TaxTMI 
TaxTMI 
2017 (2) TMI 685
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....ition, the assessee also has manufacturing facilities for Cast Iron Spun pipes. The assessee has a large customer base in India and abroad. The assessee is the flagship concern of the Group. The assessee has its registered office at Rathod Colony, Rajganpur, District Sundergarh, Rajganpur, Orissa-770 017, Administrative Office at No. 40, Stephen House, BBD Bag (East), Kolkata, West Bengal-700 001 and corporate office at G. K. Tower, 19, Camac Street, Kolkata, West Bengal-700 017. 3. The assessee manufactures DI spun pipes, DI fittings, etc., at its factory at Khardah (West Bengal) CI spun pipes at its factory at Elavur (Tamil Nadu) and low ash metallurgical coke at its factory at Haldia (West Bengal). At Khardah and Haldia factory the assessee also has its own power plant generating electricity from heat emitted from blast furnaces in the process of manufacturing of DI pipes. The power so generated at Khardah factory is entirely consumed for own use (i.e., captive consumption). In the sponge iron plant and coke oven plant at Haldia, power generated is consumed for own use (captive consumption) and surplus power generated is sold to the West Bengal State Electricity Board (WBSEB). ....
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....0,87,26,730 respectively received by the assessee which was offered to Tax as income in the return of income originally filed. The assessee claimed that the said sales Tax remission was in the nature of capital receipt and cannot to be regarded as income and ought not to have been brought to Tax. It was the plea of the assessee that sales Tax formed a part of the turnover of the assessee and waiver of the same under the West Bengal Sales Tax Act, 1994 ("WBST Act"), West Bengal Value Added Tax, 2005 ("WBVAT Act") and Central Sales Tax Act, 1956 ("CST Act") was a capital receipt and does not form part of the Taxable income of the assessee. 7. The Assessing Officer in his draft assessment order dated January 29, 2013 for the assessment years 2003-04, 2004-05 and 2005-06 respectively, however, rejected the aforesaid claim made by the assessee. Further, the following additions were proposed to be made to the income of the assessee : 2003-04 2004-05 2005-06 (i) Denial of claim under section 80-IA 6,61,87,172 7,84,83,072 7,27,98,672 (ii) Transfer pricing adjustment 13,39,446 7,53,701 61,48,435 8. Aggrieved by the above, the assessee filed an application in Form 35A ....
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....account of sales Tax incentive. However, in doing so, he reduced the said amount from the block of fixed assets and accordingly, the depreciation claim was reduced by an amount of Rs. 36,85,434, Rs. 40,84,036 and Rs. 1,13,93,716 for the assessment years 2003-04, 2004-05 and 2005-06 respectively. Further, he added a sum of Rs. 9,82,261, Rs. 5,19,078 and Rs. 41,24,797 for the assessment years 2003-04, 2004-05 and 2005-06, respectively, on account of transfer pricing adjustment. Aggrieved by the aforesaid action of the Assessing Officer, both the assessee and the Department are in appeal before the Tribunal for the assessment years 2003-04, 2004-05 and 2005-06 respectively. 11. In its appeal for the assessment years 2003-04, 2004-05 and 2005-06, the assessee has challenged the order of the Assessing Officer and the various additions made therein as beyond the scope of proceedings under section 153A of the Act on the ground that in an assessment completed under section 153A of the Act, if an assessment under section 143(3) of the Act has already been made for an assessment year and such order of assessment does not abate in view of the second proviso to section 153A(1) of the Act, the....
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.... laid down in several judicial pronouncements that in such situation of completed assessments, assessment under section 153A of the Act however shall be to the extent of income escaping assessment which comes to the knowledge of the Assessing Officer during the course of search with reference to the valuable articles or things found or documents seized during the search which are not disclosed in the original assessment. The power given by the first proviso to "assess" income for six assessment years has to be confined to the undisclosed income unearthed during search and cannot include items which are disclosed in the original assessment proceedings. When nothing incriminating is found in the course of search relating to any assessment years, the assessments for such years cannot be disturbed. Items of regular assessment cannot be added back in the proceedings under section 153A of the Act when no incriminating documents were found in respect of the disallowed amounts in the search proceedings. A search assessment under section 153A of the Act should be evidence based. An assessment under section 153A of the Act is not meant to unsettle the income shown in the regular return in th....
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....is also empowered to assess or reassess the "total income" of the aforesaid years. Under section 153A, however, the Assessing Officer has been given the power to assess or reassess the "total income" of the six assessment years in question in separate assessment orders. This means that there can be only one assessment order in respect of each of the six assessment years, in which both the disclosed and the undisclosed income would be brought to Tax. According to him Therefore, in assessment completed under section 153A of the Act, the Assessing Officer can bring to Tax income which escapes, assessment which need not be restricted to evidence found as a result of search. He also placed reliance on the decision of the Hon'ble Karnataka High Court in the case of Canara Housing Development Company v. Deputy CIT [2014] 114 DTR 162 (Karn) wherein the Hon'ble Karnataka High Court held that even if an assessment order is passed under section 143(1) or 143(3) of the Act, the Assessing Officer is empowered to reopen those proceedings and reassess the total income taking note of the undisclosed income, if any, unearthed during the search. After such reopening of the assessment, the Assessing ....
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....income which is not disclosed in the earlier return or which is not unearthed during the search, in order to find out what is the 'total income' of each year and then pass the assessment order." (emphasis supplied) 16. Therefore, according to the learned Departmental representative the Assessing Officer in an assessment under section 153A of the Act can bring to Tax any income and there are no fetters on his powers vis-a-vis a completed unabated assessment under section 143(3) of the Act, that determination of total income has to be based only on material found in the course of search. 17. Without prejudice to the above submission, the learned Departmental representative further submitted that in the event of the Tribunal coming to a conclusion that the scope of proceedings under section 153A of the Act vis-a-vis unabated assessment completed under section 143(3) of the Act has to be confined to determination of undisclosed income detected as a result of evidence found in the course of search, then the assessee's claim that the remission of sales Tax liability was a capital receipt not chargeable to Tax should not be entertained as the said claim would also be beyond ....
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....nder section 132A, as the case may be, shall abate. (2) If any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) of section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub-section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Commissioner : Provided that such revival shall cease to have effect, if such order of annulment is set aside. Explanation.-For the removal of doubts, it is hereby declared that,- (i) save as otherwise provided in this section, section 153B and section 153C, all other provisions of this Act shall apply to the assessment made under this section ; (ii) in an assessment or reassessment made in respect of an assessment year under this section, the Tax shall be chargeable at the rate or rates as applicable to such assessment year." 19. It can be seen from the second proviso to section 153A(1) of the Act that any assessment proceedings for any of the six assessment years set ou....
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.... will be made on the basis of books of account or other documents not produced in the course of original assessment but found in the course of search, and undisclosed income or undisclosed property discovered in the course of search." 22. It is thus clear from the aforesaid ruling of the Special Bench that where assessments have already been completed under section 143(3) of the Act before initiation of search under section 132 of the Act, those assessments will attain finality. The exception would be that if books of account or other documents were not produced in the course of original assessment but found in the course of search, or where undisclosed income or undisclosed property is discovered in the course of search, then the unabated assessment will not attain finality to the extent of material found in the course of search which will have a bearing on the conclusions arrived at in the unabated assessment. 23. The Hon'ble Delhi High Court in the case of CIT v. Kabul Chawla [2016] 380 ITR 573 (Delhi) has explained the scope of unabated and abated assessment proceedings and has drawn the following conclusions (page 589) : "On a conspectus of section 153A(1) of the Act, read....
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....ssessments can be interfered with by the Assessing Officer while making the assessment under section 153A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. Conclusion The present appeals concern the assessment years 2002-03, 2005- 06 and 2006-07. On the date of the search the said assessments already stood completed. Since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed." 24. It is not in dispute before us that with respect to the additions made during the course of assessment proceedings under section 153A of the Act for assessment years 2003-04, 2004-05 and 2005-06, there was no incriminating material found at the time of search and that the Assessing Officer while concluding the assessment under section 153A of the Act made enquiries with regard to deduction under section 80-IA of the Act as well as the arm's length price of the international transaction, between t....
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....ax Appellate Tribunal in the case of All Cargo Global Logistics Ltd. v. Deputy CIT (supra) has been accepted. There is no decision of the Hon'ble Calcutta High Court, which is the jurisdictional High Court on the issue. We are of the view that the view expressed by the Hon'ble Bombay High Court and the Hon'ble Delhi High Court has to be followed being views in favour of the assessee, in the facts and circumstances of the present case. 26. In the light of the discussion above, our conclusion is that in the present case, the issues with regard to deduction under section 80-IA of the Act and arm's length price of international transaction between the assessee and its associated enterprise could not and ought not to have been examined by the Assessing Officer in the assessment proceedings, under section 153A of the Act as the said issues stood concluded with the assessee's return of income on these issues being accepted in the assessment completed under section 143(3) of the Act prior to the date of search. In respect of assessments completed prior to the date of search that have not abated, the scope of proceedings under section 153A of the Act has to be confined only to mate....
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....ssessing Officer will exercise normal assessment powers in respect of the six years previous to the relevant assessment year in which the search takes place. The Assessing Officer has the power to assess and reassess the "total income" of the relevant assessment year in separate assessment order. In other words there will be only one assessment order in respect of each of this assessment year "in which both the disclosed and the undisclosed income would be brought to Tax". 29. With this background we shall now proceed to discuss the various issues that arise for consideration in the appeals by the Revenue and the assessee. As far as the assessment year 2006-07 is concerned a notice under section 153A was issued by the Assessing Officer. In response to the same the assessee filed a letter taking a stand that the return originally filed under section 139(1) of the Act on November 30, 2006 be treated as a return filed in response to notice under section 153A of the Act. 30. In course of assessment, the assessee made a revised claim that sales Tax remission of Rs. 92,13,585 which was offered to Tax as income in the original return of income was a capital receipt not chargeable to Tax....
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....ictional High Court in the cases of CIT v. Kanoria Chemicals and Industries Ltd. [2013] 35 Taxmann.com 566 (Calcutta) ignoring that there was a decision of apex court in favour of the Revenue in the case of "Transmission Corp. of AP Ltd. v. Sai R. P. Pvt. Ltd. [2010] INSC 498 (dated July 8, 2010) which says that the market value of goods and services will be subject to the value determined by the Regulatory Commission. 2. Without prejudice to ground no. 1 that on the facts and circumstances of the case and in law learned members of Dispute Resolution Panel also erred in deleting the addition of Rs. 5,32,91,803 made on account of disallowance under section 80-IA for the assessment year 2006-07 citing the decision of the jurisdictional High Court in the case of CIT v. Kanoria Chemicals and Industries Ltd. ignoring that market price is to be determined as per the Regulatory Commission in view of which provision of section 80A(6) of the Income-Tax Act, 1961 was subsequently amended which has an overriding effect." 36. As we have already seen the assessee has set up unit for generation of electricity for its captive consumption and has been enjoying deduction under section 80-IA unde....
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....ssessing Officer vide draft assessment order dated February 22, 2013 was of the following opinion : "As the value for transfer of power for the captive consumption, was at Rs. 5.30 to 4.09 per unit as compared to Rs. 0.73 to Rs. 2.53 per unit when excess power sold to WBSEB, it did not correspond to the market value of such goods or services as on the date of the transfer in view of the apex court's decision in the case of Transmission Corp. of AP Ltd. v. Sai R. P. Pvt. Ltd. |2010] INSC 498 (dated 8th July, 2010) the regulatory authority i.e., the West Bengal Electricity Regulatory Commission was approached to provide tariff for thermal electricity determined by them from financial year 2002-03 to financial year 2008-09 which corresponds to assessment year 2003-04 to assessment year 2009-10. From their tariff orders, average rate i.e., 'market value' was taken to compute the sale proceeds in respect of the units of electricity (power) transferred used for captive consumption." 39. It can thus be seen from the above order of the Assessing Officer, the Assessing Officer has applied the tariffs determined by the West Bengal State Electricity Regulatory Commission for pu....
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....under section 80-IA applying the ratio of the decision of the jurisdictional High Court in the cases of CIT v. Kanoria Chemicals and Industries Ltd. [2013] 35 Taxmann.com 566 (Calcutta), and by not following the decision of the Hon'ble Supreme Court in the case of Transmission Corp. of AP Ltd. v. Sai R. P. Pvt. Ltd. [2010] INSC 498 (dated July 8, 2010). The learned Departmental representative brought to our notice a decision of the Hon'ble Calcutta High Court in the case of CIT v. ITC Ltd. [2016] 7 ITR-OL 166 (Cal) ; [2015] 64 Taxmann.com 214 (Cal) wherein the Hon'ble Calcutta High Court took the view in the context of the provisions of section 80-IA(8) of the Act held that while computing deduction under section 80-IA, the assessee cannot benefit based on the rates chargeable by distribution licensee from consumer and that the benefit could only be claimed on basis of rates fixed by Tariff Regulation Commission for sale of electricity by generating companies to distribution licensee. He Therefore, prayed that the order of the Assessing Officer should be restored and the directions of the Dispute Resolution Panel should be reversed. It was also submitted by him that the Hon'ble Cal....
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....essee can be equated as market value as appearing in the Explanation appended to section 80-IA(8) of the Act and for the purposes of computation of deduction under this section excluding the duties, cess, Taxes etc. Even otherwise, this issue is now covered by the decision of the Hon'ble jurisdictional High Court in the case of CIT v. Graphite India Ltd." Reliance was also placed on the unreported decision of the Hon'ble Calcutta High Court in the case of CIT v. Graphite India Ltd. while construing the Explanation to section 80-IA(8) upheld the view of the Tribunal that "the amount charged by KSEB for supply of the power to the assessee is the price which is ordinarily charged in the open market". Further, attention of the Bench is invited to the following judgments : (i) Addl. CIT v. Jindal Steel and Power Ltd. [2007] 16 SOT 509 (Delhi) ; (ii) Asst. CIT v. Godavari Power and Ispat Ltd. (Appeal Nos. 60, 61 and 62 of 2010 (Bilaspur ITAT), November 4, 2011 ; and (iii) West Coast Paper Mills Ltd. v. Asst. CIT [2006] 286 ITR (AT) 252 (Mumbai). It was accordingly submitted that the claim of the assessee computed with reference to the rates at which, power was purchased by the as....
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....d sale of excess power to the State Electricity Boards but dealt with eligible units who sell the entire power generated to the SEB. (c) The Supreme Court has held that the Regulatory Commission has the jurisdiction to fix the purchase price for sale of power to the State Electricity Board by the eligible units. In our case also the sale of excess power to the State Electricity Board i.e. WBSEB is as per the power purchase agreement and the rate fixed therein. There is no dispute by either party (WBSEB and the company) as to the authority or the power of the West Bengal Electricity Regulatory Commission for the fixation of the rate for the sale of power by the eligible unit i.e. CPP at Haldia works to the WBSEB in terms of the PPA. (d) The decision was rendered in respect of a unit located in Andhra Pradesh where power could not be sold in open market whereas in the case of the assessee the unit is located in the State of West Bengal where no such restrictions exist. In light of the above distinguishing facts, it was prayed that action of the Dispute Resolution Panel in allowing the assessee's claim under section 80-IA of the Act should be upheld." 45. The learned counsel ....
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....d distribution. For generation of electrical power there are many public sector undertakings and private owned generating stations (GS). The Electrical transmission system is mainly carried out by Central Government body PGCIL (Power Grid Corporation of India Limited). To facilitate this process, India is divided into 5 regions : Northern, Southern, Eastern, Western and North Eastern region. Further within every State we have a SLDC (State load dispatch centre). The distribution system is carried out by many distribution companies (DISCOMS) and SEBs (State Electricity Board). There are two tariff systems, one for the consumer which they pay to the DISCOMS and the other one is for the DISCOMS which they pay to the generating stations. The rate at which electricity can be supplied to a consumer by the distribution licensee and the rate at which the generating companies can sell electricity to the distribution licensee are governed respectively by sections 61 and 62 of the Electricity Act, 2003. There is tariff regulatory commission which fixes both the rates for sale and purchase of electricity by the distribution licensee. There is thus an in-built mechanism to ensure permissible pr....
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....itted that power generators in West Bengal are free to trade in power on exchange or sell excess power to third parties. Therefore, the judgment of the Hon'ble Calcutta High Court in the case of ITC Ltd. (supra) will not apply to the case of the assessee. 49. It is clear from the rival contentions that determination price at which power generated can be sold is subject to statutory control under the provisions of sections 61 and 62 of the Electricity Act, 2003. The Hon'ble Calcutta High Court in its decision rendered in the case of ITC Ltd. (supra) has specifically observed that in the case before it electricity generated by the assessee could not be sold to anyone other than a distribution company or a company which is engaged both in generation and distribution. No arguments were advanced before the Hon'ble High Court nor did it deal with applicability of the proviso to section 80-IA(8) of the Act. Section 80- IA(8) lays down that when article or thing manufactured is used by the assessee himself for own consumption the profit of the undertaking manufacturing such article or thing has to be based on the market value in preference to the price as recorded by the assessee in his b....
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....ubsidy and offered to Tax. 5. Without prejudice to the above the learned members Dispute Resolution Panel, Kolkata Bench in law and in the facts and circumstances of the case also erred in not directing the Assessing Officer to deduct the sales Tax subsidy from the written down value of plant and machinery being capital receipt in nature and to add back to the total income the excess depreciation claimed due to cascading effect by not reducing the written down value by the identical amount of subsidy received in current as well as in successive years." 51. The above grounds of appeal can be conveniently dealt with together with ground No. 4 raised by the assessee in its appeal. Ground No. 4 raised by the assessee in its appeal reads as follows : "4. Disallowance made on account of depreciation by reducing incentive received on account of sales Tax remission. 4a. The impugned order erred in not following directions of Dispute Resolution Panel and reducing the incentive received on account of sales Tax deferral/remission from block of assets and hence disallowing depreciation on that block of asset. 4b. The impugned order is invalid as it is contrary to directions of Dispute....
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....he Assessing Officer placed reliance on the decision of the Hon'ble Supreme Court in the case of Goetze (India) Ltd. v. CIT in [2006] 284 ITR 323 (SC) ; [2006] 157 Taxman 1 (SC) wherein it was held that the Assessing Officer cannot accept any claim by an assessee without a revised return of income being filed. Without prejudice to the above stand taken by the Assessing Officer, the Assessing Officer also held that the receipt in question was revenue receipt and was chargeable to Tax. 53. The Dispute Resolution Panel by its directions dated November 22, 2013 directed the Assessing Officer to allow the revised claim made on account of sales Tax remission. Pursuant to the directions of the Dispute Resolution Panel, the Assessing Officer in his fair assessment order dated January 30, 2014 allowed the revised claim on account of sales Tax incentive. However, in doing so, he reduced the said amount from the block of fixed assets and accordingly, the depreciation claim was reduced by an amount of Rs. 55,79,540. Aggrieved by the aforesaid action of the Assessing Officer, both the assessee has raised ground No. 4 in its appeal and Department has raised ground Nos. 3 to 5 in its appeal. 54....
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....e sales Tax subsidy in question received by the assessee is capital receipt not chargeable to Tax or is revenue receipt which is chargeable to Tax. The learned Departmental representative in this regard placed reliance on the order of the Assessing Officer. The first aspect which needs to be clarified is that the fact that the assessee offered the receipt in question as its income in the return of income can be no ground to deny relief to the assessee, if it is found that the subsidy in question was of a capital nature not chargeable to Tax. To decide the issue one has to see the purpose for which a subsidy is granted and that is determinative of the true nature of the subsidy. If the subsidy is granted for extending financial assistance in setting up new units or expanding existing units, the subsidy shall constitute a capital receipt not Taxable under the Act. However, if the subsidy is granted for assisting the existing units in carrying out their trade operations so that they can run profitably, then such a subsidy constitutes a trade receipt. The Hon'ble Supreme Court in case of Sahney Steel and Press Works Ltd. v. CIT [1997] 228 ITR 253 (SC) has held that "If payments in the ....
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....setting up new units or expand their existing units in the backward areas. It is to be noted that benefits under the scheme could only be availed of by new units or by the existing units undergoing expansion. It was not applicable to existing units not undergoing expansion. 58. The following salient features of the scheme further establish the purpose of the scheme : (i) A unit would be eligible for securing the eligibility certificate even before the commencement of production i.e. on the fulfillment of the following conditions : * The project is covered by necessary industry approval already received in the form of industrial licence or letter of intent or registration certificate * The project is covered by a detailed feasibility report * The project is approved and sanctioned by the relevant Financial Institutions/Commercial banks (ii) It was available to only units situated in the backward area. (iii) The sales Tax deferment/remission was subject to a maximum of a specified percentage of the gross value of fixed assets as on the first date of commercial production/gross value of the additional fixed assets as on the first date of commercial production. The aforesa....
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....ss Works Ltd. v. CIT [1997] 228 ITR 253 (SC). The issue is also covered by the Tribunal's decision as noted above. Accordingly, we confirm the order of the Commissioner of Income-Tax (Appeals) and this issue of the Revenue's appeals for both the years is dismissed." 60. The Hon'ble Calcutta High Court in the case of CIT v. Rasoi Ltd. [2011] 335 ITR 438 (Cal) has in a similar case of receipt of subsidy held as follows (page 445) : "In the case before us, the object of the subsidy is for expansion of their capacities, modernisation, and improving their marketing capabilities and thus, those are for assistance on capital account. Similarly, merely because the amount of subsidy was equivalent to 90 per cent. of the sales Tax paid by the beneficiary does not imply that the same was in the form of refund of sales Tax paid. As pointed out by the Supreme Court in the case of Senairam Doongarmall v. CIT reported in [1961] 42 ITR 392 (SC) ; AIR 1961 SC 1579, it is the quality of the payment that is decisive of the character of the payment and not the method of the payment or its measure, and makes it fall within capital or revenue. Thus, in the case before us, the amount paid as s....
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....e by the assessee. In other words, the Assessing Officer reduced the amount of sales Tax remission from the block of fixed assets and accordingly revised/reduced the depreciation claim made by the assessee by a sum of Rs. 55,79,540. 65. Sub-section (10) of section 144C of the Act reads thus : "(10) Every direction issued by the Dispute Resolution Panel shall be binding on the Assessing Officer." It is clear from the aforesaid provisions that the Assessing Officer is bound by the directions of the Dispute Resolution Panel and the action of the Assessing Officer in reducing the value of sales Tax remission from the block of fixed assets was in violation of the mandate laid down in section 144C(10) of the Act. In fact ground No. 5 raised by the Revenue is itself an admission by the Assessing Officer that there was no direction by the Dispute Resolution Panel to reduce the value of sales Tax remission from the block of fixed assets and allow lesser depreciation to the extent of sales Tax remission held to be capital receipt not chargeable to Tax. Thus ground No. 4 raised by the assessee is allowed. 66. As far as ground No. 5 raised by the Revenue is concerned, we are of the view t....
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....from the actual of the cost under section 43(1) read with Explanation 10 of the Act. 68. The Hon'ble Supreme Court in the case of CIT v. P. J. Chemicals Ltd. [1994] 210 ITR 830 (SC) has held that the expression "actual cost" needs to be interpreted liberally. The subsidy of the nature we are concerned with, does not partake of the incidents which attract the conditions for their deductibility from "actual cost". The Government subsidy, it is not unreasonable to say, is an incentive not for the specific purpose of meeting a portion of the cost of the assets, though quantified as or geared to a percentage of such cost. If that be so, it does not partake of the character of a payment intended either directly or indirectly to meet the "actual cost". In the instant case too, the scheme applicable to the assessee's case nowhere specifies that the subsidy was to be utilised for acquisition of fixed assets. The scheme was brought about to encourage and induce the entrepreneurs to move to backward areas and establish industries there so that the region may develop in promoting the welfare of the people living in that region. Thus, in the absence of any specification (in the scheme) as ....
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....'s length price of loan provided by the assessee to its associated enterprises should be 3 per cent. per annum in line with the Safe Harbour Rules issued by the Government, when these Rules are effective from the assessment year 2013-14 only. 8. Whether on the basis of facts and in law, the learned Dispute Resolution Panel, Kolkata have erred in holding that the credit spread part of the arm's length price of loan provided by the assessee to its associated enterprises should be 3 per cent. per annum in line with the Safe Harbour Rules issued by the Government, when these rules can only be applied in case of eligible assessees who opt for it and in case of other assessees, the normal rules for determining the arm's length price still apply. 9. Without prejudice to the above grounds, whether on the basis of facts and in law, the learned Dispute Resolution Panel, Kolkata have erred in not holding that SBI BPLR should be taken as the base rate for determining the arm's length price of loan provided by the asses see to its associated enterprises, when they applied the Safe Harbour Rules to the credit spread part of the price of the loan." 70. The above grounds of ap....
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....7-08 (being the first two transfer pricing assessments in the appellant's case) had applied overseas lending rate (LIBOR/EURIBOR) rate as the base rate for adjustment. 2h. Without prejudice to the above, in the facts and in the circumstances of the case, the learned Transfer Pricing Officer erred in revising the transfer pricing order failing in considering the fact that no incriminating material was found during the search in respect of interest-free loan given to subsidiaries." 71. As we have already seen the assessee is engaged in the business of manufacture and export of Ductile Iron Pipe. The assessee enjoyed a leadership position in the domestic market. However, the prospects of further growth were limited due to limited domestic demand. Thus in order to expand the market for its product, Electrosteel Europe SA was incorporated and was an associated enterprise (AE) of the assessee. Its purpose was to market assessee's product abroad. The associated enterprise is mainly engaged in the trading and marketing of Ductile Iron Pipes. In the earlier years, the assessee had advanced interest-free loans to its associated enterprise namely Electrosteel Europe SA. The said tr....
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.... Instrumentarium Corporation Ltd., Finland v. Asst. DIT, International Taxation [2016] 49 ITR (Trib) 589 (Kolkata) [SB] ; [2016] 160 ITD 1 (SB) (Kol). The Special Bench had to consider the following question (page 599) : "Whether, on the facts and in the circumstances of the case, an arm's length price (ALP) adjustment, of Rs. 3,88,37,190 for the assessment year 2003-04 and Rs. 5,18,95,560 for the assessment year 2004- 06, was required to be made, in respect of interest-free loan granted by the assessee, a non-resident company, to its wholly owned subsidiary in India?" The Special Bench held that commercial expediency of a loan to a subsidiary was wholly irrelevant in ascertaining the arm's length interest on a loan which is an international transaction between associated enterprises. The loan would thus be covered by section 92 of the Act which mandated income from such transaction to be computed on the basis of arm's length price. In view of the aforesaid decision of the Special Bench, we are of the view that there is no merit in the argument advanced by the learned counsel for the assessee that the provisions of section 92 of the Act is not applicable to transacti....
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....robior rates are based on the average interest rates at which a panel of more than 50 European banks borrow funds from one another. There are different maturities, ranging from one week to one year. These rates are considered to be the most important rate in the European money market. The interest rates do provide the basis for the price and interest rates of all kinds of financial products like interest rate swaps, interest rate futures, saving account and mort gages. We find that the RBI in respect of export credit to exporters at internationally competitive rates under the scheme of pre-shipment credit in foreign currency (PCFC) and rediscounting of export bills abroad (EBR) has permitted banks to fix the rates of interest with reference to ruling LIBOR, EURO LIBOR or EURIBOR, wherever applicable and thereto appropriate percentage ranging from 1 per cent. to 2 per cent. The reference to the said circular is at page 80 of the assessee's paper book. In our view the claim of the assessee to adopt EURIBOR rate as stated before the Transfer Pricing Officer is reasonable and deserves to be accepted. Following the ruling of the Tribunal in the aforesaid cases, we are of the view th....
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.... when it lends to its associated enterprise should also consider such risk based on the credit rating of the associated enterprise. The risk so assumed should also be considered and the rate of interest that would have been charged by unrelated parties determined to arrive at the arm's length price rate of interest. The Dispute Resolution Panel held that computation of percentage of interest to be added for credit rating of the associated enterprise as done by the Transfer Pricing Officer was arbitrary and has no basis whatsoever. The same was arrived at by assigning credit rating of "CC+" or "C" to the associated enterprise (which was not rated by any rating agency). The Dispute Resolution Panel found that in doing so the Transfer Pricing Officer relied upon a booklet "Corporate Rating Criteria" issued by the Standard and Poor's in 2006. The booklet prescribes credit ratings based on various ratios like EBIT interest coverage, return on capital etc. and also credit ratings based on size of the corporate. However, the Income-Tax Act read with Transfer Pricing Rules prescribed for computation of arm's length price does not authorise the Assessing Officer to assign credit....
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....assessee. Thus, following the decision of the Hon'ble Tribunal, it is clear that action of the Transfer Pricing Officer in using data issued by Standard and Poor is clearly bad in law. Consequently the addition of interest rate on account of borrower risk in addition to the LIBOR rate was not justified. We are also of the view that the safe harbour rules referred to in the order of the Dispute Resolution Panel is not applicable, to the disputes before the Dispute Resolution Panel and Therefore, cannot be applied in the present case. We hold accordingly. 80. In the light of the discussion above, we dismiss ground Nos. 6 to 9 of the grounds of appeal of the Revenue, and dismiss ground No. 2(b) and (c) and (g) raised by the assessee and partly allow ground No. 2(a), (d), (e) and (f) raised by the assessee. IT (SS.) No. 50/Kol/2014 (assessee's appeal for the assessment year 2006- 07) 81. Many of the grounds raised by the assessee in its appeal have already been decided while deciding the connected grounds of appeal of the Revenue. The remaining grounds of appeal in the assessee's appeal will be dealt with now. Ground No. 1 is general in nature and calls for no specific adjud....
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....ission has been determined for adjustment. 3i. Without prejudice to the above, in the facts and in the circumstances of the case, the learned Transfer Pricing Officer erred in revising the transfer pricing order failing in considering the fact that no incriminating material was found during the search in respect of corporate guarantee given to subsidiaries." 82. As far as the above grounds of appeal are concerned, the facts are that the assessee during the previous year had extended guarantees in favour of the associated enterprise viz., Electrosteel Algeria SPA, Electrosteel Europe SA and Singardo International Pte Ltd. in respect of a working capital loan disbursed by BNP Paribas, ICICI Bank and HSBC respectively. Since no fee was charged for the same, the Assessing Officer proposed to compute an arm's length guarantee commission at 3 per cent. of the loan for which the assessee stood as guarantor and added the same to the income of the assessee. The Dispute Resolution Panel, however, directed the Transfer Pricing Officer to compute commission at 2 per cent. of the loan for which the assessee stood as guarantor. The Dispute Resolution Panel adopted the safe harbour guideli....
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.... 84(B). Having considered the rival submissions as well as relevant material on record, we agree with the plea of the learned authorised representative that the arm's length guarantee commission adopted at 2 per cent. by the Dispute Resolution Panel cannot be sustained. Various Benches of the Tribunal in the following decisions have considered 0.5 per cent. as appropriate adjustment in facts identical to the case of the assessee: (1) Everest Kanto Cylinder Ltd. v. Asst. CIT (LTU) (ITA No. 7073/Mum/2012), dated September 25, 2014 ; (2) Everest Kanto Cylinder Ltd. v. Deputy CIT (LTU) (ITA. No. 542/Mum/2012 dated November 23, 2012) (Mumbai-Tribunal) ; (3) Glenmark Pharmaceuticals Ltd. v. Addl. CIT (ITA No. 5031/M/2012) dated November 13, 2013) (Mumbai-Tribunal) ; (4) Godrej Household Products Ltd. v. Addl. CIT (ITA No. 7369/M/2010) (Mumbai-Tribunal), dated November 22, 2013) ; and (5) Asst. CIT v. Nimbus Communications Ltd. [2014] 30 ITR (Trib) 349 (Mum) (ITA No. 3664/M/2010) (Mumbai-Tribunal), dated June 12, 2013). 84(C). In the case of Everest Kanto Cylinder Ltd. (supra), the Tribunal while considering an identical issue has held in para 9 as under : "9. Now, comin....
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.... a minor difference can be on account of differential rate of interest. Thus, on these facts, we do not find any reason to uphold any kind of upward adjustment in arm's length price in relation to charging of guarantee commission.' As the facts and circumstances of the case during the year under consideration are pari materia, respectfully following the decision of the Tribunal in the assessee's own case, we direct the Assessing Officer to compute arm's length price of transaction as per the direction given by the Tribunal in the above order for the assessment year 2007-08." 84(D). Even the assessee has paid 0.40 per cent. as guarantee commission to a bank for similar services. The Safe Harbour Rules prescribing 2 per cent. as the guarantee commission is not relevant as those rules are relevant only to an eligible assessee who opts to be governed by those rules. Accordingly, following the decisions of the Tribunal referred to above, we direct the Assessing Officer/TPO to adopt the 0.5 per cent. as guarantee commission charges in respect of the guarantee provided by the assessee for obtaining the loan by the associated enterprise. Ground No. 3 raised by the assess....
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....e operation under section 132 of the Act was conducted in the business premises of the assessee on March 19, 2009. Since there was no earlier assessment in pursuance of the return of income filed by the assessee, the scope of proceedings under section 153A of the Act would be to assess the total income of the assessee for the relevant assessment year. The Assessing Officer will exercise normal assessment powers in respect of the six years previous to the relevant assessment year in which the search takes place. The Assessing Officer has the power to assess and reassess the "total income" of the relevant assessment year in separate assessment order. In other words there will be only one assessment order in respect of each of this assessment year "in which both the disclosed and the undisclosed income would be brought to Tax". 90. With this background, we shall now proceed to discuss, the various issues that arise for consideration in the appeals by the Revenue and the assessee. As far as assessment year 2007-08 is concerned a notice under section 153A was issued by the Assessing Officer. In response to the same the assessee filed a letter taking a stand that the return originally f....
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....ircumstances of the case and in law learned members of the Dispute Resolution Panel, Kolkata Bench, erred in deleting the addition of Rs. 6,33,79,716 made on account of disallowance under section 80-IA for the assessment year 2007-08 applying the ratio of the decision of the jurisdictional High Court in the cases of CIT v. Kanoria Chemicals and Industries Ltd. ignoring that there was a decision of apex court in favour of the Revenue in case of "Transmission Corp. of AP Ltd. v. Sai R.P. Pvt. Ltd. [2010] INSC 498 (dated July 8, 2010) which say that the market value of goods and services will be subject to the value determined by the Regulatory Commission. 2. Without prejudice to ground No. 1 that on the facts and circumstances of the case and in law learned members of the Dispute Resolution Panel also erred in deleting the addition of Rs. 6,33,79,716 made on account of disallowance under section 80-IA for the assessment year 2006-07 citing the decision of the jurisdictional High Court in the cases of CIT v. Kanoria Chemicals and Industries Ltd. ignoring that market price is to be determined as per the Regulatory Commission in view of which provision of section 80A(6) of the Income-....
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....a Bench in law and in the facts and circumstances of the case erred in accepting assessee's claim made through revised computation other than by filing revised return that subsidies received on account of sales Tax remission/deferral and industrial promotion assistance are capital subsidy and ignoring the apex court's decision in the case of Goetze (India) Ltd. v. CIT in [2006] 284 ITR 323 (SC) ; [2006] 157 Taxman 1 (SC). 4. The learned members Dispute Resolution Panel, Kolkata Bench in law and in the facts and circumstances of the case also erred in holding that subsidy received of Rs. 1,14,00,326 on account of sales Tax remission/deferral and industrial promotion assistance for the assessment year 2007-08 are capital subsidy though in the return filed under section 139(1) these subsidies were disclosed as revenue subsidy and offered to Tax. 5. Without prejudice to the above the learned members Dispute Resolution Panel, Kolkata Bench in law and in the facts and circumstances of the case also erred in not directing the Assessing Officer to deduct the sales Tax subsidy from the written down value of plant and machinery being capital receipt in nature and to add back to t....
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....sed by the Revenue in its appeal reads as follows : "6. Whether on the basis of facts and in law, the learned Dispute Resolution Panel, Kolkata have erred in holding that the arm's length price of fee for corporate guarantees stood by the assessee in favour of its associated enterprises should be 2 per cent. per annum instead of 3 per cent. as determined by the Transfer Pricing Officer. 7. Whether on the basis of facts and in law, the learned Dispute Resolution Panel, Kolkata have erred in holding that the arm's length price of fee for corporate guarantees stood by the assessee in favour of its associated enterprises should be 2 per cent. per annum in line with the Safe Harbour Rules issued by the Government, when these Rules are effective from the assessment year 2013-14 only. 8. Whether on the basis of facts and in law, the learned Dispute Resolution Panel, Kolkata have erred in holding that the arm's length price of fee for corporate guarantees stood by the assessee in favour of its associated enterprises should be 2 per cent. per annum in line with the Safe Harbour Rules issued by the Government, when these Rules can only be applied in case of eligible assesse....
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....ciated enterprise. 3h. Without prejudice to the above, the impugned order has erred by not referring to the judgments of the higher authorities where comparatively a lower rate of commission has been determined for adjustment." 103. These grounds are identical to ground No. 3 raised by the assessee in its appeal IT(SS) No. 50/Kol/14. For the reasons stated while deciding identical issue in the assessment year 2006-07, we dismiss ground Nos. 6 to 8 raised by the Revenue and partly allow ground No. 3 raised by the assessee by directing the Assessing Officer/Transfer Pricing Officer to adopt the 0.5 per cent. as guarantee commission charges in respect of the guarantee provided by the assessee for obtaining the loan by the associated enterprise. 104. The Revenue has raised the following additional grounds of appeal in its appeal. "1. Whether on the basis of facts and in law, the learned Dispute Resolution Panel, Kolkata have erred in holding that the credit spread part of the arm's length price of loan provided by the assessee to its associated enterprise should be 3 per cent. per annum instead of 3.5 per cent. per annum as determined by the Transfer Pricing Officer. 2. Wheth....
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....ch transaction is not required to be benchmarked considering the facts of the appellant's case. 2c. Without prejudice to the above, the impugned order erred in confirming the comparable uncontrolled price ('CUP') method applied by the learned Transfer Pricing Officer for determining the arm's length price (ALP), i.e., interest to be charged for the loan transaction of the appellant with its associated enterprises. 2d. Without prejudice to the above, the impugned order erred in considering the interest rate on rupee funds for benchmarking the foreign currency loans provided by the appellant to its associated enterprises. 2e. Without prejudice to the above, the impugned order erred in not considering the judicial pronouncement of the higher authorities wherein lower rate of interest has been considered for loan provided to associated enterprises. 2f. Without prejudice to the above, in the facts and in the circumstances of the case, the learned Transfer Pricing Officer and consequently the impugned order erred in misinterpreting the directions of the Dispute Resolution Panel and making an adjustment of Rs. 83,76,391 in relation to the international transactions....
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....the facts and circumstances of the case, the learned Assessing Officer failed to consider that the rule 37BA which refers to the availability of credit on the basis of information furnished by the deductor was introduced with effect from April 1, 2009 and hence is not applicable for the assessment year 2007-08. 6. Adjustment of Refund 6a. That on the facts and circumstances of the case, the learned Assessing Officer has erred in by not abiding by the directions of the Dispute Resolution Panel by not verifying and in observing that a refund of Rs. 11,37,98,310 has been granted to the appellant, when the same was never granted to the appellant." 108. As far as the aforesaid grounds of appeal are concerned, the ends of justice would be met, if the Assessing Officer is directed to give effect to the Dispute Resolution Panel's direction by making verification of TDS certificate that may be filed in physical form as well as from details from 26AS, and give credit for Taxes deducted at source. Similarly the Assessing Officer will also verify the claim of the assessee regarding refund not having been granted as claimed in ground No. 6. Ground Nos. 5 and 6 are treated as allowed fo....
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....st Bengal Sales Tax Act, 1994 ("WBST Act"), West Bengal Value Added Tax Act, 2005 ("WBVAT Act") and Central Sales Tax Act, 1956 ("CST Act") being a capital receipt was reduced from the Taxable income of the assessee. The IPA received was however offered to Tax as a revenue receipt in the return filed in response to notice under section 153A. The Assessing Officer however rejected the aforesaid claim made by the assessee. Further, he proposed to make the following additions to the total income of the assessee for the relevant assessment year in his draft assessment order dated January 29, 2013 : (i) Denial of claim under section 80-IA Rs. 1,28,71,576 (ii) Transfer pricing adjustment (loan and guarantee) Rs. 2,21,04,471 (iii) Disallowance under section 14A Rs.39,09,931 114. Aggrieved by the above, the assessee filed an application in Form 35A with the Dispute Resolution Panel (DRP) along with the objections to the draft assessment order issued by the Assessing Officer. 115. The Dispute Resolution Panel by its directions dated November 22, 2013 directed the Assessing Officer to allow the revised claim made on account of sales Tax remission and also the assessee's claim und....
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....arise for consideration is identical to ground No. 1 raised by the Revenue in its appeal in IT(SS) No. 57/Kol/2014 for the assessment year 2006-07. While deciding the said ground, we have in the earlier part of this order remanded the issue to the Assessing Officer with the following observations : "Section 80-IA(8) lays down that when an article or thing manufactured is used by the assessee, himself for own consumption the profit of the undertaking manufacturing such article or thing has to be based on the market value in preference to the price as recorded by the assessee in his books. Market value for the said purpose has been defined to mean the price that such goods or services would ordinarily fetch in the open market. When price of power is subject to statutory controls one cannot ascertain the price such goods or services would ordinarily fetch in the open market because in such circumstances it cannot be said that there is open market for the goods or services. We are of the view that in the given circumstances, there are exceptional difficulties in computing the profits and gains of the eligible business by applying the main provisions of section 80- IA(8) of the Act an....
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....idy received in current as well as in successive years." 121. The aforesaid grounds of appeal can be conveniently decided together with ground No. 5 raised by the assessee in its appeal, which reads thus : "5. Disallowance made on account of depreciation by reducing incentive received on account of sales Tax remission/industrial promotional assistance 5a. The impugned order erred in not following directions of Dispute Resolution Panel and reducing the incentive received on account of sales Tax remission/industrial promotional assistance from block of assets and hence disallowing depreciation on that block of asset. 5b. The impugned order is invalid as it is contrary to directions of the Dispute Resolution Panel. 5c. Pursuant to disallowance of depreciation on original cost of asset, the learned Assessing Officer has erred in further disallowing the depreciation on that block of asset including cascading effect on the depreciation disallowed by the Assessing Officer for the previous assessment years (assessment year 2003-04 to assessment year 2007- 08) which resulted in a total disallowance of Rs. 1,05,33,845. 5d. Without prejudice to the above, that on the facts and circ....
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....e receipt chargeable to Tax. The facts and circumstances under which ground No. 7 arises for consideration are that the assessee, as we have already seen, has a coke oven plant ("COP") and a sponge iron plant ("SIP") at Haldia, West Bengal. During the process of manufacturing coke and sponge iron, huge amount of waste hot gases are generated which, if released in the environment would cause pollution. Therefore, to utilise these hot gases, a 12 MW Capitve Power Plant (CPP) was commissioned at Haldia by installing four waste heat recovery boilers and one steam turbine. Since equivalent amount of power would have normally been produced by burning fossil fuel (like coal) which would have emitted carbon-di-oxide into the atmosphere, this project qualified for carbon credit as it has facilitated reduction in carbon emissions. 126. A brief description of what is carbon credit needs to be discussed. The burning of fossil fuels is a major source of greenhouse emissions, especially for power, cement, steel, textile, fertilizer and many other industries which rely on fossil fuels (coal, electricity derived from coal, natural gas and oil). The major greenhouse gases emitted by these industri....
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....unts so received by the assessee constitute a capital receipt not chargeable to at all. The assessee claimed that its claim as above finds strength from the following judgments : "(i) The Andhra Pradesh High Court in the case of CIT v. My Home Power Ltd. [2014] 365 ITR 82 (AP) wherein it was held that 'carbon credit was not an offshoot of business of the assessee but an offshoot of environmental concerns'. No asset was generated in the course of business but it was generated due to environmental concerns. There was no cost of acquisition or cost of production to get entitlement for the carbon credits. Therefore, the income from sale of carbon credits was to be considered as capital receipt and not liable to Tax under any head of income under the Income-Tax Act, 1961. (ii) Income-Tax Appellate Tribunal (Chennai) in the case of Ambika Cotton Mills Ltd. v. Deputy CIT [2013] 27 ITR (Trib) 44 (Chennai) held that 'the realisation of carbon credit was to be considered as capital receipt'. (iii) Income-Tax Appellate Tribunal (Chennai) in the case of Sri Velayudhaswamy Spinning Mills P. Ltd. v. Deputy CIT [2013] 27 ITR (Trib) 106 (Chennai). (iv) Income-Tax Appellate ....
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....ve erred in holding that the credit spread part of the arm's length price of loan provided by the assessee to its associated enterprise should be 3 per cent. per annum in line with the Safe Harbour Rules issued by the Government, when these rules are effective from the assessment year 2013-14 only. 10. Whether on the basis of facts and in law, the learned Dispute Resolution Panel, Kolkata have erred in holding that the credit spread part of the arm's length price of loan provided by the assessee to its associated enterprise should be 3 per cent. per annum in line with the Safe Harbour Rules issued by the Government, when these rules can only be applied in case of eligible assessees who opt for it and in case of other assessees, the normal rules for determining the arm's length price still apply. 11. Without prejudice to the above grounds, whether on the basis of facts and in law, the learned Dispute Resolution Panel, Kolkata have erred in not holding that SBI BPLR should be taken as the base rate for determining the arm's length price of loan provided by the assessee to its associated enterprise, when they applied the Safe Harbour Rules to the credit spread part....
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....t of funds at 8 per cent. instead of 6.75 per cent. 2g. Without prejudice to the above, the learned Transfer Pricing Officer erred in not following the principle of consistency. The learned Transfer Pricing Officer in the erstwhile transfer pricing order for the assessment year 2006-07 and transfer pricing order for the assessment year 2007-08 (being the first two transfer pricing assessments in the appellant's case) had applied overseas lending rate (LIBOR/EURIBOR rate as the base rate for adjustment." 133. Grounds 8 to 11 raised by the Revenue and ground No. 2 raised by the assessee are identical to ground Nos. 6 to 9 raised by the Revenue in its appeal IT(SS) No. 57/Kol/14 for the assessment year 2006-07 and ground No. 2 raised by the assessee in its appeal IT(SS) No. 50/Kol/2014 for the assessment year 2006-07 and arise under identical facts and circumstances. For the reasons given while deciding identical grounds in the assessment year 2006-07, we dismiss ground Nos. 8 to 11 raised by the Revenue, and dismiss ground No. 2(b), (c) and (g) raised by the assessee and partly allow ground No. 2(a), (d), (e) and (f) raised by the assessee. IT (SS.) No. 52/Kol/2014 (assessee&....
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....mining the arm's length price on the corporate guarantee provided by the company at 2 per cent. on the loan amount utilised by the associated enterprise against the corporate guarantee advanced to the associated enterprise. 3h. Without prejudice to the above, the impugned order has erred by not referring to the judgments of the higher authorities where comparatively a lower rate of commission has been determined for adjustment." 135. These grounds are identical to ground No. 3 raised by the assessee in its appeal IT(SS)No. 50/Kol/14. For the reasons stated while deciding identical issue in the assessment year 2006-07, we partly allow ground No. 3 raised by the assessee by directing the Assessing Officer/Transfer Pricing Officer to adopt the 0.5 per cent. as guarantee commission charges in respect of the guarantee provided by the assessee for obtaining the loan by the associated enterprise. 136. Ground No. 4 raised by the assessee reads as follows : "4. Disallowance under section 14A of the Act 4a. In the facts and circumstances of the case and in law, the impugned order erred in disallowing Rs. 39,09,931 under section 14A of the Act. 4b. Without prejudice to the above....
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....nal High Court on the basis that the investments were very old and the appellant has not incurred any expense, to earn the exempt income." 137. The assessee during the relevant previous year earned dividend income and long-term capital gain (LTCG) which are exempt from Tax under the Act. In terms of section 14A of the Act which provides that no expenditure incurred in earning any income which is not chargeable to Tax, shall be allowed as deduction while computing total income of an assessee, the assessee had to disallow expenditure incurred in earning exempt income. The assessee had voluntarily disallowed a sum of Rs. 57,57,210 as expenditure incurred under section 14A of the Act. The basis on which the assessee arrived at the aforesaid sum was as follows : Sl. No. Particulars Amount 1. Part salary-GM Finance 27,00,000 2. Part salary Assistant and others 16,20,000 3. Telephone and fax 54,000 4. Conveyance charges 81,210 5. Accounting charges 1,02,000 6 Other overheads 12,00,000 Total 57,57,210 The assessee further claimed that the expenses amounting to Rs. 26,20,51,801 debited in the profit and loss account as interest expenses was towards the foll....
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....y the Assessing Officer. Aggrieved by the aforesaid directions of the Dispute Resolution Panel which was incorporated by the Assessing Officer in the fair order of assessment, the assessee has raised ground No. 4 before the Tribunal. 140. Though elaborate submissions were made by the learned counsel for the assessee on the aforesaid addition, we deem it sufficient to deal with the major issues raised by the assessee on the disallowance under section 14A of the Act. The first issue that requires consideration is as to whether in computing the disallowance under section 14A of the Act read with rule 8D2(ii) and (iii) of the Rules, the Assessing Officer while adopting the average value of investments has to consider only those investments which yielded dividend income during the previous year. On the above issue the Hon'ble Income-Tax Appellate Tribunal, Kolkata in the case of REI Agro Ltd. v. Deputy CIT [2013] 144 ITD 141 (Kolkata) has held that it is only the investments which yields dividend during the previous year that has to be considered while adopting the average value of investments for the purpose of rule 8D(2)(ii) and (iii) of the Rules. The aforesaid view of the Tribunal ....
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....n the same line of business as that of the assessee and the given investments were made to financially assist the company in strengthening its business, investment in Lanco Industries was strategic business purposes and not for the purposes of earning dividend income or capital gains. It was also submitted that investments made by the assessee in Electrosteel (formerly Electrosteel Integrated) was also a strategic purpose and was considered as not includible for arriving at the average value of investments by the Assessing Officer himself in the assessment for the assessment years 2008-09 to 2010-11 but was considered for disallowance in the assessment year 2011-12, showing conflicting stand taken by the Assessing Officer. 142. We have considered the aforesaid submissions of the learned counsel for the assessee and are of the view that in the light of the decisions referred to above, in computing the disallowance under section 14A of the Act read with rule 8D(2)(ii) and (iii) of the Rules, the Assessing Officer while adopting the average value of investments has to consider only those investments which yielded dividend income during the previous year. Similarly, in computing the d....
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....d in the light of the figures given by the assessee before the Tribunal. All other submissions do not require any elaboration and will stand addressed in the decisions given above. Thus ground No. 4 is treated as allowed for statistical purpose. 146. Ground Nos. 6 and 7 raised by the assessee in its appeal reads as follows: "6. Short credit for Tax deducted at source 6a. That on the facts and circumstances of the case, the learned Assessing Officer has erred in not abiding by the directions of the Dispute Resolution Panel by not verifying and hence not allowing the credit for Tax deducted at source (TDS) of Rs. 1,09,27,982 for the subject assessment year. 6b. In view of the above, the impugned order has erred in by mentioning that the Instruction No. 5 of 2013 [F. No. 275/03/2013- IT(B)], dated July 8, 2013 of the Central Board of Direct Taxes has been considered while giving credit of prepaid Taxes. 6c. That on the facts and circumstances of the case, the learned Assessing Officer failed to allow the TDS credit where the TDS certificates were submitted with him. 6d. That on the facts and circumstances of the case, the learned Assessing Officer failed to consider that th....
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.... the relevant assessment year. The Assessing Officer will exercise normal assessment powers in respect of the six years previous to the relevant assessment year in which the search takes place. The Assessing Officer has the power to assess and reassess the "total income" of the relevant assessment year in separate assessment order. In other words there will be only one assessment order in respect of each of this assessment year "in which both the disclosed and the undisclosed income would be brought to Tax". 151. With this background, we shall now proceed to discuss the various issues that arise for consideration in the appeals by the Revenue and the assessee. As far as the assessment year 2009-10 is concerned a notice under section 153A was issued by the Assessing Officer. In response to the same the assessee filed a letter taking a stand that the return originally filed be treated as a return filed in response to notice under section 153A of the Act. 152. In course of assessment, the assessee made a revised claim that sales Tax remission and industrial promotional assistance (IPA) of Rs. 47,77,608 and Rs. 3,96,47,107 respectively which was offered to Tax as income in the origin....
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....d by the aforesaid, both the assessee and the Department are in appeal before the Tribunal. IT(SS) No. 60/Kol/2014 (Revenue's appeal for the assessment year 2009- 10) 157. Ground Nos. 1 and 2 raised by the Revenue reads as follows : "1. That on the facts and circumstances of the case and in law learned members of the Dispute Resolution Panel, Kolkata Bench erred in deleting the addition of Rs. 1,28,50,152 made on account of disallowance under section 80-IA for the assessment year 2009-10 applying the ratio of the decision of the jurisdictional High Court in the cases of CIT v. Kanoria Chemicals and Industries Ltd. ignoring, that there was a decision of apex court in favour of the Revenue in case of Transmission Corp. of AP Ltd. v. Sai R. P. Pvt. Ltd. [2010] INSC 498 (dated July 8, 2010) which says that the market value of goods and services will be subject to the value determined by the Regulatory Commission. 2. Without prejudice to ground No. 1 that on the facts and circumstances of the case and in law learned members of the Dispute Resolution Panel also erred in deleting the addition of Rs. 1,28,50,152 made on account of disallowance under section 80-IA for the assessme....
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.... for statistical purpose." With similar observations and directions, we allow the relevant ground of appeal of the Revenue for statistical purpose. 159. Ground Nos. 3 to 5 raised by the Revenue reads as follows : "3. The learned members Dispute Resolution Panel, Kolkata Bench in law and in the facts and circumstances of the case erred in accepting the assessee's claim made through revised computation other than by filing revised return that subsidies received on account of sales Tax remission/deferral and industrial promotion assistance are capital subsidy and ignoring the apex court's decision in the case of Goetze (India) Ltd. v. CIT in [2006] 284 ITR 323 (SC) ; [2006] 157 Taxman 1 (SC). 4. The learned members Dispute Resolution Panel, Kolkata Bench in law and in the facts and circumstances of the case also erred in holding that subsidy received of Rs. 4,44,24,715 on account of sales Tax remission/deferral and industrial promotion assistance for the assessment year 2009-10 are capital subsidy though in the return filed under section 139(1) these subsidies were disclosed as revenue subsidy and offered to Tax. 5. Without prejudice to the above the learned members Di....
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....ing the incentive received from the written down value of the block of assets thereby contradicting sub-section (6) of section 43 of the Act, which lays down the specific adjustments that can be made to the written down value of the block of assets." 161. The facts and circumstances under which the aforesaid grounds arise for consideration are identical to ground Nos. 3 to 5 raised by the Revenue in IT(SS) No. 57/Kol/2014 for the assessment year 2006-07 and ground No. 4 raised by the assessee in IT(SS) No. 50/Kol/2014 for the assessment year 2006-07. For the reasons given while deciding the relevant grounds of appeal in the assessment year 2006-07, we dismiss grounds 3 to 5 raised by the Revenue and allow ground No. 5 raised by the assessee. 162. Ground Nos. 6 and 7, raised by the Revenue in its appeal reads as follows : "6. The learned members Dispute Resolution Panel, Kolkata Bench in law and in the facts and circumstances of the case erred in accepting the assessee's claim made through revised computation other than by filing revised return that sales proceeds of CER units, carbon credits received are capital receipts and ignoring the apex court's decision in the cas....
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....n case of other assessees, the normal rules for determining the arm's length price still apply." 166. The above grounds of appeal can be conveniently decided together with ground No. 3 raised by the assessee in its appeal, which reads as follows : "3. Adjustment in relation to international transaction of corporate guarantee provided by the appellant to its associated enterprise 3a. The impugned order is contrary to law, facts and circumstances of the case in so far as it makes an adjustment of Rs. 1,23,41,739 in relation to the international transactions of corporate guarantee provided by the appellant for loans availed of by its associated enterprises. 3b. The impugned order erred in considering that the provisioning of corporate guarantees by the appellant to its associated enterprises is an international transaction as per section 92B of the Act. The impugned order further erred by not considering the fact that the abovementioned transaction falls outside the ambit of international transaction under section 92B(1) of the Act since it does not have any bearing on the appellant's profits, income, losses or assets. 3c. The impugned order erred in holding that the ....
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.... Pricing Officer. 2. Whether on the basis of facts and in law, the learned Dispute Resolution Panel, Kolkata have erred in holding that the credit spread part of the arm's length price of loan provided by the assessee to its associated enterprise, should be 3 per cent. per annum in line with the Safe Harbour Rules issued by the Government, when these rules are effective from the assessment year 2013-14 only. 3. Whether on the basis of facts and in law, the learned Dispute Resolution Panel, Kolkata have erred in holding that the credit spread part of the arm's length price of loan provided by the assessee to its associated enterprise should be 3 per cent. per annum in line with the Safe Harbour Rules issued by the Government, when these rules can only be applied in case of eligible assesses who opt for it and in case of other assessees, the normal rules for determining the arm's length price still apply. 4. Without prejudice to the above grounds, whether on the basis of facts and in law, the learned Dispute Resolution Panel, Kolkata have erred in not holding that SBI BPLR should be taken as the base rate for determining the arm's length price of loan provided by t....
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....the international transactions of interest- free loan provided to its associated enterprise ('AE'). The learned Transfer Pricing Officer has erred in interpreting the directions of the Dispute Resolution Panel in respect of cost of funds and has considered the cost of funds at 8 per cent. instead of 7 per cent. 2g. Without prejudice to the above, as per the facts and in the circumstances of the case and in law, the learned Transfer Pricing Officer has erred in computation of total disallowance in the final assessment order while giving effect to the directions of the learned Dispute Resolution Panel due to a casting error. The learned Transfer Pricing Officer has erred in considering the adjustment to be Rs. 1,69,57,837 instead of the computed adjustment of Rs. 1,40,70,887. 2h. Without prejudice to the above, the learned Transfer Pricing Officer erred in not following the principle of consistency. The learned Transfer Pricing Officer in the erstwhile transfer pricing order for the assessment year 2006-07 and transfer pricing order for the assessment year 2007-08 (being the first two transfer pricing assessments in the appellant's case) had applied overseas lending r....
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....nt in its return of income is based on a reasonable basis and has been worked out on a rational manner and specific details of such expenses had been filed by the appellant during the course of the assessment proceedings. 4e. In the facts and in the circumstances of the case and in law, the impugned order erred in denying the appellant's contention that for the assessment year 2009-10, certain expenses have been incurred for earning exempt income as envisaged by rule 8D of the Rules which has also been suo motu disallowed by the appellant. The learned Assessing Officer has erred in wrongly applying rule 8D since no speaking order was issued to the appellant stating why the learned Assessing Officer is dissatisfied with the disallowance made by the appellant. In doing so, the learned Assessing Officer has not appreciated that the provisions of section 14A mandate that the onus is on the Assessing Officer to justify the basis for not being satisfied with the correctness of the claim of the appellant in respect of such expenditure in relation to income which does not form part of the total income under the Act. 4f. Without prejudice to the above objections, the impugned order ....
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....e Dispute Resolution Panel's direction by making verification of TDS certificate that may be filed in physical form as well as from details from 26AS, and give credit for Taxes deducted at source. Ground No. 8 is treated as allowed for statistical purpose. 176. Ground No. 6 regarding charging of interest under sections 234B and 234C is purely consequential and the Assessing Officer directed to give consequential effect. Ground No. 7 regarding initiating of penalty proceedings under section 271(1)(c) of the Act cannot be subject-matter of this appeal and hence dismissed. 177. In the result, the appeal by the Revenue IT(SS) No. 60/Kol/2014 is partly allowed for statistical purpose and that by the assessee IT(SS.) No. 53/Kol/2014 is partly allowed. 178. As far as the assessment year 2010-11 is concerned, the same was an assessment under section 143(3) of the Act, read with section 144C of the Act. In other words this is not part of the six assessment years referred to in the provisions of section 153A(1) of the Act. 179. Return of income was filed on September 29, 2010 declaring income of Rs. 259,45,57,470 was disclosed as returned income of the assessee. Subsequently notices ....
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....act amount is retained by the customers as retention money while making payments to the assessee which is payable after a certain period of time on satisfactory performance of the contract. Such retention money was not offered to Tax by the assessee. It was the case of the Assessing Officer that under the mercantile system of accounting, the said sum ought to have been offered to Tax by the assessee as income to that extent can be said to have accrued to the assessee. The Dispute Resolution Panel however held that the assessee was justified in not including the retention money as part of its contract receipts for the relevant assessment year. Aggrieved by the order of the Dispute Resolution Panel, the Revenue has raised the aforesaid ground of appeal before the Tribunal. 183. At the time of hearing it was pointed out that the issue raised in ground No. 1 by the Revenue is no longer res integra and has been concluded by the Hon'ble Calcutta High Court in the case of CIT v. Simplex Concrete Piles (India) Pvt. Ltd. [1989] 179 ITR 8 (Cal). In the aforesaid decision the Hon'ble Calcutta High Court on identical facts held that having regard to the terms and conditions of the contract, i....
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....th sides." 187. The facts with regard to the aforesaid ground of appeal are that the assessee-company had issued 40,837,146 convertible warrants at Rs. 76, Rs. 68 and Rs. 81 per share warrant respectively (Re. 1 being face value and balance being the premium) to its various promoter groups and other foreign companies with an option to the warrant holders to convert the warrants into equity shares of the company after a predetermined time frame and at an agreed price. Out of the said price, as per the terms of the issue, the promoters were required to pay 10 per cent. on the issue of share warrants and the balance 90 per cent. at the time of allotment/conversion of shares. The allottees, however, did not opt for the conversion option since at that time the market value of ECL shares were only Rs. 35 while for conversion the allottees would have had to pay at least Rs. 6 per share. As per the terms of the agreement since the warrant holders did not subscribe for the conversion of warrants into equity shares, the amount of Rs. 309,470,883 paid by the warrant holders at the time of allotment of warrants was forfeited by the assessee during the assessment year 2010-11. While computing ....
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....dition in the year under consideration. The Assessing Officer is accordingly, directed to delete the proposed addition of Rs. 30,94,70,883. The ground is accordingly allowed. However, if the Assessing Officer, after examining material on record, has reason to consider the entire transaction of issue of share warrants and forfeiture as non-genuine, he is free to take appropriate action in the year of receipt as per law." 189. The final assessment order incorporating the same was passed on January 30, 2015 thereby deleting the addition on this account. The Department is now in appeal before the Tribunal against the order of the Dispute Resolution Panel. The learned Departmental representative relied on the order of the Assessing Officer and the learned counsel for the assessee relied on the order of the Dispute Resolution Panel. 190. We have given a very careful consideration to the rival submissions. The detailed break-up of the application money received from share warrants on allotment, which was subsequently forfeited during the assessment year 2010-11, has been given in the table below for ready reference : Sl. No. Name of the allottee No. of warrants issued and forfeited ....
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.... cover such a receipt. Therefore, the amount received on forfeiture of share warrants should also be considered as capital receipt not liable to Tax. 191. The issue similar to the one raised in the aforesaid ground of appeal has been considered in several judicial pronouncements in the context of amount received on forfeiture of share application money/call money, convertible debentures, etc., and it has been held that such amounts are in the nature capital receipts not liable to Tax under any head of income as per the provisions of the Act. In a recent case of Graviss Hospitality Ltd. v. Deputy CIT [2015] 67 SOT 184 (Mum) (URO), the Hon'ble Mumbai Tribunal held as follows : "The share application money by its nature itself is on capital account and it remains in the nature of capital, even if it has been forfeited due to certain circumstances, because it has not arisen out of trading transaction or during the course of business. Such a capital receipt cannot be converted into revenue receipt unless it is found that receiving share application money is the business of the assessee and has arisen out of its business operation. Thus, we hold that the amount of forfeited share appl....
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....liability side of the balance-sheet. The assessee has credited the amount in respect of the forfeited shares under the head 'Capital reserve'. Thus the Companies Act itself treats the profit on forfeiture of shares as a capital reserve not available for distribution as dividend. It is, Therefore, not possible to uphold the conclusion of the Departmental authorities that the profit arising to the company on forfeiture of shares is a trading or business profit assessable in the hands of the company." 192. Several other judicial pronouncements similar to the one referred to above were also referred to before us. We do not wish to lengthen the order by citing those long list of cases. Sufficient it to hold that in view of the above judicial precedents the amount received on issue of share warrants do not qualify as business income since the same has not been received in the ordinary course of carrying on of the business. Share warrants are essentially issued for the purposes of raising capital for the business. The amount received on allotment of share warrants is normally shown in the balance-sheet as "share warrant money". On conversion into equity, the said amount is capita....
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....by them upon conversion). In view of the same, the promoters and the non-promoters did not opt for conversion of share warrants. The prudence of the same is also evident from the fact that even the non-promoters to the share warrants did not opt for the conversion as is also confirmed by the learned Assessing Officer in the impugned order. In the light of the discussion as above, we do not find any merits in the ground raised by the Revenue and the same is dismissed. 193. Ground No. 4 raised by the Revenue reads as follows : "4. That the learned Dispute Resolution Panel erred in law and on facts in directing the Transfer Pricing Officer to adopt a credit spread of 3 per cent. instead of 7 per cent. in computing the arm's length price interest." 194. This ground can be conveniently decided together with ground No.2 raised by the assessee in its appeal, which reads as follows : "2. Adjustment in relation to the international transaction for interest-free loan provided to its associated enterprises 2a. In the facts and in the circumstances of the case, the impugned order erroneously rejected the transfer pricing documentation maintained by the appellant in accordance with ....
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....ase rate for adjustment." 195. These grounds of appeal are identical to ground Nos. 6 to 9 raised by the Revenue in its appeal IT(SS) No. 57/Kol/14 for the assessment year 2006-07 and ground No. 2 raised by the assessee in its appeal IT(SS) No. 50/Kol/2014 for assessment year 2006-07 and arise under identical facts and circumstances. For the reasons given while deciding identical grounds in assessment year 2006-07, we dismiss ground No. 4 raised by the Revenue, and dismiss ground No. 2(b), (c) and (g) raised by the assessee and partly allow ground No. 2(a), (d), (e) and (f) raised by the assessee. 196. Ground No. 5 raised by the Revenue in its appeal reads thus : "5. That the learned Dispute Resolution Panel erred in law and on facts in directing the Transfer Pricing Officer to determine the proposed adjustment of 3 per cent. is directed to be reduced to 2 per cent. in line with Safe Harbour Rules issued by the Board." 197. The aforesaid ground of appeal can be conveniently decided together with Ground No. 3 raised by the assessee in its appeal, which reads thus : "3. Adjustment in relation to international transaction of corporate guarantee provided by the appellant to its ....
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.... reasons stated while deciding identical issue in assessment year 2006-07, we dismiss ground No. 5 raised by the Revenue and partly allow ground No. 3 raised by the assessee by directing the Assessing Officer/Transfer Pricing Officer to adopt 0.5 per cent. as guarantee commission charges in respect of the guarantee provided by the assessee for obtaining the loan by the associated enterprise. ITA No. 256/Kol/2015 (assessee's appeal for the assessment year 2010- 11) 199. Many of the grounds raised by the assessee have already been decided while deciding the connected ground of appeal of the Revenue. The remaining grounds are to be decided now. Ground No. 1 is general in nature and calls for no specific adjudication. Ground No. 5 raised by the assessee reads as follows : "5. Disallowance under section 14A of the Act 5a. In the facts and circumstances of the case and in law, the impugned order erred in disallowing Rs. 75,39,437 under section 14A of the Act. 5b. Without prejudice to the above, the impugned order erred in not considering several judicial pronouncements of higher authorities where it is held that rule 8D of the Income-Tax Rules will not be triggered automatica....
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.... Assessing Officer for earning the exempt income for assessment year 2005-06 in the appellant's own case was deleted by the Hon'ble jurisdictional High Court on the basis that the investments were very old and the appellant has not incurred any expense to earn the exempt income." 200. We have while deciding identical ground of appeal of the assessee for assessment year 2008-09 already directed calculation of disallowance under section 14A of the Act in a particular manner. The necessary details which are set out in the order dealing with the issue in assessment year 2008-09 are available in the present assessment year also. The Assessing Officer is directed to examine the claim of the assessee in the light of the directions given on identical issue in assessment year 2008-09. The above directions and conclusions will apply to this ground of appeal also. We hold accordingly. 201. Ground No. 8 raised by the assessee in its appeal reads as follows : "8. Short credit for Tax deducted at source 8a. That on the facts and circumstances of the case, the learned Assessing Officer has erred in not abiding by the directions of the Dispute Resolution Panel by not undertaking verifica....
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....mpany appeared and furnished relevant details and written explanations. In course of assessment, the following additions were proposed to be made to the income of the assessee by the Assessing Officer in the draft assessment order : (i) Transfer pricing adjustment (loan and guarantee) (Rs.) (a) Interest on loan 4,66,60,985 (b) Guarantee commission 3,10,07,395 (ii) Disallowance under section 14A read with rule 8D of the Income-Tax Rules, 1962 (over and above disallowance made by the assessee) 3,58,26,657 (iii) Disallowance of claim of depreciation on account of excess depreciation claimed 2,24,68,490 (iv) Disallowance of additional depreciation 50,50,598 207. Aggrieved by the above, the assessee filed an application in Form 35A with the Dispute Resolution Panel (DRP) along with the objections in the draft assessment order issued by the Assessing Officer. The Dispute Resolution Panel thereafter, directed the Assessing Officer to consider an arm's length interest rate of 12 per cent. as opposed to 18 per cent. thereby revising addition on account of arm's length price of "interest-free loan" to be made at Rs. 3,11,07,323 and further directed addition of a sum of R....
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....the arm's length price of loan provided by the assessee to its associated enterprise should be 3 per cent. per annum in line with the Safe Harbour Rules issued by the Government when these rules can only be applied in case of eligible assessees, who opt for it and in case of other assessees, the normal rules for determining the arm's length price still apply. 4. Without prejudice to the above grounds, whether on the basis of facts and in law, the learned Dispute Resolution Panel, New Delhi have erred in not holding that SBI BPLR should be taken as the base rate for determining the arm's length price of loan provided by the assessee to its associate enterprise, when they applied the Safe Harbour Rules to the credit spread part, of price of the loan." 209. This ground can be conveniently decided together with ground No. 2 raised by the assessee in its appeal, which reads as follows : "2. Adjustment in relation to the international transaction for interest-free loan provided to its associated enterprises 2a. In the facts and in the circumstances of the case, the impugned order erroneously rejected the transfer pricing documentation maintained by the appellant in acc....
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....ssment year 2006-07 and ground No. 2 raised by the assessee in its appeal IT(SS) No. 50/Kol/2014 for the assessment year 2006-07 and arise under identical facts and circumstances. For the reasons given while deciding identical grounds in assessment year 2006-07, we dismiss ground Nos. 1 to 4 raised by the Revenue, and dismiss ground No. 2(b), (c) and (g) raised by the assessee and partly allow ground No. 2(a), (d), (e) and (f) raised by the assessee. 211. Ground Nos. 5 to 7 raised by the Revenue in its appeal reads thus : "5. Whether on the basis of facts and in law, the learned Dispute Resolution Panel, New Delhi have erred in holding that the arm's length price of fee for corporate guarantees stood by the assessee in favour of its associated enterprises should be 2 per cent. per annum instead of 3 per cent. per annum as determined by the Transfer Pricing Officer. 6. Whether on the basis of facts and in law, the learned Dispute Resolution Panel, New Delhi have erred in holding that the arm's length price of fee for corporate guarantees stood by the assessee in favour of its associated enterprises should be 2 per cent. per annum in line with the Safe Harbour Rules issu....
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....ned order erred in applying the CUP method based on earlier Dispute Resolution Panel order which has relied on Safe Harbour Rules as a basis, for deter mining the arm's length price, i.e, commission to be charged by the appellant for providing guarantees for loans availed of by its associated enterprises from banks. 3g. The impugned order erred in determining the arm's length price on the corporate guarantee provided by the company at 2 per cent. on the loan amount utilised by the associated enterprise against the said corporate guarantee advanced to the associated enterprise. 3h. Without prejudice to the above, the impugned order has erred by not referring to the judgments of the higher authorities where comparatively a lower rate of commission has been determined for adjustment." 213. These grounds are identical to ground No. 3 raised by the assessee in its appeal IT(SS) No. 50/Kol/14. For the reasons stated while deciding identical issue in assessment year 2006-07, we dismiss ground Nos. 5 to 7 raised by the Revenue and partly allow ground No. 3 raised by the assessee by directing the Assessing Officer/Transfer Pricing Officer to adopt 0.5 per cent. as guarantee com....
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....ax remission and industrial promotion assistance ('IPA') in assessment year 2003-04 to assessment year 2010-11. 5a. On the facts and circumstances of the case, the learned Assessing Officer erred in considering that the sales Tax remission and IPA is to be reduced from the block of plant and machinery in the respective assessment years (i.e. assessment year 2003-04 to assessment year 2010-11) based on the order for the relevant assessment years, thereby having a cascading effect in the allowance of depreciation in assessment year 2011-12, i.e. by reducing the same by Rs. 1,16,71,305." 215. The above grounds are similar to ground Nos. 3 to 5 raised by the Revenue in its appeal for assessment year 2007-08. While deciding those grounds of appeal, we have already held that the subsidy in question was a capital receipt not chargeable to Tax and that the action of the Assessing Officer in reducing the depreciation claim of the assessee by reducing the written down value on which depreciation was to be allowed by the amount of subsidy in question, was not proper. For the reasons stated therein, we allow ground Nos. 4 and 5 raised by the assessee. 216. Ground No. 6 raised by th....
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....at additional depreciation is available only in the year of purchase of plant and machinery. He also held that the unclaimed additional depreciation for the immediate preceding assessment year cannot be claimed in subsequent assessment year. The Dispute Resolution Panel confirmed the order of the Assessing Officer. The Dispute Resolution Panel in confirming the Assessing Officer's decision of disallowing the assessee's claim of additional depreciation held that additional depreciation is a special beneficial claim and being subject to the period concerned, is not to be carried forward. Thus, it is evident that both the Dispute Resolution Panel and the learned Assessing Officer denied the assessee's claim of additional depreciation amounting to Rs. 59,41,879 based on the premises that carry forward of unclaimed additional depreciation of immediately preceding assessment year i.e. 2010-11 is restricted under the provisions of the Income-Tax Act, 1961 and that such carry forward of the balance additional depreciation, not claimed in the year of acquisition and installation of the plant or machinery for not being put to use for 180 days or more can be carried forward to the....
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....given only to a new industrial undertaking, or only where a new industrial undertaking begins to manufacture or produce during any year previous to the relevant assessment year. 220. In CIT v. Rittal India Pvt. Ltd. (No. 1) [2016] 380 ITR 423 (Karn), the Hon'ble Karnataka High Court dealing with the law as amended by the Finance Act, 2005 with effect from April 1, 2006, held in favour of the assessee observing as follows (page 426) : "The aforesaid two conditions, i.e., the undertaking acquiring new plant and machinery should be a new industrial undertaking, or that it should be claimed in one year, have been done away by substituting clause (iia) with effect from April 1, 2006. The grant of additional depreciation, under the aforesaid provision, is for the benefit of the assessee and with the purpose of encouraging industrialisation, by either setting up a new industrial unit or by expanding the existing unit by purchase of new plant and machinery, and putting it to use for the purpose of business. The proviso to clause (ii) of the said section makes it clear that only 50 per cent. of the 20 per cent. would be allowable, if the new plant and machinery so acquired is put to use ....
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..... Section 32(1)(iia) inserted by the Finance (No. 2) Act, 2002 with effect from April 1, 2003. In speech of the Finance Minister this clause was inserted to provide incentive for fresh investment in industrial sector. This clause was intended to give impetus to new investment in setting up a new industrial unit or for expanding the installed capacity of existing units by at least 25 per cent. thereafter these provisions were amended by the Finance (No. 2) Act of 2004 with effect from April 1, 2005 and provided that in the case of any machinery or plant which has been acquired after the 31st day of March, 2005 by an assessee engaged in the business of manufacture or production of any article or thing a further sum equal to 15 per cent. of actual cost of such machinery or plant shall be allowed as deduction under clause (ii) of section 32(1). This additional allowance under section 32(1)(iia) is made available as certain percentage of actual cost of new machinery and plant acquired and installed. This provision has been directed towards encouraging industrialisation by allowing additional benefit to the setting up of new industrial undertaking making or for expansion of the industria....
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....empo Ltd. v. CIT [1992] 196 ITR 188 (SC), the provisions related to it have to be constructed reasonably, liberally and purposive to make the provision meaningful while granting the additional allowance. This additional, benefit is to give impetus to industrialisation and the basic intention and purpose of these provisions can be reasonably and liberally held that the assessee deserves to get the benefit in full when there is no restriction in the statute to deny the benefit of balance of 50 per cent. when the new plant and machinery were acquired and use for less than 180 days. Onetime benefit extended to the assessee has been earned in the year of acquisition of new plant and machinery. It has been calculated at 15 per cent. but restricted to 50 per cent. only on account of usage of these plant and machinery in the year of acquisition. In section 32(1)(iia) the expression used is "shall be allowed". Thus the assessee had earned the benefit as soon as he had purchased the new plant and machinery in full but it is restricted to 50 per cent. in that particular year on account of period of usages. Such restrictions cannot divest the statutory right. Law does not prohibit that balance....
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....er section 14A of the Act 7a. In the facts and circumstances of the case and in law, the impugned order erred in disallowing Rs. 3,58,26,657 under section 14A of the Act. 7b. Without prejudice to the above, the impugned order erred in not considering several judicial pronouncements of higher authorities where it is held that rule 8D of the Income-Tax Rules will not be triggered automatically without stating valid reasons for rejecting the disallowance as made by the appellant under section 14A of the Act. 7c. Without prejudice to the above, the impugned order erred in not accepting the appellant's claim that an amount of Rs. 19,09,495 only has been incurred towards earning the exempt income for the assessment year 2011-12 even though the same had suo motu been disallowed by the appellant in the return of income filed for assessment year 2011-12. 7d. On the facts and in the circumstances of the case, impugned order was not justified in not appreciating the fact that the disallowance under section 14A of the Act of Rs. 19,09,495 considered by the appellant in its return of income is based on a reasonable basis and has been worked out on a rational manner and specific detail....
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....identical ground of appeal of the assessee for assessment year 2008-09 already directed calculation of disallowance under section 14A of the Act, in a particular manner. The necessary details which are set out in the order dealing with the issue in assessment year 2008-09 are available in the present assessment year also. The Assessing Officer is directed to examine the claim of the assessee in the light of the directions given on identical issue in assessment year 2008-09. The above directions and conclusions will apply to this ground of appeal also. We hold accordingly. 225. Ground No. 8 regarding charging of interest under sections 234B and 234C is purely consequential and the Assessing Officer is directed to give consequential effect. Ground No. 9 regarding initiating of penalty proceedings under section 271(1)(c) of the Act cannot be subject-matter of this appeal and hence dismissed. 226. In the result, the appeal by the Revenue in ITA No. 124/Kol/2016 is dismissed and that by the assessee in ITA No. 66/Kol/2016 is partly allowed. 227. In the result, all the appeals are decided as follows : "(i) In the result, the appeals of the assessee for assessment year 2003-04, 2004-....