JSW ENERGY (BARMER) LIMITED,MUMBAI V. THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 8(3), MUMBAI, MUMBAI

ITA 3713/MUM/2024

AI Insights

The case involves appeals by JSW Energy Ltd. and JSW Energy (Barmer) Ltd. against the assessment orders passed by the Assistant Commissioner of Income Tax, which were later upheld by the Dispute Resolution Panel. The main issues revolved around transfer pricing adjustments, disallowances under sections 14A and 80IA, and the computation of book profit under section 115JB. The Tribunal examined the adjustments made by the Transfer Pricing Officer (TPO) and the subsequent disallowances, considering the legal provisions and precedents set by earlier judgments. The Tribunal's decision highlighted the importance of adhering to the arm's length principle in transfer pricing and the correct application of tax provisions concerning deductions and disallowances.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 471342 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-03-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: K
• Assessment Year: 2020-2021
• Other Referred Cases: CIT vs. Cotton Naturals (I) Pvt. Ltd., ACIT vs. Williamson Financial Services Ltd., CIT vs. Holcim India (P) Ltd, Aurionpro Solutions Ltd. vs. Addl. CIT, CIT vs. J.K. Chemicals Ltd., CIT vs. Shri Digvijay Cement Co. Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NEENA JEPH
• Assessee Lawyers: GAURAV KABRA
• Keywords: Set aside; Business income; Capital asset; Opportunity of being heard; Revised return; Transfer pricing; International transaction; Retrospective amendment; Business expenditure; Capital expenditure; Earning of tax free income; Rule 8D; Benefit of exemption; Related party transaction
• Section: 48; 43; 22; 13; 274; 14A; 115JB; 80IA; 207; 20

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “K” MUMBAI BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND MS. KAVITHA RAJAGOPAL (JUDICIAL MEMBER) ITA Nos. 3714 /MUM/2024 Assessment Year: 2020-21 JSW Energy Ltd., 2nd floor, JSW Centre, Bandra Kurla Complex, Bandra East, Mumbai-400051. Vs. The Asst. CIT, Central Circle-8(3), Room No. 659, 6th floor, Aayakar Bhavan, Maharishi Karve Road, Mumbai-400020. PAN NO. AAACJ 8109 N Appellant Respondent ITA Nos. 3713/MUM/2024 Assessment Year: 2020-21 JSW Energy (Barmer) Ltd., 2nd floor, JSW Centre, Bandra Kurla Complex, Bandra East, Mumbai-400051. Vs. The Asst. CIT, Central Circle-8(3), Room No. 659, 6th floor, Aayakar Bhavan, Maharishi Karve Road, Mumbai-400020. PAN NO. AAACR8812 N Appellant Respondent Assessee by : Mr. Gaurav Kabra Revenue by : Ms. Neena Jeph, CIT-DR/ Mr. Tushar Mohite, Sr. DR Date of Hearing : 09/01/2025 Date of pronouncement : 26/03/2025 PER OM PRAKASH KANT, AM The captioned appeal respective final assessment 27.05.2024, passed by the Ld. Assistant Commissioner of Income tax, Central Circle 8(3), Mumbai [in short ‘the Ld. Assessing Officer’], for assessment year 2020 the Ld. Dispute Resolution Panel (DRP) dispute are involved in these appeals, therefore, same were heard together and disposed off by way of this consolidated order for sake of convenience. ITA No. 3714/Mum/2024 2. Firstly, we take up the appeal in ITA No. 3714/Mum/2024 for AY 2021. The grounds raised by the reproduced as under: 1. On the facts and circumstances of the case as well as in law, the Hon'ble Disputed Resolution penal has erred in confirming the action of the Learned Assessing Officer in making an upward adjustment of Rs. 1 the Arm's Length Price in relation to providing to its Associated Enterprises, without considering the facts and circumstances 2. On the facts and circumstances of the case as well as in law, the Hon'ble Disputed Resolu confirming the action of the Learned Assessing Officer in making a disallowance of Rs. 41,81,59,866/ the Income Tax Act, 1961, without considering the facts and circumstances ITA Nos. 3714 & 3713/MUM/2024 ORDER PER OM PRAKASH KANT, AM appeals by the assessee(s) are directed against assessment orders dated 12.06.2024 passed by the Ld. Assistant Commissioner of Income tax, Central Circle 8(3), Mumbai [in short ‘the Ld. Assessing Officer’], for assessment year 2020-21 ,pursuant to the direction of the Ld. Dispute Resolution Panel (DRP). As common volved in these appeals, therefore, same were heard together and disposed off by way of this consolidated order for sake ITA No. 3714/Mum/2024 Firstly, we take up the appeal in ITA No. 3714/Mum/2024 for The grounds raised by the assessee in its appeal are reproduced as under: On the facts and circumstances of the case as well as in law, the Hon'ble Disputed Resolution penal has erred in confirming the action of the Learned Assessing Officer in making an upward adjustment of Rs. 10,32,75,726/ the Arm's Length Price in relation to providing to its Associated Enterprises, without considering the facts and circumstances of the case. On the facts and circumstances of the case as well as in law, the Hon'ble Disputed Resolution penal has erred in confirming the action of the Learned Assessing Officer in making a disallowance of Rs. 41,81,59,866/- the Income Tax Act, 1961, without considering the facts and circumstances of the case. JSW Energy Ltd 2 ITA Nos. 3714 & 3713/MUM/2024 directed against dated 12.06.2024 and passed by the Ld. Assistant Commissioner of Income- tax, Central Circle 8(3), Mumbai [in short ‘the Ld. Assessing pursuant to the direction of . As common issues in volved in these appeals, therefore, same were heard together and disposed off by way of this consolidated order for sake Firstly, we take up the appeal in ITA No. 3714/Mum/2024 for assessee in its appeal are On the facts and circumstances of the case as well as in law, the Hon'ble Disputed Resolution penal has erred in confirming the action of the Learned Assessing Officer in 0,32,75,726/- to the Arm's Length Price in relation to providing guarantee to its Associated Enterprises, without considering the facts On the facts and circumstances of the case as well as in tion penal has erred in confirming the action of the Learned Assessing Officer in u/s.14A of the Income Tax Act, 1961, without considering the facts 3. On the facts and circumstances o law, the Hon'ble Disputed Resolution penal has erred in confirming the action of the Learned Assessing Officer in making an addition of Rs. 41,81,59,866/ alleged disallowance of expenses u/s.14A of the Income Tax Act of the Act, without appreciating the fact no such addition is to be made in computing the book profit u/s.115JB of the Income 4. On the facts and circumstances of the case as well as in law, the confirming the action of the Learned Assessing Officer in making a disallowance of Rs. 53,10,000/ Income Tax Act, 1961, on the alleged plea that the same are capital in nature, without consider circumstances 5. On the facts and circumstances of the case as well as in law, the Hon'ble Disputed Resolution penal has erred in reversing the action of the Learned Assessing Officer in considering Short Term Capital Loss eligible to set off against the Short Term Capital Gain, without considering the facts and circumstances 6. On the facts and circumstances of the case as well as in law, the Hon'ble Disputed Resolution penal has confirming the action of the Learned Assessing Officer in disallowing the deduction of Rs. 69,30,25,027/ u/s.80IA of the Income Tax Act, 1961, without considering the facts and circumstances 7. On the facts and circumstances of law, the Hon'ble Disputed Resolution penal has erred in confirming the action of the Learned Assessing Officer in not allowing the claim of the assessee company to reduce the amount of Rs.29,48,977/ Non-mo offered in the computation of income, without considering the facts and circumstances 8. On the facts and circumstances of the case as well as in law, the Hon'ble Disputed Resolution penal confirming the action of the Learned Assessing Officer in not allowing the claim of the assessee company to reduce the amount of Rs. 1,09,08,529/ routed through OCl which was inadvertently offered twice in the computation of inco and circumstances 3. Before us, the assessee revised its ground No. 1 as under: ITA Nos. 3714 & 3713/MUM/2024 On the facts and circumstances of the case as well as in law, the Hon'ble Disputed Resolution penal has erred in confirming the action of the Learned Assessing Officer in making an addition of Rs. 41,81,59,866/- on account of alleged disallowance of expenses u/s.14A of the Income Tax Act, 1961, while computing the book profit u/s.115JB of the Act, without appreciating the fact no such addition is to be made in computing the book profit u/s.115JB of the Income Tax Act, 1961. On the facts and circumstances of the case as well as in law, the Hon'ble Disputed Resolution penal has erred in confirming the action of the Learned Assessing Officer in making a disallowance of Rs. 53,10,000/- u/s.37 of the Income Tax Act, 1961, on the alleged plea that the same are capital in nature, without considering the facts and circumstances of the case. On the facts and circumstances of the case as well as in law, the Hon'ble Disputed Resolution penal has erred in reversing the action of the Learned Assessing Officer considering the disallowance of Rs.53,10 Short Term Capital Loss eligible to set off against the Short Term Capital Gain, without considering the facts and circumstances of the case. On the facts and circumstances of the case as well as in law, the Hon'ble Disputed Resolution penal has confirming the action of the Learned Assessing Officer in disallowing the deduction of Rs. 69,30,25,027/ u/s.80IA of the Income Tax Act, 1961, without considering the facts and circumstances of the case. On the facts and circumstances of the case as well as in law, the Hon'ble Disputed Resolution penal has erred in confirming the action of the Learned Assessing Officer in not allowing the claim of the assessee company to reduce the amount of Rs.29,48,977/- on account of write off of moving stores and spares which was inadvertently offered in the computation of income, without considering the facts and circumstances of the case. On the facts and circumstances of the case as well as in law, the Hon'ble Disputed Resolution penal has confirming the action of the Learned Assessing Officer in not allowing the claim of the assessee company to reduce the amount of Rs. 1,09,08,529/- on account of gratuity routed through OCl which was inadvertently offered twice in the computation of income, without considering the facts and circumstances of the case Before us, the assessee revised its ground No. 1 as under: JSW Energy Ltd 3 ITA Nos. 3714 & 3713/MUM/2024 f the case as well as in law, the Hon'ble Disputed Resolution penal has erred in confirming the action of the Learned Assessing Officer in on account of alleged disallowance of expenses u/s.14A of the Income , 1961, while computing the book profit u/s.115JB of the Act, without appreciating the fact no such addition is to be made in computing the book profit u/s.115JB of On the facts and circumstances of the case as well as in Hon'ble Disputed Resolution penal has erred in confirming the action of the Learned Assessing Officer in u/s.37 of the Income Tax Act, 1961, on the alleged plea that the same ing the facts and On the facts and circumstances of the case as well as in law, the Hon'ble Disputed Resolution penal has erred in reversing the action of the Learned Assessing Officer the disallowance of Rs.53,10,000/- as Short Term Capital Loss eligible to set off against the Short Term Capital Gain, without considering the facts and On the facts and circumstances of the case as well as in law, the Hon'ble Disputed Resolution penal has erred in confirming the action of the Learned Assessing Officer in disallowing the deduction of Rs. 69,30,25,027/- claimed u/s.80IA of the Income Tax Act, 1961, without considering the case as well as in law, the Hon'ble Disputed Resolution penal has erred in confirming the action of the Learned Assessing Officer in not allowing the claim of the assessee company to reduce on account of write off of ving stores and spares which was inadvertently offered in the computation of income, without considering On the facts and circumstances of the case as well as in has erred in confirming the action of the Learned Assessing Officer in not allowing the claim of the assessee company to reduce on account of gratuity routed through OCl which was inadvertently offered twice me, without considering the facts Before us, the assessee revised its ground No. 1 as under: On the facts and circumstances of the case as well as in law, the Hon'ble Dispute resolution Panel has erred in confirming the action of the Learned Assessing Officer in making an upward adjustment of Rs 10,32,75,726/ relation to providing without considering the facts and circumstances 3.1 Further, the assessee also filed an additional ground in relation to issue of disallowance u/s 14A of the Act reproduced as under: \"On the facts and circumstances of the case as well as in law, the Hon'ble Dispute resolution Panel has erred in confirming th action of the Learned Assessing Officer without appreciating the decision of Delhi Tribunal Special bench in the case of Vireet Investment (58 /TRT) 313) wherein it has been concluded that only those investments are to be considered for computing average value of investment which yielded exempt income during 4. We have heard rival submission of the parties on the issue of admissibility of the additional ground. We find that the ground raised being purely of legal nature without requiring investigat fresh facts, therefore, same was admitted for adjudication in view of decision of Hon’ble Supreme Court in the case of ITR 283 (SC). 5. Briefly stated, facts of the case are that the assessee company is a public limited company involve of power and operation and maintenance of power plants spread across India including in the states of Karnataka, Maharashtra, Rajasthan and Himachal Pradesh. For the year under consideration, the assessee filed its return of ITA Nos. 3714 & 3713/MUM/2024 On the facts and circumstances of the case as well as in law, the Hon'ble Dispute resolution Panel has erred in confirming the ion of the Learned Assessing Officer in making an upward adjustment of Rs 10,32,75,726/ - to the Arms Length Price in relation to providing interest to its associated enterprises without considering the facts and circumstances of the e assessee also filed an additional ground in relation to issue of disallowance u/s 14A of the Act reproduced as under: \"On the facts and circumstances of the case as well as in law, the Hon'ble Dispute resolution Panel has erred in confirming th action of the Learned Assessing Officer without appreciating the decision of Delhi Tribunal Special bench in the case of Vireet Investment (58 /TRT) 313) wherein it has been concluded that only those investments are to be considered for computing value of investment which yielded exempt during year.\" We have heard rival submission of the parties on the issue of admissibility of the additional ground. We find that the ground raised being purely of legal nature without requiring investigat therefore, same was admitted for adjudication in view of decision of Hon’ble Supreme Court in the case of NTPC Ltd. 229 Briefly stated, facts of the case are that the assessee company is a public limited company involved in the business of generation of power and operation and maintenance of power plants spread across India including in the states of Karnataka, Maharashtra, Rajasthan and Himachal Pradesh. For the year under consideration, the assessee filed its return of income on 15.02.2021 JSW Energy Ltd 4 ITA Nos. 3714 & 3713/MUM/2024 On the facts and circumstances of the case as well as in law, the Hon'ble Dispute resolution Panel has erred in confirming the ion of the Learned Assessing Officer in making an upward to the Arms Length Price in to its associated enterprises the case.\" e assessee also filed an additional ground in relation to issue of disallowance u/s 14A of the Act, which is \"On the facts and circumstances of the case as well as in law, the Hon'ble Dispute resolution Panel has erred in confirming the action of the Learned Assessing Officer without appreciating the decision of Delhi Tribunal Special bench in the case of Vireet Investment (58 /TRT) 313) wherein it has been concluded that only those investments are to be considered for computing value of investment which yielded exempt We have heard rival submission of the parties on the issue of admissibility of the additional ground. We find that the ground raised being purely of legal nature without requiring investigation of therefore, same was admitted for adjudication in view of NTPC Ltd. 229 Briefly stated, facts of the case are that the assessee company d in the business of generation of power and operation and maintenance of power plants spread across India including in the states of Karnataka, Maharashtra, Rajasthan and Himachal Pradesh. For the year under income on 15.02.2021 declaring total income at Rs.145,43,82,260/ provisions of the Income profit of Rs.66,87,76,855/ income filed by the assessee was selected notices under the Act were issued and complied with. In the course of scrutiny proceedings, the Assessing Officer noticed international transactions carried out by the assessee with its associated enterprises (AEs), determination of arm’s length price of those international transactions to the ld. order dated 20/07/2023 draft assessment order the adjustments made by the Ld. TPO. Against the draft assessment order, the assessee preferred objection were disposed off on 30.05.2024. Pursuant to the direction of the Ld. DRP, the Assessing Officer passed the impugned final assessment order on 12.06.2024. A assessment order, the raising grounds as reproduced above. 6. Before us, the Ld. containing page 1 to 214. 7. The ground No. 1 (Revised) of the appeal of the assessee relates to upward adjustment of Rs.10,32,75,726/ ITA Nos. 3714 & 3713/MUM/2024 declaring total income at Rs.145,43,82,260/- provisions of the Income-tax Act, 1961 (in short ‘the Act’) and book profit of Rs.66,87,76,855/- u/s 115JB of the Act. The return of income filed by the assessee was selected for scrutiny and statutory notices under the Act were issued and complied with. In the course of scrutiny proceedings, the Assessing Officer noticed international transactions carried out by the assessee with its associated , therefore, he referred the matter for determination of arm’s length price of those international ld. Transfer Pricing Officer (TPO) dated 20/07/2023 of ld TPO, the Assessing Officer issued a draft assessment order to the assessee on 31.08.2023 incorporating the adjustments made by the Ld. TPO. Against the draft assessment , the assessee preferred objections before the Ld. DRP disposed off on 30.05.2024. Pursuant to the direction of the Assessing Officer passed the impugned final assessment order on 12.06.2024. Aggrieved with the impugned final assessment order, the assessee is in appeal before us by way of raising grounds as reproduced above. Before us, the Ld. Counsel for the assessee filed a Paper Book containing page 1 to 214. The ground No. 1 (Revised) of the appeal of the assessee relates to upward adjustment of Rs.10,32,75,726/ JSW Energy Ltd 5 ITA Nos. 3714 & 3713/MUM/2024 under regular tax Act, 1961 (in short ‘the Act’) and book u/s 115JB of the Act. The return of for scrutiny and statutory notices under the Act were issued and complied with. In the course of scrutiny proceedings, the Assessing Officer noticed international transactions carried out by the assessee with its associated therefore, he referred the matter for determination of arm’s length price of those international Transfer Pricing Officer (TPO). On receipt of , the Assessing Officer issued a to the assessee on 31.08.2023 incorporating the adjustments made by the Ld. TPO. Against the draft assessment before the Ld. DRP, which disposed off on 30.05.2024. Pursuant to the direction of the Assessing Officer passed the impugned final the impugned final assessee is in appeal before us by way of filed a Paper Book The ground No. 1 (Revised) of the appeal of the assessee relates to upward adjustment of Rs.10,32,75,726/- to the arm’s length price in relation to to its associated enterprises. 7.1 The facts in brief qua the issue in dispute are that during the financial year 2019 assessment year under consideration interest of Rs.6,14 agreement dated 26.07.2010 enterprises namely JSW Energy Minerals agreement, the borrower was required to pay interest to the lender at the rate of three month , which would be computed on the basis of 360 days year interest on said loan agreement also contained provision for charging of penal interest at the rate of one percentile at the discretion of lender in case of default in repayment of loan. amended from time to time Under amendment dated 31.03.2012 at the rate of six months LIBOR and made six monthly, simultaneously, due was deferred to 30.09.2012. Thereafter amended on 22.02.2012 from United Sates Dollar(U Interest due date wa loan was changed three years to four years from the date of ITA Nos. 3714 & 3713/MUM/2024 length price in relation to provision of interest on loans d enterprises. The facts in brief qua the issue in dispute as noted by the AO are that during the financial year 2019-2020 i.e. relevant to the under consideration, the assessee 4,49,281/- in respect of loan(s) dated 26.07.2010 entered into with associated enterprises namely JSW Energy Minerals (Mauritius) borrower was required to pay interest to the lender three month’s London Inter Bank Offered Rate( computed on the basis of 360 days year on said loan was payable every year on 31st agreement also contained provision for charging of penal interest at the rate of one percentile at the discretion of lender in case of default in repayment of loan. The said agreement was modified/ amended from time to time up to the year under consid amendment dated 31.03.2012, interest was at the rate of six months LIBOR and period of interest payment was simultaneously, the first payment for interest eferred to 30.09.2012. Thereafter, again agree amended on 22.02.2012 where loan amount limit was enhanced nited Sates Dollar(USD) 42 Million to USD 50 Million. was further deferred to 30.09.2013 loan was changed three years to four years from the date of JSW Energy Ltd 6 ITA Nos. 3714 & 3713/MUM/2024 on loans extended as noted by the AO 2020 i.e. relevant to the , the assessee was to receive (s) granted vide entered into with associated ) Ltd. As per the borrower was required to pay interest to the lender nk Offered Rate(LIBOR) computed on the basis of 360 days year. The st December. The agreement also contained provision for charging of penal interest at the rate of one percentile at the discretion of lender in case of The said agreement was modified/ up to the year under consideration. interest was made payable period of interest payment was the first payment for interest again agreement was limit was enhanced 42 Million to USD 50 Million. s further deferred to 30.09.2013 and tenure of loan was changed three years to four years from the date of disbursement. Again the loan agreement was modified on 18.07.2013 and 27.09.2013 Million to UDS 54 Million deferred to 30.09.2014. The 20.07.2014 on 31.07.2015 concerned, the loan agreement was and the assessee deferred the interest to 31.03.2019. The Assessing Officer has reproduced the suo-motu adjustment made transaction of receipt of interest from 19/07/2010 to 25/2/2020, of the final assessment order. 7.2 The assessee benchmarked the international transaction of the interest payment under method. The assessee also submitted that d 2019-2020 the loan outstanding with associated enterprises was amounted to Rs.330.96 crores financial year 2010 agreement/amended agreements entity. The amendments include utilisation of loan for paying off debts and working c loan to be disbursed to AE with increase in time limit for repayment of loan. According t agreement was carried out on 16/12/2016 and said last amended ITA Nos. 3714 & 3713/MUM/2024 Again the loan agreement was modified on 18.07.2013 and 27.09.2013, revising the loan limit from USD 50 Million to UDS 54 Million and payment of interest due 30.09.2014. The agreement was again amended on 31.07.2015. As far as year under consideration is concerned, the loan agreement was lastly amended on 16.12.2016 assessee deferred the first installment 31.03.2019. The Assessing Officer has reproduced the ment made by the assessee to the international transaction of receipt of interest on each tranches of loan released from 19/07/2010 to 25/2/2020, which is available on page of the final assessment order. The assessee benchmarked the international transaction of the interest payment under Comparable uncontrolled price( The assessee also submitted that during the financial year 2020 the loan outstanding with associated enterprises was Rs.330.96 crores, which was disbursed to them financial year 2010-11 onwards in tranches, /amended agreements between assessee and Mauritius The amendments include utilisation of loan for paying off debts and working capital needs and also to increase the limits of loan to be disbursed to AE with increase in time limit for repayment According to the assessee, the last amendment carried out on 16/12/2016 and said last amended JSW Energy Ltd 7 ITA Nos. 3714 & 3713/MUM/2024 Again the loan agreement was modified on revising the loan limit from USD 50 due was further again amended on . As far as year under consideration is amended on 16.12.2016 for payment of 31.03.2019. The Assessing Officer has reproduced the the international on each tranches of loan released which is available on pages 7 to 9 The assessee benchmarked the international transaction of Comparable uncontrolled price(CUP) uring the financial year 2020 the loan outstanding with associated enterprises was disbursed to them from tranches, based on between assessee and Mauritius The amendments include utilisation of loan for paying off apital needs and also to increase the limits of loan to be disbursed to AE with increase in time limit for repayment o the assessee, the last amendment to loan carried out on 16/12/2016 and said last amended agreement was in force during the year under consideration and therefore, there was no change in the terms and conditions of the loan agreement and hence the benchmarking analysis concluded in financial year 2016 year. In the transfer pricing report to credit rating of AEs and compared loan transactions of the assessee with other results carried out on databases and rate was the appropriate arms commercial and economic reasons, however by abundant and precaution, the assessee further at LIBOR plus a m considered as an Accordingly, the assessee submitted that interest amount at Rs.6,14,49,281/- charged accordance with the arm’s length regulatory consideration. 7.3 However, the assessee considered additional spread point on LIBOR and transaction at Rs. 16,59,18,029/ offered additional Rs. 10,44,68,748/ price of the interest transaction Particulars Amount in 3CEB (as reported in books) Amount in 3CEB (with regards to ALP) ITA Nos. 3714 & 3713/MUM/2024 in force during the year under consideration and therefore, there was no change in the terms and conditions of the loan agreement and hence the benchmarking analysis concluded in financial year 2016-17, was applicable to the current financial transfer pricing report submitted, the assessee to credit rating of AEs and compared loan transactions of the assessee with other interbank loan transactions based on search results carried out on databases and concluded that LIBOR interest was the appropriate arms length rate considering the commercial and economic reasons, however by abundant and precaution, the assessee further suo-motu offered that plus a median of 300 basis points (bps) considered as an arm’s length interest rate for the loan Accordingly, the assessee submitted that interest amount at charged by the assessee was justified accordance with the arm’s length rate based on the commercial and regulatory consideration. However, the assessee considered additional spread point on LIBOR and computed arms length price of interest at Rs. 16,59,18,029/- in the return of income filed Rs. 10,44,68,748/- as quantum of arm’s length ce of the interest transaction as under: Particulars Amount in INR Amount in 3CEB (as reported in books) 6,14,49,281 Amount in 3CEB (with regards to ALP) 16,59,18,029 JSW Energy Ltd 8 ITA Nos. 3714 & 3713/MUM/2024 in force during the year under consideration and therefore, there was no change in the terms and conditions of the loan agreement and hence the benchmarking analysis concluded in was applicable to the current financial , the assessee referred to credit rating of AEs and compared loan transactions of the based on search concluded that LIBOR interest rate considering the commercial and economic reasons, however by abundant and that interest rate basis points (bps) could be arm’s length interest rate for the loans. Accordingly, the assessee submitted that interest amount at by the assessee was justified in based on the commercial and However, the assessee considered additional spread of basis computed arms length price of interest in the return of income filed and as quantum of arm’s length Amount in INR 6,14,49,281 16,59,18,029 Difference offered to tax 7.1 The Ld. TPO however was not convinced of the assessee. The TPO rejected the comparables selected by the assessee, which were located in South Africa of ultimate utilisation of loans in which loan was given. The T should have searched for comparable interest on loan data applicable for borrowers in Mauritius geography from appropriate databases like Bloomberg. did not determine the arm’s length rat the AE in accordance with the provisions of section 92C(1) and 92C(2) and also the information or data used by the assessee not being reliable, he rejected the comparison analysis made by the assessee. The ld TPO referred to earlier years and proposed to compare keeping in mind currency of loan, geography of borrower, terms and conditions of tenor of loan, security given, repayment of loan etc The ld TPO mentioned 2014-15, 2015-16 , 2016 the assessee had actually not received any interest from the AE, therefore, the floating rate of interest would not be applicable in the case of assessee and instead the appropriate fixed rate of interest was to be ascertained Manager’ tool and accordingly interest rates should be charged at the rates applicable for fixed rates loan. ITA Nos. 3714 & 3713/MUM/2024 Difference offered to tax 10,44,68,748 The Ld. TPO however was not convinced with the explanation he TPO rejected the comparables selected by the which were located in South Africa geography of ultimate utilisation of loans instead of Mauritius i.e. the country in which loan was given. The TPO observed that the assessee should have searched for comparable interest on loan data applicable for borrowers in Mauritius geography from appropriate databases like Bloomberg. The ld TPO concluded that the assessee did not determine the arm’s length rate of interest receivable from the AE in accordance with the provisions of section 92C(1) and 92C(2) and also the information or data used by the assessee not being reliable, he rejected the comparison analysis made by the assessee. The ld TPO referred to the loans taken by the assessee in earlier years and proposed to compare ‘Blooomberg database keeping in mind currency of loan, geography of borrower, terms and conditions of tenor of loan, security given, repayment of loan etc The ld TPO mentioned that ld TPO in earlier AYs 2012 16 , 2016-17 , 2017-18 and 2018-19 has held that the assessee had actually not received any interest from the AE, therefore, the floating rate of interest would not be applicable in the essee and instead the appropriate fixed rate of interest was to be ascertained from ‘Bloomberg database and accordingly interest rates should be charged at the rates applicable for fixed rates loan. He considered the JSW Energy Ltd 9 ITA Nos. 3714 & 3713/MUM/2024 10,44,68,748 with the explanation he TPO rejected the comparables selected by the geography i.e. country instead of Mauritius i.e. the country PO observed that the assessee should have searched for comparable interest on loan data applicable for borrowers in Mauritius geography from appropriate The ld TPO concluded that the assessee e of interest receivable from the AE in accordance with the provisions of section 92C(1) and 92C(2) and also the information or data used by the assessee not being reliable, he rejected the comparison analysis made by the the loans taken by the assessee in Blooomberg database’ rate keeping in mind currency of loan, geography of borrower, terms and conditions of tenor of loan, security given, repayment of loan etc. that ld TPO in earlier AYs 2012-13, 2013-14, 19 has held that the assessee had actually not received any interest from the AE, therefore, the floating rate of interest would not be applicable in the essee and instead the appropriate fixed rate of interest erg database’ using ‘Swap and accordingly interest rates should be charged at He considered the Mauritius entity as the borrower and also considered loans issued in different tranches as well as no interest payment for more than five years. The ld TPO Bloomberg database for converting a floating rate of interest rate to fixed interest rate post inputting certain parameters. concluded that facts and circumstances for the year under consideration being same to AYs from 2012 rate should be applied for different years of loan of order of ld TPO is reproduced as “6.4.3 As the facts of the case are same in this year as that were in AY 2012-13 to AY 2016 database the corresponding Fixed rates of interest applicable for loan transactions is Financial Floating rate of interest 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 7.2 The assessee objected of converting floating rate of fixed interest rate for the reasons already rejected the fixed rate of interest applied by the ld TPO and justified floating rate of interest in the case of the assessee for arm’s length price computation. ITA Nos. 3714 & 3713/MUM/2024 entity as the borrower and also considered loans issued in different tranches as well as no interest payment for more than ld TPO used ‘Swap Manger’ tool Bloomberg database for converting a floating rate of interest rate to ed interest rate post inputting certain parameters. concluded that facts and circumstances for the year under consideration being same to AYs from 2012-13 to 2018 rate should be applied for different years of loan. The relevant part reproduced as under: 6.4.3 As the facts of the case are same in this year as that were 13 to AY 2016-17, accordingly, as per Bloomberg database the corresponding Fixed rates of interest applicable for loan transactions is stated below: Floating rate of interest Fixed rate of interest LIBOR + 389 bps 8.03% LIBOR + 575 bps 9.40% LIBOR + 600 bps 8.23% LIBOR + 382 bps 5.43% LIBOR + 352 bps 6.71% LIBOR + 352 bps 6.71% LIBOR + 612 bps 7.43% LIBOR + 725 bps 9.11% The assessee objected of converting floating rate of for the reasons, firstly, the ITAT in AY 2012 already rejected the fixed rate of interest applied by the ld TPO and justified floating rate of interest in the case of the assessee for arm’s price computation. Secondly, while making search of JSW Energy Ltd 10 ITA Nos. 3714 & 3713/MUM/2024 entity as the borrower and also considered loans issued in different tranches as well as no interest payment for more than ’ tool available in Bloomberg database for converting a floating rate of interest rate to ed interest rate post inputting certain parameters. The ld TPO concluded that facts and circumstances for the year under 13 to 2018-19, fixed . The relevant part 6.4.3 As the facts of the case are same in this year as that were 17, accordingly, as per Bloomberg database the corresponding Fixed rates of interest applicable for Fixed rate of interest 8.03% 9.40% 8.23% 5.43% 6.71% 6.71% 7.43% 9.11% The assessee objected of converting floating rate of interest to , the ITAT in AY 2012-13 already rejected the fixed rate of interest applied by the ld TPO and justified floating rate of interest in the case of the assessee for arm’s , while making search of comparables over the databa of incorporation etc were not applied consistently, used to arrive comparables was very broad and did not consider parameters like credit rating of borrower, country of borrower, tenor/maturity of loan etc. each loan/tranche based on the year in which said loan/tranche was first advanced to the AE, disregarding the fact that loan agreements had been amended to extend the tenure retrospectively from the date of issuance of respective tranche, computing fixed rate of interest , various parameters required to be inputted in the Swap Manager tool need to be correct with the facts of the transaction. 7.3 But the ld TPO observing as under: 1. The objections of the hereunder: 1. The assessee's claim that the search was undertaken on an inconsistent basis is not correct. • The assessee has stated in his submission th \"Security Status\" filter has not been applied for FY 2010 It was explained to the AR during the course of the hearing that the screenshot taken at the time of undertaking the search did not capture the said filter indeed applie for the other FY's. • Furthermore, the Assessee has stated in his submission that for FY 2011 has not been specified / not applied and instead, the ITA Nos. 3714 & 3713/MUM/2024 over the database, filters like country of risk etc were not applied consistently, thirdly used to arrive comparables was very broad and did not consider parameters like credit rating of borrower, country of borrower, loan etc., fourthly, rate of loan was applied on each loan/tranche based on the year in which said loan/tranche was first advanced to the AE, disregarding the fact that loan been amended to extend the tenure retrospectively issuance of respective tranche, computing fixed rate of interest , various parameters required to be inputted in the Swap Manager tool need to be correct with the facts But the ld TPO rejected the contention of the assessee 1. The objections of the assessee are dealt with as 1. The assessee's claim that the search was undertaken on an inconsistent basis is not correct. • The assessee has stated in his submission th \"Security Status\" filter has not been applied for FY 2010 It was explained to the AR during the course of the hearing that the screenshot taken at the time of undertaking the search did not capture the said filter - however, it was indeed applied to \"Include All\" - which has also been done for the other FY's. • Furthermore, the Assessee has stated in his submission that for FY 2011-12, the country of incorporation (Mauritius) has not been specified / not applied and instead, the JSW Energy Ltd 11 ITA Nos. 3714 & 3713/MUM/2024 se, filters like country of risk, country thirdly, criteria used to arrive comparables was very broad and did not consider parameters like credit rating of borrower, country of borrower, rate of loan was applied on each loan/tranche based on the year in which said loan/tranche was first advanced to the AE, disregarding the fact that loan been amended to extend the tenure retrospectively issuance of respective tranche, lastly, while computing fixed rate of interest , various parameters required to be inputted in the Swap Manager tool need to be correct with the facts the contention of the assessee are dealt with as 1. The assessee's claim that the search was undertaken on • The assessee has stated in his submission that the \"Security Status\" filter has not been applied for FY 2010-11. It was explained to the AR during the course of the hearing that the screenshot taken at the time of undertaking the however, it was which has also been done • Furthermore, the Assessee has stated in his submission 12, the country of incorporation (Mauritius) has not been specified / not applied and instead, the country of risk explained to the AR during the course of the hearing that the interest spread taken for the said year (i.e. 575 BPS) pertains specifically to Mauritius only from the screenshot provided. Se 1. Furthermore, given that the AE had taken the first tranche in 2010 (which at the time years) - the AE and the Assessee have time and again amended the agreement to increase the interest payment dates as well as the tenure of the loans. the search has been undertaken after considering all the loans to be repayable on 31.3.2020. 2. Ideally, the assessee should have searched for comparable interest on loan data applicable for borrowers in Mauritius geography from appropriat Bloomberg. This is because the repayments has to be done by the entity in Mauritius and it is in the cash flow of this entity which will repay the assessee's loan and not that of the entity in South Africa. External CUP has been correctly applied by the TPO by searching for appropriate interest rates prevailing in the borrower geography (Mauritius) 3. Since, the assessee had not determined the arms' length rate of interest receivable from the AE in accordance with the provisions of section the information or data used by the assessee in computation of the arms' length price is not reliable or correct, hence the same deserves to be rejected and provisions of section 92C(3)(a) and 92C(3)(c) are invoked to determine the ALP. 4. So far as the assessee's contention that the Hon'ble Mumbai ITAT has accepted the assessee's without prejudice Benchmarking Methodology for A.Y. 2011 is concerned, it is seen that the said achieve finality a assessee's reliance on the above mentioned order is not accepted. 7.4 Accordingly, to interest to be received from the AE ITA Nos. 3714 & 3713/MUM/2024 country of risk has been taken as India. It was again explained to the AR during the course of the hearing that the interest spread taken for the said year (i.e. 575 BPS) pertains specifically to Mauritius only - as can be verified from the screenshot provided. Se hermore, given that the AE had taken the first tranche in 2010 (which at the time - was for a period of 3 the AE and the Assessee have time and again amended the agreement to increase the interest payment dates as well as the tenure of the loans. Given the above, the search has been undertaken after considering all the loans to be repayable on 31.3.2020. 2. Ideally, the assessee should have searched for comparable interest on loan data applicable for borrowers in Mauritius geography from appropriate databases like Bloomberg. This is because the repayments has to be done by the entity in Mauritius and it is in the cash flow of this entity which will repay the assessee's loan and not that of the entity in South Africa. External CUP has been correctly applied by the TPO by searching for appropriate interest rates prevailing in the borrower geography (Mauritius) 3. Since, the assessee had not determined the arms' length rate of interest receivable from the AE in accordance with the provisions of section 92C(1) and 92C(2), and also since the information or data used by the assessee in computation of the arms' length price is not reliable or correct, hence the same deserves to be rejected and provisions of section 92C(3)(a) and 92C(3)(c) are invoked to rmine the ALP. 4. So far as the assessee's contention that the Hon'ble Mumbai ITAT has accepted the assessee's without prejudice Benchmarking Methodology for A.Y. 2011-12 and 2012 is concerned, it is seen that the said issue achieve finality at the higher stages. Therefore, the assessee's reliance on the above mentioned order accepted. Accordingly, the ld TPO calculated the adjustment be received from the AE as follows: JSW Energy Ltd 12 ITA Nos. 3714 & 3713/MUM/2024 has been taken as India. It was again explained to the AR during the course of the hearing that the interest spread taken for the said year (i.e. 575 BPS) as can be verified hermore, given that the AE had taken the first was for a period of 3 the AE and the Assessee have time and again amended the agreement to increase the interest payment Given the above, the search has been undertaken after considering all the 2. Ideally, the assessee should have searched for comparable interest on loan data applicable for borrowers e databases like Bloomberg. This is because the repayments has to be done by the entity in Mauritius and it is in the cash flow of this entity which will repay the assessee's loan and not that of the entity in South Africa. External CUP has been correctly applied by the TPO by searching for appropriate interest rates prevailing in the borrower geography (Mauritius) 3. Since, the assessee had not determined the arms' length rate of interest receivable from the AE in accordance with 92C(1) and 92C(2), and also since the information or data used by the assessee in computation of the arms' length price is not reliable or correct, hence the same deserves to be rejected and provisions of section 92C(3)(a) and 92C(3)(c) are invoked to 4. So far as the assessee's contention that the Hon'ble Mumbai ITAT has accepted the assessee's without prejudice 12 and 2012-13 is yet to t the higher stages. Therefore, the assessee's reliance on the above mentioned order the adjustment “1. 1. Accordingly, the adjustment is calculate follows: Tranche Date of initial Disbursement 1 19-Jul-10 2 21-May-12 3 29-JUI-10 4 1-Oct-10 5 4-Nov-10 6 3-Dec-10 7 21-Mar-11 8 27-Apr-11 9 30-May-11 10. 27-Jun-11 11. 29-Aug-11 12 11-Nov-11 13. 18-Oct-12 14 30-Nov-12 15 7-Dec-12 16 23-Jul-13 17 24-Jun-14 18 9-Oct-15 19 9-May-16 20. 6-Jun-16 21 19-Aug-16 22. 30-Sep-16 23 6-Jan-17 24 9-Jun017 25 19-Sep-17 26 29-Nov-17 ITA Nos. 3714 & 3713/MUM/2024 1. Accordingly, the adjustment is calculate Date of initial Disbursement FY of initial disbursement Amt Disbursed (USD) Rate of Interest (PA) 10 FY 2010-11 17,50,000 8.03% 12 FY 2012-13 -10'000 8.23% 10 FY 2010-11 17,50,000 8.03% 10 FY 2010-11 10,00,000 8.03% 10 FY 2010-11 30,00,000 8.03% 10 FY 2010-11 2,00,00,000 8.03% 11 FY 2010-11 2,70,000 8.03% 11 FY 2011-12 25,00,000 9.40% 11 FY 2011-12 28,00,000 9.40% FY 2011-12 10,000 9.40% 11 FY 2011-12 85,00,000 9.40% 11 FY 2011-12 4,000 9.40% 12 FY 2012-13 12,00,000 8.23% 12 FY 2012-13 11,55,000 8.23% FY 2012-13 58,20,000 8.23% 13 FY 2013-14 36,00,000 5.43% 14 FY 2014-15 25,000 6.71% FY 2015-16 3,50,000 6.71% 16 FY 2016-17 50,000 7.43% 16 FY 2016-17 50,000 7.43%% 16 FY 2016-17 3,00,000 7.43% 16 FY 2016-17 1,85,000 7.43% FY 2016-17 -10,69,519 7.43% Jun017 FY 2017-18 11,100 9.11% 17 FY 2017-18 04,50,000 9.11% 17 FY 2017-18 2,000 9.11% JSW Energy Ltd 13 ITA Nos. 3714 & 3713/MUM/2024 1. Accordingly, the adjustment is calculated as Rate of Interest Interest Amt (USD) 31.3.2020 1,40,525 823 1,40,525 80,300 2,40,900 16,06,000 21,681 2,35,000 2,63,200 940 7,99,000 376 98,760 95,057 4,78,986 1,95,480 1,678 1,678 3,715 3,715 22,290 13,746 079,465 1,011 -40,995 182 Exchange Rate as on 31/03/2020 Arm's Length Interest (INR) Amount offered by Assessee in Form 3CEB Adjustment 1. Summary of In view of the above discussion the total adjustments made to the international transactions reported by the assessee for AY 2020 stands as below: Sr. International Transactions : 1. Interest receivable on loans enterprises Total 7.3 Before the Ld. DR made before the ld TPO and Natural India Pvt. Ltd. v. DCIT [ITA No. 5855/Del/2012] the Ld. DRP rejected the contention of the assessee observing as under: “With regard to the contention of conversion to fixed rate, the Panel is of the view that the terms of the agreement hugely differ from the actual conduct of the parties. Whereas the terms of the agreement requires that the 27 25-Jan-18 28 30-Jan-18 29 15-Feb-18 30 18.-Jun-18 31 11-Mar-19 32 2-Dec-19 33 24-Jan-20 34 13-Feb-20 35 25-Feb-20 Total ITA Nos. 3714 & 3713/MUM/2024 Exchange Rate as on 31/03/2020 75.39 Arm's Length Interest (INR) 26,91,93,755 Amount offered by Assessee in Form 3CEB (INR) 16,59,18,029 Adjustment (INR); 10,32,75,726 1. Summary of Adjustments: In view of the above discussion the total adjustments made to the international transactions reported by the assessee for AY 2020 International Transactions : Interest receivable on loans given to associated Before the Ld. DRP, the assessee reiterated the submission made before the ld TPO and relied on the decision of Natural India Pvt. Ltd. v. DCIT [ITA No. 5855/Del/2012] Ld. DRP rejected the contention of the assessee observing as With regard to the contention of conversion to fixed rate, the Panel is of the view that the terms of the agreement hugely differ from the actual conduct of the parties. Whereas the terms of the agreement requires that the 18 FY 2017-18 4,00,000 9.11% 18 FY 2017-18 1,34,788 9.11% 18 FY 2017-18 10,95,681 9.11% 18 FY 2018-19 -68,33,050 9.11% 19 FY 2018-19 -10,00,000 9.11% FY 2019-20 -5,00,000 9.11% FY 2019-20 -5,00,000 9.11% FY 2019-20 -8,00,000 9.11% FY 2019-20 -5,00,000 9.11% Total 4,43,00,000 JSW Energy Ltd 14 ITA Nos. 3714 & 3713/MUM/2024 75.39 26,91,93,755 16,59,18,029 10,32,75,726 In view of the above discussion the total adjustments made to the international transactions reported by the assessee for AY 2020-21 Adjustment Amount (INR) given to associated 10,32,75,726 10,32,75,726 reiterated the submission n the decision of Cotton Natural India Pvt. Ltd. v. DCIT [ITA No. 5855/Del/2012]. But, Ld. DRP rejected the contention of the assessee observing as With regard to the contention of conversion to fixed rate, the Panel is of the view that the terms of the agreement hugely differ from the actual conduct of the parties. Whereas the terms of the agreement requires that the 36,440 12,279 99,817 -6,22,491 -91,100 -45,550 -45,550 -72,880 -45,550 35,70,683 interest payments have to be made each year, the conduct of the parties is contrary to the terms wherein no interest or capital has been paid till date. This has been the Department's contention in all years starting with AY 2012 is for AY 2012 transaction when actual facts would not have been different from the terms of the loan or considerable time has not elapsed from the advance of the first tranche. Hence the decision of the Ho applicable to the later years. In uncontrolled transactions whether the assessee would have agreed to receive the same interest rate under same facts and circumstances is the moot point. The answer is definitely no. Henc action of converting it to fixed interest rates terms is found to be in order. As regards the claim that the country of risk and country of incorporation has not been applied uniformly over the years, it is fact that the loan was availed by the AE Mauritius even though the ultimately it was used in projects for South Africa. Here the ultimate end user is not required to be considered as the loan was availed as part of the agreement between the assessee and the Mauritius entity and hence the count Mauritius. The other objections of the assessee is that credit rating of the AE has not been considered by the TPO. The assessee has arrived at the credit rating of the AE using the application, whereas the TPO In this regard, it is the observation of the Panel that even though credit rating of the borrower is an important criteria, the credit rating arrived at by the assessee is also not sacrosanct as it has not been provided by an agency but by using a software called 'Riskcalc'. it is seen that assessee has taken the credit rating for the AE's entities in South Africa, whereas it should have been for Mauritius. Hence the Id TPO's benchmarking using the Bloomberg database is found to be correct. With regard to the other contentions, the findings of the Panel are as follows: ITA Nos. 3714 & 3713/MUM/2024 interest payments have to be made within a fixed period in each year, the conduct of the parties is contrary to the terms wherein no interest or capital has been paid till date. This has been the Department's contention in all years starting with AY 2012-13 till AY 2018-19. The Hon'ble IT is for AY 2012-13 which is the first year of the loan transaction when actual facts would not have been different from the terms of the loan or considerable time has not elapsed from the advance of the first tranche. Hence the decision of the Hon'ble ITAT for the said year is not applicable to the later years. In uncontrolled transactions whether the assessee would have agreed to receive the same interest rate under same facts and circumstances is the moot point. The answer is definitely no. Henc action of converting it to fixed interest rates terms is found to be in order. As regards the claim that the country of risk and country of incorporation has not been applied uniformly over the years, it is fact that the loan was availed by the AE Mauritius even though the ultimately it was used in projects for South Africa. Here the ultimate end user is not required to be considered as the loan was availed as part of the agreement between the assessee and the Mauritius entity and hence the country of borrower is rightly taken as The other objections of the assessee is that credit rating of the AE has not been considered by the TPO. The assessee has arrived at the credit rating of the AE using the application, whereas the TPO has not considered the same. In this regard, it is the observation of the Panel that even though credit rating of the borrower is an important criteria, the credit rating arrived at by the assessee is also not sacrosanct as it has not been provided by an independent agency but by using a software called 'Riskcalc'. it is seen that assessee has taken the credit rating for the AE's entities in South Africa, whereas it should have been for Mauritius. Hence the Id TPO's benchmarking using the rg database is found to be correct. With regard to the other contentions, the findings of the Panel are as follows: JSW Energy Ltd 15 ITA Nos. 3714 & 3713/MUM/2024 within a fixed period in each year, the conduct of the parties is contrary to the terms wherein no interest or capital has been paid till date. This has been the Department's contention in all years starting 19. The Hon'ble ITAT's order 13 which is the first year of the loan transaction when actual facts would not have been different from the terms of the loan or considerable time has not elapsed from the advance of the first tranche. Hence the n'ble ITAT for the said year is not applicable to the later years. In uncontrolled transactions whether the assessee would have agreed to receive the same interest rate under same facts and circumstances is the moot point. The answer is definitely no. Hence TPO's action of converting it to fixed interest rates terms is found As regards the claim that the country of risk and country of incorporation has not been applied uniformly over the years, it is fact that the loan was availed by the AE in Mauritius even though the ultimately it was used in projects for South Africa. Here the ultimate end user is not required to be considered as the loan was availed as part of the agreement between the assessee and the Mauritius entity rightly taken as The other objections of the assessee is that credit rating of the AE has not been considered by the TPO. The assessee has arrived at the credit rating of the AE using the 'Riskcalc' has not considered the same. In this regard, it is the observation of the Panel that even though credit rating of the borrower is an important criteria, the credit rating arrived at by the assessee is also not independent Moreover, it is seen that assessee has taken the credit rating for the AE's entities in South Africa, whereas it should have been for Mauritius. Hence the Id TPO's benchmarking using the With regard to the other contentions, the findings of the Security status not applied uniformly clarified that it was a mistake in the screenshot and the same has been applied unifo Country of borrower as loan was availed by AE there and repayments are also to be made by the Mauritius entity Tenure - the Id TPO has applied the tenure as applicable for each year's tranches separately. Hence the ground of objection 7.4 Before us, the Ld. counsel for the assessee relied on the order of the Tribunal dated 07.11.2019 2012-13, wherein the methodology adopted by th ascertained from the Bloombe benchmark the loan the assessee of benchmarking using floating rate interest 7.5 On the contrary, the Ld. DR submitted that actual conduct of the parties significantly diverged from the contractual terms agreed upon stipulating fixed timeline for interest payment and in practice no such interest payment had been made. The Ld. DR submit that the initial terms of t agreement dated 31 March 2012, provided that interest was payable semi-annually, with the first 2012, based on the 6 at 3 years from the original agreement, h interest payments were made as per the stipulated schedule, ITA Nos. 3714 & 3713/MUM/2024 Security status not applied uniformly - the Id TPO has clarified that it was a mistake in the screenshot and the same has been applied uniformly. Country of borrower - As discussed it should be Mauritius as loan was availed by AE there and repayments are also to be made by the Mauritius entity the Id TPO has applied the tenure as applicable for each year's tranches separately. he ground of objection is dismissed.” Before us, the Ld. counsel for the assessee relied on the order of the Tribunal dated 07.11.2019 for assessment year 2011 wherein the Tribunal has rejected the methodology adopted by the Ld. TPO i.e. using interest rate ascertained from the Bloomberg database using Swap M benchmark the loan given to the AE and upheld the methodology of the assessee of benchmarking using floating rate interest On the contrary, the Ld. DR submitted that actual conduct of the parties significantly diverged from the contractual terms agreed upon stipulating fixed timeline for interest payment and in practice payment had been made. The Ld. DR submit he initial terms of the loan, as agreed upon in the restatement 31 March 2012, provided that interest was payable annually, with the first installment due by 30 2012, based on the 6-month LIBOR rate. The loan tenu ars from the original agreement, however, in reality, no interest payments were made as per the stipulated schedule, JSW Energy Ltd 16 ITA Nos. 3714 & 3713/MUM/2024 the Id TPO has clarified that it was a mistake in the screenshot and the As discussed it should be Mauritius as loan was availed by AE there and repayments are also the Id TPO has applied the tenure as applicable for Before us, the Ld. counsel for the assessee relied on the order assessment year 2011-12 and Tribunal has rejected the benchmarking interest rate as Swap Manager to the methodology of the assessee of benchmarking using floating rate interest. On the contrary, the Ld. DR submitted that actual conduct of the parties significantly diverged from the contractual terms agreed upon stipulating fixed timeline for interest payment and in practice payment had been made. The Ld. DR submitted he loan, as agreed upon in the restatement 31 March 2012, provided that interest was payable due by 30th September month LIBOR rate. The loan tenure remained owever, in reality, no interest payments were made as per the stipulated schedule, undermining the assessee's claim that the terms of the agreement were adhered to. The time to support that t a continuous change in its structure and tenure, as detailed below: Amendment No. 7 (22 November 2012): limit of USD 42 million was increased to USD 50 million, an the first interest payment date was deferred to 30 September 2013. The tenure of the loan remained at 3 years, but the delay in the first payment indicated that the financial discipline required by the agreement was not followed. Amendment No. 8 (18 Jul September 2013): USD 54 million. The first once again deferred to 30 September 2014, extending the timeline even though the official tenure remained Amendment No. 10 (20 July 2014): was extended from 3 years to 4 years, with the first interest payment now pushed to 30 September 2015. This formal extension highlights that the original loan terms were no longer reflective of the actual financial arrangement. Amendment No. 11 (31 July 2015): further extended from 4 years to 5 years from the date of disbursement. The first ITA Nos. 3714 & 3713/MUM/2024 undermining the assessee's claim that the terms of the agreement The ld DR referred numerous amendments to support that the loan transaction has undergone, indicating continuous change in its structure and tenure, as detailed below: Amendment No. 7 (22 November 2012): The original loan limit of USD 42 million was increased to USD 50 million, an the first interest payment date was deferred to 30 September 2013. The tenure of the loan remained at 3 years, but the delay in the first payment indicated that the financial discipline required by the agreement was not followed. Amendment No. 8 (18 July 2013) & Amendment No. 9 (27 September 2013): The loan limit was further increased to USD 54 million. The first installment for interest payment was once again deferred to 30 September 2014, extending the timeline even though the official tenure remained Amendment No. 10 (20 July 2014): The tenure of the loan was extended from 3 years to 4 years, with the first interest payment now pushed to 30 September 2015. This formal extension highlights that the original loan terms were no longer ive of the actual financial arrangement. Amendment No. 11 (31 July 2015): The loan tenure was further extended from 4 years to 5 years from the date of disbursement. The first installment for interest payment was JSW Energy Ltd 17 ITA Nos. 3714 & 3713/MUM/2024 undermining the assessee's claim that the terms of the agreement numerous amendments over he loan transaction has undergone, indicating continuous change in its structure and tenure, as detailed below: The original loan limit of USD 42 million was increased to USD 50 million, and the first interest payment date was deferred to 30 September 2013. The tenure of the loan remained at 3 years, but the delay in the first payment indicated that the financial discipline required by the agreement was not followed. y 2013) & Amendment No. 9 (27 The loan limit was further increased to for interest payment was once again deferred to 30 September 2014, extending the timeline even though the official tenure remained at 3 years. The tenure of the loan was extended from 3 years to 4 years, with the first interest payment now pushed to 30 September 2015. This formal extension highlights that the original loan terms were no longer The loan tenure was further extended from 4 years to 5 years from the date of interest payment was now deferred to 31 March 2017, demonstrating a continued departure from the initial agreement. Amendment No. 12 (16 December 2016): remained at 5 years, but the first interest payment was deferred yet again to 31 March 2019. 7.6 According to the ld DR, t date for interest payments reflects that the financial obligations were being postponed, contrary to the agreed pattern of repeated amendments to defer interest payments and extend the tenure of the loan demonstrates that the terms of the original loan agreement have been fundamentally altered over time. The consistent postponement of interest payments and changes to the loan terms suggest that the AE was not operating on an arm's length basis. Hence, the original facts upon which the Hon'ble ITAT based its decision for AY 2012 that decision inapplicable to the subsequent years. 7.7 Further, the Ld. DR submitted that that the loan should have a floating rate of interest, citing that the original agreement was linked to the LIBOR rate (6 However, the Department submits that while the agreement may have referred to a floating rate, the actual conduct and the financial arrangements between the assessee and its Associated Enterprise (AE) show that this is no longer applicable. Despite the terms ITA Nos. 3714 & 3713/MUM/2024 now deferred to 31 March 2017, demonstrating a continued departure from the initial agreement. Amendment No. 12 (16 December 2016): The loan tenure remained at 5 years, but the first interest payment was deferred yet again to 31 March 2019. to the ld DR, this continuous extension of the due date for interest payments reflects that the financial obligations were being postponed, contrary to the agreed-upon terms. pattern of repeated amendments to defer interest payments and nure of the loan demonstrates that the terms of the original loan agreement have been fundamentally altered over time. The consistent postponement of interest payments and changes to the loan terms suggest that the AE was not operating on an arm's asis. Hence, the original facts upon which the Hon'ble ITAT based its decision for AY 2012-13 have materially changed, making that decision inapplicable to the subsequent years. Further, the Ld. DR submitted that the assessee had hould have a floating rate of interest, citing that the original agreement was linked to the LIBOR rate (6-months LIBOR). However, the Department submits that while the agreement may have referred to a floating rate, the actual conduct and the financial rangements between the assessee and its Associated Enterprise (AE) show that this is no longer applicable. Despite the terms JSW Energy Ltd 18 ITA Nos. 3714 & 3713/MUM/2024 now deferred to 31 March 2017, demonstrating a continued The loan tenure remained at 5 years, but the first interest payment was his continuous extension of the due date for interest payments reflects that the financial obligations upon terms. This pattern of repeated amendments to defer interest payments and nure of the loan demonstrates that the terms of the original loan agreement have been fundamentally altered over time. The consistent postponement of interest payments and changes to the loan terms suggest that the AE was not operating on an arm's asis. Hence, the original facts upon which the Hon'ble ITAT 13 have materially changed, making assessee had argued hould have a floating rate of interest, citing that the months LIBOR). However, the Department submits that while the agreement may have referred to a floating rate, the actual conduct and the financial rangements between the assessee and its Associated Enterprise (AE) show that this is no longer applicable. Despite the terms requiring semi-annual interest payments, no interest has been received by the assessee from its AE for several years. This failure comply with the interest payment schedule renders the floating rate structure ineffective. 7.8 The Ld. DR further submitted that established transfer pricing principles, the arm's length rate for the interest charged should be reference points for fixed which provides relevant data for fixed reliable source for determining such rates. Therefore, the interest should be computed ba which better reflect the economic reality of this transaction, rather than the floating rate originally agreed upon but never implemented. 7.9 The Ld. DR submitted that form\", should be acknowledged , courts in several rulings, including Holdings BV v. Union of India Hon'ble Supreme Court held that tax liability must reflect the real and substantive aspects of a transacti The ld DR relied upon submission that, given the lack of actual interest payments, a fixed rate of interest should be applied in order to accurately reflect ITA Nos. 3714 & 3713/MUM/2024 annual interest payments, no interest has been received by the assessee from its AE for several years. This failure comply with the interest payment schedule renders the floating rate The Ld. DR further submitted that in accordance with established transfer pricing principles, the arm's length rate for the interest charged should be ascertained using the appropriate reference points for fixed-rate loans. Bloomberg's Swap Manager, which provides relevant data for fixed-rate loan transactions, is a reliable source for determining such rates. Therefore, the interest should be computed based on the applicable fixed-rate loan terms, which better reflect the economic reality of this transaction, rather than the floating rate originally agreed upon but The Ld. DR submitted that the concept of \"substance over ld be acknowledged , which has been emphasized by the courts in several rulings, including Vodafone International Holdings BV v. Union of India(2012) 341 ITR1 (SC) Hon'ble Supreme Court held that tax liability must reflect the real ive aspects of a transaction rather than its legal form. relied upon the said decision to further buttress the submission that, given the lack of actual interest payments, a fixed rate of interest should be applied in order to accurately reflect JSW Energy Ltd 19 ITA Nos. 3714 & 3713/MUM/2024 annual interest payments, no interest has been received by the assessee from its AE for several years. This failure to comply with the interest payment schedule renders the floating rate in accordance with established transfer pricing principles, the arm's length rate for the ascertained using the appropriate rate loans. Bloomberg's Swap Manager, rate loan transactions, is a reliable source for determining such rates. Therefore, the interest rate loan terms, which better reflect the economic reality of this transaction, rather than the floating rate originally agreed upon but he concept of \"substance over which has been emphasized by the Vodafone International (2012) 341 ITR1 (SC) , where the Hon'ble Supreme Court held that tax liability must reflect the real on rather than its legal form. to further buttress the submission that, given the lack of actual interest payments, a fixed rate of interest should be applied in order to accurately reflect the substance of the transaction, which better reflect the economic reality of this transaction. 7.10 The Ld. DR also rejected the lower authorities that the \"Security Status\" filter was not uniformly applied during the transfe Transfer Pricing Officer. factually incorrect. She submitted that t the non-capturing of the \"Security Status\" in the search results was due to a technical o application of the filter. 7.11 The Ld. DR further submits that geography for determining the arm's length rate of interest is Mauritius, where the AE (i.e., the immediate borrower) is base and not South Africa, where the funds were ultimately deployed. The transfer pricing rules mandate that external comparables should be based on the specific economic conditions and risk profiles associated with the borrower, not the ultimate destination of the funds. The repayment obligations of the loan are tied to the Mauritius-based AE, and it is the financial and economic conditions of this entity, not those of the South African operations, that should be considered for benchmarking the loan. The met the TPO, which focused on interest rates prevailing in the Mauritius market, is appropriate and in line with international best practices as reflected in OECD Transfer Pricing Guidelines, which prioritize ITA Nos. 3714 & 3713/MUM/2024 substance of the transaction, which better reflect the economic reality of this transaction. The Ld. DR also rejected the arguments of assessee before that the \"Security Status\" filter was not uniformly applied during the transfer pricing analysis conducted by the Transfer Pricing Officer. She submitted that this contention is She submitted that the TPO has clarified that capturing of the \"Security Status\" in the search results was due to a technical oversight in the screenshot, not in the actual application of the filter. The Ld. DR further submits that the correct borrower geography for determining the arm's length rate of interest is Mauritius, where the AE (i.e., the immediate borrower) is base and not South Africa, where the funds were ultimately deployed. The transfer pricing rules mandate that external comparables should be based on the specific economic conditions and risk profiles associated with the borrower, not the ultimate destination The repayment obligations of the loan are tied to the based AE, and it is the financial and economic conditions of this entity, not those of the South African operations, that should be considered for benchmarking the loan. The met the TPO, which focused on interest rates prevailing in the Mauritius market, is appropriate and in line with international best practices as reflected in OECD Transfer Pricing Guidelines, which prioritize JSW Energy Ltd 20 ITA Nos. 3714 & 3713/MUM/2024 substance of the transaction, which better reflect the economic s of assessee before that the \"Security Status\" filter was not uniformly r pricing analysis conducted by the this contention is he TPO has clarified that capturing of the \"Security Status\" in the search results was versight in the screenshot, not in the actual the correct borrower geography for determining the arm's length rate of interest is Mauritius, where the AE (i.e., the immediate borrower) is based, and not South Africa, where the funds were ultimately deployed. The transfer pricing rules mandate that external comparables should be based on the specific economic conditions and risk profiles associated with the borrower, not the ultimate destination The repayment obligations of the loan are tied to the based AE, and it is the financial and economic conditions of this entity, not those of the South African operations, that should be considered for benchmarking the loan. The method applied by the TPO, which focused on interest rates prevailing in the Mauritius market, is appropriate and in line with international best practices as reflected in OECD Transfer Pricing Guidelines, which prioritize the geographic and risk profile of t transactions. 7.12 The Ld. DR further submitted that detailed in the previous paragraphs, has undergone multiple extensions over the years, which directly affects the determination of the arm's length correct tenure applicable to each tranche of the loan based on the terms at the time of disbursement, and subsequent 8. We have heard rival submissions of the parties and perused the relevant materials the grounds raised is regarding adjustment made by the Ld. TPO to the international transaction of the interest associated enterprises applying fixed rate of interest as against the floating rate of interest i.e. LIBOR applied by the assessee. The primary contention of the assessee is that identical issue of applying floating rate of interest has been decided by the Tribunal in assessment year 2011 2012-13 in ITA No. 2452 & 2316/Mum/2017 8.1 The Tribunal(supra), assessee advanced unsecured loans of enterprise namely M/s JSW Energy Minerals Mauritius limited and received interest of the 13.82 lakhs. of unsecured loan having tenure of three years. The currency of ITA Nos. 3714 & 3713/MUM/2024 the geographic and risk profile of the borrower in pricing such The Ld. DR further submitted that the tenure of the loans, as detailed in the previous paragraphs, has undergone multiple extensions over the years, which directly affects the determination of the arm's length interest rate. The TPO has correct tenure applicable to each tranche of the loan based on the terms at the time of disbursement, and subsequent amendments. We have heard rival submissions of the parties and perused the relevant materials on record. The issue in dispute is regarding adjustment made by the Ld. TPO to the international transaction of the interest to be received associated enterprises applying fixed rate of interest as against the floating rate of interest i.e. LIBOR applied by the assessee. The primary contention of the assessee is that identical issue of applying floating rate of interest vis-a-vis fixed rate of the interest has been decided by the Tribunal in assessment year 2011 in ITA No. 2452 & 2316/Mum/2017 in favour of assessee (supra), in assessment year 2011-12 assessee advanced unsecured loans of ₹ 115.19 crore M/s JSW Energy Minerals Mauritius limited and received interest of the 13.82 lakhs. The said loan was in the nature of unsecured loan having tenure of three years. The currency of JSW Energy Ltd 21 ITA Nos. 3714 & 3713/MUM/2024 he borrower in pricing such the tenure of the loans, as detailed in the previous paragraphs, has undergone multiple extensions over the years, which directly affects the determination interest rate. The TPO has considered the correct tenure applicable to each tranche of the loan based on the amendments. We have heard rival submissions of the parties and perused . The issue in dispute involved in is regarding adjustment made by the Ld. TPO to to be received from the associated enterprises applying fixed rate of interest as against the floating rate of interest i.e. LIBOR applied by the assessee. The primary contention of the assessee is that identical issue of ed rate of the interest has been decided by the Tribunal in assessment year 2011-12 and in favour of assessee. 12 noted that the 115.19 crores to associated M/s JSW Energy Minerals Mauritius limited and was in the nature of unsecured loan having tenure of three years. The currency of interest payment as well as US dollars. The interest rate was stated to be floating interest rate to be computed as per LIBOR trenches during the year and accordingly, the interest was charged at three months averag 0.30% for actual number AE. The relevant facts for AY 2010 (supra), are extracted as under: “2.9.2 The assessee explained that non to invest in South Africa by means of loan capital needs approval from South African Reserve Bank particularly with reference to intended repayment dates and interest rates. The Reserve Bank will not ag rate being charged by non the South African subsidiaries but loans from non other than shareholder may be allowed to carry interest at prime +2%. The relevant extracts of provided to Learned TPO. It was submitted that intra loan advanced to Mauritius Entity was ultimately utilized in South Africa since JSWEMML further advanced the said loan to JSW Energy South Africa Ltd. [JSWENRSAL] and in view o the South African Reserve Bank regulation, the Mauritius entity would not be able to charge any interest more than LIBOR from South African Entity. In the aforesaid background, it was submitted that the intra group transaction was to acquire the asset is was at Arm's Length Price as prescribed in the Indian Regulations. In nutshell, it was submitted that due to regulatory restraints of South Africa, the interest rate could not be more than LIBOR rate for any borrowi companies outside South Africa. 2.9.3 Without prejudice to the above submissions, the assessee benchmarked the loan transaction on the basis of External Comparable Uncontrolled Price [CUP] Method by ITA Nos. 3714 & 3713/MUM/2024 interest payment as well as principal repayment was said to be in US dollars. The interest rate was stated to be floating interest rate to be computed as per LIBOR. The loan was advanced in five trenches during the year and accordingly, the interest was charged at three months average LIBOR rate ranging between 0.29% to number of days for which loan was used by the facts for AY 2010-11, reproduced by the Tribunal extracted as under: The assessee explained that non-residents who wished to invest in South Africa by means of loan capital needs approval from South African Reserve Bank particularly with reference to intended repayment dates and interest rates. The Reserve Bank will not agree to interest rates in excess of prime rate being charged by non-resident shareholders on loans to the South African subsidiaries but loans from non-residents other than shareholder may be allowed to carry interest at prime +2%. The relevant extracts of the regulations were provided to Learned TPO. It was submitted that intra loan advanced to Mauritius Entity was ultimately utilized in South Africa since JSWEMML further advanced the said loan to JSW Energy South Africa Ltd. [JSWENRSAL] and in view o the South African Reserve Bank regulation, the Mauritius entity would not be able to charge any interest more than LIBOR from South African Entity. In the aforesaid background, it was submitted that the intra group transaction was to acquire the asset is South Africa and therefore, transaction was at Arm's Length Price as prescribed in the Indian Regulations. In nutshell, it was submitted that due to regulatory restraints of South Africa, the interest rate could not be more than LIBOR rate for any borrowings from any group companies outside South Africa. 2.9.3 Without prejudice to the above submissions, the assessee benchmarked the loan transaction on the basis of External Comparable Uncontrolled Price [CUP] Method by JSW Energy Ltd 22 ITA Nos. 3714 & 3713/MUM/2024 principal repayment was said to be in US dollars. The interest rate was stated to be floating interest rate . The loan was advanced in five trenches during the year and accordingly, the interest was charged e LIBOR rate ranging between 0.29% to of days for which loan was used by the 11, reproduced by the Tribunal residents who wished to invest in South Africa by means of loan capital needs approval from South African Reserve Bank particularly with reference to intended repayment dates and interest rates. The ree to interest rates in excess of prime resident shareholders on loans to residents other than shareholder may be allowed to carry interest at the regulations were provided to Learned TPO. It was submitted that intra-group loan advanced to Mauritius Entity was ultimately utilized in South Africa since JSWEMML further advanced the said loan to JSW Energy South Africa Ltd. [JSWENRSAL] and in view of the South African Reserve Bank regulation, the Mauritius entity would not be able to charge any interest more than LIBOR from South African Entity. In the aforesaid background, it was submitted that the intra group transaction was to South Africa and therefore, transaction was at Arm's Length Price as prescribed in the Indian Regulations. In nutshell, it was submitted that due to regulatory restraints of South Africa, the interest rate could not ngs from any group 2.9.3 Without prejudice to the above submissions, the assessee benchmarked the loan transaction on the basis of External Comparable Uncontrolled Price [CUP] Method by comparing the interest rates at which with similar credit ratings would be able to obtain intra loans. The AE was selected as the tested party and its credit rating was determined to be Baa1 (Moody; equivalent to S&P BBB+) which fall in the lower medium investment Selecting the borrower country to be Mauritius/South Africa/USA, the assessee arrived at mean ALP margin of 243.83 basis points over LIBOR. Applying the spread of 243.83 basis point to LIBOR, the ALP interest was computed to be US Dollars 367598 (I against Rs.13.82 Lacs charged by the assessee from its AE. The assessee, in support of LIBOR, also submitted that the loans were advanced from internal accruals and it did not have any foreign borrowings. The weighted avera domestic borrowings was computed as 10.14% as per the workings submitted by the assessee. 2.9.4 However, upon due consideration, the Ld. TPO opined that the regulatory restriction imposed under South African Regulations would not be determinative sin advanced to Mauritius entity and not to South African entity. Further, the regulatory authority of any country would not take into account the transfer pricing provisions to determine the appropriate rates which could be considered as Arm' Price for interest payment. Drawing analogy from the decision rendered in Coca Taxman 103/309 ITR 194 (Punj & Har.) permitted by RBI would not represen transactions, Ld. TPO opined that determination of ALP was to be examined from the point of view of Transfer Pricing Provisions under the Income Tax Act. 2.9.5 Proceeding further, finding defects in the assessee's methodology to of the fact that comparable entities were based in USA whereas the loans was advanced to Mauritius entity and further, the credit rating of Mauritius AE would be much lower than BBB+ as adopted by the assessee for TPO concluded that the search process was not proper and was required to be rejected. The argument that the loans were advanced from internal accruals was also rejected since the assessee, in the opinion of Ld. TPO, failed to prove nexus ITA Nos. 3714 & 3713/MUM/2024 comparing the interest rates at which the independent parties with similar credit ratings would be able to obtain intra loans. The AE was selected as the tested party and its credit rating was determined to be Baa1 (Moody; equivalent to S&P BBB+) which fall in the lower medium investment Selecting the borrower country to be Mauritius/South Africa/USA, the assessee arrived at mean ALP margin of 243.83 basis points over LIBOR. Applying the spread of 243.83 basis point to LIBOR, the ALP interest was computed to be US Dollars 367598 (INR Equivalent Rs.164.13 Lacs) as against Rs.13.82 Lacs charged by the assessee from its AE. The assessee, in support of LIBOR, also submitted that the loans were advanced from internal accruals and it did not have any foreign borrowings. The weighted avera domestic borrowings was computed as 10.14% as per the workings submitted by the assessee. 2.9.4 However, upon due consideration, the Ld. TPO opined that the regulatory restriction imposed under South African Regulations would not be determinative since the loan was advanced to Mauritius entity and not to South African entity. Further, the regulatory authority of any country would not take into account the transfer pricing provisions to determine the appropriate rates which could be considered as Arm' Price for interest payment. Drawing analogy from the decision rendered in Coca-Cola India Inc. v. Asstt. CIT [2009] 177 Taxman 103/309 ITR 194 (Punj & Har.) that the royalty rates permitted by RBI would not represent ALP of any international transactions, Ld. TPO opined that determination of ALP was to be examined from the point of view of Transfer Pricing Provisions under the Income Tax Act. 2.9.5 Proceeding further, finding defects in the assessee's methodology to benchmark the same by External CUP in view of the fact that comparable entities were based in USA whereas the loans was advanced to Mauritius entity and further, the credit rating of Mauritius AE would be much lower than BBB+ as adopted by the assessee for benchmarking, Ld. TPO concluded that the search process was not proper and was required to be rejected. The argument that the loans were advanced from internal accruals was also rejected since the assessee, in the opinion of Ld. TPO, failed to prove nexus JSW Energy Ltd 23 ITA Nos. 3714 & 3713/MUM/2024 the independent parties with similar credit ratings would be able to obtain intra-group loans. The AE was selected as the tested party and its credit rating was determined to be Baa1 (Moody; equivalent to S&P BBB+) which fall in the lower medium investment grade. Selecting the borrower country to be Mauritius/South Africa/USA, the assessee arrived at mean ALP margin of 243.83 basis points over LIBOR. Applying the spread of 243.83 basis point to LIBOR, the ALP interest was computed to NR Equivalent Rs.164.13 Lacs) as against Rs.13.82 Lacs charged by the assessee from its AE. The assessee, in support of LIBOR, also submitted that the loans were advanced from internal accruals and it did not have any foreign borrowings. The weighted average of domestic borrowings was computed as 10.14% as per the 2.9.4 However, upon due consideration, the Ld. TPO opined that the regulatory restriction imposed under South African ce the loan was advanced to Mauritius entity and not to South African entity. Further, the regulatory authority of any country would not take into account the transfer pricing provisions to determine the appropriate rates which could be considered as Arm' Length Price for interest payment. Drawing analogy from the decision [2009] 177 that the royalty rates t ALP of any international transactions, Ld. TPO opined that determination of ALP was to be examined from the point of view of Transfer Pricing 2.9.5 Proceeding further, finding defects in the assessee's benchmark the same by External CUP in view of the fact that comparable entities were based in USA whereas the loans was advanced to Mauritius entity and further, the credit rating of Mauritius AE would be much lower benchmarking, Ld. TPO concluded that the search process was not proper and was required to be rejected. The argument that the loans were advanced from internal accruals was also rejected since the assessee, in the opinion of Ld. TPO, failed to prove nexus between interest free funds available with the assessee vis vis loans advanced to its AE. 2.9.6 The Ld. TPO also came to a conclusion that interest on outbound loan was not to be benchmarked with LIBOR since no company would like to advance loans outsid security as the interest rate in India would be higher than those prevailing in the developed country. Therefore, the rates prevailing in India would be an appropriate benchmark to determine the ALP of loans advanced by Indian entities. Although the assessee placed reliance on certain judicial pronouncements for the submission that LIBOR would be appropriate benchmark rate, however Ld. TPO opined that certain vital aspects remained to be considered in the cited decisions. Rather reliance was Tribunal rendered in Aurionpro Solutions Ltd. v. Addl. CIT [2013] 33 taxmann.com 187 (Mum. that lending should not be below the cost of the borrowings of the assessee would have earned by advancing loans to third parties. 2.9.7 Finally, Ld. TPO proceeded to work out the mean ALP rate on the basis of above factors. The assessee was taken as the tested party and External CUP me benchmarking the aforesaid transaction. External CUP, as per Ld. TPO, could be the Bank Prime Lending Rate [PLR], Corporate Bond Rates or the cost of borrowings in the domestic market. Applying the average spread of 2.89% to assessee's cost of borrowing i.e. 10.14%, cost of domestic borrowings was worked out to be 13.03%. Relying upon safe harbor rules, Prime Lending Rate was worked out to be 10.50%, which was nothing but 3% spread over State Bank of India base rate of 7.5%. The ALP based out to be 15%. Finally, the most conservative rate i.e. 10.5%, out of three rates, was adopted to benchmark the stated transactions. The ALP interest, thus, worked out to be Rs.441.61 Lacs as per computations made in para learned TPO's order. Adjusting the interest of Rs.13.82 Lacs as charged by the assessee from its AE, the net TP adjustment, thus proposed, worked out to be Rs.427.78 Lacs. ITA Nos. 3714 & 3713/MUM/2024 between interest free funds available with the assessee vis vis loans advanced to its AE. 2.9.6 The Ld. TPO also came to a conclusion that interest on outbound loan was not to be benchmarked with LIBOR since no company would like to advance loans outside India without security as the interest rate in India would be higher than those prevailing in the developed country. Therefore, the rates prevailing in India would be an appropriate benchmark to determine the ALP of loans advanced by Indian entities. hough the assessee placed reliance on certain judicial pronouncements for the submission that LIBOR would be appropriate benchmark rate, however Ld. TPO opined that certain vital aspects remained to be considered in the cited decisions. Rather reliance was placed on the decision of Tribunal rendered in Aurionpro Solutions Ltd. v. Addl. CIT [2013] 33 taxmann.com 187 (Mum. - Trib.) for the conclusion that lending should not be below the cost of the borrowings of the assessee and the assessee should earn income which it would have earned by advancing loans to third parties. 2.9.7 Finally, Ld. TPO proceeded to work out the mean ALP rate on the basis of above factors. The assessee was taken as the tested party and External CUP method was used for benchmarking the aforesaid transaction. External CUP, as per Ld. TPO, could be the Bank Prime Lending Rate [PLR], Corporate Bond Rates or the cost of borrowings in the domestic market. Applying the average spread of 2.89% to assessee's st of borrowing i.e. 10.14%, cost of domestic borrowings was worked out to be 13.03%. Relying upon safe harbor rules, Prime Lending Rate was worked out to be 10.50%, which was nothing but 3% spread over State Bank of India base rate of 7.5%. The ALP based on Corporate Bond Rates was worked out to be 15%. Finally, the most conservative rate i.e. 10.5%, out of three rates, was adopted to benchmark the stated transactions. The ALP interest, thus, worked out to be Rs.441.61 Lacs as per computations made in para learned TPO's order. Adjusting the interest of Rs.13.82 Lacs as charged by the assessee from its AE, the net TP adjustment, thus proposed, worked out to be Rs.427.78 Lacs. JSW Energy Ltd 24 ITA Nos. 3714 & 3713/MUM/2024 between interest free funds available with the assessee vis-à- 2.9.6 The Ld. TPO also came to a conclusion that interest on outbound loan was not to be benchmarked with LIBOR since e India without security as the interest rate in India would be higher than those prevailing in the developed country. Therefore, the rates prevailing in India would be an appropriate benchmark to determine the ALP of loans advanced by Indian entities. hough the assessee placed reliance on certain judicial pronouncements for the submission that LIBOR would be appropriate benchmark rate, however Ld. TPO opined that certain vital aspects remained to be considered in the cited placed on the decision of Tribunal rendered in Aurionpro Solutions Ltd. v. Addl. CIT for the conclusion that lending should not be below the cost of the borrowings of and the assessee should earn income which it would have earned by advancing loans to third parties. 2.9.7 Finally, Ld. TPO proceeded to work out the mean ALP rate on the basis of above factors. The assessee was taken as thod was used for benchmarking the aforesaid transaction. External CUP, as per Ld. TPO, could be the Bank Prime Lending Rate [PLR], Corporate Bond Rates or the cost of borrowings in the domestic market. Applying the average spread of 2.89% to assessee's st of borrowing i.e. 10.14%, cost of domestic borrowings was worked out to be 13.03%. Relying upon safe harbor rules, Prime Lending Rate was worked out to be 10.50%, which was nothing but 3% spread over State Bank of India base rate of on Corporate Bond Rates was worked out to be 15%. Finally, the most conservative rate i.e. 10.5%, out of three rates, was adopted to benchmark the stated transactions. The ALP interest, thus, worked out to be Rs.441.61 Lacs as per computations made in para 5.8 of learned TPO's order. Adjusting the interest of Rs.13.82 Lacs as charged by the assessee from its AE, the net TP adjustment, 2.9.8. The aforesaid TP adjustment was incorporated in assessment order date submitted that it did not want to pursue the matter before Ld. Dispute Resolution Panel and expressed its intention to contest the same through normal appellate channel of Ld. CIT(A). Accordingly, the assessment order was passed 17/04/2014 which was subjected to further appeal before Ld. first appellate authority. 2.10 Before Ld. first appellate authority, the assessee, inter alia, drew attention to the fact that similar benchmarking, in assessee's own case for immedi 2012-13, has been done by Ld. TPO himself in its subsequent order dated 29/01/2016 adopting LIBOR rates as the base rates and ruled out the application of Corporate Bond Rate, SBI PLR Rate or Cost of Borrowing rate etc. Relian placed, inter-alia, on the decision of Hon'ble Delhi High Court rendered in CIT v. Cotton Naturals (I) (P.) Ltd. taxmann.com 523/231 Taxman 401 submissions that LIBOR would be appropriate be rate on such outbound loan transactions. The list of other decisions which has also affirmed the said view, as relied upon by assessee during appellate proceedings, has also been tabulated on page nos. 18 Concurring wi assessee's ground by observing as under: I have considered the submissions of the assessee, the views of the AO in the assessment order and the material on record. It is apparent from the above that the end u loan was to acquire the asset company in South Africa and it is clearly evident that the JSWEMML was not able to charge the interest more than LIBOR from JSW South Africa Ltd. (JSWENRSAL), which had a direct impact on the interest repayment capability of JSWEMML to JSWEL of not more than LIBOR. Further, the assessee submitted that with respect to cross border transactions, the interest rate is determined by using foreign currency rate (LIBOR/EURIBOR) and the same has ITA Nos. 3714 & 3713/MUM/2024 2.9.8. The aforesaid TP adjustment was incorporated in assessment order dated 17/04/2014. The assessee submitted that it did not want to pursue the matter before Ld. Dispute Resolution Panel and expressed its intention to contest the same through normal appellate channel of Ld. CIT(A). Accordingly, the assessment order was passed by Ld. AO on 17/04/2014 which was subjected to further appeal before Ld. first appellate authority. 2.10 Before Ld. first appellate authority, the assessee, inter alia, drew attention to the fact that similar benchmarking, in assessee's own case for immediately succeeding year i.e. AY 13, has been done by Ld. TPO himself in its subsequent order dated 29/01/2016 adopting LIBOR rates as the base rates and ruled out the application of Corporate Bond Rate, SBI PLR Rate or Cost of Borrowing rate etc. Relian alia, on the decision of Hon'ble Delhi High Court rendered in CIT v. Cotton Naturals (I) (P.) Ltd. [2015] 55 taxmann.com 523/231 Taxman 401 to support the submissions that LIBOR would be appropriate benchmarking rate on such outbound loan transactions. The list of other decisions which has also affirmed the said view, as relied upon by assessee during appellate proceedings, has also been tabulated on page nos. 18-19 of the appellate order. Concurring with assessee's submissions, Ld. CIT(A) allowed assessee's ground by observing as under: — I have considered the submissions of the assessee, the views of the AO in the assessment order and the material on record. It is apparent from the above that the end use of intra loan was to acquire the asset company in South Africa and it is clearly evident that the JSWEMML was not able to charge the interest more than LIBOR from JSW South Africa Ltd. (JSWENRSAL), which had a direct impact on the interest nt capability of JSWEMML to JSWEL of not more than Further, the assessee submitted that with respect to cross border transactions, the interest rate is determined by using foreign currency rate (LIBOR/EURIBOR) and the same has JSW Energy Ltd 25 ITA Nos. 3714 & 3713/MUM/2024 2.9.8. The aforesaid TP adjustment was incorporated in d 17/04/2014. The assessee submitted that it did not want to pursue the matter before Ld. Dispute Resolution Panel and expressed its intention to contest the same through normal appellate channel of Ld. CIT(A). by Ld. AO on 17/04/2014 which was subjected to further appeal before Ld. 2.10 Before Ld. first appellate authority, the assessee, inter- alia, drew attention to the fact that similar benchmarking, in ately succeeding year i.e. AY 13, has been done by Ld. TPO himself in its subsequent order dated 29/01/2016 adopting LIBOR rates as the base rates and ruled out the application of Corporate Bond Rate, SBI PLR Rate or Cost of Borrowing rate etc. Reliance was alia, on the decision of Hon'ble Delhi High Court [2015] 55 to support the nchmarking rate on such outbound loan transactions. The list of other decisions which has also affirmed the said view, as relied upon by assessee during appellate proceedings, has also been 19 of the appellate order. th assessee's submissions, Ld. CIT(A) allowed I have considered the submissions of the assessee, the views of the AO in the assessment order and the material on record. se of intra-group loan was to acquire the asset company in South Africa and it is clearly evident that the JSWEMML was not able to charge the interest more than LIBOR from JSW South Africa Ltd. (JSWENRSAL), which had a direct impact on the interest nt capability of JSWEMML to JSWEL of not more than Further, the assessee submitted that with respect to cross border transactions, the interest rate is determined by using foreign currency rate (LIBOR/EURIBOR) and the same has been upheld as an appr judicial decisions which have been mentioned above. Thus, considering the above view taken by the appellant and the view taken by the TPO in appellant's own case for later years i.e. AY 12 loan has been benchmarked using the LIBOR Rate and also it is a well settled law that with respect to the cross border transactions, LIBOR has been considered as an appropriate benchmarking and thus, this ground of appeal raised by the assessee is allowed. Aggrieved as aforesaid, the revenue is in further appeal before us.” 8.2 The Tribunal(supra) rejected the benchmarking applying rate, of interest for the reason that in succeeding assessment years the learned TPO himself carried out benchmarking on the basis of LIBOR plus some spread over of basis points. But the Ld. CIT(A) benchmarked the transaction applying only the LIBOR. Though, the Tribunal supported the finding of the Ld. CIT(A) relying on the decision of the Hon’ble Delhi High Court in the case of CIT Vs Cotton Naturals (I) P Ltd(supra), but directed to determine the ALP on the basis of LIBOR plus some spread LIBOR represents interbank rates which are applicable in case of entities having highest cre assessee itself has assigned a rating of Baa1 /BBB+ to its AE, while benchmarking the international transaction. The sai of ‘lower medium investment adopt certain spread over the LIBO Tribunal is reproduced as under: ITA Nos. 3714 & 3713/MUM/2024 been upheld as an appropriate benchmarking rate in variolous judicial decisions which have been mentioned above. Thus, considering the above view taken by the appellant and the view taken by the TPO in appellant's own case for later years i.e. AY 12-13 & AY 13-14, the transaction of interest on loan has been benchmarked using the LIBOR Rate and also it is a well settled law that with respect to the cross border transactions, LIBOR has been considered as an appropriate benchmarking and thus, this ground of appeal raised by the sessee is allowed. Aggrieved as aforesaid, the revenue is in further appeal before The Tribunal(supra) rejected the benchmarking applying of interest for the reason that in succeeding assessment years the learned TPO himself carried out benchmarking on the basis of LIBOR plus some spread over of basis points. But the Ld. CIT(A) benchmarked the transaction applying only the LIBOR. Though, the Tribunal supported the finding of the Ld. CIT(A) relying on the decision of the Hon’ble Delhi High Court in the case of CIT Vs Cotton Naturals (I) P Ltd(supra), but directed to determine the ALP on the basis of LIBOR plus some spread over points, because LIBOR represents interbank rates which are applicable in case of entities having highest credit rating. The Tribunal noted that the assessee itself has assigned a rating of Baa1 /BBB+ to its AE, while benchmarking the international transaction. The sai lower medium investment-grade’ rating, the Tribunal directed to adopt certain spread over the LIBOR. The relevant finding of the ribunal is reproduced as under: JSW Energy Ltd 26 ITA Nos. 3714 & 3713/MUM/2024 opriate benchmarking rate in variolous Thus, considering the above view taken by the appellant and the view taken by the TPO in appellant's own case for later on of interest on loan has been benchmarked using the LIBOR Rate and also it is a well settled law that with respect to the cross border transactions, LIBOR has been considered as an appropriate benchmarking and thus, this ground of appeal raised by the Aggrieved as aforesaid, the revenue is in further appeal before The Tribunal(supra) rejected the benchmarking applying fixed of interest for the reason that in succeeding assessment years the learned TPO himself carried out benchmarking on the basis of LIBOR plus some spread over of basis points. But the Ld. CIT(A) benchmarked the transaction applying only the LIBOR. Though, the Tribunal supported the finding of the Ld. CIT(A) relying on the decision of the Hon’ble Delhi High Court in the case of CIT Vs Cotton Naturals (I) P Ltd(supra), but directed to determine the ALP points, because the LIBOR represents interbank rates which are applicable in case of ribunal noted that the assessee itself has assigned a rating of Baa1 /BBB+ to its AE, while benchmarking the international transaction. The said rating being ribunal directed to R. The relevant finding of the “2.14 Now the only question that survives for our consideration is the dete the facts and circumstances of the case. The Ld. first appellate authority has confirmed the determination of ALP on the basis of LIBOR only without any spread rate, in our opinion, represent in applicable in case of entities having highest credit rating. The same is also fortified by the fact that the assessee, itself, has assigned a rating of Baa1/BBB+ to its AE while benchmarking the transactions. The said rating repres investment grade rating. Therefore, the determination of ALP merely on the basis of LIBOR, in our considered opinion, would not be justified. During the course of proceedings before Ld. TPO, the assessee had arrived at mean spread of 243 basis points over LIBOR which is evident from page nos. 5 Ld. TPO's order. The computation of the same has nowhere been disputed by the revenue. Applying LIBOR + spread ALP interest has been worked out to be Rs.1,64,13,241/ are of the c computed by the assessee was undisputed, quite fair and reasonable and the same was to be accepted. Accordingly, we confirm the ALP rate of LIBOR + 2.4383% as computed by the assessee in the alternative submission The impugned order stand modified to that extent. The Ld. TPO/Ld. AO is directed to recompute the income of the assessee in terms of our direction. Accordingly, Ground Nos. 1 & 2 stands dismissed. Ground No.3 stand allowed. Ground No. 4 stands partly allowed. 8.3 Based on the above finding for assessment year 2011 Tribunal in assessment year 2012 of interest i.e. LIBOR with certain spread over of basis points as against the fixed rate of int relevant finding of the reproduced as under: ITA Nos. 3714 & 3713/MUM/2024 2.14 Now the only question that survives for our consideration is the determination of ALP rate keeping in view the facts and circumstances of the case. The Ld. first appellate authority has confirmed the determination of ALP on the basis of LIBOR only without any spread-over. However, the said rate, in our opinion, represent inter-bank rates which are applicable in case of entities having highest credit rating. The same is also fortified by the fact that the assessee, itself, has assigned a rating of Baa1/BBB+ to its AE while benchmarking the transactions. The said rating represents 'lower medium investment grade rating. Therefore, the determination of ALP merely on the basis of LIBOR, in our considered opinion, would not be justified. During the course of proceedings before Ld. TPO, the assessee had arrived at mean spread of 243 basis points over LIBOR which is evident from page nos. 5 Ld. TPO's order. The computation of the same has nowhere been disputed by the revenue. Applying LIBOR + spread ALP interest has been worked out to be Rs.1,64,13,241/ are of the considered opinion that this spread over as computed by the assessee was undisputed, quite fair and reasonable and the same was to be accepted. Accordingly, we confirm the ALP rate of LIBOR + 2.4383% as computed by the assessee in the alternative submissions made before Ld. TPO. The impugned order stand modified to that extent. The Ld. TPO/Ld. AO is directed to recompute the income of the assessee in terms of our direction. Accordingly, Ground Nos. 1 & 2 stands dismissed. Ground No.3 stand allowed. Ground . 4 stands partly allowed.” ased on the above finding for assessment year 2011 ribunal in assessment year 2012-13 also accepted the floating rate of interest i.e. LIBOR with certain spread over of basis points as against the fixed rate of interest adopted by the learned TPO. The relevant finding of the Tribunal for assessment year 2012 reproduced as under: JSW Energy Ltd 27 ITA Nos. 3714 & 3713/MUM/2024 2.14 Now the only question that survives for our rmination of ALP rate keeping in view the facts and circumstances of the case. The Ld. first appellate authority has confirmed the determination of ALP on the basis over. However, the said bank rates which are applicable in case of entities having highest credit rating. The same is also fortified by the fact that the assessee, itself, has assigned a rating of Baa1/BBB+ to its AE while benchmarking ents 'lower medium investment grade rating. Therefore, the determination of ALP merely on the basis of LIBOR, in our considered opinion, would not be justified. During the course of proceedings before Ld. TPO, the assessee had arrived at mean spread of 243.83 basis points over LIBOR which is evident from page nos. 5-6 of Ld. TPO's order. The computation of the same has nowhere been disputed by the revenue. Applying LIBOR + spread-over, ALP interest has been worked out to be Rs.1,64,13,241/-. We onsidered opinion that this spread over as computed by the assessee was undisputed, quite fair and reasonable and the same was to be accepted. Accordingly, we confirm the ALP rate of LIBOR + 2.4383% as computed by the s made before Ld. TPO. The impugned order stand modified to that extent. The Ld. TPO/Ld. AO is directed to recompute the income of the assessee in terms of our direction. Accordingly, Ground Nos. 1 & 2 stands dismissed. Ground No.3 stand allowed. Ground ased on the above finding for assessment year 2011-12, the 13 also accepted the floating rate of interest i.e. LIBOR with certain spread over of basis points as erest adopted by the learned TPO. The ribunal for assessment year 2012-13 is “3.7.4 Upon careful consideration, we find that the facts of this year are pari- transactions arise out of same contractual terms and conditions. We also find force in the submissions that learned TPO proceeded on the basis of wrong parameters as pointed out by the assessee before lower authorities, completely disregarding the contractual te the contractual terms agreed to between the parties could not be rewritten or obliterated and reclassification or substitution of the transaction was not permitted. Nothing on record rebut the facts that as per the terms of had agreed to pay the lender interest at rates equal to 3 months' LIBOR prevailing on the date of each interest payment up to 31/03/2012. The said fact has also been noted by Ld. DRP at para 2.29 of its directions. The only alle the original agreement dated 26/07/2010 was not produced before Ld. DRP. However, the same would not make much difference since we have already confirmed the application of floating rates of interest for AY 2011 we have upheld the working made by assessee, taking the same view, we upheld the workings made by the assessee during proceedings before learned TPO. Accordingly, we direct lower authorities to accept alternative TP adjustment of Rs.491.07 Lacs as worked out b proceedings before Ld. TPO based on LIBOR + spread of 243.88 bps/163.8 bps for AYs 2011 respectively. The interest already charged by the assessee would be adjusted from the same and the net amount shall be the amount of No.1 stand partly allowed. 8.4 Thus, Tribunal the interest in assessment year 2012 was no change in the contractual terms to assessment year 2011 noted the terms of the contract that borrower had agreed to pay the ITA Nos. 3714 & 3713/MUM/2024 3.7.4 Upon careful consideration, we find that the facts of this year are pari-materia with the facts of AY 2011-12. The loan ctions arise out of same contractual terms and conditions. We also find force in the submissions that learned TPO proceeded on the basis of wrong parameters as pointed out by the assessee before lower authorities, completely disregarding the contractual terms. It is settled position that the contractual terms agreed to between the parties could not be rewritten or obliterated and reclassification or substitution of the transaction was not permitted. Nothing on record rebut the facts that as per the terms of the contract, the borrower had agreed to pay the lender interest at rates equal to 3 months' LIBOR prevailing on the date of each interest payment up to 31/03/2012. The said fact has also been noted by Ld. DRP at para 2.29 of its directions. The only allegation is that the original agreement dated 26/07/2010 was not produced before Ld. DRP. However, the same would not make much difference since we have already confirmed the application of floating rates of interest for AY 2011-12. Since in AY 2011 ave upheld the working made by assessee, taking the same view, we upheld the workings made by the assessee during proceedings before learned TPO. Accordingly, we direct lower authorities to accept alternative TP adjustment of Rs.491.07 Lacs as worked out by the assessee during proceedings before Ld. TPO based on LIBOR + spread of 243.88 bps/163.8 bps for AYs 2011-12 & 2012 respectively. The interest already charged by the assessee would be adjusted from the same and the net amount shall be the amount of TP adjustment for the impugned AY. Ground No.1 stand partly allowed.” (supra) has mainly applied the floating rate of the interest in assessment year 2012-13 for the reason that there was no change in the contractual terms in AY 2012- to assessment year 2011-12. The Tribunal(supra) has noted the terms of the contract that borrower had agreed to pay the JSW Energy Ltd 28 ITA Nos. 3714 & 3713/MUM/2024 3.7.4 Upon careful consideration, we find that the facts of this 12. The loan ctions arise out of same contractual terms and conditions. We also find force in the submissions that learned TPO proceeded on the basis of wrong parameters as pointed out by the assessee before lower authorities, completely rms. It is settled position that the contractual terms agreed to between the parties could not be rewritten or obliterated and reclassification or substitution of the transaction was not permitted. Nothing on record rebut the contract, the borrower had agreed to pay the lender interest at rates equal to 3 months' LIBOR prevailing on the date of each interest payment up to 31/03/2012. The said fact has also been noted by Ld. gation is that the original agreement dated 26/07/2010 was not produced before Ld. DRP. However, the same would not make much difference since we have already confirmed the application of 12. Since in AY 2011-12, ave upheld the working made by assessee, taking the same view, we upheld the workings made by the assessee during proceedings before learned TPO. Accordingly, we direct lower authorities to accept alternative TP adjustment of y the assessee during proceedings before Ld. TPO based on LIBOR + spread of 12 & 2012-13 respectively. The interest already charged by the assessee would be adjusted from the same and the net amount shall be TP adjustment for the impugned AY. Ground the floating rate of 13 for the reason that there -13 as compared has particularly noted the terms of the contract that borrower had agreed to pay the lender interest rates equal to 3 months LIBOR prevailing on the date of the interest payment of two 31/03/2012. 8.5 Before us, the Ld. DR however submitted that facts and circumstances in the year under consideration has under gone substantial change as compared to the assessment year 2011 and 2012-13. We find that in the beginning, the assessee and its associated enterprises agreed for a quarterly and six monthly interest payments with limited tenure of loan. Thereafter, assessee has amended agreement at least 10 installment of payment of the interest from 31.03.2019. The ld DR submitted that t interest i.e. LIBOR is case of assessee in earlier years, where to three years at the time of entering the loan agreement for time. However in the current assessment year under consideration, the loan amount has loan has got substantially changed and first installment has been made payable only on 31.03.2019 i.e. almost nine first tranche of the loan agreement dated 26.07.2010. Therefore, all practical purposes, the loan extended to the associated enterprises is in the nature of long term loan 8.6 Therefore, the facts and circumstances of the year under consideration being altered as compared to the facts and circumstances in asses ITA Nos. 3714 & 3713/MUM/2024 lender interest rates equal to 3 months LIBOR prevailing on the date of the interest payment of two 31/03/2012. Before us, the Ld. DR however submitted that facts and circumstances in the year under consideration has under gone substantial change as compared to the assessment year 2011 13. We find that in the beginning, the assessee and its ated enterprises agreed for a quarterly and six monthly with limited tenure of loan. Thereafter, assessee as amended agreement at least 10 times and extended the first installment of payment of the interest from six months The ld DR submitted that the floating rate of the charged in case of loan of small case of assessee in earlier years, where parties agreed for tenure up at the time of entering the loan agreement for time. However in the current assessment year under consideration, amount has consistently increased and the tenure of the loan has got substantially changed and first installment has been made payable only on 31.03.2019 i.e. almost nine first tranche of the loan agreement dated 26.07.2010. Therefore, all , the loan extended to the associated enterprises is in the nature of long term loan. Therefore, the facts and circumstances of the year under ideration being altered as compared to the facts and circumstances in assessment year 2011-12 and 2012 JSW Energy Ltd 29 ITA Nos. 3714 & 3713/MUM/2024 lender interest rates equal to 3 months LIBOR prevailing on the Before us, the Ld. DR however submitted that facts and circumstances in the year under consideration has under gone substantial change as compared to the assessment year 2011-12 13. We find that in the beginning, the assessee and its ated enterprises agreed for a quarterly and six monthly with limited tenure of loan. Thereafter, assessee times and extended the first six months to floating rate of the charged in case of loan of small tenure like the parties agreed for tenure up at the time of entering the loan agreement for the first time. However in the current assessment year under consideration, the tenure of the loan has got substantially changed and first installment has been made payable only on 31.03.2019 i.e. almost nine year after the first tranche of the loan agreement dated 26.07.2010. Therefore, all , the loan extended to the associated enterprises Therefore, the facts and circumstances of the year under ideration being altered as compared to the facts and 12 and 2012-13, the ratio of the decision of the Tribunal (supra) is not applicable over the facts of the instant case. Accordingly, we reject the of the assessee. 8.7 The next objection of the assessee is considering the Mauritius entity as the country of the loan borrower, the Ld. TPO has held that loan was availed by the AE in Mauritus even though it was used in South Africa. We are of the opinion correctly considered the Mauritius entity and the country of the borrower as Mauritius as the loan has been availed as part of the agreement between the assessee and the Mauritius entity. Accordingly, we reject the contention of the a 8.8 Next contention of the assessee fixed rate of the interest by the Ld. TPO base applying ‘Swap M fixed rate of the interest. In our opinion, the loans granted by the assessee to its associated enterprises might be temporary term period loan in the beginning amendments from time to time way of conduct of the parties, t period loans in nature in repayment of installments has made the nature of high risk loans assessee’s loan transaction LIBOR rate i.e. floating rate of the ITA Nos. 3714 & 3713/MUM/2024 the decision of the Tribunal (supra) is not applicable over the facts of the instant case. Accordingly, we reject the The next objection of the assessee is considering the Mauritius entity as the country of the loan borrower, the Ld. TPO has held that loan was availed by the AE in Mauritus even though it was used in South Africa. We are of the opinion that the Ld. TPO has correctly considered the Mauritius entity and the country of the borrower as Mauritius as the loan has been availed as part of the agreement between the assessee and the Mauritius entity. Accordingly, we reject the contention of the assessee in this rega contention of the assessee is against application of the fixed rate of the interest by the Ld. TPO, using ‘Bloomberg Swap Manager tool’, converting the floating rate into fixed rate of the interest. In our opinion, the loans granted by the assessee to its associated enterprises might be temporary loan in the beginning years, but in view of subsequent from time to time and adding of the further loans, way of conduct of the parties, the loans have become in nature. Further, nonpayment of the interest in repayment of installments has made the loan loans. In such circumstances, comparability of loan transactions under CUP method LIBOR rate i.e. floating rate of the interest, may not be JSW Energy Ltd 30 ITA Nos. 3714 & 3713/MUM/2024 the decision of the Tribunal (supra) is not applicable over the facts of the instant case. Accordingly, we reject the first contention The next objection of the assessee is considering the Mauritius entity as the country of the loan borrower, the Ld. TPO has held that loan was availed by the AE in Mauritus even though it was that the Ld. TPO has correctly considered the Mauritius entity and the country of the borrower as Mauritius as the loan has been availed as part of the agreement between the assessee and the Mauritius entity. ssessee in this rega against application of the Bloomberg’ data the floating rate into fixed rate of the interest. In our opinion, the loans granted by the assessee to its associated enterprises might be temporary or short but in view of subsequent nd adding of the further loans, ,by become long term of the interest or delay loans being in the comparability of under CUP method invoking only not be correct as the LIBOR interest rate short term nature, where case, the assessee itself has mentioned credit score of the Mauritius AE as below Baa1/BBB grade’. The assessee itself has also accepted the change in facts and circumstances as compared to the assessment year 2011 itself has included 300 basis points to the LIBOR additional spread over points to compensate high risk nature of the loan. 8.9 But, no instance of any loan transaction between two independent parties where floating rate of interest has been applied was brought to our notice question is whether the assessee has relied transaction from database of long term n floating rate with appropriate an independent transaction has also not compared transactions of assessee with any transaction of long term loan between relying on CUP method. The methods prescribed under the law for determination of arms length price and can’t adopt arbitrary method of converting floating rate of interest into fixed rate of interest. 8.10 In view of above back to the file of the ld AO/TPO for benchmarking of the loan ITA Nos. 3714 & 3713/MUM/2024 interest rate is applied in interbank loan transactions where party’s credit score is very high. case, the assessee itself has mentioned credit score of the Mauritius AE as below Baa1/BBB+, which is a ‘lower medium investment The assessee itself has also accepted the change in facts and stances as compared to the assessment year 2011 itself has included 300 basis points to the LIBOR along with spread over points to compensate high risk nature of the no instance of any loan transaction of long term nature between two independent parties where floating rate of interest has was brought to our notice by the assessee is whether the assessee has relied on any of the CUP database of long term nature appropriate spread has been applied by parties in transaction. The answer is in negative. has also not compared transactions of assessee with any transaction of long term loan between two independent relying on CUP method. The ld AO/TPO is bound to follow prescribed under the law for determination of arms length price and can’t adopt arbitrary method of converting floating rate of interest into fixed rate of interest. n view of above, we feel it appropriate to restore the matter back to the file of the ld AO/TPO for benchmarking of the loan JSW Energy Ltd 31 ITA Nos. 3714 & 3713/MUM/2024 loan transactions of credit score is very high. In the case, the assessee itself has mentioned credit score of the Mauritius which is a ‘lower medium investment The assessee itself has also accepted the change in facts and stances as compared to the assessment year 2011-12 and along with certain spread over points to compensate high risk nature of the of long term nature between two independent parties where floating rate of interest has by the assessee. Thus, the on any of the CUP ature of loan where spread has been applied by parties in The answer is in negative. The ld TPO has also not compared transactions of assessee with any ndependent parties AO/TPO is bound to follow the prescribed under the law for determination of arms length price and can’t adopt arbitrary method of converting floating rate of feel it appropriate to restore the matter back to the file of the ld AO/TPO for benchmarking of the loan transaction of the assessee using appropriate method provided under the law treating the transaction loan transaction with appropriate risk involved. ground No. 1 of the appeal is 9. The ground No. 2 assessee relates to disallowance of Rs.41,81,59 the Act. The brief facts qua the issue in dispute are that the Assessing Officer noted investment of Rs.5416.80 crores as on 31.03.2020 in exempt income yielding assets and dividend income of Rs.28,71,57,235/- which was claimed as exempt. But against the said exempt income earned the assessee made disallowance of Rs.4,43,134/ account of expenses incurred for carrying investment. The Assessing Officer however the suo-motu disallowance by the assessee and therefore, he rejected the suo-mot Rule 8D of Income-tax Rules, 1962( in short the ‘Rules’), disallowance of Rs.41,86,03,0 disallowance of Rs.4,43,134/ Rs.4,181,59,866/-. Before the Ld. DRP, t disallowance should be restricted to the extent of exempted income. However, the Ld. DRP rejected the introduced to section 14A amendment was treated by the Ld. DRP as clarific ITA Nos. 3714 & 3713/MUM/2024 transaction of the assessee using appropriate method provided ng the transaction of the assessee loan transaction with appropriate risk involved. Accordingly of the appeal is allowed for statistical puposes The ground No. 2 and additional ground of the appeal of the assessee relates to disallowance of Rs.41,81,59,866/ the Act. The brief facts qua the issue in dispute are that the Assessing Officer noted investment of Rs.5416.80 crores as on 31.03.2020 in exempt income yielding assets and dividend income - earned during the year under which was claimed as exempt. But against the said exempt income earned the assessee made disallowance of Rs.4,43,134/ account of expenses incurred for carrying out the activity of the investment. The Assessing Officer however was not sa disallowance by the assessee and therefore, he motu disallowance by the assessee and invoking tax Rules, 1962( in short the ‘Rules’), disallowance of Rs.41,86,03,000/- and after reducing the disallowance of Rs.4,43,134/-, he made addition of Before the Ld. DRP, the assessee submitted that disallowance should be restricted to the extent of exempted income. However, the Ld. DRP rejected the contention in view of amendment to section 14A from financial year 2001. The said was treated by the Ld. DRP as clarificato JSW Energy Ltd 32 ITA Nos. 3714 & 3713/MUM/2024 transaction of the assessee using appropriate method provided of the assessee as long term Accordingly, we the allowed for statistical puposes. of the appeal of the ,866/- u/s 14A of the Act. The brief facts qua the issue in dispute are that the Assessing Officer noted investment of Rs.5416.80 crores as on 31.03.2020 in exempt income yielding assets and dividend income earned during the year under consideration, which was claimed as exempt. But against the said exempt income earned the assessee made disallowance of Rs.4,43,134/- on the activity of the was not satisfied with disallowance by the assessee and therefore, he ance by the assessee and invoking tax Rules, 1962( in short the ‘Rules’),computed and after reducing the suo-motu he made addition of he assessee submitted that disallowance should be restricted to the extent of exempted income. contention in view of amendment year 2001. The said atory amendment necessitated due to wrong use and mis the Ld. DRP upheld the action o 9.1 Before us, the Ld. counsel for the assessee assailed the finding on the issue in dispute primarily on the ground that no dissatisfaction was recorded by the Assessing Officer qua motu disallowance computed based referred to the para 4.10 and 4.11 of the order and submitted that Assessing Officer has financials of the company and the suo-motu computation of disallowance by the asse ready reference, relevant para of the reproduced as under: “4.10 Further, it is also pertinent to mention that a company cannot make such huge investment without existence of a prudent management. Investment decisions They require substantial market research, day market trends and decisions with regard to acquisition, retention and sale of shares at the most appropriate time. It is therefore, not correct to say that investments are nominal expenditure. It is difficult to accept that a company can make investment without incurring any expenses whatsoever including management or decisions are generally taken in the mee Directors for which administrative expenses are incurred. The term \"expenditure\" occurring in section 14A would take in its sweep not only direct expenditure but also all forms of expenditure regardless of whether they are fixed, vari managerial or financial. Assessee failed to consider all such expenses while calculating the disallowances made under section 14A of the Act. 4.11 On perusal of the Financial of the assessee company, it is noted that Assessee has borrowed funds of Rs. 1333.08 crore and also has incurred interest expenses & other borrowing cost on the ITA Nos. 3714 & 3713/MUM/2024 wrong use and misinterpretation the Ld. DRP upheld the action of the Ld. AO. Before us, the Ld. counsel for the assessee assailed the finding on the issue in dispute primarily on the ground that no dissatisfaction was recorded by the Assessing Officer qua disallowance computed based by the assessee. referred to the para 4.10 and 4.11 of the impugned assessment and submitted that Assessing Officer has financials of the company and duly expressed his dissatisfaction on computation of disallowance by the asse relevant para of the assessment order reproduced as under: 4.10 Further, it is also pertinent to mention that a company cannot make such huge investment without existence of a prudent management. Investment decisions are very complex in nature. They require substantial market research, day-to-day analysis of market trends and decisions with regard to acquisition, retention and sale of shares at the most appropriate time. It is therefore, not correct to say that investments are made without incurring no or nominal expenditure. It is difficult to accept that a company can make investment without incurring any expenses whatsoever including management or administrative expenses as investment decisions are generally taken in the meetings of the Board of Directors for which administrative expenses are incurred. The term \"expenditure\" occurring in section 14A would take in its sweep not only direct expenditure but also all forms of expenditure regardless of whether they are fixed, variable, direct, indirect, administrative, managerial or financial. Assessee failed to consider all such expenses while calculating the disallowances made under section 14A of the Act. 4.11 On perusal of the Financial of the assessee company, it is Assessee has borrowed funds of Rs. 1333.08 crore and also has incurred interest expenses & other borrowing cost on the JSW Energy Ltd 33 ITA Nos. 3714 & 3713/MUM/2024 interpretations. Accordingly, Before us, the Ld. counsel for the assessee assailed the finding on the issue in dispute primarily on the ground that no dissatisfaction was recorded by the Assessing Officer qua the suo- the assessee. But the Ld. DR impugned assessment and submitted that Assessing Officer has referred to issatisfaction on computation of disallowance by the assessee. For assessment order is 4.10 Further, it is also pertinent to mention that a company cannot make such huge investment without existence of a prudent complex in nature. day analysis of market trends and decisions with regard to acquisition, retention and sale of shares at the most appropriate time. It is therefore, not made without incurring no or nominal expenditure. It is difficult to accept that a company can make investment without incurring any expenses whatsoever administrative expenses as investment tings of the Board of Directors for which administrative expenses are incurred. The term \"expenditure\" occurring in section 14A would take in its sweep not only direct expenditure but also all forms of expenditure regardless administrative, managerial or financial. Assessee failed to consider all such expenses while calculating the disallowances made under section 4.11 On perusal of the Financial of the assessee company, it is Assessee has borrowed funds of Rs. 1333.08 crore and also has incurred interest expenses & other borrowing cost on the same amounting to Rs. 321.95 crore Ae the assessee has not provided any nexus of source between borrowed funds and direct or indirect expenses, therefore, it can be considered that assessee has invested the funds out from common pool only. Hence, the weighted average cost of funds i.e. interest expense is also related to the exempt income yielding investments. But assessee failed to consid the interest expenses while calculating the disallowances made under section 14A of the Act. 4.12 In view of the aforesaid discussion and having regard to the accounts of the assesses of the previous year relevant to A.Y. 2020 21, the undersigned is not for not offering disallowance accordance to section 14A of the Act r.w. Rule 8D of the Rules. For better clarity, Rule 8D is reproduced as under: 8D. (1) Where the Assessing Officer, having regard to the accounts of the assessee of a previous year, is not satisfied with (a) the correctness of the claim of expenditure made by the assessee; or (b) the claim made by the assessee that no expenditure has been incurred, in relation to income which does not form part of under the Act for such previous year, he shall determine the amount of expenditure in relation to such income in accordance with the provisions of sub I (2) The expenditure in relation to income which does not form part of the total income shall be the aggregate of following amounts, namely:— (i) the amount of expenditure directly relating to income which does not form part of total (ii) an amount equal to one per cent of the annual average of the monthly (iaverage of of investment. income from which does not or shall not form part of total income : Provided that the amount referred to in clause (i) and clause (ii) shall not exceed the total expenditure claimed by the assess In view of the above, the amount of expenditure disallowable u/s. 14A of the Act in relation to such income is hereby determined in accordance with the provisions of Rule 8D of the Income Tax Rules, ITA Nos. 3714 & 3713/MUM/2024 same amounting to Rs. 321.95 crore Ae the assessee has not provided any nexus of source between borrowed funds and direct or penses, therefore, it can be considered that assessee has invested the funds out from common pool only. Hence, the weighted average cost of funds i.e. interest expense is also related to the exempt income yielding investments. But assessee failed to consid the interest expenses while calculating the disallowances made under section 14A of the Act. 4.12 In view of the aforesaid discussion and having regard to the accounts of the assesses of the previous year relevant to A.Y. 2020 21, the undersigned is not satisfied with the action of the assessee for not offering disallowance accordance to section 14A of the Act r.w. Rule 8D of the Rules. For better clarity, Rule 8D is reproduced 8D. (1) Where the Assessing Officer, having regard to the accounts of the assessee of a previous year, is not satisfied with (a) the correctness of the claim of expenditure made by the (b) the claim made by the assessee that no expenditure has been in relation to income which does not form part of the total income under the Act for such previous year, he shall determine the amount of expenditure in relation to such income in accordance with the provisions of sub-rule (2). I (2) The expenditure in relation to income which does not form part tal income shall be the aggregate of following amounts, the amount of expenditure directly relating to income which does not form part of total income; and an amount equal to one per cent of the annual average of the monthly (iaverage of the opening and closing balances of the value of investment. income from which does not or shall not form part of Provided that the amount referred to in clause (i) and clause (ii) shall not exceed the total expenditure claimed by the assess In view of the above, the amount of expenditure disallowable u/s. 14A of the Act in relation to such income is hereby determined in accordance with the provisions of Rule 8D of the Income Tax Rules, JSW Energy Ltd 34 ITA Nos. 3714 & 3713/MUM/2024 same amounting to Rs. 321.95 crore Ae the assessee has not provided any nexus of source between borrowed funds and direct or penses, therefore, it can be considered that assessee has invested the funds out from common pool only. Hence, the weighted average cost of funds i.e. interest expense is also related to the exempt income yielding investments. But assessee failed to consider the interest expenses while calculating the disallowances made 4.12 In view of the aforesaid discussion and having regard to the accounts of the assesses of the previous year relevant to A.Y. 2020- satisfied with the action of the assessee for not offering disallowance accordance to section 14A of the Act r.w. Rule 8D of the Rules. For better clarity, Rule 8D is reproduced 8D. (1) Where the Assessing Officer, having regard to the accounts of the assessee of a previous year, is not satisfied with— (a) the correctness of the claim of expenditure made by the (b) the claim made by the assessee that no expenditure has been the total income under the Act for such previous year, he shall determine the amount of expenditure in relation to such income in accordance with the I (2) The expenditure in relation to income which does not form part tal income shall be the aggregate of following amounts, the amount of expenditure directly relating to income which does an amount equal to one per cent of the annual average of the the opening and closing balances of the value of investment. income from which does not or shall not form part of Provided that the amount referred to in clause (i) and clause (ii) shall not exceed the total expenditure claimed by the assessee.] In view of the above, the amount of expenditure disallowable u/s. 14A of the Act in relation to such income is hereby determined in accordance with the provisions of Rule 8D of the Income Tax Rules, 1962. Further, in absence of the average of monthly provided by the assessee, when specifically asked in the show cause notice, the details of exempt yielding investment has been prepared on the basis of submission of the assessee and financial statements, which Sr. No. Nature of Investment 1 Unquoted Investment 2 Unquoted Investment 3 Unquoted Investment 4 Unquoted Investment 5 Unquoted Investment 6 Unquoted Investment 7 Unquoted Investment 8 Unquoted Investment 10 Unquoted Investment 11 Unquoted Investment 12 Unquoted Investment 13 Unquoted Investment 14 Unquoted Investment The amount of expenditure relation to such income is hereby determined in provisions of Rule 8D of the Income Tax Rules, 1962. ITA Nos. 3714 & 3713/MUM/2024 1962. Further, in absence of the average of monthly provided by the assessee, when specifically asked in the show cause notice, the details of exempt yielding investment has been prepared on the basis of submission of the assessee and financial statements, which are as under: Figure in crore Nature of Investment Name of the Company As on 31st March 2020 Unquoted Investment JSW Energy (Barmer) Ltd (Formerly known as Raj Westpower Ltd) 1726.05 Unquoted Investment Jaigad Power Transco Ltd 101.75 Unquoted Investment JSW Energy (Raigarh) Ltd 115.16 Unquoted Investment JSW Power Trading Co. Ltd (formerly known as JSW Green Energy Ltd) 70.05 Unquoted Investment JSW Energy (Kutehr) Ltd 0 Investment JSW Hydro Energy Ltd (Formerly known as Himachal Baspa Power Company Ltd) 2046.01 Unquoted Investment JSW Solar Ltd 0.12 Unquoted Investment JSW Electric Vehicles Pvt Ltd 0.26 Unquoted Investment Toshiba JSW Power systems Pvt Ltd 100.23 Unquoted Investment Power Exchange India Ltd 1.25 Unquoted Investment MJSJ Coal Ltd 6.52 Unquoted Investment JSW Power Trading Co. Lt 2.87 Unquoted Investment JSW Realty & Infrastructure Pvt Ltd 2.54 Total 4172.81 The amount of expenditure disallowance u/s 14A of the ch income is hereby determined in accordance with the provisions of Rule 8D of the Income Tax Rules, 1962. JSW Energy Ltd 35 ITA Nos. 3714 & 3713/MUM/2024 1962. Further, in absence of the average of monthly investments provided by the assessee, when specifically asked in the show cause notice, the details of exempt yielding investment has been prepared on the basis of submission of the assessee and financial Figure in crore As on 31st March 2020 As on 31st March 2019 1726.05 101.75 115.16 70.05 2046.01 0.01 0.01 100.23 1.25 6.52 2.24 2.29 4199.26 disallowance u/s 14A of the Act in accordance with the Particulars Any amount of expenditure which is directly relating to exempt income Amount equal to 1% of annual average of opening and closing balances of value of investment whose income is or shall be exempt as discussed above Month Opening yearly value 4172.81 cr. Total monthly average 14A disallowance Total amount disallowed under section 14A r.w. Rule 8D 9.2 Accordingly, this contention of the Ld. counsel for the assessee for relying on the decision of the Hon’ble Bombay High Court in its own case (ITA No. 669 of 2018) cannot be the instant year distinguishable. 9.3 The next argument advanced by the Ld. counsel for the assessee is that only those investm income need to be considered for the purpose of rule 8D(2) of the Rules. decision of the Special Bench in the case of Ltd. (82 taxmann.com 415) whether investments that did not yield exempt income should be considered while computing disallowance under 14A of the Income Tax Act. decision of Hon’ble Delhi High (ITA No. 486/2014 and 299/2014), ITA Nos. 3714 & 3713/MUM/2024 Amount (Rs.) Any amount of expenditure which is directly relating to exempt NIL Amount equal to 1% of annual average of opening and closing value of investment whose income is or shall be exempt 41,86,03,000 Closing yearly value Average 4199.26 cr. 4186.03 cr. Total monthly average Not available 14A disallowance 41,86,03,000 Total amount disallowed under section 14A r.w. Rule 8D 41,86,03,000 Accordingly, this contention of the Ld. counsel for the assessee relying on the decision of the Hon’ble Bombay High Court in its own case (ITA No. 669 of 2018) cannot be considered being facts of distinguishable. The next argument advanced by the Ld. counsel for the assessee is that only those investment which has yielded exempt income need to be considered for the purpose of disallowance under (2) of the Rules. In support of Ld. counsel relied on the decision of the Special Bench in the case of Vireet Investment Pvt. Ltd. (82 taxmann.com 415). In said case the core issue was whether investments that did not yield exempt income should be considered while computing disallowance under Rule 8D of Section of the Income Tax Act. The Special Bench referred to the Delhi High Court in CIT vs. Holcim India (P) Ltd (ITA No. 486/2014 and 299/2014), wherein it is ruled that JSW Energy Ltd 36 ITA Nos. 3714 & 3713/MUM/2024 Amount (Rs.) NIL 41,86,03,000 41,86,03,000 Accordingly, this contention of the Ld. counsel for the assessee relying on the decision of the Hon’ble Bombay High Court in its considered being facts of The next argument advanced by the Ld. counsel for the ent which has yielded exempt disallowance under In support of Ld. counsel relied on the Vireet Investment Pvt. he core issue was whether investments that did not yield exempt income should be Rule 8D of Section The Special Bench referred to the CIT vs. Holcim India (P) Ltd ruled that if no exempt income (such as dividend) is earned in a financial year, Section 14A cannot be invoked acknowledged conflicting view decision dated 5th August, 2009 relied on CIT v. Rajendra Prasad Moody hold that even if no income was earned, disallowed. However, the Tribunal followed the Court's ruling in Holcim India (P) Ltd judicial hierarchy, making it binding within its jurisdiction. Hon’ble Supreme Court's dec distinguished, as it related to \"Income from Other Sources\") and not different language and intent. High Court rulings (Punjab supported the position that be made if no exempt income is earned Assessing Officer’s stance that investments could have yielded exempt income was rejected guaranteed and depends on company decisions. Tribunal reaffirmed that investment purposes cannot be disallowed under Section 14A unless actual exempt income is generated Tribunal accordingly, investments that did not yield exempt income should not be ITA Nos. 3714 & 3713/MUM/2024 exempt income (such as dividend) is earned in a financial year, Section 14A cannot be invoked. The Special Bench of acknowledged conflicting views, particularly the August, 2009 in Cheminvest Ltd. CIT v. Rajendra Prasad Moody [1978] 115 ITR 519 (SC) hold that even if no income was earned, expenses could still be However, the Tribunal followed the Hon’ble Holcim India (P) Ltd (supra), as per the , making it binding within its jurisdiction. Supreme Court's decision in Rajendra Prasad Moody distinguished, as it related to Section 57(iii) (deductions under \"Income from Other Sources\") and not Section 14A different language and intent. The Special Bench noted that High Court rulings (Punjab & Haryana, Gujarat, and Allahabad) supported the position that disallowance under Section 14A cannot be made if no exempt income is earned and accordingly t Assessing Officer’s stance that investments could have yielded exempt income was rejected because dividend income is not guaranteed and depends on company decisions. The Tribunal reaffirmed that business expenditure incurred for investment purposes cannot be disallowed under Section 14A unless actual exempt income is generated. The Special Bench of accordingly, ruled in favor of the assessee, stating that investments that did not yield exempt income should not be JSW Energy Ltd 37 ITA Nos. 3714 & 3713/MUM/2024 exempt income (such as dividend) is earned in a financial year, Special Bench of Tribunal s, particularly the Special Bench Cheminvest Ltd., which had [1978] 115 ITR 519 (SC) to expenses could still be Hon’ble Delhi High as per the principle of , making it binding within its jurisdiction. The ision in Rajendra Prasad Moody was (deductions under Section 14A, which has l Bench noted that Several & Haryana, Gujarat, and Allahabad) disallowance under Section 14A cannot nd accordingly the Assessing Officer’s stance that investments could have yielded dividend income is not The Special Bench business expenditure incurred for investment purposes cannot be disallowed under Section 14A Special Bench of ruled in favor of the assessee, stating that investments that did not yield exempt income should not be considered for disallowance under Rule 8D 1962. 10. We have heard rival submission of the pa this argument, the Ld. DR submitted that this argument is contrary to the letter and spread of law 2014 of the CBDT and more recently by way of amendment brought in Finance Act, 2022 which was inse section 14A. The Ld. DR submitted that said explanation was inserted to clarify that the provisions of section 14A have always applied to the entire investment portfolio not merely to those investments that have yielded exempt in Ld. DR referred to the decision of the of ACIT v. Williamson Financial Services Ltd. reported in 140 taxmann.com 164 and held the amendme 2022 is having retrospective effect. But High Court in the case of has held that the explanation inserted by way of Finance Act, 2022 is prospective in nature and therefore, ratio in the decision of the ACIT v. Williamson Financial Services with the higher judicial forum cannot be applied over the facts of the instant case. Accordingly, respectfully following the the Hon’ble Special Bench in the case of Vireet Investment Pvt. Ltd. (supra), we direct the Assessing Officer to restrict the disallowance u/s 14A of the Act in respect of investment ITA Nos. 3714 & 3713/MUM/2024 considered for disallowance under Rule 8D of Income We have heard rival submission of the parties in relation to this argument, the Ld. DR submitted that this argument is contrary letter and spread of law clarified by way of Circular No. 1 of 2014 of the CBDT and more recently by way of amendment brought in Finance Act, 2022 which was inserted in the Explanation to section 14A. The Ld. DR submitted that said explanation was inserted to clarify that the provisions of section 14A have always applied to the entire investment portfolio not merely to those investments that have yielded exempt income during the year. The Ld. DR referred to the decision of the Guwahati Bench in the case of ACIT v. Williamson Financial Services Ltd. reported in 140 and held the amendment by way of Finance Act, retrospective effect. But we find that Hon’ble Delhi High Court in the case of Era Infrastructure Pvt. Ltd. the explanation inserted by way of Finance Act, 2022 prospective in nature and therefore, ratio in the decision of the ACIT v. Williamson Financial Services (supra) being inconsistent with the higher judicial forum cannot be applied over the facts of . Accordingly, respectfully following the the Hon’ble Special Bench in the case of Vireet Investment Pvt. Ltd. we direct the Assessing Officer to restrict the disallowance u/s 14A of the Act in respect of investments only which JSW Energy Ltd 38 ITA Nos. 3714 & 3713/MUM/2024 of Income-tax Rules, rties in relation to this argument, the Ld. DR submitted that this argument is contrary by way of Circular No. 1 of 2014 of the CBDT and more recently by way of amendment brought rted in the Explanation to section 14A. The Ld. DR submitted that said explanation was inserted to clarify that the provisions of section 14A have always applied to the entire investment portfolio not merely to those come during the year. The Guwahati Bench in the case of ACIT v. Williamson Financial Services Ltd. reported in 140 nt by way of Finance Act, we find that Hon’ble Delhi Era Infrastructure Pvt. Ltd. 448 ITR 674 the explanation inserted by way of Finance Act, 2022 prospective in nature and therefore, ratio in the decision of the (supra) being inconsistent with the higher judicial forum cannot be applied over the facts of . Accordingly, respectfully following the decision of the Hon’ble Special Bench in the case of Vireet Investment Pvt. Ltd. we direct the Assessing Officer to restrict the disallowance which had yielded exempted income. The ground No. 2 appeal of the assessee is accordingly allowed partly for statistical purposes. 11. The ground No. 3 of the appeal of the assessee relate to disallowance of expenses u/s 14A of the Act amounting to Rs.41,81,59,866/- while computin the Act. 12. We have heard rival submissions of the parties and perused the relevant materials on record been allowed in favour of the assessee by the assessment year 2008 02.06.2017. Relevant finding of the Tribunal is reproduced as under: “7. Next Ground is about computation of book profit u/s. 115JB of the Act. It was brought to our notice that the Tribunal in assessee's own case in 2006 of the assessee, that the appeal filed by the department before the Hon'ble Bombay High Court (ITA No.1468 of 2013 dt. 30/4/2015) was dismissed. In these circumstances, we are of the opinion that the order of the FAA has to Respectfully following the order of the Tribunal for AY 2006 we decide the fifth Ground 12.1 A similar view has been in ITA No. 1336/Mum/2015. reproduced as under: “7. In so far as the second Ground is concerned, the same relates to computation of ‘book profit’ in terms of section 115JB of the Act. The Assessing Officer, while computing book profit under ITA Nos. 3714 & 3713/MUM/2024 exempted income. The ground No. 2 and additional ground appeal of the assessee is accordingly allowed partly for statistical The ground No. 3 of the appeal of the assessee relate to disallowance of expenses u/s 14A of the Act amounting to while computing the book profit u/s 115JB of We have heard rival submissions of the parties and perused the relevant materials on record. We find that an identical issue has been allowed in favour of the assessee by the assessment year 2008-09 in ITA No. 1334/Mum/2015 dated Relevant finding of the Tribunal is reproduced as 7. Next Ground is about computation of book profit u/s. 115JB of the Act. It was brought to our notice that the Tribunal in assessee's own case in 2006-07 had decided the issue in favour of the assessee, that the appeal filed by the department before the Hon'ble Bombay High Court (ITA No.1468 of 2013 dt. 30/4/2015) was dismissed. In these circumstances, we are of the opinion that the order of the FAA has to be confirmed. Respectfully following the order of the Tribunal for AY 2006 we decide the fifth Ground against the AO.” has been taken in the assessment year 2010 in ITA No. 1336/Mum/2015. Relevant finding of the Tribunal is duced as under: 7. In so far as the second Ground is concerned, the same relates to computation of ‘book profit’ in terms of section 115JB of the Act. The Assessing Officer, while computing book profit under JSW Energy Ltd 39 ITA Nos. 3714 & 3713/MUM/2024 additional ground of the appeal of the assessee is accordingly allowed partly for statistical The ground No. 3 of the appeal of the assessee relate to disallowance of expenses u/s 14A of the Act amounting to g the book profit u/s 115JB of We have heard rival submissions of the parties and perused dentical issue has been allowed in favour of the assessee by the Tribunal in in ITA No. 1334/Mum/2015 dated Relevant finding of the Tribunal is reproduced as 7. Next Ground is about computation of book profit u/s. 115JB of the Act. It was brought to our notice that the Tribunal in had decided the issue in favour of the assessee, that the appeal filed by the department before the Hon'ble Bombay High Court (ITA No.1468 of 2013 dt. 30/4/2015) was dismissed. In these circumstances, we are of be confirmed. Respectfully following the order of the Tribunal for AY 2006-07, taken in the assessment year 2010-11 Relevant finding of the Tribunal is 7. In so far as the second Ground is concerned, the same relates to computation of ‘book profit’ in terms of section 115JB of the Act. The Assessing Officer, while computing book profit under section 115JB, added the amount of disallowance under section 14A of the Act. The assessee contended before the Assessing Officer that there was no justification for taking into consideration the disallowance under section 14A of the Act, while computing book profit under section 115JB of the CIT(A) has disagreed with the stand of the Assessing Officer on two counts Firstly, according to the CIT(A), in assessment year 2006-07, the Tribunal in assessee’s own case vide ITA No.244/Banga/2010 dated 22/2/2013 has considered a similar issue and upheld the stand of the assessee following an earlier decision of the DCIT, ITA No.3850/Mum/2010 dated 27/07/2011. Secondly, the CIT(A) noticed exempt income and, the P&L Account. As a expenditure can be identified and, unworkable. In this manner, the addition Officer has been deleted. 8. Before us, it was a common point between the parties that the decision of the Tribunal in assessee’s own case for assessment year 2006-07 dated 22/2/2013(supra) which has relied upon by the CIT(A), continues to hold the field as it has not been altered by any higher the part of the CIT(A) the impugned addition. out by the CIT(A) is hold so. Thus, on CIT(A) is affirmed 12.2 Respectfully following the same, the ground of appeal of the assessee is allowed and the Assessing Officer is directed to delete the disallowance while computing Act. The ground No. 3 of the appeal is accordingly allowed. 13. The ground No. 4 of the appeal relate to disallowance of Rs.53,10,000/- u/s 37 of the Act holding that expenditure incurred for abandoned project was in the nature of the capital expenditure. The brief facts qua the issue in dispute are that the Assessing Officer observed expenditure of Rs.51,10,000/ ITA Nos. 3714 & 3713/MUM/2024 section 115JB, added the amount of disallowance under section 14A of the Act. The assessee contended before the Assessing Officer that there was no justification for taking into consideration the disallowance under section 14A of the Act, while computing book profit under section 115JB of the CIT(A) has disagreed with the stand of the Assessing Officer on two counts Firstly, according to the CIT(A), in assessment year 07, the Tribunal in assessee’s own case vide ITA No.244/Banga/2010 dated 22/2/2013 has considered a similar and upheld the stand of the assessee following an earlier decision of the Tribunal in the case of Essar Teleholdings Ltd. vs. No.3850/Mum/2010 dated 27/07/2011. Secondly, the CIT(A) noticed that in this year, assessee has not earned any ncome and, therefore, no such income was credited to the P&L Account. As a consequence, no corresponding expenditure can be identified and, thus, the provisions were unworkable. In this manner, the addition made by the Assessing Officer has been deleted. 8. Before us, it was a common point between the parties that the decision of the Tribunal in assessee’s own case for assessment 07 dated 22/2/2013(supra) which has relied upon by continues to hold the field as it has not been altered by any higher authority. As a consequence, we find no error on the part of the CIT(A) in relying upon the precedent and deleting the impugned addition. Moreover, even the factual aspect brought out by the CIT(A) is unexceptional and deserves to be upheld. hold so. Thus, on Ground of Appeal No.2 also, the decision of the CIT(A) is affirmed.” Respectfully following the same, the ground of appeal of the assessee is allowed and the Assessing Officer is directed to delete the disallowance while computing the book profit u/s 115JB of the The ground No. 3 of the appeal is accordingly allowed. The ground No. 4 of the appeal relate to disallowance of u/s 37 of the Act holding that expenditure incurred project was in the nature of the capital expenditure. The brief facts qua the issue in dispute are that the Assessing Officer observed expenditure of Rs.51,10,000/- on the project which JSW Energy Ltd 40 ITA Nos. 3714 & 3713/MUM/2024 section 115JB, added the amount of disallowance computed under section 14A of the Act. The assessee contended before the Assessing Officer that there was no justification for taking into consideration the disallowance under section 14A of the Act, while computing book profit under section 115JB of the Act. The CIT(A) has disagreed with the stand of the Assessing Officer on two counts Firstly, according to the CIT(A), in assessment year 07, the Tribunal in assessee’s own case vide ITA No.244/Banga/2010 dated 22/2/2013 has considered a similar and upheld the stand of the assessee following an earlier Tribunal in the case of Essar Teleholdings Ltd. vs. No.3850/Mum/2010 dated 27/07/2011. Secondly, that in this year, assessee has not earned any therefore, no such income was credited to consequence, no corresponding thus, the provisions were made by the Assessing 8. Before us, it was a common point between the parties that the decision of the Tribunal in assessee’s own case for assessment 07 dated 22/2/2013(supra) which has relied upon by continues to hold the field as it has not been altered authority. As a consequence, we find no error on in relying upon the precedent and deleting Moreover, even the factual aspect brought unexceptional and deserves to be upheld. We Ground of Appeal No.2 also, the decision of the Respectfully following the same, the ground of appeal of the assessee is allowed and the Assessing Officer is directed to delete the book profit u/s 115JB of the The ground No. 3 of the appeal is accordingly allowed. The ground No. 4 of the appeal relate to disallowance of u/s 37 of the Act holding that expenditure incurred project was in the nature of the capital expenditure. The brief facts qua the issue in dispute are that the Assessing on the project which was not materialized Officer as why the said expenditure may not be treated as capital expenditure, the assessee responded that said expense was incurred for obtaining feas value(CV) coal in its existing high plant to reduce dependency on high implemented due to some technical reasons. The Ld. Assessing Officer rejected the contention of the assessee for two reasons. Firstly, the assessee itself has treated the same as capi progress in its books of accounts nature though due to some technical reasons was not implemented. The Assessing Officer accordingly distinguished the decision of the Hon’ble Madras High Court in the case of Tamilnadu Magesite Ltd. v. ACIT (supra) relied upon by the assessee. Secondly, according to the Assessing Officer writing off of the expenditure being in the nature of capital expenditure was not allowable u/s 37 of the Act. The Ld. DRP rejected t the assessee firstly feasibility reports could be considered u/s 35D introduced w.e.f. 01.04.2013 wherein 1/ to the fulfillment of the conditions not meet those conditions and attempted to get benefit u/s 37 of the Act, which is not allowable and exclusively for the purpose of business also rejected the alternative cla ITA Nos. 3714 & 3713/MUM/2024 d. In response to the query of the Assessing er as why the said expenditure may not be treated as capital the assessee responded that said expense was incurred for obtaining feasibility report for use of low coal in its existing high CV coal based power generation nt to reduce dependency on high CV coal which could not be implemented due to some technical reasons. The Ld. Assessing Officer rejected the contention of the assessee for two reasons. , the assessee itself has treated the same as capi in its books of accounts and therefore, it was nature though due to some technical reasons said feasibility report was not implemented. The Assessing Officer accordingly distinguished the decision of the Hon’ble Madras High Court in the case of Tamilnadu Magesite Ltd. v. ACIT (supra) relied upon by the , according to the Assessing Officer writing off of the expenditure being in the nature of capital expenditure was not allowable u/s 37 of the Act. The Ld. DRP rejected the contention of firstly on the ground that expenses incurred on feasibility reports could be considered u/s 35D introduced w.e.f. wherein 1/10th expenditure could be amortized subject to the fulfillment of the conditions prescribed but the assessee did not meet those conditions and attempted to get benefit u/s 37 of is not allowable as the expenses was incurred wholly and exclusively for the purpose of business. Secondly alternative claim of the said expenses as short JSW Energy Ltd 41 ITA Nos. 3714 & 3713/MUM/2024 . In response to the query of the Assessing er as why the said expenditure may not be treated as capital the assessee responded that said expense was ibility report for use of low calorific coal based power generation coal which could not be implemented due to some technical reasons. The Ld. Assessing Officer rejected the contention of the assessee for two reasons. , the assessee itself has treated the same as capital work-in- it was capital in feasibility report was not implemented. The Assessing Officer accordingly distinguished the decision of the Hon’ble Madras High Court in the case of Tamilnadu Magesite Ltd. v. ACIT (supra) relied upon by the , according to the Assessing Officer writing off of the expenditure being in the nature of capital expenditure was not he contention of on the ground that expenses incurred on feasibility reports could be considered u/s 35D introduced w.e.f. expenditure could be amortized subject the assessee did not meet those conditions and attempted to get benefit u/s 37 of as the expenses was incurred wholly Secondly, the Ld. DRP im of the said expenses as short term capital loss on the ground that feasibility report was prepared, was abandoned, came into existence and therefore, any capital asset, hence the treatment capital cannot be treated as short term capital loss. observed that capital expenditure as per accounting treatment and capital loss as per the Act Ld. DRP while any expenditure which creates assets of the enduring value comes under capital expenditure whereas capital loss is triggered when there is a loss consequent to the transfer of asset. Before us, the ld. counsel for the assessee relied on the dec the Hon’ble Madras High Court in the case Tamilnadu Magesite Ltd. (supra) and decision of the Hon’ble case of Deputy Commissioner of Income (2003) 263 ITR 357 wherein it is held that such ex revenue in nature. On the contrary, the Ld. DR relied on the finding of the Ld. DRP and submitted that expenses incurred on feasibility reports are governed by the specific provision u/s 35D of the Act and therefore, not eligible u/s 37 of the A that expenses must be wholly and exclusively for the purpose of business and not to submitted that the expenditure purposes and hence evaluating new business opportunity aimed benefit for the business. The Ld. DR submitted that feasibility ITA Nos. 3714 & 3713/MUM/2024 term capital loss on the ground that in view of project for which feasibility report was prepared, was abandoned, no capital asset came into existence and therefore, there could not be transfer of hence the treatment of item appearing capital cannot be treated as short term capital loss. observed that capital expenditure as per accounting treatment and capital loss as per the Act are altogether different. According to the . DRP while any expenditure which creates assets of the enduring value comes under capital expenditure whereas capital loss is triggered when there is a loss consequent to the transfer of asset. Before us, the ld. counsel for the assessee relied on the dec the Hon’ble Madras High Court in the case Tamilnadu Magesite Ltd. (supra) and decision of the Hon’ble High Court of Deputy Commissioner of Income-tax v. Assam Asbestos Ltd. (2003) 263 ITR 357 wherein it is held that such ex revenue in nature. On the contrary, the Ld. DR relied on the finding of the Ld. DRP and submitted that expenses incurred on feasibility reports are governed by the specific provision u/s 35D of the Act and therefore, not eligible u/s 37 of the Act which explicitly that expenses must be wholly and exclusively for the purpose of business and not to be capital or personal in nature. The Ld. DR submitted that the expenditure was intended for enduring benefit purposes and hence capital in nature because the assessee was new business opportunity aimed to create long term benefit for the business. The Ld. DR submitted that feasibility JSW Energy Ltd 42 ITA Nos. 3714 & 3713/MUM/2024 in view of project for which no capital asset there could not be transfer of of item appearing in the The Ld. counsel observed that capital expenditure as per accounting treatment and According to the . DRP while any expenditure which creates assets of the enduring value comes under capital expenditure whereas capital loss is triggered when there is a loss consequent to the transfer of asset. Before us, the ld. counsel for the assessee relied on the decision of the Hon’ble Madras High Court in the case Tamilnadu Magesite Ltd. Gauhati in the Assam Asbestos Ltd. (2003) 263 ITR 357 wherein it is held that such expenses are revenue in nature. On the contrary, the Ld. DR relied on the finding of the Ld. DRP and submitted that expenses incurred on feasibility reports are governed by the specific provision u/s 35D of the Act ct which explicitly express that expenses must be wholly and exclusively for the purpose of capital or personal in nature. The Ld. DR was intended for enduring benefit because the assessee was create long term benefit for the business. The Ld. DR submitted that feasibility report in question was viability of an investment (CV) coal which would direct impact on increasing profitability and thus the expenditure confers upon the enduring benefit to the assessee’s trade for securing long term advantage by reducing operational costs and the creating enduring benefit Ld. DR relied on the decision of the Hon’ble Bombay High Court in the case of CIT v. J.K. Chemicals Ltd. reported in (1994) 207 ITR 985 and decision of the Hon’ble Gujarat High Court in the case of CIT v. Shri Digvijay Cement Co. Ltd. (1986) 53 CTR 274 (Gujarat). 14. We have heard rival submissions of the parties and perused the relevant materials on record provide for allowing the expenses as incurred wholly and exclusively for the purpose of the business and not being in the nature of capital or personal expenditure. Thus nature of capital or personal nature, it will go out of ambit of section 37 of the Act. Therefore, whether the expenditure incurred on feasibility report is in the nature of the capital expenditure or not. The Ld. counsel for the assessee has filed a copy of the said feasibility report befor perusal of the same, we find that purpose behind was to replace the raw material used for the power plants. In the existing plants, the assessee was using high calorific value ITA Nos. 3714 & 3713/MUM/2024 was obtained with the objective of viability of an investment that would result in the acquisition of low (CV) coal which would direct impact on increasing profitability and thus the expenditure confers upon the enduring benefit to the assessee’s trade for securing long term advantage by reducing operational costs and therefore, such expenditure was aimed as enduring benefit, therefore, it was capital in character. The Ld. DR relied on the decision of the Hon’ble Bombay High Court in the case of CIT v. J.K. Chemicals Ltd. reported in (1994) 207 ITR n of the Hon’ble Gujarat High Court in the case of CIT v. Shri Digvijay Cement Co. Ltd. (1986) 53 CTR 274 (Gujarat). We have heard rival submissions of the parties and perused the relevant materials on record. The section 37 of the Act clearly for allowing the expenses as incurred wholly and exclusively for the purpose of the business and not being in the nature of capital or personal expenditure. Thus, if expenditure nature of capital or personal nature, it will go out of ambit of ction 37 of the Act. Therefore, in the case we have to examine whether the expenditure incurred on feasibility report is in the nature of the capital expenditure or not. The Ld. counsel for the assessee has filed a copy of the said feasibility report befor perusal of the same, we find that purpose behind obtaining report was to replace the raw material used for the power plants. In the existing plants, the assessee was using high calorific value JSW Energy Ltd 43 ITA Nos. 3714 & 3713/MUM/2024 obtained with the objective of evaluating the esult in the acquisition of low (CV) coal which would direct impact on increasing profitability and thus the expenditure confers upon the enduring benefit to the assessee’s trade for securing long term advantage by reducing expenditure was aimed as therefore, it was capital in character. The Ld. DR relied on the decision of the Hon’ble Bombay High Court in the case of CIT v. J.K. Chemicals Ltd. reported in (1994) 207 ITR n of the Hon’ble Gujarat High Court in the case of CIT v. Shri Digvijay Cement Co. Ltd. (1986) 53 CTR 274 (Gujarat). We have heard rival submissions of the parties and perused . The section 37 of the Act clearly for allowing the expenses as incurred wholly and exclusively for the purpose of the business and not being in the nature of expenditure is in the nature of capital or personal nature, it will go out of ambit of in the case we have to examine whether the expenditure incurred on feasibility report is in the nature of the capital expenditure or not. The Ld. counsel for the assessee has filed a copy of the said feasibility report before us. On obtaining report was to replace the raw material used for the power plants. In the existing plants, the assessee was using high calorific value (CV) coal and said feasibility report has been material as low calorific value and necessary changes in the entire plant and machinery for change of the raw material various components of the power plant were required to be changed. Thus the intended for long term enduring benefit to the assessee and therefore, the expenditure incurred on the same is in the capital expenditure. 14.1 Now, we find that the legislature has specifically allowed expenditure incurred on such feasibility/project report u/s 35D the Act subject to fulfill rejected the eligibility of the assessee u/s 35D without examining or providing an opportunity of being heard on the issue. restore this matter back to the file of the Assessing Officer with the direction to the assessee to file necessary documents in support of its eligibility u/s 35D of the Act and the Assessing Officer after due verification may allow the deduction in acc 14.2 The alternative claim of the assessee raised in ground no. 5 of the appeal for allowing short capital loss is also not allowable as by way of feasibility report, agree with the finding of ld we uphold the same. are accordingly allowed for statistical purposes, whereas the ground no. 5 of the appeal is dismissed. ITA Nos. 3714 & 3713/MUM/2024 and said feasibility report has been obtained for substituting raw material as low calorific value and necessary changes in the entire plant and machinery for power generation smoothly. In view of change of the raw material various components of the power plant were required to be changed. Thus the feasibility/project report was intended for long term enduring benefit to the assessee and therefore, the expenditure incurred on the same is in the we find that the legislature has specifically allowed incurred on such feasibility/project report u/s 35D subject to fulfilling certain conditions. The ld DRP has rejected the eligibility of the assessee u/s 35D without examining or providing an opportunity of being heard on the issue. restore this matter back to the file of the Assessing Officer with the direction to the assessee to file necessary documents in support of its eligibility u/s 35D of the Act and the Assessing Officer after due verification may allow the deduction in accordance with law. The alternative claim of the assessee raised in ground no. 5 of the appeal for allowing short capital loss is also not allowable as by report, no capital asset came into existence. We agree with the finding of ld DRP on the issue in dispute, accordingly we uphold the same. The ground No. 4 of the appeal of the assessee llowed for statistical purposes, whereas the ground no. 5 of the appeal is dismissed. JSW Energy Ltd 44 ITA Nos. 3714 & 3713/MUM/2024 for substituting raw material as low calorific value and necessary changes in the entire smoothly. In view of change of the raw material various components of the power plant feasibility/project report was intended for long term enduring benefit to the assessee and therefore, the expenditure incurred on the same is in the nature of we find that the legislature has specifically allowed incurred on such feasibility/project report u/s 35D of The ld DRP has rejected the eligibility of the assessee u/s 35D without examining or providing an opportunity of being heard on the issue. Therefore, we restore this matter back to the file of the Assessing Officer with the direction to the assessee to file necessary documents in support of its eligibility u/s 35D of the Act and the Assessing Officer after due ordance with law. The alternative claim of the assessee raised in ground no. 5 of the appeal for allowing short capital loss is also not allowable as by no capital asset came into existence. We DRP on the issue in dispute, accordingly The ground No. 4 of the appeal of the assessee llowed for statistical purposes, whereas the ground 15. The ground No. 6 of the appeal relates Rs.69,30,25,027/- claimed u/s 80IA of the Act disallowed by the lower authorities. The facts in brief qua the issue in dispute are that assessee claimed deduction of Rs.69,30,25,027/ the Act. The Assessing Officer further obser having four units i.e. Unit No. 1, Unit No. 2, Unit No. 3 and Unit No. 4 eligible for claiming deduction u/s 80IA of the Act. The Assessing Officer noticed from the details of computation of deduction that earned income from three uni from Unit No. 2 ; Rs.33,54,25,991/ Rs.35,75,99,035/- from Unit No. 4 and incurred loss of Rs.92,11,43,970/- from Unit No. 1. The aggregate profit from all eligible SBU Units of Rs.9,41,59,903/ profit and loss account and therefore, according to the Assessing Officer only said profit was eligible for deduction u/s 80IA of the Act as against the deduction of Rs.69,30,25,027/ deduction in respect from the profit from U without taking into consideration loss incurred from Unit No. 1. Thus, according to the Assessing Officer, the assessee has not set off losses incurred from Unit No. 1 . In response to the show cause notice, the assessee relied on various decisions which have been cited in the submission assessee reproduced by the Assessing Officer. After considering the submission, the claim of the assessee was rejected mainly on the ground that according to the Assessing Officer deduction u/s 80IA ITA Nos. 3714 & 3713/MUM/2024 The ground No. 6 of the appeal relates to deduction of claimed u/s 80IA of the Act disallowed by the lower authorities. The facts in brief qua the issue in dispute are that assessee claimed deduction of Rs.69,30,25,027/ the Act. The Assessing Officer further observed that assessee was having four units i.e. Unit No. 1, Unit No. 2, Unit No. 3 and Unit No. 4 eligible for claiming deduction u/s 80IA of the Act. The Assessing Officer noticed from the details of computation of deduction that earned income from three units i.e. income of Rs.32,22,78,846/ from Unit No. 2 ; Rs.33,54,25,991/- from Unit No. 3 ; from Unit No. 4 and incurred loss of from Unit No. 1. The aggregate profit from all eligible SBU Units of Rs.9,41,59,903/- has been shown from the profit and loss account and therefore, according to the Assessing Officer only said profit was eligible for deduction u/s 80IA of the Act as against the deduction of Rs.69,30,25,027/ deduction in respect from the profit from Unit No. 3 and Unit No. 4 without taking into consideration loss incurred from Unit No. 1. according to the Assessing Officer, the assessee has not set off losses incurred from Unit No. 1 amounting to Rs.92,11,43,970/ In response to the show cause notice, the assessee relied on various decisions which have been cited in the submission assessee reproduced by the Assessing Officer. After considering the submission, the claim of the assessee was rejected mainly on the round that according to the Assessing Officer deduction u/s 80IA JSW Energy Ltd 45 ITA Nos. 3714 & 3713/MUM/2024 to deduction of claimed u/s 80IA of the Act disallowed by the lower authorities. The facts in brief qua the issue in dispute are that assessee claimed deduction of Rs.69,30,25,027/- u/s 80IA of ved that assessee was having four units i.e. Unit No. 1, Unit No. 2, Unit No. 3 and Unit No. 4 eligible for claiming deduction u/s 80IA of the Act. The Assessing Officer noticed from the details of computation of deduction that ts i.e. income of Rs.32,22,78,846/- from Unit No. 3 ; from Unit No. 4 and incurred loss of from Unit No. 1. The aggregate profit from all n shown from the profit and loss account and therefore, according to the Assessing Officer only said profit was eligible for deduction u/s 80IA of the Act as against the deduction of Rs.69,30,25,027/- claimed for nit No. 3 and Unit No. 4 without taking into consideration loss incurred from Unit No. 1. according to the Assessing Officer, the assessee has not set amounting to Rs.92,11,43,970/- In response to the show cause notice, the assessee relied on various decisions which have been cited in the submission of assessee reproduced by the Assessing Officer. After considering the submission, the claim of the assessee was rejected mainly on the round that according to the Assessing Officer deduction u/s 80IA is in respect of eligible business, the Ld. Assessing Officer referred to 80AB of the Act and according to which deduction has to be allowed with reference to income included in the gross tot According to the Assessing Officer net income after setting off of losses. Therefore, assessee is eligible for deduction in respect of aggregate profit from all the units after setting off loss of Unit No. 1 decision of the Hon’ble High Court Punjab & Haryana High Court in the case of Bajaj Motors Pvt. Ltd. (supra) Hon’ble Supreme Court in the case of (supra). The Assessing Officer als cited in the impugned order. The Ld. DRP also upheld the finding of the Assessing Officer and rejected the objection of the assessee. 16. We have heard rival submissions of the parties and perused the relevant materials on assessee has relied on the decision which was cited before the lower authorities. The core issue in dispute is whether the deduction is to be computed in respect of profit of each undertaking engaged in eligible business or deduction has to be computed on aggregate profit of all the units engaged in eligible business. Fore ready reference, the relevant provisions of section 80IA of the Act are extracted as under: “Deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development, etc. ITA Nos. 3714 & 3713/MUM/2024 is in respect of eligible business, the Ld. Assessing Officer referred of the Act and according to which deduction has to be allowed with reference to income included in the gross tot According to the Assessing Officer ,the gross total income net income after setting off of losses. Therefore, assessee is eligible for deduction in respect of aggregate profit from all the units after setting off loss of Unit No. 1. The Assessing Officer relied on the decision of the Hon’ble High Court Punjab & Haryana High Court Bajaj Motors Pvt. Ltd. (supra) and decision of the Hon’ble Supreme Court in the case of Synco Industries Ltd. The Assessing Officer also relied on the other decisions cited in the impugned order. The Ld. DRP also upheld the finding of the Assessing Officer and rejected the objection of the assessee. We have heard rival submissions of the parties and perused the relevant materials on record. Before us, the Ld. counsel for the assessee has relied on the decision which was cited before the lower The core issue in dispute is whether the deduction is to be computed in respect of profit of each undertaking engaged in usiness or deduction has to be computed on aggregate profit of all the units engaged in eligible business. Fore ready he relevant provisions of section 80IA of the Act are Deductions in respect of profits and gains from ustrial undertakings or enterprises engaged in infrastructure development, etc. JSW Energy Ltd 46 ITA Nos. 3714 & 3713/MUM/2024 is in respect of eligible business, the Ld. Assessing Officer referred of the Act and according to which deduction has to be allowed with reference to income included in the gross total income. the gross total income includes net income after setting off of losses. Therefore, assessee is eligible for deduction in respect of aggregate profit from all the units after Assessing Officer relied on the decision of the Hon’ble High Court Punjab & Haryana High Court and decision of the Synco Industries Ltd. o relied on the other decisions cited in the impugned order. The Ld. DRP also upheld the finding of the Assessing Officer and rejected the objection of the assessee. We have heard rival submissions of the parties and perused . Before us, the Ld. counsel for the assessee has relied on the decision which was cited before the lower The core issue in dispute is whether the deduction is to be computed in respect of profit of each undertaking engaged in usiness or deduction has to be computed on aggregate profit of all the units engaged in eligible business. Fore ready he relevant provisions of section 80IA of the Act are Deductions in respect of profits and gains from ustrial undertakings or enterprises engaged in 80-IA. [(1) Where the gross total income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in sub business being hereinafter referred to as the eligible business), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction of an amount equal to hundred of the profits and gains derived from such business for ten consecutive assessment years.] (2) The deduction specified in sub of the assessee, be claimed by him for any ten consecutive assessment years out of fifteen in which the undertaking or the enterprise develops and begins to operate any infrastructure facility or starts providing telecommunication service or develops an industrial park develops 48[***] a special economic zone referred to in clause (iii) of sub-section (4)] or generates power or commences transmission or distribution of power [or undertakes substantial renovation and modernisation of the existi distribution lines [***]] : [Provided that where the assessee develops or operates and maintains or develops, operates and maintains any infrastructure facility referred to in clause (a) or clause (b) or clause (c) of the Explanation to provisions of this sub words \"fifteen years\", the words \"twenty years\" had been substituted.] (3)…………….. (4)…………….. (5) Notwithstanding anything contained in any other provision of this Act, the profits and gains of an eligible business which the provisions of sub purposes of determining the quantum of deduction under that sub-section for the assessment year immediately succeeding the initial assessment year or any subsequent assessment year, be comput only source of income of the assessee during the previous year relevant to the initial assessment year subsequent assessment year up to and including the assessment y ITA Nos. 3714 & 3713/MUM/2024 [(1) Where the gross total income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in sub-section business being hereinafter referred to as the eligible business), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction of an amount equal to hundred of the profits and gains derived from such business for ten consecutive assessment years.] (2) The deduction specified in sub-section (1) may, at the option of the assessee, be claimed by him for any ten consecutive assessment years out of fifteen years beginning from the year in which the undertaking or the enterprise develops and begins to operate any infrastructure facility or starts providing telecommunication service or develops an industrial park [***] a special economic zone referred to in clause (iii) section (4)] or generates power or commences transmission or distribution of power [or undertakes substantial renovation and modernisation of the existing transmission or distribution lines [***]] : that where the assessee develops or operates and maintains or develops, operates and maintains any infrastructure facility referred to in clause (a) or clause (b) or clause (c) of the Explanation to clause (i) of sub-section (4), the provisions of this sub-section shall have effect as if for the words \"fifteen years\", the words \"twenty years\" had been substituted.]” (3)…………….. (4)…………….. (5) Notwithstanding anything contained in any other provision the profits and gains of an eligible business which the provisions of sub-section (1) apply shall, for the purposes of determining the quantum of deduction under that section for the assessment year immediately succeeding the initial assessment year or any subsequent assessment year, be computed as if such eligible business were the only source of income of the assessee during the previous ar relevant to the initial assessment year90 subsequent assessment year up to and including the assessment year for which the determination is to be made. JSW Energy Ltd 47 ITA Nos. 3714 & 3713/MUM/2024 [(1) Where the gross total income of an assessee includes any profits and gains derived by an undertaking or an section (4) (such business being hereinafter referred to as the eligible business), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction of an amount equal to hundred per cent of the profits and gains derived from such business for ten section (1) may, at the option of the assessee, be claimed by him for any ten consecutive years beginning from the year in which the undertaking or the enterprise develops and begins to operate any infrastructure facility or starts providing telecommunication service or develops an industrial park 47[or [***] a special economic zone referred to in clause (iii) section (4)] or generates power or commences transmission or distribution of power [or undertakes substantial ng transmission or that where the assessee develops or operates and maintains or develops, operates and maintains any infrastructure facility referred to in clause (a) or clause (b) or section (4), the section shall have effect as if for the words \"fifteen years\", the words \"twenty years\" had been (5) Notwithstanding anything contained in any other provision the profits and gains of an eligible business to section (1) apply shall, for the purposes of determining the quantum of deduction under that section for the assessment year immediately succeeding the initial assessment year or any subsequent assessment as if such eligible business were the only source of income of the assessee during the previous and to every subsequent assessment year up to and including the ear for which the determination is to be made. 16.1 The section 80IA(5) clearly specify that determining quantum of deduction , the computation has to be made as if the eligible business is the only source of income. case of the assessee, all the three units are engaged in the ‘eligible business’ of generating electricity, therefore we are of the opinion that for the purpose of computation of deduction u/s 80IA of the Act in the case of assessee, the aggregate profit of the eligibl business i.e. all the three units have to be taken. Certainly, loss from non eligible business can’t be set profit of eligible business for computing deduction u/s 80IA of the Act. The purpose of allowing deduction is for promo manufacturing or generation promotion of business of those products undertaking , therefore, aggregate profit the assessee is eligible for deduction u/s 80IA sho considered for the purpose of deduction. on the decision of Hon’ble Supreme Court in the case of Commissioner Of Income Tax (Formerly Bses Ltd) on 28 April, 2021 in Civil Appeal No. 1328 of 2021, relevant part of which is 13. The other contention of the Revenue is that sub 80-IA refers to computation of quantum of deduction being limited fro ‘eligible business’ by taking it as the only source of income. It is contended that the language of sub deduction contemplated in sub income from ‘eligible business’ which indicates section (1) that the deduction cannot exceed the ‘business income’. On the ITA Nos. 3714 & 3713/MUM/2024 The section 80IA(5) clearly specify that for the purpose of determining quantum of deduction , the computation has to be made as if the eligible business is the only source of income. ssessee, all the three units are engaged in the ‘eligible business’ of generating electricity, therefore we are of the opinion that for the purpose of computation of deduction u/s 80IA of the Act in the case of assessee, the aggregate profit of the eligibl business i.e. all the three units have to be taken. Certainly, loss from non eligible business can’t be set-off against the aggregate profit of eligible business for computing deduction u/s 80IA of the The purpose of allowing deduction is for promo or generation of the particular products and promotion of business of those products and not promotion of an therefore, aggregate profit of different undertaking of the assessee is eligible for deduction u/s 80IA sho considered for the purpose of deduction. In support , we also rely on the decision of Hon’ble Supreme Court in the case of Commissioner Of Income Tax-I vs M/S Reliance Energy Ltd (Formerly Bses Ltd) on 28 April, 2021 in Civil Appeal No. 1328 evant part of which is reproduced as und 13. The other contention of the Revenue is that sub-section (5) of refers to computation of quantum of deduction being limited fro ‘eligible business’ by taking it as the only source of income. It is contended that the language of sub-section (5) makes it clear that deduction contemplated in sub-section (1) is only with respect to the income from ‘eligible business’ which indicates that there is a cap in sub section (1) that the deduction cannot exceed the ‘business income’. On the JSW Energy Ltd 48 ITA Nos. 3714 & 3713/MUM/2024 for the purpose of determining quantum of deduction , the computation has to be made as if the eligible business is the only source of income. In the ssessee, all the three units are engaged in the ‘eligible business’ of generating electricity, therefore we are of the opinion that for the purpose of computation of deduction u/s 80IA of the Act in the case of assessee, the aggregate profit of the eligible business i.e. all the three units have to be taken. Certainly, loss off against the aggregate profit of eligible business for computing deduction u/s 80IA of the The purpose of allowing deduction is for promotion of the of the particular products and and not promotion of an different undertaking of the assessee is eligible for deduction u/s 80IA should only be In support , we also rely on the decision of Hon’ble Supreme Court in the case of I vs M/S Reliance Energy Ltd (Formerly Bses Ltd) on 28 April, 2021 in Civil Appeal No. 1328 der: section (5) of Section refers to computation of quantum of deduction being limited from ‘eligible business’ by taking it as the only source of income. It is section (5) makes it clear that section (1) is only with respect to the that there is a cap in sub- section (1) that the deduction cannot exceed the ‘business income’. On the other hand, it is the case of the Assessee that sub only to determination of the quantum of deduction under sub by treating the ‘eligible business’ as the only source of income. It was submitted by Mr. Vohra, learned Senior Counsel, that the final computation of deduction under 2002-03 as accepted by the Assessing Officer, was arrived at by taking into account the profits from the ‘eligible business’ as the ‘only source of income’. He submitted that, however, sub to the treatment to be given to the dedu not concerned with the extent to which the computed deduction be allowed. To explain the interplay between sub (1) of Section 80-IA, it wi The amount of deduction from the ‘eligible business’ computed under Section 80- 492,78,60,973 /-. There is no income from the ‘eligible business’ under source of income for the purposes of computing deduction under 80-IA. The question that arises further with reference to allowing the deduction so computed to arrive at the ‘total income’ of the Assessee cannot be determined by resorting to interpretation of sub 14. It will be useful to refer to the judgment of this Court relied upon by the Revenue as well as the Assessee. Court was concerned with is in pari materia to “ 80-I(6) Notwithstanding anythi this Act, the profits and gains of an industrial undertaking or a ship or the business of a hotel or the business of repairs to ocean or other powered craft to which the provisions of sub shall, for the purposes of determining the quantum of deduction under sub- section (1) for the assessment year immediately succeeding the initial assessment year or any computed as if such industrial undertaking or ship or hotel or the business of repairs to ocean craft were the only source of income of the assessee during the previous years relevant to the initial assessment year and to every subsequent assessment year up determination is to be made.” It was held in that for the purpose of calculating the deduction under sustained in other divisions or units cannot be taken into account as sub ITA Nos. 3714 & 3713/MUM/2024 other hand, it is the case of the Assessee that sub-section (5) pertains only to determination of the quantum of deduction under sub ng the ‘eligible business’ as the only source of income. It was submitted by Mr. Vohra, learned Senior Counsel, that the final computation of deduction under Section 80-IA for the assessment year 3 as accepted by the Assessing Officer, was arrived at by taking into account the profits from the ‘eligible business’ as the ‘only source of income’. He submitted that, however, sub-section (5) is a step antecedent to the treatment to be given to the deduction under sub- section (1) and is not concerned with the extent to which the computed deduction be allowed. To explain the interplay between sub-section (5) and sub , it will be useful to refer to the facts of this Appeal. The amount of deduction from the ‘eligible business’ computed -IA for the assessment year 2002 . There is no dispute that the said amount represents income from the ‘eligible business’ under Section 80-IA source of income for the purposes of computing deduction under . The question that arises further with reference to allowing the deduction so computed to arrive at the ‘total income’ of the Assessee cannot be determined by resorting to interpretation of sub will be useful to refer to the judgment of this Court relied upon by the Revenue as well as the Assessee. In Synco Industries Court was concerned with Section 80-I of the Act. Section 80 Section 80-IA(5), is as follows: I(6) Notwithstanding anything contained in any other provision of this Act, the profits and gains of an industrial undertaking or a ship or the business of a hotel or the business of repairs to ocean or other powered craft to which the provisions of sub-section (1) app shall, for the purposes of determining the quantum of deduction under section (1) for the assessment year immediately succeeding the initial assessment year or any subsequent assessment year, be computed as if such industrial undertaking or ship or the business of the hotel or the business of repairs to ocean-going vessels or other powered craft were the only source of income of the assessee during the previous years relevant to the initial assessment year and to every subsequent assessment year up to and including the assessment year for which the determination is to be made.” It was held in Synco Industries that for the purpose of calculating the deduction under Section 80 sustained in other divisions or units cannot be taken into account as sub JSW Energy Ltd 49 ITA Nos. 3714 & 3713/MUM/2024 section (5) pertains only to determination of the quantum of deduction under sub-section (1) ng the ‘eligible business’ as the only source of income. It was submitted by Mr. Vohra, learned Senior Counsel, that the final for the assessment year 3 as accepted by the Assessing Officer, was arrived at by taking into account the profits from the ‘eligible business’ as the ‘only source of section (5) is a step antecedent section (1) and is not concerned with the extent to which the computed deduction be section (5) and sub-section ll be useful to refer to the facts of this Appeal. The amount of deduction from the ‘eligible business’ computed for the assessment year 2002-03 is Rs. dispute that the said amount represents and is the only source of income for the purposes of computing deduction under Section . The question that arises further with reference to allowing the deduction so computed to arrive at the ‘total income’ of the Assessee cannot be determined by resorting to interpretation of sub- section (5). will be useful to refer to the judgment of this Court relied upon by Synco Industries (supra), this Section 80-I(6), which ng contained in any other provision of this Act, the profits and gains of an industrial undertaking or a ship or the business of a hotel or the business of repairs to ocean-going vessels section (1) apply shall, for the purposes of determining the quantum of deduction under section (1) for the assessment year immediately succeeding the subsequent assessment year, be the business of the going vessels or other powered craft were the only source of income of the assessee during the previous years relevant to the initial assessment year and to every subsequent to and including the assessment year for which the Synco Industries (supra) Section 80-I, loss sustained in other divisions or units cannot be taken into account as sub- section (6) contemplates that only profits from the industrial undertaking shall be taken into account as it was the Court concluded that computation of deduction whereas the treatment to be given to such deductions in order to arrive at the total income of the assessee. Court in Canara Workshops emphasize the purpose of sub the question that arose for consideration before this Court related to computation of the profits for the purpose of deduction under E, as it then existed, after setting off the loss incurred by the assessee in the manufacture of alloy steels. existed, permitted deductions in respect of profits and gains attributable to the business of generation or distribution of electricity or any other form of power or of construction, manufacture or product of the articles or things specified in the list in the Fifth Schedule. It was argued on behalf of the Revenue that the profits from the automobile ancillaries industry of the assessee must be reduced by the loss suffered by the assessee in the manufacture of alloy steels. This Court was not in agreement with the submissions made by the Revenue. It was held that the profits and gains by an industry entitled to benefit under E cannot be reduced by the loss suffered by any other industry or industries owned by the assessee. 15. In the case before us, there is no discussion about IA(5) by the Appellate Authority, n However, we have considered the submissions on behalf of the Revenue as it has a bearing on the interpretation of sub IA of the Act. We hold 80- IA of the Act is limited to determination of quantum of deduction under sub treating ‘eligible business’ as Sub-section (5) cannot be pressed into service for reading a limitation of the deduction under sub was made by the learned Senior Counsel for the Revenue to rely on the phrase ‘derived … from’ in submission that the intention of the legislature was to give the narrowest possible construction to deduction admissible under this sub not necessary for us to deal with this submission in view of the findings ITA Nos. 3714 & 3713/MUM/2024 section (6) contemplates that only profits from the industrial undertaking shall be taken into account as it was the only source of income. Further, the Court concluded that Section 80-I(6) of the Act dealt with actual computation of deduction whereas Section 80-I(1) of the Act dealt with the treatment to be given to such deductions in order to arrive at the total income of the assessee. The Assessee also relied on the judgment of this Canara Workshops (P) Ltd., Kodialball, Mangalore emphasize the purpose of sub-section (5) of Section 80- the question that arose for consideration before this Court related to the profits for the purpose of deduction under , as it then existed, after setting off the loss incurred by the assessee in the manufacture of alloy steels. Section 80-E of the Act, as it then existed, permitted deductions in respect of profits and gains attributable to the business of generation or distribution of electricity or any other form of power or of construction, manufacture or production of any one or more of the articles or things specified in the list in the Fifth Schedule. It was argued on behalf of the Revenue that the profits from the automobile ancillaries industry of the assessee must be reduced by the loss suffered see in the manufacture of alloy steels. This Court was not in agreement with the submissions made by the Revenue. It was held that the profits and gains by an industry entitled to benefit under cannot be reduced by the loss suffered by any other industry or industries owned by the assessee. 15. In the case before us, there is no discussion about by the Appellate Authority, nor the Tribunal and the High Court. However, we have considered the submissions on behalf of the Revenue as it has a bearing on the interpretation of sub-section (1) of We hold that the scope of sub-section (5) of Section IA of the Act is limited to determination of quantum of deduction under sub-section (1) of Section 80-IA treating ‘eligible business’ as the ‘only source of income’ section (5) cannot be pressed into service for reading a limitation of the deduction under sub-section (1) only to ‘business income’. An attempt was made by the learned Senior Counsel for the Revenue to rely on the ‘derived … from’ in Section 80-IA (1) of the Act in respect of his submission that the intention of the legislature was to give the narrowest possible construction to deduction admissible under this sub not necessary for us to deal with this submission in view of the findings JSW Energy Ltd 50 ITA Nos. 3714 & 3713/MUM/2024 section (6) contemplates that only profits from the industrial undertaking the only source of income. Further, of the Act dealt with actual of the Act dealt with the treatment to be given to such deductions in order to arrive at the total The Assessee also relied on the judgment of this (P) Ltd., Kodialball, Mangalore (supra) to -IA. In this case, the question that arose for consideration before this Court related to the profits for the purpose of deduction under Section 80- , as it then existed, after setting off the loss incurred by the assessee in of the Act, as it then existed, permitted deductions in respect of profits and gains attributable to the business of generation or distribution of electricity or any other form ion of any one or more of the articles or things specified in the list in the Fifth Schedule. It was argued on behalf of the Revenue that the profits from the automobile ancillaries industry of the assessee must be reduced by the loss suffered see in the manufacture of alloy steels. This Court was not in agreement with the submissions made by the Revenue. It was held that the profits and gains by an industry entitled to benefit under Section 80- cannot be reduced by the loss suffered by any other industry or 15. In the case before us, there is no discussion about Section 80- or the Tribunal and the High Court. However, we have considered the submissions on behalf of the Revenue section (1) of Section 80- section (5) of Section IA of the Act is limited to determination of quantum of of the Act by the ‘only source of income’. section (5) cannot be pressed into service for reading a limitation of section (1) only to ‘business income’. An attempt was made by the learned Senior Counsel for the Revenue to rely on the of the Act in respect of his submission that the intention of the legislature was to give the narrowest possible construction to deduction admissible under this sub-section. It is not necessary for us to deal with this submission in view of the findings recorded above. For the aforementioned reasons, the Appeal is dismissed qua the issue of the extent of deduction under 16.2 The Hon’ble Supreme Court has rejected the plea of Revenue to take business income of the assessee i.e. income under the head profit and gain of the business or profession, instead directed to take profit of eligible b 16.3 Accordingly, we do not find any infirmity in the order of the Ld. CIT(A) in the issue in dispute and accordingly we uphold same. The ground No. 6 of the appeal of the assessee is accordingly dismissed. 17. The ground No. 7 of the appeal relate to claim of the assessee of write off non-moving stores and spares to Rs.29,48,977/ brief facts qua the issue in dispute are that it had debited actual write off Rs.2.01 crores towards write off of non spares and reduced Rs.1.71 crores being provision spare recognized in profit and loss account was of Rs.29,48,977/ submitted during the assessment proceedings that it w mistake added while computing taxable income under the normal provisions of the Act and requested to reduce the said amount of Rs.29,48,977/- out of total income. But said contention of the assessee was rejected by the Assessing Officer as same was n claimed by way of filing revised return. The Ld. DRP also rejected the contention of the assessee. Before us, the Ld. counsel for the ITA Nos. 3714 & 3713/MUM/2024 recorded above. For the aforementioned reasons, the Appeal is dismissed qua the issue of the extent of deduction under Section 80 16.2 The Hon’ble Supreme Court has rejected the plea of Revenue to take business income of the assessee i.e. income under the head profit and gain of the business or profession, instead directed to take profit of eligible business as a single source of income. Accordingly, we do not find any infirmity in the order of the Ld. CIT(A) in the issue in dispute and accordingly we uphold The ground No. 6 of the appeal of the assessee is accordingly The ground No. 7 of the appeal relate to claim of the assessee moving stores and spares to Rs.29,48,977/ brief facts qua the issue in dispute are that it had debited actual write off Rs.2.01 crores towards write off of non-moving sto spares and reduced Rs.1.71 crores being provision earlier years. Hence, net expenses debited to profit and loss account was of Rs.29,48,977/- only. The assessee submitted during the assessment proceedings that it w mistake added while computing taxable income under the normal provisions of the Act and requested to reduce the said amount of out of total income. But said contention of the assessee was rejected by the Assessing Officer as same was n claimed by way of filing revised return. The Ld. DRP also rejected the contention of the assessee. Before us, the Ld. counsel for the JSW Energy Ltd 51 ITA Nos. 3714 & 3713/MUM/2024 recorded above. For the aforementioned reasons, the Appeal is dismissed Section 80-IA of the Act. 16.2 The Hon’ble Supreme Court has rejected the plea of Revenue to take business income of the assessee i.e. income under the head profit and gain of the business or profession, instead directed to usiness as a single source of income. Accordingly, we do not find any infirmity in the order of the Ld. CIT(A) in the issue in dispute and accordingly we uphold the The ground No. 6 of the appeal of the assessee is accordingly The ground No. 7 of the appeal relate to claim of the assessee moving stores and spares to Rs.29,48,977/-. The brief facts qua the issue in dispute are that it had debited actual moving stores and spares and reduced Rs.1.71 crores being provision of non-moving net expenses debited to only. The assessee submitted during the assessment proceedings that it was by mistake added while computing taxable income under the normal provisions of the Act and requested to reduce the said amount of out of total income. But said contention of the assessee was rejected by the Assessing Officer as same was not claimed by way of filing revised return. The Ld. DRP also rejected the contention of the assessee. Before us, the Ld. counsel for the assessee relied on the decision of the Hon’ble Bombay High Court in the case of Pruthvi Brokers and Shareholders report taxmann.com 23 (Bombay) and decision of the Hon’ble Delhi High Court in the case of International Tractor Ltd. v. DCIT (ITA No. 35/2019). 18. We have heard rival submissions of the parties and perused the relevant materials on record rejected by the Assessing Officer mainly for the reason that said claim was not filed by way of revised return. We are of the op that if the claim is bona same should be examined subject to provisions of law. Therefore, we set aside the finding the issue in dispute and restore Officer for examining the claim of the assessee of Rs.29,48,977/ account of write off non the appeal is accordingly allowed for statistical purposes. 19. In ground No. 8 also the assessee is aggrieved with not allowing the claim of gratuity amounting to Rs.109,98,529/ was inadvertently offered twice in the computation income. 19.1 We have heard rival submissions of the parties and perused the relevant materials on record identical to issue decided in ground No. 7 and therefore, this issue is also restored back to the file of the Assessing Officer for deciding ITA Nos. 3714 & 3713/MUM/2024 assessee relied on the decision of the Hon’ble Bombay High Court in the case of Pruthvi Brokers and Shareholders report taxmann.com 23 (Bombay) and decision of the Hon’ble Delhi High Court in the case of International Tractor Ltd. v. DCIT (ITA No. We have heard rival submissions of the parties and perused the relevant materials on record. The claim of the assessee has been rejected by the Assessing Officer mainly for the reason that said claim was not filed by way of revised return. We are of the op that if the claim is bonafide and within the provisions of the law same should be examined by the Assessing Officer and provisions of law. Therefore, we set aside the finding the issue in dispute and restore the matter back to the Assessing Officer for examining the claim of the assessee of Rs.29,48,977/ te off non-moving stores and spares. Ground No. 7 of the appeal is accordingly allowed for statistical purposes. ground No. 8 also the assessee is aggrieved with not allowing the claim of gratuity amounting to Rs.109,98,529/ y offered twice in the computation income. We have heard rival submissions of the parties and perused the relevant materials on record. The issue in dispute being identical to issue decided in ground No. 7 and therefore, this issue ack to the file of the Assessing Officer for deciding JSW Energy Ltd 52 ITA Nos. 3714 & 3713/MUM/2024 assessee relied on the decision of the Hon’ble Bombay High Court in the case of Pruthvi Brokers and Shareholders reported in (2012) 23 taxmann.com 23 (Bombay) and decision of the Hon’ble Delhi High Court in the case of International Tractor Ltd. v. DCIT (ITA No. We have heard rival submissions of the parties and perused claim of the assessee has been rejected by the Assessing Officer mainly for the reason that said claim was not filed by way of revised return. We are of the opinion fide and within the provisions of the law by the Assessing Officer and allowed provisions of law. Therefore, we set aside the finding on the matter back to the Assessing Officer for examining the claim of the assessee of Rs.29,48,977/- on moving stores and spares. Ground No. 7 of the appeal is accordingly allowed for statistical purposes. ground No. 8 also the assessee is aggrieved with not allowing the claim of gratuity amounting to Rs.109,98,529/- which y offered twice in the computation income. We have heard rival submissions of the parties and perused . The issue in dispute being identical to issue decided in ground No. 7 and therefore, this issue ack to the file of the Assessing Officer for deciding afresh. Ground No. 8 of the appeal is accordingly allowed for statistical purposes ITA No. 3713/MUM/2024 20. The grounds raised by the assessee in its appeal are reproduced as under: 1. On the facts and circumstances of the case as well as in law, the Hon'ble Disputed confirming the action of the upward adjustment of Rs. 32.51,731/ transaction of purch Enterprises, without considering the f of the case. 2. On the facts and circumstances of the case as well as in law, the Hon'ble Disputed Resolution Panel has erred in not appreciating the fact that th w/s.801A and making any upward adjustment will not have any effect on the Tax 3. On the facts and circumstances of the ca law, the Hon'ble Disputed Resolution Panel has erred in confirming the action of t making a disallowance of Rs.9,80.000/ Income Tax Act circumstances of the case. 4. On the facts and circumstances of the law, the Hon’ appreciating the fact that during the year under consideration the appellant has not earned any exempt income und amendment made in Finance Act, 2022 has not having any retrospective effect. 5. On the facts and circumstance law, the Hon'ble Disputed Resolution Panel has erred in confirming the action of the making an addition disallowance of expenses us. 14A of the Income Tux Aet. ITA Nos. 3714 & 3713/MUM/2024 Ground No. 8 of the appeal is accordingly allowed for 3713/MUM/2024 20. The grounds raised by the assessee in its appeal are reproduced On the facts and circumstances of the case as well as in law, the Hon'ble Disputed Resolution Panel has erred in confirming the action of the Ld. Assessing Officer in making an upward adjustment of Rs. 32.51,731/- on account of transaction of purchases of steel from the Associate Enterprises, without considering the facts and circumstances On the facts and circumstances of the case as well as in law, the Hon'ble Disputed Resolution Panel has erred in not appreciating the fact that the profit of the appellant is exempt w/s.801A and making any upward adjustment will not have any effect on the Tax acts and circumstances of the case as well as in law, the Hon'ble Disputed Resolution Panel has erred in confirming the action of the Learned Assessing Officer in making a disallowance of Rs.9,80.000/- u/s. 14A of the Income Tax Act 1961. without considering the facts and circumstances of the case. On the facts and circumstances of the case as well as in law, the Hon’ble Disputed Resolution Panel has erred in not appreciating the fact that during the year under consideration the appellant has not earned any exempt income und amendment made in Finance Act, 2022 has not having any retrospective effect. On the facts and circumstances of the case as well as in law, the Hon'ble Disputed Resolution Panel has erred in confirming the action of the Ld. Assessing Officer in addition of Rs.9,80,000/- on account of alleged disallowance of expenses us. 14A of the Income Tux Aet. JSW Energy Ltd 53 ITA Nos. 3714 & 3713/MUM/2024 Ground No. 8 of the appeal is accordingly allowed for 20. The grounds raised by the assessee in its appeal are reproduced On the facts and circumstances of the case as well as in Panel has erred in Assessing Officer in making an on account of alleged Associate acts and circumstances On the facts and circumstances of the case as well as in law, the Hon'ble Disputed Resolution Panel has erred in not e profit of the appellant is exempt w/s.801A and making any upward adjustment will not have se as well as in law, the Hon'ble Disputed Resolution Panel has erred in he Learned Assessing Officer in u/s. 14A of the 1961. without considering the facts and case as well as in esolution Panel has erred in not appreciating the fact that during the year under consideration the appellant has not earned any exempt income und amendment made in Finance Act, 2022 has not having any s of the case as well as in law, the Hon'ble Disputed Resolution Panel has erred in Assessing Officer in on account of alleged disallowance of expenses us. 14A of the Income Tux Aet. - 1961, while computing the book profit w/s. 115J3 of the Act, without appreciating the fact no such addition is to be made in computing the book profit us. 115JB of the Income T 1961. The appellant craves leave to ad delete the said g 20. The briefly stated facts of the case are that the assessee was engaged in generation of power through power plants. The return of income filed by the assessee was subjected to scrutiny assessment. In the course of scrutiny proceedings transaction of purchase of steel was sent to the Ld Transfer Pricing Officer (ld TPO) for arm’s length price determination. The adjustment made by the Ld. Officer in the draft assessment order. The L transfer pricing adjustment. Further, the Assessing made disallowance u/s 14A of the Act amounting to Rs.9,80,000/ in regular income as well as 20.1 The ground Nos pricing adjustment to the specified domestic transaction of the purchase of steel. The brief facts qua the issue in dispute are that assessee operates eight numbers of power plants which comprises 135 MW each that produced 1008 MW power by using lignite fuel. During the year under consideration, t exemption benefit in respect of eight power generating units u/s 80IA of the Act. The assessee explained that for maintenance of those power plants, the assessee purchased associated enterprises ITA Nos. 3714 & 3713/MUM/2024 61, while computing the book profit w/s. 115J3 of the Act, without appreciating the fact no such addition is to be made in computing the book profit us. 115JB of the Income T The appellant craves leave to add, amend, alter or id ground of appeal.” The briefly stated facts of the case are that the assessee was engaged in generation of power through power plants. The return of income filed by the assessee was subjected to scrutiny assessment. In the course of scrutiny proceedings, a specified domestic transaction of purchase of steel was sent to the Ld Transfer Pricing Officer (ld TPO) for arm’s length price determination. The adjustment made by the Ld. TPO was included by the Assessing Officer in the draft assessment order. The Ld. DRP upheld the said transfer pricing adjustment. Further, the Assessing made disallowance u/s 14A of the Act amounting to Rs.9,80,000/ as well as in book profit. s. 1 and 2 of the appeal relates to the transfer pricing adjustment to the specified domestic transaction of the purchase of steel. The brief facts qua the issue in dispute are that assessee operates eight numbers of power plants which comprises that produced 1008 MW power by using lignite g the year under consideration, the assessee claimed tax benefit in respect of eight power generating units u/s 80IA of the Act. The assessee explained that for maintenance of r plants, the assessee purchased associated enterprises (AE). For the purpose of benchmarking these JSW Energy Ltd 54 ITA Nos. 3714 & 3713/MUM/2024 61, while computing the book profit w/s. 115J3 of the Act, without appreciating the fact no such addition is to be made in computing the book profit us. 115JB of the Income Tax Act, d, amend, alter or The briefly stated facts of the case are that the assessee was engaged in generation of power through power plants. The return of income filed by the assessee was subjected to scrutiny assessment. specified domestic transaction of purchase of steel was sent to the Ld Transfer Pricing Officer (ld TPO) for arm’s length price determination. The TPO was included by the Assessing d. DRP upheld the said transfer pricing adjustment. Further, the Assessing Officer also made disallowance u/s 14A of the Act amounting to Rs.9,80,000/- . 1 and 2 of the appeal relates to the transfer pricing adjustment to the specified domestic transaction of the purchase of steel. The brief facts qua the issue in dispute are that assessee operates eight numbers of power plants which comprises that produced 1008 MW power by using lignite as the he assessee claimed tax benefit in respect of eight power generating units u/s 80IA of the Act. The assessee explained that for maintenance of steel from its or the purpose of benchmarking these transactions, the assessee has submitted a comparison chart between price of associated enterprises and ALP for purchase of the steel plant. The assessee applied other method for benchmarking using quotation from the independent 3 claimed that it accept associated enterprises and therefore, steel was purchased from the associated enterprises Ld. TPO noted that the profit of the assessee was into higher deduction u/s 80IA of the Act. Before the Ld. TPO, the assessee submitted that being a prudent businessman always purchased at the lower quotation and thus the allegation of the Ld. TPO/AO that assessee has earned more than ordinary profit was baseless by increasing the purchase price of the steel. The increase in expenses will reduce the gross total incom corresponding deduction u/s 80IA of the Act but the entire transaction is tax neutral and therefore, no adjustment price of the steel was contention of the assessee. The Ld. DRP also upheld the s relevant observation of the Ld. DRP is reproduced as “The assessee's argument that a prudent businessman will always purchase goods at the least possible cost can be accepted in a situation when related party transaction is not there. In this case, the transaction is with a related party which is enjoying ta goods to tax holiday units at a lower cost reducing their revenue and consequently their profits leading to lower taxes. Further, the tax holiday units will show higher than ordinary profits and thus claiming ITA Nos. 3714 & 3713/MUM/2024 , the assessee has submitted a comparison chart price of associated enterprises and ALP for purchase of the nt. The assessee applied other method for benchmarking using quotation from the independent 3rd parties. The assessee had accepted the lowest quotation which was from its associated enterprises and therefore, steel was purchased from the sociated enterprises instead from the independent parties. Ld. TPO noted that the profit of the assessee was inflated resulting higher deduction u/s 80IA of the Act. Before the Ld. TPO, the assessee submitted that being a prudent businessman at the lower quotation and thus the allegation of the Ld. TPO/AO that assessee has earned more than ordinary profit was baseless by increasing the purchase price of the steel. The expenses will reduce the gross total incom corresponding deduction u/s 80IA of the Act but the entire transaction is tax neutral and therefore, no adjustment was required. The Ld. TPO however rejected the contention of the assessee. The Ld. DRP also upheld the s relevant observation of the Ld. DRP is reproduced as “The assessee's argument that a prudent businessman will always purchase goods at the least possible cost can be accepted in a situation when related party transaction is not there. In this case, the transaction is with a related party which is enjoying tax holiday. In this case, the AE will be selling goods to tax holiday units at a lower cost reducing their revenue and consequently their profits leading to lower taxes. Further, the tax holiday units will show higher than ordinary profits and thus claiming greater deduction. Hence, as per the JSW Energy Ltd 55 ITA Nos. 3714 & 3713/MUM/2024 , the assessee has submitted a comparison chart price of associated enterprises and ALP for purchase of the nt. The assessee applied other method for benchmarking The assessee had the lowest quotation which was from its associated enterprises and therefore, steel was purchased from the the independent parties. The inflated resulting higher deduction u/s 80IA of the Act. Before the Ld. TPO, the assessee submitted that being a prudent businessman goods are at the lower quotation and thus the allegation of the Ld. TPO/AO that assessee has earned more than ordinary profit was baseless by increasing the purchase price of the steel. The expenses will reduce the gross total income and corresponding deduction u/s 80IA of the Act but the entire transaction is tax neutral and therefore, no adjustment to purchase required. The Ld. TPO however rejected the contention of the assessee. The Ld. DRP also upheld the same. The relevant observation of the Ld. DRP is reproduced as under: “The assessee's argument that a prudent businessman will always purchase goods at the least possible cost can be accepted in a situation when related party transaction is not there. In this case, the transaction is with a related party which x holiday. In this case, the AE will be selling goods to tax holiday units at a lower cost reducing their revenue and consequently their profits leading to lower taxes. Further, the tax holiday units will show higher than ordinary greater deduction. Hence, as per the mandate of Section 80 entity enjoying tax holiday should be the arm's length price. Also since only one unit is enjoying tax holiday, any sale by the non-eligible unit at a price l would decrease its profit and consequently its profit. Thus it is not tax neutral. In the considered view of the panel, the Ld. TPO has taken the right recourse in determining the ALP and making the relevant adjustment.” 21. We have heard rival submissions of the parties and perused the relevant materials on record steel made from the associated enterprises quotation from third party way of reducing purchase which is exempted u/s 80IA of the Act and therefore, upward adjustment had been made on the basis of the data of the quotations received from the other parties. The purpose behind transferring the goods from the related party to the assessee is for increasing the profit in the hands of the entity i.e. the assessee which is tax exempt. The assessee has not able to controvert as why the goods have been transferred quoted by the independent party. not examined the vera should have examined the independent steel purchase transactions actually happened during the relevant period between inde parties and therefore, after applying the CUP price/ adjustment should data provided by the assessee using the other method. Therefore, ITA Nos. 3714 & 3713/MUM/2024 mandate of Section 80-IA (10), the transaction price for an entity enjoying tax holiday should be the arm's length price. Also since only one unit is enjoying tax holiday, any sale by the eligible unit at a price lower than the arm's length price would decrease its profit and consequently its profit. Thus it is not tax neutral. In the considered view of the panel, the Ld. TPO has taken the right recourse in determining the ALP and making the adjustment.” We have heard rival submissions of the parties and perused the relevant materials on record. In the case the purchase of the steel made from the associated enterprises is below the independent quotation from third party. The Ld. AO and TPO observed that purchase price, the assessee has increased which is exempted u/s 80IA of the Act and therefore, upward adjustment had been made on the basis of the data of the quotations received from the other parties. The purpose behind ferring the goods from the related party to the assessee is for increasing the profit in the hands of the entity i.e. the assessee which is tax exempt. The assessee has not able to controvert as why the goods have been transferred at price lower than the p quoted by the independent party. But we find that the not examined the veracity of the independent parties should have examined the independent steel purchase transactions actually happened during the relevant period between inde parties and therefore, after applying the CUP method, arms length adjustment should have worked out rather than relying data provided by the assessee using the other method. Therefore, JSW Energy Ltd 56 ITA Nos. 3714 & 3713/MUM/2024 IA (10), the transaction price for an entity enjoying tax holiday should be the arm's length price. Also since only one unit is enjoying tax holiday, any sale by the ower than the arm's length price would decrease its profit and consequently its profit. Thus it is In the considered view of the panel, the Ld. TPO has taken the right recourse in determining the ALP and making the We have heard rival submissions of the parties and perused . In the case the purchase of the below the independent observed that by price, the assessee has increased profit which is exempted u/s 80IA of the Act and therefore, upward adjustment had been made on the basis of the data of the quotations received from the other parties. The purpose behind ferring the goods from the related party to the assessee is for increasing the profit in the hands of the entity i.e. the assessee which is tax exempt. The assessee has not able to controvert as why price lower than the price we find that the ld TPO has city of the independent parties as the TPO should have examined the independent steel purchase transactions actually happened during the relevant period between independent method, arms length have worked out rather than relying on data provided by the assessee using the other method. Therefore, the approach of the AO and the TPO which has been uph Ld. DRP is fallacious and not reliable and accordingly the finding of the Assessing Officer and restore the matter back to the AO/TPO for analyzing the transfer pricing adjustment using the CUP method by way of quoting data of the transactions for the sale of steel during relevant period. The ground Nos. 1 and 2 of the appeal of the assessee are accordingly allowed for statistical purposes. 22. The ground No. 3 and 4 of the appeal relates to disallowance u/s 14A of the Act amounting to Rs.9,80,000/ there is no exempt income earned during the year under consideration by the assessee. Hon’ble Delhi High Court in the case of 33 , we hold that no addition could be made if no exempt income was by the assessee in year under consideration. ground No. 3 and 4 of the appeal are accordingly allowed. 23. The ground No. 5 of the appeal relates to making disallowance for earning exempted income u/s 14A while computing book profit u/s 115JB of the Act. The identical issue has been decided by the in ITA No. 3714/Mum/2024 in the case of JSW Energy Ltd. therefore, this ground is allowed in favour of the assessee. ITA Nos. 3714 & 3713/MUM/2024 the approach of the AO and the TPO which has been uph Ld. DRP is fallacious and not reliable and accordingly the finding of the Assessing Officer and restore the matter back to the AO/TPO for analyzing the transfer pricing adjustment using the CUP method by way of quoting data of the for the sale of steel during relevant period. The ground . 1 and 2 of the appeal of the assessee are accordingly allowed for statistical purposes. The ground No. 3 and 4 of the appeal relates to disallowance u/s 14A of the Act amounting to Rs.9,80,000/-. Undisputedly, there is no exempt income earned during the year under consideration by the assessee. Respectfully following the decision of elhi High Court in the case of Chem invested ltd 378 ITR we hold that no addition could be made if no exempt income was by the assessee in year under consideration. ground No. 3 and 4 of the appeal are accordingly allowed. The ground No. 5 of the appeal relates to making disallowance for earning exempted income u/s 14A while computing book profit u/s 115JB of the Act. The identical issue has been decided by the in ITA No. 3714/Mum/2024 in the case of JSW Energy Ltd. e, this ground is allowed in favour of the assessee. JSW Energy Ltd 57 ITA Nos. 3714 & 3713/MUM/2024 the approach of the AO and the TPO which has been upheld by the Ld. DRP is fallacious and not reliable and accordingly, we set aside the finding of the Assessing Officer and restore the matter back to the AO/TPO for analyzing the transfer pricing adjustment using the CUP method by way of quoting data of the independent for the sale of steel during relevant period. The ground . 1 and 2 of the appeal of the assessee are accordingly allowed The ground No. 3 and 4 of the appeal relates to disallowance . Undisputedly, there is no exempt income earned during the year under following the decision of Chem invested ltd 378 ITR we hold that no addition could be made if no exempt income was by the assessee in year under consideration. Therefore, the ground No. 3 and 4 of the appeal are accordingly allowed. The ground No. 5 of the appeal relates to making disallowance for earning exempted income u/s 14A while computing book profit u/s 115JB of the Act. The identical issue has been decided by the in ITA No. 3714/Mum/2024 in the case of JSW Energy Ltd. e, this ground is allowed in favour of the assessee. 24. In the result, both the appeals are allowed partly for statistical purposes. Order pronounced in Sd/ (KAVITHA RAJAGOPAL JUDICIAL MEMBER Mumbai; Dated: 26/03/2025 Rahul Sharma, Sr. P.S. Copy of the Order forwarded to 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// ITA Nos. 3714 & 3713/MUM/2024 In the result, both the appeals are allowed partly for statistical unced in the open Court on 26/03/2025. Sd/- Sd/ (KAVITHA RAJAGOPAL) (OM PRAKASH KANT JUDICIAL MEMBER ACCOUNTANT MEMBER Copy of the Order forwarded to : BY ORDER, (Assistant Registrar) ITAT, Mumbai JSW Energy Ltd 58 ITA Nos. 3714 & 3713/MUM/2024 In the result, both the appeals are allowed partly for statistical /03/2025. Sd/- OM PRAKASH KANT) ACCOUNTANT MEMBER BY ORDER, (Assistant Registrar) ITAT, Mumbai "