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2017 (9) TMI 962 - AT - Income TaxDisallowance of deduction u/s 80IA - basis of sale price considered by the TPP for sale of power to the cement units of the appellant company - whether electricity duty and cess has to be excluded from the price while determining profits derived from the business? - Held that:- Identical issue has already been decided in assesee’s own case for A.Y.2008-09 and 2009-10 as held that as during the previous year relevant to the Asst Year 2009-10, the assessee in fact sold electricity at rates higher than that charged from it by the State Electricity Board. The assessee nevertheless made the computation for the purpose of section 80IA of the Act with reference to the price charged from it by the State Electricity Board. In such circumstances, we hold that, when it was permissible for the assessee to sell electricity to consumers and distribution licensees at rates higher than that paid by it to the State Electricity Board, the price charged by the State Electricity Board would be a very good indication of the market value of electricity and the assessee did not commit any error in adopting such price for working out the amount eligible for deduction u/s 80IA of the Act. The Tribunal agreed with the submission of the Assessee that the price paid by an assessee for purchase of raw material represents the market price of such raw material produced by the assessee. The Tribunal also held that the method adopted by the assessee viz. to take the average rate charged by the State Electricity Board for the previous month is quite appropriate and reasonable for determining the market value for the month of supply. The tribunal held that the annual weighted average adopted by the ld CITA would result in variations occurring during the year at different times being made applicable uniformly for the whole year and therefore the assessee’s method is more appropriate as it factors in variations as and when they take place. On the issue whether electricity duty and cess has to be excluded from the price while determining profits derived from the business, the Tribunal held that they are also to be considered as part of the price. - Decided against revenue Income derived by Thermal Power Plant cannot be held as income derived from eligible business for the purpose of allowing deduction u/s 80IA of the Act - Decided against assessee. Compensation paid for infringement of mining right - revenue or capital - whether infringed mining right transferred in lieu of compensation had got benefit of enduring nature, hence capital in nature? - Held that:- Identical issue was considered by the Tribunal in assesee’s own case for A.Y.2008-09 and 2009-10 held that payments are progressively distributed as they work, as they proceed year by year, going on with their work and the payments are in the nature of incidental expenditure to conduct the mine and the business operations. Therefore, held that the payment of compensation to persons whose rights are infringed by the mining activity is revenue in nature. Subsidy received - nature of receipt - Held that:- The subsidy in question is a capital receipt and not chargeable to tax. We also hold that capital receipt need not be reduced from the cost of the assets and under Explanation 10 to section 43(1) of the Act. We accordingly allow ground raised by the assessee in its appeal. Disallowance u/s 14A r.w.r. 8D - whether only investments from which exempt income was received should be considered - Held that:- Direct the AO to consider all investments (excluding investments in subsidiary companies) which yielded dividend income to the assessee for computing disallowance u/s 14A of the Act r.w. Rule 8D(2)(iii) of the Rules. Depreciation u/s 32(1)(ii) - allow balance 50% initial depreciation on Plant & Machinery put to use for a period of less than 180 days during the financial yer 2008-09 relevant to Asst. Year 2009-10 - Held that:- Assessee is entitled to additional depreciation (remaining portion). Ground raised by the assessee is allowed. Provision for leave encashment - whether it is neither a statutory liability nor contingent liability and therefore not to be considered for the purpose of computing disallowance u/s.43B(f)? - Held that:- We set aside the order of CIT(A) and remand the issue to the AO to pass order based on the outcome in the proceedings pending before the Hon’ble Supreme Court in the case of Exide Indusries Ltd. (2008 (9) TMI 921 - SUPREME COURT ). Thus ground raised by the assessee is allowed for statistical purposes. Provision for sick leave liability - whether is notional and contingent liability and therefore covered by the provisions of section 43B(f) ? - Held that:- This liability is purely notional and cannot be allowed as deduction. It is an admitted position that there is no out flow on this account in any assessment year and the liability is notional and is based purely on entries in the books of account on the basis of notional figures. This may be relevant for the purpose of showing the true and fair view of the state of affairs of the assessee as is required for reporting to share holders and other public authorities. When it comes to computing total income under the Act, such notional liability cannot be allowed as deduction. We concur with the view of CIT(A) in this regard. We are of the view that application of the provision of section 43B(f) of the Act would not be relevant because the liability in question is not otherwise allowable under the Act and Sec.43B of the Act will come into operation only when a expenditure is otherwise allowable under the Act. With this observation we dismiss ground raised by the assessee. Interest subsidy in question is a capital receipt not chargeable to tax.
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