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TMI Blog2018 (6) TMI 67X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 40,17,406/- was reversed by the CIT(A) - Held that:- In parity with the view taken by the co-ordinate bench in assessee’s own case, we do not see any reason to interfere with the decision of the CIT(A) in this regard. Therefore, we decline to interfere with the order of CIT(A). - Decided against revenue - I.T.A. Nos. 1779 And 1925/Ahd/2014 - - - Dated:- 30-5-2018 - SHRI RAJPAL YADAV, JUDICIAL MEMBER PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER For The Appellant : Shri Harsh Bhuta, A.R. For The Respondent : Shri Saurabh Singh, Sr. D.R. ORDER PER PRADIP KUMAR KEDIA - AM: The captioned cross appeals have been filed by the assessee and Revenue against the order of the CIT(A)-VIII, Ahmedabad, dated 31.03.2014 arising in the assessment order dated 28.12.2011 passed by the Assessing Officer (AO) u/s.143(3) of the Income Tax Act, 1961; (the Act) concerning assessment year 2009-10. ITA No. 1779/Ahd/2014 2. We shall first take assessee s appeal in ITA No.1779/Ahd/2014 for adjudication. 3. The solitary issue that arises in the appeal of the assessee for adjudication is allowability of commission expenses of ₹ 1,20,00,000/- paid to its sister c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted @Rs.100/- per Metric Ton (M.T.) on purchases claimed to be made with the help of the commission agent. The AO further observed that the beneficiary of the commission M/s. A. M. Ispat Ltd. has declared its income of ₹ 19.78lacs only after taking account the commission payment of ₹ 1.20crores. It was thus alleged that the commission payment was made to the sister concern with an objective to nullify the losses of M/s. A. M. Ispat Ltd. The AO next observed that the assessee has not claimed traveling and telephone expenses to support any efforts made by it for procurement of iron ore for the assessee company on which it purportedly earned commission income. The AO also relied upon the outcome of inquiries made u/s.133(6) of the Act and alleged that the suppliers have denied to have any dealing with M/s. A. M. Ispat Ltd. as a middleman. The AO also noted that during the assessment year, the assessee has purchased iron ore worth ₹ 46.30crores (1,17,576 M.T.) as against purchases worth ₹ 57.73 crores (1,38,749M.T.) in the preceding assessment year 2008-09. It was further observed that in the preceding assessment year no commission on procurement of iron ore was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d AR also pointed out that instead of making efforts for supply of its own and spending considerable amount towards costs of salary and other incidental costs required for continuous follow up, the assessee has obtained the services of the other agency to ensure regular supply in the difficult circumstances. The learned AR vociferously contended that the suppliers of the iron ore during the year are different from that of earlier years. Adverting to concern of AO on the non reply pursuant to the notices u/s.133(6) or non admission of services by the commission agent from some of the suppliers, the learned AR submitted that such outcome of inquiry is quite plausible. The learned AR submitted that the commission agent was working on behalf of the assessee and no commission has been paid by the suppliers to the commission agent and therefore, the office records for such services at the end of suppliers may not necessarily vouch for services rendered in connection with supply. The learned AR thereafter referred to the decision of a bench of the Tribunal in case of Shri Jitendra J Mehta vs. DCIT in ITA No.5438/Mum/2010 order dated 14.10.2011 for the proposition that denial of involvemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e iron ore and to provide support services for and on behalf of the assessee and therefore, there was no requirement for the commission agent to reveal its independent identity to the suppliers from whom they have obtained reply for and on behalf of the assessee company, is quite persuasive. As stated, the commission agent was providing services to the assessee company and not to the suppliers and therefore the plea on behalf of the assessee that the suppliers do not have any tangible reasons to maintain records or documentation in respect of commission agent/middleman is quite plausible. Such view also finds supports from the decision of co-ordinate bench of tribunal in the case of Jitendra J Mehta (supra). The assessee has cited reasons for obtaining services of the commission agent as reproduced at page no.3 of the assessment order. As per the aforesaid reply before the AO, the assessee has submitted that it was suffering the draw back of irregular procurement of iron ore from interior parts of mining area in Karnataka. The assessee had to rely on the local traders and suppliers and had to engage their key persons frequently for said purchases and settlements, disputes and many ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter alia claimed deduction u/s.80IA(4) on account of deemed profit arising from captive power supply to its Sponge Iron unit. The AO observed that apportionment of expenses between power plant and Sponge Iron plant has not been correctly done which has resulted in understatement of expenses to the tune of ₹ 40,17,406/- attributable to power plant. The AO accordingly increased the common and indivisible expenses to the power plant by the aforesaid amount of ₹ 40,17,406/- and consequently reduced the eligible deduction u/s. 80IA(4) to this extent. In the first appeal, CIT(A) revisited the issue in question and reversed the action of the AO in sync with earlier order on identical facts concerning 2008-09. 16. Aggrieved, the Revenue has preferred the appeal before the Tribunal to challenge the reversal of the action of the AO with reference to quantum of eligible deduction u/s. 80IA(4) of the Act. 17. With the assistance of the parties concerned, we find that the identical issue came up before the CIT(A) in assessment year 2008-09 where the CIT(A) granted relief to the assessee. The Revenue carried the matter in appeal before the tribunal in ITA No. 1239/Ahd/2013 orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the minor maintenance of on-going expenses incurred by the manufacturers. It was also pointed out that sponge iron plant undertaking has taken bank loan for installing plant in the year 2005-06 and has direct nexus with the said loan of the said sponge iron plant, whereas, there are no financial charges in power plant undertaking. It has initially raised ₹ 4 crores as equity capital. Thereafter ₹ 7 crores was raised from family members which is also reflected in the main books of the company. Minimum investment of ₹ 10 crores to ₹ 13 crores is from contribution and no finance by any bank. Thus, there was no financial charge. The ld.CIT(A) has observed that as far as fuel expenditure allocated by the AO is concerned this expenditure relates to purchase of furnace oil, R.S. mould oil, light diesel oil, etc. None of these fuel were used in the power plant, which is steam based. Thus, there should not be any allocation from fuel expenditure. Similarly, the ld.CIT(A) has examined details of maintenance expenditure i.e. repairs, stores and spares. The assessee has pointed out that its power plant was fully automatic steam based turbine, and there was no maintenan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n consumption of coal which has been purchased from steel unit and which has been purchased at market price i.e. at the rate on which steel unit has sold to the outside party. Thus, there should not be any adjustment on this count. The ld.CIT(A) has rightly excluded deduction of ₹ 29,02,335/- from the eligible profit. The assessee will be entitled to deduction under section 80IA of this amount. 10. Third item considered by the AO relates to electricity rates. The assessee has calculated power price charge from associated unit at the rate of ₹ 5.25 per unit. The AO has observed that cost from electricity board comes to ₹ 5.19 per unit, and therefore, at this rate assessee should calculate its electricity charges to associate concerns. The ld.CIT(A) did not approve this view point of the AO and deleted adjustments. 11. Before us, the ld.counsel for the assessee placed on record a chart showing month-wise details of power tariff charged by PGVCL and tariff charged by the assessee s power plant to the sponge power plant. He pointed out that as per agreement between the assessee and steel plant, power was supplied at a constant price at ₹ 5.25 per uni ..... X X X X Extracts X X X X X X X X Extracts X X X X
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