NALWA STEEL POWER LIMITED, NEW DELHI V. DCIT, CIRCLE- 17(2), NEW DELHI

ITA 451/DEL/2019

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 8481 (ITAT-DELHI)
• Duration Of Justice: 8 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-10-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I2
• Assessment Year: 2014-2015
• Appeal Filed On: 22-01-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: AGAINST DATED PASSED
• Keywords: Business income; Transfer pricing; Business expenditure; Principle of natural justice; Rule of consistency; Commercial expediency; Set aside
• Section: 92C; 143(3); 133(6); 37(1); 80G; 10B; 80IA; 144C; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: I-2, NEW DELHI BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI SUCHITRA KAMBLE, JUDICIAL MEMBER ITA NO.451/DEL/2019 ASSESSMENT YEAR: 2014-15 M/S. NALWA STEEL POWER LIMITED, 28, NAJAFGARH ROAD, WEST PUNJABI BAGH, NEW DELHI VS. DCIT, CIRCLE-17(2), NEW DELHI PAN :AABCN3209L (APPELLANT) (RESPONDENT) ORDER PER SUCHITRA KAMBLE, JM: THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE O RDER DATED 24.11.2018 PASSED BY DCIT, CIRCLE 17(2), NEW DELHI U/S 144C R.W.S. 143(3) OF THE INCOME TAX ACT, 1961 FOR A.Y. 2014-15. 2. THE GROUNDS OF APPEAL ARE AS UNDER: 1. THAT THE DRAFT ORDER PASSED BY THE ASSESSING OFFICE R (AO) U/S 144C R.W.S 143(3) OF INCOME TAX ACT. 1961 ('THE ACT) DA TED 29.12.2017, ORDER PASSED BY THE TRANSFER PRICING OFFICER (TPO) U/S 92CA(3) DATED 04.10.2017, DIRECTIONS ISSUED BY THE DISPUTE RESOLU TION PANEL ('DRP) DATED 13.09.2018 AND THE FINAL ASSESSMENT ORDER DAT ED 24.11.2018 AND ALSO THE ADDITIONS PROPOSED THEREIN ARE ILLEGAL , BAD IN LAW, WITHOUT JURISDICTION AND VOID AB INITIO. 2. THE AO/TPO/DRP HAVE ERRED, IN LAW AND IN VIEW OF TH E FACTS AND CIRCUMSTANCES OF THE CASE, IN ASSESSING THE INCOME OF THE ASSESSEE AT RS. 49,03,25,520/- INSTEAD OF THE RETURNED INCOME O F RS. 20,64,13.580/-. APPELLANT BY MS. ANANYA KAPOOR, ADV. RESPONDENT BY SHRI YOGESH KUMAR VERMA, CIT(DR) DATE OF HEARING 03.10.2019 DATE OF PRONOUNCEMENT 10.10.2019 2 ITA NO.451/DEL/2019 3. THE REFERENCE MADE BY THE AO TO THE TPO SUFFERS FRO M JURISDICTIONAL ERROR AS THE AO HAS NOT RECORDED ANY REASONS IN THE DRAFT ASSESSMENT ORDER/ ASSESSMENT ORDER BASED ON WHICH HE REACHED T HE CONCLUSION THAT IT WAS NECESSARY OR EXPEDIENT TO REFER THE M ATTER TO THE TPO FOR COMPUTATION OF THE ARMS LENGTH PRICE (ALP), AS I S REQUIRED UNDER SECTION 92CA(1) OF THE ACT. 4. THE AO/TPO/DRP ERRED IN NOT FOLLOWING THE DETAILED PROCEDURE AS LAID DOWN IN CHAPTER X OF THE ACT READ WITH THE RULES, F OR DETERMINING THE MECHANISM FOR COMPUTING THE ARMS LENGTH PRICE, AND HAS NOT ALLOWED THE ASSESSEE THE BENEFIT OF VARIOUS PROVISIONS AS S TATED IN THE ACT AND THE RULES. 5. THAT THE AO/ TPO/DRP HAS ERRED ON FACTS AND IN LAW IN DISALLOWING REMUNERATION OF RS.78.24.682/- PAID TO MS. SHALLU J INDAL, WHOLE TIME DIRECTOR OF THE ASSESSEE. THE SAID ADDITION IS ILLE GAL AND BAD IN LAW. 1. THE DRP/TPO/AO HAVE ERRED IN LAW AND FACTS BY ER RONEOUSLY QUESTIONING THE BUSINESS PRUDENCE THEREBY MAKING AD DITION ON ACCOUNT OF MANAGERIAL REMUNERATION PAID TO SMT. SHALLU JIND AL WITHOUT APPRECIATING THE FACT THE REMUNERATION PAID WAS ALL OWABLE AND NO PART OF THE SAME WAS EXCESSIVE OR UNREASONABLE. THE SAID REMUNERATION HAD BEEN ALLOWED IN EARLIER YEARS AND IN ANY CASE, THE SAME HAD ALREADY BEEN TAXED IN THE HANDS OF SMT. SHALLU JINDAL. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE AO/TPO/DRP HAVE FAILED TO APPRECIATE THAT THE SALAR Y PAID TO MS. SHALLU JINDAL WAS INCURRED WHOLLY AND EXCLUSIVELY F OR THE PURPOSES OF BUSINESS. THE SAME WAS ALSO PAID IN ACCORDANCE WITH THE LIMITS PRESCRIBED UNDER THE COMPANIES ACT, 2013. 3. THAT, IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE AO/TPO ERRED IN NOT FOLLOWING THE BINDING DIRECTIONS OF THE DRP AND NOT GRANTING THE RELIEF AS ALLOWED BY THE D RP. 4. THAT WITHOUT PREJUDICE, THE ADJUSTMENT MADE BY T HE AO/TPO/DRP IS ALSO HIGHLY EXCESSIVE AND HAS BEEN WR ONGLY WORKED OUT. 5. THAT THE TPO/ AO/DRP HAVE ERRED, IN LAW AND ON F ACTS AND CIRCUMSTANCES OF THE CASE, BY NOT APPRECIATING THAT AMENDMENT TO SECTION 92BA IS RETROSPECTIVE IN NATURE. 6. THAT THE TPO/AO/DRP HAS ERRED ON FACTS AND IN LAW I N MAKING ADDITION OF RS.3,31,20.337/- ON ACCOUNT OF ALLOCATI ON OF EXPENSES. THE SAID ADDITION IS ILLEGAL AND BAD IN LAW. 3 ITA NO.451/DEL/2019 1. THAT, THE AO/TPO/DRP HAS ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THE ANALYSIS/BENCHMARKING UNDERTAKEN B Y THE ASSESSEE IN THE TP STUDY AND THAT THE ALLOCATION HAS BEEN DO NE ON A SCIENTIFIC AND PRUDENT BASIS. IT IS ON THE BASIS OF GENERALLY ACCEPTED ACCOUNTANCY PRINCIPLES AND THERE ARE IDENTIFIED COST DRIVERS. T HE TPO/AO/DRP CANNOT REJECT THE SAME WITHOUT STATING ANY FLAW/ IN ACCURACY OR DEFICIENCY IN THE METHOD ADOPTED BY THE ASSESSEE. 2. THAT THE AO/ TPO/DRP HAVE ERRED ON FACTS AND IN LAW IN REDUCING AN AMOUNT OF RS.3,31,20,337/- TO DEDUCTION CLAIMED UNDER EXEMPT UNIT ALLEGING THAT COMMON EXPENSES (DIRECTOR REMUNERATION, EMPLOYEE SALARY, REPAIRS TO BUILDING AND INTERNAL A UDIT FEE) WERE INEXTRICABLY LINKED TO THE ELIGIBLE UNIT AND WAS TH EREFORE, TO BE ALLOCATED AMONGST THE UNITS OF THE ASSESSEE ON THE BASIS OF T URNOVER. 3. THAT, WITHOUT PREJUDICE, THE ADDITION MADE BY TH E TPO IS EXCESSIVE, ILLEGAL AND HAS BEEN WRONGLY WORKED OUT 7. THAT THE TPO/AO/DRP HAVE ERRED ON FACTS AND IN L AW IN MAKING ADDITION OF RS.23,53,79,753/- ON ACCOUNT OF PURCHAS E OF POWER. THE SAID ADDITION IS ILLEGAL, BAD IN LAW AND WITHOUT JURISDI CTION. 1. THAT, IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE AO/DRP/TPO ERRED IN REJECTING THE COMPARAB LE ANALYSIS/ BENCHMARKING ANALYSIS UNDERTAKEN BY THE ASSESSEE FO R PURCHASE OF POWER WITHOUT APPRECIATING THAT THE SAME MEETS THE REQUIREMENT OF FAR ANALYSIS AS PER RULE 10B OF THE INCOME TAX RULES. 1 962. 2. THAT IN VIEW OF THE FACTS AND CIRCUMSTANCES OF T HE CASE AND IN LAW, THE TPO/AO/DRP HAVE ERRED IN APPLYING THE IEX RATE. THE SAID RATE IS NOT APPLICABLE ON THE FACTS OF THE PRESENT CASE. 3. THAT, WITHOUT PREJUDICE, NO SHOW CAUSE NOTICE HA S BEEN ISSUED BY THE TPO AS REGARDS APPLICATION OF IEX. SHOW CAUS E NOTICE IS A MANDATORY REQUIREMENT AND NON-ISSUANCE OF A NOTICE IS AN ILLEGALITY. 4. THAT, WITHOUT PREJUDICE, TPO ERRED IN EXERCISING POWER U/S 133(6) OF THE ACT. INFORMATION OBTAINED U/S 133(6) COULD NOT HAVE BEEN USED. THAT, IN ANY CASE, THE TPO HAS USED THE INFORMATION OBTAINED U/S 133(6) WITHOUT CONFRONTING THE ASSESSEE WITH THE SA ME, WHICH IS NOT PERMITTED IN LAW. 5. THAT, WITHOUT PREJUDICE, THE SAID ADDITION IS HI GHLY EXCESSIVE AND HAS BEEN WRONGLY WORKED OUT. 8. THAT THE AO/DRP HAS ERRED ON FACTS AND IN LAW IN MA KING DISALLOWANCE OF EXPENDITURE ON CORPORATE SOCIAL RESPONSIBILITY A MOUNTING TO RS.69,46,170/-. 4 ITA NO.451/DEL/2019 1. THAT, IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE AO/DRP ERRED IN NOT APPRECIATING THAT THE SAID EXPENSES ARE ALLOWABLE U/S 37 OF THE ACT. 2. THAT, IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE AO/DRP ERRED IN NOT APPRECIATING THAT THE SAID EXPENSES ARE NECESSARY MANDATED AND ARE FOR THE PURPOSE OF BUSIN ESS. 3. WITHOUT PREJUDICE THAT THE QUANTUM OF DISALLOWAN CE MADE BY THE AO/DRP IS IN ANY CASE, IS HIGHLY EXCESSIVE AND UNRE ASONABLE. 9. THAT THE AO/DRP HAS ERRED ON FACTS AND IN LAW IN MAKING AN ADDITION OF RS.6,40,988/- ON ACCOUNT OF ALLEGED DIFFERENCE I N THE INCOME AS DECLARED BY THE ASSESSEE AND RECEIPTS APPEARING IN FORM 26AS . 1. THAT THE AO/DRP HAS ERRED ON FACTS AND IN LAW IN MAKING AN ADDITION OF RS.6,40,988/- ON ACCOUNT OF ALLEGED DIF FERENCE IN THE INCOME AS DECLARED BY THE ASSESSEE AND RECEIPTS APPEARING IN FORM 26AS. 2. THAT THE AO/DRP HAS ERRED ON FACTS AND IN LAW IN ALLEGING THAT THE ASSESSEE HAS NOT DISCLOSED ITS INCOME ON ACCOUNT OF INTEREST RECEIVED FROM SBI PROPERLY. 3. THAT THE AO/DRP HAS ERRED ON FACTS AND IN LAW IN ALLEGING THAT THE ASSESSEE DID NOT FURNISH ANY EXPLANATION REGARDING THE DIFFERENCE APPEARING IN INTEREST RECEIVED FROM SBI AND INTERES T OFFERED IN P&L ACCOUNT. 4. THAT THE AO/DRP ERRED ON FACTS AND IN LAW BY NOT CONSIDERING AND PROPERLY APPRECIATING THE EXPLANATION AND MATERIAL PLACED ON RECORD. 10. THAT THE ADDITIONS / DISALLOWANCES MADE ARE UNJ UST, UNLAWFUL, WITHOUT JURISDICTION AND ARE ALSO HIGHLY EXCESSIVE AND BASED ON SURMISES AND CONJECTURES. 11. THAT THE EXPLANATION GIVEN, EVIDENCE PRODUCED A ND MATERIAL PLACED AND MADE AVAILABLE ON RECORD HAVE NOT BEEN P ROPERLY CONSIDERED AND JUDICIALLY INTERPRETED AND THE SAME DO NOT JUST IFY THE ADDITIONS MADE. 12. THAT THE AO HAS ERRED, IN LAW AND ON FACTS AND CIRCUMSTANCES OF THE CASE, IN INITIATING PENALTY UNDER SECTION 271(1 )(C) OF THE ACT. 13. THE ASSESSEE CRAVES LEAVE TO ADD, AMEND, ALTER AND/OR DELETE ANY OF THE ABOVE GROUNDS OF APPEAL AT OR BEFORE THE TIME OF HEARING. 5 ITA NO.451/DEL/2019 3. THE ASSESSEE COMPANY IS ENGAGED IN THE MANUFACTU RING AND SELLING OF SPONGE IRON BILLETS, WIRE ROD, OXYGEN GAS AND GENER ATION OF POWER. THE ASSESSEE COMPANY ELECTRONICALLY FILED ITS ORIGINAL RETURN OF INCOME ON 28.11.2014 FOR A.Y. 2014-15 DECLARING TOTAL INCOME AT RS. 20,64,13,580/-. SUBSEQUENTLY, THE CASE WAS SELECTED UNDER CASS FOR COMPLETE SCRUTINY. NOTICE U/S 143 (2) OF THE ACT WAS ISSUED ON 31.08. 2015 AND DULY SERVED UPON THE ASSESSEE COMPANY. THEREAFTER, NOTICE U/S 1 42(1) OF THE ACT ALONG WITH QUESTIONNAIRE WAS ISSUED ON 28.07.2016 AND DUL Y SERVED UPON THE ASSESSEE COMPANY, WHEREIN CERTAIN DETAILS WERE CALL ED FOR. IN THE MEANWHILE, A REFERENCE U/S 92CA WAS MADE BY THE ACI T, CIRCLE 17(2), NEW DELHI TO DETERMINE THE ARMS LENGTH PRICE IN RESPEC T OF SPECIFIED DOMESTIC TRANSACTIONS UNDERTAKEN BY THE ASSESSEE DURING THE F.Y. 2013-14. TOTAL ADJUSTMENT MADE BY THE TPO VIDE ORDER DATED 04.10.2 017 ARE AS FOLLOWS: ON ACCOUNT OF MANAGERIAL REMUNERATION RS. 78 ,24,682/- PURCHASE OF POWER RS. 26,85,00,090/- ADJUSTMENT ON ACCOUNT OF ALLOCATION OF EXPENSES RS . 3,31,20,337/- TOTAL RS. 30,94,45,109/- THE ASSESSEE FILED OBJECTIONS BEFORE THE DRP AND TH E DRP VIDE DIRECTIONS DATED 13.09.2018 DIRECTED THE ASSESSING OFFICER TO INCORPORATE THE FINDINGS IN RESPECT OF VARIOUS OBJECTIONS IN FINAL ORDER. TH E ASSESSING OFFICER VIDE FINAL ASSESSMENT ORDER WRONGLY MENTIONED AS DRAFT A SSESSMENT ORDER DATED 24.11.2018 MADE VARIOUS ADDITIONS AND ASSESSED THE TOTAL INCOME AT RS. 49,03,25,520/-. 4. BEING AGGRIEVED BY THE ASSESSMENT ORDER, THE PRESEN T APPEAL IS FILED BY THE ASSESSEE. 5. THE LD. AR SUBMITTED THAT GROUND NOS. 1 TO 4 ARE GENERAL IN NATURE. THEREFORE, WE ARE DISMISSING GROUND NOS. 1 TO 4. 6. AS REGARDS TO GROUND NO. 5 RELATING TO DISALLOWA NCE OF SALARY PAID TO WHOLE TIME DIRECTOR, MS. SHALLU JINDAL OF RS. 78,24 ,682/-, THE LD. AR SUBMITTED THAT THIS ISSUE IS COVERED IN FAVOUR OF T HE ASSESSEE BY THE DECISION 6 ITA NO.451/DEL/2019 IN ASSESSEES OWN CASE FOR A.Y. 2013-14 BEING ITA N O. 7176/DEL/2017 ORDER DATED 31.12.2018. 7. THE LD. DR SUBMITTED THAT IN THE DECISION OF THE TRIBUNAL FOR A.Y. 2013-14, THERE IS NO DISCUSSION AS TO THE NATURE OF SERVICES PROVIDED BY THE WHOLE TIME DIRECTOR. THEREFORE, THE SAME NEEDS TO B E VERIFIED IN THE PRESENT ASSESSMENT YEARS CONTEXT. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL T HE RELEVANT MATERIAL AVAILABLE ON RECORD. THE TRIBUNAL IN A.Y. 2013-14 H ELD AS UNDER: 15. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS PERTINENT TO NO TE THAT THE PARTIAL ADDITIONS ON ACCOUNT OF MANAGERIAL REMUNERATION AMOUNTING TO RS. 8,22,798 WHICH WAS PAID TO MS. SHALLU JINDALS CONTRACTUAL ADVISOR Y SERVICE TO AE AND OTHER SERVICES PROVIDED BY HER WERE NOT DISPUTED BY THE REVENUE AT ANY POINT OF TIME. THE SAME IS ALREADY TAXED IN THE HAN DS OF MS. SHALLU JINDAL. THE LD. AR POINTED OUT THROUGH THE DOCUMENTS THAT S HE IS THE DIRECTOR OF THE COMPANY AND IS A KEY PERSONNEL IN RESPECT OF VARIOU S POLICY DECISIONS WHICH WAS REFLECTED IN MINUTES OF ALL BOARD MEETING S. THE SUBMISSION OF THE LD. AR WAS THAT THE BASIS FOR DISALLOWANCE IS N OT SUSTAINABLE BECAUSE THE COMPETITIVE FIGURES HAVE NO BEARING ON THE PRES ENT ASSESSEE. FROM THE RECORDS IT CAN BE SEEN THAT THE REMUNERATION PAID T O DIRECTOR HAS NOT BEEN DISALLOWED IN PAST YEARS AND THEREFORE THE SUBMISSI ON OF THE LD. AR THAT THE RULE OF CONSISTENCY HAS TO BE FOLLOWED IN THE P RESENT ASSESSMENT YEAR AS WELL. THE CASE LAWS RELIED UPON BY LD. AR OF THE HONBLE DELHI HIGH COURT IS RELEVANT TO THAT EXTENT AND SUPPORT THE CA SE OF THE ASSESSEE. THE COMPARISON DONE BY THE ASSESSING OFFICER BETWEEN TH E REMUNERATION PAID BY THE ASSESSEE COMPANY TO MS. SHALLU JINDAL WITH T HE REMUNERATION PAID BY ESSAR STEEL LTD TO SH. ASHUTOSH AGARWALA IS NOT PROPER AS WELL CONSIDERING THE FACTS THAT THE ASSESSEE COMPANY IS A PROFIT MAKING VENTURE WHEREAS ESSAR STEEL LTD. IS INCURRING LOSSES. IT SH OULD ALSO BE NOTED THAT THE ASSESSEE COMPANY HAS ALSO COMPLIED WITH ALL THE PROVISIONS OF THE COMPANIES ACT, 1956, RELATING TO THE PAYMENT OF MAN AGERIAL REMUNERATION 7 ITA NO.451/DEL/2019 TO ITS MANAGERIAL PERSONNEL APPOINTED AND THE SAID PAYMENT OF MANAGERIAL REMUNERATION HAS ALSO BEEN APPROVED BY THE BOARD OF DIRECTORS. THE REFERENCE MADE TO CIRCULAR NO. 6P DATED 08.07.1968 ISSUED BY THE CBDT IS APT IN THE PRESENT CASE. THUS, THE ASSESSING OFFICE R WAS NOT CORRECT IN MAKING ADDITION ON ACCOUNT OF MANAGERIAL REMUNERATI ON. GROUND NO. 3 (B) IS ALLOWED. AS REGARDS TO CONTENTION OF THE REVENUE THAT IN EAR LIER ASSESSMENT YEAR, THE SERVICES PROVIDED BY THE WHOLE TIME DIRECTOR WAS NO T DISCUSSED IS NOT CORRECT AS THE TRIBUNAL HAS DISCUSSED THE SAME IN THE FINDI NGS. BESIDES THE FACTUAL ASPECT IN THE PRESENT YEAR HAS NOT CHANGED WHICH IS ESTABLISHED BY ASSESSEE FROM THE RECORDS. IN FACT, PARA 6.1 OF THE TPOS OR DER THE ROLE AND RESPONSIBILITIES OF THE DIRECTOR WAS SUBMITTED BY T HE ASSESSEE. THE MINUTES OF MEETINGS WERE ALSO SUBMITTED BY THE ASSESSEE. TH EREFORE, THE ASSESSEE DEMONSTRATED THE SERVICES PROVIDED BY THE WHOLE TIM E DIRECTOR. THUS, ISSUE IS IDENTICAL IN THE PRESENT YEAR AS WELL. HENCE, GR OUND NO. 5 IS ALLOWED. 9. AS REGARDS TO GROUND NO. 6 RELATING TO DISALLOWA NCE ON ACCOUNT OF ALLOCATION OF EXPENSES BETWEEN EXEMPT AND NON-EXEMP T UNITS OF RS. 3,31,20,337/-, THE LD. AR SUBMITTED THAT THIS ISSUE IS ALSO COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2013-14 BEING ITA NO. 7176/DEL/2017 ORDER DATE D 31.12.2018. 10. THE LD. DR RELIED UPON THE ORDER OF THE TPO AND THE ASSESSMENT ORDER. 11. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE TRIBUNAL IN A.Y. 2013-14 H ELD AS UNDER: 18. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE RELEVANT MATERIAL AVAILABLE ON RECORD. FROM THE RECORDS IT C AN BE SEEN THAT THESE EXPENDITURES WERE ALREADY ALLOCATED TO ELIGIBLE AND NON-ELIGIBLE UNIT ON THE BASIS OF GENERALLY ACCEPTED ACCOUNTANCY PRINCIPLES, ON THE BASIS OF IDENTIFIED COST DRIVERS AND IN A PRUDENT MANNER BY THE ASSESSEE COMPANY. THE ASSESSING OFFICER/TPO/DRP RE-ALLOCATED THE EXPE NDITURE IN THE RATIO OF 8 ITA NO.451/DEL/2019 TURNOVER BETWEEN ELIGIBLE AND NON-ELIGIBLE UNITS WI THOUT ANY INVESTIGATION AND WITHOUT COLLECTING ANY MATERIAL. THE ASSESSING OFFICER/TPO/DRP HAS NOT BROUGHT ON RECORD ANY DISCREPANCY ON PART OF TH E ASSESSEE COMPANY IN RELATION TO THE METHOD OF ALLOCATION ADOPTED BY THE ASSESSEE COMPANY. THE TRIBUNAL (THIRD MEMBER DECISION) IN CASE OF DCIT VS . DELHI PRESS SAMACHAR PATRA (P) LTD. HELD AS UNDER: 39. IT IS CLEAR FROM THE ASSESSMENT ORDERS THAT IN COME SHOWN AND EXPENSES CLAIMED BY THE ASSESSEE HAVE BEEN DULY ALL OWED IN THE ASSESSMENT ORDER. NONE OF THE EXPENDITURE HAS BEEN TREATED AS INGENUINE OR NOT CONNECTED OR RELATED TO THE BUSINE SS CARRIED OUT BY THE ASSESSEE. IN THE ABOVE BACKGROUND AND WITHOUT ANY M ATERIAL, AND WITHOUT ANY JUSTIFICATION ON THE PART OF THE AO, SO ME OF THE EXPENSES CLAIMED BY THE ASSESSEE WERE HELD TO BE INFLATED IN UNIT NO. I AND WERE DEFLATED IN UNIT NOS. II AND III. ENTIRE CASE OF AO IN BOTH THE ASSESSMENT YEARS IS BASED ON SURMISES AND CONJECTURES. THE LEA RNED CIT(A) HAD PASSED A FAIR, RATIONALE AND JUST ORDER. THERE WAS NO SCOPE TO INTERFERE WITH THE IMPUGNED ORDERS AS RIGHTLY HELD BY THE LEA RNED AM IN HIS PROPOSED ORDER. ON SIMILAR FACTS CLAIM IN EARLIER Y EARS WAS ALLOWED TO THE ASSESSEE. 43. I SEE SOME PARALLEL BETWEEN THE FACTS OF THE AB OVECITED CASE AND CASE IN HAND, BECAUSE PROFIT WAS DISCLOSED IN UNIT NOS. II AND III ON WHICH DEDUCTION UNDER S. 80-I WAS CLAIMED AND NO PR OFIT WAS DISCLOSED IN UNIT NO. I ON WHICH NO SUCH DEDUCTION WAS PERMIS SIBLE AND EXPENSES IN AFORESAID UNIT NO. I WERE MUCH HIGHER THAN IN TH E OTHER TWO UNITS. IT WAS PROBABLE THAT MORE EXPENSES WERE CLAIMED IN UNI T NO. I AND SOME OF THE EXPENSES OF UNIT NOS. II AND III WERE DIVERT ED AND CLAIMED IN UNIT NO. I. BUT NO PRESUMPTION UNDER THE LAW COULD BE RA ISED THAT EXPENSES WERE SO DIVERTED. THE ASSESSEE HAS PRODUCED ACCOUNT S AND DETAILS AND, THEREFORE, CORRECT POSITION COULD HAVE BEEN ASCERT AINED FROM THE MATERIAL STATEMENT OF RELEVANT PERSONS INCLUDING MA NAGEMENT AND STAFF OF THE ASSESSEE COULD HAVE BEEN EXAMINED. BUT WITH OUT ANY 9 ITA NO.451/DEL/2019 INVESTIGATION AND WITHOUT COLLECTING ANY MATERIAL A N ARBITRARY ASSESSMENT BY HOLDING THAT EXPENSES IN UNIT NO. I S HOULD BE PROPORTIONATE TO THOSE IN UNIT NOS. II AND III WAS MADE. ASSESSMENT BASED ON SUCH INFERENCE HAS TO BE HELD AS ARBITRARY . 46. IT IS EVIDENT FROM ABOVE THAT EVEN WHEN THE MAT ERIAL PRODUCED BY THE ASSESSEE IS REJECTED, THE AUTHORITIES CANNOT PR OCEED TO LEVY WHATEVER TAX THEY MAY LEVY. THE ASSESSMENT MUST BE BASED ON SOME MATERIAL. IF IT IS NOT BASED ON ANY MATERIAL THEN IT HAS TO BE H ELD TO BE CAPRICIOUS AND ARBITRARY. THE QUESTION WHICH IS RAISED IN MOST OF THE CASES BEFORE THE TRIBUNAL IS WHETHER THE ASSESSMENT BY THE AO HA VE BEEN MADE IN ACCORDANCE WITH LAW. THE AFORESAID QUESTION HAS BE DETERMINED OBJECTIVELY AND NOT BY RAISING MERELY DOUBTS AND CE RTAINLY NOT BY ENTERTAINING SUSPICION AGAINST THE ASSESSEE, OR AGA INST PEOPLE CONNECTED WITH THE ASSESSMENT OR DISPOSAL OF APPEAL S. IF THE TRIBUNAL DOES NOT DISCHARGE ITS DUTIES WITH RESPONSIBILITY A S ENJOINED UNDER THE LAW, THE CONFIDENCE THAT IS PLACED BY THE PUBLIC ON THE TRIBUNAL WOULD STAND ERODED. WITH THE AFORESAID OBSERVATIONS, I AG REE WITH THE ORDER PROPOSED BY LEARNED AM, CONFIRMING THE IMPUGNED ORD ERS OF CIT()A. LET THE MATTER BE NOW PLACED BEFORE THE REGULAR BENCH F OR DISPOSAL IN ACCORDANCE WITH LAW IN BOTH THE ASSESSMENT YEARS. THUS, FROM PERUSAL OF THE ASSESSMENT ORDER/ORDER OF THE TPO/DIRECTIONS OF THE DRP, IN THE PRESENT CASE NONE OF THE AUTHORITIE S HAVE DOUBTED THAT THERE WAS NO EXPENSES. IN FACTS, THE ASSESSING OFFI CER/TPO/DRP RE- ALLOCATED THE EXPENDITURE IN THE RATIO OF TURNOVER BETWEEN ELIGIBLE AND NON- ELIGIBLE UNITS WITHOUT BRINGING INTO THE LIGHT THE FLAW OR INACCURACY OR ANY SUITABLE EXPLANATION INVOLVED IN RELATION TO THE ME THOD OF ALLOCATION ADOPTED BY THE ASSESSEE COMPANY. HENCE, GROUND NO. 3(C) IS ALLOWED. IN THE PRESENT ASSESSMENT YEAR AS WELL THE ASSESSIN G OFFICER/TPO/DRP COULD NOT BRING ANY MATERIAL ON RECORD OR NOT POINTED OUT ANY INACCURACY AS TO THE METHOD OF ALLOCATION ADOPTED BY THE ASSESSEE COMPAN Y. THUS, THE ISSUE IS IDENTICAL IN THE PRESENT YEAR AS WELL. GROUND NO. 6 IS ALLOWED. 10 ITA NO.451/DEL/2019 12. AS REGARDS TO GROUND NO. 7 RELATING TO DISALLOW ANCE OF RATE OF PURCHASE OF POWER OF RS. 23,53,79,753/-, THE LD. AR SUBMITTE D THAT THIS ISSUE IS ALSO COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION O F THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2013-14 BEING ITA NO. 7176/DEL/2017 ORDER DATED 31.12.2018. 13. THE LD. DR RELIED UPON THE ORDER OF THE TPO AND THE ASSESSMENT ORDER. 14. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE TRIBUNAL IN A.Y. 2013-14 H ELD AS UNDER: 12. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS PERTINENT TO NO TE THAT THE ASSESSEE IS REGULARLY CLAIMING DEDUCTION U/S 80IA OF THE ACT IN RESPECT OF PROFITS DERIVED FROM THE CAPTIVE POWER PLANT/ UNDERTAKING. THE ASSESSEE TRANSFERS THE POWER FOR CAPTIVE USE AS PER THE MARKET RATE/BE LOW ON WHICH CSEB SELLING THE POWER WHICH IS @ 4.64 P.U. IN THE PREVI OUS YEARS THE REVENUE DISPUTED CSEB RATES CONSISTS @ RS.0.38 P.U. ON ACCO UNT OF ELECTRICITY TAX, CESS AND FOR WHICH THE TRANSFER PRICE OR POWER PRIC E WAS ADJUSTED TO THAT EXTENT BY DISALLOWING TO THAT EXTENT AND FOR THE RE MAINING THE ASSESSEE IS ENTITLED FOR TRANSFER PRICE BY TREATING SALE PRICE OF POWER TRANSFERRED FOR CAPTIVE USE. THE ASSESSEE FILED APPEAL BEFORE THE C IT (A) WHEREIN THE CIT (A) ALLOWED THE APPEAL OF THE ASSESSEE. AGAINST THE SAID ORDER THE REVENUE FILED APPEAL BEFORE THE TRIBUNAL WHEREIN THE TRIBUN AL UPHELD THE FINDING OF CIT (A). THE LD. AR POINTED OUT THAT AS PER THE NEW FINANCE ACT, 2013 FROM A.Y. 2013-14, THE DOMESTIC TRANSACTION TOOK PLACE U /S 92C WHEREAS THE ASSESSING OFFICER ADOPTED A FIGURE THAT CSEB PURCHA SING POWER @ 1.89 P.U. ON THE BASIS OF THE INFORMATION GATHERED FROM THE CSEB U/S 133(6). THE TPO HAS NOT TAKEN INTO CONSIDERATION THAT THERE ARE CRITERIA FOR PURCHASE FROM STATE GENERATING STATION WHEN EXCESS PRODUCTION ARE THERE. IN SUCH SITUATION, THE GENERATING STATION ARE UNDER OBLIGATION TO SALE THE EXTRA POWER AT THE LOWEST PRICE & THIS LOWEST PRICE CANNOT BE CONSIDERED AS EQUIVALENT TO THE MARKET RATE AS DEFINED U/S 80IA(8 ) OF THE INCOME TAX ACT, 11 ITA NO.451/DEL/2019 1961. THE MATTER FURTHER REFERRED TO THE DRP WHERE THE DRP ADOPTED DIFFERENT APPROACH I.E. THE AVERAGING OF IEX RATE B UT, THE DRP HAS NOT GIVEN ANY REASON FOR ADOPTING THE SAID RATE. THE TRIBUNAL IN ASSESSEES OWN CASE HELD AS UNDER IN A.Y. 2009-10: 59. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE H AVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. THE ONLY ISS UE TO BE DECIDED IN THE IMPUGNED GROUND IS REGARDING THE ACTION OF THE ASSE SSING OFFICER IN EXCLUDING RS.0.2932/- PER UNIT WHILE COMPUTING THE MARKET PRICE OF POWER FOR THE PURPOSES OF COMPUTING DEDUCTION ADMIS SIBLE TO POWER UNITS U/S 80-1A OF THE I.T. ACT. WE FIND THE ASSESS EE IN THE INSTANT CASE HAS SOLD THE ELECTRICITY TO ITS CAPTIVE PLANT AT TH E RATE OF RS.3.92 PER UNIT I.E. RATE AT WHICH CSEB WAS SELLING TO INDUSTRIAL C ONSUMERS AS ON 01.04.2008. THE ABOVE RATE OF RS.3.92 INCLUDED ELEC TRICITY DUTY AT THE RATE OF 8% OF ENERGY CHARGES AND CESS OF RS.0.05 PA ISE PER UNIT. SINCE ACCORDING TO THE ASSESSING OFFICER, THE ASSESSEE HA S NOT BEEN MAKING ACTUAL SALES TO ITS OTHER UNITS BECAUSE THE POWER G ENERATED IS CONSUMED CAPTIVELY BY OTHER UNITS. ACCORDING TO HIM, SINCE T HE ASSESSEE IS ONLY GENERATING POWER BUT IT DOES NOT HAVE THE LICENCE T O DISTRIBUTE IT, IT CANNOT CHARGE THE ELECTRICITY DUTY AT THE RATE OF 8 % AND CESS 0.05% ON THE TRANSFER OF POWER. THUS, ACCORDING TO HIM, THE ASSESSEE HAS INFLATED THE SALE OF POWER BY RS.0.293 PER UNIT AND HAS ACCO RDINGLY INFLATED THE DEDUCTION U/S 80IA BY A SUM OF RS.3.63 PER UNIT. WE FIND THE ID. CIT(A) FOLLOWING VARIOUS DECISIONS INCLUDING THE DECISION OF THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF JINDAL STEEL & POWER LI MITED REPORTED IN (2007) 16 SOT 509 DECISIONS OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF D.C.W LTD. VS. ADDL. CIT(A) VIDE ITA NOS. 5 560 & 5569/MUM/2008 DELETED THE ADDITION MADE BY THE ASSE SSING OFFICER . WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD .CIT(A) ON THIS ISSUE. 12 ITA NO.451/DEL/2019 60. WE FIND THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF JINDAL STEEL & POWER LIMITED (SUPRA) WHILE DECIDING AN IDENTICAL ISSUE HAS OBSERVED AS UNDER '3.6.1 GROUND NO. 6 OF APPEAL IS DIRECTED AGAINST R EJECTIONS OF THE PREVAILING PURCHASE PRICE AND ADJUSTMENTS MADE TO T HE MARKET PRICE FOR THE ELECTRICITY THEREBY ADDING BACK THE SUM OF RS. 3,86,93,638/- AS EXCESS DEDUCTION U/S 80-IA(8) CLAIMED IN ITS POWER PLANT. THE ASSESSEE IS ENGAGED IN GENERATION OF POWER AND THE POWER SO GENERATED IS TRANSFERRED TO OTHER UNITS OF THE ASSESSEE CAPTIVEL Y AT THE RATE AT WHICH IT IS OBLIGED TO PURCHASE FROM THE STATE ELECTRICIT Y OF BOARD. THE ASSESSEE HAS MADE SALES OF RS. 51,73,22,855/- FROM THE POWER PLANT AND THE PROFIT HAS BEEN ARRIVED AT RS. 18,51,63,515 /- AGAINST WHICH DEDUCTION U/S 80IA HAS BEEN CLAIMED @100%. THE SALE S OF POWER TO OTHER UNITS HAVE BEEN CONSIDERED AT THE RATE OF RS. 3.92, THE RATE OF WHICH CSEB WAS SELLING TO INDUSTRIAL CONSUMERS AS O N 01.04.2008. AO OBSERVED THAT THE RATE OF RS. 3.92 INCLUDED ELEC TRICITY DUTY @8% OF ENERGY CHARGES AND CESS @ 0.05% PER UNIT. AO ALSO O BSERVED THAT THE ASSESSEE HAS NOT BEEN MAKING 'ACTUAL SALES' TO ITS OTHER UNITS BECAUSE THE POWER GENERATED IS CONSUMED CAPTIVELY BY OTHER UNITS. AS SUCH, THE SALE TO OTHER UNITS OF THE ASSESSEE CAN AT BEST BE CALLED NOTIONAL SALES. WHEN ACTUAL SALES ARE MADE, DUTY @8% AND CES S @0.05% COLLECTED FROM, CONSUMERS IS PAID TO GOVERNMENT LEV IES WHICH HAVE ACTUALLY BEEN NOT COLLECTED AND PAID TO THE GOVERNM ENT CANNOT BE PART OF THE PROFITS OF THE ASSESSEE. EVEN WHEN THE LEVIE S ARE ACTUALLY COLLECTED IT DOES NOT FORM PART OF THE REVENUE AND IS ACCOUNTED FOR SEPARATELY AS LIABILITIES. IN THE PRESENT CASE, THE ASSESSEE IS ONLY GENERATING POWER BUT SINCE IT DOES NOT HAVE THE LIC ENCE TO DISTRIBUTE IT, CANNOT ALSO CHARGE THE ELECTRICITY DUTY @8% AND CES S @ 0.05% ON THE TRANSFER OF POWER. IF THE DUTIES AND CESS ARE EXCLU DED FROM THE SALE PRICE OF RS. 3.92 PER UNIT, THE EFFECTIVE SALE PRIC E WOULD BE RS. 3.63 PER UNIT. THEREFORE, THE SALES OF THE POWER PLANT HAS B EEN INFLATED BY A SUM OF RS. 0.2932 PER UNIT. APPLYING THE ABOVE RATI O, AO HELD THAT ASSESSEE HAS INFLATED THE DEDUCTION U/S 80IA BY A S UM OF RS. 3,86,93,638/- WHICH IS ACCORDINGLY ADDED BACK TO TH E TOTAL INCOME OF THE ASSESSEE AS EXCESS DEDUCTION U/S 80IA(8) CLAIME D IN ITS POWER PLANT. 3.6.2 THEREFORE, THE ISSUE IS WHETHER THE AO IS JUSTIFIAB LE IN EXCLUDING RS.0.2932 PER UNIT WHILE COMPUTING 'MARKET PRICE' O F POWER FOR THE PURPOSE OF COMPUTING DEDUCTION ADMISSIBLE TO POWER UNITS UNDER SECTION 80IA OF THE ACT. IN THIS REGARD SUB-SECTION (8) OF SECTION 80-1 A 13 ITA NO.451/DEL/2019 OF THE ACT WHICH PROVIDES FOR DETERMINATION OF PROF ITS DERIVED FROM AN INDUSTRIAL UNDERTAKING WHERE GOODS FROM ONE ELIGIBL E BUSINESS ARE TRANSFERRED TO ANOTHER BUSINESS CARRIED ON BY THE A SSESSEE READS AS UNDER: '(8) WHERE ANY GOODS OR SERVICES HELD FOR THE PURPO SES OF THE ELIGIBLE BUSINESS ARE TRANSFERRED TO ANY OTHER BUSI NESS CARRIED. OFF BY THE ASSESSEE, OR WHERE ANY GOODS OR SERVICES HELD FOR THE PURPOSES OF/ANY OTHER BUSINESS CARRIED ON BY THE AS SESSEE ARE TRANSFERRED TO THE ELIGIBLE BUSINESS AND, IN EITHER CASE, THE CONSIDERATION, IF ANY, FOR SUCH TRANSFER AS RECORDE D IN THE ACCOUNTS OF THE ELIGIBLE BUSINESS DOES NOT CORRESPO ND TO THE MARKET VALUE OF SUCH GOODS OR SERVICES AS ON THE DA TE OF THE TRANSFER THEN FOR THE PURPOSES OF THE DEDUCTION UND ER THIS SECTION, THE PROFITS AND GAINS OF SUCH ELIGIBLE BUSINESS SH ALL BE COMPUTED AS IF THE TRANSFER/IN EITHER CASE, HAD BEEN MADE AT THE MARKET VALUE OF SUCH GOODS OR SERVICES AS ON THAT PATE: PROVIDED THAT WHERE, IN THE OPINION OF THE ASSESSIN G OFFICER, THE COMPUTATION OF THE PROFITS AND GAINS OF THE ELIGIBL E BUSINESS IN THE MANNER HEREINBEFORE SPECIFIED PRESENTS EXCEPTIONAL DIFFICULTIES, THE ASSESSING OFFICER MAY COMPUTE SUCH PROFITS AND GAIN S ON SUCH REASONABLE BASIS AS HE MAY DEEM FIT. EXPLANATION.-F OR THE PURPOSES OF THIS SUB-SECLION, 'MARKET VALUE', IN RELATION TO ANY GOODS OR SERVICES, MEANS THE PRICE THAT SUCH GOODS OR SERVIC ES WOULD ORDINARILY FETCH IN THE OPEN MARKET.' FROM THE ABOVE PROVISION IT IS CLEAR THAT THE PRICE AT WHICH GOODS ARE TO BE TRANSFERRED FROM ONE BUSINESS OF THE ASSESSEE TO ANOTHER BUSINESS SHOULD CORRESPOND TO THE MARKET VALUE OF S UCH GOODS FOR COMPUTING THE PROFITS OF THE ELIGIBLE BUSINESS. THE EXPRESSION 'MARKET VALUE' HAS BEEN DEFINED IN EXPLANATION TO SUB-SECTI ON (8) TO SECTION 80-IA OF THE ACT, AS THE PRICE WHICH SUCH GOODS WOU LD ORDINARILY FETCH WHEN SOLD IN THE OPEN MARKET. 3.6.3 IN THE PRESENT CASE, THE POWER GENERATED BY THE CA PTIVE PLANTS WAS CONSUMED BY THE MANUFACTURING UNITS OF THE APPE LLANT AT RAIGARH. THE APPELLANT ACCOUNTED FOR THE REVENUE/PROFIT ON T RANSFER OF SUCH POWER TO ITS CAPTIVE UNITS AT THE RATE OF RS. 3.92 PER UNIT, WHICH IS THE PRICE CHARGED BY CSEB FOR SUPPLYING POWER TO INDUST RIAL CONSUMERS. THIS RATE OF RS.3.92 CHARGED B: THE CSEB REPRESENTS THE MARKET PRICE. 14 ITA NO.451/DEL/2019 3.6.4 IT IS ALSO NOTEWORTHY THAT HAD THE MANUFACTURING U NITS OF THE APPELLANT PURCHASED POWER FROM CSEB, THEN, THE UNIT S WOULD HAVE PAID RS.3.92 PER UNIT. THEREFORE, FOR THE MANUFACTU RING UNITS, RS.3.92 PER UNITS IS THE..PURCHASE PRICE, I.E. THE PRICE AT WHICH POWER IS AVAILABLE IN THE OPEN MARKET. THE COMPOSITION OF SU CH MARKET PRICE, IS NOT RELEVANT FOR THE PURCHASER OF THE POWER INSOFAR AS THE PURCHASER IS CONCERNED, WHAT IS ONLY RELEVANT IS THE PURCHASE PR ICE, I.E. RS.3.92 PER UNIT, AND NOT ITS COMPOSITION. THEREFORE, WHETHER R S.3.92 PER UNIT INCLUDES ANY GOVERNMENT LEVIES OR NOT IS TOTALLY IR RELEVANT INSOFAR AS THE PURCHASER IS CONCERNED. 3.6.5 IN THE CASE OF JINDAL STEEL & POWER LIMITED: (2007 ) 16 SOT 509, WHEREIN, TOO, TH. ASSESSEE HAD ADOPTED THE PRICE AT WHICH POWER IS SOLD BY THE SEB AS THE TRANSFER/ MARKET PRICE POWER . HON'BLE 1TATDELHI, WHILE APPROVING THE PROFITS SO COMPUTED BY THE ASSESSEE, OBSERVE AS UNDER: '15. THEREFORE, FROM THE AFORESAID, IT CAN BE DEDUC ED THAT MARKET VALUE IS AN EXPRESSION WHICH DENOTED A PRICE ARRIVE D AT BETWEEN THE BUYER AND THE SELLER IN THE OPEN MARKET WHEREIN THE TRANSACTIONS TAKE PLACE IN THE NORMAL COURSE OF TRA DING AND COMPETITION IN CONTRAST TO A SITUATION WHERE THE PR ICE IS FIXED BETWEEN A BUYER AND SELLER CAN B UNDERSTOOD AS DENO TING 'MARKET PRICE' SINCE THE ELEMENTS OF TRADING AND COMPETITIO N EXIST. WHEREAS IN THE CASE OF THE LATTER SITUATION, THE PR ICE FIXED BETWEEN THE BUYER AND SELLER CANNOT BE UNDERSTOOD AS DENOTI NG THE MARKET PRICE SINCE THE ELEMENTS OF TRADE AND COMPETITION A RE CONSPICUOUS BY THEIR ABSENCE. .. 18. HAVING HELD SO, THE NATURAL COROLLARY IS TO ASC ERTAIN WHETHER THE PRICE RECORDED BY THE ASSESSEE AT RS. 3.72 PER UNIT CAN BE CONSIDERED TO BE THE MARKET VALUE FOR THE PURPOSES 0 SECTION 80- IA(8) OF THE ACT. THE ANSWER, TO OUR MIND IS IN THE AFFIRMATIVE. THIS IS FOR THE REASON THAT THE ASSESSEE AS AN INDU STRIAL CONSUMER IS ALSO BUYING POWER FROM THE BOAR, AND THE BOARD SUPPLIES SUCH POWER AT THE RATE OF RS. 3.72 PER UNIT TO ITS CONS UMERS. THIS IS THE PRICE AT WHICH THE CONSUMERS ARE ABLE TO PROCURE TH E POWER. WE MAY CONSIDER HYPOTHETICAL SITUATION AS WELL. HAD T HE ASSESSEE NOT BEEN SADDLED WITH RESTRICTIONS OF SUPPLYING SUR PLUS POWER TO THE STATE ELECTRICITY BOARD, IT WOULD HAVE SUPPLIED POWER T THE ULTIMATE CONSUMERS AT RATES SIMILAR TO THOSE OF THE BOARD OR SUCH 15 ITA NO.451/DEL/2019 OTHER COMPETITIVE RATES, MEANING THEREBY THAT PRICE RECEIVED BY THE ASSESSEE WOULD BE IN THE VICINITY OF RS.3.72 PE R UNIT I.E. CHARGED BY THE BOARD FROM ITS INDUSTRIAL CONSUMERS/ USERS. THUS, UNDER THE GIVEN CIRCUMSTANCES, IT WOULD BE IN THE F ITNESS OF THINGS TO HOLD THAT THE CONSIDERATION RECORDED BY THE ASSE SSEE'S UNDERTAKING GENERATING ELECTRIC POWER FOR TRANSFER OF POWER FOR CAPTIVE CONSUMPTION AT THE RATE OF RS.3.72 PER UNIT CORRESPONDS TO THE MARKET VALUE OF POWER. THEREFORE, ON THIS ASPEC T, WE UPHOLD THE STAND OF THE ASSESSEE AND SET ASIDE ORDER OF TH E COMMISSIONER (APPEALS) AND DIRECT THE ASSESSING OFF ICER TO ALLOW RELIEF TO THE ASSESSEE UNDER SECTION 80-IA AS CLAIM ED. ASSESSEE SUCCEEDS ON THIS GROUND. 61. WE FIND THE DECISION OF THE DELHI BENCH OF THE TRIB UNAL HAS BEEN UPHELD BY THE HONBLE PUNJAB & HARYANA HIGH COURT I N ITA NO.53/2008. SIMILARLY, THE HONBLE CHATTISGARH HIGH COURT IN THE CASE OF CIT VS. GODAWARI POWER & ISPAT LTD. REPORTED IN 42 TAXMANN.COM 551 HAS HELD THAT WHERE ASSESSEE HAD ESTABLISHED A CAPT IVE POWER PLANT IN STATE OF CHHATTISGARH TO SUPPLY ELECTRICITY TO ITS STEEL DIVISION, FOR PURPOSE OF SECTION 80-IA DEDUCTION MARKET VALUE OF POWER SUPPLIED BY ASSESSEE TO STEEL DIVISION SHOULD BE COMPUTED CONSI DERING RATE OF POWER CHARGED BY CHHATTISGARH STATE ELECTRICITY BOARD FOR SUPPLY OF ELECTRICITY TO INDUSTRIAL CONSUMERS. 62. WE FIND THE HONBLE CALCUTTA HIGH COURT IN THE CAS E OF CIT VS. KANORIA CHEMICALS & INDUSTRIES LTD. REPORTED IN 35 TAXMANN.COM 566 HAS CONFIRMED THE DECISION OF THE TRIBUNAL HOLDING THAT THE PRICE AT WHICH STATE ELECTRICITY BOARD SELLS ELECTRICITY TO INDUSTRIAL CONSUMERS IS REPRESENTATIVE OF THE PRICE THAT ELECTRICITY WOULD ORDINARILY FETCH IN THE OPEN MARKET AND I.E. THE PRICE WHICH HAS BEEN, ADO PTED BY THE ELIGIBLE BUSINESS TRANSFERRED TO ITS OTHER BUSINESS FOR THE FOR THE PURPOSE OF COMPUTATION OF PROFITS AND GAINS OF THE ELIGIBLE BU SINESS IN TERMS OF SECTION 80-1 A(8) OF THE I.T. ACT. 63. WE FIND THE MUMBAI BENCH OF THE TRIBUNAL IN THE CA SE OF DEEPAK FERTILIZERS IN ITA NO.2116/2013 ORDER DATED 30.01.2 015 FOR THE ASSESSMENT YEAR 2010-11 WHILE DECIDING AN IDENTICAL ISSUE HAS ALSO TAKEN SIMILAR VIEW. THE CHENNAI BENCH OF THE TRIBUN AL IN THE CASE OF SRI 16 ITA NO.451/DEL/2019 MATHA SPINNING MILLS (P.) LTD. VS. DCIT REPORTED IN (2013) 141 ITD 238 HAS ALSO TAKEN IDENTICAL VIEW IN FAVOUR OF THE ASSE SSEE. UNDER THESE CIRCUMSTANCES, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE ID. CIT(A) IN DELETING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER U/S 80-IA(8) OF THE I.T. ACT. WE, THEREFORE, DISMISS THE GROUNDS RAISED BY THE REVENUE ON THIS ISSUE. SINCE THE IDENTICAL ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE FOR A.Y. 2009-10 WHEREIN SIMILAR FACTS ARE INVOLVED, THERE I S NO NEED TO ADOPT A DIFFERENT APPROACH AS THE LD. DR COULD NOT POINT OU T THE DIFFERENT FACTUAL MATRIX IN THE PRESENT ASSESSMENT YEAR. THEREFORE, G ROUND NO. 3(A) IS ALLOWED. THE LD. DR COULD NOT CONTROVERT THE FACTUAL ASPECT OF THE PRESENT ASSESSMENT YEAR AS WELL AS THE EARLIER ASSESSMENT Y EAR THAT OF 2013-14. BESIDES THE FACTS ARE IDENTICAL AND THERE IS NO DIS CREPANCY MADE OUT BY THE REVENUE DURING THE ASSESSMENT PROCEEDINGS. THEREFOR E, THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE. GROUND NO. 7 IS ALLOWED. 15. AS REGARDS TO GROUND NO. 8 RELATING TO ADDITION ON ACCOUNT OF CSR, THE LD. AR SUBMITTED THAT THIS ISSUE IS ALSO COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2013-14 BEING ITA NO. 7176/DEL/2017 ORDER DATED 31.12.2018. 16. THE LD. DR RELIED UPON THE ORDER OF THE TPO AND THE ASSESSMENT ORDER. 17. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE TRIBUNAL IN A.Y. 2013-14 H ELD AS UNDER: 34. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE LD. AR RELIED UPO N THE DECISION OF THE TRIBUNAL IN CASE OF JINDAL POWER LTD. (SUPRA). THE TRIBUNAL HELD AS UNDER: 16. WE HAVE NOTED THAT FUNDAMENTAL OBJECTION OF TH E ASSESSING OFFICER IS THAT THE EXPENSES IS VOLUNTARY, NOT MAND ATORY AND NOT FOR 17 ITA NO.451/DEL/2019 BUSINESS PURPOSES. AS FOR THE CONTENTION THAT THE E XPENSES BEING IN THE NATURE OF VOLUNTARY EXPENSES, WHICH ARE NOT MANDATO RY, AND WHICH THE ASSESSEE WAS NOT STATUTORILY REQUIRED TO INCUR, ARE NOT ADMISSIBLE DEDUCTION IN COMPUTATION OF BUSINESS INCOME, WE ARE OF THE CONSIDERED VIEW THAT AS LONG AS EXPENSES ARE INCURRED WHOLLY A ND EXCLUSIVELY FOR THE PURPOSES OF EARNING THE INCOME FROM BUSINESS OR PROFESSION, MERELY BECAUSE SOME OF THESE EXPENSES ARE INCURRED VOLUNTA RILY, I.E. WITHOUT THERE BEING ANY LEGAL OR CONTRACTUAL OBLIGATION TO INCUR THE SAME, THOSE EXPENSES DO NOT CEASE TO BE DEDUCTIBLE IN NATURE. I N OTHER WORDS, IT IS NOT NECESSARY THAT EVERY EXPENSE THAT COULD BE ALLO WED AS A DEDUCTION SHOULD BE SUCH AS A HARDNOSED, AND PERHAPS DEVOID O F SENSES OF COMPASSION, BUSINESSMAN ALONE WOULD INCUR IN FURTHE RANCE OF HIS BUSINESS PURSUITS. WE FIND GUIDANCE FROM A PASSAGE FROM THE JUDGMENT OF HOUSE OF LORDS IN THE CASE OF ATHERTON VS. BRITI SH INSULATED & HELSBEY CABLES LTD. (1925) 10 TAX CASES 155 (HL), REFERRED TO WITH APPROVAL BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. CH ANDULAL KESHAVLAL & CO. (1960) 38 ITR 601 (SC), WHICH READS AS FOLLOWS: 'IT WAS MADE CLEAR IN THE ABOVE CITED CASES OF USHERS WILSHIRE BREWER Y VS. BRUCE (SUPRA) AND SMITH VS. INCORPORATED COUNCIL OF LAW REPORTING (1914) 5 TAX CASES 477 THAT A SUM OF MONEY EXPENDED NOT WITH A N ECESSITY AND WITH A VIEW TO DIRECT AND IMMEDIATE BENEFIT TO THE TRADE , BUT VOLUNTARILY AND ON THE GROUNDS OF COMMERCIAL EXPEDIENCY AND IN ORDE R TO INDIRECTLY FACILITATE, CARRYING ON OF BUSINESS MAY YET BE EXPE NDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE TRADE; AND IT AP PEARS TO ME THAT THE FINDINGS OF THE CIT IN THE PRESENT CASE, BRING THE PAYMENT IN QUESTION WITHIN THAT DESCRIPTION. THEY FOUND (IN WORDS WHICH I HAVE ALREADY QUOTED) THAT PAYMENT WAS MADE FOR THE SOUND COMMERC IAL PURPOSE OF ENABLING THE COMPANY TO RETAIN THE EXISTING AND FUT URE MEMBERS OF STAFF AND FOR INCREASING THE EFFICIENCY OF THE STAFF; AND AFTER REFERRING TO THE CONTENTION OF THE CROWN THAT THE SUM OF STERLING PO UND 31,784 WAS NOT MONEY WHOLLY AND EXCLUSIVELY LAID OUT FOR THE PURPO SE OF THE TRADE UNDER THE RULE ABOVE REFERRED TO, THEY FOUND DEDUCTION WA S ADMISSIBLE-THUS IN 18 ITA NO.451/DEL/2019 EFFECT, THOUGH NOT IN TERMS, NEGATIVING THE CROWNS CONTENTIONS. I THINK THAT THERE WAS AMPLE MATERIAL TO SUPPORT THE FINDIN GS OF THE CIT, AND ACCORDINGLY HOLD THAT THIS PROHIBITION DOES NOT APP LY.' IT WILL, THEREFORE, BE CLEAR THAT EVEN IF AN EXPENSE IS INCURRED VOLUNT ARILY, IT MAY STILL BE CONSTRUED AS 'WHOLLY AND EXCLUSIVELY. EXPLAINING T HIS PRINCIPLE, HONBLE SUPREME COURT HAS, IN THE CASE OF SASSOON J DAVID & CO. (P) LTD. VS. CIT [(1979) 118 ITR 261 (SC)] INTER AHA OBSERVED THAT : 'IT HAS TO BE OBSERVED HERE THAT THE EXPRESSION 'WHOLLY AND EXCLUSIVELY' U SED IN S. 10(2)(XV) OF THE ACT DOES NOT MEAN 'NECESSARILY'. ORDINARILY, IT IS FOR THE ASSESSEE TO DECIDE WHETHER ANY EXPENDITURE SHOULD BE INCURRED I N THE COURSE OF HIS OR ITS BUSINESS. SUCH EXPENDITURE MAY BE INCURRED V OLUNTARILY AND WITHOUT ANY NECESSITY AND IF IT IS INCURRED FOR PRO MOTING THE BUSINESS AND TO EARN PROFITS, THE ASSESSEE CAN CLAIM DEDUCTI ON UNDER S. 10(2)(XV) OF THE ACT EVEN THOUGH THERE WAS NO COMPELLING NECE SSITY TO INCUR SUCH EXPENDITURE. IT IS RELEVANT TO REFER AT THIS STAGE TO THE LEGISLATIVE HISTORY OF S. 37 OF THE IT ACT, 1961, WHICH CORRESPONDS TO S. 10(2)(XV) OF THE ACT. AN ATTEMPT WAS MADE N THE IT BILL OF 1961 TO LAY DO WN THE 'NECESSITY' OF THE EXPENDITURE AS A CONDITION FOR CLAIMING DEDUCTI ON UNDER S. 37. SEC. 37(1) IN THE BILL READ 'ANY EXPENDITURE, LAID OUT O R EXPENDED WHOLLY, NECESSARILY AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSINESS OR PROFESSION SHALL BE ALLOWED.' THE INTRODUCTION OF T HE WORD 'NECESSARILY' IN THE ABOVE SECTION RESULTED IN PUBLIC PROTEST. CO NSEQUENTLY, WHEN S. 37 WAS FINALLY ENACTED INTO LAW, THE WORD 'NECESSARILY ' CAME TO BE DROPPED. THE FACT THAT SOMEBODY OTHER THAN THE ASSE SSEE IS ALSO BENEFITED BY THE EXPENDITURE SHOULD NOT COME IN THE WAY OF AN EXPENDITURE BEING ALLOWED BY WAY OF DEDUCTION UNDER S. 10(2)(XV) OF THE ACT IF IT SATISFIES OTHERWISE THE TESTS LAID DOWN B Y LAW.' 17. THE NEXT ISSUE IS WHETHER IT IS FOR THE PURPOSE S OF BUSINESS OR NOT. WE MAY, IN THIS REGARD, USEFULLY REFER TO THE OBSER VATIONS OF A COORDINATE BENCH OF THIS TRIBUNAL, SPEAKING THROUGH ONE OF US (I.E. THE ACCOUNTANT MEMBER) AND IN THE CASE OF HINDUSTAN PETROLEUM CORP ORATION LTD VS DCIT [(2005) 96 ITD 186 (BOM)], AS FOLLOWS: 19 ITA NO.451/DEL/2019 7. WE FIND THAT AS HELD BY HONBLE KARNATAKA HIGH C OURT IN THE CASE OF MYSORE KIRLOSKAR LTD. V. CIT [1987] 166 ITR 836 1, WHILE THE BASIC REQUIREMENTS FOR INVOKING SECTIONS 37(1) AND 80G AR E QUITE DIFFERENT, 'BUT NONETHELESS THE TWO SECTIONS ARE NOT MUTUALLY EXCLUSIVE THUS, THERE ARE OVERLAPPING AREAS BETWEEN THE DONATIONS G IVEN BY THE ASSESSEE AND THE BUSINESS EXPENDITURE INCURRED BY T HE ASSESSEE. IN OTHER WORDS, THERE CAN BE CERTAIN AMOUNTS, THOUGH I N THE NATURE OF DONATIONS, AND NONETHELESS, THESE AMOUNTS MAY BE DE DUCTIBLE UNDER SECTION 37(1) AS WELL. THEREFORE, MERELY BECAUSE AN EXPENDITURE IS IN THE NATURE OF DONATION, OR, TO USE THE WORDS OF THE CIT(A), PROMOTED BY ALTRUISTIC MOTIVES, IT DOES NOT CEASE TO BE AN EXP ENDITURE DEDUCTIBLE UNDER SECTION 37(1). IN MYSORE KIRLOSKAR LTD.S CAS E (SUPRA), THEIR LORDSHIPS HAVE OBSERVED THAT EVEN IF THE CONTRIBUTI ONS BY THE ASSESSEE IS IN THE FORMS OF DONATIONS, BUT IF IT COULD BE TE RMER) AS EXPENDITURE OF THE CATEGORY FALLING IN SECTION 37(1), THEN THE RIG HT OF THE ASSESSEE TO CLAIM THE WHOLE OF IT AS A DEDUCTION UNDER SECTION 37(1) CANNOT HE DECLINED. WHAT IS MATERIAL IN THIS CONTEXT IS WHETH ER OR NOT THE EXPENDITURE IN QUESTION WAS NECESSITATED BY BUSINES S CONSIDERATIONS OR NOT. ONCE IT IS FOUND THAT THE EXPENDITURE WAS D ICTATED BY COMMERCIAL EXPEDIENCIES, THE DEDUCTION UNDER SECTIO N 37(1) CANNOT BE DECLINED AS TO WHAT SHOULD BE RELEVANT FOR EXAMININ G THIS ASPECT OF THE MATTER, WE MAY ONLY REFER TO THE OBSERVATIONS OF HO NBLE SUPREME COURT IN THE CASE OF SRI VENKATA SATYANARAYNA RICE MILL CONTRACTORS CO. V. CIT [1997] 223 ITR 101 2: * . . ANY CONTRIBUTION MADE BY AN ASSESSEE TO A PUB LIC WELFARE FUND WHICH IS DIRECTLY CONNECTED OR RELATED WITH THE CAR RYING ON OF THE ASSESSEE'S BUSINESS OR WHICH RESULTS IN THE BENEFIT TO THE ASSESSEES BUSINESS HAS TO BE REGARDED AS AN ALLOWABLE DEDUCTI ON UNDER SECTION 37(1) OF THE ACT. SUCH A DONATION, WHETHER VOLUNTARY OR AT THE INSTANCE OF THE AUTHORITIES CONCERNED, WHEN MADE TO A CHIEF MINISTER'S DROUGHT RELIEF FUND OR A DISTRICT WELFAR E FUND ESTABLISHED 20 ITA NO.451/DEL/2019 BY THE DISTRICT COLLECTOR OR ANY OTHER FUND FOR THE BENEFIT OF THE PUBLIC AND WITH A VIEW TO SECURE BENEFIT TO THE ASSESSEE'S BUSINESS, CANNOT BE REGARDED AS PAYMENT OPPOSED TO PUBLIC POLICY IT IS NOT AS IF TIE PAYMENT IN THE PRESENT CASE HAD BEEN MADE AS AN ILL EGAL GRATIFICATION. THERE IS NO LAW WHICH PROHIBITS THE MAKING OF SUCH A DONATION. THE MERE FACT THAT MAKING OF A DONATION F OR CHARITABLE OR PUBLIC CAUSE OR IN PUBLIC INTEREST RESULTS IN THE G OVERNMENT GIVING PATRONAGE OR BENEFIT CAN BE NO GROUND TO DENY THE A SSESSEE A DEDUCTION OF THAT AMOUNT UNDER SECTION 37(1) OF THE ACT WHEN SUCH PAYMENT HAD BEEN MADE FOR THE PURPOSE OF ASSESSEE'S BUSINESS. 8. IN THE CASE OF CIT V. MADRAS REFINERIES LTD. [20 04] 266 ITR 170 1, HON'BLE MADRAS HIGH COURT HAS UPHELD DEDUCTIBILITY OF THE AMOUNT SPENT BY THE ASSESSEE EVEN ON BRINGING DRINKING WAT ER TO LOCALITY AND IN AIDING LOCAL SCHOOL. WHILE DOING SO, THEIR LORDS HIPS OBSERVED AS FOLLOWS: THE CONCEPT OF BUSINESS IS NOT STATIC. IT HAS EVOLV ED OVER A PERIOD OF TIME TO INCLUDE WITHIN ITS FOLD THE CONCRETE EXPRES SION OF CARE AND CONCERN FOR THE SOCIETY AT LARGE AND THE LOCALITY I N WHICH BUSINESS IS LOCATED IN PARTICULAR. BEING A GOOD CORPORATE CITIZ EN BRINGS GOODWILL OF THE LOCAL COMMUNITY AS ALSO WITH THE REGULATORY AGE NCIES AND SOC.ETY AT LARGE, THEREBY CREATING AN ATMOSPHERE IN WHICH T HE BUSINESS CAN SUCCEED IN A GREATER MEASURE WITH THE AID OF SUCH G OODWILL.... 9. LET US NOW TAKE A LOOK AT THE UNDISPUTED FACTS O F THIS CASE. THE ASSESSEE IS A COMPANY OWNED BY THE GOVERNMENT OF IN DIA AND WORKING UNDER THE CONTROL AND DIRECTIONS OF THE GOV ERNMENT OF INDIA. AS THE STATEMENT OF FACTS CLEARLY SETS OUT, THE EXP ENDITURE ON 20-POINT PROGRAMMES WAS INCURRED IN VIEW OF SPECIFIC DIRECTI ONS OF THE GOVERNMENT OF INDIA. THIS FACTUAL ASPECT IS NO. EVE N DISPUTED OR CHALLENGED BY THE REVENUE AT ANY STAGE, IT CANNOT B UT BE IN THE BUSINESS INTEREST OF THE ASSESSEE-COMPANY TO ABIDE BY THE DIRECTIONS OF THE GOVERNMENT OF INDIA WHICH ALSO OWNS THE ASSE SSEE-COMPANY. IN 21 ITA NO.451/DEL/2019 ANY EVENT, AS OBSERVED BY THE HON'BLE MADRAS HIGH C OURT IN MADRAS REFINERIES LTD.'S CASE (SUPRA), MONIES SPENT BY THE ASSESSEE AS A GOOD CORPORATE CITIZEN AND TO EARN THE GOODWILL OF THE S OCIETY HELP CREATING AN ATMOSPHERE IN WHICH THE BUSINESS CAN SUCCEED IN A GREATER MEASURE WITH THE HELP OF SUCH GOODWILL. THE MONIES SO SPENT THEREFORE ARE REQUIRED TO BE TREATED AS BUSINESS EXPENDITURE ELIGIBLE FOR DEDUCTION UNDER SECTION 37(1) OF THE ACT. WHAT IS T HE EXPENDITURE FOR THE IMPLEMENTATION OF 20-POINT PLANT AFTER ALL? IT IS SOLELY FOR THE WELFARE OF THE OPPRESSED CLASSES OF SOCIETY, FOR WH ICH EVEN THE CONSTITUTION OF INDIA SANCTIONS POSITIVE DISCRIMINA TION, AND FOR CONTRIBUTION TO ALL AROUND DEVELOPMENT OF VILLAGES, WHICH HAS ALWAYS BEEN THE CENTRAL THEME OF GOVERNMENT'S DEVELOPMENT INITIATIVES. AN EXPENDITURE OF SUCH A NATURE CANNOT BUT BE, TO USE THE WORDS EMPLOYED BY THE HONBLE MADRAS HIGH COURT IN MADRAS REFINERIES LTD.S CASE (SUPRA), 'A CONCRETE EXPRESSION OF CARE AND CONCERN FOR THE SOCIETY AT LARGE' AND AN EXPENDITURE TO DISCHARGE T HE RESPONSIBILITIES OF A 'GOOD CORPORATE CITIZEN WHICH BRINGS GOODWILL OF WITH THE REGULATORY AGENCIES AND SOCIETY AT LARGE, THEREBY CREATING AN ATMOSPHERE IN WHICH THE BUSINESS CAN SUCCEED IN A GREATER MEASURE WITH THE AID OF SUCH GOODWILL. 18. WE HAVE ALSO TAKE NOTE OF THE FACT THAT IN VIEW OF INSERTION OF EXPLANATION 2 TO SECTION 37(1), WITH EFFECT FROM 1S T APRIL 2015. WHICH PROVIDES THAT FOR THE REMOVAL OF DOUBTS, IT IS HER EBY DECLARED THAT FOR THE PURPOSES OF SUB-SECTION (1), ANY EXPENDITURE IN CURRED BY AN ASSESSEE ON THE ACTIVITIES RELATING TO CORPORATE SO CIAL RESPONSIBILITY REFERRED TO IN SECTION 135 OF THE COMPANIES ACT, 20 3 (18 OF 2013) SHALL NOT BE DEEMED TO BE AN EXPENDITURE INCURRED BY THE ASSESSEE FOR THE PURPOSES OF THE BUSINESS OR PROFESSION, THE EXPENS ES INCURRED IN DISCHARGING CORPORATE SOCIAL RESPONSIBILITY ARE NOT DEDUCTIBLE IN COMPUTATION OF BUSINESS INCOME. LEARNED DEPARTMENTA L REPRESENTATIVE SUBMITS THAT THIS AMENDMENT SHOULD BE TREATED AS CL ARIFICATORY IN 22 ITA NO.451/DEL/2019 NATURE, AS IT IS STATED TO BE IN SO MANY WORDS, AND WE SHOULD, THEREFORE, HOLD THAT THE EXPENSES IN DISCHARGING CORPORATE SOC IAL RESPONSIBILITY WERE OUTSIDE THE AMBIT OF EXPENSES DEDUCTIBLE UNDER SECTION 37(1). 19. WE ARE UNABLE TO SEE LEGALLY SUSTAINABLE MERITS IN THIS PLEA EITHER THE AMENDMENT IN THE SCHEME OF SECTION 37(1), WHICH HAS BEEN INTRODUCED WITH EFFECT FROM 1ST APRIL 2015, CANNOT BE CONSTRUED AS TO DISADVANTAGE TO THE ASSESSEE IN THE PERIOD PRIOR TO THIS AMENDMENT. THIS DISABLING PROVISION, AS SET OUT IN EXPLANATION 2 TO SECTION 37(1), REFERS ONLY TO SUCH CORPORATE SOCIAL RESPONSIBILITY EXPENSES AS UNDER SECTION 135 OF THE COMPANIES ACT, 2013, AND, AS SUC H, IT CANNOT HAVE ANY APPLICATION FOR THE PERIOD NOT COVERED BY THIS STATUTORY PROVISION WHICH ITSELF CAME INTO EXISTENCE IN'2013. EXPLANATI ON 2 TO SECTION 37(1) IS THEREFORE, INHERENTLY INCAPABLE OF RETROSPECTIVE APPLICATION ANY FURTHER. IN ANY EVENT, AS HELD BY HONBLE SUPREME C OURTS FIVE JUDGE CONSTITUTIONAL BENCHS LANDMARK JUDGMENT, IN THE CA SE OF CIT VS VATIKA TOWNSHIPS PVT. LTD. [(2014) 367 ITR 466 (SC)] THE L EGAL POSITION IN THIS REGARD HAS BEEN VERY SUCCINCTLY SUMMED UP BY OBSERV ING THAT OF THE VARIOUS RULES GUIDING HOW LEGISLATION HAS TO BE INT ERPRETED, ONE ESTABLISHED RULE IS THAT UNLESS A CONTRARY INTENTIO N APPEARS, LEGISLATION IS PRESUMED NOT TO BE INTENDED TO HAVE A RETROSPECT IVE OPERATION. THE IDEA BEHIND THE RULE IS THAT A CURRENT LAW SHOULD G OVERN CURRENT ACTIVITIES. LAW PASSED TODAY CANNOT APPLY TO THE EV ENTS OF THE PAST. IF WE DO SOMETHING TODAY, WE DO IT KEEPING IN VIEW THE LAW OF TODAY AND IN FORCE AND NOT TOMORROWS BACKWARD ADJUSTMENT OF IT. OUR BELIEF IN THE NATURE OF THE LAW IS FOUNDED ON THE BED ROCK THAT E VERY HUMAN BEING IS ENTITLED TO ARRANGE HIS AFFAIRS BY RELYING ON THE E XISTING LAW AND SHOULD NOT FIND THAT HIS PLANS HAVE BEEN RETROSPECTIVELY U PSET. THIS PRINCIPLE OF LAW IS KNOWN AS LEX PROSPICIT NON RESPICIT: LAW LOO KS FORWARD NOT BACKWARD. AS WAS OBSERVED IN PHILLIPS VS. EYRE [, A RETROSPECTIVE LEGISLATION IS CONTRARY TO THE G RURAL PRINCIPLE TH AT LEGISLATION BY WHICH THE CONDUCT OF MANKIND IS TO BE REGULATED WHEN INTR ODUCED FOR THE FIRST TIME TO DEAL WITH FUTURE ACTS OUGHT NOT TO CHANGE T HE CHARACTER OF PAST 23 ITA NO.451/DEL/2019 TRANSACTIONS CARRIED ON UPON THE FAITH OF THE THEN EXISTING LAW. IT MAY APPEAR TO BE SOME KIND OF A DICHOTOMY IN THE TAX LE GISLATION BUT THE WELL SETTLED LEGAL POSITION IS THAT WHEN A LEGISLATION C ONFERS A BENEFIT ON THE TAXPAYER BY RELAXING THE RIGOUR OF PRE-AMENDMENT LA W, AND WHEN SUCH A BENEFIT APPEARS TO HAVE BEEN THE OBJECTIVE PURSUE D BY THE LEGISLATURE, IT WOULD A PURPOSIVE INTERPRETATION GIVING IT A RET ROSPECTIVE EFFECT BUT WHEN A TAX LEGISLATION IMPOSES A LIABILITY OR A BUR DEN, THE EFFECT OF SUCH A LEGISLATIVE PROVISION CAN ONLY BE PROSPECTIVE. WE HAVE ALSO NOTED THAT THE AMENDMENT IN THE SCHEME OF SECTION 37(1) IS NOT SPECIFICALLY STATED TO BE RETROSPECTIVE AND THE SAID EXPLANATION IS INS ERTED ONLY WITH EFFECT FROM 1ST APRIL 2015. IN THIS VIEW OF THE MATTER ALS O, THERE IS NO REASON TO HOLD THIS PROVISION TO BE RETROSPECTIVE IN APPLICAT ION. AS A MATTER OF FACT, THE AMENDMENT IN LAW, WHICH WAS ACCOMPANIED BY THE STATUTORY REQUIREMENT WITH REGARD TO DISCHARGING THE CORPORAT E SOCIAL RESPONSIBILITY, IS A DISABLING PROVISION WHICH PUTS AN ADDITIONAL TAX BURDEN ON THE ASSESSEE IN THE SENSE THAT THE EXPENS ES THAT THE ASSESSEE IS REQUIRED TO INCUR, UNDER A STATUTORY OB LIGATION, IN THE COURSE OF HIS BUSINESS ARE NOT ALLOWED DEDUCTION IN THE CO MPUTATION OF INCOME. THIS DISALLOWANCE IS RESTRICTED TO THE EXPENSES INC URRED BY THE ASSESSEE UNDER A STATUTORY OBLIGATION UNDER SECTION 135 OF C OMPANIES ACT 2013, AND THERE IS THUS NOW A LINE OF DEMARCATION BETWEEN THE EXPENSES INCURRED BY THE ASSESSEE ON DISCHARGING CORPORATE S OCIAL RESPONSIBILITY UNDER SUCH A STATUTORY OBLIGATION AND UNDER A VOLUN TARY ASSUMPTION OF RESPONSIBILITY. AS FOR THE FORMER, THE DISALLOWANCE UNDER EXPLANATION 2 TO SECTION 37(1) COMES INTO PLAY, BUT, AS FOR LATTE R, THERE IS NO SUCH DISABLING PROVISION AS LONG AS THE EXPENSES, EVEN D ISCHARGE OF CORPORATE SOCIAL RESPONSIBILITY ON VOLUNTARY BASIS, CAN BE SA ID TO BE WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS. THERE I S NO DISPUTE THAT HE EXPENSES IN QUESTION ARE NOT INCURRED UNDER THE AFO RESAID STATUTORY OBLIGATION. FOR THIS REASON ALSO, AS ALSO FOR THE B ASIC REASON THAT THE EXPLANATION 2 TO SECTION 37(1) COMES INTO PLAY WITH EFFECT FROM 1ST APRIL 24 ITA NO.451/DEL/2019 2015, WE HOLD THAT THE DISABLING PROVISION OF EXPLA NATION 2 TO SECTION 37(1) DOES NOT APPLY ON THE FACTS OF THIS CASE. 20. GROUND NO. 3 IS ALSO THUS DISMISSED. THE FACTUAL MATRIX ARE IDENTICAL IN THE PRESENT CAS E. BESIDES THIS, INSERTION OF EXPLANATION 2 TO SECTION 37(1) IS APPL ICABLE W.E.F. 1.4.2015 AND THUS, THE SAID PROVISION WILL NOT BE APPLICABLE IN THE PRESENT CASE. THERE IS NO DISPUTE THAT THE EXPENSES IN QUESTION ARE NOT IN CURRED UNDER THE STATUTORY OBLIGATION. THE ASSESSING OFFICER DISALLO WED THE CLAIM OF CSR EXPENSES WITHOUT DISPUTING THE FACTUAL MATRIX OR BR INGING ON RECORD ANY ADVERSE MATERIAL WHICH CAN BE SEEN FROM THE ASSESSM ENT ORDER. THUS, THIS DISALLOWANCE DOES NOT SURVIVE. HENCE GROUND NO. 7 I S ALLOWED. THE FACTS ARE IDENTICAL TO THE FACTS OF A.Y. 2013-1 4 AND THERE IS NO DISCREPANCY MADE OUT BY THE REVENUE DURING THE ASSE SSMENT PROCEEDINGS. THEREFORE, THE ISSUE IS COVERED IN FAVOUR OF THE AS SESSEE. GROUND NO. 8 IS ALLOWED. 18. AS REGARDS TO GROUND NO. 9 RELATING TO ADDITION ON ACCOUNT OF DIFFERENCE IN TOTAL RECEIPTS AND FORM 26AS OF RS. 6 ,49,988/-, THE LD. AR SUBMITTED THAT THIS ISSUE IS REMANDED BACK BY THE T RIBUNAL IN A.Y. 2013-14 TO THE FILE OF THE ASSESSING OFFICER AND THUS, SIMI LAR DIRECTIONS MAY BE ISSUED IN THE PRESENT YEAR AS WELL. 19. THE LD. DR DID NOT OBJECT TO THE SAME. 20. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE TRIBUNAL IN A.Y. 2013-14 H ELD AS UNDER: 37. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE LD. AR POINTED OU T THAT THE DIFFERENCE ON ACCOUNT OF 26AS THE ASSESSEE HAS ALREADY MADE THE S UBMISSION AFTER RECONCILIATION WHICH HAS NOT BEEN APPRECIATED. THER E IS NO PROPER FINDING TO THAT EFFECT IN THE ASSESSMENT ORDER, THEREFORE, IT WILL BE APPROPRIATE TO REMAND BACK THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR PROPER ADJUDICATION. NEEDLESS TO SAY, THE ASSESSEE BE GIVE N OPPORTUNITY OF HEARING 25 ITA NO.451/DEL/2019 BY FOLLOWING PRINCIPLES OF NATURAL JUSTICE. GROUND NO. 8 IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. FROM THE PERUSAL OF THE RECORDS IT IS APPROPRIATE I N THE PRESENT ASSESSMENT YEAR AS WELL TO REMAND BACK THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR PROPER ADJUDICATION. NEEDLESS TO SAY, THE ASSESSEE BE GIVEN OPPORTUNITY OF HEARING BY FOLLOWING PRINCIPLES OF NATURAL JUSTICE. GROUND NO. 9 IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. 21. AS REGARDS TO GROUND NOS. 10 AND 11, THE SAME A RE GENERAL IN NATURE, HENCE GROUND NOS. 10 AND 11 ARE DISMISSED. AS REGAR DS TO GROUND NO. 12 IS CONCERNED THE SAME IS CONSEQUENTIAL, HENCE THE SAME IS NOT ADJUDICATED AT THIS JUNCTURE. 22. IN RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALL OWED FOR STATISTICAL PURPOSE. ORDER IS PRONOUNCED IN THE OPEN COURT ON 10 TH OCTOBER, 2019. SD/- SD/- (N.K. BILLAIYA) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 10 TH OCTOBER, 2019. COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI 26 ITA NO.451/DEL/2019 SL. NO. PARTICULARS DATE 1. DATE OF DICTATION: 2. DATE ON WHICH THE DRAFT OF ORDER IS PLACED BEFORE THE DICTATING MEMBER: 3. DATE ON WHICH THE DRAFT OF ORDER IS PLACED BEFORE THE OTHER MEMBER: 4. DATE ON WHICH THE APPROVED DRAFT OF ORDER COMES TO THE SR. PS/PS: 5. DATE OF WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT: 6. DATE ON WHICH THE FINAL ORDER RECEIVED AFTER HAVING BEEN SINGED/PRONOUNCED BY THE MEMBERS: 7. DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT: 8. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 9. DATE ON WHICH FILES GOES TO THE HEAD CLERK: 10. DATE ON WHICH FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 11. DATE OF DISPATCH OF ORDER: