TaxTMI 
TaxTMI 
2017 (2) TMI 449
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....0/- towards notional interest on advances made to M/s Haldia Petrochemicals Ltd (HPL) in the facts and circumstances of the case. 2.1. The brief facts of this issue is that the assessee along with other Tata Group Companies were the promoters of M/s Haldia Petrochemicals Ltd (HPL). The ld AO observed that the assessee on one hand had been suffering interest liability on the loans borrowed by it but on the other hand had made interest free advances to HPL and accordingly sought to tax the notional interest income @ 12% on the amounts advanced in the sum of Rs. 989.21 lakhs. The assessee replied that advance was given to HPL during the period that assessee was promoter of HPL prior to commencement of production facilities, along with other Joint Venture Partners. The advance provided to HPL was agreed to be adjusted against the equity contribution and therefore it was agreed that no interest was to be charged on such advance. Subsequently the assessee had decided to withdraw from further participation in the project. However, as HPL was not in a position to repay the money advanced, it was agreed that until commencement of commercial production, HPL would not be compelled to make ....
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....cts and in the circumstances of the case the learned CIT (A) had failed to appreciate the fact that the amount was advanced (as co-promoter) by the appellant, out of it's own funds and thereby further erred in confirming the action of the Assessing Officer, ignoring the settled principles laid down by the jurisdictional High Court. 1c. That on the facts and in the circumstances of the case, the learned CIT (Appeals) had ignored to consider the submission of the appellant filed during the appeal hearing and while mechanically following the earlier orders, had failed to consider that the loans appearing in the books of the appellant at the time of making the advances, were all paid-off before the beginning of the previous year relevant to the year under appeal." 2.3. The ld AR argued that this issue is covered by the decision of the co-ordinate bench of this tribunal in assessee's own case for the Asst Year 2006-07 in ITA No. 2006/Kol/2013 dated 21.10.2016 wherein the issue was set aside to the file of the ld AO and prayed for the similar direction for this year also. In response to this, the ld DR fairly agreed for the same. 2.4. We have heard the rival submission....
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....sue under dispute is covered by the earlier order of this tribunal in assessee's own case as stated supra wherein it was held as below:- "15. At the time of hearing before us, the Ld. Counsel for the assessee submitted that the issue is covered in favour of the assessee by the decision of the Hon'ble Bombay High Court in the case of CIT vs Bharat Petroleum CorporationLtd 252 ITR 43 (Bom) wherein it has been held that 40A(9) of the Act is not applicable in case the assessee has reimbursed expenses to the club formed for the benefit of the employees. He also placed reliance on the decision of this Tribunal in the case of DCIT vs Chloride Industries Ltd reported in 76 ITD 1 (Kol). 16. On the other hand , the Ld DR relied on the orders of the lower authorities. 17. We have heard the rival submissions, perused the materials available on record and the case laws cited by the Ld. Counsel for the assessee. We find that the facts are not in dispute. We, therefore, find merit in the plea of the Ld. Counsel for the assessee that the Tribunal, Kolkata Bench in the case DCIT vs Chloride Industries Ltd (Supra) has deleted the addition by observing as under: "T....
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....(2004) 266 ITR 521 (SC) held that while computing the business profit for the purpose of section 80HHC of the Act, all the trading results of different units of the business of the assessee are to be aggregated and deduction u/s 80HHC of the Act would be allowable only when there is positive income of the business after such aggregation. The ld AO observed that obviously, whether net income of business of an assessee is positive or negative cannot be determined unless the trading results of all the units are aggregated. Accordingly, the ld AO determined the deduction eligible u/s 80HHC of the Act at Rs. 2,27,79,937/-. This action of the ld AO was upheld by the ld CITA. Aggrieved, the assessee is in appeal before us on the following grounds :- "3a That on the facts and in the circumstances of the case, the CIT (A) erred in holding that the deduction under section 80HHC of the Act allowable on a global basis, by wrongly relying on the judgment of the Hon'ble Supreme Court (266 ITR 521), which has no relevance in the present context. 3b That on the facts and in the circumstances of the case Ld CIT(A) should have held that the deductions u/s 80HHC must have been c....
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....see compared the segmental margins from sales to AEs (OP / Sales at 1.53%) with that of the comparable companies (OP / Sales at 1.07%). With regard to the methodology adopted by the ld TPO in the proceedings u/s 92CA of the Act, wherein he had proposed to combine the Auction and Private Sales with AE to compare the margins in this segment with the margins of the Auction Sub-Segment of the non AE segment, the assessee replied that the said comparison would not be appropriate given the fact that there is huge difference in the nature of business and the functions performed in relation to carrying out of such business in the Auction and Private Sales segment. It was explained that the Auction business of the assessee was in the nature of spot contract when the purchase was made and in the nature of a forward contract when the sale was effected into. The assessee tried to explain the flow of transactions under Auction sub-segment as below:- (a) The assessee sends a broad brush statement along with samples to its AEs for approval. (b) The list of teas in the Auction Market are forwarded to the AEs. (c) The offer list is returned back by the AEs with an approva....
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.... be used for benchmarking for auction purchases as well as third party purchases with AE. The assessee objected to the approach of the ld TPO in combining the auction purchases with AE (i.e Auction Business) and the third party purchases of the assessee with AE (i.e Private Business) and comparing the combined margins (GP / Direct Costs) with the same margins of auction purchases with third parties by stating that the nature of functions performed in auction business and in private business are totally distinct and separate and even the risks assumed in each category are distinct. Not satisfied with the replies of the assessee, the ld TPO passed an order dated 26.12.2006 u/s 92CA(3) of the Act recomputing the ALP of the assessee's international transactions by making an adjustment of Rs. 17,68,000/- was made and which was added to the total income of the assessee by the ld AO. 5.3. Before the ld CITA, the assessee reiterated the submissions made before the ld TPO / ld AO. The ld CITA held that the two businesses i.e Auction and Private Business are similar and accordingly sustained the TP adjustment made by the ld TPO. Aggrieved, the assessee is in appeal before us on the follow....
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....arty X √ Fixed Arbitrage X √ Pre-determined purchase Price X √ Purchase is a Spot Contract √ x Purchase effected through 'Open Bidding Process' √ x Particulars Auction Sales Private Sales Price Risk borne by appellant √ x Application of Procuring Skills √ x 5.4.2. We find that in the Auction Business, it is only in the nature of a spot contract when the purchase is made and in the nature of a forward contract when the sale is effected into. We find that in this business, the assessee had discharged functions in relation to auction business and also bears the risk in relation to it. The price risk in relation to the sale to its AE and as well as the price risk in relation to the cost of purchase from the third party lies with the assessee. Thus the assessee had performed the functions only of a trader as could be evident from the sequence of transactions enumerated supra. We find that in this Auction Business, a price range of tea is negotiated with the AE instead of a single price. The assessee then explores the auction market and put into application its procuring skil....
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.... international transactions computed on the basis of segmental results of Auction and Private Business is at Arm's Length and no adjustment need to be made thereon. In view of the above conclusion, the other contentions put forth on behalf of the assessee do not require any consideration. Accordingly the Ground No. 4 a raised by the assessee is allowed and Ground No. 4 b is dismissed as infructuous as stated above. 6. In the result, the appeal of the assessee in ITA No. 511/Kol/2010 is partly allowed for statistical purposes. ITA No. 2105/Kol/2010 - Asst Year 2004-05 - Revenue Appeal This appeal of revenue is delayed by 43 days and condonation petition has been filed by the revenue. After perusing the condonation petition and the concession given by the Ld. AR, we condone the delay and admit the appeal for hearing. 7. The first issue to be decided in this appeal is as to whether the ld CITA is justified in deleting the disallowance of expenditure incurred in the sum of Rs. 3,69,88,000/- on payment of cess on green leaf from composite income in the facts and circumstances of the case. 7.1. The brief facts of this issue is that the ld AO observed that the assessee had ....