DY. C.I.T. 1(2), RAIPUR (CG) vs. M/S HIRA FERRO ALLOYS LTD., RAIPUR

IN THE INCOME TAX APPELLATE TRIBUNAL, RAIPUR BENCH, RAIPUR

BEFORE S/SHRI N.S SAINI, ACCOUNTANT MEMBER AND PAVAN KUMAR GADALE, JUDICIAL MEMBER

ITA Nos.358 to 360/Rpr/2014 Assessment Years : 2009-10, 2010-2011 & 2011-12

DCIT, 1(2), Aayakar Vs. Hira Ferro Alloys Ltd., B- Bhawan, Central Revenue 567, Urla Industrial Area, Building, Civil Lines, Raipur Raipur PAN/GIR No.AAACH 5679 (Appellant) .. ( Respondent)

Assessee by : None Revenue by : Shri P.K.Mishra, CIT DR

Date of Hearing : 16/01/ 2018 Date of Pronouncement : 18 /01/ 2018

O R D E R Per Pavan Kumar Gadale, JM These are appeal filed by the revenue against the separate orders of

the CIT(A)-Raipur, all dated 24.9.2014 for the assessment years 2009-

2010, 2010-11 and 2011-12, respectively.

2010.

“a. Whether in law and on facts & circumstances of the case, the CIT(A) has erred in holding that the assessee has not over stated the price of power supplied to its Ferro Division and thereby disagreeing with the assessing officer who has reduced profit of power division by Rs.2,03,92,958/- for the purpose of calculation of deduction u/s.80IA of the I.T.Act, 1961. b. Whether in laws and on facts & circumstances of the case, the CIT(A) has erred in holding the disallowance of Rs.13,62,028/- on account of proportionate disallowance of common expenditure be not disallowed for the purpose of calculation of deduction u/s.80IA of the I.T.Act, 1961.’ c. Whether in laws and on facts & circumstances of the case, the CIT(A) has erred in deleting the disallowance of Rs.6,33,941/- u/s.14A of the I.T. Act, 1961.” 4. Apropos Ground No.1 of appeal, brief facts of the case are that

the assessee company is a limited company deriving income from the

business of production of Ferro Alloys and Generation of Power.

During the course of assessment proceedings, the Assessing Officer

noticed that the assessee has transferred electricity to its Ferro

Division @ Rs.2.97 per unit, whereas, the power has been transferred

to CSEB @ Rs.2.80 per unit. Thus by transferring electricity at higher

rate to its other division, the assessee has inflated profit of Power

Division, which is, eligible for deduction u/s 801A of the Act. The

income of the Ferro Alloys Division has correspondingly gone down

which is assessable to tax at normal rate. According to the Assessing

Officer, the market rate should be the rate at which the assessee has

supplied electricity to CSEB i.e. Rs.2.80 per unit. The Assessing

Officer, by invoking his power by virtue of section 801A, restricted transfer rate to the market value of the power supplied to inter

division at Rs.2.80 per unit in place of Rs.2.97 per unit claimed by the

assessee. This has resulted into disallowance of claim u/s 801A by

Rs.2,03,92,958/-.

“ The appellant has submitted that similar disallowance was made in the preceding assessment year i.e. 2008-09 and the issue was decided in favour of appellant by the CIT Appeal (Raipur) vide Appeal No. 057/2010-11 dtd.16.09.2011. The appellant further submitted that incase of group company the Godawari Power & Ispat Limited, the Appellate Commissioner. Raipur has also allowed the similar claim (Appeal No,523 to 526/2008-09 for the A.Y .2004-05 to 2006-07) and the order of Appellate Commissioner, Raipur was also up-held by the Hon'ble Bilaspur Bench of Income Tax Appellate Tribunal and the same has also been approved by the Hon'ble High Court of Chhattisgarh at Bilaspur (Tax Case No.32 of 2012). The appellant also relied upon the following judgments in support of his submissions that no disallowance is called for on the above grounds as made by the AO.

1.. Addl. CIT Vs Jindal Steel & Power Lid. 16 SOT 509 (Del.) 2. DC1T Vs 1TC Ltd. 1TA "No.l 8 (Kol) of 2006 3. DCIT Vs B.S.E.S. Ltd. 113 TTJ (Mum) 227 4. Sarda Energy & Minerals Ltd. (Formerly Chhattisgarh Electricity Co. Ltd.) Vs ACTT-U2), Uaipur the Hon'ble IT. A. T. "E" Bench, Mumhai (IT A No.248/Nag/2QOS for the A.Y.2003-04) 5. DCTT-Cir-8, Kol Vs M/s ITC Limited in l.T.A.18 (Kol) of 2006 6. Thiru Anooran Sugars Limited Vs CIT [227 ITR 432 (SC)] 7.CIT Vs Orient Paper Mills Ltd [176 ITR 110 (SC)] Grindwell Norton [2 SOT 52] 8. West Coast Paper Mills Ltd Vs JCIT reported in 100 TTJ 833 9. CIT vs. Sipla Ltd., (2005) 2 SOT 617 (Mum) 10, Assam Carbon Products Ltd. Vs AC1T 100 TO 224 (Kol ITAT)

decisions relied on before him, the CIT(A) deleted the disallowance made by

the Assessing officer by observing as under:

“6. I have carefully gone through the assessment order and submissions of the appellant. The issue essentially relates to the mechanism of section 8Q-1A(8) which deals with the transfer of goods held by eligible business are transferred to any other business carried on by the appellant. If such transfer do not correspond to the market value of such goods or services, the A.O. has right to compute the deduction by adopting market value of such goods or services on that date. Provision of section 80-IA(8) is re-produced as under:-

Section 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, jar 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 such eligible business shall be computed as if the transfer, in either case, hand been made at the market value of such goods[ or services] as on that date.

Provided that where, in the opinion of the Assessing Officer, the computation of the profits and gains of the eligible business in the manner hereinbefore specified presents exceptional difficulties, the Assessing Officer may compute such profits and gains on such reasonable basis as he may deem fit.

[Explanation- For the purposes of this sub-section, "market value", in relation to any goods or services, means the price that such goods or services would ordinarily fetch in the open market ."

"In the explanation below section 80IA(8), it is provided that the expression "market value" for the sub-section-means the price that such goods or services would ordinarily fetch in the open market. Market Value is an expression which denoted a price arrived at between the buyer and the seller in the open market wherein the transaction takes place in the normal course of trading. In the present case, the CSEB is purchasing power from the power plants at the rate different from its selling price. The private person can setup the power generation units having restriction on the use of power generated and at the same time the tariff at which a power generating unit, can supply power to Electricity Board is also liable lo determined in accordance with the statutory requirements. In this context it can be safely deducted that determination of tariff between the assesses and the Electricity Board can be said to be an exercise between a buyer and seller neither in a competitive environment and or in the ordinary course of trade in business. Therefore, the price determine in normal course of trade in business. Therefore, the price determined in such a scenario cannot be equaled with a situation where the price is determined in normal course of traded and competitive. The price at which the steel division is purchasing power from CSEB can be considered 10 be the market value for the purpose of Sec 80-IA (8) for the reason that the other industrial consumers are also buying power from electricity board at that rate. Thus the price at which the consumers are able to procure the power from the Electricity Board is the market price. The view also gets support from the decision of various Income Tax Appellant Tribunals, in case of Add}. C1T Vs Jamdal Steel & Power Ltd. [16 SOT 509 (Dell), DC1T Vs 1TC Ltd. ITA No. [18(Kol) of 2006], DOT Vs B.S.E.S.

Ltd [113 TTJ (Mum) 227], it has been held that price charged by Electricity Board to its consumer is the market price. In the present case the steel division has procured the electricity at higher rate than charged by power division to steel division, it is therefore, the AO is directed to allow relief to the appellant u/s. 80-IA as claimed. This ground of appeal is hereby allowed". 10. Looking to the facts and circumstances of the case as also decisions cited above, 1 am of the considered opinion that in the present case, the appellant has not over stated the price of power supplied to its Ferro Division and therefore, the disallowance made by the A.O is hereby deleted. “

the instant case, we find that the CIT(A) has relied on the decision of

Hon’ble Jurisdictional High Court in the case of the assessee for the

assessment year 2008-09 in I.T.Appeal No.057/2010-2011 to delete the

addition made by the Assessing Officer. No contrary decision was placed on

record by ld D.R. to take any contrary view. Hence, we see no good reason

to interfere with the order of the CIT(A), which is hereby confirmed and

ground of appeal of the revenue is dismissed.

Officer found that there is certain expenditure like Advertisement, Travelling,

Legal and Professional Charges and Director's remuneration, which were

debited to the Ferro Alloys Division whereas, they also relate Power Division.

The Assessing officer observed that expenditure to the extent of

Rs.40.84.011/-, which was common to both the division, was incurred and assessee was not able to bifurcate the same. Therefore, on the basis of

capital employed, the Assessing Officer has considered 33.33% expenses as

relatable to Power Division, income from which is claimed as 100%

deduction u/s 80IA and disallowed proportionate sum of Rs. 13,62,028/-.

incurred for Power Division. All the expenses relate to Ferro Division. It was

also contended that right from the beginning the Ferro Alloys Division, being

the flagship division, all expenses were debited to that division and was

regularly accepted by the Department. All expenses relatable to Power

Division were separately debited to the said Division. It was also contended

that in scrutiny assessments made for the subsequent two assessment

years, no such disallowance was made. Copies of assessment orders for the

subsequent years were filed. The company has total eligible profit from

Power Division at Rs.7.38 crores and they have no intention to increase

eligible profits by such small amount. Before the CIT(A), the assessee has

relied on the decision in the case of Zandu Pharmaceutical Ltd. Vs C1T dt.

12.09.2011.

that the Assessing officer has taken certain common expenses viz.

advertisement, traveling, director's remuneration, printing and stationery

etc. for the purpose of disallowance from Ferro Division and consequently,

reduced the profit of power division by an amount of Rs. 13.62,028/-. The

assessee has substantiated that the expenses proportionately disallowed by

the A.O were attributable to Ferro Alloys Division only and not to the Power

Division. The assessee further produced the copy of Ledger Account of such

expenses which were already examined by the A.O. Therefore, the CIT(A)

was in agreement with the assessee has been maintaining the books of

accounts separately for both the divisions and thus, there was no question of

making any proportionate disallowance. Hence, the CIT(A) deleted the

addition of Rs.13,62,028/- made by the Assessing officer.

find that except supporting the order of the Assessing Officer, ld D.R could

not point out any specific error in the above quoted order of the ld CIT(A).

Hence, we do not find any good reason to interfere with the order of the ld

CIT(A), which is hereby confirmed and the ground No.2 of the revenue is

rejected.

Assessing Officer has observed that the assessee has invested

Rs.15.00,03,357/- in shares and dividend income from these investments is

exempt from tax. Therefore, the Assessing Officer by invoking the provisions

of section 14A of the Act disallowed a sum of Rs.6.33,941/- and added the

same to the income of the assessee.

assessee company has not incurred any direct or indirect expenditure in

connection with earning of exempt income i.e. dividend. It was pointed out

that there must be some direct connection between the earning of exempt

income and incurrence of expenditure. Alternately, it was contended that

the amount of interest paid towards term loan and working capital being

meant for specific purpose should have been excluded from the calculation

of disallowance u/s 14A of the Act. It was further contended that it had

made investment aggregating to Rs.4.64 Crores in the shares of associate

company, whereas the assessee has earned a cash profit of Rs.22.89 Crores

during the year. It has own fund of Rs.67.67 Crores as share capital and

security premium and it is not paying any interest on share capital and the

borrowed funds were fully utilized in the project i.e. fixed assets and working

capital. Therefore, the provisions of Section 14A are not applicable in the case of the assessee. For this proposition, he relied various judicial

decisions as under:

a. Navin Chemicals Mfg. & Trading Co. Vs Collector of Customs (1993J 68ELT 3 CSC), b. Goodyear India Ltd. Vs State of Haryana (1991) 188 ITR 402 (SC), c. Wimco Seedlings Ltd. & State of Maharashtra Vs DCIT (2007) 107 ITD 267 (Del. ITAT), d. C1T Vs Hero Cycle Ltd. (2010) 323 ITR518 (P&H HC), e. ACIT Vs Eicher Ltd. (2006) 103 TTJ 369 (Del TAT). f. Dhanlakshmi Bank Ltd. Vs ACIT (2007) 12 SOT 625 (Coch –ITAT) g. Birla Group Holdings Ltd. Vs DCIT (2007)13 SOT 642 (Mum-ITAT) h. Auchte] Products Ltd. Vs ACIT (2012) 52 SOT 39 (Mum-ITAT) i. Balarampur Chini Mills Ltd. Vs DCJT (2011)140 TTJ 73 (Kol-ITAT) j. ACIT VS' Mohan Exports P. Ltd. (2012) 138 ITD 108 (Delhi-ITAT) k. Bio Science P. Ltd. Vs ACIT (2012)51 SOT 16 (Mum-ITAT) l. ACIT Vs Sil Investment Lid (20] 0) 54 SOT 54 (Del. ITAT)

m. ACIT Vs Jindal Saw Pipes Ltd. 118 TTHJ 228 (Del-ITAT) n. RIE Agro Ltd. vs DCIT (2013) TS-271-1TAT 2013 (Kol)

It was also submitted that the Assessing officer has not established

any nexus between the interest bearing borrowings and non taxable bearing

investments. The investments have not been made out of interest bearing

borrowings. It is not a case of diversion of interest bearing borrowing to non

taxable income bearing investments as presumed by the A.O. It was

submitted that under identical facts in the case of Lal Ganga Builders (P)

Ltd., Raipur vs. Addl. CIT, Range-1, Raipur in 1TA No.1 17/BLPR/2009, the

jurisdictional ITAT, Bilaspur Bench has deleted the disallowance of

proportionate interest expense made by the AO holding that when interest free funds and interest bearing funds are available, a presumption would

arise that interest free advances have been given out of interest free funds.

Section 14A deals with the expenditure incurred in relation to income not

includible in total income. It is seen that the disallowance has been made

without establishing any nexus between the interest bearing funds and

exempted income yielding investment / non-interest bearing advances. It is

seen that the assessee had sufficient non-interest bearing funds for making

the investment in shares as it had sufficient net worth of its own. The

Assessing Officer has not disputed the submission of the assessee that no

expenditure was incurred for making the investment. The CIT(A) has relied

on the following judicial pronouncements:

i) In S. A. Builders Ltd. vs. Commissioner of Income Tax (Appeals) & ANR. 288 ITR 1 (SC), it was held that interest on borrowed funds cannot be disallowed if the assessee has advanced interest-free loan to a sister-concern as a measure of commercial expediency.

ii) The Hon’ble Allahabad High Court in CIT vs. Raj Kumar Singh & Co. (2007) 210 CTR (All) 483 has held that interest paid by assessee on money borrowed for repayment of an interest-free advance was allowable as deduction.

The CIT(A) held that in the instant case, the assessee has explained the

commercial expediency behind investment in shares of sister concerns and the same has not been rebutted by the Assessing officer. Hence, the CIT(A)

was in agreement with the view of the assessee and relying on the following

judicial decisions deleted the addition made by the Assessing officer.

i) ITAT Kolkata Bench in DC1T vs. Ashish JhunjbumvaJa ITA No. ]8()9/Kol/2012 dated 14.05.2013.

2) Mumbai Tribunal in the case of J.K.Investors (Bombay) Ltd. vs. AC1T in ITA No.7858/Mum/2011.

3) ITAT Hyderabad in the case of SSPDL Ltd vs. DCIT, 33 TAXMANN.COM 447.

4) CIT vs. Suzlon Energy Ltd., 33 taxmann. Com 151 (Guj)

we find that the Assessing Officer has made addition by applying section 14A

of the Act in respect of investment in shares. He was of the view that the

investment was not for making any profit for future benefit of the assessee

company. The Assessing Officer noticed that the assessee has incurred

certain expenditure towards interest and also these investments were made

out of borrowed funds. Whereas, the CIT(A) found that the investment in shares is not out of its ainterest bearing funds, which is not disputed by ld

D.R. and also the investments have been made with profit motive. In these

circumstances, the CIT(A) found that the disallowance is not in order. We

find that the CIT(A) while deleting the disallowance has relied various

judicial pronouncements, which support the assessee’s case. Considering the

facts of the case, we are inclined to uphold the order of the CIT(A) and

reject the ground of appeal of the revenue.

ITA No.359/Rpr/2014 for A.Y. 2010-2011.

u/s. 14A of the i.T.Act, 1961.

consideration is similar to the ones made by the Assessing Officer for the

assessment year 2009-2010, which has been deleted by the CIT (A) and the

findings of the CIT(A) is confirmed by us in preceding para. The revenue

has not brought anything new to persuade the Bench to differ from the view

taken in the assessee’s own case for that year. The principles of consistency

requires that unless facts or law has undergone a change, the view taken earlier year under similar circumstances needs must be followed. Hence,

following our decision for the earlier years, we uphold the findings of the

CIT(A) and dismiss this ground of appeal of the revenue.

of proportionate disallowance of Rs.86,06,261/- out of interest expenses on

account of interest free advance given to sister concern.

assessee did not charge interest on the advances made to sister concern,

though substantial interest amounts were paid to bank and others against

loans obtained from them.

proved the nexus of transfer of borrowed funds without charging any

interest and deleted the addition made by the Assessing officer.

that " the assessee had substantial interest free funds and cash profits and

also the assessee has substantiated that the loan so advanced was out of

commercial expediency/exigency” " has not specifically challenged by the

Revenue. Therefore, considering the facts and circumstances in its entirety, we are inclined to confirm the order of the CIT(A) and dismiss the ground of

appeal of the revenue.

u/s.40A(3) of the I.T.Act, 1961 to Rs.11,88,332/- thereby giving relief of

Rs.4,61,041/-.

payment exceeding Rs.20,000/- and Rs.35,000/- to the transporters. The

Assessing officer required the assessee to explain as to why these expenses

should not be disallowed as per provisions of section 40A(3) of the Act. The

assessee submitted that the payment made to individual truck owner for

transportation of raw material on the basis of bill and there is no payment

exceeding Rs.20,000/- in a single day. The above explanation of the

assessee was not acceptable to the Assessing officer and, therefore, he

disallowed Rs.11,88,332/- and added the same to the income of the

assessee.

the assessee has incurred crores of rupees as transport expenses and only

Rs.11,08,,332/- was paid in cash that too due to urgent requirement of transporter and the payments were genuine. The assessed produced

relevant documents before the CIT(A).

that several amounts paid were below the prescribed limit and aggregate of

such payments works out to Rs.4,61,041/-. No plausible explanation was

furnished by the assessee for rest of the amount. Therefore, the CIT(A)

restricted the disallowance to Rs.4,61,041/-.

reason to interfere. Hence, we uphold the same. This ground of appeal of

the revenue is dismissed.

Rs.19,81,216/- u/s.37(1) of the Act.

on account of fines & penalty, pooja and festivals, charity and donation, etc,

on the ground that these are not allowable expenses as per the I.T.Act.

amounts of Rs.117/-, Rs.16,63,482/-, Rs.27,160/- and Rs.1,03,037/- related to debit/credit of earlier year, fines and penalties, income tax of earlier

years, pooja and festival expenses.

substantiated as relatable to infringement of any legal provisions but to

lifting of additional coal and, therefore, it cannot be treated as penalty for

breach of any law. In view of above, he deleted Rs.16,63,482/- and

confirmed all other disallowances.

Hence, we see no good reason to interfere with the order of the CIT(A),

which is hereby confirmed and ground of appeal of the revenue is dismissed.

ITA No.360/RPR/2014 A.Y. 2011-12.

“a. Whether in law and on facts & circumstances of the case, the CIT(A) has erred in holding not to allow set off of losses of one eligible unit from profit of another unit for the purpose of calculation of deduction u/s. 80IA of the I.T.Act thereby disagreeing with the AO’s disallowance of Rs.14,34,95,083/- out of claim of deduction u/s.80IA of the I.T.Act, 1961.”

the assessee has earned income from its 20MW Power Generating Unit of

Rs.21,99,45,770/- and whereas a loss of Rs.2,83,64,580/- was incurred

from Wind Mill unit at Karnataka. The Assessing officer held that while

calculating the deduction u/s. 80IA of the Act, the loss of an eligible

industrial unit is required to be set off against profit of other eligible

industrial unit. Hence, the Assessing officer disallowed Rs.14,34,95,083/-

u/s. 80IA of the Act.

assessee was accepted by the Hon’ble Jurisdictional High Court in the case of

group company i.e. M/s. Godwawari Power & Ispat Ltd., for the assessment

years 2004-05 to 2006-07. It was also submitted that the CIT(A) has also

accepted in assessee’s own case for the assessment year 2008-09. The ld

CIT(A) discussed the issue at length in the impugned order and referring to

various case laws on this issue and of the Hon’ble Jurisdictional High Court

in the case of Godawari Power & Ispast Limited in (Tax case No.32 of 2012),

opined that the price at which the Steel Division is purchasing power from

CSEB can be considered to be the market value for the purpose of section

80IA(8) for the reason that the other industrial consumers are also buying

power from electricity Board at that rate. He held that in the present case the Steel Division has procured the electricity at the same rate as it pays to

CSPDL to achieve its business plans. He, therefore, directed the AO to re-

compute the eligible profits by applying the market value of power at

Rs.4.127 per unit, which is rate of sale to Ferro Division by the State

Electricity Company and partly allowed the appeal of the assessee.

appeal before the Tribunal.

action of the Assessing Officer.

record and have gone through the orders of authorities below as well as the

judgment of Hon’ble Jurisdictional High Court in the case of Godawari Power

& Ispat Ltd (supra). Ld. D.R. could not point out any material difference in

the facts in the present year as compared to the facts in the case of

Godawari Power & Ispat Ltd (supra). The facts for the year under

consideration being no different from those before the Hon’ble High Court

in the case of Godawari Power & Ispat Ltd (supra), we find no reason to

differ therefrom. We find that Hon’ble High Court in its judgment, inter alia,

held that the CIT(A) and Tribunal had rightly computed the market value of

the power after considering it with the rate of power available in the open market namely the price charged by the Board. There is no illegality in their

orders. No contrary view has been taken by any superior authority on this

issue. Accordingly, the findings of the learned Commissioner of Income-

tax (Appeals) stand confirmed. Ground raised by the revenue is

dismissed.

‘Whether in law and on facts & circumstances of the case, the CIT(A) has erred in deleting the disallowance of Rs.2,68,796/- on account of CSR expenses which has not been laid out wholly and exclusively for the purpose of business.”

expenses of Rs.2,68,796/- for undertaking CSR activities viz cleaning and

beautification of pond at village “Fundher” etc. He disallowed the expenses

for not being incurred for purposes of assessee’s business.

genuineness of claim of expenditure i.e. incurrence of expenditure and

payment thereof. The CIT(A) following the decision in the case of CIT vs.

Modi Industries Ltd., 327 ITR 570, the decision of Karnataka High Court in

the case of CIT vs. Infosys Technologies Ltd., 360 ITR 714 (kar) and also the amendment in Section 37 in the Finance No.(2) Act, 2014 w.e.f. 1.4.2015,

deleted the disallowance of Rs.2,68,796/-.

that the CIT(A) has relied on the decision in the case of Modi Industries

(supra) and Hon’ble Karnataka High Court in the case of CIT vs. Infosys

Technologies Ltd (supra), wherein, it has been held that the expenditure

incurred on social responsibility was laid out or expended wholly and

exclusively for purposes of business. The CIT(A) has referred to the

amendment made in Finance Act (No.2) 2014 w.e.f. 1.4.2015 in Section 37,

wherein, it is declared that for the purposes of sub-section(1) any

expenditure incurred by an assessee on the activities relating to corporate

social responsibility referred to in section 135 of the Companies Act, 2013

shall not be deemed to be an expenditure incurred by the assessee for the

purposes of the business or profession. The CIT(A) has held that there was

no such embargo for the preceding years. In view of above, the CIT(A) held

that the disallowance cannot be sustained. In the instant case, it is

submitted that CSR expenses are incurred for the welfare of local community

and thereby improve corporate image of the companies incurring such

expenditure. We are of the considered opinion that the CIT(A) has rightly considered the decision and deleted the addition made by the Assessing

Officer and Ground No.1 of appeal of the revenue is dismissed.

disallowance made by the AO on account of Pooja and festival expenses and

charity & donation expenses thereby giving relief of Rs.71,779/-.

amount of Rs.96,041/- and Rs.80,015/- towards charity and donation and

Pooja and festival expenses, which are not allowable in company’s case.

Therefore, he disallowed the same.

, an amount of Rs.71,779/- was expended for purchase of distribution of

sweets to all the employees/workers on the auspicious occasion of

Viswakarma poooja day, independence day and republic day. The assessee

relied on the CBDTG Circular No.17(F.No.27(2)-IT/43) dated 6.5.1983 &

circular No.13A/20/68-IT-II dated 3.10.1968, wherein, it was emphasized

that expenses incurred on the occasion of Diwali and Muhurat are in the

nature of business expenditure. Based on these circulars, the CIT(A)

allowed Rs.71,779/- and disallowed balance of Rs.1,01,277/-. Hence, the

revenue is in appeal before us.

order of the CIT(A) as the CIT(A) has allowed relief considering the CBDT

Circulars referred above (supra). Hence, we dismiss this ground of revenue.

erred in deleting addition of Rs.1,05,790/- ESI made by the AO on account

of delayed payment of employees contribution to PF/ESI.

alia, did not allow deduction for employees’ contribution towards EPF and

ESI which was deposited beyond the period prescribed in the relevant

statute but before the due date of filing the return u/s.139(1).

find that the CIT(A) relying on the decision of the Delhi High Court in CIT

Vs. AIMIL Limited [2010] 188 TAXMAN 265 (DELHI), wherein, it has been

that the employees’ contribution towards EPF and ESI etc. deposited after

the due date but before the time allowed for filing the return u/s.139(1) will

not call for any disallowance u/s.36(1)(va), has deleted the disallowance.

We find that the assessee has deposited the amount before the due date u/s

139(1). Therefore, we confirm the order of the CIT(A) and dismiss the

ground of appeal of the revenue.

Rs.14,37,568/- u/s.14A of the I.T.Act, 1961.

erred in deleting the proportionate disallowance of Rs.40,56,337/- out of

interest expenses on account of interest free advances given to sister

concern. Since both these grounds are inter-connected, same are disposed

of as under:

I.T.Rules holding that this expenditure is not allowable being relatable to

income not included in the total income and Rs.40,56,337/- out of interest

expenses on the ground that the interest free advances were made to sister

concern. The Assessing officer also held that the assessee has advanced to

sister concern but charged any interest. It has paid substantial interest on

bank loans and loans taken from sister concerns. Therefore, he disallowed

proportionate interest expenditure @ 12% per annum in respect of amount

advanced without charging interest.

decision of Hon’ble Jurisdictional High Court in the case of JCIT vs. Beckay Engineering Corporation, 325 ITR 384 (CG) and held that the Assessing

officer failed to prove nexus of transfer of borrowed funds without charging

interest, except saying that same is given from the cash credit account

maintained by the assessee. The assessee has substantial interest free

funds and cash profits and also the assessee has substantiated that the loan

so advanced was out of commercial expediency/exigency and deleted the

addition made by the Assessing Officer.

CIT(A). he could not point out any specific defects in the order of the

CIT(A). We also find that the assessee has substantial interest free funds

and cash profits to advance interest free loans. Therefore, we do not find

any good reason to interfere with the order of the CIT(A), which is hereby

confirmed and grounds of appeal of revenue No.e & f are dismissed.

Order pronounced on 18 /01/2018.

Sd/- sd/- (N.S Saini) (Pavan Kumar Gadale) ACCOUNTANT MEMBER JUDICIALMEMBER Raipur; Dated 18 /01/2018 B.K.Parida, SPS

Copy of the Order forwarded to : 1. The appellant: DCIT, 1(2), Aayakar Bhawan, Central Revenue Building, Civil Lines, Raipur 2. The Respondent. Hira Ferro Alloys Ltd., B- 567, Urla Industrial Area, Raipur 3. The CIT(A)- Raipur 4. Pr.CIT- Raipur 5. DR, ITAT, Raipur 6. Guard file. //True Copy//

BY ORDER,

SR.PRIVATE SECRETARY ITAT, Raipur