M/S GODAWARI POWER & ISPAT LTD., RAIPUR (CG) V. DY. C.I.T.1(2), RAIPUR (CG)

CO 12/RPR/2018

• Counselvise Citation: [2018] 124 COUNSELVISE.COM (IT) 7310 (ITAT-RAIPUR)
• Duration Of Justice: 1 month(s) 25 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 01-10-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 07-08-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: P K MISHRA
• Assessee Lawyers: R B DOSHI
• Keywords: Depreciation; Business expenditure; Opportunity of being heard; Earning of tax free income; Capital receipt; Revised return; Unabsorbed depreciation
• Section: 43B; 143(3); 14A; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAIPUR BENCH, RAIPUR BEFORE SHRI R. K. PANDA, ACCOUNTANT MEMBER AND MS. SUCHITRA KAMBLE, JUDICIAL MEMBER ITA NO.365/RPR/2014 ASSESSMENT YEAR : 2011-12 DCIT- 1(2), RAIPUR (CG). VS. GODAWARI POWER & ISPAT LTD., PLOT NO.482/2, INDUSTRIAL GROWTH CENTRE, PHASE- 1, SILTARA, RAIPUR (CG). PAN : AAACI7189K (APPELLANT) (RESPONDENT) C.O. NO.12/RPR/2018 (IN ITA NO.365/RPR/2014) ASSESSMENT YEAR : 2011-12 GODAWARI POWER & ISPAT LTD., PLOT NO.482/2, INDUSTRIAL GROWTH CENTRE, PHASE- 1, SILTARA, RAIPUR (CG). VS. DCIT- 1(2), RAIPUR (CG). PAN : AAACI7189K (APPELLANT) (RESPONDENT) DEPARTMENT BY : SHRI P. K. MISHRA, CIT(DR) ASSESSEE BY : SHRI R. B. DOSHI, CA DATE OF HEARING : 16-08-2018 DATE OF PRONOUNCEMENT : 01-10-2018 O R D E R PER R. K. PANDA, AM : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER DATED 25.09.2014 OF THE LD. CIT(A), RAIPUR (CG) RELATING TO ASSESSMENT YEAR 2011-12. THE ASSESSEE HAS FILED THE CROSS OBJECTIO N AGAINST THE APPEAL FILED BY 2 ITA NO.365/RPR/2014 C.O. NO.12/RPR/2018 THE REVENUE. FOR THE SAKE OF CONVENIENCE, THESE WE RE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER. ITA NO.365/RPR/2014 (BY REVENUE) : 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS A COMPANY AND IS ENGAGED IN MANUFACTURE AND SALE OF STRUCTURAL PELLE T, SPONGE IRON, STEEL BILLETS, FERRO ALLOYS, WIRE ROD, H.B. WIRE AND MINING & CRUS HING OF IRON ORE. IT IS ALSO ENGAGED IN GENERATION AND SALE OF POWER. THE ASSESSEE FILED ITS RETURN OF INCOME ON 27.09.2011 DECLARING TOTAL INCOME OF RS.2 6,63,65,921/- WHICH INCLUDED LONG TERM CAPITAL GAIN OF RS.9,88,867/-. THE GROSS TOTAL INCOME WAS SHOWN AT RS.46,54,65,157/- FROM WHICH DEDUCTION U/S 80-IA OF THE I.T. ACT, 1961 OF RS.19,90,99,326/- WAS CLAIMED AND THE TOTAL INCOME WAS WORKED OUT AT RS.26,63,65,921/-. BOOK PROFIT FOR MAT PURPOSES WA S SHOWN AT RS.88,39,67,803/- ON WHICH THE TAX LIABILITY WORKED OUT TO BE RS.17,61,79,203/- WHICH WAS MORE THAN THE TAX PAYABLE UNDER THE NORMA L PROVISIONS OF THE I.T. ACT. THE CASE WAS SELECTED FOR SCRUTINY THROUGH CA SS AND THE FIRST NOTICE U/S 143(2) DATED 07.08.2012 WAS ISSUED BY ASSESSING OFF ICER AND DULY SERVED ON THE ASSESSEE THROUGH REGISTERED POST ON 13.08.2012. SUBSEQUENTLY, A REVISED RETURN WAS FILED BY THE ASSESSEE ON 30.03.2013 DECL ARING TOTAL INCOME OF RS.12,10,79,996/- WHICH INCLUDED LONG TERM CAPITAL GAIN OF RS.9,88,867/-. THE GROSS TOTAL INCOME WAS SHOWN AT RS.46,54,65,157/- F ROM WHICH DEDUCTION U/S 3 ITA NO.365/RPR/2014 C.O. NO.12/RPR/2018 80-IA OF RS.34,43,85,162/- WAS CLAIMED AND THE TOTA L INCOME WAS WORKED OUT AT RS.12,10,79,996/-. BOOK PROFIT FOR MAT PURPOSES WA S SHOWN AT RS.88,39,67,803/- ON WHICH THE TAX LIABILITY WORKED OUT TO BE RS.17,61,79,203/- WHICH WAS MORE THAN THE TAX PAYABLE UNDER THE NORMA L PROVISIONS OF THE I.T. ACT. 3. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT U /S 143(3) VIDE ORDER DATED 19.02.2014 DETERMINING THE TOTAL INCOME OF RS .50,90,06,690/- BY MAKING THE FOLLOWING 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 2,25,43,39 8 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 ITA NO.365/RPR/2014 C.O. NO.12/RPR/2018 4. THE ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A), WHO GAVE PART RELIEF TO THE ASSESSEE. 5. AGGRIEVED WITH SUCH ORDER OF THE LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. THE ASSESSEE HAS FILED CROSS OBJECTION BEFORE THE TRIBUNAL. THE GROUNDS RAISED BY THE REVENUE AND THE ASSESSEE ARE AS UNDER:- ITA NO.365/RPR/2014 (REVENUE) : A. WHETHER IN LAW AND ON FACTS & CIRCUMSTANCES OF THE CASE, FOR THE PURPOSE OF CALCULATION OF DEDUCTION U/S.80IA OF THE I.TAX ACT, 1961 THE LD. CIT(A) HAS ERRED IN I) NOT ALLOWING SET OFF OF LOSSES OF ONE ELIGIBLE UNIT FROM PROFIT OF ANOTHER ELIGIBLE UNIT. II) NOT AGREEING WITH THE ASSESSING OFFICER WHO HAS HEL D THAT THE VALUE OF POWER SUFFICIENT TO ITS OWN UNIT FOR CAPTIVE CONSUM PTION HAS BEEN OVER STATED. III) NOT AGREEING WITH THE A.O. THAT SALE PROCEEDS OF CA RBON CREDIT IS NOT INCOME DERIVED FROM BUSINESS OF POWER GENERATIONS A ND THERE BY DELETING DISALLOWANCE OF RS.37,56,76,933/- OUT OF D EDUCTION CLAIMED U/S 80IA OF THE I.T. ACT, 1961. B. WHETHER IN LAW AND ON FACTS & CIRCUMSTANCES OF T HE CASE, THE LEARNED CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS.1,91,7 9,611/- ON ACCOUNT OF CSR EXPENSES WHICH HAVE NOT BEEN LAID OUT WHOLLY AND EX CLUSIVELY FOR THE PURPOSE OF BUSINESS? C. WHETHER IN LAW AND ON FACTS & CIRCUMSTANCES OF T HE CASE, THE LEARNED CIT(A) HAS ERRED IN RESTRICTING THE ADDITION TO RS.12,57,9 76/- OUT OF DISALLOWANCE MADE BY THE A.O. ON ACCOUNT OF CHARITY/POOJA AND FESTIVAL EXPEN SES THEIR BY GIVING RELIEF OF RS.3,50,000/-? D. WHETHER IN LAW AND ON FACTS & CIRCUMSTANCES OF T HE CASE, THE LEARNED CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS.2,25,4 3,398/- U/S 14A OF THE IT ACT, 1961? E. WHETHER IN LAW AND ON FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.2,10,551/- MADE BY THE A.O. ON ACCOUNT OF DELAYED PAYMENT OF EMPLOYEES CONTRIBUTION TO PF AND ESI WHICH WERE DEEMED AS INCOME U/S 2(24)(X) OF IT ACT, 1961 READ WITH SECTI ON 36(1)(VA) OF IT ACT, 1961? F. THE ORDER OF THE LD. CIT(A) IS ERRONEOUS BOTH IN LAW AND ON FACTS? G. ANY OTHER GROUND THAT MAY BE ADDUCED AT THE TIME OF HEARING? C.O. NO.12/RPR/2018 (ASSESSEE) : ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, RECEIPT OF RS.67,18,544/- ON ACCOUNT OF CARBON CREDIT IS A CAPITAL RECEIPT IN VI EW OF JUDGMENT OF HONBLE JURISDICTIONAL ITAT IN ACIT VS. SHREE NAKODA ISPAT LTD. I.T.A. NO.109/BLPR/2011, 5 ITA NO.365/RPR/2014 C.O. NO.12/RPR/2018 AND THEREFORE, NOT LIABLE TO TAX. THE A.O. HAS ERR ED 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 HONBLE 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 FR OM BUSINESS REFERRED TO IN SECTION 80-IA AND NOT TO THE UNDERTAKING. 7. BEFORE THE LD. CIT(A), THE ASSESSEE SUBMITTED TH AT THE DEDUCTION U/S 80-IA HAS BEEN CLAIMED IN RESPECT OF ITS UNITS (UNI T-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 UNDERTAKI NG WAS THE ONLY SOURCE OF INCOME OF THE ASSESSEE DURING THE PREVIOUS YEAR REL EVANT TO THE INITIAL ASSESSMENT YEAR AND TO EVERY SUBSEQUENT ASSESSMENT YEARS UP TO AND INCLUDING THE IMPUGNED ASSESSMENT YEAR FOR WHICH THE DETERMIN ATION OF DEDUCTION IS TO BE MADE AND, THEREFORE, EACH UNDERTAKING HAS TO BE TRE ATED AS A SEPARATE SOURCE OF INCOME. HENCE, THE LOSS OF ONE ELIGIBLE UNDERTAKIN G CANNOT BE SET OFF AGAINST THE PROFITS OF ANOTHER ELIGIBLE UNDERTAKING AND ALS O AGAINST NON-ELIGIBLE 6 ITA NO.365/RPR/2014 C.O. NO.12/RPR/2018 UNDERTAKING. THE DECISION OF THE AHMEDABAD SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF GOLDMINE SHARES AND FINANCE (P) LTD. RE PORTED IN 302 ITR 208 AND THE VARIOUS OTHER DECISIONS WERE BROUGHT TO THE NOT ICE OF THE LD. CIT(A). 8. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE, THE LD. CIT(A) HELD THAT THE ASSESSING OFFICER IS NOT JUSTIFIED IN MAKI NG THE ADJUSTMENT OF PROFIT OF ELIGIBLE UNDERTAKING WITH LOSSES OF OTHER ELIGIBLE UNDERTAKING BY OBSERVING AS UNDER :- 5. I HAVE CAREFULLY GONE THROUGH THE ASSESSMENT OR DER AND SUBMISSIONS OF THE APPELLANT. THE A.O. HAS RELIED ON THE DECISION OF LIBERTY INDIA VS. CIT (2009) 183 TAXMAN 349 (SC) AND STATED THAT THE PROVISION OF SE CTION 80-IA(5) OF THE ACT IS APPLICABLE TO THE PROFIT FROM THE ELIGIBLE BUSINESS AS A WHOLE AND THE ELIGIBLE UNDERTAKING HAS NOT TO BE SEEN ON A STANDALONE BASI S OF NON-ELIGIBLE BUSINESS. HOWEVER, I AM IN AGREEMENT WITH THE SUBMISSIONS OF THE APPELLANT THAT ON A CONJOINT READING OF SUB-SECTIONS (1), (4) AND (5) OF SECTION 80-IA OF THE ACT, IT IS CLEAR THAT THE DEDUCTION UNDER SECTION 80-IA OF THE ACT SHALL BE A LLOWED TO AN UNDERTAKING, WHICH IS ENGAGED IN THE ELIGIBLE BUSINESS AND THE AFORESAID DEDUCTION SHALL BE COMPUTED AS IF THE ELIGIBLE BUSINESS OF THE UNDERTAKING IS THE ONL Y SOURCE OF INCOME OF THE ASSESSEE. 5.2 THE APPELLANT HAS ELABORATELY DIFFERENTIATED IN THE SUBMISSION THE FOLLOWING JUDICIAL PRONOUNCEMENTS RELIED UPON BY THE A.O. CIT VS. HIM TEKNOFORGE LTD. (2013) 256 CTR 393 (HP-HC); IPCA LABORATORY LTD. VS. DCIT (2004) 266 ITR 521 (SC); ITO VS. INDUFLEX PRODUCTS (P) LTD. (2006) 280 ITR 1 (SC); A.M. MOOSA VS. CIT (2007) 294 ITR 1 (SC) CIT VS. SHIRKE CONSTRUCTION EQUIPMEN TS LTD. (2007) 291 ITR 380 (SC) AND SYNCO INDUSTRIES LTD. VS. ASSESSING OFFICER & A NR (2008) 299 ITR 444 (SC). 5.3 IN VIEW OF THE ABOVE, I AM OF THE CONSIDERED OP INION THAT THE A.O. HAS ERRED IN NETTING OFF THE PROFITS & LOSSES OF TWO ELIGIBLE UN ITS AND ALLOWING THE DEDUCTION THEREON, IN SPITE OF THE FACT THAT THE DEDUCTION UN DER SECTION 80-IA OF THE ACT IS AVAILABLE TO THE EACH OF THE UNDERTAKING, CONSIDERI NG THE SAME AS THE ONLY SOURCE OF INCOME AS PER SECTION 80-IA(5) OF THE ACT. ACCORDI NGLY, 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. 7 ITA NO.365/RPR/2014 C.O. NO.12/RPR/2018 10. THE LD. DR HEAVILY RELIED ON THE ORDER OF THE A SSESSING OFFICER. 11. THE LD. COUNSEL FOR THE ASSESSEE ON THE OTHER H AND 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 A DJUSTED AGAINST THE PROFIT OF ANOTHER ELIGIBLE UNIT. 12. SO FAR AS VARIOUS DECISIONS RELIED ON BY THE AS SESSING OFFICER ARE CONCERNED, HE SUBMITTED THAT ALL THESE DECISIONS AR E EITHER DISTINGUISHABLE OR NOT APPLICATION TO THE FACTS OF THE PRESENT CASE. 13. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. WE FI ND THE ASSESSING OFFICER IN THE INSTANT CASE WHILE COMPUTING THE DEDUCTION U/S 80-IA HELD THAT THE LOSS OF THE ELIGIBLE INDUSTRIAL UNIT IS REQUIRED TO BE SET OFF AGAINST THE PROFIT OF OTHER ELIGIBLE INDUSTRIAL UNIT. WE FIND THE LD. CIT(A) R EJECTED THE FINDING OF THE ASSESSING OFFICER BY HOLDING THAT THE ASSESSING OFF ICER IS NOT JUSTIFIED IN NETTING OFF OF THE PROFIT AND LOSSES OF THE TWO ELI GIBLE UNITS AND ALLOWING 8 ITA NO.365/RPR/2014 C.O. NO.12/RPR/2018 DEDUCTION THEREON. THE RELEVANT FINDING OF THE LD. CIT(A) HAS ALREADY BEEN REPRODUCED IN THE PRECEDING PARAGRAPH. IT HAS BEEN HELD IN VARIOUS DECISIONS 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 ANOTHE R ELIGIBLE UNIT. SINCE THE ORDER OF THE LD. CIT(A) IS IN CONSONANCE WITH THE LAW LAI D DOWN BY VARIOUS HIGH COURTS AND VARIOUS BENCHES OF THE TRIBUNAL, THEREFO RE, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A). ACCORDINGLY, THE SAME IS UPHELD AND THE GROUND RAISED BY THE REVENUE ON THIS ISSUE IS DISMISSED. 14. SO FAR AS GROUND OF APPEAL NO.(A)(II) IS CONCER NED, THE FACTS OF THE CASE, IN BRIEF, ARE THAT THE POWER GENERATING ELIGIBLE UNITS OF THE ASSESSEE COMPANY NAMELY, THE UNIT-1 & UNIT-2 SELL THE ELECTRICITY TO OUTSIDE PARTIES AS WELL AS TRANSFER THE ELECTRICITY TO THEIR OTHER DIVISIONS F OR CAPTIVE CONSUMPTION. FROM THE VARIOUS DETAILS FURNISHED BY THE ASSESSEE, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS SHOWN PROFIT AT THE RATE OF 5 8.9% OF UNIT-1 AND 45.7% IN UNIT-2 ON WHICH DEDUCTION U/S 80-IA HAS BEEN COMPUT ED. HE OBSERVED THAT IF THE RESULTS OF THE UNIT-1 & UNIT-2 ARE COMPARED WIT H THAT OF THE GOVERNMENT OWNED PSUS, IT WILL BE FOUND THAT SUCH HIGH NET PRO FIT IS NOT PREVALENT IN THIS LINE OF BUSINESS. HE, THEREFORE, CAME TO THE CONCL USION THAT THE CONSIDERATION RECORDED IN THE BOOKS OF ACCOUNT BY THE ASSESSEE CO MPANY FOR THE TRANSFER OF GOODS (ELECTRICITY) FROM THE ELIGIBLE UNITS TO ITS OTHER DIVISIONS DOES NOT 9 ITA NO.365/RPR/2014 C.O. NO.12/RPR/2018 CORRESPOND TO THE MARKET VALUE OF SUCH GOODS (ELECT RICITY) AS ON THE DATE OF THE TRANSFER. HE, THEREFORE, CONFRONTED THE SAME TO TH E ASSESSEE. REJECTING THE VARIOUS EXPLANATIONS GIVEN BY THE ASSESSEE AND RELY ING ON VARIOUS DECISIONS, THE ASSESSING OFFICER HELD THAT THE MARKET VALUE FOR SA LE OF ELECTRICITY BY A PRIVATE GENERATING UNIT BASED IN CHHATTISGARH (INCLUDING TH E ELIGIBLE UNITS OF THE ASSESSEE COMPANY) FOR ASSESSMENT YEAR 2011-12 IS RS .2.84 PER UNIT WHICH IS THE AVERAGE PURCHASE RATE OF CSPDCL, WHICH IS ALSO BASE D IN CHHATTISGARH. THE ASSESSING OFFICER ACCORDINGLY DISALLOWED THE DEDUCT ION CLAIMED U/S 80-IA BY HOLDING THAT VALUE OF POWER SUPPLIED TO ITS OWN UNI T FOR CAPTIVE CONSUMPTION AT RS.4.28 PER UNIT HAS BEEN OVERSTATED. HE ACCORDING LY 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 OR DER 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 DIVIS ION (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 PRO CURED FROM THE CSPDCL (STATE ELECTRICITY COMPANY). THUS, LOOKED AT FROM THE STAN D POINT OF STEEL DIVISION IT CAN BE SAID THAT THE STEEL DIVISION RECEIVES ELECTRICITY A T THE SAME PRICE AS IT PAYS TO THE CSPDCL TO ACHIEVE ITS BUSINESS PLANS. THEREFORE, TH E PRICE THAT THE STEEL DIVISION WOULD OTHERWISE HAVE PAID TO THE CSPDCL, WOULD BE T HE PRICE THAT IT WOULD BE WILLING TO PAY TO THE CAPTIVE POWER PLANT AND THE S AME SHOULD BE CONSIDERED AS THE TRANSFER PRICE FROM THE ELIGIBLE UNIT TO THE STEEL DIVISION. THE ABOVE CONTEXTUAL INTERPRETATION IS FURTHER REINFORCED IF ONE CONSIDE RS THE FACT THAT WHEN THE CAPTIVE POWER GENERATORS SUCH AS THE APPELLANT SUPPLY SURPL US ELECTRICITY TO THE CSPDCL, IT CANNOT BE IGNORED THAT CSPDCL PURCHASES SUCH POWER AS TRADER / DISTRIBUTOR OF ELECTRICITY. IT IS IMPERATIVE TO APPRECIATE THE DIF FERENT CAPACITY AND ROLE PLAYED BY CSPDCL WHILE BUYING AND SELLING ELECTRICITY, FOR TH E PURPOSES OF GIVING A CORRECT CONTEXTUAL MEANING TO THE TERM 'MARKET VALUE' APPEA RING IN SECTION 80- IA OF THE ACT. 10 ITA NO.365/RPR/2014 C.O. NO.12/RPR/2018 WHEN THE CAPTIVE POWER PLANT DIRECTLY TRANSFERS ELE CTRICITY TO THE STEEL DIVISION AND OTHER DIVISION, THE CAPTIVE POWER PLANT IS DOING SO AS A GENERATOR AND DISTRIBUTOR AND NOT AS A SIMPLE GENERATOR OF ELECTRICITY. HENCE, IT IS CLEAR THAT THE MARKET VALUE FOR THE TRANSACTION OF SALE OF POWER FROM THE CAPTIVE POWER PLANT TO THE STEEL DIVISION SHALL BE SALE PRICE OF CSPDCL TO THE STEEL DIVISION. FURT HER, THE APPELLANT IN ITS SUBMISSION HAS ALSO RELIED ON VARIOUS JUDICIAL DECI SIONS WHEREIN IT IS STATED THAT THE RATE AT WHICH POWER WAS SOLD BY STATE ELECTRICITY B OARDS SHOULD BE CONSIDERED AS THE MARKET VALUE FOR THE PURPOSE OF SECTION 80-IA(8) OF THE ACT. 7.2 FURTHER, IN THE APPELLANT'S OWN CASE ON IDENTIC AL FACTS IN THE AYS 2004-05 TO 2006-07 SUCH CLAIM WAS ALSO ACCEPTED BY THE HON'BLE HIGH COURT OF CHHATTISGARH. IN THE CASE OF THE APPELLANT (TAX CASE NO.32 OF 2012) THE HON'BLE HIGH COURT HAS HELD THAT:- 'THE MARKET VALUE OF THE POWER SUPPLIED TO THE STEE L 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 THE 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. IN OUR OPINION, THE AO COMMITTED AN ILLEGALITY IN C OMPUTING 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. IT IS ADMITTED BY THE DEPARTMENT THAT IN CHHATTISGA RH THE POWER WAS SUPPLIED TO THE INDUSTRIAL CONSUMERS AT THE RATE OF R3.20/- PER UNI T FOR THE A.Y. 2004-05 AND R 3.75/- PER UNIT FOR THE AY'S 2005-06 AND 2006-07. IT WAS T HIS 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 THE IR ORDERS'. 7.3 LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE C ASE 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 PO WER AT THE RATE OF SALE TO STEEL DIVISION BY THE STATE ELECTRICITY COMPANY. THUS, TH IS GROUND OF APPEAL IS ALLOWED. 16. AGGRIEVED WITH SUCH ORDER OF THE LD. CIT(A), TH E 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 HONBLE CHHATTISGARH HIGH COURT IN ASSESSEES OWN CASE FOR ASSESSMENT YE ARS 2004-05 TO 2006-07 HAS DECIDED IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE B Y OBSERVING AS UNDER :- 11 ITA NO.365/RPR/2014 C.O. NO.12/RPR/2018 22. THE ASSESSEE HAD SOLD POWER TO THE STEEL-DIVIS ION AT THE RATE OF RS.3.30/- PER UNIT FOR AY 2004-05 AND RS.3.75/- PER UNIT FOR AYS 2005-06 AND 2006-07. 23. THE AO COMPUTED THE MARKET VALUE OF POWER UNDE R SECTION 80-IA (8) READ WITH ITS PROVISO AND THE EXPLANATION. HE CONSIDERED THE RATE CHARGED BY THE CHHATTISGARH ELECTRICITY COMPANY LIMITED, RAIPUR (THE CHHATTISGA RH-COMPANY) FOR SUPPLY OF ELECTRICITY TO THE BOARD AND HELD THE MARKET VALUE OF THE POWER TO BE RS.2.25/- PER UNIT FOR THE AY 2004-05 AND 2005-06; AND RS.2.32/- PER U NIT FOR THE AY 2006-07. 24. THE MARKET VALUE COMPUTED BY THE AO WAS LESS TH AN THE VALUE CLAIMED BY THE ASSESSEE, HE (THE AO) DIS-ALLOWED THE DIFFERENCE AN D ADDED IT IN THE INCOME OF THE ASSESSEE. 25. IN CHHATTISGARH, A CONSUMER CAN UTILISE THE PO WER PRODUCE BY ITS OWN CAPTIVE POWER GENERATING UNIT OR IT CAN BUY POWER FROM THE BOARD. NO OTHER ENTITY CAN SUPPLY POWER TO ANY CONSUMER IN THE STATE: A CONSUMER CANN OT PURCHASE ELECTRICITY FROM ANY OTHER PERSON. 26. THE BOARD WAS CHARGING @ RS.3.30/- PER UNIT IN THE AY 2004-05 AND @ RS.3.75/- PER UNIT IN THE AYS 2005-06 AND 2006-07 F ROM INDUSTRIAL UNITS. THE CPP OF THE ASSESSEE ALSO CHARGED THE SAME AMOUNT FROM ITS STEEL DIVISION. AS BOTH WERE SAME, THE CIT-A HELD THIS IS TO BE THE MARKET VALUE . THE TRIBUNAL HAS UPHELD THIS FINDING. 27. THE COUNSEL FOR THE DEPARTMENT SUBMITS THAT: THE CHHATTISGARH-COMPANY IS SITUATE IN THE SAME AREA AND THE PRICE FOR WHICH IT SOLD POWER TO THE BOARD WAS RELEVANT; THE AO RIGHTLY COMPARED IT FOR CALCULATING THE M ARKET VALUE OF THE POWER SUPPLIED TO THE STEEL-DIVISION; THE RATE CHARGED BY THE BOARD CANNOT BE TAKEN IN TO ACCOUNT AS IT INCLUDES WHEELING AND TRANSMISSION CHARGES. 28. THE CHHATTISGARH-COMPANY IS A COMPANY WHICH IS GENERATING POWER. IT IS NEITHER CONSUMER OF THE ELECTRICITY, NOR IT IS SUPP LYING POWER TO A CONSUMER. IT ALSO CANNOT SELL POWER TO ANY CONSUMER DIRECTLY: IT HAS TO COMPULSORILY SELL IT TO THE BOARD. 29. THE POWER SOLD BY THE CHHATTISGARH-COMPANY TO THE BOARD IS A SALE TO A COMPANY WHICH ITSELF SUPPLIES POWER TO THE CONSUMER S. IT IS NOT SALE OF POWER TO THE CONSUMER. 30. THE STEEL-DIVISION OF THE ASSESSEE IS A CONSUM ER. 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 BOAR D. THE CPP HAS CHARGED THE SAME RATE FROM THE STEEL-DIVISION THAT THE STEEL-DI VISION 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 CONSUME R 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 DIVI SION 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 SUPPLI ER: IT SHOULD HAVE BEEN COMPARED WITH THE MARKET VALUE OF POWER SUPPLIED TO A CONSUM ER. 12 ITA NO.365/RPR/2014 C.O. NO.12/RPR/2018 33. IT IS ADMITTED BY THE DEPARTMENT THAT IN CHHAT TISGARH THE POWER WAS SUPPLIED TO THE INDUSTRIAL CONSUMERS AT THE RATE OF RS.3.20/ - PER UNIT FOR THE AY 2004-05 AND RS.3.75/- PER UNIT FOR THE AYS 2005-06 AND 2006-07. IT WAS THIS RATE THAT WAS TO BE CONSIDERED WHILE COMPUTING THE MARKET VALUE OF THE POWER. 34. THE CIT-A AND THE TRIBUNAL HAD RIGHTLY COMPUTE D THE MARKET VALUE OF THE POWER AFTER CONSIDERING IT WITH THE RATE OF POWER A VAILABLE IN THE OPEN MARKET NAMELY THE PRICE CHARGED BY THE BOARD. THERE IS NO ILLEGAL ITY IN THEIR ORDERS. 35. IN VIEW OF ABOVE, THE QUESTION IS DECIDED AGAI NST THE DEPARTMENT AND IN FAVOUR OF THE ASSESSEE. THE TAX APPEALS HAVE NO MERIT. THE Y ARE DISMISSED. 18. WE FIND THE RAIPUR BENCH OF THE TRIBUNAL IN THE CASE OF DCIT VS. HIRA FERRO ALLOYS LTD. VIDE ITA NO.358 TO 360/RPR/2014 O RDER DATED 18.01.2018 FOR ASSESSMENT YEARS 2009-10, 2010-11 AND 2012-12 H AS ALSO DECIDED IDENTICAL ISSUE BY UPHOLDING THE DECISION OF THE LD. CIT(A) W HEREIN THE LD. CIT(A) HAS DELETED THE DISALLOWANCE MADE BY THE ASSESSING OFFI CER U/S 80-IA BY HOLDING THAT THE ASSESSEE HAS NOT OVERSTATED THE PRICE OF P OWER SUPPLIED TO ITS DIVISIONS. FURTHER, WE FIND THE ASSESSING OFFICER IN SUBSEQUEN T ASSESSMENT YEARS I.E. FOR ASSESSMENT YEARS 2009-10, 2010-11 AND 2012-13 HAS N OT MADE ANY SUCH DISALLOWANCE U/S 80-IA ON ACCOUNT OF POWER TARIFF C HARGED TO OTHER UNITS OF THE ASSESSEE. UNDER THESE CIRCUMSTANCES, WE DO NOT FIN D ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) ON THIS ISSUE. THE GROUND RAISED BY THE REVENUE IS ACCORDINGLY DISMISSED. 19. GROUND OF APPEAL NO.(A)(III) RELATES TO THE TAX ABILITY OF THE CARBON CREDITS. 20. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT THE ASSESSE E COMPANY HAS SHOWN 13 ITA NO.365/RPR/2014 C.O. NO.12/RPR/2018 RECEIPT OF RS.0.67 CRORES ON ACCOUNT OF CARBON CRED IT. ON BEING QUESTIONED BY THE ASSESSING OFFICER, IT WAS SUBMITTED THAT AN AMO UNT OF RS.67,18,544/- HAS RECEIVED ON ACCOUNT OF CARBON CREDIT HAS RIGHTLY BE EN CREDITED AS INCOME OF POWER UNIT-1. IT WAS SUBMITTED THAT THE LD. CIT(A) HAS ALLOWED SIMILAR CLAIM FOR THE PURPOSE OF DEDUCTION U/S 80-IA FOR ASSESSMENT Y EAR 2008-09 IN ASSESSEES OWN CASE. WITHOUT PREJUDICE TO THE ABOVE, IT WAS A LTERNATIVELY ARGUED THAT THE HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF MY H OME POWER LTD. VS. DCIT (2012) HAS DECIDED THE ISSUE OF CARBON CREDIT ENTIT LEMENT IN FAVOUR OF THE ASSESSEE AND HELD THE SALE OF CARBON CREDIT CERTIFI CATES AS CAPITAL RECEIPT NOT CHARGEABLE TO TAX. IT WAS ACCORDINGLY ARGUED THAT THE AMOUNT OF RS.67,18,544/- RECEIVED DURING THE YEAR ON SALE OF CARBON CREDIT I S NOT AT ALL TAXABLE. THE ASSESSEE ALSO STATED THAT IT HAS INCURRED AN EXPEND ITURE OF RS.31,23,279/- WHICH HAS BEEN DEBITED UNDER THE HEAD CDM EXPENSES AND SHOWN AS OPERATING EXPENSES. THUS, THE NET RECEIPT OF CARBON CREDIT I S RS.35,95,265/- DURING THE YEAR. 21. HOWEVER, THE ASSESSING OFFICER WAS NOT SATISFIE D WITH THE ARGUMENTS ADVANCED BY THE ASSESSEE AND HELD THAT THE INCOME F ROM SALE OF CARBON CREDIT BEING INCOME RECEIVED FROM A SOURCE BEYOND THE FIRS T DEGREE DOES NOT CONSTITUTE PROFIT AND GAINS DERIVED BY THE ELIGIBLE UNDERTAKIN G OR ENTERPRISE FROM ANY 14 ITA NO.365/RPR/2014 C.O. NO.12/RPR/2018 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 T AXABLE AS REVENUE RECEIPT. 22. BEFORE THE LD. CIT(A), THE ASSESSEE SUBMITTED T HAT DURING FINANCIAL YEAR 2010-11, THE ASSESSEE COMPANY HAS RECEIVED VERIFIED EMISSION REDUCTION CREDIT (VER CREDIT) OF RS.67,18,544/-. THE AFORE SAID SUM RECEIVED FROM THE SALE OF VER CREDIT FORMS PART OF ELIGIBLE UNIT- 1 O F THE ASSESSEE AND THE SAME HAS BEEN INCLUDED AFTER DEDUCTING THE EXPENSES OF R S.31,23,279/- AS ELIGIBLE PROFIT OF UNIT- 1 FOR THE CLAIM OF DEDUCTION U/S 80 -IA OF THE ACT. IT WAS SUBMITTED THAT THE ASSESSEE COMPANY HAS EARNED THE VER CREDIT (HEREINAFTER REFERRED TO AS CARBON CREDIT) FROM THE INSTALLATI ON OF THE WASTE HEAT RECOVERY BOILER (WHRB) IN ELIGIBLE UNIT- 1 FOR US E IN THE GENERATION OF POWER. THE ASSESSEE IS ENGAGED IN THE PRODUCTION O F THE SPONGE IRON THROUGH ROTARY KILN. THE FUEL GASES FROM THE SPONGE IRON K ILN CONSTITUTE A TREMENDOUS AMOUNT OF WASTE HEAT ENERGY WHICH IS ABSORBED BY TH E WHRB TO AN EXTENT OF 75%. THE FUEL GASES ARE UTILIZED TO PRODUCE STEAM AND THE STEAM IS UTILIZED TO GENERATE ELECTRICITY. ACCORDINGLY, IT WAS ARGUED T HAT THE VER CREDIT RECEIVED BY THE ASSESSEE PERTAINS TO THE POWER GENERATING UN IT (UNIT- 1) OF THE COMPANY. 23. RELYING ON VARIOUS DECISIONS, IT WAS ARGUED THA T SUCH CARBON CREDIT ACCRUES IN THE HANDS OF THE COMPANY IN THE COURSE O F GENERATION OF POWER ITSELF AND IT SATISFIES THE CRITERIA OF THE FIRST DEGREE N EXUS AS LAID DOWN BY THE APEX 15 ITA NO.365/RPR/2014 C.O. NO.12/RPR/2018 COURT IN LIBERTY INDIA (SUPRA). THE VARIOUS DECISI ONS RELIED ON BY THE ASSESSING OFFICER WERE DISTINGUISHED. 24. BASED ON THE ARGUMENT ADVANCED BY THE ASSESSEE, THE LD. CIT(A) HELD THAT THE CARBON CREDIT COULD BE EARNED IF POWER IS GENER ATED AND NOT OTHERWISE AND, THEREFORE, GAIN FROM SALE OF CARBON CREDIT IS A GAI N DERIVED FROM THE BUSINESS OF GENERATION OF POWER AND CONSEQUENTLY, ELIGIBLE FOR DEDUCTION U/S 80-IA(4) OF THE I.T. ACT. RELYING ON VARIOUS DECISIONS INCLUDING T HE DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF FENNER (INDIA) LTD . VS. CIT REPORTED IN 241 ITR 803, DECISION OF THE HON'BLE SUPREME COURT IN T HE CASE OF B. DESRAJ VS. CIT REPORTED IN 301 ITR 439, HE ALLOWED THE GROUND RAISED BY THE ASSESSEE BEFORE HIM. 25. AGGRIEVED WITH SUCH ORDER OF THE LD. CIT(A), TH E REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 26. THE LD. DR HEAVILY RELIED ON THE ORDER OF THE A SSESSING OFFICER. 27. THE LD. COUNSEL FOR THE ASSESSEE ON THE OTHER H AND 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 TH E LAW RELATING TO THE SAME HAS BEEN SETTLED IN FAVOUR OF ASSESSEE BY THE DECISION OF THE HONBLE ANDHRA PRADESH HIGH COURT IN THE CASE OF CIT VS. MY HOME P OWER LTD. REPORTED IN 365 16 ITA NO.365/RPR/2014 C.O. NO.12/RPR/2018 ITR 82. FOLLOWING SUCH DECISION, THE ISSUE HAS BEE N SETTLED IN FAVOUR OF THE ASSESSEE BY JURISDICTIONAL TRIBUNAL IN THE CASE OF SHREE NAKODA ISPAT LTD. IN ITA NO.109/BLPR/2011. SUBSEQUENTLY, AN AMENDMENT H AS ALSO BEEN BROUGHT BY ENACTING SECTION 115BBG BY FINANCE ACT, 2017 PRO VIDING 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 AMENDME NT IS PROSPECTIVE AND THEREFORE AS A NECESSARY COROLLARY SUCH RECEIPT PRI OR 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, 1 963 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 ADJ UDICATION, THEREFORE, CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE A ND 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 DO ING SO, HE SHALL GIVE DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND DECI DE THE ISSUE AS PER FACT AND LAW. WE HOLD AND DIRECT ACCORDINGLY. THE GROUND R AISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 17 ITA NO.365/RPR/2014 C.O. NO.12/RPR/2018 30. GROUND OF APPEAL NO.(B) BY THE REVENUE RELATES TO THE DELETION OF DISALLOWANCE OF RS.1,91,79,611/- ON ACCOUNT OF CSR EXPENSES. 31. FACTS OF THE CASE, IN BRIEF, ARE THAT DURING TH E COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS INCURRED AN AMOUNT OF RS.1,91,79,611/- ON ACCOUNT OF CORPORATE SOCIAL RESPONSIBILITY (CSR), THE DETAILS OF WHICH ARE AS UNDER :- S.NO. UNIT AMOUNT IN RS. 1 CPIL-SILTARA 1,19,34,381 GPIL-RR ISPAT 11,45,230 GPIL-IOCD 61,00,000 TOTAL 1,91,79,611 32. HE OBSERVED THAT SUCH EXPENSES ARE REGULARLY BE ING DISALLOWED IN THE ASSESSMENT PROCEEDINGS IN EARLIER YEARS. FURTHER, THE PAYMENT OF RS.1,19,34,381/- RELATING TO GPIL-SILTARA INCLUDES PAYMENTS OF YAGYASHALA, DRINKING WATER HUT, PURCHASE OF PC FOR RAJNANDGAON COLLECTORATE, DONATION TO NGO, EXPENSES FOR EYE CAMP, DONATION/ EXPENSES FOR GRAM PANCHAYAT, PAYMENT FOR SUPPLY OF DRINKING WATER PAYMENT TO GRAM VIKAS SAMITI, DEVELOPMENT OF VILLAGE POND, BEAUTIFICATION OF POND AND EXPENSES O F SIMILAR NATURE. ON PERUSAL OF THE LEDGER ACCOUNT, HE OBSERVED THAT THE SUM OF RS.11,45,230/- RELATING TO GPIL-RR ISPAT INCLUDES PAYMENTS RELATING TO CONSTRU CTION EXPENSES FOR SIMILAR WORK. SIMILARLY, ON PERUSAL OF LEDGER ACCOUNT, HE OBSERVED THAT OUT OF RS.61,00,000/- RELATING TO GPIL-IOCD, A SUM OF RS.5 5,00,000/- REPRESENTS 18 ITA NO.365/RPR/2014 C.O. NO.12/RPR/2018 DONATION TO AKASNSHA LION SCHOOL FOR PHYSICALLY HAN DICAPPED AND RS.6,00,000/- REPRESENTS DONATION TO ISKCON. RELYI NG ON VARIOUS DECISIONS, HE OBSERVED THAT THE ABOVE EXPENSES WERE INCURRED B Y THE ASSESSEE COMPANY WITHOUT ANY LEGAL OBLIGATION AND PURELY AS AN ACT O F GOOD CITIZENSHIP AND, THEREFORE, IT CANNOT BE SAID TO HAVE BEEN LAID OUT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ITS BUSINESS. HE ACCORDINGLY DISALLOWED A SUM OF RS.1,91,79,611/- DEBITED TO THE PROFIT & LOSS ACCOUNT. 33. IN APPEAL, THE LD. CIT(A) RELYING ON VARIOUS DE CISIONS DELETED THE ADDITION. WHILE DOING SO, HE OBSERVED THAT THE GEN UINENESS OF THE CLAIM OF EXPENDITURE I.E. INCURRENCE OF EXPENDITURE AND PAYM ENT THEREOF HAS NOT BEEN DOUBTED. FURTHER, THE FINANCE ACT, 2014 BROUGHT AN AMENDMENT IN SECTION 37 AND THE LEGISLATURE INTENDED TO PUT AN EMBARGO ON T HE ADMISSIBILITY OF EXPENSES AND TO ACHIEVE THE PURPOSE, THEREFORE, THERE WAS NO SUCH EMBARGO FOR THE PRECEDING YEARS. 34. AGGRIEVED WITH SUCH ORDER OF THE LD. CIT(A), TH E REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 35. AFTER HEARING BOTH THE SIDES, WE FIND IDENTICAL ISSUE HAD COME UP BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2009-10 AND 2010-11. WE FIND THE TRIBUNAL VIDE ITA NOS.358 TO 360/RPR/20 14 ORDER DATED 19 ITA NO.365/RPR/2014 C.O. NO.12/RPR/2018 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 MO DI INDUSTRIES (SUPRA) AND HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. INFOSYS TECHNOLOGIES LTD. (SUPRA), WHEREIN, IT HAS BEEN HELD THAT THE EXPENDITURE INCU RRED ON SOCIAL RESPONSIBILITY WAS LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR PUR POSES 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 PU RPOSES OF SUB-SECTION (1) ANY EXPENDITURE INCURRED BY AN ASSESSEE ON THE ACTIVITI ES RELATING TO CORPORATE SOCIAL RESPONSIBILITY REFERRED TO IN SECTION 135 OF THE CO MPANIES ACT, 2013 SHALL NOT BE DEEMED TO BE AN EXPENDITURE INCURRED BY THE ASSESSE E FOR THE PURPOSES OF THE BUSINESS OR PROFESSION. THE CIT(A) HAS HELD THAT THERE WAS NO SUCH EMBARGO FOR THE PRECEDING YEARS. IN VIEW OF THE ABOVE, THE CIT(A) HELD THAT THE DISALLOWANCE CANNOT BE SUSTAINED. IN THE INSTANT CASE, IT IS SUBMITTED TH AT CSR EXPENSES ARE INCURRED FOR THE WELFARE OF LOCAL COMMUNITY AND THEREBY IMPROVE CORP ORATE IMAGE OF THE COMPANIES INCURRING SUCH EXPENDITURE. WE ARE OF THE CONSIDER ED OPINION THAT THE CIT(A) HAS RIGHTLY CONSIDERED THE DECISION AND DELETED THE ADD ITION MADE BY THE ASSESSING OFFICER AND GROUND NO.1 OF APPEAL OF THE REVENUE IS DISMISS ED. 36. RESPECTFULLY FOLLOWING THE DECISION OF THE TRIB UNAL IN ASSESSEES OWN CASE AND IN ABSENCE OF ANY CONTRARY MATERIAL BROUGH T TO OUR NOTICE, THE ORDER OF THE LD. CIT(A) IS UPHELD ON THIS ISSUE. THE GROUND RAISED BY THE REVENUE IS ACCORDINGLY DISMISSED. 37. GROUND NO.(C) BY THE REVENUE RELATES TO ORDER O F THE LD. CIT(A) IN RESTRICTING THE ADDITION TO RS.12,57,976/- ON ACCOU NT OF CHARITY/POOJA AND FESTIVAL EXPENSES TO RS.3,50,000/-. 38. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SING OFFICER, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, OBSERVED THAT THE ASSESSEE HAS DEBITED AN AMOUNT OF RS.5,94,487/- ON ACCOUNT OF POOJA & FESTI VAL EXPENSES IN RESPECT OF 20 ITA NO.365/RPR/2014 C.O. NO.12/RPR/2018 GPIL-SILTARA RS.513184/-, GPIL-RR ISPAT RS.65,1 30/- AND GPIL-IOCD RS.16,175/-. HE OBSERVED THAT SUCH EXPENSES ARE RE GULARLY BEING DISALLOWED BY THE ASSESSING OFFICER. RELYING ON THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF HIRA FERRO ALLOYS LTD. RE PORTED IN 227 CTR 508 (WHICH IS A SISTER CONCERN OF THE ASSESSEE) WHEREIN IT HAS BEEN HELD THAT THE EXPENDITURE INCURRED ON POOJA/VISHWAKARMA POOJA BY A COMPANY CANNOT BE TREATED AS EXPENDITURE INCURRED WHOLLY AND EXCLUSIV ELY FOR PURPOSES OF BUSINESS OR PROFESSION OF A COMPANY, HE DISALLOWED THE ENTIR E SUM OF RS.5,94,487/-. SIMILARLY HE NOTED THAT THE ASSESSEE HAS DEBITED AN AMOUNT OF RS.10,13,489/- ON ACCOUNT OF CHARITY AND DONATION. SINCE SUCH TYPE O F EXPENSES ARE REGULARLY BEING DISALLOWED IN THE ASSESSMENT PROCEEDINGS IN E ARLIER YEARS, HE ASKED THE ASSESSEE TO SUBSTANTIATE THE CLAIM. FROM THE DETAI LS SUBMITTED BY THE ASSESSEE, HE OBSERVED THAT THESE EXPENSES ARE IN NATURE OF :- - PAYMENTS OF BASTAR RAJMISTRI KALYAN SINGH, CHHATT ISGARH KISAAN SANGH, - DONATION FOR NAVRATRI, ENGINEERS DAY CELEBRATION , JANMASHTAMAI, - DONATION TO ROTARY CLUB, NAV DURGA SAMITI, SHIV S ENA, 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 RS.10,13,489/- ON THE GROUND THAT THE SAME HAS NOT BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. 21 ITA NO.365/RPR/2014 C.O. NO.12/RPR/2018 40. IN APPEAL, THE LD. CIT(A) RESTRICTED SUCH DISAL LOWANCE TO RS.12,87,978/- AND ALLOWED RELIEF OF RS.3,50,000/-. WHILE DOING S O, HE OBSERVED THAT EXCEPT RS.3,50,000/- INCURRED TOWARDS PURCHASE AND DISTRIB UTION OF SWEETS, THE BALANCE AMOUNT DOES NOT RELATE TO THE BUSINESS. 41. AGGRIEVED WITH SUCH ORDER OF THE LD. CIT(A), TH E 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 ASSESSEES OWN CASE WHEREIN THE TRIBUNAL, CONSIDERING THE CBDT CIRCULAR NO.17(F.NO.27(2)-IT/43) DATED 06. 05.1983 AND ANOTHER CBDT CIRCULAR NO.13A/20/68-IT(A-II) DATED 03.10.196 8 WHEREIN IT HAS BEEN HELD THAT THE EXPENSES INCURRED ON THE OCCASION OF DEEPAWALI AND MAHURAT ARE IN THE NATURE OF BUSINESS EXPENDITURE HAD ALLOWED A ND GRANTED RELIEF TO RS.6,54,900/-. SINCE IN THE INSTANT CASE SUCH RELI EF GRANTED BY LD. CIT(A) IS ONLY RS.3,50,000/- TOWARDS PURCHASE AND DISTRIBUTION OF SWEETS, THEREFORE, FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FO R THE PRECEDING ASSESSMENT YEARS 2009-10 AND 2010-11 RESPECTIVELY, WE DO NOT F IND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A). ACCORDINGLY, THE SAME IS UPHELD AND THE GROUND RAISED BY THE REVENUE IS DISMISSED. 22 ITA NO.365/RPR/2014 C.O. NO.12/RPR/2018 43. IN GROUND OF APPEAL NO.(D), THE REVENUE HAS CHA LLENGED THE DISALLOWANCE OF RS.2,25,43,398/- MADE BY THE ASSESSING OFFICER U /S 14A OF THE I.T. ACT. 44. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SING OFFICER, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, OBSERVED THAT THE DISALLOWANCE OF RS.4,57,029/- WAS MADE U/S 14A IN ASSESSMENT YEAR 2 008-09 WHICH WAS CONFIRMED BY THE LD. CIT(A). SIMILARLY, IN ASSESSM ENT YEAR 2010-11 AN AMOUNT OF RS.2,03,73,385/- WAS DISALLOWED U/S 14A OF THE I .T. ACT. HE, THEREFORE, ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE PROVISI ONS OF SECTION 14A SHOULD NOT BE APPLICABLE IN THIS YEAR ALSO SINCE THE SECURED L OAN HAS INCREASED FROM 39,14,988/- AS ON 31.03.2010 TO RS.607,78,962/- AS ON 31.03.2011 AND THE UNSECURED LOAN HAS INCREASED FROM NIL AS ON 31.03.2 010 TO RS.36,45,41,838/- AS ON 31.03.2011 WHICH SHOWS THAT MAJOR PART OF INVEST MENT HAD BEEN MADE OUT OF BORROWED FUNDS. SIMILARLY, THE TOTAL INVESTMENT HA S INCREASED AT RS.7,15,41,58,000/- AS AGAINST RS.1,20,449/-. 45. THE ASSESSEE REPLIED THAT DURING THE YEAR UNDER CONSIDERATION IT HAS EARNED CASH PROFIT OF RS.114.96 CRORES (EXCLUDING A MALGAMATING COMPANIES) AND THE NET INCREASE IN THE INVESTMENT IS OF RS.116.74 CRORES (EXCLUDING AMALGAMATING COMPANIES). THEREFORE, IT IS EVIDENT THAT THE INVESTMENT MADE DURING THE YEAR UNDER ASSESSMENT IS OUT OF OWNED FU ND. IT WAS FURTHER SUBMITTED 23 ITA NO.365/RPR/2014 C.O. NO.12/RPR/2018 THAT THE LOANS OBTAINED DURING THE YEAR HAS BEEN UT ILIZED TOWARDS FIXED ASSETS AND CAPITAL WORK IN PROGRESS. 46. HOWEVER, THE ASSESSING OFFICER WAS NOT SATISFIE D WITH THE EXPLANATION GIVEN BY THE ASSESSEE ON THE GROUND THAT THE ASSESS EE MISERABLY FAILED TO DISCHARGE THE PRIMARY ONUS CAST UPON IT. THE METHO D OF APPORTIONMENT OR ALLOCATION OF EXPENSES AS ADOPTED BY THE ASSESSEE F OR DETERMINING THE EXPENSES RELATABLE TO THE EXEMPT INCOME IS NOT CORRECT. SIN CE THE ASSESSEE HAS FAILED TO ESTABLISH THAT NO PART OF INTEREST BEARING FUNDS WA S UTILIZED FOR MAKING SUCH INVESTMENTS, THE INCOME FROM WHICH WAS NOT TAXABLE, THEREFORE, THE ASSESSING OFFICER REJECTED THE CORRECTNESS OF THE CLAIM OF TH E ASSESSEE THAT NO INTEREST EXPENDITURE IS RELATABLE TO MAKING SUCH INVESTMENTS , THE INCOME OF WHICH WAS NOT TAXABLE. APPLYING THE PROVISIONS OF SECTION 14 A READ WITH RULE 8D AND RELYING ON VARIOUS DECISIONS, THE ASSESSING OFFICER DISALLOWED AN AMOUNT OF RS.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 INVESTME NT AND NON-INTEREST BEARING ADVANCES. HE FURTHER NOTED THAT THE ASSESS EE HAS SUFFICIENT NON-INTEREST BEARING FUNDS FOR MAKING THE INVESTMENT IN SHARES A S IT HAS SUFFICIENT NET WORTH OF ITS OWN. THE ASSESSING OFFICER HAS NOT DISPUTED THE SUBMISSION OF THE 24 ITA NO.365/RPR/2014 C.O. NO.12/RPR/2018 ASSESSEE THAT NO EXPENDITURE WAS INCURRED FOR MAKIN G INVESTMENT. RELYING ON VARIOUS DECISIONS, HE HELD THAT THE DISALLOWANCE MA DE BY THE ASSESSING OFFICER CANNOT BE SUSTAINED. 48. AGGRIEVED WITH SUCH ORDER OF THE LD. CIT(A), TH E REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 49. THE LD. DR HEAVILY RELIED ON THE ORDER OF THE A SSESSING OFFICER. 50. THE LD. COUNSEL FOR THE ASSESSEE WHILE SUPPORTI NG THE ORDER OF THE LD. CIT(A) SUBMITTED THAT THE ASSESSEE HAD SUFFICIENT I NTEREST FREE FUNDS OF ITS OWN WHICH WAS STATED BEFORE THE ASSESSING OFFICER. IT WAS SUBMITTED THAT SHARE CAPITAL AND RESERVES OF THE ASSESSEE WAS AT RS.559. 11 CRORES WHEREAS INVESTMENT WAS ONLY RS.212.09 CRORES. THUS, THERE WERE SUFFIC IENT INTEREST FREE FUNDS FOR MAKING INVESTMENT. REFERRING TO THE DECISION OF TH E HONBLE GUJARAT HIGH COURT IN THE CASE OF PR.CIT VS. SINTEX INDUSTRIES L TD. IN TAX APPEAL NO.268 OF 2017 DATED 04.05.2017, HE SUBMITTED THAT THE HON'BL E HIGH COURT IN THE SAID DECISION HAS HELD THAT WHERE THE ASSESSEE HAD SUFFI CIENT INTEREST FREE FUND TO COVER INVESTMENT, DISALLOWANCE U/S 14A FOR INTEREST AND ADMINISTRATIVE EXPENSES IS NOT JUSTIFIED. 51. REFERRING TO THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. RELIANCE UTILITIES & POWER LTD. REPORTED IN 313 ITR 340, HE SUBMITTED THAT THE HON'BLE HIGH COURT IN THE SAID D ECISION HAS HELD THAT WHERE 25 ITA NO.365/RPR/2014 C.O. NO.12/RPR/2018 INTEREST BEARING FUNDS ARE AVAILABLE AND THE INTERE ST FREE FUNDS ARE MORE THAN INVESTMENTS MADE, THE PRESUMPTION IS THAT THE INVES TMENT IN THE TAX FREE SECURITIES WOULD HAVE BEEN MADE OUT OF THE INTEREST FREE FUNDS WITH THE ASSESSEE. 52. REFERRING TO THE DECISION OF THE HONBLE CHHATT ISGARH HIGH COURT IN THE CASE OF JCIT VS. BEEKAY ENGINEERING COPR. REPORTED IN 325 ITR 384, HE SUBMITTED THAT THE HON'BLE HIGH COURT IN THE SAID D ECISION HAS HELD THAT WHEN THERE WAS SUFFICIENT FUNDS IN THE ACCOUNT OF HUF PA RTNER AND SUBSTANTIAL PROFIT HAD ACCRUED TO THE ASSESSEE FIRM IN THE RELEVANT YE AR, FINDINGS OF THE TRIBUNAL THAT THE BORROWED FUNDS WERE NOT DIVERTED AS INTERE ST FREE ADVANCES TO THE MEMBERS OF THE HUF AND THUS THERE WAS NO JUSTIFICAT ION FOR MAKING PART DISALLOWANCE OUT OF INTEREST PAID ON BORROWED FUNDS ARE FINDINGS OF FACT AND THE SAME DID NOT WARRANT ANY INTERFERENCE. 53. RELYING ON VARIOUS OTHER DECISIONS, HE SUBMITTE D THAT SINCE THE ASSESSEE HAD SUFFICIENT OWN CAPITAL AND FREE RESERVES WHICH IS MORE THAN INVESTMENT MADE, THE INCOME OF WHICH IS EXEMPT FROM TAX, NO DI SALLOWANCE IS CALLED FOR. REFERRING TO THE DECISION OF THE HONBLE PUNJAB & H ARYANA HIGH COURT IN THE CASE OF CIT VS. ABHISHEK INDUSTRIES LTD. REPORTED I N 380 ITR 652 AND THE DECISIONS OF THE KOLKATA BENCH OF THE TRIBUNAL IN T HE 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 ESTA BLISH THAT BORROWED FUNDS 26 ITA NO.365/RPR/2014 C.O. NO.12/RPR/2018 WERE USED FOR MAKING INVESTMENTS, THE INCOME OF WHI CH EXEMPT. HOWEVER, SUCH INITIAL BURDEN WAS NOT DISCHARGED BY THE ASSES SING OFFICER. IN HIS ALTERNATE SUBMISSION, HE SUBMITTED THAT THE DISALLOWANCE CANN OT EXCEED THE EXEMPT INCOME. FOR THE ABOVE PROPOSITION, HE RELIED ON VA RIOUS DECISIONS. 54. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. WE FI ND THE ASSESSING OFFICER IN THE INSTANT CASE DISALLOWED AN AMOUNT OF RS.2,25,43 ,398/- U/S 14A ON THE GROUND THAT SIMILAR DISALLOWANCE U/S 14A WAS MADE B Y THE ASSESSING OFFICER IN ASSESSMENT YEAR 2008-09 WHICH WAS CONFIRMED THE LD. CIT(A) AND DISALLOWANCE OF RS.2,03,73,385/- WAS MADE BY THE ASSESSING OFFIC ER U/S 14A FOR ASSESSMENT YEAR 2010-11. WE FIND THE LD. CIT(A) DELETED SUCH DISALLOWANCE ON THE GROUND THAT THE ASSESSEE HAD SUFFICIENT OWN FUNDS FOR MAKI NG INVESTMENT AND, THEREFORE, NO DISALLOWANCE IS CALLED FOR. WE FIND IN THE IMME DIATELY PRECEDING ASSESSMENT YEAR THE ISSUE RELATING TO SECTION 14A WAS RESTORED TO THE FILE OF THE ASSESSING OFFICER SINCE THE ASSESSEE HAD ARGUED THAT THE INVE STMENTS MADE BY THE ASSESSEE COMPANY WERE FOR STRATEGIC INVESTMENTS AND WERE NOT FOR EARNING THE EXEMPT INCOME. HOWEVER, FOR THE IMPUGNED ASSESSMENT YEAR, THE LD. COUNSEL FOR THE ASSESSEE ARGUED THAT ITS OWN CAPITAL AND FREE RESER VES OF RS.559.12 CRORES IS MUCH MORE THAN THE INVESTMENT OF RS.212.09 CRORES, THE INCOME ON WHICH IS EXEMPT FROM TAX. THUS SINCE THE ASSESSEE HAS SUFFI CIENT OWN CAPITAL AND FREE 27 ITA NO.365/RPR/2014 C.O. NO.12/RPR/2018 RESERVES TO MEET THE INVESTMENT, THEREFORE, NO DISA LLOWANCE U/S 14A IS CALLED FOR. 55. WE FIND SOME FORCE IN THE ABOVE ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE. IT IS AN ADMITTED FACT THAT THE OWN CAPI TAL AND FREE RESERVES OF THE ASSESSEE COMPANY AT 559.12 CRORES IS MUCH MORE THAN THE INVESTMENT OF RS.212.09 CRORES, THE INCOME OF WHICH IS EXEMPT FRO M TAX. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF RELIANCE UTILITIES & POWER LTD. REPORTED IN 313 ITR 340 HAS HELD THAT IF THERE WERE FUNDS AVAIL ABLE BOTH INTEREST FREE AND OVERDRAFT AND/OR LOANS TAKEN THEN A PRESUMPTION WOU LD ARISE THAT INVESTMENTS WOULD BE OUT OF THE INTEREST FREE FUNDS GENERATED O R AVAILABLE WITH THE COMPANY, IF INTEREST FREE FUNDS WERE SUFFICIENT TO MEET THE INVESTMENTS. 56. THE HONBLE CHHATTISGARH HIGH COURT IN THE CASE OF JCIT VS. BEEKAY ENGINEERING CORPORATION REPORTED IN 325 ITR 384 HAS HELD THAT WHEN THERE WERE SUFFICIENT FUNDS IN ACCOUNT OF THE HUF PARTNERS AND SUBSTANTIAL PROFIT HAD ACCRUED TO THE ASSESSEE FIRM IN THE RELEVANT YEAR, FINDINGS OF THE TRIBUNAL THAT THE BORROWED FUNDS WERE NOT DIVERTED AS INTEREST FR EE ADVANCES TO THE MEMBERS OF THE HUF AND THUS THERE WAS NO JUSTIFICATION FOR MAKING PART DISALLOWANCE OUT OF INTEREST PAID ON BORROWED FUNDS ARE FINDING OF F ACT AND THE SAME DID NOT WARRANT ANY INTERFERENCE. 28 ITA NO.365/RPR/2014 C.O. NO.12/RPR/2018 57. WE FIND THE HONBLE GUJARAT HIGH COURT IN THE C ASE OF PR. CIT VS. SINTEX INDUSTRIES LTD. IN TAX APPEAL NO.291 OF 2017 ORDER DATED 04.05.2017 HAS ALSO DECIDED IDENTICAL ISSUE AND HELD THAT THE DISALLOWA NCE U/S 14A IS NOT JUSTIFIED WHEN THE ASSESSEE HAD SUFFICIENT INTEREST FREE FUND S OUT OF WHICH CONCERNED INVESTMENT HAD BEEN MADE. THE RELEVANT OBSERVATION OF THE HONBLE HIGH COURT AT PARA 9 OF THE ORDER READS AS UNDER :- 9. CONSIDERING THE AFORESAID FACTS AND CIRCUMSTANC ES, MORE PARTICULARLY THE FACT THAT THE ASSESSEE WAS ALREADY HAVING ITS OWN SURPLU S FUND AND THAT TOO TO THE EXTENT OF RS.1981.55 CRORES AGAINST WHICH INVESTMENT WAS MADE OF RS.144.51 CRORES, THERE WAS NO QUESTION OF MAKING ANY DISALLOWANCE OF EXPEN DITURE IN RESPECT OF INTEREST AND ADMINISTRATIVE EXPENSES UNDER SECTION 14A OF THE AC T, THEREFORE, THERE WAS NO QUESTION OF ANY ESTIMATION OF EXPENDITURE IN RESPEC T OF INTEREST AND ADMINISTRATIVE EXPENSES OF RS.24,37,500/- UNDER RULE 8D OF THE RUL ES. 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 DI SALLOWANCE OF EXPENDITURE OF RS.24,37,500/- INCURRED IN RESPECT OF INTEREST AND ADMINISTRATIVE EXPENSES UNDER SECTION 14A OF THE ACT. WE ARE IN COMPLETE AGREEME NT WITH THE VIEW TAKEN BY THE LEARNED TRIBUNAL. AT THIS STAGE, DECISION OF DIVIS ION BENCH OF THIS COURT IN THE CASE OF PRINCIPAL COMMISSIONER OF INCOME-TAX VS. INDIA GELA TINE & CHEMICALS LIMITED, REPORTED IN [2015] 376 ITR 553 [GUJARAT] NEEDS A RE FERENCE. IN THE SAID DECISION, IT IS OBSERVED AND HELD BY THE DIVISION BENCH OF THIS COURT THAT WHEN THE ASSESSEE HAD SUFFICIENT INTEREST-FREE FUNDS OUT OF WHICH CONCERN ED INVESTMENTS HAD BEEN MADE, DISALLOWANCE UNDER SECTION 14A IS NOT JUSTIFIED. 58. IT MAY BE PERTINENT TO MENTION HERE THAT THE SL P FILED BY THE REVENUE WAS DISMISSED BY THE HONBLE SUPREME COURT VIDE SLP (CI VIL) DIARY NO.39602/2017 ORDER DATED 23.03.2018. SINCE ADMITT EDLY THE ASSESSEE IN THE INSTANT CASE HAS SUFFICIENT OWN CAPITAL AND FREE RE SERVES OF RS.559.12 CRORES WHICH IS MUCH MORE THAN THE INVESTMENTS OF RS.212.0 9 CRORES, THEREFORE, RESPECTFULLY FOLLOWING THE DECISIONS CITED ABOVE, W E HOLD THAT NO DISALLOWANCE 29 ITA NO.365/RPR/2014 C.O. NO.12/RPR/2018 OF INTEREST IS CALLED FOR. HOWEVER, SINCE THE ASSE SSEE IS HOLDING HUGE INVESTMENTS, THE INCOME OF WHICH IS EXEMPT FROM TAX , THEREFORE, SOME DISALLOWANCE TOWARDS ADMINISTRATIVE EXPENSES IS REQ UIRED TO BE MADE. CONSIDERING THE TOTALITY OF THE FACTS 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 EARNI NG SUCH EXEMPT INCOME. THE ASSESSING OFFICER IS DIRECTED TO COMPUTE THE SA ME AND THE ORDER OF THE LD. CIT(A) IS ACCORDINGLY MODIFIED TO THIS EXTENT. THE GROUND RAISED BY THE REVENUE IS ACCORDINGLY PARTLY ALLOWED. 59. IN GROUND OF APPEAL NO. (E), THE REVENUE HAS CH ALLENGED THE ORDER OF THE LD. CIT(A) IN DELETING THE ADDITION OF RS.2,10,551/ - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DELAYED PAYMENT OF EMPLOYEES CONTRIBUTION TO PF AND ESI. 60. AFTER HEARING BOTH THE SIDES, WE FIND THE ASSES SING OFFICER DISALLOWED AN AMOUNT OF RS.2,10,551/- BEING DELAYED PAYMENT OF EM PLOYEES CONTRIBUTION TO PF AND ESI UNDER THE PROVISIONS OF SECTION 2(24)(X) R.W.S. 36(1)(VA) OF THE I.T. ACT. WE FIND THE LD. CIT(A) DELETED THE DISALLOWAN CE MADE BY THE ASSESSING OFFICER ON THE GROUND THAT SUCH PAYMENTS WERE BEFOR E THE DUE DATE OF FILING OF THE RETURN OF INCOME U/S 139(1) AND, THEREFORE, CAN NOT BE DISALLOWED U/S 43B AND U/S 36(1)(VA) OF THE I.T. ACT. WE FIND IDENTICAL I SSUE HAD COME UP BEFORE THE 30 ITA NO.365/RPR/2014 C.O. NO.12/RPR/2018 RAIPUR BENCH OF THE TRIBUNAL IN THE CASE OF DCIT VS . HIRA FERRO ALLOYS LTD. VIDE ITA NOS.358 TO 360/RPR/2014 ORDER DATED 18.01. 2018 WHEREIN THE TRIBUNAL HAS DISMISSED THE GROUND RAISED BY THE REV ENUE ON THE GROUND THAT EMPLOYEES CONTRIBUTION TO PF AND ESI ALTHOUGH DEPO SITED AFTER THE DUE DATE PRESCRIBED UNDER THE RELEVANT DATE, HOWEVER, WERE D EPOSITED 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 E MPLOYEES 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 BENCHE S 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 B Y 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 ASSESSE E COULD NOT EXPLAIN SATISFACTORILY THE REASONS FOR SUCH LONG DELAY IN F ILING OF THIS CROSS OBJECTION BY 31 ITA NO.365/RPR/2014 C.O. NO.12/RPR/2018 THE ASSESSEE. IN ABSENCE OF ANY SATISFACTORY EXPLA NATION REGARDING DELAY IN FILING OF THE CROSS OBJECTION, SUCH DELAY IN FILING OF THE CROSS OBJECTION CANNOT BE CONDONED. THE CROSS OBJECTION IS, THEREFORE, DI SMISSED BEING BARRED BY LIMITATION. 63. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES AND THE CROSS OBJECTION FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 01 ST OCTOBER, 2018. SD/- SD/- (SUCHITRA KAMBLE) (R. K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 01-10-2018. SUJEET COPY OF ORDER TO: - 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT 4) THE CIT(A) 5) THE DR, I.T.A.T., RAIPUR. BY ORDER //TRUE COPY// SR. PRIVATE SECRETARY ITAT, RAIPUR