TaxTMI 
TaxTMI 
2019 (10) TMI 991
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.... in view of the facts and circumstances of the case, in assessing the income of the assessee at Rs. 49,03,25,520/- instead of the returned income of Rs. 20,64,13.580/-. 3. The reference made by the AO to the TPO suffers from jurisdictional error as the AO has not recorded any reasons in the draft assessment order/ assessment order based on which he reached the conclusion that it was 'necessary or expedient' to refer the matter to the TPO for computation of the arm's length price ('ALP'), as is required under section 92CA(1) of the Act. 4. The AO/TPO/DRP erred in not following the detailed procedure as laid down in Chapter X of the Act read with the Rules, for determining the mechanism for computing the arm's length price, and has not allowed the Assessee the benefit of various provisions as stated in the Act and the Rules. 5. That the AO/ TPO/DRP has erred on facts and in law in disallowing remuneration of Rs. 78.24.682/- paid to Ms. Shallu Jindal, Whole Time Director of the assessee. The said addition is illegal and bad in law. 1. The DRP/TPO/AO have erred in law and facts by erroneously questioning the business prudence thereby making addition ....
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....753/- on account of purchase of power. The said addition is illegal, bad in law and without jurisdiction. 1. That, in view of the facts and circumstances of the case and in law, the AO/DRP/TPO erred in rejecting the comparable analysis/ benchmarking analysis undertaken by the Assessee for purchase of power without appreciating that the same meets the requirement of FAR analysis as per Rule 10B of the Income Tax Rules. 1962. 2. That in view of the facts and circumstances of the case and in law, the TPO/AO/DRP have erred in applying the IEX rate. The said rate is not applicable on the facts of the present case. 3. That, without prejudice, no show cause notice has been issued by the TPO as regards application of IEX. Show cause notice is a mandatory requirement and non-issuance of a notice is an illegality. 4. That, without prejudice, TPO erred in exercising power u/s 133(6) of the Act. Information obtained u/s 133(6) could not have been used. That, in any case, the TPO has used the information obtained u/s 133(6) without confronting the assessee with the same, which is not permitted in law. 5. That, without prejudice, the said add....
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....he manufacturing and selling of sponge iron billets, wire rod, oxygen gas and generation of power. The assessee company electronically filed its original return of income on 28.11.2014 for A.Y. 2014-15 declaring total income at Rs. 20,64,13,580/-. Subsequently, the case was selected under CASS for Complete Scrutiny. Notice u/s 143 (2) of the Act was issued on 31.08.2015 and duly served upon the assessee company. Thereafter, notice u/s 142(1) of the Act along with questionnaire was issued on 28.07.2016 and duly served upon the assessee company, wherein certain details were called for. In the meanwhile, a reference u/s 92CA was made by the ACIT, Circle - 17(2), New Delhi to determine the Arm's Length Price in respect of specified domestic transactions undertaken by the assessee during the F.Y. 2013-14. Total adjustment made by the TPO vide order dated 04.10.2017 are as follows: On account of managerial remuneration Rs. 78,24,682/- Purchase of power Rs. 26,85,00,090/- Adjustment on account of allocation of expenses Rs. 3,31,20,337/- Total Rs. 30,94,45,109/- The assessee filed objections before the DRP and the DRP vide directions dated 13.09.2018 direct....
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....The comparison done by the Assessing Officer between the remuneration paid by the assessee company to Ms. Shallu Jindal with the remuneration paid by Essar Steel Ltd to Sh. Ashutosh Agarwala is not proper as well considering the facts that the assessee company is a profit making venture whereas Essar Steel Ltd. is incurring losses. It should also be noted that the assessee company has also complied with all the provisions of the Companies Act, 1956, relating to the payment of managerial remuneration to its managerial personnel appointed and the said payment of managerial remuneration has also been approved by the Board of Directors. The reference made to Circular No. 6P dated 08.07.1968 issued by the CBDT is apt in the present case. Thus, the Assessing Officer was not correct in making addition on account of managerial remuneration. Ground No. 3 (b) is allowed." As regards to contention of the revenue that in earlier Assessment Year, the services provided by the whole Time director was not discussed is not correct as the Tribunal has discussed the same in the findings. Besides the factual aspect in the present year has not changed which is established by assessee from the record....
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.... fair, rationale and just order. There was no scope to interfere with the impugned orders as rightly held by the learned AM in his proposed order. On similar facts claim in earlier years was allowed to the assessee. ......... 43. I see some parallel between the facts of the abovecited case and case in hand, because profit was disclosed in Unit Nos. II and III on which deduction under s. 80-I was claimed and no profit was disclosed in Unit No. I on which no such deduction was permissible and expenses in aforesaid Unit No. I were much higher than in the other two units. It was probable that more expenses were claimed in Unit No. I and some of the expenses of Unit Nos. II and III were diverted and claimed in Unit No. I. But no presumption under the law could be raised that expenses were so diverted. The assessee has produced accounts and details and, therefore, correct position "could have been ascertained from the material statement of relevant persons including management and staff of the assessee could have been examined." But without any investigation and without collecting any material an arbitrary assessment by holding that expenses in Unit No. I should be prop....
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....the Assessment Order. 14. We have heard both the parties and perused all the relevant material available on record. The Tribunal in A.Y. 2013-14 held as under: "12. We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that the assessee is regularly claiming deduction u/s 80IA of the Act in respect of profits derived from the captive power plant/ undertaking. The assessee transfers the power for captive use as per the market rate/below on which CSEB selling the power which is @ 4.64 p.u. In the previous years the Revenue disputed CSEB rates consists @ Rs. 0.38 p.u. on account of electricity tax, cess and for which the transfer price or power price was adjusted to that extent by disallowing to that extent and for the remaining the assessee is entitled for transfer price by treating sale price of power transferred for captive use. The assessee filed appeal before the CIT (A) wherein the CIT (A) allowed the appeal of the assessee. Against the said order the Revenue filed appeal before the Tribunal wherein the Tribunal upheld the finding of CIT (A). The Ld. AR pointed out that as per the new Finance Act, 2013 from ....
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....he Tribunal in the case of D.C.W Ltd. Vs. Addl. CIT(A) vide ITA Nos. 5560 & 5569/Mum/2008 deleted the addition made by the Assessing Officer . We do not find any infirmity in the order of the Ld.CIT(A) on this issue. 60. We find the Delhi Bench of the Tribunal in the case of Jindal Steel & Power Limited (supra) while deciding an identical issue has observed as under "3.6.1 Ground no. 6 of appeal is directed against rejections of the prevailing purchase price and adjustments made to the market price for the electricity thereby adding back the sum of Rs. 3,86,93,638/- as excess deduction u/s 80-IA(8) claimed in its power plant. The assessee is engaged in generation of power and the power so generated is transferred to other units of the assessee captively at the rate at which it is obliged to purchase from the State Electricity of Board. The assessee has made sales of Rs. 51,73,22,855/- from the power plant and the profit has been arrived at Rs. 18,51,63,515/- against which deduction u/s 80IA has been claimed @100%. The sales of power to other units have been considered at the rate of Rs. 3.92, the rate of which CSEB was selling to industrial consumers as o....
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.... then for the purposes of the deduction under this section, the profits and gains of such eligible business shall be computed as if the transfer/in either case, had been made at the market value of such goods or services as on that pate: Provided that where, in the opinion of the Assessing Officer, the computation of the profits and gains of the eligible business in the manner hereinbefore specified presents exceptional difficulties, the Assessing Officer may compute such profits and gains on such reasonable basis as he may deem fit. Explanation.-For the purposes of this sub-seclion, "market value", in relation to any goods or services, means the price that such goods or services would ordinarily fetch in the open market." From the above provision it is clear that the price at which goods are to be transferred from one business of the assessee to another business should correspond to the market value of such goods for computing the profits of the eligible business. The expression 'market value' has been defined in Explanation to sub-section (8) to section 80-IA of the Act, as the price which such goods would ordinarily fetch when sold in the open market. ....
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....n that the assessee as an industrial consumer is also buying power from the Boar, and the Board supplies such power at the rate of Rs. 3.72 per unit to its consumers. This is the price at which the consumers are able to procure the power. We may consider hypothetical situation as well. Had the assessee not been saddled with restrictions of supplying surplus power to the State Electricity Board, it would have supplied power t the ultimate consumers at rates similar to those of the Board or such other competitive rates, meaning thereby that price received by the assessee would be in the vicinity of Rs. 3.72 per unit i.e. charged by the Board from its industrial consumers/users. Thus, under the given circumstances, it would be in the fitness of things to hold that the consideration recorded by the assessee's undertaking generating electric power for transfer of power for captive consumption at the rate of Rs. 3.72 per unit corresponds to the market value of power. Therefore, on this aspect, we uphold the stand of the assessee and set aside order of the Commissioner (Appeals) and direct the assessing officer to allow relief to the assessee under Section 80-IA as claimed. Assessee s....
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....ides the facts are identical and there is no discrepancy made out by the revenue during the assessment proceedings. Therefore, the issue is covered in favour of the assessee. Ground No. 7 is allowed. 15. As regards to Ground No. 8 relating to addition on account of CSR, the Ld. AR submitted that this issue is also covered in favour of the assessee by the decision of the Tribunal in assessee's own case for A.Y. 2013-14 being ITA No. 7176/Del/2017 order dated 31.12.2018. 16. The Ld. DR relied upon the order of the TPO and the Assessment Order. 17. We have heard both the parties and perused all the relevant material available on record. The Tribunal in A.Y. 2013-14 held as under: "34. We have heard both the parties and perused all the relevant material available on record. The Ld. AR relied upon the decision of the Tribunal in case of Jindal Power Ltd. (supra). The Tribunal held as under: "16. We have noted that fundamental objection of the Assessing Officer is that the expenses is voluntary, not mandatory and not for business purposes. As for the contention that the expenses being in the nature of voluntary expenses, which are not mandatory, and which the a....
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....'wholly and exclusively'. Explaining this principle, Hon'ble Supreme Court has, in the case of Sassoon J David & Co. (P) Ltd. vs. CIT [(1979) 118 ITR 261 (SC)] inter aha observed that :"It has to be observed here that the expression "wholly and exclusively" used in s. 10(2)(xv) of the Act does not mean "necessarily". Ordinarily, it is for the assessee to decide whether any expenditure should be incurred in the course of his or its business. Such expenditure may be incurred voluntarily and without any necessity and if it is incurred for promoting the business and to earn profits, the assessee can claim deduction under s. 10(2)(xv) of the Act even though there was no compelling necessity to incur such expenditure. It is relevant to refer at this stage to the legislative history of s. 37 of the IT Act, 1961, which corresponds to s. 10(2)(xv) of the Act. An attempt was made n the IT Bill of 1961 to lay down the "necessity" of the expenditure as a condition for claiming deduction under s. 37. Sec. 37(1) in the Bill read "any expenditure, laid out or expended wholly, necessarily and exclusively for the purposes of the business or profession shall be allowed." The introductio....
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.... * . . any contribution made by an assessee to a public welfare fund which is directly connected or related with the carrying on of the assessee's business or which results in the benefit to the assessee's business has to be regarded as an allowable deduction under section 37(1) of the Act. Such a donation, whether voluntary or at the instance of the authorities concerned, when made to a Chief Minister's Drought Relief Fund or a District Welfare Fund established by the District Collector or any other fund for the benefit of the public and with a view to secure benefit to the assessee's business, cannot be regarded as payment opposed to public policy It is not as if Tie payment in the present case had been made as an illegal gratification. There is no law which prohibits the making of such a donation. The mere fact that making of a donation for charitable or public cause or in public interest results in the Government giving patronage or benefit can be no ground to deny the assessee a deduction of that amount under section 37(1) of the Act when such payment had been made for the purpose of assessee's business. 8. In the case of CIT v. Madras Refineries Ltd....
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....iture to discharge the responsibilities of a 'good corporate citizen which brings goodwill of with the regulatory agencies and society at large, thereby creating an atmosphere in which the business can succeed in a greater measure with the aid of such goodwill'. 18. We have also take note of the fact that in view of insertion of Explanation 2 to Section 37(1), with effect from 1st April 2015. which provides that "for the removal of doubts, it is hereby declared that for the purposes of sub-section (1), any expenditure incurred by an assessee on the activities relating to corporate social responsibility referred to in section 135 of the Companies Act, 20 3 (18 of 2013) shall not be deemed to be an expenditure incurred by the assessee for the purposes of the business or profession", the expenses incurred in discharging corporate social responsibility are not deductible in computation of business income. Learned Departmental Representative submits that this amendment should be treated as clarificatory in nature, as it is stated to be in so many words, and we should, therefore, hold that the expenses in discharging corporate social responsibility were outside the ambit of ....
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....ars to have been the objective pursued by the legislature, it would a purposive interpretation giving it a retrospective effect but when a tax legislation imposes a liability or a burden, the effect of such a legislative provision can only be prospective. We have also noted that the amendment in the scheme of Section 37(1) is not specifically stated to be retrospective and the said Explanation is inserted only with effect from 1st April 2015. In this view of the matter also, there is no reason to hold this provision to be retrospective in application. As a matter of fact, the amendment in law, which was accompanied by the statutory requirement with regard to discharging the corporate social responsibility, is a disabling provision which puts an additional tax burden on the assessee in the sense that the expenses that the assessee is required to incur, under a statutory obligation, in the course of his business are not allowed deduction in the computation of income. This disallowance is restricted to the expenses incurred by the assessee under a statutory obligation under section 135 of Companies Act 2013, and there is thus now a line of demarcation between the expenses inc....