9911796707
TMI Blog2025 (3) TMI 1085X X X X Extracts X X X X X X X X Extracts X X X X ..... adjustments / additions of Rs. 18,19,19,254/- in relation to International Transactions & Specified Domestic Transactions arising out of the order of the Ld. Transfer Pricing Officer ('TPO') u/s 92CA(3) of the Act and additions / disallowances of Rs. 1,00,30,23,411/- on account of various non-transfer pricing issues. 2.0 That the Ld. DRP and consequently the Ld. AO have grossly erred in law and on the facts & circumstances of the assessee's case in not entertaining or granting the additional claims / allowances total amounting to Rs. 17,36,90,694/- made by the assessee during the course of assessment proceedings and again before the Ld. DRP, on account remaining additional depreciation, which was inadvertently left to be claimed by the assessee while filing / revising its return of income. 3.0 That the Ld. DRP and consequently the Ld. AO have grossly erred in law and on the facts & circumstances of the assessee's case in not allowing the deduction of Education Cess (@ 3%) amounting to Rs. 2,15,79,405/- u/s 37 of the Act paid or payable under normal provision of the Act. 4.0 That the final assessment order passed u/s 143(3) r.w.s. 144C(13) / 92CA(3) of the Act dated 30th Apri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to 'Gurgaon R&D Research Facility' only and thus acted without application of mind & beyond his authority as mandated under law; iv. without prejudice, the Ld. AO has grossly erred in inadvertently disallowing the entire amount of deduction amounting to Rs. 9,63,12,743/- claimed by the assessee u/s 80-IA of the Act in respect of WPP unit ignoring that an amount of Rs. 6,53,67,880/- has already been added through transfer pricing adjustment in accordance with the directions of the Ld. DRP in respect of same unit [contested by assessee vide ground no. 40.0 to 43.0] and thus inadvertently making excess disallowance to the extent of Rs. 9,63,12,743/-; v. without prejudice, the Ld. AO has grossly erred in law and on facts and circumstances of the case in not grating the claim of remaining deduction u/s 80-IC of the Act amounting to Rs. 2,82,36,993/-[Rs. 2,82,41,479/- (original amount of deduction) minus 30% of Rs. 14,952/- (being amount of adjustment upheld by the Ld. DRP)] in respect to the Technical Textiles Business at Kashipur; vi. without prejudice, the Ld. AO has grossly erred in law and on facts and circumstances of the case in not grating the claim of remaining deducti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee's case in not appreciating and completely ignoring that assessee has recovered the software allocation cost along with finance charges @ 8.99% which should have been accepted at ALP mark-up having regard to the nature of transaction. 10.0 That the Ld. DRP and consequently Ld. TPO / Ld. AO have grossly erred in holding that not charging of mark-up is not reflective of arm's length behavior of the transaction and thus failing to appreciate that the assessee while performing its role of a parent company of the group incurs various costs for and behalf of its group entities/AE's at group HO level (which are charged to group entities without any mark-up), as incurring such cost (such as software implementation, license etc.) at individual entity level may not be commercially and economically feasible. 11.0 The Hon'ble ITAT may be pleased to direct the Ld. TPO / Ld. AO to delete aforesaid adjustment of Rs. 16,68,574/- in respect of allocation of software cost only to AE's. II. Reimbursement / recovery of expenses from AE's - Adjustment of Rs. 22,20,109/- 12.0 That the Ld. DRP and consequently Ld. TPO / Ld. AO have grossly erred in law and on the facts & circumstances of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed back to back counter guarantees of equal amounts on similar terms to the appellant, therefore appellant is completely indemnified against any risk of default on the part of its AE's. 19.0 That the Ld. DRP and consequently Ld. TPO / Ld. AO have grossly erred in law and on the facts & circumstances of the appellant's case in not appreciating the fact that corporate guarantee has been extended by the appellant, being the parent company on behalf of its wholly owned subsidiary, as a matter of business prudence and to protect its own commercial interest. The appellant does not incur any cost by extending such corporate guarantee to its AEs nor assumes any risk as entire capital / assets of its AEs are held directly or indirectly by the appellant. Further, the Ld. DRP / Ld. TPO / Ld. AO have not followed the established judicial precedents rendered on the issue including the Hon'ble ITAT's orders in assessee's own case for A.Y. 2010-11 and A.Y. 2012-13. 20.0 The Hon'ble ITAT may be pleased to hold that: - i. the act of giving corporate guarantee by the appellant on behalf of the AE's is not an international transaction and, therefore, not amenable to any adjustment under Chapter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unit transactions pertaining to TTB Segment. V. Inter-unit Transfer - Chemical and Polymer Business - Adjustment of Rs. 58,02,000/- 25.0 That the Ld. DRP and consequently Ld. TPO / Ld. AO have grossly erred in law and on the facts & circumstances of the appellant's case in making transfer pricing adjustment of Rs. 58,02,000/- in respect of inter-unit transactions amounting to Rs. 6,39,36,389/- pertaining to Engineering and Plastic Business unit (EPB), Pantnagar forming part of 'Chemical and Polymer Business' (CPB) segment of the assessee. 26.0 That the Ld. DRP and consequently Ld. TPO / Ld. AO have grossly erred in law and on facts and circumstances of the case, in rejecting, without any cogent reason, the assessee's most appropriate method being 'CUP Method' and 'Other Method' both of which are direct price based methods and instead applying the 'TNMM' in arbitrary manner, not providing FAR analysis and search process to the assessee and resultantly taking the companies which are product wise and functionally incomparable to the assessee's EPB unit. 27.0 Without prejudice, the Ld. DRP and consequently Ld. TPO / Ld. AO have grossly erred in computing the adjustment twice Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... factored in while benchmarking the transactions. 34.0 The Hon'ble ITAT may be pleased to direct the Ld. TPO / Ld. AO to delete the above transfer pricing adjustment of Rs. 18,72,72,104/- in respect of transaction of transfer of electricity by captive power plant at Bhiwadi. VII. Purchase of Electricity from its AE's Vavyu Renewable Energy (Tapti) Private Limited (VRETPL) - Adjustment of Rs. 8,86,15,614/- 35.0 That the Ld. DRP and consequently Ld. TPO / Ld. AO have grossly erred in law and on the facts & circumstances of the appellant's case in making transfer pricing adjustment of Rs. 8,86,15,614/- in respect of specified domestic transaction as referred in section 92BA(i) in the nature of purchase of electricity from its associate VRETPL@ Rs. 5.68 per unit on wholly unjust, illegal, erroneous, superficial, frivolous, arbitrary and untenable grounds and is prayed to be deleted before your honour. 36.0 That the Ld. DRP and consequently Ld. TPO / Ld. AO have grossly erred in law and on the facts & circumstances of the appellant's case in rejecting the assessee's reliable internal CUP data in form of actual transactions of purchase of electricity and instead taking the genera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsequently Ld. TPO / Ld. AO have grossly erred in law and on the facts & circumstances of the appellant's case in taking the tariff rates obtained from TNERC without appreciating that such tariff rates may only be basic rates and various other charges viz. fixed charges, electricity duty, cesses etc. have not been factored in while considering such rate for benchmarking purposes. 43.0 The Hon'ble ITAT may be pleased to direct the Ld. TPO / Ld. AO to delete such adjustment of Rs. 6,35,67,880/- in respect of specified domestic transaction of sale of electricity by WPP unit of the assessee. Grounds of Appeal - Corporate Tax Issues - Additions / Disallowances of Rs. 1,05,51,38,904/- IX. Disallowance of deduction u/s 32AC of the Act amounting to Rs. 5,63,55,983/- 44.0 That the Ld. DRP and consequently the Ld. AO have grossly erred in law and on the facts & circumstances of the assessee's case in disallowing the deduction u/s 32AC of the Act to the extent of Rs. 5,63,55,983/-. 45.0 That the Ld. DRP / Ld. AO has grossly erred in law and on the facts & circumstances of the assessee's case in disallowing the deduction u/s 32AC of the Act to the extent of Rs. 5,63,55,983/- on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he purpose of making investments such that clause (ii) of rule 8D(2) of the Rules is not attracted. 50.0 That the Ld. DRP and consequently the Ld. AO have grossly erred in law and on the facts & circumstances of the appellant's case in enhancing the above disallowance by failing to appreciate that assessee had made investment out of its own reserves and surplus funds as the amount of average investments related to tax free income is only Rs. 8.47 Crores and the total amount of reserves & surplus as on 31.03.2016 is Rs. 2,631.85 Crores which is 310.72 times of the value of average tax free investments, thus warranting no disallowance u/s 14A of the Act r.w.r. 8D(2)(ii). 51.0 Without prejudice to the above grounds, the Ld. DRP and consequently the Ld. AO have grossly erred in law and on the facts & circumstances of the assessee's case in making the disallowance u/s 14A to the tune of Rs. 15,32,818/- without appreciating the fact that the assessee has already made a disallowance of Rs. 4,26,590/- u/s 14A r.w.r. 8D(2)(iii) and thus resulting in a total disallowance of more than the amount of exempt income viz. Rs. 18,21,155/- received by the assessee during the year under considera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 80 of its directions dated 26thMarch, 2021. The Ld. AO erred in not giving effect to the directions of Ld. DRP in correct manner and making disallowance of entire deduction pertaining to all five R&D facilities despite the specific directions of Ld. DRP to disallow deduction pertaining to 'Gurgaon R&D Research Facility' only and thus acted without application of mind & beyond his authority as mandated under law. Grounds on Merits 58.0 That the Ld. DRP has grossly erred in law and on the facts & circumstances of the appellant's case by disallowing the claim of weighted deduction u/s 35(2AB) of the Act in respect of 'Gurgaon R&D Research Facility' by allegedly stating that the such 'Gurgaon R&D Research Facility' was not an approved facility by the DSIR for the relevant year under consideration and accordingly concluding that the assessee is not eligible for weighted deduction for amount spent on such 'Gurgaon R&D Research Facility'. 59.0 That the Ld. DRP has grossly erred in law and on the facts & circumstances of the appellant's case in incorrectly stating that 'Gurgaon R&D Research Facility' is approved by DSIR from 01.04.2016 ignoring that such facility has been duly rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n) minus 30% of Rs. 58,02,000/- (being amount of adjustment upheld by the Ld. DRP)] in respect of its Engineering and Plastic Business at Pantnagar as directed by the Ld. DRP. 65.0 The Hon'ble ITAT may be pleased to direct the Ld. TPO / Ld. AO to grant the deduction u/s 80-IC of the Act amounting to Rs. 5,21,15,493/- XIV. Disallowance of Depreciation of Goodwill amounting to Rs. 14,36,387/- 66.0 That the Ld. DRP and consequently the Ld. AO have grossly erred in law and on the facts & circumstances of the assessee's case in making the disallowance of depreciation of Rs. 14,36,387/- on goodwill arising on acquisition of three business units from SRF Polymers. 67.0 That the Ld. DRP and consequently the Ld. AO have grossly erred in law and on the facts & circumstances of the assessee's case in making the disallowance of depreciation of Rs. 14,36,387/- on goodwill: - i. by taking a view that the amount of goodwill as arise on acquisition of three businesses is a balancing figure and not the goodwill which the assessee paid in excess of its valuation; ii. by drawing an incorrect interpretation after perusal of agreement for transfer of business dated 01.01.2009 that in the gi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowed as revenue expenditure. 76.0 The Hon'ble ITAT may be pleased to direct the Ld. AO to delete the above disallowance of Rs. 8,19,870/-. XVII. Other Corporate Tax Issue - Other claims made during the course of assessment proceedings and before the Ld. DRP- Rs. 17,36,90,694/- 77.0 That the Ld. DRP and consequently the Ld. AO have grossly erred in law and on the facts & circumstances of the assessee's case in not entertaining the claim made by the assessee during the course of assessment and then again before the ld. DRP pertaining to remaining additional depreciation @ 10% u/s 32(1)(iia) amounting to Rs. 17,36,90,694/- which was inadvertently left to be claimed while filing / revising the return of income. 78.0 That on the facts & circumstances of the assessee's case, the Ld. DRP and consequently the Ld. AO have grossly erred in law in not entertaining and adjudicating the above ground by relying the judgment of Hon'ble Supreme Court in the case of Goetze (India) Ltd. vs CIT [284 ITR 323] and without prejudice, the claim is being made before the Hon'ble ITAT as an adjudicating authority following precedent in NTPC Ltd. [229 ITR 383 (1998)]. XVIII. Other Corporate Tax I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erprises are concerned, ld. Counsel for the assessee submitted that this issue is fully covered by the order of the Hon'ble Jurisdictional ITAT in the assessee's own case for A.Y. 2014-15, wherein the coordinate Bench upheld that the reimbursement received at cost does not require any mark-up. It was further submitted that the Transactions entered into with the AEs are purely reimbursement received of software allocations on cost to cost basis from the AEs. Hence, no mark-up is chargeable on the cost of reimbursement received from AEs. It was the further contention that not considering the fact that the assessee is a holding company of the group and incurs cost, which is recovered from the AEs and also, not appreciating that the assessee has recovered the software allocation costs along with finance charges @ 8.99%. Further, it was submitted that the mark up of 13.18% which has been worked out through a search process, wherein selected companies are into the manufacturing of textiles, yarn etc. This average margin is applied on reimbursement transactions, which is grossly erroneous. Further the assessee has entered into various business transactions with its AEs in the natu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services as these were third party costs which were reimbursed by AEs on a cost to cost basis. The submission of the 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 submis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... behalf of AEs from the AEs and passes it on to the third parties. He further submitted that it is not an international 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 21 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 valu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the assessee has also entered into the ancillary transactions in the nature of reimbursement received and paid from/to AEs for Rs. 1.68crores, which is nominal and normal considering the volume of business transactions entered into with the AEs. It was also submitted that the assessee also relies on OECD guidelines in this regard which advocate that no mark-up is chargeable in reimbursements. It was further submitted that Hon'ble Supreme Court in the case of Engineering Analysis Centre of Excellence Pvt. Ltd. vs. CIT (supra) had also upheld the reference to OECD guidelines being persuasive in nature. The Ld. AR also submitted that various judicial precedents on the issue have upheld the cost to cost nature of reimbursement as ALP. In view of above, he requested to direct the TPO to delete such adjustment of Rs. 22,20,109/- in respect of reimbursement received. 8. Ld. DR of the Revenue relied upon the orders of the authorities below, but she did not controvert the contention of the ld. AR for the assessee that the issue is covered in favour of the assessee by the decision of the Tribunal in assessee's own case in the assessment year 2014-15 and neither produced any contrary deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contention of the ld. AR for the assessee that the issue is covered in favour of the assessee by the decision of the Tribunal in assessee's own case in the assessment year 2014-15 and neither produced any contrary decision. 12. Considered the rival submissions and material placed on record. We find considerable cogency in the contention of the Ld. AR that the instant issue is fully covered by the order of the Coordinate Bench of the Tribunal in assessee's own case for A.Y. 2014-15, wherein the coordinate Bench upheld the corporate guaranteed rate @0.25%. It is also noted that ITAT has reversed the order of the DRP for the AY 2014-15 and AY 2012-13 and also AY 2010-11 in assessee's own case. Relevant findings of ITAT in ITA No.6620/Del/2018 for AY 2014-15 is reproduced as under :- "10. TPO noticed that assessee had given Corporate Guarantee to the lenders of the beneficiaries who are AEs of the assessee and for giving 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 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the guarantee fee of 0.5% to be fair and just. It further noted that since the facts of the case in the year under consideration being similar to that of A.Y. 2013-14, it accordingly held the guarantee fee to be at 0.5% and accordingly directed AO/TPO to re-compute the adjustment accordingly. AO thereafter made adjustment of Rs 2,28,67,811/-. 11. Aggrieved by the order of DRP, assessee is now before us. 12. Before us, Learned AR reiterated the submissions made before the lower authorities. He thereafter submitted that identical issue arose in assessee's own case in A.Y. 2010-11, 2012-13 wherein the Coordinate Bench of Tribunal has upheld the corporate guarantee rate @ 0.25%. He further submitted that the Hon'ble ITAT had reversed the order of DRP for A.Y. 2012-13 & 2010-11 in assessee's own case. He pointed to the relevant orders of the Tribunal placed in the paper book. He therefore submitted that since assessee had charged 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, bank guarantee rates as applied by the TPO is not an appropriate comparable while benchmarking the said transaction and hence approach of TPO is rejected. 15. In the instant case, the AEs to whom corporate guarantees have been extended are wholly owned subsidiaries of the assessee. The existence of special relationship between holding and its subsidiary cannot be ignored. The assessee being a parent entity is responsible for survival and growth of its subsidiary and hence extended corporate guarantees to secure funds needed for survival and growth of its subsidiaries. Further as submitted by AR, by extending corporate guarantees to secure funds needed for survival and growth of its subsidiaries. 16. Therefore in view of the above discussions, the corporate guarantee fee at the rate of 0.25% voluntary offered to tax by the assessee is upheld as the arm length price and the addition over and above 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 transactio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r note that segmental margin of TTB segment computed by TPO @6.28% is incorrect as the segmental margin from the segmental results of assessee is 12.14% and hence no adjustment is warranted in any case. Accordingly, we direct the TPO to delete the adjustment of Rs. 14,952/-. Accordingly, Ground Nos.21 to 24 are allowed in the aforesaid manner. 17. Apropos Grounds No.25 to 29 relating to adjustment of Rs. 58,02,000/- on account of Chemical & Polymer Business are concerned, ld. Counsel for the assessee submitted that assessee's methodology was rejected without providing any reason. It was further submitted that on the anvil of the various judicial precedents, CUP method to be preferred over TNMM. It was further submitted that segmental margin of CPB segment computed by TPO @(-)1.37% is incorrect as the segmental margin from the segmental results of assessee is 33.34%. It was further contended that on the other hand, the PLI of eligible unit as computed by TPO is 16.32% which is again lower than the CPB segment's correct PLI. Thus, no adjustment is warranted even under TPO approach. It was further submitted that DRP erred in computing the adjustment twice Rs. 40.23 lacs on cost side ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M Shriram Limited by order dated 21.10.2021. He further submitted that on the anvil of various judicial pronouncements advocating the adoption of SEB rates for benchmarking the electricity transfer, Rule of Consistency has also been filed before Ld. DRP. It was further submitted that data of various discom rates obtained u/s 133(6) were not available in public domain, hence cannot be used and no opportunity to examine and rebut the data. It was submitted that assessee's internal CUP to be preferred over an external CUP, by placing reliance on the case of Technimont ICB P Ltd. (TS-557-ITAT-2012 (Mum). In view of the above, he requested that adjustment of Rs. 18,72,72,104/- needs to be deleted. 22. Ld. DR of the Revenue relied upon the orders of the authorities below on this issue. 23. Considered the rival submissions and material placed on record. We find considerable cogency that no reason provided by TPO for rejection of assessee's MAM. We further find that Hon'ble Supreme Court ruling in case of M/s Jindal Steel and Others (supra)has settled the law that in order to benchmark the transfer of electricity by captive power plants, the rate at which state electricity board ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the adoption of SEB rates for benchmarking the electricity transfer have been submitted, it was further submitted that copy of sample invoices of power purchase by assessee from Tamil Nadu State Electricity Board (SEB) as an evidence to depict that the purchase rate of SEB is way higher than the rate charged by VREPL. He further submitted that detailed note explaining the basis of pricing of electricity and the benchmarking of the same in contrast to the rate of electricity purchase by the assessee from the SEB. It was further contended that date of various discom rates obtained u/s 133(6) not available in public domain, hence cannot be used. It was submitted that assessee's internal CUP to be preferred over an external CUP, by placing reliance on the case of Technimont ICB P Ltd. (supra). In view of above, he requested that adjustment of Rs. 8,86,15,614/- needs to be deleted. 26. Ld. DR of the Revenue relied upon the orders of the authorities below on this issue. 27. Considered the rival submissions and material placed on record. We find considerable cogency in the submissions of the assessee that no reason provided by TPO for rejection of assessee's methodology. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been favourably adjudicated by ITAT in the case of DCM Shriram Limited by order dated 21.10.2021. On the anvil of various judicial pronouncements advocating the adoption of SEB rates for benchmarking the electricity transfer, it was submitted that assessee's rate of power sale at 6.35 p.u. is already lower than the effective rate at which power is purchased by the non eligible units which after considering all costs comes out to Rs. 15.26 per unit. It was further contended that the basis of the adjustment i.e. TNERC rates obtained by the TPO u/s 133(6) not available in public domain hence cannot be used. It was further submitted that rule of consistency has also been filed before the DRP. It was submitted that assessee's internal CUP to be preferred over an external CUP, by placing reliance on the case of Technimont ICB P Ltd. (supra). In view of above, he requested that adjustment of Rs. 6,53,67,880/- needs to be deleted. 30. Ld. DR of the Revenue relied upon the orders of the authorities below on this issue. 31. Considered the rival submissions and material placed on record. We find considerable cogency that no reason provided by TPO for rejection of assessee's methodolog ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... report, location wise details of addition to fixed assets, which are available at page no. 826 of paper book and calculation of investment allowance, available at page no. 825 of P.B.) including the certificate from a Chartered Accountant available at page no. 872 of paper book for claim of deduction u/s 32AC of the Act which was submitted during the course of assessment proceedings vide its submission dated 11.12.2018 at pages 417-418 of paper book and submission dated 27.12.2019 at pages 518-523 of paper book. It was further submitted that AO and consequently the DRP incorrectly alleged that the assessee failed to justify the claim in spite of several opportunities.AO and consequently the DRP have not appreciated that the assessee has discharged its onus of substantiating its claim with documentary evidence. With regard to bonafide claim of the assessee, he submitted that it is required to be appreciated that under the provisions of the Act, it is a settled law that only correct amount of taxes can be collected and where an assessee is eligible to a particular relief as per the provisions of law, the same is required to be granted. To support this contention, he placed reliance o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... BPO Services Ltd. {TS-27-HC-2019(DEL)} (P. no. 758-771 of Case Laws Compilation); (iv) Sam Global Securities Ltd. {[2013] 38 taxmann.com 129 (Delhi)} (Annexure to CT Synopsis). 32. Ld. DR of the Revenue relied upon the orders of the authorities below on this issue. 33. Considered the rival submissions and material placed on record. We find that the assessee has submitted the relevant information on the claim of investment in new plant and machinery during the year. It has submitted the relevant documents in the form of paper book. We observed that AO and Ld DRP have concluded that the assessee has not substantiated the claim. After careful consideration of the various documents submitted by the assessee, we direct the AO to consider the various information de novo after giving the proper opportunity of being heard to the assessee. The claim made by the assessee cannot be rejected mechanically and the assessee has made huge investments in the plant and machinery in order to claim the benefit u/s 32AC of the Act. Therefore, we are remitting these grounds back to file of AO and the same are allowed for statistical purposes. 34. Apropos Grounds no.48 to 54 relating to disallowance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n is shown below: - Particulars Amount claimed (in lakhs) Amount approved by DSIR (in lakhs) Difference (in lakhs) Capital Expenditure (other than land & building) Rs.2,194.81/- Rs.2,184.19/- Rs.10.62/- Weighted deduction @ 200% of above capital expenditure (a) Rs.4,389.62/- Rs.4,368.38/- Rs.21.24/- Additional 100% weighted deduction of revenue expenditure (b) Rs.3,872.03/- Rs.2,726.22/- Rs.1,145.81 Total (a + b) Rs.8,261.65/- Rs.7,094.60/- Rs.1,167.05/- The unit wise details of the amount of deduction of Rs. 82,61,65,610/- u/s 35(2AB) of the Act is as follows: - S.No. Particulars Revenue Expenditure Capital Expenditure 1 Chemical Business, Bhiwadi 18,06,53,915 20,37,85,981 2 Chemical Business, Manali 6,44,56,580 1,32,55,557 3 Techncial Textiles, Manali 2,64,37,723 11,67,659 4 Engineering Plastics, Manali 1,54,33,247 1,99,000 5 Chemical Technology, Gurgaon 10,02,21,675 10,63,128 Total 38,72,03,140 21,94,81,235 Eligible in percentage 100% 200% Eligible in amount 38,72,03,140 43,89,62,470 Grand Total 82,61,65,610 Action of the Ld. AO in the Draft Order: - The Ld. AO has disallowed the deduction to the extent of Rs. 1167.05 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had approved the Gurgaon R&D unit from 01.04.2016 to 31.03.2020 vide Form No. 3CM dated 08.09.2017 (P. no. 927 of P.B.) is not correct on the facts & circumstances of the assessee's case as the Ld. DRP failed to appreciate that the before such approval, the DSIR had also approved the Gurgaon R&D unit vide order dated 11.09.2015 at P. no. 891 of P.B. from 31.07.2015 to 31.03.2016 and thereafter, the DSIR had further extend approval vide its order dated 08.09.2017 (P. no. 927 of P.B.) for all five units from 01.04.2016 to 31.03.2020 which was relied by the Ld. DRP above. Therefore, the assessee company is eligible for the deduction w.r.t. Gurgaon R&D unit from the F.Y. 2015-16 relevant from the A.Y. 2016-17 as well to the F.Y. 2019-20 relevant to the A.Y. 2020-21. Therefore, the Ld. DRP had ignored the earlier approval of Gurgaon R&D unit by DSIR vide order dated 11.09.2015 at P. no. 891 of P.B. from 31.07.2015 to 31.03.2016 and accordingly assessee company is eligible for the deduction w.r.t. Gurgaon R&D unit for the F.Y. 2015- 16 relevant to A.Y. 2016-17 as well. Therefore, it is prayed before your honour that kindly allow the deduction of Gurgaon R&D unit U/S 35(2AB) of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , in observing that in absence of such certification, claim of deduction under section 35(2AB) was not allowable. However, neither the prescribed authority nor the Assessing Officer has applied the mind as to the expenditure, be it revenue or capital in nature, actually incurred in developing the in-house research and development facility. To the limited extent, the Commissioner desired the Assessing Officer to verify such figures, we would allow the Assessing Officer to do so. In other words, in principle, we accept the Tribunal's reasons and conclusions. Merely because the prescribed authority failed to send intimation in Form 3CL, would not be reason enough to deprive the assessee's claim of deduction under section 35(2AB) of the Act. However, in facts of the present case, it would be open for the Assessing Officer to verify the actual expenditure incurred by the assessee. " * Special Leave Petition filed by revenue against ruling of the Hon'ble Gujrat High Court, has been dismissed by Hon'ble Supreme Court [2018-TIOL- 282-SC-ITJ) "The assessee company, engaged in manufacture & sale of pharmaceutical products, also conducted research & development for develop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ms and conditions, filed the relevant Form 3CK, actually filed the same only on 12.07.2016. The assessee has submitted various reasons for not submitting the same on time. Pg 892 of PB. e. What is relevant is the final approval granted by the DSIR only upon the letter finally submitted by the assessee on 12.07.2016. For renewal of 4 facilities vide letter dated 27.09.2016. f. The DSIR has approved all the 5 facilities of R&D on 8.09.2017 for the period 1.04.2016 to 31.03.2020.In the same order of approval, they have clearly mentioned the date of application as application dated 12.07.2016 to new facility of Gurgaon and application for renewal of 4 facilities dated 27.09.2016. 40. The above facts clearly shows that the DSIR has only recognized the 5 facilities vide letter dated 11.09.2015 and subject to fulfillment of terms and conditions. The assessee has actually filed the relevant terms and conditions and other formalities only on 12.07.2016 and 27.09.2016. Accordingly, the DSIR has approved all the five facilities back dated from 1.04.2016. Therefore, in our considered view, the findings of Ld DRP are just and proper. 41. Coming to the case law relied by the assessee, we o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion. 45. Considered the rival submissions and material placed on record. We find considerable cogency in the contention of the Ld. AR that the instant issue is fully covered by the order of the Coordinate Bench of the Tribunal in assessee's own case for years 2009-10, 2012-13, 2014-15 & 2015-16 wherein, the Bench upheld that goodwill is an intangible asset and eligible for depreciation. In view of the aforesaid discussions and respectfully following the aforesaid precedents, we deem it fit and proper to direct the TPO to delete such disallowance of Rs. 14,36,387/- in light of the aforesaid precedents in assessee's own case. Accordingly, the Grounds No.66 to 70 are allowed in the aforesaid manner. 46. Apropos Grounds no.71 to 73 relating to disallowance on account of inventories written off amounting to Rs. 2,04,00,000/- are concerned, ld. Counsel for the assessee submitted that the assessee had claimed expense on account of fixed assets / inventories provided / written off as part of other expense in note no.29 of annual report amounting to Rs. 2.22 crores. However, the assessee has added back Rs. 0.18 crores (Rs.17,98,117/-) of fixed assets written off in its computation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y for reduction in the value of closing stock and the AO has rejected the same on the basis of non submission of item wise details or for other reasons. The Courts have decided the issues in favour of the assessee. The facts in the present case is distinguishable to facts of those decisions relied by the assessee. In the result, grounds raised by the assessee are dismissed. 50. Apropos GroundsNo.74 to 76 relating to disallowance on account of software expenses amounting to Rs. 8,19,870/- are concerned, ld. Counsel for the assessee submitted that these charges include payment for recurring items, such as, purchase of annual software licenses for Adobe, annual subscription renewal charges, updating the barcode software, renewal of auto CAD software etc., which are revenue in nature. Further, details of software expenses alongwith major invoices are at page nos. 968-983 of the paper book. He also submitted that assessee has bonafide claim due to the fact that the AO is statutory bound under law to verify claim of assessee with documentary evidences and shall compute correct total income, in view of decision of ITAT, Chandigarh in the case of MIT Mohan Singh Kahlon [2013] 39 taxmann.c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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