TaxTMI 
TaxTMI 
2017 (2) TMI 685
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....ring Ductile-Iron ("DI") spun pipes. In addition, 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 ....
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....laim that sale Tax remission of Rs. 92,13,585, Rs. 1,08,07,994 and Rs. 20,87,26,730 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 ....
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....ated January 30, 2014 for the assessment years 2003-04, 2004-05 and 2005-06 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. 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 a....
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....ection 132. Further and very importantly, in relation to the years whose assessment is completed, it has been 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 a....
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....iately preceding the assessment year relevant to the previous year in which the search or requisition was made. He 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 ....
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....take note of the income disclosed in the earlier return, any undisclosed income found during search or and also any other 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 sal....
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....in the period of six assessment years, referred to in this sub-section pending on the date of initiation of the search under section 132 or making of requisition under 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....
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....assessment year shall be made separately on the basis of the findings of the search and any other material existing or brought on the record of the Assessing Officer, (b) In respect of non-abated assessments, the assessment 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 ....
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....nal assessment and the assessment under section 153A merges into one. Only one assessment shall be made separately for each assessment year on the basis of the findings of the search and any other material existing or brought on the record of the Assessing Officer. (vii) Completed assessments 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, t....
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....a Housing Development Company (supra) has taken the view that the decision rendered by the Special Bench is to be followed. In the subsequent decision rendered by the Hon'ble Delhi High Court in the case of CIT v. Kabul Chawla [2016] 380 ITR 573 (Delhi), the view expressed by the Special Bench of the Income-Tax 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'....
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....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 on November 30, 2006, 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". 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 ....
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....evenue in its appeal reads thus : "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. 5,32,91,803 made on account of disallowance under section 80-IA for the assessment year 2006-07 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) 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 pri....
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....to sell its power in the open market than the buyer who is buying from the assessee would buy the same at a rate at which he is buying from any other source say WBSEB. Therefore, the rate at which WBSEB sells powers to its consumers should be adopted as "market value" and accordingly profits of the eligible undertaking should be computed. 38. While completing the assessment, the Assessing 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....
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....the above cited case is squarely applicable to this case. Therefore, this Panel upholds the objection raised by the asses see. Accordingly, this ground is allowed." 42. Aggrieved by the directions of the Dispute Resolution Panel, the Revenue has raised ground Nos. 1 and 2 before the Tribunal contending that the Dispute Resolution Panel has erred in deleting the addition made on account of disallowance 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 d....
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....see is squarely covered in favour of the assessee by the judgment of the Calcutta High Court in case of Kanoria Chemicals and Industries Limited [2013] 35 Taxmann.com 566 (Calcutta) (I. T. A. T. No. 58 of 2013). The Hon'ble High Court in the given case upheld the following view of the Tribunal : "Since the assessee is an industrial consumer also buying power from other Boards or utilities and such power supplied to the assessee 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 follo....
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...., 2009 and would not be applicable for the assessment year 2006-07. Secondly it was argued that the facts in the case of Transmission Corp. of AP Ltd. v. Sai R.P. Pvt Ltd. [2010] INSC 498 (dated 8th July, 2010) and the case of the assessee are not similar viz. : "(a) The decision does not at all deal with the concept of market value as explained in the Explanation to sub-section (8) to section 80-IA. (b) It does not exclusively deal with units set up for captive consumption and 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 ....
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.... of such eligible business has to be computed as if the transfer had been made at the market value of such goods or services as on the relevant date. "Market value" has been defined in the Explanation to section 80-IA(8) of the Act as the "the price that such goods or services would ordinarily fetch in the open market". In India the business of generation of electricity and its distribution is governed by the Indian Electricity Act, 2003. The electrical power system mainly consists of generation, transmission and 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 i....
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....Open Access) Regulations, 2007, which lays down that a licensee or a generating company or a captive generating plant or a consumer or any person engaged in the business of supplying electricity to the public under the Act (Electricity Act, 2003) shall be eligible for open access to the intra-state transmission lines or associated facilities of the STU or any transmission licensee on payment of charges, as may be specified by the commission, for using the transmission system of the transmission licensee. It was submitted 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 ot....
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....ng 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. 66,47,906 on account of sales Tax remission/deferral and industrial promotion assistance for the assessment year 2006-07 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 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 ....
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....ax remission) constituted a capital receipt not assessable to Tax. Accordingly, the income for the assessment year 2003-04 was reduced by the amount of Rs. 66,47,906 being the amount of sales Tax remission included in the profit and loss and offered to Tax by the assessee. Such a claim was made by the assessee in the course of assessment proceedings under section 153A of the Act in the form of filing of a revised computation of income. According to the Assessing Officer, the assessee cannot make such a claim without filing a revised return of income. In coming to the above conclusion the 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 t....
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....axman 430, has inter alia ruled that the assessee can file revised computation in the course of ongoing assessment proceedings under the Act, without making recourse to revised return, despite the fact that time limit for revising return under section 139(5) had expired. In the light of the aforesaid decisions, we are of the view that the Dispute Resolution Panel was right in accepting the revised claim that sales Tax remission received is capital receipt and not chargeable to Tax. 56. As far as ground No. 4 raised by the Revenue is concerned, the issue for determination is as to whether the 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 w....
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....ssee. Attention in this regard is invited to the resolution approving the scheme passed by the Government of West Bengal, opening paragraph of which is reproduced below : "Having regard to the continuing need for providing incentives for the establishment of new units and expansion of existing units in the medium and large scale sectors in the State and having reviewed the impact of the earlier schemes in this regard the Governor is pleased to approve and sanction the following incentive scheme :" The aforesaid shows that the scheme was brought about to provide incentive to entrepreneurs for 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....
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.... '1. In the case of ITO v. Duro Plast India Pvt. Ltd. in ITA Nos. 1983, 1984, 1985/Kol/2008, dated January 16, 2009 for the assessment years 1999-2000 to 2001-02. 2. In the case of Deputy CIT v. Teesta Agro Industries Ltd. in ITA No. 1237/Kol/2010 and ITA No. 1053/Kol/2010 and ITA No. 1753/Kol/2010, dated January 7, 2011 for the assessment years 2003-04, 2006- 07 and 2007-08 respectively.' We find that the West Bengal Incentive Scheme 1993 and 1999 categorically encouraged the promotion of industries in the State of West Bengal and in such circumstances the issue clearly covered by the decision of the Hon'ble Supreme Court in the case of Sahney Steel and Press 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....
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....l submissions of the parties in this regard. The learned Departmental representative relied on the final order of the Assessing Officer dated January 30, 2014 while the learned counsel for the assessee relied on the directions of the Dispute Resolution Panel in its directions/order dated November 22, 2013. 64. We have seen the order of the Dispute Resolution Panel on this issue and find that the Dispute Resolution Panel in its directions/order had directed the Assessing Officer to allow the entire amount of Rs. 66,47,906 being the amount of sales Tax remission. However, the Assessing Officer merely allowed a sum of Rs. 10,68,371. The balance of Rs. 55,79,540 was adjusted with the depreciation claim made 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 ....
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....s. The subsidy is provided to extend financial assistance to entrepreneurs in setting up new units/expanding existing units in the backward areas. There appears no restriction imposed on the assessee to utilise the subsidy for acquisition of fixed assets only. The assessee is at a liberty to utilise the funds in any manner it likes. Merely because the amount of subsidy is subject to a maximum of a specified percentage of 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 does not mean that the subsidy was given to finance the acquisition of fixed assets only. Under the given circumstances, the amount of subsidy, is not deductible 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 n....
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....und of excess depreciation claim, should be allowed. Thus ground No. 5 raised by the Revenue is dismissed. 69. Ground Nos. 6 to 9 raised 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 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 instead of 7 per cent. and 7.5 per cent. per annum respectively in case of the two associated enterprises 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 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 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 pr....
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....ut 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 making an adjustment of Rs. 66,58,292 in relation to the international transactions of interest- free loan provided to its associated enterprise ("AE"). 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. 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 f....
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....ng of "CC+" or "C" to the associated enterprise. The Dispute Resolution Panel directed the Transfer Pricing Officer to compute the upward adjustment by applying an arm's length interest rate of 11 per cent., i.e. 8 per cent. plus 3 per cent. (credit spread). Aggrieved by the said direction of the Dispute Resolution Panel, the assessee is in appeal before the Tribunal raising ground No. 4 and the Revenue is in appeal before the Tribunal raising ground Nos. 6 to 9. 73. The first and foremost submission of the learned counsel for the assessee was that the transaction of giving loan by the assessee to its associated enterprise cannot be regarded as an international transaction at all. At the time of hearing the Bench expressed the view that this issue is no longer res integra and has been concluded by a decision of the Special Bench in the case of 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 ....
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.... assessee and the associated enterprise is in foreign currency and the transaction is an international transaction, then the transaction would have to be looked upon by applying the commercial principles in regard to international transaction. If this is so, then the domestic prime lending rate would have no applicability and the international rate fixed being LIBOR would come into play. In the circumstances, we are of the view that it is the LIBOR rate which has to be considered while determining the arm's length interest rate in respect of the transaction between the assessee and the associated enterprises." (ii) Mumbai Tribunal in the case of Tata Autocomp Systems Ltd. v. Asst. CIT [2013] 1 ITR (Trib)-OL 374 (Mum) ; [2012] 149 TTJ 233 (Mumbai) held as follows (page 390 of 1 ITR (Trib)-OL) : "In the present case the associated enterprise is a German company. Eurobior 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 p....
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....ahindra Ltd. (supra). The Revenue not having filed any appeal, has in fact accepted the decision of the Tribunal in VVF Ltd. v. Deputy CIT (supra) and Deputy CIT v. Tech Mahindra Ltd. (supra). In view of the above we see no reason to entertain the present appeal." 76. In view of the aforesaid decisions, we are of the view that instead of the base rate of 8 per cent. (based on lending rates of banks in India, for commercial borrowing), it would be appropriate to apply LIBOR rate (and not domestic lending rate). We direct accordingly. 77. The next aspect to be considered is as to whether any percentage has to be added over and above the LIBOR rate on account of credit rating of the associated enterprise. The Assessing Officer added LIBOR + 7 per cent. The basis for such addition is that any lender would consider the credit rating of the borrower before lending and Therefore, the assessee 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 lengt....
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....icing Officer to have looked into such type of transactions and applying it as uncontrolled trans actions. In our view, re-coursing straightaway to CRISIL, which deals in hardcore institutional finance transactions that too with clear commercial object of earning out of loans bereft on other considerations, is wholly inapplicable. There is no dispute on the issue that the real income theory has no application to a fictional working as provided by section 92 but this being part of the Income-Tax Act, the valid consideration for properly assessing a transaction cannot be given a go by. Every fiction, has limits to its application. In view thereof, we hold that the rate of 13.49 per cent. applied solely relying upon a third party opinion by applying on uncontrolled set of trans action is factually not correct and cannot be accepted." 79. The facts of the aforesaid case are identical to that in case of 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....
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....d by the associated enterprise. 3e. Without prejudice to the above, the impugned order also erred in not considering the appellant's transaction with a third party where the bank guarantee was provided for a charge of 0.35 per cent. 3f. Without prejudice to the above, the impugned order erred in applying the CUP method, relying on Safe Harbour Rules as a basis, for determining 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 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. 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 o....
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....that the arm's length guarantee charges may be taken at 0.40 per cent. which was the percentage of commission charged by the bank from the assessee for furnishing identical guarantee as was furnished by the assessee for a loan transaction by banks to its associated enterprise. In this regard our attention was drawn to the fact that IDBI Bank has charged a commission of 0.40 per cent. per annum as guarantee commission for similar facility extended to the assessee and that should be taken as a comparable case. Our attention was drawn to page 120 of the paper book II filed by the assessee in the appeal for the assessment year 2011-12. 84(A).On the other hand, the learned Departmental representative has relied upon the orders of the authorities below and submitted that the assessee has undertaken the risk by providing the guarantee for the loan obtained by the associated enterprise from the bank, Therefore, the differential rate adopted by the Transfer Pricing Officer is justified. 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....
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....king external comparable by the Transfer Pricing Officer, cannot be sustained in facts of the present case. We also find that in an independent transaction, the assessee has paid 0.6 per cent. guarantee commission to ICICI Bank India for its credit arrangement. This could be a very good parameter and a comparable for taking it as internal CUP and comparing the same with the trans action with the associated enterprise. The charging of 0.5 per cent. guarantee commission from the associated enterprise is quite near to 0.6 per cent., where the assessee has paid independently to the ICICI Bank and charging of guarantee commission at the rate of 0.5 per cent. from its associated enterprise can be said to be at arm's length. The difference of 0.1 per cent. can be ignored as the rate of interest on which ICICI Bank, Bahrain Branch has given loan to associated enterprise (i.e. subsidiary company) is at 5.5 per cent., whereas the asses see is paying interest rate of more than 10 per cent. on its loan taken with ICICI Bank in India. Thus, such 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....
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....ld 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. Ground No. 5 is treated as allowed for statistical purpose. 87. Ground No. 6 regarding initiation of penalty proceedings under section271(1)(c) of the Act is not appealable and hence, dismissed. Ground No. 7 regarding charging of interest under section 244A is purely consequential and the Assessing Officer is directed to give consequential effect. 88. In the result, the appeal by the Revenue IT(SS) No. 57/Kol/2014 is partly allowed for statistical purpose and that by the assessee IT(SS.) No. 50/Kol/2014 is partly allowed. 89. As far as the assessment year 2007-08 is concerned, the assessee had filed return of income under section 139(1) of the Act declaring total income of Rs. 85,85,50,983. There was no assessment of total income by the Assessing Officer pursuant to the return filed by the assessee. Search and seizure operation under section 132 of the Act was conducted in the business premises of the assesse....
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....ons 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 under section 80-IA. However, with regard to the transfer pricing adjustment, it directed the Assessing Officer to consider an arm's length interest rate of 11 per cent. as opposed to 15 per cent. proposed by the Assessing Officer. 94. Pursuant to the directions of the Dispute Resolution Panel the Assessing Officer by his fair order of assessment 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. 74,03,138. Further, he added a sum of Rs. 1,79,73,606 on account of transfer pricing adjustment. 95. Aggrieved by the aforesaid, both the assessee and the Department are in appeal before the Tribunal. IT(SS) No. 58/Kol/2014 (Revenue's appeal for assessment year 2007-08) 96. 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 Disp....
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....gains of the eligible business by applying the main provisions of section 80- IA(8) of the Act and Therefore, the proviso to section 80-IA(8) of the Act would apply and the Assessing Officer may compute such profits and gains on such reasonable basis as he may deem fit. In our view, interest of justice would be met by setting aside the order of the Assessing Officer on this issue and directing the Assessing Officer to determine the profits and gains of the undertaking generating power on a reasonable basis after affording the assessee opportunity of being heard. The discretion given to the Assessing Officer under the proviso to section 80-IA(8) is not a subjective satisfaction but an objective one and Therefore, the reasonableness of the action of the Assessing Officer should be justifiable. With these observations, we allow the relevant ground of appeal of the Revenue for statistical purpose." With similar observations and directions, we allow the relevant ground of appeal of the Revenue for statistical purpose. 98. 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 ....
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....ce of Rs. 74,03,138. 4d. Without prejudice to the above, that on the facts and circumstances of the case, the impugned order erred in not considering the fact that the incentive was not granted for acquisition of fixed assets but for promoting industries in the State of West Bengal and hence could not be reduced from the written down value of assets. 4e. Without prejudice to the above, the impugned order erred in adjusting 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." 100. 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. 4 raised by the assessee. 1....
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.... income, losses or assets. 3c. The impugned order erred in holding that the provision of corporate guarantees by the appellant without charging any interest has to be benchmarked without appreciating that such transaction is not required to be benchmarked considering the facts of the appellant's case. 3d. The impugned order is erroneous to the extent it does not consider the fact that the appellant has not borne any cost relating to corporate guarantee and neither its funds have been used by the associated enterprise. 3e. Without prejudice to the above, the impugned order also erred in not considering the appellant's transaction with a third party where the bank guarantee was provided for a charge of 0.35 per cent. 3f. Without prejudice to the above, the impugned order erred in applying the CUP method, relying on Safe Harbour Rules as a basis, for determining 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 th....
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....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 of the price of the loan. 5. That the Department craves leave to add, modify or alter any of the grounds of appeal and/or adduce additional evidence at the time of hearing of the case." 105. The aforesaid grounds of appeal 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 the provisions of the Act read with the Income-Tax Rules, 1962 ('Rules') and makes an adjustment on the basis of Cost of Funds + Credit Spread (3 per cent.) in relation to the international transactions of interest-free loan provided to its associated enterprise ('AE'). 2b. The impugned order erred in h....
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.... by the assessee and partly allow ground No. 2(a), (d), (e) and (f) raised by the assessee. 106. IT(SS.) No. 51/Kol/2014 (assessee's appeal for assessment year 2007-08) 107. Many of the grounds raised by the assessee in its appeal have already been decided while deciding the appeal of 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 raised by the assessee is general in nature and calls for no specific adjudication. Ground Nos. 5 and 6 raised by the assessee in its appeal reads as follows : "5. Short credit for Tax deducted at source 5a. 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 verification and not allowing the credit for Tax deducted at source (TDS) of Rs. 44,633,462 for the subject assessment year. 5b. In view of the above, the impugned order has erred in by mentioning that the Instruction No. 5/2013 [F. No. 275/03/2013- IT(B)), dated July 8, 2013 of the Central Board of Direct Taxes has been considered while giving cre....
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....t 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". 112. 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 2008-09 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. 113. In course of assessment, the assessee made a revised claim that sales Tax remission and industrial promotional assistance (IPA) of Rs. 63,01,946 and Rs. 1,23,30,181 ....
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....ment year 2008-09) 118. 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. 1,28,71,576 made on account of disallowance under section 80-IA for the assessment year 2008-09 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. 1,28,71,576 made on account of disallowance under section 80-IA for the assessment year 2008-09 citing the decision of the jurisdictional High Court in the cases of CIT v. Kanoria Chemicals and Industries Ltd. ignori....
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.... for statistical purpose. 120. 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. 1,86,32,127 on account of sales Tax remission/deferral and industrial promotion assistance for 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 ....
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....ee 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. 123. 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 case of Goetze (India) Ltd. v. CIT in [2006] 284 ITR 323 (SC) ; [2006] 157 Taxman 1 (SC). 7. The learned members Dispute Resolution Panel, Kolkata Bench in law and in the facts and circumstances of the case also erred in holding that sales proceeds of CER units, carbon credits received of Rs. 2,62,94,945 for the assessment year 2008-09 are capital receipts." 124. As far as ground No. 6 raised by the Revenue is concerned, the same is identical to ground No. 3 raised by the Re....
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....al registries, which are required to be validated and monitored for compliance by the UNFCCC. Each operator has an allowance of credits, where each unit gives the owner the right to emit one metric tonne of carbon-di-oxide or other equivalent greenhouse gas. Operators that have not used up their quotas can sell their unused allowances as carbon credits, while businesses that are about to exceed their quotas can buy the extra allowances as credits, privately or on the open market. As demand for energy grows over time, the total emissions must still stay within the cap, but it allows industry some flexibility and predictability in its planning to accommodate this. By permitting allowances to be bought and sold, an operator can seek out the most cost-effective way of reducing its emissions, either by investing in "cleaner" machinery and, practices or by purchasing emissions from another operator who already has excess "capacity". Since 2005, the Kyoto mechanism has been adopted for CO2 trading by all the countries within the European Union under its European Trading Scheme (EU ETS) with the European Commission as its validating authority. From 2008, EU participants must link with the ....
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....profit or gain and it cannot be subjected to Tax in any manner under any head of income'." 128. The Assessing Officer rejected the claim of the assessee for the reason that the claim was made without filing a valid revised return of income and Therefore, cannot be entertained. The Dispute Resolution Panel however held that a claim could be made by the assessee without filing a valid return of income. The Dispute Resolution Panel further held that the sum in question cannot be brought to Tax and that the same was capital receipt not chargeable to Tax. Aggrieved by the order of the Dispute Resolution Panel, the Revenue has raised ground Nos. 6 and 7 before the Tribunal. 129. The learned Departmental representative relied on the order of the Assessing Officer. We are of the view from the decisions referred to the in the earlier paragraph, that receipts from sale of carbon credits constitute capital receipts which are not chargeable to Tax at all. 130. In view of the aforesaid judicial pronouncements on the issue, we find no merit in ground No. 7 raised by the Revenue. 131. Ground Nos. 8 to 11 raised by the Revenue in its appeal reads as follows: "8. Whether on....
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.... associated enterprise ('AE'). 2b. The impugned order erred in holding that the loans advanced by the appellant to its associated enterprise without any interest have to be benchmarked without appreciating that such 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 ....
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.... makes an adjustment of Rs. 1,43,73,568 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 provision of corporate guarantees by the appellant without charging any interest has to be benchmarked without appreciating, that such transaction is not required to be benchmarked considering the facts of the appellant's case. 3d. The impugned order is erroneous to the extent it does not consider the fact that the appellant has not borne any cost relating to corporate guarantee and neither its funds have been used by the associated enterprise. ....
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....appellant in the return of income filed for the assessment year 2008-09. 4d. 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. 57,57,210 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 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 2008-09, 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 ....
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.... 3F Inter corporate loans 7,15,069 3G Misc. interest 17,46,825 3H Foreign exchange (gain)/loss (7,24,82,872) Total of 3 (A to H) 7,43,27,636 4 Financing charges 61,74,706 5 Derivative gain/(loss) (5,58,11,387) Total 26,20,51,801 Rule 8D of the Income-Tax Rules, 1962 (Rules) prescribes the circumstances under which and the manner in which disallowance of expenses under section. 14A of the Act has to be made. The Assessing Officer in course of assessment blindly applied rule 8D and computed total disallowance at Rs. 96,67,141 and added the differential amount of Rs. 39,09,931 (Rs. 96,67,141 - 57,57,210) to the total income of the assessee. 138. The computation of disallowance under section 14A of the Act read with rule 8D of the Rules done by the Assessing Officer was as follows : (i) Disallowance under rule 8D(2)(ii) of the Rules : A = Amount of expenditure by way of interest other than the amount included in clause (i) sub-rule (2) of rule 8D incurred during the previous year = Rs. 4,11,65,938 B = The average value of investment, income from which does not or shall not form ....
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....nce, the Assessing Officer erred in including the investment of Rs. 5 crores, being closing balance of investments in NIMID while calculating the average value of dividend earning investment. 141. The second issue, that requires consideration is as to whether in computing the disallowance under section 14A of the Act read with rule8D2(ii) and (iii) of the Rules, the Assessing Officer while adopting the average value of investments has to exclude the investments which are strategic investments. In this regard reliance was placed by the learned counsel for the assessee on the decision of the Hon'ble Delhi High Court in the case of CIT v. Holcim India P. Ltd. [2014] 90 CCH 81 (Delhi) wherein it was held, investments made by an assessee in the business of holding investments had to be excluded while computing disallowance under section 14A of the Act. Reference was also made to the decision of the Income-Tax Appellate Tribunal (Chandigarh) in the case of Asst. CIT v. Spray Engineering Devices Ltd. [2013] 1 ITR (Trib)-OL 168 (Chandigarh) ; [2012] 53 SOT 70 (Chandigarh-Trib) wherein it was held that where a business strategy had been adopted by the assessee by way of investment in sha....
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....h regard to submissions in paragraphs 138 and 139 above, viz. Investments of the assessee (Rs. 15,894.02 lakhs), strategic investments (Rs. 5990.06 lakhs), investments which yielded dividend income during the previous year including strategic investments (Rs. 13,650.89 lakhs) and investments in dividend yielding shares (excluding strategic investments) (Rs. 7,660.83 lakhs). 144. Without prejudice to the above submissions, it was also submitted on behalf of the assessee that the assessee had sufficient own funds if the overall funds position is taken. In this regard it was submitted by the learned counsel for the assessee that where own funds are sufficient to cover the investments that have to be considered for the purpose of section14A disallowance, then a presumption has to be drawn that the investments were made out of own funds and not out of borrowed funds. The assessee has filed the necessary charts in this regard showing own funds and investments. The learned counsel for the assessee has placed strong reliance on the decision of the Hon'ble Bombay High Court in the case of CIT v. Reliance Utilities and Power Ltd. [2009] 313 ITR 340 (Bom) wherein proposition similar to the....
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.... abovementioned grounds, that on the facts and circumstances of the case, the learned Assessing Officer has erred in including a refund adjustment which was not mentioned in the draft order. 7b. The impugned order erred by erroneously reducing the amount of total refund from Rs. 5,05,21,096 to Rs. 1,98,99,706 stating that refund of Rs. 3,06,21,390 has already been issued where the same has not been issued/received by the appellant." 147. As far as the aforesaid ground of appeal is 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. 7. Ground Nos. 6 and 7 are treated as allowed for statistical purpose. 148. Ground No. 8 regarding charging of interest under section 244A is purely consequential and the Assessing Officer is directed to give consequential effect. Ground No. 9 regarding ....
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....x 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 assessee received CER units (carbon credit) of Rs. 5,86,61,510 which was claimed as not chargeable to Tax being a capital receipt. This claim was made by filing a revised computation of total income in the course of assessment. 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. 1,28,50,152 (ii) Transfer pricing adjustment (loan and guarantee) Rs. 3,25,83,495 (iii) Disallowance under section 14A Rs. 78,98,539 153. 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. 154. The Dispute Resolution Pane....
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....ew of which provision of section 80A(6) of the Income-Tax Act, 1961 was subsequently amended which has an overriding effect." 158. The facts and circumstances under which the aforesaid ground of appeal 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....
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....e 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." 160. 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 the 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 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....
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....Dispute Resolution Panel, Kolkata Bench in law and in the facts and circumstances of the case also erred in holding that sales proceeds of CER units, carbon credits received of Rs. 5,86,61,510 for the assessment year 2009-10 are capital receipts." 163. As far as ground No. 6 raised by the Revenue is concerned, the same is identical to ground No. 3 raised by the Revenue in its appeal. For the reasons stated while dismissing ground No. 3, ground No. 6 raised by the Revenue is without any merit and the same is hereby dismissed. 164. As far as ground No. 7 raised by the Revenue is concerned, the question to be decided is as to whether the sale proceeds of CER units, carbon credits received is capital receipt not chargeable to Tax or revenue receipt chargeable to Tax. While deciding identical ground of the Revenue for the assessment year 2008-09, in ITA No. 59/Kol/2014, we have already upheld similar order of the Dispute Resolution Panel. For the reasons stated therein, we dismiss ground No. 7 raised by the Revenue. 165. Ground Nos. 8 to 10 raised by the Revenue in its appeal reads as follows: "8. Whether on the basis of facts and in law, the learned Dispute Resolution....
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....out charging any interest/commission has to be benchmarked without appreciating that such transaction is not required to be benchmarked considering the facts of the appellant's case. 3d. The impugned order is erroneous to the extent it does not consider the fact that the appellant has not borne any cost relating to corporate guarantee and neither its funds have been used by the associated enterprise. 3e. Without prejudice to the above, the impugned order also erred in not considering the appellant's transaction with a third party where the bank guarantee was provided for a charge of 0.35 per cent. 3f. Without prejudice to the above, the impugned order erred in applying the CUP method, relying on Safe Harbour Rules as a basis, for determining 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 corporate guarantee advanced to the....
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.... see to its associated enterprise, when they applied the Safe Harbour Rules to the credit spread part of the price of the loan. 5. That the Department craves leave to add, modify or alter any of the grounds of appeal and/or adduce additional evidence at the time of hearing of the case." 169. The aforesaid grounds of appeal 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 the provisions of the Act read with the Income-Tax Rules, 1962 ('Rules') and makes an adjustment on the basis of Cost of Funds + Credit Spread (3 per cent.) in relation to the international transactions of interest-free loan provided to its associated enterprise ('AE'). 2b. The impugned order erred in holding that the loans advanced by the appellant to its associated enterprise without any interest have t....
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....in the appellant's case) had applied overseas lending rate (LIBOR/EURIBOR) rate as the base rate for adjustment." 170. The additional ground of appeal arises out of the order of the Commissioner of Income-Tax (Appeals) and Therefore, the same is admitted for adjudication. 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 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 additional grounds of appeal of 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. 170. IT(SS.) No. 52/Kol/2014 (assessee's appeal for assessment year 2008-09) 171. Many of the grounds raised by the assessee in its appeal have already been decided while deciding the appeal of the connected grounds of appeal of the Revenue. The remaining grounds of appeal in the assessee's appeal will be dealt wi....
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.... part of the total income under the Act. 4f. Without prejudice to the above objections, the impugned order has failed to appreciate the fact that even an expense of 1 per cent. of the exempt income considered as a reasonable expenditure under section 14A of the Act by the learned Assessing Officer for earning the exempt income for the 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." 173. We have while deciding identical ground of appeal of the assessee for the 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 the 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 the assessment year 2008-09. The above directions and conclusions will apply to this ground of appeal also. We hold accordingly. ....
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.... 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 under sections 143(2) and 142(1) were served on the assessee. Thereafter a revised return was filed on March 26, 2011 declaring income of Rs. 256,04,00,863 wherein the claim on account of subsidy by way of sales Tax remission and IPA was made. In course of assessment, the following additions were proposed to be made to the income of the assessee : Rs. (i) Denial of claim under section 80-IA 1,07,08,282 (ii) Transfer pricing adjustment (loan and guarantee) 5,01,34,043 (iii) Disallowance under section14A 75,39,437 (iv) Forfeiture of share warrants 30,94,70,883 (v) Retention money 1,84,26,995 (vi) Excess depreciation 2,07,29,466 180. Aggrieved by the above, the assessee filed an application with the Dispute Resolution Panel (DRP) along with the objections in the draft assessment order issued by the Assessing Officer. The Dispute Resolution Panel directed the Assessing Officer to allow the assessee's claim under section 80-IA. However, with respect to the transfer pric....
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....plex 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, it could not be held that either 10 per cent. or 5 per cent., as the case may be, being retention money, became legally due to the assessee on the completion of the work. Only after the assessee fulfilled the obligations under the contract, the retention money would be released and the assessee would acquire the right to receive such retention money. Therefore, on the date when the bills were submitted, having regard to the nature of the contract, no enforceable liability accrued or arose and, accordingly, it could not be said that the assessee had any right to receive the entire amount on the completion of the work or on the submission of bills. The assessee had no right to claim any part of the retention money till the verification of satisfactory execution of the contract. Therefore, the Tribunal was right in holding that the retention money in respect of the jobs completed by the assessee during the relevant previous year should not be taken into account in computing the pr....
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....be 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 the total income, the assessee considered such amount received on forfeiture of share warrants, where the option for subscription had not been exercised by the allottee, as capital receipt not liable to Tax under the provisions of the Act. The Assessing Officer, however, treated the same to be of revenue nature and Taxed it under the residuary head, i.e. income from other sources. In page 13 of his assessment order dated February 26, 2014, the Assessing Officer has accepted the fact that the amount received on forfeiture of shares is not a trading receipt and has observed as follows : "From the above findings Therefore, it can safely be concluded that, yes this forfeited amount as claimed has not been received by the assessee-company in its regular course of business." However, the Assessing Officer further went on to raise his doubt regarding the genuineness of the entire transaction by alleging as follows : "But from the happening o....
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....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 Face Premium per share Total amount including premium payable on allotment 10% value received on allotment and forfeited during the year 1. Cellour Vyapaar Ltd. (previous Cellour Vyapaar Pvt. Ltd.) 65,00,00 1 75 76.00 4,94,00,000 2. Ramoli Vincome Pvt. Ltd. 35,00,000 1 75 76.00 2,66,00,000 3. Green Field Techno Services (P.) Ltd. 35,00,000 1 75 76.00 2,66,00,000 4. Diwakar Commercials (P) Ltd. 50,00,000 1 75 76.00 3,80,00,000 5. Cubbon Marketing (P) Ltd. 15,00,000 1 75 76.00 1,14,00,000 6. PGS Invest Limited 87,00,000 1 67 68.00 5,91,60,000 7. Dtemcor Metals Limited 1,21, 37,146 1 80 81.00 9,83,10,883 4,08,37,146 30,94,70,883 As stated earlier, the assessee considered the aforesaid amount of Rs. 30,94,70,883....
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.... 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 application money transferred to 'warrant, forfeiture account' in the capital reserve, is a capital receipt only and cannot be Taxed as income of the assessee, either under section 28(iv) or under section 41(1) of the Act. Accordingly, ground raised by the assessee is allowed." Again, the Mumbai Bench of the Income-Tax Appellate Tribunal in Prism Cement Ltd. v. Joint CIT [2006] 285 ITR (AT) 43 (Mumbai) ; [2006] 103 TTJ 63 (Mumbai) held that the amount received by the assessee in lieu of issuance of debentures which were forfeited later on account of non- payment of call money, would assume the character of a capital receipt. Section 41(1) is not attracted and same cannot be treated as deemed business income. It concluded as follows (page 54 of 285 ITR (AT)) : "Thus, the earnest....
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....ed 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 capitalised in the books of account under the head "share capital" and "share premium". As a corollary to the above, when company forfeits the share application money/call money, it is a capital receipt in the hands of company. The same cannot be subsequently recorded as a trading receipt due to change of circumstances. We may also add that the Assessing Officer has alleged that the assessee was indulging in Tax evasion but has not brought any material on record to substantiate his allegation. We are of the view that the Assessing Officer has to substantiate that there has been Tax avoidance or Tax evasion in terms of who has avoided the Tax and in what manner before laying the allegation. There has to be some evidence to prove that the assessee has resorted to some kind of Tax a....
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....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 the provisions of the Act read with the Income-Tax Rules, 1962 ('Rules') and makes an adjustment on the basis of cost of funds + credit spread (3 per cent.) in relation to the international transactions of interest-free loan provided to its associated enterprise ('AE'). 2b. The impugned order erred in holding that the loans advanced by the appellant to its associated enterprise without any interest have to be benchmarked without appreciating that such 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 ....
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....esolution 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 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. 1,43,68,643 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 th....
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....e 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 automatically without stating valid reasons for rejecting the disallowance as made by the appellant under section 14A of the Act. 5c. Without prejudice to the above, the impugned order erred in not accepting the appellant's claim that an amount of Rs. 44,12,426 only has been incurred towards earning the exempt income for the assessment year 2010-11 even though the same had suo motu been disallowed by the appellant in the return of income filed for the assessment year 2010-11. 5d. On the facts and in the circumstances of the case, impugned order was not justified in not appreciating the fact that....
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.... 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 verification and not allowing the credit for Tax deducted at source (TDS) of Rs. 4,35,512 for the subject assessment year. 8b. 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. 8c. 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." 202. As ....
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....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 Rs. 2,06,71,597 on account of arm's length price of "corporate guarantee" by considering adjustment of 3 per cent. made by the Transfer Pricing Officer to be on a higher side and reducing the same to 2 per cent. Further, the Dispute Resolution Panel confirmed the disallowance of Rs. 3,58,26,657 over and above disallowance made by the assessee under section 14A of the Income-Tax Act, 1961 made by the Assessing Officer. With respect to subsidy received by the assessee in the form of sales Tax remission an....
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....solution 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 accordance with the provisions of the Act read with the Income-Tax Rules, 1962 ('Rules') and makes an adjustment of Rs. 3,11,07,323 on the basis of cost of funds + credit spread (3 per cent.) in relation to the international transactions of interest-free loan provided to its associated enterprise ('AE') : 2b. The impugned order erred in holding that the loans advanced by the appellant to its associated enterprise without any interest hav....
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....(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 issued by the Government, when these rules are effective from assessment year 2013-14 only. 7. 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 Rul....
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....ed 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 commission charges in respect of the guarantee provided by the assessee for obtaining the loan by the associated enterprise. ITA No. 66/Kol/2016 (assessee's appeal for the assessment year 2011-12) 214. Many of the grounds raised by the assessee have already been decided while deciding the connected ground of appeal of th....
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....duced 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 the assessee reads as follows : "6. Disallowance on account of additional depreciation under section 32(1)(ii) of the Act 6a. That on the facts and circumstances of the case, the learned Assessing Officer erred in not allowing the claim of the appel....
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....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 next year only with effect from the assessment year 2016-17 in view of the amendment to the Income-Tax Act, 1961 brought about by the Finance Bill, 2015 thereby applying prospectively and not retrospectively. Aggr....
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....levant 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 for less than 180 days in a financial year. However, it nowhere restricts that the balance 10 per cent. would not be allowed to be claimed by the....
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....ance 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 industrial undertaking by way of making more investment in capital goods. Thus, these are incentives aimed to boost new inve....
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....ve 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 50 per cent. will not be allowed in succeeding year. The extra depreciat....
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....a. 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 details of s....
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.... 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. 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 assess....