9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2023 (8) TMI 1630 - AT - Income TaxComputing Transfer Price of Power for the purpose of Deduction u/s 80-IA in respect to its eligible power undertakings - rejecting the assessee s claim of Reliability charge merely on the contention that such claim has not been made vide the return of income - HELD THAT - As differentiated hereinabove that the decision of Wipro Ltd. 2022 (7) TMI 560 - SUPREME COURT is clearly not applicable as the assessee is not making new claim but revising the claim of price of power supply in the facts of the present case. On the contrary in view of our categorical finding above and also keeping in view the decision of National Thermal Power corporation Ltd. 1996 (12) TMI 7 - SUPREME COURT Jute Corporation of India 1990 (9) TMI 6 - SUPREME COURT we are of the view that assessee could raise additional ground before ld. CIT (A) as well as before us for revising claim of deduction already made in the return of income. Granting the higher rate on account of commitment of Uninterrupted Power Supply to the cement unit - As relying on M/s Hindustan Zinc Limited 2022 (11) TMI 1498 - ITAT JODHPUR apart from state of Haryana and Uttarakhand as stated by the assessee Government of Bihar West Bengal and Maharashtra has also approved the rate for uninterrupted and continuous supply of power. The Coordinate Bench Tribunal Jodhpur after noting that state electricity boards of various states do charge a premium of 10% to 15% over and above the normal rate of power for uninterrupted power supply had allowed a 15% premium on the transfer price of power adopted by the assessee in the said case. D/R had nothing to defend against the aforesaid contention of the assessee. Therefore respectfully following the case of Hindustan Zinc 2022 (11) TMI 1498 - ITAT JODHPUR we are of the view that reliability charge @15% of Grid rate of Rs. 7.15 per unit which comes to Rs. 1.10 per unit should be allowed to the appellant instead of Rs. 1.50 per unit as claimed. Thus ground no. 1 of appeal is therefore partly allowed. Disallowance made on account of claim of Education Cess - HELD THAT - As identical view has been upheld in case of Sesa Goa Ltd. 2020 (3) TMI 347 - BOMBAY HIGH COURT Thus Education and Secondary Higher Education Cess were held to be allowable expenses and no addition was warranted under section 40(a)(ii) as the law stood before the enactment of Finance Act 2022. Subsequently the Finance Act 2022 brought about a retrospective amendment in the Income Tax Act whereby the Education and Secondary Higher Education Cess ( Education Cess ) paid by an assessee is clarified to be a disallowable expense. In light of the amendment in section 40(a)(ii) effected retrospectively it is held that Education Cess is not an allowable Expense and the ground raised by the assessee is not tenable and the same is dismissed. MAT - exclusion of profit on sale of investment and profit on sale of fixed assets while computing book profit u/s 115JB - HELD THAT - The issue is covered against the assessee by the decision in assessee s own case 2015 (3) TMI 759 - ITAT JAIPUR for the assessment year 2008-09. Exclusion of deduction u/s 80IA 80IC in computing Book Profit under section 115JB - HELD THAT - The issue of allowability of deduction under section 80IA while computing MAT provisions under section 115JB of the Act has already been decided against the assessee in the case of Safeflex International Ltd. 2019 (9) TMI 299 - ITAT JAIPUR as held exemption u/s 10AA allowed under normal provisions cannot be allowed to be reduced while computing Book Profit under section 115JB. Claim of depreciation on expenditure incurred in respect to acquisition of leasehold rights on land u/s 32(1)(ii) being business or commercial right of similar nature - appellant has submitted that such rights have been acquired for carrying on the business and hence is in the nature of business or commercial right eligible for deprecation @ 25% u/s 32(1)(ii) - HELD THAT - Expenditure incurred on acquiring the land is a capital expenditure and hence cannot be allowed. However the expenditure incurred on acquiring land on lease is different from the expenditure incurred on acquisition of land. On acquiring land on lease from the government the assessee has to pay certain upfront premium on lease which is the price paid for acquiring the rights of land and not the land itself and the ownership of the land vests with the lessor of the land. The lessee is liable to return the land to its original owner after the expiry of the lease and does not have ownership rights over the land. On such facts courts have held that such rights acquired by the assessee which is used for the purpose of its business is an intangible asset in the nature of business or commercial right. Such intangible assets being business or commercial right is entitled to depreciation u/s 32(1)(ii) - AO is directed to grant depreciation @25% on such leasehold rights acquired in accordance with section 32(1)(ii) of the Act. The additional ground no. 1 raised by the assessee is allowed. Allowability of interest paid on late deposit of TDS as business expenditure u/s 37(1) - HELD THAT - We find merit in the contention of the ld. A/R of the assessee that the issue in question is squarely covered in favour of the assessee in the case of Resolve Salvage Fire India 2022 (4) TMI 906 - ITAT MUMBAI to hold that the interest paid on delayed payment of TDS u/s 201(1A) is an allowable deduction. Disallowance of deduction u/s 80IA in respect of captive power plant - HELD THAT - We find force in the argument of the ld. A/R and the observations as made by CIT (Appeals). The provisions of the Act give the assessee an option to adopt the transfer price of power in accordance with any of the clause as stated under section 80-IA(8) of the Act i.e. either as goods or services would ordinarily fetch in the open market or the ALP as defined in Section 92F(ii) of the Act. It is further observed form the order of ld CIT (A) that open market value standards as stated under amended section 80IA(8) and arm s length price standards as stated under section 92F would ordinarily yield the same results. We can conclude that ld. CIT (A) has rightly held that meaning of arm s length price as required u/s 92BA read with section 92F is identical to the meaning of open market value as defined in Section 80-IA(8) of the Act and accordingly all the judicial pronouncements and principles held therein rendered before the amendment brought under section 80-IA(8) of the Act including that of Hon ble Jurisdictional High Court and Jaipur Tribunal in assessee s own case for earlier year would equally apply for the year under consideration post amendment brought under section 80IA(8) of the Act. Why rate at which power is sold to 3rd parties including Power distribution companies should not be considered as internal CUP and hence considered for computing arm s length price under the Transfer Pricing regulations? - There is no long term commitment available to 3rd parties from Power units unlike available to CMU. This assured long term supply of committed power by the Power unit to the Cement Unit cannot be compared with power sold to 3rd parties where there are no such commitments. Secondly Power sold to 3rd parties represent distress sale of excess power generated and not utilised by the CMU. Since Power cannot be stored it has to be compulsorily sold at whatever price is available and hence such sale price cannot represent market price. Thirdly rate at which power is sold to 3rd parties will not be available to all the customers in the market since this sale rate does not cover various cost factors like transmission bottlenecks for scheduling of open access transmission losses and regulatory charges which are all on buyers account and not on the Power undertaking. Therefore the sale price charged is subdued and does not represent the full landed cost of power to the ultimate consumer. Thus we are of the view that the CIT (A) has rightly held that sale rate of Generating Companies does not represent actual market value. Disallowance on account of deduction u/s 80IA on account of Solid Waste - CIT(A) allowed claim - HELD THAT - On perusal of the record we noticed that similar claim of the assessee has been allowed by the AO for the preceding assessment year 2013-14 2018 (1) TMI 785 - ITAT JAIPUR and for the subsequent assessment years viz. 2015-16 to 2017-18 the TPO has accepted the method adopted by the assessee for computing transfer price. Thus we do not find any scope left for any dispute after TPO has himself accepted the computation method adopted by assessee in earlier year as well as in later years. When year after year department has not disputed the computation method adopted by assessee rejecting the same in one particular year without any change in the facts and law is not justified. Accordingly the order of the ld. CIT (A) is upheld. This ground of the Revenue is dismissed. Disallowance on account of deduction u/s 80IA on account of Water Treatment System - CIT(A) allowed claim - HELD THAT - We noticed that similar claim of the assessee has been allowed by the AO for the preceding assessment years 2011-12 and 13-14 vide order dated 30.04.2012 and 16.12.2014 respectively. AO adopted the rate of Rs. 2.50/ltr and Rs. 2.75/ltr for the assessment years 2011-12 and 2013-14 respectively determining the Fair Market Value of Water consumed captively allowed the claim of the assessee. The method adopted by the appellant for determination of realizable market value of water was consistently accepted by the departmental authorities from assessment years 2011-12 to 2013-14. Reference may be made to the decision of A T S India (P) Ltd 2018 (5) TMI 900 - ITAT KOLKATA wherein it was held that when the department has been consistently accepting the assessee s method of benchmarking for 3 consecutive previous years the revenue authorities are bound to have consistency in its views. However for the assessment year under consideration we find that the AO determined the ALP based on a fresh analysis even when there was no change in facts for AY 2014-15 as compared to earlier years. Accordingly the order of the ld. CIT (A) is upheld. This ground of the Revenue is dismissed. Deduction u/s 80IA of Rail system due to adjustment of Transfer Pricing - HELD THAT - We find that the AO determined the ALP based on a fresh analysis even when there was no change in facts for AY 2014-15 as compared to earlier years. The AO without giving any cogent reasons rejected the benchmarking adopted by the appellant and undertaken fresh transfer pricing analysis. CIT (Appeals) has discussed the matter at great length and following the OECD Transfer Pricing Guidelines and Practice Manual for Multinational Enterprises and Tax Administrations partly allowed the claim of the assessee AS directed to allow deduction u/s 80IA on account of Rail Infrastructure Facility System - AO is directed to re-check this working carefully while giving appeal effect. Disallowance on account of sales tax subsidy and electricity duty exemptions received by assessee in nature of capital receipt and the AO computed total income under regular provisions while computing book profit u/s 115JB - HELD THAT -Similar view was expressed by the Jurisdictional Tribunal while deciding the matter vide its consolidated order for the assessment years 2007-08 to 2009-10 and for assessment years 2012-13 2013-14 holding that sales tax subsidy received by the appellant under RIPS 2003 is in the nature of capital receipt and hence is not chargeable to tax under regular provisions nor under the provisions of section 115JB. We further find that the decision of the jurisdictional Tribunal for the assessment years 2006-07 to 2009-10 has also been upheld by the Hon ble Rajasthan High Court in assessee s own case for AY 2006-07 for AY 2007-08 2008-09 2017 (8) TMI 1588 - RAJASTHAN HIGH COURT and for AY 2009-10 2017 (8) TMI 1337 - RAJASTHAN HIGH COURT Decided against revenue.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment include:
2. ISSUE-WISE DETAILED ANALYSIS Reliability Charge in Transfer Price of Power:
Education Cess Deduction:
Profit on Sale of Investments and Fixed Assets:
Deduction under Sections 80IA and 80IC in Book Profit:
Depreciation on Leasehold Rights:
Interest on Late Deposit of TDS:
Deductions under Section 80IA for Various Infrastructure Facilities:
Subsidies under Rajasthan Investment Promotion Scheme:
3. SIGNIFICANT HOLDINGS Reliability Charge: The Court allowed a reliability charge of Rs. 1.10 per unit for uninterrupted power supply, supporting the industry practice and similar rulings. Education Cess: The Court upheld the disallowance of education cess as a deduction, aligning with the retrospective amendment in the Finance Act, 2022. Profit on Sale of Investments and Fixed Assets: The Court maintained the disallowance of excluding such profits in computing book profit under section 115JB, consistent with prior rulings. Deduction under Sections 80IA and 80IC in Book Profit: The Court denied the inclusion of these deductions in computing book profit under section 115JB, following established precedents. Depreciation on Leasehold Rights: The Court allowed depreciation on leasehold rights under section 32(1)(ii), treating them as intangible assets. Interest on Late Deposit of TDS: The Court permitted the deduction of interest on late TDS deposit as a business expense, considering it compensatory. Deductions under Section 80IA for Infrastructure Facilities: The Court upheld partial allowances for deductions, adhering to consistent methodologies accepted in previous and subsequent assessments. Subsidies under Rajasthan Investment Promotion Scheme: The Court affirmed the treatment of subsidies as capital receipts, excluding them from taxable income, in line with jurisdictional High Court rulings.
|
