TaxTMI 
TaxTMI 
2025 (3) TMI 1085
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....ed 26th March, 2021 after making transfer pricing adjustments / additions of Rs. 18,19,19,254/- in relation to International Transactions & Specified Domestic Transactions arising out of the order of the Ld. Transfer Pricing Officer ('TPO') u/s 92CA(3) of the Act and additions / disallowances of Rs. 1,00,30,23,411/- on account of various non-transfer pricing issues. 2.0 That the Ld. DRP and consequently the Ld. AO have grossly erred in law and on the facts & circumstances of the assessee's case in not entertaining or granting the additional claims / allowances total amounting to Rs. 17,36,90,694/- made by the assessee during the course of assessment proceedings and again before the Ld. DRP, on account remaining additional depreciation, which was inadvertently left to be claimed by the assessee while filing / revising its return of income. 3.0 That the Ld. DRP and consequently the Ld. AO have grossly erred in law and on the facts & circumstances of the assessee's case in not allowing the deduction of Education Cess (@ 3%) amounting to Rs. 2,15,79,405/- u/s 37 of the Act paid or payable under normal provision of the Act. 4.0 That the final assessment order ....
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....ining to all five R&D facilities despite the specific directions of Ld. DRP to disallow deduction pertaining to 'Gurgaon R&D Research Facility' only and thus acted without application of mind & beyond his authority as mandated under law; iv. without prejudice, the Ld. AO has grossly erred in inadvertently disallowing the entire amount of deduction amounting to Rs. 9,63,12,743/- claimed by the assessee u/s 80-IA of the Act in respect of WPP unit ignoring that an amount of Rs. 6,53,67,880/- has already been added through transfer pricing adjustment in accordance with the directions of the Ld. DRP in respect of same unit [contested by assessee vide ground no. 40.0 to 43.0] and thus inadvertently making excess disallowance to the extent of Rs. 9,63,12,743/-; v. without prejudice, the Ld. AO has grossly erred in law and on facts and circumstances of the case in not grating the claim of remaining deduction u/s 80-IC of the Act amounting to Rs. 2,82,36,993/-[Rs. 2,82,41,479/- (original amount of deduction) minus 30% of Rs. 14,952/- (being amount of adjustment upheld by the Ld. DRP)] in respect to the Technical Textiles Business at Kashipur; vi. without prejudice....
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.... cost allocation transaction is highly unjustified. 9.0 That the Ld. DRP and consequently Ld. TPO / Ld. AO have grossly erred in law and on the facts & circumstances of the assessee's case in not appreciating and completely ignoring that assessee has recovered the software allocation cost along with finance charges @ 8.99% which should have been accepted at ALP mark-up having regard to the nature of transaction. 10.0 That the Ld. DRP and consequently Ld. TPO / Ld. AO have grossly erred in holding that not charging of mark-up is not reflective of arm's length behavior of the transaction and thus failing to appreciate that the assessee while performing its role of a parent company of the group incurs various costs for and behalf of its group entities/AE's at group HO level (which are charged to group entities without any mark-up), as incurring such cost (such as software implementation, license etc.) at individual entity level may not be commercially and economically feasible. 11.0 The Hon'ble ITAT may be pleased to direct the Ld. TPO / Ld. AO to delete aforesaid adjustment of Rs. 16,68,574/- in respect of allocation of software cost only to AE's. ....
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....the Act and therefore not subject to assessment under Chapter- X. 18.0 That the Ld. DRP and consequently Ld. TPO / Ld. AO have grossly erred in law and on the facts & circumstances of the appellant's case in not considering that the AE's have furnished back to back counter guarantees of equal amounts on similar terms to the appellant, therefore appellant is completely indemnified against any risk of default on the part of its AE's. 19.0 That the Ld. DRP and consequently Ld. TPO / Ld. AO have grossly erred in law and on the facts & circumstances of the appellant's case in not appreciating the fact that corporate guarantee has been extended by the appellant, being the parent company on behalf of its wholly owned subsidiary, as a matter of business prudence and to protect its own commercial interest. The appellant does not incur any cost by extending such corporate guarantee to its AEs nor assumes any risk as entire capital / assets of its AEs are held directly or indirectly by the appellant. Further, the Ld. DRP / Ld. TPO / Ld. AO have not followed the established judicial precedents rendered on the issue including the Hon'ble ITAT's orders in assessee's own case fo....
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....ts of assessee is @ 12.14%; ii. even following Ld. TPO's approach the assessee's eligible unit's margin @ 10.10% is lower than the relevant segmental margin @ 12.14% and hence no adjustment is warranted in any case. 24.0 The Hon'ble ITAT may be pleased to direct the Ld. TPO / Ld. AO to delete such adjustment of Rs. 14,952/- in respect of inter-unit transactions pertaining to TTB Segment. V. Inter-unit Transfer - Chemical and Polymer Business - Adjustment of Rs. 58,02,000/- 25.0 That the Ld. DRP and consequently Ld. TPO / Ld. AO have grossly erred in law and on the facts & circumstances of the appellant's case in making transfer pricing adjustment of Rs. 58,02,000/- in respect of inter-unit transactions amounting to Rs. 6,39,36,389/- pertaining to Engineering and Plastic Business unit (EPB), Pantnagar forming part of 'Chemical and Polymer Business' (CPB) segment of the assessee. 26.0 That the Ld. DRP and consequently Ld. TPO / Ld. AO have grossly erred in law and on facts and circumstances of the case, in rejecting, without any cogent reason, the assessee's most appropriate method being 'CUP Method' and 'Other Method' both of which are di....
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.... available in public domain. 33.0 That the Ld. TPO has erred in law and in facts and circumstances of the case in rejecting the assessee's reliable internal CUP data in form of actual transactions of purchase of electricity and taking the average tariff rates obtained u/s 133(6) of the Act without appreciating that such tariff rates are general in nature and various other charges viz. fixed charges, electricity duty, cesses etc. have not been factored in while benchmarking the transactions. 34.0 The Hon'ble ITAT may be pleased to direct the Ld. TPO / Ld. AO to delete the above transfer pricing adjustment of Rs. 18,72,72,104/- in respect of transaction of transfer of electricity by captive power plant at Bhiwadi. VII. Purchase of Electricity from its AE's Vavyu Renewable Energy (Tapti) Private Limited (VRETPL) - Adjustment of Rs. 8,86,15,614/- 35.0 That the Ld. DRP and consequently Ld. TPO / Ld. AO have grossly erred in law and on the facts & circumstances of the appellant's case in making transfer pricing adjustment of Rs. 8,86,15,614/- in respect of specified domestic transaction as referred in section 92BA(i) in the nature of purchase of electr....
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....re your honour. 41.0 That the Ld. DRP and consequently Ld. TPO / Ld. AO have grossly erred in law and on the facts & circumstances of the appellant's case in rejecting the assessee's reliable internal CUP data in form of actual transactions of purchase of electricity and instead taking the general tariff rates @ 2.95 per unit obtained by ld. TPO u/s 133(6) of the Act from TNERC while benchmarking the transaction of sale of electricity by WPP unit of the assessee. 42.0 Without prejudice, that the Ld. DRP and consequently Ld. TPO / Ld. AO have grossly erred in law and on the facts & circumstances of the appellant's case in taking the tariff rates obtained from TNERC without appreciating that such tariff rates may only be basic rates and various other charges viz. fixed charges, electricity duty, cesses etc. have not been factored in while considering such rate for benchmarking purposes. 43.0 The Hon'ble ITAT may be pleased to direct the Ld. TPO / Ld. AO to delete such adjustment of Rs. 6,35,67,880/- in respect of specified domestic transaction of sale of electricity by WPP unit of the assessee. Grounds of Appeal - Corporate Tax Issues - Additions /....
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....,32,818/- relying on the Ld. DRP's own directions in case of assessee for A.Y. 2012-13 and A.Y. 2013-14, which is wholly untenable in law and based on conjectures and surmises. 49.0 That the Ld. DRP and consequently the Ld. AO have while enhancing the disallowance u/s 14A of the Act, grossly erred in holding that the entire amount of finance cost of Rs. 93.53 Crores is in-directly attributable for earning a dividend income of Rs. 18,21,155/-, disregarding the fact that the finance costs (including interest expenses) were directly relatable to specific purpose borrowings used for the assessee's business & not for the purpose of making investments such that clause (ii) of rule 8D(2) of the Rules is not attracted. 50.0 That the Ld. DRP and consequently the Ld. AO have grossly erred in law and on the facts & circumstances of the appellant's case in enhancing the above disallowance by failing to appreciate that assessee had made investment out of its own reserves and surplus funds as the amount of average investments related to tax free income is only Rs. 8.47 Crores and the total amount of reserves & surplus as on 31.03.2016 is Rs. 2,631.85 Crores which is 310.72 time....
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.... u/s 35(2AB) of the Act pertaining to four R&D facilities of the assessee which were not even under dispute in the draft assessment which is contrary to the provisions of law. 57.0 Without prejudice, the Ld. DRP and consequently the Ld. AO have grossly erred in law and on the facts & circumstances of the appellant's case in making the disallowance of the entire claim of weighted deduction u/s 35(2AB) of the Act amounting to Rs. 82,61,65,610/- pertaining to all five R&D facilities of the assessee, instead of disallowing the portion of such claim amounting to Rs. 10,23,47,931/- pertaining to 'Gurgaon R&D Research Facility' as directed by the Ld. DRP vide para no. 18.6 & 18.7 at page no. 80 of its directions dated 26thMarch, 2021. The Ld. AO erred in not giving effect to the directions of Ld. DRP in correct manner and making disallowance of entire deduction pertaining to all five R&D facilities despite the specific directions of Ld. DRP to disallow deduction pertaining to 'Gurgaon R&D Research Facility' only and thus acted without application of mind & beyond his authority as mandated under law. Grounds on Merits 58.0 That the Ld. DRP has grossly erred in la....
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....XIII. Non-granting of claim of deduction of Rs. 5,21,15,493/- u/s 80-IC of the Act 64.0 Without prejudice, the Ld. AO has grossly erred in law and on facts and circumstances of the case in not following the binding directions of the Ld. DRP by not granting the following claims of remaining deduction u/s 80-IC of the Act in respect of Technical Textiles Business at Kashipur and Engineering Plastic Business at Pantnagar;- i. a deduction of Rs. 2,82,36,993/- [Rs. 2,82,41,479/- (original amount of deduction) minus 30% of Rs. 14,952/- (being amount of adjustment upheld by the Ld. DRP)] in respect of its Technical Textile Business at Kashipur as directed by the Ld. DRP; ii. a deduction of Rs. 2,38,81,562/- [Rs. 2,56,22,162/- (original amount of deduction) minus 30% of Rs. 58,02,000/- (being amount of adjustment upheld by the Ld. DRP)] in respect of its Engineering and Plastic Business at Pantnagar as directed by the Ld. DRP. 65.0 The Hon'ble ITAT may be pleased to direct the Ld. TPO / Ld. AO to grant the deduction u/s 80-IC of the Act amounting to Rs. 5,21,15,493/- XIV. Disallowance of Depreciation of Goodwill amounting to Rs. 14,36,387/- ....
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....ls have been submitted. 73.0 It is prayed before the Hon'ble Tribunal to delete the aforesaid disallowance of Rs. 2,04,00,000/- made in respect of inventories written off. XVI. Disallowance on account of software expenses amounting to Rs. 8,19,870/- 74.0 That the Ld. AO has grossly erred in law and on the facts & circumstances of the appellant's case by making the disallowance of Rs. 8,19,870/- by treating the software expense in nature of annual maintenance and annual recurring subscription fee amounting to Rs. 10,93,160/- as capital expenditure which is bad in law. 75.0 That the Ld. AO has grossly erred by failing to give the effect of the directions of the Ld. DRP vide para no. 23.2 at page no. 83 of its directions dated 26thMarch, 2021 that if the expenses are in the nature of annual maintenance & annual recurring subscription fee, the same shall be allowed as revenue expenditure. 76.0 The Hon'ble ITAT may be pleased to direct the Ld. AO to delete the above disallowance of Rs. 8,19,870/-. XVII. Other Corporate Tax Issue - Other claims made during the course of assessment proceedings and before the Ld. DRP- Rs. 17,36,90,694/-....
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....s of income, nor any default according to law by the assessee. 83.0 That the Ld. AO has grossly erred in law and on the facts & circumstances of the appellant's case in charging alleged interest under section 234A and 234B of the Act on wholly unjust, illegal, erroneous and untenable grounds and is prayed not to be upheld and deleted before your honour. 84.0 That the assessee craves leave to amend, alter, change vary or substitute any of the aforesaid grounds of appeal or add & raise an additional ground of appeal if it becomes necessary to do so in the interest of justice. 85.0 That each ground of appeal is independent of and without prejudice to the other grounds of appeals raised herein." 2. The Ground Nos. 1 to 6 are general in nature, hence, not adjudicated and dismissed as such. 3. Apropos grounds no.7 to 11 relating to adjustment of Rs. 16,68,574/- u/s 92CA(3) of the Act on account of allocation of software cost received from its Associated Enterprises are concerned, ld. Counsel for the assessee submitted that this issue is fully covered by the order of the Hon'ble Jurisdictional ITAT in the assessee's own case for A.Y. 2014-15, where....
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.... Considered the rival submissions and material placed on record. We find considerable cogency in the contention of the Ld. AR that the instant issue is fully covered by the order of the Coordinate Bench of the Tribunal in assessee's own case for A.Y. 2014-15, wherein the coordinate Bench upheld that the reimbursement received at cost does not require any mark-up. The relevant findings of the coordinate bench are reproduced below: "23. Ground No.12 to 15 are with respect to adjustment on account of reimbursement received by the assessee from its AEs amounting to Rs. 45,39,571/-. 24. TPO on perusing the TP documentation noticed that assessee had incurred certain expenses which were in the nature of travelling lodging and boarding charges, courier etc. Assessee was asked to show-cause as to why reimbursement of the expenses not be treated as expenses and why a markup should be charged to which assessee inter alia submitted that the reimbursement should not be treated as intra group services as these were third party costs which were reimbursed by AEs on a cost to cost basis. The submission of the assessee was not found acceptable to TPO. TPO noted that assessee h....
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....2/Del/2010 order dated 21.09.2020 for A.Y. 2014-15 has held that no mark up was warranted on the reimbursement of primary third party expenses for which no value addition was done by the assessee and which are subsequently reimbursed by the AEs on cost to cost basis. He pointed to the relevant findings of the Tribunal order placed at Page 236 of the paper book. He therefore submitted no addition is called for. 27. Learned DR on the other hand pointed to the observations made by DRP. She also placed reliance on the decision rendered by Hon'ble Delhi High Court in case of CIT vs. Cushman And Wakefield (India) Pvt. Ltd. reported in 367 ITR 730 and decision rendered by Hon'ble Delhi High Court in the case of Centrica India Offshore Pvt. Ltd. (WP-6807 of 2012 order dated 25.04.2014). 28. Learned AR in the rejoinder submitted that the expenses were in the nature of reimbursement and there is no whisper in the order of TPO of the assessee having rendered any services and that assessee collects the expenses incurred on behalf of AEs from the AEs and passes it on to the third parties. He further submitted that it is not an international transactions as per Clause 92D(1) of....
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....ee submitted that this issue is fully covered by the order of the ITAT in the assessee's own case for A.Y. 2014-15, wherein the coordinate bench upheld that the reimbursement received at cost does not require any mark-up. Reimbursement received from AEs in the nature of expenses incurred for traveling, lodging, boarding, courier etc. of employees of AEs which are charged on cost-to-cost basis. Similarly, the reimbursement expenditure paid by the assessee to its AE is also on a cost basis only. Further, it was submitted that the mark up of 13.18% which has been worked out through a search process, wherein selected companies are into the manufacturing of textiles, yarn etc. This average margin is applied on reimbursement transactions, which is grossly erroneous. Further the assessee has entered into various business transactions with its AEs in the nature of export of goods, import of goods, corporate guarantee fee, interest on loan, management support services etc. the volume of which is around Rs. 33.17 crores. It was also submitted that the assessee has also entered into the ancillary transactions in the nature of reimbursement received and paid from/to AEs for Rs. 1.68crores,....
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....case for A.Y. 2014-15, wherein ITAT upheld that the corporate guaranteed rate @ 0.25%. It was further submitted that not considering the fact that the AEs have furnished a counter guarantee to the assessee, therefore, assessee is completely indemnified against any risk of default on the part of the AEs. It was further concluded that corporate guarantees does not involve any cost and therefore are out of the ambit of international transactions u/s. 92B of the Act thus not subject to assessment under Chapter-X. It was further submitted that TPO/DRP has rejected the valid comparable data obtained by the assessee in the form of quotation received from HDFC bank without assigning any cogent reason for such action. In view of the above, he requested that no adjustment is required as @0.25% charged by the assessee as corporate guarantee fee from its AE's is at arms' length and thus upward adjustment of Rs. 2,40,32,125/- be directed to be deleted. 11. Ld. DR of the Revenue relied upon the orders of the authorities below, but she did not controvert the contention of the ld. AR for the assessee that the issue is covered in favour of the assessee by the decision of the Tribunal in asses....
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....ereafter by applying the interest saved approach and using the data from Bloomberg database, computed the external comparable interest rate range to be 4.45% and the rate at which the AEs obtained funds with corporate guarantee of the assessee at 3.01% and thus computed the interest saved to be at 1.44%. He thereafter worked out the total guarantee fee that should have been charged 11 by using the interest saved rate of 1.44% at Rs. 172,00,08,122/-. He noted that since the assessee has already received Rs 22,854,407/-recommended the enhancement of income by AO to the extent of Rs 14,91,53,715/-. AO thereafter in the draft assessment order enhanced the income as suggested by the TPO. Aggrieved by the order of TPO, assessee carried the matter before the DRP. DRP noted that various jurisdictional decisions have held the guarantee fee rate to be near about 0.5% and TPO had not given any reason for applying a higher rate of 1.3% based on SBI general Bank guarantee fee. DRP also noted that in assessee's own case for A.Y. 2011-12, 2012-13 & 2013-14, DRP has held that the guarantee fee of 0.5% to be fair and just. It further noted that since the facts of the case in the year under consider....
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....ta in terms of Rule 10D (3) of the Rules. Therefore, rejection of assessee's CUP in form of ICICI Bank quotation in not valid. 13. It is pertinent to note that even TPO has used general bank rates obtained from various Indian banks. These bank guarantee rates are also in the nature of offers which are general rates and not specific to the assessee. Therefore, the approach of TPO itself is contradictory, when on the one hand he rejects the assessee's specific quotation saying the same as offers while on the other hand he himself uses the general bank guarantee rates which are again the offers and that too far from being comparable to the case. 14. Further the issue of using bank guarantee rates for benchmarking corporate guarantee transaction has been put to rest by the Hon'ble Supreme Court in case of Glenmark Pharmaceuticals Ltd. [2019] 107 taxmann.com 445 (SC), where in the judgment of Hon'ble Bombay High Court was upheld. Further, DRP in assessee's own case in subsequent years rejected the TPO's approach of using India band guarantee rates for benchmarking corporate guarantee. Therefore, bank guarantee rates as applied by the TPO is not an appropriate comparabl....
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....ntee fee from its AEs. Accordingly, the Grounds No. 16 to 20 are allowed. 14. Apropos grounds no.21 to 24 relating to adjustment of Rs. 14,952/- on account of Inter unit Transfer - Technical Textile Business, Kashipur Division are concerned, ld. Counsel for the assessee submitted that assessee's methodology was rejected without providing any reason. It was further submitted that on the anvil of the various judicial precedents, CUP method to be preferred over TNMM. It was further submitted that segmental margin of TTB segment computed by TPO @6.28% is incorrect as the segmental margin from the segmental results of assessee is 12.14% and hence no adjustment is warranted in any case. Hence, he requested that the adjustment of Rs. 14,952/- need to be deleted. 15. Ld. DR of the Revenue relied upon the orders of the authorities below on this issue. 16. Considered the rival submissions and material placed on record. We find considerable cogency in the contention that assessee's methodology was rejected without providing any cogent reason. In our view, in various judicial precedents, CUP method has been preferred over TNMM. We further note that segmental margin of TTB segment comp....
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.....25 to 29 are allowed for statistical purposes. 20. Apropos Grounds No.64 to 65 relating to non-granting of claim of deduction w.r.t. profit based deduction u/s. 80IC of the Act amounting to Rs. 5,21,18,555/- in respect to its TTBK unit Rs. 2,82,36,993/- & EPP Unit Rs. 2,38,81,562/- are concerned, the same are consequential in nature, hence, not adjudicated. 21. Apropos Ground no. 30 to 34 relating to transfer of power by Captive Power Plant (CPP) at Bhiwadi Adjustment of Rs. 18,72,72,104/- are concerned, ld. Counsel for the assessee submitted that no reason provided by TPO for rejection of assessee's MAM. He also placed reliance of the Hon'ble Supreme Court decision in case of M/s Jindal Steel and Others [TS- 731-SC-2023] wherein, it has been settled that in order to benchmark the transfer of electricity by captive power plants, the rate at which state electricity board sells electricity to Industrial consumer in the market should be adopted as the open market value u/s 80-IA(8). It was further submitted that issues of transfer of electricity being benchmarked w.r.t. SEB rates has been favourably adjudicated by ITAT in the case of DCM Shriram Limited by order dated 21.10....
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....ges, we are inclined to remit this issue back to the file of AO/TPO to redo the bench marking based on the decision of Hon'ble Supreme Court in the case of Jindal Steels and others (supra) and as per law. Accordingly, Ground Nos. 30 to 34 are allowed as indicated above. 25. Apropos Ground no. 35 to 39 relating to purchase of Electricity from VRETPL - adjustment of Rs. 8,86,15,614/- are concerned, ld. AR of the assessee submitted that assessee's methodology was rejected without providing any reason. Ld. Counsel for the assessee submitted that in view of the Hon'ble Supreme Court ruling in case of M/s Jindal Steel and Others [TS-731-SC-2023] wherein, it has been settled that in order to benchmark the transfer of electricity by captive power plants, the rate at which state electricity board sells electricity to Industrial consumer in the market should be adopted as the open market value u/s 80-IA(8). It was further submitted that issues of transfer of electricity being benchmarked w.r.t. SEB rates has been favourably adjudicated by ITAT in the case of DCM Shriram Limited by order dated 21.10.2021. On the basis of various judicial pronouncements advocating the adoption of SEB rates ....
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....sion in the case of Technimont ICB P Ltd. (supra), assessee's internal CUP to be preferred over an external CUP, which was not done, hence no adjustment is warranted in any case. 28. Hence, for the sake of bench marking the correct ALP on the electricity charges, we are inclined to remit this issue back to the file of AO/TPO to redo the bench marking by following the decision of Hon'ble Supreme Court in the case of Jindal Steel and others (supra) case and as per law. Accordingly, Ground Nos.35 to 39 are allowed as indicated above. 29. Apropos Grounds no.40 to 43 relating to sale of Electricity by WPP unit at Tamilnadu - adjustment of Rs. 6,53,67,880/- are concerned, ld. AR of the assessee submitted that in view of the Hon'ble Supreme Court ruling in case of M/s Jindal Steel and Others (supra) wherein, it has been settled that in order to benchmark the transfer of electricity by captive power plants, the rate at which state electricity board sells electricity to Industrial consumer in the market should be adopted as the open market value u/s 80-IA(8). It was further submitted that issues of transfer of electricity being benchmarked w.r.t. SEB rates has been favourably adju....
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....e for other units from Tamil Nadu State Electricity Corporation, the same was accepted by the TPO and in AY 2015-16 accepted on the basis of CBDT instruction no 3/2016. Hence, for the sake of bench marking the correct ALP on the electricity charges, we are inclined to remit this issue back to the file of AO/TPO to redo the bench marking based on the decision of Hon'ble Supreme Court in the case of Jindal Steel and others (supra) case and as per law. Hence, Ground Nos.40 to 43 are allowed as indicated above. 33. Apropos Ground No. 62 to 63 relating to disallowance of deduction u/s. 80IA of the Act amounting to Rs. 9,63,12,743/- in respect of WPP unit at Tamil Nadu are concerned, the same are consequential in nature, hence, not adjudicated. 34. Apropos Ground no. 44 to 47 relating to disallowance of deduction u/s. 32AC of the Act amounting to Rs. 5,63,55,983/- are concerned, ld. Counsel for the assessee submitted that there is no requirement of certificate for claiming the deduction u/s 32AC of the Act. He further submitted that AO disregarded the various details like addition to P&M, sample copy of the bills, transaction wise details of additions, capex completion report, loca....
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....hat the AO have to compute the correct claim of the assessee and the reliance is placed on recent judgement of the ITAT, Delhi in the case of Mankind Pharma Ltd. (ITA No. 2313/Del/2022) (P. no. 680-720 of Case Law Compilation). He submitted that AO is statutory bound under law to verify claim of assessee with documentary evidence and shall compute correct total income and relied on the decision of MIT Mohan Singh Kahlon [2013] 39 taxmann.com 145 (Chandigarh-Trib.) (P. no. 721-726 of Case Law Compilation). He further submitted that the AO is duty bound to grant exemption or deduction even where assessee failed to claim the same and in this regard, relied on the decision of Mrs. Meena S. Banerji vs. ITO [2007] 14 SOT 569 (Mumbai- Trib.) (P. no. 727-735 of Case Law Compilation) and Anchor Pressings (P.) Ltd. vs. CIT [1986] 27 taxman 295 (SC) (P. no. 736-739 of Case Law Compilation). 31. He also relied on the following decisions :- (i) International Tractors Ltd. vs. DCIT {[2021] 127 taxmann.com 822 (Delhi)} (P. no.740-747 of Case Laws Compilation); (ii) E-Funds International India Pvt. Ltd. [TS-587-HC-2015(DEL)] (P. no. 748-757 of Case Laws Compilation); ....
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....isallowance of Rs. 15,32,818/- in the light of the aforesaid precedents in assessee's own case. Accordingly, Grounds No.48 to 54 are allowed in the aforesaid manner. 37. Apropos Grounds no.55 to 61 relating to disallowance of weighted deduction u/s. 35(2AB) of the Act amounting to Rs. 82,61,65,610/- in respect of In-House Research and Development Units, in this regard Ld AR submitted as under :- "The assessee has Five in-house R&D facilities duly recognized by the competent authority i.e. Department of Scientific & Industrial Research (DSIR). The assessee has claimed an amount of Rs. 8,261.65 lakhs as weighted deduction of capital & revenue expenditure under section 35(2AB) of the Act during the relevant assessment year. Such expenses are required to be certified by the auditors of the company as part of the compliance to the DSIR guidelines and the assessee has claimed the deduction based on such said certificates. The assessee submitted that deduction has also been reported by the tax auditor in form no. 3CD as well (P. no. 59 of P.B.). The assessee also submitted the DSIR letter approving the eligible expenditure along with comparison of amount claimed & amount claim....
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....20 which was relied by the Ld. DRP above. Therefore, the Ld. DRP had ignored the earlier approval of Gurgaon R&D unit by DSIR vide order dated 11.09.2015 at P. no. 891 of P.B. from 31.07.2015 to 31.03.2016 and accordingly assessee company is eligible for the deduction w.r. t. Gurgaon R&D unit for the F. Y. 2015 -16 relevant to A. Y. 2016-17 as well. Action of the Ld. AO in the Final Order: - However, after the Ld. DRP's direction, the Ld. AO had made the disallowance of Rs. 8261.65 lakhs pertaining to all five R&D units, instead of disallowing the claim of Rs. 10,23,47,9311- pertaining to "Gurgaon R&D unit" as directed by the Hon'ble DRP (P. no. 10 of Ld. AO's Final Order I P. no. 54 of Appeal Set). Passing of the Rectification Order by the Ld. AO: - Further, after filing the rectification application by the assessee company, the Ld. AO had restricted the amount of disallowance to Rs. 10,23,47,931/- pertaining to "Gurgaon R&D unit" by passing Rectification Order u/s 154 of the Act dated 06.01.2023 (P. no. 124- 125 of Case Law Compilation). After passing of the Rectification Order by the Ld. AO, the only issue under c....
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.... should be allowed on the basis of quantification by DSIR. In this regard, reliance can be made on the following judicial precedent. * Crompton Greaves Ltd. {[2019] III taxmann.com 338 (Mumbai - Trib.)}; * Crest Composites and Plastics A.Y. 2014-15 (2022-TIOL-675- ITAT-AHM); * Crest Composites and Plastics A.Y. 2013-14 (2022-TIOL-205- ITAT-AHM); * Cummins India Ltd. [2018] 96 taxmann.com 576 (Pune - Trib.); * Force Motors Ltd. [2021] 133 taxmann.com 71 (Pune - Trib.) and * Natural Remedies Pvt. Ltd. [TS-36-ITAT-2021 (Bang)]. The reliance may be placed on the following judgments which held that claim of assessee in form of deduction u/s 35(2AB) of the Act shall not be denied even on account of non-receiving of approval in Form No. 3CL from DSIR. * DCIT vs. M/s. STP Ltd. (2021-TIOL-128-ITAT-KOL); * CIT vs. Sun Pharmaceutical Industries Ltd. [2017] 85 taxmann.com 80 (Gujarat); "5. Having heard learned counsel for the parties and having perused the orders on record, we are broadly in agreement with the view of the Tribunal. Undisputedly, the research and development facility set up by the assessee....
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....ity to the department. In case of assessee, the research and development activity having already been approved in Form 3CM, the assessee thereafter, had no further role to play in the inter-departmental correspondence. The Tribunal therefore, held that the assessee was entitled to deduction on the capital and revenue expenses incurred on in house research and development. In writ, the Apex Court was of the view that, delay condoned. The Special Leave Petition is dismissed leaving the question of law open. Revenue's SLP Dismissed. " * Minilec India (P.) Ltd. vs. Asstt. CIT {[2018] 93 taxmann.com 213 / 171 ITD 124 (Pune - Trib.)}." 38. Ld. DR of the Revenue relied upon the orders of the authorities below on this issue. 39. Considered the rival submissions and material placed on record. We considered the submissions of the parties carefully and observed following facts: a. The assessee has filed letter dated 17.09.2015 for recognition of new R&D in-house facility at Gurgaon -Pg 889 of PB b. The other 4 units of in-house facilities were already recognized vide approval letter dated 18.07.2012 - Pg 890 of PB c. The DSIR upo....
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....o 31.03.2020. The short comings in the complying to the application and meet the terms of conditions is upon the assessee and it cannot be considered as the short coming in the inter departmental approval between the DSIR and revenue as held in the various case law in the old regime of approval. In the new regime, it is the assessee has to follow up the approval process diligently and submit the same for claiming the deduction under the Act. Therefore, we are inclined to agree with the findings of Ld DRP. 42. Coming to the final assessment order, the AO has wrongly disallowed all the deductions claimed by the assessee including the old 4 approved facilities. Therefore, we direct the AO to allow the genuine claim of the assessee relating to approved facilities and disallow the excess deductions claimed by the assessee for the Gurgaon facility alone. In the result, grounds raised by the assessee are partly allowed. 43. Apropos Grounds no.66 to 70 relating to disallowance of depreciation of goodwill amounting to Rs. 14,36,387/- are concerned, ld. Counsel for the assessee submitted that the issue is fully covered by the order of the ITAT in assessee's own case in different years ....
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.... (iv) CIT vs. Sicom Ltd. (2017-TIO:-1144-HC-Mum-IT). 47. Ld. CIT-DR relied upon the orders of the authorities below on this issue. 48. Considered the rival submissions and material placed on record. We observed from the record that the assessee has claimed separate line item in its profit and loss account as expense for writing off of obsolete inventory to the extent of Rs. 2.04 crores by taking proper approval and declaring the same in its note no 29 of notes to account. Upon the query from the bench at the bar, the Ld AR submitted that the assessee has not claimed double deduction in such writing off inventory as separate line item. The assessee also filed a auditor certificate in this regard. 49. We are aware that in the conventional method of accounting, while calculating the cost of material consumed, the opening stock plus relevant purchases for the year and reducing the closing stock of Raw material, you get the final material consumption. In case you revalue the closing stock for obsolete or completely write off the value, the consumption value for year will automatically get adjusted for the above said revaluation or write off. In case assessee claims as a sepa....