Appeal Details
Counselvise Citation
[2023] 100 COUNSELVISE.COM (IT) 4975 (ITAT-AHMEDABAD)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
3 year(s) 5 month(s) 18 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
29-11-2023
Appeal Filed By
Assessee
Order Result
PartlyAllowed
Bench Allotted
D
Next Hearing Date
06-11-2023
Assessment Year
2012-2013
Appeal Filed On
10-06-2020
Judgement Text
आयकरअपीलीयअधिकरण , अहमदाबादनयायपीी INTHEINCOMETAXAPPELLATETRIBUNAL, ‘’D’’BENCH,AHMEDABAD BEFORESHRIWASEEMAHMED,ACCOUNTANTMEMBER And MS.MADHUMITAROY,JUDICIALMEMBER Sl. No(s) ITANos.Asset. Year(s) Appeal(s)by Appellantvs.Respondent AppellantRespondent 1.ITANo.319/Ahd/20202012-13AdaniPorts&Special EconomicZoneLtd., AdaniHouse,Nr. MithakhaliSixRoads, Navrangpura, Ahmedabad-380009 PAN:AAACG7917K Jt.Commissionerof IncomeTax(OSD), O/o.Pr.CIT-1, Ahmedabad 2.ITANo.335/Ahd/20202012-13D.C.I.T., Circle-1(1)(1), Ahmedabad M/s.AdaniPorts& SpecialEconomic ZoneLtd. AdaniHouse,Nr. NavrangpuraRailway CrossRoad, Ahmedabad PAN:AAACG7917K 3.ITANo.446/Ahd/20202013-14AdaniPorts&Special EconomicZoneLtd., AdaniHouse,Nr. MithakhaliSixRoads, Navrangpura, Ahmedabad-380009 PAN:AAACG7917K D.C.I.T., Circle-1(1)(1), Ahmedabad 4.ITANo.471/Ahd/20202013-14D.C.I.T., Circle-1(1)(1), Ahmedabad M/s.AdaniPorts& SpecialEconomic ZoneLtd. AdaniHouse,Nr. NavrangpuraRailway CrossRoad, Ahmedabad PAN:AAACG7917K ITAnos.319/AHD/2020&09others Asstt.Years2012-13and04others 2 5.ITANo.44/Ahd/20212014-15AdaniPorts&Special EconomicZoneLtd., AdaniCorporate House,Shantigram, SGHighway,Nr. VaishnoDeviCircle, Khodiyar,Ahmedabad PAN:AAACG7917K Jt.Commissionerof IncomeTax(OSD), Circle-1(1)(2), Ahmedabad 6.ITANo.63/Ahd/20212014-15D.C.I.T., Circle-1(1)(1), Ahmedabad M/s.AdaniPorts& SpecialEconomic ZoneLtd. AdaniHouse,Nr. NavrangpuraRailway CrossRoad, Ahmedabad PAN:AAACG7917K 7.ITANo.45/Ahd/0212015-16AdaniPorts&Special EconomicZoneLtd., AdaniCorporate House,Shantigram, SGHighway,Nr. VaishnoDeviCircle, Khodiyar,Ahmedabad PAN:AAACG7917K D.C.I.T, Circle-1(1)(2), Ahmedabad 8.ITANo.64/Ahd/20212015-16D.C.I.T., Circle-1(1)(1), Ahmedabad M/s.AdaniPorts& SpecialEconomic ZoneLtd. AdaniHouse,Nr. NavrangpuraRailway CrossRoad, Ahmedabad PAN:AAACG7917K 9.ITANo.46/Ahd/20212016-17AdaniPorts&Special EconomicZoneLtd., AdaniCorporate House,Shantigram, SGHighway,Nr. VaishnoDeviCircle, Khodiyar,Ahmedabad PAN:AAACG7917K A.C.I.T, Circle-1(1)(1), Ahmedabad ITAnos.319/AHD/2020&09others Asstt.Years2012-13and04others 3 Assesseeby:ShriDhrunalBhatt&ShriBiren Shah,A.Rs. Revenueby:ShriSudhenduDas,C.I.TD.R. सुनवाईकीतारीख/DateofHearing:07/11/2023 घोषणाकीतारीख/DateofPronouncement:30/11/2023 आदेश/ORDER PERBENCH: Thecaptionedappealshavebeenfiledattheinstanceofassesseeandthe RevenueagainsttherespectiveordersoftheLearnedCommissionerofIncome Tax(Appeals),Ahmedabadarisinginthematterofassessmentorderpassed unders.143(3)r.w.s.144CoftheIncomeTaxAct,1961(here-in-afterreferredto as"theAct")relevanttotheAssessmentYearsasmentionedinthecausetitle. First,wetakeupITANo.319/AHD/2020,anappealbytheassesseefor AY2012-13 2.Theassesseehasraisedfollowinggroundsofappeal: “1.Onthefactsandinthecircumstancesofthecase,thelearnedCIT(A)erredin upholdingdisallowanceofdepreciationforRs.6,77,38,601inrespectoflanddevelopment expenditureincurredonleaseholdlandstowardsreclamationoflandbytheappellanton meritsofthecase.TheCIT(A)hasallowedtechnicalgroundofAppellantforentitlementof 10.ITANo.65/Ahd/20212016-17D.C.I.T., Circle-1(1)(1), Ahmedabad M/s.AdaniPorts& SpecialEconomic ZoneLtd. AdaniHouse,Nr. NavrangpuraRailway CrossRoad, Ahmedabad PAN:AAACG7917K (Applicant)(Respondent) ITAnos.319/AHD/2020&09others Asstt.Years2012-13and04others 4 increaseddeductionu/s801ABoftheActonsuchdisallowanceandheoughttohavealso decidedtheissueonmeritsinfavourofappellant. 2.Onthefactsandinthecircumstancesofthecase,thelearnedCIT(A)erredin upholdingdisallowanceofdepreciationofRs.1,12,29,956claimedbytheappellant- companyon"righttouseleaseholdland",beingintangibleasseteligibleforgrantof depreciationu/s32oftheI.T.Actonmeritsofthecase.TheCIT(A)hasallowedtechnical groundofAppellantforentitlementofincreaseddeductionu/s80IABoftheActonsuch disallowanceandheoughttohavealsodecidedtheissueonmeritsinfavourofappellant. 3.Onthefactsandinthecircumstancesofthecase,thelearnedCIT(A)erredin upholdingdisallowanceu/s14AoftheActtotheextentofRs1,75,00,000beingexempt incomeonmeritsofthecase,andwithoutappreciatingthefactthatappellanthas substantialownfundsinexcessofinvestmentsmadebyit.TheCIT(A)oughttohave deletedentireadditionu/s14AoftheActonmeritsofthecase,ratherthanrestrictingitto theexemptincomeandallowingtechnicalgroundofAppellantforentitlementofincreased deductionu/s80IABoftheActonsuchdisallowance. 4.Theappellantcravesleavetoadd,alter,amendand/orwithdrawanygroundor groundsofappealeitherbeforeorduringthecourseofhearingoftheappeal. 3.ThefirstissueraisedbytheassesseeisthatthelearnedCIT(A)erredin confirmingthedisallowanceofdepreciationofRs.6,77,38,601/-onland developmentexpenditureincurredonleaseholdproperty. 4.Thefactsinbriefarethattheassesseeisapubliccompanyandmainly engagedinthebusinessofdevelopment/operationofPortandspecialeconomic zone(SEZ)atMundraGujarat.Theassesseeinthestatementofincomeclaimed deductionofRs.6,77,38,601/-onaccountofamortizationoflanddevelopment expenditure.Theassesseeinthisregardsubmittedthatpartofleaseholdland awardedtoitfordevelopmentofMundraPortandSEZwerenotreadilyusablefor industrialpurposes.Therefore,itincurredcertainexpendituretodeveloptheland whichmainlyincludedlandlevelingexpensesforcreatingbackupyard.Assuch thebackupyardisasolidstructuremadeupofconcretewhichwasusedfor storingcargo/containers.Therefore,thelandlevelingexpensesincurredfor creatingabackupyardistreatedasbuildingandaccordingly,thedepreciationwas claimed@10%oftotalcostincurredonlanddevelopment. 4.1However,theAOduringtheassessmentproceedingsfoundthatland developmentexpenditureincurredintheyearunderconsiderationforRs.3.59 ITAnos.319/AHD/2020&09others Asstt.Years2012-13and04others 5 Croreswascapitalizedbytheassesseeandclaimeddepreciationthereonwhereas similarexpenseswereamortizedinearlieryears.Thus,theassesseewasfoundto betakingdifferentstandforsameexpenditureindifferentyears.TheAOfurther foundthattheamortizationofexpensesundersection35DoftheActisonly availableforexpenseincurredbeforeincorporationorsetupofnewindustrialunit afterincorporationbutinthecaseoftheassessee,theconditionswerenot fulfilled.TheAOalsonotedthattheassesseeononehandistreatingthe impugnedexpenditureincurredoninfrastructurefacilityandtherefore,thesame shouldbetreatedasbuildingforthepurposeofdepreciationbutchoosestoclaim thesameasamortizationforRs.6,77,38,601/-only.Hence,theAOdisallowedthe claimoftheassesseeandaddedtothetotalincome. 5.TheaggrievedassesseepreferredanappealbeforethelearnedCIT(A).The learnedCIT(A)afterconsideringthefactsintotalityconfirmedthedisallowance madebytheAObyobservingasunder: IhavecarefullyconsideredtheAssessmentOrderandthesubmissionfiledbythe Appellant.Itisobservedthatidenticaldisallowancewasmadeinthecaseoftheappellant forA.Y2010-11whereinCIT(Appeals)-6onidenticalfactsvideorderdated13 th November, 2014hasconfirmedthedisallowanceonthegroundthatthereisnoprovisionintheAct foramortizingthevalueofleaseholdlandandappellanthasnotjustifiedthebasisfor treatingtheexpenditureasbuilding.Asfactsoftheyearunderconsiderationcontinueto remainthesame,disallowancemadebyAOforRs.6,66,38,601/-isherebyupheld. 6.BeingaggrievedbytheorderofthelearnedCIT(A),theassesseeisin appealbeforeus. 6.1ThelearnedARbeforeusfiledapaperbookrunningfrompages1to112 andsubmittedthatimpugnedexpenditureswereincurredforthepurposeofthe businessandthereforethesameshouldbeallowedasdeduction. 6.2Ontheotherhand,thelearnedDRvehementlysupportedtheorderofthe authoritiesbelow. ITAnos.319/AHD/2020&09others Asstt.Years2012-13and04others 6 7.Wehaveheardtherivalcontentionsofboththepartiesandperusedthe materialsavailableonrecord.Theissueonhandfirstaroseinthehandsofthe assesseeintheassessmentyear2011-12.Inthatassessmentyear,theassessee claimedthedepreciationwhichwasdisallowedbytheAOandsubsequentlythe orderoftheAOwasalsoupheldbythelearnedCIT-A.Againstthefindingofthe learnedCIT-A,theassesseedidnotchallengethesamebeforethehigherforum. Thus,thefindingofthelearnedCIT-Areachedthefinality.Now,thecontroversy ariseswhethertheissuerelatingtothedepreciationcanberaisedbytheassessee inthesubsequentyearwithoutchallengingtheinitial/firstassessmentyearas discussedabove.Theanswerstandsagainsttheassessee.Insimplewords,the assesseeinitsowncasehasadmittedthedisallowanceofdepreciationand thereforethesamecannotbeagitatedinthelateryears.Hence,thegroundof appealoftheassesseeisherebydismissed. 8.ThenextissueraisedbytheassesseeisthatthelearnedCIT(A)erredin confirmingthedisallowanceofdeprecationofRs.1,12,29,956/-claimedon“right touseleaseholdland”. 9.Thenecessaryfactsarethattheassesseehasbeenallottedlandonlease basisbytheGujaratMaritimeBoard(GMB).Theassesseeaccountedfortheright touseleaseholdlandintheA.Y.2011-12atpresentvalueoffutureannuallease andclaimeddepreciationonthesame@25%bytreatingthesameasintangible assets. 9.1However,theAOdisallowedtheclaimofdepreciationbyholdingthatthe assetinthequestionislandpropertyandthereisnoprovisionundersection32of theActtoallowdepreciationonlandproperty.TheAOfurtherheldthatthe assesseeisalsonoteligibletoclaimdepreciationbytreatingsuchleaseholdland asintangibleassetforthereasonthatthegrantingsometypesofownershipover thelandcannotbeequatedwiththephrase“BusinessorCommercialright”used ITAnos.319/AHD/2020&09others Asstt.Years2012-13and04others 7 undersection32(1)(ii)oftheAct.Accordingly,theAOdisallowedtheclaimofthe depreciationonrighttouseleaseholdland. 10.Onappealbytheassessee,thelearnedCIT(A)confirmedthedisallowance madebytheAObyfollowingtheorderofhispredecessorintheowncaseofthe assesseeforAY2011-12. 11.BeingaggrievedbytheorderofthelearnedCIT(A),theassesseeisin appealbeforeus. 11.1ThelearnedARfortheassesseebeforeussubmittedthattheissuehas beendecidedinfavouroftheassesseebytheITATinitsowncaseinITANo.122 &167/AHD/2015forAY2011-12. 11.2Ontheotherhand,thelearnedDRvehementlysupportedtheorderofthe lowerauthorities. 12.Wehaveheardtherivalcontentionsofboththepartiesandperusedthe materialsavailableontherecord.Attheoutset,wefindtheissuehasbeen decidedinfavouroftheassesseebythecoordinatebenchofthistribunalinthe owncaseoftheassesseeinITANo.122&167/AHD/2015forAY2011-12.The benchvideorderdated29-03-2023heldasunder: 13.Wehaveheardboththepartiesandperusedalltherelevantmaterialavailableon record.Itispertinenttonotethattherecognitionoftherighttouseleaseholdlandas intangibleassetasperthestatementofaccountandthesamewasnotdisputedbythe Departmentatanystage.Thus,theclaimofdepreciationwascorrectlymadeandthe sameshouldhavebeentakenintoaccountbytheAssessingOfficeraswellasCIT(A). Thus,groundno.5andgroundno.5.1areallowed. 12.1Beforeus,nomaterialhasbeenplacedonrecordbytheRevenueto demonstratethatthedecisionoftheTribunalinowncaseoftheassesseeas discussedabovehasbeensetaside/stayedoroverruledbytheHigherJudicial Authorities.Beforeus,nomaterialwasplacedonrecordtopointoutany ITAnos.319/AHD/2020&09others Asstt.Years2012-13and04others 8 distinguishingfeatureinthefactsofthecaseofearlierAYandtheyearunder consideration.Thus,respectfullyfollowingtheorderofthetribunalintheown caseoftheassesseeasdiscussedabove,weherebysetasidethefindingofthe learnedCIT(A)anddirecttheAOtodeletethedisallowancemadebyhim.Thus, thegroundofappealraisedbytheassesseeisherebyallowed. 13.ThenextissueraisedbytheassesseeisthatthelearnedCIT(A)erredin confirmingthedisallowancesundersection14AoftheActonmerit. 14.TheAOfoundthattheassesseehasclaimedexempteddividendincomefor Rs.2croreandmadecorrespondingdisallowancesu/ssection14AoftheActfor Rs.25Lacsonly.However,theAObeingdissatisfiedwiththeamountdisallowed bytheassessee,invokedtheprovisionssection14Ar.w.rule8Dofincometax ruleworkedoutthedisallowableamountasunder: (i)DirectexpenditureNIL (ii)InterestexpensesRs.10,78,91,890/- (iii)AdministrativeexpensesRs.4,05,02,551/- 14.1Thus,theAOworkedoutthedisallowableamountatRs.14,83,94,441/- andafterprovidingcreditofsuo-motodisallowance,madeadditionofRs. 14,58,94,441/-tothetotalincomeoftheassessee.TheAOfurthermadeaddition tothebookprofitaspertheprovisionofsection115JBoftheActbytheamount disallowedu/s14AoftheAct. 15.TheaggrievedassesseepreferredanappealbeforethelearnedCIT(A)who restrictedthedisallowancetotheextentofexemptedincome.ThelearnedCIT(A) furtherdirectedtheAOtoincreasetheamountofeligibleprofitundersection 80IABoftheActbytheamountofdisallowancemadeu/s14AoftheAct.The learnedCIT(A)regardingtheadditiontothebookprofitheldthattheamount ITAnos.319/AHD/2020&09others Asstt.Years2012-13and04others 9 calculatedu/s14AoftheActcannotbethesubjectmatterofadditiontobook profitunderu/s115JBoftheAct. 16.BeingaggrievedbytheorderthelearnedCIT(A)boththeassesseeandthe revenueareinappealbeforeus.Theassesseeisinappealagainstthe confirmationofdisallowancestotheextentofRs.1.75crores.Ontheotherhand, therevenueisinappealagainstreductionofdisallowancestotheextentof exemptedincomeaswellasdeletionofadditiontothebookprofitundersection 115JBoftheAct.Therelevantgroundofrevenue’sappealinITANo. 335/AHD/2020readsasunder: “4.Theld.CIT(A)haserredinlawandfactsinrestrictingthesection14A disallowanceofRs.14,58,94,441/-toRs.1,75,00,000/-underthegeneralprovisions. 5.Theld.CIT(A)haserredinlawandfactsindeletingtheS.115JBadjustmentofRs. 14,58,94,441/-.” 16.1ThelearnedARbeforeuscontendedthattheassesseewashavinginterest freeownfundexceedingtheamountofinvestment.Therefore,nointerest expensecouldbedisallowed.Likewise,theamountofdisallowanceof administrativeexpensesshallbecomputedconsideringonlythoseinvestments whichyieldedtheexemptedincomeduringtheyear,whichstandatRs.4000Lacs. Accordingly,theadministrativeexpensesdisallowancesshallbeofRs.20Lacs(Rs. 4000Lacsx0.5%)onlywhichislessthanthesuo-motodisallowance(Rs.25Lacs) madebytheassessee.Hencenofurtherdisallowanceisrequiredtobemade. 16.2Ontheotherhand,thelearnedDRreiteratedthefindingscontainedinthe assessmentorder. 16.3Beforeus,boththeld.DRandtheld.ARbeforeusvehementlysupported theorderoftheauthoritiesbelowasfavourabletothem. ITAnos.319/AHD/2020&09others Asstt.Years2012-13and04others 10 17.Wehaveheardtherivalcontentionsofboththepartiesandperusedthe materialsavailableonrecord.Admittedly,theAOhasworkedouttheamountof disallowanceundersection14AoftheActaspertheprovisionofrule8Dof IncomeTaxRulewhichincludesdisallowancesonaccountofinterestexpensesas welladministrativeexpenses.TheAOhasalsomadetheadditiontothebook profitcalculatedundertheprovisionsofsection115JBoftheAct.Thelearned CIT(A)restrictedthequantumofdisallowanceundersection14AoftheActtothe extentofexemptedincomeonlywhereasdeletedtheadditiontobookprofitin entirety.Nowboththeassesseeandtherevenueareinappealbeforeus. 17.1Itissettledpositionoflawbyseveralcompetentcourtthatifthereare mixedfundsorinterestfreefundsexceedtheamountofinvestmentthenthe powerofpresumptionwouldbethattheinvestmenthasbeenmadeoutof interestfreefunds.Inholdingso,wedrawsupportandguidancefromthe judgmentofHon’bleJurisdictionalHighCourtinthecaseofCITvs.TorrentPower Ltdreportedin363ITR474whereitwasheldasunder: Itwasnotedfromrecordsthattheassesseewashavingshareholdingfundstotheextent of2607.18croresandtheinvestmentmadebyitwastotheextentof`Rs.195.10crores.In otherwords,theassesseehadsufficientfundsformakingtheinvestmentsandithadnot usedtheborrowedfundsforsuchpurpose.Thisaspectofhugesurplusfundsisnot disputedbytherevenuewhichearnedittheinterestonbondsanddividendincome.[Para 7] 17.2Inthecaseofthepresentassessee,theinterestfreefundoftheassessee exceedstheamountoftheinvestmentyieldingtheexemptedincome.Therefore, nodisallowancecanbemadeonaccountofinterestexpenditureunderthe provisionofrule8DITruleinthegivenfactsandcircumstances. 17.3Comingtotheissueofdisallowanceofadministrativeexpenses,inour consideredopinion,thecontentionoftheassesseecannotbeacceptedthatno expenditureinrelationtotheinvestmentwasincurred.Therefore,the disallowanceofadministrativeasperrule8DoftheIncomeTaxRuleneedstobe made.Aspertheprovisionofrule8D(2)(iii)theamountofadministrativeexpense ITAnos.319/AHD/2020&09others Asstt.Years2012-13and04others 11 shallbeequalto0.5%ofaveragevalueoftheinvestment,incomefromwhich doesnotorshallnotformpartoftotalincome.Now,thequestionariseswhile computingtheaveragevalueofinvestmentwhetheralltheinvestmentcapableof yieldingexemptedincomeshallbeconsideredoronlythoseinvestmentswhich yieldedexemptedincomeduringtheyearshallbeconsidered.Thequestionhas beenansweredbytheSpecialBenchofTribunalinthecaseofACITvs.Vireet Investment(P.)Ltdreportedin82taxmann.com415whereinitwasheldthatonly thoseinvestmentshallbeconsideredwhichyieldedexemptedincomeduringthe year.TherelevantfindingoftheSpecialBenchreadsasunder: 11.16Therefore,inourconsideredopinion,nocontraryviewcanbetakenunderthese circumstances.We,accordingly,holdthatonlythoseinvestmentsaretobeconsideredfor computingaveragevalueofinvestmentwhichyieldedexemptincomeduringtheyear. 17.4Inthepresentcase,thelearnedARoftheassesseecontendedthatduring theyearexemptedincomeearnedonlyfromtheinvestmentmadeinKutch RailwaysCompanyLtd.,whichhasnotbeencontroverted.Therefore,inviewof theabovediscussionandfindingoftheSpecialBench,weholdthatamountof disallowanceunderrule8D(2)(iii)shallbecomputedonlyconsideringthe investmentinKutchRailwaysCompanyLtdofwhichaveragevaluestandatRs. 4000LacsonlyandaccordinglytheamountofdisallowanceshallbeatRs.20Lacs onlywhereastheassesseehasalreadymadedisallowancesofRs.25lacs. Therefore,inourconsideredopinion,nofurtherdisallowanceisrequiredtobe made.HencethegroundofappealoftheRevenueinrelationtodisallowanceu/s 14AoftheActisdismissedwhereasthegroundofappealoftheassesseeonthe sameisherebyallowed. 17.5Comingtotheissueofadditiontobookprofitcomputedundersection 115JBoftheAct.AttheoutsetwenotethattheSpecialBenchofHon’bleDelhi TribunalinthecaseofACITvs.VireetInvestmentPvt.Ltd.reportedin82 Taxmann.com415hasheldthatthedisallowancemadeu/s14Ar.w.r.8Dcannot ITAnos.319/AHD/2020&09others Asstt.Years2012-13and04others 12 bethesubjectmatterofdisallowancewhiledeterminingthenetprofitu/s115JB oftheAct.Therelevantportionofthesaidorderisreproducedbelow: “Inviewofabovediscussion,thecomputationunderclause(f)ofExplanation1to section115JB(2),istobemadewithoutresortingtothecomputationas contemplatedundersection14A,readwithrule8DoftheIncome-taxRules,1962.” 17.6TheratiolaiddownbytheHon’bleTribunalissquarelyapplicabletothe factsofthecaseonhand.Thus,itcanbeconcludedthatthedisallowancemade undersection14Ar.w.r.8Dcannotberesortedwhiledeterminingtheexpensesas mentionedunderclause(f)toexplanation1tosection115JBoftheAct. 17.7However,itisalsoclearthatdisallowanceneedstobemadewithrespectto theexemptedincomeintermsoftheprovisionsofclause(f)tosection115JBof theActwhiledeterminingthebookprofit.Inholdingso,wedrawsupportfrom thejudgmentofHon’bleCalcuttaHighCourtinthecaseofCITVs.JayshreeTea IndustriesLtd.inGONo.1501of2014(ITATNo.47of2014)dated19.11.14 whereinitwasheldthatthedisallowanceregardingtheexemptedincomeneeds tobemadeaspertheclause(f)toExplanation-1ofSec.115JBoftheAct independently.Therelevantextractofthejudgmentisreproducedbelow: “Wefindcomputationoftheamountofexpenditurerelatabletoexemptedincomeofthe assesseemustbemadesincetheassesseehasnotclaimedsuchexpendituretobeNil. Suchcomputationmustbemadebyapplyingclause(f)ofExplanation1undersection 115JBoftheAct.Weremandthematterforsuchcomputationtobemadebythelearned Tribunal. WeacceptthesubmissionofMr.Khaitan,learnedSeniorAdvocatethattheprovisionof section115JBinthematterofcomputationisacompletecodeinitselfandresortneednot andcannotbemadetosection14AoftheAct.” 17.8Givenabove,weholdthatthedisallowancesmadeundertheprovisionsof Sec.14Ar.w.r.8DoftheITRules,cannotbeappliedtotheprovisionofSec. 115JBoftheActasperthedirectionoftheHon'bleCalcuttaHighCourtinthe caseofCITVs.JayshreeTeaIndustriesLtd.(Supra). ITAnos.319/AHD/2020&09others Asstt.Years2012-13and04others 13 17.9Nowthequestionarisestodeterminethedisallowanceaspertheclause(f) toExplanation-1ofSec.115JBoftheActindependently.Inthisregard,wenote thatthereisnomechanism/mannergivenunderclause(f)toExplanation-1of Sec.115JBoftheActtoworkout/determinetheexpenseswithrespecttothe exemptedincome.Therefore,inthegivenfacts&circumstances,wefeelthatad- hocdisallowancewillservethejusticetotheRevenueandassesseetoavoidthe multiplicityoftheproceedingsandunnecessarylitigation.Inthegiventhe assesseeiteslfhasmadeadhocdisallowancesofRs.25Lacsundernormal computationofincomeinconnectionwiththeexmptedincomeearnedduringthe year.Thereforeweareoftheconsidredopinionthattheamountwhichbeen admittedbytheassesseeitselfasincurredinconnectionwithexemptedshallbe addedtothebookprofitaspertheprovionofclause(f)toexplantion1ofsection 115JBoftheAct.ThuswedirecttheAOtomaketheadditionofRs.25Lacsas discussedaboveunderclause(f)toExplanation-1ofSec.115JBoftheAct.Thus, thegroundofappealoftheRevenueinrelationtoadditontobookprofitsispartly allowed. 18.Intheresult,appealoftheassesseeisherebyPartlyallowed. ComingtoITANo.335/AHD/2020anappealbytheRevenueforA.Y. 2012-13 19.TheRevenuehasraisedfollowinggroundsofappeal: “1)Theld.CIT(A)haserredinlawandfactsinallowingdeductionu/s.80IABonsale ofscrapofRs.1,75,46,556/-. 2)Theld.CIT(A)haserredinlawandfactsinallowingdeductionu/s.80IABongain onforeigncurrencyderivativetransactionofRs.9,60,24,519/-. 3)Theld.CIT(A)haserredinlawandfactsinholdingtheforeigncurrencyderivative lossofRs.54,48,34,443/-asnon-speculativeandnegatingthefindingsoftheAO. 4)Theld.CIT(A)haserredinlawandfactsinrestrictingthesection14A disallowanceofRs.14,58,94,441/-toRs.1,75,00,000/-underthegeneralprovisions. ITAnos.319/AHD/2020&09others Asstt.Years2012-13and04others 14 5)Theld.CIT(A)haserredinlawandfactsindeletingtheS.115JBadjustmentofRs. 14,58,94,441/-. 6)Theld.CIT(A)haserredinlawandfactsindeletingthedepreciationdisallowance ofRs.34,54,256/-. 7)Theld.CIT(A)haserredinlawandfactsinholdingthattheCorporateGuarantee isnotaninternationaltransactionandindeletingtheupwardadjustmentofRs. 4,75,74,829/-madebytheTPO. 8)Itis,therefore,prayedthattheorderofld.CIT(A)maybesetasideandthatof theAssessingOfficerberestored.” 20.ThefirstissueraisedbytheRevenueisthatthelearnedCIT(A)erredin allowingthedeductionu/s80IABoftheActonaccountofsaleofscrapforRs. 1,75,46,556/-only. 21.TheAOduringtheassessmentproceedingsfoundthattheassesseeinthe profiteligiblefordeductionundersection80IABoftheActhasincludedreceipton accountofsaleofscrapforRs.1,75,46,556/-whichmainlyconsistreplacedparts, unusableconsumablesgeneratedduetodefectsetc.TheAOfurtherfoundthat theassesseeinthebooksofaccountsitselfhasnottreatedproceedsfromscrap saleasincomefromoperation.TheAOwasalsooftheviewthatsaleofscrap cannotbeheldasincomederivedfromeligibleindustrialundertakings.Hencethe AOdisallowedthesame. 22.TheaggrievedassesseepreferredanappealbeforethelearnedCIT(A).The learnedCIT(A)followingtheorderofitspredecessorinowncaseoftheassessee forA.Y.2011-12allowedthedeductionclaimedbytheassessee. 23.BeingaggrievedbytheorderofthelearnedCIT(A),theRevenueisin appealbeforeus. 23.1ThelearnedDRbeforeusvehementlysupportedthefindingoftheAO. ITAnos.319/AHD/2020&09others Asstt.Years2012-13and04others 15 23.2Ontheotherhand,thelearnedARbeforeussubmittedthattheissueon handhasbeencoveredinfavouroftheassesseebyorderofthistribunalinown caseoftheassesseeforA.Y.2011-12. 24.Wehaveheardtherivalcontentionsofboththepartiesandperusedthe materialsavailableontherecord.Attheoutset,wefindtheissuehasbeen decidedinfavourtheassesseebythecoordinatebenchofthistribunalintheown caseoftheassesseeinITANo.122&167/AHD/2015forAY2011-12.Thebench videorderdated29-03-2023heldasunder: 7.Wehaveheardboththepartiesandperusedalltherelevantmaterialavailableon record.InrespectofinterestincomerelatedtoFDinterest,interestfromcustomer’s receiptsandinterestincomefrombusinessadvances,thesaidissuehasbeenallowedby theTribunalinA.Ys.2008-09,2009-10&2010-11.Thefactsareidenticalinthepresent assessmentyearaswell.TheLd.DRcouldnotpointoutanydistinguishingfactsandthe decisionsrelieduponbytheLd.DRareondifferentfactsaltogether.Asregardsscrap saleincomeandcurrencyswapincome,thesameisalsoidenticalasreferredby theassesseetovariousdecisionsbeforeusandnodistinguishingfactswere pointedoutbytheLd.DR.Hence,groundno.1to3ofassessee’sappealisallowed. 24.1Beforeus,nomaterialhasbeenplacedonrecordbytheRevenueto demonstratethatthedecisionoftheTribunalinowncaseoftheassesseeas discussedabovehasbeensetaside/stayedoroverruledbytheHigherJudicial Authorities.Beforeus,nomaterialwasplacedonrecordtopointoutany distinguishingfeatureinthefactsofthecaseofearlierAYandtheyearunder consideration.Thus,respectfullyfollowingtheorderofthetribunalintheown caseoftheassesseeasdiscussedabove,wedonotfindanyinfirmityinthe findingofthelearnedCIT(A)anddirecttheAOtodeletethedisallowancemade byhim.Thus,thegroundofappealraisedbytherevenueisherebydismissed. 25.ThenextissueraisedbytheRevenuevideground2&3isthatthe learnedCIT(A)erredinholdingthegainonforeigncurrencyderivativeswapas eligibleincomeundersection80IABoftheActandfurthererredinholding derivativeswaplossof54,48,34,433/-asbusinessloss. ITAnos.319/AHD/2020&09others Asstt.Years2012-13and04others 16 26.Theassessee,tohedgeitsinterestcostaswellasforeigncurrency exposure,earned/realizedgainonforeigncurrencyswapofRs.9,60,24,519/-and furtherincurredunrealizedlossofRs.54,48,34,433/-onderivative/foreign currencyswaponmarktomarketbasis.Accordingly,theassesseeclaimednet losson“Derivative/swapcontract”atRs.44,88,09,924/-whilecomputingthe eligibleprofitundersection80IABoftheAct.However,theAOheldthegainofRs. 9,60,24,519wasnotderivedfromtheActivityofdevelopmentofSEZ,hencethe sameisnoteligiblefordeductionundersection80IABoftheAct.Likewise,the lossincurredforRs.54,48,34,433/-isalsonoteligiblefordeductionasbusiness lossundersection43(5)(d)oftheActasthederivativetransactionwasnotcarried outonrecognizedstockexchange.Hence,thesameisspeculativeinnature. 27.Onappealbytheassessee,thelearnedCIT(A)allowedtheclaimofthe assesseebyobservingasunder: “Itcanbeseenfromaboveorderthatbothgain/losshasbeentreatedasbusiness loss/gainbymypredecessorCIT(Appeals)aswellasgranteddeductionunderSection 80IABoftheAct. 6.6Inadditiontoabove,itisobservedthatinthepresentcaseallthederivative contractsareagainstunderlyingsecuritiesorforeigncurrencyexposurebyappellant. ThesederivativetransactionsarealsorelatedtoswaptransactionswhereinRupee loan/NCDliabilityisswappedagainstUSDoragainstanyothercurrency.Duringthecourse ofassessmentproceedingsappellanthasstatedthatasperRBIMasterCirculardated1 st July,2011,Indiancompanycannotenterintocurrencyswaptransactionsonrecognized stockexchangeasitviolatestheprovisionsofFEMAandthisfactisnotdisputedbyAO. Duringthecourseofassessmentproceedingsappellanthassubmittedsamplecopyofsuch swapcontractstoprovethatsuchtransactionsareforthepurposeofhedgingandAOhas notbroughtanythingonrecordtoprovethatthesetransactionsarespeculativeinnature. ItisalsofoundthatHon'bleAhmedabadITATinoneofthegroupcaseofAdani EnterprisesLtd.v/s.Addl.CIT[2015J55taxmann.com375hasdecidedsimilarissuein favourofAssesseeandheldasunder: "FromtheHeadnote: Section43(5)oftheIncome-taxAct,1961-Speculativetransactions(Currencies)- Assessmentyear2008-09-Whetherprovisionsofsection43(5)donotapplyto currenciesand,therefore,lossincurredbyassesseeincurrencyswapcontract cannotbedeniedtobesetoffagainstotherheadsofincometakingitas speculativeloss-Held,yes[Para4.10][Infavourofassessee] Section37(1)oftheIncome-taxAct,1961-Businessexpenditure-Allowabilityof (Currencyswaploss)-Assessmentyear2008-09-Whetherwhereassessee companyhadenteredintocurrencyswapcontractsforworkingcapitalloanswhich waspre-requisiteforitsbusinessofexportandimportofcommodities,loss ITAnos.319/AHD/2020&09others Asstt.Years2012-13and04others 17 incurredinsaidcontractbeinginrespectofcirculating/workingcapitalwastobe allowedundersection37(1)-Held,yes[Para4.6][Infavourofassessee]"s TheabovedecisionwasrenderedbyHon'bleAhmedabadITATafterthedecisionofmy predecessorCIT(Appeals)andfactsoftheyearunderconsiderationcontinuetoremain thesame.ThedisallowancemadebyAOforRs.54,48,34,443/-treatingcurrency swaplossasspeculationlossisherebydeleted. 6.7SofarasdisallowanceofdeductionofswapgainunderSection80IABisconcerned, mypredecessorCIT(Appeals)hasalreadydecidedinfavourofAssessee.Inadditionto above,duringthecourseofappellatehearing,ARsoftheappellanthavereliedupon decisionofHon'bleBombayHighCourtinthecaseofPCITV/sJindalDrugs Limited[2019]101taxmann.com316,whereinitisheldasunder: "Section80-IBoftheIncome-taxAct,1961-Deductions-Profitsandgainsfrom industrialundertakingsotherthaninfrastructuredevelopmentundertakings (Computationofdeduction)-Assessmentyear2006-07-Assesseecompanywas engagedinbusinessofmanufacturingL-Menthol-Mainrawmaterialforsaid productwasanagro-basedproductcalledCrudeMentholOil-Sincesaidraw materialwassubjecttohighpricefluctuation,assesseeenteredintoforward contractstohedgeitselfagainstsuchpricefluctuations-Inrelevantyear, assesseeearnedprofitoutofsuchhedgingcontracts-Assessee'smainbusinessof productionofL-Mentholwasundisputedlyeligiblefordeductionundersection80- IB-Inreturn,assesseeclaimeddeductionof;profitreceivedthroughhedging, contractsaswell-AssessingOfficerwasofopinionthatsameIwasnotallowable ongroundthatprofitcouldnotbestatedtohavebeenderivedfromassessee 1 sI manufacturingactivity-Tribunal,however,allowedassessee'sclaim-Whether sinceassesseefhadenteredintohedgingcontractsforpurposeofmakingits businessmoreprofitable,saidactivitywastoberegardedasapartofassessee's manufacturingactivityand,thus,itsclaimfordeductionwasrightlyallowedby Tribunal-Held,yes[Para9][Infavourofassessee]" Inviewofthesefactsandrelyinguponthedecisionreferredtosupra,AOisdirectedto allowdeductionunderSection80IABonforeigncurrencygainof Rs.9,60,24,519/-. 6.8Itisalsofoundthatinyearunderconsiderationappellanthasincurredderivative lossaswellgainhenceinanycaseonlynetlossofRs.44,88,09,913/-canbetreatedas speculativeloss.Evensuchlossisheldtobespeculativeloss,businessincomeofappellant wouldstandincreasedbysuchdisallowanceandonsuchincreasedbusinessincome, appellantwouldbeentitledfordeductionunderSection80IABasappellantiscarryingout onlyonebusinessactivitybeingdevelopmentofSEZ.RelianceisplacedonCBDTCircular No.37/2016dated02.11.2016whereinithasgivenfollowingclarification: "ChapterVI-AoftheActstatesthatwhilecomputingtheprofitsandgainsof business,theAssessingOfficer(AO)maymakecertaindisallowances,suchas disallowancespertainingtoSections32,40(a)(ia),40A(3),43B,etc.,oftheAct.At timesdisallowanceoutofspecificexpenditureclaimedmayalsobemade.The effectofsuchdisallowancesisanincreaseintheprofits.Doubtshavebeenraised astowhethersuchhigherprofitswouldalsoresultintheclaimforahigherprofit- linkeddeductionunderChapterVI-AoftheAct....................... ......Inviewoftheabove,CBDThasacceptedthesettledpositionthatthe disallowancesmade underSections32,40(a)(ia),40A(3),43B,etc.oftheActandotherspecific disallowances,relatedtothebusinessactivityagainstwhichtheChapterVI-A deductionhasbeenclaimed,resultinenhancementoftheprofitsoftheeligible ITAnos.319/AHD/2020&09others Asstt.Years2012-13and04others 18 business,thedeductionunderChapterVI-Aisadmissibleontheprofitsso enhancedbythedisallowance..................." ItisalsofoundthatsimilardisallowanceismadeinthecaseofappellantforA.Y.2013-14 whereinAOhimselfafterrelyinguponaboveCircularhasallowedhigherdeductionunder Section80IABinassessmentorderdated16 th December,2016.Evenonthisground appellantisentitledforreliefasclaimedasalternatecontentioninitswrittensubmission. 6.9Inviewofdetaileddiscussionmadehereinabove,boththedisallowancemade byAOaredeletedandtherelatedgroundsare,thus,allowed.” 28.BeingaggrievedbytheorderofthelearnedCIT(A),therevenueisin appealbeforeus 28.1ThelearnedDRbeforeusvehementlysupportedtheorderoftheAO. 28.2Ontheotherhand,thelearnedARsubmittedthattheissueonhand coveredbytheorderthustribunalinowncaseoftheassesseeforA.Y.2011-12in inITANo.122&167/AHD/2015. 29.Wehaveheardtherivalcontentionsofboththepartiesandperusedthe materialsavailableonrecord.Attheoutset,wenotethatintheowncaseofthe assessee,identicaldisallowancewasmadebytheAOforAY2011-12whichwas subsequentlydeletedbythelearnedCIT(A).Theissuetravelledtothistribunalin ITANo.122&167/AHD/2015forA.Y.2011-12,thebenchvideorderdated29-03- 2023decidedtheissueinfavouroftheassesseebyholdingasunder: 7.Wehaveheardboththepartiesandperusedalltherelevantmaterialavailableon record.InrespectofinterestincomerelatedtoFDinterest,interestfromcustomer’s receiptsandinterestincomefrombusinessadvances,thesaidissuehasbeenallowedby theTribunalinA.Ys.2008-09,2009-10&2010-11.Thefactsareidenticalinthepresent assessmentyearaswell.TheLd.DRcouldnotpointoutanydistinguishingfactsandthe decisionsrelieduponbytheLd.DRareondifferentfactsaltogether.Asregardsscrap saleincomeandcurrencyswapincome,thesameisalsoidenticalasreferredby theassesseetovariousdecisionsbeforeusandnodistinguishingfactswere pointedoutbytheLd.DR.Hence,groundno.1to3ofassessee’sappealisallowed. XXXXXXXXXXXXXXXXXXXX 22.Asregardsgroundnos.4,5&6ofRevenue’sappeal,thesamearealsoidenticalto groundnos.1,2&3ofassessee’sappealaswellasRevenue’sappealandhencethesame aredismissed. ITAnos.319/AHD/2020&09others Asstt.Years2012-13and04others 19 29.1Beforeus,nomaterialhasbeenplacedonrecordbytheRevenueto demonstratethatthedecisionofTribunalinowncaseoftheassesseeas discussedabovehasbeensetaside/stayedoroverruledbytheHigherJudicial Authorities.Beforeus,nomaterialwasplacedonrecordtopointoutany distinguishingfeatureinthefactsofthecaseofearlierAYandtheyearunder consideration.Thus,respectfullyfollowingtheorderoftheTribunalintheown caseoftheassesseeasdiscussedabove,wedonotfindanyinfirmityinthe findingofthelearnedCIT(A)anddirecttheAOtodeletethedisallowancemade byhim.Thus,thegroundofappealraisedbytherevenueisherebydismissed. 30.ThenextissueraisedbytheRevenuevidegroundNos.4&5isthatthe learnedCIT(A)erredinreducingamountofdisallowanceu/s14AoftheActtothe extentofexemptedincomeonlyandfurthererredindeletingtheadditionmadeto thebookprofitu/s115JBoftheAct. 31.Attheoutset,wenotethattheissueraisedbyrevenueinthecaptioned groundofappealhasbeenadjudicatedalongwithassessee’sgroundofappeal raisedinITANo.319/AHD/2020.We,videparagraphNo.17ofthisorder,decided theissueofdisallowanceundersection14AoftheActagainsttheRevenue whereasissueofadditiontobookprofitundersection115JBoftheActhasbeen partlyallowedinfavouroftheRevenue.Fordetaileddiscussion,pleasereferto theaforementionedparagraphofthisorder.Hencethegroundofappealraisedby therevenueisherebypartlyallowed. 32.ThenextissueraisedbytheRevenuevidegroundNo.6ofitsappealis thatthelearnedCIT(A)erredindeletingthedisallowancesofdepreciationforRs. 34,54,256/-. 33.Theassesseeontheblockofassets,namelyofficeequipment,claimed depreciation@15%ontheWDV.Theassesseeinsupportsubmittedthatthe block“officeequipment”includesassetssuchasDomeCamera,AC,Radar,CT2 ITAnos.319/AHD/2020&09others Asstt.Years2012-13and04others 20 NetCrainconnectivity,BinocularetcwhichwereinstalledatMundraPortSite,and alltheseareintegralpartofplantandmachinery. 33.1However,theAOfoundthatassetsincludedintheblockofoffice equipmentareinthenatureoffurniture,fittings/electricalfittingsonwhichrateof depreciationspecifiedisat10%whereastheassesseehasclaimedat15%.Hence theAOdisallowedtheexcessdepreciationofRs.34,54,256/-andaddedtototal incomeoftheassessee. 34.Onappealbytheassessee,thelearnedCIT(A)allowedthedepreciationon theblockofficeequipment@15%byfollowingtheorderofthistribunalinthe caseM/sAdaniEnterpriseLtd.inITANo.1840/Ahd/2012. 35.BeingaggrievedbytheorderofthelearnedCIT(A),theRevenueisin appealbeforeus. 35.1ThelearnedDRbeforeusvehementlysupportedthefindingoftheAO. 35.2Ontheotherhand,thelearnedARsubmittedthattheissueonhandhas beencoveredinfavouroftheassesseebytheorderthistribunalincaseofthe assesseeforA.Y.20011-12inITANo.122&167/AHD/2015. 36.Wehaveheardtherivalcontentionsofboththepartiesandperusedthe materialsavailableonrecord.Attheoutset,wenotethatintheowncaseofthe assessee,identicaldisallowancewasmadebytheAOforAY2011-12whichwas subsequentlydeletedbythelearnedCIT(A).Theissuetravelledtothistribunalin ITANo.122&167/AHD/2015forA.Y.2011-12,thebenchvideorderdated29-03- 2023havedecidedtheissueinfavouroftheassesseebyholdingasunder: 24.Asregardsgroundno.8ofRevenue’sappealrelatingtodisallowanceofdepreciationon officeexpensesat15%expensesinsteadofqualifiedrateofdepreciation@10%,the reasoninggivenbytheCIT(A)isjustifiableandhencegroundno.8ofRevenue’sappealis dismissed. ITAnos.319/AHD/2020&09others Asstt.Years2012-13and04others 21 36.1Beforeus,nomaterialhasbeenplacedonrecordbytheRevenueto demonstratethatthedecisionofTribunalinowncaseoftheassesseeas discussedabovehasbeensetaside/stayedoroverruledbytheHigherJudicial Authorities.Beforeus,nomaterialwasplacedonrecordtopointoutany distinguishingfeatureinthefactsofthecaseofearlierAYandtheyearunder consideration.Thus,respectfullyfollowingtheorderofthetribunalintheown caseoftheassesseeasdiscussedabove,wedonotfindanyinfirmityinthe findingofthelearnedCIT(A)anddirecttheAOtodeletethedisallowancemade byhim.Thus,thegroundofappealraisedbytherevenueisherebydismissed. 37.ThelastissueraisedbytheRevenueisthatthelearnedCIT(A)erredin holdingthecorporateguaranteeasnotaninternationaltransaction. 38.Theassesseehadextendedcorporateguaranteesinrespectofborrowings madebyitsassociatedenterprise,namelyMundraPortHoldingPTYLtdforUSD 800MillionandAUD51.752million.Theassesseedidnotchargeany considerationfromitsAEfortheissuanceofcorporateguarantees.Duringthe courseofascertainingtheArmLengthPriceofimpugnedguaranteetransaction, theTPOwasoftheviewthatareasonableguaranteecommissionoughttohave beenchargedinrespectofissuanceofsuchguarantee.Theargumentofthe assesseetothiseffectthatitdoesnotconstituteaninternationaltransactionwas rejectedbytheTPO.AssuchtheTPOfoundthattheassesseeinextendingsuch guaranteehasincurredcostofRs.19,26,10,644/-(servicefeechargedbySBI Ahmedabad@1.3%)whichlaterwasreimbursedbytheAEtotheassessee.Thus, theTPOworkedouttheArm’sLengthPriceofthecorporateguarantee commissionatRs.4,75,74,829/-basedonthecostincurredbyassesseefor extendingsuchguaranteeplusmarkup@24.7%(beingaverageofmarginof10 differentbank)andaccordinglymadeupwardadjustmentbyaddingtothetotal incomeoftheassessee. ITAnos.319/AHD/2020&09others Asstt.Years2012-13and04others 22 39.AggrievedassesseepreferredanappealbeforethelearnedCIT(A)who followingtheorderthisTribunalinowncaseoftheassesseeforA.Y.2009-10and 2010-11deletedtheupwardadjustmentmadebytheAO.ThelearnedCIT-A furtherobservedthattheassesseehasnotincurredanycostquathecorporate guaranteefurnishedtotheAE.Accordingly,thebasisadoptedbytheAO/TPOby usingtheCPMmethodforworkingouttheALPisnottheappropriatemethod.The learnedCIT-AalsoobservedthattheTPOhastakenthecomparabletodetermine theALPwhicharethebankswhereastheassesseeisintotheactivityofPort developmentandmaintenance.Thus,asperthelearnedCIT-A,suchabasis cannotbeadoptedbytheTPOfordeterminingtheALP.Furthermore,AEis carryingmoreinterestliabilityeventhoughtheassesseehasfurnishedthebank guarantee.Assuch,therehasnotaccruedanybenefittotheassesseerequiring anyadjustmentundertheprovisionsoftransferpricingadjustment. 40.BeingaggrievedbytheorderofthelearnedCIT(A),theRevenueisin appealbeforeus. 40.1ThelearnedDRbeforeuscontendedthattheactoftheassesseefor furnishingthecorporate/bankguaranteeisaninternationaltransactionand therefore,ALPofthesameneedstobedeterminedforsuchtransaction. 40.2TheARbeforeusvideletterdated27 th November2023submittedthatthe assesseehasnotincurredanycostinprovidingsuchcorporateguaranteeand thereforenoadjustmentinthegivencaseisrequiredtobemade.Itwasalso pointedoutbythelearnedARthatthebankratescannotbeequatedwiththerate applicableforthetransactionoffurnishingthebankguaranteebytheassesseeto theAE.LearnedARalsopointedoutthattherewasnobenefitaccruedtotheAE. Assuch,theassesseewaspayingahigherrateofinterestdespitetheassessee furnishedthecorporateguaranteetoAE. ITAnos.319/AHD/2020&09others Asstt.Years2012-13and04others 23 40.3BoththelearnedDRandtheARbeforeusvehementlysupportedtheorder oftheauthoritiesbelowtotheextentfavourabletothem. 41.Wehaveheardtherivalcontentionsofboththepartiesandperusedthe materialsavailableonrecord.Theprovisionsofsection92BoftheActdefinethe parametersofwhatconstituteaninternationaltransaction.Although,theambitof internationaltransactionwaswideenough,yetduetojudicialinterpretation, certainclassesoftransactionswerebeingleftoutofthetransferpricingnet.To tacklethesame,bytheFinanceActof2012anExplanationtoSection92B[2]of theActwasbroughtinthestatutewithretrospectiveeffectfrom1 st April2002. Theexplanationisclarificatoryinnatureandaddedcertaincategoriesof transactions,interalia,thetransactionasspecifiedunderclause(c)ofexplanation (i)tosection92BoftheActwithintheambitofinternationaltransactionswhichis reproducedasunder: [Explanation.—Fortheremovalofdoubts,itisherebyclarifiedthat— (i)theexpression"internationaltransaction"shallinclude— (a)*********** (b)************* (c)capitalfinancing,includinganytypeoflong-termorshort-termborrowing,lending orguarantee,purchaseorsaleofmarketablesecuritiesoranytypeofadvance, paymentsordeferredpaymentorreceivableoranyotherdebtarisingduringthe courseofbusiness; 41.1Thecorporateguaranteewasincludedwithintheambitofinternational transactionbytheFinanceAct2012withretrospectiveeffect.Thus,thereremains noambiguitytothefactthatthecorporateguaranteeextendedbytheassesseeto itsAEisaninternationaltransactionandthereforethesamehastobe benchmarkedatthearmlengthprice.However,wenotethatthedifferent benchesoftheITAThavetakendifferentviews.Someofthemheldthatthe transactionofcorporateguaranteeisaninternationaltransactionwhereassomeof themheldthatthetransactionofcorporateguaranteeisoutsidethepurviewof theinternationaltransactionincludingtheAhmedabadtribunalinthecaseofMicro InkLtd.vs.Addl.CITreportedin[2015]63taxmann.com353,whereinitwas ITAnos.319/AHD/2020&09others Asstt.Years2012-13and04others 24 heldthatthecorporateguaranteeisnotinternationaltransaction.Theprecedent laidoutinthecaseofMicroInkLtd(Supra)wasalsofollowedintheowncaseof theassesseeforA.Y.2009-10inITANo.3321&3480/Ahd/2014bythe coordinatebenchofthistribunal.Atthetimeofhearing,thelearnedARheavily reliedonthisorderofthetribunal. 41.2However,wefindthattheHon’bleMadrasHighCourtinthecaseofPCITvs. Redington(India)Ltd.reportedin122taxmann.com136hasheldthatcorporate guaranteeiscoveredunderthelimbofinternationaltransactionandhaving bearingonprofitandlossaccount.TherelevantfindingoftheHon’blecourtreads asunder: TheconceptofbankGuaranteesandCorporateGuaranteeswasexplainedinthedecision oftheHydrabadTribunalinthecaseofProlificsCorpn.Ltdv.Dy.CIT[2015]55 taxmann.com226/68SOT104(URO).Inthesaidcase,therevenuecontendedthatthe transactionofprovidingCorporateGuaranteeiscoveredbythedefinitionofinternational transactionafterretrospectiveamendmentmadebyFinanceAct,2012.Theassessee arguedthattheCorporateGuaranteeisandadditionalguarantee,providedbytheParent company.Itdoesnotinvolveanycostofrisktotheshareholders.Further,the retrospectiveamendmentofsection92Bdoesnotenlargethescopeoftheterm 'internationaltransaction'toincludetheCorporateGuaranteeinthenatureprovidedbythe assesseetherein.TheTribunalheldthatincaseofdefault,Guarantorhastofulfilthe liabilityandtherefore,thereisalwaysaninherentriskinprovidingguaranteesandthat maybeareasonthatFinanceproviderinsistonnon-charginganycommissionfrom AssociatedEnterpriseasacommercialprinciple.Further,ithasbeenobservedthathis positionindicatesthatprovisionofguaranteealwaysinvolvesriskandthereisaservice providedtotheAssociateenterpriseinincreasingitscreditworthinessinobtainingloansin themarket,befromFinancialinstitutionsorfromothers.Theremaynotbeimmediate chargeonprofit&lossaccount,butinherentriskcannotberuledoutinproviding guarantees.U1andadjustmentaretobemadeonguaranteecommissionsonsuch guaranteesprovidedbytheBankdirectlyandalsoontheguaranteeprovidedtothe erstwhileshareholdersforassuringthepaymentofAssociateEnterprise. Inthelightoftheabovedecisions,theTribunalcommittedanerrorindeletingthe additionsmadeagainstCorporateandBankGuaranteeandtheorderpassedbytheDRPis toberestored.[Para76] 41.3Thus,inviewoftheabove,weholdthatthebank/corporateguarantee extendedtoAEisaninternationaltransaction.Therefore,thesamehastobe benchmarkedfordeterminingtheALP.Thus,theissueinvolvedonhandisno longercoveredasallegedbythelearnedARfortheassesseeinviewofthe judgmentofHon’bleMadrasHighCourtasdiscussedabove. ITAnos.319/AHD/2020&09others Asstt.Years2012-13and04others 25 41.4Thenextaspectsarisetodeterminethebenchmarkingforworkingoutthe ALPoftheimpugnedinternationaltransaction.TheTPO/AOinthecaseonhand hasworkedouttheALPatcost+24%Markupcalculatedonthebasisofaverage marginearnedbythebanks.Inthisregard,wefindthattheHon’bleBombayHigh CourtincaseofCITvs.EverestKentoCylindersLtdreportedin58taxmann.com 254heldthatwhiledeterminingtheALPtheratechargedbythebankorfinancial institutioncannotbetakenascomparable.TherelevantfindingoftheHon’ble Courtreadsasunder: Inthepresentcase,itisassessee-companythatisissuingcorporateguaranteetothe effectthatifthesubsidiaryAEdoesnotrepayloanavailedofitfromICICI,theninsuch event,theassesseewouldmakegoodtheamountandrepaytheloan.Theconsiderations whichapplyforissuanceofacorporateguaranteearedistinctandseparatefromthatof bankguaranteeand,accordingly,commissionchargedcannotbecalledinquestion,inthe mannerTPOhasdone.Thecomparisonisnotasbetweenliketransactionsbutthe comparisonsarebetweenguaranteesissuedbythecommercialbanksasagainsta corporateGuaranteeissuedbyholdingcompanyforthebenefitofitsAE,asubsidiary company.Inviewoftheabovediscussion,appealdoesnotraiseanysubstantialquestion oflawanditisdismissed. 41.5Now,thequestionariseswhatshouldbetheALPrateofthecommissionon corporateguaranteeinthegivenfactsandcircumstances?Todecidetherate, therecannotbeastraightjacketformulabecauseeconomicfactors,timingfactors andcommercialconsiderationdifferspartytoparty.Similarly,thebankguarantee ratescannotbeconsideredforbenchmarkingcorporateguaranteefee,therefore, benchmarkingoftheAssessingOfficerisalsoincorrect.Itdependsonthe creditworthinessofthepartiesandthebenefitarisingoutofthesameinthe handsofpartiestothetransaction.Thebenefitisalsorequiredtobedistributed betweentheissuerofguaranteeandinwhosefavoursuchguaranteeisissued.As such,thebenchmarkingofthetransactionsofcorporateguaranteefeeshouldbe basedaftereitheradoptinginterestsavingapproach,comparablecorporate guaranteefeerates,costofprovidingtheguaranteeoranyotherapproach, dependinguponthefactsandcircumstancesofeachcase. ITAnos.319/AHD/2020&09others Asstt.Years2012-13and04others 26 41.6Comingtothecaseonhand,wenotethatassesseehasborrowedloan fromtheStandardCharteredbankataneffectiverateofinterestat4.06%per annumwhereastheAEhasborrowedloanattherateof4.92%perannum despitethecorporateguaranteefurnishedbytheassessee.Thefindingtothis effectoftheld.CIT-Areadsasfollows: 12.9ItisfurtherobservedthatduringthecourseofTPProceedings,appellanthas providedinternalCUPandprovedthatappellantisprocuringloanfromStandardChartered Bank@4.6%whereascostofloanobtainedbyAEis@4.92%whichalsoprovesbeyond doubtthatbyprovidingcorporateguarantee,nobenefitisatallaccruedtoAE.The appellanthasalsoprovidedexternaldataregardingborrowingsavailedofbycorporatesin AustraliausingBloombergDataBaseasMPPLbeingAEisdomicileinAustralia.Theentire comparativedatawasprovidedtoTPOandappellanthasnarroweddownitssearchtoone companybeingBHPBillitonFinanceUSALimitedwhohasborrowed750millionUSD(size oftheborrowingandtenureofborrowingwassimilartoborrowingmadebyMPPL)and borrowingcosttosuchcompanywas2.75%whereasMPPLisincurringborrowingcost includingLoCcharges@4.92%.ThisfactisnotdisputedbyTPOinhisorder.Evenon thisgroundonceitisprovedbyappellantthatMPPLispayinghigherinterest/incurring borrowingcost,thenexternalcomparableorinternalcomparablebeingloantakenby appellantfromStandardCharteredBankcoupledwiththefactthatappellantisnot incurringanycostforprovidingguaranteetoAEbutentirecostisbornedirectlybyMPPL aswellasthereisnoadvantageflowingtoMPPLfromthistransaction,upwardadjustment madebyTPOcannotbesustained. 41.7Thus,fromthesefactsitistranspiredthattheassesseehasnotobtained anysavingoftheinterest/bankcharges.Accordingly,thequestionarises,whether theassesseeshouldbemadesubjecttotheadditionforthecorporateguarantee furnishedbyitinthegivenfactsandcircumstances.Toourunderstanding,on applyingtheinterestsavingapproach,itisnotjustifiabletomakeanyadditionon accountoffurnishingthecorporateguaranteetotheAE.Inotherwords,the assesseewouldhavesavedhugeinterestcostifitwouldhaveadvancedmoney oninteresttotheAEafterborrowingatitsownfromtheStandardCharteredBank. Hence,wedonotfindanyinfirmityintheorderoflearnedCIT-A.Thus,the groundofappealoftherevenueisherebydismissed. 42.Intheresult,theappealoftheRevenueisherebypartlyallowed. ComingtoITANo.446/Ahd/2020,anappealbytheassesseeforA.Y. 2013-14 ITAnos.319/AHD/2020&09others Asstt.Years2012-13and04others 27 43.Theassesseehasraisedfollowinggroundsofappeal: “1.Onthefactsandinthecircumstancesofthecase,thelearnedCIT(A)erredin upholdingdisallowanceu/s14AoftheActtotheextentofRs5,28,00,000/-TheCIT(A) oughttohavedeletedentiredisallowancemadebyAO. 2.Onthefactsandinthecircumstancesofthecase,thelearnedCIT(A)erredin upholdingdisallowanceofdepreciationforRs.13,01,46,376/-inrespectofland developmentexpenditureincurredonleaseholdlandstowardsreclamationoflandbythe appellantonmeritsofthecase. 3.Onthefactsandinthecircumstancesofthecase,thelearnedCIT(A)erredin upholdingdisallowanceofdepreciationofRs.84,22,467claimedbytheappellant-company on"righttouseleaseholdland",beingintangibleasseteligibleforgrantofdepreciationu/s. 32oftheI.T.Actonmeritsofthecase. 4.Onthefactsandinthecircumstancesofthecase,thelearnedCIT(A)erredin upholdingadditionoftransferpricingadjustmentofRs.1,21,744/-forbenchmarkingof interest. 5.Onthefactsandinthecircumstancesofthecase,theEducationCessandthe SecondaryandHigherEducationCessisallowablebusinessexpenditureu/s37(1)ofthe Actandcannotbeconsideredasdisallowableexpenditureu/s40(a)(ii)oftheIncome-tax Act,1961.TheAOmaybedirectedtoallowsuchexpenditurewhilecomputingtaxable incomeinthecaseofappellant. 6.Theappellantcravesleavetoadd,alter,amendand/orwithdrawanygroundor groundsofappealeitherbeforeorduringthecourseofhearingoftheappeal.” 44.ThefirstissueraisedbytheassesseeisthatthelearnedCIT(A)erredin sustainingtoadditionundersection14AoftheActforRs.5.28crores. 45.Attheoutset,wenotetheissueraisedbytheassesseeisidenticaltothe issueraisedbytheassesseeaswellasbytherevenueincrossappealforA.Y. 2012-13bearingITANo.319&335/Ahd/2020.Theissueraisedbytheassessee andbytheRevenueforA.Y.2012-13hasbeenadjudicatedvideparagraph18of thisorder.Intheaforesaidpara,weholdthatnodisallowanceofinterestexpense underrule8D(2)(ii)oftheITruleisrequiredtobemadesincetheassesseewas havingsufficientinterestfreeownfund.Suchfindingwillbecontinuedforthe yearunderconsideration.Likewise,whiledealingwiththedisallowanceof administrativeunderrule8D(2)(iii)ofIncomeTaxRule,weholdthatonlythose investmentsshallbeconsideredforcomputingdisallowancewhichhaveyielded ITAnos.319/AHD/2020&09others Asstt.Years2012-13and04others 28 incomeduringtheyear.Thisfindinginprincipleshallcontinuefortheyearunder considerationaswell.Thus,weherebysetasideissuetothefileoftheAOfor limitedpurposetore-computedisallowanceofadministrativeexpensesunderrule 8D(2)(iii)ofITRuleconsideringonlythoseinvestmentsyieldedincomeduringthe year.However,suchamountofdisallowanceshallnotexceedtheamountof exemptedincome.Hence,thegroundofappealraisedbytheassesseeishereby allowedforstatisticalpurposes. 46.ThenextissueraisedbytheassesseeisthatthelearnedCIT(A)erredin confirmingthedisallowanceofdepreciationonlanddevelopmentexpenditure incurredonleaseholdland. 47.Attheoutset,wenotethattheissueraisedbytheassesseeinitsgrounds ofappealfortheAY2013-14isidenticaltotheissueraisedbytheassesseeinITA No.319/AHD/2020fortheassessmentyear2012-13.Therefore,thefindingsgiven inITANo.319/AHD/2020shallalsobeapplicablefortheyearunderconsideration i.e.AY2013-14.Theappealoftheassesseefortheassessment2012-13hasbeen decidedbyusvideparagraphNo.7ofthisorderagainsttheassessee.The learnedARandtheDRalsoagreedthatwhateverwillbethefindingsforthe assessmentyear2012-13shallalsobeappliedfortheyearunderconsiderationi.e. AY2013-14.Hence,thegroundofappealfiledbytheassesseeishereby dismissed. 48.ThenextissueraisedbytheassesseeisthatthelearnedCIT(A)erredin confirmingthedisallowanceofdepreciationonrighttouseleaseholdland. 49.Attheoutset,wenotethattheissueraisedbytheassesseeinitsgrounds ofappealfortheAY2013-14isidenticaltotheissueraisedbytheassesseeinITA No.319/AHD/2020fortheassessmentyear2012-13.Therefore,thefindingsgiven inITANo.319/AHD/2020shallalsobeapplicablefortheyearunderconsideration i.e.AY2013-14.Theappealoftheassesseefortheassessment2012-13hasbeen ITAnos.319/AHD/2020&09others Asstt.Years2012-13and04others 29 decidedbyusvideparagraphNo.12ofthisorderinfavouroftheassessee.The learnedARandtheDRalsoagreedthatwhateverwillbethefindingsforthe assessmentyear2012-13shallalsobeappliedfortheyearunderconsiderationi.e. AY2013-14.Hence,thegroundofappealfiledbytheassesseeisherebyallowed. 50.ThenextissueraisedbytheassesseeisthatthelearnedCIT(A)erredin confirmingtheupwardadjustmentinTPonaccountofinterestforRs.1,21,744/- only. 51.TheassesseehasprovidedinterestfreeloantoitsAEnamelyMundraPort Pty.Ltd(Australia)forRs.60,32,07,740/-only.IntheTPreport,theassessee benchmarkedtheinterestat6monthsLIBOR+280basisandaccordinglyoffered incomeofRs.3,59,876/-only.Assuch,theassesseebenchmarkedtheinterest amountinaccordancewithinternalcupbeingrateofinterestchargedbytheSBI forloandirectlygiventotheAE. 51.1However,theTPOfoundthattheSBIonthesecuredloangiventotheAE for7yearsbesidescharginginterestat6-monthLIBOR+280basispointalso chargedupfrontfeeof285basispointwhichmeansthatanadditional40.07basis pointwasannuallycharged.Thus,consideringtheinternalcupusedbythe assesseeitselftherateofinterestshallbeLIBOR+320.7basispointand consideredfactorofsecuredandunsecuredloananadditional50basispointshall becharged.Accordingly,theTPOworkedtheALPat6-monthLIBOR+370.7basis andmadeupwardadjustmentofRs.1,21,744/-. 52.TheaggrievedassesseepreferredanappealbeforethelearnedCIT(A)who confirmedtheorderoftheAO/TPObyobservingasunder: “11.3Oncarefulconsiderationofthefactsofthecase,theobservationofTPOand submissionmadebyAppellant,itisobservedthattheappellantCompanyhasprovided unsecuredloantoMPPLwhichiswhollyownedsubsidiaryoftheAppellanttotheextentof $25Million.Though,appellanthasnotchargedanyinterestinitsbooksofaccounts,in Form3CEBtheinterestchargeablehasbeenbenchmarkedat6monthsLIBOR+280basis pointsandhasbeenofferedasincome.Thisbenchmarkinghasbeendoneonthebasisof internalCUPintheformoftheratechargedbySBIforaloandirectlygiventoAE.Sofar ITAnos.319/AHD/2020&09others Asstt.Years2012-13and04others 30 asargumentofappellantthatloangiventoAEisinnatureofquasai-capitalandno transferpricingadjustmentshouldbemade,itisobservedthatsimilaradjustmentwas alsomadeinoneofthegroupconcernofappellantbeingAdaniPowerLimitedforAY 2010-11to2013-14andinappellateorderdated11/02/2020forAY2013-14,undersigned hasnotacceptedsuchviewandheldthatqusai-capitalshouldhavesomeresemblanceto equityandifaloanwasinnatureofequity,repatriatingthesameisnotaconsideration whichshouldbeafactordeterminingthenatureofinfusionoffundsinAEs,Commercial compulsionmaybeaconsiderationwhichcangiverisetotransactionsandforthat purposetransactionshastobeevaluatedonastand-alonebasisasfarastransferpricing principlesareconcerned.Itisalsoobservedthatsuchmatterisnotyetadjudicatedby Hon'bleAhmedabadITAThencesimilarargumentmadebyappellantinpresentcaseisnot accepted.Further,theappellantitselfinForm3CBhasbenchmarkedabovetransactions andmadeadjustmentinreturnofincomehencecontentionofappellantthatloanisinthe natureof"quasiequity"andquasicapitalloanandnoadjustmentisrequiredtobemade cannotbeaccepted. 11.4TheappellanthasalsoreferredtodecisionofHon'bleMumbaiITATinthecaseof HindujaGlobleSolutionsLtd(supra)butsaiddecisionscannotbemadeapplicablein presentcaseasincasebeforeMumbaiITAT,assesseehasalreadychargedhigherinterest thatLIBORratewhereasinpresentcase,appellanthasnotchargedanysuchinterestin booksofaccount. 11.5SofarasworkingadoptedbyAOforarrivingatinterestrateof4.327%based uponfactthatappellanthasgivenunsecuredloantoAEwhereasSBIhasgivensecured loantoAEwhichrequiresadditionalmarkupof50basepointsandupfrontfeeisalso requiredtoequalized,itisobservedthatappellantitselfhasbenchmarkedentire transactionsbaseduponloanagreementbetweenSBIandAEandconsideringittobe internalCUPandTPOalsohasacceptedsuchinternalcupsubjecttoadjustmentbeing natureofloanandupfrontfeesasdiscussedhereinaboveandappellanthasnotexplained astowhysuchadjustmentsarenotrequiredtobemadeforarrivingatcorrecttransfer pricingadjustment,thereisnoreasontorelyonyieldanalysisofloanconnectordatabase tocontendthatsimilartransactionsofunsecuredloanswerehavingyieldof6months Liborplus300basispoints.Onthisbasis,alternatecontentionofappellantforrestricting adjustmenttoLibor+300bpsonlycannotbeaccepted.Innutshell,theTPOwascorrect inmakingadjustmentofRs1,21,744andsameisupheld.TheadditionmadebyAOfor Rs1,21,744/-isconfirmedandthisgroundofappealisdismissed.” 53.BeingaggrievedbytheorderofthelearnedCIT(A),theassesseeisin appealbeforeus. 53.1ThelearnedARbeforeussubmittedthatthetribunalinthecaseofArvind LtdinITANo.2347-2292/AHD/2018videorderdated26-05-2023hasadoptedthe ALPoftheinterestasLIBOR+2%afterconsideringtheseriesofjudgements.As perthelearnedARtheassesseehasofferedmoreinterestrateontheinterest- freeadvances.AccordingtothelearnedARnoadjustmentisrequiredtobemade. ITAnos.319/AHD/2020&09others Asstt.Years2012-13and04others 31 53.2Ontheotherhand,thelearnedDRvehementlysupportedtheorderofthe authoritiesbelow. 54.Wehaveheardtherivalcontentionsofboththepartiesandperusedthe materialsavailableonrecord.Admittedlytheassesseehasextendedinterestfree loanandadvancestoAEinAustralia.However,theassesseeinTPreportoffered notionalinterestincomebytakingALPat6-monthLIBOR+280basispointbeing therateofinterestchargedbySBIfromitsAEonindependentloan.Thenotional interestofferedbytheassesseeatLIBOR+280basiswaspointnotacceptedby theTPOandcomputedALPat6-monthLIBOR+370.7basispointandmade upwardadjustment.AssuchtheTPOincomputingtheALPalsoconsideredthe upfrontfeechargedbythebankaswellasriskadjustmentonaccountnatureof unsecuredloan.TheviewoftheTPOhasbeenconfirmedbythelearnedCIT(A). Inourconsideredview,thelearnedCIT(A)failedtoappreciatethefactthatinthe givencaseaholdingcompanyextendedinterestfreeloansandadvancestoits foreignsubsidiarytogrowthebusiness.Suchatransactioncannotbecompared withloanextendedbythebankswhosemainactivityisextendingloansto generaterevenue.Inholdingso,wedrawsupportandguidancefromthe judgmentofjudgmentofHon’bleBombayHighCourtincaseofCITvs.Everest KentoCylindersLtdreportedin58taxmann.com254whereinitwasheldthatas under: Inthepresentcase,itisassessee-companythatisissuingcorporateguaranteetothe effectthatifthesubsidiaryAEdoesnotrepayloanavailedofitfromICICI,theninsuch event,theassesseewouldmakegoodtheamountandrepaytheloan.Theconsiderations whichapplyforissuanceofacorporateguaranteearedistinctandseparatefromthatof bankguaranteeand,accordingly,commissionchargedcannotbecalledinquestion,inthe mannerTPOhasdone.Thecomparisonisnotasbetweenliketransactionsbutthe comparisonsarebetweenguaranteesissuedbythecommercialbanksasagainsta corporateGuaranteeissuedbyholdingcompanyforthebenefitofitsAE,asubsidiary company. 54.1TheabovefindingoftheHon’bleBombayHighCourtisinrelationto extensionofcorporateguarantee,buttheprinciplelaiddowncanbeappliedhere inthecaseofextensionofloansandadvancesalso.Therefore,inourconsidered ITAnos.319/AHD/2020&09others Asstt.Years2012-13and04others 32 TPOwasnotrightinconsideringtheupfrontfeechargedbythebankaswell adjustmentofriskassociatedwithunsecuredloan. 54.2WealsonotethatincaseofM/sArvindLtdbearingITANo.2347& 2292/AHD/2018,wherethefactsandcircumstanceswereidenticaltothecaseon hand,thetribunalafterconsideringseriesoffindingofdifferenttribunalheldthat incaseofloanextendedbyparentcompanytoforeignsubsidiarythereasonable rateofinterestshouldbeLIBOR+2%.Therelevantfindingofthetribunalincase M/sArvindLtd(supra)readsasunder: 41.Beforedecidinggroundofappeal,itwouldbeusefultodiscusssomejudicial precedentswhichhaveanalyzedthisissuebeforeus.InthecaseofIPCALaboratories Ltd.146taxmann.com28(Mumbai-Trib.),theMumbaiITATheldthatwhereassessee- companyhadgiveninterestFreeloanstoitsAEs,sinceloanwasgiveninforeign jurisdiction,LIBOR+200pointswascorrectbenchmarkingforinterest.Inthecaseof Bhansali&Co.54taxmann.com131(Mumbai-Trib.),theMumbaiITATheldthatinterest chargedasLIBORplus200basispointsonforeigncurrencyloangivenabroadismost correctbenchmark.InthecaseofMothersonSumiSystemsLtd.58taxmann.com38 (Delhi-Trib.),theDelhiITATheldthatwhereTPOmadeadditiontoassessee'sALPin respectofinterestonloangiventoitsAE,sinceinterestratechargedbyassesseefromits AEwashigherthanLIBORrateintheyearunderconsideration,impugnedadditionwasto besetaside.InthecaseofSomaTextiles&IndustriesLtd.149taxmann.com163 (Ahmedabad-Trib.),theAhmedabadITATheldthatALPadjustmentofinterestonloan giventoAEwastobebenchmarkedatLIBOR+2percent.Weobservethatintheinstant facts,theassesseehascomputedtheALPatLIBORplus2.5%.TheLd.CIT(Appeals)has upheldtheorderoftheLd.AssessingOfficerontheGroundthattheassesseehasnot giventhecomparablebasisforarrivingattheaforesaidrate.However,inourview,theLd. CIT(Appeals)hasfailedtoappreciatevariousjudicialprecedentswhichhaveheldthat LIBORplus2%isareasonablemargintocomputeALPofloangiventosubsidiaries.Inthe instantcase,theassesseehasworkedouttheALPatLIBORplus2.5%.Further,theLd. CIT(Appeals)hasalsonotappreciatedthefactthatthemark-upof3.72%computedby theTPOworksouttonearly72%ofLIBORwhichinourview,isquiteexcessive. Accordingly,lookingintotheinstantfactsoftheinstantcase,weareoftheconsidered viewthattheassesseeisjustifiedincomputingtheALPat7.69%(i.e.atLIBORplus2.5%) andtheappealoftheassesseeisallowedwithrespecttothisGroundofAppeal. 54.3Inviewoftheabovediscussionandfindingbythetribunalthatthe reasonablerateofinterestshallbeLIBOR+2%,weherebyholdthatsuo-moto notionalinterestofferedbytheassesseeatLIBOR+2.8%isALPandnofurther adjustmentisrequiredtobemade.Hence,weherebysetasidethefindingofthe learnedCIT(A)anddirecttheAOtodeletetheupwardadjustmentmadeon ITAnos.319/AHD/2020&09others Asstt.Years2012-13and04others 33 accountofbenchmarkingofinterestfreeloantoAE.Thus,thegroundofthe appealfiledbytheassesseeisherebyallowed. 55.Thelastissueraisedbytheassesseeinrelationtoallowanceofdeduction ofCessundersection37oftheActhasnotbeenpressedbythelearnedARofthe assessee.Hencethesameisherebydismissedasnotpressed. 56.Intheresulttheappealoftheassesseeisherebypartlyallowedfor statisticalpurposes. ComingtoITANo.471/AHD/2020,anappealbytheRevenueforA.Y. 2013-14 57.TheRevenuehasraisedfollowinggroundsofappeal: “(1)Theld.CIT(A)haserredinlawandfactsInallowingdeductionu/s.80IABongain onforeigncurrencyderivativetransactionofRs.7,72,00,000/-. (2)Theld.CIT(A)haserredInlawandfactsIndeletingthedisallowanceofforeign currencyderivativelossofRs.50,14,00,000/-andnegatingthefindingsofAO. (3)Theld.CIT(A)haserredInlawandfactsinallowingdeductionu/s.80IABonsale ofscrapofRs.1,20,00,000/-. (4)Theld.CIT(A)haserredInlawandfactsInrestrictingthesectionMA disallowancetotheextentofRs.23.02croresunderthegeneralprovisions. (5)Theld.CIT(A)haserredInlawandfactsIndeletingtheSection115JBadjustment ofRs.28,04,62,746/-. (6)Theld.CIT(A)haserredInlawandfactsInholdingthattheCorporateGuarantee IsnotanInternationaltransactionandIndeletingtheupwardadjustmentof Rs.13,44,10,481/-madebytheTPO. (7)Theld.CIT(A)haserredIndeletingtheTPadjustmenttothetuneof Rs.13,44,10,481byignoringthattheactualadditionmadebytheTPO/AOwasloweratRs. 13,42,88,737/-. (8)Theappellantcraves,toleave,toamendand/ortoalteranygroundoraddanew groundwhichmaybenecessary.” ITAnos.319/AHD/2020&09others Asstt.Years2012-13and04others 34 58.ThefirstissueraisedbytherevenuevidegroundNos.1&2ofitsappealis thatthelearnedCIT(A)erredinholdingthegain/lossonderivative/currencyswap asnon-speculativeandeligiblefordeductionundersection80IABoftheAct. 59.Attheoutset,wenotethattheissuesraisedbytherevenueinitsgrounds ofappealfortheAY2013-14areidenticaltotheissuesraisedbytherevenuein ITANo.335/AHD/2020fortheassessmentyear2012-13.Therefore,thefindings giveninITANo.335/AHD/2020shallalsobeapplicablefortheyearunder considerationi.e.AY2013-14.Theappealoftherevenuefortheassessment 2012-13hasbeendecidedbyusvideparagraphNo.29ofthisorderagainstthe revenue.ThelearnedARandtheDRalsoagreedthatwhateverwillbethe findingsfortheassessmentyear2012-13shallalsobeappliedfortheyearunder considerationi.e.AY2013-14.Hence,thegroundofappealfiledbytherevenueis herebydismissed. 60.ThenextissueraisedbytherevenueisthatthelearnedCIT(A)erredin allowingthedeductionundersection80IABoftheActonthereceiptfromscrap sale. 61.Attheoutset,wenotethattheissueraisedbytherevenueinitsgroundsof appealfortheAY2013-14isidenticaltotheissueraisedbytheRevenueinITA No.335/AHD/2020fortheassessmentyear2012-13.Therefore,thefindingsgiven inITANo.335/AHD/2020shallalsobeapplicablefortheyearunderconsideration i.e.AY2013-14.Theappealoftherevenuefortheassessment2012-13hasbeen decidedbyusvideparagraphNo.24ofthisorderagainsttherevenue.The learnedARandtheDRalsoagreedthatwhateverwillbethefindingsforthe assessmentyear2012-13shallalsobeappliedfortheyearunderconsiderationi.e. AY2013-14.Hence,thegroundofappealfiledbytherevenueisherebydismissed. 62.ThenextissueraisedbytheRevenuevidegroundNos.4&5ofitsappeal isthatthelearnedCIT(A)erredinrestrictingthedisallowanceundersection14A ITAnos.319/AHD/2020&09others Asstt.Years2012-13and04others 35 oftheActtotheextentof5.28croresfromactualdisallowanceofRs.28.30crores furthererredindeletingtheadditionmadeunderbookprofitbythesameamount. 63.Attheoutset,wenotethattheissuesraisedbytherevenueinitsgrounds ofappealfortheAY2013-14areidenticaltotheissuesraisedbytherevenuein ITANo.335/AHD/2020fortheassessmentyear2012-13.Therefore,thefindings giveninITANo.335/AHD/2020shallalsobeapplicablefortheyearunder considerationi.e.AY2013-14.Theappealoftherevenuefortheassessment 2012-13hasbeendecidedbyusvideparagraphNo.31ofthisorderpartlyin favouroftheRevenue.ThelearnedARandtheDRalsoagreedthatwhateverwill bethefindingsfortheassessmentyear2012-13shallalsobeappliedfortheyear underconsiderationi.e.AY2013-14.Hence,thegroundofappealfiledbythe revenueisherebypartlyallowed. 64.ThelastissueraisedbytherevenuevidegroundNos.6&7and additionalgroundofitsappealisthatthelearnedCIT(A)erredindeletingthe TPadjustmentoncorporateguarantee. 65.Attheoutset,wenotethattheissuesraisedbytherevenueinitsgrounds ofappealfortheAY2013-14areidenticaltotheissuesraisedbytherevenuein ITANo.335/AHD/2020fortheassessmentyear2012-13.Therefore,thefindings giveninITANo.335/AHD/2020shallalsobeapplicablefortheyearunder considerationi.e.AY2013-14.Theappealoftherevenuefortheassessment 2012-13hasbeendecidedbyusvideparagraphNo.41ofthisorderagainstthe Revenue.ThelearnedARandtheDRalsoagreedthatwhateverwillbethe findingsfortheassessmentyear2012-13shallalsobeappliedfortheyearunder considerationi.e.AY2013-14.Hence,thegroundofappealfiledbytherevenueis herebydismissed. 66.Intheresultappealoftherevenueisherebypartlyallowed. ITAnos.319/AHD/2020&09others Asstt.Years2012-13and04others 36 ComingtoITANo.44/Ahd/2021,anappealbytheassesseeforA.Y. 2014-15 67.Theassesseehasraisedfollowinggroundsofappeal: “1.Onthefactsandinthecircumstancesofthecase,thelearnedCIT(A)erredin upholdingdisallowanceu/s14AoftheActtotheextentofRs7,23,00,000/-TheCIT(A) oughttohavedeletedentiredisallowancemadebyAO. 2.Onthefactsandinthecircumstancesofthecase,thelearnedCIT(A)erredin upholdingdisallowanceofdepreciationforRs.13,41,64,267/-inrespectofland developmentexpenditureincurredonleaseholdlandstowardsreclamationoflandbythe appellantonmeritsofthecase. 3.Onthefactsandinthecircumstancesofthecase,thelearnedCIT(A)erredin upholdingdisallowanceofdepreciationofRs.63,16,850/-claimedbytheappellant- companyon"righttouseleaseholdland",beingintangibleasseteligibleforgrantof depreciationu/s.32oftheI.T.Actonmeritsofthecase. 4.Onthefactsandinthecircumstancesofthecase,thelearnedCIT(A)erredin upholdingadditionoftransferpricingadjustmentofRs.29,95,877/-forbenchmarkingof interest. 5.Onthefactsandinthecircumstancesofthecase,theappellantisentitledfor deductionofeducationcessandhighereducationcesspaidwhilecomputingincomefrom businessandprofessioninviewoftheCBDTCIRCULARF.No.91/58/66-ITJ(19)DT.18th May,1967;.Hon'bleITATmaydirectforallowingdeductionforeducationcessandhigher educationcessasallowableexpenditureinviewofbindingCBDTcircularandinviewof decisionofHon'bleRajasthanHCinthecaseofIncomeTaxAppealNo.52/2018Pr. CommissionerOfIncomeTaxVs.M/s.ChambalFertilizersAndChemicalsLtdanddecision ofHon'bleBombayHighcourtinthecaseofSesaGoaLimitedinTaxAppealNo17& 18/2013. 6.Theappellantcravesleavetoadd,alter,amendand/orwithdrawanygroundor groundsofappealeitherbeforeorduringthecourseofhearingoftheappeal.” 68.ThefirstissueraisedbytheassesseeisthatlearnedCIT(A)erredin sustainingtoadditionundersection14AoftheActforRs.7.23crores. 69.Attheoutset,wenotethattheissuesraisedbytheassesseeinitsgrounds ofappealfortheAY2014-15areidenticaltotheissuesraisedbytheassesseein ITANo.446/AHD/2020fortheassessmentyear2013-14.Therefore,thefindings giveninITANo.446/AHD/2020shallalsobeapplicablefortheyearunder considerationi.e.AY2014-15.Theappealoftheassesseefortheassessment 2013-14hasbeendecidedbyusvideparagraphNo.45ofthisorderpartlyin ITAnos.319/AHD/2020&09others Asstt.Years2012-13and04others 37 favouroftheassesseeforstatisticalpurposes.ThelearnedARandtheDRalso agreedthatwhateverwillbethefindingsfortheassessmentyear2013-14shall alsobeappliedfortheyearunderconsiderationi.e.AY2014-15.Hence,the groundofappealfiledbytheassesseeisherebyallowedforstatisticalpurposes. 70.ThenextissueraisedbytheassesseeisthatthelearnedCIT(A)erredin confirmingthedisallowanceofdepreciationonlanddevelopmentexpenditure incurredonleaseholdland. 71.Attheoutset,wenotethattheissuesraisedbytheassesseeinitsgrounds ofappealfortheAY2014-15areidenticaltotheissuesraisedbytheassesseein ITANo.319/AHD/2020fortheassessmentyear2012-13.Therefore,thefindings giveninITANo.319/AHD/2020shallalsobeapplicablefortheyearunder considerationi.e.AY2014-15.Theappealoftheassesseefortheassessment 2012-13hasbeendecidedbyusvideparagraphNo.7ofthisorderagainstthe assessee.ThelearnedARandtheDRalsoagreedthatwhateverwillbethe findingsfortheassessmentyear2012-13shallalsobeappliedfortheyearunder considerationi.e.AY2014-15.Hence,thegroundofappealfiledbytheassessee isherebydismissed. 72.ThenextissueraisedbytheassesseeisthatthelearnedCIT(A)erredin confirmingthedisallowanceofdepreciationonrighttouseleaseholdland. 73.Attheoutset,wenotethattheissueraisedbytheassesseeinitsgrounds ofappealfortheAY2014-15isidenticaltotheissuesraisedbytheassesseein ITANo.319/AHD/2020fortheassessmentyear2012-13.Therefore,thefindings giveninITANo.319/AHD/2020shallalsobeapplicablefortheyearunder considerationi.e.AY2014-15.Theappealoftheassesseefortheassessment 2012-13hasbeendecidedbyusvideparagraphNo.12ofthisorderinfavourof theassessee.ThelearnedARandtheDRalsoagreedthatwhateverwillbethe findingsfortheassessmentyear2012-13shallalsobeappliedfortheyearunder ITAnos.319/AHD/2020&09others Asstt.Years2012-13and04others 38 considerationi.e.AY2014-15.Hence,thegroundofappealfiledbytheassessee isherebyallowed. 74.ThenextissueraisedbytheassesseeisthatthelearnedCIT(A)erredin confirmingtheupwardadjustmentinTPonaccountofinterestforRs.29,95,877/- only. 75.Attheoutset,wenotethattheissuesraisedbytheassesseeinitsgrounds ofappealfortheAY2014-15areidenticaltotheissuesraisedbytheassesseein ITANo.446/AHD/2020fortheassessmentyear2013-14.Therefore,thefindings giveninITANo.446/AHD/2020shallalsobeapplicablefortheyearunder considerationi.e.AY2014-15.Theappealoftheassesseefortheassessment 2013-14hasbeendecidedbyusvideparagraphNo.54ofthisorderinfavourof theassessee.ThelearnedARandtheDRalsoagreedthatwhateverwillbethe findingsfortheassessmentyear2013-14shallalsobeappliedfortheyearunder considerationi.e.AY2014-15.Hence,thegroundofappealfiledbytheassessee isherebyallowed. 76.Thelastissueraisedbytheassesseeinrelationtoallowanceofdeductionof cessundersection37oftheActhasnotbeenpressedbythelearnedARofthe assessee.Hencethesameisherebydismissedasnotpressed. 77.Intheresulttheappealoftheassesseeisherebypartlyallowedfor statisticalpurposes. ComingtoITANo.63/AHD/2021,anappealbytheRevenueforA.Y. 2014-15 78.TheRevenuehasraisedfollowinggroundsofappeal: ITAnos.319/AHD/2020&09others Asstt.Years2012-13and04others 39 “1."Theld.CIT(A)haserredindeletingthedisallowancemadeu/s.80-IABoftheAct onaccountofscrapincomeofRs.3,00,22,394/-. 2.“Theld.CIT(A)haserredindeletingthedisallowancemadeu/s.80-IABoftheAct onaccountofgrainfromforeigncurrencyderivativesofRs.73,91,50,977/-. 3."Theld.CIT(A)haserredinrestrictingthedisallowanceofRs.50,92,25,029/-to extentofexemptincomeanddeletingtheinterestexpensesofRs.43.96croresclaimedby theassesseeCompany." 4."Theld.CIT(A)haserredinrestrictingthedisallowanceofadministrativeexpenses tothe,extentofexemptincomeandrestrictingthenetdisallowancetoRs.7.23croresand givingfurtherrelieftotheassesseeamountingtoRs.26,74,971/-." 5.Theld.CIT(A)haserredindeletingthedisallowanceoflossonforeigncurrency derivatives/swaptransactionsofRs.175,99,38,748/-(2499089725–739150977). 6."Theld.CIT(A)haserredindeletingtheTransferPricingadjustmentadditions beingbenchmarkingofcorporateguaranteeforRs.14,79,32,963/-madebytheAO". 7.Theappellantcraves,toleave,toamendand/ortoalteranygroundoraddanew groundwhichmaybenecessary.” 79.ThefirstissueraisedbytherevenueisthatthelearnedCIT(A)erredin allowingthedeductionundersection80IABoftheActonthereceiptfromscrap saleforRs.3,00,22,394/-only. 80.Attheoutset,wenotethattheissuesraisedbytherevenueinitsgrounds ofappealfortheAY2014-15areidenticaltotheissuesraisedbytherevenuein ITANo.335/AHD/2020fortheassessmentyear2012-13.Therefore,thefindings giveninITANo.335/AHD/2020shallalsobeapplicablefortheyearunder considerationi.e.AY2014-15.Theappealoftherevenuefortheassessment 2012-13hasbeendecidedbyusvideparagraphNo.24ofthisorderagainstthe revenue.ThelearnedARandtheDRalsoagreedthatwhateverwillbethe findingsfortheassessmentyear2012-13shallalsobeappliedfortheyearunder considerationi.e.AY2014-15.Hence,thegroundofappealfiledbytherevenueis herebydismissed. 81.ThenextissueraisedbytherevenuevidegroundNos.2&5ofitsappeal isthatthelearnedCIT(A)erredinholdingthegain/lossonderivative/currency swapasnon-speculativeandeligiblefordeductionundersection80IABoftheAct. ITAnos.319/AHD/2020&09others Asstt.Years2012-13and04others 40 82.Attheoutset,wenotethattheissuesraisedbytherevenueinitsgrounds ofappealfortheAY2014-15areidenticaltotheissuesraisedbytherevenuein ITANo.335/AHD/2020fortheassessmentyear2012-13.Therefore,thefindings giveninITANo.335/AHD/2020shallalsobeapplicablefortheyearunder considerationi.e.AY2014-15.Theappealoftherevenuefortheassessment 2012-13hasbeendecidedbyusvideparagraphNo.29ofthisorderagainstthe revenue.ThelearnedARandtheDRalsoagreedthatwhateverwillbethe findingsfortheassessmentyear2012-13shallalsobeappliedfortheyearunder considerationi.e.AY2014-15.Hence,thegroundofappealfiledbytherevenueis herebydismissed. 83.ThenextissueraisedbytheRevenuevidegroundNos.3&4ofitsappeal isthatthelearnedCIT(A)erredinrestrictingthedisallowanceundersection14A oftheActtotheextentofexemptedincome. 84.Attheoutset,wenotethattheissuesraisedbytherevenueinitsgrounds ofappealfortheAY2014-15areidenticaltotheissuesraisedbytherevenuein ITANo.335/AHD/2020fortheassessmentyear2012-13.Therefore,thefindings giveninITANo.335/AHD/2020shallalsobeapplicablefortheyearunder considerationi.e.AY2014-15.Theappealoftherevenuefortheassessment 2012-13hasbeendecidedbyusvideparagraphNo.31ofthisorderwherethe issueofdeletionofdisallowanceundersection14AoftheActhasbeendecided againsttheRevenue.ThelearnedARandtheDRalsoagreedthatwhateverwill bethefindingsfortheassessmentyear2012-13shallalsobeappliedfortheyear underconsiderationi.e.AY2014-15.Hence,thegroundofappealfiledbythe revenueisherebydismissed. 85.ThelastissueraisedbytherevenuevidegroundNo.6andadditional groundofitsappealisthatthelearnedCIT(A)erredindeletingtheTP adjustmentoncorporateguarantee. ITAnos.319/AHD/2020&09others Asstt.Years2012-13and04others 41 86.Attheoutset,wenotethattheissuesraisedbytherevenueinitsgrounds ofappealfortheAY2014-15areidenticaltotheissuesraisedbytherevenuein ITANo.335/AHD/2020fortheassessmentyear2012-13.Therefore,thefindings giveninITANo.335/AHD/2020shallalsobeapplicablefortheyearunder considerationi.e.AY2014-15.Theappealoftherevenuefortheassessmentyear 2012-13hasbeendecidedbyusvideparagraphNo.41ofthisorderagainstthe Revenue.ThelearnedARandtheDRalsoagreedthatwhateverwillbethe findingsfortheassessmentyear2012-13shallalsobeappliedfortheyearunder considerationi.e.AY2014-15.Hence,thegroundofappealfiledbytherevenueis herebydismissed. 87.Intheresult,theappealoftherevenueisherebydismissed. ComingtoITANo.45/Ahd/2021,anappealbytheassesseeforA.Y. 2015-16 88.Theassesseehasraisedfollowinggroundsofappeal: “1.Onthefactsandinthecircumstancesofthecase,thelearnedCIT(A)erredin upholdingdisallowanceu/s14AoftheActtotheextentofRs10,32,15,036/-.TheCIT(A) oughttohavedeletedentiredisallowancemadebyAO. 2.Onthefactsandinthecircumstancesofthecase,thelearnedCIT(A)erredin upholdingdisallowanceofdepreciationforRs.18,12,31,296/-inrespectofland developmentexpenditureincurredonleaseholdlandstowardsreclamationoflandbythe appellantonmeritsofthecase. 3.Onthefactsandinthecircumstancesofthecase,thelearnedCIT(A)erredin upholdingdisallowanceofdepreciationofRs.47,37,638/-claimedbytheappellant- companyon“righttouseleaseholdland”,beingintangibleasseteligibleforgrantof depreciationu/s.32oftheI.T.Actonmeritsofthecase. 4.Onthefactsandinthecircumstancesofthecase,theappellantisentitledfor deductionofeducationcessandhighereducationcesspaidwhilecomputingincomefrom businessandprofessioninviewoftheCBDTCIRCULARF.No.91/58/66-ITJ(19)DT.18 th May,1967;.Hon’bleITATmaydirectforallowingdeductionforeducationcessandhigher educationcessasallowableexpenditureinviewofbindingCBDTcircularandinviewof decisionofHon’bleRajasthanHCinthecaseofIncomeTaxAppealNo.52/2018Pr. CommissionerOfIncomeTaxVs.M/s.ChambalFertilizersAndChemicalsLtdanddecision ofHon’bleBombayHighCourtinthecaseofSesaGoaLimitedinTaxAppealNo17& 18/2013. ITAnos.319/AHD/2020&09others Asstt.Years2012-13and04others 42 5.Theappellantcravesleavetoadd,alter,amendand/orwithdrawanygroundor groundsofappealeitherbeforeorduringthecourseofhearingoftheappeal.” 89.ThefirstissueraisedbytheassesseeisthatlearnedCIT(A)erredin sustainingtoadditionundersection14AoftheActforRs.10,32,15,036/-. 90.Attheoutset,wenotethattheissuesraisedbytheassesseeinitsgrounds ofappealfortheAY2015-16areidenticaltotheissuesraisedbytheassesseein ITANo.446/AHD/2020fortheassessmentyear2013-14.Therefore,thefindings giveninITANo.446/AHD/2020shallalsobeapplicablefortheyearunder considerationi.e.AY2015-16.Theappealoftheassesseefortheassessmentyear 2013-14hasbeendecidedbyusvideparagraphNos.45ofthisorderpartlyin favouroftheassesseeforstatisticalpurposes.ThelearnedARandtheDRalso agreedthatwhateverwillbethefindingsfortheassessmentyear2013-14shall alsobeappliedfortheyearunderconsiderationi.e.AY2015-16.Hence,the groundofappealfiledbytheassesseeisherebyallowedforstatisticalpurposes. 91.ThenextissueraisedbytheassesseeisthatthelearnedCIT(A)erredin confirmingthedisallowancesofdepreciationonlanddevelopmentexpenditure incurredonleaseholdland. 92.Attheoutset,wenotethattheissuesraisedbytheassesseeinitsgrounds ofappealfortheAY2015-16areidenticaltotheissuesraisedbytheassesseein ITANo.319/AHD/2020fortheassessmentyear2012-13.Therefore,thefindings giveninITANo.319/AHD/2020shallalsobeapplicablefortheyearunder considerationi.e.AY2015-16.Theappealoftheassesseefortheassessmentyear 2012-13hasbeendecidedbyusvideparagraphNos.7ofthisorderagainstthe assessee.ThelearnedARandtheDRalsoagreedthatwhateverwillbethe findingsfortheassessmentyear2012-13shallalsobeappliedfortheyearunder considerationi.e.AY2015-16.Hene,thegroundofappealfiledbytheassesseeis herebydismissed. ITAnos.319/AHD/2020&09others Asstt.Years2012-13and04others 43 93.ThenextissueraisedbytheassesseeisthatthelearnedCIT(A)erredin confirmingthedisallowanceofdepreciationonrighttouseleaseholdland. 94.Attheoutset,wenotethattheissuesraisedbytheassesseeinitsgrounds ofappealfortheAY2015-16areidenticaltotheissuesraisedbytheassesseein ITANo.319/AHD/2020fortheassessmentyear2012-13.Therefore,thefindings giveninITANo.319/AHD/2020shallalsobeapplicablefortheyearunder considerationi.e.AY2015-16.Theappealoftheassesseefortheassessmentyear 2012-13hasbeendecidedbyusvideparagraphNo.12ofthisorderinfavourof theassessee.ThelearnedARandtheDRalsoagreedthatwhateverwillbethe findingsfortheassessmentyear2012-13shallalsobeappliedfortheyearunder considerationi.e.AY2015-16.Hence,thegroundofappealfiledbytheassessee isherebyallowed. 95.Thelastissueraisedbytheassesseeinrelationtoallowancesofdeduction ofcessundersection37oftheActhasnotbeenpressedbythelearnedARofthe assessee.Hencethesameisherebydismissedasnotpressed. 96.Intheresultappealoftheassesseeisherebypartlyallowedforstatistical purposes. ComingtoITANo.64/AHD/2021,anappealbytheRevenueforA.Y. 2015-16 97.TheRevenuehasraisedfollowinggroundsofappeal: “1.“Theld.CIT(A)haserredindeletingthedisallowancemadeu/s.80-IABoftheAct onaccountofscrapincomeofRs.6,70,96,251/-.” 2.“Theld.CIT(A)haserredindeletingthedisallowancemadeu/s.80-IABoftheAct onaccountofgrainfromforeigncurrencyderivativesofRs.82,09,67,854/-.” ITAnos.319/AHD/2020&09others Asstt.Years2012-13and04others 44 3.“Theld.CIT(A)haserredinrestrictingthedisallowanceofRs.127.99croresto extentofexemptincomeanddeletingtheinterestexpensesofRs.111.31croresclaimed bytheassesseeCompany.” 4.“Theld.CIT(A)haserredinrestrictingthedisallowanceofadministrativeexpenses totheextentofexemptincomeandrestrictingthenetdisallowancetoRs.10.31crores andgivingfurtherrelieftotheassesseeamountingtoRs.6,37,29,000/-.” 5.Theld.CIT(A)haserredindeletingthedisallowanceoflossonforeigncurrency derivatives/swaptransactionsofRs.20,25,25,692/-. 6.“Theld.CIT(A)haserredindeletingtheTransferPricingadjustmentadditions beingbenchmarkingofcorporateguaranteeforRs.14,43,09,894/-.MadebytheAO.” 7.Theappellantcraves,toleave,toamendand/ortoalteranygroundoraddanew groundwhichmaybenecessary.” 98.ThefirstissueraisedbytherevenueisthatthelearnedCIT(A)erredin allowingthedeductionundersection80IABoftheActonthereceiptfromscrap saleforRs.6,70,96,251/-only. 99.Attheoutset,wenotethattheissuesraisedbytherevenueinitsgrounds ofappealfortheAY2015-16areidenticaltotheissuesraisedbytherevenuein ITANo.335/AHD/2020fortheassessmentyear2012-13.Therefore,thefindings giveninITANo.335/AHD/2020shallalsobeapplicablefortheyearunder considerationi.e.AY2015-16.Theappealoftherevenuefortheassessmentyear 2012-13hasbeendecidedbyusvideparagraphNo.24ofthisorderagainstthe revenue.ThelearnedARandtheDRalsoagreedthatwhateverwillbethe findingsfortheassessmentyear2012-13shallalsobeappliedfortheyearunder considerationi.e.AY2015-16.Hence,thegroundofappealfiledbytherevenueis herebydismissed. 100.ThenextissueraisedbytherevenuevidegroundNos.2&5ofitsappeal isthatthelearnedCIT(A)erredinholdingthegain/lossonderivative/currency swapasnon-speculativeandeligiblefordeductionundersection80IABoftheAct. 101.Attheoutset,wenotethattheissuesraisedbytherevenueinitsgrounds ofappealfortheAY2015-16areidenticaltotheissuesraisedbytherevenuein ITAnos.319/AHD/2020&09others Asstt.Years2012-13and04others 45 ITANo.335/AHD/2020fortheassessmentyear2012-13.Therefore,thefindings giveninITANo.335/AHD/2020shallalsobeapplicablefortheyearunder considerationi.e.AY2015-16.Theappealoftherevenuefortheassessmentyear 2012-13hasbeendecidedbyusvideparagraphNo.29ofthisorderagainstthe revenue.ThelearnedARandtheDRalsoagreedthatwhateverwillbethe findingsfortheassessmentyear2012-13shallalsobeappliedfortheyearunder considerationi.e.AY2015-16.Hence,thegroundofappealfiledbytherevenueis herebydismissed. 102.ThenextissueraisedbytheRevenuevidegroundNos.3&4ofitsappeal isthatthelearnedCIT(A)erredinrestrictingthedisallowancesundersection14A oftheActtotheextentofexemptedincome. 103.Attheoutset,wenotethattheissuesraisedbytherevenueinitsgrounds ofappealfortheAY2014-15areidenticaltotheissuesraisedbytherevenuein ITANo.335/AHD/2020fortheassessmentyear2012-13.Therefore,thefindings giveninITANo.335/AHD/2020shallalsobeapplicablefortheyearunder considerationi.e.AY2015-16.Theappealoftherevenuefortheassessmentyear 2012-13hasbeendecidedbyusvideparagraphNo.31ofthisorderwherethe issueofdeletionofdisallowanceundersection14AoftheActhasbeendecided againsttheRevenue.ThelearnedARandtheDRalsoagreedthatwhateverwill bethefindingsfortheassessmentyear2012-13shallalsobeappliedfortheyear underconsiderationi.e.AY2015-16.Hence,thegroundofappealfiledbythe revenueisherebydismissed. 104.ThelastissueraisedbytherevenuevidegroundNo.6andadditional groundofitsappealisthatthelearnedCIT(A)erredindeletingtheTP adjustmentoncorporateguarantee. 105.Attheoutset,wenotethattheissuesraisedbytherevenueinitsgrounds ofappealfortheAY2015-16areidenticaltotheissuesraisedbytherevenuein ITAnos.319/AHD/2020&09others Asstt.Years2012-13and04others 46 ITANo.335/AHD/2020fortheassessmentyear2012-13.Therefore,thefindings giveninITANo.335/AHD/2020shallalsobeapplicablefortheyearunder considerationi.e.,AY2015-16.Theappealoftherevenuefortheassessmentyear 2012-13hasbeendecidedbyusvideparagraphNo.41ofthisorderagainstthe Revenue.ThelearnedARandtheDRalsoagreedthatwhateverwillbethe findingsfortheassessmentyear2012-13shallalsobeappliedfortheyearunder considerationi.e.,AY2015-16.Hence,thegroundofappealfiledbytherevenue isherebydismissed. 106.Intheresult,theappealoftherevenueisherebydismissed. ComingtoITANo.46/Ahd/2021,anappealbytheassesseeforA.Y. 2016-17 107.Theassesseehasraisedfollowinggroundsofappeal: “1.Onthefactsandinthecircumstancesofthecase,thelearnedCIT(A)erredin upholdingdisallowanceu/s14AoftheActtotheextentofRs1,51,24,949/-TheCIT(A) oughttohavedeletedentiredisallowancemadebyAO. 2.Onthefactsandinthecircumstancesofthecase,thelearnedCIT(A)erredin upholdingdisallowanceofdepreciationforRs.24,48,42,105/-inrespectofland developmentexpenditureincurredonleaseholdlandstowardsreclamationoflandbythe appellantonmeritsofthecase. 3.Onthefactsandinthecircumstancesofthecase,theappellantisentitledfor deductionofeducationcessandhighereducationcesspaidwhilecomputingincomefrom businessandprofessioninviewoftheCBDTCIRCULARF.No.91/58/66-ITJ(19)DT.18 th May,1967;.Hon’bleITATmaydirectforallowingdeductionforeducationcessandhigher educationcessasallowableexpenditureinviewofbindingCBDTcircularandinviewof decisionofHon’bleRajasthanHCinthecaseofIncomeTaxAppealNo.52/2018Pr. CommissionerOfIncomeTaxVs.M/s.ChambalFertilizersAndChemicalsLtdanddecision ofHon’bleBombayHighCourtinthecaseofSesaGoaLimitedinTaxAppealNo17& 18/2013. 4.Theappellantcravesleavetoadd,alter,amendand/orwithdrawanygroundor groundsofappealeitherbeforeorduringthecourseofhearingoftheappeal.” 108.ThefirstissueraisedbytheassesseeisthatlearnedCIT(A)erredin sustainingtoadditionundersection14AoftheActforRs.1,51,24,949/-only. ITAnos.319/AHD/2020&09others Asstt.Years2012-13and04others 47 109.Attheoutset,wenotethattheissuesraisedbytheassesseeinitsgrounds ofappealfortheAY2016-17areidenticaltotheissuesraisedbytheassesseein ITANo.446/AHD/2020fortheassessmentyear2013-14.Therefore,thefindings giveninITANo.446/AHD/2020shallalsobeapplicablefortheyearunder considerationi.e.AY2016-17.Theappealoftheassesseefortheassessment 2013-14hasbeendecidedbyusvideparagraphNo.45ofthisorderpartlyin favouroftheassesseeforstatisticalpurposes.ThelearnedARandtheDRalso agreedthatwhateverwillbethefindingsfortheassessmentyear2013-14shall alsobeappliedfortheyearunderconsiderationi.e.AY2016-17.Hence,the groundofappealfiledbytheassesseeisherebyallowedforstatisticalpurposes. 110.ThenextissueraisedbytheassesseeisthatthelearnedCIT(A)erredin confirmingthedisallowancesofdepreciationonlanddevelopmentexpenditure incurredonleaseholdland. 111.Attheoutset,wenotethattheissueraisedbytheassesseeinitsgrounds ofappealfortheAY2016-17areidenticaltotheissuesraisedbytheassesseein ITANo.319/AHD/2020fortheassessmentyear2012-13.Therefore,thefindings giveninITANo.319/AHD/2020shallalsobeapplicablefortheyearunder considerationi.e.AY2016-17.Theappealoftheassesseefortheassessmentyear 2012-13hasbeendecidedbyusvideparagraphNo.7ofthisorderagainstthe assessee.ThelearnedARandtheDRalsoagreedthatwhateverwillbethe findingsfortheassessmentyear2012-13shallalsobeappliedfortheyearunder considerationi.e.AY2016-17.Hence,thegroundofappealfiledbytheassessee isherebydismissed. 112.Thelastissueraisedbytheassesseeinrelationtoallowanceofdeduction ofcessundersection37oftheActhasnotbeenpressedbythelearnedARofthe assessee.Hencethesameisherebydismissedasnotpressed. ITAnos.319/AHD/2020&09others Asstt.Years2012-13and04others 48 113.Intheresulttheappealoftheassesseeisherebypartlyallowedfor statisticalpurposes. ComingtoITANo.65/AHD/2021,anappealbytheRevenueforAY 2016-17 114.TheRevenuehasraisedfollowinggroundsofappeal: “1.“Theld.CIT(A)haserredindeletingthedisallowancemadeu/s.80-IABoftheAct onaccountofscrapincomeofRs.5,80,72,284/-.” 2.“Theld.CIT(A)haserredindeletingthedisallowancemadeu/s.80-IABoftheAct onaccountofgrainfromforeigncurrencyderivativesofRs.254,55,33,080/-.” 3.“Theld.CIT(A)haserredinrestrictingthedisallowanceofRs.78,80,72,101/-to extentofexemptincomeanddeletingtheinterestexpensesofRs.54.22croresclaimedby theassesseeCompany.” 4.“Theld.CIT(A)haserredinrestrictingthedisallowanceofadministrativeexpenses totheextentofexemptincomeandrestrictingthenetdisallowancetoRs.1.50croresand givingfurtherrelieftotheassesseeamountingtoRs.24.58crores.” 5.“Theld.CIT(A)haserredindeletingthedisallowanceoflossonforeigncurrency derivatives/swaptransactionsofRs.148,40,29,769/-.” 6.“Theld.CIT(A)haserredindeletingtheTransferPricingupwardadjustmentsof Rs.9,60,91,300/-madebytheAO”. 7.Theappellantcraves,toleave,toamendand/ortoalteranygroundoraddanew groundwhichmaybenecessary.” 115.ThefirstissueraisedbytherevenueisthatthelearnedCIT(A)erredin allowingthedeductionundersection80IABoftheActonthereceiptfromscrap saleforRs.5,80,72,284/-. 116.Attheoutset,wenotethattheissuesraisedbytherevenueinitsgrounds ofappealfortheAY2016-17areidenticaltotheissuesraisedbytherevenuein ITANo.335/AHD/2020fortheassessmentyear2012-13.Therefore,thefindings giveninITANo.335/AHD/2020shallalsobeapplicablefortheyearunder considerationi.e.AY2016-17.Theappealoftherevenuefortheassessmentyear 2012-13hasbeendecidedbyusvideparagraphNo.24ofthisorderagainstthe ITAnos.319/AHD/2020&09others Asstt.Years2012-13and04others 49 revenue.ThelearnedARandtheDRalsoagreedthatwhateverwillbethe findingsfortheassessmentyear2012-13shallalsobeappliedfortheyearunder considerationi.e.AY2016-17.Hence,thegroundofappealfiledbytherevenueis herebydismissed. 117.ThenextissueraisedbytherevenuevidegroundNos.2&5ofitsappeal isthatthelearnedCIT(A)erredinholdingthegain/lossonderivative/currency swapasnon-speculativeandeligiblefordeductionundersection80IABoftheAct. 118.Attheoutset,wenotethattheissuesraisedbytherevenueinitsgrounds ofappealfortheAY2016-17areidenticaltotheissuesraisedbytherevenuein ITANo.335/AHD/2020fortheassessmentyear2012-13.Therefore,thefindings giveninITANo.335/AHD/2020shallalsobeapplicablefortheyearunder considerationi.e.AY2016-17.Theappealoftherevenuefortheassessmentyear 2012-13hasbeendecidedbyusvideparagraphNo.29ofthisorderagainstthe revenue.ThelearnedARandtheDRalsoagreedthatwhateverwillbethe findingsfortheassessmentyear2012-13shallalsobeappliedfortheyearunder considerationi.e.AY2016-17.Hence,thegroundofappealfiledbytherevenueis herebydismissed. 119.ThenextissueraisedbytheRevenuevidegroundNos.3&4ofitsappeal isthatthelearnedCIT(A)erredinrestrictingthedisallowancesundersection14A oftheActtotheextentofexemptedincome. 120.Attheoutset,wenotethattheissuesraisedbytherevenueinitsgrounds ofappealfortheAY2016-17areidenticaltotheissuesraisedbytherevenuein ITANo.335/AHD/2020fortheassessmentyear2012-13.Therefore,thefindings giveninITANo.335/AHD/2020shallalsobeapplicablefortheyearunder considerationi.e.AY2016-17.Theappealoftherevenuefortheassessmentyear 2012-13hasbeendecidedbyusvideparagraphNo.31ofthisorderwherethe issueofdeletionofdisallowanceundersection14AoftheActhasbeendecided ITAnos.319/AHD/2020&09others Asstt.Years2012-13and04others 50 againsttheRevenue.ThelearnedARandtheDRalsoagreedthatwhateverwill bethefindingsfortheassessmentyear2012-13shallalsobeappliedfortheyear underconsiderationi.e.AY2016-17.Hence,thegroundofappealfiledbythe revenueisherebydismissed. 121.Thelastissueraisedbytherevenuevidegroundno.6andadditional groundofitsappealisthatthelearnedCIT(A)erredindeletingtheTP adjustmentoncorporateguarantee. 122.Attheoutset,wenotethattheissuesraisedbytherevenueinitsgrounds ofappealfortheAY2016-17areidenticaltotheissuesraisedbytherevenuein ITANo.335/AHD/2020fortheassessmentyear2012-13.Therefore,thefindings giveninITANo.335/AHD/2020shallalsobeapplicablefortheyearunder considerationi.e.AY2016-17.Theappealoftherevenuefortheassessmentyear 2012-13hasbeendecidedbyusvideparagraphNo.41ofthisorderagainstthe Revenue.ThelearnedARandtheDRalsoagreedthatwhateverwillbethe findingsfortheassessmentyear2012-13shallalsobeappliedfortheyearunder considerationi.e.AY2016-17.Hence,thegroundofappealfiledbytherevenueis herebydismissed. 123.Intheresult,theappealoftherevenueisherebydismissed. 124.Inthecombinedresults: S.No.ITANos.A.YearAppellantResult 1319/Ahd/20202012-13AssesseePartlyallowed 2&3335& 471/Ahd/2020 2012-13& 2013-14 DepartmentPartlyAllowed 4446/Ahd/20202013-14AssesseePartlyallowedfor statisticalpurposes 5to744to46/Ahd/20212014-15to 2016-17 AssesseePartlyallowedfor statisticalpurposes ITAnos.319/AHD/2020&09others Asstt.Years2012-13and04others 51 8to1063to65/Ahd/20212014-15to 2016-17 DepartmentDismissed OrderpronouncedintheCourton30/11/2023atAhmedabad. Sd/-Sd/- (MADHUMITAROY)(WASEEMAHMED) JUDICIALMEMBERACCOUNTANTMEMBER (TrueCopy) Ahmedabad;Dated30/11/2023 Manish
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