DCIT CORPORATE CIRCLE-1, COIMBATORE, COIMBATORE V. L G BALAKRISHAN & BROS LTD, COIMBATORE

ITA 396/CHNY/2023

AI Insights

The case involves cross-appeals by the revenue and the assessee, M/s. L.G. Balakrishnan & Bros Ltd., concerning the assessment year 2014-15. The primary issues revolved around the admissibility of additional evidences related to economic adjustments for the Pantnagar Plant and the recomputation of eligible profits under section 80IC, as well as the disallowance under section 14A while computing Book Profit under section 115JB. The Tribunal found that the additional evidences were admitted in violation of Rule 46A and remitted the matter back for de novo consideration. It also ruled that the disallowance under section 14A should not affect the computation of Book Profit under section 115JB.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 134172 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-08-2023
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 31-07-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 26-03-2023
• Other Referred Cases: Vireet Investment P. Ltd. (82 Taxmann.com 415)
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: G.SURESH ADDL LD
• Keywords: Additional evidence
• Section: 143(3); 14A; 80IC; 80IC; 92CA

Judgement Text

आयकर अपीलीय अिधकरण “डी” ायपीठ चे ई म । IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, CHENNAI माननीय ी महावीर िसंह, उपा ! एवं माननीय ी मनोज कुमार अ&वाल ,लेखा सद) के सम!। BEFORE HON’BLE SHRI MAHAVIR SINGH, VP AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM आयकरअपील सं./ ITA No.396/Chny/2023 (िनधा*रण वष* / As sessment Year: 2014-15) DCIT Corporate Circle-1, Coimbatore – 641 018 बनाम/ V s. M/s. L.G. Balakrishnan & Bros Ltd. 6/16/13, Krishnarayapuram Road, Ganapathy, Coimbatore-641 006. थायीलेखासं./जीआइआरसं./PAN/GIR No. AAAC L - 3 7 4 0 -P (अपीलाथ /Appellant) : ( थ / Respondent) & आयकरअपील सं./ IT(TP)A No.33/Chny/2023 (िनधा*रण वष* / As sessment Year: 2014-15) M/s. L.G. Balakrishnan & Bros Ltd. 6/16/13, Krishnarayapuram Road, Ganapathy, Coimbatore-641 006. बनाम / V s. DCIT Corporate Circle-1, Coimbatore – 641 018 थायीलेखासं./जीआइआरसं./PAN/GIR No. AAAC L - 3 7 4 0 -P (अपीलाथ /Appellant) : ( थ / Respondent) Revenue by : Shri G.Suresh (Addl CIT)- Ld.DR Assessee by : Shri B. Ramakrishnan (FCA)-Ld .AR सुनवाईकीतारीख/Date of He arin g : 01-08-2023 घोषणाकीतारीख /Date of Pronouncement : 30-08-2023 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid cross-appeals for Assessment Year (AY) 2014-15 arises out of the order of learned Commissioner of Income Tax (Appeals)-16, Chennai [CIT(A)] dated 30-01-2023 in the matter of final assessment 2 order passed by Ld. Assessing Officer [AO] u/s. 143(3) r.w.s 92CA r.w.s 144C of the Act on 27-02-2018. The grievance of the revenue is that Ld. CIT(A) erred in admitting additional evidences qua various economic adjustment for Pantnagar Plant in violation of Rule 46A. The grievance of the assessee is re-computation of eligible profit u/s 80IC. The assessee is also aggrieved by confirmation of disallowance u/s 14A while computing Book Profit u/s 115JB. 2. The Ld. Sr. DR submitted that additional evidences were submitted by Ld. CIT(A) in violation of Rule 46A. The Ld. AR advanced arguments and referred to the order of Tribunal in assessee’s own case for AY 2013-14 vide ITA No.1924/Chny/2017 order dated 17-12-2018. Having heard rival submissions and upon perusal of case records, our adjudication would be as under. Proceedings before Ld. AO / TPO 3.1 The assessee being resident corporate assessee is stated to be engaged in manufacturing of automobile and auto parts. During the course of assessment proceedings, a reference was made by Ld. AO to Ld. Transfer Pricing Officer-3(1), Chennai (TPO) for determination of Arm’s Length price of specified domestic transactions. The Ld. TPO passed an order u/s 92CA(3) on 31-10-2017 wherein profit of eligible business u/s 80IC were re-computed. 3.2 It transpired that the transmission segment of the assessee reflected margin of 8.99%. However, the margin of Pantnagar Plant, which was eligible for deduction u/s 80IC, reflected margin of 23.47% and accordingly, the assessee was show caused by Ld. TPO that this 3 plant was showing extraordinary margin which was not at par with other Plant’s margins. 3.3 The assessee attributed higher margin to reduction in cost in Pantnagar Plant on account of Power & fuel, repairs and maintenance cost and employee cost. Further, this plant was stated to be nearer to the source of raw material. This plant was stated to be enjoying benefit of excise duty. 3.4 The Ld. TPO accepted excise duty exemption plea but rejected other economic factors as pleaded by the assessee. Finally, the revised margin were computed as 25.45% as against mean comparable margins on cost @10.42% as reflected by three entities. Applying the same, Ld. TPO held that profit of this unit should be Rs.28.77 Crores and deduction u/s 80IC was to be recomputed. 3.5 Accordingly, Ld. AO recomputed eligible deduction u/s 80IC @30% which came to Rs.8.70 Crores as against Rs.21.08 Crores as claimed by the assessee in the return of income. 3.6 The Ld. AO also computed disallowance u/s 14A r.w.r. 8D(2)(iii) @0.5% of average investments which came to be Rs.11.61 Lacs. The same was added under normal provisions as well as while computing Book Profits u/s 115JB. However, in the computations, this disallowance was considered as Rs.17.41 Lacs Proceedings before Ld. CIT(A) 4.1 During appellate proceedings, the assessee sought economic adjustments and also assailed comparability matrix. The Ld. CIT(A), in para 12.4 of the order, granted economic adjustment and recomputed assessee’s margins of 17.27% on cost as against 10.42% of comparable 4 entities. The said adjudication enhanced the deduction u/s 80IC by Rs.4.08 Crores. Aggrieved, the assessee as well as revenue is in further appeal before us. 4.2 The Ld. CIT(A), while upholding the disallowance u/s 14A, directed Ld. AO to compute correct disallowance. Aggrieved, the assessee is in further appeal before us. Our findings and Adjudication 5. We find that the assessee could not substantiate its claim of economic adjustment before Ld. TPO. However, Ld. CIT(A), by considering additional evidences granted further relief to the assessee without confronting the same to Ld. TPO. The same was in violation of Rule 46A. During the course of hearing, it also transpires that the issue of economic adjustment has already been remitted by Tribunal in assessee’s own case for AY 2013-14 vide ITA No.1924/Chny/2017 order dated 17-12-2018. The bench, in para-5 of the order, remitted the matter back to the file of Ld. TPO for denovo consideration. Similar plea has been made before us. Therefore, keeping all the issues open and to enable revenue to take consistent stand, we remit this issue back to the file of Ld. AO / TPO for de novo consideration. The grounds raised in cross-appeal stand allowed for statistical purposes. 6. So far as adjustment of disallowance u/s 14A is concerned, we find that, considering the decision of Special Bench of Delhi Tribunal in Vireet Investment P. Ltd. (82 Taxmann.com 415), no such disallowance could be made while computing Book Profit u/s 115JB. Therefore, Ld. AO is directed not to add the disallowance u/s 14A u/s 115JB. The corresponding ground in assessee’s appeal stand allowed. 5 7. The appeal of the revenue stand allowed for statistical purposes. The appeal of the assessee stands partly allowed in terms of our above order. Order pronounced on 30 th August, 2023. Sd/- Sd/- (MAHAVIR SINGH) (MANOJ KUMAR AGGARWAL) उपा34 / VICE PRESIDENT लेखा सद6 / ACCOUNTANT MEMBER चे8ई Chennai ; िदनांक Dated : 30-08-2023 DS आदेशकीDितिलिपअ&ेिषत/Copy of the Order forwarded to : 1. अपीलाथ /Appellant 2. थ /Respondent 3. आयकरआयु@/CIT 4. िवभागीय ितिनिध/DR 5. गाडEफाईल/GF