AI Drafter 
TaxTMI 
TaxTMI 
2015 (10) TMI 2053
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....lowance of interest paid on late payment of TDS amount, in view of smallness of the amount. The assessee did not press additional ground Number 1 also. Therefore all the grounds cited above are dismissed as not pressed. Ground No. X, being general in nature, does not require adjudication. 3. In the remaining grounds, the assessee has urged following issues: a) Disallowance made u/s 14A of the Act. b) Disallowance of foreign travel expenses amounting to Rs. 2,12,010/-; c) Assessment of rental income of house property and service charges as income from house property. d) Disallowance of deduction of Rs. 7,19,01,340/- pertaining to IFFCO arbitration Claim; e) Addition u/s 92CA of the Act made in respect of purchase of Rs. 6,03,07,020/- from its Associated Enterprises; f) Addition u/s 92CA of the Act made in respect of Corporate Guarantee fee of Rs. 9,70,40,250/- The additional ground No. 2 is related to IFFCO arbitration claim listed as (d) above. The additional ground no.3 is related to addition made in respect of Corporate Guarantee fee listed as (f) above. 4. Facts of the case are stated in brief. The assessee is engaged in the business of manufacture and sa....
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....or the AY 2003-04 and 2004-05 for identical reasoning and department has not filed any appeal against it. The Ld A.R also invited our attention to page 18 of the paper book and submitted that the cash flow statement prepared by the assessee would show that the investments made during the year under consideration is far excess of own funds generated during the instant year. He further placed reliance on the decision rendered by the jurisdictional Bombay High Court in the case of HDFC Bank Ltd (366 ITR 505) to contend that no disallowance of interest is required when sufficient own funds are available. He further submitted that the assessing officer has made disallowance towards administrative expenses at a reasonable level of Rs. 10.00 lakhs. He submitted that the Ld CIT(A) was not justified in enhancing the same to Rs. 11.00 crores by following the methodology prescribed in Rule 8D(2)(iii) without referring to the factual situation. 7. The ld. DR submitted that the availability of own funds should be examined as on the date of making investment and not on Balance Sheet date. He further submitted that the disallowance of administrative expenses is tune with magnitude of investmen....
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....04-05. 11. At the time of hearing, the ld. A.R fairly submitted that this issue has been decided against the issue by the Tribunal in the assessee‟s own case, vide its order dated 11.2.2009 passed in ITA No.3209/Mum/2006 for AY-2004-05. Therefore, respectfully following the order of the Tribunal referred above, we confirm the order of Ld CIT(A) on this issue. 12. The next issue relates to the assessment of rental income under the head income of house property and service charges income under the head Income from other sources, as against the claim of the assessee that both the receipts should be assessed as business income of the assessee. The assessee owns a property as co-owner in Calcutta and it has given the said premises on rent. It also received service charges from the said premises. The assessee declared both the receipts as business income. The AO assessed the rental receipts as Income from house property and the service charges as income under the head income from other sources. The Ld CIT(A) confirmed the same. 13. The Ld A.R fairly admitted that identical issue was considered by the Tribunal in the assessee‟s own case in ITA No.5468/Mum/2001 (AY-199....
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.... not accept the award and hence filed appeal before Hon‟ble Delhi High Court. However, since the arbitration award has gone against the assessee by majority view of the arbitrators, the assessee claimed before the AO that the provision of Rs. 7.19 crores has to be allowed as deduction in AY 2005-06. The AO rejected the said claim by holding that the dispute is not finally settled. The Ld CIT(A) also confirmed the same. 15. The assessee has challenged the decision of Ld CIT(A) on this issue in the original grounds of appeal and in the additional ground, the assessee has prayed for allowing deduction of interest payable to IFFCO up to 31.3.2005 on the arbitration award. 16. The Ld A.R submitted that the award given by the arbitrators has crystallized during the year under consideration, since the award has been given during the year under consideration. He further submitted that the liability to pay the award cannot become contingent liability, even if the assessee has challenged the arbitration award in the High Court. In this regard, the Ld A.R placed reliance on the decision rendered by the Hon‟ble Gujarat High Court in the case of Navijan Roller Flour and Pulse ....
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....d for holding that the liability had not been incurred...." In the instant case also, there is no dispute that the arbitration award was given in the month of July, 2004 and hence the said award relate to the assessment year under consideration. It is a fact that the assessee has challenged the arbitration award by filing appeal before the Hon‟ble High Court. However, the Hon‟ble Gujarat High Court has held in the above cited case that the liability accrues at the earliest point of time and the fact that the award was challenged in appeal cannot be a ground for holding that the liability had not been incurred. Accordingly by following the Hon‟ble Gujarat High Court (referred supra), we direct the AO to allow deduction of the arbitration award. The assessee has also raised an additional ground praying that the interest accrued thereon up to 31.3.2005 should also be allowed. However, we prefer to restore this matter to the file of the AO with the direction to examine the arbitration order and take appropriate decision in accordance with the law, after affording necessary opportunity of being heard to the assessee. 18. The next issue relates to the addition of ....
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.... for purchase of concentrates with its AE on a long term basis for the entire life of the Mines and hence such the prices fixed on long term contracts cannot be compared with the purchases made from Non-AEs, where no such long term contract was there. The Ld A.R further submitted that the TC/RC charges for non-AEs are fixed on calendar year basis, whereas the same is fixed on financial year basis with AE. He submitted that the Japanese smelters usually fix the TC/RC charges in the month of January, every year. While for non-AEs, the same is given effect immediately from the month of January itself, for AEs, the same is given effect from 1st April. Since the TC/RC charges are given effect on calendar year basis for Non-AEs and the same is given effect on financial year basis for AE, there bound to be some difference in the prices on account of TC/RC charges in the months of January to March every year. He further submitted that it so happened that the TC/RC charges deductible from prices paid to non-AEs was higher during the year under consideration resulting in payment of higher prices to the AE. He submitted that the assessee has paid lower prices to its AE in the subsequent years....
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....ed the TC/RC charges deducted to the AE with a non-AE named M/s PT Freeport. He submitted that the assessee has entered into no-holiday contract with M/s PT Freeport. The AO has also compared the prices paid to M/s Minera Escondida, another party with whom the assessee had entered into long term contract only. Accordingly he submitted that the AO/TPO has compared the price paid to the AE with internal comparables having similar features. Accordingly he submitted that the tax authorities are justified in making this addition. 25. We have heard rival contentions on this issue and perused the record. It is an admitted fact that the assessee has entered into a long term contract with its AE for procuring the copper concentrates. The period of contract is for the life time of the mine. It is also an admitted fact that no other comparables is having this feature and hence, on this ground alone, the comparables adopted by the AO/TPO is liable to be rejected. Further, there is no difference between AE and non-AE with regard to the methodology adopted for determining the prices of copper concentrates, viz., (a) ascertain the price quoted for copper metal in LME. (b) ascertain the T....
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....o the AE. Hence, we find merit in the contentions of the assessee that the temporary price differentials due to following a particular pattern should be ignored. Besides the above, as noticed earlier, the comparison should be between two cases having similar features. However, in the instant case, the assessee has entered into a long term contract for the life time of the mines and hence the price paid to its AE should be compared with a case having similar features. Accordingly, in our view, the contract entered with AE cannot be compared with other cases having only annual contracts. We have noticed earlier that the "No holiday contract" is a variant of long term contract. The assessee has entered no holiday contract with two parties, but they were for lifting fixed quantity of materials, i.e., they were not life time contracts. Hence, they cannot also be compared. 27. Even otherwise, there is no difference in the methodology adopted by AE and non-AE for determining the price. The difference has occurred due to following „financial year basis‟ for AE, where as the non-AEs have followed calendar year basis. Since the assessee is following a particular pattern for it....
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....egard to the applicability of the Explanation. In our view, the said observations are obiter dicta only. The decision rendered by the Hyderabad bench of Tribunal in the case of Four soft Ltd (2011)(142 TTJ (Hyd) 358), on which also the assessee placed reliance, has been rendered prior to the insertion of Explanation by Finance Act, 2012. Accordingly, we reject the additional ground urged by the assessee. 30. The facts relating to guarantee fee received by the assessee are that the assessee has given corporate guarantee to the AEs viz., M/s Birla Mt. Gordon Pty Ltd; Birla Nifty Pty Ltd and Birla Mineral Resources Pty Ltd. The assessee charged guarantee fee at 0.25% p.a. The AO noticed that a US bank has charged a fee of 1.5% to 2% to the guarantee given by it. Accordingly, the AO adopted the rate of 1.75% and accordingly computed the guarantee commission/fee, which resulted in an addition of Rs. 9.70 crores. The Ld CIT(A) also confirmed the same. 31. Before us, the Ld A.R placed reliance on the decision dated 08-05-2015 rendered by Hon‟ble jurisdictional Bombay High Court in the case of CIT Vs. M/s Everest Kento Cylinders Ltd (ITA No.1165 of 2013), wherein the High Court....
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....er years: A) Deduction for Unit no.6 has been confirmed by the Tribunal in ITA No.4774/Mum/2003 relating to AY-1998-99, vide its Order dated 6.7.2007. The relevant discussions are available in para 51 and 51.1 of the order; B) Deduction for Unit no.7 has been confirmed by the Tribunal in ITA No.4775/Mum/2003 relating to AY-1999-00, vide its Order dated 6.7.2007. The relevant discussions are available in para 82 of the order; C) Deduction for Unit no.8 has been confirmed by the Tribunal in ITA No.4775/Mum/2003 relating to AY-1999-00, vide its Order dated 6.7.2007. The relevant discussions are available in para 86 of the order; D) Deduction for Unit no.9 has been confirmed by the Tribunal in ITA No.4336/Mum/2005 relating to AY-2003-04, vide its Order dated 28.11.2008. The relevant discussions are available in para 7 and 7.1 of the order; E) Deduction for Unit no.10 has been confirmed by the Tribunal in ITA No.3852/Mum/2006 relating to AY 2004-05, vide its Order dated 4.8.2009. The relevant discussions are available in para 12 and 13 of the order; The claim of the assessee for Renu power unit No.6 to 9 was allowed by the Tribunal in AY 2004-05 (supra) also, by follow....
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....r deciding this issue also. Hence, we do not find any infirmity in his order on this issue. Since he has held that the assessee is eligible to claim deduction u/s 80IA of the Act in respect of Co-generation Plat 2, he was justified in holding that the assessee could exercise option u/s 80IA(2) of the Act. 39. The next issue relates to the direction given by Ld CIT(A) to compute deduction u/s 80IA by applying supplier/UPSEB market rate. It was brought to our notice that the Tribunal, in the orders passed for earlier years, have consistently held that the State electricity board rates has to be taken as market value for computing deduction u/s 80IA of the Act. Hence, we do not find any infirmity in the decision of Ld CIT(A) on this issue. 40. The next issue relates to the eligibility of the assessee to claim deduction u/s 80IA of the Act in respect of Birla Copper Power Plat Unit I & II. This issue was considered by the Tribunal in AY 2003-04 in ITA No.4336/Mum/05 in its order dated 28-11-2008 and it was decided in favour of the assessee. It was submitted that the order of AY 2003-04 was followed in AY 2004-05. Accordingly, we are of the view that the Ld CIT(A) was justified in....