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2009 (5) TMI 623 - AT - Income TaxDisallowance on payment of fees - claim for expenses incurred towards payment to the Dakshni Bhart Hindi Prachar Sabha payment to Dalmia Animals Ecological Welfare Association and payment for Vedic Education to employees etc - assessee contended that such payments were made in AY s 1997-98 and 2002-03. In both these years the payments have been allowed to the assessee. HELD THAT - CIT (A) has not discussed the facts independently in this year. For confirming the disallowance he simply relied upon his order in AY s 2002-03 and 2001-02. In both these years the disallowance has been deleted by the Tribunal. Assessee has placed on record copies of the ITAT s orders in AY s 1997-98 and 2002-03 wherein such issues have arisen. According to the ITAT the donations made to Veda Bhawan or vedic classes are required to be considered as welfare activity for the employees and expenses incurred on such activity is an eligible expenditure u/s 37(1). Since there is no disparity on facts therefore respectfully following the ITAT s orders we allow this ground of appeal and delete the disallowance. Disallowance u/s 80-IA - Computation of profits and gains from industrial undertakings - assessee had entered into a power wheeling arrangement with TNEB - TNEB replaces the power generated at the wind farm unit and in turn wheels/supplies power to the assessee-company cement unit after deducting 2-5 per cent of the powers received by them as a wheeling charges - assessee has computed cumulative profit of wind energy generator (WEG) in accordance with the provisions of section 80-IA(7) by treating the same as self contained independent unit of powers generation - AO rejected the claim of assessee - he adopted the price of the electricity generated by it on the ground that TNEB purchased the electricity at about 60 per cent of the rate of electrical energy supplied by them to the consumers and this is the rate to be taken for the purpose of computation of the profit. HELD THAT - Assessee had established its wind mill 300 KM away from its cement plant. It was not having any distribution system for taking the electricity from wind farm to the cement plant and therefore it must had entered into an agreement with TNEB for wheeling the electricity to its cement plant. The charges paid by the cement plant to the electricity plant is immaterial for determining the price of electricity produced by the assessee because cement plant and this power generation unit are altogether different entities for the purpose of deduction admissible u/s 80-I but that can be a relevant corroborative factor for determining the market price of a product. The market value recorded in the books can only be disturbed if it is evident that such value has not been recorded in the books in accordance with the market value of such goods or services as on date of transfer. The only reference brought by AO is the electricity purchased by Rajasthan Electricity Board but how one can ignore that electricity purchased by the assessee or any other consumer do not indicates the market price of an item at the relevant date. AO is not able to bring out any circumstance that assessee is showing higher charges for the electricity supplied to its cement plant. Therefore taking into consideration all the facts and circumstances we allow this ground of appeal and held that assessee is eligible for grant of deduction u/s 80-IA on the profit shown on each meter. Its profit is to be computed by applying the rate of electricity charged by TNEB from its cement plant. AO shall look into the other requirements i.e. the year and the rate of deduction while computing the deduction admissible to the assessee. Deduction u/s 80HHC - inclusion of excise duty and sales tax in the turnover of the business - HELD THAT - In the case of Laxmi Mills Co. Ltd. 2006 (2) TMI 150 - MADRAS HIGH COURT held that excise and sales tax were collected by the assessee in fiduciary capacity they do not include element of profit in themselves and therefore they cannot be formed part of the total turnover. Respectfully following the decision we allow ground and direct AO to exclude sales tax and excise duty from the total turnover. Deduction u/s 80HHD - exclusion of interest income - HELD THAT - Since CIT(A) in the present year simply followed the findings of his predecessor in AY 2001-02 that finding has already been set aside by the ITAT and the claim of the assessee has been allowed therefore respectfully following the order of the ITAT we allow this ground of appeal and direct AO to consider interest income for the deduction admissible u/s 80HHD. Deduction of tax at source - Business expenditure - assessee had claimed credit of the TDS on account of certificates issued by Swiss International Airlines - CIT (A) confirmed the disallowance of assessee s claim on the ground that commission income has not accrued to the assessee because Swiss International Airlines has reversed the entries therefore assessee cannot claim the benefit of TDS credit - ld counsel for the assessee submitted that amount has been paid to the Government exchequer therefore credit deserves to be given of such amount. HELD THAT - We do not find any reason to interfere in it. The moment Swiss International Airlines had reversed the entries with regard to the cost of tickets as well as the commission it would indicate that no TDS was deducted on behalf of the assessee. If the Swiss Airlines had wrongly made the payment after deducting the amount then it is for that company to claim the benefit. How the assessee can claim the credit of TDS. The amount has not gone from assessee s pocket. Therefore it cannot be repaid to it. The ground taken by the assessee is therefore rejected. In the result the appeal filed by the assessee is partly allowed.
Issues Involved:
1. Disallowance of Rs. 24,000 paid to Veda Bhawan. 2. Disallowance of Rs. 1,43,25,000 under section 80-IA. 3. Inclusion of excise duty and sales tax in turnover for section 80HHC. 4. Exclusion of interest income while computing deduction under section 80HHD. 5. Disallowance of Rs. 36,452 related to TDS credit. Detailed Analysis: 1. Disallowance of Rs. 24,000 paid to Veda Bhawan: The assessee contested the disallowance of Rs. 24,000 paid to Veda Bhawan for conducting Vedic education classes for employees. The CIT (Appeals) had upheld this disallowance without independent discussion, relying on previous orders. The Tribunal noted that in earlier years, similar disallowances were deleted by the ITAT, recognizing such payments as welfare activities eligible under section 37(1) of the Act. Given the consistency in facts, the Tribunal allowed this ground of appeal and deleted the disallowance. 2. Disallowance of Rs. 1,43,25,000 under section 80-IA: The assessee claimed a deduction under section 80-IA for profits derived from wind energy generators (WEGs) installed at its wind farm. The Assessing Officer rejected the claim, arguing that the entire wind farm should be treated as a single undertaking and that the profits must be considered cumulatively. Additionally, the AO contended that the power generated was consumed by the assessee's cement plant, and the transfer prices should reflect the rates at which the Tamil Nadu Electricity Board (TNEB) purchased power. The Tribunal, however, found that each WEG was a standalone unit capable of independent operation and measurement. The Tribunal also noted that the assessee had consistently prepared meter-wise profit and loss accounts, which were audited and not previously objected to by the AO. The Tribunal concluded that the assessee was eligible for the deduction under section 80-IA, and the profits should be computed based on the rate charged by TNEB from the cement plant. 3. Inclusion of excise duty and sales tax in turnover for section 80HHC: The assessee argued that excise duty and sales tax should be excluded from the total turnover while computing the deduction under section 80HHC. The Tribunal noted that this issue was covered in favor of the assessee by the Supreme Court's decision in CIT v. Laxmi Mills Co. Ltd., which held that excise and sales tax collected in a fiduciary capacity do not include an element of profit and should not be part of the total turnover. Consequently, the Tribunal directed the AO to exclude these amounts from the total turnover. 4. Exclusion of interest income while computing deduction under section 80HHD: The assessee contended that interest income should be included in the profits of the business while computing the deduction under section 80HHD. The Tribunal referred to its earlier decisions in the assessee's own case, where it was held that interest income, being part of the business income, should not be excluded while computing the deduction. The Tribunal followed its previous rulings and directed the AO to consider interest income for the deduction under section 80HHD. 5. Disallowance of Rs. 36,452 related to TDS credit: The assessee claimed credit for TDS on commission income wrongly debited by Swiss International Airlines. The CIT (Appeals) disallowed the claim, stating that since the entries were reversed, the commission income did not accrue to the assessee, and thus, the TDS credit could not be claimed. The Tribunal upheld this view, noting that the reversal of entries indicated no TDS was deducted on behalf of the assessee, and any wrongful payment by Swiss International Airlines should be claimed by them, not the assessee. Therefore, the Tribunal rejected this ground of appeal. Conclusion: The appeal was partly allowed. The Tribunal deleted the disallowance of Rs. 24,000 paid to Veda Bhawan, allowed the deduction under section 80-IA, directed the exclusion of excise duty and sales tax from total turnover for section 80HHC, and included interest income for section 80HHD deduction. However, it upheld the disallowance of Rs. 36,452 related to TDS credit.
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