TMI Blog2020 (6) TMI 564X X X X Extracts X X X X X X X X Extracts X X X X ..... ction for provision for warranty based on scientific working and analysis made by the assessee and in order to avoid multiplicity of proceedings we are inclined to allow the claim of provision for warranty - ground raised by the assessee is allowed. Disallowance u/s 14A r.w.r 8D - HELD THAT:- Both the parties fairly agreed that only those investments which had actually yielded exempt income during the year to the assessee are to be considered for the purpose of working out the disallowance made in the third limb of Rule 8D(2) of the Rules. This issue is now very well settled by the decision of ROTORK CONTROLS INDIA (P) LTD. VERSUS COMMISSIONER OF INCOME TAX, CHENNAI [ 2009 (5) TMI 16 - SUPREME COURT], we direct the ld. AO to consider only those investments which had actually yielded exempt income during the year while working out the disallowance under third limb of Rule 8D(2) of the Rules. Transfer pricing adjustment made in respect of corporate guarantee fee - HELD THAT:- ALP of corporate guarantee fee in respect of old guarantees to be determined at 3% in line with the decision take by this Tribunal for A.Y.2009-10 as the matter is pending before the Hon ble Jurisdict ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ency loans utilised for acquiring fixed assets and overseas investments is to be capitalised and correspondingly depreciation need to be granted to the assessee. In this, the exchange loss pertaining to the period till the asset was put to use should alone be capitalised and thereafter, the same should be allowed as revenue expenditure. Foreign exchange loss attributable to other monetary items debited to FCMITA as per AS 11 of ICAI should be allowed as revenue expenditure. Allowability of expenses on Employees Stock Options (ESOP) - HELD THAT:- We find that the ld. AR fairly submitted that in principle, this issue is decided in favour of the assessee by the Special Bench in the case of Biocon Ltd. [ 2013 (8) TMI 629 - ITAT BANGALORE] but still in the interest of justice, a specific direction need to be given to the ld. AO to allow deduction in respect of all options exercised during the year equal to the difference between the exercise price and the market price at the time of exercise of the option, as held in the case of Biocon Ltd, instead of the market price at the time of grant of option. We find lot of force in the said argument of the ld. AR and direct the ld. AO acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reference to DVO - AO adopted the valuation determined by the Stamp Valuation Authority and observed that the sale is higher than the sale consideration received by the assessee and accordingly computed the capital gains in terms of Section 50C - allowability of the tolerance limit of 5% to 10% range variation - HELD THAT:- We find that the ld. AR made elaborate arguments disputing the valuation report given by the DVO by suggesting various reasons. He also pleaded that any variation in full value of consideration between the DVO report and the actual sale consideration cannot be automatically treated as income and tolerance limit of 5% to 10% range should be granted to the assessee. We find that valuation report of DVO had been received after the order of ld. DRP and hence, the ld. AO did not have the benefit of the said DVO report either while framing the assessment or while giving the effect to the order of ld. DRP. Hence, in the interest of justice and fair play, we deem it fit and appropriate to remand this issue to the file of the ld. AO with a direction to recompute the capital gains on sale of land in terms of Section 50C(2) of the Act based on the reports obtained from DV ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quity shares in terms of Section 100 of Companies Act 1956. We find that there was extinguishment of the rights of the assessee and hence, this reduction has resulted into a capital loss in the hands of the shareholder i.e. assessee company. In the instant case, there is absolutely no dispute that the assessee company i.e. Mahindra and Mahindra Ltd., received no consideration on reduction of capital - Decided against assessee Additional ground for non-taxability of interest on tax free bonds - computation of income for both under normal provisions of the Act as well as in computation of profits u/s.115JB of the Act - HELD THAT:- Additional ground deserves to be admitted as it does not involve verification of the primary facts on record and more especially in view of the undisputed fact that the entire details of interest income had been duly filed before the ld. AO by the assessee during the course of assessment proceedings. Admittedly, the said interest income included interest earned on tax free bonds which is not liable for taxation at all both under normal provisions of the Act as well as in the computation of book profits u/s.115JB Merely because, the assessee had erro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ward loss and unabsorbed depreciation relating to demerged business of MADPL in the return of income. However, the ld. AO had allowed the said benefit based on the assessed loss of MADPL. We find that MADPL is in appeal for differential amount of loss. In case if MADPL succeeds in appeal and becomes entitled to the full or part loss of ₹ 108.13 Crores then, correspondingly, the availability of business loss and unabsorbed depreciation loss in the hands of the assessee company for set off would also increase. Hence, in the interest of justice and fair play, we deem it fit and appropriate to give the direction to the ld. AO to modify the assessment order and allow the loss to the assessee company as consequential effect consequent to determination of final loss of MADPL. - ITA No.1449/Mum/2016, SA No.462/Mum/2019 (Arising out of ITA No.1449/Mum/2016), ITA No.7382/Mum/2017, SA No.461/Mum/2019 (Arising out of ITA No.7382/Mum/2017), ITA No.1797/Mum/2016, ITA No.719/Mum/2017 - - - Dated:- 19-6-2020 - Shri Mahavir Singh, VP And Shri M. Balaganesh, AM For the Assessee : Shri H.P. Mahajani For the Revenue : Shri A. Mohan ORDER PER M. BALAGANESH (A.M): IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f expenditure in the sum of ₹ 17,45,55,863/- incurred by the assessee as capital expenditure. The alternative prayer made by the assessee on without prejudice basis is that in case if said expenditure is construed as capital expenditure, then depreciation should be allowed to the assessee. 2.1. We have heard the rival submissions and perused the materials available on record. We find that assessee is engaged in the business of manufacturing and sale of on-road automobiles, agricultural tractor implements, engine parts and accessories of motor vehicle rendering services, property development activity, financing, investment and transport solutions. We find that during the year under consideration, the assessee incurred expenses amounting to ₹ 17,45,55,863/- in connection with various acquisitions made / explored by it as under:- No Particulars Amount Amount A Automotive Division - Marketing 1 Legal Fees Legal Fees for Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Project Moon (For strategic alliance of systech companies) 34,20,421 Project Vacation (In connection with sale of MHRIL) 7,00,000 Total Legal Fees 41,20,421 ii) Professional Fees Project Moon (For strategic alliance of systech companies) 3,10,00,000 Project Amphere (Launch of electrically powered 2 Wheeler in the USA) 2,49,02,379 Project US Electric Vehicle (Launch of electrically powered 2 Wheeler in the USA) 15,18,952 Project Lotus (Restructuring of Mahindra Ugine Steel Company Limited) 23,63,155 Total Professional Fees 5,97,84,486 Head ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e first set of expenditure which resulted in acquisition of investments and hence the expenditure incurred could be added to the cost of investments as directed by the Tribunal in AY 2009-10 and earlier years. c) For this proposition reliance is placed on the following two decisions:- (i) Commissioner of income tax v/s. M/s. Magnese Ore India Limited (Income tax Reference No. 150 of 1993). The relevant paras of the order are Para 8 in which facts have been set out. The expenses were incurred for setting up a plant but which was never set up. The disputed expenditure was towards travelling expenses which was held by the Department to be capital in nature (para 14). In Para 20 the High Court has referred to the order of the SC in the case of Madras Auto Services (P) Ltd. (233 ITR 468) in which certain expenditure was held to be revenue in nature because no capital asset was generated by spending the amount in question. Concluding the issue in para 23 and applying the ratio in the case of Madras Auto (supra), the High Court held that the subject expenditure could not be directly related with the acquisition of any capital asset (because no capital asset resulted from the said ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee whenever each and every vehicle / tractor is sold, the said sale is covered by warranty clause and the buyer is entitled to enforce this clause within specified period / mileage provided, the defects in vehicle / tractor noticed by the buyer are covered by the warranty. It was stated that the warranty period extends from six months to 30 months. Pursuant to this warranty clause, the assessee during the year had made provision for warranty in the sum of ₹ 50,11,63,331/- as under:- (Rs. In lakhs) Division Provision for warranty for the year AY 2012-13 Provision for warranty for the year AY 2013-14 Incremental Provision for Warranty Automotive Division 19,053.01 24,637.71 5,584.70 Tractor Division 6,341.93 5,727.76 -614.17 Swaraj Division 1,640.55 1,673.44 32.89 Defense 5.49 0 -5.49 Total 27,040.98 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fic defects contained in the warranty clause within the warranty period and wherever the existing provision already made requires reversal due to the fact that the claim is made beyond the warranty period or the claim is not covered within the warranty clause etc, the same is reversed. This scientific exercise of making provision for warranty clause for each and every vehicle / tractor sold is made on a regular basis year on year by the assessee which is duly proved in the extensive workings provided before the lower authorities and hence, we find that the issue is squarely covered by the decision of the Hon ble Supreme Court in the case of Rotork Controls India Pvt. Ltd., vs CIT in 314 ITR 62. We also find that this issue has been allowed by the Tribunal in assessee s own case for the A.Y.1989-1990 to A.Y.1998-1999. Later in A.Y.2009-10, this issue was remitted back to the file of the ld. AO to decide the samein the light of the aforesaid Supreme Court decision. We find that the decision for A.Y.2009-10 was rendered by this Tribunal by placing reliance on the decision rendered in assessee s own case for the A.Y.2006-07 to 2008-09. For A.Y.2006-07 to 2008-09, the ld. AR submitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w very well settled by the decision of the Hon ble Supreme Court and accordingly, we direct the ld. AO to consider only those investments which had actually yielded exempt income during the year while working out the disallowance under third limb of Rule 8D(2) of the Rules. Accordingly, the concise ground No.3 raised by the assessee is partly allowed for statistical purposes. 5. The next issue to be decided in this appeal is with regard to transfer pricing adjustment made in respect of corporate guarantee fee of ₹ 4,44,82,256/- by the ld. TPO. 5.1. We have heard rival submissions and perused the materials available on record. We find that the assessee had given guarantee / letter of consent to Mahindra Overseas Industries Company (Mauritius) Ltd., (MOICML in short), Mahindra USA Inc (MUSA) and Mahindra Forgings Europe AG (MFEA) to expand the business operations and achieve overall growth in the business of the assessee. MOICML needed funds to make equity investments in other group companies. MUSA and MFEA needed the loan for working capital and to augment the growth of the business operations. There was no cost incurred to provide corporate guarantee. We find that as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 2,40,63,705/-. 6.1. We have heard rival submissions and perused the materials available on record. We find that assessee company had given loans to Bristlecone UK Ltd., Mahindra Overseas Investment Company (Mauritius) Ltd, Mahindra Gears International Ltd, at the rate of 6%, 6.20-6.6%, 9% and 6.25%, as the case may be. The assessee company benchmarked the loans using LIBOR rate by using external Comparable Uncontrolled Price Method (CUP). The ld. TPO applied LIBOR for the year of loan and further added the average spread of comparable unsecured loans given in the said year and made ALP adjustment accordingly. We find that the ld. DRP directed the ld. AO to adopt LIBOR rate of the year in which the loan was given in case the loan had been granted at fixed rate for the entire tenure of the loan. However, if the loan had been granted for a floating / flexible rate of interest, the ld DRP directed the ld AO that LIBOR rate to be applied would be LIBOR for the year under consideration. The ld. DRP also directed the ld. AO to adopt the LIBOR as directed above and further add 5% towards basis points. 6.2. Aggrieved by this direction, the assessee is in appeal before us. The ld. DR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... end provision made for various expenses. But we find that the entire break-up had been duly submitted by the assessee before the lower authorities and the same are enclosed in page 234 of the paper book and the figures mentioned thereon are fairly ascertainable and are not mere adhoc provisions. Respectfully following the said decision of the Tribunal in assessee s own case for A.Y.2009-10, we have no hesitation in directing the ld. AO to delete the disallowance u/s. 40(a)(ia) in the sum of ₹ 33,78,54,976/-. Accordingly, the concise ground No.5 raised by the assessee is allowed. 8. The next issue to be decided in this appeal is with regard to allowance of weighted deduction u/s.35(2AB) of the Act. 8.1. We have heard rival submissions and perused the materials available on record. We find that assessee has several research and development (R D) units which were even approved by the Department of Scientific and Industrial Research (DSIR) for the purpose of claiming weighted deduction u/s.35 (2AB) of the Act as under:- a) For the period 01/04/2011 to 31/03/2013 Mahindra Research Valley Centre. b) For the period 01/04/2010 to 31/03/2015 i) Kandivali R D Servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bility for claim of deduction u/s.35(2AB) of the Act thereof. The concise ground No.6 raised by the assessee is disposed off in the aforesaid manner. 9. The next issue to be decided is with regard to disallowance u/s.40(a)(ia) of the Act in respect of dealer incentives of ₹ 386,85,00,000/-. 9.1. We have heard rival submissions and perused the materials available on record. We find that the limited issue involved herein is whether provisions of 194 H are applicable in respect of dealer incentives in the form of discounts / rebates paid by the assessee to the dealers on meeting certain criteria. We find that the assessee had contended that the transaction between the dealer and the assessee manufacturer is of a sale of the vehicle on a principal to principal basis, whereas the revenue had been holding that the dealers are agents of the assessee, who had rendered services in the course of buying and selling of goods. According to the revenue, since the dealer is merely an intermediary between the assessee and final customer, the provisions of Section 194H of the Act are applicable and since the assessee had failed to deduct the tax at source, disallowance u/s.40(a)(ia) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... way of Electricity Duty exemption, exemption from payment of Stamp Duty, refund of royalty and any other benefits (as may be specified by the Government) availed by the eligible Mega Projects under PSI 2001 / 2007, whichever is lower. The copy of the said incentive scheme are enclosed in page 278 to 318 of the paper book filed before us. We find that assessee treated the amount of incentive received under Industrial Promotion Subsidy as capital receipt in the return of income on account of the following reasons:- (a) The main objective of the Scheme was to ensure sustained industrial growth through innovative initiatives for development of key potential sectors and further improving the conducive industrial climate in the State, for providing the global competitive edge to the State's industry. The policy envisages grant of fiscal incentives to achieve higher and sustainable economic growth with emphasis on balanced regional development and employment generation through greater private and public investment in industrial development. In other words, the Scheme was meant to correct regional imbalance in the industrial development of the State and also achieve higher and sust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ind that this issue has been addressed in the following decisions of Hon ble Supreme Court in favour of the assessee as under:- (a) Chaphalkar Brothers, case reported in (2017) 88 Taxmann.com 178 (SC) (b) Shree Balaji Alloys and others, case reported in (2017) 80 Taxmann.com 239 (SC) 10.5. Respectfully following the said decision, we hold that the subsidy in the sum of ₹ 45,36,95,084/- is to be treated as capital receipt. Accordingly, the concise ground No.8 raised by the assessee is allowed. 11. The next issue to be decided in this appeal is with regard to treatment of industrial promotion subsidy incentive of ₹ 119,85,01,118/- in the hands of the assessee. 11.1 We have heard rival submissions and perused the materials available on record. We find that assessee had claimed a sum of ₹ 119,85,01,118/- for the industrial promotion subsidy incentive received on the basis of Package Scheme of incentive 2007 declared by Government of Maharashtra for setting up of industry in certain backward areas (Chakan). The said incentive was given by Directorate of Industries for locating in a backward area and sales tax payment is only a measure or yard stick to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary company s case i.e. Mahindra Vehicle Manufacturers Ltd., in ITA No.6919 6920/Mum/2016 dated 28/11/2018 wherein the receipt of subsidy had been held to be capital receipt as the same had been held to be capital receipt as the same had been granted for either setting up new unit or for expanding the existing unit in certain regions of the State. It was further held that the subsidy was granted in the form of sales tax payable on finished goods and spares sold by the assessee. This Tribunal decision was rendered by duly considering the decision of Hon ble Supreme Court in the case of Ponni Sugars and Chemicals Ltd., reported in 306 ITR 392. Respectfully following the same, we direct the ld. AO to treat the receipt of industrial promotion subsidy incentive of ₹ 119,85,01,118/- under the 2007 incentive scheme as capital receipt. Accordingly, the concise ground No.9 raised by the assessee is allowed. 12. The next issue to be decided in this appeal is with regard to disallowance of deduction of difference in exchange rate of ₹ 119,37,27,592/-. 12.1. We have heard rival submissions and perused the material available on record. We find at the outset that the differen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed assets, (ii) capital work-in-progress and (iii) has carried forward certain amount in the 'Foreign Currency Monetary item Translation Difference Account' to be written-off to the profit loss account in later years. 12.8. The exchange loss debited to 'Foreign Currency Monetary Item Translation Difference Account' is written-off to the profit loss account over the life of the corresponding foreign currency loans. 12.9 Section 43A of the Income Tax Act, 1961 deals with exchange difference arising on repayment of liabilities incurred for the purpose of acquiring fixed assets outside India. Since there is no specific provision dealing with adjustment based on foreign exchange fluctuation for assets acquired locally in India, the Company has claimed the Difference in Exchange of ₹ 63,02,52,539/- to the Fixed assets / Capital work- in- progress and ₹ 56,34,75,052/- carried forward in the 'Foreign Currency Monetary Item Translation Difference Account' as deductible revenue expenditure. 12.10. We find that the ld. AO had disallowed the aforesaid exchange fluctuation loss as notional and contingent and also capital in nature and accor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssets only till such time, the assets were not put to use. Thereafter, such exchange loss should be allowed as revenue expenditure. We find that this line of argument was not taken up by the assessee for A.Y.2009-10 while addressing this issue before the Tribunal for A.Y.2009-10. Accordingly, there was no occasion for this Tribunal to adjudicate this aspect of the issue. The ld AR submitted that this exchange loss that is debited to FCMITA is not related to acquire fixed assets and hence, the same should be allowed as revenue expenditure. The ld. AR further stated that, in any event, the process of capitalisation of such exchange loss should end with the commencement of overseas investments utilizing foreign currency loans. Exchange loss for the period after acquisition of investments and therefore, be allowed as revenue expenditure according to the ld. AR. We find that the decision taken by this Tribunal in A.Y.2009-10 may not be fully applicable to the facts of the instant case and we hold that the said decision would hold good with some modifications as suggested below based on factual developments that had happened later:- (a) Foreign currency loans utilised for acquiring fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee company. The ld. AO also observed that employees stock option will give enduring benefit to the assessee company from the employees who have availed the scheme. The ld. AO by placing reliance on the decision of Hon ble Supreme Court in the case of Punjab State Industrial Development Corporation Ltd., reported in 225 ITR 792 and Brooke Bond India Ltd., reported in 225 ITR 798 held that the said expenditure would be capital in nature. This action was upheld by the ld. DRP. We find that this issue is now settled by the Special Bench of the Bangalore Tribunal in the case of Biocon Ltd., in favour of the assessee, wherein it has been held that the deduction is to be allowed for the difference between the exercise price of the option and the market price at the time of exercise of the option. We find that in the return of income, the assessee had claimed deduction for the difference between the exercise price and the market price on the date of grant of option. This Tribunal while rendering the decision for the A.Y.2009-10 in assessee s own case had restored this issue to the file of the ld. AO to consider the claim of deduction in the light of the Special Bench decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mently stated before the lower authorities that, the liability had indeed arisen during the current year and the said scheme has been formulated wholly and exclusively for the purpose of the business of the company, the said sum of ₹ 751.45 lakhs should be allowed as business expenditure. The ld. AO, however, disallowed the claim holding it to be a mere provision and contingent in nature. Further, he observed that this benefit will be given to retiring employees and not working employees and hence, not allowed as business expenditure. 14.3. Similarly, with regard to provision made for post-retirement medical scheme in the sum of ₹ 206.30 lakhs, the ld. AO disallowed the same on the same ground that it is a mere provision and contingent in nature and that the benefit will be given to retiring employees and not to working employees. The copy of the said actuarial valuation report for post retirement medical benefits is enclosed in pages 429-445 of the paper book filed before us. 14.4. We find that the issue under dispute is squarely covered in favour of the assessee by the coordinate bench decision of this Tribunal in the case of Hindustan Petroleum Corporation Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8377; 3,33,56,000/- on the pretext that the said claim was not made by the assessee company in the return of income. The ld. AO in this regard placed reliance on the decision of the Hon ble Supreme Court in the case of Goetze India Ltd., reported in 284 ITR 323. This action of the ld. AO was upheld by the ld. DRP. We find that the claim of the assessee deserves to be accepted in view of the narration of the aforesaid facts which remain undisputed. In any case, the decision of Hon ble Supreme Court in Goetze India Ltd., in 284 ITR 323 does not apply to appellate authorities especially the Tribunal, which fact is clearly mentioned in the last paragraph of the said decision. It is not the case of the revenue that the claim made by the assessee herein to reduce the same and ₹ 3,33,56,000/- is ingenuine. We would like to place reliance on the decision of the Hon ble Jurisdictional High Court in the case of Pruthvi Brokers and Shareholders Pvt. Ltd., reported in 349 ITR 336 (Bom) and accordingly, entertain the claim of the assessee and direct the ld. AO to reduce a sum of ₹ 3,33,56,000/- from the total income while giving effect to this order. Accordingly, the concise ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y granting exemption for the same while giving effect to this order. Accordingly, the concise ground No.14 raised by the assessee is allowed. 17. The next issue to be decided in this appeal is with regard to capital gains on sale of land amounting to ₹ 270,37,500/-. 17.1. Brief facts of this issue are that during the year under review, the company has sold land at Pune Goa and shown capital gain of ₹ 6,29,47,157 as under:- Details of Land Actual Sale vale Indexed cost of acquisition Long term capital gains LAND AT BICHOLIM MOITEM, GOA 1,89,130 SQ.MTS 8.28.00.000 2,48,57,432 5,79,42.568 LAND AT WAGHOLI PUNE GAT NO 2358 0 HEC.75ARES 1,20,00,000 1,01,68,830 18,31.170 LAND AT PUNE WAGHOLI GAT NO. 2360 O.HEC 82 ARES 1,30,00,000 1,11,18,201 18,81,799 GAT NO.2359 PUNE WAGHOLI LAND 44.12 ARES 70,00,000 57,08,380 12,91,620 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ingly, the concise ground No.15 is disposed off in the aforesaid manner. 18. The concise ground Nos.16A and 16B were stated to be not pressed by the ld. AR at the time of hearing. The same is reckoned as statement made from the Bar and accordingly, the concise ground Nos . 16A and 16B are dismissed as not pressed. 19. The next issue to be decided in this appeal is with regard to deduction u/s.80IC of the Act in respect of Rudrapur unit of the assessee. 19.1. The brief facts of this issue are that the assessee claimed deduction u/s.80IC of the Act in respect of Rudrapur unit for ₹ 135,35,79,000/-, which was restricted by the ld. AO to ₹ 57,01,61,441/-. The ld. AO in principle accepted the fact that assessee is entitled for deduction u/s.80IC of the Act in respect of profits derived from Rudrapur unit of the assessee. The ld. AO allowed deduction u/s.80IC of the Act by applying the following formula:- Total business of the company x Rudrapur unit turn over Total turn over 19.2. This formula was adopted by placing reliance on the order of the ld. DRP for A.Y.2009-10 and 2012-13. This action was upheld by the ld. DRP. 19.3. The ld. AR before us argued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transfer of components to Rudrapur unit from other unit was not done at arm s length. It was also observed that in earlier years, the provisions of Section 80IA(8) and Section 80IA(10) were not complied with. However, in the current financial year relevant to A.Y.2013-14, there was no such finding recorded by the ld. AO. Hence, the order of the ld. TPO making no adjustment to ALP in respect of specified domestic transaction of Rudrapur unit would be binding on the ld. AO and the claim of deduction u/s.80IC of the Act by the assessee for Rudrapur unit need to be accepted in toto. He also argued that similar claim of deduction u/s.80IC of the Act for Rudrapur Unit made by the assessee were accepted as such in A.Yrs. 2007-08 and 2008-09 before it was disturbed in A.Y.2009-10 as stated supra. He submitted that in A.Y.2009-10, this Tribunal in assessee s own case in ITA No.1956/Mum/2014 dated 10/04/2019 had restored the matter back to the file of the ld. AO to recompute the deduction with specific directions after primarily accepting the method of computation of eligible profits followed by the assessee. He drew our attention to the paras 55 to 59 of the said Tribunal order for A.Y.2009 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngthened by CBDT instruction No.3/2016. We find for A.Y.2009-10, reference to Transfer Pricing Officer under the category of specified domestic transactions, were not provided for in the statute at the relevant point of time. Whereas for A.Y.2013-14 i.e. the year under appeal, the statute had duly provided for determining of arm s length price in respect of specified domestic transactions. It is not in dispute that the transactions of Rudrapur Unit duly fall within the ambit of specified domestic transactions . Hence, we hold that once the profitability disclosed by the assessee for Rudrapur unit had been accepted to be at arm s length by the ld. TPO in the transfer pricing adjustment, the same cannot be further disturbed by the ld. AO by making some disallowance or by adopting different method of determining the profitability and especially in view of the fact that no adverse findings were recorded by the lower authorities, with regard to profitability of Rudrapur Unit. In view of the aforesaid findings, we direct the ld. AO to accept the claim of deduction u/s.80IC of the Act made by the assessee in the return of income. Accordingly, the concise ground No.17 raised by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of capital gains. We find that the lower authorities had not allowed the loss by placing reliance on the decision of the Special Bench of Mumbai Tribunal in the case of Bennett and Coleman Co. Ltd., in ITA No.3013/Mum/2007 reported in 14 Taxmann.com 1 dated 30/09/2011 wherein it was held that capital loss on reduction of share capital cannot be allowed. We find that the ld. DRP erred in holding that requisite evidence was not available during the hearing to substantiate that Mahindra Shubhlabh Services Ltd., is not a wholly owned subsidiary of assessee company. The ld. AR submitted that assessee holds 83.05% shares in Mahindra Shubhlabh Services Ltd., which was duly substantiated before the ld. DRP by drawing reference to page No.167 of the paper book which is part of annual accounts. We find that reduction of share capital had taken place in paid up value of equity shares in terms of Section 100 of Companies Act 1956. We find that there was extinguishment of the rights of the assessee and hence, this reduction has resulted into a capital loss in the hands of the shareholder i.e. assessee company. 24.2. In this regard, it would be relevant to address the primary undisputed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ace value was reduced from ₹ 5000/- per share to ₹ 50/- per share. The Assessing Officer in that case held that a sum of ₹ 450/- per share which was received by the assessee in 1966 was subject to capital gains. However, the assessee contended in that case that that such reduction of the face value did not result in transfer as per the provisions of Section 2(47) of the Act. In this regard, the Hon ble Supreme Court held as under:- 10. Section 2(47) which is an inclusive definition, inter alia, provides that retinquishment of an asset or extinguishment of any right therein amounts to a transfer of a capital asset. While, it is no doubt true that the appellant continues to remain a shareholder of the company even with the reduction of a share capital, it is not possible to accept the contention that there has been no extinguishment of any part of his right as a shareholder qua the company. It is not necessary that for a capital gain to arise there must be a sale of a capital asset. Sale is only one of the modes of transfer envisaged by section 2(47). Relinquishment of the asset or the extinguishment of any right in it, which may not amount to sale, can also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res. It was observed that in effect the company buys back the preference shares from the shareholders. Further, referring to the provisions of the Companies Act, it held that the reduction of preference shares by a company was a sale and would squarely come within the phrase 'sale, exchange or relinquishment1 of an asset under section 2(47). It was also held that the definition of word 'transfer' under section 2(47) was not an exhaustive definition and that sub-section (1) of clause (47) of section 2 implies that parting with any capital asset for gain would be taxable under section 45 of the Act. In this connection, it was noted that when preference shares are redeemed by the company, the shareholder has to abandon or surrender the shares in order to get the amount of money in lieu thereof. 14. In our opinion, the aforesaid decision of this Court in Anarkali Sarabhai's case (supra) is applicable in the instant case. The only difference in the present case and Anarkali Sarabhai's case (supra) is that whereas in Anarkali Sarabhai's case (supra), preference shares were redeemed in entirety, in the present case there has been a reduction in the share capit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . AO by the assessee during the course of assessment proceedings. Admittedly, the said interest income included interest earned on tax free bonds in the sum of ₹ 3,47,19,107/- which is not liable for taxation at all both under normal provisions of the Act as well as in the computation of book profits u/s.115JB of the Act. Merely because, the assessee had erroneously offered the same in the return of income, the same cannot be brought to tax by the revenue. The law is now well settled that only just and right tax should be collected from the right person by the revenue. Hence, we deem it fit and admit the additional ground and direct the ld. AO to reduce the sum of ₹ 3,47,19,107/- towards interest income on tax free bonds both under normal provisions of the Act as well as in the computation of book profits u/s.115JB of the Act. We also place reliance on the decision of Hon ble Jurisdictional High Court in the case of Pruthvi Brokers and Shareholders Pvt. Ltd., reported in 349 ITR 336 (Bom) in support of the proposition. Accordingly, the additional ground No.2 raised by the assessee is allowed. 27. In the result, the appeal of the assessee in ITA No.1449/Mum/2016 for A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale of vehicles in its books as and when the vehicles are sold to the dealer. Once, the vehicle is sold to the dealer, the dealer becomes a debtor to the assessee company and the payment thereon is not linked to further sale by the dealer to the ultimate customer. It was also specifically pointed out that there is no provision for return of unsold vehicles by the dealer to the assessee company. Thus, the relationship of principal and agent does not exist between the company and dealer. Since the dealer does not render any services to the company, in lieu of incentives received by them, the question of deduction of tax at source on the said payment within the ambit of Section 194H of the Act does not arise. We find that the ld. AO however, did not agree to the said proposition of the assessee and concluded that the dealer has rendered services in the course of buying and selling of vehicles by acting in the capacity of agent and that there is no difference between the term discount and commission . With these observations, the ld. AO concluded that the said payment would fall within the ambit of Section 194H of the Act warranting deduction of tax at source, for which there would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee is with regard to seeking benefit of set off of brought forward loss and unabsorbed depreciation relating to demerged business of Mahindra Automobile Distributor Pvt. Ltd. (MADPL). 34.1. We have heard rival submissions and perused the materials available on record. We find that assessee company had claimed set off of brought forward loss and unabsorbed depreciation relating to demerged business of MADPL amounting to ₹ 519.54 Crores in the return of income. However, the ld. AO had allowed the said benefit to the extent of ₹ 411.41 Crores based on the assessed loss of MADPL. We find that MADPL is in appeal for differential amount of loss of ₹ 108.13 Crores. In case if MADPL succeeds in appeal and becomes entitled to the full or part loss of ₹ 108.13 Crores then, correspondingly, the availability of business loss and unabsorbed depreciation loss in the hands of the assessee company for set off would also increase. Hence, in the interest of justice and fair play, we deem it fit and appropriate to give the direction to the ld. AO to modify the assessment order and allow the loss to the assessee company as consequential effect consequent to dete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nners :- (a) The Bench may pronounce the order immediately upon the conclusion of the hearing. (b) In case where the order is not pronounced immediately on the conclusion of the hearing, the Bench shall give a date for pronouncement. (c ) In a case where no date of pronouncement is given by the Bench, every endeavour shall be made by the Bench to pronounce the order within 60 days from the date on which the hearing of the case was concluded but, where it is not practicable so to do on the ground of exceptional and extraordinary circumstances of the case, the Bench shall fix a future day for pronouncement of the order, and such date shall not ordinarily (emphasis supplied by us now) be a day beyond a further period of 30 days and due notice of the day so fixed shall be given on the notice board. 8. Quite clearly, ordinarily the order on an appeal should be pronounced by the bench within no more than 90 days from the date of concluding the hearing. It is, however, important to note that the expression ordinarily has been used in the said rule itself. This rule was inserted as a result of directions of Hon ble jurisdictional High Court in the case of Shivsagar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion has expired after 15.03.2020 then the period from 15.03.2020 till the date on which the lockdown is lifted in the jurisdictional area where the dispute lies or where the cause of action arises shall be extended for a period of 15 days after the lifting of lockdown . Hon ble Bombay High Court, in an order dated 15th April 2020, has, besides extending the validity of all interim orders, has also observed that, It is also clarified that while calculating time for disposal of matters made time-bound by this Court, the period for which the order dated 26th March 2020 continues to operate shall be added and time shall stand extended accordingly , and also observed that arrangement continued by an order dated 26th March 2020 till 30th April 2020 shall continue further till 15th June 2020 . It has been an unprecedented situation not only in India but all over the world. Government of India has, vide notification dated 19th February 2020, taken the stand that, the coronavirus should be considered a case of natural calamity and FMC (i.e. force majeure clause) maybe invoked, wherever considered appropriate, following the due procedure . The term force majeure has been defined in Bl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4(5) of the Appellate Tribunal Rules, 1963. Viewed thus, the exception, to 90-day time-limit for pronouncement of orders, inherent in rule 34(5)(c), with respect to the pronouncement of orders within ninety days, clearly comes into play in the present case. Of course, there is no, and there cannot be any, bar on the discretion of the benches to refix the matters for clarifications because of considerable time lag between the point of time when the hearing is concluded and the point of time when the order thereon is being finalized, but then, in our considered view, no such exercise was required to be carried out on the facts of this case. 11. To sum up, the appeal of the assessee is allowed, and appeal of the Assessing Officer is dismissed. Order pronounced under rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1962, by placing the details on the notice board. 38.1. Respectfully following the aforesaid judicial precedent, we proceed to pronounce this order beyond a period of 90 days from the date of conclusion of hearing. TO SUM UP: 39. In the result, all the appeals of the assessee are partly allowed for statistical purposes and appeal of the revenue is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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