2015 (2) TMI 1027 - AT - Income Tax

Unaccounted parking charges - AO made the addition of ₹ 1.25 lakhs on the basis that the assessee has been realising parking charges which has not been declared in the books of account - CIT(A) deleted addition following his own order for the assessment year 2005-06 - Held that - Since the basis of addition is survey carried out under section 133A of the Act on September 19, 2007 no such addition is justified in earlier years, i.e., assessment years 2006-07 and 200708. We also find that the Assessing Officer has referred to a letter dated January 13, 2006 written to ICICI Bank which was found in the course of survey but when the Assessing Officer made enquiry from ICICI Bank, it was replied by ICICI Bank that they had not received any such letter and they have not made any such payment to the assessee. Thereafter, the Assessing Officer has made assumptions that the assessee has started realising parking charges directly from the customers but this assumption of the Assessing Officer is without any basis and considering all these facts, we feel that no interference is called for in the order of the Commissioner of Income-tax (Appeals) on this issue because no case has been made out by the Assessing Officer for making addition in the present year. - Decided against revenue. Deduction under section 80-IA of the Act in respect of captive power consumption - CIT(A) allowed the deduction - as per AO assessee-firm was not set up for the generation or distribution of powers but the firm was formed specifically for constructing and running a commercial complex - Held that - As per partnership deed the assessee-firm is authorised to carry on business of real estate and business of similar nature and/or other business as the partners may mutually decide and agree from time to time. In our considered opinion, the objects clause of the assessee-firm are so wide that it includes any sort of activity being carried on by the assessee as authorised by the said partnership firm and therefore, we do not find any merit in the first objection of the Assessing Officer that the assessee-firm was not set up for the generation of electricity. Higher profit shown for the purpose of claiming extra deduction under section 80-IA - Commissioner of Income- tax (Appeals) has reproduced the detailed working regarding rate per unit of electricity along with the meter reading, etc., and a clear finding is given that rate per unit charged is same as that being charged from other tenants of the building. This finding of the Commissioner of Income-tax (Appeals) could not be controverted by the learned Departmental representative of the Revenue and therefore, in the facts of the present case and as per various judgments cited by the learned authorised representative of the assessee, it cannot be said that there is any merit in this allegation that extra profit has been shown by the assessee in the electricity generation and distribution unit by transferring extra profit from air conditioning unit to generation unit. Non obtaining of permission or approval from the Central Government or the State Government - Enough material has been brought on record by the learned authorised representative of the assessee showing that in respect of generation of power by using diesel generating set and its captive consumption and supply to tenants, no approval or permission from any Government authority is required. Regarding the argument of Revenue that a power generation unit cannot have profit of more than 16 per cent. on the capital invested as per the Electricity Regulatory Act, no such copy of any Act by highlighting such provision has been brought on record and moreover, even if such restriction is there regarding profit of electricity generating company, then such restriction is on account of restricting the rate of electricity to be charged by electricity generating company to common public by holding that such electricity company should not earn higher profit. In the present case, as against supply of power to the tenants and captive power consumption of ₹ 130.83 lakhs, the assessee is showing profit of ₹ 17.54 lakhs whereas in respect of air conditioning undertaking against total receipt of ₹ 135 lakhs, the assessee is showing net profit of ₹ 27.68 lakhs and considering these facts, we are of the considered opinion that in the facts of the present case, the profit reported by the assessee in respect of power generation cannot be said to be excessive or unreasonable particularly when the same rate of power per unit is being charged by the assessee from tenants. Deduction under section 80-IA allowed - Decided in favour of assessee.

Summary

Issues Involved:
1. Deletion of addition on account of parking charges.
2. Allowability of deduction under section 80-IA of the Income-tax Act, 1961 for captive power consumption.
3. Acceptance of additional evidence during appellate proceedings without providing proper opportunity to the Assessing Officer.
4. Reduction of profits of power generation undertaking eligible for deduction under section 80-IA by the Commissioner of Income-tax (Appeals).

Issue-wise Detailed Analysis:

1. Deletion of Addition on Account of Parking Charges:
The Revenue contested the deletion of an addition of Rs. 1,25,000 made by the Assessing Officer (AO) on account of undisclosed parking charges. The AO based the addition on evidence collected during a survey under section 133A of the Income-tax Act, 1961, which indicated the collection of parking charges not declared in the books. The Commissioner of Income-tax (Appeals) [CIT(A)] deleted the addition by referencing a similar decision in the assessee's case for the assessment year 2005-06. The Tribunal upheld the CIT(A)'s decision, noting that the survey was conducted in the financial year 2007-08, and no such addition was justified for earlier years (2006-07 and 2007-08) due to lack of evidence. The AO's assumptions were deemed baseless, leading to the rejection of the Revenue's ground on this issue.

2. Allowability of Deduction under Section 80-IA for Captive Power Consumption:
The Revenue argued against the CIT(A)'s decision to allow the deduction under section 80-IA for captive power consumption, citing the absence of necessary permissions for power generation and distribution. The Tribunal noted that the CIT(A) had relied on precedents, including the Madras High Court's judgment in Tamilnadu Petro Products Ltd. v. Asst. CIT and ITAT decisions in West Coast Paper Mills Ltd. v. Joint CIT and Dalmia Cement (Bharat) Ltd. v. Addl. CIT, which supported the assessee's eligibility for the deduction. The Tribunal found the AO's objections baseless, as the assessee's partnership deed authorized power generation, and the rate per unit of electricity charged was consistent with other tenants. The Tribunal also dismissed the argument about excessive profit margins, noting the absence of any statutory limit on profit for captive power generation. Consequently, the Tribunal upheld the CIT(A)'s decision to allow the deduction under section 80-IA.

3. Acceptance of Additional Evidence During Appellate Proceedings:
The Revenue contended that the CIT(A) accepted additional evidence without providing the AO an opportunity to examine it, violating rule 46A of the Income-tax Rules, 1962. The Tribunal did not find merit in this argument, as the CIT(A)'s decision was based on substantial evidence and precedents. The Tribunal upheld the CIT(A)'s decision, rejecting the Revenue's ground on this issue.

4. Reduction of Profits of Power Generation Undertaking:
The assessee challenged the CIT(A)'s reduction of Rs. 1,80,000 from the profits of the power generation undertaking eligible for deduction under section 80-IA. The CIT(A) had noted the absence of expenses for security, upkeep, and notional rent for the space occupied by DG sets, estimating Rs. 1.80 lakhs as a reasonable amount for these expenses. The Tribunal found this estimate reasonable and upheld the CIT(A)'s decision, dismissing the assessee's cross-objection.

Conclusion:
The Tribunal dismissed all four appeals of the Revenue and both cross-objections of the assessee, upholding the CIT(A)'s decisions on all issues. The order was pronounced in the open court.