TaxTMI 
TaxTMI 
2025 (6) TMI 898
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....A No. 2457/Kol/2024 as a lead case and appeal filed by the assessee shall be adjudicated by us separately. 2. It appears from the report of the registry that the appeal have been filed by the revenue after a delay of 32 days. At the time of hearing the counsel of the revenue explained the reason for delay in filing the appeal. The Ld. A.R did not raise any objection in condoning the delay. Keeping in view, the submission made by the D.R. and the judicial pronouncement that a case should be decided on merit not on technical issue, the delay is hereby condoned. ITA No. 2457/Kol/2024 for AY 2018-19 3. Brief facts of the case of the assessee are that the assessee engaged in the manufacturing and sale of carbon black, sale of surplus of power generated from off-gases from carbon black manufacturing process having its factories at Durgapur, Kochi and Mundra. The assessee filed return of income for AY 2018-19 on 30.11.2018 declaring total income of Rs. 2,67,89,81,290/-. Further, the assessee filed revised return on 30.03.2019 declaring total income of Rs. 2,65,88,45,310/-. It was processed on 13.11.2019 u/s 143(1) of the Act at total income of Rs. 2,68,05,34,260/-. Further the ca....
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.... explanation to section 80IA(8) of the Act market value in relation to any goods or services meant the prices that such goods or services to the ordinarily fetched in the open market or Arm's Length Price as defined in clause (4) of Section 92f of the Act, where the transfer of such goods or services is a specified domestic transaction referred to Section 92BA. The Ld. D.R has further submitted that the Ld. CIT(A) has further committed wrong in not appreciating the fact that the assessee is generating unit [CPP] account as such claim of any benefit u/s 80IA of the Act and further did wrong by not appreciating that the manufacturer cannot be compensated based on rate meant for distributor and thereby ignoring the clear provision of Rule 10B(2)(b) of the Rule, 1962 that specifies the function, assets and risks to be essential comparability factors for reference. The Ld. D. R has further submitted that the Ld. CIT(A) erred in fact and law by allowing CSR expenditure to the extent of Rs. 1,16,00,000/- to be allowable for claiming deduction u/s 80G of the Act. The Ld. D.R has further submitted that the Ld. CIT(A) has erred in law by allowing deduction u/s 80IA of the Act against the gro....
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....ed order and find that the sole grievance of the revenue in the several grounds raised in the appeal for AY 2018-19 relates to the action of the Ld. CIT(A) deleting the disallowing the deduction of Rs. 28,34,57,200/- claimed u/s 80IA of the Act on account of downwards transfer pricing adjustment made by TPO in response to the transfer price of eligible CPPs at Durgapur in West Bengal, Kochi in Kerala and Mundra in Gujarat eligible for deduction u/s 80IA of the Act. There is no dispute that the assessee is engaged in the business of manufacture of carbon black having its factory at Durgapur, Kochi and Mundra. The following issues are for adjudication. (i) Transfer Pricing Adjustment in relation to transfer value of power by CPPs to manufacturing unit and consequent disallowance of deduction claimed u/s 80-IA of the Act. 8. The facts of the case are that, the assessee is engaged in the business of manufacture of carbon blank having its factories at Durgapur, Kochi and Mundra. The assessee operates four (4) power plants whose profits are eligible for deduction u/s 80- IA of the Act. During the relevant year, these power plants had generated and distributed power which was entire....
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....eration station to the State Electricity Board. The Hon'ble Apex Court noted that the price at which surplus power was supplied by the assessee to the State Electricity Board was determined entirely by State Electricity Board in terms of statutory regulations and contractual terms and that such a price could not be equated with market value as was understood for purpose of Section 80-IA(8) of the Income Tax Act, 1961. Instead, the Hon'ble Apex Court held that the rate at which the State Electricity Board supplied electricity to industrial consumers would have to be taken as market value for computing deduction u/s 80-IA. Thus, in totality, the Hon'ble Apex Court has concluded that the market value of the power supplied by CPP to an industrial unit should be computed by considering the rate at which the State Electricity Board supplied power to the industrial consumers in the open market and not by comparing it with the rate of power when sold by the Assessee to the State Electricity Board. The Hon'ble Supreme Court emphasized that the rate contended by the Revenue was not the rate at which an industrial consumer could have purchased power in the open market. 9. I....
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.... the Ld. CIT(A)'s action directing the AO to allow the deduction claimed by the assessee under Chapter VI ie. Section 80- IA and 80G of the Act against the 'Gross Total Income' instead of 'Business Income'. The facts relating to this issue are that, the assessee had reported Gross Total Income of Rs. 17,64,29,012/- against which deduction(s) under Chapter VI ie. Section 80-IA & 80G was claimed, which aggregated to Rs. 125,45,60,120/-, Accordingly, the deduction claimed under Chapter VI was restricted to the extent of Gross Total Income Le Rs. 17,64,29,012/-. The AO however in the impugned order while assessing the total income restricted the allowance of deduction under Chapter VI to the extent of 'Business Income' which was assessed at Rs. 14,63,72,782/- and therefore assessed the Total Income at Rs. 2,92,64,030/- which comprised of Short-Term Capital Gain taxable at normal rates of Rs. 2,92,64,030/-. In this context a question which was put up for consideration before the Hon'ble Apex Court, whether the quantum of deduction u/s 80IA has to be restricted by treating 'eligible business' as the only source of income' or whether it can be a....
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....tion u/s 135 of the Companies Act, 2013 and was not voluntary in nature and thus did not qualify for deduction u/s 80G of the Act. The AO accordingly disallowed the same. It is submitted that the reason given by the AO for disallowing the deduction claimed u/s 80G in respect of CSR donations to registered charitable trusts is unjustified as nowhere do the provisions of Section 80G provide that the sums paid to charitable trusts have to be 'voluntary' in nature so as to become eligible for deduction under the said provision. It is further submitted that, it was the assessee's sole prerogative to decide as to the manner in which it proposes to contribute towards CSR activities. It was not a case that the assessee has contributed to the registered charitable trust in question under any specific mandate or compulsion. Instead, the appellant has voluntarily decided to contribute to the registered charitable trust(s). Hence, the AO's action that the donation was not made at the assessee's own volition was untenable. It is imperative to mention that the Legislature was well aware that the companies may spend on CSR activities by contributing to charitable trusts rec....
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....herein the CSR donations of Rs. 10 crores claimed as deduction u/s 80G of the Act was disallowed. On appeal the Ld. CIT(A) in his appellate order in Appeal No. NFAC/2019-20/10303941 dated 20.08.2024 for AY 2020-21 [Ground No. 11 - Paras 5.6.1 to 5.6.3] had deleted the same by following the impugned appellate order for AY 2018-19. It is submitted that the Revenue has not preferred any appeal on this issue in AY 2020-21 and the same has attained finality. In that view of the matter, when the Revenue itself has accepted the decision of the Ld. CIT(A) on this same issue in the subsequent AY 2020-21, the impugned ground raised in AY 2018-18 has no legs to stand on. 15. Going over the above discussion, we do not find any infirmity in the order of Ld. CIT(A) on this issue. (iv) Disallowance u/s 14A of the Act Ground No. 11 of Revenue's appeal in ITA No. 11 for AY 2020-21 Ground No. 2 of Assessee's appeal in ITA No.2034/Kol/2024 for AY 2020-21 16. This ground relates to the disallowance made by the AO u/s 14A read with Rule 8D amounting to Rs. 2,27,70,615/-. During the year, the appellant earned exempted dividend income of Rs. 5,27,97,867/-. In the return of income f....
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....he same ought to have been allowed u/s 37(1) of the Act The assessee is engaged in the business of manufacture of carbon black, having its presence at various locations in India. The company has customers located across India. The company had obtained corporate membership of clubs having affiliations across India for its Directors and senior employees to interact with customers and other stakeholders Such clubs provide a perfect platform for interactions, exchange of information and to conduct business. The club facilities are used as a platform for holding business meetings of the directors and senior employees to interact with business partners and customers. The activities undertaken by the Directors and the senior employees in such clubs are in the nature of business meetings, networking, brand building, dealings and business gatherings between suppliers/customers and/or senior executives of the appellant company, which fosters the business interests of the appellant company. In the circumstances, the club membership and club service expenses borne by the company were incurred in the course and for the purposes of business. The year-wise details of club expenses incurred by ....
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....further disallowance is called for in this regard. The Ld. A.R has also placed reliance on the decision passed by the Hon'ble Calcutta High Court in the case of Kesoram Industries Ltd. vs. PCIT and decision of Hon'ble supreme Court in the case of Maxopp Investment ltd. vs. CIT 402 ITR 640. The Ld. A.R has further submitted that the disallowance u/s 14A in terms of formula laid down in Rule 8D(2)(ii) should be computed only with reference to the cost of dividend yielding investment. The further submission of the Ld. AR with regard to the disallowance of weighted component of deduction u/s 35(2)(ab) of the Act is concerned that the Ld. CIT(A) confirmed the order of AO on this issue for want of form 3CL. The submission of AR is that the assessee in now in receipt in form 3CL issued from DSIR, hence, his prayer is to send back the same to the file of AO for reverification and by giving an opportunity to the assessee to submit form 3CL. We have perused the order and find that in the first issue raised by the assessee with respect to disallowance made u/s 14A that the Ld. CIT(A) has directed the AO to recompute the disallowance under rule 8D(2)(iii) with reference to the component closin....