AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2025 (12) TMI 187
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.... Income Tax Act, 1961 for the guarantee given by the assessee to its AEs ? (ii) Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in holding that there is absence of change in any facts of the Appellant for AY 2021-22 ignoring the fact that the benchmarking arrived by the TPO for the year under consideration on the basis of reliable data obtained from various banks u/s 133(6) of the Income tax Act and hence the decision relied upon by Ld. CIT(A) of M/s Excel Industries Ltd. [2013] 38 taxmann.com 100 (SC) is not applicable in the present case of assessee? (iii) Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in ignoring the benchmarking arrived by the TPO on the basis of reliable data obtained from various banks u/s 133(6) of the Income tax Act thereby violating Rule 10C of the I.T. Rules, 1962? (iv) Whether on facts and in the circumstances of the cases and in law, the Ld. CIT(A) has erred in accepting the ALP of the assessee ignoring the fact that the comparable rate for HDFC and ICICI bank taken by assessee is not reliable as the data obtained by TPO from banks u....
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....ustment on corporate guarantee fee charged from Associated Enterprises (AEs) - INR 2,55,68,000/- 8.3.2 The Appellant has raised various grounds towards Transfer Pricing adjustment on corporate guarantee fee charged from Associated Enterprise ('AEs') as under: 2.1 On the facts and in the circumstances of the case and in law, the Ld. Transfer Pricing Officer (TPO) and Assessing Officer (AO) have grossly erred in making an addition on account of Transfer Pricing (TP) adjustment on corporate guarantee fen charged from its AEs viz. Alembic Pharmaceuticals Inc. USA (Alembic USA) and Alembic Global Holdings SA (AGH) of INR 2,55,68,000/- 2.2 The Lo TPO and AO have grossly erred in holding that provision of corporate guarantee is an international transaction when such corporate guarantee by the Appellant to the bankers of its AEs was in the nature of shareholder activity and therefore, it cannot be considered as an International transaction 2.3 The Ld. TPO and AO have also grossly erred in holding that provision of corporate guarantee is an international transaction when the liability arising from such provision of corporate guarantee by the Appel....
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....re are no maternal changes in the facts pertaining to the transaction for the current period. Hence, following the 'Principle of Consistency' which requires that when the facts & circumstances continue to remain the same, then there should not be any variation in the treatment from earlier years and relying on the judgement of Apex Court in the matter of Mis Excel Industries Ltd. [2013] 38 taxmann.com 100 (SC) held that, "In Radhasoami Satsang Saomi Bagh v. Commissioner of Income Tax, [1992] 193 ITR 321 (SC) this Court did not think it appropriate to allow the reconsideration of an issue for a subsequent assessment year if the same fundamental aspect permeates in different assessment years. In arriving at this conclusion, this Court referred to an interesting passage from Hoystead v. Commissioner of Taxation, 1926 AC 155 (PC) wherein it was said "Parties are not permitted to begin fresh litigation because of new views they may entertain of the law of the case, or new versions which they present as to what should be a proper apprehension by the court of the legal result either of the construction of the documents or the weight of certain circumstances if this were p....
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....that the Appellant did not make this claim in the return of income. During the scrutiny proceedings, this claim has been made before the AO vide its letter dated 20.10.2023. However, the AO had not made any observations on this claim though the assessee requested to allow the same. The same issue came for adjudication for the appeal filed by the assessee in its own case for the AY 2018-19 and AY 2020-21 with different quantum of export incentives. For the AY 2021-22, the quantum of exports incentives under MEIS Scrips received is Rs. 59,79,85,415/-, Hence, the decision taken by my predecessors in CIT(A) proceedings on this very issue for the AY 2018-19 & AY 2020-21 is squarely applicable to the ground raised in this appeal on characterization of export receipts. The discussion for the AY 2018-19 is reproduced below for ready reference 14.01 During the assessment proceedings, the assessee made an additional claim before the AO for reducing the taxable receipts Rs 57,83,98,917/- which are reported in the profit and loss account under the caption export incentives received in the form of scripts under Merchandise Export from India Scheme (MEIS) pursuant to the Foreign Trade P....
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....e assessee should be prevented from raising that question before the Tribunal for the first time, so long as the relevant facts are on record in respect of that item. We do not see any reason to restrict the power of the Tribunal under section 254 only to decide the grounds which arise from the order of the Commissioner (Appeals) Both the assessee as well as the Department have a right to file an appeal/cross-objections before the Tribunal. We fail to see why the Tribunal should be prevented from considering questions of law arising in assessment proceedings although not raised earlier. 6. in the case of Jute Corpn of India Ltd. v. CIT [1991] 187 ITR 588, this Court, while dealing with the powers of the AAC, observed that an appellate authority has all the powers which the original authority may have in deciding the question before it subject to there striations or limitations, if any, prescribed by the statutory provisions. In the absence of any statutory provision, the appellate authority is vested with all the plenary powers which the subordinate authority may have in the matter. There is no good reason to justify curtailment of the power of the AAC in entertaining an a....
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....the assessee before the Assessing Officer by filing a revised computation instead of filing a revised return since the time to file the revised return was lapsed for claiming to treat the incentive subsidies in question as capital receipts instead of revenue receipts as claimed in original return. The Assessing Officer had denied this claim. Revenue has attacked the order of the tribunal by relying on the decision in the case of Goetze (india) Ltd. (supra) 29. This case does not help the revenue/appellant in this case Supreme Court has made it clear that its decision was restricted to the power of the Assessing authority to entertain a claim for deduction otherwise than by a revised return, and did not impinge on the power of the Appellate Tribunal under Section 254 of the Income Tax Act, 1961 The Hon'ble Supreme Court in the said decision held as follows: "In the circumstances of the case, we dismiss the Civil Appeal However, we make it clear that the issue in this case is limited to the power of the Assessing Authority and does not impinge on the power of the Income Tax Appellate Tribunal under Section 254 of the income Tax Act, 1961." 29.1 This judgmen....
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....relied on several case laws wherein it was held that the powers of appellate commissioner being co-terminus with that of the AD the appellate authority can modify the assessment order on an additional ground even if it not raised before the AO and thus the CIT(A) has admitted the additional ground and decided the issue on merits in favour of the appeliant. Further, it is also noted that the Revenue had appealed before Hon'ble ITAT against the decision of CIT(A) in admitting the additional ground on the above issue which was not a subject matter of discussion before the AO during the assessment proceedings. After having detailed discussion, the Hon'ble ITAT had confirmed the order of CIT(A) in admitting a new issue which was not a subject of discussion before the AO. Subsequently, 'Revenue preferred an appeal before the Hon'ble High Court against the order of the ITAT It is pertinent to mention here that Revenue did not raise a ground on the issue of admissibility of additional ground by the CIT(A)/ITAT before the Hon'ble Gujarat High Court which was not found place in the assessment order of the AO. In view of the above, it may be concluded that Revenue has accepted....
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....e correctness of the claim of such item(s) as taxable or otherwise without adhering to the stringent principles of time limitations to make such claims insisting to file only through the revised return. Basically, in two circumstances in which the additional claims shall not be made- (i) the expenditure which was not routed through accounts as part of the return filing & (ii) new claims which are made only in the reassessment proceedings initiated u/s 147. Thus when only a question of law involved which has to be decided based on all facts which are available on the record before taken up the case for scrutiny, there is no harm caused to the Revenue in considering such claim of the assessee and decide the issue whether exigible to tax or otherwise as per the applicable provisions of the law. The principle to be followed is no tax can be imposed/collected without sanction of the low. All the case laws submitted by the assessee in support of his pleas are examined and found that all those decisions are relevant to the facts of the case and guiding the lower appellate authorities to admit the question of law which was raised on the facts available on the record to decide the issue of ....
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.... exports. By using scrips to pay duties and taxes, exporters could reduce their overall cost of production and improve competitiveness in the global market. The objective of primary said to be offset infrastructural in efficiencies and associated costs involved MEIS was exporting goods produced or manufactured in India, especially those having high export intensity. employment potential, and value addition and thus the rational with which the scheme was introduced is capital in nature, the incentives so received under the scheme should also to be treated as capital receipts. With the above submissions and placing reliance on some of the case laws (which will be discussed later in the order), the AR has requested to reduce the books profit admitted in the return of income to the extent of MEIS scrips recorded in the return of income as operating business revenue 14.08 To support the purpose test to decide a receipt as capital or revenue the Department and taxpayers knocked the doors of the Hon'ble courts both at High Court level and Supreme Court One of the cases where the Department pleaded before the Hon'ble Court of Kolkata on the similar issue to decide the taxa....
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....such cases, one has to apply the purpose test. The point of time at which the subsidy is paid is not relevant. The source is immaterial. The form of subsidy is immaterial. The main eligibility condition in the scheme with which we are concerned in this case is that the incentive must be utilized for repayment of loans taken by the assessee to set up new units or for substantial expansion of existing units. On this aspect there is no dispute. If the object of the subsidy scheme was to enable the assessee to run the business more profit able then the receipt is on revenue account On the other hand, if the object of the assistance under the subsidy scheme was to enable the assessee to set up a new unit or to expand the existing unit then the receipt of the subsidy was on capital account. Therefore, it is the object for which the subsidy assistance is given which determines the nature of the incentive subsidy The form or the mechanism through which the subsidy is given are irrelevant" 21. A perusal of the judgments in Sahney Steel & Press Works Ltd (supra) and Ponni Sugars & Chemicals Ltd (supra) therefore, reveals that the apex court had applied the above quote dictum to dete....
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....dy should be treated as capital receipt in spite of the fact that computation of Power subsidy is based on the power consumed by the assessee. It is well established from submission of the assessee as enunciated above that once the purpose of a subsidy is established, the mode of computation is not relevant as held in the decisions of the Hon'ble Supreme Court in the case of Sahney Steel & Press Works Ltd. (supra), CIT v. Ponni sugars & Chemicals Ltd (supra) and the decision of our High Court in case of Rasoi Ltd. (supra) against which SLP has been dismissed. The mode of computation/form of subsidyis irrelevant The mode of giving incentive is re-imbursement of energy charges. The nature of subsidy depends on the purpose for which it is given Hence the assessee draws support from the decisions already discussed earlier as the same principle will apply here. Thus the entire reason behind receiving the subsidy is setting up of plant in the backward region of West Bengal, namely, Bankura" In the case on hand the incentive is said to be given for improving the exiting infrastructural facilities or improve the processes to enhance the exports with an object to create employm....
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....s to encourage exports from India are not given to carry the business of the assessee but provided to encourage the industries to build-up the manufacturing facilities at international Standards Such non-cash incentives cannot be treated as revenue receipts. Thus, it is explained by the appellant that non-cash incentives cannot be fit into the definition of income u/s 2(24)(xvi) of the Act and requested to treat the MEIS scrips as capital receipts and exclude the same from the total receipts erroneously reported as revenue of the year in the rectum of income. The appellant also explained in detail the incentives received against the exports under MEIS Scheme are the rewards for the achievement rather to categorise the same under subsidy, grant assistance or cash-incentive or duty draw back or waiver or concession or reimbursement of expenditure by taking the dictionary meaning of all these terms since the same are not defined in the Act but important in deciding the nature of the export incentive receipts I am in complete agreement with the appellant that the value of MEIS Scrips is nothing but a reward which is not taxable as income since the same is not falling under the definiti....
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....nd cannot be subjected to fax either under the normal computation provisions or under section 115JB of the Act. The absence of provision in section 115JB of the Act for exclusion of such capital receipt credited to the profit and loss account cannot result in its taxation." 14.12 Even if the export incentives under MEIS Scrips are considered as capital receipts, the question would arise that whether the AO is empowered to modify the book profits u/s 115JB of the Act. The book profit is derived from the net profit shown in the profit and loss account prepared as per Schedule III of the Companies Act. 2013. If in case, the AC finds that the profit and loss account has not been prepared in accordance with the accounting standards or the Companies Act, the AD can only make specific adjustments. These include certain adjustments in the form of (a) Increase by Provision for unascertained liabilities, provisions for diminution in the value of assets, deferred tax, etc. (b) Reduced by Amount withdrawn from reserves provisions etc. if credited to the profit and loss account etc. As per the provisions of Sec 115JB of the Act, the AO has limited power of ma....
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....assessee from the Government of West Bengal under the schemes in question are to be included for the purpose of computation of book profit under Section 115 JB of the Income Tax Act 1961 as contended by the revenue by relying on the decision in the case of Appollo Tyres Ltd (supra) 27. In this case since we have already held that in relevant assessmentyear2010-11thaincentives'Interestsubsidy and Power subsidy' is a 'capital receipt and does not fall within the definition of "Income' under Section 2(24) of Income Tax Act 1961 and when a receipt is no ton in the character of income it cannot form part of the book profit under Section 115JB of the Act, 1961. In the case of Appollo Tyres Ltd. (supra) the income in question was taxable but was exempt under a specific provision of the Act as such it was to be included as a part of the book profit. But where a receipt is not in the nature of income at all it cannot be included in book profit for the purpose of computation under Section 115JB of the Income Tax Act, 1961. For the aforesaid reason, we hold that the interest and power subsidy under the schemes in question would have to be excluded while computing book....
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....ower to modify the book profit reported by the assessee under companies Act is given below- In case of CIT-1, Ludhiana v Oswal Sugar Ltd [2019] 105 taxmann.com86 (Punjab & Haryana), the Hon'ble High Court distinguished the decision of the Apex Court in the case of Apollo Tyres Ltd. v. CIT [2002] 122 Taxman552/2551TR273(SC)about the powers of the AO to set night the mistakes committed by the assessee in preparing the books of account of the assessee company and assess the correct income by making modification to the profit reported as per the companies Act. The relevant portion of the decision of the Hon'ble Punjab & Haryana High Court in this case is extracted below for ready reference- "3. Learned counsel for the revenue submitted that the assessee had claimed a sum of Rs. 2.00,42,333/- as expenses on account of lease rent for the assessment years 1995-96 and 1996-97 which was charged to the Profit and Loss account. According to the counsel, the same was inadmissible while calculating deemed income under Section 115JA of the Act for purposes of determining the faxable income for the current assessment year. It was submitted that the claim of lease rent as....
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....nd Loss account is prepared in accordance with Parts II and ill to the 6th Schedule of the Companies Act Wherever the Assessing Officer finds that the profit is not determined in the profit and loss account in accordance with the aforesaid Schedule he is required to adjust the profit. Further the deduction as claimed by the assessee is not covered by any of Clauses (1) to (ix) of Explanation to Section 115JA of the Act. Once that is so the Tribunal was in error in applying the ratio laid down by the Apex Court in Apollo Tyres Ltd 's case (supra)" 14.17 Subjected to the above discussion, it is concluded that the receipts under MEIS Scrips is considered as capital receipts for normal computation of income and also for the computation of book profits u/s115JB of the Act. Accordingly, the AD is directed to allow the fresh claim made before him during the assessment to exclude the value of MEIS Scrips which was not made in there turn of income or through revised return but claim filed only through are vised computation/claim request made Due to the above said decision, the ground no. 3 of appeal raised on the above said issue is allowed." 8.4.2 Further during the a....