TMI Blog2018 (5) TMI 796X X X X Extracts X X X X X X X X Extracts X X X X ..... ffice memorandum dated 04.02.2013 that no public sector undertakings may reopen those cases in which clear decisions have been issued by the COD prior to 17.02.2011. Therefore, the department ought not to have filed the appeal on these issues. Dismiss these grounds of the appeal of the department with the rider that the revenue will be entitled to ask for revival of the appeal on the happening of the events as directed by the Hon’ble Jurisdictional High Court in CIT-V Vs Rural Electrification Corp. Ltd. [2014 (1) TMI 1238 - DELHI HIGH COURT] - Decided against revenue - ITA No. 15/Del/2009 - - - Dated:- 4-5-2018 - Sh. N. K. Saini, AM And Smt. Suchitra Kamble, JM Assessee by : Sh. Ved Jain, Adv. Revenue by : Ms. Shefali Swroop, CIT DR ORDER Per N. K. Saini, AM: This is an appeal by the department against the order dated 03.10.2008 of ld. CIT(A)-XVI, New Delhi. 2. Following grounds have been raised in this appeal: 1. On the facts and circumstances of the case, the Ld. CIT(A) erred in allowing deduction u/s 80IA of the I.T. Act on steam unit of CCGPS Plant by considering it as separate industrial undertaking or enterprise. 2. On the facts and ci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the settled legal principles. As per the commercial accounting practice, the businessman would debit the profit and loss account either on the basis of expenditure actually paid or on the basis of liability incurred/accrued as per the mercantile method of accounting. There is no scope of notional expenditure in computing such profits. If no expenditure is incurred for use of any material or services, where is the question of debiting any amount on account of such notional expenses? Admittedly, the hot gas was freely available to the steam unit. If the assessee had not set up the steam unit, such hot gas would have to be exposed to the open atmosphere. There is no evidence that such hot gas can be sold in the open market. It is only because of the advanced technology that such hot gas, which otherwise goes waste, can be utilized for generating electricity. But that requires massive investment. What would happen if the assessee, in the national interest, allows a third party to use such gas free of any charges? Would the department reduce the profits of steam unit by notional expenditure? In our opinion, the answer would be clearly in the negative as no deduction can be allowed unles ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vy reliance has been placed by the revenue on the provisions of sub-section (8) of section 80-I and sub-section (9) of section 80-IA which, for the benefit of this order, are reproduced as under: Section 80-1(8): Where any goods held for the purposes of the business of the industrial undertaking or the hotel or the operation of the ship or the business of repairs to ocean-going vessels or other powered craft are transferred to any other business carried on by the assessee, or where any goods held for the purposes business carried on by the assessee, or where any goods held for the purposes of any other business carried on by the assessee are transferred to the business of the industrial undertaking or the hotel or the operation of the ship or the business of repairs to ocean-going vessels or other powered craft and, in either case, the consideration, if any, for such transfer as recorded in the accounts of the business of the industrial undertaking or the hotel or the operation of the ship or the business of repairs to oceangoing vessels or other powered craft does not correspond to the market value of such goods as on the date of the transfer, then, for the purposes of the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t correspond to the market value as on the date of transfer. Market value has been defined as the price, which such goods would fetch on sale in the open market. No evidence, whatsoever, has been brought to our notice to show that there is any market for sale of such waste hot gas in India. There is also no evidence that such gas transported. Such gas, if not used, has to be exposed to the open atmosphere. Maybe such gas may find a market but as per the provisions of sub-section (8) of section 80-1 and sub-section (9) of section 80-IA, the market value has to be seen as on the date of transfer. Since there is no evidence of any market for sale of such waste hot gas, we are unable to accept the stand of the revenue. 11. In view of the above discussion, it is held that the course adopted by the Assessing Officer for shifting a portion of expenses incurred by gas unit to the steam unit was not permissible in law and, therefore, cannot be approved. Consequently, the order of the CIT(A) confirming the above action of the Assessing Officer is set aside and the Assessing Officer is directed to allow deductions under sections 80-I and 80-IA without allocating any expenditure of gas un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtments, stood wound up in accordance with the Order dated 17.2.2011 of the Hon'ble Supreme Court. 2. Instances have come to notice wherein a few PSUs/ Departments have approached Tribunals/Courts to re- open the cases in which permission to litigate was denied by COD. In a few cases, Public Sector Undertakings /Departments have filed petitions in the High Courts. In an isolated case, a Special Leave Petition (SLP) has also been filed in the Hon'ble Supreme Court by an organisation against the High Court decision seeking clarification of the Order dated 17.2.2011 of the Hon' ble Supreme Court, although the High Court had declined to re-open the case. 3. Since the matter has been agitated before the Hon'ble Supreme Court in one case and decision on the same is pending, following interim directions are issued, with the approval of the competent authority, for strict compliance: (i) No Ministry/Department or Public Sector Undertaking under them may re- open those cases in which clear decisions had been issued by the COD prior to 17.2.2011, AND (ii) Ministries/ Departments may circulate the instructions to all concerned offices/ PSUs under their admi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... um dated 4th February, 2013 issued by the Government of India, Cabinet Secretariat. The same is reproduced below:- The undersigned is directed to refer to Cabinet Secretariat s Office Memoranda of even number dated 1.9.2011 and 20.12.2011 on the above subject vide which all Ministries/Departments were intimated inter alia that the Committee on Disputes (COD) that had been functioning in Cabinet Secretariat for pursuing litigation by PSUs/Govt. Departments, stood wound up in accordance with the Order dated 17.2.2011 of the Hon ble Supreme Court. 2. Instances have come to notice wherein a few PSUs/ Departments have approached Tribunals/Courts to re- open the cases in which permission to litigate was denied by COD. In a few cases, Public Sector Undertakings/Departments have filed petitions in the High Courts. In an isolated case, a Special Leave Petition (SLP) has also been filed in the Hon ble Supreme Court by an organisation against the High Court decision seeking clarification of the Order dated 17.2 .2011 of the Hon ble Supreme Court, although the High Court had declined to re- open the case. 3. Since the matter has been agitated before the Hon ble Supreme Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue having similar facts has been adjudicated in the aforesaid referred to case of DCIT Vs Power Grid Corporation of India Ltd. wherein the relevant findings have been given in paras 10 to 11.5 which read as under: 10. We have heard both the parties and gone through the facts of the case as also the aforecited decisions relied on by the ld. AR on behalf of the assessee. Indisputably, the assessee did not incur any expenditure by way of interest for investment in tax free bonds. In fact, the tax free bonds were acquired on the orders of the Government on conversion of sundry debtors of State Electricity Boards, facing financial crunch. The AO disallowed 2.5 % of the administrative expenses for earning interest income from tax free bonds in the assessment years 2002-03 to 2004-05 while in assessment year 2007-08 disallowance has been made having recourse to provisions of rule 8D of the I. T. Rules, 1962. There is no material before us, suggesting that the assessee incurred any expenditure by way of administrative expenses for earning interest income in these four assessment years nor the AO identified any item of such expenditure for earning the interest income. In these circumst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 14A is that certain incomes are not includible while computing total income as these are exempt under certain provisions of the Act. In the past, there have been cases in which deduction has been sought in respect of such incomes which in effect would mean that tax incentives to certain incomes was being used to reduce the tax payable on the non-exempt income by debiting the expenses, incurred to earn the exempt income, against taxable income. The basic principle of taxation is to tax the net income, i.e., gross income minus the expenditure. On the same analogy the exemption is also in respect of net income. Expenses allowed can only be in respect of earning of taxable income. This is the purport of section 14A. In section 14A, the first phrase is for the purposes of computing the total income under this Chapter which makes it clear that various heads of income as prescribed under Chapter IV would fall within section 14A. The next phrase is, in relation to income which does not form part of total income under the Act . It means that if an income does not form part of total income, then the related expenditure is outside the ambit of the applicability of section 14A. Furth ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
