TaxTMI 
TaxTMI 
TaxTMI 
2025 (12) TMI 1216
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.... final assessment order u/s. 143(3) r.w.s. 260 of the Act dated 29th April, 2022 pursuant to the directions of the Learned Dispute Resolution Panel ('Ld. DRP') dated 09th February, 2022 making transfer pricing adjustments / additions of Rs. 56,31,05,314/- arising out of the order of the Ld. Transfer Pricing Officer ('TPO') u/s. 92CA(3) of the Act and additions / disallowances of Rs. 2,20,99,54,363/- on account of various non-transfer pricing issues. 2.0 That the Ld. DRP and consequently the Ld. AO have erred in law and on the facts & circumstances of the assessee's case in not entertaining or granting the additional claim / allowance amounting to Rs. 54,15,119/- made by the assessee during the course of assessment proceedings and again before the Ld. DRP, on account of gratuity actually paid during the year 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 erred in completely ignoring the claim for enhanced deduction u/s. 80-IA of the Act raised by the assessee by re-determining the arm's length price of steam transferred by CPP unit at Bhiwadi, Rajasthan to Rs. 82,1....
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..... 1,19,57,051/- u/s. 156 of the Act which is laced with the following mistakes apparent from records and which are on wholly unjust, illegal, erroneous and untenable grounds: that the Ld. AO has erred in disallowing the entire amount of deduction amounting to Rs. 54,91,48,703/- [Rs. 17,29,14,326/- in respect of its CPP Unit at Bhiwadi & Rs. 37,62,34,377/-in respect of CPP at Dahej] claimed by the assessee u/s. 80-IA of the Act, ignoring that an amount of Rs. 42,40,28,739/- has already been added through transfer pricing adjustment in accordance with the directions of the Ld. DRP in respect of same units [as contested by assessee vide ground no. 36 to 41] and thus inadvertently making excess/double disallowance to the extent of Rs. 54,91,48,703/-; i. that of the remaining deduction under Chapter-VIA available to the assessee, the ld. AO has erred in granting the deduction to the extent of Rs. 25,02,27,500/- only instead of the correct remaining deduction amounting to Rs. 28,81,77,500/-; ii. that the Ld. AO has erred in law and on the facts & circumstances of the assessee's case in not granting or allowing the benefit of the MAT Credit available to the assessee to e....
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....e's case for AY 2016-17 without appreciating that this year involves 3 new companies which have not been examined by the ld. DRP in earlier year. 14.0 That the Ld. TPO/ Ld. AO have further erred in blindly accepting the abovementioned three companies as comparables, ignoring the assessee's submissions that said three companies are completely different from the assessee's profile both in the terms of nature of activities and the functions performed and such action is against the tenet of comparability under Rule 10B(2) of the Rules. 15.0 That the Ld. DRP and consequently Ld. TPO/ Ld. AO have erred in law and on the facts & circumstance of the assessee's case in arriving at arm's length mark-up @ 25.43% against assessee's mark-up @ 15.28% on cost and thus making the adjustment for the difference. 16.0 The Hon'ble ITAT may be pleased to direct the Ld. TPO / Ld. AO to delete such adjustment of Rs. 34,41,669/- in respect of international transaction of provision of management support services. II. Allocation of Software Cost to AE's - Adjustment of Rs. 12,20,172/- 17.0 That the Ld. DRP and consequently Ld. TPO / the Ld. AO have erred in law a....
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....AO have erred in not appreciating that said transactions are pure reimbursement of business expenditure such as travelling, boarding, lodging, conveyance, IT expenses etc. undertaken by both the assessee and the AEs under reciprocal arrangements on cost-to-cost basis. 24.0 That the Ld. DRP and consequently Ld. TPO / Ld. AO have erred in law and on the facts & circumstances of the case by not following the binding precedent of the Hon'ble ITAT, Delhi on the identical issue in assessee's own case for the AY 2014-15 (ITA No. 6220/Del/2018), wherein the Hon'ble Tribunal has accepted the assessee's methodology / benchmarking the same transaction on cost-to-cost basis. 25.0 The Hon'ble ITAT may be pleased to treat the above transactions in the nature of pure reimbursement and not in the nature of intra-group services and thus warranting no mark-up over and above cost. IV. Corporate Guarantee Fee from AE's - Adjustment of Rs. 2,03,99,088/- 26.0 That the Ld. DRP and consequently Ld. TPO / Ld. AO have erred in law and on the facts & circumstances of the assessee's case in making an upward adjustment of Rs. 2,03,99,088/- by imputing the arm's length corpor....
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....antee fee from its AE's [wholly owned subsidiaries] is at arm's length and thus upward adjustment of Rs. 2,03,99,088/- be directed to be deleted; iv. the transactions of corporate guarantee fee, benchmarked by the assessee using 'Other Method' as most appropriate method based on specific quotations obtained from HDFC Bank and Yes Bank are at arm's length; v. no adjustment is required as corporate guarantee fee charged by the assessee @ 0.25% has also been accepted at arm's length by Hon'ble Jurisdictional ITAT in assessee's own case for A.Y. 2010- 11, A.Y. 2012-13 and A.Y. 2014-15. GROUNDS OF APPEAL - TRANSFER PRICING ADJUSTMENTS SPECIFIED DOMESTIC TRANSACTIONS - ADJUSTMENTS OF Rs. 53,80,44,385/- V. Inter-unit Transfer - Technical Textile Business, Kashipur (TTBK) Division - Adjustment of Rs. 8,095/- 32.0 That the Ld. DRP and consequently Ld. TPO / Ld. AO have erred in law and on the facts & circumstances of the assessee's case in making transfer pricing adjustment of Rs. 8,095/- in respect of inter-unit transactions amounting to Rs. 3,14,970/- pertaining to 'Technical Textile Business' (TTB) Segment of the assessee. 33.0 That t....
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..... TPO/ Ld. AO have erred in law and on facts and in circumstances of the assessee's case in treating the rates of power traded on IEX u/s. 133(6) of the Act, as comparable uncontrolled rates/prices. IEX Transactions are not at all comparable with the assessee's transactions of power on account of following factors: - i. the modus operandi and business model of IEX which is a spot energy exchange is not comparable to the assessee's case. ii. the rates obtained from IEX u/s. 133(6) do not qualify as an appropriate comparable data for the application of CUP method. iii. there are material differences between the terms and conditions of transaction entered into by the assessee and those taken from IEX. 39.0 That the Ld. DRP and consequently the Ld. TPO/ Ld. AO have erred in law and on the facts & circumstances of the assessee's case rejecting the assessee's reliable internal CUP data in form of actual transactions of purchase of electricity from the SEBs and instead applying the external CUP method by taking the average rates of average price being traded at IEX & rate at which power was purchased from respective state electricity boards. 40....
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....see. VIII. Enhanced claims of deduction made during the course of proceedings before the Ld. DRP Claim w.r.t Captive Power Plant ("CPP") Unit at Bhiwadi, Rajasthan 46.0 That the Ld. DRP and consequently the Ld. AO have erred in not entertaining the claim of enhanced deduction u/s. 80-IA of the Act raised by the assessee by re-determining the arm's length price of steam transferred by CPP unit at Bhiwadi, Rajasthan to Rs. 82,19,37,824/- [instead of Rs. 25,71,07,345/-] which is computed by multiplying the equivalent quantity of such steam in terms of unit of electricity (KwH) as certified by the Chartered Engineer with the ALP rate of electricity in accordance with the directions of the Hon'ble DRP in the assessee's own case for the A.Y. 2016-17. 47.0 That the Hon'ble ITAT may be pleased to direct the Ld. TPO/ Ld. AO to re-determine the profitability of CPP unit at Bhiwadi, Rajasthan giving the consequential effect of above ground and therefore allow the enhanced deduction u/s. 80-IA of the Act by Rs. 56,48,30,479/- in respect to said unit. Claim w.r.t. Captive Power Plant ("CPP") Unit at Dahej, Gujarat 48.0 That the Ld. DRP and c....
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.... in Form No. 3CL is not a mistake/obligation/delay attributable to the assessee, though the assessee made several reminders to the DSIR for that matter, and even the provisions of section 35(2AB) nowhere requires that receipt of Form No. 3CL is pre-condition for claiming deduction under said section by the assessee. 53.0 The ld. AO has erred in making the disallowance of bonafide claim of the assessee without appreciating that deduction allowed by the substantive provisions of the Act cannot be controlled by the procedural lapses specified in subordinate legislation and that too on part of some other agency and which is beyond the control of assessee. 54.0 Without prejudice, the Ld. AO/Ld. DRP have erred in not granting the deduction of depreciation, additional depreciation and investment allowance u/s. 32(1), 32(1)(iia) and 32AC of the Act respectively in respect of Capital expenditure of which weighted deduction u/s. 35(2AB) of the Act was disallowed. 55.0 The Hon'ble ITAT may be pleased to grant the weighted deduction amounting to Rs. 1,64,72,14,000/- u/s. 35(2AB) of the Act. X. Disallowance of Deduction u/s. 80-IA of the Act amounting to Rs. ....
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....rom SRF Polymers. 60.0 That the Ld. DRP and consequently the Ld. AO have erred in law and on the facts & circumstances of the assessee's case in making the disallowance of depreciation of Rs. 10,77,290/- on goodwill: - i. by taking a view that the amount of goodwill as arise on acquisition of three businesses is a balancing figure and not the goodwill which the assessee paid in excess of its valuation; ii. by drawing an incorrect interpretation after perusal of agreement for transfer of business dated 01.01.2009 that in the given schedule of assets & liabilities, goodwill is not mentioned implying thereby that there was neither any valuation of goodwill nor there was any sale of goodwill; iii. by treating the same merely as book entry in the books of accounts of the assessee. 61.0 That the Ld. DRP and consequently the Ld. AO have erred in law and on the facts & circumstances of the assessee's case in failing to appreciate that the identical issue has been decided in the favour of the assessee by the Hon'ble Delhi ITAT in the A. Y. 2014-15 and A.Y. 2012-13 in the assessee's own case. 62.0 The Hon'ble ITAT may be pleased to grant ....
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....s w.r.t. closing balance of investments. 67.0 Without prejudice to above, the Ld. DRP and consequently the Ld. AO have erred in law and on the facts & circumstances of the assessee's case in failing to appreciate that the similar issue has been decided in the favour of the assessee in the assessee's own case in different years before the various appellate forums viz. Ld. CIT(A) in the AY 2015- 16, Hon'ble DRP in the AY 2014-15 and Hon'ble Delhi ITAT in the AY 2012-13, AY 2010-11, AY 2008-09, AY 2007-08 & AY 2006-07. 68.0 The Hon'ble ITAT may be pleased to delete the disallowance u/s. 14A of the Act amounting to Rs. 1,25,14,370/-. XIII. Incorrect computation book profits u/s. 115JB of the Act by the Ld. AO. 69.0 That the Ld. DRP and consequently the Ld. AO have erred in law and on the facts & circumstances of the assessee's case in making the addition of Rs. 1,25,14,370/- on account of disallowance u/s. 14A of the Act while computing the book profits u/s. 115JB of the Act, even when provisions of section 115JB do not provide for such disallowance. 70.0 That the Ld. AO has erred in law and on the facts & circumstances of the assessee's cas....
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....ropos Ground Nos. 1 to 4 are general in nature, hence, not adjudicated and dismissed as such. 4. Apropos Ground Nos. 5 to 6 are common grounds of appeal, although not specifically argued by the ld. AR. In view of not pressing these common grounds and ld. AR took up the other grounds on merits of the case, these grounds are not adjudicated and dismissed as such. 5. Apropos ground Nos.7 to 8 are in relation to incorrect computation of total income and consequently the incorrect demand of tax and interest thereon. 6. We have considered the submissions of the assessee and perused the material on record. The assessee has pointed out that while giving effect to the DRP's directions, the AO has committed apparent mistakes in computing the assessed income and consequential demand of Rs. 1,19,57,051/-. It is noted that the AO disallowed the entire deduction u/s. 80-IA amounting to Rs. 54,91,48,703/-, even though Rs. 42,40,28,739/- relating to the same units had already been added through TP adjustment, thereby resulting in double disallowance. Further, the deduction under Chapter VI-A has been restricted to Rs. 25,02,27,500/- instead of the correct Rs. 28,81,77,500/-, MAT credit of....
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.... Limited 29.64% 8 Overseas Manpower Corporation Ltd. 41.38% Arithmetic mean 11.58% 35th Percentile 5.32% Median 12.59% 65th Percentile 15.75% 10. The TPO in the proceedings u/s. 92CA, rejected 4 out of the 8 comparables adopted by the assessee and conducted a fresh search introducing 6 new comparables. Based on this new set of 10 comparables (including 4 comparables of the assessee)the TPO determined the median margin at 22.20% that is shown in below table: S.No. Name of The Company OP/OC (%) 1 Kestone Integrated Marketing Services Private Limited (Segmental) 5.74% 2 I C R A Management Consulting Services Ltd. 13.31% 3 Pressman Advertising consulting services Ltd. 15.61% 4 Concept Publisc relations India Ltd. 16.53% 5 Praendex Management Resources Pvt. Ltd. 18.49% 6 EDCIL India Ltd. 25.91% 7 Info Edge India Ltd. 28.98% 8 KitKo Ltd. 29.79% 9 Majestic Resarch Ltd. 39.33% 10 ICRA Ltd. 66.56% 35th Percentile 16.53% Median 22.20% 65th Percentile 28.98% 11. However, on objections before the D....
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.... approach is wrong in considering the entity level FAR. As held by DRP in other cases, ITDC Ltd. being a Govt. undertaking cannot be taken as comparable. To remain excluded. 3 Concept Public Relations India Ltd. The company fails the FAR filter as the company is into PR business The company is engaged in providing services relating to organising conferences, tours, demonstration of products, seminars, publicity campaign through various media channels, demonstrations of client products. Hotels bookings, conference literature etc From the website of the company, it is seen that the company is engaged in public relations management. Functionally dissimilar. Rightly excluded by the TPO. 4 Kestone Integrated Marketing Services Private Ltd. (Segmental) The company fails the FAR filter as the company is into Marketing Services, For the purpose of benchmarking, only one segment viz. Event Management Services has been considered. Thus TPO's approach is wrong in considering the entity level FAR. DRP has held in other cases that this company has a manpower services and sales management service segment which is included in marketing support segment. The segment....
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.... assessee's working of average PLI of comparable after giving effect to DRP directions is reproduced hereunder: S. No. Name of the Company Margins as per Ld. TPO's Order Giving Effect to Hon'ble DRP's Direction (P. no. 86 of Appeal Set) Assessee's reason for rejection of the comparable Margins as computed by the Assessee TPO's margins for comparable selected by assessee 1. Kestone Integrated Marketing Services Pvt. Ltd. 5.74% Not Applicable 5.74% 5.74% 2. I C R A Management Consulting Services Ltd. 13.31% Not Applicable 5.32% (P. no. 156 of Paper Book) 13.31% 3. Pressman Advertising Ltd. 15.61% Not Applicable 15.61% 15.61% 4. EDCIL (India) Ltd. 25.91% It is a Govt. Company, to be excluded (screen shot of website attached*) Not Applicable Not Applicable 5. ICRA Ltd. 66.56% It is in the business of credit rating, to be excluded (screen shot of website attached*) Not Applicable Not Applicable Simple Average 25.43% 8.89% 11.55% Assessee's PLI (as per Ld. TPO's Order) 15.28% (P. no. 194 of Appeal Set) ....
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....fied. Wide deviations in PLI must trigger further investigations/analysis." 19. On the other hand, ld. DR of the Revenue relied on the findings of the lower authorities. 20. Considered the rival submissions and material placed on record. It is observed that the DRP in A.Y. 2016-17, in the assessee's own case, had examined identical facts and directed exclusion of certain comparables for functional and business dissimilarity. The TPO's approach of introducing new comparables without substantiating their functional parity with the assessee's MSS operations or sharing the search process cannot be said to be in accordance with law. 21. Respectfully following the DRP's reasoning in the assessee's own case in the A.Y. 2016-17, as well placing reliance on their functional and business description we hold that the EDCIL (India) Ltd being a Government undertaking should be excluded from the comparable list. Further, the ICRA Ltd which is a credit rating agency is into completely different business and cannot be said to be a functionally similar entity with the MSS segment of the assessee and hence liable to be excluded. After exclusion of these companies, the assessee's margin of 1....
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....ind 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& 2016-17, wherein the coordinate Bench upheld that the reimbursement received at cost does not require any mark-up. The relevant findings of the coordinate bench in assessee's own case for AY 2016-17 are reproduced below: "5. 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, co....
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....rmal considering the volume of business transactions entered into with the AEs. He further submitted that no adjustment is required when it is reimbursement of expenses. He further submitted that transactions were undertaken from commercial expediency point of view and were not intended for the exploitation of return. He thereafter submitted that Co-ordinate Bench of Tribunal in the case of Vedanta Ltd. vs. ACIT in ITA No.12/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 ....
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....tfully the aforesaid precedents, we deem it fit and proper to direct the AO/TPO to delete adjustments of Rs. 16,68,574/- in respect of reimbursement received. Accordingly, Ground Nos.7 to 11 are allowed". 27. Respectfully following the above decisions and further it is noted that Hon'ble Supreme Court in the case of Engineering Analysis Centre of Excellence Pvt. Ltd. vs. CIT (supra) had also upheld the reference to OECD guidelines being persuasive in nature. In view of the aforesaid discussions and respectfully the aforesaid precedents, we deem it fit and proper to direct the AO/TPO to delete adjustments of Rs. 12,20,172/-in respect of allocation of software cost from its AEs received. Accordingly, Ground Nos.17 to 21 are allowed. 28. Apropos grounds no. 22 to 25 relating to adjustment of Rs. NIL/- u/s. 92CA(3) of the Act on account of allocation of reimbursement received from its Associated Enterprises are concerned, ld. AR submitted that this issue is fully covered by the order of the ITAT in the assessee's own case for A.Y. 2014-15 and recent order passed for the AY 2016-17 wherein the coordinate bench upheld that the reimbursement received at cost does not require any....
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....ransactions in the nature of reimbursement received and paid from/to AEs for Rs. 1.68crores, which is nominal and normal considering the volume of business transactions entered into with the AEs. It was also submitted that the assessee also relies on OECD guidelines in this regard which advocate that no mark-up is chargeable in reimbursements. It was further submitted that Hon'ble Supreme Court in the case of Engineering Analysis Centre of Excellence Pvt. Ltd. vs. CIT (supra) had also upheld the reference to OECD guidelines being persuasive in nature. The Ld. AR also submitted that various judicial precedents on the issue have upheld the cost to cost nature of reimbursement as ALP. In view of above, he requested to direct the TPO to delete such adjustment of Rs. 22,20,109/- in respect of reimbursement received. 8. 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 assessee's own case in the assessment year 2014-15 and neither produced any contrary decision. 9. Considered the rival submis....
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....mined the arm's length rate at 1.30% and proposed an upward adjustment by applying the differential of 1.05% (1.30% minus 0.25%). Upon objections filed before the DRP, the DRP partly accepted the assessee's contentions and, following its earlier directions in the assessee's own case for A.Y. 2016-17, determined the appropriate corporate guarantee rate at 0.50% instead of 1.30%. Consequently, the DRP sustained a partial adjustment by applying a difference of 0.25% (0.50% minus 0.25%), leading to an upward adjustment of Rs. 2,03,99,088 as incorporated in the TPO/AO's order. 35. Considered the rival submissions and material placed on record. This issue has already been decided by us in favour of assessee in assessee's appeal for AY 2011-12 in ITA No.80/Del/2016. There is no change in the facts in issue in the year under consideration from the said year nor ld. DR has raised any objection on dissimilarity on facts. Thus, by following the observations made therein, the adjustment made w.r.t the Corporate Guarantee Fee made in the year under appeal is hereby deleted. Accordingly, Ground of appeal Nos. 26 to 31are allowed. 36. Concerning grounds no. 32 to 35 relates to adjustment of....
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....n 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 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. Accordingly, we direct the TPO to delete the adjustment of Rs. 14,952/-. Accordingly, Ground Nos.21 to 24 are allowed in the aforesaid manner". 42. We find considerable cogency in the contention that assessee's metho....
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.... a rate of Rs. 10.39 per unit & Rs. 7.50 per unit respectively as the arm's length price (ALP) for inter-unit transfer of electricity. 47. The TPO rejected this approach and instead determined the ALP by averaging the assessee's actual rate in form of actual purchase of electricity from respective state electricity boards (SEB's) rate and the Indian Energy Exchange (IEX) rate, resulting in an average rate of per unit that is as below:. Proposed rates - CPP Bhiwadi at Rajasthan: Rs. 2.58 p.u. as IEX & assessee's comparable uncontrolled price data @ Rs. 10.39 p.u. as actual purchase of electricity from SEB, resulted in proposed rate @ 6.48 p.u. Proposed rates - CPP Dahej at Gujarat: Rs. 2.29 p.u. as IEX & assessee's comparable uncontrolled price data @ Rs. 7.50 p.u. as actual purchase of electricity from SEB, resulted in proposed rate @ 4.89 p.u. 48. Based on the above proposed rate, the TPO proposed an adjustment of Rs. 15,57,92,582/-& Rs. 26,82,36,157/- for CPP Bhiwadi at Rajasthan & CPP Dahej at Gujarat respectively, which was upheld by the Hon'ble DRP relying upon its own directions for A.Y. 2016-17. 49. The ld. Counse....
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....EB rates for benchmarking the electricity transfer, Rule of Consistency has also been filed before Ld. DRP. It was further submitted that data of various discom rates obtained u/s. 133(6) were not available in public domain, hence cannot be used and no opportunity to examine and rebut the data. It was submitted that assessee's internal CUP to be preferred over an external CUP, by placing reliance on the case of Technimont ICB P Ltd. (TS-557-ITAT-2012 (Mum). In view of the above, he requested that adjustment of Rs. 18,72,72,104/- needs to be deleted. 22. Ld. DR of the Revenue relied upon the orders of the authorities below on this issue. 23. Considered the rival submissions and material placed on record. We find considerable cogency that no reason provided by TPO for rejection of assessee's MAM. We further find that Hon'ble Supreme Court ruling in case of M/s Jindal Steel and Others (supra)has settled the law 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 is also noticed....
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....mining the market value of electricity supplied by captive power units of the assessee in that case. In that case, the assessee had entered into an agreement with the SEB of State of Madhya Pradesh to supply surplus electricity at the rate of Rs. 2.32 per unit. However, the Assessee had computed the revenue from supply of electricity to its own unit at the rate of Rs. 3.72 per unit. It was the Assessee's case that the market value of the electricity was Rs. 3.72 per unit as that was the rate charged by the SEB for supply of electricity to industrial consumers including the Assessee. The learned ITAT had accepted the assessee's stand and had set aside the order passed by the CIT(A) rejecting the assessee's appeal in that regard. The High Court had also rejected the Revenue's appeal by referring to its earlier decision where the question of law had been answered against the Revenue and in favour of the Assessee. 58. The Revenue had approached the Supreme Court assailing the orders passed by the learned ITAT and the High Court. In the aforesaid context, the Supreme Court had held as under: "23. This brings to the fore as to what do we mean by the expression "open mar....
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....lectricity by the former to the latter. The price of such supply of electricity by the assessee to the State Electricity Board was fixed at Rs. 2.32 per unit as per the contract. This price is, therefore, a contracted price. Further, there was no room or any elbow space for negotiation on the part of the assessee. under the statutory regime in place, the assessee had no other alternative but to sell or supply the surplus electricity to the State Electricity Board. Being in a dominant position, the State Electricity Board could fix the price to which the assessee really had little or no scope to either oppose or negotiate. Therefore, it is evident that determination of tariff between the assessee and the State Electricity Board cannot be said to be an exercise between a buyer and a seller in a competitive environment or in the ordinary course of trade and business i.e., in the open market. Such a price cannot be said to be the price which is determined in the normal course of trade and competition. 27. Another way of looking at the issue is, if the industrial units of the assessee did not have the option of obtaining power from the captive power plants of the assessee, then....
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....pectfully following the judgement of Hon'ble High Court and Co-ordinate Bench of the Tribunal in the case of assessee itself and also by respectfully following the judgement of Hon'ble Supreme court in the case of Jindal Steel & Power ltd. (supra), we find no infirmity in the order of the Ld. CIT(A) in deleting the adjustment made on account of transfer of power from eligible units to non-eligible units and accordingly, the adjustment of INR7,96,94,566/- has rightly been deleted by ld. CIT(A) which order is hereby upheld. Ground No.1 raised by the Revenue is thus, dismissed." 54. The Ld. AR placed the reliance on various other judicial precedents of the co-ordinate Benches in case of Nectar Lifesciences Ltd. (ITA. No. 567/Del/2019), dated 13th September, 2021 [TS-438-ITAT-2021(DEL)-TP] in which the ITAT Delhi, adjudicated the similar issue in favour of the appellant in the said case (supra), wherein the it held that state electricity board rate can be accepted as sale rate or market price by relying the various judgments viz. High Court of Chhattisgarh in the case of Commissioner of Income Tax Raipur v/s M/s Godawari Power & Ispat Ltd. Raipur [2014] 42 taxmann.com 551 (Chhattisg....
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....wo unrelated datasets - one regulated (SEB) and another unregulated (IEX)is not a recognized or rational approach for determining the ALP under the Act. 58. We note that in the assessee's own case for A.Y. 2016-17, the coordinate bench of this Tribunal has held that the SEB rate is the appropriate comparable for benchmarking the captive power transfer. Further, the Hon'ble Supreme Court in Jindal Steel & Power Ltd. (supra) has categorically held that: "The market value of the power supplied by the assessee to its industrial units should be computed by considering the rate at which the State Electricity Board supplied power to the consumers in the open market." 59. In light of this authoritative pronouncement, there remains no scope to adopt IEX rates for benchmarking captive power transfers. Further, as regards the SEB rates, there is no dispute as the TPO himself have taken the assessee's SEB purchase rate for the purpose of averaging with the IEX rates. Thus, one the IEX rates are dropped from the TPO methodology, what remains is the SEB rates and the issue does not require any further verification by the lower authorities. 60. Various judicial decisions- includ....
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.... WPP unit at Tamilnadu, on the basis of above rates charged by the Tamil Nadu State Electricity Corporation (TNSEC)(SEB). Accordingly, the assessee adopted a rate of Rs. 6.35 per unit as the arm's length price (ALP) for inter-unit transfer of electricity. 67. The TPO rejected this approach and instead determined the ALP by taking the general tariff rates @ 2.5192 per unit obtained u/s. 133(6) of the Act from TNERC (Tamil Nadu Electricity Regulatory Commission) while benchmarking the transaction of sale of electricity by WPP unit of the assessee. Based on the above proposed rate, the TPO proposed an adjustment of Rs. 3.8371 p.u. (6.35 - 2.5129) amounting to Rs. 11,40,07,551/-., which was upheld by the DRP relying upon its own directions for A.Y. 2016-17. 68. On the other hand, ld. DR of the Revenue relied on the findings of the lower authorities. 69. Considered the rival submissions and material placed on record. We have perused the material available on record as the fact and circumstances are similar to the Ground no. 36 to 41 of this appeal and the such issue has already been decided by us in favour of assessee in this appeal in Ground No. 36 to 41 above holding that rat....
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.... the learned counsel for the assessee submitted that the issue is covered by decisions in the assessee's own case and group cases as well as by various judicial pronouncements. It was contended that in the assessee's own case for A.Y. 2016-17, the DRP had accepted the principle of valuing steam at the equivalent electricity rate, and further the ITAT in the case of the assessee's group company, DCM Shriram Limited, for Assessment Years 2016-17, 2018-19, and 2020-21 (vide orders dated 30.06.2025) had admitted the similar enhanced claim of the deduction u/s. 80-IA in respect of steam and restored the issue to the Assessing Officer for verification and adjudication in accordance with law. 74. Ld. DR of the Revenue relied upon the orders of the authorities below, but he did not controvert the contention of the ld. AR for the assessee. 75. Considered the rival contentions and material placed on record. It is an undisputed fact that the CPP units at Bhiwadi and Dahej are eligible undertakings under section 80-IA(4)(iv) and that the steam generated by these units is supplied to the assessee's own manufacturing divisions. The DRP in A.Y. 2016-17 had already accepted the principle tha....
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....or claiming the benefit u/s. 10B(8) of the Act, the twin conditions of furnishing the declaration to the AO in writing and the same must be furnished before the due date of filing of return of income u/s139(1) of the Act are required to be fulfilled and are satisfied which conditions are mandatory. It cannot be said that one of the conditions would be mandatory and other is directory. However, in the instant case, it is seen that the assessee has not made a fresh claim of deduction u/s. 80IA of the Act before us, but the claim of the deduction u/s. 80IA of the Act was made in the return of income which was revised to an upward figure and for which the additional claim is lodged before the Tribunal for the first time. Therefore, the judgement of Hon'ble Supreme Court in the case of Wipro Ltd.(supra) is not applicable to the facts of the present case. The Hon'ble Delhi High Court in the case of PCIT vs Oracle (OFSS) BPO Services Ltd. (2019) 102 taxmann.com 396 (Del.) has held that "the Act does not debar the assessee to correct or modify the deduction once claimed under particular section." The AO indeed can examine the claim of deduction and can make additions/disallowances. ....
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.... are as under:- 8. The next issue is with reference to re-determination of ALP of steam transferred from eligible unit to non-eligible units and consequent enhancement of deduction under section 80IA of the Act. This issue arises in assessment years 2016-17 and 2017-18. 9. We have considered rival submissions and perused the materials on record. As could be seen from the materials placed before us, this issue was raised for the first time by the assessee before the Tribunal through additional grounds in assessment year 2016-17. In assessment year2017-18, as well, the assessee did not raise the issue in course of assessment proceedings. Even, before learned DRP no specific objection was raised in this regard. It is the say of the assessee, in course of proceedings before the DRP, the assessee has raised the issue of enhanced claim of deduction under section 80IA of the Act through submissions. However, learned DRP has completely ignored the issue while issuing the directions. 10. Having heard the parties and considering the fact that neither the Assessing Officer, nor learned DRP have examined this particular claim of the assessee, we are inclined to resto....
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....proved in-house R&D facilities. The claim was supported by statutory auditors' reports and certification in Form No. 3CLA submitted to the Department of Scientific and Industrial Research (DSIR) within time. 80. The AO, however, disallowed the claim on the ground that DSIR had not issued Form No. 3CL approving the quantification of revenue and capital expenditure for the relevant year. The DRP upheld the disallowance, following directions given in earlier years. 81. Subsequently, the assessee filed a writ petition before the Hon'ble Delhi High Court. Pursuant to the Hon'ble Court's order dated 14.07.2022, DSIR issued the requisite approval in Form No. 3CL dated 15.12.2022, approving eligible expenditure of Rs. 10,189.31 lakh (Rs. 101.89 crore) for A.Y. 2017-18. 82. Based on this DSIR approval, the AO, vide Rectification Order u/s. 154 dated 07.06.2023, allowed the assessee's entire claim of weighted deduction u/s. 35(2AB) amounting to Rs. 164.72 crore. 83. At the time of hearing before us, the ld. AR for the assessee submitted that in view of the rectification order dated 07.06.2023 passed by the AO under section 154 of the Act allowing the entire claim, the assessee do....
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.... its favour by the order of the ITAT in its own case for A.Y. 2014-15, wherein similar deduction under section 80-IA in respect of the same CPP units was allowed. The assessee further contended that all necessary justifications, details and documentary evidence were duly furnished before the Assessing Officer and that the tax auditor had certified the amount of deduction claimed under section 80-IA in the tax audit report and Form 10CCB, which were filed along with the return of income. The Assessing Officer's observation that the tax auditor did not certify the claim was therefore factually incorrect. It was also brought to our attention that an amount of Rs. 42,40,28,739/- had already been added to the total income by way of transfer pricing adjustment in respect of the same CPP units and, therefore, the disallowance of deduction under section 80-IA resulted in a double disallowance to the extent of Rs. 54,19,48,703/-. 91. We have examined the issue and we tend to agree with assessee's contentions that making the entire disallowance claimed u/s. 80-IA results in double disallowance in view of the adjustment made by the TPO in respect of transaction entered into by the respecti....
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.... and AY 2013-14 in ITA No. 4539/Del/2017. There is no change in the facts in issue in the year under consideration from the said year. Thus, by following the observations made therein, the adjustment made w.r.t the Corporate Guarantee Fee made in the year under appeal is hereby deleted. Accordingly, Ground of appeal Nos. 59 to 62 are allowed. 98. Apropos Grounds no. 63 to 68 and Ground No.69-71 are interconnected therefore considered together. These are related to the disallowance u/s. 14A under the Normal Provisions of the Act and under section 115JB (MAT) provision of the Act. 99. Ground Nos. 63 to 68 are in relation to disallowance of Rs. 1,25,14,370/- made by the AO by invoking the provision of rule 8D(2)of the Rules. Briefly stated, the assessee had not earned any exempt income during the relevant assessment year and accordingly made no suo-moto disallowance under section 14A of the Act. The Ld. AR submitted 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. 6.52 crores, whereas its own reserves and surplus stood at Rs. 3,086.41 crores as on 31.03.2017 which is 473.38 tim....
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....bout in section 14A by Finance Act, 2022, it has been held by Hon'ble Delhi High Court in Principal Commissioner of Income-tax (Central) vs. Era Infrastructure (India) Ltd. [2022] 448 ITR 674 (Delhi)[20-07-2022] that the Explanation is not retrospective and cannot change earlier settled law and it applies only prospectively as expressly stated in the Finance Bill and the same has already been discussed in the by deciding the matter for in assessee's appeal for AY 2011-12 in ITA No. 80/Del/2016. 105. Thus, by following the observations made therein and in view of judicial precedents cited above, the disallowance u/s. 14A under normal provision of the Act made in the year under appeal is hereby deleted. Accordingly, Ground of appeal Nos. 63 to 68 are allowed. 106. Ground No. 69-71 raised by the assessee is in relation to the disallowance u/s. 14A to the book profits computed u/s. 115JB of the Act. This issue again has already been decided by us in favour of assessee in assessee's appeal for AY 2011-12 in ITA No. 80/Del/2016. 107. Thus, by following the observations made therein, we hold that no addition could be made in the book profits on account of disallowance made u/s. 1....
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....t evidence should be considered and allowed in the interest of justice. Reliance was also placed on the decision of the Delhi ITAT in Mankind Pharma Ltd. vs. DCIT (ITA No. 2313/Del/2022), wherein it was held that the Assessing Officer is duty bound to compute the correct income and allow eligible deductions after verification of supporting documents. 113. The Ld. AR therefore contends that the claim for gratuity payment of Rs. 54,15,119/-, which represents actual expenditure incurred and duly accounted for in accordance with the mercantile system, ought to be allowed after verification. He requested that issue may be remitted back to the AO for verification. 114. Ld. DR of the Revenue relied upon the orders of the authorities below, but he did not controvert the contention of the ld. AR for the assessee. 115. Considered the rival submissions and material available on record. In the interest of justice and following the judicial precedents cited above, we hold that the Assessing Officer shall verify the claim of gratuity payment of Rs. 54,15,119/- and, upon due verification, allow the same under the normal provisions of the Act. The assessee is directed to furnish all relev....
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....d. DRP and consequently the Ld. AO have erred in not granting the claim for enhanced deduction u/s. 80-IA of the Act raised by the assessee by re-determining the arm's length price of steam transferred by CPP unit at Bhiwadi, Rajasthan to Rs. 88,39,61,354/- [instead of Rs. 26,14,87,986/-]and at Dahej, Gujarat to Rs. 2,34,19,87,791/- [instead of Rs. 79,09,57,273/-] based on the certificates of the Chartered Engineer in accordance with the directions of the Hon'ble DRP in the assessee's own case for the A.Y. 2016-17. 4.0 That the final assessment order passed u/s. 143(3) r.w.s. 144C(13) of the Act dated 29th April, 2022 [read with rectification order u/s. 154/143(3) dated 07th June, 2022] is bad in law. Grounds of Appeal in respect of incorrect computation of total income and consequently the incorrect demand of tax and interest thereon [Mistake apparent from records] 5.0 Without prejudice to the grounds challenging the adjustments / additions / disallowances made by the Ld. TPO / Ld. AO as upheld by the Ld. DRP, the Ld. AO has erred in law and on the facts & circumstances of the assessee's case in computing the incorrect assessed total income and again in ....
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....0/- 7.0 That the Ld. DRP and consequently Ld. TPO / the Ld. AO have erred in law and on the facts & circumstances of the assessee's case in making an adjustment of Rs. 13,35,090/- in respect of international transaction of allocation of software cost amounting to Rs. 1,50,34,805/- to AE's by imputing a mark-up @ 8.88% over and above the pure software cost allocation. Adjustment made without any show-cause notice and hence null and void 8.0 That the Ld. TPO has erred in proposing and ld. DRP erred in upholding the aforesaid adjustment which is made without issuing any show cause notice and thus the said adjustment is in contradiction to the principle of natural justice which is liable to be deleted. Without prejudice to above and on merits of the case 9.0 Without prejudice, the Ld. DRP and consequently the Ld. TPO / Ld. AO have erred in applying the search process / comparables and their PLI's solely based on directions given by the Ld. DRP in the assessee's case for the A.Y. 2016-17 which in turn are based on the ld. DRP directions of A.Y. 2014-15, and thus completely ignoring that such comparables are manufacturing companies and applyin....
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....The Hon'ble ITAT may be pleased to treat the above transactions in the nature of pure reimbursement and not in the nature of intra-group services and thus warranting no mark-up over and above their cost. XVIII. Corporate Guarantee Fee from AE's - Adjustment of Rs. 1,75,32,794/- 17.0 That the Ld. DRP and consequently Ld. TPO / Ld. AO have erred in law and on the facts & circumstances of the assessee's case in making an upward adjustment of Rs. 1,75,32,794/- by imputing the arm's length corporate guarantee fee rate @ 0.50% instead of @ 0.25% charged by assessee from its AEs [wholly owned subsidiaries] based on the specific quotations obtained from HDFC Bank and ICICI Bank, which constituted the valid comparable data in assessee's specific case under the 'Other Method'. Adjustment made without any show-cause notice and hence null and void 18.0 That the Ld. TPO has erred in proposing and ld. DRP erred in upholding the aforesaid adjustment which is made without issuing any show cause notice and thus the said adjustment is in contradiction to the principle of natural justice which is liable to be deleted. Without prejudice to above and on ....
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....thod' as most appropriate method based on specific quotations obtained from HDFC Bank and ICICI Bank are at arm's length; v. no adjustment is required as corporate guarantee fee charged by the assessee @ 0.25% has also been accepted at arm's length by Hon'ble Jurisdictional ITAT in assessee's own case for A.Y. 2010- 11, A.Y. 2012-13 and A.Y. 2014-15. GROUNDS OF APPEAL - TRANSFER PRICING ADJUSTMENTS SPECIFIED DOMESTIC TRANSACTIONS - ADJUSTMENTS OF Rs. 1,03,87,37,184/- XIX. Inter-unit Transfer - Technical Textile Business, Kashipur (TTBK) Division - Adjustment of Rs. 49,765/- 24.0 That the Ld. DRP and consequently Ld. TPO / Ld. AO have erred in law and on the facts & circumstances of the assessee's case in making transfer pricing adjustment of Rs. 49,765/- in respect of inter-unit transactions amounting to Rs. 18,63,873/- pertaining to 'Technical Textile Business' (TTB) Segment of the assessee. 25.0 That the Ld. DRP and consequently the Ld. TPO / Ld. AO have 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' which is a direct p....
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....treating the rates of power traded on IEX u/s. 133(6) of the Act, as comparable uncontrolled rates/prices. IEX Transactions are not at all comparable with the assessee's transactions of power on account of following factors: - i. the modus operandi and business model of IEX which is a spot energy exchange is not comparable to the assessee's case. ii. the rates obtained from IEX u/s. 133(6) do not qualify as an appropriate comparable data for the application of CUP method. iii. there are material differences between the terms and conditions of transaction entered into by the assessee and those taken from IEX. 31.0 That the Ld. DRP and consequently the Ld. TPO/ Ld. AO have erred in law and on the facts & circumstances of the assessee's case rejecting the assessee's reliable internal CUP data in form of actual transactions of purchase of electricity from the SEBs and instead applying the external CUP method by taking the average rates of average price being traded at IEX & rate at which power was purchased from respective state electricity boards. 32.0 That the Ld. DRP and consequently the Ld. TPO/ Ld. AO have erred in law and on the facts ....
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....I. Sale of Electricity by Wind Power Mill (WPP) unit at Tamil Nadu - Adjustment of Rs. 11,40,84,142/- 37.0 That the Ld. DRP and consequently Ld. TPO / Ld. AO have erred in law and on the facts & circumstances of the assessee's case in making the transfer pricing adjustment of Rs. 11,40,84,142/- in respect of specified domestic transaction of transfer or sale of electricity @ 6.35 per unit by the assessee's WPP unit at Tamil Nadu on wholly unjust, illegal, erroneous, superficial, frivolous, arbitrary and untenable grounds and is prayed to be deleted before your honour. 38.0 That the Ld. DRP and consequently Ld. TPO / Ld. AO have erred in law and on the facts & circumstances of the assessee's case in rejecting the assessee's reliable internal CUP data in form of actual purchase of electricity and instead taking the general tariff rates @ 2.86 per unit obtained by ld. TPO u/s. 133(6) of the Act from TNERC (Tamil Nadu Electricity Regulatory Commission) while benchmarking the transaction of sale of electricity by WPP unit of the assessee. 39.0 Without prejudice, that the Ld. DRP and consequently the Ld. TPO / Ld. AO have erred in law and on the facts & circums....
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....PP unit at Dahej, Gujarat giving the consequential effect of above ground and therefore allow the enhanced deduction u/s. 80-IA of the Act by Rs. 1,55,10,30,518/- in respect to said unit. GROUNDS OF APPEAL - CORPORATE TAX ISSUES - DISALLOWANCE OF Rs. 61,66,48,448/- XXIII. Disallowance of Weighted Deduction u/s. 35(2AB) of the Act amounting to Rs. 52,78,00,000/- in respect of In-House Research and Development Units 45.0 That the Ld. DRP and consequently the Ld. AO have erred in law and on the facts & circumstances of the assessee's case by disallowing the entire claim of weighted deduction u/s. 35(2AB) of the Act in respect of in-house scientific research facility to the extent of Rs. 52,78,00,000/- solely on account of not receipt of approval of allowable revenue & capital expenditure in Form No. 3CL viz. report to be submitted by the prescribed authority i.e. DSIR to the Director General (Income-tax Exemptions). 46.0 That the Ld. DRP and consequently the Ld. AO has erred in law in making the aforesaid disallowance by ignoring that assessee has duly complied with all applicable provisions of section 35(2AB) r.w.r. 6(7A) as attributable to the ass....
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....e tax auditor of the assessee did not approve / certify the eligibility of the above unit in the tax audit report which is factually incorrect as the tax auditor has duly certified the above amount of deduction u/s. 80-IA of the Act in its tax audit report and also necessary certificates in Form no.10CCBs were duly filed by the assessee. f) that the Ld. DRP had upheld the similar disallowance in AY 2016-17, however, the Ld. AO has failed to correctly appreciate the Ld. DRP directions on this issue; g) that as per the details submitted by the assessee in respect of cost incurred in each plant, the assessee is not eligible for claim of deduction u/s. 80-IA of the Act in respect of both the units which is without any reason, evidence or justification on part of ld. AO. h) that the disallowance has been proposed solely on the basis of disallowance made by the predecessor Ld. AO and the precedent followed in AY 2017-18. 52.0 The Hon'ble ITAT may be pleased to direct the Ld. AO to delete the disallowance of deduction u/s. 80-IA of the Act amounting to Rs. 7,09,74,669/-. XXV. Disallowance of Depreciation of Goodwill amounting to Rs. 8,07,967/- ....
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....elying on the clarification inserted to section 14A in the Act via Finance Act, 2022 and by following the CBDT Circular No. 05/2014 (F. No. 225/182/2013-ITA.II) dated 11.02.2014. 59.0 That the Ld. DRP and consequently the Ld. AO have erred in law and on the facts & circumstances of the assessee's case in making the above disallowance by failing to appreciate that the 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. 4.12 Crores and the total amount of reserves & surplus as on 31.03.2018 is Rs. 3,391.23 Crores which is 823.11 times of the value of average tax free investments, thus warranting no disallowance under section 14A of the Act. 60.0 Without prejudice to above grounds, the Ld. DRP and consequently the Ld. AO while making the disallowance u/s. 14A of the Act, have erred in taking entire value of investments instead of investments related to tax-free income and thus not following the judgments of the various courts including jurisdictional Delhi High Court in the case of ACB India Ltd. vs. ACIT (2015) 374 ITR 108 (Delhi) and others. The ld. AO erred in taking the....
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....ng its return of income. 67.0 That the Ld. DRP and consequently the Ld. AO have erred in law and on the facts & circumstances of the assessee's case in not entertaining the claim made by the assessee during the course of proceedings before the ld. DRP amounting to Rs. 25,79,06,280/-(being 25% of original cost of lease hold land amounting to Rs. 1,03,16,25,119/-) on account of amount of depreciation on lease hold land, which was inadvertently left to be claimed by the assessee while filing/ revising its return of income. 68.0 That on the facts & circumstances of the assessee's case, the Ld. DRP and consequently the Ld. AO have erred in law in not entertaining and adjudicating the above ground by relying the judgment of Hon'ble Supreme Court in the case of Goetze (India) Ltd. vs CIT [284 ITR 323] and without prejudice, the claim is being made before the Hon'ble ITAT as an adjudicating authority following precedent in NTPC Ltd. [229 ITR 383 (1998)]. 69.0 The Hon'ble ITAT may be pleased to grant the claim of Gratuity amounting to Rs. 54,15,119/- on account of actually paid by the assessee and claim of depreciation on lease hold land amounting to Rs. 25,79,06,....
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....relating to adjustment of Inter-unit Transfer - Technical Textile Business, Kashipur (TTBK) Division of Rs 49,765/-. These grounds are covered by our above decision vide paras 41 & 42 in ITA No.1448/Del/2022 and accordingly respectfully following the same, these grounds are allowed. 126. Apropos grounds no.28 to 36 relating to adjustment of Transfer of Electricity by Captive Power Plant (CPP) unit at Bhiwadi, Rajasthan and at Dahej, Gujarat of Rs. 22,62,18,062/-&Rs. 69,83,85,215/- respectively. These grounds are covered by our above decision vide paras 57 to 61 in ITA No.1448/Del/2022 and accordingly respectfully following the same, these grounds are allowed. 127. Apropos grounds no. 37 to 40 relating to adjustment of Transfer of Electricity by Wind Power Mill (WPP) unit at Tamil Nadu of Rs 11,40,84,142/-. These grounds are covered by our above decision vide paras 57 to 61 in ITA No.1448/Del/2022 and accordingly respectfully following the same, these grounds are allowed. 128. Apropos grounds no. 41 to 44 relating to assessee's claim of enhanced deduction u/s. 80-IA of the Act made during the course of proceedings before the DRP w.r.t Captive Power Plant ("CPP") Unit at Bhi....
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.... assessee, during the relevant assessment year, had acquired leasehold land for business purposes, the original cost of which amounted to Rs. 1,03,16,25,119/-. It is the submission of the assessee, that under the provisions of the Act, the assessee was eligible to claim depreciation at 25% treating the leasehold rights as an intangible asset, resulting in a depreciation claim of Rs. 25,79,06,280/-. However, due to inadvertence and complexities arising from IND AS implementation, the assessee failed to claim the said depreciation while filing or revising the return of income. Supporting documents, including the fixed asset register and notes forming part of financial statements, were placed in the Paper Book (Page Nos. 981 & 39), evidencing capitalization of the leasehold land and eligibility of depreciation. 135. The assessee raised an additional claim before the DRP. The DRP, however, refused to entertain the same solely relying on the judgment of the Hon'ble Supreme Court in Goetze (India) Ltd. v. CIT (284 ITR 323) and held that since the claim was not made in the original or revised return, it could not be admitted at that stage. Thus, no adjudication on the merits of the cla....
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.... NO.5618/Del/2014 (AY 2021-22) 143. This appeal is filed by the assessee against the assessment order dated 24.10.2024 passed by the ACIT, Circle 10 (1), Delhi passed under section 143(3) r.w.s. 144C(13) of the Income-tax Act, 1961 (for short 'the Act") for Assessment Year 2021-22 pursuant to the directions of the Dispute Resolution Panel u/s. 144C(5) of the Act raising following grounds of appeal :- "General Grounds: 1.0 That the Learned Assessing Officer ('Ld. AO') has erred in law and on the facts & circumstances of the assessee's case in making transfer pricing adjustments / additions of Rs. 8,47,48,351/- arising out of the order of the Ld. Transfer Pricing Officer ('TPO') u/s. 92CA(3) of the Act and additions / disallowances of Rs. 12,24,63,445/- on account of various non-transfer pricing issues under normal provisions of the Act and not rectifying the mistakes crept in intimation u/s. 143(1) of the Act amounting to Rs. 3,07,03,85,274/- and included in the final assessment order passed u/s. 143(3) r.w.s. 144C(13) of the Act dated 24th October, 2024 pursuant to the directions of the Learned Dispute Resolution Panel ('Ld. DRP') dated 30th September, 2024. ....
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....on the facts and circumstances of the assessee's case in making an upward adjustment of Rs. 3,61,35,181/- by imputing the arm's length corporate guarantee fee rate @ 0.50% instead of @ 0.25% charged by assessee from its AEs [wholly owned subsidiaries] based on the specific quotations obtained from HDFC Bank and Yes Bank, which constituted the valid comparable data under the 'Other Method' in assessee's specific case. 5.2 Without prejudice, the Ld. DRP and consequently Ld. TPO / Ld. AO have exceeded their jurisdiction in making a transfer pricing adjustment w.r.t. (w.r.t. : With respect to) extension of corporate guarantees which do not involve incurring of any cost and therefore, are out of the ambit of international transactions u/s. 92B of the Act and therefore, not subject to re-determination under Chapter-X of the Act. 5.3 The Hon'ble ITAT may be pleased to hold that: - i. the act of giving corporate guarantee by the assessee on behalf of the AE's is not an international transaction and, therefore, not amenable to any adjustment under Chapter X of the Act; ii. no adjustment is required as AE has provided back-to-back counter guarantees of....
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....n the case of Euro loans from its AE, does not meet the arm's length principle. 7.2 That the Ld. DRP and consequently Ld. TPO / the Ld. AO have grossly erred in law and on the facts & circumstances of the assessee's case in making the above adjustment of Rs. 69,31,832/- by inadvertently taking the benchmark interest rate @ 3.84% for USD loans and 3.51% for EURO loans extracted from a private database 'Bloomberg database' on an arbitrary basis. 7.3 That the Ld. DRP and consequently Ld. TPO / the Ld. AO have grossly erred in law and on the facts & circumstances of the assessee's case in disregarding the benchmarking analysis carried out by the assessee in its TP study without affording any cogent reason which correctly determined the benchmark rate of interest on similar loans from third parties (i.e. from Banks) at @0.71% / 0.81% for USD loans and @0.50% / 0.75% for Euro denominated loan. 8.0 Interest on Trade Receivable - Adjustment of Rs. 24,95,150/- 8.1 That the Ld. DRP and consequently Ld. TPO / the Ld. AO have erred in law and on the facts & circumstances of the assessee's case in making an upward adjustment of Rs. 24,95,150/- by recharac....
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....of power. 9.4 The Hon'ble ITAT may be pleased to delete the transfer pricing adjustment of Rs. 1,31,04,579/- in respect of transaction of transfer of electricity by the CPP unit at Bagdoon, Madhya Pradesh. 10.0 Transaction of inter-unit transfer of Power (Electricity) by Wind Power Mill (WPP) Unitat Tamil Nadu-Adjustment of Rs. 2,49,15,866/- 10.1 That the Ld. DRP and consequently Ld. TPO / Ld. AO have erred in law and on the facts & circumstances of the assessee's case in making the transfer pricing adjustment of Rs. 2,49,15,866/- in respect of specified domestic transaction of transfer of electricity @ Rs. 6.35 per unit by the assessee's WPP unit at Tamil Nadu on wholly unjust, illegal, erroneous, superficial, frivolous, arbitrary and untenable grounds and is prayed to be deleted. 10.2 That the Ld. DRP and consequently Ld. TPO / Ld. AO have erred in law and on the facts & circumstances of the assessee's case in rejecting the assessee's reliable CUP data in form of actual purchase of electricity from Tamil Nadu State Electricity Board ('TNSEB') / Tamil Nadu State Electricity Corporation ('TNSEC') and instead taking the average of power sale price....
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....d. AO have erred in law and on the facts & circumstances of the assessee's case in making above disallowance by completely ignoring that assessee has duly complied with all applicable provisions of section 35(2AB) r.w.r. 6(7A) as attributable to the assessee i.e. Recognition/renewal of all R&D units from DSIR dated 28.10.2021 and obtaining the reports from statutory auditors in Form No. 3CLA and getting the same uploaded on IT Portal, Audits of accounts of R&D units, and further following up with DSIR for getting the Form No. 3CL filed with IT authorities and non-receipt of approval in Form No. 3CL is not a mistake/obligation/delay attributable to the assessee, though the assessee did follow up and made several reminders to the DSIR even for that. 11.3 The Hon'ble ITAT may be pleased to direct the Ld. AO to delete the disallowance of weighted deduction u/s. 35(2AB) of the Act amounting to Rs. 8,44,43,000/-. 12. Disallowance of Deduction u/s. 80-IA of the Act amounting to Rs. 3,80,20,445/- 12.1 That the Ld. DRP and consequently the Ld. AO have erred in law and on the facts & circumstances of the assessee's case in disallowing the amount of deduction claime....
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.... with section 274 of the Act as there is no under reporting / misreporting of any income, nor any default according to law by the assessee. 16.0 Other Grounds of Appeal 16.1 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. 16.2 That each ground of appeal is independent of and without prejudice to the other grounds of appeals raised herein." 144. Apropos Ground Nos. 1 to 2 are general in nature, hence, not adjudicated and dismissed as such. 145. Apropos Ground No. 3 is in relation to the Mistakes apparent from records committed in intimation u/s. 143(1) of the Act aggregating to Rs. 3,07,03,85,274/-. 146. Brief Fact The Centralized Processing Centre ("CPC") while issuing intimation u/s. 143(1) made certain prima facie adjustments aggregating to Rs. 3,07,03,85,274/-, including: a) Disallowance of bad debts of Rs. 10,12,54,712/-; b) Addition of deemed income of Rs. 57,13,58,000/- without basis; c) Non-allowance of bonus u/s. 43B amounting to Rs. 2,09,63,3....
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....se grounds are covered by our above decision in ITA No.1448/Del/2022 for AY 2017-18 vide paras 26 & 27 and respectfully following the same, these grounds are allowed. 157. Apropos grounds no. 7.1 to 7.3 relating to Interest on Foreign Currency Loan - Adjustment of Rs. 69,31,832/- 158. The assessee advanced foreign currency loans to its Associated Enterprises (AEs) in the ordinary course of business. The loans were denominated in USD and EURO, and the assessee charged interest at international market-linked rates, namely 6-month LIBOR + 115/125 bps (1.40%-1.50%) for USD loans and 6-month EURIBOR + 110 bps (1.10%) for EURO loans. The assessee supported these rates by benchmarking them against comparable third-party loans from banks, which ranged between 0.71% to 0.81% for USD loans and 0.50% to 0.75% for EURO loans, demonstrating that its interest rates were at arm's length. 159. The TPO rejected the assessee's LIBOR/EURIBOR-based interest rates of 1.40%- 1.50% for USD loans and 1.10% for Euro loans advanced to AEs, and instead adopted much higher benchmark rates of 3.84% (USD) and 3.51% (Euro) taken from the Bloomberg database, treating the assessee's loans as being below a....
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....Rs. 24,95,150/-. 166. Ld. DRP upheld the TPO's approach and confirmed the notional interest adjustment by applying the same interest rate of 4.621%. Thus, The DRP thus sustained the adjustment of Rs. 24,95,150/-. 167. The Ld. AR of the assessee argued that there was no separate international transaction of financing, since the receivables merely arose from sale of goods in the ordinary course of business. It submitted that exporters in competitive markets customarily extend longer credit periods, and its credit terms to AEs were at par at those granted to unrelated parties. 168. It was further submitted that the sale of Polyester Chips to AEs had been benchmarked under TNMM, where the assessee earned substantially higher margins (in the range of 26.99% to 29.93%) compared to the median margin of 4.87% of comparables which have been accepted by the TPO himself. 169. The Ld. AR contended that once the primary transaction is at arm's length, no separate adjustment on receivables can be made, particularly when working capital adjustment already captures the impact of credit period. The assessee also emphasized the following points: a) High margins already factor in....
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....e directions. 174. Apropos grounds no. 9.1 to 9.4 is relating to adjustment of Transfer of Electricity by Captive Power Plant (CPP) unit at Bagdoon, Madhya Pradesh of Rs. 1,31,04,579/-. This ground is covered by our above decision in ITA No.1448/Del/2022 for AY 2017-18 vide paras 57 to 61 and respectfully following the same, these grounds are allowed as indicated above. 175. Apropos grounds no. 10.1 to 10.6 relating to adjustment of Transfer of Electricity by Wind Power Mill (WPP) unit at Tamil Nadu of 2,49,15,866/-. These grounds are covered by our above decision in ITA No.1448/Del/2022 for AY 2017-18 vide para 69 and respectfully following the same, these grounds are allowed as indicated above. 176. Apropos grounds no. 11.1 to 11.2 is relating to the primary issue involved in this appeal of the disallowance of weighted deduction amounting to Rs. 8,44,43,000/- claimed by the assessee under section 35(2AB) of the Act in respect of expenditure incurred on its in-house Research and Development (R&D) facilities approved by the Department of Scientific and Industrial Research (DSIR). 177. The AO, however, disallowed the entire claim of weighted deduction u/s. 35(2AB) of the....
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..../s. STP Ltd. (2021-TIOL-128-ITAT-KOL) (iv) CIT vs. Sun Pharmaceutical Industries Ltd. [2017] 85 taxmann.com 80 (Gujarat) (v) Special Leave Petition filed by revenue against ruling of Hon'ble Gujrat High Court, has been dismissed by Hon'ble Supreme Court [2018-TIOL-282-SC-IT]) (vi) Minilec India (P.) Ltd. vs. Asstt. CIT {[2018] 93 taxmann.com 213 / 171 ITD 124 (Pune - Trib.)}. 184. Considered the rival submissions and material placed on record. It is undisputed that the assessee's in-house R&D facilities were duly recognized by DSIR and the AO has not doubted the genuineness of the expenditure. The only basis of disallowance is non- issuance of Form 3CL by DSIR for the same the assessee continuously followed up with DSIR for issuance of Form 3CL. 185. Hon'ble High Courts and Tribunal have consistently held that delay or non-issuance of Form 3CL by DSIR cannot result in denial of deduction u/s. 35(2AB) once the assessee has complied with its statutory obligations and the R&D facility is duly approved. Form 3CL is essentially a post-facto quantification by DSIR. The assessee does not control or influence the timeline of DSIR. Therefore, adverse con....
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....er, brought our attention to the preceding year's rectification order dated 16.06.2023 in A.Y. 2017-18 wherein similar disallowance made by the AO u/s. 80-IA of the Act was rectified and fully allowed by AO itself. The ld. AR submitted that following the same approach, the disallowance made by the AO should be deleted in this year as well. 194. The Ld. DR did not object to the submissions of the assessee. 195. Considered the rival submissions, the material placed on record and the applicable legal principles. We note that in A.Y. 2017-18, the revenue itself accepted the similar claim of assessee in rectification proceedings, thereby allowing the entire deduction u/s. 80-IA. Consistency demands that the same view be adopted for the present year. 196. We, therefore deem it appropriate to restore the matter to the file of the AO for a fresh examination. The AO shall verify the assessee's claim in line with the rectification order passed for A.Y. 2017-18 and in accordance with law, after granting due opportunity of being heard. 197. Accordingly, the issue relating to the disallowance of Rs. 3,80,20,445/- under Section 80- IA is remitted back to the AO for necessary adjudica....