TMI Blog2022 (8) TMI 1445X X X X Extracts X X X X X X X X Extracts X X X X ..... the market value of the power supplied by the assessee to its steel division was rightly computed by considering the rate at which power was available in the open market, namely, the price that was charged by the electricity board. 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 or the Steel- Division could have purchased power in the open market. The rate of power to a supplier is not the market rate to a consumer in the open market. AO 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. CIT-A and the Tribunal had rightly computed the market value of the power after considering it with the rate of power available in the open market namely the price charged by the Board. There is no illegality in their orders. Decided in favour of assessee. Disallowance u/s.14A r.w.r. 8D - As per CIT(A) assessee had own funds t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rm's length price as defined in clause (ii) of section 92F, where the transfer of goods and services is a specified domestic transaction referred to section 92BA? (3) Whether on points If law and on facts circumstances of the case, the Ld. CIT(A) was justified in deleting the disallowance of Rs. 19,40,967/- made by the AO u/s. 14A of the Act r.w.r. 8D of the I.T. Rules? (4) Whether on points If law and on facts circumstances of the case, the Ld. CIT(A) has erred in deleting the addition made u/s. 14A ,when clause (3) of the Section 14A of the Act clearly prescribes that provision of section 14A(2) shall M/s Mahendra Sponge and Power Ltd. Raipur for A.Y. 2014-15 also apply in relation to case where any assessee claims that no expenditure has beenincurred by him in relation to the income which does not part form part of the total income under this Act, as held in the case of Cheminvest Ltd. Vs ITO(ITAT, SB-Del) 121 ITD 318 and Pradeep Kar Vs ACUIT(Kar) 319 ITR 416? (5) Whether on points of law and facts circumstances of the case, the Ld. CIT(A) was justified by giving a finding that the exemption of income from taxability by claiming no expenditure w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the learned CIT(A) has erred in confirming the addition made by the A.O of Rs.2,91,792/- on account of delay payment of PF/ESIC. The addition made by the A.O and sustained by the CIT(A) is unjustified, unwarranted and uncalled for. 2. Succinctly stated, the assessee company which is engaged in the business of manufacturing and trading of sponge iron, steel ingots and generation of power had e-filed its return of income for the assessment year 2014-15 on 29.09.2014, declaring an income of Rs.2,71,31,360/-. Subsequently, the case of the assessee company was selected for scrutiny assessment u/s.143(2) of the Act. 3. Assessment was, thereafter, framed by the A.O u/s.143(3) of the Act dated 26.12.2017 determining the income of the assessee company at Rs. 6,72,14,570/-i.e. after, inter alia, making the following additions/disallowances: Sr.No. Particulars Amount 1. Disallowance out of assessee s claim for deduction u/s.80IA of the Act Rs.3,86,20,902/- 2. Disallowance u/s.14A r.w.r. 8D Rs.10,88,188/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... though the assessee company had sold power to CSEB at the rate of Rs. 1.88 per unit, but had sold/transferred the same to its steel division and associate concerns at a higher value, i.e, at the rate of Rs. 4.30 per unit, the AO with the prior approval of the Pr. CIT, Raipur made a reference u/s.92CA(1) of the Act to the Transfer Pricing Officer (TPO) for computing the arm s length price (ALP) of the specified domestic transactions of the assessee with its associate enterprise viz. Animesh Ispat (P) Ltd. The TPO vide his order passed u/s.92CA(3) of the Act, dated 31.10.2017 did not find favour with the benchmarking carried out by the assessee of its specified domestic transactions with its AE. Accordingly, the TPO on the basis of the reasoning recorded in his aforesaid order adopted the rate of Rs.1.88/- per unit, i.e, the rate at which electricity was sold by the assessee to CSEB and determined the ALP of the assessee s specified domestic transaction at Rs.1.88/- per unit. On the basis of his aforesaid observations, the TPO proposed a downward adjustment of Rs.11,47,00,658/- and advised a revision of the assessee s claim for deduction u/s. 80IB of the Act. Accordingly, the A.O aft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed out as under: 6. At the outset, it is informed that the issue is squarely covered by the decision of Bilaspur Bench of the Tribunal in the case of ACIT V/s Godavari Power Ispat Ltd. [2011] 133 ITD 502 (Bilaspur). In the compilation of the assessee at page 12, the respondent-assessee has also placed reliance on the order of Hon ble High Court of Chhattisgarh at Bilaspur in the Tax case No.31, 34,32 of 2012 dated 2nd August, 2013 pronounced in the case of CIT V/s Godavari Power Ispat Ltd., wherein on this very fact that the said assessee was a manufacturer of Iron steel and captive power plant has supplied electricity to its manufacturer unit which was at higher rate than the power supplied to Chhattisgarh State Electricity Board; the Hon ble High Court has held as under : 28. The Chhattisgarh-Company is a company which is generating power. It is neither consumer of the electricity, nor it is supplying power to a consumer. It also cannot sell power to any consumer directly: it has to compulsorily sell it to the Board. 29. The power sold by the Chhattisgarh-Company to the Board is a sale to a company which itself supplies power to the consumers. It is not sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tance of the case, as also law pronounced by the Hon ble Jurisdictional High Court, we hereby reject this ground of revenue. 11. As the facts and issue involved in the present appeal of the assessee remains the same as were there before the Tribunal in its own case for AY 2008-09, therefore, we are unable to comprehend as to on what basis the A.O had declined to follow the same. At this stage, we may herein observe that it is neither a fact nor the case of the department that the aforesaid order of the Tribunal had either been setaside or stayed by the Hon ble High Court which would have otherwise justified the declining on its part to follow the same. Apart from that, we find absolutely no justification on the part of the A.O in not following the binding judgment of the Hon ble High Court in the case of CIT Vs. Godawari Power Ispat Ltd. (supra) which seizes the issue under consideration. Admittedly, the Department had assailed the aforesaid judgment of the Hon ble High Court by filing a SLP before the Hon ble Apex Court but again,as long as the said judicial pronouncement is not set-aside or stayed by the Hon ble Apex Court the same holds the ground and have to be ritually ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had not made out a case that the investment in exempt income yielding assets was made out of interest bearing loans. Further, the CIT(Appeals) was of the view that as the assessee during the year was not in receipt of any exempt income, therefore, no disallowance u/s.14A r.w. Rule 8D was called for in its hands. 16. At the time of hearing of the appeal, it was submitted by the Ld. AR that the issue in hand was squarely covered by the order passed by the Tribunal in its own case for the immediately preceding year i.e assessment year 2013-14 in ITA No.197/RPR/2017, dated 29.07.2022, wherein, the Tribunal had upheld the order of the CIT(Appeals) by observing as under: 14. On appeal, the CIT(Appeals) observed that the A.O had failed to co-relate the interest paid by the assesee company on borrowed funds with the investments made in the exempt income yielding shares. On the contrary, it was noticed by the CIT(Appeals) that the various interest-bearing loans were raised by the assessee company to meet out its working capital requirements and maintaining its current assets level for running the business smoothly. It was also observed by the CIT(Appeals) that the AO while dislodgi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CO No.24/RPR/2019 Assessment Year: 2014-15 18. Now we shall deal with the cross-objection filed by the assessee wherein it has challenged the confirming of the addition made by the A.O of Rs.2,91,792/- on account of delayed payment of PF /ESIC. 19. Shorn of unnecessary details, the A.O while framing the assessment had triggered the provisions of section 36(1)(va) of the Act and disallowed an amount of Rs.2,91,792/- qua the delayed deposit of the employee s share of contributions towards Provident fund (PF) and Employees State Insurance (ESI) by the assessee. 20. Aggrieved, the assessee, inter alia, assailed the aforesaid disallowance made by the AO u/s 36(1)(va) before the CIT(Appeals), but without any success. 21. We have heard the ld. Authorized Representatives of both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by the Ld. AR to drive home his contentions qua the aforesaid issue in hand. 22. Admittedly, it is though a matter of fact borne from record that the assessee firm had delayed deposit of an amount of Rs.2,91,79 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law and disallowed the aforementioned amounts, despite the fact that the same had been deposited prior to due date of filing of the return of income by the assessee company. 10. In order to answer the issue as to whether or not the employees contribution to welfare funds falls within the scope and domain of Sec. 43B of the Act, we may herein draw support from the judgment of the Hon ble High Court of Bombay in the case of CIT Vs. Hindustan Organic Chemicals Ltd in ITA No. 399/12, dated 11.07.2014. In the said case, the Hon ble High Court of Bombay was, inter alia, called upon to answer the following substantial question of law that was raised in the appeal filed by the revenue:- (A). Whether on the facts and in the circumstances of the case, the Hon'ble Tribunal, in law, was right in allowing the claim of the Assessee on account of delayed payments of P.F. Of employees' contribution amounting to Rs.1,82,77,138/- by relying on the decision of the Hon'ble Supreme Court in the case of CIT vs. Alom Extrusion Ltd. (319 ITR 306) ? After referring to the amendments that were made available to Section 43B of the Act, the Hon ble High Court answered the af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entious and different High Courts have taken divergent views on the same issue, out of which some are in favour of the assessee and some are against the assessee. The ld. CIT(A) further observed that the judgments and orders relied upon by the assessee have been rendered before the clarificatory amendments made in the Finance Act, 2021 and the Finance Act, 2021 has put an end to this controversy. 5.2 Admittedly there is plethora of judgments in favour of the Assessee s contention and of the Revenue. The controversy with regard to divergent views of different High Courts, has been settled by the Hon'ble Apex Court in the case of CIT Vs. M/s. Vegetables Products Ltd. (88 ITR 192) by laying the dictum that if two reasonable constructions of a taxing provision are possible that construction which favours the Assessee must be adopted. The Hon ble jurisdictional High Court in the case of CIT Vs. M/s Hemla Embroidery Mills (P) Ltd. (366 ITR 167) (P H HC) and in the case of CIT Vs. M/s Mark Auto Industries Ltd. (358 ITR 43) (P H HC) clearly held that the assessee is entitled to claim deduction of employee s share of ESI PF u/s.43B of the Act, if the same has been deposited prio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xplanation 5 to Section 43B and Explanation 2 to Section 36(1)(va) are applicable w.e.f 01.04.2021, i.e, from A.Y 2021-22 onwards, therefore, the same would not have any bearing on the case of the assessee before us, i.e, for A.Y 2011-12.Accordingly, drawing support from the aforementioned judicial pronouncements, we, herein conclude, that as the employees contributions to PF and ESI of Rs.2,88,976/-was deposited by the assessee before the due date of filing of its return of income for the year under consideration, therefore, the same being saved by the provisions of Sec. 43B of the Act could not have been disallowed by the A.O. We, thus, in the backdrop of our aforesaid deliberations set-aside the order of the CIT(A) and vacate the disallowance of Rs.2,88,976/- made by the A.O. Thus, the Ground of appeal No. 1 is allowed in terms of our aforesaid observations. As the facts and issue involved in the aforesaid order of the Tribunal in the case of Ind Synergy Ltd. (supra) remains the same as are there before us in the case of the present assessee, therefore, we respectfully follow the same. We, thus, in terms of our aforesaid observations set-aside the order of the CIT(App ..... X X X X Extracts X X X X X X X X Extracts X X X X
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