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TMI Blog2021 (11) TMI 374X X X X Extracts X X X X X X X X Extracts X X X X ..... allowance u/s 43B - liability incurred during the previous year but not paid on or before due date of filing return of income - CIT(A) observed that it is evident that the claim of the assessee is not a fresh claim but a revised claim and he has also considered the judicial pronouncement relied by the assessee and in view of above discussions, he is of the considered view that claim of the assessee required consideration in impugned assessment order. Accordingly, he allowed the deduction claimed by the assessee - HELD THAT:- Claim of the assessee is legitimate claim and such revised claim can be entertained by the first appellate authority and accordingly Ld. CIT(A) has allowed the claim of the assessee by relying on decision of GOETZE (INDIA) LIMITED [ 2006 (3) TMI 75 - SUPREME COURT] and the claim of the assessee is legitimate. Therefore, we do not see any reason to interfere with the findings of the Ld. CIT(A). Accordingly, ground raised by the Revenue is dismissed. Disallowance of expenses incurred by the employees of the assessee in the clubs - HELD THAT:- It is normal practice to allow the employees to use the facilities in the club and also it is part of the business t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ling Tower and Cooling power from Ammonia Absorption Refrigeration plant at Sandila as on 31.01.2000, 22.03.1997 and 28.02.2002 respectively. Similarly, commencement of production was claimed of Steam Power and Cooling Power from Cooling Towers as on 01.03.2001 and 02.08.2002 respectively. 4. It is submitted before us that the Assessing Officer rejected the claim of the assessee u/s 80IA of the Act with the observation that generation of steam is not a form of power eligible for deduction, no separate undertaking was set up for production of instant dry seized and it is manufactured in an undertaking which already existing prior to 01.10.1994 and according to AO, the undertaking is established by stipulating the old existing business for the purpose of section 80IA of the Act. It is brought to our notice that the reasons for disallowing the claim of deduction u/s 80IA are materially same which was raised in earlier assessment year by the respective Assessing Officers. The assessee also relied on the same arguments to support the claim of deduction u/s 80IA. It is submitted that the Ld. CIT(A) in the current assessment year relying on the orders of respective CIT(A) in the earl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the remand report stated as under: The Assessee has submitted the copy of factory inspector s certificate in respect of cooling power plant and biogas power plant. The certificate revels that the cooling power plant and biogas power plant is separate from Fresh Baker Yeast and Instant Dry Yeast. The assessee submitted separate and duly audited Profit and Loss accounts giving the revenues and expenses from such power generation undertakings at Sandila and Chiplun and also furnished Balance Sheets which give details of assets and liabilities of each power generation undertaking. These details are available at pages no 195 to 473 of the assessee Paper book No I. It has been held that if new a industrial unit is established as a part of an existing industrial establishment and if the newly established unit is itself an integrated independent unit in which new plant and machinery is put up and that by these is capable of production of goods independently, the said unit could be classified as newly established undertaking. 35. The assessee has separate plant and machinery, separate labour for each of its power generation undertakings. In the assessee s case, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a larger undertaking and assessee s power generation undertakings are not independent unit with a distinct name, address or product and that in various documents filed before various Government authorities, the name and address of the factory is that of Saf Yeast Co.Pvt. Ltd. and the product manufactured is stated to be yeast. There is no need nor is there any statutory obligation to have a different name and the address obviously has to be the same as the assessee s power generation undertakings are situated in the same premises as the yeast producing factory. The Mumbai Bench of ITAT in the case of West Coast Paper Mills, 100 TTJ 833 observed that Section 80IA of the Act does not speak of the consumption of power and there is no fetter against using the power generated for self consumption. The Bench was of the view that the assessee was eligible for deduction for power generated by the two DG sets, which was used for captive consumption. In taking this view, the Tribunal relied on the decision of the Supreme Court in Textile Machinery Corporation Ltd. vs. CIT regarding exemption under section 15C of the 1922 Act and the Bombay High Court decision in CIT vs Sahney Steel P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r reporting of a separate segment in the Accounts. Accounting Standards are prescribed under the Companies Act. Income tax authorities cannot derive adverse inference merely since the assessee took a view that segment reporting is only required for the manufacture of yeast. Further, the Cooling Power and Steam Power generated by the assessee are captive consumption and hence no separate segment disclosure is required. Further as per the provisions of the Act, for granting a deduction u/s 80IA of the Act only a separate P/ L account and B/S is to be prepared and report from a Chartered Accountant as per Form No 10CCB is also required to be filed and same have been duly filed. The assessee relied on the judgement of the Hon ble Supreme Court in the case of CIT vs Bongaigaon Refinery and Petrochemical Ltd (349 ITR 352). In this case the AO while framing assessment, under Section 143(3) allowed deduction u/s 80HH and 80I of the Act after examining and being satisfied with the unitwise profit loss statement filed by that Assessee. The CIT u/s 263 passed an order holding that the assessee was statutorily obliged to maintain Segregated Accounts for each of the three units unit-wise for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be entertained at this stage. 7. Aggrieved with the above order the assessee preferred an appeal before the Ld. CIT(A) and before Ld. CIT(A), the assessee submitted that the bona fide claim can be entertained on the stage of appellate proceedings as per the Apex Court decision in the case of Goetze (India) Limited v. CIT 284 ITR 323 (SC). After considering the submissions of the assessee, the Ld. CIT(A) observed that AO has not considered the claim for the reason that no revised return was filed to make this claim and hence the same was not allowable. Further, the Ld. CIT(A) observed that it is evident that the claim of the assessee is not a fresh claim but a revised claim and he has also considered the judicial pronouncement relied by the assessee and in view of above discussions, he is of the considered view that claim of the assessee required consideration in impugned assessment order. Accordingly, he allowed the deduction claimed by the assessee. 8. Aggrieved, the Revenue is in appeal before us and after considering the submissions of both the counsels, in our considered view, the claim of the assessee is legitimate claim and such revised claim can be entertained by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profit on such sale, which has not been done. According to the assessee, as compared to the rates charged by the U.P. State Electricity Board for electricity supplied by it the rate charged for the refrigeration energy is on the lower side. Sub-section (8) of section 801A defines market value of eligible goods as the price that such goods would ordinarily fetch in the open market. A comparison with the market price of some other goods is not contemplated by the assessee. Comparison of the price of the refrigeration energy with electric energy is therefore of no relevance. Considering net profit percentage declared in consolidated profit loss account of deduction u/s. 80IA works out as follows: Accounting Year Cooling power (Chiplun) Steam power (Chiplun) Cooling power (Sandila) Total Net Profit as per P L a/c on yeast mfg activity 2012-13 Net profit 83.88% 94.44% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Hon' ble Tribunal are binding on the lower authorities. 2. On the facts and in the circumstances of the case and in law the CIT(A) erred by passing an order under Section 250 of the Income Tax Act, 1961 by following the order of his predecessor, when, such order was set aside and appeals of the Assesee were allowed by the Hon'ble Income Tax Appellate Tribunal for AY 2005-06 to AY 2008-09 and for AY 2009-10 to AY 2012-13. A copy of the Hon ble Tribunal's order for AY 2005-06 to AY 2008- 09 was submitted on 12.02.2018 along with written submission. The Hon'ble Tribunal's order for AY 2009-10 to AY 2012-13 was submitted to CIT(A) on 21.01.2020. 3. On the facts and in the circumstances of the case and in law the CIT(A) erred in passing the order under Section 250 of the Income Tax Act, 1961 by failing to treat the Appellant's appeal as a covered issue in Appellant's own case vide orders passed by the Hon'ble Tribunal for AY 2005-06 to AY 2008-09 and for AY 2009-10 to AY 2012-13 12. At the time of hearing, it is brought to our notice that the Co-ordinate Bench has considered exactly similar issue to re-compute the deduction u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear and to every subsequent assessment year up to and including the assessment year for which the determination is to be made. 68. Perusal of the above provision shows that for purposes of calculating the deduction under Section 80-IA of the Act, the profits of the eligible business must be worked out as it were the only source of an assessee s income. Therefore, the the AO by applying the net profit percentage of the assessee s yeast manufacturing business for arriving at profits u/s 80-IA in respect of Cooling Power and Steam Power generation undertakings is contrary to Section 80IA(5) of the Act and is therefore baseless and deserves to be set aside. When the assessee has submitted the audited statements duly supported by various records of the power generation undertakings, the same should be taken as correct, subject of course to the verification of the facts. None of these facts have been disputed by the AO. 69. In view of the above discussion and facts of the case, case laws cited of courts, we finally held as under: - (i) That the assessee has generated steam power from bio-gas, (ii) Generation of cooling power from cooling towers and (ii ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing a legal question and very important submission made by the Appellant during the course of Appellate proceedings, on 'limited scrutiny', when such question is about jurisdiction and goes to the root of this scrutiny assessment. 16. Brief facts, relating to the above grounds of appeal are, at the time of assessment, the Assessing Officer observed from the note forming the part of the audit report that the assessee has debited ₹1,02,051/- in the profit and loss account as expenditure incurred in the clubs. The AO observed that the expenditure on clubs is on personal entertainment, accordingly, he was of the view that no personal expense to be debited in the profit and loss account within the meaning of section 37(1) of the Act. Therefore, he disallowed expenditure of club membership at ₹1,02,051/-. 17. Aggrieved with the above order, the assessee preferred an appeal before the Ld. CIT(A) and submitted the detailed submissions in this regard, it is reproduced below: 1. The Appellant is in the business of manufacturing bakers yeast. 2. The Appellant conducts meeting with its clients at clubs to discuss the business prospects and improve bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owed under section 37(1). 7. The Tax Auditor has not disclosed any expenses incurred for utilizing club services as personal expenses itself indicate that the expenses are not personal expenses. 8. This indicates that the expenses incurred at club are wholly and exclusively for the purpose of the business and thus the disallowance made by the Assessing Officer should be deleted. 18. After considering the submissions of the assessee, the Ld. CIT(A) dismissed the appeal of the assessee with the following observations : 6.4 As to club expenses, it is noteworthy that whether a particular expenditure is to be allowed as revenue expenditure in the hands of the assessee will depend upon the facts of each individual case and no straitjacket formula can be adopted for deciding the issue. In the case of the assessee, the Auditor has flagged the club expenses as being personal in nature. The assessee did not furnish any evidence even before me that the Club expenses were in respect of business events/meetings and that the same has to be taken as incurred for furtherance of business of the assessee. In the case of British Bank of Middle East 004 SOT 0122 Mumbai IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.Y.2014- 15 (Current Assessment Years) is the first year where this disallowance has been made. The Ld. CIT(A) in impugned order at para 6.4 wrongly and falsely held that Auditor has flagged the club expenses to be personal in natures whereas on contrary the Auditor has held it to be business expenditure. The relevant extract of the Audit Report is reproduced in picture form : The Appellant also relies on the decision of the Co-ordinate Bench in the case of Dy. Commissioner of Income Tax vs. M/s. Deloitte Touche Tohmatsu (ITA no.3017/Mum/2016) wherein Hon'ble ITAT held that expenditure incurred towards club and hotel membership fees is an allowable expense under Section 37(1) of the Income Tax Act. Hon'ble ITAT in the case of ISGEC Heavy Engineering Ltd. V/s. The DCIT/ITA NO. 798/Chd/2019 held as under with regard to Club expenses: 13. In the present case also the Assessee has incurred the expenses on account of club membership fees for the employees and to entertain customers, so, these were business expenses under section 37(1) of the Act. We therefore by following the ratio laid down by the Hon'ble Apex Court in the aforesaid referred to case ..... X X X X Extracts X X X X X X X X Extracts X X X X
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