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TMI Blog2024 (4) TMI 451X X X X Extracts X X X X X X X X Extracts X X X X ..... the return of income on 28.09.2016 declaring loss of Rs. 1,65,90,818/- which was subsequently revised on 30.11.2016 at a loss of Rs. 90,47,202/-. The case was taken up for scrutiny and in view of reported international transactions and "specified domestic transactions" with the AEs, and the case was referred to the Transfer Pricing Officer (TPO) for determination of arm's length price of such transactions. The Ld.TPO passed the order u/s 92CA (3) of the Act on 31.10.2019 wherein adjustment u/s 92CA of the Income Tax Act, of Rs. 3,28,72,48,398/- was proposed which included adjustment to purchase cost of land development rights of Rs. 3,22,42,75,788/- and adjustment of interest paid to AEs on CCD / OCD of Rs. 6,29,72,610/-. 2.1 The Ld.AO passed the Draft Order u/s 143(3) r.w.s. 144C of the Act, on 25.12.2019 wherein the income of the appellant company was proposed to be assessed at a total income of Rs. 3,28,59,57,780/- as against returned loss of Rs. 90,47,202/-, thereby proposing an addition of Rs. 3,28,59,57,780/-. The appellant informed the AO that it was not filing objection against the draft order before the Dispute Resolution panel ('DRP') and intends agitating the same in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k to determine arm's length price of the transaction. 4. That in any case, the Ld. CIT(A) was not justified in upholding 10% reduction in the arm's length price determined on the basis of circle rate without assigning any valid basis or justification. 5. That on the facts and circumstances of the case, Ld. CIT(A) erred in not allowing the benefit of tolerance/ Safe Harbour Limit of 5%/10% as per the amended provisions of section 92C which is of clarificatory and retrospective nature and duly supported from various judicial precedents. B. Disallowance of Business Expenditure 6.1 That on the facts and circumstances of the case, Ld. CIT(A) erred in upholding the disallowance of business expenditure amounting to Rs 75,48,006 on the alleged ground that these expenses have not been incurred wholly and exclusively for the purpose of business of the appellant company. 6.2 That the expenses were incurred wholly and exclusively for the purpose of business and same being fully supported from relevant bills and vouchers, the disallowance is without proper opportunity and appreciation of facts of the case. 7. That the appellant company craves leave to add, alter, amend, substitu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red into an Agreement with DLF Home Developers Ltd. on 21.12.2015 for purchase of irrevocable, absolute and unfettered rights in respect of land parcel measuring 19.06 acres (77,133.0754 square meters) situated at Shivaji Marg, Moti Nagar, New Delhi for development of planned residential project at Shivaji Marg. On the basis of Valuation Report dated 28.08.2015 of M/s Cushman Wakefield (C&W) (here in after refered as 'Valuer' ) for valuing the project, the land of the project was valued at Rs. 27831 Million rupees. The valuation was made on two methods:- (a) Sales Comparable Method = 27803 Million Rupees (b) Discounted Cashflow Method = 27859 Million Rupees Average of (a) & (b) = 27831 Million Rupees" 3.2 The total consideration Rs. 925 Cr. is agreed / paid for Purchase of Development Rights of land as under:- Particulars Consideration (Rs. in crores) Remarks Fixed monetary consideration 462.50 Paid Variable consideration based on % of realization 462.50 Future Total 925.00 4. The Revenue is defending the case of TPO who had rejected this valuation report and proposed to apply circle rate for benchmarking this transaction of purchase of devel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon following judicial decisions wherein also it has been held that since clause (i) of section 92BA has been omitted by Finance Act, 2017 with effect from 01-04-2017 without any saving clause of General Clauses Act thereby meaning that the said clause never existed in the statute book and thus Transfer Pricing reference and impugned proceedings become invalid in law even for the earlier assessment years. * Cauvery Aqua Private vs. DCIT (ITA No.2021/Bang/2019) (ITAT Bangalore) * Sobha City us ACIT (IT AppealNo.2936 (Bangalore) of 2018) * Ammann India (P.) Ltd us ACIT, ITA No. 2262 of 2018 (ITAT, Ahmedabad) * Raipur Steel Casting India Ltd. vs. PCIT (ITA Nos.895, 1035 (Kol) of 2019) (ITAT Kolkata) * Bhartia-SMSIL (JV) vs ITO (ITA No. 117/Gau/2019 7. However, the Ld. CIT(A) was not satisfied with the plea and dismissed this additional ground with following relevant findings; "9.4 Law is very clear and unambiguous that the relevant amendment has been made in section 92BA by Finance Act, 2017 with effect from 01.04.2017. The impugned transaction had taken place in FY 2015-16. In view of unambiguous provision of law, clearly, the omission of clause (i) to section 92BA is e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... retrospectively upset. 9.7 Thus, the Hon'ble Supreme Court has always followed the legal principle "lexprospicit non respicit" i.e. law in hand always looks forward and not towards the back. The essence of this principle is that the legislation which modified certain existing position is to be considered as of prospective nature and not of retrospective unless the legislation was clearly removing the one which was in existence from retrospective effect. 9.8 It is further observed that the issue has not become final as Hon'ble Supreme Court has admitted SLP on this issue against the Hon'ble High Court of Karnataka decision in the case of PCIT vs M/S Texport Overseas Pvt. Ltd. in its order dated 20.11.2020 in SLP No. 15296/2020. 9.9 It is pertinent to note that the appellant has taken this ground as an additional ground for the first time during appellate proceedings vide a letter filed on 26.10.2021. This ground was never taken at the time of filing appeal. In fact, the appellant had never raised this issue during assessment. The impugned assessment order was passed on 14.02.2020. It is observed that the leading case on this issue Texport Overseas Private Limited vs DCIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d is justified? 3. Whether for benchmarking of transaction of purchase of development rights in land, the Circle rates are most appropriate method of valuation?" 9. As with regard to the first issue, Ld. CIT(A) observed as follows; "10. In ground no. 2, the appellant has challenged the transfer pricing adjustment made in respect of payment for development rights on the ground that the same is shown as part of inventory i.e. capitalised in the books and not debited to the P&L account. 10.1 It has been contended that the transaction of payment in respect of development rights in land had been capitalized in the books of accounts in the relevant F.Y. and was not debited to the profit and loss account and as there is no impact on the taxable income, therefore, the provisions of section 92 of the Act are not triggered. It has been submitted that the acquisition of capital assets cannot be considered as an expenditure u/s 40A(2)(b) requiring disallowance. Reliance has been placed on the decision in the case of HDFC Bank Ltd Vs CIT [Writ petition No. 462 of 2017] wherein it was held that consideration paid for purchasing an asset would not mean that it is an 'expenditure' as an ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, the appellant cannot take a contrary position subsequently. 10.4 The reliance of the appellant on HDFC Bank; Vodafone India and Shell India cases is misplaced as the transaction in those cases was purely of capital in nature. In HDFC Bank (supra) case, the issue involved purchase of loans of another AE which was a capital transaction. In Vodafone India (supra) and Shell India (supra) cases, the issue was raising of share capital which is always capital in nature. In these cases, the transaction was only taken to the balance sheet and was never to be debited in the P&L account. The facts of the present case are clearly distinguishable. The arguments of the appellant could be considered if the appellant had not been a real estate developer and had purchased land/rights as a capital asset e.g. for setting up a plant or office etc. which is not the case here. 10.5 In view of above, ground no. 2 is dismissed." 10. As with regard to the second issue of justification of the valuation made by M/s Cushman & Wakefield, the Ld. CIT(A) has held as follows; "11. The appellant has submitted that the JV partner M/s Reco Greens Pte Ltd ('RGPL') appointed M/s Cushman & Wakefield, Intern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The valuation report cannot be accepted merely because the valuer is stated to be an independent organisation of international repute. The TPO has not questioned the reputation of the valuer but the method of the valuation made. 11.6 In view of the above, it is concluded that the TPO has rightly rejected the valuation made by M/s Cushman & Wakefield. The argument is rejected. Investment made by RGPL, a Singapore Government company, based on the valuation made by Cushman & Wakefield 12. The appellant has contended that RGPL (51% partner in the JV), a Singapore Government entity, has made investment based on the valuation made by Cushman & Wakefield and therefore, the transaction of purchase of development rights should be treated at arm's length. 12.1 It is submitted that the appellant company, a wholly owned subsidiary of DLF Home Developers Ltd. (DHDL), incorporated with the main object to engage in the business of construction, development, and sale of integrated townships and residential complexes, approached many investors for evincing interest in developing a project in Moti Nagar situated in New Delhi. Thereupon, Singapore government through its arm M/s Reco Greens ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue, the Ld. CIT(A) has sustained the bench marking of the alleged specified transaction on the Circle rate by following relevant observations: "13. It has been contended that the circle rate cannot be considered as market rate and cannot be adopted as arm's length price disregarding the valuation made by Cushman & Wakefield. 13.1 It has been submitted that the limited and the sole purpose of notifying minimum rate (circle rate) is to collect stamp duty by the state government which cannot be used as a benchmark to ascertain the commercial value or the market value of the immovable property; the purpose of specifying this minimum circle rate is to indicate the minimum value at which the property should be valued in a particular area for the purpose of collection of stamp duty; the commercial value of a property can still be higher than the minimum rate or circle rate depending upon various factors. Reliance in this regard has been placed on Hon'ble Delhi High Court decision in case of GoVt of NCT of Delhi Collector of Stamps vs CTA Apparels Ltd (LPA No 278 of 2019) wherein it has been held that circle rate is only a guidance for the Registering Authority to, at best, mechanicall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or assessed or assessable for stamp duty purposes will be deemed as full value of consideration. Circle rate is notified by the State Government in respect of each area and it is on this rate that the Registering Authority values the property for the purpose of levy of stamp duty. Circle rates vary from locality to locality. They are revised from time to time by the State Government, to keep the value close to the existing market value of property in a particular area. Therefore, the argument of the appellant that 'circle rate' is not recognised in the Income Tax Law is incorrect. 13.3 The case laws relied upon by the appellant are for the purpose of levy of stamp duty (GNCT Delhi), award of compensation on acquisition of land (Lal Chand and Savitri Devi cases). Therefore, the issue in those cases was totally different than the issue at hand which is determination of arm's length price/market value of the development rights in land. It is observed that the valuation by the Stamp Duty Authority based on circle rate notified by a State Government gives a good guidance for the purpose of adopting the same as market value for determining arm's length price of the transaction for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ropriate benchmark. Therefore, basis above facts, cost of purchase Of development rights 'is restricted to the value of land under consideration i.e. the circle rate as per area of land. 8. The Assessee has submitted that the area of land falls within zone / category "E" and 'F HAVING CIRCLE RATE OF Rs. 70,000/- per Sq. Mtr. And Rs. 56,640/- per Sq. Mtr. However, the assessee did not submit bifurcation that how much area fall underE & and how much falls under F category. In valuation, the assessee has applied rate of E category (higher) to the entire area; which is wrong. In absence of exact bifurcation between E and F category, rate of F category is applied to the entire plot. Hence value of land as per circle rate of F category within (Rs. 56,640) comes to Rs. 27,478,1115 x 55,640 = Rs. 155,63,60,235/-." 16. The appellant has submitted that in response to the show cause notice dated 29.10.2019, it was categorically informed to the TPO vide submission dated 30.10.2019 that the property falls under category E and not category F. Relevant portion of the submission dated 30.10.2019 filed before TPO is reproduced below: 17. It is also stated that land of the assessee and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r alia that any expenditure in respect of which payment has been made by the assessee to certain "specified persons" under section 40A(2)(b) of the Income-tax Act were covered within the ambit of SDTs. 44.2 As a matter of compliance and reporting, taxpayers needed to obtain the chartered accountant's certificate in Form 3CEB providing the details such as list of related parties, nature and value of SDTs, method used to determine the arm's length price for SDTs, positions taken with regard to certain transactions not considered as SDTs, etc. This had considerably increased the compliance burden of the taxpayers. 44.3 In order to reduce the compliance burden of taxpayers, section 92BA of the Income- tax Act has been amended so as to provide that expenditure in respect of which payment has been made by the assessee to a person referred to in under section 40A(2)(b) are to be excluded from the scope of section 92BA of the Income-tax Act. Consequential amendment has also been made to section 40(A)(2)(a) of the Income-tax Act. 44.4 Applicability: These amendments take effect from 1st April, 2017 and will, accordingly, apply from assessment year 2017-18 and subsequent assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs initiated will continue. Thus, as per Ld. AR there is no merit in the arguments of the assessee that there is no saving clause in the amendment made. 13.4 Rebutting the reliance by Ld. AR on the decision of Hon'ble Karnataka High Court in the case of PCIT-7 Vs. Texport Overseas Pvt. Ltd., 114 taxmann.com 568 (Karnataka), the Ld. DR has submitted that the Hon'ble High Court while relying on the judgement of the Hon'ble Apex Court in the case of Kolhapur Canesugar works ltd. vs. UOI, AIR 2000 SC 811 has held that once section has been omitted by the Finance Act 2017 with effect from 01.04.2017, the resultant effect is that it had never been passed to be considered as a law and never been existed. He on the contrary relied the Hon'ble Supreme Court decision in the case of Fiber Boards Pvt. Ltd. vs. CIT Bangalore 62 taxmann.com 135/ 376 ITR 596(SC) and submitted that the omission and repeal of any law/Act is governed by the General Clauses Act. Whether the omission means repeal of the particular section right from the very inception has been dealt by the Hon'ble Supreme Court in the case of Fiber Boards Pvt. Ltd. vs. CIT Bangalore (supra). He has pointed out that in this c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent, the second constitution bench judgment states as follows: "33. In para 21 of the judgment the Full Bench has noted the decision of a Constitution Bench of this Court in Chief Inspector of Mines v. Karam Chand Thapar [AIR 1961 SC 838] and has relied upon the principles laid down therein. The Full Bench overlooked the position that that was a case under Section 24 of the General Clauses Act which makes provision for continuation of orders, notification, scheme, rule, form or bye-law, issued under the repealed Act or regulation under an Act after its repeal and re-enactment. In that case Section 6 did not come up for consideration. Therefore the ratio of that case is not applicable to the present case. With respect we agree with the principles laid down by the Constitution Bench in Rayala Corpn. Case [(1969) 2 SCC 412 : (1970) 1 SCR 639] . In our considered view the ratio of the said decision squarely applies to the case on hand." 23. The Kolhapur Canesugar Works Ltd. (supra) judgment also concerned itself with the applicability of Section 6 of the General Clauses Act to the deletion of Rule 10 and 10A of the Central Excise Rules on 6th August, 1977. 24. An attempt was made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us hereinbelow. 27. First and foremost, it will be noticed that two reasons were given in Rayala Corporation (P) Ltd. for distinguishing the Madhya Pradesh High Court judgment. Ordinarily, both reasons would form the ratio decidendi for the said decision and both reasons would be binding upon us. But we find that once it is held that Section 6 of the General Clauses Act would itself not apply to a rule which is subordinate legislation as it applies only to a Central Act or Regulation, it would be wholly unnecessary to state that on a construction of the word ''repeal" in Section 6 of the General Clauses Act, "omissions" made by the legislature would not be included. Assume, on the other hand, that the Constitution Bench had given two reasons for the non-applicability of Section 6 of the General Clauses Act. In such a situation, obviously both reasons would be ratio decidendi and would be binding upon a subsequent bench. However, once it is found that Section 6 itself would not apply, it would be wholly superfluous to further state that on an interpretation of the word "repeal", an "omission" would not be included. We are, therefore, of the view that the second so-called r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us to be both logical as well as in accordance with the principles upon which the rule as to implied repeal rests to attribute to that legislature which effects a repeal by necessary implication the same intention as that which would attend the case of an express repeal. Where an intention to effect a repeal is attributed to a legislature then the same would, in our opinion, attract the incident of the saving found in Section 6 for the rules of construction embodied in the General Clauses Act are, so to speak, the basic assumptions on which statutes are drafted " (At page 484) 31. The two later Constitution Bench judgments also did not have the benefit of the aforesaid exposition of the law. It is clear that even an implied repeal of a statute would fall within the expression "repeal" in Section 6 of the General Clauses Act. This is for the reason given by the Constitution Bench in M.A. Tulloch & Co. (supra) that only the form of repeal differs but there is no difference in intent or substance. If even an implied repeal is covered by the expression "repeal", it is clear that repeals may take any form and so long as a statute or part of it is obliterated, such obliteration would b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, the proceedings initiated under the omitted provisions cannot be continued unless there is saving clause to that effect while omitting such provisions. To buttress his submissions the Id AR for the assessee relied on the decision of Bangalore Tribunal in Textport Overseas Private Limited Vs DCIT (IT (TP) A. 1772/Bang/2017, which has been affirmed by High Court of Karnataka vide order dated 12.12.2019 reported vide [2020] 114 taxmann.com 568 (Karnataka High Court], Mumbai Tribunal in Add.CIT Vs WNS Global (ITA No. 4520/Mum/2013 dated 19.02.2019, reported vide [2020] 116 taxmann.com 20 (Mumbai - Trib.J and the decision of Hon'ble Supreme Court in General I Finance Company Vs ACIT [2002] 257 ITR 338(SC)/ [2002] 124 Taxman 432(SC). Accordingly, the Id. ARfor the assessee prayed for outright dismissal of the appeal filed by the revenue/ assessing officer. 12. On the other hand the Id. CIT-DR for the revenue submits that the assessee has not filed Cross Objection in the appeal filed by the revenue nor sought any permission for raising objection on the maintainability of the appeal of the revenue. The assessing officer filed the present appeal during the currency of the sub-se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing or remedy may be instituted, continued or enforced, and any such penalty, forfeiture or punishment may be imposed as if the repealing Act or Regulation had not been passed. 6-A. Repeal of Act making textual amendment in Act or Regulation:- Where any [Central Act] or Regulation made after the commencement of this Act repeals any enactment by which the text of any [Central Act] or Regulation was amended by the express omission, insertion or substitution of any matter, then, unless a different intention appears, the repeal shall not affect the continuance of any such amendment made by the enactment so repealed and in operation at the time of such repeal. 24. Continuation of orders, etc., issued under enactments repealed and reenacted,. Where any (Central Act) or Regulation, is, after the commencement of this Act, repealed and re¬enacted with or without modification, then, unless it is otherwise expressly provided any (appointment notification) order, scheme, rule, form or bye-law, (made or) issued under the repealed Act or Regulation, shall, so far as it is not inconsistent with the provisions reenacted, continue in force and be deemed to have been (made or) issued under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actice in India shows that 'omission' of a provision is treated as 'amendment'. (page 675, Chapter; "Express Repeal"). Further Hon'ble Supreme Court in Ekambrarappa Ks EPTO (AIR 19671541), held that amending Act which limits the area of operation of existing Act by modifying the extent clause, result in partial repeal of the Act in respect of the area which its operation is excluded ( emphasis and under lines are added by us). 17. Further; the Hon'ble Supreme Court in the matter of Fibre Boards P. Ltd dated 11.08.2015 reported vide [(2015) 52 taxmann.com 135] /(2015) 10 SCC 333, as well as in the matter of M/s. Shree Bhagwati Steel Rolling Mills [CA No.4280 of2007, dt.24.11.2015], reported vide (2016) 3 SCC 643, wherein the Hon'ble Supreme Court in these two cases elaborately discussed the issue of repeal /omission/ amendment etc, and held that 'omission' would amount to 'repeal'. It is also held that there is no real distinction between an amendment and that ''amendment'' is in fact a wider term which includes deletion of the provision in an existing statue. 18. The Hon'ble Court in M/s. Shree Bhagwati Steel Rolling Mills (supra) in a later decision, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rayala Corporation (P) Ltd Vs Enforcement (1969) 2 SCR 412 and Kolhapur Cane Sugar Works Ltd Vs Union of India (2000) 2SCC536 and in the case of General Finance Company Vs CIT (2002) 7 SCC 1. Further, the Hon'ble Supreme Court in the case of Fibre Boards (I) Ltd, after referring to the provisions of Section 6A of the General Clauses Act held that "a repeal can be by way of an express "omission" and that even an implied repeal of a statute would fall within the expression "repeal" in section 6 of the General clauses Act. Repeals may take any form and so long as a statute or part of it is obliterated, such obliteration would be covered by the expression "repeal" in section 6 of General clauses Act. Considering the latest decision of Hon'ble Supreme Court in Fibre Board and Bhagwati Steel, the earlier decisions rendered by the Constitution Bench in Rayala Corporation (P) Ltd and Kolhapur Cansugar Works cannot be said to have laid down any ratio decidendi on an interpretation of the word "repeal" an "omission" would not be included. Their observations are in the nature of obiter dicta as held by the Supreme Court in Fibre Boards. It is also held that the earlier decisions have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n (supra) was per incurium. 19. In our humble view the Hon'ble Supreme Court in Fibre Board (supra) and Bhagwati Steel Rolling (supra) have declared that the law in Rayala Corporation is per in curium, on the basis of which General Finance Co., (supra) was passed. Thus, the later judgments in Fibre Board (supra) and Bhagwati Steel Rolling (supra) shall have a binding precedent on all Courts in India including this Tribunal. 20. We may mention that the decision of the Hon'ble Apex Court is declaration of law as per Article 141 of the Constitution of India. The law declared by Hon'ble Apex Court in Fibre Boards (P) Ltd (supra) dated 11.08.2015, was available when the decisions was rendered by Bangalore Tribunal Textport Overseas Pvt Limited Vs DCIT (supra), however, the same was not brought to the notice of the bench. The coordinate bench while rendering the decision relied on the decision of Hon'ble Apex Court in General Finance Co. Vs ACIT (supra), which was already declared as per-in curium. Similarly, the decision in General Finance Co (supra) is based on Rayala Corporation P. Ltd Vs Director of Enforcement (supra)' and Kolhapur Canesugar Works Ltd Ks Unio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made post omission of the clause (i) is illegal and unsustainable in the eyes of law as post omission it will be treated as if the said clause never existed in the statute. In this regard, placing reliance on the direct decision of Hon'ble Karnataka High Court in the case of PCIT v. Texport Overseas (P.) Ltd. [supra] it was again submitted that this decision of Hon'ble Karnataka High has been consistently followed and applied by the various benches of Hon'ble ITAT. 14.1 The reliance placed by the Ld. DR on Mumbai bench decision in the case of Firemenich Aromatics (India) Pvt. Ltd vs ACIT Circle 4(2), (supra) is sought to be distinguished by Ld. AR by submitting that said decision of Mumbai Bench is not in the context of section 92BA(i) and as such the same has no relevance. He stressed that there is no contrary decision of Jurisdictional High Court or for that matter any other High Court. So, the Hon'ble Karnataka High Court judgement is binding on the Tribunal. 14.2 Further, with regard to the decision of Mumbai Bench in the case of Firemenich Aromatics (supra) as relied upon by the Ld. DR, the Ld. AR however defended his reliance of the Hon'ble Karnataka High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a report, from an accountant, which is to be furnished u/s 92E of the Act relating to international transactions and specified domestic transaction. This form has been attached great importance by the Government of India in Transfer Pricing analysis and it provides that every person who has entered into in international transaction during the previous year shall file this report after verification from the accountant. This form is to be voluntary filed by the assessee and basic pre condition is that it must have entered into international transactions/ specified domestic transaction. When the assessee on its own has filed this form, it is clear that this form has been filed only because assessee is also aware that it has entered into specified domestic transaction during the previous year. Thus the basic condition of admitting specified Domestic transaction with AE's has been fulfilled in this case. The importance, Government attaches to this form is that if the person fails to submit this report then penalty of Rs. 1 lakh is to be levied on that person u/s 271B of the Act. 15.1 In this context the Ld. DR has pointed out that in serial no.l of from 3CEB, it is mentioned "I/We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st of land is capitalised is of no consequence in case of assessee company because the transaction in case of builder is definitely revenue in nature. The assessee stand that no revenue is recognized in P&L a/c is because it was the initial year of the project but this does not change the character of the transaction because purchase of land rights on which a real estate project is to be built in the hands of the real estate company will always be revenue in nature. Also for Real Estate Company ultimately all the expenditure on land will be debited in the P&L account. Thus, the nature of entry shown by assessee in its books is of no consequence and rather this itself shows assessee's intention to bypass TP provision and avoid taxation. Ld. DR has relied the settled law that the theory of real income for application of TP provisions has no locus standi specially after the decision of Special bench in the case of Instrumentarium Corporation ltd. Vs. ADIT, IT Kolkata , 71 taxmann.com 193 (2016) wherein it has been held that even when no income is reported in respect of an item but the same can be brought to tax u/s 92 of the IT Act. We consider it beneficial to reproduce the relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idered view, even when no income is reported in respect of an item in the nature of income, such as interest, but the substitution of transaction price by arm's length price results in an income, it can very well be brought to tax under Section 92. This plea of the assessee is also, therefore, unsustainable in law." 17. Next in regard to the valuation of development rights the Ld. DR submitted that the valuation report of Cushmen and Wakefield was supplied to both the AE i.e. DHPL and the assessee company DLF Urban Pvt. Ltd., he thus submitted that valuation lacks objectivity. 17.1 Then referring to page 54 of the valuation report Ld. DR submitted that the valuation of property is done on the current state on the date of visit i.e. 28.08.2015, on which date the land was industrial land, however, it should have been on residential. 17.2 He then has referred to page 80 of PB, where it is mentioned that the valuer has adopted the sales comparable method, Discounted Cash Flow and Residual method for valuation of the property. He submitted that as mentioned by the valuer, also in sales comparable method, the price per unit area of similar properties are examined. The sales of pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the Income Tax Act/Transfer Pricing and based on the same, the valuation has been rejected. 21. As with regard to the question whether circle rate can be taken as market rate, Ld. DR has submitted that it is settled law that section 50C is applicable in the case of development agreements and several tribunal have taken this stand. Reference was made to the 1TAT Mumbai decision in the case of Arif Akhtar Hussain vs. ITO in ITA No. 541/Mumbai/2010 (also mentioned by Ld. CIT(A) in his order. He submitted that Circle Rate is one of the best indicator of market value of land and also for measuring development rights in the land. It is fixed by the government based on extensive analysis of the price /market value of land in a particular area based on several factors. In transfer pricing, the primary requirement is to benchmark a transaction based on a comparable transactions. For doing the same, the most important factor is to arrive at a comparable price / rate which has been fixed by the government / other government agency etc. the legitimacy of the comparable rate is the most important ingredient of comparing two transactions. He submitted that in several cases for transfer pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd not the F category rates. Again in its support, the assessee has relied on the circle rate notification issued by the Delhi Govt. In fact, based on the documents submitted by the assessee, the Ld. CIT(A) has not only taken the land classification as industrial and also the rates of the land are taken in the E category against the F category taken by the TPO/AO. Thus the assessee when himself has taken the use of the various notification issued by the Government for categorization /valuation of land based on Circle Rate Only then according to Ld. DR, the assessee cannot take a totally contradictory stand of negating the circle rate. The assessee is not allowed to take one position before the lower authorities and identical opposite stand in appeal. 23. Next addressing the issue raised by the assessee that circle rate should not be adopted because it has purchased the land in 2007 at almost 6 times more than the prevailing price from DCM. Ld. DR has submitted that this issue of purchasing of land in 2007 is irrelevant, as also dealt by Ld. CIT(A) in para 22.2/page 129 because the issue in the instant case is consideration by the TPO of circle rate as the fair market rate for benc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en the law had provided for penalty in case of non-compliance of a provision of the Act and the assessee reserving a right to protest at appropriate stage, makes the compliance, the assessee cannot be estopped by own act and conduct to dispute the applicability of the said provisions during the assessment. 27. Coming to merits of the additional ground, having given a thoughtful consideration to the matter on record and the submissions we observe that the ld. DR could not dispute the fact that the Hon'ble Karnataka High Court in case of Texport Overseas Pvt. Ltd. (supra) and the coordinate Benches of this Tribunal in several cases, as referred by the ld. AR has held that once this section is omitted w.e.f. 01.04.2017, the resultant effect is that it had never been passed to be considered as a law and never been existed. However, in the light of the Explanatory Notes to the Finance Act, 2017 relied by the ld. DR along with the judgement of the Hon'ble Supreme Court in the case of Fiber Boards Pvt. Ltd. (supra) and Shree Bhagwati Steel Rolling Mills (supra) which have been considered by the Mumbai Bench in the case of Firemenich Aromatics (India) Pvt. Ltd. (supra) we need to decide t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T Vs Godavari Devi Saraf [(1979) 113 ITR 589 (Bom)], Hon'ble jurisdictional High Court took note of a non-jurisdictional High Court and held that the Tribunal, outside the jurisdiction of that Hon'ble High Court and in the absence of a jurisdictional High Court decision to the contrary, could not be faulted for following the same. Their Lordships observed that, "It should not be overlooked that the Income-tax Act is an All-India statute.......... Until a contrary decision is given by any other competent High Court, which is binding on a Tribunal in the State of Bombay, it has to proceed on the footing that the law declared by the High Court, though of another State, is the final law of the land". Of course, these observations were in the context of a provision being held to be unconstitutional, an issue on which the Tribunal could not have adjudicated anyway, as evident from the observation "Actually, the question of authoritative or persuasive decision does not arise in the present case because a Tribunal constituted under the Act has no jurisdiction to go into the question of constitutionality of the provisions of that statute" but nevertheless the respect for the higher judicial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e implicit in Hon'ble Supreme Court's judgment in the case of ACIT Vs Saurashtra Kutch Stock Exchange Ltd [(2008) 305 ITR 227 (SC)] wherein Their Lordships have upheld the plea that "non-consideration of a decision of Jurisdictional Court or of the Supreme Court can be said to be a mistake apparent from the record". The decisions of Hon'ble non-jurisdictional High Courts are thus placed at a level certainly below the Hon'ble High Court, and it's a conscious call that is required to be taken with respect to the question whether, on the facts of a particular situation, the non-jurisdictional High Court is required to be followed. The decisions of non-jurisdictional High Courts do not, therefore, constitute a binding judicial precedent in all situations. To a forum like us, following a jurisdictional High Court decision is a compulsion of law and absolutely sacrosanct that way, but following a non-jurisdictional High Court is a call of judicial propriety which is never absolute, as it is inherently required to be blended with many other important considerations within the framework of law, or something which cannot be, in deserving cases, deviated from. [Emphasis, by underlining, sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2016. The said provisions related to right to file appeal and in that case, the AO had filed the appeal during the currency of section 253(2A) of the Act and for that reason, the Mumbai Bench had considered the issue of repeal/omission made in a statute and the consequences thereof. Since right to appeal is a substantive and, certainly, if it was there in the statute when the appeal was filed and, subsequently, if the statute had omitted the provision, the substantive right of appeal vested in a party would not be taken away by holding the repeal to be retrospective. However, in the case in hand, a substantive provision, being infact a charging provision, has been omitted/deleted and consequently benefit of the same has to be given to the assessee. Thus, we are inclined to follow the Hon'ble Karnataka High Court judgement and, on that basis, the additional ground raised by the assessee deserves to be allowed and consequently the whole exercise done by ld. AO to bench mark the transaction of purchase of development right, stands being void. 32. Next, coming to remaining three issues on merits covered in ground Nos.2 to 5, in appeal of assessee, on which Ld. CIT(A) has given the fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of ALP, provides through sub-section (1) that the ALP shall be determined by any of the following methods, being the most appropriate method, having regard to the nature of transaction or class of transaction or class of associated persons or functions performed by such persons or such other relevant factors as the Board may prescribe. Five specific methods have been set out, namely, (a) comparable uncontrolled price method; (b) resale price method; (c) cost plus method; (d) profit split method; (e) transactional net margin method. Thereafter, another method is given in clause (f), namely, such other method as may be prescribed by the Board, which has since been prescribed in rule 10BA as `Other method'. Sub-section (2) of section 92C mandates that: `The most appropriate method (MAM) referred to in sub-section (1) shall be applied, for determination of arm's length price, in the manner as may be prescribed'. On going through the prescription of sub-sections (1) and (2) of section 92C read with section 92, it gets highlighted that the legislature has used the word `shall' for determining the ALP under the most appropriate method and the most appropriate method is to be appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g 'other method' as MAM. In this context, after considering all the aspects, we like to conclude that assessee was justified to adopt the 'other method' as most appropriate method since this method stipulates for determining the ALP of a transaction under any method, which takes into account (and not directly considering) the price charged or paid, or that would have been charged or paid, for the same or similar uncontrolled transaction considering all the relevant facts. The term `would have been charged or paid' may encompass quotations or valuation reports etc., instead of actual comparable. The specific methods, such as, the Comparable Uncontrolled Price, Resale Price, Cost plus etc., which provide for the ALP determination by considering the profit/price actually transacted, would not have been applicable in the absence of availability of actual transacted price in a comparable uncontrolled situation, thus leaving room to look for a probable price of asset, that would have been transacted for same or similar property. The fortiori is that the `other method' was rightly considered as most appropriate method as none of the other five specific methods was capable of application. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les or other recently sold properties in the area with similar characteristics. This method accounts for the effect that individual features of parties or property, have on the overall value. In other words, the total value of a property is the sum of the values of all of its features. On the other hand, the comparable uncontrolled price (CUP) method establishes a price based on the pricing of similar transactions that have taken place between third parties. The individual features of the transaction are generally not relevant. The CUP method makes a comparison between the price charged for a specific product/service for a specific quantity at a specific moment with comparable terms and conditions and quantities. When comparable uncontrolled prices exist, then only this method is applicable. However, in case of transaction like we are dealing of Development rights, there is very less possibility of comparable uncontrolled prices being in existence. Infact TPO himself had fallen on circle rate only, and could not give any other comparable uncontrolled price/value. 36.3 It is for this reason we are of opinion that the principles applicable to land acquisition matters where market va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to ensure there is no undervaluation of particular property. The principles and methods of arriving at the rates or prices of merchantable products, as determined by the Custom authority cannot be equated with the circle prices for land. 36.5 Thus, we find no fault in valuation arrived using the relevant parameters and adding premium or discounting, the value, on those parameters. The Valuer's Report is quite in conformity with the principles and method by which market value of a real estate property should generally be arrived at. 37. Then coming to the valuation calculation on DCF method, the Valuer has primarily calculated the saleable area of 1.43 million sq. feet on the basis of effective FAR of 4.0. Then having taken into consideration the fact that the subject property would be extension of residential township of DLF Green. Further taking into account the cost assumptions, the value of cash inflow at Rs. 15,500/- per sq.ft as an appropriate selling rate for subject property is calculated. Certainly the benchmarking has been done on basis of sale rate of apartments of other residential projects, but then the development rights are acquired for apartments proposed at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TPO have fallen in error in invoking the provisions of Section 92CA of the Act and on the other hand in discarding the valuation report and to substitute it with circle rate. 39. Resultantly, the ground no. 1 and 3 with their sub grounds are decided in favour appellant and as a consequence to same the ground no. 2, 4 and 5 have become academic and are left open. 40. Now coming to Ground No. 6 with sub-grounds, the assessee company has challenged the order of Ld.CIT(A) of confirming disallowance of claim of expenses aggregating Rs. 77,56,583/-. It comes up that the Ld.CIT(A) has sustained the findings of assessing officer that no proper details in support of claim of expenses were filed. The Ld. Counsel has submitted that out of total expenses of Rs. 1,53,04,789/-, the assessee company has suo moto disallowed expenses to the tune of Rs. 75,48,006/- and the balance claim of expense to the extent of Rs. 77,56,593/- is in respect of routine business expenses such as insurance, payment to auditors, debenture issue expenses, legal and professional expenses etc. which have direct nexus with the business of assessee and are accordingly allowable. 41. We have considered the findings of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was treated as ALP based on 2 separate comparables thus resulting in the transfer pricing adjustment. The Ld. CIT(A) has decided the issue with following finding: "24.18 It is observed that the TPO conducted fresh search on the Bloomberg database; however, the parameters such as year of issue, tenure of the instrument etc. which need to be considered while performing the search have not been considered by the TPO. It is also observed that the two comparables considered by the TPO were the companies which were not similar to the appellant company. The companies identified by the TPO operate in different industry i.e. Rubber products (Suja Shoei Industries Private Limited) and Energy sector (Celestial Solar Solutions Private Limited). Thus, TPO did not apply the industry filter for determining the ALP which is critical as the rates of interest may differ from industry to industry based on the circumstances prevailing in each industry. Further, in a high-risk industry like the real estate sector, the rate of interest is likely to be more vis-a-vis a low-risk industry. It is also observed that the instruments selected by the TPO are bonds/loans instead of CCDs (as issued by the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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