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TMI Blog2018 (10) TMI 581X X X X Extracts X X X X X X X X Extracts X X X X ..... Bench of the Tribunal in the case of DCIT vs. Hira Ferro Alloys Ltd. [2009 (8) TMI 732 - CHHATTISGARH HIGH COURT] for assessment years 2009-10, 2010-11 and 2012-12 has also decided identical issue by upholding the decision of the CIT(A) wherein CIT(A) has deleted the disallowance made by the Assessing Officer u/s 80-IA by holding that the assessee has not overstated the price of power supplied to its divisions. Further, we find the Assessing Officer in subsequent assessment years i.e. for assessment years 2009-10, 2010-11 and 2012-13 has not made any such disallowance u/s 80-IA on account of power tariff charged to other units of the assessee. Under these circumstances, we do not find any infirmity in the order of the ld. CIT(A) on this issue. Taxability of the carbon credits - Assessee filed an application under Rule 27 of the Income Tax (Appellate Tribunal) Rules, 1963 and submitted that the issue relating to the taxability of receipts on account of carbon credit was a highly contentious issue and the law relating to the same has been settled in favour of assessee by the decision of the Hon’ble Andhra Pradesh High Court in the case of CIT vs. My Home Power Ltd. [2014 (6) TMI 82 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts of the case, we are of the considered opinion that 2% of the dividend income received during the year may reasonably be estimated towards administrative expenses for earning such exempt income. The Assessing Officer is directed to compute the same and the order of the ld. CIT(A) is accordingly modified to this extent. Disallowance u/s 43B - delayed payment of employees’ contribution to PF and ESI - employees’ contribution to PF and ESI although deposited after the due date prescribed under the relevant date, however, were deposited before the due date of filing of the return u/s 139(1) - Held that:- The various Benches of the Tribunal are also taking the consistent view that employees’ contribution to PF and ESI cannot be disallowed u/s 2(24)(x) r.w.s. 36(1)(va) if such deposits are made before the due date of filing of the return. Since in the instant case the assessee has deposited the employees’ contribution to PF and ESI before the due date of filing of the return u/s 139(1) of the I.T. Act, 1961, therefore, following the consistent view of the various Benches of the Tribunal on this issue, we hold that the ld. CIT(A) is justified in deleting such disallowance - decided aga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollowing additions :- Amount [Rs.] Amount [Rs.] 1. Income chargeable under the head business and profession, as per the revised return : 49,02,98,644 Add: Disallowance of CSR expenses : 1,91,79,611 Disallowance of Charity / donation expenses 10,13,489 Disallowance of Pooja & Festival expenses 5,94,487 Disallowance u/s 14A of the I.T. Act 2,25,43,398 Delayed payment of Employees' contribution to the Provident Fund/ ESI 2,10,551 Income chargeable under the head business and profession : 53,38,40,180 2. Long term capital gain, as per the revised return 9,88,867 Short term capital gain, as per the revised return 16,13,756 Income chargeable under the head Capital gains 26,02,623 3. Gross Total Income 53,64,42,803 Less: Set-off of unabsorbed depreciation R.R. Ispat- A.Y. 2010-11 as per the revised return 2,53,85,466 Set-off of unabsorbed depreciation Iron Ore crushing Div - A.Y. 2009-10 as per the revised return 20,50,644 2,74,36,110 Less: Deduction u/s 80IA 0 0 4. Total Income 50,90,06,693 5. Total Income [rounded off] 50,90,06,690 4. The assessee filed appeal before the ld. CIT(A), who gave part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /2011, ITA No.365/RPR/2014 C.O. No.12/RPR/2018 and therefore, not liable to tax. The A.O. has erred in holding it and thereby taxing it as revenue receipt." 6. So far as ground of appeal no.(a)(i) by Revenue is concerned, the facts of the case, in brief, are that the Assessing Officer, in the assessment order relying on the provisions of section 80-IA and the decision of the Hon'ble Supreme Court in the case of Liberty India vs. CIT reported in 317 ITR 218 and various other decisions, held that the loss of an eligible industrial unit is required to be set off against profit of other eligible industrial unit since the deduction u/s 80- IA(1) is allowed to the profit and gains derived from "business" referred to in section 80-IA and not to the undertaking. 7. Before the ld. CIT(A), the assessee submitted that the deduction u/s 80-IA has been claimed in respect of its units (Unit-1 & Unit-2) separately which are generating power. It was submitted that the 'profit and gains of an undertaking' shall be computed as if such undertaking was the only source of income of the assessee during the previous year relevant to the initial assessment year and to every subsequent assessment years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndertaking, considering the same as the only source of income as per section 80-IA(5) of the Act. Accordingly, the adjustment of profits is eligible undertaking with losses of other eligible undertaking made by the A.O. is deleted." 9. Aggrieved with such order of the ld. CIT(A), the Revenue is in appeal before the Tribunal. 10. The ld. DR heavily relied on the order of the Assessing Officer. 11. The ld. counsel for the assessee on the other hand relied on the decision of the Bangalore Bench of the Tribunal in the case of Jindal Aluminium Ltd. vs. ACIT reported in 54 SOT 283, decision of the Mumbai Bench of the Tribunal in the case of Meera Cotton & Synthetic Mills (P) Ltd. vs. ACIT reported in 29 SOT 177 and the decision of the Delhi Bench of the Tribunal in the case of CIT vs. Sona Koyo Steering Systems Ltd. reported in 321 ITR 463. Referring to the above decisions, he submitted that while computing the deduction u/s 80-IA loss of one eligible unit is not to be set off or adjusted against the profit of another eligible unit. 12. So far as various decisions relied on by the Assessing Officer are concerned, he submitted that all these decisions are either distinguishable or no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... value for sale of electricity by a private generating unit based in Chhattisgarh (including the eligible units of the assessee company) for assessment year 2011-12 is ₹ 2.84 per unit which is the average purchase rate of CSPDCL, which is also based in Chhattisgarh. The Assessing Officer accordingly disallowed the deduction claimed u/s 80-IA by holding that value of power supplied to its own unit for captive consumption at ₹ 4.28 per unit has been overstated. He accordingly reduced the deduction claim u/s 80-IA of the I.T. Act. 15. In appeal, the ld. CIT(A) allowed the claim of the assessee by observing as under :- "7. I have carefully gone through the assessment order and submissions of the appellant. It is seen that the appellant set up the Captive Power Plants for meeting the requirement of electricity of steel and other division (being non-eligible units). The electricity generated by the Captive Power Plant is, therefore, a substitute for the electricity which the Steel Division would have procured from the CSPDCL (State Electricity Company). Thus, looked at from the stand point of Steel Division it can be said that the Steel Division receives electricity at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the market value of power supplied to a consumer. It is admitted by the department that in Chhattisgarh the power was supplied to the industrial consumers at the rate of R3.20/- per unit for the A.Y. 2004-05 and R 3.75/- per unit for the AY's 2005-06 and 2006-07. It was this rate that was to be considered while computing the market value of the power. The 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". 7.3 Looking to the facts and circumstances of the case as also decision of the Hon'ble Jurisdictional High Court cited supra, the AO is directed to re-compute the eligible profits by applying the market value of power at the rate of sale to Steel Division by the State Electricity Company. Thus, this ground of appeal is allowed." 16. Aggrieved with such order of the ld. CIT(A), the Revenue is in appeal before the Tribunal. 17. We have considered the rival arguments made by both the sides and perused the material available on record. We find the Hon'ble Chhattisgarh High Court in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. The CPP of the Assessee supplies electricity to the Steel-Division. Had the Steel-Division not taken power from the CPP then it had to purchase power from the Board. The CPP has charged the same rate from the Steel-Division that the Steel-Division had to pay to the Board if the power was purchased from the Board. 31. 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. 32. In our opinion, the 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. 33. It is admitted by the Department that in Chhattisgarh the power was supplied to the industrial consumers at the rate of ₹ 3.20/- per unit for the AY 2004-05 and ₹ 3.75/- per unit for the AYs 2005-06 and 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear on sale of carbon credit is not at all taxable. The assessee also stated that it has incurred an expenditure of ₹ 31,23,279/- which has been debited under the head "CDM Expenses" and shown as Operating Expenses. Thus, the net receipt of carbon credit is ₹ 35,95,265/- during the year. 21. However, the Assessing Officer was not satisfied with the arguments advanced by the assessee and held that the income from sale of carbon credit being income received from a source beyond the first degree does not constitute profit and gains derived by the eligible undertaking or enterprise from any business referred to in sub-section (4) of section 80-IA of the I.T. Act. Further, he held that the receipt of such carbon credit is taxable as revenue receipt. 22. Before the ld. CIT(A), the assessee submitted that during financial year 2010-11, the assessee company has received Verified Emission Reduction Credit ('VER Credit') of ₹ 67,18,544/-. The aforesaid sum received from the sale of VER Credit forms part of eligible unit- 1 of the assessee and the same has been included after deducting the expenses of ₹ 31,23,279/- as eligible profit of unit- 1 for the claim of deduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee by jurisdictional Tribunal in the case of Shree Nakoda Ispat Ltd. in ITA No.109/BLPR/2011. Subsequently, an amendment has also been brought by enacting section 115BBG by Finance Act, 2017 providing that w.e.f. 01.04.2018 the receipts from sale of carbon credits would be taxable @ 10%. Thus, by this amendment, the uncertainty prevailing in taxation of receipts from carbon credits has been settled. The above amendment is prospective and therefore as a necessary corollary such receipt prior to the amendment are not taxable and are capital in nature. 28. After hearing both the sides, the ground raised by the assessee under Rule 29. of the Income Tax (Appellate Tribunal) Rules, 1963 is admitted for adjudication. Since this ground was neither raised before the Assessing Officer nor before the ld. CIT(A) for which there is no adjudication, therefore, considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore this issue to the file of the Assessing Officer with a direction to adjudicate the issue afresh. While doing so, he shall give due opportunity of being heard to the assessee and decide the issue as per fact and law. We h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was no such embargo for the preceding years. 34. Aggrieved with such order of the ld. CIT(A), the Revenue is in appeal before the Tribunal. 35. After hearing both the sides, we find identical issue had come up before the Tribunal in assessee's own case for assessment year 2009-10 and 2010-11. We find the Tribunal vide ITA Nos.358 to 360/RPR/2014 order dated 18.01.2018 has decided the issue at para 47 of the said order by observing as under :- "47. We have heard ld. D.R. and perused the record of the case. We find that the CIT(A) has relied on the decision in the case of Modi Industries (supra) and Hon'ble Karnataka High Court in the case of CIT vs. Infosys Technologies Ltd. (supra), wherein, it has been held that the expenditure incurred on social responsibility was laid out or expended wholly and exclusively for purposes of business. The CIT(A) has referred to the amendment made in Finance Act (No.2) 2014 w.e.f. 1.4.2015 in Section 37, wherein, it is declared that for the purposes of sub-section (1) any expenditure incurred by an assessee on the activities relating to corporate social responsibility referred to in section 135 of the Companies Act, 2013 shall not be deemed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... avratri, Engineers day celebration, Janmashtamai, - donation to Rotary club, Nav Durga Samiti, Shiv Sena, Durgotsava Samiti, Corporation Bank, Sangit Samiti, - donation to Chhattisgarh Cricket Association (Rs.5,00,000/-), - donation to World Renewal Spiritual Trust (Rs.51,000/-). 39. Rejecting the various explanations given by the assessee, he disallowed the entire sum of ₹ 10,13,489/- on the ground that the same has not been incurred wholly and exclusively for the purpose of business. 40. In appeal, the ld. CIT(A) restricted such disallowance to ₹ 12,87,978/- and allowed relief of ₹ 3,50,000/-. While doing so, he observed that except ₹ 3,50,000/- incurred towards purchase and distribution of sweets, the balance amount does not relate to the business. 41. Aggrieved with such order of the ld. CIT(A), the Revenue is in appeal before the Tribunal. 42. We have considered the rival arguments made by both the sides and perused the material available on record. We find identical issue had come up before the Tribunal in assessee's own case wherein the Tribunal, considering the CBDT Circular No.17(F.No.27(2)-IT/43) dated 06.05.1983 and another CBDT Circ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ionment or allocation of expenses as adopted by the assessee for determining the expenses relatable to the exempt income is not correct. Since the assessee has failed to establish that no part of interest bearing funds was utilized for making such investments, the income from which was not taxable, therefore, the Assessing Officer rejected the correctness of the claim of the assessee that no interest expenditure is relatable to making such investments, the income of which was not taxable. Applying the provisions of section 14A read with Rule 8D and relying on various decisions, the Assessing Officer disallowed an amount of ₹ 2,25,43,398/-. 47. In appeal, the ld. CIT(A) deleted the addition on the ground that the disallowance has been made without establishing any nexus between the interest bearing funds and exempted income yielding investment and non-interest bearing advances. He further noted that the assessee has sufficient non-interest bearing funds for making the investment in shares as it has sufficient net worth of its own. The Assessing Officer has not disputed the submission of the assessee that no expenditure was incurred for making investment. Relying on various de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is called for. Referring to the decision of the Hon'ble Punjab & Haryana High Court in the case of CIT vs. Abhishek Industries Ltd. reported in 380 ITR 652 and the decisions of the Kolkata Bench of the Tribunal in the case of Damodar Valley Corporation vs. Addl.CIT reported in 66 taxmann.com 25, he submitted that the initial burden was on the Assessing Officer to establish that borrowed funds were used for making investments, the income of which exempt. However, such initial burden was not discharged by the Assessing Officer. In his alternate submission, he submitted that the disallowance cannot exceed the exempt income. For the above proposition, he relied on various decisions. 54. We have considered the rival arguments made by both the sides and perused the orders of the authorities below. We find the Assessing Officer in the instant case disallowed an amount of ₹ 2,25,43,398/- u/s 14A on the ground that similar disallowance u/s 14A was made by the Assessing Officer in assessment year 2008-09 which was confirmed the ld. CIT(A) and disallowance of ₹ 2,03,73,385/- was made by the Assessing Officer u/s 14A for assessment year 2010-11. We find the ld. CIT(A) deleted such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he relevant observation of the Hon'ble High Court at para 9 of the order reads as under :- "9. Considering the aforesaid facts and circumstances, more particularly the fact that the assessee was already having its own surplus fund and that too to the extent of ₹ 1981.55 Crores against which investment was made of ₹ 144.51 Crores, there was no question of making any disallowance of expenditure in respect of interest and administrative expenses under Section 14A of the Act, therefore, there was no question of any estimation of expenditure in respect of interest and administrative expenses of ₹ 24,37,500/- under rule 8D of the Rules. Under the circumstances and in the facts of the case, narrated hereinabove, it cannot be said that the learned Tribunal has committed any error in deleting the disallowance of expenditure of ₹ 24,37,500/- incurred in respect of interest and administrative expenses under Section 14A of the Act. We are in complete agreement with the view taken by the learned Tribunal. At this stage, decision of Division Bench of this Court in the case of Principal Commissioner of Income-tax vs. India Gelatine & Chemicals Limited, reported in [2015] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion to PF and ESI although deposited after the due date prescribed under the relevant date, however, were deposited before the due date of filing of the return u/s 139(1) of the I.T. Act. The various Benches of the Tribunal are also taking the consistent view that employees' contribution to PF and ESI cannot be disallowed u/s 2(24)(x) r.w.s. 36(1)(va) if such deposits are made before the due date of filing of the return. Since in the instant case the assessee has deposited the employees' contribution to PF and ESI before the due date of filing of the return u/s 139(1) of the I.T. Act, 1961, therefore, following the consistent view of the various Benches of the Tribunal on this issue, we hold that the ld. CIT(A) is justified in deleting such disallowance made by the Assessing Officer. The ground raised by the Revenue is accordingly dismissed. 61. Grounds of appeal no. (f) and (g) being general in nature are dismissed. C.O. No.12/RPR/2018 (By Assessee) : 62. There was a delay of 1123 days in filing of the Cross Objection of the assessee. However, the ld. counsel for the assessee could not explain satisfactorily the reasons for such long delay in filing of this Cross Objection by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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