TMI Blog2020 (7) TMI 370X X X X Extracts X X X X X X X X Extracts X X X X ..... ability. 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. Contribution to club, Other staff welfare Exp. and Other workers` welfare expenses - HELD THAT:- 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) on Contribution to clu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r plants and all the expenses related to concerned plant are booked appropriately in the books of the same plant and these books of accounts are audited by the Statutory Auditors and certified by the management of company. It has also been argued that the apportionments of certain expenses made by the learned A.O. between 80-IA and other plants is totally baseless and assumptive therefore another opportunity should be given to the assessee to explain the allocation of expenses to Power plant unit before the assessing 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. Disallowance of various expenses on ad hoc basis - HELD THAT:- 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... venue pertaining to assessment years 2008-09 to 2010-11, are directed by the separate orders passed by the commissioner of income tax (Appeals), which in turn arise out of separate assessment orders passed by the assessing officer under section 143(3) of the Income Tax Act, 1961 ( hereinafter referred to as the Act ) . 2. Since, the issues involved in all the appeals and cross objections are common and identical; 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C.O. No. 19/Ran/2017 for A.Y. 2009-10 , Ground no. 6 of Revenue s appeal in ITA No. 136/Ran/2015 for A.Y. 2009-10, Ground no. 4 of Revenue s appeal in A.Y. 2010-11, Ground no. 6 of Revenue s appeal in ITA NO. 137/Ran/2015 A.Y. 2010-11 and C.O. No. 4 of assessee in C.O. 20/Ran/2017 A.Y. 2010-11. Ground no. 7 : ld. CIT(A) has erred in deleting the addition made on allocation of expenses to Power plant unit. This ground covers ground no. 5 of Revenue s appeal in ITA No. 136/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 ₹ 43,10,307/- on a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hese summarised grounds one by one: Summarized Grounds of Revenue Appeals Summarised ground No. 1 raised by Revenue reads as follows: Ground No. 1 : Addition u/s 40(a)(ia) of ₹ 45,17,640/- on account of payments made as consultancy charges to MsUdhe. This ground also relates to Ground no. 1 of C.O. No. 18/Ran/2017. 5. At the outset itself, we note that this ground raised by the Revenue does not relate to assessment year 2008-09. Ld. Counsel for the assessee informs the Bench that this ground relates to assessment year 2007-08. We have 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 ₹ 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 ₹ 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/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rences arises in weights at both ends. Hindalco Industries Ltd accepts only that quantity which it receives at their end as per its weighment practice and payment releases only for quantity which it shown to receive. It is noted that the assessee has calculated the total short quantity (Net) received at their end during F.Y.2007-08 accumulated 86.88 MT which works out of total value of ₹ 78.01 lakhs which is also evident from the ledger details of the Hindalco Industries Ltd. It is noted that liability taken in F.Y.2007-08 (A.Y.2008-09) was an ascertained liability. In view of these discussion, and on perusal 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 ₹ 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exp. etc. This ground also relates to Ground no. 3 of C.O. No. 18/Ran/2017, Ground no. 3 of Revenue s Appeal in ITA No. 136/Ran/2015 for A.Y. 2009-10, Ground no. 3 of C.O. No. 19/Ran/2017,Ground no. 3 of Revenue s Appeal in ITA No. 137/Ran/2015 A.Y. 2010-11, C.O. No. 3 of assessee s C.O. No. 20/Ran/2017 A.Y. 2010-11. 13. Brief facts qua the issue are that the Ld. A.O. during the course of assessment proceedings had observed that the assessee had debited expenses totalling to ₹ 52,77,946/- under the head Welfare Expenses. The Ld. A.O. had issued show cause to the assessee to explain why expenses debited under this head was allowable 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 disa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d under this head have been disallowed by the A.O. on the ground that these expenses are purely altruistic and philanthropic in nature and these expenses are not incurred wholly and exclusively for business purpose of the appellant Company. The expenses claimed under this head have been disallowed by the A.O. on the ground that these expenses are not in relation to the business of the appellant Company. On perusal of the assessment order it is found that the expensed claimed under this has been made towards scholarship / reimbursement of school fee, Gross expenses under this head from the scholarship / reimbursement of school fee ₹ 2,87,370/- has been claimed as deduction. I have considered all the facts circumstances 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 industria ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Plant site. The appellant submitted that the assessee Company is located in remote area naxal infected area where there are no recreational facilities in around the nearby locality. In order to retain the employees recruited from different locations, the Company has constituted staff/workers club for their recreational activities. 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 itwould be fair and reasonable if the addition made by the Ld. A.O. is restrictedto 10% of the actual expensesclaimed i.e. 3,16,021/- under thishead which comes to ₹ 31,602/-.Accordingly, this ground of appeal is partly allowed. (v) Other staff welfare expenses - ₹ 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 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , this ground of appeal is partly allowed. 15. Aggrieved the order of the ld. CIT(A) the Revenue is in appeal before us and assessee is in cross objection before us. 16. 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 defended the order passed by the ld CIT(A). 17. 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 has argued before us that all the expenses 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to another quarter, reimbursement of electricity bills as per Union agreement etc. for workers are covered under the head. Theld Counsel has also argued that company has paid Fringe Benefit Tax (FBT) on above welfare expenses incurred for employees of the company and expenses of similar nature has been allowed by ITAT, Ranchi in the previous year, hence there should not be any reason of disallowance by the A.O. 18. We note thatld CIT(A) has sustained 10% addition of the following expenditure: (i) Contribution to club ₹ 31,602/- (ii) Other staff welfare Exp. ₹ 2,33,618/- (iii) Other workers` welfare expenses ₹ 3,937/- 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 business of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res are purely capital in nature and having enduring benefits. All these additions are dealt with separately as under:- (i) Subscription - ₹ 13,49,087/- On perusal of the details submitted by the assessee company before the Ld. A.O. and before the appellate proceedings before this office it is noted that the expenses met by the assessee towards subscription to Society for Environmental Commission, High Tech Publishing Ltd., Annual MembershipSubscription to National Safety Council, AnnualSubscription Fee to Alkali Manufacturers Association, Chemical Weekly, Coal Consumer Association of India, Centax Publication Pvt. Ltd. - for Excise Law ST Review, patron membership of Indian Chemical Council, National Safety Council - Jharkhand Chapter - Membership, Institute of Economic Studies, Labour Law Journal, Membership - Indian Economic Development Research Association, Nandini Chemical Journal etc. It is also noted that if expenditure 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d ₹ 7,06,311/- under this head. It is also noted that the assessee company is an ISO-9000-2000 certified company and for achieving manufacturing excellence the company practice World Class Manufacturing (WCM) standards and expenses claimed under this head are related to ISO/WCM auditors for assessment, expenses on air ticket to auditors and expenses on guest house and photography charges to get certificate. I have considered arguments of the appellant and perused material available on record. It is noted that the assessee has claimed ₹ 7,06,311/- as expenses for procuring ISO 9000-2000 certificates for meeting the requirement of the clients. This is being the periodic exercise to maintain international quality standards and international acceptance and demand in the product/services, the expenses thereon are revenue in nature. The AO however did not agree with the claim of the assesseeand held that the expenses incurred towards ISO 9000 certification were sort of patent 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 ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recruitment expenses is allowable as revenue expenditure. Having regard to facts of the case the addition made by the Ld. A.O. cannot be sustained in appeal and is directed to be deleted. 22. Aggrieved by the order of the ld. CIT(A), the revenue is in appeal before us and assessee is in cross objection before us. 23. 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 defended the order of theld CIT(A). 24. 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 has argued that the expenses are related toInsurance guide for Material Dept, and for MD 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - under the heads Gardening/Horticulture expenses, CSR expenses and Community welfare expenses. The Ld. A.O. had asked the assessee to substantiate its claim with documentary evidences. The Ld. A.O on perusal of the submission of the assessee had observed that the assessee had furnished the details in the form of ledger details, in which the expenditures are written as the various heads like programme coordination, social reforms, labour engaged, firm making charges, housekeeping for AdityChikitshalaya, Indian Chemical Counsel, charges for making video film, gardening work etc. and not specific details had been furnished and merely saying that expenditures had been incurred for social reforms, infrastructural development, watershed development, programme coordination etc therefore AO took the view that assessee had not discharged its onus of showing that expenditure has actually been incurred or not and even if incurred whether it is for the purposes of the business or not. The Ld. A.O. had also observed that the assessee company was incurred 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 ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ronment, plantation of trees, plants and their beautification is necessary and it is obligatory to such company who is running a chemical plant. It is noted that this expenditure is were incurred by the assessee in order to maintain green pollution free environment at around the plant premises. In the assessee s case Hon ble ITAT, Circuit Bench, Ranchi in ITA No. 192/Ran/2008 and ITA No. 194/Ran/2008 for A.Yrs. 2003- 04 and 2004-05 has allowed the appeal of the assessee. In view of this, the disallowance made by the Ld. A.O. cannot be sustained in appeal and directed to be deleted. (ii) Gift to others - an addition of ₹ 1,52,430/- This amount was disallowed by the Assessing officer on the ground that these expenses had no connection with the business ofCompany. As per details filed before the A.O., the gifts were found to havebeen given to the others being customers on the eve of Diwali and republic day. 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 actual expenses amounting to ₹ 1,52,430/- were incurred by the assessee as gift to others include ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ₹ 20,42,017/- [₹ 18,11,380/- + ₹ 2,30,637/-] were incurred by the assessee to provide basic occupation health care services to its employees and basic schooling to children of employees which is mandatory for the company to make provision for occupational health care under the Factories Act and all such expenses are incidental and ancillary for running a factory in such a remote location. 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. is restricted to 10% of the actual expenses claimed i.e.20,42,017/- under this head which comes to ₹ 2,04,202/-. Accordingly, this ground of appeal is partly allowed. v. Guest House expenses Community Welfare This amount was disallowed by the Assessing officer on the ground that these expenses had no connection with the business of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 defended the order of ld CIT(A). 30. 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 has argued that the expenditures are not altruistic and philanthropic in nature and are wholly and exclusively for business purposes. In respect of the addition of gardening / horticulture expenses, the ld Counsel has argued that the company is engaged in production of hazardous chemicals hence, maintaining a green belt in and around the factory premises becomes essential. The company is also an ISO 9000/OHSAS 18001 certified company which requires neat and green environmental around the factory premises and therefore, the company maintains garden, do plantation etc in the company premises for smooth and healthy environment at the work place. Regarding expenses under the head gift to ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenses to Power plant unit. This ground covers ground no. 5 of Revenue s appeal in ITA No. 136/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. 33. Brief facts qua the issue are that Ld. A.O. during the course of assessment proceedings had observed that while claiming deduction u/s 80-IA for its unit for a captive power plant, assessee had taken into account common expenses / overhead attributable to this unit and had not accordingly apportioned these expenses in its profit and loss account. The Ld. A.O. had also observed that the assessee had not given any valid reason for not taking into account common expenses / overheads attributable to this unit. The Ld. A.O. had also observed that the expenses like sales promotions, sales overhead expenses, business head office expenses etc. are though incurred at corporate level/office but it is for the benefit of the entire company including all its units and constituents. The Ld. A.O. had also observed that the Director s sitting fees and Direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant while claiming deduction u/s 80- IA and in schedule 14 of the profit and loss account of captive power plant it is mentioned as directors remuneration. It is also noted that similarly, CSR expenses, employee s welfare expenses and other overhead and miscellaneous expenses directly related to power plant or having relevance to power plant are debited in power plant division and the same can be verified from profit and loss account of captive power plant. Therefore, it is claimed that as per the arrangement, the expenses are incurred specifically for chemical business, these expenses have no nexus with the power and steam units, therefore, no portion of this expenditure is allocated to power generating unit and these expenses are not in the nature of common corporate expenditure incurred for the benefit of all the units. Hence, reallocation done by A.O. on this account is erroneous and not justified.The stand of appellant is also supported by the judgment of Hon ble Calcutta High Court in the case of Tide Water oil co (India) Ltd Vs CIT, 353 ITR 300in which it was held that while directing that expenses incurred at Corporate office essentially for the eligible unit should be d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ound of appeal of the appellant is partly allowed. 35. Aggrieved the order of the ld. CIT(A) the revenue is in appeal before us and assessee is in cross objection before us. 36. 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 defended the order of ld CIT(A). 37. 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 has argued that the company maintains separate books of accounts for 80-IA plant and other plants and all the expenses related to concerned plant are booked appropriately in the books of the same plant and these books of accounts are audited by the Statutory Auditors and certified by the management of company. It has also been argued that the apportionments of certain expenses made by the learned A.O. betwe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, ITA No. 127/Ran/2015 Ground no. 7. 41. When this appeal was called out for hearing, the ld. Counsel for the assessee invited our attention to the order dated 18.11.2019, passed by the Tribunal in assessee s own case in I.T.A. Nos. 116 117/Ran/2015, for assessment years 2006-07 2007-08, whereby the issue of adjustment to the market price by reducing the electricity duty has been discussed and adjudicated in favour of assessee. The ld. Counsel submitted that the present issue is squarely covered by the above said order of the Tribunal, a copy of which is also placed before the Bench. 42. The ld. DR relied upon the orders of the authorities below. 43. We see no reason to take any other view of the matter then the view so taken by the division bench of this Tribunal in assessee s own case vide order dated 18.11.2019. In this order, the Tribunal has inter alia observed as under: 11. Apropos Ground No.8 of appeal of the assessee, briefly stated the relevant facts of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ench dated 24.8.2016 in the case of Graphite India Ltd vs ACIT, in ITA Nos.304-305/Kol/2008 for A.Y. 2003- 04, no such disallowance regarding duties can be made. Ld counsel vehemently pointed out that it is a settled position of law that the rate of electricity is to be calculated at the rate of State Electricity Board and despite that the CIT(A) has accepted all the contentions of the assessee in this regard and partly confirmed the addition, particularly the amount of difference and tax thereon which is not sustainable in view of the decision of Hon ble Chhatisgarh High Court in the case of CIT vs. Godawari Power Ispat Ltd, order dated 2.8.2013 (2014) 42 taxmann.com 551 (Chhatishgarh). 14. Replying to above, ld CIT DR contended that the CIT(A) has granted relief to the assessee without any basis and the Assessing Officer was right in making the addition by observing that the cost of production of power has to be assumed at ₹ 2.5 per unit and the same may be revised later, if the assessee furnishes details of its cost of production of power along with necessary evidence. Ld CIT DR submitted that the AO was right in making the addition of the amount of difference betwee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon ble Chhatishgarh High Court in the case of Godawari Power Ispat Ltd (supra) has categorically held that where the assessee had established captive power plant to supply electricity to its manufacturing unit for the purpose of section 80IA of the Act, deduction market value of power supplied by assessee to steel division should be computed considering rate of power charged by State Electricity Board for supply of electricity to other industrial consumers. Ld counsel also drew our attention to para 10 of the order of ITAT Kolkata Bench in the case of Graphite India Ltd (supra) and submitted that after considering all relevant decisions of Hon ble High Court including the decision of Hon ble Gujarat High Court in the case of CIT vs. Shah Alloys Ltd in Tax Appeal No.2092 of 2010 dated 22.11.2011, it was held that the market value of electricity which comprises of a component of electricity duty has to be taken into consideration for determining the market value for a consumer and out of electricity charges calculated by State Electricity Board, the duty is passed to the Government and this would make no difference. Therefore, not only the relief granted by the CIT(A) should be uph ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he purpose of the deduction under this section, the profits and gains of such eligible business shall be computed as if the transfer, in either case, had been made at the market value of such goods or services as on that date. Provided that where, in the opinion of the A.O. the computation of the profits and gains of the eligible business in the manner hereinbefore specified presents exceptional difficulties, the A.O. may compute such profits and gains on such reasonable basis as he may deem fit. Explanation - For the purpose of this sub-section, 'market value', in relation to any goods or services means the price of that such goods or services would ordinarily fetch in the open market. As per the above sub-section, it is clear that in case of transfer of goods and services between eligible unit and other businesses of the assessee, the transfer pricing of goods and services for computing deduction under section 80-IA of eligible business should be market value of goods and services at which the goods or services can ordinarily be sold in the open market. It is noted that Jharkhand State Electricity Board in the State of Jharkhand authorized by the State Gov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive power plant in State of Chhattisgarh to supply electricity to its steel division. It had sold power to steel division at same rate, which was charged by Chhattisgarh State Electricity Board for supply of electricity to industrial consumers. Assessee claimed deduction u/s 80-IA. The A.O. has computed market value of power supplied by assessee to steel division by taking into account rate charged by Chhattisgarh Electricity Company Limited, Raipur for supply of electricity to Board. The Court held that the market value of the power supplied to the Steel Division should be computed considering the rate of power to a consumer in the open market and it should not be compared with the rate of power when it is sold to a supplier as this is not the rate for which a consumer the Steel Division could have purchased power in the open market. In our opinion, the A.O. committed an illegality in computing the market value by taking into account the rate charged to a supplier: it should have been compared with the market value of power supplied to a consumer. It is also noted that in the case of CIT Vs. Kanoria Chemicals Industries Ltd the Hon'ble Kolkata High Court in IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as per books and as per above working reduces the profit earned by the 80IA eligible unit to that much level and to that extent addition made by the Ld. A.O. is upheld. Accordingly, the addition made by the A.O. is directed to be restricted to ₹ 33,95,748/- as per the above working. Accordingly, this ground of appeal of the assessee is partly allowed. 17. From the relevant part of the assessment order at page 8, we further observe that the Assessing Officer in the top para, observed as under: The assessee was requested to furnish its cost of production of power but no details have been furnished by the assessee company. Hence, the cost of production of power is assumed at ₹ 2.5 per unit and the same may be revised later if the assessee furnishes details of its cost of production of power alongwith necessary evidence. The sale consideration of power is therefore shown as below: Sale value of power as per P L a/c of Captive Power Plant: ₹ 61,39,17,000/- Tariff rate of JSEB:-361.58 paise/unit(net energy rate applicable to assessee company) Therefore total unit produced : - ₹ 16,97,87,322/- Therefore correct sale consideration of power ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me for the purpose of granting relief to the assessee. However, the CIT(A) accepted the contention of the assessee but did not allow entire relief to the assessee and partly confirmed the addition to the tune of ₹ 33,95,748/- by taking into consideration that the price charged by the State Electricity Board is inclusive of electricity duty of 2 paise per unit. 20. As we have noted above that Hon ble High Court of Chhattisgarh in the case of Godawari Power Ispat Ltd (supra), ITAT Kolkata in the case of Graphite India Ltd (supra) has held that the rate charged by State Electricity Board has to be taken into consideration while calculating deduction for 80IA eligible unit and electricity duty has no relevance for calculating the same. On the basis of foregoing discussion, we reached to a logical conclusion that the CIT(A) was right in granting part relief to the assessee but was not correct in confirming part addition considering the factum of 2 paise per unit for working out eligible profits u/s. 80IA of the Act. Consequently, the findings of the CIT(A) granting relief to the assessee are confirmed and the addition partly confirmed pertaining to the electricity duty being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se vide order dated 09.01.2018. In this order, the Hon`ble High Court has inter alia observed as under: 4. Re. Question 3: a) We note that the impugned order of the Tribunal has allowed the appeal of the Respondent Assessee by following the order of its co-ordinate Bench in respect for assessment year 2002-03 by applying its rationale to disallow the allocation of head office expenses to profits derived from 100 per cent export oriented units falling under Section 10B of the Act. The same reasoning was extended to hold that the head office expenses cannot be allocated out of profits derived from units claiming deduction under Section 80IA and 80IB of the Act. b) The Revenue is unable to show why the adoption of the reasoning to disallow allocation of profits of Section 10B units to head office expenses cannot be extended to profits of Section 80 IA and 80 IB units. c) The Appeal of the Revenue from the order of the Tribunal for assessment year 2002-03 to this Court being Income-Tax Appeal No. 311 of 2015 against the same Respondent-Assessee on the issue of allowing head office expenses to profits derived under Section 10B of the Act was disallowed today by a s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 37/Ran/2015, A.Y 2010-11 Ground No.1 of assessee s Cross-Objection No.20/Ran/2017, A.Y 2010-11. 51. Brief facts qua the issue are that during the assessment proceedings, the assessing officer noticed that assessee had debited to its profit and loss account, the following expenses, under the head repairs and maintenance : 1. Installation of Isolator breakers of improved rating ₹ 4,41,122.75 2. Installation of two lighting transformers ₹ 2,91,522.00 The assessing officer was of the view that these expenses should be capital in nature. The assessee argued before the AO, that installation of isolator breakers of improved rating are in the nature of current repairs and maintenance. The installation of two lighting transformers has been done to make it suitable for smooth operation of the plant. However, the ld AO was of the view that the all above expenditures were indicative of either used for enhancement of the capacity of the plant or used for enhancement of quality of production of the plant. Therefore, the said expenditures cannot be treated as revenue in nature and socannot be allowed as 'Repair Maintenance Expenses , therefore, the said expendi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the assessee case the following expenditure are Revenue in nature because these expenses are for running the business or working it with a view to produce the profits: 1. Installation of Isolator breakers of improved rating ₹ 4,41,122.75 2. Installation of two lighting transformers ₹ 2,91,522.00 Therefore, we direct the assessing officer to treat the above mentioned expenses as revenue expenditure. Hence, we allow the grounds raised by the assessee and dismiss the grounds of appeals raised by the Revenue. 56. Summarized ground No. 2 raised by the assessee reads as follows: 2.Ground No.11 Ld. CIT(A) erred in disallowing donation of ₹ 1,51,000/- paid to Shri DehatiSthapana Trust. The donation was claimed by assessee u/s 80G(V) of the Act. 57. At the outset, ld. Counsel informs the Bench that the assessee does not want to press ground No. 11 in ITA No. 126/Ran/2015 for A.Y. 2009-10, therefore, we dismiss this ground No. 11 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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