9911796707
TMI Blog2018 (6) TMI 67X X X X Extracts X X X X X X X X Extracts X X X X ..... relief towards aforesaid concerned payment as business expenditure. 4. Briefly stated, the relevant facts concerning the issue are that the assessee is a domestic company and engaged as manufacturer of iron and steel and has also a separate undertaking producing and distributing power as a captive power plant where the power so generated is mainly consumed by the iron and steel unit of the company. The combined turnover of the assessee stands at Rs. 211.58crores on which the assessee has declared a net profit of Rs. 17.25crores. During the financial year relevant to assessment year 2009-10, the assessee has paid an aggregate commission of Rs. 1,35,25,031/- to certain parties including the sister concern of the assessee M/s. A. M. Ispat Ltd. as against Rs. 2,54,496/- in assessment year 2008-09 in the Sponge Iron Plant account. This apart, the assessee has claimed deduction u/s.80IA(4) of the Act treating itself as a power producer. This is the second year of claim of deduction u/s.80IA(4). 5. The return filed by the assessee was subjected to scrutiny assessment. The AO in the course of assessment proceedings questioned the genuineness of the commission payment to M/s. A. M. Ispat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... procurement of iron ore by the assessee company through M/s. A. M. Ispat Ltd. is not proved. He accordingly held that payment of commission to be not genuine and accordingly denied the claim on this account as business expenditure. 7. Aggrieved, the assessee filed appeal before the CIT(A) without any success. 8. Further aggrieved, the assessee preferred the appeal before the Tribunal. 9. At the time of hearing, the learned AR for the assessee at the outset submitted that the assessee has obtained the services of M/s. A. M. Ispat Ltd. for procurement of iron ore from various parties located in Bellary, Hospet etc. of the State of Karnataka which were suffering from serious problems and unrest and therefore the raw material was not easily accessible. The learned AR next submitted that a meager payment of Rs. 100/- per M.T. on procurement of iron ore was made in terms of written agreement. All supplies were obtained from new suppliers. The learned AR thereafter pointed out that the sister concern is also engaged in similar line of activity and is thus adequately experienced and accomplished to obtain such supplies from their resources for the assessee. The learned AR submitted tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such circumstances, the name of the broker may not appear in the books of the parties. The learned AR thereafter referred to a reply addressed to the AO pursuant to notice u/s. 133(6) from one of the suppliers M/s. Continent Impex (P) Ltd. where it was clearly admitted by the supplier that the assessee was introduced for supply by the commission agent and no fee was paid by them to the agent. The learned AR thus submitted that the factum of rendition of services, at times, cannot be approved to the hilt and requires to be gauged from the surrounding circumstances and in totality of the facts, viz; the supply to the assessee from disturbed regions of Karnataka etc., requires to be read for determination of the claim of the assessee. The learned AR thereafter referred to the profit & loss account of this supplier and submitted that the AO has incorrectly observed that the supplier has not incurred any expenses for rendering services. The learned AR, in conclusion, submitted that the AO as well as the CIT(A) have misdirected themselves in law and on facts in denying the bonafide claim towards commission expenses to the assessee. 10. The learned DR on the other hand relied upon the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 22,000/- per M.T. in April 2008 to Rs. 14,200/- per M.T. in March 2009. A case was made out by the assessee that such volatility itself requires services of experience middle person on crucial task of procurement of key raw material to ensure a regular supply at commensurate price. The Revenue has mainly negated the factum of commission payment on the ground that commission has been paid to the sister concern with a view to evade incidence of taxation. At this juncture, we notice that commission has been paid to the sister concern which is in the similar line of business and therefore an accomplished player. The recipient of the commission has included the commission in its books of accounts and paid taxes on remaining portion of it after deducting expenses. Noticeably, the supply of iron ore is from altogether new parties qua the parties in the preceding assessment year. This fact also gives considerable strength to the existence of services towards procurement of crucial supply. In the totality of circumstances, it will not be correct to view the claim in a petty foggy manner and put heavy burden on the assessee to discharge onus disproportionately. In our considered view, the vo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eunder: "7. With the assistance of the ld.representatives, we have gone through the record carefully. The first adjustment made by the AO in the eligible profit is reduction of Rs. 30,70,108/- on account of allocation of proportionate expenses between power plant as well as sponge iron plant. Details of expenses have been reproduced by the AO in para 3.2.4 on page no.6 of the assessment order. Major items which have been considered by the ld.CIT(A) for exemption from adjustments are as under: "Factory General Exps. - Rs. 2456/- Purchase of Fuel - Rs. 649571/ - Purchase of stores & spares - Rs. 924144/ - Repairing & maintenance - Rs. 773803/ - Transportat ion Exps. - Rs. 445355/ - Total Rs.2795329/ - 8. There is no dispute with regard to the proposition that if two units consisting of 80IA and non-80A are being managed and controlled under common administration and being operated in common campus then certain expenses are bound to be identified and related to these units. In case it is a difficult to find out direct attribution, then they are to be allocated on the basis of some scientific formula. The assessee is maintaining separate accounts for both plants. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s directed the AO not to reduce Rs. 27,95,329/- out of eligible profit on account of allocation of expenditure. The order of the ld.CIT(A) on this issue is upheld. 9. Next item relates to adjustment of coal price. As observed earlier, power plant is being run on steam generated as by-product in the hands of sponge iron plant. In order to ensure smooth supply of steam, power plant needs re-heater which ensures smooth and continuous supply of steam to turbine. In this re-heater waste coal was being used by the assessee. Assessee has purchased waste coal at the rate of Rs. 844/- per ton from steel unit. The ld.AO estimated that at least 5% of the total coal used by the assessee must be of first grade. Hence, he made adjustment of Rs. 29,02,335/- of coal price i.e. the assessee must have incurred this much expenditure over and above shown by it. The ld.CIT(A) has deleted this adjustment on the ground that when power plant was not in existence then also alleged waste coal was being sold by the sponge iron plant. In the Asstt.Year 2007-08 when power plant was not there, waste coal to the tune of Rs. 171.82 lakhs at an average sale price of Rs. 990.95 per MT was sold to the outside par ..... X X X X Extracts X X X X X X X X Extracts X X X X
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