Income Tax Appellate Tribunal - Ahmedabad
Dy.Cit.,Bharuch Circle,, Bharuch vs Pragati Glass Wroks Pvt. Ltd, Bharuch on 5 May, 2017
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: 2008-2009 & 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
राज व क ओर से/By Revenue : Shri Vilas V. Shinde, Sr. D.R.
आवेदक क ओर से/By Assessee : Shri Surendra Modiani, A.R.
सन
ु वाई क तार ख/Date of Hearing : 03.05.2017
घोषणा क तार ख/Date of
Pronouncement : 05.05.2017
ORDER
PER S. S. GODARA, JUDICIAL MEMBER
These two Revenue's appeals for assessment years 2008-09 and 2009- 10 arise against the CIT(A)-VI, Baroda's separate orders 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 Income Tax Act, 1961; in short "the Act".
Heard both sides. Case files perused.
ITA Nos. 475 & 779/Ahd/2014 (DCIT vs. Pragati Glass Works P. Ltd.) A.Ys. 2008-09 & 2009-10 -2-
2. It is evident from Revenue's pleadings that it seeks to raise two substantive grounds identical in both of its appeals. 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 deleted in the lower appellate proceedings. Relevant facts thereto are in a very narrow compass. This assessee manufactures tumblers and glass bottles. It also has a captive power generation unit eligible for Section 80IA deduction. This eligible unit generates power which is transferred to assessee's 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 abovestated rate by reducing the same to the extent of difference in its eligible unit and that paid to the above Government undertaking. This culminated in the impugned disallowance as stated hereinabove in the two assessment years in question. The CIT(A) in turn relies upon his order in assessment year 2007-08 placing reliance upon a co-ordinate bench's decisions in assessee's cases itself in A.Y. 2003-04 & 2004-05. He therefore deletes the impugned disallowance of Section 80IA deduction. This leaves the Revenue aggrieved.
3. Learned Departmental Representative vehemently argues that the CIT(A) ought not to have deleted the impugned disallowance. He however fails to dispute the fact that this tribunal's co-ordinate bench's decisions hereinabove (supra) have already settled the issue against the Revenue. The said orders form part of the case file. The relevant discussion therein reads as follows:
"11. We have carefully considered the rival submissions on the issue, perused the material along with the orders of authorities below. W e have also gone through the decisions cited by the respective representative 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 being paid at the rate of 4.9 per ITA Nos. 475 & 779/Ahd/2014 (DCIT vs. Pragati Glass Works P. Ltd.) A.Ys. 2008-09 & 2009-10 -3- unit while the power procured from Captive Unit installed by the assessee for the purpose of computing eligible profit the assessee has 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 (2006) 100 TTJ (Mumbai) 833, in which the Tribunal, on this issue, what should be the price attributable to the power generated and consumed by the assessee for the purpose of computing the deduction available under section 80IA after availing 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 should 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 business carried on by the assessee, or where any goods [or services] held for the purposes of any other business carried on by the assessee are transferred to the eligible business and, in either case, the consideration, if any, for such transfer as recorded 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 transfer, then, for the purposes of the deduction under this section, the profits and gains of such eligible business shall be computed as if the transfer, in either case, had been made at the market value of such goods [or services] as on that date "
The above concept of transfer pricing is also apparent in R.7 of IT Rules, 1962 provided for determining the income from agricultural produces consumed by the agriculturist-assessee in his business as raw material. The rule provides that in the case of income which is partially 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 by the assessee and utilized as a raw material in such business shall be deducted at the prevalent market value. This principle has been considered and upheld by the Supreme Court in the case of Thiru Arooran Sugars 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 the annual landed cost of electricity purchased by the assessee from Karnataka State Electricity Board during the impugned previous year. It may be determined on the basis of payment details available from the bills issued by the Karnataka State Electricity Board, during the year under consideration"
33. This issue is therefore, decided in favour of the assessee"
12. In this case also, we noted that the cost of electricity 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 Glass Works P. Ltd.) A.Ys. 2008-09 & 2009-10 -4- Bench of the Tribunal in the case of West Coast Paper Mills Ltd V/s JCIT (supra), we are of the view that the cost of electricity produced by the assessee at Captive Unit may be taken at market value at Rs.4.9 per unit 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 aside the order of the CIT(A) and direct the AO to compute deduction u/s 80IA by taking market value of the electricity generated by the assessee at the rate of 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 substantive ground raised at Revenue's behest in both the appeals is declined.
5. The Revenue's latter substantive ground avers that 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 Rs.14,41,902/- on account of provision made for bonus (assessment year 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 latter issue as under:
"10.1 While computing the book profit u/s 115JB, the 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, the assessee submitted as under-
"It is submitted that provision for bonus is regularly made on 31st March every year and bonus is paid to employees shortly before Diwali. As Diwali happens to be after the due date for filing of return of income, it is disallowed in computation of income under section 438 of Income-tax Act. It is submitted that the provisions for computation of book profit under section 115JB are different from provisions for computation of income under other provisions of Income-tax Act. The disallowance under section 43B is not required to be added for computing book profit under section 115JB. Further, no reasons are stated in the Assessment order for the addition. Also there is no provision for making such disallowance."
10.3 I have carefully considered the facts and circumstances 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 Glass Works P. Ltd.) A.Ys. 2008-09 & 2009-10 -5- 10.4 This issue is came up before Hon'ble ITAT in assessee's own case in A.Y. 07-08 in ITA No. 54/Ahd./2011 and Hon'ble ITAT, while setting aside the issue to the file of the Assessing Officer, observed as under-
"....in our considered opinion, to establish that provision for bonus @20% of salary is ascertained liability, the assessee was required to show the amount of allocable surplus as per Payment of Bonus Act to establish that such allocable surplus was more than 20% of salary of this year and then only, it may be accepted 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 section 1(4) of the Payment of Bonus Act, for the year ending 31.03.2008. The assessee has further submitted as under in this regard-
"It is submitted that the provision for bonus was made for Rs. 13,72,726/- which was computed @20% of the eligible salary for the year under the Payment of Bonus Act. The same was provided in the books of accounts as per the Payment of Bonus Act as well as as per the applicable Accounting Standard and provisions 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, be bound to pay an amount in proportion to the salary or wages earned by the employee during the accounting year subject to a maximum of twenty percent of such salary or wages.
We enclose herewith computation of allocable surplus compute in 'Form A' as per the Payment of Bonus Act. The amount of allocable surplus computed under the Act was Rs. 1,79,74,415/-which exceeds the amount of maximum bonus payable under the 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 the 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 under section 43B in the Assessment Year 2008-09 but allowable in Assessment Year 2009-10 on payment basis under the normal provisions for computation of total income. However, there is no adjustment prescribed for such liability for computing book profit under section 115JB."
In view of the fact that the allocable surplus during 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 view 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 is held that the provision for ITA Nos. 475 & 779/Ahd/2014 (DCIT vs. Pragati Glass Works P. Ltd.) A.Ys. 2008-09 & 2009-10 -6- leave encashment of Rs. 13,72,726/- is not to be added for the purpose of computing book profit u/s 115JB of the Income-tax Act. The assessee succeeds on this ground of appeal."
6. It is thus apparent herein as well that this tribunal's co-ordinate bench's decision has already cleared the air qua this 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 purpose 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 Revenue's appeals are accordingly dismissed.
[Pronounced in the open Court on this the 05th day of May, 2017.] Sd/- Sd/-
(PRADIP KUMAR KEDIA) (S. S. GODARA)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Ahmedabad: Dated 05/05/2017
True Copy
S.K.SINHA
आदे श क त ल
प अ े
षत / Copy of Order Forwarded to:-
1. राज व / Revenue
2. आवेदक / Assessee
3. संबं धत आयकर आयु!त / Concerned CIT
4. आयकर आयु!त- अपील / CIT (A)
5. )वभागीय ,-त-न ध, आयकर अपील य अ धकरण, अहमदाबाद /
DR, ITAT, Ahmedabad
6. गाड3 फाइल / Guard file.
By order/आदे श से,
उप/सहायक पंजीकार
आयकर अपील य अ धकरण, अहमदाबाद ।