TMI Blog2015 (3) TMI 356X X X X Extracts X X X X X X X X Extracts X X X X ..... rposes of section 80IA(8) of the Act. The stand of the Revenue to the aforesaid effect cannot be approved. As stated earlier, order of the FAA in the case of Jindal Steel & Power Ltd (2007 (6) TMI 308 - ITAT DELHI ) has been reversed by the Tribunal wherein identical issue was involved. Besides, similar issue had been decided against the department by the Hon'ble Chhattisgarh High Court in the matter of Godavari Power and Ispat Ltd. [2013 (10) TMI 5 - CHHATTISGARH HIGH COURT ]Other cases relied upon by the assessee also support the stand taken by the FAA. Therefore, if she had followed the orders of the Tribunal for the earlier assessment year in respect of proceedings initiated u/s.263 of the Act, in our opinion she has chosen a legal, just and reasonable path.Confirming the orders of the FAA, we decide effective ground of appeal against the AO. - Decided in favour of assessee. Disallowance of sum paid to arrive at a settlement of dispute under the provisions of Factories Act, 1948 - Held that:- AO or the FAA has not mentioned the penal provisions of the Factory Act that were violated by the assessee, that they have not discussed anything about the penalty order passed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act. ITA/71/NGP/2011-AY.2007-08: 2. Assessee-company, engaged in the business of generation of power and manufacturing of Ferro Alloys and steel products filed its return of income on 07.11.2007 declaring total income of Rs. Nil. AO finalised the assessment order u/s.143(3) of the Act, n 31.03.2009, determining the total income at ₹ 31.40 Crores. Effective Ground of appeal is about claim made by the assessee u/s.80IA of the Act. During the assessment proceedings AO noticed that assessee had claimed deduction u/s. 80IA of the Act at ₹ 52,86,27,662/- which was limited to the available profit i.e.36,83,76,045/-, that during the year under appeal Chattisgarh Electricity Company Ltd. (CECL) and Raipur Gas Ltd. (RGL)merged with Raipur Alloys Steel Ltd. (RASL) w.e.f 01.04.2006, that subsequent to the merger the names of the company were changed to Sarda Energy Minerals Ltd. (SEML), that CECL was claiming deduction u/s.80IA of the Act from AY. 2003-04 for its power plant, that after merger SEML made a claim under section 80IA. On perusal of the comparative chart of sale to CSEB and RASL, he noticed that sale of power to RASL was @ ₹ 3.38 per unit where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imited (ITA 844/Ahd/2006-AY.2002-03). He further submitted that CIT,Raipur had initiated revisionary proceedings in the case of the assessee for the earlier AYs. on the similar ground mentioned by the AO in his order, that order passed by the CIT u/s. 263 of the Act was quashed by the Tribunal, that in the case of Godavari Power and Ispat Ltd. (supra) similar issue was decided in favour of the assessee by the Bilaspur Bench of the Tribunal, that Hon'ble High Court of Chhattisgarh had, vide its order dated 02.08.2013, had held that there was no illegality in the orders passed by the Bilaspur Bench of the Tribunal, that the AO had relied upon the order of the CIT Raipur while deciding the issue against the assessee, that in view of the order of the Tribunal for earlier years order of the FAA should be endorsed. 2.3.We have heard the rival submissions and perused the material before us. We find that it was the order passed by the CIT, Raipur u/s.263 of the Act that has triggered the controversy before us. He had, while revising the order for the AY 2003-04 passed by the AO, held that electricity was sold at higher rate by the assessee to its own Ferro Alloys Division Capti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. Section 80- IA (5) provides that where an assessee, which is eligible for section 80IA benefits, transfers its goods or services to a business other than the eligible business the consideration if any, recorded or such transfer in the accounts of the eligible business should correspond to the market value of such goods or services.The said section authorizes the Assessing Officer that where the transfer as recorded in the accounts of the eligible business does not correspond to the market value, the profits declared of the eligible business can be adjusted by the Assessing Officer on such basis ensure that goods or services transferred to its own unit is done at the market blue of such goods or services. Ostensibly, in this case, the Assessing Officer was of the opinion that the consideration for transfer of power for captive consumption to other units has been recorded at a consideration which does not correspond to its market value. According to the Assessing Officer the consideration has been recorded at a price higher than the market value, in other words, the Assessing Officer does not perceive ₹ 3.72 per unit as the market value of the power generated by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a price arrived at between the buyers and the seller in the open market wherein the transactions take place in the normal course of trading and competition in contrast to a situation where the price is fixed between a buyer and a seller in a negotiation done under the shadow of legislatively mandated compulsion. In case of the former, the price fixed between the buyer and seller can be understood as denoting 'market price' since the elements of trading and competition exist. Whereas in the case of the latter situation, on, the price fixed between the buyer and seller cannot be understood as denoting the market price since the elements of trade and competition are conspicuous by the absence. 16. To understand the contrasting situations, let us analyze the situation on hand. In this case, the assessee received consent under section 44A of the Electricity(supply)Act,1948 to establish and operate the captive power plant in terms of a Power Purchase-cum-wheeling of Power Agreement dated 15.7.1999 entered between the State Electricity Board and the assessee. A copy of the said agreement has been placed in the paper book. Now, in terms of the Electricity (supply) Act, 1948, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39;ble High Court, relevant for the present, was the procurement rate of paddy offered by the State could be considered to be the market value of paddy. In this background, the following observations of the Hon'ble High Court are worthy of notice:- A market connotes freedom of bargain. There may be a market, completely circumscribed as regards the rates by price control, but with/n the limit set by the relevant rule or order, the area of operation would still be a commercially free area. Even where a control price is fixed, it is generally the ceiling which is fixed and not an in variable price. Be that it may, to say that when agents of the State seize paddy grown by subjects under the authority of some law or regulation and pay for it at some rate fixed by themselves and much below the rate in the open market, they create a regulated or any kind of market at all, is if I may be permitted to use the strong expression, a misuse of language.The Tribunal even speak of the persons whose paddy is seized as operating in the regulated market.How any person who is seized by the neck and compelled to deliver his paddy and then dismissed with a trivial sum as its price can be said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aimed.Assessee succeeds on this ground. 2.3.b.Here we would also like to mention that the revisionary proceedings initiated by the CIT u/s. 263 of the Act, for the earlier three AYs., were challenged before the Tribunal where similar issue was involved. CIT was of the opinion that AO should have taken price of the power unit at which assessee had supplied power to the State Electricity Board. Tribunal, while allowing the appeal filed by the assessee held that the Commissioner did not dispute that the stand of the assessee i.e. the price at which electricity sale was to be taken into account was the price at which State Electricity Board was selling electricity to it's consumers,was supported by a decision of the coordinate bench in the case of Jindal Steel Power Ltd (supra), that the Commissioner did not agree with the view so taken by the co-ordinate bench, hat the view adopted by the assessee, which was sought to be disturbed by the impugned revision order, was not only a possible view of the matter but it was a view which had been approved by a co-ordinate bench of the Tribunal. Referring to the decision of the Hon'ble Supreme Court delivered in the case of Malabar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have to conclude that learned Commissioner indeed erred in assuming jurisdiction u/s 263 on the facts of this case. That apart, even on merits, respectfully following co-ordinate benches, we have to hold that learned Commissioner erred in concluding that the transfer price of electricity is to be taken at the price at which electricity is sold to the state electricity board Sells the same to it's consumers. In our considered view, the price at which State Electricity Board sells electricity to it's consumers is true indicator of it's market price as required to be taken into account in terms of the provisions of section 80IA(8). From above it is clear that matter was decided in favour of the assessee on merits by the Tribunal. As stated earlier, order of the FAA in the case of Jindal Steel Power Ltd (supra) has been reversed by the Tribunal wherein identical issue was involved. Besides, similar issue had been decided against the department by the Hon'ble Chhattisgarh High Court in the matter of Godavari Power and Ispat Ltd. Other cases relied upon by the assessee also support the stand taken by the FAA. Therefore, if she had followed the orders of the Tribuna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we reverse the order of the FAA and decide Ground Nos.1 to 3 in favour of the assessee. 5. Next Ground of appeal is about disallowance of ₹ 1,00,000 paid to arrive at a settlement of dispute under the provisions of Factories Act. During the assessment proceedings AO found that the assessee had paid an amount of ₹ 1,00,000/- to two workers who had made an accident. AO was of the opinion that said payment was made as a penalty for infringement of law, that the expenditure was not allowable u/s.37(1) of the Act. In the appellate proceedings, FAA held that payments were made in lieu of the violation of the Factory Act that resulted in to fatal accidents, that submission of the assessee that there was no infringement of law was not acceptable.He upheld the order of the AO 5.1. Before us,AR submitted that amount in question was not paid as penalty but to protect the officer of the company,that there was no violation of the Factory Act, that the amount was an admissible business expenditure, that settlement made with the workers cannot be equated with payment of penalty. DR supported the order of the FAA. We have heard the rival submissions and perused the material o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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