TMI Blog2023 (10) TMI 1023X X X X Extracts X X X X X X X X Extracts X X X X ..... unit of the assessee company had sold electricity to outside parties as well as transferred the electricity to its other divisions for captive consumption - HELD THAT:- CIT(Appeals) observed that the issue involved in the present appeal was squarely covered by the order of the Tribunal in the assessee s own case for [ 2015 (11) TMI 1865 - ITAT RAIPUR] . Also, the CIT(Appeals) had drawn support from the judgment of Godavari Power Ispat Ltd. [ 2013 (10) TMI 5 - CHHATTISGARH HIGH COURT] wherein involving identical facts, the Hon ble High Court had held that the market rate of power will be the rate of power available in the open market, namely the price charged by the Board. As the issue involved in the present appeal before us remains the same as was there in the aforementioned judgment/order, therefore, finding no infirmity in the view taken by the CIT(Appeals) who had rightly vacated the disallowance of the assessee s claim for deduction u/s. 80IA. Disallowance u/s. 14A r.w.r 8D - Mandation of recording satisfaction - HELD THAT:- We concur with the view taken by the CIT(Appeals) that in the absence of any dissatisfaction having been recorded by the A.O as regards the cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he AO u/s 14A of the I.T. Act, 1961 read with Rule 8D of the I.T Rules, 1961. 4. Any other ground that may be adduced at the time of hearing. 2. Succinctly stated, the assessee company, which is engaged in the business of manufacturing sponge iron, billets, blooms, ferro alloys etc. and generation of power, had e-filed its return of income for A.Y.2012-13 on 29.09.2012, declaring an income of Rs. 5,00,45,390/- and book profit u/s. 115JB of the Act of Rs. 30,15,17,400/-. The case of the assessee company was, thereafter, selected for scrutiny u/s. 143(2) of the Act. 3. The A.O vide his order passed u/s. 143(3) dated 11.08.2014 assessed the income of the assessee company at Rs. 11,11,19,238/- after making the following additions/disallowances: Sr. No. Particulars Amount 1. Recharacterization of the sales tax subsidy that was claimed by the assessee as a capital subsidy and treated by the A.O as a revenue subsidy Rs.3,09,58,737/- 2. Disallowance u/s. 14A r.w.r.8D Rs.35,18,577/- 3. Disa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ddition to the abundant, locally available mineral and forest based resources. To insure balanced regional development by attracting industries in the economically backward areas of the state. To insure participation of scheduled casts, scheduled tribes and other weaker sections in the development process. To mike industrial investments in the state competitive vis - vis other states in the country. To promote private sector participation for creation of industrial infrastructure in the state. To crate an enabling environment for increasing industrial production, productivity and quality up gradation to face the challenge of competition emerging from economic liberalization. Keeping in view, the above policy, the government of Chhattisgarh had introduced Directed incentives, which will be provided for industrial investment in the State in the form of infrastructure development / capital investment. Eligible amount of subsidy is required to be determined on the basis of 25% of the infrastructure cost for establishing industry outside industrial areas subject to maximum amount equivalent to the amount of commercial tax/central sales tax paid in the state i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee company. The A.O observed that the subsidy given by the State Government of Chhattisgarh was neither for any specific purpose like the purchase of any capital asset nor was it for reimbursement of any specific or definite capital expenditure incurred by the assessee company and was payable only when the eligible plant/industry commenced its production. On the basis of the aforesaid observation, the A.O held a conviction that the subsidy received by the assessee company could not be held as anything but an operational subsidy which was given to encourage the setting up of industries in the State of Chhattisgarh by making the business of production and sale of goods in the state more profitable. The A.O. was of the view that subsidy of the aforesaid nature could only be held as an assistance given for the purpose of carrying on the business of the assessee company and, thus, was of a revenue character. Relying upon the judgment of the Hon ble Supreme Court in the case of Sahney Steel Press Works Ltd. Ors Vs. CIT (2002) 228 ITR 253 (SC), the A.O. was of the view that subsidy received by the assessee company in the garb of assistance for the purpose of carrying on it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 737/- that was made by the A.O by recharacterizing the subsidy received by the assessee as a revenue subsidy. 9. We have thoughtfully considered the aforesaid issue and find that the same is squarely covered by the order passed by the Tribunal in the assessee s own case for A.Y.2010-11 in DCIT-2(1), Raipur Vs. M/s. Bajrang Power and Ispat Ltd., ITA No.172/RPR/2016, Page 45-48 of APB, wherein following its earlier order for the immediately preceding year i.e. A.Y.2009- 10 in ITA No.57/BLPR/2012 dated 13.10.2015, the Tribunal had approved the order of the CIT(Appeals) who had vacated the addition that was made by the A.O by recharacterizing the capital subsidy received by the assessee company as a revenue receipt. For the sake of clarity, the relevant observations of the Tribunal are culled out as follows: 3. Facts of the case, in brief, are that the assessee is a company engaged in the business of manufacturing of Sponge Iron, Billets, Blooms, Ferro Alloys and Generation of Power. It filed its return of income on 05.10.2010 declaring Nil income under the regular provisions and Rs. 28,73,59,903/- as book profit for MAT u/s 115JB of the I.T. Act, 1961. Subsequently, the return ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the ld. CIT(A) deleting the addition. While doing so, the Tribunal has followed the decision of the Mumbai Special Bench of the Tribunal in the case of DCIT vs. Reliance Industries Ltd. Reported in 82 TTJ (Mumbai) (SB) 765. Since the issue raised by the Revenue in the impugned appeal has already been decided by the Tribunal in assessee s own case in the immediately preceding assessment year, therefore, in absence of any contrary material brought to our notice, we do not find any infirmity in the order of the ld. CIT(A) deleting the addition made by the Assessing Officer. The ground raised by the Revenue is accordingly dismissed. 9. In the result, the appeal filed by the Revenue is dismissed. 10. As the issue involved in the present appeal as regards aforesaid issue remains the same as it was before us in ITA No.172/RPR/2016 for A.Y. 2010-11, we respectfully follow the same. Accordingly, finding no infirmity in the view taken by the CIT(Appeals), who had rightly vacated the addition of Rs. 3,09,58,737/- made by the A.O. by treating the subsidy as a production incentive and not a capital subsidy, we uphold the same. Thus, Ground of appeal No.1 raised by the revenue is dismi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nies to CGPDCL is determined on the basis of various parameters laid down in Section 43A of the Electricity (Supply) Act, 1948, therefore, as such determination of tariff was not made in a competitive environment or in the ordinary course of trade and business, hence, the same could not be equated with the market value. It was, thus, the claim of the assessee company that the price determined according to the Electricity Supply Act, 1948 could not be equated with a situation where the price is determined in the normal course of trade and competition. Also, it was the claim of the assessee company that the rate of Rs. 3.17/- per unit that was charged by it for interunit transfer of the electricity was lower than the actual cost at which CGPDCL would have supplied electricity. As such, the assessee company, based on its aforesaid submissions, sought for vacating of the part disallowance of its claim for deduction u/s. 80IA of the Act made by the A.O. 13. The CIT(Appeals), on the basis of his aforesaid exhaustive deliberations on the issue in hand in the backdrop of the contentions advanced by the assessee company, found favor with the same. He observed that the issue involved in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on profits and gains of eligible business are to be computed as if the transfer was done on the market value on that date. 20. The proviso to section 80-IA (8) of the Act requires the AO to compute the profits and gains in the manner already proved. And in case the manner presents exceptional difficulties then the AO is empowered to compute profits and gains on such reasonable basis as he may deem fit. 21. Explanation to section 80-IA (8) of the Act provides market value to mean the price that such goods would ordinarily fetch on sale in the open market. 22. The Assessee had sold power to the Steel-Division at the rate of Rs. 3.30/- per unit for AY 2004-05 and Rs. 3.75/- per unit for AYs 2005-06 and 2006-07. 23. The AO computed the market value of power under section 80- IA (8) read with its proviso and the explanation. He considered the rate charged by the Chhattisgarh Electricity Company Limited, Raipur (the Chhattisgarh-Company) for supply of electricity to the Board and held the market value of the power to be Rs. 2.25/- per unit for the AY 2004-05 and 2005-06; and Rs. 2.32/- per unit for the AY 2006-07. 24. The market value computed by the AO was less than the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty 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. 33. It is admitted by the Department that in Chhattisgarh the power was supplied to the industrial consumers at the rate of Rs. 3.20/- per unit for the AY 2004-05 and Rs. 3.75/- per unit for the AYs 2005-06 and 2006-07. It was this rate that was to be considered while computing the market value of the power. 34. The 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. 35. In view of above, the question is decided against the Department and in favour of the Assessee. The tax appeals have no merit. They are dismissed. 14. Also, we find that the Tribunal had taken a similar view in the case of DCIT Vs. M/s. Mahendra Sponge Power Pvt. Ltd., ITA No.196/RPR/2019 CO No.24/RPR/2019 dated 05.08.2022 for A.Y.2014-15. As the issue involved in the present appeal before us remains the same as was there in the aforementioned judgment/order, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture on investments from which there was no exempt income earned. As regards the amendment to section 14A brought in by the Finance Act, 2022 whereby the requirement of actual earning of exempt income has been done away with for computing disallowance u/s 14A r.w.r. 8D, the decision of Hon'ble Delhi High Court in the case of PCIT Vs Era Infrastructure (I) Ltd. (ITA No. 204/2022) is relevant wherein it was held that the changes u/s 14A will be applicable from 01.04.2022 onwards. In this judgment of Hon'ble Delhi High Court, reference to the decision of CIT Vs Podar Cement Pvt. Ltd. (SC) 5 SCC 482 was made whereby the Hon'ble Apex Court had held that if clarificatory amendment changes the law, it is not presumed to be retrospective, irrespective of the fact that the phrases used are it is declared or for the removal of doubts . Hon'ble Delhi High Court in Era Infrastructure (I) Ltd. held that the amendment in section 14A vide Finance Act 2022 seeks to change the law as existing before and hence, retrospective in nature. In view of these facts and legal discussion, the disallowance of Rs. 35,18,577/- u/s. 14A r.w.r. 8D(2)(iii) is not sustainable for the current AY a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced before him, it is not possible to generate the requisite satisfaction with regard to the correctness of the claim of the assessee. It is only thereafter that the provisions of Section 14A(2) and (3) read with Rule 8D of the Rules or a best judgment determination, as earlier prevailing, would become applicable. Also, a similar view was taken by the Hon ble Supreme Court in the case of Maxopp Investment Ltd. Vs. Commissioner of Income Tax (2018) 101 CCH 0092 (SC). 18. Apropos the amendment in 14A vide the Finance Act, 2022, we concur with the view taken by the CIT(Appeals) who, after relying upon the judgment of the Hon ble High Court Delhi in the case of Pr. CIT Vs. Era Infrastructure (I) Ltd. (ITA No.204/2022) had observed that the said amendment whereby the requirement of actual earning of exempt income had been dispensed with for computing disallowance u/s. 14A r.w.s. 8D was applicable prospectively w.e.f. 01.04.2022 onwards, and thus, would not have any bearing in the case of the present assessee before us. 19. We, thus, in terms of our aforesaid observations, find no infirmity in the view taken by the CIT(Appeals), who had rightly vacated the disallowance of Rs. 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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