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2022 (1) TMI 923 - ITAT MUMBAI
Nature of receipt - Sales tax exemption benefit received - whether to be treated as capital receipts not liable to tax - HELD THAT:- This issue has been subject matter of appeal in the assessee’s own case from AY 2004-05 onwards and has been decided in favour of the assessee from AY 2004-05 onwards.he facts and circumstances during the year under consideration remain the same and hence following the series of the orders of Coordinate Bench of this Tribunal for earlier years in assessee’s own case AND in AY 2010-11[2017 (12) TMI 1134 - ITAT MUMBAI] , we confirm the order of the LD CIT(A) and dismiss this ground raised by the Revenue.
Disallowance u/s 80IA for Rail Systems and for Power Plants - Rail Systems and Power Plants transferred from Samruddhi Cement Limited to the appellant Company pursuant to the scheme of amalgamation, the deduction is not allowable as per the provisions of section 80IA(12A) - HELD THAT:- The coordinate Bench of this tribunal in AY 2010-11[2017 (12) TMI 1134 - ITAT MUMBAI] analysed the issue in great detail and allowed the claim of the assessee. It has been held that the Rail undertakings are infrastructure facilities and eligible for deduction u/s.80IA - Since the facts and circumstances with regard to this claim of the assessee remain same in this year, following the orders of Coordinate Bench in assessee’s own case for earlier assessment years, especially for AY 2010-11, we uphold the action of the LD CIT(A) and dismiss this ground raised by the Revenue.
Disallowance u/s 14A r.w.r. 8D - indirect expenses incurred for earning exempt income - HELD THAT:- The facts in the present case are similar to the facts in the earlier years. For the year under consideration, the disallowance offered by the assessee is in respect of salary cost of the employees looking after the investment activities and the indirect cost relating to such employees. Therefore, following the decision of Coordinate Bench of this Tribunal in assessee’s own case for earlier year and the Bombay High Court’s ruling for AY 2008-09[2017 (2) TMI 1005 - BOMBAY HIGH COURT] against which the SLP filed by the Revenue has been rejected by the Hon’ble Apex Court [2018 (7) TMI 646 - SC ORDER] we hold that total disallowance for the purpose of section 14A should be restricted to the amount suo moto offered by the assessee and accordingly dismiss the ground raised by the Revenue in this regard.
Nature of receipts - treating the receipts on sale of CER certificates as capital receipts instead of revenue receipts - HELD THAT:- We note that this issue has also been decided in favour of the assessee in its own case by the Coordinate Bench of this Tribunal in for AY 2008-09 Since the facts on this issue remains same for the year under consideration, we do not find any reason to interfere with the order of the LD CIT(A). Accordingly, following the decision of the Coordinate Bench of this Tribunal in assessee’s own case for AY 2008-09, this ground of the Revenue is dismissed.
Deduction u/s 80IA - amalgamating / demerged entity to claim any deduction in the year of amalgamation/ demerger - HELD THAT:- since the provisions of sub-section (12) were disabling in nature, as it disentitled an amalgamating company or a demerged company from claiming deduction in the year of amalgamation or demerger, the insertion of sub-section (12A) merely negated the effect of sub-section (12) and cured the disability created under sub-section (12) of section 80IA of the IT Act. Further, it is also worth noting that the language used in sub-section (12) had another defect. It can be explained with the help of an example: Suppose an entity had 3 eligible undertaking on which tax holiday was claimed and one out of the three was demerged to another entity. By virtue of clause (a) of sub-section (12) which specifies that no deduction shall be admissible under this section to the amalgamating or the demerged company for the previous year in which the amalgamation or the demerger takes places, even the other two undertakings which remains with the demerged company could be denied the benefit of tax holiday when only one undertaking is determined. We are, therefore, of the view that the legislature, in all its wisdom, has neutralised the disability enshrined in sub-section (12) by inserting sub-section (12A) in section 80IA of the IT Act.
If the intention of tax holiday under section 80IA was to provide incentive to only original investor, the legislature would have never inserted sub-section (12) in the statute. At least, the memorandum explaining the provisions of Finance Bill 2007, regarding insertion of sub-section (12) in Section 80IA should have clarified why the legislature thought fit to deviate from the its basic intent of providing incentive to the original investor and provide benefit to the successor. We have seen earlier, the memorandum explaining the provisions of Finance Bill 2007 has no such reference. It is, therefore, difficult to accept the contention of the Revenue and accept the contents of Circular no. 3 of 2008 to be depicting correct intention.
In our view, therefore, the clarification provided in the circular for insertion of sub-section (12A) cannot be extended beyond what is unambiguously stated in the provisions of the IT Act. Sub-section (12A) simply states that from a particular date i.e. 31 March 2007 the provisions of sub-section (12) shall not apply in the specified situations. There cannot be any other meaning to such simple provision of the IT Act
We hold that sub-section (12A) of section 80IA of the IT Act, merely neutralises applicability of subsection (12) and does not disentitle the successor entities to claim deduction in accordance with section 80IA of the IT Act. Accordingly, AO is directed to allow the deduction as claimed by the assessee with respect to eligible units acquired from SCL. Accordingly, Ground no.1 of the assessee is allowed.
Disallowance of additional depreciation under section 32(1)(iia) of the IT Act in respect to assets installed during the FY 2009-10 (i.e. AY 2010-11) and are used for a period less than 180 days in that year (spill over depreciation) - HELD THAT:- As following decision of the Hon’ble jurisdictional High court in the case of Pr.CIT vs. Godrej Industries Ltd.[2018 (12) TMI 64 - BOMBAY HIGH COURT] on this issue, we allow the appeal of the assessee and accordingly direct the assessing officer to delete this addition.
Denial of claim u/s 35(2AB) in respect of R&D expenses incurred on the basis of report received from Department of Scientific and Industrial Research (DSIR) - HELD THAT:- The AO in the present case has not disputed the correctness of the claim made by the assessee. In view of the above discussions and judicial precedents on this issue, we hold that the claim of the assessee must be granted as made in its return of income. It cannot be restricted to the extent of claim as approved in Form No.3CL by DSIR since there was no such requirement either under the Act or in the Rules for the assessment year 2011-12. We accordingly allow the appeal of the assessee Company on this ground and direct the AO to delete the disallowance in this regard.
Short grant of TDS / TCS credit claimed by the assessee on the basis of certificates available with the assessee - HELD THAT:- Credit for TDS / TCS should be allowed to the assessee on the basis of TDS/ TCS certificates available although no entry for the same appears in Form 26AS. The mismatch cannot be attributed to the assessee as it has no control over Form 26AS. Accordingly, we direct the AO to grant credit of TDS / TCS credit for certificates produced by the assessee including the certificates which may be in name of Grasim / SCL. The AO can satisfy himself to the effect that the claim in respect of the said certificates are not made by the Grasim / SCL in their ROI. This ground is remitted back to Ld AO and accordingly it is allowed for statistical purpose.
Admissibility of the additional grounds - HELD THAT:- We are of the view that a legal plea can be raised by the affected party at any point of time in the matter pending for adjudication. Further, it is settled proposition of law that mere procedural lapse, or omission on the part of the assessee, cannot lead to denial of substantive benefit/eligible claim in the hands of the assessee. Keeping in view, of above discussion and decision of the Hon’ble Apex Court, the additional grounds filed by the assessee are accepted and taken up for adjudication
Claim of deduction towards the education cess and secondary and higher education cess - HELD THAT:- Education cess, secondary and higher education cess should be allowed as deduction. Their Lordships had held that Section 40a(ii) of the Act applies only to taxes other than cess. This issue is also decided in favour of assessee by Jurisdictional High Court in case of Sesa Goa Limited [2020 (3) TMI 347 - BOMBAY HIGH COURT] which has been followed in various Tribunal orders subsequently. We direct the AO to allow deduction towards education cess and secondary and higher education cess to the extent of actual payment made by the assessee.
Refund of dividend distribution tax paid in excess of the rate prescribed under DTAA on dividend paid to non-resident shareholders - HELD THAT:- We restore the issue to the AO for examining assessee’s claim of applicability of beneficial rate of tax as per the applicable DTAA to the DDT paid under section 115O of the IT Act. If the amount quantified as DDT liability based on the tax treaty rate is lower than the actual DDT paid by the assessee, then the same should be refunded back to the assessee. Accordingly, this ground of appeal is allowed for statistical purposes.
Validity of transfer pricing proceedings - original assessment proceedings ceased to exist, and fresh proceedings u/s. 153C r.w.s. 153A was initiated - HELD THAT:- After the issue of notice under section 153C of the IT Act, the AO was required to make a fresh reference under section 92CA(1) of the IT Act. Since no fresh reference has been made the order passed by TPO dated 28 November 2014 is bad in law as it is based on the abated proceedings. The order of the TPO is, therefore treated as non-est.
Further, in the present case the notice under section 143(2) of the IT Act pursuant to fresh proceedings under section 153C was issued on 8 January 2015. The order of the TPO has been passed on 28.11.2014 i.e. before the assessment proceedings initiated by issue of notice u/s.143(2). Since in the instant case, the TPO had passed the order even before issuance of notice under section 143(2) of the Act, the order passed under section 92CA(3) of the Act is without jurisdiction.
In view of the above, we hold that the transfer pricing order passed by the TPO for the subject year is without jurisdiction and hence invalid. The addition made consequent to TPO order therefore does not hold any ground. Accordingly, this ground of the assessee is allowed.
TP Adjustment - corporate guarantee transaction as international transaction within the meaning of section 92B - HELD THAT:- We reject the determination of arm’s length price reduced to Nil by the Ld CIT(A) and direct the AO to adopt 0.5% as an arm’s length consideration for the corporate guarantee issued by the assessee in favour of its AEs.
Entitled to deduction u/s 32AC of the Act on the value of cost of components of plant or machinery lying as CWIP as on 1 April 2013 but installed during the financial year 2013-14 confirmed. We therefore direct the AO to allow deduction as investment allowance u/s 32AC of the IT Act.