TaxTMI 
TaxTMI 
2026 (8) TMI 675
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....- u/s. 14A of the Act 2. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in not directing the AO to delete disallowance of Rs. 6,59,79,904/- towards interest cost u/s. 14A of the Act as the Appellant always had sufficient non-interest bearing own funds. 3. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in upholding the action of the AO in reducing deduction u/s. 80IA of the Act by Rs 4,52,09,741/-by increasing the input cost by including the component of excise duty/service tax claimed as CENVAT credit by the Appellant. 4. On the facts and in the circumstances of the cases and in law, the learned CIT(A) erred in upholding the action of the AO in treating the expenses of Rs. 1,02,97,345/-incurred towards corporate advertisement as capital expenditure. 5. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in upholding the action of the AO in disallowing lease equalization charges of Rs. 2,96,54,084/-. 6. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in upholding the action of the AO in ....
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....in the circumstances of the case and in law, the Appellant prays that the Id. AO be directed to exclude incentive under the Focus Market Scheme, Focus Product Scheme and Market Linked Focus Product Scheme, being capital receipt, from Profit as shown in the statement of profit and loss, while computing Book profit u/s. 115JB of the ITA ADDITIONAL GROUND NO. 3: 3.1 On the facts and the circumstances of the case and in law, the Appellant prays that the Id. AO be directed to treat the fertilizer subsidy under the 'Policy for Stage-III of New Pricing Scheme for urea manufacturing units' as capital receipt not chargeable to tax. 3.2 On the facts and in the circumstances of the case and in law, the Appellant prays that the Id. AO be directed to exclude fertilizer subsidy, being a capital receipt, from Profit as shown in the statement of profit and loss, while computing Book profit u/s. 115JB of the ITA. ADDITIONAL GROUND NO. 4: 4.1 On the facts and the circumstances of the case and in law, the Appellant prays that the Id. AO be directed to treat the freight subsidy under the 'Policy for uniform freight subsidy on all fertilizers und....
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....and circumstances of the case and in law the Ld. CIT(A) erred in deleting the disallowance of Rs. 14,10,093/-claimed depreciation on goodwill. 9.On the facts and circumstances of the case and in law the Ld. CIT(A) erred in deleting the disallowance of Rs. 12,38,77,761/ on account of the interest subsidy on TUF claimed as Capital Receipts by the Assessee which was held as Revenue Receipts by the Assessing Officer. 10. On the facts and circumstances of the case and in the law, the Ld CIT(A) erred in restricting ALP of guarantee fee, in respect of corporate guarantee given by assessee to its AEs to enable them to borrow funds from foreign banks, to 0.5% as against 2% as held by TPO/AO" 11. On the facts and circumstances of the case and in the law, the Ld CIT(A) erred in restricting ALP of guarantee fee, in respect of performance guarantee given by assessee on behalf of its AE to M/s Capital One Service Inc., to 0.5% as against 1.74% as held by TPO/AO". 12. On the facts and circumstances of the case and in law the Ld. CIT(A) erred in undoing the allocation of Rs. 35,85,874/- u/s. 80IA on account of allocation of Head Office expenses to the Captive Po....
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....e was made to the Transfer Pricing Officer (TPO) to determine the arm's length price (ALP) of the international transactions the assessee was having with its associated enterprises (AE). The TPO passed an order u/s. 92CA of the Act dated 31.10.2017 computing a TP adjustment towards financial guarantee of Rs. 11,81,09,773/- and TP adjustment towards specified domestic transaction of Rs. 45,08,74,387/-. The AO, thereafter, passed assessment order u/s. 143(3) r.w.s. 144C of the Act by incorporating the TP adjustments. The AO, besides the TP adjustments, also made various additions/disallowances to arrive at the assessed income of the assessee under normal provisions at Rs. 663,05,92,034/-. He also recomputed the book profit u/s. 115JB of the Act at Rs. 754,28,99,017/-. 6. Aggrieved by the order of AO, the assessee filed the appeal before the CIT(A). The CIT(A) partly allowed the appeal filed by the assessee. The assessee and the revenue are in appeal before the Tribunal against the order of the CIT(A). 7. We shall first take up the appeal of the assessee in ITA No. 1112/Mum/2019. 8. Grounds No. 1 and 2 pertains to disallowance u/s. 14A r.w. Rule 8D(2)(ii) amounting to Rs. 6,5....
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....ee towards indirect expenses. Therefore, the ld. AR argued that the AO should not have made any disallowance u/s. 14A r.w.r. 8D(2)(iii) without recording satisfaction. He, therefore, submitted that the disallowance towards indirect expenses should be restricted to the suo-moto disallowance already made by the assessee, as held by the Tribunal in assessee's own case for AY 2012-13 in ITA No. 5848/Mum/2017 and ITA No. 5935/Mum/2017. In support of this argument, reliance was also placed on decisions in case of CIT-LTU v. Asian Paints Ltd. [ITA No.1564 of 2016 dated February 06, 2019 (Bombay HC)] and HDFC Bank Ltd V. DCIT (ITA No. 1783, 1784 and 1785/M/2023, dated 24.01.2024) (Mum. Trib.). 8.4 The ld. CIT-DR, on the other hand, submitted that in para 3.1 of the assessment order, the AO noted that the suo-moto disallowance by the assessee in respect of indirect expenses was not as per Rule 8D and the same was stated to be the record of non-satisfaction. He further submitted that in para 3.5 of the assessment order, in light of the arguments made on behalf of the assessee, the AO has brought out the non-satisfaction or the reasons for not accepting assessee's submissions in respect of....
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....ome, I am not satisfied with regard to correctness of the claim of expenditure made by the assessee and provisions of Rule 8D of Income Tax Rules are being invoked. Therefore, vide questionnaire dated 04.12.2015, the assessee was asked to furnish details of dividend income earned and expenses incurred as per provisions of section 14A and Rule 8D on earning this income. 3.3. ......... 3.4 The above submissions of the assessee is considered but the contention of the assessee is not acceptable for the following reasons: (i) to (iii). .......... iv) It is known fact that investment is a most scientific and research-oriented activity, it requires expertise and deep knowledge of not only company where investments are made, but also various other factors, like future prospect of a particular sector and industry, political scenario-domestic as well as international, Government policies, the competition from similar other products and services, and competition from other companies etc., and various other factors. Therefore, for keeping a track of all these aspects and activities, not only highly professionally qualified, trained and experienced staff are ....
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....o conclusion that some part of the expenditure is attributable to exempt income." 9.1 The ld. AR also submitted that para 3.5 of the order of the AO for the current year is verbatim the same as para 3.4 of his order for AY 2012-13 as reproduced in the order of the Tribunal in ITA No. 5848 & 5935/Mum/2017 reproduced in the earlier paragraph. 9.2 In respect of ld. DR's submission that the suo-moto disallowance made by the assessee is on estimation with "no basis for estimation or calculations involved having been brought out", it was submitted that such a statement is fallacious as the assessee has made the suo-moto disallowance on the basis of Independent Accountant's report which was duly furnished before both the lower authorities. This fact has been duly recorded as part of assessee's submissions in para 3.2(3) of the order of the AO. The AO himself has reduced the suo-moto disallowance made by the assessee while computing his disallowance in the assessment order. 9.3 Insofar as revenue's ground No. 1 is concerned, the following submissions were made in the rejoinder filed by the ld. AR: (i) The ld. DR's argument that disallowance u/s. 14A can exceed exempt inco....
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....oto disallowance and the observations justifying the disallowance towards indirect expenses are general in nature. We also notice that the AO has not called for any details from the assessee or analysed the workings of the suomoto disallowance. In this regard we notice that the Hon'ble Supreme Court in the case of Maxopp Investment Ltd. v. CIT [2018] 91 taxmann.com 154 (SC) has held as follows:- "41. Having regard to the language of Section 14A(2) of the Act, read with Rule 8D of the Rules, we also make it clear that before applying the theory of apportionment, the AO needs to record satisfaction that having regard to the kind of the assessee, suo moto disallowance u/s. 14A was not correct. It will be in those cases where the assessee in his return has himself apportioned but the AO was not accepting the said apportionment. in that eventuality, it will have to record its satisfaction to this effect. Further, while recording such a satisfaction, nature of loan taken by the assessee for purchasing the shares/making the investment in shares is to be examined by the AO." 10. In view of the above Hon'ble Apex Court judgment, it is clear that no disallowance can be ....
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....r, the ld. AR submitted that the approach of the ld. DR to have a limited view of incremental investments vs. incremental own funds is fallacious for the reasons that: (i) Hon'ble Supreme Court, jurisdictional Bombay High Court and various other Courts have held that when own funds are more than the investments, the presumption has to be that the investments are made from own funds. (ii) The position of own funds on the 1st April of the previous year and on the 31st March of the previous year compared with the position of investments on 1st April and 31st March respectively shows that the own funds are far in excess of the investments on both these dates. Therefore, even during the year when new investments are made, the position would be the same i.e. on any given date during the whole year, the aggregate of own funds would be more than the aggregate of investments. (iii) As regards reliance placed by the ld. DR on the decision of HDFC Bank Limited vs. DCIT in ITA No. 1795 of 2014, attention was invited to the subsequent decision of HDFC Bank Ltd for AY 2012-13 in ITA No. 5672/MUM/2017 & ITA No. 5660/MUM/2017, wherein the Tribunal acknowledging the earli....
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....nt MU. Therefore, the debit in respect of the excise duty/service tax element and the credit in respect of excise duty on manufactured goods are both recorded in the books of MU. The AO however allocated Cenvat credit while computing profits eligible for deduction u/s. 80-IA for the CPP on the contention that all direct expenses incurred for CPP should be deducted in computing deduction u/s. 80-IA. On further appeal, the CIT(A) confirmed the disallowance made by the AO following the decision of CIT(A) in AY 2011-12 to AY 2013-14. Aggrieved by the order of CIT(A), the assessee filed appeal before the Tribunal. 13.1 The ld. AR submitted before us that the issue is covered by assessee's own case for the earlier years: (i) AY 2013-14: [ITA No. 563/Mum/2018 and ITA No. 1885/Mum/2018]; (ii) AY 2012-13: [ITA No. 5848/Mum/2017 and ITA No. 5935/Mum/2017]; (iii) AY 2011-12: [ITA No. 1065/Mum/2017 and ITA No. 1248/Mum/2017] and (iv) AY 2008-09, AY 2009-10 and AY 2010-11: [ITA No. 7640/Mum/2019, ITA No. 7641/Mum/2019 and ITA No. 7642/Mum/2019]. 14. The ld. DR, on the other hand, placed reliance on the decision of Coordinate bench in the case of Hercules Pigment Industry [2014] 146 ITD 31....
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....Courts and Supreme Court and granted relief to the assessee. .............. ................... 3.11. We further find that the similar issue had arose before this Tribunal in the case of Ambuja Cements Ltd vs. Addl. CIT in ITA No.2384 & 3475/Mum/2019 and 1241/Mum/2018 for A.Y. 2010-11, 2011-12 and 2012-13 and ITA Nos. 2958 and 3843/Mum/2019 and 1889/Mum/2018 for A.Yrs. 2010-11, 2011-12 and 2012-13 vide consolidated order dated 07/11/2022 wherein this Tribunal had held as under:- 99. In ground No. 6, the assessee has raised the following grievances: On the facts and in the circumstances of the case and in law, the Ld. CIT(A) was not justified and grossly erred in confirming the action of the AO in treating CENVAT credit availed on inputs and capital goods used in the undertakings eligible for deduction u/s. 80IA as cost of the eligible undertakings. 100. So far as this grievance of the assessee is concerned, only a few material facts need to be taken note of. During the course of the assessment proceedings, the Assessing Officer noted that while computing the deduction u/s. 80IA in respect of captive power plants, ports and rail systems, the asses....
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....equent AY, be computed as if such eligible business were the only source of income of the assessee during the previous year relevant to the initial AY and to every subsequent AY up to and including the AY for which the determination is to be made". All that this provision does is that it provides for the profits of the eligible unit being treated on a standalone basis, but then in case the Assessing Officer makes an adjustment for the payment which has earned the CENVAT credit, he must also make an adjustment for the corresponding CENVAT credit availed by any other unit of the assessee - other than the eligible unit. If the captive power unit makes a payment of X amount, and in turn, it generates a CENVAT credit of X amount, which is availed by another unit, say Ropar Cement Manufacturing Unit, the hypothetical independence embedded in the profit computation on a standalone basis requires that the Ropar Cement Manufacturing Unit must reimburse the captive power unit for such a CENVAT credit. It cannot be open to the assessee to provide for the expenses which have earned the CENVAT credits, but not to account for the CENVAT credits and the benefits accruing form the same. In any eve....
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....trategy designed to not only interest consumers in products and services offered by the company but also to cultivate a positive reputation among consumers and others within the business world. The assessee submitted before the AO that the corporate advertising expenses are incurred to generate and enhance the confidence among vendors and consumers and directly aimed at generating sales. Accordingly, the assessee submitted that the corporate advertisement expenses cannot be treated as capital expenditure. The AO did not accept the submissions of the assessee and proceeded to hold that the assessee is deriving enduring benefits from corporate advertisement and therefore, treated the sum of Rs. 1,02,97,345/- as capital expenditure. The AO however allowed depreciation to the tune of Rs. 1,43,96,589/- on expenditure including earlier year WDV. On appeal, the CIT(A) confirmed the disallowance made by the AO following the decision of CIT(A) in AY 2011-12 to AY 2013-14. Aggrieved, the assessee is in appeal before the Tribunal. 18.1 Before us, the ld. AR submitted that the issue is covered by assessee's own case in earlier years: (i) AY 2013-14: [ITA No. 563/Mum/2018 and ITA No. 1885/Mu....
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....on charges of Rs. 2,96,54,084/-. Brief facts of the issue are that the assessee has debited in the profit and loss account, a sum of Rs. 2,96,54,084/- towards lease equalisation charges as per Accounting Standard 19. The same was disallowed in the computation of income out of abundant caution and has been claimed as an allowable expense u/s. 37 through the notes to the return of income. The AO did not accept the claim of the assessee stating that the deduction has neither been claimed in the original return of income nor in the revised return of income. In this regard, the AO placed reliance on the decision of the Hon'ble Supreme Court in the case of M/s Goetze India Ltd. v. CIT (284 ITR 323) (SC). The AO also considered the issue on merits and held that the lease equalisation charge is a notional charge on the profit and loss account and no actual liability has been incurred. Thus, even on merits, the AO held that the amount cannot be allowed as a deduction. On appeal, following decision of CIT(A) in AY 2011-12 to AY 2013- 14, the disallowance made by the AO has been upheld by CIT(A). Aggrieved the assessee is in appeal before the Tribunal. 22.1 Before us, the ld. AR submit....
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.... and since the department has consistently taxed any corresponding credits in subsequent years on account of lease equalisation, it cannot be allowed to blow hot and cold. 24. With regard to the ld. DR's submissions on section 30 of the Act, it was submitted by the ld. AR in the rejoinder that section 30 should be read along with section 43(2) of the Act where the term "paid" is defined to mean the amount actually paid or incurred according to the assessee's regular method of accounting. Since the assessee strictly follows the accrual method governed by the mandatory AS 19, lease equalization charges qualify as an "amount incurred" and consequently, these charges must be allowed as a deduction. It was also submitted that the argument based on section 30 of the Act has been fully considered by the Tribunal in assessee's own case for AY 2011-12 at pages No. 18, para 21. 25. We have heard both parties and perused the materials available on record. We have also deliberated upon the decisions relied upon by both sides. The coordinate bench in assessee's own case for AY 2011-12 (supra) has considered the same issue and held as under: "23. We have heard the parties ....
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....penses, that the expenses were claimed in accordance with accounting standard, that AO was not justified in treating the expenses as contingent/unconfirmed, that the claim made by the assessee was based on scientific method, that the assessee was following the same method in earlier years. Finally, he held that the lease payment under the operating lease should be recognised as an item of the P&L A/c on a straight line basis over the lease period. He deleted the addition made by the AO. 8.Before us, the DR supported the order of the AO.AR relied upon the order of the FAA and stated that the assessee followed the mandate of AS-19, that the provision was made on a scientific basis, that rent payable was allowable as per the section 30 of the Act. 9.We find that the AO had made the disallowance as he was of the opinion that it was a prepaid expense and that it could not be claimed during the year under appeal, that the assessee had claimed the expenditure as per the provisions of AS-19, that the agreement entered into by the assessee was in the nature of operating lease as defined in AS-19, as per the accounting standard in such cases the payments have to be consider....
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....machinery lying as CWIP as on 01.04.2013 but installed during the financial year 2013-14. 28. On the other hand, the ld. DR placed reliance on the decision of Chennai Tribunal in case of Hyundai Motor India Limited vs. DCIT in ITA No. 70 of 2018, wherein it has been held that section 32AC of the Act clearly mentions that both the acquisition and installation should have been after the specified date. Following the Chennai Tribunal decision (supra), ld. DR submitted that the amount that was outstanding in the CWIP at the beginning of the year was not acquired during the year and is thus out of the purview of section 32AC of the Act. 28.1 In respect of the decision of UltraTech relied upon by the ld. AR, the ld. DR in his written submissions stated that in this decision, the Tribunal has held that the word "and" can be replaced with word "or" when such a replacement leads to "intended" results or in other words, such a replacement was held to be necessary so that the end result is as intended by Hon'ble Legislature. He further relied on Gopal Krishna & Ors vs Daulat Ram & Ors in 13192 of 2024 to submit that for courts to be able to read "and" as "or" there must be a discern....
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....urage investment". Similarly, the intention of introduction of section 32AC was also to give an impetus to the manufacturing sector making substantial investment including in the stalled projects. Therefore, in view of the discernible legislative intent of section 32AC, the Mumbai Tribunal in the case of Ultratech has rightly held that in section 32AC, "the words "acquired and installed" have to be read as "acquired or installed" to give effect to the intention of the legislature.". Further, the intention behind introduction of section 32AC and provide investment allowance was to attract new investment as well as to quicken the implementation of projects. One should not lose sight of the fact that this incentive is meant only for very large investment in Plant & Machinery which exceeds Rs. 100 Cr. as observed by the Tribunal in Ultratech's case (supra). 29.4 It was also submitted that in case of Grasim Industries Limited in ITA No. ITA No. 4754 & 5978/Mum/2004 (AY 2003-04), the Mumbai Tribunal has allowed the assessee's claim u/s. 32(1)(iia) following the decision of Hon'ble Gujarat High Court in PCIT v. IDMC Ltd [2017] 393 ITR 441 (Guj.), wherein it was held that the twin condi....
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....arlance and commercial usage. The term "acquisition" cannot be given a restrictive or literal interpretation to denote mere purchase, legal ownership, or bare possession of standalone, piecemeal components. To interpret the scope of 'acquisition' u/s. 32AC as referring to mere purchase of isolated parts/components - which are otherwise reflected and carried under the head 'CWIP' - would amount to restricting the scope of the term 'acquisition'. Acquisition of mere parts/ components of a plant cannot be regarded as 'acquisition of a plant'. We also note that for assessee's manufacturing processes, huge plant and machineries are required which are generally in the nature of complex machineries. Various purchased components are to be assembled and commissioned together which takes substantial amount of time given the complexity, size and nature of the machinery/ project/ plant required for the business. In our view, the process of 'acquisition' of a plant or machinery stands completed only when all the components of the machinery are aggregated, installed, and successfully commissioned so as to function as an integrated whole. Until such commissioning takes place, the asset does not a....
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.... is properly understood as curative of an unintended hardship inherent in the original provision, rather than as introducing a wholly new benefit, and is accordingly to be given retrospective effect. Read in that light, the statutory scheme itself contemplates that acquisition and installation of a new asset may fall in different financial years without defeating the claim, which is inconsistent with the strict, twin-condition reading adopted in Hyundai Motor India Ltd. (supra). Infact, this curative first proviso to section 32AC(1A) inserted by the Finance Act, 2016 was never referred to in the decision of Hyundai Motor India Ltd. (supra) which also renders the said decision per incuriam. 31. Finally, section 32AC was introduced by the Finance Act, 2013, specifically to attract large-scale capital investments (exceeding Rs. 100 crore) in new plant and machinery by manufacturing undertakings. Given that major industrial projects naturally span across financial years with costs initially accounted for as CWIP, adopting the rigid view canvassed by the Revenue would, in our considered opinion, defeat the very purpose and intent for which the provision was enacted. 31.1 In view o....
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....to various banks and he made a TP adjustment towards corporate guarantee of Rs. 11,81,09,773/- by applying ALP rate of 2%. 33.3 On appeal, CIT(A) fixed the ALP for corporate guarantee commission at 0.5% by placing reliance on the decision of CIT v. Everest Kanto Cylinder Ltd. reported in 58 taxmann.com 254 (Bom.) and on the decision of Mumbai Tribunal in the case of Aditya Birla Minacs Worldwide Ltd v. DCIT (ITA No. 7033/Mum/2012) for AY 2007-08. Aggrieved by the order of CIT(A), both the assessee and department are in appeal before the Tribunal. 33.4 Before us, ld. AR submitted that this issue has been decided in assessee's own case in earlier years upto AY 2013-14 by the Tribunal placing reliance on the decision of the Hon'ble Bombay High Court in the case of CIT v. Everest Kento Cylinders Ltd. [2015] 58 taxmann.com 254 (Bombay). The ld. DR, on the other hand, relying on the decision of Graves Cotton Limited v. ACIT (ITA No. 1745 of 2016, dated July 25, 2023) submitted that the judgement of Hon'ble Bombay High Court in Everest Kanto case was in respect of AY 2008-09 and cannot be applied on a different year. 34.5 In the rejoinder, the ld. AR reiterated that the assessee ....
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....rated and supplied power only to the assessee's manufacturing unit at Rayon Plant for captive consumption at an average rate of Rs. 6.82 per unit. No third-party sales have been made by the CPP. The MU at Rayon Plant has also purchased power from Gujarat State Electricity Board (GSEB) to meet its requirements. The assessee has used internal CUP to benchmark the aforesaid specified domestic transaction between the CPP and the MU whereby, the MU has been considered as the tested party and the rate at which the transaction has taken place between the two units is based on the rate at which the MU has purchased power from the GSEB. 36.1 In the transfer pricing assessment proceedings, the TPO rejected the CUP applied by the assessee on the following grounds: (i) The assessee does not perform any distribution functions as compared to GSEB and also no distribution risk is assumed by the assessee since it supplies only to its AE; (ii) The SEB is capital intensive and requires a license for distribution of power; (iii) Close comparability in specific characteristics of goods should be coupled with other comparability factors of CUP; (iv) Since the prof....
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....mitted that the Hyderabad Bench decision relied by ld. DR has duly been considered and distinguished by the Hon'ble Third Member at para 45. Further, the ld. DR has not pointed out any difference in facts of the current year as compared to AY 2013-14, being the year for which the Hon'ble Third Member had decided the issue. It was further submitted that the ld. DR not only desired the Bench to disregard the decision of the Hon'ble Third Member, but has also completely ignored the following binding decisions: (i) CIT v. Jindal Steel & Power Ltd. [2023] 157 taxmann.com 207 (SC), (ii) PCIT v. DCM Shriram [2025] 170 taxmann.com 631 (Delhi High Court), (iii) PCIT vs. Rungta Mines Ltd. [2025] 176 taxmann.com 410 (Calcutta High Court), (iv) PCIT vs. Birla Corporation Ltd. [2025] 175 taxmann.com 637 (Calcutta), and (v) PCIT vs. Star Paper Mills Ltd. [2025] 172 taxmann.com 391 (Calcutta High Court). 36.7 The ld. AR further submitted that the last 4 High Court decisions cited above pertain to AY 2013-14 or thereafter, i.e. after introduction of SDT in the Act. Hence, these decisions, which have confirmed that the ALP determined for the SDT under consideration to be based on the rate at whi....
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.... State Electricity Board, the pattern of tariff determination by GUVNL, the absence of any deviation from approved industrial tariff, and the economic rationale underlying the internal transfer price adopted by the assessee. He also took note of the submissions recorded in the earlier orders of the learned Members and the factual matrices that prompted the divergence of opinion. 5. After considering all relevant material, the Hon'ble Third Member expressed his conclusions in paragraph 46 of his order. Paragraph 46 forms the fulcrum of the majority view, and for completeness it is necessary to incorporate and discuss it fully in this confirmatory order. The Hon'ble Third Member held as follows:- "46. Upon considering the overall facts and circumstances of the case in the light of the judicial precedents cited before me, I am of the considered opinion that the price at which the assessee purchased power from the distribution licensee GUVNL can be applied as a valid CUP for determining the arm's length price of sale or supply of power by the captive power plant to the Rayon Plant. In other words, the price of Rs 6.62 per unit charged by the captive power plant to the....
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....nd it to be factually distinguishable. The Bench has recorded a finding of fact that the CPP had sold surplus electricity to 14 individuals at an average rate of Rs. 2.97/- per unit. Whereas, in the TP study it has adopted the rate of Rs. 7.85/- per unit. In contrast, in the present case, CPP has sold power only to Rayon Plant for captive consumption at Rs. 6.62/- per unit and to no other party at any other rate. As against the aforesaid decision cited by learned DR, there are decisions of Hon'ble Delhi High Court in case of PCIT Vs DCM Shriram Ltd.(supra) and that of Hon'ble Calcutta High Court in case of PCIT Vs Rungta Mines Ltd. as well as plethora of other decisions of ITAT favourable to assessee, which are directly on the issue and have been rendered after considering all the relevant provisions of the Act, including, sections 80A(6), 80IA(8) with amended explanation, 92F(ii), Rule 10B etc. Therefore, these decisions carrying precedent value cannot be lightly brushed aside by branding them as per incuriam or having been rendered sub silentio of certain relevant provisions, merely because they are against the revenue." 37.2 Facts being identical for the year under considerat....
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.... the ld. DR objected by submitting that as there was no discussion of the ground either in the order of CIT(A) or the order of AO, the assessee should have taken the additional ground route in raising this issue. Accordingly, it was submitted by the ld. DR that the ground may not be admitted at all. 40.2 In the rejoinder, the ld. AR submitted that the fact of assessee having paid education cess is very much visible and apparent from the records of the tax department and therefore, the question of not admitting additional claim does not arise. It was further submitted by the ld. AR that the decision of Hon'ble Rajasthan High Court in Chambal Fertilizers was pronounced on 31.07.2018 whereas the return of income was filed by the assessee on 28.11.2014. Thus, the ground was not available to the assessee at the time of filing the return of income and on this ground also, the additional claim deserves to be admitted. 41. We have heard both sides and perused the materials on record. It is seen that the issue of allowability of Secondary and Higher Education Cess is covered against the assessee by the decision of the Hon'ble Supreme Court in the case of Chambal Fertilisers & Chemical....
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....he AO, it cannot be the ground for rejection of the additional ground. In the present case, the ground itself became available to the assessee after the filing of appeal before the Tribunal. The Id. AR submitted that the issue may be restored back to the file of the AO for verification since the essential facts relating pertaining to the present ground are being placed on the record for the first time through additional evidence petition. The mere fact that such verification may involve examination of voluminous data cannot be a ground for not admitting the additional ground itself. The interest of justice warrants that the issue be duly examined on merits after affording an opportunity for necessary verification. The Ld. AR submitted that the contention of the Id. DR that the ground became available only pursuant to the decision of Hon'ble Bombay High Court in the case of Colorcon Asia Pvt. Ltd. (supra) is completely misplaced. The assessee had, in fact, raised the additional ground on 16.09.2022, pursuant to the decision of Hon'ble Delhi Tribunal in the case of Giesecke & Devrient (India) (P.) Ltd. v. ACIT [2020] 120 taxmann.com 338 (Del. Trib.), which was decided in the ....
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.... facts needed to decide the ground were there on record. The observations of Hon'ble High Court from para 12 are reproduced below- "12] We note that it is an undisputed position before us that for the subject assessment year, the appellant assessee had not claimed benefit of Section 80IA of the Act in respect of its Jetty/Port either before the Assessing Officer or before the CIT(A). A claim for benefit u/s. 80IA of the Act can only be made if the infrastructure facility such as Jetty/Port is, among other things, being run on the basis of an agreement for either developing or operating and maintaining or developing, operating and maintaining a new infrastructure facility. The sine qua non provided in Sub-Section (7) of Section 80IA of the Act is the furnishing along with its return of Income, a report of the Audited Accounts in Form 10CCB as required under Rule 18BBB(3) of the Act. The Form 10CCB which is required to be filed along with Return of Income has various details to be filled in, including initial assessment year from which the deduction is being claimed, the nature of the activity carried out with regard to the infrastructure facility, namely whether it is for d....
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....erification of the same by the Authority before the claim u/s. 80IA of the Act can be allowed, cannot be faulted." 17. Hon'ble High Court clearly observed that when a new ground is dependent upon leading of evidence and verification of the same by the authorities before the claim can be accepted, it cannot be allowed. In the given case also, Form 10F, as mandated by Section 90 of the Act r.w.r. 21AB is not available on records. The Form 10F has to provide certain facts and also mandates that a Certificate referred to in sub-section (4) of Section 90 of the Act must be obtained from Government of the country which is party to the DTAA. The assessee' claim of eligibility u/s. 90 of the Act can only be allowed if such facts have been verified and found acceptable by AO. In absence of such a Certificate and Form 10F, the observations of Hon'ble High Court would be squarely applicable to the facts of the case. 18. In para 15 Hon'ble High Court noted further- "15] Mr. Agarwal then contended that once the additional ground is allowed, he would lead evidence in support. This submission seeks to unsettle the settled position as laid down in NTPC Ltd. (supra) that ....
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....ction u/s. 32(1)(iii) because the asset had been claimed as a revenue expenditure. Thus, the question of claiming a deduction u/s. 32(1)(iii) arose as a result of the Tribunal's order in the assessee's case for the assessment year 1962-63. The assessee sought to raise an additional ground of appeal to the effect that Rs. 42,443 be allowed as revenue loss u/s. 32(1)(iii) of the Act, incurred due to the destruction of the sugar godown because of a cyclone on 10.06.1961. The Tribunal did not permit the assessee to raise this additional ground as the same was not raised and did not arise out of the order of the Appellate Assistant Commissioner (AAC) from which the appeal had been preferred to the Tribunal. The dispute before Hon'ble High Court was whether the ITAT could permit additional grounds to be raised before it which were not raised before the AAC or the ITO. In this context, Hon'ble Court referring to the judgment of Hon'ble Supreme Court in the case of Jute Corporation of India Ltd. v. CIT [1991]187ITR688(SC) held that an additional ground before the AAC can be raised if the ground so raised could not have been raised at the stage when the return was filed or when the ....
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....ower authorities. In no way did the said judgment deal with the requirement of the essential facts being there on record. The same has clearly been differentiated by Hon'ble High Court in case of Ultratech Cement (supra) in the para reproduced above. It has clearly been pointed out that the dispute about absence of facts on record, which is essential to ascertain the veracity of assessee's claim of eligibility is different from dispute about the power of the Tribunal to consider grounds which were not raised before lower authorities. It is apparent that the observation of Hon'ble High Court that an additional ground can be raised when it becomes available as a result of changed circumstances or subsequent judgment does not create an exception from requirement of availability of facts and evidence on record. In fact, the requirement of availability of essential facts on record was not even under consideration before Hon'ble High Court in Ahmedabad Electricity Company Ltd. (supra). Further, the changed circumstances in Ahmedabad Electricity Company Ltd. (supra) do not refer to a particular interpretation of the law being accepted over the other but refer to a case wherein the ground ....
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....1AB read with section 90 of the Act are not there on record. If the assessee's claim is to be allowed, then the same facts and documents need to be there on record and verified by the AO. It is clear that the observations of Hon'ble High Court are squarely applicable to the facts at hand and, hence, the additional grounds raised on behalf of the assessee cannot be admitted. Accordingly, the ground No.1 in Cross Objections of the assessee is not admitted." 43.1 Since the facts of the present appeal are similar to those of the above case, following the above decision, the additional ground No.1 is not admitted. 44. Additional grounds No. 2 to 5 pertains to treatment of incentives under Focus Market Scheme, Focus Product Scheme and Market Linked Focus Product Scheme, Fertilizer subsidy, Freight subsidy and Sales Tax Subsidy as capital receipt under normal provisions of the Act as well as for the purpose of book profits u/s. 115JB of the Act. 44.1 The legal issue involved in these additional grounds are whether the incentives received under the: (i) Focus Market Scheme ("FMS"), Focus Product Scheme ("FPS") and Market Linked Focus Product Scheme ("MLFPS") [Additional G....
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....made a without prejudice submission that since the AO did not have an opportunity to examine the issue during assessment proceedings, the issues may be set aside to the AO for fresh examination. 47. We heard the parties with regard to additional ground no 3 to 7. We notice that the assessee has not raised these issues before the lower authorities and that the same is raised before us based on certain judicial pronouncements which happened subsequent to the appellate proceedings. At the same time we see merit in the argument of the ld DR that the treatment of subsidies and incentives are not uniform across all Schemes and that the various clauses, terms and conditions of the specific scheme need to be examined before applying the decisions of the Hon'ble High Courts and Tribunals to assessee's case. Since the AO has not scrutinized these issues and since the issues require factual verification, we are remitting the issues of treatment of incentives under Market Linked Focus Product Scheme, fertilizer subsidy and sales tax subsidy as capital receipt back to the AO for a denovo examination. The AO is directed to call for necessary details and keep in mind the judicial....
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....his is a repetitive issue covered in favour of the assessee in earlier years' orders of Tribunalupto AY 2013-14. It was also submitted that the ld. DR has not pointed out any difference in facts of the captioned AY vis-à-vis the earlier years and therefore, the decisions rendered in assessee's own case for earlier years are squarely applicable in the captioned AY. It was further submitted that the AO makes CENVAT addition to closing stock every year following inclusive method u/s. 145A. The assessee's stand has been that whether following the inclusive or exclusive method has no effect on the taxable profits and, therefore, no addition can be made. This is for the simple reason that if the inclusive method is to be followed, it will add to the value of opening stock, purchases, sales as well as closing stock. Therefore, the effect will get nullified thereby not making any difference to the taxable profits. To support this contention, the ld. AR relied on the decisions of Hon'ble Supreme Court in Indo Nippon's case [261 ITR 275] and the Hon'ble Delhi High Court in CIT v. Mahavir Aluminum Ltd [2008] 297 ITR 77 (Delhi) and several other decisions rendered after introduction of ....
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.... before us that had the assessee followed inclusive method of accounting instead of exclusive method (as actually followed by them consistently), there would be no impact on the Profit and Loss account. To take an example, Exclusive Method Inclusive Method Purchases 1,000 Purchases 1,000 VAT (assumed at 10%) (under exclusive method taken in a separate VAT credit account on asset side of balance sheet) 100 VAT (assumed at 10%) 100 Purchases under exclusive method as debited in P&L (A) 1,000 Purchases under exclusive method as debited in P&L (A) 1,100 Sales 1,200 Sales 1,200 VAT (assumed at 10%) (under exclusive method taken in a separate VAT payable account on liability side of balance sheet) 120 VAT (assumed at 10%) 120 Sales under exclusive method as credited in P&L (B) 1,200 Sales under exclusive method as credited in P&L (B) 1,320 No debit in P&L on account of VAT expense as separate accounts has been maintained for VAT credit and liability VAT expense paid to government debited in P&L (C) [120 - 100] 20 Net Profit in ....
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....unt of provisions for leave salary/compensated absence. Brief facts are that the net global provision for leave salary amounting to Rs. 13,00,38,255/- was created based on actuarial valuation, which is a scientific method of computing estimated liability. AO made disallowance u/s. 43B(f) of the Act for the reason that the decisions relied upon by the assessee do not deal with provisions for leave salary and its allowance u/s. 43B(f). On appeal, CIT(A) allowed the assessee's claim following the decision for earlier years. The revenue is in appeal before the Tribunal. 50.1 The ld. DR in his submissions stated that the Hon'ble Supreme Court decision in Bharat Earth Movers Limited (245 ITR 428) did not deal with section 43B. The ld. DR also relied on the decision of the Hon'ble Supreme Court in Exide Industries Ltd (CA No. 3545/2009) wherein it has been held that the deduction for leave encashment would otherwise be allowable u/s. 37 of the Act, but such an allowance is postponed by action of section 43B, to the year in which the payment is actually made. Accordingly, it was prayed that the disallowance made by AO may be restored. 50.2 In the rejoinder, the ld. AR submitted that ....
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....sallowance made by the AO towards provision made for leave salary/compensated absence. We noticed that the issue is covered by the decision of the co-ordinate bench in assessee's own case for AY 2010-11 where it is held that "30. We observed that that the Co-ordinate Bench of the Tribunal while deciding the appeal of the assessee for AY 2008-09 decided the issue on merits in turn by placing reliance on Tribunal order for A.Y. 2008- 09. The Tribunal allowed relief to the assessee by following the decision of the Hon'ble Apex Court in the case of Bharat Earth Movers CIT reported as 245 ITR 428(SC). Dehors the issue of constitutional validity Of clause(f) to section 43B of the Act, the Co-ordinate Bench after considering the issue on merits has deleted the addition. Taking into consideration, entirety of facts we respectfully follow the decision of Tribunal in assessee's own case for AY 2008-09 and confirm the findings of CIT(A) in deleting the disallowance. Consequently, ground No.4 of the appeal by the Revenue is dismissed. " 59. Considering that there is no change to the facts for the year under consideration following the above decision of the co- ordinat....
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....llowed in respect of any sum paid by the assessee as an employer towards setting up or formation of or as contribution to any fund/ trust, company, association of persons, hods of individuals, society registered under the Societies Registration Act or other institution for any purpose except where sum is 30 paid for the purposes and to the extent provided for under clause (iv) or clause (v) of sub section (1) of section 36 or as required by or under any other law for the time being in force. The assessee argued that provisions of section 40A(9) were not applicable and the expenditure was allowable as revenue expenditure u/s. 37(1). CIT(A) however following the decision in AY 1994-95 confirmed the disallowance. Aggrieved by the said decision the assessee is in appeal. 2.91 We have heard both the parties in the matter. We find that the same issue had been considered by the Tribunal in assessee's own case in AY 1991 95 in ITA No.2320/M/2007. In that year also disallowance had been made u/s. 40A(9) in respect of payments made to Indrayan School. The tribunal however following the decision in A.Y.199291 and 1993-94 allowed the claim. Facts this year are identical. Therefore....
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....oordinate Bench of the Tribunal after placing reliance on the decision of Hon'ble Jurisdictional High Court in the case of PCIT vs. Godrej Industries (supra) allowed the claim of the assessee. 9.1 The ld. Departmental Representative has not been able to controvert the findings of Co-ordinate Bench of the Tribunal on this issue in assessee's own case. We find no reason to take a different view, hence, following the decision of the Tribunal in assessee's own case in the immediate preceding AY, ground No.3 of the appeal is allowed in similar terms." 54.1 For the year under consideration, the revenue did not bring any new material on record and therefore we see no reason to take a different view from the view taken for the earlier years. Accordingly, we uphold the decision of CIT(A) and dismiss the ground raised by the revenue. 55. Ground No. 7 pertains to allowance of ESOP Expenses. The facts of this recurring issue is that the assessee has claimed ESOP expenses amounting to Rs. 2,19,77,775/- being the difference between the market price on the date of exercise and the exercise price. The AO disallowed this deduction on the ground that notional loss as per S....
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....TA No. 4220/Mum/2015 and ITA No. 4704/Mum/2015 is as follows: "13. We have heard the submissions made by rival sides. We find that identical issue was raised in an appeal by the assessee before the Tribunal in AY 2009-10. The Tribunal in turn following the order of Co-ordinate Bench in assessee's own case in ITA No.3033/Mum/2012 for AY 2008-09 decided on 09/12/2015 allowed assessee's claim and held the expenditure in respect of ESOP as revenue in nature. No contrary decision has been placed by ld. Departmental Representative. Respectfully following the decisions of Co- ordinate Bench of the Tribunal in assessee's own case for the preceding AYs we hold ESOP expenditure as revenue in nature. The ground No.5 of the appeal is allowed for parity of reasons." 56.1 Respectfully following the decision of the co-ordinate bench, revenue's ground No. 7 is dismissed. 57. Ground No. 8 pertains to allowance of depreciation on goodwill. Brief facts are that the assessee had incurred an expenditure of Rs. 20.35 Cr. on the acquisition of goodwill relating to the garments division of Madura Coats Ltd. during FY 1999-2000. Since the goodwill is acquired, depreciation has be....
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.... the contention of the ld. DR that subvention of interest is to improve the profitability of the assessee and not to acquire any new asset is completely misplaced. It was further submitted by the ld. AR that the Tribunal, in preceding AYs had, inter alia, applied the purposive test as laid down by Hon'ble Supreme Court in case of Ponni Sugars & Chemicals Ltd. (supra) and followed the decisions of Hon'ble Rajasthan High Court in case of Nitin Spinners Ltd. [2020] 116 taxmann.com 26 (Raj.) [SLP against High Court order dismissed in PCIT v. Nitin Spinners Ltd. [2021] 130 taxmann.com 402 (SC)] and Hon'ble Calcutta High Court in the case of Gloster Jute Mills Ltd. [2018] 96 taxmann.com 303 (Cal.) and held that the interest subsidy from TUF is a capital receipt. 59. We have heard both sides and perused the materials on record. We have gone through the orders passed by the co-ordinate bench in assessee's own case for AY 2013-14 (ITA No. 563 & 1885/Mum/2018) and AY 2012-13 (ITA No. 5848 & 5935/Mum/2017) and observe that this issue has been allowed in favour of the assessee by following the order for AY 2011-12, where it has been held that - "72. Revenue is contending the direct....
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....on u/s. 80-IA are separate and independent entities and all expenses in respect thereof have been accounted for in the accounts maintained for the said CPPs. It has been claimed that there is no direct and proximate nexus between the expenses incurred at the Head Office and such CPPs. Therefore, no Head Office expenses have been allocated to the profitability of the said CPPs. The AO did not accept the contention of the assessee on the ground that without the involvement of Head Office, the CPPs cannot work and the expenses at Head Office are in relation to activities for the entire company including R&D activities, borrowings, etc. Thus, as per the AO, such Head Office expenses should be allocated to the CPPs. Accordingly, the AO determined Rs. 26,00,43,426/- as the total common Head Office expenses allocable to the CPPs which he allocated to the CPPs based on the turnover of all units, as higher turnover would require more attention from the management and the same would be the most logical and fair criterion for apportioning the Head Office expenses. The total allocation made by the AO to Rayon CPP II (for which deduction u/s. 80-IA has been claimed) is Rs. 35,85,874/-. CIT(A) d....