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TMI Blog2018 (1) TMI 1376X X X X Extracts X X X X X X X X Extracts X X X X ..... ision, it is therefore, the AO is directed to allow relief to the appellant u/s. 80-IA as claimed. Proportionate disallowance of advertisement, traveling, director's remuneration, printing and stationery etc. for the purpose of disallowance from Ferro Division - Held that:- The assessee has substantiated that the expenses proportionately disallowed by the A.O were attributable to Ferro Alloys Division only and not to the Power Division. The assessee further produced the copy of Ledger Account of such expenses which were already examined by the A.O. Therefore, the CIT(A) was in agreement with the assessee has been maintaining the books of accounts separately for both the divisions and thus, there was no question of making any proportionate disallowance. Addition u/s 14A in respect of investment in shares - Held that:- Investment was not for making any profit for future benefit of the assessee company. The Assessing Officer noticed that the assessee has incurred certain expenditure towards interest and also these investments were made out of borrowed funds. Whereas, the CIT(A) found that the investment in shares is not out of its ainterest bearing funds, which is not disputed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of CSR expenses - Held that:- In the instant case, it is submitted that CSR expenses are incurred for the welfare of local community and thereby improve corporate image of the companies incurring such expenditure. We are of the considered opinion that the CIT(A) has rightly considered the decision and deleted the addition made by the Assessing Officer. Disallowance made by the AO on account of Pooja and festival expenses and charity & donation expenses - Held that:- As relied on the CBDTG Circular No.17(F.No.27(2)-IT/43) dated 6.5.1983 & circular No.13A/20/68-IT-II dated 3.10.1968, wherein, it was emphasized that expenses incurred on the occasion of Diwali and Muhurat are in the nature of business expenditure. Based on these circulars, the CIT(A) allowed ₹ 71,779/- and disallowed balance of ₹ 1,01,277/-. Addition on ESI made by the AO on account of delayed payment of employees contribution to PF/ESI - deposits beyond the period prescribed in the relevant statute but before the due date of filing the return u/s.139(1) - Held that:- We find that the CIT(A) relying on the decision of the Delhi High Court in CIT Vs. AIMIL Limited [2009 (12) TMI 38 - DELHI HIGH COURT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rief facts of the case are that the assessee company is a limited company deriving income from the business of production of Ferro Alloys and Generation of Power. During the course of assessment proceedings, the Assessing Officer noticed that the assessee has transferred electricity to its Ferro Division @ ₹ 2.97 per unit, whereas, the power has been transferred to CSEB @ ₹ 2.80 per unit. Thus by transferring electricity at higher rate to its other division, the assessee has inflated profit of Power Division, which is, eligible for deduction u/s 801A of the Act. The income of the Ferro Alloys Division has correspondingly gone down which is assessable to tax at normal rate. According to the Assessing Officer, the market rate should be the rate at which the assessee has supplied electricity to CSEB i.e. ₹ 2.80 per unit. The Assessing Officer, by invoking his power by virtue of section 801A, restricted transfer rate to the market value of the power supplied to inter division at ₹ 2.80 per unit in place of ₹ 2.97 per unit claimed by the assessee. This has resulted into disallowance of claim u/s 801A by ₹ 2,03,92,958/-. 5. Before the CIT(A), the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny goods [or services] held for the purposes of the eligible business are transferred to any other business carried on by the assessee. or where any goods [or services} held for the purposes of any other business carried on by the assessee are transferred to the eligible business and, in either case, the consideration, if any, jar such transfer as recorded in the accounts of the eligible business does not correspond to the market value of such goods [ or services] as on the date of the transfer, then, for the purposes of the deduction under this section, the profits and gains such eligible business shall be computed as if the transfer, in either case, hand been made at the market value of such goods[ or services] as on that date. Provided that where, in the opinion of the Assessing Officer, the computation of the profits and gains of the eligible business in the manner hereinbefore specified presents exceptional difficulties, the Assessing Officer may compute such profits and gains on such reasonable basis as he may deem fit. [Explanation- For the purposes of this sub-section, market value , in relation to any goods or services, means the price that such goods or services wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asis of CSEB tariff applicable to such industries. The Ferro Division had purchased power from CSEB and according to the CSEB tariff, the average purchase price of power was ₹ 20.77 per unit. On the contrary, CSEB purchased power (a: ₹ 2.80 per unit. In the given facts and circumstances- what should be the market price, is a matter for adjudication. I am of the considered opinion that the value of power agreed in PPA is on the basis of certain statutory provisions enacted in the Electricity Act and not based on demand and supply factors prevailing in the market. 9. The identical issue was decided in appellant's favour in its own case as decided in the .Y. 2008-09 (Appeal No.057/2010-11).The case of the appellant certainly derives strength from the decision of the Hon'ble High Court Chhattisgarh in the case of Godawari Power Ispat Limited (Tax case No.32 of 2012 for the A.Y. 2005-06 to 2007-08) wherein, the Hon'ble High Court has observed as below In the explanation below section 80IA(8), it is provided that the expression market value for the sub-section-means the price that such goods or services would ordinarily fetch in the open market. Market ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs of the CIT(A). In the instant case, we find that the CIT(A) has relied on the decision of Hon'ble Jurisdictional High Court in the case of the assessee for the assessment year 2008-09 in I.T.Appeal No.057/2010-2011 to delete the addition made by the Assessing Officer. No contrary decision was placed on record by ld D.R. to take any contrary view. Hence, we see no good reason to interfere with the order of the CIT(A), which is hereby confirmed and ground of appeal of the revenue is dismissed. 8. Adverting to Ground No.2 of appeal, the facts are that the Assessing Officer found that there is certain expenditure like Advertisement, Travelling, Legal and Professional Charges and Director's remuneration, which were debited to the Ferro Alloys Division whereas, they also relate Power Division. The Assessing officer observed that expenditure to the extent of ₹ 40.84.011/-, which was common to both the division, was incurred and assessee was not able to bifurcate the same. Therefore, on the basis of capital employed, the Assessing Officer has considered 33.33% expenses as relatable to Power Division, income from which is claimed as 100% deduction u/s 80IA and disallowe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal, the facts of the case are that the Assessing Officer has observed that the assessee has invested ₹ 15.00,03,357/- in shares and dividend income from these investments is exempt from tax. Therefore, the Assessing Officer by invoking the provisions of section 14A of the Act disallowed a sum of ₹ 6.33,941/- and added the same to the income of the assessee. 14. On appeal before the CIT(A), the assessee submitted that the assessee company has not incurred any direct or indirect expenditure in connection with earning of exempt income i.e. dividend. It was pointed out that there must be some direct connection between the earning of exempt income and incurrence of expenditure. Alternately, it was contended that the amount of interest paid towards term loan and working capital being meant for specific purpose should have been excluded from the calculation of disallowance u/s 14A of the Act. It was further contended that it had made investment aggregating to ₹ 4.64 Crores in the shares of associate company, whereas the assessee has earned a cash profit of ₹ 22.89 Crores during the year. It has own fund of ₹ 67.67 Crores as share capital and security p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rest bearing advances. It is seen that the assessee had sufficient non-interest bearing funds for making the investment in shares as it had sufficient net worth of its own. The Assessing Officer has not disputed the submission of the assessee that no expenditure was incurred for making the investment. The CIT(A) has relied on the following judicial pronouncements: i) In S. A. Builders Ltd. vs. Commissioner of Income Tax (Appeals) ANR. 288 ITR 1 (SC), it was held that interest on borrowed funds cannot be disallowed if the assessee has advanced interest-free loan to a sister-concern as a measure of commercial expediency. ii) The Hon'ble Allahabad High Court in CIT vs. Raj Kumar Singh Co. (2007) 210 CTR (All) 483 has held that interest paid by assessee on money borrowed for repayment of an interest-free advance was allowable as deduction. The CIT(A) held that in the instant case, the assessee has explained the commercial expediency behind investment in shares of sister concerns and the same has not been rebutted by the Assessing officer. Hence, the CIT(A) was in agreement with the view of the assessee and relying on the following judicial decisions deleted the additio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earlier year under similar circumstances needs must be followed. Hence, following our decision for the earlier years, we uphold the findings of the CIT(A) and dismiss this ground of appeal of the revenue. 22. In Ground No.2 of the appeal, the revenue is aggrieved by the deletion of proportionate disallowance of ₹ 86,06,261/- out of interest expenses on account of interest free advance given to sister concern. 23. The Assessing Officer made disallowance on the ground that the assessee did not charge interest on the advances made to sister concern, though substantial interest amounts were paid to bank and others against loans obtained from them. 24. On appeal, the CIT(A) observed that the Assessing officer has not proved the nexus of transfer of borrowed funds without charging any interest and deleted the addition made by the Assessing officer. 25. After hearing ld D.R. we find that the finding recorded by the CIT(A) that the assessee had substantial interest free funds and cash profits and also the assessee has substantiated that the loan so advanced was out of commercial expediency/exigency has not specifically challenged by the Revenue. Therefore, consideri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fines and penalties, income tax of earlier years, pooja and festival expenses. 34. The CIT(A) found that the expenditure of ₹ 16,63,482/- is not substantiated as relatable to infringement of any legal provisions but to lifting of additional coal and, therefore, it cannot be treated as penalty for breach of any law. In view of above, he deleted ₹ 16,63,482/- and confirmed all other disallowances. 35. Before us, ld D.R. could not controvert the above findings of ld CIT(A). Hence, we see no good reason to interfere with the order of the CIT(A), which is hereby confirmed and ground of appeal of the revenue is dismissed. 36. In the result, appeal filed by the revenue is dismissed. ITA No.360/RPR/2014 A.Y. 2011-12. 37. Ground No.1 of appeal reads as under: a. Whether in law and on facts circumstances of the case, the CIT(A) has erred in holding not to allow set off of losses of one eligible unit from profit of another unit for the purpose of calculation of deduction u/s. 80IA of the I.T.Act thereby disagreeing with the AO's disallowance of ₹ 14,34,95,083/- out of claim of deduction u/s.80IA of the I.T.Act, 1961. 38. Facts in brief of the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ispat Ltd (supra). The facts for the year under consideration being no different from those before the Hon'ble High Court in the case of Godawari Power Ispat Ltd (supra), we find no reason to differ therefrom. We find that Hon'ble High Court in its judgment, inter alia, held that the CIT(A) and 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. No contrary view has been taken by any superior authority on this issue. Accordingly, the findings of the learned Commissioner of Income- tax (Appeals) stand confirmed. Ground raised by the revenue is dismissed. 43. Ground No.b of appeal reads as under: 'Whether in law and on facts circumstances of the case, the CIT(A) has erred in deleting the disallowance of ₹ 2,68,796/- on account of CSR expenses which has not been laid out wholly and exclusively for the purpose of business. 44. The Assessing officer observed that the assessee has incurred CSR expenses of ₹ 2,68,796/- for undertaking CSR activities viz cleaning and beautification of pond at vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... donation and Pooja and festival expenses, which are not allowable in company's case. Therefore, he disallowed the same. 50. On appeal, the CIT(A), the assessee submitted that out of ₹ 80,015/- , an amount of ₹ 71,779/- was expended for purchase of distribution of sweets to all the employees/workers on the auspicious occasion of Viswakarma poooja day, independence day and republic day. The assessee relied on the CBDTG Circular No.17(F.No.27(2)-IT/43) dated 6.5.1983 circular No.13A/20/68-IT-II dated 3.10.1968, wherein, it was emphasized that expenses incurred on the occasion of Diwali and Muhurat are in the nature of business expenditure. Based on these circulars, the CIT(A) allowed ₹ 71,779/- and disallowed balance of ₹ 1,01,277/-. Hence, the revenue is in appeal before us. 51. Having heard ld D.R., we see no good reason to interfere with the order of the CIT(A) as the CIT(A) has allowed relief considering the CBDT Circulars referred above (supra). Hence, we dismiss this ground of revenue. 52. In Ground No.(d), the grievance of the revenue is that the CIT(A) erred in deleting addition of ₹ 1,05,790/- ESI made by the AO on account of delay ..... X X X X Extracts X X X X X X X X Extracts X X X X
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