TaxTMI 
TaxTMI 
2017 (4) TMI 1489
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....ading of Petrochemicals, Polyester, Fibre Immediate Textiles, Generation & Distribution of Power and Operation of Jetties and related infrastructure, Retail Marketing and Petroleum Products and Investment. During the course of scrutiny assessment, AO made disallowance u/s.14A. The depreciation on capital value of goods purchased from Durga Iron & Steel Ltd., and Surajbhan Rajkumar Pvt. Ltd., was also disallowed. Claim of deduction u/s.80IA was also declined by AO. AO also disallowed professional fees paid to various companies on the plea of non-genuine. Addition was also made on account of non-funded guarantee given by assessee to bank of America for giving loans to its associated concern. Addition was also made in respect of interest free loans and advances given to subsidiary. Sales Tax incentives received from Government was also added by AO treating the same as revenue receipt. 5. By the impugned order, CIT(A) deleted the addition made on account of notional Sales Tax which has been treated by the AO as revenue receipt. Partial relief was given on account of claim of depreciation by directing the AO to adopt WDV as on 01/04/2008. Assessee's claim for deduction u/s.80IA was a....
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....sonable. 3. The CIT(A) erred in confirming the disallowance of depreciation of Rs. 14,19,106/on the capitalized value of goods purchased from Durga Iron & Steel Ltd. and Surajbhan Rajkumar Pvt. Ltd. in A.Y. 2003-2004. The Appellants submits that the cost of the goods purchased from the above parties were capitalised as plant and machinery in A.Y. 2003-04 and were used during the year under consideration and hence depreciation u/s. 32 of the I.T. Act on such capitalised value of the goods is allowable. 4. The CIT(A) erred in confirming the disallowance of depreciation of Rs. 55,35,000/- in respect of jetties constructed by the appellant and used for the purpose of its business. The CIT(A) has confirmed the order of AO wherein he failed to appreciate that since the jetty was constructed by the appellant at its own cost and was used for the purpose of its business, depreciation as per law was allowable. The appellant prays that depreciation on the jetties of Rs. 55,35,000/- as claimed by it be allowed. 5. The CIT(A) erred in confirming the disallowance of an amount of Rs. 5,45,40,000/- being Professional fees paid to various companies as be....
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..... Grounds taken by Revenue reads as under:- 1. On the facts and in the circumstances of the case Iaid in law, the Ld. CIT(A) erred in deleting the notional Sales Tax of Rs. 15,38,71,72,697/- which has been treated as revenue receipt by the A.O. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in allowing depreciation as claimed by assessee at Rs. 35,29,64,19,750/- against the deprecation allowed by the A.O. at Rs. 32,67,34,84,564/- by directing to adopt the WDV of the assets as on 01-04-2008. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in not deciding the issue on merits in view of provisions of section 80IA of the Income tax Act, 1961. 4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in not appreciating that section 801A(8) has clearly defined that "Market Value" means the price of goods/services would fetch, if these were sold by the unit/undertaking in the open market subject to statutory regulations, if any and the assessee had clearly violated this section 5. On the facts and in the circumstances of the case and in law....
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.... of the case and submissions of the appellant as against the observation/ findings of the AO in his order. The contentions raised by the appellant in respect of the ground of appeal are being discussed and decided as under: 1. This is a recurring issue in the case of the appellant, In the decision of Hon'ble Special Bench of Mumbai ITAT in Appellant's own case for AY. 19~6-87 (88 ITD273) (S.B.) it was held that: "The question for consideration is whether the Tribunal in the case of Reliance Industries Ltd. (Supra) had correctly appreciated and interpreted the ratio of the decision of the Supreme Court in Sahney Steel & Press -Works Ltd's case (supra). On a careful reading of the order of the. Tribunal in the case of Reliance Industries Ltd. (Supra), it appears to us that the ratio of the judgment in Sahney Steel & Press Works Ltd's case (supra) has been correctly interpreted and appreciated by the Bench (Para.28) The Scheme framed by the Government of Maharashtra in 1979 and formulated by its Resolution dated 5-1-1980 has been analysed in detail by the Tribunal in its order in RlL for the assessment year 1985-86 which we have already referred ....
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....irect nexus with the fixed capital investment and that it could not be said that the subsidy was given with the object of assisting or lending a helping hand to the assessee in its business operations. (para 29) The Tribunal was thus aware of the distinction between the subsidy given with the object of setting up the industry and the subsidy given after the industry commences of production and conditional upon the commencement of production. Factually, the Tribunal found that the assessee's case which fell under the Maharashtra scheme, was a case where the subsidy was given for the purpose of facilitating the assessee to set up an industry in Patalganga, Raigad District, which is a notified area, The actual disbursement took place after the assessee commenced production, but, according to the Tribunal, it was only a mode of disbursement and had nothing to do with the object for which the subsidy was given. Thus, it was found that the Tribunal did notice The crucial observations of the Supreme Court Sahney Steel & Press Works Ltd.'s case (supra) which gave primacy to the object of the subsidy over the fact that it was given after the commencement of production. (par....
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....ying on the orders of my' Ld. predecessors in preceding assessment years, I am inclined to allow the appellant's claim for treatment of Notional Sales. Tax of Rs, 1538,71,72,697/- as Capital receipt not liable to tax. This ground of appeal is therefore allowed. iv. Since the main contention of the Appellant regarding notional Sales tax being capital in nature not liable to tax has 'been allowed as above, it is not considered necessary to go into the alternative plea of the Appellant claiming the Notional Sales Tax as deductible U/S 43B. However, it may be pointed out that similar alternative plea taken in A.Y. 2003*04 to A.V, 2006-07 has been rejected by my Ld. Predecessors for the reasons that the CBDT circular no, 496 dated 25.09.1987 clarified the position regarding applicability of the provisions of Section 43B only to Sales Tax. Deferral Scheme. This circular did not apply to the Sales Tax exemption scheme availed of by the Appellant. Therefore, the alternate claim made by the appellant seeking deduction under section 43B is rejected. 12. We had considered rival contentions and found that this issue has already been decided by the Tribunal in assessee's....
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....f capital receipt not liable to tax. It was contended that the Tribunal also considered the decision of the Hon'ble Apex Court in the case of Sahney Steel and Press Works Ltd.(supra). He submitted that the Special Bench while deciding the issue in favour of the assessee also considered the decision of another Bench of ITAT Mumbai in the case of Bajaj Auto Limited (supra) which had taken a contrary view that the subsidy is revenue receipt. It was contended that in subsequent assessment years ITAT has allowed similar claim of the assessee and even in the just preceding assessment year 2001-02 the claim for deduction of notional sales tax was held in the nature of capital receipt not liable to tax. The ld. CIT(A) accepted the above contention of the assessee and held that the claim for deduction of notional sales tax of Rs. 1024,34,61,999/- should be allowed as deduction as it is in the nature of capital receipt not liable to tax. 4.4 The assessee has also taken an alternative submission before the ld. CIT(A) that if the amount of subsidy is regarded as revenue receipt then such sales tax incentives received should be allowed as a deduction under section 43B of the Act wh....
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....nch of the Tribunal in assessee's own case for assessment year 2002-03 dated 28.5.2012 (supra), we uphold the order of ld. CIT(A) that the claim for treatment of notional sales tax is capital receipt. Hence, ground No.1 of the appeal taken by the department is rejected. Since ground No.1 in assessee's appeal is an alternative ground, we hold that ld. CIT(A) has rightly held that it is not necessary to go into the alternative plea of the assessee claiming the notional sales tax is deductible under section 43B of the Act. Therefore, ground No.1 of the appeal taken by the assessee is rejected. 13. As the facts and circumstances during the year under consideration are same, respectfully following the order of the Tribunal in assessee's own case vis-à-vis decision of the Special Bench in case of Reliance Industries Ltd., 88 ITD 273, Shree Balaji Alloys Ltd., 138 DTR 36(SC), Rasoi Ltd., 335 ITR 438(CAL), Bougainvillea Multiples Entertainment Centre (P) Ltd., 373 ITR 014(Delhi), Kirloskar Oil Engines Ltd., 364 ITR 88 (Bom) and Associated Cement Cos. Ltd., ITA No.7594 & 7644/M/04, we do not find any infirmity in the order of CIT(A) for treating the same as capital receipt....
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....d also apply subsequent to assessment year 1988-89 when the concept of block of asset was introduced for the purpose of computing claim for depreciation and section 34 requiring filing of prescribed particulars stands omitted. This issue has come up before the Hon'ble lTAT, Mumbai in various appeals cited hereinabove, where after analysing the Supreme Court Judgement in the case of Mahindra Mills, the Hon'ble Tribunal has come to a conclusion that the depreciation can be allowed only when the claim for such deduction is made by the assessee, Moreover, the Hon'ble Tribunal has further observed that even after omission of section 34 and introduction of block 'of asset 'concept from assessment year 1988-89, the ratio had laid down by the Supreme Court still holds good. The claim for depreciation is optional and can be allowed only if claimed by the assessee. The Hon'ble ITAT has further referred to the Explanation -5 inserted in Section 32 of the IT.Act by Finance Act, 2001 with effect from 1/4/2002 and have observed that the Explanation-5 has been prospective in its effect; the principle laid down by the Supreme Court holds good and applies to all the years pr....
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....iation of Rs. 3903,53,90,481/- as against the claim of assessee of Rs. 4977,74,24,949/-. The assessee filed appeal before the First Appellate Authority. 19.1 Ld. CIT(A) stated that the legal position as it stood prior to 1.4.2002 i.e. prior to assessment year 2002-03, the claim for depreciation was optional. The amendment made by insertion of Explanation 5 to section 32(1) of the Act is prospective whereby the statute made the granting of depreciation mandatory. Ld. CIT(A) has stated that in the earlier years, the assessee did not claim any depreciation on the said plants/units. Hence, it was eligible for the claim of depreciation on the original WDV and not on the reduced WDV. Thus, the ld. CIT(A) stated that the said issue had been considered in the assessee's own case in the preceding years including assessment years 2001-02 and 2002-03 and view has been taken that the claim for depreciation cannot be thrust upon the assessee and the issue was decided in favour of assessee. The ld. CIT(A) directed the AO to adopt WDV of the assets as on 1.4.2002 on the basis of effect given to the order of ld. CIT(A) for the preceding assessment year and allow depreciation according....
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.... 80IA in respect of its power generating undertakings and the' submissions of the assessee, in my opinion the question which is required, to be answered in respect of the ground of appeal taken by the assessee is whether the action of the AO of restricting the deduction is correct in the present facts and circumstances of the case.. To answer the question, it would be pertinent to refer to Sec. 80IA(8) of the Act since the said section is relevant in the present case Sec. 80IA(8)reads as follows: "Where any goods (or services) held for the 'purposes of the eligible business are transferred to any other business carried on by the assessee, or where any goods (or services) held for the purpose of any other business carried on by the assessee or where any goods (or services) held for the purpose of any other business carried on by the assessee are transferred to the eligible business and, in either case the consideration, if any, for such transfer as recorded in the accounts of the eligible business does not correspond to the market value of such goods (or services) as on' the date of the transfer, then for the purposes of the deduction under this' section, th....
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....the proviso to Sec, 80lA(B), because it is the proviso that the AO has invoked to work out the deduction available to the assessee u/s. 80lA. Perusal of the facts on record show that the assessee had disclosed that it has sold/transferred electricity to related concerns and, that the said transfer had been done at the fair market value of the goods. In the earlier 'assessment years in the regular assessments, the basis of taking the market value of the goods had been accepted by the Assessing Officer. I find that the Assessing Officer has assumed the power u/s. 80IA(B) without bringing any material on record to show that the price recorded in the books by the eligible business did not correspond to the market value of the goods as on the date of the transfer. It is important to note that for giving a finding that a particular value did not correspond to the market value, the market value has to be found out. Hence, the section pre-supposes that there is another value attached to the said goods which would represent the market value of the goods. I find that there is nothing brought on record to show as to how the price recorded in the Books does not correspond to the m....
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.... i.e. consumers, at a rate higher than the rate at which the 'State Distribution Agency had procured the electricity, at. 'Another important aspect which is required to be considered is' that the: rate at which the 'Independent Power Producers' sell to the; State - Distribution Agency' under the Electricity Act, 1948 is a regulated rate which is determined ,on the basis' of the normative parameters 'determined by the Government of India under its Notification No, 251 (E) 'dated 30.03.1992. The normative parameters have been fixed by the Government, which is required to be followed by all, and no deviation in fixing the tariff is allowed Hence, even here, the rate cannot be taken to be the "price that such goods would ordinarily fetch in the open 'market" as this is the regulated rate fixed by the Government. It is also seen that the Assessing Officer has taken 16% return on capital base to work out the profits of the eligible business of the. assessee eligible for deduction u/s, 80IA of the IT.Act, 1961. 16% return on capital base in Notification No. 251(E) dt. 30/3/1992 is only an exercise for fixation, of tariff. It is 'one 'of the ....
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.... relating to Sec, 80A(6), I find that same submissions were made by the assessee before the Assessing Officer during the course of the re-assessment proceedings. I find that the AO has not controverted the submissions of the assessee.I am also of the opinion that since the said Sec, 80(6) has been specifically made retrospective from a specific date i.e. w.e.f.01.04.2009, the same would apply only with respect to the A.Y. 2009-10 onwards and would not apply to the A.Y.* 2VUtj-07 in question. This is also clear from the fact that the Explanation 10 Sec. 80IB(10) was inserted by the Finance (No.2) ct, 2009 and was made operational w.r.e.f 01/04/2001 while sec. 80A(6) was also inserted by the Finance (No.2) Act, 2009 and was made operational w.r.e.f 01/04/2009. Further, as per the explanation to Sec. 80A(6), the market value means the price that such goods or services would fetch if these were sold by the undertaking or unit or 'enterprise or eligible business in the open market, subject to statutory or regulatory restrictions, if any. In the present case, the AO has not brought any material on record to show that the goods supplied by the undertaking were at a p....
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....s of the statutory regulations. Such a price cannot be equated with the market value as understood for the purposes of s.80-IA(8) The price recorded by the assessee Rs. 3.72 per unit can be considered to be the market value-for the purposes of s. 80-IA(8). This is for the reason that the assessee as an industrial consumer is also buying power from the Board 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. 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 power for captive "consumption at' the rate of Rs. 3.72 per unit corresponds to the market value of power. The AO is directed to allow relief to the assessee under s.'80IA as claimed:" It is pertinent to note that the assessee is not supplying electricity to the State Electricity Board or to any other power distribution agency. In the case of West Coast Paper Mills Ltd. reported in 1000 TT] 833 (Mum), the Hon'ble Tribunal has held as follows: "Having held t....
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....nits varies from Rs. 4.55 per KWH to,Rs. 4.52 per KWH and for the sake of uniformity, the same had been taken at the average rate of Rs. 4.54 per KWH for computing the claim u/s. 80IA for the power generating units. The working had been done based on the price of electricity charges by Dakshin 'Gujarat. Vij company, a state owned company which was the only supplier of electricity other than the captive power plants. In views of the decisions of Hon'ble Tribunals as. discussed above, the Assessing. Officer will examine whether the submission of the assessee with respect to the rate taken is correct. If it is found that the rate charged by the suppliers is lower than the role adopted for sale by the captive power generating units of the assessee, such rate would be taken by the Assessing Officer for computing the profits of 'the' eligible-business, eligible for deduction u/s. 80IA. However, if the' rate charged. by the suppliers is the same as the rate adopted for sale' by the 'captive power generating units of the assessee, such rate' adopted should be accepted for' the purpose of working out the deduction u/s. 80IA. Subject to the above, thi....
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....Tribunal referred to earlier in the assessee's own case. 22. We had gone through the decision of the Calcutta High court in M/s.ITC Ltd. and found that it has no connection to the facts of the assessee's case for following reasons: 23. First, the judgement of the Calcutta High Court was considering the provisions relating to the Electricity Act as they stood prior to the Electricity Act, 2003 as it was dealing with A Y 2002-03. No doubt, the Calcutta High Court has referred to Section 61 & 62 of the Electricity Act, 2003, but that is only in context of discussion relating to the rates fixed by Tariff Regulation Commission for sale of electricity by generating companies. The decision therefore cannot hold the field for A Y 2007-08, 2008-09 and 2009-10 as these Assessment years are years after the Electricity Act came into force on 10.06.2003. 24. It is therefore necessary to see what is the effect of the Electricity Act 2003 and its impact on and regulation of tariffs. The Preamble to The Electricity Act 2003 states as follows: "An Act to consolidate the laws relating to generation, transmission, distribution, trading and use of electricity and generally fo....
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....ntending to set-up a hydrogenating station shall prepare and submit to the Authority for its concurrence, a scheme estimated to involve a capital expenditure exceeding such sum, as may be fixed by the Central Government, from time to time, by notification. 29. It is only hydro-electric electricity generation which is regulated u/s 8. In the case of the assessee, the generation is for captive consumption and therefore section 9 is material and it reads as under: "Section 9. (Captive generation): (1) Notwithstanding anything contained in this Act, a person may construct, maintain or operate a captive generating plant and dedicated transmission lines: Provided that the supply of electricity from the captive generating plant through the grid shall be regulated in the same manner as the generating station of a generating company. Provided further [flat no licence shall be required under [his Act for supply of electricity generated from a captive generating plant to any licencee in accordance with the provisions of this Act and the rules and regulations made thereunder and to any consumer subject to the regulations made under subsection (2) of secti....
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.... the proviso makes it clear that it is only when the Captive Generation Plant sells to an outsider through the high voltage backbone system of interconnection transmission, that the full vigour and rigour of regulation under the Electricity Act, 2003 will be attracted. The 2nd proviso makes it clear that although no license is required when a Captive Generation plant supplies electricity to a consumer, the rules and regulations of the Act made u/s 42(2) would apply for the sale of electricity by a Captive Generation plant to a consumer other than himself. 34. This fact makes it clear that the provisions of section 42(2) apply only to a Captive Generation plant in respect of sales made or electricity consumed by a third party. This distinction is very significant in as much as there is no regulation of intra department consumption by any person generating electricity. In other words, for a person generating electricity and consuming it there is no obligation and no duty to either obtain a licence to set up a plant or transmit electricity which is self consumed. 35. The Calcutta High Court in page 11 has held "the rate at which electricity was purchased from Andhra State Electr....
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.... deduction shall be made in respect of any expenditure incurred by the assessee as a cultivator or receiver of rent-in-kind. "(2) For the purpose of sub-rule (1) 'market value' shall be deemed to be (a) where agricultural produce is ordinarily sold in the market in its raw state, or after application to it of any process ordinarily employed by a cultivator or receiver of rent-in-kind to render it fit to be taken to market, the value calculated according to the average price at which it has been so sold during the relevant previous year; (b) where agricultural produce is not ordinarily sold in the market in its raw state or after application to it of any process aforesaid, the aggregate of- (i) the expenses of cultivation; (ii) the land revenue or rent paid for the area in which it was grown; and (iii) such amount as the Assessing Officer finds, having regard to all the circumstances in each case, to represent a reasonable profit. " 36. The revenue argued that Rule 7(2)(a) ought to be followed and according to the assessee, Rule 7(2)(b) was the correct rule to be followed. The Supreme Court rejected the argument of the asses....
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.... and the tax officer must assume that there was an open market in which the asset could be sold. In view of the aforesaid, it is very difficult to uphold the contention of Mr. Nariman that in order to find out the market price there has to be an actual market where there will be 'a concourse of buyers and sellers'. 39. Having discussed these principles, it laid down the following criteria for determining the price at which the sugar cane was said to have been sold to the manufacturing unit of the assessee. It noted that the assessee company actually bought sugarcane from a large number of growers, year after year in the ordinary course of business. The price at which it buys the sugarcane must be the market price and if the price was controlled, the controlled price will be taken as the market price, because it is at this price that a willing buyer and a willing seller are expected to transact business. Applying, this principle of the facts of the assessee's case, there is only a single buyer for the electricity generated by the Captive Generation Power which is the assessee himself. Just as in Thiru Arooran Sugars Ltd. v. CIT, the sugarcane produced by Thir....
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....red under this Act for supply of electricity generated from a captive generating plant to any licensee in accordance with the provisions of this Act and the rules and regulations made thereunder and to any consumer subject to the regulations made under sub-section (2) of section 42. " 43. Therefore, the decision of the Calcutta High Court is distinguishable as in that case in the.period before the introduction of the Electricity Act, 2003 a captive generating plant would sell electricity only to a generating or distribution and generating company whereas in the case of the assessee after the enactment of the Electricity Act, 2003 the Assessee would sell to "any licencee" and is not restricted to selling electricity only to a distribution company or a generating and distribution company. 44. It was in these circumstances and for these reasons that the Calcutta High Court concluded that the purchase price would be different from the selling price of electricity on account of wheeling and distribution of losses. The Calcutta High Court concluded at page 12 as under: " The rate at which electricity can be supplied to a consumer by the distribution licensee and the rate a....
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....alcutta High Court had referred to section 62 of the Electricity Act 2003, whereby generating companies can recover expected revenue on the basis of tariff fixed by the commission. The provisions of section 62 of the Electricity Act 2003 reads as follows: 62 (1) The Appropriate Commission shall determine the tariff in accordance with provisions of this Act for - (a) Supply of electricity by a generating company to a distribution licensee: Provided that the Appropriate Commission may, in case of shortage of supply of electricity, fix the minimum and maximum ceiling of tariff for sale or purchase of electricity in pursuance of an agreement, entered into between a generating company and a licensee or between licensees, for a period not exceeding one year to ensure reasonable prices of electricity; (b) Transmission of electricity; (c) Wheeling of electricity; (d) Retail sale of electricity Provided that in case of distribution of electricity in the same area by two or more distribution licensees, the Appropriate Commission may, for promoting competition among distribution licensees, fix only maximum ceiling of tariff for re....
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....aipur v. Godavari Power & Ispat Ltd - 133 ITD 502 (Dilaspur ITAT) 2. Eveready Spinning Mills (P) Ltd v. ACIT, Circle-1, Tirupur - 17 Taxmann 254 (AY 2007-08) Chennai ITAT. 3. Assam Carbon Products Ltd v. ACIT - 100 TTJ 224 (IT AT Kolkatta) 4. West Coast Paper Mills Ltd V. JCIT -100 TTJ 833 (Mum) Mumbai ITAT 5. Add!. CIT v. Jindal Steel & Power Ltd - 16 SOT 509 (ITAT Delhi). 6. Shree Cement Ltd v. The Addl. CIT Jaipur-ITA NO.503/JP/2012 (Jaipur ITAT) 54. In any view of the matter, several decision of the Tribunal listed below have taken a view consistent with a view taken by Tribunal in assessee's own case for A Y 2006-07. In the circumstances, except in the case of Calcutta High Court in M/s. ITC Ltd, there are four judgements of other High Court in assessee's favour and six judgements of Tribunal in assessee favour and no contrary decision of Tribunal. In the circumstance, the appropriate course of action to follow would be the decision of Supreme Court in the case of Thiru Aroovan Sugar Mills and the decisions of Calcutta High Court which are earlier in point of time and decision of Chattisgarh and Madras High Court and vari....
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....in assessee's own case for preceding assessment year 2002-03 on similar facts has held that proportionate disallowance of interest is not justified as the assessee's own funds are far in excess than the interest free advances given by assessee and the investment made which is giving exempt income to the assessee. 61.3 At the time of hearing, ld. Representatives of the parties have categorically stated the findings given in assessment year 2003-04 will be applicable for this assessment year 2006-07 as well. Since, we have held vide para 9.6 that ld. CIT(A) is not justified to make proportionate disallowance of interest as assessee's own funds are far in excess interalia than the investment made which is giving exempt income to the assessee, and have held that the disallowance of interest as computed by ld. CIT(A) by applying Rule 8D read with section 14A of the Act is not justified. 61.4 In so far as disallowance of administrative expenses u/s 14A of the Act, we have held vide para 9.7 that it is fair and reasonable to restrict the disallowance to 1% of the exempt income. Since in the assessment year under consideration, the assessee has earned interest....
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.... well as cited by learned AR and DR during the course of hearing before us in the context of factual matrix of the case. During the A.Y. 2007-08 we found that the total interest free own funds of the assessee are as under: Particulars 31.03.2007 Rs in Crore Own Funds: Shareholder Funds (Share Capital + Reserves) (Refer page 6 of the paper book): 63,967.13 Less: Investments yielding exempt income (Refer page 69 of the assessment order) 14,954.12 Excess of own Fund 49,013.01 62. From the above table it is clearly evident that the assessee's own funds are far in excess of total investments (which includes investments of Rs. 1,602.11 crares giving rise to exempt income). Therefore, no interest expense can be attributable for making disallowance u/s 14A of the I.T. Act. 63. In this connection reliance can be placed on the following judgments i) HDFC Bank Limited vs Dy. Commissioner of Income tax - 2(3), Mumbai & Ors. (Writ Petition No.1753 of 2016) (ii) CIT vs HDFC Bank Limited [ITA 330/2012 Bom HC] (iii) CIT Vs. Reliance Utilities & Power Ltd reported in 313 ITR 340 [Bombay HC] (iv) CIT vs GUJARAT STATE FERTILIZERS & ....
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.... / shipping fee on use of jetty, which was to be set-off against capital investment made by the assessee. The assessee treated this right to use the jetty as an intangible asset and claimed depreciation on the cost incurred @ 25%. The Assessing Officer stated that the assessee was not entitled to depreciation on the cost of construction of jetty as the entire cost being reimbursed by GMB by way of rebate on the wharfage charges which otherwise the assessee was liable to pay in full. Further, the right to use the jetty was not in the nature of any business or commercial right similar to normally accepted intangible asset such as knowhow, patents, copy rights, trade marks, license, franchises or any other business or commercial rights in similar nature. That entire investment in the jetty was quantifiable and the return from the investment was specified based on which the rebate on wharfage charges was determined. It is relevant to state that in the said case, as per the agreement, the ownership of the jetty was to be with GMB although, the cost of building and jetty was made by the assessee. In the said case also, the assessee was required to pay landing and shipping fees (known as ....
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....like building, machinery, plant or furniture. Any other expenditure which did not result in the acquisition of these intangible assets can only be treated as intangible assets. In our view, substantial expenditure incurred by the assessee is for certain commercial considerations and business interest has resulted in business advantage to the assessee in the form of priority user of the infrastructure facility that was badly needed by the assessee and its associates concerns. The assessee would have been forced to incurred extra expenditure if this expenditure were not incurred by the assessee. After all the businessman does not incur any expenditure unless it gives some business advantage and the huge expenditure incurred by the assessee is only to get such business advantage like priority user by the assessee company and right to claim rebate on the wharfage charges payable or to guard against the possible increase in the wharfage charges that may be necessitated by efflux of time or economic inflation. All points are considered together, in our view, the expenditure in question give rise to acquisition of licence or other business or commercial right which are really in the natur....
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....sons. During the course of assessment proceeding, the assessee explained that it has availed the professional services of Shri. S.K. Gupta for the business purposes and made the payments to him which duly constitute business expenses deductible u/s 37 of the Act. However, the AO made the disallowance of said professional feed, in view of the admission made in the statement given by Shri S. K. Gupta and the said disallowance has been confirmed by the CIT(A). 73. From the record we found that during the subjected year assessee has availed the services of Shri S. K. Gupta and paid the professional fees and also reimbursed expenses to his companies. The payments towards professional services charges and reimbursement of expenses were contended to be genuine and incurred for business purposes, hence, the same was claimed as deduction u/s 37 of the Act. We found that identical issue has been decided by Tribunal in favour of the assessee in preceding year i.e. A Y 2006-07 (Reopened) in ITA No.536/Mum/2012 order dated 29/05/2015, wherein the ITAT has deleted the disallowance following the decision of DCIT Vs. M/s. Link Engineers Pvt Ltd (ITA No.968 & 2248/Del/2011). 74. As the facts ....
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....icted to 0.385% after having the following observation. 80. Relevant observation of the Tribunal in the assessment year 2005-06 in its order dated 13/09/2013 was as under:- 52.2 Relevant facts giving rise to above grounds of appeal are that during the previous year, the assessee provided corporate guarantee to Bank of America in connection with loans of Euro 80 Million taken by its associated enterprises viz Trevira GmbH. TPO has stated that assessee has not charged any guarantee fee/commission to Trevira GmbH for providing said guarantee. The assessee stated that guarantees have been provided by it to Banks which are not its associated enterprises. That the assessee has not incurred any cost for providing guarantees and the same have been provided as part of normal commercial practice followed by bank of taking guarantee of parent company and /or directors. The assessee also contended that the transaction of providing guarantee does not fall within the definition of "international transaction"under section 92B of the Act. 52.3 TPO did not accept above contention of the assessee. He stated that providing guarantee to its associated enterprises by assessee is a ....
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.... it was contended that assessee provided guarantee to the Bank against the loan given by them to assessee's subsidiary as normal commercial practice in the capacity of parent company. The assessee reiterated its submissions as made before TPO that the transaction of providing guarantee by a parent company for the loan taken by its associated enterprises does not constitutes an "international transactions" as defined in section 92B read with section 92(1) of the Act. It was also contended that assessee had given non funded corporate guarantee to the bank which is not comparable with independent instances relied upon by the TPO/AO for computing ALP of 2.5% guarantee commission as comparable case. It was also contended that guarantee was given as a part of commercial exigency. Since such incidental benefit attributable solely to its being a part of a larger concern, it cannot be considered as providing any services or giving rise to any income which could be considered for application of transfer pricing provisions. The assessee also furnished details regarding guarantee commission charged by bank in India for giving non funded guarantees and it varies from 0.25% to 0.6%, the deta....
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....he above cited table, from the 10 cases given the average rate on which the appellant has paid guarantee commission to third parties is 0.38%. Therefore, in my view the rate of 0.38% is the appropriate rate. In view of above discussion I direct the AO to take the rate of 0.38% as guarantee commission payable by the appellant. The addition is thus restricted to Rs. 1,71,30,400/- and the appellant gets a relief of Rs. 9,55,69,600/- (11,27,00,000 - 1,71,30,400)." Being aggrieved the assessee as well as department, both are have raised this issue in their respective appeal before the Tribunal. 52.8 On behalf of the assessee, the ld. AR submitted that the assessee had given guarantee to the bank for the loan given to its associated enterprises because of business interest. Ld. AR submitted that the assessee has given guarantee to the bank I.T.A. No.4475/Mum/2007 68 and 7 other appeals and thus transaction is between the assessee and the bank, and it is unrelated party. It is not a transaction between the assessee and its associated enterprises and thus, cannot be termed as "international transaction" under section 92B of the Act. During the course of hearing the attent....
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....rders of ld. CIT(A) as well as TPO. There is no dispute to the fact I.T.A. No.4475/Mum/2007 69 and 7 other appeals that for providing guarantee by the assessee to Bank of America against the financial assistance given to assessee's AE Trevira GmbH, the assessee has not charged any commission. In this regard, the assessee firstly contended that providing of guarantee by the assessee to the bank on behalf of its AE does not constitute an "international transaction" and the said transaction is between the assessee company and the bank, who are unrelated parties and not between the two associated enterprises. We are of the considered view that the above contention of the ld. AR has rightly been rejected by authorities below and particularly in view of the amendment made by Finance Act, 2012 with retrospective effect from 1.4.2002 by way of Explanation -(i) (c) of section 92B to include guarantee in the Expression "international transaction". Therefore, the contention of the ld. AR that providing of guarantee to the bank on behalf of its AE does not fall in the definition of "international transaction" has no merits. We agree with TPO that there is a benefit to assessee's AE by ....
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....the rates varies from 0.25% to 0.6% as mentioned hereinabove. 52.12 We are of the considered view that the ld. CIT(A) on the facts and circumstances of the case has rightly taken average rate on which the assessee has paid guarantee commission to third party, which comes to 0.38%. Hence, we uphold the order of ld. CIT(A) to charge guarantee commission at the rate of 0.38% being ALP for the guarantee given by the assessee to Bank of America on behalf of its AE Trevira GmbH. In view of above, we reject Ground No.9 of the appeal taken by assessee as well as Ground No.6 of the appeal taken by the department. 81. Similarly in the assessment year 2006-07, the Tribunal observed as under:- 64.3 We have considered the above submissions of ld. Representatives of the parties and orders of authorities below. We agree with the ld. Representatives of the parties that similar issue has been considered by the Tribunal in preceding assessment year i.e. assessment year 2005-06 in paras 52.2 to 52.12 hereinabove. Since the facts and the issue in this assessment year i.e assessment year 2006-07 are identical to assessment year 2005-06, we for the reasons mentioned in paras 52.10 t....
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....e ought to have charged the interest on the said loans at the market rate prevailing on the date on which such loans and made the adjustment of interest @ 5.3% which worked out to Rs. 13,52,01,303/-. The CIT(A) upheld the adjustment of Rs. 13,52,01,303/- made by the TPO. 87. Contention of learned AR was that loans and advances given to the subsidiary companies are out of its own funds are given for furthering the business interest of the assessee and hence no disallowance is called for. 88. We have considered rival contentions and gone through the orders of lower authorities. We found in the case of Taurian Iron & Steel Co. Pvt. Ltd., v/s. ADCIT (ITA No.5920/Mum/2012) similar adjustment has been restricted at LIBOR + 1.50%. In the case of Golawal Diamonds v/s. ACIT (ITA No. 518/Mum/2014) also adjustment has been restricted at LIBOR + 1.50%. Respectfully following the verdicts laid down by Tribunal in these cases under similar facts and circumstances, we direct the AO to restrict adjustment at LIBOR + 1.50%. We direct accordingly. 89. In Ground No.5 of the department appeal, the department is aggrieved by action of CIT(A) for allowing an amount of Rs. 4,83,25,200/- u/s. 40(....
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.... debt service invoice dtd. 23/1/2007. Approval for the above referred ECB was obtained from the Government of India, Ministry of Finance, Department of Economic Affairs (GOI) vide their letter dt.30/07/1996. Appellant made remittance of above mentioned interest without deduction of tax at source. The AO did not agree and after considering the appellant's contention, held that the tax was required to be deducted at source. The AO computed the tax to be deducted at Rs. 1,32,89,430/- and held appellant to be liable for default u/s.201 and further levied interest u/s.201(A), for the default in remittance, of Rs. 11,96,049/- for the delay of nine months. 4. Before the CIT(A), the assessee submitted that this issue has been examined by the ITAT in the assessee's own case in ITA Nos.5966, 5967, 5968/Mum/2002 vide order dated 23-3-2006 and ITA No.s 5407 & 5408/Mum/2007, vide order dated 15-4-2009. Learned CIT(A) after analyzing the issue in detail and the decision of the ITAT as have been relied upon, allowed the assessee's appeal. 5. We have carefully considered the impugned orders and material on record. It is noticed that this issue has been decided in a bunch of appea....
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....line the question to be answered by us which according to us are as follows: (1) What is the implication of Hon'ble Delhi High Court decision as well as the SLP filed before the Hon'ble Apex Court on the jurisdiction of the Tribunal.? (2) What is the scope of Section 10(15)(iv)(f) and whether the exemption was rightly withdrawn considering the utilization of ECB and merits of the case? (3) Whether the A.O was right in directing the assessee to deduct withholding tax @ 20% vide an order u/s.195(2) of IT Act 14. Even before we proceed to answer the above questions it is pertinent to examine the contents of section 248 of IT Act, which according to both the parties is the only section under which an appeal lies against such-direction as made in the impugned order u/s.195 of IT Act. The section 248 reads as follows: "Appeal by person denying liability to deduct tax: 248. Any person having in accordance with the provisions of section 195 and 200 deducted and paid tax in respect of any sum chargeable under the Act, other than interest, who denies his liability to make such deduction may appeal to the Commissioner (Appeals) to be declared....
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....ommunicating the impugned judgment to the effect that such exemption had been withdrawn is communication of a foundation of fact. If, according to the petitioner, the order of the quasi judicial authority suffers from any illegality they could have carried the matter high up." So the Hon'ble Court has viewed that the quasi-judicial authorities cannot be denuded of their quasi judicial power. Mere communication of withdrawal of exemption, according to the view expressed was a foundation of fact to be adjudicated by quasi-judicial authority to determine whether such an order suffers from any illegality. After expressing this view the Hon'ble Court has concluded as follows vide placitum "C" and "D" on page - 160. "There cannot be any doubt whatsoever that the assessing authority and the appellate authority are quasi-judicial authorities. By reason of the order impugned in the writ petition the Central Government has in no way curtailed the power of a judicial or quasijudicial authority (c) It is well known that the jurisdiction of judicial review of this court is limited. Having regard to the facts and circumstances, we do not find that there exists any illegality, i....
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....ld that the full effect of the provision has to be given in preference to supporting legislature such as rules, notifications, approvals etc. Some of the decisions in this regard are worth quoting as follows: (i) CIT vs. Abdul Hussein Essaji Arsiwalla, 69 ITR 38 (Bom) wherein the Hon'ble Court at page-44 has observed as under: "It is a cardinal principle of interpretation that it is this main statute which will govern the rules made under the rule making power given under the Act and not view versa. If the interpretation of the provision of the statute is clear, a rule framed under the rule making power given under the statute cannot affect it. It is well-settled that rules must be interpreted in the light of the section under which it is made and no exercise of the rule-making power can affect or derogate from the full operative effect of the provisions of the statue." (ii) CIT vs. Taj Mahal Hotel, 82 ITR 44(SC), wherein vide para-49 the Hon'b;e Court has observed as under: "It has been rightly observed that the Rules meant only for the purpose of carrying out the provisions of the Act and they could not take was what was conferred by the Act or....
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....out the purposes of the Act, indeed, such a rule may be regarded as patently violate of the purposes of the Act, i.e of s 10(2). (iv) CIT vs. Hyderabad Asbestos Cement products Ltd, 172 ITR 762(AP) wherein the Hon'ble Court at page No.775 & 776 has observed as under: "Learned Counsel for the assessee invited our attention to the decision of the Supreme Court in CIT vs. S. Chenniappa Mudaliar (1969), 74 ITR 41. Relying on this decision, learned counsel represented that if the notification should be held to be inconsistent in any manner, it should given way to the statutory provisions contained in section 36(1)(iv) of the Act and, therefore, it is not strictly necessary for this court to strike down conditions Nos. 2 and 3 of the notification in question..................................................................... In all these cases, the courts were dealing with the constitutional validity of the provisions as opposed to the validity of subordinate legislation with reference to the provisions of the Act itself. Learned standing counsel does fairly admit that the Supreme Court decision referred to above does provide that even in a reference proceeding, if the....
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....statute itself. The gist of all the above decisions is that the rules are made only for the purpose of carrying out the provisions of the Act which cannot be taken away or whittle down the effect conferred by the statute. With the result we hereby agree with the contentions of ld. A.R that the ITAT has both the power and duty to deal with such rules or notification and decide whether the same are in agreement with the main provisions of the statute. In view of above discussion, in the present appeal, now we have to decide the validity of the withdrawal of exemption as has been done by the subordinate competent authority. For this purpose first of all we have to examine the language of the relevant section and its scope as well as its application. 18. The section under with exemption is granted is section 10(15)(iv)(f) of IT Act, reads as follows: "Income not included in total income 10. In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included (15) ............................................................................... (iv) Interest payable --- ....
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....dated 6/10/97 has raised a question about the utilization of ECB already sanctioned in the Hazira Phase-II Expansion Project. The utilization ECB was explained by the company that out of the US $ 914 million ECB received, US $ 205.35 million was yet to be utilized as on 31/1/97. The explanation was given in respect of the said unutilized ECB that there were letters of credit to the tune of US$224.88 million. So at that time it was mentioned that the conditions were satisfied as the entire amount of ECB obtained for Hazira Phase-II Project was either utilized in the Project or kept for Forex commitment. On page 15 of the compilation placed on record there is a detailed working of the amount utilized and also kept for Forex commitment. Subsequently a request was made to grant permission to pre-pay/ buy back to 20% of outstanding ECB per year. A proposal was made to the concerned Ministry in the year 1998. In response to this proposal of buy back of ECB a show cause was issued by the Ministry of Finance on 12/4/99. After prolonged correspondence between the appellant company and the Ministry there was a proposal from Dy.Director ECB for withdrawal of tax exemption granted u/s.10(15)(i....
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....ued the notification and floated this scheme of ECB. The arguments have further been advanced that whenever or wherever the legislation decides to ascertain the usage of money the suitable language is used in the body of the statute itself. For example section 10(15)(iv)(c) has mentioned the end used of money borrowed and specifically directed to be "in respect of the purchase outside India or raw material or capital plant and machinery". So the end use in the said section is categorically specified. Few more sections have also been quoted in support of this argument, therein also the phrase was distinctly used. Another example cited of the phraseology used in section 10(15) (iv) (e) wherein the language used is, "where the moneys are borrowed either for the purpose of advancing loan to industrial undertakings in India for purchase outside India or raw material or capital plant and for the purpose of importing any goods". So the section clearly laid down the purpose of utilization of monies borrowed. Thus the arguments before us is that the purpose of utilization of ECB is missing in the statute, therefore, imposition of such condition through a letter by Dy. Director (ECB) was ill....
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....oreign currency expenditure. Ld. A.R has informed that Director (ECB) has made it clear that the foreign currency expenditure incurred after the date of application but before the date of borrowing was considered as eligible expenditure for utilization of ECB. The subsequent para also approved as per ld. A.R, the expenditure incurred on item for which ECB was proposed which had been made from the appellant's own resources incurred upto 22/11/95. So it was argued that it was very much within the knowledge of the concerned authority about the fungibility of funds. The said mixed method of utilization of funds was in a way accepted by the Ministry in the past. As far as the concept of fungibility of funds is concerned this is not a new concept and it is approved by several judicial authorities. We have persued the precedents cited in this regard in the light of the prevailing circumstances of the appeal in hand. In one of the case of Woolcombers of India Ltd 134 ITR 219 (cal) the concept of fungibility was considered and it was held that the profits were sufficient to meet the advance tax liability as the profits were deposited in the overdraft account, so the taxes were not paid out ....
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....re the ECB availed under the scheme. Let it remain undisputed and without entering into dispute which is more in the nature of findings of fact we have to concentrate on the core issue of withdrawal of exemption. The legislature has granted exemption to the lender i.e the foreign institution and not to the borrower i.e the appellant company. If there was a mistake, for arguments, if at all the committed by the borrower even then the lender cannot be punished by withdrawal of exemption. This view of ours gets fortified by a decision of Hon'ble Apex Court in the case of CIT vs. Chotatingrai Tea Estate Pvt. Ltd. & Others, 258 ITR 259. 22. After an elobrate discussion made herein above we deem it proper to summarize the gist of those elongated paras. First of all we want to observe that if the bureaucracy or executive is acting in an unjustifiable manner then the only course left to a citizen is to approach the judiciary for legitimate redressal. This is what exactly had been done in this appeal by the appellant company. At first the company had tried to convince the authorities concerned i.e Dy. Director (ECB) about the utility of foreign currency loan already approved, but o....
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....end. According to the company the time had come for repayment or buy back of the outstanding loans. It was a commercial decision taken by the company in the capacity of a prudent businessman. At that juncture the clock could not be set into reverse motion. Certain steps already taken by the appellant company which were well within the knowledge of the concerned authority could not be retracted. As the facts indicates retrospectively the mode of utilization of the funds could not be altered. Rather the sanctioning authority has not checked at that very point of time when according to them, if at all, there was mis-utilization of ECB borrowings. On the contrary the claim of the assessee was that the utilization was in accordance with the scheme though by the process of fungible funds, the obligations were satisfied and the conditions were fulfilled. So according to us, at that stage, it was catastrophic to withdraw the exemption already granted u/s.10(15)(iv)(f). Due to the withdrawal of the exemption the impugned order u/s.195(2), now under dispute was passed directing to deduct with holding tax @ 20%. To arrive at a logical conclusion first we hold that, considering the totality of....
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.... of the Tribunal and Hon'ble Supreme Court (supra) uphold the order of the ld. CIT(A) in allowing the appeals of the assessee and reject the grounds taken by the Revenue in all these appeals. 12. In the result, the Revenue's appeals stand dismissed". 6 Thus, respectfully following the aforesaid decisions, we find no merit in the present appeal filed by the department. Hence, the grounds taken by the revenue are dismissed. 7. In the result, the appeal filed by the department is dismissed 92. As the facts and circumstances during the year under consideration are same, respectfully following the order of Tribunal in assessee's own case, we do not find any infirmity in the order of CIT(A) allowing amount u/s.40(a)(ia) of IT Act. 93. In Ground No.6, Revenue is aggrieved by the action of CIT(A) restricting the guarantee commission @0.575% in place of 2.5% of non-funded guarantee given by assessee for advancing loan to its associated concerns. 94. We found that on this issue both assessee and revenue are in appeal and the Tribunal in its order for assessment year 2006-07 at para 64.3 have restricted the disallowance to 0.38%. We had already discussed th....
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....ed from Durga Iron & Steel Ltd. and Surajbhan Rajkumar Pvt. Ltd. in A.Y. 2003-2004. The Appellants submits that the cost of the goods purchased from the above parties were capitalised as plant and machinery in A.Y. 2003-04 and were used during the year under consideration and hence depreciation u/s. 32 of the I.T. Act on such capitalised value of the goods is allowable. 4. The CIT(A) erred in confirming the reduction of profits of the business of the undertaking while computing deduction under section 10B of the Act by an amount of Rs. 7,56,20,473/- being recoveries of various expenses incurred and charged to Profit and Loss Account of the undertaking. The appellant submits that the other income of Rs. 7,56,20,473/- represents recoveries of expenses incurred and debited to Profit & Loss Account of the undertaking and therefore the same has been rightly included in the profit of the business of the undertaking while computing deduction under section 10B of the Act. 5. The CIT(A) erred in confirming the disallowance made by the AO of Rs. 6,79,77,588/- being Professional Fees Paid to various parties, holding that the parties have not rendered any se....
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....n funds and given for furthering the business interest of the appellant and hence no disallowance is called for on this amount. 7. Your Appellant reserves the right to add, amend, alter or vary all or any of the above grounds of appeal as they or their representatives may think fit. Grounds taken by revenue in ITA NO.815/Mum/2013 for the A.Y. 2008-09 reads as under: 1. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the notional sales tax of Rs. 11,33,25,21,847/- which has been treated as revenue receipt by the A.O. 2. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in allowing depreciation as claimed by assessee at Rs. 32,28,00,18,444/- against the depreciation allowed at Rs. 30,12,64,26,001/- by directing to adopt the WDV of the assets as on 01/04/2007 and thereby disallowing Rs. 2,15,35,92,443/- being depreciation on plants at Hazira, Patalganga Cracker Unit at Hazira, Oil & Gas division , SBM Refinery and Polypropylene and Paraxylene complex at Jamnagar and also erred in allowing consequential change of the claim of deduction u/s.80IA & U/s.80IB of the IT. Act. 3. On the f....
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....based on RBI circular without appreciating the rate calculated by the TPO as per the market rate for loan advance to M/s.RIME OMCC, UAE. 11. The appellant prays that the order of the Learned CIT(A) on the above grounds be set aside and that of the A.O. is restored. 12. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary. 95. Rival contentions have been heard and record perused. 96. In Ground No.1, assessee has alleged addition of Rs. 11,33,25,21,847/- claimed u/s.43B. The facts and circumstances of the case are parametria to what we have decided in ground No.1 of assessee's and department's appeal for the A.Y.2007-08 hereinabove. AO is directed accordingly. 97. In ground No.2, assessee has alleged disallowance of Rs. 101.93 crores u/s.14A read with Rule 8D. Facts in brief are that during the year under consideration assessee has received dividend of Rs. 17.62 crores and same is claimed exempt u/s 10(34)/(35) of the I.T. Act in its computation of total income. The assessee had identified the expenditure of Rs. 3,30,60,894/- being salary, administrative and IT cost of employees working in the treasury departmen....
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....investments of Rs. 10 crores giving rise to exempt income). Therefore, no interest expense can be attributable for making disallowance u/s 14A r.w.Rule 8D(2)(ii) of the I.T. Rules. Following the reasoning given in the A.Y. 2007-08, we do not find any justification for disallowance of interest expenditure. 101. Respectfully following the decision of Bombay High Court in case of Reliance Utiities (supra) of HDFC Bank (supra), we direct AO to delete disallowance of interest so made. 102. From the record, we found that the investments in the subsidiary companies have been made for strategic purpose of having controlling interest therein, and there was no intention of earning exempt income therefrom for the purposes of calculating the disallowance under Rule 8D(2)(ii) and 8D(2)(iii) of the IT. Rules only those investment has to be considered on which the assessee has received the dividend for this purpose reliance can be placed on the decision of Hon'ble Delhi High Court in the case of ACB India Limited [TS-176-HC-201S-Del). 103. It was argued by learned AR that exempt income is Rs. 17.62/- crore only whereas the disallowance made by the AO is Rs. 101.93 crores, which is fa....
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....d., in the A.Y.2003-04. We have already considered this issue in assessee's appeal for the A.Y.2007-08 hereinabove. AO is directed accordingly. 109. Ground No.4 pertains to reduction of profits of the business of the undertaking while computing deduction under section 10B of the Act by an amount of Rs. 7,56,20,473/- being recoveries of various expenses incurred and charged to Profit and Loss Account of the Undertaking. 110. We have considered rival contentions and found from record that the assessee in the return of income had claimed exemption u/s.l0B of the Income tax Act with reference to Refinery and Petrochemicals Undertaking. While computing the deduction u/s.10B of the Act, other income of Rs. 98S,83, 198/- was considered as part of the eligible profit as the same was derived from the business of export. However the AO in the assessment order has excluded the amount of other income of Rs. 985,83,198/- while computing deduction u/s.l0B of the Act by observing that the nature of these receipts clearly indicates that they are not derived from the export of goods by Export Oriented Unit. Further, relying on the Supreme Court judgement in the case of Liberty India (317 ITR ....
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....i and North India for liasioning with various Government Departments in connection with business related matters to be followed up in Government offices. The assessee paid fees and reimbursed cost incurred of Rs. 6,79,77,588/- to the above parties for rendering the aforesaid services which was debited to Profit and Loss account under professional fees. All the payments concerning the above services rendered by these companies were made by Alc. Payee Cheques. The AO however, disallowed the amount of Rs. 6,79,77,588/- being reimbursement of expenses and professional fees paid by the assessee, on the basis that no services were rendered by above parties to the assessee. The disallowance made by the AO has been confirmed by the CIT(A). 117. It was contended by learned AR that the AO has made the disallowance just on the basis of the letter received from Income tax Officer, Ward 37(1), New Delhi. The assessee has furnished the details of professional services rendered by the above parties, and the bills given by them for rendering the services. The assessee also submitted that the aforesaid two parties have rendered liasioning and coordination services like maintaining cordial relati....
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....gh the order of the ITAT Delhi Bench in case of Shri Vijay Kumar Gupta dated 22/07/2016 wherein ITAT held as under:- 2.The assessee has raised similar grounds of appeal in all the three appeals. However, at the very outset of the hearing of the arguments, the ld. AR submitted that the issues involved in all these three appeals stand covered vide order of this Tribunal in the case of assessee's sons Shri Anish Kumar Gupta and Shri Ashish Kumar Gupta in ITA Nos. 120 & 121/Del/2013 for A.Ys 2007-08 and 2008-09, a copy of which has been furnished on record. The ld. AR further submitted that neither the ld. CIT(A) nor the AO was justified in coming to a haste and arbitrary conclusion without appreciating the facts and circumstances of the case and without verifying the confirmations of the assessee of the assessee placed on record. The ld. AR contended that he has no objection if the matter is restored to the file of the AO for fresh adjudication and prayed that the AO may be directed to verify the confirmations before passing order. 3.On careful consideration of above submissions, at the outset, from the copy of the order of the Tribunal dated 9.1.2014, passed in the ....
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....een Rs. 378,93,277 minus Rs. 3,71,525 and Rs. 340,66,623 minus Rs. 333,41,778. How the total amount can be added in the hands of the assessee is not ascertainable in the assessment order. The confirmation of Reliance Industries is available on pages 53 and 63 of the paper book. We have gone through these documents. This issue is also set aside to the file of the Assessing Officer for readjudication. Learned Assessing Officer shall keep in mind that similar additions are deleted by Learned CIT(Appeals) in assessment year 2006-07 and ITAT has affirmed the order of Learned CIT(Appeals). He shall also keep in mind that in the case of Anish Gupta, he himself made addition on protective basis. 14. Now, we take the remaining grounds of appeal in the case of Ashish Kumar Gupta. The ground No.5 in assessment year 2007-08 is connected with Ground No.2. In this ground, assessee has pleaded that Learned CIT(Appeals) has erred in confirming the addition of Rs. 1,53488. The brief facts of the case are that according to the Assessing Officer, assessee had shown advance of Rs. 114,76,588 while he has furnished the details by way of cash received from the agriculturalist at Rs. 113,23,100.....
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....ancy fee of 12 months. Learned Assessing Officer has made an addition of Rs. 247,78,097 on protective basis which is an amount worked out by debiting the total receipts paid by the Reliance Industries at Rs. 255,77,109 minus Rs. 7,99,012. 17. In assessment year 2009-10, Assessing Officer has again made an addition of Rs. 46,08,774. The assessee had received a sum of Rs. 49,00,004 from Reliance Industries and out of this amount, a sum of Rs. 45,03,104 was towards the reimbursement of expenditure. The Assessing Officer has made an assessment of Rs. 46,08,774 on protective basis. He worked out this amount by debiting a sum of Rs. 1,80,000 claimed by the assessee as consultancy charges from the total amount paid by the Reliance Industries Ltd. in this year. 18. The facts are similar to that of Shri Anish Kumar Gupta as discussed in the foregoing paragraphs of this order. Learned Assessing Officer in two assessment years i.e. 2008-09 and 2009-10 himself has observed that the alleged receipts from the Reliance Industries is to be assessed on protective basis in the hands of the assessee, then how he can made addition on substantive basis in assessment year 2007-08. We h....
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....of being heard to the assessee, without being prejudiced with the earlier impugned order. Grounds of appeal raised by the assessee are allowed for statistical purposes. 121. In view of the finding recorded by the Tribunal in the hands of the recipients Vijay Kumar Gupta and Anish Kumar Gupta, we restore the matter back to the file of AO for deciding afresh the allowability of professional fees paid by assessee. 122. Ground No.6 pertains to addition made in respect of commission paid to its associated enterprises by determining the arm's length price at Rs. 26,18,980/- as against Rs. 43,64,968/-. We have already considered this issue in the A.Y.2007-08 while deciding ground No.6(a) hereinabove, as the facts and circumstances are same. We confirm the addition made by the lower authorities. 123. Ground No.6(b) and (c) pertain to addition made on account of arm's length price of guarantee commission in respect of non-funded guarantee provided to AE. We have considered rival contentions. This issue has been decided by us in ground No. 6(c) of assessee's appeal for the A.Y.2007-08. As the facts and circumstances are same, respectfully following the reasoning given hereinabove in....
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.... read with Rule 8D have already been discussed by us while deciding ground No.2 of assessee's appeal. Following the same reasoning, we dismiss the ground raised by the Revenue. 132. Ground No.6 refers to decline of depreciation in respect of jetties we have already considered in length this issue in the A.Y.2007-08 while deciding ground No.4 of assessee's appeal. As the facts and circumstances are the same, following the same reasoning, we dismiss the ground raised by the Revenue. 133. Ground No. 6 relates to the disallowance of part of the lease rent of Rs. 6,08,48,652/-, being portion of lease rent held to be repayment of principal. The disallowance has been made in respect of the two pipelines, i.e. Hazira-Dahej pipeline and Dahej-Baroda pipeline, following the reasoning adopted in the assessments for AY s 2003-04 and 2004-05. 134. We have considered rival contentions and found that this issue was decided in favour of the assessee by ITAT Mumbai in the case of Indian Petrochemicals Corp. Ltd. a company merged with the assessee company vide its order in ITA Nos. 1426/Ahd/2009 & 3921/Mum/2009 for A Y 2005-06 and IT No.4005/Mum/2013 for A Y 2006-07 vide order dated 18.11.2....
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....s of the business of the undertaking while computing deduction under section 10B of the Act by an amount of Rs. 11,17,23,864/- being recoveries of various expenses incurred and charged to Profit and Loss Account of the undertaking. The appellant submits that the other income of Rs. 11, 17,23,864/- represents recoveries of expenses incurred and debited to Profit & Loss Account of the undertaking and therefore the same has been rightly included in the profit of the business of the undertaking while computing deduction under section 10B of the Act. 4. The appellant reserves the right to add, amend, alter or vary all or any of the above grounds of appeal as they or their representatives may think fit. 139. In this appeal, assessee is aggrieved for reopening of assessment as well as merit of the addition so made. It was contended by learned AR that notices u/s.148 is bad in law for want of jurisdiction. After going through the reasons recorded for reopening, we do not find any infirmity in the order of lower authorities for reopening of assessment. 140. In ground No.2, assessee is aggrieved for disallowance of Rs. 83,75,235/- being Professional Fees Paid to vario....
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....he estimated expenditure ought to be restricted to Rs. 3,45,01,874/- under normal computation of income. b. The CIT(A) erred in confirming the disallowance of Rs. 87.85 crores u/s.14A of the Act r.w.r. 80 of the Income tax Rules, as against Rs. 50,384/- disallowed by the appellant, being expenditure incurred in relation to the income exempt u/s. 10(34/35) of the Act while computing book profit u/s.115JB of the Act. The appellant submits that an expenditure of Rs. 50,384/- has been worked out as incurred in relation to earning exempt dividend income and further the provisions of Section 14A of the Act r.w.r. 8D is not-applicable while computing book profits u/s. 115JB of the Act, therefore the disallowance of the estimated expenditure ought to be restricted to Rs. 50,384/- for computing book profit u/s. 115JB of the Act. c. The CIT (A) erred in confirming the action of the AO in disallowing expenditure u/s.14A of the Act r.w.r. 80 of the Income tax Rules, i) without recording satisfaction on the correctness of expenditure disallowed by the appellant with regards to the accounts of the appellant. ii) with reference to investments in shares....
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....t of non-funded guarantee provided to 3 AE's, i.e. M/s. Recron Malaysia SdnBhd, M/s. Reliance Industries (Middle East) DMCC ('M/s. RIME'), and M/s. Reliance Europe Ltd, UK @ 0.575% p.a. instead of 0.30% p.a. adopted by the Appellant. The Appellant submits that the guarantee commission rate, adopted by the appellant @0.30% p.a. is comparable with guarantee commission rates prevailing in the market for similar kind of guarantees given by banks, for which comparable cases were furnished by the appellant. c. The CIT(A) erred in confirming the action of the AO in determining the arms length price at Rs. 29,61,74,7231- being interest chargeable in respect of interest free loan of USD 70,000,000 (equivalent to Rs. 3,55,04,00,000) and Euro 12,946,245 (equivalent to Rs. 81,91,00,000), advanced to its AE i.e. M/s. RIME DMCC, UAE. d. The CIT(A) erred in confirming the action of the AO in computing an arms length interest on the aforesaid loan of USD 70,000,000 (equivalent to Rs. 3,55,04,00,000) which was converted into 5% Non-cumulative compulsory convertible preference shares of the AE, allotted to the appellant, as on 31st March 2009, which was duly su....