2022 (10) TMI 827
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....peals) 57, Mumbai (hereinafter referred to as the 'learned CIT(A)'] under section 250(6) of the Income-tax Act, 1961 ('the Act'), the present appeal is being preferred on the following grounds which, it is prayed, may be considered without prejudice to one another. On the facts and in the circumstances of the case and in law, the learned CIT(A) Disallowance u/s 14A 1. 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. 2. erred in directing to make the disallowance u/s 14A being higher of 0.5% of average value of investments which have yielded exempt income during the year or expenses disallowed by the assessee. 3. 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 o....
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....prices of its Specified Domestic Transactions, either at the stage of invoking or initiating the assessment or at the stage of framing the assessment. 10. 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. Interest chargeable on share application money refunded by the Associated Enterprise(AE) Reliance Industries Middle-East DMCC 11. erred in determining the arm's length price (ALP) of interest chargeable in respect of share application money refunded by the AE at INR 50,02,095. 12. erred in re-characterizing the transaction as being in the nature of loan financing on which interest is chargeable without appreciating that the amounts were refunded within 91 days due to business considerations. 13. failed to appreciate that the provision of Chapter X of the Act are not applicable to the transaction of share application money paid for subscription of preference shares being equity in nature. 14. without prejudice to the above, erred in up....
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.... 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 apportioned any expenses as having been incurred for earning this exempt income, I am not satisfied with regard to correctness of the claim of expenditure made by the assessee, and, accordingly, provisions of rule 8D of the Income Tax Rules are being invoked". It cannot, therefore, be said that the Assessing Officer has proceeded to make the disallowance under section 14A r.w.r 8D without recording satisfaction for rejection of the disallowance computed by the assessee"." 6. The learned Authorised Representative ('learned AR') could not show us any reason to deviate from the aforesaid decision rendered in assessee's own case and no change in facts and law was alleged in the relevant assessment year. Thus, respectfully following the judicial precedent in assessee's own case cited supra, we find no infirmity in the impugned order passed by the learned CIT(A) on this issue. As a result, ground No. 1 raised in assessee's appeal is dismissed. 7. As regards ground No. 2, raised in assessee's appeal, we find that similar ....
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....ediately preceding assessment year in assessee‟s own case, a coordinate bench has decided this issue in favour of the assessee, and observed as follows: On this issue the subject matter is whether for the purpose of computation of book profit under section 115 JB disallowance under section 14A have to be taken into account or not. The learned counsel of the assessee this regard has referred to ITAT decision in assessee's own case. We note 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 115J....
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....sessee under section 115JB of the Act. 16. The brief facts pertaining to this issue are: For the year under consideration, assessee in its return has offered interest income on income tax refund of Rs. 266,45,06,765, following the Special Bench decision in Avada Trading Company (P) Ltd vs ACIT (100 ITD 131). The interest income on income tax refund was revised to Rs. 265,38,24,122 due to orders passed subsequently. During the course of assessment proceedings, the assessee was asked to show cause as to why interest on income tax refund ought not to be added to book profit under section 115 JB of the Act. In reply, assessee submitted that there was no certainty with the quantum of interest on income tax refund, as the assessee as well as Department are in appeal on multiple issues before appellate forums, thus no finality has been obtained with respect to assessment. Therefore, interest on income tax refund was not credited to profit and loss account as per the policy consistently followed by the assessee. The assessee further submitted that once the financial statement have been prepared under the Companies Act following the accounting policies and Accounting Standard then the book....
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....income tax refund which has been reduced from advance Income Tax shown under the head 'loans and advances'. While filing the return of income, the said interest has been offered to tax under the normal provisions of the Act. Interest on income tax refund was revised to Rs. 265,38,24,122 due to orders passed subsequently and same was assessed to tax under the normal provisions of the Act. However, since the said interest was not routed through the profit and loss account, the same was not offered to tax under section 115 JB of the Act. As per the assessee since corresponding appeals, relating to the income tax refunds on which interest has been received, are pending at different forums, therefore, there is no finality as to the assessed income of the assessee. Thus, interest on income tax refund is not crystallised and accordingly the same was not credited to the profit and loss account as per the policy consistently followed by the assessee. Further, the said financial statement has been prepared as required under Companies Act. The assessee further submitted that the financial statement of the assessee has been duly scrutinised and audited by the statutory auditors and have also b....
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....has limited power under section 115 JB of the Act to make adjustment to book profit only in respect of the items provided in Explanation 1 to section 115 JB (1) of the Act. As regards the submission of learned DR that the information regarding interest on income tax refund being not included in the profit and loss account has not been disclosed by the assessee in its annual accounts and thus could not be said to be approved in the AGM or filed with the ROC and other statutory authorities, we find that no evidence has brought on record to the effect that because of such non-disclosure the accounts of the assessee were not maintained as per the provisions of Companies Act and other relevant rules and regulations. Further, no such objection by the statutory auditor or ROC or other statutory authority has been brought to our notice. In the present case, there is no dispute on the fact that assessee has offered interest on income tax refund to tax while filing its return of income and same has also been assessed under the normal provisions of the Act. Accordingly, we find no merits in addition of interest on income tax refund for computing the book profit under section 115 JB of the Act....
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....the assessee, excess share application money of Rs. 45,76,26,069 out of the remittance made on 21/03/2016 of Rs. 4,42,25,21,250, was refunded to the assessee in July 2016. It is only in respect of this part share application money, which was returned by the AE without issuance of preference shares, the learned CIT(A) has upheld the levy of interest. Since, the assessee has remitted the share application money to AE in UAE, reliance has been placed upon Master Direction No. 15/2015 - 16 dated 01/01/2016, issued by Reserve Bank of India on 'Direct Investment by Residents in Joint Venture/Wholly-Owned Subsidiary abroad'. From the perusal of aforesaid Master Direction issued by RBI, it is evident that direct investments by residents in joint venture and wholly-owned subsidiary abroad are being allowed in terms of section 6(3)(a) of Foreign Exchange Management Act, 1999 read with Foreign Exchange Management (Transfer or Issue of Any Foreign Security) Regulations, 2004. As per the aforesaid Master Direction, share certificate or any other document as an evidence of investment in foreign entity is to be received by the Indian party within 6 months from the date of effective remittance. 3....
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....on the facts and in the circumstances of the case and in law, the Id CIT(A) erred in not accepting the decision of AO that "Mineral Oil" does not include "Natural Gas and condensate" for the purpose of claiming deduction under section 801B(9)(ii). - Nil 3.2 Whether, on the facts and in the circumstances of the case and in law, the Id.CIT(A) erred in not accepting the decision of AO to restrict the deduction u/s 80IB(9)(ii) to the extent of ratio of production of oil. - Nil 4. Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in directing AO to grant deduction u/s 10AA with reference to profits and gains as determined by Hon'ble Supreme court in the case of Vijay Industries v. CIT [2019] 412 ITR 1 (SC) in Civil Appeal No 1581-1582 of 2005. Rs.347,32,20,835/- 5. Whether, on the facts and in the circumstances of the case and in law, the Ld.CIT(A) was right in directing AO to grant deduction u/s 10AA with reference to profits and gains of SEZ unit for manufacture of Polypropylene and other petrochemical products as determined by Hon'ble Supreme court in the case of Vijay Industries v. CIT [2019] 412 ITRI (SC) in Civil Appeal No 1581 1582 ....
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....ed parties under uncontrolled conditions, BEPS Action 8 to 10 and various case-laws including the one stated in ground 2.30 above?(Included in 7) 7.4 Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in ignoring the following sufficient and adequate vital facts brought on record in the TP order of the impugned year (which are more fully stated in the grounds under 2 above) to hold that the transaction of preference shares with the AEs RGBV and RIME is sham to recharacterize the transaction as loan transaction and therefore the capital loss arising out of the said transaction is not allowable?: (Included in 7) (i) The said preference shares of AE-RGBV were claimed as 'compulsorily convertible', but at no point of time the said shares were converted into equity shares till the time of winding up of the said AE-RGBV, indicating its dubious nature; (Included in 7) (ii) The said preference shares of AE-RGBV were claimed as 'compulsorily convertible', but much of the said investment was redeemed periodically, losing its character of 'compulsory conversion', further indicating its dubious nature; (Included in 7) (iii) The periodical redemptio....
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....Es made by the TPO, based on earlier years decisions which is in violation of Rule 10B(4) on contemporaneous nature of comparable data, as interest rate vary every year? (Included in 7) 8.1 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 the TPO to benchmark the interest chargeable on receivables, and in holding that ad-hoc 1 month Libor plus spread of 200 bps as adopted by the assessee is correct, and also holding that interest as in offer letters for short term loans from various banks to provide buyers/supplier credit facilities @ 0.75% to 0.95% is comparable when the trade receivables are entirely different financial transactions compared to short term loans, which violates all comparability factors laid down in Rule 10B(2)? (Included in 7) 8.2 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? (Included in 7) ....
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.... in the instant case? (Included in 7) 9.5 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 50 crore number of such shares or 16.04.2013, 183.27 crore number of such shares on 06.06.2014 and 27.66 crore number of such shares on 28.10.2014 at the same face value at 0.01 euro per share 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? (Included in 7) 9.6 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 redeemed the investment as above, though the investment was stated to be made only few months back in the FY 2013-14, on 10.03.2014, 262,13,30,100 number 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 loan transaction and not compulsorily convertible preference shares as ....
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....e meaning of section 92F(ii)? (Included in 7) 9.11 Whether on the facts and circumstances of the case and in law, the CIT(A) is correct in ignoring the fact that the AE RIME has been making losses continuously from calendar year 2010 to 2014 and though its net worth is negative, the assessee has shown to have invested in the said preference shares, which is not an arm's length behavior, which no unrelated party would have done so looking from the angle section 92F(ii)? (Included in 7) 9.12 Whether on the facts and circumstances of the case and in law, the CIT(A) is correct in ignoring the fact that the situation in the case of the AE-RGBV is much worse and it has been making very meager profit during the FYs 2010-11 to 2012-13 and loss during the FYS 2013-14 and 2014-15 and has been in liquidation process from FY 2014-15 and its networth is also negative only, and in spite of that the assessee claimed to have made investment in said preference shares, which is not an arm's length behavior which no unrelated party would have done so looking from the angle section 92F(ii)?(Included in 7) 9.13 Whether on the facts and circumstances of the case and in law, the Included in 7 Ld.CI....
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....? - (Included in 7) 9.17 Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) is correct in not appreciating the sham nature of the nomenclature and form of the transaction "compulsorily convertible preference share", when the investment was redeemed losing the significance of "compulsorily convertible"; never ever been convert into equity shares at any point of time further losing its nature; and never ever received the coupon rate of return losing the nature of preference share, thus rendering the transaction essentially an interest free loan? (Included in 7) 9.18 Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) is correct in ignoring the fact that an amount of Rs.3163 crores (Rs 2746 crores in the case of RIME &Rs 417 crores in the case of RGBV) has flown out of India in the garb of preference share investment in the AES without any return leading to base erosion in India, which cannot be an arm's length situation in uncontrolled circumstances as mandated in Section 92F(ii)? (Included in 7) 9.19 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....
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.... facts and circumstances of the case and in law, the CIT(A) is correct in ignoring the essential character of the transaction is "loan" in "substance" which the assessee camouflages as "preference share' in order to avoid tax liability on the interest that accrues coupled with the base erosion in India by shifting of huge amount of Rs.3163 crores (Rs 2746 crores in the case of RIME & Rs 417 crores in the case of RGBV) out of India without any return? (Included in 7) 9.26 Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in ignoring the BEPS (Base Erosion and Profit Shifting) Action Plan 8-10 of which India is a party which mandates that transactions can be disregarded for TP purposes where they lack commercial rationality, as far as proper return on investments is concerned? (Included in 7) 9.27 Whether on the facts and circumstances of the case and in law, the CIT(A) is correct in ignoring the BEPS Action Plan which emphasizes substance over form, economic reality over legal form and conduct of parties over contracts for evaluating a transaction from transfer pricing angle? (Included in 7) 9.28 Whether on the facts and circumstances of ....
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....or the impugned year to show that the transaction is loan which is substantially at variance with the stated form of preference share? (Included in 7) 9.32 Whether, on the facts and circumstances of the case and in law, the and order of the Ld. CIT(A) is not bad in law in not realizing that Hon'ble Supreme Court in the landmark case of Mc Dowell & Company Limited vs The Commercial Tax Officer (SC) (1985) held, "proper way to construe a taxing statute, while considering a device to avoid tax, is not to ask whether the provisions should be construed literally, or liberally, nor whether the transaction is not unreal and not prohibited by the statute, but whether the transaction is a device to avoid tax"; and in the present case, it can be clearly seen that the form of preference share investment was given to the transaction which was in substance, advancing money to the AEs, so as to avoid tax on interest and so, the form given to the transaction by the assessee was a device to avoid taxes, and therefore, the dicta of the constitutional bench in McDowell case clearly applies to the present case?" (Included in 7) 10. Whether on the facts and circumstances of the case and in law, th....
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....basic tenet of the transfer pricing u/s 92F(ii) 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? (Included in 7) 10.6 Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in relying on ITAT order for AY 2011-12 in which it has been observed by the ITAT that the "TPO did not bring any other comparable to prove that the amount charged by the assessee is not at arm's length. Instead, he has simply marked up the transaction by 12.50%, which is not supported by material", which will not apply to the impugned AY 2016-17 as mark-up has been arrived at 7.07% by adopting separate set of comparables for the given year, thus rendering the order of the CIT(A) violative of Rule 108(4), without appreciating that the transfer pricing study is highly facts-intensive and vary from year to year and thus the CIT(A) should have decided the issue on merits of the facts for the impugned year separately? (Included in 7) 10.7 Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in relying on ITAT decision for the ....
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....e place that he accepted the yield spread method as followed by assessee and at another place relying on the Hon'ble ITAT's decision for a y 2005 2006 to 2009-2010 wherein assessee followed CUP method, which again clearly shows that the CIT(A) has not verified the YSM adopted by the assessee? (Included in 7) 11.3 Whether on the facts and circumstances of the case and in law, L.d. CIT(A) is correct in failing to demonstrate as to how the rates were arrived at by the assessee based on yield spread method followed by assessee for impugned AY and has erred on simply accepting the rates adopted by assessee without looking into actual working of the yield spread methodology of assessee? (Included in 7) 11.4 Whether on the facts and circumstances of the case and in law, Ld. CIT(A) is correct in failing to show as to how assessee followed yield spread method correctly for impugned AY? (Included in 7) 11.5 Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in accepting the artificial division of short-term guarantee and long-term guarantee made by the assessee, without appreciating the observations of the TPO in his order that when the corporate g....
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...., the Ld.CIT(A) is correct in restricting the rate ignoring the fact that the rate depends on various variables such as risk profile, credit profile, place of loan, time period & rate of interest and that all these variables vary from company to company and one rate cannot be applied in an ad hoc manner to all the AEs across the board which will be violative of provisions of Rule 108? (Included in 7) 11.11 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 dividing the interest differential between the assessee and the AEs at 50:50 in an ad hoc unscientific manner, instead of dividing it on the basis of FAR analysis between the assessee and the AEs? (Included in 7) 11.12 Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) is correct in accepting the assessee's division of interest differential 50:50 between the assessee and the AEs, whereas it is anybody's knowledge that the assessee and the AEs cannot be considered on the same footing for attributing the interest differential advantage equally, as FAR significantly differ between the assessee and the AES? (Included in....
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....ear and passing order without depending on independent FAR analysis done for the impugned AY 2016-17? (Included in 7) 11.20 Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in accepting the same method of benchmarking for both corporate guarantee and performance guarantee transactions when in fact they are two completely different transactions? (Included in 7) 11.21 Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in accepting the interest saving method/yield spread method adopted by the assessee to benchmark the performance guarantee transaction when there cannot arise an interest saving that can be distributed between the AE and the assessee in case of a performance guarantee? (Included in 7) 12. Whether on the facts and circumstances of the case and in law, the Incl Ld. CIT(A) is right in excluding the comparable M/s BVG India Ltd. without appreciating that it is functionally similar as it is engaged in the business support service only? (Included in 7) 12.1 Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is right in including the comparable M/s Empire Industries....
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....Rs. 113,76,65,177/- by merely placing reliance on the Hon. ITAT's order in the assessee's own case for AY 2013-14 which in turn placed reliance on the orders of earlier years from AY 2005-06 onwards without appreciating that that the case was referred to the TPO in view of the new section 92BA and the Assessing officer was making additions in the earlier AYS on the Return on Capital employed by the unit, whereas the facts were entirely different for the impugned AY wherein the TPO has determined the arm's length value of the transaction and therefore, the CIT(A) cannot rely on the earlier years orders of the Tribunal? (Included in 7) 13.2 Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in not appreciating the fact and position of law that comparability of the specified domestic transaction (SDT) with uncontrolled transaction has to be established in terms of parameters contained in Rule 10B(2), by which the price charged by a power generating company cannot be compared to the price of a Distributor more so since the Functions performed, Assets employed and Risks assumed (FAR) are entirely different? (Included in 7) 13.3 Whether on the fa....
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....ch was the entire object of enacting the provisions relating to SDT; (f) Looking at the commencing phrase of section 80IA(8) "Where any goods or services held for the purposes of the eligible business are transferred to any other business carried on by the assessee....." and definition of 'market value' in Explanation (i) of section 801A(8) "market value means (i) the price that such goods or services would ordinarily fetch in the open market", what is to be seen and tested with comparable is the price that the electricity generated by the eligible unit would ordinarily fetch in the open market if sol in the open market and not the rate at which non-eligible unit could procure the electricity in the open market from a distribution company and therefore, only the eligible unit alone can be taken as tested party and its power rate has to be compared with power sale rate of the matching FAR comparable whose functional activity is power generation; and (g) The tested party in the case of SDT has to be the person performing the economic activity that is entitled for the deduction i.e. the power generating unit. 13.5 Whether on the facts and circumstances of the case and in law, th....
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....d the intention of the legislature is to allow the deduction only to the extent of ordinary profits, and precisely for this reason, the Hon'ble Supreme Court in the Glaxo case (supra) had given advisory to the legislature to extend transfer pricing principles to such domestic transactions also, which led to the amendment in Explanation to Section 80IA(8) and insertion of Section 92BA? (Included in 7) 13.10 Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in not appreciating the fact and position of law that as per Section 92F(ii) on arm's length principle, the veil of relatedness is to be lifted and seen, and that independent enterprise under uncontrolled conditions would not take pains investing its time labour and capital for establishing CPPs, if it has to procure the electricity from its CPPs at the same rate which it regularly procures from Power Distribution company? (Included in 7) 13.11 Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in not appreciating the fact that to claim the higher notional rate equivalent to the sale rate of distribution company is clearly a ploy to claim deduction on....
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.... on record, we find that this is a recurring issue and has been decided in favour of the assessee in preceding assessment years. We further find that in assessment years 2014-15 and 2015-16, coordinate bench of the Tribunal vide order dated 08/03/2022, observed as under: "11. Having heard the rival contentions, and having perused the material on record, we see no reasons to interfere in the conclusions arrived at by the learned CIT(A) on this aspect either. The first appellate order for the assessment year 2013-14, based on which the impugned relief was granted by the CIT(A), has since come up for consideration before a coordinate bench of this Tribunal, and the coordinate bench has approved the said order of the CIT(A). While doing so, the coordinate bench has observed as follows: We find that learned CIT(A) has granted relief following earlier orders of ITAT. He had noted that it was held that the claim for depreciation cannot be thrust upon the assessee. Nevertheless, the Assessing Officer has consistently rejected the claim of the assessee based on the stand taken at assessment stage in earlier year. Learned CIT(A) noted that current year issue is consequential. Accordingly....
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....‟s own case, for the assessment years 2010-11 to 2012-13. Learned Departmental Representative does not dispute this position, nor does he point out any specific reasons for our not following these coordinate bench decisions, but he relies upon the stand of the Assessing Officer nevertheless. We see no reasons to take any other view of the matter than the view so taken by the coordinate benches, in assessee‟s own cases for the assessment years 2010-11, 2011-12 and 2012-13, and, respectfully following the same, we confirm the conclusions arrived at by the learned CIT(A) on this point as well, and decline to interfere in the matter." 40. The learned DR could not show us any reason to deviate from the aforesaid decision rendered in assessee's own case and no change in facts and law was alleged in the relevant assessment year. Thus, respectfully following the judicial precedent in assessee's own case, we find no infirmity in the direction of learned CIT(A) to consider investment which have yielded dividend during the year under consideration. As a result, ground No. 2 raised in Revenue's appeal is dismissed. 41. The issue arising in ground No. 2.1, raised in Revenue's appe....
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....be computed without any regard to the losses on aborted exploration. The learned CIT(A) vide impugned order by following the decision of the coordinate bench of the Tribunal rendered in assessee's own case in preceding assessment years directed the AO to compute the profits of KGD undertaking on a standalone basis as per the provisions of 80 IA(5), for the purpose of claiming deduction under section 80 IB(9) of the Act. Accordingly, the AO is directed that cost in respect of abortive/unsuccessful blocks are not to be reduced while computing the profits of undertaking namely, KGD which is eligible for deduction under section 80 IB(9) of the Act. Being aggrieved, the Revenue is in appeal before us. 44. Having heard both the parties and perused the material available on record, we find that this is a recurring issue and has been decided in favour of the assessee in preceding assessment years. We further find that in assessment years 2014-15 and 2015-16, coordinate bench of the Tribunal vide order dated 08/03/2022, observed as under: "35. As learned representatives fairly agree, this issue is also covered, in favour of the assessee, by decisions of the coordinate benches, in assesse....
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....as been made in the computation of income u/s 42(l)(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.2042.69 crores 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. 80IB. Thus, this ground of appeal is allowed and AO is directed to compute the profits of KGD undertaking on a standalone basis as per the provisions of 80IA(5), for the purpose of claiming deduction under the section 80IB(9) of the Act. The AO is accordingly, directed....
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....IB (9)(ii) of the Act in respect of 'natural gas' and 'condensate'. 47. The brief facts of the case pertaining to this issue are: Although, no deduction was claimed by the assessee under section 80 IB(9) of the Act in respect of KGD6 block on account of loss of Rs. 972,48,51,991 as submitted by the assessee itself, in order to keep the issue alive and considering that this is the last year of claim, the assessee was asked to show cause as to why the profit derived from sale of natural gas and condensate should be allowed as deduction under section 80 IB(9) of the Act. The AO following the approach adopted in assessment year 2011-12 computed the deduction under section 80 IB of the Act. The learned CIT(A) vide impugned order, following the decision of coordinate bench of the Tribunal in assessee's own case held that the term 'mineral oil' for the purpose of claiming deduction under section 80 IB(9) of the Act includes 'natural gas' and 'condensate'. Being aggrieved, the Revenue is in appeal before us. 48. Having considered the submissions of both the parties and perused the material available on record, we find that this issue is recurring in nature and has been decided in favour ....
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.... mineral oil eligible for deduction u/s 80IB(9) of the Act. The above decision of the ITAT has been further confirmed by the Hon'ble Gujarat High Court (reported in 374 ITR 369) by placing reliance upon the decision of the Supreme Court in the case of Association of Natural Gas &Ors.Vs Union of India &Ors.(2004) 4 SCC 489. The Hon'ble Gujarat High Court has also held that the insertion of sub-clause (iv) to Section 80-IB(9) does not mitigate against meaning attributed to the expression "mineral oil" by the Apex Court, Entry 53 of List I does not refer to Natural Gas separately. Further, Hon'ble Gujarat High Court has also rejected the contention raised by the Department, that petroleum products and natural gas have been made part of mineral oil only through inclusive provisions contained in Sections 42, 44BB and 293A and its conspicuous absence in section 80-IB has to be inferred that the purpose of Section 80-IB, mineral oil would include petroleum products and natural gas. Similar issue has been allowed to appellant in the immediately preceding assessment year i.e. for AY 2014-15. Further, similar issue has been decided by the ITAT in favour of the appellant for AY. 2011-12....
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....rdingly, rejected the revised claim of the assessee under section 10 AA of the Act with respect to Refinery SEZ and PP SEZ filed during the course of assessment proceedings. The learned CIT(A) vide impugned order, following the decision of coordinate bench of Tribunal in assessee's own case for assessment year 2013-14 directed the AO to grant deduction under section 10 AA with respect to profit and gains as determined by the Hon'ble Supreme Court in Vijaya Industries (supra). Being aggrieved, the Revenue is in appeal before us. 52. We find that the coordinate bench of the Tribunal in the immediately preceding assessment years i.e. 2014-15 and 2015-16, vide order dated 08/03/2022, by following the judicial precedent in assessee's own case, upheld the plea of the assessee in principle and directed the AO to grant the relief accordingly. Since, this is a recurring issue, therefore, we see no reason to deviate from the conclusion so reached by the coordinate bench of the Tribunal in assessee's own case in preceding assessment years, in absence of any allegation of change in facts and law. Thus, with similar directions, the plea of the assessee is accepted in principle. Accordingly gro....
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.... the Rules with effect from 01/07/2016, whereby prescribed authority can quantify the expenditure eligible for weighted deduction under subsection (2AB) of section 35 of the Act, would apply only from assessment year 2017-18. The relevant findings of learned CIT(A) on this issue are as under: "I have carefully considered the submissions of the appellant and the case law relied upon before me. I agree with the submission made by the appellant that prior to the amendment in Rule 6(7A), no such authority was granted to DSIR [i.e. the prescribed authority under Rule 6(1B) for approving any expenditure for the purpose of claiming deduction us 35(2AB). The pre-amended rules only stipulate filing of audit report before DSIR by the persons availing deduction u/s 35(2AB) of the Act. The provisions pre-amendment do not prescribe any methodology of approval to be granted by DSIR vis-a-vis the expenditure from year to year The amended provisions by which separate part has been inserted in Form No. 3CL for certifying the amount of expenditure thus lays down the procedure to be followed by DSIR Since the amendment has come into effect only from 01.07.2016 (was notified on 28th April 2016) th....
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.... is dismissed. 59. The issue arising in grounds No. 7- 7.4, raised in Revenue's appeal, is pertaining to deletion of disallowance of long term capital loss and short term capital loss on sale of non-cumulative compulsory convertible preferential shares. 60. The brief facts of the case pertaining to this issue are: During the year under consideration, the assessee has sold 593,90,00,000 non-cumulative compulsory convertible preferential (NCCP) shares of M/s Reliance Global Business BV to M/s Reliance Industries (Middle East). Out of these 331,76,69,900 NCCP shares were held for more than 36 months and balance 262,13,30,100 NCCP shares were held for less than 36 months. On the shares are categorised as long term capital asset, assessee worked out long term capital loss of Rs. 86,47,98,392 and on shares categorised as short-term capital asset assessee worked out short term capital loss of Rs. 26,80,56,497. The AO disallowed the entire long-term and short-term loss on the basis that the TPO has re-characterised the said NCCP's as loan, while benchmarking the income thereon. The learned CIT(A) by relying upon its predecessor's order for assessment year 2010-11 and order passed by the ....
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....nt years 2014-15 and 2015-16 vide order dated 08/03/2022 decided similar issue in favour of assessee by observing as under: "63. We find that in the immediately preceding assessment years, consistently this approach of the assessee, at the even lower spread of 150 bps, has been all along accepted by the coordinate benches. In any case, no case has been made out that the spread of 200 bps is lower than the arm's length price. As regards the cost-plus method on the cost of funds, we find it is fundamentally flawed inasmuch as it treats all the types of borrowing at par and proceeds on the erroneous assumption that the arm's length price of the debt has, at its basis, cost of funds available to the tested party- particularly when these funds are of significantly different tenures and different currencies. In view of these discussions, as also bearing in mind the entirety of the case, we approve the conclusions arrived at by the learned CIT(A)- which is, in any event, in harmony with the decisions of the coordinate benches in assessee's own, and decline to interfere in the matter." 65. Since, this is a recurring issue, therefore, we see no reason to deviate from the conclusion so re....
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....tions are sham or bogus nor it was shown that the apparent is not real. It was also not shown that the unrelated share applicant has been paid any interest for the period commencing from date of subscription to the date of allotment of shares. It has been held that the amendment made by Finance Act 2012 including capital financing transactions as international transactions cannot be applied retrospectively. The Ld A.R further submitted that the Preference shares carry coupon rate of 5%, which is higher than the 6 months Libor plus 300 bps." We further note that it has been submitted before us that the above decision is squarely applicable in as much as no fresh investment has been done during the A.Y. 2013-14. Furthermore, as pointed out by learned Counsel of the assessee from Hon'ble Bombay High Court decision in the case of Pr. CIT Vs. M/s. Aegis Limited (supra) supports the above proposition. We may refer the Hon'ble High Court decision as under :- "The respondent-assessee is a Company registered under the Companies Act. For the Assessment Year 2009-10, the assessee was subjected to transfer pricing regime. Question no.1 arises out of the action of the Revenue to tax notiona....
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.... event, the subscription for compulsorily convertible preference shares cannot be compared with a simple loan because it is a case of quasi capital and the significant reward for this investment by the assessee is the opportunity to own the equity- something inherently incompatible with a loan transaction simpliciter. It cannot be open to the revenue authorities to ignore this aspect of the matter and compare the rewards on a compulsorily convertible preference share with the rewards on a loan transaction. The rewards for the investment for a limited period, i.e. the period till the conversion into shares takes place, cannot be considered in isolation from the overall transaction as a whole. The decision of the CIT(A) for the assessment year 2013-14, which is relied upon in the impugned order, has already been confirmed by a coordinate bench as above. As regards plea of the Assessing Officer that the CIT(A) has simply relied upon the earlier decisions of the coordinate benches, without taking a fresh look at the facts, it is an admitted position that there are no changes in the facts in circumstances of the case and there is not even a fresh investment in the present year, and, suc....
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....with Kurdish government. 70. The brief facts of the case pertaining to this issue are: The assessee's AE had entered into production sharing agreement with the Government of Kurdistan for exploration and development of petroleum in certain contract area. Pursuant to said agreement, any professional or administrative services provided by AE's affiliate shall be on cost-to-cost basis. The assessee provided support services for drilling operations carried out by the AE and charged the AE on cost to cost basis. Assessee submitted that since the transaction would get covered by Rule 10 B(2)(d), the amount charged by the assessee was at arm's length. The TPO rejected the submission of the assessee and held that the Production Sharing Contract entered by the AE with the concerned foreign governments has little relevance in determining the arm's length price of the aforesaid transaction between assessee and AE. Accordingly, the TPO computed arm's length price of the markup at 7.07% and made an adjustment of Rs. 44,15,893. The learned CIT(A) vide impugned order, following the decisions of coordinate bench of the Tribunal in assessee's own case in preceding assessment years, allowed the app....
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.... the basis of which impugned relief was granted by the CIT(A), has already been approved by a coordinate bench. The issue is thus covered in favour of the assessee by decisions of the coordinate benches in assessee's own cases for the assessment years 2011-12, 2012-13 and 2013-14. No reasons as to why we must not follow the decision have been pointed out to us. Undoubtedly, one of the critical factors in determining the ALP, as recognized by rule 10B(2)(d), is conditions prevailing in the market in which AEs operate, and once it's a legal condition precedent in entering the transaction in the respective PSC market is that the AE's affiliates are not allowed to have any mark up on a supply of services to the AE, the determination of ALP is required to be having regard to this condition. Viewed thus, the cost to cost rendition of services can be indeed be viewed as an arm's length transaction. In view of these discussions, and being consistent with the co-ordinate bench decisions, we uphold the action of the CIT(A) and decline to interfere in the matter." 72. Since, this is a recurring issue, therefore, we see no reason to deviate from the conclusion so reached by the coordinate ben....
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....no reasons to take any other view of the matter than the view so taken by the coordinate benches in assessee's own cases for the preceding assessment years. We, therefore, approve the conclusions arrived at by the learned CIT(A) and decline to interfere in the matter." 76. Since, this is a recurring issue, therefore, we see no reason to deviate from the conclusion so reached by the coordinate bench of the Tribunal in assessee's own case in preceding assessment years, in absence of any allegation of change in facts and law. Thus, we find no infirmity in the findings of the learned CIT(A) on this issue. Accordingly grounds No. 11 - 11.21 raised in Revenue's appeal are dismissed. 77. The issue arising in grounds No. 12.1 - 12.4, raised in Revenue's appeal, is pertaining to selection of comparables for benchmarking the international transaction pertaining to determination of arm's length price of business support services availed from the AE vis-à-vis. 78. The brief facts of the case pertaining to this issue are: During the year under consideration, the assessee entered into agreement with Reliance Corporate IT Park Ltd, inter-alia, for availing business support services. For....
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....lity of Spectrun Business Solutions Ltd and ICRA Management Consulting Services Ltd will become academic. 86. We see no reasons to take any other view of the matter than the view so taken by the coordinate bench in assessee's own case for the immediately preceding assessment year. Respectfully following the same, and subject to the observations as above, we uphold the conclusions arrived at by the learned CIT(A) and decline to interfere in the matter." 80. Since, the aforesaid companies were tested for the purpose of comparability only on the basis of functionality, therefore, in absence of any allegation of change in functional profile of these companies, in the year under consideration, we find no infirmity in the findings of learned CIT(A), insofar as, these companies are concerned. 81. It is the plea of the assessee that if Empire Industries Ltd is included and BVG India Ltd is excluded as comparable, the margin would be at arm's length. From the perusal of record, it is evident that Spectrum Business Solutions Limited was rejected as a comparable by the TPO by applying the turnover filter. We find that Hon'ble Delhi High Court in Chrys Capital Investment Advisors India Pvt....
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....5-16, coordinate bench of the Tribunal vide order dated 08/03/2022, observed as under: "124. We have heard the rival contentions, perused the material on record and duly considered the facts of the case in the light of the applicable legal position. 125. We find that the learned CIT(A)'s order for the assessment year 2013-14, based on which the impugned ALP adjustment has been sustained, has come up for consideration before a coordinate bench which has, reversing the stand of the learned CIT(A), observed as follows: 168. We have heard both the counsel and perused the records. Learned counsel of the assessee contended that assessee has benchmarked the transaction using internal cup by considering the manufacturing unit as a tested party and comparing the inter unit power rate at which the power was purchased by the manufacturing units from the third-party DGVC. That in the case of Reliance Industries Ltd for assessment year 2005-06 to assessment year 2012-13 the ITAT Mumbai has upheld that the power rate charged by DGVCL for determining the market rate of unit rate of electricity. 169. Furthermore it is the contention that Hon'ble High Court has rejected the appeal of the re....
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.... in either case, the consideration, if any, for such transfer as recorded in the accounts of the eligible business does not correspond to the market value of such goods or services as on the date of the transfer, then, for the purposes of the deduction under this section, the profits and gains of such eligible business shall be computed as if the transfer, in either case, had been made at the market value of such goods or services as on that date: Provided that where, in the opinion of the Assessing Officer, the computation of the profits and gains of the eligible business in the manner hereinbefore specified presents exceptional difficulties, the Assessing Officer may compute such profits and gains on such reasonable basis as he may deem fit. Explanation.-For the purposes of this sub-section, "market value", in relation to any goods or services, means- (i) the price that such goods or services would ordinarily fetch in the open market; or (ii) the arm's length price as defined in clause (ii) of section 92F, where the transfer of such goods or services is a specified domestic transaction referred to in section 92BA. 175. The rate charged by the assessee has been duly acce....
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.... carried in appeal by the revenue before the High Court in Income Tax Appeal No.2180 of 2011, such appeal was dismissed making following observations:- "6. As far as question (d), namely, the claim relating to purchase price from Tata Power Company is concerned and that was for the deduction under Section 80IA, the ITAT in paragraph 21 onwards has noted the factual findings and also referred to the order of the Maharashtra Electricity Regulatory Authority (for short "MERC"). Paragraph 36 set outs as to how the claim arose. The claim has been considered in the light of Section 80IA and particularly proviso and explanation thereto. The Tribunal eventually held that till the Assessment Year 2005-2006, the Revenue considered the rate at which the power was purchased by the Assessee from Tata Power Company as market value. There is nothing brought on record as to how the rate determined by the MERC is the true market value. The Assessee gave explanation that the rates determined by the MERC do not reflect the correct 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 par....
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....ined is the market value of the goods transferred by the eligible business, when such transfer is by eligible business to another non eligible business of the same assessee and the consideration recorded in the accounts of the eligible business does not correspond to market value of such goods. Term "Market Value" is further explained in explanation to said sub-section to mean in relation to any goods or services, price that such goods or services will ordinarily fetch in the open market. To our mind sum of Rs.4.51 per unit of electricity only represented cost of electricity generation to the assessee and not the market value thereof. It is not in dispute that the GEB charged Rs. 5 per unit for supplying electricity to other industries including non eligible unit of the assessee itself. Tribunal therefore, while adopting the said base figure and excluding excise duty therefrom to work out Rs. 4.90 as the market value of the electricity generated by the assessee, to our mind, committed no error. It can be easily seen that if the assessee were to supply such electricity or was allowed to do so in the open market, surely it would not fetch Rs. 4.51 per unit but Rs. 5 per unit as was b....