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TMI Blog2023 (1) TMI 473X X X X Extracts X X X X X X X X Extracts X X X X ..... issue of the notional gain on the fair valuation of investments in Corporate Debt Bonds. Ground Nos. 1 and 7 are general in nature. Ground Nos. 5 & 6 are against the consequential interest. 4. In regard to Ground No. 4 of appeal, regarding deduction of notional gain on fair valuation of investments, it was fairly agreed by ld. AR that inadvertently, the assessee has credited notional income. It was the submission that though this was not claimed in the return of income, the issue had been submitted before the Assessing Officer and the Dispute Resolution Panel (DRP). It was the submission that the DRP and AO on the ground that the revised return had not been filed, applied the principles laid down by the Hon'ble Supreme Court in the case of Goetze (India) Ltd. vs CIT, 284 ITR 323 (SC) and rejected the claim of the assessee. It was fairly agreed by both the sides that in view of the principles laid down by the Hon'ble Supreme Court in the case Goetze (India) Ltd. (supra), the Appellate Tribunal being the appellate authority did have the power to restore the issue to the file of the Assessing officer with the direction to consider the claim of the assessee though the revised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal has been filed against the decision of the Hon'ble Jurisdictional High Court of Orissa in the case of the assessee in respect of allowability of the deduction u/s. 80IA. It was the submission that the DRP had specifically given direction that if no appeal has been filed, the same has attained finality in assessee's case, deduction u/s. 80IA was to be allowed subject to the DRP direction in the subsequent paragraph in respect of factual matrix of the case. It was the submission that the Assessing Officer has violated the provisions of section 144C(10) and (13) of the Act insofar as the Assessing Officer has not followed the direction of the DRP. It was the submission that no appeal has been filed by the Revenue against the order of the Hon'ble Jurisdictional High Court of Orissa in the case of the assessee and as the Co-ordinate Bench of this Tribunal has already held the issue of deduction u/s. 80-IA in favour of the assessee for the assessment year 2006-07, the assessee is entitled to the deduction u/s. 80-IA for the impugned assessment i.e. 2018-19. It was the further submission by ld. AR that the CBDT vide its circular No. F.178/28/2001-ITA-I dated 3.10.2001 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order need not be accepted: i.) The Hon'ble Delhi IT AT in the case of Boettcher India (P.) Ltd. vs. ACIT (86 taxmann.com 229) held as under in para-5 as under: "5. We have heard the rival submissions and have perused the material on record. It is undisputed and apparent from the directions of the Hon'ble DRP that the Hon'ble DRP in page 3 of its directions dated 23.08.2016 had directed the TPO to calculate the ALP by restricting the adjustment to the international transaction and also allowing credit of amount of Rs. 3698683/- already added back by the assessee in the computation of taxable income. It is very much evident that while passing the order subsequent to the directions of the Hon'ble DRP, the AO has not followed the directions of the Hon'ble DRP in this regard and has proceeded to calculate the ALP by applying the entity level turnover. Therefore, we deem it fit to restore this issue to the file of the TPO/AO for giving effect to the directions of the Hon'ble DRP in a proper manner after verification and after affording due opportunity to the assessee to present its case. Accordingly, ground no. 6 and 8 of the assessee's appeal stand allow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19.01 Spry Resources ltd 33.25 33.25 33.25 Ajet Infotech Ltd. 25.60 Rejected as per DRP Rejected as per DRP Arithmatic mean 27.98 23.82 21.06 Accordingly, we direct the AO to examine the working given by the assessee and if such a work is found to be correct, then he shall adopt the correct operating profits for both the comparables and then include the same in the list of comparables with the corrected margin to work out the average profit margin to benchmark the ALP." iii.) The Hon'ble Kolkata ITAT in the case of Dongfang Electric (India) (P.) Ltd. (116 taxmann.com 441 (one of the co-authors is the Vice-president Shri P M Jagtap) held in para-6 as under: "6. The ld. Counsel for the assessee has contended that the aforesaid direction specifically given by the DRP for allowing the working capital adjustment, however, is not followed by the TPO while re-computing the quantum of Transfer Pricing Adjustment and this position clearly evident from the order of the TPO dated 20.08.2017 passed under section 92CA(3) read with section 144C(5) [pages 468 to 470 of the paper book] is not disputed even by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot support the case of the revenue. In the present case, the assessee company by filing rectification application before the A.O. had conceded that not allowing the deduction u/s. 80IA was just a mistake apparent from the records. d) The Hon'ble DRP has itself held in para-3.S on page-4 of its order that deduction u/s. 80IA wilt be allowed subject to DRP's directions in the subsequent paragraphs on the related transfer pricing adjustment and fulfillment of conditions laid down in the said section in terms of factual matrix. Thus the TPOI A.O. were directed to allow deduction u/s. 80IA on fulfillment of conditions as laid down in said section. The Hon'ble DRP held in para-4.3 on page-6 of its order that supply of power by SEB to a manufacturing unit was a transaction between a power destitution entity and consumer involving distribution expenses whereas supply of power by the CPP to the same unit was a transaction between a power generation unit and the consumer. Hence these two transactions could not be compared in terms of Rule 10B(3) of Income Tax Rules. It was further held that most appropriate comparable in this case would be price charged by the CPP (as a power g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was of the opinion that the sugarcane grown at home would be deemed to have been sold to the sugar mill at the same rate at which sugar cane was purchased by the sugar mill. That obviously is correct because if the sugarcane grown at home had not been sold to the sugar mill of the assessee itself, the sugarcane would have been sold in the open market. The rate of sale in the open market would be the same at which sugarcane was purchased by the sugar mill of the assessee. But in the case before us the electricity generated by the assessee could not be sold to anyone other than a distribution company or a company which is engaged both in generation and distribution. The rate at which electricity could have been sold to any such company is not the same at which such companies sale electricity to the consumers. The rate at which electricity can be supplied to a consumer by the distribution licensee and the rate at which the generating companies can sell electricity to the distribution Iicensee are governed respectively by Sections 61 and 62 of the Electricity Act 2003. There is tariff regulatory commission which fixes both the rates for sale and purchase of electricity by the distrib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... & Industries Ltd. [2013] 219 Taxman 35(Mag.)/35 taxmann.com 566 (Calcutta) to which one of us was a party (Girish Chandra Gupta, J.). That judgment was rendered on concession. Therefore, that judgment also does not constitute a precedent. 22. The Last submission, advanced by Mr. Khaitan that this point was not taken by the appellant, has not impressed us. The point is certainly involved in the appeal because the CIT(A) reversed the finding of the assessing officer that the rate at which electricity was supplied by the Andhra Pradesh State Electricity Board "cannot be taken as the market rate within the meaning of Section 80-IA". The learned Tribunal has upheld that finding. The revenue is in appeal. The decision to reverse the finding is based on a wrong determination of a substantial question of law and is therefore amenable under Sub-Section (6) of Section 260A of the I.T. Act, 1961. Moreover when this Court is satisfied that the case involves the aforesaid question, it has a corresponding duty to decide the same. 23. Reference in this regard may also be made to the proviso to Sub-section of Section 260A of the I.T. Act. The assessee, in such a case is entitled to notice that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erty has been granted to the Assessing Officer to withdraw the deduction granted u/s. 80IA, if and when the Hon'ble Supreme Court adjudicated on the issue of said deduction u/s. 80IA in the case SLP filed in the case of Alembic Ltd., should the issue be held against the assessee. Nowhere, either the Hon'ble Jurisdictional High Court or the Co-ordinate Bench of this Tribunal held that the deduction allowable u/s. 80IA is to await the decision of the Hon'ble Supreme Court in the SLP filed in the case of Alembic Ltd. Thus, the interpretation taken by the Assessing Officer that the deduction allowed u/s. 80IA is to be kept alive to await the decision of the Hon'ble Supreme Court in the case of Alembic Ltd. is erroneous. In these circumstances, the Assessing Officer is directed to grant the assessee the benefit of deduction u/s. 80IA of the Act as claimed. Ground No. 3 of the assessee stands allowed. 8. In regard to Ground No. 2 i.e. being the transfer pricing issue, it was submitted by ld. AR that the Assessing Officer had applied the State Electricity Board rate of Rs. 2.63 per unit as against Rs. 3.83 per unit applied by the assessee. It was the submission that the q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said question of law also stands answered in favour of the assessee. It was the submission that consequently, the rate adopted by the assessee being the rate at which the consumer purchases the power from the State Electricity Board was to be considered. It was further submitted that in para 4.5 of the order of the DRP, the DRP has also directed that the Assessing Officer was to verify whether the issue was available in the SLP filed before the Hon'ble Supreme Court in the case of Alembic Limited. It was the submission that the issue of transfer pricing was not an issue in the case of Alembic Limited and consequently this direction of the DRP itself is erroneous. It was the further submission that consequent to the direction of the DRP, the interpretation as done by the AO while giving effect to the order of the DRP on the issue was also erroneous. It was the submission that the addition as made by the AO is liable to be deleted. 9. In reply, ld. CIT DR drew our attention to the decision of the Hon'ble High Court of Calcutta in the case of CIT vs ITC Ltd., (2015) 64 taxmann.com 214 (Calcutta), wherein in para 18, it has been categorically held that the benefit can only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ible for the benefit of deduction u/s. 80IA and in the case of captive power unit also, the provisions of law is the same. The word used are 'generation' or 'generation and distribution of power'. On perusal of the decision of Hon'ble High Court of Calcutta in the case of ITC Ltd. (supra) referred by ld. CIT DR, shows that the said decision has been rendered in the case of an assessee which is generating power. The Hon'ble High Court of Calcutta itself recognizes in para 18 that there are different limbs. It is from the words "there is thus an in-built mechanism to ensure permissible profit both to the generating companies and the distribution licenses". 11. A perusal of provisions of section 80-IA(4) clearly shows that the provision is available to both the undertakings which is doing the business of generating of electricity as also to an undertaking which is in the business of generating and distributing of electricity. A perusal of the facts of the assessee's case clearly shows that 95% of the assessee's power generation has been sold to Tata Steel Limited. Thus, clearly, the assessee is not only generating but also distributing the power. There ..... 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