ACIT CC 3(4) CEN RG 3, MUMBAI V. PATEL ENGINEERING LTD, MUMBAI

ITA 2757/MUM/2017

• Counselvise Citation: [2022] 103 COUNSELVISE.COM (IT) 9368 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 6 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Next Hearing Date: 21-08-2022
• Assessment Year: 2008-2009
• Appeal Filed On: 16-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase; Transfer pricing; International transaction; Proportionate interest; Wholly owned subsidiary; Fair market value; Notional interest; Capital receipt; TDS; Set aside
• Section: 56; 143(3); 14A; 80IB; 194C; 80IA; 43; 48

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “J” BENCH, MUMBAI BEFORE SHRI VIKAS AWASTHY, HON'BLE JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, HON'BLE ACCOUNTANT MEMBER ITA Nos. 2757 & 2758/MUM/2017 (A.Y. 2008-09 & 2009-10) ITA.No. 2933/MUM/2019 (A.Y. 2014-15) DCIT – Central Circle – 3(4) Central Range -3 Room No. 1915, 19 th Floor Air India Building, Nariman Point Mumbai – 400 021 v. M/s. Patel Engineering Ltd., Patel Estate Road Jogeswari (W) Mumbai - 400102 PAN: AAACP2567L Appellant Respondent C.O. Nos. 259 &260/MUM/2018 [ARISING OUT OF ITA Nos. 2757 & 2758 /MUM/2017 (A.Y. 2008-09 & 2009-10)] M/s. Patel Engineering Ltd., Patel Building, Opp Patel Samaj Hall Patel Estate, S.V. Road Jogeswari (W), Mumbai - 400102 PAN: AAACP2567L v. ACIT – Central Circle – 3(4) Room No. 1915, 19 th Floor Air India Building, Nariman Point Mumbai – 400 021 Appellant Respondent Assessee Represented by : Shri Mayur Kisnadwala & Shri Radhakant Saraf Revenue Represented by : Ms. Vatsalaa Jha Date of Hearing : 22.08.2022 Date of pronouncement : 31.10.2022 2 ITA Nos. 2757 & 2758 /MUM/2017 ITA.No. 2933/MUM/2019 (A.Y. 2014-15) C.O. No. 259 & 260/MUM/2018 M/s. Patel Engineering Ltd., O R D E R PER S. RIFAUR RAHMAN (AM) 1. These appeals and cross objections are filed by revenue and assessee respectively, against different orders of the Learned Commissioner of Income Tax (Appeals)-57, Mumbai [hereinafter in short “Ld.CIT(A)”] dated 30.01.2017 for the A.Y. 2008-09 and 2009-10. ITA.No. 2933/Mum/2019 is filed by the Revenue against order of the Ld.CIT(A)-51 dated 27.02.2019 for the A.Y. 2014-15. 2. Since the issues raised in all the appeals are identical, therefore, for the sake of convenience, these appeals are clubbed, heard and disposed off by this consolidated order. We are taking Appeals in ITA.No. 2757/MUM/2017 and C.O. No. 259/Mum/2018 for A.Y. 2008-09 as a lead cases. ASSESSMENT YEAR 2008-09 ITA.No. 2757/MUM/2017 – Revenue Appeal 3. Revenue has raised following grounds in its appeal: - 1. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding the assessee as a developer and not a contractor as the agreement entered Into by the assessee with various government authorities is for contractual 3 ITA Nos. 2757 & 2758 /MUM/2017 ITA.No. 2933/MUM/2019 (A.Y. 2014-15) C.O. No. 259 & 260/MUM/2018 M/s. Patel Engineering Ltd., work and not to develop/operate and maintain any infrastructure facilities to which deduction u/s. 80IA(4)(i) is intended to and allowing the deduction u/s 80IA(4) of the IT Act, 1961 and failed to appreciate that the section 80IA(4) as amended by the Finance Act, 2007, retrospectively from AY-2000-01 by inserting Explanation to section 80IA, which states that nothing contained in this section shall apply to a person who executes a work contract entered into with the undertaking or enterprises" 2. "On the facts and in the circumstances of the case and in law, the CIT(A) erred in allowing that the credit of TDS be allowed to the assessee in contravention to section 199(2) of the IT Act, 1961, since the advances pertaining thereto are not credited in the P & L A/c of the assessee in the FY under consideration". 3. "On the facts and in the circumstances of the case and in law, the CIT(A) erred in holding that the assessee is eligible for enhanced claim of deduction u/s 80IA(4), in respect of M/s ShivamGiri Steel Ltd., Ambica Steel Ltd. and M/s D.S.P. Enterprises only to the extent of unsubstantiated purchases without appreciating the fact that the additions were made on account of accommodation entries in the nature of bogus purchases and the bogus purchases were not supported by any documentary evidences and therefore they were mere book entries against which deduction u/s 80IA(4) cannot be allowed, as the purchases itself were not genuine and hence deduction u/s 80IA(4) cannot be allowed on the same." 4. "On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in allowing the deduction under sec. 80IA(4) of the Act as regards enhancement of profit on disallowance of bogus purchase, without appreciating that assessee is not at all eligible for deduction u/s. 801A(4) as the agreement entered into by the assessee with various government authorities is for contractual work and not to develop / operate and maintain any infrastructure facilities to which deduction u/s. 80IA(4)(i) is intended to." 5. "On the facts and in the circumstances of the case and in law, the CIT(A) erred in deleting the adjustments made by the TPO ignoring the fact that the difference between the issue price and 4 ITA Nos. 2757 & 2758 /MUM/2017 ITA.No. 2933/MUM/2019 (A.Y. 2014-15) C.O. No. 259 & 260/MUM/2018 M/s. Patel Engineering Ltd., the book value of shares of the AES is nothing but loan in disguise." 6. "On the facts and in the circumstances of the case and in law, the CIT(A) erred in deleting the disallowance u/s 14A ignoring the fact that the monthly summary of the joint venture capital account submitted by the assessee shows that in all the joint ventures, there is debit balance and further the investment have been made out of current account on which the assessee has paid interest 7. "On the facts and in the circumstances of the case and in law, the CIT(A) erred in holding that only if disallowance is sustained u/s. 14A of the I.T.Act, then only income computed u/s.115JB will be enhanced for the purpose of disallowance 14A otherwise nothing would naturally be computed to the book profit." 8. The appellant craves to leave, to add, to amend and / or to alter any of the ground of appeal, if need be. 9. The appellant, therefore, prays that on the grounds stated above, the order of the CIT(A)-57, Mumbai, may be set aside and that ofthe Assessing Officer restored.” 4. At the outset, Ld. AR of the assessee with regard to Ground No. 1 and 4 which are in respect of “whether assessee is a developer or contractor”and whether liable for deduction u/s. 80IA(4) of the Act,submitted his written submissions, for the sake of clarity it is reproduced below:- “7. During the course of the hearing, the Assessee submitted that all the projects executed were highly technical and specialized and involved huge risk; the assessee has also deployed people, plant and machinery, technical expertise, knowhow and financial resources; moreover, all sums received till the final completion certificate is issued on completion of the defect liability period, are considered interim payments. 5 ITA Nos. 2757 & 2758 /MUM/2017 ITA.No. 2933/MUM/2019 (A.Y. 2014-15) C.O. No. 259 & 260/MUM/2018 M/s. Patel Engineering Ltd., 8. For the AY 2005-06 and 2006-07, wherein these nine contracts were considered, the Hon'ble Tribunal had held that on going through the tender document filed by the assessee which is placed on record, after analyzing the major clauses of the agreement to determine the scope and nature of work undertaken, it can be seen that the Assessee is a developer, therefore, eligible for claim of deduction u/s.80IA(4). It had further held that after considering and deliberating on the meanings of the words "developer" and "contractor", scope of the work, responsibilities and risks undertaken by the assessee in each of the contracts, the CIT(A) recorded a finding to the effect that the assessee is not a contractor but a developer. In coming to the above finding, the CIT(A) also considered the clarificatory amendment by way of Explanation below sub section (13) of section 80IA by the Finance Acts 2007 and 2009 and held, after considering various judicial pronouncements, that the amendment does not impact development contracts. After analyzing the terms of the contract, it was held that for all the projects, based on the investment, financial and technical risks undertaken by the contractor, the Assessee is a developer of the respective projects.” 5. In support of the above submissions, Ld. AR placed reliance on the following decisions: - (i). ABG Heavy Industries Ltd. 322 ITR 323 (para 5 of that order) (ii). Assessee's own case for AY 2000-01 reported in 94 ITD 411 (paras 46 and 47) (iii). ACIT v Bharat Udyog Ltd. 24 SOT 412 (iv). B.T. Patil & Sons Belgaum Constructions (P.) Ltd. v. ACIT, 34 taxmann.com 97 (v). ACIT v. Patel KNR Joint Venture ITA 5230/M/2012 (vi). DCIT v. V.R.M. (India) Ltd. ITA 811/Del/2008 (vii). KCL BEL Tarmat JV v, ITO, ITA 111/Rjt/2010 (viii). GVPR Engineers Ltd. v. ACIT 21 Taxmann.com 25 (Hyd) (ix). KMC Constructions Ltd. v. ACIT 21 Taxmann.com 138 (Hyd). 6 ITA Nos. 2757 & 2758 /MUM/2017 ITA.No. 2933/MUM/2019 (A.Y. 2014-15) C.O. No. 259 & 260/MUM/2018 M/s. Patel Engineering Ltd., 6. Ld. AR submitted that out of the nine projects, six projects (namely Koyna project, Bheema Lift Irrigation project, Kameng Hydro Electric Project Package II and III, Kalwakurty Lift irrigation project and NLIP project) are existing projects for which the deduction was allowed in the earlier year by the Coordinate Bench in assessee’s own case for the A.Y.2005-06. Further, with regard to other three new projects namely Haflong Tunnel 1 and 2, Haflong Tunnel 3 and 4 and Haflong Tunnel 5 and 6, Ld.AR of the assessee submitted that the issue has been discussed in the order of the Ld.CIT(A) that the said projects are identical to Haflong Tunnel 7, which has already been held to be eligible for deduction u/s80IA(4) in A.Y 2006-07. Ld. AR brought to our notice that the issue in appeal has been considered by the Co-ordinate Bench in assessee’s own case for the A.Y. 2006-07. Ld. AR prayed that the same may be adopted for the year under consideration. 7. Ld. DR vehemently argued that the projects under consideration are different and relied on the order of the Assessing Officer. 8. Considered the submissions and material placed on record, we observe from the record that identical issue is decided in favour of the assessee in assessee’s own case in ITA.No. 6605/Mum/2013 dated 7 ITA Nos. 2757 & 2758 /MUM/2017 ITA.No. 2933/MUM/2019 (A.Y. 2014-15) C.O. No. 259 & 260/MUM/2018 M/s. Patel Engineering Ltd., 18.11.2015 for the A.Y.2005-06 and in ITA.No. 3275 & 3640/Mum/2014 dated 05.07.2016 for the A.Y. 2006-07 & 2007-08. While deciding the issue in favour of the assessee the Coordinate Bench of the Tribunal in ITA.No. 6605/Mum/2013 held as under: - “6. Rival contentions have been heard and record perused. The Revenue has challenged the decision of the CIT(A) granting deduction u/s 80IA(4) holding the assessee to be a developer of the infrastructure facilities (projects) and also that deduction is available to the assessee even when it has developed only a part of the project. We found that the CIT(A) has elaborately dealt with the contention of the AO at page 5 & 9 of his appellate order, as reproduced above. The CIT(A) has gone through the terms and conditions of each and every contract and at page 19 para 6.6 of her order, the CIT(A) held that the contract documents show that the projects executed were highly technical and specialized and involved huge risk; the assessee has also deployed people, plant and machinery, technical expertise, knowhow and financial resources; moreover, all sums received till the final completion certificate is issued on completion of the defect liability period, are considered interim payments. While holding so the CIT(A) relied on the decisions of the Hon'ble Bombay High Court in ABG Heavy Industries Ltd. 322 ITR 323 (para 5 of that order), assessee's own case for AY 2000-01 reported in 94 ITD 411 (paras 46 and 47) and Bharat Udyog Ltd. 24 SOT 412 to hold that the assessee is a developer and not a contractor. 7. We had also gone through the tender document filed by the assessee which is placed on record, after analyzing the major clause of the agreement to determine the scope and nature of work undertaken, we found that assessee was a developer, therefore, eligible for claim of deduction u/s.80IA(4). After considering and deliberating on the meanings of the words "developer" and "contractor", scope of the work, responsibilities and risks undertaken by the assessee in each of the contracts on page 60 to 62 para 6.14 of her order, the CIT(A) recorded a finding to the effect that the assessee is not a contractor but a developer. In 8 ITA Nos. 2757 & 2758 /MUM/2017 ITA.No. 2933/MUM/2019 (A.Y. 2014-15) C.O. No. 259 & 260/MUM/2018 M/s. Patel Engineering Ltd., coming to the above finding, in para 6.15, the CIT{A} also considered the clarificatory amendment by way of Explanation below sub section (13) of section 80lA by the Finance Acts 2007 and 2009 and held, after considering various judicial pronouncements, that the amendment does not impact development contracts. On pages 63 to 66 paras 6.16 and 6.17, the ClT(A) noted that for the Koyna and Udhampur projects, the assessee has already been held to be a developer by the Hon'ble ITAT in its own case in the earlier years. Moreover, the Koyna project has also been held to be eligible for deduction in B.T. Patil& Sons Belgaum Construction Pvt. Ltd. After analyzing the terms of the contract, the CIT(A) reiterated that for all the projects, based on the investment, financial and technical risks undertaken by the contractor, the assessee is a developer of the respective projects. As regards the issue whether, to be eligible for deduction, the assessee has to develop the entire infrastructure facility and not only a part thereof, the CIT(A) relied on the CBDT circular no. 4/2010, the decisions of the ITAT in the assessee's own case, B.T. Patil& Sons Belgaum Construction Ltd. 34 Taxmann.com 97 and the Hon'ble Bombay High Court in ABG Heavy Industries Ltd. 8. We also found that the CIT(A) has dealt in great detail the scope of the work, risk and responsibilities undertaken by the assessee and after applying the proposition of law laid down in the following decisions arrived at the conclusion that assessee was a developer and not only a contractor: - i) Patel Engineering Ltd. v. OCIT 94 ITO 411; ii) B.T. Patil & Sons Belgaum Constructions (P.) Ltd. v. ACIT, 34 taxmann.com 97; iii) ACIT v. Patel KNR Joint Venture ITA 5230/M/2012; iv) CIT v. ABG Heavy Industries Ltd. 322 ITR 323 v) DClT v. V.R.M. (India) Ltd. ITA 811/Del/2008; vi) KCL BEL Tarmat JV v, ITO, ITA 111/Rjt/2010. As regards the clarificatory Explanation inserted in section 80IA by the Finance Acts 2007 and 2009, we place our reliance on the following decisions. (i). B.T. Patil& Sons Belgaum Constructions (P.) Ltd. v. ACIT 34 taxmann.com 97; 9 ITA Nos. 2757 & 2758 /MUM/2017 ITA.No. 2933/MUM/2019 (A.Y. 2014-15) C.O. No. 259 & 260/MUM/2018 M/s. Patel Engineering Ltd., (ii). ACIT v. Pate I KNR Joint Venture ITA 5230/M/2012; (iii). DClT v. V.R.M. (India) Ltd. ITA 811/Del/2008; (iv). KCL BEL Tarmat JV v, ITO ITA 111/Rjt/2010; (v). GVPR Engineers Ltd. v. ACIT 21 Taxmann.com 25 (Hyd); (vi). KMC Constructions Ltd. v. ACIT 21 Taxmann.com 138 (Hyd). 9. With regard to contention of ld. CITDIR that assessee is a contractor, insofar as assessee has been mentioned as contractor in all the agreements, we rely on the following decisions :- (i). In the assessee's own appeal for AY 2000-01, 94 ITD 411 (Mum); (ii). ACIT v. Pratibha Industries 28 Taxmann.com 246 (Mum) ,wherein Mahalaxmi Construction Corpn. Ltd. v. Asstt. CIT in ITA 433/Pn/2007 has been relied upon; (iii). ACIT v. Bharat Udyog Ltd. 24 SOT 412 (Mum) As regards the CIT DR's argument that the decision of the larger Bench in B.T. Patil & Sons Belgaum Construction Pvt. Ltd. 126 TTJ 577 (Mum) is still good law, we rely on the confirmatory order [reported in 34 Taxmann.com 97) (Pune)] passed by the Pune Bench. 10 In view of the above discussion, we uphold the action of CIT(A) for allowing claim of deduction u/s.80IA(4) in respect of all the projects.” 9. Similarly, inassessee’s own casefor the A.Y. 2006-07 in ITA.No.3275 & 3640/Mum/2014dated 05.07.2016 the Coordinate Bench following the decision of the Coordinate Bench for the A.Y. 2005-06, held as under: - “2.6 During hearing before us, both the parties and more specifically the Revenue has not brought any adverse material. It is also noted that the Tribunal in the aforesaid order has considered 10 ITA Nos. 2757 & 2758 /MUM/2017 ITA.No. 2933/MUM/2019 (A.Y. 2014-15) C.O. No. 259 & 260/MUM/2018 M/s. Patel Engineering Ltd., the decision of earlier Assessment years, terms and conditions of the agreement and then reached to a particular conclusion. The scope of work, risk and responsibilities, under taken by the assessee and after applying the proposition of law laid down in various cases including B.T. Patil & Sons, CIT vs ABG Heavy Industries Ltd. 322 ITR 323, etc and thereafter concluded that the assessee is a developer and not a contractor as has been held by the ld. Assessing Officer. The cases relied upon by the Revenue has also been dealt with. Since the facts are identical, following the earlier orders of the Tribunal and also from higher forums including Hon’ble High Court, we find no infirmity in the conclusion of the Ld. Commissioner of Income Tax (Appeal). The same is affirmed. 2.7 So far as, the issue of Teesta Lower Dam is concerned, we find that the Tribunal for Assessment year 2005-06 held that NHPC performs functions akin to state, therefore, assessee is eligible for deduction u/s 80IA(4) of the Act on this project (refer para 40 & 41, pages 62 & 63 of the order of the Tribunal). 2.8 So far as, the issue on Halflong Tunnel 7, NLIP I, Bheema Lift Irrigation Project, Kameng I & II is concerned, this issue is also covered by the order of the Tribunal dated for Assessment year 2005-06 in the context of NHPC, as NEEPCO also performs functions akin to state.” 2.9 So far as, the claimed deduction u/s 80IA(4) of the Act with respect to M24 is concerned, the ld. CIT(A) disallowed the claim of the assessee for the reason that infrastructure facility, being developed under this project cannot be considered as “new” infrastructure (refer para 6.21) at page 74 of the impugned order. We find that the assessee has merely made relying on the existing roads, therefore, we are in agreement with the finding of the ld. CIT(A) as no new infrastructure development was made by the assessee. Even Circular No. 4 of 2010 dated 18/05/2010 (F.No.178/14/2010ITA.1), as per which widening of existing roads was examined by the CBDT and held that widening of an existing road by constructing additional layers as part of highway project by an undertaking would be regarded as new infrastructure facility. In the present appeal (on the issue under hand- M24) neither there is widening of existing road nor construction of additional lanes as part of highway projects, therefore, on this issue, we don’t find any 11 ITA Nos. 2757 & 2758 /MUM/2017 ITA.No. 2933/MUM/2019 (A.Y. 2014-15) C.O. No. 259 & 260/MUM/2018 M/s. Patel Engineering Ltd., merit in the claim of the assessee, therefore, it is decided against the assessee.” 10. Respectfully following the above decision and following the principle of consistency, we direct the Assessing Officer to follow the terms as directed by the Tribunal in the above orders. Ground Nos. 1 and 4 raised by the revenue are dismissed. We order accordingly. 11. With regard to Ground No. 2 which is in respect of allowability of TDS credit on advances received, Ld. AR of the assessee filed his written submissions, for the sake of clarity it is reproduced below: - “14. It was submitted that on the advances/loans received, the payer/principal uniformly deducts tax at source u/s 194C of the Act. The AO has, citing section 199, has disallowed credit of TDS as the advances pertaining thereto are not credited to the profit and loss account during the year. The CIT(A) concurred with the view of the AO. As per terms of various contract agreements under which Site Mobilisation Loan and the Machinery Mobilisation Loan / advances, mostly on interest ranging from @ 12% to 18% p.a., have been granted against bank guarantee. In the balance sheet, such contractee advance mobilisation loan is reflected as loan funds under the head Contractee advances as a liability. It was submitted that such loan can never be the income of the Assessee, neither in present or in future; hence, deduction of such loan advance from running bills is only a practical and convenient way to recover the loan. Such mobilisation loan being a capital receipt, there was no legal obligation on the part of the contractee to deduct tax at source u/s 194C. If tax has been deducted at source, the credit for such TDS has to be allowed in the year of deduction itself. 15. It is further submitted that where tax is deducted at source on an amount which is not at all chargeable to tax, command of 12 ITA Nos. 2757 & 2758 /MUM/2017 ITA.No. 2933/MUM/2019 (A.Y. 2014-15) C.O. No. 259 & 260/MUM/2018 M/s. Patel Engineering Ltd., section 199 will have to be harmoniously and pragmatically read as providing for allowing credit for tax deducted at source in the year of receipt of amount, in which the tax was deducted at source. 16. It was submitted that as regards the advance against work and material, the said advance is reflected as a reduction from construction work in progress, which itself is valued at contract rates i.e. selling price. In other words, the income pertaining to such advance is already impregnated in the work in progress offered for tax during the impugned year itself. The Tribunal in ACIT v. Patel KNR Joint Venture ITA 5230/Mum/2012, on identical facts, following Toyo Engineering Ltd., decided in favour of the Assessee. Respectfully following the decision of the coordinate bench in the case of associate concern of the assessee vis-a-vis other decisions referred above, we pray that the AO be directed to allow the credit for TDS in year of deduction itself. 12. In support of the above submissions, Ld. AR placed reliance on the following decisions: - (i). ACIT v. Peddu Srinivas Rao ITA 324/Vizag/2009 (ii). Zelan Projects Pvt. Ltd. v. DCIT ITA 1361/Hyd/2013 (iii). Arvind Murjani Brands (P.) Ltd.v. ITO 21 Taxmann.com 131 (Mum) (iv). ACIT v.Patel KNR Joint Venture ITA 5230/Mum/2012 13. Ld. AR brought to our notice that the issue in appeal has been considered by the Co-ordinate Bench in assessee’s own case for the A.Y.2005-06 and decided the issue in favour of the assessee. Copy of the order is placed on record. Ld. AR prayed that the same may be adopted for the year under consideration. 13 ITA Nos. 2757 & 2758 /MUM/2017 ITA.No. 2933/MUM/2019 (A.Y. 2014-15) C.O. No. 259 & 260/MUM/2018 M/s. Patel Engineering Ltd., 14. Ld. DR has fairly accepted the submissions of the Ld.AR and relied on the order of the Assessing Officer. 15. Considered the submissions and material placed on record, we observe from the record that identical issue is decided in favour of the assessee in assessee’s own case in ITA.No. 6605/Mum/2013 dated 18.11.2015 for the A.Y.2005-06. While deciding the issue in favour of assessee the Coordinate Bench of the Tribunal in ITA.No. 6605/Mum/2013 held as under: - “32 We have considered rival contentions and found that in terms of the contract agreement, the assessee receives advances / loans on which the payer deducts tax at source. Such loans and advances can broadly be classified as (i) Site Mobilisation loan granted to enable the assessee to mobilise the work site i.e. create access roads, mobilise men, equipments, establish and set up site office, etc., (ii) Machinery Mobilisation loan granted to enable the assessee to purchase machineries and equipments needed to carry out the subsequent work on the site and (iii) Advance against work and material given to the assessee to help it in procuring material and against the work in progress on the site. Whereas in the first two cases, it is a capital receipt in the nature of loan not connected to any work carried out by the contractor, the third one is an advance in the revenue field. ln all the above cases, the Principal uniformly deducts tax at source u/s 194C of the Act. From the record we found that the AO has discussed this on pages 18-21 of the assessment order and citing section 199 has disallowed credit of TDS of Rs.1,29,31,900/- as the advances pertaining thereto are not credited to the profit and loss account during the year. The CIT(A), on page 73-74 para 11 of her order, concurred with the view of the AO. As per terms of various contract agreements under which Site Mobilisation Loan and the Machinery Mobilisation Loan / advances, mostly on interest ranging from @ 12% to 18% p.a., have been granted against bank guarantee. In the balance sheet, such contractee advance mobilisation loan is reflected as loan funds under the head Contractee advances as a liability. Such loan can 14 ITA Nos. 2757 & 2758 /MUM/2017 ITA.No. 2933/MUM/2019 (A.Y. 2014-15) C.O. No. 259 & 260/MUM/2018 M/s. Patel Engineering Ltd., never be the income of the assessee, neither in present or in future; deduction of such loan advance from running bills is only a practical and convenient way to recover the loan. Such mobilisation loan being a capital receipt, there was no legal obligation on the part of the contractee to deduct tax at source u/s 194C. If tax has been deducted at source, the credit for such TDS has to be allowed in the year of deduction itself. In ACIT v. Peddu Srinivas Rao ITA 324/Vizag/2009 mobilisation advance was received and on identical facts it was held that credit for such TDS should be given in the year of deduction of TDS itself. This decision was followed in Zelan Projects Pvt. Ltd. v. DClT ITA 1361/Hyd/2013 fel::pBlS~ee]. Similarly, in Arvind Murjani Brands (P.) Ltd. v. ITO 21 Taxmann.com 131 (Mum) E, it was held that where tax is deducted at source on an amount which is not at all chargeable to tax, command of section 199 will have to be harmoniously and pragmatically read as providing for allowing credit for tax deducted at source in the year of receipt of amount, in which the tax was deducted at source. 33. In respect of advance against work and material, we found that the said advance is reflected as a reduction from construction work in progress, which itself is valued at contract rates i.e. selling price. In other words, the income pertaining to such advance is already impregnated in the work in progress offered for tax during the impugned year itself. The Tribunal in ACIT v.Patel KNR Joint Venture ITA 5230/Mum/2012, on identical facts, following Toyo Engineering Ltd., decided in favour of the assessee. Respectfully following the decision of the coordinate bench in the case of associate concern of the assessee vis-à-vis other decisions referred above, we direct the AO to allow the credit for TDS in year of deduction itself. We direct accordingly.” 16. Respectfully following the above decision in assessee’s own case and also following the principle of consistency, we direct the Assessing Officer to allow the credit for TDS as per the directions given by the Coordinate Bench in earlier assessment year i.e. A.Y. 2005-06. Ground No.2 raised by the revenue is dismissed. We order accordingly. 15 ITA Nos. 2757 & 2758 /MUM/2017 ITA.No. 2933/MUM/2019 (A.Y. 2014-15) C.O. No. 259 & 260/MUM/2018 M/s. Patel Engineering Ltd., 17. With regard to Ground No. 3 and 4 which are in respect of Enhanced claim of deduction u/s. 80IA(4) to the extent of unsubstantiated purchases, Ld.AR of the assessee reiterated the submissions made before Ld.CIT(A) and supported the order of the Ld.CIT(A). Ld. AR relied upon the CBDT Circular No. 37/2016 dated 2.11.2016. Copy of the circular is placed on record. 18. Ld.DR relied on the order of the Assessing Officer and prayed that the order of the Ld.CIT(A) be set-aside. 19. Considered the rival submissions and material placed on record, we observe that the assessee has purchased from D.S.P Enterprises, Shivan Giri Steel and Ambika Steel aggregating to Rs. 657,17,517/- and it was found to be bogus and non genuine, this was admitted as such in the statement u/s 132(4) of the Act. This being the case, now assessee is claiming that this should be allowed as deduction by relying on the CBDT circular and certain decisions to claim that the disallowance of the purchases will increase the income which are eligible to get exemption u/s 80IA(4) of the Act. After careful consideration, we observe from the submissions that any expenditure disallowed will certainly increase the gross profit which is chargeable to tax, such gross profit are eligible for 16 ITA Nos. 2757 & 2758 /MUM/2017 ITA.No. 2933/MUM/2019 (A.Y. 2014-15) C.O. No. 259 & 260/MUM/2018 M/s. Patel Engineering Ltd., deduction u/s 80IB(4) of the Act. Therefore, this view is held to be inline with the CBDT circular issued on this aspect, hence we are inclined to accept the submissions made by the Ld AR, therefore, we dismiss the ground raised by the revenue. 20. With regard to Ground No. 5 which is in respect of difference between the share issue price and its book value alleged as loan in disguise. Ld. AR of the assessee filed his written submissions, for the sake of clarity it is reproduced below: - “29. During the course of hearing, the Assessee drew the attention of the Hon'ble Bench that the decision of the Hon'ble Bombay High Court in favour of Vodafone India Services (368 ITR 1) has been accepted by the Department, wherein it was held that the issue of shares at a premium by the assessee to its holding company does not gives rise to any income from international transactions. Vide press release dated 28.01.2015, the Union Cabinet of India concluded that it would not file an SLP against the said order of the Bombay High Court in the Apex Court. 30. It was further submitted that the Hon'ble Bombay High Court in the case of PCIT v. PMP Auto components (P.) Ltd. in 416 ITR 435 held that revenue could not bring difference between actual investment and fair market value of shares to tax merely on basis that same was an inbound investment and not an outbound investment, and that such a distinction is of no significance and would not take case of revenue any further, as Legislature has made no such distinction while providing for determination of any income on adjustments to arrive at ALP arising from an international transaction. 31. Further, it was submitted that the Hon'ble Court in the case of PMP Auto (Supra) held that the definition of Income as provided 17 ITA Nos. 2757 & 2758 /MUM/2017 ITA.No. 2933/MUM/2019 (A.Y. 2014-15) C.O. No. 259 & 260/MUM/2018 M/s. Patel Engineering Ltd., under section 2(24) was amended to include sub-clause (xvi) therein. It provided as income, any consideration received for issue of shares, if it exceeds the fair market value, as falling under clause (viib) of sub-section (2) of section 56. The amendment/insertion of section 56(2)(viib) was with effect from 1-4-2013. However, as this provision was made effective only with effect from 1-4-2013, and it is not even the case of revenue before the authorities, that the said provision would apply for the subject assessment year 2010-11. In the above view, there is no occasion to examine the above amendments in the context of this case. This would be done appropriately in a case arising after the amendment.” 21. Ld.DR relied on the order of the Assessing Officer and prayed that the order of the Ld.CIT(A) be set-aside and the order of the Assessing Officer be restored. 22. Considered the rival submissions and material placed on record, we find that the assessee has made investments in equity shares in its associate enterprises namely Patel Engineering Inc and ASI Construction Inc. The TPO observed that the assessee has not made bench marking in this transactions. After considering the submissions of both the parties and case law relied by them, in our considered view, the assessee has made investments in the associate enterprises which are capital transaction and they have brought on record clearly that these are investment in share capital, there is no requirement as far as capital investment is concerned to make any bench marking at that point of 18 ITA Nos. 2757 & 2758 /MUM/2017 ITA.No. 2933/MUM/2019 (A.Y. 2014-15) C.O. No. 259 & 260/MUM/2018 M/s. Patel Engineering Ltd., time and the bench marking has to be made only the those transactions involving International Transactions with the AE’s which involve benefit/cost transfer based on allocation, apportionment or contribution depending upon the ALP of such benefit or cost adjustments. The investments involving capital transaction are not part of international transactions at that point of time. We observe that there is amendment in section 56 and the legislature introduced the section 56(2)(viib) of the Act with effect from 1.8.2013 involving receipt of share capital if it exceeds the fair market value, the difference is chargeable to tax as income. The TPO proposed to bring this transaction as income of the assessee where the assessee had invested in their AE’s with the observation, without bench marking the capital transaction is not proper. Therefore, we are inclined to accept the findings of Ld CIT(A) and accordingly, the ground raised by the revenue is dismissed. 23. With regard to Ground No. 6 which is in respect of 14A disallowance made by the Assessing Officer, Ld. AR of the assessee filed his written submissions, for the sake of clarity it is reproduced below: - “36. The question of disallowance of interest U/S.14A arises only when the funds have been invested by the assesses in the JV/sister concerns, income from which is not liable to tax. In the present case, it is clear and an accepted fact by the AO as well, that the 19 ITA Nos. 2757 & 2758 /MUM/2017 ITA.No. 2933/MUM/2019 (A.Y. 2014-15) C.O. No. 259 & 260/MUM/2018 M/s. Patel Engineering Ltd., amount was receivable on account of hire charges on machinery from JV or on account of assessee's share in the JV firm. No capital amount has been invested by the Assessee and hence the question of making disallowance u/s 14A does not arise.” 24. Ld. AR further submitted that the issue with the disallowance u/s.14A had been taken up by the Assessing Officer in the order passed u/s 143(3) for AY 2005-06, 2006-07 and 2007-08 and has been considered and decided upon by the first appellate authority wherein the disallowance u/s 14A has been discussed at length of the appellate order. In the said appellate order, the appeal of the Assessee was allowed in part against which, the assessee filed a cross objection before Hon'ble ITAT which has been disposed off, wherein the Assessing Officer was directed to delete the disallowance made u/s 14A. Pursuant to such directions, the Assessing Officer passed an order giving effect wherein after verification; the entire disallowance made u/s 14A has been deleted by the Assessing Officer. In the present order, the facts are identical and no new facts have been brought out by the Assessing Officer. Moreover, the Assessee's own funds are sufficient to cover the entire investment. Copy of audited accounts and computation of income is placed on record. Ld. AR prayed that the order of the Coordinate Bench in assessee’s own case for the A.Y. 2005-06, 2006-07 and 2007-08 20 ITA Nos. 2757 & 2758 /MUM/2017 ITA.No. 2933/MUM/2019 (A.Y. 2014-15) C.O. No. 259 & 260/MUM/2018 M/s. Patel Engineering Ltd., may be adopted for the year under consideration and prayed for deletion of 14A disallowance made by the Assessing Officer. 25. Ld. DR has fairly accepted the submissions of the Ld.AR and relied on the order of the Assessing Officer. 26. Considered the submissions and material placed on record, we observe from the record that identical issue is decided in favour of the assessee in assessee’s own case in ITA.No. 6605/Mum/2013 dated 18.11.2015 for the A.Y.2005-06 and in ITA.No. 3275 & 3640/Mum/2014 dated 05.07.2016 for the A.Y. 2006-07 & 2007-08. While deciding the issue in favour of the assessee the Coordinate Bench of the Tribunal in ITA.No. 6605/Mum/2013 held as under: - “12. With regard to disallowance u/s.14A, it was observed by the A.O that assessee has invested funds in joint ventures, the income from which does not form part of the total income. The A.O was therefore of the view that the proportionate interest allocable to such funds on pro-rata basis has to be disallowed. The assessee objected to the said proposal stating that no capital amount has been invested in the joint venture and that with regard to the partnership firm only Rs.25,000/- has been contributed towards capital which is out of own funds. It was also stated before the A.O that as regards the debit balance outstanding with them, the same are not in the nature of investment in capital but mainly due to the company's share of profit and machinery hire charges lying with them, which is already reflected as income in the P&L A/c. Without prejudice, it was further stated before the A.O that the current account transactions are carried out from bank where sale proceeds of the assessee are deposited and also that the dues from J.Vs and Partnership firm on current-account are out of company's 21 ITA Nos. 2757 & 2758 /MUM/2017 ITA.No. 2933/MUM/2019 (A.Y. 2014-15) C.O. No. 259 & 260/MUM/2018 M/s. Patel Engineering Ltd., own fund and not out of borrowed funds. The A.O rejected the said contention of the appellant stating that from a summary of the current account it could be observed that funds have flown out of the current account on which the assessee had paid interest. In these circumstances, the A.O disallowed the proportionate interest on the current account applying the interest rate of 12.5% as charged by the bank on CC Account. Accordingly, a sum of Rs.88,69,937/- has been disallowed and added back to the total income. 13. Before the CIT(A), the assessee submitted that the addition is not warranted since the same has been made on the basis of presumptions, conjectures and surmises. It is stated that the during the course of assessment the A.O had called for details of the balances in various joint ventures/ partnership firm wherein the assessee is the member/partner. It was explained that the debit balances in various JV /firm as on 31.03.2005 are as under - Pate I KNR JV Rs.9,01,67,275 KNR Patel JV Rs. 7,49,10,863 Patel Michigan JV Rs. 84,229 AHCL PEL Rs. 6,03,90;870 14. By the impugned order, the CIT(A) deleted the disallowance made u/s.14A after observing as under :- “7.3 I have considered the matter. From the facts of the case it is apparent that the amounts treated by the A.O as loans and advances outstanding are in fact debit balances i.e. amounts receivable by the appellant either on account of hire charges in respect of machineries leased to JV or the share of profit of the appellant from the JV /firm. It has been amply demonstrated by the appellant through the copies of the various ledger account in respect of the Head Office/Capital account placed at pages 372 to 446 of paper book/volume II that the debit balances with the various JV/firm are not on account or funds transfer by the appellant but solely on account of the appellant's income and share of profit generated from such JV/firm. When no funds whatsoever, borrowed or otherwise, have been invested in JVs/firms, the applicability of section 14A does not arise. When there is no expenditure incurred in relation to income not includable in the total income, the applicability of section 14A is not warranted. Hence I am unable to sustain the disallowance as made by the A.O under s. 14A of the Act. The disallowance on a sum of Rs. 88,69,937/- is deleted. 22 ITA Nos. 2757 & 2758 /MUM/2017 ITA.No. 2933/MUM/2019 (A.Y. 2014-15) C.O. No. 259 & 260/MUM/2018 M/s. Patel Engineering Ltd., 15. Ld. DR relied on the order of AO. On the other hand, the contention of ld. AR was that at the time of the hearing it was specifically pointed out to the A.O that the entire debit balance as shown above comprises of either amounts receivable by the appellant on account of hire charges of machinery from the JV or the appellant's share of profit in the JV firm. Factually it is stated that in Patel KNR JV, the debit balance of Rs.9,01,67,275 as on 31.3.2005, comprises of machinery hire charges received / receivable of Rs.10,01,60,225 by the assessee from them and the share of profit of the appellant in the said JV aggregates to Rs.8,24,05,845; both, together, aggregating to Rs.l~,25,66,070. Hence the debit balance the said JV is not on account of any funds invested by the assessee in such JV. In KNR Patel JV the debit balance of Rs.7,49,10,863 as on 31.3.2005, comprise solely of machinery hire charges received / receivable of Rs.12,69,86,836 by the appellant from them and the share of profit of the assessee in the said JV aggregates to Rs.6,32,94,249; both, together, aggregating to Rs.19,02,81,084. Hence the debit balance in the said JV is not on account of funds invested by the assessee in such JV. In AHCL PEL, the debit balance of Rs.6,03,90,869, as on 31.3.2005, comprises of the share of profit of - the appellant in the firm for A.Y. 2004-05 of Rs.5,0 1,57,164. 16. The alternate contention of assessee was that the provisions of section 14A cannot be applied to the appellant since the share of profit received by the appellant from such integrated joint venture AOP is chargeable to tax in terms of provisions of section 167B r.w.s. 86 of the Act. A further without prejudice submission is that the company has substantial own funds by way of capital reserves aggregating Rs. 12,936 lacs which is more than 5.50 times of the balance in such JV / partnership firm. The sale proceeds of the appellant are deposited in the cash credit account and the debit balance are presumed to have been company's own funds and not from borrowed funds. The appellant relies on the following decisions:  ACIT vs. Bombay Samachar Limited 74 ITR 723 (Bom).  Wimco Seedlings Ltd. vs. OCIT 107 ITO 267 (Del.) It was further pointed out that the facts of following decisions are distinguishable from the facts of the appellant's case:  ACIT v. Citicorp Finance (India) Ltd. 108 ITD 457  Everplus Securities & Finance Ltd. v. DCIT 101 ITD 151 23 ITA Nos. 2757 & 2758 /MUM/2017 ITA.No. 2933/MUM/2019 (A.Y. 2014-15) C.O. No. 259 & 260/MUM/2018 M/s. Patel Engineering Ltd.,  DCIT v. SG Investments & industries Ltd. 89 ITD 44 We have considered rival contentions and found that a clear finding has been given by the CIT(A) to the effect that amount was receivable on account of hire charges on machinery from JV or on account of assessee’s share in the JV firm. The question of disallowance of interest u/s.14A arises only when the funds have been given to JV/sister concern income from which is not liable to tax. The detailed finding recorded by CIT(A) at para 7.3 has not been controverted, accordingly, we do not find any reason to interfere in the order of CIT(A) for deleting the disallowance made u/s.14A amounting to Rs.88,68,937/-.” 27. Respectfully following the above decision and following the principle of consistency, we direct the Assessing Officer to follow the terms indicated in assessee’s own case for the A.Y. 2005-06. Ground raised by the revenue is dismissed. We order accordingly. 28. With regard to Ground No. 7 which is in respect of 14A r.w.s. 115JB of the Act, this ground is consequential in nature, as we have deleted the addition u/s. 14A of the Act, at this stage this ground become infructuous. Accordingly, ground raised by the revenue is dismissed as infructuous. 29. In the result, appeal filed by the revenue is dismissed as per above terms. 24 ITA Nos. 2757 & 2758 /MUM/2017 ITA.No. 2933/MUM/2019 (A.Y. 2014-15) C.O. No. 259 & 260/MUM/2018 M/s. Patel Engineering Ltd., C.O.NO.259/MUM/2018 – ASSESSEE APPEAL 30. Assessee has raised following grounds in its cross objection: - “1. On the facts and circumstances of the case and in Law, the Learned CIT (A) erred in confirming the action of the A.O. that the pre-payment towards purchase of fixed assets is advance in the nature of loan and charging notional interest @13.75%. 2. On the facts and circumstances of the case and in Law, the Learned CIT (A) erred in directing the A.O to calculate adjustment of Arm's length commission@ 1% on the amount of Bank Guarantees advanced by the banks to the AE as against 0.66% actually charged. 3. On the facts and circumstances of the case and in Law, the Learned CIT (A) erred in confirming the action of A.O in assessing interest income of Rs.10,250 merely on the basis of AIR information.” 31. At the outset, with regard to Ground No. 1 which is in respect of prepayment towards purchase of fixed assets alleged as loan to which notional interest @13% is charged, Ld. AR of the assessee filed his written submissions, for the sake of clarity it is reproduced below: - “43. The Assessee paid an advance of USD 30,000/- towards purchase of machinery in October 2007 which was received back after a period of 16 month due to cancellation of the said transaction in February 2009. 44. The Indian TP provisions do not permit recharacterization of a transaction. In the Assessee's own case for AY 2006-07 in ITA No. 3037/M/2012, the Hon'ble ITAT Mumbai, relied upon the decision of the Bombay High Court in the case of Besix Kier Dabhol SA wherein the assessee, a non-resident company, had raised loans from its two equity holders (JV partners) on which it paid interest. The ITAT disagreed with the stand of the Revenue that such raising of loan is to be viewed as raising of equity, thereby disallowing the deduction of interest paid, and held that there were 25 ITA Nos. 2757 & 2758 /MUM/2017 ITA.No. 2933/MUM/2019 (A.Y. 2014-15) C.O. No. 259 & 260/MUM/2018 M/s. Patel Engineering Ltd., no provisions under the Act to recharacterize equity into debt or vice versa. Thus the Hon'ble ITAT Mumbai ruled in favour of the Assessee. 45. Without prejudice to the above, the interest rate ought to be charged at Libor +. This has been held by the Hon'ble Bombay High Court in the case of CIT v. Aurionpro Solutions Ltd. in ITA No. 1869 of 2014, wherein after relying upon the case of Tata Autocom System Ltd 374 ITR 516 (Bom) and Tech Mahindra Ltd. 12 taxmann.com 132 (ITAT Mum), the Hon'ble Court held that LIBOR has to be the benchmark for US dollar transactions which would be reasonable and proper in commercial principle rather than the interest on domestic borrowings. 32. In support of the above submissions, Ld. AR placed reliance on the following decisions: - (i). CIT v. Aurionpro Solutions Ltd. in ITA No. 1869 of 2014 (Bom HC) (ii). Tata Autocom System Ltd 374 ITR 516 (Bom) and Tech Mahindra Ltd. 12 taxmann.com 132 (ITAT Mum) 33. Ld. AR further submitted that the Indian TP provisions donot permit recharacterization of a transaction in the Assessee's own case for A.Y. 2006-07 in ITA No. 3037/M/2012, the ITAT Mumbai, relied upon the decision of the Bombay High Court in the case of Besix Kier Dabhol SA wherein the assessee, a non resident company, had raised loans from its two equity holders (JV partners) on which it paid interest. The ITAT disagreed with the stand of the Revenue that such raising of loan is to be viewed as raising of equity, thereby disallowing the deduction of interest paid, and held that there were no provisions under the Act to 26 ITA Nos. 2757 & 2758 /MUM/2017 ITA.No. 2933/MUM/2019 (A.Y. 2014-15) C.O. No. 259 & 260/MUM/2018 M/s. Patel Engineering Ltd., recharacterize equity into debt or vice versa. Thus, the ITAT Mumbai ruled in favour of the assessee. 34. Ld. AR of the assessee without prejudice to the above submissions submitted that, the interest rate ought to be charged at Libor+. This has been held by the Hon'ble Bombay High Court in the case of CIT v Auriongro Solutions Ltd. in ITA No. 1869 of 2014, wherein after relying upon the case of Tata Autocom System Ltd 374 ITR 516 (Bom) and Tech Mahindra Ltd. 12 taxmann.com 132 (ITAT Mum), the Hon'ble Court held that LIBOR has to be the benchmark for US dollar transactions which would be reasonable and proper in commercial principle rather than the 117-123 interest on domestic borrowings. 35. Ld. DR relied on the orders of the Authorities below. 36. Considered the rival submissions and material placed on record, we observe from the record that the assessee has paid advance for purchase of machinery to its AE but the AE did not deliver the machinery as per the agreed terms and the assessee did not press for the refund of the advances due to its relationship. Therefore, it is fact on record that the assessee allowed its AE to enjoy advance payment without insisting 27 ITA Nos. 2757 & 2758 /MUM/2017 ITA.No. 2933/MUM/2019 (A.Y. 2014-15) C.O. No. 259 & 260/MUM/2018 M/s. Patel Engineering Ltd., for repayment, therefore, we are inclined to accept the findings of TPO/AO to charge notional interest on this transaction. We observe that the TPO has proposed to charge the above said notional interest @ 13.75% however, since the transactions are international transactions, therefore, the bench marking has to be in Libor plus rates. This issue is well settled, the various courts have held the above view. Accordingly, we direct the AO/TPO to bench mark the interest rate on the basis of LIBOR Plus. Hence the ground raised by the assessee is partly allowed. 37. With regard to Ground No. 2 which is in respect of Guarantee commission considered at 1% instead of 0.66% actually charged. Ld.Counsel for the assessee filed its written submissions, for the sake of clarity it is reproduced below: - “52. Relying upon various judgments, the Assessee submits that the rate charged by the banks should be considered as internal CUP. 53. The provision of corporate guarantee does not lead to any additional costs or risks for the appellant warranting compensation. Therefore, it would have been appropriate to offer this facility on mere reimbursement basis - particularly, because a sanctioned limit was already available and the involvement of indirect cost and specific efforts were nominal. However, still, the Assessee has recovered the said charges from its AE for the guarantees issued in their favour in the following manner: i. Guarantee in favor of Patel Engineering Singapore Pte. Ltd.(PES): 28 ITA Nos. 2757 & 2758 /MUM/2017 ITA.No. 2933/MUM/2019 (A.Y. 2014-15) C.O. No. 259 & 260/MUM/2018 M/s. Patel Engineering Ltd., The bank had charges a guarantee commission of 0.60% which have been recovered from the AE after adding a markup of 10% i.e. a fee of 0.66% has been recovered from the AE. ii. Guarantee in favor of Patel Engineering Inc: As no guarantee commission was levied by the bank, the Assessee did not charge any sum from its AE. iii. Guarantee in favor of ASI RCC Inc (100% subsidiary of Patel Engineering Inc): The Assessee and Patel Engineering Inc have entered into a Contractual Service Agreement dated 1.3.2003, wherein it was agreed that the Assessee will provide agreed services mentioned therein to Patel Engineering Inc and its subsidiaries for a period not exceeding five years for an agreed compensation of USD 6,50,000 which was received upfront in A.Y.2003-04. Hence, no charges were recoverable from the AE on account of issue of the guarantee. 54. In view of the above, it is prayed that in case of guarantee at sr no.(i) the commission of 0.66% actually charged ought to be considered at ALP; at sr no. (ii) No adjustment to be made as the bank had not levied any charges on the Assessee as a result of which no commission was charged from the AE; at sr no (iii) No adjustment to be made as a lumpsum fee of USD 6,50,000 had already been paid upfront in AY 2003-04. 55. The Hon'ble Apex court in the case of CIT(LTU) v. Glenmark Pharmaceuticals Ltd in civil appeal nos. 12632/2017 has upheld the order of the Hon'ble Bombay High Court in ITA No. 1302 of 2014, wherein the Hon'ble Court followed the order of Everest Kanto Cylinder Ltd (ITA no. 542/Mum/2012) wherein it was held that guarantee commission charged at 0.53% is at arm's length. As the Assessee is charging at 0.66 % the same may be accepted. 38. In support of the above submissions, Ld. AR placed reliance on the following decisions: - (i). Glenmark Pharmaceuticals Ltd. vs. Addl. CIT - [2014] 43 taxmann.com 191(Mumbai-Trib.) 29 ITA Nos. 2757 & 2758 /MUM/2017 ITA.No. 2933/MUM/2019 (A.Y. 2014-15) C.O. No. 259 & 260/MUM/2018 M/s. Patel Engineering Ltd., (ii). Asian Paints ITA No. 08/Mum/2010 - [2014] 41 taxmann.com 71 (Mumbai-Trib.) (iii). Everest Kanto Cylinder Ltd. ITA No.714/Mum/2012 (iv). M/s. Garware Polyester Ltd. ITA no. 4189/Mum./2010 (v). Apollo Health Street Ltd. vs. DCIT - [2014] 48 taxmann.com 111 (Hyderabad -Trib.) 39. Ld. DR vehemently supported the orders of the authorities below. 40. Considered the rival submissions and material placed on record, we find that the assessee granted corporate guarantees to its AE’s and charged 10% as mark up on the commission levied by the bank. The effective rate charged by the assessee is 0.66% of the loan amount. Whereas the TPO proposed @3% and CIT(A) sustained the same @1%. We considered the rival submissions and observe that this issue of corporate guarantee is pretty much settled after the decision of the Hon’ble Bombay High Court decision in the case of Everest Kanto Cylinder Ltd (supra) wherein it was held that corporate guarantee commission @ 0.53% is reasonable and is at Arm’s Length price. Since in this case the assessee has already charged mark up on the commission charged by the bank are within the range and at arm’s length. Hence we direct the Assessing Officer to Mark up charged by the assessee on the corporate guarantee is at ALP. Accordingly, the ground raised by the assessee in the CO is allowed. 30 ITA Nos. 2757 & 2758 /MUM/2017 ITA.No. 2933/MUM/2019 (A.Y. 2014-15) C.O. No. 259 & 260/MUM/2018 M/s. Patel Engineering Ltd., 41. With regard to Ground No. 3 which is in respect of interest income based on AIR information, Ld. AR of the assessee submitted that this ground is not pressed due to smallness of the amount, accordingly, the same is dismissed. 42. In the result, cross objection filed by the assessee is partly allowed. ASSESSMENT YEAR 2009-10 ITA.No. 2758/MUM/2017 – REVENUE APPEAL 43. Revenue has raised following grounds in its appeal: - “1. "On the facts and in the circumstances of the case and in law, the CIT(A) erred in holding the assessee as a developer and not a contractor as the agreement entered into by the assessee with various government authorities is for contractual work and not to develop / operate and maintain any infrastructure facilities to which deduction u/s. 801A(4)(i) is intended to and allowing the deduction u/s 80IA(4) of the IT Act, 1961 and failed to appreciate that the section 801A(4) as amended by the Finance Act, 2007, retrospectively from AY-2000-01 by inserting Explanation to section 801A, which states that nothing contained in this section shall apply to a person who executes a work contract entered into with the undertaking or enterprises ". 2. "On the facts and in the circumstances of the case and in law, the CIT(A) erred in allowing that the credit of TDS be allowed to the assessee in contravention to section 199(2) of the IT Act, 1961, since the advances pertaining thereto are not credited in the P&L A/c of the assessee in the FY under consideration." 31 ITA Nos. 2757 & 2758 /MUM/2017 ITA.No. 2933/MUM/2019 (A.Y. 2014-15) C.O. No. 259 & 260/MUM/2018 M/s. Patel Engineering Ltd., 3. "On the facts and in the circumstances of the case and in law, the CIT(A) erred in holding that the assessee is eligible for enhanced claim of deduction u/s 80IA(4), in respect of M/s D.S.P. Enterprises and S.R. Machine Shop only to the extent of unsubstantiated purchases without appreciating the fact that the additions were made on account of accommodation entries in the nature of bogus purchases and the bogus purchases were not supported by any documentary evidences and therefore they were mere book entries against which deduction u/s 80IA(4) cannot be allowed, as the purchases itself were not genuine and hence deduction u/s 80IA(4) cannot be allowed on the same". 4. "On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in allowing the deduction under sec. 80IA(4) of the Act as regards enhancement of profit on disallowance of bogus purchase, without appreciating that assessee is not at all eligible for deduction u/s. 80IA(4) as the agreement entered into by the assessee with various government authorities is for contractual work and not to develop / operate and maintain any infrastructure facilities to which deduction u/s. 80IA(4)(1) is intended to." 5. "On the facts and in the circumstances of the case and in law, the CIT(A) erred in deleting the adjustments made by the TPO ignoring the fact that the difference between the issue price and the book value of shares of the AES is nothing but loan in disguise". 6. "On the facts and in the circumstances of the case and in law, the CIT(A) erred in deleting the disallowance u/s 14A ignoring the fact that the monthly summary of the joint venture capital account submitted by the assessee shows that in all the joint ventures, there is debit balance and further the investment have been made out of current account on which the assessee has paid interest. 7. "On the facts and in the circumstances of the case and in law, the CIT(A) erred in holding that only if disallowance is sustained u/s. 14A of the I.T.Act, then only income computed u/s. 115JBwill be enhanced for the purpose of disallowance 14A otherwise nothing would naturally be computed to the book profit." 32 ITA Nos. 2757 & 2758 /MUM/2017 ITA.No. 2933/MUM/2019 (A.Y. 2014-15) C.O. No. 259 & 260/MUM/2018 M/s. Patel Engineering Ltd., 8. "On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in holding that since the expenditure on Portland was sourced out of bogus purchases disclosed from Karma Ispat and hence, the benefit of telescoping of additions made on account of land expenses is allowable to assessee, ignoring the fact that the assessee has failed to furnish any documentary evidence to substantiate the same and the amount of purchase were part of bogus purchase from Karma Ispat." 9. The appellant craves to leave, to add, to amend and / or to alter any of the ground of appeal, if need be. 10. The appellant, therefore, prays that on the grounds stated above, the order of the CIT(A)-57, Mumbai, may be set aside and that of the Assessing Officer restored. 44. Ground Nos. 1 to 7 raised by the revenue for the A.Y. 2009-10 are similar to Ground No. 1 to 7 of grounds of appeal raised for the A.Y.2008-09 and the decision taken therein shall apply mutatis-mutandis to the appeal for the A.Y. 2009-10. We order accordingly. 45. Coming to Ground No. 8 which is in respect of granting of telescoping benefit on the addition on account of port land purchased from funds sourced out of bogus purchases from M/s. Karma Ispat. Ld.AR of the assessee filed his written submissions, for the sake of clarity it is reproduced below: - “1. During the course of arguments for Ground No. 8 of the Department's appeal in 2758/Mum/2017 relating to the granting of telescoping benefit on the addition on account of port land purchased from funds sourced out of bogus purchases from M/s 33 ITA Nos. 2757 & 2758 /MUM/2017 ITA.No. 2933/MUM/2019 (A.Y. 2014-15) C.O. No. 259 & 260/MUM/2018 M/s. Patel Engineering Ltd., Karma Ispat, the learned CIT(DR) referred to a letter filed by their office on 06.02.2020 (Annexure 1). It was pointed out by the Authorized Representative (AR) that a copy of the said letter is not available with him, which was handed over to us immediately. We have perused the said letter and as directed by the Hon'ble Bench, we respond as under: 2. During the course of search, a sworn statement of Mr. K.D. Nair was recorded u/s 132(4) of the Act on 17.12.2010 (Annexure 2), wherein at question no. 16 it was asked as follows:-, "Q. 16 Please go through the pages 36 & 49 in which it was written Rs 25.22 crores paid by Patel Engineering Ltd., on behalf of PEL Power as on 09.03.2009 and patel Engineering Ltd., received Rs. 11.27 crores from PEL Power Ltd. Please explain the transactions contained therein? Ans. I have gone through the above pages an amount of Rs. 17.50 crores paid towards purchase of land at Mamillapally an amount of Rs. 2 crores paid as donation and Rs. 7 crores payment in cash for port land. I will fumish the completed details within a week's time." (emphasis supplied) 3. Ultimately, a group disclosure was made and this payment of Rs. 7 crores for the port land was explained by way of a reconciliation during the course of search proceedings. We draw your attention to the letter filed by the Assessee on05.04.2011 before the learned DDIT (Investigation) IV-2, Mumbai (Annexure 3).wherein the details and explanations were filed along with the reconciliation of the statement given by Mr. K.D. Nair. A perusal of the said reconciliation at Annexure4, serial no. 16 at page no. 14 will show that there was an unreconciled difference of Rs. 7 crores. It was explained that this Rs. 7 crores was the only amount which was not reflected in the books of accounts of the Assessee, the source whereof was the steel purchases made from M/s Karma Ispat. 4. As regards the port land, the same was purchased by the Assessee from twelve vendor parties namely, M/s Fiesta Restaurants Ltd., M/s Anusha Air Travels Ltd.. M/s Spencer International Hotels Ltd., M/s Harrison Agroproduct Ltd., M/s 34 ITA Nos. 2757 & 2758 /MUM/2017 ITA.No. 2933/MUM/2019 (A.Y. 2014-15) C.O. No. 259 & 260/MUM/2018 M/s. Patel Engineering Ltd., Spencer & Co. Ltd., M/s Spencer Information Services Itd., M/s Spencer Furinture& Furnishings Ltd., M/s Harrison Malayalam Ltd., M/s Vulcan Electricals Ltd., M/s Spenpharma Laboratories Pvt Ltd., M/s Sentinel Tea & Exports Ltd., M/s Harrison Malayalam Financial Services Ltd. Pursuant to the negotiations, the General Power of Attorney to register the transaction was signed by the vendors (twelve parties) in favour of Mr. K.D. Nair on 27.02.2009 (Annexure 05 to 16), effectively giving all rights in the said land in favour of the Assessee, at which time cash of Rs. 7 crores referred to in the seized material was handed over to the twelve vendors; this cash was sourced by obtaining purchase bills from Karma Ispat. We enclose the ledger account of M/s Karma Ispat (Annexure 17) and the bank statements of the Assessee (Annexure 18) which reflects that payment was made against such bills aggregating to Rs. 7.20 Crores between April 2008 to February 2009, the last payment being made on 09.02.2009, which was returned by them to the Assessee. 5. Hence, as stated by Mr. K.D. Nair in his statement u/s 132(4) of the Act read with the reconciliation filed on 05.04.2011, it would be seen that Rs. 7.00 crores of payment for port land was sourced from M/s Karma Ispat. As regards the learned DR's contentions that during the course of assessment proceedings, the Assessee had not provided any documentary evidences and that it has used the word "could", we state that as the staff of the Assessee company had changed at that point in time, the new staff was not aware of the reconciliation filed and therefore the said submission was erroneously given. However, it is apparent and obvious that a statement u/s 132(4) of the Act along with the reconciliation, which is duly backed by supporting documents regarding the sourcing of cash for the payment for port land would have tremendous evidentiary value over the apparent error in the submission during the assessment proceedings. 6. In this regards, we place reliance upon the following.  CIT v. Golani Brothers (250 Taxman 446) (Bombay High Court)  PCIT v. AliasgarAnvaraliVarteji (96 taxmann.com 231) (Gujarat HC)  Rajni M. patel v. DCIT (88 taxmann.com 349) (Ahmedabad ITAT)  Mr. Shyam Bahadur Singh v. ACIT (ITA No. 3966/Mum/2010) (Mumbai ITAT) 35 ITA Nos. 2757 & 2758 /MUM/2017 ITA.No. 2933/MUM/2019 (A.Y. 2014-15) C.O. No. 259 & 260/MUM/2018 M/s. Patel Engineering Ltd., 7. In view of the above submissions, we submit that the telescoping benefit of Rs.7.00 crores has been correctly allowed by the learned CIT (Appeals).” 46. Ld DR submitted that this is a search and seizure case and there are seized materials and statements recorded. The ground pertains to telescoping of bogus purchases against land expenses. The basic facts are in Paragraph No. 14 of assessment order. This may kindly be perused. 47. The Assessing Officer during assessment proceedings on a poser, obtained a reply from Assessee. It is reproduced in Page No.26 of assessment order. The reply is vague as can be seen in the word ‘could’ in the extract of reply given before Assessing Officer. No specifics were placed before Assessing officer as can be seen from extract of submission reproduced in same paragraph in assessment order. When a claim is made, submission before Assessing Officer has to be emphatic and is to be supported by documentary evidence and also dates are to be matched. No such exercise is made. The Assessing Officer is therefore correct in coming to his decision. The CIT(A) gave relief and reasons are in paragraph 32 (page 66) of his order. Although he relies on a statement recorded during search, the explanation given before 36 ITA Nos. 2757 & 2758 /MUM/2017 ITA.No. 2933/MUM/2019 (A.Y. 2014-15) C.O. No. 259 & 260/MUM/2018 M/s. Patel Engineering Ltd., Assessing Officer and its vagueness escaped his consideration. He made of the gross figures in coming to his decision. This is without going into dates or cash availability, which were to be produced/explained by assessee before Assessing Officer before allowing benefit of telescoping. The decision is without examining relevant information, despite explanation before Assessing Officer being vague and unsubstantiated. Thus the Assessee has not discharged his onus of establishing conclusively his claim. Hence, it is prayed that the decision of CIT(A) is reversed on account of fact that proper explanation was not given before Assessing Officer by the assessee. 48. On the other hand, Ld. AR submitted that during the course of search itself, while providing explanation to seized pages before DDIT (Inv), the assessee explained that ₹.7 Crores paid for land development expenses were sourced from steel purchases of Karma Ispat of ₹.11,07,85,159/-, which has been disclosed as bogus purchases and has been offered for tax. Thus, substantial funds were available with the Assessee on account of the bogus purchases booked. All these facts have neither been disputed by the DDIT(Inv) nor by the Assessing Officer. Accordingly, the telescoping benefit should be allowed. 37 ITA Nos. 2757 & 2758 /MUM/2017 ITA.No. 2933/MUM/2019 (A.Y. 2014-15) C.O. No. 259 & 260/MUM/2018 M/s. Patel Engineering Ltd., 49. Considered the rival submissions and material placed on record, we observe from the record that the assessee during search proceedings itself disclosed the fact that the assessee had utilized the funds generated from the non genuine transactions entered with the Karma Ispat and the same was disallowed by the authorities. This being the case, the source is already disclosed is the contention of the Assessee. However, we observe that the statement given during search are general in nature without their being any material to support their statement. We are in agreement with the submissions of the Ld DR that the assessee has to submit detailed cash statement etc to substantiate that the cash generated out of bogus purchases are utilized specifically in land purchase. Mere general statement cannot be considered as discharge of onus of proof. We are in agreement with the submissions of the Ld DR that the assessee has to demonstrate the availability of the funds at the time of investment made in the Land, further, the assessee cannot try to cover up two non genuine transactions with this submissions, first they arranged non genuine purchase without proper reasons particularly when they know that the profit generated out of the projects are eligible for deduction u/s 80IB still they arranged bogus bills and second payment of funds for land in cash. Therefore, The Assessing 38 ITA Nos. 2757 & 2758 /MUM/2017 ITA.No. 2933/MUM/2019 (A.Y. 2014-15) C.O. No. 259 & 260/MUM/2018 M/s. Patel Engineering Ltd., Officer is directed to verify the respective purchases from the Karma Ispat and if it is disallowed in the year of purchase and now claimed as deduction u/s 80IB then this transaction can be allowed as source are already disclosed otherwise, the addition can be sustained. We modify the directions given by the first appellate authority in this regard. Accordingly, the ground raised by the revenue is allowed for statistical purpose. 50. In the result, appeal filed by the Revenue is partly allowed as per above directions. C.O. NO. 260/MUM/2018 – Assessee Appeal 51. Assessee has raised following grounds in its cross objection: - “1. On the facts and circumstances of the case and in Law, the Learned CIT (A) erred in directing the A.O to calculate adjustment of Arm's length commission @ 1.5% on the amount of Bank Guarantees advanced by the banks to the AE as against 0.74% actually charged. 2. On the facts and circumstances of the case and in Law, the Learned CIT (A) erred in confirming the action of A.O in assessing construction income of Rs.2,22,335 merely on the basis of AIR information.” 52. Ground Nos. 1 and 2 raised by the assessee for the A.Y. 2009-10 are similar to Ground No. 2 and 3 of grounds of appeal raised in cross objection for the A.Y.2008-09 and the decision taken therein shall apply 39 ITA Nos. 2757 & 2758 /MUM/2017 ITA.No. 2933/MUM/2019 (A.Y. 2014-15) C.O. No. 259 & 260/MUM/2018 M/s. Patel Engineering Ltd., mutatis-mutandis to the cross objection for the A.Y. 2009-10. We order accordingly. 53. In the result, cross objection filed by the assessee is partly allowed. ASSESSMENT YEAR 2014-15 ITA.No. 2933/MUM/2019 – Revenue Appeal 54. Revenue has raised following grounds in its appeal: - 1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the disallowance of the assessee's claim of deduction u/s 80IA of the Act of Rs. 1,64,90,19,917/ 2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in holding the assessee as a developer and not contractor and allowing deduction u/s.80IA (4) of the IT Act, 1961 and failed to appreciate section80IA (4) as amended by the Finance Act, 2007, retrospectively from AY 2000- 01 by inserting Explanation to section 80IA, states that nothing contained in this section shall apply to a person who executes a work contract entered into with the undertaking or enterprise. 3. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in holding that the credit of TDS on the advances be allowed to the assessee in contravention to section 199(2) of the IT Act, 1961.since the advances pertaining thereto are not credited in the P&L A/c of the assessee in the FY under consideration” 40 ITA Nos. 2757 & 2758 /MUM/2017 ITA.No. 2933/MUM/2019 (A.Y. 2014-15) C.O. No. 259 & 260/MUM/2018 M/s. Patel Engineering Ltd., 55. Ground Nos. 1 to 3 raised by the revenue for the A.Y. 2014-15 are similar to Ground No. 1, 4 and 2 of grounds of appeal raised for the A.Y.2008-09 and the decision taken therein shall apply mutatis-mutandis to the appeal for the A.Y. 2014-15. We order accordingly. 56. In the result, appeal filed by the revenue is dismissed. Order pronounced in the open court on 31 st October, 2022. Sd/- Sd/- (VIKAS AWASTHY) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai / Dated 31/10/2022 Giridhar, Sr.PS Copy of the Order forwarded to: 1. The Appellant 2. The Respondent. 3. The CIT(A), Mumbai. 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. //True Copy// BY ORDER (Asstt. Registrar) ITAT, Mum