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TMI Blog2023 (5) TMI 1220X X X X Extracts X X X X X X X X Extracts X X X X ..... dentical to the year with the appeal following the same, he allowed relief on this issue also to the assessee - HELD THAT:- The principle of res judicata are not applicable in the income tax proceedings and, therefore, as a quasi-judicial authority, the ld. CIT(A) should have examined the facts for this year and then compared them with the facts in a definite manner as appearing in the Pune Tribunal s decision which was relied on by him. Such exercise has not been done as is evident in his order. On the contrary, it is evident from the order of the AO that after considering the submissions filed by the assessee, he has categorically stated why disallowance u/s. 14A is warranted in this case and that he was not satisfied with the calculation of the assessee. It is clearly evident that the AO has recorded his reasons and satisfaction specifically in his order while addressing this issue and invoking sec.14A r.w.r. 8D. Decided in favour of revenue. TP adjustment - Allocation of certain corporate expenses to the 80IC unit at Roorkee - HELD THAT:- Admittedly, in this case, the allocation of corporate expenses was done for both the units on the basis of sale for the year under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) has erred in deleting the allowances made u/s 14A of the Act by relying upon the decision of the Hon'ble ITAT, Pune wherein the Hon'ble Tribunal held that, no satisfaction has been recorded by the assessing officer as per requirement of Rule 8D, ignoring the fact that the necessary satisfaction as mandated under Sec 14A(2) of the Act has been drawn by the AO in the present case. 2(b) Whether on the facts and circumstances of the case, the Ld.CIT(A) is correct by relying upon the decision of the Hon'ble ITAT, Pune where in the Hon'ble Tribunal held that holding that the mandatory requirement of recording satisfaction is not fulfilled in terms of law explained by the Hon'ble jurisdiction High court in the case of Pr. Commissioner of Income Tax Vs. Reliance Capital Asset management Ltd. reported as 86 taxmann.com 200? 3(a) Whether on the facts and in circumstances of the case, Ld. CIT(A) was justified in allowing the appeal of the assessee by deleting the transfer pricing adjustment in the transaction of allocation of common expenses to the manufacturing unit in Roorkee for which the assessee is claiming deduction u/s 80IC of the Act and in concluding t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the profits of Rs. 1,18,08,92,057/- of the eligible business undertaking. It was observed by the AO from the computation of the quantum of this eligible deduction u/s. 80IC that the assessee has also included scrap of sale of Rs. 7,38,53,684/-. The written explanation was asked from the assessee, which was duly complied with and which forms part of the assessment order. After considering the submission of the assessee, the AO held that as per the provision of sec.80IC, the assessee is entitled to deduction of 100% of profits and gains derived from an industrial undertaking which is engaged in manufacture or production of articles or things. It was further concluded that the words derived from have a definite but a narrow meaning and it cannot be given a flexible or wider concept. As per the AO, the words derived from have restricted domain as against the words attributable to which have a wide import. For the purpose of deduction u/s. 80IC, only direct profits arising from sale of goods manufactured from the eligible business undertaking can be considered. Therefore, the AO interpreting the words derived from observed that only direct profit arising from the sale of manu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore the Bench. 5.1 The AO had subtracted the value for the sale of scrap while calculating the deduction u/s. 80IC of the Act for the reason that, according to the AO, the words derived from pertains to sale of the goods manufactured in the eligible unit and scrap sales are not byproduct of the assessee. For this proposition, he had relied upon certain judicial pronouncements which are on record as appearing in his order. Thereafter, ld. CIT(A), allowed this issue in favour of the assessee placing reliance on the order of the Pune Tribunal (supra). We observe that the same issue had come up before the Pune Tribunal for A.Y. 2016-17 and there also, by placing reliance on the earlier decision of Pune Tribunal in assessee s own case in ITA No.593 to 596/PUN/2016 (supra), the Tribunal had provided the relief to the assessee. The ld.DR also, on principle, conceded that the issue is covered in favour of the assessee. He was unable to demonstrate any contradicting facts with those already on record nor could furnish any judgment of higher forum favouring the Revenue on this issue. With these facts and circumstances, we are of the considered view that as per principle of consistency ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion or not while invoking s.14A r.w.r. 8D. The principle of res judicata are not applicable in the income tax proceedings and, therefore, as a quasi-judicial authority, the ld. CIT(A) should have examined the facts for this year and then compared them with the facts in a definite manner as appearing in the Pune Tribunal s decision which was relied on by him. Such exercise has not been done as is evident in his order. On the contrary, it is evident from the order of the AO that after considering the submissions filed by the assessee, he has categorically stated why disallowance u/s. 14A is warranted in this case and that he was not satisfied with the calculation of the assessee. It is clearly evident that the AO has recorded his reasons and satisfaction specifically in his order while addressing this issue and invoking sec.14A r.w.r. 8D. The relevant paragraphs are extracted as follows:- (i) Since the assessee has not categorized the expenses incurred for earning tax free income, the only way is to calculate the expenses as per Rule 8D of LT. Rules 1961. (ii) The applicability of Rule 8D in determining the expenses incurred for earning tax free income has been upheld by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accordance with law. In this connection, the provisions of sub-section (2) or(3)of s.14A inserted by the Finance Act, 2006 deserve to be noted . In another case of Dag Capital Management Ltd., the Hon'ble ITAT, Mumbai has been held that section 14A is a special provision which deals with disallowance of expenditure incurred by assessee in relation to income which does not form part of total income under the Act and thus, in view of specific provisions of section 14A, expenses falling under any head or section which are otherwise deductible as business expenditure or under other respective heads, would call for disallowance to extent to which those expenses have been incurred in relation to income exempt from tax. Therefore, in view of provisions of section 14A read with rule 8D and considering the facts of the case, I am not satisfied with calculation of the assessee .. In these facts and circumstances, we are inconformity with the submissions of the ld.DR and accordingly, grounds No.2 including (a) (b) of the Revenue are allowed. 11. Ground No.3 pertains to the transfer pricing adjustment. The TPO has discussed the issue in page No.5 at para 6 onwards of h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ors. This is overall profitability of Company. The profitability of Roorkee unit is higher due to excise exemption as explained above. 5. With reference to paragraph 5, it is humbly submitted that total expenses of 434.76 crores are expenses for company as whole and not for corporate expenses alone. The turnover of other plants (other than Roorkee) is Rs.1291.73 crores (Rs.2270.68 - Rs.978.94 crores) (Net of excise duty). The expenses of other plants also need to be considered and reduced from Rs. 434.76 crores to arrive at appropriate corporate expenses. The corporate expenses need to be allocated to all the plants. The details of direct expenses corporate expenses is enclosed. From the above explanation of the assessee it can be seen that the assessee has not given any explanation as to why the markup @ 7.48% should not be charged on the cost allocated to Roorkee unit. In fact, during the course of hearing, it was explained by the assessee that in the interunit transfers, 10% markup is added as per Rule 8 of Excise Valuation Rules, 2000. However, the assessee has failed to show that the cost allocated of Rs.34,31,87,513/- includes the markup. The common cost incurred ..... X X X X Extracts X X X X X X X X Extracts X X X X
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