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TMI Blog2018 (7) TMI 1955X X X X Extracts X X X X X X X X Extracts X X X X ..... et aside the whole matter of determination of ALP of interest paid by the Assessee to its associated enterprise back to the file of the Ld. Transfer Pricing Officer with a direction to examine the computation of ALP by the Assessee of above transaction strictly in accordance with the provisions of section 92C of the Income Tax Act considering the evidences placed by the Assessee before him and then decide the issue of adjustment, if any, on merits. Disallowance of branch office expenditure by treating the same as preoperative expenditure - expenses allowable under section 37(1) - HELD THAT:- We find identical issue had come up before the Tribunal in assessee s own case as held Assessing Officer nor the Ld. Departmental Representative could press any other judicial precedent which shows that amount spent by the assessing is not allowable as revenue expenditure under section 37 (1) of the act. It is also not the argument of the revenue that such expenditure incurred by the Assessee is capital in nature. Furthermore, the Ld. AR has also pressed into several decisions which say that that expenses incurred towards extension of business which was subsequently abandon or did not fructi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the interest of justice, we deem it proper to restore this issue to the file of the Assessing Officer/TPO for adjudication of the issue afresh. Disallowance of depreciation of Panna Well Cost - HELD THAT:- We deem it proper to restore the issue to the file of the Assessing Officer with a direction to give an opportunity to the assessee to substantiate his case as per the direction of the DRP. The Assessing Officer shall decide the issue as per fact and law after giving due opportunity of being heard to the assessee. We hold and direct accordingly. Disallowance of depreciation on the IT infrastructure and software - HELD THAT:- Since the assessee in the instant case has not filed the documentary evidences before the Assessing Officer substantiating that the assets were put to use for the business of the assessee, therefore, we in the interest of justice deem it proper to restore the issue to the file of the Assessing Officer/TPO to adjudicate the issue afresh after giving due opportunity of being heard to the assessee. While doing so, the Assessing Officer/TPO shall keep in mind the order of the Tribunal in assessee s own case in the immediately preceding assessment year. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R. K. Panda And Ms. Suchitra Kamble, JJ. Assessee by : Shri Ajay Vohra, Shri Sahil Sharma, Department by : Shri H. K. Choudhary, CIT-DR ORDER R. K. Panda, This appeal filed by the assessee is directed against the order dated 23.02.2017 passed u/s 143(3)/144C(13) of the I.T. Act, 1961 by the JCIT (International Taxation), Dehradun for the assessment year 2011-12. 2. Facts of the case, in brief, are that the assessee (BGEPIL) is a nonresident company incorporated in the Cayman Islands with limited liability and is engaged in the business of prospecting for exploration and production of crude oil and natural gas. It filed its return of income on 30.11.2011 declaring total income of ₹ 890,50,35,760/-. Since the assessee had entered into several international transactions with its AE, the Assessing Officer referred the matter to the TPO for determination of the arm s length price of the international transactions entered into by the assessee with its AE. The TPO vide order dated 29.01.2016 proposed an upward adjustment of ₹ 291,72,84,667/- in respect of the international transactions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing Officer/TPO/DRP, the assessee is in appeal before the Tribunal by raising the following grounds :- The Appellant objects to the order dated 23 February 2017 passed by the Joint Commissioner of Income Tax (International Taxation), Dehradun ( AO ) for the Assessment Year ( AY ) 2011-12, pursuant to the directions dated 23 December 2016 issued by the Dispute Resolution Panel ( DRP ) under section 144C(5) of the Incometax Act, 1961 ( the Act ) on the following among other grounds. Ground No.1: Proceedings barred by limitation 1.1 The order for the assessment year 2011-12 is bad in law and is liable to be quashed having regard to the statutory time limit prescribed under the section 153 of the Act read with Explanation 1 to section 153(4) of the Act. Ground No.2: Erroneous rejection of Transactional Net Margin Method ( TNMM ) and selection of Comparable Uncontrolled Price ( CUP ) Method 2.1 The learned AO / DRP / Transfer Pricing Officer ( TPO ) have erred in law and on facts by disregarding the economic analysis conducted by the Appellant, for determination of the arm's length price ( ALP ) by applicat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r data 8.1 The learned AO / DRP / TPO grossly erred in erroneously rejecting multiple year data used by the Appellant in computing the ALP. Ground No.9: Disallowance of branch office expenditure 9.1 The learned AO / DRP erred in law and in facts in disallowing the branch office expenditure of ₹ 51,42,39,383 by treating it as pre-operative in nature. 9.2 The learned AO / DRP erred in not appreciating that the said expenditure was incurred wholly and exclusively for the purpose of the Appellant's business in India. 9.3 The learned AO erred in law and in facts in observing that the payments made for purchase of seismic data, included in the branch office expenditure, were liable to be disallowed under section 40(a)(ia) of the Act. Ground No. 10: Disallowance of expenditure incurred on non-producing Production Sharing Contracts ( PSCs ) 10.1 The learned AO / DRP erred in law and in facts in disallowing under section 42 of the Act read with the PSCs, the expenditure of ₹ 39,18,72,912 incurred on non-producing PSCs. Ground No. 11: Disallowance of exploration expenditure writt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n fact, in levying interest under sections 234B and 234C of the Act disregarding the fact that the appellant is a non-resident whose income is subject to tax deduction at source. Ground No. 20: General 20.1 The Appellant submits that the AO, TPO and DRP have erred in arriving various unwarranted and erroneous conclusions unsupported by any relevant material in deciding the case. 20.2 The AO erred in initiating penalty proceedings under section 271(1)(c) of the Act. 20.3 The Appellant submits that each grounds of appeal are without prejudice to one another 20.4 The Appellant craves leave to add, alter, amend, substitute and / or modify in any manner whatsoever all or any of the foregoing grounds of objections at or before the hearing of the appeal. 7. The ld. counsel for the assessee at the time of hearing did not press ground no.1, 17 and 20 being general in nature for which ld. DR has no objection. Accordingly, the above grounds are dismissed as not pressed. 8. Ground no.2 to 8 by the assessee relates to the transfer pricing adjustment made by the Assessing Officer/TPO/DRP. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PO made an adjustment amounting to ₹ 183,94,39,318/- as under :- S.No. Description of intra group service Value of International Transaction Amount shared by Join Venture (JV) Total Adjustment I Payroll expenses 255,563,180 107,381,829 148,181,351 II Management Service Unit Charges 1,014,795,742 0 1,015,132,296 III IM Recharge and Time writing charges 74,397,367 7,086,287 67,310,540 IV Joint acquisition development of IT Infrastructure and software 804,936,227 0 267,933,582 (amount claimed as depreciat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view that the needed test, the benefit test are also required to be viewed from the perspective of a businessperson and not from the perspective of the revenue. Further, no evidences have been led before us by revenue stating that these services are duplicative in nature and also serves only the interest of the shareholder. According to the information supplied by the assessee and examined by the Ld. dispute resolution panel does not give any such indication. Further regarding nonsharing of the cost by the joint-venture partners we have given our findings while deciding the appeal of the assessee that such an action of the joint-venture partners cannot be the reason to determine the arm s length price of the services which is been received by the assessee at nil. In view of this we uphold the finding of the Ld. dispute resolution panel holding that transactions of intragroup services are interlinked, therefore, they should be benchmarked together by adopting TNMM as the most appropriate method, hence, directing the Ld. transfer pricing officer to delete the adjustment proposed of ₹ 3 329766244/ . In the result ground No. 1 to 3 of the appeal of the revenue are dismissed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a fixed rate of 6.18% (being Libor USD Swap rate +350 bps) for succeeding five years. The said loan from the AE was an unsecured loan, since the financial position of the assessee did not permit obtaining secured loan on favourable rate of interest from unrelated party, financial institutions or banker. 18. The interest rate was amended in October 2009, when the assessee availed of an additional tranche (under the same loan agreement) from its AE to meet its working capital requirement. As there were significant variations in the global interest rates sine 2005 (i.e. when the loan was initially extended and the original agreement was signed) through 2009, the AE and the assessee agreed for an interest rate revision in 2009 from LIBOR +200 bps to LIBOR + 350 bps based on Barclay banks quotation after assessing appellant's risks and market conditions prevailing at that time. Further, as the appellant expected volatile interest rates in future and hence believed that there should be stability in the interest rate to be paid at least for the next five year period. 19. Accordingly, the assessee decided to migrate from a floating interest rate to fixed ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... solution Panel. The Assessee entered originally into a loan agreement dated 31st of May 2005 between BG. Asia Pacific Plc Ltd and Assessee for unsecured loan facility of US dollar 500 million. According to the terms and conditions of that agreement interest rate was fixed as one month, US $ LIBOR +2% for an and apportioned on an actual 360 basis. The termination date of the agreement was 31st of May 2020. Subsequently on 21/10/2009 There is an amendment made it to the existing loan facility under agreement dated 31/05/2005, according to which, the parties have agreed to amend the interest rate terms applicable to the existing loan facility at the fixed rate of 6.18% for 5 years from the date of execution of this agreement (i.e. from 21/10/2009), it would be once again at available rate of 6 months USD LIBOR +350 unless the parties agree otherwise. On conjoint readings of this 2 agreements it is apparent that during the year there is a change in the interest rate of the above loan, which was earlier at US dollar LIBOR +2% to 6.18%. For part of the year i.e. from 01/04/2009 2 21/10/2009, the rate of interest on the above loan was 2.33% and from 22/10/2009 to 31/03/2010 the rate of in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a classic example of transfer pricing to reduce the profitability of the Assessee company. For this reasons he proposed an adjustment of ₹ 42,72,64,082/ on account of interest payments. We disagree with this finding of the Ld. Transfer Pricing Officer that there was no reason for the Assessee to increase the interest rate for 2.33% to 6.18%. The Assessee has given detailed rational behind its own decision for shifting from floating rate of interest regime to fixed rate of interest. In a way, it reduces the risk of changes in the interest rates. It is a well settled proposition of law that The Ld. Transfer Pricing Officer is not supposed to question the business decision of the Assessee. The Assessee has given ample reasons for its business decision even stating that most of the reported loans in that particular period were having a clause of fixed rate of interest. Therefore, the decision of the appellant to shift from floating rate to fixed rate of interest was based on commercial consideration and to protect the business operation of the appellant from any adverse movement in floating interest rates and that only businessmen can decide. It may sound illogical to the Ld. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is payment of interest where the terms and conditions with respect to rate of interest have changed during the year, whereas the loan was granted in 2005. For benchmarking the interest transaction it is necessary to consider the factors such as :- i) Prevailing economic situation ii) Time Schedule of drawing down the debt iii) repayment schedule, iv) options of prepayment of the loan, v) term / tenure of loan, vi) tenure and periodicity of interest payments, vii) withholding taxes burden on interest viii) Security offered ix) Credit rating of the group , AE and Payer entity x) risk of currency xi) Possibility and terms and condition of convertibility of Debt to equity. The Ld. Transfer Pricing Officer must have looked the agreement dated 31st of May 2005. According to clause No. 7, the interest is required to be paid on the interest payment date, which is 31st May each year, , the taxes on interest, shall be on the account of the borrower according to clause 9 of the agreement. Further, according to clause 5 of the agreement the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transaction strictly in accordance with the provisions of section 92C of the Income Tax Act considering the evidences placed by the Assessee before him and then decide the issue of adjustment, if any, on merits. Needless to say that Assessee may be given proper opportunity of hearing to demonstrate that payment of interest made by the Assessee to its associated enterprise is at arm s length according to one of the methods supporting it with necessary and credible evidences . In the result ground No. 2 of the appeal of the Assessee is allowed with above direction. 24. Following the decision of the Tribunal in assessee s own case, we deem it proper to restore the issue to the file of the Assessing Officer/TPO to decide the issue afresh in the light of the direction of the Tribunal in assessee s own case in the immediately preceding assessment year. The grounds no.2 to 8 raised by the assessee on this issue are accordingly allowed for statistical purposes. 25. So far as ground no.9 is concerned, the same relates to disallowance of branch office expenditure of ₹ 51,42,39,383/- by treating the same as preoperative expenditure. 26. Facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nditure incurred by the assessee is to explore and evaluate new business opportunities in India. Since the business of the assessee is already in existence, the aforesaid expenses cannot be regarded as pre-operative. Referring to provisions of section 37, he submitted that the said section provides for deduction of expenditure not being expenditure of the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee laid out or expended wholly and exclusively for the purposes of the business. Thus, for expenditure to be allowable u/s 37, the following conditions need to be satisfied :- (i) Expense should be incurred wholly and exclusively for the purposes of the business. (ii) The expense should be revenue in nature. 28. Referring to the decision in the case of ONGC Videsh Ltd. vs. DCIT reported in 37 SOT 97, he submitted that the assessee in that case was engaged in business of exploration and production of hydrocarbons incurred expenditure on purchase and evaluation of seismic data of foreign blocks. It was held that expenditure so incurred was for furtherance of activities u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowance in terms of section 40(a)(ia) is applicable only when the payer fails to deduct tax u/s 195, which casts an obligation on a person making payment to a non-resident of any sum, which is chargeable under the provisions of the Act to deduct tax at the rates in force at the time of payment of such sum or at the time of credit thereof to the account of the payee, whichever is earlier. As per the said section 195, tax is required to be withheld in respect of payments made to a non-resident only if such payment is chargeable to tax in India. In terms of section 90(2) of the Act, provisions of the Act are overridden by the provisions of the DTAA to the extent more beneficial to the non-resident assessee. In the present case, Furgo and Geo are non-residents and entitled to claim benefit under the India-Swiss and India-UK Tax Treaties respectively. In terms of paragraph 1 of Article 7 of the aforesaid treaties, business profits arising to a non-resident enterprise shall be taxable in India, only if such enterprise has a PE in India. In other words, in absence of PE in India, no part of the business profits arising to such enterprise would be taxable in India. In the instant cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g new business activities and, therefore, the same are basically pre-operative in nature and not allowable u/s 37(1) of the I.T. Act. We find the action of the Assessing Officer has been upheld by the DRP. It is the submission of the ld. counsel for the assessee that the issue has been decided by the Tribunal in assessee s own case in the immediately preceding assessment year. It is the submission of the ld. DR that when the assessee was given permission to open branch office for exploration of crude oil/gas as per RBI Guidelines and as per PSC, the assessee cannot conduct any business beyond permission by the RBI especially when the assessee is not a normally resident assessee. 35. We find identical issue had come up before the Tribunal in assessee s own case and the Tribunal at para 55 and 56 has decided the issue in favour of the assessee by observing as under :- 55. From the above chart it is apparent that out of the total expenditure incurred of ₹ 931819021/ the Ld. Assessing Officer has allowed the expenditure of ₹ 471505233/ which is the cost of respective PSC and shared with JV partners. The balance cost which is not shared by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by JV partners, then it is not allowable. We failed to see any such provision in the act that if the other party in the joint-venture do not agree to share the particular cost, the cost incurred by one of the partners of that joint-venture becomes the expenditure not for the purpose of the business of that partner. No such provision has also been brought to our notice by the revenue. It is also not the case of the revenue that details of those expenditure are not available before them or Assessee has furnished incomplete information for its allowability. Further, no judicial precedent was cited before us by revenue, which says that such expenditure are not allowable to the Assessee. Therefore according to us the expenses incurred by the Assessee with respect to i) KG-OS- 02004/1 of ₹ 7 163 8553 ii) MN DWN 2002/2 of ₹ 1 0524 1649 iii) KG-DWN-98/4 of ₹ 6 245 0283/ cannot be disallowed. In view of this we direct the Ld. Assessing Officer to delete the disall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during benefit to the business nor the same can be said as initial outlay for expansion of business. In the instant case, the expenditure so incurred by the Assessee is for furtherance of activities undertaken by it in the normal course of its business. The same are incurred on continuous basis for evaluation of business activities. In view of the decision of Bombay High Court in the case of CIT v. Essar Oil Ltd. [IT Appeal No. 921 of 2008, dated 16-10-2008], such expenditure is to be allowed as revenue expenditure. Hon ble Calcutta High Court in the case of Kesoram Industries Cotton Mills Ltd. v. CIT [1992] 196 ITR 845 held that where the setting up does not amount to starting of new business but expansion or extension of the business already being carried on by the Assessee, expenses in connection with such expansion or extension of the business must be held to be deductible as revenue expenses. One has to consider purpose of the expenditure and its object and effect. Accordingly, it was held that expenses pertaining to exploring feasibility of expansion or extension of business are revenue expenditure and not capital expenditure. The expenditure so incurred by the Assessee in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayer, the same has to be treated as revenue expenses in nature. So, following the decision rendered by the coordinate Bench of the Tribunal in taxpayer s own case for AY 2010-11 (supra), AO is directed to allow the expenditure incurred by the taxpayer on cost of purchase of seismic data, general and administrative expenses in connection with proposed NELP-VIII and staff cost and project management and consultancy charges of ₹ 40,70,92,375/-. So, ground no.11 is determined in favour of the taxpayer. 37. Respectfully following the decision of the Tribunal, the above grounds are decided in favour of the assessee. 38. So far as ground no.10 is concerned, the same relates to disallowance of expenditure of ₹ 39,18,72,912/- incurred on non-producing PSC. 39. Facts of the case, in brief, are that the assessee being a non-resident entity has interest in Panna/Mukta oil and gas fields, Mid and South Tapti oil and gas fields, KG-OSN-2004/1, MN-DWN-2002/2, KG-DWN-1998/4 and KG-DWN2009/1 fields. During the year under consideration, Panna/Mukta and Mid and South Tapti oil and gas fields were producing gas fields. The production in KGOSN-204/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions of the Act. In other words, the section does not override or seek to take away benefits/deductions available to the eligible assessee under any other provision of the Act in the absence of a non-obstante clause. Accordingly, where an assessee already carrying on business of exploration and production of mineral oil, incurs any expenditure in pursuance of such existing business, the same would be allowable business deduction u/s 37(1) de hors section 42 of the I.T. Act. He submitted that identical issue had come before the Tribunal in assessee s own case in the immediately preceding assessment year and the Tribunal had deleted the disallowance. He accordingly submitted that the disallowance of expenditure of ₹ 39,18,72,912/- incurred on non-producing PSC made by the Assessing Officer is bad in law and liable to be deleted. 44. The ld. DR on the other hand heavily relied on the order of the Assessing Officer/TPO/DRP. He reiterated the arguments as made while arguing the ground of appeal no.9. 45. We have considered the rival arguments made by both the sides and perused the material available on record. We find, following the decision of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t cost, which is also capital expenditure, and (iii) production costs which are operational expenditure. Therefore it is erroneous belief that in case of PSC the Assessee is only entitled to deduction, which are covered there and not any other deduction which are covered under the any other provisions of the act. We have already discussed the provision of section 42 of the act in deciding some of the grounds of appeal of the assessee. Therefore, we reject the contention of the revenue that if the expenditure do not find allowability under section 42, it cannot be allowed to the Assessee. Now coming to the various expenditure which has been incurred by the Assessee are in the form of various expenditure pertaining to oil exploration blocks for which the PSC has been entered into. Out of the same, the Ld. Assessing Officer has allowed some of the expenditure and disallowed rest of the expenditure. The below chart depicts this picture. Classification Allowed by AO Disallowed by AO Total KG-OSN-2004/1 102,937,064 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Assessee by giving breakup of their cost as well as nature of those expenditure. Assessee explained that as it needs to safeguard its interest in the blocks it has employed technical experts for which time writing charges are incurred. Further, for the support functions. It also hires several other persons and necessarily has to incur other expenditure with respect to its finance and accounting activities, its human resource activities and legal compliance and litigation activities. These expenditure are though incurred in support to the PSC contracts executed by the Assessee at may not be necessarily shared by the other joint-venture partners. Merely because it is not shared by others, which may be for many reasons, it cannot be said that the Assessee has not incurred these expenditure wholly and exclusively for the purposes of business of the Assessee. With respect to the details available with the Assessing Officer, It was not pointed out a single instance that any of the expenditure are not incurred by the Assessee for the purposes of its business. In fact, out of the total expenditure The Ld. Assessing Officer has partly allowed the expenditure and partly disallowed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wn case for AY 2010-11 (supra), the disallowance made by the AO/DRP is not sustainable in the eyes of law, hence disallowance is ordered to be deleted and ground no.12 is determined in favour of the taxpayer. 45.1 Respectfully following the same, the grounds raised by the assessee on this issue are allowed. 46. In ground no.11, the assessee has challenged the order of the ld. CIT(A) in sustaining the disallowance of exploration expenses written off amounting to ₹ 68,39,51,972/-. 47. Facts of the case, in brief, are that the assessee in its audited Profit Loss Account had claimed an amount of ₹ 71,72,23,583/- as exploration expenses written off. On being asked the Assessing Officer to furnish the details regarding such expenditure the assessee submitted that the above amount consists of two elements i.e. ₹ 68,39,51,972/- which represents amount payable by the assessee to ONGC in relation to cost incurred by them in KGDWN-98/4 block in the past. It was further submitted that since the assessee, before commencement of commercial production, had decided to exit from the block considering it to be not beneficial, hence it st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isallowance of exploration expenses written off amounting to ₹ 68,39,51,972/- made by the Assessing Officer being bad in law is liable to be deleted. 52. The ld. DR on the other hand heavily relied on the order of the Assessing Officer/DRP. Reiterating his arguments as made while arguing ground appeal no.9 he submitted that since the expenditure has been incurred beyond the RBI permission, therefore, it is not an allowable expenditure u/s 37 of the I.T. Act. 53. After hearing both the sides, we find the issue involved in the above grounds are identical to the issue as per ground of appeal no.9. We have already decided the issue and the ground has been allowed in the preceding paragraph. Following similar reasoning, this ground by the assessee is allowed. 54. In ground no.12, the assessee has challenged the order of the Assessing Officer/DRP in disallowing the amount of ₹ 237,61,05,409/- holding the same being expenses paid by the assessee to BGIL which is not borne by the operator board of the PSC and, therefore, cannot be allowable as deduction to the extent of 5% of adjusted total income in terms of section 44C of the I.T. Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenses has not been borne by the JV partners. He accordingly submitted that since the expenditure have been incurred by the assessee wholly and exclusively for the purpose of its business of prospecting for, exploration and production of crude oil and natural gas, therefore, the disallowance made by the Assessing Officer being bad in law is liable to be deleted. 58. Without prejudice to the above, the ld. counsel for the assessee drew the attention of the Bench to the provisions of section 44C and Circular No.202 dated 05th July, 1976 issued by the CBDT and various other decisions, he submitted that the assessee in the instant case is incorporated in Cayman Islands and is operating in India through Project office established with the prior approval of RBI for the purpose of conducting its business activities. In other words, the head office of the assessee is situated in Cayman Islands. Further, BGIL is an affiliate company incorporated in the United Kingdom with more than 40 years of experience and expertise in oil and gas exploration and production. BGIL possesses a pool of highly knowledgeable, technically trained and experienced individuals having extensive knowl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iii) the expenditure has been incurred by the appellant for availing specialized services for carrying out its technical business operations in relation to prospecting, exploring and production of oil-and gas and the expenses, (iv) payment made for specific services for- which necessary manpower/experience is not available with the appellant; and are not in nature of executive and general administration expenses. 59. The ld. DR on the other hand strongly supported the order of the Assessing Officer/DRP. He submitted that the provisions of section 44C does not spell out what construed head office expenses, therefore, specific services will include head office expenses. Reiterating his arguments as made while arguing in ground no.9, he submitted that the order of the Assessing Officer/DRP should be upheld. 60. We have considered the rival arguments made by both the sides and perused the material available on record. We find identical issue had come up before the Tribunal in assessee s own case in the immediately preceding assessment year and the Tribunal has allowed the claim of the assessee at para 31 of the order holding that cost of services availed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shape of bills, vouchers, invoices etc., the Assessing Officer made disallowance of ₹ 26,57,46,314/-. While doing so, he further alleged that the assessee could not find fault with the finding of the Auditors and make its own claim regarding the proper head of expenditure. 63. The DRP remitted the issue to the Assessing Officer directing him to verify the claim of the assessee after scrutinizing the bills, vouchers, invoices, etc. However, the Assessing Officer in the order passed on 23.02.2017 upheld the disallowance of ₹ 26,57,46,314/- proposed in the draft assessment order. 64. Ld. counsel for the assessee at the outset submitted that pursuant to the directions issued by the DRP, the Assessing Officer while passing the final assessment order dated 23.02.2017 did not grant an opportunity to the assessee to furnish the invoices, bills, etc. and passed the impugned order in gross violation of principles of natural justice upholding the disallowance proposed in the draft assessment order. Relying on various decisions, he submitted that in absence of affording adequate opportunity the addition cannot be made. He accordingly submitted that he ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vital role in updating the operations and saving both time and energy of the employees. Hence, there could be no doubt as to whether these have been put to use by the assessee. Further, ownership need not only be denoted by physical control but also includes intangible rights in the asset. Further, it is not possible to document every record of benefits derived from the use of IT assets. The qualitative aspects and benefits of the IT infrastructure procured are very high and carry a significant element of being non-figurative. However, the global IT T cost had been incurred centrally and infrastructure implemented after due deliberations and discussions with the appellant. Further, the cost has been allocated to the appellant based on a detailed cost allocation methodology. Hence, the disallowance in respect of deduction should be deleted. 70. Without prejudice to the above, if it is considered that the appellant is not eligible to deduction on account of not being the registered owner of the assets, the appellant submits that the entire expenditure should be allowed as revenue expenditure under section 37(1) of the Act, the same having been incurred wholly and exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore the Assessing Officer substantiating that the assets were put to use for the business of the assessee, therefore, we in the interest of justice deem it proper to restore the issue to the file of the Assessing Officer/TPO to adjudicate the issue afresh after giving due opportunity of being heard to the assessee. While doing so, the Assessing Officer/TPO shall keep in mind the order of the Tribunal in assessee s own case in the immediately preceding assessment year. The ground raised by the assessee on this issue is allowed for statistical purposes. 74. In ground no.15, the assessee has challenged the disallowance of interest expenses of ₹ 14,99,98,785/- as capital in nature. 75. Facts of the case, in brief, are that the Assessing Officer during the course of assessment proceedings observed that the assessee has claimed an amount of ₹ 151,11,93,163/- as payment of interest to BG Asia pacific Pte Ltd., a group entity of the assessee. This amount has been added back in the computation of income and an amount of ₹ 166,04,21,607/- has been claimed as interest paid on BGAP loan. The Assessing Officer, therefore, asked the assessee to expl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r tax purposes which are different from accounting. The assessee has been following this method of accenting regularly. The A.O. did not give it an opportunity to explain the accounting method. In view of this the A.O. is directed to go through the submissions of the assessee and to allow the interest as per the law. 77. Aggrieved with such order of the Assessing Officer/DRP, the assessee is in appeal before the Tribunal. 78. After hearing both the sides and in view of the agreement made by both the sides, we are of the opinion that this issue should be restored to the file of the Assessing Officer for proper verification. We therefore restore the issue to the file of the Assessing Officer/TPO with a direction to verify the details and adjudicate the issue afresh after giving due opportunity of being heard to the assessee. We hold and direct accordingly. The ground raised by the assessee is accordingly allowed for statistical purposes. 79. In ground no.16, the assessee has challenged the order of the Assessing Officer in not granting additional depreciation of ₹ 4,32,25,478/- u/s 32(1)(iia) on the new plant and machiner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee s own case for assessment year 2009-10 in ITA No.2227/Del/2014 and for assessment year 2010-11 in ITA No.1170/Del/2015, he submitted that the Tribunal in the said decision has directed the Assessing Officer not to charge interest u/s 234B on the income of the assessee which is liable to tax deduction at source. He accordingly submitted that the ground raised by the assessee should be allowed. 85. Ld. DR on the other hand supported the order of the ld. CIT(A) and submitted that section 234B is mandatory and consequential in nature. 86. After hearing both the sides, we find identical issue had come up before the Tribunal in the immediately preceding assessment year. We find the Tribunal at para 61 and 62 of the order has observed as under :- 61. We have carefully considered the rival contentions and also perused the relevant judicial precedents cited before us. In the decision cited by the Ld. Authorised Representative in case of CIT versus GE packaged power incorporation (373 ITR 65) in Para No. 19, the Hon ble high court has considered the decision cited by the Ld. Departmental Representative as under:- xxxxx ..... X X X X Extracts X X X X X X X X Extracts X X X X
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