TaxTMI 
TaxTMI 
2021 (12) TMI 1324
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....ossly erred in law and on facts by making an upward transfer pricing adjustment of Rs. 2,28,48,22,523 in total towards international transactions pertaining to payment of management service and unit charges, IM charges and payroll expenses to its AE. Ground No. 2: Erroneous rejection of Transactional Net Margin Method ("TNMM") and selection of Comparable Uncontrolled Price ("CUP") Method 2.1. The learned TPO/AO/DRP/have erred in law and on facts by disregarding the economic analysis conducted by the Appellant, for determination of the arm's length price ("ALP") pertaining to intra-group services, by application of TNMM on an aggregated basis and further, erred in applying CUP method. Ground No. 3: Without prejudice that TNMM should be selected, learned TPO/AO/DRP applied CUP method in an erroneous manner 3.1. Without prejudice that TNMM should be selected as the most appropriate method for benchmarking the transactions pertaining to intra-group services, the learned TPO/AO/DRP have erroneously selected CUP method and have applied the same in an....
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....("PSCs") 8.1. The learned AO/DRP erred in law and in facts in disallowing the expenditure of Rs. 18,84,57,216 incurred on non-producing PSCs. 8.2. The learned AO/DRP erred in not appreciating the fact that set off of expenditure of non-producing PSC against the income of PSC in which commercial production has been commenced is in accordance with the provisions of the Act and provisions of PSC. 8.3. The learned AO/DRP erred in not appreciating that this expenditure was held allowable by the Hon'ble ITAT in Appellant's own case for earlier AYs. Ground No. 9: Disallowance of head office expenditure 9.1. The learned AO/DRP erred in law and in facts in applying the provisions of section 44C of the Act to payments made to BG International Limited. 9.2. The learned AO/DRP erred in not appreciating that the head office expenditure was allowed by the Hon'ble ITAT in Appellant's own case for earlier AY. &nbs....
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....ed AO erred in not granting credit of tax deducted at source to the extent of Rs. 2,37,656. Ground No. 15: Short grant of interest under section 244A 15.1 The learned AO erred in fact and in law, in granting short interest under section 244A of the Act. Ground No. 16: General 16.1 The Appellant submits that the AO, TPO and DRP have erred in arriving various unwarranted and erroneous conclusions unsupported by any relevant material in deciding 16.2 The AO erred in initiating penalty proceedings under section 271(1)(c) of the Act. 16.3 The Appellant submits that each grounds of appeal are without prejudice to one another 16.4 The Appellant craves leave to add, alter, amend, substitute and/or modify in any manner whatsoever all or any of the foregoing grounds of objections at or before the hearing of the appeal." 2. Ground Nos. 1 to 5 are regarding addition made on account of transfer pricing adjustment in respec....
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....he above ruling. 16. From the above, it is clear that Revenue intends to keep issues alive, however, could not controvert view taken in respect of these issues as there has been no contrary observation/material evidences brought out on record by ld. CIT DR. It has been admitted by him that facts and circumstances of the services received by assessee for the year under consideration are same vis-à-vis assessment year 2010-11, and other preceding assessment years. We are therefore inclined to follow the same view. Respectfully, following view taken by this Tribunal in assessment year 2010-11 reproduced hereinabove and other preceding assessment years, orders of which are placed at pages 530-915 of paper book, addition made by Assessing Officer stands deleted. 6. To maintain the rule of consistency, we follow the earlier order of Tribunal and decide the issue in favour of the assessee and the addition made being T P adjustment on account of intra group services provided by the assessee to its AE is deleted. 7. Ground No. 6 is regarding addition made on account of transfer pricing adjustment of interest payment on loan. 8. We have heard ld. Sr. Cou....
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.... "55. From the above chart it is apparent that out of the total expenditure incurred of Rs. 931819021/- the Ld. Assessing Officer has allowed the expenditure of Rs. 471505233/- which is the cost of respective PSC and shared with JV partners. The balance cost which is not shared by the JV partners amounting to Rs. 460313788/- was disallowed for the reason that these cost have not been shared by the JV partners and therefore it is not incurred for the purposes of the business of the Assessee and hence disallowable. Further sum of Rs. 220983295/- included in the disallowance of Rs. 460313788/- was pertaining to the purchase of seismic data for exploring new opportunities in the business of the company under the pretext that these are with respect to the future businesses which has not yet commenced. Therefore, primary the disallowances of Rs. 460313788/- includes a sum of Rs. 22098 3295/- for purchase of seismic data and balance amount primarily with respect to time writing cost and development expenses. The time writing charges as it is explained by the Assessee are for the purpose of drilling and subsurface inputs, analysis and administrative expenses with respect to executive....
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....nbsp; Rs. 10524 iii) KG-DWN-98/4 of Rs. 6245 0283/- cannot be disallowed. In view of this we direct the Ld. Assessing Officer to delete the disallowance made with respect to about 3 items. 56. Now coming to the claim of the deduction of expenditure of Rs. 220983295/- on account of purchase of seismic data and general and administrative expenses in connection with the proposed NELP VIII, It is submitted by the Assessee that these were the expenses incurred by the Assessee with respect to the offers which were invited for the 8th offer of blocks for national exploration licensing policy for which the Assessee has to purchase the data for the bidding purposes. The other expenses ....
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....e expenditure. Hon'ble Calcutta High Court in the case of Kesoram Industries & Cotton Mills Ltd. v. CIT [1992] 196 ITR 845 held that where the setting up does not amount to starting of new business but expansion or extension of the business already being carried on by the Assessee, expenses in connection with such expansion or extension of the business must be held to be deductible as revenue expenses. One has to consider purpose of the expenditure and its object and effect. Accordingly, it was held that expenses pertaining to exploring feasibility of expansion or extension of business are revenue expenditure and not capital expenditure. The expenditure so incurred by the Assessee in the normal course of business of exploration and production of oil, being revenue in nature, is liable to be allowed as a deduction. Similar claim was also made by the Assessee in the earlier year. We, therefore, direct the Assessing Officer to allow the same as revenue expenditure. As we have allowed ground Nos. 3 to 3.2, the alternate ground No. 3.3 as taken by the Assessee become infructuous." [Extracted Taxmann.com][underline....
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....bility. Further, no judicial precedent was cited before us by revenue, which says that such expenditure are not allowable to the Assessee. Accordingly, these grounds raised by the assessee stands allowed." 12. Following the earlier order of this Tribunal, this issue is decided in favour of the assessee and against the Revenue. 13. Ground No. 9 is regarding disallowance of head office expenses. 14. We have heard ld. Sr. Counsel as well as ld. DR and carefully perused the orders of the authorities below on this issue as well as the decision of this Tribunal in assessee's own case for the preceding assessment years. At the outset we note that this Tribunal in its earlier order in assessee's own cases for the assessment years 2013-14 and 2014-15 vide order dated 03.04.2019 in ITA Nos. 7476 & 7477/Del/2018 has considered and decided this issue in para 39 to 43 asunder: 39. At the outset, Ld. Counsel submitted that this issue has been dealt with by the Co-ordinate Bench of this Tribunal for assessment years 2010-11 and 2012-13. He submitted that the assessee has incurred expenses to undertake activities required by the PSC with regard to its standar....
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....f the Assessee, once again. Further, if the expenses are not specified in the agreement u/s. 42 (1), even if the JV partners agree to share those expenditure, it is not allowable u/s. 42 (1) or section 37 (1) of the act. Now it needs to be examined, whether the Assessee has incurred expenditure for the purposes of its business or not. The Assessee has stated that it has incurred such expenditure having regard to its standard of operation and the quality of execution work, safety of its employees in the environment. These expenses are required to be incurred by the Assessee based on the commercial expediency. The Assessee has stated that in relation to the support functions, which are innovatively inevitable for carrying on its business and incurred based on the commercial expediency are expenses belonging to the Assessee which cannot be accepted by the operating board. Further, there may be certain expenditure which are required to be incurred to enable the Assessee to perform its operation under the production sharing contract sustaining its activities and maintaining its standard of operations. It is irrelevant whether the joint operator board has approved such expenditure or not....
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....int-venture do not agree to share the particular cost, the cost incurred by one of the partners of that joint-venture becomes the expenditure not for the purpose of the business of that partner. No such provision has also been brought to our notice by the revenue. It is also not the case of the revenue that details of those expenditure are not available before them or Assessee has furnished incomplete information for its allowability. Further, no judicial precedent was cited before us by revenue, which says that such expenditure are not allowable to the Assessee. Accordingly, this ground raised by the assessee stands allowed." 15. To maintain the rule of consistency, we follow the earlier order of Tribunal and decide the issue in favour of the assessee and allow this ground of assessee's appeal. 16. Ground No. 10 is regarding disallowance of depreciation and depletion. 17. We have heard ld. Sr. Counsel as well as ld. DR and carefully perused the orders of the authorities below on this issue as well as the decision of this Tribunal in assessee's own case for the preceding assessment years. At the outset we note that this Tribunal in its earlier order in assessee'....
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....sed by the Assessee. Issues have also been examined at the time of determining Arm's length price of these expense. The actual cost of these assets are not doubted by the Ld. Assessing Officer. In view of this we are of the opinion that these assets are beneficially owned by the Assessee and are used for the purposes of the business of the Assessee, therefore entitles Assessee to claim the depreciation on these assets. In view of this ground No. 5 of the appeal of the Assessee is allowed." 50. As regards difference in depreciation of other assets of Rs. 2,65,85,446, the appellant submits that the aforesaid difference is on account of the fact that the appellant had capitalised certain costs as part of the cost of the fixed assets and appellant had claimed depreciation thereon. However, the tax auditor in the Tax Audit Report considered this as revenue in nature. In this regard, the appellant submits that even though the aforesaid amounts have been treated as revenue expenditure by the tax auditor in the respective previous years, their view was not binding on the appellant and hence, the same have been capitalised by the appellant and depreciation has been....
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.... as per the computation of income and tax audit report. Without prejudice, it is submitted that if the expenditure capitalised by the appellant in previous years is not held to be capital in nature and depreciation and depletion on capitalised portion is subsequently disallowed, the amount capitalised by the appellant should be allowed as deduction under section 37(1) of the Act in the relevant assessment year. 53. The ld. CIT DR has no objection for the above issue to be set aside to ld. AO/TPO. 54. After hearing both the sides and considering the totality of the facts of the case, we deem it proper to restore the issue to the file of the Assessing Officer with a direction to give an opportunity to the assessee to substantiate its case. The Assessing Officer shall decide the issue as per fact and law after giving due opportunity of being heard to the assessee. We hold and direct accordingly. The ground raised by the assessee on this issue is allowed for statistical purposes." 18. To maintain the rule of consistency, we follow the earlier order of Tribunal and restore this issue to the record of Assessing Officer with the same directio....
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....ssessment proceedings and further relied upon the decision rendered by coordinate Bench of the Tribunal in Gillette India Ltd. vs. ACIT - 66 taxmann.com 221. Ld. DR for the Revenue to repel the arguments addressed by the ld. AR for the taxpayer relied upon the orders of AO/DRP. 39. While deciding the identical issue, the Hon'ble Bombay High Court in case cited as Alfa Laval India Ltd. vs. DCIT (supra) held as under:- "Held, (i) that the duly certified auditor's report placed before the Assessing Officer clearly justified valuation of obsolete items at 10 per cent. of cost. There is no dispute that the assessee is entitled to value the closing stock at market value or at cost whichever is lower. It is also not in dispute that the value of the closing stock has been taken as the value of the opening stock in the subsequent year. Moreover, it is also not disputed that the obsolete items were in fact sold in the subsequent year at a price less than 10 per cent. of the cost. In the absence of any basis for valuing the obsolete items at 50 per cent. of the cost, the....
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.... the return of income. The Assessing Officer disallowed the claim of the assessee being part of the Income-tax which is not an allowable deduction. 23. Before us, ld. Sr. counsel for the assessee has submitted that Hon'ble Rajasthan High Court in the case of Chambal Fertilizers and Chemicals Ltd. vs. JCIT reported in 107 Tamann.com 484 has held that Education Cess is an allowable deduction while computing the income under the head "profit and gains from business or profession", as it does not fall within section 40(a)(ii) of the Act. He has also relied upon the decision of Hon'ble Bombay High Court in the case of Sesa Goa Ltd. v. JCIT (2020) 117 taxmann.com 96 (Bom) on this issue. Placing reliance on the precedents, as laid down by Hon'ble Rajasthan High court and Hon'ble Bombay High Court, he has submitted that education cess paid by the assessee is an allowable deduction for computing the income from business and profession. 24. On the other hand, ld. DR has submitted that Education Cess is part and parcel of income-tax itself and therefore, is not allowable deduction. He has relied upon the order of the Assessing Officer. 25. We have considered the rival....