Ballupur Solar Power Projects Private Ltd. , Delhi V. AO Circle-4(2), Delhi

ITA 482/DEL/2022

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 0709 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: I1
• Assessment Year: 2017-2018
• Appeal Filed On: 16-03-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURENDER PAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “I-1” DELHI BEFORE SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER & SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER I.T.A. No.482/DEL/2022 Assessment Year 2017-18 Ballupur Solar Power Projects Pvt. Ltd., Unit No.236B, 236C First Floor, DLF Sourth Court Saket, New Delhi. v. AO, Circle-4(2), Delhi. TAN/PAN: AAGCB6645P (Appellant) (Respondent) Appellant by: Shri Kamal Sawhney, Adv. Shri Prashant Meharchandani, Adv. Respondent by: Shri Surender Pal, CIT-DR Date of hearing: 19 05 2022 Date of pronouncement: 31 05 2022 O R D E R PER PRADIP KUMAR KEDIA, A.M.: Th e cap tio n ed ap peal h as b een filed at th e in s tan ce o f th e assesse e ag ain st t h e o rd er o f th e Natio n al F ace less Assessmen t Cen tre, De lh i d ate d 1 6 .02 .2 02 2 p assed u nd er Sectio n 1 4 3 (3 ) r.w. Sect io n 1 4 4 C(13 ) r.w. Sec tio n 1 4 4 B o f th e In co me T ax Act, 1 9 6 1 (th e Act) co n cern in g AY 20 1 7-1 8 . 2 . Th e g ro u n d s o f ap p eal ra ised b y th e assesse e read s as u n d er: “Th a t o n th e fa cts a n d in circu msta n ces o f th e ca se a n d in la w, th e Ld . Assess in g Offi cer (“AO”)/ L d . Tra n sfer Pri cin g Offic er (“Ld . TPO”) b a sed o n d irectio n s o f th e Ho n ’b le Dispu te Reso lu tio n Pa n el -DRP”) h a s: I.T.A. No.482/Del/2022 2 1 . Erred b y ma king a d ju stmen t/ d isa llo wa n ces o f INR 3 4 ,4 5 ,97 ,4 3 5 to th e to ta l in co me f il e d th e Ap p el la nt. 2 . Erred b y a ll eg in g th a t EREN Ren ew a b le En erg y S A, F ra n ce (“EREN Fra n ce” ) co n sti tu tes a n Asso cia te En ter p rise (“AE” ) o f th e Ap p ella n t o n ly o n th e b a sis o f d isc losu re in th e rela ted p a rty tra n sa ctio n s sch ed u le o f th e Ap p ella n t, wi th o u t a pp recia ti n g th a t th e sa id enti ty d o es n o t fa ll w ith in th e d ef in i tio n o f A E a s p er S ec tio n 9 2 A o f th e Ac t. 3 . Wi th o u t Pre ju d ice to g ro u n d 2 , even if EREN F r a n ce co n stitu tes AE o f Ap p ella n t, erred i n no t co n sid erin g th e d eta iled eco n o mic a n a lysis su b mitt ed a s a d d itio n a l ev id en ce b efo re th e DRP t o b en ch ma rk th e imp u g n ed tra n saction wh ich su b sta n tia tes th a t th e p u rch a se o f so lar mo du les/p a n els (i . e., ca p ita l a ssets ) were a t a rm’s l e n g th fro m a n In d ia n tran sfer p ri cin g p ersp ect ive 4 . Wi th o u t Pre ju d ice to g ro u n d 2 , even if EREN F r a nce co n stitu tes AE o f A p p ella n t, er red in red etermin in g th e va lu e o f ca p ita l a ssets p u rcha sed (wh ich is a pp ea rin g a s a ta n g ib le a sset in t h e fin a n cia l sta t e men ts o f Ap p ella n t) fro m EREN Fra n ce a s “NIL” u sin g “Other Meth o d ” a s p er Rule 1 0 AB o f th e In co me Ta x Ru les, 1 9 6 2 (“th e Ru le s”) a s th e mo st a pp ro p ria te meth o d (“MAM" ) in a n a rb itra ry ma nn er wi th o u t p erfo rmi n g a n y co mp reh en sive b en ch markin g a n a lysis 4 .1 . Wi th o u t p reju d ice to g ro u n d 4 , erre d in d isreg a rd in g th e fa ct th a t th e p u rch a se o f ca p ita l ( it ems fro m EREN Fra n ce, wa s a ba ck-to -b a ck p u rcha se fro m th ird p a rtie s (o n I.T.A. No.482/Del/2022 3 wh ich EREN F ra n ce h a d ch a rg ed a min o r a dmin ist ra tive ma rk-u p , b a ck-to -b a ck in vo ices fo r wh ich were su b mitt ed b efo re th e DRP ) a n d if a d isa l lo wa n ce i s wa rra n ted o n th e sa me, it sh o u ld b e restr ic ted to th e d ep recia t io n on th e ma rk-u p cha rg ed b y EREN Fra n c e o n su p p lies o f su ch ca p ita l i tems a n d cla imed b y th e Ap p ella n t in i ts ta x-r etu rn “ 4 .2 . Wi th o u t p reju d ice to g ro u n d 4 an d 4.1 erred in ma kin g a d ju stmen t fo r th e en tire a mo u n t o f ca p ita l i tems pu rch a sed fro m EREN Fra n ce, in st ea d o f restr ict in g th e sa me to th e exten t o f d ep reci a tio n cla imed b y th e Ap p ella n t on su ch ca p ita l i tems wh i le ca l cu la tin g th e to ta l ta xa b le in co me d u rin g th e su b ject a ssessmen t yea r In itia t io n o f Pen alty p ro ceed in g s u n d er S ectio n 2 70A a nd 2 7 1 AA o f th e Ac t 4 . Erred in p ro p o sing in it ia tio n o f p en a lty p ro ceed in gs u n d er S ectio n 2 7 0 A a n d 2 7 1 AA o f th e Ac t. Th e a b o ve g ro u nds a re wi th o u t p rej u d ice to ea ch o ther. Th e Ap p ella n t cra ves to lea ve to a d d , wi th d ra w, a lter , mo d ify, a men d o r va ry th e a bo ve g rou nd s o f a p p ea l b efo re o r a t th e time o f h ea rin g .” 3 . Wh en th e mat ter was cal led fo r h ea rin g , th e ld . co u n sel fo r th e ass essee su b mi tted at th e o u ts et t h at g ro u n d n o.4 in th e in s tan t case i s d o min an t an d ov erwh elmi n g an d wh en th is g rou n d is ad ju d icat ed , o th er g ro u nd s will fad e in to in s ig n ifican ce. Th e ld . co u n sel su b mi tt ed as fo llo ws: I.T.A. No.482/Del/2022 4 3 .1 Th e assessee is e n g ag ed in th e b u sin ess o f p ro du ctio n and g en eratio n o f p o wers u sin g so lar, fo ssi ls an d o th er al tern at iv e so u rce o f en erg y . It is a lso en g ag ed in d istrib u t ion o f elec tri ci ty . Retu rn o f in co me was fi led d eclarin g a lo ss o f Rs.12 ,6 5 ,2 5 ,86 1 /-. Du rin g th e Fin an cia l Year 2 0 1 6 -17 relev an t Assess men t Year 2 0 17 -18 in q u estio n , th e assessee p u rch ased so lar mo d ules /p an els fro m EREN Ren e wab le En erg y SA (EREN Fran ce) fo r an amo u n t o f Rs.3 4 ,4 5 ,9 7 ,4 35 /-. On referen ce, th e TPO Ben ch mark ed th e afo resa id tran sa ct i o n o f p u rch ase o f so lar mo d u les/p a n els fro m EREN Fran ce b y all eg in g th at ER EN Fran ce is an AE of th e assesse e. Th e TPO d etermin ed th e Arms’ Len g th Price (ALP) o f su ch tran sactio n at ‘Nil’ b y ho ld in g th at n o u n co n tro lled en terp rise wo u ld h av e p aid an y amo u n t fo r su ch asset wi th o u t mak in g req u isi te en q u iries an d n eg o tiat io n s. Th e Assessin g Officer ev en tu a ll y ad d ed th e en tire v alu e o f tran sact io n fo r p u rch ase o f its ass ets o f Rs .3 4 ,4 5 ,9 7 ,4 3 5 /- fro m alleg ed AE as the in co me o f th e Assessee . In th is co n tex t, i t was sub mi t t ed th at th e assesse e h as en tere d in to co n trac t wi t h EREN Fran ce fo r su p p ly o f so lar mo d u le/p an el. Th e su p p lier fu rth er en tered into a mo d u le su p p ly ag reemen t with th ird p arty v en d o r n amely Zh ej ian g Jin k o So lar Co . Ltd . in o rd er to fu lfi l l i ts o b lig at io n to su p p ly th e assets . Ag ain st su p p ly , th e th ird p arty raise d in v o ices o n EREN Fran ce an d EREN Fran ce in tu rn h as raised b ill o n th e assesse e b y add ing a mark u p p ercen tag e. In essen ce, EREN Fran ce h as p urch ased th e asset fro m th ird p arty [Zh ej ian g Jin k o So lar Co . L td .] at th e co st o f Rs.3 3 ,2 2 ,6 7 ,5 1 3 /- o n wh ich ad min i stra tiv e mark u p o f Rs.1 ,2 3 ,2 9 ,9 2 2 /- was ad d ed an d su ch assets were , in tu rn , so ld to th e assess ee fo r a to ta l co n sid erat io n o f Rs.3 4 ,4 5 ,9 7 ,4 35 /-. In th is b ack d rop , it was co n ten d ed th at n o twith stan d in g an d with o u t I.T.A. No.482/Del/2022 5 p reju d ice to th e fa ct th at th e p u rch ase o f fix ed asse ts i n q u estio n is n o t an in t ern at io n al tr an sact io n as EREN Fran ce is n o t an AE o f th e assess ee as wr o n g ly alleg ed ; th e assu mp t io n o f who le o f co st o f p u rch ase as in co me o n ac co u n t o f ad ju s t men ts t o ALP o f all eg ed in tern at io n al tran sac tio n is p rima fa cie d ev o id o f an y lo g ic. Th e co st in cu rred b y th e AE, osten sib ly , cann o t b e reg ard ed as in co me o f th e as sessee b y way o f a d ju stmen t to ALP. 3 .2 It was co n ten d ed th at EREN Fran ce t h e alleg ed AE h ad its el f p u rch ased su ch cap ita l g o o d s fro m th ird p arty n amely Zh ejian g Jin k o So lar Co . Lt d . an d th ereafter t ran sferred th e sa me asse ts to th e asse ssee . A re feren ce was mad e to th e ad d itio n al ev id en ces fi led b e fo re th e D RP an d TPO to c o n ten d th at th e assessee h ad p ro v id ed b ack to b ack in v o ices rais ed b y th e th ird p arty su p p lier o n EREN Fran ce a s ad d it io n al ev id en ce b e fo re th e DRP an d TPO. Ho wev er, th e TPO en tirely fa i led to ad d ress th e ad ditio n al ev id en ces o n b ac k to b ack th ird p arty in v o ices in th e reman d rep o rt. Th e DRP h as a lso wro n g ly stated in i ts d irec tio n s th at th e assesse e h as o n ly p ro v id ed few in v oices fo r p urch ase o f cap ita l assets fro m EREN Fran ce o n samp le b asis an d h as n o t d iv u lg ed co mp le te p ar ticu la rs o f b ack to b ack in v o ices ra ised b y th ird p arty su p p lier o n EREN Fran ce. Th e ld . co u n sel th u s su b mitt ed th at th e act io n o f th e lo wer au th o rities are wh o lly un ju sti fied in mak in g ad ju st men ts o f th e g ro ss amo u n t o f it s asse ts p u rchased and co n seq u en tly in crease th e ch arg eab le in co me fo r co st o f acq u isi tio n o f asse t. I t was su b mi tt ed th at th e Reven u e co u ld h av e, at b est , en t ered in to ad ju st men t to t h e v alu e o f d ep recia tio n o n mark u p an d no t th e wh o le amo u n t o f p u rch ase it is in t h e lig h t o f d ecisio n o f th e Co -o rd in ate Ben ch o f Trib u n al in Cien a In d ia Pvt. Ltd . vs. ITO, 1 4 5 3 /Del/2 0 1 4 o rd er da ted 2 4 .0 4 .20 15 & R o ki Min d a I.T.A. No.482/Del/2022 6 Co . Pvt. Ltd . vs . ACIT, ITA No .6 5 55 /Del/2 0 1 6 o rd er d a ted 1 9 .1 1 .20 2 0 . 3 .3 On b ein g in q u ired b y th e Ben ch , th e ld . co u n sel fo r th e assesse e co u ld n ot c lari fy i ts p o sit i o n on th e ad miss i o n o f th e ad d itio n al ev id en c es fi led b efo re TP O/DRP b y way o f i mp u g n ed b ack to b ack in v o ices. Th e ld . co u n sel h o wev er in sist ed th a t Assessin g Officer p erv ersely an d wro n g ly add ed th e en tire v alu e o f fix ed asse ts a mo u n tin g to Rs.3 4 .45 cro re to th e retu n ed lo ss o f Rs.1 2 .6 5 cro re in stead o f restr ic tin g th e ad ju st ments to th e ex ten t o f d ep recia tio n o n ly . It was th u s su b mit ted th a t b est p o ssib le tran sac tio n p ricin g ad ju stmen t th a t may b e warran ted is to th e ex ten t o f d ep reci at io n cla i med o n ma rk u p b y th e al leg e d AE an d n o t mo re. 4 . Th e ld . CIT-DR fo r th e Rev en u e, o n th e o th er h and , reli ed u p on th e o rd er o f th e lo wer au th o rit i es an d co n ten ded th at in th e ab sen ce o f fac ts mad e av a ilab le b efo re lo wer au th o rit ies, th e act io n o f th e AO/T PO/DRP can n o t b e fau lt ed . 5 . We h av e carefu ll y co n sid ered th e riv al su b miss ion s. The assesse e h as rais e d sev eral g ro u nd s b u t with o u t p reju d ice to a ll o th er g rou n d s, Gro u nd No .4 was p ressed . It was as sert ed th at th e in v o ices fo r p u rchase o f fix ed assets fro m th e al leg ed AE can n o t b e su b jected to Tr an sfer Pri cin g Ad j u stmen t fo r th e wh o le a mo u n t wh ere th e p u rch ase co st o f th e asso ci a te en t erp rise i s su p p o rted by b ack to b ack in v o ice rai sed b y th ird p arty v en d or on the al leg ed AE. Th e in v o ices raised b y al leg e d AE (EREN Fran ce) o n th e assesse e an d b ack to b ack in v o ices raised b y th ird p arty v en d or on EREN Fran ce ag a i n st ea ch p u rch ase l o t is t ab u lat ed h ere in . I.T.A. No.482/Del/2022 7 S . N o . I n vo i c e s r a i s e d b y Z h e j i a n g J i n k o o n E R E N F r a n c e I n vo i c e s r a i s e d b y E R E N F r a n c e o n A p p e l l a n t I n vo i c e N o . A m o u n t ( i n U S D ) I n vo i c e N o . A m o u n t ( i n U S D ) 1 . Z 2 0 1 6 1 0 1 8 1 1 8 , 3 0 , 0 0 0 1 . 1 8 , 6 0 , 8 0 0 2 . Z 2 0 1 6 1 0 1 8 1 2 8 , 3 0 , 0 0 0 2 . 1 8 , 6 0 , 8 0 0 3 . Z 2 0 1 6 1 0 1 8 1 3 8 , 3 0 , 0 0 0 3 . 1 8 , 6 0 , 8 0 0 4 . Z 2 0 1 6 1 0 1 8 6 4 8 , 3 0 , 0 0 0 4 . 1 8 , 6 0 , 8 0 0 5 . Z 2 0 1 6 1 0 1 8 6 5 8 , 3 0 , 0 0 0 5 . 1 8 , 6 0 , 8 0 0 6 . Z 2 0 1 6 1 0 1 8 6 6 8 , 3 0 , 0 0 0 6 . 1 8 , 6 0 , 8 0 0 6 . On p eru sal o f th e o rd er o f DRP, i t is n o t d iscern ib l e as to wh eth er th e ad d i ti o n al ev id en ces to ward s so cal led b ack to b ack in v o ices raised we re ad mi tt ed b y th e DRP o r o th erwise. DRP is sil en t o n th is p o in t. A reman d repo rt was so ug h t by th e DRP fro m th e TPO in th e co u rse o f p ro ceed in g s b efo re i t. Ho wev er, th e TPO ap p ears to h av e n o t ex amin ed th e fac tu al matr ix . Und er th e circu ms tan ce s, we co n sid er it ex p ed ie n t to set as ide th e imp u g n ed o rd er o f th e Asses sin g Offic er p asse d u n d er Sectio n 1 4 3 (3) r.w. Sect io n 1 4 4 C(1 3 ) r.w. Sec tio n 1 4 4 B of th e Ac t an d remi t th e issu e b ack to th e file o f th e AO to co n d u ct en q u iry /cause to mak e en q u iry th rou gh TPO as p er law o n th e factu a l ma trix reg ard ing b ack to b ack p u rch ases p o in ted o u t o n b eh alf o f Assess ee. 7 . We fin d rat io n ale in th e p l ea o f th e ass essee that th e d isal lo wan ces warran ted , i f an y , sh o u ld b e restricted to th e d ep reciat io n o n th e mark u p ch arg ed b y EREN Fran ce on su p p ly o f su ch cap ital ite ms an d claimed b y th e assessee in its tax retu rn . Hen ce wh ere th e Assessin g Officer is sa tis fied o n th e b o no fid es I.T.A. No.482/Del/2022 8 o f p u rch ase tran sactio n o f cap i ta l g o o d s claimed to b e b ack to b ack in v o ices, th e d isal lo wan ce sh all b e restricted to d ep recia tio n cla i med o n mark up ch arg es on ly . It sh all b e o p en to Assessin g Officer to mak e n ecessary en q u iries in th is reg ard as p er law. It sh all a lso b e o p en to th e assess ee t o fu rn ish su ch ev id en ces an d ex p lan atio n as c o n sid ered ex p ed ien t to su p p o rt i ts case o n g en u in en ess o f p u rch ases o f cap i ta l g o o d s in q u estio n with a ll d o cu men tary ev id en ces in clu d in g p u rch ase o f a sse t by t h e su p p lier EREN Fran ce. Th e Assess in g Offic er sh al l p ass th e ord er in acco rd an ce with la w an d after tak in g in to ac co u n t ord er o f TPO o n sp eci fi c p o in ts, i f co n sid ered n ecessary . Need less to say , p ro p er o p po rtu n ity o f h ea rin g sh all b e p ro v id ed to th e assess ee . 8 . Gro un d No .4 is th u s al lo wed fo r s ta tis tic al p u rpo ses. 9 . All o th er g rou n d s h av e n o t b een ad ju d icated in th e ab sen ce o f an y su b stan t ia ti o n th ereo f an d th u s st an d s d ismiss ed . 1 0 . In th e resu l t, th e a p p eal o f th e asses s ee is p art ly a l lo wed . Order pronounced in the open Court on 31/05/2022. Sd/- Sd/- [CHANDRA MOHAN GARG] [PRADIP KUMAR KEDIA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 31/05/2022 Prabhat