TaxTMI 
TaxTMI 
2022 (2) TMI 1220
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....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 adjustments of transfer pricing. However I find that all the i....
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....unt 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 appellant to the transfer pricing officer. Under the facts and circumstances of the case, there was no reasons to interfere with the pricing....
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....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 degree of comparability with uncontrolled transactions is very high. According to assessee, in any case, it is not necessary to give all the reasons or grounds....
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....ciated 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 necessary to combine the CUP method with other less direct methods, or to use such methods instead. 2.12 One illustrative case where adjustments may be required is whether the circu....
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....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 associated with that particular line of business activity, the assessee is reasonably expected to be not only aware about nuances of that business, but also about economic conditions and peculiar circumstances, if any, o....
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....rovide 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 taxpayer. The most important of these are the following : If an enterprise that is tax resident in Italy wants to claim a deduction for the costs of transactions with parties that are resident in certain tax havens, then t....
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....e 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 after the 1999 rules is that the burden for proving that transfer prices are at arm ' s length falls squarely on the taxpayer ' s shoulders. The act of submitting the return under self- assessment implicitly assumes ....
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....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 transactions carried by it and give basis and supporting authentic evidence of ALP and adjustments made. The taxpayer has further to co-operate in the determination of the ALP by the tax authorities by furnishing all relevant information. The tax author....
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....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 evaluation is to be done and adjustment made. Reliability of uncontrolled transaction would depend upon the degree of comparability. The uncontrolled transaction may not be taken "as comparable" if there are such material differences as cannot be adjusted. If dat....
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....en 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 full knowledge of transaction carried out and as a personal associate with that particular line of business, the assessee reasonably accepted to be not only aware about nuisance of that business and but also economic conditions and peculiar situation of that business. The ....
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....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 A.O. had allowed the same for the said year and in subsequent years had accordingly worked out the claim of depreciation on the reduced WDV ,while the assessee had claimed higher depreciation. On account of this difference, A.O. had found the assessee's claim of depreciation to be in ....
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....sion 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 Supreme Court in the case of CIT vs. Mother India Refrigeration Industries Pvt. Ltd.,155 ITR 711 as also the decision of the ITAT Ahmedabad Bench in the case of United Phosphours Ltd. vs. JCIT (2001) 73 TTJ 404 (Ahd), the AO reduced the claim for depreciation on the basis of his own findings in th....
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....ee 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 but not claimed in the return for normal computation of income, has to be allowed while computing the deductions under Chapter VI-A viz., sections 80HH, 80IA, 80IB, etc., of an industrial undertaking. Respectfully following the aforesaid decisions, we do not find any illegality or infirmity in the order of the CIT(A). We accordingly confirm ....
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....heques 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 that the investments were old and no disallowance had been made in the past. The Assessee also contended that Rule 8D was not applicable for the impugned year. The Ld. CIT(A) however upheld the order of the A.O. holding at para 4.3 of his order as under: 4.3 I have considered the facts of the case, assessment order and appellant's submission. It is not in disp....
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....e 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 Rule 8D does not rule out any disallowance to be made ,at the same time the quantum of disallowance has to be worked out as per the most appropriate method considering the facts and circumstances of the case. In the present case the Ld. Counsel for the assessee has demonstrated availability of sufficient own funds for the purposes of making the impugned investments calling for no disallowance of interest u/s 1....
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.... 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 free bonds/ securities which yield tax free dividend and interest to assessee Banks when assessee had sufficient interest free own funds which were more than the investments made" 3. While common arguments have been advanced by the learned counsel for the parties, to place the legal issues in the appropriate perspective, the relevant facts are adverted from the Civil Appeal No. 9606 of 2011 (South Indian Bank Ltd. Vs. CIT, Trichur), for the purpose of this....
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.... 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 situation is same so far as overheads and other administrative expenditure of the assessee. 8. In absence of separate accounts for investment which earned tax free income, the Assessing Officer made proportionate disallowance of interest attributable to the funds invested to earn tax free income. The assessees in these appeals had earned substantial tax-free income by way of interest from tax free bonds and dividend income which also is tax free. It is manifest that substantial expendi....
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....ssee 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 answered is whether Section 14A, enables the Department to make disallowance on expenditure incurred for earning tax free income in cases where assessees like the present appellant, do not maintain separate accounts for the investments and other expenditures incurred for earning the tax-free income. 14. We have heard Mr. S. Ganesh, Mr. S.K. Bagaria, Mr. Jehangir Mistri and Mr. Joseph Markose, learned Senior Counsel appearing for the appellants. Also heard Mr. Vikramjit Banerjee, learned Additional Solicitor General and Mr. Arijit Prasad, learne....
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....d 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 Commissioner of Income Tax4, the assessee was a Scheduled Bank and the issue therein also pertained to disallowance under Section 14A. In this case, the Bombay High Court even while remanding the case back to Tribunal for adjudicating afresh observed (relying on its own previous judgment in same assessee's case for a different Assessment Year) that, if assessee possesses sufficient interest free funds as against investment in tax free securities then, there is a presumption that investment which has been made in tax free securities, has come out of interest free funds available....
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.... 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 and therefore the income had escaped assessment. On this, suffice would be to observe that the action in Honda Siel (supra) related to re-opening of assessment where full disclosure was not made. An assessee definitely has the obligation to provide full material disclosures at the time of filing of Income Tax Return but there is no corresponding legal obligation upon the assessee to maintain separate accounts for different types of funds held by it. In absence of any statutory provision which compels the assessee to maintain separate accounts for different types of funds, the judgment cited by ....
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....rned 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 declared by the investee company that would necessarily be earned by the assessee and the assessee alone. Therefore, even at the time of investing into those shares, the assessee knows that it may generate dividend income as well and as and when such dividend income is generated that would be earned by the assessee. In contrast, where the shares are held as stockin-trade, this may not be necessarily a situation. The main purpose is to liquidate those shares whenever the share price goes up in order to earn profits.........." The learned Judge then considered the implication of Rule 8D of the Rules in the context of Section 14-A(2....
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.... 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 Statutory Liquidity Ratio (SLR), as mentioned in the circular. In view of this position, when there is no finding that the investments of the Assessee are of the related category, tax implication would not arise against the appellants, from the said circular. 27. The aforesaid discussion and the cited judgments advise this Court to conclude that the proportionate disallowance of interest is not warranted, under Section 14A of Income Tax Act for investments made in tax free bonds/ securities which yield tax free dividend and interest to Assessee Banks in those situations where, interest free own funds available with the Assessee, exceeded their investments. With....
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....nds 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 cheques of dividend earned no other expense was incurred by the assessee. The counter of the Revenue to the same we find does not address this contention of the assessee and is purely presumptive, that considering the huge amount of administrative expenditure incurred some amount must relate to the earning of exempt income. But at the same time considering the quantum of investment made, some amount of expenses must have been incurred in relation to maintaining the same and earning income therefrom. Considering the entire facts and circumstances therefore the disallowance of expenses with respect to administrative expenses is restricted to Rs. 1,00,000/-The balance disallowance of Rs,.13,00,410/- is direc....
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.... 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 explaining the nature of the irrevocable balances written off placed at paper book page no. 31 is as under: 4. Further to details of 'irrecoverable balances written off' given in Annexure -5 of our letter dt. 19-11-2008, You have asked us to explain the amount written of M/s Consultore Makaya Aso. Ltd. (Makaya) In this regards please note that the Assessee Company entered into an agreement with Makaya for collaboration for technology. The amount was paid as first installment. But ultimately the technology did not work well and the contract was closed down. Now the amount paid was written off. We enclose copy of approval for payment from the Govt Department of Industrial Policy & Promotion as Annexure - 3. We produce le....
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.... 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 holding that the same was to be denied since it was not allowed in the earlier years. 33. Drawing our attention to the facts of the issue, Ld. Counsel for the assessee pointed out from page 12 to 18 para 7 of the CIT(A)'s order that the assessee had been denied deduction u/s. 80IA of the Act on new power plant claimed at Rs. 4,90,84,017/-,since the assessee's claim for the same since assessment year 2001-02 had been consistently denied by the department which had been upheld by the ITAT. The Ld. CIT(A) upheld the order of the A.O. for the same reason at para 7.3 of his order as under: 7.3 I have considered the facts of the case, assessment order and appellant's submission. This ground has two limbs- rejection of claim of dedu....
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....e 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 this Tax Appeal, we frame following substantial question of law. "Whether the Income Tax Appellate Tribunal was justified in recalling its judgment relying on the subsequent decision of this Court in case of Gujarat Alkalies and Chemicals Ltd. v. Commissioner of Income-tax, reported in [2013 350 ITR 94 (Guj) on the ground that there was an error apparent on the face of the record committed by the Tribunal." 37. The Hon'ble High Court went on to hold against the assessee,holding that while the case of Gujarat Alkalies and Chemicals Ltd. (supra) laid down certain broad propositions for ascertaining whether a new industrial undertaking was established, it did not lay down a ratio which could be straightway applied to the facts of the present case befo....
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....urpose 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 refers to a mistake apparent on record/ which can be rectified. The concept of mistake apparent on record was not diluted by the Supreme Court in case of Honda SIEL Power Products Ltd. (supra) also. 13. In case of Saurashtra Kutch Stock Exchange Ltd. (supra) also, the Supreme Court observed that a patent manifest and self evident error which does not require elaborate discussion of evidence or arguments to establish it can be said to be an error apparent on the face of the record. In the said judgment, the II Supreme Court approved the decision of Gujarat High Court in case of Saurashtra Kutch Stock Exchange Ltd. (supra). 14. In view of such settled legal position, we may examine the facts on hand. As noted, the assessee had installed a turbine for power generation, which....
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....ng 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 investment of fresh capital is made to enable earning of profit attributable to that new capital." 16. It can thus, be seen that the High Court in case of Gujarat Alkalies and Chemicals Ltd. (supra) while laying down certain broad propositions for ascertaining whether a new industrial undertaking in the given set of facts was established, did not lay down ratio which can be straightway applied to the facts of the present case. In the present case, the view adopted by the Revenue authorities which was upheld by the Tribunal was that by mere installation of turbines, the assessee did not install a new industry, since turbines themselves would not be sufficient for power generation, without generation of steam. When the High Court in case of Gujarat Alkalies and Chemicals Ltd. (supra) referred to the iss....
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.... 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 profits earned on captive power plant to Rs. 6,26,51,076/- as against 9,62,10,765/- claimed by the assessee. Thus reducing the claim of deduction on captive power plant by Rs. 3,35,59,689/-. 43. The matter was carried in appeal before the Ld. CIT(A) who upheld the order of the A.O. holding at para 7.3 as under: As regards reduction of claim in respect of captive power plant, assessing officer reduced the deduction under section 80 IA (8) on the ground that appellant considered transfer of electricity generated by captive plant to other business of the appellant is at the rate on which GEB sold electricity to the appellant. However it is not in dispute that appellant cannot sale electricity at this rate in the open market. The market rate is defined in explanation below sub section 8 to section 80 IA and as per tha....
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.... 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 case of Gujarat Fluorochemicals Ltd. in ITA No. 805 & 2744/Ahd/2017. Copies of all the above orders was placed before us in compilation of orders at paper book page no. 10 to 27. 45. Ld. D.R. on the other hand supported the order of the revenue authorities. 46. We have heard the contentions of both the parties. The solitary issue to be considered and adjudicated is whether for the purpose of computing profits earned by captive power plant for the purposes of claiming deduction u/s.80IA(4) of the Act, the credit for captive consumption of electricity is to be the selling price adopted by the State Electricity Board i.e. (GEB) or the purchase price of GEB. This identical issue, it has been pointed out to us by the Ld. Counsel for the assessee, has already been dealt with by the Jurisdictional High Court in the case of Gujarat Al....
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....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 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 for such transfer does not correspond to the market value of such goods as on the date of the transfer, then for the purposes of deduction under Section 80IA in case of the eligible business as if the transfer had been made at the market value of such goods or services. It is in this context that the question of substituting the actual consideration by the market value comes into picture. 7. We may notice that the Tribunal did not accept the contention of the assessee that the electricity is neither goods nor services and that, transfer of electricity, therefore, would not be covered under sub-Section ....
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....ods 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 industries including non eligible unit of the assessee itself. Tribunal therefore, while adopting the said base figure and excluding excise duty therefrom to work out Rs. 4.90 as the market value of the electricity generated by the assessee, to our mind, committed no error. It can be easily seen that if the assessee were to supply such electricity or was allowed to do so in the open market, surely it would not fetch Rs. 4.51 per unit but Rs. 5 per unit as was being charged by GEB. Since the excise duty component thereof would not be retained by the assessee, Tribunal reduced the said figure by the nature of excise duty and came to the figure of Rs. 4.90 to ascertain the market value of electricity generated by the eligible unit and supplied to non eligible business of the assessee. No error was committed by the Tribunal. No question of law therefore, arises. Tax Appeal is dismissed." ....