TaxTMI 
TaxTMI 
2026 (6) TMI 1435
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....tion to interest received on loans to its Associated Enterprises, without considering the facts and circumstances of the case. 2. On the facts and circumstances of the case as well as in law, the Hon'ble Disputed Resolution panel has erred in confirming the action of the Learned Assessing Officer in disallowing the deduction of Rs. 13,39,89,406/- claimed u/s. 80IA of the Income Tax Act, 1961, without considering the facts and circumstances of the case. 3. Additional Ground: 1) On the facts and circumstances of the case as well as in law, the Hon'ble Disputed Resolution panel has erred in confirming the action of the Transfer Pricing Officer/Learned Assessing Officer in upholding the disallowance claimed u/s. 80IA with respect to the Sale of power to AE by treating the purchase rate of SDC/SEB as ALP rate instead of considering the selling price of such distribution company as ALP. 3. The assessee requested to allow to raise the above additional ground stated to be purely legal in the nature and matter of interpretation of the law. On careful consideration of the above facts qua the records, we admit the additional ground respectfully following the case....
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....amendment was carried out on 16th December, 2016. The total loan outstanding during AY 2020-21 was Rs. 333.96 cr. The assessee benchmarked the transaction based on the analysis carried out in FY 2016-17 in which LIBOR plus 300 bps was arrived at. The assessee had agreed to lend at LIBOR rates, but later suo moto offered LIBOR plus 300 bps in the return. As the interest amount was not received during the year, secondary adjustment as mandated in Section 92CE was carried out. The TPO was not satisfied with the benchmarking adopted by the assessee. He carried out a search on the Bloomberg database by considering various parameters like geography of the lender and borrower, the currency of loan, date of issue of loans, tenure of the loans, security and whether interest and capital were paid repaid or not. Based on the same, the TPO arrived at the Interest rates for the various tranches issued in different financial years. As the assessee had not received the interest, the floating interests were converted into fixed interest based on the swap manager in the Bloomsberg database. Now the applicant assessee is before this Panel questioning the benchmarking on the following counts....
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....e. In this regard, it is the observation of the Panel that even though credit rating of the borrower is an important criteria, the credit rating arrived at by the assessee is also not sacrosanct as it has not been provided by an independent agency but by using a software called 'Riskcalc'. Moreover, it is seen that assessee has taken the credit rating for the AE's entities in South Africa, whereas it should have been for Mauritius. Hence the id TPO's benchmarking using the Bloomberg database is found to be correct. 5.1 It was observed by ld.DRP that there was similar fact with the assessment year 2020-21. The submission of the assessee was also found to be largely the same as was made before DRP proceedings. No interference was called for in the benchmarking adopted by the ld TPO. Relying on the direction of DRP of AY 2020-21 grounds of objection was rejected. 6. Before us, the ld.AR has contended that the issue in hand is squarely covered in favour of the assessee. Oral submissions as also written submissions have been made. It is submitted that the assessee company had advanced a loan to its Associated Enterprise ("AE") at a floating rate of interest, being LIBOR plus an ap....
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....e primary contention of the Ld. AR that the issue deserves to be decided by following the orders of this Tribunal for assessment years 2011-12 and 2012-13 (supra) therefore cannot be accepted. It is thus held that reliance on the earlier Tribunal orders for assessment years 2011-12 and 2012-13 (supra) is misplaced, as the critical aspect of the parties conduct and prolonged non- payment of interest could not have been examined in those years. 9.2. While the intra-group loans to the Mauritius AE were denominated in foreign currency and, in principle, a floating LIBOR-based rate could have been applied however, application of such a rate became untenable in the present facts. As noted, the creditworthiness of the South African AE to whom the loan was extended by the Mauritius AE was based on "Risk call" tool, and the references provided in the TP study are unverifiable. Further the spread-over of the rate is without any basis and not supported by the credit risk of the Mauritius AE being the borrower. Further, the agreed repayment schedules were repeatedly breached without any enforcement, rendering the floating rate mechanism ineffective and administratively impractical. ....
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....is consistent with arm's length principles, even where the AE's credit risk could not be independently verified and the floating rate mechanism could not be reliably enforced. 9.7. Be that as it may, from the manner in which both the assessee and the Revenue have determined the arm's length price of the loan transaction with the Mauritius AE, it is evident that several obligations mandated under Chapter X of the Act have not been duly followed. It is also an admitted fact that the assessee did not levy any penal interest for the continued non-payment of interest by the Mauritius AE for more than a decade. We, therefore, concur with the view adopted by the Coordinate Bench of this Tribunal for assessment year 2020-21 (supra), that a default fixed interest rate, and not a floating rate. 9.8. At this stage, we deem it appropriate to clarify that no useful purpose would be served by remanding the issue to the Ld.TPO/Ld.AO for fresh determination. In the present facts, remand would merely result in a mechanical re-examination of the same material already available on record, without any likelihood of altering the substantive outcome, and would only prolong ....
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.... outcome by drawing guidance from the Safe Harbour principles, considering the facts of the present case. 9.11. This determination is based on the undisputed factual matrix and the consistent conduct of the parties as emerging from the materials available on record for the relevant period. It is clarified that, so long as these material facts and contractual arrangements remain substantially unchanged and no fresh evidence is brought on record, the benchmarking of the interest rate on the said intra-group loan shall ordinarily not warrant reconsideration on the same grounds in subsequent assessment years under consideration. 9.12. Accordingly, the Ld.AO is directed to adopt fixed interest rate of 6.5% on the loan advanced by the assessee to its Mauritius AE for assessment year 2013-14 and to grant due credit for the interest already offered to tax by the assessee for the year under consideration. In respect of other years under consideration, considering the fact that there has been no change in the facts, the fixed interest rate at 6.5% is reasonable. Accordingly, Grounds 1-4 raised by revenue stands partly allowed." 6.3 In view of the above, and in the absenc....
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....A was claimed by the assessee. The company had claimed deduction under Chapter VIA of the act under section 80IA of the Act of Rs. 13,39,89,406/- after setting of loss from Unit-3 of Rs. 37,94,98,424/- against the profit of Rs. 51,34,87,830/- earned by Unit 4. In this regard, the AO held that assessee company had earned profits from Units-4 i.e. Rs. 51,34,87,830/- and incurred loss from Unit-1 of Rs. 118,33,33,002/-, from Unit-2 of Rs. 10,03,83,587/-, from Unit-3 of Rs. 37,94,98,424/-. On totalling of Profit & Loss from eligible SBU (Units), the assessee had shown Income eligible for claim of deduction u/s. 801A of Rs. 13,39,89,406/-(i.e. after setting of loss from Unit-3 of Rs. 37,94,98,424) and accordingly claimed deduction of Rs. 13,39,89,406/- on account of profit from Unit-4 (net off with Unit 3) without taking into consideration the loss incurred by Unit-1 and Unit-2. Thus, the AO adjusted the losses from other units against the balance amount of Rs. 13,39,89,406/- claimed as deduction under Section 80-IA of the Act and disallowed the claim of assessee company. Action of the AO was upheld by the DRP. 11. Before us, the ld.AR has fairly admitted that the Revenue has relied ....
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....g on a judicial precedent which is not applicable to the issue under consideration. Further reliance was also placed on the decision of Punit Construction vs JCIT (92 taxmann.com 28) wherein after considering multiple decisions including special bench ones, the Mumbai ITAT held concluded that in terms of provisions of sub-section (5) of section 80-IA, deduction has to be given unit-wise without considering profit or loss of other eligible units. Copy of the order was submitted at the time of hearing. Reliance was also placed on the decision of Hon'ble Allahabad HC in the case of CIT vs. Modi Xerox Ltd (344 ITR 411). Thus, it was submitted that the assessee company was eligible for deduction u/s. 80-IA as the loss from other eligible units could not be set-off and that the deduction has to be calculated unit-wise. 12. The ld.DR has contended that the issue has already been decided against the assessee by the ITAT in its appeal for AY 2020-21 in ITA No. 3714-3713/Mum/2024 which inter alai placed reliance on the decision of hon'ble Supreme Court in the case of Reliance Energy Ltd. in Civil Appeal no. 1328 of 2021. It is further submitted that the MA filed by the assessee before the....
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....Officer also relied on the other decisions also cited in the impugned order. The Ld. DRP also upheld the finding of the Assessing Officer and rejected the objection of the assessee. 16. We have heard rival submissions of the parties and perused the relevant materials on record.. Before us, the Ld. counsel for the assessee has relied on the decision which was cited before the lower authorities. The core issue in dispute is whether the deduction is to be computed in respect of profit of each undertaking engaged in Business or deduction has to be computed on aggregate eligible business profit of all the units engaged in eligible business. Fore ready reference, the relevant provisions of section 80IA of the Act are extracted as under: Deductions in respect of profits and gains from "Deductions Industrial undertakings or enterprises engaged in industrial infrastructure development, etc. [(1) Where the gross total income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in sub-section sub section (4) (such business being hereinafter referred to as the eligible business), there shall, in accord....
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....lectricity, therefore we are of the opinion that for the purpose of computation of deduction u/s. 80IA of the Act in the case of assessee, the aggregate profit of the eligible business i.e. all the three units have to be taken. Certainly, loss set off against the aggregate from non eligible business can't be set-off profit of eligible business for computing deduction u/s. 80IA of the Act. The purpose of allowing deduction is for promotion of the manufacturing or generation of the particular products and promotion of business of those products and not promotion of an undertaking, therefore, aggregate profit of different undertaking of the assessee is eligible for deduction u/s. 80IA should only be considered for the purpose of deduction. In support, we also rely on the decision of Hon'ble Supreme Court in the case of Tax-II vs M/S Reliance Energy Ltd Commissioner Of Income Tax (Formerly Bses Ltd) on 28 April, 2021 in Civil Appeal No. 1328 of 2021. 13. The other contention of the Revenue is that sub-section 80-IA refers to computation of quantum of deduction being limited from fro 'eligible business' by taking it as the only source of income. It is sub sectio....
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....duction under sub- section (1) for the assessment year immediately succeeding the initial assessment year or any subsequent assessment year, be computed as if such industrial undertaking or ship or the business of the ocean going vessels or other powered hotel or the business of repairs to ocean-going craft were the only source of income of the assessee during the previous years relevant to the initial assessment year and to every subsequent assessment year up to and including the assessment year for which the determination is to be made." It was held in Synco Industries (supra) that for the purpose of calculating the deduction under Section 80-I, loss sustained in other divisions or units cannot be taken into account as sub-sub section (6) contemplates that only profits from the industrial undertaking shall be taken into account as it was the only source of income. Further, the Court concluded that Section 80-I(6) of the Act dealt with actual computation of deduction whereas Section 80-I(1) of the Act dealt with the treatment to be given to such deductions in order to arrive at the total income of the assessee. The Assessee also relied on the judgment of this Court in Can....
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....issue of the extent of deduction under Section 80-IA of the Act." 13. On careful consideration of above facts, it is evident that the issue has already been adjudicated against the assessee. Respectfully following the above ITAT order, we find not infirmity in the order passed which is, therefore, upheld and the ground of appeal of the assessee is dismissed. 14. In so far as the additional ground is concerned, it is submitted that during the year under consideration, the assessee company has sold power to JSWSL, ARCL, JSWSCL, JSWCL and ACCIL for their own captive consumption as per the power purchase agreement (PPA) signed between them. The power is sold by Unit 2, Unit 3, and Unit 4 plant of SBU 3 situated in Ratnagiri, Maharashtra. The rate per unit for power supplied had been determined by following the mechanism laid down by the Central Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2019. The CERC Tariff Regulation has been issued for the purpose of determining the tariff rate of a generating unit that generates and transfers power for commercial purposes. The CERC Tariff Regulation provides for computation of two different charges for sup....
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.... also covered by the decision of Mumbai Third Member Bench in the case of Aditya Birla Nuvo Ltd. (563/Mum/2018), wherein the Hon'ble Vice President, being the Third Member observed that the ALP rate had to be considered as the selling rate of Distribution Companies. Relevant parts of the order are reproduced as below: "44. It is noteworthy, in case of Star Paper Mills Limited vs. DCIT(supra)identical view expressed by the Bench has been upheld by the Hon'ble Calcutta High Court. At this stage, we must observe, in case of Jindal Steel & Power Ltd. (supra), the Hon'ble Supreme Court while was on the issue of what should be the market value u/s. 80IA(8) of the Act prior to its amendment in 2013, had observed that in case the assessee had not obtained power from the captive power plant, it would have purchased power from the State Electricity Board and in such a scenario, it would have purchased power at the same rate at which the State Electricity Board supplies power to other consumers, hence such rate can be considered as the market value. The learned DR has forcefully submitted that the decision of Hon'ble Supreme Court having been rendered prior to the amendment t....