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TMI Blog2018 (12) TMI 1872X X X X Extracts X X X X X X X X Extracts X X X X ..... ees' contribution to PF & ESI beyond the prescribed time limit provided in respective Acts? (iii) Whether in the facts and in the circumstances of the case and in law, the ld. CIT(A) was justified in holding that employee's contribution to PF & ESI are governed by the provisions of section 43B and not by section 36(1) (va) r.w.s. 2(24)(x) of the I.T. Act? (iv) Whether in the facts and in the circumstances of the case and in law, the ld. CIT(A) was justified in deleting the disallowance of energy Conservation Fund of Rs. 1,00,00,000/- without appreciating the fact that the expenses was not incurred wholly and exclusively for the business purposes and it is only application of income?" Assessee's grounds of appeal (ITA No. 817/JP/2018): "1. The Ld. Commissioner of Income Tax (Appeals) has erred in facts and in law in directing the AO to decide the issue as to the contribution to Rajasthan Bhawan of Rs. 1 crore in accordance with the direction of the Hon'ble ITAT, Jaipur instead of deciding the issue when assessee as per the said direction of the Hon'ble ITAT has submitted the requisite letter from the Government of Rajasthan. The direction so given by the ld. CIT(A) is other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration Ltd has held as under: "9. Insofar as the expenditure incurred on State Renewal fund is concerned, said expenditure also goes to show that the renewal fund was set up by the State Government and was created with the object of providing a safety net for the workers likely to be effected by restricting in the State Public Enterprise and that a finding of fact has been recorded that the contribution made to the state renewal fund is solely for the purposes of the welfare and benefit of the employees. In our view, it is for the assessee to decide whether any expenditure should be incurred in the course of business and expenditure of this nature being for business expediency is certainly allowable deduction under section 37(1) of the Act. In our view, any normal expenditure for the welfare and benefit of employees is allowable expenditure under section 37(1), the Tribunal has come to a finding of fact that it was a legal obligation of the respondent assessee towards contribution of the said amount to the state renewal fund and there being a legal obligation as well in our view the Tribunal has come to a correct conclusion." 6. In the present case, it is noted that the State R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... htly deleted the disallowance made by the AO towards employees contribution to PF. In the result, the ground no. 2 & 3 of the Revenue's appeal is dismissed. 8. In ground No. 4, the Revenue has challenged the deletion of disallowance of energy conservation fund of Rs. 1 crore without appreciating the fact that the expenses was not incurred wholly and exclusively for the business purchases and it is only application of income. The ld. AR has contended that this issue is covered in favour of assessee by ITAT order in assessee's own case for AY 2008-09 in ITA No. 983/JP/2013 dated 30.09.2015 and for AY 2012-13 in ITA No. 88/JP/2016 dated 18.08.2017. 9. In this regard, our reference was drawn to the decision of the Coordinate Bench in ITA No. 88/JP/2016 dated 18.08.2017 for the A.Y. 2012-13 wherein the Coordinate Bench has held as under:- "91. In respect of ground No. 7, the Revenue has challenged the action of ld CIT(A) in deleting disallowance of contribution to energy conservation fund of Rs. 1 crore. Brief facts of the case are that the assessee contributed Rs. 1 crore to State Energy Conservation Fund to be spent on conservation of energy as and when required. The AO held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer is directed to be deleted. This ground is allowed." 94. Undisputedly, there is no change in the facts and circumstances of the case or any authority which has been brought to our notice subsequent to the decision of the Coordinate Bench in assessee's own case in AY 2008-09. Respectfully following the decision of the Coordinate Bench referred supra, we affirm the findings of the ld CIT(A) and the ground taken by the Revenue is dismissed." 10. Undisputedly, there are no change in the facts and circumstances of the case. Following the decision of the Coordinate Bench referred supra, we affirm the findings of the ld CIT(A) and the ground no. 4 taken by the Revenue is dismissed. 11. Now coming to ground no. 1 of the assessee's appeal wherein the assessee has challenged the action of ld CIT(A) in confirming the disallowance of Rs. 1 crore in respect of contribution to Rajasthan Bhawan. 12. Briefly the facts of the case are that the assessee contributed Rs. 1 crores to the Government of Rajasthan towards construction of 'Rajasthan Bhawan' at Mumbai wherein employees of the Rajasthan Government and its companies can stay during their visit for government work in view of the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee is allowed for statistical purposes." 15. It was further submitted that this issue is covered by the decision of Hon'ble ITAT in case of RIICO Ltd. for AY 2012-13 where after considering its decision in assessee's case for AY 2011-12 in Para 36 it was held as under:- "36. Since this letter dated 24.10.2017 was not available before the Coordinate Bench in case of Rajasthan Renewal Energy Corporation Ltd. (Supra) therefore, the AO was asked to examine the fact. However, in view of the said letter dated 24.10.2017 it is clear that the assessee got the rebate of 75% as well as the right to use the accommodation by its officers/employees visiting at Mumbai. Accordingly, in view of the earlier decision of this Tribunal in assessee's own case as well as in view of the fact that the assessee has received the benefit in the shape of accommodation against the said expenditure for construction of Rajasthan house we hold that the claim of the assessee is an allowable expenditure u/s 37(1) of the Act." 16. Heard both the parties and purused the material on record. In view of the afresaid letter dated 24.10.2017, it is clear that the assessee got the rebate of 75% as well as the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed product, awareness & importance of national mission, i.e. Jawaharlal Nehru Solar Mission, national mission on enhanced energy efficiency, etc. As a result, assessee received sum of Rs. 6.42 crores as registration fees from various entrepreneurs for setting renewable energy plants. The Ld. CIT(A) without requiring assessee to furnish further detail in respect of the expenditure debited in the ledger account has summarily disallowed 50% of the expenses by holding that no details are given in the ledger account for almost 50% of the expenditure. 20. It was further submitted that similar expenditure of Rs. 3,25,71,656/- incurred by the assessee in AY 2012-13 was allowed by the Ld. CIT(A) and this order is upheld by Hon'ble ITAT in ITA No. 88/JP/2016 dated 18.08.2017 wherein the Coordinate Bench has held as under:- "100. In respect of ground no. 9, the Revenue has challenged the action of ld CIT(A) in deleting disallowance of publicity and advertisement expenses of Rs. 3,25,71,656/- on account of topographic survey, recruitments, technical investigation, printing of energy policy, inviting tenders, etc. The AO observed that these expenditures are in the nature of development/explo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olar energy was being done under the policy for promoting generation of electricity through Non-Conventional Energy Sources, 2004. The company was also appointed as Nodal Agency for Single Window Clearance of project of Solar Power project set up in the state of Rajasthan, as per Rajasthan Solar Energy policy, 2011 as notified and issued by the Government of Rajasthan Energy Department vide dated 19.04.2011. The ledger account of the expenditure has been filed and perused. Largely, the expenditure is related to payment to advertising agencies and printing and publishing agencies. A small amount of 3.50 lakhs approx. is fixed for topographic survey Geo technical investigation which has been explained by AR as in pursuance of the promulgation of the new policy. In view of the above the disallowance made by the Assessing Officer is deleted." 103. We have heard the rival contentions and purused the material available on record. One of the business objects of the assessee company is to promote and facilitate energy conservation and popularize the usage of renewable energy sources & encourage companies to set up renewable energy plants. As part of its activities, the assessee com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessee debited Rs. 3,71,601/- under the head prior period expenditure. The AO disallowed the same holding that same is not eligible for deduction. The Ld. CIT(A) after considering the ledger account filed by the assessee allowed expenditure of Rs. 1,38,604/- by holding that the same crystallised during the year but for the remaining expenditure he held that it could not be ascertained whether they crystallised during the year or not and thus, confirmed the disallowance to the extent of Rs. 2,33,005/-. 25. It was further submitted that assessee is a State Government Corporation. No expenditure is booked without the approval of the competent authority. From the ledger account it can be noted that the remaining expenditure is on payment of salary, bonus, publicity expenses, AMC charges, etc. which are accounted for only after approval of such expenditure by the competent authority. Bonus of Rs. 9,631/- is otherwise allowable u/s 43B on payment basis. Similarly expenditure of Rs. 35,037/- was booked since this amount was receivable from MNRE but since they have not given this amount after discussion it was charged to expenditure during the year. Otherwise also the tax rate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ainst originally claim of Rs. 12,21,63,337/-. 29. Being aggrieved, the assessee carried the matter in appeal before the ld CIT(A) and it was submitted that the cost auditor has taken the indirect income on proportionate basis and indirect Head office expenses have been taken wrongly at Rs. 7,53,19,050 as against common head office expenses of Rs. 5,14,57,675 and necessary working in form of a chart was furnished. The Ld. CIT(A) however following the decision of the Coordinate Bench for AY 2012-13 allowed the deduction on income on account of shortfall/ low generation of power of Rs. 9,73,405/- but confirmed the disallowance of the remaining amount. Now, the assessee is in appeal before us. 30. During the course of hearing, the ld. AR submitted that both the lower authorities have excluded the gross receipts from sale of services, FDR interest and other income for allowing deduction u/s 80-IA without allocating any expenditure against these receipts. As a result, all the expenditure has been considered against the income which is eligible for deduction u/s 80-IA. 31. The ld. AR further submitted that the assessee has two activities, one is from sale of power eligible for deductio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fice and other expenses have a direct nexus with the running of various eligible units. In our view, there cannot be any dispute that the provisions of section 80IA(5) are attracted in the instant case. At the same time, provisions of section 80IA(5) have to be read harmoniously along with the provisions of section 80IA(1) which provides for profits and gains derived from an eligible business. 43. In this regard, we refer to the decision of the Hon'ble Bombay High Court in case of Zandu Pharmaceuticals Works Ltd. vs. CIT reported in 350 ITR 366 wherein drawing support from the decision of Hon'ble Supreme Court in case of CIT v. Sterling Foods reported in 104 Taxman 204, it was held as under: "13. The Supreme Court held that there must be for the application of the words "derived from" a direct nexus between the profits and gains and an industrial undertaking. Sections 80-I and 80-IA also use the expression "derived from". If there must be a direct nexus between the profits and gains and an industrial undertaking, it must follow equally that there must be a direct nexus between an industrial undertaking and the expenses which are sought to be apportioned/attributable to it. Expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company. The AO is accordingly directed to allocate common expenditure of Rs. 45,77,500 to the power units out of total expenditure of Rs. 3,02,06,576/- in the ratio of their turnover to the total turnover while working out the eligible profits under section 80IA of the Act. 45. Now coming to the second category of expenditure amounting to Rs. 4,76,62,462/- which falls under the head administrative/establishment and other relates expenses. Out of the said expenditure, the expenditure of Rs. 24,84,561/- has already been considered by the assessee while working out the profit of power units. Further, ld CIT(A) has held that an amount of Rs. 2,61,09,810/- on biomass fuel supply discount, IEC plan expenses, expenses relating to rural village electrification (RVE), energy conservation contribution expenses pertain directly to the promotional activities of the appellant and cannot be apportioned on proportionate basis with power generation activity. The said finding of the ld CIT(A) remain uncontroverted before us. Thereafter, an amount of Rs. 1,90,68,091/- remains as the common head office expenditure under the head 'administrative/ establishment expenses'. In this regard, it was sub ..... X X X X Extracts X X X X X X X X Extracts X X X X
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