TaxTMI 
TaxTMI 
TaxTMI 
2020 (2) TMI 1485
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....wances, amounting to Rs. 4,57,59,45,187/- made by the assessee during the course of assessment proceedings, on account of transfer of CERs, excise duty component on sale effected by the eligible unit, short claim of deduction u/s 10A(1A), interest subsidy under TUF scheme, additional depreciation and depreciation on goodwill. 3. The Ld DRP/AO has grossly erred in law in not excluding/including the capital receipts/ items total (net) amounting to Rs. 4,60,91,78,552 /- in the nature of CER receipts, interest subsidy under TUF scheme, excise duty component on sale effected by the eligible unit, provisions for doubtful debts/ advances/ investment written back etc from the book profits u/s 115JB of the Act. GROUNDS OF OBJECTIONS IN RESPECT OF TRANSFER PRICING ADJUSTMENTS Corporate Guarantee 4. The Ld. DRP/TPO and consequently the Ld. AO have grossly erred in holding that extending of corporate guarantee by the assessee to the lending institution of the AEs constitutes an international transaction u/s 92B of the Act. 5. The Ld. DRP/TPO and consequently the Ld. AO have grossly erred in law and on facts and in the circumstances of the appellant's case in making an upward adjust....
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....s purpose. 11. That the Ld. AO be directed to delete the enhancement of disallowance of Rs. 1,54,16,743/- made u/s 14A of the IT Act. Claims of deduction u/s 10A(1A) (A) Scrap sale of Rs. 49,32,423/- 12. The Ld. DRP/AO has erred in law and in facts and in circumstances of the case by reducing the claim of deduction u/s 10A(1A) by an amount of Rs. 49,32,423/- being the scrap sale made by the eligible unit by holding that scrap sale is in the nature of domestic sales and hence not eligible for deduction u/s 10A(1A). 13. (a) The Ld. DRP/AO has erred in law in not following the legally binding precedent of Hon'ble Karnataka High Court in case of GE BE (P) Ltd Vs ACIT-11(2), wherein in the similar facts as that of appellant, it was held that scrap generated during manufacturing or production activities of the unit is eligible for profit based deduction. (b) The Ld. DRP/AO has grossly erred in law in disregarding the legally binding precedent of Hon'ble Delhi High Court in case of CIT v Sadhu Forgings Ltd 3 and further misinterpreting the said case does not deal with issue of domestic sale or export sale. 14. The Ld. DRP has grossly erred in law by not following its own d....
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...., from the taxable income of the assessee, since this was a capital receipt not liable to tax. 20. That the Ld. DRP/ AO failed to appreciate that the taxes are leviable & recoverable in accordance with law and legal claims are required to be entertained at any stage of the proceedings. Computation of book profits under MAT 21. Without prejudice to the grounds 18, 19 & 20 that the ITAT may be is pleased to admit the following additional grounds as a decision on these issues is in the interest of justice and all facts for their adjudication are on record of the AO and raise legal issues only as per the judgment of Hon'ble SC in the case of NTPC Vs. CIT 229 ITR 383(SC) (a) That Rs. 4,39,72,72,157/-, received by the assessee on account of transfer of Carbon emission reductions (CERs) to be excluded from the taxable income, since the same was a capital receipt, not liable to tax. (b) That Rs. 11,81,58,510/- being the excise duty component on sale effected by the eligible unit (u/s 80-IC at Kashipur) worked out on reverse calculation mechanism, be excluded from the taxable income of the assessee since the same was a capital receipt not liable to tax. (c) That Rs. 3,08,96,338....
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.... 22,66,432/- on account of provision for doubtful debt created f) inclusion of Rs. 7,64,706/- on account of provision for doubtful advances created g) inclusion of Rs. 9,07,600/- on account of provision for doubtful advances created h) exclusion of Rs. 3,08,96,338/- received by the assessee on account of interest subsidy under TUF scheme, being capital receipt in nature. i) exclusion of excise duty component amounting to Rs. 11,81,58,510/- on sale affected by eligible unit u/s 80-IC (Kashipur unit) of worked out on reverse calculation mechanism being capital receipt in nature. 23. The Ld. DRP/AO has erred in law & circumstances of the case by initiating penalty proceedings u/s 271(1)(c ) of the Act. 24. That the order of the Ld. Assessing Officer dated 23rd September 2016 is bad in law. 2. During the year under consideration, certain transfer pricing adjustments and other corporate tax additions/disallowances were made by the TPO and AO. The assessee raised its objections against said transfer adjustments and addition/disallowances before DRP. The DRP has upheld the transfer pricing adjustments and other additions and disallowances. The assessee has thereafter filed ap....
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....ii). The DRP upheld the assessment order. 7. The ld. counsel for assessee argued that no disallowance in respect of Rule 8D(2)(ii) can be made in respect of interest expenses as interest was paid for loan taken for specific business purposes. Chart depicting actual utilization and purpose of loans for which interest was paid as given to AO and DRP is as under: Interest on Loan/ Purpose AY 2012-13 Utilisation/Justification by assessee Loan under TUF scheme of Govt. of India 377.66 Fixed Assets under TUF scheme administered by Government Rupee term loan other than TUF 3439.36 Fixed Assets : specific loans for purchase of fixed assets Foreign Currency Loan (Term Loan) 684.63 Fixed Assets : specific loans for purchase of fixed assets Buyer's Credit for Capital Goods 95.35 Interest on Cash Credit 43.74 Day to day operations by manufacturing units. Exports Packing Credit 159.64 For exports - granted under Govt. policy for the sole purpose of financing export of goods or services. Bill Discounting charges 8.05 For exports - for early cash requirement. Buyer's Credit for Purchase of Raw Material - Procurement of imported Raw material - such loan does ....
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....d that disallowance u/s 14A read with rule 8D(2)(ii) is not sustainable. In view of above, the disallowance of Rs. 1,54,16,743/- u/s 14A made by the assessing officer is therefore deleted. Disallowance of deduction u/s 10(1A) in respect of Scrap Sale (Ground no.12-14): 12. During the year, the SEZ Indore unit of the assessee received proceeds from scrap sales amounting to Rs. 49,32,423/-. The same was shown as Other Income in P&L of the SEZ Unit- Indore and has been considered for purpose of calculation of eligible deduction u/s 10A(1A). The AO claimed that scrap sale made was in nature of domestic sales and hence not eligible for deduction u/s 10A(1A). The AO held that scrap sale is not a business activity and therefore ineligible for profit base deduction u/s 10A. The DRP also upheld the order of the AO, aggrieved from which the assessee is before us in appeal. 13. In this regard the Ld. Counsel submitted that scrap has been generated out of manufacturing activities carried on by the SEZ Unit. The assessee placed reliance on the judgment of Karnataka HC in GE BE (P) Ltd vs ACIT [2014] 49 taxmann.com 348 (Karnataka) wherein it was held that scrap generated during manufacturing....
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....ilar goods are purchased by the Kashipur unit from unrelated parties. The AR has submitted that average rate of inter-unit transfer of goods is Rs. 85.22 per unit while the third party rate of same goods was Rs. 85.5 and 86.5 per unit. The copies of invoice of third parties -JBF Industries were submitted (Page no. 404-405 of Paper Book). It was further submitted that the assessee has fulfilled the conditions of section 10A(7) read with section 80-IA of the Act- transfer of goods between eligible business and any other business of assessee have been undertaken at market value. The assessee vide its ground no.18 also submitted without prejudice to other grounds that only the deduction claimed on the profits element attributable to aforesaid inter-unit transfer could have been disallowed at best and not whole the amount of inter-unit transfer. 18. We have heard the rival contentions, perused the relevant findings and as well as material referred to before us at the time of hearing. The provisions of section 10A(7) read with section 80-IA(8) of the Act are there to ensure that profits of eligible unit are not overstated. These provisions specifically provides for the purpose of deduct....
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....on reported in My Home Power Ltd. vs DCIT [2012] 27 taxmann.com 27 151 TTJ 616 subsequently confirmed by the Hon'ble Andhra Pradesh High Court in CIT vs My Home Power Ltd. [2014] 365 ITR 82, described carbon credits as an offshoot of environmental concerns and not offshoot of business and hence held as capital receipt in nature. In light of above judgment the assessee claimed before AO that such receipts from sale of CER certificates are not chargeable to tax being such receipts capital in nature and hence should be excluded from the total income of assessee. 22. The AO however did not entertain the additional claim of the assessee. The DRP did not adjudicate the additional claim of the assessee relying on the judgment in Goetze (India) Limited vs CIT 284 ITR 323. 23. We have heard the rival contentions, perused the relevant findings and as well as material referred to before us at the time of hearing. The facts and issue involved are identical the assessee's own case for AY 2010-11, which we have dealt in ITA no. 356/Del/15. In the said case we allowed the assessee's plea for admission of admission claim in respect of CERs and remitted back the issue to the file of AO. Similarly....
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....im of interest subsidy on TUF scheme as capital in nature as no addition has been made in subsequent years. 26. Ld DR relied upon the orders of authorities below. 27. We have heard the rival contentions, perused the relevant findings and as well as material referred to before us at the time of hearing. It is a settled position that purpose of subsidy or incentive and not the nomenclature of such incentive have to be seen for the purpose of deciding its nature as capital or revenue. In the judgment of Ponni Sugars & Chemicals Ltd. (Supra), the Hon'ble Apex Court have held that character of the receipt of a subsidy in the hands of recipient assessee has to be decided with respect to the purpose for which subsidy is granted. If the subsidy is received to enable the assessee to run its business more profitably then such subsidy is revenue in nature. While, if the subsidy has been received by the assessee to set up a new unit or for expansion of existing unit then such subsidy would be capital in nature. We find form the objective of TUF scheme that interest subsidy under such scheme was granted for expansion of capacities, modernisation and up gradation of facilities. In case of CIT ....
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....cate this claim of the assessee after granting reasonable opportunity to the assessee of being heard. The assessee is also free to file such documents, explanations, submissions as it deems fit in respect of this claim. Claim 4. Depreciation on Goodwill: 32. The assessee had purchased a running business in the financial year 2008-09 and paid sale consideration in excess of value of net assets acquired. The excess payment was recognized as goodwill in books of account. During the year, relevant to assessment year 2012-13, the Assessee Company has claimed depreciation on Goodwill of Rs. 45,39,692/-. 33. It was submitted that amount of goodwill represents the excess of consideration paid for purchase of such businesses over the value of assets acquired. Valuation reports for various assets acquired were placed on record by the assessee during the proceedings. The assessee made such additional Claim made vide letter dated 09.02.2016 before the AO stating that excess amount paid for purchase of business of Rs. 3,68,94,006/- be treated as goodwill and depreciation be allowed thereon. The AO did not entertain the additional claim of the assessee. The DRP did not admit the additional c....
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....resh adjudication. The assessee shall be free to file such documents, explanations, submissions as it deems fit in respect of this claim. Exclusion/inclusion of capital receipts/items in the book profit u/s 115JB (Ground no.21 and 22): 38. In grounds no. 21 and 22 the assessee has pleaded to exclude certain receipts viz., CER receipts, subsidy under TUF, from the computation of book profits u/s 115JB. Further assessee has sought to exclude/include certain provisions written back /created from the computation of book profits u/s 115JB of the Act. The claim for exclusion/inclusion of such items in computation of book profits was made by the assessee before lower authorities. However the lower authorities did not entertain the additional claim of the assessee. The items sought to be excluded / included through above grounds are as under: Capital receipts a) Exclusion of Rs. 4,39,72,72,157/- received by the assessee on account of transfer of Carbon emission reductions (CERs) from the book profit of the assessee. b) Exclusion of Rs. 3,08,96,338/- on account of interest subsidy received under the TUF Scheme. c) Exclusion of excise duty component amounting to Rs. 11,81,58,510/-....