ASST CIT CIR 6(1)(2), MUMBAI vs. BHANDER POWER LTD, MUMBAI

The present appeal has been preferred by the Revenue against the order dated 20.10.2016 relevant to assessment year 2012-13 of the Commissioner of Income Tax (Appeals)-12 [hereinafter referred to as the CIT(A)].

The common issue raised by the Revenue in ground No.1 & 2 is against the order of Ld. CIT(A) deleting the disallowance of deduction under section 80IA of the Act which was rejected by the AO by applying the provisions of section 80IA(10) of the Act by holding that the assessee is not eligible for claiming deduction under section 80IA of the Act and also challenging the order of Ld. CIT(A) on the ground that the disallowance of

The Ld. A.R. submitted that the issue involved in the present appeal is squarely covered by the decision of the co- ordinate bench of the Tribunal in assessee’s own case in & 6062/M/2016 in Assessment Years: 2010-11 & 2011-12 vide order dated 31.05.2019. The Ld. A.R. therefore submitted that the facts being identical in the current year , therefore grounds No.1 & 2 raised by the Revenue may kindly be dismissed.

The Ld. D.R., on the other hand, fairly agreed to the arguments of the Ld. A.R. that issue is decided in the earlier year in favour of the assessee by dismissing the appeal of the Revenue, however, the Ld. D.R. strongly relied on the grounds of appeal and the order of the AO.

We have heard the rival submissions of both the parties and perused the material on record and observed that the issue in this case is as regards allowing the deduction under section 80IA of the Act in respect of phase 1 which is eligible for deduction under section 80IA of the Act. We find that identical issue has been decided by the co-ordinate bench of the Tribunal in assessee’s own case in & 6062/M/2016 in Assessment Years: 2010-11 & 2011-12 (supra). The operative part whereof is reproduced as under: “23. After hearing both the sides and carefully perusing the materials as placed before us including the case laws cited by the rival parties, we observe that the assessee has hardly employed any staff in the power plant, store and maintenance section and thus was dependent on M/S Essar Investments Ltd for all the 3 M/s. Bhandar Power Ltd. managerial support services for which there was an agreement with the said company. Moreover the monthly bills were raised on the assessee for the services rendered and the payments were also made accordingly. We further note that there was heavy employment of staff in the various section in Essar Investments Ltd as stated by the AR of the assessee and the said company was providing services to other group companies which were accepted by the revenue even in the scrutiny proceedings where all the assessments were framed u/s 143(3) of the Act. Further it is the assessee who is to decide what to do and when to do and but not to do and the department can not dictate to the assessee. In the case of CIT Vs Yum Restaurant India Pvt. Ltd.(supra) the Hon’ble Delhi High Court has held that as long as the payment is made for the purpose of business, the payment would be allowable as expenses. Whether a particular expense has to be incurred is to be seen from the business point of view and have to be respected by the authorities, regardless of the fact that it may appear to the latter that expenses were incurred unnecessarily. In the case of S.A Builders (supra), the Hon’ble Apex Court has held that any particular expenditure may not be incurred under any legal obligation, yet it is allowable as business expenditure as it is incurred on the grounds of commercial expediency. The revenue has not brought any materials before us to controvert the findings of ld CIT(A) who has otherwise taken a correct view of the issue and decided the issue in favour of the assessee. Accordingly, we are inclined to uphold the order of CIT(A) on this issue by dismissing the ground no. 3 of the revenue.”

Since the facts of the present case before us are identical to one as decided by the co-ordinate bench of the Tribunal in the earlier year, we,therefore, respectfully following the decision of the co-ordinate bench of the Tribunal affirm the order of Ld. CIT(A) by dismissing the ground Nos.1 & 2 raised by the Revenue.

The issue raised in ground No.3 is against the deletion of disallowance by Ld. CIT(A) of managerial supports service charges which were disallowed by the AO on the ground that assessee has failed to prove the benefit arising out of the said services obtained from the related parties.

The facts in brief are that the AO observed from the perusal of annual audited accounts that assessee has incurred an 4 M/s. Bhandar Power Ltd. expenditure of Rs.1,98,54,000/- towards payment to M/S Essar Investments Ltd. towards availing various in the area of finance and treasury, accounting standard and audits, legal matters and litigation (both in India and abroad), arbitration, disputes, international benchmarking norms and project management systems, corporative governance, personnel policies, inventory management and risk and insurance management etc. (refer page 27) which were disallowed by the AO on the ground that assessee has failed to prove the proof of availing of services and the benefits realised out of those services.

The Ld. A.R., at the outset, pointed out that issue is squarely covered by the decision of the co-ordinate bench of the Tribunal in favour of the assessee in assessee’s own case in & 6062/M/2016 in Assessment Years: 2010-11 & 2011-12 (supra) and hence the Ld. A.R. prayed that the same may kindly be followed in this case as well and dismiss the ground raised by the Revenue.

The Ld. D.R., on the other hand, strongly relied on the grounds of appeal and the order of the AO.

We have heard the rival submissions of both the parties and perused the material on record and observed that the identical issue in this case is decided in favour of the assessee by the co-ordinate bench of the Tribunal in assessee’s own case in & 6062/M/2016 in Assessment Years: 2010-11 & 2011-12 (supra). Since the facts involved in the present case in the present case are identical vis.-a-vis. the case of the assessee as decided by the co-ordinate bench of the Tribunal,

Ground Nos.4 & 5 are general in nature and need no adjudication.

In the result, the appeal of the Revenue is dismissed.