TaxTMI 
TaxTMI 
2021 (1) TMI 741
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.... normal provisions and Rs. 1,67,73,82,769/- under the MAT provisions. The case was selected for scrutiny and notice u/s 143(2) of the Act dated 06.09.2010 was issued and served on the assessee. 4. AO noted that during the year under consideration, assessee had entered into international transactions with its Associate Enterprise (AEs) and the value of such transactions exceeded Rs. 15 crores. He therefore referred the case to TPO on 25.07.2011 u/s 92CA for computing the Arm's Length Price (ALP) of the international transactions entered by the assessee with its AEs. The TPO vide order dated 22.01.2013 passed u/s 92CA(3) proposed adjustment of Rs. 59,02,538/- with respect to market support services and Rs. 15,19,68,061/- towards interest on excess amount of investments in share and thus proposed aggregate adjustment of Rs. 15,78,70,599/- to the total income on account of ALP with respect to international transaction with associated enterprises. AO thereafter in the order passed u/s 143(3) r.w.s 144C(4)(a) of the Act dated 28.05.2013 determined the total income of the assessee under normal provisions of the Act at Rs. 21,18,15,600/- and book profit of Rs. 165,91,02,036/-. 5. ....
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....he purpose of making/earning income in India. 3. That on the facts and in the circumstances of the case and the legal position, the learned CIT(A) has erred in confirming the disallowing a sum of Rs. 2,47,68,964/- in respect of provision made for sales incentive under "Shahensha Scheme" and holding that the provision made by the appellant under the aforesaid scheme was not being made on a scientific or logical basis and therefore the provisions, is not allowable as deduction. 4. That on the facts and in the circumstances of the case and the legal position, the learned CIT(A) has erred in not allowing the sum of Rs. 23,059/- being the interest income of Rs. 16,725/- and Rs. 6,334/- in respect of Baddi and Haridwar units respectively for the purpose of deduction u/s 8OIC of the I.T. Act, 1961. 5.01. That on the facts and in the circumstances of the case and the legal position, the learned CIT (A) has erred m not allowing the deduction of education cess and secondary and higher education cess of Rs. 54,75,037/-. 5.02. That on the facts and in the circumstances of the case and the legal position, the learned CIT (A) has erred in not adjudicating the ....
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....trical products manufactured by it. It was further submitted that the testing was done by foreign entity outside India for the purpose of exports outside India, the services was rendered and utilized outside India and the payment have also been received by the foreign entity outside India, the assessee's case falls under the exemption provided u/s 9(1)(vii)(b) of the Act and therefore assessee was not required to deduct TDS on the payments. The submissions of the assessee was not found acceptable to AO as he was of the view that the payment made by the assessee falls within the purview of "fees for technical services" and the testing report certification etc. was in respect of products to be utilized for the purpose of the business of the assessee. AO also noted that the Hon'ble Delhi High Court in assessee's own case for A.Y. 2005-06 had decided the issue against the assessee. He therefore, held that non-deduction of tax by the assessee would lead to attraction of provision u/s 40(a)(i) of the Act and accordingly he disallowed the payments of Rs. 17,59,124/-. 10. Aggrieved by the order of AO, assessee carried the matter before the CIT(A) who upheld the order of AO. Aggrieved by....
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....certification of the electrical products manufactured by it, assessee should have deducted TDS as it was in the nature of technical services received by assessee. Before us, Learned AR has submitted that identical issue of disallowance has been decided by the Coordinate Benches of Tribunal in favour of the assessee in A.Ys. 2005-06, 2006-07, 2007-08 & 2008-09. The aforesaid contention of the Learned AR has not been controverted by the Learned DR. We find that while deciding the issue in A.Y. 2008-09 (order dated 10.11.2020) in favour of the assessee, the coordinate Bench of the Tribunal has observed as under: "3. As regards Ground No. 1, 1.1 and 1.2 relating to addition of Rs. 5,68,856/- u/s 40(a)(i) paid to foreign entity as treaty/certification fees outside India. The Ld. AR submitted that during the previous year's relating to the Assessment Year 2008-09, the assessee paid levy and certificate charges aggregating to Rs. 5,68,856/- to M/s KEMA Quality BV, Netherlands for the purpose of certification of electrical products manufactured by the assessee. The aforesaid foreign entity was authorized for certification of products for export which is a mandatory requirement ....
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....unal. Hence, Ground No. 1, 1.1, 1.2 are allowed." 14. Before us, no material has been placed by the Revenue to point out that the orders passed by the Co-ordinate Bench of Tribunal in A.Y. 2005-06 to 2008-09 in assessee's own case has been set aside/ stayed or over ruled by the higher judicial forum nor has it pointed to any distinguishing feature in the facts of the case in the year under consideration and that of earlier years. Considering the totality of the aforesaid facts and following the order of the Co-ordinate bench in the assessee's own case and for similar reasons, we hold that the Revenue was not justified in making the addition. We therefore set aside the action of AO. Thus the ground of the assessee is allowed. 15. Ground No.3 is with respect to disallowance of Rs. 2,47,68,964/- in respect of provision made for sales incentive under "Shahenshah Scheme". 16. During the course of assessment proceedings, AO noticed that assessee had made provision in respect of "Shahenshah Scheme" and the assessee was asked to furnish the details of the same. Assessee inter alia submitted that it had made provision of Rs. 5,67,26,847/- in respect of "Shahenshah Scheme" tow....
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....e present ground is with respect to the disallowance of provision made with respect to the sales incentive payable under "Shahenshah Scheme". The AO had disallowed the provision by holding that the provision made by the assessee was not based on any scientific method and there is an element of contingent liability and therefore the sum is not allowable. We find that identical issue arose in assessee's own case in AY 2006-07, 2007-08 and 2008-09 before the co-ordinate Bench of Tribunal. The Co-ordinate Bench of Tribunal in earlier years has decided the issue in favour of the assessee by holding that the provision made by the assessee in respect to "Shahenshah Scheme" to be on scientific basis. Before us, no material has been placed by the Revenue to point out any distinguishing feature in the facts of the case in the year under consideration and that of earlier years. Further Revenue has also not placed any material to demonstrate that the decision of the Tribunal in assessee's own case in A.Y. 2006-07, 2007-08, 2008-09 has been set aside/ stayed or over ruled by the higher judicial forum. Considering the totality of the aforesaid facts and following the order of the Co-ordinate ben....
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....extricably linked to the main business activity of the assessee as it was earned from fixed deposits which was required to be maintained as per the statutory requirements. The aforesaid contentions of the assessee have not been controverted by the Revenue. We find that the Hon'ble Delhi High Court in the case of PCIT vs. Bharat Sanchar Nigam Ltd. (supra) and the Co-ordinate Bench of Tribunal in the case of M/s. NHPC Ltd. (supra) has held that the Revenue was not justified in denying the claim of deduction on such income. Before us, Revenue has not pointed any contrary binding decision in its support. We therefore, hold that AO not justified in denying the claim of deduction u/s 80IC of the Act and thus direct the AO to grant deduction u/s 80IC on the interest income earned by the assessee. Thus the ground of the assessee is allowed. 27. Fifth ground is with respect to deduction of education cess and secondary and higher education cess of Rs. 54,75,037/-. 28. During the course of assessment proceedings, assessee submitted before the AO that it has paid Education Cess and Secondary and Higher Education Cess of Rs. 54,75,037/- and the same being allowable expenditure, therefore ....
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....g as under: "17. We have heard both the parties and perused the material available on record It is pertinent to note that the levy of education cess on Income tax is distinct from that of an income tax or surcharge since the letter to form part of part one of the First Schedule which defines income tax and provides rate of levy thereof. Unlike income tax and surcharge which are levied for general purpose, Government has explained an cess and is admittedly levied for specific purpose that is to fulfill the commitment of the government to provide quality health services and finance universalized quality basic education and secondary and higher education. Unlike surcharge which was an exclusive component of income tax, education cess as introduced vide Finance Act, 2004 was also imposed an additional levy on indirect taxes namely Customs, Excise and Service Tax. Education cess does not part take the care of being a component of income tax per say as levied under the Provisions of the Act. The decision of the Hon'ble Supreme Court in case of Goetz India (supra) will not be applicable in the present case. The claim of the assessee in respect of the education cess is allowable a....
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....see to claim such deduction. On the merits, it was noted by the AO that since the interest has been paid to acquire capital assets, the interest was not allowable as revenue expenditure. AO also noted that assessee had capitalized the interest attributable to loans used to acquire such assets and on such enhanced cost had claimed depreciation. He accordingly denied the claim of deduction. When the matter was carried before the CIT(A), CIT(A) upheld the order of AO. He therein after considering the submission of the assessee noted that the products manufactured in two units i.e. Greater Noida at Neemrana and at RICCO were completely different and therefore assessee had entered into expansion of its existing business activities by setting of units namely Greater Noida at Neemrana. He therefore held that proviso of Section 36(1)(iii) were applicable and accordingly upheld the disallowance of interest. 38. Aggrieved by the order of CIT(A), assessee is now before us. Before us Learned AR with respect to the admissibility of claims during the assessment proceedings submitted that if the claim is genuine the same can be admitted even without filing revised return of income and for t....
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....perused the material on record. In the present ground assessee is seeking the deduction of interest paid. It is an undisputed fact that during the year under consideration assessee had capitalized interest expenses of Rs. 20,72,556/- in respect of land at Greater Noida & Interest of Rs. 50,69,120/- for land purchased at Neemrana to RICCO. The aforesaid interest was capitalized in the books of accounts and not claimed as revenue expenditure. However, during assessment proceedings, assessee claimed the interest expenses pertaining to Noida & Neemrana Unit as revenue expenses u/s 36(1)(iii) of the Act which was denied by AO. 41. We find that CIT(A) while deciding the issue and after examining the excise returns of various manufacturing units of Assessee has given a finding that the products manufactured at Greater Noida are capacitors and reactors and the products manufactured at Neemrana are electric motors, CFL bulbs etc. The products manufactured at Greater Noida and Neemrana Unit are completely different and the technology, plant & machinery, skill required for its production cannot be same for the manufacturing of existing products and therefore assessee had entered into ex....
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.... 5. WAPCOS Ltd.(Segment) 23.60 Average 17.97 44. The TPO accordingly made an adjustment of Rs. 5,902,538/- on account of arm's length price of the international transaction of provision of services. Assessee challenged the inclusions of the comparable before CIT(A). CIT(A) after considering the submission made by the assessee arrived at following set of comparables: Sr. No. Particulars After appeal effect of order of CIT(A) (A) Name of the Company for ALP 1 Best Mulyankan Consultants Ltd. 9.91% 2. IDC (India) ltd. 9.99% 3. Piramal Enterprises Ltd. 17.13% 4. WAPCOS Ltd. (Segment) 23.60% 5. In house Production Ltd. 5.16% 6. India Tourism Development Corporation Ltd. 11.75% (B) Average (Arithmetic Mean) 12.92% 45. The assessee is aggrieved by the action of CIT(A) in the inclusions of Piramal Enterprises Ltd. and WAPCOS Ltd. (Segment). 46. Before us, Learned AR submitted that extract of service income of Piramal Enterprises Ltd. shared by the TPO in its order does not match with the figures reported in the annual report available in the Pu....
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....inted to the detailed description of the services provided by it in the Annual Report of the paper book. He therefore submitted that it cannot be considered as comparable to the assessee. He further submitted that it is a Govt. of India undertaking and has the support and backing of the Government which also makes it to be not comparable to the assessee and further the function profiles of the entity is completely different. He submitted that the business profile of Government owned undertakings is dissimilar to that of the entities operating in free market/ uncontrolled environment. In support of his proposition to the Government undertaking cannot be selected as a comparable, he placed reliance on the decision of Hon'ble Bombay High Court in the case of Thyssen Krupp Industries India (P) Ltd. ITA No.2218 of 2013 and Hyderabd ITAT order in the case of Worley Parsons India Pvt. Ltd. in ITA No.273/Hyd/2016 wherein it has been held that public sector undertakings are not driven by profit motive alone but such other considerations also weigh such as discharge of social obligations etc. and hence they cannot be considered as comparable to the private companies. He therefore submitted t....