ACIT, CIRCLE-14(1)(2), MUMBAI V. M/S RELIANCE INFRASTRUCTURE LTD, MUMBAI

ITA 2796/MUM/2022

AI Insights

The case involves cross appeals by the Revenue and the assessee, Reliance Infrastructure Ltd., against the order passed by the National Faceless Appeal Centre (NFAC), Delhi, for the assessment year 2016-17. The appeals primarily revolved around the disallowances made under section 14A of the Income Tax Act, the treatment of replacement meter expenses, the allocation of head office expenses for computing profits eligible for deduction under section 80IA, and the disallowance of inflated coal expenses. The Tribunal examined various legal precedents and the specific circumstances of the case, including the financial transactions and the regulatory framework governing the assessee's business operations.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 302366 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 28-12-2022
• Assessment Year: 2016-2017
• Appeal Filed On: 01-11-2022
• Other Referred Cases: Maxopp Investments Ltd. vs. CIT, Vireet Investments P. Ltd. vs. ACIT, Principal Commissioner of Income-tax-2 vs. Caraf Builders & Constructions (P.) Ltd., South Indian Bank Ltd. vs. Commissioner of Income Tax, Reliance Utilities and Power Ltd. vs. CIT, HDFC Bank Ltd. vs. CIT, CIT vs. Reliance Utilities and Power Ltd., Principal Commissioner of Income Tax vs. GVK Project and Technical Services Ltd., Principal Commissioner of Income Tax, Bangalore vs. Sterling Developers (P) Ltd., Principal Commissioner of Income Tax-6 vs. Kohinoor Project P. Ltd., ACIT vs. Vireet Investments P. Ltd., ACIT, Ward 10(2) vs. Geometric Software Solutions Co. Ltd.
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Business income; Depreciation; Earning of tax free income; Corroborative evidences; Revised return; Revenue expenditure; Capital expenditure; Rule 8D; Set aside
• Section: 10; 143(3); 14A; 115JB; 80IA; 64; 73

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, ‘D‘ BENCH MUMBAI BEFORE: SHRI AMIT SHUKLA, JUDICIAL MEMBER & SHRI S RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA No.2796/Mum/2022 (Assessment Year :2016-17) ACIT, CIRCLE-14 (1)(2), Room No. 455, 4 th Floor, Aayakar Bhavan, M.K.Road, Mumbai-400020 Vs. M/s. Reliance Infrastructure Ltd, Mumbai. Ground Floor, Reliance Centre 19, Walchand Hirachand Marg, Ballard Estate, Mumbai- 400001 PAN/GIR No. AACCR7446Q (Appellant) .. (Respondent) ITA No.2590/Mum/2022 (Assessment Year :2016-17) M/s. Reliance Infrastructure Ltd, Mumbai. Ground Floor, Reliance Centre 19, Walchand Hirachand Marg, Ballard Estate, Mumbai- 400001 Vs. ACIT, CIRCLE-14 (1)(2), Room No. 455, 4 th Floor, Aayakar Bhavan, M.K.Road. Mumbai-400020 PAN/GIR No. AACCR7446Q (Appellant) .. (Respondent) Assessee by Shri. Jitendra Sanghavi Revenue by Shri. Sanjay Deshmukh (CIT DR Date of Hearing 29/12/2022 Date of Pronouncement 29/03/2023 ITA No.2796/Mum/2022 & 2590/Mum/2022 M/s. Reliance Infrastructure Ltd. 2 आदेश / O R D E R PER AMIT SHUKLA (J.M): The aforesaid cross appeals have been filed by the Revenue as well as by the assessee against order dated 06/09/2022 passed by NFAC Delhi for the quantum of assessment passed u/s.143(3) for the A.Y.2016-17. In the Revenue appeal, the following grounds have been raised:- 1. "Whether on the facts and under the circumstances of the case and in law, the Ld CIT(A) was justified in directing the AO to exclude the investments made in subsidiaries, being strategic investments which had yielded exempt income during the year and also to re-compute the disallowances under Rule 8D2(iii) of Rules by considering only those investments which had actually yielded exempt income during the year accordingly and thereafter reduce the voluntary disallowance made by the assessee in the return of income. 2 Whether on the facts and under the circumstances of the case and in law, the Ld CIT(A) was justified in allowing the expenses incurred for replacement of meters as Revenue expenditure? 3. Whether on the facts and under the circumstances of the case and in law, the Ld CIT(A) was justified in allowing the proportionate apportionment and allocation of Head Office expenses while calculating deduction u/s 801A of the Act? 4. Whether on the facts and the circumstances of the case and in law, the Ld CIT(A) was justified in holding that the deduction u/s 80IA of the Act to the extent of gross total income computed and not against the net business income only? ITA No.2796/Mum/2022 & 2590/Mum/2022 M/s. Reliance Infrastructure Ltd. 3 5. Whether on the facts and the circumstances of the case and in law, the Ld CIT(A) was justified in deletion of disallowance made u/s. 14A of the Act while computing book profit u/s. 115JB of the Act? 6. Whether on the facts and the circumstances of the case and in law the Ld CIT(A) was justified in restricting the over valuation of coal price estimated by AO to 50% i.e. over valuation to be taken at 12%, instead of over valuation of coal price taken by AO at 24%. 2. Whereas in the assessee‟s appeal the only issue raised in various grounds of appeal is with regard to disallowance of inflated coal expenses of Rs.10,69,29,926/- being 50% of the disallowance made by the ld. AO, whereby he has confirmed disallowance on adhoc and estimated basis at 12%. 3. The grounds raised by the assessee as well as ground No.6 raised by the Revenue pertains to the same issue, therefore, the same will be discussed while dealing with the Revenue‟s appeal. The assessee company is engaged in generation, distribution of power, execution-procurement-commissioning of power plants and financial activities. The generation of power and distribution is made to Mumbai suburban areas, Goa, Andhra Pradesh and Karnataka. 4. In so far as ground No.1 relating to disallowance u/s.14A of Rs. 224,66,88,127/-, the facts in brief are that assessee had earned dividend income of Rs. 145,93,26,446 which had been claimed exempt u/s. 10 of the Act. The assessee had disallowed a sum of Rs. 13,92,89,519 in the original as well as revised ITA No.2796/Mum/2022 & 2590/Mum/2022 M/s. Reliance Infrastructure Ltd. 4 return considering only those investments on which dividend was received during the year and excluding there from investments in subsidiaries and interest expenses. 5. During the course of assessment proceedings, the assessee had submitted an alternate computation of disallowance u/s. 14A considering only those investments on which dividend was received during the year including investments in subsidiaries in view of the Supreme Court decision in case of Maxopp Investments Ltd. reported in 402 ITR 640 and excluding interest expenses. The disallowance u/s. 14A as per the above working was computed at Rs. 14,08,17,019/-. 6. During the course of assessment proceedings, the assessee was asked to furnish details as per the provisions of section 14A and Rule 8D in response to which the assessee had made submissions vide its letter dated 12.08.2019. The assessee also submitted without prejudice computation of disallowance u/s. 14A as per Rule 8D considering all investments capable of earning exempt income and including interest expenses. The disallowance accordingly worked out to Rs. 238,59,77,646/-. Further, without prejudice to above the assessee had submitted that the disallowance u/s.14A be restricted to exempt income i.e Rs. 145,93,26,446/-. However, the main argument of the assessee before the ld. AO was that no interest disallowance should be made because assessee had surplus interest free funds of Rs. 17517.57 crores far exceeding the total value of tax ITA No.2796/Mum/2022 & 2590/Mum/2022 M/s. Reliance Infrastructure Ltd. 5 free investments which was Rs.11,444.74 Crores. However, ld. AO after discussing the assessee‟s submissions rejected all the contention. Ld. AO has though not disputed this fact that assessee had interest free funds, but he rejected the plea that no disallowance u/s.14A can be made on the basis of decisions of the Hon’ble Bombay High Court in the case of Reliance Utilities and Power Ltd reported in 313 ITR 340; and the two decisions of Hon’ble Bombay High Court in the case of HDFC Bank Ltd. reported in (2014) 49 taxmann.com 335; and (2016) 67 taxmann.com 42, stating that these judgment do not lay down the correct law and he finally, mechanically apply Rule 8D and worked out the disallowance at Rs.238,59,77,646/- and after reducing suomoto disallowance of Rs.13,92,89,519/- made disallowance of Rs.224,66,89,126/-. 7. Before the ld. CIT(A), assessee had relied on the decision of the ITAT in its own case for AY 2013-14 and AY 2014-15, ld. CIT(A) Order for AY 2015-16 in its own case and Special Bench decision in case of ACIT v. Vireet Investments P. Ltd. (ITA No. 502/Del/2012) along with other judicial precedents in support of its contention that only those investments which have yielded exempt income ought to be considered for working out the disallowance u/s. 14A. 8. As regards exclusion of interest expenses for computing disallowance u/s. 14A, Ld. Counsel had provided a statement giving details of own funds and the tax free investments in ITA No.2796/Mum/2022 & 2590/Mum/2022 M/s. Reliance Infrastructure Ltd. 6 support of his contention that interest free funds available with the assessee were more than the investments made and therefore no borrowed funds were utilized for making investments and accordingly, interest expenses should not be disallowed. He also placed reliance on the decision of the ITAT in its own case for AY 2013-14 and AY 2014-15, CIT(A) Order for AY 2015-16 in its own case and Supreme Court decision in case of Pr. CIT v. Sintex Industries Ltd. [2017] 82 Taxmann.com 171 and decision of the Hon‟ble Bombay High Court in case of CIT v. Reliance Utilities and Power Ltd. 313 ITR 340. In support of his without prejudice contention that the disallowance u/s. 14A ought to be restricted to exempt income, he placed reliance on the Supreme Court judgment in case of Principal Commissioner of Income-tax-2 v. Caraf Builders & Constructions (P.) Ltd. [2019] 112 taxmann.com 322 (SC), wherein it was held that upper disallowance u/s. 14A cannot exceed exempt income of relevant year and also held that where for year in question, finding of fact was that assessee had not earned any tax free income, corresponding expenditure could not be worked out for disallowance. The ld. CIT(A) following its predecessor‟s order for AY 2015-16 in the assessee‟s own case has directed the ld.AO to re-compute the disallowance u/s. 14A considering only those investments including investments in subsidiaries which have earned tax free income during the year and has deleted the disallowance on account of interest expenses. Thus, ld. CIT(A) has allowed the assessee‟s ground of appeal on disallowance u/s. ITA No.2796/Mum/2022 & 2590/Mum/2022 M/s. Reliance Infrastructure Ltd. 7 14A for which the department has preferred an appeal before ITAT. 9. Before us, ld. Counsel submitted that the disallowance u/s. 14A ought to be worked out as per Rule 8D considering only those investments on which exempt income has been received during the year as has been allowed in the assessee‟s own case by ITAT in AY 2015-16. The assessee also placed reliance on the following decisions:-  ACIT vs. Vireet Investments P. Ltd. (ITA No. 502/Del/2012) and C.O. No. 68/Del/2014) (SB)  Principal Commissioner of Income Tax v. GVK Project and Technical Services Ltd. [2019] 106 taxmann.com 181 (SC)  Principal Commissioner of Income Tax, Bangalore v. Sterling Developers (P) Ltd. [2021] 129 taxmann.com 116 (Kar HC)  Principal Commissioner of Income Tax – 6 v. Kohinoor Project P. Ltd [2020] 121 taxmann.com 177 (Bom). With respect to the assessee‟s without prejudice contention that disallowance u/s. 14A ought to be restricted to exempt income earned by the assessee, reliance has placed on the following decisions  Principal Commissioner of Income Tax – 2 v. Caraf Builders & Constructions Pvt. Ltd. [2019] 112 taxmann.com 322 (SC)  Joint Investments Pvt. Ltd. Vs. CIT [2015] (59 taxmann.com 295) (Del.) (HC)  Principle Commissioner of Income Tax v. India Bulls Capital Services Ltd. (SC) [2020] 114 taxmann.com 647 ITA No.2796/Mum/2022 & 2590/Mum/2022 M/s. Reliance Infrastructure Ltd. 8  Principal Commissioner of Income Tax v. Reliance Chemotex Industries Ltd. [2022] 138 taxmann.com 199 (Cal HC) 10. Further, this issue of disallowance under section 14A has been decided by the ITAT in Appeal Nos. ITA No. 476/Mum-2022 and ITA No. 2106/Mum-2022 for AY 2017-18 & AY 2018-19 respectively vide their order dated 23.03.2023 at para 61 on pages 57 and 58 of the order as under: “61. Now, it is pointed out that, ITAT in assessee’s own case for AY 2015-16 after following the various decisions held that disallowance u/s. 14A worked out as per rule 8D should be after considering only those investments on which exempt income has been received during the year. Therefore, following the precedence of the earlier order, the disallowance is only restricted for considering the purpose of rule 8D(ii) only on those investments on which exempt income has been received during the year. Accordingly, the disallowance made by the AO and confirmed by the DRP in both the assessment years is hereby deleted.” 11. On the other hand, ld. DR strongly relied upon the order of the ld. AO. 12. After considering the relevant finding given in the impugned orders, we find that ld. AO, first of all has made huge disallowance of interest of Rs.185,32,54,062/- rejecting the various judgments of Jurisdictional High Court. Now it is well settled law by the Hon‟ble Supreme Court in the case of South Indian Bank Ltd. vs. Commissioner of Income Tax reported ITA No.2796/Mum/2022 & 2590/Mum/2022 M/s. Reliance Infrastructure Ltd. 9 in [2021] 130 taxmann.com 178, that in case assessee has surplus fund then it is presumed that investment has been made out of surplus funds and no disallowance u/s 14A can be made on interest expenditure. Thus, in view of the aforesaid judgment of the Hon‟ble Supreme Court, no disallowance on account of interest can be made when assessee has surplus funds. In so far as the ld. CIT(A)‟s direction that to re-compute disallowance considering only those investments including investment in subsidies which have earned tax free income during the year, is based on precedents of earlier years of the Tribunal for the A.Y.2017-18 and 2018-19 supra. Therefore, there is no infirmity in such direction of the ld. CIT(A) and same is confirmed and consequently, ground No.1 raised by the Revenue is dismissed. 13. In so far as expenditure on replacement of meters of Rs.12,52,27,442/- as raised ground No.2, the facts in brief are that the assessee is engaged in the business of distribution of electricity in the suburbs of Mumbai catering to over 2.9 million consumers. The assessee has installed separate meters in the premises of each consumer (either residential or commercial or industrial) These meters have to be periodically replaced on account of obsolescence, reading of the meter becoming faulty, meter being burnt etc. Many times on account of manufacturing defects, the entire lot of meters has to be replaced. In the books of account, the assessee capitalizes the cost of these replaced meters as per the governing provisions of the Electricity Act, however in the computation of income, the expenditure incurred ITA No.2796/Mum/2022 & 2590/Mum/2022 M/s. Reliance Infrastructure Ltd. 10 on replacement of meters is claimed as revenue expenditure since the replacement of meters only facilitates better reading and does not in any way enhance the capital assets or the quantity of power supply. The assessee has been claiming the expenditure on replacement of meters as revenue expenditure since AY 1999-2000 onwards. 14. Ld. AO held that expenditure incurred in replacement of meters is a capital expenditure and allowed depreciation thereon as against assessee‟s claim as „revenue expenditure‟. In sum and substance, his reasoning was that; firstly, that meters are distinct and separate item of expenditure which is different from wiring and switches involved in the same head of expenditure. Meter can be easily replaced, removed and repaired; and secondly, assessee has not placed any record whether other distribution companies like BEST or MSEB are claiming this item of expenditure as „Revenue‟ or not; and lastly, since it is a separate item of expenditure giving due benefit to the assessee over a period of 2.2 to 2.5 years therefore, it is a capital expenditure. 15. Ld. CIT(A) has allowed the assessee‟s ground of appeal treating the expenditure incurred on replacement of meters as revenue expenses following the decision of CIT(A) in assessee‟s own case for AY 2015-16 and the decision of the ITAT in assessee‟s own case for AY 2013-14 and AY 2014-15. The Department is in appeal before ITAT against the decision of the ITA No.2796/Mum/2022 & 2590/Mum/2022 M/s. Reliance Infrastructure Ltd. 11 ld. CIT (A) in allowing the assessee‟s ground of appeal for treating the expenditure incurred on replacement of meters as revenue expenditure. 16. Before us, ld. Counsel submitted that the expenditure incurred on replacement of meters is revenue expenditure and ought to be allowed as claimed. The expenditure on replacement of meters is for facilitating the assessee‟s business operations and enables maintenance and conduct of the assessee‟s business more effectively or more profitably. The replacement of meter does not increase the assessee‟s generation or distribution capacity. Further, replacing old meters by new meters has resulted only in getting better readings of the current consumption and does not in any way enhance the capital assets or the quantity of power supply. Accordingly, the assessee has correctly claimed the expenditure incurred on replacement of meters as revenue expenditure. The assessee’s claim of expenditure on replacement of meters is allowed by the Bombay High Court in assessee’s own case for AY 2006-07 to AY 2009-10 and by ITAT Mumbai for AY 2002-03 to AY 2015- 16. 17. The issue of disallowance of expenditure on replacement of meters has been decided by the ITAT in Appeal Nos. ITA No. 476/Mum-2022 and ITA No. 2106/Mum-2022 for AY 2017-18 & AY 2018-19 respectively vide their order dated 23.03.2023 at para 67 on pages 59 and 60 of the order as under: ITA No.2796/Mum/2022 & 2590/Mum/2022 M/s. Reliance Infrastructure Ltd. 12 “67. After considering the aforesaid facts and earlier judicial pronouncements in assessee’s own case, it is seen that the expenditure has been incurred on replacement of meters which is treated as revenue expenditure for facilitating the business operations and enables the maintenance and conduct of the assessee’s business more effectively or more profitably. The replacement of meter does not increase the Assessee’s generation or distribution capacity. In fact assessee replacing old meters by new meters which resulted in better readings of the electricity / current consumption and do not in any way enhance the capital assets or the quantity of power supply. Accordingly, the same is rightly claimed as revenue expenditure. Moreover, this issue has been covered by the decision of Hon’ble Bombay High Court in assessee’s own case for AY 2006-07 to AY 2009-10 and also by ITAT Mumbai for AY 2002-03 to AY 2015-16. Accordingly, the disallowance of expenditure made by the AO in both the assessment years is hereby deleted.” 18. Since this issue is squarely covered by the decision of the Hon‟ble Bombay High Court in assessee‟s own case for A.Y.2012- 13 to 2015-16 and therefore, consistent with the binding precedents of Jurisdictional High Court in the case of the assessee, the addition made by the ld. Counsel is admitted and ground No.2 raised by the Revenue is dismissed. 19. In ground No.3 the Revenue has challenged the finding of the ld. CIT(A) on allocation of head office expenses for computing profit eligible for deduction u/s.80IA for distribution unit of Rs.171,57,07,942/-. The brief facts are that the assessee is eligible for deduction u/s. 80IA in respect of its distribution division. The assessee has incurred various expenses at its head ITA No.2796/Mum/2022 & 2590/Mum/2022 M/s. Reliance Infrastructure Ltd. 13 office. The assessee has not allocated the commonly incurred head office expenses to arrive at the profit of the eligible 80IA undertaking since the deduction is allowable in respect of profits derived from the business. The common expenses incurred cannot be allocated to the eligible 80IA undertaking to arrive at the business profits in the absence of direct nexus. The assessee has claimed deduction u/s.80IA of Rs.557,24,83,941/- in the original return of income. The ld. AO has allocated commonly incurred head office expenses to all undertakings on the basis of turnover resulting in reduced profits of eligible 80IA undertaking stating that the head office expenses have been incurred for running and administration of all the units/activities of the assessee company including the activities of the eligible units. As per section 80IA(5), profits of these units are to be computed as if these units are the only source of income and therefore, the expenses of the head office, which controls the business of these units, must be apportioned to arrive at the correct eligible profits. 20. Finally, AO has apportioned the head office expenses to all the units and the eligible profits were re-computed in the following manner:- 7.1.4 Considering the facts of the case, the stand taken in the earlier years, the discussion here-in-above and the position of law, the head office expenses are apportioned over all the units and the eligible profits are recomputed as under: Head Office expenses Rs.368,21,83,658 Less: Depreciation as per books Rs. 7,88,89,907 ITA No.2796/Mum/2022 & 2590/Mum/2022 M/s. Reliance Infrastructure Ltd. 14 Add: Depreciation as per IT Act Rs. 42,59,38,331 Less: Expenses offered for disallowance In the computation of income included in Head Office Expenses Rs.92,26,23,272 Add: Expenses claimed in computation of Income to be included in Head Office Exp. Rs.11,22,09,205 Net Allocable H.O. expenses of the Assessee Rs.321,88,18,015 7.1.5 The working of the allocation of head office expenses in the ratio of the turnover of the unit to the total turnover is as under:- 7.1.6 Accordingly, the head office expenses to the extent of Rs. 171,57,07,942 are allocated to the unit and the deduction u/s 80IA of the said unit stands reduced to Rs. 385,67,75,999/-. 21. The ld. CIT (A) has allowed the assessee‟s ground of appeal for non-allocation of head office expenses for computing the eligible 80IA profits following the decision of CIT (A) in assessee‟s own case for AY 2015-16 and the decision of the ITAT in assessee‟s own case for AY 2013-14 and AY 2014-15. Sr. No. Name of unit Turnover of the unit Proportion to the total turnover Share of head office expenses Revised profit/dedn u/s 80IA A B = A/TO C=HO*B i. Power Distribution Unit 7203,56,94,524 0.5330242 171,57,07,942 385,6775,999 Total 171,57,07,942 385,67,75,999 ITA No.2796/Mum/2022 & 2590/Mum/2022 M/s. Reliance Infrastructure Ltd. 15 22. Before us, ld. Counsel submitted that the head office expenses should not be allocated while computing the profits of the eligible 80IA undertaking. The profit of the eligible undertaking has to be worked out as if such undertaking was only the source of income during the previous year. Further, the deduction u/s.80IA is allowable in respect of profits and gains “derived” from such business. The assessee had therefore claimed that the head office expenses cannot be deducted from the profits and gains which are derived from the eligible business as these expenses do not have the direct and immediate connection with the unit. 23. Further, this issue has been allowed by the Bombay High Court in assessee‟s own case for AY 2006-07 to AY 2009-10 and by ITAT Mumbai for AY 2002-03 to AY 2015-16. 24. The issue of allocation of head office expenses to the eligible 80IA profits has been decided by the ITAT in Appeal Nos. ITA No. 476/Mum-2022 and ITA No. 2106/Mum-2022 for AY 2017-18 & AY 2018-19 respectively vide order dated 23.03.2023 read with corrigendum dated 27.03.2023 to the order at para 73 on pages 62 and 63 of the order as under: “73. After considering the aforesaid facts and earlier judicial pronouncements in assessee’s own case, we find that this issue is now covered by the decision of the Hon’ble Bombay High Court in assessee’s own case for AY 2006-07 to AY 2009-10 and also by ITAT Mumbai for AY 2002-03 to AY 2015-16. Thus, ITA No.2796/Mum/2022 & 2590/Mum/2022 M/s. Reliance Infrastructure Ltd. 16 we direct the AO to allow the deduction u/s. 80IA without allocation of head office expenses. Accordingly, this ground raise in both the assessment years are allowed.” 25. On the other hand, ld. DR though admitted that the issue is covered by the decision of the Hon‟ble Bombay High Court, however, he strongly relied upon the order of the ld. AO. After considering the aforesaid findings of the ld. AO and ld. CIT(A). 26. Now this issue is settled in the case of the assessee on the same point by the decision of the Tribunal as well as the Hon‟ble Bombay High court in earlier years that profit of eligible undertaking has to be worked out as if such undertaking was only source of income during the previous year and deduction u/s.80IA is allowable in respect of profits and gains derived from such business. Therefore, head office expenses cannot be deducted from the profits and the gains which had derived from eligible business because it has been found as a finding of fact that these expenses do not have direct and immediate connection with the eligible unit. Accordingly, ground No.3 raised by the Revenue is dismissed. 27. In ground No.4, Revenue has raised deduction u/s.80IA should be restricted to business income instead of total income. The brief facts are that the company has claimed the deduction u/s 80IA of the Income Tax Act with reference to the net income derived from the eligible 80IA undertaking. This deduction has ITA No.2796/Mum/2022 & 2590/Mum/2022 M/s. Reliance Infrastructure Ltd. 17 been restricted to total taxable income of the assessee in accordance with section 80A(2) of the Act. The ld. AO in the assessment order has stated that the assessee‟s claim for deduction u/s. 80IA is to be restricted to the extent of business income instead of gross total income. He has further stated that since for the year under consideration, the assessee‟s claim for deduction u/s. 80IA as per revised return of Rs. 557,24,83,941 was lower than the business income of Rs.1028,45,30,159, the issue of restricting the deduction u/s. 80IA to business income does not arise. 28. The assessee had not raised the ground with respect to restricting the deduction u/s. 80IA to the extent of business income instead of gross total income since for the year under consideration the assessee‟s claim for deduction u/s. 80IA was lower than the business income. 29. Before us ld. Counsel submitted that though there was neither any decision by the CIT(A) nor any impact on the disallowance by the ld.AO, the department has still preferred an appeal on the ground of allowability of set-off of deduction u/s. 80IA against the gross total income. He submitted that this issue now otherwise has been decided in the assessee‟s own case by Hon‟ble Supreme Court, Hon‟ble Bombay High Court and Tribunal in earlier years in favour of the assessee. The Hon‟ble Supreme Court vide its Order dated 28.04.2021 has decided the issue in favour of the assessee for AY 2001-02 to AY 2003-04, AY ITA No.2796/Mum/2022 & 2590/Mum/2022 M/s. Reliance Infrastructure Ltd. 18 2007-08 and AY 2008-09. The assessee‟s claim that deduction u/s. 80IA ought to be allowed upto gross total income has been accepted. 30. Thus, in view of the above, the issue now stands settled by the Hon‟ble Supreme Court in the case of the assessee supra, and accordingly we allow the assessee‟s claim of deduction u/s.80IA that it ought to be allowed up to gross total income which has been accepted. Consequently, the ground No.4 is dismissed. 31. In ground No.5 Revenue has challenged the computation of book profits u/s.115JB and disallowance u/s.14A. Brief facts are that, the ld. AO while computing the book profits u/s.115JB has made further addition of Rs. 224,66,88,126/- u/s. 14A being expenses incurred in relation to exempt income. The disallowance has been computed as per Rule 8D considering all investments capable of earning exempt income including disallowance of interest expenses. The assessee had suo-moto disallowed a sum of Rs. 13,92,89,519 u/s. 14A while computing book profits u/s. 115JB. The ld. AO has made further addition on account of disallowance u/s. 14A of Rs. 224,66,88,126 without appreciating the fact that the assessee has already considered a disallowance of Rs. 13,92,89,519 while computing the book profits u/s. 115JB in the revised return of income filed on 16.02.2018. ITA No.2796/Mum/2022 & 2590/Mum/2022 M/s. Reliance Infrastructure Ltd. 19 32. Ld.CIT(A) has deleted the addition made u/s. 14A of Rs. 224,66,88,126 while computing the book profits u/s. 115JB following the decision of the CIT(A) in assessee‟s own case for AY 2015-16 and the decision of the Hon‟ble ITAT for AY 2013-14 and AY 2014-15 in assessee‟s own case. 33. Before us ld. Counsel submitted that the amount worked out under Rule 8D cannot be applied to work out the amount of expenditure in respect of exempt income required to be added in computation of book profit. The assessee submitted that the ITAT in its own case for AY 2013-14 to AY 2015-16 has held that no disallowance u/s. 14A is required to be made for computing book profits u/s. 115JB. Reliance is also placed on the following decisions:  ACIT vs. Vireet Investments P. Ltd. (ITA No. 502/Del/2012) and C.O. No. 68/Del/2014) (SB)  ACIT, Ward 10(2) v. Geometric Software Solutions Co. Ltd. [2022] 140 taxmann.com 647 (Mum. Trib) 34. The issue of disallowance u/s. 14A for computing book profits u/s. 115JB has been decided by the ITAT in Appeal Nos. ITA No. 476/Mum-2022 and ITA No. 2106/Mum-2022 for AY 2017-18 & AY 2018-19 respectively vide their order dated 23.03.2023 at para 78 on page 64 of the order as under: “78. Now coming to issue with regard to disallowance u/s. 14A while computing book profit u/s. 115JB in AY 2017-18. We find that this issue is covered by the decision of ITAT in assessee’s own case for AY 2013-14 to AY 2015-16 wherein it was held that no disallowance u/s. 14A is required to be made ITA No.2796/Mum/2022 & 2590/Mum/2022 M/s. Reliance Infrastructure Ltd. 20 for computing book profits u/s. 115JB. Apart from that, reliance was also placed in the case of ACIT vs. Vireet Investments P. Ltd. (ITA No. 502 /Del / 2012) and C.O. No. 68 / Del / 2014) (SB) and ACIT, Ward 10(2) v. Geometric Software Solutions Co. Ltd. [2022] 140 taxmann.com 647 (Mum. Trib). Accordingly, this ground is allowed.” 35. Accordingly, in view of the ITAT order in assessee‟s own case which issue is also covered by the decision of the Special Bench in the case of ACIT vs. Vireet Investment Pvt. Ltd, this ground is dismissed. 36. Now coming to the disallowance of inflated coal expenses of Rs.10,69,29,926/- which has been raised by the Revenue in ground No.6 and also in assessee‟s ground No.1-4. The brief facts are that the assessee has a coal based generation plant at Dahanu and requires coal as a primary fuel for generation of power. Due to shortage in domestic supply of coal, the assessee resorted to import of coal required for generation of power. The assessee followed a proper procedure for purchase of coal and quotations were called from various parties for the coal requirements and the lowest quote is selected for purchase of coal. M/s. Century Exports Ltd. (CEL), Hongkong had been supplying imported coal to Dahanu Thermal Power Station at agreed standard terms and conditions since last four years and hence for F.Y. 2015-16 also, the imported coal was purchased from CEL. ITA No.2796/Mum/2022 & 2590/Mum/2022 M/s. Reliance Infrastructure Ltd. 21 37. The Assessee Company has purchased / imported coal from CEL transparently and based on price linked to international coal-indices and therefore it was contended that it cannot be said that the Company has purchased / imported coal at high / inflated price. The assessee‟s business is a regulated business and the assessee under no circumstances can inflate the cost or reduce its revenue. Information was received from the Directorate of Revenue Intelligence (DRI), Mumbai for AY 2011- 12 to AY 2015-16 that it had investigated a case of over- valuation in the import of coal of Indonesian origin. Accordingly the assessments of the assessee were re-opened for AY 2011-12 to AY 2015-16. 38. The ld. AO merely based on the additions made in the re- opened assessments u/s. 143(3) rws 147 for AY 2011-12 to AY 2015-16 has worked out notional inflated cost of coal expenses by considering the average inflation rate for the earlier years and applied it to the declared CIF value for FY 2015-16. The disallowance accordingly worked out to Rs. 21,38,59,853/-. 39. The ld. AO in the Assessment Order has stated that the assessee had purchased the coal from intermediaries at an inflated rate than the actual value of such coal sourced from original suppliers. The ld. AO has stated that the intermediary firms were merely invoicing agents for facilitating invoice inflation. Further, as per the ld.AO the over valuation of coal has the effect of artificially raising the power tariff fixed by the ITA No.2796/Mum/2022 & 2590/Mum/2022 M/s. Reliance Infrastructure Ltd. 22 respective state electricity regulatory commission. By overvaluing the coal imports, the cost of coal purchase have been enhanced which in turn is passed on to the ultimate consumers benefitting the power generation companies. The ld. AO based on the disallowance made in the re-assessment proceedings for A.Y. 2011-12 to A.Y. 2015-16 has added back inflated coal expenses of Rs. 21,38,59,853. The ld. AO has not confronted any adverse material and / or evidence to suggest the so-called inflation of expenses. AO then worked out the the average of % of overvaluation to the CIF value for F.Y. 2011-12 to F.Y. 2014-15 and applied the same to the declared CIF value for F.Y. 2015-16 to work out the disallowance. He has not accepted the assessee‟s contention that there is no inflation of coal expenses and has added back Rs. 21,38,59,853/-. 40. The ld. CIT (A) has restricted the disallowance to 50%, i.e. the over valuation of coal price has been taken at 12% thereby confirming the disallowance at Rs. 10,69,29,926. The CIT(A) has stated that the ld. AO has not brought out the probability that the over-valuation of coal has the effect of artificially raising the power tariff fixed by the respective state electricity regulatory commission and has also worked out the extent of over valuation without giving any factual or supporting evidence for its working. Thus, CIT(A) restricted the disallowance to an adhoc 50% of the disallowance made by the ld.AO. ITA No.2796/Mum/2022 & 2590/Mum/2022 M/s. Reliance Infrastructure Ltd. 23 41. The assessee has raised the ground of appeal before ITAT on the issue that ld. CIT(A) has confirmed 50% of the disallowance made by the ld. AO at Rs. 10,69,29,926 without appreciating the fact that the ld. AO has made the disallowance merely based on the additions made in the previous assessment and without giving any factual evidence. The Department has preferred an appeal against the decision of the ld. CIT(A) for restricting the disallowance made by the ld. AO at 50% i.e. Rs. 10,69,29,926/-. 42. Before us ld. Counsel submitted that the ld. AO merely based on the additions made in the previous assessment years i.e. AY 2011-12 to AY 2015-16 has worked out notional inflated cost of coal expenses by considering the average inflation rate for the earlier years and applied it to the declared CIF value for FY 2015-16 to work out the disallowance at Rs. 21,38,59,853/-. 43. Ld. Counsel submitted that the assessee has purchased / imported coal from CEL transparently and based on price linked to international coal-indices and therefore it cannot be said that the assessee has purchased / imported coal at high / inflated price. The assessee‟s business is a regulated business and the assessee under no circumstances can inflate the cost or reduce its revenue. Ld. Counsel further submitted that the purchase of coal cost is not at inflated price and the disallowance of so-called inflated coal expenses of Rs. 10,69,29,926/- made on an adhoc and estimated basis is wrong and ought to be deleted. He also ITA No.2796/Mum/2022 & 2590/Mum/2022 M/s. Reliance Infrastructure Ltd. 24 submitted that the findings of the DRI Report were specifically for AY 2011-12 to AY 2015-16 and cannot be applied to the current year under consideration i.e. AY 2016-17 merely on presumptions. 44. He further submitted that the ld.AO and the learned CIT (A) has made the disallowance at Rs. 10,69,29,926/- without appreciating the fact that cost of coal is an integral part for determining the tariff price and the cost of coal already recovered as part of tariff from the consumers and credited to Profit and Loss Account through tariff of electricity sold is offered for tax. Therefore, the disallowance of coal cost has resulted in taxing the recovery of coal cost without allowing the coal cost. Ld. Counsel pointed out that the Adjudicating Authority of Directorate of Revenue Investigation (DRI) had passed an order upholding the show cause notice of DRI for alleged over valuation of Indonesian coal imports in case of Knowledge Infrastructure Systems Pvt. Ltd. which was further challenged before the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Mumbai by Knowledge Infrastructure Systems Pvt. Ltd. CESTAT vide its order dated 31.05.2018 in Order No: A/86617-86619 / 2018 has set aside the order passed by the Adjudicating Authority of DRI. The facts in case of Knowledge Infrastructure Systems Pvt. Ltd. are similar to the facts of assessee‟s case and accordingly the findings of the investigation report of DRI would not sustain in assessee‟s case also. The order of CESTAT dated 31.05.2018 was further challenged by the Additional Director General (DRI) ITA No.2796/Mum/2022 & 2590/Mum/2022 M/s. Reliance Infrastructure Ltd. 25 Mumbai before the Bombay High Court. The Hon‟ble Bombay High Court also vide their order dated 18.06.2019 in customs appeal no. 7 of 2019 has disposed of the appeal as not maintainable. 45. Further, the assessee has also received Intimation under section 28(9A) of the Customs Act, 1962 dated 25.03.2019 wherein the Addl. In. Director General, DRI (Adjudication), Mumbai has intimated the assessee that since the issue involved in SCN No. DRI/MZUF/INT-154/2014 dated 31.08.2016 issued in assessee‟s case is similar to the one dealt in the matter of M/s. Knowledge Infrastructure Systems Limited, the same is covered under clause (a) of section 28(9A) of the Customs Act, 1962. Ld. Counsel further submitted that till date after the show cause notice has been issued, neither any adjudicating order has been passed nor any action has been taken by the DRI.Thus, disallowance of so-called inflated coal expenses is wrongly made and ought to be deleted. 46. Before us, ld. DR referred to the observations and the finding given by the ld. AO from pages 20-27 of the assessment order. He submitted that once the information has been received from DRI which has investigated the case of over valuation and the import of Indonesian origin and similar enquiries were conducted on the assessee under the provision of Custom Act. Apart from that, ld. AO has also analysed this issue in detailed in ITA No.2796/Mum/2022 & 2590/Mum/2022 M/s. Reliance Infrastructure Ltd. 26 the order. The relevant observation of the ld. AO in this regard as highlighted by him reads as under:- 8.3 Modus Operandi 8.3.1 The Coal Procurement team (CPT) of R Infra floats inquiries for the required quality and quantity of coal and negotiates with the bidders. After settling terms & conditions, quality specifications and price, the successful bidders (called as 1st stage traders) were told to route the transactions through certain intermediaries firms. The intermediary firms were given letters of awards (LoAs) by R infra for supply of coal as per specifications finalized by the CPT with the 1st stage traders. Intermediary firms further issued LoAs to the 1st stage traders selected by the CPT of R Infra in their bidding process. Both the LoAs are almost mirror of each other except the price in as much as the price in the LoAs from the intermediary firms to the 1st stage traders was as negotiated by the CPT of R Infra, but the price in the LoAs from R Infra to the intermediary firms was much higher. The 1 stage traders supplied Coal to R Infra after purchasing from Indonesian suppliers or 2nd stage traders. The 1st stage traders raised invoices on the intermediary firms as per the LoAs issued by the latter to them. The Coal, however, was shipped directly from Indonesia to India. 8.3.2 The intermediary firms raised invoices on R-Infra at inflated price mentioned in the LoAS from the latter to the former It appears from the investigation done by Department of Revenue Intelligence that the intermediary firms were merely invoicing agents for facilitating invoice inflation. The intermediary firms appear to have received remittances towards value of invoices raised on the assessee in India, which included the over-valued portion of the price. 8.3.3 Looking at the above case from the perspective of normal commercial prudence and due diligence, payment of such huge amounts running into more than few crores over and above the actual value of the goods appears to be unusual and highly Irregular. When the actual suppliers were selling the Coal, at a much lower value, no prudent business entity would pay so much more than the actual value of the goods to intermediary firms with no known bonafide value addition and more so by ITA No.2796/Mum/2022 & 2590/Mum/2022 M/s. Reliance Infrastructure Ltd. 27 foregoing the duty benefit available to the imported goods on production of certificates in 'Form-Al, added to their cost, IN the instant case, the Coal was shipped directly to India, by the actual suppliers, and only Invoices were routed through the intermediary firms. Reliance ADAG companies, assessee knowing fully well as to who the actual suppliers were and where the Coal was coming from (as the Coal, was shipped directly to them), have chosen to pay such an inflated value and that too on such a large scale, which appears to be contrary to all commercial prudence and due diligence. It appears that no prudent business firm/entity can be expected to be paying such overvalued amounts for goods which is much more than their actual value except by collusion with fraudulent intent, which appears to be apparent from the overall facts of the case as discussed above. It appears that the Reliance ADAG companies, i.e. assessee have colluded with the intermediary firms and have been aided and abetted by various person to import impugned Coal by over-valuation following a well-planned and executed modus- operandi of Trade Based Mis-pricing. 8.3.4 It appears that the intermediary firms were not independent suppliers, per-se, but merely intermediary dummy agents for artificial inflation of invoice for enabling siphoning off of money abroad as a part of the modus-operandi. 8.3.5 The assessee through Coal Procurement Team (CPT) of Reliance ADAG were all along aware of the actual suppliers of the Coal ordered by them on the intermediary firms. In fact, they only dealt with the actual suppliers and finalized the prices. The Coal was shipped directly to India by the actual suppliers and only documents were routed through the intermediary firms. The intermediary firms appear to have executed back-to-back contracts with assessee with overlapping scope and responsibility and supply of the Coal when they were fully aware that these responsibilities were entrusted upon the actual suppliers. The intermediary firms had no role to play even in negotiation, finalization of order with actual suppliers, and freightment of cargo as the Incoterms of trade remained identical between the actual suppliers and the intermediary firms on one hand and the intermediary firms and assessee on the other That the intermediary firms were dummy supplier created only for artificially inflating the invoice also appears to be seen from ITA No.2796/Mum/2022 & 2590/Mum/2022 M/s. Reliance Infrastructure Ltd. 28 Reliance ADAG officers directly negotiating with actual suppliers in their office at Mumbai and elsewhere by interacting with them. 8.3.6. The conduit companies i.e. Intermediary Firms that have been used are as mentioned below, 1 Reliance Natural Resources Ltd. (RNRL); 2. Larimar Holdings Ltd., Jersey ("LHL"): A British crown dependency and tax haven. 3 3.Epic Alloy Steel Pvt. Ltd, Raigarh, 4. Century Exports Ltd., Hong Kong. ("CEL"): Tax haven, 8.3.7 In respect of the Coal imported by assessee, documentary evidence (Invoices of actual suppliers etc.) pertaining to back-to- back transaction between the intermediary firms and the actual suppliers in relation to consignments imported by assessee are available, based on which the actual value of the Coal invoiced by the Intermediary firms for individual consignments could be estimated. The extent of what appears as artificial inflation of value by the intermediary firms in their invoices, during F.Y.2010-11 to FY.2014-15, is at Column (6) and (7) of the Table below: It appears that the declared value of the impugned consignments imported by assessee totally amounting to Rs. 8,60,46,25,154/- CIF on the basis of artificially inflated invoice price in invoices of the intermediary firms, does not represent the actual value of the goods, which appears to be Rs.7.15,44,68, 198/- CIF An Amount of Rs.1,45,01,56,956/- appears to have been siphoned by over-valuation by the assessee. 8.3.8 The Coal of Indonesian origin was exempted from Custom duty with effect from 01.10.2010 subject to submission of Sr. No. Name of Importer No.of Vessels Declared CIF Value Rs. Actual Value Rs. Difference Rs. % Inflation 1 2 3 4 5 6 7 1 R-Infra 37 8,60,46,25,154 7,15,44,68,198 1,45,01,56,956 20.27 ITA No.2796/Mum/2022 & 2590/Mum/2022 M/s. Reliance Infrastructure Ltd. 29 Country of Origin certificate in Form-Al issued by Indonesian authorities, Amongst many data fields, the Form-Al' certificate contains the FOB value of the goods. The assessee have, however, in majority of the import consignments, have not availed of the concession eligible to them. It appears that they have deliberately not claimed the concession. because it would have necessitated submission of the Form-AI certificates, which in turn would have revealed the true FOB value of the Coal consignments to the Assessing Officers and would have exposed them to scrutiny for overvaluation. 8.3.9 Further, it is pertinent to mention that the assessee, as the importers of the overvalued Coal, has preferred to pay more Customs duty inasmuch as they have not claimed the exemption under AIFTA for many imports. This eagerness to pay taxes when none or less were payable was apparently for the reason that the taxes formed part of landed cost of the Coal which was being factored in for power tariff accrued to the power generators. Thus, the non-payable taxes paid by the power generators did not affect their profitability and was revenue neutral. 8.3.10 The overvaluation of Coal has the effect of artificially raising the power tariff fixed by the respective state electricity regulatory commission. In India the power tariff is regulated by the regulatory authorities based on the costing date provided by power generation. By overvaluing the Coal imports, the power generator, i.e. assessee, appear to have illegitimately managed to increase landed cost of the Coal, which is primary fuel in Coal based thermal power plants. The higher tariff dispensed by the regulators to the power generators enhances the cost of purchase of the power distributors which in turn is passed on to ultimate consumers benefitting to power generating companies: 8.3.11 Based on the data for the earlier years, extent of over- valuation for A.Y 2016-17 relevant to FY 2015-16 is worked out as under: FY Declared CIF value (Rs.) Extent of Over Valuation % of Over Valuation to ITA No.2796/Mum/2022 & 2590/Mum/2022 M/s. Reliance Infrastructure Ltd. 30 declared CIF value 2011-12 2,48,63,51,806 32,87,01,976 13% 2012-13 28,41,06,769 6,52,20,632 23% 2013-14 2,35,05,52,646 67,44,36,930 29% 2014-15 52,43,67,834 16,85,39,090 32% Average to be considered for AY 2015-16 24% Declared CIF value for FY 2015-16 89,10,82,719 Extent of Over- valuation @24% 21,38,59,853 9. As discussed above in summary of interconnectedness among the buyers and their authenticity, it is clear that all the buyers have been pre-arranged. If one puts together and sees in totality all that has been discussed above, which is nothing but pure, unadulterated marshalling of hard facts, there emerges undeniable and concrete evidence to suggest that the purchase of coal of Indonesian origin through intermediaries was nothing but a colourable device, rather an outright sham scripted and executed for the purposes of reducing the taxable income of the assessee, and thus evading taxes. The information received and facts produced above in detail need to be tested against the touchstone of human probability. After all that has transpired, preponderance of probabilities overwhelmingly suggests, rather firmly establishes, the intention of the assessee to indulge in deliberate wrongdoing, which was given effect by way of purchase of coal of Indonesian origin through Intermediaries at an inflated rate than the actual value of such coals. 9.2 This entire, order thus far has focused solely on facts and evidences, for they form the bedrock of lifting the veil from the sham-transaction. However Income tax proceedings ultimately need to stand the test of judicial scrutiny and facts, when backed by legal precedent and judicial pronouncements, gain substance, weight and meaning. Time and again, in cases of financial and economic fraud, assessees have raised questions ITA No.2796/Mum/2022 & 2590/Mum/2022 M/s. Reliance Infrastructure Ltd. 31 about the legitimacy of evidence rooted in circumstances, and the test of human probability. 47. We have heard rival submissions and perused the relevant finding given in the impugned orders. For the purpose of generation of electricity plant at Dahanu which requires coal as a primary fuel for generation of power, assessee purchased coal from M/s. Century Exports Ltd. Hongkong based company for supply of imported coal to Dahanu thermal power station at agreed standard terms and conditions. The assessee had purchased imported coal from CPL Hongkong based on price linked to international coal-indices. The entire basis of the addition was made by the ld. AO is the information received from DRI, Mumbai for A.Y.2011-12 to 2015-16, wherein it had investigated the case of over valuation in the import of coal of Indonesian origin. The case of the ld. AO is that intermediary firms were merely invoicing agents for facilitating invoice inflation which has effect of artificially raising the power tariff fixed by the respective state electricity regulatory commission. The ld. CIT(A) has merely stated that the ld. AO has not brought out profitability and the over valuation of coal as an effect of artificially raising the power tariff fixed by the respective state electricity regulatory commission and accordingly, he restricted the disallowance in Adhoc 50% made by the ld. AO. 48. First of all, so far as DRI report is concerned, the same pertains to A.Y.2011-12 to 2015-16 and moreover, no final ITA No.2796/Mum/2022 & 2590/Mum/2022 M/s. Reliance Infrastructure Ltd. 32 conclusion or any order has been passed in the case of the assessee therein and it is still at show-cause notice stage. 49. Here in this case, the cost of coal is otherwise an integral part of determining the tariff price and the cost of coal are tariff price and the cost of coal already recovered as part of tariff from the consumers has been credited to the profit and loss account and tariff of electricity sold has already been offered for tax. Though ld. Counsel has pointed out that based on similar show- cause notice issued by the DRI for alleged over valuation of Indonesian coal imports in case of Knowledge Infrastructure Systems Pvt. Ltd., CESTAT has already set aside the order passed by the adjudicating authority of DRI and finally that CESTAT order has also been confirmed by the Hon‟ble Bombay High Court, in the sense that the Hon‟ble Court has held that appeal was not maintainable. If the ld. AO is heavily relying upon report of the DRI on similar information, then the same has no legs to stand because CESTAT Mumbai in the case of Knowledge Infrastructure Systems Pvt. Ltd has already set aside the order of the adjudicating authority, thus, the said information cannot be the basis for any kind of disallowance. 50. In any case, all the observations and the finding given by the ld. AO as incorporated supra these are all based on DRI report which as of now has not been approved by the higher appellate forums and as informed by the assessee, the same are still at the stage of show-cause notice and no final order has ITA No.2796/Mum/2022 & 2590/Mum/2022 M/s. Reliance Infrastructure Ltd. 33 been passed. Thus, all the observations of AO has no relevance at all. As observed above, the case of the Revenue is that assessee might have inflated cost of the coal, however, once the cost of the coal is part of tariff price determination by the regulatory authority and once the electricity is sold on the same tariff which has been credited to the profit and loss account and offered to tax, then there is no question of separately taxing the alleged inflated cost of coal. Therefore, we agree with the contention of the ld. Counsel that in such circumstances, no disallowance at all is warranted. Accordingly, the entire addition is deleted and consequently, the Revenue‟s appeal is dismissed and assessee‟s appeal is allowed. 51. In the result, appeal of the Revenue is dismissed and appeal of the assessee is allowed. Order pronounced on 29 th March,2023 Sd/- (S. RIFAUR RAHMAN) Sd/- (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated 29/03/2023 KARUNA, sr.ps ITA No.2796/Mum/2022 & 2590/Mum/2022 M/s. Reliance Infrastructure Ltd. 34 Copy of the Order forwarded to : BY ORDER, (Asstt. Registrar) ITAT, Mumbai 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy//