THE ACIT, CORP CIRCLE-1(1), KOCHI, ERNAKULAM vs. APPOLO TYRES LTD, ERNAKULAM

Per CHANDRA POOJARI, AM:

These are cross appeals filed by the assessee and the Revenue against different

orders of the CIT(A)-I, Kochi for the assessment years 2005-06, 2006-07, 2008-09

and 2009-10. The assessee has also raised cross objections in C.O.

I.T.A. Nos. 247,302, 339, 268&336/Coch/2018& C.O. Nos. 56&57/Coch/2018 No.56/Coch/2018 for the assessment year 2008-09 and C.O. No. 57/Coch/2018 for

the assessment year 2009-10.

ITA No. 247/Coch/2018 : Revenue’s appeal A.Y. 2006-07

was incurred by the company because of fire.

3.1 The facts of the case are that assessment u/s. 143(3) was originally completed

on 19/12/2008 on an income of Rs.66,15,44,477/- making an addition of

Rs.20,58,67,559/-. The assessee filed an appeal before the CIT(A) and he CIT(A)

disposed of the appeal vide order dated 30/11/2009. The Department and the

assessee filed before the ITAT. The ITAT passed a combined order dated

29/05/2013 and set aside the issue to the file of the Assessing Officer. The AO 4

I.T.A. Nos. 247,302, 339, 268&336/Coch/2018& C.O. Nos. 56&57/Coch/2018 passed order u/s. 143(3) r.w.s. 254 giving effect to the order of the ITAT. The

assessee had filed the appeal against the Assessing Officer’s order dated 31.5.2015.

The Assessing Officer disallowed the claim along with other claims of the assessee

as follows:

“2. The ITAT in paragraph No. 25 of its order has stated as under: “We have carefully gone through the judgment of the Apex Court in Goetze India Ltd. (supra).

“The decision in question is that the power of the Tribunal under sec. 254 of the Income-tax Act 1961 is to entertain for the first time a point of law provided the facts on the basis of which the issue of law can be raised before the tribunal. The decision does not in any way relate to the power of the assessing officer to entertain a claim for deduction otherwise than by filing a revised return. In the circumstances of the case, we dismiss the civil appeal. However, we make it clear that the issue in this case is limited to the power of the assessing officer and does not impinge on the power of the income tax appellate tribunal u/s. 254 of the Income-tax Act 1961. These shall be no order as to costs.”

“In view of the judgment of the Apex Court it is obvious that the power of the Income-tax Appellate Tribunal to entertain an additional claim will not impinge. Therefore, even if the claim of the loss was not made in the return of income the CIT(A) ought to have been admitted the claim as an additional ground and examined the issue on merit. This tribunal also has to entertain the same as an additional ground since the claim was made in the course of assessment proceedings in view of the judgment of the Apex Court in the case of CIT vs. Shelly Products (2003) 261 ITR 367 (SC). In view of the above, the CIT(A) is not justified in rejecting the claim of the assessee. However, since the assessing officer has not considered the matter on merit, this tribunal is of the considered opinion that the matter has to be adjudicated by the assessing officer at the first instance. Accordingly, the orders of the lower authorities are set aside and the issue of loss of Rs.18,26,47,613/- on account of fire is remitted back to the file o the assessing officer. The assessing officer shall consider the issue on merit and thereafter decide the same in accordance with law after giving reasonable opportunity of hearing to the assessee.”

I.T.A. Nos. 247,302, 339, 268&336/Coch/2018& C.O. Nos. 56&57/Coch/2018 3.2 The assessee was granted an opportunity to explain with regard to the above

issue and submitted that since the loss of Rs.17,34,34,860/- was incurred during the

previous year ended 31.3.2006, hence the loss is allowable u/s. 26/37 of the Act,

during the assessment year 2006-07, i.e., the year in which the same was incurred.

The assessee submitted that the accounting treatment given by the company in the

books of account was not relevant for the allowability of the expenditure incurred in

the income-tax assessment. Hence, even though the loss was shown as recoverable

in the books during the previous year ended 31/3/2006, the same was allowable in

the assessment year 2006-07 in which the same was incurred. It was further

submitted that in the event of the assessee being allowed loss on account of fire at

MSWC godowns in the income tax assessment for A.Y. 2006-07, any amount

received by the assessee from the MSWC in the subsequent years against the said

loss claim shall be offered to tax by the assessee in the respective assessment

years. It was submitted that the assessee had received a sum of Rs.4,24,96,060/-

as part payment of the claim from MSWC during the assessment year 2008-09

against the total loss claim lodged with MSWC. Further, the assessee had also

provided for loss amounting to Rs. 7 crores and charged the same to the P&L

account during the year ended 31/3/2007, i.e. A.Y. 2008-09. The assessee has

further provided a sum of Rs.6,09,38,800/- against the loss claimed and charged

the same to the P&L account during the year ended 31/3/2010. It was submitted

that in case the assessee loss claim of Rs.17,34,34,860/- was allowed during A.Y.

2006-07, then the amounts provided in the books in the subsequent assessment

I.T.A. Nos. 247,302, 339, 268&336/Coch/2018& C.O. Nos. 56&57/Coch/2018 years against the said may be taxed in the hands of the assessee in the subsequent

years as under:

3.3 Thus, the assessee prayed that the loss incurred by the assessee during the

year ended 31/3/2006 may be allowed in the assessment year 2006-07 in

accordance with the provisions of section 28/37 of the Act.

3.4 On appeal, the CIT(A) directed the Assessing Officer to allow the balance loss

of Rs.4,24,29,060/- during the assessment year 2006-07.

3.5 Against this, the Revenue is in appeal before us.

3.6 We have heard the rival submissions and perused the record. For A.Y. 2006-

07, the assessee estimated the loss at Rs.17,34,34,860/- which was disallowed by

the Assessing Officer. However, subsequently, it was allowed by the Assessing

Officer at Rs. 7 crores in A.Y. 2008-09 and at Rs.6,09,38,800 in A.Y. 2010-11,

totaling Rs.13,09,38,800/-. The balance amount of R.4,24,29,060/- was not allowed.

It is brought on record that the assessee had received insurance claim to the extent

of that amount and offered to tax during A.Y. 2008-09. However, the claim of the

I.T.A. Nos. 247,302, 339, 268&336/Coch/2018& C.O. Nos. 56&57/Coch/2018 balance loss of Rs.4,24,29,060/- for the assessment year 2006-07 was not allowed

by the Assessing Officer on the reason that the assessee had not claimed it in the

revised return. However, the same was allowed by the CIT(A) as the assessee had

offered the receipt of insurance claim during the subsequent year, i.e., 2008-09.

Being so, it is revenue neutral. We find no infirmity in the order of the CIT(A) in

allowing the claim of loss of the assessee, though there was no revised return of

income filed by the assessee. Thus, this ground of appeal of the Revenue is

dismissed.

profits of gas turbine boiler amounting to Rs.2,06,20,739/-.

4.1 The facts of the case are that the assessee filed return of income and claimed

deduction u/s. 80IA on its power generation plants as under:

Diesel generation unit Rs. 71,20,803/- Gas Turbine unit Rs.10,16,77,289/- Total Rs.10,87,98,092/-

During the course of assessment proceedings, the assessee made another claim of

Rs.2,06,20,739/- as profit on generation of steam from gas turbine unit. The

Assessing Officer disallowed profit on gas turbine unit and did not consider the claim

of steam profit. The CIT(A) allowed the claim of deduction on gas turbine unit

amounting to Rs.10,16,77,289/-. But he also did not consider the fresh claim of

Rs.2,06,20,739/- on steam profits. On appeal to the Tribunal, the Tribunal directed

I.T.A. Nos. 247,302, 339, 268&336/Coch/2018& C.O. Nos. 56&57/Coch/2018 the Assessing Officer to consider the claim of the assessee in accordance with the

provisions of the Act. However, the Assessing Officer did not follow the directions

of the Tribunal and disallowed the claim of Rs.10,16,77,389/-.

4.2 Before the CIT(A) the assessee contended that the profit arising out of captive

consumption of steam generated from the gas turbine by utilising waste heat

released from the gas turbine was erroneously not claimed by the assessee in its

return of income. It was contended that the assessee had placed the audited

profitability statement of the gas turbine (both for power and steam generation)

along with the certificate of the auditor before the Assessing Officer. Further, the

assessee relied on the decision of the ITAT, Delhi Bench in the case of ACIT vs. Sial

SBEC Bioenergy (83 TTJ 866)(Del) wherein it was held that steam is a form of

energy and thus power from that would qualify for deduction u/s. 80IA. Similarly,

the assessee relied on the decision of the ITAT, Mumbai Bench in the case of West

Coast Paper Mills Ltd. vs. ACIT (52 taxman.com 268) wherein it was held that

deduction u/s. 80IA is allowable in respect of captive power consumption units and

generation of steam amounts to generation of power for the purpose of deduction

u/s. 80IA. The assessee also submitted that the gas turbine unit is a separate

undertaking and is not a result of splitting up of reconstruction of an already

existing unit. The technology used in gas turbine vis-à-vis diesel turbine is different

from each other. In view of the above, the CIT(A) directed the Assessing Officer to

allow the claim of the assessee on gas turbine unit amounting to Rs.10,16,77,289/-

and on generation of steam power amounting to Rs.2,06,20,739/-. 9

I.T.A. Nos. 247,302, 339, 268&336/Coch/2018& C.O. Nos. 56&57/Coch/2018

4.3 Against this, the Revenue is in appeal before us.

4.4 We have heard the rival submissions and perused the record. We find that

this issue is covered in favour of the assessee by the decision of ITAT, Mumbai

Bench in the case of West Coast Paper Mills Ltd. vs. ACIT (52 taxman.com 268)

wherein it was held that deduction u/s. 80IA is allowable in respect of captive power

consumption units and generation of steam amounts to generation of power for the

purpose of deduction u/s. 80IA. We do not find any infirmity in the order of the

CIT(A) and confirm the same. Accordingly, this ground of appeal of the Revenue is

dismissed.

being club expenses.

5.1 The facts of the case are that the Assessing Officer treated the club expenses

as personal in nature and disallowed them. The CIT(A) allowed these expenses.

Against the Revenue’s appeal, the Tribunal set aside the issue to the file of the

Assessing Officer stating that entrance fees, subscription fees etc. be treated as

business expenditure and for balance expenditure, commercial expediency be

verified. During the course of re-assessment, the Assessing Officer asked for bills,

vouchers etc. and gave time of only two days. The same was produced but they

I.T.A. Nos. 247,302, 339, 268&336/Coch/2018& C.O. Nos. 56&57/Coch/2018 were not admitted as the assessee was aware that these verifications were required

to be carried out by the Assessing Officer.

5.2 On appeal, the CIT(A) confirmed the addition of Rs. 20,00,000/- and balance

Rs.30,09,299/- was deleted because the Assessing Officer had given adequate time

but the assessee was not prepared despite the Tribunal’s clear directions. Thus,

Rs.30,09,299/- was treated as business purpose and balance was treated as

personal in nature.

5.3 Against this, the Revenue is in appeal before us. The Ld. DR submitted that

the CIT(A) is not justified in giving relief to the assessee.

5.4 The ld. AR relied on the judgment of the Gujarat High Court in the case of

Sayaji Iron and Engg. Co. vs. CIT ( 253 ITR 749) wherein it was held that the

directors of the assessee were entitled to use the vehicles for their personal use in

accordance with the terms and conditions on which they were appointed and the

prerequisites given to the directors formed part of their “remuneration” under the

Explanation to section 198 of the Companies Act, 1956, for the purpose of

determining their remuneration under section 309 of that Act. Once such

remuneration was fixed as provided in section 309 it was not possible to state that

the assessee incurred the expenditure for the personal use of the directors. Even if

there was any personal use by the directors that was as per the terms and

I.T.A. Nos. 247,302, 339, 268&336/Coch/2018& C.O. Nos. 56&57/Coch/2018 conditions of service and, in so far as the assessee was concerned, it was business

expenditure and no part of the expenditure could be disallowed.

5.5 We have heard the rival submissions and perused the record. In our opinion,

the observation made by the CIT(A) is justified. The Assessing Officer had given

only two days to produce the requisite vouchers and bills. The assessee has also

not produced any documents. More so, there was no disallowance in the

subsequent year on this count. Considering the totality of the facts and

circumstances of the case, the CIT(A) disallowed Rs. 20 lakhs and balance

Rs.30,09,299/- was deleted. Hence, we do not find any infirmity in the order of the

CIT(A) and confirm the same. This ground of appeal of the Revenue is dismissed.

The appeal of the Revenue in ITA No. 247/Coch/2018 is dismissed.

ITA No.339/Coch/2018 : Assessee’s Appeal : A.Y. 2006-07

amounting to Rs.3,67,43,119/-.

6.1 There was a delay of 52 days in filing this appeal before the Tribunal. The Ld.

AR has filed condonation petition accompanied by an affidavit citing the reasons for

the delay in filing the appeal. On perusal of the affidavit, we find that the there was

sufficient cause for the delay in filing the appeal before the Tribunal. Accordingly,

we condone the delay of 52 days and admit the appeal for adjudication.

I.T.A. Nos. 247,302, 339, 268&336/Coch/2018& C.O. Nos. 56&57/Coch/2018 6.2 The facts of the case are that this claim was not made in the original return of

income or through a revised return of income. The claim was made during the

course of assessment proceedings. For the reasons, already discussed above, the

Assessing Officer refused to entertain this claim. On appeal, the Tribunal directed

the Assessing Officer to entertain the claim on merits. On verification, the Assessing

Officer found that the DSIR approval was not there for 2006-07. The deduction was

not allowable for this assessment year This disallowance was also confirmed by the

CIT(A) for the assessment year 2007-.

6.3 On appeal, the CIT(A) confirmed the disallowance of Rs.3,67,43,119/-.

6.4 Against this, the assessee is in appeal before us.

6.5 We have heard the rival submissions and perused the record. As rightly

observed by the CIT(A), the assessee was not granted DSIR approval for the

assessment year 2006-07. Hence, there is no question of granting reduction u/s.

35(2AB) of the Act. Hence, this ground of appeal of the assessee is dismissed. The

appeal of the assessee in ITA No.339/Coch/2018 is dismissed.

ITA No. 249/Coch/2018 : Assessee’s Appeal : A.Y. 2007-08 ITA No. 302/Coch/2018 : Revenue’s Appeal : A.Y. 2007-08

the disallowance of Rs.6,29,87,576/- u/s. 35(2AB) of the Act in respect of 13

I.T.A. Nos. 247,302, 339, 268&336/Coch/2018& C.O. Nos. 56&57/Coch/2018 expenditure incurred by it for its in-house R&D facility. It was submitted that the

approval of the DSIR has retrospective application considering the fact that R&D

unit already has the recognition and hence, deduction ought to have been allowed.

7.1 We have heard the rival submissions and perused the record. As rightly

observed by the CIT(A), the assessee was not granted DSIR approval for the

assessment year 2007-08. Hence, there is no question of granting reduction u/s.

35(2AB) of the Act. Hence, this ground of appeal of the assessee is dismissed.

7.2 The assessee has raised additional ground in ITA No. 249/Coch/2018 which

reads as follows:

“With reference to the appeal filed by the Department via ITA No.302/Coch/2017 dated 8th June, 2017, if for any reason, the entire expenditure of Rs.63,607,257/- incurred on issue of shares and Rs.12,50,000/- incurred on ROC fees by the Appellant Company is not allowed by the bench members of the Hon’ble ITAT, as allowed by the CIT(A), then the deduction u/s. 35D amounting to Rs.12,972,451 [1/5th of (63,607,257 + 1,250,000)] should be allowed as the said expenditure is incurred for expanding the current business of tyre manufacture and hence clearly covered u/s. 35D of the Act.”

7.3 We find that the reason explained by the assessee for not raising this ground

on earlier occasion is bona fide. Hence, we admit the additional ground for

adjudication.

I.T.A. Nos. 247,302, 339, 268&336/Coch/2018& C.O. Nos. 56&57/Coch/2018 7.4 The facts of the case are that the Assessing Officer disallowed deduction u/s.

35D of the Act since such deduction was available only for initial setting up or in

connection with setting up a new industrial unit but not for meeting the expanding

needs of the business.

7.5 On appeal, the CIT(A) considered the allowability of this expenditure u/s.

37(1) of the Act and allowed it. However, the CIT(A) has not considered the

allowability of expenditure u/s. 35D of the Act.

7.6 Thus, on the issue of allowability of expenditure u/s. 37(1) of the Act, the

Revenue is in appeal before us in ITA No. 302/Coch/2018 and on the allowability of

expenditure u/s. 35D of the Act, the assessee is in appeal before us in ITA

No.249/Coch/2018 by way of additional ground.

7.6.1 With regard to allowability of expenditure u/s. 37(1), we are of the opinion

that this issue was already settled by the Supreme Court in the case of Brooke Bond

India Ltd. vs. CIT (225 ITR 798) wherein it was held that expenditure incurred by a

company in connection with issue of shares, with a view to increase its share

capital, is directly related to the expansion of the capital base of the company, and

is capital expenditure, even though it may incidentally help in the business of the

company and in the profit making. Being so, we are inclined to reverse the finding

of the CIT(A) on this issue. Accordingly, we allow the ground taken by the

Revenue. 15

I.T.A. Nos. 247,302, 339, 268&336/Coch/2018& C.O. Nos. 56&57/Coch/2018 7.7 With regard to allowability of expenditure u/s. 35D, the assessee claimed

expenditure of Rs.6,36,07,257/- on issue of shares and Rs.12,50,000/- incurred on

ROC fees and submitted that it should be allowed u/s. 35D of the Act. This issue

was raised for the first time before us. The Assessing Officer had no occasion to

examine the same. Hence, we remit this issue to the file of the AO for fresh

consideration and decide the issue in accordance with law after giving reasonable

opportunity of hearing to the assessee. The additional ground raised by the

assessee is allowed for statistical purposes.

to disallowance of claim of deduction made on the profits of gas turbine boiler.

8.1 We have heard the rival submissions and perused the record. As discussed

earlier in para 4.4, the assessee is entitled to deduction u/s. 80IA on captive power

consumption units and generation of steam amounts to generation of power for the

purpose of deduction u/s. 80IA. We do not find any infirmity in the order of the

CIT(A) and confirm the same. Accordingly, this ground of appeal of the Revenue is

dismissed. The appeal of the Revenue in ITA No. 302/Coch/2018 is partly allowed

and the appeal of the assessee in ITA No.249/Coch/2018 is partly allowed for

statistical purposes.

ITA No. 268/Coch/2018: Revenue Appeal: A.Y. 2008-09 C.O. No. 56/Coch/2018: Assessee Appeal: A.Y. 2008-09 16

I.T.A. Nos. 247,302, 339, 268&336/Coch/2018& C.O. Nos. 56&57/Coch/2018 ITA No. 336/Coch/2018: Revenue Appeal: A.Y. 2009-10 C.O. No. 57/Coch/2018 : Assessee Appeal:A.Y. 2009-10

I.T.A. Nos. 247,302, 339, 268&336/Coch/2018& C.O. Nos. 56&57/Coch/2018 9.1 The Revenue has raised the following grounds in ITA No.336/Coch/2018:

1.1 In the facts and circumstances of this case, the learned Commissioner of Income Tax (Appeals) ought to have considered the provisions of Section 43(1) which states that cost of an asset includes all kinds of expenses related to erection and installation of an asset.

1.2 Learned Commissioner of Income Tax (appeals) failed to appreciate that the assessee had capitalized these expenses in its books and claimed the expenses as revenue expenses in the computation of income.

2.1 The Learned Commissioner of Income Tax (Appeals) erred in directing to exclude 3 comparable from the list and to compute the Arm's Length Price at the rate of 0.605% on salary amount only instead of total reimbursed amount from the associate enterprise.

2.2 The Ld. Commissioner of Income Tax (Appeals) failed to appreciate that the said 3 companies are broadly engaged in similar services and therefore functionally comparable and the same comparable was accepted in earlier year when it was having lower profit margin.

3 In the fact and circumstances of this case, Commissioner of Income Tax (Appeals) erred in holding that once the amounts written off have not been carried forward to the balance sheet of the subsequent years, the write off needs to be allowed

3.1 The learned Commissioner of Income Tax(Appeals) ought to have appreciated the fact that the assessee has carried forward the bad debts to the subsequent Assessment Years.

I.T.A. Nos. 247,302, 339, 268&336/Coch/2018& C.O. Nos. 56&57/Coch/2018 4. The learned Commissioner of Income Tax(Appeals) is erred in holding that Gas turbine units are eligible for deduction u/s. 80IA. 4.1 The learned Commissioner of Income Tax(Appeals)'s stand is without appreciating the factual matrix brought on record by the Assessing Officer. The Ld. Commissioner of Income Tax (Appeal) erred in not appreciating the fact that Gas Turbine units are not new units as claimed by the assessee and they are merely reconstruction of old units. And the profit calculated in Form 10CCB is on the notional basis.

56&57/Coch/2018 which reads as follows:

Ground No. 2: that the Assessing Officer erred in not passing a draft assessment order, which is a mandatory requirement as per section 144A. Hence, the order passed by the Assessing Officer dated 02/03/2016 is illegal, bad in law and without jurisdiction.

Ground No. 3 : That not following the mandatory procedure vititates the entire proceedings and renders the order dated 02/03/2016 illegal, void ab- initio and hence liable to be quashed.

10.1 The issue raised in the additional ground in C.O. Nos. 56&57/Coch/2018

which is a legal issue and goes to the root of the matter, it is to be admitted. We

also place reliance on the judgment of the Supreme Court in the case of National

Thermal Power Co. Ltd. vs. CIT (229 ITR 383) (SC) wherein it was held that under

section 254 of the Income Tax Act, 1961, the Appellate Tribunal may, after giving

both the parties to the appeal an opportunity of being heard, pass such orders

thereon as it thinks fit. The power of the Tribunal in dealing with appeals is thus

I.T.A. Nos. 247,302, 339, 268&336/Coch/2018& C.O. Nos. 56&57/Coch/2018 expressed in the widest possible terms. The purpose of the assessment

proceedings before the taxing authorities is to assesss correctly the tax liability of an

assessee in accordance with law. If, for example, as a result of a judicial decision

given while the appeal is pending before the Tribunal, it is found that a non-taxable

item is taxed or a permissible deduction is denied, there is no reason why the

assessee should be prevented from raising that question before the Tribunal for the

first time, so long as the relevant facts are on record in respect of the item. There

is no reason to restrict the power of the Tribunal under section 254, only to decide

the grounds which arise from the order of the Commissioner of Income-

tax(Appeals). Both the assessee as well as the Department have a right to file an

appeal/cross objections before the Tribunal. The Tribunal should not be prevented

from considering questions of law arising in assessment proceedings, although not

raised earlier. The view that the Tribunal is confined only to issues arising out of

the appeal before the Commissioner(Appeals) is too narrow a view to take of the

powers of the Tribunal. In view of the above judgment of Supreme Court, we are

inclined to admit the additional ground raised by the assessee.

10.2 In the present case, originally, the assessee came in appeal before the

Tribunal for both the assessment years. The Tribunal remitted the matter to the file

of the Assessing Officer to examine the issue afresh after giving reasonable

opportunity of hearing to the assessee. Consequently, the Assessing Officer passed

the assessment order for the assessment year 2008-09 u/s. 143(3) r.w.s. 144C and

for the assessment year 2009-10 on 31/12/2013. 20

I.T.A. Nos. 247,302, 339, 268&336/Coch/2018& C.O. Nos. 56&57/Coch/2018

10.3 Now the contention of the Ld. AR is that the Assessing Officer directly

passed the final order without passing the draft assessment order u/s. 144C of the

I.T. Act which is invalid. As such, the final assessment order dated 02/03/2018 is

bad in law.

10.4 We have heard the rival contentions and perused the record. We find that

this issue has come up for consideration in various Courts and Supreme Court as

follows:

(a) In the case of JCB India Ltd. vs. DCIT (398 ITR 189) (Delhi), the Delhi

High Court held that section 144C(1) is unambiguous. It requires the Assessing

Officer to pass a draft assessment order after receipt of the report from the TPO.

There is nothing in the wording of section 144C(1) which would indicate that this

requirement of passing a draft assessment order does not arise where the

exercise had been undertaken by the TPO on remand to it, of the said issue, by

the Tribunal. It was then contended by the revenue that the assessment order

passed by the Assessing Officer should not be declared to be invalid because of

the failure to pass a draft assessment order u/s. 144C. In this regard, reference

is made to 292B of the Act. As already noted, the final assessment order of the

Assessing Officer stood vitiated not on account of mere irregularity but since it

was an incurable illegality, section 292B would not protect such an order.

I.T.A. Nos. 247,302, 339, 268&336/Coch/2018& C.O. Nos. 56&57/Coch/2018 (b) In the case of Addl. CITvs. Nokia India (P) Ltd. (259 taxman 81 (SC), the

Supreme Court held that once there is a clear order of setting aside of an

assessment order with requirement of Assessing Officer/TPO to undertake a

fresh exercise of determining the arm’s length price, failure to pass a draft

assessment order, would violate section 144C(1).

(c) In the case of International Air Transport Association vs. DCIT (290 CTR 46)

(Bom.), the Bombay High Court held that in case of foreign company, prior to

final order passed by the Assessing Officer u/s. 143(3) a draft assessment order

u/s. 144C(1) is mandated.

(d) In the case of Vijay Television (P) Ltd. vs. DRP (Mad.), the Madras High

Court held that where pursuant to order of TPO, Assessing Officer passed a final

order u/s. 143(3) instead of passing a draft assessment order u/. 144C, there

being violation of procedure prescribed under Act, impugned order was to be set

aside and, in such a case, even corrigendum issued by Assessing Officer

modifying final order of assessment to be read as a draft assessment order,

could not cure defect existing in original order.

(e) In the case of ACIT vs. Vijay Television (P) Ltd. (407 ITR 642) (Mad.), the

Madras High Court held that where without first passing draft assessment order,

final assessment order was passed u/s. 144C and demand was raised and

penalty imposed, final assessment, demand and penalty would be invalid. 22

I.T.A. Nos. 247,302, 339, 268&336/Coch/2018& C.O. Nos. 56&57/Coch/2018

(f) In the case of Pr.CIT vs. Andrew Telecommunications (96 taxman.com 613)

(Bom.), the Bombay High Court held that where T.P. proceedings were started

afresh on remand by Tribunal, non-issuance of draft assessment order would

vitiate final assessment order.

(g) In the case of Eaton Fluid Power Ltd. (96 taxman.com 512) (ITAT, Pune),

the Tribunal held that the impugned order passed by Assessing Officer was

contrary to mandatory provisions of section 144C and thus same was to be

declared as one without jurisdiction, null and void.

(h) In the case of Addl. CIT vs. Oracle India (P) Ltd. (93 taxmann.com 8) (Delhi-

Trib.), the Tribunal held that if draft assessment order has not been passed in

accordance with the procedure laid down in section 144C(1) and instead final

assessment order has been passed though within limitation time, then such an

order cannot be cured after limitation has expired by any subsequent

rectification proceedings or corrigendum and in such a situation all subsequent

proceedings and final assessment order will get invalidated.

10.5 In view of the above decisions, the facts of the present case being similar to

that considered by the various Courts and Supreme Court, we hold that when the

final assessment order is passed without passing the draft assessment order, it is

illegal and without jurisdiction. Accordingly, we quash the assessment orders for 23

I.T.A. Nos. 247,302, 339, 268&336/Coch/2018& C.O. Nos. 56&57/Coch/2018 both the assessment years. This ground of appeals of the Revenue is dismissed.

The appeals of the Revenue in ITA Nos. 336/Coch/2018 and 268/Coch/2018 are

dismissed and the Cross Objections filed by the assessee in C.O. Nos. 56 &

57/Coch/2018 are allowed.

dismissed, the appeal filed by the assessee in ITA No 339/Coch/2018 is dismissed,

the appeal filed by the Revenue in ITA Nos. 336 & 268/Coch/2018 are dismissed.

The appeal of the assessee in ITA No. 249/coch/2018 is partly allowed for statistical

purposes. The appeal filed by the Revenue in ITA No. 302/Coch/2018 is partly

allowed. The Cross Objections of the assessee in C.O. Nos. 56&57/Coch/2018 are

allowed. Order pronounced in the open Court on this 21st March, 2019

sd/- sd/- (GEORGE GEORGE K.) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER

Place: Kochi Dated: 21st March, 2019 GJ Copy to: 1. Appollo Tyres, Cherupushpam Building, Shanmugham Road, Kochi-682 031. 2. Appollo Tyres, 3rd Floor, Areekal Mansion,Panampilly Nagar, Kochi-682 036. 3. The Assistant Commissioner of Income-tax, Corporate Circle-1(1), Kochi. 4. The Commissioner of Income-tax(Appeals)-I, Kochi.

I.T.A. Nos. 247,302, 339, 268&336/Coch/2018& C.O. Nos. 56&57/Coch/2018

(ASSISTANT REGISTRAR) I.T.A.T., Cochin