MECLEOD RUSSEL INDIA LTD.,KOLKATA V. A.C.I.T., CIRCLE - 4(1), KOLKATA, KOLKATA

ITA 454/KOL/2022

AI Insights

The case involves Mcleod Russel India Ltd., which appealed against the orders of the Assessing Officer (AO) and the Dispute Resolution Panel (DRP) concerning transfer pricing adjustments and various disallowances made under the Income Tax Act for the assessment years 2017-18 and 2018-19. The main issues included the arm's length pricing of corporate guarantees, disallowances related to club expenses and excess remuneration, and adjustments under section 14A concerning tax-free income. The Tribunal examined the methodologies used for these adjustments and disallowances, referencing previous ITAT orders and various High Court judgments to arrive at its decision.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 652623 (ITAT-KOLKATA)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2017-2018
• Other Referred Cases: Checkmate Services Pvt. Ltd. vs. 448 ITR 518 (SC), CIT vs. Moderate Leasing and Capital Services Pvt. Ltd. ITA NO. 102/2018, PCIT vs. TV Today Network Ltd ITA 227/2022, Birla Corporation Ltd. ITA No. 1024/Kol/2023 & CO No. 04/Kol/2024, ACIT Vs. Vireet Investments Pvt. Ltd. 82 taxmann.com 415 (Delhi-Trib-SB), PCIT Vs. J.J. Glastronics Pvt. Ltd. 446 ITR 712 (Kar), PCIT (Central)-1, Vs. Moon Star Securities Trade and Finance Co. (P) Ltd. 161 taxmann.com 158, CIT vs Jayshree Tea Limited [ITAT 47 of 2014 and GA 1501 of 2014]
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Set aside; Transfer pricing; TDS; Earning of tax free income; Rule 8D; FORM 26AS
• Section: 144; 143(3); 154; 90; 234B; 14A; 115JB

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, KOLKATA SHRI SONJOY SARMA, JUDICIAL MEMBER SHRI SANJAY AWASTHI, ACCOUNTANT MEMBER I.T.A. No. 454/Kol/2022 (Assessment Year 2017-18) I.T.A. No. 458/Kol/2022 (Assessment Year 2018-19) Mcleod Russel India Ltd., Four Mangoe Lane, Surendra Mohan Ghosh Sarani, Kolkata - 700001 [PAN: AAACE6918J] …..…….…...……………..... Appellant vs. ACIT, Circle-4(1), Kolkata, Aayakar Bhawan, P-7, Chowringhee Square, Kolkata - 700069 .................................. Respondent Appearances by: Assessee represented by : Priyanka Salpuria, AR Department represented by : Praveen Kishore, CIT-DR Date of concluding the hearing : 16.04.2025 Date of pronouncing the order : 17.06.2025 O R D E R PER SANJAY AWASTHI, ACCOUNTANT MEMBER 1. This is a batch of two appeals pertaining to the same assessee for AYs 2017-18 and 2018-19. Since some of the issues are inter-connected and common to both the years, hence these appeals are being disposed of through a single order. 2. Both these appeals arise from the order of Ld. AO, dated 29.07.2022 (ITA No. 454/Kol/2022) and order dated 28.07.2022 (ITA No. 458/Kol/2022) passed by the Ld. AO u/s 143(3) r.w.s. 144C(13), r.w.s. 144B of the Income Tax Act, 1961 (hereafter “the Act”), after the Ld. Dispute 2 ITA Nos. 454 & 458/Kol/2022 Mecleod Russel India Ltd. Resolution Panel (hereafter “the Ld. DRP”) orders dated 24.06.2022 in both the cases. The assessee is aggrieved with the impugned orders and has raised the following grounds of appeal as under: ITA No. 454/Kol/2022 (AY 2017-18) “1. The Learned Dispute Resolution Panel (DRP) erred on facts and in the circumstances of the case and in law affirming the order of the Assessing Officer on the following ground and the appeal is being preferred against the same. 2. The computation made and the pricing methodology adopted by the Learned Assessing Officer to determine the arms-length price and the purported transfer pricing adjustment of Rs.2,01,97,394/- made in respect of Corporate Guarantees provided by the appellant is vitiated by an error in law and fact and is therefore liable to be deleted. 3. The computation made and the pricing methodology adopted by the Learned Assessing Officer to determine the arms-length price and the purported transfer pricing adjustment of Rs.2,98,142/- made on account of the purchase of goods by the appellant is vitiated by an error in law and fact and is therefore liable to be deleted. 4. For that the Assessing Officer erred in law and on facts in making disallowance of Rs.30,85,965/- u/s 36(1)(va) read with section 2(24)(x) of the IT Act for employees' contribution towards the provident fund beyond the due date prescribed in the Act, but paid before the due date of filing of return u/s 139(1) of the Act. 5. For that the Assessing Officer erred in law and on facts in making disallowance of Rs.68,81,145/- u/s 37 of the IT Act under the head Club expenses which were incurred for the business of the appellant. 6. For that the Assessing Officer erred in law and on facts in making disallowance of excess remuneration of Rs.2,66,40,000/-paid to Managing Director, when the excess amount paid was realized in the A.Y.2018-19 and offered to tax. 7. For that the Assessing Officer erred in law and on facts in double taxation of recovery of remuneration paid excess to Managing Director, in A.Υ. 2015-16 of Rs.3,75,18,000/-even though it was realized and offered to tax in the impugned assessment year. 8. For that the Assessing Officer erred in law and on facts in mechanically making further disallowance u/s 14A of Rs.44,07,000/- by invoking Rule 8D(2) and without establishing any approximate cause between such expenditure incurred and earning of tax-free income. 9. For that without prejudice to anything said herein above, the Assessing Officer erred in law and on facts and did not appreciate that total disallowance u/s 14A as determined by AO Rs.64,35,109/-of cannot exceed the exempt income of Rs.33,59,625/-. 3 ITA Nos. 454 & 458/Kol/2022 Mecleod Russel India Ltd. 10. For that the Assessing Officer erred in law and facts in adding the disallowance made of Rs.44,07,000/- u/s 14A read with Rule 8D to the book profit computed u/s 115JB of the Act. 11. For that the Assessing Officer erred in law and facts in not allowing the credit of TDS of Rs.10,20,11,960/-and TCS of Rs.43,630/-which was claimed in the return of income and also allowed in the draft assessment order passed on 30.06.2021. 12. The Appellant craves leave to add, alter, amend and/or withdraw any of the grounds or ground of appeal either before or at the time of appeal hearing.” ITA No. 458/Kol/2022 (AY 2018-19) “1. On the facts and in the circumstances of the case and in law, impugned assessment order so passed by the Assessing Officer is bad in law. 2. The computation made and the pricing methodology adopted by the Learned Assessing Officer to determine the arms-length price and the purported transfer pricing adjustment of Rs.1,40,38,728/-made in respect of Corporate Guarantees provided by the appellant is vitiated by an error in law and fact and is therefore liable to be deleted. 3. For that the Assessing Officer erred in law and on facts in mechanically making further disallowance u/s 14A of Rs 5,17,964/- by invoking Rule 8D(2) and without establishing any approximate cause between such expenditure incurred and earning of tax-free income. 4. For that without prejudice to anything said herein above, the Assessing Officer erred in law and on facts and not appreciating that total disallowance u/s 14A as assessed by AO of Rs.23,52,885/-cannot exceed exempt income of Rs.16,96,336/- 5. For that the Assessing Officer erred in law and in facts in adding the disallowance made u/s 14A read with Rule 8D to the book profit computed u/s 115JB of the Act. 6. For that the Assessing Officer erred in law and on facts in making disallowance of Rs. 61,99,971/- u/s 36(1)(va) read with section 2(24)(x) of the I.T. Act for employees' contribution towards the provident fund beyond the due date prescribed in the Act, but paid before the due date of filing of return u/s 139(1) of the Act. 7. For that the Assessing Officer has erred in law and on facts in adopting book profit u/s 115JB at Rs.135,57,95,708/- as per order u/s 143(1) instead of Rs.1,07,63,78,204/- by not considering adjustment of Rs. 27,94,17,504/- on account of deferred tax which has been certified by auditor. 8. For that the Assessing Officer has erred in law and on facts in not granting relief u/s 90/90A of Rs. 83,59,942/- . 9. For that the Assessing Officer has erred in law and on facts in computing book profit at Rs. 136,42,13,233/- and tax liability at Rs. 29,11,44,931/- 10. For that the Assessing Officer has erred in law and on facts in computing proportionate profit/loss on purchase of green leaf at Rs (-)19,50,89,450 and business loss at Rs(-) 43,90,86,432. 11. For that the Assessing Officer has erred in law and on facts in computing interest u/s 234B at Rs 5,95,96,264/- and interest u/s 234C at Rs 1,02,41,996/-. 4 ITA Nos. 454 & 458/Kol/2022 Mecleod Russel India Ltd. 12. The Appellant craves leave to add, alter, amend and/or withdraw any of the grounds or ground of appeal either before or at the time of appeal hearing.” 3. Before us, the Ld. AR argued extensively with the help of paper books, written submissions and compendium of case laws. In light of these documents and arguments each of these appeals may be dealt with in respect to the grounds of appeals for both of the years under consideration. ITA No. 454/Kol/2024 (AY 2017-18) Ground No. 2 4. Ground No. 2 pertains to Corporate Guarantee Fee which has been determined at an Arm’s Length Price (ALP) at 1.82%, thus leading to an adjustment of Rs. 2,01,97,394/-. On this issue, the Ld. AR drew our attention to ITAT’s order for AY 2014-15 in ITA No. 2279/Kol/2019 (order dated 07.07.2023). In this order, the Corporate Guarantee has been held to be 0.5% with the following findings: “8. The next question arose was the quantification of the fees required to be charged. On the strength of host of orders at the end of the ITAT, Mumbai Benches, Hyderabad Benches, it has been laid down that if an assessee has charged fees @0.5% on account of corporate guarantee provided by it, then such a fee would be considered at Arm's Length Price and no further adjustment is required to be made. The assessee by adopting this method has worked out the value of Arm's Length Price at Rs.24,73,927/- as against the fee of Rs.61,84,092/- determined by the TPO. The Id. 1st Appellate Authority has followed the orders of the ITAT Coordinate Benches for holding that fee is to be charged at 0.50% for providing corporate guarantee. This finding is discernible from paragraph no. 7 of the ld. CIT(Appeals)'s order extracted supra. After taking note of this finding, we do not wish to interfere in this finding because it is based on the decisions of the Coordinate Benches.” 4.1 The Ld. DR relied on the orders of Ld. AO and Ld. DRP. 4.2 We have considered the rival submissions and we find that this issue is covered in favour of the assessee due to the finding given for AY 2014- 15 by the ITAT (supra). Considering the order for AY 2014-15, we hold that the Corporate Guarantee has to be assessed @ 0.5% and not 1.82%. Consequently, the assessee succeeds on this ground of appeal. 5 ITA Nos. 454 & 458/Kol/2022 Mecleod Russel India Ltd. Ground No. 3 5. Ground No. 3 pertains to the downward adjustment of purchase of goods at Rs. 2,98,142/-. On this issue, the Ld. AR pointed out that in para 3.2 at page 5 of the Ld. DRP’s order, it has been clearly mentioned that no claim u/s 80IE of the Act was presented in the computation of income. The Ld. AR pointed out that the claim under Chapter VIA is shown as zero. Furthermore, the Ld. DRP has discussed this issue on page 5 at para 3.2 in its order and stated that no deduction u/s 80IE of the Act has been claimed by the assessee and hence the Ld. DRP merely directed to verify this fact from the records and delete any adjustments made thereon. The Ld. AR has taken pains to point out the factual situation in this regard to demonstrate that no claim u/s 80IE of the Act has been tendered. 5.1 The Ld. DR relied on the orders of the authorities below. 5.2 We have carefully considered the submissions and gone through the records. It is seen that, prima facie, no claim u/s 80IE of the Act has been tendered by the assessee and hence there should be no downward adjustment regarding the same. We find no fault with the directions given by the Ld. DRP. We merely reiterate the same for the Ld.AO to follow. Accordingly, the Ld. AO will verify the facts from the record and in case no claim u/s 80IE of the Act has been tendered, there will be no downward adjustment of Rs. 2,98,142/-. With these directions this ground is allowed for statistical purposes. Ground No. 4 6. Ground No. 4 challenges the disallowance of Employees Contributions u/s 36(1)(va) r.w.s. 2(24)(x) of the Act at Rs. 30,85,965/-. In this regard, the Ld. AR pointed out the discussion in this regard in the DRP’s order at pages 19 to 22 and fairly mentioned that the issue will need to be decided in light of the case of Checkmate Services Pvt. Ltd. reported in 448 ITR 518 (SC). The Ld. DR also relied on this case law. 6 ITA Nos. 454 & 458/Kol/2022 Mecleod Russel India Ltd. 6.1 We have considered the submissions and we find that this issue has to be decided against the assessee following the judgment in the case of Checkmate Services Pvt. Ltd. (supra). Accordingly, this ground is dismissed. Ground No. 5 7. Ground No. 5 challenges the disallowance of Club Expense of Rs. 68,81,145/- u/s 37 of the Act. On this issue the Ld. AR pointed out that there is a clear finding of the Ld. DRP on page 18, paras 9 to 9.3, wherein it has been held that the membership of clubs is beneficial to the business of any person and hence the same deserves to be allowed. 7.1 The Ld. DR, on the other hand, stated that the Ld. AO has recorded a finding to the extent that the assessee did not submit the copies of bills/invoices pertaining to the said expense and thereafter out of the claimed amount of Rs. 84,01,820/-, he found that only an amount of Rs. 15,20,675/- was found to be in the assessee’s name. It was only after this exercise that he disallowed Rs. 68,81,145/- u/s 37 of the Act. 7.2 We have considered the rival submissions and have also gone through the orders of Ld. AO and Ld. DRP in this regard. We find that the Ld. DRP has given the following directions: “The AO is accordingly directed to allow the said expenditure after due verification that the membership of the club is in the name of the company. The ground is disposed of as above” We find no fault in principle with these directions and consequently direct the Ld. AO to verify the expenses and allow all expenses which are billed to the assessee company. The assessee would do well to present the requisite details before the Ld. AO in this regard. Accordingly, this ground is allowed for statistical purposes. 7 ITA Nos. 454 & 458/Kol/2022 Mecleod Russel India Ltd. Ground No. 6 8. Ground No. 6 pertains to disallowance of excess remuneration of Rs. 2,66,40,000/- paid to Managing Director. In this respect, the Ld. AR read out from the written submissions which deserve to be extracted for reference as under: “5.6 After considering the submissions of the appellant the Hon'ble DRP directed the Assessing Officer as follows:- \"The submissions have been perused. The AO has referred to purported violation of order of Department of Corporate Affairs which is not relevant in determining the taxation of the relevant amount under the IT Act. The assessee has stated that the addition of the said sum amounts to double taxation of the same amount since the said sum has been offered to tax by it in FY 2017-18. The AO is directed to verify the claim of the assessee from the financial statements, return of income and additional documents filed during remand proceedings, with specific reference to the claim of credit of the same under the head 'Key managerial personnel compensation'. If the claim is found correct, the addition shall be deleted. It shall be ensured that there is no double taxation of the same amount. The Grounds are disposed of as above. [Refer Page 11 Para 6.5 of DRP's Order dated 24.06.2022] 5.7 In the assessment order passed pursuant to the Hon'ble DRP's order the Assessing Officer observed as follows:- \"On the basis of direction of Hon'ble DRP, the details furnished by the assessee in course of assessment proceedings and remand proceedings are verified. As the assessee has made excess payment of remuneration of Rs.266.40 lakhs to the Directors as stipulated under section 197 of the companies Act, 2013 and the assessee company has not provided any evidences such as application made to Central Gout for regularization of the said excess payment and/or proof of Central Government has regularized the excess payment made by the assessee. Since, the assessee has failed to substantiate the claim of the excess payment made to Directors, therefore, an amount of Rs.2,66,40,000/- are disallowed and added to the income of the assessee. Penalty proceedings u/s 270A of the IT Act for under reporting of the income by misreporting the fact of the income is separately initiated. 5.8 The appellant submits that the Assessing Officer exceeded his jurisdiction by stating in the order that \"the assessee company has not provided any evidence such as application made to Central Govt. for regularization of the said excess payment and/or proof of Central Govt. has regularized the excess payment made by the assessee\" in spite of the direction of the Hon'ble DRP in Para 5 at Page 11 of the order that violation of order of the Department of Corporate Affairs is not relevant in determining the taxation of the relevant amount under the IT Act. It is prayed that in view of the submissions made above the addition be deleted in full.” 8.1 The Ld. DR relied on the order of Ld. AO. 8 ITA Nos. 454 & 458/Kol/2022 Mecleod Russel India Ltd. 8.2 We have carefully considered the submissions (as per extract supra) and also gone through the order of Ld. AO at pages 10-11 of his order. We find that the Ld. DRP’s directions have been mis-construed by the Ld. AO as he was to simply confine himself to the language of the said directions (para 6.5 at page 11 of the DRP’s order). Thus, we direct that the Ld. AO would confine himself to the claim of the assessee with respect to the treatment meted out to the impugned amount in the computation of income and the audited accounts. In case, the claim of the assessee is verified from these then there can be no addition on this account. In result, this ground of the assessee is allowed for statistical purposes. Ground No. 7 9. Ground No. 7 pertains to double taxation of excess remuneration of Rs. 3,75,18,000/- paid to Managing Director in the AY 2015-16. On this issue the Ld. AR mentioned that there was a suo-moto disallowance in the accounts and computation in this regard. The Ld. AR pointed out that the Ld. DRP’s findings on pages 12-13, especially in para 7, were relevant. The Ld. AR took us through the finding of Ld. AO at pages 8-9 of his order in which he has mentioned that the purported recovery is shown only on paper. In this manner, the Ld. AO is seen to have doubted that the recovery was ever made at all. The Ld. AR took us through the statement of accounts and reiterated the claim that the impugned amount was already disallowed. 9.1 The Ld. DR relied on the orders of Ld. AO and the Ld. DRP. 9.2 We have carefully considered the contention of both the Ld. AR/DR and have also gone through the orders of authorities below. It is seen that in para 7.4 at page 13 of the Ld. DRP’s order there is a clear direction that the fact of recovery as reflected in Notes 43(e)(i) to the audited accounts should be verified and in case the recovery is reflected in the said audited accounts then there can be no addition. Here also we find that the Ld. AO has travelled beyond the mandate given to him as per para 7.4 at page 13 of the Ld. DRP’s order. However, to make issues clear, we direct that in 9 ITA Nos. 454 & 458/Kol/2022 Mecleod Russel India Ltd. case the said recovery is reflected in the audited accounts then the assessee would get relief with respect to the impugned amount as per the ground of appeal. The Ld. AO is directed accordingly. In result, this ground is allowed for statistical purposes. Ground Nos. 8 & 9 10. Ground Nos. 8 and 9 pertain to disallowance u/s 14A of Rs. 44,09,000/-. On this issue, the Ld. AR pointed out that the Ld. AO had actually made the disallowance of Rs. 64,35,109/- and had given the benefit of an amount of Rs. 20,28,109/- suo-moto disallowed by the assessee. The Ld. AR took us through the relevant findings of Ld. DRP on pages 13 to 18, mentioned in paras 8 to 8.6. The Ld. AR argued with the help of written submissions, relevant extracts from which deserve to be mentioned for reference: “7.3 After considering the submissions of the appellant the Hon'ble DRP observed as follows:- The submissions have been examined. On the matter of recording of satisfaction or otherwise by the AO as contended by the assessee, in terms of the provisions of sub-section (8) of Section 114C of the Act, the DRP can only confirm, reduce or enhance the variation proposed in the draft order. It cannot set aside any proposed variation or issue any direction under sub-section (5) for further enquiry and passing of the assessment order. The DRP does not have the power to give any direction on matters such as non-recording of satisfaction and consequent annulment/quashing of the variation proposed. It is also noted that at Para 5.7.3 of the draft assessment order, the AO has discussed the reasons for invoking Rule 8D. In view of the above, the objections of the assessee in this regard are rejected. 7.4 The Hon'ble DRP observed that CBDT Circular No. 5/2014 dated 11.02.2014 provides that for disallowance u/s 14A all expenditures relatable to exempt income, regardless of the intention with which the investments have been made or whether any such exempt income has been declared by the assessee in its relevant year. In the present case, the assessee has made investments which are capable of generating dividend income which is not includible (even if not included in the current year) in the total income, thus attracting the provisions of section 14A of the Act. Consequently, the computation under 115JB of the Act is also in order. The AO's action is not interfered with Grounds 9 and 10 are dismissed. 7.5 In the assessment order dated 29.07.2022 passed in pursuant to the directions of the Hon'ble DRP the AO disallowed Rs.64,35,109/- u/s 14A and after deducting the disallowance made by the appellant itself in the return of income of Rs.20,28,109/- made a further disallowance of Rs.44,07,000/-. Similar addition of Rs.44,07,000/- was also made to the income computed u/s 115JB. 10 ITA Nos. 454 & 458/Kol/2022 Mecleod Russel India Ltd. 7.6 The Appellant submits that the Hon'ble Supreme Court in the case of South Indian Bank Ltd (C. A 9606/2011 dated 09.09.2021] held that revenue's failure to prove nexus makes proportionate disallowance u/s 14A unsustainable. Therefore, without showing nexus of expenditure with the exempt income no disallowance can be made u/s 14A. In the alternate it is the submission that because of various judicial decisions, the total disallowance u/s 14A cannot exceed the exempt income of Rs.33,59,625/-. Reliance in this regard is placed on the decision of Hon'ble Delhi High Court in the case of CIT vs Moderate Leasing and Capital Services Pvt. Ltd (ITA NO. 102/2018) against this judgment the SLP filed by the Revenue was dismissed by the Hon'ble Supreme Court. SLP (Civil) Diary No(s) 38584/2018 dated 19.11.2018. Recently on 27.07.2022, Delhi High Court in the case of PCIT vs TV Today Network Ltd in ITA 227/2022 has held relying on the decisions in the case of Cheminvest Ltd. vs. CIT) (2015) 61 taxmann.com 118 (Del.) and PCIT vs. IL & FS Energy Development Company Ltd. reported in 2017 SCC OnLine Del 9893, that disallowance to be made under Section 14A cannot be in excess of the exempt income earned by the assessee.” 10.1 The Ld. DR relied on the findings given in the DRP’s and AO’s order. 10.2 The contention of Ld. AR/DR have been considered and we have also gone through the orders of authorities below in this regard. We have also carefully gone through the case laws relied on by the Ld. AR, copies of which have been filed in the compendium of case laws. It deserves to be held that the provisions of section 14A read with Rule 8D would apply in principle to the facts in this case. However, we are conscious of the fact that the exempt income is only to the tune of Rs. 33,59,625/- and in that respect any disallowance u/s 14A of the Act cannot be more than the actual exempt income earned. Thus, following the case of TV Today Network Ltd. (supra) and other decisions mentioned in the submissions extracted (supra), we hold that the disallowance u/s 14A, read with Rule 8D, cannot be more than Rs. 33,59,625/-. Also, this disallowance would take into consideration, the amount that has already been disallowed by the assessee amounting to Rs. 20,28,109/-. We direct the Ld. AO to compute the disallowance accordingly. In light of this discussion, these grounds of the assessee are partly allowed. Ground No. 10 11. Ground No. 10 pertains to an addition of disallowance u/s 14A of the Act at Rs. 44,07,000/- to the amount considered for computing the book profit u/s 115JB of the Act. 11 ITA Nos. 454 & 458/Kol/2022 Mecleod Russel India Ltd. Right at the outset, the Ld. AR pointed out that there were several cases in favour of the assessee, wherein disallowance u/s 14A of the Act cannot be considered for working out books profits u/s 115JB of the Act. She relied on the case of Monsoon Star Securities reported in TMI 667 of the Hon’ble Delhi High Court and some others. 11.1 The Ld. DR relied on the finding given by the Ld. DRP on pages 17- 18 of the said order. 11.2 We have carefully considered the rival submissions and have also gone through the documents before us, including the case laws relied on by the assessee. It has been brought to our notice that in the case of Birla Corporation Ltd, ITA No. 1024/Kol/2023 & CO No. 04/Kol/2024, dated 24.12.2024, where one of us was the author, that this issue has been decided in the following manner: “5. Regarding the upward adjustment of disallowance computed under Section 14A of the Act for computing “book profit” under Section 115JB of the Act. It is seen that for A.Y. 2015-16 the matter has been decided against the assessee by the Hon'ble ITAT vide its order in ITA No. 1965/Kol/2019 (supra) as under: “32. The ld. counsel for the assessee, in this respect, has submitted that the provisions of section 115JB are complete code in itself and therefore, the Assessing Officer cannot tinker with the book profits. However, we do not find force in the aforesaid contention of the ld. counsel for the assessee in this respect. It is to be pointed out that as per Explanation 1(f), the book profit means the profit shown in the statement of profit and loss account as increased by the amount of expenditure relatable to the exempt income. The said amount of expenditure has already been ordered to be determined as per our observations made above while adjudicating the issue relating to the disallowance u/s 14A vide Ground No.10 of the revenue’s appeal. It has to be further noted that section 115JB in itself does not prescribe any procedure to calculate the expenditure relatable to exempt income earned by the assessee. The said provision has been separately and specifically placed in the Act u/s 14A of the Act. Therefore, the book profits of the assessee are liable to be increased by the expenditure as Clause (f) of section 115JB of the Act. In view of this, it is directed that the book profits will be increased u/s 115JB of the Act by the disallowance calculated as per our directions given while adjudicating Ground No.10 of the revenue’s appeal. This ground of the revenue’s appeal is hereby allowed.” 5.1 It is seen that while coming to the conclusion as extracted above, the Hon'ble Bench was presumably not made aware of the ITAT Special Bench decision in the 12 ITA Nos. 454 & 458/Kol/2022 Mecleod Russel India Ltd. case of ACIT Vs. Vireet Investments Pvt. Ltd. reported in 82 taxmann.com 415 (Delhi- Trib-SB). In this case it has been held that the computation u/s 115JB of the Act is to be made without resorting to computation as contemplated under Section 14A read with Rule 8D of the Rules. Furthermore, a review of literature on this issue reveals that the Hon'ble Karnataka High Court in the case of PCIT Vs. J.J. Glastronics Pvt. Ltd. reported in 446 ITR 712 (Kar) has specifically directed that the amount disallowed under Section 14A could not be added to net profit while computing book profit under Section 115JB of the Act. Similarly, the Hon'ble Delhi High Court in the case of PCIT (Central)-1, Vs. Moon Star Securities Trade and Finance Co. (P) Ltd. reported in 161 taxmann.com 158 as also directed that disallowance made under Section 14A of the Act could not be considered while computing MAT under Section 115JB of the Act. These authorities are merely cited as illustrations since there are other judicial pronouncements also on the subject, including an unreported judgement of the Hon’ble Calcutta High Court: CIT vs Jayshree Tea Limited [ITAT 47 of 2014 and GA 1501 of 2014, order dated 19.11.2014]. Respectfully following these judgements, and differing from the order of ITAT for AY 2015-16 (supra), the issue of computing for book profits after including additions made under Section 14A read with Rule 8D, cannot be supported and thus, the action of Ld. CIT(A) as per his findings on page 45 of the impugned order is upheld and the specific ground of the revenue is dismissed.” Considering the finding given in the case of Birla Corporation Ltd. (supra) we hold that this issue needs to be decided in favour of the assessee and against the revenue. In result, this ground of the assessee is allowed. Ground No. 11 12. Ground No. 11 pertains to not allowing credit of TDS of Rs. 10,20,11,960/- and TCS of Rs. 43,630/-. 12.1 The Ld. AR requested that suitable directions may be given to the Ld. AO for allowing credit of TDS/TCS to the assessee. 12.2 The Ld. DR had no objection in case this matter was to be remanded to the Ld.AO for verification. 12.3 We have considered the facts of this matter and we direct that the Ld.AO must allow credit of taxes collected or deducted at source which should be available in Form 26AS etc. Accordingly, this ground is allowed for statistical purposes. 13 ITA Nos. 454 & 458/Kol/2022 Mecleod Russel India Ltd. ITA No. 458/Kol/2022 (AY 2018-19) 13. In this appeal Ground No. 2 pertains to the Corporate Guarantee Fee worked out by the TPO, through upward adjustment of Rs. 1,40,38,728/-, has been challenged. In this case, the TPO has determined the ALP of the associated enterprise transaction of Corporate Guarantee @ 1.82% per annum. The assessee on the other hand has followed the method of computing Corporate Guarantee Fee at 0.5%, as has been done in the immediately preceding year, which is being adjudicated through this common order. For the sake of brevity, it needs to be mentioned that this issue has been discussed at length in paras 4 to 4.2 of this order. In that discussion, it has been held that Corporate Guarantee Fee @ 0.5% should be used to determine ALP. Needless to say, since the assessee has adopted this very same percentage, hence, there will be no upward adjustment. Accordingly, the assessee succeeds with regard to this ground of appeal. 14. Ground Nos. 3 and 4 challenge the disallowance u/s 14A read with Rule 8D of the IT Rules at Rs. 5,17,964/-. For this year, the AO is seen to have made a disallowance of Rs. 23,52,885/-. The Ld. DR has pointed out that the assessee made a suo-moto disallowance of Rs. 18,34,921/-. She also pointed out that the total exempt income was only to the tune of Rs. 16,96,336/-. Since on this issue also a finding has been given in para 10 to 10.2 (supra) through which it has been held that the disallowance u/s 14A read with Rule 8D cannot exceed the quantum of exempt income. We find that in this case, the exempt income is Rs. 16,96,336/- and the assessee has already made a suo-moto disallowance of Rs. 18,34,921/- hence, we direct that the disallowance u/s 14A read with Rule 8D of the IT Rules should be restricted to the amount disallowed by the assessee on its own, being Rs. 18,34,921/-. In result, the assessee succeeds with respect to these two grounds. 15. Ground No. 5 challenges the additions of disallowance u/s 14A of the Act of Rs. 5,17,964/- to the book profit u/s 115JB of the Act. On this issue 14 ITA Nos. 454 & 458/Kol/2022 Mecleod Russel India Ltd. also we have already given a finding in paras 11 to 11.2 (supra) that any addition u/s 14A of the Act would not be used for working out the book profit u/s 115JB of the Act. Following the finding in paras 11 to 11.2 (supra), we direct that the disallowance u/s 14A of the Act will not be used to compute book profit u/s 115B of the Act. Accordingly, the assessee succeeds on this ground of appeal. 16. Ground No. 6 challenges the disallowance of Employees Contribution u/s 36(1)(va) read with section 2(24)(x) of the Act at Rs. 61,69,971/-. The Ld. AR fairly pointed out that on this issue the finding for AY 2017-18 (ITA No. 454/Kol/2022) would hold good. We find that this issue has been discussed in the light of the case of Checkmate Services Pvt. Ltd. reported in 448 ITR 518 (SC) and a finding has been given in paras 6 to 6.1 (supra). Needless to say, the issue has been held against the assessee and following the findings in paras 6 to 6.1, this ground of appeal is dismissed. 17. Ground No. 7 challenges computing book profit u/s 115JB of the Act at Rs. 135,57,95,708/-, in place of Rs. 107,63,78,204/-, after adjustment of deferred tax Rs. 27,94,17,594/-. In this case, it has been pointed out by the Ld. AR that the adjustment of deferred tax of Rs. 27,94,17,594/- has not been allowed while working out the tax liability. The Ld. AR has requested that directions may be issued to the Ld. AO for recomputing the books profits, in line with the directions contained for section 14A disallowance and thereafter, working out the tax on the same. The Ld. DR did not have any objections in case suitable directions were to be issued to the Ld. AO in this regard. 17.1 We have considered the submissions in this regard and documents before us. We find that this matter deserves to be disposed of with the direction to the Ld.AO for correctly computing the book profit and in this regard, we expect that the assessee would file a computation from their side also, keeping in view the directions contained in this order and thereafter, the Ld. AO would work out the book profit and the taxes 15 ITA Nos. 454 & 458/Kol/2022 Mecleod Russel India Ltd. thereon. In result, this ground of the assessee is allowed for statistical purposes. 18. Ground No. 8 ventilates the grievance of not granting relief u/s 90/90A of the Act at Rs. 83,59,942/-. In this regard, the Ld. AR pointed out the discussion in the order of Ld. DRP at pages 14-15 in paras 9.1 and 9.2. The Ld. AR read out from the written submissions, which would be relevant for considering this issue and hence are extracted as under: “Details of the income earned, tax paid outside India, tax payable in India and tax relief sought was provided in the Schedule FSI of 1.T Return. (Copy enclosed). Since the Tax payable on this income in India is higher, the assessee had claimed tax relief u/s 90, however in the intimation u/s 143(1), without giving any reason, no deduction for taxes paid abroad was allowed to the Appellant. The DRP dismissed the objection of the appellant by observing that a conjoint reading sub-section 2 of Section 144C and sub Section (5) of the provisions shows that the DRP can issue direction only in respect of a variation the Assessing Officer has proposed to make in the draft assessment order. The adjustments made u/s 143(1) involves adjustments made by the Centralised Processing Cell while processing the return under the scheme for Centralised processing of returns. Such adjustment do not constitute variation within the meaning and scope of Sec. 144C of the Act as they have not been made by the Assessing Officer u/s 1343(3) of the Act by way of assessment. For this the assessee can file an application u/s 154 for amendment of the intimation u/s 143(1) of the Act and dismissed the grounds of the appellant. The appellant submits that the observation of the DRP are not sustainable in law. The proceedings u/s 143(3) as well as u/s 144 before the DRP are continuation of assessment proceedings. The endeavor should be to assess the correct income of the appellant. If a mistake is pointed out by the appellant during the proceedings either u/s 143(3) or 144C it is the duty of the appropriate authority to rectify the mistake at the earliest point of time to save the appellant from unnecessary litigation and cost. Therefore, the appellant submits that the DRP miserably failed to address the genuine grievance of the appellant.” 18.1 The Ld. DR supported the findings given in the Ld. DRP’s order. 18.2 We have carefully considered the submissions of Ld. AR/DR and we find considerable strength in the submission of Ld. AR to the extent that the benefit of relief u/s 90 of the Act is allowable to the assessee and should be granted by the Ld. AO, as claimed by the assessee, at the time of giving effect to this appellate order. In result, this ground of appeal of the assessee is allowed. 16 ITA Nos. 454 & 458/Kol/2022 Mecleod Russel India Ltd. 19. In Ground No. 9, the assessee has challenged the fact that the book profit as per the assessment order is shown at Rs. 135,63,13,672/- whereas in the computation sheet annexed to the assessment order this figure is shown as Rs. 136,42,12,233/-. On this issue, the Ld. AR requested that suitable directions may be given to the Ld. AO for correctly computing the book profits considering the findings given for treating the disallowance u/s 14A of the Act separately from the provision of section 115JB of the Act, and thereafter arriving at the correct figure of books profits for the purposes of computing payable tax. The Ld. DR had no objection in case a suitable direction is given to the Ld. AO. 19.1 We have considered the documents before us and the averments of Ld. AR/DR. We direct the Ld. AO to adopt the correct figure of book profit and thereby compute the taxable income. In result, this ground is treated as allowed for statistical purposes. 20. Ground No. 10 points out an apparent error in the computation of proportionate profit/loss on purchase of green leaves. The Ld. AR has pointed out that the business loss has been computed at Rs. 43,90,86,432/- instead of Rs. 46,03,97,765/-. The Ld. AR prayed that suitable directions may be issued to the Ld.AO to adopt the correct figure of loss in the case. The Ld. AR had no objection in case directions were to be issued to the Ld. AO for a correct computation of profit/loss. 20.1 Considering the facts and circumstances of this case and the documents before us, we direct the AO to compute the loss/profit accurately and adopt the figures arising after appeal effect is given to this adjudication order. In result, this ground of the assessee is allowed for statistical purposes. 21. Ground No. 11 protests the charge of interest u/s 234B at Rs. 5,95,96,264/- and interest u/s 234C at Rs. 1,02,41,996/-. We find that the charging of interest would be consequential upon the final 17 ITA Nos. 454 & 458/Kol/2022 Mecleod Russel India Ltd. determination of profit/loss and hence we do not give any specific directions in this regard. This ground of appeal is thus, partly allowed. 22. In result, both the appeals of the assessee are partly allowed. Order pronounced on 17.06.2025 Sd/- Sd/- (Sonjoy Sarma) (Sanjay Awasthi) Judicial Member Accountant Member Dated: 17.06.2025 AK, Sr. P.S. Copy of the order forwarded to: 1. Mecleod Russel India Ltd. 2. ACIT, Circle-4(1), Kolkata 3. CIT(A)- 4. CIT- 5. CIT(DR) //True copy// By order Assistant Registrar, Kolkata Benches "