Shree Cement Limited, Beawar V. Deputy Commissioner of Income Tax, Ajmer

ITA 152/JPR/2023

AI Insights

The case involves cross appeals by Shree Cement Limited and the Deputy Commissioner of Income-tax, Circle -2, Ajmer, against the order of the CIT(A), which was passed under section 250 of the Income Tax Act for the assessment year 2014-15. The primary issues revolved around the deductions claimed under sections 80IA and 80IC, the admissibility of certain claims not made in the original return, and the treatment of various receipts and expenditures in the computation of book profit under section 115JB. The Tribunal examined the legal and factual basis of these issues, considering various judicial precedents and the specific provisions of the Income Tax Act.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 132192 (ITAT-JAIPUR)
• Duration Of Justice: 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-08-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: B
• Next Hearing Date: 30-05-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 19-03-2023
• Other Referred Cases: PCIT vs. Wipro Ltd., National Thermal Power Co. Ltd. vs. CIT, Goetze (India) Limited vs. CIT, Captain Steel India Ltd. vs. DCIT, Jute Corporation of India Ltd. vs. CIT, Best Trading and Agencies Ltd. vs. DCIT, Sesa Goa Ltd. vs. JCIT, Metal & Chromium Plater (P) Limited vs. CIT, Radhasoami Satsang vs. CIT, Thigarajar Mills Ltd. vs. CIT, Hindustan Petroleum Corporation Ltd. vs. DCIT, Sony Ericsson Mobile Communications India (P) Ltd. vs. CIT, Aztec Software & Technology Services Ltd. vs. ACIT, M/s. Crystal Crop Protection (P) Ltd. vs. DCIT, M/s. Shahi Exports Pvt. Ltd vs. ACIT, M/s. Adani Wilmar Ltd. vs. ACIT, M/s. Balarampur Chini Mills Limited vs. DCIT, M/s. Best Trading and Agencies Ltd. vs. DCIT, M/s. Reliance Industries Ltd vs. ACIT, M/s. Batliboi Limited vs. DCIT, M/s. Nirma Chemicals Works Pvt Ltd vs. DCIT, M/s. Jai Parabolic Springs Ltd vs. CIT, M/s. Britannia Industries Ltd vs. CIT, M/s. Metal & Chromium Plater (P) Limited vs. CIT, M/s. Best Trading and Agencies Ltd vs. DCIT, M/s. ACIT vs. JSW Steel Ltd, M/s. ACIT vs. Reliance Industries Ltd, M/s. ACIT vs. Adani Wilmar Ltd, M/s. ACIT vs. Hindustan Zinc Ltd, M/s. ACIT vs. Shree Cement Limited
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: APPELLANTS CAPTIVE
• Assessee Lawyers: APPLYING CUP METHOD IS CONCERNED
• Keywords: Capital asset; Depreciation; Transfer pricing; Business expenditure; International transaction; Retrospective amendment; Question of law; Cost of acquisition; Reasonable cause; Fair market value; Prejudicial to interest; Tax effect; Capital receipt; Benefit of exemption; Revised return; Capital expenditure; TDS; Capital Gains
• Section: 37; 263; 28; 10; 154; 92C; 139; 143(3); 92F; 92E; 10AA; 115JB; 80IB; 133(6); 37(1); 139(5); 10B; 195; 250; 80IA; 201; 144C; 80IC; 207; 192; 139(1); 54EC; 64; 80IC; 48; 13; 22; 92CA

Judgement Text

vk;dj vihyh; vf/kdj.k] t;iqj U;k;ihB] t;iqj IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”B” JAIPUR Jh laanhi xkslkbZ] U;kf;d lnL; ,oa Jh jkBkSM+ deys'k t;arHkkbZ] ys[kk lnL; ds le{k BEFORE: HON’BLE SHRI SANDEEP GOSAIN, JM & HON’BLE SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA No. 152/JP/2023 fu/kZkj.k o"kZ@Assessment Year : 2014-15. Shree Cement Limited, Bangur Nagar, Admin Block, Post box No. 33, Masuda Road, Beawar. cuke Vs. Deputy Commissioner of Income-tax, Circle -2, Ajmer. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No. AACCS 8796 G vihykFkhZ@Appellant izR;FkhZ@Respondent vk;dj vihy la- @ITA No. 142/JP/2023 fu/kZkj.k o"kZ@Assessment Year : 2014-15. Deputy Commissioner of Income- tax, Circle -2, Ajmer. cuke Vs. Shree Cement Limited, Bangur Nagar, Admin Block, Post box No. 33, Masuda Road, Beawar. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No. AACCS 8796 G vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri Vijay Shah, CA jktLo dh vksj ls@ Revenue by : Shri Arvind Kumar, CIT lquokbZ dh rkjh[k@ Date of Hearing : 31/05/2023 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 7/08/2023 vkns'k@ ORDER PER BENCH : These two cross appeals by the assessee and revenue are directed against the order dated 20.01.2023 of ld. CIT (A), Delhi-44 passed under section 250 of the 2 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. IT Act for the assessment year 2014-15. The grounds raised by the assessee and revenue are as under :- ITA NO. 152/JP/2023 (ASSESSEE) 1. That on the facts and in the circumstances of the case, the ld. CIT (Appeals) was not justified and erred in rejecting the appellant’s claim of allowing reliability charge of Rs. 1.5/unit in computing Transfer Price of Power for the purpose of Deduction u/s 80-IA in respect to its eligible power undertakings merely on the contention that such claim has not been made vide the return of income. 2. That on the facts and in the circumstances of the case, the ld. CIT (Appeals) was not justified and erred in confirming the disallowance made by the AO on account of claim of Education Cess of Rs. 5,21,67,086/-. 3. That on the facts and in the circumstances of the case, the ld. CIT (Appeals) was not justified and erred in confirming the disallowance made by the AO on account of profit on sale of investments of Rs. 83,31,72,239/- and profit on sale of fixed assets of Rs. 44,93,014/- while computing book profit u/s 115JB of the Act. 4. That on the facts and in the circumstances of the case, the ld. CIT (Appeals) was not justified and erred in rejecting the claim of deduction u/s 80IA and 80IC while computing book profit u/s 115JB of the Act merely on the contention that such claim has not been made vide the return of income. 5. That on the facts and in the circumstances of the case, necessary direction may be given to the AO to allow the claim of depreciation on leasehold rights u/s 32(1)(ii) being business or commercial right acquired during the year under consideration. 6. That on the facts and in the circumstances of the case, necessary direction may be given to the AO to allow interest on TDS amounting to Rs. 7,99,142/- debited to the Statement of P & L as an allowable business expenditure. ITA NO. 142/JP/2023 (REVENUE) 1. Whether on the facts and circumstances of the case, the learned CIT (A) NFAC Delhi was justified in allowing the appeal of the assessee by deleting the disallowance of Rs. 2,89,07,63,321/- on account of deduction u/s 80IA in respect of captive power plant. 3 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. 2. Whether on the facts and circumstances of the case, the learned CIT (A) NFAC Delhi was justified in allowing the appeal of the assessee by deleting the disallowance of Rs. 1,09,34,68,350/- on account of deduction u/s 80IA on account of Solid Waste. 3. Whether on the facts and circumstances of the case, the learned CIT (A) NFAC Delhi was justified in allowing the appeal of the assessee by deleting the disallowance of Rs. 14,68,08,695/- out of claim u/s 80IA of water treatment system due to transfer pricing adjustment u/s 80IA. 4. Whether on the facts and circumstances of the case, the learned CIT (A) NFAC Delhi was justified in allowing the appeal of the assessee by deleting the disallowance of Rs. 26,69,07,312/- as against total disallowance made by the AO is Rs. 34,32,56,010/- on account of deduction u/s 80IA of Rail system due to adjustment of Transfer Pricing. 5. Whether on the facts and circumstances of the case, the learned CIT (A) NFAC Delhi was justified in allowing the appeal of the assessee by deleting the disallowance of Rs. 62,34,41,568/- on account of sales tax subsidy and electricity duty exemptions received by assessee in nature of capital received and the same AO has computing as total income under regular provisions while computing book profit u/s 115JB. 6. That the appellant craves to add, amend, alter, delete or modify any or all the above grounds of appeal before or at the time of hearing. For the sake of convenience, both these appeals are being disposed off by this common order. 2. The brief facts of the case are that the assessee company i.e. Shree Cement Limited is a Public Limited Company engaged inter alia in the business of manufacture and sale of cement and generation and sale of power. The assessee filed its return of income for the year under consideration on 29.11.2014 disclosing total income of Rs. Nil under the normal provisions of the Act and book profit amounting to Rs. 6,96,12,33,525/- under provisions of section 115JB of the Act. The case was taken up for scrutiny. In view of specified domestic transactions, a 4 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. reference under section 92CA was made to the Transfer Pricing Officer (TPO). The TPO passed an order under section 92CA(3) dated 25.10.2017 of the Act proposing various upward adjustments aggregating to Rs. 4,85,58,87,970/-. The AO after incorporating the proposed adjustments made by the TPO passed draft assessment order under section 144C of the Act on 28.12.2017 determining total income under the normal provisions of the Act at Rs. 453,88,97,023/- and Rs. 842,23,40,345/- under provisions of Section 115JB of the Act. Since the assessee did not intend to exercise the option to file objections before the Dispute Resolution Panel, the AO passed final order under section 144C read with section 143(3) of the Act on 23.02.2018 by making various disallowances/additions to the returned income of the assessee as under :- - Reduction in claim u/s 80IA on power undertakings on account of transfer pricing adjustment of power (Rs. 2,89,07,63,321/-, - Reduction in claim u/s 80IA on Solid Waste Management System on account of transfer pricing adjustment of pond ash (Rs. 1,45,50,59,944/-, - Reduction in claim u/s 80IA on Water Treatment System on account of transfer pricing adjustment of water (Rs. 14,68,08,695/-, - Reduction in claim u/s 80IA on Rail System due to modification in transfer price of logistic services (Rs. 36,32,56,010/-, - Disallowance of Sales Tax Subsidy (Rs. 62,29,26,819/-) and Electricity Duty Exemption (Rs. 5,14,748/-) - Disallowance of Education Cess (Rs. 5,21,67,086/-) - Disallowance of Profit on sale of fixed assets (Rs. 44,93,014/-) and profit on sale of investment Rs. 83,31,72,239/-) while computing book profit u/s 115JB of the Act. - Excess levy on interest u/s 234C (Rs. 2,55,24,706/-) - Short Grant of TDS )Rs. 22,947/-) 5 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. Aggrieved by the order of AO, the assessee preferred appeal before the ld. CIT (Appeals). In response to the notice issued under section 250 of the I.T. Act, 1961, the assessee filed written submissions along with paper book etc. The ld. CIT (A) after considering the submissions of the assessee partly allowed the appeal of the assessee. 2.1 Now, aggrieved by the order of the ld. CIT (A), the assessee and the revenue filed cross appeals before us. First, we take up the appeal of the assessee in ITA No. 152/JP/2023. Ground No. 1 relates to rejecting allowability of Reliability charge of Rs. 1.50 per unit in computing Transfer Price of Power for the purpose of deduction u/s 80-IA of the Act. The said ground relates to non- consideration of component of reliability charge of Rs. 1.50 per unit which the power undertaking is eligible to charge for providing uninterrupted and quality power supply to the cement manufacturing units of the assessee. 3. Before us, the ld. A/R of the assessee has submitted that the aforesaid issue was also raised before the ld. CIT (A) by the assessee which was turned down on the contention that the claim has also not been made by appellant in the return of income. The ld. CIT (A) referred to the decision of Hon’ble Supreme Court in Pr. CIT vs. Wipro Ltd. (2022) 140 taxmann.com 223 and stated that even a revised return could not be of any help to the appellant as the Apex Court has stated that by filing the revised return, the assessee cannot be permitted to substitute the original return filed under section 139(1). 6 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. 3.1 In this regard, the ld. A/R during the course of hearing argued that ld. CIT (A) was not justified in dismissing the additional ground filed merely because of the reason that no claim has been made either in the original return or in the revised return. Though the assessee has claimed the deduction and asked the adjustment on Power supply rate on account of commitment towards the Uninterrupted Power Supply to cement unit. Thus the assessee is not raising new claim but revising its claim. He submitted that reliance on the decision of Apex Court in the case of PCIT vs. Wipro Ltd. (2022) 140 taxmann.com 223 (SC) was totally misplaced and out of the context due to the following – (a) Apex Court has nowhere held that new claim cannot be lodged before the appellate authorities. Apex Court was dealing with the provisions of revised return under section 139(5) and held that revised return can only substitute original return under section 139(1) and cannot transform it into loss return under section 139(3) for the purpose of availing the benefit of carry forward or set off of loss. (b) Issue before the Apex court was on non-compliance of section 10B(8) r.w.s. 139(1) of the Act which specifically requires to lodge the claim in the return. The appellant’s case is not a case of any non-compliance of any provisions of the Act which was the subject matter before the Hon’ble Apex Court. The claim of deduction under section 80-IA and under section 80-IC under provisions of MAT is in accordance with the provisions of section 115JB(5) of the Act. (c) Ld. CIT (Appeals) have relied upon the decision of Hon’ble Supreme Court in the case of Wipro Ltd. (supra) to hold that additional ground, 7 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. by which the appellants have lodged their claim for the first time, cannot be admitted by him, although the question of admissibility of new claim vide an additional ground of appeal was not before the Hon’ble Apex Court at all in the said case. 3.2 The ld. A/R further submitted that the question on allowability of new claim by way of additional ground before the appellate authorities is favourably settled by the categorical decision of Hon’ble Apex Court in National Thermal Power Co. Ltd. vs. CIT (1998) 229 ITR 383 (SC) and the same has been reiterated by the Apex Court later in Goetze (India) Limited vs. CIT (2006) 284 ITR 323 (SC). 4. The ld. D/R on the other hand strongly relied upon the order of ld. CIT (A). 5. We have carefully heard the rival contentions and perused written submissions filed by the assessee. We have also carefully gone through the order of ld. CIT (A). The judicial precedents as relied upon during the course of hearing have duly been deliberated upon. Our decision on the subject matter would be as given in succeeding paragraphs. 5.1 First of all we will decide with regard to the issue raised by ld. CIT (A) on the admissibility of the ground. In this regard, after hearing both the parties, we are of the view that ld. CIT (A) while relying upon the decision of Hon’ble Supreme Court in the case of PCIT vs. Wipro Ltd.(2022) 446 ITR 1 (SC) had dismissed the claim of the assessee. However, in our view the reliance placed on the decision of Wipro Ltd (supra) by ld. CIT (A) is erroneous and not applicable in the present facts because of the following :- 8 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. (a) In Wipro Ltd. (supra), the issue was decided against he assessee on the grounds that to withdraw the claim of exemption under section 10B(8), declaration was required to be filed within the due date prescribed under section 139(1) which was not complied with and that the original return was filed under section 139(1) and not under section 139(3). Hence, revised return cannot be filed to claim carry forward of losses for the first time. Supreme Court itself at para9 of the order has held that the assessee can file a revised return in a case where there is an omission or a wrong statement. (b) In the case at hand the issue involved is determination of Arms’ Length Price (or transfer price) for determining the quantum of deduction under section 80IA already calimed in the original return of income. The judgment of Hon’ble Supreme Court in case ofWipro, is applicable to cases wherein “new claim” is filed by way of revised return for claiming “exemption” under section 10B of the IT Act. In the present case, there is no new claim being lodged but only modification in the existing claim already made in the return of income. (c) The Hon’ble Supreme Court, on plain reading of the section 10B, which is for claiming of exemption, held that “ ..... we note that the wording of the section 10B(8) is very clear and unambiguous. For claiming the benefit under section 10B(8), the twin conditions of furnishing the declaration to the assessing 9 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. officer in writing and that the same must be furnished before the due date of filing the return of income under sub-section (1) of section 139 of the IT Act are required to be fulfilled and/or satisfied. .... It cannot be disputed that in a taxing statute the provisions are to be read as they are and they are to be literally construed, more particularly in a case of exemption sought by an assessee” (extract from para 8). Contrary to the case of Wipro Ltd., there is no breach of statutory timelines, neither there is claiming of any exemption in the present case of the assessee. (d) It is further noteworthy that the Hon’ble Supreme Court in Wipro’s case (supra), clearly distinguished the mechanism of allowing claim of deduction under Chapter VIA (as applicable in the present case) with mechanism of allowing claim in respect to exemption. On this aspect, Supreme Court in case of Wipro (supra) has held that “ Now so far as the reliance placed upon the decision of this Court in the case of G.M. Knitting Industries (P) Ltd. (supra), ...... section 10B(8) is an exemption provision ...... Even otherwise, Chapter III and Chapter VIA of the Act operate in different realms and principles of Chapter III, which deals with ”incomes which do not form a part of total income”, cannot be equated with mechanism provided for deductions in Chapter VIA, which deals with 10 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. “directions to be made in computing total income”. Thus even in the words of Supreme Court, the decision given in case of Wipro does not have any applicability to the cases involving chapter VIA. Thus the decision of Supreme Court in case of GM Knitting, which pertains to claiming of deduction, would be applicable to the present case, instead of decision of Wipro, which pertains to claiming of exemption. (e) We further noticed that recently the above issue came up before the Hon’ble Kolkata Tribunal in the case of Captain Steel India Ltd. vs. DCIT in ITA No. 231/Kol/2022 dated 01.02.2023, wherein Kolkata Tribunal held that claim under section 80JJAA, by way of an additional ground, can be admitted before ld. CIT (A) and the decision of Hon’ble Supreme Court in Wipro (supra) is applicable on claims made under Chapter III and is not applicable on claim made under Chapter VIA via additional ground of appeal. 5.2 We have also gone through the decisions in the case of National Thermal Power Ltd. vs. CIT (1998) 229 ITR 383 (SC) wherein the Hon’ble Supreme Court has held that the ITAT has jurisdiction to examine a question of law which even did not arose before the lower authorities but was raised first time before the ITAT. 5.3 In the case of CIT vs. Pruthvi Brokers and Shareholders Pvt. Ltd. (2012) 349 ITR 336 (Bom.) wherein the Hon’ble Bombay High Court has observed that the assessee is entitled to raise not merely additional legal submissions before the 11 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. appellate authorities, but is also entitled to raise additional claims before them. The appellate authorities have jurisdiction to deal not merely with additional grounds, which became available on account of change of circumstances or law, but with additional grounds which were available when the return was filed. The words ‘could not have been raised’ must be construed liberally and not strictly. There may be several factors justifying the raising of a new plea in an appeal and each case must be considered on its own facts. 5.4 In the case of CIT vs. Jai Parabolic Springs Ltd (2008) 306 ITR 42 (Delhi), the Hon’ble Delhi High Court has held that there is no prohibition of powers of the Tribunal to entertain an additional ground which was not raised before the lower authorities. 5.5 Apart from above, under similar circumstances the Coordinate Bench of ITAT Delhi Bench in the case of M/s. Crystal Crop Protection (P) Ltd. vs. DCIT in ITA No. 1539/Del/2016 while relying upon different decisions of higher courts had held as under :- “ 9. In the case of Jute Corporation of India Ltd. Vs CIT vide order dated 04.09.1990, 1991 AIR 241 held that the Hon’ble Apex Court while adjudicating on the issue of additional ground held that the declaration of law is clear that the power of the Appellate Assistant Commissioner is coterminus with that of the Income Tax Officer. If that be so, there appears to be no reason as to why the appellate authority cannot modify the assessment order on an additional ground even if not raised before the Income Tax Officer. No exception could be taken to this view as the Act does not place any restriction or limitation on the exercise of appellate power. Even otherwise an Appellate Authority while hearing appeal against the order of a subordinate authority 12 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. has all the powers which the original authority may have in deciding the question before it subject to the restrictions or limitation if any prescribed by the statutory provisions. In the absence of any statutory provisions to the contrary the Appellate Authority is vested with all the plenary powers which the subordinate authority may have in the matter. 10. The Hon’ble Apex Court has also held that if the Appellate Assistant Commissioner is satisfied he would be acting within his jurisdiction in considering the question so raised in all its aspects. Of course, while permitting the assessee to raise an additional ground, the Appellate Assistant Commissioner should exercise his discretion in accordance with law and reason. He must be satisfied that the ground raised was bona fide and that the same could not have been raised earlier for good reasons. The satisfaction of the Appellate Assistant Commissioner depends upon the facts and circumstances of each case and no rigid principles or any hard and fast rules can be laid down for this purpose. 11. The similar proposition has reiterated by the Hon’ble Apex Court while dealing with the similar issue in the case National Thermal Power Co. Ltd. Vs CIT 229 ITR 383. The Apex Court reiterated that “6. In the case of Jute Corporation of India Ltd. v. C.I.T. this Court, while dealing with the powers of the Appellate Assistant Commissioner observed that an appellate authority has all the powers which the original authority may have in deciding the question before it subject to the restrictions or limitations, if any, prescribed by the statutory provisions. In the absence of any statutory provision, the appellate authority is vested with all the plenary powers which the subordinate authority may have in the matter. There is no good reason to justify curtailment of the power of the Appellate Assistant Commissioner in entertaining an additional ground raised by the assessee in seeking modification of the order of assessment passed by the Income-tax Officer. This Court further observed that there may be several factors justifying the raising of a new plea in an appeal and each case has to be considered on its 13 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. own facts. The Appellate Assistant Commissioner must be satisfied that the ground raised was bona fide and that the same could not have been raised earlier for good reasons. The Appellate Assistant Commissioner should exercise his discretion in permitting or not permitting the assessee to raise an additional ground in accordance with law and reason. The same observations would apply to appeals before the Tribunal also.” 12. While dealing with the case of NTPC, the Hon’ble Apex Court enunciated that it would not be proper if the Tribunal is confined only to issues arising out of the appeal before the Commissioner of Income-tax (Appeals) and it amounts to taking too narrow a view of the powers of the Appellate Tribunal. Undoubtedly, the Tribunal will have the discretion to allow or not allow a new ground to be raised. But where the Tribunal is only required to consider a question of law arising from the facts which are on record in the assessment proceedings we fail to see why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee. Thus, we find that the Courts have always upheld the powers of the Tribunal or rather directed the Tribunals to assess the correct tax liability of the assessees. In case the assessee has wrongly or owing to lack of knowledge pays tax on an item of amount which is not taxable in accordance with the provisions of the Income Tax Act, the assessee would have every right to pray for right taxation of his taxable income. 13. Thus, it can be said that the claim of the assessee has to be considered based on the fact that whether the amounts in question or taxable or not, notwithstanding the fact that the assessee has suo-moto offered the amounts to taxation already. For determination of the issue whether the Assessing Officer or the Tribunal empowered to consider the plea of the assessee, the provisions of the Act are examined. 14. Year-1989 -- The provision sub-section (3) was substituted by the following provision by the Direct Tax Laws (Amendment) Act, 1987 with effect 14 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. from 1st April 1989, which read as follows "(3) On the day specified in the notice issued under sub-section (2), or as soon afterwards as may be, after hearing such evidence as the assessee may produce and such other evidence as the Assessing Officer may require on specified points, and after taking into account all relevant material which he has gathered, the Assessing Officer shall, by an order in writing, make an assessment of the total income or loss of the assessee, and determine the sum payable by him on the basis of such assessment." 15. On perusal of the above provision, it is noted the Legislature specifically excluded the A.O.'s power to determine sum 'refundable' to the assessee on completion of assessment under sub-section (3) of Section 143 of the Act. The intention of the Legislature in introducing amended Section 143(3) was explained by the CBDT in Circular No. 549 dated 31.10.1989 wherein the Board stated that under the amended provisions, the ITA No.679/Kol/2016 Smt. Sharmila Kumar, AY- 2011-12 Assessing Officer in an assessment order passed under section 143(3) cannot assess income at a figure lower than the returned income, nor can loss be assessed at a figure higher than the returned, and therefore no tax paid with reference to the returned income can now be refunded to the assessee on completion of regular assessment. 16. Year 1998 -- The above provision was later on substituted by the Finance (No.2) Act of 1998 and the power to determine 'sum refundable' to the assessee by the Assessing Officers in the proceedings u/s 143(3) was re- instated by the Legislature. The relevant provision, as it stands now reads as under: "(3) On the day specified in the notice issued under sub-section (2), or as soon afterwards as may be, after hearing such evidence as the assessee may produce and such other evidence as the Assessing Officer may require on specified points, and after taking into account all relevant material which he has gathered, the Assessing Officer shall, by an order in writing, make an assessment of the total income or loss of the assessee, and determine the 15 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. sum payable by him or refund of any amount due to him on the basis of such assessment." 17. The CBDT Circular No. 772 dtd. 23.12.1998-- explaining the above substituted provision of Section 143(3) explicitly stated that under the erstwhile provisions, there was no provision to issue refund and the Assessing Officer was only empowered to determine the sum payable by the assessee, but under the amended provisions the A.O. is empowered to provide for determination of sum payable by the assessee as well as the refund of any amount due to him. 18. On harmonious reading of these provisions & after giving due consideration of the legislative history of Section 143(3) and the judgment of the Hon'ble Calcutta High Court in the case of CIT Vs Britannia Industries Ltd in ITA No. 03/2013 vide order dated 13.07.2017 held that even if it (accepting the fresh claim of the assessee) results in an assessment below the returned income and consequently refund arises, it is valid as per law. 19. The Hon’ble High Court has also held that there is no conflict between the Gurjargravures Private Ltd. and Goetze (India) Ltd. In the former a claim for exemption was for the first time put up before the Appellate Assistant Commissioner who rejected the claim as not made before the I.T.O. This rejection was set aside by the Tribunal with direction upon the Appellate Assistant Commissioner to entertain the question of relief under section 84, claimed by the assessee in that case. The Supreme Court held that it was not competent for the Tribunal to have done so. The distinction between the two authorities eliminating any conflict is that in Gurjargravures Private Ltd. the competence of the Tribunal to direct the Appellate Assistant Commissioner to entertain a claim not made before the I.T.O was found to be lacking. In Goetze (India) Ltd. the Supreme Court held that the assessing Authority's power was limited but not that of the Tribunal in the context of dealing with a claim of the assessee therein not put forward before the Assessing Officer. In 16 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. Gurjargravures Private Ltd. (supra) the Tribunal itself did not consider to allow the claim for relief. 20. Further, the CBDT Circular No. 14(XL-35 dated 11.04.1955) wherein it is held as under: "3. Officers of the Department must not take advantage of ignorance of an assessee as to his rights. It is one of their duties to assist a taxpayer in every reasonable way, particularly in the matter of claiming and securing reliefs and in this regard the Officers should take the initiative in guiding a tax payer where proceedings or other particulars before them indicate that some refund or relief is due to him. This attitude would, in the long run, benefit the ITA No.679/Kol/2016 Smt. Sharmila Kumar, AY- 2011-12 department for it would inspire confidence in him that he may be sure of getting a square deal from the department. Although, therefore, the responsibility for claiming refunds and reliefs rests with assessees on whom it is imposed by law, officers should" 21. Further, we also note that the relief sought cannot be refused merely because the assessee has omitted to claim the relief as held by the Hon'ble Supreme Court in Anchor Pressings P. ltd. Vs. CIT 161 ITR 159. Hence, keeping in view the entire facts on record, the judicial pronouncements of the Hon’ble Apex Court on the issue of allowability of the claim, we hereby hold that the assessee is eligible to raise the issue at appellate levels.” 5.6 The coordinate bench of ITAT Jaipur in the case of Mayur Uniquoters Ltd. vs. CIT in ITA No. 02/JP/2022 and ITA No. 212/JP/2022 has also held that assessee is entitled to raise additional claim before the appellate authorities. 5.7 Even otherwise, the assessee has not lodged any fresh claim as what has happened in the case of the appellant is that it has not lodged any new claim but is 17 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. only praying for a modification of existing claim made on account of adjustment of price of power plant on account of continue power supply commitment. 5.8 The issue of revision of claim is covered in favour of the appellant by the decision of Hon’ble Rajasthan High Court in case of CIT vs. Gokuldass & Co. (2002) 253 ITR 633 (Rajasthan), wherein the assessee had raised a claim for weighted deduction under section 35B during the assessment proceedings before the AO. The Hon’ble Court upheld the decision of Tribunal and held that the Appellate Authority has the power to consider a larger amount if the materials supporting that claim are already available on record. 5.9 As differentiated hereinabove that the decision of Hon’ble Supreme Court in the case of PCIT vs. Wipro Ltd. (supra) is clearly not applicable as the assessee is not making new claim but revising the claim of price of power supply, in the facts of the present case. On the contrary, in view of our categorical finding above and also keeping in view the decision of Hon’ble Supreme Court in the case of National Thermal Power corporation Ltd. (supra), Jute Corporation of India (supra) and other citations discussed by us above, we are of the view that assessee could raise additional ground before ld. CIT (A) as well as before us for revising claim of deduction already made in the return of income. 6. Thus, admitting and considering the above discussion, now we deal with the case on the merits of the case. The ld. A/R of the assessee has submitted that the captive power plants (CPP) set up by the assessee requires huge capital outflow and were set up with the primary objective of supplying long term uninterrupted power supply to the cement manufacturing units of the assessee. The ld. A/R further 18 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. submitted that the cement industry being a continuous process industry requires uninterrupted power supply on 24 hour basis which is provided by the CPP of the assessee. The CPP being set up exclusively for the cement manufacturing unit carries a risk of having a single customer. Therefore, service provided for this continuous and uninterrupted supply of power and for carrying this business risk should be accompanied by a charge. The ld. A/R also in his detailed argument contended as below : “Further, the above reliability charge is also valid for the following reasons : (a) Continuous source of power supply – Cement industry is a continuous process industry and hence the quality of power supply has to be reliable to ensure uninterrupted supply. The sole objective of setting up of CPP was to fulfill the huge power requirements of the manufacturing unit of the appellant and provide long term assured power supply; (b) Single customer risk - The CPP’s infrastructure supplies electricity only to the manufacturing units located adjacent to its premises. Thus, doing business exclusively with a single client carries different type of risk and therefore exclusivity should be accompanied by a premium; (c) Capacity utilization risk - CPP technically is set up as an infrastructure which generates and distribute/transmit electricity to manufacturing units based on its requirement in line with production planning irrespective of actual off take by the manufacturing units which could be lower based on the actual production or nil in case the plant is shut down. Thus, the CPP even face capacity utilisation risk for which it should be adequately compensated; 19 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. (d) Several states recover such charges for continuous and uninterrupted supply of power from the industrial consumers and even CERC provides for charge of such reliability support charges.” The ld. A/R of the assessee further submitted that similar issue is also covered by the decision of this bench in the case of M/s. Hindustan Zinc Limited in ITA Nos. 127 & 128/Jodh/2022 dated 15.11.2022 (AY 2017-18 and 2018-19) wherein the Hon’ble Bench while allowing the transfer price of power based on rate at which power is supplied by Grid has upheld the inclusion of reliability charge @ 15% charged by the assessee over and above such Grid rate. 7. On the other hand, the ld. D/R supported the orders of the revenue authorities. 8. We have heard the rival submissions, perused the material available on record and gone through the orders of the revenue authorities and the case law cited by both the parties. The issue thus, is of granting the higher rate on account of commitment of Uninterrupted Power Supply to the cement unit and on this issue we have gone through the facts of the case and order of ld. CIT (A). It is noted that Haryana Electricity Regulatory Commission vide its order dated 14.03.2013 has considered this issue and held as follows :- “ The issue of per unit rate of reliability charge was also discussed at length. In the hearing held on 12.02.2013, the Chairman cum Managing Director of the Discoms agreed to reduce the reliability charge of Rs. 2.50/unit originally proposed by them to Rs. 1.50 / unit. The Commission, considering the cost difference in the weighted average rate of short term power and the weighted average rate of long term power purchased by the Discoms, finds the modified proposed reasonable and thus approves the same. Hence the reliability 20 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. charge shall be Rs. 1.50 / unit subject to the terms and conditions as approved by the Commission in the present order. 8.1 On perusal of above order it is noted that reliability charge of Rs. 2.50 / unit as originally claimed by the Discoms was reduced to Rs. 1.5 /unit which was found to be reasonable by the commission and hence was allowed. Further, Uttarakhand Electricity Regulatory Commission (UERC) while passing order dated 06.05.2013 on approval of business plan & tariff petition for Uttarakhand Power Corporation Ltd. has held as follows : 6. Continuous and Non-continuous supply. (i) Only Continuous Process Industry consumers operating 24 hours a day for 7 days of a week without any weekly off connected on either independent feeders or industrial feeder can opt for continuous supply. For industrial feeder, all connected industries will have to opt for continuous supply and in case any one consumer on industrial feeder does not wish to opt for continuous supply, all the consumers on such feeder will not be able to avail continuous supply. Such continuous Process Industry consumers who opt for continuous supply shall be exempted from load shedding during scheduled/unscheduled power cuts and during restricted hours of the period of restriction in usage approved by Uttarakhand Electricity Regulatory Commission from time to time, except loan shedding required due to emergency breakdown/shutdown. Such consumers shahll pay 15% extra energy charges, in addition to the energy charges given above, with effect from May 01, 2013 or in case of new consumers, from the date of connection, till 31 st March, 2014, irrespective of actual period of continuous supply option. However, in case of re-arrangement of supply through independent feeder, the Continuous Supply Surcharge shall be applicable from the date of energisation of aforesaid independent feeder till 31 st March, 2014, irrespective of actual period of continuous supply option. Demand charge and other charges remain same as per rate of charge given above. Therefore it is noted that both the commission i.e HERC and UERC has allowed the collection of Reliability Charges by the Grid on account of committed power supply for 24 hours over & above the Tariff Rate. Though both the orders of commission 21 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. does not pertain to the state of Rajasthan being state in which power undertakings of the assessee is situated, however we do not think that the aforesaid fact is of much relevance here as what is to be considered is whether the concept of collection of reliability charges is justifiable and being practiced in the industry or not. We note that such concepts are not unfamiliar and have become common industry practice in some states. 8.2 Further, the decision relied upon by Ld. AR of the coordinate bench of Hon'ble Jodhpur Tribunal is also relevant here to decide the issue at hand. The Tribunal in the said case of M/s Hindustan Zinc Limited (Supra) has held as follows: As per TP study a premium of 15% was also charged by the captive power plants on supply of power to the non-eligible units as premium for the uninterrupted power supply. Accordingly, the price charged by the CPP units from the taxable units of HZL was established to be at arm's length. The price for power charged by the SEB from the Appellant is the best indicator of the market price of the power for sale of power from CPP units to other units. Thus the Appellant correctly adopted the current year market price of Rs.7.76 to Rs. 8.64 per unit for transferring the electricity to other units. The TPO/AO, however, adopted @ Rs 2.53 per unit for the relevant year which was the rate for sale to third parties as against HZL rate of Rs. 7.76 to Rs. 8.64 per unit and thereby reduced the claim u/s 801A of the Act. The Transfer Pricing Officer merely relied on extraneous factors (which are without any basis) to conclude that the cost at which the Appellant purchase/s electricity from SEBs cannot be taken as a comparable. The Transfer Pricing Officer failed to appreciate that in terms of the Electricity Act and RERC/ CSERC guidelines, Appellant is restrained from directly selling generated electricity to the consumers. The Appellant therefore, has no other option but to sell the excess (over and above self-consumption) electricity generated to JVVNL, AVVNL or JdVVNL at the predetermined rates and it cannot charge higher rate from JVVNL, AVVNL, or JdVVNL. The market rate of electricity thus is not determined by the forces of demand and supply, rather 22 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. the same is regulated by the Government. In spite of it, the Appellant has determined transfer price at Rs. 7.76 to Rs. 8.64 per unit as charged by SEB. Further, the fixed demand charges were stated to be for ensuring uninterrupted supply. In the assessee's case, the Appellant has fulfilled this condition as the CPP's have provided uninterrupted power supply to the manufacturing units. In the state of Uttarakhand, Bihar, West Bengal and Maharashtra, Governments has announced different rates for normal supply of power and uninterrupted continuous supply of power to the same industrial unit. These State Electricity Boards of these states charge a premium of 10% to 15% over and above the normal rate of power for uninterrupted power supply. ......... We, therefore, respectfully following the decisions of the coordinate Bench of the Tribunal, allow this ground of the assessee by deleting the disallowance." 8.3 On perusal of the above decision, it is noted that apart from state of Haryana and Uttarakhand as stated by the assessee, Government of Bihar, West Bengal and Maharashtra has also approved the rate for uninterrupted and continuous supply of power. The Coordinate Bench Tribunal, Jodhpur after noting that state electricity boards of various states do charge a premium of 10% to 15% over and above the normal rate of power for uninterrupted power supply, had allowed a 15% premium on the transfer price of power adopted by the assessee in the said case. The Ld. D/R had nothing to defend against the aforesaid contention of the assessee. 8.4 Therefore, respectfully following the aforesaid decision of the coordinate bench of the Jodhpur Tribunal in the case of Hindustan Zinc (supra), we are of the view that reliability charge @15% of Grid rate of Rs. 7.15 per unit which comes to Rs. 1.10 per unit should be allowed to the appellant instead of Rs. 1.50 per unit as claimed. Thus ground no. 1 of appeal is therefore partly allowed. 23 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. Ground No. 2 relates to confirming the disallowance made by the AO on account of claim of Education Cess of Rs. 5,21,67,086/-. 9. Before us, the ld. A/R of the assessee reiterated the submissions as made before the ld. CIT (A), are as under :- “ Education Cess is not a levy on profit or gain of any business and hence not covered by the provisions of Sec 40(a)(ii) of the Act. The contention of the A.O. that the education cess falls within the mischief of Sec. 40(a)(ii) as it has been specifically provided in the said section that even rate or tax assessed as a proportion of or otherwise on the basis of any such profit and gains is not allowed, is not correct as education cess is neither levied on the profits or gains of any business or profession nor assessed at a proportion of, or otherwise on the basis of, any such profits or gains. In fact it is levied on the amount of tax. Hence, Education Cess is not covered by Sec. 40(a)(ii) of the Act. It is pertinent to refer to sub-section (4) of Sec. 10 of the Income Tax Act, 1922 which is pari materia with Sec. 40(a)(ii) of the Income Tax Act, 1961. The said section reads as under: “10(2)(ix)Any sums paid on account of land revenue, local rates or municipal taxes in respect of such part of the premises as is used for the purposes of the business, profession or vocation.” “(xv) Any expenditure [not being an allowance of the nature described in any of the clauses (i) to (xiv) inclusive, and not being in the nature of capital expenditure or personal expenses of the assessee] laid out or expended wholly and exclusively for the purposes of such business, profession or vocation.” “10(4) Nothing in clause (ix) or clause (xv) of sub-section (2) shall be deemed to authorize the allowance of any sum paid on account of any cess, rate or tax levied on the profits or gains of any business, profession or vocation or assessed at a proportion of or otherwise on the basis of any such profits or gains....” [Emphasis added] 24 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. In view of above provisions it is humbly submitted that the word “Cess” was present in Sec. 10(4) of the Income Tax Act, 1922 which has now been omitted in corresponding Sec. 40(a)(ii) of Income Tax Act, 1961. The said omission has further been clarified by CBDT Circular No. 91/58/66 - ITJ (19) dated 18-05- 1967 which reads as under: ‘’1. Recently a case has come to the notice of the Board where the Income-tax Officer has disallowed the “cess” paid by the assessee on the ground that there has been no material change in the provisions of section 10(4) of the 1922 Act and section 40(a)(ii) of the 1961 Act. 2. The view of the Income-tax Officer is not correct. Clause 40(a)(ii) of the Income-tax Bill, 1961, as introduced in the Parliament, stood as under: “(ii) any sum paid on account of any cess, rate or tax levied on the profits or gains of any business or profession or assessed at a proportion of, or otherwise on the basis of, any such profits or gains.” When the matter came up before the Select Committee, it was decided to omit the word “cess” from the clause. The effect of the omission of the word “cess” is that only taxes paid are to be disallowed in the assessments for the years 1962-63 onwards. 3. The Board desire that the changed position may please be brought to the notice of all the Income-tax Officers so that further litigation on this account may be avoided.’’ [Emphasis added] In view of above circular, it is humbly submitted that the effect of the omission of the word ‘cess’ from Sec. 40(a)(ii) is that only taxes paid are to be disallowed in the assessment for the year 1962-63 and onwards and not the ‘cess’. Issue is squarely covered by the decision of Hon’ble Jurisdictional Rajasthan High Court in Chambal Fertilizers and Chemicals Ltd. -vs.- JCIT [In ITA No. 52/2018 dated 31-07-2018] wherein the court relying on the aforesaid CBDT Circular No. 91/58/66 - ITJ(19) dated 18-05- 1967 has held that cess is not a tax for the purpose of Sec. 40(a)(ii) of the Act & hence is an allowable expenditure. Further, relying on the above decision, identical view has been upheld by Hon’ble Bombay High Court in Sesa Goa Ltd. –vs.- JCIT [In TA No. 17 of 2013 dated 28-02-2020]. 25 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. Retrospective amendment brought vide Finance Act, 2022 is not justified: Vide Finance Act 2022, Explanation 3 to Sec 40(a)(ii) has been inserted with retrospective effect from 01-04-2005 that the term ‘tax’ as used in Sec. 40(a)(ii) shall include any surcharge or cess levied on such tax. The rationale for bringing such amendment has been clarified by Explanatory Notes to the provisions of Finance Act, 2022 vide Circular No. 23/2022 dated 03-11-2022. As per the aforesaid circular, following clarification has been provided: • ITAT Kolkata in Kanoria Chemicals• & Industries Ltd (ITA No. 2184/ Kol/2018 dated 26-10-2021) after considering the judgement of Bombay HC & Rajasthan HC in Sesa Goa (Supra) & Chambal Fertilisers (Supra) held that “Cess” is not an allowable deduction by relying on the decision of Apex Court in CIT –vs.- K. Srinivasan (1972) 83 ITR 346 (SC). • Apex Court in CIT vs. K. Srinivasan (supra) has held that the surcharge and additional surcharge is part of Income tax. The aforesaid clarifications as stated in the Explanatory Notes to the provisions of Finance Act, 2022 does not hold good due to following reasons : • Decision of Kanoria Chemicals & Industries Ltd (ITA No. 2184/Kol /2018 dated 26-10-2021) is primarily based on the principles held by the Apex Court in K. Srinivasan (1972) 83 ITR 346 (SC). However, the aforesaid judgment by the Apex Court pertains to the allowability of surcharge and additional surcharge. The word 'cess' has no mention in the judgment. Therefore, reliance on the aforesaid decision of Apex Court by Hon’ble Kolkata Tribunal is totally misplaced. • The aforesaid contention of the appellant has since been upheld by the Hon’ble Ahmedabad Tribunal in Nirma Chemicals 26 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. Works Pvt Ltd – vs.- DCIT (In ITA No. 1054/Ahd/2012 dated 24-02-2022) wherein after distinguishing the decision of Apex Court in K. Srinivasan (Supra) & decision of Kolkata Tribunal in Kanoria Chemicals & Industries has allowed the claim of education cess. • Similarly, Hon’ble Chennai Tribunal in ITO –vs.- K. Vivekanandan (ITA No. 1256/Mad/2012 dated 15-03-2017) while dealing with the applicability of CBDT circular No. 21/2015 dated 10-12-2015 for computing low tax effect has held that the decision of Apex Court in K. Srinivasan (Supra) cannot be applied as the same was delivered by the Apex Court on 05-11-1971 relating to assessment year 1964-65, however Sec. 2(43) of the Act was amended with effect from 01-04-1965. In view of the above submissions, the appellant would humbly like to submit that it would not be fair for legislature to bring education cess within the purview of income-tax, by terming it as additional surcharge on account of following contentions: • While the levy of surcharge is similar to levy of income-tax as utilisation of surcharge is in the same manner as that of tax however, education cess is earmarked only for the purpose of specific use of access to education and health facilities. • Separate reference has been made under the Act with regard to education cess like in Sec. 115JB, where legislature had intention to disallow the claim of surcharge and cess separately. In absence of similar inclusion of the term cess under Sec. 40(a)(ii), same cannot be presumed to be covered within the definition of tax. The ld. A/R prays to kindly consider the amendment brought u/s 40(a)(ii) as prospective in nature and allow the claim of education 27 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. cess as held by Hon’ble Rajasthan High Court in Chambal Fertilisers (Supra).” 10. On the other hand, the ld. D/R supported the orders of the revenue authorities. 11. We have heard the rival submissions, perused the material available on record and gone through the orders of the revenue authorities and the case law cited by both the parties. The assessee has claimed deduction on account of Education Cess and Secondary & Higher Education Cess of Rs. 5,21,67,086/- relating to Income Tax & Dividend Distribution Tax in accordance with the provisions of Section 40(a)(ii) of the IT Act and in view of the Circular No. 91/58/66-ITJ(19) dated 18.05.1967. The ld. A/R submitted that the issue involved is squarely covered against the assessee by the decision of Hon’ble Jurisdictional High Court of Rajasthan, in case of Chambal Fertilizers and Chemicals Ltd. vs. JCIT in ITA No. 52/2018 dated 31.07.2018, wherein the Court relying on the aforesaid CBDT Circular No. 91/58/66-IT(19) dated 18.05.1967 has held “that Cess is not a tax for the purpose of section 40(a)(ii) of the Act and hence is an allowable expenditure”. Relying on the above decision, identical view has been upheld by Hon’ble Bombay High Court in case of Sesa Goa Ltd. vs. JCIT in TA No. 17 of 2013 dated 28.02.2020. Thus, Education and Secondary Higher Education Cess were held to be allowable expenses and no addition was warranted under section 40(a)(ii) as the law stood before the enactment of Finance Act 2022. Subsequently, the Finance Act, 2022 brought about a retrospective amendment in the Income Tax Act whereby the “Education and Secondary Higher Education Cess” (‘Education Cess’) paid by an assessee is clarified to be a disallowable expense. The 28 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. Finance Act 2022 has amended section 40 by inserting Explanation 3 with effect from 01-04-2005 as under :- Explanation 3 – For the removal of doubts, it is hereby clarified that for the purposes of this sub-clause, the term “tax shall include and shall be deemed to have always included any surcharge or cess, by whatever name called, on such tax. In light of the amendment in section 40(a)(ii) effected retrospectively, it is held that Education Cess is not an allowable Expense and the ground raised by the assesse is not tenable and the same is dismissed. Ground No. 3 relates to exclusion of profit on sale of investment and profit on sale of fixed assets while computing book profit under section 115JB. 12. Before us, the ld. A/R of the assessee submitted that the appellant while computing book profit under section 115JB excluded profit on sale of investment of Rs. 83,31,72,239/- and profit on sale of fixed assets of Rs. 44,93,014/-. The same was excluded on the premise that for the purpose of section 115JB, what is required is the book profit arising from the working of the concern and does not include any profit on sale of capital assets. 13. On the other hand, the ld. D/R supported the orders of the revenue authorities. 14. We have heard the rival submissions, perused the material available on record and gone through the orders of the revenue authorities. During the course of hearing, the ld. A/R of the assessee fairly conceded that the issue is covered against 29 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. the assessee by the decision of Coordinate Bench of the Tribunal, Jaipur, in assessee’s own case in ITA No. 504/JP/2012 dated 27.01.2014 for the assessment year 2008-09 wherein the Coordinate Bench vide para 39 has held as under :- “ 39. Ground No. 7 of the assessee relates to disallowance of profit on sale of fixed assets of Rs. 11,63,403/- & profit on sale of investment of Rs. 4,13,50,483/- in computing book profit u/s 115JB. This issue is covered against the assessee by the decision of Hon’ble Tribunal in its own case vide order dated 23 rd Dec. 2009 in ITA No. 942/JP/08. Respectfully following the above decision of Tribunal, this ground of the assessee is dismissed.” We, thus, considering the above decision of the Coordinate Bench in the assessee’s own case, (supra) dismiss this ground of the assessee. Ground No. 4 relates to exclusion of deduction under section 80IA & 80IC in computing Book Profit under section 115JB of the Act. 15. Before us, the ld. A/R of the assessee has reiterated the submissions as made before the revenue authorities, are as under :- “ Issue is squarely covered on merits by the following Judicial pronouncements: Reliance is placed on the decision of Hon’ble Mumbai Tribunal in Neha Home Builders Pvt. Ltd. –vs.- CIT (2018) 195 TTJ 506 (Mum), [Pg. No. 80 to 85 of CLPB] wherein the Hon’ble Tribunal has categorically held that if any income is not taxable because of a specific provision of the Act, the same will not form part of Book Profits u/s 115JB. Hence, Deduction u/s 80-IB shall be available while computing Book Profit u/s 115JB of the Act. Relevant extract of the decision is as under:- 30 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. “13. Sub-s. (5) clearly provides that all the provisions of the IT Act will be applicable to the computation governed by s. 115JB. As such, if any income is not taxable because of a specific provision of the Act, the same will not form part of book profit under s. 115JB. Like s. 80-IB(10) excludes the income from housing project for taxation purpose under normal provisions of the Act. Thus, it will not be taxable under s. 115JB. 14. Secs. 80-IB(10) and 115JB have presence of a non obstante clause. Therefore, the non obstante clause as incorporated in s. 80-IB should prevail, as it is in consonance with the intention of the legislature in granting exemption in respect of the income earned by the assessee from housing project. Reliance is placed on the following judicial pronouncements : (i) Central Bank of India vs. State of Kerala (2009) 21 VST 505 (SC), (ii) Madhav Rao Jivaji Rao Scindia vs. Union of India (1971) 1 SCC 85 15. Sub-s. (5) which says that save as otherwise provided in this section. Similar provision was incorporated in sub-s. (4) of s. 115JA which is the predecessor of s. 115JB. But absent in s. 115J which preceded s. 115JA. This peculiar provision raised a controversy as to the legal implication of insertion of sub-s. (5) and sub-s. (4) in s. 115JB and s. 115JA, respectively. This legal issue has been considered by Mumbai Bench of the Tribunal in the case of ITO vs. Frigsales (India) Ltd. (2005) 4 SOT 376 (Mumbai). The issue related to capital gains arising on a depreciable asset which is exempt under s. 50 of the Act. Taking notice of sub-s. (4) of s. 115JA which provision, as stated above, was not available in s. 115J, the Tribunal held that the exempt income under s. 50 would remain exempted as per provisions of sub-s. (4) of s. 115JA and therefore, capital gain arising to an assessee under s. 50 on a depreciable asset is liable to be excluded from calculation of deemed profits under s. 115JA. Exemption/deduction allowed by one provision of the Act cannot be taken away by another provision of the Act. Sec. 115JA, the predecessor to s. 115JB, was introduced to the statute book and the Budget Speech of the Finance Minister while introducing the Bill, House and also to the subsequent Board circular, for levying a minimum alternate tax to those companies which were though paying handsome dividends to its shareholders and had good amount of book profit, was, nevertheless, filing a return of nil income for the purpose of income-tax. 16. When once the assessee-company had developed housing project, where the income is exempted under s. 80-IB(10), the assessee- company had legitimate expectation to enjoy the benefit of exemption 31 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. and even a legitimate expectation being in the nature of an assurance in law if it flows out of the statutory provisions, that cannot be denied to the assesseecompany. Reliance is placed on the following judicial pronouncements : (I) MRF Ltd. vs. Asstt. CST (2006) 148 STC 225 (SC) (II) Bannari Amman Sugars Ltd. vs. CIT (2004) 192 CTR (SC) 492 : (2005) 1 SCC 625 (III) MP Oil Extraction vs. State of MP (1997) 7 SCC 592 17. The receipts which are not taxable cannot bring to tax under any other section. [ CIT vs. D.P. Sandu Bros. Chembur (P) Ltd. (2005) 193 CTR (SC) 578 : (2005) 273 ITR 1 (SC) ]. 18. In the newly inserted s. 115JC, the legislature clearly mentions that "Deduction claimed, if any, under the heading 'C.—Deductions in respect of certain incomes'", i.e., if the legislature have intention not to give benefit of s. 80-IB(l0) for the purpose of MAT calculation, then legislature will also provide same type of provision in s. 115JB which is currently absent, i.e., legislature wants to give benefit of deduction under s. 80-IB(10) for the purpose of s. 115JB calculation......... 21. Tribunal, Mumbai Bench in case of ITO vs. Frigsales (India) Ltd. (supra) held that a receipt which is not in the nature of income cannot be taxed as income under s. 115JA. The headnotes of the case reads as under : "Sec. 115JA r/w s. 50, of the IT Act, 1961 -Minimum alternate tax— Asst. yr. 1998-99—Whether a receipt, which is not in nature of income, can be taxed as income under s. 115JA—Held, no—Whether exempt income under s. 50 would remain exempted as per provisions of sub-s. (4) of s. 115JA - Held, yes—Whether, therefore, capital gain arising to an assessee under s. 50 on a depreciable asset is liable to be excluded from calculation of deemed profits under s. 115JA—Held, yes." 22. In ITO vs. Suraj Jewellery (India) Ltd. (2008) 21 SOT 79 (Mumbai), Mumbai Tribunal again held that capital receipts which do not constitute income under the Act cannot be brought to tax net by employing the mechanism of s. 115JB. The Tribunal further held that s. 115JB is not intended to bring all non-income items within the domain of the Act. 23. By inserting sub-s. (4) in s. 115JA and sub-s. (5) in s. 115JB, the legislature has made both these sections as part of the Act now. Further, in Sutlej Cotton Mills Ltd. vs. Asstt. CIT (1993) 46 TTJ (Cal)(SB) 310 : (1993) 45 ITD 22 (Cal)(SB) , Special Bench held that the expression book profit under s. 115J is intended to be confined to 32 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. business profit and that the term book profit is not intended to include profit in realization of any asset. It is further held that what is specifically exempted under s. 54E could not be taxed under s. 115J. This decision supports our contention. 24. Supreme Court in the case of CIT vs. D.P.Sandhu Brothers (supra) held that the receipts which are not taxable cannot brought to tax under any other section. Deduction claimed by assessee in the instant case under s. 80-IB(10) is not taxable under the normal provisions of the Act cannot be treated as part of book profit under s. 115JB, hence, the learned AO has adopted one of the possible views. Thus, income arising from development of housing projects is not taxable; s. 80- IB(10) and were excluded from its purview. Therefore, s. 80-IB(10) income will not be part of MAT income and MAT tax. Thus, the assessment order was rightly passed and cannot be termed as erroneous and prejudicial to interest of Revenue.” Hon’ble Chennai Tribunal in ACIT -vs.- State Industrial Promotion Corporation of Tamil Nadu Limited [ITA No. 1290/Mds/2011 dated 07-03- 2013] [Pg. No. 99 to 103 of CLPB] has also held that deduction u/s 80-IA is required to be allowed even while computing Book profit u/s 115JB of the Act. Reliance is also be placed on the decision of Hon’ble Madras High Court in the case of CIT –vs.- Metal & Chromium Plater (P) Limited (2016) 97 CCH 80 (Mad), [Pg. No. 86 to 88 of CLPB] wherein while dealing with the issue of allowability of exemption u/s 54EC in computing Book Profit u/s 115JB, it has been held that levy of tax u/s 115JB is on the book profits after effecting various upward and downward adjustments as set out in Explanation 1 to Sec. 115JB(2). The provisions of sub-section (5) of Sec. 115JB open the assessment to the application of all other provisions contained in the Income Tax Act except if specifically barred by that section itself. Accordingly, it has been held that the adjusted book profits would be further eligible to the benefits set out in the other provisions of the Act, including Section 54EC. Departmental appeal filed against the decision of Hon’ble High Court has since been dismissed by Hon’ble Apex Court in Civil Appeal No. 9620 of 2018 dated 17-09-2018. 33 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. Similarly, Hon’ble Mumbai Tribunal in the case of ITO –vs.- Savannah Real Estate Pvt. Limited (ITA No. 6310/Mum/2017 dated 07-02-2018) following the decision of Hon’ble Madras High Court in Metal & Chromium (supra) has held that benefit of exemption u/s 54EC is admissible in computation of Book Profit u/s 115JB as well. Further, Hon’ble Karnataka High Court in the case of Best Trading and Agencies Ltd. -vs.- DCIT (2020) 428 ITR 52 (Kar) [Pg. No. 104 to 111 of CLPB] has held that as per sub-section (5) of Sec. 115JB, the application of other provisions are open, except if specifically barred by the section itself. Hence, considering the said provision, it has been held that since there is no provision in the Act to prevent the assessee from claiming indexed cost of acquisition on the sale of asset, assessee has to be given the benefit of indexed cost of acquisition. Relevant extract of the decision is given as hereunder: “Thus, by virtue of sub-s. (5) of s. 115JB, the application of other provisions of the Act are open, except if specifically barred by the section itself. The indexed cost of acquisition is a claim allowed by s. 48 of the Act to arrive at the income taxable under the income from capital gains. The difference between the sale consideration and indexed cost of acquisition represents the actual cost(to be read as ‘gain’) of the assessee, which is taxable as per s. 45 of the Act at the rates provided under s. 112 of the Act. There is no provision in the Act to prevent the assessee from claiming indexed cost of acquisition on the sale of asset in case, where the assessee is subjected to s. 115JB of the Act. In any case, since, the indexed cost of acquisition is subjected to tax under a specific provision viz., s. 112 of the Act, therefore, the provisions of s. 115JB of the Act, which is a general provision cannot be made applicable to the case of the assessee. For yet another reason, the assessee has to be given the benefit of indexed cost of acquisition as considering the profits on sale of land without giving the benefit of indexed cost of acquisition results in taxing the income other than actual/real income. In other words, a mere book keeping entry cannot be treated as income.” It is humbly submitted that Hon’ble Karnataka High Court in the above case of Best Trading (Supra) have categorically held that capital gain after 34 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. considering the indexed cost of acquisition is subjected to tax under a specific provision i.e. Sec. 112 of the Act. As regards taxation of capital gains, the provisions of Sec. 115JB of the Act are general provisions vis-a-vis the specific provisions of Sec. 112 of the Act. Hence according to Hon’ble High Court, even on this count, Sec. 112 of the Act needs to be considered while computing book profit u/s 115JB in relation to capital gains. Tax holiday provisions u/s 80-IA being specific provisions must prevail over the provisions of Sec. 115JB Following the analogy rendered by Hon’ble Karnataka High Court in case of Best Trading (Supra), it is humbly submitted that Sec. 80IA & 80IC are specific sections enacted for the purpose of encouraging setting up of specific new undertakings and/or infrastructure facility by providing tax holiday for specified period on profits earned by the said undertakings/ infrastructure facility. These sections are specific provisions providing explicit tax incentive for investment by assessees in priority sectors for the country like power generation, infrastructure building, solid waste management and so on. These being specific tax holiday provisions and since nothing otherwise in relation to the same is provided in Sec. 115JB, following the principles laid down by the decisions of Hon’ble Karnataka HC in Best Trading (Supra) & Hon’ble Madras HC in Metal & Chromium (supra) (Departmental Appeal rejected by Hon’ble Supreme Court in CA No. 9620 of 2018 dated 17-09- 2018), it is humbly submitted that the benefit of tax holiday under the specific sections, namely sections 80IA & 80IC must be considered for the purpose of Sec. 115JB as well. Further, Sec. 80IA & Sec. 80IC reflect specific and clear intention of legislature to grant tax holiday in respect of actions specified in those sections for a long tenure of 10 years. The said decision of Government to give tax holiday in .deserving cases cannot be abrogated or compromised by a technical interpretation of provisions of Sec. 115JB without holistic 35 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. understanding of the Legislature’s objective which could be gathered on a holistic and combined reading of the provisions of Sec. 115JB on one hand and Section 80IA & Section 80IC on the other hand. Receipts which are not taxable under normal provisions cannot be taxed under the provisions of MAT as well : The assessee would further like to submit that receipts which are not taxable under normal provisions of the Act cannot be brought to tax under the provisions of MAT as well. Reliance in this regard can be placed on the following decisions: In case of Patel Engineering Ltd –vs.- DCIT (ITA No. 9090/Mum/2010 dated 22-05-2019), assessee’s share of income of Joint Venture L.G.P. & Patel Joint Venture, was not taxable under normal provisions as the same was already taxed in the hands of the joint venture. Therefore, assessee contented the same not to be taxable under provisions of MAT as well. Hon’ble Mumbai Tribunal in this regard held the following: “This was also never the purpose of section 115JB to tax any income or receipts which is otherwise not taxable under the Act. If the intention of legislature was always that income which is not taxable under the normal provisions of the Act should not be brought to tax under MAT also, then it has to be interpreted that such a benefit has to be given to all and where the income is otherwise not taxable under the Act cannot be brought to be taxed under MAT that when the share of AOP was not taxable in the hands of assessee under the normal provision of the Income Tax Act then the same cannot be brought to be taxed under provisions of MAT as well”. In case of Sun Pharmaceutical Industries Ltd –vs.- ACIT (ITA 1462 & 1463/Ahd/2018 dated 24-08-2022), assessee received certain remuneration from the partnership firm for which no deduction was allowed to the firm in view of provisions of Sec. 40(b)(i) of the Act. Assessee contended that the said remuneration since not taxable in its hand in view of provisions of Sec 28(v) of the Act, the same cannot be taxed under the 36 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. provisions of MAT as well. Hon’ble Ahmedabad Tribunal in this regard held the following: “Thus, there remains no ambiguity to the fact that the amount of remuneration not allowed as deduction in the hands of the partnership firm cannot be made subject to tax in the hands of the partner. Thus, once the receipt is not taxable then the same cannot be made subject to tax under the provisions of MAT while calculating the profit under section 115JB of the Act. In view of the above, we do not find any reason to uphold the finding of the learned CIT –A”. In case of ACIT –vs.- JSW Steel Ltd (2020) 180 ITD 505 (Mum), while dealing with the issue of taxability of sales tax subsidy, Hon’ble Mumbai Tribunal held the following – “50. In this view of the matter and considering the ratio of case laws discussed hereinabove, we are of the considered view that when a particular receipt is exempt from tax under the Income tax law, then the same cannot be considered for the purpose of computation of book profit u/s 115JB of the I.T. Act 1961” In case of Batliboi Limited -vs.- DCIT 5428/Mum/2015 dated 17-02-2021 Hon’ble Mumbai tribunal held the following: “5.1. We have already held hereinabove that the receipt of Rs.4,27,43,000/- by the assessee company received from the welfare trusts is a capital receipt not liable to income tax. Hence, a receipt which from its inception is not the income u/s.2(24) of the Act cannot be taxed u/s.115JB of the Act also. To put it differently, what cannot be taxed directly cannot be taxed indirectly.” In case of ACIT –vs.- Reliance Industries Ltd I.T.(TP)A. No. 1547/Mum/2016 dated 28-09-2018, Hon’ble Mumbai Tribunal held the following: “..........Once the subsidy received cannot be taxed under section 4, there cannot arise any taxability under section 115JB of the Act, which merely provides for an alternate mechanism for computation of income and tax thereon. Thus, an item which is not otherwise taxable, cannot 37 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. be subjected to tax under the MAT provision without any express authority in this behalf.” Contention of Ld. CIT(A) to dismiss the additional ground relying upon decision of Hon’ble Supreme Court in Wipro Ltd. (supra) is erroneous and misconstrued: CIT(Appeals) was not justified in dismissing the additional ground filed merely because of the reason that no claim has been made either in the original return or in the revised return. Reliance on the decision of Apex Court in the case of PCIT -vs.- Wipro Ltd. (2022) 140 taxmann.com 223 (SC) was totally misplaced and out of the context due to the following – (a) Apex court has nowhere held that new claim cannot be lodged before the appellate authorities. Apex Court was dealing with the provisions of revised return u/s 139(5) and held that revised return can only substitute original return u/s 139(1) and cannot transform it into loss return u/s 139(3) for the purpose of availing the benefit of carry forward or set off of loss. (b) Issue before the Apex court was on non-compliance of Sec. 10B(8) r.w.s 139(1) of the Act which specifically requires to lodge the claim in the return. The appellant’s case is not a case of any non-compliance of any provisions of the Act which was the subject matter before the Hon’ble Apex Court. The claim of deduction u/s 80-IA and u/s 80-IC under provisions of MAT is in accordance with the provisions of Sec 115JB(5) of the Act. (c) Ld. CIT(Appeals) have relied upon the decision of SC in the case of Wipro Ltd.(supra) to hold that additional ground, by which the appellants have lodged their claim for the first time, cannot be admitted by him, although the question of admissibility of new claim vide an additional ground of appeal was not before the Hon’ble Apex Court at all in the said case. 38 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. Deduction Claimed is allowable even though not lodged in the return of income: Without prejudice to the submissions above, that no new claim is lodged, it is humbly submitted that though the claim of deduction u/s 80-IA & 80-IC while computing Book Profit u/s 115JB has not been lodged in the Return of Income, the aforesaid is purely legal in nature and does not require determination of any new fact. Hence, the same needs to be considered in view of principles laid down by Hon’ble Apex Court in National Thermal Power Co. Ltd. –vs.- CIT (1998) 229 ITR 383 (SC) and the same has been reiterated by the Apex Court later in Goetze (India) Limited -vs- CIT (2006) 284 ITR 323(SC). The interpretation of Section 115JB(5) by the Ld. CIT(A) cannot be accepted: Ld. CIT(A) vide his order dated 20-01-2023 has stated that section 115JB is a special charging section for regulating tax liability of the companies. There cannot be any question of deduction u/s 80IA/80IB/80IC having any bearing or effect or control over the provisions of Sec. 115JB. In this regard it is humbly submitted that the Ld. CIT(A) did not take note of the decision of Hon’ble Madras High Court in Metal & Chromium (supra) wherein the Hon’ble High Court have stated that Section 115JB is a self-contained code of assessment. The levy of tax is on the ‘book profits’ after effecting various upward and downward adjustments as set out in terms of the Explanation thereto. The provision of Sec. 115JB(5) open the assessment to the application of all other provisions contained in the Act except if specifically barred by that section itself. Hence, it is humbly submitted that the interpretation of the Ld. CIT(A) on Sec. 115JB(5) is erroneous in law. It is further submitted that if the contentions of the Ld. CIT(A) are held to be correct then all the capital receipts which are not chargeable to tax at all shall also be subjected to tax u/s 115JB. However, in the assessee’s own case in earlier years, Hon’ble Rajasthan High Court has held that capital 39 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. receipts not liable to tax cannot be subjected to MAT and hence are required to be excluded while computing Book Profit u/s 115JB of the Act. Similar view has been taken by various courts as follows: • In ITO -vs.- Suraj Jewellery (India) Ltd. [2008] 21 SOT 79 (Mum.), Hon’ble Mumbai Tribunal held that capital receipts which do not constitute income under the Act cannot be brought to tax net by employing the mechanism of section 115JB. The Tribunal further held that section 115JB has not intended to bring all non-income items within the domain of the Act. • In Sutlej Cotton Mills Ltd. -vs.- Asstt. CIT [1993] 45 ITD 22 (Cal.) (SB) held that what is specifically exempted u/s 54E could not be taxed u/s. 115J. • Hon’ble Calcutta High Court in PCIT -vs.- Ankit metal & Power Ltd. [2019] 416 ITR 591 (Cal.) have held that capital receipts are not income which is chargeable to tax u/s 115JB of the Act as well. In light of above submissions it is humbly submitted that the view of the CIT(A) that Sec. 115JB is a self-contained code which does not allow any further adjustments other than that as stated in Explanation to Sec.115JB(2) thereto is unsustainable, in view of the specific provisions of Sec. 115JB(5) and the decisions of Hon’ble Tribunals and High Courts relied upon hereinabove. Decisions relied by Ld. CIT(A) are distinguishable and not applicable in the present case of the appellant: Ld. CIT(A), while deciding the issue against the appellant has relied on the following decisions:- - Sankhla Polymers (P) Ltd. -vs.- ITO (2013) 352 ITR 452 (Kar - HC) - Jaintia Alloys (P) Ltd. & Ors. -vs.- UOI (2010) 320 ITR 442 (Gua - HC) 40 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. - Bishnu Krishna Shrestha -vs.- CIT & Ors. (2019) 414 ITR 405 (Raj - HC) - Sidcul Industrial Association -vs.- State of Uttarakhand (2011) 331 ITR 491 (Uttarakhand - HC) The appellant would humbly like to submit that the aforesaid decisions are not applicable due to the following reasons :- - In the decision of Sankhla Polymers (P) Ltd (Supra) it has been stated that no provision of a statute can be so interpreted as to render it unconstitutional. Sec. 115JB, in fact, in no way either denies the benefit given u/s. 80IB or reduces the same. While the appellant-assessee can claim the benefit u/s 80IA and it is not denied per se to the appellant, the provision of Sec. 115JB may be attracted or may not be attracted depending upon the nature or legal composition of the assessee. - Hence, it is humbly submitted that the Hon’ble Karnataka Court has rendered the decision on the question raised by the assessee whether provisions of Sec. 115JB are unconstitutional and are not required to be applied where the assessee is eligible for Deduction under Chapter VI-A. However, the said issue is not raised by the assessee in the present case at all. The assessee is not challenging the constitutional validity of Sec. 115JB. The assessee itself has computed Book Profit as per the provisions of Sec. 115JB. While computing Book Profit, it is contended that deductions under Chapter VI-A also needs to be reduced. Hence, Book Profit as may be computed after reducing deduction under Chapter VI-A, will be subjected to tax u/s 115JB. It is not the case of the assessee that it is exempted from the levy of tax u/s Sec. 115JB on the ground that it is eligible for tax holiday under Chapter VIA. Similarly, in all other judgements of Hon’ble High Court as relied by the Ld. CIT(A) i.e Jaintia Alloys (P) Ltd. – vs. – UOI (2010) 320 ITR 442 (Gau), Bishnu Kumar Shrestha –vs- CIT (2019) 414 ITR 405(Raj) , Sidcul Industrial Association -vs.- State of Uttrakhand (2011) 199 Taxman 75 (Uttaranchal), pertained to Writ Petition filed challenging the Vires of the Section 115JB. The 41 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. Hon’ble Courts in those case, did not examined the section 115JB(5), which otherwise also cannot be done in case of Writ Petition challenging the vires of the section itself. Hence it is humbly submitted that the aforesaid decisions cannot be applied to the present appeal as the vires of section 115JB has not been challenged. - In the said decisions, contention of the assessee before the courts was that provisions of Sec. 115JB should not apply at all where the assessees were entitled to avail special deductions. Sec. 115JB, which seeks to impose tax at the rate of 7.5% on book profit on an industry availing various deductions is illegal and unconstitutional on grounds that it seeks to override the benefits granted under Chapter VIA which is not the issue in the present case of the assessee. Further, Ld. CIT(A) has also referred to few other decisions of tribunals which are also distinguishable as could be seen below :- Ganesh Housing Corporation Ltd -vs.- ACIT (2009) 32 SOT 207 (Ahd.- Tri) - The assessee claimed deduction u/s 80-IB for the purpose of calculation of book profit u/s 115JB. Hon’ble Ahmedabad Tribunal held that Sec. 115JB is concerned with the computation of book profit and not the total income. The terms ‘book profit’ and ‘total income’ both are having different meanings. ‘Book Profit’ is defined under Explanation 1 to Sec. 115JB while ‘total income’ is defined u/s 66. Thus, the ‘book profit’ and ‘total income’ have to be computed independently. Therefore, the assessee could not be allowed deduction u/s 80-IB while computing the book profit u/s 115JB. - Although the issue has been decided against the assessee, however it is humbly submitted that that the in the aforesaid decision it has been stated that capital receipts are eligible to be excluded by virtue of Sec. 115JB(5) but not deduction u/s 80IA. It is humbly submitted that Sec. 115JB(5) does not specify any particular claim to be excluded or included under the said provisions. The said sub-section applies to all the provisions of the Act and 42 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. not to any particular claim or section. Further, the said decision have not referred to the decision of Hon’ble Madras and Karnataka High Court. - Further, it is humbly submitted that while rendering the above decision, Hon’ble Ahmedabad Tribunal has not considered the decision of coordinate Bench in ITO -vs.- Frigsales (India) Ltd. (2005) 4 SOT 376 (Mum) wherein referring to Sec. 115JA(4) which is pari materia Sec. 115JB(5), Hon’ble Mumbai Tribunal has held that now other provisions of the Act will continue to operate in view of sub-section (4) of Sec. 115JA. The exempt income u/s 50 of the Act would remain exempted as per the provisions of sub-section (4). The operation of non obstante clause is now limited only to determine the book profits and the book profits so determined has to be taxed taking into consideration the other provisions of the Act. In other words, Sec. 115JA is a part of the Act now and the exemption allowed by one provision of the Act cannot be taken away by another provision of the Act. - It is a settled principle that a decision which is per incuriam is not a binding judicial precedent. It is also well settled that when it is not open to a High Court Bench to differ from the decision of a bench of equal strength, it cannot also be open to a bench of this Tribunal to differ from the view taken by a co-ordinate bench of equal strength. The only option in case one doubts the correctness of such a decision is to refer the matter for constitution of a larger Bench. A decision ignoring this rule of precedent, which is duly approved by the Hon’ble Courts from time to time, cannot but be viewed as per incuriam. Such a decision of the coordinate bench was of no precedence value. Above view is supported by the following decisions : o Mehratex India Ltd. –vs. – DCIT (2005) 3 SOT 539 (Mum) o J K T Fabrics –vs.- DCIT (2005) 4 SOT 84 (Mum) o ITO –vs.- Modern International (ITA No. 1253/Kol/2011) dated 17-02-2012. 43 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. While rendering the above decisions, Hon’ble Tribunals followed the decision of Hon’ble Andhra Pradesh High Court in CIT -vs.- B.R. Constructions (1993) 202 ITR 222 (FB). Rockline Developers P. Ltd. –vs- ITO (ITA No 5125/Mum/2016 dtd 06- 07- 2018) In the said case, the assessee claimed deduction u/s 80-IB for the purpose of calculation of book profit u/s 115JB before CIT(A) through additional ground which CIT(A) rejected. Tribunal placing reliance on Sankhla Polymers P Ltd (supra) and Ganesh Housing Corporation Ltd (supra) held that assessee is not entitled to claim deduction u/s 80IB(10) from the net profit for the purpose of computing “Book Profit” u/s 115JB of the Act. Chheda Electricals and Electronics (P.) Ltd -vs.- DCIT (ITA NOs. 400 & 668/Pune/2018 dated 04-05-2022) In the said case, the assessee was claiming deduction u/s 80IC on the profits derived from Roorkee unit. It was held by the Hon’ble tribunal that the assesses is not entitle to reduce deduction u/s. 80IC in the computation of book-profit u/s 115JB of the Act as not even a single judgment of any Hon'ble High Court has been brought to the notice of the tribunal in support of the assessee contention. The appellant humbly submits that aforesaid decisions are distinguishable for the following reasons – (a) Above decisions have been rendered either without considering or without distinguishing the favorable decision of Higher Courts in the case of CIT -vs.- Metal & Chromium Plater (P) Ltd (2016) 97 CCH 80 (Mad) & Best Trading and Agencies Ltd. -vs.- DCIT (2020) 428 ITR 52 (Kar - HC). 44 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. (b) Provisions of Sec. 115JB(5) have not been considered and interpreted in above decisions which specifically provide that – “Save as otherwise provided in this section, all other provisions of this Act shall apply to every assessee being a company mentioned in this section.” (c) It is a settled principle that the decisions of High Courts shall prevail over the decision of the Tribunal. Since the issue has now been covered by the decision of Hon’ble Madras High Court and Karnataka High Court, aforesaid decisions of tribunal cannot be relied upon. (d) Further, the principles laid down in Neha Builders (supra) has also not been distinguished or considered by the said decisions. Hence, the Ld. CIT(A) was not justified in relying upon the aforesaid decisions. Rule of literal interpretation to be applied in the present case of the assessee : It is humbly submitted that it is a settled principle of interpretation that the Court should neither add nor delete words from a statute. Where the words of a statute are absolutely clear and unambiguous, recourse cannot be taken to the principles of interpretation, other than the literal rule. In Prakash Nath Khanna –vs.- C.I.T (2004) 266 ITR 1 (SC), it was held by the Hon’ble Apex Court that the language employed in a statute is the determinative factor of the legislative intent. The legislature is presumed to have made no mistake. The presumption is that it intended to say what is has said. Assuming there is a defect or an omission in the words used by the legislature, the Court cannot correct or make up the deficiency, especially when a literal reading thereof produces an intelligible result. Relevant extract is stated below: 45 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. “14. It is a well settled principle in law that the Court cannot read anything into a statutory provision which is plain and unambigous. A statute is an edict of the Legislature. The language employed in a statute is the determinative factor of legislative intent. The first and primary rule of construction is that the intention of the legislation must be found in the words used by the Legislature itself. The question is not what May be supposed and has been intended but what has been said. "Statutes should be construed, not as theorems of Euclid". Judge Learned Hand said, "but words must be construed with some imagination of the purposes which lie behind them". (see Lenigh Valley Coal Co. vs. Yensavage (218 FR 547). The view was reiterated in Union of India vs. Filip Tiago De Gama of Vedem Vasco De Gama, AIR 1990 SC 981 and Padma Sundara Rao (Decd) & Ors. vs. State of Tamil Nadu & Ors. (2002) 176 CTR (SC) 104 : 2002 (3) SCC 533. 15. In D. R. Venkatachalam vs. Deputy Transport Commissioner (1977) 2 SCC 273 it was observed that courts must avoid the danger of a priori determination of the meaning of a provision based on their own preconceived notions of ideological structure or scheme into which the provision to be interpreted is somewhat fitted. They are not entitled to usurp legislative function under the disguise of interpretation. 16. While interpreting a provision the Court only interprets the law and cannot legislate it. If a provision of law is misused and subjected to the abuse of process of law, it is for the Legislature to amend, modify or repeal it, if deemed necessary. (see Rishabh Agro Industries Ltd. vs. P. N. B. Capital Services Ltd. (2000) 5 SCC 515 ; (2000) 101 Comp Cas 284). The legislative causus omissus cannot be supplied by judicial interpretative process.” The rules of interpretation would come into play only if there is any doubt with regard to the express language used. Where the words are unequivocal, there is no scope for importing any rule of interpretation [Pandian Chemicals Limited v. CIT (2003) 262 ITR 278 (SC)]. In the present case, sub-section (5) clearly states that save as otherwise provided in the section, all other provisions of the Act shall apply. The said sub-section neither states that the other provisions which does not deal with computation shall apply nor state that only 46 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. exempted income or procedural sections is covered therein. It would not be proper to import words in the said sub-section which is not present therein. If two views are possible in the matter of interpretation of a charging section, the one favourable to the assessee need to be applied. Ld. CIT(A) has held that Sec. 115JB is a charging section and a self-contained code. In this regard it is humbly submitted that in the case of Commissioner of Customs –vs.- Dilip Kumar & Co. & Others (2018) 9 SCC 1, Hon’ble Supreme Court in 5 Member Bench Constitution after relying on Collector of Customs and Central Excise, Guntur and Ors. –vs.- Surendra Cotton Oil Mills and Fertilizers Co. and Ors., 2001 (1) SCC 578 held that in the matter of interpretation of charging section of a taxation statute, strict rule of interpretation is mandatory and if there are two views possible in the matter of interpretation of a charging section, the one favourable to the assessee need to be applied. In the present case as well, while interpreting Sec. 115JB(5), what is mentioned in the Statute should be considered. In case of conflicting views appearing, view favourable to the assessee should be considered. Non-obstantive clause referred in Sec 115JB(1) is only relevant for sub section (1) and does not extend to entire Section of 115JB It is humbly submitted that Sub-section (1) of Sec. 115JB has non-obstantive clause. The said sub section (1) provides that in case of a company, if the income tax payable on the total income as computed under the income tax act is less than 18.5% of its book profit, then book profit shall be deemed to be its total income and 18.5% of the said book profit will be the tax payable by the corporate assessee on such total income. Because of the non-obstantive clause, this provision 47 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. of sub-section (1) for levy of tax on book profit, overrides other provisions of the Act where under tax can be levied only on its total income. The non-obstantive clause has overriding effect for subsection (1) of Sec. 115JB and not entire Section 115JB. It is humbly submitted that it can go that far and no further. The aforesaid non-obstante clause when compared with non- obstante clause contained in Sec. 40A, brings to the fore, its scope and ambit. In Sec 40A(1), it has been specifically stated that “The provisions of this section shall have effect notwithstanding anything to the contrary contained ...”. Above language used by the legislature under Section 40A(1) is not there in Section 115JB(1). Thus the non- obstante clause of Sec. 40A is in respect of the whole of section 40A, while the non-obstante clause of Section 115JB(1) is only and only in respect of subsection (1) of Section 115JB. Further, explanation 1 below Sec. 115JB(2) defines ‘book profit’. There is no non obstantive clause in the said provisions. It is very important to note that there is no non-obstantive clause to sub-section (2), (2A), (2B), (2C), (2D),(3) & (4) to Sec. 115JB. There is no such non-obstantive clause even in sub-section (5). However, subsection (5) states that save as otherwise provided in this section all other provisions of this act shall apply to every assessee being a company mentioned in this section. On perusal on the above, it is humbly submitted that the scope and ambit of the non-obstantive clause is only relevant for sub section (1) and extends only to sub-section (1). Thus what is relevant in the present case is not the nonobstantive clause of sub-section (1) to Sec. 115JB but the restrictive clause of sub-section (5) to Section 115JB. Since Sec. 115JB do not provide anything otherwise in respect of the provisions of Sec. 80IA & 80IC, on a plain reading of Sec. 115JB(5), it can be said that the provisions of Sec. 80IA & Sec. 80IC shall be applicable in the context of Sec. 115JB also, as categorically laid down 48 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. the provisions of subsection (5) and also by Hon’ble Madras & Karnataka HC in the case of Metal & Chromium (supra) & Best Trading (supra). Prayer The appellant humbly prays to allow deduction u/s 80-IA & 80-IC while computing Book Profit u/s 115JB of the Act.” 16. On the other hand, t he ld. D/R relied on the finding of the lower authorities and submitted that the provisions of section 115JB are very clear and sub section (6) along with the proviso thereto makes it clear that the MAT provisions are applicable to the assessee company from A.Y 2012-13 onwards and there is no basis for the assessee to claim exemption as per the provisions of sub-section (5) of section 115JB of the Act. He accordingly supported the findings of the revenue authorities. 17. We have heard the rival submissions, perused the material available on record and gone through the orders of the revenue authorities. We have also gone through the judgments relied upon by the ld. A/R. However, we are unable to concur with the arguments of the ld. A/R. The issue of allowability of deduction under section 80IA while computing MAT provisions under section 115JB of the Act has already been decided against the assessee by this Bench of the Tribunal in the case of Safeflex International Ltd. vs. ITO in ITA No.769/JP/2018. In the said case, assessee claimed exemption under section 10AA in respect of its unit situated at Pithampur, District Dhar (MP) under normal provisions. Although the same was allowed, tax liability was computed under MAT provisions by the AO. In the appeal 49 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. before the ld. CIT (A), the assessee stated that MAT liability shall not arise since the assessee is eligible for exemption under section 10AA and said exemption is required to be considered while computing tax liability under MAT as well. This Bench of Jaipur Tribunal rejected the contention of the ld. A/R that since the assessee company is 100% exempt as per the provisions of section 10AA and hence tax under MAT should not be levied. It was confirmed by the Bench that exemption under section 10AA allowed under normal provisions cannot be allowed to be reduced while computing Book Profit under section 115JB. The relevant paras of the said decision are being reproduced as under :- “ 13. It is thus seen that the Special Economic Zones Act, 2005 had initially inserted sub-section (6) in section 115JB of the Act to provide that the provisions of section 115JB shall not apply to income accrued or arising on or after 1-4-2005 from any business carried on, or services rendered, by an entrepreneur in a unit of SEZ or a developer of SEZ. Thus, a company carrying on the specified business in a unit in SEZ or as a developer of SEZ was not liable to pay MAT on the profits derived from the said business. However, the Finance Act, 2011 brought-in a sunset clause and inserts a proviso to sub-section (6) to provide that, with effect from 1-4-2012, the provisions of sub-section shall cease to have effect. Accordingly, a SEZ developer or any entrepreneur carrying on business in an SEZ unit (being a company) would be liable to pay MAT on the profits arising from the development of SEZ or the business carried on in an SEZ unit with assessment year 2012-13 and onwards. 14. In the instant case, it is not in dispute that the assessee carries on its business in an SEZ Unit and its income will therefore be subject to the provisions of Section 115JB of the Act. On bare reading of 50 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. provisions of sub-section (6) to section 115JB, it is crystal clear that provisions of section 115JB will apply to the assessee company for the assessment year beginning assessment year 2012-13 onwards. Therefore, while passing the assessment order u/s 143(3), where the Assessing officer has forgot to invoke the provisions of section 115JB of the Act, the matter clearly falls within purview of section 154 of the Act and the same can be rectified as mistake apparent from record. 15. Now, coming to another contention of the ld AR that in view of sub-section (5) to section 115JB of the Act, the entire income of the assessee cannot be brought to tax under Section 115JB given that the income of the assessee company is exempt as per the provisions of section 10AA of the Act. In this regard, we refer to sub-section (5) to section 115JB of the Act which reads as under: “(5) Save as otherwise provided in this section, all other provisions of this Act shall apply to every assessee, being a company, mentioned in this section.” 16. The above provisions thus provide that all other provisions of this Act shall apply to the assessee company subject to any thing otherwise provided in or barred by section 115JB of the Act. The said provisions have been explained in CBDT Circular No. 13 of 2001 where it was stated as under: “2. Instances have come to the notice of the Board that a large number of companies liable to tax under the new MAT provisions of section 115JB are not making advance tax payments. It may be emphasised that the new provision of section 115JB is a self-contained code. Sub-section (1) lays down the manner in which income-tax payable is to be computed. Sub-section (2) provides for computation of "book profit". Sub-section (5) specifies that save as otherwise provided in this section, all other provisions of this Act shall apply to every assessee, being a company mentioned in that section. In 51 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. other words, except for substitution of tax payable under the provision and the manner of computation of book profits, all the provisions of the tax including the provision relating to charge, definitions, recoveries, payment, assessment, etc., would apply in respect of the provisions of this section.” 17. In sub-section (6) to section 115JB, as we have noted above, it has been specifically provided that income accruing or arising from the business carried on by the assessee company in its SEZ Unit shall be subject to MAT provisions for assessment year beginning 2012-13 onwards. Therefore, provisions of sub-section (5) is subject to provisions of sub-section (6) of section 115JB and reading both the provisions harmoniously, it is clear that the income of the assessee company shall be subject to the provisions of MAT under section 115JB of the Act. 18. The sub-section (5) to section 115JB has also been subject matter of interpretation by the Courts and it would be relevant to refer to these decisions which have been brought to our notice during the course of arguments by the ld AR. In case of CIT vs Metal & Chromium Plater (P) Ltd (Supra), the issue for consideration before the Hon’ble Madras High Court was whether claim under section 54EC for computing capital gains can be allowed while computing book profits as per section 115JB of the Act. In that context, the Hon’ble Madras High Court has held that section 115JB is a self-contained code of assessment and the levy of tax is on the book profits after effecting various adjustments as set out in terms of explanation thereto. It was further held that provisions of sub-section (5) of section 115JB open the assessment to the application of all other provisions contained in the Income Tax Act except specifically barred by that section itself. It was accordingly held that section 115JB admits grant of relief under section 54EC of the Act. In the instant case, the assessee company is eligible for relief under Section 10AA of the Act however the sub- 52 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. section (6) specifically provides that MAT provisions continue to apply to the assessee company beginning assessment year 2012-13 onwards. In other words, the application of other provisions of the Act as so provided in sub-section (5) has been barred by virtue of sub- section (6) to section 115JB of the Act. Therefore, this decision of the Hon’ble Madras High Court doesn’t support the case of the assessee company rather our reading of the provisions of sub-section (5) to section 115JB has been fortified by this decision. 19. In case of Neha Home Builders (P) Ltd vs CIT (Supra), the issue for consideration before the Co-ordinate Bench was whether the ld CIT has jurisdiction to issue directions u/s 263 of the Act to the Assessing officer not to allow deduction u/s 80IB(10) while computing book profits u/s 115JB of the Act. In that context, referring to provisions of sub-section (5) to section 115JB, it was held that where income is not taxable in view of section 80IB(10), the same has to be excluded while computing book profits. In the instant case, it is no doubt true that income of the assessee company is eligible for benefit u/s 10AA of the Act, however, on combined reading of provisions of sub-section (5) and (6) of section 115JB, no adjustment can be made to book profits as the MAT provisions have been specifically made applicable to assessee company in respect of its income from business carried on in its SEZ Unit for assessment year 2012-13 and onwards. Therefore, this decision of the Co-ordinate Bench doesn’t support the case of the assessee company. 20. We have also gone through other decisions relied upon by the ld AR. However, we find that these decisions are distinguishable mainly for the reason that in none of these decisions, the provisions as contained in sub-section (6) to section 115JB have been examined and/or discussed which clearly provides that the MAT provisions will be applicable to income from business carried on by the assessee 53 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. company in its SEZ unit. Therefore, in view of the specific provisions so contained in sub-section (6) of section 115JB, these decisions doesn’t support the case of the assessee company. 21. In light of above discussions and in the entirety of facts and circumstances of the case, we affirm the order of the ld CIT(A) and the matter is decided in favour of the Revenue and against the assessee company. “ In view of the above discussion, and following the decision of Coordinate Bench of the Tribunal, Jaipur wherein the relevant provisions of the Act and circulars of the CBDT have been taken into consideration, we find no infirmity in the order of the ld. CIT (A) and the same is upheld. This ground of the assessee is dismissed. Ground No. 5 (Additional Ground) relates to necessary direction may be given to the AO to allow the claim of depreciation on expenditure incurred in respect to acquisition of leasehold rights on land u/s 32(1)(ii) being business or commercial right of similar nature. The appellant has submitted that such rights have been acquired for carrying on the business and hence is in the nature of “business or commercial right” eligible for deprecation @ 25% u/s 32(1)(ii) of the Act. 18. Before us, the ld. A/R appearing behalf of the assessee submitted that the claim of depreciation on leasehold right though not lodged in the Return of Income, the aforesaid ground raised being purely legal in nature may kindly be admitted since no new facts are brought on record. Details of acquisition of leasehold rights are already available in the audited accounts filed with the return of income. Reliance was placed on the decisions of Apex Court in the case of National Thermal 54 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. Power Corporation Ltd. vs. CIT (1998) 229 ITR 383 (SC) and Jute Corporation of India Ltd. vs. CIT (1991) 187 ITR 688 (SC). 19. On the other hand, the ld. D/R supported the orders of the revenue authorities. 20. We have heard the contention of the AR of the assessee. We note that this issue was not raised before the Assessing Officer during the course of assessment proceedings or before the Ld. CIT(A). It is noted that the leasehold rights has been capitalized in the books under the head ‘leasehold land’. The aforesaid audited accounts was also submitted before the Assessing officer during the course of assessment proceeding, hence the claim of depreciation on expenditure incurred in respect to acquisition of leasehold rights on land is purely a legal issue for which the relevant facts are already available on record before the authorities. 20.1 It is noted that while adjudicating Ground No.4 of the assessee's appeal above, we have already stated by relying on the decision of Hon'ble Apex Court in the case of National Thermal Power (supra) & Jute Corporation Iulia (supra) that additional ground which purely raises the question of law should be admitted by the appellate authorities even though such claim is not lodged in the return of income. In the present case, the subject matter of the additional ground goes to the root of the case and is decisive of the total tax liability of the assessee. This being a legal issue, the relevant facts of which are already on record, involves adjudication on question of law. The Hon'ble Supreme Court in National Thermal Power Co. Ltd. vs.CIT (1998) 97 Taxman 358/229 ITR 383 has observed that: 55 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. " the purpose of the assessment proceedings before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law. If, for example, as a result of a judicial decision given while the appeal is pending before the Tribunal, it is found that a non taxable item is taxed or a permissible deduction is denied, we do not see any reason why the assessee should be prevented from raising that question before the tribunal for the first time, so long as the relevant facts are on record in respect of that item” . Answering the question posed before it in affirmative, their Lordships held that on the facts found by the authorities below a question of law arises (though not raised before the authorities) which bears on the tax liability of the assessee and the Tribunal has jurisdiction to examine the same. We find that the additional ground raised before the tribunal involves a pure questions of law and no fresh investigation of facts is necessary for its determination. As such, the additional ground is admitted and espoused for disposal on merits.” Respectfully following the same, we admit the aforesaid question of law on merits raised by the assessee in respect to allowability of depreciation on expenditure incurred in respect to leasehold rights on land. 21. Now, coming to the issue on merits. Briefly stated, the facts of the case are that an amount of Rs. 14,93,25,916/- has been incurred during the year under consideration by the assessee in respect to leasehold rights on land acquired by it from the State governments for carrying out manufacturing activities. The Ld. A/R of the assessee submitted that such expenditure on lease-hold rights being in nature of intangible asset i.e. business or commercial right of similar nature, depreciation under section 32(1)(ii) should be allowed to the assessee. 21.1 In support of the said contention, the Ld. A/R. relied on the decisions of Hon'ble Delhi Tribunal in the case of Hero Moto Corp Ltd. vs. National e-Assessment Centre (ITA No. 706/Del/2021 dated 26-11-2021), and Vasant Chemicals Pvt Ltd. vs. ITO (ITA No. 2182 of 2017/Hyd dated 17-08-2021(Hyd). 56 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. 21.2 We have gone through the principles rendered in judicial decisions relied upon by the ld. A/R of the assessee. The said issue has been dealt by Coordinate Bench of Delhi Tribunal in the case of Hero Moto Corp Ltd (supra). In the said decision the Tribunal has observed that premium paid for acquisition of leasehold rights on land to be used for the purpose of business is an asset which is different from land and would be considered as an intangible asset in the nature of business or commercial right" eligible for depreciation under section 32(1)(ii) of the Act. The findings of the Tribunal are as under : "Similarly, in assessment years 2009-10 and 2013-14, the assessing officer had held the payment of lease premium to be in the nature of capital expenditure. The Hon'ble DRP, however, allowed the appellant depreciation on the premium paid for acquiring of leasehold rights of land, considering the same as an intangible asset in the nature of business or commercial right which is eligible for depreciation under section 32(1)(ii) of the Act. The Assessing officer, however, erred in not giving effect to such binding directions of the DRP. On appeal, the Hon'ble Tribunal directed the assessing officer to pass necessary orders give effect to the direction of the Hon'ble DRP. Recently, the Hon'ble Tribunal has in the order dated 14.04.2021 passed for assessment year 2015-16, allowed the claim for depreciation on leasehold right in land which was not claimed in the return of income but raised by way of additional ground before the Tribunal, by observing as under:- "63.0.0 We have heard both the parties and have perused the material available on record. Though this claim was not made before the lower authorities, we find that the additional ground raised by the assessee raises a pure question of law, facts for the same are on record. We accordingly admit the additional ground of appeal raised by the assessee following the decision of the Hon'ble Supreme Court in the case of National Thermal Power Co Ltd. vs. CIT 229 ITR 383 (SC). 63.0.1 We also find that the issue on merits is squarely covered in favour of the assessee by the order dated 24.10.2016 passed by Tribunal in the preceding assessment years, i.e. AY 2010-11 and AY 2011-12 wherein the Tribunal held that lease premium charges were not allowable revenue deduction. However, the 57 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. Tribunal allowed the alternate plea raised by the assessee company and held the premium paid for acquisition of lease hold rights to be an intangible asset, independent from the land itself, eligible for depreciation under section 32(1)(ii) of the Act. 63.0.2 Accordingly, we also find that the issue on merits is squarely covered in favour of the assessee by the order dated 24.10.2016 passed by Tribunal in the preceding assessment years, i.e. AY 2010-11 and AY 2011-12 wherein the Tribunal held that lease premium charges were not allowable revenue deduction. However, the Tribunal allowed the alternate plea raised by the assessee company and held the premium paid for acquisition of lease hold rights to be an intangible asset, independent from the land itself, eligible for depreciation under section 32(1)(ii) of the Act. Accordingly, we hold that the assessee is eligible for depreciation at 25% on lease hold rights acquired in Haridwar and Neemrana. As regards the land at Haridwar, the AO is directed to allow the claim of depreciation as per opening WDV carry forward from the earlier years. In so far as the depreciation of land at Neemrana is concerned the same shall be allowed after verification of the relevant payments claimed to have been made by the assessee. In view of the above, the aforesaid issue is squarely covered in favour of the appellant by orders passed by the Hon’ble Tribunal for assessment years 2009-10 to 2011-12, 2013-14 and 2015-16. 81. We have carefully considered the rival contention and perused the orders of the lower authorities. We find that the assessee has though not claim the amortization expenses in the return of income made the claim before the learned assessing officer. Such claim is required to be adjudicated in accordance with the law as it has already been decided in the assessee’s own case for earlier years. In the earlier years, the coordinate bench has allowed the claim of the assessee for assessment year 2009-10 to 2011-12, 2013-14 and 2015-16. Therefore, the issue squarely covered in favour of the assessee. Accordingly, we allow ground number 21 of the appeal and direct the learned Assessing officer to grant deduction of the amortization expenses to the assessee.” 21.3 Further in Vasant Chemicals Pvt. Ltd. vs. ITO (ITA No. 2182 of 2017/Hyd dated 17-08-2021)(Hyd) it was contended by the assesse that one time premium 58 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. paid for acquiring leasehold right on land for a period of 33 years from Andhra Pradesh Industrial Infrastructure Corporation Ltd is an intangible asset as per section 32(1)(ii) of the Act as the payment allows the appellant to exercise a right in the nature of license or commercial right over the property over a specific period for conducting its business activities. Relying on the decision of its co-ordinate bench in ACIT vs. Progressive Constructions Ltd (2018) 92 taxmann.com 104 (Hyd), Hyderabad Tribunal allowed the claim of depreciation on such leasehold rights on land. 21.4 The aforesaid issue has also been covered in favour of the assessee in the following judicial pronouncements: Karnataka Emta Coal Mines Ltd. vs. ACIT (ITA No. 2135/Bang/2018 dated 14-11-2022) NMDC Ltd vs. JCIT (2015) 56 taxmann.com 396 (Hyd Trib.) DIT vs. National Mineral Development Corporation Ltd. (ITA No. 1593/Hyd/2014, dated: 20-03-2015) Bangalore International Airport Ltd. vs. DCIT (2023) 146 taxamann.com 206 (Kar) 21.5 On going through the aforesaid judicial pronouncements, the important principle that emerges is that expenditure incurred on acquiring the land is a capital expenditure and hence cannot be allowed. However, the expenditure incurred on acquiring land on lease is different from the expenditure incurred on acquisition of land. On acquiring land on lease from the government, the assessee has to pay certain upfront premium on lease which is the price paid for acquiring the rights of land and not the land itself and the ownership of the land vests with the lessor of 59 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. the land. The lessee is liable to return the land to its original owner after the expiry of the lease and does not have ownership rights over the land. On such facts, courts have held that such rights acquired by the assessee which is used for the purpose of its business is an intangible asset in the nature of business or commercial right. Such intangible assets being "business or commercial right" is entitled to depreciation u/s 32(1)(ii) of the Act. Hence, AO is directed to grant depreciation @25% on such leasehold rights acquired of Rs. 14,93,25,916/- in accordance with section 32(1)(ii) of the Act. The additional ground no. 1 raised by the assessee is allowed. Ground No. 6 (additional ground no. 2) of the assessee’s appeal raised by the ld. A/R of the assessee is in relation to allowability of interest paid on late deposit of TDS amounting to Rs. 7,99,142/- as business expenditure under section 37(1) of the I.T Act. 22. The brief facts of the case are that the assessee during the assessment year under appeal had paid interest of Rs. 7,99,142/- on late deposit of TDS, which has been added back in the computation of income while computing total income under Normal provisions. Now, the assessee has pleaded before us that such interest paid being compensatory in nature should be allowed as a deduction. 22.1 The said ground, being a pure question of law is also admitted on merits as per our discussion made while admitting additional ground no. 1 of the assessee’s appeal. 22.2 The ld. A/R of the assessee submitted that as per provisions of section 201(1A) of the Act, tax deducted by the deductor must be deposited to Government within a specified period and non-compliance of the same results in levy of interest to be paid to the credit of Central Government. The ld. A/R submitted that only such 60 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. expenditure can be disallowed under section 37 which is offensive or prohibited by law. Interest on delay in deposit of TDS being compensatory in nature, and not penal in nature and hence not required to be disallowed under section 37(1) of the IT Act. 22.3 The ld. A/R in support of his view relied on the following decisions:- M/s. Resolve Salvage & Fire India vs. DCIT In ITA No. 841/Mum/2019 dated 18.04.2022. Harcharan Dass Gupta vs. DCIT In ITA No. 1013/Del/2022 dated 24.03.2023. Welkin Telecom Infra (P) Ltd vs. DCIT In ITA No. 12/Kol/2021 dated 18.04.2022. Karnataka Emta Coal Mines Ltd. vs. ACIT In ITA No. 2135/Bang/2018 dated 14.11.2022. 23. On the other hand, the ld. D/R did not raise any objection on admissibility of additional ground. Further, on merits as well, the ld. D/R did not controvert to the contention of the assessee. 24. We have heard the contentions made by the ld. A/R of the assessee and have also perused the material placed on record. We have also gone through the facts of the case and perused the judicial precedents on this subject. We find merit in the contention of the ld. A/R of the assessee that the issue in question is squarely covered in favour of the assessee in the case of Resolve Salvage & Fire India vs. DCIT (supra). The relevant observations made by the Coordinate Bench of the Mumbai Tribunal are as follows :- “ 5. Considered the rival submissions and materials placed on record. We observe that assessee has paid interest on late payment of TDS. We observe from various decisions relied upon by both the parties and we observe that ld. CIT (A) has relied upon the decision of 61 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. Ferro Alloys Corpn. (supra) in which the Hon’ble High Court has not discussed anything on merit considering the fact6 that the case Bharat Commerce Industries Ltd. vs. CIT (1985) 20 Taxman 302/153 ITR 275 was pending before Hon’ble Supreme Court and it observe that even in the case of Bharat Commerce Industries Ltd. the issue involved is relating to interest paid on late payment of advance-tax. Therefore, the issue involved in the present case is not relating to late remittance of advance-tax but late remittance of TDS. Therefore, the issue involved is whether the interest paid by the assessee to the government can be termed as compensatory or penal in nature. In our considered view the assessee has deducted the tax on behalf of the third party and failed to remit the same within the due date and the interest charged on such amount is only compensatory in nature. 6. Being consistent with the above decision of the co-ordinate bench, we hold that the interest paid on delayed payment of TDS u/s 201(1A) is an allowable deduction.” 24.1 Further on going through the recent decision of Kolkata Tribunal in the case of Welkin Telecom Infra (P) Ltd. (supra) aforesaid principles have been fully accepted as below :- “ 39. We, therefore, find merit in the contention of the ld. AR that the interest expended on discharge of such vicarious liability concerning payment of TDS is compensatory in nature and therefore eligible for deduction u/s 37 of the Act. The aforesaid view finds support from the following observations of the Hon’ble Karnataka High Court in the case of CIT v. Oriental Insurance Co. Ltd. (2009) 183 Taxman 186/315 ITR 102, wherein Hon’ble High Court held that interest for late payment of TDS is not in penal nature by observing as follows : “ 7. In the Mittal Steel case (supra), the proviso to s. 201 was under consideration. The said proviso empowers levy of penalty if the TDS deduction is not effected for any valid reason. However, s. 201(1A) is a distinct provision to levy interest for delayed remittance. It is in the practice of Revenue that for belated payment of tax for any reasonable cause, the assessee is liable to pay interest @ 12 per cent per annum. Similarly, for refunds, Revenue pays interest to the assessee. Therefore, the levy of interest under s. 201(1A) cannot at any rate be construed as a penalty ..........” Xxxxxxxxxxx 42. It is, therefore evident that “TDS” qua the assessee, is not income-tax on its “profits or gains of any business or profession” assessable under section 28. Instead it is the tax on the profits and gains of the business of the recipient. In view of the above, as the tax deducted at source (TDS) is not in the nature of the income tax which 62 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. is required to be paid on profits & gains chargeable to tax under section 28 and thus not disallowable under section 40(a)(ii), the consequential interest paid under section 201(1A) upon late payment of TDS also cannot be disallowed under section 40(a)(ii). For the reasons as aforesaid, the disallowance of interest paid on belated payment of TDS is hereby deleted.” 24.2 It is pertinent to note that even Hon’ble Karnataka High Court in the case of CIT vs. Oriental Insurance Co. Ltd. (supra) has decided the issue in favour of the assessee. Being consistent with the decisions held by various other courts and considering that no other contrary decisions could be pointed out by the ld. D/R, we hold that the interest paid on non-deduction of TDS/late payment of TDS of Rs. 7,99,142/- is allowable deduction while computing total income under normal provisions of the Act. 24.3 We, therefore, taking into consideration the facts and circumstances of the case as discussed herein above, and also following judgment of the Hon’ble High Court and the consistent view taken by the Coordinate Benches of the Tribunal, allow the claim of the assessee but as the same is not so far agitated or verified by the lower authorities to the fact that the same was claimed or not. Therefore, AO is directed to verify the claim of the assessee. The ground of the assessee is allowed. 25. In the result, appeal of the assessee is partly allowed. ITA NO. 142/JP/2023 (REVENUE) : 26. We now take up the appeal of the Revenue for adjudication as under : Ground No. 1 relates to allowing the appeal of the assessee by deleting the disallowance of Rs. 2,89,07,63,321/- on account of deduction u/s 80IA in respect of captive power plant. 63 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. 27. The facts in brief are that the assessee is engaged in the business of manufacture and sale of cement and generation and sale of power. The power undertakings of the respondent are eligible for deduction under section 80-IA of the IT Act. The assessee in the return of income had claimed deduction under section 80-IA amounting to Rs. 5,40,42,83,443/- on the power generated by the eligible units. The power generated by these units, was also captively consumed by the cement manufacturing units (CMUs) of the assessee. Along with the Return of Income, assessee had also submitted report in Form 10CCB together with Audited Balance Sheet and Profit & Loss Account. For computing the profitability of units captively consumed by CMU, in terms of provisions of Sec. 80IA(8) and Sec. 80A(6), transfer price at market value or Arm’s Length Price was computed based on annual average rate of power sold by the State Electricity Board (‘Grid/SEB’) during the year to the nearby manufacturing units of independent assessees in the State of Rajasthan @ Rs. 7.15 per unit by applying Comparable Uncontrolled Price (‘CUP’) Method. The TPO, vide order u/s 92CA(3) dated 25-10-2017 rejected the transfer price adopted by the respondent and made an adjustment of Rs. 2,89,07,63,321/- by adopting transfer price of power at Rs. 3.99 per unit computed by considering average of the following rates [Pg 16 to 24 of the Order]: • The rate of power traded at IEX; • The rate at which power is sold by respondent to different customers; and • The rate at which power is sold by generating power plants to DISCOM. 64 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. The AO following the order of TPO dated 25-10-2017 passed the order u/s 143(3) dated 23-02-2018 making an upward revision to the total income of the respondent by Rs. 2,89,07,63,321/- on account of transfer of power. The ld. CIT (Appeals) after making detailed analysis on the aforesaid issue and relying upon the earlier decisions of Hon’ble Rajasthan High Court and Hon’ble Tribunal in assessee’s own case deleted the addition made by A.O. vide order dated 20-01-2023. Now the revenue is in appeal before us. 28. Before us, the ld. A/R of the assessee reiterated his submissions as made before the lower authorities, as under :- “Value at which State Grid has sold power to the cement unit constitutes market value Issue under consideration is squarely covered in favour of the assessee by the decision of Hon’ble Jurisdictional Tribunal in the assessee’s own case for A.Y. 2007-08 to 2009-10 [ITA No. 503/JP/2012, 504/JP/2012 & 505/JP/2012 (Jaipur – Trib.)] vide order dated 27-01-2014. Relevant extract of the same is reproduced below: - “(b) the value at which State Grid has sold power to the Cement Unit of the Assessee (average annual landed cost) also constitute ‘market value’ in terms of explanation to Section 80IA(8) but the value at which State Grid or third party has purchased power from the Power Unit of the Assessee, which represents its power which is sold when not required by the Cement Unit, does not constitute ‘market 3 | P a g e value’ in terms of explanation to Section 80IA(8). It is the ‘principle’ and not the ‘quantum’ which is deciding factor; (c) where a basket of ‘market values’ are available for the relevant period and relevant geographical area where the eligible unit is situated, the assessee has discretion to adopt any one of them as market value; and (d) If the value adopted by the assessee is ‘market value’ as explained above, it is not 65 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. permissible for Revenue to recompute the profits & gains of the eligible unit by substituting the said value (as adopted by the Assessee) by any other ‘market value’.” [Emphasis Added] The above principle has also been followed by the Hon’ble Tribunal in A.Y. 2010-11 (ITA No. 445/JP/2014 dated 27-04-2016) & in A.Y. 2011-12 (ITA No. 1394/JPR/2019 dated 10-08-2020) (Page no. 44-54 of CLPB). The aforesaid orders of Hon’ble Tribunal for AY 2007-08 to AY 2010-11 has also been affirmed by the Hon’ble Rajasthan High Court for AY 2009-10 (D.B. Income Tax Appeal No. 85/2014 dated 22-08-2017) (Page no. 1-15 of CLPB) and for AY 2007-08, 2008-09 & AY 2010-11 (D.B. Income Tax Appeal No. 86/2014, 87/2014 & 227/2016 dated 22-08-2017) (Page no. 17-25 of CLPB). Relevant extract of the Order of High Court confirming the principles laid down by Hon’ble Jaipur Tribunal is reproduced as under: - “25. In view of the submissions made by Mr. S. Ganesh, price which has been given to the sister concern is to be determined on the basis of principle laid down by the Supreme Court in case all the four conditions are fulfilled as stated in his submissions and more so the Tribunal has given the finding which reads as under: ....... (b) the value at which State Grid has sold power to the Cement Unit of the Assessee (average annual landed cost) also constitute ‘market value’ in terms of explanation to Section 80IA (8) but the value at which State Grid or third party has purchased power from the Power Unit of the Assessee, which represents its power which is sold when not required by the Cement Unit, does not constitute ‘market value’ in terms of explanation to Section 80IA (8). It is the ‘principle’ and not the ‘quantum’ which is deciding factor; ........ 27. The said issue is also answered in favour of the asessee” After considering the said decisions of Hon’ble High Court and Hon’ble ITAT, Ld. CIT(A) allowed the transfer price adopted by the adopted by the assessee and held that: - 66 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. “a. The case of the appellant is squarely covered by the decision of Rajasthan High Court and ITAT Jaipur in its own case and various other judicial pronouncements of High Courts and Tribunal discussed above wherein it has been held that purchase of power from the grid by the manufacturing unit of the assessee represents market value in terms of Sec 80-IA (8) & Sec 80A (6);” [Refer Para 8.22 at Page 34 of CIT(Appeals) order.] Ld. CIT(A) has duly considered the fact that there has been no material change in the definition of ‘Market Value’ u/s 80-IA(8) read with Section 80A(6) post introduction of Sec. 92BA of the Act. Post introduction of Sec. 92BA of the Act, the definition of ‘market value’ under the provisions of Sec. 80-IA (8) has been amended to provide the respondent with an option to compute the market value of goods or services based on the price that such goods or services would fetch in the open market or the arm’s length price as defined in clause (ii) of Sec. 92F. The relevant extract of the provisions are reproduced below: “Explanation. —For the purposes of this sub-section, “market value”, in relation to any goods or services, means— i. the price that such goods or services would ordinarily fetch in the open market; or ii. the arm’s length price as defined in clause (ii) of section 92F, where the transfer of such goods or services is a specified domestic transaction referred to in section 92BA.” [Emphasis Added] Since the statute has itself provided the assessee with an option to compute market value under either of the two clauses, market value computed based on clause (i) i.e., the price that such goods or services would ordinarily fetch in the open market still holds good. Hence, there has been no 67 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. change in definition of market value even after the introduction of provisions of specified domestic transactions. Further, Sec. 92F of the Act defines ‘arm’s length price’ as under: 92F (ii) "arm's length price" means a price which is applied or proposed to be applied in a transaction between persons other than associated enterprises, in uncontrolled conditions; Further, in terms of the Guidance Note issued by ICAI, arm’s length price is the price at which independent enterprises deal with each other, where the conditions of their commercial and financial relations ordinarily are determined by market forces. Hence, the basic element of price being ordinarily determined by the market forces, clearly continues even in the amended definition of market value. Accordingly, all the judicial pronouncements rendered in context of the market value of ‘power’ prior to introduction of specified domestic transactions would still hold good. Hence, the transfer price adopted while computing Deduction u/s 80IA represented the arm’s length price as per the definition of Sec. 92F of the Act. In this regard, Ld. CIT(Appeals) vide his order dated 20-01-2023 (Pg. 28 to 31) has held as follows:- “8.13 A bare reading of the above amended provision shows that the definition of ‘market value’ as per Sec. 80-IA(8) has been amended to provide an option to compute the market value of goods or services based on the price that such good or services would fetch in the open market or the arm’s length price as defined in clause (ii) of Sec. 92F. It is observed that there is no change in the meaning of ‘market value’ even post introduction of Sec. 92BA read with Sec. 92F of the Act. This also finds support from Guidance Note on Report u/s 92E of the Income Tax Act, 1961(Transfer Pricing), 2020 issued by the Institute of Chartered Accountant of India which provides that arm’s length price is the price at which independent enterprises deal with each other, where the conditions of their commercial and financial relations ordinarily are determined by market forces. Further, Para 1.2 of the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (July 2017) (‘OECD Guidelines’) also provides that the 68 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. commercial relation in a transaction between two independent enterprises are ordinarily determined by market forces. Hence, the basic element of price being ordinarily determined by the market forces, clearly continues even in the amended definition of market value. Accordingly, all the judicial pronouncements rendered in context of the market value of ‘power’ prior to introduction of specified domestic transactions would still hold good. 8.14 Therefore, price which is considered to be at ‘market value’ prior to the amendment cannot be said to be NOT ‘market value’ post introduction of Sec. 92BA of the Act. The definition of ‘market value’ as per Sec. 80-IA(8) means the market value of goods or services based on the price that such goods or services would fetch in the open market; or the arm’s length price as defined in clause (ii) of Sec. 92F. Therefore, it is observed that the intent of the law remains same even after introduction of Sec. 92BA. This view has been duly upheld in DCIT vs. M/s Balarampur Chini Mills Limited [ITA No. 1672/Kol/2019] for AY 2016-17 and also in Star Paper Mills Limited vs. DCIT [ITA No. 127/Kol/2021 (AY 2016-17) dated 26-10-2021] wherein it is held as under: “24. The contention of the Ld. CIT, DR that the above referred decisions are not applicable since they were rendered in the context of ‘open market value’ and not ‘arm’s length price’ is found to be misplaced. We agree with the Ld. AR of the assessee that, the ‘open market value’ standards and ‘arm’s length price’ standards would ordinarily yield the same results, unless the considerations and rules involved are different. On this particular issue of determination of the transfer price of power u/s 80-IA(8) of the Act, we note that the considerations taken into account under the open market valuation standards by the High Courts in the above decided cases (supra) are consistent with the considerations and guidelines under the arm’s length standards set out in Chapter X of the Act and therefore the ratio laid down in the above decisions (supra) indeed applies in the present case as well.” 8.15 As far as mode of computation of transfer price of power transferred from eligible unit to other eligible/non-eligible units of the appellant by applying CUP method is concerned, appellant submits that the rate at which power is sold by the Grid to various manufacturing units has been judicially held to be 69 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. market value of power as per the provisions of sec. 80IA(8) of the Act. The AR relied upon following case laws in this regard: a) Nectar Lifesciences Limited vs. ACIT (AY 2013-14) [ITA No. 567/Del/2019 dated 13-09-2021]: The ITAT, Delhi held that held that electricity available to a customer from Grid at a specific rate coresponds to ‘market value’ and can be used for benchmarking the transaction for transfer of power from eligible unit to the manufacturing units of the assesse. b) Reliance Industries Ltd vs. ACIT [I.T.A. No. 7299/Mum/2017 (AY 2013-14)]: ITAT, Mumbai rejected the Revenue’s stand that ‘market rate’ duly applied for purpose of Sec. 80-IA(8) of the Act shall change for the purpose of domestic transfer pricing regime and upheld the rate at which power is sold by the Grid to the manufacturing unit of the appellant to be at an arm’s length price. c) Star Paper Mills Limited vs. DCIT (supra): Kolkata ITAT held that the key factor in the application of CUP method is ‘product comparability’. Since manufacturing units procured power throughout the year from CPP as well as unrelated external party i.e. Grid in the same geographical location, it fulfills the internal CUP parameters based on similarity of geographical location between AE and non-AE transaction. d) M/s Shahi Exports Pvt. Ltd vs. ACIT (supra): ITAT, Delhi held that that for the purpose of claiming deduction under section 80IA of the Act the rate should have been the rate charged by the electricity board to its consumers..... As these judgements dealt with the identical issue of ‘market value’ u/s 80IA(8) and facts are also similar as the case of the appellant, therefore, appellant’s reliance on these judgement is found correct and applicable to the present case. 8.16 Thus, the finding of the TPO that the appellant has not complied with the provisions of Sec. 80A(6) is found to be not correct. Sec. 80A(6) states that the ‘market value’ of goods or services means the arm’s length price as defined in Sec. 92F(ii) of the Act, if it is a specified domestic transaction. Meaning of arm’s length price is identical to the meaning of open market value and it produces the same result. Hence, method adopted by the appellant for computation of transfer price of power is in accordance with the provisions of Sec. 80A(6) and 80-IA(8) r.w. Sec. 92F of the Act. ” 70 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. Chapter X of Income Tax Act contains provisions with regard to computation of arm’s length price. The Section 92(1) of chapter X provides that “Any income arising from an International Transaction shall be computed having regard to the arms’ length price”. A perusal of section 92(1) with other provisions of chapter X makes it clear that, the section 92(2) and various provisions of chapter X specifically mention about ‘specified domestic transaction’ with ‘international transaction’. However, no reference of ‘specified domestic transaction’ is given under subsection (1) of section 92 of. Thus, the conscious absence of ‘specified domestic transaction’ from the ambit of section 92(1) fortifies the submission made above that the open market value concept is still prevalent at the option of assesse. This is because, had the legislation intended to mandate to compute arm’s length price in each and every specified domestic transaction, it would not have given option under explanation section 80IA (8) nor it would have excluded ‘specified domestic transaction’ from the mandate of section 92(1). Further, reliance is placed on decision of Hon’ble Jodhpur Tribunal in case of Hindustan Zinc Ltd. –vs.- NFAC (ITA No. 127 & 128/Jodh/2022 dated 15-11- 2022) wherein while dealing with issue of transfer pricing of power for the AY 2016-17 (i.e. after the applicability of SDT provisions) it has been held that the rate at which electricity is sold by the Grid to the manufacturing units is an acceptable market value u/s 80-IA for transfer of electricity. Further, the assessee would also like to submit that unlike Sec. 80-IA (8), the word ‘OR” is missing in provisions of Section 80A (6) of the Act. Relevant extract of the provisions of Sec. 80A (6) is reproduced as hereunder: Sec 80A (6) ........ Explanation.—For the purposes of this sub-section, the expression “market value”,— 71 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. (i) in relation to any goods or services sold or supplied, means the price that such goods or services would fetch if these were sold by the undertaking or unit or enterprise or eligible business in the open market, subject to statutory or regulatory restrictions, if any; (ii) in relation to any goods or services acquired, means the price that such goods or services would cost if these were acquired by the undertaking or unit or enterprise or eligible business from the open market, subject to statutory or regulatory restrictions, if any; (iii) in relation to any goods or services sold, supplied or acquired means the arm’s length price as defined in clause (ii) of section 92F of such goods or services, if it is a specified domestic transaction referred to in section 92BA. It is humbly submitted that unlike Sec. 80-IA(8), Sec. 80A(6) specifically requires that when goods or services transferred from the eligible unit to other units of the assessee whether sold or acquired falls within the category of specified domestic transactions of Sec. 92BA then in such case it is mandatory to adopt market value as per clause (iii) of Sec. 92F of the Act. Since, Ld CIT(A) after relying on various judicial pronouncements has already held vide its order dated 20-01-2023 that the transfer price of power as adopted in the instant case of the assessee is as per provisions of Sec. 92F of the Act, the transaction has to be at arm’s length price in terms of Sec. 80A (6) of the Act as well. Sale rate of power undertaking to 3rd parties is not market driven and hence not a market value for the purpose of transfer pricing : TPO has adopted the average of the rate at which power is sold through IEX, rate at which power is sold by the respondent to different customers, rate at which power is sold by the third parties to the State Grid for the purpose of determining the ALP of transfer of power from power undertakings to cement manufacturing units. The assessee humbly submits that sale rate of power by the assessee to 3rd parties cannot be considered as correct market value on account of following contentions: 72 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. • As the prime objective of setting up of power undertakings is to cater the electricity requirement of CMUs, there is long term commitment of supplying such uninterrupted power to CMU. Since, power generated would first be captively used and remaining power, if any would then be directed for sale purpose, there was no such long term commitment while sale of power to 3rd parties. • Power which was not consumed by the cement manufacturing units were unused at the power plants and thus sold to 3rd parties. It was not the primary objective of the power plants to sell power to 3rd parties and hence is nothing but distress sale and such sale rate does not represent the true market value as per Sec 80-IA (8). • Rate at which power is sold to 3rd parties does not cover various cost• factors like transmission bottlenecks for scheduling of open access, transmission losses, and regulatory charges which are to be borne by the such buyers. Hence, price charged from such 3rd part is subdued and does not represent the full landed cost of power to the ultimate consumer. Therefore, the sale price charged is subdued and does not represent the full landed cost of power to the ultimate consumer. TPO vide Para 7.16 of his order dated 25-10-2017 has accepted that the sale of power by the assessee is sale of surplus power which itself means that the aforesaid sale is a distress sale. Hon’ble Jurisdictional High Court in assessee’s own case for AY 2007- 08, 2008- 09 & AY 2010-11 (D.B. Income Tax Appeal No. 86/2014, 87/2014 & 227/2016) vide orders dated 22-08-2017 [Page No. of 17–25 CLPB] has held that ‘power which is sold when not 73 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. required by the Cement Unit does not constitute market value in terms of explanation to Sec. 80IA (8) of the Act’. Considering the said submissions, Ld. CIT(A) in his order (Page No. 31 to 32 of the order) has categorically held that the sale of balance power i.e. power unutilised by the CMU, to the third parties is a distress sale and such sale rate does not represent actual market value as below: - “8.18 The appellant in its submissions has also explained as to why the rates adopted by the TPO should not be considered ....... (2) Rate of Sale of power by the captive power plant - The price at which power units of the appellant supplies power to third parties is a distress sale and CPPs are forced to sell power at the rates offered by the local buyers, thereby resulting in a lower sale price. In order to achieve economies of scale the appellant has to operate at optimum level which results in surplus power. Further, the rate at which power is sold to third parties by CPPs cannot be considered for the purpose of determination of ALP in view of the order of the Jurisdictional High Court for AY 2007-08 to 2010-11 wherein it has been held that ‘the value at which State Grid or third party has purchased power from the Power Unit of the Assessee, which represents its power which is sold when not required by the Cement Unit, does not constitute ‘market value’ in terms of explanation to Section 80IA (8)’. Further, ITAT Kolkata in the case of ACIT vs. Philips Carbon Black Ltd. (supra) has held that excess power generated by CPPs which is sold in the open market is at lower rate as power is a highly perishable commodity which cannot be stored for future. The selling rate of power by CPP in the open market was under compelling circumstances and was targeted to recover only the cost of power generation and therefore such price cannot be considered as representative of market value of the commodity. Thus, adoption of such rate for determination of transfer price of power is not appropriate.” [Emphasis Added] Rates at which Generating Company sell power to Distribution Company cannot be stated to be a “Market Value” The rate at which power is sold by generating company to distribution company does not satisfy the comparability factors laid down in Rule 74 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. 10B(2) and 10B(3) of the Income Tax Rules, 1962. There is considerable difference in the said models which has been discussed here-in below: (a) Differences in business risk of CPP– The captive power plants of the assessee bears capacity utilisation risk (lower requirement of power by manufacturing unit may lead to surplus power in CPP) and single customer risk (if the manufacturing unit of the assessee closes its operation, the CPP will also be shut down); (b) Difference in business models - The rates at which power is purchased by distribution companies from generation companies are the rates charged by generation companies to middlemen like distribution companies/ transmission companies (i.e. B2B business models) which are governed by altogether different level of market and are therefore not comparable to the rates which are charged to ultimate consumer (manufacturing unit in the instant case). (B2C Business Models) (c) Difference in regulatory aspects – Each of the entities involved in the power market (engaged in generation of power, transmission, distribution as well as trading of power) are regulated by separate regulatory provisions issued from time to time by Central and State Electricity Regulatory Commission. However, as per the said provisions, CPPs are not required to obtain a license if these CPPs are set up primarily for the purpose of self-consumption of power so generated. In view of the same, given the regulatory restrictions it is not appropriate to compare the rates at which the generating companies sell power to other licensees as these licensees are not the ultimate consumers as in the case of assessee where the CPPs transfer power directly to the ultimate industrial consumer i.e. the manufacturing units. 75 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. Considering the aforesaid submissions, Ld. CIT(A) has held that the sale rate of Generating Companies to Distribution Companies does not represent actual market value. The relevant extract of the same is reproduced below for your kind reference:- (Pg No. 31 to 32 of the Order) “8.18 The appellant in its submissions has also explained as to why the rates adopted by the TPO should not be considered. ............................ (3) Rate of sale of power by the generating companies – The rate at which Adani Power Rajasthan Ltd. (‘APRL’) and Raj West Power Limited (‘RWPL’) supplies power to distribution companies is a regulated price which is determined by the State Electricity Regulatory Commission. It is therefore not a market driven rate determined by forces of demand and supply and also does not denote rate available in the open market. Power sold by generating company to a distribution company is a totally different business model as compared to the sale of power by the CPP, thus, it does not satisfy the comparability factors laid down in Rule 10B(2) and 10B(3) of the Income Tax Rules, 1962.” Prayer The respondent humbly pray before Your Honours to dismiss the aforesaid ground of departmental appeal.” 29. On the other hand, the ld. D/R vehemently supported the order of the Assessing Officer and submitted that although the matter is covered in favour of the assessee by the decision of Jaipur Bench of the Tribunal and Rajasthan High Court in assessee’s own case but since department has not accepted the said decisions and are in further appeal before the Supreme Court, this ground should not be allowed in favour of the assessee. The ld. D/R further relying upon the order of the AO argued that since in earlier years transfer pricing provisions were not applicable, earlier 76 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. decisions should not be relied upon. He submitted that the order of the ld. CIT (A) be quashed to the extent of deletion of addition. 30. We have heard the rival submissions, perused the material on record and gone through the orders of the revenue authorities and the case laws cited before us. At the outset, we find that this ground of the Revenue has already been decided by the Tribunal in earlier years in the assessee’s own case. The copies of the orders were placed on record. With regard to the deduction under section 80-IA, power transfer price issue was decided in favour of the assessee vide consolidated order of the Tribunal, Jaipur for the assessment year 2011-12 dated 10.08.2020 in ITA No. 1394/JP/2019 wherein the Coordinate Bench followed the earlier orders of the Tribunal, Jaipur for the AY 2007-08 to 2009-10 dated 27.01.2014 in ITA Nos. 503, 505/JP/2012 and vide order dated 27.04.2016 for the AY 2010-11 in ITA No. 445/JP/2014. 30.1. We further noticed that the orders of the Tribunal dated 27.01.2014 and 27.04.2016 had been confirmed by the Hon’ble Rajasthan High Court vide orders dated 22.08.2017 in DB IT Appeal No. 85/2014 and order dated 22.08.2017 in DB IT Appeal No. 227/2016 respectively. 30.2. The Coordinate Bench of the Jaipur Tribunal in ITA No. 1394/JP/2019 dated 10.08.2020 while dealing with the matter, had decided the ground of the Revenue by observing at para 2.12 to 2.15 as under :- “ 2.12. We have carefully gone through the orders of the Tribunal in assessee's own case for the above assessment years wherein issue with regard to deduction u/s 801A has been dealt with by the Tribunal in its order dated 27-01-2014 for the A.Y. 2007-08 to 77 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. 2009-10 at page 15 in para 13 and at page 39 in para 46 of the order. Similarly for the A.Y. 2010-11, the Tribunal has dealt with the issue in its order dated 27-04-2016 at pages 7 & 8 of its order. 2.13. The precise order of the Tribunal dated 27-10-2014 at page 15 reads as under:- “13. In the light of the aforesaid, we hold that- (a) the value adopted by the Assesse be it value as per independent third party trading transactions or as per Power Exchange (IEX etc.) or any other independent transaction (for the relevant period and which has taken place in the relevant area where the eligible unit is located) constitute market value' in terms of explanation to Section 801A(8); (b) the value at which State Grid has sold power to the Cement Unit of the Assessee (average annual landed cost) also constitute market value' in terms of explanation to Section 801A(8) but the value at which State Grid or third party has purchased power from the Power Unit of the Assessee, which represents its power which is sold when not required by the Cement Unit, does not constitute market value' in terms of explanation to Section 801A (8). It is the 'principle and not the "quantum' which is deciding factor; (c) where a basket of 'market values' are available for the relevant period and relevant geographical area where the eligible unit is situated, the assessee has discretion to adopt any one of them as market value; and (d) If the value adopted by the assessee is 'market value' as explained above, it is not permissible for Revenue to recompute the profits & gains of the eligible unit by substituting the said value (as adopted by the Assesse) by any other 'market value'." 2.14. Further observations of the Tribunal in its order dated 27- 04-2016 are at page 39 in para 46 which reads as under:- 78 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. "46. Ground No. 1 & 2 are on deduction u/s 801A and substantively similar to corresponding Grounds for AY 2007-08 & 2008-09. The AR for the assessee submitted that since in the relevant previous year, transaction values from Power Exchange (IEX) were available from June 28, 2008 onwards, the assessee has adopted (a) for the period up to June 27, '08, the market value in relation to independent third party transactions as in earlier years and (b) for the period from June 28, 08 to March 31, 2009, IEX market price for power sale in N2 region which includes the State of Rajasthan. In the assessment order, the AO has accepted the assessee's basis upto June 27 '08 as per (a) above. However, for the period from June 28, '08 to August 29,'08 he has adopted IEX market value for power sold on the Power Exchange [by adopting all India Rate instead of N2 region rate applicable to Rajasthan where Assessee's Unit is located] and for the subsequent period, the AO has adopted rate at which power is sold by the assessee's Power Unit to third parties, when not required by its Cement Unit. We have extensively dealt with the dispute on adaptation of market value for power captively consumed in Para 2 to 14 above while dealing with Assessee's Appeal for AY 2007-08 in ITA No. 503/JP/12 and in the light of our findings and decision recorded in Para 13 above, we hold that the disallowance in this year also needs to be deleted. Assessee's Grounds are therefore allowed and corresponding disallowance u/s 801A is deleted." 2.15. We had also gone through the order of Hon'ble Rajasthan High Court dated 22-08-2017 wherein the order of the Tribunal was confirmed by Hon'ble Rajasthan High Court for all the three years i.e. A.Y. 2007-08 to A.Y. 2009-10. We also observe that provisions of Section 80IA(8) read with Section 80A(6) require that the value of captive consumption of goods supplied by eligible undertaking to any other undertaking has to correspond with market value and that once the value adopted by the assessee is termed as market value there is no provision under the law for substituting market value adopted by the assessee with any other value. The AO is not permissible to substitute the 79 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. said rate with another sale rate in spite of acknowledging that the method adopted by the assessee also constitutes market value. Now coming to the method adopted by the Ld.CIT(A) vide his order dated 15-11-2019, we observe that the Ld.CIT(A) has adopted average annual landed cost of electricity purchased by the Cement Unit of the assessee from the State Grid as the market value. While determining the said market value, Ld. CIT(A) has placed reliance on the decision of ITAT in assessee's own case in A.Y. 2007-08 to 2009-10 vide order dated 27-01- 2014. The Ld.CIT(A) has stated that as per clause (b) of para 13 of the order of ITAT, value at which the assessee has sold power to State Grid or third party does not constitute market value in terms of Explanation to Section 801A(8). As per the order of Tribunal, the value adopted by the assessee under the bilateral contract with the independent third party has been specifically mentioned to be stated to constitute market value in terms of Explanation to Section 80IA(8) read with Section 80A(6) of I.T. Act. Thought it cannot be ruled out that the average annual landed cost of electricity purchased by the Cement Unit of the assessee from the State Grid can also be one of the market value in terms of Section 801A(8) read with Section 80A(6) of I.T. Act since it represents rate at which power would have been sold, if it had not been supplied to the Cement Unit of the assessee. However, Para 13 (c) & (d) states that where basket of market value is available, it is on the discretion of the assessee to adopt any one of them as market value and once the assessee has adopted a market value, Revenue is not permitted to substitute the same with another value. Overlooking Para 13(a), (c) & (d) of the order of ITAT, the ld. CIT(A) chose to rely only on Para 13(b) 80 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. of the order and here also ld.CIT(A) has misinterpreted the decision of this Bench. The Id. CIT(A) has to consider the order of the ITAT in entirety and cannot rely merely on Para 13(b) while omitting to consider Para 13(a), (c) & d). We further find from the order of both AO as well as Id. CIT(A) that neither the AO nor Id. CIT(A) has disputed the market price as adopted by the assessee. They have simply replaced the same with their own derived market price which is not permissible under the law. As already noted that the transfer price of power as computed by the assessee satisfies the criteria of Market Value as defined in terms of Section 80IA(8) of the Act as well Section 80A(6) of the Act. Hence, the Department cannot replace the said market value with any other value. Hence respectfully following the binding of Hon'ble High Court and the Coordinate Bench of Tribunal (supra), we delete the disallowance, as made by the AO u/s 143(3) and partly upheld by ld. CIT(A) on account of deduction claimed u/s 80IA of the Act.” 30.3. However, at this point it would be pertinent to refer to the contention raised by the TPO that the Grid Rate as adopted by the assessee cannot be held to be the market value of power post introduction of Section 92BA of the Act. As per TPO in view of amended definition of Section 80IA(8), market value of power is required to be computed as per the provisions of Section 92F of the Act and hence the decisions of Jaipur Bench of the Tribunal & Hon’ble Rajasthan High Court are not applicable in the year under consideration. 81 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. 30.4 Before proceeding, it would be pertinent to refer to the provisions of Section 80-IA(8), Section 80A(6) and Section 92F of the Act which are reproduced herein below: Sec 80IA(8) "(8) Where any goods or services held for the purposes of the eligible business are transferred to any other business carried on by the assessee, or where any goods or services held for the purposes of any other business carried on by the assessee are transferred to the eligible business and, in either case, the consideration, if any, for such transfer as recorded in the accounts of the eligible business does not correspond to the market value of such goods or services as on the date of the transfer, then, for the purposes of the deduction under this section, the profits and gains of such eligible business shall be computed as if the transfer, in either case, had been made at the market value of such goods or services as on that date: Provided that where, in the opinion of the Assessing Officer, the computation of the profits and gains of the eligible business in the manner hereinbefore specified presents exceptional difficulties, the Assessing Officer may compute such profits and gains on such reasonable basis as he may deem fit. [Explanation. - For the purposes of this sub-section, "market value", in relation to any goods or services, means- (i) the price that such goods or services would ordinarily fetch in the open market; or (ii) the arm's length price as defined in clause (ii) of section 92F, where the transfer of such goods or services is a specified domestic transaction referred to in section 92BA ] Section 92F of the Act defines 'arm's length price' as under: 92F (ii) "arm's length price" means a price which is applied or proposed to be applied in a transaction between persons other than associated enterprises, in uncontrolled conditions. Sec 80A(6) (6) Notwithstanding anything to the contrary contained in section 10A or section 10AA or section 108 or section 10BA or in any provisions of this 82 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. Chapter under the heading "C-Deductions in respect of certain incomes", where any goods or services held for the purposes of the undertaking or unit or enterprise or eligible business are transferred to any other business carried on by the assessee or where any goods or services held for the purposes of any other business carried on by the assessee are transferred to the undertaking or unit or enterprise or eligible business and, the consideration, if any, for such transfer as recorded in the accounts of the undertaking or unit or enterprise or eligible business does not correspond to the market value of such goods or services as on the date of the transfer, then, for the purposes of any deduction under this Chapter, the profits and gains of such undertaking or unit or enterprise or eligible business shall be computed as if the transfer, in either case, had been made at the market value of such goods or services as on that date. Explanation. - For the purposes of this sub-section, the expression "market value”, - (i) in relation to any goods or services sold or supplied means the price that such goods or services would fetch if these were sold by the undertaking or unit or enterprise or eligible business in the open market, subject to statutory or regulatory restrictions, if any; (ii) in relation to any goods or services acquired, means the price that such goods or services would cost if these were acquired by the undertaking or unit or enterprise or eligible business from the open market, subject to statutory or regulatory restrictions, if any; (iii) in relation to any goods or services sold, supplied or acquired means the arm's length price as defined in clause (ii) of section 92F of such goods or services, if it is a specified domestic transaction referred to in section 92BA. 30.5. The ld. A/R of the assessee during the course of the hearing pleaded that Section 801A(8) & Section 80A(6) prior and subsequent to the amendment made vide Finance Act 2012 are the same. The trigger of these provisions can be invoked only if the transaction recorded in the books of eligible business does not correspond to the market value. Further, the concept of Market Value also remains the same as the term 'Open market Value' remains same post amendment as well. The ld. A/R also submitted that post introduction of the Section 92BA of the Act, the definition of 83 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. 'market value' has been amended under Section 80IA(8) of the Act to provide the assessee with an option to compute the market value of goods or services based (i) on the price that such goods or services would fetch in the open market or (ii) the arm's length price as defined in clause (ii) of Section 92F. Since the statute has itself provided the assessee with an option to compute market value under either of the two clauses, market value computed based on clause (i) i.e., the price that such goods or services would ordinarily fetch in the open market still holds good. Hence, there has been no change in definition of market value even after the introduction of provisions of specified domestic transactions. 30.6 The ld. A/R further pleaded that even the transfer price adopted by the assessee in the instant case represented the arm's length price as per the definition of Section 92F of the Act. In support of his contention he relied upon order of Ld. CIT (Appeals) which is reproduced below: "8.13 A bare reading of the above amended provision shows that the definition of market value as per Sec 80-1A(8) has been amended to provide an option to compute the market value of goods or services based on the price that such good or services would fetch in the open market or the arm's length price as defined in clause (ii) of Sec. 92F. It is observed that there is no change in the meaning of market value' even post introduction of Sec 92BA read with Sec. 92F of the Act. This also finds support from Guidance Note on Report us 92E of the Income Tax Act, 1961(Transfer Pricing), 2020 issued by the Institute of Chartered Accountant of India which provides that arm's length price is the price at which independent enterprises deal with each other, where the conditions of their commercial and financial relations ordinarily are determined by market forces. Further, Para 1.2 of the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (July 2017) (OECD Guidelines) also provides that the commercial) relation in a transaction between two independent enterprises are ordinarily determined by market forces. Hence, the basic element of 84 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. price being ordinarily determined by the market forces, clearly continues even in the amended definition of market value. Accordingly, all the judicial pronouncements rendered in context of the market value of power prior to introduction of specified domestic transactions would still hold good. 8.14 Therefore, price which is considered to be at market value prior to the amendment cannot be said to be NOT ‘market value' post introduction of Sec. 92BA of the Act. The definition of market value as per Sec. 80-1A(8) means the market value of goods or services based on the price that such goods or services would fetch in the open market; or the arm's length price as defined in clause (ii) of Sec. 92F. Therefore, it is observed that the intent of the law remains same even after introduction of Sec. 92BA. This view has been duly upheld in DCIT vs. M/s Balarampur Chini Mills Limited (ITA No 1672/Kol/2019] for AY 2016-17 and also in Star Paper Mills Limited vs. DCIT [ITA No. 127/Kol/2021 (AY 2016-17) dated 26-10-2021] wherein it is held as under : "24. The contention of the ld. CIT. D/R that the above referred decisions are not applicable since they were rendered in the context of open market value' and not 'arm's length price is found to be misplaced. We agree with the ld. A/R of the assessee that, the 'open market value’ standards and ‘arm's length price' standards would ordinarily yield the same results, unless the considerations and rules involved are different. On this particular issue of determination of the transfer price of power u/s 80-IA(8) of the Act, we note that the considerations taken into account under the open market valuation standards by the High Courts in the above decided cases (supra) are consistent with the considerations and guidelines under the arm's length standards set out in Chapter X of the Act and therefore the ratio laid down in the above decisions (supra) indeed applies in the present case as well.” 8.15 As far as mode of computation of transfer price of power transferred from eligible unit to other eligible/non-eligible units of the appellant by applying CUP method is concerned, appellant submits that the rate at which power is sold by the Grid to various manufacturing units has been judicially held to be market value of power as per the provision of sec. 80IA(8) of the Act. The ld. A/R relied upon following case laws in this regard : a) Nectar Lifesciences Limited vs ACIT (AY 2013-14) [ITA No 567/Del/2019/ dated 13-09-2021): The ITAT, Delhi held that held that electricity available to a customer from Grid at a 85 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. specific rate corresponds to ‘market value’ and can be used for benchmarking the transaction for transfer of power from eligible unit to the manufacturing units of the assessee. b) Reliance Industries Ltd. vs ACIT [ITA No 7299/Mum/2017 (AY 2013-14): ITAT, Mumbai rejected the Revenue's stand that ‘market rate’ duly applied for purpose of Sec 80-IA(8) of the Act shall change for the purpose of domestic transfer pricing regime and upheld the rate at which power is sold by the Grid to the manufacturing unit of the appellant to be at an arm's length price. c) Star Paper Mills Limited vs. DCIT (supra); Kolkata ITAT held that the key factor in the application of CUP method is ‘product comparability’. Since manufacturing units procured power throughout the year from CPP as well as unrelated external party i.e. Grid in the same geographical location, it fulfills the internal CUP parameters based on similarity of geographical location between AE and non-AE transaction. d) M/s. Shahi Exports Pvt. Ltd vs. ACIT (supra): ITAT, Delhi held that that for the purpose of claiming deduction under section 801A of the Act the rate should have been the rate charged by the electricity board to its consumers ...... As these Judgements dealt with the identical issue of ‘market value’ u/s 80IA(8) and facts are also similar as the case of the appellant, therefore, appellant's reliance on these judgement is found correct and applicable to the present case. 8.16 Thus, the finding of the TPO that the appellant has not complied with the provisions of Sec. 80A(6) is found to be not correct. Sec. 80A(6) states that the ‘market value’ of goods or services means the arm's length price as defined in Sec 92F(ii) of the Act, if it is a specified domestic transaction. Meaning of arm's length price is identical to the meaning of open market value and it produces the same result. Hence, method adopted by the appellant for computation of transfer price of power is in accordance with the provisions of Sec. 80A(6) and 80-IA(8) r.w. Sec. 92F of the Act.” 30.7. We find force in the argument of the ld. A/R and the observations as made by CIT (Appeals). The provisions of the Act give the assessee an option to adopt the transfer price of power in accordance with any of the clause as stated under section 86 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. 80-IA(8) of the Act i.e. either as goods or services would ordinarily fetch in the open market or the ALP as defined in Section 92F(ii) of the Act. 30.8. It is further observed form the order of ld CIT(A) that ‘open market value' standards as stated under amended section 80IA(8) and ‘arm's length price' standards as stated under section 92F would ordinarily yield the same results. While upholding the said principle ld. CIT(Appeals) has referred to various judicial pronouncements which are discussed herein below: In the case of Star Paper Mills Limited vs. DCIT (ITA No.127/Kol/2021 dated 26-10- 2021) following was held by the Kolkata Tribunal: “ 5.....Perusal of the Transfer Pricing Study Report placed at Pages 31 to 67 of the paper-book reveals that the non-eligible unit was taken as the 'tested party as it was procuring power both from CPP as well as Paschimancla Vidyut Vitran Nigam Ltd i.e. State Electricity Board (hereinafter referred to as 'SEB). The transfer price of power supplied by the CPP to the paper manufacturing unit was accordingly benchmarked at the annual average of the landed cost at which power was being purchased by the non-eligible unit from the SEB i.e. Rs. 8.41 per unit. 24. The contention of the ld. CIT D/R that the above referred decisions are not applicable since they were rendered in the context of 'open market value' and not arm's length price is found to be misplaced. We agree with the ld. A/R of the assessee that, the 'open market value’ standards and ‘arm's length price’ standards would ordinarily yield the same results, unless the considerations and rules involved are different. On this particular issue of determination of the transfer price of power us 80-IA(8) of the Act, we note that the considerations taken into account under the open market valuation standards by the High Courts in the above decided cases (supra) are consistent with the considerations and guidelines under the arm's length standards set out in Chapter X of the Act and therefore the ratio laid down in the above decisions (supra) indeed applies in the present case as well. 27. For the reasons set out above and following the above cited decisions (supra), we thus hold that the benchmarking analysis undertaken by the assessee to ascertain the arm's length transfer price 87 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. of power by eligible unit to non-eligible unit at Rs.8.41/unit was justified" Mumbai Tribunal in case of Reliance Industries Ltd vs. ACIT [IT.A. No. 7299/Mum/2017 (AY 2013-14)) dated 10-11-2020 has held the following: "177. Thus we find that the view of the authorities below that the definition of the market value shall change for the purpose of domestic transfer pricing regimen is not at all sustainable. Accordingly, in the background of the aforesaid discussion and precedent, we set aside the orders of the authorities below and decide issue in favour of the assessee.” 30.9. In light of above, we can conclude that ld. CIT(A) has rightly held that meaning of arm's length price as required under section 92BA read with section 92F is identical to the meaning of "open market value” as defined in Section 80-IA(8) of the Act and accordingly all the judicial pronouncements and principles held therein, rendered before the amendment brought under section 80-IA(8) of the Act including that of Hon'ble Jurisdictional High Court and Jaipur Tribunal in assessee's own case for earlier year would equally apply for the year under consideration post amendment brought under section 80IA(8) of the Act. 30.10. Considering that TPO has disputed the Grid rate not to be the market value in terms of provisions of Section 80A(6) of the Act, we would like to state here that that unlike Section 801A(8), the word "OR" is missing in provisions of Section 80A(6) of the Act. It is noted that as per provisions of Section 80A(6), if any goods or services whether sold or acquired falls within the category specified domestic transactions of Section 92BA then in such case it is mandatory to adopt market value 88 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. as per clause (iii) of the aforesaid section i.e. as per Section 92F of the Act. Since, it has already been held that the Grid rate represents market value for the purpose of Section 92F of the Act, it can be concluded that the same represents arm's length price for the purpose of Section 80A(6) of the Act. 30.11. The ld. D/R in his submissions relied strongly on the order of TPO and the method adopted by TPO for determining market rate of power. According to ld. D/R, TPO has adopted the rate of power at which Distribution companies purchase power from the Generating companies. We find that this aspect has also been dealt with by ld. CIT(Appeals) in his order wherein he has held that the sale rate of Generating Companies does not represent actual market value. The relevant extract of the same is reproduced below:- "8.18 The appellant in its submissions has also explained as to why the rates adopted by the TPO should not be considered. ........................ (3) Rate of sale of power by the generating companies-The rate at which Adani Power Rajasthan Ltd (APRL) and Raj West Power Limited (RWPL) supplies power to distribution companies is a regulated price which is determined by the State Electricity Regulatory Commission It is therefore not a market driven rate determined by forces of demand and supply and also does not denote rate available in the open market Power sold by generating company to a distribution company is a totally different business model as compared to the sale of power by the CPP, thus, it does not satisfy the comparability factors laid down in Rule 10B(2) and 10B(3) of the Income Tax Rules, 1962.” 30.12. The ld. A/R of the assessee also submitted that the rates at which power is purchased by distribution companies from generation companies are the rates charged by generation companies to middlemen (i.e. B2B business models) which 89 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. are governed by altogether different level of market and are therefore not comparable to the rates which are charged to ultimate consumer (B2C Business Models), Further, each of the entities involved in the power market (engaged in generation of power, transmission, distribution as well as trading of power) are regulated by separate regulatory provisions thus it is not appropriate to compare the rates at which the generating companies sell power to other licensees as these licensees are not the ultimate consumers as in the case of assessee where the CPPs transfer power directly to the ultimate industrial consumer i.e. the manufacturing units of assessee. 30.13. Further, the aspect as to why rate at which power is sold to 3rd parties including Power distribution companies should not be considered as internal CUP and hence considered for computing arm's length price under the Transfer Pricing regulations, needs to be dealt with. The ld. A/R submitted that sale to 3rd party by the power unit is not comparable with the transaction of captive consumption of power by the Cement manufacturing unit due to various factors. Power undertaking provides power on long term supply basis unlike power sold to 3 rd parties which are for a short term period. There is no long term commitment available to 3 rd parties from Power units unlike available to CMU. This assured long term supply of committed power by the Power unit to the Cement Unit cannot be compared with power sold to 3 rd parties where there are no such commitments. Secondly, Power sold to 3 rd parties represent distress sale of excess power generated and not utilised by the CMU. Since Power cannot be stored, it has to be compulsorily sold at whatever price is available and hence such sale price cannot represent market price. 90 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. Thirdly, rate at which power is sold to 3 rd parties will not be available to all the customers in the market since this sale rate does not cover various cost factors like transmission bottlenecks for scheduling of open access, transmission losses, and regulatory charges which are all on buyers account and not on the Power undertaking. Therefore, the sale price charged is subdued and does not represent the full landed cost of power to the ultimate consumer. 30.14. In light of above discussion we are of the view that the ld. CIT(A) has rightly held that sale rate of Generating Companies does not represent actual market value. 30.15. We, thus, respectfully, following the orders of the Hon’ble Jurisdictional Rajasthan High Court and the consistent view taken by the Coordinate Bench of the Tribunal, Jaipur, and the discussions made herein above, we find no infirmity in the order of the ld. CIT (A), accordingly the order of the ld. CIT (A) is upheld. The ground of the Revenue is dismissed. Ground No. 2 relates to allowing the appeal of the assessee by deleting the disallowance of Rs. 1,09,34,68,350/- on account of deduction u/s 80IA on account of Solid Waste. 31. The brief facts of the case are that the assessee is engaged in manufacturing of Pozzolana Portland Cement (PPC) and Ordinary Portland Cement (OPC). Apart from using gypsum and clinker as raw materials in the cement production, respondent also uses treated pond ash/fly ash (‘treated solid waste’) as a substitute of clinker in the production of cement. The said treated solid waste is provided by the solid waste management system being the infrastructure facility set up by the 91 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. respondent. This treated solid waste is used by cement manufacturing units as substitute of clinker in the production of cement. The assessee claimed deduction u/s 80-IA on its Solid Waste Management System (SWMS) of Rs. 1,46,48,22,897. In terms of Sec. 80-IA(8) r.w.s. 92F of the Act, the transfer price of treated solid waste has been determined by taking average landed cost of clinker saved by the Cement Manufacturing Unit (CMU) of the assessee. The aforesaid computation has been certified by a Chartered Accountant vide his Report in Form 10CCB filed along with the return of income. The TPO vide his order u/s 92CA(3) dated 25-10-2017 (Pg. No. 24-32 of the Order) rejected the benchmarking of the respondent and made an adjustment of Rs. 1,45,50,59,944/- on account of transfer of treated solid waste by applying Cost Plus Method (CPM) and applied margin @ 24.21% (on cost) earned by the respondent from sale of clinker which was subsequently reduced to Rs. 139,83,41,610- by AO vide order u/s 154 dated 31-05-2019. On appeal by the assessee, the ld. CIT(A) after upholding the transfer pricing methodology adopted by the respondent, adopted Profit Split Method (PSM) as adopted by department in earlier as well as in subsequent years. Based on FAR analysis, split of 79.73% has been arrived for Solid Waste Management Facility instead of 100% as claimed by the assessee. Accordingly, the ld. CIT (A) confirmed disallowance of Rs. 30,48,73,080/- made by the TPO and deleted the balance disallowance of Rs. 109,34,68,530/- vide his Order dated 20.01.2023. Now the Revenue is in appeal before us. 32. Before us, the ld. A/R of the assessee reiterated his submissions as made before the lower authorities, as under :- 92 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. “ Method adopted by respondent for computing revenue of SWMS has been accepted by the department in earlier years as well as in subsequent years. A.O. in immediately preceding year i.e. AY 2013-14 vide order dated 16-12-2014 (Page 67-74 of CLPB) has adopted Profit Split Method (PSM) in determining the transfer price and profitability of Solid waste management facility. Transfer price of treated solid waste has been determined by taking average landed cost of clinker that would have been incurred by the Cement Manufacturing Unit (CMU) of the assessee. A.O. was however of the view that the Solid Waste Management Facility (SWMF) alone cannot generate the entire profit since Cement Manufacturing Unit (CMU) also has a role in generation of profit. Accordingly, A.O. carried out detailed FAR analysis on the basis of which 79.73% of the profits were allocated to the SWMF and 20.27% of the profits were allocated to the CMU. Though the assessee is of the view that the entire profit is attributable to SWMF, but in order to avoid any litigation no further appeal was preferred against the said order in AY 2013- 14. The aforesaid methodology of computing transfer price and profitability of Solid Waste Management Facility has been accepted by TPO in assessment proceedings for all subsequent assessment years as well from AY 2015-16 to AY 2017-18. (Page no. 104-160 for AY 2015-16, 161-204 for AY 2016-17 & 205-239 for AY 2017-18 of CLPB). Ld. CIT(A) vide para 9.5, 9.10 to 9.12 of his Order dated 20-01-2023 [Refer Pg 46 to 48 of the Order] took note of the aforesaid facts and upheld the aforesaid methodology of transfer pricing as follows: “9.5 The AR filed orders of TPO passed for subsequent AYs i.e. AY 2015- 16, AY 2016-17 and AY 2017-18. It was pointed out by the AR that in all these years, the TPO has accepted the approach adopted by the appellant, though with certain modifications. It is only the current assessment year i.e. AY 2014-15, that the TPO has rejected the method adopted by appellant. It was therefore contended that since in earlier years 93 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. as well as in later years, TPO has not disputed the method, there was no reason for disputing the same in this year. ................. 9.10 It is very relevant to note fact that TPO has accepted the computation method adopted by appellant in earlier year as well as in later years. When year after year, department has not disputed the computation method adopted by appellant, rejecting the same in one particular year, without any change in the facts and law, is not justified. As, pond ash in its raw form cannot be used in the manufacture of cement and that it requires a series of processes to make it usable, it is not reasonable to treat transfer of treated waste in the form of pond ash and fly ash from SWMS to Cement Manufacturing Unit of the appellant at NIL value. 9.11 Coming to the next question of what should be the benchmarking of the treated solid waste transferred by SWMS. Since, treated solid waste is not readily available in the market, the appellant applying the functionality test has compared the product with the product being replaced i.e. clinker and adopted the rate based on the savings approach. TPO himself has agreed that the product of the appellant is comparable to that of clinker based on functionality test and accordingly has applied the margin of clinker. Since, in manufacture of cement, the solid waste is replacing clinker in equal quantity and because of its use, the appellant is saving equivalent quantity of clinker, benchmarking would be justified by adopting realisable value of clinker to determine the revenue of SWMS facility. 9.12 However, I do not agree completely with the benchmarking model of the appellant. Solid waste management undertaking cannot generate the entire profit (100%) by itself and certain portion of the profits needs to be attributed to the Cement Manufacturing Unit (CMU) based on functions, assets and risk analysis carried on by the two entities, i.e., SWMS & CMU. Thus, Profit Split Method seems to be the most appropriate method in the instant case and a profit share needs to be allocated to the CMU as well. Identical methodology has been applied by the TPO/AO in earlier year i.e., AY 2013 -14. For the year under consideration the appellant has claimed 100% profits of SWMS. However, TPO is of the view that entire profits cannot be attributable to SWMS and accordingly, attributed a part of the profits to SWMS and balance to CMU based on FAR analysis. Since in the preceding year, above split has been derived by department at 79.73%, there is no reason why the appellant should be granted 100% profits as attributable to SWMS in the 94 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. current year. The above order of A.O. on this issue in A.Y. 2013- 14 has attained finality since the appellant has not filed any appeal on this issue. This view gets support from the decision of Supreme Court in Radhasoami Satsang. vs. CIT [1992] 193 ITR 321 (SC) that the principle of consistency is applicable in tax matters.” Treated Solid waste used by the respondent is a 100% substitute of clinker and thus realisable market value of clinker may be used to determine the transfer price of treated solid waste. Solid Waste Management Facility of the respondent undertakes a series of processes to treat the solid waste acquired from nearby thermal plants to convert it into a suitable product and makes it fit for consumption by the Cement Manufacturing Unit in the manufacture of cement. Such processes carried out by the SWMS are unique and as per the information available in public domain, are not carried out by any other 3rd party in the market. Therefore, no transfer price is readily available in respect of such treated solid waste in the market. Further, the solid waste so treated is a 100% substitute of clinker which can be used in the manufacture of cement. In view of same, SWMS has adopted the transfer price based on cost saved by the CMU by replacing it with clinker. TPO modified the method adopted based on wrong and erroneous assumptions as could be noted from the following – (a) The data relied upon by the TPO is relating to untreated pond ash which is a waste product and the respondent is not using pond ash but using ‘treated pond ash’ which is completely different product. 95 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. (b) Pond ash and bottom ash supplied by NTPC is a waste material and cannot be used unless further processed. The Solid Waste Infrastructure Facility of respondent undertakes series of processes to convert it into a product which is a treated pond ash. Hence, the untreated pond ash supplied by NTPC cannot be compared with treated pond of the respondent; (c) No data is available in public domain w.r.t sale/purchase of treated pond ash between independent parties since there is no readily available market for treated pond ash; Even otherwise, the rate for pond ash if available in the public domain, would be with respect to untreated pond ash which is a waste material and cannot be used unless further processed; (d) There is no third party involved in the business of processing/treating such waste pond ash which could help to determine the market value of the processed pond ash. Ld. CIT(A) [Refer Para 9.9 at Pg 47 of the Order] has held that as solid waste in its raw form cannot be used in the manufacture of cement and that it requires a series of processes to make it usable, it is not reasonable to consider treated waste from Solid Waste Management Facility to Cement Manufacturing Unit of the assessee at NIL value. Relevant extract of the order is stated as hereunder: “9.9 Based on an inquiry from NTPC made u/s 133(6) of the Act, the TPO has given a finding that pond ash or fly ash does not have any cost and it is sold to the user free of cost. This reasoning of TPO is not justified because what TPO is referring to is a waste product which does not have any use and hence it is sold free of cost. In the present case, SWMS facility of the appellant is engaged in waste management wherein it is converting the waste material which is raw pond ash and fly ash into a usable product by treating the waste product and converting it into a product which has substantial realisable value. The very starting point of the TPO, that the appellant is using 96 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. pond ash and comparing the same with a free product is grossly erroneous and ignores the processes undertaken to make waste usable.” Cost Savings Approach is a recognized Method in Transfer Pricing & TPO has erred in stating that for determining the transfer price, functionally comparable products cannot be considered The concept of adoption of savings approach to determine revenue has been recognized in various international TP literatures and has also been given recognition by the Indian Government. The respondent relies upon Para 1.139 to 1.143 and 9.126 to 9.131 of the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (July 2017) (‘OECD Guidelines’) [Page no. 248-252 of CLPB] and Para B.1.10.14, B.1.10.15 and D.3.7.1 of United Nations Practical Manual on Transfer Pricing for Developing Countries, 2017 (‘UN Manual’) [Page no. of 240-244 of CLPB] wherein concept of location savings and its allocation among the MNE group has been recognised. Further, reliance is placed on Para 1.109 of the OECD Guidelines [Pg No. 247 of CLPB] wherein it has been stated that uncontrolled transactions involving different product but having similar functionality may be considered as a comparable. Hence, assessee adopting transfer price of treated solid waste on the basis of average landed cost of clinker is justified. Para 1.108 of the OECD Guidelines [Pg. No. 246-247 of CLPB] provides that product comparability is of utmost importance for application of CUP method which is a general guideline. However, Para 1.109 of the guidelines provides a specific carve 97 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. out from the aforesaid requirement and states that it may be acceptable to broaden the scope of the comparability analysis to include uncontrolled transactions involving products that are different, but where similar functions are undertaken. The correct approach would have been to read Para 1.108 (referred to by the TPO) along with Para 1.109 (referred to by the assessee) but TPO has completely ignored the said carve out and read Para 1.108 in isolation which itself is bad in law and erroneous. Therefore it is humbly submitted that the above guidelines do recognises the concept of location savings and its allocation among the group under the transfer pricing law. In the case of Sony Ericsson Mobile Communications India (P.) Ltd. – vs.- CIT [2015] 55 taxmann.com 240 (Delhi-HC), it has been held that: “60. The transfer pricing methods have seen a measure of standardization, universal recognition and acceptability. Indian transfer pricing regulations have adopted and benefited, from the international framework. The OECD Transfer Pricing guidelines for multinational enterprises and tax administration and United Nations' Practical Manual on Transfer Pricing do reflect the international understanding on several aspects relating to transfer pricing. We have taken note and liberally referred to the two guidelines as it is found to be conducive and helpful in deciding the issues. Their relevance has been examined in some detail below. 142. ..... The Act, i.e. the Income Tax Act, 1961 and the Rules are supreme, but the OECD Transfer Pricing Guidelines or the U.N. Transfer Pricing Manual can be supplement and constitute a valuable and convenient commentary on the subject. They are not binding but surely their rational and articulacy requires cogitation, if not acceptance, when warranted. 98 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. Further, in Aztec Software & Technology Services Ltd. – vs.- ACIT [(2007) 107 ITD 141 (BANG.) (SB- Tri)] it has been held that although India is not a Member of the Organization for Economic Cooperation & Development (OECD). However, the organization has been supporting efforts of tax administration in India to properly and effectively administer and implement Transfer Pricing Policy. A useful reference can always be made to OECD Guidelines, for the purposes of resolving dispute of transfer pricing in India, subject, however, to statutory regulations. The aforesaid contention of the assessee has been upheld by the Ld. CIT(A) vide para 9.6 to 9.8 of Order [Refer Pg 46 & 47 of the Order] as follows: “9.6 The appellant has computed the income of the Solid Waste Management System by following the cost saving approach wherein revenue has been recognised based on savings on account of using treated pond ash as a substitute of clinker for manufacture of cement. The concept of adoption of savings approach to determine revenue has been recognized in various international TP literatures. Further, India recognizes the concept of location savings which is evident from Chapter D.3 i.e. ‘Transfer Pricing Practices and Challenges in India’ of the UN Manual. Hence, savings approach adopted by the appellant cannot be out-rightly rejected. For the purpose of applying savings approach, comparison needs to be made with a product which can be used as a substitute of another product (clinker and treated pond ash in instant case). 9.7 From perusal of the assessment order, it can be seen that the TPO has nowhere doubted the functional comparability w.r.t. clinker and in-fact himself applied the margin earned on sale of clinker for determination of transfer price of SWMS. TPO’s rejection of CUP method on the contention that strict comparability is required for applying the said method also is not correct. OECD Guidelines at Para 1.109 clearly states that uncontrolled transactions involving different product but having similar 99 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. functionality may be considered as a comparable. Guidelines also states that it may be acceptable to broaden the scope of the comparability analysis to include uncontrolled transactions involving products that are different, but where similar functions are undertaken. TPO’s rejection of above guidelines in the order therefore does not seem to be fair. 9.8 The appellant also relied upon various judicial pronouncements wherein notional cost has been considered to be market value in terms of Section 80IA (8) of the Act. In CIT vs. Thiagarajar Mills Ltd. in Tax Case(Appeal) Nos.68 to 70 of 2010 dated 07-06-2010, it was held that captive consumption of power generated by the assessee from its own power plant would enable the assessee to derive profit and gains by working out the cost of such consumption of power in as much as the assessee is able to save to that extent which would certainly be covered by Sec. 80IA (1). SLP filed against the aforesaid decision has since been dismissed by Apex Court in CIT vs. Thiagarajar Mills Ltd. (CC 2717- 2719/2011) (SC) dated 21-02- 2011. Further, Hon. Bombay High Court in Hindustan Petroleum Corporation Ltd. vs. DCIT [(2010) 328 ITR 534 (Bom – HC)], has observed that the savings in consumption of Low Sulphur Heavy Stock (LSHS) as fuel due to the use of steam generated as a by-product in the generation of electricity is allowable for deduction u/s 80-IA. Thus, aforesaid judgments show that courts have also 99recognized the concept of savings approach based on which profitability of the undertaking was computed and accordingly the deduction u/s 80IA of the Act was claimed.” The assessee humbly prays before Your Honours to dismiss the aforesaid ground of departmental appeal.” 33. On the other hand, the ld. D/R supported the order of the Assessing Officer and submitted that the order of the ld. CIT (A) be quashed to the extent of deletion of addition. 100 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. 34. We have heard the rival submissions, perused the material on record and gone through the orders of the revenue authorities and the case laws cited before us. On perusal of the record, we noticed that similar claim of the assessee has been allowed by the AO for the preceding assessment year 2013-14 vide order dated 16.12.2014 passed under section 143(3) of the IT Act, 1961, and for the subsequent assessment years viz. 2015-16 to 2017-18, the TPO has accepted the method adopted by the assessee for computing transfer price. Thus we do not find any scope left for any dispute after TPO has himself accepted the computation method adopted by assessee in earlier year as well as in later years. When year after year, department has not disputed the computation method adopted by assessee, rejecting the same in one particular year, without any change in the facts and law, is not justified. This settled principle follows from the decision of Hon’ble Apex Court in the case of Radhasoami Satsang vs. CIT (1992) 193 ITR 032 (SC) wherein it has been held that :- “ 9. We are aware of the fact that, strictly speaking, res judicata does not apply to IT proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be charged in a subsequent year. One these reasonings, in the absence of any material change justifying the Revenue to take a different view of the matter - and, if there was no change, it was in support of the assessee – we do not think the question should have been reopened and contrary to what had been decided by the CIT in the earlier proceedings, a different and contradictory stand should have been take. We are, therefore, of the view that these appeals should be allowed and the question should be answered in the affirmative, namely, that the Tribunal was justified in 101 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. holding that the income derived by the Radhasoami Satsang was entitled to exemption under ss. 11 and 12 of the IT Act of 1961.” 34.1. We find that the ld. CIT (A) while dealing with the matter has considered the various aspects of the matter vigorously at great length and following the judicial precedents of Hon’ble Supreme Court and Hon’ble High Courts, partly allowed the claim of the assessee by observing in para 9.5 to 9.13 of his order as under : “9.5 The AR filed orders of TPO passed for subsequent AYs i.e. AY 2015- 16, AY 2016-17 and AY 2017-18. It was pointed out by the AR that in all these years, the TPO has accepted the approach adopted by the appellant, though with certain modifications. It is only the current assessment year i.e. AY 2014-15, that the TPO has rejected the method adopted by appellant. It was therefore contended that since in earlier years as well as in later years, TPO has not disputed the method, there was no reason for disputing the same in this year. 9.6 The appellant has computed the income of the Solid Waste Management System by following the cost saving approach wherein revenue has been recognised based on savings on account of using treated pond ash as a substitute of clinker for manufacture of cement. The concept of adoption of savings approach to determine revenue has been recognized in various international TP literatures. Further, India recognizes the concept of location savings which is evident from Chapter D.3 i.e. ‘Transfer Pricing Practices and Challenges in India’ of the UN Manual. Hence, savings approach adopted by the appellant cannot be out-rightly rejected. For the purpose of applying savings approach, comparison needs to be made with a product which can be used as a substitute of another product (clinker and treated pond ash in instant case). 9.7 From perusal of the assessment order, it can be seen that the TPO has nowhere doubted the functional comparability w.r.t. clinker and in-fact himself applied the margin earned on sale of clinker for determination of transfer price of SWMS. TPO’s rejection of CUP method on the contention that strict comparability is required for applying the said method also is not correct. OECD Guidelines at Para 1.109 clearly states that uncontrolled transactions involving different product but having similar functionality may be considered as a comparable. 102 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. Guidelines also states that it may be acceptable to broaden the scope of the comparability analysis to include uncontrolled transactions involving products that are different, but where similar functions are undertaken. TPO’s rejection of above guidelines in the order therefore does not seem to be fair. 9.8 The appellant also relied upon various judicial pronouncements wherein notional cost has been considered to be market value in terms of Section 80IA (8) of the Act. In CIT vs. Thiagarajar Mills Ltd. in Tax Case(Appeal) Nos.68 to 70 of 2010 dated 07-06-2010, it was held that captive consumption of power generated by the assessee from its own power plant would enable the assessee to derive profit and gains by working out the cost of such consumption of power in as much as the assessee is able to save to that extent which would certainly be covered by Sec. 80IA (1). SLP filed against the aforesaid decision has since been dismissed by Apex Court in CIT vs. Thiagarajar Mills Ltd. (CC 2717-2719/2011) (SC) dated 21-02- 2011. Further, Hon. Bombay High Court in Hindustan Petroleum Corporation Ltd. vs. DCIT [(2010) 328 ITR 534 (Bom – HC)], has observed that the savings in consumption of Low Sulphur Heavy Stock (LSHS) as fuel due to the use of steam generated as a by-product in the generation of electricity is allowable for deduction u/s 80-IA. Thus, aforesaid judgments show that courts have also 102recognized the concept of savings approach based on which profitability of the undertaking was computed and accordingly the deduction u/s 80IA of the Act was claimed.” “9.9 Based on an inquiry from NTPC made u/s 133(6) of the Act, the TPO has given a finding that pond ash or fly ash does not have any cost and it is sold to the user free of cost. This reasoning of TPO is not justified because what TPO is referring to is a waste product which does not have any use and hence it is sold free of cost. In the present case, SWMS facility of the appellant is engaged in waste management wherein it is converting the waste material which is raw pond ash and fly ash into a usable product by treating the waste product and converting it into a product which has substantial realisable value. The very starting point of the TPO, that the appellant is using pond ash and comparing the same with a free product is grossly erroneous and ignores the processes undertaken to make waste usable.” 9.10 It is very relevant to note fact that TPO has accepted the computation method adopted by appellant in earlier year as well as in later years. When year after year, department has not disputed the computation method adopted by appellant, 103 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. rejecting the same in one particular year, without any change in the facts and law, is not justified. As, pond ash in its raw form cannot be used in the manufacture of cement and that it requires a series of processes to make it usable, it is not reasonable to treat transfer of treated waste in the form of pond ash and fly ash from SWMS to Cement Manufacturing Unit of the appellant at NIL value. 9.11 Coming to the next question of what should be the benchmarking of the treated solid waste transferred by SWMS. Since, treated solid waste is not readily available in the market, the appellant applying the functionality test has compared the product with the product being replaced i.e. clinker and adopted the rate based on the savings approach. TPO himself has agreed that the product of the appellant is comparable to that of clinker based on functionality test and accordingly has applied the margin of clinker. Since, in manufacture of cement, the solid waste is replacing clinker in equal quantity and because of its use, the appellant is saving equivalent quantity of clinker, benchmarking would be justified by adopting realisable value of clinker to determine the revenue of SWMS facility. 9.12 However, I do not agree completely with the benchmarking model of the appellant. Solid waste management undertaking cannot generate the entire profit (100%) by itself and certain portion of the profits needs to be attributed to the Cement Manufacturing Unit (CMU) based on functions, assets and risk analysis carried on by the two entities, i.e., SWMS & CMU. Thus, Profit Split Method seems to be the most appropriate method in the instant case and a profit share needs to be allocated to the CMU as well. Identical methodology has been applied by the TPO/AO in earlier year i.e., AY 2013 -14. For the year under consideration the appellant has claimed 100% profits of SWMS. However, TPO is of the view that entire profits cannot be attributable to SWMS and accordingly, attributed a part of the profits to SWMS and balance to CMU based on FAR analysis. Since in the preceding year, above split has been derived by department at 79.73%, there is no reason why the appellant should be granted 100% profits as attributable to SWMS in the current year. The above order of A.O. on this issue in A.Y. 2013-14 has attained finality since the appellant has not filed any appeal on this issue. This view gets support from the decision of Supreme Court in Radhasoami Satsang. vs. CIT [1992] 193 ITR 321 (SC) that the principle of consistency is applicable in tax matters.” 104 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. 9.13. In view of the above, applying the split of 79.73% in the current year, profits attributable to SWMS comes to Rs. 1,19,91,87,501/- as against 1,50,40,60,581/- and eligible deduction u/s 80IA comes to Rs. 1,15,99,49,817/- as against Rs. 1,46,48,22,897/- as claimed by the appellant in its return of income. The AO is therefore directed prima facie to allow deduction u/s 80IA on account of Solid Waste Management of Rs. 1,15,99,49,817/- and disallowance of Rs. 30,48,73,080/- made by the AO is confirmed and balance disallowance is deleted. The AO is directed to re-check this working carefully while giving appeal effect. These grounds are therefore partly allowed.” Therefore, in the facts and circumstances of the case, following the judgments of Hon’ble Supreme Court and Hon’ble High Courts and also considering the detailed order of the ld. CIT (A), we are of the view that the ld. CIT (A) has passed a reasoned order and no interference is required. Accordingly the order of the ld. CIT (A) is upheld. This ground of the Revenue is dismissed. Ground No. 3 relates to allowing the appeal of the assessee by deleting the disallowance of Rs. 14,68,08,695/- on account of deduction u/s 80IA on account of Water Treatment System. 35. The brief facts of the case are that the assessee has developed and is operating and maintaining a separate Water Treatment System (‘WTS’) at Beawar and Ras for processing of raw water into purified drinking water and providing the same for captive consumption by other units of the assessee. The said water treatment system is ‘Infrastructure Facility’ as defined in Explanation to section 80- IA(4)(i) and is eligible for tax holiday u/s 80-IA of the Act. For determining the profitability of the said Infrastructure Facility, the assessee has computed transfer price of water by applying the provisions of Sec. 80-IA(8) r.w.s 92F of the Act i.e. at 105 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. Arm’s Length price of such water. Realisable market value of water for captive consumption has been adopted at Rs 3/ltr by applying Any Other Method (‘AOM’) based on quotation received from Bisleri International Pvt. Ltd. (BIPL) of Rs. 3.50/ltr, after making necessary adjustment. Accordingly, deduction u/s 80-IA was claimed by the assessee on its Water Treatment system (‘WTS’) amounting to Rs. 16,05,24,197/-. Assessee has also submitted report in Form 10CCB along with the return of income. The TPO vide his order u/s 92CA (3) dated 25-10-2017 rejected the benchmarking of the respondent and made an adjustment of Rs. 14,68,08,695/- by adopting Cost Plus Method and applying a gross profit margin of 41.12% earned by comparable companies. On appeal before the ld. CIT (A), the ld. CIT(A) after making detailed analysis on the aforesaid issue deleted the disallowance of Rs. 14,68,08,695/- as proposed by the TPO and allowed the claim of the assessee as per the transfer price adopted at Rs 3/ltr in respect to the treated water. [Refer Order of CIT(A) at Para No. 10.4 to 10.12 of Pg 56-59]. Now the revenue is in appeal before us. 36. Before us, the ld. A/R of the assessee reiterated his submissions as made before the revenue authorities, as under :- “Method adopted by respondent has been accepted by the department in earlier years: The aforesaid methodology of computing revenue as adopted by the appellant has been accepted by the AO from AY 2011-12 to AY 2013-14 wherein the claim was allowed as follows: • AY 2011-12: Against the transfer price of Rs 3/Ltr (based on quotation from BIPL for bulk supply of drinking water) as 106 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. adopted by the assessee, AO has allowed a rate of Rs 2.50/ltr. [Page no. 271-272 of CLPB] • AY 2012-13: Against the transfer price of Rs 2.50/Ltr (based on quotation from BIPL for bulk supply of drinking water) as adopted by the assessee, no adjustment was proposed by AO in transfer price of water. • AY 2013-14: Against the transfer price of Rs 3.00/Ltr (based on quotation from BIPL for bulk supply of drinking water) as adopted by the assessee, AO has allowed a rate of Rs 2.75/ltr. [Page no. 63-67 of CLPB] Ld. CIT(A) [Refer Para 10.12 of Pg 58 of the Order] held that benchmarking analysis adopted by the assessee based on quotations received from Bisleri India Pvt Ltd. after making necessary adjustments on account of department’s stand in earlier years is the most appropriate method to determine arm’s length price to compute transfer price of treated water. Although the quotations received by the assessee is for Rs. 3.50/Lt, the assessee has itself made an adjustment of 15% (Rs. 0.50/-) in line with the stand taken by the A.O. in earlier years. Following the principle of consistency, Ld. CIT(A) allowed the claim of WTS by adopting a transfer price of Rs 3/ltr in respect to treated water. Relevant extract of the order is stated as under: - “10.12 In view of the above discussion, I am of the considered view that the benchmarking analysis adopted by the appellant based on quotations received from Bisleri India Pvt Ltd. after making necessary adjustments on account of department’s stand in earlier years is the most appropriate method to determine arm’s length price to compute transfer price. Although the quotations received by the appellant is for Rs. 3.50/Lt, the appellant has claimed to have made an adjustment of 15% (Rs. 0.50 p) in line with the stand taken by the TPO in 107 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. earlier years. In AY 2013-14, the quotation from Bisleri was Rs 3/- per Lt and TPO considered ALP as Rs 2.75/ Lt. Accordingly, ALP in this year is reasonably considered as Rs 3/ Lt. The AO is directed to verify this fact and if the appellant has made adjustment of 15% (Rs. 0.50 p) and taken ALP as Rs 3/- per Lt, no further adjustment would be warranted in respect of deduction u/s 80IA on Water Treatment System. If the appellant has not made the adjustment, the AO is directed to restrict the deduction u/s 80IA on Water Treatment System considering the ALP as Rs 3/ Lt. These grounds are therefore, partly allowed.” Benchmarking based on quotation is a recognized method under Rule 10AB of the Income Tax Rules, 1962. Benchmarking through quote is an acceptable method under the Indian Transfer Pricing Law. Earlier, quotation was not specifically covered in any of the methods as stated in Sec. 92C of the Act which was brought specifically in the statute vide Rule 10AB w.r.e.f 01-04- 2012 to clarify that quotation is also a recognized method for justifying the ALP of a transaction. Relevant extract of the Rule 10AB of the Income Tax Rules, 1962 (‘the Rules’) is reproduced here-in below: “For the purposes of clause (f) of sub-section (1) of section 92C, the other method for determination of the arm's length price in relation to an international transaction or a specified domestic transaction shall be any method which takes into account the price which has been charged or paid, or would have been charged or paid, for the same or similar uncontrolled transaction, with or between non associated enterprises, under similar circumstances, considering all the relevant facts.” (Emphasis added) Hon’ble Delhi Tribunal in Toll Global Forwarding India Pvt Ltd. - vs.- DCIT [(2015) 37 ITR 391 (Del - Trib.)] [Pg No. 275-284 of CLPB] has held that bonafide quotations are duly covered under the purview of the expression ‘price which....would have been charged or 108 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. paid’ used in Rule 10AB of the Rules. [Since upheld by the Hon’ble Delhi High Court in Pr. CIT -vs.- Toll Global Forwarding India Pvt Ltd. [(2016) 381 ITR 38 (Del - HC)] [Pg No. 285- 287 of CLPB]. Similar view also taken in ACIT -vs.- Adani Wilmar Ltd. [(2014) 64 SOT 0122 (Ahd - Trib.)] as affirmed by Hon’ble Gujarat High Court in CIT - vs.- Adani Wilmar Ltd. [(2014) 363 ITR 0338 (Guj - HC)]. Reliance in this regard may also be placed on the decision of Hon’ble Mumbai Tribunal in Gulf Energy Maritime Services Pvt. Ltd. –vs.- ITO [(2016) 136 DTR 0130 (Mum – Trib.) Ld. CIT(A) in its order has upheld the methodology adopted by the assessee for computation of transfer price of water based on quotation received from BIPL. Ld. CIT(A) at Para 10.6 & 10.7 held the following [Pg no. 57 of the Order] “10.6 The TPO has rejected the benchmarking analysis of appellant on the ground that bulk purchase cannot be compared with the retail purchase and quotations cannot be considered as basis for determining the price of articles produced for captive consumption. However, the appellant has shown relying upon Hon’ble Delhi High Court in PCIT vs. Toll Global Forwarding India Pvt Ltd. [(2016) 381 ITR 38 and Gujarat High Court in CIT vs. Adani Wilmar Ltd. (2014) 363 ITR 0338 that benchmarking on the basis of quotations received from third parties is a recognised method under Rule 10AB of the Income Tax Rules, 1962. 10.7 It is observed that TPO has not questioned the genuineness of the quotation but has merely ignored the quotation in view of his opinion that bulk purchase cannot be equated with the retail purchases. Thus, the TPO has not doubted the genuineness of the quotation. As could be noted from the said quotations, purchase requirement is of 140 KL of 109 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. water per day which by no standard can be considered a retail quote but has to be taken as a bulk purchase quote only.” Profit margin of the appellant is not relevant when the transaction is at arm’s length TPO made adjustment on the contention that assessee is earning exorbitant profit for WTS by applying the rates quoted by BIPL. The assessee would humbly like to submit that Sec. 92(2) of the Act requires an assessee to determine income having regard to the ALP. Once ALP has been determined and is acceptable in terms of Rule 10B of the Income Tax Rules, the profit arrived at is just consequential. In MSS India (P.) Ltd. vs. Asst. CIT (2009) 32 SOT 132 (Pune- Trib.) it has been held that the transfer pricing provisions do require the transactions to be ALP but there is no such requirement that the AE must enter into transactions in such a manner as to ensure that the AEs are allowed to make a reasonable profit margin. Ld. CIT(A) in its order dated 20-01-2023 upheld the aforesaid view of the assessee at Para 10.9 of his order as follows: “10.9 The TPO has also observed that the appellant has earned abnormal profit margin by applying the rates on the basis of quotations received from Bisleri. This observation is not relevant since what we are concerned is determination of arm’s length price. Profit margin is the consequence of such arm’s length price and cannot be a determining factor if the arm’s length is correct.” Cost Plus Method [CPM] mandates application of Gross Margins of the comparable transactions, reliable data of which was not available in public domain TPO in the instant case has applied cost plus method in order to determine the ALP of transfer of water. For the purpose of determining 110 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. the comparable margin, the TPO has used the Prowess software. However, details of gross profit margin of the comparable companies is not directly available either from Prowess or from Annual Reports of the company. In the instant case, CPM cannot be applied in view of the following: - Determination of gross profit mark-up of the comparable companies is a very difficult and subjective exercise since the data with respect to gross margins are not disclosed by Indian Companies in their Annual Reports; - There is inherent uncertainty about the accounting conventions used by comparable companies for classifying cost items between direct/indirect cost of services rendered and operating expenses under Indian Generally Accepted Accounting Principles, such that gross profit margins can be reliably computed. - It is not possible to make adjustments on account of different accounting practices. Hence, TPO was not justified in considering the GP margin of the comparable companies and hence the application of CPM is incorrect. Companies selected by the TPO are not functionally Comparable to the assessee TPO rejected the benchmarking analysis carried out by the assessee and substituted the same with Cost Plus Method [CPM] based on profit margins of various package drinking water companies such as Bisleri International Pvt. Ltd, Global Acqua Pvt Ltd., Parle Agro Pvt Ltd and Orient Beverages Ltd. 111 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. The companies selected by the TPO are not comparable to the respondent due the following reasons: (i) Turnover of the companies selected by the TPO is too high as compared to Water Treatment Plant of the respondent. (ii) The companies selected by the TPO are engaged in multiple business segments and manufacturing of multiple products whereas the respondent’s Water Treatment Plant includes only processing of raw water into purified water. The companies selected by the TPO are engaged in multiple business segments and manufacturing of multiple products whereas the respondent’s Water Treatment Plant includes only processing of raw water into purified water. The said contention of the assessee has been confirmed by the Ld. CIT(A) vide Para 10.10 of order dated 20- 01-2023 [Refer Page 58 of the Order] as follows: “10.10 Another reasoning given by TPO in rejecting the bench marking analysis of the appellant is that the packaged drinking water companies face various risks which the appellant does not face. After making this observation, the TPO himself adopted Cost Plus Method based on profit margins of various package drinking water companies such as Bisleri International Pvt. Ltd, Global Acqua Pvt Ltd., Parle Agro Pvt Ltd and Orient Beverages Ltd. The appellant has shown that these companies are engaged in multiple business segments; their turnover are also too high and not comparable with the facility set up by appellant; various risks faced and functions performed by these companies may not apply to appellant’s undertaking which is using it for captive consumption. Further, Cost Plus Method mandates application of Gross Margin of comparable transactions whose reliable data are not available in public domain. For these reasons, I am of the view that benchmarking adopted by appellant cannot be brushed aside and thus CPM cannot be applied in the present case.” 112 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. The respondent humbly prays before Your Honours to dismiss the aforesaid ground of departmental appeal.” 37. On the other hand, the ld. D/R supported the order of the Assessing Officer and submitted that the order of the ld. CIT (A) be quashed to the extent of deletion of addition. 38. We have heard the rival submissions, perused the material on record and gone through the orders of the revenue authorities and the case laws cited before us. On perusal of the record, we noticed that similar claim of the assessee has been allowed by the AO for the preceding assessment years 2011-12 and 13-14 vide order dated 30.04.2012 and 16.12.2014 respectively. The AO adopted the rate of Rs. 2.50/ltr and Rs. 2.75/ltr for the assessment years 2011-12 and 2013-14 respectively determining the Fair Market Value of Water consumed captively, allowed the claim of the assessee. The method adopted by the appellant for determination of realizable market value of water was consistently accepted by the departmental authorities from assessment years 2011-12 to 2013-14. In this regard, reference may be made to the decision of ITAT Kolkata in the case of A T & S India (P) Ltd vs. DCIT (2018) 94 taxmann.com 16 (Kol.Trib.) wherein it was held that when the department has been consistently accepting the assessee’s method of benchmarking for 3 consecutive previous years, the revenue authorities are bound to have consistency in its views. However, for the assessment year under consideration, we find that the AO determined the ALP based on a fresh analysis even when there was no change in 113 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. facts for AY 2014-15 as compared to earlier years. In support of its case, the ld. A/R placed reliance on the following judicial pronouncements :- -Radhasoami Satsang vs. CIT, 193 ITR 321 (SC) -CIT vs. Neo Poly Pack (P) Ltd, 112 Taxman 363 (Del.) -PCIT vs. Quest Investment Advisors Pvt. Ltd. – ITA No. 280 of 2016 dated 28.06.2018 (Bom.) -Racold Thermo Ltd vs. DCIT, 63 taxmann.com 215 (Pune-Trib.) -Vishay Components India P Ltd vs. Addl.CIT, 88 taxmann.com 427 (Pune-Trib.) The ld. CIT (Appeals) has detailed his order by following the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations and the judicial precedents of Hon’ble Supreme Court and Hon’ble High Courts and the Tribunals while allowing the claim of the assessee, in para 10.4 to 10.12 of his order, as under :- 10.4 The appellant contends that the TPO has erred in replacing the benchmarking analysis adopted by the appellant with Cost Plus Method. Appellant has done the benchmarking analysis on the basis of quotations received from Bisleri India Private Limited after making certain necessary adjustments on the basis of departmental stand taken in earlier years and the same method has been followed by the appellant in the previous years also which has been duly allowed in assessment by the department. 10.5 As discussed earlier, as per Section 92C(3) of the Act the AO may proceed to determine the ALP in relation to an international transaction or specified domestic transaction on the basis of material or information or document available with him, if any one of the four conditions are satisfied: 114 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. a) The price charged or paid in an international transaction/SDT has not been determined in accordance with Sections 92C(1) and 92C(2) of the Act: b) Proper documentation has not been maintained in terms of Section 92D(1) r.w.Rule 10D of the Income Tax Rules, 1962; c) The information or data used in computation of ALP is not reliable or correct; d) Failure to furnish any information or document, as required by the AO/TPO during the course of assessment proceedings. 10.5.1 It is observed that the TPO has not substantiated that any of the above four conditions was applicable in this case. Therefore, I am of the view that the TPO was not justified in disregarding the TP Study carried out by the appellant. 10.6 The TPO has rejected the benchmarking analysis of appellant on the ground that bulk purchase cannot be compared with the retail purchase and quotations cannot be considered as basis for determining the price of articles produced for captive consumption. However, the appellant has shown relying upon Hon'ble Delhi High Court in PCIT vs. Toll Global Forwarding India Pvt Ltd. [(2016) 381 ITR 38 and Gujarat High Court in CIT vs. Adani Wilmar Ltd. (2014) 363 ITR 0338 that benchmarking on the basis of quotations received from third parties is a recognised method under Rule 10AB of the Income tax Rules, 1962. 10.7 It is observed that TPO has not questioned the genuineness of the quotation but has merely ignored the quotation in view of his opinion that bulk purchase cannot be equated with the retail purchases. Thus, the TPO has not doubted the genuineness of the quotation. As could be noted from the said quotations, purchase requirement is of 140 KL of water per day which by no standard can be 115 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. considered a retail quote but has to be taken as a bulk purchase quote only. 10.8 The TPO has noted that the appellant has applied CUP method in disguise of Any Other Method' and the CUP method requires exact similarity of the product. However, this view is not justified in accordance with OECD Guidelines. The OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (July 2017) (OECD Guidelines') states as under: “1.109 Depending on the facts and circumstances of the case, it may be acceptable to broaden the scope of the comparability analysis to include uncontrolled transactions involving products that are different, but where similar functions are undertaken. However, the acceptance of such an approach depends on the effects that the product differences have on the reliability of the comparison and on whether or not more reliable data are available." Thus, OECD is of the view that different products may be selected as comparable if the functions performed by both the products are identical. Since Filtered water and packaged water are both used as water for drinking purpose, the TPO's opinion is not found to be justified. 10.9 The TPO has also observed that the appellant has earned abnormal profit margin by applying the rates on the basis of quotations received from Bisleri. This observation is not relevant since what we are concerned is determination of arm's length price. Profit margin is the consequence of such arm's length price and cannot be a determining factor if the arm's length is correct. 10.10 Another reasoning given by TPO in rejecting the bench marking analysis of the appellant is that the packaged drinking water companies face various risks which the appellant does not face. After making this observation, the TPO himself adopted Cost Plus Method 116 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. based on profit margins of various package drinking water companies such as Bisleri International Pvt. Ltd, Global Acqua Pvt Ltd., Parle Agro Pvt Ltd and Orient Beverages Ltd. The appellant has shown that these companies are engaged in multiple business segments; their turnover are also too high and not comparable with the facility set up by appellant; various risks faced and functions performed by these companies may not apply to appellant's undertaking which is using it for captive consumption. Further, Cost Plus Method mandates application of Gross Margin of comparable transactions whose reliable data are not available in public domain. For these reasons, I am of the view that benchmarking adopted by appellant cannot be brushed aside and thus CPM cannot be applied in the present case. 10.11 Most important observation in this issue is that AO has accepted the method adopted by appellant in earlier assessment years from AY 2011-12 to AY 2013-14. When year after year, department has not disputed the method adopted by appellant, rejecting the same in one particular year is not justified. As there is no change in the facts and circumstances of the case in the current year, in view principle of consistency laid down by Apex Court in Radhasoami Satsang vs. CIT [[1992] 193 ITR 321 (SC), the TPO's action in rejecting the benchmarking model of the appellant and proceeding to do a fresh analysis in current year is not found to be sustainable. 10.12 In view of the above discussion, I am of the considered view that the benchmarking analysis adopted by the appellant based on quotations received from Bisleri India Pvt Ltd. after making necessary adjustments on account of department's stand in earlier years is the most appropriate method to determine arm's length price to compute transfer price. Although the quotations received by the appellant is for Rs. 3.50/Lt, the appellant has claimed to have made an adjustment of 15% (Rs. 0.50 p) in line with the stand taken by the TPO in earlier 117 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. years. In AY 2013-14, the quotation from Bisleri was Rs 3/- per Lt and TPO considered ALP as Rs 2.75/ Lt. Accordingly. ALP in this year is reasonably considered as Rs 3/ Lt. The AO is directed to verify this fact and if the appellant has made adjustment of 15% (Rs. 0.50 p) and taken ALP as Rs 3/- per Lt, no further adjustment would be warranted in respect of deduction u/s 80IA on Water Treatment System. If the appellant has not made the adjustment, the AO is directed to restrict the deduction u/s 80IA on Water Treatment System considering the ALP as Rs. 3/Lt. These grounds are therefore, partly allowed.” We find that the Coordinate Bench of the Tribunal Delhi in case of Toll Global Forwarding India Pvt. Ltd. vs. DCIT, 37 ITR_Trib 391 (Delhi) while dealing with the matter, has held as under :- “ 25. In effect, thus, it would appear that as long as one can come to the conclusion, under any method of determining the arm’s length price, that price paid for the controlled transactions is the same as it would have been, under similar circumstances and considering all the relevant factors, for an uncontrolled transaction, the price so paid can be said to be arm’s length price. As we have noted earlier in this order, the price need not be in terms of an amount but can also be in terms of a formulae, including interest rate, for computing the amount. In any case, when the expression “price which ......would have been charged or paid” is used in rule 10BA, dealing with this method, in this method the place of “price charged or paid”, as is used in rule 10B(1)(a), dealing with CUP method, such an expression not only covers the actual price but also the price as would have been, hypothetically speaking; paid if the same transaction was entered into with an independent enterprise. This hypothetical price may not only cover bona fide quotations, but it also takes it beyond any doubt or controversy that where pricing mechanism for associated enterprise and independent enterprise is the same, the price charged to the associated enterprises will be treated as an arm’s length price. In this view of the matter, the business model said to have been adopted by the assessee, in principle, meets the test of arm’s length price determination under rule 10BA as well.” 118 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. The above decision of the Delhi Tribunal has since been upheld by the Hon’ble Delhi High Court in PCIT vs. Toll Global Forwarding India Pvt. Ltd. 381 ITR 38 (Del-HC)]. Similar view has also taken in ACIT vs. Adani Wilmar Ltd., 64 SOT 0122 (Ahd – Trib.) as affirmed by Hon’ble Gujarat High Court in CIT vs. Adani Wilmar Ltd., 363 ITR 0338 (Guj-HC). 39. We, therefore, considering the detailed findings of the ld. CIT (A) along with the judicial precedents of the Hon’ble Supreme Court, Hon’ble High Courts and the various benches of the Tribunal, find no infirmity in the order of the ld. CIT (A), accordingly the order of the ld. CIT (A) is upheld. The ground of the Revenue is dismissed. Ground No. 4 relates to deleting the disallowance of Rs. 26,69,07,312/- as against total disallowance made by the AO at Rs. 34,32,56,010/- on account of deduction u/s 80IA of Rail system due to adjustment of Transfer Pricing. 40. The brief facts of the case are that the assessee was operating and maintaining a separate Rail Infrastructure Facility System (RIFS) at Beawar, Rajasthan for procurement of principal raw materials i.e., clinker, coal and pet coke and for the purpose of cement dispatches to its customers. The said infrastructure facility is eligible for deduction u/s 80-IA of the Act. In the Return of Income, the assessee had claimed deduction u/s 80-IA of Rs. 34,32,56,010/- in respect of the said infrastructure facility. Assessee has also submitted report in Form 10CCB along with the Return of Income. 119 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. For determining the above profitability, the assessee has computed transfer price of services provided by RIFS to eligible/non-eligible units by applying the provisions of Sec. 80-IA(8) r.w.s 92F of the Act i.e. at arm’s length price of such services. Revenue, for the purpose of services provided by RIFS, was computed by considering savings on account of gross road freight & handling charges payable for transportation of goods by road to the rail head, Bangur Gram (i.e. nearest railway station) and rail freight from rail head to the final destination, determined as per the tariff notified by the Indian Railways. Further, the assessee has also applied PSM on the revenue so derived and allocated 15.17% of the profits to its Cement Manufacturing Unit (‘CMU’) based on an effective Functional, Assets and Risk (‘FAR’) analysis. TPO in the order u/s 92CA(3) dated 25-10-2017 rejected the model adopted by the assessee and made an adjustment of Rs. 36,32,56,010/- which was subsequently reduced to Rs. 34,32,56,010/- by AO vide order u/s 154 dated 31-05- 2019 stating that no profit accrues to RIFS of the assessee since the railways have charged full freight and not provided any concession on account of infrastructure provided by the respondent. It was further stated that notional savings approach for computation of revenue derived by RIFS is not acceptable under the transfer pricing law. Aggrieved by the order of AO, assessee preferred appeal before ld. CIT(A), who after making detailed analysis on the aforesaid issue confirmed the disallowance of Rs. 7,63,48,698/- and deleted balance disallowance of Rs. 26,69,07,312/- vide order dated 20-01-2023. Now the revenue is in appeal before us. 120 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. 41. Before us, the ld. A/R of the assessee reiterated his submissions as made before the ld. CIT (A), as under :- “Method adopted by the respondent has been accepted by the department in earlier years The method applied by the assessee for computing revenue for RIFS has been accepted by the A.O. in AY 2012-13 and AY 2013-14 wherein the claim was allowed as follows : • AY 2012-13: The savings approach adopted by the assessee while computing revenue of the aforesaid infrastructure facility was accepted by the A.O. [Page no. 297-299 of CLPB] • AY 2013-14: Though the savings approach was accepted, but A.O. was of the view that the assessee had given lower weightage to the cement units for functions performed, assets employed and risks undertaken by RIFS as RIFS alone cannot make such huge profit without relying on the cement unit for its proper working. Hence, based on the effective FAR analysis, 65.52% of the profits was allocated to RIFS and 34.48% of the profits were allocated to the CMU. [Page no. 75-97 of CLPB] In order to avoid any litigation no further appeal was preferred against the said order of A.O. for AY 2013-14. Ld. CIT(A) vide Para 11.11 of the order dated 20-01-2023 [Refer Pg 66 of the Order] held that RIFS cannot generate the entire profit (100%) by itself and certain portion of the profits needs to be attributed to the Cement Manufacturing Unit (CMU) based on functions, assets and risk analysis carried on by the two entities, i.e., RIFS & CMU. Ld. CIT(A) observed that in earlier year, Department has quantified a split of 65.52% to the RIFS and balance to the CMU based on FAR analysis which has been accepted by the assessee by not preferring any further appeal on the said issue. Following the principle of consistency, Ld. CIT(A) allowed claim of RIFS by attributing a split of 65.52% 121 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. to the RIFS as against a split of 84.83% attributed by the assessee based on FAR analysis. Cost Savings approach as adopted by the assessee is a recognised concept in various international literatures The concept of adoption of savings approach to determine revenue has been recognized in various international TP literatures and has also been given recognition by the Indian Government. Reliance is placed on Para 1.139 to 1.143 and 9.126 to 9.131 of the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (July 2017) (‘OECD Guidelines’) [Page no. 311-317 of CLPB] and Para B.1.10.14, B.1.10.15 and D.3.7.1 of United Nations Practical Manual on Transfer Pricing for Developing Countries, 2017 (‘UN Manual’) where concept of location savings and its allocation among the MNE group has been recognised [Page no. 240-244 of CLPB]. Therefore it is humbly submitted that the above guidelines do recognises the concept of location savings and its allocation among the group under the transfer pricing law. In the case of Sony Ericsson Mobile Communications India (P.) Ltd. –vs.- CIT [2015] 55 taxmann.com 240 (Delhi-HC), it has been held that: “60. The transfer pricing methods have seen a measure of standardization, universal recognition and acceptability. Indian transfer pricing regulations have adopted and benefited, from the international framework. The OECD Transfer Pricing guidelines for multinational enterprises and tax administration and United Nations' Practical Manual on Transfer Pricing do reflect the international understanding on several aspects relating to transfer pricing. We have taken note and liberally referred to the two guidelines as it is found to be conducive and helpful in deciding the issues. Their relevance has been examined in some detail below. 142. ..... The Act, i.e. the Income Tax Act, 1961 and the Rules are supreme, but the OECD Transfer Pricing Guidelines or the U.N. Transfer Pricing Manual can be supplement and constitute a valuable and convenient commentary on the subject. They are 122 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. not binding but surely their rational and articulacy requires cogitation, if not acceptance, when warranted. Further, in Aztec Software & Technology Services Ltd. – vs.- ACIT [(2007) 107 ITD 141 (BANG.) (SB- Tri)] it has been held that although India is not a Member of the Organization for Economic Cooperation & Development (OECD). However, the organization has been supporting efforts of tax administration in India to properly and effectively administer and implement Transfer Pricing Policy. A useful reference can always be made to OECD Guidelines, for the purposes of resolving dispute of transfer pricing in India, subject, however, to statutory regulations. Indian Railways has a monopoly in operation of Railways in India and accordingly determines the tariff with respect to the same. Indian Railways would never set up a Railway Infrastructure Facility System for respondent’s captive use. Also, there is no other independent party which would install a Railway Infrastructure Facility System similar to that set up by the respondent nearby to its plant locations for captive handling of inward and outward materials. Further, the railway freight tariff is the charge for normal movement of goods without having created a specific infrastructure facility for a customer. If the Railway Authorities provides any specific facility to its customers, it would not charge normal fares but shall also charge some additional freight which is not covered in the tariff. Hence, in the absence of Comparable Uncontrolled Price (CUP) in the instant case, the respondent has identified revenue of the RIFS based on the value addition created by RIFS in the business of the respondent i.e. savings on account of road transportation and handling charges which would have been otherwise incurred by the CMU. Ld. CIT (A) vide Para 11.7 & 11.8 of the order dated 20-01-2023 [Refer Pg 64 & 65 of the Order] confirmed the above contention of the assessee as follows: 123 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. “11.7 The basic issue that needs consideration is the adoption of cost savings approach to determine the arm’s length price under transfer pricing regulations. As noted in earlier paragraphs, in view of OECD Guidelines and Practice Manual, the concept of cost savings and its allocation among group entities is a recognized and well accepted concept. The appellant has also applied split on the revenue derived by savings approach and allocated 15.17% of the profits to the cement manufacturing unit based on the Function, Assets and Risk analysis. Therefore, the inference drawn by TPO that such savings approach is not recognised under transfer pricing laws is not correct. It has been shown that before the railway sidings were set up, the appellant was using road for transportation of coal, clinker & other materials. The cost of road transportation being quite high, the appellant developed and installed a captive RIFS for ease of transport and the main objective of saving cost Thus, by installation of RIFS has resulted in substantial savings on account of road transportation charges which would have been otherwise incurred. On this savings, the appellant is computing deduction u/s 80-IA of the Act. 11.8 It is important to note that in absence of the Rail Infrastructure Facility System, the goods would have been transported by road from appellant’s factory to the nearest Railway station and from thereon to end destination by Rail which would have increased substantial cost in the hands of manufacturing units. Thus, revenue derived by the Rail Infrastructure Facility System computed based on savings in cost which inter-alia includes road freight from appellant’s factory to nearest railway station is correct and the fact that such road is not owned by the appellant would not be relevant.” TPO’s contention that RIFS cannot generate profit is incorrect: TPO had rejected the savings approach adopted by assessee on the contention that the railways ought to have charged concessional freight from the assessee on account of infrastructure provided by the assessee and in doing so no profit actually accrues to the Rail Infrastructure Facility of the assessee. The assessee humbly submits that the aforesaid contention of TPO is addressed by OECD Guidelines, relevant extract of which are as follows [Pg No. 314 of CLPB]: 124 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. “B.2.3.2 Considerations on including a profit element 7.35 Depending on the method being used to establish an arm’s length charge for intra-group services, the issue may arise whether it is necessary that the charge be such that it results in a profit for the service provider. In an arm’s length transaction, an independent enterprise normally would seek to charge for services in such a way as to generate profit, rather than providing the services merely at cost. The economic alternatives available to the recipient of the service also need to be taken into account in determining the arm’s length charge.” The RIFS of the assessee have charged for the services provided to the Cement Manufacturing Units at a mark-up, something that any prudent enterprise would do and which is in consonance with the aforesaid OECD guidelines. Hence the TPO’s contention that the Rail Infrastructure Facility System of the assessee has not resulted in any profit is not correct. The aforesaid contention of the assessee was upheld by the Ld CIT(A) vide Para 11.10 of his order dated 20-01-2023 [Refer Pg 65 of the Order] as follows: “11.10 It is seen that in the present case the railways have charged full freight and not given any concession to the appellant. However, the Rail Infrastructure Facility System have charged for the services provided to the Cement Manufacturing Units at a mark-up, something that any prudent enterprise would do and something which is in consonance with the aforesaid OECD guidelines. Accordingly, the savings model adopted by appellant has resulted in a margin of 9.92% on turnover. Hence the TPO’s opinion that the Rail Infrastructure Facility System of the appellant has not resulted in any profit is not correct. It is also seen that the Indian Railways has a monopoly in operation of Railways in India and the tariff with respect to the same is determined in accordance with the applicable enactment of Railway regulations. The railway freight tariff is the charge for normal movement of goods without having created a specific infrastructure facility for a customer. If the Railway Authorities provides any such specific facility, it would not charge normal fares but would also charge some 125 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. additional freight which is not covered in the tariff. Thus, the opinion of TPO in this regard is not correct. It has been pointed out by the appellant that neither the Indian Railways nor any third party would set up a Rail System for appellant’s captive use nearby to appellant plant locations. Hence, the appellant has rightly identified revenue based on the value addition created by the Railway Infrastructure Facility System in the business of the appellant.” Prayer The respondent humbly prays before Your Honours to dismiss the aforesaid ground of departmental appeal.” 42. On the other hand, the ld. D/R supported the order of the Assessing Officer and submitted that the order of the ld. CIT (A) be quashed to the extent of deletion of addition. 43. We have heard the rival submissions, perused the material on record and gone through the orders of the revenue authorities and the case laws cited before us. On perusal of the record, we noticed that similar claim of the assessee has been allowed by the AO for the preceding assessment years 2012-13 and 13-14 vide order dated 30.01.2014 and 16.12.2014 respectively. On the similar ground, the AO has accepted the claim of the assessee for the preceding assessment year 2012-13 by holding in para (iii) at page 12 of the assessment order, as under :- “As the rail system is used at assessee’s own undertaking, hence provision of section 80-IA(8) are applicable. On going through Form 10CCB for this facility for the year under consideration as submitted by the assessee company it was found that assessee company has adopted transfer price for using the services of this infrastructure facility at the average transportation and handling charges expenses for this type of services that would have been incurred by the assessee company if this infrastructure facility in the form of rail system would have not been there. In view of above, the transfer price as adopted by the assessee company for value of services from this infrastructure facility found to be reasonable fair market value for the claim of deduction u/s 80-IA of Income Tax Act, 1961. Accordingly claim of Rs. 66,86,27,656/- for rail system u/s 80-IA is allowed.” 126 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. However, for the assessment year under consideration, we find that the AO determined the ALP based on a fresh analysis even when there was no change in facts for AY 2014-15 as compared to earlier years. The AO without giving any cogent reasons rejected the benchmarking adopted by the appellant and undertaken fresh transfer pricing analysis. In support of assessee’s claim, the ld. A/R placed reliance on the following judicial pronouncements :- -Radhasoami Satsang vs. CIT, 193 ITR 321 (SC) -CIT vs. Neo Poly Pack (P) Ltd, 112 Taxman 363 (Del.) -PCIT vs. Quest Investment Advisors Pvt. Ltd. – ITA No. 280 of 2016 dated 28.06.2018 (Bom.) -Racold Thermo Ltd vs. DCIT, 63 taxmann.com 215 (Pune-Trib.) -Vishay Components India P Ltd vs. Addl.CIT, 88 taxmann.com 427 (Pune-Trib.) The ld. CIT (Appeals) has discussed the matter at great length and following the OECD Transfer Pricing Guidelines and Practice Manual for Multinational Enterprises and Tax Administrations, partly allowed the claim of the assessee by observing in para 11.4 to 11.12 of his order, as under :- “11.4 The appellant has contended that the transfer price adopted for the purpose of services provided by rail to the eligible/non-eligible units is to be computed by taking gross road freight & handling charges payable for transportation of goods by road to the rail head, Bangur Gram (i.e. nearest railway station) and rail freight from rail head to the final destination, determined as per the tariff notified by the Indian railways. The background behind the aforesaid revenue model adopted by the appellant was explained by the AR as under: 127 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. • Coal and clinker is one of the main raw material required for manufacturing of cement and generation of power hence its procurement is extremely crucial to the appellant, • The manufacturing unit of the appellant is in remote location where means of transport are limited and road transport cost and related logistics cost are high • If Rail Infrastructure Facility System would not have been installed by the appellant, the appellant would have transported its goods through road. Thus, installation of the said Rail Infrastructure Facility System has resulted in substantial cost savings which has been considered as revenue. 11.5 It has been contended that u/s 92C(3) of the Act, the AO may proceed to determine the ALP in relation to an international transaction or specified domestic transaction on the basis of material or information or document available with him, if any one of the four conditions are satisfied: a) The price charged or paid in an international transaction/SDT has not been determined in accordance with Sections 92C(1) and 92C(2) of the Act; b) Proper documentation has not been maintained in terms of Section 92D(1) r.w Rule 10D of the Income Tax Rules, 1962; c) The information or data used in computation of ALP is not reliable or correct; d) Failure to furnish any information or document, as required by the AO/TPO during the course of assessment proceedings. 11.5.1 It is observed that the TPO has not substantiated that any of the above four conditions was applicable in this case. Therefore, I am of the view that the TPO was not justified in disregarding the TP Study carried out by the appellant. 128 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. 11.6 It is observed that the revenue model of appellant has been rejected by TPO without giving any reasons. Further, on perusal of the order passed by the TPO, it is any of the seen that the TPO has not applied any of the transfer pricing methods as laid down u/s 92C of the Act. The TPO simply rejected the method applied by the appellant i.e. PSM which is not correct. After having discussed the approach of the TPO, let me decide upon the correctness of the method applied by the appellant. 11.7 The basic issue that needs consideration is the adoption of cost savings approach to determine the arm's length price under transfer pricing regulations. As noted in earlier paragraphs, in view of OECD Guidelines and Practice Manual, the concept of cost savings and its allocation among group entities is a recognized and well accepted concept. The appellant has also applied split on the revenue derived by savings approach and allocated 15.17% of the profits to the cement manufacturing unit based on the Function, Assets and Risk analysis. Therefore, the inference drawn by TPO that such savings approach is not recognised under transfer pricing laws is not correct. It has been shown that before the railway sidings were set up, the appellant was using road for transportation of coal, clinker & other materials. The cost of road transportation being quite high, the appellant developed and installed a captive RIFS for ease of transport and the main objective of saving cost. Thus, by installation of RIFS has resulted in substantial savings on account of road transportation charges which would have been otherwise incurred. On this savings the appellant is computing deduction u/s 80-1A of the Act. 11.8 It is important to note that in absence of the Rail Infrastructure Facility System, the goods would have been transported by road from appellant's factory to the nearest Railway station and from thereon to 129 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. end destination by Rail which would have increased substantial cost in the hands of manufacturing units. Thus, revenue derived by the Rail Infrastructure Facility System computed based on savings in cost which inter-alia includes road freight from appellant's factory to nearest railway station is correct and the fact that such road is not owned by the appellant would not be relevant. 11.9 Another reason for the TPO to reject the savings approach adopted by appellant is the observation that the railways ought to have charged concessional freight from the appellant on account of infrastructure provided by the appellant, and in doing so no profit actually accrues to the Rail Infrastructure Facility of the appellant. This opinion of TPO is also not correct. OECD Guidelines addresses this issue, relevant extract of which are as follows : "B 2.3.2 Considerations on including a profit element 7.35 Depending on the method being used to establish an arm's length charge for intra-group services, the issue may arise whether it is necessary that the charge be such that it results in a profit for the service provider. In an arm's length transaction, an independent enterprise normally would seek to charge for services in such a way as to generate profit, rather than providing the services merely at cost The economic alternatives available to the recipient of the service also need to be taken into account in determining the arm's length charge." 11.10 It is seen that in the present case the railways have charged full freight and not given any concession to the appellant. However, the Rail Infrastructure Facility System have charged for the services provided to the Cement manufacturing Units at a mark-up, something that any prudent enterprise would do and something which is in consonance with the aforesaid OECD guidelines. Accordingly, the 130 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. savings model adopted by appellant has resulted in a margin of 9.92% on turnover. Hence the TPO's opinion that the Rail Infrastructure Facility System of the appellant has not resulted in any profit is not correct. It is also seen that the Indian Railways has a monopoly in operation of Railways in India and the tariff with respect to the same is determined in accordance with the applicable enactment of Railway regulations. The railway freight tariff is the charge for normal movement of goods without having created a specific infrastructure facility for a customer. If the Railway Authorities provides any such specific facility, it would not charge normal fares but would also charge some additional freight which is not covered in the tariff. Thus, the opinion of TPO in this regard is not correct. It has been pointed out by the appellant that neither the Indian Railways nor any third party would set up a Rail System for appellant's captive use nearby to appellant plant locations. Hence, the appellant has rightly identified revenue based on the value addition created by the Railway Infrastructure Facility System in the business of the appellant. 11.11 However, I do not agree completely with the benchmarking model of the appellant. RIFS cannot generate the entire profit (100%) by itself and certain portion of the profits needs to be attributed to the Cement Manufacturing Unit (CMU) based on functions, assets and risk analysis carried on by the two entities, i.e., RIFS & CMU. Thus, Profit Split Method seems to be the most appropriate method in the instant case and a profit share needs to be allocated to the CMU as well. Identical methodology has been applied by the TPO/AO in earlier year i.e., AY 2013-14. For the year under consideration the appellant has claimed 84.83% profits of RIFS in the Return of Income. However, in earlier year the TPO has quantified a split of 65.52% to the RIFS and balance to the Cement Manufacturing Unit based on FAR analysis. The order of A.O./TPO on this issue in AY 2013-14 has been accepted by the appellant and it has not filed any appeal on this issue. Since in the 131 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. preceding year, above split has been computed by TPO at 65,52%, there is no reason why the appellant should be granted 84.83% profits as attributable to RIFS in the current year. 11.12 In view of above, applying the split of 65.52% in the current year, profits attributable to rail system comes to Rs. 25,90,55,755/- as against Rs. 33,54,04,453/- and eligible deduction u/s 801A comes to Rs. 26,69,07,312/- as against Rs. 34,32,56,010/- as claimed by the appellant in its return of income. The AO is therefore directed to allow deduction u/s 801A on account of Rail Infrastructure Facility System of Rs. 26,69,07,312/- and disallowance of Rs. 7,63,48,698/- made by the AO is confirmed and balance disallowance is deleted. The AO is directed to re-check this working carefully while giving appeal effect. These grounds are therefore partly allowed.” After considering the detailed findings of the ld. CIT (A) and also considering the judgment of the Hon’ble Delhi High Court in the case of Sony Ericsson Mobile Communications India Pvt. Ltd. vs. CIT, 55 taxmann.com 240 (Delhi HC) and the decision of Coordinate Bench of the Tribunal, Bangalore in the case of Aztec Software & Technology Services Ltd. vs. ACIT, 107 ITD 141 (Bang.)(SB-Trib), we find no infirmity in the order of the ld. CIT (A), accordingly the order of the ld. CIT (A) is upheld. The ground of the Revenue is dismissed. Ground No. 5 relates to deleting the disallowance of Rs. 62,34,41,568/- on account of sales tax subsidy and electricity duty exemptions received by assessee in nature of capital receipt and the AO computed total income under regular provisions while computing book profit u/s 115JB. 132 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. 44. The brief facts of the case are that the assessee has availed subsidy of Rs. 62,29,26,819/- and incentive in the form of Electricity Duty Exemption of Rs. 5,14,748/- from the Rajasthan Government under the Rajasthan Investment Promotion Scheme, 2003 (RIPS 2003) and Rajasthan Investment Promotion Scheme, 2010 (RIPS 2010). The assessee treated these receipts as capital receipts and credited the same to capital reserve. Being capital receipt, in the return of income the same was excluded in computing total income under both regular provisions as well as under section 115JB of the IT Act, 1961. However, the AO treated the entire receipt aggregating to Rs. 62,34,41,567/- as revenue receipt on the ground that the department has not accepted the decision of Hon’ble Jurisdictional High Court and shall be preferring an appeal before Hon’ble Apex Court. Further, the AO added the amount of subsidy and electricity duty exemption also while computing book profit under the provisions of section 115JB of the IT Act. Aggrieved by the order of the AO, the assessee preferred appeal before the ld. CIT (A). The ld. CIT (A) following the binding decisions of Hon’ble Rajasthan High Court in ITA No. 204/2010 dated 22.08.2017 and the Jurisdictional Tribunal in assessee’s own case for earlier years, allowed the claim of the assessee vide his order dated 20.01.2023. Now the revenue is in appeal before us. 45. Before us, the ld. A/R of the assessee submitted his written submission as under :- “Subsidy received on account of carrying out expansion or setting up new unit is capital in nature. During the year the assessee has availed subsidy (i) under RIPS, 2003 on account of various expansion carried out at units in Ras & Khushkhera and 133 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. for setting up of new unit at Suratgarh and (ii) under RIPS, 2010 on account of setting up of new unit at Jaipur in State of Rajasthan. The purpose of aforesaid schemes was to incentivise setting up of new unit or expansion of existing unit and to generate employment opportunities. Since the subsidy has been granted to the assessee on making fixed capital investments and generating employment as specified in the Schemes, the same has to be considered as capital receipts not chargeable to tax under the normal provisions as well as under the provisions of Section 115JB. 3.0 Issue has been decided in favour of Assessee in earlier years Subsidy received under RIPS, 2003 has been allowed as capital receipts under Normal Provisions and while computing book profits u/s 115JB in assessee’s own case by Hon’ble Jaipur Tribunal in AY 2006-07 [Page no. 323-358 of CLPB] wherein following has bene held: “17. Ground No. 1 and Additional Ground raised by the Revenue are identical to Ground No. 1 and Additional Ground for A.Y. 2004-05 in ITA No. 614/Jp./2010 Ld. Counsel for the assessee fairly submitted in his key submissions filed before us, that besides the subsidy as dealt with in earlier years, the assessee also received further subsidy under “Rajasthan Investment Promotion Policy 2003” for expansion of its undertaking at Ras in the state of Rajasthan, the purpose of incentive where under is also to encourage setting up of new unit or expansion of existing units. Copy of the scheme as Ill as eligibility certificate dated 08- 09-2006 granted pursuant to the said scheme has been filed at pg 26-40 and pg 41 of Paper Book respectively. I further find that the object of the above scheme is identical with the purpose of the other scheme examined by the Tribunal and us in AY 2003- 04 & 2004-05. On examination of the scheme as filed by the assessee and eligibility certificate issued under RIPS 2003, I find that on completion of the expansion of the Ras unit of the Assessee during the year wherein it made capital investment of more than Rs. 200 Crs., it becomes eligible for incentive to be availed over a period of seven years from 21-12- 2005. I further find that the ‘purpose’ of granting incentive under both Rajasthan Incentive Scheme 1998 and Rajasthan Investment Promotion Policy 2003 was to incentivize setting up of a new unit or carrying out expansion of existing unit and not for running the business more profitably. Ld. DR in his submission or in the course of hearing has not pointed out any 134 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. contrary facts for the year under consideration. Hence, respectfully following the decision of Ponni Sugars and other decisions analyzed earlier to that effect and the decision of this bench in ITA no. 942/Jp/2008 and in terms of our discussion in AY 2004-05 vide para 10.3 and 13.11 above, I dismiss this ground of Revenue and hold that incentive granted both under Rajasthan Incentive Scheme, 1998 and under RIPS, 2003 is capital receipt. Hence, Ground No. 1 & additional ground filed by the Revenue are rejected and decided in favor of the assessee.” Similar view has been taken by the Hon’ble Jaipur Tribunal in assessee’s own case in A.Y. 2007-08 to 2009-10 vide its consolidated order dated 27-01-2014 [Page no. 375-385 of CLPB] Hon’ble Rajasthan High Court has since affirmed the view taken by the Tribunal for A.Y. 2006-07 to AY 2009-10 vide its order dated 22-08-2017 and has held that subsidy received under RIIPS’ 2003 by the assessee are in the nature of capital receipt and hence needs to be excluded while computing total income under Normal provisions as well as under MAT provisions. Copy of order of the Hon’ble High Court for AY 2006-07 to AY 2009-10 is enclosed at Page no. 1-16 for AY 2009-10, 17-25 for AY 2007-08, 2008-09 & 2010-11, 318-322 for AY 2006-07 of CLPB. Ld. CIT(A) vide his order dated 20-01-2023 after analysing all the schemes under which incentives has been granted to the appellant has held that since the objective of RIPS, 2010 & customised package under RIPS 2010 is similar to the objective of the scheme under RIPS, 2003, the above decisions of Hon’ble Jurisdictional High Court and Hon’ble Jaipur Tribunal taken in earlier years shall mutatis mutandis apply to subsidy received by the assessee under RIPS, 2010 and hence is in the nature of capital receipt not chargeable to tax. [Refer Para 13.7 & 13.9 of CIT(A) order dated 20-01- 2023]. Reliance in this regard may also be placed on the decision of Hon’ble Pune Tribunal in Jain Irrigation Systems Ltd. vs DCIT in ITA No. 227/Pun/2018 dtd. 22-12-2022 wherein subsidy received under RIPS 2010 has also been held to be capital receipts not chargeable to tax. 135 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. Ld. CIT(A) at Para 13.8 has further held that mere fact that the order of the appellate authority is not acceptable to the department and is the subject matter of an appeal can furnish no ground for not following it unless its operation has been suspended by a competent court as has been held in UOI – vs.- Kamlakshi Finance Corporation (1992) 1 SCC 648 (SC). The respondent humbly prays before Your Honours to dismiss the aforesaid ground of departmental appeal.” 46. On the other hand, the ld. D/R supported the order of the Assessing Officer and submitted that the order of the ld. CIT (A) be quashed to the extent of deletion of addition. 47. We have heard the rival submissions, perused the material on record and gone through the orders of the revenue authorities and the case laws cited before us. At the outset, we find that this ground of the Revenue has already been decided by the Tribunal in earlier years in the assessee’s own case. The copies of the orders were placed on record. With regard to the subsidies received under RIPS 2003 in earlier years has since been allowed as capital receipts while computing total income under regular provisions and while computing book profit under section 115JB by the Jurisdictional Tribunal in assessee’s own case for the assessment year 2006-07 vide its consolidated order dated 09.09.2011. Similar view was expressed by the Jurisdictional Tribunal while deciding the matter vide its consolidated order dated 27.01.2014 for the assessment years 2007-08 to 2009-10 and order dated 28.12.2017 for assessment years 2012-13 & 2013-14 holding that sales tax subsidy 136 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. received by the appellant under RIPS 2003 is in the nature of capital receipt and hence is not chargeable to tax under regular provisions nor under the provisions of section 115JB. We further find that the decision of the jurisdictional Tribunal for the assessment years 2006-07 to 2009-10 has also been upheld by the Hon’ble Rajasthan High Court in assessee’s own case for AY 2006-07 in DB ITA No. 29/2012, for AY 2007-08 in DB ITA No. 86/2014, for AY 2008-09 in DB ITA No. 87/2014 and for AY 2009-10 in DB ITA No. 85/2014 vide its order dated 22.08.2017. 47.1. The extract of the jurisdictional Tribunal’s order at 17 page 34 for the assessment year 2006-07 dated 09.09.2011 are reproduced hereunder : “17. Ground No. 1 and Additional Ground raised by the Revenue are identical to Ground No. 1 and Additional Ground for A.Y. 2004-05 in ITA No. 614/Jp./2010 Ld. Counsel for the assessee fairly submitted in his key submissions filed before us, that besides the subsidy as dealt with in earlier years, the assessee also received further subsidy under “Rajasthan Investment Promotion Policy 2003” for expansion of its undertaking at Ras in the state of Rajasthan, the purpose of incentive where under is also to encourage setting up of new unit or expansion of existing units. Copy of the scheme as Ill as eligibility certificate dated 08- 09-2006 granted pursuant to the said scheme has been filed at pg 26-40 and pg 41 of Paper Book respectively. I further find that the object of the above scheme is identical with the purpose of the other scheme examined by the Tribunal and us in AY 2003- 04 & 2004-05. On examination of the scheme as filed by the assessee and eligibility certificate issued under RIPS 2003, I find that on completion of the expansion of the Ras unit of the Assessee during the year wherein it made capital investment of more than Rs. 200 Crs., it becomes eligible for incentive to be availed over a period of seven years from 21-12- 2005. I further find that the ‘purpose’ of granting incentive under both Rajasthan Incentive Scheme 1998 and Rajasthan Investment Promotion Policy 2003 was to incentivize setting up of a new unit or carrying out expansion of existing unit and not for running the business more profitably. Ld. DR in his submission or in the course of hearing has not pointed out any contrary facts for the year under consideration. Hence, respectfully following the decision of Ponni Sugars and other decisions analyzed earlier to that effect and the decision of this bench in ITA no. 942/Jp/2008 and in terms of our discussion in AY 2004-05 vide para 10.3 and 13.11 above, I dismiss this ground of Revenue and hold that incentive granted both under Rajasthan Incentive Scheme, 1998 and under RIPS, 2003 is capital receipt. Hence, Ground No. 1 & additional ground fled by the Revenue are rejected and decided in favour of the assessee.” 137 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. 47.2. The ld. CIT (A) vide his order dated 20.01.2023 after analyzing all the Schemes under which incentives has been granted to the appellant, allowed the claim of the assessee by observing in para 13.7 to 13.9 of his order as under :- “ 13.7. I have perused the relevant provisions of RIPS 2010 and the customized package under RIPS 2010. It is observed that the objective of RIPS, 2010 under which the subsidy/incentive i.e. for expansion and setting up of the units is similar to the objective of the Schemes under RIPS, 2003. Hence, the decision of jurisdictional High Court and ITAT, Jaipur Tribunal rendered in earlier years treating the aforesaid subsidy as capital receipts under normal provisions and under provisions of MAT shall hold good in law and would squarely apply in the present case. 13.8. The reasoning of the AO that the binding precedent of the jurisdictional High Court shall not be followed as he is preferring an appeal before the Apex Court is not correct. Mere fact that the order of the appellate authority is not acceptable to the department and is the subject matter of an appeal can furnish no ground for not following it unless its operation has been suspended by a competent court as has been held by Apex Court in the case of UOI vs. Kamlakshi Finance Corporation 1992 Supp (1) SCC 648 (SC). 13.9. In view of the binding decisions of Hon’ble High Court and ITAT in appellant’s own case, it is held that subsidy received by the appellant is in the nature of capital receipt and hence needs to be excluded while computing total income under regular provisions and while computing book profit u/s 115JB of the Act. The AO is directed to delete disallowance of Rs. 62,34,41,567/- under normal provisions and under the provisions of Sec. 115JB. The appeal of the appellant on all three grounds is allowed.” Respectfully, following the orders of the Hon’ble Jurisdictional Rajasthan High Court and the consistent view taken by the Coordinate Bench of the Tribunal, Jaipur, we find no infirmity in the order of the ld. CIT (A), accordingly the order of the ld. CIT (A) is upheld. The ground of the Revenue is dismissed. 138 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar. 48. In the result, this appeal of the assessee is partly allowed and appeal of the Revenue is dismissed. Order pronounced in the open court on 7/08/2023. Sd/- Sd/- ¼ jkBkSM+ deys'k t;arHkkbZ ½ ¼lanhi xkslkbZ½ (RATHOD KAMLESH JAYANTBHAI) (SANDEEP GOSAIN) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 7/08/2023. Das/ vkns'k dh izfrfyfi vxzsf’kr@Copy of the order forwarded to: 1. vihykFkhZ@The Appellant- Shree Cement Ltd., Beawar. 2. izR;FkhZ@ The Respondent- The DCIT, Circle-2, Ajmer. 3. vk;dj vk;qDr@ CIT 4. vk;dj vk;qDr@ CIT(A) 5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur. 6. xkMZ QkbZy@ Guard File {ITA No. 152 & 142/JP/2023} vkns'kkuqlkj@ By order, lgk;d iathdkj@Asst. Registrar 139 ITA Nos. 152 & 142/JP/2023 Shree Cement Limited, Beawar.