TaxTMI 
TaxTMI 
2026 (7) TMI 1298
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....s of appeal: ITA 4224/M/2025 (AY2016-17) "1. Whether on the facts and circumstances of the case and in law the Ld. CTT(A) was justified in deleting the transfer pricing adjustment of Rs.2,63,41,360/- on account of addition made by the transfer pricing officer towards interest on loans advanced by the assessee to its Associated Enterprises? 2. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) was justified in deleting the adjustment by relying on the order of Hon'ble ITAT in the case of JSW Energy Ltd vs DCIT, in ITA No. 2316/Mum/2017 without appreciating that the facts of the international transaction of JSW Energy Ltd were different than that of the assessee's international transaction of loans of current year? 3. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) was justified in deleting the adjustment by applying the judgment in the case of the assessee for A.Y 2008-09 to A.Y 2011-12 without considering the fact that the transfer pricing study is highly facts-based exercise based on contemporaneous data and it differs from case to case and that all the factors in Rule 10B have to be consi....
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....t year cannot be adopted as such to the instant assessee, which would be violative of the specific provisions in Rule 10B? 10. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in holding that the fee for the guarantee issued by the instant assessee for the loans availed by the AE should be fixed at 0.35% placing reliance upon the decision other cases, which is in violation of provisions of Rule 10B of IT Rules as credit ratings and the interest rate vary every year? 11. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in holding that the fee for the guarantee issued by the instant assessee for the loans availed by the AE should be fixed at 0.35% placing reliance upon the decision in other cases, without adopting any of the methods prescribed in Section 92C which is violation of law? 12. Whether on the facts and the circumstances of the case and in law, the Ld. CTT(A) erred in directing the Assessing Officer to consider the gain on prepayment of Sales Tax deferrals of Rs. 247,84,20,566/- as Capital Receipt ignoring the fact that the gain of prepayment of Sales tax was in the nature of incentive/concessi....
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....ndia. The assessee is also eligible for claiming deduction under section 80IA for sale of power (which is one pf the subject matter in AY 2017-18). The assessee filed its return of income for assessment year (A.Y.) 2016-17 on 30.11.2016 declaring loss. The case of assessee was selected for scrutiny. During assessment, the assessing officer (AO) noted that assessee has reported certain international transaction as well as specified domestic transaction (SDT) with its associated enterprises (AE) as reported in Form 3CEB. Consequent upon reporting such international transaction, a reference was made to Transfer Pricing Officer (TPO). The TPO entered into the reference and after allowing opportunity to the assessee, suggested adjustment on account of interest on loans to AE of Rs. 2.63 crore and adjustment on account of corporate guarantee fee of Rs. 50.66 crorein his order dated 01.11.2019. On receipt of report of TPO, the AO passed draft assessment order wherein various other disallowances on various corporate issues were proposed. Copy of draft assessment order was served upon the assessee. The assessee exercised its option to file appeal before ld. CIT(A) instead of filing objectio....
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....to AEs (JSW NRL). The learned Authorised Representative (ld. AR) of the assessee submits that this ground of appeal is covered by the decision of Tribunal in assesses own case for A.Y. 2013-14 to 2015-16 in ITA Nos. 5188/M/2024, 4223/M/2025 & 5189/M/2024. In all three earlier years, the AO / TPO made similar adjustment on account of interest given to AEs. However, on further appeal before ld. CIT(A), the additions / adjustments were deleted. The TPO and AO benchmarking methodology for determining Arm's Length Price (ALP) on short term loan extended to its AE during F.Y. 2012-13, resulting in an unwarranted addition of Rs. 2.63 crore. The TPO considered all loans disbursed in F.Y. 2012-13 indiscriminately, without filtering for tenure, nature, or the specifically short-term, floating rate character of the assesses AE loan. This flawed selection process led to an inaccurate average interest rate, failing to reflect comparable uncontrolled transactions and distorting the true ALP. The TPO grossly erred in summarily rejected assessee's own benchmarking analysis without giving cogent reasons, and disregarding binding judicial precedents. Courts and Tribunals have consistently held that ....
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....onnector (LPC) database. The benchmarking conducted by assessee was summarily rejected by TPO and he applied Bloomberg database rate which provides LIBOR interest rate of loan based on categorical location of both borrower and lender, tenure of loan, security given and interest charged and received, repayment of loan, loan agreement. The TPO considered the interest received by any Indian assessee's from its AE situated at Mauritius. The TPO determined corresponding rate of interest applicable for loan transaction at LIBOR + 575 bps for loan amounting to USD 10 million and thereafter, an appropriate amount of fixed rate of interest was apportioned using Swap Manager considering the loan given at 0% fixed rate of interest and same was ascertained at 9.402%. The TPO determined corresponding rate of interest applicable for loan transaction at Libor + 600 bps and thereafter appropriate amount of fixed rate of interest was apportioned using Swap Manager considering loan given at 0% fixed rate of interest and the same was ascertained at 8.23% and suggested adjustment of Rs. 2.63 crore. We find that the ld. CIT(A) allowed relief to the assessee by taking view that similar benchmarking of i....
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....nderlying financial exposure. Such fact is duly recorded by TPO in its order. The ld. AR of the assessee submits that earlier year order may be followed. 8. On the other hand, ld. CIT-DR for the Revenue submits that Hon'ble Jurisdictional High Court in Everest Kento Cylinder (377 ITR 57 Bom) has upheld corporate guarantee commission at 0.50%. The ld. CIT-DR for the Revenue submits that ld. CIT(A) is not justified in directing the corporate guarantee rate at 0.35% without considering the fact that benchmarking undertaking by assessee has arrived at ALP corporate guarantee commission which is more than 0.35%. The assessee has offered guarantee fees of Rs. 50.66 crore against JSW Steel (Netherlands) BV which is 0.63%. All factors as prescribed in Rule 10B have to be considered for each other case independently and that rate decided in different case on a different set of fact for different year cannot be adopted as such which would be violated to specific provision in Rule 10B. 9. In rejoinder submissions, the ld AR of the assessee submits that the rate of 0.5% cannot be viewed in isolation or as a uniform benchmark but must be understood as falling within a broader range determ....
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....bmits that definition of income has been changed from April, 2015 and all the subsidies are now treated as income. To support her submission, the ld. CIT-DR relied upon the decision of Mumbai Tribunal in Oricon Enterprises Ltd. vs DCIT in ITA No. 2810/M/2024 dated 16.06.2025 and the decision of Chennai Tribunal in Hyundai Motors India Ltd Vs ACIT in IT (TP)53/Chny/2022. 13. In the rejoinder submission from the ld. AR of the assessee submits that there is consistent order in assessee's own case for earlier years in treating such sales tax deferral as capital receipt. The ld. AR of the assessee submits that ratio of decision relied by ld. CIT-DR for the revenue is not applicable on the facts of his case. In Oricon Enterprises Ltd. vs DCIT (supra), the Tribunal addressed the taxability of benefit arising from pre-payment of deferral sales tax allowability at net present value. In the said decision, it was held that such pre-payment does not result in assessable benefit under section 28(iv) of the Act as it is a capital receipt rather than a Revenue receipt. In the said case, the benefit accrued at the first stage as well as at the time receipt of eligibility certificates and not in....
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....Ltd. (42 SOT 457) which was upheld by Jurisdictional High Court. The assessee also relied on various other decisions including the decision of Bombay High Court in Soft works Computers Private Limited (2013) 35 taxmann.com 610 (Bom) and the decision of Hon'ble Apex Court in CIT vs Balkrishna Industries Ltd. (2018) 252 taxmann.com 375 (SC). The reply of assessee was not accepted by assessing officer by taking view that assessee itself has shown the said amount in its profit and loss account as other 'operating revenue'. So, the decision of Sulzer India Ltd. (supra) is not helpful to the assessee as in Sulzer India Ltd., the amount was credited in capital reserve account and not in profit and loss account. Further, the decision of Sulzer India Ltd. is not accepted by department. The assessing officer thereby added Rs. 247.84 crore in the income of assessee and also added while computing book profit under section 115JB. The ld. CIT(A) allowed relief to the assessee on the basis of decision of his predecessor in A.Y. 2013-14 and 2015-16. 15. We find that similar issue was considered by co-ordinate bench of this Tribunal in A.Y. 2008-09 wherein the order of CIT(A) in treating the sal....
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....ter, balance of Rs. 22.29 crore was written off as irrecoverable in the books for the year under consideration. The assessee claimed deduction under section 36(1)(vii). The ld. AR of the assessee submits that once the debt is written off in the accounts, deduction is allowable as per decision of Hon'ble Supreme Court in TRF Ltd. vs CIT 323 ITR 397 (SC). In alternative, the ld. AR of the assessee submits that even if deduction is not allowed as bad debt claim must be allowed under section 37 as it is incidental to the business and deductible. To support such view, the ld. AR relied upon the decision of Supreme Court in Badridas vs Daga vs CIT 34 ITR 10. The ld. AR also relied upon the decision of Bombay High Court in Harshad J. Choksi vs CIT 25 taxmann.com 567 (Bom). 18. On the other hand, ld. CIT-DR for the Revenue supported the order of AO. The ld. CIT-DR relied upon the decision of Delhi High Court in CIT vs Triveni Engineering & Industries Limited in ITA 56 of 2009. The ld. CIT-DR submits that nature of deposit must be keep in mind. The security deposits were not given in the course of business and not allowable as deduction. 19. In the short rejoinder, the ld. AR of the a....
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....CIT (supra) held that after 01.04.1989 is it not necessary for assessee to establish that debt has in fact become irrecoverable. It would be sufficient if the bad debts are written off as irrecoverable in the accounts of assessee. On the basis of aforesaid view, the ld. CIT(A) deleted the addition. The ld. CIT(A) also allowed in alternative as business loss, on the ratio of decision of Jurisdictional High Court in Harshad J. Choksi vs CIT (25 taxmann.com 567 Bom) wherein it was held that if the amount claimed as bad debt is held to be not deductible for the want of compliance of condition prescribed under section 36(2), the same could be considered as allowable business loss. 21. On independent appreciation of facts, we find that there is no much dispute on the fact. The parties have their difference on the allowability or disallowance of write off. We find that the assessing officer has not disputed about creation of tenancy or the amount of security deposit. The AO was of the view that the properties were not utilised by the present management of assessee as those were vacated before merger of Ispat Industries Limited. It is settled legal position that once, Ispat Industries L....
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....show cause, the assessee explained that this amount is on account of waiver of principle amount of loan utilised for purchase of plant & machinery. The AO further issued show cause notice that why addition of this amount be made in accordance with additions in the preceding years. Though before the AO, the assessee claimed that similar issue was held in favour of assessee by ld. CIT(A) in AY 2004-05 and on appeal before Tribunal, the action of ld. CIT(A) was upheld. The AO despite recording such fact held that principalof loan amount was for purchase of plant & machinery which was capitalised and assessee claimed depreciation. Though receipt of loan of capital receipt, the amount changes its character when it became its own money because of contractual arrangements. The credit balance on losing its character of a liability is written back in the profit and loss account is required to be taxed as income of assessee under section 28(iv) of the Act. The AO also referred certain case law. We find that ld. CIT(A) allowed relief to the assessee on the basis of decision of Tribunal in A.Y. 2013-14 & 2015-16 in favour of assessee. We find that similar addition was made by AO in A.Y. 2012-1....
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....ey available with the assessee are in far excess of investment for earning exempt income. The assesses share application, reserve and surplus of Rs. 21,752,96 Crore, whereas the assessee made total investment of Rs. 4,473.63 Crore only. Thus, there is presumption that the assessee made investment from interest free funds available with the assessee. Hence no disallowance under Rule 8D(ii) is to be made. To support his submissions, the ld AR relied on the decision of Apex Court in CIT Vs Reliance Utilities & Power Limited (SLP No. 37 /2019 and Bombay High Court in CIT Vs HDFC Bank Limited (165 ITD 659 Bom) and CIT Vs Suzlon Energy Limited (354 ITR 630 Guj). The ld AR of the assessee further submits that while calculating disallowances the AO considered all the investment appearing in the books of assessee. The assessee made investment in partnership firm and not earned any exempt income thereof. The assessee earned exempt income of Rs. 18.29 crore from investment in JSW Energy Ltd. The assessment made investment in Rs. 220.61 crore in JSW Energy Ltd. As per decision of special bench of Delhi Tribunal in ACIT vs Vireet Investment Private Ltd. 82 taxmann.com 415 (Delhi SB) only those ....
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....me is to be considered as per decision of Special Bench of Delhi Tribunal. It was noted that assessee has made disallowance of section 14A r.w.r. 8D of Rs. 2.58 crore. The ld. CIT(A) also directed the AO to delete the disallowance @ .5% of average value of investment which did not yield exempt income and to consider only thoseinvestments which yielded exempt income and accordingly allowed part relief to the assessee. On our independent appreciation of fact, we find that decision of ld. CIT(A) is based on various judicial precedent. The ld. CIT(A) also followed the decision of Tribunal in assessee's own case for A.Y. 2013-14 & 2015-16 as recorded in para 19.11 of his order. Thus, we do not find any infirmity or inconsistency for our interference. Hence, we affirmed the order of ld. CIT(A). We also affirm the order of ld. CIT(A) that addition / disallowance under section 14A cannot be added while computing the book profit under section 115JB as has been held by Special Bench of Delhi Tribunal in ACIT vs Vireet Investment (P) Ltd. (supra) and Delhi High Court in Bhushan Steel Ltd. in ITA No. 593/2015. In the result, ground no. 17 & 18 of the appeal are also dismissed. 29. In the re....
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.... residential flat or commercial space as well as abandoning the same was conscious business decision. Due to deteriorating financial position and not servicing debts to banks and financial institutions, Jindal Vijayanagar Steel Ltd. went into corporate debt restructuring (CDR) wherein one of the conditions in CDR was that Jindal Steel Ltd. (assessee) shall undertake to sell the land / real estate proposed to be hived off within one year time frame and deposit the proceeds in the trust and retention account. Copy of CDR conditions were also furnished. The assessee contended that advances were given for commercial expediency and be treated as business loss as allowable deduction. The advances were made fur furtherance of business hence loss incurred constitute business loss. To support such view the assessee relied on decision in TRF Ltd. vs CIT (supra). The assessee has shown written off advances of 86.63 crore in its books of account and explained in Note - 24 "Other expenses". The reply of assessee was not accepted by AO by taking view that such claim of deduction in respect of irrecoverable property advances written off is not a revenue receipt. Rather it is a capital advance. Fu....
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....f advance. 34. The ld. AR of the assessee submits that assessee made agreement with Naman Enterprises and BPM Industries Ltd. to acquire share in commercial and residential flat for its business purpose and for residential need of its employee. The assessee made advances for business expediencies. The advances were made in furtherance of business activities for acquiring residential flats for effective business operations. The assessee is eligible for right of such advances and in alternative for business loss. 35. On the other hand, the ld. CIT-DR for the Revenue supported the order of lower authorities. The ld. CIT-DR submits that advance given by assessee was on account of capital. The assessee is engaged in the business of manufacturing of steel. Investment and building cannot be considered for business purpose. The Hon'ble Apex Court on similar set of facts in PCIT vs Khyati Realtors Private Ltd. in Civil Appeal No. 5804 of 2022held that assessee cannot claim a deduction for an unrealised advance as a "bad debt" under Section 36(1)(vii) unless they conclusively prove that their business includes money lending or that the advance was integrated into their ordinary trading....
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....ed Enterprises? 2. Whether on the facts and in the circumstances of the case, the Ld. CIT(A) was justified in deleting the adjustment by relying on the order of Hon'ble IIAT in the case of JSW Energy I.td vs DCIT, in ITA No. 2316/Mum/2017 without appreciating that the facts of the international transaction of JSW Energy Ltd were different than that of the assessee's international transaction of loans of current year? 3. Whether on the facts and in the circumstances of the case, the Ld. CTT(A) was justified in deleting the adjustment by applying the judgment in the case of the assessee for A.Y 2008-09 to A.Y 2011-12 without considering the fact that the transfer pricing study is highly facts-based exercise based on contemporaneous data and it differs from case to case and that all the factors in Rule 10B have to be considered for every cases and every year independently and that a rate decided in a different case for different set of facts and for different year cannot he adopted as such to the instant assessee, which would be violative of the specifie provisions in Rule 10B? 4. Whether on the facts and circumstances of the case and in law, the Ld.....
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.... at 0.35% placing reliance upon the decision other cases, which is in violation of provisions of Rule 10B of IT Rules as credit ratings and the interest rate vary every year? 11. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in holding that the fee for the guarantee issued by the instant assessee for the loans availed by the AF should be fixed at 0.35% placing reliance upon the decision in other cases, without adopting any of the methods prescribed in Section 92C which is violation of law? 12. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in deleting the adjustment on inter-unit transfer of power from captive power plant of Rs. 12,35.69.20,904/-? 13. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in relying on the decision of Hon'ble Supreme Court in the case of CТT . Jindal Steel and Power Limited (C. A. No. 13771 of 2015), when the case of the assessee pertains to AY 2015-16 and therefore the said judgment of the Hon'ble Supreme Court which pertains to years prior to the introduction of Section 80A(6) vide Finance Act, 2009 an....
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....uch eligible power generation unit. (d) In view of the above, the power generating unit alone should be considered as the tested party and the FAR of the power generating unit which has a direct impact in the quantum of SDT, should be given precedence over the FAR of the power consuming unit for choosing the matching FAR comparable. (e) Only when the FAR of the power generating unit is tested against a comparable transaction having a similar FAR, will we be able to reach the correct profitability of the power generation activity, only then the object of 801A will be achieved through the mechanism of TP provisions which was the entire object of enacting the provisions relating to SDT. (f) Looking at the commencing phrase of section 801A(8) "Where any goods or services held for the purposes of the eligible business are transferred to any other business carried on by the assessee....." and definition of 'market value in Explanation (i) of section 801A(8) "market value means (i) the price that such goods or services would ordinarily fetch in the open market", what is to be seen und tested with comparable is the price that the electricity generated by the ....
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....ng to Rs. 699.57,99,932/-without appreciating the facts? 22. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified to allow the assessee 's alternate claim that investment written off on reduction of capital of overseas subsidiary and liquidation of overseas subsidiary amount to Rs. 1778 cr as business loss/deduction without appreciating the facts? 23. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in deleting disallowance of Cargo handling expenses being non-business expenses u/s. 69C of the Act amounting to Rs. 44,40,00.000/-without appreciating the facts? 24. "Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the disallowance w/s. 144 of the Act, by overlooking the computational procedure prescribed in Rule 8D of the Income Tax Rules, 1962, which must be followed for making any disallowance w/s. 14A?" 25. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in deleting disallowance u/s. 14A r.w.r 8D of the Act while computing book profit u/s. 115.JB of the Act....
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....unt of transfer of power from captive power plant to assessee, adopted at which State Power Distribution Company purchased electricity from captive power plants.The ld. CIT(A) allowed relief to the assessee on the basis of decision in assessee's group case in JSW Energy Limited in A.Y. 2013-14 & 2015-16.On independent considering the order of lower authorities and the submission of both the parties, we find that the issue raised in ground no. 12 to 18 is squarely covered by the decision of Special Bench / Third Member in Aditya Birla Nuvo Ltd. wherein all earlier decision including decision of Hyderabad Tribunal in Sanghi Industries Ltd. vs CIT was considered by Special Bench. The Hon'ble Special Bench has held that price at which the assessee (industrial units) purchased power from the State Electricity Board can be applied as a valid CUP for determining the ALP of sale/supply of power by the CPP to its other unit. It was also held that that price at which the assessee (industrial units) purchased power from the State Electricity Board can be applied as a valid CUP for determining the ALP of sale/supply of power by the CPP to its other unit. In view of aforesaid factual and legal ....
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....,84,59,500 7,60,18,29,086 (3,91,28,53,905) 1,09,10,568 - 3,88,83,45,249 2011-12 3,88,83,45,249 10,42,57,86,264 (3,67,13,48,190) 1,17,12,15,258 - 11,81,39,98,581 2012-13 11,81,39,98,581 16,20,84,89,393 (1,42,03,55,474) 98,66,76,757 - 27,58,88,09,257 2013-14 27,58,88,09,257 8,88,27,54,220 (23,92,89,33,569) 4,11,79,81,224 - 16,66,06,11,132 2014-15 16,66,06,11,132 11,30,90,43,884 (7,44,48,888) 93,25,98,525 - 28,82,78,04,653 2015-16 28,82,78,04,653 6,70,80,89,093 (14,28,72,000) 1,83,56,55,180 - 37,22,86,76,926 2016-17 37,22,86,76,926 13,50,31,27,012 - (57,66,57,287) (34,64,76,24,603) 15,50,75,22,049 45. The AO further recorded that case of assessee was specifically selected on account of "large any other amount claimed as deduction under schedule business and profession". The AO issued show cause notice to assessee to provide break up of claim of amount of Rs. 55,91,61,56,387/-, as claimed in income tax return. The assessee was also asked to justify the allowability of such claim. The AO recorded that assessee filed reply dated 21.06.2021 that s....
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.... and accordingly, activity of lending money to its subsidiaries should be treated as business activity. To support their contention from reliance was made on decision of Hon'ble Karnataka High Court in assesses own case for AY 1995-96 in CIT Vs JSW Steel Limited in ITA No. 385/2010 dated 13.02.2010. 47. The AO further noted that on correlating the submission filed by the assessee with the computation of income, it has been gathered that, in the return of income the assessee had claimed the above written off of investment / loans and advances as expenses during the year under consideration. Further, in revised return of income in addition to the above, they had also claimed the long-term capital loss / short term capital loss on written-off of investment in subsidiaries under the head "Income from Capital Gain". The detailed break-up of write -off of loans and investments and loss claimed of long-term capital loss / short term capital loss on reduction in share capital was also recorded by AO. On seeking explanation, the assessee explained that there is long term capital loss on capital reduction of equity share of shares of JSW Netherland of Rs. 2023.44 crore. (indexation benefi....
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....itted that the write off of loan of Rs. 3,464.76 crores given to JSW Steel Holding USA has been claimed as a deduction under the head profits and gains from business and the loss of Rs. 1778.23 crores on liquidation of JSW Steel Holdings USA and on reduction of Equity and preference capital of JSW Steel Holdings BV, Netherlands has been claimed under the head "capital gains". The assessee also given detail justification regarding reduction in the equity that assessee is one of the India's leading steel producer companies, listed with National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). With a view to expanded overseas business operation, the assessee has made investment in various jurisdiction for the purpose of business interest of the assessee company. All such business operations are included in the minutes of board meeting. Copy of minutes of board meeting was provided. The assessee funded the overseas subsidiaries / operations through equity capital, preference capital and or debt instruments, either directly or through JSW BV, depending upon the regulatory requirements / restrictions applicable in the investment jurisdiction and the overseas investment regulations i....
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....rldwide including the assessee-company and raised concerns regarding the long-term economic viability and efficiency of the steel industry. On account of the aforesaid global slowdown in steel industry, the past financial performance of JSW BV and US Hold Co. reflected losses and eventually resulted into negative net worth. The details of the same have been provided to the AO. The global slowdown particularly in the USA market and negative margins on account of lower prices significantly impacted the operations of assessee's overseas entities in the USA and the desired capacity utilization could not be achieved. Further, global fall in iron ore prices and weakening of demand of steel and other industries also resulted in overall losses for the Chilean operations. Pursuant to the same, resulted into substantial losses in the USA and Chilean operations, since acquisition and hence, has significantly impacted the investments held by JSW BV and US Hold Co. Most of the facilities were either not operational or had significantly reduced their production and the purpose for which they were acquired could not fructify. The assessee made continuous efforts to revive the financial performanc....
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....ssee, vide its letter dated March 17, 2017. This justifies the grim operational and financial condition at overseas entity level which required JSW to write-off the loans in its books as duly acknowledged by RBI. The RBI while granting approval for write-off of investments in JSW's books also considered financial conditions of overseas entity. The copy of the approval obtained from the RBI was also furnished to AO. 50. With regard to write off on account of liquidation of US Holdco, the assessee submitted that JSW India is a listed entity with a net worth exceeding Rs. 100 crores, the assessee-company submitted that, in terms of Regulation 16 of Foreign Exchange Management (Transfer or Issue of Any Foreign Security) (Amendment) Regulations 2004, as amended by Foreign Exchange Management (Transfer or Issue of any Foreign Security) (Amendment) Regulations, 2013 ('Outbound Regulation'), the contemplated write-off of debt and equity investment pursuant to liquidation of US Hold Co falls under the automatic route and does not entail a specific approval from the RBI. The Company has also obtained confirmation in this regard from its authorised dealer; copy of the same was also....
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..... should be regarded as transfer of a capital asset under section 2(47) of the Act and accordingly the loss of Rs. 1.59 crores will be a capital loss under section 45/46(2) read with section 48 of the Act. On long term capital loss on account of reduction of shares held in JSW BV, the assessee submitted that the aforesaid restructuring also resulted into write-off of equity and / or preference capital on account of capital reduction at JSW BV level and thereby resulting into reduction of existing capital of the assessee in JSW BV. under the capital reduction scheme, 17,42,37,650 equity shares and 9,36,94,334 preference shares held by the assessee were cancelled for Nil consideration. The assessee has claimed the loss upon cancellation of shares as capital loss in its revised return of income for AY 2017-18. The details of the amount claimed as capital loss on account of write-off of investments of Rs. 2723 crore, which includes short term capital loss on account of cancellation of preference share of Rs. 699.57 crore and long-term capital loss on account of cancellation of equity share of Rs. 2023.43 crore, detailed working was also furnished to AO. The assessee submitted that capi....
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....year under consideration the assessee company has decided to merge all its business in USA under a single entity i.e. Periama Holding LLC (Delaware Corporation). Before the said merger, the assessee company claimed that they had appointed various independent valuers to calculate the value of investments made by the assessee through JSW B.V. The said independent valuers have derived the valuation of JSW B.V. by taking the fair value of all the investments made by the JSW B.V.. For valuing the fellow subsidiaries in which actual business was undertaken by the assessee group the valuer has considered 'Discounted Cash Flow Method' (i.e. DCF) and for the valuation of investment companies, the valuer has adopted 'fair value method'. The assessee group has taken the valuation of the downstream subsidiaries when mining reserves are intact and no mining has been undertaken and the value of mining reserves has in fact increased. It is not known how the assessee claimed impairment in mining assets when the said mines were never operated. Since, the mines were never operated by the assessee group and the rights of the said mines are still with the group only, then how could in the projections ....
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....uring the year under consideration JSW Steel Holding (USA) Inc. has transferred all the assets mainly, the investments held in JSW Steel (USA) Inc. at the impaired cost lying in the accounts. Due to transferring of assets at lower value, there was a notional loss which was outstanding in the books of JSW Steel Holding (USA) Inc. and to adjust the said notional loss, JSW Steel Holding (USA) Inc. has written off loan received from the assessee company. As the loan was adjusted to nullify the books results and give effect to the notional loss in the books of accounts, it cannot be considered that the said loan is not recoverable or the Group has incurred huge losses in its US subsidiaries. On the basis of such observation, the AO was of the view that restructuring activities carried out by assessee with a clear intention of evasion of tax. The AO also recorded that purpose mentioned in restructuring agreement is to "take advantage of certain favourable laws" under the jurisdiction of Delaware. However, the agreement nowhere describes what those laws are and how this restructuring is going to bring benefits to the group concerns under those laws. In other words, the very purpose of res....
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....ness activity of assessee company. The assessee also relied on decision of Karnataka High court in CIT Vs JSW Steel Limited (supra) for A.Y. 1995-96 on similar issue wherein it was concluded that advance given is in fact acceptable business activity of the assessee. The ld. CIT(A) held that as per section 36(1)(vii), bad debts written off irrecoverable in the accounts are deductible while computing business income. The provision does not require proof of recoverability; it is sufficient if debts are deductible if it has been taken into account in computation of income for relevant or any earlier assessment year. The ld. CIT(A) also referred the decision of Bombay High Court in CIT vs Pudumjee Pulp & Paper Mills Ltd. (2015) [2015] 63 taxmann.com 283 (Bombay), CIT vs T. Veerabhadra Rao (1985) 155 ITR 152 and Delhi High Court in CIT vs Bonanza Portfolio Ltd. (2010)320 ITR 178 (Delhi). The ld. CIT(A) also noted that assessee has consistently offered interest income on the loans to JSW Steel Holding (USA) Inc. as a part of business income. Loans and investments were written off as irrecoverable in the books of assessee and the provisions of section 36(1)(vii) and 36(2)(i) have been full....
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.... share capital and subsequent proportionate reduction in shareholding would amount to "sale, exchange or relinquishment" of an asset under section 2(47). The ld. CIT(A) also referred the decision of Gujarat High Court in Anarkali Sara Bhai vs CIT 138 ITR 437 wherein it was held that redemption preference shares result in a transfer of capital asset. On the basis of aforesaid legal view, the ld. CIT(A) further noted that it is case of assessee that long term capital loss and short-term capital loss arisen from capital reduction and liquidation transaction should be allowed. The ld. CIT(A) by giving an example that when an assessee holds a 100% stake in its subsidiary, company A. However, company A has been incurring losses. Subsequently, management of such company-A decides to reduce its capital to address the accumulated losses. As a result, of this merger, the valuation of such company has decreased. Although, the assessee still retain control over company A, it has effectively lost its entitlement to the higher valuation due to this decline. Consequently, if the assessee chooses to sale its share in company A in the future, the value it would receive from the sale would be lower,....
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....t loan given to US based entity became irrecoverable and investments were completely eroded, thus, it was decided to write off such amount. To support his submissions, the ld. AR relied upon the decision of Hon'ble Apex Court in TRF vs CIT (supra), CIT vs Veerabhadra Rao (supra), Delhi High Court in CIT Bonanza Portfolio Ltd. (supra) and Bombay High Court in CIT vs Colgate Palmolive (India) Ltd. (supra). In alternative, it was submitted that the said loss is independently allowable as business loss under section 28(i) being incidental to business. To support such view, the ld. AR relied upon the decision of Supreme Court in Badridas Daga vs CIT (supra). 59. To support the allowability of long term and short-term capital loss, the ld. AR relied upon the decision of ld. CIT(A). The ld. AR submits that such losses are arising from capital reduction and liquidation extinguishing proportionate shareholder rights. These qualify as "transfer" under Section 2(47)(ii)extinguishment of rights in capital assets triggering capital gains/loss computation under Section 45 read with Section 46(2) (deemed distribution on liquidation/reduction) and Section 48 (indexation for LTCL). To support su....
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....nty about the benefit it is going to bring to the group concern. The AO has clearly brought the facts on record that reorganisation agreement does not speak about any financial loss incurred by the overseas entities. The AO also held that all the assets/rights held by holding companies are intact and the intention of the assessee group by way of said restructuring was to avoid tax liabilities in India and the said transaction is a colourable transaction. The AO was also of the view that even capital loss either long term or short term cannot be allowed. Thus, the assessee is not eligible for any such claims. The assessee has not proved the facts that the loans have become irrecoverable. The claims of short term and long-term loss are based on report managed by assessee which is not based on scientific method or the method prescribed by Institute of Chartered Accountant of India. The assessee is not eligible either for write off of claims nor any short term or long-term capital loss. The ld. CIT-DR for the revenue carried us through the contents of different sub-paras of para-5 of assessment order and prayed for restoration of order of AO. 61. We have considered the rival submiss....
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.... JSW Netherland except holding that adjustments were made only to give fact to the notional loss in the books of account. 62. We find that Hon'ble Supreme Court in TRF Ltd. v. CIT(supra), held that post amendment from 01.04.1989, it is sufficient if the bad debt is written off in the books of account and it is not necessary to establish recoverability. We find that the assessee has offered the interest income from loan to subsidiaries in earlier years. Otherwise, this fact is not disputed by AO.Thus, the condition under Section 36(2) stands satisfied once the interest income on such loans had already been offered to tax. Similar view was taken inCIT Vs T. Veerabhadra Rao (155 ITR 152), wherein it has been held that once income from the debt has been offered to tax, the requirement of Section 36(2) is fulfilled. Similarly, the Hon'ble Delhi High Court in CIT Vs Bonanza Portfolio Ltd. (320 ITR 178) has held that even if a part of the debt has been taken into account in computing income, the condition of Section 36(2) stands satisfied. Further, Hon'ble Bombay High Court in CIT Vs Pudumjee Pulp & Paper Mills Ltd. [235 Taxman 451] also took the similar view. Further on the same issue....
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.... Rs. 44.40 crore. Brief facts leading to disallowance of such expenses that during assessment, the AO noted that he has an information received in case of Archisha Steels Private Ltd. and other related concern from DDIT(Inv.) that a survey action was carried out on such related concern. During survey proceeding, it was found that Geetaporam Port Services Ltd. (GPSL) has entered into agreement with JSW Ispat Steel Ltd., which merged with assessee for rendering cargo handling services at JSW Jetty till 31.03.2019 and has received fund in advance of Rs. 240.00 crore during F.Y. 2012-13. Such funds were utilised for investment in Archisha Steels Private Ltd. through North-East Natural Resources Private Ltd. and various entities. During the course of survey statement of Milind Mande, who is one of the directors in GPSL was recorded under section 131. In response to various questions, Milind Mande stated that iron ore, pellets, lime stone, coal and scrap was imported by JSW Ispat Ltd. from foreign countries through large ships which were halted more than 1000 kms from port. The imported material was carried through barges to the port and then transported to JSW Ispat Ltd. It was also sta....
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....toms and Securities Staff as per Customs Area Regulation 2009. Each and every person required permission from Customs Officers. In 2013, Customs Department issued show cause notice for procedural violation. Penalty was imposed on assessee which was set aside by CESTAT in order dated 14.03.2014. Another notice for non-compliance was issued against three companies namely GSPL, assessee and JSW Dharmantar Port Private Ltd. The Additional Commissioner of Customs vide his order dated 23.05.2017 regularise the permission of outsourcing. As per agreement with GPSL, the assessee paid advance of Rs. 278 crore on which applicable TDS was made and deposited with the Government. Service tax payable on such payment on advance as per rules was also discharged. All the invoices raised by GPSL post 01.10.2012 have been adjusted against these advances and there was no requirement of TDS on the same amount again. On the basis of such submission, the assessee stated that allegation between GPSL and then then Ispat Industries Ltd. are bogus or that there is no receipt of any service under the contract is incorrect and not tuneable as per the evidence on record. The assessee also stated that details so....
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....2012 as payments were adjusted against the advance already made. GPSL has not raised an invoice post July, 2017 and as such no further payments or expenditure was booked by assessee. On the basis of such observation, the ld. CIT(A) concluded that service contract between GPSL and Ispat Industries Ltd. was legitimate and in accordance with applicable loss and regulation. The assessee made full compliance of tax obligation, regulatory supervision supported with documentation. Reliance on the statement of Milind Mande without allowing opportunity of cross examination constitute a series breach of law, violating of principle of natural justice and rendering reliance on such statement as invalid. On the basis of such categorical finding, the ld. CIT(A) deleted the disallowance of Rs. 44.00 crore. 67. Before us, the ld. AR of the assessee by carrying us through show cause notice issued by Principal Commissioner of Customs submits that such show cause notice was issued regarding certain violation of handling of cargo in Customs area regulation, 2009 which later on regularise. The ld. AR further submits that AO has erred in relying upon the statements of one Mr. Milind Mande, allegedly ....
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.....10.2012 were adjusted against this advance, hence no further TDS was required. Payments to JSWIL and its subsidiary were also subject to regular TDS deduction. The contract expired on 31.03.2019, and notably, GPSL has not raised any invoice since 01.07.2017, nor has JSW Steel Ltd booked any expenditure thereafter. On the basis of the above facts, agreements, evidences, and statutory records the allegation that the cargo handling contract between GPSL and Ispat Industries Ltd was bogus, or that services were not rendered, is wholly untenable. The additions made by the Ld. AO are based on unverified third-party statements without affording cross-examination, contrary to law and principles of natural justice. Hence, he fully supports the order of ld CIT(A). 68. On the other, hand the ld CIT-DR for the revenue supported the order of AO. The ld CIT-DR for the revenue submits that the AO has specific information that a survey action was carried out on in case of Archisha Steels Private Ltd. and other related concern from DDIT(Inv.) During such survey action it was found that GPSL has entered into agreement with JSW Ispat Steel Ltd., which later on merged with assessee for rendering c....
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....mation and doubting the transaction without bringing adverse material on record. The ld. CIT(A) allowed relief to the assessee on the basis of material evidence available on record proper documentation compliance of tax obligation and statutory supervision of Customs Authority. In our view, statement of a person cannot be termed as evidence against third party unless it is tested by cross examination. In other words, the statement per se cannot be treated as evidence unless it is tested by cross examination and corroborative with material evidence. No comments were made on the agreement between the assessee and GPSL. No material evidence is brought on record to prove the expenses of cargo handling as bogus except reliance on third party statement. In view of aforesaid factual discussion, we affirm the order of ld. CIT(A) with our additional observation. In the result, ground no. 23 of appeal is dismissed. 70. Ground no. 24 relates to deleting the disallowance under section 14A and Ground no. 25 relates to adjustment of disallowance under section 14A to book profit under section 115JB. 71. Brief facts leading to disallowance under section 14A are that during assessment the AO ....