TaxTMI 
TaxTMI 
2026 (5) TMI 730
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....Compliance and Adjustment 5. Refund Claim 6. Deduction Claimed for Industrial Undertaking u/s. 801A/801AB/801AC/IB/IC/IBA/80ID/80IE/10A/10AA 7. ICDS Compliance and Adjustment 8. Expenses Incurred for Earning Exempt Income 9. Investment in Intangible Assets 10. Specified Domestic Transactions 11. Foreign Outward Remittance 12. Deduction on Account of Donation for Scientific Research 13. Deduction from Total Income under Chapter VI-A 14. Capital Gains/Income on Sale of Property 15. Expenditure by Way of Penalty or Fine for Violation of any Law 3. The details of opportunities and response is as under:- 4. Despite several opportunities, the assessee had not replied to the show cause notices. On completion of proceedings draft assessment order u/s. 144C(1) of the Act dated 26.09.2023 determining the total income of Rs. 1162,74,51,662/-. Subsequently, the assessee filed its objections before the Dispute Resolution Panel (DRP) against draft order dated 26.09.2023. The DRP gave direction u/s. 144C(5) on 26.06.2024. Ld. AO vide assessment order dated 29.07.2024 made final computing of in....
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....ees of equal amounts on similar terms and hence no adjustment/addition is required; c. no adjustment is required as @ 0.25% charged by the assessee as corporate guarantee fee from its AE's [wholly owned subsidiaries] is at arm's length and thus upward adjustment of Rs. 2,74,15,890/- be directed to be deleted; d. 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 Α.Υ. 2010-11, A.Y. 2012-13 and A.Y. 2014-15. 4.1 Allocation of Software Cost to AE's 15,04,002/-Adjustment of Rs. 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. 15,04,002/- in respect of international transaction of allocation of software cost amounting to Rs. 1,49,80,098/- to AE's by imputing a mark-up @ 10.04% over and above the pure software cost allocation. 4.2 That the Ld. DRP and consequently the Ld. TPO/Ld. AO have erred in holding that not charging of mark-up is not reflective of arm's length b....
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....assessee's case in rejecting, without any cogent reason, the assessee's reliable CUP data in form of actual transactions of purchase of electricity from the State Electricity Board(s) ['SEB'] and instead applying the external data obtained u/s. 133(6) of the Act, being the average price charged by RVUNL from state electricity boards, which is far from being comparable. 5.3 That the Ld. DRP/Ld. TPO/Ld. AO have erred in law and on the facts & circumstances of the assessee's in acting contrary to the judgments of various courts including the judgment of Hon'ble Supreme Court in case of Jindal Steel & Power Ltd. (CA.13771/2015 & Others) wherein the rate at which SEB transfers the electricity to its consumers was held as an appropriate market rate for benchmarking the similar transaction of transfer of electricity. 5.4 The Hon'ble ITAT may be pleased to delete the transfer pricing adjustment of Rs. 18,69,10,815/- in respect of transaction of transfer of electricity by the CPP unit at Bhiwadi. 6.1 Transaction of inter-unit transfer of Power (Heating and Cooling) by Captive Power Plant (CPP) Unit at Bagdoon, Madhya Pradesh - Adjustmen....
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....t rate for benchmarking the similar transaction of transfer of electricity. 6.5 The Hon'ble ITAT may be pleased to delete the transfer pricing adjustment of Rs. 1,57,48,098/- in respect of transaction of transfer of electricity by the CPP unit at Bagdoon, Madhya Pradesh. 7.1 Transaction of inter-unit transfer of Power (Heating and Cooling) by Captive Power Plant (CPP) Unit at Pithampur, Madhya Pradesh - Adjustment-NIL That the Ld. TPO and consequently the Ld. AO have erred in law and on the facts & circumstances of the assessee's case in rejecting the assessee's comparable uncontrolled price data in form of actual purchase of electricity from Madhya Pradesh Paschim Kshetra Vidyut Vitaran Company Ltd. @ Rs. 4.07 per unit and instead using the external price data being the average of Indian Energy Exchange (IEX) rates [@ Rs. 2.99 per unit) plus mark-up of 30% thereon [effectively @ Rs. 3.89 per unit]. [Even though no adjustment has been made as the assessee's transfer price was Rs. 3.74 per unit. ]. 7.2 That the remaining grounds of appeal in respect of rejection of assessee's comparable in form of actual purchase of electricity from Madhya ....
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....Hon'ble Supreme Court in case of Jindal Steel & Power Ltd. (CA.13771/2015 & Others) wherein the rate at which SEB transfers the electricity to consumer was held as appropriate market rate for benchmarking the similar transaction of transfer of electricity. 8.5. Without prejudice, the Id. DRP and consequently the Ld. TPO/Ld. AO have erred in law and on the facts & circumstances of the assessee's case in applying the average price of various power generating companies, without appreciating that assessee's transfer price falls within the range of such prices [obtained by Id. TPO u/s. 133(6) of the Act] and hence no adjustment is warranted. 8.6 The Hon'ble ITAT may be pleased to direct the Ld. TPO/ Ld. TPO to delete the above adjustment of Rs. 4,15,90,549/- in respect of specified domestic transaction of transfer of electricity by WPP unit of the assessee. 9.1 Disallowance of Deduction u/s. 80-IA of the Act amounting to Rs. 18,69,10,815/-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 claimed by the assessee u/s. 80-IA of the Act a....
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.... of Delhi in case of Holcim India Pvt; Ltd [2015 57 Taxmann, 28 [Detj, Chem Invest Limited vs. CIT (ITA No. 749/2014/Delhi HC)-SLP also dismissed, Joint Investments Pvt. Ltd. (2015) 372 ITR 694 and others, which have held that no disallowance u/s. 14A r.w.r. 8D of the Act can be made in absence of any tax-free income or the disallowance under said section can be made to the extent of tax free income actually received. 10.3 The Hon'ble ITAT may be pleased to delete the disallowance u/s. 14A of the Act amounting to Rs. 6,13,500/-. 11.1 Disallowance of 'education cess' amounting to Rs. 2,31,61,053/-while computing the book profits u/s. 115JB of the Act. That the Ld. AO has erred in law and on the facts & circumstances of the appellant's case in making inadvertent addition on account of 'education cess' amounting to Rs. 2,31,61,053/- while computing the book profits u/s. 115JB of the Act without appreciating the fact that assessee had not claimed any deduction of the same in computation of book profits u/s. 115JB of the Act. 11.2 The Hon'ble ITAT may be pleased to delete the disallowance u/s. 115JB of the Act amounting to ....
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....Departmental Representative relied on impugned order. 9. From examination of record in light of aforesaid rival contentions, it is crystal clear that the assessee had charged corporate guarantee fee @ 0.25% from its Associated Enterprises (wholly owned subsidiaries) for providing such guarantees, the assessee has obtained the quotation from HDFC Bank and Yes Bank in F.Y 2020-21 [P. no. 126 of Appeal Set] @ 0.25%-P. no. 545-550 of P. B] 9.1. Further, the assessee had selected the other method as most appropriate method (P. no. 248 & 254-256 of PB). 9.2. Pricing policy & party wise details of CG (P. no. 276 of PB) charged from AE's (P. no. 512-520 of PB) and invoice wise details of transaction with AE's along with debit notes (P. no. 521-544 of PB). (Submission dated 05.04.2023 at P. no. 322-329 of PB) /(Submission dated 19.07.2023 at P. no. 353-360 of PB) 9.3. Ld. TPO had used other method for benchmarking the transaction. Relying on the directions of the Hon'ble DRP in previous years @ 0.50%. [Р. nо. 130 of Appeal Set/P.no. 7 of TPO order] 9.4 Ld. DRP had upheld the TPO's action of imputing the corporate guarantee rate @ 0.50% for the year....
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....n the basis of respective annual accounts of the comparable and determine the quantum of adjustment accordingly. (P. no. 84 of Appeal Set)/ (P.no. 9 of the DRP's direction) 12.4 TPO's order giving effect of the DRP's direction and the same has been taken into the consideration by the Ld. AO. As directed by the Id. DRP, The ld. TPO had recomputed the margins and determines the quantum of adjustment by taking the weighted Average (OP/OC) @ 10.04% of respective annual accounts of the comparable and made an adjustment of Rs. 15,04,002/-(P. no. 59 of Appeal Set). Further, the Ld. AO had considered the same in its final order (P.no. 44 of the Appeal set/P.no. 22 of the AO's Final order). 12.5. The assessee submitted that in identical issue ITAT has decided in favour of the assessee the Hon'ble ITAT, Delhi for A.Y 2016-17 in which the Hon'ble ITAT referred to the case of Hon'ble Supreme Court in the case of Engineering Analysis Centre of Excellence Pvt. Ltd. vs. CIT (Pg No. 516-517 of CLC) and deleted the adjustment. The relevant para no. 6 is reproduced before for your reference: - "6. Respectfully following the above decisions and further it is not....
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.... Pradesh and Pittampur Madhya Pradesh as well as sale of electricity by Wind Power Mill Unit at Tamilnadu. 15.1. TPO rejected assessee's internal CUP & applied an external CUP method i.e average price being taken by exercising power u/s. 133(6) of the Act. 15.2 The TPO rejected assessee's internal CUP & applied an external CUP method i.e. average of price data in form of Indian Energy Exchange (IEX) Rates & assessee's rate charged to non-eligible units based on SEB rates. 15.3 The TPO rejected assessee's internal CUP method & applied an external CUP method i.e. price data in form of Indian Energy Exchange (IEX) Rates & assessee's rate charged to non-eligible units based on SEB rates. Ld. TPO rejected assessee's internal CUP method & applied an external CUP method. 15.4 The ld. DRP upheld the decision made by the Ld. TPO and it did not consider the ruling made by the Hon'ble SC in case of Jindal Steel by stating that the such ruling does not applicable in this case due to coming of new regime of specified domestic transaction that require determination of ALP. 15.5 The issue under consideration is fully covered by the recent judgment of jurisdictional High Court in ca....
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..... 55. As noted above, the learned ITAT also accepted the rates at which electricity was supplied by the SEBs/power distribution companies to the Assessee in Gujarat and Rajasthan regions as the said rates was considered as an external CUP. 56. Undoubtedly, there is a degree of similarity between the transaction of supply of electricity by SEBs to the Assessee and the supply of electricity by the Assessee's eligible units. However, there is a difference between the transactions being benchmarked, which is supply of electricity by captive units, and the transaction of supply of electricity by distribution companies/corporations. The power distribution companies enjoy a near monopoly status. The tariff charged by such companies are regulated tariffs. However, we accept that there is a sufficient degree of similarity between the said transaction for reasonably determining the ALP by using the CUP method. 57. We also consider it apposite to refer to the recent decision of the Supreme Court in Commissioner of Income Tax v. Jindal Steel and Power Limited'. The principal issue involved in the said decision was the determination of market value of goods an....
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....ssion which denotes the price of a good arrived at between a buyer and a seller in the open market i.e., where the transaction takes place in the normal course of trading. Such pricing is unfettered by any control or regulation; rather, it is determined by the economics of demand and supply. 26. Under the electricity regime in force, an industrial consumer could purchase electricity from the State Electricity Board or avail electricity produced by its own captive power generating unit. No other entity could supply electricity to any consumer. A private person could set up a power generating unit having restrictions on the use of power generated and at the same time, the tariff at which the said power plant could supply surplus power to the State Electricity Board was also liable to be determined in accordance with the statutory requirements. In the present case, as the electricity from the State Electricity Board was inadequate to meet power requirements of the industrial units of the assessee, it set up captive power plants to supply electricity to its industrial units. However, the captive power plants of the assessee could sell or supply the surplus electricity (after s....
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....e rate at which power was supplied to a supplier could not be the market rate of electricity purchased by a consumer in the open market. On the contrary, the rate at which the State Electricity Board supplied power to the industrial consumers has to be taken as the market value for computing deduction under Section 80IA of the Act." [emphasis added] 59. As is apparent from the above, the Supreme Court had accepted the rates at which electricity was supplied by the SEBs to industrial consumers as being the market value of the said supplies for the purposes of Sub-section (8) of Section 80IA of the Act. 60. In view of the above, the questions of law are answered in favour of the Assessee and against the Revenue. 61. The appeal is dismissed in the aforesaid terms." 15.6 In view of the above material facts and well settled principle of law, the additions/ disallowance made by ld. AO are set aside and the matter is restored to the file of Ld. AO for verification and fresh decision in accordance with law after affording fair opportunity of hearing to the Assessee. Therefore, ground No. 5.1 to 5.4 to 8.1 to 8.6 are allowed in above terms. 16. Grounds of....
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....lication dated 21.01.2023. 19.5 The assessee has further furnished all justification along with documentary evidences. 19.6 The claim of assessee has duly reported/certified by the tax auditor while issuing the tax audit report. 19.7 The ld. AO is statutory bound under law to verify claim of assessee with documentary evidences and shall compute correct total income-MIT Mohan Singh Kahlon [2013] 39 taxman.com 145 (Chandigarh-Trib). 19.8 Ld. AO is duty bound to grant exemption or deduction even where assessee failed to claim the same. In view of above facts, the double addition/disallowance u/s. 80-IA of the Act of Rs. 18,69,10,815/- is unsustainable. The Ld. A.O. is directed to verify and delete double disallowance u/s. 80IA of the Act. Therefore, grounds of appeal No. 9.1 to 9.3 are allowed in manner indicated above. 20. Grounds of appeal Nos. 10.1 to 10.2 are regarding addition/disallowance of Rs. 6,13,500/- u/s. 14A of the Act. 21. Ld. Authorized Representative submitted that the issues is fully covered by the orders of Hon'ble Jurisdictional ITAT, Ld. DRP and Ld. CIT(A) in the assessee's own case in different years ie., in A.Y. 2006-07, Α.&Upsilon....
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....d. DRP in A.Y 2014-15 and Ld. CIT(A) in A.Y 2015-16. As such addition/disallowance of Rs. 6,13,500/-being unsustainable is deleted. Therefore, ground of appeal No. 10.1 to 10.2 are accepted. 24. Grounds of appeal No. 11.1 to 11.2 are regarding disallowance of Rs. 2,31,61,053/-. 25. Ld. AR for appellant/assessee submitted that the assessee has claimed the education cess of Rs. 2,31,61,053/- as an expenditure u/s. 37 of the Act in its computation of income prepared on the basis of normal provision of the Act for the AY 2020-21 viz. but not in the MAT computation prepared u/s. 115JB of the Act. 26. Ld. DR submitted that matter may be got verified. 27. From perusal of record, it is evident that ld. AO has perhaps inadvertently made an addition on account of 'education cess' amounting to Rs. 2,31,61,053/- while computing the book profits u/s. 115JB of the Act without appreciating the fact that assessee had not claimed any deduction of the same in computation of book profits u/s. 115JB of the Act. (P.no. 45 of the Appeal set). So, the disallowance of Rs. 2,31,61,053/- is deleted and the matter is restored to the file of Ld. AO for verification and adjudication afresh ....