TaxTMI 
TaxTMI 
2022 (3) TMI 1433
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....and in law, the Ld. CIT (A) erred in deleting the addition of sales tax incentive/subsidy of Rs. 524,44,02,597/- holding it as capital in nature? 4. So far as this ground of appeal is concerned, it is sufficient to take note of the fact that the assessee had, during the relevant previous year, received sales tax subsidy of Rs 524,44,02,597 and claimed it to be a capital receipt not chargeable to tax. The Assessing Officer, however, rejected this stand and held that the said amount is taxable, as a revenue receipt, under section 28 of the Act. Aggrieved, 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....
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....ea, it will be capital, irrespective of the modality or the source of funds through or from which it is given and that if monies are given for assisting the in carrying out the business operations only after, and conditional upon, the commencement of production, it would be revenue. It was only for the purpose of bringing out this distinction that the Tribunal had analysed the features of the Maharashtra Scheme of 1979 and had come to the conclusion that the subsidy given under the Scheme had a direct nexus with the fixed capital investment and that 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 act....
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....her also relying on the orders of my predecessors in preceding assessment years including the order for immediate preceding assessment year i.e. A.Y.2013-14 and order of the Hon'ble ITAT for AY 1994-95 to AY 2012-13, I am inclined to allow the assessee's claim for treatment of Notional Sales tax of Rs. 524,44,02,597/- as Capital receipt not liable to tax. This ground of appeal is therefore allowed. 5. The Assessing Officer is aggrieved and is in appeal before us. 6. Learned representatives fairly agree that, as rightly noted by the 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 gri....
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.... this order. The Assessee Company is entitled for depreciation of only Rs. 6418,60,98,039/- as against the claim made of Rs. 6524,55,55,688/-. The difference in the department's calculation of depreciation amount and the claim of the assessee amounting to Rs. 105,94,57,649/- is due to the fact that the department has been giving depreciation to the assessee leading to reduction in WDV prior to year when the assessee started making the claim of depreciation. Hence, there has been difference in WDV as per working of the department and the 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 assessee company is entitled for a depreciation of Rs. 5....
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....rred in restricting the disallowance u/s 14A of the Act r. w. Rule 8D(2)(iii) to 0.5% by taking the average value of that investment which have yielded a dividend during the year under consideration? 15. This issue is required to be taken up along with the ground of appeal no. 10 (additional ground of appeal) raised by the assessee. The said ground of appeal, raised by the assessee, is as follows: The learned CIT (A) Mumbai erred in directing the AO to compute the disallowance under section 14A of the Act, by invoking the provisions of Rule 8D of the income tax 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, according....
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....e is concerned, it is sufficient to take note of the fact that after computing the disallowance under section 14A, and relying upon the Explanation 1(f) to Section 115JB(1) of the Act, the disallowance under section 14A is also to be added to the book profits. In appeal, learned CIT (A) upheld the adjustment in principle but restricted the quantum to the disallowance as computed by the assessee under section 14A, rather than the actual disallowance made under section 14A read with rule 8D. While doing so, the learned CIT (A) observed as follows: 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 exem....
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....he order dated 5/1/18 held that disallowance under section 14A cannot be added under section 115JB. Respectfully following the precedent from honourable jurisdictional High Court, we decide this issue in favour of the assessee. 25. We see no reasons to take any other view of the matter than the view so taken by the coordinate bench. Respectfully following the same, we direct the Assessing Officer to delete the impugned adjustment for disallowance under section 14 A in the book profit computed under section 115JB. The assessee gets 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 Ac....
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....o export profit, the assessee claimed deduction of Rs. 6832,18,56,826/- out of the total profit of Rs. 7530,26,45,346/- of the eligible undertaking. Further a deduction of Rs. 698,07,88,519/- [i.e. Rs. 7530,26,45,346 profit of the undertaking - (less) Rs. 6832,18,56,826/-] is claimed as deduction u/s. 801B(9) of the Act as per Form 10CCB submitted by the appellant. The appellant's claim of deduction of eligible profit u/s 10AA and 80IB{9) of the Act has not exceeded the profit of the undertaking in respect of SEZ refinery 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 cl....
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..... 2010-11 to 2012-13 as under: 76. We have heard rival contentions and perused the record. The dispute between the parties revolve around sec. 80A(4) and sec.80IA(9) of the Act, For the sake of convenience, we extract below both the provisions:- "80A(4) Notwithstanding anything to the contrary contained in section 10A or section 10AA or section 10B or section 10BA or in any provisions of this Chapter under the heading "C-Deductions in respect of certain incomes", where, in the case of an assessee, any amount of profits and gains of an undertaking or unit or enterprise or eligible 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 p....
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....may be claiming deduction under different provisions of the Act for the profits derived from the same undertaking. Hence the provisions of sec. 80A(4) visualises that the deduction in respect of profits and gains of an undertaking may be claimed under different provisions and hence the restriction is only for that portion of profit claimed and allowed as deduction under setc. 10A or 10AA or 10B or 10BA or any provisions of Chapter VI under heading "C - deductions in respect, of certain incomes" shall not be eligible for deduction under any other provisions of the Act. For the remaining portion of profit, the 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 pro....
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....ciated Capsules (P) Ltd (supra). The High Court was concerned with the eligibility of the assessee to claim deduction u/s 80IA and 80HHC of the Act. The provisions of sec. 80IA(9) provided that where any amount of profits and gains of an undertaking is claimed and allowed under sec. 80IA(1) for any assessment year, deduction to the extent of such profits and gains shall not be allowed under any other provisions of Chapter VIA and shall in no case exceed the profits and gains of such eligible business or undertaking. The Hon'ble Bombay High Court held that the provisions of sec. 80IA(9) affects 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 fo....
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.... case and in law, the ld.CIT(A) erred in deleting the disallowance of Rs. 228,39,15,312/- incurred by the assessee on aborted blocks of other contract areas underproduction Sharing contracts other than KGD? 33. This issue is also continuing from the past assessment years. While computing the 80IB(9) deduction, the assessee had reduced it by Rs 228,39,15,312, being unsuccessful exploration cost in respect of areas, other than KGD-9 on which the profits were made. When asked to justify the same, the assessee 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 th....
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....s incurred in contract areas other than KGD while computing deduction u/s,80IB(9) of the Act in respect of KGD undertaking. In doing so, he has relied on the provisions of Article 17.2.2. of the Production Sharing Contract (PSC). However, on harmonious reading of the provisions of Article 17 of the PSC, it can be concluded that the deduction under Article 17.2.2 in respect of abortive/unsuccessful blocks is to be allowed to a Company while computing its profits and gains from the business of 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 assessee was right in contending that the article/clause 17.2.2 was concerned with the....
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....s a separate undertaking and hence the expenses relating to aborted blocks of different contracts cannot be reduced from the profit from sale of mineral oil obtained from another contract. The operative portion of CIT (A) on this issue are extracted below:- "49. Decision: I have considered the facts of the case and the submissions made by assessee. The issue for consideration is whether cost of abortive/ unsuccessful blocks (other independent undertakings) are be reduced 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 claime....
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....use 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 provisions of sec. 80IA(5) of the Act, the profits and gains of eligible 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 CI....
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....nd gas, refining of petroleum products etc. On 12.04.2000 the assessee alongwith M/s Niko Resources Limited entered into a PSC with the Government of India ['GOI'] for obtaining a Petroleum Mining Lease in respect of Development area specified therein namely Block KG-DWN-98/3 (KGD) for extraction and exploration of mineral oil i.e. 'Petroleum'. Although the term 'mineral oil' is defined in section 42, 44BB and 293A of the Act, the same is 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....
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....essed 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. 42. Ground no. 7 is also thus dismissed. 43. In ground nos. 8, 9 and 10, which we will take up together, the Assessing Officer has raised the following grievances: 8. "Whether, on the facts and in 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 ld. CIT (A) erred in allowing appeal of the assessee and directing the assessing officer to recompute the profit and deductions tak....
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....is aggrieved and in appeal before us. 46. 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 jurisdiction of the appellate authorities....
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....owing: The provisions of Section 115JB have to be considered subject to charging provisionsunder Section 4 of the Act and an item of income which is otherwise not chargeable to taxcannot be subjected under tax under MAT provisions unless specifically provided for. Since the legislature itself has created parity between income under normal provisions andbook profit so far as exempted receipts are concerned, 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 ....
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....e AO has only power to examine whether books of accounts are certified by authorities under Companies Act, 1956 as having been properly maintained in accordance with Companies Act and thereafter the AO has limited power to increase and reduce items as provided in Explanation to sec. 115JB of the Act. In support of this proposition, the Ld D.R placed his reliance on the decision rendered by the Special bench 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). ....
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....rging section. Unless, specifically made taxable such subsidy cannot be taxed as income. Once the subsidy received cannot be taxed under section 4, there cannot arise any taxability under section 115JB of the Act, which merely provides for an alternate mechanism for computation of income and tax thereon. Thus, an item which is not otherwise taxable cannot be subjected to tax under the MAT 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 a....
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.... in nature." Yet, a different view was taken in the immediately preceding assessment year, not on merits but by sending the matter back to the CIT (A) for fresh adjudication on the ground that "in the case of DCIT vs. M/s. Alok Industries Limited (supra), in a subsequent decision for A.Ys. 2006-07 to 2011-12 dated 16.07.2020, this tribunal has adjudicated the same issue and 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 a....
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....dent), the coordinate bench has observed as follows: 7. .......... We may usefully take note of the observations of Hon'ble Supreme Court in the case of Asstt. CCE v. Dunlop India Ltd. [1985] 154 ITR 172, wherein the Their Lordships quoted, with approval, from the decision of House of Lords to the effect that "We desire to add and as was said in Cassell & Co. Ltd. v. 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, there....
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....ns come into play only when the views are of non-jurisdictional High Court which, do not, legally speaking, bind the lower tiers of judiciary. In our considered view, so far as the precedence value of a non-jurisdictional High Court's judgment is concerned, the position has been very well summed up by a coordinate bench decision, in the case of Bank of India (supra), wherein, 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....
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....he decision of a non-jurisdictional High Court, but then this decision by the coordinate bench is on its own unique facts and it recognizes the fundamental principle that it is more of an exception that the decisions of the non-jurisdictional High Court are not followed. At one place, this decision, inter alia, states that "To a forum like us, following a jurisdictional High 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 ....
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....l forum. 53. In any event, even with respect to the earlier assessment years, this issue was decided, in favour of the assessee, in the assessee's own case. The only reason for taking a deviation, in the immediately preceding assessment year, was the applicability of Veekaylal Investment decision (supra) but that reasoning has now been specifically disapproved by Hon'ble 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 c....
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....R 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 (5651/Mum/2017), ACIT Vs Crompton Greaves Ltd (111 taxmann.com 338) and Cummins India Ltd Vs DCIT (309/Pune/2014). In view of these discussions, and bearing in mind the entirety of the case, we approve the ....
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....ugned 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 tenures and different currencies. 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)- which is, in any event, in harmony with the decis....
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....3 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 the assessee is eligible for compulsory 5% coupon rate on the said investment and though the AE RGBV had positive incomes of 11,494,125 UAE Dirhams, 5,188,402 Dirhams and $742,069 during the calendar years 2007....
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....th 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 losing its nature, and never even 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 circu....
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....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 amount of Rs. 652.4 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 ....
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.... 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 person would enter into such transactions in a real commercial world. He was of the view that this transaction needs to be recharacterized as its economic substance differs....
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.... 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. Question no.1 arises out of the action of the Revenue to tax notional interest in the hands of the assessee through transfer pricing. The facts are that, during the period releva....
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....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 there is not even a fresh investment in the present year, and, such being the facts, there cannot indeed be any justification for disregarding the binding legal precedents. T....
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....gies 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 cost plus 7% mark up. This transaction was benchmarked on the basis of the transactional net margin method (TNMM) with certain comparables including Ace BPO Services Pvt Ltd and Allsec Techn....
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.... 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 absence of any binding Bilateral Treaty between Indian and 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 cove....
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.... 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 can be indeed be viewed as an arm's length transaction. In view of these discussions, and being consistent with the co-ordinate bench decisions, we uphold the action of the CIT (A) and decline to interfer....
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....count 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 coordinate benches have consistently held, right from 2011-12 onwards, that 50:50 allocation is reasonable, and there is no change in the material facts, we see no reasons to take any other view of the matter than the v....
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.... 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, and subject to the observations as above, we uphold the conclusions arrived at by the learned CIT (A) and decline to interfere in the matter. 87. Ground no. 18 is also thus dismissed. 88. In the result, the appeal filed by the Asse....
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....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 ground that it does not fall under business expenditure. 101. During the course of the scrutiny assessment proceedings, the Assessing Officer noted that the assessee has incurred an expenditure of Rs 520,25,03,446 on account of certain corporate s....
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....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 on of business may yet be expended wholly and exclusively for the purpose of the trade; and it appears to me that the findings of the CIT in the present case, bring the payment in question within that description. They found (in words which I have already q....
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....or 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 an expenditure is in the nature of donation, or, to use the words of the CIT(A), 'promoted by altruistic motives', it does not cease to be an expenditure deductible under section 37(1). In Mysore Kirloskar Ltd.'s case (supra), Their Lordships have obser....
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....y 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 the Hon'ble Madras High Court in Madras Refineries Ltd.'s case (supra), monies spent by the assessee as a good corporate citizen and to earn the goodwill of the society help creating an atmosphere in which the business can succeed in a greater measure with the help of ....
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....s 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 today cannot apply to the events of the past. If we do something today, we do it keeping in view the law of today and in force and not tomorrow's backward adjustment of it. Our belief in the nature of the law is founded on the bedrock that every human being is entitled to arrange h....
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....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 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 coor....
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....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 Rs. 522,40,48,126 which works out to Rs. 78,36,07,218. Further as per para 14.6.2 above, the assessee is eligible for deduction u/s 32AC which was not claimed In the Return of Income in respect of additions categorized as Plant & Machinery in the KGD6 Block. Hence an addit....
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....ired 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: acquisition, installation, usage and discard, investment allowance under section 32AC is available to any assessee only when the second stage is completed i.e. when the asset is actually installed by the assessee. Thus even if assets....
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....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 sec 32 AC (1) it is seen that this section specifically mentions that this acquires and installed new asset after 31st day of march 2013. And so the word "and" connotes that acquisit....
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....s 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 plant...... which has been acquired and installed after the 31st day of March, 2005". When this judicial precedent and the legal positionwere put to the learn....
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....nt 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 has to be of gross profits and gains, i.e., before computing the income as specified in Sections 30 to 43D of the Act." Without prejudice to the above, the appellan....
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....rm 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 made with reference to the income included in the gross total income. 80AB. Where any deduction is required to be made or allowed under any section included in this Chapter under the heading "C.-De....
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....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) was to be given at the stage of computing the gross total income of the eligible undertaking under Chapter IV of the Act i.e. prior to the commencement of the exercise to be undertaken under Chapter VI of the Act for arr....
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....and. 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 the TPO, without applying his mind and without recording his satisfaction, thereby making the entire process of referring the matter to the TPO as invalid; 7.2. On the facts and in the circumstances of the case and in law, t....
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....alysis 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 Hazira, STGII Hazira and CPP II Gandhar, 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 company. The r....
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.... 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. 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. Learned counsel of the assesse....
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....ds 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 Industries Ltd. (in ITA No. 1056 of 2....
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....ng 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 2003-2004. For the reasons assign....
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.... 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 n....
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....ent 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 regards the first additional ground of appeal, we have already adjudicated upon the same while dealing with the related ground of Assessing Officer's appeal, and rejected the same. We, therefore, reject this additional ground of appeal. 130. The additional ground of appeal n....
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....pectfully 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 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. 141. Ground no. 1 is thus dism....
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....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, 1961 ("the Act" for short), provision made by the assessee for wealth tax should be excluded. The Tribunal was of the opinion that the section itself refers to the income tax paid or payable or the provisions made therefore. This would not include the provision made for wealth tax. The Tribunal rel....
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.... 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 ld.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 mutatis mutandis on this issue as well. Vide paragraph nos. 32-37 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 take any other view of the matter than the view so ....
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....he 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 Explanatory Notes thereof clearly spell out that an assessee intending to claim the benefit of 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....
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....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: acquisition, installation, usage and discard, investment allowance under section 32AC is available to any assessee 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 repetition. "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 during any previous year exceeds twenty-five crore rupees and such assets are installed on or before the 31 day of March, ....
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....t 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 point as well. 161. Ground no. 5 is thus dismissed. 162. In the ground nos. 6, the Assessing Officer has raised the following grievance: 6. "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 ....
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....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 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 refer....
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....ns 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 every year?" (b) "Whether on the facts and circumstances of the case and in law, Ld. CIT (A) is correct in not considering the cost of borrowing for the assessee adopted by the TPO to benchmark the interest chargeable on receivables and instead adopting adhoc Libor plus spread of 200 bps as adopted by the assessee?" (c) "Whether on the facts and circumstances of the case....
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....s 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 was stated to be made only few months back in the FY 2013-14, on 10.03.2014, 262,13,30,100 number of preference shares (Rs.222,66,88,853) in RGBV at the same face value of 0.01 euro per share without any return, which again shows the nature as current account loan transaction and not compulsorily convertible preference shares as claimed by the assesses? "Whether on the facts and circumstance....
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....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 preference shares, which is not an arm's length behavior which no unrelated party would have done so looking from the angle section 92F(H)? "Whether on the facts and circumstances of the case and in law, the Ld. CIT (A) is correct in ignoring the fact that the assessee has not furnished any detailed valuation report for the value of the preference shares said to be invested as above in RGBV pr....
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....reference 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 fact that an amount of Rs. 502.41 crores has flown out of India in the garb of preference share investment in the AEs without any return leading to base erosion in India, which cannot be an arm's length situation in uncontrolled circumstances as in Section 92F(ii)? "Whether on the facts and circumstances of the case and in law, the Ld. CIT (A) is correct in ignoring the very essence of transfer pri....
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.... 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 ld. CIT (A) is correct in Ignoring the BEPS Action Plan which emphasizes substance over form, economic reality o over legal form and conduct of parties over contracts for evaluating a transaction from transfer pricing angle? Whether on the facts and circumstances of the case and in law, the CIT (A) is correct in not realizing the fact that if such practices are allowed under transfer pricing unchecked without setting it right for arm's length return, it would lead to base erosion to this coun....
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....r 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 core competence is health care back office support system whereas tested party (assessee) is providing consultancy and 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 be....
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...., 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 services to the AE, without understanding the basic tenet of the transfer pricing u/s 92F(H) that no unrelated assessee in uncontrolled circumstances in third party situation would have rendered services on cost-to-cost basis, leading to base erosion in India?" 175. Learned representatives agree, even as learned Departmental Representative relies upon the stand of the Assessing Officer, that whatever....
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.... 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 Ld. CIT (A) is correct in observing the 60:40 split of interest differential carried out by TPO is adhoc and without any basis, without properly going through the scientific FAR analysis carried out by the TPO?" "Whether on the facts and circumstances of the case and in law, the Ld. CIT (A) is correct in passing a non-speaking order in as much as she observed as 'The FAR analysis done by the TPO is not appropri....
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....entific, 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 Y2012-13 set aside the order of the CIT (A) on this issue with a specific direction to the TPO to verify the correctness o the method claimed by the assessee in its original order in I.T (TP)A, No. 5842/Mum/2017 dated 28.09.2018 and also in the M.A order in M.A.No.736/Mum/2018 dated 2.1.2019?" 178. Learned representatives agree, even as learned Departmental Representative relies upon the stand of the Assessing O....
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....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 decision earlier in this order, and for the detailed reasons we have set out in paragraphs 84-87 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. 182. Ground no. 16 is thus dismissed. 183. In the result, the appeal of the Asses....
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....y 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 has to be of gross profits and gains, i.e., before computing the income as specified in Sections 30 to 43D of the Act." Without pr....
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....age 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 closely connected person was so arranged that it produces to the Appellant more than ordinary profits which might be expected to arise in its eligible business 195. Learned counsel submits that he does not wish to press this ground of appeal. Learned Departmental Representative has no objection to this prayer. 196. Ground no. 4 is thus dismissed as not pressed. 197. In ground no. 5, the assessee has raised the following grievance: 5. Management Consultancy Services and Busin....
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....fferent 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 company. The rate at which the electricity is so supplied is Rs 6.70 per KWH, and it is exactly the same at which an external supplier of power (i.e. Dakshin Gujarat Vij Company Limited- DGVCL in short) is supplying the power to the manufacturing units of the assessee company. It is on this basis that the assessee claimed the electricity sale transaction between its CPPs and manufacturing units to be at arm's length. Based on the price at which external vendor, namely DGVCL, is supplying power to the manufacturing di....
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....up 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. Learned counsel of the assessee further pleads that he is relying upon the decision of honourable Supreme Court in the case of Radha Soami Satsang vs. CIT (1992) 193 ITR 321 (SC), for the proposition that on the ground of consistency also DG VCL rate should be accepted. It is further contended that market value of electricity supplied by the CPP unit to the other unit would be the same as charged by the Gujarat Electricity Board to the end consumers. In this regard learned Counsel of the assessee also referred to ITAT decision and H....
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....er 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 Industries Ltd. (in ITA No. 1056 of 2016 dated 30.01.2019), which reads as under: 4. Question (c) pertains to the dispute between the department and the assessee regarding the rate at which the electricity generated by one unit of the assessee-company and provided to the another be valued. The assessee contended that such valuation should be at the rate at which the electricity distribution companies are allowed to supply electricity to the consumers. The revenue on the other hand argues that the appropriate rate should be the rate at which the ele....
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....l 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 2003-2004. For the reasons assigned by the ITAT and finding that the attempt is to seek reappreciation and reappraisal of the factual data that we come to a conclusion that even question (d) as framed is not a substantial question of law." 8. Thus, the issue at hand had been examined by this Court on earlier occasion and the view of the Tribunal under similar circumstances was approved. 9. Additionally, we also notice that similar issue came up for consideration before Chhattisgarh High Court in case of Commissioner of Income-tax, Rai....
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....essee 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 retained by the assessee, Tribunal reduced the said figure by the nature of excise duty and came to the figure of Rs. 4.90 to ascertain the market value of electricity generated by the eligible unit and supplied to non eligible business of the assessee. 11. Judgment of Calcutta High Court in case of Commissioner of Income- tax, Kolkata - III Vs. ITC Ltd. was also brought to our notice in which the said High Court has taken a different stand. However, since the issue has already been examined by t....
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....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 remitted the matter regarding plea for inclusion of Cameo Corporate Services Ltd, as a comparable, to the file of the Assessing Officer for having the matter examined by the TPO on the same, and deciding the matter on that basis. It has been so done on the ground that there was no occasion for the TPO to examine the matter since the said comparable was not included in the assessee's transfer pricing analysis. This reason holds good in the present context as well. We, therefore, deem it fit and proper to remit the matt....