TMI Blog2022 (3) TMI 1433X X X X Extracts X X X X X X X X Extracts X X X X ..... ideration - HELD THAT:- We find that this issue is covered, in favour of the assessee, by several decisions of the coordinate benches, in assessee s own case, for the assessment years 2010-11 to 2012-13. DR does not dispute this position, nor does he point out any specific reasons for our not following these coordinate bench decisions, but he relies upon the stand of the Assessing Officer nevertheless. We see no reasons to take any other view of the matter than the view so taken by the coordinate benches, in assessee s own cases for the assessment years 2010-11, 2011-12 and 2012-13, and, respectfully following the same, we confirm the conclusions arrived at by the CIT(A) on this point as well, and decline to interfere in the matter. MAT computation - disallowance u/s 14A r.w Rule 8D(2)(iii) to the amount calculated by the assessee for the purpose of income u/s. 115JB - HELD THAT:- We find that in the immediately preceding assessment year in assessee s own case note that this issue is covered in favour of the assessee by the decision of honourable Bombay High Court in the case of Commissioner of income tax vs Bengal finance and investment private limited [ 2015 (2) TMI 1263 - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pect of R D expenditure u/s. 35(2AB) as claimed by the assessee - HELD THAT:- We see no reasons to interfere in the findings of the CIT(A)- particularly as there are now a number of decisions of the coordinate benches holding that so far as assessment years prior to 2016-17 are concerned, the DSIR s limitingthe quantification of expenditure incurred on research and development expenses on a DSIR approved facility would not come in the way of weighted deduction under section 35AB. We are of the considered view that as long as the expenditure is actually incurred in the DSIR approved facility, which is not even in dispute in the present case, the entire expenses will have to be allowed as a deduction. TP adjustment in respect of interest on delayed realization of receivables - whether the assessee s benchmarking of the interest on the delayed realization of debts at 200 bps above the LIBOR is correct or not? - HELD THAT:- We find that in the immediately preceding assessment years, consistently this approach of the assessee, at the even lower spread of 150 bps, has been all along accepted by the coordinate benches. In any case, no case has been made out that the spread of 200 bp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y other view of the matter than the view so taken by the coordinate benches, and, in any case, no specific reasons for doing so have been pointed out to us. We have also noted that there is not even doubt on the bonafides and reasonableness of the expenses, and that the dispute before us, as elaborated earlier, is confined to the nature of the amendment being clarificatory. That issue, for the detailed reasons set out above- with which we are in considered agreement, must be held to only prospective in effect. In this view of the matter, and respectfully following the esteemed views of the coordinate benches, we delete the impugned disallowance. Disallowance of investment allowance under section 32AC deleted. Deduction in respect of export profits of SEZ unit u/s 10AA with reference to the income computed under the head 'profits and gains of business or profession' of the SEZ unit instead of 'gross profits and gains' of SEZ unit, as interpreted by Supreme Court in the recent judgement in the case of Vijay Industries [ 2019 (3) TMI 171 - SUPREME COURT ] - Thus we direct the assessing officer to grant the deduction under section 10 AA with reference to the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ieved, assessee carried the matter in appeal before the CIT(A), and the learned CIT(A), following decisions of the coordinate benches from the assessment years 1994-95 to 2012-13, deleted the said addition. While doing so, learned CIT(A) observed as follows: I have considered the facts and submissions made by the assessee and have also perused the decision of the Special Bench of Mumbai ITAT in assessee's own case wherein it was held: The question for consideration is whether the Tribunal in the case of RelianceIndustries Ltd. (supra) had correctly appreciated and interpreted the ratio of thedecision of the Supreme Court in Sahney Steel Press Works Ltd. s case (supra).On a careful reading of the order of the Tribunal in the case of Reliance IndustriesLtd. (supra), it appears to us that the ratio of the judgment in Sahney Steel PressWorks Ltd 's case (supra) has been correctly interpreted and appreciated by the Bench. [Para 28] The Scheme framed by the Government of Maharashtra in 1979 and formulated by its Resolution dated 5-1-1930 has been analysed in detail by the Tribunal in its order in RIL for the assessment year 1985-86 which we have already referred to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it could not be said that the subsidy was given with the object of assisting or lending a helping hand to the in its business operations. (Para 29) The Tribunal was thus aware of the distinction between the subsidy given with the object of setting up the industry and the subsidy given after the industry commences production and conditional upon the commencement of production. Factually, the Tribunal found that the appellant's case which fell under the Maharashtra Scheme, was a case where the subsidy was given for the purpose of facilitating the to set up an industry in Patalganga, Raigad District, which is a notified area. The actual disbursement took place afer the commenced production, but, according to the Tribunal, it was only a mode of disbursement and had nothing to do with the object for which the subsidy was given. Thus, it was found that the Tribunal did notice the crucial observations of the Supreme Court in Sahney Steel Press Works Ltd.'s case (supra) which gave primacy to the object of the subsidy over the fact that it was given after the commencement of production. [Para 30] The Tribunal's observations made on the basis of the observations of the Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned CIT(A), this issue is covered, in favour of the assessee, by the coordinate bench decisions in the assessee s own cases for the assessment years 1994-95 to 2012-13. No reasons have been pointed out to us as to why we should not follow these decisions of the coordinate benches in the assessee s own cases. In view of this position, respectfully following these binding judicial precedents- including the special bench decision, we uphold the conclusions arrived at by the learned CIT(A) and decline to interfere in the matter. 7. Ground no. 1 is thus dismissed. 8. In the ground no. 2, the Assessing Officer has raised the following grievance by way of a question posed for our consideration: Whether, on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in allowing depreciation as claimed by the assessee by holding that the claim of depreciation for the year was optional in nature? 9. So far as this grievance of the Assessing Officer is concerned, the relevant material facts are like this. So far as the pre 1st April 2002 position is concerned, i.e. prior to insertion of Explanation 5 to Section 32(1) of the Act, the assessee had not claimed the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... working of the assessee and that has led to the difference in calculation of depreciation. Accordingly an addition of Rs. 105,94,57,649/- is being made to the total income of the assesse. Penalty proceedings u/s 271(1)(c) of the Act for furnishing inaccurate particulars are initiated separately. 5.1.3 Further, during the assessment proceedings, it is also noted that has claimed depreciation under Oil and Gas division in respect of KG-D6 basin/Block of Rs 726,75,62,145/-. As has been discussed in detail under subsequent paragraphs (para 14.7) of this order, the assesse company is entitled for a depreciation of Rs. 575,79,90,895/-, accordingly an addition of Rs. 150,05,71,250/- is made to the total income of the assessee . 10. Aggrieved, the assessee carried the matter in appeal before the CIT(A). Learned CIT(A), following her predecessor sorder for the assessment year 2013-14 and the decisions of coordinate benches in the assessee s own case for the earlier assessment years, deleted the said addition. Aggrieved by the relief so granted by the learned CIT(A), the Assessing Officer is in appeal before us. 11. Having heard the rival contentions, and having perused ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x Rules, while computing income under normal provisions of the Act without recording any satisfaction for rejection of the disallowance computed by the appellant under section 14A of the Act. 16. So far as the additional ground of appeal is concerned, we find that this grievance is ill-conceived inasmuch as, at page 58 of the assessment order, the Assessing Officer has specifically observed that since the assessee has not correctly apportioned any expenses as having been incurred for earning this exempt income, I am not satisfied with regard to correctness of the claim of expenditure made by the assessee, and, accordingly, provisions of rule 8D of the Income Tax Rules are being invoked . It cannot, therefore, be said that the Assessing Officer has proceeded to make the disallowance under section 14A r.w.r 8D without recording satisfaction for rejection of the disallowance computed by the assessee . 17. As regards the Assessing Officer s grievance that the learned CIT(A) has erred in directing the Assessing Officer to take into account only such investments as having yielded dividends during the year under consideration, we find that this issue is covered, in favour of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I have considered the facts and the submission of the Appellant. I find strength in the arguments of the Appellant on the ground relating to disallowance made under section 14A r.w.r. 8D, where the Appellant has relied on the decision of Bombay High Court in case of CIT vs. Reliance Utilities and Power Limited (313 ITR 340 ) wherein it has been held that where the own funds of the is more than the investments made on which exempt income has been earned no disallowance can be made out of interest expenditure. Following the above decision I am of the considered view that the Appellants own funds far more exceed investments made on which exempt income has been earned, therefore I direct the AO to delete the disallowance made us.14A out of interest expenditure. With regard to disallowance made out of other expenses being 0.5% of average value of investments, I have perused the submission made by the Appellant and the various judgments which the Appellant has relied upon, which were delivered by various courts. In this regard relying on various judicial pronouncements I direct the AO to recompute the disallowance @ 0.5% by taking average value of those investment which have yielde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the relief accordingly 26. Once we uphold the connected grievance of the assessee, the grievance so raised by the Assessing Officer must be held to be academic, and, as such, infructuous. 27. Ground no. 4 of the Assessing Officer s appeal is thus dismissed as infructuous, as ground no. 2 of the assessee is allowed. 28. In ground no. 5, the Assessing Officer has posed the following question for our adjudication: Whether, on the facts and circumstances of the case and in law, the Ld. CIT(A) was right in deleting the disallowance of deduction u/s. 80IB(9) of the Act holding that the assessee shall be eligible to claim deduction u/s. 80IB(9) of the Act in respect of profits not allowed as deduction u/s. 10 AA of the Act. 29. Learned representatives fairly agree that this issue is also covered, in favour of the assessee, by a decision of the coordinate bench in the assessee s own cases for the assessment years 2011-12 and 2013-14. Vide its order, the coordinate bench, in the assessee s own case for the assessment year 2013-14, has observed as follows 75. At the outset, the Ld. Counsel of the assessee submitted that this ground is covered in favour of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nery unit. Section 80IB(9) of the Act provides deduction in respect of profit and gains derived from an undertaking for specified period if the undertaking is engaged in refining of mineral oil and begins such refining process on or after the 1st day of October, 1998. Accordingly, the assessee submitted that it had complied with the conditions specified u/s 80IB(9J of the Act and it claimed deduction of the balance profits and gains u/s 80-18(9) of the Act. The Form 10CCB (Revised) filed by the assessee/ has been verified by the AO and there is no dispute as regards the quantum of deduction worked out therein. The assessee's claim of deduction of eligible profit u/s 10AA and 80IB(9) of the Act was based on various judgments and as per the provisions of law. The assessee during the course of assessment proceedings has furnished detailed submission to the AO on the above issue vide its letter no. RIL/ASPRQ/12-13/13, which was not accepted by the AO. The AO has disallowed the assessee's claim of deduction u/s 80IB(9) of the Act of Rs.698,07,58,520/-, discussed this issue in para 13 of the assessment order. The conclusion of the AO is as under: 13.9 However t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igible business is claimed and allowed as a deduction under any of those provisions for any assessment year, deduction in respect of, and to the extent of, such profits and gains shall not be allowed under any other provisions of this Act for such assessment year and shall in no case exceed the profits and gains of such undertaking or unit or enterprise or eligible business, as the case may be. 80IA(9) Where any amount of profits and gains of an undertaking or of an Enterprise in the case of an assessee is claimed and allowed under this section for any assessment year, deduction to the extent of such profits and gains shall not be allowed under any other provisions of this Chapter under the heading C.-Deductions in respect of certain incomes , and shall in no case exceed the profits and gains of such eligible business of undertaking or enterprise, as the case may be. The provisions of sec. 80A(4) uses the expression where any amount of profits . of undertaking .....is claimed and allowed as deduction under any of those provisions for any assessment year... deduction in respect of, and to the extent of, such profits shall not be allowed under any other provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee is eligible to claim deduction under any other section. 77. The Id CIT(A) has referred to the decision rendered by Hon'ble Delhi High Court in the case of TEI Technologies P Ltd (supra). Following observations made by Hon'ble High Court, which has been extracted by Ld CIT(A) at page 84 of his order, in fact, support our view:- This section seems to indicate, as contended by the Revenue, that Section 10A or Section 10B are only deduction provisions. No doubt, the assumption underlying the sub-section is that Section 10A and Section 10B are deduction provisions and once a deduction is allowed to the assessee under those sections, the same profits shall not be allowed as a deduction under any other provision of this Act for the same assessment year and that in any case the deduction shall not exceed the profits and gains of the eligible undertaking or unit or enterprise or business, as the case may be. Even if Section 10A/Section 10B are construed as exemption provisions, sub-section (4) of Section 80A cannot defeat such construction. The sole object of the sub-section is to ensure that double benefit does not result to an assessee in respect of the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ects only allowability of deduction and not computation of deduction. This decision rendered by Hon'ble Bombay High Court supports the case of the assessee that sec. 80A(4) and sec. 801A(9) restricts only allowability of deduction and not computation of deduction . 80. The ld CIT(A) has expressed the view that the assessee has adopted two different parameters for computing deductions u/s 10AA and u/s 80IB(9) of the Income Tax Act, 1961. We have noticed earlier that, during the year under consideration, the assessee earned profit of Rs.5036.35 crores from this unit. As per the formula prescribed in scc. 10AA of the Act, the deduction allowable u/s 10AA on the above said profit worked out to Rs.4379.13 crores. Against the profit of Rs.5036.35 crores arid the deduction actually allowed u/s 10AA of the Act was Rs.4379.13 crores. The difference between the two figures was Rs.657.22 crores. The assessee claimed deduction of Rs.421,39 crores u/s 80IB(9) of the Act, which was over and above the amount of Rs.4379.13 crores claimed u/s.10AA of the Act. The amount of deduction of Rs.421.38 crores u/s. 80IB(9) of the Act was arrived at by the assessee as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee submitted that the provisions of section 80IB(9) are required to be read with the provisions of Section 80IA(5) which, inter alia, requires that the profits of the eligible business are required to be computed as if that business is the only source of income. Accordingly, the losses required in other exploration on other blocks, in addition to the profits from the blocks from which the income is earned, are also required to be taken into account. Elaborate legal submissions were also made in support of this broad proposition. None of these submissions, however, impressed the Assessing Officer. He was, inter alia, of the view that such an accounting practice and claim of the assessee company is in patent violation of the mandatory provisions of clause 17.2.2 of the PSC agreement signed in respect of its undertaking which laid down the manner in which deduction for such expenses are to be allowed. He was of the view that the deduction under section 80IB(9) are to be computed without any regard to the losses on aborted exploration. Aggrieved, the assessee carried the matter in appeal. Learned CIT(A) reversed the stand of the Assessing Officer, and upheld the plea of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Petroleum Operations. Thus, the same are not be reduced for the purpose of computing the profits of an Undertaking' eligible for deduction u/s 801B. Similar issue has been allowed to appellant in the immediately preceding assessment year ie. for AY 2013-14. Futher, similar issue has been decided by the ITAT in favour of the appellant for A.Y. 2011-12. The relevant extract of ITAT order for A.Y. 2011-12 is reproduced below. 108. We notice that the article/clause 17.2.2 of PSC allows deduction of expenses relating to aborted blocks against the profit arising from other blocks. In our view, the assesse was right in contending that the article/clause 17.2.2 was concerned with the computation of income at entity level in terms of sec. 42 of the Act. The article/clause 17.2.5 of PSC states that all other provisions of Income Tax Act shall apply. The PSC does not deal with the deduction given u/s 80IB(9) of the Act and hence the provisions of the Act shall apply. Hence the deduction u/s. 80IB(9) of the Act has to be computed in terms of sec. 80IB of the Act.sec. 80IB (13) of the Act provides that the provisions of sec. 80IA(5) shall apply and under the provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duced while computing the profits of a successful block (KGD in the assessee's case which is independent undertaking) for the purpose of claiming deduction u/s 80-IB(9).The assessee was engaged in the business of exploration and production of mineral oil. The assessee was awarded 31 contract areas under separate production sharing contracts (PSC) signed with the Government of India. The above contract areas were awarded on bidding in separate auction for each contract area. There is no dispute that for the purpose of claiming deduction u/s. 80IB(9) of the Act each contract area constituted an independent undertaking. Since the assessee had complied with the conditions specified u/s. 80IB(9) of the Act, it claimed deduction of the profits and gains of KGD undertaking u/s. 80-IB(9) of the Act. While computing the profits and gains of KGD undertaking for the purpose of claiming deduction under the section 80IB(9) of the Act, the provisions of section 80IA(5) are applicable, which provide that for the purposes of determining the quantum of deduction, the profits and gains of the eligible business shall be computed as if such eligible business were the only source of income of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business, for the purposes of sec. 80IB, shall be computed as if such eligible business were the only source of income of the assessee. In view of these provisions, the deduction u/s 80IB(9) has to be computed after ascertaining profits and gains of eligible business in terms of sec. 80IA(5) of the Act. Hence there is no scope to adjust expenses relating to other undertaking while computing deduction u/s 80IB(9) of the Act. Hence, we are of the view that the decision rendered by Ld CIT(A) does not call for any interference and accordingly we uphold the same. Since facts are identical and it is not the case that above decision of ITAT has been reversed by Hon ble Jurisdictional High Court, we uphold the order of learned CIT(A). 36. Respectfully following the views so expressed by the coordinate bench in assessee s own case, for the immediately preceding assessment year, we uphold the conclusions arrived at by the learned CIT(A) on this point as well, and decline to interfere in the matter. 37. Ground no. 6 is also thus dismissed. 38. In ground no. 7, the Assessing Officer has raised the following grievance: Whether, on the facts and in the circumstances of the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not defined in Section 80-IB of the Act. When one refers to following statutes dealing with mineral oil, petroleum and natural gas etc, natural gas is treated as a part of 'mineral oil' viz: a) The Oil fields (Regulation Development) Act, 1948 b) The Mines and Minerals (Development and Regulation) Act, 1959 c) The Oil industry (development) Act, 1974 d) The Regulation for foreign direct investment in India e) Notification issued (No GSR 304(E) dated March 31, 1983 for extending the applicability of the Act to the continental shelf of India f) New Exploration Licensing Policy g) Petroleum Tax Guide published by the Ministry of Petroleum and Natural Gas, Government of India The issue is whether natural gas is mineral oil and is eligible for deduction u/s. 801B(9) of the Act has already been considered by the Hon ble Income Tax Appellate Tribunal Ahmedabad Bench in the case of NIKO Resources Limited Vs. DCIT [22 DTR 225] and held that natural gas is mineral oil eligible for deduction u/s 80IB(9) of the Act. The above decision of the ITAT has been further confirmed by the Hon'ble Gujarat High Court (reported in 374 ITR 369) by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the circumstances of the case and in law, the ld CIT(A) erred in allowing appeal of the assessee and directing the Assessing Officer to recompute the profits and deductions taking into consideration the revised interest expenditure as submitted by the assessee? 9. Whether, on the facts and in the circumstances of the case and in law, the Id CIT(A) erred in allowing appeal of the assesses and directing the assessing officer to recompute the profit and deductions taking into consideration the revised interest expenditure as submitted by the assessee? 10. Whether, on the facts and in the circumstances of the case and in law, the Id. CIT(A) erred in allowing appeal of the assessee and directing the assessing officer to recompute the profit and deductions taking into consideration the revised interest expenditure as submitted by the assessee? 44. So far as these grievances are concerned, the relevant material facts are as follows. These grievances pertain to the revision of deductions claimed under sections 80IB and 80AA for KGD6 Unit, Refinery SEZ Unit and PP SEZ Unit. The revision was on account of a revision, on account of some factual corrections, in interest ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct that the appellate authorities did not have this limitation, and that apparently was the reason that the Assessing Officer stated that the necessary verification will be done in case of admission of claim by the appellate authorities. His grievance before us thus does not make sense and seems somewhat mechanical or ritualistic. In any event, in the case of CIT Vs Pruthvi Brokers and Shareholders Pvt Ltd [(2012) 349 ITR 336 (Bom)], Hon ble jurisdictional High Court has observed that It is clear to us that the Supreme Court did not hold anything contrary to what was held in the previous judgments to the effect that even if a claim is not made before the assessing officer, it can be made before the appellate authorities. The jurisdiction of the appellate authorities to entertain such a claim has not been negated by the Supreme Court in this judgment. In fact, the Supreme Court made it clear that the issue in the case was limited to the power of the assessing authority and that the judgment does not impinge on the power of the Tribunal under section 254 . While there is a specific reference to the powers of the Tribunal, as was the issue before Their Lordships, these observations h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if this logic is extended further,items of receipt which are not income at all and hence fall outside the purview of thecomputation of income under normal provisions cannot be included in book profit u/s115JB of the Act. Relying on provisions of sub-section section 5 to Section 115JB of the Act which reads as save as otherwise provided in this section, all other provisions of the Act shall apply toevery assesse, being a company, mentioned in this section , it is submitted that sinceSection 115JB for the relevant assessment year does not provide for any specific inclusionof a subsidy or a capital receipt for computing book profit, other provisions of the Act haveto be applied for determining whether such receipt has to be taken into account for computing book profit. Thus provisions of Section 4 and Section 2(24) will necessarilyapply for computation of book profit u/s 115JB and as such applying the aforesaidprovisions, the sales tax subsidy being capital in nature and outside the ambit of chargingsection 4, has to be reduced while computing book profit u/s 115JB of the Act. The intention of legislature for introducing MAT provisions (Section 115J, 115JA and 115JB) was to levy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nch of Tribunal in the case of Rain Commodities Ltd (2010) (40 SOT 265). We notice that an identical issue was considered by the co-ordinate bench in the case of M/s. Alok Industries Ltd (ITA No.1017/Mun/2017 dated 21.05.2018) and has been held that the Capital receipts cannot be included in the Book Profit u/s.115JB of the Act. We notice that an identical view has been expressed in several other cases also by the co-ordinate benches. For the sake of convenience, we extract below the relevant observations made by the Co-ordinate bench in the case of Alok Industries Ltd (supra): 25. Contention of learned AR was as under:- i. Section 115JB should be considered subject to charging provisionunder sectionSection 4 read with the definition of an income under Section 2(24). ii. The definition of income under Section 2(24) has been amended by the Finance Act 2015 to include subsidy within its scope, but only with prospective effect from AY 2016-17. iii. Therefore, such subsidy which is capital in nature cannot be brought within the purview of Section 115JB as the charging provision fails. iv. Also, the intention of the legislature in bringing Section 115JB on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AT provision without any express authority in this behalf. Also, if we look at Explanation 1 to Section 115JB(2), we find that the legislature has defined 'book profit . For calculation of such book profit, one has to reduce certain items, which inter alia include, item ii which states that the amount of income to which any of the provisions of section 10 (other than the provisions contained in clause (38) thereof) or section 11 or section 12 apply, if any such amount is credited to the profit and loss account . Thus, what can be discerned from above item is that, for calculation of book profit one has to reduce those items of income which do not form part of total income under normal provisions. If that be the case, then it logically follows that those items which do not constitute income at all cannot for part of book profit and no MAT can be levied thereon at all, Even sub section (5) of section 115JB states that Save as otherwise provided in this section, all provisions of this Act shall apply to every assessee, being a company, mentioned in this section. Thus, provisions of section 4 and section 2(24) shall necessarily apply for computation of book profit and MAT u/s. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd directed that the learned CIT(A) is directed to consider this issue de novo after taking into account the aforesaid Hon'ble Jurisdictional High Court decisions [i.e. in the case of CIT vs Veekaylal Investment Co. (P.) Ltd., 249 ITR 597 (Bom.] That approach, however, is contrary to the stand taken by Hon ble Madras High Court, in the case of CIT Vs Metal and Chromium Plater Pvt Ltd [(2019) 415 ITR 123 (Mad)] wherein Their Lordships have, inter alia, observed that The Bombay High Court in the case of Veekaylal Investments (supra) considers the inclusion of capital gain for the purposes of assessment under section 115J. Both judgements are rendered in the context of Section 115J which does not contain a provision analogous to sub-sections (4) of section 115JA or (5) of section 115JB of the Act. Thus while an assessment u/s 115J would be concluded exclusively on the basis of the book profits as adjusted by the items set out in the Explanation thereunder, in an assessment in terms of sections 115JA or JB, the adjusted book profits would be further subjected to the effect of other provisions of the Act that are specifically brought into play by virtue of sub-sections (4) of se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Broome [1972] AC 1027 (HL), we hope it will never be necessary for us to say so again that in the hierarchical system of courts which exists in our country, it is necessary for each lower tier , including the High Court, to accept loyally the decision of the higher tiers . It is inevitable in hierarchical system of courts that there are decisions of the Supreme appellate Tribunal which do not attract the unanimous approval of all members of the judiciary... But the judicial system only works if someone is allowed to have the last word, and that last word, once spoken, is loyally accepted and observed that. . . the better wisdom of the Court below must yield to the higher wisdom of the Court above. That is the strength of the hierarchical judicial system. The principle is thus unambiguous. As a rule, therefore, judicial discipline warrants that the wisdom of a lower tier in the judiciary has to make way for higher wisdom of the tiers above. Unlike the decisions of Hon'ble jurisdictional High Court, which bind us in letter and in spirit on account of the binding force of law, the decisions of Hon'ble non-jurisdictional High Court are followed by the lower authoritie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... speaking through one of us (i.e. the Vice President), the coordinate bench has observed as follows: While dealing with judicial precedents from non-jurisdictional High Courts, we may usefully take of observations of Hon'ble jurisdictional High Court in the case of CIT v. Thana Electricity Co. Ltd [(1994) 206 ITR 727 (Bom)], to the effect The decision of one High Court is neither binding precedent for another High Court nor for the courts or the Tribunals outside its own territorial jurisdiction. It is well-settled that the decision of a High Court will have the force of binding precedent only in the State or territories on which the court has jurisdiction. In other States or outside the territorial jurisdiction of that High Court it may, at best, have only persuasive effect . Unlike the decisions of Hon'ble jurisdictional High Court, which bind us in letter and in spirit on account of the binding force of law, the decisions of Hon'ble non-jurisdictional High Court are followed by the lower authorities on account of the persuasive effect of these decisions and on account of the concept of judicial propriety-factors which are inherently subjective in nature. Quite c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igh Court decision is a compulsion of law and absolutely sacrosanct that way, but following a non-jurisdictional High Court is a call of judicial propriety ..-which can be, in deserving cases, deviated from . Implicit in this observation is the fact that not following non-jurisdictional High Court decision is more of an exception than the rule. There have to be very strong and good reasons not to follow even non jurisdictional High Court decisions. It is not, therefore, open to us in the present situation, as has been contended by the learned counsel, to simply disregard this judicial precedent from Hon'ble Madras High Court, and follow the decision of the coordinate bench, in assessee's own case, in favour of the assessee. The fact that the decisions in assessee's own cases were authored by one of us, the claim that these decisions elaborately deal with certain aspects which may or may not have been examined by Hon'ble High Court and the apprehension that it may not have been argued on certain important facets, are wholly irrelevant. Once Their Lordships of a higher judicial forum express their esteemed views on any subject, the views expressed by us, in the past, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Madras High Court holding that the said decision does not apply in the case of section 115JB- as in this case. In view of these discussions, as also bearing in mind the entirety of the case, we approve the conclusions arrived at by the learned CIT(A) and decline to interfere in the matter on this count as well. 54. Ground no. 11 is also thus dismissed. 55. In ground no. 12, the Assessing Officer has raised the following grievance: Whether, on the facts and in the circumstances of the case and in law, the ld CIT(A) right in allowing appeal of the assessee and directing the assessing officer to allow the weighted deduction at 200% in respect of R D expenditure u/s. 35(2AB) of the Act as claimed by the assessee.? 56. So far as this grievance is concerned, the relevant material facts are as follows. In the course of the assessment proceedings, the Assessing Officer disallowed Rs 8.66 crores for weighted deduction under section 35(2AB) in respect of research and development expenditure by observing as follows: 21.1 On perusal of the computation of income statement, it is seen that during the year under consideration the assesse company has claimed weighted deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sent assessment year is concerned, which is a pre-amendment assessment year, the quantification by the DSIR cannot restrict the eligibility for deduction as long as expenses are actually incurred in a DSIR approved facility. The Assessing Officer is aggrieved and is in appeal before us. 58. Having heard the rival contentions, and having perused the material on record, we see no reasons to interfere in the findings of the learned CIT(A)- particularly as there are now a number of decisions of the coordinate benches holding that so far as assessment years prior to 2016-17 are concerned, the DSIR s limitingthe quantification of expenditure incurred on research and development expenses on a DSIR approved facility would not come in the way of weighted deduction under section 35AB. We are of the considered view that as long as the expenditure is actually incurred in the DSIR approved facility, which is not even in dispute in the present case, the entire expenses will have to be allowed as a deduction. This is also so held by several decisions of the coordinate benches, including in the cases of JCIT Vs Reliance Life Sciences Pvt Ltd (2130/Mum/2018), Glenmark Pharmaceutical Ltd Vs ACIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowing the stand taken by the coordinate benches in the assessee s own case for the assessment years 2010-11 to 2012-13 and CIT(A) s order in the assessee s own case for the assessment year 2013-14, deleted the impugned ALP adjustment and upheld the benchmarking of LIBOR plus 200 bps as adopted by the assessee. The Assessing Officer is aggrieved and is in appeal before us. 62. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. 63. We find that in the immediately preceding assessment years, consistently this approach of the assessee, at the even lower spread of 150 bps, has been all along accepted by the coordinate benches. In any case, no case has been made out that the spread of 200 bps is lower than the arm s length price. As regards the cost-plus method on the cost of funds, we find it is fundamentally flawed inasmuch as it treats all the types of borrowing at par and proceeds on the erroneous assumption that the arm s length price of the debt has, at its basis, cost of funds available to the tested party- particularly when these funds are of significantly different tenure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ignoring the vital fact that though the said investment is stated to be compulsorily convertible preference shares, the assessee said to have redeemed 2,90,720 said preference shares in RIME in the FY 2012-13 at par with same value of AED 290,72,00,000 (INR 430.70 crores) at which it was invested, without any arm's length return from the AE RGBV, proving the claim of compulsorily convertible as dubious, which shows the investment in the AE is essentially interest free loan in nature? Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in ignoring another vital fact that though the assessee is eligible for compulsory 5% coupon rate on the said investment and though the AE RGBV had positive incomes of 33,31,606 Euro for FY 2009-10, 1,09,313 Euro for FY 2010-11, 18,923 Euro for FY 2011-12 and 22,332 Euro for FY 2012-13, the assessee has not accounted any such return on accrual basis leading to base erosion to India, casting severe doubts on the nature of entire investment, which is otherwise an interest free loan? Whether on the facts and circumstances of the case and in law, theLd. CIT(A) is correct in ignoring the fact that though th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the facts and circumstances of the case and in law, the CIT(A) is correct in ignoring the facts that the AE RIME has been making losses continuously from calendar year 2010 to 2015 and though is net worth is negative, the assessee has shown to have invested in the said preference shares, which is not an arm s length behavior? Whether on the facts and circumstances of the case and in law, the CIT(A) is correct in ignoring the facts that the situation in the case of the AE-RGBV is much worse and it has been making very meager profit during the FYs 2010-11 to 2012-13 and loss during the FY 2013-14 and has been in liquidation process from FY 2014-15 and its net worth is also negative only, though the assessee claimed to have made investment in said preference shares, which is not an arm s length behavior? Whether on the facts and circumstances of the case and in law, the CIT(A) is correct in not appreciating the sham nature of the nomenclature and form of the transaction compulsorily convertible preference share , when the investment was redeemed losing the significance of compulsory convertible ; never ever been converted into equity shares at any point of time further losi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g to look through the substance of transaction and instead looked at the superficial form of the transaction to arrive at the decision that the investment is quasi-equity in nature whereas in substance it is loan in nature and that the form of investment in preference shares was used to avoid taxation of interest leading to base erosion in India ? Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is right in ignoring the amendment by way of Explanation (i)(c) inserted by Finance Act 2012, with retrospective effect from 1.4.2002 whereby the capital investment could be covered as an international transaction under capital financing and such transaction would yield accrued interest which is 'income' for the purposes of section 92(1), so as to be dealt under Chapter X of the Income tax Act? Whether on the facts and circumstances of the case and in law, the CIT(A) is correct in ignoring the essential character of the transaction is loan in substance which the assessee camouflages as 'preference share in order to avoid tax liability on the interest that accrues coupled with the base erosion in India by shifting of huge amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal was considered as loan and only the accrued interest has been considered as the income? Whether on the facts and circumstanced of the case and in law, the Ld. CIT(A) is correct in not appreciating the order of the Hon'ble Tribunal in assessee's own case for AY 2010-11 while relying on it, in which it has been held recharacterisation is possible when the transaction is sham or substantially at variance with the stated form, and ignoring that there are enough pointers as above for the impugned year to show that the transaction is loan which is substantially at variance with the stated form of preference share? 66. So far as this set of issues raised by the Assessing Officer is concerned, the relevant material facts are as follows. The assessee has made investments in non-cumulative compulsorily convertible preference shares of its subsidiary companies, bearing a coupon rate of 5% p.a. This transaction was converted as a loan simpliciter, and, accordingly, benchmarking was done on the basis of Bloomberg database. The Assessing Officer noted that even though the assessee was entitled to a yield of 5% of the value there was no dividend declaration in many cases, and no perso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itself. The AO/TPO has not shown that the transactions are sham or bogus nor it was shown that the apparent is not real. It was also not shown that the unrelated share applicant has been paid any interest for the period commencing from date of subscription to the date of allotment of shares. It has been held that the amendment made by Finance Act 2012 including capital financing transactions as international transactions cannot be applied retrospectively. The Ld A.R further submitted that the Preference shares carry coupon rate of 5%, which is higher than the 6 months Libor plus 300 bps. We further note that it has been submitted before us that the above decision is squarely applicable in as much as no fresh investment has been done during the A.Y. 2013-14. Furthermore, as pointed out by learned Counsel of the assessee from Hon'ble Bombay High Court decision in the case of Pr. CIT Vs. M/s. Aegis Limited (supra) supports the above proposition. We may refer the Hon'ble High Court decision as under :- ―The respondent-assessee is a Company registered under the Companies Act. For the Assessment Year 2009-10, the assessee was subjected to transfer pricing regime. Questi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reement with the views so expressed by the coordinate bench. In any event, the subscription for compulsorily convertible preference shares cannot be compared with a simple loan because it is a case of quasi capital and the significant reward for this investment by the assessee is the opportunity to own the equity- something inherently incompatible with a loan transaction simpliciter. It cannot be open to the revenue authorities to ignore this aspect of the matter and compare the rewards on a compulsorily convertible preference share with the rewards on a loan transaction. The rewards for the investment for a limited period, i.e. the period till the conversion into shares takes place, cannot be considered in isolation from the overall transaction as a whole. The decision of the CIT(A) for the assessment year 2013-14, which is relied upon in the impugned order, has already been confirmed by a coordinate bench as above. As regards plea of the Assessing Officer that the CIT(A) has simply relied upon the earlier decisions of the coordinate benches, without taking a fresh look at the facts, it is an admitted position that there are no changes in the facts in circumstances of the case and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... support service in the field of petroleum products? Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in including M/s Allsec Technologies Ltd, as the comparable without appreciating that it is functionally dissimilar as it is engaged into ITES service whereas benchmarking is done for MCS and BSS? Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is right in excluding the comparable M/s Axis Integrated Systems Ltd. without appreciating that it is functionally similar as both the assessee and the comparable are engaged in providing high end management and business support services? Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is right in excluding the comparable M/s BNR Udyog Ltd. without appreciating that it is functionally similar, as only business support service segment of comparable has been considered for benchmarking the transaction? 72. So far as this set of grievances is concerned, it is sufficient to take note of the facts that the assessee has rendered management consultancy services and business support services to its associated enterprise at cos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judication, the Assessing Officer has raised the following grievance: Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in deleting the addition of Rs. 58,16,290/- with regard to transfer pricing adjustment on Provision of support services for drilling operations to AE? Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in not appreciating that the contract between AE and a foreign government is not determinative of arm s length price? Whether on the facts and circumstances of the case and in law the Ld. CIT(A)is correct in failing to understand that the contract between the AE and the foreign government was to avoid base erosion for the Kurdish government and it would not avoid Indian jurisdiction to arrive at the ALP of the transaction unless it is prohibited by any Bilateral Investment Treaty? Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in not appreciating the fact that at best the agreement with Kurdish government would only serve as evidence for the cost incurred and it could not be read into much for ALP determination in the abse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 290. The Assessing Officer is aggrieved of the relief so granted by the CIT(A) and is in appeal before us. 77. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. 78. We find that the decision of the CIT(A) for the assessment year 2013-14, on the basis of which impugned relief was granted by the CIT(A), has already been approved by a coordinate bench. The issue is thus covered in favour of the assessee by decisions of the coordinate benches in assessee s own cases for the assessment years 2011-12, 2012-13 and 2013-14. No reasons as to why we must not follow the decision have been pointed out to us. Undoubtedly, one of the critical factors in determining the ALP, as recognized by rule 10B(2)(d), is conditions prevailing in the market in which AEs operate, and once it s a legal condition precedent in entering the transaction in the respective PSC market is that the AE s affiliates are not allowed to have any mark up on a supply of services to the AE, the determination of ALP is required to be having regard to this condition. Viewed thus, the cost to cost rendition of services ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sues so raised pertain to benchmarking of the corporate guarantees. This benchmarking has been done on the basis of yield spread approach, based on the offer letters issued by the bench. The assessee has taken into account interest rate quoted by the bank with and without the corporate guarantee issued by the assessee company. The difference between these two rates is equally divided between the assessee and the AE inasmuch as the corporate guarantee is benchmarked on the basis of 50% of the difference. While there is no dispute on the method of ascertaining the ALP, all that has been done by the TPO is that instead of 50:50 division of the spread, he has modified it to 60:40 i.e. 60% benefit to the assessee and 40% benefit to the AE. There is no justification for this change. In appeal, following accepted earlier decisions of the coordinate benches on this issue, in the assessee s own case, the CIT(A) has accepted 50:50 allocation of spread. The Assessing Officer is aggrieved and is in appeal before us. 82. Having heard the rival contentions and having perused the material on record, we find that this is a purely factual matter, which permeates from year to year, and once the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 1138 crores, overlooking the fact that non-application of turnover filter will defeat the very purpose of benchmarking the transaction and also ignoring the decision of Hon'ble Karnataka high court in case of Acusis software India Private Limited (ITA No .223/2017) in this regard? 85. Learned representatives fairly agree that so far as this issue is concerned, it is also now covered in favour of the asseseee inasmuch as in the immediately preceding assessment year in assessee s own case, a coordinate bench has upheld the exclusion of BVG India Limited, as a comparable, and inclusion of Empire Industries Limited as a comparable. Once BVG is excluded and Empire Industries is included, in the valid comparables for the purpose of the benchmarking analysis under the TNMM- as has been done in this case, learned representatives agree that the adjudication on comparability of Spectrun Business Solutions Ltd and ICRA Management Consulting Services Ltd will become academic. 86. We see no reasons to take any other view of the matter than the view so taken by the coordinate bench in assessee s own case for the immediately preceding assessment year. Respectfully following the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer, earlier in this order. We have thus upheld this ground, and on that basis, rejected the Assessing Officer s grievance on quantification part as infructuous. 95. In view of the above position, the plea of the assessee is thus upheld. 96. Ground no. 2 is this allowed. 97. In ground no. 3, the assessee has raised the following grievance: The CIT(A) erred in confirming the disallowance of depreciation of Rs. 4,54,933/-on the opening WDV of capitalized value of goods purchased from P.K. Agarwal Group concerns Viz (Durga Iron Steel Ltd. and Surajbhan Rajkumar Pvt. Ltd.) in A.Y. 2003-04. 98. Learned representatives fairly agree that this issue is covered against the assessee by the decisions of the cordi ate benches in assessee s own case. Respectfully following these decisions, we uphold the conclusions arrived at by the learned CIT(A) and decline to interfere in the matter. 99. Ground no. 3 is thus dismissed. 100. In ground no. 4, the assessee has raised the following grievance: The CIT(A) erred in disallowing the deduction of Rs 520,25,03,446/- u/s 37(1) of the Act, being expenses incurred on corporate social responsibility (CSR) on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the purposes of earning the income from business or profession, merely because some of these expenses are incurred voluntarily, i.e. without there being any legal or contractual obligation to incur the same, those expenses do not cease to be deductible in nature. In other words, it is not necessary that every expense that could be allowed as a deduction should be such as a hardnosed and perhaps devoid of senses of compassion, businessman alone would incur in furtherance of his business pursuits. We find guidance from a passage from the judgment of House of Lords in the case of Atherton v. British Insulated Helsbey Cables Ltd. [1925] 10 Tax Cases 155 (HL), referred to with approval by the Hon'ble Supreme Court in the case of CIT v. ChandulalKeshavlal Co. [1960] 38 ITR 601, which reads as follows: It was made clear in the above cited cases of Usher's Wilshire Brewery v. Bruce (supra) and Smith v. Incorporated Council of Law Reporting [1914] 6 Tax Cases 477 that a sum of money expended not with a necessity and with a view to direct immediate benefit to the trade, but voluntarily and on the grounds of commercial expediency and in order to indirectly facilitate, carrying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... han the assessee is also benefited by the expenditure should not come in the way of an expenditure being allowed by way of deduction under s. 10(2)(xv) of the Act if it satisfies otherwise the tests laid down by law. 17. The next issue is whether it is for the purposes of business or not. We may, in this regard, usefully refer to the observations of a coordinate bench of this Tribunal, speaking through one of us (i.e. the Accountant Member) and in the case of Hindustan Petroleum Corporation Ltd v Dy. CIT [2005] 96 ITD 186/[2004] 141 Taxman 33 (Mum.) (Mag.), as follows: 7. We find that as held by Hon'ble Karnataka High Court in the case of Mysore Kirloskar Ltd. v. CIT [1987] 166 ITR 836, while 'the basic requirements for invoking sections 37(1) and 80G are quite different', 'but nonetheless the two sections are not mutually exclusive'. Thus, there are overlapping areas between the donations given by the assessee and the business expenditure incurred by the assessee. In other words, there can be certain amounts, though in the nature of donations, and nonetheless, these amounts may be deductible under section 37(1) as well. Therefore, merely because a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd in aiding local school. While doing so, Their Lordships observed as follows: The concept of business is not static. It has evolved over a period of time to include within its fold the concrete expression of care and concern for the society at large and the locality in which business is located in particular. Being a good corporate citizen brings goodwill of the local community as also with the regulatory agencies and society at large, thereby creating an atmosphere in which the business can succeed in a greater measure with the aid of such goodwill . . . . 9. Let us now take a look at the undisputed facts of this case. The assessee is a company owned by the Government of India and working under the control and directions of the Government of India. As the statement of facts clearly sets out, the expenditure on 20-Point Programmes was incurred in view of specific directions of the Government of India. This factual aspect is not even disputed or challenged by the Revenue at any stage. It cannot but be in the business interest of the assessee-company to abide by the directions of the Government of India which also owns the assessee-company. In any event, as observed by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich has been introduced with effect from 1st April 2015, cannot be construed as to disadvantage to the assessee in the period prior to this amendment. This disabling provision, as set out in Explanation 2 to Section 37(1), refers only to such corporate social responsibility expenses as under Section 135 of the Companies Act, 2013, and, as such, it cannot have any application for the period not covered by this statutory provision which itself came into existence in 2013. Explanation 2 to Section 37(1) is, therefore, inherently incapable of retrospective application any further. In any event, as held by Hon'ble Supreme Court's five judge constitutional bench's landmark judgment, in the case of CIT v. Vatika Townships Pvt Ltd (2014) 367 ITR 466/227 Taxman 121/49 taxmann.com 249 (SC), the legal position in this regard has been very succinctly summed up by observing that Of the various rules guiding how legislation has to be interpreted, one established rule is that unless a contrary intention appears, legislation is presumed not to be intended to have a retrospective operation. The idea behind the rule is that a current law should govern current activities. Law passed toda ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsibility. As for the former, the disallowance under Explanation 2 to Section 37(1) comes into play, but, as for latter, there is no such disabling provision as long as the expenses, even in discharge of corporate social responsibility on voluntary basis, can be said to be wholly and exclusively for the purposes of business . There is no dispute that the expenses in question are not incurred under the aforesaid statutory obligation. For this reason also, as also for the basic reason that the Explanation 2 to Section 37(1) comes into play with effect from 1st April 2015, we hold that the disabling provision of Explanation 2 to Section 37(1) does not apply on the facts of this case. 104. We further find that another coordinate bench has, in assessee s own case for the immediately preceding assessment year, deleted the similar disallowance. We see no reasons to take any other view of the matter than the view so taken by the coordinate benches, and, in any case, no specific reasons for doing so have been pointed out to us. We have also noted that there is not even doubt on the bonafides and reasonableness of the expenses, and that the dispute before us, as elaborated earlier, is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and installation must be read together. The Assessing Officer thus concluded as follows: 19.5.5 A plain reading of the provisions of the Section and the Explanatory Notes clearly reflect the intention behind the introduction of the Section which is to incentivize investment in P M by manufacturing companies, who invests above a certain threshold (l00 crore) within a period between 01.04.2013 and 31.03.2015. The provisions of the Section and Explanatory Notes thereof clearly spell out that an assessee intending to claim the benefit or the Section must acquire and install the P M within the aforementioned period and as such there is no scope left for any interpretation otherwise. It is pertinent to mention here that the deduction under section 32AC is investment linked which is to be made in a specific period and thus any claim of deduction without investment in that specific period is ultra virus. Since, deduction under section 32AC is allowed only on the assets acquired and installed during FY 13-14, the assessee's claim of deduction on assets acquired prior to 01.04.2013 but installed during FY 13-14 is disallowed. Accordingly, deduction u/s 32AC is allowed @15% on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion. (1A) Where an assessee, being a company, engaged in the business of manufacture or production of any article or thing, acquires and installs new assets and the amount of actual cost of such new assets acquired and installed during any previous year exceeds twenty-five crore rupees, then, there shall be allowed a deduction of a sum equal to fifteen per cent of the actual cost of such new assets for the assessment year relevant to that previous year: Provided that no deduction under this sub-section shall be allowed tor the assessment year commencing on the 1st day of April, 2015 to the assessee, which is eligible to claim deduction under sub-section (1) for the said assessment year. The appellant has submitted that it can be observed that investment allowance is available on assets installed during any previous year. Thus it was accepted by the legislature that both acquisition and installation cannot/would not happen in a particular financial year and hence the purpose of Section 32AC would be defeated if an assessee is called upon to both acquire and install the new asset in the same financial year. Since there are 4 stages of an asset cycle viz: acquisitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... because the appellant's facts of the case are governed by sec 32AC (1) and not subsequent amendment made in sub section32AC (1A). Sec. 32 AC (1) says Where an assessee, being a Company, engaged in the business of manufacture or production of any article or thing, acquires and installs new asset after 31st day of March, 2013 but before the 1st day of April, 2015 and the aggregate amount of actual cost of such new assets exceeds one hundred crore rupees, then there shall be allowed a deduction, (a) for the assessment year commencing On the 1st day of April, 2014, of as sum equal to fifteen per cent of the actual cost of new assets acquired and installed after the 31st day of March, 2013 but before the 1st day of April, 2014, if the aggregate amount of actual cost of such new assets exceeds one hundred crore rupees; and (b) for the assessment year commencing on the 1st day of April, 2015, of as sum equal to fifteen per cent of the actual cost of new assets acquired and installed after the 31st day of March, 2013 but before the 1 day of April, 2015, as reduced by the amount of deduction allowed, if any, under clause (a). From the plain reading of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction. Thus, as rightly held by the learned ITAT the provision of section 32(1)(iia) of the IT Act is required to be interpreted reasonably and purposively as the strict and literal reading of section 32(1)(iia) of the IT Act will lead to an absurd result denying the additional depreciation to the assessee though admittedly the assessee has installed new plant and machinery . Clearly thus the expression acquisition and installation‟ are required to be read in a manner in which even if the acquisition is one year and installation is in another year, the year in which both the conditions, that is acquisition and installation are completed, would be the year in which acquisition and installation‟ is said to be completed. A view thus indeed seems possible, and that is what Their Lordships have approved, that when a plant and machinery is installed in one year, even if it is acquired in an earlier year, it will be treated as acquired and installed‟ in the year of installation of plant and machinery. No contrary decision has been cited before us. We may reiterate that the expression used in Section 32(1)(iia) is materially the same as it refers to new machinery or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of business or profession' of the SEZ unit instead of 'gross profits and gains' of SEZ unit, as interpreted by Supreme Court in the recent judgement in the case of Vijay Industries. The Apex court while interpreting the provisions of section 80HH relevant to AY 1979-80 and 1980-81 has held that phrase profits and gains means gross profits of the business i.e. before computing income as specified in section 30 to 43D of me Act in para (18) and (19) as under: It is most humbly submitted that the concept 'profits and gains s a wider concept than the concept of 'income'. The profits and gains/loss are arrived at after making actual expenses incurred from the figure of sales by the assessee. It does not include any depreciation and investment allowance, as admittedly these are not the expenses actually incurred by the assessee. However, the term 'income' does take into consideration the deductions on account of depreciation and investment allowance. Therefore, the term profits and gains are not synonymous with the term 'income' .. 19) Reading of Section 80HH along with Section 80A would clearly signify that such a deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d full reading of the concerned section. The suggestion of the learned departmental representative that section 80 HH does not deal with profit and gains derived is totally fallacious. The term derived has been very much used and the same in facts controls the provision of section 80 HH. Hence learned departmental representative submission in this regard is not sustainable. 130. The submission of the learned departmental representative and the stand of the revenue will succeed only when the explanation below section 10 AA is considered as clarificatory. The said explanation inserted by Finance Act 2017 with effect from 1/4/18 provides that For the removal of doubts, it is hereby declared that the amount of deduction under this section shall be allowed from the total income of the assessee computed in accordance with the provisions of this act, before giving effect to the provisions of this section and the deduction under this section shall not exceed such total income of the assessee . 131. In this regard it is noted that the provisions of section 80 AB are parimatereia with the provisions of this explanation. Section 80 AB reads as under: Deductions to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble Supreme Court is the law of the land and is totally binding upon all the other courts and tribunals. Furthermore, the submission of learned Departmental Representative that other decisions have not been considered by the Hon'ble Supreme Court is without any substance. Moreover, as cogently brought by learned Counsel of the assessee in para 9 of his submission, the reference to decision ofPlastibends India Ltd. (supra) here is not applicable. Suffice is to reiterate here that it dealt with a deduction provision under section 80IA, which falls under Chapter VI-A and is therefore covered by provisions of section 80AB (i.e. the deeming fiction to provide deduction only from income as included in the gross total income of the assessee). In the appellant's case the deduction is claimed under section 10AA of the Act which is not covered in section 80AB. That the legislature in its wisdom has not made 80AB applicable to section 10A/10AA/10B/10BA/ 10C of the Act, even though the said sections provide for deduction to be granted to an assessee. Secondly, deduction under section 10AA of the Act (prior to the amendment made by Finance Act 2017 by way of insertion of Explanation) wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tation of the meaning of word profit and gains with reference to which the discussion is being made here. Accordingly the submission of the learned departmental representative does not oxygenate the revenue s stand. 136. Accordingly in the background of aforesaid discussion and the precedent from the Hon'ble Supreme Court we direct the assessing officer to grant the deduction under section 10 AA with reference to the profit and gains as determined by the honourable Supreme Court in the case of Vijay Industries (supra). 116. Respectfully following the views so expressed by the coordinate bench, with which we are in considered agreement, we uphold the plea of the assessee in principle and direct the Assessing Officer to grant the relief accordingly. 117. Ground no. 6 is thus allowed. 118. In ground no. 7, the assessee has raised the following grievance: 7. Reference to the Transfer Pricing Officer ('TPO') under section 92CA of the Act, 7.1 On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in confirming the action of learned Assessing Officer ('AO') in making a reference of the Appellant's case to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6,595 claimed under section 80IA of the Act; 8.3. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in confirming the action of the learned AO in rejecting the economic analysis or the benchmarking analysis of the Appellant, on the application of internal Comparable Uncontrolled Price Method by the Appellant, without providing any cogent reasons; 8.4. On the facts and in the circumstances of the case, the learned CIT(A) erred in confirming the action of the learned AO in accepting the economic analysis of the learned TPO without providing cogent reasons and specifically: failed to appreciate that the level of market of the comparable transaction adopted by the learned TPO, is different as compared with the level of market in which appellant (manufacturing units) operate; and Erred in confirming the action of the AO/TPO of determining the arm's length rate for each four captive power plants after making adjustment to the comparable's fixed cost based on Plant Load Factor. 122. So far as this ground of appeal is concerned, the assessee has certain captive power plants, namely CPP GTG VII Hazira, CPP GTG IX ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ining consistent stand, this ground of appeal is dismissed. 123. The assessee is aggrieved of the stand so taken by the learned CIT(A) and is in appeal before us. 124. We have heard the rival contentions, perused the material on record and duly considered the facts of the case in the light of the applicable legal position. 125. We find that the learned CIT(A) s order for the assessment year 2013-14, based on which the impugned ALP adjustment has been sustained, has come up for consideration before a coordinate bench which has, reversing the stand of the learned CIT(A), observed as follows: 168. We have heard both the counsel and perused the records. Learned counsel of the assessee contended that assessee has benchmarked the transaction using internal cup by considering the manufacturing unit as a tested party and comparing the inter unit power rate at which the power was purchased by the manufacturing units from the third-party DGVC. That in the case of Reliance Industries Ltd for assessment year 2005-06 to assessment year 2012-13 the ITAT Mumbai has upheld that the power rate charged by DGVCL for determining the market rate of unit rate of electricity. 169. Fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld for the purposes of any other business carried on by the assessee are transferred to the eligible business and, in either case, the consideration, if any, for such transfer as recorded in the accounts of the eligible business does not correspond to the market value of such goods or services as on the date of the transfer, then, for the purposes of the deduction under this section, the profits and gains of such eligible business shall be computed as if the transfer, in either case, had been made at the market value of such goods or services as on that date: Provided that where, in the opinion of the Assessing Officer, the computation of the profits and gains of the eligible business in the manner hereinbefore specified presents exceptional difficulties, the Assessing Officer may compute such profits and gains on such reasonable basis as he may deem fit. Explanation.-For the purposes of this sub-section, market value , in relation to any goods or services, means- (i) the price that such goods or services would ordinarily fetch in the open market; or (ii) the arm's length price as defined in clause (ii) of section 92F, where the transfer of such goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore dismiss ground. 7. Counsel for the assessee pointed out that the judgment of the Tribunal in case of Reliance Infrastructure limited (supra) was carried in appeal by the revenue before the High Court in Income Tax Appeal No.2180 of 2011, such appeal was dismissed making following observations:- 6. As far as question (d), namely, the claim relating to purchase price from Tata Power Company is concerned and that was for the deduction under Section 80IA, the ITAT in paragraph 21 onwards has noted the factual findings and also referred to the order of the Maharashtra Electricity Regulatory Authority (for short MERC ). Paragraph 36 set outs as to how the claim arose. The claim has been considered in the light of Section 80IA and particularly proviso and explanation thereto. The Tribunal eventually held that till the Assessment Year 2005-2006, the Revenue considered the rate at which the power was purchased by the Assessee from Tata Power Company as market value. There is nothing brought on record as to how the rate determined by the MERC is the true market value. The Assessee gave explanation that the rates determined by the MERC do not reflect the correct market ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B for such power generation. Thus the sum of Rs.4.51 per unit only represented the cost of electricity generation to the assessee. In Section 80IA(8) of the Act what is required to be ascertained is the market value of the goods transferred by the eligible business, when such transfer is by eligible business to another non eligible business of the same assessee and the consideration recorded in the accounts of the eligible business does not correspond to market value of such goods. Term Market Value is further explained in explanation to said sub-section to mean in relation to any goods or services, price that such goods or services will ordinarily fetch in the open market. To our mind sum of Rs.4.51 per unit of electricity only represented cost of electricity generation to the assessee and not the market value thereof. It is not in dispute that the GEB charged Rs. 5 per unit for supplying electricity to other industries including non eligible unit of the assessee itself. Tribunal therefore, while adopting the said base figure and excluding excise duty therefrom to work out Rs. 4.90 as the market value of the electricity generated by the assessee, to our mind, committed no error. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 126. Once the very decision, based on which the impugned decision of the CIT(A) has its foundational basis, stands disapproved by a coordinate bench, the stand of the learned CIT(A) cannot meet our judicial approval. In any event, we are in considered agreement with the view taken by the coordinate bench in the assessee s own case for the immediately preceding assessment year, and we are unable to see any legally sustainable basis for rejection of internal CUP on the facts of this case. Respectfully following the views so expressed by the coordinate bench, which, in turn, follows the views of other coordinate benches and Hon ble jurisdictional High Court in assessee s own case, we uphold the plea of the assessee. Accordingly, the impugned ALP adjustment of Rs 147,12,37,934 stands deleted. 127. Ground no. 8 is thus allowed. 128. We now take up the additional grounds of appeal filed by the assessee. Having heard the parties on the admissions of these grounds of appeal, and having regard to the well-settled legal position in the light of the Hon ble Supreme Court s judgment in the case of NTPC Vs CIT [ (1998) 229 ITR 383 (SC)], these grounds are admitted. 129. As regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2013-14, earlier in this consolidated order, we have rejected this plea and confirmed the findings of the learned CIT(A) on this issue. We, therefore, have no reasons to take any other view of the matter than the view so taken by us for the assessment year 2013-14. Respectfully following the same, we confirm the conclusions arrived at by the learned CIT(A) on this point and decline to interfere in the matter. 138. Ground no. 1 is thus dismissed. 139. In ground no. 2, the Assessing Officer has raised the following grievance: Whether, on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in allowing depreciation as claimed by the assessee by holding that the claim of depreciation for the year was optional in nature? 140. Learned representatives fairly agree that whatever we decide in ground no. 2 in the Assessing Officer s appeal for the assessment year 2013-14 will also apply mutatis mutandis on this issue as well. Vide paragraph nos. 8-13 in our decision for the assessment year 2013-14, earlier in this consolidated order, we have rejected this plea and confirm the findings of the learned CIT(A) on this issue. We, therefore, have no reasons to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, have no reasons to take any other view of the matter than the view so taken by us for the assessment year 2013-14. Respectfully following the same, we confirm the conclusions arrived at by the learned CIT(A) on this point and decline to interfere in the matter. 145. Ground no. 3(a)and (b) of the Assessing Officer as also ground no. 8 of the assessee, are thus dismissed. 146. In ground no. 3(c), the Assessing Officer has raised the following grievance: Whether, on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in in deleting the addition of wealth tax, while computing the book profits under section 115JB of the Act. 147. Learned representatives fairly agree, even as learned Departmental Representative vehemently relies upon the assessment order- as usual, that the issue is now covered by Hon ble jurisdictional High Court s judgment, in assessee s own case - reported as CIT Vs Reliance Industries Ltd [(2020) 423 ITR 236 (Bom)] wherein Their Lordships have, inter alia, observed as follows: 2. Question (i) pertains to Revenue's contention that for computing the assessee's Book profits under Section 115JB of the Income Tax Act, 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax. This question, therefore, is not required to be entertained. [Emphasis, by underlining, supplied by us] 148. As we take note of the above legal position, we may also take note of the fact that the similar relief granted by the CIT(A), in the immediately preceding assessment year, has not even been challenged in appeal before us.In this view of the matter, respectfully following the views so expressed by the Hon ble jurisdictional High Court, and in consonance with the coordinate bench decisions, we approve the conclusions arrived at by the learned CIT(A) and decline to interfere in the matter. 149. Ground no. 3(c) is also thus dismissed. 150. In ground no. 4(a), the Assessing Officer has raised the following grievance: 4 (a) ―Whether, on the facts and in the circumstances of the case and in law, the Id.CIT(A) erred in deleting the disallowance of Rs. 1026,68,74,864 incurred by the assessee on aborted blocks of other contract areas under Production Sharing Contracts other than KGD? 151. Learned representatives fairly agree that whatever we decide in ground no. 6 in the Assessing Officer s appeal for the assessment year 2013-14 will also apply mutat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and directed the Assessing Officer to allow investment allowance on assets acquired prior to 01.04.2013 and installed in FY 2013-14? 157. So far as this grievance of the assessee is concerned, it is noted that the assessee had claimed the investment allowance under section 32 AC of Rs 1954,43,98,216, being 15% of the asset addition under the head plant and machinery, but, after withdrawal of claim with respect of KGD6 Unit, it was revised to Rs 1552,33,45,856. Out of this claim, so far as the assets acquired during the relevant previous year and installed during the same previous year were concerned, the Assessing Officer granted the investment allowance of Rs 1239,40,15,856 under section 32AC. However, the remaining claim of investment allowance was rejected by the Assessing Officer by observing, inter alia, as follows: 16.5.5 A plain reading of the provisions of the Section and the Explanatory Notes clearly reflect the intention behind the introduction of the Section which is to incentivize investment in P M by manufacturing companies, who invests above a certain threshold (100 crore) within a period between 01.04.2013 and 31.03.2015. The provisions of the Section and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the said assessment year, On perusal of sub-section 1A (highlighted in bold), it can be observed that investment allowance is available on assets installed during any previous year. Thus it was accepted by the legislature that both acquisition and installation cannot/would not happen in a particular financial year and hence the purpose of Section 32AC would be defeated if an assesse is called upon to both acquire and install the new asset in the same financial year. Since there are 4 stages of an asset cycle viz: acquisition, installation, usage and discard, investment allowance under section 32AC is available to any assesse only when the second stage is completed i.e. when the asset is actually installed by the assesse. Thus even if assets are acquired by the assesse, if they are not installed during the period specified, no allowance is available under Section 32AC. I agree with the submission of the appellant that the section emphasizes on installation of the assets for granting investment allowance. This is further clarified from the amendment brought in sub-section 1A of the Act vide the Finance Act, 2016 which is reproduced below at the cost of repetiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he relevant year. Accordingly, I direct the AO to allow investment allowance on assets acquired prior to 01stApril, 2013 and installed in FY 2013-14. 159. The Assessing Officer is aggrieved of the relief so granted by the CIT(A) and is in appeal before us. 160. Having heard the rival contentions and having perused the material on record, we find that the observations made in paragraphs 111 and 112 will be equally applicable in the present context, and, in the light of the law laid down by Hon ble Gujarat High Court in the case of IDMC (supra), the conclusions arrived at by the learned CIT(A) must be approved for this short reason alone inasmuch as even in the asset in question is acquired in an earlier previous year but installed in the relevant previous year, it will be eligible for the benefit of investment allowance under section 32AC. As we have upheld the relief granted by the CIT(A) on this short reason, it is not really necessary to examine the reasoning adopted by the CIT(A) for the said conclusion. That aspect of the matter, as of now, is academic. We, therefore, approve the conclusions arrived at by the learned CIT(A) and decline to interfere in the matter on this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer. However, the Assessing Officer is aggrieved and in appeal before us. 164. Having heard the rival contentions and having perused the material on record, we see no reasons to interfere in the findings of the CIT(A) on this point either. As a matter of fact, the Assessing Officer s observations, as extracted earlier, would show that his only point was that he did not have the powers to admit the claim in the assessment order, but he was alive to the fact that the appellate authorities did not have this limitation, and that apparently was the reason that the Assessing Officer stated that the necessary verification will be done in case of admission of claim by the appellate authorities. His grievance before us thus does not make sense and seems somewhat mechanical or ritualistic. In any event, in the case of CIT Vs Pruthvi Brokers and Shareholders Pvt Ltd [(2012) 349 ITR 336 (Bom)], Hon ble jurisdictional High Court has observed that It is clear to us that the Supreme Court did not hold anything contrary to what was held in the previous judgments to the effect that even if a claim is not made before the assessing officer, it can be made before the appellate authorities. The ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 167. Learned representatives agree, even as learned Departmental Representative relies upon the stand of the Assessing Officer, that whatever we decide in the ground no. 12 in the Assessing Officer s appeal for the assessment year 2014-15 will apply mutatis mutandis on this ground of appeal as well. Vide our detailed decision earlier in this order, and for the detailed reasons we have set out in paragraphs 56-59, we have rejected this grievance of the assessee. The observations made therein will be equally applicable here as well. Respectfully following the said decision, we approve the conclusions arrived at by the learned CIT(A) and decline to interfere in the matter. 168. Ground no. 10 is thus dismissed. 169. In ground no. 11, which has several sub parts, the Assessing Officer has raised the following grievances: (a) Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is correct in deleting the TP adjustment of Rs.8,40,44,575/- in respect of interest charged on delayed realization of receivables based on earlier years decisions which is in violation of Rule 10B(4) on contemporaneous nature of comparable data, as interest rate vary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce on earlier years decisions without going through the new facts brought-on record by the TPO this year independently? Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in deleting the TP adjustment by merely treating it as recharacterisation without looking into facts of case as to why it has been recharacterised so? Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in ignoring the vital fact that though the said investment is stated to be compulsorily convertible preference shares, the assesses said to have redeemed 50 crore number of such shares on 16.04.2013, 183.27 crore number of such shares on 06.06.2014 and 27.66 crore number of such shares on 28.10.2014 at the same face value at 0.01 euro per share without any arm's length return from the AE RGBV, proving the claim of compulsorily convertible as dubious, which shows the investment in the AE is essentially interest free loan in nature? Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in ignoring the fact that the assesses redeemed the investment as above, though the investment wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ference shares), that too, at the fag end of the FY 2013-14 knowing fully well that the AE is incurring losses and there is no possibility of getting any return as the stipulated 5% coupon rate, which no unrelated party in uncontrolled circumstances would have done within the meaning of section 92F(ii)? Whether on the facts and circumstances of the case and in law, the C!T(A) is correct in ignoring the fact that the AE RIME has been making losses continuously from calendar year 2010 to 2014 and though its net worth is negative, the assesses has shown to have invested in the said preference shares, which is not an arm's length behavior, which no unrelated party would have done so looking from the angle section 92F(ii)? Whether on the facts and circumstances of the case and in law, the C/T(A) is correct in ignoring the fact that the situation in the case of the AE - RGBV is much worse and it has been making very meager profit during the FYs 2010-11 to 2012-13 and loss during the FYs 2013-14 and 2014-15 and has been in liquidation process from FY 2014-15 and its networth is also negative only, and in spite of that the assessee claimed to have made investment in said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inding-up, which clearly shows that the alleged preference share transaction is a sham one with a motive of avoiding taxation of interest, as the real nature of the transaction is interest free loan? Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in not appreciating the sham nature of the nomenclature and form of the transaction compulsorily convertible preference share , when the investment was redeemed losing the significance of compulsorily convertible ; never ever been converted into equity shares at any point of time further losing its nature; and never ever received the coupon rate of return losing the nature of preference share, thus rendering the transaction essentially an interest free loan ? Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct-in over-looking the fact that though the stated preference shares should carry a fixed rate of dividend, the assesses has not accounted any such return which casts cloud on the real nature of investment being interest free loan? Whether on the facts and circumstances of the case and in law, the Ld, CIT(A) is correct in ignoring the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereby the capital investment could be covered as an international transaction under capital financing and such transaction would yield accrued interest which is 'income' for the purposes of section 92(1), so as to be dealt under Chapter X of the Income tax Act? Whether on the facts and circumstances of the case and in law, the CIT(A) is correct in ignoring the essential character of the transaction is loan in substance which the assessee camouflages as 'preference share in order to avoid tax liability on the interest that accrues coupled with the base erosion in India by shifting of huge amount of Rs. 502.41 crores out of India without any return? Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct In ignoring the BEPS (Base Erosion and Profit Shifting) Action Plan 9 of which India is a party which mandates that transactions can be disregarded for TP purposes where they lack commercial rationality, as far as proper return on investments is concerned? Whether on the facts and circumstances of the case and in law, the Id. CIT(A) is correct in Ignoring the BEPS Action Plan which emphasizes substance over fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w that the transaction is loan which is substantially at variance with the stated form of preference share? 169. Learned representatives agree, even as learned Departmental Representative relies upon the stand of the Assessing Officer, that whatever we decide in the ground no. 14 in the Assessing Officer s appeal for the assessment year 2014-15 will apply mutatis mutandis on this ground of appeal as well. Vide our detailed decision earlier in this order, and for the detailed reasons we have set out in paragraphs 67-70 we have rejected this grievance of the assessee. The observations made therein will be equally applicable here as well. Respectfully following the said decision, we approve the conclusions arrived at by the learned CIT(A) and decline to interfere in the matter. 170. Ground no. 12 is thus dismissed. 171. In ground no. 13, with several subpartsin the nature of arguments embedded in it, raises the following questions for our adjudication: Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is right in including M/s Ace BPO Services Pvt, Ltd.(Ace BPO) as the comparable without appreciating that it is functionally dissimilar as its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ircumstances of the case and in law, the Ld. CIT(A) is correct in failing to understand that the contract between the AE and the foreign government was to avoid base erosion for the Kurdish government and it would not avoid Indian jurisdiction to arrive at the ALP of the transaction unless it is prohibited by any Bilateral Investment Treaty? Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in not appreciating the fact that a best the agreement with Kurdish government would only serve as evidence for cost incurred and it could not be read into much for ALP determination in the absence of any binding Bilateral Treaty between Indiaand Iraq? Whether on the facts and circumstances of the case and in law the Ld. CIT(A)is correct in holding that the transaction is covered u/s 10B(2)(d) in the absence of any laws and Government orders in force and equating an agreement between the AE and the regional government for incurring of cost with law or government order in force for ALP of the transaction? Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in accepting the cost-to-cost basis of support serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the facts and circumstances of the case and in law, the Ld, CIT(A) is correct in accepting the assessee's division of interest differential 50:50 between the assessee and the AEs, whereas it is anybody's knowledge that the assessee and the AEs cannot be considered on the same footing for attributing the interest differential advantage equally, as FAR significantly differ between the assessee and the AEs? Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) Is correct in not passing a speaking order on the FAR analysis carried out by the TPO for attributing the interest differential in a more conservative manner at 60:40 ratio and simply accepting the assessee's ad hoc unscientific ratio of 50:50 without any backing of FAR analysis? Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in equating the huge assessee with less credit-worthy small AEs in assigning the interest differential equally which is not possible at any stretch of imagination, ignoring the scientific apportionment done by the TPO based on FAR analysis? Whether on the facts and circumstances of the case and in law, the L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made by the assessee, without appreciating the fact that the data given in the table appearing in page No.62 to 64 of the TPO's Order shows that the assessee has taken guarantee for 90 days under short term as well as under long term and guarantee for 275 days also under long term as well as under short term, which clearly indicates that the classification of corporate guarantee done by the assessee is ad hoc, unscientific, artificial and so is untenable? Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is correct in relying upon the order of her predecessor for AY 2011-12 stating it as speaking order, without appreciating the fact that her predecessor, for upholding the yield spread approach of the assessee, relied on the decision of Hon'ble Gujarat High Court in CIT Vs Adani Wilmar Ltd (Tax Appeal No.240 of 2014 dated 07.04.2014) which nowhere discusses about the method at all? Whether on the facts and circumstances of the case and in law, the Ld, CIT(A) is correct in relying upon the order of her predecessor and order of Hon'ble Tribunal for A Y2012-13, ignoring that the Hon'ble Tribunal in assessee's own case for A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tested party is 577 crores, overlooking the fact that non application of turnover filter will defeat the very purpose of benchmarking the transaction and also ignoring the decision of Hon'ble Karnataka high court in case of Acusis software India Private Limited (ITA No .223/2017) in this regard? Whether On the facts and circumstances of the case and in law, the Ld. CIT(A) is right in including M/s Spectrum Business Solutions Ltd. as comparable without appreciating that it is having substantially lower turnover i.e. 8.53 crores only whereas segmental turnover of tested party is 577 crores, overlooking the fact that non application of turnover filter will defeat the very purpose of benchmarking the transaction and also ignoring the decision of Hon'ble Karnataka high court in case of Acusis software India Private Limited (ITA No .223/2017) in this regard? 181. Learned representatives agree, even as learned Departmental Representative relies upon the stand of the Assessing Officer, that whatever we decide in ground no. 18 in the Assessing Officer s appeal for the assessment year 2014-15 will apply mutatis mutandis on this ground of appeal as well. Vide our detailed decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thus dismissed as not pressed. 191. In ground no. 3, the assessee has raised the following grievance: 3. The learned CIT(A) Mumbai erred in allowing the deduction in respect of export profits of SEZ unit u/s 10AA of the Income tax Act, 1961 (Act) with reference to the income computed under the head 'profits and gains of business or profession' of the SEZ unit instead of 'gross profits and gains' of SEZ unit, as interpreted by Supreme Court in the recent judgement in the case of Vijay Industries. The Apex court while interpreting the provisions of section 80HH relevant to AY 1979-80 and 1980-81 has held that phrase profits and gains means gross profits of the business i.e. before computing income as specified in section 30 to 43D of me Act in para (18) and (19) as under: It is most humbly submitted that the concept 'profits and gains s a wider concept than the concept of 'income'. The profits and gains/loss are arrived at after making actual expenses incurred from the figure of sales by the assessee. It does not include any depreciation and investment allowance, as admittedly these are not the expenses actually incurred by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the circumstances of the case and in law, the learned C!T(A) erred in confirming the action of the learned AO of not demonstrating The motive of the Appellant to shift profits outside of India by manipulating the prices charged in its international transaction, either at the stage of invoking, or initiating the assessment or at the stage of framing the assessment, in its international transaction, either at the stage of invoking or initiating the assessment or at the stage of framing the assessment; 4.4. On the facts and in the circumstances of the case and in law. the learned CIT(A) erred in confirming the action of the learned AO in not demonstrating the motive of the Appellant, to carry out transactions between an eligible business anti other business, to reduce the taxable profits by manipulating the prices of its Specified Domestic transactions, either at the stage of invoking or initiating the assessment or at the stage of framing the assessment; 4.5. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in confirming the action of the learned AO in not demonstrating that the course of business between the Appellant and the closel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts that during the year under consideration no income based deductions, under section 80IA of the Act, has been claimed by the aforesaid power plants. 6.3. On the facts and in the circumstances of the case, the learned CIT(A) erred in confirming the action of the learned A.O. in accepting the economic analysis of the learned TPO without providing cogent reasons and specifically. Failed to appreciate that the level of the market of the comparable transaction adopted by the learned TPO, is different as compared with the level of market in which appellant (manufacturing units) operate; and erred in confirming the action of the AO/TPO of determining the arm's length rate of captive power plants after making adjustments to the comparable's fixed cost based on Plant Load Factor. 201. So far as this ground of appeal is concerned, the assessee has certain captive power plants, namely CPP GTG VII Hazira, CPP GTG IX Hazira, STGII Hazira and STG-II Hazira, which are eligible for deduction under section 80IA. These four eligible units have supplied electricity to Hazira Manufacturing Division (HMD) and Dahej Manufacturing Division (DMD) of the assessee comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duly considered the facts of the case in the light of the applicable legal position. 204. We find that the learned CIT(A) s order for the assessment year 2013-14, based on which the impugned ALP adjustment has been sustained, has come up for consideration before a coordinate bench which has, reversing the stand of the learned CIT(A), observed as follows: 168. We have heard both the counsel and perused the records. Learned counsel of the assessee contended that assessee has benchmarked the transaction using internal cup by considering the manufacturing unit as a tested party and comparing the inter unit power rate at which the power was purchased by the manufacturing units from the third-party DGVC. That in the case of Reliance Industries Ltd for assessment year 2005-06 to assessment year 2012-13 the ITAT Mumbai has upheld that the power rate charged by DGVCL for determining the market rate of unit rate of electricity. 169. Furthermore it is the contention that Hon ble High Court has rejected the appeal of the revenue for assessment year 2006-07 and has discussed non applicability of judgement of Hon ble Calcutta High Court in the case of CIT vs. ITC Ltd. 170. Le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pond to the market value of such goods or services as on the date of the transfer, then, for the purposes of the deduction under this section, the profits and gains of such eligible business shall be computed as if the transfer, in either case, had been made at the market value of such goods or services as on that date: Provided that where, in the opinion of the Assessing Officer, the computation of the profits and gains of the eligible business in the manner hereinbefore specified presents exceptional difficulties, the Assessing Officer may compute such profits and gains on such reasonable basis as he may deem fit. Explanation.-For the purposes of this sub-section, market value , in relation to any goods or services, means- (i) the price that such goods or services would ordinarily fetch in the open market; or (ii) the arm's length price as defined in clause (ii) of section 92F, where the transfer of such goods or services is a specified domestic transaction referred to in section 92BA. 175. The rate charged by the assessee has been duly accepted by the Tribunal and upheld by the Hon ble Jurisdictional High Court in the case of CIT vs. M/s. Reliance Industri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal was dismissed making following observations:- 6. As far as question (d), namely, the claim relating to purchase price from Tata Power Company is concerned and that was for the deduction under Section 80IA, the ITAT in paragraph 21 onwards has noted the factual findings and also referred to the order of the Maharashtra Electricity Regulatory Authority (for short MERC ). Paragraph 36 set outs as to how the claim arose. The claim has been considered in the light of Section 80IA and particularly proviso and explanation thereto. The Tribunal eventually held that till the Assessment Year 2005-2006, the Revenue considered the rate at which the power was purchased by the Assessee from Tata Power Company as market value. There is nothing brought on record as to how the rate determined by the MERC is the true market value. The Assessee gave explanation that the rates determined by the MERC do not reflect the correct market rate. The finding is that the mode of computation and deduction under Section 80IA requires no deviation from the past. The findings of fact and to be found in paragraphs 42 to 50 also reflect that the very issue came up for consideration for the Assessment Year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such transfer is by eligible business to another non eligible business of the same assessee and the consideration recorded in the accounts of the eligible business does not correspond to market value of such goods. Term Market Value is further explained in explanation to said sub-section to mean in relation to any goods or services, price that such goods or services will ordinarily fetch in the open market. To our mind sum of Rs.4.51 per unit of electricity only represented cost of electricity generation to the assessee and not the market value thereof. It is not in dispute that the GEB charged Rs. 5 per unit for supplying electricity to other industries including non eligible unit of the assessee itself. Tribunal therefore, while adopting the said base figure and excluding excise duty therefrom to work out Rs. 4.90 as the market value of the electricity generated by the assessee, to our mind, committed no error. It can be easily seen that if the assessee were to supply such electricity or was allowed to do so in the open market, surely it would not fetch Rs. 4.51 per unit but Rs. 5 per unit as was being charged by GEB. Since the excise duty component thereof would not be retain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot meet our judicial approval. In any event, we are in considered agreement with the view taken by the coordinate bench in the assessee s own case for the immediately preceding assessment year, and we are unable to see any legally sustainable basis for rejection of internal CUP on the facts of this case. Respectfully following the views so expressed by the coordinate bench, which, in turn, follows the views of other coordinate benches and Hon ble jurisdictional High Court in the assessee s own case, we uphold the plea of the assessee. Accordingly, the impugned ALP adjustment of Rs 34,96,00,236stands deleted. 206. Ground no. 6 is thus allowed. 207. In ground no. 7, the assessee has raised the following grievance: The learned CIT(A) erred in rejecting the comparable company namely Cameo Corporate Services Limited without providing any cogent reasons. 208. Learned representatives agree, even as learned Departmental Representative relies upon the stand of the authorities below, thatthis issue is covered by the decision of a coordinate bench in the assessee s own case for the assessment year 2013-14 wherein the coordinate bench, ain paragraph 156 of the order, has remitte ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
