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TMI Blog2021 (8) TMI 422X X X X Extracts X X X X X X X X Extracts X X X X ..... ent and power purchase agreement are not held to be sham by the AO but it is only disputed the retrospective applicability in both these agreements, i.e. both these agreements were entered into on 24th of March 2005, made it applicable from 15th of March 2005. We do not find any reason to disallow the depreciation in the hands of the assessee. It is also to be seen that the Keshav Power Ltd has deposited a sum of ₹ 60 crores as security deposit. No doubt, this clause was not there in the lease deed entered into - this fact does not impact the allowability of this allowability of depreciation on the power plant in the hence of the assessee for assessment year 2005 06 - no doubt the availability of coal and water for purchasing of the power are to very relevant factors for production of power, however they may be relevant in determining the allowability of the power purchase price paid by the assessee to Keshav Power Ltd, but does not have any impact on the allowability of depreciation to the assessee on leased out assets. In view of this, we find no infirmity in the order of the learned CIT- A in deleting the disallowance of depreciation to the assessee on power plant whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... well as the power purchase agreement between the assessee and Keshav Power Ltd is sham - HELD THAT:- Now it is an established fact that assessee has purchased power from power plant leased out to Keshav Power Ltd at the competitive rate which are neither excessive not unreasonable, therefore there is no reason that why this power purchase expenditure incurred by the assessee should be disallowed. Accordingly we direct the learned assessing officer to delete the disallowance being power purchased by the assessee from Keshav Power Ltd. Thus ground number 2 of the appeal is allowed. Disallowance of payment made for conducting Hindi classes to one organization and payment for supply of milk and maintenance of the guidance - HELD THAT:- Both these expenditure are also been considered by the learned CIT A incurred wholly and exclusively for the purposes of the business of the assessee as well as the same are also covered by the decision of the coordinate benches in earlier years in the assessee‟s own case where expenditure of similar nature are allowed. The learned departmental representative could not show us any reason to deviate from the decision of the learned CIT A. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome, is also required to be added to the book profit of the assessee u/s 115JB of the income tax act. - ITA No. 1044/Del/2015, ITA No. 1036/Del/2015, ITA No. 5258/Del/2010, ITA No. 5529/Del/2010, ITA No. 4124/Del/2014, ITA No. 4166/Del/2014 - - - Dated:- 3-8-2021 - Shri Prashant Maharishi, Accountant Member And Shri K.N.Chary, Judicial Member For the Assessee : Shri R. M. Mehta, FCA For the Revenue : Ms. Nidhi Srivastava, CIT DR ORDER PER PRASHANT MAHARISHI, A. M. 1. These are the 6 cross appeals filed by both the parties for three consecutive assessment years in case of one assessee involving similar issues, argued together by both the parties raising common arguments and therefore as a matter of convenience all these six appeals are disposed of by this common order. 2. For assessment year 2005 06 , history shows that the coordinate bench disposed off vide order dated 27/9/2013 ITA number 5257/del/2010 filed by the assessee and ITA number 5528/del/2010 filed by the revenue against the order of the Commissioner Of Income Tax (Appeals) LTU , New Delhi dated 30 September 2010 wherein the assessee challenged the order of the learned asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat in the Memorandum of Association, it has one of the main object of carrying out leasing business as one of the businesses, Resolutions were passed commencing that business, Proper Lease agreement was entered in to and leasing business has started. The leased assets is a power plant which is already in existence on which lease rental is earned, offered for taxation and therefore the power plant is owned by the assessee, used in its leasing business, therefore depreciation there on is allowable. 9. The learned assessing officer disallowed the payment of power charges of ₹ 35 lakhs as well as the depreciation on the power plant alleging that the assessee has not installed the power plant by 31st of March 2005 itself and therefore depreciation to the assessee cannot be allowed. Similarly as the power plant is not installed before 31st of March 2005, assessee could not have purchased power from M/s Keshav Power Ltd and therefore power charges paid by the assessee to that company were also disallowed. The main reason for holding that assessee has not installed power plant before 31st of March 2005 is that the assessee has submitted the evidence of installation of the power ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ected the claim of the assessee of the depreciation and also disallowed the power charges. The learned assessing officer did so giving the reason that additional evidences filed by the assessee were in support of the various steps undertaken by the assessee company to comply with the provisions of Section 293 (1) (a) of The Companies Act 1956 like seeking the approval of the shareholders for releasing of the plant and it is merely a statutory formalities which do not bring on record any evidence to the effect that the said power plant was ready for commission on the said date. He further held that there is no reason given by the assessee for making the lease deed effective from retrospective effect. He further reiterated that the whole transaction entered into by the assessee is with the sole object of claiming the depreciation on the power plant. Thus the original order passed by the learned assessing officer was also repeated in the second assessment order passed by the learned assessing officer. 15. The assessee aggrieved with the same preferred an appeal before the learned CIT A. This time the learned CIT A allowed the claim of the assessee granting the depreciation on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... grounds and any other relief, to which it is entitled under the law, may be directed to be granted to it. 4. That the above grounds of appeal are without prejudice to one another. 18. The revenue has raised the following grounds of appeal in ITA No. 1036/Del/2015 for Assessment Year 2005-06:- 1. On the facts and circumstances of the case and in law Ld. CIT(A) has erred in deleting the disallowances of depreciation of ₹ 13,97,38,163/- made by AO in respect of newly installed building, plant and machinery comprising a captive thermal power plant which was not put to use in the Financial Year 2004-05 relevant to AY 2005-06. 2. On the facts and circumstances of the case and in law Ld. CIT(A) has erred in giving part relief to the assessee on account of addition of ₹ 35,00,000/- made by AO in respect of disallowance of power charges paid to M/s KPL. 19. The learned authorised representative firstly explained history of the case and thereafter referred to the order of the learned CIT (A). He took us to paragraph number 6.2 of Appellate order and submitted that lease transactions cannot be held to be sham as the learned assessing officer acce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsumption of electricity and power purchases from Tamil Nadu Electricity Board as well as Keshav Power Ltd were also examined. In those years the cement production increased and the power consumption of Tamilnadu Electricity Board drastically reduced and the power supplied by Keshav Power Ltd significantly increased. He submitted that this fact itself proves that the power plant was in operation and the power was purchased by the assessee. 21. He further referred to the paragraph number 6.5 of Appellate order wherein the regulatory compliance with respect to the leasing business of the assessee was also complied stating that assessee is a public limited company and all these records are available in public domain. He further referred to the minutes of the meeting of the board of directors dated 28/12/2004 which clearly shows that the lease deed entered into by the assessee on 24th of March 2005 was made effective from 15th of March 2005 and therefore it cannot be an afterthought. He also referred to the consent of the shareholder to lease out the assets of the company. He further submitted that there is nothing wrong which prevented the assessee in entering a lease agreement s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that:- i. As per page number 9 of the order electric inspector certificate was given to the assessee on 30th of March 2005 and therefore it is apparent that the plant could not have been commenced for production by 31st of March 2005. ii. Referred lease agreement which did not mention that the lessor, assessee owns a running power plant but it specifically says that the lessor proposes to build. Therefore at least till the date of signing of the lease agreement the power plant was not ready to commence. iii. Referred power purchase agreement and submitted that it also did not refer that lessee had a power plant which is in operation. It also says that it is proposed. iv. Submitted that the balance sheet of lessee did not show any power production for the year ended on 31/3/2005 therefore the power plant was not in operation. v. Merely because lease income shown by the assessee and offered for taxation, it does not entitle the assessee to claim depreciation on the power plant. vi. The whole transaction is a perfect case to apply the ratio laid down by the decision of the Supreme Court in McDowell Co Ltd versus commercial tax Officer 154 ITR 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paper book which is the memorandum of Association of the company wherein he referred to the main object clauses where the leasing is also main object of the assessee. ii. Stated that it is the prerogative of the CIT A to get any enquiry conducted by him and assessee does not have any say. In fact he supported that the order of enquiry was issued u/s 131 of the Income Tax Act by the CIT A to his counterpart in Trichy who got inquiries conducted. He submitted that the enquiry report cannot be doubted by the revenue now. iii. Even otherwise, except disputing inquiry report No infirmity is pointed by the revenue. Thus, on subject , same remains unchallenged, iv. Lease agreement is document that has to be read as a whole and the revenue cannot approbate and reprobate the same transaction in two different assessment years. He submitted that the lease agreement has been accepted by the revenue in the subsequent years and the same lease agreement is held to be sham in this assessment year. v. Referred to the power purchase agreement entered into by the assessee, power purchase agreement and the lease agreement are required to be looked into together. vi. Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt is ready to use‟ even then the depreciation is allowable to the assessee as lessor. viii. Submitted that the permission was given by the Chief Electrical Inspector on 30th of March 2005 to commission the electrical installation inspected by the authority on 26th of March 2005 which itself proves that the power plant was ready for use on 26th of March 2005 itself and even otherwise on 30th of March 2005 there is a permission to commission the power plant. ix. Submitted that if the power plant is not ready it cannot commission on 30th of March 2005 itself proves that the power plant was granted the permission to commission it. x. referred to the lease agreement and the power purchase agreement and stated that the lease rental are taxable in the hands of the assessee, payments on account of power generated by Keshav Power Ltd are supplied to the assessee for use in the manufacturing of the cement and assessee is entitled to depreciation on the power plant being the owner‟ thereof and used it into the leasing business. xi. Relied on several judicial precedents to support his argument. Therefore he submitted that the assessee is entitled to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany over the power purchased from Tamil Nadu Electricity Board and the rates offered by lessee are far more competitive. For this proposition for the sources of the power and respective tariff as well as the competitiveness of the tariff offered by lessee and outside consultant was also retained based on its advice the power purchase agreement could be entered into. This consultant submitted a report on 18 January 2005 to the assessee. Consequently lease deed was entered into by the assessee with lessee on 24th day of March 2005 which is made effective from 15th day of March 2005 as per the lease agreement clause number 2. 1. The lease rent was provided in clause 3 at monthly lease rent of ₹ 1,837,500 per month. However the lease rent for the broken period from 15th of March 2005 to 31st of March 2005 was determined at ₹ 918,750 which is for 15 days. The details of the power plant are also provided in schedule 1 which shows in nomenclatures of machinery and equipment, quantity and the details of the manufacturer/supplier. Scheduled 2 shows the details of lease rent as well as tenure and the commencement date. The commencement date is stated to be 15th day of Mar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see with Keshav Power Ltd and also power purchase agreement entered into with that party, which is stated to be a related party by the learned assessing officer, he therefore stated that these are the sham agreements entered into by the assessee for claim of depreciation for financial year 2004 2005 (assessment year 2005 06) on the power plant which did not commence production till 31st of March 2005. He further looked at the availability of water and coal in the hands of the lessee to be supplied by lessor, and found that no such water and coal is supplied by the assessee and therefore there could not have been any power produced by the lessee. Hence, according to the learned assessing officer the power plant was not commissioned on or before 31st of March 2005 and therefore no depreciation could be granted to the assessee. Further with respect to the claim of the assessee that the main object of the assessee is the business of leasing, assessee has leased out its power plant which is backed by the proper resolution of the Board of Directors and also of the shareholders of the company, assessee is a public listed company, therefore there cannot be any afterthought in executed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 32 of 'ownership' and 'put to use' have been duly found to be satisfied. That being the case, such leasing transaction cannot be held as 'sham' and 'after thought' as was held by the Ld. AO in the impugned order based on by my Ld. Predecessor in the, first round of appeal. In view of this, such transaction cannot be held as a colorable device and the reliance of the Ld. AO on the decision of CIT Vs MacDowell and Co. Ltd. Vs Commercial Tax Officer (supra) and the case of Siddho Mal Vs CIT (supra) was misplaced. 6.3 This issue had come up for adjudication before me with regard the appeal filed by the appellant against the assessment orders for A.Y.2007-08, 2008-09, 2009-10 and 2010-11, in which disallowance of depreciation and power charges was made by holding the leasing agreement with M/s KPL as 'sham' and 'after thought'. In order to ascertain the correct facts relating to existence and operation of the captive power plant, which is the subject matter of dispute, commission under Section 131 was issued to CIT, Trichy. The CIT, Trichy got the enquiries conducted by the Income Tax Inspector and forwarded the report in the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;, as was held by my Ld. Predecessor while deciding the first round of appeal for the current year, the appellant had filed additional evidences before the Hon'ble ITAT. These evidences buttress the fact that before leasing out the power plant, the appellant company had made regulatory compliance with the statutory obligations laid down by the Companies Act 1956 as required in the case of a listed company. The appellant company had more than 15,000 shareholders and therefore, the requirement of obtaining their consent through postal ballot, which in was itself is a mammoth exercise, cannot be concocted by the appellant, only for booking the depreciation allowance for A.Y.2005-06, as alleged by the AO, just for the sake of tax avoidance, more so, when in the immediately subsequent assessment year, i.e. A.Y.2006-07, the AO had himself allowed depreciation allowance on the power plant. By very nature, the additional evidences are the ones, which are in the public domain as required under the Companies act, 1956. The Ld. AO, while passing the impugned order, has referred to the said evidences in Para 15, 16,17,18,19,20 21 of the impugned order. The Ld. AO has held that the Minut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fillment of statutory process under the Companies Act, 1956, which show that the said leasing transaction was neither 'sham' nor an 'after thought' as was alleged by my Ld. Predecessor, while deciding the first round of appeal. The additional evidences filed before the Hon'ble ITAT were not intended to explain as to why the power plant was made retrospectively effective from 15.03.2005, therefore the Ld. AO's observation that such evidences do not explain as to why the plant was made effective from 15.03.2005, was not relevant, as these additional evidences did not intend to do so. Keeping in view the above facts, the bonafide of the leasing transaction of the said captive power plant to M/s KPL, stands proved and therefore, such transaction cannot be held as 'sham' or 'after thought'. This is supported by the fact that in all the subsequent assessment years, on similar facts, depreciation was granted by the AO and the leasing arrangement has been held as bonafide by the Department. 6.6 As per the Section 32 of the Act, there are two essential contentions for allowing depreciation allowance namely; (i) Ownership of the assets; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its leasing business, keeping in view the decision of the Hon'ble Supreme Court in the case of CIT Vs Shaan Finance (P) Ltd (supra) and in the case of M/s ICDS Ltd. Vs CIT (supra) and M/s CIT Vs Kotak Mahindra Finance Ltd. (supra) and several other decisions on the same ratio, which have been cited by the Ld. Appellate Counsel in the written submissions. 6.6.2 Without prejudice, The adverse observation of the AO that there was no evidence of supply of coal and water for this purpose cannot be held as an adverse finding on the use of the asset by the appellant in the leasing business. Moreover, it is evident that the appellant is a manufacturer of cement with a turnover of over ₹ 5,000 crores. Coal and water are important input materials required for such cement production. With a view to keep the cement plant in readiness for operation, the appellant is required to maintain huge stock of coal and water, apart from the main ingredients. Therefore, there is no requirement for the appellant to produce evidence of specific purchase of coal only for the purpose of making supply of coal to the power plant on 30.03.2005. 6.6.3 Keeping in view the above facts, I find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 05, in subsequent years it supplied power to the assessee. This enquiry report has been dealt with in detail by the learned CIT A. The learned CIT DR has not disputed the content of this enquiry report but has argued that that only inspector was debited and further the year of hearing of the appeal was far later on then the year in which the plant was commissioned and therefore the income tax Department could not have given a finding that the plant and machinery has commenced production or even ready to commence the production for the year ended on 31st of March 2005. We find that the enquiry has been referred by the Commissioner of income tax appeals, he referred to the Commissioner of income tax Trichy, where the plant is situated, enquiry report was submitted and gave a finding that plant and machinery commence the operations for the year ended on 31st of March 2005. Now two dispute by the revenue of the report of not of the CIT A , but of the CIT Trichy, that too without any evidence contrary to that, cannot be accepted. Even against the assessee there is no evidence that plant and machinery i.e. power plant was not commissioned on or before 31st of March 2005 at least wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the assets came into existence only on 26th of March 2005, it is a matter between these two parties to enter it into with retrospective effect from 15th of March 2005 the parties have agreed to, it does not make any impact on the allowability of depreciation in the hence of the assessee. It is also to be seen that the Keshav Power Ltd has deposited a sum of ₹ 60 crores as security deposit. No doubt, this clause was not there in the lease deed entered into. However this fact does not impact the allowability of this allowability of depreciation on the power plant in the hence of the assessee for assessment year 2005 06. Further no doubt the availability of coal and water for purchasing of the power are to very relevant factors for production of power, however they may be relevant in determining the allowability of the power purchase price paid by the assessee to Keshav Power Ltd, but does not have any impact on the allowability of depreciation to the assessee on leased out assets. In view of this, we find no infirmity in the order of the learned CIT A in deleting the disallowance of depreciation of ₹ 139,738,163/ to the assessee on power plant which is leased ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant could not have operated the power plant without the approval of the Chief Electrical Inspector, Govt, of Tamilnadu, understandably, the agreement would not have been made operable before 30.03.2005. The approval given by the Inspector dated 30.03.2005 clearly shows that for this purpose, the Chief Electrical Inspector had inspected the plant and machinery on 26.03.2005 and approved the same on the said date itself i.e.26.03.2005. Therefore, effectively, the power plant was fit to be 'put to use' even on 26.03.2005 itself. However, the order in writing was issued on 30.03.2005. Under the circumstances, there is no reason to believe that the appellant company and M/s KPL, who must be keen to start generation of power from the said newly built captive power plant immediately, may not have made efforts to receive this letter immediately and hence, the company may not have started generation of power on or before 31.03.2005. In any case, there are no adverse facts on record to hold that the power plant was not put to use by the appellant company on or after 30.03.2005 in its leasing business. However, prior to this, for the period 15.03.2005 till 29.03.2005, it cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd for the year ended on 31st of March 2006 which is placed at paper book as per annexure 6 of the paper book wherein looking at notes to accounts in [B][7] where the details regarding production and sale of power is mentioned it specifically shares that the production of power in the previous year ended on 31st of March 2005 is Nil and the value received is ₹ 35 lakhs. We have not been shown any clause in the power purchase agreement that when assessee does not produce any unit of the power, the minimum off take requirement obligation of the assessee would trigger and assessee is required to pay Keshav Power Ltd minimum off take power bill. Further this is evident that assessee has shown that it would be beneficial for it to buy power from Keshav Power Ltd then to consume power from Tamil Nadu Electricity Board. Even then assessee does not purchased power from Keshav Power Ltd is clearly evident because the Keshav Power Ltd has not produced any unit of the power. Therefore, we do not agree with the order of the learned CIT A in allowing even the proportionate amount of power charges to the assessee wherein there is no production of power by the supplier. Merely becau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er relief, to which it is entitled under the law, may be directed to be granted to it. 40. The revenue has raised the following grounds of appeal in ITA No. 5529/Del/2010 for Assessment Year 2006-07:- 1. On the facts and circumstances of the case and in law, the CIT(A) has erred in directing the AO to allow the expenditure incurred by the appellant of ₹ 45,15,026/- to various sales organizers for rendering marketing services with regard to sale of non-levy cement. 2. (a) On the facts and circumstances of the case and in law, the CIT(A) has erred in directing the AO to allow maintenance and pooja expenses of colony and nearby temples of ₹ 18,49,152/-. (b) On the facts and circumstances of the case and in law, the CIT(A) has erred in directing the AO to allow expenditure incurred of ₹ 9,30,557F/- on employees‟ recreation activities, festivals, get-togethers, annual day function, excursion trips at various factories. (c) On the facts and circumstances of the case and in law, the CIT(A) has erred in directing the AO to allow payment of ₹ 30,000/- to Dakshina Bharat Hindi Prachar Sabha for conducting Hindi classes. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e depreciation should be granted in this assessment year. Accordingly this ground of appeal does not survive. Therefore same is allowed for statistical purposes. 44. The second ground of appeal is with respect to disallowance of expenditure of ₹ 97,849,164 incurred by the assessee on payment of power charges. The learned assessing officer disallowed the above charges holding that the whole transaction of leasing of the power plant as well as the power purchase agreement between the assessee and Keshav Power Ltd is sham. Therefore he disallowed the payment of ₹ 97,849,164/ paid by the assessee to Messer‟s case of power Ltd. The learned CIT A also disallowed the same based on his own order for assessment year 2005 06. Now we find that the transaction of purchase of power is backed by the power purchase agreement and lease agreement of power plant leased out to Keshav Power Ltd has also been executed. As in assessment year 2005 06 we have held that there is no infirmity in either the power purchase agreement or in the lease agreement. Further in the set-aside proceedings for assessment year 2005 06, the learned CIT A has allowed the depreciation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. Both the parties agreed that there is no change in the facts and circumstances of the case and therefore we do not find any infirmity in the order of the learned CIT A deleted the above disallowance. 50. The next issue involved is the disallowance of payment of ₹ 30,000 made for conducting Hindi classes to one organization and payment of ₹ 92,411/ for supply of milk and maintenance of the guidance. Both these expenditure are also been considered by the learned CIT A incurred wholly and exclusively for the purposes of the business of the assessee as well as the same are also covered by the decision of the coordinate benches in earlier years in the assessee‟s own case where expenditure of similar nature are allowed. The learned departmental representative could not show us any reason to deviate from the decision of the learned CIT A. accordingly we confirm his order. 51. In the result ground number 2 of the appeal of the learned AO is dismissed. 52. Ground number 3 is with respect to the disallowance of depreciation on water works and water installation system is the learned assessing officer held them as part of building and allowed de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in upholding the disallowance made u/s 14A of the Income-tax Act, 1961 to the extent of ₹ 51,23,311/-. 3. That the learned CIT (Appeals), while determining the amount of disallowance u/s 14A of the Income-tax Act, 1961 has failed to appreciate that: - (i) entire amount of interest paid by the assesse company in an amount of ₹ 53,96,44,059/- has been incurred on the term loans and other borrowings made by the assesse company for the purposes of its business of manufacture of commodities and no portion of the same was to be disallowed; (ii) the Assessing Officer has not brought anything on record to support his contention that borrowed funds of the company had been diverted for purposes of making investments in shares and securities and thus certain amount of interest is liable to be disallowed under section 14A of the Income- tax Act, 1961; and (iii) while considering the amount of salaries disallowable as expenditure for the purpose of calculation of disallowance under section 14A of the Income- tax Act, 1961, the amount of salaries relatable to all the employees of the Finance Department ought not to be included inasmuch as the company had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er normal .provisions on account of disallowance u/s 14A. 6.1 On the facts and circumstances of -the case and in law Ld. CIT(A) has erred in reducing the addition of ₹ 9,56,00,000/- to ₹ 51,23,311/- made by AO under-section 115JB on account of disallowance u/s 14A. 60. Assessee filed its return of income declaring a total income of ₹ 94,29,28,376 on 31 October 2007 the assessment u/s 143 (3) of the income tax act was passed by the learned assessing officer on 30 December 2009 wherein several additions/disallowances were made. The assessee preferred an appeal before the learned CIT A wherein the assessee was granted substantial relief and therefore the learned AO is aggrieved by the relief granted to the assessee and assessee is aggrieved by the additions/disallowances sustained by the AO. 61. Both the parties are heard on the issues. The orders of the lower authorities were also perused the learned authorised representative and the learned departmental representative both agreed that that ground number 1 4 of the appeal of the learned assessing officer are covered by the decision of the coordinate bench in assessee‟s own case. On other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ely covered in favour of the assessee by the decision of the coordinate bench in assessee‟s own case, respectfully following the same we direct the learned assessing officer to allow the claim of the assessee u/s 80 IA of the income tax act, we confirm the order of the learned CIT A and dismiss ground number 4 of the appeal. 65. Ground number 5 and 5.1 with respect to the deletion of the disallowance of power charges paid by the assessee to Messer‟s Keshav Power Ltd amounting to ₹ 273,742,954. Now the argument of the learned authorised representative is that the learned CIT A has accepted the report of the income tax inspector without affording any approach and 82 the learned assessing officer in the matter. We find that this issue is identical to the issue in the case of the assessee for assessment year 2006 07 wherein we have held that the assessee has paid power charges to Keshav Power Ltd based on the validly executed power purchase agreement. The assessee has also shown that in earlier years the consumption of power purchased from Keshav Power Ltd has resulted into substantial benefit to the assessee. It is also demonstrated that the rates paid to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e comprising the dividend on long-term capital gain by the amount of book profit as per the profit and loss account and accordingly computed the total disallowance u/s 14 A of ₹ 5,123,311 and thereby granting relief of ₹ 89,976,688. Accordingly both the parties are in appeal before us. The learned assessing officer is challenging the deletion of the disallowance to the extent of ₹ 89,976,688 whereas the assessee is challenging the addition sustained by the learned CIT A and above sum of ₹ 5 lakhs made by the assessee itself. 67. The learned authorised representative vehemently submitted that the assessee has disallowed a sum of ₹ 5 lakhs on its own as an exempt income, the learned assessing officer has not recorded any satisfaction with respect to the correctness of the claim of the assessee with respect to examination of the books of accounts. Therefore it was submitted that in absence of any sum satisfaction recorded by the learned assessing officer, the disallowance cannot be made as held by the decision of the honourable Delhi High Court in case of CIT versus Taikisha engineering India Ltd [ supra]. 68. The learned departmental represen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 115JB of the act. The special bench of ITAT in ACIT versus Vireet investment private limited 82 taxmann.com 415 has categorically held that the disallowance made u/s 14 A read with rule 8D cannot be the subject matter of disallowance while determining the book profit u/s 115 JB of the act. Therefore, so far as the quantum is concerned, determined by the learned assessing officer and the learned CIT A which was based on the provisions of rule 8D cannot be upheld as such disallowance cannot be imputed under the provisions of Section 115JB of the act. However it is also important to note that the disallowance needs to be made with respect to the expenditure incurred with respect to the exempt income in terms of the provisions of clause (f) to Section 115 JB of the act while determining the book profit. Honourable Calcutta High Court in the case of CIT versus JayShree tea industries Ltd ITA number 1501 of 2014 dated 19/11/2014 and 2019 (7) TMI 33 - GUJARAT HIGH COURT THE PRINCIPAL COMMISSIONER OF INCOME TAX 3 VERSUS M/S NIRMA CHEMICALS WORKS PVT LTD.Dated:- 24-6-201 held that the disallowance regarding the exempted income needs to be made as per clause (f) to explanation 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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