M/S. KIRI DYES AND CHEMICALS LTD.,,AHMEDABAD vs. THE ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE-2(1)(2),, AHMEDABAD

आदेश/O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: 1. The captioned appeals have been filed at the instance of the Assessee and the Revenue against the separate orders of the Learned Commissioner of Income Tax (Appeals) Ahmedabad, involving the respective Assessment Years.

The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal.

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3.1 The assessee filed its original return of income for the year under consideration dated 29th November 2003 declaring total income at ₹ 90,31,849/- after claiming the deduction under section 80IB and 80HHC of the Act. The assessee subsequently revised its return of income and claimed deduction under section 10B of the Act on the reasoning that it was registered as 100% EOU w.e.f. 1st November 2002. The assessee in the revised return of income declared an income of ₹ 29,18,932/- after claiming the exemption under section 10B of the Act. However, the Assessing officer in the assessment framed under section 143(3) of the Act dated 30th March 2006 denied the exemption claimed by the assessee for ₹ 3,78,28,641/- under section 10B of the Act. Thereafter, the matter was carried to the learned CIT (A), ITAT and the Hon’ble Gujarat High Court. The Hon’ble Gujarat High Court eventually has set aside the issue to the AO in tax appeal No. 312 of 2008 vide order dated 23rd July 2008 for fresh adjudication.

3.2 In consequence to the direction of the Hon’ble Gujarat High Court, the AO initiated the proceedings for fresh examination. The AO in the set-aside proceedings found that the other income shown by the assessee in its financial statement is not eligible for exemption under section 10B of the Act in view of the judgments of Hon’ble Supreme Court in the case of CIT vs. Sterling Food reported in 237 ITR 579 and Pandian Chemicals Ltd. vs. CIT Reported in 262 ITR 278.

3.3 Besides this, the AO was also of the opinion that the assessee is not eligible for exemption under section 10B of the Act for the reasons as detailed under: i. It was mandatory on the part of the assessee to file the certificate of the chartered accountant for claiming the deduction under section 10B of the Act. But the same was not filed. However, the certificate which was filed along with the revised return of income was pertaining to the assessment year 2004-05. ii. The approval for 100% EOU was granted in the middle of the year i.e. 1st November 2002.

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iii. If other income shown by the assessee are excluded for working out the exemption under section 10B of the Act, the income of the assessee from the eligible unit becomes negative. Thus there is no question for claiming or allowing the exemption under section 10B of the Act. 3.4 In view of the above, the AO denied the exemption claimed by the assessee under section 10B of the Act and assessed the income in the assessment framed under section 143(3) read with section 254/260B vide order dated 15th December 2008 determining the total income at ₹ 4,16,41,810/- only.

3.5 On appeal, the learned CIT (A) vide order dated 30th November 2009 held that the assessee is eligible for exemption under section 10B of the Act with effect from 1st November 2002. Meaning thereby that the assessee is not eligible for deduction with respect to other income accrued or arise for the period 01-04-2002 to 31-10-2002 for deduction under section 10B of the Act. However the ld. CIT-A was pleased to grant exemption under section 80IB and 80HHC for pre EOU period income subject to verification and fulfilment of condition therein. Further with respect to post EOU period, the learned CIT (A) found that the other income declared by the assessee for the year is of ₹ 11,34,67,923/- only. Out of such other income a sum of ₹ 5,55,31,132/- pertains to the pre-EOU period (i.e. upto 31st October 2002) and the balance amount of ₹ 6,08,75,051/- pertains to the post EOU period (i.e. from 1st November 2002). The learned CIT (A) further found that the other income as declared includes Excise duty refund, Interest, DEPB etc which are not the part of eligible income under section 10B as per Hon’ble supreme court decision in case of Liberty India vs. CIT reported in 317 ITR 218. Accordingly the learned CIT (A) excluded the entire other income of Rs. 6,08,75,051/- from the computation of eligible profit under section 10B of the Act.

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section 10B of the Act for the post EOU period i.e. from 1st November 2002 in view of the CBDT circular bearing number 1/05 dated 6-1-2005.

5.1 For the balance amount of other income, the ITAT also recorded in his order that the ld. AR for the assessee contended that the same is covered in favor of assessee. The relevant recording of the ITAT reads as under: With respect to other incomes other than those covered against the assessee, it is submitted that the same are covered in favour of Assessee by the various decision cited hereinabove.

5.2 After recording the arguments of the ld. AR, the ITAT was pleased to set aside the issue to the file of the AO for fresh examination after considering the other income between the pre and post EOU period on the basis of the case laws cited by the ld. AR. The relevant finding of the ITAT reads as under: From the table it is seen that Assessee has bifurcated the income into 2 periods up to the period of granting of EOU status and subsequent to it. We are of the view that these factual aspect needs verification at the end of A.O. We therefore remit the issue to the file of A.O for fresh examination of the claim of Assessee, the bifurcation of income into 2 period in the light of the decisions cited reasonable opportunity of hearing to the Assessee. The Assessee shall be at liberty to furnish additional evidence before A.O. Thus this ground is allowed for statistical purposes.

5.3 In the 3rd round of litigation, the AO in the assessment framed under section 143(3) read with section 254 of the Act vide order dated 7th October 2015 denied the exemption with respect to the other income aggregating to ₹ 6,00,87,989/-only. The breakup of such other income stands as under:

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Other Incomes DEPB Rs.2,41,94,222/- DEPB Difference Rs.1,80,270/- Duty Draw Back Rs.5,57,529/- Excise Duty Refunds(M) Rs.3,15,58,576/- Excise Duty Refunds(T) Rs.9,69,840/- Bank Interest Rs.10,12,683/- Quality difference income Rs.41,720/- Bank Interest Rs.5,22,546/- Discount Income Rs.10,50,423/- Total Rs.6,00,87,989/-

5.4 The AO was of the view that other income namely Duty draw back, DEPB and DEPB rate difference are covered against the assessee by the judgment of Hon’ble supreme court in case of Liberty India vs. CIT (supra).

5.5 Similarly Excise duty refund cannot be included in eligible profit u/s 10B of the Act as held by the E bench of Mumbai ITAT in case of Tessitura Monti India Pvt Ltd. vs. ITO in ITA no. 7127/Mum/2010.

5.6 The AO with respect to bank interest & netting of the interest income, exchange rate difference and rate difference in sale price held that the case law relied upon by the assessee are challenged by the Revenue which are pending before the higher forum, therefore at this juncture, the same cannot be allowed.

5.7 The AO further observed that the net income for the post EOU period declared by the assessee was of Rs. 2,54,92,775/- which includes other income for Rs. 6,00,86,989/-for the post EOU period which is not eligible for exemption. Therefore, in the present scenario if the same is disallowed then, the eligible profit becomes negative by Rs. 3,45,95,214/-. Therefore the assessee is not eligible for deduction under section 10B of the Act.

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shown under the head other income are business income of the assessee which was duly recorded in the books of account and offered to tax as business income of the eligible undertaking. Accordingly in view of the decision of Special Bench of ITAT in case of Maral Overseas Ltd. vs. ACIT, 136 ITD 177 every income forming part of the business income will be eligible for deduction under section 10B as per the ratio provided therein.

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9.1 without prejudice to the above, the learned AR further submitted that even it is assumed that the concession has been given by the counsel for the assessee before the ITAT in the 2nd round of litigation, then such concession is in the nature of concession of law which is against the judgment of Hon’ble jurisdictional High Court in case of Dishman Pharmaceuticals and Chemicals Ltd in Tax appeal number 192 of 2019. Furthermore, such concession can play no role to decide the issue against the assessee as it was given under the wrong impression of the provisions of law. The learned AR in support of his claim relied on the judgments: I. Department of Elementary Education vs. Pramod Kumar Sahoo (2019) 10 SCC 674 II. Central Council for Research in Ayurveda vs. DK Santha Kumari (2001) 5 SCC 60 III. DCIT vs. KS Suresh 399 ITR 1(Mad) IV. Krishna B Aggarwal vs. ITO in ITA No 2176/Ahd/2012 10. However the learned DR submitted that the assessee has fairly conceded before the ITAT that it is not eligible for exemption with respect to DEPB, Duty Drawback and DEPB rate difference income aggregating to Rs. 2,49,32,201/-. The ITAT accordingly decided the issue against the assessee.

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13.2 Under the above provision, what has been referred is the profit of the eligible undertaking which implies that all the income pertaining to such eligible undertaking will be taken into consideration while working out the deduction. In holding so we

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draw support and guidance from the judgment of Hon’ble special bench ITAT Indore in case of Maral Overseas Ltd vs. ACIT (supra) where it was held as under: It is clear from the plain reading of section 10B(1) that the said section allows deduction in respect of profits and gains as are derived by a 100 per cent EOU. Further, section 10B(4) stipulates specific formula for computing the profit derived by the undertaking from export. Thus, the provisions of sub-section (4) of section 10B mandate that deduction under that section shall be computed by apportioning the profits of the business of the undertaking in the ratio of export turnover by the total turnover. Thus, even though sub-section (1) of section 10B refers to profits and gains as are derived by a 100 per cent EOU, the manner of determining such eligible profits has been statutorily defined in sub-section (4) of that section. Both sub-sections (1) and (4) are to be read together while computing the eligible deduction under section 10B. One cannot ignore sub-section (4) of section 10B which provides specific formula for computing the profits derived by the undertaking from export. As per the formula so laid down, the entire profits of the business are to be determined which are further multiplied by the ratio of export turnover to the total turnover of the business. [Para 77] Section 10B sub-section (1) allows deduction in respect of profits and gains as are derived by a 100 per cent EOU. Section 10B(4) lays down special formula for computing the profits derived by the undertaking from export. [Para 78] Thus, sub-section (4) of section 10B stipulates that deduction under that section shall be computed by apportioning the profits of the business of the undertaking in the ratio of turnover to the total turnover. Thus, notwithstanding the fact that sub-section (1) of section 10B refers the profits and gains as are derived by a 100 per cent EOU, yet the manner of determining such eligible profits has been statutorily defined in sub-section (4) of section 10B. As per the formula stated above, the entire profits of the business are to be taken which are multiplied by the ratio of the export turnover to the total turnover of the business. Sub-section (4) does not require an assessee to establish a direct nexus with the business of the undertaking and once an income forms part of the business of the undertaking, the same would be included in the profits of the business of the undertaking. Thus, once an income forms part of the business of the eligible undertaking, there is no further mandate in the provisions of section 10B to exclude the same from the eligible profits. The mode of determining the eligible deduction under section 10B is similar to the provisions of section 80HHC inasmuch as both the sections mandate determination of eligible profits as per the formula contained therein. The only difference is that section 80HHC contains a further mandate in terms of Explanation (baa) for exclusion of certain income from the "profits of the business" which is, however, conspicuous by its absence in section 10B. On the basis of the aforesaid distinction, sub-section (4) of section 10A/10B is a complete code providing the mechanism for computing the 'profits of the business' eligible for deduction under section 10B. Once an income forms part of the business of the income of the eligible undertaking of the assessee, the same cannot be excluded from the eligible profits for the purpose of computing deduction under section 10B. [Para 79]

13.3 Now coming to the case on hand, there is no ambiguity to the fact that the other income as discussed above belongs to the eligible undertaking which was offered as business income in the income tax return by the assessee. Accordingly we hold that all the incomes shown by the assessee under the head other income post EOU period are eligible for deduction under section 10B of the Act.

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13.4 Before parting, it is important to note that the ITAT on the earlier occasion in ITA numbers 814 & 1035/Ahd/2010 vide order dated 7th March 2014 has given the finding qua the fact that the other income comprising of to DEPB, Duty Drawback and DEPB rate difference income aggregating to Rs. 2,49,32,201/- is not eligible for deduction under section 10B of the Act. This finding of the ITAT was based on the concession made by the learned counsel for the assessee. However, it was contended by the learned AR for the assessee that the ITAT has not given any finding respect to DEPB, Duty Drawback and DEPB rate difference income but it was set aside to the AO for fresh adjudication after recording the concession extended by the then learned AR for the assessee.

13.5 Now the controversy arises for our adjudication whether the ITAT has given any finding qua the DEPB, Duty Drawback and DEPB rate difference income i.e. the said income is on not eligible for deduction under section 10B of the Act. In this connection, we have perused the finding of the ITAT. A close/minute reading of the ITAT order reveals that there was no finding given by the ITAT except recording the concession of the learned AR that the income namely DEPB, Duty Drawback and DEPB rate difference income are not eligible for deduction under section 10B of the Act. The relevant finding of the ITAT has already been reproduced in the previous paragraph.

13.6 A question also arises for a consideration whether the tribunal was supposed to give the independent finding with respect to the dispute where the assessee does not agitate. Under the normal circumstances, the ITAT does not give any finding based on reasons with respect to the disputes not agitated by the counsel of the assessee. However, it is also pertinent to note that the ITAT in the same order has also observed that certain issues stand in favour of the assessee but the ld. CIT-A has not just followed the same blindly by allowing the same but adjudicated the same on merit in his order. Thus in the light of above discussion, we hold that the

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ITAT in his order on the previous occasion has not decided the issue on merit, just remitted the same to the AO for de-novo adjudication.

13.7 In view of the above we direct the AO to allow the exemption to the assessee with respect to DEPB, Duty Drawback and DEPB rate difference income in the manner as discussed above. Hence the ground of appeal of the assessee is allowed and the ground of appeal of the Revenue is dismissed.

 Coming to ITA number 2295/Ahd/2016 an appeal by the Revenue corresponding to A.Y. 2003-04

 Coming to ITA No. 1948/Ahd/2012 an appeal by the Assessee corresponding to A.Y. 2008-09

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19.1 It was contended by the assessee that the fees paid to SBI Capital Market Ltd does not fall within the nature of expenses as provided under section 35D of the Act. Therefore, the assessee treated the consultancy fee as revenue in nature. Without prejudice to the above, the assessee also contended that the expenses incurred in connection with the issue of shares are revenue in nature as held by the Hon’ble Madras High Court in the case of CIT vs. Southern Petrochemicals Industries Corporation Ltd. reported in 311 ITR 202.

19.2 However, the AO found that the impugned expenses were incurred by the assessee for the purpose of the study of the capital market which was conducted

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before the issue of IPO. Therefore, such expenses were incurred in connection with the raising of funds through the issue of shares. Therefore, the same cannot be treated as revenue in nature and the same needs to be capitalized in the books of accounts. The AO in holding so has placed reliance on various judgments which are recorded in para 5.4 on page 9 of his order. Accordingly, the AO disallowed the claim of the assessee by treating the impugned consultancy fee as capital in nature and made the addition to the total income of the assessee.

21.1 However, the learned CIT (A) found that the SBI Capital Market ltd has raised the bill dated 26th October 2006 to the assessee. Thus the same pertains to the previous year 2006-07 corresponding to assessment year 2007-08. Therefore, such claim cannot be made in the year under consideration.

21.2 Furthermore, the learned CIT (A) found that such expenses were incurred by the assessee for raising the funds by way of IPO and therefore the same cannot be allowed as revenue expenses.

21.3 Likewise, the learned CIT (A) noted that the public issue was brought by the assessee in the assessment year 2009-10 with effect from 22nd April 2008 and therefore the question of claiming deduction under section 35D of the Act arise in the assessment year 2009-10. Therefore, the learned CIT (A) denied to entertain the alternate claim made by the assessee. In view of the above, the learned CIT (A) rejected the contention of the assessee.

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25.1 The next controversy arises whether the impugned expenditure pertains to the previous year 2006-07 as alleged by the learned CIT (A). Admittedly, the expenditure was incurred in the earlier year but the same was claimed as deduction in the year under consideration. However, there is no loss to the revenue in a situation, if law permits, to allow the deduction in the year under consideration as there is no change in the rate of tax applicable on the company in the year under consideration viz a viz the earlier year. Therefore, on this count, the deduction of the impugned expenditure cannot be denied as held by the learned CIT (A). But, this finding of the learned CIT (A) becomes irrelevant as we have denied the claim of the assessee for the deduction under section 37(1) of the Act.

25.2 The 3rd controversy arises for adjudication whether such expenditure is eligible for deduction under section 35D of the Act. On perusal of the order of the AO, we note that the impugned expenditure has been incurred in connection with the IPO brought by the assessee. The relevant finding of the AO reads as under: Admittedly, the amount paid to the above consultant was in relation to study of capital markets for raising capital via IPO route. No expenses relatable to raising of an IPO can be said to have been incurred for running of the current business of the assessee. Prima facie, raising of capital is an activity which is not part of regular activity of the assessee and any expenditure incidental to such activity is required to be debited to the capital so raised and cannot be passed through the normal P&L account. The assessee itself has disallowed all other expenses related to the public issue of shares by the company. Hence its claim that part of such expenditure was revenue in nature and should be allowed as such cannot be accepted.

25.3 Admittedly, the IPO was brought by the assessee in the month of April 2008 i.e. in the financial year 2008-09 and the expenses were incurred in the previous year 2006-07. There is no denial under the provisions of section 35D of the Act for the expenses incurred in the earlier year. What is required is this that the expenditure incurred by the assessee should be eligible for deduction under the provisions specified under section 35D of the Act. If, the expenditure is eligible for deduction under section 35D of the Act then it is the duty of the Revenue to allow the same despite the fact that the assessee has not claimed the same in the income tax return. Thus the question arises whether the expenditure incurred in connection with the study of the capital market are qualified for deduction under section 35D

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of the Act. In this connection, the attention is drawn to sub-clause (iv) to clause (c) to subsection 2 of section 35D of the Act which reads as under: (2) The expenditure referred to in sub-section (1) shall be the expenditure specified in any one or more of the following clauses, namely :— (a)******* (b)******* (c) where the assessee is a company, also expenditure— (i) ***** (ii) ***** (iii) *** (iv) in connection with the issue, for public subscription, of shares in or debentures of the company, being underwriting commission, brokerage and charges for drafting, typing, printing and advertisement of the prospectus;

25.4 The above clause has been interpreted by the Hon’ble Madhya Pradesh High Court in the case of CIT vs. Shree Synthetics Ltd. reported in 162 ITR 819 that such list of the expenses is illustrative nature. As such all the expenses incurred in connection with the issue of shares since beginning till the completion of the IPO are eligible for deduction under 35D of the Act. The relevant extract of the judgment reads as under: The word 'being' has been used in section 35D(2)(c )(iv) by way of illustration and is not restricted only to the words 'underwriting commission, brokerage and charges for drafting, typing, printing and advertisement of the prospectus'. There are the following stages in connection with the issue of shares for public subscription: (1) issue of prospectus and invitation to the public to subscribe, (2) making of calls, that is, entertainment of applications by subscribers, (3) acceptance by the company represented by allotment of shares, (4) actual issue of share scrip and entering the names of the shareholders in the register of members; and (5) expenses incurred after issue, i.e., payment of brokerage and underwriting commission, as also refund of excess amount over- subscribed. The word "being" used in section 35(D) must be read with reference to the context in which the words are used. It would include the last stage in connection with the issue of shares, namely, even refund of the amount of oversubscription in relation to those shares for which applications were invited.

25.5 In view of the above we hold that the assessee is eligible for deduction of the impugned expenditure as per the provisions specified under section 35D of the Act. Accordingly, the alternate ground of appeal of the assessee is allowed.

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The assessee has three manufacturing units of which one is an EOU and the export profits of this unit are being claimed exempt under section 10B. the requisite certificate in form no56G has been filed during the course of assessment proceedings.

32.1 Now the 1st question that arises whether such investment was made by the assessee in the undertaking eligible for deduction under section 10B of the Act. In this connection our attention was drawn on pages 102 to 105 of the PB where the profit and loss account of the eligible and non-eligible units were placed. On perusal of the same, we note that such loss with respect to investments in mutual fund on account of the diminution in its value has been shown in the profit and loss account of the eligible unit. This fact was also not doubted by the authorities below. The learned DR at the time of hearing has also not advanced any argument contrary to the arguments advanced by the learned AR. Thus we can draw an inference that such loss pertains to the eligible unit. Accordingly we direct the AO to enhance the amount of deduction under section 10B of the Act by the amount of ₹ 48,85,261/-. Hence the ground of appeal of the assessee is allowed in terms of above.

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the Act. As per the AO, the assessee has included such amount in working out the profit and gains of the eligible undertaking in the ratio of export turnover and the total turnover of the undertaking. Thereafter, the assessee has once again considered such amount of Duty Drawback income independently and separately while working out the deduction under section 10B of the Act in the ratio of export turnover and the total turnover. Accordingly, the AO concluded that the assessee has taken double benefit of deduction under section 10B of the Act with respect to such income.

34.1 The AO also found that there was a sister concern of the assessee namely Survin Laboratories which has shown an expense amounting to ₹ 2,80,05,452/- only. As per the AO such sister concern has incurred the expenses on behalf of other manufacturing undertaking of the assessee. Accordingly, the AO was of the view that such expenses need to be allocated to the undertakings of the assessee being eligible and no eligible undertaking.

34.2 On question by the AO, the assessee agrees to allocate the expenses of the sister concern in the ratio of productions carried out by eligible and non-eligible unit. The assessee further worked out an expense of ₹ 1,13,34,211/- attributable to the eligible unit in the letter dated 16th December 2010. Accordingly the AO allocated the expenses to the extent of ₹ 1,13,34,211/- to the eligible unit while working out the deduction under section 10B of the Act.

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36.1 The assessee with respect to the allocation of the expenses of the sister concern namely Survin Laboratories for ₹ 1,13,34,211/- of the eligible unit contended that it is maintaining separate income and expenditure account of its all the units being 3 in numbers. Furthermore, the assessee has not incurred any expense in the unit of sister concern attributable to the eligible undertaking.

36.2 However the learned CIT (A) disregarded the contention of the assessee by observing as under: In ground no, 6 the appellant objected the reduction of duty drawback of Rs. 97.35.571/- from eligible profits of EOU. It is seen that the duty drawback of Rs. 97,35,571/- is part of other income of EOU unit (Kiri), the total other incomes are of Rs. 3,33,60,996/-, whereas in making computation, the other incomes of Rs. 2,36,25,425/- are reduced, accordingly the amount of Rs.97,35,571/- i.e. duty drawback was not reduced and accordingly the profit is worked out at Rs. 12,37,32,567/-, which .is considered as eligible profit of the EOU unit and for working deduction u/s.108, the profit is worked out in the ratio of turnover at the same time the portion of incentive in the ratio of turnover is also added in making overall deduction u/s10B as claimed in IT Return, hence, the AO has rightly pointed out that the deduction is claimed double, once it is included in the eligible profits and secondly it is separately worked out as incentive. As the AO has rightly reduced duty drawback of Rs.97,35,571/- from the profits of EOU for computation u7s.10B, the action of AO is upheld. The Ground of appeal is dismissed. (ii) In ground no. 7 the appellant objected the reduction of expenses of Survin Lab of Rs. 1,13,24,211/-from eligible profits of EOU. It is seen that The expenses of Survin Laboratories of Rs. 1,13,34,211/- are allocated to EOU unit (Kiri) as per working given by the appellant based on production, such expenses were not reduced by the appellant for working eligible profits of EOU unit, the same were reduced by AO as per working provided by the appellant. As the AO has rightly reduced expenses of Survin Laboratories of Rs.1,13,34,211/- from the profits of EOU for computation u7s.10B, the action upheld. The Ground of appeal is dismissed.

38.1 The learned AR further submitted that the assessee has not claimed double deduction with respect to duty drawback income as held by the authorities. For this

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purpose, the learned AR drew our attention on pages 94 to 97 of the paper book where the certified form 56 G was placed.

38.2 Regarding the apportionment of the expenses of the sister concern namely Survin Laboratories, the learned AR contended that it is engaged in providing spray Roy plants services which is not required by the eligible undertaking. Furthermore, the sister concern is preparing separate income and expenditure account. Accordingly, the learned AR contended that the impugned expenditure cannot be allocated to the eligible undertaking.

40.1 Furthermore, this eligible undertaking has shown the other income separately. In other words the assessee has not computed the deduction under section 10B of the Act with respect to Duty Drawback income while computing profit on export turnover. Accordingly, the assessee has calculated separately the deduction available with respect to such Duty Drawback income. These facts have been verified from the form 56 G placed in the paper book as discussed above. Accordingly we are of the view that, the authorities below have misunderstood the detail filed by the assessee and wrongly drew an inference against the assessee by

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holding that the assessee has claimed double deduction with respect to duty drawback income. On this count, we allow the ground of appeal of the assessee.

40.1.1 Coming to the allocation of the expenses of the sister concern. In this regard we find that the sister concern of the assessee is only incurring the expenses without showing any income. The sister concern was exclusively working for the undertaking of the assessee. Therefore, in our considered view such expenses needs to be allocated to the undertakings of the assessee being eligible and non-eligible unit. However, it was contended by the learned AR before us that the eligible undertaking has not taken any services from the sister concern. Therefore, there should not be any expense of the sister concern to be allocated to the eligible undertaking for the purpose of computing the deduction under section 10B of the Act. Nevertheless, contention of the assessee was not based on any documentary evidence.

40.2 Besides the above, we also note that the assessee vide letter dated 16th December 2010 itself has admitted for the allocation of the expenses of the sister concern. The relevant finding of the AO reads as under: Accordingly, it has submitted vide its letter dated 16/12/2010 that out of the total expenses of the unit Rs.1,13,34,211/- can be said to be attributable to Kiri EOU and hence needs to be factored in while computing the deduction. The assessee has made further submission dated 30/12/2010 stating the reason for apportionment of expenses relating to Survin between EOU and non-EOU.

40.3 Thus, we find that the contention of the learned AR before us is contrary to the finding of the authorities below.

40.4 That as may be, the learned AR before us prayed to provide one more opportunity to the assessee to justify its stand that the expenses incurred by the sister concern are not attributable to the eligible undertaking. The prayer of the learned AR was not objected by the learned DR appearing on behalf of the Revenue. Accordingly in the interest of justice and fair play we are inclined to remit the issue to the file of the AO for fresh adjudication de novo to this extent in accordance to

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the provisions of law. Hence, the ground of appeal of the assessee is allowed for the statistical purposes.

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47.1 It was contended by the learned AR at the time of hearing that the assessee has written off such diminution in the value of assets against the investments. The learned AR has not brought anything on record contrary to the arguments advanced by the learned AR for the assessee. We have also perused the balance sheet of the assessee placed on pages 4 to 21 of the paper book and find that there was no provision created on the side of liability in the balance sheet of the assessee. Accordingly, it seems that the assessee has actually adjusted such loss on account of diminution in the value of assets against the investments. Hence, the principles laid down by the Hon’ble Gujarat High Court in the case of Vodafone Essar Gujarat Ltd (supra) are squarely applicable to the facts of the case on hand. Accordingly we direct the AO to delete the addition made by him while determining the books profit

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under the provisions of section 115JB of the Act. Hence the ground of appeal of the assessee is allowed.

 Coming to ITA No. 2524/Ahd/2015 an appeal by the Assessee corresponding to A.Y. 2010-11

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submitted by the appellant from time to time which ought to have been considered before passing the impugned order. This action of the lower authorities is in clear breach of law and Principles of Natural Justice and therefore deserves to be quashed. 8. The ld.CIT(A) has erred in law and on facts of the case in confirming action of the ld.AO in levying interest u/s.234A/B/C/D of the Act. 9. The learned CIT(A) has erred in law and on facts of the case in confirming action of the ld.AO in initiating penalty u/s.271(1)(c) of the Act. 50.1 The first issue raised by the assessee vide ground nos. 1 & 2 is that the learned CIT(A) erred in confirming the action of AO by invoking the provisions of section 14A r.w.r. 8D of Income Tax Rules without recording dissatisfaction about its claim.

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56.1 Regarding the addition made on account of interest expenses, we note that the assessee has substantial amount of interest free fund in the form of share capital and reserve which exceeds the amount of investment. This fact can be verified from the Balance Sheet of the assessee. The relevant page of the Balance Sheet, placed on page number 7/Y of paper book, is extracted below:

Balance Sheet as at 31st March, 2010 Particulars Annexure As At (Rs.in Lacs) 31.03.2010 As At 31.03.2009 SOURCES OF FUNDS: Capital & Liabilities: Share capital A 1500.01 1500.01 Reserves & Surplus B 13022.59 10795.66

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

Investments F 11826.74 1660.42

56.2 In view of the above, it can be presumed that the assessee has used its own fund in the impugned investment and therefore there cannot be any disallowance on account of interest expenses. Regarding this the Hon’ble Courts have held that where own interest free fund of the assessee is sufficient enough to meet the investment then no any disallowances on account of interest is warranted under

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section 14A r.w.r. 8D of the Act. In this respect we draw support from the judgment of Hon’ble jurisdictional High Court in the case of CIT vs. Torrent Power Ltd reported in 363 ITR 474 where it was held as under: It was noted from records that the assessee was having share holding funds to the extent of 2607.18 crores and the investment made by it was to the extent of`Rs.195.10 crores. In other words, the assessee had sufficient funds for making the investments and it had not used the borrowed funds for such purpose. This aspect of huge surplus funds is not disputed by the revenue which earned it the interest on bonds and dividend income. [Para 7]

56.3 Respectfully following the same we set aside the finding of the ld. CIT (A) and direct the AO to delete the addition made by him on account of interest expenses.

56.4 Coming to the second fold of addition i.e. addition on account of administrative expenses, in this regard we note that the learned AR before us has not advanced any contention. As such the onus lies upon the assessee to provide the documentary evidence that it has not incurred any expense against the exempted income. In the absence of such details, the AO had no option except to resort to the provisions of section 14A read with rule 8D for making the disallowance against the exempted income. However, it is also pertinent to note that the amount of disallowance under section 14A r.w.r. 8D cannot exceed the amount of exempted income as held by the Hon’ble Delhi High Court in case of P.CIT vs. Craft Builders & Construction (P.) Ltd. reported in (2019) 101 taxmann.com 167 further SPL filed by the revenue against such order was dismissed by the Hon’ble Supreme Court in 112 taxmann.com 322 where the Hon’ble High court held as under: “25. Total exempt income earned by the respondent-assessee in this year was Rs. 19 lakhs. In these circumstances, we are not required to consider the case of the Revenue that the disallowance should be enhanced from Rs. 75.89 crores to Rs. 144.52 crores. Upper disallowance as held in Pr. CIT v. McDonalds India (P.) Ltd. ITA 725/2018 decided on 22nd October, 2018 cannot exceed the exempt income of that year. This decision follows the ratio and judgment of the Supreme Court in the case of Maxopp Investments Ltd. v. CI T[2018] 402 ITR 640/254 Taxman 325/91 taxmann.com 154 and the earlier judgments of the Delhi High Court in Cheminvest v. CIT [2015] 378 ITR 33/234 Taxman 761/61 taxmann.com 118 and CIT v. Holcim (P.) Ltd. [2015] 57 taxmann.com 28 (Delhi).”

56.5 In view of the above we direct the AO to limit the disallowance of the administrative and interest expenses, if any, then it should be lower of exempted

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income or the disallowance made under section 14A r.w.r. 8D of Rules of Income Tax Rules. Accordingly, we confirm the disallowance made by the AO which was subsequently confirmed by the learned CIT (A) towards the administrative expenses. Thus the grounds of appeal raised by the assessee is partly allowed.

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has to be a building. Thus a mere land cannot be subject to the provisions of house property income if it is let out. However, if there is a land appurtenant to the building, then the rent with respect to such land shall be subject to the provisions of income under the head house property. The Legislature has not used the word building and land appurtenant thereto. Furthermore, there is no requirement under the provisions of section 22 of the Act that both the building and the land should be owned by the assessee. As such, it is sufficient enough to charge the rental income from the land under the head house property provided it is appurtenant to the building. Accordingly it was contended by the learned AR that the conditions as specified under section 22 the Act have been satisfied.

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A plain reading of section 22 provides that it is the income from property consisting of any 'building' or 'land appurtenant thereto' which is assessed under section 22 and not the income from renting out of open land or some kutcha plinth only. In the instant case, no building having been let out, there was no question of treating the rent received for letting out of land only as income from house property. [Para 7] What is covered by the expression 'appurtenant' is the land which is necessary for enjoyment of the building and not the land only. [Para 8]”

63.1 Respectfully following the same we uphold the finding of the authorities below. Thus the ground of appeal raised by the assessee is dismissed.

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71.1 However, we note that in the recent judgment of Special Bench of Hon’ble Delhi Tribunal in the case of ACIT vs. Vireet Investment Pvt. Ltd. reported in 82 Taxmann.com 415 has held that the disallowances made u/s 14A r.w.r. 8D cannot be the subject matter of disallowances while determining the book profit u/s 115JB of the Act. The relevant portion of the said order is reproduced below:

“In view of above discussion, the computation under clause (f) of Explanation 1 to section 115JB(2), is to be made without resorting to the computation as contemplated under section 14A, read with rule 8D of the Income-tax Rules, 1962.”

71.2 The ratio laid down by the Hon’ble Tribunal is squarely applicable to the facts of the case on hand. Thus it can be concluded that the disallowance made under section 14A r.w.r. 8D cannot be resorted while determining the expenses as mentioned under clause (f) to explanation 1 to section 115JB of the Act.

71.3 However, it is also important to note that the disallowance needs to be made with respect to the exempted income in terms of the provisions of clause (f) to

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section 115JB of the Act while determining the book profit. In holding so, we draw support from the judgment of Hon’ble Calcutta High Court in the case of CIT Vs. Jayshree Tea Industries Ltd. in GO No.1501 of 2014 (ITAT No.47 of 2014) dated 19.11.14 wherein it was held that the disallowance regarding the exempted income needs to be made as per the clause (f) to Explanation-1 of Sec. 115JB of the Act independently. The relevant extract of the judgment is reproduced below:- “We find computation of the amount of expenditure relatable to exempted income of the assessee must be made since the assessee has not claimed such expenditure to be Nil. Such computation must be made by applying clause (f) of Explanation 1 under section 115JB of the Act. We remand the matter for such computation to be made by the learned Tribunal. We accept the submission of Mr. Khaitan, learned Senior Advocate that the provision of section 115JB in the matter of computation is a complete code in itself and resort need not and cannot be made to section 14A of the Act.”

71.4 Given above, we hold that the disallowances made under the provisions of Sec. 14A r.w.r. 8D of the IT Rules, cannot be applied to the provision of section 115JB of the Act as per the direction of the Hon'ble Calcutta High Court in the case of CIT Vs. Jayshree Tea Industries Ltd. (Supra). But the disallowance needs to be made with respect to the exempted income in terms of the provisions of clause (f) to section 115JB of the Act while determining the book profit.

71.5 Now the question arises how to determine the disallowance as per the clause (f) to Explanation-1 of Sec. 115JB of the Act independently. In this regard, we note that there is no mechanism/ manner given under the clause (f) to Explanation-1 of Sec. 115JB of the Act to workout/ determine the expenses with respect to the exempted income. Therefore in the given facts & circumstances, we feel that ad- hoc disallowance will serve the justice to the Revenue and assessee to avoid the multiplicity of the proceedings and unnecessary litigation. Thus we direct the AO to make the disallowance of 1% of the exempted income as discussed above under clause (f) to Explanation-1 of Sec. 115JB of the Act. We also feel necessary to bring this fact on record that we have restored other cases involving identical issues to the file of AO for making the disallowance as per the clause (f) to Explanation-1 of Sec. 115JB of the Act independently. But now we note that since there is no mechanism provided under the clause (f) to Explanation-1 of Sec. 115JB of the Act

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to make the disallowance independently, therefore our action for restoring back the issue to the file of AO would unnecessarily cause further litigation. Thus we limit the disallowance on an ad-hoc basis @ 1 % of the exempted income as per the clause (f) to Explanation-1 of Sec. 115JB of the Act. Thus the ground of appeal of the assessee is partly allowed.

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(iii) 1PO Stationery expenses of Rs.8,55,688/-being 10% of the total claim of Rs.8556884/-. The AO has not found any specific defects in respect of the claim. (iv) IPO travelling expenses of Rs.3,12,491/-being 10% of the total claim of Rs.31,24,910/-.The AO has not found any specific defects in respect of the claim. 7.9.8. In view of the aforesaid discussion, total disallowance of the claim of expenditures works out to Rs. 23,93,179/- which is reduced from the total claim of expenditure at Rs. 5,01,82,479/- and in result the balance claim of expenditure amounting to Rs.4,77,89,300/- is directed to be considered for deduction u/s. 35D of the I. T. Act, 1961. Since the provisions of section 40(a)(ia) of the I.T. Act are attracted on the payments towards various expenditures amounting to Rs.23,93,179/- and hence disallowance of these expenditures to the extent of an amount of Rs.23,93,179/- is upheld and same is reduced from the total claim of expenditure u/s. 35D of the I. T. Act as mentioned above. It has been noticed that in the appellate proceedings, the appellant has claimed the deduction @ 20% every year in view of the provisions of section 35D{2) of the I. T. Act, 1961, since the AO has not given any observations about the rate of allow ability of the same i.e. @ 20% or the 10% every year and hence, the AO is directed to allow the claim in view of the provisions of section 35D of the . T. Act, 1961 after necessary verification. In result, the claim of deduction u7s. 35D of the Act made through the additional ground of appeal is partly allowed.

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through the banking channel. Similarly these expenses were not debited in the profit and loss account. Furthermore, the books of accounts were duly audited and accepted by the authorities below.

77.1 The learned AR alternatively contended that the disallowance needs to be made then it should be restricted to 30% of such expenses as per the amended proviso to section 40(a)(ia) of the Act.

77.2 The learned AR further alternatively submitted that the recipient of the expenses in dispute have already offered the same to tax and therefore no disallowance can be made under the provisions of section 40(a)(ia) of the Act on account of non-deduction of TDS.

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79.2 Coming to the expenses incurred without deducting the TDS, in this connection the first controversy arise whether the provision of section 40(a)(ia) can be invoked in the case of deduction claimed under section 35D of the Act. For this purpose we refer the provisions of section 40 of the Act which reads as under: 40. Notwithstanding anything to the contrary in sections 30 to 38, the following amounts shall not be deducted in computing the income chargeable under the head "Profits and gains of business or profession",—

79.3 The above provisions overrides the provisions contained under section 35D of the Act. Therefore, though the expenses which are eligible for deduction under section 35D of the Act but the same cannot be allowed as deduction in the event the TDS was not deducted.

79.4 Regarding the alternate contention by the learned AR, we find force in the argument advanced by the Learned AR that if the recipient of consultancy and advertisement fees has paid the taxes on the amount received from the assessee, then there will be no any disallowance warranted under section 40(a)(ia) of the Act. Indeed the said provision, though inserted by the Finance Act 2012 w.e.f. 1-4-2013, has been held to be retrospective in operation by recent decision of the Hon'ble Delhi High Court in the case of CIT v. Ansal Land Mark Township (P) Ltd. (2015) 61 taxmann.com 45 (Del) wherein the question raised before the court and the decision rendered thereon is reproduced herein below for the sake of clarity:- “Question: Whether the second proviso to Section 40(a)(ia) (inserted by the Finance Act, 2012), which states that TDS shall be deemed to be deducted and paid by a deductor if resident recipient has disclosed the amount in his return of income and paid tax thereon, is retrospective in nature or not?” Held: Section 40(a)(ia) was introduced by the Finance (No.2) Act, 2004 to ensure that an expenditure should not be allowed as deduction in the hands of an assessee in a situation where income embedded in such expenditure has remained untaxed due to tax withholding lapses by the assessee. Hence, section 40(a)(ia) is not a penalty provision for tax withholding lapse but it is a provision introduced to compensate any loss to the revenue in cases where deductor hasn’t deducted TDS an amount paid to deductee and, in turn, deductee also hasn’t offered to tax income embedded in such amount The penalty for tax withholding lapse per se is separately provided under section 271C and, therefore, section 40(a)(i) isn’t attracted to the same. Hence, an assessee could not be penalized under section 40(a)(ia) when there was no loss to revenue.

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The Agra Tribunal in the case of Rajiv Kumar Agarwal-vs-ACIT [2014] 45 taxmann.com 555 (Agra – Trib) had held that the second proviso to Section 40(a)(ia) is declaratory and curative in nature and has retrospective effect from 1st April, 2005, being the date from which sub- clause (ia) of section 40(8) was inserted by the Finance No.(2) Act, 2004, even though the Finance Act, 2012 had not specifically stated that proviso is retrospective in nature. The High Court affirmed the ratio laid down by the Agra Tribunal and held that said provisos is declaratory and curative in nature and ha retrospective effect from 1st April, 2005.”

79.5 In view of above, we are inclined to set aside the order of the ld. CIT-A to the AO for fresh adjudication in the light of the above discussion. As we have set aside the issue raised by the assessee to the file of the AO, we are not inclined to entertain the 2nd alternate contention raised by the learned AR for the assessee. As such, the alternate contention becomes infructuous. Hence the ground of appeal of the assessee is partly allowed for the statistical purposes.

 Coming to ITA No. 1231/Ahd/2018 an appeal by the Assessee corresponding to A.Y. 2010-11 82. The assessee has raised the following grounds of appeal: 1. The learned CIT(A) has erred both in law and on the facts of the case in confirming the penalty when show cause notice u/s.274 r.w.s.271(l)(c) of the Act did not specify the exact charge as to whether the penalty is levied for concealment or furnishing of inaccurate particulars of income. Such a defect renders the penalty void ab initio and is also a violation of the principles of natural justice. 2. The learned CIT(A) has erred in law and on facts in confirming the action of AO in initiating and levying penalty under section 271(l)(c) of the Act without recording mandatory satisfaction as contemplated under the Act at the time of framing the assessment order. 3. The learned CIT(A) has erred both in law and on the facts of the case in confirming the penalty of Rs.88,200/- levied u/s 271(l)(c) of the Act on disallowance of standard deduction of Rs.2,94,000/- claimed from income from house property after treating it as income from other sources.

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by the assessee under section 24 of the Act by treating the rent from the land as income from house property will amount to furnishing inaccurate particular of Income. At this juncture it is pertinent to consider the assessee’s explanation that there was a shed constructed by the tenant on the leased land and on the basis of such shed, the assessee under the bona fide belief concluded that the lease rental will be taxed as income from house property. This explanation of the assessee has not been controverted by the Revenue. Further all the materials facts relating to the claim of deduction on lease rental have been disclosed by the assessee in the return of income. Thus in our considered view the claim made by the was based on genuine difference of opinion related to taxability of the rental income which cannot be made to subject to penalty under section 271(1)(c) of the Act. In holding so we draw support and guidance from the judgment of Hon’ble Jurisdictional High Court in case of CIT vs. Sambhav Media Ltd reported in 33 taxmann.com 97 where it was held as under: 3. The issue pertains to deletion of penalty imposed on account of disallowance of bad debts. It appears that the assessee disclosed all relevant material facts before the Assessing Officer at the time of filing of return. The Assessing Officer did not find such claim sustainable and imposed penalty on the assessee. The CIT(A) deleted such penalty and the Tribunal has rightly held in the finding that it is a case of difference of opinion in allowability of certain deductions and in absence of any material to indicate any dishonest attempt on the part of the assessee to conceal the income, no penalty can be imposed.

89.1 We also draw support and guidance from the order of Coordinate bench of Mumbai ITAT in case of ITO vs. Kantilal G Kotecha reported in 108 taxmann.com 119 where it was held as under: 3.5.1 We find that the assessee's case falls under Explanation 1 of section 271(1)(c ) of the Act wherein he had offered bonafide explanation narrating the entire facts before the ld AO. Moreover, it is well settled that the discharge of consideration by way of issue of shares is a valid consideration and hence for the Goodwill Portion, the assessee was allotted shares in the public limited company should have to be treated as valid consideration for the transfer of Goodwill together with other assets and liabilities. Reliance in this regard is placed on the decision of Hon'ble Kerala High Court in the case of the Commonwealth Trust India Ltd. v. CIT [2008] 173 Taxman 379/306 ITR 356. We find from the materials available on record that the entire facts relating to the said issue and which are material to the computation of total income were duly disclosed by the assessee before the ld AO. No explanation furnished by the assessee was found to be false by the ld AO. It was only a genuine difference of opinion between assessee and the ld AO in not allowing the claim of exemption u/s 47(xiv) of the Act. 3.5.2 We find that the ld CITA had also given the finding that the explanation given by the assessee was bonafide and in that regard had observed as under which are crucial for

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determining the penalty dispute before us. These findings are not controverted by the revenue. The observations of the ld CITA in this regard are as under:- "A claim of deduction can be said to be bonafide if a legally sustainable view on its allowability exists in the given facts. Such a view need not be necessarily cent percent foolproof. If chances are there that a person, properly instructed in law, can form an opinion about his deduction, then it will be considered as bonafide. A claim shall lack bonafide if the facts are manufactured to give a colour of genuineness to the deduction, or if there is not even a far flung possibility of forming a legally sustainable opinion about the deduction, either because of the facts prevailing in a particular case or because no judicial precedent in favour of allowability of such deduction or if an issue is still virgin and had not received attention of the Courts so far, then simple and plain interpretation of the provision leaves no chance to a reasonably prudent person to form an opinion that such a deduction is allowable. In simple words, the term 'bonafide' means : in good faith or without fraud or deception and honestly as distinguished from bad faith". 3.5.3 We find that the reliance placed by the ld DR on the decision of Hon'ble Supreme Court in the case of Mak Data (P.) Ltd. (supra) is not applicable to the facts of the case as in that case, there was a survey conducted in the premises of that assessee and there was undisclosed income found and statement was recorded from the assessee wherein he had accepted to offer the same. Subsequently while filing the return, the assessee did not offer such income found during survey. Later during the assessment proceedings, when the assessee had no other option but to offer the income found during survey, he came forward before the ld AO to offer such income. In that factual matrix, the Hon'ble Supreme Court held that department is not in the business of selling peace and that assessee had to be invited with the levy of penalty. This decision is factually distinguishable with that of the assessee. In the instant case, there was absolutely no malafide on the part of the assessee in making the claim of exemption u/s 47(xiv) of the Act as could be seen from the findings rendered hereinabove. We find that the decision that would be applicable to the facts of the instant case would be the decision of Hon'ble Supreme Court in the case of CIT v. Reliance Petroproducts (P.) Ltd. [2010] 189 Taxman 322/322 ITR 158 wherein it was held that when no information given in the return was found to be incorrect or inaccurate or the details supplied by the assessee was found to be factually incorrect, then primafacie, the assessee cannot be held guilty of furnishing inaccurate particulars. It may at best result in making incorrect claim in law. The Hon'ble Apex Court further observed that by any stretch of imagination, making an incorrect claim in law cannot tantamount to furnishing inaccurate particulars. It held that merely because a claim made by the assessee is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Accordingly, by placing reliance on the said decision of Hon'ble Supreme Court in Reliance Petroproducts (P.) Ltd.'s case (supra) we hold that the ld CITA had rightly deleted the penalty in respect of denial of exemption u/s 47(xiv) of the Act on self -generated Goodwill portion partially. Accordingly, we do not find any infirmity in the order of the ld CITA.

89.2 Accordingly, we are of the view that there cannot be any penalty under the provisions of section 271(1)(c) of the Act in the given facts and circumstances. Hence, the order of the learned CIT (A) is set aside and we further direct the AO to delete the penalty levied by him. Thus, the ground of appeal of the assessee is allowed.

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 Coming to ITA No. 3491/Ahd/2015 an appeal by the Assessee corresponding to A.Y. 2011-12

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and information submitted by the appellant from time to time which ought to have been considered before passing the impugned order. This action of the lower authorities is in clear breach of law and Principles of Natural Justice and therefore deserves to be quashed. 11. The learned CIT(A) has erred in law and on facts of the case in confirming action of the ld.AO in levying interest u/s.234A/B/C/D of the Act. 12. The learned CIT(A) has erred in law and on facts of the case in confirming action of the ld.AO in initiating penalty u/s.271(1)(c) of the Act.

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allowed in favor of the assessee. For detailed discussion please refer the relevant paragrapgh No.71 of this order. Thus we hold that the principles laid down in above paragraph will mutas mutandis apply herein also. In the result ground of appeal raised by the assessee is partly allowed.

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guarantee fee for the year under consideration as charged in A.Y. 2010-11. Hence the same was written off in the year under consideration.

99.1 The assessee also submitted that corporate guarantee given in favour of its AEs/ subsidiary does not fall under the definition of international transaction, as there was no cost incurred in connection with such guarantee. Further it is the normal practice where holding company provides such type of guarantee to its subsidiary which is in the nature of commercial expediency. The assessee further submitted that it was not the AE i.e. M/s Kiri Holding Singapore Pvt. Ltd. which benefited from such guarantee, but it was the appellant company who benefited by getting larger market. In this respect the assessee placed reliance on the judgment of Hon’ble Courts in following cases: (a) SA Builder reported in 288 ITR 1 (b) CIT vs. Amalgamation Ltd. reported in 266 ITR 188 c (c) ACIT vs. W S Industries Ltd. reported in 2009 TIOL 783-Mad

99.2 The assessee further submitted that it is not engaged in the business of banking. Thus it cannot charge the guarantee fee from its AE. The assessee also contended that the notional value of guarantee was not a transaction to shift the profits from India.

99.3 Assessee also contended that while considering guarantee to AE the business strategy of the assessee should also be considered. The assessee in this regard referred the OECD guidelines 2010 where in para 1.59 it was stated that “a tax payer seeking to penetrate a market or to increase its market share might temporarily lower than the price charged for otherwise comparable products, in same market. “

99.4 However, the TPO disregarded the contention of the assessee by holding as under:

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(i) The assessee, without substantiating its contention based on cogent material, claimed that issuance of corporate guarantee has commercial expediency and in return assessee will get benefited in future. Further the provisions of chapter X of the Act are an anti-avoidance rule which do not differentiate transaction on account of commercial expediency. In any case transaction with the AEs needs to be tested on the parameter of ALP. Therefore the reliance placed on the judgment of SA Builder Ltd (supra) by the assessee is not acceptable.

(ii) The extension of corporate guarantee to AE falls within the ambit of service as the same is also recognized by the OECD commentary and therefore needs to be benchmarked. This view was also confirmed by the US tax court in case of Container Corporation vs. Commissioner as well as by Canadian Tax Court in case of General Electric (GE) dated 4th December 2009 and also by Mumbai ITAT in case of Nimbus Communications Ltd. reported in [2013] 34 taxmann.com 298.

(iii) In transaction of guarantee there is always a cost inherent in the form of administrative expenses, maintenance of appropriate level of cash & cash equivalent, capital, standby credit line to cope up with the risk associated with guarantee. These costs need to be covered by charging fee on such guarantee.

99.5 The TPO in view of the above held that the guarantee extended by the assessee in favour of its AE i.e. M/s Kiri Holding Singapore Pvt. Ltd. is an international transaction in the nature of services and need to be benchmarked. In order to benchmark the guarantee fee, the TPO analyzed the bond data in US market which was available on the web namely www.finance.yahoo.com . The TPO analyzed the A rated and BB rated bond out of 3060 bond data and worked out rate at 4.67% as reasonable fee to be charged on guarantee. Accordingly the TPO made

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upward adjustment of ₹. 4,67,00,000/- only and added the same to the total income of the assessee.

100.1 The Assessee also submitted that the intention of TP provision is to prevent the avoidance of tax by shifting the income from India to other tax jurisdiction through intra group transaction. But in corporate guarantee extended by parent company to foreign subsidiary does not involve any monetary transaction. Therefore the question of shifting of profit does not arise. In this respect the assessee placed its reliance on the following judgment: (i) Dana Corporation, In re [2010] 321 ITR 178 (AAR) (ii) Vanceburg Group B.V. , In re [2007] 289 ITR 464 (AAR) (iii) Deere and Company, In re bearing AAR No. 934 of 2010

100.2 Further there was not any method provided under the Act to benchmark the guarantee fee/commission with respect to the transaction under consideration. Therefore the charging provision of section 92B of the Act gets failed. The assessee also contended that the issue of corporate guarantee stands in its favor as it has not incurred any cost and having no bearing on profit or losses. As such the transaction of bank guarantee should not be treated as international transaction. In

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this respect the assessee placed its reliance on the order of the Hon’ble Delhi tribunal in case of Bharti Airtel Ltd vs. ACIT reported in 43 taxmann.com 150.

100.3 The assessee alternatively contended that in any case the corporate guarantee fee should be taken @ 0.5 % on the value of bank guarantee.

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92B. It was also contended that, while rendering Bharti Airtel decision, the Delhi Tribunal did go overboard in deciding something which was not even raised before us. In the written submission, it was stated that "Hon'ble Delhi ITAT was not requested by the contesting parties to decide the issue as to whether the provision of guarantee was a service or not". That's not factually correct. We are unable to see any merits in learned Departmental Representative's contention, particularly as decision categorically noted that not only before the Tribunal, but this issue was also raised before the DRP- as evident from the text of DRP decision. We now take up the issue with respect to specific mention of the words in Explanation to Section 92B which states that "For the removal of doubts, it is hereby clarified that (i) the expression "international transaction" shall include…….. (c) capital financing, including any type of long -term or short -term borrowing, lending or guarantee, purchase or sale of marketable securities or any type of advance, payments or deferred payment or receivable or any other debt arising during the course of business." There is no dispute that this Explanation states that it is merely clarificatory in nature inasmuch as it is 'for the removal of doubts', and, therefore, one has to proceed on the basis that it does not alter the basic character of definition of 'international transaction' under Section 92B. Accordingly, this Explanation is to be read in conjunction with the main provisions, and in harmony with the scheme of the provisions, under Section 92B. Under this Explanation, five categories of transactions have been clarified to have been included in the definition of 'international transactions'. The first two categories of transactions, which are stated to be included in the scope of expression 'international transactions' by virtue of clause (a) and (b) of Explanation to Section 92B, are transactions with regard to purchase, sale, transfer, lease or use of tangible and intangible properties. These transactions were anyway covered by transactions 'in the nature of purchase, sale or lease of tangible or intangible property'. The only additional expression in the clarification is 'use' as also illustrative and inclusive descriptions of tangible and intangible assets. Similarly, clause (d) deals with the " provision of services, including provision of market research, market development, marketing management, administration, technical service, repairs, design, consultation, agency, scientific research, legal or accounting service" which are anyway covered in "provision for services" and "mutual agreement or arrangement between two or more associated enterprises for the allocation or apportionment of, or any contribution to, any cost or expense incurred or to be incurred in connection with a benefit, service or facility provided or to be provided to anyone or more of such enterprises ". That leaves us with two clauses in the Explanation to Sect ion 92B which are not covered by any of the three categories discussed above or by other specific segments covered by Section 92B, namely borrowing or lending money. The remaining two items in the Explanation to Section 92B are set out in clause (c) and (e) thereto, dealing with (a) capital financing and (b) business restructuring or reorganization. These items can only be covered in the residual clause of definition in international transactions, as in Section 92B (1), which covers "any other transaction having a bearing on profits, incomes, losses, or assets of such enterprises". It is, therefore, essential that in order to be covered by clause (c) and (e) of Explanation to Section 92B, the transactions should be such as to have bearing on profits, incomes, losses or assets of such enterprise. In other words, in a situation in which a transaction has no bearing on profits, incomes, losses or assets of such enterprise, the transaction will be outside the ambit of expression 'international transaction'. This aspect of the matter is further highlighted in clause (e) of the Explanation dealing with restructuring and reorganization, wherein it is acknowledged that such an impact could be immediate or in future as evident from the words "irrespective of the fact that it (i.e. restructuring or reorganization) has bearing on the profit, income, losses or assets of such enterprise at the time of transaction or on a future date". What is implicit in this statutory provision is that while impact on " profit, income, losses or assets" is sine qua non, the mere fact that impact is not immediate, but on a future date, would not take the transaction outside the ambit of 'international transaction'. It is also important to bear in mind that, as it appears on a plain reading of the provision, this exclusion clause is not for "contingent" impact on profit, income, losses or assets but on "future" impact on profit, income, losses or assets of the enterprise. The

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important distinction between these two categories is that while latter is a certainty, and only its crystallization may take place on a future date, there is no such certainty in the former case. In the case before us, it is an undisputed position that corporate guarantees issued by the assessee to the various banks and crystallization of liability under these guarantees, though a possibility, is not a certainty. In view of the discussions above, the scope of the capital financing transactions, as could be covered under Explanation to Section 92B read with Section 92B(1), is restricted to such capital financing transactions, including inter alia any guarantee, deferred payment or receivable or any other debt during the course of business, as will have "a bearing on the profits, income, losses or assets or such enterprise". This precondition about impact on profits, income, losses or assets of such enterprises is a precondition embedded in Section 92B(1) and the only relaxation from this condition precedent is set out in clause (e) of the Explanation which provides that the bearing on profits, income, losses or assets could be immediate or on a future date. These guarantees do not have any impact on income, profits, losses or assets of the assessee. There can be a hypothetical situation in which a guarantee default takes place and, therefore, the enterprise may have to pay the guarantee amounts but such a situation, even if that be so, is only a hypothetical situation, which are, as discussed above, excluded. When an assessee extends an assistance to the associated enterprise, which does not cost anything to the assessee and particularly for which the assessee could not have realized money by giving it to someone else during the course of its normal business, such an assistance or accommodation does not have any bearing on its profits, income, losses or assets, and, therefore, it is outside the ambit of international transaction under section 92B (1) of the Act.”

105.1 Since in the case on hand, the guarantee is not having "bearing on profits, income, losses or assets," therefore, respectfully following the same we are also of the opinion that such guarantee issued by the assessee is not covered under the definition of section 92B of the Act.

105.2 Before us, no material has been placed on record by the Revenue to demonstrate that the decision of Tribunal as discussed above has been set aside / stayed or overruled by the higher Judicial Authorities. Before us, Revenue has not placed any material on record to point out any distinguishing feature in the facts of the present case viz a viz the case as discussed above nor has placed any contrary binding decision in its support.

105.3 We also note that admittedly the assessee has charged guarantee fee of Rs. 1,88,42,093/- from its AE in the immediate previous assessment year for providing very same corporate guarantee which was written off in the current year. The TPO in show cause notice raised this issue and asked explanation from the assessee. The assessee in this regard furnished that there were no cost involved in such

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corporate guarantee extended to its AE. Thus they mutually decided to waive off the guarantee fee and decided not to charge fee in future also. The TPO, thereafter, dropped the issue in final finding with respect to the corporate guarantee fees written off in the year under consideration which implies that the TPO has accepted the assessee contention. Thus what inferred is this that the revenue in one previous year has accepted the claim of the assessee but making an addition in current year which is against the principles of consistency. Therefore there no effect on the income of the assessee.

105.4 Accordingly, we direct the TPO/AO to delete the addition made by him. Thus the ground of appeal of the assessee is allowed and the ground of appeal of the Revenue is dismissed.

107.1 However the AO found that the assessee has incurred the expenses in connection with the share subscription, shareholders agreement and convertible bond subscription agreement. Accordingly the AO was of the view that such expenses were in the nature of capital which cannot be allowed as deduction under

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section 37(1) of the Act. Thus the AO disallowed the same and added to the total income of the assessee.

110.1 The learned AR also submitted that the AO has made the disallowance by observing that the payment made to Wong Partnership LLP as capital in nature but the fact is that no new assets has come into existence out of such expenses viz a viz it has not resulted any benefit of enduring nature to the assessee. Likewise, there was no allegation of the AO whether such expenses were incurred wholly and exclusively for the purpose of the business. Accordingly it was contended that such expenses should be allowed as revenue in nature.

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112.1 Before we look into the fact whether the impugned consultancy expenses are in the nature of capital expenses, we note that admittedly the assessee to acquire the Dystar Group has established a company in Singapore. Now the Singapore company was requiring fund for the acquisition of Dystar Group. To arrange the fund for the Singapore company, a professional consulting from was engaged. Against the professional advices for arranging the fund for the Singapore company, a fee of ₹ 31,00,093/- was paid. First of all, the question arises whether such payment was made by the assessee wholly and exclusively for the purpose of its business. The answer stand in negative. It is because the funds were arranged for the Singapore company and not for the assessee. Singapore company is a separate and independent legal entity which is chargeable to tax in Singapore. Thus it seems to us that the assessee has not incurred such expenses wholly and exclusively for its business which is a prerequisite for claiming the deduction under section 37(1) of the Act.

112.2 Indeed, the AO has not touched upon the issue whether the impugned expenses were incurred wholly and exclusively for the purpose of the business. The AO only held that such expenses were capital in nature.

112.3 However, on perusal of the order of the learned CIT (A), we find that the learned CIT (A) has given very clear-cut finding that the assessee has not incurred such expenses wholly and exclusively for the purpose of its business. Such finding of the learned CIT (A) has been reproduced in the preceding paragraph. What has been challenged before us is the order of the learned CIT (A). In other words the order of the AO has merged with the order of the learned CIT (A). Accordingly, we

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do not find any infirmity in the order of the learned CIT (A). Hence the ground of appeal of the assessee is dismissed.

Coming to ITA No. 44/Ahd/2016 an appeal by the Revenue corresponding to A.Y. 2011-12

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Nmes of Parties Export Sale Rs Commission Rs. Lig Li Ching, 5F No 55, Lane 15,37,650 1,28,680 258, Rueiguang Neihu District, Taipei city, 11466, Talwan M/s Sheskhani International 1,98,44,840 10,14,096 Shop 10-11, first shopping Centre, S.I.T.E. manghopir Road, karachi, 75700, Pakistan Shin Jeng Eun., Korea 1,64,31,581 7,57,945 Total 3,78,14,071 19,00,721

119.1 During the assessment proceedings it was contended by the assessee that:

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i. The brokers were independent agents and they were not working for the assessee. ii. The brokers had no permanent establishment or fixed place of business in India. iii. The services were rendered by the brokers from outside India. Furthermore, these services were utilised outside India. iv. The payment to the brokers were directly made to them in their respective countries and none of the broker has received the payment in India.

119.2 In view of the above the assessee submitted that commission paid to the overseas brokers is not chargeable to tax in India under the provisions of section 9, 5 & 6 of the Act. For the deduction of tax under the provisions of section 195 of the Act, chargeability of income to tax in India is prerequisite. Once the income is not chargeable to tax, then the question of deducting the TDS under section 195 of the Act does not arise.

119.3 However the AO disagreed with the contention of the assessee by observing that the commission paid to the foreign brokers was from the business connection in India as well as the amount of commission to the brokers was from the source of income in India. Accordingly, the income was deemed to accrue or arise in India as provided under section 9(1)(i) of the Act. Accordingly the AO held that the amount of commission paid to the foreign brokers was chargeable to tax in India and therefore the assessee was liable to deduct the TDS under section 195 of the Act. Accordingly the AO disallowed the sum of ₹ 19,00,721/- and added to the total income of the assessee.

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they have been appointed as commission agents. None of the activities soliciting the clients and procuring the orders has taken place in India. The goods were being delivered by the appellant company in the other country. The activities of procuring the payment on behalf of the appellant company were also done abroad. The AO was therefore, incorrect to hold that the source of income lies in India as the sales have been made from India. The provisions of Income Tax Act clearly provide that the tax would be deducted on. the income which is taxable in India. The activity of earning the income is not the sale but soliciting the sales by commission agents. Though this activity is linked to the sales of the company but it cannot be said that the income has been derived from sales which has been made from India. The income has been derived from the activity of soliciting the sales on behalf of the appellant company. The agents have carried out all the activity on the foreign soil and none of their activity is in India therefore, it cannot be said that the income has accrued or arisen in India and the source of income was in India. There is no fact brought out by the AO in the order as well as observed by me during the course of appellate proceedings to indicate that the services have been rendered in India. 4.1 1 . The judgment of honourable Supreme Court in the case of CIT vs. Toshoku Limited [125 ITR 525 (SC)] is important on the issue, whereby it has been held that commission earned by the non-resident for acting as the selling agent 'for the Indian exporter, wherein such non-resident was rendering services from outside India does not accrue in India. In the present case before me also, the foreign selling commission agents are resident of foreign country, from where the procurement service had been provided for which the commission has been paid, and therefore, the issue is directly and squarely covered by the Apex Court decision. 4.12. Regarding the observation of the AO that the income is deemed to accrue or arise in India by applying the provisions of section 9 (l)(i), it is seen that there is no fact on record to indicate that any of the agents had any permanent establishment in India. All the agents had their offices on the foreign soil and nothing on record that they had PE in India. Further the assessing officer has also not pointed out any such fact in its order which indicate that there was any such office of the overseas agents in India which attract the deeming provisions. Further the observation that the source of income was in India is also not proper as it has clearly been discussed in fhe preceding paragraphs that none of the services have been rendered in India and source of income cannot be said to be in India as the source of income is the services rendered and not the sales. There is no business connection in India from which the income has been earned, there is no property through or from which the income has been earned. Therefore, the provisions of section 9 (l)(i) also cannot be applied. 4.13. Reliance is placed on the judgement of honourable Supreme Court in the case of GE India Technology Centre Private Limited 327 ITR 456 and the judgement of honourable ITAT Mumbai in the case of our Ardesi B Cursetjee & Sons Ltd. 115 TTJ 916. 4.14. Therefore, in view of the preceding discussion the AO was not justified to hold that the commission payable to the overseas agents was deemed to accrue or arise in India and is taxable under the Act in view of the specific provisions of sections 5 (2)[b) read with section 9 (l)(i) of Income Tax Act. 4.15. Regarding the issue of obtaining no deduction certificate under section 195 it is seen that for the applicability of the provisions of this section, the sum must be chargeable under the provisions of the Income Tax Act. Section 195 provides for deduction of tax by the person responsible for paying to a non-resident any interest or any other sum chargeable under the Provisions of the Act. It is clear that the payment was not the interest. It has to be seen whether the payment is covered under the term "any other sum chargeable under the provision of this Act". It' has been observed in the preceding discussion that income was not chargeable to tax as it has not been received in India nor it has accrued or arisen in India

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directly or indirectly. Therefore, once the income is not taxable there is no liability to deduct tax and therefore, it was not obligatory for the appellant to deduct tax in view of this, there was no violation of the1 provisions of section1 195 and the appellant was also not required to pay no deduction certificate from the AO.

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 Coming to ITA No. 1850/AHD/2016 for the assessment year 2012-13, an appeal by the assessee

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 Coming to ITA No. 2296/AHD/2016 for the assessment year 2012-13, an appeal by the Revenue

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reducing upward adjustment of Rs.1,91,48,980/- to Rs.44,32,634/- without properly appreciating the facts of the case and the material brought on record. 4. The Ld.CIT(A) has erred in law and on facts in holding adhoc guarantee fee of 0.50% in respect of guarantee given without appreciating the fact that the above rate was without any basis and hence the rate need to be adjusted before it could be adopted as an arms length rate. 5. The Ld.CIT(A) has erred in law and on facts in rejecting the arm’s length price of Rs.1,91,48,980/- determined by TPO/Assessing Officer in respect of guarantee given by the assessee company in respect of loans taken by the group company. 6. he Ld.CIT(A) has erred in law and on facts in holding that assessee has not provided any loans but the guarantee which did not involve any expenditure on the part of the appellant nor any monetary benefits in the hand of the recipient AE. 7. On the facts and in the circumstances of the case, the Ld.CIT(A) sought to have upheld the order of the Assessing Officer. 8. It is therefore, prayed that the order of the Ld.CIT9A) may be set aside and that of the Assessing Officer may be restored to the above extent.

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Thus in the year under consideration net fund deployed in form CWIP and capital goods for ₹ 41,60,22,265/- (₹ 82,17,65,196 - ₹ 30,83,70,236 - ₹ 9,73,72,695) only.

141.1 The AO was of the view that the borrowed fund has been diverted and deployed in the form of CWIP and Capital advance, hence the proportionate interest expenses incurred needs to be disallowed. Accordingly the AO proposed to disallow the interest @ 12% on the amount of ₹ 41,60,22,265/- whereas the assessee contended that during the year it has incurred interest cost of ₹ 6,98,02,444/- on term loan utilised both for the purpose of business and expansion of existing project. Out of total interest cost it has capitalised an amount of ₹ 3,95,81,203/- being 57% of total cost against the expansion of extisting project. Therefore, no additional disallowance of interest is required.

141.2 However, the AO rejected the submission of the assessee by holding that the assessee has not provided any justification or fund flow statement establishing that the term loan was utilised for the expansion of existing project being CWIP and advace for capital goods to the extent interest amount capitalized suo moto. Hence the AO in absence of any justification worked the amount of interest which needs to be capitalized at ₹ 4,99,22,715/- being @ 12% on fund deployed in CWIP and Advance for Capital Goods. Accordingly the AO made an additon of Rs. 1,03,41,512/- after providing benefit of amount already capitalized by the assessee for ₹ 3,95,81,203/- only.

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capital goods. Thus the capitalisation of interest is not required. The assessee in its support placed reliance on various judgment of Hon’ble Gujarat High Court including CIT vs. Torrent Power Ltd. reported in 363 ITR 474.

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KIRI INDUSTRIES LIMITED Balance Sheet as at 31st March, 2012 Particulars Notes As at 31st March, 2012 EQUITY AND LIABILITIES SHARE HOLDERS FUNDS Share Capital 2 190,000,530 Reserves and Surplus 3 3,600,205,314 3,790,205,844

148.1 In view of the above we hold that there cannot be any disallowance of interest expenses. Accordingly the grounds of appeal raised by the Revenue is dismissed.

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 Coming to ITA No. 1654/AHD/2017 for the assessment year 2013-14, an appeal by the Assessee

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105 of this order. Thus we hold that the principles laid down in above paragraph will mutas mutandis apply here in also. In the result ground of appeal raised by the assessee is allowed whereas ground of appeal raised by the Revenue is dismissed.

Coming to ITA No. 1814/AHD/2017 for the assessment year 2013-14, an appeal by the Revenue

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148 of this order. Thus we hold that the principles laid down in above paragraph will mutas mutandis apply herein also. In the result ground of appeal raised by the Revenue is dismissed.

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172 The next issue raised by the Revenue vide ground no. 6 to 9 is that the learned CIT (A) erred in allowing the part relief to assessee out of addtion made by the AO on account of corportae guarantee extended to AE.

175 The AO/TPO during the assessment proceedings found that the assessee has advanced money/share application money to its AE without charging any interest thereon. As per the AO/TPO such transaction of advancing money for the acquisition of the shares are international transaction, therefore the same needs to be benchmarked. Accordingly the AO/TPO worked out the ALP of the interest attributable on such advance/share application money and made the upward adjustment of ₹ 12,52,159/- by adding to the total income of the assessee.

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178 The learned DR before us vehemently supported the order of the AO whereas the learned AR before us submitted that money was advanced by the assessee to its AE for the acquisition of the shares. Therefore, the provisions of chapter X of the Act cannot be applied to the impugned transaction being capital account transactions. Accordingly the learned AR requested to delete the addition made by the authorities below.

179.1 If the parties have agreed to treat the advance/share application money for subscription of shares, then onus is upon the AO to prove it contrary that it is an international transaction. Here, the AO has drawn presumption on the ground that there was delay in allotment of shares, hence it is an international transaction of capital financing. Such a presumption cannot change the character of transaction. This issue of re-characterization of share application money into loan has been considered at length by the Hon'ble Bombay High Court in the case of Vodafone

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India Services (P) Ltd. Vs Union of India reported in 368 ITR 1, wherein Hon'ble High Court after detailed discussion has concluded that provisions of chapter X are not applicable to international transaction of issuance of equity shares. Here in this case it has been brought on record that the shares have been allotted to the assessee company after some time gap. Therefore, such shares ostensibly fall into capital account that cannot be treated as capital financing which needs to be benchmarked for the purpose of determining the ALP by imposing any kind of interest. The TPO/AO cannot disregard any apparent transaction and substitute it by re-characterizing the said transaction without any material or exceptional circumstances that the assessee has tried to conceal the real transaction. Investment made in shares or applying for the shares cannot be given different colour so as to expand the scope of transfer pricing adjustment by re-characterizing it as interest free loan. Thus, we are unable to uphold the contention of the Revenue that share application money pending allotment should be re-characterized as loan till the period it is allotted after a reasonable time. Accordingly, we do not find any reason to interfere in the finding of the learned CIT (A), thus the ground of appeal raised by the Revenue is dismissed.

 Coming to ITA No. 1655/AHD/2017 for the assessment year 2014-15, an appeal by the Assessee

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Accrodingly the AO invoked the provison of section 40(a)(ia) of the Act, and disalllowed the advertisment expenses paid to M/s Market Bulletin for ₹ 2,14,130/- by adding the same to the total income of the assessee.

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contention is found acceptable, then also the appellant could have submitted the details and evidences in support of its contention in the present appellate proceedings as it has the opportunity to submit the same, which has not been done so. This amply shows that the appellant does not have any case 1o put-forth in its support, in view of the aforesaid discussion, the disallowance made by the AO is found correct and justified and hence the same is confirmed.

191.1 In this case, the payee M/s Media Bulletin is based in Pakistan and have rendered its services of advertisement in Pakistan/outside India. The payee was not having any permanent establishment in India. At the time of hearing learned DR did not bring any material on record suggesting that the non-resident payee is having any permanent establishment in India or services were provided within India. In absence of such finding it is held that the income earned by the non-resident payee cannot be deemed to be accrue or arise in India. Regarding applicability of section 195 of the Act, we observe that once the income is not taxable in India, there is no

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liability of deduction of tax. Therefore, it was not applicable for the assessee to deduct tax, therefore, there was no violation of provisions of section 195 of the Act.

191.2 Before parting it is pertinent to note that the assessee has challenged the addition on legal grounds also. However, we have allowed the appeal of the assessee on merits. Hence we don’t find any reason to adjudicate the issue raised on legal ground. Accordingly, we direct to the AO to delete the addition by him. Hence, the ground of appeal of the assessee is allowed.

192.1 In the result the appeal of the assessee is partly allowed.

 Coming to ITA No. 1815/AHD/2017 for the assessment year 2014-15, an appeal by the Revenue

1.1. The Ld.CIT(A) has failed to appreciate that the assessee had invested more than Rs.100 Crore in new capital assets which was extension of existing business and therefore the provisions of Section 36(1)(iii) was squarely applicable. 1.2. That the Ld.CIT(A) has failed to appreciate that the assessee had paid considerable amount of interest on borrowings made and it had no such interest free cash flow available to invest in acquisition of such capital asset (CWIP). 1.3. That the Ld.CIT(A) has failed to appreciate that the onus was on the assessee to demonstrate that the assessee had such interest free cash flow to invest in such new assets (CWIP). 2. The Ld.CIT(A) has erred in law and on facts in deleting the disallowance u/s.14A amounting to Rs.3,91,90,512/-. 3. The Ld.CIT(A) has erred in deleting the addition of disallowance u/s.14A to the Book Profit u/s.115JB of the Act.

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(11) Revenue’s appeal in ITA No.1814/Ahd/2017 for AY 2013-14 is partly allowed (12) Assessee’s appeal in ITA No.1655/Ahd/2017 for AY 2014-15 is partly allowed (13) Revenue’s appeal in ITA No.1815/Ahd/2017 for AY 2014-15 is partly allowed.

Order pronounced in the Court on 30/07/2021 at Ahmedabad.

Sd/- Sd/- (MAHAVIR PRASAD) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 30/07/2021 Manish