The DCITBharuch Circle, Bharuch V. Pragati Glass Wroks Pvt. Ltd, Bharuch

ITA 779/AHD/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6024 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-05-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 03-05-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 14-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VILAS V SHINDE
• Keywords: Business income; Transfer pricing
• Section: 43B; 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH AHMEDABAD BEFORE, SHRI S. S. GODARA, JUDICIAL MEMBER AND SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ITA NOS. 475 & 779/AHD/2014 (ASSESSMENT YEARS: 200 8-2009 & 2009-10) DEPUTY COMMISSIONER OF INCOME-TAX, BHARUCH CIRCLE, BHARUCH APPELLANT VS. PRAGATI GLASS WORKS PVT. LTD., ONGC ROAD, KHARACH, TAL. HANSOT KOSAMBA (R.S.), DIST. BHARUCH- 394120 RESPONDENT PAN: AABCP7377H /BY REVENUE : SHRI VILAS V. SHINDE, SR. D.R. /BY ASSESSEE : SHRI SURENDRA MODIANI, A.R. /DATE OF HEARING : 03.05.2017 /DATE OF PRONOUNCEMENT : 05.05.2017 ORDER PER S. S. GODARA, JUDICIAL MEMBER THESE TWO REVENUES APPEALS FOR ASSESSMENT YEARS 20 08-09 AND 2009- 10 ARISE AGAINST THE CIT(A)-VI, BARODAS SEPARATE O RDERS DATED 01.11.2013 & 06.12.2013 IN CASE NOS. CAB/VI-238/2010-11 & CAB/VI -463/2011-12, RESPECTIVELY, IN PROCEEDINGS U/S.143(3) OF THE INC OME TAX ACT, 1961; IN SHORT THE ACT. HEARD BOTH SIDES. CASE FILES PERUSED. ITA NOS. 475 & 779/AHD/2014 (DCIT VS. PRAGATI GLAS S WORKS P. LTD.) A.YS. 2008-09 & 2009-10 - 2 - 2. IT IS EVIDENT FROM REVENUES PLEADINGS THAT IT S EEKS TO RAISE TWO SUBSTANTIVE GROUNDS IDENTICAL IN BOTH OF ITS APPEAL S. FIRST SUBSTANTIVE GROUND READS THAT THE REVENUE ENDEAVORS TO RESTORE SECTION 80IA DEDUCTION DISALLOWANCE OF RS.33,45,281/- IN FORMER AND RS.43, 24,778/- IN LATTER ASSESSMENT YEAR AS MADE IN ASSESSMENT ORDERS AND DE LETED IN THE LOWER APPELLATE PROCEEDINGS. RELEVANT FACTS THERETO ARE IN A VERY NARROW COMPASS. THIS ASSESSEE MANUFACTURES TUMBLERS AND GLASS BOTTL ES. IT ALSO HAS A CAPTIVE POWER GENERATION UNIT ELIGIBLE FOR SECTION 80IA DED UCTION. THIS ELIGIBLE UNIT GENERATES POWER WHICH IS TRANSFERRED TO ASSESSEES OTHER UNIT. THE ASSESSEE IN TURN CHARGES THE SAME RATE OF POWER AS IS PURCHASED FROM THE STATE ELECTRICITY BOARD. THE ASSESSING OFFICER DISALLOWED ITS ABOVES TATED RATE BY REDUCING THE SAME TO THE EXTENT OF DIFFERENCE IN ITS ELIGIBLE UN IT AND THAT PAID TO THE ABOVE GOVERNMENT UNDERTAKING. THIS CULMINATED IN THE IMP UGNED DISALLOWANCE AS STATED HEREINABOVE IN THE TWO ASSESSMENT YEARS IN Q UESTION. THE CIT(A) IN TURN RELIES UPON HIS ORDER IN ASSESSMENT YEAR 2007- 08 PLACING RELIANCE UPON A CO-ORDINATE BENCHS DECISIONS IN ASSESSEES CASES I TSELF IN A.Y. 2003-04 & 2004-05. HE THEREFORE DELETES THE IMPUGNED DISALLO WANCE OF SECTION 80IA DEDUCTION. THIS LEAVES THE REVENUE AGGRIEVED. 3. LEARNED DEPARTMENTAL REPRESENTATIVE VEHEMENTLY A RGUES THAT THE CIT(A) OUGHT NOT TO HAVE DELETED THE IMPUGNED DISAL LOWANCE. HE HOWEVER FAILS TO DISPUTE THE FACT THAT THIS TRIBUNALS CO-O RDINATE BENCHS DECISIONS HEREINABOVE (SUPRA) HAVE ALREADY SETTLED THE ISSUE AGAINST THE REVENUE. THE SAID ORDERS FORM PART OF THE CASE FILE. THE RELEVA NT DISCUSSION THEREIN READS AS FOLLOWS: 11. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISS IONS ON THE ISSUE, PERUSED THE MATERIAL ALONG WITH THE ORDERS OF AUTHORITIES B ELOW. W E HAVE ALSO GONE THROUGH THE DECISIONS CITED BY THE RESPECTIVE REPRE SENTATIVE BEFORE US. IT IS NOT IN DISPUTE THAT THE ASSESSEE WAS CONSUMING POWER FROM TWO SOURCES I.E GEB AND CAPTIVE GENERATION PLANT OF ITS OWN. THE GEB WAS BE ING PAID AT THE RATE OF 4.9 PER ITA NOS. 475 & 779/AHD/2014 (DCIT VS. PRAGATI GLAS S WORKS P. LTD.) A.YS. 2008-09 & 2009-10 - 3 - UNIT WHILE THE POWER PROCURED FROM CAPTIVE UNIT INS TALLED BY THE ASSESSEE FOR THE PURPOSE OF COMPUTING ELIGIBLE PROFIT THE ASSESSEE H AS TAKEN THE MARKET VALUE OF THE POWER PRODUCED BY CAPTIVE PLANT AT THE RATE OF 4.9 PER UNIT. W E NOTED THAT THE SIMILAR ISSUE HAS ARISEN BEFORE THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF W EST COAST PAPER MILLS LTD V/S JCIT REPORTED IN (200 6) 100 TTJ (MUMBAI) 833, IN WHICH THE TRIBUNAL, ON THIS ISSUE, WHAT SHOULD BE T HE PRICE ATTRIBUTABLE TO THE POWER GENERATED AND CONSUMED BY THE ASSESSEE FOR TH E PURPOSE OF COMPUTING THE DEDUCTION AVAILABLE UNDER SECTION 80IA AFTER AVAILI NG THE PROVISIONS OF SECTION 80IA (9) HAS HELD AS UNDER : '32. HAVING HELD THAT THE ASSESSEE IS ENTITLED FOR THE DEDUCTION AVAILABLE UNDER SECTION 80IA, THE NEXT QUESTION IS WHAT SHOUL D BE THE PRICE ATTRIBUTABLE TO THE POWER GENERATED AND CONSUMED BY THE ASSESSEE. THE ANSWER TO THE QUESTION IS READILY AVAILABLE IN SUB- SECTION (8) OF S.80IA WHICH READS AS BELOW: '80IA(8) WHERE ANY GOODS [OR SERVICES] HELD FOR THE PURPOSES OF THE ELIGIBLE BUSINESS ARE TRANSFERRED TO ANY OTHER BUSI NESS CARRIED ON 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 CORRESPOND TO THE MARKET VALUE OF SUCH GOODS [OR SERVICES] AS ON THE DATE OF THE TRAN SFER, THEN, FOR THE PURPOSES OF THE DEDUCTION UNDER THIS SECTION, THE P ROFITS AND GAINS OF SUCH ELIGIBLE BUSINESS SHALL BE COMPUTED AS IF T HE TRANSFER, IN EITHER CASE, HAD BEEN MADE AT THE MARKET VALUE OF S UCH GOODS [OR SERVICES] AS ON THAT DATE ' THE ABOVE CONCEPT OF TRANSFER PRICING IS ALSO APPAR ENT IN R.7 OF IT RULES, 1962 PROVIDED FOR DETERMINING THE INCOME FROM AGRIC ULTURAL PRODUCES CONSUMED BY THE AGRICULTURIST-ASSESSEE IN HIS BUSIN ESS AS RAW MATERIAL. THE RULE PROVIDES THAT IN THE CASE OF INCOME WHICH IS P ARTIALLY AGRICULTURAL INCOME AND PARTIALLY INCOME CHARGEABLE AS BUSINESS INCOME, IN DETERMINING THAT PART WHICH IS CHARGEABLE TO INCOME -TAX, THE MARKET VALUE OF ANY AGRICULTURAL PRODUCE WHICH HAS BEEN RAISED B Y THE ASSESSEE AND UTILIZED AS A RAW MATERIAL IN SUCH BUSINESS SHALL B E DEDUCTED AT THE PREVALENT MARKET VALUE. THIS PRINCIPLE HAS BEEN CON SIDERED AND UPHELD BY THE SUPREME COURT IN THE CASE OF THIRU AROORAN SUGA RS LTD V/S CIT (1997) 142 CTR (SC) 9: (1997) 227ITR 432 (SC). THEREFORE, WE DIRECT THE ASSESSING AUTHORITY TO WORK OUT THE PROFITS ON THE BASIS OF THE PRICE OF THE POWER GENERATED BY THE ASSESSEE AT THE AVERAGE OF T HE ANNUAL LANDED COST OF ELECTRICITY PURCHASED BY THE ASSESSEE FROM KARNA TAKA STATE ELECTRICITY BOARD DURING THE IMPUGNED PREVIOUS YEAR. IT MAY BE DETERMINED ON THE BASIS OF PAYMENT DETAILS AVAILABLE FROM THE BILLS I SSUED BY THE KARNATAKA STATE ELECTRICITY BOARD, DURING THE YEAR UNDER CONS IDERATION' 33. THIS ISSUE IS THEREFORE, DECIDED IN FAVOUR OF T HE ASSESSEE' 12. IN THIS CASE ALSO, WE NOTED THAT THE COST OF EL ECTRICITY PER UNIT PURCHASED BY THE ASSESSEE FROM GEB IS RS.4.9 PER UNIT. THEREFORE, IN VIEW OF THE DECISION OF MUMBAI ITA NOS. 475 & 779/AHD/2014 (DCIT VS. PRAGATI GLAS S WORKS P. LTD.) A.YS. 2008-09 & 2009-10 - 4 - BENCH OF THE TRIBUNAL IN THE CASE OF WEST COAST PAP ER MILLS LTD V/S JCIT (SUPRA), WE ARE OF THE VIEW THAT THE COST OF ELECTRICITY PRO DUCED BY THE ASSESSEE AT CAPTIVE UNIT MAY BE TAKEN AT MARKET VALUE AT RS.4.9 PER UNI T FOR THE PURPOSE OF COMPUTATION OF THE ELIGIBLE PROFIT OF THAT UNIT. NO CONTRARY DECISION WAS BROUGHT TO OUR NOTICE BY THE LEARNED DR. WE, THEREFORE, SET AS IDE THE ORDER OF THE CIT(A) AND DIRECT THE AO TO COMPUTE DEDUCTION U/S 80IA BY TAKI NG MARKET VALUE OF THE ELECTRICITY GENERATED BY THE ASSESSEE AT THE RATE O F RS.4.9 PER UNIT. GROUND NO.3 IS ALLOWED. 4. WE THEREFORE ADOPT THE VERY REASONING HEREIN AS WELL TO AFFIRM THE CIT(A)S FINDINGS UNDER CHALLENGE. THIS FORMER SUB STANTIVE GROUND RAISED AT REVENUES BEHEST IN BOTH THE APPEALS IS DECLINED. 5. THE REVENUES LATTER SUBSTANTIVE GROUND AVERS TH AT THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING DISALLOWANCE/ ADDITION MADE BY THE ASSESSING OFFICER AMOUNTING TO RS.13,72,726/- AND R S.14,41,902/- ON ACCOUNT OF PROVISION MADE FOR BONUS (ASSESSMENT YEA R WISE). THE ASSESSING OFFICER ADMITTEDLY TREATED THE SAME AS A CONTINGENT LIABILITY ONLY. WE NOTICE THAT THE CIT(A)S ORDER DEALS WITH THE INSTANT LATT ER ISSUE AS UNDER: 10.1 WHILE COMPUTING THE BOOK PROFIT U/S 115JB, TH E ASSESSING OFFICER ADDED BACK AN AMOUNT OF RS. 13,72,726/- AS PROVISION FOR BONUS. RELEVANT PORTIONS OF THE ASSESSING OFFICER'S ORDER HAS BEEN REPRODUCED IN PARA 8.2 (SUPRA) OF THIS, ORDER. 10.2 DURING THE COURSE OF APPELLATE PROCEEDINGS, TH E ASSESSEE SUBMITTED AS UNDER- 'IT IS SUBMITTED THAT PROVISION FOR BONUS IS REGULA RLY MADE ON 31ST MARCH EVERY YEAR AND BONUS IS PAID TO EMPLOYEES SHORTLY B EFORE DIWALI. AS DIWALI HAPPENS TO BE AFTER THE DUE DATE FOR FILING OF RETU RN OF INCOME, IT IS DISALLOWED IN COMPUTATION OF INCOME UNDER SECTION 4 38 OF INCOME-TAX ACT. IT IS SUBMITTED THAT THE PROVISIONS FOR COMPUTATION OF BOOK PROFIT UNDER SECTION 115JB ARE DIFFERENT FROM PROVISIONS FOR COM PUTATION OF INCOME UNDER OTHER PROVISIONS OF INCOME-TAX ACT. THE DISA LLOWANCE UNDER SECTION 43B IS NOT REQUIRED TO BE ADDED FOR COMPUTING BOOK PROFIT UNDER SECTION 115JB. FURTHER, NO REASONS ARE STATED IN THE ASSESS MENT ORDER FOR THE ADDITION. ALSO THERE IS NO PROVISION FOR MAKING SUC H DISALLOWANCE.' 10.3 I HAVE CAREFULLY CONSIDERED THE FACTS AND CIRC UMSTANCES OF THE CASE, OBSERVATIONS OF THE ASSESSING OFFICER, SUBMISSIONS OF THE ASSESSEE, MATERIAL AVAILABLE ON RECORD AND THE JUDICIAL PRONOUNCEMENTS ON THE SUBJECT. ITA NOS. 475 & 779/AHD/2014 (DCIT VS. PRAGATI GLAS S WORKS P. LTD.) A.YS. 2008-09 & 2009-10 - 5 - 10.4 THIS ISSUE IS CAME UP BEFORE HON'BLE ITAT IN A SSESSEE'S OWN CASE IN A.Y. 07-08 IN ITA NO. 54/AHD./2011 AND HON'BLE ITAT, WHI LE SETTING ASIDE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER, OBSERVE D AS UNDER- '....IN OUR CONSIDERED OPINION, TO ESTABLISH THAT P ROVISION FOR BONUS @20% OF SALARY IS ASCERTAINED LIABILITY, THE ASSESS EE WAS REQUIRED TO SHOW THE AMOUNT OF ALLOCABLE SURPLUS AS PER PAYM ENT OF BONUS ACT TO ESTABLISH THAT SUCH ALLOCABLE SURPLUS WAS MO RE THAN 20% OF SALARY OF THIS YEAR AND THEN ONLY, IT MAY BE ACCEPT ED THAT IT WAS A CERTAIN LIABILITY....' 10.5 DURING THE COURSE OF THE APPELLATE PROCEEDINGS , THE ASSESSEE HAS SUBMITTED THE COMPUTATION OF THE ALLOCABLE SURPLUS UNDER SECT ION 1(4) OF THE PAYMENT OF BONUS ACT, FOR THE YEAR ENDING 31.03.200 8. THE ASSESSEE HAS FURTHER SUBMITTED AS UNDER IN THIS REGARD- 'IT IS SUBMITTED THAT THE PROVISION FOR BONUS WAS M ADE FOR RS. 13,72,726/- WHICH WAS COMPUTED @20% OF THE ELIGIBLE SALARY FOR THE YEAR UNDER THE PAYMENT OF BONUS ACT. THE SAME W AS PROVIDED IN THE BOOKS OF ACCOUNTS AS PER THE PAYMENT OF BONUS A CT AS WELL AS AS PER THE APPLICABLE ACCOUNTING STANDARD AND PROVISIO NS FOR THE COMPANIES ACT, 1956. UNDER THE PAYMENT OF BONUS ACT, WHERE THE ALLOCABLE SURPLUS EXCEEDS THE AMOUNT OF MINIMUM BONUS PAYABLE TO THE EMPLOYEES, THE EMPLOYER SHALL IN LIEU OF SUCH MINIMUM BONUS, B E BOUND TO PAY AN AMOUNT IN PROPORTION TO THE SALARY OR WAGES EARN ED BY THE EMPLOYEE DURING THE ACCOUNTING YEAR SUBJECT TO A MA XIMUM OF TWENTY PERCENT OF SUCH SALARY OR WAGES. WE ENCLOSE HEREWITH COMPUTATION OF ALLOCABLE SURPLU S COMPUTE IN 'FORM A' AS PER THE PAYMENT OF BONUS ACT. THE AMOUN T OF ALLOCABLE SURPLUS COMPUTED UNDER THE ACT WAS RS. 1,79,74,415/ -WHICH EXCEEDS THE AMOUNT OF MAXIMUM BONUS PAYABLE UNDER T HE PAYMENT OF BONUS ACT. HENCE, THE APPLICANT WAS REQUIRED TO PAY BONUS AT THE RATE OF 20% OF THE ELIGIBLE SALARY TO THE EMPLOYEES . ACCORDINGLY, PROVISION FOR BONUS OF RS. 13,72,726/-WAS MADE AT T HE RATE OF 20% OF SALARY OF RS. 68,63,632A FOR THE YEAR, WHICH WAS NOT AN UNASCERTAINED LIABILITY. WHILE THE PROVISION FOR BONUS WAS DISALLOWABLE UNDE R SECTION 43B IN THE ASSESSMENT YEAR 2008-09 BUT ALLOWABLE IN ASS ESSMENT YEAR 2009-10 ON PAYMENT BASIS UNDER THE NORMAL PROVISION S FOR COMPUTATION OF TOTAL INCOME. HOWEVER, THERE IS NO A DJUSTMENT PRESCRIBED FOR SUCH LIABILITY FOR COMPUTING BOOK PR OFIT UNDER SECTION 115JB.' IN VIEW OF THE FACT THAT THE ALLOCABLE SURPLUS DURI NG THE RELEVANT PERIOD EXCEEDS THE MAXIMUM BONUS PAYABLE UNDER THE PAYMENT OF BONUS ACT, THE ASSESSEE WAS OBLIGED TO PAY MAXIMUM BONUS OF 20% OF THE SALARY AS PER SECTION 2(4) AND IN VIEW OF THIS, AS WELL AS IN VIE W OF THE OBSERVATIONS OF HON'BLE ITAT IN ASSESSEE'S OWN CASE IN A.Y. 2007-08 , THIS ATTAINS THE CHARACTER OF ASCERTAINED LIABILITY. THEREFORE, IT I S HELD THAT THE PROVISION FOR ITA NOS. 475 & 779/AHD/2014 (DCIT VS. PRAGATI GLAS S WORKS P. LTD.) A.YS. 2008-09 & 2009-10 - 6 - LEAVE ENCASHMENT OF RS. 13,72,726/- IS NOT TO BE AD DED FOR THE PURPOSE OF COMPUTING BOOK PROFIT U/S 115JB OF THE INCOME-TAX A CT. THE ASSESSEE SUCCEEDS ON THIS GROUND OF APPEAL. 6. IT IS THUS APPARENT HEREIN AS WELL THAT THIS TRI BUNALS CO-ORDINATE BENCHS DECISION HAS ALREADY CLEARED THE AIR QUA TH IS LATTER ISSUE AGAINST THE REVENUE BY CONCLUDING THAT THE ABOVE BONUS IS VERY MUCH IN THE NATURE OF AN ASCERTAINED LIABILITY NOT TO BE ADDED FOR THE PURPO SE OF COMPUTING SECTION 115JB BOOK PROFITS. SHRI SHINDE FAILS TO POINT OUT ANY DISTINCTION ON THE RELEVANT FACTS IN THE TWO SETS OF ASSESSMENT YEARS IN QUESTION. WE THUS DECLINE THIS LATTER SUBSTANTIVE GROUND AS WELL. 7. THESE TWO REVENUES APPEALS ARE ACCORDINGLY DISM ISSED. [PRONOUNCED IN THE OPEN COURT ON THIS THE 05 TH DAY OF MAY, 2017.] SD/- SD/- ( PRADIP KUMAR KEDIA ) (S. S. GODARA) ACCOUNTANT MEMBER JUDICIAL M EMBER AHMEDABAD: DATED 05/05/2017 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- / REVENUE 2 / ASSESSEE ! / CONCERNED CIT 4 !- / CIT (A) ( )*+ ,--. . /0 / DR, ITAT, AHMEDABAD 1 +23 45 / GUARD FILE. BY ORDER / . // . /0