TMI Blog2021 (1) TMI 741X X X X Extracts X X X X X X X X Extracts X X X X ..... pect to Shahenshah Scheme to be on scientific basis. Before us, no material has been placed by the Revenue to point out any distinguishing feature in the facts of the case in the year under consideration and that of earlier years. Further Revenue has also not placed any material to demonstrate that the decision of the Tribunal in assessee s own case in A.Y. 2006-07, 2007-08, 2008-09 has been set aside/ stayed or over ruled by the higher judicial forum. Considering the totality of the aforesaid facts and following the order of the Co-ordinate bench in the assessee s own case and for similar reasons, we hold that the Revenue was not justified in making the addition. Denial of claim of deduction u/s 80IC on interest income - interest income in the accounts of Baddi Unit and Haridwar Unit - HELD THAT:- We find that the Hon ble Delhi High Court in the case of PCIT vs. Bharat Sanchar Nigam Ltd. [ 2016 (8) TMI 270 - DELHI HIGH COURT] and the Co-ordinate Bench of Tribunal in the case of M/s. NHPC Ltd [ 2019 (5) TMI 1664 - ITAT DELHI] has held that the Revenue was not justified in denying the claim of deduction on such income. Before us, Revenue has not pointed any contrary binding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e view that it cannot be considered to be a comparable company - in the case of Worley Parsons India Pvt. Ltd [ 2017 (2) TMI 117 - ITAT HYDERABAD] has noted that public sector undertakings are not driven by profit motive alone but other considerations such as discharge of social obligations etc also weigh and hence they cannot be considered as comparable to the private companies - we hold that WAPCOS Ltd. cannot be considered to be a comparable company and we therefore direct its exclusion. - ITA No.6194/Del/2015, ITA No.463/Del/2016 - - - Dated:- 19-1-2021 - Sh. Anil Chaturvedi, Accountant Member And Sh. Kuldip Singh, Judicial Member For the Assessee : Shri Ved Jain, Advocate, Shri Akshat Goyal, Advocate For the Revenue : Shri Bhagwati Charan, CIT(DR) ORDER PER ANIL CHATURVEDI, AM: Both the appeals by the assessee are preferred against the order of the Commissioner of Income Tax (Appeals)-22 44, New Delhi dated 23.10.2015 29.10.2015 respectively pertaining to Assessment Year 2009-10. Appeal No 6194/Del/2015 is against the quantum additions confirmed by CIT(A) and appeal No ITA No.463/Del/2016 is against the order passed u/s 154 of the Act. 2. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shah Scheme treating the same as unascertained and contingent liability. 3. That on the facts and in the circumstances of the case and the legal position, the learned CIT (Appeals) has erred in confirming the Order of the AO when : i. addition made by the AO in the assessment proceedings u/s 143(3) is debatable addition. ii. the addition u/s 143(3) is debatable, the rectification proceedings u/s 154 are illegal and void-ab-initio. 4. That the appellant, craves, leave to add/alter/delete/amend any ground(s) of appeal before or at the time of hearing. ITA No.463/Del/2016 1. That the impugned order of CIT (A)-44, New Delhi is bad in law and wrong on the facts and in the circumstances of the case and legal position. 2.01 That on the facts and in the circumstances of the case and the legal position, the learned CIT(A) has erred in confirming the disallowance of ₹ 17,59,124/- u/s 40(a)(i) of the Act, 1961 paid to a foreign entity as testing / certification fees outside India, as no income has accrued /arisen in India. 2.02 That the Learned CIT(A) has failed to appreciate that testing/certification fees paid outside India was not chargeabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aim was not made by filing a revised return, without appreciating that the embargo/ prohibition contained in the case of Goetze India Limited 284 ITR 323 (SC) do not apply to the powers of the appellate authority to entertain any fresh/ new claim. 7. That on the facts and in the circumstances of the case and the legal position, the learned CIT (A) has erred in confirming the adjustment by re-determining the arm s length price under Section 92CA of the Act, of the appellant Company s international transactions of support services provided to wholly owned foreign subsidiary Company and step down subsidiary Company (AE) at Net Cost plus margin ( NCP ) of 12.92% as against 7.70% claimed by the appellant Company and thus confirming the disallowance of ₹ 36,04,286/-. 6. We thus first proceed to dispose of assessee s appeal in ITA No.463/Del/2016. 7. Before us, at the outset, Learned AR submitted that the Ground No.1 is general in nature therefore requires no adjudication. 8. Ground No.2 and the sub grounds are with respect to the disallowance u/s 40(a)(i) of the Act. 9. During the course of assessment proceedings, AO noticed that assessee had paid ₹ 17,59,1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee. He pointed to the relevant order which is placed in the paper book submitted by the assessee. He therefore submitted that the reliance placed by the AO on the decision of Hon ble Delhi High Court in the case of assessee is misplaced. He thereafter submitted that identical issue came up in subsequent year i.e. A.Y. 2006-07 and the Tribunal following the findings given by the Tribunal in A.Y.2005-06 deleted the addition made by AO. He submitted that identical issue once again came before the Tribunal in A.Y. 2007-08 (ITA No.6073/Del/2010) wherein the Tribunal following the findings given by the Tribunal in A.Y. 2005-06 and 2006-07 deleted the addition made by AO. He further submitted that the order for A.Y. 2007-08 was followed by the Tribunal while passing the order for A.Y. 2008-09. He thus submitted that the issue is thus squarely covered in favour of the assessee by the orders of Tribunal for A.Ys. 2005-06, 2006-07, 2007-08 2008-09. Learned AR further submitted that the facts of the issue in the year under consideration are identical to that of earlier years. He therefore, submitted that addition made by the AO be deleted. 12. Learned DR on the other hand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 5,68,856/- to M/s KEMA Quality BV,Netherland for the purpose of certification of electrical products manufactured by the assessee. The aforesaid foreign entity was authorized for certification of products for export which is a mandatory requirement for selling products in Europe, Middle East Countries, and South African Countries. The explanation given by the assessee before the Assessing Officer for not withhold tax at source on the aforesaid payment of ₹ 5,68,856/- made to the overseas entity, since the assessee bonafidely believed that such certification fee was not liable to tax in India, as the same was not covered within the meaning of Fee for Technical Services as provided u/s 9(1) (vii) of the Act and/or the overriding provisions of the Double Taxation Avoidance Agreements. The aforesaid issue stands covered in favour of the assessee by the order of the Tribunal passed in the assessee s own case for Assessment Year 2006-07 (ITA No. 4813/Del/2010 Assessment Year 2007-08 being ITA No. 6073/Del/2010). The Tribunal vide order dated 30/09/2019 passed in Assessment Year 2006-07 held that the payment made by the assessee to very same party i.e. M/s KEMA Quality ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fic method but was in the nature of contingent liability. He also noted that CIT(A) while deciding the issue in assessee s own case for A.Y. 2008-09 had analyzed scheme and had confirmed the addition made by the AO. He therefore disallowed ₹ 2,47,68,964/- [5,67,26,847 2,61,14,170 (5843713/-)]. 17. Aggrieved by the order of AO, assessee carried the matter before the CIT(A), who following the order of his predecessor in assessee s own case for A.Y. 2008-09, upheld the action of the AO. Aggrieved by the order of CIT(A), assessee is now before us. 18. Before us, Learned AR reiterated the submissions made before the AO and CIT(A) and further submitted that against the order of CIT(A) for A.Y. 2008-09, assessee had carried the matter before the Tribunal. The Tribunal vide order dated 30.09.2019 in ITA No.4695/Del/2012 has decided the issue in favour of the assessee by holding that the provision made in respect of Shahenshah Scheme is on a scientific basis. He further submitted that the Co-ordinate Bench of Tribunal had deleted the similar additions made by AO in A.Y. 2007-08 2006-07. He pointed to the relevant findings in the synopsis filed by him. He therefore submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income derived from business activity of industrial undertaking and since interest has been derived from fixed deposits, the interest was not eligible for deduction. He accordingly denied the claim of deduction u/s 80IC on such interest income. 23. Aggrieved by the order of AO, assessee carried the matter before the CIT(A) who upheld the order of AO. Aggrieved by the order of CIT(A), assessee is now before us. 24. Before us, Learned AR reiterated the submissions made before the lower authorities and further submitted that interest income was earned on the fixed deposits which was required to be maintained as per the statutory requirements of the respective state. He submitted that since the interest income was inextricably linked to the main business activity of the assessee, it should be considered to be treated as eligible for claiming deduction. In support of its claim for interest being eligible for deduction, he also relied on the decision of Hon ble Delhi High Court in the case of PCIT vs. Bharat Sanchar Nigam Ltd. in ITA No.477/2016 dated 01.08.2016 and the decision of ITAT in the case of M/s. NHPC Ltd vs. ACIT in ITA No.3738/Del/2015 in order dated 08.05.2019. 25. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim of deduction. 29. Aggrieved by the order of AO, assessee carried the matter before the CIT(A) who upheld the order of AO. 30. Aggrieved by the order of CIT(A), the assessee is now before us. 31. Before us, Learned AR submitted that identical issue arose in assessee s own case in A.Y. 2008-09, wherein on identical facts, when the claim was made without filing the revised return of income, the Co-ordinate Bench of Tribunal has allowed the deduction. He pointed to the relevant findings noted in the synopsis. He submitted that since the facts of the case in the year under consideration are identical to that of A.Y. 2008-09, therefore following the order for AY 2008-09, the claim of the assessee are allowed. 32. Learned DR on the other hand supported the order of lower authorities. 33. We have heard the rival submissions and perused all the materials available on record. The issue in the present grounds is with respect to the claim of deduction on account of education cess and secondary and higher education cess. 34. It is an undisputed fact that the claim of deduction was not made in the return of income nor any revised return of income was filed for claiming th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... denying the claim of deduction. We therefore set aside the action of AO. Thus the ground of the assessee is allowed. 36. Ground No.6 is with respect to denial of claim of deduction of interest expenses of ₹ 1,57,80,709/-. 37. During the course of assessment proceedings, assessee claimed that the interest expenses capitalized in respect of land of Greater Noida amounting to ₹ 20,72,556/-, interest in respect of land of Neemrana to RICCO amounting to ₹ 50,69,120/- and interest of ₹ 82,39,033/- paid to Canara Bank in respect of Neemrana Plant aggregate interest being ₹ 1,57,80,709/- which has been capitalized be allowed as a revenue expenditure. To justify the claim of expenditure as revenue expenses it was submitted that the interest has been paid for the expansion of existing business activities of the assessee which was already being carried out at other units. It was further submitted that since there was a complete unity, interlacing, inter dependence and inter connection of management, financial, administrative and production aspects amongst all division of each unit and amongst all units of the business as a whole, the expenditure incurred i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the same line of products, being electrical products such as CFL and electric motor, spares etc. for which assessee had two plants, one in Greater Noida and other in Neemrana. He further submitted that during the course of assessment proceedings, the AO had asked for a specific query regarding the pre-operative expenditure of ₹ 4,30,88,908/- incurred for setting up the manufacturing unit at Neemrana and it was submitted that it was for the expansion of the business and not for Extension of the business and the AO had allowed the expenses without invoking the provision of Section 35D of the Act. He further submitted that Hon ble Delhi High Court in assessee s own case for A.Y. 2005-06 are held that where there were intermingling and interlacing of the funds of the units and common management, then all the business constituted the same or single business and expenditure incurred by the assessee on new unit would be considered as expenditure in respect of an expansion of the existing business. He further submitted that pre-amended proviso to Section 36(1)(iii) shall be applicable to the relevant assessment year in question (prior to its amendment by Financial Act, 2015) a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness and financial risk, development and management of the company s supply chain and other procurement services etc, (the details of which are listed in the order) for which assessee had received consideration of ₹ 4,78,20,606/-. For benchmarking of aforesaid international transactions, Assessee had applied Transactional Net Margin Method (TNMM) by considering itself to be the tested party and operating profit to operating cost (OP/OC) as the Profit Level Indicator ( PLI ). Assessee considered three comparable companies namely Hartron Informatics Ltd. (with OP/OC of 12.05%), Escorts Asset Management Ltd. (with OP/OC of 1.22%) and Mecklai Financial and Commercial Services Ltd. (with OP/OC of 9.82%) as comparable companies and the average operating profit margin of those comparable companies was worked out at ₹ 7.70%. Since the profit margin of the assessee was at 5.01%, which was within the arm s length range of +/- 5% of the average operating profit margin of the comparable companies at 7.70%, Assessee considered the international transaction of provision of services to be at arm s length. During the proceeding before the TPO, TPO disregarded the benchmarking analysi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ual report available in the Public Domain and in support of which he pointed to the copy of the annual report which is placed in the paper book. He submitted that TPO cannot use the information which does not match with the figures reported in the Annual Report and for this proposition he placed reliance on the decision of the case of M/s. Dell International Services India Pvt. Ltd. vs. DCIT, IT(TP)A No.879/Bang/2018 order dated June 24, 2020, AIRCOM International (India) (P.) Ltd. vs. DCIT Appeal No.4403(Delhi) of 2012 where the Tribunal had held that the information which was not available in public domain could not have been used by the TPO, when the same is contrary to the Annual Report. He further submitted that as per the Annual Report of Piramal Enterprises Ltd. which is available in the public domain, it was formerly known as Piramal Healthcare Ltd and it is a pharmaceutical company and is engaged in the business of manufacture of medicines, drugs and formulations. He further submitted that the information provided in the Annual Report reveals that 98.79% of the company s total revenue is earned from sale of manufactured and traded pharmaceutical products and therefore it i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nies. He therefore submitted that this company be excluded as a comparable company. 48. Learned DR on the other hand supported the order of lower authorities. 49. We have heard the rival submissions and perused all the materials available on record. With respect to inclusion of Piramal Healthcare Ltd., it is the contention of the Learned AR that the extract of services income extracted the TPO in the order does not match with the figures reported in the Annual Report which are available in the public domain. The fact of the figures being different when pointed out by the Learned AR has not been controverted by the Learned DR. The Learned AR for the Annual Report placed in the paper book has also pointed out that 98.79% of its revenue are earned from sale of manufactured and traded pharmaceutical products. On the other hand the revenue earned by the assessee are for various business services. In such a situation, we find force in the argument of Learned AR that it cannot be considered to be a comparable to assessee company. We thus direct its exclusion as a comparable company. 50. As far as the inclusion of WAPCOS Ltd. is concerned, we find that it is a Govt. India under ..... X X X X Extracts X X X X X X X X Extracts X X X X
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