TaxTMI 
TaxTMI 
2017 (2) TMI 116
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....essee against final assessment order dated 24th December, 2015, passed under section 143(3) r.w.s 144C(13) in pursuance of directions given by the DRP dated 27.11.2015. Since common issues are involved in all the appeals arising out of identical set of facts, therefore, the same were heard together and are being disposed off by way of this consolidated order. The various transfer pricing issues involved in all the appeals at a glance are highlighted as under:- Sl. No. Issue under Appeal AY 2009-10 AY 2010-11 AY 2011-12 1 Adjustment in contract Manufacturing segment Departmental Appeal (Computation of 5% Range working as per Proviso to section 92C(2) of the Income tax Act, 1961 ( „Act‟) Rs.26,08,53,000 NA NA 2 Disallowance of royalty Payment -(Assessee's Appeal) Rs.4,79,44,806 (Ground Nos. 3 & 3.1) Rs.6,13,25,824 Ground Nos. 3 & 3.1 Rs.5,53,93,209 Ground Nos.3 &3.1 3 Adjustment on account of location savings- (Assessee's appeal) Rs54,69,43,636 Rs60,45,21,233 Ground No.4 and 4.1 Rs.65,26,11,480 Ground No.4 & 4.1 4 Adjustment on account of green (environment) cost- (Assessee's appeal) Rs.1,47,27,846 Groun....
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....thout prejudice and not withstanding to the above, the learned AO/ TPO erred in wrongly computing and not restricting the adjustment on account of location saving to Appellants contract manufacturing activities i.e. Rs. 45,88,53,296, in accordance with the directions of DRP. 5. Based on the facts and circumstances of the case and in law, the learned AO/ TPO pursuant to the directions of the DRP, erred in making arbitrary adjustment of Rs. 1,47,27.846 based on conjectures and surmises in relation to environment/ green cost savings and further erred in not appreciating that the same was not an international transaction amenable to TP provisions. 6. That the learned AO/ TPO erred on the facts and circumstances of the case and in law in not granting the benefit of economic and risk adjustments Corporate-tax grounds: 7. Based on the facts and circumstances of the case and in law, the learned AO, pursuant to the directions of the DRP, erred in setting off the brought forward losses of Rs. 8,10,29,424 pertaining to Profenofos unit against the profits of the current year while computing deduction under Section 80-IB of the Act. 8(a) Based on the facts and the circumstances o....
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..... This involves imports of raw materials from Syngenta Asia Pacific Pte Ltd ("SAPL") and sale of finished goods to SAPL. The assessee has a manufacturing unit at Goa where it manufactures such active ingredients (i.e. TMX and its derivate products). The assessee has reported its segmental accounts in the following manner:- Segment Crop Protection Segment Seeds Total Sub- segment I Sub- Segment-II Crop Protection- Total Particulars Crop Protection Licensed Manufacturing Crop Protection Contract Manufacturing Gross sales 79,96,232 38,93,619 1,18,89,851 25,60,669 1,44,50,520 Less: Excise Duty (6,48,164) - (6,48,164) (6,48,164) Net Sales 73,48,068 38,93,619 1,12,41,687 25,60,669 1,38,02,356 Less: Cost of goods sold (52,34,359) (34,61,675) (86,96,034) (12,81,355) (99,77,389) Less: Operating Expenses (9,79,139) - (9,79,139) (6,71,743) (16,50,882) Operating Profit 11,34,570 4,31,944 15,66,514 6,07,571 21,74,085 Add: Other Income Other 1,03,071 4,097 1,07,168 L....
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....TPO in this regard were as under: • There is huge requirement of continuous research and development and innovation in development of the higher yield seeds, in order to meet the increasing requirements of consumer for food; • To meet the requirement, the Group's researchers focus their efforts on creating new varieties with greater productivity, better tolerance to pests, diseases and environmental stresses, and improved quality characteristics such as nutritional composition, safety, consumer appeal and shelf life. In the years 2006, 2007 and 2008, Syngenta set aside USD $232 million, $283 million and $343 million, respectively in total research and development spending for the seeds business, representing approximately 14% of its annual seeds turnover in each year; • The assessee also explained that in the seeds business, the parent seeds provide the key property/characteristic of the seeds and play a vital role in the yield/ productivity of the crop. These parent seeds are further developed into hybrid seeds (i.e. plant material). These parent and hybrid seeds are owned by Syngenta Crop Protection AG ('SCPAG') and the hybrid se....
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.... to sunflower seeds; and d) The agreement between Hoechst Schering Agrevo Limited ('HSAL') and Sandoz India Limited ('Sandoz') sought to be used by the Assessee as a comparable, pertain to the year 1995 and was not continuing when the present agreement was entered into". 7. Before us, the Ld. Counsel, Mr. Mukesh Bhutani after explaining the entire facts and background of the case submitted that, this precise issue had come up for consideration before the Tribunal in the assessee's own case for the assessment years 2007-08 and 2008-09 wherein, the matter has been set aside to the file of the TPO to examine the Internal CUP. He also brought to our notice that, in the assessment year 2003-04, the similar matter was restored back to the file of the TPO by the Tribunal, in pursuance thereof; TPO had examined the Internal Cup and accepted the payment of 'Royalty' on the same rate. On merits, Mr. Bhutani submitted that assessee has substantiated the determination of ALP of the entire transaction along with royalty payments in its Transfer Pricing Study Report by using TNMM as MAM which has been accepted in the earlier years also. The assessee had carried out detailed search analysis....
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....s crucial information to the Assessee to enable it to grow the seeds in Indian climate and to effectively meet the yield/productivity specifications; • The information includes protocols, guidelines on procedures to combat diseases; • Safeguard against viruses and make crops resistant in the Indian geographical region; • Syngenta also uses a data application management application ('SPIRIT) for its group entities to actualise research co-operation on a global scale. The main aim of the application is to provide history, data, information and best seed-breeding solutions to user groups; • In addition, training programs imparting knowledge about breeding methods, techniques, and novel technologies are also arranged for the breeders. d) Receipt of technology in form of basic seeds by the Assessee from its AE is demonstrated by the grant of 'Permit for Import of Germplasm/ Transgenic/ Genetically Modified Organism for Research Purpose' by the National Bureau of Plant Genetic Resources ("NPGBR") to the assessee. 8. As regards the TPO's action for benchmarking the royalty rate of hybrid corn and sunflowers seeds @ 1% a....
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....ngenta Seeds AG Novartis Seeds Ltd. Corn Intellectual Property & Trademarks 12% United Kingdom And Ireland October, 2007 SCPAG Cantenbury Seeds Pea Intellectual Property 12% Production in New Zealand, promotion and comer- cialization in India and Pakistan Average 12% Referring to these agreements, the copies of which have been placed in the paper book, Mr. Bhutani submitted that they constitute internal CUP because, the terms and conditions, technology transfer and the products were same, therefore, he submitted that the royalty paid by the assessee @ 5% and 8% is quite lower than the royalty paid by the AEs to the third parties which was around 12%. Thus, the royalty payment by the assessee is at Arm's length. He further pointed out that, even if the agreements relates to different geographical regions, however, the geographical circumstances will not make a difference because the terms of technology transfer being the same. Even if one goes by 'Royalty Stat Database', then also the comparables drawn are mostly from different geographical regions. 9. On the other hand, Ld. D....
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....hould be given for following the Internal Cup. Regarding Ld. DR's argument that Internal Cup based on AEs and third party are of different geographical region, he submitted that, in assessee's own case the TPO himself has taken CUP from different jurisdiction not only in one year but in three assessment years viz., AYs 2002-03, 2003-04 and 2004-05, wherein he has specifically dealt and analyzed the facts of each and every transaction of the other AEs with the third parties, therefore, there cannot not be any variation in this year. 11. We have heard the rival submissions, perused the relevant finding given in the impugned orders as well as material referred to and placed on records. It is an undisputed fact that the assessee's AE, Syngenta Seeds AG, Switzerland has been supplying plant material / basic seed to the assessee in terms of 'Technical Collaboration Agreement'. The assessee based on such proprietary rights, proprietary information, valuable technical knowhow and trademarks owned by AE carries out to produce, promote, and commercialize corn and sunflower seeds in the domestic market through its own process and modification to suit to Indian climatic condition. It bears ....
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....ng basically the breeder seeds and with the aid of technical know-how of its AE and assists in further developing seeds at the facilities located in various parts of the country. Thus, to say that there is no benefit to the assessee from such proprietary information, trademarks, technical know-how would not be correct. Even in third party situation, proprietary rights, information and license to use trademarks and know-how is provided or make available then it would not be free of cost. In such transactions there is always a price which needs to be computed under the principles of "Arm's Length Price". Thus, we hold that, the contention of the TPO as well as direction of the DRP that royalty payment has to be treated as "Nil" cannot be justified in the wake of not only the "technical collaboration agreement" but also the actual conduct of the parties and the assessee who has earned huge returns during carrying out its activity by exploiting these intangibles. 30. Once we hold that the royalty payment cannot be computed at "Nil", the next issue which comes before us is how to compute the Arm's Length Price of such a transaction. The Ld. Counsel before us has contended that, there....
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....n can be taken for the comparability analysis or not would be a very difficult proposition to accept at the first instance, because under Rule 10B (2) the factors governing the comparability of international transaction with an uncontrolled transaction is judged by the factors of similarity of; quality of products; contractual terms; economic conditions prevailing in different geographical locations and other market conditions, etc. The geographical location becomes very vital factor in certain cases because one has to take into account the market condition, the laws in force, cost of labour, capital, overall economic level of competition, etc. However, in the present case, it has been brought to our notice that, the Assessing Officer/TPO in earlier years consecutively in three assessment years has specifically dealt and analyse the similar agreements of the assessee's AEs with third parties in the different geographical regions. Therefore, no exception should be carved out in this year and accordingly, these agreements can be examined or analyzed by the TPO if the geographical location does not have any material effect on the determination of the prices. Thus, we direct the TPO/AO....
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....he finished goods either from the assessee or any other group or third party and therefore, due to various alternatives being available to the AEs the assessee does not have any bargaining power with the AE. In its export operations, assessee acts as a contract manufacturer and in this capacity it does not own or control any non-routine intangible assets. The assessee is also not entitled to any location specific advantages that are not available to other companies in the Indian market; (iv) The assessee placed strong reliance on the decision of ITAT Delhi Bench in the case of Gap International Sourcing India Pvt Ltd in ITA 5147/Del/2011 and 228/Del/2012. 13. However, the Ld. TPO rejected the assessee's contention on the ground that, firstly, locational saving is not tagged with reallocation of an existing business. It can arise wherever factors of production are employed keeping in view the locational advantage of a particular location to give rise to the saving with respect to one or many of the factors of production, like cheap finance, cheap labour, cheap raw materials etc. He also referred to India's position on United Nations Transfer Pricing Draft in this regard; secon....
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....arm's length compensation for cost savings and location rents should be such that both parties would benefit from participating in the transaction. In other words, it should be not less than zero and not greater than the value of cost savings and locations rents; it should also reflect an appropriate split of the cost savings and location rents between the parties. Accordingly, the adjustment is being made at 50% of the savings which is Rs. 56,83,40,074/- summarized in the table below: Location Savings - Licensed Manufacturing Segment Rs. 8,80,90,340 - Contract Manufacturing Segment 45,88,53,296 - Seeds Segment 2,13,96,438 Total 56,83,40,074 14. The Ld. DRP upheld the contention of the TPO, however, gave part relief by restricting the adjustment of locational saving only to the Goa Pant of the assessee and accordingly the adjustment has been marginally reduced to Rs. 54,69,636/- out of Rs. 56,83,40,074/-. 15. Before us, Mr. Bhutani retreating the same submissions which were made before the authorities below, relied heavily upon the coordinate Bench decision in the case of Watson Pharma Private Ltd vs DCIT, reported in [2015] 168 TTJ 281 (Mum)....
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....ch have to be cumulatively satisfied: i) Existence of an international transaction between two AEs; ii) Existence of income arising from such international transaction; and iii) Such income to be computed having regard to the ALP of the transaction. b) From the perusal of the provisions it can be inferred that TP regulations would be applicable to any transaction being an arrangement, understanding or action in concert in relation to purchase, sale or lease/ use of tangible / intangible property or any other transaction having bearing on profits, income, losses or assets of such enterprises. In other words, to be an international transaction it should be pursuant to an arrangement, understanding or action in concert; c) Thus, the pre-requisite for invoking TP provisions is that there must be an international transaction within the meaning of the Act between two AEs and there must exist an income arising from an international transaction; d) It is to be appreciated that a transaction per se involves a bilateral contract between the parties. Unilateral action without any binding obligation cannot be termed as transaction. Reference was invited to t....
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.... the ALP of an international transaction. In absence of the same, the TPO cannot suo-moto pick-up a transaction for characterizing the same as an international transaction and compute its ALP. He referred to para-3 of the said instructions, which lays down the detail procedure in this regard. In the instant case, no such reference qua location saving was made by the AO to the TPO. The alleged location savings was held to be an international transaction and benchmarked as a unilateral action by the TPO. In view of the above, such a unilateral action by the TPO makes the TP order on this account bad in law. Lastly, he submitted that, locational saving is, in fact, embedded in the operating margins of the comparables. He pointed out that, assessee operates in a perfectly competitive market and in such a market, a manufacturer will have to pass on any location specific advantages (if any), to the customers to remain competitive. Accordingly, it would not be able to earn more than what the third party comparable companies, in same geographical location, performing similar functions and assuming similar risk, would earn. Thus, it can be stated that return on location specific advantages,....
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....hich existing Transfer Pricing provisions enunciated in our Income-tax Act or the Income-tax Rules, such a transaction has been reckoned as separate international transaction which warrants separate benchmarking especially when the overall profit margin of the entire transaction with the AE under the TNMM vis-à-vis the comparables has been accepted. No provision or precedence has been referred by the Revenue authorities, whether our existing Transfer Pricing provisions suggest any such kind of an adjustment or is there any settled judicial principle that location costs requires to be adjusted while measuring the allocation of the profits of the Group entities/associated enterprises operating in different tax jurisdiction and such a location cost advantages needs to be factored in while determining the Arm's Length Price. The locational savings alludes to a concept of a location specific advantage with reference to specific market features and/or factors of production that enables MNE to achieve improved financial outcome from the provision of the same product or services relative to alternative locations, that is, the places where costs are lower than the location where the ....
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....y the affiliate in Country B under a contract manufacturing arrangement. The arrangement does not involve the use of any significant intangible owned by or licensed to the affiliate or the assumption of any significant risks by the affiliate in Country B. Once manufactured by the affiliate in Country B, the clothes will be sold to the enterprise in Country A which will on-sell them to third party customers. Assume that this restructuring makes it possible for the group formed by the enterprise in Country A and its affiliate in Country B to derive significant location savings. The question arises whether the location savings should be attributed to the enterprise in Country A, or its affiliate in Country B, or both (and if so in what proportions); 9.151 In such an example, given that the relocated activity is a highly competitive one, it is likely that the enterprise in Country A has the option realistically available to it to use either the affiliate in Country B or a third party manufacturer. As a consequence, it should be possible to find comparables data to determine the conditions in which a third party would be willing at arm's length to manufacture the clothes for the ....
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....gth remuneration for the sub-contracted services. In appropriate circumstances (e.g. if there are significant unique contributions such as intangibles used by both the enterprise in Country X and its subsidiary in Country Y), the use of a transactional profit split method may be considered". Thus, under OECD, the locational saving costs has been recognized only when there is either reallocation of activities or business restructuring whereby MNE Group, Multinational Enterprises reallocates some activities or business to a place where costs are lower than the location where such activities or business was initially performed. Whether under various circumstances, locational savings may arise or not and whether under the TP analysis such an adjustment can be made has been elaborately dealt in the examples explained in para 9.150 to 9.153. 18. The key factor which is required to looked into while considering the location cost advantage to an entity working in low cost jurisdiction is that, whether there are suitable local comparable data to determine the conditions in which third party would be carrying out such an activity which would be the measure of Arm's Length and if on suc....
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....ilable then the benefits of locational savings can be said to have been captured in the ALP so determined. However, if good local parties are not available, or whether the overseas AE is chosen as a tested party, then the problem of capturing the benefit of location savings would remain an issue for determination the ALP. The Indian Chapter has also aligns with the position advocated by BEPS 'Action 8' Report. However under the BEPS also such an adjustment is not required to be made separately if reliable local market comparables are available. In case, reliable local market comparables are not present, then various aspects have been highlighted for making the adjustment. But, whether such an Action Plan as enunciated in the BEPS Guidelines has been captured in our present TP provision? Till now, at least nothing has been brought on record before us, that the Action Plan as enunciated in the BEPS has been captured in our current TP laws /provisions. Therefore, the manner in which the TPO or DRP have made the adjustment is not at all justified sans any specific provision or guidelines. 19. Here in this case, the entire transaction between assessee and the AE have been analyzed un....
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....t international transaction or it is just an adjustment on the determination of profit of the assessee. If it is an independent international transaction, then it needs to be benchmarked with uncontrolled transaction by carrying out comparability analysis under prescribed methods. On the other hand, if it is an adjustment on the profit of the assessee, then the TPO has to demonstrate that firstly, the profit margin of the assessee, under TNMM is incapable of determining the Arm's Length Prices and in the case of the assessee there are no independent local comparables in India to carry out the comparability analysis for determining of the ALP. Such an arbitrary adhocism for making such huge adjustment in the profit sans any Transfer Pricing analysis under the prescribed provisions cannot be sustained. Hon'ble Delhi High Court in Li and Fung India Pvt. Ltd (supra) too has observed that. " Tax authorities should base their conclusions on specific facts and not on vague generalities, such as "significant risks", "functional risks", "enterprise risk" etc. without any material on record to establish such findings. If such findings are warranted, they should be supported by demonstrable r....
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....ogramme for the prevention, control or abatement of pollution. The assessee has submitted the consent to operate the manufacturing facilities for:- (i) Water, (ii) Air and (iii) to handle hazardous waste. Thus, it can be concluded that SIL has complied with the local environmental laws; and • SIL has never been fined/ penalized by any competent court in India in relation to claims for environmental damages. Apart from that, it was submitted that, the return for assuming the environmental risk is already embedded in the margins earned by comparable companies which also carries this risk and since the operating margins earned by the assessee for its business activities are more than profit margin earned by the comparable companies, therefore, there is no question of assessee being separately compensated for environmental degradation. It was further pointed out that, the assessee has incurred huge amount towards environmental compliance cost during the year, which shows that in India also it is imperative for assessee to incur these costs if it has to carry on its business operations in India and comply with the environmental laws in India. 22. The TPO rejected the ....
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....the assessee to establish that its pricing is at ALP in all aspects. The assessee cannot escape the TPO's demand for information merely because assessee does not consider this information relevant for determination of ALP (assessee's submissions supra). Thus the primary onus is not discharged. In the circumstances, TPO's calculation is based on information collected from public domain; Additionally, as discussed by TPO, there is one unit of production devoted entirely to export of goods to AEs of assessee. This being the case, it is evident that benefits in respect of those exports are clearly transferred to the AE's. The pollutant unit was established in India for exporting assessee's production to AE's abroad including those in developed countries; The environment being impacted due to the entire production and sales, assessee's entire sales are being considered for the adjustment. Accordingly, the adjustment has been calculated as under:- Particulars Source USD million Total environmental Provision A Syngenta AG -Form 20F For 2008 -Note 19 Page F-46 432 Total Sales B Syngenta AG -Form 20F for 2008 Note 5 P....
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.... hazardous waste in Form 4 submitted to State Pollution Control Board or Committee, * Monitoring Reports by independent agencies; and * Renewal letter of consent to operate from Goa State Pollution Board g) The TPO failed to provide a rationale for taking provision for environmental compliance of Syngenta AG (refer Form 20F) as a base for determining the adjustment on account of green cost savings; h) The assessee incurs costs of Rs. 27,93,79,758/- on account of environmental and HSE compliance which is 2% of the sales; i) The assessee had stopped production of Monocrotophos in 2001 and accordingly, has not produced during AY 2009-10. To support the above fact, the extract of product register was submitted; j) The environmental norms in India are at par with the international standards. The comparison of both the norms has been submitted; k) The comparables selected by the assessee are local Indian comparables operating in similar economic circumstances as the assessee, and thus all comparable companies in the similar industry carry similar risk. Hence, such savings if any are embedded in the margin of the comparables; l) The assessee sells goods....
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....ironment standards in India; d) Submission of returns regarding disposal of hazardous wastes in Form 4 submitted to State Pollution Control Board, performance reports of effluent treatment plant, air quality and meteorological data, etc. Further, the comparables selected by assessee are local Indian comparables operating in similar economic circumstance as the assessee itself, and thus all comparable companies in the similar industry carry similar risk. Hence, such savings if any, are embedded in the margin of the comparables and there cannot be any additional attribution. The environmental norms relating to permitted quantum of emissions in India are at par with or even stricter than international standards. In this regard, the assessee had submitted a comparative study of both these standards. This fact has also been accepted by the DRP in its order. 26. Without prejudice, the Ld. Counsel submitted that the TPO failed to provide a rationale for taking provision for environmental compliance of Syngenta AG as a base for determining the adjustment on account of green cost savings, without appreciating that the assessee complied with all the Indian environmental norms and hi....
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.... are unable to apprehend as to when under the TNMM once a comparability analysis has been carried out vis-a-vis the margins of the comparable companies and the assessee's profit margin has been found to be not only at Arm's Length Price but at a higher profit margin and no adjustment in the profit has been made, then how a separate adjustment been made in the ALP by the TPO. If it is treated as separate international transaction, then certainly benchmarking has to be done by carrying out the comparability analysis with uncontrolled transaction under the prescribed methods; and if it is an adjustment made on account of profit margin after comparability analysis exercise is done, then TPO has to bring on record and justify how the 'green cost' is material effect to eliminate the difference under the comparable situation with the uncontrolled transactions. Both the TPO as well as the DRP has assumed that there is laxity of enforcement of Environmental Laws in India which is causing saving to the assessee. How far this assertion is true has not been substantiated. Before us, as well as before the authorities below, it has been submitted that assessee has fully complied with all the sta....
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....d it is materially affecting the price under arms length conditions. Our finding and observations given with regard to location saving adjustment in the foregoing paragraphs will also apply here. Accordingly, we do not find any reason and justification for such adjustment and same is directed to be deleted. 29. Now we come to the domestic corporate grounds. In ground No.7, the assessee has challenged the direction of the DRP setting off the brought forward loss of Rs. 8,10,24,124/- pertaining to Profenofos unit against the profits of the current year while computing deduction under Section 80-IB of the Act. 30. Before us, it has been submitted that this issue had come up for consideration before the Tribunal in assessment years 2007-08 and 2008-09 wherein this has been decided in favour of the assessee. 31. We find that the Assessing Officer has followed the earlier year finding and calculated the deduction under section 80IB holding that brought forward losses of earlier years have to be taken into account for determining the deduction under section 80IB(10). The Tribunal has decided this issue after considering the facts in the following manner:- "36. In ground No. 2.....
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....s. 50 and taxable income will be Rs. 100. In such a case the loss of one eligible unit is not set off against the profit of another eligible unit and is carried forward for that unit itself. However, in the case of the total income, including the profits of the ineligible unit. Hence for the purpose of calculation of deduction u/s 80IB, the losses of eligible units are to be first set off from profits of other eligible units and on resultant positive figure the deduction is to be calculated. 3.4.4 In similar and circumstances and accounting treatments, it has been held that losses in two units and profit in one unit should be set off before computing deduction - CIT vs. Sundravel Match Industries Pvt Ltd. (MAD) 245 ITR 605 and CIT vs Macmilan Co. of India Ltd. (MAD) 243 ITR 403. Further, it has been held in CIT vs RPG Telecom Ltd. (Kar) 292 ITR 355 that "set off loss in other u nits against the income from eligible units and compute deduction only on the net income". and accordingly, computed the deduction under section 80IB in the following manner: Name of Unit Profit Loss Net Amount 1)Multipurpose Formulation Unit 20,00,51,614 20,00,51,6....
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....nit for the purpose of computing the profit or whether loss of one unit can be adjusted with profit of other unit or not, we find from the perusal of Hon'ble Delhi High Court decision in the case of Sona Koyo Steering Systems Ltd., reported in [2010] 328 ITR 463, that while computing the deduction under section 80I, loss of one eligible unit can be set off or adjusted against profit of another eligible unit. Relevant observation of the Hon'ble Delhi High Court after relying upon the decision of Supreme Court in the case of Synco Industries Ltd, 299 ITR 44 reads as under:- "8. It is further clear from a plain reading of the aforesaid provisions that the deduction under S. 80-I is to be made in case the gross total income includes any profits and gains derived from an industrial undertaking, etc., in case such profits and gains are included in the gross total income of the assessee. The deduction in the case of a company, in view of the proviso to s. 80-1(1), is to be given to the extent of 25 per cent of such profits and gains of such an industrial undertaking. It is also clear that in view of s. 80-1(6), which begins with a non obstante clause, the quantum of deduction is ....
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....me Court considered the concept of gross total income and came to the conclusion, following its earlier decision in CIT vs. Kotagiri Industrial Co-operative Tea Factory Ltd. (1997) 139 CTR (SC) 359 : (1997) 224 ITR 604 (SC), that the gross total income has to be computed in accordance with the Act after adjusting the losses, etc. and that, if the gross total income so determined is positive, then the question of allowing deductions under Chapter VI-A would arise, but not otherwise. While doing so, the Supreme Court further made it clear that the gross total income must be determined by setting off business losses of earlier years before allowing deduction under Chapter VI-A and that if the resultant income is 'nil', then the assessee cannot claim any deduction under Chapter VI-A. While coming to the aforesaid conclusion, the Supreme Court was also confronted with an argument which had been raised on the basis of the provisions of s. 80-1(6) that the profits of one industrial undertaking cannot be set off against the losses suffered by the other industrial undertaking. The Supreme Court was of the view that the provisions of s. 80-1(6) were only for the purposes of computing....
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....d in holding that the loss from the oil division was required to be adjusted before determining the gross total income and as the gross total income was 'nil' the assessee was not entitled to claim deduction under Chapter VI-A which includes s. 80-1 also. 14. The proposition of law, emerging from the above discussion is that the gross total income of the assessee has first got to be determined after adjusting losses, etc., and if the gross total income of the assessee is "nil" the assessee would not be entitled to deductions under Chapter VI-A of the Act." 11. From the above extract, it is apparent that the Supreme Court did not at all hold that while computing the deduction under s. 80-1(6), the loss of one eligible industrial undertaking is to be set off against the profit of another eligible industrial undertaking. All that the Supreme Court said was that in computing the gross total income of the assessee, the same has to be determined after adjusting the losses and that, if the gross total income of the assessee so determined turns out to be 'nil', then the assessee would not be entitled to deduction under Chapter VI-A of the said Act. ....
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....sment year 2005-06 wherein this issue has been decided in the following manner:- 2.3 The third dispute is regarding addition of Rs. 80334273/- to the value of closing stock on account of unutilized CENVAT credit. The AO noted that the assessee had not added the unutilized CENVAT credit in respect of materials other than capital goods amounting to Rs. 80334173/- which was required to be added in view of the provisions of section 145A. He, therefore made addition of Rs. 80334273/-. The claim of the assessee to make similar adjustments to opening stock and purchases was not accepted. In appeal CIT(A) agreed with AC that this being the first year of change, the method of accounting u/s 145A was bound to have impact on the profit. He, therefore, confirmed the addition made by AG, aggrieved by which the assessee is in appeal before Tribunal. 2.3.1 Before us the learned AR for the assessee submitted that the assessee was following the exclusive method of accounting in which duty was not routed through the profit loss account. It was also submitted that adjustment u/s 145A, will have to be made at all stages including opening stock and purchases and if this was done this would not re....
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....t has been submitted that, similar depreciation has been granted by Assessing Officer for the assessment year 2010-11, however, the same has not been given in this year. Accordingly, we direct the Assessing Officer to grant the depreciation as repair and maintenance to the building has been treated as capital expenditure and also in line with the assessment year 2010-11. 34. As regards the non-granting of TDS credit, we direct the Assessing Officer to look into the matter and grant the credit accordingly. 35. As regard to ground No.11, relating to chargeability of interest under section 234B, it has been submitted that, the same should be calculated after giving appropriate credit of the TDS. We accordingly direct the Assessing Officer to compute the interest under section 234B after giving due credit of the TDS amount. 36. Accordingly, the appeal of the assessee is treated as partly allowed for statistical purposes. 37. Now, we come to the revenue's appeal in ITA No.1926/Mum/2014 for AY 2009-10 vide which following grounds have been raised:- "1. Whether in the facts and in the circumstances of the case and in Law, the DRP has correctly applied second proviso to Sect....