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TMI Blog2025 (2) TMI 327X X X X Extracts X X X X X X X X Extracts X X X X ..... med in the return of income or during assessment proceedings - Without prejudice, even otherwise, as per Section 80A(5), assessee has to claim deduction under section 80IAB of the Act in the Return of Income. As per section 80AC no deduction under Chapter-VIA shall be allowed, unless assessee furnished Return of Income within the due date mentioned under section 139(1) of the Act. In this case, admittedly, assessee had not claimed deduction u/sec.80IAB for Income from Other Sources and Short-Term Capital Gain. We have already mentioned that assessee had not made any such claim in the Form No.10CCB. In these facts and circumstances of the case, assessee was not eligible to make a claim for deduction under section 80IAB for Income from Other Sources and Short Term Capital Gain. Therefore, on this ground also, the assessee's claim for deduction under section 80IAB for Income from Other Sources and Short Term Capital Gain is not maintainable. TP Adjustment - Embassy Office Parks REIT holds 100% shares of Assessee company. Embassy Office Parks REIT is a Trust. It is claimed that income of Embassy Office Parks REIT is exempt - assessee has bench marked the impugned transaction by using ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of natural justice, and therefore liable to be quashed. 2. Interest on borrowings from Embassy Office Parks REIT amounting to INR 7,80,17,976 2.1 The Honorable Dispute Resolution Panel ('Hon'ble. DRP') has erred in upholding the order passed by Learned Transfer Pricing Officer ('Ld.TPO') wherein the Ld.TPO has rejected the benchmarking conducted by the Assessee by adopting 'CUP' method as the most appropriate method for determining the Arm's Length Price ('ALP') of the Assessee with respect to interest paid on loan taken from Embassy office Parks REIT ('EOP REIT') as against 'Other Method' selected by the Assessee. 2.2 The Hon'ble. DRP has erred in upholding the order passed by Ld.TPO wherein the Ld.TPO has determined the arm's length price with respect to interest paid on loan taken from Embassy office Parks REIT under 'CUP method' by adopting the interest rate of 8.95% on the borrowings availed from State Bank of India. 2.3 The Hon'ble. DRP has erred in upholding the order passed by Ld.TPO wherein the Ld.TPO has concluded that since an internal comparable is readily available in assessee's case, CUP method is the most appropriate method to determine the arm's length ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has erred in adding the adjustment carried out in the intimation under section 143(1) of the Act to the computation of book profits under section 115JB of the Act. 5.2 The NFAC / Ld.AO has erred in not taking cognizance of the submissions made during assessment proceedings that adjustment carried out in the intimation under section 143(1) of the Act is on account of non-consideration of the revised Tax Audit Report filed by the Assessee. 6. Provisions of Chapter XIIB are independent and TP adjustments, if any, ought not be made to the deemed total income computation under section 115JB 6.1 The NFAC / Ld.AO has erred in law and on facts by carrying out the transfer pricing adjustment pertaining to interest paid to the computation of book profits under section 115JB of the Act. 6.2 Provisions of Chapter XIIB are independent and transfer pricing adjustments ought not be made to the computation of book profits under section 115JB of the Act. 7. Non grant of deduction under section 80-IAB on income from other sources and capital gains earned during the subject year The Hon'ble. DRP / NFAC / Ld.AO has erred in not granting a deduction under section 80-IAB of the Act on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cting the benchmarking conducted by the Appellant for determining the arm's length of the interest on borrowings from Embassy Office Parks REIT and proceeded with considering the rate of interest of overdraft facility availed from the State Bank of India, i.e., 8.95% as the arm's length of such interest expense. Further, the Ld.TPO has erred in concluding that the loan taken from Embassy Office Parks REIT, being an unsecured loan, is comparable with overdraft facility availed from the State Bank of India, being a secured loan. In this regard, the Appellant wishes to place reliance on the following judicial precedents - Decision of the Hon'ble Jaipur Tribunal in the case of Deputy Commissioner of Income tax, Central Circle-2, Jaipur vs M/s KsheerSagar Developers Pvt. Ltd., [ITA Nos. 1158 to 1162/JP/2019), wherein it has been held that unsecured loans taken from Associated Enterprises cannot be compared with loans taken from banks. We have enclosed a copy of the judgment as Annexure 1 (refer para 48 and 49 found on page 56 to 58 of the case law). Relevant extract from the judgement is provided below - "48. After careful consideration of the matter and the writte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elevant extract of the decision relied on by the Company has been reproduced below for the reference of the Hon'ble ITAT: 15. In the case before us, there is no discussion about Section 80-IA(5) by the Appellate Authority, nor the Tribunal and the High Court. However, we have considered the submissions on behalf of the Revenue as it has a bearing on the interpretation of sub-section (1) of Section 80-IA of the Act. We hold that the scope of sub-section (5) of Section 80-IA of the Act is limited to determination of quantum of deduction under sub-section (1) of Section 80-IA of the Act by treating 'eligible business' as the 'only source of income. Sub-section (5) cannot be pressed into service for reading a limitation of the deduction under sub-section (1) only to 'business income. An attempt was made by the learned Senior Counsel for the Revenue to rely on the phrase 'derived... from' in Section 80-IA (1) of the Act in respect of his submission that the intention of the legislature was to give the narrowest possible construction to deduction admissible under this sub-section. It is not necessary for us to deal with this submission in view of the findin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecision of Hon'ble Supreme Court in Commissioner of Income Tax-I Vs. Reliance Energy Ltd., [2022] 441 ITR 346 (SC) dated 28.04.2021. Submission of ld.DR : 4. Ld.Departmental Representative(ld.DR) for the Revenue submitted that Assessee had not claimed deduction on Income from Other Sources and Capital Gains under section 80IAB of the Act in the Return of Income and in the Form No.10CCB. Ld.DR for the Revenue took us through the relevant pages of the Return of Income. Ld.DR relied on section 80A(5) of the Income Tax Act. Ld.DR submitted that conjoint reading of Section 80A(5) and Section 80AC makes it clear that Assessee has to claim the deduction in the Return of Income and the Return of Income shall be filed within the time mentioned in Section 139(1) of the Act. In this case, assessee has not claimed the deduction, neither in the Original Return of Income nor in the Revised Return of Income. The ld.DR further submitted that Assessee has not made the claim even before the Assessing Officer. Ld.DR submitted that DRP has jurisdiction only to adjudicate adjustment proposed by the Assessing Officer in the Draft Assessment Order. In this case, since there was no adjustment with refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d transfer pricing adjustment suggested in the Draft Assessment Order before the Dispute Resolution Panel (DRP). Assessee for the first time, before the DRP pleaded that Assessee Company is eligible for a deduction under section 80IAB of the Act on Income from Other Sources amounting to Rs. 57,03,058/- and Short Term Capital Gains amounting to Rs. 2,57,47,042/-. Assessee relied on the decision of Hon'ble Supreme Court in the case of CIT-I Vs. Reliance Energy Ltd.(supra) [2022] 441 ITR 346 (SC). The Dispute Resolution Panelheld that there is no variation proposed in the Draft Assessment Order with reference to Assessee's claim of deduction under section 80IAB of the Act, hence the DRP do not have any jurisdiction to adjudicate the impugned issue. 6.1 Aggrieved by the same, Assessee has filed appeal before this Tribunal. We have already reproduced all the basic facts pertaining to the issue of deduction under section 80IAB of the Act. 7. Before discussing, we would like to reproduce Section 144C of the Act which grants jurisdiction to the Dispute Resolution Panel as under : "144C. (1) The Assessing Officer shall, notwithstanding anything to the contrary contained in this Act, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t set aside any proposed variation or issue any direction under sub- section (5) for further enquiry and passing of the assessment order." 7.1 Thus, the scheme of the section is that Assessing Officer has to prepare the Draft of the proposed assessment order. If Assessing Officer is proposing any variation which is prejudicial to the interest of the Assessee in the Draft Assessment Order, then Assessing Officer shall provide Draft Assessment Order to the Assessee. On receipt of the Draft Assessment Order, the Assessee has two options i.e. either he may accept the variation proposed; or may file objections against the impugned variations before the Dispute Resolution Panel within 30 days of receipt of Draft Assessment Order. The Dispute Resolution Panel after hearing the assessee, has to issue such direction with reference to the objections to the Assessing Officer to enable him to complete the assessment. The Assessing Officer then passes final assessment order as directed by the Dispute Resolution Panel. 7.2 Thus, as per Section 144C(2), the jurisdiction of the DRP is qua, objections filed by the Assessee qua variations proposed. As per Section 144C(8), the DRP's directions are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ular appeal to the Commissioner of Income-Tax against an order of assessment which is sought to be given up in view of the provisions of section 92C and Section 144C. The directions issued by the DRP under section 144C is binding on the assessing officer and against the said order of the assessing officer a direct appeal to the Income-Tax Appellate Tribunal. Wherefore we have to look into the proposed draft order in the present case to find out as to whether the directions issued by the DRP as per direction No.(iv) culled out above is valid and binding or not. It is clear from the proposed draft order that the appellant had claimed exemption of Rs. 32,58,26,375/-. The proposed draft order annexed to the proposed draft referable to excess claimed under section 10A in a sum of Rs. 44,49,280/- is arrived in the draft proposal order as follows: - Particulars Rs. Total turnover of the undertaking (A) 305,31,27,853 Export turnover of the undertaking 305,31,27,853 Less: Communication Expenses 3,25,98,610 Travel Expenses in foreign currency 90,92,976 Adjusted Export turnover (B) 304,14,36,267 Profit of the Undertaking (C) 32,58,26,375 Exemption u/Section 10A (D - B/A x ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other decision of Hon'ble Jurisdictional High Court on the impugned issue. The ld.Counsel has also not brought to our notice any decision of Hon'ble Jurisdictional High Court on the impugned issue. 8.1 The Hon'ble Bombay High Court in the case of Smt. Godavaridevi Saraf Vs CIT, 113 ITR 589(Bom) has held as under : Quote , " Until contrary decision is given by any other competent High Court, which is binding on a Tribunal in the State of Bombay, it has to proceed on the footing that the law declared by the High Court, though of another State, is the final law of the land. When the Tribunal set aside the order of penalty it did not go into the question of intra vires or ultra vires. It did not go into the question of constitutionality of section 140A(3). That section was already declared ultra vires by a competent High Court in the country and an authority like an Income-tax Tribunal acting anywhere in the country has to respect the law laid down by the High Court, though of a different State, so long as there is no contrary decision of any other High Court on that question." Unquote 8.2 Therefore, decision of Hon'ble Karnataka High Court (supra) is a binding precedence. 8.3 Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imited, admittedly assessee had not claimed in the Return of Income deduction under section 80IAB for Income from Other Sources and Short Term Capital Gain. Therefore, the decision of Hon'ble Supreme Court in the case of Reliance Energy Limited is not applicable to the assessee. 9.1 Therefore, even on this ground the Ground No.7 raised by the assessee is dismissed. Ground No.2 : 10. Ground No.2 raised by the assessee is regarding the transfer Pricing Adjustment of Rs. 7,80,17,976/-. 10.1 The basic facts pertaining this issue are that the Embassy Office Parks REIT holds 100% shares of Assessee company. Embassy Office Parks REIT is a Trust. It is claimed that income of Embassy Office Parks REIT is exempt. The relevant paragraph related to this transaction of the submission of the assessee is reproduced as under : "Qubix Business Park Private Limited Qubix Business Park Private Limited was incorporated on 5 January 1999. The Company is primarily engaged in the business of development, leasing and maintenance of commercial real estate and related interiors. The Company has constructed office buildings forming an IT Special Economic Zone (SEZ) in Hinjewadi, Pune. The operations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the arm's length standard from an Indian Transfer Pricing perspective. 10.3 Thus, as per assessee, the assessee has bench marked the impugned transaction by using "other method". Assessee conducted a search for comparable debt instruments in the form of NCDs' on NSDL and BSE database. Assessee selected some comparables, and justified the interest rate paid by assessee to its parent of 12.5% per annum. Ld.TPO rejected the benchmarking analysis done by the assessee. Ld.TPO mentioned in the order that assessee has overdraft facility from State Bank of India(SBI). Ld.TPO compared rate of interest charged by SBI which was '8.55% and proposed the Transfer Pricing Adjustment. Assessee filed objections before DRP. DRP upheld the benchmarking done by the TPO. However, DRP observed that there was arithmetical error while considering the one year MCLR Rate and accordingly, directed TPO to consider the rate of 8.95% per annum. Aggrieved by this direction, assessee filed appeal before this Tribunal. 10.4 In this case, it is an admitted fact that assessee has obtained a loan from its parent entity, as per the loan agreement dated 11.03.2019. The said loan is for a period of 15 years ..... X X X X Extracts X X X X X X X X Extracts X X X X
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