9911796707
TMI Blog2025 (3) TMI 1085X X X X Extracts X X X X X X X X Extracts X X X X ..... the contention of the Ld. AR that the instant issue is fully covered by the order in assessee's own case for A.Y. 2014-15 [2021 (12) TMI 1428 - ITAT DELHI] wherein upheld that the reimbursement received at cost does not require any mark-up. It is noted that in this case the assessee relied on OECD guidelines which support that no mark-up is chargeable in reimbursements. Thus, we deem it fit and proper to direct the TPO to delete such adjustment in respect of reimbursement received. Adjustment u/s. 92CA(3) on account of Corporate Guarantee Fee from AE - HELD THAT:- We find considerable cogency in the contention of the Ld. AR that the instant issue is fully covered by the order of the Coordinate Bench of the Tribunal in assessee's own case for A.Y. 2014-15, wherein the coordinate Bench upheld the corporate guaranteed rate @0.25%. Adjustment on account of Inter unit Transfer - Technical Textile Business, Kashipur Division - assessee submitted that assessee's methodology was rejected without providing any reason - HELD THAT:- We find considerable cogency in the contention that assessee's methodology was rejected without providing any cogent reason. In our view, in various jud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Electricity from VRETPL - HELD THAT:- Copy of sample invoices of power purchase by assessee from Tamil Nadu State Electricity Board (SEB) as an evidence to depict that the purchase rate of SEB is way higher than the rate charged by VREPL. We further note that detailed note explaining the basis of pricing of electricity and the benchmarking of the same in contrast to the rate of electricity purchase by the assessee from the SEB and the date of various discom rates obtained u/s 133(6) not available in public domain, hence it cannot be used. Tribunal decision in the case of Technimont ICB P Ltd. [2012 (7) TMI 1172 - ITAT MUMBAI] assessee's internal CUP to be preferred over an external CUP, which was not done, hence no adjustment is warranted in any case. Hence, for the sake of bench marking the correct ALP on the electricity charges, we are inclined to remit this issue back to the file of AO/TPO to redo the bench marking by following the decision of Hon'ble Supreme Court in the case of Jindal Steel and others [2023 (12) TMI 417 - SUPREME COURT] case and as per law. Sale of Electricity by WPP unit at Tamilnadu - HELD THAT:- It is brought to our notice that in AY 2013-14 and 2014- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed. Disallowance of depreciation of goodwill - HELD THAT:- We find considerable cogency in the contention of the Ld. AR that the instant issue is fully covered by the order of the Coordinate Bench of the Tribunal in assessee's own case for years 2009-10, 2012-13, 2014-15 & 2015-16 wherein, the Bench upheld that goodwill is an intangible asset and eligible for depreciation. Disallowance on account of inventories written off - HELD THAT:-The assessee has failed to submit the rationale for claiming separately the write off of inventory. Therefore, the submissions of the assessee are not appealing to us and we are inclined to sustain the additions made by the AO. Case relied by the assessee are on the facts that the relevant assessee's claimed the revaluation of inventory for reduction in the value of closing stock and the AO has rejected the same on the basis of non submission of item wise details or for other reasons. The Courts have decided the issues in favour of the assessee. The facts in the present case is distinguishable to facts of those decisions relied by the assessee. In the result, grounds raised by the assessee are dismissed. Disallowance on account of softwa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts & circumstances of the assessee's case in not entertaining or granting the additional claims / allowances total amounting to Rs. 17,36,90,694/- made by the assessee during the course of assessment proceedings and again before the Ld. DRP, on account remaining additional depreciation, which was inadvertently left to be claimed by the assessee while filing / revising its return of income. 3.0 That the Ld. DRP and consequently the Ld. AO have grossly erred in law and on the facts & circumstances of the assessee's case in not allowing the deduction of Education Cess (@ 3%) amounting to Rs. 2,15,79,405/- u/s 37 of the Act paid or payable under normal provision of the Act. 4.0 That the final assessment order passed u/s 143(3) r.w.s. 144C(13) / 92CA(3) of the Act dated 30th April, 2021 is bad in law. Grounds of Appeal in respect of incorrect computation of total income and consequently the incorrect demand of tax and interest payable thereon [Mistake apparent from records] 5.0 Without prejudice to the grounds challenging the adjustments / additions / disallowances made by the Ld. TPO / Ld. AO as upheld by the Ld. DRP, the Ld. AO has grossly erred in law and on the facts & circu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed through transfer pricing adjustment in accordance with the directions of the Ld. DRP in respect of same unit [contested by assessee vide ground no. 40.0 to 43.0] and thus inadvertently making excess disallowance to the extent of Rs. 9,63,12,743/-; v. without prejudice, the Ld. AO has grossly erred in law and on facts and circumstances of the case in not grating the claim of remaining deduction u/s 80-IC of the Act amounting to Rs. 2,82,36,993/-[Rs. 2,82,41,479/- (original amount of deduction) minus 30% of Rs. 14,952/- (being amount of adjustment upheld by the Ld. DRP)] in respect to the Technical Textiles Business at Kashipur; vi. without prejudice, the Ld. AO has grossly erred in law and on facts and circumstances of the case in not grating the claim of remaining deduction u/s 80-IC of the Act amounting to Rs. 2,38,81,562/-[Rs. 2,56,22,162/- (original amount of deduction) minus 30% of Rs. 58,02,000/- (being amount of adjustment upheld by the Ld. DRP)] in respect to the Engineering Plastic Business at Pantnagar; vii. that the Ld. AO has grossly erred in law and on the facts & circumstances of the assessee's case in not granting or allowing the benefit of the MAT Credit amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransaction and thus failing to appreciate that the assessee while performing its role of a parent company of the group incurs various costs for and behalf of its group entities/AE's at group HO level (which are charged to group entities without any mark-up), as incurring such cost (such as software implementation, license etc.) at individual entity level may not be commercially and economically feasible. 11.0 The Hon'ble ITAT may be pleased to direct the Ld. TPO / Ld. AO to delete aforesaid adjustment of Rs. 16,68,574/- in respect of allocation of software cost only to AE's. II. Reimbursement / recovery of expenses from AE's - Adjustment of Rs. 22,20,109/- 12.0 That the Ld. DRP and consequently Ld. TPO / Ld. AO have grossly erred in law and on the facts & circumstances of the appellant's case in making an adjustment of Rs. 22,20,109/- in respect of international transaction of reimbursement / recovery of expenses from its AE (on cost-to-cost basis) amounting to Rs. 1,68,44,535/- by erroneously imputing a mark-up of @ 13.18% over and above said cost. 13.0 Without prejudice, the Ld. DRP and consequently Ld. TPO / Ld. AO have grossly erred in taking the search process / compar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant, being the parent company on behalf of its wholly owned subsidiary, as a matter of business prudence and to protect its own commercial interest. The appellant does not incur any cost by extending such corporate guarantee to its AEs nor assumes any risk as entire capital / assets of its AEs are held directly or indirectly by the appellant. Further, the Ld. DRP / Ld. TPO / Ld. AO have not followed the established judicial precedents rendered on the issue including the Hon'ble ITAT's orders in assessee's own case for A.Y. 2010-11 and A.Y. 2012-13. 20.0 The Hon'ble ITAT may be pleased to hold that: - i. the act of giving corporate guarantee by the appellant on behalf of the AE's is not an international transaction and, therefore, not amenable to any adjustment under Chapter X of the Act; ii. no adjustment is required as AE has provided back-to-back counter guarantees of equal amounts on similar terms and hence no adjustment / addition is required; iii. no adjustment is required as @ 0.25% charged by the appellant as corporate guarantee fee from its AE's [wholly owned subsidiaries] is at arm's length and thus upward adjustment of Rs. 2,40,32,125/- be directed to be deleted; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Engineering and Plastic Business unit (EPB), Pantnagar forming part of 'Chemical and Polymer Business' (CPB) segment of the assessee. 26.0 That the Ld. DRP and consequently Ld. TPO / Ld. AO have grossly erred in law and on facts and circumstances of the case, in rejecting, without any cogent reason, the assessee's most appropriate method being 'CUP Method' and 'Other Method' both of which are direct price based methods and instead applying the 'TNMM' in arbitrary manner, not providing FAR analysis and search process to the assessee and resultantly taking the companies which are product wise and functionally incomparable to the assessee's EPB unit. 27.0 Without prejudice, the Ld. DRP and consequently Ld. TPO / Ld. AO have grossly erred in computing the adjustment twice Rs. 40.23 Lakhs on cost side and Rs. 17.82 Lakhs on revenue side thus incorrectly applying the TNMM. 28.0 Without prejudice, the methodology adopted by the Ld. TPO and upheld by the Ld. DRP is plagued with the gross mistakes, inconsistency and assumptions on account of following; - i. the segmental margin of TTB segment computed by ld. TPO @ (-) 1.37% is incorrect as the segmental margin of CPB from the se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - 35.0 That the Ld. DRP and consequently Ld. TPO / Ld. AO have grossly erred in law and on the facts & circumstances of the appellant's case in making transfer pricing adjustment of Rs. 8,86,15,614/- in respect of specified domestic transaction as referred in section 92BA(i) in the nature of purchase of electricity from its associate VRETPL@ Rs. 5.68 per unit on wholly unjust, illegal, erroneous, superficial, frivolous, arbitrary and untenable grounds and is prayed to be deleted before your honour. 36.0 That the Ld. DRP and consequently Ld. TPO / Ld. AO have grossly erred in law and on the facts & circumstances of the appellant's case in rejecting the assessee's reliable internal CUP data in form of actual transactions of purchase of electricity and instead taking the general tariff rates obtained by the Ld. TPO u/s 133(6) of the Act from the Tamil Nadu State Electricity Corporation (TNERC) @ Rs. 2.95 per unit while benchmarking the transaction of purchase of electricity from associate by the assessee. 37.0 That the Ld. DRP and consequently Ld. TPO / Ld. AO have grossly erred in law and on the facts & circumstances of the appellant's case in making the above adjustment in res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be pleased to direct the Ld. TPO / Ld. AO to delete such adjustment of Rs. 6,35,67,880/- in respect of specified domestic transaction of sale of electricity by WPP unit of the assessee. Grounds of Appeal - Corporate Tax Issues - Additions / Disallowances of Rs. 1,05,51,38,904/- IX. Disallowance of deduction u/s 32AC of the Act amounting to Rs. 5,63,55,983/- 44.0 That the Ld. DRP and consequently the Ld. AO have grossly erred in law and on the facts & circumstances of the assessee's case in disallowing the deduction u/s 32AC of the Act to the extent of Rs. 5,63,55,983/-. 45.0 That the Ld. DRP / Ld. AO has grossly erred in law and on the facts & circumstances of the assessee's case in disallowing the deduction u/s 32AC of the Act to the extent of Rs. 5,63,55,983/- on the following grounds:- i. by treating the difference between the claim of assessee i.e. Rs. 53,59,40,165/- and amount shown in the tax audit report at Rs. 47,95,84,182/- as inadmissible deduction completely ignoring the various supporting documents including Chartered Accountant's specific certificate certifying the amount of deduction allowable u/s 32AC of the Act; ii. by erroneously stating that the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lated to tax free income is only Rs. 8.47 Crores and the total amount of reserves & surplus as on 31.03.2016 is Rs. 2,631.85 Crores which is 310.72 times of the value of average tax free investments, thus warranting no disallowance u/s 14A of the Act r.w.r. 8D(2)(ii). 51.0 Without prejudice to the above grounds, the Ld. DRP and consequently the Ld. AO have grossly erred in law and on the facts & circumstances of the assessee's case in making the disallowance u/s 14A to the tune of Rs. 15,32,818/- without appreciating the fact that the assessee has already made a disallowance of Rs. 4,26,590/- u/s 14A r.w.r. 8D(2)(iii) and thus resulting in a total disallowance of more than the amount of exempt income viz. Rs. 18,21,155/- received by the assessee during the year under consideration. 52.0 That the Ld. DRP has erred in upholding the enhanced disallowance u/s 14A solely relying on its own direction in assessee's own case A.Y. 2012-13 and A.Y. 2013-14, however, it completely ignoring its own directions in assessee's case for A.Y. 2014-15 wherein it deleted the identical enhanced disallowance. 53.0 That the Ld. DRP and consequently the Ld. AO have grossly erred in law and on the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er law. Grounds on Merits 58.0 That the Ld. DRP has grossly erred in law and on the facts & circumstances of the appellant's case by disallowing the claim of weighted deduction u/s 35(2AB) of the Act in respect of 'Gurgaon R&D Research Facility' by allegedly stating that the such 'Gurgaon R&D Research Facility' was not an approved facility by the DSIR for the relevant year under consideration and accordingly concluding that the assessee is not eligible for weighted deduction for amount spent on such 'Gurgaon R&D Research Facility'. 59.0 That the Ld. DRP has grossly erred in law and on the facts & circumstances of the appellant's case in incorrectly stating that 'Gurgaon R&D Research Facility' is approved by DSIR from 01.04.2016 ignoring that such facility has been duly recognised by the DSIR we.f. 31stJuly, 2015 vide letter dated 11th September, 2015 already placed on records. 60.0 That the Ld. DRP and consequently the Ld. AO have grossly erred in law in making the aforesaid disallowance by ignoring that assessee has duly complied with all applicable provisions of section 35(2AB) r.w.r. 6(7A) as attributable to the assessee i.e. recognition / renewal of all R&D units from D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Ld. DRP and consequently the Ld. AO have grossly erred in law and on the facts & circumstances of the assessee's case in making the disallowance of depreciation of Rs. 14,36,387/- on goodwill arising on acquisition of three business units from SRF Polymers. 67.0 That the Ld. DRP and consequently the Ld. AO have grossly erred in law and on the facts & circumstances of the assessee's case in making the disallowance of depreciation of Rs. 14,36,387/- on goodwill: - i. by taking a view that the amount of goodwill as arise on acquisition of three businesses is a balancing figure and not the goodwill which the assessee paid in excess of its valuation; ii. by drawing an incorrect interpretation after perusal of agreement for transfer of business dated 01.01.2009 that in the given schedule of assets & liabilities, goodwill is not mentioned implying thereby that there was neither any valuation of goodwill nor there was any sale of goodwill; iii. by treating the same merely as book entry in the books of accounts of the assessee. 68.0 That the Ld. DRP has grossly erred in law and on the facts & circumstances of the assessee's case in confirming the above disallowance of depreciat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s case in not entertaining the claim made by the assessee during the course of assessment and then again before the ld. DRP pertaining to remaining additional depreciation @ 10% u/s 32(1)(iia) amounting to Rs. 17,36,90,694/- which was inadvertently left to be claimed while filing / revising the return of income. 78.0 That on the facts & circumstances of the assessee's case, the Ld. DRP and consequently the Ld. AO have grossly erred in law in not entertaining and adjudicating the above ground by relying the judgment of Hon'ble Supreme Court in the case of Goetze (India) Ltd. vs CIT [284 ITR 323] and without prejudice, the claim is being made before the Hon'ble ITAT as an adjudicating authority following precedent in NTPC Ltd. [229 ITR 383 (1998)]. XVIII. Other Corporate Tax Issue - Other claim made during the proceedings before the Ld. DRP - Rs. 2,15,79,405/- 79.0 That the Ld. DRP and consequently the Ld. AO have grossly erred in law and on the facts & circumstances of the assessee's case in not allowing the deduction of Education Cess amounting to Rs. 2,15,79,405/- u/s 37 of the Act paid or payable under normal provision of the Act. 80.0 That the Ld. DRP and consequently th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f software allocations on cost to cost basis from the AEs. Hence, no mark-up is chargeable on the cost of reimbursement received from AEs. It was the further contention that not considering the fact that the assessee is a holding company of the group and incurs cost, which is recovered from the AEs and also, not appreciating that the assessee has recovered the software allocation costs along with finance charges @ 8.99%. Further, it was submitted that the mark up of 13.18% which has been worked out through a search process, wherein selected companies are into the manufacturing of textiles, yarn etc. This average margin is applied on reimbursement transactions, which is grossly erroneous. Further the assessee has entered into various business transactions with its AEs in the nature of export of goods, import of goods, corporate guarantee fee, interest on loan, management support services etc. the volume of which is around Rs. 33.59 Crores. It was also submitted that the assessee has also entered into the ancillary transactions in the nature of software cost allocations received from AEs for Rs. 1.27 Crores, which is nominal and normal considering the volume of business transactions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e would have benefitted and by utilizing those resources for benefit of its AEs, the assessee is losing out on benefits. He therefore held that assessee should have earned a markup on such expenses. The TPO thereafter by considering the comparables, as listed at Page 40 & 41 of his order, proposed an adjustment of Rs. 58,13,774/-. 25. Aggrieved by the proposed adjustment, assessee carried the matter before the DRP. DRP upheld the action of adjustment proposed by the TPO but however directed to compute the adjustment by taking the nine comparables as listed on Page 11 of its directions. Consequent to the direction of DRP, AO made final upward adjustment of Rs. 45,39,571/-. Aggrieved by the order of AO, assessee is now before us. 26. Before us, Learned AR reiterated the submissions made before the lower authorities and further submitted that on identical facts, no adjustment on account of reimbursement of expenses was made in earlier years. He further submitted that transactions entered into with the AEs are of the pure reimbursement received from the AEs which are in the nature of expenses incurred for travelling, lodging, boarding, courier etc. of employees of the AEs which are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enses which were reimbursement of all expenditure which were inter alia incurred by the assessee on behalf of the AEs and the same have been reimbursed to the third parties and for which no value addition has been done by the assessee. It is further assessee's submissions that the reimbursement are on cost to cost basis and transactions were undertaken for commercial expediency and not intended with the expectation of return. The aforesaid contentions of the AR have not found to be false. We find that the Co-ordinate Bench of Tribunal in the case of Vedanta Ltd. (supra) has held that no mark up is warranted on pass through costs which are inter alia incurred by the assessee and are reimbursement of primary third party expenses initially incurred by the assessee for which no value addition is done by the assessee and which are subsequently reimbursed by the AEs on cost to cost basis. Before us no material has been placed by Revenue to demonstrate that value addition has been done by the assessee and is not in the nature of reimbursement of primary third party expenses which were initially incurred by the assessee. Considering the totality of the aforesaid facts and relying on the af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er submitted that Hon'ble Supreme Court in the case of Engineering Analysis Centre of Excellence Pvt. Ltd. vs. CIT (supra) had also upheld the reference to OECD guidelines being persuasive in nature. The Ld. AR also submitted that various judicial precedents on the issue have upheld the cost to cost nature of reimbursement as ALP. In view of above, he requested to direct the TPO to delete such adjustment of Rs. 22,20,109/- in respect of reimbursement received. 8. Ld. DR of the Revenue relied upon the orders of the authorities below, but she did not controvert the contention of the ld. AR for the assessee that the issue is covered in favour of the assessee by the decision of the Tribunal in assessee's own case in the assessment year 2014-15 and neither produced any contrary decision. 9. Considered the rival submissions and material placed on record. We find considerable cogency in the contention of the Ld. AR that the instant issue is fully covered by the order of the Coordinate Bench of the Tribunal in assessee's own case for A.Y. 2014-15, wherein the coordinate Bench upheld that the reimbursement received at cost does not require any mark-up. It is noted that in this case th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Coordinate Bench of the Tribunal in assessee's own case for A.Y. 2014-15, wherein the coordinate Bench upheld the corporate guaranteed rate @0.25%. It is also noted that ITAT has reversed the order of the DRP for the AY 2014-15 and AY 2012-13 and also AY 2010-11 in assessee's own case. Relevant findings of ITAT in ITA No.6620/Del/2018 for AY 2014-15 is reproduced as under :- "10. TPO noticed that assessee had given Corporate Guarantee to the lenders of the beneficiaries who are AEs of the assessee and for giving the corporate guarantee, assessee had charged guarantee fee of 0.25% aggregating to Rs 2,28,54,407/-. The AEs to whom Corporate Guarantee were issued are listed at Page 5 of the TPO order. It was submitted by the assessee that it has not incurred any cost for provision of the guarantees and that during 10 F.Y. 2013-14, it had obtained a quotation from a Bank whereby the Bank had agreed to provide corporate guarantee to the AEs of the assessee at a service fee of 0.25%. Assessee considered the quotation from the Bank of similar arrangement to be an appropriate CUP to determine the Arm's Length nature of similar arrangement between the assessee and its AEs. It was t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12. Before us, Learned AR reiterated the submissions made before the lower authorities. He thereafter submitted that identical issue arose in assessee's own case in A.Y. 2010-11, 2012-13 wherein the Coordinate Bench of Tribunal has upheld the corporate guarantee rate @ 0.25%. He further submitted that the Hon'ble ITAT had reversed the order of DRP for A.Y. 2012-13 & 2010-11 in assessee's own case. He pointed to the relevant orders of the Tribunal placed in the paper book. He therefore submitted that since assessee had charged 0.25% as corporate guarantee fee to its AEs, no adjustment is required and therefore the adjustment proposed by the AO be deleted. 13. Learned DR on the other hand took us to the finding of the DRP and supported the order of DRP. 14. We have heard the rival submissions and perused the materials available on record. The issue in the present ground is with respect to the adjustment made to corporate guarantee fee charged by the assessee from its AEs. We find that identical issue arose in assessee's own case in A.Y. 2010-11 and the Co-ordinate Bench of Tribunal in ITA No.356/Del/2015 order dated 24.02.2020 decided the issue in favour of the assessee by obs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity is responsible for survival and growth of its subsidiary and hence extended corporate guarantees to secure funds needed for survival and growth of its subsidiaries. Further as submitted by AR, by extending corporate guarantees to secure funds needed for survival and growth of its subsidiaries. 16. Therefore in view of the above discussions, the corporate guarantee fee at the rate of 0.25% voluntary offered to tax by the assessee is upheld as the arm length price and the addition over and above this of Rs. 56,17,984/- is hereby deleted." 15. We further find that in assessee's own case for A.Y. 2012-13 in ITA No.5784/Del/2016 order dated 24.02.2020, the Coordinate Bench of Tribunal by relying on the order in assessee's own case for A.Y. 2010-11 had held that the transaction of corporate guarantee fee charged at 0.25% by the assessee from its AEs to be at Arm's Length rate and accordingly deleted the addition made by TPO. Before us, Revenue has not pointed to any distinguishing feature in the facts of the case in the year under consideration and that of the earlier years. Revenue has also not placed any material on record to demonstrate that the aforesaid decision of the Co-or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,02,000/- on account of Chemical & Polymer Business are concerned, ld. Counsel for the assessee submitted that assessee's methodology was rejected without providing any reason. It was further submitted that on the anvil of the various judicial precedents, CUP method to be preferred over TNMM. It was further submitted that segmental margin of CPB segment computed by TPO @(-)1.37% is incorrect as the segmental margin from the segmental results of assessee is 33.34%. It was further contended that on the other hand, the PLI of eligible unit as computed by TPO is 16.32% which is again lower than the CPB segment's correct PLI. Thus, no adjustment is warranted even under TPO approach. It was further submitted that DRP erred in computing the adjustment twice Rs. 40.23 lacs on cost side and Rs. 17.82 lacs on revenue side, thus incorrectly applying the TNMM method. Hence, he requested that adjustment of Rs. 58,02,000/- needs to be deleted. 18. Ld. DR of the Revenue relied upon the orders of the authorities below on this issue. 19. Considered the rival submissions and material placed on record. We find considerable cogency in the contention that assessee's methodology was rejected without p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to examine and rebut the data. It was submitted that assessee's internal CUP to be preferred over an external CUP, by placing reliance on the case of Technimont ICB P Ltd. (TS-557-ITAT-2012 (Mum). In view of the above, he requested that adjustment of Rs. 18,72,72,104/- needs to be deleted. 22. Ld. DR of the Revenue relied upon the orders of the authorities below on this issue. 23. Considered the rival submissions and material placed on record. We find considerable cogency that no reason provided by TPO for rejection of assessee's MAM. We further find that Hon'ble Supreme Court ruling in case of M/s Jindal Steel and Others (supra)has settled the law that in order to benchmark the transfer of electricity by captive power plants, the rate at which state electricity board sells electricity to Industrial consumer in the market should be adopted as the open market value u/s 80-IA(8).It is also noticed that issues of transfer of electricity being benchmarked w.r.t. SEB rates has been favourably decided by ITAT in the case of DCM Shriram Limited by its order dated 21.10.2021. We also observed that various judicial pronouncements advocated the adoption of SEB rates for benchmarkin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the benchmarking of the same in contrast to the rate of electricity purchase by the assessee from the SEB. It was further contended that date of various discom rates obtained u/s 133(6) not available in public domain, hence cannot be used. It was submitted that assessee's internal CUP to be preferred over an external CUP, by placing reliance on the case of Technimont ICB P Ltd. (supra). In view of above, he requested that adjustment of Rs. 8,86,15,614/- needs to be deleted. 26. Ld. DR of the Revenue relied upon the orders of the authorities below on this issue. 27. Considered the rival submissions and material placed on record. We find considerable cogency in the submissions of the assessee that no reason provided by TPO for rejection of assessee's methodology. We further find that Hon'ble Supreme Court ruling in case of M/s Jindal Steel and Others (supra) has settled the law that in order to benchmark the transfer of electricity by captive power plants, the rate at which state electricity board sells electricity to Industrial consumer in the market should be adopted as the open market value u/s 80-IA(8).It is noticed that issues of transfer of electricity being bench ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all costs comes out to Rs. 15.26 per unit. It was further contended that the basis of the adjustment i.e. TNERC rates obtained by the TPO u/s 133(6) not available in public domain hence cannot be used. It was further submitted that rule of consistency has also been filed before the DRP. It was submitted that assessee's internal CUP to be preferred over an external CUP, by placing reliance on the case of Technimont ICB P Ltd. (supra). In view of above, he requested that adjustment of Rs. 6,53,67,880/- needs to be deleted. 30. Ld. DR of the Revenue relied upon the orders of the authorities below on this issue. 31. Considered the rival submissions and material placed on record. We find considerable cogency that no reason provided by TPO for rejection of assessee's methodology. We further find that Hon'ble Supreme Court ruling in case of M/s Jindal Steel and Others (supra) has settled the law that in order to benchmark the transfer of electricity by captive power plants, the rate at which state electricity board sells electricity to Industrial consumer in the market should be adopted as the open market value u/s 80-IA(8). It is noticed that issues of transfer of electricity bein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11.12.2018 at pages 417-418 of paper book and submission dated 27.12.2019 at pages 518-523 of paper book. It was further submitted that AO and consequently the DRP incorrectly alleged that the assessee failed to justify the claim in spite of several opportunities.AO and consequently the DRP have not appreciated that the assessee has discharged its onus of substantiating its claim with documentary evidence. With regard to bonafide claim of the assessee, he submitted that it is required to be appreciated that under the provisions of the Act, it is a settled law that only correct amount of taxes can be collected and where an assessee is eligible to a particular relief as per the provisions of law, the same is required to be granted. To support this contention, he placed reliance on the judgement of Hon'ble Delhi High Court in the case of Clix Capital Services Pvt. Ltd. (2024-TIOL-343-HC-DEL-IT), a copy thereof is placed at Page no. 676-679 of PB-Case Law Compilation wherein, by referring to Article 265 of the Constitution of India, the Hon'ble Delhi High Court in para no. 15 of the judgment has held as under:- "15. At this juncture, it is also apposite to refer to Article 265 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laim of investment in new plant and machinery during the year. It has submitted the relevant documents in the form of paper book. We observed that AO and Ld DRP have concluded that the assessee has not substantiated the claim. After careful consideration of the various documents submitted by the assessee, we direct the AO to consider the various information de novo after giving the proper opportunity of being heard to the assessee. The claim made by the assessee cannot be rejected mechanically and the assessee has made huge investments in the plant and machinery in order to claim the benefit u/s 32AC of the Act. Therefore, we are remitting these grounds back to file of AO and the same are allowed for statistical purposes. 34. Apropos Grounds no.48 to 54 relating to disallowance u/s. 14A of the Act amounting to Rs. 15,32,818/- are concerned, ld. Counsel for the assessee submitted that the issue is fully covered by the orders of the ITAT, DRP and CIT(A) in assessee's own case in different years wherein, the appellate forum had deleted the additions made u/s. 8D2(ii) of the Rules. 35. Ld. DR of the Revenue relied upon the orders of the authorities below, but she did not controvert t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,145.81 Total (a + b) Rs.8,261.65/- Rs.7,094.60/- Rs.1,167.05/- The unit wise details of the amount of deduction of Rs. 82,61,65,610/- u/s 35(2AB) of the Act is as follows: - S.No. Particulars Revenue Expenditure Capital Expenditure 1 Chemical Business, Bhiwadi 18,06,53,915 20,37,85,981 2 Chemical Business, Manali 6,44,56,580 1,32,55,557 3 Techncial Textiles, Manali 2,64,37,723 11,67,659 4 Engineering Plastics, Manali 1,54,33,247 1,99,000 5 Chemical Technology, Gurgaon 10,02,21,675 10,63,128 Total 38,72,03,140 21,94,81,235 Eligible in percentage 100% 200% Eligible in amount 38,72,03,140 43,89,62,470 Grand Total 82,61,65,610 Action of the Ld. AO in the Draft Order: - The Ld. AO has disallowed the deduction to the extent of Rs. 1167.05 lakhs on the basis of DSIR short approval (P. no. 13-14 of Ld. AO's Draft Order I P. no. 194-195 of Appeal Set). Directions of the Ld. DRP: - The Ld. DRP had held that DSIR had approved the Gurgaon R&D unit from 01.04.2016 only & therefore eligible for deduction from F.Y. 2016-17 relevant to A.Y. 2017-18 and accordingly directed to Ld. AO to disallow deduction on entire amount w.r.t. Gurgaon R&D unit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had further extend approval vide its order dated 08.09.2017 (P. no. 927 of P.B.) for all five units from 01.04.2016 to 31.03.2020 which was relied by the Ld. DRP above. Therefore, the assessee company is eligible for the deduction w.r.t. Gurgaon R&D unit from the F.Y. 2015-16 relevant from the A.Y. 2016-17 as well to the F.Y. 2019-20 relevant to the A.Y. 2020-21. Therefore, the Ld. DRP had ignored the earlier approval of Gurgaon R&D unit by DSIR vide order dated 11.09.2015 at P. no. 891 of P.B. from 31.07.2015 to 31.03.2016 and accordingly assessee company is eligible for the deduction w.r.t. Gurgaon R&D unit for the F.Y. 2015- 16 relevant to A.Y. 2016-17 as well. Therefore, it is prayed before your honour that kindly allow the deduction of Gurgaon R&D unit U/S 35(2AB) of the Act as the contention of the Ld. DRP is not correct. Quantification of expenditure by DSIR is not a pre-condition of allowability of weighted deduction u/s 35(2AB) of the Act read with rule 6(7 A)(b) of the Rules: - The statute does not prescribe that the quantification of expenditure by DSIR is a pre-condition of allowability of weighted deduction U/S 35(2AB) of the Act, the only requirement, is that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to verify such figures, we would allow the Assessing Officer to do so. In other words, in principle, we accept the Tribunal's reasons and conclusions. Merely because the prescribed authority failed to send intimation in Form 3CL, would not be reason enough to deprive the assessee's claim of deduction under section 35(2AB) of the Act. However, in facts of the present case, it would be open for the Assessing Officer to verify the actual expenditure incurred by the assessee. " * Special Leave Petition filed by revenue against ruling of the Hon'ble Gujrat High Court, has been dismissed by Hon'ble Supreme Court [2018-TIOL- 282-SC-ITJ) "The assessee company, engaged in manufacture & sale of pharmaceutical products, also conducted research & development for developing new drugs and formulations. During the relevant A Y, the assessee incurred expenditure on in-house research and development facility & claimed various deductions U/S 35(2AB). On assessment, such claims were accepted by the AO. However, the CIT exercised power of revision U/S 263 & held that the AO failed to make proper enquiries before accepting the claim. The CIT held that the AO did not send intimati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 5 facilities of R&D on 8.09.2017 for the period 1.04.2016 to 31.03.2020.In the same order of approval, they have clearly mentioned the date of application as application dated 12.07.2016 to new facility of Gurgaon and application for renewal of 4 facilities dated 27.09.2016. 40. The above facts clearly shows that the DSIR has only recognized the 5 facilities vide letter dated 11.09.2015 and subject to fulfillment of terms and conditions. The assessee has actually filed the relevant terms and conditions and other formalities only on 12.07.2016 and 27.09.2016. Accordingly, the DSIR has approved all the five facilities back dated from 1.04.2016. Therefore, in our considered view, the findings of Ld DRP are just and proper. 41. Coming to the case law relied by the assessee, we observed that the procedure for granting deductions u/s 35(2AB) has under gone change, earlier it was AO to send the intimation in Form 3CL to revenue and the same was approved by the authorities for deductions. The process was to send the intimation by the prescribed authorities to the department. However, the process was simplified and the assessee has to obtain the approval directly. The assessee has relie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aforesaid discussions and respectfully following the aforesaid precedents, we deem it fit and proper to direct the TPO to delete such disallowance of Rs. 14,36,387/- in light of the aforesaid precedents in assessee's own case. Accordingly, the Grounds No.66 to 70 are allowed in the aforesaid manner. 46. Apropos Grounds no.71 to 73 relating to disallowance on account of inventories written off amounting to Rs. 2,04,00,000/- are concerned, ld. Counsel for the assessee submitted that the assessee had claimed expense on account of fixed assets / inventories provided / written off as part of other expense in note no.29 of annual report amounting to Rs. 2.22 crores. However, the assessee has added back Rs. 0.18 crores (Rs.17,98,117/-) of fixed assets written off in its computation of income. He further submitted that assessee furnished the submission dated 14.12.2018 and submission dated 23.12.2019 stating that the said amount of Rs. 2.22 crores include fixed assets written of Rs. 0.18 crores and inventories written off of Rs. 1.77 crores and non - performing assets (raw material devaluation) provision of Rs. 0.27 crores alongwith detailed note regarding the writing off of assets / inve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lating to disallowance on account of software expenses amounting to Rs. 8,19,870/- are concerned, ld. Counsel for the assessee submitted that these charges include payment for recurring items, such as, purchase of annual software licenses for Adobe, annual subscription renewal charges, updating the barcode software, renewal of auto CAD software etc., which are revenue in nature. Further, details of software expenses alongwith major invoices are at page nos. 968-983 of the paper book. He also submitted that assessee has bonafide claim due to the fact that the AO is statutory bound under law to verify claim of assessee with documentary evidences and shall compute correct total income, in view of decision of ITAT, Chandigarh in the case of MIT Mohan Singh Kahlon [2013] 39 taxmann.com 145. It was further submitted that the AO is duty bound to grant exemption or deduction even where assessee failed to claim the same in view of the decision of the Mumbai Tribunal in the case of Mrs. Meena S. Banerji vs. ITO [2007] 14 SOT 569. 51. Ld. DR of the Revenue relied upon the orders of the authorities below on this issue. 52. Considered the rival submissions and material placed on record. We fi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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