TaxTMI 
TaxTMI 
2022 (11) TMI 1446
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....ect income declared by the appellant in the Revised Return of Income (filed on 31.03.2018), despite the fact that in the draft order of assessment Gross Total Income was computed after giving effect to the Revised Return of Income. 3. That on facts and in law the AO/DRP have erred in disallowing deduction u/s 80IA(4)(i) claimed by the appellant in the revised return of income. 3.1 That on facts and in law the AO / DRP have erred in holding that: (a) Contractees, who have allotted work of infrastructural facility to the appellant, are not recognized u/s 80IA(4)(i)(b), and (b) Appellant is merely a contractor and not a "developer". 4. That on facts and in law the TPO / DRP have erred in making / upholding Transfer (a) Adjustment of Rs 1,01,87,884/- on account of alleged interest receivable on advance given to M/s BSC C&C JV Nepal Pvt Ltd. (b) Adjustment of Rs 37,71,124/- on account of interest paid to Mr B. Krishnalah. 4.1 That on facts and in law the TPO / DRP has erred in not appreciating that there is no advance given by the appellant to M/s BSC JV Nepal Pvt. Ltd. and hence there is no "transaction" for receiv....
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....r while passing the final assessment order on 30.04.2021 u/s 143(3) r.w.s. 144C(13) of the Act he has started the final computation of income shown in the original return of income as against the income shown by the assessee in the revised return of income. Ld. Counsel therefore submits that direction may be given to the Assessing Officer to correctly compute the total income after taking into consideration the revised return of income filed by the assessee. 3. Heard both the parties and perused the copies of returns placed in the paper book. On perusal of the draft assessment order, we noticed that the Assessing Officer had already taken cognizance of the revised return filed by the assessee on 31.03.2018 and this return was picked up for scrutiny while passing the final assessment order on 30.04.2021. The Assessing Officer started the computation of income by taking the income declared in the original return filed by the assessee instead of the income declared in the revised return. The Assessing Officer is directed to act upon the revised return filed by the assessee and compute the income accordingly for the assessment year under consideration. Ground no. 2 is allowed for st....
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....has entered into an agreement with the assessee as an EPC Contractor for carrying out the contract work awarded by NHAI and, therefore, the basic condition of sub-section (4) of Section 80IA is not fulfilled. 8. Further the Assessing Officer was also of the view that the assessee is only a contractor and not a developer as the developer is expected to arrange finances and also to undertake risk. According to the Assessing Officer, assessee cannot be held to be a developer and, therefore, deduction claimed u/s 80IA was denied. The assessee approached the DRP and made its elaborate submissions. However, the DRP noted that the analysis as well as the conclusions drawn by the Assessing Officer is based on perusal of contract agreements and its details and, therefore, did not find any reason to interfere with the conclusions drawn by the Assessing Officer. 9. The Ld. Counsel for the assessee before us referring to the provisions of clause (b) of sub-section (4) of Section 80IA of the Act submits that any enterprise carrying on the business of developing or operating and maintaining or developing, operating and maintaining any infrastructure facility and has entered into an agreeme....
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....The Ld. Counsel for the assessee further submits that PGCIL is part of Ministry of Power as depicted in the organization structure as is evident from annual report for the FY 2015-16 of Ministry of Power. The annual report observes the purpose of incorporating PGCIL and has been a notified central transmission utility since 1998. It is responsible for integrated development of Interstate transmission system in the Country for evacuation of power from central sector projects, system strengthening scheme, etc. and for implementation of transmission projects assigned to it. Therefore, the Ld. Counsel submits that the above Companies (PCUs & PSCs) are incorporated by Central/State Governments as special purpose vehicle to undertake specific jobs of respective Ministries. 11.1 The Ld. Counsel for the assessee further submits that the provisions of Section 80IA incentive wise rapid development of infrastructural projects in India and, therefore, a liberal interpretation has to be given to the condition stipulated in Section 80IA(4)(i). It is submitted that the literal/strict interpretation of Section 80IA(4)(i)(b) as done by the AO will yield manifestly absured results and this kind o....
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....before us. On perusal of the draft assessment order, we observe that the reason for denying the deduction claimed u/s 80IA(4) by the AO was that the agreement for development of projects has to be entered into by a Company registered in India or by a consortium of such Companies with Central Government or State Government or a local authority or any other statutory body. However, DFCCIL, PGCIL and IRCON have not come into existence because of any law connected by any legislature and, therefore, they are not statutory bodies but are only Companies owned by the Government. Thus, the AO was of the view that the basic condition for claiming deduction u/s 80IA(4) in respect of six projects which was awarded by DFCCIL, PGCIL and IRCON are not fulfilled as these contractee companies are neither Central Government nor State Government nor a local authority nor any other statutory body. 17. The AO further observed that insofar as Mokama-Munger Project is concerned the assessee JV entered EPC agreement with Mokama-Munger Highway Ltd. which is a Company registered under the provisions of Companies Act and Mokama-Munger Highway Ltd. obtained contract from NHAI, the assessee is an EPC Contra....
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....l, 1976, mainly for the purpose of construction and development of Railway infrastructure in India and abroad with Indian Railways'expertise. The company diversified in other areas and considering its major share of business from projects abroad, its name was changed to "Ircon International Limited" w.e.f 17th October 1995. Dedicated Freight Corridor Corporation of India Limited (DFCCIL) Dedicated Freight Corridor Corporation of India (DFCCIL) is a Special Purpose Vehicle set up under the administrative control of Ministry of Railways to undertake planning & development, mobilization of financial resources and construction, maintenance and operation of the Dedicated Freight Corridors. DFCCIL was incorporated on 30th October 2006 under Indian Companies Act 1956. Your Honours may also observe from the copy of the agreement with IRCON International (submitted separately) that the Tender Documents were issued by the Ministry of Railways. IRCON International has executed the contracts under the Ministry of Railways. Organisational Structure of Ministry of Power: We are also submitting herewith relevant pages of the Annual Report for the FY 20....
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....h Court in case of CIT vs Ranjit Projects (P) Ltd reported in (2019) 104 taxmann.com 39i(Guj). In this case it has been held by Hon'ble High Court as under: "13. The above statutory provisions and the relevant facts arising in the present case and noted above would leave little doubt in one's mind that GSRDC was a nodal agency constituted by the State Government for the purpose of executing road development projects through private participation and was a Government agency as defined in section 2(e) of the Act of 1999. Significant factors in the present case are that the road widening project was cleared by the Government, land for such purpose was alloted by the Government. The concession agreement which GSRDC executed was approved by the Government. It was under the Government Resolution that the assessee would collect toll upon completion of such project. Upon the completion of the project period, the entire infrastructure so developed would vest in the Government. Signatory to the applicant may be GSRDC for all practical purposes and in essence, it was the agreement between the assessee and the State Government. We are conscious that condition (b) of subsection (4) of ....
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....begins operating and maintaining an infrastructure facility on Build-Operate-Transfer (BOT) or on Build-Own-Operate-Transfer (BOOT) basis, subject to certain conditions specified in that sub-section. One of the conditions to be fulfilled by the enterprise is that it should develop, maintain and operate a new infrastructure facility which shall be transferred to the Central Government, etc., within the period stipulated in the agreement. The definition of infrastructure as per sub-section (12) of section 80-IA includes a rail system also. 2. The Indian Railways have formulated a Build-Own-Lease-Transfer (BOLT) Scheme, wherexinder a private enterprise will provide the necessary and crucial components of a Railway system, own them for a stipulated period but will not maintain or operate the same. Instead, the enterprise will lease the asset (only necessary and crucial components of a Railway System) back to Indian Railways for maintenance and operation, and shall ultimately transfer it to Indian Railways. 3. This is to clarify that, the said (BOLT) Scheme of the Indian Railways shall be eligible for the benefit of section 80-IA of the Income-tax Act, IQ6I, s....
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....tium of BSCPL Infrastructure Ltd. and C&C Constructions Ltd. (i.e. BSC C&C JV, the applicant) vide LOA dated 19.05.2010. Copy of the same is attached herewith for your kind perusal. The above said company - Mokama Munger Highway Ltd. was incorporated as a pre-condition of NHAI as specified in the said LOA. Kindly see the highlighted portion of above LOA. After incorporation of the above said company, the concession agreement was made with NHAI and the applicant had entered into an agreement with the above said company to carry out the whole of the project. Ratio propounded and upheld by Apex Court in case of Ranjit Project's case (supra) is squarely applicable to the present situation. In view of above, it is submitted that since NHAI had awarded the contract to the applicant, it cannot be held that the above said agreement was entered into with an Indian Company. The said Indian Company is a pre-condition imposed by NHAI and hence, the deduction u/s 80IA of the Act may kindly not be denied to the applicant. It is prayed accordingly. Re: Ground of Objection No. 5.2 The Ld. AO further held that the applicant is not a developer and is rath....
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....ioned three types of activities. When an assessee is only developing an infrastructure facility/project and is not maintaining nor operating it, obviously such an assessee will be paid for the cost incurred by it: otherwise, how will the person, who develops the infrastructure facility project, realise its cost? If the infrastructure facility, just after its development, is transferred to the Government, naturally the cost would be paid by the Government. Therefore, merely because the transferor has paid for the development of infrastructure facility carried out by the assessee, it cannot be said that the assessee did not develop the infrastructure facility. If the interpretation canvassed by the revenue authorities is accepted, no enterprise, carrying on the business of only developing the infrastructure facility, would be entitled to deduction under section 80-IA(4), which is not the intention of the law. If a person who only develops the infrastructure facility is not paid by the Government, the entire cost of development would be a loss in the hands of the developer as he is not operating the infrastructure facility: When the Legislature has provided that the income of the deve....
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....in view of the fact that the assessee was paid by the Government in respect of the work undertaken by it and assessee has not invested his own funds for completing the Project nor assessee has recovered the same through operating the facility thereafter. As per our considered view, after amendment by the Finance Act, 2002 for claim of deduction u/s. 8oIA(4) infrastructure facility is only required to be developed and there is no condition that assessee should also operate the same. Thus, after amendment, when the assessee is not required to operate the facility, the payment for development of such infrastructure is required to be made by the Government only. However, as per pre-amended law when the assessee was not only required to develop but also required to operate and maintain the infrastructure facility, there was collection of revenue through toll tax by which assessee could have recovered not only its cost part but also profit thereon. After amendment, when assessee undertakes to develop the infrastructure facility only, it is the Government who will make payment to assessee in resvect of infrastructure facility developed bu it in terms of agreement so entered with Governmen....
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....' and a 'contractor'. Generally in common parlance a person is referred as 'developer' who undertakes the project to develop and construct on its own responsibility and takes all the risks of the development. These responsibilities and risk can be categorized as under: (a) That in a development contract" responsibility .is fully assigned to the developer to do all acts for execution and completion of work right from designing the project till handing over the project to the Government. As such, the agreement is not for a specific work, it is for development of facility as a whole. Indeed the ownership of the site or the ownership over the land remains with the Government/owner but during the period of development agreement the developer exercise complete realm over the land or the project. However, in some case there can be a situation that the developer has to take the approval of the design from the Government/contractee but that will not change the status of the developer as works contractor. (b) That the first phase for the developers is to take over the existing premises of the projects and thereafter developing the same into infrastructur....
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....contractor' is a person who undertakes work on a contract basis. He does not assume risks and responsibilities like that of a developer. He merely carries out the work as has been instructed to him by the contractee. Moreover, in case of such work the contractor gets fixed amount of revenue for executing such work and is not entitled to any share of profit from revenue generated by the developer/land owner. 13.3 To summarize, the developer acts as a principal whereas the contractor acts as an agent in performing the Junctions as required by the developer. The developers, in true sense, are the persons who are carrying out the business of developing or operating and maintaining or developing, operating and maintaining the infrastructure facility the infrastructure facility whereas the contractors are those persons who merely execute part of these functions on behalf of developer and do not own any risks and responsibilities of the work. In such cases, the contractors may not be eligible for the deduction under section 80-IA of the Act, as they are not developing any infrastructure facility but only providing assistance to the actual developer. 13.4 In view of t....
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.... is liable for liquidated damages if it failed to fulfill the obligation laid down in the agreement. The liability that was assumed by the assessee under terms of the contract would be obligations involving the development of an infrastructure facility. The assessee has also in its employment technically and administratively qualified team of persons. If the above conditions are satisfied, then it would not be correct to say that assessee is merely a contractor and not a developer. Without giving adverse finding on the above tests, the CIT could not conclude that the order of the AO was erroneous and prejudicial to the interest of the revenue." It will therefore be relevant to see whether the applicant has acted as an entrepreneur who has employed his material, plant, machinery, labour etc in a project and undertaken risk. This has been narrated in detail in Point No. C below of each project. B. The assessee should enter into an agreement with Central Government, State Government and or local authority or Statutory body on or after 01.04.1995. As explained in Ground of Objection No. 5 even contracts entered into with PSUs/PSEs, fully owned by the Governments, are ....
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...., a bridge or a rail system; a highway project including housing or other activities being an integral part of the highway project; a water supply project, water treatment system, irrigation project, sanitation and sewerage system or solid waste management system; a port, airport, inland waterway, inland port or navigational channel in the sea. Before detailing the fulfilment of the ahove said conditions, we are giving hereby flow chart of getting construction contracts from NHAI, PWD, IRCON, DFCC, PGCIL etc.: FLOW CHART FOR OBTAINING CONSTRUCTION CONTRACTS: * Different Ministries such as Road & Transport Ministry, Railway Ministry, Power Ministry etc. decide about the development of infrastructure facility as per their yearly plan and as provided in the budget every year. * According to the plan, these Ministries give work to different PSUs/ PSEs or other autonomous bodies - PWD, NHAI or other PSUs. * These PSUs/ PSEs/ Autonomous Bodies float the Tender on the leading newspaper and on their website. * Interested parties collect the tender documents from the concerned offices. This tender documents contains, specifications, stan....
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....f a new infrastructure facility which includes road, bridges etc: Project: 2 laining of Nongstoin-Shillong section of NH-44 and Nongstoin- Rongjeng-Tura Road, in the state of Meghalaya under Phase-'A' of SARDP- NE- Job No. SARDP-NE-NH-44 & SR-MG-PWD2010-11-172. Detailed Project Description: Clause 9 of the Contract Data contains detailed project description as follows. "9. Work consists of Earthwork, GSB, WMM, DBM, BC, Bridges, Culverts, Retaining/ Breast Wall, Road Sign etc. The work shall, inter-alia, include the following, as specified or as directed. (A) Road Works Site clearance; setting-out and layout; widening of existing carriageway and strengthening including camber corrections; construction of new roads/ parallel service roads: bituminous pavements remodelling/construction of junctions, intersections, bus bays, lay byes; supplying and placing of drainage channels, flume, guard posts and guard other related items; construction/extensions of cross drainage works, bridges, approaches and other related stones; road marking, road signs and kilometre/ hectometre stones; protective works for roads/ bridges; all aspects of qua....
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....lant: Plant is any integral part of the Works which is to have a mechanical, electrical, electronic or chemical or biological function. "9 Personnel 9.1 Contractor shall employ the key personnel named in the Schedule Key Personnel as referred to in the Contract Data to carry out the functions stated in the Schedule or other personnel approved by the Engineer. The Engineer will approve any proposed replacement of key personnel only if their qualifications abilities and relevant experience are substantially equal to or better than those of the personnel listed in the Schedule. 12 Contractor's Risks 12.1 All risks of loss of or damage to physical property and of personal injury and death which arise during and in consequence of the performance of the Contract other than the excepted risks are the responsibility of the Contractor. 13 Insurance 13.1 The Contractor shall provide in the joint names of the Employer and the Contractor, insurance cover from the Start Date to the end of the Defect Liability Period in the amounts and deductibles stated in the Contract Data for the following events which are due to the Contractor's Risks....
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....iability Period and the additional security for unbalanced bids shall be valid until a date 28 days from the date of issue of the certificate of completion. 54 Cost of Repairs 54.1 Loss or damage to the Works or Materials to be incorporated in the Works between the Start Date and the end of the Defects Correction period shall be remedied by the Contractor at the Contractor's cost if the loss or damage arises from the Contractor's acts or omissions. SPECIAL CONDITIONS OF CONTRACT 1 LABOUR The Contractor shall, unless otherwise provided in the Contract, make his own arrangements for the engagement of all staff and labour, local or other, and for their payment, housing, feeding and transport. 2 COMPLIANCE WITH LABOUR REGULATIONS: During the continuance of the contract, the Contractor and his sub-contractors shall abide at all times by all existing labour enactments and rules made there under, regulations, notifications and bye laws of the State or Central Government or local authority and any other labour law. ADDITIONAL SPECIAL CONDITION 1 From the date of taking over of site by contractor till the compl....
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....ect was awarded by Central/ State Government/ local authority/Statutory Body. B> SECOND CONDITION - The Project should be for development of a new infrastructure facility and infrastructure facility includes road, bridge, railway system etc. Your Honours would observe from the following clauses that the assessee was engaged in the development of a new infrastructure facility which includes road, bridges railway system etc. Kindly see underlined portion of Letter of Acceptance which provides details of the project to be executed: "Design and Construction of formation including blanketing, Major Bridges, Minor Bridges, RUBs, ROBs, Supply and Spreading of Ballast and other related infrastructural works for Dedicated Freight Corridor from Chainage 14.108 Km (from New Karvandiya) to Chainage 119.437 (New Ganj Khwaja) (Approx.105 KMs) on Mughalsarai- Sone Nagar Section of Eastern Corridor DFCC has constructed a new railway line for transportation of goods. The above said project description duly includes construction of blankets, bridges, RUBs (Rail Under Bridge), ROBs (Rail Over Bridge) and spreading of Ballast, which is basic infrastructure facility ....
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....ontractor's Equipment, Temporary Works and all other things, whether of a temporary or permanent nature required in and for such design, procure, manufacture, execution, installation, completion, testing (including Integrated Testing) and commissioning and remedying all defects. 4.1.3 Before commencing design, the Contractor shall satisfy himself regarding the Employer's Requirements (including designs, criteria, specifications and calculations, if any and the items of reference mentioned in thereof. The Contractor shall give notice to Engineer of any error, fault or other defect in the Employer's requirements or such items of reference. After receipt of such notice, the Engineer shall determine whether shall be applied and shall notify the Contractor accordingly. 4.1.4 The Contractor shall be responsible for the adequacy, stability and safety of all site operations and of all methods of construction, manufacture and all Works irrespective of any approval or consent of the Engineer. The Contractor shall, whenever required by the Engineer, submit details of the arrangement and methods which the contractor proposes to adopt for the execution of the works. No....
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....e Works and not be removed without the consent in writing of the Engineer. Such consent shall not be unreasonably withheld or delayed. The Contractor shall be responsible for all Contractor's Equipment. When brought on to the Site, Contractor's Equipment shall be deemed to be exclusively intended for the execution of the Works. The Contractor shall not remove from the Site any major items of Contractor's Equipment without the consent of the Engineer. However, consent shall not be required for vehicles transporting Goods or Contractor's Personnel off Site. Contractor's Equipment which is owned by the Contractor (either directly or indirectly) shall be deemed to be the property of the Employer with effect from its arrival on the Site. This vesting of property shall not: a. Affect the responsibility or liability of the Employer, b. Prejudice the right of the Contractor to the sole use of the vested Contractor's Equipment for the purpose of the Works; or c. Affect the Contractor's responsibility' to operate and maintain Contractor's Equipment. 4.16.2 Upon completion of the Works the Contractor shall remove from the Site all th....
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....ive execution of Works and/or as otherwise required by the Engineer. 17.0 Engagement of Staff & Labour 17.1 The Contractor shall make his own arrangements for the engagement of staff and labour at his own cost. The Contractor's key staff shall be approved by the Employer before starting working on site. The Employer may require to interview and test the proposed staff before approval. D> FOURTH CONDITION: Above responsibilities and duties alongwith other Clauses of the Agreement duly substantiate that the assessee is not a simplicitor contractor rather the assessee is a developer of the project who has taken complete responsibility and risk for the said DFCC Project. Your Honours would observe from the above said details that the DFCC Project duly complies with the conditions laid down for claiming deduction u/s 80IA as follows: i> The Project has been awarded by the DFCCIL (A Government of India Enterprise); ii> The Project is for development of "New Infrastructure facility" as the Government is constructing a new Freight Corridor to provide a safe and sufficient freight transport system; iii> The Project was awarded a....
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....ssessee also explained the various clauses of the agreements entered with various entities to prove that assessee is a developer and not merely a contractor. The basic objection of the AO in denying the claim u/s 80IA was that the enterprise with which the assessee entered into agreement for developing the projects are not statutory bodies. However, the submissions and evidences placed on record suggest that these Companies/Entities were formed under various Ministries of Government of India and, therefore, the contention of the AO that the basic condition of provisions of Section 80IA(4) of the Act was not fulfilled by the assessee is not correct. 22. The second contention of the AO is that the assessee has entered into EPC agreement with Mokama-Munger Highway Ltd. which in turn had obtained a contract from NHAI and, therefore, the assessee is only an EPC contractor for carrying out work awarded by NHAI to Mokama-Munger Highway Ltd. and, therefore, the basic condition of sub-section (4) of Section 80IA is not fulfilled. 23. On perusal of the Letter of Authority (LOA) dated 19.05.2010 which is placed at page 733 of the PB it is observed that the NHAI accepted the assessee JV ....
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..... 13 Insurance 13.1 The Contractor shall provide in the joint names of the Employer and the Contractor, insurance cover from the Start Date to the end of the Defect Liability Period in the amounts and deductibles stated in the Contract Data for the following events which are due to the Contractor's Risks: (a) loss of or damage to the Works, Plant and Materials; (b) loss of or damage to Equipment; (c) loss of or damage of property (except the Works, Plant, Materials and Equipments) in connection with the Contract; and (d) personal injury or death. 21 Possession of the Site 21.1 The Employer shall give possession of all parts of the Site to the Contractor. If possession of apart is not given by the date stated in the Contract Data the Employer is deemed to have delayed the start of the relevant activities and this will be Compensation Event. 27 Programme 27.1 Within the time stated in the Contract Data the Contractor shall submit to the Engineer for approval a Programme showing the general methods, arrangements, order, and timing for all the activities in the Works along with monthly cash fl....
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....ctors shall abide at all times by all existing labour enactments and rules made there under, regulations, notifications and bye laws of the State or Central Government or local authority and any other labour law. ADDITIONAL SPECIAL CONDITION 1 From the date of taking over of site by contractor till the completion of the whole work. the entire responsibility for maintenance of the road portion including the portions where the work is not vet started (in addition to the maintenance of the already executed works) shall lie with the contractor. In case the contractor fails to carry out the maintenance works, he will be notified by the Executive Engineer to execute the same. If the contractor still then fails to carry out the same within 7 days from the date of receiving instruction etc. from the Executive Engineer in writing, the Executive Engineer will be done the work and the cost thereof will be recovered from the contractor's next bill for the works. The maintenance Road as required in the place of work is to be carried out as per the existing provisions of the road i.e. WBM/BUSG/PC/SC as may be applicable as per the director of the Engineer-in-charge. D>....
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....ted that it had charged no interest on such advance receivables as the AE Company is being established by JV Partners in the 50:50 ratio by BSE PL & C&C to provide working capital requirement for crusher unit which was set up in Nepal to provide aggregate as product from boulders as the cost of production in Nepal is quite lower than in India. Therefore, since both the JV Partners are the shareholders in BSE and C&C JV Nepal are the shareholders in such company in equal proportion charging any interest from its own pocket do not have any commercial expediency and, therefore, there is no transaction of any interest which require any benchmarking. However, the TPO in view of the Explanation 1 to Section 92B introduced by the Finance Act, 2012 w.e.f. AY 2012-13 and also relying on the decision of the Delhi High Court in the case of Mkensay Knowledge Center India Pvt. Ltd. Vs. PCIT (96 taxmann.com 237) and applying the principles of the decision in the case of CIT Vs. Cotton Naturals India Pvt. Ltd. (55 taxmann.com 523) the Arm's Length Price of interest on advance given to BSC & C&C Nepal Pvt. Ltd. was determined at 12.51% (9.51% + 300 basis points) and accordingly made adjustment of ....
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....ime. From details submitted your goodself will appreciate that the account balance of M/s BSC C&C Nepal Pvt Limited got converted from a debit to credit in FY 2011-12. Thereafter in FYs 2012-13 to 2015-16 the account remained as debit due of Rs 8.14 crores. In assessments for these years it has never been the case of tax department that the debit balance is either "money advanced" or "sum receivable". The fact that amount shown as debit was not "money advanced" or "sum receivable" is further cemented by the fact that the Debit Balance was subsequently also written off in FY 2017-18. f) Further, it is submitted that applicant is a joint venture between two companies - BSCPL Infrastructure Ltd. and C&C Construction Ltd. having 50% equal share in the profits & loss of the applicant. The foreign AE - BSC C&C JV Nepal Pvt. Ltd. also has two shareholders - BSCPL Infrastructure Ltd. and C&C Constructions Limited having equal share of 50% in the capital of the company. All the transfers made upon closure of the Nepal Company was on account of the JV Partners. Only the transfer of assets (mainly the Crusher) was to the specific work-site of the applicant. Transfer of LCs w....
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....y impact on profits, incomes, losses or assets of the assessee. In view of these discussions, in our considered view, a continuing debit balance per se, in the account of the associated enterprises, does not amount to an international transaction under section 92B in respect of which ALP adjustments can be made. The factum of payment has to be considered vis- a-vis terms of payment set out in the transaction arrangement, and not in isolation with the commercial terms on which transaction in respect of which payment is, according to the revenue authorities, delayed. In any event, even when an ALP is made in respect excessive credit period allowed under the CUP method, stated by the TPO, the comparable has to be dues recoverable from a debtor and not a borrower. It appears that the TPO has adopted interest at the rate of 2.19 per cent LIBOR on balances which exceed 30 days, but LIBOR rate is relevant only in the case of lending or borrowing of funds, and not in the case of commercial overdues. Even assuming that the continuing debit balances of associated enterprises can be treated as 'international transactions' under section 92B, the light course of applying the CUP method, in ....
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....to 2015-16 the account remained as debit due of Rs. 8.14 crores. It was contended that in the assessments for these years it has never been the case of the Department that the debit balance is either "money advanced" or "sum receivable". It was also stated that the amount shown as debit was not money advanced or sum receivable and was subsequently written off in 2017-18 to prove the contention that it is neither money advanced nor sum receivable. 33. At this stage the observations of the Hon'ble Delhi High Court in the case of PCIT Vs. Kusum Healthcare (P) Ltd. (398 ITR 66) are very much relevant and they are as follows: "10. The court is unable to agree with the above submissions. The inclusion in the Explanation to section 92B of the Act of the expression "receivables" does not mean that dehors the context every item of "receivables" appearing in the accounts of an entity, which may have dealings with foreign associated enterprises would automatically be characterised as an international transaction. There may be a delay in collection of monies for supplies made, even beyond the agreed limit, due to a variety of factors which will have to be investigated on a case to ....
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....,77,022/-. It was submitted that the unsecured loan at an interest rate of 24% p.a. is not excessive and unreasonable. It was also further contended that Transfer Pricing provisions are enacted with the object to prevent shifted of profit by declaring lower receipts or higher payments. In the present situation, Mr. B. Krishnaiah is a tax resident of India and is liable to tax at maximum marginal rate and, therefore, it cannot be assumed by any stretch of imagination that the transaction between Assessee and Mr. B. Krishnaiah are not executed on Arm's Length basis and thereby eroding countries tax base and the aforesaid transaction is tax neutral. It was further contended that the assessee JV has taken secured term loan from SREI Equipment Finance Ltd. against machinery @18% which are compounded monthly as the principle amount is repaid on monthly basis. It was contended that the unsecured loans @24% on simple interest are much cheaper than secured loans compounded monthly @18% interest rate. In case of defaults in repayment of secured loans the assessee may face legal action and penal interest which is around 36.5% p.a., whereas for unsecured loans taken from related parties the as....