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TMI Blog2018 (8) TMI 1048X X X X Extracts X X X X X X X X Extracts X X X X ..... the above observations of the CIT(A). - Decided against the revenue. Disallowance of deduction by invoking 43B - deposit of electricity duty in a designated account - Payment of crystallized liability - declaration under Section 158A(1) of the Act, 1961 to be made by an assessee claiming that identical question of law is pending before the High Court or the Supreme Court. - Held that:- Matter restored before AO to consider based on the final outcome of the assessee’s appeal in identical issue pending before the Hon’ble High Court for the assessment ear 2009-2010 as mentioned in the Form No.8 - Decided partly in favor of assessee. - ITA Nos. 412 & 342/ CTK/2016 And ITA No. 220/CTK/2017, ITA Nos. 405 & 312/ CTK/2016 And ITA No. 230/CTK/2017, ITA Nos.411/CT K/2016 - - - Dated:- 10-8-2018 - Shri N. S. Saini, AM And Shri Pavan Kumar Gadale, JM Revenue by : Shri Saad Kidwai, CITDR Assessee by : Shri Sachit Jolly, AR ORDER Per Shri Pavan Kumar Gadale, JM These are the cross appeals filed by the Revenue and assessee for the assessment years 2007-2008, 2012-2013 2013-2014 against the separate orders of CIT(A), Bhubaneswar. 2. Since, the issues in appeals ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the other hand, ld. AR relied on the order of CIT(A). 8. We have heard rival submissions and perused the material on record. Prima facie, with regard to addition made u/s.68 of the Act and addition made on account of lease rent, the CIT(A) observed that the assessee has explained all the points raised by the AO quite satisfactorily in its written submission filed in the course of assessment proceeding, however, the AO has not mentioned as to why the explanations of the assessee are not satisfactory, therefore, the CIT(A) deleted both the additions after observing as under :- 3.2 I have considered the matter carefully and gone through the facts on record. I have also perused the reasons given by the AO to consider the impugned transaction as a sham transaction, and the explanation/reply of the assessee to the points raised by the AO In the assessment order. The AO has made the addition u/s.68 of the Act. As has been rightly pointed out by the assessee an addition u/s.68 for unexplained cash credit can be made only if the assessee fails to prove the following three ingredients, namely, i) identity of the creditor, ii) creditworthiness of the creditor and iii) genuineness of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and, therefore, the question of valuation under Rules 11U and 11UA does not arise. Moreover, the AO has no authority to question the commercial wisdom of the assessee so far as financial transactions are concerned. It is the assessee whose -commercial prudence will govern its business and the AO cannot substitute his own wisdom for the same. This position is quite well settled and cannot be questioned. 3.2.2 The AO has also questioned the payment of sales-tax by the assessee company and not by IAFL on the sale of the 30MVA furnace and observed that this is quite unusual as the sales-tax is usually paid by the buyer. Of course, it is true that the sales-tax is usually borne by the buyer. However, there is no bar in law for the seller to bear the sales-tax on the goods sold by it if the agreement for sale so provides. Another point raised by the AO relates to the memorandum of transfer dt.4.2.2013. The AO raises suspicion on the fact that though the transfer of the 30MVA furnace occurred on 1.2.2013, the major part of the payment of ₹ 29.80 crores was paid only on the date of agreement, i.e. 4.2.2013. I do not see anything fishy or abnormal about the aforesaid transaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty involved in the process of transfer and proper documentations were made. All necessary approvals are found to have been taken from various authorities including the RBI. 3.2.5 In my opinion, all the points raised by the AO in the assessment order may be relevant at the initial stage for raising a valid suspicion in his mind about the genuineness of the sale and lease-back arrangement in question. But suspicion, however, strong cannot be a substitute for evidence. It appears clearly that the assessee has explained all the points raised by the AO quite satisfactorily in its written submission filed in the course of assessment proceeding. The AO, however, has rejected the same summarily by observing In this regard, I hereby state that the explanation offered by the assessee about the credit of the sum of ₹ 33,28,47,561/- in their books, as above, has not at ail been found satisfactory by me . Why the explanation of the assessee was not found satisfactory has nowhere been discussed by the AO. Keeping in view the facts stated above, it is held that the addition made by the AO of ₹ 33,28,47,561/- u/s.68 is highly unjustified and unreasonable. The addition of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in case of Gridco Ltd. Vs. ACIT, [2011] 15 taxmann.com 354 (Cuttack-Trib.), wherein the Tribunal has held that Section 194-I is not applicable in respect of transmission charges and consequently, no disallowance can be made u/s.40(a)( ia) in respect of transmission charges after observing as under :- 25. On careful consideration of the rival submissions and contents of the Paper Book and the case laws relied on by both the parties, it is noticed that the assessee in its ground Nos.2 and 3 has raised the issue of payment of ₹ 367.06 Crores made to DISCOMs was not in its own account but on account of the DISCOMs. In ground Nos.4,6 and 8, it has raised the issue that in any case there were payments and the payments made by it to OPTCL of ₹ 45.38 Crores are not covered by the provisions of Section 194-I and as such, the Assessing Officer has gone wrong in making the disallowance u/s.40(a)( ia) of the I.T. Act. Therefore, here the provisions of Section 194-I are to be considered in order to ascertain whether they are applicable in respect of payments made on account of transmission charges of power. In the view of the Assessing Officer, as can be seen from the assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... L which has got the infrastructure in the form of equipments and transmission lines. In such circumstances it cannot be said that the assessee is using the equipments involved itself in transmitting the powers. The OPTCL was created as an independent company to carry out the work of transmission and wheeling of power. In fact, after the notification dt.9.6.2005 the assessee has transferred assets to the OPTCL and OPTCL is carrying out the transmission and wheeling by using its equipments for the same. It gets price for the same in terms of unit transmitted by the DISCOMs and the number of units transmitted at the rate as determined by the OERC. The payment is for service of transmission of power and not for use of plant and/or equipments. Transmission of power is the main business of the OPTCL. For use of its infrastructure including equipment and transmission lines owned by it, it is immaterial in discharging its function OPTCL using its equipments. All the cost of maintenance of transmission lines, equipment, employees cost and other cost risk is on account of OPTCL. 28. The words used in relation to any equipment if understood in the broad sense of availing of the benefit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the equipments and machineries. The assessee has made the payment for the services provided by them. This view is fortified by the judgment of ITAT, Mumbai Bench rendered in the case of Vodafone Essar Ltd. ( supra), wherein somewhat similar issue has arisen and it was held therein paragraph 10 of the order, as follows : 10. The question is whether the payment made by the assessee as national roaming charges to the other service providers is for the use of such equipment. We may refer to an analogous situation. Let us take for example a lathe. If a person takes a piece of steel rod for turning or grinding by a lathe, he would approach the owner of the lathe to carry out the work. It is the owner of the lathe who, while carrying out the turning or grinding job, would use the lathe and the person who requires the lathe owner to do the job is not the person who can be described as the user of the lathe. The service of turning or grinding the steel rod is rendered by the lathe owner by using the lathe for which charges are paid by the person who wanted the steel rod to be turned or ground. It is not possible to say that it is this person who used the lathe. All that he paid fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n and wheeling charges. 30. The stand of the Department that this Tribunal has held in the case of DISCOMs in ITA Nos. 191, 192, 193, 194, 283, 282 and 284/CTK/2010, wherein in paragraph 7 of the order, the ITAT observed that DISCOMs have not used the equipments of OPTCL. GRIDCO has used the equipment for delivery of the electricity to DISCOMs. The DISCOMs paid charges only to GRIDCO as per their agreement with GRIDCO and GRIDCO has paid to OPTCL as per the rate fixed. Bills are raised by the OPTCL in the name of DISCOMs. Basing on these observations, the ITAT concluded that the transmission and wheeling charges paid to the OPTCL towards use of equipments for transmission of power from the generators to DISCOMs and thereby comes within the purview of Section 194-I of the I.T. Act. This observation of the Tribunal will have no impact in the case of the assessee because the assessee has not participated in those proceedings. Hence, the mere obiter regarding that by the Tribunal cannot be used against the assessee. Since we have categorically stated supra that the assessee has never used the equipments of transmission lines of OPTCL but it has only asked the OPTCL to transmit pow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder :- 7. After considering the rival submissions and perusing the materials available on record, we find that in the instant case, the assesse has made import of materials amounting to ₹ 2180,04,41,000/-. The Assessing Officer disallowed the deduction for the same on the ground that the assessee has not deducted TDS u/s.195(1) of the Act by invoking the provisions of section 40(a)(ia) of the Act. 8. On appeal, the CIT(A) allowed the deduction by following his order for the assessment year 2009-2010. 9. Before us no specific error in the order of the CIT(A) could be pointed out by ld D.R. Further, ld D.R. could not point out whether the order of the CIT(A) passed in assessment year 2009-2010 was varied in appeal by any higher forum. The Hon ble Supreme Court in the case of CIT vs. Excel Industries Ltd, 358 ITR 295(SC) has held that where a consistent view had been taken in favour of the assessee on the question raised, there was no reason for the court to take a different view unless there were very convincing reasons, which there were not. 10. Therefore, respectfully following the above decision of Hon ble Supreme Court and keeping in view the fact no ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Assessing Officer, therefore, he prayed that the addition deleted by the CIT(A) is not justified. On the other hand, ld. AR relied on the order of CIT(A). 21. We have heard rival submissions and perused the material on record. We find that the CIT(A) while dealing with the dispute issue has observed that the sale and leaseback transaction entered into between IMFA and the assessee company IAFL was a valid financial transaction and cannot be called a sham transaction held by the AO. The relevant observation of the CIT(A) is as under :- 4.2 I have considered the matter. In my order dt.10.8.2016 in the case of IMFA for the AY 2013-14, it has been held that the sale and leaseback transaction entered into between IMFA and the assessee company IAFL was a valid financial transaction and cannot be called a sham transaction as was held by the AO. In that order, the addition of ₹ 33,28,47,561/- made in the case of IMFA has been directed to be deleted. For the same reasons as mentioned in my order in the case of IMFA(supra) the protective addition of ₹ 33,28,47,561/- in the hands of the assessee company is deleted. Before us ld. DR could not bring out any new mater ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his Hon'ble Tribunal in ITA No.521/CTK/2013 passed in the Appellant's case for AY 2009-10, without appreciating that aforesaid order of the Tribunal has been stayed by the Hon'ble High Court. That the CIT(A) erred on facts and in law in confirming the action of the AO in disallowing deduction of ₹ 19,80,334/-, incurred on account of Export Promotion (Foreign Travel of Directors), on an adhoc basis without assigning any reasons therefor. That the CIT(A) erred on facts and in law in confirming the action of the AO in disallowing deduction of ₹ 4,51,976/-, incurred towards Foreign Travel of Consultants, on an adhoc basis without assigning any reasons therefor. That the CIT(A) erred on facts and in law in partly confirming the action of the AO in disallowing deduction of ₹ 2,00,145/-, incurred towards travel cost of bankers, retainers, auditors, guests, etc., on an adhoc basis without assigning any reasons 5. That the CIT(A) erred on facts and in law in confirming the action of the AO in disallowing deduction for entertainment expenses of ₹ 11,12,200/-, on an adhoc basis without assigning any reasons therefor. 6. That the CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the business of Appellant Company? Issue notice to the respondent by speed post with A.D. making it returnable within four weeks. Requisites for issue of notice be filed within one week. List this matter four weeks after. The Registry is directed to call for the L.C.R. from the Tribunal in the meantime . We considering the declaration filed by the assessee in Form No.8 and the observations of the Hon ble High Court and the provisions of law, restore this issue to the file of Assessing Officer to consider based on the final outcome of the assessee s appeal in identical issue pending before the Hon ble High Court for the assessment ear 2009-2010 as mentioned in the Form No.8. Accordingly, this ground of appeal is allowed for statistical purposes. 28. In regard to ground Nos.2,3,4,5,6,7 8 in the appeal of the assessee, we find that the CIT(A) has considered the submissions of the assessee and granted partly relief to the assessee. Though the assessee has come in appeal against the part relief granted by the CIT(A), however, the ld. AR of the assessee could not filed any details before us to controvert the findings the CIT(A) in this regard. Accordingly, we upho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... port commission, VMI services etc. 3.1 That the CIT(A) and AO erred on facts and in law in disallowing deduction of ₹ 1,55,67,394/- without appreciating that the said sum was paid in foreign currency towards advisory activities/services which were rendered outside India and therefore, not chargeable to tax India and thus the Appellant was not liable to deduct tax at source on such amount. 3.2 That the CIT(A) and AO erred on facts and in law in disallowing deduction of ₹ 82,02,523/- without appreciating that the said sum was paid in foreign currency towards export commission and therefore, not chargeable to tax India and thus the Appellant was not liable to deduct tax at source on such amount. 3.3 That the CIT(A) and AO erred on facts and in law in disallowing deduction of ₹ 2,51,79,863/- without appreciating that the said sum was paid in foreign currency towards VMI charges and therefore, not chargeable to tax India and thus the Appellant was not liable to deduct tax at source on such amount. 3.4 That the CIT(A) and AO erred on facts and in law in disallowing deduction of ₹ 2,28,291/- without appreciating that the said sum was paid in for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the case and in law, the Commissioner of Income Tax (Appeals) ['CIT(A)'] erred in partly confirming the action of the Assessing Officer ('AO') in disallowing a sum of ₹ 17,28,737/- (AO had disallowed ₹ 25,28,737/) and adding back the same to the income of the Appellant by treating donations and subscription expenses having not been incurred wholly and exclusively for the purpose of the business of the Appellant. 2. That on facts and circumstances of the case and in law, the CIT(A) erred in partly confirming the action of the AO in disallowing a sum of ₹ 21,12,823/-(AO had disallowed ₹ 42,25,647/-), being 25% of expenditure incurred on diwali new year gifts, corporate dinners and other entertainment expenses on the erroneous ground that the Appellant had not submitted complete details of such expenses and that the expenditure was not related to the business of the Appellant. 3. That on facts and circumstances of the case and in law, the CIT(A) erred in partly confirming the action of the AO in disallowing a sum of ₹ 60,70,282/-(AO had disallowed ₹ 91,05,422/-), being 20% of expenditure incurred on foreign travel of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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