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TMI Blog2022 (1) TMI 1367X X X X Extracts X X X X X X X X Extracts X X X X ..... issue in accordance with law, after affording sufficient opportunity of being heard to the assessee. Disallowance of deduction u/s 80IA - rate for eligibility of deduction - AR stated that the rate applied by the assessee is not correct and it is the say of the counsel that the rate charged by the electricity board to its consumers should be taken as rate for eligibility of deduction under section 80IA of the Act - HELD THAT:- We are of the considered view that this contention of the ld. counsel for the assessee is correct. The counsel has applied the rate which it has charged to the electricity board whereas the rate should have been the rate charged by the electricity board to its consumers. We, therefore, set aside this issue to the file of the Assessing Officer. The assessee is directed to furnish the rates charged by the electricity board to its consumers and the Assessing Officer is directed to verify the same and decide the issue afresh. Ground No. 4 is allowed for statistical purposes. Claim of education cess as deductible u/s 37 - HELD THAT:- This issue has been extensively considered by the Hon ble High Court of Bombay in the case of Sesa Goa [ 2020 (3) TMI 347 - BOMBAY ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arbitrary, unjust, not based on comparable and bad in law. 4. That the disallowance of deduction u/s 80IA of the Act amounting to Rs 26,20,451/-, as sustained by DRP/ AO out of total deduction claimed by the Assessee of Rs 38,15,24,886/- in respect of steam generating units based on the rates prescribed by the various State Electricity Regulations Authority for purchase of electricity from electricity generating units is arbitrary, unjust and against the provision of section 80IA(8) of the Act and ought to have allowed at the rates on which the State Electricity companies supplied to the consumers. 5. That the education cess, as paid the assessee during the year under consideration amounting to Rs. 4,10,96,638/- ought to have been allowed as expense u/s 37 of the Act by the lower Authorities as per Law. 6. That the assessee denies its liability to pay interest charged under section 234A, 234B and 234D of the Act." 3. Vide Ground No. 1, the assessee has challenged the jurisdiction of the Assessing Officer to refer to the Transfer Pricing Officer [TPO] for determination of transfer pricing adjustment. 4. Briefly stated, the facts of the case are that the assessee company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aka High Court in the case of SMR Automotive Systems India Ltd in ITA 6614/Del/2017 and Yorkn and Tech Pvt. Ltd 635/Delhi/2021. 9. Per contra, the ld. DR vehemently stated that in the decisions of the Hon'ble Karnataka High Court and various decisions of the coordinate bench of the Tribunal, one most important and relevant fact has not been brought before the court, which is that a saving clause was there in section 40A of the Act and, therefore, decisions relied upon by the ld. counsel for the assessee should not be considered. 10. It is the say of the ld. DR that even otherwise, the Memorandum explaining the provisions in Finance Bill, 2017 has specifically mentioned that these amendments will take effect from 01.04.2017 and will apply accordingly, in relation to A.Y 2017-18 and subsequent years. 11. We have given careful consideration to the rival submissions. It is true that provisions of section 92BA of the Act was brought to the statute book by Finance Act, 2012 and the same was introduced on the advice and observations of the Hon'ble Supreme Court in the case of Glaxco Smithline Asia Pvt. Ltd 195 taxmann.com 35, which is also clear from the Memorandum explaining the provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... posed to amend the Act to provide applicability of similar pricing regulations (including procedural and penalty provisions) to transactions between related resident parties for the purposes of computation of income, disallowance of expenses, etc., as required under the provisions of sections 40A, 80-IA, 10AA, 80A, where reference is made to section 80-IA, or to transactions as may be prescribed by the Board, if aggregate amount of all such domestic transactions exceeds Rs.5 crore in a year. It is further proposed to amend the meaning of related persons as provided in section 40A to include companies having the same holding company. This amendment will take effect from 1st April 2013 and will, accordingly, apply in relation to the assessment year 2013-14 and subsequent assessment years. 12. The Hon'ble Supreme Court in the said judgement has observed as under: "2. ….. However, we may clarify that proceedings are pending even today at various stages for different assessment years before the Authorities under the Income-tax Act. We express no opinion with regard to those proceedings. 3. However, we direct the Authorities to examine as to whether there is any loss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le omitting the clause (i) of section 928A, nothing was specified whether the proceeding initiated or action taken on this continue. Therefore, the proceeding initiated or action taken under that clause would not survive at all. In this legal position, the cognizance taken by the AO under section 92B(i) and reference made to TPO under section 92CA is invalid and bad in law. Therefore, the consequential order passed by the TPO and DRP is also not sustainable in the eyes of law." 14. This Judgment of the co-ordinate bench has been affirmed by the Hon'ble Karnataka High Court in ITA No. 392/2018, which was followed by this Tribunal in the case of SMR Automotive Systems Private Limited in ITA No. 6614/DEL/2017. The relevant findings of this Tribunal read as under: 13. Before us referring to the additional ground raised the Counsel for the assessee vehemently stated that sub-section (r) of Section 92BA has been omitted from the statute and by virtue of the amendment this particular sub-clause shall be deemed not to be on the statute since the beginning and, therefore, the assessment order deserves to be quashed. The Counsel referred to various judicial decisions in support of his co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on was invited to judgment of the Apex Court in the case of Kolhapur Cane sugar Works Ltd., (supra) in which the impact of omission of old rule ro and r OA was examined. Having carefully examined the issue in the light of provisions of section 6 of the General Clauses Act, their Lordship has observed that in such a case, the court is to look to the provisions in the rule which has been introduced after omission of the previous rule to determine whether a pending proceeding will continue or lapse. If there is a provision therein that pending proceedings shall continue and be disposed of under the old rule as if the rule has not been deleted or omitted then such a proceeding will continue. If the case is covered by Section 6 of the General Clauses Act or there is a pari-materia provision in the statute under which the rule has been framed in that case also the pending proceeding will not be affected by omission of the rule. In the absence of any such provisions in the statute or in the rule, the pending proceeding will lapse under rule under which the notice was issued or proceeding being omitted or deleted". 15. Respectfully following the decision of the Hon'ble Karnataka ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as under: Unit Steam generated (KG) m Coverei on as per Charter Eng. Formula (2) Electricity units (1)*<2M3) Rate of electridty charged for Captive Consumption Total Sales of Electriaty Units (Turnover) as per Audited Finandal (3)*(4W5) Expenses induding Fuel cost, Water Cost etc.(6) Net Profit (5H6H7) Depredation as per Company Act (8) Depredation as per Income tax (9) Net Profit for deduction u/s 80IA as per Certificate (7+8*9H10) FI 12,178,06 0.628 7,647,824 4.85 37,091,944 17,771,76 19320,181 548384 451,701 19,416,76 1 5,096,800 0.628 3,200,790 4.85 15323333 6397398 9,126,435 109398 75,648 9,160,185 7 23,651,05 0.628 14,852,863 4.85 72,036383 26,659,70 45,176,680 121,703 95304 45,40237S 8 3,9- 0.628 2,474320 4.85 12,000,452 4,804,653 7,195,799 448,653 368,012 7376,440 9 7,810,300 0.628 4,904^68 4.85 23,788,612 11,457361 12,331,251 276361 205,010 12,402,60 12 12,127,18 0.628 7315374 4.85 36,936,989 7,445329 19,491,160 541,829 354,748 19,678341 23 21,005,41 0.628 13,191,403 4.85 63,978302 27,497,19 36,481,111 1,991,19 1,464,972 37,007330 26 6,013,883 0.628 3,776,719 4.85 18,317,085 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same is admitted in light of the ratio laid down by the Hon'ble Supreme Court in the case of NTPC 229 ITR 383. 28. This issue has been extensively considered by the Hon'ble High Court of Bombay in the case of Sesa Goa Ltd 117 Taxmann.com 96 wherein the Hon'ble High Court was seized, inter-alia with the following substantial question of law: "Whether on the facts and in the circumstances of the case and in law the Education Cess and Higher and Secondary Education Cess is allowable as a deduction in the year of payment." 29. The Hon'ble High Court answered the question as under: "15. The substantial question of law No. (iii) in Tax Appeal No. 17 of 2013 and the only substantial question of law in Tax Appeal No. 18 of 2013 is one and the same. namely,' whether Education Cess and Higher and Secondary Education Cess, collectively referred to as "cess" is allowable as a deduction in the year of its payment ?'. 16. The aforesaid question arises in the context of provisions of Section 40(a)(ii) which inter alia provides that notwithstanding anything to the contrary in sections 30 to 38 of the IT Act, the following amounts shall not be deducted in comput ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st declares its tntention and must be accepted as decisive of it. 19. Besides. when it comes to interpretation of the IT Act, it is well established that no tax can be imposed on the subject without words in the Act clearly showing an intention to lay a burden on him. The subject cannot be taxed unless he comes within the letter of the law and the argument that he falls within the spirit 20. In a taxing Act one has to look merely at what is clearly said. There is. no room for any intendment. There is no equity about a tax. There is no presumption as to a tan. Nothing is to be read in, nothing is to be implied, into the provisions which has not been provided by the legislature [See CIT Vs Radhe Developers L20l2J 17 ta:gnann.com 156/204 Taxman 543/341 ITR 403 (Guj.). One can only look fairly at the language used. No tax can be imposed by inference or analogy. It is also not permissible to construe a taxing statute by making assumptions and presumptions [See Goodyear v. State of Haryana [1991] 188 ITR 402(SC)] 21. There are several decisions which lay down rule that the provision for deduction, exemption or relief should be interpreted liberally, reasonably and in favour of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are to be deducted in computing it income chargeable under the head "profits and gains of business or profession". Since the deletion of expression "cess" from the lncome-tax Bill. 1961, was deliberate, there is no question of reintroducing this expression in Section 40(a) of IT Act and that too, under the guise of interpretation of taxing statute. 26. ln fact" in the aforesaid precise regard, reference can usefully be made to the Circular No. F. No. 91158166-lTJ(19), dated 18th May, 1967 issued by the CBDT which reads as follows :- "Interpretation of provision of Section 40(a)(ii) of IT Act, 1961 - Clarification regarding.- "Recently a case has come to the notice of the Board where the Income-tax Officer has disallowed the 'cess' paid by the assessee on the ground that there has been no material change in the provisions of section 10(4) of the Old Act and Section 40(a)(ii) of the new Act 2. The view of the lncome-tax Officer is not correct. Clause 40 a (ii) of the Income-tax Bill, l96l as introduced in the Parliament stood as under:- "(ii) any sum paid on account of any cess, rate or tax levied on the profits or gains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s premises, and the quantum of the rate was fixed after consideration of the 'circumstances' of the assessee, including his business income. The Privy Council held that the rate was not 'assessed on the basis of profits' and was allowable as a business expense. Following this decision, the Supreme Court held in Jaipuria Samla Amalgamated Collieries Ltd. Vs. CIT [82 ITR 580] that the expression 'profits or gains of any business or profession' has reference only to profits and gains as determined in accordance with Section 29 of this Act and that any rate or tax levied upon profits calculated in a manner other than that provided by that section could not be disallowed under this sub-clause. Similarly, this sub-clause is inapplicable, and a deduction should be allowed, where a tax is imposed by a district board on business with reference to 'estimated income' or by a municipality with reference to 'gross income'. Besides, unlike Section 10(4) of the 1922 Act, this sub-clause does not refer to 'cess' and therefore, a 'cess' even if levied upon or calculated on the basis of business profits may be allowed in computing such profits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions in Section 40(a)(ii) of the IT Act. The mode of collection, is really not determinative in such matters. 34. Ms. Linhares, has relied upon M/s. Unicorn Industries Vs. Union of India [20I9] I I 2 taxmann.com I 27 (SC) in support of her contention that "cess" is nothing but "tax" and therefore, there is no question of deduction of amounts paid towards "cess" when it comes to computation of income chargeable under the head profits or gains of any business or profession. 35. The issue involved in Unicorn Industries (supra) was not in the context of provisions in Section 40(a)(ii) of the IT Act. Rather, the issue involved was whether the 'education cess, higher education cess and National Calamity Contingent Duty (NCCD)' on it could be construed as "duty of excise" which was exempted in terms of Notification dated 9th September, 2003 in respect of goods specified in the Notification and cleared from a unit located in the Industrial Growth Centre or other specified areas with the State of Sikkim. The High Court had held that the levy of education cess, higher education cess and NCCD could not be included in the expression "du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Brokers & Shareholders Pvt. Ltd. 349 ITR 336,1208 Taxman 498123 tanmann.com 23 (Bom)one of the questions of law which came to be framed was whether on the facts and circumstances of the case, the ITAT, in law, was right in holding that the claim of deduction not made in the original returns and not supported by revised return, was admissible. The Revenue had relied upon Goetze (supra) and urged that the ITAT had no power to allow the claim for deduction. However, the Division Bench, whilst proceeding on the assumption that the Assessing Officer in terms of law laid down in Goetze (supra) had no power, proceeded to hold that the Appellate Authority under the IT Act had sufficient powers to permit such a deduction. In taking this view, the Division Bench relied upon the Full Bench decision of this Court in Ahmedabad Electricity Co. Ltd. Vs. CIT (199 ITR 351/66 Taxman 27 (Bom.) to hold that the Appellate Authorities under the IT Act have very wide powers while considering an appeal which may be filed by the Assessee. The Appellate Authorities may confirm, reduce, enhance or annul the assessment or remand the case to the Assessing Officer. This is because, unlike an ordinary appeal, th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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