TMI Blog2018 (12) TMI 1872X X X X Extracts X X X X X X X X Extracts X X X X ..... efore the due date of filing of return of income u/s 139(1) of the Act. The issue is no more res integra in light of various judicial pronouncements of M/S. STATE BANK OF BIKANER JAIPUR AND JAIPUR VIDYUT VITARAN NIGAM LTD. [ 2014 (5) TMI 222 - RAJASTHAN HIGH COURT] , M/S. UDAIPUR DUGDH UTPADAK SAHAKARI SANGH LIMITED, UDAIPUR [ 2014 (8) TMI 677 - RAJASTHAN HIGH COURT] and JAIPUR VIDYUT VITRAN NIGAM LTD AND RAJASTHAN RAJYA VIDYUT UTPADAN NIGAM LTD [ 2014 (1) TMI 1085 - RAJASTHAN HIGH COURT] - We accordingly affirm the order of the ld CIT(A) who has rightly deleted the disallowance made by the AO towards employees contribution to PF. Disallowance of energy conservation fund - expenses was not incurred wholly and exclusively for the business purchases and it is only application of income - HELD THAT:- As relying on own case [ 2017 (8) TMI 1382 - ITAT JAIPUR] the disallowance on account of contribution to energy conservation fund made by the Assessing Officer is directed to be deleted. This ground is allowed. Addition of contribution to Rajasthan Bhawan - HELD THAT:- Assessee got the rebate of 75% as well as the right to use the accommodation by its officers/employees vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nate Bench in AY 2011-12 and as per its working, the indirect expenses allocable to the eligible undertakings amounts to ₹ 18,49,771. Further, taking the same into account, as per the revised working, it is eligible for deduction u/s 80IA at ₹ 8,56,70,349 as against original claim of ₹ 12,21,63,337. The matter is accordingly set-aside to the file of the AO to examine and verify the said revised working so furnished by the assessee available at assessee s paperbook pages 7-8 after providing reasonable opportunity to the assessee, and where the same is found to be in compliance with the directions of the Coordinate Bench referred supra, allow the same to the assessee. In the result, the ground of appeal is allowed for statistical purposes. - ITA No. 772/JP/2018, ITA No. 817/JP/2018 - - - Dated:- 10-12-2018 - SHRI VIJAY PAL RAO, JM AND SHRI VIKRAM SINGH YADAV, AM For the Assessee : Shri P.C. Parwal (C.A.) For the Revenue : Shri Varinder Mehta (CIT) ORDER PER: SHRI VIKRAM SINGH YADAV, A.M. These are the cross appeals filed by the Revenue and the assessee directed against the order of ld. CIT(A)-2, Jaipur dated 23.03.2018 for A.Y. 2013-14. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. Commissioner of Income Tax (Appeals) has erred in facts and in law in confirming the disallowance of ₹ 2,33,005/- out of the prior period expenditure on the ground that it could not be ascertained whether the expenses crystallized in the previous year or not. 4. The Ld. Commissioner of Income Tax (Appeals) has erred in facts and in law in disallowing the claim of deduction U/s 80IA by ₹ 10,63,92,647/- (10,73,66,052-9,73,405) out of the total claim of ₹ 12,21,63,337/- by excluding the indirect income of ₹ 10,63,92,647/- but at the same time not excluding the indirect expenses of ₹ 7,53,19,051/-. She has further erred in not considering the revised claim of deduction u/s 80IA at ₹ 8,56,70,349/- computed by the assessee as per the direction of Hon ble ITAT for earlier assessment years. 2. Firstly, we take up the Revenue s appeal. In ground no. 1, the Revenue has challenged the deleting of addition of ₹ 20 lacs towards contribution to the State Renewal Fund. The ld. AR has contended that this issue is covered in favour of assessee by ITAT s order in assessee s own case for AY 2011-12 in ITA No. 202/JP/2015 dated 18.08.2017. It was fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... affirm the order of the ld CIT(A) who has rightly deleted the disallowance made by the AO towards contribution to State Renewal Fund. In the result, the ground no. 1 of the revenue s appeal is dismissed. 4. Undisputedly, there are no changes in the facts and circumstances of the case. Following the decision of Coordinate Bench referred supra, we affirm the order of the ld CIT(A) who has rightly deleted the disallowance made by the AO towards contribution to State Renewal Fund. In the result, the ground no. 1 of the revenue s appeal is dismissed. 5. In ground No. 2 and 3, the Revenue has challenged the deleting the disallowance of ₹ 8,60,731/- made by the A.O. for depositing the employees contribution to PF ESI beyond the prescribed time limit provided in respective Act and holding the employees contribution to PF ESI are governed by the provisions of section 43B and not by section 36(1)(va) r.w.s. 2(24)(x) of the IT Act. 6. The ld. AR has contended that this issue is covered in favour of assessee by ITAT order in assessee s own case for AY 2011-12 in ITA No. 202/JP/2015 dated 18.08.2017. It was further submitted that the issue is also covered in favour of assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Rajasthan State Energy Conservation Fund constituted as per section 16 of the Energy Conservation Act, 2001. The object of the fund is mentioned at Pg 11- 12 of the CIT(A) order. The assessee is incorporated with the object of promoting the non conventional and renewable energy sources and therefore the contribution so made is wholly exclusively for the purpose of business. Otherwise also, any contribution made to a statutory fund is allowable as deduction as held by Supreme Court in case of CIT Vs. New Horizon Sugar Mills Pvt. Ltd.269 ITR 397 where it was held that amount set apart towards molasses storage reserve fund is to be excluded from assessee s total income on the principle of diversion of income by overriding title. In view of above, CIT(A) has rightly deleted the disallowance and thus the ground of the department be dismissed. 93. The relevant finding of the ld. CIT(A) are reproduced as under:- 5.3 I have perused the facts of the case, the assessment order and the submissions of the appellant. The fact of this issue is similar to the fact in assessee s own case for the assessment year 2008-09, appeal No. ITA No. 983/JP/2013. This issue has been decided in fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibution to Rajasthan Bhawan is not wholly and exclusively for assessee s business of generating renewable energy and it is a clear cut case of application of income. 13. In appellate proceedings before the ld CIT(A), the assessee filed a copy of letter dated 24.10.2017 issued by Government of Rajasthan whereby the Government of Rajasthan has intimated to all the Corporations who have made contributions for the construction of this building to allow them rebate on the room tariff. The assessee is allowed a rebate of 75% of the tariff rate considering the total contribution made by it. 14. It was submitted by the ld AR that the Ld. CIT(A) though accepted that assessee filed the letter from Government of Rajasthan but still directed the AO to decide the issue in accordance with the direction of Hon ble ITAT for AY 2011-12 whereby Hon ble ITAT in absence of any document set aside the matter to AO and the relevant findings are as under: 55. We have heard the rival contentions and pursued the material available on record. It is not disputed that the contribution towards construction of Rajasthan Bhawan has been made as directed and authorized by the State Government, being the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed. 17. In respect of ground no. 2, the assessee has challenged the confirmation of disallowance of 50% of the expenses of ₹ 57,98,634/- incurred on publicity and advertisement on the ground that in lot of entries, details of expenditure are not appearing in the ledger account without providing opportunity to furnish such detail ignoring the explanation given about the nature of the expenditure incurred which is wholly and exclusively for the purpose of business. 18. The ld AR has submitted that the assessee claimed expenditure of ₹ 57,98,634/- on account of publicity advertisement. In support of the expenditure, assessee filed the ledger account of the expenses and explained the justification for such expenses as per letter dt. 05.12.2015 reproduced at Pg 11 of the assessment order. The AO observed that expenditure is not incurred wholly and exclusively for generation of electricity but is only an application of income and therefore, he disallowed the expenditure. On appeal, the Ld. CIT(A) accepted that expenditure is incurred for the purpose of business but he noted that in the ledger account against certain entries no detail is given. He therefore, rest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rpose it carries out mass communication in public awareness programs by publication of Akshay Urja Sandesh on quarterly basis, distributing brochures, leaflets hand bills and advertising through TV, radio, cable network, cinema slides, display boards, hoardings, etc. As a result, assessee received a sum of ₹ 16.77 crores as registration fees from various entrepreneurs for setting renewable energy plants. Only an amount of ₹ 3.50 lacs is incurred for topographic survey which is also a part of its business activity. Hence, the expenditure incurred by the assessee on advertisement is wholly exclusively for the purpose of business and the same is allowable u/s 37(1). In view of above, ld CIT(A) has rightly deleted the disallowance and thus the ground of the department be dismissed 102. The relevant finding of the ld. CIT(A) are reproduced as under:- 7.3 I have perused the facts of the case, the assessment order and the submissions of the appellant. The Assessing Officer has made the disallowance under this head as he found that the expenditure had been incurred for topographic survey, recruits members, technical investigations, printing of energy policy and invit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of appeal taken by the Revenue is dismissed. 21. The ld DR is heard who has relied on the findings of the ld CIT(A) which reads as under: 8.3 I have perused the facts of the case, the assessment order and the submissions of the appellant. The Assessing Officer noted that the appellant has claimed expenses of ₹ 57,98,634/- for publicity and advertisement. The Assessing Officer had that the expenditure has not been incurred wholly and exclusively in connection with the generation of electricity which is the business of the assessee. The amount was held not allowable under section 37(1) of the I.T. Act. In the present proceedings, it has been submitted that the company is engaged in the business for development of non conventional energy in the State of Rajasthan and is also the nodal Agency of the Ministry of new and Renewable Energy Department, Government of India and is required to popularise usage of renewable energy. The ledger account of this expenses was also enclosed. It is seen that in a lot of entries, it is only mentioned that the amount is paid for publicity expenses but no details are given and this is also 50% of the expenditure. Since, the details of these ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ical Industries Ltd. Vs CIT 213 ITR 523 (Guj.), Rajasthan State Industrial Development Inv. Corpn. Ltd. Vs. ACIT (66 354/JP/08, dated 30-09-2008 for AY 2004-05 and 138 235/JP/09 for AY 05-06 dated 08-01-2010). 26. We have heard the rival contentions and perused the material available on record. The incurrence of expenditure for the purposes of business is not been disputed by the Revenue. Further, the ld AR has explained that the expenditure has been booked after seeking the approval from the competent authority during the year and the same is consistent with the accounting practice of booking the expenses in earlier years. We accordingly donot see any basis for disallowance of the expenditure so claimed by the assessee. In view of the same, the AO is directed to allow the same and the ground no. 3 of assessee s appeal is allowed. 27. In ground no. 4., the assessee has challenged the disallowing the claim of deduction u/s 80IA by ₹ 10,63,92,647/- out of the total claim of ₹ 12,21,63,337/- by excluding the indirect income of ₹ 10,63,92,647/- but at the same time not excluding the indirect expenses of ₹ 7,53,19,051/-. She has further erred in not c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 21,14,66,341/- and thus, profit from this activity is ₹ 9,10,79,361/-. From this amount, after reducing the office expenses and salary expenses of those units who are exclusively looking after this activity at ₹ 35,59,240/-, the remaining profit from this activity is ₹ 8,75,20,120/-. After considering the direct expenses, the indirect expenses remains at ₹ 27,93,611/-. This expenditure when allocated in the ration of turnover of both the activities, the expenditure allocable to the activities eligible for deduction u/s 80-IA works out at Rs,18,49,771/- and thus, the profit eligible for deduction u/s 80-IA works out at ₹ 8,56,70,349/- (8,75,20,120-18,49,771). Therefore, as against the claim made by the assessee u/s 80-IA at ₹ 12,21,63,337/-, the assessee is eligible for deduction at ₹ 8,56,70,349/- as per the revised working placed at pages 7-8 of paperbook. This working has been accepted by Hon ble ITAT in AY 2011-12 as per the discussion made at Para 42 to 45 of the order and the same was followed in AY 2012-13 as per the finding extracted at Pg 34 of the order of Ld. CIT(A). 32. In this regard, our reference was drawn to the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovisions. In light of above, what is to be examined is whether there is proximate connection or direct nexus which has been established between the expenditure and the industrial undertaking in the instant case. 44. The expenditure under consideration falls under two broad baskets. The first expenditure relates to payment to and provision for employees amounting to ₹ 3,02,06,576. In this regard, the ld AR has submitted that all the seven power plants have been given to the third party operators for operation and maintenance and the assessee is liable to pay specified amounts as per the agreement executed with them. Therefore, assessee is not required to employ any person for day-to- day operation and maintenance of these plants. It was further submitted that as far as the expenditure of ₹ 3,02,06,576/- on account of payment and provision to employees is concerned, it was submitted that from the employee-wise details of the expenditure under this head, it can be noted that salary to the employees who are exclusively employed towards promotional activities is of ₹ 2,56,29,076/-. The remaining salary of ₹ 45,77,500/- is both towards the promotional acti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nits. Further, it was submitted that the balance amount of ₹ 90,68,091/- again has no nexus but the assessee has offered to allocate 5% of the said expenditure before the ld CIT(A) and where the same is not acceptable, it was submitted that the same can be allocated in the ratio of turnover of the power plants to the total turnover of the assessee. We agree with the assessee s contention to restrict the pool of common expenses to ₹ 90,68,091. Given the fact that these are common head office expenses relating to the activities in the nature of management and supervision at the Head office, they have a direct nexus with the activities of the seven plants at the strategic and management level. As we have directed earlier to allocate the salary expenses of the Head office employees, the common head office expenses are also directed to be allocated in the ratio of turnover of the power plants to the total turnover of the assessee company. In our view, this is the most rational and reasonable basis for allocation of common expenses in absence of anything more specific which has been brought on record. In any case, the pool of common expenses has been brought down to a large e ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
