TaxTMI 
TaxTMI 
2022 (3) TMI 1433
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....Whether, on the facts and circumstances of the case and in law, the Ld. CIT (A) erred in deleting the addition of sales tax incentive/subsidy of Rs. 524,44,02,597/- holding it as capital in nature? 4. So far as this ground of appeal is concerned, it is sufficient to take note of the fact that the assessee had, during the relevant previous year, received sales tax subsidy of Rs 524,44,02,597 and claimed it to be a capital receipt not chargeable to tax. The Assessing Officer, however, rejected this stand and held that the said amount is taxable, as a revenue receipt, under section 28 of the Act. Aggrieved, assessee carried the matter in appeal before the CIT(A), and the learned CIT(A), following decisions of the coordinate benches from the assessment years 1994-95 to 2012-13, deleted the said addition. While doing so, learned CIT (A) observed as follows: I have considered the facts and submissions made by the assessee and have also perused the decision of the Special Bench of Mumbai ITAT in assessee's own case wherein it was held: "The question for consideration is whether the Tribunal in the case of RelianceIndustries Ltd. (supra) had correctly apprecia....
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.... the subsidy is given for setting up or expansion of the industry in a backward area, it will be capital, irrespective of the modality or the source of funds through or from which it is given and that if monies are given for assisting the in carrying out the business operations only after, and conditional upon, the commencement of production, it would be revenue. It was only for the purpose of bringing out this distinction that the Tribunal had analysed the features of the Maharashtra Scheme of 1979 and had come to the conclusion that the subsidy given under the Scheme had a direct nexus with the fixed capital investment and that it could not be said that the subsidy was given with the object of assisting or lending a helping hand to the in its business operations. (Para 29) The Tribunal was thus aware of the distinction between the subsidy given with the object of setting up the industry and the subsidy given after the industry commences production and conditional upon the commencement of production. Factually, the Tribunal found that the appellant's case which fell under the Maharashtra Scheme, was a case where the subsidy was given for the purpose of facilitating th....
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....f the assessee by my predecessor. Accordingly, following the Special Bench decision discussed above, further also relying on the orders of my predecessors in preceding assessment years including the order for immediate preceding assessment year i.e. A.Y.2013-14 and order of the Hon'ble ITAT for AY 1994-95 to AY 2012-13, I am inclined to allow the assessee's claim for treatment of Notional Sales tax of Rs. 524,44,02,597/- as Capital receipt not liable to tax. This ground of appeal is therefore allowed. 5. The Assessing Officer is aggrieved and is in appeal before us. 6. Learned representatives fairly agree that, as rightly noted by the learned CIT(A), this issue is covered, in favour of the assessee, by the coordinate bench decisions in the assessee's own cases for the assessment years 1994-95 to 2012-13. No reasons have been pointed out to us as to why we should not follow these decisions of the coordinate benches in the assessee's own cases. In view of this position, respectfully following these binding judicial precedents- including the special bench decision, we uphold the conclusions arrived at by the learned CIT (A) and decline to interfere in the matter. ....
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....view of the consistent stand taken by the department, the claim of depreciation of the Assessee Company is reworked as Annexure 'A' forming part of this order. The Assessee Company is entitled for depreciation of only Rs. 6418,60,98,039/- as against the claim made of Rs. 6524,55,55,688/-. The difference in the department's calculation of depreciation amount and the claim of the assessee amounting to Rs. 105,94,57,649/- is due to the fact that the department has been giving depreciation to the assessee leading to reduction in WDV prior to year when the assessee started making the claim of depreciation. Hence, there has been difference in WDV as per working of the department and the working of the assessee and that has led to the difference in calculation of depreciation. Accordingly an addition of Rs. 105,94,57,649/- is being made to the total income of the assesse. Penalty proceedings u/s 271(1)(c) of the Act for furnishing inaccurate particulars are initiated separately. 5.1.3 Further, during the assessment proceedings, it is also noted that has claimed depreciation under "Oil and Gas division" in respect of KG-D6 basin/Block of Rs 726,75,62,145/-.....
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....no. 3, the Assessing Officer has raised the following question for our adjudication: Whether, on the facts and circumstances of the case and in law, the Ld. CIT (A) erred in restricting the disallowance u/s 14A of the Act r. w. Rule 8D(2)(iii) to 0.5% by taking the average value of that investment which have yielded a dividend during the year under consideration? 15. This issue is required to be taken up along with the ground of appeal no. 10 (additional ground of appeal) raised by the assessee. The said ground of appeal, raised by the assessee, is as follows: The learned CIT (A) Mumbai erred in directing the AO to compute the disallowance under section 14A of the Act, by invoking the provisions of Rule 8D of the income tax Rules, while computing income under normal provisions of the Act without recording any satisfaction for rejection of the disallowance computed by the appellant under section 14A of the Act. 16. So far as the additional ground of appeal is concerned, we find that this grievance is ill-conceived inasmuch as, at page 58 of the assessment order, the Assessing Officer has specifically observed that "since the assessee has not correctly apporti....
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....le computing book profit u/s 115JB of the Act, relying on Tribunal decision in appellant's own case for AY 2009-10 vide corrigendum order dated 02.04.2008. 21. So far as this grievance of the assessee is concerned, it is sufficient to take note of the fact that after computing the disallowance under section 14A, and relying upon the Explanation 1(f) to Section 115JB(1) of the Act, the disallowance under section 14A is also to be added to the book profits. In appeal, learned CIT (A) upheld the adjustment in principle but restricted the quantum to the disallowance as computed by the assessee under section 14A, rather than the actual disallowance made under section 14A read with rule 8D. While doing so, the learned CIT (A) observed as follows: I have considered the facts and the submission of the Appellant. I find strength in the arguments of the Appellant on the ground relating to disallowance made under section 14A r.w.r. 8D, where the Appellant has relied on the decision of Bombay High Court in case of CIT vs. Reliance Utilities and Power Limited (313 ITR 340) wherein it has been held that where the own funds of the is more than the investments made on which exempt ....
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.... that this issue is covered in favour of the assessee by the decision of honourable Bombay High Court in the case of Commissioner of income tax vs Bengal finance and investment private limited, wherein the honourable High Court by the order dated 5/1/18 held that disallowance under section 14A cannot be added under section 115JB. Respectfully following the precedent from honourable jurisdictional High Court, we decide this issue in favour of the assessee. 25. We see no reasons to take any other view of the matter than the view so taken by the coordinate bench. Respectfully following the same, we direct the Assessing Officer to delete the impugned adjustment for disallowance under section 14 A in the book profit computed under section 115JB. The assessee gets the relief accordingly 26. Once we uphold the connected grievance of the assessee, the grievance so raised by the Assessing Officer must be held to be academic, and, as such, infructuous. 27. Ground no. 4 of the Assessing Officer's appeal is thus dismissed as infructuous, as ground no. 2 of the assessee is allowed. 28. In ground no. 5, the Assessing Officer has posed the following question for our adjudication: ....
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....nover from its Jamnagar Refinery SEZ undertaking u/s. 10AA of the Act. The Form 56F (Revised) filed by the assessee, has been verified by the AO and there is no dispute as regards the quantum of deduction worked out therein. Since the deduction allowable u/s 10AA is restricted to export profit, the assessee claimed deduction of Rs. 6832,18,56,826/- out of the total profit of Rs. 7530,26,45,346/- of the eligible undertaking. Further a deduction of Rs. 698,07,88,519/- [i.e. Rs. 7530,26,45,346 profit of the undertaking - (less) Rs. 6832,18,56,826/-] is claimed as deduction u/s. 801B(9) of the Act as per Form 10CCB submitted by the appellant. The appellant's claim of deduction of eligible profit u/s 10AA and 80IB{9) of the Act has not exceeded the profit of the undertaking in respect of SEZ refinery unit. Section 80IB(9) of the Act provides deduction in respect of profit and gains derived from an undertaking for specified period if the undertaking is engaged in refining of mineral oil and begins such refining process on or after the 1st day of October, 1998. Accordingly, the assessee submitted that it had complied with the conditions speci....
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....ce upon several decisions of Hon'ble Delhi High Court and Hon'ble Karnataka High Court and rejected the assessee's ground in this regard. 78. Against the above, the assessee is in appeal before us. We note that identical issue was decided by this tribunal in assessee's own case vide order dated 28.09.2018 for A.Y. 2010-11 to 2012-13 as under: 76. We have heard rival contentions and perused the record. The dispute between the parties revolve around sec. 80A(4) and sec.80IA(9) of the Act, For the sake of convenience, we extract below both the provisions:- "80A(4) Notwithstanding anything to the contrary contained in section 10A or section 10AA or section 10B or section 10BA or in any provisions of this Chapter under the heading "C-Deductions in respect of certain incomes", where, in the case of an assessee, any amount of profits and gains of an undertaking or unit or enterprise or eligible business is claimed and allowed as a deduction under any of those provisions for any assessment year, deduction in respect of, and to the extent of, such profits and gains shall not be allowed under any other provisions of this Act for such assessment year and shall in no....
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....efers to the entire profit of Rs. 5036.35 crores. Accordingly we are of the view that there is merit in the contentions of the assessee. Our view is further fortified by the expression "shall in no case exceed the profits and gains of such undertaking. as the case may be". The above said expression visualises the situation that an assessee may be claiming deduction under different provisions of the Act for the profits derived from the same undertaking. Hence the provisions of sec. 80A(4) visualises that the deduction in respect of profits and gains of an undertaking may be claimed under different provisions and hence the restriction is only for that portion of profit claimed and allowed as deduction under setc. 10A or 10AA or 10B or 10BA or any provisions of Chapter VI under heading "C - deductions in respect, of certain incomes" shall not be eligible for deduction under any other provisions of the Act. For the remaining portion of profit, the assessee is eligible to claim deduction under any other section. 77. The Id CIT (A) has referred to the decision rendered by Hon'ble Delhi High Court in the case of TEI Technologies P Ltd (supra). Following observations made....
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....rary to the decision rendered by Hon'ble Bombay High Court in the case of Black &Veath Consulting P Ltd (251 CTR 265), yet the ratio of the decision rendered by Hon'ble Delhi High Court is that the double benefit is not available in respect of same income. 79. The assessee has relied upon the decision rendered by Hon'ble Bombay High Court in the case of Associated Capsules (P) Ltd (supra). The High Court was concerned with the eligibility of the assessee to claim deduction u/s 80IA and 80HHC of the Act. The provisions of sec. 80IA(9) provided that where any amount of profits and gains of an undertaking is claimed and allowed under sec. 80IA(1) for any assessment year, deduction to the extent of such profits and gains shall not be allowed under any other provisions of Chapter VIA and shall in no case exceed the profits and gains of such eligible business or undertaking. The Hon'ble Bombay High Court held that the provisions of sec. 80IA(9) affects only allowability of deduction and not computation of deduction. This decision rendered by Hon'ble Bombay High Court supports the case of the assessee that sec. 80A(4) and sec. 801A(9) restricts only allowability o....
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....easons for not following the views so expressed by the coordinate bench have been pointed out to us by the learned Departmental Representative, we approve the conclusions arrived at by the learned CIT (A) and decline to interfere in the matter. 31. Ground no. 5 is thus dismissed. 32. In ground no. 6, the Assessing Officer has raised the following grievance: Whether, on the facts and in the circumstances of the case and in law, the ld.CIT(A) erred in deleting the disallowance of Rs. 228,39,15,312/- incurred by the assessee on aborted blocks of other contract areas underproduction Sharing contracts other than KGD? 33. This issue is also continuing from the past assessment years. While computing the 80IB(9) deduction, the assessee had reduced it by Rs 228,39,15,312, being unsuccessful exploration cost in respect of areas, other than KGD-9 on which the profits were made. When asked to justify the same, the assessee submitted that the provisions of section 80IB(9) are required to be read with the provisions of Section 80IA(5) which, inter alia, requires that the profits of the eligible business are required to be computed as if that business is the only source of ....
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.... of the assessee. Accordingly, the assessee has correctly not reduced the unsuccessful exploration cost incurred in contract area other than KGD, which has been made in the computation of income u/s 42 (1)(a) against the entire income of the assessee company while computing the business income. The AO has however, rejected the above claim of the assessee and has reduced the amount of Rs. 228,39,15,312/- being the abortive cost of wells incurred in contract areas other than KGD while computing deduction u/s,80IB(9) of the Act in respect of KGD undertaking. In doing so, he has relied on the provisions of Article 17.2.2. of the Production Sharing Contract (PSC). However, on harmonious reading of the provisions of Article 17 of the PSC, it can be concluded that the deduction under Article 17.2.2 in respect of abortive/unsuccessful blocks is to be allowed to a Company while computing its profits and gains from the business of Petroleum Operations. Thus, the same are not be reduced for the purpose of computing the profits of an Undertaking' eligible for deduction u/s 801B. Similar issue has been allowed to appellant in the immediately precedin....
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....lier decisions of the coordinate benches, the order dated 10th November 2020, for the assessment year 2013-14, observes as follows: At the outset on this issue learned Counsel of the assessee submitted that the issue is covered in favour of the assessee by the ITAT on this issue for A.Y. 2011-12 to 2012-13 as under :- "107. We have heard rival contentions on this issue. We have noticed earlier that the Ld CIT (A) has decided this issue in favour of the assessee by holding that each contract is a separate undertaking and hence the expenses relating to aborted blocks of different contracts cannot be reduced from the profit from sale of mineral oil obtained from another contract. The operative portion of CIT (A) on this issue are extracted below:- "49. Decision: I have considered the facts of the case and the submissions made by assessee. The issue for consideration is whether cost of abortive/ unsuccessful blocks (other independent undertakings) are be reduced while computing the profits of a successful block (KGD in the assessee's case which is independent undertaking) for the purpose of claiming deduction u/s 80-IB(9).The assessee was engaged....
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....pect of abortive/unsuccessful blocks are not be reduced while computing the profits of the undertaking viz. KGD which is eligible for deduction u/s. 80IB(9). This ground of appeal is accordingly allowed." 108. We notice that the article/clause 17.2.2 of PSC allows deduction of expenses relating to aborted blocks against the profit arising from other blocks. In our view, the assessee was right in contending that the article/ clause 17.2.2 was concerned with the computation of income at entity level in terms of sec. 42 of the Act. The article/clause 17.2.5 of PSC states that all other provisions of Income tax Act shall apply. The PSC does not deal with the deduction given u/s 80IB(9) of the Act and hence the provisions of the Act shall apply. Hence the deduction u/s 80IB(9) of the Act has to be computed in terms of sec. 80IB of the Act. Sec. 80IB(13) of the Act provides that the provisions of sec. 80IA(5) shall apply and under the provisions of sec. 80IA(5) of the Act, the profits and gains of eligible business, for the purposes of sec. 80IB, shall be computed as if such eligible business were the only source of income of the assessee. In view of these provisions, the deduct....
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....ment year 2013-14, which forms the basis of the impugned relief, has travelled in appeal before a coordinate bench, and the coordinate bench, vide order dated 10th November 2020, confirmed the relief so granted by the CIT (A) by observing, inter alia, as follows: I have considered the facts of the case and submissions made by the assessee. The issue for consideration is whether the term 'mineral oil' u/s 80-IB(9) includes natural gas and condensate. The assessee company is engaged in the business of extraction of natural resources including Petroleum and gas, refining of petroleum products etc. On 12.04.2000 the assessee alongwith M/s Niko Resources Limited entered into a PSC with the Government of India ['GOI'] for obtaining a Petroleum Mining Lease in respect of Development area specified therein namely Block KG-DWN-98/3 (KGD) for extraction and exploration of mineral oil i.e. 'Petroleum'. Although the term 'mineral oil' is defined in section 42, 44BB and 293A of the Act, the same is not defined in Section 80-IB of the Act. When one refers to following statutes dealing with mineral oil, petroleum and natural gas etc, natural gas is t....
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....(A) has followed the same, we do not find any infirmity in the order passed by Ld CIT (A) on this issue. On perusal of the aforesaid facts and following the decision of the Gujarat High Court (supra) and recent ITAT order in appellant's own case for A. Y. 2011-12, I hold that the term 'mineral oil', for the purpose of claiming deduction u/s 80-IB(9) of the Act includes natural gas and condensate and therefore the assessee claim for deduction us 80IB(9) of the Act in respect of both natural gas and condensate is accordingly allowed. Accordingly, this ground of appeal is accordingly allowed. 41. Respectfully following the views so expressed by the coordinate bench in assessee's own case, for the immediately preceding assessment year, we uphold the conclusions arrived at by the learned CIT (A) on this point as well, and decline to interfere in the matter. 42. Ground no. 7 is also thus dismissed. 43. In ground nos. 8, 9 and 10, which we will take up together, the Assessing Officer has raised the following grievances: 8. "Whether, on the facts and in the circumstances of the case and in law, the ld CIT (A) erred in allowing appeal of the assessee and d....
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....rest expenses is to be verified along with documentary evidence. 45. Even in declining the claim, thus, the Assessing Officer had indicated that it was on account of limitations placed on him by the Goetze decision (supra), he could not have accepted the claim. There was no issue on the merits on the claim. In appeal before the CIT(A), learned CIT (A) accepted the claim and directed the Assessing Officer to recompute the same. Learned CIT (A) noted that the Goetze decision does not impinge on the powers of the appellate authorities. In effect thus the claim was admitted by the CIT (A) but the computation was directed to be done by the Assessing Officer. However, the Assessing Officer is aggrieved and in appeal before us. 46. Having heard the rival contentions and having perused the material on record, we see no reasons to interfere in the findings of the CIT (A) on this point either. As a matter of fact, the Assessing Officer's observations, as extracted earlier, would show that his only point was that he did not have the powers to admit the claim in the assessment order, but he was alive to the fact that the appellate authorities did not have this limitation, and that appare....
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....e have confirmed, following the coordinate bench decisions for the preceding assessment years, as such, earlier in this order. In the computation of book profits, however, this amount was included in the book profits. When grievance against this amount being included in the book profit was raised before the learned CIT(A), he upheld the plea of the assessee and observed as follows: On perusal of the submission filed by the appellant, it is observed that the main contentionof the appellant is that a capital receipt which is not chargeable to tax under normalprovisions of the Act also cannot be brought to tax under the provisions of Section 115JB. In this regard the appellant has relied upon the following: The provisions of Section 115JB have to be considered subject to charging provisionsunder Section 4 of the Act and an item of income which is otherwise not chargeable to taxcannot be subjected under tax under MAT provisions unless specifically provided for. Since the legislature itself has created parity between income under normal provisions andbook profit so far as exempted receipts are concerned, if this logic is extended further,items of rece....
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.... "23. We heard the parties on this issue. The Ld A.R placed his reliance on various case laws and submitted that Tribunal / High Court has held that the capital receipts, which are not liable for taxation under the Income tax, are to be excluded from Net profit for the purpose of computing book profit u/s. 115JB of the Act. The Ld A.R submitted that the Sales tax incentive is embedded in the Sales revenue and the same has been held to be capital receipt under normal provisions of the Act. Accordingly he submitted that the same is required to be reduced from Net Profit for the purposes of sec. II5JB of the Act. On the contrary, the Ld D.R submitted that the provisions of sec. II5JB do not contain any provision for exclusion capital receipts. He submitted that the AO has only power to examine whether books of accounts are certified by authorities under Companies Act, 1956 as having been properly maintained in accordance with Companies Act and thereafter the AO has limited power to increase and reduce items as provided in Explanation to sec. 115JB of the Act. In support of this proposition, the Ld D.R placed his reliance on the decision rendered by the Special bench of Tribunal in ....
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.... of law. Further, entry 82 of the Seventy Schedule of the Constitution of India lays down that the Central Government has the right to levy tax on income. Further, section 4 of the Income Tax Act 1961 which provides for the charge, specifies that every assessee shall be charged for any assessment year income tax in respect of the total income of the previous year. 27. The main charging section provides for levy of income tax only in respect of income of the assessee. Once an item is not considered as income of the person as the same constitutes capital receipt, it shall not be subjected to tax under this Act. Therefore, once the subsidy received under the TUF scheme is held to be capital in nature, it comes outside the meaning of the term "income" and therefore outside the ambit of section 4 i.e the charging section. Unless, specifically made taxable such subsidy cannot be taxed as income. Once the subsidy received cannot be taxed under section 4, there cannot arise any taxability under section 115JB of the Act, which merely provides for an alternate mechanism for computation of income and tax thereon. Thus, an item which is not otherwise taxable cannot be subjected to tax....
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.... the matter was all along decided in favour of the assessee- as evident from the observation that "The assessee submits that this issue is covered in favour of the assessee by the ITAT decision in assessee on case for assessment year 10-11 to 12-13. We note that identical ground was dealt with by the ITAT in its order as referred above. The tribunal has referred to the decision of ITAT in the case of DCIT vs. M/s. Alok Industries Limited (in ITA Nos. 900 to 906/Mum/2019 vide order dated 16.07.2020 and quoted there from. Thereafter, the ITAT has concluded that "consistent with the view taken by the coordinate benches on an identical issue we direct the assessing officer to exclude the amount of sales tax incentive from the net profit for the purpose of computed book profit under section 115 JB of the act as the same is capital in nature." Yet, a different view was taken in the immediately preceding assessment year, not on merits but by sending the matter back to the CIT (A) for fresh adjudication on the ground that "in the case of DCIT vs. M/s. Alok Industries Limited (supra), in a subsequent decision for A.Ys. 2006-07 to 2011-12 dated 16.07.2020, this tribunal has adjudicated ....
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....t under a specific provision of the Act as such it was to be included as a part of the book profit. But where a receipt is not in the nature of income at all it cannot be included in book profit for the purpose of computation under Section 115JB of the Income Tax Act, 1961. For the aforesaid reason, we hold that the interest and power subsidy under the schemes in question would have to be excluded while computing book profit under Section 115 JB of the Income Tax Act, 1961". There is no decision contrary thereto by the Hon'ble jurisdictional High Court. While on the issue as to which judicial precedent be followed in such a situation, we find guidance from a rather decision of a coordinate bench, in the case of Siro Clinpharm Pvt Ltd Vs ITO [(2021) 131 taxmann.com 73 (Mum)], wherein, speaking through one of us (i.e. the Vice President), the coordinate bench has observed as follows: 7. .......... We may usefully take note of the observations of Hon'ble Supreme Court in the case of Asstt. CCE v. Dunlop India Ltd. [1985] 154 ITR 172, wherein the Their Lordships quoted, with approval, from the decision of House of Lords to the effect that "We desire to add and as was said ....
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....Act has no jurisdiction to go into the question of constitutionality of the provisions of that statute" but nevertheless the respect for the higher judicial forum was unambiguous. In Tej International (P.) Ltd. v. Dy. CIT [2001] 118 Taxman 59 (Delhi) (Mag.), a coordinate bench has, on this issue, observed that "In the hierarchical judicial system that we have, better wisdom of the Court below has to yield to higher wisdom of the Court above and, therefore, one a authority higher than this Tribunal has expressed an opinion on that issue, we are no longer at liberty to rely upon earlier decisions of this Tribunal even if we were a party to them. Such a High Court being a non-jurisdictional High Court does not alter the position...". . There can, however, be exceptions to this situation on account of a variety of reasons, and these exceptions come into play only when the views are of non-jurisdictional High Court which, do not, legally speaking, bind the lower tiers of judiciary. In our considered view, so far as the precedence value of a non-jurisdictional High Court's judgment is concerned, the position has been very well summed up by a coordinate bench decision, in the case of ....
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....olute, as it is inherently required to be blended with many other important considerations within the framework of law, or something which cannot be, in deserving cases, deviated from. [Emphasis, by underlining, supplied by us] 8. No specific reasons for not following the non-jurisdictional High Court decision in Redington's case (supra) have been pointed out to us. It is not even the case of the assessee, and rightly so, that the issue decided by Hon'ble Madras High Court is not the same as we are called upon to decide in this case, that there are conflicting decisions of Hon'ble non-jurisdictional High Court on the issue or that there are any other good and sufficient reasons for not following this judicial precedent. There is nothing more than Bank of India decision (supra) to justify our taking a decision at variance with the decision of a non-jurisdictional High Court, but then this decision by the coordinate bench is on its own unique facts and it recognizes the fundamental principle that it is more of an exception that the decisions of the non-jurisdictional High Court are not followed. At one place, this decision, inter alia, states that "To a ....
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....re specific good reasons not to do so. The doubts, if at all, and somewhat nightmarish doubts at that, arise about the manner in which Bank of India decision (supra) could be interpreted so as to destabilize the well settled norms of judicial discipline, but neither do we need to perpetuate an error, even if there be any, nor do we need to examine to that aspect any deeper at this stage. There is, thus, no legally sustainable justification, on the facts of this case, to disregard the views expressed by Hon'ble Madras High Court in Redington's case (supra). Given the important judicial developments by way of a binding legal precedent, directly on the issue, even if from a non-jurisdictional High Court, we cannot simply treat this issue as covered by decisions of the coordinate bench, and thus disregard the esteemed views expressed by a higher judicial forum. 53. In any event, even with respect to the earlier assessment years, this issue was decided, in favour of the assessee, in the assessee's own case. The only reason for taking a deviation, in the immediately preceding assessment year, was the applicability of Veekaylal Investment decision (supra) but that reasoning has....
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....nbsp;405.58 crores whereas the assessee has claimed a deduction of Rs. 414.24 crores. Hence Rs. 8.66 crores (414.24 crores less 405.58 cores) being the additional claim made by the assessee u/s 35(2AB) of the Act is hereby disallowed. 57. Aggrieved, the assessee carried the matter in appeal before the CIT(A). In the proceedings before the learned CIT(A), it was pointed out that the law, as it stood at the relevant point of time, empowered the DSIR only to approve the facility for the purpose of research and development expenses under section 35(2AB), and it was only with effect 1st July 2016 that the DSIR was also required to quantify the eligible weighted deduction. The plea was accepted by the learned CIT (A) and it was held that so far the present assessment year is concerned, which is a pre-amendment assessment year, the quantification by the DSIR cannot restrict the eligibility for deduction as long as expenses are actually incurred in a DSIR approved facility. The Assessing Officer is aggrieved and is in appeal before us. 58. Having heard the rival contentions, and having perused the material on record, we see no reasons to interfere in the findings of the lea....
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....er pricing as enshrined in section 92F(ii), as in a third party unrelated uncontrolled circumstances the assessee would have recovered the interest on receivables considering the cost of borrowing in its hands?" 61. The short point requiring our adjudication on this ground of appeal is whether the assessee's benchmarking of the interest on the delayed realization of debts at 200 bps above the LIBOR is correct or not. The TPO has made the adjustment of Rs 19,38,27,643 by benchmarking the interest on the delayed realization of debtors at the assessee's average cost of funds (including short term and long term, domestic and foreign borrowings) and using cost plus mark up based on the Bloomberg data, which has been computed at 4.76% for the USA and 6.15% for Tanzania. In appeal, following the stand taken by the coordinate benches in the assessee's own case for the assessment years 2010-11 to 2012-13 and CIT(A)'s order in the assessee's own case for the assessment year 2013-14, deleted the impugned ALP adjustment and upheld the benchmarking of LIBOR plus 200 bps as adopted by the assessee. The Assessing Officer is aggrieved and is in appeal before us. 62. We have heard the rival c....
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....re number of such shares on 16.04.2013 at the same face value at 0.01 euro per share (Rs. 32,22,00,444) without any arm's length return from the AE RGBV, proving the claim of "compulsorily convertible" as dubious, which shows the investment in the AE is essentially interest free loan in nature? Whether on the facts and circumstances of the case and in law, the Ld. CIT (A) is correct in ignoring the fact that the assesses redeemed the investment as above, it again stated to have invested in the same FY 2013-14, on 10.03.2014, 262,13,30,100 numbers of preference shares (Rs.222,66,88,853) in RGBV at the same face value of 0.01 euro per share without any return, which again shows the nature as current account loan transaction? "Whether on the facts and circumstances of the case and in law, the Ld. CIT (A) is correct in ignoring the vital fact that though the said investment is stated to be compulsorily convertible preference shares, the assessee said to have redeemed 2,90,720 said preference shares in RIME in the FY 2012-13 at par with same value of AED 290,72,00,000 (INR 430.70 crores) at which it was invested, without any arm's length return from the AE RGBV....
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....rcumstances would have done within the meaning of section 92F(ii)?" "Whether on the facts and circumstances of the case and in law, the CIT (A) is correct in ignoring the fact that the assessee has not furnished any detailed valuation report for the value of the preference shares said to be invested as above in RGBV preference shares and also for the value of AED 1000 per preference share in the AE RIME which again casts cloud on the nature of the investment?" Whether on the facts and circumstances of the case and in law, the Ld. CIT (A) is correct in ignoring the fact that the assessee has not furnished any detailed valuation report for the value of the preference shares said to be invested as above in RGBV preference shares and also for the value of AED 1000 per preference share in the AE RIME which again casts cloud on the nature of the Investment? Whether on the facts and circumstances of the case and in law, the CIT (A) is correct in ignoring the facts that the AE RIME has been making losses continuously from calendar year 2010 to 2015 and though is net worth is negative, the assessee has shown to have invested in the said preference shares, which is....
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....and in law, the Ld. CIT (A) is correct in ignoring the economic substance of the transaction which is essentially loan though its external form is stated to be investment in preference shares, as the basic tenet of transfer pricing is that the transaction is to be seen in uncontrolled circumstances in thiro party situation as per Section 92F(ii)? Whether on the facts and circumstances of the case and in law, the Ld. CIT (A) is correct in ignoring the fact that the assessee has entered into an "arrangement, understanding or action in concert" with its AE within the meaning of section 92F(v) whereby huge funds have flown out of India for no return, which no unrelated independent party would have done within the meaning of section 92F(ii) which in turn became possible because of the special relationship existed between the assessee and its AEs? Whether on the facts and circumstances of the case and in law, the Ld. CIT (A) is correct in failing to "look through" the "substance" of transaction and instead "looked at" the superficial "form" of the transaction to arrive at the decision that the investment is quasi-equity in nature whereas in substance it is "loan" in nat....
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....ppliances Ltd, (345 ITR 241) wherein it has been held that recharacterisation of transaction is permissible in exceptional circumstances as that of assessee as under?Two exceptions have been allowed to the aforesaid principle and they are - (i) where the economic substance of a transaction differs from its form; and (ii) where the form and substance of the transaction are the same but arrangements made in relation to the transaction, viewed in their totality, differ from those Which would have commercially rational manner. Whether on the facts and circumstances of the case and in law, the Ld. CIT (A) is correct in deleting the interest relying on the decision of the Hon'ble High Court in the case of Vodafone India Service P. Ltd (Writ Petition No. 871 of 2014), as the decision held that the shortfall or excess in investment is capital in nature and so cannot be added as income, whereas in the instant case, capital itself has not been considered for adjustment and that the capital was considered as loan and only the accrued interest has been considered as the income? Whether on the facts and circumstanced of the case and in law, the Ld. C....
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....We notice that the Ld CIT (A) has followed the decision rendered by Hon'ble jurisdictional High Court in the case of Besix Kier Dabhol (supra) in order to hold that re-characterisation of transaction is not permissible. In the case of Bharti Airtel Ltd (supra), the Delhi ITAT has held that it is not open to the TPO to recharacterise transaction under Income tax Act, unless it is found to be sham or bogus. It was further held that, even under judge-made law, re-characterisation is possibly only if transactions are found to be substantially at variance with the stated form. In the absence of any such finding and also in the absence of anything on record to show that unrelated applicant was to be paid interest for the period ending till the date of allotment of shares, the ITAT deleted the addition. In the case of Bharti Airtel Ltd (supra), there was delay in allotment of shares and still, the Tribunal held that re- characterisation is not permissible. In the instant case, it is seen that the preference shares have been allotted within the year itself. The AO/TPO has not shown that the transactions are sham or bogus nor it was shown that the apparent is not real. It was also not shown....
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....ction of purchase and sale of shares of an AE. Nothing is brought on record by the Revenue to suggest that the transaction was sham. In absence of any material on record, the TPO could not have treated such transaction as a loan and charged interest thereon on notional basis. No question of law arises. "Furthermore, we note that as submitted no fresh investment is made during the year. That the shares were allotted in earlier years. The new issue raised by Revenue on the theory of preponderance are not sustainable as nothing has been cogently brought on record. As pointed out by the learned Counsel of the assessee the examples mentioned in the grounds above do not relate to current year and it is trite that every year is different for transfer pricing purpose. Subsequent year instances cannot give a carte blanche to the Assessing Officer to make adjustment and render the Tribunal decision ceasing to be a precedent. Accordingly in the background of the aforesaid decision and precedent we uphold the order of learned CIT (A) 69. We are in considered agreement with the views so expressed by the coordinate bench. In any event, the subscription for compulsorily convertible pr....
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....unless it results in an appropriate amendment in law, and the change in the definition of international transaction, including capital financing in its ambit, has no impact on the stand of the CIT (A) because what has been held is that this transaction cannot be compared with a loan. In the light of these discussions, as also bearing in mind the entirety of the case, we approve the conclusions arrived at by the learned CIT (A) on this point as well, and decline to interfere in the matter. 70. Ground no. 14 is all thus dismissed. 71. In ground no. 15, which again has several parts and all of which we will take up together, the Assessing Officer has raised the grievances, all of which we will take up together, as follows: "Whether on the facts and circumstances of the case and in law, the Ld. CIT (A) is right in including M/s Ace BPO Services Pvt, Ltd.(Ace BPO) as the comparable without appreciating that it is functionally dissimilar as its core competence is health care back office support system whereas tested party (assessee) is providing consultancy and support service in the field of petroleum products? "Whether on the facts and circumstances of the case ....
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....t coordinate benches, in assessee's own cases on the same set of facts for the assessment years 2012-13 and 2013-14, have held, and no reasons have been pointed out for deviating from the stand so taken by the coordinate benches on the same set of facts. These grievances of the Assessing Office must, therefore, be rejected. We do so. As regards the plea against the inclusion of Ace BPO Services as a comparable, learned counsel for the assessee submits, that aspect of the matter is wholly academic inasmuch, with Ace BPO as comparable or without Ace BOP as comparable, the transaction value is at arm's length. Learned Departmental Representative does not dispute that aspect of the matter. In view of these discussions, conclusions arrived at by the CIT(A), even though conceded by the learned counsel on the point of inclusion of Ace BPO, donot call for any interference. We confirm the deletion of the impugned ALP adjustment by the CIT (A) ad decline to interfere in the matter. 74. Ground no. 15 is thus also dismissed. 75. In ground no. 16, which again has several questions for our adjudication, the Assessing Officer has raised the following grievance: "Whether on the fact....
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..... The stand of the assessee was that since the provisions of rule 10B(2)(d), which provide thatan uncontrolled transaction being judged with respect to "conditions prevailing in the markets in which the respective parties to the transactions operate, including the geographical location and size of the markets, the laws and Government orders in force, costs of labour and capital in the markets, overall economic development and level of competition and whether the markets are wholesale or retail", will be attracted, and viewed thus, the cost to cost transaction is an arm's transaction on the facts of this case. The TPO, however, rejected this plea, holding the PSC of no relevance in the manner, and proceed to compute arm's length price of the transaction at 17.21% mark up. An addition of Rs 58,16,290 was thus made. Aggrieved, assessee carried the matter in appeal before the CIT(A). Learned CIT(A), following the orders of the coordinate benches in assesee's own cases for the assessment years 2011-12 and 2012-13 and following his predecessor's order for the assessment year 2013-14, deleted the ALP adjustment of Rs 58,16,290. The Assessing Officer is aggrieved of the relief so granted b....
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....ons of Rule 10B?" "Whether on the facts and circumstances of the case and in law, the Ld. CIT (A) is correct in accepting the rate arrived at by the assessee based on Yield Spread Approach dividing the interest differential between the assessee and 50:50 in an ad hoc unscientific manner, instead of dividing it on the basis of FAR analysis between the assessee and the AE's? "Whether on the facts and circumstances of the case and in law, the Ld. CIT (A) is correct in accepting the assessee's method of Yield Spread Approach, whereas it is anybody's knowledge that the assessee and the AE's cannot be considered on the same footing for attributing the interest differential advantage equally, as FAR significantly differ between the assessee and the AE's? "Whether on the facts and circumstances of the case and in law, the Ld. CIT (A) is correct in not passing a speaking order on the FAR analysis carried out by the TPO for attributing the interest differential in a more conservative manner at 60:40 ratio and simply accepting the assessee's ad hoc unscientific ratio of 50:50 without any backing of FAR analysis?" 81. The issues so raised pertain to benchmarking o....
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.... is engaged in the service sector? "Whether on the facts and circumstances of the case and in law, the Ld. CIT (A) is right in accepting functionally dissimilar companies as comparable without appreciating that including such comparables will defeat the very purpose of benchmarking?" "Whether on the facts and circumstances of the case and in law, the Ld. CIT (A) is right in including M/s ICRA Management Consulting Services Ltd. as comparable without appreciating that it is having substantially lower turnover i.e. 25.73 crores whereas segmental turnover of the tested party is 1138 crores, overlooking the fact that non-application of turnover filter will defeat the very purpose of benchmarking the transaction and also ignoring the decision of Hon'ble Karnataka high court in case of Acusis software India Private Limited (ITA No .223/2017) in this regard?" "Whether on the facts and circumstances of the case and in law, the Ld. CIT (A) is right in including M/s Spectrum Business Solutions Ltd. as comparable without appreciating that it is having substantially lower turnover i.e. 8.23 crores only whereas the segmental turnover of tested party is 1138 crores....
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.... to have given a decision on this issue in favour of the Appellant. 91. While dealing with the first ground of appeal filed by the Assessing Officer, earlier in this very order, we have upheld the CIT(A)'s finding that the receipt of Rs 524,44,02,597 on account of sales tax subsidy is capital in nature. In this view of the matter, this ground of appeal is wholly academic and infructuous. Accordingly, in conformity with the stand of the coordinate benches from assessment years 1994-95 to 2013-14, we decline to interfere in the matter. The action of the CIT (A) is confirmed. 92. Ground no. 1 is thus dismissed. 93. In the second ground of appeal, the assessee has raised the following grievance: The Learned CIT (A) erred in directing the AO to compute the disallowance under clause (f) of Exp 1 to section 115JB(2) i.e. expenditure relating to exempt income, when no such disallowance ought to have been made while computing book profit u/s 115JB of the Act, relying on Tribunal decision in appellant's own case for AY 2009-10 vide corrigendum order dated 02.04.2008. 94. We have already dealt with this plea, while dealing with a connected ground of appeal in the appe....
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....ncome". The disallowance was thus made. Aggrieved, assessee carried the matter in appeal before the CIT (A) but without any success. The assessee is not satisfied and is in further appeal before us. 102. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. 103. While dealing with the deductibility of corporate social responsibility expenses, so far as period prior to insertion of Explanation 2 to Section 37(1) is concerned, it is useful to take note of a coordinate bench decision in the case of ACIT Vs Jindal Power Ltd [(2016) 70taxmann.com 389 (Raipur)] wherein, speaking through one of us (i.e. the Vice President), it was observed thus: 16. We have noted that fundamental objection of the Assessing Officer is that the expenses is voluntary, not mandatory and not for business purposes. As for the contention that the expenses being in the nature of voluntary expenses, which are not mandatory, and which the assessee was not statutorily required to incur, are not admissible deduction in computation of business income, we are of the considered view that as long as expenses ....
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....inter alia observed that : "It has to be observed here that the expression "wholly and exclusively" used in s. 10(2)(xv) of the Act does not mean "necessarily". Ordinarily, it is for the assessee to decide whether any expenditure should be incurred in the course of his or its business. Such expenditure may be incurred voluntarily and without any necessity and if it is incurred for promoting the business and to earn profits, the assessee can claim deduction under s. 10(2)(xv) of the Act even though there was no compelling necessity to incur such expenditure. It is relevant to refer at this stage to the legislative history of s. 37 of the IT Act, 1961, which corresponds to s. 10(2)(xv) of the Act. An attempt was made in the IT Bill of 1961 to lay down the "necessity" of the expenditure as a condition for claiming deduction under s. 37. Sec. 37(1) in the Bill read "any expenditure, laid out or expended wholly, necessarily and exclusively for the purposes of the business or profession shall be allowed." The introduction of the word "necessarily" in the above section resulted in public protest. Consequently, when s. 37 was finally enacted into law, the word "necessarily" came to be drop....
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....e carrying on of the assessee's business or which results in the benefit to the assessee's business has to be regarded as an allowable deduction under section 37(1) of the Act. Such a donation, whether voluntary or at the instance of the authorities concerned, when made to a Chief Minister's Drought Relief Fund or a District Welfare Fund established by the District Collector or any other fund for the benefit of the public and with a view to secure benefit to the assessee's business, cannot be regarded as payment opposed to public policy. It is not as if the payment in the present case had been made as an illegal gratification. There is no law which prohibits the making of such a donation. The mere fact that making of a donation for charitable or public cause or in public interest results in the Government giving patronage or benefit can be no ground to deny the assessee a deduction of that amount under section 37(1) of the Act when such payment had been made for the purpose of assessee's business. 8. In the case of CIT v. Madras Refineries Ltd. [2004] 266 ITR 170 1, Hon'ble Madras High Court has upheld deductibility of the amount spent by the assess....
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....gulatory agencies and society at large, thereby creating an atmosphere in which the business can succeed in a greater measure with the aid of such goodwill." 18. We have also take note of the fact that in view of insertion of Explanation 2 to Section 37(1), with effect from 1st April 2015, which provides that "for the removal of doubts, it is hereby declared that for the purposes of sub-section (1), any expenditure incurred by an assessee on the activities relating to corporate social responsibility referred to in section 135 of the Companies Act, 2013 (18 of 2013) shall not be deemed to be an expenditure incurred by the assessee for the purposes of the business or profession", the expenses incurred in discharging corporate social responsibility are not deductible in computation of business income. Learned Departmental Representative submits that this amendment should be treated as clarificatory in nature, as it is stated to be in so many words, and we should, therefore, hold that the expenses in discharging corporate social responsibility were outside the ambit of expenses deductible under section 37(1). 19. We are unable to see legally sustainable merits in this....
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....urposive interpretation giving it a retrospective effect but when a tax legislation imposes a liability or a burden, the effect of such a legislative provision can only be prospective. We have also noted that the amendment in the scheme of Section 37(1) is not specifically stated to be retrospective and the said Explanation is inserted only with effect from 1st April 2015. In this view of the matter also, there is no reason to hold this provision to be retrospective in application. As a matter of fact, the amendment in law, which was accompanied by the statutory requirement with regard to discharging the corporate social responsibility, is a disabling provision which puts an additional tax burden on the assessee in the sense that the expenses that the assessee is required to incur under a statutory obligation in the course of his business are not allowed deduction in the computation of income. This disallowance is restricted to the expenses incurred by the assessee under a statutory obligation under section 135 of Companies Act 2013, and there is thus now a line of demarcation between the expenses incurred by the assessee on discharging corporate social responsibility under such a ....
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.... investment allowance of Rs 406,63,37,137 under section 32AC of the Act, which was computed @ 15% on the additions to the assets, i.e. Rs 1862,08,83,681. While the Assessing Officer accepted the claim with respect to additions to the assets to the extent of Rs 848,80,14,416 as these assets were acquired during the relevant previous year and installed during the same previous year, the Assessing Officer declined the investment allowance with respect to the remaining assets of Rs 1862,08,83,681 on the ground that these assets were acquired prior to 1st April 2013 but installed in the relevant previous year. The stand of the Assessing Officer that investment allowance under section 32AC will be available only when the assets are acquired in the same period, and that the assets acquired prior to 1st April 2013 will not be eligible for the benefit of Section 32 AC. The Assessing Officer noted that Section 32AC was introduced in the Finance Act 2013, with effect from 1st April 2014, for encouraging substantial investment in plant and machinery and provided for incentive for "acquisition and installation of new plant and machinery by manufacturing companies"- as was evident from the Expla....
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....d Machinery" Out of the total claim of the assessee company, investment allowance of Rs. 78,36,07,218/- was claimed @ 15% on assets acquired and installed during FY 2013-14 amounting to Rs. 522,40,48,126 and balance deduction of Rs. 328,2729,919/- was claimed @ 15% on assets amounting to Rs. 2188,48,66,122 acquired prior to 01st April, 2013 but installed in FY 2013-14, which has been disallowed by the AO. Thus the crux of issue in appeal is, whether investment allowance is available on asset acquired prior to 1st April, 2013 but installed in FY 2013-14. Although for the year under appeal, the provisions of sub-section 1 of section 32AC are applicable (which provide investment allowance 15% to a manufacturing company who has acquired and installed after 31 March 2013 and before 1st April 2015, new plant and machinery of Rs. 100 cr or more), the appellant has relied on the subsequent provisions and amendments which place importance on the condition of installation' for granting of investment allowance. In this connection, the appellant has submitted that Investment Allowance u/s 32AC is available on installation of new asset for which re....
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....dingly, the appellant vide letter dated 16.10.2018 has submitted a copy of the CA certificate dated 12.10.2018 and specimen copies of invoices, on perusal of which it can be observed that assets acquired and installed during FY 2013-14 amounts to Rs. 868,43,26,433 (instead of Rs. 522,40,48,126 earlier submitted during the course of assessment proceedings) and asset acquired prior to 01st April, 2013 but installed in FY 2013-14 amounts to Rs. 1842,45,71,66 (instead of Rs. 2183,48,6,122 earlier submitted during the course of assessment proceedings). The total assets on which investment allowance has been claimed remains unchanged to Rs. 2710,88,98,098. Accordingly, the appellant has submitted that, without prejudice to its ground of appeal that the disallowance of investment allowance u/s 32AC ought to be deleted, the disallowance even if upheld should be restricted to the revised figure of Rs. 276,36,85,749 (being 15% of Rs. 1842,45,71,664) which has been now submitted by the appellant in course of appellant proceedings. Thus the claim on investment allowance on assets acquired and installed during FY 2013-14 has increased from Rs. (3....
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.... course of appellant proceedings. Thus the claim on investment allowance on assets acquired and installed during FY 2013-14 has increased from Rs. 78,36,07,218/- to Rs. 130,26,48,964 (being 15% of Rs. 868,43,26,433). I have gone through the submission. Hence I direct the AO to allow deduction us 32AC on assets acquired and installed during FY -2013-14 after due verification based on the revised figure as certified in the CA certificate dated 12.10.2018. Hence the ground of appeal is dismissed but the AO is directed to verify the revised figure. 109. The assessee is not satisfied and is in further appeal before us. 110. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. 111. We have noted that, as pointed out by the learned counsel, the words used in Section 32(1)(iia) are materially similar inasmuch as it refers to "new machinery or plant...... which has been acquired and installed after the 31st day of March, 2005" and yet, in the case of PCIT Vs IDMC Ltd [(2017) 393 ITR 441 (Guj)], Hon'ble Gujarat High Court has observed that "The purpose and obje....
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....trary decision by Hon'ble jurisdictional High Court, the said judicial precedent continues to be binding on the lower judicial forums particularly when no other specific reasons, except as discussed above- which has been rejected on merits, for not following the Hon'ble Gujarat High Court judgment in the case of IDMC (supra) have been pointed out to us. As regards the reasons explaining and justifyingbonafides of the delay in installation of plant and machinery, as submitted to us during the hearing, given our findings as above, it is not really necessary to adjudicate on the correctness of the claim of the assessee at this stage. We may also add that the learned counsel for the assessee has also cited several other decisions in support of the same proposition, but, having taken note of a binding judicial precedent from a higher judicial forum, there is no need to specifically deal with the same. 112. Respectfully following theviews of the Hon'ble Gujarat High Court, we uphold the plea of the assessee and direct the Assessing Officer to delete the impugned disallowance of investment allowance under section 32AC. 113. Ground no. 5 is thus allowed. 114. In ground no. 6, whic....
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....th, provided that where the gross total income of the assessee includes any profits and gains derived from an industrial undertaking, or the business of the hotel to which this section applies, there shall in accordance with an subject to the provisions of this section be allowed in computing the total income of the assessee deduction from such profits and gains of an amount equal to 20% thereof. 126. The provision of section 10 AA provides that in computing the total income of an assessee following deduction shall be allowed - ..... Percent of profits and gains derived from exports. 127. From the above it is amply clear that the language of section 80 HH and 10 AA are parimateria in as much as both the section provides that in computing the total income of the assessee deduction shall be allowed at certain percentage of profit and gains derived 128. Now it was the meaning of above referred "profit and gains" derived that honourable Supreme Court expounded that the same refers to profits which are commercial profit and without deducting the depreciation and investment allowance as per the income tax act. 129. Thus the contention of the l....
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....as introduced by Finance Act 1980 with effect from 1.4.1981. 133. A bare reading of the above makes it clear that the explanation below section 10 AA and provision of section 80 AB are parimateria. Honourable Supreme Court in the case of Vijaya industries (supra) has expounded that provision of section 80 AB are prospective. In our considered opinion the ratio from the above honourable Supreme Court decision also applies here and accordingly the explanation below 10 AA has to be construed to be prospective. Hence the same cannot be invoked in determining the amount of deduction in the present assessment year. The learned departmental representative submission that the same is clarificatory accordingly fails. 134. Furthermore learned departmental representative submission that the decision of Vijaya industries was rendered without considering other decisions in this regard is not at all sustainable. This decision of honourable Supreme Court in the case of Vijaya Industries (supra) is a recent decision rendered by the larger bench of 3 of their Lordships from the honourable court. By no stretch of imagination it can be said that the subject dealt with by the elabora....
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....d departmental representative himself contradicts by submitting that though post-amendment such an exemption is available in form of deduction from profit and gains derived from the undertaking. The reading of section 10AA clearly shows that the section itself provides that the same is a deduction provision. Honourable Supreme Court in the case of CIT versus Yokogawa India Ltd civil appeal No. 8498 of 2013 another's had the occasion to consider this aspect. The honourable Supreme Court settled the issue by holding that the amendment in section 10A has altered the nature of the provision from providing exemption to providing for deductions. The deductions under section 10A are prior to the commencement of the exercise to be undertaking under chapter VI of the Act i.e aggregation of income and set off of loss. The above exposition is applicable on all fours here. Hence the submission of learned departmental representative year also doesn't succeed. The last claim of The learned departmental representatives submission is that decision of honourable Supreme Court in the case of Commissioner of Customs (Import) versus Dilip Kumar and company and others Civil Appeal No. 3327 of....
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.... taxable profits by manipulating the prices of its Specified Domestic transactions, either at the stage of invoking or initiating the assessment or at the stage of framing the assessment; 7.4. On the facts and in the circumstances of the case and in law, the learned CIT (A) erred in confirming the action of the learned AO in not demonstrating that the course of business between the Appellant and the closely connected person was so arranged that it produces to the Appellant more than ordinary profits which might be expected to arise in its eligible business. 119. Learned counsel for the assessee does not press these grievances and the ground of appeal is thus dismissed as not pressed. 120. Ground no.7 is thus dismissed. 121. In the ground no. 8, the assessee has raised the following grievances: 8. Inter-unit transfer of Power: 8.1. On the facts and in the circumstances of the case and in law, the learned AO erred in making and the learned CIT (A) erred in confirming the transfer pricing adjustment of INR 147,12,37,934 in relation to the transaction of inter-unit transfer of Power from the Captive Power Plant ('CPP') to Other Manufacturing ....
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....power to the manufacturing divisions of the assessee company, the assessee applied Internal CUP (comparable uncontrolled price) method for the benchmarking. This benchmarking, however, was rejected by the Transfer Pricing Officer. The TPO was of the view that DGVCL was not a manufacturer of the electricity and it was only supplying the electricity purchased from others, and, therefore, its price is bound to be higher. He then proceeded to obtain information from Gujarat State Electricity Corporation Ltd and analyze the data with respect to the plant load factor (PLF) and the financial costs of its various manufacturing units. He then applied these details, with suitable PLF adjustment, which worked out to Rs 4.50, Rs 4.52, Rs 5.41 and Rs 4.99 per KWH for electricity supplied by CPP GTG VII Hazira, CPP GTG IX Hazira, STGII Hazira and CPP II Gandhar respectively. These prices were used as external CUP inputs, and based thereon an ALP adjustment of Rs 147,12,37,934 was made. Aggrieved, assessee carried the matter in appeal before the learned CIT (A) but without any success. In a very brief operative portion of her order, learned CIT (A) observed as follows: I have carefully p....
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....rd learned Counsel of the assessee also referred to ITAT decision and Hon'ble Gujarat High Court decision. It is further contention that honourable Supreme Court has also rejected the special leave decision filed by the Commissioner of income tax, Ahmedabad and the principle down by the honourable High Court has attained finality in favour of the assessee. 171. With regard to ground No. 10.4 it is the contention of the learned counsel of the assessee that he will not press this ground if ground No. 10.3 is decided in favour of the assessee. 172. In this ground the assessee contends that assessee's CPP is supplying power to the manufacturing unit that is the customer and learned Transfer Pricing officer has applied rate at which power generating unit is selling to power distribution which will then sell to the end consumer. Hence the level of market is different. 173. It is further contended that rate which electricity is supplied by GEB to the end consumer is to be considered as the market rate at which the captive power plant can sell power to other unit. 174. Upon careful consideration we find that for the purpose of 80IA(8), the ....
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....panies are allowed to supply electricity to the consumers. The revenue on the other hand argues that the appropriate rate should be the rate at which the electricity is purchased by the distribution companies from the electricity generating companies. 5. This controversy arose in the background of the fact that the assessee had set up a captive power generating unit and claimed deduction under Section 80IA of the Income Tax Act, 1961 ("the Act" for short) in respect of the profits arising out of such activity. Obviously, therefore the attempt on the part of the assessee was to claim larger profit under the unit which was eligible for such deduction as against this, attempt of the revenue would be see that the ineligible unit shows greater profit. 6. The Tribunal in the impugned judgment extracted extensively from the order of CIT (Appeals) and independent reasons for confirming the same. In such order CIT (Appeals) had placed reliance on an earlier judgment of the Tribunal in case of Reliance Infrastructure Limited Vs. Addl. CIT, Range 1(1), Learned counsel for the assessee had placed on record a copy of the judgment of the Tribunal in case of Reliance Infrastruct....
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....similar circumstances was approved. 9. Additionally, we also notice that similar issue came up for consideration before Chhattisgarh High Court in case of Commissioner of Income-tax, Raipur Vs. Godawari Power &Ispat Limited1, in which the Court held and observed as under: "31. The market value of the power supplied to the Steel-Division should be computed considering the rate of power to a consumer in the open market and it should not be compared with the rate of power when it is sold to a supplier as this is not the rate for which a consumer or the Steel-Division could have purchased power in the open market. The rate of power to a supplier is not the market rate to a consumer in the open market. 32. In our opinion, the AO committed an illegality in computing the market value by taking into account the rate charged to a supplier. it should have been compared with the market 10. Gujarat High Court in case of Principal Commissioner of Income-Tax Vs. Gujarat Alkalies and Chemicals Ltd. also had occasion to examine such an issue. It referred to earlier order in case of Asst. CIT Vs. Pragati Glass Works Pvt. Ltd.2 in which following observations were....
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....Tribunal. No question of law therefore, arises. Tax Appeal is dismissed." 11. Judgment of Calcutta High Court in case of Commissioner of Income- tax, Kolkata - III Vs. ITC Ltd. was also brought to our notice in which the said High Court has taken a different stand. However, since the issue has already been examined by this Court earlier and in view of the decisions of the Chhattisgarh and Gujarat High Court, we see no reason to entertain this question." 176. Here we note that the assessing officer while expounding that rate duly approved under 80 IA(8) is to be changed for Transfer Pricing purposes has placed reliance upon honourable Calcutta High Court decision in the case of ITC Ltd. We find that the view of TPO and learned CIT(appeals) also by relying upon Calcutta High Court decision in ITC Ltd that market value basis duly approved by the honourable Bombay High Court shall change for the purpose of domestic transfer pricing regimen here is not at all sustainable. The reliance by learned CIT(appeals) on honourable Calcutta High Court decision in the case of ITC Limited supra has been distinguished by the honourable jurisdictional High Court. The honourable juri....
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....radation Fund (TUF) Scheme, being a capital receipt not liable to tax, while computing income under the normal provisions of the Act. The learned CIT (A) Mumbai, erred in not excluding the interest subsidy of Rs. 1,45,90,856 accrued under the TUF scheme, from the Book profit computed u/s 115 JB of the Act being capital receipt and not income liable to tax. 132. Learned representatives fairly agree that as the related facts have not come up for examination before any of the authorities below, even upon admission of these grounds of appeal, these issues are only required to be remitted to the file of the Assessing Officer for fresh adjudication in accordance with the law, by way of a speaking order and after giving an opportunity of hearing to the assessee. We order accordingly. 133. Additional grounds of appeal nos. 2 and 3 are thus allowed for statistical purposes. 134. In the result, the appeal of the assessee for the assessment year 2014-15 is partly allowed in the terms indicated above. 135. We will now take up the ITA No. 3945/Mum/2019, i.e. the appeal filed by the Assessing Officer against the learned CIT(A)'s order dated 27th March 2019 in the m....
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....and in law, the Ld. CIT (A) erred in restricting the disallowance u/s 14A of the Act r. w. Rule 8D(2)(iii) to 0.5% by taking average value of that investment which have yielded dividend during the year under consideration? (b) Whether, on the facts and circumstances of the case and in law, the Ld. CIT (A) erred in restricting the disallowance under section 14A of the Act to the amount disallowed by the assessee for the purpose of income under section 115JB of the Act. 143. This issue is required to be taken up along withthe ground of appeal no. 8 (additional ground of appeal raised by the assessee) as under: The learned CIT (A) Mumbai erred in directing the AO to compute the disallowance under section 14A of the Act, by invoking the provisions of Rule 8D of the income tax Rules, while computing income under normal provisions of the Act without recording any satisfaction for rejection of the disallowance computed by the appellant under section 14A of the Act. 144. Learned representatives fairly agree that whatever we decide in the ground no. 3 and 4 in the Assessing Officer's appeal for the assessment year 2013-14 and the assessee's additional ground of appea....
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....3. Learned counsel for the Revenue, however, submitted that the decision of this Court in the case of Echajay Forgings (P.) Ltd. (supra) proceeded on the concession made by the Revenue's counsel and the Tribunal, therefore, committed an error in treating it as ratio of the High Court decision. On the other hand, the learned counsel for the assessee submitted that even otherwise, the statutory provision being clear, there is no scope for interpretation. 4. Section 115JB of the Act pertains to special provision for payment of tax by certain companies. As is well known, detailed provisions have been made to compute the book profit of the assessee for the purpose of the said provision. Explanation 1 contains list of amounts to be added while computing assessee's book profit under Section 115JB of the Act. Clause (a) thereof reads as under:- "(a) the amount of income-tax paid or payable, and the provision therefor," Likewise, clause (c) reads as under:- "(c) the amount or amounts set aside to provisions made for meeting liabilities, other than ascertained liabilities," In plain terms, clause (a) as noted above refers to amount of income ....
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....ed CIT (A) on this point and decline to interfere in the matter. 152. Ground no. 4 (a) is thus dismissed. 153. In ground no. 4 (b), the Assessing Officer has raised the following grievance: "Whether, on the facts and in the circumstances of the case and in law, the Id CIT (A) erred in allowing deduction u/s 80IB(9)(ii) of the Act at Rs 604,61,83,730/- instead of Rs. NIL as held by the Assessing Officer?" 154. So far as this grievance of the Assessing Officer is concerned, it is sufficient to take note of the fact that the deduction under section 80IB(9), amounting to Rs 604,61,83,730 was declined for the short reason that this deduction is allowable for mineral oil, which, according to the Assessing Officer, includes crude oil but not natural gas and condensate. The correctness of this approach, which has been reversed by the CIT (A) aggrieved by which the assessee is in appeal before us, has come up for our consideration earlier in this order while dealing with the assessment year. Learned representatives, therefore, fairly agree that whatever we decide in ground no. 7 in the Assessing Officer's appeal for the assessment year 2013-14 will also apply mutatis ....
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....ent in that specific period is ultra virus. 16.5.6 In view of above, deduction under section 32AC is allowed only on the Plant & machinery acquired and installed during FY 13-14 & F.Y 14-1, and the assessee's claim of deduction on Plant & machinery acquired prior to 01.04.2013 but installed during FY 13-14 is disallowed. Accordingly, the claim of the assessee of Rs. 312,93,30,000/- on the plant & machinery of Rs. 2086,22,00,000/- acquired before 1st April 2013 is hereby disallowed. 158. When the matter travelled in appeal before the CIT(A), learned CIT (A) reversed the disallowance so made by the Assessing Officer on the ground that a specific provision to enable the said claim was inserted by virtue of Section 32AC(1A). While doing so, learned CIT (A) observed as follows: The crux of issue in appeal i.e. whether investment allowance is available on asset acquired prior to 0lst April, 2013 but installed in FY 2013-14. In this connection, I agree with the contention raised by the appellant that Investment Allowance u/s 32AC is available on installation of new asset for which reliance was placed by the appellant on the provisions of sub-Sec....
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....deduction of a sum equal fifteen per cent of the actual cost of such new assets for the assessment year relevant to that previous year" As can be seen, the amendment (highlighted in bold) in sub-section 1A to Section 32AC clearly provides for investment allowance on assets acquired during any previous year but installed on or before 31.03.2017. Thus the emphasis was to give investment allowance only if the same are installed on or before 31/03/2017. This is further corroborated if one refers to the 1st proviso to sub-section 1A of Section 32AC of the Act. The said proviso was also amended to clarify that investment allowance will be available on installation of assets, where installation and acquisition is in two different years. The amended proviso is also reproduced below for your ready reference: "Provided that where the installation of the new assets are in a year other than the year of acquisition, the deduction under this sub-section shall be allowed in the year in which the new assets are installed" Thus here also the emphasis is on the installation of assets and not on acquisition. Thus the intention of Section 32AC all along was to provi....
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....ions taking into consideration the revised interest expenditure as submitted by the assessee?" 7 "Whether, on the facts and in the circumstances of the case and in law, the ld. CIT (A) erred in allowing appeal of the assessee and directing the assessing officer to recompute the profit and deductions u/s 10AA in respect of Polypropylene (PP) SEZ taking into consideration the revised interest expenditure as submitted by the assessee ?" 8 "Whether, on the facts and in the circumstances of the case and in law, the Id CIT (A) erred in allowing appeal of the assessee and directing the assessing officer to recompute the profit and deductions taking into consideration the revised interest expenditure as submitted by the assessee ?" 163. So far as these grievances are concerned, the relevant material facts are as follows. These grievances pertain to the revision of deductions claimed under sections 80IB and 10AA for Refinery SEZ Unit and PP SEZ Unit. The revision was on account of a revision, on account of some factual corrections, in interest expenditure to be considered for computing these deductions. The assessee made these revisions, by way of filing a letter, and r....
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....e there is a specific reference to the powers of the Tribunal, as was the issue before Their Lordships, these observations hold equally good in respect of the powers of the Commissioner (Appeals). It is also important to bear in mind the fact that it was not even a fresh claim, it was simply a request for correction in the claim which was already made. Keeping in view of these discussions, as also bearing in mind the entirety of the case, we approve conclusions arrived at by the learned CIT(A), and decline to interfere in the matter on this count as well. 165. Grounds nos. 6,7 and 8 are thus dismissed. 166. In ground no. 9, the Assessing Officer has raised the following grievance: Whether, on the facts and in the circumstances of the case and in law, the ld CIT (A) right in allowing appeal of the assessee and directing the assessing officer to exclude the amount of Notional sales tax incentive while computing Book Profit u/s 115JB of the Act? 167. Learned representatives agree, even as learned Departmental Representative relies upon the stand of the Assessing Officer, that whatever we decide in ground no. 11 in the Assessing Officer's appeal for the assessment yea....
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.... assessee?" (c) "Whether on the facts and circumstances of the case and in law, Ld. CIT (A) is correct in not considering the cost of borrowing for the assessee adopted by TPO to benchmark interest chargeable on receivables when the sale price is determined to recover the cost of business, which is inclusive of cost of borrowing?" (d) "Whether on the facts and circumstances of the case and in law, Ld.CIT (A) is correct in ignoring the basic tenet of the transfer pricing as enshrined in section 92F(ii), as in a third party unrelated uncontrolled circumstances the assessee would have recovered the interest on receivables considering the cost of borrowing in its hands?" 167. Learned representatives agree, even as learned Departmental Representative relies upon the stand of the Assessing Officer, that whatever we decide in the ground no. 13 in the Assessing Officer's appeal for the assessment year 2014-15 will apply mutatis mutandis on this ground of appeal as well. Vide our detailed decision earlier in this order, and for the detailed reasons we have set out in paragraphs 60-64 we have rejected this grievance of the assessee. The observations made therein will be ....
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....d not compulsorily convertible preference shares as claimed by the assesses? "Whether on the facts and circumstances of the case and in law, the Ld. CIT (A) is correct in ignoring the vital fact that though the said investment is stated to be compulsorily convertible preference shares, the assessee said to have redeemed 2,90,720 said preference shares in another AE-RIME in the FY 2012-13 at par with same value of AED 290,72,00,000 (INR 430.70 crores) at which it was invested, without any arm's length return from the AE, proving the claim of "compulsorily convertible "as dubious, which shows the investment in the AE is essentially interest free loan in nature? "Whether on the facts and circumstances of the case and in law, the Ld. CIT (A) is correct in ignoring another vital fact that though the assessee is eligible for compulsory 5% coupon rate on the said investment and though the AE RGBV had positive incomes of 33,31,606 Euro for FY 2009-10, 1,09,313 Euro for FY 2010-11, 18,923 Euro for FY 2011-12 and 22,332 Euro for FY2012-13, the assessee has not accounted any such return on accrual basis leading to base erosion to India, casting severe doubts on the natur....
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....gnoring the fact that the assessee has not furnished any detailed valuation report for the value of the preference shares said to be invested as above in RGBV preference shares and also for the value of AED 1000 per preference share in the AE RIME which again casts cloud on the nature of the Investment? "Whether on the facts and circumstances of the case and in law, the CIT (A) is correct in ignoring the facts that the AE RIME has been making losses continuously from calendar year 2010 to 2015 and as such the share value under NA Vis negative and even if it is to be valued under DCF method based on RBI's Circular for outbound shares, the actual cash flows during these years are negative and so its value would be negative only? "Whether on the facts and circumstances of the case and in law, the CIT (A) is correct in ignoring the facts that the AE RGBV has been making very meager profit during the FYs 2010-11 to 2012-13 and loss during the FY 2013-14 and has been under liquidation process from AY 2014-15 and if its outbound shares are valued under DCF, it would also be negative only? "Whether on the facts and circumstances of the case and in law, the CI....
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....tuation in uncontrolled circumstances as in Section 92F(ii)? "Whether on the facts and circumstances of the case and in law, the Ld. CIT (A) is correct in ignoring the very essence of transfer pricing as to whether unrelated enterprises under uncontrolled conditions would enter into such transactions within the meaning of section 92F(ii)? "Whether on the facts and circumstances of the case and in law, the Ld. CIT (A) is correct in not perceiving the intention of the assessee in providing loans in the garb of preference shares thereby avoiding tax liability on the interest? "Whether on the facts and circumstances of the case and in law, the Ld. CIT (A) is correct in ignoring the economic substance of the transaction which is essentially loan though its external form is stated to be investment in preference shares, as the basic tenet of transfer pricing is that the transaction is to be seen in uncontrolled circumstances in thiro party situation as per Section 92F(ii)? "Whether on the facts and circumstances of the case and in law, the Ld. CIT (A) is correct in ignoring the fact that the assessee has entered into an "arrangement, understanding or ac....
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....cts and circumstances of the case and in law, the CIT (A) is correct in not realizing the fact that if such practices are allowed under transfer pricing unchecked without setting it right for arm's length return, it would lead to base erosion to this country as huge funds as in this case could besiphoned out of this country in the garb of alleged preference shares in AE, even though the actual character is essentially loan which should be earning interest, which again would be yielding tax revenue to this country? Whether on the facts and circumstances of the case and in law, the Ld. CIT (A) is correct in ignoring the decision of Hon'ble Delhi High court in the case of CIT v/s EKL Appliances Ltd, (345ITR 241) wherein it has been held that recharacterisation of transaction is permissible in exceptional circumstances as that of assessee as under? Two exceptions have been allowed to the aforesaid principle and they are - (i) where the economic substance of a transaction differs from its form; and (ii) where the form and substance of the transaction are the same but arrangements made in relation to the transaction, viewed in their totality, differ fro....
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....port service in the field of petroleum products? Whether on the facts and circumstances of the case and in law, the Ld. CIT (A) is correct in including M/s Allsec Technologies Ltd, as the comparable without appreciating that it is functionally dissimilar as it is engaged into ITES service whereas benchmarking is done for MCS and BSS? Whether On the facts and circumstances of the case and in law, the Ld. CIT (A) is right in excluding the comparable M/s Axis Integrated Systems Ltd. without appreciating that it is functionally similar as both the assessee and the comparable are engaged in providing high end management and business support services? 172. Learned representatives agree, even as learned Departmental Representative relies upon the stand of the Assessing Officer, that whatever we decide in ground no. 15 in the Assessing Officer's appeal for the assessment year 2014-15 will apply mutatis mutandis on this ground of appeal as well. Vide our detailed decision earlier in this order, and for the detailed reasons we have set out in paragraphs 71-74 we have rejected this grievance of the assessee. Accordingly, the inclusion of Allsec Technologies Ltd is to be i....
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....g the basic tenet of the transfer pricing u/s 92F(H) that no unrelated assessee in uncontrolled circumstances in third party situation would have rendered services on cost-to-cost basis, leading to base erosion in India?" 175. Learned representatives agree, even as learned Departmental Representative relies upon the stand of the Assessing Officer, that whatever we decide in the ground no. 16in the Assessing Officer's appeal for the assessment year 2014-15 will apply mutatis mutandis on this ground of appeal as well. Vide our detailed decision earlier in this order, and for the detailed reasons we have set out in paragraphs 75-79 we have rejected this grievance of the assessee. The observations made therein will be equally applicable here as well. Respectfully following the said decision, we approve the conclusions arrived at by the learned CIT (A) and decline to interfere in the matter. 176. Ground no. 14is thus dismissed. 177. In ground no. 15, which again has several parts in the nature of arguments, the Assessing Officer has raised the following grievances: "Whether on the facts and circumstances of the case and in law, the Ld.CIT (A) is correct in directing to....
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....d. CIT (A) is correct in observing the 60:40 split of interest differential carried out by TPO is adhoc and without any basis, without properly going through the scientific FAR analysis carried out by the TPO?" "Whether on the facts and circumstances of the case and in law, the Ld. CIT (A) is correct in passing a non-speaking order in as much as she observed as 'The FAR analysis done by the TPO is not appropriate" without adducing reasons as to why it is not appropriate?" "Whether on the facts and circumstances of the case and in law, after having observed that the FAR analysis done by the TPO is not appropriate and powers being coterminous, the CIT (A) is correct in not carrying out appropriate FAR analysis on her own, or getting it done by the TPO by remanding the case u/s 250(4) r.w.r. 46A and deciding the issue taking into account such remand report?" "Whether on the facts and circumstances of the case and in law, the Ld. CIT (A) is correct in passing a non-speaking order in as much as she held the split of 50:50 of interest differentia is correct without adducing any reasons as 'to how the equal split between the assessee and the AEs would be....
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....Hon'ble Tribunal in assessee's own case for A Y2012-13 set aside the order of the CIT (A) on this issue with a specific direction to the TPO to verify the correctness o the method claimed by the assessee in its original order in I.T (TP)A, No. 5842/Mum/2017 dated 28.09.2018 and also in the M.A order in M.A.No.736/Mum/2018 dated 2.1.2019?" 178. Learned representatives agree, even as learned Departmental Representative relies upon the stand of the Assessing Officer, that whatever we decide in ground no. 17in the Assessing Officer's appeal for the assessment year 2014-15 will apply mutatis mutandis on this ground of appeal as well. Vide our detailed decision earlier in this order, and for the detailed reasons we have set out in paragraphs 80-83 we have rejected this grievance of the assessee. The observations made therein will be equally applicable here as well. Respectfully following the said decision, we approve the conclusions arrived at by the learned CIT (A) and decline to interfere in the matter. 179. Ground no. 15is thus dismissed. 180. In ground no. 16, with several arguments having been made part of the ground of appeal itself, the Assessing Officer has ....
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....tatis mutandis on this ground of appeal as well. Vide our detailed decision earlier in this order, and for the detailed reasons we have set out in paragraphs 84-87 we have rejected this grievance of the assessee. The observations made therein will be equally applicable here as well. Respectfully following the said decision, we approve the conclusions arrived at by the learned CIT (A) and decline to interfere in the matter. 182. Ground no. 16 is thus dismissed. 183. In the result, the appeal of the Assessing Officer for the assessment year 2015-16 is dismissed. 184. We now take up the ITA No. 2876/Mum/2019, i.e. the appeal filed by the assessee against the order dated 27^th March 2019passed by the learned CIT (A) in the matter of assessment under section 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961, for the assessment year 2015-16. 185. In the first ground of appeal, the assessee has raised the following grievance: The Learned CIT (A) erred in directing the AO to compute the disallowance under clause (f) of Exp 1 to section 115JB(2) i.e., expenditure relating to exempt income, when no such disallowance ought to have been made while computing book prof....
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....iation and investment allowance, as admittedly these are not the expenses actually incurred by the assessee. However, the term 'income' does take into consideration the deductions on account of depreciation and investment allowance. Therefore, the term profits and gains are not synonymous with the term 'income' ..... 19) Reading of Section 80HH along with Section 80A would clearly signify that such a deduction has to be of gross profits and gains, i.e., before computing the income as specified in Sections 30 to 43D of the Act." Without prejudice to the above, the appellant prays that while computing the commercial profit of the SEZ unit eligible for deduction 10AA of the Act (to the extent of export), depreciation charged in the books as per the Companies Act 1956 ought to have been reduced, instead of the depreciation allowed u/s. 32 of the Income Tax Act 1961. 192. Learned Representatives fairly agree that whatever we decide on ground no. 6 in the assessee's appeal for the assessment year 2014-15, which has been heard along with this appeal, will hold good for this assessment year as well. In our decision on the said ground, earlier in paragraphs 114-1....
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....rred in confirming the action of the learned AO in not demonstrating that the course of business between the Appellant and the closely connected person was so arranged that it produces to the Appellant more than ordinary profits which might be expected to arise in its eligible business 195. Learned counsel submits that he does not wish to press this ground of appeal. Learned Departmental Representative has no objection to this prayer. 196. Ground no. 4 is thus dismissed as not pressed. 197. In ground no. 5, the assessee has raised the following grievance: 5. Management Consultancy Services and Business Support Services rendered to AEs: 5.1 The learned CIT (A) erred in rejecting the Appellant's comparable Tech process Solutions Limited, on the ground of functional dissimilarity. 5 2. The learned CIT{A) erred in accepting the TPO's cherry picked comparable BNR Udyog Ltd, without providing any cogent reasons. 198. While dealing with a connected grievance earlier in this order in ground no. 14 of the appeal of the Assessing Officer, we have already held that, following the decision in the immediately preceding assessment year, Allsec Techn....
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....n under section 80IA. These four eligible units have supplied electricity to Hazira Manufacturing Division (HMD) and Dahej Manufacturing Division (DMD) of the assessee company. The rate at which the electricity is so supplied is Rs 6.70 per KWH, and it is exactly the same at which an external supplier of power (i.e. Dakshin Gujarat Vij Company Limited- DGVCL in short) is supplying the power to the manufacturing units of the assessee company. It is on this basis that the assessee claimed the electricity sale transaction between its CPPs and manufacturing units to be at arm's length. Based on the price at which external vendor, namely DGVCL, is supplying power to the manufacturing divisions of the assessee company, the assessee applied Internal CUP (comparable uncontrolled price) method for the benchmarking. This benchmarking, however, was rejected by the Transfer Pricing Officer. The TPO was of the view that DGVCL was not a manufacturer of the electricity and it was only supplying the electricity purchased from others, and, therefore, its price is bound to be higher. He then proceeded to obtain information from Gujarat State Electricity Corporation Ltd and analyze the data with resp....
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....urt has rejected the appeal of the revenue for assessment year 2006-07 and has discussed non applicability of judgement of Hon'ble Calcutta High Court in the case of CIT vs. ITC Ltd. 170. Learned counsel of the assessee further pleads that he is relying upon the decision of honourable Supreme Court in the case of Radha Soami Satsang vs. CIT (1992) 193 ITR 321 (SC), for the proposition that on the ground of consistency also DG VCL rate should be accepted. It is further contended that market value of electricity supplied by the CPP unit to the other unit would be the same as charged by the Gujarat Electricity Board to the end consumers. In this regard learned Counsel of the assessee also referred to ITAT decision and Hon'ble Gujarat High Court decision. It is further contention that honourable Supreme Court has also rejected the special leave decision filed by the Commissioner of income tax, Ahmedabad and the principle down by the honourable High Court has attained finality in favour of the assessee. 171. With regard to ground No. 10.4 it is the contention of the learned counsel of the assessee that he will not press this ground if ground No. 10.3 is d....
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....fied domestic transaction referred to in section 92BA. 175. The rate charged by the assessee has been duly accepted by the Tribunal and upheld by the Hon'ble Jurisdictional High Court in the case of CIT vs. M/s. Reliance Industries Ltd. (in ITA No. 1056 of 2016 dated 30.01.2019), which reads as under: 4. Question (c) pertains to the dispute between the department and the assessee regarding the rate at which the electricity generated by one unit of the assessee-company and provided to the another be valued. The assessee contended that such valuation should be at the rate at which the electricity distribution companies are allowed to supply electricity to the consumers. The revenue on the other hand argues that the appropriate rate should be the rate at which the electricity is purchased by the distribution companies from the electricity generating companies. 5. This controversy arose in the background of the fact that the assessee had set up a captive power generating unit and claimed deduction under Section 80IA of the Income Tax Act, 1961 ("the Act" for short) in respect of the profits arising out of such activity. Obviously, therefore the attempt o....
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....ct market rate. The finding is that the mode of computation and deduction under Section 80IA requires no deviation from the past. The findings of fact and to be found in paragraphs 42 to 50 also reflect that the very issue came up for consideration for the Assessment Year 2003-2004. For the reasons assigned by the ITAT and finding that the attempt is to seek reappreciation and reappraisal of the factual data that we come to a conclusion that even question (d) as framed is not a substantial question of law." 8. Thus, the issue at hand had been examined by this Court on earlier occasion and the view of the Tribunal under similar circumstances was approved. 9. Additionally, we also notice that similar issue came up for consideration before Chhattisgarh High Court in case of Commissioner of Income-tax, Raipur Vs. Godawari Power &Ispat Limited1, in which the Court held and observed as under: "31. The market value of the power supplied to the Steel-Division should be computed considering the rate of power to a consumer in the open market and it should not be compared with the rate of power when it is sold to a supplier as this is not the rate for which a ....
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....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. 11. Judgment of Calcutta High Court in case of Commissioner of Income- tax, Kolkata - III Vs. ITC Ltd. was also brought to our notice in which the said High Court has taken a different stand. However, since the issue has already been examined by this Court earlier and in view of the decisions of the Chhattisgarh and Gujarat High Court, we see no reason to entertain this question." 176. Here we note that the assessing officer while expounding that rate duly approved under 80 IA(8) is to be changed for Transfer Pricing purposes has placed reliance upon honourable Ca....
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....vices Limited without providing any cogent reasons. 208. Learned representatives agree, even as learned Departmental Representative relies upon the stand of the authorities below, thatthis issue is covered by the decision of a coordinate bench in the assessee's own case for the assessment year 2013-14 wherein the coordinate bench, ain paragraph 156 of the order, has remitted the matter regarding plea for inclusion of Cameo Corporate Services Ltd, as a comparable, to the file of the Assessing Officer for having the matter examined by the TPO on the same, and deciding the matter on that basis. It has been so done on the ground that there was no occasion for the TPO to examine the matter since the said comparable was not included in the assessee's transfer pricing analysis. This reason holds good in the present context as well. We, therefore, deem it fit and proper to remit the matter to the Assessing Officer with the direction as above. Ordered, accordingly. 209. Ground no. 7 is thus allowed for statistical purposes. 210. We now take up the additional grounds of appeal filed by the assessee. Having heard the parties on the admissions of these grounds of appeal, and having re....