9911796707
TMI Blog2024 (8) TMI 1135X X X X Extracts X X X X X X X X Extracts X X X X ..... order passed u/s. 92CA of the Act. As a result, additional ground of appeal is dismissed. Allowability of Pro-rata amount for the year in respect of Leasehold Lands - Assessee had made claim by way of a Note in computation of income - AO rejected the claim on the ground that the amount has not been claimed in the return of income or in the revised return of income - HELD THAT:- AO has allowed assessee s claim of pro-rata amount on the leasehold land. Since, the claim of assessee has been allowed in the past i.e. A.Y 2006-07 and 2007-08 on similar set of facts, in principle we hold that assessee s claim of deduction of pro-rata amount in respect of leasehold lands deserves to be accepted, however, we deem it appropriate to restore the issue to the A.O for the limited purpose to examine quantum of claim. Ground No.1 of appeal is allowed in the aforesaid terms. Write back of provision for doubtful debts - contention of the assessee is that the quantum of aforesaid claim has been inadvertently computed - HELD THAT:- During assessment proceedings the assessee furnished details of write back of doubtful debts along with certificate from Chartered Accountant. We find that in A.Y. 2006-07 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Year 2008-09 i.e. the impugned assessment year before us. Prior to Assessment Year 2008-09 disallowance u/s. 14A was made merely on estimations. Hence, the manner of making disallowance prior to Assessment Year 2008-09 would not apply to Assessment Year 2008-09 and thereafter. Hence, we are not in agreement with the first submission of the assessee, therefore, rejected. The second/alternate contention of the assessee is that disallowance be restricted to investments yielding exempt income. The Special Bench in the case of Vireet Investments Pvt.Ltd. [ 2017 (6) TMI 1124 - ITAT DELHI ] has held that for the purposes of disallowance u/s. 8D only investments yielding dividend income should be considered. The alternate prayer of the assessee is in line with the principle laid down by Special Bench, hence, we find merit in the alternate prayer made by the ld.Counsel for the assessee. The Assessing Officer is directed to compute disallowance u/r. 8D(2)(iii) on investments yielding exempt income only. Disallowance u/s. 14A r.w.r. 8D while computing book profit u/s. 115JB - HELD THAT:- Special Bench in the case of Vireet Investments Pvt. Ltd. [ 2017 (6) TMI 1124 - ITAT DELHI ] has held tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TPO further failed to consider the fact that the assessee has sold only two units to the non-AE where the average price charged is more than the average price per unit charged to AEs. Thus, we are in agreement with the ld.Counsel for the assessee that to determine ALP of the transaction average price charged to AEs should have been compared to the average price of the comparable uncontrolled transactions in respect of each product/model of vehicle. TPO has resorted to cherry picking which is unacceptable in making Transfer Pricing adjustment. Thus, the adjustment made in respect of export of vehicles deserves to be deleted. Hence, ground No.8 of appeal is allowed. Adjustment u/s.92CA(3) in respect of transaction with Hispano Carrocera, S.A - HELD THAT:- It is an admitted position that as against total assets of Hispano aggregating to Euro 21.95 million the assessee has extended unsecured loans to the tune of Rs. 15 million, which count for more than 51% of the book value of total assets of Hispano. Thus, conditions set out in section 92A(2)(c) are satisfied. A perusal of Form 3CEB at page 70 to 95 of the paper book shows that while disclosing information in Clause 7 Part B i.e. the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... valuer has to be accepted in determination of value of the property. TPO cannot arbitrarily adopt a value without there being any substantive basis. The insurance value possibly could be only of the building and not the land as there was no question of insuring land. Thus we are of the considered view that the TPO erred in adopting insured value of the property. The transfer pricing adjustment cannot be made on adhoc basis. TPO has to apply one of the prescribed method as is notified during the relevant point of time. We see no plausible reason to sustain the addition, hence, the adjustment on account of purchase of property from Hispano is liable to be deleted. We hold and direct accordingly. In the result, ground No.11 of appeal is allowed. Adjustment u/s. 92CA(3) - property leased to Hispano adopting 10% of property as fair annual value - HELD THAT:- The recitals of Lease Agreement show that the property has been leased out on monthly rent of Euro 80,000, excluding Value Added Tax charged by the State. The said rent has been calculated at Euro rate of 4% in accordance with stringent market conditions. Thus, in view of specific clause of rent in the lease agreement we observe th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plication dated 20/12/2017 has raised an additional ground of appeal. One of the additional ground raised by the assessee challenges validity of order passed u/s. 92CA(3) of the Act. The additional ground raising jurisdictional issue reads as under: 16. On the facts and circumstances of the case and in law, the Order u/s. 92CA(3) of the Act passed by the Additional Commissioner of Income-tax, Transfer Pricing - ll(2), Mumbai (Addl. CIT) is without jurisdiction and bad in law inasmuch as the Transfer Pricing Officer means a Joint Commissioner or Deputy Commissioner or Assistant Commissioner authorized by the Board to perform all or any of the functions of an Assessing Officer specified in sections 92C and 92D in respect of any person or class of persons, as per Explanation to section 92CA of the Income-tax Act, 1961 ( the Act ). To support admission of additional ground, the assessee placed reliance on the following decisions: (i) Jute Corporation of India Ltd. , 187 ITR 688 (SC). (ii) National Thermal Power Company, 229 ITR 383(SC) (iii) Pruthvi Brokers and Share Holders, 349 ITR 351 (Bom) 3. After examining the aforesaid additional ground raised by the assessee, we are of the cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erent clauses of section 116 of the Act. The Additional Commissioners have been put in clause (cc), whereas Joint Commissioners have been put in clause (cca) of section 116. Hence, this itself signifies that Additional Commissioner and Joint Commissioners are not the authorities in same class. He further referred to the definition of Additional Commissioner u/s. 2(1C) of the Act. He submitted that Additional Commissioners have been defined separately u/s. 2(1C) and Joint Commissioners have been defined u/s. 2(28C) of the Act. The definition of Additional Commissioner was inserted by the Finance Act, 2007 with retrospective effect from 01/06/1994, whereas the definition of Joint Commissioner was inserted by Finance (No.2) Act, 1998 w.e.f. 01/10/1998. The aforesaid definitions of two different authorities were inserted at different point of time, hence, by no stretch of explanation it can be said that Additional Commissioners and Joint Commissioners are one and the same. He further referred to the definition of Assessing Officer u/s. 2(7A) of the Act to contend that in the definition of the Assessing Officer, Joint Commissioner was included by the Finance (No.2) Act of 1998, whereas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 09/09/2004 to point the right manner of authorization. Finally, he submitted that where the assessment or any order is passed by an authority not competent to pass such order or is not authorized to pass such order, the said order and any proceedings arising therefrom are bad in law. To support his argument he placed reliance on the decision in the case of Virtura Consulting Services Pvt. Ltd. Vs. DRP Ors, 139 taxmann.com 361 (Madras). 6. Au contraire, Ms. Vatsala Jha representing the Department submitted that there is no difference in the work assigned to Joint Commissioner and Additional Commissioner. Both, the Joint Commissioner and the Additional Commissioner are Authorities at same level and head the Range. The Joint Commissioners after four years of service in the same rank are re-designated as Additional Commissioners with no change in nature of work or functions. In other words, time scale Joint Commissioners are designated as Additional Commissioners. The ld. Departmental Representative referring to the definition of Joint Commissioner in Sec.2(28C) of the Act contended that the said definition makes it clear that Joint Commissioner includes Additional Commissioner of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Representative placed on record Explanatory note to the provisions of Finance Act, 2007 vide which definition of Additional Commissioner was inserted as section 2(1C). She submitted that a perusal of explanatory note would make it clear that the definition of Additional Commissioner was inserted only as a clarificatory amendment to the definition of Assessing Officer defined in section 2(7A) of the Act. She pointed that Joint Commissioner has been defined u/s. 2(28C) of the Act which includes Additional Commissioner u/s. 117 of the Act. The Ld. Departmental Representative referring to the decision in the case of DCIT vs. BBC Worldwide India Pvt. Ltd.112 taxmann.com 380 (Del-Trib) submitted that an additional ground challenging jurisdiction of Additional Commissioner to act as TPO was raised in the said appeal. The decision of Delhi High Court in the case of Pawan Kumar Garg (supra) was also relied upon by the ld.Counsel for the assessee therein. The Tribunal distinguished the said decision and dismissed the additional ground raised by the assessee. 7. We have heard extensive submissions made by rival sides and have considered the Notifications decisions on which reliance has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vely. This necessitated re-designating the existing Deputy Commissioner of Income-tax and Deputy Director Income-tax as Joint Commissioner of Income-tax and Joint Director of Income-tax respectively. The above changes in designation made it necessary to amend the various sections of the Income-tax Act so that the statutory powers continue to be exercised by the substituted authorities as a result of redesignation. 5.2 The following substitution of income-tax authorities has been globally made in the Income-tax Act: Table From To Assistant Commissioner Assistant Commissioner or Deputy Commissioner Assistant Director Assistant Director or Deputy Director Deputy Commissioner Joint Commissioner Deputy Director Joint Director 5.3 Clause (74) of section 2 of the Income-tax Act containing the definition of Assessing Officer has been amended to include the redesignated authorities as above. 5.4 Clause (94) of section 2 of the Income-tax Act has been amended to include Deputy Commissioner in the definition of Assistant Commissioner. 5.5 Clauses (194) and (19C) of section 2 of the Income-tax Act have been amended to exclude the authorities of Additional Commissioner of Income-tax and Additio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respectively under clauses(28C) and (28D) of the section(2) respectively. However, in order to further clarify the intension of the legislature with regard in the meaning of the term Assessing Officer , the following amendments have been carried out through the Finance Act, 2007- (i) (ii) .. (iii) Clause (1C) has been inserted in section 2 so as to provide that Additional Commissioner means a person appointed to be an Additional Commissioner of Income-tax under sub-section (1) of section 117. This amendment will take retrospective effect and will be effective from 1st June, 1994. (iv) . (v) .. (vi) . (vii) Clause (b) of sub-section (4) of section 120 has been amended so as to provide that the powers and functions conferred on or assigned to the Assessing Officer may also be exercised or performed by an Additional Commissioner. This amendment will retrospective effect and will be effective from 1st June,-1994. The definition of Joint Commissioner in section 2(28C) makes it unambiguous that Joint Commissioner means a person appointed to be Joint Commissioner or Additional Commissioner. The definition of Additional Commissioner was subsequently inserted u/s. 2(1C) of the Act as a clar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere omitted from the definition of Deputy Commissioner in Section.2(19A) of the Act and Additional Commissioner was included in the definition of Joint Commissioner. Thus, Additional Commissioner was never separately defined. The Additional Commissioner was initially bracketed with Deputy Commissioner (upto 01/10/1998) and thereafter with Joint Commissioner w.e.f. 01/10/1998. In the backdrop of these amendments we can say that the designation of Additional Commissioner was not per se authority superior/at a different level to the DCIT prior to the amendment or Joint Commissioner after the amendment of 1998. 11. We find that the Co-ordinate Bench in the case of BBC Worldwide (India) Pvt. Ltd. (supra) had an occasion to deal with similar legal issue wherein the assessee had challenged the validity of order passed u/s. 92CA by the Additional Commissioner. The objection of assessee therein was that the order passed by TPO is not valid as the same has not been passed by the prescribed authority under the provisions of the Act. The Co-ordinate Bench decided the issue in favour of the Department holding as under:- 19. We have carefully considered the rival contention. Admittedly according ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pra) wherein the issue was that the second warrant of authorization in respect of the said locker was issued by the Additional Director, Income-tax (Investigation). The Additional Director does not find mention in the provisions of section 132(1). However, it was contended by the learned counsel for the revenue that the Additional Director would be covered in the expression 'Joint Director' in view of the provisions of section 2(28D) of the said Act. The court held that Even assuming that the expression 'Joint Director' as used in section 132(1) includes an Additional Director, such Additional Director or Joint Director would have to have initial empowerment by the Board to issue warrants of authorization in view of the provisions of section 132(1)(B). Therefore the only issue before the honourable Delhi High Court was whether the warrant issued by the additional director who was not empowered by the central board of direct taxes is a valid warrant or not. The honourable High Court held so only for the reason that there was no authorization by the board in favour of the additional director. Here it is not the case of the assessee that the Additional Commissioner of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Income- tax Department. Precisely for this very reason the definition of Joint Commissioner in section 2(28D) includes Additional Commissioner, hence, the case of Dr.Nalini Mahajan does not support the cause of assessee. Similar were the facts in the case of Pawan Kumar Garg (supra). The warrants were required to be issued by Director whereas, the warrants were issued by lower authority i.e. Additional Director. Therefore, the Hon ble Court followed the decision in the case of Dr.Nalini Mahajan. 11.2 The second limb of the arguments advanced by the ld.Counsel for the assessee is that Shri Vatsalya Saxena, Additional Commissioner is not authorized by the Board to act as TPO. The arguments of ld.Counsel is that Explanation to Section 92CA requires Joint Commissioner/Deputy Commissioner/ Assistant Commissioner to be authorized by the Board to perform the functions of a TPO and such an authorization is in a particular manner. He referred to one such authorization Notification No.239/2004 dated 09/09/2004. Mr. Mistry asserted that the authorization furnished by the Department falls short of the requirement as envisaged u/s. 92CA of the Act. The Department has referred to the Notificat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntioned in column (4)over the person or class of persons mentioned in column (5). The Note in the end of the said notification clarifies that Board has empowered Director General of Income-tax (International Taxation) or Director Income-tax (Transfer Pricing) to distribute the work amongst the TPOs working under them. The Ld. Departmental Representative has placed on record order No.59 of 2011 dated 04/04/2011 vide which Board has transferred the officers in the grade of Joint Commissioner/Additional Commissioner in the Directorate of International Taxation and Transfer Pricing. The name of Shri Vatsalya Saxena figures in the list of Officers who are being posted to other station/region at Sl.No.11. Thus, he was transferred in the charge of Director General of Income Tax (International Taxation) by the Board and the DGIT(IT) posted Shri Vatsalya Saxena vide office order dated 05/04/2011 as TPOII(2). Thus posting orders of Shri Vatsalya Saxena as TPO-II(2) in harmony with authorisation by the Board vide notification dated 22/08/2007 (supra). Here we would observe that what Mr. Mistry referred to as authorization is in fact the order of posting. Authorization by the Board and posting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim of assessee was allowed by the Tribunal in ITA NO.5600/Mum/2011 decided on 25/04/2019, the Tribunal directed the A.O to consider assessee s claim of deduction in line with earlier assessment years. The A.O while passing the order giving effect to the Tribunal order allowed the claim of assessee. 14. We find that in A.Y 2007-08 the assessee had made claim on account of pro-rata amount of leasehold land by way of Note No.4 to the computation of income. The A.O and the DRP rejected the claim of assessee citing Goetz (India) Ltd., 284 ITR 323(SC). The Tribunal admitted the claim of assessee and restored the issue back to the file of A.O holding as under:- 13. We have considered rival submissions and perused material on record. It is evident, the assessee s claim of deduction on account of amortization of upfront payment made towards leasehold land was rejected both by the Assessing Officer and learned DRP only for the reason that such deduction was not claimed either in the original or in the revised return of income. However, it is a fact on record that in the computation of income the assessee has claimed such deduction. Moreover, though, the ratio laid down in Goetz India Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le offering the income to tax in the impugned assessment year. The correct amount of reversal of provision during the year was only Rs. 8,48,77,596/-. During assessment proceedings the assessee requested the Assessing Officer to exclude difference of Rs. 5,75,29,337/- i.e.(Rs. 14,24,06,933 - Rs. 8,48,77,596). The assessee inadvertently offered to tax Rs. 14,24,06,933/- as against actual provision reversed pertaining to assessment year 2004-05 and 2005-06 Rs. 8,48,77,596/-. He pointed that details of write back of doubtful debts were submitted to the A.O along with certificate from Chartered Accountant. He referred to the submissions made before the A.O and the certificate of the Chartered Accountant at pages 491 to 505 of the paper book. He pointed that in A.Y. 2007-08 the Tribunal restored the issue to the file of A.O. He further submitted that second part of claim is, in A.Y 2004-05 the deduction claimed by TFL Rs. 1,37,99,189/- was disallowed by the A.O in reassessment proceedings. The assessee challenged reopening of assessment before the Tribunal in ITA No.4100/Mum/2011 for Assessment Year 2004-05. The Tribunal vide order dated 31/07/2017 quashed reopening of assessment. There ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claimed that in the assessment year 2004 05 and 2005 06, Tata Finance Ltd., which got amalgamated with the assessee in assessment year 2006 07, had claimed deduction in respect of provisions of doubtful debts / advances. It was stated that in the impugned assessment year, the assessee had reversed the provisions made in assessment years 2004 05 and 2005 06 and offered it to tax. It was submitted, though the actual reversal of provision during the year was Rs. 7,17,70,032, however, in the return of income the assessee had inadvertently offered an amount of Rs. 11,03,04,467. In this context, the assessee furnished a year wise break up of provisions made towards doubtful debts / advances. Further, it was submitted that deduction claimed towards provision for doubtful debt and advances in the assessment year 2004 05 was disallowed by the Assessing Officer while completing assessment under section 143(3) of r/w section 147 of the Act. Therefore, it amounts to double addition of the same income. After considering the submissions of the assessee, the Assessing Officer held that since the deduction claimed by the assessee was not made either in the return of income or in the revised return ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order dated 15/04/2013 is not disputed by the Department. The assessee has offered to tax interest received u/s. 244A Rs. 16,43,50,232/-, which was subsequently restricted to Rs. 12,20,33,651/-. It is undisputed that the assessee after finalization of interest amount in proceedings u/s. 154 has not filed revised return of income, nevertheless the assessee in computation of income by way of Note No.2 has mentioned that in case interest amount is reduced or withdrawn, subsequently on completion of assessment the interest chargeable to tax for the year should be considered accordingly. Or in alternate the assessee reserve the right to claim interest withdrawn by the Department as deduction for the total income for the year in which interest is withdrawn. Nevertheless, the powers of the Appellate Tribunal are not impinged to entertain fresh claim made by assessee during appellate proceedings. It is a well settled law that Government cannot charge tax in excess of what is due. Since, assessee has offered to tax excess amount Rs. 4,23,16,581/-, the Assessing Officer is directed to grant relief on the excess amount offered to tax by the assessee. 21. Thus, assessee succeeds on ground No.3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, it shall be presumed that the investments are made by the assessee from available interest free funds.[Re.HDFC Bank Ltd. vs. CIT, 383 ITR 529(Bom)]. The assessee has substantiated availability of own interest free funds in the form of Share Capital and Reserves Surplus from the Balance Sheet as on 31/03/2008 (at page 32 of Paper Book) and Funds Flow Statement ( page 318 of the Paper Book). In view of the above, disallowance u/r.8D(2)(ii) is directed to be deleted. In respect of disallowance u/s. 8D(2)(iii) the ld.Counsel for the assessee has made two fold submissions. The first submissions of ld.Counsel for the assessee is that the disallowance be restricted to 1% of the exempt income as was done in the preceding Assessment Years. The second submission of the assessee is that disallowance be restricted to investments yielding exempt income. The provisions of Rule 8D would apply from the Assessment Year 2008-09 i.e. the impugned assessment year before us. Prior to Assessment Year 2008-09 disallowance u/s. 14A was made merely on estimations. Hence, the manner of making disallowance prior to Assessment Year 2008-09 would not apply to Assessment Year 2008-09 and thereafter. Hence, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submission the Authorities Below have erred in not appreciating the fact that FCCN was never converted into shares and the debt was repaid on maturity. It was further submitted that FCCN were convertible to shares, at the option of the holder. 28. Per contra, the ld. Departmental Representative strongly supporting the findings of the Assessing Officer submitted that the Special Bench in the case of Ashima Syntex Ltd. vs. ACIT, 100 ITD 247 has held that the expenditure incurred on issuance of convertible debentures is not allowable as revenue expenditure. 29. We have heard the submissions made by rival sides. We find that identical issue was considered by the Co-ordinate Bench in assessee's own case in Assessment Year 2006-07 (supra). The Bench allowed expenditure on issuance of FCCN by observing as under:- 12. We have considered rival submissions and perused material on record. Undisputedly, the Assessing Officer has disallowed assessee s claim on the reasoning that FCCNs issued by the assessee are in the nature of convertible debentures, hence, expenditure related to issue of such debenture is capital in nature. However, it is observed that while deciding identical issue in as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erage price 1. Tata Africa Holdings (Ghana) Ltd. 280 400228 1,50,32,445 2. Tata De Mozambique Limited 25 415942 9,49,325 3. Tata Africa Holdings (Tanzania) Ltd. 25 417218 9,17,425 4.Tata Zambia Ltd. 6 416953 2,21,774 (iii) Adjustment made - Rs. 1,71,20,979/- The ld.Counsel for the assessee submits that the TPO has cherry picked only one transaction to make adjustment. The assessee is selling different variants of the same vehicle to AEs and Non-AEs. The TPO without appreciating the fact that there could be difference in the variant of vehicle sold to AE and Non- AE made adjustment rejecting assessee s CUP. The ld.Counsel for the assessee referred to the detailed list of vehicles exported, tabulating description/model of the vehicle, region, country, sale to AE or Non-AE and the value of vehicle in Indian rupee. He submitted that the TPO and the DRP without appreciating the facts made the adjustment. The ld.Counsel for the assessee further referred to month wise export to AE and comparable Third Party transactions at 655 of the Paper Book. Referring to the table at page 655 he submitted that a perusal of aforesaid data would reveal that in all instances price charged to AE is more t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... much higher. A perusal of the table would show that the average sale price per unit charged to AEs is higher than the average sale price per unit of comparable uncontrolled transactions. Though, the TPO held that internal CUP is not acceptable but he has not specified what other method he has applied to benchmark the transaction. PRODUCT: 207-4x4-483 Name of party (AE) Qty. FOB in INR Average FOB in INR Tata Africa Holdings (Ghana) Ltd. 280 112,063,745 400,228 Tata De MocambiqueLimita 25 10,398,550 415,942 Tata Africa Holdings (SA) Ltd. 42 18,679,145 444,742 Tata Africa Holdings (Tanzania) Ltd 25 10,430,450 417,218 Tata Zambia (Senegal) 15 6,569,062 437,937 Tata Uganda Ltd. 2 874,458 437,229 Tata Zambia Ltd. 6 2,501,716 416,953 Total 395 161,517,126 408,904 Average Sales Price per unit. 408,904 Comparable transaction(Non-AEs) Compotec UEM 65 23,972,364 368,806 Zahira S.P.R.L 60 23,209,540 386,826 Societe Miniere Bakwanga 15 5,925,680 395,045 United Diesel 20 8,451,518 422,576 All Trans F Z E 13 5,047,588 388,276 Paul Ries Sons (ETH) Ltd 7 2,754,243 393,463 Al Zayani Trading Co. 12 4,813,103 401,092 Diesel Motor Engine 2 907,830 453,915 Total 194 75,081,866 387,020 Average sales pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to the aforesaid loans, the assessee has also given an undertaking to Citi Bank NA for non disposal of share holding in Hispano during the tenure of loan. Thus, the assessee has locked its investments in Hispano in addition to the loan. It is pertinent to mention that the assessee had acquired 21% shares in Hispano as on 16/03/2005 and as per the terms of agreement, the assessee is open to acquire 79% of the remaining shares in Hispano in addition to the loan. The assessee falls within the definition of AE in accordance with provisions of section 92A(2)(c) of the Act. The total assets of Hispano as per Balance Sheet as on 31/03/2008 are to the tune of Euro 21.95 Million. The provisions of clause (c) to section 92A(2) is triggered when loan advanced by enterprise to the other enterprise constitutes not less than 51% of the book value of the total assets of other enterprises. In the present case the loans by assessee to Hispano exceeds 51% of total assets. 37. The ld.Counsel for the assessee fairly conceded that the assessee had extended substantial loans to Hispano. However, he submitted that for another enterprise to become AE, conditions set out in sub-section(1) to section 92A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. The DRP following its own directions for earlier Assessment Years i.e. Assessment Year 2006-07 and 2007-08 granted part relief to the assessee and restricted addition to LIBOR + 200 bps. Thus, the Assessing Officer in accordance with direction of the DRP confirmed the adjustment on account of interest on loans to Rs. 79,91,563/-. 40. The ld.Counsel for the assessee referring to the table at page 16 of the assessment order submitted that the Contract Rate of Interest with the AEs is more than the base LIBOR/EURIBOR rates. He further referred to base rates as per European Central Bank at page 303 of the paper book to contend that since the rate of interest charged by the assessee from its AEs is more than the base rate no adjustment was required to be made by the TPO/DRP. He further submitted that similar issue has been considered by the Tribunal in assessee's own case in appeal for Assessment Year 2006- 07 and 2007-08. The Tribunal deleted the addition and restored the issued back to the file of Assessing Officer. 41. Per contra, the ld. Departmental Representative vehemently defended the assessment order and the direction of DRP, however, she fairly submitted that in the pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate cannot exceed LIBOR plus 50 basis points. In this context, it has been submitted by the assessee that the overseas AE in U.K. has taken a loan from third party in U.K. at LIBOR plus 30 basis points. Similarly, he had submitted that the AE in Spain has taken loan from an unrelated party in the same period at the interest rate of Euribor plus 127.79 basis points. 31. Having considered rival submissions and perused material on record, we are of the view that assessee s contention regarding availability of internal CUP requires examination. Moreover, while deciding similar issue in assessment year 2006 07, in ITA no.8926/ Mum./2010, dated 28th January 2019, we have restored the issue to the Assessing Officer for considering various submissions made by the assessee with regard to the rate of interest. In view of the aforesaid, we restore the issue to the Assessing Officer / Transfer Pricing Officer for de novo adjudication after considering assessee s claim of availability of internal CUP. This ground is allowed for statistical purposes. We deem it appropriate to restore this issue back to the file of Assessing Officer with similar directions. In the result, ground No.9 of appeal i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, he pointed that the same has been mentioned in the Agreement for purchase of property. He vehemently argued that the assessee has applied CUP in the light of valuation report available on record. The TPO without any valid reason has rejected the report and has made adjustment on adhoc basis. He submitted that it is a well settled law that where no method is applied by the TPO for making adjustment, the adjustment is not tenable. To support his submissions he placed reliance on the following decisions: i) Johnson Johnson Pvt. Ltd, 247 Taxman 136 (Bom) ii) CA Computer Associates Pvt. Ltd., 351 ITR 69 (Bom) (ii) Merck Limited, 179 TTJ 121 (Mum-Trib) affirmed by Hon ble Bombay High Court in Income Tax Appeal No.744 of 2017 decided on 16/09/2019. 45. Per contra, ld. Departmental Representative vehemently supported the order of TPO and the directions of DRP. She referred to the short coming in the valuation report highlighted by the TPO in para 6.6 of the order passed u/s. 92CA(3) of the Act. She pointed that valuation report cannot be relied upon as there are no comparable instances to the value of property, the valuer has not deducted the value of encumbrances from the total value. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on the office area and workshop area separately. The assessee has paid net amount of Euro 21.34 million to Hispano after deducting payments made to various parties in discharge of encumbrances. In the absence of any contrary material valuation certificate produced by the assessee from an independent valuer has to be accepted in determination of value of the property. The TPO cannot arbitrarily adopt a value without there being any substantive basis. The insurance value possibly could be only of the building and not the land as there was no question of insuring land. Thus, taking into consideration entire facts of the case, we are of the considered view that the TPO erred in adopting insured value of the property. The transfer pricing adjustment cannot be made on adhoc basis. The TPO has to apply one of the prescribed method as is notified during the relevant point of time. We see no plausible reason to sustain the addition, hence, the adjustment on account of purchase of property from Hispano is liable to be deleted. We hold and direct accordingly. In the result, ground No.11 of appeal is allowed. Ground No.12 Adjustment u/s. 92CA(3) of the Act in respect of notional interest co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 18. Thus, in view of the statement made by ld.Counsel for the assessee ground No.17 and 18 of the appeal are dismissed, as such. Ground No.19 Assessment order time barred by limitation, hence, liable to be quashed: 52. The assessee vide application dated 02/06/2022 has raised a legal ground assailing validity of assessment order on the ground of limitation. The additional ground raised by the assessee in ground No.19 reads as under:- 19. On the facts and circumstances of the case, the learned TPO/AO erred in passing draft assessment order by following procedure laid down under section 144C of the Act without appreciating that provision of Section 144C is not applicable during AY 2008-09. Thus the assessment order passed is beyond the time limit prescribed under section 153 of the Income Tax Act, 1961 and hence bad in law and liable to be quashed. In support of this ground of appeal, the assessee has placed reliance on the following decisions: (i) M/s. Vedanta Limited vs. ACIT [WP No 1729 of 2011] 22/10/2019 for AY 2007- 08 - Hon'ble Madras High Court (ii) M/s. Truetzschler India Pvt. Ltd. Vs. DCIT in ITA No.-1949/Mum/2015 decided on 30/09/2020 for AY 2009-10. (iii) M/s A. T. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w. Thus, the additional grounds raised by the assessee are accordingly dismissed 54. Similar ground was considered by Co-ordinate Bench in the case of Wockhardt Ltd. vs. DCIT, 144 taxmann.com 27 (Mum-Trib). The Tribunal after considering various decisions, including the decision in the case of Vedanta Limited (supra) dismissed the ground by observing as under: 9. In the present case, however, we have much simpler and much more objective criteria readily available, which is the strength of the bench of the Hon ble non- jurisdictional High Court which have rendered the judgment. There is one decision of the division bench consisting of two Hon ble judges, and there is another decision of a single judge bench consisting of only one Hon ble judge. The plurality in the decision- making process makes the decisions of benches with a larger number of Hon ble judges being placed on a higher pedestal than the decisions of the of the benches with a lesser number of Hon ble judges. Explaining this principle, Hon'ble Gujarat High Court, in the case of CIT Vs VallabhdasVithaldas [(2015) 56 taxmann.com 300 (Guj)] has observed that the law of precedent heavily relies on the collective decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd s case (supra), cannot be said to per incuriam, for the simple reason that a Hon ble High Court judgment does not constitute a binding precedent for any other Hon ble High Court other than the Hon ble High rendering such a judgment, the judgment of Hon ble Andhra Pradesh High Court in the case of Zuari Cements Ltd (supra), being a division bench decision of Hon ble non-jurisdictional High Court, is required to be followed even if it is contrary to a single bench judgment of another High Court in the case of Vedanta Ltd (supra). The impugned assessment order thus cannot be said to be barred by limitation. We uphold the impugned assessment order on this count, and decline to interfere in the matter on this jurisdictional ground. As we are deciding this issue on this short ground alone, all other contentions on merits remain open. 10. The additional ground of appeal is dismissed. As no arguments were advanced by the parties on the remaining grounds of appeal, we deem it fit and proper to direct the Registry to fix the matter for hearing on the other grounds of appeal taken by the parties. As one of us (i.e. the Vice President) is retiring, on superannuation, next month, it will co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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