ESSAR POWER LTD, MUMBAI V. DCIT RG 6(3)(2), MUMBAI

ITA 1388/MUM/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 5525 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-07-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: K
• Assessment Year: 2011-2012
• Appeal Filed On: 14-03-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V JENARDHANAN
• Keywords: Business income; Depreciation; Transfer pricing; Earning of tax free income
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL K , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI RAVISH SOOD , JM ITA NO. 1388/ MUM/20 16 & ITA NO.2233/MUM/2015 ( ASSESSMENT YEAR : 2011 - 12 & 2010 - 11 ) M/S. ESSAR POWER LIMITED ESSAR HOUSE, 11, K.K. MARG MAHAL AXMI, MUMBAI 400 034 VS. DEPUTY COMMISSIONER OF INCOME TAX, RANGE - 6(3)(2) MUMBAI PAN/GIR NO. AAACE0895J APPELLANT ) .. RESPONDENT ) ITA NO. 1930/MUM/2016 & 1931/MUM/2016 ( ASSESSMENT YEAR : 2011 - 12 ) DEPUTY COMMISSIONER OF INCOME TA X, RANGE - 6(3)(2) MUMBAI VS. M/S. ESSAR POWER LIMITED ESSAR HOUSE, 11, K.K. MARG MAHALAXMI, MUMBAI 400 034 PAN/GIR NO. AAACE0895J APPELLANT ) .. RESPONDENT ) ASSESSEE BY SHRI VIJAY MEHTA REVENUE BY SHRI V. JENARDHANAN DATE OF H EARING 26 / 06 /201 8 DATE OF PRONOUNCEMENT 03 / 07 /201 8 / O R D E R PER BENCH : THESE ARE THE APPEALS FILED BY ASSESSEE AND REVENUE AGAINST THE ORDER PASSED BY DRP - 1, MUMBAI DATED 23/12/2015 FOR A.Y.2010 - 11 AND 2011 - 12 IN THE MATTER OF ORDER PASSED U/S.143(3) R.W.S. 144C OF THE INCOME TAX ACT, 1961. ITA NO. 1388/MUM/2016 AND OTHER APPEALS M/S. ESSAR POWER LIMITED 2 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. 3. FACTS IN BRIEF ARE THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF GENERATION OF POWER. DURING THE COURSE OF ASSESSMENT, AO MADE AN ADDITION ON ACCOUNT OF TRANSFER PRICING ADJUSTMENT RELATING TO CORPORA TE GUARANTEE COMMISSION. 4. IN THIS REGARD TPO HAS DEALT WITH THE ISSUE IN GREAT DETAIL AFTER HAVING OBS ERVATION AT PARA 5 OF HIS ORDER, T HE TPO OBSERVED THAT ASSESSEE HAS ALSO SUBMITTED THAT IT HAS TAKEN GUARANTEE FROM VARIOUS BANKS WHICH CONSTITUTES INT ERNAL CUP, ACCORDINGLY ARMS LENGTH PRICE OF CORPORATE GUARANTEE WAS WORKED OUT AT 2.5%. AS THE GUARANTEE WAS JOINTLY GIVEN BY ASSESSEE AND OTHER AE, THEREFORE, ALP GIVEN BY GUARANTEE COMMISSION WAS TAKEN AT 1.25%. ASSESSEE IS IN FURTHER APPEAL BEFORE US. IT WAS CONTENDED BY LEARNED AR THAT ISSUE IS COVERED BY THE ORDER OF THE BOMBAY HIGH COURT IN CASE OF EVEREST KENTO CYLINDERS LTD. 378 ITR 57 WHEREIN RATE OF CORPORATE GUARANTEE HAS BEEN UPHELD AT .05%. 5. ON THE OTHER HAND, LEARNED DR RELIED ON THE ORDER OF THE LOWER AUTHORITIES. 6. WE HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND THAT THE ISSUE RAISED BY ASSESSEE BEFORE THE DRP RELATING FROM GUARANTEE COMMISSION WAS DISMISSED BY DRP AFTER HAVING THE FOLLOWING OBSERVATION: - 3.1. THESE GROUNDS ARE RAISED WITH REGARD TO THE ADJUSTMENT PROPOSED BY THE TPO ON ACCOUNT OF CORPORATE GUARANTEE COMMISSION AMOUNTING TO RS.4,22,02,808/ - . ITA NO. 1388/MUM/2016 AND OTHER APPEALS M/S. ESSAR POWER LIMITED 3 3.2. IN THE COURSE OF THE PROCEEDINGS BEFORE THE DRP, THE LD. AR SUBMI TTED THAT THEY DO NOT WISH TO PRESS THE GROUNDS RELATING TO ADJUSTMENT ON ACCOUNT OF CORPORATE GUARANTEE. THE GROUNDS ARE THEREFORE, DISMISSED. 7. HOWEVER, KEEPING IN VIEW THE CONTENTION OF LEARNED A R THAT THE ISSUE IS COVERED BY THE DECISION OF THE BOMBA Y HIGH COURT IN CASE OF EVEREST KANTO (SUPRA), IN ALL THE FAIRNESS, WE RESTORE THE MATTER BACK TO THE FILE OF THE DRP FOR DECIDING AFRESH AFTER CONSIDERING THE BINDING DECISION OF JURISDICTIONAL HIGH COURT AS STATED ABOVE. AFTER DECIDING THE RATE OF GUARAN TEE COMMISSION, WE DIRECT FOR TAKING HALF OF SUCH GUARANTEE COMMISSION IN SO FAR AS TPO HIMSELF HAS ACCEPTED THE SAME IN THE A.Y. 2010 - 11 AS THE GUARANTEE WAS GIVEN BY TWO PARTIES. WE DIRECT ACCORDINGLY. 8. ALL OTHER GROUNDS TAKEN BY ASSESSEE AND REVENUE A RE COVERED BY THE ORDER OF TRIBUNAL IN ASSESSEES OWN CASE EITHER IN FAVOUR OF ASSESSEE OR AGAINST ASSESSEE. BOTH LEARNED AR AND DR FAIRLY AGREED FOR THE SAME. 9 . NEXT GRIEVANCE OF ASSESSEE RELATES TO ADDIT ION FOR PROVISION OF INCOME TAX RECOVERABLE FROM G UVNL AND ESSAR STEEL LTD., WHILE COMPUTING INCOME UNDER NORMAL PROVISIONS OF THE ACT AND FOR THE PURPOSE OF BOOK PROFIT U/S.115 JB OF THE ACT. 10 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT THIS ISSUE IS DECIDED AGAINST THE ASSESSEE BY THE TRIBUN AL IN ASSESSEES OWN CASE FOR THE A.Y.2009 - 10 VIDE ORDER DATED 17/10/2017 WHEREIN ADDITION UNDER ITA NO. 1388/MUM/2016 AND OTHER APPEALS M/S. ESSAR POWER LIMITED 4 NORMAL PROVISIONS OF THE ACT WAS UPHELD. HOWEVER, ADDITION WHILE COMPUTING BOOK PROFIT U/S.115JB OF THE ACT HAS BEEN DECIDED BY THE TRIBUNAL IN ASSESSEES FAVO UR IN ITS ORDER DATED 17/10/2017. 1 1 . RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE, WE UPHELD THE ADDITION UNDER NORMAL PROVISIONS OF THE ACT, HOWEVER, THE ADDITION MADE WHILE COMPUTING BOOK PROFIT U/S.115JB IS DIRECTED TO BE DE LETED. 1 2 . GROUND RAISED WITH REGARD TO DISALLOWANCE OF DEPRECIATION WAS NOT PRESSED BY LEARNED AR, THE SAME IS THEREFORE DISMISSED IN LIMINI. 1 3 . IN THE A.Y.2011 - 12 AND 2010 - 11, REVENUE IS AGGRIEVED FOR DELETING THE DISALLOWANCE U/S.14A R.W.RULE 8D OF TH E ACT UNDER NORMAL PROVISIONS AS WELL AS WHILE COMPUTING BOOK PROFIT U/S.115JB OF THE ACT. 14 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND FROM RECORD THAT DURING THE YEAR, ASSESSEE HAS NOT RECEIVED ANY EXEMPT INCOME. THE ISSUE IS COVERED BY THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE A.Y.2009 - 10 VIDE ORDER DATED 17/10/2017. RESPECTFULLY FOLLOWING THE SAME, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) FOR DELETING THE DISALLOWANCE MADE U/S. 14A WHILE COMPUTING NORMAL INCOME AS WELL A S B OOK PROFIT U/S.115JB OF THE ACT, IN SO FAR AS ASSESSEE WAS NOT IN RECEIPT OF ANY EXEMPT INCOME DURING THE YEARS UNDER CONSIDERATION. 1 5 . IN THE A.Y.2010 - 11, ASSESSEE IS AGGRIEVED FOR TREATME NT OF INTEREST INCOME ON LOAN GIVEN TO EMPLOYEES AND MARGIN DEP OSITS AS INCOME FROM OTHER SOURCES INSTEAD OF BUSINESS INCOME . ITA NO. 1388/MUM/2016 AND OTHER APPEALS M/S. ESSAR POWER LIMITED 5 1 6 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT THIS ISSUE IS ALSO COVERED BY THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE A.Y.2003 - 04, 2004 - 05 AND 2009 - 10. AS THE FACTS AN D CIRCUMSTANCES DURING THE YEAR UNDER CONSIDERATION ARE SAME, RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE, WE DIRECT THE AO TO TREAT INTEREST INCOME O N LOAN GIVEN TO EMPLOYEES AND MARGIN DEPOSITS AS INCOME FROM BUSINESS, IN PLAC E OF INCOME FROM OTHER SOURCES. WE DIRECT ACCORDINGLY. 1 7 . GROUND NO.4 IS SAME AS DISCUSSED ABOVE IN THE A.Y.2011 - 12, WHEREIN WE HAVE UPHELD THE ORDER OF AO WHILE COMPUTING INCOME UNDER NORMAL PROVISIONS OF THE ACT WITH RESPECT TO PROVISION OF INCOME TAX R ECOVERABLE FROM GUVNL AND ESSAR STEELS LTD., HOWEVER, NO ADDITION IS WARRANTED WHILE COMPUTING BOOK PROFIT U/S.115JB. THIS ISSUE IS ALSO COVERED BY THE ORDER OF THE TRIBUNAL DATED 17/10/2017 FOR A.Y.2009 - 10. 1 8 . ISSUE WITH REGARD TO DISALLOWANCE OF DEPREC IATION WAS NOT PRESSED, THE SAME IS THEREFORE DISMISSED IN LIMINI. 1 9 . DISALLOWANCE OF EXPENDITURE U/S.14A IS SAME AS DISCUSSED IN THE A.Y.2011 - 12. SINCE, THE ASSESSEE IS NOT HAVING ANY EXEMPT INCOME DURING THE YEAR, THERE IS NO JUSTIFICATION FOR THE DISA LLOWANCE SO MADE BY THE LOWER AUTHORITIES. THIS ISSUE IS ALSO COVERED BY THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE A.Y.2009 - 10. 20 . GROUND NO.7 IS WITH REGARD TO DISALLOWANCE OF INTEREST EXPENDITURE U/S.36(1)(III) IS COVERED AGAINST THE ASS ESSEE BY THE ORDER OF THE TRIBUNAL ITA NO. 1388/MUM/2016 AND OTHER APPEALS M/S. ESSAR POWER LIMITED 6 IN ASSESSEES OWN CASE FOR THE A.Y.2009 - 10. RESPECTFULLY FOLLOWING THE SAME, THE DISALLOWANCE OF INTEREST SO MADE U/S.36(1)(III) IS CONFIRMED. 21 . IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED WHEREAS APPEAL OF THE A SSESSEE IS ALLOWED IN PART IN TERMS INDICATED HEREINABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 03 / 07 /201 8 SD/ - ( RAVISH SOOD ) SD/ - (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMB ER MUMBAI ; DATED 03 / 07 /201 8 KARUNA SR. PS COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//