TaxTMI 
TaxTMI 
2025 (4) TMI 2180
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....ould be decided on merit not on technical issue, the delay is hereby condoned. 3. Brief facts of the case of the assessee are that the assessee company was engaged primarily in the business of cultivation and manufacture of tea, company filed return of income for AY 2013-14 declaring total income of Rs. 36,48,96,214/-. The return of income was selected for scrutiny, notices u/s 143(2) and subsequently 142(1) were issued, since the assessee company during the proceedings under assessment year had entered into the international transaction within the meaning of Section 92CA of the Act, hence, the case of the assessee was referred to the concerned transfer pricing officer after obtaining necessary administrative approval of the concerned authorities in order to get the arms' length price of those transactions to be determined by TPO. The order u/s 92CA(3) of the Act was passed, a draft of the proposed order of the assessment has been forwarded to the assessee. The AO after going over the entire facts held the followings: "The downward adjustment for purchase = 98,91,009/- The upward adjustment for sale = 75,813.21 Total adjustment Rs. 99,66,822.21" The....
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.... had also disallowed the claim u/s 80IE and assessee has filed an appeal against the same order and the Ld. CIT(A) has given relief and that order has been confirmed by the ITAT, Kolkata. 7. Upon hearing the submission of the counsel of the respective parties. It appears to us that the department has raised two grounds before the Tribunal. Grounds are that the Ld. CIT(A) has erred in law in deleting the arms' length price adjustment at Rs. 99,66,822/- and further erred by allowing the claim of the assessee u/s 80IE of the Act. In this context, we have gone through the order passed by the Ld. CIT(A) and find that in discussing the issues of TPO, the Ld. CIT(A) has considered the case of the assessee on the basis of the order passed by the Ld. CIT(A) confirmed by the ITAT. The operative portion of the Ld. CIT(A)'s order is here in below : "I have examined the entire issue carefully including the TPO's order, the appellant's submissions and the decisions rendered in the appellant's own case. I find that this identical issue had come up in the subsequent AY 2014-15 in which the appellant has been granted relief by the Ld. CIT(A). During the year, I find that the appellant h....
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....of the property transferred or services provided in the international transaction;" In the present case, the arm' length price of the loan advanced by the assessee to its associated enterprises is required to be determined under the CUP method. The assessee has also used the same method." Keeping in view, the order passed by the Ld. CIT(A) and the facts of the case as discussed above, we do not find any infirmity in the impugned order on this issue. 8. So far, the next issue i.e. disallowance u/s 80IE is concerned, we find that the Ld. CIT(A) has allowed the appeal of the assessee on the identical facts for AY 2014-15. The Ld. CIT(A) has allowed the appeal of the assessee and that order has been confirmed by the ITAT. We have gone through the order passed by the Ld. CIT(A) and find that the Ld. CIT(A) in its order had discussed this issue at length which is essential to reproduce hereinbelow: "I have carefully considered the submissions filed by the appellant and gone through the order of the ld. A.O. I have also perused the assessment orders and the appellate orders passed for the earlier as well as subsequent years. It is noted that the appellant had claim....
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.... plant & machinery by 25% in comparison to the book value of P&M block at the beginning of the year in which the substantial expansion began. From the material available on record, it is noted that the Ld. AO questioned the allowability of deduction u/s 80IE for the first time in the assessment order framed u/s 143(3) for AY 201011 and noted that wherever the substantial expansion at tea gardens were not completed in the same year but in subsequent year/s, the tea estate were not eligible for claiming deduction u/s 80IE of the Act. By placing such interpretation on provisions of Section 80IE of the Act, the AO rejected the claim for deduction u/s 80IE in respect of profits derived by these thirteen tea gardens in AYs 2010-11, 2011-12 & 2012-13. It is noted that on appeal, the Ld. CIT(A) in AYs 2010-11 & 2011-12 in his order dated 05.10.2015 held that to qualify for deduction u/s 80IE it was not mandatory for the assessee to show that the substantial expansion was carried out only in one previous year. In the opinion of the Ld. CIT(A), the language of Section 80IE nowhere mandated that to avail the deduction u/s 80IE the substantial expansion must be carried out only in one year and....
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....0IE in respect of four tea gardens, namely Moran, Paneery, Mona bari and Mijicajan. Aggrieved by the assessment order, the assessee preferred an appeal before the Ld. CIT(A) who allowed the assessee's claim for deduction u/s 80IE by holding as follows: "9.6 From the empirical data provided by the assessee, I find that the technical ' teams at tea gardens had devised systematic plan for expansion of production capacities at each of the 4 tea gardens. Based on the work studies carried out at the factories the bottlenecks were identified by the Technical teams. After analyzing the production process the technical teams identified the bottlenecks & then recommended additions to be made in different Sections so as to remove the sectional imbalance and increase the overall production finished tea. The technical team also estimated the overall cost of the expansion project and sought sanction for additional funds. Since the technical studies carried out at twenty eight gardens recommended need for undertaking debottlenecking processes, it was not possible for the appellant to provide requisite funds for all the gardens in one go and in one year in the circumstances it was....
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....cuted a systematic expansion of its production capacities by adding and installing plant & machineries aggregate value of which exceeded 25% of the actual cost of the plant & machinery which was existing at the time when the expansion program commenced in AY 2008-09. 9.7. In the impugned order the AO placed much reliance on the fact that the assessee had claimed depreciation on some of the items of plant & machineries installed and put to use in AYs 2008-09 and 2009-10. In the circumstances if the machineries were actually used by the appellant in the prior years, then it meant that even without the expansion of the undertaking these machineries were capable of being used and therefore for deciding whether the criteria as laid down in section 80IE was fulfilled, cost of such plant & machineries could not be taken into account. In my considered opinion the condition which the AO has read into section 80IE reads as follows: (2) This section applies to any undertaking which has during the period beginning on the 1st day of April, 2007 and ending before the 1st day of April, 2017 begun or begins, in any of the North Eastern States - (i) to manufacture or prod....
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....expanded undertaking becomes operational I phases and depreciation thereon is claimed accordingly. In my opinion the interpretation of section 80IE as made by the AO is not correct since he has imposed his own restrictive conditions which are not so prescribed by the Legislature. The AO has interpreted Section 80IE in a manner by which the assessee's are precluded from capitalizing the cost of expansion in a phased manner. AO has also imposed prohibition from making the expansion program operational in phases. 9.9 I find merit in the submissions of the AR that Section 80IE is a beneficial provision of the LT. Act. It is enacted by the Legislature to provide boost to the economic and industrial growth of the North Eastern part of India which is known to be economically backward. The intention of the Legislature in enacting Section 80IE was to encourage even the existing industrial undertaking to make additional & fresh investment in plant & machineries so that industrial growth in the North Eastern part of the country was given impetus. The intent and purpose of enacting Section 80IE was to provide profit based incentive to those assessee who made investments exceeding ....
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....heard the rival submissions of both the parties. The Ld. DR appearing on behalf of the Revenue strongly relied on the order of the AO and vehemently argued that in order to claim deduction u/s 80IE it was necessary for the assessee to demonstrate that the substantial expansion had been carried out only in one financial year. Referring to clauses (i) & (iii) of Section 80IE(7) the Ld. DR submitted that for the purpose of ascertaining whether the substantial expansion has been carried out, the comparison should necessarily be made between the gross block of plant & machinery at the completion of substantial expansion and the gross block of plant & machinery on the opening date of the relevant previous year in which substantial expansion is complete. Since in the assessee's case this crucial test was not met, the Ld. DR argued that the AO was perfectly justified in rejecting the assessee's claim for deduction in respect of these four gardens. 4. Per contra, the Ld. AR fully supported the appellate order wherein the Ld. CIT(A) had discussed all the relevant facts and material as also applicable legal provisions of Section 80IE. The Ld. AR also brought to our attention ....