TaxTMI 
TaxTMI 
2022 (2) TMI 1220
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.... various case laws relied upon by the appellant. Such confirmation of addition by Id. CIT (A) without independent application of mind or on merits or justification deserves to be quashed. 3. Ld. Counsel for the assessee pointed out that the issue involved related to addition made to the income of the assessee of Rs. 2,70,80,490/- on account of adjustments to the Arm's Length Price of the transaction of sales made with its Associated Enterprises (AE), as per the provisions of Section 92CA of the Act. Ld. Counsel for the assessee pointed out that the same was upheld by the Ld. CIT(A) following his order in the case of the assessee for Assessment Year 2004-05 finding the issue to be identical. He drew our attention to Para 2.3 of the order of the Ld. CIT(A) in this regard as under: 2.3. I have considered the facts of the case, assessment order and appellant's submission. Similar issue came up in earlier years also and my learned predecessors decided the same against the appellant. In appeal order for AY 2004-05 dated 23-03- 2007, the decision is as under- "The appellant has raised many technical issues challenging the action of assessing officer in making the ....
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....learned CIT(A) has erred in law and on facts in confirming the action of AO in adding Rs. 1,80,62,067/- on account of adjustments to the Arm's length price without there being any jurisdiction as well as legal and factual basis for the same." "5. The learned CIT(A) has erred in law and on facts in confirming the action of AO in invoking the provisions of Chapter X without prima facie demonstrating that there was some tax avoidance." "6. The learned CIT(A) has erred in law and on facts in confirming the action of AO in making a reference to the Transfer Pricing Officer (TOP) u/s.92C(3) r.w.s. 92CA(1) of the Act without providing an opportunity of being heard to the appellant." "7. In any case the whole reference and the consequent orders are bad and illegal because the alleged approval granted by CIT u/s.92C(1) of the Act is vitiated in law firstly because the appellant was not heard before any such approval and secondly because the same has been granted mechanically, without any application of mind and without due diligence." "8. The learned CIT(A) has erred in law and on facts in confirming the action of AO in referring the case of the appel....
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....re us as Annexure-A, which is available at pages 34 to 111 of the assessee's paper book-II. The assessee has made comparison in many of the cases with the sales made with AEs in the developed countries and the sales made to under-developed countries to non- AEs. The main contention of the assessee is that the assessee has more margins in the sales made to under-developed countries due to various risks involved in dealing with the under-developed countries. Accordingly, it was the contention that its sales goods to the AEs and the AEs in turn sale the goods to their customers in North / South America, Europe etc., which are highly competitive markets and as such it becomes difficult to sustain. The assessee has denied that it has charged lower rates from AE's as compared to those of Non-AE's, the AE's have not been able to make profits. As per assessee, if the assessee has charged rates, which are higher than those charged to Non-AE's there is a possibility that the AE's will not be able to sale anything. According to assessee, the CUP method is used, as in the said method, controlled transactions are being compared with uncontrolled transactions wherein the ....
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....able uncontrolled transactions. 2.11 The CUP method is a particularly reliable method where an independent enterprise sells the same product as is sold between two associated enterprise. For example, an independent enterprise sells unbranded Colombian coffee beans of a similar type, quality, and quantity as those sold between two associated enterprises, assuming that the controlled and uncontrolled transactions occur at about the same time, at the same stage in the production / distribution chain, and under similar conditions. If the only available uncontrolled transaction involved unbranded Brazilian coffee beans, it would be appropriate to inquire whether the difference in the coffee beans has a material effect of the price. Of example, I could be asked whether the source of coffee beans commands a premium or requires a discount generally in the open market. Such information may be obtainable from commodity markets or may be deduced from dealer prices. If this difference does have a material effect on price, some adjustments would be appropriate. If a reasonably accurate adjustment cannot be made, here liability of the CUP Method would be reduced, and it might be necessa....
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....to maintain detailed documents and to justify that transaction was carried at ALP. It is contended/argued that this is like insisting upon production of self-incriminating evidence and is uncalled for. This criticism, in our opinion, is without any valid basis. It is to be remembered that international transactions carried out by taxpayer are cross-border transactions. Departmental authorities in India are required to deal with and determine ALP of transactions carried in Asia, Europe, America, Australia, other developed and under-developed countries in Africa, etc. It is very difficult, if not impossible for them to find relevant data of an exact or of a similar transaction or profit made not only by the taxpayer, but also by other similarly situated uncontrolled enterprises. Knowledge of economic conditions prevailing at the place where transactions are carried is also essential. The very nature of this job of collection of data is such that the assessee is in the best position to gather the requisite information. 129. The taxpayer, on the other hand, as a party to the transaction has full knowledge of the transaction carried and profit earned by him. As a person associa....
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....e tax authorities, unless the transfer of profits concerns a tax haven, in which case the burden of proof is transferred to the taxpayer. Recent developments mean that there is now a legal requirement for taxpayers to provide documentation supporting their transfer pricing policies. Though in theory the burden of proof lies with the tax administration, in practical terms the burden of proof has always fallen on the taxpayer where the tax authorities have deemed a profit shift to have taken place or inappropriate transfer pricing to exist. Indonesia Indonesia operates on a self- assessment system with companies setting their own transfer prices. The burden of proof lies with the taxpayer to prove that the original price has been set at arm ' s length. Ireland Under Ireland is self-assessment system, the burden of proof in the event of a revenue audit will fall on the taxpayer. Italy The general principle is that the burden of proof lies with the tax authorities. Where the tax authorities issue an assessment to additional tax, however, the taxpayer must prove there is no liability for the additional tax. There are other circumstances in which the burden of proof lies with the tax....
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....den of proof is also transferred to the taxpayer, and will be more onerous, if s/he refuses to provide information requested by the tax authorities where there is a legal obligation to provide that information, or if the requisite tax return is not filed. Finally, the Court sometimes allocates the burden of proof to the party best able to provide the evidence. New Zealand In New Zealand, the burden of proof normally lies with the taxpayer, not the Commissioner. However, s. GD13(9) places the burden of proof on the Commissioner where the taxpayer has determined its transfer prices in accordance with ss. 13(6) to 13(8) of the New Zealand Tax Act. Where the Commissioner substitutes an arm's length price for the actual price, then the Commissioner must prove that either : (1) this is a more reliable measure : or (2) the taxpayer has not co-operated with the Commissioner. The guidelines provide guidance on what is considered to be non-cooperation : Where the taxpayer does not provide the requested relevant information to the Commissioner : or If a taxpayer does not prepare adequate documentation, and provide it to the inland Revenue if requested. United Kingdom The position....
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....132. A dispassionate study of provisions of various countries on burden of proof, would show, the following fundamental features : (i) That the burden to establish that international transaction is carried at ALP, is on the taxpayer who is to disclose all the relevant information and documents relating to prices charged and profit earned with related and unrelated customer. (ii) If the AO has determined an ALP, other than the price declared by the assessee, AO has to prove that the price determined by him is reliable and reasonable and confirms the statutory requirement unless the case is covered by situation No. (iii) below. (iii) In case of failure on the part of the taxpayer to comply with the statutory provisions, the tax authorities would have to determine the ALP. In such a situation, burden of proof on tax authorities is much reduced. 133. Having regard to the statutory provisions, particularly the mandate of ss. 92(1) and 92D read with relevant rules, we hold that it is obligatory on the part of the taxpayer to furnish information relating to controlled international transactions, select a suitable method for determination and furnish ALP of such international tran....
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....44 of the IT Act and determine the ALP on the basis of the material collected or available on record. In such circumstances, the ALP determined would be on the parity with a best judgment assessment. Such assessment (determination of ALP) would have some approximations and estimations. But even such approximations and estimations must satisfy dictates of justice and fair play and look reasonable. It cannot be arbitrary and capricious. The order of TPO is appealable and therefore, it must be objective, contain detailed reasons, conform to regulations and should be seen as just and fair. 135. On consideration of the relevant provisions, it is evident that in the process of determining ALP, the first important factor to consider is the specific characteristics of services rendered both in the international transaction as also in the uncontrolled transaction. Next important aspect required to be considered is amount of assets employed, risk involved, both in controlled and uncontrolled transactions. If there are such differences between transactions taken for comparison, which are likely to affect the price or cost charge etc. in the open market then reasonable and accurate ev....
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....aggregate value of transactions exceeded Rs. 5 crores. The circular being binding was required to be followed. The taxpayer filed all conceivable objections before the TPO. Although each transaction should be separately mentioned, but no prejudice is shown to have been caused to the taxpayer on account of non-mention of each transaction separately. Therefore, in our opinion, this contention is to be rejected." 30. In view of the above dictates provided in the guidelines of transfer price for multi-national enterprises and tax administration in the case of CUP method including the situation where adjustments need to be made to uncontrolled transactions to make them comparable uncontrolled transaction. The assessee has not filed the details of functional analysis of these enterprises taking into account assets used and risk assumed. Similarly, the Hon'ble ITAT Bangalore Special Bench in the case of Aztec Software & Technology Services Ltd. (supra) has placed burden of the taxpayer to justify the transactions carried at ALP by maintaining the documents and other details. The Hon'ble Bangalore Special Bench has also held that taxpayer as a party to the transaction has ....
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....rtunity of hearing. 8. In view of the above, Ground no. 1 is allowed for statistical purposes. 9. Ground no. 2 raised by the assessee reads as under: 2. Ld. CIT (A) erred in law and on facts in confirming disallowance of claim of depreciation of Rs. 2,66,83,892/- made by AO reducing the depreciation claimed for the year under consideration by enhancing depreciation for A.Y. 2001/02 without appreciating the facts that the appellant had opted not to claim any depreciation for A.Y. 2001/02. Ld. CIT (A) instead of taking into consideration the submissions of the appellant confirmed the disallowance on the basis of the decision of the Hon'ble ITAT for A.Y. 2001/02. Ld. CIT (A) ought to have appreciated the controversy independently and deleted the disallowance made by AO. 10. Drawing our attention to the facts of the case from Para 5 page no. 3 of the assessment order and page 4 to 5 and Para 3 of the Ld. CIT(A)'s order, Ld. Counsel for the assessee pointed out that the issue involved related to disallowance of depreciation of Rs. 2,66,83,892/- which was disallowed for the reason that while the assessee had not claimed depreciation for Assessment Year 2001-02, the ....
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....ced in the light of his own findings in the AY 2001-02. In response, the assessee submitted vide letter dated 25- 11-2006 that the assessee did not opt for depreciation in AY 2001- 02 in view of the decision of the Hon'ble Jurisdictional High Court in the case of Arun Textile Ltd. as also decision of the Hon'ble Supreme Court in the case of Mahendra Mills Ltd. It was also pointed out by the assessee that the explanation 5 to section 32(1)(ii) was not explanatory and came into operation only with effect from AY 2002-03. Accordingly, relying upon the decision of the Hon'ble Punjab & Haryana High Court in the case of Ram Nath Jindal vs. CIT ,170 CTR 251 and the decision of the Hon'ble Kerala High Court in the case of CIT vs. Kerala Electric Lamp Works Ltd.,183 CTR 182, the assessee contended that depreciation should not be reduced in the year under consideration. However, the AO did not accept the contentions of the assessee. While referring to the amendment in the provisions of section 32 of the Act and the principles laid down by the Hon'ble Jurisdictional High Court in the case of CIT vs. Gujarat Warehousing Corporation,104 ITR 1 and the decision of Hon'ble ....
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.... the eligible business, the Assessing officer has to give effect to the provisions of section 32 also and work out the profits and gains after allowing the depreciation. It is true that certain Division Benches of the Tribunal have taken the view that for computing deduction under Chapter VI-A also, it is the option of the assessee to claim the depreciation or not to claim. However, when the view canvassed by the Revenue is supportable by the decisions of the Supreme Court, the jurisdictional High Court and other High Courts in the sense that while working out the income for the purpose of Chapter VI-A, the depreciation has to be deducted whether opted to the claimed by the assessee or not; and the view canvassed by the assessee was only supported by the decisions of the Tribunal that it is choice of the assessee as in the case of normal computation of income, it cannot be said that both the views are equally possible or reasonable views. The view, which is supported by the decisions of the Supreme Court, jurisdictional High Court and other High Courts, has to be preferred than the view taken by the Tribunal. Therefore, the depreciation, which is though allowable ....
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....income in the form of dividend income amounting to Rs. 2,62,37,663/- during the impugned year. Accordingly, the assessee was asked to submit as to why expenses incurred in earning the said income be not disallowed as per the provisions of Section 14A of the Act. The assessee denied incurring any such expenditure stating that the dividend was received by way of five cheques and the only expenditure incurred was on the person who deposited it. The A.O. was not convinced with the explanation of the assessee stating that a number of costs like interest, administrative and management were associated with the earning of dividend income. Accordingly, the assesee was directed to submit the working of disallowance of expenses pertaining to the dividend income earned as per Rule 8D of the Income Tax Rules, 1962. The same was submitted by the assessee and the expenditure calculated as per the said rules amounting to Rs. 14,00,410/- was accordingly disallowed by the A.O. 16. Before the Ld. CIT(A), the assessee challenged the disallowance stating that it had sufficient own funds for making the investments and therefore no disallowance was called for u/s. 14A of the Act. It was also contended....
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....interest under section 14 A made by the assessing officer as per rule 8 D is confirmed 17. Before us, the Ld. Counsel for the assessee , reiterating his contentions made before the ld. CIT(A) contested the action of the Ld. CIT(A) for the following reasons (a) that Rule 8D was not applicable for the impugned year. (b) that there was sufficient own funds available for the purpose of making the impugned investments. (c) that disallowance u/s 14A is not automatic on earning of exempt income. 18. Ld. DR on the other hand supported the order of the Ld. CIT(A) 19. We have heard both the parties. 19.1 With regards to the assesses contention of Rule 8D of the Income Tax Rules,1962 not being applicable for the impugned year, we find that there is no dispute as regards the same with even the Ld. CIT(A) agreeing with it and the Hon'ble Supreme Court having settled this issue in the case of Commissioner of Income Tax Vs Essar Teleholdings Ltd. (2018) 401 ITR 445(SC). But we find that the Ld. CIT(A) has still gone on to uphold the disallowance of expenses computed as per Rule 8D. We are not in agreement with the same since though the inapplicability of Rul....
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....on of Woolcombers of India Ltd, v. CIT H34 ITR 219) (Cal). Therefore addition made by the Ld. assessing officer under section 14A is required to be deleted. 20. We are aware of the proposition of law settled by the Hon'ble Apex Court in the case of CIT (large tax buyer unit) vs. Reliance Industries Ltd. 307 CTR 121 (SC) which was followed in another recent decision of the Hon'ble Apex Court in the case of South Indian Bank Ltd. vs. CIT in Civil Appeal No. 9606 of 2011 dated 09.09.2021, to the effect that where there is a finding of fact that interest free funds available to the assessee was sufficient to meet its investment it will be presumed that the investments were made from such interest free funds. The relevant extract of the order of the Hon'ble Apex Court in its latest decision in South Indian Bank Ltd. from Para 2 to 30 is as under: 2. The question of law to be answered in the present batch of appeals is on interpretation of Section 14A of the Income Tax Act (for short "the Act") and the same reads as follows: "Whether proportionate disallowance of interest paid by the banks is called for under Section 14A of Income Tax Act for investments made in tax ....
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....r, re-assessment, rectification of assessment was prohibited for any assessment year, up-to the assessment year 2000-2001, when the proviso was introduced, without making any disallowance under Section 14A. The earlier assessments were therefore permitted to attain finality. As such the disallowance under Section 14A was intended to cover pending assessments and for the assessment years commencing from 2001-2002. It may be noted that in the present batch of appeals, we are concerned with disallowances made under Section 14A for assessment years commencing from 2001-2002 onwards or for pending assessments. 7. At outset it is clarified that none of the assessee banks amongst the appellants, maintained separate accounts for the investments made in bonds, securities and shares wherefrom the tax-free income is earned so that disallowances could be limited to the actual expenditure incurred by the assessee. In other words, the expenditure incurred towards interest paid on funds borrowed such as deposits utilized for investments in securities, bonds and shares which yielded the tax-free income, cannot conveniently be related to a separate account, maintained for the purpose. The ....
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....ermine the amount of expenditure incurred in relation to such income which does not form part of the total income under this Act in accordance with such method as may be prescribed, if the Assessing Officer, having regard to the accounts of the assessee, is not satisfied with the correctness of the claim of the assessee in respect of such expenditure in relation to income which does not form part of the total income under this Act. (3) The provisions of sub-section (2) shall also apply in relation to a case where an assessee claims that no expenditure has been incurred by him in relation to income which does not form part of the total income under this Act: Provided that nothing contained in this section shall empower the Assessing Officer either to reassess under section 147 or pass an order enhancing the assessment or reducing a refund already made or otherwise increasing the liability of the assessee under section 154, for any assessment year beginning on or before the 1st day of April, 2001." 12. The sub-Section (2) and (3) were introduced to the main section by the Finance Act, 2006 with effect from 01.04.2007. 13. The question therefore to be answer....
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....mbay High Court in Pr. CIT v. Bombay Dyeing and Mfg. Co. Ltd2 where the answer was in favour of the assessee on the question, whether the Tribunal was justified in deleting the disallowance under Section 80M of the Act on the presumption that when the funds available to the assessee were both interest free and loans, the investments made would be out of the interest free funds available with the assessee, provided the interest free funds were sufficient to meet the investments. The resultant SLP of the Revenue challenging the Bombay High Court judgment was dismissed both on merit and on delay by this Court. The merit of the above proposition of law of the Bombay High Court would now be appreciated in the following discussion. 18. In the above context, it would be apposite to refer to a similar decision in Commissioner of Income Tax (Large Tax Payer Unit) Vs. Reliance Industries Ltd3 where a Division Bench of this Court expressly held that where there is finding of fact that interest free funds available to assessee were sufficient to meet its investment it will be presumed that investments were made from such interest free funds. 19. In HDFC Bank Ltd. Vs. Deputy C....
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.... concern while here the Assessee- Banks have invested in bonds/securities. The factual scenario is different and distinguishable and therefore the issue pending before the larger Bench should have no bearing at this stage for the present matters. 22. The High Court herein endorsed the proportionate disallowance made by the Assessing Officer under Section 14A of the Income Tax Act to the extent of investments made in tax-free bonds/securities primarily because, separate account was not maintained by assessee. On this aspect we wanted to know about the law which obligates the assessee to maintain separate accounts. However, the learned ASG could not provide a satisfactory answer and instead relied upon Honda Siel Power Products Ltd. v. DCIT9 to argue that it is the responsibility of the assessee to fully disclose all material facts. The cited judgment, as can be seen, mainly dealt with re-opening of assessment in view of escapement of income. The contention of department for re-opening was that the assessee had earned tax-free dividend and had claimed various administrative expenses for earning such dividend income and those (though not allowable) was allowed as expenditure ....
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....verting to the law as it stood earlier, this Court rejected the theory of dominant purpose suggested by the Punjab & Haryana High Court and accepted the principle of apportionment of expenditure only when the business was divisible, as was propounded by the Delhi High Court. Finally adjudicating the issue of expenditure on shares held as stock-in-trade, the following key observations were made by Justice Sikri: "50. It is to be kept in mind that in those cases where shares are held as "stock-in-trade", it becomes a business activity of the assessee to deal in those shares as a business proposition. Whether dividend is earned or not becomes immaterial. In fact, it would be a quirk of fate that when the investee company declared dividend, those shares are held by the assessee, though the assessee has to ultimately trade those shares by selling them to earn profits. The situation here is, therefore, different from the case like Maxopp Investment Ltd. [Maxopp Investment Ltd. v. CIT, 2011 SCC OnLine Del 4855 : (2012) 347 ITR 272] where the assessee would continue to hold those shares as it wants to retain control over the investee company. In that case, whenever dividend is dec....
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.... seen that the Central Board of Direct Taxes (CBDT) had issued the Circular no. 18 of 2015 dated 02.11.2015, which had analyzed and then explained that all shares and securities held by a bank which are not bought to maintain Statutory Liquidity Ratio (SLR) are its stock-intrade and not investments and income arising out of those is attributable, to business of banking. This Circular came to be issued in the aftermath of CIT Vs. Nawanshahar Central Cooperative Bank Ltd.12 wherein this Court had held that investments made by a banking concern is part of their banking business. Hence the income earned through such investments would fall under the head Profits & Gains of business. The Punjab and Haryana High Court, in the case of Pr. CIT, vs. State Bank of Patiala13 while adverting to the CBDT Circular, concluded correctly that shares and securities held by a bank are stock in trade, and all income received on such shares and securities must be considered to be business income. That is why Section 14A would not be attracted to such income. 26. Reverting back to the situation here, the Revenue does not contend that the Assessee Banks had held the securities for maintaining the....
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....ng on generation of revenue. 30. In view of the forgoing discussion, the issue framed in these appeals is answered against the Revenue and in favour of the assessee. The appeals by the Assessees are accordingly allowed with no order on costs. 21. Therefore it is settled law that where sufficient own funds are available and the investments have been made out of mixed funds, no disallowance u/s. 14A is called for. In the facts of the present case, the assessee had canvassed the facts before the Ld. CIT(A) that it had own funds of 28,524.85 lacs and had generated cash of 4,770.83 lacs during the year. That in the past 10 years from 1995-96 to 2004-05, the assessee was having sufficient own funds ranging from 20,593 lacs to 20,011 lacs which was more than sufficient for making the impugned investments of Rs. 6902 lacs. Since these facts have remained uncontroverted by the Ld. CIT(A) as also the fact that the investments have been made out of mixed funds, we have no hesitation in holding that no disallowance of interest u/s. 14A was warranted in the impugned case. 21.1 As for disallowance of administrative expenses the assessee has contended that other than depositing che....
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.... the facts of the case, assessment order and appellant's submission. Appellant claimed advances given for new project for technical collaboration. Undoubtedly this claim is capital in nature and not allowable as revenue. Further it is also not allowable as bad debts since condition of section 36 (2) is not satisfied. Appellant claimed it as business loss but the same is not allowable since it was not incurred for the running of business. Undoubtedly it was incurred for new project in the form of technical collaboration. Therefore this loss is not incidental to the running of business and accordingly not allowable under section 28 also. The decisions relied upon by the appellant are on different facts. The advances were given in those cases for running of the business whereas in the case of appellant; the advance was given for new project which did not commence. Therefore assessing officer is justified in disallowing the claim. The disallowance made is therefore confirmed. 26. Before us, Ld. Counsel for the assessee reiterated the contentions made before the lower authorities. He drew our attention to the letter addressed to the Assessing Officer dated 28th November, 2008 exp....
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....ture. It goes without saying that the real test for determining whther the payment was revenue or capital in character entirely depends on the pupose for which it was incurred. The same can be determined from the technical collaboration agreement. In the absence of the same, the claim of either of the parties merits no consideration and it is not possible to adjudicate on the issue. We, therefore, considerate it fit to restore this matter to the Assessing Officer to determine the nature of the amount written off by the assessee from the contents of the technical collaboration agreement and any other document which he considers necessary. The A.O. is directed thereafter to adjudicate this issue in accordance with law. Needless to add, the assessee be granted due opportunity of hearing. 31. Ground of appeal no. 4 is allowed for statistical purposes. 32. Ground no. 5 raised by the Assessee reads as under: 5 Ld. CIT (A) erred in law and on facts in confirming disallowance of deduction claimed of Rs. 4,90,84,017/- for new power plant made by AO denying the benefit u/s 80IA of the Act. Ld. CIT (A) also rejected the claim without independently examining the issue by merely ....
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....ng through all of the above, we find that the assessee had been denied deduction u/s. 80IA on new power plant in assessment year 2001-02 which had been upheld by the ITAT also. This fact is evident from the orders of the lower authorities who in turn have relied on the order of the ITAT in A.Y. 2001-02 for denying deduction u/s. 80IA on new power plant. We have also gone through the order of the Jurisdictional High Court in the case of the assessee for assessment year 2001-02, passed in appeal filed by the Revenue against order of the ITAT in Miscellaneous application filed recalling the order passed by it in quantum proceedings. We find that the High Court had noted that the issue arises out of the rectification application by the assessee and the substantial question of law framed by the High Court was whether the ITAT was justified in recalling its judgment relying upon the subsequent decision of the Jurisdictional High Court in the Case of Gujarat Alkalies and Chemicals Ltd. vs. CIT reported in [2013] 350 ITR 94 (Guj) on the ground that there was error apparent on record. The question of law framed by the Hon'ble High Court is reproduced hereunder: "For the purpose of ....
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....f the Tribunal, the same would not form a ground to hold that the Tribunal's judgment suffered from an apparent mistake. However, the Revenue argued that the said judgment did not clinch the issue and at any rate, it was debatable whether by virtue of the judgment of Gujarat High Court, the Tribunal's view would be rendered incorrect and in that view of the matter, power of rectification could have been exercised. 11. As noted, the Supreme Court in case of T.S. Balram (supra) held that a mistake apparent on record must be obvious and patent mistake and not something which can be established on a long drawn process of reasoning where two opinions are possible. 12. In case of Honda SIEL Power Products Ltd.(supra), the Supreme Court highlighted that the purpose behind enactment of section 254(2) is based on the fundamental principle and no party appearing before the Tribunal should suffered on account of the mistake committed by the Tribunal and that power of rectification of the Tribunal is granted to see that no prejudice is caused to either of the parties by the decision of the Tribunal based on the mistake apparent from the record. Section 254 (2) itself ....
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....machinery of the old unit. When the assessee approached the High Court, in this context, the High Court observed that there was no logic for the argument that the true test would be whether a new industrial undertaking can function independently of the existing industrial undertaking. On the question of satisfying the test of a separate and distinct identity of the industrial unit set up, the Court was of the opinion that only because to a certain extent, the new undertaking is dependent on the existing unit, will not deprive the new undertaking status of a separate and distinct identity. It all depends on the nature of technicality and the mechanism of production. 15. Thus while discarding the theory of the test of separate and distinct identity failing merely because the new undertaking was dependent on the existing one, the Court opined that it all depends on the nature of technicality and the mechanism of production. In the later portion of the judgment, the Court observed that "The true test is not whether the new industrial undertaking connotes expansion of the existing business of the assessee but whether it is a new identifiable endeavor where substantial investmen....
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....captive power plant denying the benefit u/s 80IA of the Act. Ld. CIT (A) erred in confirming action of AO in estimating profits ignoring the certificate issued by the Auditor, which itself being illegal and without jurisdiction ought to have been quashed. Ld. CIT (A) failed to appreciate various submissions, evidences and supporting case laws relied upon by the appellant and instead formulated a completely new basis of computing deduction to be granted u/s. 80IA of the Act. The order of Ld. CIT(A) against the provisions of law deserves to be quashed and claim of deduction u/s. 80IA of the act be granted as claimed. 42. The facts relating to the issue are that the assessee had claimed deduction u/s. 80IA in respect of profits earned on captive power plant amounting to Rs. 9,62,10,765/-. The A.O. noted that the basis of computing the profits was the selling price of electricity of Gujarat Electricity Board at Rs. 5.766 per unit. The A.O. noted that as per this rate, the assessee had earned profits @ 37.75% of the entire credit for internal consumption which according to him was too high, therefore he reduced the rate of credit for electricity to 4.266 and accordingly reduced the p....
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....t for captive use as against open market sale. Considering this I am of the clear view that GEB buying rate is the market rate for the purpose of working out profit of electricity generated by captive power plant. The decisions relied upon by the appellant have not considered the specific features of electricity market in which distributors suffers transmission and distribution losses which is not there with generators. In view of this the market price in case of distributor of electricity will be much higher than market price for generator of electricity. If this aspect is considered, the market value for the generator of electricity will be the rate at which electricity generator can sale which is nothing but the buying rate of distributor which is GEB in this case. In view of this I uphold the disallowance made by the assessing officer. In the final result, appeal is partly allowed. 44. Before us, Ld. Counsel for the assessee contended that this issue was squarely covered by the decision of the Jurisdictional High Court in the Case of Gujarat Alkalies & Chemicals Ltd. 395 ITR 247, Alembic Ltd. in ITA No. 553 & 554 of 2017 and by the decision of the ITAT Ahmedabad Bench in the....
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....ent of electricity duty the Assessing Officer discarded for the purposes of ascertaining market value of the electricity generated by the CPP Unit and supplied to its general unit. 4. CIT (Appeals) confirmed the view of the Assessing Officer on the same line of reasoning. The Tribunal, however, on further appeal by the assessee, reversed the orders passed by the Revenue authorities referring to and relying upon the decisions of other Tribunals. The Tribunal was of the opinion that the market value of the electricity supplied by the CPP Unit to the general unit would be the same being charged by GEB from the consumers. 5. Counsel for the Revenue contended that the component of 8 paise per unit was the electricity duty which GEB was not authorized to retain but had to pass on to the Government. In essence, GEB was only collecting 8 paise per unit as electricity duty for and on behalf of the Government. He submitted that the market value of the electricity should be reckoned on Rs. 5.32 ps. per unit as was done by the Revenue authority. 6. Under sub-Section(8) of Section 80IA of the Act, if it is found that where any goods or services held for the purposes o....
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....erms 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 i....