2021 (4) TMI 449 - ITAT DELHI

Disallowance u/s 14A read with Rule 8D - HELD THAT:- The issue is settled in view of judgment of Apex Court in case of Essar Teleholdings Ltd. [2018 (2) TMI 115 - SUPREME COURT] that Rule 8D cannot be enforced prior to AY 2008-09 for making disallowance u/s 14A of the Act. Further, in assessee's own case [2020 (2) TMI 1485 - ITAT DELHI] and [2018 (2) TMI 2030 - ITAT DELHI] this Tribunal has upheld deletion of disallowance u/s 14A r.w.r. 8D in view of sufficiency of assessee’s own surplus funds in form of reserves and surplus over the value of investments.

As has been brought to our attention that in the year under consideration, the reserve and surplus are much higher than the investments and further, investment made during the year is only ₹ 399.17 Lakhs (net ₹ 299.00 Lakhs), while there is actual repayment of borrowings during the year to the extent of ₹ 12,020 lakhs. Therefore, assessee’s own funds are much more than investment and on the facts of the case it can be reasonably inferred that amount of investment made cannot be said to be made from borrowings but out of assessee’s own funds. Thus, the contentions of CIT(A) that assessee has failed to establish the acquisition of shares and sources thereof by producing books of accounts and other documentary evidence by relying on the judgment of Calcutta High Court in case of Dhanuka & Sons[2011 (4) TMI 861 - CALCUTTA HIGH COURT] is erroneous. It is apparent from the facts submitted by the assessee before assessing officer as well as before CIT (A) from which one may reasonably infer that investments are not out of borrowings but from the assessee’s own surplus funds. - we direct the AO to delete the disallowance made u/s 14A - Decided in favour of assessee.

Adjustment on account of transfer pricing international transaction under dispute is the ‘Export of Nylon Tyre Yarn' and ‘Export of Chafer' by the assessee to its associated enterprise namely ‘SRF Overseas Ltd, Dubai’ - assessee benchmarked the aforesaid international transaction by applying CUP as most appropriate method (MAM) to determine ALP - HELD THAT:- As carefully examined the working given by the assessee in Annexure-I of the synopsis, according to which the net effect under aggregate approach which we have affirmed before giving effect of debit note is a positive of ₹ 14,58,033/- against the negative of ₹ 44,77,914/- computed by the TPO.

While the aforesaid net positive after giving the effect of debit note the same gets enhanced to ₹ 51,53,489/-. Hence there is no scope left for any ALP adjustment in these facts. We therefore, allow the claim of the assessee of benchmarking the entire transaction of export of nylon yarn and chafer using the aggregation approach which has been duly confirmed in various decisions cited supra and accordingly, the assessee’s international transactions of export of Nylon Yarn and Chafer are held at arm’s length. Thus, transfer pricing adjustment made by the TPO/AO and upheld by CIT (A) is hereby deleted.

Transfer of Carbon emission reduction (CER) certificates - assessee has received carbon emission reduction (‘CER’ or ‘carbon credits’) certificates on account of its efforts to reduce the emission of greenhouse gases in terms of Kyoto Protocol - HELD THAT:- We have observed that facts of the assessee are similar to the case of Gujarat Flourochemicals Ltd [2018 (8) TMI 857 - ITAT AHMEDABAD]. Further, in other cases too, the Hon’ble High Courts have held CER as the capital receipts not liable to tax. This tribunal in earlier years also has dealt with this issue in the case of assessee and remitted the matter to the file of AO. [2018 (2) TMI 2030 - ITAT DELHI] . Thus following the judgments of coordinate benches in assessee’s own case on merits, remit this issue back to the file of AO to decide it in accordance with the law having regard to above observations and the case laws relied upon by the assessee, after granting a reasonable opportunity of hearing to the assessee.

Admission of additional grounds - Interest subsidy under TUF scheme and other pertaining to allowance of deduction of education cess u/s 37 - HELD THAT:- NATIONAL THERMAL POWER COMPANY LIMITED VERSUS COMMISSIONER OF INCOME-TAX [1996 (12) TMI 7 - SUPREME COURT] and M/S. JAI PARABOLIC SPRINGS LTD. [2008 (4) TMI 3 - DELHI HIGH COURT] has categorically held that there is no fetters on the powers of the tribunal to entertain an additional ground. Hon’ble Court has described that power of tribunal in dealing with appeals have been expressed in widest possible term.We, therefore allow the application of the assessee for admission of additional grounds.

Interest Subsidy under Technological upgradation fund (TUF) - It is a settled position that purpose of subsidy or incentive and not the nomenclature of such incentive have to be seen for the purpose of deciding its nature as capital or revenue. Following the order of coordinate bench in assessee’s own case for AY 2012-13, we remit the issue to the file of assessing officer to verify the claim of the assessee and allow the relief if the same is in the nature of interest subsidy under TUF scheme after granting a reasonable opportunity of being heard to the assessee.

Deduction of education cess u/s 37/40(a)(ii) - HELD THAT:- As decided in M/S. SICPA INDIA PRIVATE LTD [2020 (4) TMI 425 - ITAT DELHI] education cess is not a disallowable expenditure u/s 40(a)(ii) of the Act having been expressly excluded from section 40(a)(ii) of the Act.

Moreover, cess is not in the nature of tax as has been held by Hon’ble Supreme Court in case of Smith Kline Amp; French (India) Ltd. and Ors.[1996 (4) TMI 2 - SUPREME COURT] - So, we are of the considered view that AO/CIT(A) have erred in disallowing the deduction for education cess on income-tax, dividend distribution tax and fringe benefit tax for AYs 2009-10, 2010-11 & 2011-12 in computing the total income under normal provisions of the Act, consequently ordered to be deleted. . Accordingly, we remit the issue back to the file of the AO to verify the claim of the assessee and allow the same in accordance with the law after granting a sufficient opportunity to the assessee.