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2015 (3) TMI 356 - AT - Income TaxDeduction under section 801A - CIT(A) restricting the deduction under section 801A to ₹ 26,10,28,391 instead of the ₹ 68,48,02,132, as claimed - whether Market Value as stated in Sec. 80IA (8) will be the same as the Sale Price of the State Electricity Board when the assessee is not incurring any transmission/line losses or administrative or any other charge which the State Electricity Board? - Held that - An analogy that can be safely deduced is that the market value cannot be the result of a transaction which has been entered into between a buyer and a seller in a situation where one of the parties is carrying the compulsive mandate of the Legislature. The situation before us is such where the aforesaid analogy can be usefully applied. As we have seen earlier, the price at which the power is supplied by the assessee to the Board is determined entirely by the Board in terms of the statutory regulations. Such a price cannot be equated with the market value as understood for the purposes of section 80IA(8) of the Act. The stand of the Revenue to the aforesaid effect cannot be approved. As stated earlier, order of the FAA in the case of Jindal Steel & Power Ltd (2007 (6) TMI 308 - ITAT DELHI ) has been reversed by the Tribunal wherein identical issue was involved. Besides, similar issue had been decided against the department by the Hon'ble Chhattisgarh High Court in the matter of Godavari Power and Ispat Ltd. 2013 (10) TMI 5 - CHHATTISGARH HIGH COURT Other cases relied upon by the assessee also support the stand taken by the FAA. Therefore, if she had followed the orders of the Tribunal for the earlier assessment year in respect of proceedings initiated u/s.263 of the Act, in our opinion she has chosen a legal, just and reasonable path.Confirming the orders of the FAA, we decide effective ground of appeal against the AO. - Decided in favour of assessee. Disallowance of sum paid to arrive at a settlement of dispute under the provisions of Factories Act, 1948 - Held that - AO or the FAA has not mentioned the penal provisions of the Factory Act that were violated by the assessee, that they have not discussed anything about the penalty order passed by the labour law authorities. In absence of the basic fact of payment of penalty by the assessee, it cannot be held that there was infringement of law. Payment made to the workers who had met an accident cannot be termed penalty. Therefore, treating it an allowable business expenditure, we decide ground in favour of the assessee.
Issues Involved:
1. Determination of "Market Value" versus "Sale Price" for electricity under Section 80IA(8) of the Income Tax Act. 2. Restriction of deduction under Section 80IA. 3. Binding nature of previous ITAT findings. 4. Disallowance of settlement payment under the Factories Act as a business expenditure. 5. Levying of interest under Sections 234B and 234C. Issue-wise Detailed Analysis: 1. Determination of "Market Value" versus "Sale Price" for Electricity under Section 80IA(8): The main issue was whether the "Market Value" as stated in Section 80IA(8) should be the same as the "Sale Price" of the State Electricity Board when the assessee is not incurring any transmission/line losses or administrative or other charges which the State Electricity Board has to incur. The AO argued that the assessee sold electricity to its own division at a higher rate to reduce taxable profit. The Tribunal found that the price at which the State Electricity Board sells electricity cannot be equated with the market value due to the legislative mandate on tariff determination. The Tribunal upheld the assessee's claim that the internal sale price of Rs. 3.80 per unit was appropriate, referencing previous decisions, including Jindal Steel and Power Ltd., and Godavari Power and Ispat Ltd. 2. Restriction of Deduction under Section 80IA: For AY 2008-09, the AO restricted the deduction under Section 80IA to Rs. 26,10,28,391 instead of Rs. 68,48,02,132 as claimed. The assessee argued that the CIT(A) did not follow the binding ITAT decisions from previous years. The Tribunal reversed the FAA's order, finding that the issue had been decided in favor of the assessee in earlier cases and by the Hon'ble Chhattisgarh High Court, confirming the higher sale price as the market value. 3. Binding Nature of Previous ITAT Findings: The assessee contended that the CIT(A) erred by not considering the binding nature of ITAT's previous findings for AYs 2003-04, 2004-05, and 2005-06. The Tribunal agreed, noting that the CIT(A) should have followed the earlier ITAT decisions, which were in favor of the assessee. 4. Disallowance of Settlement Payment under the Factories Act as Business Expenditure: The AO disallowed Rs. 1,00,000 paid to settle a dispute under the Factories Act, considering it a penalty for infringement of law. The Tribunal found no evidence of penal provisions being violated or a penalty order from labor law authorities. It held that the payment to workers involved in an accident was not a penalty but a compensatory business expenditure, allowing the deduction under Section 37(1). 5. Levying of Interest under Sections 234B and 234C: The assessee challenged the interest levied under Sections 234B and 234C. The Tribunal directed the AO to provide relief in accordance with the law, treating this ground as consequential. Conclusion: The Tribunal dismissed the AO's appeal for AY 2007-08 and allowed the assessee's appeal for AY 2008-09. The Tribunal upheld the assessee's method of determining the market value for internal electricity sales, allowed the full deduction under Section 80IA, recognized the binding nature of previous ITAT decisions, and approved the settlement payments as business expenditures.
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