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2024 (3) TMI 1016 - HC - Income TaxNature of receipt - Addition on account of notional sales tax - treated as revenue receipt by the A.O - HELD THAT - The issue is covered by the order of the Apex Court in GUJARAT ALKALIES AND CHEMICALS LTD. 2023 (6) TMI 1046 - SC ORDER , INDIAN PETROCHEMICALS CORPORATION LTD. 2016 (9) TMI 110 - GUJARAT HIGH COURT - No substantial question of law arise. Disallowance u/s 14A - Tribunal restricting the expenses u/s. 14A at 0.50% of the exempt income as against disallowance of Rs. 87.85 made by the A.O - HELD THAT - AO has not given any reasons as to why he was not satisfied with the disallowance of Rs. 3.88 crores made by assessee and, therefore, cannot be faulted for restricting the expenses under Section 14A disallowing at 5% of the exempted income. TP Adjustment - addition of guarantee commission - Tribunal restricting the guarantee commission to 0.38% of the guaranteed amount as against at 2.90%, as determined by the A.O - HELD THAT - TPO has not given any reasons why according to him the guarantee amount should be 2.90% and not 3.8%. Therefore, we do not find any error finding arrived at by the ITAT. Interest referable to interest free loans and advances to LIBOR - Tribunal restricting the interest referable to interest free loans and advances to LIBOR 1.50% as against at 7.5%, as determined by the A.O. on the basis of RBI Circular - HELD THAT - Counsels agreed that this question requires to be admitted. Depreciation directing to adopt the WDV of the assets as on 01.04.2007 - HELD THAT - This question raises an issue which is merely consequential to the final decisions of the earlier years. Assessee is entitled to depreciation on the opening WDV and the additions made to such WDV during the year. The opening WDV is the amount of the closing WDV of the earlier year as finally determined. In this Question, the Revenue is seeking to reduce the value of the opening WDV on the basis of the stand taken by the Revenue in the earlier years. As the issue raised in this question is only consequential and effect will have to be given to the final decision in the earlier years, there is no question of law which arises for consideration in this year. Deduction u/s 80IA - rate to be adopted for determining the profit of the captive power generation unit which is eligible for deduction - Assessee contends that the rate at which electricity is supplied to the customer should be considered whereas the Revenue contends that profit should be restricted to 16% of the investment or capital base - HELD THAT - This issue is covered in favour of assessee by the decision of this Court in the assessee's own case in the earlier assessment year being Question No. C in M/s Reliance Industries Ltd. 2019 (2) TMI 178 - BOMBAY HIGH COURT as held 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. The Apex court in the case of CIT v Jindal Steel Power Limited 2023 (12) TMI 417 - SUPREME COURT as affirmed the aforesaid decision of the Bombay High Court in the assessee's own case. Further, it is not the case of the Revenue that insertion of Section 80A(6) of the Act has made any change in law as the AO in coming to its conclusion has himself relied on the assessment order for the earlier years. For the reasons given in the said judgment, there is no question of law which arises for consideration. Appeal is admitted on the following question of law Whether on the facts and in the circumstances of the case and in law, Hon'ble Tribunal was right in restricting the interest referable to interest free loans and advances to LIBOR 1.50% as against at 7.5%, as determined by the A.O. on the basis of RBI Circular?
Issues Involved:
1. Deletion of addition on account of notional sales tax. 2. Restriction of expenses \u/s 14A of the Act. 3. Restriction of guarantee commission. 4. Restriction of interest on interest-free loans and advances. 5. Allowance of depreciation. 6. Restriction of deduction \u/s 80IA. Summary: Issue 1: Deletion of Addition on Account of Notional Sales Tax The court held that the issue is covered by the order of the Apex Court in Commissioner of Income Tax-I Vs. Gujarat Alkalies & Chemicals Ltd. and other related judgments. Therefore, no substantial question of law arises. Issue 2: Restriction of Expenses \u/s 14A of the Act The court noted that the AO did not provide any reasons for dissatisfaction with the disallowance made by the assessee. Hence, the restriction of expenses under Section 14A at 5% of the exempted income by the Tribunal was upheld. Issue 3: Restriction of Guarantee Commission The court observed that the TPO did not justify why the guarantee commission should be 2.90% instead of 3.8%. Therefore, the Tribunal's decision to restrict the guarantee commission was found to be without error. Issue 4: Restriction of Interest on Interest-Free Loans and Advances Both counsels agreed that this question requires admission. The appeal was admitted on the question of whether the Tribunal was right in restricting the interest referable to interest-free loans and advances to LIBOR +1.50% as against 7.5% determined by the AO based on RBI Circular. Issue 5: Allowance of Depreciation The court held that the modification made by the AO to the opening WDV was incorrect. The Tribunal's decision, based on the Supreme Court judgment in CIT Vs. Mahendra Mills and the Tribunal's own decision in the assessee's past cases, was upheld. The issue was deemed consequential to the final decisions of earlier years, and no question of law arose for the current year. Issue 6: Restriction of Deduction \u/s 80IA The court found that the issue regarding the rate for determining the profit of the captive power generation unit eligible for deduction under Section 80IA was covered in favor of the assessee by the decision in the assessee's own case in Commissioner of Income Tax-LTU Vs. M/s Reliance Industries Ltd. The Tribunal's decision to uphold the CIT(A)'s deletion of the addition made by the AO was affirmed. Conclusion: The appeal was admitted only on the specific question regarding the restriction of interest on interest-free loans and advances. The remaining issues were resolved in favor of the assessee based on existing precedents and detailed reasoning provided by the Tribunal and CIT(A).
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