, such a restriction in respect of expenditure made by an assessee to any other fund or insti....
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....ation 2 : The company has contributed Rs. 3 crores to Swach Bharat Kosh. Tax Treatment: The entire CSR expenditure of Rs. 3 crores is to be disallowed and added back in terms of Explanation 2 to Section 37(1) of the Act. In terms of Section 135(5) of the Act read with Section 80G(iiihk) only the excess sum paid amounting to Rs. 1 crores [ 3 crores - 2% of 100 crores] can be availed as deduction u/s 80G of the Act. Situation 3: The company has contributed Rs. 1 crore to Swach Bharat Kosh and Rs. 1 crore to any other charitable trust registered u/s 80G(5) of the Act. Tax Treatment: The entire CSR expenditure of Rs. 2 crores is to be disallowed and added back in terms of Explanation 2 to Section 37(1) of the Act. In terms of Section 135(5) of the Act read with Section 80G(iiihk) the donation of Rs. 1 crores made to Swach Bharat Kosh is not eligible for deduction u/s 80G of the Act. The company can claim deduction of fifty percent of the donation of Rs. 1 crores paid to any other registered charitable trust u/s 80G(2)(iv) read with Section 80G(1)(ii) of the Act. Situation 4 : The company has contributed Rs. 1 crore to Prime Minister's National Re....
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....T u/s 263 of the Act is bad in law and therefore need to be quashed and we order accordingly". 14. We are in agreement with such observations and findings of the Coordinate Bench of the Tribunal and while respectfully following the same, we hold that inasmuch as the assessee satisfied the conditions of section 80G of the Act, the assessee is entitled to claim deduction under section 80G of the Act in respect of such donations which formed part of the spend towards CSR. Accordingly, we hold this ground in favour of the assessee. 15. In view of the above, this appeal of assessee is allowed. 10.3 Similar findings are observed by other coordinate benches of this tribunal in the cases referred to (supra) by the Ld. AR in the written submissions extracted herein above. 10.4 In light of the aforesaid findings, referring to the facts of the present case, we may herein observe that the donations were extended by the assessee during the year under consideration to (i) Shri Marwadi Pathshala Samiti (Bitti Committee) of Rs. 7,50,000/- and (ii) Rajashthan Gokalyan of Rs. 50,000/- and claimed 50% of the same u/s 80G of the Act. The parties to whom the donations were made ....