TMI Blog2024 (4) TMI 451X X X X Extracts X X X X X X X X Extracts X X X X ..... ing study report had mentioned that as a matter of abundant caution the transaction is being reported for the purpose of section 92E of the Act. We are of the considered view that when the law had provided for penalty in case of non-compliance of a provision of the Act and the assessee reserving a right to protest at appropriate stage, makes the compliance, the assessee cannot be estopped by own act and conduct to dispute the applicability of the said provisions during the assessment. Without much indulgence on our part, we would like to rely on the order of the Mumbai Bench of the Tribunal in the case of Siro Slimpharma Pvt. Ltd. [ 2021 (10) TMI 754 - ITAT MUMBAI] wherein while dealing with somewhat similar question of law, the Mumbai Tribunal has indicated that in the absence of judgment of Jurisdictional High Court, the non-jurisdictional High Court judgment has persuasive value and should be generally followed. We have also taken into consideration the order relied by ld. DR in the case of Firemenich Aromatics (India) Pvt. Ltd. [ 2020 (7) TMI 658 - ITAT MUMBAI] and the order of Yorkn Tech Pvt, Ltd. [ 2021 (8) TMI 1374 - ITAT DELHI] relied by ld. AR and there is no doubt the coo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uisition matters where market value is determined on the bases of certain parameters peculiar to the parties and property - HELD THAT:- We find no fault in valuation arrived using the relevant parameters and adding premium or discounting, the value, on those parameters. The Valuer s Report is quite in conformity with the principles and method by which market value of a real estate property should generally be arrived at Discounted cash flow (DCF) refers to a valuation method that estimates the value of an investment using its expected future cash flows. DCF analysis attempts to determine the value of an investment today, based on projections of how much money that investment will generate in the future. In case of real estate project, initial cost, annual cost, estimated income, and holding period of a property are some of the variables used in a DCF analysis. We are of considered view that more than to determine the profitability, but to atleast ensure the viability, of an investment, DCF method is often used in real estate sector. DCF method is not only applicable where the assets-based approach is applied and the value of a business is derived from the FMV of the assets (tangibl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot object to their inclusion, the order of Ld. CIT(A) cannot be faulted. There is no apparent infirmity requiring our indulgence. Accordingly, the grounds so raised have no substance. - Shri Shamim Yahya, Accountant Member And Shri Anubhav Sharma, Judicial Member For the Assessee : Shri R.S. Singhvi, Shri Satyajeet Goel And Shri Rajat Garg, CAs. For the Revenue : Shri Rajesh Kumar, CIT, DR ORDER PER ANUBHAV SHARMA, JM: These are cross appeals preferred by the Assessee and the Revenue against the order dated 30.06.2022 of the Commissioner of Income-tax (Appeals)-44, New Delhi (hereinafter referred as Ld. First Appellate Authority or in short Ld. FAA ) in appeal No.CIT(A), Delhi-3/10660/2019-20/CIT(A)-44 arising out of the appeal before it against the order dated 14.02.2020 passed u/s 143(3) r.w.s. 144C(3) of the Income Tax Act, 1961 (hereinafter referred as the Act ) by the ACIT, Circle 7(1), Delhi (hereinafter referred to as the Ld. AO). 2. Background to present lis is that the appellant is engaged in the business of construction, development and sale of integrated townships and residential houses and apartments. It filed the return of income on 28.09.2016 declaring loss of Rs. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CA(4) are applicable even where payment for development rights is capitalised in the books of accounts and not debited to Profit Loss Account and in upholding part addition. 2.2 That the amount paid towards acquisition of development rights having been capitalized in the books of account under the head Capital work-in- progress and in absence of any impact on the profit for the year under reference, the transfer pricing adjustment and consequential addition to the income of the appellant is highly arbitrary and not in accordance with law. 3.1 That on the facts and circumstances of the case, Ld. CIT(A) erred in rejecting valuation report by M/s Cushman and Wakefield and in upholding application of circle rate for determination of arm s length price even though the notified circle rate are only for the purpose of calculation of stamp duty and merely of indicative nature and cannot be taken as valid basis for benchmarking the transaction of purchase of development right. 3.2 That on the facts and circumstances of the case, Ld. CIT(A) erred in holding that Circle Rates serves as the most appropriate benchmark to determine arm s length price of the transaction. 4. That in any case, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is correct in ignoring the facts that assessee did not take into account the maturity period of these securities. No filter to determine maturity was applied. The appellant craves to leave, to add, alter or amend any ground of appeal raised above at the time of the hearing. 3. Heard and perused the records. 3.1 The case of Revenue and assessee need to be first understood to adjudicate the aforesaid grounds. The appellant company, a wholly owned subsidiary of DLF Home Developers Ltd (DHDL), was incorporated with the main object to engage in the business of construction, development, and sale of integrated townships and residential complexes. The case of assessee is that it approached many investors for evincing interest in developing a project in Moti Nagar situated in New Delhi. Thereupon, Singapore government through its arm M/s Reco Moti Pte Ltd. (RMPL) (a Singapore Government entity) acquired a controlling stake of 51% in the appellant company based on a valuation report by Cushman Wakefield, an internationally recognized real estate company. The appellant company entered into an Agreement with DLF Home Developers Ltd. on 21.12.2015 for purchase of irrevocable, absolute and unf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion the Ld. CIT(A) was challenged as an additional ground of appeal. Assesee had claimed that in view of the omission of clause (1) of section 92BA with effect from 01.04.2017 action taken under that clause is invalid and bad in law in view of the decision of the Hon ble Supreme Court in the case of Kolhapur Cane Sugar Works Ltd. vs UOI 2000 (2) SCC 536 which was followed by various Income Tax Appellate Tribunals and also upheld by Hon ble Karnataka High Court in the case of Texport Overseas Pvt. Ltd. ITA No.392/2018 dated 12.12.2019.Assessee had relied upon various judicial precedents/ case laws wherein the various Benches of ITAT (including Delhi ITAT decision in case of SMR Automotive Systems India Ltd (ITA No 6614/Del/2017) have taken a view that since section 92BA (i) has been omitted by the Finance Act, 2017, Transfer Pricing reference and impugned proceedings and order will lapse and will become invalid in law even for the earlier assessment years. Apart from the Delhi ITAT decision (supra), ld. AR has also relied upon following judicial decisions wherein also it has been held that since clause (i) of section 92BA has been omitted by Finance Act, 2017 with effect from 01-04- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (P.) Ltd. [2014] 49 taxmann.com 249/227 Taxman 121 in a detailed judgement provided clarity- on the matter of prospective and retrospective operation of the legislative changes brought about in the tax system. While referring to the observations in judgment in the case of Govinddas (supra) the Court has held as under: - Of the various rules guiding how a legislation has to be interpreted, one established rule is that unless a contrary intention appears, a legislation is presumed not 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 bed rock and every human being is entitled to arrange his affairs by relying on the existing law and should not find that his plans have been retrospectively upset. 9.7 Thus, the Hon ble Supreme Court has always followed the legal principle lexprospicit non respicit i.e. law in hand always looks forward and not towards the back. The essenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t did not have any objection in this regard at the time of transfer pricing proceedings. Thus, the appellant is clearly barred by section 124 of the Act in raising this objection in appeal. 9.10 In view of the overall discussion above, the cognizance taken by the AO under section 92B(i) and reference made to the TPO in the appellant s case under section 92CA is found as legally valid. It is also held that the additional ground cannot be admitted in the facts of the case at this stage. The additional ground appeal is legally inadmissible and is dismissed. 8. Further the issue on merits of Transfer pricing adjustment in respect of transaction of purchase of development rights, the Ld. CIT(A) has dealt the aspect on the following three issues; 1. Whether due to the captalisation of payment in lieu of purchase of development rights the provisions of section 92 of the Act are not triggered? 2. Whether the valuation of the development rights as made by M/s Cushman Wakefield is justified? 3. Whether for benchmarking of transaction of purchase of development rights in land, the Circle rates are most appropriate method of valuation? 9. As with regard to the first issue, Ld. CIT(A) observed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g developed, shall always be a revenue expenditure in the hands of the real estate developer notwithstanding the assertion that the expenditure has been capitalised in the books in view of an accounting policy. In any case, the expenditure will be ultimately debited in the P L account when the revenue is recognised by the appellant. Therefore, this argument is not acceptable. 10.3 Further, it is pertinent to note that the appellant has itself reported this transaction in Form 3CEB and duly maintained Transfer Pricing Documentation under Rule 10D of Income Tax Rules, 1962 which was submitted during assessment/ transfer pricing proceedings. The appellant had itself shown the transaction of purchase of development right in land as expenditure in respect of which payment has been made to any person referred to in section 40A(2)(b). Thus, the appellant was itself of the view that the transaction impacts the taxable income or expense of the appellant. Therefore, the appellant cannot take a contrary position subsequently. 10.4 The reliance of the appellant on HDFC Bank; Vodafone India and Shell India cases is misplaced as the transaction in those cases was purely of capital in nature. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partments. Thus, the comparables selected for the valuation in this case are totally different and do not at all meet the strict comparability criteria. Therefore, the sales comparable method applied in the particular manner is not an appropriate method for valuation of land in this case. 11.4 Further, at the time of transaction, the property under consideration was simply a piece of land which did not have any intangibles. Admittedly, DCF method is suitable for the valuation of running business which has tangibles as well as intangibles. The valuation using DCF method in this case is based on various assumptions and projections. The DCF method applied here is not on a sound basis. Therefore, DCF method is also not an appropriate method for valuation of land in this case. 11.5 The argument that the valuation made by an independent valuer of international repute should be accepted as the arm s length price is without any merit. The valuation report cannot be accepted merely because the valuer is stated to be an independent organisation of international repute. The TPO has not questioned the reputation of the valuer but the method of the valuation made. 11.6 In view of the above, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gapore Government owned corporation; Singapore is one of the most reputed countries in the world; and, investment was made by RGPL based on the said valuation report. However, the issue here is not the genuineness of the investment made by RGPL in the appellant JV. Further, the ownership of RGPL that it is a Singapore Government corporation and the reputation of Singapore as a reputed jurisdiction is not in doubt. However, the impugned addition is not an addition of any unexplained investment or unexplained transaction where identity or genuineness of the transaction has been questioned. The issue pertains to the determination of transfer price of development rights of a land. It has been discussed in earlier paragraphs that the valuation made by Cushman Wakefield was not correct. Thus, these arguments are found to be not relevant for the purpose of this appeal. 11. Dealing with the third issue, the Ld. CIT(A) has sustained the bench marking of the alleged specified transaction on the Circle rate by following relevant observations: 13. It has been contended that the circle rate cannot be considered as market rate and cannot be adopted as arm s length price disregarding the valuatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be bought or sold in an area in so far that the Registering Authority of the State Government will not register the sale deed which is required to effect transfer under Transfer of Property Act, 1956. As per section 50C of Income Tax Act, for the purpose of capital gains, where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, is less than the value of adopted or assessed or assessable by any authority of State Govt, for the purpose of payment of Stamp duty in respect of such transfer, the value of adopted or assessed or assessable shall be deemed to be full value of the consideration received or accruing as a result of such transfer. Therefore, if the value adopted or assessed or assessable for stamp duty purposes is more than the consideration shown by the assessee then the value adopted or assessed or assessable for stamp duty purposes will be deemed as full value of consideration. Circle rate is notified by the State Government in respect of each area and it is on this rate that the Registering Authority values the property for the purpose of levy of stamp duty. Circle rates vary from lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for circle rate/ stamp valuation and observed as follows; 14. Having held that the TPO was correct in principle that circle rate of land is the most appropriate benchmark for benchmarking of land in this case, the contentions of the appellant that the AO has made some errors while applying the correct circle rate is examined. It has been submitted that the TPO has wrongly applied circle rate of category F whereas the property in question falls under category E . It has also been shown that the property for the purpose of circle rate falls in Industrial category as against the residential category considered by the TPO. 15. The relevant findings of the TPO [at p. 4 of order u/s 92CA(3)] are reproduced below: 7. For the purpose of benchmarking of transaction of land, valuation as per stamp valuation authority i.e. the circle rate of land serves the most appropriate benchmark. Therefore, basis above facts, cost of purchase Of development rights 'is restricted to the value of land under consideration i.e. the circle rate as per area of land. 8. The Assessee has submitted that the area of land falls within zone / category E and 'F HAVING CIRCLE RATE OF Rs. 70,000/- per Sq. Mtr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act 2017. Ld. DR has submitted that this ground of retrospective application/omission of clause (i) of section 92BA has been dealt in detail by the Ld. CIT(A) and all the grounds/contentions raised by assessee have been disposed off by the Ld. CIT(A) by a speaking order. He relied the Explanatory notes to Finance Act 2017 with regard to scope of section 92BA of the IT Act. It is submitted that the amendment has been made in section 92BA by Finance Act, 2017 which is applicable with effect from 01.04.2017. The explanatory notes to the amendment were relied and we find it relevant to reproduce the same here in below:- 44. Scope of section 92BA of the Income-tax Act relating to Specified Domestic Transactions (SDTs). 44.1 Before amendment by the Act, the provisions of section 92BA of the Income-tax Act provided inter alia that any expenditure in respect of which payment has been made by the assessee to certain specified persons under section 40A(2)(b) of the Income-tax Act were covered within the ambit of SDTs. 44.2 As a matter of compliance and reporting, taxpayers needed to obtain the chartered accountant's certificate in Form 3CEB providing the details such as list of related ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rpretation only. 13.3 Further rebutting the argument of Ld. AR that as there is no saving clause in the amendment made accordingly all the proceedings initiated and in progress even for the period prior to the date of omission of the said section gets omitted and becomes invalid. The Ld. DR has submitted that the language of the amendment itself proves the implied saving clause in the amendment because it is specifically mentioned that the amendment will take effect from 01.04.2017 and also it is clarified that it is applicable from A.Y. 2017-18 and subsequent assessment years. Thus, from wordings of the amendment itself, it is crystal clear that the legislature wanted to save all the actions initiated/pending in section 92BA(i) till the period of 31.03.2017 for A.Y. 2016-17 and all proceedings initiated will continue. Thus, as per Ld. AR there is no merit in the arguments of the assessee that there is no saving clause in the amendment made. 13.4 Rebutting the reliance by Ld. AR on the decision of Hon ble Karnataka High Court in the case of PCIT-7 Vs. Texport Overseas Pvt. Ltd., 114 taxmann.com 568 (Karnataka), the Ld. DR has submitted that the Hon ble High Court while relying on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gulation and not of a rule. If Section 6 of the General Clauses Act had been applied, no doubt this complaint against the two accused for the offence punishable under Rule 132-A of the DIRs could have been instituted even after the repeal of that rule. 22. It will be clear from a reading of this paragraph that a Madhya Pradesh High Court judgment was distinguished by the Constitution Bench on two grounds. One being that Section 6 of the General Clauses Act does not apply to a rule but only applies to a Central Act or Regulation, and secondly, that Section 6 itself would apply only to a repeal not to an omission . This statement of law was followed by another Constitution Bench in the Kolhapur Canesugar Works Ltd. case (supra). After setting out paragraph 17 of the earlier judgment, the second constitution bench judgment states as follows: 33. In para 21 of the judgment the Full Bench has noted the decision of a Constitution Bench of this Court in Chief Inspector of Mines v. Karam Chand Thapar [AIR 1961 SC 838] and has relied upon the principles laid down therein. The Full Bench overlooked the position that that was a case under Section 24 of the General Clauses Act which makes prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sideration for omission of a provision results in abrogation or obliteration of that provision in the same way as it happens in repeal. The stress in these cases was on the question that a 'rule' not being a Central Act or Regulation, as defined in the General Clauses Act, omission or repeal of a 'rule' by another 'rule' does not attract section 6 of the Act and proceedings initiated under the omitted rule cannot continue unless the new rule contains a saving clause to that effect.... (At pages 697 and 698) 26. In view of what has been stated hereinabove, perhaps the appropriate course in the present case would have been to refer the aforesaid judgment to a larger bench. But we do not find the need to do so in view of what is stated by us hereinbelow. 27. First and foremost, it will be noticed that two reasons were given in Rayala Corporation (P) Ltd. for distinguishing the Madhya Pradesh High Court judgment. Ordinarily, both reasons would form the ratio decidendi for the said decision and both reasons would be binding upon us. But we find that once it is held that Section 6 of the General Clauses Act would itself not apply to a rule which is subordinate leg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;repeal' is expressly used. So far as statutory construction is concerned, it is one of the cardinal principles of the law that there is no distinction or difference between an express provision and a provision which is necessarily implied, for it is only the form that differs in the two cases and there is no difference in intention or in substance. A repeal may be brought about by repugnant legislation, without even any reference to the Act intended to be repealed, for once legislative competence to effect a repeal is posited, it matters little whether this is done expressly or inferentially or by the enactment of repugnant legislation. If such is the basis upon which repeals and implied repeals are brought about it appears to us to be both logical as well as in accordance with the principles upon which the rule as to implied repeal rests to attribute to that legislature which effects a repeal by necessary implication the same intention as that which would attend the case of an express repeal. Where an intention to effect a repeal is attributed to a legislature then the same would, in our opinion, attract the incident of the saving found in Section 6 for the rules of construc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the assessee while objecting the application of condonation of delay raised another objection that the appeal of revenue is not maintainable and submitted that sub-section (2A) of section 253 was inserted by Finance Act 2014 with retrospective effect from 01.06.2013, however, the same was omitted by Finance Act 2016 from 01.06.2016. It was argued that, the sub-section (2 A) was omitted from the statue by way of omission, hence, this sub-section shall be deemed as it was not on the statue book right from the beginning. The Id. AR for the assessee further submits that 'omission' and 'repeal' of provision in the statue carries different meanings and effect. Therefore, as per section 6 of General Clauses Act, the proceedings initiated under the omitted provisions cannot be continued unless there is saving clause to that effect while omitting such provisions. To buttress his submissions the Id AR for the assessee relied on the decision of Bangalore Tribunal in Textport Overseas Private Limited Vs DCIT (IT (TP) A. 1772/Bang/2017, which has been affirmed by High Court of Karnataka vide order dated 12.12.2019 reported vide [2020] 114 taxmann.com 568 (Karnataka High Court] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erent intention appears, the repeal shall not- (a) revive anything not in force or existing at the time at which the repeal takes effect; or (b) affect the previous operation of any enactment so repealed or anything duly done or suffered thereunder; or (c) affect any right, privilege, obligation or liability acquired, accrued or incurred under any enactment so repealed; or (d) affect any penalty, forfeiture or punishment incurred in respect of any offence committed against any enactment so repealed; or (e) affect any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture or punishment as aforesaid, and any such investigation, legal proceeding or remedy may be instituted, continued or enforced, and any such penalty, forfeiture or punishment may be imposed as if the repealing Act or Regulation had not been passed. 6-A. Repeal of Act making textual amendment in Act or Regulation: Where any [Central Act] or Regulation made after the commencement of this Act repeals any enactment by which the text of any [Central Act] or Regulation was amended by the express omission, insertion or substitution of any matter, then, un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... affect the continuance of any such amendment made by the enactment so repealed and in operation at the time of such repeal. 16. The Hon'ble Supreme Court in Bhagat Ram Sharma Vs Union of India (AIR 1988 SC 740] held that it is a matter of legislative practice to provide while enacting an amending law that an existing provision shall be deleted and a new provision substituted. Such deletion has the effect of repeal of the existing provision. Such a law may also provide for the introduction of a new provision. There is no real distinction between 'repeal1 and an 'amendment'. /Is per the commentary on Principles of Statutory interpretation by Justice G.P. Singh, the legislative practice in India shows that omission of a provision is treated as 'amendment . (page 675, Chapter; Express Repeal ). Further Hon'ble Supreme Court in Ekambrarappa Ks EPTO (AIR 19671541), held that amending Act which limits the area of operation of existing Act by modifying the extent clause, result in partial repeal of the Act in respect of the area which its operation is excluded ( emphasis and under lines are added by us). 17. Further; the Hon'ble Supreme Court in the matter of Fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... valid legislation during its life time before omission will be saved and will not come to end. The decision in the case of Texport Overseas Private Ltd (supra) was rendered without considering the decisions of the Hon'ble Apex Court in the cases of (i) M/s. Fibre Boards Pvt. Ltd and (ii) M/s Shree Bhagwati Steel Rolling vs. Commissioner of Central excise another and also the statutory provision contained in section 6A of General clauses Act and hence, lacks any binding or persuasive value. 16. The Hon'ble Apex court in the case of Fibre Boards Pvt. Ltd and M/s. Shree Bhagwati Steel Rolling has doubted and disapproved its earlier decisions rendered in the case of Rayala Corporation (P) Ltd Vs Enforcement (1969) 2 SCR 412 and Kolhapur Cane Sugar Works Ltd Vs Union of India (2000) 2SCC536 and in the case of General Finance Company Vs CIT (2002) 7 SCC 1. Further, the Hon'ble Supreme Court in the case of Fibre Boards (I) Ltd, after referring to the provisions of Section 6A of the General Clauses Act held that a repeal can be by way of an express omission and that even an implied repeal of a statute would fall within the expression repeal in section 6 of the General clauses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the General Clauses Act, Section 6A and 24 and thereafter held that the repeal, omission and deletion are interchangeable and thereafter had held that 'omission' will have an effect of 'repeal' and 'repeal' will have an effect of 'omission'. The distinction carved out in Rayala Corporation (supra) was not correct and further the reference to the Constitution bench has not considered in view of a binding judgment of the Constitution bench in the matter of M.A.Tulloch Co as well as the provisions of Section 6A of the General Clauses Act and thereafter the Court had held that the decision, in the matter of Rayala Corporation (supra) was per incurium. 19. In our humble view the Hon'ble Supreme Court in Fibre Board (supra) and Bhagwati Steel Rolling (supra) have declared that the law in Rayala Corporation is per in curium, on the basis of which General Finance Co., (supra) was passed. Thus, the later judgments in Fibre Board (supra) and Bhagwati Steel Rolling (supra) shall have a binding precedent on all Courts in India including this Tribunal. 20. We may mention that the decision of the Hon'ble Apex Court is declaration of law as per Article 141 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is the basic principles which regulates the effect of such omission/repeal. In the above noted case laws, the basic principles which governs the effect of any omission/repeal has been analyzed at length by the Hon ble Supreme Court and also laid down/clarify the law and the general clauses Act which governed any omission/repeal and its consequent effect. 14. The Ld. AR has submitted the rejoinder to the aforesaid contention of Ld. DR on the issue of legality of the domestic transfer pricing adjustment, reinforcing that on account of omission of clause (i) of section 92BA of the Act vide Finance Act, 2017, the impugned transfer pricing adjustment made post omission of the clause (i) is illegal and unsustainable in the eyes of law as post omission it will be treated as if the said clause never existed in the statute. In this regard, placing reliance on the direct decision of Hon'ble Karnataka High Court in the case of PCIT v. Texport Overseas (P.) Ltd. [supra] it was again submitted that this decision of Hon'ble Karnataka High has been consistently followed and applied by the various benches of Hon'ble ITAT. 14.1 The reliance placed by the Ld. DR on Mumbai bench decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been referred to by the Assessing Officer after the omission of the said clause by the Finance Act, 2017 even though transaction has undertaken in the Assessment Year 2016-17. 16. Further, our decision is equally fortified by the judgment of IT AT Kolkata Bench in the case of M/s. Raipur Steel Casting India (P) Ltd. vs. PCIT which pertained to the Assessment Year 2014-15, and catena of other judgments as relied upon by the Ld. Counsel of the assessee cited extensor in the foregoing paragraphs. 15. As with regard to the merits of case Ld. DR has relied the Entries in the Form of 3CEB. He has submitted that Form 3CEB provides for a report, from an accountant, which is to be furnished u/s 92E of the Act relating to international transactions and specified domestic transaction. This form has been attached great importance by the Government of India in Transfer Pricing analysis and it provides that every person who has entered into in international transaction during the previous year shall file this report after verification from the accountant. This form is to be voluntary filed by the assessee and basic pre condition is that it must have entered into international transactions/ spe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ghts in land parcel from DHDL. 15.3 Ld. DR has also pointed out that though in page 139 assessee has mentioned that as a matter of abundant caution, the assessee has adopted other method to benchmark expenditure incurred of purchase of development rights, the facts remains that it has itself shown such expenditure and it has been duly verified by the transfer pricing expert engaged by assessee itself. 16. Ld. DR has then submitted that the assessee company is indisputably a builder, who is engaged in the business of construction, development and sale of integrated townships. Accordingly, to say, as per Ld. DR, the cost of land is capitalised is of no consequence in case of assessee company because the transaction in case of builder is definitely revenue in nature. The assessee stand that no revenue is recognized in P L a/c is because it was the initial year of the project but this does not change the character of the transaction because purchase of land rights on which a real estate project is to be built in the hands of the real estate company will always be revenue in nature. Also for Real Estate Company ultimately all the expenditure on land will be debited in the P L account. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the assessee does not derive any support from this decision since consideration for a loan, i.e interest, is inherently in the nature of income. There is no, and there cannot be any, dispute or controversy about this character of income. The point of dispute is whether zero interest, or no interest, is good enough for computing the income or whether an arm 's length interest must substitute this zero interest. The answer is obvious. As long as the transaction is an international transaction between the AEs, the computation of income has to be on the basis of arm's length interest. Therefore, in our considered view, even when no income is reported in respect of an item in the nature of income, such as interest, but the substitution of transaction price by arm's length price results in an income, it can very well be brought to tax under Section 92. This plea of the assessee is also, therefore, unsustainable in law. 17. Next in regard to the valuation of development rights the Ld. DR submitted that the valuation report of Cushmen and Wakefield was supplied to both the AE i.e. DHPL and the assessee company DLF Urban Pvt. Ltd., he thus submitted that valuation lacks object ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ebutted the contention of Ld. AR, that as in the JV, 51% controlling stake is with M/s RGPL , Singapore Government Company, whose basis for investment, was the valuation report of Cushmen and Walkfield, accordingly the valuation is to be accepted by the department. He submitted that again, it is a faulty argument because department is not judging the creditworthiness or trustworthiness of the company controlled by the Singapore Government and the issue before hand is the determination of transfer price of development rights of land which is subjected to the rules and regulations as contained in the provision of the Income Tax Act/Transfer Pricing and based on the same, the valuation has been rejected. 21. As with regard to the question whether circle rate can be taken as market rate, Ld. DR has submitted that it is settled law that section 50C is applicable in the case of development agreements and several tribunal have taken this stand. Reference was made to the 1TAT Mumbai decision in the case of Arif Akhtar Hussain vs. ITO in ITA No. 541/Mumbai/2010 (also mentioned by Ld. CIT(A) in his order. He submitted that Circle Rate is one of the best indicator of market value of land and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... page no. 106 to 120 of his order. He has contended that the assessee vehemently made this argument before Ld. CIT(A) because the circle rate meant for industrial use needs to be multiplied by factor of 2 to arrive at the correct rate. In fact, the assessee, based on his arguments and evidences convinced the Ld. CIT(A) to treat the said land as industrial land and the rate of land was determined by multiplying by 2 in line with government notifications. Ld. DR has further contended that not only this, the assessee also submitted before the Ld. CIT(A) that the circle rate of E category is to be taken and not the F category rates. Again in its support, the assessee has relied on the circle rate notification issued by the Delhi Govt. In fact, based on the documents submitted by the assessee, the Ld. CIT(A) has not only taken the land classification as industrial and also the rates of the land are taken in the E category against the F category taken by the TPO/AO. Thus the assessee when himself has taken the use of the various notification issued by the Government for categorization /valuation of land based on Circle Rate Only then according to Ld. DR, the assessee cannot take a totally ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... report and had disclosed specified domestic transaction in Form 3CEB which is to be furnished u/s 92E of the Act disclosing international transactions and specified domestic transaction, therefore, the assessee cannot now escape from the liability to get this transaction benchmarked and so the TPO was justified to make the adjustments. The ld. DR has himself admitted that the assessee while filing the transfer pricing study report had mentioned that as a matter of abundant caution the transaction is being reported for the purpose of section 92E of the Act. We are of the considered view that when the law had provided for penalty in case of non-compliance of a provision of the Act and the assessee reserving a right to protest at appropriate stage, makes the compliance, the assessee cannot be estopped by own act and conduct to dispute the applicability of the said provisions during the assessment. 27. Coming to merits of the additional ground, having given a thoughtful consideration to the matter on record and the submissions we observe that the ld. DR could not dispute the fact that the Hon ble Karnataka High Court in case of Texport Overseas Pvt. Ltd. (supra) and the coordinate Benc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th of the hierarchical judicial system. The principle is thus unambiguous. As a rule, therefore, judicial discipline warrants that the wisdom of a lower tier in the judiciary has to make way for higher wisdom of the tiers above. Unlike the decisions of Hon ble jurisdictional High Court, which bind us in letter and in spirit on account of the binding force of law, the decisions of Hon ble non-jurisdictional High Court are followed by the lower authorities on account of the persuasive effect of these decisions and on account of the concept of judicial propriety. In the case of CIT Vs Godavari Devi Saraf [(1979) 113 ITR 589 (Bom)], Hon ble jurisdictional High Court took note of a non-jurisdictional High Court and held that the Tribunal, outside the jurisdiction of that Hon ble High Court and in the absence of a jurisdictional High Court decision to the contrary, could not be faulted for following the same. Their Lordships observed that, It should not be overlooked that the Income-tax Act is an All-India statute . Until a contrary decision is given by any other competent High Court, which is binding on a Tribunal in the State of Bombay, it has to proceed on the footing that the law dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve effect . Unlike the decisions of Hon ble jurisdictional High Court, which bind us in letter and in spirit on account of the binding force of law, the decisions of Hon ble non-jurisdictional High Court are followed by the lower authorities on account of the persuasive effect of these decisions and on account of the concept of judicial propriety-factors which are inherently subjective in nature. Quite clearly, therefore, the applicability of the non-jurisdictional High Court is never absolute, without exceptions and as a matter of course. That is the principle implicit in Hon ble Supreme Court s judgment in the case of ACIT Vs Saurashtra Kutch Stock Exchange Ltd [(2008) 305 ITR 227 (SC)] wherein Their Lordships have upheld the plea that non-consideration of a decision of Jurisdictional Court or of the Supreme Court can be said to be a mistake apparent from the record . The decisions of Hon ble non-jurisdictional High Courts are thus placed at a level certainly below the Hon ble High Court, and it s a conscious call that is required to be taken with respect to the question whether, on the facts of a particular situation, the non-jurisdictional High Court is required to be followed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 01.04.2017 has to be considered to have never been part of the statute and, accordingly, no transfer pricing adjustment can be made on a domestic transaction. 31. We will also like to distinguish the Mumbai Tribunal order in Firemenich Aromatics (India) Pvt. Ltd. (supra) by observing that in that case the issue was with regard to omission of sub-section (2A) of section 253 of the Act which was initially inserted by Finance Act, 2014 with retrospective effect from 01.06.2013 and which was then omitted by Finance Act, 2016 from 01.06.2016. The said provisions related to right to file appeal and in that case, the AO had filed the appeal during the currency of section 253(2A) of the Act and for that reason, the Mumbai Bench had considered the issue of repeal/omission made in a statute and the consequences thereof. Since right to appeal is a substantive and, certainly, if it was there in the statute when the appeal was filed and, subsequently, if the statute had omitted the provision, the substantive right of appeal vested in a party would not be taken away by holding the repeal to be retrospective. However, in the case in hand, a substantive provision, being infact a charging provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustment in the consideration involved in the said transaction on the basis that while dealing with an associated enterprise an assessee had entered the transaction in a manner that the price or consideration paid towards acquisition of any tangible or intangible asset is less than the market value leading to avoidance of tax. 34.1 Thus, Section 92 of the Act provides that any income arising from an international transaction shall be computed having regard to the arm s length price. Section 92C of the Act, dealing with computation of ALP, provides through sub-section (1) that the ALP shall be determined by any of the following methods, being the most appropriate method, having regard to the nature of transaction or class of transaction or class of associated persons or functions performed by such persons or such other relevant factors as the Board may prescribe. Five specific methods have been set out, namely, (a) comparable uncontrolled price method; (b) resale price method; (c) cost plus method; (d) profit split method; (e) transactional net margin method. Thereafter, another method is given in clause (f), namely, such other method as may be prescribed by the Board, which has sinc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... determine the three issues, by first taking up controversy, as to what should be the most appropriate method for benchmarking the transaction in issue. Assessee has claimed that it has chosen the `Other method being average of Sales Comparable Method and Discounted Cash Flow Method. Ld. TPO has discarded the two methods applied for arriving the average for valuation of transaction and instead the Ld. TPO adopted Circle rate as most appropriate method of valuation. We are of the view that the same also amounts to adopting other method as MAM. In this context, after considering all the aspects, we like to conclude that assessee was justified to adopt the other method as most appropriate method since this method stipulates for determining the ALP of a transaction under any method, which takes into account (and not directly considering) the price charged or paid, or that would have been charged or paid, for the same or similar uncontrolled transaction considering all the relevant facts. The term `would have been charged or paid may encompass quotations or valuation reports etc., instead of actual comparable. The specific methods, such as, the Comparable Uncontrolled Price, Resale Pric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omparables selected for the valuation in this case are totally different and do not at all meet the strict comparability criteria. Therefore, the sales comparable method applied in the particular manner is not an appropriate method for valuation of land in this case. 36.2 We do not agree with the observation of Ld. CIT(A) to hold sales comparable method is akin to comparable uncontrolled price (CUP) . The sales comparison method is a real estate centric approach that compares one property to comparables or other recently sold properties in the area with similar characteristics. This method accounts for the effect that individual features of parties or property, have on the overall value. In other words, the total value of a property is the sum of the values of all of its features. On the other hand, the comparable uncontrolled price (CUP) method establishes a price based on the pricing of similar transactions that have taken place between third parties. The individual features of the transaction are generally not relevant. The CUP method makes a comparison between the price charged for a specific product/service for a specific quantity at a specific moment with comparable terms and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uxtaposition.... 36.4 Here we will like to consider the argument of Ld. DR that in several cases for transfer pricing analysis, various courts have taken the prices /rates taken by the custom authority/Govt. agency for benchmarking /determining ALP in Income Tax. We are of considered view that the levy of rates of excise or customs, is generic for the class of product, to earn Revenu. The purpose is to have uniformity of levy. However, circle rates are not fixed to levy uniform stamp duty, but to ensure there is no undervaluation of particular property. The principles and methods of arriving at the rates or prices of merchantable products, as determined by the Custom authority cannot be equated with the circle prices for land. 36.5 Thus, we find no fault in valuation arrived using the relevant parameters and adding premium or discounting, the value, on those parameters. The Valuer s Report is quite in conformity with the principles and method by which market value of a real estate property should generally be arrived at. 37. Then coming to the valuation calculation on DCF method, the Valuer has primarily calculated the saleable area of 1.43 million sq. feet on the basis of effectiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the wisdom of TPO to apply circle rates to make adjustment we are in agreement with Ld. AR that certainly the circle rates never are correct reflection of the market rates. Circle rates are merely fair market value of the land for fiscal purposes but cannot be considered to be market value. When a transaction involving land is to be benchmarked, then the market value is more realistic parameter for making the adjustment and not the circle rates. Thus at one end, the Ld. CIT(A) and Ld. TPO have fallen in error in invoking the provisions of Section 92CA of the Act and on the other hand in discarding the valuation report and to substitute it with circle rate. 39. Resultantly, the ground no. 1 and 3 with their sub grounds are decided in favour appellant and as a consequence to same the ground no. 2, 4 and 5 have become academic and are left open. 40. Now coming to Ground No. 6 with sub-grounds, the assessee company has challenged the order of Ld.CIT(A) of confirming disallowance of claim of expenses aggregating Rs. 77,56,583/-. It comes up that the Ld.CIT(A) has sustained the findings of assessing officer that no proper details in support of claim of expenses were filed. The Ld. Counse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company and substituting the same with 2 comparables. 42.2 Giving our thoughtful consideration to the issue, regarding transfer pricing adjustment u/s 92CA of Rs. 6,29,72,610/- in respect of interest paid to AE on CCD/OCD. It comes up that the assessee company has benchmarked the transaction based on CUP method and the ALP of interest was determined at 15% based on 47 comparables. The Ld. TPO rejected the comparables so selected by the assessee company and coupon rate of 10.25% was treated as ALP based on 2 separate comparables thus resulting in the transfer pricing adjustment. The Ld. CIT(A) has decided the issue with following finding: 24.18 It is observed that the TPO conducted fresh search on the Bloomberg database; however, the parameters such as year of issue, tenure of the instrument etc. which need to be considered while performing the search have not been considered by the TPO. It is also observed that the two comparables considered by the TPO were the companies which were not similar to the appellant company. The companies identified by the TPO operate in different industry i.e. Rubber products (Suja Shoei Industries Private Limited) and Energy sector (Celestial Solar So ..... X X X X Extracts X X X X X X X X Extracts X X X X
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