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TMI Blog2022 (11) TMI 1498X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings including the hearing and directions have to be issued by the DRP within 9 months as contemplated under Section 144C (12) of the Income Tax Act. Irrespective of whether the DRP concludes the proceedings and issues directions or not, within 9 months, the Assessing officer is to pass orders within the stipulated time. he outer time limit of 33 months in case of reference to TPO under Section 153, would not refer to draft order, but only to final order and hence, the entire proceedings would have to be concluded within the time limits prescribed. When no period of limitation is prescribed, orders are to be passed within a reasonable time, which in any case cannot be beyond 3 years. However, when the statute prescribes a particular period within which orders are to be passed, then such period, irrespective of whether it is short or long, shall be applicable. Adjustments in intimation issued u/s 143(1)(a) retained without issuing show cause notice illegal and bad in law - Adjustment was made in the Intimation issued under section 143(1)(a) of the Act and the AO has computed the total income taking the income processed under section 143(1)(a) as the base. Against this adjustm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (iv), held the Tribunal. Under these circumstances, we fully concur with the decision on the issue arrived at by CIT( ) that assessee is in the business of generation of power and that the steam so generated by the industrial undertaking and receipt from the business of industrial undertaking is within the meaning of section 80-IA which would qualify for this benefit. Allocation of head office expenses to eligible units - We find that the coordinate Bench of the Tribunal in assessee s own case [ 2018 (1) TMI 758 - ITAT JAIPUR] for the assessment year 2006-07 has adjudicated the issue by following its earlier order in [ 2017 (4) TMI 1642 - ITAT JODHPUR] for the assessment year 2005-06 wherein restore this issue to the file of the AO for re-computing the reduction of deduction u/s 80IA. AO would restrict the apportionment to the extent of Director s fee, charity and donations. The Ground partly allowed as discussed hereinabove for statistical purpose. Thus partly allow the ground of the assessee on the above terms. Accordingly following the earlier year s order of the coordinate Bench in assessee s own case the Assessing Officer is directed to re-work allocation of the expenses relat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Enterprise incur the costs on behalf of the group members, cost that the group members would have incurred directly had they been independent, it may be appropriate to pass on the costs to group recipients without a mark-up and to apply a mark-up only to the costs incurred by the intermediary in performing its agency function. In the present case, we are of the view that the assessee-appellant is not performing any agency function but has only incurred some costs which are charged from the AEs. Thus, assessee-appellant is merely acting as pass through entity on which no mark-up is required to be charged. Assessee appeal allowed. Disallowance u/s 14A both under normal provisions and for computing Book profit under MAT as per section 115JB - HELD THAT:- AO cannot, apply the provisions of section 14A of the Act, automatically once the appellant is found to have earned exempt income. With respect to the allegation of the AO that the appellant did not maintain separate books of accounts for exempt income, reference is made to the recent decision of South Indian Bank Ltd. [ 2021 (9) TMI 566 - SUPREME COURT] wherein the Court has observed that the assessing officer cannot make disallowa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 40A(9). TDS credit - It is the right of the assessee to get credit of the TDS deducted by deductors against tax liability. The AO is directed to verify the claim of the assessee and allow credit for TDS as per provisions of Income-tax law. The ground is allowed for statistical purposes. - HON BLE SHRI SANDEEP GOSAIN, JM AND HON BLE SHRI RATHOD KAMLESH JAYANTBHAI, AM For the Assessee : Shri Ajay Vohra (Sr. Advocate), Shri Neeraj K. Jain (Advocate) Shri Ramit Katyal (CA) For the Revenue : Shri Sanjay Dhariwal (CIT-DR) ORDER PER BENCH : These are two appeals filed by the assessee against two orders of Assessing Officer dated 29.07.2022 28.07.2022 for the assessment years 2017-18 18-19 respectively passed u/s 143(3) r.w.s. 144C(13) read with section 144B of the Income Tax Act, 1961. Common grounds are raised in both these appeals, therefore, both these appeals are disposed off by this combined order for the sake of convenience. The assessee has raised the following grounds of appeal :- ITA NO. 127/Jodh/2022 A.Y. 2017-18 : 1. That the assessing officer (AO) / National Faceless Assessment Centre (NFAC) erred on facts and in law in completing assessment under section 143(3) read w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis of the order passed under section 92CA(3) of the Act by the Transfer Pricing Officer (TPO): i. by a sum of Rs. 252,02,36,273 for CPP 80MW at Chanderia Lead and Zine Smelter, ii. by a sum of Rs. 220,94,71,451 for CPP 80MW at Zawar Mines; iii. by a sum of Rs. 635,27,42,648 for CPP 160MW at Rajpura Dariba. 3.1 That the DRP/NFAC/AO/TPO erred on facts and in law in reducing the claim under section 80IA in respect of CPP units by considering the transfer pricing of the power supplied by CPP to other manufacturing unit of the Appellant @ Rs. 2.53 per unit as against Rs. 7.76 to Rs. 8.64 per unit considered by the Appellant being the rates at which electricity is purchased from SEBs. 3.2 Without prejudice, that the DRP/NFAC/AO/TPO erred on facts and in law in reducing the claim of deduction under section 80-IA in respect of CPP units to Nil instead of restricting the disallowance of deduction under section 80-IA to the extent of the difference between the per unit rate of Rs. 7.76 to Rs. 8.64 per unit as considered by the Appellant and Rs. 2.53 per unit considered by the TPO/the AO as the market price. 3.3 That the DRP/NFAC/AO/TPO erred on facts and in law in not appreciating that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e TPO, in respect of the CPP units of the appellant eligible for deduction under section 80-IA and in respect of the undertaking eligible for deduction under section 80-IC. 5.1 That the DRP/NFAC/AO/TPO erred on facts and in apportioning Head Office expenses and depreciation on assets on turnover basis while computing profits relatable to various tax holiday units and thus reducing the claim by a sum of: A. Rs. 2,00 Cr for CPP 80 MW Chanderiya B. Rs. 3.50 Cr for CPP 80 MW Zawar C. Rs. 2.82 Cr for CPP 160 MW Rajpura Dariba D. Rs. 42.24 Cr for 80IC Unit of Pantnagar Lead and Zinc Plant (PLZP) 5.2 The DRP/NFAC/AO/TPO erred in facts and in law in holding that the deduction u/s 801A for the wind power plants (WPPs) was available only after apportioning HO expenses and depreciation on common assets on turnover basis while computing profits relatable from the following WPPs, and thus reducing the deduction claimed by a sum of Rs. 43,00,000. 6. That the DRP/NFAC/AO/TPO erred on facts and in law in enhancing the income of the eligible units under section 80-IC of Pantnagar Zinc and Lead Plant (PLZP) of the Appellant by Rs. 1543,73,18,062; and Pantnagar Silver Metal Plant (PSMP) by Rs. 1068,7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive and measure of the actual contribution/value created by such units. 6.7 That the DRP/AO/NFAC/ TPO erred on facts and in law in making the adjustment holding that computation of transfer price of inter-unit transactions of PSMP unit presents exceptional difficulty and thus, considering a different approach for PSMP unit based on the Profit to Cost ratio of other eligible units of the Appellant after making disallowance of deduction in those units. 6.8 That the DRP/AO/NFAC/ TPO erred on facts and in law in making an adjustment adopting an inconsistent approach of selective allocation of profits to PLZP, PSMP units and taxable units of the Appellant, without taking into consideration the contribution made by the CPP units. 6.9 That the DRP/AO/NFAC/ TPO erred on facts and in law in disregarding the favourable judicial pronouncements while making the TP adjustment, including the ruling passed by the Hon'ble ITAT in Appellant's own case. 7. The Ld. TPO/NFAC/AO/DRP erred in facts and in law in making an adjustment of Rs. 66,54,233, ie, 15.86% of Rs. 4,19.56,073 in the order passed under section 143(3) read with section 144B /144C(13) and order passed under section 154 rws 143 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 r.w.s. 143(3) of the Act, of Rs. 94,55,355 w/s 35(2AB) of the Act. 9.1 That the AO/NFAC/DRP erred on facts and in law in not appreciating that the required Form 3CL provided by the assessee was valid for the impugned AY 2017-18. 10. That the AO/NFAC/DRP erred on facts and in law in making disallowance in the order passed under section 143(3) read with section 144B /144C(13) and order passed under section 154 r.w.s 143(3) of the Act, of Grass Root expenses of Rs. 54,69,30,401 being expenditure on exploration which is necessary for sustaining the existing business of mining of metals holding that such expenses pertain to prospecting operations, which did not result in commercial exploitation of mines. 10.1 That the AO/ DRP/NFAC erred on facts and in law in not appreciating that the above grass root expenditure was not incurred in respect of mining areas where the mining license is granted, and no commercial production has yet started and thus were not disallowable in terms of provisions of section 35E of the Act. 10.2 That the AO/ NFAC/DRP erred on facts and in law in not appreciating that the above grass root expenditure was held to be deductible business expenditure by the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h section 143(3) of the Act at total income of Rs. 8329,54,19,051/-. 2.2 Pursuant to the draft assessment order, objections were filed by the appellant before the Dispute Resolution Panel (DRP) which were disposed vide directions issued under section 144C(5) of the Act on 20.06.2022. Giving effect to the DRP order, the assessment order under section 143(3) read with section 144C(13)/144B and order passed under section 154 read with section 143(3) of the Act at an income of Rs. 8445,98,12,500/- as against the returned income of Rs. 6325,11,95,270/- after making the various additions/disallowances. Aggrieved by the order of A.O, the assessee is in appeal before this Tribunal. Ground nos. 1, 1.1 1.2 relate to assessment order barred by limitation. 3. Before us, the ld. Counsel for the assessee submitted that in terms of the provisions of sub-section (1) of Section 153 of the Act, the assessing officer is required to pass assessment order within twenty one months from the end of the relevant assessment year. 3.1 Sub Section (4) of Section 153 of the Act provides additional time of 12 months for passing the assessment order in cases where a reference is made to the Transfer Pricing offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raft order and not for the final order. A careful perusal of the timeline would indicate that the time limit is for the final assessment and not for the draft order. The anomaly in the argument is that in the present cases, no fresh draft order was passed, but the DRP had issued the notices. If the contention of the Appellants / revenue was to hold some water, they must have passed the draft assessment order immediately on receipt of the order from the Tribunal, but instead, notice was issued by the DRP. In any case, it is a far cry for the revenue as because no order has been passed for more than 5 years. 21. As held above, the assessment has to be concluded within 21 months when there is no reference and when there is a reference, it has to be concluded within 33 months. In the additional 12 months, the draft order is to be passed, the objections have to be filed, the DRP has to issue the directions and the final order is to be passed. The provisions under section 144C and section 153 are not mutually exclusive as both contain provisions relating to Section 92CA and are inter-dependant and overlapping. On remand, prior to amendment as per Section 153 (2A), the Assessing officer i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 74 dated 25.06.2021. 2. All the orders were passed within the time limits as prescribed u/s 144C and 92CA(3A) of the Act. 3. Sequence of events (AY 2018-19) Order by TPO 31.07.2021 Draft order by AO u/s 144C(1) 29.09.2021 Directions u/s 144C(5) by DRP 20.06.2022 Assessment u/s 144C (13) 28.07.2022 4. Time limit as per section 153(1) r.w.s. 153(4) for AY 2018-19 was 30 months, i.e., 30.09.2021 to determine the last day on which order was to be passed by the TPO. 5. All the orders were passed within the time limits as prescribed u/s 144C and 92CA(3A) of the Act for AY 2018-19 also. 6. Sub-section (1) of section 153 prescribes the general time-barring date and it does not override any other provision while section 144C is a code in itself. Sub-section (4) of section 153 prescribes that if any reference is made to the TPO, then time barring date u/s 153(1) is extended by 12 months. Subsection (3A) of section 92CA mandates that TPO is required to pass order u/s 92CA(3) of the Act sixty days prior to the date of limitation u/s 153 of the Act. Sub-section (1) of section 144C overrides all other provisions of the Act. Subsection (4) and (13) of section 144C overrides section 153 and 153B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specified in that section will also be applicable to the order u/s 144C(13). Had this been the intention of the Legislature, then it would have mentioned section 144C(13) also in subsection (1) of section 153 of the Act. It is to be noted that the Legislature has consciously not mentioned section 144C(13) whereas section 143(3) and 144 are mentioned in section 153(1). This is to ensure that section 144C remains a code in itself. The Hon ble Supreme Court in the case of South India Corporation Pvt Ltd v The Secretary, Board of Revenue 1964 AIR 207 has held that: It is settled law that a special provision should be given effect to the extent of its scope, leaving the general provision to control cases where the special provision does not apply. (Page-13) ii. The Co-ordinate benches of the Tribunal have consistently held that in a case where reference is made to the TPO, time-limit to pass order u/s 144C(13) would be one month from the end of the month in which directions were received by the AO from the DRP. Time limit specified in section 153 has no relevance, except setting the time limit for the TPO to pass order u/s 92CA(3) of the Act. The landmark order on the issue is in the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t if the time limit for the passing of the final assessment order international transactions having regard to the ALP was inserted the passing of the order by the TPO, being a period of sixty days prior to the date of completion of assessment as per section 153. Simultaneously, the time limit for passing of order u/s 153 in cases where a reference is made to the TPO, was also enhanced to thirty three months. Here, we would like to mention that later on this time limit u/s 153 was enhanced to three years. It means that with the insertion of section 92CA(3A), the time limit for passing of the assessment order continued to be still governed by section 153, though the time limit for passing of the order by the TPO was also set within the overall time limit prescribed u/s 153 for the passing of the assessment order. The provisions of section 144C about 'Reference to the dispute resolution panel', were inserted by the Finance (No. 2) Act, 2009 w.e.f. 1.4.2009. This led to the ushering in the era of passing the draft order. It means that up to the A.Y. 2008-09, when the mechanism of DRP and the passing of draft order was not in place, the final assessment order pursuant to the ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reason for not adding a sunset clause in section 153. The reason is that section 92CA mandating the TPO to pass order determining the ALP of international transactions, also contains sub-section (3A), which provides time limit for the passing of the order by the TPO. As per this provision inserted by the Finance Act, 2007 w.e.f. 1.6.2007, the TPO may pass order u/s 92CA(3) 'at any time before sixty days prior to the date on which the period of limitation referred to in section 153, .. for making the order of assessment or reassessment or recomputation or fresh assessment, as the case may be, expires'. Since the time limit for passing of the order by the TPO is not direct but is linked with the time limit as per section 153, the legislature did not insert any sunset clause in section 153, which would have otherwise made the provision of sub-section (3A) of section 92CA unworkable without the insertion of a separate corresponding provision giving time limit for the passing of the order by the TPO. This is the answer to the ld. AR's poser that when the time limit for completion of assessment is contained in section 144C, then the provisions of section 153 cannot be read as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... passing of order by the TPO, was inserted by the Finance Act, 2002. It means that during the interregnum, though there was a requirement for the passing of order by the TPO, but there was no specific time limit for the passing of such order. The mere fact that no time limit has been prescribed for the passing a draft order, does not and cannot mean that the time limit for the completion of assessment given u/s 153 should be inferred as that for passing a draft order. 5.26. It is a settled legal position that where no time limit is prescribed for passing an order, then such order should be passed within a reasonable time. Section 201 requires the passing of order under sub-section (1) treating a person responsible as an assessee in default in case there is a failure to deduct tax at source or after deduction, there is a failure to pay tax at source. Prior to insertion of sub-section (3) of section 201 by the Finance (No. 2) Act, 2009 w.e.f. 1.4.2010, no time limit was prescribed for the passing of such an order. The Honourable High Courts and the benches of the tribunal across the country have recognized the position that no time limit has been prescribed for passing an order treat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for determining the time available with the TPO for passing order u/s 92CA(3). 5.28 Turning to the facts of the instant case, we find that the AO passed the final assessment order on 29.1.2015, which is well within a period of one month from the end of the month in which direction was received from the DRP on 24.12.2014. As such, we hold that the final assessment order passed by the AO is within time prescribed u/s 144C(13). Further since the draft order has also been passed within a reasonable time, the same is also not barred by limitation. The contention of the ld. AR that the draft order passed in this case was barred by limitation, is therefore, found to be without any substance and hence repelled. The Hon ble Delhi Tribunal again had an occasion to deal with this issue in the case of Religare Capital Markets Pvt Ltd v ACIT and it was held that: 10. We have carefully considered the rival contentions and perused the orders of the lower authorities as well as the time lines which are under challenge before us. We do not have any hesitation in holding that the issues argued by the ld AR are squarely covered against the assessee by the decision of coordinate bench in ITA No. 1132 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at draft order of assessment cannot be equated with the assessment completed in pursuance of direction of DRP u/s 143(3) read with section 144C(13) of the Act. The argument of the ld AR though looks attractive but on careful examination of the same we are not impressed. The provisions of the income tax act 1961 sets out a special scheme for the assessment of an entity engaged in international transaction under Chapter X of the income tax act in terms of section 144C (1) to section 144C (14) of the income tax act. Therefore it is apparent that it is not an assessment scheme as applicable to other assesses. It is a scheme of assessment in respect of matters that included the transfer pricing adjustment. According to the provisions of section 144C (1) and order of the draft assessment proposing a variation to the income or loss as returned by the assessee is to be forwarded to the assessee by the assessing officer. On receipt of that order assessee is given 2 options to be exercised within 30 days of the receipt of the draft order either to accept the draft order and intimate the assessing officer accordingly or to file objections to the proposed variations with the dispute resolution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al purposes the role of the assessing officer comes to an and the movement he passes the draft order. He is only authorized to pass the final assessment order which is according to the directions of the learned dispute resolution panel. The above provisions also contained the separate time limits and it has its own timelines which binds the revenue as well as the assessee. The honourable Madras High Court in 398 ITR 645(2017) CIT vs Sanmina SCI India private limited in para number 7 has held that it is a self-contained code in itself. Thus, the provisions contained therein only determine the timelines of the passing of such order and not as provided u/s 153 of the act. Thus this argument of the assessee deserves to be rejected. 13. Further according to the provisions of section 253 of the Act pertaining to appeals to the tribunal, clause (d) of subsection 1 also separately carves out the appealable order as order passed by the assessing officer under subsection 3 of section 143 of section 147 of section 153A or section 153C in pursuance of the directions of the dispute resolution panel. Further, it may also be possible that in certain circumstances the provisions of section 263 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7/ Bang/2012 (d) Pricewaterhouse Coopers (P) Ltd v DCIT, 117 taxmann.com 276 (KolTrib) Neither of the orders mentioned above were brought to knowledge of the Hon ble Madras High Court. iv. The judgement of the non-jurisdictional High Court may have persuasive value, but it is not binding on the Hon ble Tribunal, particularly when then various co-ordinate benches have taken the contrary view. It has been held by the Hon ble Ahmedabad Special Bench in the case of ACIT v Goldmine Shares and Finance Pvt Ltd, 113 ITD 209 that : 54. We do not find any merits in these submissions of Mr. Vora. Firstly, the Supreme Court was dealing with the binding nature of the Supreme Court decision on the High Court, whereas we are dealing with the decision of a High Court and that too of a High Court having no jurisdiction over the case arising from a different State, which though has a high persuasive value is not binding in other jurisdiction. Secondly, the decision of Rajasthan High Court has not dealt with and was also not addressed to deal with the controversy by noticing the non obstante provisions of section 80- I(6)/80-IA(5) aforesaid. Thirdly, in any case the issue before Rajasthan High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on to average time taken by the CsIT (Appeals) to dispose of cases. This time limit cannot be further curtailed by reading into something which is not present in the provisions. By no stretch of imagination, the function of DRP can be taken as extension of the assessment proceedings. DRP is an independent authority and it is not an income-tax authority as defined in section 116. vi. The interpretation of the Hon ble High Court is not as per legislative intent will also be evident if we take a hypothetical example of a search case. Let us assume that last search authorization in the case was executed on 28.02.2022. In that scenario time limit for completion of the assessment u/s 143(3) for AY 2022-23 will be 31.03.2023 as per the provisions of section 153B(1)(b) of the Act. The person in whose case search was conducted can file return of income till 31.12.2022 u/s 139(4) of the Act. AO is required to issue notice u/s 143(2) and make reference to the TPO well before 31.03.2023. Thereafter time limit to complete the assessment will be extended to 31.03.2024. Now, in this case as per the interpretation of the Hon ble High Court, passing of draft assessment order u/s 144C(1), issuing di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is clear from para-7 of the said order ( Pg 684, Index of Case Laws-Vol.1 submitted by the appellant) that time limit gets extended when draft order is required to be passed. The Hon ble Mumbai Tribunal has observed that- Coming to the second part, we find that there is no dispute if no draft order was to be issued in this case, the assessment would have been time-barred on 31st December, 2017 but the present assessment order is passed on 17th August. 2018. Once we hold that no draft assessment order could have been issued in this case, as the provisions of section 144C(1) could not have been invoked in this case, the time limit of completion of assessment was available only upto 31st December 2017. The mere issuance of draft assessment order, when it was legally not required to be issued, cannot end up enhancing the time limit for completing the assessment u/s 143(3). In the present case, there is no dispute that draft assessment order was required to be issued. Once it was so, the order of the Hon ble Mumbai Tribunal goes against the appellant, rather than supporting its cause. 11(ii). It is true that the Hon ble Tribunal in Super Brands has allowed the appeal of the additiona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Board under section 119 of the Act to issue orders, instructions and directions to others income-tax authorities for the proper administration of the Act and such authorities and all other persons employed in the execution of the Act have to observe these. The income-tax authorities acting anywhere in the country, however, have to respect the law laid down by the High Court, whether of the State in which they are functioning or of a different State, in the absence of any contrary decision of any other High Court. The said circulars and its language, therefore, are not in good taste. Since I am taking a view contrary to that of the Punjab and Haryana High Court, the circulars cannot be quashed. It is clear from the above observations that- (a) There is no finding, there are certain observations. The Hon ble Court itself dissented from the judgement of the Hon ble Punjab and Haryana High Court. This is important because Delhi High Court judgement was of Single Bench, wherein three judgements of the Hon ble Punjab and Haryana High Courts were of Double Bench. (b) The observations were passed in respect of income-tax authorities and not for Tribunals. Tribunal is not an income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act), the assessing officer is mandatorily required to pass proposed order of assessment (hereinafter referred to as draft assessment order ). Once the draft assessment order is passed by the assessing officer and served on the eligible assessee, the eligible assessee may within 30 days of receipt thereof either (a) file his acceptance of the variations to the Assessing Officer; or (b) file his objections, if any, to such variation with the Dispute Resolution Panel ( DRP ). [Refer section 144C(2) of the Act]. In case the eligible assessee is to accept the variations made in the draft assessment order or does not file objection thereto within the stipulated time (intending to pursue the appeal remedy before the CIT(A)), the assessing officer in such circumstances has to pass the final assessment order within one month from the end of the month in which the acceptance is received. [Refer section 144C(4) of the Act]. Where the eligible assessee chooses to file objection before the DRP, the DRP is duty bound to dispose of the objections within 9 months from the end of the month in which the draft order is forwarded to the eligible assessee.[Refer section 144C(12) of the Act]. Up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sued by the DRP, failing which any directions are to be treated as otiose. As seen from the timeline discussed in the earlier paragraphs, the original assessment proceedings are to be completed within 21 months and the additional time of 12 months is granted when proceedings before TPO is pending. The TPO has to pass orders before 60 days prior to the last date. Then 30 days time is given to the assessee to file their objection before the DRP and the DRP is given 9 months time and thereafter, within one month from the end of the month of receipt of directions from DRP, the final order is to be passed. This court is not in consonance with the contention of the learned senior panel counsel for the Appellants/ revenue that the time period of 33 months, provided initially is for the draft order and not for the final order. A careful perusal of the timeline would indicate that the time limit is for the final assessment and not for the draft order. The anomaly in the argument is that in the present cases, no fresh draft order was passed, but the DRP had issued the notices. If the contention of the Appellants / revenue was to hold some water, they must have passed the draft assessment ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before, we conclude as under: (a) The provisions of Sections 144C and 153 are not mutually exclusive, but are rather mutually inclusive. The period of limitation prescribed under Section 153 (2A) or 153 (3) is applicable, when the matters are remanded back irrespective of whether it is to the Assessing Officer or TPO or the DRP, the duty is on the assessing officer to pass orders. (b) Even in case of remand, the TPO or the DRP have to follow the time limits as provided under the Act. The entire proceedings including the hearing and directions have to be issued by the DRP within 9 months as contemplated under Section 144C (12) of the Income Tax Act, (c) Irrespective of whether the DRP concludes the proceedings and issues directions or not, within 9 months, the Assessing officer is to pass orders within the stipulated time, (d) In matter involving transfer pricing, upon remand to DRP, the Assessing officer is to pass a denova draft order and the entire proceedings as in the original assessment, would have to be completed within 12 months, as the very purpose of extension is to ensure that orders are passed within the extended period, as otherwise the extension becomes meaningless. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Tribunal in the case of Maral Overseas Limited v. Addl. CIT: 136 ITD 177 (SB) @ pg 206 (Copy attached as Annexure 2) of the judgement, following the dictum of law laid down in All India Lakshmi Commercial Bank (supra) held that the Tribunal was bound by the only decision of the Hon ble Karnataka High Court, (on the issue pending before the Special Bench) notwithstanding that the said decision was of the non-jurisdictional High Court. The relevant observations in the said judgement are reproduced hereunder: 57. Applying the proposition of law laid down by the above decision to the facts of the instant case, as the period of ten years from the year of start of manufacture has not expired as on the date when the amended provision came into force, the assessee is entitled to the benefit of tax holiday for the remaining period of ten years. It is pertinent to mention here that in the aforesaid decision, the Hon'ble Karnataka High Court went on to hold that even if the period of five years has expired as on the date of amended provisions but the period of ten years is still running, the assessee cannot be denied the benefit. Thus, the issue raised before this Special Bench is squa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there is no judgment of a jurisdictional Court: - CIT v. Smt. Godavaridevi Saraf [1978] 113 ITR 589 (Bom.) - CIT v. Highway ConstructionCo. (P.) Ltd. [1996] 217 ITR 234 (Gau.) - CIT v. Smt. Nirmalabai K. Darekar [1990] 186 ITR 242/49 Taxman 74 (Bom.) - CIT v. Maganlal Mohanlal Panchal (HUF) [1994] 210 ITR 580 (Guj.). The Hon ble Bombay High Court in the case of CIT vs. Thane Electricity Supply Co.: 206 ITR 727, has however, taken a view contrary to aforesaid preponderant judicial position as laid down by the Hon ble High Courts. The Supreme Court in the case of Union of India and others vs. Kamlakshi Finance Corporation Limited: 1992 Supp (1) Supreme Court Cases 443 / 55 ELT 433 (Copy attached as Annexure 3) emphasized the principles of judicial discipline as under: It cannot be too vehemently emphasised that it is of utmost importance that, in disposing of the quasi-judicial issues before them, revenue officers are bound by the decisions of the appellate authorities. The order of the Appellate Collector is binding on the Assistant Collectors working within his jurisdiction and the order of the Tribunal is binding upon the Assistant Collectors and the Appellate Collectors who funct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act as well. For that purpose, the Ld. CIT (DR) provide that the Assessing Officer shall notwithstanding anything contained in section 153 pass an assessment order within one month from the end of the month in which the acceptance is received for the draft assessment order or the period of filing of objections expired in which such directions of DRP are received. 3) The Ld. CIT (DR) in his written submissions has, however, sought to contend that there nothing in section 153 which suggests that time-limit specified in that section will also be applicable to the order 144C(13). He further contended that had this been the intention of the Legislature, then it would have mentioned section 144C(13) in sub-section (1) of section 153 of the Act. It is to be noted that the Legislature consciously did not mention section 144C(13) whereas section 143(3) and 144 are mentioned in section 153(1). This is to ensure that section 144C remains a code in itself. Reliance has also been placed on the decision of Supreme Court in the South India Corporation Pvt Ltd v The Secretary, Board of Revenue 1964 AIR 207 wherein it held that It is settled law that a special provision should be given effect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aft assessment order, filing of objections before the DRP, disposal of objections by DRP and passing of assessment order by the assessing officer in compliance with the directions of the DRP are all part of the procedure for assessment contained in Chapter XIV of the Act. That the assessment completed under section 143(3) / 144C(13) of the Act pursuant to the directions of the DRP is an order of assessment, is further supported by the following provisions: - Section 2(8) of the Act, which defines assessment to include reassessment; - Section 253(1)(d) of the Act governing filing of appeals to the Tribunal by the eligible assessee, which reads as under: an order passed by an Assessing Officer under sub-section (3), of section 143 or section 147 or section 153A or section 153C in pursuance of the directions of the Dispute Resolution Panel or an order passed under section 154 in respect of such order; - Section 253(2A) of the Act (omitted by the Finance Act, 2016, w.e.f. 1-6-2016) providing Revenue the power to file appeal against the order of assessment completed pursuant to directions of the DRP, which reads as under: (2A) The Principal Commissioner or Commissioner may, if he object ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent order. The non-obstante provision in section 144C(1) of the Act is to make it mandatory for the assessing officer to pass draft assessment order in the case of an eligible assessee, contrary to the scheme of the Act wherein the assessing officer is required to pass one and only assessment order in the case of all other assessees. Having regard to the aforesaid, the non-obstante clause in section 144C(1) of the Act requiring passing of a draft assessment order in case of an eligible assessee is, therefore, to be read limited to the context, i.e., exception to the ordinary rule that there will be only one assessment order passed by the assessing officer on culmination of the assessment proceedings. Reliance is placed on the decision of the Supreme Court in CIT v. Mother India Refrigeration Industries (P.) Ltd.: 155 ITR 711 wherein it is reiterated that legal fictions are created only for some definite purpose and these must be limited to that purpose and should not be extended beyond their legitimate field . Section 153 of the Act providing for limitation for framing an assessment contains an absolute prohibition to the effect that an order passed after the limitation prescribed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of non-eligible assessees, then, in that situation, the said section would have read as under: No order of assessment .. other than an assessment completed in pursuance of directions of the DRP . (words inserted) shall be made under section 143 or section 144 at any time after the expiry of ... In such a situation, exception to the applicability of section 153 of the Act would be achieved by doing violence to the language of the said section and reading words into the statute which are conspicuous by their absence. Having regard to the aforesaid scheme of the Act, it is the respectful submission of the appellant that over all limitation for making an assessment including in the case of an eligible assessee is 33 months from the end of the relevant assessment year which would include reference to the TPO, receipt of order from the TPO, passing of draft assessment order, filing of objections before the DRP, disposal of objections and issue of directions by DRP and passing of assessment order by the assessing officer. The time limitation in section 144C(4) or section 144C(13), as the case may be, are only sub-limits, subsumed within the overall limitation of 3 years from the end of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment / reassessment is progressively being reduced which shows the conscious intent of the Legislature to ensure speedy finality and certainty of the taxpayer s liability. The Memorandum to the Finance (No. 2) Bill, 2009 while introducing the provisions of section 144C in the statute clarified the legislative intent in the following terms: The dispute resolution mechanism presently in place is time consuming and finality in high demand cases is attained only after a long drawn litigation till Supreme Court. Flow of foreign investment is extremely sensitive to prolonged uncertainity in tax related matter. Therefore, it is proposed to amend the Income-tax Act to provide for an alternate dispute resolution mechanism which will facilitate expeditious resolution of disputes in a fast track basis . It is submitted that if the non-obstante clause in sections 144C(4)/ 144C(13) of the Act is interpreted as allowing the assessing officer additional time over and above the limit provided under section 153 of the Act, the same would defeat the entire purpose of expediting the dispute resolution process, by enlarging the time available for completion of assessment to almost five years from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Pvt. Ltd. (Supra) has no relevance to the present controversy dealing with the inter play between section 153, on the one hand and section 144C(13) of the Act, on the other. It is settled law that a decision is an authority for what it decides. [Refer CIT vs Sun Engineering Works Pvt Ltd: 198 ITR 297 @ pg 320]. The finding recorded by the Hon ble Madras High Court in that case relied upon by the Ld. CIT DR was rendered in a different context. In that view of the matter, it cannot be said that the later decision in Roca Bathroom (supra) is per incuriam since the said decision failed to notice the earlier decision in the case of Sanmina Sci India (supra), which had no bearing on the issue in dispute in the case of Roca Bathroom (supra). The view taken by the Hon ble Madras High Court in the case of Roca Bathroom (supra), furthers the legislative intent of expediting the assessment in the case of eligible assessee, by curtailing the time limit for framing assessment in the case of such category of assessees. The decision of the Special bench in the case of Goldmine Shares (supra) does not lay down the correct law considering that the Gujarat High Court in the cases of CIT v. Sarabha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad the occasion to address an identical issue. It would be pertinent to refer to the relevant part of the judgment, which is directly on the challenge before us, which is as under: After an international transaction is noticed subject to satisfaction of section 92B, a reference is made to the TPO under sub-Section (1) of Section 92CA of the Act. Though the provision does not state as to when a reference is to be made, a reading of section 153 would explicit that the reference is to be made during the course of the assessment proceedings before the expiry of the period to pass an assessment order. The TPO after considering the documents submitted by the assessee is to pass an order under Section 92CA(3) of the Act. As per Section 92CA (3A), the order has to be passed before the expiry of 60 days prior to the date on which the period of limitation under Section 153 expires. As per Section 153, no order of assessment can be passed at any time after the expiry of 21 months. As per 92CA (4), the assessing officer has to pass an order in conformity with the order of the TPO. After the receipt of the order from the TPO determining ALP, the assessing officer is to forward a draft assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent and after amendment, as per section 153 (3), the time limit has been reduced to 9 months. As per the proviso to section 153 (3) if the order is received after 1st April 2019, the time limit is one year. From the above provisions, it is very clear that various time limits have been prescribed to various mechanisms which form part of assessment proceedings, either original or on remand to expedite and bring a finality to the assessment proceedings, which can be taken to a logical end. Discussion and Findings. 18. The main contentions of the Department, through their counsel are that Section 144C is a code in itself and hence on remand by the ITAT, the power of DRP to take up the dispute on additions by TPO, is not circumscribed by Section 153 and that in the absence of any express time limits contemplated under the Act, the time limits under Section 153 for reassessment cannot be read into Section 144C more particularly when the provisions of Section 153 are excluded by the non-obstante clause in section 144C(13) and hence the proceedings are not barred by limitation. Per contra, it has been contended by the learned senior counsels appearing for the respondent(s)/assessees that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... passed. This court is not in consonance with the contention of the learned senior panel counsel for the appellants/ revenue that the time period of 33 months, provided initially is for the draft order and not for the final order. A careful perusal of the timeline would indicate that the time limit is for the final assessment and not for the draft order. The anomaly in the argument is that in the present cases, no fresh draft order was passed, but the DRP had issued the notices. If the contention of the appellants / revenue was to hold some water, they must have passed the draft assessment order immediately on receipt of the order from the Tribunal, but instead, notice was issued by the DRP. In any case, it is a far cry for the revenue as because no order has been passed for more than 5 years. 21. As held above, the assessment has to be concluded within 21 months when there is no reference and when there is a reference, it has to be concluded within 33 months. In the additional 12 months, the draft order is to be passed, the objections have to be filed, the DRP has to issue the directions and the final order is to be passed. The provisions under section 144C and section 153 are not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lps in avoiding any inconsistency either within a section or between two different sections or provisions of the same statute. 15. On a conspectus of the case-law indicated above, the following principles are clearly discernible: (1) It is the duty of the courts to avoid a head-on clash between two sections of the Act and to construe the provisions which appear to be in conflict with each other in such a manner as to harmonise them. (2) The provisions of one section of a statute cannot be used to defeat the other provisions unless the court, in spite of its efforts, finds it impossible to effect reconciliation between them. (3) It has to be borne in mind by all the courts all the time that when there are two conflicting provisions in an Act, which cannot be reconciled with each other, they should be so interpreted that, if possible, effect should be given to both. This is the essence of the rule of harmonious construction . (4) The courts have also to keep in mind that an interpretation which reduces one of the provisions as a dead letter or useless lumber is not harmonious construction. (5) To harmonise is not to destroy any statutory provision or to render it otiose. (ii) CIT v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oid a construction which would reduce the legislation to futility, and should rather accept the construction based on the view that draftsmen would legislate only for the purpose of bringing about an effective result. We must strive as far as possible to give meaningful life to enactment or rule and avoid cadaveric consequences [See Principles of Statutory Interpretation by Justice G.P. Singh, 14th Edn., p. 50.] 23. Further, similar non-obstante clause is also used in section 144C(4) with a same limited purpose to imply, even though there might be a larger time limit under Section 153, once the order of TPO is accepted or not objected to, causing a deeming fiction of acceptance, the final order is to be passed immediately. The object is to conclude the proceedings as expeditiously as possible and the authority above, the DRP will have no authority to issue directions after nine months and a further period of one month as per section 144C (13) and three months under section 153 (2A) is available, within which period no orders have been passed in the present cases. The reference made by the learned senior counsels on the judgments in Nokia India Private Ltd (supra) and Vedanta Ltd (S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and also following the judicial pronouncement of the Hon ble Madras High Court as discussed hereinabove, quash the assessment order as barred by limitation. Ground Nos. 2 2.1 relate to adjustments in intimation issued under section 143(1)(a) of the Act retained without issuing show cause notice illegal and bad in law. 7. Before us the ld. Counsel for the assessee submitted that the impugned order passed under section 143(3) r.w.s 144C(13)/144B and under section 154 r.w.s 143(3) of the Act is in complete violation of the statutory provisions of section 144B inasmuch as the adjustments aggregating to Rs. 65,44,93,450 made in intimation issued under section 143(1)(a) of the Act have been mechanically imported by the assessing officer, without confronting the same to the assessee during the course of assessment proceedings by issuing any show-cause notice, prior to the issuance of the draft assessment order. 8. On the other hand, the ld. D/R submitted that the appellant did not file an appeal against intimation issued under section 143(1)(a) of the Act and, therefore, the same has become final. 9. In rejoinder, the ld. Counsel for the assessee submitted that the Ld. CIT (DR) failed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espectfully submitted that the addition / disallowance amounting to Rs. 65,44,93,450 made in the impugned assessment order on the basis of the said intimation under section 143(1)(a) of the Act may kindly be remitted / set aside to the assessing officer for providing explanation / reasons and an opportunity to rebut the same. 10. We have heard the rival contentions, perused the material available on record and gone through the orders of the revenue authorities. We find that the adjustment of Rs. 65,44,93,450/- was made in the Intimation issued under section 143(1)(a) of the Act and the AO has computed the total income taking the income processed under section 143(1)(a) as the base. Against this adjustment, the appellant has not filed any appeal. As against this, the ld. A/R has contended that Intimation under section 143(1)(a) of the Act was never made available/received by the appellant and, therefore, there was no occasion or opportunity for filing the appeal. Even the details of the adjustment are not made known to the appellant. In these circumstances, in the interest of natural justice, we deem it appropriate to direct the AO to provide the details of adjustment made in proces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... used for CUP, but it was the price at which it had sold the electricity to third parties/JVVN/AVVN/JDVNN at the rates specified by RERC/CSERC which was to be used for benchmarking the transaction. The TPO accordingly concluded that the sale of electricity to third parties made @ Rs. 2.53 per unit it could be considered as internal CUP. The TPO held that the Appellant incorrectly applied CUP by taking purchase rate of the end consumer, i.e. sale rate of SEBs as sale rate for CPPs. Further, the TPO concluded that since internal CUP is available, rate of Rs. 2.53 per unit is to be considered for benchmarking the transaction of sale of power by the eligible unit to non-eligible unit and made adjustment of Rs. 1286,10,45,365/-. The AO in his final assessment order dated 29.07.2022 considered the upward adjustment but restricted it to total deduction claimed by the Appellant u/s 80IA to Rs. 1108,24,50,372 within the umbrella disallowance made under section 80IA of the Act including allocation of common expenses to eligible units and deduction towards disallowance of steam. 12. On the other hand the ld. D/R referred to the amendment made by way of insertion of Explanation section 80IA(8) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act 2012 provided that the market value in relation to any goods or services means the arm s length price as defined in clause (ii) of section 92F of the Act. The said Explanation reads as follows: Explanation. For the purposes of this sub-section, market value , in relation to any goods or services, means (i) the price that such goods or services would ordinarily fetch in the open market; or (ii) the arm's length price as defined in clause (ii) of section 92F, where the transfer of such goods or services is a specified domestic transaction referred to in section 92BA. Section 80IA of the Act, thus provides that the transfer price of the goods or services transacted between an eligible unit or a non-eligible unit should correspond to the market price of the goods and services so transacted. However no-where in the Act it has been prescribed that what should be the component of that price structure. The Act does not provide that what component of price structure should be included or excluded from the transfer price to arrive at the market price. In case of the Appellant, the price of power at which the consuming units can procure the power is available in the market. It is su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IA of the Act. The Transfer Pricing Officer merely relied on extraneous factors (which are without any basis) to conclude that the cost at which the Appellant purchase/s electricity from SEBs cannot be taken as a comparable. The Transfer Pricing Officer failed to appreciate that in terms of the Electricity Act and RERC / CSERC guidelines, Appellant is restrained from directly selling generated electricity to the consumers. The Appellant therefore, has no other option but to sell the excess (over and above self-consumption) electricity generated to JVVNL, AVVNL or JdVVNL at the predetermined rates and it cannot charge higher rate from JVVNL, AVVNL or JdVVNL. The market rate of electricity thus is not determined by the forces of demand and supply, rather the same is regulated by the Government. In spite of it, the Appellant has determined transfer price at Rs. 7.76 to Rs. 8.64 per unit as charged by SEB. Further, the fixed demand charges were stated to be for ensuring uninterrupted supply. In the assessee s case, the Appellant has fulfilled this condition as the CPP s have provided uninterrupted power supply to the manufacturing units. In the state of Uttarakhand, Bihar, West Bengal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of power charged by SEB for supply of electricity to industrial consumers. Reliance in this regard is also placed on the decision of Bombay High court in the case of CIT vs. Reliance Industries Ltd.: 421 ITR 686 (ref. Page 1011-1015 of CL Paperbook) wherein it has been held that valuation of electricity provided to another unit should be at rate at which electricity distribution companies were allowed to supply electricity to consumers. To the similar effect is the decision of Calcutta High court in the case of CIT v. Kanoria Chemicals Industries Ltd.: 219 Taxman 35 (Calcutta)(Mag.) and Chennai Bench of the Tribunal in the case of Sri Matha Spinning Mills (P.) Ltd. v. DCIT: 141 ITD 238. The above issue is squarely covered in favour of the Appellant by the decision of the Delhi Bench of the Tribunal in the case of CIT v. Jindal Steel Power Limited: 16 SOT 509, wherein it was observed as under: 15. Therefore, from the aforesaid, it can be deduced that market value is an expression which denoted a price arrived at between the buyer and the seller in the open market wherein the transactions take place in the normal course of trading and competition in contrast to a situation where the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tariff in terms of present statutory guidelines. Therefore, the price determined in such a scenario cannot be equated with a situation where the price is determined in the normal course of trade and competition. Therefore, the price determined as per the PPA cannot be equated with market value as understood in common parlance. We see no reason for not holding so for the purposes of Section 80-IA(8) also. . From the aforesaid, an analogy that can be safely deduced is that the market value cannot be the result of a transaction which has been entered into between a buyer and a seller in a situation where one of the parties is carrying the compulsive mandate of the Legislature. The situation before us is such wherein the aforesaid analogy can be usefully applied. As we have seen earlier, the price at which the power is supplied by the Appellant to the Board is determined entirely by the Board in terms of the statutory regulations. Such a price cannot be equated with the market value as understood for the purposes of Section 80-IA(8) of the Act. The stand of the revenue to the aforesaid effect cannot be approved. 18. Having held so, the natural corollary is to ascertain whether the pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of section 80-IA(8), where a basket of Market Values (say like, independent third party transactions, grid price (average annual landed cost at which grid has sold power to the assessee), Power Exchange Price for the relevant period etc.) are available, the law does not put any restriction on the Appellant as to which Market Value it has to adopt, it is purely the discretion of the assessee. As long as the Appellant has adopted a Market Value as the transfer price, it is sufficient compliance of law. It was observed that the assessing officer can adopt a different value only where the value adopted by Appellant does not correspond to the market value . In case there are options, the option favourable to the Appellant is to be adopted as held in Vegetable Products Ltd 88 ITR 192 (SC). The aforesaid findings of the Jaipur bench of the Tribunal were also affirmed by the Hon ble Rajasthan High Court, vide order dated 22.8.2017, in Income tax Appeal No 85/2014 (ref. Page 2941-2955 of CL PB) as under: 24. The issue No. 2 is with regard to the claim of the assessee for the value of the goods or services for the purpose of Section 80IA(8). 25. In view of the submissions made by Mr. S. G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e date of transfer, then for the purposes of the deduction under this section, the profits and gains of such eligible business shall be computed as if the transfer, in either case, had been made at the market value of such goods or services as on that date Explanation For the purposes of this subsection, market value , in relation to any goods or services, means the price that such goods or services would ordinarily fetch in the open market. 12. On perusal of the above, it could be clearly seen that the Statute provides that the assessee must adopt Market Value as the transfer price. In the open market, where a basket of Market Values [say like, independent third party transactions, grid price (average annual landed cost at which grid has sold power to the assessee), Power Exchange Price for the relevant period etc.] are available, the law does not put any restriction on the assessee as to which Market Value it has to adopt, it is purely assessee s discretion. So long as the assessee has adopted a Market Value as the transfer price, that is sufficient compliance of law. AO can adopt a different value only where the value adopted by assessee does not correspond to the market value . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of CIT Vs. Vegetable Products Ltd. [1973] 88 ITR 192 [SC] and other High Courts as pointed out by the AR. 13. In the light of the aforesaid, we hold that (a) the value adopted by the Assesse be it value as per independent third party trading transactions or as per Power Exchange (IEX etc.) or any other independent transaction (for the relevant period and which has taken place in the relevant area where the eligible unit is located) constitute market value in terms of explanation to Section 80IA(8); (b) the value at which State Grid has sold power to the Cement Unit of the Assessee (average annual landed cost) also constitute market value in terms of explanation to Section 80IA(8) but the value at which State Grid or third party has purchased power from the Power Unit of the Assessee, which represents its power which is sold when not required by the Cement Unit, does not constitute market value in terms of 16 explanation to Section 80IA(8). It is the principle and not the quantum which is deciding factor; (c) where a basket of market values are available for the relevant period and relevant geographical area where the eligible unit is situated, the assessee has discretion to adop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er is consumed in other undertakings of the assessee. Transfer of power from CPP Debari CPP Zawar are reckoned at market price which corresponds to the State Grid electricity price. The assessee has claimed deduction under section 80IA of the Act in respect of profit gains derived from business of generation of power for CPP, Debari (being first year of the consecutive period of 10 out of 15 years). Regarding CPP, Zawar, there was no profit available for deduction under section 80IA during the year under consideration. In the original assessment order the A.O. had allowed deduction under section 80IA regarding CPP, Debari for A.Ys. 2004-05 to 2006. 7. The ld. Authorized Representative argued that all the requisite conditions, which are necessary and sine-qua-known for claiming deduction in payment of section 80IA(3), stands satisfied. 7. We incorporate or extract paragraph no. 2.2.4 at page nos. 4 to 6 of CIT(A)' s order to demonstrate as to how the assessee has fulfilled the requisite conditions: 2.2.4 The AR has further submitted that the appellant has fulfilled the three conditions as prescribed in sub-section (3) of 80/A of the Act. A. The brief submissions in respect of ea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment order also there was no dispute raised on this matter. C. Accounts of the undertaking to be audited by Chartered Accountant:- The accounts of the CPP Debari and CPP Zawar were duly audited by Chartered Accountant as defined in section 288 and certificates in Form 10CCB have been enclosed with the return of income. Kind reference is made to Page No 10-16 of PB-for CPP Debari and for CPP Zawar Mines at Page No 33-42 of PB, enclosed with this submission. These reports in the statutory form furnish the details and the quantum of deduction claimed by the Company . These reports were accompanied by the profit and loss account and balance sheet of the respective eligible undertakings. In the case of CPP Debari, the profit and loss account is at Page No 15-16 and balance sheet at Page No 14. In the case of CPP Zawari, the relevant information of profitability is at Page No 38-39 and balance sheet at Page No 37 of PB. In the case of CPP Debari and CPP Zawar Mines, since the claim of 80IA was allowed by the AO regularly in the original assessment, from the AY 2004-05 and onwards, the relevant information was attached in each of the assessment years. Kind reference is also made to the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by itself? 4. After considering the issue, the statutory requirement as prescribed under s.80-IA(l) has been stated in paras 8 and 9 of the above said judgement which reads thus:- 8. The contention that only whatever power generated from the sale to an outsider or the Electricity Board, and the profit or gain derived by such sale alone can be taken as profits or gains derived by the assessee as mentioned in s. 80-IA(1) of the IT Act, has been rejected, by the Tribunal in the order impugned. In our considered view, the Tribunal was well justified in having rejected such a stand of the appellant. Having referred to s. 80- IA(1) of the IT Act, we are also convinced that what is all to be satisfied in order to be eligible for the deduction as provided under sub-s.(l) of s. 80-IA, the assessee should have set up an undertaking or an enterprise and from and out of such an undertaking or an enterprise set up, any profit or gain is derived, falling under sub- section covered by sub-s.(4) of s.80-IA of the IT Act, such profit or gain derived by the assessee can be deducted in its entirety for a period of 10 years starting from the date of functioning of the set up. The contention that profi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bench has stated as under in para 13 of the judgment:- 13. A perusal of the above said circular would clearly show that it is also in favour of the assessee. The said circular is very specific that in a case of captive power unit the provision of law is also the same as in the case of the undertaking which generates and distributes the power to any other concern. Further, it is a well-established principle of law that a circular can only be made in consonance with the provisions of the enactment and the same cannot be derogatory to the purport sought to be achieved. Hence we are of the opinion that the circular relied upon by the learned counsel for the Revenue is infact in favour of the assessee and therefore the said contention also cannot be accepted. 6. Mr. K. Subramanian, learned standing counsel for the respondent would however contend that the expression 'derived from' should be given restricted meaning in which event the claim of the appellant cannot be countenanced. According to the learned standing counsel since the business of the appellant is manufacture of petro products and generation of electricity is not its business, it cannot be held that whatever profit e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year under consideration. However, as per the enclosed report of the Chartered Accountant at Annexure 'I', there are no profits for deduction u/s 80A during the y ear under consideration. The company would claim the same whenever there are profits from this unit. Since power generation has been started during the assessment year 2004-05, therefore, the AO has not considered as to whether the depreciation for earlier year was allowable against set off of income of the earlier year because the commencement of Captive Power Plant is from assessment year 2004-05. There has been clear cut lack of enquiry for ascertaining the quantum of deduction u/s 80IA. 9. Therefore, it becomes clear from the above that the assessee has been held eligible for deduction under section 80IA of the Act in respect of Captive Power Plant, Debari. Respectfully following the above Tribunal Order, we do not find any merit in the ground raised by the Revenue in this appeal. Therefore, we confirm the impugned deletion and dismiss the appeal of the Revenue. 262. Respectfully following the decision of the Coordinate Bench and in the absence of any distinguishing factor brought to our attention by the Ld. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellant holding as under: 2.2 The AO firstly held that the CPP had been set up for generation of electricity, steam was not at power for the purposes of section 80IA, and therefore income from sale of steam was not eligible for deduction u/s 80IA. Without prejudice, the AO held that even if notional income from sale of steam was considered eligible for deduction u/s 80IA, the assessee had failed to furnish any details of cost of steam claimed at Rs. 31,17,36,541/- to show that any specific cost attached to steam which was a waste product generated in the process of generation of electricity from coal. In these facts, sale price for notional transfer of steam (submitted by the assessee to be equal to cost of steam) was taken at NIL by the AO, reducing the income of the CPPs eligible for deduction u/s 80IA by Rs. 31,17,36,541/-. 2.3 As regards the first finding of the AO, while deciding the preceding Ground, 8(b), of appeal, income from sale of steam has been held eligible for deduction u/s 80IA following the Hon. ITAT s orders in assessee s own case in earlier years. However, the question to be decided in this ground of appeal, i.e., whether the assessee, in the year under appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther than generation of electricity, is power or not. Here the appellant submits that it is a well-known fact that the Steam is power. The Webster s Dictionary defines steam as energy . In Webster's Abridged Dictionary, at p. 1391, the steam has been defined to mean 'power or energy . The Oxford English Dictionary defines Power as mechanical or electrical energy or any form of energy or force available for application to work (as that of gravitation, running water, wind, steam, electricity. The TPO failed to appreciate that section 80 IA of the act refers to the term Power and this term has to be determined from the perspective of the recipient and also that Power cannot only mean electricity . Accordingly, the steam and power are one or the other form of energy and giving steam a different treatment would be contrary to the spirit of the statute. Since the steam is equated with the power it is a form of energy and power being also energy, the revenue so generated would qualify for deduction u/s. 80-IA. It is submitted that the income derived from the supply of steam is income derived from an undertaking engaged in the generation of power is a form of energy and is thus pow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tries Ltd. [S.L.P.(C) No. 18537 of 2009] (319 ITR 8 and 9) held that the appellant was entitled to claim deduction under section 80-IA of the Act on the value of steam used for captive consumption by the appellant. At this juncture, it is respectfully submitted that the issue of allowability of this claim of deduction u/s 80-IA is no longer res integra and is covered by decision of Hon ble Kolkata Bench of Tribunal in Deputy Commissioner of Income-tax, Circle-8, Kolkata vs ITC Ltd. [2015] 154 ITD 136 (Kolkata Trib). The similar claim of steam has been allowed in Appellant s favour in the past, in respect to Asst. Yr. 2014-15 and 2015-16 by the Hon ble CIT(Appeals), Udaipur. The Hon ble Jurisdictional ITAT Jodhpur in the case assessee s own case has allowed the claim of the Appellant vide its consolidated order dated 04/09/2017 for the assessment years 2008-09 (ref. pages 208-212 of CL Paper book), 2011-12(ref. pages 349 of CL Paper book) and for the AY 2012-13. (ref. pages 349 of CL Paper book). 18. We have heard rival contentions, perused the material available on record and gone through the orders of the revenue authorities. We find that the matter is squarely covered by the deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... doubt that scientifically or in general parlance, production of steam and generation of steam or for that matter, production of electricity and generation of electricity, shall have the same meaning whichever of the two be the item under consideration. Regarding the sub-clauses (b) and (c) of section 80-1 (4)( iv) deal with -transmission and distribution lines, he submitted that under clause (iv) of section 80-1 (4) provides for deduction in case of three types of undertakings, viz., the one which is engaged in generation or generation and distribution of power, the second which starts transmission or distribution by laying a network of new transmission or distribution lines; and the third which undertakes substantial renovation and modernization of the existing network of transmission or distribution lines. All these three clauses deal with the three different categories of the undertakings. These three types of undertakings referred to in the said sub-clauses (a), (b) and (c ) are different and independent of each other. Hence while dealing with one sub-clause, inference need not and cannot be drawn from the other sub-clause. He submitted that the word 'power' used in se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as base route. 5. Considering the above submissions, we find substance in the arguments of the learned Authorised Representative that like electricity, steam is also a form of power as per the dictionary meaning reproduced by the learned CIT( ) at pp. 5 and 5 (sic) of the first appellate order. We also concur with the view of the learned Authorised Representative that there is little room for any doubt that scientifically or in general parlance, 'production of steam' and 'generation of steam'; or for that matter, 'production of electricity' and 'generation of electricity', shall have the same meaning whichever of the two be the item under consideration. In this regard the learned Authorised Representative has also referred the definition of word 'generate' under section 2(29) of the Electricity Act, 2003 as per which 'generate' means to produce electricity from a generating station for the purpose of giving supply to its any premises or enabling a supplier to be so given. The Assessing Officer has tried to point out the intention of the Legislatures by referring to section 80-1A(4)(iv)( b) to infer that intention is to provide benefit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the steam is the hot gas that is produced when water boils; steam can be used to provide power, steam turbines of a steam engine/ locomotive of the age of steam. Thus, there is no doubt, like electricity, steam is also a form of power. The arguments advanced on behalf of the assessee also find support from the decision of Delhi Bench of the Tribunal in the case of Sial SBEC Bioenergy Ltd. (supra) on an identical issue wherein dealing with the matter in detail, it has been held that the word 'power' has to be given a meaning which is in common parlance and in common parlance the word 'power' shall mean the energy only. The energy can be of any form, be it mechanical, be it electrical, be it wind or be it thermal. The steam produced by the assessee on the principle of interpretation of statute shall only be termed as power and shall qualify for the benefits available under section 80-1A(iv), held the Tribunal. Under these circumstances, we fully concur with the decision on the issue arrived at by learned CIT( ) that assessee is in the business of generation of power and that the steam so generated by the industrial undertaking and receipt from the business of industr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion on the head office assets i.e. residential building, computers, furniture and fittings, motor vehicles etc. was also considered for the apportionment. That way, the expenses of Rs. 4.90 Cr, 4.65 Cr, Rs. 10.97 Cr, Rs. 57.44 Cr respectively were determined to be apportioned for CPPs Chanderiya 80MW, Zawar 80MW CPP, CPP Dariba 160 MW and Pantnagar lead and Zinc plant respectively and in the case of WPPs Rs. 2.07 Cr on the basis of turn-over while computing the eligible profits. For arriving at the amount of disallowance, the TPO has worked out the percentage of HO expenses to the Total expenses of HZL which worked out at Rs. 337.97 Cr being 32% of total head office expenses and arrived at an amount of Rs. 7.97 Cr and added the same with total HO expenses for depreciation on HO assets and apportioned total amount of Rs. 345.94 Cr on the basis of turnover of the units and made total addition of Rs. 50.99 Cr. 20. On the other hand the ld. D/R contended that head office is only the cost center and not a profit center. Reference made to the observations of the TPO at page 63 of the TPO s order which reads as under: 6.9 The plain reading of subsection (8) of section 80 IA makes it clear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenses, cost audit expenses, director s related expenses, grass- root expenses and salary to non executive employees are nil in the case of CPPs, refineries and WPPs whereas the said expenses are substantial in the case of Head Office. The substantial difference in staff welfare expenses, rates and taxes, insurance, technical consultancy and watch and ward expenses paid at Head Office without earning any income and those incurred in the case of CPPs, refineries and WPPs where huge turnover was made is a glaring example to establish that CPPs and other units were being controlled and managed by the Head Office. Therefore, Head Office expenses need to be allocated to the CPPs and other units to work out their actual exempted profits. The Ld. CIT (DR) contended that services received from head office is to be construed as transfer in terms of section 80IA of the Act and, therefore, the same is to be taken into account for determining the profit eligibility for deduction under section 80IA for the eligible unit. 21. In Rejoinder, the ld. Counsel for the assessee submitted as under :- The Appellant submits that the action of the TPO/AO in apportioning the expenditure incurred is not su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39; travelling expenses Auditor s remuneration and expenses Donation The board of directors take part in strategic and key decision making for facilitating the operational activities at eligible as well as non-eligible units. In this regard, the salary cost of the board of directors may be apportioned and allocated to the eligible units. Similarly, the other expenses listed herein, are incurred for the Company as a whole and may also be apportioned between the eligible and non-eligible units, based on a rational allocation key, which would appropriately reflect the efforts undertaken by the respective units. The Appellant submitted that the Head Office expenses and common assets have no proximate connection with the industrial undertaking eligible for deduction under the Act. These expenses would have been incurred otherwise also had there been no tax benefit units in existence and these expenses represent common corporate expenditure which cannot be allocated or assigned to any particular unit or activity. The TPO/AO while making the apportionment has taken all the expenditure incurred at the HO and went ahead in reducing the deduction u/s 80IA and 80IC of the Act, which in the hu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on a rationale and scientific basis, if no method has been prescribed under statute, and also affirmed application of headcount basis for allocating common expenses. (d) No provision for apportionment of expenditure in the Act. The TPO/AO held that the head office expenses have to be apportioned on the basis of turnover. Various Head Office expenses like salary, rent, insurance, etc. and depreciation on the head office assets i.e. residential building, computers, furniture and fittings, motor vehicles etc. was also considered for the apportionment. That way, the expenses of Rs. 4.90 Cr, 4.65 Cr, Rs. 10.97 Cr, Rs. 57.44 Cr respectively were determined to be apportioned for CPPs Chanderiya 80MW, Zawar 80MW CPP, CPP Dariba 160 MW and Pantnagar lead and Zinc plant respectively and in the case of WPPs Rs. 2.07 Cr on the basis of turn-over while computing the eligible profits. The TPO also held that the head office expenses and the depreciation on the common assets have to be apportioned on the basis of turnover and not on the basis of number of employees . For arriving at the amount of disallowance, the TPO has worked out the percentage of HO expenses to the Total expenses of HZL whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The following principles may be laid down : (i) if the income of an Appellant is derived from various head of income, he is entitled to claim deduction permissible under the respective head, whether or not computation under each head results in taxable income; (iii) if the income of an assessee arises under any of the heads of income but from different items, e.g., different house properties or different securities, etc., and income from one or more items alone is taxable whereas income from the other item is exempt under the Act, the entire permissible expenditure in earning the income from that head is deductible; and (iii) in computing the profit and gains of business or profession when an assessee is carrying on business in various ventures and some among them yield taxable income and the others do not, the question of allowability of the expenditure under s. 37 of the IT Act, 1961, - will depend on : (a) fulfillment of requirements of that provisions, namely that (i) the expenditure should not be in the nature of capital expenditure or personal expenses of the assessee; (ii) it should have been laid out or expended wholly and exclusively for the purposes of the business or pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tained, and therefore common expenditure of the Head Office cannot be apportioned for considering the deduction under chapter VIA. Aggrieved by the order of the assessment apportioning the common expenditure incurred by the Head Office, the assessee went on appeal before the Commissioner of Income Tax (Appeal), who following his earlier order, held against the assessee. Aggrieved by the same, the assessee went on appeal before the Tribunal, so too the Revenue went on appeal as against certain relief granted to the assessee. 3. A perusal of the order of the Tribunal shows that it followed the orders relating to assessment years 1981-82 to 1991-92 dated 28.5.2002 deciding the issue in favour of the assessee. Thus, the assessee's appeals were allowed. Learned counsel for the assessee placed before this Court the Tribunal's order passed in the assessee's own case on the identical claim dealt with under paragraph 28 of the order relating to assessment year 1984-85, paragraph 53 of the order relating to assessment year 1987-88 and paragraph 77 of the order relating to assessment year 1990-91. The Tribunal pointed out that the Head Office monitored the requirement of finance a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le are that the deductions admissible under the Act shall be the actual amount relating to the income derived from agricultural operations and proved by accounts or other conclusive evidence. Where no such accounts or evidence available, the Assessing officer can proceed to asses the income to the best of his judgment. In confirming the view of the Karnataka High Court, the Supreme Court also affirmed the similar view rendered by this Court in the decision of CIT v. Manjushree Plantations Ltd. [1981] 130 ITR 908 6. As far as the above stated decision is concerned, the deduction is based on Rule 5. In the absence of any specific provision in the Income Tax Act, and more so in the absence of any such provision, there being no material to show that the expenditure though common were with reference to individual units relatable to the income earned, we do not find any justifiable ground to accept the plea of the Revenue. The assessee had taken the contention that the expenses incurred was for the overall management of the units as well as for providing finance. In the circumstances, the decision of the Apex Court is misplaced. 7. As far as the decision of the Madhya Pradesh High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 97,262/- made by the Assessing Officer for the claim u/s 80IA of the Act. The Ld. Departmental Representatives adopted the same argue as were made in ITA No. 612/JU/ 2009. He submitted that the assessee has not apportioned the expenses related to Head Office and CPP. He submitted that Director's fee is same for the Head Officer as well. 9.1 On the contrary, Id. Counsel for the assessee submitted that the expenses are duly apportioned and the word derived from has a wide import and be construed accordingly. 9.2 We have heard the rival contentions, perused the material available on record and gone through the order of the authorities below. The identical issue was in the ITA No. 612/JU/2009 we have decided this issue in para 10.2 by observing as under:- 10.2 We have heard the rival contentions, perused the material available on records and gone through the orders of the authorities below. We find that the identical issue was in the year 2004-05 in ITA No.235/JU/2008. The coordinate Bench has decided the issue in Para 17.9 holding as under:- 17.9 We have heard the rival contention and perused the material available on record. It is settled law that when the assessee claims any all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat HO is not a profit earning centre and Captive Power Plant, Debari is not a standalone unit, having independent functioning and a separate profit center and on such erroneous assumption reduced the deduction u/ 80IA by aforesaid expenses of other independent and functionally different units. Ld. Counsel has demonstrated that other units of the Company cannot use the fixed assets, like permanent residential buildings of Udaipur unit which are wholly and exclusively for the operation of Udaipur unit only; there is no basis to assume that they were even impliedly used by other operating units including CPP. Consequently there being no direct nexus between two independent industrial units the question of proportionate apportionment of their user or depreciation to CPP does not arise. Moreover, it has been demonstrated that the Udaipur based office equipment, furniture, fixtures, computers, motor vehicles etc. are also exclusively used for the day to day working of Udaipur Unit and they can in no way be supposed to be used for CPP. Since respective units retain control over their assets, they have no occasion of user by CPP. Rom the facts and circumstances emerging form the record an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penditure and industrial activity. Since there is no direct nexus of the alleged expense with CPP unit, neither allocation nor reduction of 80IA claim has justification. It is settled law that allocation, if any, cannot be made by demonstration of direct nexus between alleged proportions of expenses with power generation operations of PP unit situate at Debari, Ld. CIT(A) has rightly deleted the reduction in 80IA claim. i) The Legislature has used the words derived from in contradiction to the words attributable to in other sections. a. In the case of Cambay Electric supply Co vs. CIT 1978 CTR (SC) 50: (197) 113 ITR 84 Hon'ble Supreme Court has squarely held that the Words ''derived from have been used by the legislature in restricted sense as the Words ''attributable to are much wider in meaning than the words derived from b. Hon'ble Supreme Court in the case of IT vs. Sterling Foods (1999) 153 ITR CTR (SC) 439: (1999) 237 ITR 579 (SC) has held that or application of the words ''derived from' There must be a direct nexus between the profits and the activity of the industrial undertaking, consequently, it is by now a settled proposition that remo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the issue. is restored to the file of the Assessing Officer for re-computation of reduction. The Assessing Officer would re-work allocation of the expenses related to the director's fees, auditor's fees and donation for charity. To this extent, the order of the Ld. CIT(A) is modified This ground of the Revenue's appeal is partly allowed for statistical purposes. 9.3 There is no change into facts and circumstances. Therefore, taking a consistent view, we restore this issue to the file of the Assessing Officer for re- computing the reduction of deduction u/s 80IA. The Assessing Officer would restrict the apportionment to the extent of Director's fee, charity and donations. The Ground no. 8 is partly allowed as discussed hereinabove for statistical purpose. The above view has been affirmed by the decision of the Hon ble Jodhpur Bench of the Tribunal in the assessee s own case pertaining to AY 1992-93 to 2011-12 (ref. pages 214-218 of CL Paper book) (ref. pages 349 of CL Paper book) and also for AY 2012-13 (ref. pages 461-465, 475-476, 492 ,523 of CL Paper book) which the Hon ble Tribunal has categorically held that turnover cannot be the basis for apportionment of H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Assessee in the earlier order was also the basis of allocation. Hence while accepting that there was no basis for allocating expenditure of the Head Office to the eligible units he make the exception in respect of directors fee, auditors fee and donation for charity. However, we direct the Assessing Officer to apportion such expenditure on a reasonable basis and not on the basis of turnover as was done by him in the Assessment Years. For these utterly support from the decision of a Coordinate Bench in the case of ACIT Vs. P.I. Industries (144 TTJ 353) (Jodhpur) where the Tribunal has disapproved the turnover basis for allocating common expenditure. Given the nature of these expenses it would be seen that the auditors have contention and expenses for charity cannot rely be attributed to any particular unit as these are genuine expenses and in our opinion only such expenses should be attributed which have a direct bearing of the business activity. It is the humble submission of the assessee that that the TPO/AO has erred in apportioning the head office expenses and depreciation on assets at head office and thereby reducing the quantum of deduction allowable u/s. 80IA and 80I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g as under:- 17.9 We have heard the rival contention and perused the material available on record. It is settled law that when the assessee claims any allowable deduction the explanation and evidence submitted in this behalf is to be objectively considered by ld. AO. In case of any infirmity in the claim, the same should be effectively dealt and the claim should be denied by proper discharge of onus. Without effective rebuttal and objective consideration assessee s beneficial claim cannot be disallowed on assumptions and intendments. It is also settled jurisprudence that while interpreting the beneficial legislations a liberal approach should be adopted. This is so as a very strict interpretation will defeat the legislative intent of encouraging captive power plants in electricity starved nation in general and power short state of Rajasthan. Provisions of Sec. 80IA of the IT Act are undoubtedly beneficial in nature, so in case of ambiguity about its interpretation a liberal approach is mandates by settled judicial precedents. The undisputed facts which emerge from the record indicate that assessee by evidence and explanation brought on record objective material to demonstrate in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... retain control over their assets, they have no occasion of user by CPP. Rom the facts and circumstances emerging form the record and contentions. We observe that: a) No allocation of Ho and other expenses is justified since such expenditure on Ho and other units was incurred even prior to setting up of eligible CPP unit. b) The assessee is primarily engaged in the activities of mining and manufacturing of Zinc and lead metals. This business of the assessee is one and indivisible from CPP unit. In the absence of any direct nexus the apportionment is not mandated by the correct interpretation of sec 80IA. c) It has not been rebutted that after the commencement of CPP activity there was no increase in the HO expense relatable to employee s remuneration benefits an Administrative expense as a whole, in comparison to the earlier year. Rather HO expenses for the year under consideration have been reduced drastically. Thus there is no reason to assume any notional increase in these expenses after the commencement of CPP Debari, Consequently, the conclusion that impugned allocation of expenses has no direct nexus with eligible CPP unit, has no basis or valid justification. d) Apropos expen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndustrial undertaking, consequently, it is by now a settled proposition that remote or indirect nexus would not be sufficient for application of the words derived from . c. In the case of IT vs. Strawboard Manufacturing Co Ltd. {(1989) 177 ITR 43} in the context of deduction under section 80E, Hon ble Supreme Court held that: The provision for rebate has been made for the purpose of encouraging the setting up of new industries. It is necessary to remember the when a provision is made in the context of a law providing for concessional rate of tax for the purpose of encouraging an industrial activity, a liberal construction should be put upon the language of the statute. In our view, the controversy in question stands squarely covered by the case of Zandu Pharmaceuticals Works Ltd. (supra) in favor of the assesee. In this case assessee incurred expenditure for the R D work in the HO and there were independent manufacturing units. Assessee claimed deduction u/s 80IA without allocating any proportionate expenses of HO Ld. AO adopted the same course as in the case of this assessee. It was held that the HO was maintained for the overall benefit of the manufacturing units only and HO was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es raised by the Assessee in the earlier order was also on the basis of allocation. However, we direct the Assessing Officer to apportion such expenditure on a reasonable basis and not on the basis of turnover as was done by him in the Assessment years. For this we find support from the decision of a Coordinate Bench in the case of ACIT vs. P.I. Industries (144 TTJ 353)(Jodhpur) where the Tribunal has disapproved the turnover basis for allocating common expenditure. In our opinion only such expenses should be attributed which have a direct bearing of the business activity. With these observations this ground of revenue is partly allowed. On the very same issue the Coordinate Bench of the Tribunal in ITA No. 246/Jodh/2017 dated 04.09.2017 for the assessment year 2011-12 observed in para 509 as under :- 509. We find that similar issue has been considered by us in ground no. 11 of the Revenue s appeal for AY 2008-09 in ITA No. 184/Jodh/2012. For the reasons contained therein, we allow this ground of appeal of the assessee. We, therefore, respectfully following the decisions as discussed above, partly allow the ground of the assessee on the above terms. Accordingly following the earlie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aken by the Appellant [using Transactional Net Margin Method (TNMM) as the MAM] and has applied the Profit Split Method (PSM) for determining arm s length price for transfer of cathode. TPO held in the impugned TP order that the cost plus approach adopted by the Appellant for valuing the transfer of semi-finished/ intermediary goods from the noneligible units to the eligible units of the Appellant is inappropriate and has applied PSM Method (considering the processing cost incurred as the allocation key). 24. On the other hand, the ld. D/R contended as under :- (i) The Ld. CIT (DR) contended that in the Pantnagar Silver Metal Process ( PSMP ) unit significant value addition to semi-finished cathode ingots is not made and only marginal refinement / reduction in the impurities takes place. Reference to the statement of Mr. Rajesh Dua at pages 46, 56 and 61 of the paper book. (ii) The Ld. CIT (DR) contended that TP study of the appellant the arm s length price of the eligible transactions of transfer of semi-finished cathode is not properly determined in as much as the comparable companies considered in the TP study were not appropriate for benchmarking of the eligible undertaking. (i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and silver ingots for ultimate sale to the customer. The manufacturing process at the refining units is explained below: (i) The cathode sheets are transported to the refining units of HZL through containerized trucks, either by rail / road, in bundles, each weighing approx. 2.5 2.8 MT with MS strapped. The bundles are unloaded by the forklift and kept in the storage yard. (ii) These cathode bundles are unstrapped manually by cutter and with the help of forklift they are taken to the charging floor. The cathode sheets of approx. 1MT to 1.5 MT are charged in the furnace through the chain rollers charging system. (iii) These sheets are melted in the induction type Electrical furnace. The furnace is associated with the suction ducts and the bag house system for collecting the melting fumes and fine dust from the furnace. The temperature maintained in the furnace bath is approx. 500-510 degree centigrade. Ammonium chloride, of about 250-300 gms per MT of cathode sheets is used as flux. (iv) The molten metal then is transferred through the pump which is mounted in the furnace bath to the casting machine. Thereafter, the metal is collected in the tundish of the casting machine which fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... / revert on the same thereafter. [Ref. Pg 61 of the compilation filed by the Ld. CIT (DR)]. In the statement of Mr. Ramesh J. Parmar placed at pages 64 to 71 of the compilation filed by the Ld. CIT (DR) only confirms and corroborate the aforesaid manufacturing process undertaken at PSMP plant. It is also confirmed in the said statement that the raw material, i.e., zinc, cathode, sheets received from plants in Rajasthan are further refined at PSMP which results in reduction of 2-2.5% of waste material, viz., zinc dross and consequently the finish product, viz., zinc ingots with 99.995% zinc content/purity is produced. In other words, by virtue of the technology involved in the manufacturing process at PSMP unit, zinc ignots could be manufactured which is the marketable or saleable finished product. Therefore, it is respectfully submitted the contentions of the Ld. CIT (DR) that significant value addition is not undertaken at PSMP plant is incorrect arbitrary and not supported by the material, namely, statements of the concerned technical person placed on record. Cost plus approach adopted by the Appellant is most appropriate - Consistent with OECD Guidelines Further, the Ld. TPO has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TNMM was selected as the most appropriate method considering the nature and characteristics of the transactions undertaken between the eligible and non eligible undertaking. (Detailed functional and economic analysis at Pg 419-434 of paper book Vol 2). Further, on the basis of the aforesaid analysis, the appellant selected functionally comparable companies engaged in mining and production of aluminium and copper. It is submitted that such companies are functionally comparable to the taxable units of the appellant and a detailed business description of the aforesaid companies was provided as Annexure D of the TP documentation (Pg 457 of the paper book). It is submitted that neither the TPO nor the Ld CIT(DR) have provided any specific reasons for rejection of the companies selected by the appellant for the purpose of undertaking benchmarking analysis. The profitability of such companies was thereafter compared with the profitability of the taxable units of the appellant and since the operating margins of the taxable undertaking at 10% were higher than the operating margins of the comparable companies at 6.53%, the specified domestic transactions were considered to be at arm s lengt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng 10% mark-up on cost of producing cathode for transfers to eligible units is also in line with Rule 8 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 ( Central Excise Rules ) which reads as following Quote Where the excisable goods are not sold by the Appellant but are used for consumption by him or on his behalf in the production or manufacture of other articles, the value shall be one hundred and ten per cent of the cost of production or manufacture of such goods. Unquote Further, the Appellant would also like to submit that while undertaking this transaction, it has complied with relevant regulations and framework of Central Excise Rules and therefore, it would not be appropriate to disturb the pricing basis adopted by the Appellant. In this regard, the Appellant wishes to place reliance on the case of ThyssenKrupp Industries India Pvt. Ltd vs. ACIT (ITA No.6460/Mum/2012), wherein Hon ble Mumbai ITAT held as follows: Quote 14.3. After considering the rival submissions and perusing the relevant material on record, we find that the Appellant entered into collaboration agreement with its AE for payment of 2% of contract value for manufacturing, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into consideration for evaluating comparability of the specified domestic transaction in terms of the Rule 10B(2)(d) of the Income-tax Rules. In other words, the said price of cost plus 10% adopted by the appellant as the transfer price for determining the profit of the eligible unit is to be considered sacrosant and as per arm s length and for the purpose of transfer pricing under the Income-tax Act. Similar observation was also made by Delhi ITAT in case of Abhishek Auto Industries Ltd. Vs. DCIT (ITA No. 1433/Del/2009), wherein the Hon ble ITAT upheld that transactions approved by regulatory authorities and undertaken keeping in view the commercial need should not be challenged by the tax authorities. The relevant extract from the said ruling are reproduced below for your goodself s kind perusal: Quote 8. We have carefully perused the record and considered the submissions of both the parties. It is a settled proposition of the law that legally binding agreements between unrelated parties cannot be disregarded without assigning any cogent reasons thereto. In this case it has not been imputed that agreements were non genuine or sham, rather they are duly approved by RBI and other r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of sub section 2 of section 80IC apply to your unit. c) Also furnish information as has been asked in the case of CPP for claiming deduction u/s 80IA i.e. information required to be furnished by the eligible unit as per sub section 5 and sub section 7 to 12 of section 80IA. d) Explain whether cathode sheets were being sold by any particular supplier unit to HZP plant. Besides, the same unit was also making sales of cathode sheets to other consumers. If so, compare the average sale price at which cathode sheets were supplied to HZP plant as well as to other consumers/buyers. In case, cathode sheets were being sold by any unit of the Company to any consumer other than the HZP plant, the comparison chart of the average sale price i.e. sale price to HZP plant and average sale price to other consumer/buyers be supplied. e) You are required to justify that the sale price of the cathode sheet to HZP plant was at the arms length price. Please also workout the cost of the cathode sheet per unit ( i.e. units at which cathode sheets were sold) and also justify that while selling cathode sheets, the supplier units of the Company has also charged reasonable profit at market rate from HZP pla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting etc. 2. The Haridwar Zinc Plant (HZP) caters only the requirement of buyers needing zinc of 99.995% purity. 3. The raw material zinc cathode does not have Harmonized System code and it is not a saleable commodity having no market anywhere. 4. Appellant claimed that deduction u/s 80IC is permissible to the unit under clause (ii) (a) of sub section 2 of section 80IC which reads as under:- 2a (ii) on the 7th day of January, 2003 and ending before the 1st day of April, 2012, in any Export Processing Zone or Integrated Infrastructure Development Centre or Industrial Growth Centre or Industrial Estate or Industrial Park or Software Technology Park or Industrial Area or Theme Park, as notified by the Board in accordance with the scheme framed and notified by the Central Government in this regard, in the State of Himachal Pradesh or the State of Uttaranchal . 5 That Appellant does not produce any article or thing mentioned in schedule thirteen and it is not formed by splitting up or reconstruction of old business. Neither it has been formed by transfer to a new business of machinery or plant of old business. 6 Appellant relied on the following rulings to establish that the eligible un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ully. From the evidences furnished by the Appellant, it is noticed that the undertaking is situated in the notified area and that it is involved in manufacturing of article or things not covered by schedule thirteen. Therefore, the undertaking of the Appellant duly falls within the category specified in sub section 2 (a) (ii) of section 80IC and is found eligible for deduction u/s 80IC. ) Unquote [Emphasis supplied] Also, the said methodology of determining the transfer price of semi-finished goods from non-eligible to eligible units by adding a mark-up of 10% on cost incurred by the non-eligible units was also accepted by the Ld. TPO in the AY 2013-14 (ref. Page 2017 2018 of the CL Paper Book). The Hon ble Jodhpur bench of the Tribunal vide order dated 4 September 2017 in Appellant s own case for AY 2011-12 (ref. pages 359 -365 of CL Paper book) decided the issue in favour of the Appellant holding that the cost plus approach adopted by the Appellant is most appropriate considering that cathodes were not separately marketable and as such had no comparable market price available, method prescribed under excise rules (i.e. cost + 10%) should be considered as the most reasonable metho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... computed as if the transfer, in either case, had been made at the market value of such goods [or services] as on that date . Provided that where, in the opinion of the Assessing Officer, the computation of the profits and gains of the eligible business in the manner hereinbefore specified presents exceptional difficulties, the Assessing Officer may compute such profits and gains on such reasonable basis as he may deem fit. [Explanation. For the purposes of this sub-section, market value , in relation to any goods or services, means the price that such goods or services would ordinarily fetch in the open market.] 534. A plain reading of the said provisions, very clearly provide that where any goods are transferred between the other unit and the eligible unit, the transfer price as recorded in the accounts should correspond to the market value of such goods as on the date of such transfer. The proviso further empowers the A.O. to recompute the profits of the eligible business where he encounters exceptional difficulties. However, the explanation very clearly provides that the market value in relation to any goods means the price that such goods would ordinarily fetch on sale in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that such a case was not intended to fall within the charging section. Otherwise one would be driven to conclude that while a certain income seems to fall within the charging section, there is no scheme of computation for quantifying it. The legislative pattern discernible in the Act is against such a conclusion. It must be borne in mind that the legislative intent is presumed to run uniformly through the entire conspectus of provisions pertaining to each head of income. No doubt there is a qualitative difference between the charging provision and a computation provision. And ordinarily the operation of the charging provision cannot be affected by the construction of a particular computation provision. But the question here is whether it is possible to apply the computation provision at all if a certain interpretation is pressed on the charging provision. That pertains to the fundamental integrity of the statutory scheme provided for each head . 536. We do not see as to how the situation at hand is any different. We also note that apart from rejecting the contention of the Assessee in context of the valuation as per Central Excise, the A.O. has only stated that such method is not p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crue equally over every unit of expense. Having come to that conclusion we also failed to understand how by applying the test of reasonableness the CIT(A) affirmed the allocation of profits on the basis of the expenditure incurred by the units. This is impermissible in law. 539. We have also analyzed the provisions of Rule 8 of the Central Excise Valuation which were applied by the Assessee for determining the transfer price which state as under:- Where the excisable goods are not sold by the Assessee but are used for consumption by him or on his benefit in the production or manufacture of other articles, the value shall be one hundred and ten per cent of the cost of production or manufacture of such goods 540. We find that the excise legislation covers an identical situation where the excisable goods are not sold by the Assessee but are used for consumption in the production or manufacture of other Articles. The Rule provides that while determining the excisable value, the Rule requires such value to be taken at 110% of the cost of production or manufacture of such goods. In our opinion, this method of valuation as sanctioned by the Central Excise Valuation Rules is the most reaso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ys to 110 days and hence, on that basis concluded that the Appellant has provided support services to its AE and thus mark-up should have been charged by the Appellant. Accordingly, the TPO has identified companies providing market support functions and after noting their average profit margins held that a mark-up of 15.86% should be applicable for these transactions. The TPO held that Cost plus method should be applied for these services and made adjustment of Rs. 66,54,233 i.e., 15.86% of Rs. 4,19,56,073 on account of mark-up on business support services. 28. On the other hand, the Ld. CIT (DR) referred to the discussions at page 113 of the TPO s order wherein reference is made to para 7.36 of OECD Transfer Pricing Guidelines to contend that if an entity has provided administrative (agency) services to its international AE acting as an intermediary, mark-up on the same should be applied. The TPO further observed that the services provided by the assessee are not the basic function of the assessee therefore provision of the same required expenditure of major amount to the tune of lakhs and efforts of the employee of the assesse and the same should be reimbursed to the assessee by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue that the accounting entries of JMUK do not treat the cost of PGM as a pass-through cost fails to acknowledge that JMUK is in the business of selling PGM. It does not require to charge JMIPL for processing the raw material i.e. PGM as that is passed on to MUL's vendors and thereby to MUL. The fact that JMIPL is paid a fixed manufacturing charge per unit shows that costs associated with the possible fluctuations in the price of the raw material is passed on to the customers and does not affect the profits of JMIPL. The submission of the Revenue that the international transaction between JMUK and JMIPL with regard to sale of precious metals may not be at ALP because JMIPL was a wholly owned subsidiary of JMUK does not appear to be based on any definite information but on suspicion. No convincing reason is forthcoming in the orders of the TPO, the CIT(A) or the ITAT for rejecting the alternate plea of JMIPL as regards the PLI being OP/TC-RMC. Reliance in this regard is also placed in the decision of the Delhi High Court in the case of Li Fung India Pvt. Ltd. vs. CIT 361 ITR 85, (ref. Page 1071 1093 @ 1090 - 1091 of the CL Paper Book).wherein, the Court held that for underta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the issue to the file of the Assessing Officer / TPO for detailed verification. We make it clear that if the receipts are mere recovery of expenses without any service then the same should not be added back to the cost base for the purpose of mark up. It is ordered accordingly. Reliance may also be placed on the following decisions of the benches of Tribunal wherein, the Tribunal held that costs paid to third parties ought to be excluded while computing operating costs of an entity acting ion the capacity of an facilitator for the purpose of applying the mark up: Agility Logistics Pvt. Ltd. vs. ACIT (ITA No. 2000/Mum/2010) FedEx Express Transportation and Supply Chain Services India Private Ltd vs DCIT (ITA No. 435/Mum/2014) In view of the above, it is submitted that since the appellant is merely acting as a pass through entity, between AE and third parties suppliers and is therefore, not required to earn any mark up on the amount of reimbursement charged to AE. Therefore, any addition on account of mark-up on reimbursement received by the appellant calls for be deleted. 30. We have heard the rival contentions, perused the material available on record and gone through the orders o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the costs incurred by the intermediary in performing its agency function. In the present case, we are of the view that the assessee-appellant is not performing any agency function but has only incurred some costs which are charged from the AEs. Thus, assessee-appellant is merely acting as pass through entity on which no mark-up is required to be charged. This position has also been accepted by the various Hon ble High Courts as under :- In case of Johnson Matthey India Private Limited vs. DCIT 380 ITR 43 (Delhi High Court) In the case of Li Fung India Pvt. Ltd. vs. CIT 361 ITR 85 (Delhi High Court) In the case of Mitsubishi Corporation India Pvt Ltd vs DCIT (ITA No 5042/Del/2011)(Delhi Tribunal) In the matter of M/s Cognizant Technology Solutions India Pvt Ltd vs. The Assistant Commissioner of Income Tax, ITA Nos. 114 2100 (Mds)/2011.(Mumbai Tribunal) LG Soft India Pvt. Ltd. (ITA No.1121/Bang/2011)(Bangalore Tribunal) In view of the above observations, the ground of the appellant is allowed. Ground Nos. 8-8.1 relate to disallowance of Rs. 15,31,69,157 u/s 14A of the Act, both under normal provisions and for computing Book profit under MAT as per section 115JB of the Act. 31. Be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er MAT: The AO also made adjustment for the same amount while computing book profit in terms of section 115JB of the Act. 32. On the other hand, the ld. D/R relied on the discussion at pages 17 to 18 of the final assessment order wherein it is observed as under: It is seen that the assessee has incorrectly computed the disallowance u/s 14A on the exempt income. The income as per the profit and loss account inter-alia includes income, which are exempt from tax and on which certain expenditure have been debited to the profit loss account. The assessee has not maintained separate books of account for the exempt income. However, the assessee itself has made disallowance of certain amount by apportioning salary relating to treasury staff and HO expenses on ad-hoc basis, which cannot be considered as rational or scientific method for making disallowance u/s 14A of the Act. The assessee has not established that the tax free investments were made out of non-interest bearing funds only. In the assessee s case, interest bearing funds and non interest bearing funds are mixed up and the interest expenditure incurred in earning the tax free income cannot be correctly found out from the accounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orm part of the total income under the Act, he then proceeds to determine the amount of expenditure, by following such method as is prescribed, i.e., Rule 8D of the Rules. 13.1 This methodology, as envisaged under Rule 8D of the Rules, is required to be followed even where the Appellant claims that no expenditure was incurred by him concerning income which does not form part of the total income under the Act. 13.2 The approach of the Tribunal has been that, since a disallowance was made, it follows logically, that the AO was not satisfied. This, according to us, is not what is envisaged under the provisions of Section 14A of the Act. The satisfaction has to be arrived at by the AO having regard to the assessee's accounts and not otherwise. Concededly, there is nothing in the record to suggest that the AO examined the accounts from this perspective. 13.3 Furthermore, in our view, because the appellant/Appellant had itself offered an amount which could be disallowed under section 14A of the Act, the onus shifted onto the revenue to ascertain, after examination of the accounts, as to whether or not the appellant's/assessee's claim was correct. It is only after the aforesai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A of the Act cannot be made under MAT provisions. Reliance in this regard is placed on the decision of the Delhi High Court in the case of PCIT vs Bhushan Steel Ltd: ITA No. 593/2015, dated 29.09.2015, wherein, the Court upheld the decision of the Tribunal that disallowance under section 14A read with Rule 8D could not be added while computing book profits as per section 115JB of the Act and declined to frame question of law. Relevant extract of the said judgment is reproduced hereunder: 7. Question No.6 concerns deletion of addition of Rs. 89,00,000 made by the AO for computation of the income for the purposes of Minimum Alternate Tax ( MAT‟) under Section 115 JB of the Act. This pertained to the expenditure incurred for earning exempt income under Section 14A read with Rule 8D. The ITAT has rightly held that this being in the nature of disallowance, and with Explanation 115JB not specifically mentioning Section 14A of the Act, the addition of Rs. 89,00,000 was not justified. The view taken by the ITAT cannot be faulted with. It is consistent with the decision in Apollo Tyres Ltd. v. Commissioner of income Tax (2002) 255 ITR 273 (SC) which held that the Assessing Officer doe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es 54-55 as under :- 42. We have heard the rival submissions and perused the material on record. We find that the co-ordinate bench vide its order dated 04.09.2017 has dealt with this very issue and has held as under:- 346. The revenue in its Appeal has also agitated the relief given by the CIT( ) on the issue of 144 disallowance. In our view, based on the material available on record it is evident that the Assessee had sufficient selfgenerated funds to make the investments from which tax exempt income was earned. The A.O. was not correct in recording that the Assessee had failed to show that it had surplus funds. This fact is apparent on the face of the balance sheet as has been rightly pointed out by the Ld. Counsel of the Assessee. We also find that the A.O. has not discharged the onus which lay on him of recording a valid satisfaction as to how the disallowance offered by the Assessee was incorrect. We also find that the A.O. has not brought any material on record to show that the Assessee had incurred interest expenditure for making such investments. The amount of Rs. 3 crores shown as an interest expenditure in Schedule 17 related to bill discounting activity undertaken by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cility of the Appellant is duly recognized by DSIR and further approval under section 35(2AB) of the Act has also been granted in Form 3CM. The substantive provision of section 35(2AB) of the Act to claim weighted deduction, in our considered view, is incurring of expenditure on scientific research at R D centres approved by DSIR. Therefore, so long as any expenditure is incurred as such on scientific research at the approved R D Centres, the Appellant becomes entitled to claim weighted deduction. Further once R D facility of the Appellant has been approved by the prescribed authority and there being no dispute to the fact that Appellant has incurred the expenditure towards R D activities, the deduction under section 35(2AB) cannot be denied merely on the ground that prescribed authority has not submitted report in Form 3CL: Sun Pharmaceutical Industries Ltd. vs. PCIT: 162 ITD 484 (Ahd. Trib.) affirmed in CIT v. Sun Pharmaceutical Industries Ltd.: 250 Taxman 270 (Guj.), Sri Biotech Laboratories India Ltd. v. ACIT : 36 ITR (T) 88 (Hyd.) DCIT v. STP Ltd.: [2021] 187 ITD 538 (Kolkata - Trib.) Efftronics Systems (P.) Ltd. v. ACIT: 52 ITR(T) 497 / 161 ITD 688 (Vishakhapatnam Trib.) DCIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led Grass Root Expenditure and the same is debited to the head office as this does not pertain to any mine under production. The Appellant claimed the expenditure incurred on exploration activity Rs. 54,69,30,401 as allowable revenue expenditure under section 37(1) of the Income Tax Act, 1961. Details of Grass Root Exploration Expenses claimed of Rs. 54,69,30,401 is as below : (in INR) Particulars Amount Grass Root Exploration - Kayad Mines 100,906,956 Grass Root Exp-Zawar Mines 187,666,352 Grass Root Exploration - RA MINES 45,772,347 Grass Root Exploration - S.K. Mine 81,027,896 Grass Root Exploration - Regional 66,561,055 Grass Root Exploration - Dariba-South 63,352,567 Grass Root Exp-BKI 1,643,228 Total 546,930,401 The expenditure incurred for finding new reserves is called Grass Root Expenditure and the same is debited to the head office as this does not pertain to any mine under production. The expenditure incurred on exploration activity is a fully allowable expenditure under section 37(1) of the Income Tax Act, 1961. Any expenditure incurred before setting up of a business is a capital expenditure, however any expenditure incurred for any extension or addition to the existin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fall within the criteria as laid down by the Hon ble ITAT as all the expenditure incurred under the head grass root expenditure is either on the area where the mining lease has been granted and the mine is under commercial production in that area and as a result the same was allowed by the ITAT as explained above. 39. On the other hand, the ld. D/R contended that the grass root expenses is in the nature of prospecting operations and this expenses of Rs. 54,69,30,401 pertain to prospecting operations, which have not resulted in commercial exploration of any mine. He submitted that the AO concluded that allowability of expenditure of Rs. 54,69,30,401 has to be examined within the provisions of section 35E and has disallowed the same in the draft assessment order dt 29.09.2021. 40. We have heard the rival contentions, perused the material available on record and gone through the orders of the Revenue authorities. We find that similar issue of Grass Root Expenses is covered by the decision of Jodhpur Bench of the Tribunal in assessee s own case in ITA Nos. 404/Jodh/2017 and 412/Jodh/2017 dated 22.02.2018 for the assessment year 2012-13 wherein the Tribunal following its earlier order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty is invested with very wide powers under section 251(1)(a) and once an assessment order is brought before the authority, his competence is not restricted to examining only those aspects of the assessment about which the assessee make a grievance and ranges over the whole assessment to correct the Assessing Officer not only with regard to a matter raised by the assessee in appeal but also with regard to any other matter which has been considered by the Assessing Officer and determined in the course of assessment. However, there is a solitary but significant limitation to the power of revision, viz., that it is not open to the Commissioner to introduce in the assessment a new source of income and the assessment has to be confined to those items of income which were the subject-matter of original assessment. 565. Thus, from the above, it can easily be discerned that the CIT( ) cannot introduce in the assessment a new source of income and the assessment has to be confined to those items of income which was the subject matter of original assessment. The endeavor of the CIT( ) to make a disallowance of the grass root expenses during the course of the Appellate Proceedings would tantamo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would not get covered by Section 35E and would be allowable u/s 37 of the Act. 568. We find that the CIT(A) has treated the entire expenditure of Rs. 34.36 crores as expenditure on operations for prospecting for minerals. However, the CIT( ) has not properly appreciated the distinction in respect of the applicability under Section 35E and clearly was an error in not appreciating that the said expenditure was facilitating the existing operation of the Assessee as well as identifying new business opportunities. It has also being rightly brought to our attention by the Ld. Counsel that the A.O. had disallowed similar expenditure being feasibility and consultancy being ground no. 6 in revenue's Appeal being ITA No. 3/Jodh/2015 for AY : 1999-00 where we have allowed such expenditure under the provision of Section 37 of the Act. Of course, there the issue raised by the revenue was that such expenditure was capital in nature since it resulted in enduring benefit to the Assessee. We have held that apart from the fact that no enduring benefit arises from such expenditure, such expenditure was incurred for facilitating the day to day operation of the Assessee. In the end, to conclude we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ie. contribution towards recognised provident fund or contribution towards pension fund. In respect of the amounts incurred by the Appellant toward employee welfare provisions of section 40A (9) cannot be invoked, as follows: a. The Appellant being a large corporate house is governed by Industrial Disputes Act, Factories Act and other legislations and is under obligation to provide for such facilities to the employees as per the provisions of those statute. b. The canteen facility is required to be provided within the business premises for supplying food to the workers/employees at concessional rate as per the statutory requirements as per Factories Act and Mines Act. c. Similarly, the school expenses were incurred for running Kendriya Vidyalaya at the business location of the appellant for providing education facility to employee s wards working at the remote and rural locations. The school expenditure were in the form of reimbursement of running expenses by Govt./other institutions. i. To encourage the employee s children to achieve higher in the studies, the Appellant company has framed scheme to provide the scholarship to brilliant students. This act of the appellant enhances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act by observing in para 196-197 at pages 238-241 as under :- 196. We have heard the rival contentions raised at the Bar and also perused the relevant material on record. We note that the co-ordinate bench in its order dated 04.09.2017 has decided this issue in favour of the Assessee, by observing as follows :- 170. The Counsel also submitted that the Coordinate Bench of the Tribunal in the Assessee s own case had consistently been allowing such expenditure which now stood confirmed by the jurisdictional High Court. .......... 13.5. We have heard the rival contentions and perused the material available on record. Assessee is a PSU governed by statutory as well as internal regulations for incurring the expenditure, its approval as per a hierarchical administrate frame work. On facts neither of the auditors Ld. Statutory and tax auditors have indicated anything adverse in respect of staff welfare expenditure. It is also a fact that the staff welfare expenditure is incurred through various bodies in consultation with such staff unions. These facts coupled with findings of ld. CIT (A) that expenditure is genuine, wholly for business purposed and allowed in various earlier years even af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . CIT (A) on the issue of staff welfare expenditure is upheld, this ground no. 7 of the revenue is dismissed. 171. We have considered the rival contention and have perused the orders of the Coordinate Bench as well as the relevant provisions of the Labour Laws as cited by the ld. Counsel. Given the fact that the nature of expenditure is absolutely similar as incurred by the Assessee for the earlier years we have no hesitation in upholding the order of the CIT (A) and dismissing the ground of Revenue. 197. Hence, respectfully following the decision of the co-ordinate Bench we dismiss ground No. 16 of the Revenue s appeal. We further find that the issue relating to Staff Welfare Expenses has also been decided by the Jaipur Bench of the Tribunal in assessee s own case in case of ITA No. 612/JU/2009 for the assessment year 2005-06 dated 10.04.2017 and ITA Nos. 638/JU/2008 606/JU/2008 for the assessment year 2006-07 dated 24.04.2017 in favour of the assessee by deleting the disallowance under section 40A(9) of the IT Act. We, therefore, respectfully following the decision of the co-ordinate Benches of the Tribunal, delete the disallowance of staff welfare expenses. The ground of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions issued by the DRP after the period of 9 months prescribed in terms of section 144C(5) of the Act are barred by Limitation and thus the impugned Assessment order under section 143(3) read with section 144B /144C(13) of the Act passed pursuant thereto by the AO/NFAC is liable to be quashed. 2. That the AO/NFAC erred on facts and in law in completing the assessment under section 143(3) read with section 144C(13)/144B and order passed under section 154 r.ws 143(3) of the Act at an income of Rs. 13669,09,83,530, after making additions/disallowances to the income of Rs. 1,07,81,12,53,620 determined in the intimation issued under section 143(1)(a) of the Act, and thereby making addition and disallowance also in respect of adjustments aggregating to Rs. 65,44,93,150 made in the intimation. 2.1. That the AO/NFAC erred on facts and in law in completing the assessment under section 143(3) read with section 144C(13)/144B and order passed under section 154 r.w.s 143(3) of the Act in making addition and disallowance also in respect of adjustments aggregating to Rs. 65,44,93,150 made in the intimation issued under section 143(1)(a) of the Act, without issuing any show cause notice and witho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... That the DRP/AO/NFAC/TPO erred on facts and in law in relying upon the tariff order issued by the SEBs for the purpose of undertaking benchmarking analysis without appreciating that the said rates are for supply for power-by power generation companies to SEBs for further supply to the ultimate customers and not for the consumption by SEBs themselves. 3.6 That the DRP/AO/NFAC/TPO erred on facts and in law in not appreciating that the CPP supplies continuous uninterrupted power which is critical for the operations of the appellant and is therefore, at a premium even in comparison to rates charged by SEBs for supply of power. 4. That the DRP/AO/NFAC/TPO erred on facts and in law in holding that the Appellant was not entitled to deduction u/s 80IA of the Act amounting to Rs. 96,46,574 for generation and transfer of steam which is included in the profit computed for CPPs at Chanderiya and Dariba, thus reducing the claim of the Appellant u/s 80IA by the corresponding amount in the order passed under section 143(3) read with section 144B /144C(13) and order passed under section 154 r.w.s. 143(3) of the Act, allegedly on the basis of the order passed under section 92CA(3) of the Act by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eligible units of the appellant, being the least complex entities, ought to have been accepted as the tested party. 6.2 That the DRP/AO/NFAC/TPO erred on facts and in law in not appreciating that comparable companies were selected in the transfer pricing documentation considering the non-eligible units as the tested party and such companies are not comparable to the eligible undertaking of the appellant. 6.3 That the DRP/AO/NFAC/TPO erred on facts and in law in making protective transfer pricing adjustment by enhancing the income of the eligible units (or 80-IC units) of the Assessee by Rs. 4670.60 crore. 6.4 That the DRP/AO/NFAC/TPO erred on facts and in law in holding that deduction u/s 80IC of the Act in respect of Pantnagar Lead Zinc Plant (PLZP) is available by determining the income of PLZP, the eligible unit u/s 80IC, in the ratio of expenditure incurred by the PLZP and other units of the Appellant, thereby making an adjustment of Rs. 3,014,61 Crores. 6.5 That the DRP/AO/NFAC/TPO erred on facts and in law in holding that deduction u/s 80IC of the Act in respect of Pantnagar Silver Metal plant (PSMP) is to be allowed by determining the income of PSMP, the eligible unit u/s 80 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nits of the Appellant, without taking into consideration the contribution made by the CPP units. 6.13 That the DRP/AO/NFAC/TPO erred on facts and in law in disregarding the favourable judicial pronouncements while making the TP adjustment, including the ruling passed by the Hon'ble ITAT in Appellant's own case. 7. That the AO/NFAC/DRP erred on facts and in law in making disallowance in the order passed under section 143(3) read with section 144B /144C(13) and order passed under section 154 r.w.s 143(3) of the Act, of Rs. 15,60,21,934 u/s 14A of the Act, both under normal provisions and for computing Book profit under MAT as per section 115JB of the Act, not appreciating the fact that the assessee has suo moto disallowed a sum of Rs. 4,36,399 u/s 14A under the normal provisions and made adjustment of Rs. 15,60,21,934 u/s 14A of the Act while computing Book profit under MAT and under the normal provisions of the act. 7.1 That the AO/ NFAC/DRP erred on facts and in law in making disallowance of Rs. 15,60,21,934 u/s 14A of the Act read with rule 8D of the Income tax Rules, 1962, both under normal provisions and for computing Book profit under MAT alleging that the Appellant was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r.w.s 143(3) of the Act, of staff welfare expenses of Rs. 22,75,94,336, being the expenses towards canteen facility, school activities, sport club, scholarship, other club, etc. holding them to be not allowable u/s 40A(9) of the Act; as well as holding them to be in the nature of corporate social responsibility expenses disallowable in terms of Explanation 2 of section 37 of the Act. 10.1 That the AO/NFAC/DRP erred on facts and in law in not appreciating that the above expenses were incurred in the course of the business by the appellant pursuant to statutory or contractual obligation and were held to be deductible business expenditure in the earlier years. 11. That the AO/NFAC erred in facts and in law in incorrectly levying interest under section 234B and under section 234C of the Act. 12. That the AO/NFAC erred on facts and in law in initiating penalty proceedings under section 270A r.w.s. 274 of the act for the alleged under- reporting of income. The Appellant craves leave to add, amend, alter or vary, any of the aforesaid grounds of appeal before or at the time of hearing of the appeal and consider each of the grounds as without prejudice to the other grounds of appeal. 52. Gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 10.04.2017 for the assessment year 20005-06, and in ITA No. 184/Jodh/2012 for the assessment year 2008-09 ITA No. 246/Jodh/2017 for the assessment year 2011-12 dated 04.09.2017. Therefore, respectfully following the decisions the Coordinate Bench and taking a consistent view of the matter, we have decided this ground in Para 22 hereinabove. This ground of the assessee is partly allowed. Ground Nos. 6-6.13 relate to enhancing the income of the eligible units under section 80 IC of the Act in respect of Pantnagar Zinc and Lead Plant (PLZP) and Pantnagar Silver Metal Plant (PSMP) allegedly on account of Transfer Pricing ( TP ) adjustment. 58. We have adjudicated this ground of the assessee in ITA No. 127/Jodh/2022 for the assessment year 2017-18 in Para 26 hereinabove. In the light of above discussion and following our order hereinabove, we allow this ground of the assessee. Ground Nos. 7-7.2 relates to disallowance under section 14A of the Act, both under normal provisions and for computing Book profit under MAT as per section 115JB of the Act. 59. This ground of the assessee is covered in favour of the assessee in assessee s own case in ITA No. 404 412/Jodh/2017 dated 22.02.2018 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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