2022 (8) TMI 1445 - AT - Income Tax

Deduction u/s.80IA denied - adopting the domestic purchase price of electricity by CSEB as the market rate and justifiably scaled down the assessee s claim for deduction to NIL - transfer of goods and services is a specified domestic transaction referred to section 92BA - 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 - TPO proposed a downward adjustment and advised a revision of the assessee s claim for deduction u/s. 80IB and AO reduced the assessee s claim for deduction u/s. 80IA(4)(iv) to Rs. Nil - HELD THAT - As decided in own case MAHENDRA SPONGE AND POWER LTD 2015 (6) TMI 1243 - ITAT RAIPUR as relying on case of CIT Vs. Godawari Power Ispat Ltd. 2013 (10) TMI 5 - CHHATTISGARH HIGH COURT found favor with the claim of the assessee and observed that 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 to make investment in shares and the A.O had not made out a case that the investment in exempt income yielding assets was made out of interest bearing loans - HELD THAT - As in own case 2022 (8) TMI 440 - ITAT RAIPUR i.e AY 2013-14 as the assessee company during the year under consideration also had not earned any exempt income therefore on the said count itself no disallowance of any part of expenditure could have been made u/s.14A of the Act. Therefore the order passed by the CIT(Appeals) on this score is upheld. Thus the Grounds of appeal raised by the revenue are dismissed. Delayed payment of PF /ESIC - HELD THAT - As the facts and issue involved in the aforesaid order of the Tribunal in the case of Ind Synergy Ltd 2022 (4) TMI 36 - ITAT RAIPUR 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(Appeals) and direct the AO to vacate the disallowance made by him u/s. 36(1)(va) of the Act qua the delayed deposit of the employees share of contribution of EPF/ESIC.

Summary

Issues Involved:
1. Deletion of disallowance under Section 80IA of the Income-tax Act.
2. Deletion of disallowance under Section 14A read with Rule 8D of the Income-tax Rules.
3. Addition on account of delayed payment of PF/ESIC.

Detailed Analysis:

1. Deletion of Disallowance under Section 80IA of the Income-tax Act:
The department challenged the CIT(A)'s decision to delete the disallowance of Rs. 3,86,20,992/- under Section 80IA, arguing that the CIT(A) ignored the Arm's Length Price (ALP) determined by the Transfer Pricing Officer (TPO). The assessee transferred electricity from its power division to its steel division and associate concerns at a higher rate than the rate at which it sold electricity to the Chhattisgarh State Electricity Board (CSEB). The TPO determined the ALP based on the lower rate charged to CSEB, leading to a downward adjustment. However, the Tribunal found that the issue was covered by its earlier decision in the assessee's own case for AY 2013-14, where it held that the market value should be based on the rate charged to consumers, not suppliers. The Tribunal upheld the CIT(A)'s order, dismissing the revenue's grounds of appeal.

2. Deletion of Disallowance under Section 14A read with Rule 8D of the Income-tax Rules:
The AO disallowed Rs. 10,88,188/- under Section 14A, arguing that the assessee had made investments in shares but did not offer any disallowance. The CIT(A) observed that the assessee had sufficient own funds for the investments and had not earned any exempt income during the year. The Tribunal, following its earlier decision for AY 2013-14, upheld the CIT(A)'s order, stating that no disallowance under Section 14A is warranted if no exempt income is earned during the year. The Tribunal dismissed the revenue's grounds of appeal related to this issue.

3. Addition on Account of Delayed Payment of PF/ESIC:
The assessee challenged the addition of Rs. 2,91,792/- for delayed payment of PF/ESIC. The AO disallowed the amount under Section 36(1)(va), but the assessee argued that the payments were made before the due date of filing the return of income. The Tribunal noted that the issue was covered by its decision in the case of M/s Ind Synergy Limited, where it held that employees' contributions to PF and ESI deposited before the due date of filing the return are allowable under Section 43B. The Tribunal set aside the CIT(A)'s order and directed the AO to vacate the disallowance, allowing the assessee's cross-objection.

Conclusion:
The Tribunal dismissed the revenue's appeal and allowed the assessee's cross-objection, upholding the CIT(A)'s deletion of disallowances under Sections 80IA and 14A, and vacating the addition for delayed payment of PF/ESIC. The Tribunal's decisions were based on precedents and the specific facts of the case, ensuring that the legal principles were consistently applied.