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TMI Blog2021 (1) TMI 741X X X X Extracts X X X X X X X X Extracts X X X X ..... s decided the issue in favour of the assessee by holding that the provision made by the assessee in respect to Shahenshah Scheme to be on scientific basis. Before us, no material has been placed by the Revenue to point out any distinguishing feature in the facts of the case in the year under consideration and that of earlier years. Further Revenue has also not placed any material to demonstrate that the decision of the Tribunal in assessee s own case in A.Y. 2006-07, 2007-08, 2008-09 has been set aside/ stayed or over ruled by the higher judicial forum. Considering the totality of the aforesaid facts and following the order of the Co-ordinate bench in the assessee s own case and for similar reasons, we hold that the Revenue was not justified in making the addition. Denial of claim of deduction u/s 80IC on interest income - interest income in the accounts of Baddi Unit and Haridwar Unit - HELD THAT:- We find that the Hon ble Delhi High Court in the case of PCIT vs. Bharat Sanchar Nigam Ltd. [ 2016 (8) TMI 270 - DELHI HIGH COURT] and the Co-ordinate Bench of Tribunal in the case of M/s. NHPC Ltd [ 2019 (5) TMI 1664 - ITAT DELHI] has held that the Revenue was not justified in denying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n providing basic business support services and therefore we are of the view that it cannot be considered to be a comparable company - in the case of Worley Parsons India Pvt. Ltd [ 2017 (2) TMI 117 - ITAT HYDERABAD] has noted that public sector undertakings are not driven by profit motive alone but other considerations such as discharge of social obligations etc also weigh and hence they cannot be considered as comparable to the private companies - we hold that WAPCOS Ltd. cannot be considered to be a comparable company and we therefore direct its exclusion. X X X X Extracts X X X X X X X X Extracts X X X X ..... d and contingent liability. 3. That on the facts and in the circumstances of the case and the legal position, the learned CIT (Appeals) has erred in confirming the Order of the AO when : i. addition made by the AO in the assessment proceedings u/s 143(3) is debatable addition. ii. the addition u/s 143(3) is debatable, the rectification proceedings u/s 154 are illegal and void-ab-initio. 4. That the appellant, craves, leave to add/alter/delete/amend any ground(s) of appeal before or at the time of hearing." ITA No.463/Del/2016 1. That the impugned order of CIT (A)-44, New Delhi is bad in law and wrong on the facts and in the circumstances of the case and legal position. 2.01 That on the facts and in the circumstances of the case and the legal position, the learned CIT(A) has erred in confirming the disallowance of ₹ 17,59,124/- u/s 40(a)(i) of the Act, 1961 paid to a foreign entity as testing / certification fees outside India, as no income has accrued /arisen in India. 2.02 That the Learned CIT(A) has failed to appreciate that testing/certification fees paid outside India was not chargeable to tax under the provisions of the IT Act, 1961 read with the overridin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ained in the case of Goetze India Limited 284 ITR 323 (SC) do not apply to the powers of the appellate authority to entertain any fresh/ new claim. 7. That on the facts and in the circumstances of the case and the legal position, the learned CIT (A) has erred in confirming the adjustment by re-determining the arm's length price under Section 92CA of the Act, of the appellant Company's international transactions of support services provided to wholly owned foreign subsidiary Company and step down subsidiary Company (AE) at Net Cost plus margin ('NCP') of 12.92% as against 7.70% claimed by the appellant Company and thus confirming the disallowance of ₹ 36,04,286/-." 6. We thus first proceed to dispose of assessee's appeal in ITA No.463/Del/2016. 7. Before us, at the outset, Learned AR submitted that the Ground No.1 is general in nature therefore requires no adjudication. 8. Ground No.2 and the sub grounds are with respect to the disallowance u/s 40(a)(i) of the Act. 9. During the course of assessment proceedings, AO noticed that assessee had paid ₹ 17,59,124/- to a foreign entity and while making the aforesaid payment no TDS was deducted. The assessee was asked to e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore submitted that the reliance placed by the AO on the decision of Hon'ble Delhi High Court in the case of assessee is misplaced. He thereafter submitted that identical issue came up in subsequent year i.e. A.Y. 2006-07 and the Tribunal following the findings given by the Tribunal in A.Y.2005-06 deleted the addition made by AO. He submitted that identical issue once again came before the Tribunal in A.Y. 2007-08 (ITA No.6073/Del/2010) wherein the Tribunal following the findings given by the Tribunal in A.Y. 2005-06 and 2006-07 deleted the addition made by AO. He further submitted that the order for A.Y. 2007-08 was followed by the Tribunal while passing the order for A.Y. 2008-09. He thus submitted that the issue is thus squarely covered in favour of the assessee by the orders of Tribunal for A.Ys. 2005-06, 2006-07, 2007-08 & 2008-09. Learned AR further submitted that the facts of the issue in the year under consideration are identical to that of earlier years. He therefore, submitted that addition made by the AO be deleted. 12. Learned DR on the other hand supported the order of AO in CIT(A). 13. We have heard the rival submissions and perused all the materials available on r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee. The aforesaid foreign entity was authorized for certification of products for export which is a mandatory requirement for selling products in Europe, Middle East Countries, and South African Countries. The explanation given by the assessee before the Assessing Officer for not withhold tax at source on the aforesaid payment of ₹ 5,68,856/- made to the overseas entity, since the assessee bonafidely believed that such certification fee was not liable to tax in India, as the same was not covered within the meaning of " Fee for Technical Services" as provided u/s 9(1) (vii) of the Act and/or the overriding provisions of the Double Taxation Avoidance Agreements. The aforesaid issue stands covered in favour of the assessee by the order of the Tribunal passed in the assessee's own case for Assessment Year 2006-07 (ITA No. 4813/Del/2010 & Assessment Year 2007-08 being ITA No. 6073/Del/2010). The Tribunal vide order dated 30/09/2019 passed in Assessment Year 2006-07 held that the payment made by the assessee to very same party i.e. M/s KEMA Quality BV Netherland cannot be brought to tax in India as "Fees for Technical Services" in accordance with India Netherland DTAA. In the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d analyzed scheme and had confirmed the addition made by the AO. He therefore disallowed ₹ 2,47,68,964/- [5,67,26,847 - 2,61,14,170 - (5843713/-)]. 17. Aggrieved by the order of AO, assessee carried the matter before the CIT(A), who following the order of his predecessor in assessee's own case for A.Y. 2008-09, upheld the action of the AO. Aggrieved by the order of CIT(A), assessee is now before us. 18. Before us, Learned AR reiterated the submissions made before the AO and CIT(A) and further submitted that against the order of CIT(A) for A.Y. 2008-09, assessee had carried the matter before the Tribunal. The Tribunal vide order dated 30.09.2019 in ITA No.4695/Del/2012 has decided the issue in favour of the assessee by holding that the provision made in respect of "Shahenshah Scheme" is on a scientific basis. He further submitted that the Co-ordinate Bench of Tribunal had deleted the similar additions made by AO in A.Y. 2007-08 & 2006-07. He pointed to the relevant findings in the synopsis filed by him. He therefore submitted that since the issue in the year under consideration is identical to that of earlier years, therefore following the order of tribunal in earlier years, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . He accordingly denied the claim of deduction u/s 80IC on such interest income. 23. Aggrieved by the order of AO, assessee carried the matter before the CIT(A) who upheld the order of AO. Aggrieved by the order of CIT(A), assessee is now before us. 24. Before us, Learned AR reiterated the submissions made before the lower authorities and further submitted that interest income was earned on the fixed deposits which was required to be maintained as per the statutory requirements of the respective state. He submitted that since the interest income was inextricably linked to the main business activity of the assessee, it should be considered to be treated as eligible for claiming deduction. In support of its claim for interest being eligible for deduction, he also relied on the decision of Hon'ble Delhi High Court in the case of PCIT vs. Bharat Sanchar Nigam Ltd. in ITA No.477/2016 dated 01.08.2016 and the decision of ITAT in the case of M/s. NHPC Ltd vs. ACIT in ITA No.3738/Del/2015 in order dated 08.05.2019. 25. Learned DR on the other hand supported the order of lower authorities. 26. We have heard the rival submissions and perused all the materials available on record. The iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is now before us. 31. Before us, Learned AR submitted that identical issue arose in assessee's own case in A.Y. 2008-09, wherein on identical facts, when the claim was made without filing the revised return of income, the Co-ordinate Bench of Tribunal has allowed the deduction. He pointed to the relevant findings noted in the synopsis. He submitted that since the facts of the case in the year under consideration are identical to that of A.Y. 2008-09, therefore following the order for AY 2008-09, the claim of the assessee are allowed. 32. Learned DR on the other hand supported the order of lower authorities. 33. We have heard the rival submissions and perused all the materials available on record. The issue in the present grounds is with respect to the claim of deduction on account of education cess and secondary and higher education cess. 34. It is an undisputed fact that the claim of deduction was not made in the return of income nor any revised return of income was filed for claiming the deduction. The claim of deduction was made before the AO during the course of assessment proceedings. We find that identical issue arose in assessee's own case in A.Y. 2008-09 wherein the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of ₹ 1,57,80,709/-. 37. During the course of assessment proceedings, assessee claimed that the interest expenses capitalized in respect of land of Greater Noida amounting to ₹ 20,72,556/-, interest in respect of land of Neemrana to RICCO amounting to ₹ 50,69,120/- and interest of ₹ 82,39,033/- paid to Canara Bank in respect of Neemrana Plant aggregate interest being ₹ 1,57,80,709/- which has been capitalized be allowed as a revenue expenditure. To justify the claim of expenditure as revenue expenses it was submitted that the interest has been paid for the expansion of existing business activities of the assessee which was already being carried out at other units. It was further submitted that since there was a complete unity, interlacing, inter dependence and inter connection of management, financial, administrative and production aspects amongst all division of each unit and amongst all units of the business as a whole, the expenditure incurred in connection with the new unit is deductible. It was further submitted that proviso of section 36(1)(iii) was not applicable in assessee's case. The interest has been paid for extension of existing business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the course of assessment proceedings, the AO had asked for a specific query regarding the pre-operative expenditure of ₹ 4,30,88,908/- incurred for setting up the manufacturing unit at Neemrana and it was submitted that it was for the expansion of the business and not for Extension of the business and the AO had allowed the expenses without invoking the provision of Section 35D of the Act. He further submitted that Hon'ble Delhi High Court in assessee's own case for A.Y. 2005-06 are held that where there were intermingling and interlacing of the funds of the units and common management, then all the business constituted the same or single business and expenditure incurred by the assessee on new unit would be considered as expenditure in respect of an expansion of the existing business. He further submitted that pre-amended proviso to Section 36(1)(iii) shall be applicable to the relevant assessment year in question (prior to its amendment by Financial Act, 2015) as amended Proviso will not be applicable retrospectively. He therefore submitted that the assessee be allowed the claim of deduction. 39. Learned DR on the other hand pointed to the findings of CIT(A) and submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4,78,20,606/-. For benchmarking of aforesaid international transactions, Assessee had applied Transactional Net Margin Method (TNMM) by considering itself to be the tested party and operating profit to operating cost (OP/OC) as the Profit Level Indicator ('PLI'). Assessee considered three comparable companies namely Hartron Informatics Ltd. (with OP/OC of 12.05%), Escorts Asset Management Ltd. (with OP/OC of 1.22%) and Mecklai Financial and Commercial Services Ltd. (with OP/OC of 9.82%) as comparable companies and the average operating profit margin of those comparable companies was worked out at ₹ 7.70%. Since the profit margin of the assessee was at 5.01%, which was within the arm's length range of +/- 5% of the average operating profit margin of the comparable companies at 7.70%, Assessee considered the international transaction of provision of services to be at arm's length. During the proceeding before the TPO, TPO disregarded the benchmarking analysis undertaken by the appellant and rejected the comparable companies considered by the assessee. He thereafter arrived at the following set of five comparable companies with an average operating profit margin @ 17.97% : Sr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed pharmaceutical products and therefore it is functionally different with the assessee company and therefore cannot be considered to be a comparable company. He further pointed out that during the year extra-ordinary events in the form of exclusion of Minrand International Inc. and RxElite Holdings Inc. had taken place in Piramal Enterprises Ltd. to enhance its presence in the Inhalation anesthetics segment. He therefore, relying on the decision rendered by Hon'ble Delhi High Court and Delhi Tribunal submitted that companies having extraordinary income has to be excluded. He therefore, submitted that since the comparable company is functionally not comparable to the assessee therefore it should not have been considered as a comparable company. He in the alternative submitted that the matter may be remitted to the TPO with a direction to him to share the financial details which has been relied upon by him. 47. With respect to WAPCOS Ltd., he submitted that is functionally dissimilar to the company as it is engaged in the high-end consultancy and works on engineering projects. The segment of the company is functionally not comparable as it undertakes high-end technical services as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd that it is a Govt. India undertaking and undertaking highend technical consultancy services like rural electrification, Water harvesting, low cost Sanitation, lakes and wetlands etc. it is also engaged in independent review and monitoring agency for projects in Rajasthan and West Bengal and it provides supervision for construction/ up gradation of Rural roads under Pradhan Mantri Gram Sadak Yojana. Considering the functions undertaken by it, we are of the view that the functions performed by it are not comparable to the assessee company which is engaged in providing basic business support services and therefore we are of the view that it cannot be considered to be a comparable company. We further find that Co-ordinate Bench of Tribunal in the case of Worley Parsons India Pvt. Ltd. (supra) has noted that public sector undertakings are not driven by profit motive alone but other considerations such as discharge of social obligations etc also weigh and hence they cannot be considered as comparable to the private companies. Considering the totality of the aforesaid facts and relying on the aforesaid decision of Worley Parsons (supra) we hold that WAPCOS Ltd. cannot be considered to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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