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TMI Blog2023 (2) TMI 1268X X X X Extracts X X X X X X X X Extracts X X X X ..... ch payments were through banking channels along with the relevant extract of the bank statement of the Appellant exhibiting the aforesaid payments. AO is directed to obtain the bank statement of M/s Gupta Suppliers Company for the relevant period, and/or from the concerned bank by exercising powers as per the provisions of the Act including Section 133(6) of the Act; In case the cash withdrawals made by M/s Gupta Suppliers Company from the aforesaid bank account are sufficient to account for deposit of cash made by M/s Gupta Suppliers Company into the account of the Appellant, then the AO is directed to delete the addition u/s 68 to the extent of such cash withdrawals and as regards, the balance amount of addition made u/s 68 of the Act left (after deletion as aforesaid), if any, the Assessing Officer is directed to consider the details/documents furnished by the Appellant and gather such further information/documents from M/s Gupta Suppliers Company or any other source as it may deem fit, and decide the issue afresh as per law - Ground No. 3 raised by the Appellant is allowed for statistical purposes. Computation of Book Profits‟ as per Section 115JB - increase o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r clause (f) of Explanation 1 to Section 115JB(2) is to be made without resorting to the computation as contemplated under Section 14A of the Act read with Rule 8D of the Rules. Therefore, the Assessing Officer erred in adding to the Net Profits while computing 'Book Profits‟ under Section 115JB of the Act. Accordingly, we remand this issue back to the file of Assessing Officer for determining the amount of expenditure deductible to earning exempt dividend income which is to be added to the Net Profits while computing Book Profit as per Clause (f) of Explanation 1 to Section 115JB(2) of the Act having regard to the provisions contained in Section 14A the Act (without resorting to the computation as contemplated under Rule 8D of the Rules).Ground No. 6 allowed for statistical purposes. TP Adjustment - TPO concluded that the rate at which product was transferred by the Appellant's 80IB Unit to a non-80IB Unit was lower than the rate at which the same product were sold to third party/non-AEs sales in few cases, and therefore, proposed upward transfer pricing adjustment passed u/s 92CA(3) - HELD THAT:- Though the product has been sold to AEs at different prices on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctions of the DRP, has erred in law and on facts in disallowing a sum of Rs. 1,19,90,747/- u/s. 14A of the Act r.w.r. 8D of I.T. Rules while computing income under normal provisions of the Act. 6. The Assessing Officer, under the directions of the DRP, has erred in law and on facts in disallowing a sum of Rs. 1,19,90,747/- u/s. 14A of the Act r.w.r. 8D of IT. Rules while computing income u/s 115JB of the Act. 7. The Assessing Officer, under the directions of the DRP, has erred in law and on facts in making transfer pricing adjustment of Rs. 2,87,575/-. 8. The Assessing Officer has erred in law and on facts in levying interest u/s 234D of the Act. 3. Brief facts of the case are that the Appellant is a company engaged, inter alia, in the business of manufacturing menthol and essential oils for which the Appellant procures raw materials from farmers in Barabanki, Uttar Pradesh. The Appellant makes payments to farmers for raw material in cash either directly by itself or through agents. According to the Appellant, the aforesaid practice followed by the Appellant is normal business practice followed by the companies engaged in the business of manufacturing agri-p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12,60,50,000 10,96,19,326 01.03.2017 to 15.03.2017 9,75,50,000 11,20,79,490 16.03.2017 to 31.03.2017 10,02,00,000 11,19,75,362 6.2. The Assessing Officer noted that the Appellant had received cash of INR 1,98,42,000 from M/s Gupta Suppliers Company. In response to the query raised by the Assessing Officer in relation to the aforesaid cash deposit, the Appellant submitted that M/s Gupta Suppliers Company acted as an agent for procurement of raw material from the farmers. Just before demonetization funds were transferred through banking channels to M/s Gupta Suppliers Company for procurement of raw material and making payment in cash to large number of farmers from whom raw material was purchased in small quantities. Since the farmers did not have access to banking facilities the payment to such farmers was to be made in cash. This was a normal business practice being followed by the Appellant for a number of years just like other companies engaged in the manufacture of agri-products which were specifically covered un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In appellate proceedings before us the Learned Authorised Representative for the Appellant reiterated the submissions made before the Assessing Officer and the DRP. He vehemently contended that the Assessing Officer had failed to appreciate that the all the relevant details/documents including PAN of M/s Gupta Suppliers Company, ledger account maintained by the Appellant showing transactions with M/s Gupta Suppliers Company during the relevant previous year through normal banking channels, as well as the confirmation issued by M/s Gupta Suppliers Company, were furnished by the Appellant. The Appellant had thereby, discharge the initial onus cast upon the Appellant under Section 68 of the Act. Merely because notice issued under Section 133(6) of the Act were not complied with by M/s Gupta Suppliers Company, adverse inference cannot be drawn against the Appellant in view of the documents placed before the Assessing Officer by the Appellant. 6.4. Per contra, the Learned Departmental Representative relied upon the Draft Assessment Order, dated 29.09.2021, and the directions issued by DRP on 22.06.2022. He submitted that huge amount of cash of INR 1,98,42,000/- was deposited by M/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... zation period. Whereas, the Appellant has sought to explain the deposit of cash in the Appellant‟s bank account by M/s Gupta Suppliers Company as being money transferred to M/s Gupta Suppliers Company for purchase of raw material which was withdrawn by M/s Gupta Suppliers Company, but could not be used for making payments to farmers on account of demonetization and was, therefore, deposited back in the bank account of the Appellant. The Appellant has filed a confirmation issued on the letter head of M/s Gupta Suppliers Company (placed on page 58 of the paper-book) and is dated 19.11.2016. It has been signed by Authorised Signatory‟. However, the name and details of the authorized signatory are not stated therein. The notice issued by the Appellant under Section 133(6) of the Act has also not been complied with. Therefore, the confirmation letter does not inspire confidence. The confirmation states that cash has been withdrawn from bank out of funds transferred to M/s Gupta Suppliers Co. It also states that the same is being returned to the Appellant as M/s Gupta Suppliers Co can no longer hold this cash on account of demonetization. During the course of hearing, the Ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Appellant is allowed for statistical purposes. Ground No. 4 7. Ground No. 4 is directed against the increase of the Net Profits as per Profit Loss Statement of the Appellant by INR 1,98,42,000/, being addition made under Section 68 of the Act, for computing Book Profit‟ under Section 115JB of the Act. 7.1. We have remitted the issue related to addition of INR 1,98,42,000/- made under Section 68 of the Act while computing income under normal provisions of the Act back to file of the Assessing Officer with directions in paragraph 6.6 above while disposing off Ground No.3. The issue raised in Ground No. 4 relating to computation of Book Profits‟ as per Section 115JB of the Act. We note that the transactions related to deposit of cash of INR 1,98,42,000/- is recorded in the books of accounts of the Appellant. The accounts prepared by the Appellant have been certified by the Auditor as having been prepared in compliance with the provisions of the Companies Act, 2013. Once the accounts including the profit and loss account are certified by the authorities under the Companies Act it is not open to the Assessing Officer to contend that the Profit And Loss Accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her, he submitted that in view of the decision of the Special Bench of the Tribunal in the case of Assistant Commissioner of Income Tax - Circle 17(1), New Delhi vs. Vireet Investment Private Limited: [2017] 188 TTJ 1 (Delhi - Trib.) (SB), only income yielding exempt income are to be considered while computing disallowance in terms of Section 14A of the Act read with Rule 8D of the Rules. 8.3. Per contra, Ld. Departmental Representative relied upon the Draft Assessment Order and the directions issued by the DRP on this issue. The Learned Departmental Representative relied upon the amendments to Section 14A introduced by the Finance Act 2022, and submitted that the law stands amended retrospectively and therefore, the provisions contained in Section 14A of the Act are now to be interpreted taking into account the Explanation inserted by the Finance Act 2022, and therefore, the deduction under Section 14A of the Act cannot be restricted to the amount of exempt income. 8.4. In response, the Learned Authorised Representative for Appellant relied upon the decision of the Hon‟ble Delhi High Court in the case of Principal Commissioner of Income-Tax (Central) -2 Vs. M/s Era Inf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act. Accordingly, we remand this issue back to the file of Assessing Officer for determining the amount of expenditure deductible to earning exempt dividend income of INR 96,031/- which is to be added to the Net Profits while computing Book Profit as per Clause (f) of Explanation 1 to Section 115JB(2) of the Act having regard to the provisions contained in Section 14A the Act (without resorting to the computation as contemplated under Rule 8D of the Rules). Accordingly, in terms of the aforesaid, Ground No. 6 raised by the Appellant is allowed for statistical purposes. Ground No. 7 10. Ground No. 7 pertains to making transfer pricing adjustment of INR 2,87,575/-. 10.1 The relevant facts for adjudication of the issue under consideration are that as per Form 3CEB, the Appellant had Units eligible for deduction under Section 80IB of the Act (hereinafter referred to as 80IB Units‟) which have entered into specified domestic transactions Non-Section 80IB Units during previous year 2016-17 relevant to the Assessment Year 2017-18. For determining ALP of the specified domestic transaction of sale of Chocolate of INR 1,21,92,676/- by Choco Bari Brahmana, one of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re DRP it was contended by on behalf of the Appellant that the benchmarking exercise carried out by the TPO is incorrect as the TPO had chosen to consider highest price for that particular product prevailing on date of transaction, instead of adopting weekly average of benchmark external prices. Placing on record a sheet containing the details of sales made by the Appellant to Associated Enterprises (AEs) and Non-AEs, he submitted that the TPO has ignored the transactions where difference in the rates were favourable to the Appellant while making the transfer pricing adjustment. 10.4 Per contra, Ld. Departmental Representative supported the order passed by TPO and submitted that Appellant had failed to provide any reason for adopting weekly average either before the TPO or before DRP. She submitted that under CUP method selected by the Appellant each transaction is to be considered separately and therefore, the TPO was justified in taking the adopting the highest price for the particular product prevailing on date of transaction. 10.5 We have heard the rival contentions and perused the material on record. The grievance of the Appellant is that the TPO has, while computing the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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