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2025 (10) TMI 529
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....ivity, the assessee has set up a plant at plot no. 801/23, GIDC, Phase-III, Vapi Dist-Valsad, Gujarat. For supplying uninterrupted power to the manufacturing unit, the assessee has set up a Captive Power Plant ('CPP' for short) in the same premises. 4. During the year under consideration, the CPP has generated power (electricity) and steam and has claimed deduction of Rs. 67,91,90,511/- u/s. 80IA of the Act, comprising of Rs. 22,91,82,801/- towards sale of electricity and Rs. 45,00,07,710/- towards sale of steam. For supply of electricity, the CPP has charged Rs. 7.52 per unit. Whereas, for steam it had charged Rs. 1.509 per kg. 5. When the Assessing Officer ('A.O.' for short) called upon the assessee to justify the arm's length nature of such transaction, the assessee submitted that in the very same period the manufacturing unit had also purchased power from DGVCL, a wholly owned subsidiary of Gujarat Urja Vikas Nigam Ltd. (GUVNL). It was submitted, the price at which the manufacturing unit had purchased power from DGVCL has been adopted as per unit cost of electricity sold by CPP to the manufacturing plant. The A.O., however, was not convinced with the submissions of the as....
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....ng to sale of electricity between CPP and the manufacturing unit is a Specified Domestic Transaction ('SDT' for short) coming within the ambit of section 92BA of the Act. Therefore, in terms with Explanation (ii) under section 80IA(8) of the Act read with clause (iii) to Explanation u/s. 80IA(6) of the Act, the deduction allowable u/s. 80IA of the Act should be equal to an amount which corresponds to the Arm's Length Price ('ALP' for short) of the transaction determined in terms of section 92F(ii) of the Act and other transfer pricing provisions. In fact, in paragraphs 4.1 to 4.3 of the assessment order, the A.O. himself has observed that reference was made to the Transfer Pricing Officer ('TPO' for short) to determine the ALP of related party transactions. Notably, in terms with the reference made by the A.O., the TPO undertook analysis of the international transaction as well as SDTs between the related parties. Vide order dated 30.10.2018 passed u/s. 92CA(3) of the Act, the TPO finally concluded that the ALP of the international transactions as well as SDT undertaken by the assessee with its Associated Enterprises (AE)/related parties being at arm's length, no further adjustment....
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....transactions entered into by the taxpayer: During the year under consideration, Assessee has entered into the following international transactions and specified domestic transactions with its AEs/ related parties: Nature of services Amount (Rs.) International Transaction Sale of organic and inorganic chemicals and intermediates 78,13,15,195 Total 78,13,15,195 Specified Domestic Transaction Purchase of Raw materials 4,55,45,317 Purchase of Finished goods 3,57,66,726 Purchase of Packing material 80,716 Rent for business premises 87,26,436 Managerial Remuneration 2,99,34,778 Sitting Fees 10,40,000 Commission payments 5,00,34,000 Payment of Professional fees 6,48,182 Payment of Salary 21,44,261 Sale of power from eligible business units to noneligible business units of the company 181,65,20,754 Total 199,04,41,170 6. Details and information requested were furnished by the taxpayer from time to time, and issues relating to the arm's length price of the international transactions/ specified domestic transactions were discussed. 7. In view of the tax....
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....etc. and had earned exempt income. He further observed that compared to the investment made, suo motu disallowance is grossly disproportionate. Therefore, he called upon the assessee to explain why disallowance should not be made by applying the methodology provided under Rule 8D(2). Though the assessee objected to the proposed disallowance, however, rejecting the objections of the assessee, the A.O. proceeded to compute disallowance applying the methodology provided under Rule 8D(2)(iii) and worked out at Rs. 23,87,151/-. After reducing the suo motu disallowance made by the assessee, the A.O. made net disallowance of Rs. 20,82,151/-. 12. The assessee contested the aforesaid disallowance before the ld. first appellate authority. Following the decision of ITAT Special Bench in the case of Asstt. CIT v. Vireet Investment (P.) Ltd. [2017] 82 taxmann.com 415/165 ITD 27 (Delhi - Tri) (SB), the ld. first appellate authority directed the A.O. to compute the disallowance u/s. 14A of the Act taking the average value of those investments which have yielded exempt income during the year. He further directed that if upon such computation, the resulting disallowance comes to a figure less th....
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....ng approval by Department of Scientific and Industrial Research ('DSIR' for short), however, they were not furnished. Accordingly, he disallowed the weighted deduction claimed u/s. 35(2AB) of the Act at double the amount of expenditure actually incurred. However, he allowed the expenditure incurred in toto. 16. The assessee contested the aforesaid disallowance before ld. first appellate authority. 17. After considering the submissions of the assessee and in the context of facts and materials on record, ld. first appellate authority having found that the issue has been consistently decided in favour of the assessee till A.Y. 2014-15, allowed assessee's claim of deduction in full. 18. We have heard the parties and perused the materials on record. It is observed, in the latest order passed by the co-ordinate bench on identical issue in assessee's own case in A.Y. 2014-15 (in ITA No. 3583, 3695/Mum/2018 vide order dated 30.03.2022), referring to the view taken by the ITAT in A.Ys. 2011-12, 2012-13 and 2013-14, the co-ordinate bench has allowed assessee's claim. Thus, respectfully following the consistent view of ITAT in assessee's own case, we uphold the decision of ld. first ....
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....id loss was treated as capital in nature and added to the value of the plant and machinery on which the assessee claimed depreciation. The A.O. was of the view that since the forex loss was unrealized, it cannot be added to the value of the block of plant and machinery in terms of section 43A of the Act. Accordingly, following the decision taken by the A.O. to disallow the claim of the assessee in A.Ys. 2009-10 and 2010-11, he made the disallowance. 25. The assessee contested the aforesaid disallowance before ld. first appellate authority. Having found that assessee's claim has been allowed in the preceding assessment years, ld. first appellate authority allowed assessee's claim. 26. We have considered rival submissions and perused the materials on record. On perusing the materials placed before us, we find that this is a recurring dispute between the parties since A.Y. 2009-10. In fact, the A.O. has accepted the aforesaid factual position. In the latest order passed in assessee's case in A.Y. 2014-15, the co-ordinate bench, while dealing with the issue, has held as under: 25. With regard to Ground No. 6 which is in respect of depreciation of foreign exchange loss di....
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....come could not have been accepted by the A.O., hence, he was justified in disallowing assessee's claim. Without prejudiced, he submitted that the nature and character of subsidy being revenue, it is taxable. 31. Per contra, ld. Counsel appearing for the assessee forcefully submitted that the issue being covered in favour of the assessee in its own case as well as in various other cases, the decision of ld. first appellate authority needs to be upheld. 32. We have considered rival submissions and perused the materials on record. Insofar as the power of ld. first appellate authority to admit assessee's claim, which was not accepted by the A.O. at the first stage, we must observe that there is no restriction on the appellate authorities to entertain a fresh claim if facts relating to such claim are available on record. In the facts of the present appeal, undoubtedly, in course of assessment proceedings itself the assessee has made the claim that SHIS and fertilizer subsidies are taxable as they are capital in nature. All facts relevant to the aforesaid claim were available before the A.O. That being the case, in our considered opinion, ld. first appellate authority was wholly wi....
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....early a capital expenditure. So far as the incremental incentive scheme is concerned, the incentive was linked with incremental export if a particular year, export sale was more than certain percentage of export in the preceding year, the assessee becomes entitled for this incentive. The said incentive was connected to expenses of investment in new plant and machinery, hence, the incentive is capital in nature. With regard to, Market Linked Focus Product Scheme (MLEPS) is concerned, the incentive was granted in order to export of products of high export intensity employment potential and is incentivized at 2% of FOB value of exports. This incentive was linked to employment generation by the company connected to the export of goods and mercantile. It is linked with capital in nature. The CIT(A)has placed reliance upon the decision of the Hon'ble Supreme Court in the case of CIT VS. Ponni Sugars& Chemicals Ltd. (2008) 306 ITR 392 (SC), Eastman Exports Global Clothing Pvt. Ltd. in ITA.No.47/MDS/2016 dated 17.05.2016 and Sutlej Textiles & Industries Ltd. (ITA. No. 5142/Del/2013) and M/s. Gloster Jute Mills Ltd. Vs. Addl. CIT in ITA.No. 687/Kol/2010. These issues have duly been exam....