9911796707
TMI Blog2016 (12) TMI 1659X X X X Extracts X X X X X X X X Extracts X X X X ..... ar under consideration, assessee filed its return of income on 29th September 2009, declaring total income of Rs. 91,47,89,900. Subsequently, assessee filed a revised return of income on 29th March 2011, declaring total income of Rs. 84,33,81,255. In the course of assessment proceedings, the Assessing Officer while examining the computation of income filed by the assessee noticed that the assessee had claimed deduction under section 80IA(4) for an amount of Rs. 87,86,871, in respect of its captive power plant at Ankleshwar. On examining Profit & Loss account pertaining to the said captive power plant it was noticed by the Assessing Officer that assessee had credited a sum of Rs. 3,94,50,820 as savings from captive power plant. On the aforesaid credit to the Profit & Loss account assessee has computed profit from the undertaking at Rs. 91,46,428 and from such profit has claimed deduction under section 80IA. On examining Form no.10CCB, filed by the assessee, the Assessing Officer noticed, at point no.27, assessee has shown an amount of Rs. 3,94,50,820, pertaining to the total sales of the undertaking as cost and at Point no.28, it has mentioned that no other transaction apart from tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of Rs. 87,86,871 under section 80IA. Being aggrieved of such disallowance, assessee preferred appeal before the first appellate authority. 4. The learned Commissioner (Appeals), after considering the submissions of the assessee with reference to provisions contained under section 80IA, and more particularly, sub-section (8) of section 80IA, held that the section specifically provides for a situation where any goods or services held for the purpose of eligible business are transferred to any other business carried on by the assessee. Therefore, as power generated from the eligible business was transferred for captive consumption of other businesses of the assessee it satisfies the condition of section 80IA(8). He further observed, it is not the Assessing Officer's case that the power generation unit of the assessee is not an eligible business in terms of section 80IA. He also noted that before the Assessing Officer the assessee has made clear and categorical disclosure that revenue was generated from captive consumption and from sale to sell to an outsider. He also noted that the Assessing Officer was made aware that the amount mentioned under the caption "savings from captive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n companies. He submitted, as per section 80IA(6), Explanation (i), the market value is subject to statutory or regulatory restriction only. He submitted, since the assessee is purchasing electricity from the Gujarat State Electricity Board at the cost of Rs. 6.17 per unit the application of such rate to the captive consumption of electricity is justified. In support of such contention, he relied upon the following decisions:- i) CIT v/s Reliance Energy Ltd., 31 taxmann.com 63 (Bom.); & ii) Indian Petrochemical Corp. Ltd. v/s ACIT, ITA no.1426/ Ahd./2009 & Ors., order dated 18.11.2015. 6. Learned Departmental Representative referring to the provisions of section 80IA submitted, only profit from eligible business of an undertaking can be allowed as deduction. Therefore, onus lies on the assessee to demonstrate the actual profit earned by the undertaking. He submitted in case of GSEB the cost of distribution is significant whereas in case of assessee there is hardly any cost of distribution. He submitted, the rate charged by the GSEB at 6.17 per unit is for commercial purpose, hence, the assessee is not justified in computing the cost of electricity generated by its eligible und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter relating to 16% return on capital base is only an exercise for fixation of tariff and is only one of the many parameters taken into consideration for fixing the tariff under the old Electricity Act, 1948 and has nothing to do with the actual profits which are earned by the activity of power generation plant. The Tribunal, Mumbai Bench, in Indian Petrochemicals Corp. Ltd. (supra), relying upon the decision of the same Bench in Reliance Industries Ltd., ITA no.536/Mum./2012 dated 29th May 2015, allowed assessee's claim of deduction under section 80IA, computed by applying the price at which industrial consumer pay for electricity purchased from the State Board distribution agencies. We have further noted, in case of Reliance Industries Ltd. (supra), the Tribunal has observed that the parameter relating to 16% of the capital base is for working out the tariff of sale to distribution agency and not for sale to end consumers and not for computing the profit and gains for the eligible business. In view of the decisions referred to above, we are of the opinion, the direction of the learned Commissioner (Appeals) to allow deduction under section 80IA, at 16% on return of capital base i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that as the PLI of comparables at 13.33% is higher than the assessee's margin of 13.24% and the variation between the margin is Rs. 74,11,957, which is more than 5% of sales to A.E. adjustment is required to be made. Without prejudice to the aforesaid conclusion, the Assessing Officer observed, since, as per assessee's own admission in the case of one product i.e., Tebuconazola assessee has incurred loss of Rs. 15,17,980, the arm's length price of the said product applying the entity level margin at 13.24% can be determined and accordingly worked out the adjustment at Rs. 20,23,348. While doing so, he observed, if the assessee gets relief before the appellate authority in respect of adjustment made to arm's length price of Rs. 74,11,937, then arm's length price determined in case of the product Tebuconazola by applying CUP method should be considered for adjustment. The assessee challenged the adjustment of arm's length price before the learned Commissioner (Appeals). 12. The learned Commissioner (Appeals), after considering the submissions of the assessee found that the assessee has sold four products to the A.E. out of which in respect of three products it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sats Air Catering Ltd. v/s ACIT, ITA no.8790/Mum./2013 dated 20.8.2013; and iii) Boskalis International v/s DDIT, ITA no.4862/Mum./2008 dated 18.7.2014. 14. Learned Departmental Representative relying upon the observations of the Assessing Officer and the learned Commissioner (Appeals) submitted aggregation is allowable if assessee demonstrate that assessee is inextricably linked to other similar and related transactions. 15. We have considered the submissions of the parties and perused the material available on record in the light of the decisions relied upon. At the outset, it needs to be observed, the transfer pricing adjustment made by the Assessing Officer at Rs. 74,11,937 applying TNMM was not found suitable by the learned Commissioner (Appeals) and he deleted the same. Against this finding of the learned Commissioner (Appeals), the Revenue has not preferred any appeal. Therefore, the order of the learned Commissioner (Appeals) on this issue has become final. In the aforesaid factual context, it needs to be examined whether arm's length price of a single product sold by the assessee can be taken up independently. Undisputedly, the assessee is a manufacturer of pestic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riate return across portfolio rather than single product. The assessee is selling various insecticide products used in the household at various strata of the society and, therefore, the products of the assessee are clearly falling under the one portfolio of same category of product and, therefore, the assessee can have a portfolio approach as a business strategy. A similar view has been taken by the Co-ordinate bench of this Tribunal in the case of Taj Sats Air Catering Ltd. v/s Additional CIT (supra). In view of the above facts and circumstances of the case as well as from the above discussion, we are of the view considered opinion that all the insecticide products sold by the assessee to its A.E. in each country shall be clubbed together for the purpose of determining the arm's length price. Accordingly, we decide this issue in favour of the assessee. Consequently, the addition made by the Assessing Officer is deleted." 16. As the aforesaid decision of the Tribunal is directly on the issue and no contrary decision has been brought to our notice by the learned Departmental Representative, respectfully following the aforesaid decision of the Tribunal, we hold that the adjustment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er rule 8D(2)(iii) is concerned, learned Authorised Representative submitted, only one employee is looking after the investment, therefore, the assessee has disallowed salary income relating to one of the employee. However, he submitted, in view of the decisions of the Tribunal in assessee's own case for assessment year 2007-08, 2% of the dividend income can be disallowed. 20. Learned Departmental Representative relied upon the observations of the Assessing Officer and the learned Commissioner (Appeals). 21. We have considered the submissions of the parties and perused the material available on record in the light of the decisions relied upon. It is evident, before the first appellate authority assessee had specifically taken a plea that it has own interest free fund of Rs. 348.67 crore to make the investment of Rs. 127 crore. However, the aforesaid contention of the assessee did not find favour with the learned Commissioner (Appeals). The fact that assessee was having substantial interest free funds available with it to take care of the exempt income yielding investment has not been disputed by the Departmental Authorities. Therefore, applying ratio laid down by the Hon'ble ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
