TaxTMI 
TaxTMI 
2025 (12) TMI 578
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....t dated 28.02.2017, relevant TPO order u/s 92CA(3) is dated 27.10.2016 2 7375/Del/2018 2014-15 Order dated 28.08.2018 of the Ld. CIT(A) arising out of order u/s 143(3)/92CA/144C(3) of the Act, TPO order dated 25.10.2017 3 9205/Del/2019 2015-16 Assessing Officer's order dated 30.09.2019 u/s 144C(13) r.w.s. 143(3) of the Act arising out of Dispute Resolution Panel's direction dated 25.07.2019 u/s 144C(5) of the Act. ITA No. 1575/DEL/2018 [AY 2013-14] 2. First of all, we take up the appeal for assessment year 2013-14. The assessee is in appeal against the order dated 17.11.2017 passed by the Ld. CIT(A)-38, New Delhi arising out of assessment order passed under section 143(3)/144C(3) of the Income Tax Act, 1961 (hereinafter referred as 'the Act'), dated 28.02.2017 passed by the Addl. CIT, Special Range-7, Delhi. 3. Brief facts of the case: The assessee is a company incorporated under the Companies Act, 1956 and is a 100% subsidiary of Pioneeer Overseas Corpn. USA (POC). In the relevant AY 2013-14, the assessee filed its return of income on 30.11.2013 declaring total income of Rs. 40,03,75,727/- after claiming exemption under section 2(1A....
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....laim of deduction u/s 10(1) of the Act and on the issue of receivables u/s 92CA of the Act. It appears from the grounds of appeal by the assessee before the Ld. CIT(A) that the assessee has not challenged the disallowances u/s 37(1) of the Act and u/s 43B of the Act. 5. The Ld. CIT(A) observed that the assessee company is not engaged in the performance of agricultural operations because the basic operations like tilling, sowing etc. are being performed by the farmer. 5.1. The discussion about the findings of the Assessing Officer and the ld. CIT(A) in more details are dealt later in this order. 6. Aggrieved by the order passed by the ld. CIT(A), the assessee is in appeal before us. Grounds No. 1 to 3 pertain to the addition on account of denial of claim of exemption under section 10 (1) of the Act. The said grounds of appeal are reproduced as under :- "1. That on the facts and in the circumstances of the case, the learned Commissioner of Income Tax (Appeals) erred in law in upholding the order passed by the assessing officer rejecting the assessee's claim of deduction u/s 10(1) of the Act. 2. That the CIT(A) has passed the order without application of....
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.... generating income on account of agriculture produce. The land is actually cultivated by the land owner/ farmers themselves. All the basic agricultural operation form tilling to harvesting is done by the farmers themselves. * The Lease & Service Agreement entered into by the company with the farmers does not amount to lease also. * Assessee does not undertake any basic agricultural activity viz, tilling. cultivating. sowing the seed, growing, irrigation and harvesting etc. * Its name is not entered in any land record as cultivator. * A close scrutiny of the no agreements ie. Leave & License Agreement and Service Provider's Agreement, reveals that these are the devices created by the assessee to make an impression that it was doing agricultural operation. First it enters into a lease & license agreement with a farmer then enters into a service provider's agreement with the same farmer to grow crop on his own land. The strangest part of this arrangement is that by entering into these agreements the farmer becomes laborer on his own land having no right on his produce but bears all risks. He will be compensated for all his labour an....
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....dition to the row seeds but also change their basic nature by chemical treatment. After such kind of processing seeds become deferent from seeds originally produced. These processed and treated seeds were packaged and marketed by the assessee under its brand name "Pioneer' through its various marketing offices situated throughout country in Hyderabad. Hubli, Aurangabad. Ahmadabad. Jaipur, Chandigarh, Lucknow, Ranchi and Raipur etc. Thus, contrary to its claim. activities of the assessee company can easily be termed as manufacturing activity. Assessee Company is in a business of manufacturing and marketing of hybrid seeds of high yielding verity. After purchasing seeds from farmers (grown from parent seeds supplied by it), assessee company is doing processing of these seeds. * In the Form CD submitted by the assessee the nature of business is given as Manufacturing Industry-Agro Based Industry. 1.2 In view of the above, why not the income of Rs. 124,59,41,832/- claimed to be exempt u/s 2(1A) r.w. section 10(1) of the Income Tax Act. 1961 be treated as business income and thus, is taxed accordingly." 7.1. The AO after considering the reply/e....
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....e farmers as per the contract; xii. Assessee does not bear any risk relating to quantity or quality of product. xiii. Assessee only pays to farmers the cost of their products plus mark up in the garb of lease and license fee and labour cost who bear all risk relating to product. xiv. Assessee receives seed/ crop produced by farmers on the basis of its quality though it claims that it is its own produce. xv. In view of findings of Hon'ble Karnatka High Court the activities are not of agricultural nature and the assessee company is not eligible for exemption under section 10(1) of the Act. 4.5. Thus, the assessee has not carried out any basic agricultural operations and from the secondary operations also the assessee cannot be said to have derived any agricultural income. As stated by the assessee in its reply, the assessee carries on the following post harvest operations to process seeds- I. Receiving & Sorting II. Drying III. Cooling IV. Precleaning V. Shelling VI. Grading VII. Destoner VIII. Sizing IX Specific Gravity Seperator X. Treator ....
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....m of deduction us 801 of the Act as well as its claim before the Hon'ble Andhra Pradesh High Court in the writ petition filed by it. 4.17. In the Form CD submitted by the assessee the nature of business is given as Manufacturing Industry-Agro Based Industry. 4.18 In view of the above discussion/ detailed examination of the issue and various judgments of various judicial authorities mentioned therein, it is concluded that assessee is not pursuing agricultural operations and is deriving income from manufacturing/processing and sale/ purchase of hybrid seeds. Thus income amounting to Rs. 124,59,41,832/- claimed as agricultural income is assessed as income from the business activities ................" (Emphasis supplied) 8. The Ld. CIT(A) vide her order dated 17.11.2017 confirmed the action of the AO by stating that the facts are similar in the case of the assessee for earlier years. She relied upon the orders of her predecessors for AY 2007-08, 2008-09, 2009-10 and 2010-11 and discussed in para no. 3.3 to 3.4 appearing on page no.39 to 43 of her order. The same is reproduced as under :- 3.3. I have carefully considered the order passed by the AO a....
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....IT(A)'s had consistently sustained the disallowance of agricultural income in the earlier predecessor CIT(A) in his order Appeal No: 203/CIT(A)X VII/ Del/09-10 dated 18.08.2010 for the A. Y. 2006- 07 has held as under: "2.1. However, I find that the submissions of AR are similar to his submissions in A.Y. 2004-05 and assessment year 2005-06. I further find that my Id. predecessor vide Appeal Order dated 20.3.2009 for assessment year 2004-05 has decided this issue against the appellant with the following observations: "It is noted that the issue in dispute is a recurring issue during last several years. The AO has also mentioned in his order that in CIT(A)'s order for assessment year 1996-97 to 2001-02 this issue was decided against the assessee and it was categorically held that the income of the appellant is not agricultural income exempt u/s 10(1) of the IT Act and the same has correctly been held by the AO as business income. I have also carefully gone through the said order. Relevant para of the order of my predecessor dealing with identical issue is reproduced hereunder: In view of the above discussion, conclusions drawn in different paragrap....
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....ed on a few leave and license agreements and service provider contracts. But even these legal documents fails to substantiate that the appellant company had carried out any agricultural operations as the appellant company had not even adequately compensated the farmer for his agricultural labour or adequate rent was paid to the farmer for the land taken from them on lease. The payments made to the farmers are only post harvest and after procuring the seeds from them. The nature of payments clearly indicated that this was in lieu of the seeds purchased from them and the price paid was on a per kg rate. As a result, ground No. 1, 4 to 14 & 19 and ground No. 1 of the summary of the grounds of appeal are here by rejected and based on the evidence available on record the addition of Rs. 26,93,65,409/- made by the AO is sustained." 6.1. During the appellant proceedings, the appellant relied on the decision of the Hon'ble ITAT, Mumbai in the case of M/s Monsanto India Ltd. in ITA Nos. 286 & 287/Bang/03 dated 28.01.2011. The relevant portion of the above ITAT decision is as follows: "14. All other cases relied upon by the AR have already taken into consideration by th....
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....ot be enough to characterize them as agricultural operations; in order to invest them with the character of agricultural operations these subsequent operations must necessarily be in conjunction with and in continuation of the basic operations which are the effective cause of the products being raised from the land. The subsequent operations divorced from the basic operations cannot constitute by themselves agricultural operations. Only if this integrated activity which constitutes agriculture is undertaken and performed in regard to any land can that land be said to have been agricultural purposes" and the income derived there from be said to be agricultural income" derived from the land by agriculture, under section 2(1) of the Indian Income-tax Act, 1922." 6.3. The Ld. CIT(A) in the order for A. Y. 2008-09 had observed as under on this aspect: "5.3. The above decision of Hon'ble Supreme Court and definition of agricultural income in section 2 (1A) of the I. T. Act, 1961 makes it amply clear that agricultural income had to be derived from land and that too by carrying out agricultural operations on land. In the case of the appellant, there is no dispute that....
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....on were read out to the confirming party in Telugu, the local language understood by him and that he has signed this confirmation voluntarily and without any coercion or undue influence. (Sign) Confirming Party (Sign) Witness" 5.4. None of the confirmations submitted are for the relevant assessment year and the lease is for a period of six months from October-November, 1999. Though, the confirmations mentions about the rent of Rs. 1440/- per acre, the extent of land taken on lease or the amount of rent paid to the farmers are not mentioned in the confirmation. The only payment made to the farmer mentioned in the confirmation letter is about a composite sum of Rs.6.75/ - per kg of good seeds of corn and it is pertinent to note that the rent is not paid at per acre rate but at per kg rate of seeds. The other payment mentioned as paid to the farmers is towards substandard quality seeds and both these payments cannot be considered as payment of rent to the farmer. Therefore, from the evidence available, it is not possible to conclude that the appellant had taken any land on lease as there is no evidence of any payment of lease rent to the farmers. In this reg....
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....urchase of seeds either for good seeds or substandard seeds and there is no mention of any lease rent paid for land in these confirmations. Therefore, the appellant's claim that they had taken land on lease from the farmers is without any evidence and thus not acceptable. Even in the appellate proceedings for A. Y. 2007-08, the appellant could show only composite payments to farmers and that too at a fixed rate per kg of seeds purchased from the farmers. The appellant is unable to furnish any evidence of any lease rent paid to farmers in the appellate proceedings and therefore, I am of the view that the AO's decision to disallow the appellant's claim of agricultural income of Rs. 55,07,79, 154/- requires to be sustained. 5.6. The next important aspect to be verified is whether the appellant had carried out any agricultural operations. The confirmations mentioned above though it does not pertain to the relevant assessment year mentions only purchase of seeds under two categories i.e. good seeds and substandard seeds. Therefore, it is clear that the appellant had not carried out any agricultural operations as required for claiming agricultural income as ....
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....ations during the relevant assessment year. In view of the above, Rule 7 is not at all applicable in the case of the appellant. Provisions of Rule 7 are as follows: "Income which is partially agricultural and partially from business. 7.(1) In the case of income which is partially agricultural income as defined in section 2 and partially income chargeable to income tax under the head "Profits an gains of business", in determining that part which is chargeable to income tax the market value of any agricultural produce which has been raised by the assessee or received by him as rent-in-kind and which has been utilized as a raw material in such business or the sale receipts of which are included in the accounts of the business shall be deducted, and no further deduction shall be made in respect of any expenditure incurred by the assessee as a cultivator or receiver of rent-in-kind." 6.1. The appellant has not made out a case during the appellate proceedings to consider that its income was partially agricultural and therefore Rule 7 is not applicable at all to the appellant's case. From the facts mentioned in the earlier paragraphs with regard to Ground No....
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....ultural income for the respective assessment years and endorsed the action of the Assessing Officer to treat the same as business income. The relevant findings of the Tribunal as appearing in para no.15 to 23 of the order are reproduced as under :- "15. We have heard the rival submissions and perused the relevant material on record. The principles regarding the scope of agricultural activities and agricultural income has been laid down by the Hon'ble Supreme Court in the case of CIT Vs. Raja Benoy Kumar Sahas Roy(supra), wherein it was held as under: "The primary sense in which the term agriculture is understood is agar-field and cultra-cultivation, i.e., the cultivation of the field, and if the term is understood only in that sense agriculture would be restricted only to cultivation of the land in the strict sense of the term meaning thereby, tilling of the land, sowing of the seeds, planting and similar operations on the land. They would be the basic operations and would require the expenditure of human skill and labour upon the land itself. There are however other operations which have got to be resorted to by the agriculturist and which are absolutely nece....
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....aid to be "agricultural income" derived from the land by agriculture. If the term "agriculture" is thus understood as comprising within its scope the basic as well as subsequent operations in the process of agriculture and the raising on the land of products which have some utility either for consumption or for trade and commerce, it will be seen that the term "agriculture" receives a wider interpretation both in regard to its operations as well as the results of the same. Nevertheless, there is present all throughout the basic idea that there must be at the bottom of it cultivation of land in the sense of tilling of the land, sowing of the seeds, planting, and similar work done on the land itself. This basic conception is the essential sine qua non of any operation performed on the land constituting agricultural operation. If the basic operations are there, the rest of the operations found themselves upon the same. But if these basic operations are wanting the subsequent operations do not acquire the characteristic of agricultural operations. All these operations no doubt require the expenditure of human labour and skill but the human labour and skill spent upon ....
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....e the actual agricultural operations were carried out by the employees of the assessee company, it would have been a different case altogether. 19. The features of the agreement relied upon by the assessee like composite payment, giving parent seeds free of cost to the farmer, not carrying out any agricultural operations by itself clearly shows that the assessee company is only earning business income from the activity and not agricultural income. It is the farmer in the present case, who has to ensure the watering of the land, fertility and the suitability of the land. Without carrying out the basic operations alongwith the subsequent operations on the agricultural field, the assessee cannot claim agricultural income. The facts of the present case though represent a legal business model preferred by the assessee and the farmer but the said arrangement only gives rise to business income in the hands of the assessee and not agricultural income. The leave and license agreement as well as the service provider agreement read alongwith the statements of the farmers also show that the agricultural operations are carried out by the farmers only. 20. The reliance placed b....
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....cation indicated by the assessee. The seeds which do not qualify the specification" are also not sold by the farmer, but by the company and the sale consideration, if any is given to the farmer. The farmer while multiplying foundation seeds, uses his land and labour. The input given by the assessee is only technical supervision of the company. Whatever seeds grown by the farmer whether qualifies the specification indicated by the assessee or not has to be given to the assessee and the assessee will pay a fixed price so far as the seeds which quality the specification and other seeds will be sold in the open market by the assessee and there is no fixation of any price for the seeds which do not meet the specification. The farmer has to ensure fertility of the land, suitability of the land, cultivation of the land, watering of the land, use of the seeds supplied by the assessee and also had to sell the hybrid seeds at a price fixed by the assessee ...... .... If the farmer has to arrange the labour and pay the labour charges and also spend money for other operations either basic or subsequent operations, he can only take advance amount from the assessee and such amount paid ....
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....er, we hold that the entire income amounts to business income. As a matter of fact for some of the assessment years based on the opinion of one of the senior counsel on taxation Mr. K.R. Prasad, the assessee - company offered its income as business income and even claimed deduction under s. 80HHC of the Act. 22. In view of the aforesaid, we affirm the reasoning given by the AO and the CIT(A) and dismiss grounds No. 1 to 12 raised by the assessee. 23. As a result, the appeal of the assessee stands dismissed." 10. Against this order, the assessee has filed an appeal u/s 260A of the Act before the Hon'ble Delhi High Court. The Hon'ble Delhi High Court has admitted the appeal of the assessee by observing as under :- "ITA Nos.1051/2018, 1052/2018, 1053/2018 and 1054/2018 Notice. Mr. Deepak Anand, Junior Standing Counsel accepts notice on behalf of respondent. It is pointed out that there are conflicting judgments of the Bombay High Court and the Karnataka High Court, against which SLPs are pending. Admit. The following question of law is framed: (1) Whether the assessee's income from "cultivation" and....
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.... income derived therefrom will fall within the definition of agricultural income and the assessee would be entitled to the benefit of section 10(1) of the Act. It was submitted that the assessee had entered into valid 'Leave and License Agreement' with the farmers and had carried out the agricultural activities under its supervision and therefore, the assessee was entitled to the benefit of exemption u/s 10(1) of the Act. It was further submitted that the claim of all expenses on lease rent and labour charges for carrying out agri-operations have been fully allowed and the accounts have been accepted in toto in all the years. Further, it was submitted that the assessee, being in lawful possession of the impugned lands taken on lease for the cropping season for raising crops has derivative interest in the land and there was no contrary finding by AO/CIT)(A). The Ld. AR further submitted that the possession of the agricultural land by the assessee company for a cultivation season creates a derivative and beneficial interest in the land and it is the derivative interest that matters in the claim u/s 10 (1) of the Act and it is immaterial if such a person carries out cultivatio....
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....cense Agreement' were make believe arrangements, which was supported by statement of farmers as recorded placed at page no.610 of the paper book. It was further submitted that the purchase of seeds was by the farmers and all other expenses and efforts are incurred by the assessee. It was submitted that the agriculture activity considered as exempt as per the provisions of section 2(1A) of the Act is an activity which is considered below the land and after it comes out of land. It was further submitted that all the judgments relied upon by the ld. AR are prior to the matter heard and considered by the Tribunal in assessee's own case for the earlier years as referred earlier in this order. As regards the order dated 18.07.2014 of the Hon'ble Karnataka High Court in the case of M/s Namdhari Seeds and ACIT, Circle-2(1), Bangalore in ITA No. 346/2012 and Ors., it was submitted that the decision in the case of Namdhari Seeds in favour of the Revenue was delivered by Hon'ble Karnataka High Court on 24.10.2011, whereas the subsequent decision in the case of Namdhari Seeds do not apply to the facts of the case of the assessee as the assessee has not carried out the basic agr....
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....d leave no manner of doubt that no agricultural income arose in the hands of the assessee. During the year also, there is no change in the position in the carrying out of the agricultural activity for the present year as noted by the Tribunal in the case of the assessee for the earlier years. Further, on perusal of the 'Leave and License Agreement' dated 01.11.2011 between the farmer/land owner and the assessee (sample copy placed at page no.400 to 404 of the paper book) and the service provider contract between the assessee and the farmer/land owner (sample copy placed at page no.407 to 415 of the paper book), it is seen that in the said agreement/contract, the assessee has not undertaken the responsibility of carrying out the basic agricultural operations as per the tests laid down by the Hon'ble Apex Court in the case of CIT vs Raja Benoy Kumar Sahas Roy (Supra). Thus, its claim as referred in para no.11 and 11.1 of this order that the possession of the agricultural land by the assessee company for a cultivation season creates a derivative and beneficial interest in the land and it is the derivative interest that matters in the claim u/s 10 (1) of the Act and it is i....
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....present assessee towards incurring of any expenditure for preparation of the lands owned by the landlords, which constitutes basic agricultural operations as held by Hon'ble Supreme Court in the case of CIT Vs. Raja Benoy Kumar Sahas Roy (supra). In the same para, the Tribunal observed that it is a case wherein the assessee supplied all the needs required for agricultural activities. i.e. money, seeds lease lands and met all the expenditure and collected the seeds grown in the said lands using the services of the land owners-cum-growers. Another important fact noted by the Tribunal in that case was, that it is not a case of buying of seeds from the landlords. Further, it was noted by the Tribunal that the assessee paid to the landlords for the services as well as the rent of the lands. The same findings were also noted by the Tribunal in the cited case in its concluding para no. 18 and 23, which is reproduced as below:- "18. We heard both the sides and perused the orders of the Revenue. We have also perused the paper book filed by both the sides and the decision relied on by them. The objections of the AOs are : A. Absence of the registered deeds of leased lan....
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....irit. We find it is a case that that assessee supplied all the needs required for agricultural activities, i.e. money, seeds, lease lands and met all the expenditure and collected the seeds grown in the said lands using the services of the landowners-cum-growers. It is not a case of buying of seeds from the landlords. Assessee paid to the landlords for the services as well as the rent of the lands." xxxxxxxxxxxxxxx 23. To sum up, on the facts of assessee entering into an agreement with the agricultural landlords-cum-growers for growing the foundation and breeder seeds as per the terms and conditions and also the scientific specifications provided by the assessee, when the assessee bears all the expenditure on land development, irrigation, fertilizers, pesticides, transportation etc., when the assessee pays the land rent and also for the labour, when the landlord acts only as a grower and hands over the entire agricultural produce of foundation and breeder seeds to the assessee at the end. Grower never sold the agricultural produce to the assessee etc. Thus, the activity constitutes agricultural activity as the assessee constitutes an agriculturist and the entire activit....
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.....1 on page no.6-7 of this order) as distinguished in the case of M/s Nath Genes (I) Ltd. (supra), wherein, the Tribunal in para-23 of its order as reproduced above gave a categorical finding that the 'Grower never sold the agricultural produce to the assessee etc." Further, the Assessing Officer also noted that though the assessee claims to have borne all expenses on account of seeds, fertilizers, pesticides, etc. on the basis of some standard formula (and not on actual basis) but all these were adjusted against the sale proceeds of crop and the farmers were paid only the balance amount after adjusting the aforesaid expenses. Therefore, the case law relied by the assessee in the case of ITO vs Nath Bio Genes (I) Ltd. is distinguishable in the case of present assessee and does not support the contention made by the assessee. Therefore, the said reliance by the Ld. AR is rejected. 14.6. Further, in view of the specific finding recorded by the Tribunal as discussed in para no.9 of this order as above, the other case laws and the submissions relied by the assessee cannot be accepted. Moreover, the ld. AR has not brought any case law on record in which, it is held that an activit....
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....tion, the benefit of such ambiguity cannot be claimed by the subject/ assessee and it must be interpreted in favour of the revenue. (3) The ratio in Sun Export case (supra) is not correct and all the decisions which took similar view as in Sun Export Case (supra) stands over-ruled. 14.8. In view of the above discussion, we are of the considered view that the assessee fails to satisfy the condition as per clause-(1) of para 52 of the aforesaid order. In view of the facts as discussed by us earlier in this order, we are of the considered view that the assessee has not carried out the basic operations of agricultural activity as per the tests laid in the judgment of the Hon'ble Supreme Court in the case of CIT Vs. Raja Benoy Kumar Sahas Roy (Supra) and has thus has failed to discharge the burden cast upon it that its case comes within the parameters for seeking exemption of Rs. 124,59,41,832/- as claimed u/s 2(1A) r.w.s. 10(1) of the Act. 14.9. Therefore, in view of the above facts and following the order dated 18.12.2017 of the Co-ordinate Bench in the case of the assessee, we confirm the order of the Ld. CIT(A) in confirming the disallowance of agricultural income....
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.... 5. Receivables A show cause dated 18.10.2016 was issued to the taxpayer as per details below: [QUOTE] "2. Examination of the balance sheet reveals receivables thereby implying that the payment for the invoices raised by you have not been received within the stipulated time as provided in your service agreement with your AE. In this regard, you are requested to furnish the time period for payment as per your service agreement with your AE. However, to be reasonable and fair to you (the assessee), instead of charging penal interest, the delayed payments are being treated as unsecured loans advanced to the AEs for the period of delay in receipt of payment beyond the time stipulated in the services agreement. You are requested to furnish details as to whether the invoices were raised in INR(Domestic currency) or in foreign currency. In case of the invoices raised in domestic currency, the interest rate is proposed to be charged on the basis of mark-up on prevailing average SBI base rate(300 basis points) during the year. Whereas in case the invoices have been raised in foreign currency, the interest rate is proposed to be charged on the basis of Mar....
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....ircumstances it is not justifiable to presume that, borrowed funds have been utilized to pass on the facility to its AE's. The revenue has also not brought on record that the assessee has been found paying interest to its creditors or suppliers on delayed payments. " 16. In lieu of the discussions and the ratio laid down in the case of Kusum Healthcare Put. Ltd., we direct that no separate adjustment for interest on receivables are warranted in the hands of the assessee." 15.3. However, the ld. CIT(A) did not make any comment regarding the above contention of the assessee but relying upon the decision of Co-ordinate Bench in the case of Ameriprise India Pvt. Ltd. in ITA No.2010/Del/2014 AY 2009-10 and of the Mumbai Bench of the Tribunal in the case of Tecnimont ICB Ltd. vs DCIT (2013) 32 taxmann.com 357 (Mum. Trib.) justified the action of the Assessing Officer but reduced the addition by directing the Assessing Officer to apply LIBOR rate plus 200 basis points from 400 basis points as computed by the TPO and the Assessing Officer. The relevant finding of the Ld. CIT(A) in para no.4.3 to 4.5 of her order is reproduced as under :- "4.3. I have carefully gone....
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....se of Tecnimont ICB Ltd. vs. DCIT (2013) 32, taxman.com 357 has also held that transfer pricing adjustment can be made on account of interest for period beyond the agreed credit period. In light of the TPO's report, if the appellant did not have sufficient surplus funds to lend, it may borrow such funds from banks or others, then cost of borrowings in India would be relevant. Also if the surplus funds were to be invested in existing business or expansion into new businesses, the return also would be linked with domestic interest rates. So, the entire opportunity cost to the appellant, will be with reference to the interest rates prevailing in India. TPO has applied LIBOR rate + 400 basis points applicable to the ECBs having average maturity period between 3 and 5 years after taking into consideration the foreign exchange risk. The Ld TPO has carried out Interest adjustment for a flat period of 11 months after applying the grace period of 30 days from due date. Hence, I hold that the CUP to be used is the Libor to which 200 basis points is being added to take into account the various factors / risks as already discussed in the order of TPO, reducing the addition above LIBOR rate....
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....ejudice, that on the facts and circumstances of the case and in law, CIT(A) erred in not giving directions to assess the total income of the Appellant as per normal provisions of Act by making necessary adjustments as per sections 28 to 43B of the Act." 16.2. We find that all the facts relevant for adjudication of the aforesaid additional grounds are already on record. The additional grounds raised by the assessee are purely legal in nature. Hence, in view of the decision of the Hon'ble Supreme Court in the case of NTPC Limited vs CIT 229 ITR 383(SC), these additional grounds are hereby admitted and taken up for adjudication. 16.3. In this regard, the ld. AR filed a written synopsis giving a factual position and contending the various proposition as under :- "The appellant is primarily engaged in the activities of cultivation and sale of commercial hybrid seeds. The company purchases the parent seeds form Pioneer Overseas Corporation India Branch (POC IB) and cultivates them, to grown commercial hybrid seeds on agricultural land situated in India, taken on lease at various locations in Andhra Pradesh, Karnataka, Gujarat and Rajasthan. The commercial hybrid seeds ....
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....enterprises 7. Without prejudice-Incorrect computation of interest. 16.4. In respect of each such proposition at the sr. No. 1 to 7, the assessee relied upon various case laws as referred in the written synopsis filed by the assessee. 16.5. In this regard, the submission of the assessee on its contention at Sr. No.4 that it was a debt free company as above is reproduced as under :- 4. Appellant is a debt free company It is submitted that the appellant is a debt free company and there are no long term or short terms loans in the balance sheet of the appellant. The Hon'ble Delhi Bench of the Tribunal in the case of Bechtel India Pvt. Ltd. vs. DCIT (ITA No. 1478/Del/2015) deleted the adjustment on account of outstanding receivables on the basis that the assessee is a debt free company. The decision of the Hon'ble Tribunal was upheld by the Hon'ble Delhi High Court in ITA No. 379/2016 on the basis that the assessee is a debt free company and therefore, the question of receiving any interest on receivables does not arise. SLP filed by the revenue against the decision of the Hon'ble High Court was dismissed by the Hon'ble Supr....
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....used the material available on record. As noted above, the assessee in its submissions has stated that the assessee is a debt free company and therefore no TPO Adjustment on account of interest receivables could be made in its case and has relied upon the order of the Co-ordinate Bench of the Tribunal in the case of Bechtel India Pvt. Ltd.(supra), which has been affirmed by the Hon'ble Delhi High Court and the SLP against the same has been dismissed by the Hon'ble Apex Court. The relevant extract of the said orders are reproduced as under :- ITA No.1478/Del/2015 (AY 2010-11) order dated 21.12.2015 "This is an appeal filed by the assessee against the assessment order dated 30.01.2015, of ld. DCIT Circle 4(2) u/s 143(3) r.w. sec 144C of I.T. Act, 1961 for A.Y. 2010-11. 2. Brief facts of the case are as under: The assessee filed its return of income declaring total income of Rs.33,42,28,149/ -. Subsequently the same was revised to Rs.33,39,32,080/ -. 3. The assessee is a captive service provider, providing (a) engineering design and related services, (b) financial and accounting support ('FAS') services and (c) IT Infrastructur....
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....ech Private Ltd. -5.71% Mean 21.00% II. Financial and accounting support services S. No. Company Name OP/ Cost (Forex as operating) (%)* 1. Accentia Technologies Ltd. 43.62% 2. Cosmic Global Ltd. 18.28% 3. E4e Healthcare Ltd. 32.67% 4. Fortune Infotech Ltd. 19.62% 5. iGate Global Solutions Ltd. 18.21% 6. Infosys BPO Ltd. 31.61% 7. TCS E-Serve International Ltd. 51.51% 8. TCS E-Serve Ltd. 66.35% 9. Jindal Intellicom Ltd. 14.19% 10. Microland Ltd. -3.11% Mean 29.30% III. IT Infrastructure support services S. No. Company Name OP/Cost (Forex as operating) (%)* 1. Accentia Technologies Ltd. 43.62% 2. Cosmic Global Ltd. 18.28% 3. E4e Healthcare Ltd. 32.67% 4. Fortune Infotech Ltd. 19.62% 5. iGate Global Solutions Ltd. 18.21% 6. Infosys BPO Ltd. 31.61% 7. TCS E-Serve International Ltd. 51.51% 8. TCS E-Serve Ltd. 66.35% 9. Jindal Intellicom Ltd. 14.19% 10. Microland Ltd. -3.11% Mean 29.30% 6. The ld. TPO further ....
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....al further held that interest income is associated more with lending or borrowing of money and not with sale. The Tribunal further held while determining the ALP of sale transaction, all relevant aspects, including credit period allowed, are taken into consideration and that interest aspect is embedded in the sale price. The Tribunal held that there can be no separate international transaction of interest, on outstanding receivables and that early of late realization of the sale proceeds is incidental to transaction of sale. The l d.AR also places his reliance on the Delhi Tribunal decision in the case of Kusum Healthcare Pvt. Ltd., reported in TS-129-ITAT-2015(Del)- TP. 14.11. The ld. DR relied on the orders of the authorities below. 15. From the submissions of both the parties we observe as under; 15.1. It is brought to our notice that the assessee is a debt free company. In such circumstances it is not justifiable to presume that, borrowed funds have been utilized to pass on the facility to its AE's. The revenue has also not brought on record that the assessee has been found paying interest to its creditors or suppliers on delayed payments. ....
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.... There may be a delay in collection of monies for supplies made, even beyond the agreed limit, due to a variety of factors which will have to be investigated on a case to case basis. Importantly, the impact this would have on the working capital of the assessee will have to be studied. In other words, there has to be a proper inquiry by the Transfer Pricing Officer by analysing the statistics over a period of time to discern a pattern which would indicate that vis-a-vis the receivables for the supplies made to an associated enterprise, the arrangement reflects an international transaction intended to benefit the associated enterprise in some way. 11. The court finds that the entire focus of the Assessing Officer was on just one assessment year and the figure of receivables in relation to that assessment year can hardly reflect a pattern that would justify a Transfer Pricing Officer concluding that the figure of receivables beyond 180 days constitutes an international transaction by itself. With the assessee having already factored in the impact of the receivables on the working capital and thereby on its pricing/ profitability vis-a-vis that of its comparables, any further....
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.... assessee had further filed additional grounds of appeal in terms of Rule-11 of the Income Tax (Appellate Tribunal) Rules 1963 claiming deduction of Education Cess computed on returned income and dividend distribution tax paid by the appellant before the due date of filing of return of income for the subject assessment year. The said additional ground was not pressed by the assessee, hence, the same is dismissed as not pressed. ITA No.7375/Del/2018 19. This is an appeal of the assessee for AY 2014-15. Grounds No. 1 to 2 pertain to claim for exemption agricultural income under section 10 (1) of the Act. Since the facts are identical to the case of the assessee for AY 2013-14, we follow our own decision in ITA No. 1575/DEL /2018 and dismiss the aforesaid grounds. 20. Ground no.3 pertain to transfer pricing issue relating to transfer pricing adjustment amounting to Rs.20,37,553/- on account of delayed receipt of receivables from AE's. Since the facts are identical to the case of the assessee for AY 2013-14, we follow our own decision in ITA No. 1575/DEL /2018 and allow the ground of the assessee for statistical purpose. ITA No.9205/Del/2019 21. This is an appeal of ....
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....lowable nature therefore, added to the income of the assessee. (Addition: Rs. 19,22,00,000/-) 6. Addition on account of unexplained gratuity, bonus and compensated absence. Vide notice under section 142(1) dated 15.10.2018, the assessee was required that as per Point no. 26(i)(B)(a) of audit report it has claimed gratuity, bonus and compensated absence in the Profit and loss account Rs. 3,20,55,733/- 12282872+15781974+3990887) but not paid before the due date of filing return under section 139, so as to why the same may not be disallowed and added to income. The notice was properly served through ITBA portal. The date of compliance was 22.10.2018, but the assessee filed no reply till date. The above facts prove that the assessee has nothing to say therefore, gratuity, bonus and compensated absence of Rs. 3,20,55,733/ - are disallowed under section 43B and added to the income of the assessee." 22.2. Against the above disallowances, the assessee filed an appeal before the DRP. The DRP vide it order dated 25.07.2019 gave the following directions in respect of ground no.3 as under :- 2.3 Ground no. 3: 3. That the Ld. AO has erred in law and on ....
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....30.09.2019. On its perusal, it is seen that the Assessing Officer did not make the necessary verifications as directed by the ld. DRP and simply made the additions without any discussions. 22.4. Against the above order, the assessee is in appeal before us. 22.5. During the course of hearing, both the parties agreed that the matter may be set-aside to the file of the Assessing Officer for verifying the directions of the DRP and pass the necessary order after the said verification as per law. Considering the facts of the case and the request of both the parties, the above three matters as raised in the ground no. 3 of the appeal are set-aside to the file of the Assessing Officer for verifying the directions of the DRP and pass the necessary order after the said verification as per law. Ground no.3 of the appeal is allowed for statistical purpose. 23. In the result, all appeals of the assessee are partly allowed. Order pronounced in the open court on 06th August, 2025. ============= Document 1 ANNEXURE566 0000000000000000000000000000000000 000515 To. PHI Seeds Private Limited, Hyderabad, Sir AFFIDAVIT This is Mr Village: of S/o solemnly a....