MADHAV MARBLES AND GRANITES LIMITED,UDAIPUR vs. ITO, NATION E-ASSESSMENT CENTRE / ACIT, CIRCLE-2, DELHI / UDAIPUR

The first issue in ITA No. 249/Jodh/2024 and the only issue in ITA No. 250/Jodh/2024 relate to disallowance of deduction claimed under Section 80IA of the Income Tax Act, 1961 (in

Briefly, the facts more or less common in both the appeals are, the assessee is a resident corporate entity engaged in manufacturing, processing, and trading of granite slabs/tiles, marble, slabs/tiles and reality business. In addition to three units, namely, granite division, granite slab division, and marble division, the assessee also has a fourth unit i.e. windmill unit for generation of power. The power generated by the windmill unit is mostly utilized on captive basis by the other units and surplus power, if remains, is sold to the Electricity Board. The profit derived by the assessee on sale of power for captive use was claimed as deduction under Section 80IA of the Act. While examining assessee's claim of deduction, the Assessing Officer called for necessary details. After verifying the details, though the Assessing Officer did not express any doubt on the fact that the assessee had generated power and transferred to its other units for captive use, however, he was of the view that the assessee cannot make profit out of itself, as ultimately all units are of the assessee. Accordingly, he disallowed assessee’s claim of deduction under Section 80IA of the Act. While doing so, he heavily relied upon a decision of ITAT in case of National Aluminium Company Limited [2006] 101 TTJ 948.

Challenging the aforesaid decision of the Assessing Officer, assessee filed an appeal before learned first appellate authority.

However, learned first appellate authority upheld the decision of the Assessing Officer, stating that applying the doctrine of mutuality, deduction claimed cannot be allowed, as the

We have considered rival submissions and perused the materials on record. So far as the issue, the profit derived from sale of electric consumption, whether would qualify for deduction under Section 80IA of the Act, is no more res integra by virtue of the decision of the Hon'ble Supreme Court in the case of CIT vs. Jindal Steel and Power Limited [(2024) 460 ITR 162 (SC)]. Even there are catena of judicial precedents upholding the claim of deduction under Section 80IA of the Act on profit derived on captive sale of electricity. Thus, the primary issue, whether the profit derived from sale of electricity for captive use would qualify for deduction under Section 80IA of the Act, is decided in favour of the assessee. Insofar as the applicable rate for determining the profit derived from sale of electricity for captive use, undisputedly, the assessee has applied the rate of Rs.6.35 per unit, being the same rate at which the Electricity Board sells electricity to consumers. Whereas, the Assessing Officer has applied the rate of Rs.2.0625 per unit, the rate at which the generating company sells electricity to the Electricity

The only other issue arising in ITA No. 249/Jodh/2024 relates to the disallowance of Rs.15,219,032/- for non-deduction of tax at source in terms with section 194C of the Act.

Briefly, the facts relating to this issue are, in case of assessment proceedings, the Assessing Officer noticed that the assessee had made payments to various persons without deducting tax at source under section 194C of the Act, though such payments were debited to the profit and loss account as expenses. Noticing this fact, the Assessing Officer called upon the assessee to furnish various details relating to the parties to whom the payments were made. After examining the details furnished by the assessee, the Assessing Officer observed that most of the parties to whom payments have been made are non-filers of return of income. He further observed that compared to Financial Years 2014-15 and 2015-16, there is substantial increase in similar payments made in the impugned assessment year. Ultimately, alleging that the assessee

In our view, this cannot be a justifiable reason to disallow the payments. Firstly, the payments were made during the Financial Year 2016-17, whereas assessment order was passed on 28-12-2019. Therefore, after lapse of two years, the assessee cannot be expected to produce the persons to whom the payments were made, particularly when the persons to whom payments were made are 134 in number. Many of these persons can be labourers, contractors, job workers, etc. Therefore, it is virtually impossible on the part of the assessee to produce the parties for verification. In fact, the first appellate authority has appreciated the aforesaid facts while issuing directions to the Assessing Officer. The other reason shown by the Assessing Officer regarding substantial increase in payments made is also unacceptable, keeping in view the fact that the increase is not so exponential that it requires scaling down. In course of hearing, it has been

In the result, both the appeals are allowed.