9911796707
TMI Blog2020 (7) TMI 370X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore, these appeals and cross objections have been heard together and are being disposed of by this consolidated order. For the sake of convenience, the grounds as well as the facts narrated in ITA No.125/Ran/2015, for assessment Year 2008-09, ITA No.131/Ran/2015, for assessment Year 2008- 09, ITA No.126/Ran/2015, for assessment Year 2009-10 have been taken into consideration for deciding the above appeals en masse. 3. Although, these appeals filed by the Assessee and Revenue for Assessment Year 2008-09, 2009-10 and 2010-11 and Cross-Objections filed by the Assessee in Assessment Years 2008-09, 2009-10 and 2010-11, contain multiple ground of appeals. However, at the time of hearing we have carefully perused all the grounds raised by the Revenue and Assessee, as well as cross objections raised by the Assessee. Most of the grounds raised by the Revenue as well as Assessee, are either academic in nature or contentious in nature. However, to meet the end of justice, we confine ourselves to the core of the controversy and main grievances of Revenue and the Assessee as well. With this background, we summarize and concise the grounds raised by the Revenue as well as Assessee as foll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 36/Ran/2015 for A.Y. 2009-10, cross objection no. 4 of assessee's C.O. No. 19/Ran/2017 for A.Y. 2009-10. Ground no. 5 of revenue's appeal in ITA NO. 137/Ran/2015, A.Y. 2010-11, C.o. NO. 5 of assessee's C.O. No. 20/Ran/2017 for A.Y. 2010-11. Summarized Grounds of Assessee`s Appeals ITA No. 125/Ran/2015 Assessee`s appeal for A.Y. 2008-09 1. Ground Nos. 1 to 9 raised by the assessee isin respect of disallowance of various expenses on ad hoc basis. This ground covers assessee`s appeal in ITA No. 126/Ran/2015, Ground no. 2 to 7, and ITA No 127/Ran/2015 Ground no. 1 to 6. 2. Ground No. 10 raised by the assessee relates to disallowance of claim of deduction u/s 80IA of Rs. 43,10,307/- on account of adjustment to the market price by reducing the electricity duty without appreciating the fact that electricity duty is a part of the market price if the same is purchased from outside. This ground covers assessee`s appeal in ITA NO. 126/Ran/2015 ground no. 8 and ITA No. 127/Ran/2015 Ground no. 7. 3. Ground No. 11 raised by the assessee relates to reallocating the expenses on account of directors remuneration of Rs. 17,14,560/- and thereby reducing the claim of deduction u/s 80IA by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... examined the assessment order and order of ld. CIT(A) and noted that there is no any discussion about addition u/s 40(a)(ia) of Rs. 45,17,640/-, therefore, this ground does not relate to A.Y. 2008-09, hence we dismiss ground No. 1 raised by the Revenue. 6. Summarised ground No. 2 raised by Revenue reads as follows: Addition under Rebate and claim of Rs. 78,00,190/- on account of payments made as rebates and claims, on the ground that it is unascertained liability and a provision. Ld. CIT(A) has given full relief after calling for remand report. This ground also relates to Ground no. 2 of C.O. No. 18/Ran/2017, Revenue appeal in ITA No. 136/Ran/2015 for A.Y. 2009-10 Ground no. 2, Ground no. 2 of C.O. No. 19/Ran/2017 A.Y. 2009-10, Ground no. 2 of Revenue's Appeal in ITA NO. 137/Ran/2015 A.Y. 2010-11, C.O. No. 2 of Assessee's C.O. No. 20/Ran/2017 A.Y. 2010-11. 7. Brief facts qua the issue are that this ground relates to addition of Rs. 78,00,190/- claimed under the head rebate and claim. The ld. AO during the course of assessment proceedings had asked the assessee to give the details of rebates and claims - Party wise details and reasons alongwith copy of ledgers. The ld. AO had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rusal of proper vouchers and details of such liability it is noted that the Ld. A.O. has failed to appreciate these details and incorrectly disallowed the ascertained liability of Rs. 78,00,190/- on account of rebate and claims. On the basis of this discussion the addition made by the Ld. A.O. cannot be sustained in appeal and is directed to be deleted. Accordingly, this ground of appeal of the assessee is allowed." 9. Aggrieved the order of the ld. CIT(A) the Revenue is in appeal before us. 10. The ld. DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer which we have already noted in our earlier para and the same is not being repeated for the sake of brevity and on the other hand the ld. Counsel for the assessee has relied on the order of the ld CIT(A). 11. We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials available on record. Learned Counsel hasargued before us that rebate and claim is not a provision but a crystallized liability. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wable particularly gift to employees, other staff welfare expenses, reimbursement of school fees etc. The assessee had replied to the AO stating that these expenses are for the purpose of business. The AO has gone through the reply of the assessee and was of the view that these expenses were purely altruistic and philanthropic in nature and these expenses were not incurred wholly and exclusively for business purposes but have to be treated as application of income. The Ld. A.O. on perusal of the submission of the assessee company had disallowed the following expenditures namely; (i) Festival celebration - Rs. 6,36,292/-, (ii) Scholarship / Reimbursement of School Fee - Rs. 2,87,370/-, (iii) Gift to employees - Rs. 16,62,709/-, (iv) Contribution to club - Rs. 3,16,021/-, (v) Other staff welfare expenses - Rs. 23,36,185/- and (vi) other workers welfare expenses - Rs. 39,369/- totaling to Rs. 52,77,946/-. 14. Aggrieved by the order of the Assessing Officer the assessee carried the matter in appeal before the ld. CIT(A) who has partly deleted the addition made by the Assessing Officer observing the following: "I have considered the submission of the appellant and perused the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ircumstances of the addition and submissions made by the Ld. A.R. of the appellant and I find that the expenses claimed under this head are in the nature of business expenditure. It is the liability of the Company to provide basic facilities to the employees and their dependent, providing scholarship / reimbursement of school fee for the children of employees is also one of them. It is in the nature of staff welfare and also necessary for maintaining cordial industrial relation and harmony. In view of these facts the addition made by the A.O. is difficult to sustain in appeal and is directed to be deleted. In view of these facts the addition made by the A.O. is difficult to sustain in appeal and is directed to be deleted. iii. Gift to employees - an addition of Rs. 16,62,709/- This amount was disallowed by the Assessing officer on the ground that these expenses had no connection with the business of Company. As per details filed before the A.O., the gifts were found to have been given to the employees on the occasion of their marriage and on the occasion of marriage of their family member. I have carefully considered the appellant's contention as well as observation of the As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenses - Rs. 23,36,185/- This amount was disallowed by the Assessing officer on the ground that these expenses had no connection with the business of Company. As per details filed before the A.O., the other staff welfare expenses were found to have been given to the employees tea and snacks within office and factory premises, stitching of official uniform, subsidy given to canteen where employees get meal during working hours, drugs & chemicals bought for first-aid-treatment under OHC, expenses incurred on shifting of furniture from one quarter to other etc. I have considered the submission made by the appellant and perused the assessment order of the Ld. A.O. From the details of expenses, it is noted that the expenses met within office and factory premises for staff & officers in the form of tea and snacks, stitching of official uniform, subsidy given to canteen where employee get meal during working hours, medicines & chemicals for OHC etc. These expenses which well not only help them to procure more business and attract people to work more efficiently in present as well as in future also. It is also to be noted that the allowability of expenses u/s 37(1) are that with a vie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penses incurred under the head Welfare Expenses are related to employees who work for the organization and therefore, these expenses are business expenditure. The ld Counsel has also argued that gift to employees is a kind of incentives related to their performance which reflects from progress of the company and increase in production as per policy of the company. In respect of other staff welfare expenses, it has been submitted that these expenses are tea and snacks within office and factory premises, stitching of official uniform, subsidy given to canteen where employees get meal during working hours at concessional rate, reimbursement of school fees to workers is done as per agreement with the union and all these expenses are incurred by the company to retain and motivate the employees. Theld Counsel submitted that festival celebration is that various festivals like independence day, republic day, durga puja, vishwakarma puja etc. are celebrated for employees and their families. In respect of scholarship / reimbursements of school fee, ld Counsel has submitted that this is done as per agreement with workers union. In respect of gift to employees, the ldCoundel has submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n this case, the AO has not passed any order u/s 144 of the Act. The AO thus without rejecting the books of account of the assessee has gone for estimation on suspicion and conjectures that the assessee may be inflating its expenses. While scrutinizing the expenditure if the expenses claimed are not having any nexus to the business of the assessee or if there is deficiency in the vouchers or there is no bills supporting the incurrence of an expenditure, at the most expenses to the extent that are not supported by the vouchers can be held to be non-genuine and can be disallowed by the AO; and item-wise the AO could have disallowed the expenditure rather than going for adhoc disallowance of percentage basis of the expenses claimed by the assessee which action of the AO is arbitrary in nature and cannot be sustained. Therefore, we delete the following adhoc expenses sustained by the ld CIT(A). (i) Contribution to club Rs. 31,602/- (ii) Other staff welfare Exp. Rs. 2,33,618/- (iii) Other workers` welfare expenses Rs. 3,937/- Hence, we dismiss the appeals of Revenue and allow the cross objections filed by the assessee. 19. Summarised ground No. 4raised by Revenue reads as follow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenditure is made for acquiring or bringing into existence an asset or advantage for the enduring benefit of the business, it is properly attributable to capital and is of the nature of capital expenditure. But if it is made for running the business or working it with a view to produce the profits, it is a revenue expenditure. The aim and object of the expenditure would determine the character of the expenditure whether it is a capital expenditure or a revenue expenditure. In view of the tests laid down, it was held that amount expended on subscription fee cannot be termed as a capital expenditure. It is also noted that in view of the details of the expenses claimed, it is observed that the assessee has claimed excessive under this head, and in view of these facts, the disallowance under this head is fair and reasonable to restrict @10% of the total expenses claimed being Rs. 1,34,909/- as against disallowance of Rs. 13,49,087/- made by the Ld. A.O. Accordingly, this ground of appeal is partly allowed. ii) Books & Periodicals - Rs. 43,824/- On perusal of the details submitted by the assessee company before the Ld. A.O. and before the appellate proceedings before this office it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tent or copyright which are intangible assets and therefore any expenses incurred thereof are capital expenditure and required to be capitalized. The AO accordingly disallowed the claim of the assessee and added the same to the total income of the assessee. It is also noted that the expenses of ISO certificates are in the nature of regular business expenses and to meet with the market demands of recognition as to the standard quality material not bringing in any specific capital asset and regular and necessary expenses of such nature surely fall under revenue head and cannot be treated as separate capital asset and for allowing for depreciation thereon. Accordingly, it would be reasonable to allow the ISO expenses being certification expenses as revenue item and delete the disallowance in this regard. Reliance in this regard is placed on the case of Lubi Submersible Ltd., in ITA No. 1179/Ahd/2007 for A.Y.2004-2005 dated 26-2-2010 wherein the Hon'ble Tribunal had allowed similar claim by holding that the ISO 9000 expenses allowable as business expenditure under Section 37(1) of the Act. In view of these facts, the addition made by the Ld. A.O. cannot be sustained and is directed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... office, News papers for various dept., taxman's Ready reckoner, Income tax Act, Income Tax Rules, legal books for Co's work etc. these expenses are purely of revenue nature. Regarding books and periodicals the ld Counsel has submitted that these expenses are related to books and periodicals purchased like insurance guide for material department and for MD office, newspapers for various department, taxman's ready reckoner, Income Tax Act, Income Tax Rules, Legal books for Company's work etc and these expenses are purely of revenue nature. As ISO/WCM expenses is concerned, the ld Counsel has argued that the company is an ISO 9000-2000 certified company and the company practice world class manufacturing excellence. It has also been stated that the expenses under this head are related to ISO/WCM auditors for assessment to give various certificates and awards like quality award 2007, green tech environment award 07, IMC RBNQ 07, Green tech safety award, DNV audit for ISO 9001-2000, OHSAS 18001, SA- 8000-2001 etc. these expenses are purely of revenue nature and are incurred every year. Regarding HRD recruitment expenses, theld Counsel has argued that these expenses are related to rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncurred expenditure through the trust named "Jan Seva Trust", but on perusal of the records it was observed by A.O. that this trust is a separate entity altogether which had received registration u/s 12A, hence, any expenditure on this account for which work was carried out by a trust should actually be a donation in the hands of the assessee company and not business expenditure. The Ld. A.O. keeping in view of these facts, had disallowed expenditures namely; gardening/horticulture expenses - Rs. 8,52,261/-, gift to others - Rs. 1,52,430/-, contribution to rural development - Rs. 34,77,680/-, contribution for education Rs. 18,11,380/-, community welfare expenses - Rs. 1,33,188/-, entertainment expenses (others) - Rs. 19,53,623/-, occupational health care expenses - Rs. 2,30,637/-, and guest house expenses - Rs. 3,55,343/- totaling to Rs. 89,97,609/- on the basis that these expenditures are purely altruistic and philanthropic in nature. 27. Aggrieved by the order of the Assessing Officer the assessee carried the matter in appeal before the ld. CIT(A) who has partly deleted the addition made by the Assessing Officer observing the following: "I have considered the submission of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee as gift to others include sweets and dry fruits distributed among customers, suppliers and other business associates on occasion of Diwali and Republic Day. On careful reading of Appellant submission and assessment of need of these facilities which has been incurred for employees of the appellant I am of the opinion that it would be fair and reasonable if addition made by the Ld. A.O. is restricted to 10% of the actual expenses claimed i.e. 1,52,430/- under this head which comes to Rs. 15,243/-. Accordingly, this ground of appeal of the assessee partly allowed. (iii) Entertainment expenses (others) - an addition of Rs. 19,53,623/- This amount was disallowed by the Assessing officer on the ground that these expenses had no connection with the business of Company. As per details filed before the A.O., the expenses incurred on customers, supplier and other business associates who visits to factory of the assessee and take snacks, foods etc. in the guest house. These expenses also include the entertainment of customers and suppliers of the Company during visits of Company officials for business purposes. I have considered the submission made by the appellant and pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the A.O., the expenses incurred on guest house expenses & community welfare expenses. I have considered the submission made the appellant and perused the assessment order of the Ld. A.O. From the details of expenses, it is noted that actual expenses amounting to Rs. 3,55,343 & Rs. 1,33,188 were incurred by the assessee to provide guest house & community welfare who may stay and take food. On careful reading of Appellant submission and assessment of Ld. A.O. it is noted that need of these facilities which has been incurred for employees of the appellant I am of the opinion that it would be fair and reasonable if addition made by the Ld. A.O. are restricted to 10% of the actual expenses claimed i.e.3,55,343/- 8s Rs. 1,33,188/- under these heads which comes to Rs. 35,534/- & Rs. 13,318/-. Accordingly, this ground of appeal is partly allowed. (v) Rural Development Expenses & Rural Development - an addition of Rs. 31,067/- & Rs. 34,77,680/- This amount was disallowed by the Assessing officer on the ground that these expenses had no connection with the business of Company. As per details filed before the A.O., the expenses incurred on account of basic education in nearby villages v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of contract workmen sons and daughter. The Entertainment expenses has incurred on customers, supplier and other business associates who visits to factory premises and take snacks, food etc. in the guest house. Regarding contribution to education and health and occupational health care expenses the ld counsel has argued that factory place is naxal affected place and no provision of medical health care and schooling of children of the employees and for this purpose the company incurs expenses under this head.Regarding guest house expensesthe assessee has argued that company is located in very remote area and fooding and lodging facilities are not available within 30 kms. of its facory, therefore, company operates a guest house for its business associates who may stay and take food. We delete the following adhoc disallowances sustained by the ld CIT(A), vide our detailed reasoning in para 18 of this order: (i).Gift to others Rs. 15,253/- (ii).Entertainment Expenses Rs. 1,95,362/- (iii).Contribution for education and health care expenses Rs. 2,04,202/- (iv).Guest House expenses Rs. 35,534/- (v).Community welfare expenses Rs. 13,318/- Hence, appeal of the Revenue is dismisse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... behalf of the entire company and their administrative and managerial controls extends to all their units including units on which deduction u/s 80-IA have been claimed. In the case of Director's remuneration, the assessee company had apportioned in the case of captive power plant. In view of these discussions, the expenses were apportioned in proportion to the turnoverand taken as expenses in the units for which deduction u/s 80-IA was claimed. Accordingly, an addition of Rs. 45,17,640/- as expenses in thehands of the exempt units reduces the profit claimed u/s 80-IA by the same amount and hence, the same was added back to the total income of the assessee company. 34. Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the ld. CIT(A) who has partly deleted the addition made by the Assessing Officer observing the following: "I have considered the submission of the appellant and perused the assessment order as well as remand report of the Ld. A.O. It is noted that the A.O. apportioned the expenses on principal unit and captive power plant unit on the ground that the assessee was claiming deduction u/s.80-IA in respect of captive powe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndCIT Vs Hindustan Lever Ltd Madras High Court ITA No 219 of 2006 where The Madras High Court held that Common head office administrative expenditure necessary for running of the business and therefore, cannot be apportioned to the individual units before computing the deductions u/s 10B, 80HH 80I of Income Tax Act, 1961. In this regard it is noted that assessee is running captive power plant and generating electricity for consumption by the assessee's own chemical division. There is no third party sale to any other entity. Due to these peculiar facts of the case it is seen that expenditure which can be allocated to captive power plant should relate only to generation of electricity and management of power plant. In this regard it is noted that the Ld. A.O. has considered allocation of sales promotion expenses of Rs. 94,000/- and other sales overhead expenses of Rs. 55,000/- to the captive power plant. However, as per the details available it is seen there is not much basis for inclusion of these expenses in the expenditure of captive power plant as it is seen that the power generated is for in house use by the assessee and has not be marketed or sold to third party. In view of thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... officer. We have gone through the order of ld CIT(A) and note that there is no any infirmity in the order passed by him. That being so, we decline to interfere in the order passed by the ld. CIT(A), his order on this issue, is hereby upheld and the ground of appeal raised by the Revenue is dismissed. The Cross objection filed by the assessee on this issue is also dismissed. 38. Summarized Grounds of Assessee's Appeals 1.Ground nos. 1 to 9 raised by the assessee in respect of disallowance of various expenses on ad hoc basis. This ground covers assessee's appeal in ITA No. 126/Ran/2015 Ground no. 2 to 7, ITA No. 127/Ran/2015 Ground no. 1 to 6. 39. At the outset itself we note that the AO could have ventured into estimation only after rejecting the books of accounts of the assessee u/s 145(3) and thereafter by best judgment assessment u/s 144 of the Act. Here in this case, the AO has not passed any order u/s 144 of the Act. The AO thus without rejecting the books of account of the assessee has gone for estimation on suspicion and conjectures that the assessee may be inflating its expenses. While scrutinizing the expenditure if the expenses claimed are not having any nexus to the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /-) for assessment year 2006-07. The AO also observed that the assessee for its power plant had taken sale value amounting to Rs. 61,39,17,000/-, which had been arrived at by taking the tariff rate of JSWEB @ Rs. 3.6158/ unit. Therefore, the Assessing Officer required the assessee to give reason/justification of valuation of power produced on the basis of JSEB rate. After considering the submission of the assessee, the AO relying on sub-section(5) of Section 80IA, observed that the word derived from cannot have a wide import and derivation of income must be directly connected with the business in the sense that the income is generated by the business. Thereafter the Assessing officer referred to sub-section (8) of Section 80IA, observed that it was clear that one had to take the consideration at the market value which in relation to any goods or services, means the price that such goods or services would ordinarily fetch in the open market. The AO observed that the energy rate of JSEB inherently not only takes into account its cost of production but also its level of efficiency or inefficiency and there is also transmission and distribution losses embedded in its tariff rate. The A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee. Ld CIT DR pressing said Ground No.3 of revenue submitted that the assessee has calculated the sales of its steam boiler unit at production cost + 20% mark up but in the case of its power plant instead of taking the same logic, the assessee has taken sale value of Jharkhand State Electricity Board (JSEB) as its sale rate which is not correct. Ld CIT DR submitted that the CIT(A) was not right in deleting the said addition on the ground that the value should be taken at market value of goods as per State Electricity Board. Ld CIT DR submitted that there is no justified reason or basis in the CIT(A)'s order as to why sale value could not have been taken as cost of production + 20% mark up instead of taking JSEB value which includes transmission cost, operational cost/insufficiency of JESB which has no bearing to the exempt plant of the assessee. Ld CIT DR also submitted that the CIT(A) on one hand while deciding the issue of expenses allowable of the power plant unit has held that no expenses which are remotely or directly related to power plant unit like corporate office expenses, common head office expenses etc can be taken into consideration and on the other hand has allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T(A)'s order, wherein, he has allowed part relief to the assessee and partly confirmed the difference of Rs. 33,95,748/- between the sale price as per books and as per working noted in the CIT (A)'s order to calculate the profit earned by 80IA eligible unit as under: "9.4. I have considered the submission of the appellant and perused the assessment order as well as remand report of the Ld. A.O. It is noted that the company has claimed deduction u/s 80-IA for its unit of a captive power plant amounting to Rs. 16,58,48,283/- for A.Y.2006-07 and for its power plant it has taken sale value amounting to Rs. 61,39,17,000/- which has been arrived by taking the tariff rate of JSEB @Rs. 3.6158 per unit. It is noted that the appellant has computed deduction to the tune of Rs. 16,57,98,146/- as profit generated from the captive power plant and the computation is done by adopting the transfer price of power captively consumed at Rs. 3.61 per unit which is the rate at which power is supplied by Jharkhand State Electricity Board to industrial consumers in the State of Jharkhand and the appellant since importing power from Jharkhand State Grid only has therefore, adopted the same as transfer pric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would have been purchased from JSEB at a rate of 3.61 per unit. Further, it is also noted that for adaptation of cost plus mark up as transfer pricing for power, the A.O. has relied on the decision of Bombay High Court in the case of Atul Durga House Ltd. 211 ITR 604, it is important to mention here that the decision was given in the context of claim u/s 80J of the Income Tax Act I961 as applicable prior to 1.4.1976 and the said section was not containing any provision similar to sub-section 8 of section 80-IA which requires computation of profits by taking market value of goods transferred from eligible unit to another unit. The present case is clearly distinguishable as the sub section 8 of Section 80-IA clearly mandates the adoption of market price for inter unit transfers. Thus adoption of cost plus mark up is clearly in contradiction of sub section 8 of section 80-IA. It is also noted that the Ld. A.O. has also mentioned M/s. Damodar Valley Corporation as power supplying company in the state. If M/s. Damodar Valley Corporation is supplying power to industrial consumers, A.O. did not say at what price DVC is supplying powers to industrial consumers. Further, it more than on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o its other business for the purpose of computation of profits and gains of the eligible business in terms of Section 80-IA(8) of the Act." In this regard it is noted that the Hon'ble Mumbai Tribunal in the case of the West Coast Paper Mills Ltd. Vs. Asstt. Commissioner of Income Tax [2006] 103 ITD 19 MUM [2006] 286 ITR 252 MUM has noted that the rate to be adopted for the power generated and supplied to assessee'spaper division for the purpose of working of the profit for the purpose of 80IA of the Income Tax Act would be linked to the purchase price of power paid by the assessee to KSEB. The Hon'ble Tribunal concluded that the price should be worked out on the basis of average unit price of power purchased by assessee from KSEB during the whole year minus certain extraneous charges such as electricity duty etc. which is not connected to the business of the assessee. Applying these guidelines of Hon'ble Mumbai Tribunal to the present case it is seen that assessee has purchased power from JSEB at the average rate of Rs. 3.6158 unit. This price paid included the electricity duty of 2 paise per unit. This duty is nowhere connected with business of assessee and thus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO was not sure about the cost of production of power and he assumed the same at Rs. 2.5 per unit with a rider that same may be revised later if the assessee furnishes details of cost of production of power alongwith necessary evidence. Be that as it may, from the order of the Hon'ble Chhattisgarh High Court in the case of Godawari Power &Ispat Ltd., (supra), we observe that Their Lordships speaking for the Hon'ble High Court explicitly held that where the assessee had established a captive power plant to supply electricity to its Steel Division, then for the purpose of section 80IA of the Act, deduction of market value of power supplied by assessee to Steel Division should be computed considering rate of power charged by Chhattisgarh State Electricity Board for supply of electricity to industrial consumers. Further, ITAT Kolkata in its order in the case of Graphite India Ltd (supra) referring to the decision of Hon'ble Gujarat High Court in the case of Shah Alloys Ltd (supra) held that the market value of electricity supplied by the State Electricity Board to other consumers has to be taken as benchmark for computation of deduction u/s. 80IA for an assessee. 19. In the pres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs of the Co-ordinate Bench. Therefore, respectfully following the decision of Co-ordinate Bench we allow grounds of appeal raised by the assessee. 45. Summarised ground Nos. 3, 4 & 5 raised by the assessee reads as follows: 3. Ground no. 11 raised by the assessee relates to reallocating the expenses on account of directors remuneration of Rs. 17,14,560/- and thereby reducing the claim of deduction u/s 80IA by the same amount. Since this expense is already shared between 80IA plant and other plant, hence there is no question of again sharing the same expenses to 80IA plant. 4. Ground no. 12 raised by the assessee relates to reallocating the expenses on account of directors sitting fees of Rs. 1,95,050/- and thereby reducing the claim of deduction u/s 80IA by the same amount. This ground covers assessee's appeal inITA No. 126/Ran/2015 ground no. 9, ITA NO. 127/Ran/2015 Ground no. 8 5. Ground no. 13 relates to reallocating the expenses on account of business head office expenses of Rs. 25,38,000/- and thereby reducing the claim of deduction u/s 80IA by the same amount without appreciating the fact that the business head office expenses are directly related to the other busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal No. 311 of 2015 in respect of the same Respondent-Assessee relating assessment year 2002-03. We have by an order passed today not entertained the Income Tax Appeal No. 311 of 2015 on this issue / question. b) Accordingly, for the reasons mentioned in our order passed today in Income Tax Appeal 311 of 2015, this question does not give rise to any substantial question of law. Thus, not entertained. 6. Appeals admitted on substantial question of law at (1) above. 7. Respondents waive service. 8. Registry is directed to communicate a copy of thisorder to the Tribunal. This would enable to keep papers and proceedings relating to the present appeals available, to be produced when sought for by the Court." 49. As the issue is squarely covered in favour of the assessee by the decision of the Hon`ble High Court in assessee's own case (supra) in I.T.A. No. 111 of 2015, and there is no change in facts and law and the Revenue is unable to produce any material to controvert the above said findings of the Hon`ble High Court. Therefore, respectfully following the decision of Hon'ble Bombay High Court, we allow grounds of appeal raised by the assessee. 50. Now we shall take in ITA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant premises and repairs and maintenance of plant and machinery and other assets. It is also noted that the assessee has made addition to capital assets as these were new equipments installed and by incurrence of these expenses, had created capital assets. It is also noted that repairs may involve replacement of some part by which the assets is made as efficient as it was before or as close to it as possible but here these two new assets namely; installation of isolator breakers and installation of two lighting transformers have been created and expenditure incurred on these is of capital nature. In view of these facts, it is noted that expenses incurred by the appellant company is of the nature of capital expenses and the Ld. A.O. had rightly disallowed these two expenses and there is no cause of interference with the action of the Ld. A.O." 53. Aggrieved the order of the ld. CIT(A) the assessee as well as Revenueare in appeal before us. 54. The ld. Counsel for the assessee has relied on the submissions made before the authorities below and on the other hand the ld. DR has primarily reiterated the stand taken by the Assessing Officer which we have already noted in our earlier pa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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