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2023 (10) TMI 1133 - AT - Income TaxShort credit of tax deducted at source - HELD THAT - As we find that this was not the part of the draft assessment order and therefore the assessee came to know only about this adjustment at the time of making of the final assessment order, hence, in the interest of justice, we set-aside it to the file of AO to verify the credit claimed by the assessee in the return of income - Thus, ground is allowed with above direction. MAT computation - not granting assessee the lower of brought forward losses or unabsorbed decision while computing book profit u/s 115JB - HELD THAT - In this case as the unabsorbed depreciation is rupees nil whereas the unabsorbed business losses are ₹ 201.76 crores and therefore the assessee is entitled to deduction of rupees nil. The view of the AO is also supported by the decision of MILAN INTERMEDIATES LLP 2018 (7) TMI 1724 - ITAT AHMEDABAD no infirmity was shown to us that how the order of the AO is erroneous. It was also not shown to us that the decision of the coordinate benches relied upon by the learned assessing officer is incorrect or upset by the decision of the honourable High Court. We are not inclined to set aside back to the file of the learned assessing officer because there is no purpose. Accordingly, we dismiss ground of the appeal confirming the action of AO that assessee has already been granted deduction while computing book profit under section 115JB of the act of lower of unabsorbed business losses or unabsorbed depreciation. Adjustment of the book profit u/s 115JB - addition on account of the foreclosure cost was made by AO - As assessee has debited capital expenditure and did not reduce it book profit - when company provides for premium on redemption out of the profits of the company whether it needs to be debited as expenses in the statement of profit and loss account or it is to be deducted from balance of surplus in the balance sheet? - HELD THAT - In the present case, in form number 3CD, assessee has classified the above expenditure as capital expenditure. Form number 3CD is always prepared by the assessee. The report is given by an accountant in form number 3CA or Form No. 3CB. Thus, there is a basic contradiction in the claim of the assessee that tax audit report (form number 3CD) cannot be used by the learned assessing officer for making adjustment under section 115JB. The fact shows that in form number 3CD assessee is stating that foreclosure cost is in the form of premium paid on redemption of redeemable preference shares and is capital expenditure, whereas while computing book profit, assessee pleads that it is a revenue expenditure which can be debited to the profit and loss account. In the result we do not find any infirmity in the order of the lower authorities in making addition of Rs 200 crores to the book profit u/s 115 JB of The Act holding that it is statement of assessee that it is a capital expenditure. Thus Ground no 2 to 9 of the appeal are dismissed. Nature of expenses - share issue expenses - revenue or capital expenditure - HELD THAT - As per provisions of section 37 (1) any capital expenditure is not allowable as deduction. Assessee has incurred this expenditure only for the share issue and capital reduction. In view of this, we do not find any infirmity in the order of the lower authorities in holding that expense is capital in nature. Further in form number 3CD assessee itself is qualified it to be a capital expenditure and therefore now assessee cannot argue otherwise as form number 3CD is also prepared by the assessee. The claim of assessee is contradictory on the same issue. Therefore, no infirmity in the orders of the lower authorities in holding that expenditure incurred by the assessee is a capital expenditure relying on assessee's own claim in Form no 3 CD. Accordingly ground number 10 12 of the appeal are dismissed. TPA - sale of fuel stock and purchase of fuel stock - MAM selection - assessee concluded that comparable Uncontrolled Price Method (CUP) cannot be applied due to non-availability of transaction level data through both internal and external sources - TPO rejected the benchmarking analysis and held that Comparable Uncontrolled Price CUP method is the most appropriate method, he used TIPS database to benchmark the transaction by using that method and accordingly he benchmarked the purchase and sale of fuel stock transaction - HELD THAT - The product Transacted is coal. On careful look at Rule 10 AB of the ITA Rules 1962 introducing Other method , it merely facilitates considers the price which has been charged or paid, or would have been charged or paid, for the same or similar uncontrolled transaction, with or between non-associated enterprises, under similar circumstances, considering all the relevant facts. As assessee has failed follow mandate of section 92CA (3) of the Act, the ld. TPO adopted the Uncontrolled Comparable price Method CUP , adopted TIPS data base and held part of transaction of purchase and sale at Arm s length price and without respect of few transactions made the adjustment. The ld. DRP also upheld the TP approach of ld. TPO. TPO found the comparable prices of the transacted goods and then made adjustment wherever the prices are found not comparable. No infirmity pointed out in the transactions compared, timing of transactions and on any other parameter of transaction. Therefore, we do not have any hesitation in confirming the adjustment on account of Arm s length price of specified domestic transaction. It is not the case that TIPS database is not reliable. No evidence was produced before us that there is any infirmity in the database used by the TPO. Many coordinate bench decisions have held that TIPS database is the appropriate database in determining comparable uncontrolled prices of products. No infirmity was pointed out in approach of ld. TPO before us other than above, hence transfer pricing adjustment on account of sale of fuel stock and on account of purchase of fuel stock are confirmed. Decided against assessee.
Issues Involved:
1. Re-working Book-Profit under section 115JB by adding Rs. 200 crores. 2. Treatment of foreclosure costs. 3. Addition of share issue expenses as capital expenditure. 4. Adjustment made by the TPO under section 92CA(3). 5. Short grant of TDS. 6. Brought forward loss. Summary: Re-working Book-Profit under section 115JB by adding Rs. 200 crores: The Lower Authorities erred in making an addition of Rs. 200 crores on account of 'foreclosure on account of early redemption of preference shares' to the book-profit of the Appellant and thereby re-computing the book profit at Rs. 155,43,34,549/-. The Tribunal upheld the AO's adjustment, stating that the foreclosure cost on account of early redemption of preference shares is capital expenditure and cannot be deducted in computing book profit under section 115JB of the Act. Treatment of foreclosure costs: The Lower Authorities erred in disregarding that foreclosure costs on account of early redemption of preference shares are akin to pre-payment charges levied by banks/financial institutions/lenders on settlement of loans/borrowings. The Tribunal found that the foreclosure cost should be treated as a capital expenditure and not as a revenue expenditure, thus supporting the AO's adjustment. Addition of share issue expenses as capital expenditure: The Lower Authorities erred in holding that share issue expenses incurred towards capital reduction, issue of equity shares, and foreclosure on account of early redemption of preference shares was capital in nature, rather than revenue in nature and liable to be allowed as an expenditure under section 37(1) of the Act. The Tribunal upheld the AO's disallowance of Rs. 25 lakhs as capital expenditure, relying on the assessee's own classification in Form No. 3CD. Adjustment made by the TPO under section 92CA(3): The Lower Authorities erred in making an addition of Rs. 18,67,424/- on account of sale of fuel stock and an addition of Rs. 1,17,01,150/- on account of purchase of fuel stock by arbitrarily rejecting the 'Other Method' applied as Most Appropriate Method ("MAM") as per Rule 10AB of the Income Tax Rules, 1962 ("Rules"). The Tribunal upheld the TPO's use of the Comparable Uncontrolled Price (CUP) method and the adjustments made based on TIPS database. Short grant of TDS: The AO erred in granting short-credit of Tax Deducted at Source ("TDS") to the Appellant, i.e., TDS claimed in computation of total income at Rs. 30,30,259/-, whereas the credit granted by the AO is Rs. 29,29,411/- resulting in short-grant of TDS of Rs. 1,00,848/-. The Tribunal set aside this issue to the AO for verification and granting the correct credit if found in accordance with the law. Brought forward loss: The Lower Authorities erred in not reducing lower of brought forward losses or unabsorbed depreciation while computing book-profit under section 115JB of the Act. The Tribunal upheld the AO's computation, stating that the lower of unabsorbed business loss or unabsorbed depreciation is required to be reduced from the book profit, which in this case was nil. Conclusion: The appeal was partly allowed, with specific directions for the AO to verify the short-credit of TDS and the computation of brought forward losses or unabsorbed depreciation while computing book profit under section 115JB of the Act. Other grounds of appeal were dismissed, upholding the AO's adjustments and disallowances.
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