Tribunal rulings: Loss due to fire allowed, deductions upheld, transfer pricing adjustments dismissed

The Tribunal upheld the CIT(A)'s decision to allow the loss incurred due to fire, deductions under Section 80IA for gas turbine units, and disallowance of club expenses. However, it confirmed the disallowance of deductions under Section 35(2AB) and remitted the issue of deduction under Section 35D for fresh consideration. The Tribunal dismissed the Revenue's appeal on transfer pricing adjustments and quashed assessment orders passed without draft assessment orders. The Tribunal partly allowed the assessee's appeal and the Revenue's appeal for statistical purposes, while allowing the Cross Objections.

---

---

Issues Involved:
1. Allowability of loss incurred due to fire.
2. Deduction under Section 80IA for gas turbine units.
3. Disallowance of club expenses.
4. Deduction under Section 35(2AB).
5. Deduction under Section 35D.
6. Transfer Pricing adjustments.
7. Validity of assessment orders without draft assessment orders.

Issue-wise Detailed Analysis:

1. Allowability of Loss Incurred Due to Fire:
The Revenue challenged the CIT(A)’s decision to allow a loss of Rs. 17,34,34,860 incurred by the assessee due to fire, which was initially disallowed by the AO citing the Supreme Court's decision in Goetze (India) Ltd. v. CIT. The Tribunal noted that the CIT(A) rightly allowed the claim since the loss was incurred during the relevant year and was revenue neutral as the insurance claim was offered to tax in subsequent years. Thus, the Tribunal upheld the CIT(A)’s decision.

2. Deduction Under Section 80IA for Gas Turbine Units:
The Revenue disputed the CIT(A)’s allowance of deductions under Section 80IA for profits from gas turbine units, including steam profits. The Tribunal upheld the CIT(A)’s decision, referencing the ITAT, Mumbai Bench decision in West Coast Paper Mills Ltd. v. ACIT, which allowed deductions for captive power consumption units, including steam generation.

3. Disallowance of Club Expenses:
The AO disallowed Rs. 50,09,299 in club expenses, treating them as personal in nature. The CIT(A) allowed Rs. 30,09,299 as business expenses and disallowed Rs. 20,00,000. The Tribunal upheld the CIT(A)’s decision, noting that the assessee was not given adequate time to produce the necessary vouchers.

4. Deduction Under Section 35(2AB):
For the assessment years 2006-07 and 2007-08, the assessee’s claim for deduction under Section 35(2AB) was disallowed due to lack of DSIR approval. The Tribunal confirmed the CIT(A)’s decision to disallow the deduction, as the DSIR approval was not granted for those years.

5. Deduction Under Section 35D:
The assessee claimed expenditure on issue of shares and ROC fees under Section 35D. The CIT(A) allowed it under Section 37(1), but the Tribunal reversed this, citing the Supreme Court’s decision in Brooke Bond India Ltd. v. CIT. The Tribunal remitted the issue of allowability under Section 35D to the AO for fresh consideration.

6. Transfer Pricing Adjustments:
The Revenue’s appeal against the CIT(A)’s direction to recalculate Transfer Pricing adjustments was dismissed. The Tribunal upheld the CIT(A)’s decision to exclude certain comparables and adjust the Arm's Length Price.

7. Validity of Assessment Orders Without Draft Assessment Orders:
The assessee raised additional grounds challenging the validity of the final assessment orders passed without draft assessment orders as mandated by Section 144C. The Tribunal, referencing multiple judicial decisions, including JCB India Ltd. v. DCIT and Addl. CIT v. Nokia India (P) Ltd., quashed the assessment orders for being illegal and without jurisdiction.

Conclusion:
The Tribunal dismissed the Revenue’s appeals in ITA Nos. 247/Coch/2018, 336/Coch/2018, and 268/Coch/2018, and the assessee’s appeal in ITA No. 339/Coch/2018. The assessee’s appeal in ITA No. 249/Coch/2018 was partly allowed for statistical purposes. The Revenue’s appeal in ITA No. 302/Coch/2018 was partly allowed. The Cross Objections in C.O. Nos. 56 & 57/Coch/2018 were allowed.

---