TaxTMI 
TaxTMI 
2025 (3) TMI 1847
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.... 1. On the facts and circumstances of the case as well as in law, the Hon'ble Disputed Resolution penal has erred in confirming the action of the Learned Assessing Officer in making an upward adjustment of Rs. 10,32,75,726/- to the Arm's Length Price in relation to providing guarantee 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 penal has erred in confirming the action of the Learned Assessing Officer in making a disallowance of Rs. 41,81,59,866/- u/s.14A of the Income Tax Act, 1961, without considering the facts and circumstances of the case. 3. On the facts and circumstances of the case as well as in law, the Hon'ble Disputed Resolution penal has erred in confirming the action of the Learned Assessing Officer in making an addition of Rs. 41,81,59,866/- on account of alleged disallowance of expenses u/s.14A of the Income Tax Act, 1961, while computing the book profit u/s.115JB of the Act, without appreciating the fact no such addition is to be made in computing the book profit u/ s.115JB of the Income T....
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....es without considering the facts and circumstances of the case." 3.1 Further, the assessee also filed an additional ground in relation to issue of disallowance u/s 14A of the Act, which is reproduced as under: "On the facts and circumstances of the case as well as in law, the Hon'ble Dispute resolution Panel has erred in confirming the action of the Learned Assessing Officer without appreciating the decision of Delhi Tribunal Special bench in the case of Vireet Investment (58 /TRT) 313) wherein it has been concluded that only those investments are to be considered for computing average value of investment which yielded exempt income during year." 4. We have heard rival submission of the parties on the issue of admissibility of the additional ground. We find that the ground raised being purely of legal nature without requiring investigation of fresh facts, therefore, same was admitted for adjudication in view of decision of Hon'ble Supreme Court in the case of NTPC Ltd. 229 ITR 283 (SC). 5. Briefly stated, facts of the case are that the assessee company is a public limited company involved in the business of generation of power and operation and maintenance....
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....reement also contained provision for charging of penal interest at the rate of one percentile at the discretion of lender in case of default in repayment of loan. The said agreement was modified/ amended from time to time up to the year under consideration. Under amendment dated 31.03.2012, interest was made payable at the rate of six months LIBOR and period of interest payment was made six monthly, simultaneously, the first payment for interest due was deferred to 30.09.2012. Thereafter, again agreement was amended on 22.02.2012 where loan amount limit was enhanced from United Sates Dollar(USD) 42 Million to USD 50 Million. Interest due date was further deferred to 30.09.2013 and tenure of loan was changed three years to four years from the date of disbursement. Again the loan agreement was modified on 18.07.2013 and 27.09.2013, revising the loan limit from USD 50 Million to UDS 54 Million and payment of interest due was further deferred to 30.09.2014. The agreement was again amended on 20.07.2014 on 31.07.2015. As far as year under consideration is concerned, the loan agreement was lastly amended on 16.12.2016 and the assessee deferred the first installment for payment of interes....
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....lars Amount in INR Amount in 3CEB (as reported in books) 6,14,49,281 Amount in 3CEB (with regards to ALP) 16,59,18,029 Difference offered to tax 10,44,68,748 7.4 The Ld. TPO however was not convinced with the explanation of the assessee. The TPO rejected the comparables selected by the assessee, which were located in South Africa geography i.e. country of ultimate utilisation of loans instead of Mauritius i.e. the country in which loan was given. The TPO observed that the assessee should have searched for comparable interest on loan data applicable for borrowers in Mauritius geography from appropriate databases like Bloomberg. The ld TPO concluded that the assessee did not determine the arm's length rate of interest receivable from the AE in accordance with the provisions of section 92C(1) and 92C(2) and also the information or data used by the assessee not being reliable, he rejected the comparison analysis made by the assessee. The ld TPO referred to the loans taken by the assessee in earlier years and proposed to compare 'Blooomberg database' rate keeping in mind currency of loan, geography of borrower, terms and conditions of tenor of loan, s....
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....., fourthly, rate of loan was applied on each loan/tranche based on the year in which said loan/tranche was first advanced to the AE, disregarding the fact that loan agreements had been amended to extend the tenure retrospectively from the date of issuance of respective tranche, lastly, while computing fixed rate of interest, various parameters required to be inputted in the Swap Manager tool need to be correct with the facts of the transaction. 7.6 But the ld TPO rejected the contention of the assessee observing as under: 1. The objections of the assessee are dealt with as hereunder: 1. The assessee's claim that the search was undertaken on an inconsistent basis is not correct. ● The assessee has stated in his submission that the "Security Status" filter has not been applied for FY 2010-11. It was explained to the AR during the course of the hearing that the screenshot taken at the time of undertaking the search did not capture the said filter - however, it was indeed applied to "Include All" - which has also been done for the other FY's. ● Furthermore, the Assessee has stated in his submission that for FY 2011-12, the cou....
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.... 19-Jul-10 FY 2010-11 17,50,000 8.03% 1,40,525 2 21-May-12 FY 2012-13 -10'000 8.23% 823 3 29-JUI-10 FY 2010-11 17,50,000 8.03% 1,40,525 4 1-Oct-10 FY 2010-11 10,00,000 8.03% 80,300 5 4-Nov-10 FY 2010-11 30,00,000 8.03% 2,40,900 6 3-Dec-10 FY 2010-11 2,00,00,000 8.03% 16,06,000 7 21-Mar-11 FY 2010-11 2,70,000 8.03% 21,681 8 27-Apr-11 FY 2011-12 25,00,000 9.40% 2,35,000 9 30-May- FY 2011-12 28,00,000 9.40% 2,63,200 10 27-Jun-11 FY 2011-12 10,000 9.40% 940 11 29-Aug-11 FY 2011-12 85,00,000 9.40% 7,99,000 12 11-Nov- FY 2011-12 4,000 9.40% 376 13 18-Oct-12 FY 2012-13 12,00,000 8.23% 98,760 14 30-Nov-12 FY 2012-13 11,55,000 8.23% 95,057 15 7-Dec-12 FY 2012-13 58,20,000 8.23% 4,78,986 16 23-Jul-13 FY 2013-14 36,00,000 5.43% 1,95,480 17 24-Jun-14 FY 2014-15 25,000 6.71% 1,678 18 9-Oct-15 FY 2015-16 3,50,000 6.71% 1,678 19 9-May-16 FY 2016-17 50,000 7.43% 3....
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....s contention in all years starting with AY 2012-13 till AY 2018-19. The Hon'ble ITAT's order is for AY 2012-13 which is the first year of the loan transaction when actual facts would not have been different from the terms of the loan or considerable time has not elapsed from the advance of the first tranche. Hence the decision of the Hon'ble ITAT for the said year is not applicable to the later years. In uncontrolled transactions whether the assessee would have agreed to receive the same interest rate under same facts and circumstances is the moot point. The answer is definitely no. Hence TPO's action of converting it to fixed interest rates terms is found to be in order. As regards the claim that the country of risk and country of incorporation has not been applied uniformly over the years, it is fact that the loan was availed by the AE in Mauritius even though the ultimately it was used in projects for South Africa. Here the ultimate end user is not required to be considered as the loan was availed as part of the agreement between the assessee and the Mauritius entity and hence the country of borrower is rightly taken as Mauritius. The other obje....
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....as per the stipulated schedule, undermining the assessee's claim that the terms of the agreement were adhered to. The ld DR referred numerous amendments over time to support that the loan transaction has undergone, indicating a continuous change in its structure and tenure, as detailed below: Amendment No. 7 (22 November 2012): The original loan limit of USD 42 million was increased to USD 50 million, and the first interest payment date was deferred to 30 September 2013. The tenure of the loan remained at 3 years, but the delay in the first payment indicated that the financial discipline required by the agreement was not followed. Amendment No. 8 (18 July 2013) & Amendment No. 9 (27 September 2013): The loan limit was further increased to USD 54 million. The first installment for interest payment was once again deferred to 30 September 2014, extending the timeline even though the official tenure remained at 3 years. Amendment No. 10 (20 July 2014): The tenure of the loan was extended from 3 years to 4 years, with the first interest payment now pushed to 30 September 2015. This formal extension highlights that the original loan terms were no longer ref....
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....nsaction, rather than the floating rate originally agreed upon but never implemented. 7.14 The Ld. DR submitted that the concept of "substance over form", should be acknowledged, which has been emphasized by the courts in several rulings, including Vodafone International Holdings BV v. Union of India(2012) 341 ITR1 (SC), where the Hon'ble Supreme Court held that tax liability must reflect the real and substantive aspects of a transaction rather than its legal form. The ld DR relied upon the said decision to further buttress the submission that, given the lack of actual interest payments, a fixed rate of interest should be applied in order to accurately reflect the substance of the transaction, which better reflect the economic reality of this transaction. 7.15 The Ld. DR also rejected the arguments of assessee before lower authorities that the "Security Status" filter was not uniformly applied during the transfer pricing analysis conducted by the Transfer Pricing Officer. She submitted that this contention is factually incorrect. She submitted that the TPO has clarified that the non-capturing of the "Security Status" in the search results was due to a technical oversight ....
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....secured loan having tenure of three years. The currency of interest payment as well as principal repayment was said to be in US dollars. The interest rate was stated to be floating interest rate to be computed as per LIBOR. The loan was advanced in five trenches during the year and accordingly, the interest was charged at three months average LIBOR rate ranging between 0.29% to 0.30% for actual number of days for which loan was used by the AE. The relevant facts for AY 2010-11, reproduced by the Tribunal (supra), are extracted as under: "2.9.2 The assessee explained that non-residents who wished to invest in South Africa by means of loan capital needs approval from South African Reserve Bank particularly with reference to intended repayment dates and interest rates. The Reserve Bank will not agree to interest rates in excess of prime rate being charged by non-resident shareholders on loans to the South African subsidiaries but loans from non-residents other than shareholder may be allowed to carry interest at prime +2%. The relevant extracts of the regulations were provided to Learned TPO. It was submitted that intra-group loan advanced to Mauritius Entity was ultimately u....
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.... RBI would not represent ALP of any international transactions, Ld. TPO opined that determination of ALP was to be examined from the point of view of Transfer Pricing Provisions under the Income Tax Act. 2.9.5 Proceeding further, finding defects in the assessee's methodology to benchmark the same by External CUP in view of the fact that comparable entities were based in USA whereas the loans was advanced to Mauritius entity and further, the credit rating of Mauritius AE would be much lower than BBB+ as adopted by the assessee for benchmarking, Ld. TPO concluded that the search process was not proper and was required to be rejected. The argument that the loans were advanced from internal accruals was also rejected since the assessee, in the opinion of Ld. TPO, failed to prove nexus between interest free funds available with the assessee vis-à- vis loans advanced to its AE. 2.9.6 The Ld. TPO also came to a conclusion that interest on outbound loan was not to be benchmarked with LIBOR since no company would like to advance loans outside India without security as the interest rate in India would be higher than those prevailing in the developed country. Ther....
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....rking, in assessee's own case for immediately succeeding year i.e. AY 2012-13, has been done by Ld. TPO himself in its subsequent order dated 29/01/2016 adopting LIBOR rates as the base rates and ruled out the application of Corporate Bond Rate, SBI PLR Rate or Cost of Borrowing rate etc. Reliance was placed, inter-alia, on the decision of Hon'ble Delhi High Court rendered in CIT v. Cotton Naturals (I) (P.) Ltd. [2015] 55 taxmann.com 523/231 Taxman 401 to support the submissions that LIBOR would be appropriate benchmarking rate on such outbound loan transactions. The list of other decisions which has also affirmed the said view, as relied upon by assessee during appellate proceedings, has also been tabulated on page nos. 18-19 of the appellate order. Concurring with assessee's submissions, Ld. CIT(A) allowed assessee's ground by observing as under: - I have considered the submissions of the assessee, the views of the AO in the assessment order and the material on record. It is apparent from the above that the end use of intra-group loan was to acquire the asset company in South Africa and it is clearly evident that the JSWEMML was not able to charg....
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....ch are applicable in case of entities having highest credit rating. The same is also fortified by the fact that the assessee, itself, has assigned a rating of Baal/BBB+ to its AE while benchmarking the transactions. The said rating represents 'lower medium investment grade rating. Therefore, the determination of ALP merely on the basis of LIBOR, in our considered opinion, would not be justified. During the course of proceedings before Ld. TPO, the assessee had arrived at mean spread of 243.83 basis points over LIBOR which is evident from page nos. 5-6 of Ld. TPO's order. The computation of the same has nowhere been disputed by the revenue. Applying LIBOR + spread-over, ALP interest has been worked out to be Rs. 1,64,13,241/-. We are of the considered opinion that this spread over as computed by the assessee was undisputed, quite fair and reasonable and the same was to be accepted. Accordingly, we confirm the ALP rate of LIBOR + 2.4383% as computed by the assessee in the alternative submissions made before Ld. TPO. The impugned order stand modified to that extent. The Ld. TPO/Ld. AO is directed to recompute the income of the assessee in terms of our direction. Accordingly, G....
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....ompared to assessment year 2011-12. The Tribunal(supra) has particularly noted the terms of the contract that borrower had agreed to pay the lender interest rates equal to 3 months LIBOR prevailing on the date of the interest payment of two 31/03/2012. 8.5 Before us, the Ld. DR however submitted that facts and circumstances in the year under consideration has under gone substantial change as compared to the assessment year 2011-12 and 2012-13. We find that in the beginning, the assessee and its associated enterprises agreed for a quarterly and six monthly interest payments with limited tenure of loan. Thereafter, assessee has amended agreement at least 10 times and extended the first installment of payment of the interest from six months to 31.03.2019. The Id DR submitted that the floating rate of the interest i.e. LIBOR is charged in case of loan of small tenure like the case of assessee in earlier years, where parties agreed for tenure up to three years at the time of entering the loan agreement for the first time. However in the current assessment year under consideration, the loan amount has consistently increased and the tenure of the loan has got substantially changed and ....
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.... 2011-12 and itself has included 300 basis points to the LIBOR along with certain additional spread over points to compensate high risk nature of the loan. 8.9 But, no instance of any loan transaction of long term nature between two independent parties where floating rate of interest has been applied was brought to our notice by the assessee. Thus, the question is whether the assessee has relied on any of the CUP transaction from database of long term nature of loan where floating rate with appropriate spread has been applied by parties in an independent transaction. The answer is in negative. The ld TPO has also not compared transactions of assessee with any transaction of long term loan between two independent parties relying on CUP method. The Id AO/TPO is bound to follow the methods prescribed under the law for determination of arms length price and can't adopt arbitrary method of converting floating rate of interest into fixed rate of interest. 8.10 In view of above, we feel it appropriate to restore the matter back to the file of the ld AO/TPO for benchmarking of the loan transaction of the assessee using appropriate method provided under the law treating the transa....
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....ay analysis of market trends and decisions with regard to acquisition, retention and sale of shares at the most appropriate time. It is therefore, not correct to say that investments are made without incurring no or nominal expenditure. It is difficult to accept that a company can make investment without incurring any expenses whatsoever including management or administrative expenses as investment decisions are generally taken in the meetings of the Board of Directors for which administrative expenses are incurred. The term "expenditure" occurring in section 14A would take in its sweep not only direct expenditure but also all forms of expenditure regardless of whether they are fixed, variable, direct, indirect, administrative, managerial or financial. Assessee failed to consider all such expenses while calculating the disallowances made under section 14A of the Act. 4.11 On perusal of the Financial of the assessee company, it is noted that Assessee has borrowed funds of Rs. 1333.08 crore and also has incurred interest expenses & other borrowing cost on the same amounting to Rs. 321.95 crore Ae the assessee has not provided any nexus of source between borrowed funds and di....
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....re Sr. No. Nature of Investment Name of the Company As on 31st March 2020 As on 31st March 2019 1 Unquoted Investment JSW Energy (Barmer) Ltd (Formerly known as Raj Westpower Ltd) 1726.05 1726.05 2 Unquoted Investment Jaigad Power Transco Ltd 101.75 101.75 3 Unquoted Investment JSW Energy (Raigarh) Ltd 115.16 115.16 4 Unquoted Investment JSW Power Trading Co. Ltd (formerly known as JSW Green Energy Ltd) 70.05 70.05 5 Unquoted Investment JSW Energy (Kutehr) Ltd 0 6 Unquoted Investment JSW Hydro Energy Ltd (Formerly known as Himachal Baspa Power Company Ltd) 2046.01 2046.01 7 Unquoted Investment JSW Solar Ltd 0.12 0.01 8 Unquoted Investment JSW Electric Vehicles Pvt Ltd 0.26 0.01 10 Unquoted Investment Toshiba JSW Power systems Pvt Ltd 100.23 100.23 11 Unquoted Investment Power Exchange India Ltd 1.25 1.25 12 Unquoted Investment MJSJ Coal Ltd 6.52 6.52 13 Unquoted Investment JSW Power Trading Co. Lt 2.87 2.24 14 Unquoted Investment JSW Realty & Infrastructure Pvt Ltd 2.5....
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....ld that even if no income was earned, expenses could still be disallowed. However, the Tribunal followed the Hon'ble Delhi High Court's ruling in Holcim India (P) Ltd (supra), as per the principle of judicial hierarchy, making it binding within its jurisdiction. The Hon'ble Supreme Court's decision in Rajendra Prasad Moody was distinguished, as it related to Section 57(iii) (deductions under "Income from Other Sources") and not Section 14A, which has different language and intent. The Special Bench noted that Several High Court rulings (Punjab & Haryana, Gujarat, and Allahabad) supported the position that disallowance under Section 14A cannot be made if no exempt income is earned and accordingly the Assessing Officer's stance that investments could have yielded exempt income was rejected because dividend income is not guaranteed and depends on company decisions. The Special Bench Tribunal reaffirmed that business expenditure incurred for investment purposes cannot be disallowed under Section 14A unless actual exempt income is generated. The Special Bench of Tribunal accordingly, ruled in favor of the assessee, stating that investments that did not yield exempt i....
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....avour of the assessee, that the appeal filed by the department before the Hon'ble Bombay High Court (ITA No.1468 of 2013 dt. 30/4/2015) was dismissed. In these circumstances, we are of the opinion that the order of the FAA has to be confirmed. Respectfully following the order of the Tribunal for AY 2006-07, we decide the fifth Ground against the AO." 12.1 A similar view has been taken in the assessment year 2010-11 in ITA No. 1336/Mum/2015. Relevant finding of the Tribunal is reproduced as under: "7. In so far as the second Ground is concerned, the same relates to computation of 'book profit' in terms of section 115JB of the Act. The Assessing Officer, while computing book profit under section 115JB, added the amount of disallowance computed under section 14A of the Act. The assessee contended before the Assessing Officer that there was no justification for taking into consideration the disallowance under section 14A of the Act, while computing book profit under section 115JB of the Act. The CIT(A) has disagreed with the stand of the Assessing Officer on two counts Firstly, according to the CIT(A), in assessment year 2006-07, the Tribunal in assessee's o....
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.... books of accounts and therefore, it was capital in nature though due to some technical reasons said feasibility report was not implemented. The Assessing Officer accordingly distinguished the decision of the Hon'ble Madras High Court in the case of Tamilnadu Magesite Ltd. v. ACIT (supra) relied upon by the assessee. Secondly, according to the Assessing Officer writing off of the expenditure being in the nature of capital expenditure was not allowable u/s 37 of the Act. The Ld. DRP rejected the contention of the assessee firstly on the ground that expenses incurred on feasibility reports could be considered u/s 35D introduced w.e.f. 01.04.2013 wherein 1/10th expenditure could be amortized subject to the fulfillment of the conditions prescribed but the assessee did not meet those conditions and attempted to get benefit u/s 37 of the Act, which is not allowable as the expenses was incurred wholly and exclusively for the purpose of business. Secondly, the Ld. DRP also rejected the alternative claim of the said expenses as short term capital loss on the ground that in view of project for which feasibility report was prepared, was abandoned, no capital asset came into existence and ....
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.... expenses as incurred wholly and exclusively for the purpose of the business and not being in the nature of capital or personal expenditure. Thus, if expenditure is in the nature of capital or personal nature, it will go out of ambit of section 37 of the Act. Therefore, in the case we have to examine whether the expenditure incurred on feasibility report is in the nature of the capital expenditure or not. The Ld. counsel for the assessee has filed a copy of the said feasibility report before us. On perusal of the same, we find that purpose behind obtaining report was to replace the raw material used for the power plants. In the existing plants, the assessee was using high calorific value (CV) coal and said feasibility report has been obtained for substituting raw material as low calorific value and necessary changes in the entire plant and machinery for power generation smoothly. In view of change of the raw material various components of the power plant were required to be changed. Thus the feasibility/project report was intended for long term enduring benefit to the assessee and therefore, the expenditure incurred on the same is in the nature of capital expenditure. 14.1 Now, ....
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....lied on various decisions which have been cited in the submission of assessee reproduced by the Assessing Officer. After considering the submission, the claim of the assessee was rejected mainly on the ground that according to the Assessing Officer deduction u/s 80IA is in respect of eligible business, the Ld. Assessing Officer referred to 80AB of the Act and according to which deduction has to be allowed with reference to income included in the gross total income. According to the Assessing Officer,the gross total income includes net income after setting off of losses. Therefore, assessee is eligible for deduction in respect of aggregate profit from all the units after setting off loss of Unit No. 1. The Assessing Officer relied on the decision of the Hon'ble High Court Punjab & Haryana High Court in the case of Bajaj Motors Pvt. Ltd. (supra) and decision of the Hon'ble Supreme Court in the case of Synco Industries Ltd. (supra). The Assessing Officer also relied on the other decisions 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....
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....f an eligible business to which the provisions of sub-section (1) apply shall, for the purposes of determining the quantum of deduction under that sub-section for the assessment year immediately succeeding the initial assessment year or any subsequent assessment year, be computed as if such eligible business were the only source of income of the assessee during the previous year relevant to the initial assessment year90 and to every subsequent assessment year up to and including the assessment year for which the determination is to be made. 16.1 The section 80IA(5) clearly specify that for the purpose of determining quantum of deduction, the computation has to be made as if the eligible business is the only source of income. In the case of the assessee, all the three units are engaged in the 'eligible business' of generating electricity, 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 from non eligible business can't be set-off against the aggregate profit of eligible business for comput....
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....eduction under Section 80-IA. The question that arises further with reference to allowing the deduction so computed to arrive at the 'total income' of the Assessee cannot be determined by resorting to interpretation of sub-section (5). 14. It will be useful to refer to the judgment of this Court relied upon by the Revenue as well as the Assessee. In Synco Industries (supra), this Court was concerned with Section 80-I of the Act. Section 80-1(6), which is in pari materia to Section 80-IA(5), is as follows: " 80-I(6) Notwithstanding anything contained in any other provision of this Act, the profits and gains of an industrial undertaking or a ship or the business of a hotel or the business of repairs to ocean-going vessels or other powered craft to which the provisions of sub-section (1) apply shall, for the purposes of determining the quantum of deduction 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 hotel or the business of repairs to ocean-going vessels or other powered craft were the only sourc....
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....Section 80- IA of the Act is limited to determination of quantum of deduction under sub-section (1) of Section 80-IA of the Act by treating 'eligible business' as the 'only source of income'. Sub-section (5) cannot be pressed into service for reading a limitation of the deduction under sub-section (1) only to 'business income'. An attempt was made by the learned Senior Counsel for the Revenue to rely on the phrase 'derived ... from' in Section 80-IA (1) of the Act in respect of his submission that the intention of the legislature was to give the narrowest possible construction to deduction admissible under this sub-section. It is not necessary for us to deal with this submission in view of the findings recorded above. For the aforementioned reasons, the Appeal is dismissed qua the issue of the extent of deduction under Section 80-IA of the Act. 16.2 The Hon'ble Supreme Court has rejected the plea of Revenue to take business income of the assessee i.e. income under the head profit and gain of the business or profession, instead directed to take profit of eligible business as a single source of income. 16.3 Accordingly, we do not fin....
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....e in dispute being identical to issue decided in ground No. 7 and therefore, this issue is also restored back to the file of the Assessing Officer for deciding afresh. Ground No. 8 of the appeal is accordingly allowed for statistical purposes ITA No. 3713/MUM/2024 20. The grounds raised by the assessee in its appeal are reproduced as under: 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 Ld. Assessing Officer in making an upward adjustment of Rs. 32.51,731/- on account of alleged transaction of purchases of steel from the Associate 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 not appreciating the fact that the profit of the appellant is exempt w/s.80IA and making any upward adjustment will not have any effect on the Tax 3. 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 making a ....
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....ssee has submitted a comparison chart between price of associated enterprises and ALP for purchase of the steel plant. The assessee applied other method for benchmarking using quotation from the independent 3rd parties. The assessee had claimed that it accepted the lowest quotation which was from its associated enterprises and therefore, steel was purchased from the associated enterprises instead from the independent parties. The Ld. TPO noted that the profit of the assessee was inflated resulting into higher deduction u/s 80IA of the Act. Before the Ld. TPO, the assessee submitted that being a prudent businessman goods are always purchased at the lower quotation and thus the allegation of the Ld. TPO/AO that assessee has earned more than ordinary profit was baseless by increasing the purchase price of the steel. The increase in expenses will reduce the gross total income and corresponding deduction u/s 80IA of the Act but the entire transaction is tax neutral and therefore, no adjustment to purchase price of the steel was required. The Ld. TPO however rejected the contention of the assessee. The Ld. DRP also upheld the same. The relevant observation of the Ld. DRP is reproduced as....