2020 (12) TMI 165
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....of depreciation of Rs. 5,35,215/-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 Act on such capitalised value of the goods is allowable. 3. The CIT(A) erred in remanding back the appellant's claim of depreciation on office equipment's @ 15%, to the file of the assessing officer for verifying the correctness of classification vis-a-vis the law. The appellant submits that it had submitted complete details of additions to the assets viz. office equipment's which are in the nature of Plant & Machinery and hence the depreciation u/s.32 of the I T Act ought to have been allowed @ 15%. 4. The CIT(A) erred in confirming the disallowance of deduction u/s 80IB(9) of the Act of Rs. 698,07,88,5197- in respect of Refinery SEZ Undertaking by holding that once claim u/s 10AA of the Act has been made on profits of Refinery SEZ Undertaking, no deduction u/s 80IB(9) of the Act be ....
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.... in law, the learned CIT(A) erred in confirming the action of AO of not demonstrating the motive of the Appellant to shift profits outside of India by manipulating the prices charged in its international transaction, either at the stage of invoking or initiating the assessment or at the stage of framing the assessment; 7.4 On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in confirming the action of the learned AO in not demonstrating that the course of business between the Appellant and the closely connected person was so arranged that it produces to the Appellant more than ordinary profits which might be expected to arise in its eligible business; 7.5 On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in confirming the action of the learned AO in not demonstrating the motive of the Appellant, to carry out transactions between an eligible business and other business, to reduce the taxable profits by manipulating the prices of its Specified Domestic transactions, either at the stage of invoking or initiating the assessment or at the stage of framing the assessment. : 8 Guarantee Commission charged in res....
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....n rejecting the economic analysis or the benchmarking analysis of the Appellant, on the application of internal Comparable Uncontrolled Price Method by the Appellant, without providing any cogent reasons; 10.4 On the facts and in the circumstances of the case, the learned CIT(A) erred in confirming the action of the learned AO in accepting the economic analysis of the learned TPO without providing cogent reasons and specifically: The learned AO and CIT(A) failed to appreciate that the turnover of the comparable company is more than 10 times that of the tested transaction; The learned AO and CIT(A) failed to appreciate that the level of market of the comparable transaction adopted by the learned TPO, is different as compared with the level of market in which appellant (manufacturing units) operate; The learned AO and CIT(A) erred by relying on non-contemporaneous data, order dated 29 April 2014, to determine the arm's length rate. 11. Each of the above Grounds of Appeal are without prejudice to each other. The Appellant craves leave to add, amend, delete, rectify, substitute, modify, or otherwise, all or any of the aforesaid grounds or add a new ground(s) at any time b....
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....ts and circumstances of the case and law, the Ld. CIT(A) has erred in relying the agreement between the AE and Khurdish government as it would only serve as evidence for cost incurred and there is no binding bilateral treaty between India and Iraq for not charging mark up on cost." 11. "On the facts and circumstances of the case and law, the Ld. CIT(A) has erred in deleting the mark up on the cost without appreciating the fact that it would lead to base erosion for India." 12. "On the facts and circumstances of the case and law, the Ld. CIT(A) has erred in not appreciating the fact that no party would render support services to an unrelated party at cost without mark up, the concept being very basis of transfer pricing." 13. "On the facts and circumstances of the case and law, the Ld. CIT(A) has erred in deleting the addition of Rs. 39,77,60,683/- in respect of debts receivable from AE made by the TPO by holding that recharacterisation of such transaction is not permissible under the law even when the TPO had not recharacterised the debtors as loan and held the same as receivable. 14. "On the facts and circumstances of the case and law, the Ld. CIT(A) has erred in deleting ....
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....which no unrelated third party would do so at arm's length which is the very essence of transfer pricing." 22. "On the facts and circumstances of the case and law, the Ld. CIT(A) has erred in not appreciating the fact that assessee which is bound to earn income at fixed coupon rate on preference stock has not received any income in this regard with huge investment which will not be the case in any third party scenario as envisaged in section 92F(ii)." 23. "On the facts and circumstances of the case and law, the Ld. CIT(A) has failed to see the fact even when the AE- RGBV had profits of Rs. 33,31,606/- euro in FY 2009-10, the mandatory fixed income at the coupon rate of 5% on the preference stock was not paid to the assessee." 24. "On the facts and circumstances of the case and law, the Ld. CIT(A) has failed to see the fact even when the AF- RIME had profits of 11,494,125 UAE Dirhams, 5188402 UAE Dirhams and the 742,069 dollars during calendar year 2007, 2008 and 2010 respectively, assessee has not received the fixed 5% coupon rat income. 25. "On the facts and circumstances of the case and law, the Ld. CIT(A) has failed to "look through" the "substance" of transaction an....
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....ssessee followed yield spread method correctly for impugned AY." 34. "On the facts and circumstances of the case and law, the Ld. CIT(A) has failed to give any reason for rejecting the CUP rate adopted by the TPO." 35. "On the facts and circumstances of the case and law, the Ld. CIT(A) has erred in including the comparable M/s Allsec Technologies Ltd. without appreciating the fact that company is loss making in earlier years as well as in subsequent year." 36. "On the facts and circumstances of the case and law, the Ld. CIT(A) has erred in excluding the comparable M/s Axis Integrated Systems Limited without appreciating the fact that Business Support Services and Management Services are highly skill-based services and by no stretch of imagination BSS and MSS can be treated as low-end services." 37. On the facts and circumstances of the case ld. CIT(A) has erred in including comparable M/s. Empire Industries Ltd. without appreciating that comparable is functionally dissimilar. 38. "On the facts and circumstances of the case and law, the Ld. CIT(A) has erred in excluding comparable M/s BVG India Ltd. without appreciating that comparable is functionally similar." 39. The a....
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....puting total income under the normal provisions. 5. The learned CIT(A) Mumbai erred in allowing the deduction in respect of export profits of SEZ unit u/s 10AA of the Act with reference to the income computed under the head 'profits and gains of business or profession' of the SEZ unit instead of 'gross profits and gains' of SEZ unit, as interpreted by Supreme Court in the recent judgement in the case of Vijay Industries. The Apex court while interpreting the provisions of section 80HH relevant to AY 1979-80 and 1980-81 has held that phrase "profits and gains" means gross profits of the business i.e. before computing income as specified in section 30 to 43D of the Act in para (18) and (19) as under:- "It is most humbly submitted that the concept 'profits and gains' is a wider concept than the concept of 'income'. The profits and gains/loss are arrived at after making actual expenses incurred from the figure of sales by the assesses. It does not include any depreciation and investment allowance, as admittedly these are not the expenses actually incurred by the assessee. However, the term 'income' does take into consideration the deduction....
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....as well as several other decisions. He further referred that ITAT Special Bench in assessee's own case reported in 88 ITD 273 decided the issue in favour of assessee. 11. Learned Departmental Representative on the other hand could not dispute the above said proposition. The ITAT in assessee's own case in a number of orders for preceding years has decided the issue in favour of the assessee and the same order has not been reversed by Hon'ble Jurisdictional High Court. Accordingly, we follow the doctrine of stare-decisis and uphold the order of learned CIT(A). Hence, Revenue's appeal on this issue stands dismissed. 12. Apropos ground No. 2 is relating to allowance of depreciation as claimed by the assessee by holding that the claim of depreciation for the year was optional in nature. 13. This ground of appeal pertains to restricting the allowance of depreciation to Rs. 64,47,59,69,037/- as against the assessee's claim of Rs. 65,18,82,98,4587- and disallowing Rs. 71,23,29,421/- (Rs. 6518,82,98,458- Rs. 6447,59,69,037) being depreciation on power plants at Hazira, Patalganga, Cracker Unit at Hazira, Oil & Gas division, SBM Refinery and Polypropylene and Paraxylene complex at....
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....unt of WDV to be taken as on 01.04.2012. Following the decisions of my predecessors in the Appellant's case in the preceding years and also the decision of the Hon'ble ITAT upto AY 2009-10, the AO is directed to adopt the WDV of the assets as on 01.04.2012 on the basis of effects given to the orders of CIT(A) for the preceding years. The Appellant has worked out the amount of depreciation allowable on the basis of these orders at Rs. 6518,82,98458/-. Similar issue was decided by my predecessors in favour of the appellant. Consequently following the earlier year's decision of my predecessors this ground of appeal 2(a) is therefore, allowed. Since Ground no. 2(b) is not pressed by the appellant (as stated above), the same is disposed off." 15. Against the above order, Revenue is in appeal before us. 16. At the outset, learned Counsel of the assessee submitted that this issue is squarely covered in favour of the assessee by decision of ITAT in assessee's own case in order for A.Y. 2007-08, 2009-10 & 2010-11 to 2012-13. 17. We find that learned CIT(A) has granted relief following earlier orders of ITAT. He had noted that it was held that the claim for depreciation cannot....
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.... deletion of addition on this account. 22. As regards disallowance for other expenses learned CIT(A) referred to several judgements relied upon by the assessee and directed that disallowance should be computed @ 0.5% by taking average value of those investments which have yielded dividend during the year under consideration or the expenses disallowed by the assessee whichever is higher, both in normal provisions as well as book profit u/s. 115JB of the Act. Learned CIT(A) also noted that identical issue was similarly decided by the ITAT in earlier years. 23. Against this order, Revenue is in appeal before us. 24. Learned Counsel of the assessee in this regard has submitted that the issue is covered in favour of the assessee by earlier year orders of the ITAT. He also referred to following further case laws :- * Pr.CIT Vs. Bhushan Steel (Delhi High Court) * Bengal Finance & Investment Vs. ACIT (Mumbai) * Vireet Investment (ITAT Special bench) 25. Upon careful consideration, we find that the direction of learned CIT(A) is in consonance with earlier year ITAT order as regards disallowance u/s 14A is concerned. Hence, in this regard, we uphold the order of CIT(A). As regards ....
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.... allowed to the assessee in the immediately preceding assessment year i.e. A.Y. 2012-13. The learned CIT(A) held as under :- "13.3 Decision I have considered the facts of the case and the submissions made by the assessee. The issue for consideration is whether cost of abortive/unsuccessful blocks (other independent undertakings) are be reduced while computing the profits of a successful block (KGD in the assessee's case which is independent undertaking) for the purpose of claiming deduction u/s 80-IB(9). The assessee was engaged in the business of exploration and production of mineral oil. The assessee was awarded 30contract areas under separate production sharing contracts (PSC) signed with the Government of India. The above contract areas were awarded on bidding in separate auction for each contract area. There is no dispute that for the purpose of claiming deduction u/s.80IB(9) of the Act each contract area constituted an independent undertaking. Since the assessee had complied with the conditions specified u/s 80IB(9) of the Act, it claimed deduction of the profits and gains of KGD undertaking u/s 80-IB(9) of the Act. While computing the profits and gains of KGD under....
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....he assessee by holding that each contract is a separate undertaking and hence the expenses relating to aborted blocks of different contracts cannot be reduced from the profit from sale of mineral oil obtained from another contract. The operative portion of CIT(A) on this issue are extracted below:- "49. Decision: I have considered the facts of the case and the submissions made by assessee. The issue for consideration is whether cost of abortive/ unsuccessful blocks (other independent undertakings) are be reduced while computing the profits of a successful block (KGD in the assessee's case which is independent undertaking) for the purpose of claiming deduction u/s 80-IB(9). The assessee was engaged in the business of exploration and production of mineral oil. The assessee was awarded 31 contract areas under separate production sharing contracts (PSC) signed with the Government of India. The above contract areas were awarded on bidding in separate auction for each contract area. There is no dispute that for the purpose of claiming deduction u/s. 80IB(9) of the Act each contract area constituted an independent undertaking. Since the assessee had complied with the conditions ....
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....sec. 42 of the Act. The article/clause 17.2.5 of PSC states that all other provisions of Income tax Act shall apply. The PSC does not deal with the deduction given u/s 80IB(9) of the Act and hence the provisions of the Act shall apply. Hence the deduction u/s 80IB(9) of the Act has to be computed in terms of sec. 80IB of the Act. Sec. 80IB(13) of the Act provides that the provisions of sec. 80IA(5) shall apply and under the provisions of sec. 80IA(5) of the Act, the profits and gains of eligible business, for the purposes of sec. 80IB, shall be computed as if such eligible business were the only source of income of the assessee. In view of these provisions, the deduction u/s 80IB(9) has to be computed after ascertaining profits and gains of eligible business in terms of sec. 80IA(5) of the Act. Hence there is no scope to adjust expenses relating to other "undertaking" while computing deduction u/s 80IB(9) of the Act. Hence, we are of the view that the decision rendered by Ld CIT(A) does not call for any interference and accordingly we uphold the same. 32. Since facts are identical and it is not the case that above decision of ITAT has been reversed by Hon'ble Jurisdictional High C....
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.... PSC entered into on or after 1st January 1999. Paragraph 5 of the guide deals with the Income Tax provisions in relation to PSC participants. Subparagraph 5 (11) reads as under:- "Under Section 80-IA of the Income Tax Act, 1961, PSC Participants who begin Commercial Production of Petroleum in any part of India on or after 1st April 1997 shall be entitled to claim deduction of 100% of their profits and gains derived from such business for initial seven years commencing from the first year of Commercial Production." The term "Commercial Production" is defined as under in the Petroleum Tax Guide :- "Commercial Production" means production of Petroleum (excluding any production for testing purposes) from a field and delivery of the same at the relevant delivery point under a programme of regular production and sale. The date of commencement of commercial production will be the date when commercial production commences from a field and the date of commencement of commercial production shall be intimated by the contractor to the Government of India in writing.' The company started commercial production of petroleum i.e. mineral oil from the above specified development area/ ....
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....uance of any law for the time being in force or by the Central or a State Government in any other manner;] (iii) is engaged in refining of mineral oil and begins such refining on or after the 1st day of October, 1998 3 [but not later than the 31st day of March, 2012];" As can be observed from the above, deduction under 80IB(9)(ii) is available to an undertaking which 'is located in any part of India and has begun or begins commercial production of mineral oil on or after the 1st day of April, 1997'. The undertaking namely KGD6 block belonging to the assessee company, is located in India i.e. at Tallerevu Mandal, East Godavari District, Gadimoga - 533 463, Andhra Pradesh, India and has begun commercial production of mineral oil after the 1st day of April, 1997 i.e. on 01.05.2009. Hence the assessee company duly fulfills the eligibility criteria/conditions specified under sub-section (9)(ii) of section 80IB of the Act. The accounts of the undertaking are audited by an Accountant as defined in the Explanation to sub section (2) of section 288 of the Act and the company has furnished alongwith its return of income Audit Report in Form 10CCB wherein the auditor has certified tha....
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...., the same is not defined in Section 80-IB of the Act. When one refers to following statutes dealing with mineral oil, petroleum and natural gas etc, natural gas is treated as a part of 'mineral oil' viz: a) The Oilfields (Regulation Development) Act, 1948 b) The Mines and Minerals (Development and Regulation) Act, 1959 c) The Oil industry (development) Act, 1974 d) The Regulation for foreign direct investment in India e) Notification issued (No GSR 304(E) dated March 31, 1983 for extending the applicability of the Act to the continental shelf of India f) New Exploration Licensing Policy g) Petroleum Tax Guide published by the Ministry of Petroleum and Natural Gas, Government of India The issue whether natural gas is a mineral oil and is eligible for deduction u/s. 80IB(9) of the Act has already been considered by the Hon'ble Income Tax Appellate Tribunal, Ahmedabad Bench in the case of NIKO Resources Limited Vs. DCIT [22 DTR 225] and held that natural gas is mineral oil eligible for deduction u/s 80IB(9) of the Act. The above decision of the ITAT has been further confirmed by the Honourable Gujarat High Court (reported in 374 ITR 369) by placing relianc....
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....A), however, held that the mineral oil shall include "natural gas" also and accordingly directed the AO. The revenue is aggrieved by the said decision of Ld. CIT(A). 110. We heard the parties on this issue and perused the record. We notice that the question as to whether "natural gas" shall fall under "mineral oil" or not was examined by the Ahmedabad bench of ITAT in the case of "NIKO Resources Ltd vs. DCIT (22 DTR 225) and it has been held that the natural gas shall fall under "mineral oil" in terms of sec. 80IB(9) of the Act. The said decision of Tribunal has since been affirmed by Hon'ble Gujarat High Court in the same case reported in 374 ITR 369. 111. The AO had taken support of sub-clause (iv) inserted in sec. 80IB(9) by Finance (No. 2) Act, 2009 w.e.f. 1.4.2010, whereby the commercial production of natural gas in blocks licensed under the VIII round of bidding award was made eligible for deduction u/s 80IB(9) of the Act. Since the impugned license was allotted to the assessee prior to VIII round, the AO held that the deduction u/s 80IB(9) shall not be available for natural gas. The AO had also taken support of speech made by the Hon'ble Finance Minister in 2008, wherein....
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....taken the following transaction with the AE during FY 2012-13 :- Particulars Amount (in USD) Amount (in Rs.) Provision of support services to AE for drilling operations 30,89,554 16,74,39,458 The Appellant has submitted copies of specimen service agreements entered with REP DMCC for all the international blocks, a statement which provides the details of invoice raised on REP DMCC towards provision of support services for drilling operations, alongwith copy of the invoices, before the TPO and this office. It is also submitted that as per the PSC entered by the AE, the cost of professional and administrative services and scientific or technical services provided by an affiliate for the direct benefit of petroleum operations shall be charged on cost of service basis and shall not include any element of profit. Accordingly, the Appellant has provided administrative, technical or scientific personnel on cost to cost basis in accordance with the provisions of PSC. Relevant extract of PSC entered between REP DMCC and The Kurdistan Regional Government of Iraq for Rovi Block and Satra block was submitted before the TPO and this office. Accordingly, in terms of Rule 10B(2)(d), the ....
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....n this issue. We notice that the assessee has collected for the supply of materials and equipments and also for providing services in accordance with the PSC entered with foreign governments. Said decision of assessee is supported by the provisions of Rule 10B(2)(d) of the I.T. Rules. We further noticed that the TPO did not bring any other comparable to prove that the amount charged by the assessee is not at arm's length. Instead, he had simply marked up the transactions by 12.50%. Following the same, we uphold the order passed by learned CIT(A) on this issue." 44. Since it has not been disputed by the Revenue that facts are not identical, respectfully following the precedent as above we uphold the learned CIT(A)'s order. 45. Ground No. 13 to 19 relate to transfer pricing adjustment of Rs. 39,77,60,683/- in respect of debts receivable from AE. 46. Brief facts and TPO's action on this issue are as under :- The Appellant had sold petroleum products to its AE RIL USA Inc. in respect of certain sales made, the proceeds were received beyond the agreed credit period. Accordingly, in respect of such sales, the Appellant has raised debit notes on the AE towards interest on delayed rec....
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....arned CIT(A) deleted the adjustment done by TPO, by holding that benchmarking done by assessee is accepted. 48. Learned Counsel of the assessee submitted that the addition is to be deleted following the ITAT order in assessee's own case for A.Y. 2010-11 to 2012-13 and it is a covered issue. It is further submitted that ground No. 14 to 19 are infructuous in as much as CUP submitted by assessee are actual transaction undertaken by the assessee during the financial year. 49. We note that identical issue was decided by this Tribunal in favour of the assessee by order for A.Y. 2011-12 to 2012-13. In this order the Tribunal has held as under :- "44. We heard the parties on this issue and perused the record. It is the submission of the assessee that it has availed short term loans from M/s BNP Paribas and M/s Intesa Sanpaola at Libor plus 45 bps. The assessee has charged interest at the rate of Libor plus 125 bps for the delayed payments. Since the benchmarking done by the assessee could not be controverted by TPO, in our view, the T.P adjustments made by TPO is devoid of any reasoning as held by Ld CIT(A). Accordingly we are of the view that the Ld CIT(A) was justified in deleting t....
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....e NCCCPS allotted by RIME and REP DMCC carries dividend rate of 5% p.a. Further, the Class A shares issued by the AEs M/s. RGBV and M/s. RNBV would be entitled to dividend @ 5% of the nominal value of share out of the profits realized in a financial year. However, no dividend was declared in respect of NCCCPS subscribed in earlier years since no sufficient profit was earned by the AEs to declare the dividend. The TPO issued a show-cause to the Appellant that in respect of outstanding balances of preference shares issued in earlier years to AEs, the transactions being in the nature of loan financing, the ALP rate of interest chargeable on such preference shares was proposed to be determined on the basis of the benchmarking done from Bloomberg. The Appellant filed detailed response which was not accepted by the TPO. The TPO determined the ALP rate by adopting the benchmarking done from Bloomberg, on the amount remitted to the AEs from the date of remittance till 31 March 2013 and made an adjustment of INR 1,04,60,29,112." 52. On this issue learned CIT(A) has decided the issue in favour of the assessee by referring his own order in assessee's own case for earlier years. He gave a....
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....ay in allotment of shares and still, the Tribunal held that re-characterisation is not permissible. In the instant case, it is seen that the preference shares have been allotted within the year itself. The AO/TPO has not shown that the transactions are sham or bogus nor it was shown that the apparent is not real. It was also not shown that the unrelated share applicant has been paid any interest for the period commencing from date of subscription to the date of allotment of shares. It has been held that the amendment made by Finance Act 2012 including capital financing transactions as international transactions cannot be applied retrospectively. The Ld A.R further submitted that the Preference shares carry coupon rate of 5%, which is higher than the 6 months Libor plus 300 bps." 55. We further note that it has been submitted before us that the above decision is squarely applicable in as much as no fresh investment has been done during the A.Y. 2013-14. Furthermore, as pointed out by learned Counsel of the assessee from Hon'ble Bombay High Court decision in the case of Pr. CIT Vs. M/s. Aegis Limited (supra) supports the above proposition. We may refer the Hon'ble High Court....
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....der the Tribunal decision ceasing to be a precedent. Accordingly in the background of the aforesaid decision and precedent we uphold the order of learned CIT(A). 57. Ground 28 to 34 relate to deletion of learned CIT(A) ALP at 1.5% charged by the TPO in arriving at corporate guarantee fees. 58. During the Financial year 2012-13, the assessee has provided corporate guarantee to the bank in connection with loan taken by the AEs. The assessee stated that guarantees provided by the assessee on behalf of its AEs are not an international transactions. However, out of abundant caution a corporate guarantee was reported as an international transaction. The same was benchmarked and arm's length price of the guarantee fees has been recorded from the AEs in respect of short term guarantee @ .38% per annum (from 1.4.2012 up to 31.12.2012) and .30% (from 1.1.2013). Further, in respect of long term guarantee provided on behalf of the Reliance Holdings USA Inc. in respect of bond issue made by Reliance Holding USA Inc. to investors @ 0.60% per annum from 1.4.2012 up to 31.12.2012 and @ 1.20% per annum from 1.1.2013. The TPO in his order has determined arm's length price @ 1.5% based on rates quo....
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....3 are flowing in AY 2013-14. The guarantee commission rates are ranging from 0.3% to 0.38%. Considering the totality of facts and following the orders of ITAT for AY 2005-06 to AY 2009-10 and the order passed by the then CIT (A) in AY 2011-12 and AY 2012-13, the ALP rate of commission for guarantee is determined to be 0.38%. Long term guarantees Similar to short term guarantees, the Appellant adopted yield spread approach for benchmarking long term guarantees for the first time in AY 2011-12 which has been accepted by the then CIT (A) by a speaking order in AY 2011-12 and the ALP rate of guarantee commission was accepted at 1.8% as determined by the Appellant based on the yield spread approach adopted for that year. The then CIT (A)in AY 2012-13 has followed the order for AY 2011-12, however, restricted the rate of commission to 1.8% though the Appellant had determined 1.8% for the period April to December 2011 and 0.6% for the period January to March 2012. On perusing the facts for AY 2013-14, it is found that the guarantees from AY 2011-12 and AY 2012-13 are flowing in AY 2013-14. Further, the undersigned is of a considered opinion that, once the yield spread approach adop....
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.....Y. 2012-13 has observed that the ITAT has upheld the yield spread approach adopted by the assessee for A.Y. 2011-12 and has remanded the matter observing as under :- "We heard Ld D.R and perused the record. We notice that the Tribunal has upheld the order passed by Ld CIT(A) in AY 2011-12 on an identical issue, wherein the Ld CIT(A) has upheld the yield spread approach/interest saving approach adopted by the assessee, meaning thereby, the change in methodology for benchmarking the guarantee commission was upheld by the Tribunal. When the assessee is following the yield spread approach/interest saving approach, the guarantee commission would depend upon the interest rate charged by the banks. We notice that the Tribunal has omitted to consider this important point. Accordingly, we find merit in the contentions of the assessee that there is mistake apparent from record on this issue. Accordingly, the paragraph 141 of the order is replaced by this paragraph:- "141 In AY 2011-12, we have considered an identical issue and upheld the view taken by Ld CIT(A). However, we notice that the Ld CIT(A) has failed to appreciate the methodology of the yield spread approach/interest saving ap....
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....ods 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 Act on such capitalised value of the goods is allowable. 71. At the outset, the Ld. Counsel of the assessee fairly accepted that this issue is covered against the assessee. In this regard, he also referred to ITAT order for earlier year in assessee's own case. Accordingly, this ground raised by the assessee stands dismissed. 72. Ground No.3: 3. The CIT(A) erred in remanding back the appellant's claim of depreciation on office equipment's @ 15%, to the file of the assessing officer for verifying the correctness of classification vis-a-vis the law. The appellant submits that it had submitted complete details of additions to the assets viz. office equipment's which are in the nature of Plant & Machinery and hence the depreciation u/s.32 of the I T Act ought to have been allowed @ 15%. 73. At the outset, the ld. Ld. Counsel of the assessee submitted that he shall not be pressing this ground. Hence, this ground is dismissed as not pressed. 74. Ground No.4: 4. The CIT(A) erred in confirmi....
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....ction. Since the assessee had complied with the conditions specified u/s 10AA, it claimed 100% deduction of profit and gains earned in respect of export turnover from its Jamnagar Refinery SEZ undertaking u/s. 10AA of the Act. The Form 56F (Revised) filed by the assessee, has been verified by the AO and there is no dispute as regards the quantum of deduction worked out therein. Since the deduction allowable u/s 10AA is restricted to export profit, the assessee claimed deduction of Rs. 6832,18,56,826/- out of the total profit of Rs. 7530,26,45,346/- of the eligible undertaking. Further a deduction of Rs. 698,07,88,519/- [i.e. Rs. 7530,26,45,346 profit of the undertaking - (less) Rs. 6832,18,56,826/-] is claimed as deduction u/s. 801B(9) of the Act as per Form 10CCB submitted by the appellant. The appellant's claim of deduction of eligible profit u/s 10AA and 80IB{9) of the Act has not exceeded the profit of the undertaking in respect of SEZ refinery unit. Section 80IB(9) of the Act provides deduction in respect of profit and gains derived from an undertaking for specified period if the undertaking is engaged in refining of mineral oil and begins such refining process on or a....
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....lied upon by the assessee and placed reliance upon several decisions of Hon'ble Delhi High Court and Hon'ble Karnataka High Court and rejected the assessee's ground in this regard. 78. Against the above, the assessee is in appeal before us. We note that identical issue was decided by this tribunal in assessee's own case vide order dated 28.09.2018 for A.Y. 2010-11 to 2012-13 as under: 76. We have heard rival contentions and perused the record. The dispute between the parties revolve around sec. 80A(4) and sec.80IA(9) of the Act, For the sake of convenience, we extract below both the provisions:- "80A(4) Notwithstanding anything to the contrary contained in section 10A or section 10AA or section 10B or section 10BA or in any provisions of this Chapter under the heading "C-Deductions in respect of certain incomes", where, in the case of an assessee, any amount of profits and gains of an undertaking or unit or enterprise or eligible business is claimed and allowed as a deduction under any of those provisions for any assessment year, deduction in respect of, and to the extent of, such profits and gains shall not be allowed under any other provisions of this Act for such assessment....
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....entire profit of Rs. 5036.35 crores. Accordingly we are of the view that there is merit in the contentions of the assessee. Our view is further fortified by the expression "shall in no case exceed the profits and gains of such undertaking.... as the case may be". The above said expression visualises the situation that an assessee may be claiming deduction under different provisions of the Act for the profits derived from the same undertaking. Hence the provisions of sec. 80A(4) visualises that the deduction in respect of profits and gains of an undertaking may be claimed under different provisions and hence the restriction is only for that portion of profit claimed and allowed as deduction under setc. 10A or 10AA or 10B or 10BA or any provisions of Chapter VI under heading "C - deductions in respect, of certain incomes" shall not be eligible for deduction under any other provisions of the Act. For the remaining portion of profit, the assessee is eligible to claim deduction under any other section. 77. The Id CIT(A) has referred to the decision rendered by Hon'ble Delhi High Court in the case of TEI Technologies P Ltd (supra). Following observations made by Hon'ble High Co....
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....ay High Court in the case of Black & Veath Consulting P Ltd (251 CTR 265), yet the ratio of the decision rendered by Hon'ble Delhi High Court is that the double benefit is not available in respect of same income. 79. The assessee has relied upon the decision rendered by Hon'ble Bombay High Court in the case of Associated Capsules (P) Ltd (supra). The High Court was concerned with the eligibility of the assessee to claim deduction u/s 80IA and 80HHC of the Act. The provisions of sec. 80IA(9) provided that where any amount of profits and gains of an undertaking is claimed and allowed under sec. 80IA(1) for any assessment year, deduction to the extent of such profits and gains shall not be allowed under any other provisions of Chapter VIA and shall in no case exceed the profits and gains of such eligible business or undertaking. The Hon'ble Bombay High Court held that the provisions of sec. 80IA(9) affects only allowability of deduction and not computation of deduction. This decision rendered by Hon'ble Bombay High Court supports the case of the assessee that sec. 80A(4) and sec. 801A(9) restricts only allowability of deduction and not "computation of deduction". 8....
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.... for deprecation u/s. 32 of the Act. The Appellant submits that, on the facts and circumstances of the case, the total cost incurred by the Appellant in respect of KGD constitutes cost of acquisition of "intangible assets" eligible for depreciation u/s 32 of the IT. Act. 81. At the outset, the ld. Ld. Counsel of the assessee submitted that he shall not be pressing this ground. Hence, this ground is dismissed as not pressed. 82. Ground no.6 6. The CIT(A) erred in disallowing deduction of Rs. 206,22,11,0007- u/s 37(1) of the Act, being expenses incurred on corporate social responsibility (CSR) on the ground that it does not fall under business expenditure. The CIT(A) failed to appreciate that the amendment in the scheme of section 37(1) of the Act has been effective from 1st April 2015 and the same cannot be constructed as disadvantage to the assessee in the period prior to this amendment. 83. The assessee has incurred expenditure towards CSR expenditure. AO has disallowed this claim under section 37(1)1 of the IT act but allowed the same under section 80G (50%) of the Act. When the Assessing Officer proposed to disallow the CSR expenditure, the assessee made elaborate submi....
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....ced reliance upon the decision of Delhi tribunal in the case of the National Small Industries Corporation Ltd vs DCIT (in ITA no 1367/del/16 vide order dated 25.02.2019). 87. Per contra, the learned departmental representative relied upon the orders of authorities below. 88. Upon careful consideration we note that assessee's expenditure on corporate social responsibility has been rejected by the authorities below in the ground that these expenditure are not wholly and exclusively laid out for the purpose of the business and hence are not allowable under section 37(1). In this regard, we note that following submission was noted by the learned CIT(A) on behalf of the assessee in his appellate order which has not been dealt with by him:- The appellant also relied on the decision of the ITAT Raipur Bench in the case of ACIT vs. Jindal Power Ltd. (ITA No. 99/BLPR/2012 A.Y. 2008-09), wherein on an identical issue of allowability of CSR expenditure, the learned ITAT had held that" "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 n....
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....lf came into existence in 2013. Explanation 2 to Section 37(1} is, therefore, inherently incapable of retrospective application any further. Reliance in this regard was placed on the decision of the Hon'ble Supreme Court's five judge constitutional bench's landmark judgment, in the case of CIT Vs Vatika Townships Pvt. Ltd. [(2014) 367 ITR 466 (SC)], which held that "Of the various rules guiding how legislation has to be interpreted, one established rule is that unless a contrary intention appears, legislation is presumed not to be intended to have a retrospective operation." Thus it can be noted that the since 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 there is no reason to hold this provision to be retrospective in application. Therefore, in light of the aforesaid discussions and judicial pronouncements, it was submitted that the said expenses incurred towards CSR activities are allowable as a deduction u/s 37(1) of the Act. 15.3. Decision: The submissions of the appellant have been considered and found to be not acceptable. Section 37 of t....
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....re incurred by the assessee for the purpose of business or profession, and the same is not applicable for this assessment year. 90. Hence from the above discussion it is evident that assessee has incurred expenditure on the activities relating to corporate social responsibility. The act specifically debars such expenditure from under section 37(1) with effect from 1/04/2015. The ITAT in Jindal Power (supra) has taken exactly this view. On the facts and circumstances of the case it cannot be said that the expenditure incurred by the assessee is not relating to corporate social responsibility. Another reason for adverse inference by the authorities below for disallowance under section 37(1) is that assessee has incurred these expenditures through trusts. We find that there is no bar in the act in this regard. No cogent case has been made out that these expenditures are not covered under the statutory obligation under section 135 of the companies Act. It is also not the case that relevant authorities in this regard have rejected them as not meeting the statutory obligation u/s. 135 of the Companies Act. Moreover, AO has himself noted that he has verified the respective document and f....
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....ble jurisdictional High Court has reversed this decision. Hence, we respectfully follow the precedent as above. Hence following the aforesaid decision we direct the assessing officer accordingly. 95. Additional ground No. 2 2. The learned CIT(A) Mumbai, erred in not excluding notional sales tax incentive of Rs. 266,72,89,043/- held as capital receipt not liable to tax [while computing income under the normal provisions of the Income-tax Act, 1961 ('Act')], from the Book profit computed u/s 115 JB of the Act. The Appellant submits that notional Sales Tax incentive is not an "Income" liable to tax under the Act, and hence the same shall be directed to be excluded while computing the Books profit u/s 115 JB of the Act." 96. The assessee submits that this issue is covered in favour of the assessee by the ITAT decision in assessee on case for assessment year 10-11 to 12-13. We note that identical ground was dealt with by the ITAT in its order as referred above. The tribunal has referred to the decision of ITAT in the case of DCIT vs. M/s. Alok Industries Limited (in ITA Nos. 900 to 906/Mum/2019 vide order dated 16.07.2020) and quoted there from. Thereafter, the ITAT has co....
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....d Departmental Representative further submitted that the ITAT decision in assessee's own case has a mistake apparent from record is in as much as it has not considered the Hon'ble Jurisdictional High Court order as well as the Special Bench decision. 11. In rejoinder, the learned counsel of the assessee submitted that the Hon'ble Bombay High Court decision in the cases referred by learned Departmental Representative have been duly considered and distinguished by the Hon'ble Madras High Court in the case of C/T vs. Metal & Chromium Plater (P.) Ltd., 415 ITR 123 (Madras). He also submitted that ITAT decision in assessee's own case should be assumed to have considered this decision. 12. Upon careful consideration, we find ourselves in agreement with the submission of the learned Departmental Representative that the ITAT orders relied upon by the learned counsel of the assessee do not consider aforesaid Hon'ble Jurisdictional High Court decision. It is without any doubt that the decision of Hon'ble Jurisdictional High Court is exactly on the same subject as is being discussed hereunder. Furthermore, the proposition that book profit is not to be tinkered ....
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....ITAT in the above order of Alok Industries has discussed the issue with reference to honourable Bombay High Court decisions and remitted the same to the file of assessing officer. As this is an additional ground and in light of the subsequent order of the Alok Industries (supra) (to which one of us was a party), we are not inclined to deviate from the aforesaid order of the ITAT in Alok Industries (supra) in remitting the issue to the file of assessing officer to consider in accordance with the discussion there in. However we direct the assessing officer consider the aforesaid case laws and submissions referred by the learned counsel of the assessee also in this regard. The assessee is also free to make the necessary submissions as it deems fit in this regard. Accordingly this issue stands remitted to the file of assessing officer to consider the same afresh in light of our observations as above. 100. Additional ground no 3: 3. The learned CIT(A) Mumbai, erred in confirming the disallowance while computing book profit u/s.115JB of the Act, by applying provisions of Section 14A rwr 8D and erred in directing to re-compute the said disallowance @ 0.5% by taking average value of tho....
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.... evidence in the substantial interest of justice. In doing so we draw support from the decision of honourable Supreme Court in the case of Goetze (India) Ltd. v. CIT [2006] 284 ITR 323 (SC) wherein in the concluding portion the Hon'ble Supreme Court has held that the decision in that case would not impinge upon the ITAT jurisdiction to admit additional ground otherwise than filing revised return of income. Accordingly we admit the aforesaid additional ground and additional evidence . As agreed by the learned counsel of the assessee the issue stands remitted to the file of assessing officer to decide the issue in light of the submissions of the assessee. Needless to add assessee should be granted adequate opportunity of being heard. 105. Additional ground 5 "5. The learned CIT(A) Mumbai erred in allowing the deduction in respect of export profits of SEZ unit u/s 10AA of the Act with reference to the income computed under the head 'profits and gains of business or profession' of the SEZ unit instead of 'gross profits and gains' of SEZ unit, as interpreted by Supreme Court in the recent judgement in the case of Vijay Industries. The Apex court while interpreti....
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....r refining of mineral oil. Since the assessee had complied with the conditions as specified u/s.10AA of the Act, he claimed 100% deduction of profit and gains erred in respect of export turn over from its refinery at SEZ u/s.10AA of the Act. It has been further submitted that since the refinery began refining of mineral oil on or after the first day of October 1998, and since the assessee has complied with the conditions as specified u/s.80IB(9) of the Act, he claimed deduction of the balance profits and gains u/s.80IB(9) of the Act. Though both the AO and CIT(A) had disallowed the deduction u/s.80IB(9) of the Act for A.Y. 2013-14, similar claims in earlier year was decided in favour of the assessee by the ITAT for A.Y.2012-13 and hence, the appeal raised by the assessee for A.Y.2013-14 on this ground i.e. ground No.4 in ITA No.7299/Mum/2017 is covered. 108. Now, the assessee contends that in light of the Apex Court decision in the case of Vijay Industries, dated 01/03/2019 the term 'profit and gains' in respect of export profit u/s.10AA of the Act ought to be interpreted as gross profit and gains of SEZ units i.e. before computing income as specified in Section 30 to 43 D of the ....
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....all the earlier judgements of the Supreme Court i.e. Cambay Electric Supply [1978] 113 ITR 84 (SC), Cloth Traders [1979] 118 ITR 243 (SC), Distributor Baroda [1085] 155 ITR 120 (SC), HH Sir Ram Verma [1994] 205 ITR 433 (SC), Kotagiri Industrial Co-operative Tea Factory Ltd [1997] 224 ITR 604 (SC) concluded as under: "19) Reading of Section 80HH along with Section 80A would clearly signify' that such a deduction has to be of gross profits and gains, i.e., before computing the income as specified in Sections 30 to 43D of the Act. It is correctly pointed out by Division Bench in the reference order that in Mali/al Pesticides case, the Court followed Me judgment rendered in the M/s. ('b/h Traders (P) Lid. which was a case under Section 80M of the Act, on the premise that language of Section 80HH and Section 80M is the come. This basis is clearly incorrect as the language of two provisions is materially different. We are, therefore, of the considered opinion that judgment of Motilal Pesticides is erroneous. We, therefore, overrule this judgment The Apex Court also held that provisions of section 80AB, which is a deeming fiction to provide that for the purposes of deduction u....
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....ed and credited to a reserve account (to be called the "Special Economic Zone Re-investment Reserve Account") to be created and utilized for the purposes of the business of the assessee in the manner laid down in sub-section (2). [Explanation - For the removal of doubts, it is hereby declared that the amount of deduction under this section shall be allowed from the total income of the assessee computed in accordance with the provisions of this Act, before giving effect to the provisions of this section and the deduction under this section shall not exceed such total income of the assessee.] Thus, on perusal of section 1OAA read in light with the recent Apex Court decision in the case of Vijay Industries, it is submitted that (1) Section 10AA provides tax incentives equal to 100% / 50% of "profits and gains" derived from exports from a unit set up in a SEZ. (2) The term "profits and gains" has not been defined under the Act. (3) The full bench of the Apex court has held that the terms "profits and Gains" and "income" are different and hence are to be assigned different meaning. The term "profits and gains" mean gross profits i.e. gross revenue receipts less actual expenses....
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......Section 10AA (1) also provides that - "Subject to provisions of this section, in computing the total income of an asses.cee ..... ...the following deduction shall be allowed". Therefore, the appellant submits that both section 80A(1) as well as section 10AA(1) provide that deduction is to be allowed in computing the total income of the assessee. Therefore, the appellant submits that what has been stated in 80A(1) has been incorporated in section 10AA(1). Hence, the appellant submits that the provisions of section 10AA(1) and section 80HH r.w.s 80A(1) are pari materia. (c) The appellant submits that reference to 'gross total income' in section 80A(1), which is not stated in section 10AA(1), is irrelevant as the same only provides the stage at which the deduction is be allowed. The appellant submits that the Supreme Court was not concerned with the stage of allowing deduction, but was concerned with the quantification of deduction. Hence, the appellant submits that the decision of Supreme Court would apply in full force." 110. Per contra, the ld. departmental representative elaborately argued that the said decision of Vijay Industries (supra) is not applicable in the fac....
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....e, in the case of Motilal Pesticides, the Hon'ble Supreme Court relied on its decision in the case of Distributors Baroda Pvt. Ltd. and held that same principles are applicable for deduction u/s.80HH. It was also held that Sec.80M and Sec.80HH are similar in nature and deduction is to allowed from the net income. iv) In the recent judgement in the case of Vijay Industries Ltd.( A.Y 1979-90 and 1980-81), however, the judgement in the case of Motilal Pesticides is overruled. It has been held that the language of Sec.80HH and the language of Sec.80M are not similar. It has been further held that Sec. 80AB (which pertains to all sections in chapter VI A except section 80M) is not clarificatory but prospective in nature and operative from A.Y. 1981-82. The Hon'ble apex court has, therefore, held that reading of Sec.80HH along with Sec.80AB would clearly signify that the deduction u/s.80HH has to be of the gross profits and gains, i.e., before computing the income as specified in Sec. 30 to 43D of the Act. It is in this background that the Appellant has preferred the ground on the basis of the latest decision of the Hon'ble Supreme Court in the case of Vijay Industries Lt....
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....ection 2 of the Special Economic Zones Act, 2005, from his Unit, who begins to manufacture or produce articles or things or provide any services during the previous year relevant to any assessment year commencing on or after the 1st day of April, 2006, a deduction of (i) Hundred per cent of profits and gains derived from the export, of such articles or things or from services for a period of five consecutive assessment years beginning with the assessment year relevant to the previous year in which the Unit begins to manufacture or produce such articles or things or provide services, as the case may be, and fifty per cent of such profits and gains for further five assessment years and thereafter; (ii) For the next five consecutive assessment years, so much of the amount not exceeding fifty per cent of the profit as is debited to the profit and loss account of the previous year in respect of which the deduction is to be allowed and credited to a reserve account (to be called the "Special Economic Zone Re-investment Reserve Account") to be created and utilized for the purposes of the business of the assessee in the manner laid down in subsection (2)." A bare reading of this sect....
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.... income, deductions to be made under Chapter VIA of the Act, etc. The Hon'ble jurisdictional High Court thereafter analyzed the word "derived" used in this section (among other sections) and referred to the decision in the case of Liberty India vs. CIT. The Hon'ble High Court held that Sec. 801A is a code by itself and is a special deduction which is linked to profit. In para 43 of the order, it was noted that "thus, on analysis of all the decisions referred herein above, it is seen that the quantum of deduction allowable u/s.801A of the Act has to be determined by computing the gross total income from the business, after taking into account all the deductions allowable u/s.30 to 43D of the Act. Therefore, whether the assessee has claimed the deduction allowable u/s.30 to 43D of the Act or not, the quantum of deduction u/s.801A has to be determined on the total income computed after deducting all deductions allowable u/s.30 to 43D of the Act." The jurisdictional High Court in para 34 to 36 observed as under: "34. As noted earlier, the Apex Court in the case of Mahendra Mills (supra) has neither considered the scope of deduction under Chapter VI-A nor the said decision c....
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.... be highlighted. Each of the eligible business in subsections (3) to (11A) constitutes a stand-alone item in the matter of computation of profits. That is the reason why the consent of "Segment Reporting" stands introduced in the Indian Accounting Standards (AS) by the Institute of Chartered Accountants of India (ICAI). 14. Analysing Chapter V/-A, we find that Sections 80-lB I 80-IA are the Code by themselves as they contain both substantive as well as procedural provisions. Therefore, we need to examine what these provisions prescribe for ''computation of profits of the eligible business". It is evident that Section 80-lB provides for allowing of deduction in respect of profits and gains derived from the eligible business. The words "derived from" in narrower in connotation as compared to the words "attributable to". In other words, by using the expression "derived from" Parliament intended to cover sources not beyond the first degree. In the present batch of cases, the controversy which arises for determination is: whether the DEPB credit I Duty drawback receipt comes within the first degree sources ? According to the assessee(s), DEPB credit/duty drawback receipt reduc....
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....trict the quantum of deduction to a specified percentage of profits. This is the importance of the words "derived from industrial undertaking" as against "profits attributable to industrial undertaking". Thus even for the A.Y 1997-98, in the case of Plastiblend (supra) and without reference to section 80AB, Hon'ble High court rendered the decision after discussing the scope of profits and gains derived and held that the quantum of deduction u/ s.801A has to be determined on the total income computed after deducting all deductions allowable u/s.30 to 43D of the Act. Thereafter, the Hon'ble apex court confirmed the jurisdictional High Court decision and held (in para 18) that "the assessees/appellants want 100% deduction, without taking into consideration depreciation which they want to utilise in the subsequent years. This would be anathema to the scheme under Section 80-IA of the Act which is linked to profits and if the contention of the assessees is accepted, it would allow them to inflate the profits linked incentives provided under Section 80-IA of the Act which cannot be permitted." The decision in the case of plastiblends is apparently not referred in the decisi....
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....the total income of the assessee computed in accordance with the provisions of this Act, before giving effect to the provisions of this section and the deduction under this section shall not exceed such total income of the assessee]" The appellant contends this explanation is prospective in nature. However the language of the explanation itself says that it is for the purpose of removal of doubts that deduction is to be allowed from the income computed as per provisions of the Act. In any case , the language of section 10AA itself makes it clear that the deduction is to be allowed from income computed as per provisions of the Act as discussed before w.r.t. the decision in the case of Plastiblends (supra) and therefore there is no substance in the arguments of the appellant. (x) It may be also noted that the decision in the case of Vijay Industries pertains to only section 80HH and the language used in that section as specifically pointed out by the Hon'ble Apex Court in para 17 of the order. (xi) Reference is also invited to section 10AA(8) which says that provisions of section 10A(6) are equally applicable which bars giving effect to section 32(2) even in later years. ....
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....tion u/s.10AA to be allowed from the total income of the assessee Thus, while deduction under Chapter VIA r.w.s 80AB is in respect of the income as computed in accordance with the provisions of the Act, the deduction u/s 10AA as per the Explanation shall not exceed the total income of the assessee i.e. while 80AB provides the basis for quantifying he deduction under various head of chapter VIA, Explanation to section 10AA(1) provides that deduction shall be allowed from total income. Hence, Explanation to section 10AA(1) does not deal with quantification of deduction. (ii) Further the said Explanation to section 1OAA is prospective and not retrospective. The appellant further submits that the Explanation to section 10AA was inserted by the Finance Act 2017 w.e.f 0104.2018 and hence the same cannot be applied retrospectively. The appellant further relies on the Explanatory Memorandum' to the Finance Bill 2017, wherein in the context of rationalization of provisions of section 10AA, it was stated that the amendment will take effect from 1St April 2018 and will accordingly apply in relation to assessment year 2018-19 and subsequent years. Hence, the appellant submits that th....
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....ion 10A/10AA/10B/10BA/10C of the Act, even though the said sections provide for deduction to be granted to an assessee. Secondly, deduction under section 10AA of the Act (prior to the amendment made by Finance Act 2017 by way of insertion of Explanation) was to be given at the stage of computing the gross total income of the eligible undertaking under Chapter IV of the Act i.e. prior to the commencement of the exercise to be undertaken under Chapter VI of the Act for arriving at the total income of the assessee from the gross total income. This has been held by the Supreme Court in the case of CTT v. Yokogawa India Ltd 391 ITR 274 (SC) in the context of section 10A of the Act. Plastiblends India deals with a situation of computation of deduction under Chapter VIA of the Act i.e. after computing the gross total income of the eligible undertaking under Chapter IV of the Act. (7) There is clear evidence in the Act that whenever the legislature wanted to allow a deduction as a percentage or fraction of the income computed under the head 'Profits and Gains from Business or Profession' it has specifically provided for the same. Thus section 33ABA reads, inter alia as follows:....
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....he Explanation to section 10AA introduced by the Finance Act, 2017 with effect from 1.4.2018 makes it clear that its purpose is to allow deduction under section 10AA from the total income of the assessee and not the total income of the undertaking. The memorandum explaining the provisions of the Finance Bill 2017 at 391 1TR 1 (St) at page 214 state as follows:- "Rationalisation of provisions of Section 10AA Under the existing provisions of the section 10AA, deduction is allowed from the total income of an assessee, in respect of profits and gains from his Unit operating in SEZ. Subject to fulfillment of certain conditions. Section 10AA allows deduction in computing the total income of the assessee, hence the deduction is to be allowed for the total income of the assessee as computed in accordance with the provision of the Act before giving effect to the provisions of section 10AA. However, courts have taken a view (while deciding the matter pertaining to section 10A which also contains similar provision) that the deduction is to be allowed from the total income of the undertaking and not from the total income of the assessee. In view of the above, it is proposed to clarify th....
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....R 278 9. Western states Trading Co. P. Ltd. v. CIT (SC) 80 ITR 21 10. CIT v. Shrikishan Chandmal (Madhya Pradesh HC) 60 ITR 303 11. CIT v. R. Dalmia (Delhi HC) 96 ITR 463 12. Brooke Bond and Co. Ltd. v. CIT (SC) 162 ITR 373 13. Addl.CIT v. Solar Chemical Pvt. Ltd. (Allahabad HC) 190 ITR 216 14. CIT v. Ramnath Goenka (Madras HC) 259 ITR 26 15. K. Raheja IT Park v. DCIT (ITAT Hyderabad) ITANo. 1774/Hyd/14, 727/Hyd/15 & 728/Hyd/15 16. P.K. Badianiv. CIT(SC) 105 ITR 642 115. We have carefully considered the submissions and perused the records. Before proceeding further it may be gainful here to refer to the decision of Hon'ble Supreme Court in the case of Vjay Industries (supra) which read as under :- " JUDGMENT A.K. Sikri, J. - Leave granted. Delay condoned. 2. In all these appeals issue relates to the interpretation that is to be accorded to the provisions of Section 80HH of the Income Tax Act, 1961 (hereinafter referred to as the 'Act'). Section 80HH and other related provisions, as it existed at the relevant time, are to be taken note of since we are concerned with the Assessment Years 1979-80 and 1980-81. Section 80HH provides deduction from incom....
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....e'. Therefore, whatever profit and gains are earned by an undertaking covered by Section 80HH of the Act, 20% thereof is admissible as deduction. As a corollary, from such profits and gains of the industrial undertaking, depreciation or unabsorbed investment allowances which are the deductions admissible under Sections 32 and 32AB of the Act, cannot be taken into consideration. 4. We may mention, at this stage, that this Court in the the case of Motilal Pesticides (I) (P.) Ltd. v. CIT [2000] 111 Taxman 83/243 ITR 26 has taken the view which is favourable to the Department. This view is followed by the High Court in the impugned judgment thereby dismissing the appeals of the appellants/assessees herein. The assessees in these appeals submit that the aforesaid view taken in Motilal Pesticides (I.) (P.) Ltd. case (supra) is not a correct view as it ignores certain earlier judgments on this very issue. Therefore, according to them, Motilal Pesticides (I.) (P.) Ltd. case (supra) needs a re-look. 5. These appeals had come up for hearing before a Devision Bench of this Court. After hearing the arguments advanced by the counsel for the parties on the aforesaid lines, the Division B....
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....he aforesaid heads thereby arriving at total income on which the tax would become payable. 9. Chapter VIA also contains provisions in respect of certain deductions which are to be made in computing total income. Section 80A of this Chapter stipulates that in computing the total income of an assessee, there shall be allowed from 'gross total income' the deductions specified in Section 80C to 80U. It is relevant to point out that though Chapter VIA also allows certain deductions in computing total income, these provisions are not clubbed with the provisions of part of Chapter IV of the Act. There is a reason for doing so. The provisions made in Chapter IV are for the purposes of computing total income qua income under the head 'profits and gains' from business or profession. Various deductions which are specified to be given from the gross total income are in the nature of expenses incurred or to be treated as expenses. It may be rents paid, insurance premium paid for building, expenditure incurred on scientific research, various other kinds of expenditures etc. The purpose is to arrive at true income after making such expenditure admissible for deduction. Deduction....
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....o the provisions based on Income/Gross Total Income/Net Taxable Income and is wholly inapplicable to provisions like 80HH/80I/80IA/80J under which the deduction has been provided for promoting a particular kind of activity and is accordingly calculatable on the Profit and Gains of Business, i.e. such activity. It is argued that Sections 80HH and 80I very categorically refer to and use the terminology 'profits and gains of Industrial Undertakings'. The terms 'profits and gains' and 'income' are not same but are different. The term 'profits and gains' has not been defined under the provisions of the Act whereas the term 'income' has been defined. It is further submitted that there are a number of provisions under Chapter VIA, some of which refer to the term 'profits and gains'. Whereas some other refer to the term 'income'. Thus, in some of the provisions of Chapter VIA, the deduction is intended to be given out of 'profits and gains', whereas in some other sections, the deduction has been provided to be given out of 'income'. When the term 'profits and gains' has not been defined under the Act, in that c....
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....income. The Gujarat High Court in a judgment delivered on November 28, 1973, held that the deduction permissible under Section 80-M is liable to be calculated with reference to the dividend income computed in accordance with the provisions of the Act and not with reference to the full amount of dividends received by the assessee. The assessee being aggrieved by this judgment preferred an appeal to this Court and this appeal was allowed by the judgment delivered in Cloth Traders case. This Court overruled the view taken by the Gujarat High Court and held that the deduction required to be allowed under Section 80-M must be calculated "with reference to the full amount of dividends received from a domestic company and not with reference to the dividend income as computed in accordance with the provisions of the Act, that is, after making deductions provided under the Act". This decision was given by the Court on May 4, 1979." 13. Now, according to Parliament, this interpretation placed on Section 80-M by the summit court was not in conformity with the legislative intent and it resulted in considerable unjustified loss of revenue. Parliament therefore immediately proceeded to set rig....
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....rovisions of Section 80P of the Act are interpreted in the following manner: '1. ... The Tribunal referred the following question for the opinion of the High Court: "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the deduction under Section 80-P of the Income Tax Act should be allowed before set-off of unabsorbed losses of earlier year?"...... 5. Reference may be made at this stage to the provisions of Section 80-P which falls in Chapter VI-A of the Act. Sub-section (1) of Section 80-P, which is relevant for the purpose of the case, provides as follows: "80-P. (1) Where in the case of an assessee being a cooperative society, the gross total income includes any income referred to in sub-section (2), there shall be deducted, in accordance with and subject to the provisions of this section, the sums specified in sub-section (2), in computing the total income of the assessee." 6. For the purpose of Chapter VI-A the expression "gross total income" is defined in clause (5) of Section 80-B in the following terms: " 'gross total income' means the total income computed in accordance with the provisi....
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....November, 2014 rightly draws a distinction between 'profits and gains' and 'income'. We would like to reproduce the said reference order in its entirety as we find that it captures the legal position lucidly and succinctly: '1. We are concerned in these cases with Assessment Year 1979-1980 and Assessment Year 1980-1981. The High Court of Rajasthan by the impugned judgment dated 17th May, 2004 construed Section 80-HH of the Income Tax Act, 1961 following a judgment of this Court in Motilal Pesticides(I) Pvt. Ltd. v. Commissioner of Income Tax, Delhi-II [2000] 9 SCC 63. The High Court noticed an argument made before it to the following effect: "It is most humbly submitted that the concept 'profits and gains' is a wider concept than the concept of 'income'. The profits and gains/loss are arrived at after making actual expenses incurred 2 from the figure of sales by the assessee. It does not include any depreciation and investment allowance, as admittedly these are not the expenses actually incurred by the assessee. However, the term 'income' does take into consideration the deductions on account of depreciation and investment allowance. ....
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....er or of construction, manufacture or production of any one or more of the articles or things specified in the list in the Fifth Schedule, there shall be allowed a deduction from such profits and gains of an amount equal to eight per cent, thereof, in computing the total income of the company. (2) This section applies to (a) an Indian Company; or (b) any other company which has made the prescribed arrangements for the declaration and payment of dividends (including dividends on preference shares) within India. But does not apply to any Indian Company referred to in Clause (1), or to any other company referred to in clause (b), if such Indian or other company is a company referred to in Section 108 of its total income as computed before applying the provisions of sub-section (1) does not exceed twenty-five thousand rupees". 6. It will be noticed that in marked contrast to the Section under consideration in this appeal i.e. 80-HH, Section 80-E uses the expression "total income [as 5 computed in accordance with the provisions of this Act]" and goes on to speak of any profits and gains, so computed, for the purpose of deduction under Section 80-E. It will be seen in the present c....
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....the Act mentions various kinds of incomes which are chargeable under this head. Therefore, all those incomes specifically mentioned in that provision when earned by a particular assessee, are to be aggregated to arrive at profits and gains of the assessee. Section 29 thereof mentions the method of arriving at 'income' which is to be computed in accordance with the provisions contained in Sections 30-43D of the Act. Sections 30-43D contain deductions of various kinds which are in the nature of expenditure or the like nature. After providing the deductions admissible in these provisions, one arrives at the figure of net profits which would become the net income under the head 'profits and gains of business or profession'. In contrast, as mentioned above, under Chapter VI-A of the Act certain deductions are given by way of incentives. Assessees may earn these deductions on fulfilling the eligibility conditions contained therein, even when they are not in the nature of any expenditure incurred by the assessee. Here, Section 80A of the Act provides that in computing the total income of assessee, there shall be allowed from his gross total income, in accordance with the s....
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....(P.) Ltd. case (supra) and mentions that the directions specified in the aforesaid sections will be calculated with reference to the net income as computed in accordance with the provisions of the Act (before making any deduction under Chapter VIA) and not with reference to the gross amount of such income, subject, however, to the other requirements of the respective sections. Notwithstanding the same, this circular also categorically mentions that it will take effect from April 01,1981. Following portion of this circular is relevant: "The new section 80AB will take effect from 1st April, 1981, and will accordingly apply in relation to the assessment year 1981-82, and subsequent years. It should be carefully noted that the new section 80AB, unlike section 80AA, will not have any retrospective operation." 21. It is, thus, clear that change in legal position is brought about only, with the insertion of Section 80AB and made applicable from Assessment Year 1981-82. In view thereof, judgments in the case of Cloth Traders (P.) Ltd. (supra) relied by the Revenue will be of no relevance. Likewise, judgment in Kotagiri Industrial Co-Operative Tea Factory Ltd. case (supra) decided altog....
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....d become the net income under the head profits and gains of business or profession. In contrast as mentioned above under chapter VI A of the Act certain deductions are given by way of incentives. Assessee's may earn this deductions on fulfilling the eligibility conditions contained therein, even when they were not in the nature of expenditure incurred by the assessee. Here section 80A of the act provides that in computing the total income of assessee there shall be allowed from his gross total income in accordance with the subject of the provisions of this chapter the deductions as specified in section 80C to U. As mentioned above section 80 C to 80 U contain different subject matters. 119. The Hon'ble Apex Court expounded that reading section 80 HH along with section 80A would clearly signify that deduction has to be of gross profits and gains that is before computing the income as a specified in section 30 to 43D. Thereafter honourable court held that the judgement of Motilal pesticides is erroneous in as much as the language of 80 M and 80H are materially different and hence the same was overruled. Thereafter the honourable court held that provisions of section 80 AB are perspe....
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....ndertaking as is referred to in section 33B, in the circumstances and within the period specified in that section; (iii) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose in any backward area; (iv) it employs ten or more workers in a manufacturing process carried on with the aid of power, or employs twenty or more workers in a manufacturing process carried on without the aid of power. Explanation.-Where any machinery or plant or any part thereof previously used for any purpose in any backward area is transferred to a new business in that area or in any other backward area and the total value of the machinery or plant or part so transferred does not exceed twenty per cent of the total value of the machinery or plant used in the business, then, for the purposes of clause (iii) of this sub-section, the condition specified therein shall be deemed to have been fulfilled. (3) This section applies to the business of any hotel, where all the following conditions are fulfilled, namely :- (i) the business of the hotel has started or starts functioning after the 31st day of December, 1970 but before the 1st day of April, 1990, i....
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....nsfer, in either case, had been made at the market value of such goods as on that date : Provided that where, in the opinion of the Assessing Officer, the computation of the profits and gains of the industrial undertaking or the business of the hotel 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.-In this sub-section, "market value" in relation to any goods means the price that such goods would ordinarily fetch on sale in the open market. (7) Where it appears to the Assessing Officer that, owing to the close connection between the assessee carrying on the business of the industrial undertaking or the hotel to which this section applies and any other person, or for any other reason, the course of business between them is so arranged that the business transacted between them produces to the assessee more than the ordinary profits which might be expected to arise in the business of the industrial undertaking or the hotel, the Assessing Officer shall, in computing the profits and gains of the industrial undertaking or the hotel for the purpose....
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....eeding fifty per cent of the profit as is debited to the profit and loss account of the previous year in respect of which the deduction is to be allowed and credited to a reserve account (to be called the "Special Economic Zone Re-investment Reserve Account") to be created and utilized for the purposes of the business of the assessee in the manner laid down in sub-section (2). Explanation.-For the removal of doubts, it is hereby declared that the amount of deduction under this section shall be allowed from the total income of the assessee computed in accordance with the provisions of this Act, before giving effect to the provisions of this section and the deduction under this section shall not exceed such total income of the assessee.] (2) The deduction under clause (ii) of sub-section (1) shall be allowed only if the following conditions are fulfilled, namely :- (a) the amount credited to the Special Economic Zone Re-investment Reserve Account is to be utilised- (i) for the purposes of acquiring machinery or plant which is first put to use before the expiry of a period of three years following the previous year in which the reserve was created; and (ii) until the acquisi....
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....ecial Economic Zone, the period of ten consecutive assessment years referred to above shall be reckoned from the assessment year relevant to the previous year in which the Unit began to manufacture, or produce or process such articles or things or services in such free trade zone or export processing zone : Provided also that where a Unit initially located in any free trade zone or export processing zone is subsequently located in a Special Economic Zone by reason of conversion of such free trade zone or export processing zone into a Special Economic Zone and has completed the period of ten consecutive assessment years referred to above, it shall not be eligible for deduction from income as provided in clause (ii) of sub-section (1) with effect from the 1st day of April, 2006. (4) This section applies to any undertaking, being the Unit, which fulfils all the following conditions, namely:- (i) it has begun or begins to manufacture or produce articles or things or provide services during the previous year relevant to the assessment year commencing on or after the 1st day of April, 2006 in any Special Economic Zone; (ii) it is not formed by the splitting up, or the reconstruct....
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....he figures, letters and word "1st April, 2001", the figures, letters and word "1st April, 2006" had been substituted; (b) for the word "undertaking", the words "undertaking, being the Unit" had been substituted. (9) The provisions of sub-section (8) and sub-section (10) of section 80- IA shall, so far as may be, apply in relation to the undertaking referred to in this section as they apply for the purposes of the undertaking referred to in section 80-IA. (10) Where a deduction under this section is claimed and allowed in respect of profits of any of the specified business, referred to in clause (c) of subsection (8) of section 35AD, for any assessment year, no deduction shall be allowed under the provisions of section 35AD in relation to such specified business for the same or any other assessment year. Explanation 1.-For the purposes of this section,- (i) "export turnover" means the consideration in respect of export by the undertaking, being the Unit of articles or things or services received in, or brought into, India by the assessee but does not include freight, telecommunication charges or insurance attributable to the delivery of the articles or things outside India....
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....e assessee that languages of both the above section are pari materia is to be accepted. The submission of the learned departmental representative that the languages are different is not at all sustainable in light of the above said discussion. The distinction brought out by the learned departmental representative is not based upon a proper and full reading of the concerned section. The suggestion of the learned departmental representative that section 80 HH does not deal with profit and gains derived is totally fallacious. The term derived has been very much used and the same in facts controls the provision of section 80 HH. Hence learned departmental representative submission in this regard is not sustainable. 130. The submission of the learned departmental representative and the stand of the revenue will succeed only when the explanation below section 10 AA is considered as clarificatory. The said explanation inserted by Finance Act 2017 with effect from 1/4/18 provides that "For the removal of doubts, it is hereby declared that the amount of deduction under this section shall be allowed from the total income of the assessee computed in accordance with the provisions of this a....
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....preme Court is to be overlooked by referring to other decisions of lesser strength in judicial hierarchy. Hence the learned departmental representative submission that while rendering this decision other decisions were not referred is not at all acceptable. It is settled law that decision rendered by the honourable Supreme Court is the law of the land and is totally binding upon all the other courts and tribunals. Furthermore the submission of learned Departmental Representative that other decisions have not been considered by the Hon'ble Supreme Court is without any substance. Moreover, as cogently brought by learned Counsel of the assessee in para 9 of his submisison, the reference to decision of Plastibends India Ltd. (supra) here is not applicable. Suffice is to reiterate here that it dealt with a deduction provision under section 80IA, which falls under Chapter VI-A and is therefore covered by provisions of section 80AB (i.e. the deeming fiction to provide deduction only from income as included in the gross total income of the assessee). In the appellant's case the deduction is claimed under section 1OAA of the Act which is not covered in section 80AB. That the legisla....
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....uity the same needs to be interpreted in favour of the revenue. Here we find that it cannot be said that after the elaborate and well reasoned and speaking order rendered by the recent larger bench of three of their Lordships of the honourable Supreme Court there can be any scope of ambiguity in the interpretation of the meaning of word profit and gains with reference to which the discussion is being made here. Accordingly the submission of the learned departmental representative does not oxygenate the revenue's stand. 136. Accordingly in the background of aforesaid discussion and the precedent from the Hon'ble Supreme Court we direct the assessing officer to grant the deduction under section 10 AA with reference to the profit and gains as determined by the honourable Supreme Court in the case of Vijay Industries (supra). 137. The without prejudice submission of the learned Counsel of the assessee does not need any separate adjudication. In fact by requesting for computation of profit without adjustment of the difference between depreciation as per Companies Act and Income Tax Act, the learned Counsel of the assessee is reiterating the computation of commercial profit exposit....
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....ground No. 7.4 the learned counsel of the assessee placed reliance upon several case laws. 140. The proposition canvassed is that as mandated under section 80IA(10) the assessing officer/transfer pricing officer has failed to prove the existence of arrangement between the assessee and its related party. That there cannot be any adverse inference just because the assessee's margins are better. 141. As regards ground No. 7.5, the learned counsel of the assessee submits that the same is general ground. 142. Upon careful consideration we find that these are general grounds and that they are with reference to other Transfer Pricing addition partly sustained by learned CIT appeals in subsequent grounds. We shall be dealing this issue's subsequently as follows. 143. Ground No. 8 8 Guarantee Commission charged in respect of corporate guarantee provided on behalf of Associated Enterprises 8.1 The learned CIT(A) erred in confirming the order of the AO/ TPO in treating the guarantee given by Appellant to banks for giving loan to its Associated Enterprises as International Transaction within the meaning of Section 92B r.w.s 92(1) of the Act. 8.2 The learned CIT(A) erred in de....
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.... comparables: Sr. No. Company Name NCP (%) 1 Empire Industries 4.32 2 HGS Business Services Pvt. Ltd. 15.33 3 ICRA Management Consulting Services Ltd. 2.10 4 Spectrum Business Solutions Ltd. 1.82 Arithmetic Mean 5.90 The 5% margin earned by AE is within the tolerance range, hence it was contented that RIL Refinery SEZ is not making more than ordinary profits and the specified domestic transactions between RCITPL with RIL Refinery SEZ related to provision of Business Support Services were consistent with the arm's length standard from Indian transfer pricing regulations perspective. 148. The TPO rejected the search process conducted by the assessee and conducted a fresh search process to determine the arm's length mark-up of the transaction by applying TNMM. The TPO issued a show cause notice proposing to use the following comparable companies:- Sr. No. Name of Comparable Company OP/OE(%) 1 BVG India Limited. 24.08 2 Axis Integrated Systems Limited. 36.30 3 Asian Business Exhibition & Conferences Limited. 12.09 4 HGS Business Services Private Limited. 14.52 Average 21.75 149. The assessee vide letter dated 18 October 2016 ....
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....ables. Cameo Corporate Services Limited The company is an established service provider, Providing business support services to a wide range of clients. Its main businesses are in the areas of Document Management, Medical Transcription, Data Conversion and Registry & Share Transfer. The TPO has not discussed. So no opinion can be given. Neilsoft Limited The Company, along with its subsidiaries in USA, Germany and branch located in UK provides Software engineering services to its clients. The Company provides solutions across a range of engineering segments. The TPO has not discussed. So no opinion can be given. Goldmine Advertising Limited The company is engaged in service-oriented activities. Its revenue comprises of Space Media, Radio Advertising etc. The TPO has not discussed. So no opinion can be given. BVG India Limited BVG India Limited is engaged in providing and undertaking facility management, mechanised, housekeeping, transportation, plant relocations, attendant services and labour supply. It also undertakes various projects for garden development, slum rehabilitation, landscaping, beautification projects, engineering and other contracts. Three reportable segme....
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....g the action of the assessing officer in cherry picking the non-comparable company namely Asian Business Exhibition and Conference Ltd. It is the submission that this comparable is to be rejected as the employee cost total operational cost ratio is only 12.83% and that of the assessee's 66.6%. That low cost of the employees cost implies that company would not be providing services by employing its own sources and is following a different business model. Hence, the same is functionally not comparable. Further, the learned counsel of the assessee submits that from the website it is observed that the company is engaged in the business of exhibitions such as trade fair organizer, networking events, conferences, activation, road shows, digital and publications entail completely different set off employee skills and are not comparable. 154. As regards the revenues grounds the learned counsel of the assessee relies upon assessee submission before the learned CIT(appeals). The learned counsel submits that the learned CIT(appeals) has appreciated the submissions and given a finding of facts which have not been controverted by the revenue. 155. Upon careful consideration as regards the....
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....39;s length rate at INR 6.155 per KHW without considering INR 6.45 per KHW as determined by the Appellant; 10.2 On the facts and in the circumstances of the case and in law, the learned AO erred in reducing and the learned CIT(A) erred in confirming the reduction of deduction by INR 17,52,72,214 claimed under section 80IA of the Act; 10.3 On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in confirming the action of the learned AO in rejecting the economic analysis or the benchmarking analysis of the Appellant, on the application of internal Comparable Uncontrolled Price Method by the Appellant, without providing any cogent reasons; 10.4 On the facts and in the circumstances of the case, the learned CIT(A) erred in confirming the action of the learned AO in accepting the economic analysis of the learned TPO without providing cogent reasons and specifically: The learned AO and CIT(A) failed to appreciate that the turnover of the comparable company is more than 10 times that of the tested transaction; The learned AO and CIT(A) failed to appreciate that the level of market of the comparable transaction adopted by the learned TPO, is differ....
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....s MAM and adopting an internal comparable where by the electricity rate at which the Power was sold by Dakshin Gujarat Vij Company Limited ('DGVCL') to the Manufacturing Division. The DMD unit pays to third Party i.e. DGVCL at the rate of INR 6.45 KHW. Hence, the transaction is at arm's length. 161. The learned TPO issued show-cause notice (SRN) dated 14 October 2016 as to why the profitability or the deduction claimed by the aforesaid CPP should not be restricted to the profits/rate -computation prescribed in the Notification No. I-7/145(160)/2008-CERC dated 19 January 2009 issued by the Central Electricity Regulatory Commission, New Delhi. The assessee filed reply to the SCN issued by the TPO vide its letter dated 24 October 2016, the TPO accepted the response filed by the Appellant and no adjustment was proposed at this stage by the learned TPO. The learned TPO again issued a show cause notice during the course of hearing held on 27 October 2016, wherein the learned TPO has proposed to adopt the rate at which Power is purchased from Gujarat State Electricity Board and proposed the arm's length price of INR 4.70 per unit. 162. The assessee filed a detailed reply....
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....he price charged by the distributing company DGVCL to the end customer. Therefore for fulfilling the object of 80IA through the mechanism of TP provisions the transaction should be benchmarked as done by the TPO. Reliance is also placed on the decision in the case of CIT Vs ITC Ltd 64 taxmann. Com 214 (Cal) in appeal No. 425 of 2006 dt. 1.06.2015 wherein the amended provisions of sec 80IA(8) was considered. The facts are similar. The appellant has also relied on the decisions in the case of Pr. CIT Vs Gujarat Alkaline and Chemicals, CIT Vs Shah Alloys (whereon the SLP of revenue is dismissed) and its own case in AY 2005-06 and ay 2006-07. However, as mentioned by TPO the decision were rendered for determining the fair market value for the propose of sec 80IA(8) as it existed. Therefore considering the entirety of the facts and decision in the case of CITVs ITC Ltd this ground of appeal is dismissed. 167. Against this order, the assessee is in appeal before us. 168. We have heard both the counsel and perused the records. Learned counsel of the assessee contended that assessee has benchmarked the transaction using internal cup by considering the manufacturing unit as a tested party....
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.... 80IA(8):- Deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development, etc. 80-IA. (8) 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 purposes 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, 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 date: 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 fi....
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....generation of power worked out by the Assessee on the basis of the price that it paid to TPC for purchase of power continues to be the best basis even after the order of MERC and therefore the same has to be accepted as was done in the past and as approved by the ITAT in Assesssee's case. We therefore dismiss ground." 7. Counsel for the assessee pointed out that the judgment of the Tribunal in case of Reliance Infrastructure limited (supra) was carried in appeal by the revenue before the High Court in Income Tax Appeal No.2180 of 2011, such appeal was dismissed making following observations:- "6. As far as question (d), namely, the claim relating to purchase price from Tata Power Company is concerned and that was for the deduction under Section 80IA, the ITAT in paragraph 21 onwards has noted the factual findings and also referred to the order of the Maharashtra Electricity Regulatory Authority (for short "MERC"). Paragraph 36 set outs as to how the claim arose. The claim has been considered in the light of Section 80IA and particularly proviso and explanation thereto. The Tribunal eventually held that till the Assessment Year 2005-2006, the Revenue considered the rate at w....
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....s recorded that Rs. 4.51 was computed as the reasonable value of the electricity generated by eligible unit of assessee. This amount included Rs. 4.17 per unit which was the cost of electricity generation and Rs. 0.34 per unit which was duty paid by the assessee to GEB for such power generation. Thus the sum of Rs. 4.51 per unit only represented the cost of electricity generation to the assessee. In Section 80IA(8) of the Act what is required to be ascertained is the market value of the goods transferred by the eligible business, when such transfer is by eligible business to another non eligible business of the same assessee and the consideration recorded in the accounts of the eligible business does not correspond to market value of such goods. Term "Market Value" is further explained in explanation to said sub-section to mean in relation to any goods or services, price that such goods or services will ordinarily fetch in the open market. To our mind sum of Rs. 4.51 per unit of electricity only represented cost of electricity generation to the assessee and not the market value thereof. It is not in dispute that the GEB charged Rs. 5 per unit for supplying electricity to other indu....