TMI Blog2021 (12) TMI 1428X X X X Extracts X X X X X X X X Extracts X X X X ..... ced loan to its AEs and had charged interest @LIBOR + 224 bps on the advance provided to the AEs - HELD THAT:- We find that identical issue arose in assessee s own case in A.Y. 2010-11 [ 2018 (2) TMI 2030 - ITAT DELHI] and the Co-ordinate Bench of Tribunal in assessee s own case decided the issue LIBOR rate should be used while undertaking the benchmarking analysis in respect of foreign currency loans extended to AE. Well the assessee has charged 250 basis points over an above such benchmark viz. LIBOR. No addition is justified and the entire addition. Adjustment on account of reimbursement received by the assessee from its AEs - HELD THAT:- It is an assessee s submissions that the expenses which were reimbursement of all expenditure which were inter alia incurred by the assessee on behalf of the AEs and the same have been reimbursed to the third parties and for which no value addition has been done by the assessee. It is further assessee s submissions that the reimbursement are on cost to cost basis and transactions were undertaken for commercial expediency and not intended with the expectation of return. The aforesaid contentions of the AR have not found to be false. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dwill amounting to Rs.25,53,577/- to work out the adjusted Book Profit - HELD THAT:- We have herein while deciding the Ground have held the depreciation on goodwill as an allowable expenditure. Therefore in such a situation, we are of the view that once the depreciation is held to be an allowable expenditure, same cannot be added to the book profit more so as u/s 115JB the depreciation which is required to be added back to compute book profits is the depreciation as per the books of account and not as per the Income Tax Act. We are of the view that AO was not justified in making addition of depreciation on goodwill to compute the book profits. We accordingly direct the AO to delete the addition made to book profit u/s 115JB - Thus the ground of assessee is allowed. Claim of deduction u/s 80-IA in respect to Wind Power Plant (WPP) and Captive Power Plant (CPP) - HELD THAT:- We are also find in the case of Mitesh Impex [ 2014 (4) TMI 484 - GUJARAT HIGH COURT] has held that if a claim though available in law is not made either inadvertently or on account of erroneous belief of complex legal position, such claim cannot be shut out for all times to come, merely because it is raise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore considering the submissions of the Learned AR restore the matter to AO to examine the same as per record and if the claim of the assessee is found to be in order, to allow the claim. Thus the ground of assessee is allowed for statistical purposes. Deduction of education cess - HELD THAT:- Since the issue being identical to the issue in the case of ExLServices.com (India) Pvt. Ltd [ 2021 (9) TMI 361 - ITAT DELHI] we therefore for similar reasons hold the expenses on education cess to be allowable and accordingly direct the AO to allow its deduction. Thus the ground of assessee is allowed. - ITA No.6620/Del/2018 - - - Dated:- 13-12-2021 - SH. ANIL CHATURVEDI, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER For the Assessee : Shri Pradeep Dinodia, C.A. For the Revenue : Ms. Meera Srivastava, CIT-D.R. ORDER PER ANIL CHATURVEDI, AM : This appeal filed by the assessee is directed against the order dated 13.07.2018 of the Asstt. Commissioner of Income Tax, Circle-1, LTU, New Delhi passed under section 144C(5) of the Act pursuant to the directions of Dispute Resolution Panel (DRP) 2, for Assessment Year 2014-15. 2. The relev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on/disallowance. 2. That the final assessment order u/s 143(3) r.w.s 144C of the Act dated 30th August 2018 is bad in law. The additions/disallowances made by Ld. AO are wholly illegal untenable and on erroneous grounds. GROUNDS OF OBJECTIONS IN RESPECT OF TRANSFER PRICING ADJUSTMENTS Corporate Guarantee Fee- Rs.2,28,67,811/- 3. That the Ld. DRP/TPO and consequently the Ld. AO have grossly erred in law and on facts and in the circumstances of the appellant s case in making an upward adjustment of Rs.2,28,67,811/- by imputing the arm s length corporate guarantee fee rate @0.5% instead of 0.25% actually charged by appellant from its AEs [wholly owned subsidiaries] based on the specific quotations obtained from HDFC Bank and ICICI Bank under the other method. 4. The Ld. DRP/TPO and consequently the Ld. AO have grossly erred on facts in not considering that the AEs have furnished counter guarantees of equal amounts on back to back terms to the appellant, therefore appellant is completely indemnified against any risk of default on the part of its AEs. 5. The Ld. DRP/TPO and consequently the Ld. AO have grossly erred in not appreciating the fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erage cost of foreign borrowing is LIBOR + 87 basis points, whereas it has charged 6M LIBOR + 225 basis points, which is 138 basis points higher from its AE. 11. The Hon ble ITAT may be pleased to hold that the interest charged by the appellant from its overseas wholly owned subsidiary at 6M LIBOR plus 225 basis points is at arm s length and no adjustment is required therein and thus delete the aforesaid adjustment of Rs.12,98,917/-. Adjustments proposed on account ALP of reimbursement received from AEs Rs.45,39,571/- 12. The Ld. TPO and consequently Ld. AO have erred in law and in facts and in the circumstances of the assessee in re-characterize the transition of reimbursement received from AEs in the nature of travelling, lodging, boarding etc. as intra-group services and consequently proposing a mark-up of 12.79% on cost on ad-hoc basis. 13. That the TPO/DRP and consequently Ld. AO failed to appreciate that no mark-up was required on reimbursement of actual cost received from the AE. 14. Without prejudice, the mark-up proposed by Ld. TPO/AO @12.79% based on the search conduced on manufacturing companies is unjustified and is very high in respect o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of CIT vs. Sam Global Securities [(2014) 360 ITR 682(Delhi)]. 22.1 claim of profit based deduction under section 80-IA amounting to Rs.11,12,42,521/- in respect of its Wind Power Plant (WPP) and Captive Power Plant (CPP) which was inadvertently left to be claimed while filing the return of income. 22.2 allowance of remaining additional depreciation @10% u/s 32(1)(iia) amounting to Rs.58,14,99,012/-. 22.3 claim of TDS deducted on sale of immovable property amounting to Rs.2,70,000/- which was inadvertently left to be claimed while filing of the return of income and self assessment tax amounting to Rs.47,61,334/- which was inadvertently paid as TDS. 23. The Ld. AO has erred in law and circumstances of the case by initiating penalty proceedings u/s 271(1)(c) of the Act. 24. The above grounds are without prejudice to each other. 25. The appellate craves the leave to add, amend or alter all or any of the grounds of appeal. 4. Assessee thereafter has raised an additional ground which reads as under: 26. The Hon ble ITAT may be pleased to grant the claim of ducation Cess (@3%) amounting to Rs 34,79,518 u/s 37 of the Act paid/payable by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the corporate guarantee, assessee had charged guarantee fee of 0.25% aggregating to Rs 2,28,54,407/-. The AEs to whom Corporate Guarantee were issued are listed at Page 5 of the TPO order. It was submitted by the assessee that it has not incurred any cost for provision of the guarantees and that during F.Y. 2013-14, it had obtained a quotation from a Bank whereby the Bank had agreed to provide corporate guarantee to the AEs of the assessee at a service fee of 0.25%. Assessee considered the quotation from the Bank of similar arrangement to be an appropriate CUP to determine the Arm s Length nature of similar arrangement between the assessee and its AEs. It was therefore the submission of the assessee that the Corporate Guarantee fee charged by the assessee from its AEs could be considered to be at Arm s Length Price. The submissions of the assessee were not found acceptable to TPO. TPO was of the view that in an uncontrolled transaction like the present one, guarantee fee would have been charged taking into account the credit worthiness of the AE, margins, security or any other consideration relevant for deciding the financial solvency of the AE. He was therefore of the view tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... harged 0.25% as corporate guarantee fee to its AEs, no adjustment is required and therefore the adjustment proposed by the AO be deleted. 13. Learned DR on the other hand took us to the finding of the DRP and supported the order of DRP. 14. We have heard the rival submissions and perused the materials available on record. The issue in the present ground is with respect to the adjustment made to corporate guarantee fee charged by the assessee from its AEs. We find that identical issue arose in assessee s own case in A.Y. 2010-11 and the Co-ordinate Bench of Tribunal in ITA No.356/Del/2015 order dated 24.02.2020 decided the issue in favour of the assessee by observing as under: 12. We have heard the rival contentions, perused the relevant findings and as well as material referred to before us at the time of hearing. The TPO and DRP has rejected the assessee s CUP based on the ICICI Bank specific to facts of the assessee and has applied the Indian banks u/s 133(6) of the Act. First of all TPO S rejection of assessee s CUP merely on the ground that such quotation are merely offers and hence does not qualify as CUP is not appropriate. The assessee has obtained specific quotat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove this of Rs.56,17,984/- is hereby deleted. 15. We further find that in assessee s own case for A.Y. 2012-13 in ITA No.5784/Del/2016 order dated 24.02.2020, the Coordinate Bench of Tribunal by relying on the order in assessee s own case for A.Y. 2010-11 had held that the transaction of corporate guarantee fee charged at 0.25% by the assessee from its AEs to be at Arm s Length rate and accordingly deleted the addition made by TPO. Before us, Revenue has not pointed to any distinguishing feature in the facts of the case in the year under consideration and that of the earlier years. Revenue has also not placed any material on record to demonstrate that the aforesaid decision of the Co-ordinate Bench of Tribunal in assessee s own case for A.Y. 2010-11 2012-13 has been stayed/ set aside/ overruled by higher judicial forum. In view of the aforesaid facts, on relying on the decision of the Co-ordinate Bench of Tribunal for A.Y. 2010-11 in assessee s own case, we hold that the AO was not justified in making adjustment of Rs.2,28,67,811/-. We therefore, set aside the addition made by TPO. Thus the ground of assessee is allowed. 16. Ground Nos.7 to 11 are with respect to the adj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g. The appropriate rate for benchmarking is rate prevailing in the country where the loan has been utilized. It thereafter held that LIBOR rate should be used while undertaking the benchmarking analysis in respect of foreign currency loans extended to AEs and since assessee had charged 250 basis points over and above the LIBOR rates, no addition was called for. The Learned AR thereafter submitted that in A.Y. 2012-13 no adjustment has been made on account of interest on foreign currency loan. He therefore submitted that no adjustment is called for in present case. 20. Learned DR on the other hand supported the order of DRP. 21. We have heard the rival submissions and perused the materials available on record. The issue in the present ground is with respect to interest for Foreign Currency Loan granted by the assessee to its AEs. We find that identical issue arose in assessee s own case in A.Y. 2010-11 and the Co-ordinate Bench of Tribunal in assessee s own case decided the issue observing as under: 22. We have heard the rival contentions, perused the relevant findings and as well as material referred to before us at the time of hearing. There is no dispute that assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee was not found acceptable to TPO. TPO noted that assessee had incurred expenses and also employed manpower, assets and had rendered travel related services to its AEs. He was of the view that had these resources been utilized by the assessee for its own business activities, the assessee would have benefitted and by utilizing those resources for benefit of its AEs, the assessee is losing out on benefits. He therefore held that assessee should have earned a markup on such expenses. The TPO thereafter by considering the comparables, as listed at Page 40 41 of his order, proposed an adjustment of Rs.58,13,774/-. 25. Aggrieved by the proposed adjustment, assessee carried the matter before the DRP. DRP upheld the action of adjustment proposed by the TPO but however directed to compute the adjustment by taking the nine comparables as listed on Page 11 of its directions. Consequent to the direction of DRP, AO made final upward adjustment of Rs.45,39,571/-. Aggrieved by the order of AO, assessee is now before us. 26. Before us, Learned AR reiterated the submissions made before the lower authorities and further submitted that on identical facts, no adjustment on account of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal transactions as per Clause 92D(1) of the Act. 29. We have heard the rival submissions and perused the materials on record. The issue in the present ground is with respect to the adjustment made on account of reimbursement of cost. Before us, it is an assessee s submissions that the expenses which were reimbursement of all expenditure which were inter alia incurred by the assessee on behalf of the AEs and the same have been reimbursed to the third parties and for which no value addition has been done by the assessee. It is further assessee s submissions that the reimbursement are on cost to cost basis and transactions were undertaken for commercial expediency and not intended with the expectation of return. The aforesaid contentions of the AR have not found to be false. We find that the Co-ordinate Bench of Tribunal in the case of Vedanta Ltd. (supra) has held that no mark up is warranted on pass through costs which are inter alia incurred by the assessee and are reimbursement of primary third party expenses initially incurred by the assessee for which no value addition is done by the assessee and which are subsequently reimbursed by the AEs on cost to cost basis. Before us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls available on record. The issue in the present ground is with respect to disallowance of brought forward business losses amounting to Rs 24,84,48,618/- of A.Y. 2013-14. Before us, Learned AR has submitted that the appeal for A.Y. 2013-14 is listed before the Tribunal and the decision of the Tribunal is thus awaited. Considering the aforesaid facts, we direct the AO to allow the claim of the losses when the same is finally determined and in accordance with law. Thus the Ground of the assessee is allowed. 35. Ground No.17 and 18 are with respect to disallowance of depreciation on Goodwill amounting to Rs.25,53,577/- . 36. During the course of assessment proceedings, it was noticed that assessee had claimed depreciation on goodwill amounting to Rs 25,53,577/-. It was submitted that assessee had purchased three business namely Industrial Yarn Business at Manali (Tamilnadu), Engineering Plastic business at Manali (Tamilnadu) and Engineering Plastic business at Pantnagar (Uttrakhand) for a consideration of Rs.150,31,26,228/- as slump sale on 31st December 2008. It was submitted that the businesses was purchased from M/s SRF Polymers Limited on lump sum basis and the amount of goo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de to AO for examination. In the year under consideration, he submitted that it is not a case wherein an additional claim has been made and therefore following the decision of Hon ble Apex Court in the case of Smifs Securities Ltd. (supra), the claim of the assessee be allowed. 39. Learned DR on the other hand took us to the findings of the AO and DRP and pointing to their findings submitted that the AO was fully justified in denying the claim of depreciation. 40. We have heard the rival submissions and perused the material available on record. The issue in the present ground is with respect to the claim of depreciation on goodwill. We find that issue of depreciation on goodwill also arose in assessee s own case in A.Y. 2012-13 and the Co-ordinate Bench of Tribunal in ITA No.5784/Del/2016 order dated 24.04.2020 by relying on the decision of Hon ble Apex Court in the case of Smifs Securities Ltd. (supra), held that assessee is eligible to claim depreciation on goodwill. However in that order since the claim of depreciation was made as an additional claim before the Tribunal, the matter was remitted to the AO for examination. In the year under consideration, we are of the view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eciation as per the books of account and not as per the Income Tax Act. Considering the aforesaid, we are of the view that AO was not justified in making addition of depreciation on goodwill to compute the book profits. We accordingly direct the AO to delete the addition made to book profit u/s 115JB of the Act. Thus the ground of assessee is allowed. 46. Ground No.22.1 is with respect to the claim of deduction u/s 80-IA of the Act amounting to Rs.11,12,42,521/- in respect to Wind Power Plant (WPP) and Captive Power Plant (CPP). 47. Before us, Learned AR submitted that assessee had made an additional claim with respect to the deduction u/s 80-IA of the Act amounting to Rs.10,93,38,575/- in respect of Wind Power Plant (WPP) and Rs.19,03,946/- in respect of Captive Power Plant (CPP) thus claiming an aggregate deduction of Rs.11,12,42,521/- before the AO which was inadvertently left to be claimed while filing the return of income. He submitted that assessee had submitted the complete details with respect to the deductions like Form No.10CCB, audited financial statement, certificates of chartered accountant and other required documentary evidences vide submission made on 26.12.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt ground is with respect to the additional claim of deduction made u/s 80IA of the Act. It is an undisputed fact that assessee did not claim the deduction in the return of income but was claimed during the course of assessment proceedings before the AO but the same was denied by the AO as it was not claimed in the return of income. It is also a fact that when the matter was carried before the DRP, the claim of deduction was also denied by DRP by relying on the decision of Hon ble Apex Court in the case of Goetze (India) Ltd. (supra). We find that identical issue of additional claim of deduction arose in assessee s own case in A.Y. 2010-11 and the Co-ordinate Bench relying on the various decisions cited therein had held that instead of rejecting the additional claim of the assessee authority should make endeavor to examine the bonafide claim of the assessee on merits. We are also find that Hon ble Gujarat High Court in the case of Mitesh Impex [2014] 367 ITR 85 (Guj) has held that if a claim though available in law is not made either inadvertently or on account of erroneous belief of complex legal position, such claim cannot be shut out for all times to come, merely because it is r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the file of AO for verification and thereafter allowing the claim on merits. 55. Learned DR on the other hand did not seriously controvert the submissions made by Learned AR and also did not object to the prayer for remitting the issue back to AO for verification. 56. We have heard the rival submissions and perused the material available on record. The issue in the present ground is with respect to the claim of additional depreciation u/s 32(1)(iia) of the Act. It is the case of the assessee that it did not claim the additional depreciation in the return of income but was claimed before the AO but however AO did not discuss the issue and when the matter was carried before the DRP, DRP also did not allow the claim of additional depreciation. We find that identical issue arose in assessee s own case in A.Y. 2010-11. The Coordinate Bench of Tribunal restored the issue back to the file of AO for considering the claim of assessee by observing as under. 44. The facts as submitted are that assessee claimed additional depreciation @10% (half of 20%) amounting to Rs.18,67,13,454/- on assets being the plant and machinery put to use for less than 180 days during the relevant asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e after granting reasonable opportunity to the assessee of being heard. The assessee will be at liberty to file such documents, explanations, submissions as it deems fit in respect of this claim. 57. We further find that following the decision of the tribunal for A.Y. 2010-11, the claim was allowed in A.Y. 2012-13. Before us, no distinguishing features in the facts of the case in the year under consideration and that of the earlier years has been pointed out by Revenue. Revenue has also not placed any material on record to demonstrate that the ITAT orders in assessee s own case for earlier years has been stayed/ set aside/ overruled by higher judicial forum. We therefore, following the reasoning of the Co-ordinate Bench for A.Y. 2010-11 and for similar reasons set aside the issue back to the file of AO to consider the same on merits after considering the submissions made by assessee and in accordance with law. The AO shall be free to call for such information and explanations as he deems fit to adjudicate the claim of the assessee. Needless to state that AO shall grant adequate opportunity of hearing to the assessee and the assessee shall also be at liberty of file such docum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee has paid education cess amounting to Rs.34,79,518/- under the normal provision of the Act. He submitted that Hon ble Rajasthan High Court in the case of Chambal Fertilisers Chemicals Ltd. vs. CIT in Appeal No.52/2018 vide order dated 03.07.20218 has held that education cess is an allowable deduction while computing the income under the head profit and gains of business or profession as it does not fall within Section 40(a)(ia) of the Act. He submitted that Hon ble Bombay High Court in the case of Sesa Goa Limited vs. JCIT in Tax Appeal No.17/2013 and others order dated 28.02.2020 have also held the education cess to be an allowable expenses. He therefore submitted that Education Cess being not in the nature of tax and not being a disallowable expenditure u/s 40A(2) of the Act, the claim of its deduction be allowed. 65. Learned DR on the other hand did not controvert the submission. 66. We have heard the rival submissions and perused the materials available on record. With respect to the additional ground with claim of deduction of Rs.34,79,518/- on account of payment of education cess, Before us, it is Ld AR s contention that assessee has paid education cess which w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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