TaxTMI 
TaxTMI 
2022 (11) TMI 1498
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.... 143(3) read with section 144C(13)/144B and order passed under section 154 r.ws. 143(3) of the Income-tax Act ("the Act") at an income of Rs. 8445,98,12,500 as against the returned income of Rs. 63,25,11,95,270. 1.1 That on the facts and circumstances of the case and in law the order dated 29.07.2022 passed by the AO/NFAC under section 143(3) read with section 144B /144C(13) of the Act, having been passed beyond limitation provided in terms of Section 144C(13) read with section 153(3) of the Act, is illegal being barred by limitation, void ab initio and is liable to be quashed. 1.2 That on the facts and circumstances of the case and in law directions issued by the DRP after the period of 9 months prescribed in terms of section 144C(5) of the Act are barred by Limitation and thus the impugned Assessment order under section 143(3) read with section 144B/144C(13) of the Act passed pursuant thereto by the AO/NFAC is liable to be quashed. 2. That the AO/NFAC erred on facts and in law in completing the assessment under section 143(3) read with section 144C(13)/144B and order passed under section 154 r.w.s 143(3) of the Act at an income of Rs. 84,45,98,12,500, a....
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....the AO as the market price. 3.3 That the DRP/NFAC/AO/TPO erred on facts and in law in not appreciating that the specified domestic transaction of transfer of power by the Captive Power Plants (CPP) of the Appellant was appropriately benchmarked by applying the other method on the basis of rates at which the power is supplied by the State Electricity Boards (SEBs) to third party consumers. 3.4 That DRP/NFAC/AO/TPO erred on facts and in law in considering the rate at which power is supplied by the power generation companies to the State Electricity Boards ('SEBs') as an appropriate comparable for benchmarking the Specified Domestic Transaction of supply of power undertaken by the Appellant. 3.5 That the DRP/NFAC/AO/TPO erred on facts and in law in relying upon the tariff order issued by the SEBs for the purpose of undertaking benchmarking analysis without appreciating that the said rates are for supply for power by power-generation companies to SEBs for further supply to the ultimate customers and not for the consumption by SEBs themselves. 3.6 That the DRP/NFAC/AO/IPO erred on facts and in law in not appreciating that the CPP supplies cont....
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....FAC/AO/TPO erred on facts and in law in enhancing the income of the eligible units under section 80-IC of Pantnagar Zinc and Lead Plant (PLZP) of the Appellant by Rs. 1543,73,18,062; and Pantnagar Silver Metal Plant (PSMP) by Rs. 1068,72,78,348, in the order passed under section 143(3) read with section 144B /144C(13) and order passed under section 154 r.w.s 143(3) of the Act, allegedly on account of Transfer Pricing (TP") adjustment disregarding the arm's length price and the methodical economic analysis and benchmarking carried out by the Assessee in the TP documentation maintained by it in terms of Section 92D of the Act read with Rule 10D of the Income-tax Rules, 1962. 6.1 That the AO/NFAC/DRP/TPO erred on facts and in law in disallowing deduction under section 80-IC of the Act in respect of the eligible units under section 80-IC of Pantnagar Zinc and Lead Plant (PLZP) of the Appellant; and Pantnagar Silver Metal Plant (PSMP) to the extent of Rs. 800,45,96,398 (in aggregate), allegedly on the basis of the order passed under section 92CA(3) of the Act by the Transfer Pricing Officer ("TPO"). 6.2 That the AO/NFAC/DRP/TPO erred on facts and in law in holding ....
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....luding the ruling passed by the Hon'ble ITAT in Appellant's own case. 7. The Ld. TPO/NFAC/AO/DRP erred in facts and in law in making an adjustment of Rs. 66,54,233, ie, 15.86% of Rs. 4,19.56,073 in the order passed under section 143(3) read with section 144B /144C(13) and order passed under section 154 rws 143(3) of the Act, allegedly on account of markup on Business Support Services under normal provisions of the Act. 7.1 That the AO/NFAC/TPO/ DRP erred on facts and in law in ignoring the fact that the Appellant incurred expenses amounting to Rs. 4,19,56,073, towards third-party cost on behalf of its overseas AEs, which were in the nature of pass-through costs not involving any value addition and were rightly charged back without any mark up to the relevant AEs at cost. 7.2 The Ld. TPO/DRP/AO/NFAC erred in facts and in law in making addition of Rs. 66,54,233 on account of TP adjustment mark-up on Business Support Services, not apprecting that the similar adjustment was deleted by CIT(A)-1 Udaipur, in AY 2015-16, and thus the addition made is in violation of the mandatory directions of the DRP in terms of section 144C(13) of the Act. 8. T....
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....rass root expenditure was not incurred in respect of mining areas where the mining license is granted, and no commercial production has yet started and thus were not disallowable in terms of provisions of section 35E of the Act. 10.2 That the AO/ NFAC/DRP erred on facts and in law in not appreciating that the above grass root expenditure was held to be deductible business expenditure by the Hon'ble ITAT, Jodhpur in AY 2011-12 (in ITA No. 246&262/JODH/2017) and in AY 2012-13/ (in ITA No. 404&412/Jodh/2017). 11. That the AO/NFAC/DRP erred on facts and in law in making disallowance in the order passed under section 143(3) read with section 144B /144C(13) and order passed under section 154 r.w.s 143(3) of the Act, of staff welfare expenses of Rs. 23,66,67,865, being the expenses towards canteen facility, school activities, sport club, scholarship, other club, etc. holding them to be not allowable u/s 40A(9) of the Act, as well as holding them to be in the nature of corporate social responsibility expenses disallowable in terms of Explanation 2 of section 37 of the Act. 11.1 That the AO/NFAC/DRP erred on facts and in law in not appreciating that the above ....
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....to assessment order barred by limitation. 3. Before us, the ld. Counsel for the assessee submitted that in terms of the provisions of sub-section (1) of Section 153 of the Act, the assessing officer is required to pass assessment order within twenty one months from the end of the relevant assessment year. 3.1 Sub Section (4) of Section 153 of the Act provides additional time of 12 months for passing the assessment order in cases where a reference is made to the Transfer Pricing officer. Accordingly, the assessing officer was required to pass final assessment order within 33 months from the end of the relevant assessment year and after considering the extended time allowed under Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 the order was required to be passed on or before September 30, 2021. 3.2 The final assessment order was however passed by the assessing officer on 29.07.2022 i.e. much beyond the time limit for passing the final assessment order. 3.3 In terms of section 153(1)/(4) of the Act, and after considering the extended time allowed under Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 the ....
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....onths when there is no reference and when there is a reference, it has to be concluded within 33 months. In the additional 12 months, the draft order is to be passed, the objections have to be filed, the DRP has to issue the directions and the final order is to be passed. The provisions under section 144C and section 153 are not mutually exclusive as both contain provisions relating to Section 92CA and are inter-dependant and overlapping. On remand, prior to amendment as per Section 153 (2A), the Assessing officer is given 12 months to pass a fresh assessment order. Therefore, it is incumbent on him to do so, irrespective of the fact that DRP has completed the hearing and issued the directions or not. As rightly held by the learned judge, we are of the view that the DRP ought to have concluded the proceedings within 9 months from the date of receipt of the Tribunal's order, when it had issued a notice on 19.02.2014 and conducted the hearing as early as on 10.03.2014 and on several dates. The DRP at Chennai, in fact ought to have passed orders before 19.11.2014, even if the date of receipt of the notice is taken as 19.02.2014. In that event, the assessing officer ought to have passe....
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....t for AY 2018-19 also. 6. Sub-section (1) of section 153 prescribes the general time-barring date and it does not override any other provision while section 144C is a code in itself. Sub-section (4) of section 153 prescribes that if any reference is made to the TPO, then time barring date u/s 153(1) is extended by 12 months. Subsection (3A) of section 92CA mandates that TPO is required to pass order u/s 92CA(3) of the Act sixty days prior to the date of limitation u/s 153 of the Act. Sub-section (1) of section 144C overrides all other provisions of the Act. Subsection (4) and (13) of section 144C overrides section 153 and 153B of the Act. The harmonious construction of all these provisions is that the TPO has to pass the order 60 days before the time-barring date u/s 153(1)/153(4) of the Act and without prejudice to any provision u/s 153 of the Act, the AO will pass order u/s 144C(13) of the Act within one month from the end of the month in which directions by the DRP u/s 144C(5) are received by him. 7. The Hon'ble Madras High Court in the case of Roca Bathroom Products Pvt Ltd has held that all proceedings should be completed within the time limit prescribed u/s ....
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...., Board of Revenue 1964 AIR 207 has held that: "It is settled law that a special provision should be given effect to the extent of its scope, leaving the general provision to control cases where the special provision does not apply." (Page-13) ii. The Co-ordinate benches of the Tribunal have consistently held that in a case where reference is made to the TPO, time-limit to pass order u/s 144C(13) would be one month from the end of the month in which directions were received by the AO from the DRP. Time limit specified in section 153 has no relevance, except setting the time limit for the TPO to pass order u/s 92CA(3) of the Act. The landmark order on the issue is in the case of Honda Trading Corporation, Japan v DCIT reported in 61 taxmann.com 233 by Hon'ble Delhi Tribunal, wherein it has been held that: "5.16 We have heard the marathon arguments advanced by both the sides on the point. The controversy which looms large before us is to decide the nature of order referred to in section 153, thatis, whether it is draft order as contended by the ld. AR or the final assessment order as put forth by the ld. DR. We have set out supra the language of section 153....
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....ime limit u/s 153 was enhanced to three years. It means that with the insertion of section 92CA(3A), the time limit for passing of the assessment order continued to be still governed by section 153, though the time limit for passing of the order by the TPO was also set within the overall time limit prescribed u/s 153 for the passing of the assessment order. The provisions of section 144C about 'Reference to the dispute resolution panel', were inserted by the Finance (No. 2) Act, 2009 w.e.f. 1.4.2009. This led to the ushering in the era of passing the draft order. It means that up to the A.Y. 2008-09, when the mechanism of DRP and the passing of draft order was not in place, the final assessment order pursuant to the order of the TPO was required to be passed within the time limit given in section 153. However, when the institution of the DRP and the concept of passing a draft order came into being w.e.f. the A.Y. 2009-10, the time limit for the completion of assessment came to be governed by sub-section (4) or (13) of section 144C. This shows that upon the introduction of section 144C, there emerged two simultaneous time limits for completion of assessments, viz., the one w....
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....on referred to in section 153,..... for making the order of assessment or reassessment or recomputation or fresh assessment, as the case may be, expires'. Since the time limit for passing of the order by the TPO is not direct but is linked with the time limit as per section 153, the legislature did not insert any sunset clause in section 153, which would have otherwise made the provision of sub-section (3A) of section 92CA unworkable without the insertion of a separate corresponding provision giving time limit for the passing of the order by the TPO. This is the answer to the ld. AR's poser that when the time limit for completion of assessment is contained in section 144C, then the provisions of section 153 cannot be read as meaningless except for linking it with draft order. In our considered opinion, it is overt that the time limit u/s 153 is not meaningless as the same has been retained for keeping alive the time limit given to the TPO for passing his order. 5.24 We have noticed above that the term 'draft order' has been statutorily coined u/s 144C(1). It means that the term 'draft order' has been recognized as and is actually different in ambit ....
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.... that for passing a draft order. 5.26. It is a settled legal position that where no time limit is prescribed for passing an order, then such order should be passed within a reasonable time. Section 201 requires the passing of order under sub-section (1) treating a person responsible as an assessee in default in case there is a failure to deduct tax at source or after deduction, there is a failure to pay tax at source. Prior to insertion of sub-section (3) of section 201 by the Finance (No. 2) Act, 2009 w.e.f. 1.4.2010, no time limit was prescribed for the passing of such an order. The Honourable High Courts and the benches of the tribunal across the country have recognized the position that no time limit has been prescribed for passing an order treating a person responsible as assessee in default. Whereas the Hon'ble Calcutta High Court in British Airways v. CIT [1992] 193 ITR 439/[1991] 54 Taxman 470 has held that since no period of limitation for liability has been statutorily given, even the order passed after 6 years is valid, the Hon'ble Delhi High Court in CIT v. NHK Japan Broadcasting Corpn [2008] 305 ITR 137/172 Taxman 230 has held such order in the absence....
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....ed u/s 144C(13). Further since the draft order has also been passed within a reasonable time, the same is also not barred by limitation. The contention of the ld. AR that the draft order passed in this case was barred by limitation, is therefore, found to be without any substance and hence repelled." The Hon'ble Delhi Tribunal again had an occasion to deal with this issue in the case of Religare Capital Markets Pvt Ltd v ACIT and it was held that: 10. We have carefully considered the rival contentions and perused the orders of the lower authorities as well as the time lines which are under challenge before us. We do not have any hesitation in holding that the issues argued by the ld AR are squarely covered against the assessee by the decision of coordinate bench in ITA No. 1132/Del/2015 . The above order of the coordinate bench has clearly covers from para No. 5.22 onwards that in such cases the passing of the final assessment order pursuant to the order of the ld TPO as contained in section 144C(4) and (13), the time limit given u/s 153 has no relation whatsoever with the passing of the draft order, which should be passed within a reasonable time and the time lim....
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....ed in international transaction under Chapter X of the income tax act in terms of section 144C (1) to section 144C (14) of the income tax act. Therefore it is apparent that it is not an assessment scheme as applicable to other assesses. It is a scheme of assessment in respect of matters that included the transfer pricing adjustment. According to the provisions of section 144C (1) and order of the draft assessment proposing a variation to the income or loss as returned by the assessee is to be forwarded to the assessee by the assessing officer. On receipt of that order assessee is given 2 options to be exercised within 30 days of the receipt of the draft order either to accept the draft order and intimate the assessing officer accordingly or to file objections to the proposed variations with the dispute resolution panel and the assessing officer. If the assessee exercised an option to accept the draft order nothing else is required to be done except to complete the assessment on the basis of the draft order. Such order i.e. the draft order becomes the final order when acceptances received or the period for filing of the objection expires. Ifthe objections are filed....
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.... as the assessee. The honourable Madras High Court in 398 ITR 645(2017) CIT vs Sanmina SCI India private limited in para number 7 has held that it is a self-contained code in itself. Thus, the provisions contained therein only determine the timelines of the passing of such order and not as provided u/s 153 of the act. Thus this argument of the assessee deserves to be rejected. 13. Further according to the provisions of section 253 of the Act pertaining to appeals to the tribunal, clause (d) of subsection 1 also separately carves out the appealable order as order passed by the assessing officer under subsection 3 of section 143 of section 147 of section 153A or section 153C in pursuance of the directions of the dispute resolution panel. Further, it may also be possible that in certain circumstances the provisions of section 263 of the income tax act also do not apply to orders passed under directions of the dispute resolution panel. Thus law has seen the assessment passed in pursuance of direction u/s 144C of the Act different from the regular assessment as envisaged u/s 153 of the Act. 14. The further argument of the learned authorized representative is that there....
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....ive value, but it is not binding on the Hon'ble Tribunal, particularly when then various co-ordinate benches have taken the contrary view. It has been held by the Hon'ble Ahmedabad Special Bench in the case of ACIT v Goldmine Shares and Finance Pvt Ltd, 113 ITD 209 that : "54. We do not find any merits in these submissions of Mr. Vora. Firstly, the Supreme Court was dealing with the binding nature of the Supreme Court decision on the High Court, whereas we are dealing with the decision of a High Court and that too of a High Court having no jurisdiction over the case arising from a different State, which though has a high persuasive value is not binding in other jurisdiction. Secondly, the decision of Rajasthan High Court has not dealt with and was also not addressed to deal with the controversy by noticing the non obstante provisions of section 80- I(6)/80-IA(5) aforesaid. Thirdly, in any case the issue before Rajasthan High Court was whether Assessing Officer could be said to be justified to invoke section 154 to rectify the mistake which on a contentious matter is not permitted. Fourthly, a decision without noticing an existing provision of law governing the very issue i....
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....he function of DRP can be taken as extension of the assessment proceedings. DRP is an independent authority and it is not an income-tax authority as defined in section 116. vi. The interpretation of the Hon'ble High Court is not as per legislative intent will also be evident if we take a hypothetical example of a search case. Let us assume that last search authorization in the case was executed on 28.02.2022. In that scenario time limit for completion of the assessment u/s 143(3) for AY 2022-23 will be 31.03.2023 as per the provisions of section 153B(1)(b) of the Act. The person in whose case search was conducted can file return of income till 31.12.2022 u/s 139(4) of the Act. AO is required to issue notice u/s 143(2) and make reference to the TPO well before 31.03.2023. Thereafter time limit to complete the assessment will be extended to 31.03.2024. Now, in this case as per the interpretation of the Hon'ble High Court, passing of draft assessment order u/s 144C(1), issuing directions u/s 144C(5) and passing the final assessment order u/s 144C(13) is required to be done in just 15 months which is practically not possible and blatantly against the provisions of the Act. ....
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....to be passed. The Hon'ble Mumbai Tribunal has observed that- "Coming to the second part, we find that there is no dispute if no draft order was to be issued in this case, the assessment would have been time-barred on 31st December, 2017 but the present assessment order is passed on 17th August. 2018. Once we hold that no draft assessment order could have been issued in this case, as the provisions of section 144C(1) could not have been invoked in this case, the time limit of completion of assessment was available only upto 31st December 2017. The mere issuance of draft assessment order, when it was legally not required to be issued, cannot end up enhancing the time limit for completing the assessment u/s 143(3)." In the present case, there is no dispute that draft assessment order was required to be issued. Once it was so, the order of the Hon'ble Mumbai Tribunal goes against the appellant, rather than supporting its cause. 11(ii). It is true that the Hon'ble Tribunal in Super Brands has allowed the appeal of the additional ground following the judgement of the Hon'ble Madras High Court in Roca Bathroom case, but factual foundations of the above case were....
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....x authorities for the proper administration of the Act and such authorities and all other persons employed in the execution of the Act have to observe these. The income-tax authorities acting anywhere in the country, however, have to respect the law laid down by the High Court, whether of the State in which they are functioning or of a different State, in the absence of any contrary decision of any other High Court. The said circulars and its language, therefore, are not in good taste. Since I am taking a view contrary to that of the Punjab and Haryana High Court, the circulars cannot be quashed." It is clear from the above observations that- (a) There is no finding, there are certain observations. The Hon'ble Court itself dissented from the judgement of the Hon'ble Punjab and Haryana High Court. This is important because Delhi High Court judgement was of Single Bench, wherein three judgements of the Hon'ble Punjab and Haryana High Courts were of Double Bench. (b) The observations were passed in respect of 'income-tax authorities' and not for Tribunals. Tribunal is not an income-tax authority and it cannot shut its eyes if any non-jurisdictional High Cour....
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....ndatorily required to pass proposed order of assessment (hereinafter referred to as 'draft assessment order'). Once the draft assessment order is passed by the assessing officer and served on the eligible assessee, the eligible assessee may within 30 days of receipt thereof either (a) file his acceptance of the variations to the Assessing Officer; or (b) file his objections, if any, to such variation with the Dispute Resolution Panel ("DRP"). [Refer section 144C(2) of the Act]. In case the eligible assessee is to accept the variations made in the draft assessment order or does not file objection thereto within the stipulated time (intending to pursue the appeal remedy before the CIT(A)), the assessing officer in such circumstances has to pass the final assessment order within one month from the end of the month in which the acceptance is received. [Refer section 144C(4) of the Act]. Where the eligible assessee chooses to file objection before the DRP, the DRP is duty bound to dispose of the objections within 9 months from the end of the month in which the draft order is forwarded to the eligible assessee.[Refer section 144C(12) of the Act]. Upon receipt of directions is....
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....nths is prescribed, within which, directions are to be issued by the DRP, failing which any directions are to be treated as otiose. As seen from the timeline discussed in the earlier paragraphs, the original assessment proceedings are to be completed within 21 months and the additional time of 12 months is granted when proceedings before TPO is pending. The TPO has to pass orders before 60 days prior to the last date. Then 30 days time is given to the assessee to file their objection before the DRP and the DRP is given 9 months time and thereafter, within one month from the end of the month of receipt of directions from DRP, the final order is to be passed. This court is not in consonance with the contention of the learned senior panel counsel for the Appellants/ revenue that the time period of 33 months, provided initially is for the draft order and not for the final order. A careful perusal of the timeline would indicate that the time limit is for the final assessment and not for the draft order. The anomaly in the argument is that in the present cases, no fresh draft order was passed, but the DRP had issued the notices. If the contention of the Appellants / revenue was to hold s....
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....her the meaning and intentions. ..... ..... ..... 27. For the reasons set out herein before, we conclude as under: (a) The provisions of Sections 144C and 153 are not mutually exclusive, but are rather mutually inclusive. The period of limitation prescribed under Section 153 (2A) or 153 (3) is applicable, when the matters are remanded back irrespective of whether it is to the Assessing Officer or TPO or the DRP, the duty is on the assessing officer to pass orders. (b) Even in case of remand, the TPO or the DRP have to follow the time limits as provided under the Act. The entire proceedings including the hearing and directions have to be issued by the DRP within 9 months as contemplated under Section 144C (12) of the Income Tax Act, (c) Irrespective of whether the DRP concludes the proceedings and issues directions or not, within 9 months, the Assessing officer is to pass orders within the stipulated time, (d) In matter involving transfer pricing, upon remand to DRP, the Assessing officer is to pass a denova draft order and the entire proceedings as in the original assessment, would have to be completed within 12 months, as the v....
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.... Monthly Paid Employees Welfare Trust, 271 ITR 159 (Delhi) -CIT v. Sarabhai Sons Ltd. : 143 ITR 473 @ 486 (Guj.) -CIT v. Maganlal Mohanlal Panchal (HUF)[1\1994] 210 ITR 580 (Guj.) s The Special Bench of the Tribunal in the case of Maral Overseas Limited v. Addl. CIT: 136 ITD 177 (SB) @ pg 206 (Copy attached as Annexure 2) of the judgement, following the dictum of law laid down in All India Lakshmi Commercial Bank (supra) held that the Tribunal was bound by the only decision of the Hon'ble Karnataka High Court, (on the issue pending before the Special Bench) notwithstanding that the said decision was of the non-jurisdictional High Court. The relevant observations in the said judgement are reproduced hereunder: "57. Applying the proposition of law laid down by the above decision to the facts of the instant case, as the period of ten years from the year of start of manufacture has not expired as on the date when the amended provision came into force, the assessee is entitled to the benefit of tax holiday for the remaining period of ten years. It is pertinent to mention here that in the aforesaid decision, the Hon'ble Karnataka High Court went on to ho....
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....ther of the State in which they are functioning or of a different State, in the absence of any contrary decision of any other High Court. Similar view has been taken in the following cases holding that the Tribunal had to follow the law laid down by a non-jurisdictional High Court where there is no judgment of a jurisdictional Court: - CIT v. Smt. Godavaridevi Saraf [1978] 113 ITR 589 (Bom.) - CIT v. Highway ConstructionCo. (P.) Ltd. [1996] 217 ITR 234 (Gau.) - CIT v. Smt. Nirmalabai K. Darekar [1990] 186 ITR 242/49 Taxman 74 (Bom.) - CIT v. Maganlal Mohanlal Panchal (HUF) [1994] 210 ITR 580 (Guj.)." The Hon'ble Bombay High Court in the case of CIT vs. Thane Electricity Supply Co.: 206 ITR 727, has however, taken a view contrary to aforesaid preponderant judicial position as laid down by the Hon'ble High Courts. The Supreme Court in the case of Union of India and others vs. Kamlakshi Finance Corporation Limited: 1992 Supp (1) Supreme Court Cases 443 / 55 ELT 433 (Copy attached as Annexure 3) emphasized the principles of judicial discipline as under: "It cannot be too vehemently emphasised that it is of utmost importance th....
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.... in section 153(1)/153(4) of the Act is for completion of assessment under section 143(3) and not an assessment completed pursuant to directions of DRP. 2) The Ld. CIT (DR) further contended that section 144C is a later provision brought on the statute now which starts with a non-obstante clause and thus overrides all other provisions including provisions, of section 153 of the Act as well. For that purpose, the Ld. CIT (DR) provide that the Assessing Officer shall notwithstanding anything contained in section 153 pass an assessment order within one month from the end of the month in which the acceptance is received for the draft assessment order or the period of filing of objections expired in which such directions of DRP are received. 3) The Ld. CIT (DR) in his written submissions has, however, sought to contend that "there nothing in section 153 which suggests that time-limit specified in that section will also be applicable to the order 144C(13). He further contended that had this been the intention of the Legislature, then it would have mentioned section 144C(13) in sub-section (1) of section 153 of the Act. It is to be noted that the Legislature consciously ....
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....he matter, the order of the Tribunal to this effect is right in law and calls for no interference." 8) The decision of the Hon'ble Delhi bench of the Tribunal in the case of Super Brands (supra) relied upon by the Appellant was passed by the Hon'ble Tribunal without application of mind. Rebuttal: It is respectfully submitted that section 144C requiring reference to the DRP is part of the procedure of the assessment. The passing of a draft assessment order, filing of objections before the DRP, disposal of objections by DRP and passing of assessment order by the assessing officer in compliance with the directions of the DRP are all part of the procedure for assessment contained in Chapter XIV of the Act. That the assessment completed under section 143(3) / 144C(13) of the Act pursuant to the directions of the DRP is an order of assessment, is further supported by the following provisions: - Section 2(8) of the Act, which defines assessment to include reassessment; - Section 253(1)(d) of the Act governing filing of appeals to the Tribunal by the eligible assessee, which reads as under: "an order passed by an Assessing Officer under sub-sect....
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.... the directions of the DRP under section 144C(13) of the Act is regarded as the assessment order; the same is the only operative assessment in case of an eligible assessee. The submission made by the Ld. CIT DR has, therefore, no legs to stand. The provisions of section 144C(1) mandating passing of draft assessment order in case of an eligible assessee, is an exception to the ordinary rule wherein the assessing officer has to pass only one order, i.e., assessment order under section 143(3) of the Act without passing draft assessment order. The non-obstante provision in section 144C(1) of the Act is to make it mandatory for the assessing officer to pass draft assessment order in the case of an eligible assessee, contrary to the scheme of the Act wherein the assessing officer is required to pass one and only assessment order in the case of all other assessees. Having regard to the aforesaid, the non-obstante clause in section 144C(1) of the Act requiring passing of a draft assessment order in case of an eligible assessee is, therefore, to be read limited to the context, i.e., exception to the ordinary rule that there will be only one assessment order passed by the assessing office....
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....ring to order(s) of assessment in case of non-eligible assessees only, that would amount to creating two separate and distinct categories of assessment, viz., (i) assessment completed without recourse to section 144C; and (ii) assessment completed in pursuance of directions of DRP. Such an artificial bifurcation is not warranted by the scheme of the Act which countenances only one assessment, whether under section 143(3) or under section 143(3) read with section 144C(13) of the Act. Further, if section 153(1) of the Act were to apply only to cases of non-eligible assessees, then, in that situation, the said section would have read as under: "No order of assessment ........... other than an assessment completed in pursuance of directions of the DRP ... .... (words inserted) shall be made under section 143 or section 144 at any time after the expiry of............" In such a situation, exception to the applicability of section 153 of the Act would be achieved by doing violence to the language of the said section and reading words into the statute which are conspicuous by their absence. Having regard to the aforesaid scheme of the Act, it is the respectful submission....
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....sition that the Courts are duty bound to interpret the words of a statute in their ordinary sense as drafted by the Legislature and are not to resort of creative devices of judicial incorporation or modification of statutory language. It is submitted that words used in a statute, in plain and clear terms, serve as the best guide towards determination of legislative intention, and any external device, which enables a construction, contrary to such plain words of the statute, is to be avoided. Additionally, it may be pointed that it is important to bear in mind that the limitation for completing assessment / reassessment is progressively being reduced which shows the conscious intent of the Legislature to ensure speedy finality and certainty of the taxpayer's liability. The Memorandum to the Finance (No. 2) Bill, 2009 while introducing the provisions of section 144C in the statute clarified the legislative intent in the following terms: "The dispute resolution mechanism presently in place is time consuming and finality in high demand cases is attained only after a long drawn litigation till Supreme Court. Flow of foreign investment is extremely sensitive to prolonged u....
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.... the case of CIT vs Roca Bathroom Products Pvt Ltd (Supra), wherein the Hon'ble High Court laid down the law with respect to the time limit for passing final assessment order passed pursuant to Directions of the DRP, which is contrary to the aforesaid decisions of the Tribunal. The Ld. CIT (DR) erroneously contended that the decision of the Hon'ble Delhi Tribunal in the case of Super Brands Ltd. (UK) vs. ADIT (ITA No. 2609/Del/2011) was not dealing with this issue related to limitations, as evident from perusal of the relevant findings of the Hon'ble Delhi Tribunal in paras 27 to 31 of the said judgment. The decision of the Madras High Court in the case of CIT vs. Sanmina Sci India Pvt. Ltd. (Supra) has no relevance to the present controversy dealing with the inter play between section 153, on the one hand and section 144C(13) of the Act, on the other. It is settled law that a decision is an authority for what it decides. [Refer CIT vs Sun Engineering Works Pvt Ltd: 198 ITR 297 @ pg 320]. The finding recorded by the Hon'ble Madras High Court in that case relied upon by the Ld. CIT DR was rendered in a different context. In that view of the matter, it cannot be said that th....
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...., we find that the very recently Delhi Bench-D of the Tribunal, New Delhi in a bunch of cases of Super Brands Ltd (UK) vs. The ADIT Circle 1(1)(2) International Taxation, New Delhi in ITA Nos. 3115/Del/2009, 2609/Del/2011, 654/Del/2014, 189/Del/2015, 4461/Del/2016, 869/Del/2018, 411/Del/2018, 2975/Del/2019, 5223/Del/2011, 5224/Del/2011 and 5633/Del/2012 dated 20.09.2022 have adjudicated identical issue by following the judgment of the Hon'ble Madras High Court in the case of Roca Bathroom Products Pvt. Ltd. dated 09.06.2022 by observing in Para 29 to 31 as under :- "29. The Hon'ble High Court of Madras in the case of Roca Bathroom Products Pvt Ltd in Writ Appeal Nos. 1517, 1519, 1609, 1610 and 1854 of 2021 and CMP Nos. 9656, 9658, 10022, 10023 and 11720 of 2021 had the occasion to address an identical issue. It would be pertinent to refer to the relevant part of the judgment, which is directly on the challenge before us, which is as under: "After an international transaction is noticed subject to satisfaction of section 92B, a reference is made to the TPO under sub-Section (1) of Section 92CA of the Act. Though the provision does not state as to when a referen....
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....ing period shall be extended to 60 days. This implies that not only the time frame is mandatory but also the TPO has to pass an order within 60 days. Further, the extension in the proviso referred above also automatically extends the period of assessment to 60 days as per the second proviso to Section 153. That apart, but for the reference to the TPO, the time limit for completing the assessment would only be 21 months from the end of the assessment year. It is only if a reference has been made during the course of assessment and is pending, the department gets another 12 months as per second proviso to Section 153 (1) and under Section 153(4) after amendment. In Section 153(2A), a time limit is prescribed to the Assessing officer to complete the fresh assessment within one year prior to amendment and after amendment, as per section 153 (3), the time limit has been reduced to 9 months. As per the proviso to section 153 (3) if the order is received after 1st April 2019, the time limit is one year. From the above provisions, it is very clear that various time limits have been prescribed to various mechanisms which form part of assessment proceedings, either original or on remand to e....
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....ings is a continuation of assessment proceedings. To put it further, it is a part of assessment proceedings, once the objections are filed and under section 144C (12) a period of 9 months is prescribed, within which, directions are to be issued by the DRP, failing which any directions are to be treated as otiose. As seen from the timeline discussed in the earlier paragraphs, the original assessment proceedings are to be completed within 21 months and the additional time of 12 months is granted when proceedings before TPO is pending. The TPO has to pass orders before 60 days prior to the last date. Then 30 days time is given to the assessee to file their objection before the DRP and the DRP is given 9 months time and thereafter, within one month from the end of the month of receipt of directions from DRP, the final order is to be passed. This court is not in consonance with the contention of the learned senior panel counsel for the appellants/ revenue that the time period of 33 months, provided initially is for the draft order and not for the final order. A careful perusal of the timeline would indicate that the time limit is for the final assessment and not for the draft order. The....
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....P has to be passed within 30 days from the end of the month of receipt of such directions. The section and the sub-section have to be read as a whole with connected provisions to decipher the meaning and intentions. At this juncture it would be useful to refer to the following decisions: (i) Sultana Begum v. Prem Chand Jain, (1997) 1 SCC 373 at page 381: "11. The statute has to be read as a whole to find out the real intention of the legislature. 12. In Canada Sugar Refining Co. v. R. [1898 AC 735 : 67 LJPC 126] , Lord Davy observed: "Every clause of a statute should be construed with reference to the context and other clauses of the Act, so as, as far as possible, to make a consistent enactment of the whole statute or series of statutes relating to the subject-matter." .......... 14. This rule of construction which is also spoken of as "ex visceribus actus" helps in avoiding any inconsistency either within a section or between two different sections or provisions of the same statute. 15. On a conspectus of the case-law indicated above, the following principles are clearly discernible: (1) It is the duty of the....
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.... [(1997) 1 SCC 373 : AIR 1997 SC 1006])." (iii) Franklin Templeton Trustee Services (P) Ltd. v. Amruta Garg, (2021) 6 SCC 736 : 2021 SCC OnLine SC 88 at page 752: "17. The concept of "absurdity" in the context of interpretation of statutes is construed to include any result which is unworkable, impracticable, illogical, futile or pointless, artificial, or productive of a disproportionate counter-mischief [ See Bennion on Statutory Interpretation, 5th Edn., p.969.] . Logic referred to herein is not formal or syllogistic logic, but acceptance that enacted law would not set a standard which is palpably unjust, unfair, unreasonable or does not make any sense. [Bennion on Statutory Interpretation, 5th Edn., p. 986.] When an interpretation is beset with practical difficulties, the courts have not shied from turning sides to accept an interpretation that offers a pragmatic solution that will serve the needs of society [Id, p. 971, quoting Griffiths, L.J.] . Therefore, when there is choice between two interpretations, we would avoid a "construction" which would reduce the legislation to futility, and should rather accept the "construction" based on the view that draftsmen....
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....comes meaningless. (e) The outer time limit of 33 months in case of reference to TPO under Section 153, would not refer to draft order, but only to final order and hence, the entire proceedings would have to be concluded within the time limits prescribed. (f) The non-obstante clause would not exclude the operation of Section 153 as a whole. It only implies that irrespective of availability of larger time to conclude the proceedings, final orders are to be passed within one month in line with the scheme of the Act, (g) When no period of limitation is prescribed, orders are to be passed within a reasonable time, which in any case cannot be beyond 3 years. However, when the statute prescribes a particular period within which orders are to be passed, then such period, irrespective of whether it is short or long, shall be applicable." 31. As no distinguishing decision has been brought to our knowledge on this additional ground also, the impugned assessment orders are held to be barred by limitation and are, accordingly, quashed." We, therefore, considering the decision of Coordinate Bench of Delhi Tribunal and also following the judicial pronouncem....
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....cause notice [but was merely/ silently captured in computation at end of draft assessment order]. Being so, the impugned order passed without complying with the procedure under Clauses (xx) to (xxx) of sub-section (i) of section 144B of the Act is unlawful is as much as void ab initio and is liable to be quashed. 9.3 In view of the aforesaid, it is the humble submission of the assessee company that the impugned order passed is not only in gross violation of mandatory provisions of section 144B of the Act but also principles of natural justice, and is thus, liable to be quashed at the threshold. 9.4 Without prejudice and in addition to the above, it is submitted that the additions/disallowances amounting to Rs. 65,44,93,450 made in the impugned assessment order passed under section 143(3), read with section 144C(13)/144B and under section 154 read with section 143(3) of the Act on the basis of the adjustments made in intimation issued under section 143(1)(a) of the Act, without discussion / ascribing reasons in the assessment order nor providing any details is even otherwise not sustainable and is liable to be set aside. 9.5 In the aforesaid circumstances, it is respectfull....
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....duced certain excess electricity, which was transferred by the CPPs to outside parties @ Rs. 2.53 per unit. During the impugned AY 2017-18, the eligible units of the Appellant (i.e. CPPs) have generated and supplied 2,265 million units (KWH) of electricity out of which only 66 million units, which accounts for approximately 2.91% of the total transfers, were supplied to outside parties. This evidences that supply of electricity to outside parties is made in limited cases and represents supply of the excess electricity which has not been consumed by the taxable units and has to be either transmitted or destroyed, as the same cannot be stored. Such sale is non-committal in nature and only done in exceptional circumstances where only the excess electricity is sold. The CPP units have also transferred electricity to the taxable units of Appellant taking into consideration the rate at which HZL purchased electricity from SEB. During the FY 2016-17 (AY 2017-18), the market rate at which SEB supplied electricity to Appellant was INR 7.76 to INR 8.64 per KWH. The TPO, however, rejecting the contention of the Appellant MADE held that the price at which the appella....
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....ch 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." Therefore, it was contended that since in respect of transfer of goods and services are now regarded as specified domestic transaction in terms of section 92BA of the Act, to which transfer pricing provisions apply the decisions rendered by the Hon'ble Tribunal in the appellant's case for earlier years cannot simpliciter be followed. The AO thus disallowed the entire deduction u/s 80IA, claimed by the assessee. He further, in terms of the findings of the TPO within the umbrella disallowance, disputed the price of power charged by the assessee's power generating units from the power consuming units invoking the provisions of section 80IA(8) of the Act. 13. In Rejoinder, the ld. Counsel for the assessee submitted that Sec. 80IA(8) ....
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.... There is no dispute that the establishment of captive power plants, use of electricity produced by them and tariff for sale to State Electricity Boards is regulated by Electricity (Supply) Act, 1948 and statutory requirements therein. The Appellant cannot sell the electricity in open market and charge tariff at its will. So, the Appellant has access only to regulated market. The price for power charged by the SEB from the Appellant is the best indicator of the market price of the power for sale of power from CPP units to other units and thus, CUP has been correctly applied by the Appellant. As per TP study a premium of 15% was also charged by the captive power plants on supply of power to the non-eligible units as premium for the uninterrupted power supply. Accordingly, the price charged by the CPP units from the taxable units of HZL was established to be at arm's length. The price for power charged by the SEB from the Appellant is the best indicator of the market price of the power for sale of power from CPP units to other units. Thus the Appellant correctly adopted the current year market price of Rs. 7.76 to Rs. 8.64 per unit for transferring the electricity to other unit....
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....y duty and fixed demand charges from the market price. Regarding Judicial precedent on fair market value of transfer of power from eligible undertaking / CPP to the non-eligible undertaking/manufacturing unit. It is submitted that it is a settled judicial position that for the purpose of determination of eligible profit of a Co-generation power plant, the rate charged by the SEB is to be considered as an appropriate benchmark. Reliance is placed in this regard on the decision of the Hon'ble Chattisgarh High Court in the case of CIT v. Godawari Power & Ispat Ltd.: 223 Taxman 234 (Chhattisgarh) (Mag.). In that case, the Appellant engaged in manufacture of iron and steel, had established a captive power plant in state of Chhattisgarh to supply electricity to its steel division. It had sold power to steel division at same rate, which was charged by Chhattisgarh SEB for supply of electricity to industrial consumers. Appellant claimed deduction under section 80-IA of the Act adopting the said rate. Assessing Officer computed market value of power supplied by Appellant to steel division by taking into account rate charged by Chhattisgarh Electricity Company Limited, Raipur for su....
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....nctioning. The power generating units are allowed to use power for captive consumption and the surplus available, if any, is to be sold transferred to the State Electricity Boards. Section 43 of the Electricity (Supply) Act, 1948 only authorizes the State Electricity Board to enter into arrangements for purchase and sale of electricity under certain conditions. Section 43A of the Electricity (Supply) Act, 1948 also lays down rules and conditions for determining the tariff for the sale of electricity by a generating company to the State Electricity Boards. A perusal of the same reveals that the tariff is determined on the basis of various parameters contained therein. From the aforesaid, it is evident that on one hand it is only upon granting of specific consent that a private person can set up a power generating unit having restrictions on the use of power generated and at the same time the tariff at which a power generating unit can supply power to the Electricity Board is also liable to be determined in accordance with the statutory requirements. In this context it can be safely deduced that determination of tariff between the Appellant and the Board can be said to be an exercise....
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....nsumers/users. Thus, under the given circumstances, it would be in the fitness of things to hold that the consideration recorded by the assessee's undertaking generating electric power for transfer of power for captive consumption at the rate of Rs. 3.72 per unit corresponds to the market value of power. Therefore, on this aspect, we uphold the stand of the Appellant and set aside order of the Commissioner (Appeals) and direct the assessing officer to allow relief to the Appellant under Section 80-IA as claimed. Appellant succeeds on this ground." (emphasis supplied) To the same effect are the decisions of the Delhi Bench of the Tribunal in the case of Jindal Steel and Power Ltd. for assessment years 2000-01 and 2004-05 in ITA No. 3663/ Del/ 2005 and ITA No. 3319/ Del/ 2008 respectively. The appeals preferred by Revenue against the decisions of the Delhi Tribunal in that case for assessment years 2000-01 and 2001-02 have been dismissed by the Punjab & Haryana High Court vide orders dated 02.09.2008 in ITA nos. 544/ 2006 and 53/ 2008 respectively). The aforesaid claim of Appellant has also been upheld by the Tribunal in the case of Jindal Steel and Power Ltd., ....
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....Now let us deal with 'Market Value'. On perusal of the assessment order & all other records, we find that facts with regard to adaptation of 'market value' are clear. The assessee has adopted a 'value' which is market value and the department has substituted the same by another value. The department is contending that the 'market value' as adopted by AO is the most appropriate since it represents price charged by the State Grid to various customers including the assessee. Hence, the same should be considered. The AR of the assessee submits that the value adopted by assessee represents 'market value' since it is based on real transactions between unrelated parties and the details for the same are available in public domain. The issue before us is whether in such situations where there are two or more market values available and if the Assessee has adopted a 'value' which is 'market value', whether it is permissible for the Revenue to still replace the same by another 'market value'. 11. At this stage, it is necessary to refer to the relevant provisions of the Act i.e. Sec 80IA(8), which states that - "Where any goods or services held for the purposes of the eligibl....
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..... ACIT [2007] 107 ITD 141 [Bang][SB] as well as Mumbai Tribunal decision in the case of ACIT Vs. Maersk Global Service Centre (I) Pvt. Ltd [2011] 133 ITD 543 [Mum] wherein while interpreting the Transfer Pricing provisions, the courts have held that it is the assessee who is the best judge to know the transactions undertaken & thus finding out the comparable cases from the vast database available in the public domain. Once the assessee has adopted the same, the AO has to examine whether the same is market price or not. AO has the power to adopt the market price only when the price adopted by the assessee does not correspond to market value. In the present case, we find that the assessee has adopted a rate at which actual transactions have been undertaken by unrelated entities. The volumes of transaction as relied upon are also substantial and hence it cannot be said that the assessee has hand picked 15 some transactions, which are beneficial to it. The DR submitted that since the assessee has itself drawn power from the grid, the grid rate represents the 'best market value' & hence the same should only be adopted. We are not agreeable to the above contention of the department. No d....
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....ing Mills (P.) Ltd. v. DCIT: 141 ITD 238 (Chennai.) - Prabhu Spinning Mills (P.) Ltd. v. DCIT: [2013] 33 taxmann.com 398 (Chennai Trib.) - NR Agarwal Industries Ltd vs DCIT (ITA No. 341-344/Ahd/2012) In view of the aforesaid, your Honour would appreciate that the revenue has been correctly recorded in eligible units of the Appellant based on the rates at which power is supplied by the SEB. Further, the Hon'ble ITAT Jodhpur has also allowed this ground of appeal in ITA no. 179 & 184 for AY 2008-09 (ref. pages 196-206 of CL Paper book), 262 & 246/Jodh/2017 for AY 2011-12 and 404 & 412/Jodh/2017 for 2012-13(ref. pages 570 to 577 of CL Paper book). In view of the foregoing facts and case laws, it is submitted that the disallowance made by the Ld. AO may be deleted. 14. We have heard rival contentions, perused the material available on record and gone through the orders of the revenue authorities. We find that similar issue has been considered by the coordinate bench of the Tribunal in assessee's own case in ITA No. 184/Jodh/2012 dated 04.09.2017 for the assessment year 2008-09 wherein the Tribunal confirmed the deletion of disallowance by observing in para....
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....was inter alia given to Wartsila for a total consideration of Rs 69.24 Crore. In the assessment order also there was no dispute raised on this matter. (iii) No transfer of machinery/plant from other business in excess of twenty percent of value of plant and machinery: - Since the CPPs were totally new undertakings, where the suppliers including Wartsila were required to supply all the plant and machinery; hence the entire plant and machinery were new and not used one. These facts were not disputed by the AO in the impugned order. B. Option to claim deduction in 10 consecutive assessment years out of fifteen years beginning from the year in which undertaking begins to generate power:- i) CPP Debari began generation of power in FY 2002-03. The deduction u/s. 80/A could be claimed in any 10 consecutive assessment years out of block of 15 years (From FY 2002-03 to FY 2016-17). The Appellant has opted to claim deduction for a period of 10 years commencing from FY 2003-04 to FY 2012-13 which is falling under the block of 15 year. In the assessment order also there was no dispute raised on this matter. ii) The CPP Zaw....
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.... Page No 7, wherein it is inter alia stated that your Company placed special focus on power which is a major cost element and apart from taking various measures to conserve energy; .... In addition, a new 29 MW diesel generating station was commissioned at Debari zinc smelter in 2003 in a record time of around 7 months. This will reduce the cost of energy and consequently, cost of production of the Debari smelter. Similar mention was also made regarding CPP installation in the Directors' Report of the Annual Accounts for the AY 2004-05 as well." 8. In fact, this issue also stands covered in favour of the assessee. This decision of this very Bench in assessee's own case for A.Y. 2004-05 is relevant. We extract the relevant portion of this decision which are contained in paragraph nos.2.11 to 2.12 of this order dated 19.08.2011 passed in ITA No.229/JU/2009 for A.Y. 2004-05 as under :- "2.11 We have heard both the parties. It cannot be ascertained form the assessment order that the AO has made enquiry as to allowability of deduction u/s 80IA in respect of Captive Power Plant because the power so produced has been consumed by the assessee in its other undertak....
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....id s.80-IA(l) in the beginning as well as in the last part of sub-s.(4) makes it abundantly clear that such profit or gain could be obtained by one's own consumption of the outcome of any such undertaking or business enterprise as referred to in sub-s.(4) of s. 80-IA. The dictionary meaning of the expression 'derive' in the New Oxford Dictionary of English states 'obtaining something from a specified source'. In s.80-IA(1) also no restriction has been imposed as regards the deriving profit or gain in order to state that such profit or gain derived only through an outside source alone would make eligible for the benefits provided in the said section. 9. Therefore, there is no difficulty in holding that captive consumption of the power-generated by the assessee from its own power plant would enable the respondent/assessee to derive profits and gains by working out the cost of such consumption of power in as much as the assessee is able to save to that extent which would certainly be covered by s. 80/A( 1). When such will be the outcome out of won consumption of the power generated and gained by the assessee by setting up its own power plant, we do not fin....
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....pplication to the case on hand. In as much as we dealt with the issue in the light of s. 80-IA and in particular sub-cl. (iv) of the said section which provides for the benefit even in respect of electricity generation plant established by the assessee and the income derived from such enterprise of the assessee, it will have to be held that the assessee fully complied with the requirements prescribed under s.80-IA in order to avail the benefits provided therein. Therefore, the contention based on the interpretation of the expression 'derived from' can have no application to the case where the provisions of s.80-IA get attracted. 8. Therefore, we do not find any scope to deviate from what was held by this court in the decision dt. 7th June, 2010 in Tax Case (Appeal ) Nos.68 to 70 of 2010. The questions of law are therefore; answered in favour of the appellant. The appeals stand allowed and the impugned orders are set aside. Consequently, connected miscellaneous petitions are closed. Mo costs." The Hon'ble Madras High Court has referred to the decision of SLP of the Department by the Hon'ble Apex Court in the case of CIT Vs. Tanfac Industries Ltd., 3....
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.... ITA No. 404 & 412/Jodh/2017 dated 22.02.2018 for the assessment year 2012-13 in favour of the assessee in para 144 to 149 of its order. We, therefore, respectfully following the decisions of the coordinate Bench of the Tribunal, allow this ground of the assessee by deleting the disallowance. Ground Nos. 4-4.1 relate to disallowance of deduction u/s 80IA of the Act amounting to Rs. 2,64,58,812 for generation and transfer of "Steam" which is included in the profit computed for CPPs at Chanderiya and Dariba. 15. Before us the ld. Counsel for the assessee narrated the submissions as under :- "It is submitted that the eligible units of the Appellant transfer steam to the taxable units on a cost-to-cost basis, without charging any profit margin. The details of transfer of steam from eligible units to other units of the Appellant are provided in the table below: Eligible Unit Sale value (INR Cr.) Cost (INR Cr.) Profit CPP CLZS 80MW 0.85 0.85 0 CPP DSC 160MW 0.31 0.31 0 The TPO held that steam is a by-product of the process of manufacturing power and it bears no cost. In case it was not utilized the same would have been wasted. Since n....
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....imed at Rs. 31,17,36,541/- to show that any specific cost attached to steam which got generated in the course of generation of electricity from coal, is one to be decided in the facts of this year and therefore the assessee's submission that the issue is covered in its favour by ITAT orders in earlier years is not acceptable. The facts in the year under appeal, as relevant to the ground of appeal, 8 (c), are net taken up. 2.4 The transfer of steam from tax exempt CPPs of the assessee to its taxable units, is specified domestic transaction u/s 92BA(iii) and as per Section 92 (2A) any income in relation to a specified domestic transaction has to be computed having regard to the arm's length price (ALP). The AO made a reference to the TPO u/s 92C for determination of the ALP, inter alia, for the transfer of steam." The Ld. CIT (DR) contended that steam generated in the process is by-product and is of no value. Since value of the steam generated is Nil, its cost itself is equivalent to market value and, therefore, no deduction. 17. In Rejoinder, the ld. Counsel for the assessee submitted that the eligible unit should be set up for generation, distribution or generation a....
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....fy for the deduction under s. 80-IA of the IT Act. The Appellant therefore contends that any form of energy produced or generated and/or generated and distributed shall fall within the ambit of expression "power" used in section 80-IA(iv) and the receipts so generated shall qualify for the benefit of section 80-IA. The Appellant places reliance on the decision of Hon'ble Jaipur Tribunal in the case of DCIT vs Maharaja Shree Umaid Mills Ltd.120 TTJ 711(2009) (ref. Page 1016-1019 of CL Paper Book) in which it has been held that the income from the sale of power by a power generating unit is a receipt from the business eligible for deduction under section 80IA. The Court while dismissing the revenues appeal in this regard observed as under: "we fully concur with the decision on the issue arrived at by learned CIT(A) that appellant is in the business of generation of power and that the steam so generated by the industrial undertaking and receipt from the business of industrial undertaking is within the meaning of s. 80-IA which would qualify for this benefit. The first appellate order is thus upheld. The ground is thus rejected." The Appellant further places reliance on ....
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....squarely covered by the decision of Coordinate Bench of the Tribunal in assessee's own case in ITA Nos. 404 & 412/Jodh/2017 dated 22.02.2018 for the assessment year 2012-13 wherein the Tribunal by following its earlier order in assessee's own case in ITA Nos. 179 & 184/Jodh/2014 dated 04.09.2017 for the assessment year 2008-09 adjudicated the issue in favour of the assessee by observing in para 64-65 as under :- 64. "We have heard the rival submissions and perused the material on record. We find that this issue now stands covered in favour of the Assessee in view of the judgment of the co-ordinate bench in the Assessee's own case dated 04.09.2017 for AY 2008-09, wherein it was held as under:- 270. Having considered the facts of the case and the decision cited at the bar, we hold that the there was no ground for the to disallow the deduction in respect of transfer of steam u/s 801A. This issue has been considered by not only the Hon'ble Madras High Court but has also been considered by the Coordinate Bench in favour of the Assessee. The Coordinate Bench in the Maharaja Shree Umaid Mils (supra.) has observed as under:- "3. The learned Departmental R....
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....and cannot be drawn from the other sub-clause. He submitted that the word 'power' used in section 80 ) has not been specifically defined for the purpose of relevant provisions. As such, the dictionary meaning of the same need to be looked into like, there are transmission and distribution lines for electricity, there are transmission and distribution lines for steam too. He submitted further that in the present case of undertaking, power generation unit of the assessee was conceived ab initio to have the system of waste heat recovery for generation of steam of required pressure which could also be made available for the operations of the textile unit of the assessee. The steam so generated through the attachment of power generation unit, was by using the residual heat being exhausted by the engine while producing electric power. Such steam is thus generated as a bye-product of plant for generation of electricity. The textile unit would have itself had to generate steam for its use if the same were not available to it from the power generation unit, as was being done there before. The learned Authorised Representative also reiterated submissions made before the lower authori....
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....ting station for the purpose of giving supply to its any premises or enabling a supplier to be so given. The Assessing Officer has tried to point out the intention of the Legislatures by referring to section 80-1A(4)(iv)( b) to infer that intention is to provide benefit to the generation of electricity only, since in the sub-clause (b) transmission and distribution lines are mentioned which can be of electricity only. Submission of the learned Authorised Representative in this regard to which we also agree remained that sub-clauses (a), (b) and (c) of section 80IA(4)( iv) provide for deduction in the cases of three types of undertaking viz. the one which is engaged in generation or generation and distribution of power; second, which start transmission or distribution lines; and the third, which undertakes substantial renovation and modernization of the existing network of transmission or distribution lines. All these three clauses deal with the three different categories of the undertaking. These three types of undertakings referred to in the said sub-clauses (a), (b ) and (c) are different and independent of each other. Thus while dealing (with) one sub-clause, inference need not ....
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....d the Tribunal. Under these circumstances, we fully concur with the decision on the issue arrived at by learned CIT(Å) that assessee is in the business of generation of power and that the steam so generated by the industrial undertaking and receipt from the business of industrial undertaking is within the meaning of section 80-1Å which would qualify for this benefit. The first appellate order is thus upheld. The ground is thus rejected. " 271. Thus, respectfully following the decision of the Hon'ble Madras High Court as well as decision of the Coordinate Bench we confirm the order of the CIT(A) and dismiss this ground of Appeal of the Revenue. " 65. Hence, in view of the above ground No. 27 to 34 stands allowed in favour of the Assessee." We, therefore, respectfully following the consistent view taken by the Co-ordinate Bench of the Tribunal as referred hereinabove, allow the ground of the assessee. Ground Nos. 5-5.2 relate to allocation of head office expenses to eligible units: 19. Before us, the ld. Counsel for the assessee submitted as under :- "At the outset, the Appellant would like to respectfully submit that while preparing the ....
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....r of the units and made total addition of Rs. 50.99 Cr. 20. On the other hand the ld. D/R contended that head office is only the cost center and not a profit center. Reference made to the observations of the TPO at page 63 of the TPO's order which reads as under: "6.9 The plain reading of subsection (8) of section 80 IA makes it clear that the benefit provided under this section is bound by certain limitations. The assessee is required to fulfil certain conditions to claim the above deduction. This sub section makes sure that the benefit of deduction is fair and reasonable and the quantum of deduction is such that it actually accrues. Therefore the intention of the legislature seems to be two fold, firstly it seeks to provide 100 % tax deduction on certain eligible business activities but at the same time it aspires to limit such benefit to the real eligible beneficiaries and to a quantum of profits that could be treated to have been reasonably derived from eligible business. The details of the expenses made by the exempt units of the assessee are tabulated hereunder as 6.10 In this backdrop, the case of the assessee was analysed and it is found that there is n....
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....s transfer in terms of section 80IA of the Act and, therefore, the same is to be taken into account for determining the profit eligibility for deduction under section 80IA for the eligible unit. 21. In Rejoinder, the ld. Counsel for the assessee submitted as under :- "The Appellant submits that the action of the TPO/AO in apportioning the expenditure incurred is not sustainable and is liable to be deleted for the following reasons - (a) The profits and gains to be derived from the eligible business As per the provisions of section 80IA (1) and 80IC of the Act, profit of the eligible units under the respective sections is to be computed by reducing the expenditure from the income of specific undertaking and expenditure /income can be treated as derived from that undertaking. The expenditure incurred by the eligible unit, in order to be reduced for computing profit of the eligible unit, should have direct nexus with manufacturing activity of the specific undertaking and expenditure /income can be treated as derived from that undertaking only if direct nexus between the expenditure/income of that undertaking can be established. There cannot be any d....
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....mate connection with the industrial undertaking eligible for deduction under the Act. These expenses would have been incurred otherwise also had there been no tax benefit units in existence and these expenses represent common corporate expenditure which cannot be allocated or assigned to any particular unit or activity. The TPO/AO while making the apportionment has taken all the expenditure incurred at the HO and went ahead in reducing the deduction u/s 80IA and 80IC of the Act, which in the humble submission of the Appellant, is not a correct legal position in view of the above discussion. Hence is liable to be deleted. (b) Separate books of accounts maintained for each of the unit The CPPs, HZP, and WPPs are autonomous units and maintain the books of account separately by its dedicated staff and cost is accounted for in the books of the respective units and the functioning of these industrial undertakings are independent. Further it is submitted that the separate books of accounts so maintained for CPPs Chanderiya , Dariba and Zawar; HZP; and WPPs have been duly audited by a firm of Chartered Accountants and a certificate in form No. l0CCB have been enc....
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....0.97 Cr, Rs. 57.44 Cr respectively were determined to be apportioned for CPPs Chanderiya 80MW, Zawar 80MW CPP, CPP Dariba 160 MW and Pantnagar lead and Zinc plant respectively and in the case of WPPs Rs. 2.07 Cr on the basis of turn-over while computing the eligible profits. The TPO also held that the head office expenses and the depreciation on the common assets have to be apportioned on the basis of turnover and not on the basis of number of employees . For arriving at the amount of disallowance, the TPO has worked out the percentage of HO expenses to the Total expenses of HZL which worked out at Rs. 337.97 Cr being 32% of total head office expenses and arrived at an amount of Rs. 7.97 Cr and added the same with total HO expenses for depreciation on HO assets and apportioned total amount of Rs. 345.94 Cr on the basis of turnover of the units and made total addition of Rs. 50.99 Cr. In line with the findings of the TPO the AO has made additions on account of apportionment of head office expenses whilst calculating the deduction u/s 80IA and 80IC of the Act. Section 80IA (8) is not applicable at all in the present case of the Appellant. Section 80IA(8) of the act applies where the ....
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....permissible expenditure in earning the income from that head is deductible; and (iii) in computing the 'profit and gains of business or profession' when an assessee is carrying on business in various ventures and some among them yield taxable income and the others do not, the question of allowability of the expenditure under s. 37 of the IT Act, 1961, - will depend on : (a) fulfillment of requirements of that provisions, namely that (i) the expenditure should not be in the nature of capital expenditure or personal expenses of the assessee; (ii) it should have been laid out or expended wholly and exclusively for the purposes of the business or profession; and (iii) it should have been expended in the previous year: and (b) on the fact whether all the ventures carried on by him constituted one indivisible business or not; if they do the entire expenditure will be a permissible deduction, but if they do not, the principle of apportionment of the expenditure will apply, because there will be no nexus between the expenditure attributable to the venture not forming an integral part of the business and the expenditure sought to be deducted as the business expenditure of the assessee. Held....
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....see. 3. A perusal of the order of the Tribunal shows that it followed the orders relating to assessment years 1981-82 to 1991-92 dated 28.5.2002 deciding the issue in favour of the assessee. Thus, the assessee's appeals were allowed. Learned counsel for the assessee placed before this Court the Tribunal's order passed in the assessee's own case on the identical claim dealt with under paragraph 28 of the order relating to assessment year 1984-85, paragraph 53 of the order relating to assessment year 1987-88 and paragraph 77 of the order relating to assessment year 1990-91. The Tribunal pointed out that the Head Office monitored the requirement of finance and other action which were necessary for running all the units. Consequently, the administrative expenses though relatable to the various units, are expenses incurred in general, towards the well-being of the business. Thus, the Tribunal granted the relief to the assessee holding that the Head office expenses could not be proportionately distributed among the various units or allotted to any particular unit independently. The order passed by the Tribunal had not been canvassed by the Revenue before this Court b....
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....tations Ltd. [1981] 130 ITR 908 6. As far as the above stated decision is concerned, the deduction is based on Rule 5. In the absence of any specific provision in the Income Tax Act, and more so in the absence of any such provision, there being no material to show that the expenditure though common were with reference to individual units relatable to the income earned, we do not find any justifiable ground to accept the plea of the Revenue. The assessee had taken the contention that the expenses incurred was for the overall management of the units as well as for providing finance. In the circumstances, the decision of the Apex Court is misplaced. 7. As far as the decision of the Madhya Pradesh High Court in Prestige Foods Ltd.'s case (supra) is concerned, the assessee did not furnish the expenses incurred by the units for the purpose of considering the deductibility. The Madhya Pradesh High Court viewed that in the absence of any details being made available by the assessee to establish that the particular expenses were incurred for its particular unit out of its two units, the expenses had to be treated as one for both the units which has to be divided based ....
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.... that the expenses are duly apportioned and the word derived from has a wide import and be construed accordingly. 9.2 We have heard the rival contentions, perused the material available on record and gone through the order of the authorities below. The identical issue was in the ITA No. 612/JU/2009 we have decided this issue in para 10.2 by observing as under:- "10.2 We have heard the rival contentions, perused the material available on records and gone through the orders of the authorities below. We find that the identical issue was in the year 2004-05 in ITA No.235/JU/2008. The coordinate Bench has decided the issue in Para 17.9 holding as under:- "17.9 We have heard the rival contention and perused the material available on record. It is settled law that when the assessee claims any allowable deduction the explanation and evidence submitted in this behalf is to be objectively considered by Id. AO. In case of any infirmity in the claim, the same should be effectively dealt and the claim should be denied by proper discharge of onus. Without effective rebuttal and objective consideration assessee's beneficial claim cannot be disallowed on assumptions ....
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....at other units of the Company cannot use the fixed assets, like permanent residential buildings of Udaipur unit which are wholly and exclusively for the operation of Udaipur unit only; there is no basis to assume that they were even impliedly used by other operating units including CPP. Consequently there being no direct nexus between two independent industrial units the question of proportionate apportionment of their user or depreciation to CPP does not arise. Moreover, it has been demonstrated that the Udaipur based office equipment, furniture, fixtures, computers, motor vehicles etc. are also exclusively used for the day to day working of Udaipur Unit and they can in no way be supposed to be used for CPP. Since respective units retain control over their assets, they have no occasion of user by CPP. Rom the facts and circumstances emerging form the record and contentions. We observe that: a) No allocation of Ho and other expenses is justified since such expenditure on Ho and other units was incurred even prior to setting up of eligible CPP unit. b) The assessee is primarily engaged in the activities of mining and manufacturing of Zinc and lead metals. This busi....
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....us between alleged proportions of expenses with power generation operations of PP unit situate at Debari, Ld. CIT(A) has rightly deleted the reduction in 80IA claim. i) The Legislature has used the words "derived from" in contradiction to the words "attributable to" in other sections. a. In the case of Cambay Electric supply Co vs. CIT 1978 CTR (SC) 50: (197) 113 ITR 84 Hon'ble Supreme Court has squarely held that the Words ''derived from" have been used by the legislature in restricted sense as the Words ''attributable to" are much wider in meaning than the words "derived from" b. Hon'ble Supreme Court in the case of IT vs. Sterling Foods (1999) 153 ITR CTR (SC) 439: (1999) 237 ITR 579 (SC) has held that or application of the words ''derived from' There must be a direct nexus between the profits and the activity of the industrial undertaking, consequently, it is by now a settled proposition that remote or indirect nexus would not be sufficient for application of the words "derived from" c. In the case of IT vs. Strawboard Manufacturing Co Ltd. [(1989) 177 ITR 43] in the context of deduction under section BOE, ....
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....or's fees, auditor's fees and donation for charity. To this extent, the order of the Ld. CIT(A) is modified This ground of the Revenue's appeal is partly allowed for statistical purposes." 9.3 There is no change into facts and circumstances. Therefore, taking a consistent view, we restore this issue to the file of the Assessing Officer for re- computing the reduction of deduction u/s 80IA. The Assessing Officer would restrict the apportionment to the extent of Director's fee, charity and donations. The Ground no. 8 is partly allowed as discussed hereinabove for statistical purpose." The above view has been affirmed by the decision of the Hon'ble Jodhpur Bench of the Tribunal in the assessee's own case pertaining to AY 1992-93 to 2011-12 (ref. pages 214-218 of CL Paper book) (ref. pages 349 of CL Paper book) and also for AY 2012-13 (ref. pages 461-465, 475-476, 492 ,523 of CL Paper book) which the Hon'ble Tribunal has categorically held that turnover cannot be the basis for apportionment of Head Office expenses. The relevant finding is reproduced here under for your ready reference: 267. He also submitted that as rightly pointed out by the ....
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....for allocating expenditure of the Head Office to the eligible units he make the exception in respect of directors fee, auditors fee and donation for charity. However, we direct the Assessing Officer to apportion such expenditure on a reasonable basis and not on the basis of turnover as was done by him in the Assessment Years. For these utterly support from the decision of a Coordinate Bench in the case of ACIT Vs. P.I. Industries (144 TTJ 353) (Jodhpur) where the Tribunal has disapproved the turnover basis for allocating common expenditure. Given the nature of these expenses it would be seen that the auditors have contention and expenses for charity cannot rely be attributed to any particular unit as these are genuine expenses and in our opinion only such expenses should be attributed which have a direct bearing of the business activity." It is the humble submission of the assessee that that the TPO/AO has erred in apportioning the head office expenses and depreciation on assets at head office and thereby reducing the quantum of deduction allowable u/s. 80IA and 80IC. Without prejudice, allocation of head office expenses to eligible units: Further, it is ....
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....TA No. 235/JU/2008. The coordinate Bench has decided the issue in Para 17.9 holding as under:- "17.9 We have heard the rival contention and perused the material available on record. It is settled law that when the assessee claims any allowable deduction the explanation and evidence submitted in this behalf is to be objectively considered by ld. AO. In case of any infirmity in the claim, the same should be effectively dealt and the claim should be denied by proper discharge of onus. Without effective rebuttal and objective consideration assessee's beneficial claim cannot be disallowed on assumptions and intendments. It is also settled jurisprudence that while interpreting the beneficial legislations a liberal approach should be adopted. This is so as a very strict interpretation will defeat the legislative intent of encouraging captive power plants in electricity starved nation in general and power short state of Rajasthan. Provisions of Sec. 80IA of the IT Act are undoubtedly beneficial in nature, so in case of ambiguity about its interpretation a liberal approach is mandates by settled judicial precedents. The undisputed facts which emerge from the record indicate that as....
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....o exclusively used for the day to day working of Udaipur Unit and they can in no way be supposed to be used for CPP. Since respective units retain control over their assets, they have no occasion of user by CPP. Rom the facts and circumstances emerging form the record and contentions. We observe that: a) No allocation of Ho and other expenses is justified since such expenditure on Ho and other units was incurred even prior to setting up of eligible CPP unit. b) The assessee is primarily engaged in the activities of mining and manufacturing of Zinc and lead metals. This business of the assessee is one and indivisible from CPP unit. In the absence of any direct nexus the apportionment is not mandated by the correct interpretation of sec 80IA. c) It has not been rebutted that after the commencement of CPP activity there was no increase in the HO expense relatable to employee's remuneration & benefits an Administrative expense as a whole, in comparison to the earlier year. Rather HO expenses for the year under consideration have been reduced drastically. Thus there is no reason to assume any notional increase in these expenses after the commencement of CPP De....
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....b. Hon'ble Supreme Court in the case of IT vs. Sterling Foods (1999) 153 ITR CTR (SC) 439: (1999) 237 ITR 579 (SC) has held that or application of the words "derived from". There must be a direct nexus between the profits and the activity of the industrial undertaking, consequently, it is by now a settled proposition that remote or indirect nexus would not be sufficient for application of the words "derived from". c. In the case of IT vs. Strawboard Manufacturing Co Ltd. {(1989) 177 ITR 43} in the context of deduction under section 80E, Hon'ble Supreme Court held that: "The provision for rebate has been made for the purpose of encouraging the setting up of new industries. It is necessary to remember the when a provision is made in the context of a law providing for concessional rate of tax for the purpose of encouraging an industrial activity, a liberal construction should be put upon the language of the statute. In our view, the controversy in question stands squarely covered by the case of Zandu Pharmaceuticals Works Ltd. (supra) in favor of the assesee. In this case assessee incurred expenditure for the R & D work in the HO and there were independent m....
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.... the Jodhpur Bench of the Tribunal in the assessee's own case in ITA No. 184/Jodh/2012 dated 04.09.2017 for the assessment year 2008-09 by observing in para 277 as under :- "277. Having considered the submissions of the parties we find the contentions raised by the ld. A/R to be correct and note that one of disputes raised by the Assessee in the earlier order was also on the basis of allocation. However, we direct the Assessing Officer to apportion such expenditure on a reasonable basis and not on the basis of turnover as was done by him in the Assessment years. For this we find support from the decision of a Coordinate Bench in the case of ACIT vs. P.I. Industries (144 TTJ 353)(Jodhpur) where the Tribunal has disapproved the turnover basis for allocating common expenditure. In our opinion only such expenses should be attributed which have a direct bearing of the business activity. With these observations this ground of revenue is partly allowed." On the very same issue the Coordinate Bench of the Tribunal in ITA No. 246/Jodh/2017 dated 04.09.2017 for the assessment year 2011-12 observed in para 509 as under :- "509. We find that similar issue has been consider....
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....is (FAR analysis) undertaken by the Appellant and disregarded the TP documentation maintained by the Appellant, stating that the refining units of the Appellant do not perform any significant function in the manufacturing of the final product of HZL and accordingly, the FAR analysis undertaken by the Appellant is incorrect. Further, the Ld. TPO has proposed to reject the economic analysis undertaken by the Appellant [using Transactional Net Margin Method (TNMM) as the MAM] and has applied the Profit Split Method (PSM) for determining arm's length price for transfer of cathode. TPO held in the impugned TP order that the cost plus approach adopted by the Appellant for valuing the transfer of semi-finished/ intermediary goods from the noneligible units to the eligible units of the Appellant is inappropriate and has applied PSM Method (considering the processing cost incurred as the allocation key). 24. On the other hand, the ld. D/R contended as under :- (i) The Ld. CIT (DR) contended that in the Pantnagar Silver Metal Process ("PSMP") unit significant value addition to semi-finished cathode ingots is not made and only marginal refinement / reduction in the impuri....
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....herefore Profit Split Method was rightly applied by the TPO. 25. In Rejoinder, the ld. Counsel for the assessee submitted regarding Manufacturing Process of PSMP Unit as under :- "At the outset, the Appellant would like to submit that HZL has zinc, lead and silver refining facilities at Pantnagar in the state of Uttarakhand, which are eligible for claiming deduction u/s 80IC of the Act. These units input cathode sheets, which are semi-finished goods manufactured by the smelting units of HZL, and produce zinc, lead and silver ingots for ultimate sale to the customer. The manufacturing process at the refining units is explained below: (i) The cathode sheets are transported to the refining units of HZL through containerized trucks, either by rail / road, in bundles, each weighing approx. 2.5 - 2.8 MT with MS strapped. The bundles are unloaded by the forklift and kept in the storage yard. (ii) These cathode bundles are unstrapped manually by cutter and with the help of forklift they are taken to the charging floor. The cathode sheets of approx. 1MT to 1.5 MT are charged in the furnace through the chain rollers charging system. (iii) These sheets a....
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....d does not have much value and the value added by the refining process to the metal enables it to fetch the premium prices in the market. The statement of Mr. Rajesh Dua and others referred to by the Ld. CIT (DR) does not contradict the aforesaid factual position regarding the manufacturing process. Mr. Rajesh Dua in his statement has merely submitted that as he comes from financial background and is not familiar with the manufacturing process. He thus submitted in the statement that was not competent to provide details / make statement with respect to technical aspects and would consult the concerned technical department and submit reply / revert on the same thereafter. [Ref. Pg 61 of the compilation filed by the Ld. CIT (DR)]. In the statement of Mr. Ramesh J. Parmar placed at pages 64 to 71 of the compilation filed by the Ld. CIT (DR) only confirms and corroborate the aforesaid manufacturing process undertaken at PSMP plant. It is also confirmed in the said statement that the raw material, i.e., zinc, cathode, sheets received from plants in Rajasthan are further refined at PSMP which results in reduction of 2-2.5% of waste material, viz., zinc dross and consequ....
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....lled transaction is the provision of services. Unquote Thus, the approach of supplying semi-finished goods from non-eligible units to eligible units on a total cost plus basis is in line with the guidance provided by the OECD. In the instant case, since the gross cost is not easily available, variation of total cost was considered for pricing the semi-finished goods transferred to eligible units. In this regard, the attention of your goodself is also drawn to the discussion in respect of most appropriate method as captured in the TP Documentation of the Appellant. It is further submitted that the appellant has undertaken a detailed economic analysis wherein suitability of every method was examined and TNMM was selected as the most appropriate method considering the nature and characteristics of the transactions undertaken between the eligible and non eligible undertaking. (Detailed functional and economic analysis at Pg 419-434 of paper book Vol 2). Further, on the basis of the aforesaid analysis, the appellant selected functionally comparable companies engaged in mining and production of aluminium and copper. It is submitted that such companies ....
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....Therefore, there is no basis for the Assessing Officer / TPO to reject the accepted methodology of benchmarking of such transfer of semi-finished goods undertaken by the appellant and instead of applying Profit Split Method. It is further respectfully submitted that in terms of section 80IA(8) what is required to determine is market price of the goods and services transferred. Section 80IA(8) does not provide determination profit of the eligible undertaking and for that reason also it is not open for the TPO to embark upon profit determination by resorting to Profit Split Method. For the aforesaid cumulative reasons action of the AO/TPO in rejecting Transactional Net Margin Method consistently applied by the Appellant. In line with Indian Excise Laws The Appellant's approach of adding 10% mark-up on cost of producing cathode for transfers to eligible units is also in line with Rule 8 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 ('Central Excise Rules') which reads as following - Quote Where the excisable goods are not sold by the Appellant but are used for consumption by him or on his behalf in the ....
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....n the above facts, the Appellant submits that once the pricing basis is in accordance with the norms/rules provided in one of the government legislation, such basis should not be interfered unless it is shown that such transfer is vitiated by fraud, bias or a patent mistake. Under the TP provisions too, rule 10B(2) of the Income-tax Rules providing that the comparability of an "international transaction" or a specified domestic transaction, with an uncontrolled transaction shall be judged with reference to, inter alia, "...the laws and Government orders in force". [refer clause (d) Rule 10(B)(2)]. In the present case, it is reiterated in terms of the Central Excise laws the transfer price of the semi-finished goods, viz., cathod are to be at cost plus 10% mark up and the same has mandatorily required to be followed by the appellant. The aforesaid requirement under the Excise law would have to be taken into consideration for evaluating comparability of the specified domestic transaction in terms of the Rule 10B(2)(d) of the Income-tax Rules. In other words, the said price of cost plus 10% adopted by the appellant as the transfer price for determining the profit of ....
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.... in the AY 2012-13 for Pantnagar Zinc and Lead Plant (PLZP). For the AY 2009-10 the then Ld. AO had verified the claim in detail and allowed the Appellant's claim on merit after due verification of all facts and discussion in by way of a speaking order on the subject. While verifying and allowing the claim of the Appellant, the then AO had observed as following in his order for the AY 2009-10 (ref. Page 1681 - 1687 of the CL Paper Book): Quote "(''PARA 12. DEDUCTION U/S 80IC IN RESPECT OF HZL PLANT (HZP) The Appellant has claimed deduction u/s 80IC at Rs. 118,26,40,303/- in respect of income from HZP. To examine this claim, following queries were raised. "You have claimed deduction u/s 80IC at Rs. 1182640303/- in respect of HZP plant Haridwar. In this regard, you are required to furnish the following information:- a) Whether the undertaking fulfills the conditions laid down in sub section 3 of section 80IC. Please give detailed reply in respect of each condition. b) Explain in details whether provisions of sub section 2 of section 80IC apply to your unit. c) Also furnish information as has been asked in the case of CPP ....
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....purchases and sales including those of capital goods) with narration nature of transactions (furnish only gross figures of different nature of transactions). c) How the cost of Zinc Cathode has been valued. Furnish costing per metric ton with appropriate breakup of expenses taken into account. Also furnish the quantitative statement of Zinc Cathode." 12.2. During the course of hearing vide order sheet entry dated 23-11- 2011 Appellant was further required to furnish details of HO expenses and to explain why these may not allocated to HZP to work out eligible income. 12.3. In response to above queries, vide reply No. 6 dated 03-11-2011 (part ii), reply No. 7 dated 23-11-2011 and reply No. 9 dated 13-12- 2011 the Appellant interalia furnished following information:- 1. Process flow chart showing charging of cathode, use of various chemicals in electric induction furnace for melting cathode, production of buy production like dross and metallics, use of graphite pumps, casting, stamping, clamping etc. It was also explain that zinc ingots so produced contains 99.995% purity and used in galvanizing, manufacturing of zinc oxide, die casting etc. ....
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....ministrative and other expenses related to HZP have been booked. 12 Appellant furnished copy of possession letter dated 04-10-2007 showing possession of plot No. 2D1 Sector-10 in Industrial Estate, 2E, Haridwar. 13 Appellant furnished a map and a printout of Sidcul State Infrastructure and Industrial Development Co-operation of Uttaranchal taken from their website to establish that their factory is situated in eligible area where 100% under the I.T. Act is eligible. Further vide reply 10 dated 27-11-2011 the Appellant produced certified copy of letter received from Regional Manager, Sidcul IIE - Haridwar certifying that the plant of Hindustan Zinc situated at 2D-1, Sector10, IIE-Haridwara Uttar Khand is situated in notified area Salempur Mehdood in Khasra No. 545 which has been notified by the Government of India vide notification bearing No. SO741(E) dated 28-06-2004 as amended by Notification No. 283/2006(F.No. 142/30/2005-TPL dated 03-10-2006) for the purpose of allowing deduction u/s 80IC. Further Appellant also furnished certificate of Tehsildar Haridwar certifying that the unit of the Appellant is situated in Khasra No. 545 which has been notified for granti....
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....22.02.2018 for the assessment year 2012-13 allowed the ground of the assessee by following its earlier decision in ITA No. 246/Jodh/2017 vide order dated 04.09.2017 for the assessment year 2011-12 by observing in para 88 to 89 as under :- "88. We have heard the rival submissions and perused the relevant material on record. The co-ordinate bench in the Assessee's own case for AY 2011-12 vide its order dated 04.09.2017 has decided the issue in favour of the Assessee whilst holding as under:- "533. We have given our anxious consideration to the issue at hand as well as the submissions made before us. Before we adjudicate the issue, it would be relevant to refer to the provisions of Section 801Å (8) of the Act (as applicable for assessment year under consideration) - (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, or where any goods [or services] held for the purposes of any other business carried on by the assessee are transferred to the eligible business and, in either case, the consideration, if any, for such transfer as recorded in the accounts of ....
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....bad decision in the case of Cadila Healthcare (supra) where it has been very clearly held that before invoking the provisions of Section 801Å (8), the A.O. must first discharge the onus of bringing on record the market price of such goods. At this juncture, we are reminded of the decision of the Hon'ble Supreme Court in the case of CIT Vs. B.C. SrinivasaSetty [19811 128 ITR 294 (SC)where the Hon 'ble Supreme Court made the following observations: - "8. For the purpose of imposing the charge, Parliament has enacted detailed provisions in order to compute the profits or gains under that head. No existing principle or provision at variance with them can be applied for determining the chargeable profits and gains. All transactions encompassed by section 45 must fall under the governance of its computation provisions. transaction to which those provisions cannot be applied must be regarded as never intended by section 45 to be the subject of the charge. This inference flows from the general arrangement of the provisions in the Income-tax Act, whereunder each head of income the charging provision is accompanied by a set of provisions for computing the income subjec....
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....ction under Section 263, "was not able to point out any error, deficiency or short coming in the method as adopted by the Assessee and neither was the CIT able to point out any authority or textual support of his own formula based on expenses incurred at various locations" Thus, we have no hesitation in holding that in the absence of any error being found by the Revenue in respect of the transfer price adopted by the Assessee, the disallowance of deduction on account of allocating profits in the ratio of expenses was completely unwarranted. We further failed to understand that how does allocation of profits on the basis of expenses results in the determination of the market price as stated in the explanation to Section 801Å(8). The power that is vested in the A.O. to recompute profits under the proviso cannot be read in isolation to the main provision. This power has been vested only where an exceptional difficulty is faced by the A.O. in computing the eligible profits of the unit. The AO has not pointed out any exceptional difficulty as mandated under the act. We note that the incentive providing provisions need not be construed in a manner so as to discourage investments as....
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....4, 128/- as claimed by the Assessee. " 87. Hence, respectfully following the co-ordinate bench's decision dated 04.09.2017, ground No. 62 to 70 are decided in favour of the Assessee and against the revenue." We, therefore, respectfully following the decision of Coordinate Bench as discussed hereinabove, allow the ground of the assessee. Ground Nos. 7-7.2 relate to addition of Rs. 66,54,233, i.e., 15.86% of Rs. 4,19,56,073 on account of mark-up on business support services: 27. Before us, the ld. Counsel for the assessee narrated the submissions as under :- "During the AY 2017-18, the Appellant incurred certain expenses in the nature of payments to third parties for routine administrative function on behalf of its overseas AEs which have been charged back to the relevant AEs at cost amounting to Rs. 4,19,56,073 without any mark-up. Since, the aforesaid reimbursements were third party expenses where no value addition is made by the Appellant and are subsequently reimbursed by the AEs on a cost-to-cost basis, the Appellant applied "Other Method" as it merely acted as a facilitator of payments on behalf of the AEs and did not provide any service ....
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....he costs of renting advertising space on behalf of group members, costs that the group members would have incurred directly had they been independent. In such a case, it may well be appropriate to pass on these costs to the group recipients without a mark-up, and to apply a mark-up only to the costs incurred by the intermediary in performing its agency function." It is respectfully submitted that since Appellant is merely acting as a pass through entity, between AE and third parties suppliers, it is not required to earn any mark up on the amount charged back to AE seeking a reimbursement as payments made to third party supplier. Reliance in this regard is placed on the decision of the Delhi High Court in case of Johnson Matthey India Private Limited vs. DCIT 380 ITR 43 (at Page 1060 - 1070 @ 1069 of the CL Paper Book).where in the Delhi High Court directed to exclude the pass through cost, being raw material purchased by an automobile component manufacturer, while computing the operating margin. The Delhi High Court held as follows: "It is further importantly pointed out that the very purpose of transfer pricing is to benchmark transactions between relate....
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.... such goods. To the same effect is the decision of the Delhi Bench of the Tribunal in the case of DCIT vs. M/s. Cheil Communication India Pvt. Ltd.: (ITA No. 712/Del/10), wherein, it has been held that, for application of TNMM, payment made by the Appellant to 3rd party venders / media agency, need not be included in the total cost for determining the profit margin. Similarly, the absence of mark up on reimbursement of expenses was upheld by the Mumbai ITAT in the matter of M/s Cognizant Technology Solutions India Pvt Ltd vs. The Assistant Commissioner of Income Tax, ITA Nos. 114 & 2100 (Mds)/2011. (ref. Page 1139 - 1179 @ 1152 of the CL Paper Book). The relevant extract of Para 6.10 of the ruling reads as follows: ".....the fact is that the reimbursement was made on cost to cost basis and there is no rendering of any service and it does not involve service element. What is incurred is reimbursed. So, therefore, there is no profit element in the reimbursement. In such situation there is no justification in making a mark up of 5 per cent. This addition is accordingly deleted. This issue is decided in favour of the assessee." Reliance in this regar....
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....charged by the appellant for providing the services. Further payment has been received by the appellant from its AE over a period ranging from 23 days to 110 days and, therefore, mark-up should have been charged. The ld. CIT D/R referred to para 7.36 of OECD Transfer Pricing Guidelines to contend that if administrative (agency) services to its International AE acting as an intermediary, mark-up should be applied. The services provided by the assessee-appellant are not its basic function and, therefore, considering the amount involved and the effort of the employees of the appellant, mark-up should have been charged. The relevant para 7.36 of OECD Guidelines reads as under :- "7.36 When an associated enterprise is acting only as an agent or intermediary in the provision of services, it is important in applying the cost-plus method that the return or mark-up is appropriate for the performance of an agency function rather than for the performance of the services themselves. In such a case, it may not be appropriate to determine arm's length pricing as a mark-up on the cost of the services but rather on the costs of the agency function itself. For example, an associated enterp....
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....income. Apart from this the administrative expenditure of location of their seat i.e. Head Office, has been offered in the ratio of no. of employees at HO and the treasury department. These investments are on auto pilot mode only and month to month changes are on account of MTM adjustments and no purchases/sales were made. These do not require constant management attention as such investment were made in the earlier years and the Appellant has only maintained the same during the year and earned tax free income. There is one employee who is full time engaged in the treasury department while there is another employee who is looking into treasury department as part time, so 100% salary of the said full time employee and 50% of the salary of the said part time employee is considered for suo moto disallowance which works out to Rs. 65,72,510. Thus, the Appellant, while computing the total income has offered the entire expenditure which is directly relatable to the earning of exempt income. The AO, however, contended that the Appellant did not make disallowance of expenses as per provisions of sections 14A of the Act read with rule 8D of the Income tax Rules, 1962. Furt....
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.... with Rule 8D of I.T. Rules. Further, it is seen that assessee is having huge investments. It is quite certain that administrative expenses such as salary, other services fees, printing and stationery, postage and stamp, telephone, bank charges, legal and professional fees, office expenses, clerical and other administrative expenses are made in acquiring, maintaining the tax free investments and earning the tax free income. However, the exact expenditure cannot be found out from the accounts maintained. Hence the provisions of Rules 8D(2)(iii) of I.T. Rules are required to be applied for disallowance of administrative expenses in assessee's case. 33. In Rejoinder, the ld. Counsel for the assessee submitted that merely presuming that the Appellant must have incurred expenditure for earning exempt income, without specifying the nature of expenses, leave alone its quantification, does not tantamount to recording of satisfaction as referred to in section 14A of the Act. Reference in this regard may be made to the following decisions: * CIT vs. Walfort Share & Stock Brokers: 326 ITR 1 (SC) * Godrej & Boyce Manufacturing Company Ltd. vs. DCIT: 394 ITR 449 (SC) ....
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.... cannot, apply the provisions of section 14A of the Act, automatically once the appellant is found to have earned exempt income. With respect to the allegation of the ld. AO that the appellant did not maintain separate books of accounts for exempt income, reference is made to the recent decision of the Supreme Court in the case of South Indian Bank Ltd. vs CIT: 438 ITR 1 (ref. pages 1180-1187 of CL Paper book), wherein the Court has observed that the assessing officer cannot make disallowance of deduction under Section 14A of the Act merely because the Appellant has not maintained separate accounts for expenses incurred in earning tax-free income. The assessing officer must, in order to make any disallowance under section 14A of the Act, record satisfaction that having regard to the accounts of the Appellant, suomoto disallowance of Rs. 65,72,510, made under section 14A by the appellant is not correct. In the facts of the present case, it will be appreciated that no valid satisfaction has been recorded by the assessing officer in the assessment order, before applying Rule 8D. In that view of the matter, the action of the assessing officer in invoking the provisions of sect....
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.... the Special Bench of the Delhi Tribunal in the case of ACIT vs. Vireet Investments (P.) Ltd: 165 ITD 27 (Del Trib.), inter alia, placing reliance on the judgment of Delhi High Court in the case of Bhushan Steel Ltd. (supra), likewise held that computation under clause (f) of Explanation 1 to section 115JB(2) of the Act is to be made without resorting to computation as contemplated under section 14A read with rule 8D of the Rules. To the similar effect are the following decisions wherein it has been held that disallowance under section 14A cannot be imputed while making addition to book profits in terms of clause (f) of Explanation to section 115JB of the Act: * Pepsico India Holdings Pvt. Ltd. vs. DCIT: ITA No. 4077/Del/2015 (Del Trib.) * Kamat Hotels (India) Ltd. v. ACIT: [2018] 89 taxmann.com 225 (Mum Trib) * Quippo Telecom Infrastructure Ltd v. ACIT: ITA No.4931/Del/2010 (Del Trib.) * Shriram Capital Ltd v. DCIT (ITA. Nos.512 &513 /Mds/2015) (Chennai Trib.) * Scope Private Ltd. v. ACIT: ITA No. 8934/Mum./2010 (Mum Trib.) * Reliance Industrial Infrastructure Ltd. v. ACIT: ITA Nos. 69 & 70/Mum/2009 (Mum Trib.) * JC....
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....orrowed funds. 347. Our above conclusions are supported by a recent decision of the Coordinate Bench of Mumbai Tribunal in the case of ShapoorjiPallonji (supra) where, having considered a catena of judgments, the Tribunal made the following observations:- Thus, to conclude the Appeal of the Assessee is allowed and the Appeal of the Revenue is dismissed. " 40. Hence, in view of the above facts and binding decision of Coordinate Bench in Assessee's own case the disallowance u/s 14A of the Act is unsustainable in the eyes of law. These grounds stand allowed in favour of the Assessee." Respectfully following the decisions of the coordinate Bench of the Tribunal in the assessee's own case hereinabove, and also considering the consistent view taken in favour of the assessee by the various benches of the Tribunal, the ground of the assessee stands allowed. Ground Nos. 9-9.1 relate to disallowance of deduction under section 35(2AB) of the Act Rs. 94,55,355/-. 35. Before us, the ld. Counsel for the assessee submitted that during the relevant previous year, the Appellant claimed Rs. 94,55,355 as weighted deduction u/s 35(2AB) of the Act which was also ....
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....7 / 161 ITD 688 (Vishakhapatnam Trib.) * DCIT v. Famy Care Ltd.: 67 SOT 85/ 52 taxmann.com 461 (Mum. Trib.) In any case, it is submitted that the Appellant's in house research and development facility was already approved by DSIR, Govt. of India, Ministry of Science & Technology and such approval was valid till 31.03.2020. The said approval till 31.03.2020 was provided in Form 3CL which was furnished before the AO vide our submission dt 02.04.2021 and 16.04.2021 and Para Number 8 of the said Form 3CL clearly shows that the approval was valid till 31.03.2020 (ref. page 599 of Merit Paper Book Vol. II ). Further, the Hon'ble Jodhpur bench of the Tribunal in the Appellant's case for AY 2012-13 upheld the claim of weighted deduction under section 35(2AB) of the Act in respect of expenditure on scientific research at R & D centers approved by DSIR (ref. pages 534 of CL Paper book). In view of the aforesaid the disallowance of Rs. 94,55,355 is liable to be deleted. 36. On the other hand, the ld. D/R contended that the Form 3 CL pertains to assessment years 2014-15 and 2015-16 only and on that basis supported the orders of the Revenue authorities. 37. We have heard th....
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..... Any expenditure incurred before setting up of a business is a capital expenditure, however any expenditure incurred for any extension or addition to the existing business are revenue in nature. In the case of the Appellant the business was setup in 1966 and for sustenance and extension of the existing business the Appellant has taken continuous steps to explore further sources of mineral reserves. Had the Appellant not taken steps to sustain its existing business, the closure of various mines would have led to the closure of the business of the Appellant. Thus, the Appellant submits that exploration activity undertaken by it is not an activity for extension or expansion of an existing business but for sustaining the business. The reserves and resources of our company stood at 162 Million tonnes as on 31st March 1996 which is 404.4 Million MT as on 31st March 2017 which shows that this activity is indispensable for the sustenance of the company and hence the Appellant has claimed such expenditure under section 37(1) of the Act. Also, section 35E sub section (1) of the Act reveals that it provides a special mechanism to allow certain expenditure incurred by a company/Appellant w....
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....f the Tribunal in assessee's own case in ITA Nos. 404/Jodh/2017 and 412/Jodh/2017 dated 22.02.2018 for the assessment year 2012-13 wherein the Tribunal following its earlier order in assessee's own case in ITA No. 246/Jodh/2017 dated 04.09.2017 for the assessment year 2011-12 allowed the ground of the assessee by observing in para 113-114 at pages 150-155 as under :- "113. We have heard the rival submissions and perused the material on record. We notice that similar issue was considered by the coordinate bench in Assessee's own case for AY 2011-12 in ITA No. 246/Jodh/2017, vide order dated 04.09.2017. Relevant portion of the said order dated 04.09.2017 is reproduced hereunder:- "564. We have considered the rival contentions as well as the decision of the Hon'ble Delhi High Court in the case of CIT Vs. Union Tyres (supra). As pointed out by the Ld. Counsel for the Assessee this decision of the Hon'ble Delhi High Court considers all the leading judgments of the Supreme Court including the one cited by the CIT(Å) and lays down the applicable position of law. On the facts of that case, the Hon'ble Delhi High Court held that the minute an expendit....
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.... and the assessment has to be confined to those items of income which was the subject matter of original assessment. The endeavor of the CIT(Å) to make a disallowance of the grass root expenses during the course of the Appellate Proceedings would tantamount to an enhancement in respect of a new source of income and as such given the bar contained on the power of the CIT(Å), we hold that the CIT(Å) was not justified in enhancing the income of the Assessee. 566. Since submissions have been made before us on merits of the matter, we feel compelled to examine the merits of allowablity of such expenditure. As has been explained by the Ld. Counsel and what is evident from the details of expenditure contained in the Chart filed before us [which forms the annexure to the order of the CIT(Å)] the expenditure of Rs. 10.16 crores was clearly in respect of existing mines for which commercial production had commenced since long. This fact is also borne out in the Assessee's submission before the CIT(Å) which have been reproduced by her from page 334 and 335 of her order. Thus, to hold that since this expenditure was exploratory in nature it was automat....
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....ised by the revenue was that such expenditure was capital in nature since it resulted in enduring benefit to the Assessee. We have held that apart from the fact that no enduring benefit arises from such expenditure, such expenditure was incurred for facilitating the day to day operation of the Assessee. In the end, to conclude we allow the Assessee's grounds of Appeal while holding that the CIT(Å) was not justified in exercising the power of enhancement and even otherwise on merits such grass root expenditure was allowable u/s 37 of the Act. " 114. We hold that the facts in the present appeal for Assessment Year 2012-13 are similar to Assessment Year 2011-12. Respectfully following the decision of co-ordinate bench in Assessee's own case, we allow ground No. 91 to 95 of the Assessee's appeal." We, therefore, taking a consistent view of the matter and respectfully following the decision of the co-ordinate Benches of the Tribunal in the assessee's own case, delete the disallowance of Grass Root expenses. The ground of the assessee is allowed. Ground Nos. 11-11.1 relate to disallowance of staff welfare expenses of Rs. 23,66,67,865/- being the expenses ....
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....driya Vidyalaya at the business location of the appellant for providing education facility to employee's wards working at the remote and rural locations. The school expenditure were in the form of reimbursement of running expenses by Govt./other institutions. i. To encourage the employee's children to achieve higher in the studies, the Appellant company has framed scheme to provide the scholarship to brilliant students. This act of the appellant enhances the belongingness of the employee towards the company. ii. The scholarship expenses debited by the Appellant are towards direct expenses incurred as per policy of the company. The Sports club/Community Centre is managed by the committees and expenses are reimbursed. iii. Cooperative stores are for the workmen and employees and facility provided as per contractual obligations. The above payments are as per settlement reached with the worker's union as per terms of employment of employees. Accordingly the expenditure on staff welfare under the above mentioned heads, is not covered u/s. 40A(9) of the Act. In this regard the Appellant submits that the above payments are not covered u/s. 40A(9) relying upon....
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....ry as well as internal regulations for incurring the expenditure, its approval as per a hierarchical administrate frame work. On facts neither of the auditors Ld. Statutory and tax auditors have indicated anything adverse in respect of staff welfare expenditure. It is also a fact that the staff welfare expenditure is incurred through various bodies in consultation with such staff unions. These facts coupled with findings of ld. CIT (A) that expenditure is genuine, wholly for business purposed and allowed in various earlier years even after verification have neither been dislodged by revenue nor controverted in any manner except raising a specious plea that issue may be set aside again. Its vehemently contended that setting aside amounts to a burden of fresh proceedings on assessee which should not be resorted to by appellate authorities in routine and casual manner. Ld. Counsel contends that it amounts to reassessment proceedings and in this case after 15 years, various courts have expressed their strong displeasure on perfunctory reassessments. In our considered view the following propositions of law in the realm of tax jurisprudence as contended by ld. Counsel for the assessee de....
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....und No. 16 of the Revenue's appeal." We further find that the issue relating to Staff Welfare Expenses has also been decided by the Jaipur Bench of the Tribunal in assessee's own case in case of ITA No. 612/JU/2009 for the assessment year 2005-06 dated 10.04.2017 and ITA Nos. 638/JU/2008 & 606/JU/2008 for the assessment year 2006-07 dated 24.04.2017 in favour of the assessee by deleting the disallowance under section 40A(9) of the IT Act. We, therefore, respectfully following the decision of the co-ordinate Benches of the Tribunal, delete the disallowance of staff welfare expenses. The ground of the assessee is allowed. Ground No. 12 relates to allowing TDS credit of Rs. 5,74,27,821/-instead of Rs. 5,86,75,126/- claimed in the return of income. 45. Before us, the ld. Counsel for the assessee submitted that the Assessing Officer may kindly be directed to allow TDS credit of Rs. 5,86,75,126, as claimed in the return of income as against Rs. 5,74,27,821 allowed in the impugned assessment order, after verification. 46. On the other hand, the ld. D/R supported the orders of the Revenue authorities. 47. We have heard rival contentions and perused the material avai....
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....9,09,83,530, after making additions/disallowances to the income of Rs. 1,07,81,12,53,620 determined in the intimation issued under section 143(1)(a) of the Act, and thereby making addition and disallowance also in respect of adjustments aggregating to Rs. 65,44,93,150 made in the intimation. 2.1. That the AO/NFAC erred on facts and in law in completing the assessment under section 143(3) read with section 144C(13)/144B and order passed under section 154 r.w.s 143(3) of the Act in making addition and disallowance also in respect of adjustments aggregating to Rs. 65,44,93,150 made in the intimation issued under section 143(1)(a) of the Act, without issuing any show cause notice and without giving any opportunity of hearing to the Appellant, which is in contravention of the scheme of faceless assessment as provided in section 144B of the Act and such an action of the AO/NFAC is against Natural justice and as such the said disallowance cannot sustain and should be deleted. 3. That the DRP/AO/ NFAC/TPO erred on facts and in law in disallowing deduction claimed by the appellant under section 80IA of the Act in respect of Captive Power Plants (CPPs) amounting to Rs. 1105....
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.... in not appreciating that the CPP supplies continuous uninterrupted power which is critical for the operations of the appellant and is therefore, at a premium even in comparison to rates charged by SEBs for supply of power. 4. That the DRP/AO/NFAC/TPO erred on facts and in law in holding that the Appellant was not entitled to deduction u/s 80IA of the Act amounting to Rs. 96,46,574 for generation and transfer of steam which is included in the profit computed for CPPs at Chanderiya and Dariba, thus reducing the claim of the Appellant u/s 80IA by the corresponding amount in the order passed under section 143(3) read with section 144B /144C(13) and order passed under section 154 r.w.s. 143(3) of the Act, allegedly on the basis of the order passed under section 92CA(3) of the Act by the Transfer Pricing Officer ("TPO"). 4.1 That the DRP/AO/NFAC/TPO erred on facts and in taking cost of steam at NIL, when the powers of TPO are limited to determining the Arm's Length Price. 5. That the AO/ NFAC erred on facts and in law in making an addition of Rs. 91,44,54,516 to the income of the Appellant in the order passed under section 143(3) read with section 144B /14....
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....the non-eligible units as the tested party and such companies are not comparable to the eligible undertaking of the appellant. 6.3 That the DRP/AO/NFAC/TPO erred on facts and in law in making protective transfer pricing adjustment by enhancing the income of the eligible units (or 80-IC units) of the Assessee by Rs. 4670.60 crore. 6.4 That the DRP/AO/NFAC/TPO erred on facts and in law in holding that deduction u/s 80IC of the Act in respect of Pantnagar Lead & Zinc Plant (PLZP) is available by determining the income of PLZP, the eligible unit u/s 80IC, in the ratio of expenditure incurred by the PLZP and other units of the Appellant, thereby making an adjustment of Rs. 3,014,61 Crores. 6.5 That the DRP/AO/NFAC/TPO erred on facts and in law in holding that deduction u/s 80IC of the Act in respect of Pantnagar Silver Metal plant (PSMP) is to be allowed by determining the income of PSMP, the eligible unit u/s 80IC, in the Profit to Cost ratio of other eligible units of the Assessee after making disallowance of deduction in those units, thereby making an adjustment of Rs. 1,470.97 crores. 6.6 That the DRP/AO/NFAC/TPO erred on facts and in law in holdi....
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....ble judicial pronouncements while making the TP adjustment, including the ruling passed by the Hon'ble ITAT in Appellant's own case. 7. That the AO/NFAC/DRP erred on facts and in law in making disallowance in the order passed under section 143(3) read with section 144B /144C(13) and order passed under section 154 r.w.s 143(3) of the Act, of Rs. 15,60,21,934 u/s 14A of the Act, both under normal provisions and for computing Book profit under MAT as per section 115JB of the Act, not appreciating the fact that the assessee has suo moto disallowed a sum of Rs. 4,36,399 u/s 14A under the normal provisions and made adjustment of Rs. 15,60,21,934 u/s 14A of the Act while computing Book profit under MAT and under the normal provisions of the act. 7.1 That the AO/ NFAC/DRP erred on facts and in law in making disallowance of Rs. 15,60,21,934 u/s 14A of the Act read with rule 8D of the Income tax Rules, 1962, both under normal provisions and for computing Book profit under MAT alleging that the Appellant was having huge investments and it is quite certain that administrative expenses such as salary, other services fees, printing and stationery, postage and stamp, tel....
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....canteen facility, school activities, sport club, scholarship, other club, etc. holding them to be not allowable u/s 40A(9) of the Act; as well as holding them to be in the nature of corporate social responsibility expenses disallowable in terms of Explanation 2 of section 37 of the Act. 10.1 That the AO/NFAC/DRP erred on facts and in law in not appreciating that the above expenses were incurred in the course of the business by the appellant pursuant to statutory or contractual obligation and were held to be deductible business expenditure in the earlier years. 11. That the AO/NFAC erred in facts and in law in incorrectly levying interest under section 234B and under section 234C of the Act. 12. That the AO/NFAC erred on facts and in law in initiating penalty proceedings under section 270A r.w.s. 274 of the act for the alleged under- reporting of income. The Appellant craves leave to add, amend, alter or vary, any of the aforesaid grounds of appeal before or at the time of hearing of the appeal and consider each of the grounds as without prejudice to the other grounds of appeal." 52. Grounds raised in this appeal i.e. ITA No. 128/Jodh/2022 are ....
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....or the assessment year 20005-06, and in ITA No. 184/Jodh/2012 for the assessment year 2008-09 & ITA No. 246/Jodh/2017 for the assessment year 2011-12 dated 04.09.2017. Therefore, respectfully following the decisions the Coordinate Bench and taking a consistent view of the matter, we have decided this ground in Para 22 hereinabove. This ground of the assessee is partly allowed. Ground Nos. 6-6.13 relate to enhancing the income of the eligible units under section 80 IC of the Act in respect of Pantnagar Zinc and Lead Plant (PLZP) and Pantnagar Silver Metal Plant (PSMP) allegedly on account of Transfer Pricing ("TP") adjustment. 58. We have adjudicated this ground of the assessee in ITA No. 127/Jodh/2022 for the assessment year 2017-18 in Para 26 hereinabove. In the light of above discussion and following our order hereinabove, we allow this ground of the assessee. Ground Nos. 7-7.2 relates to disallowance under section 14A of the Act, both under normal provisions and for computing Book profit under MAT as per section 115JB of the Act. 59. This ground of the assessee is covered in favour of the assessee in assessee's own case in ITA No. 404 & 412/Jodh/2017 dated 22.02.2018....