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

KANT, AM appeals by the assessee(s) are d ssessment orders dated
12
by the Ld. Assistant Commissio
8(3), Mumbai [in short ‘the ment year 2020-21 ,pursuant to solution Panel (DRP). As com in these appeals, therefore, sa d off by way of this consolidate
/2024
up the appeal in ITA No. 3714
nds raised by the assessee in :
e facts and circumstances of the case as he Hon'ble Disputed Resolution penal ha ming the action of the Learned Assessing g an upward adjustment of Rs. 10,32,7
m's Length Price in relation to providing
Associated Enterprises, without considerin rcumstances of the case.
e facts and circumstances of the case as he Hon'ble Disputed Resolution penal ha ming the action of the Learned Assessing g a disallowance of Rs. 41,81,59,866/- come Tax Act, 1961, without considerin rcumstances of the case.
JSW Energy Ltd
2
714 & 3713/MUM/2024
directed against
2.06.2024
and oner of Income-
Ld. Assessing the direction of mmon issues in ame were heard d order for sake
/Mum/2024 for n its appeal are s well as in as erred in ng Officer in 75,726/- to guarantee ng the facts s well as in as erred in ng Officer in u/s.14A of ng the facts

e facts and circumstances of the case as he Hon'ble Disputed Resolution penal ha ming the action of the Learned Assessing g an addition of Rs. 41,81,59,866/- on d disallowance of expenses u/s.14A of ct, 1961, while computing the book profit
Act, without appreciating the fact no su be made in computing the book profit u/
come Tax Act, 1961. e facts and circumstances of the case as he Hon'ble Disputed Resolution penal ha ming the action of the Learned Assessing g a disallowance of Rs. 53,10,000/- u/
e Tax Act, 1961, on the alleged plea tha apital in nature, without considering the mstances of the case.
e facts and circumstances of the case as he Hon'ble Disputed Resolution penal ha ing the action of the Learned Assess nsidering the disallowance of Rs.53,10
Term Capital Loss eligible to set off agains
Capital Gain, without considering the mstances of the case.
e facts and circumstances of the case as he Hon'ble Disputed Resolution penal ha ming the action of the Learned Assessing wing the deduction of Rs. 69,30,25,027
0IA of the Income Tax Act, 1961, without cts and circumstances of the case.
e facts and circumstances of the case as he Hon'ble Disputed Resolution penal ha ming the action of the Learned Assessing owing the claim of the assessee compan mount of Rs.29,48,977/- on account of oving stores and spares which was in d in the computation of income, without cts and circumstances of the case.
e facts and circumstances of the case as he Hon'ble Disputed Resolution penal ha ming the action of the Learned Assessing owing the claim of the assessee compan mount of Rs. 1,09,08,529/- on account through OCl which was inadvertently of computation of income, without considerin rcumstances of the case assessee revised its ground No. 1
JSW Energy Ltd
3
714 & 3713/MUM/2024
s well as in as erred in ng Officer in account of the Income u/s.115JB uch addition
/s.115JB of s well as in as erred in ng Officer in /s.37 of the at the same e facts and s well as in as erred in sing Officer
0,000/- as st the Short facts and s well as in as erred in ng Officer in 7/- claimed considering s well as in as erred in ng Officer in ny to reduce write off of nadvertently considering s well as in as erred in ng Officer in ny to reduce of gratuity ffered twice ng the facts
1 as under:

On the facts a Hon'ble Disp action of the adjustment of relation to p without consid
3.1 Further, the a relation to issue of reproduced as under "On the facts the Hon'ble D action of the decision of D
Investment (5
only those i average va income durin
4. We have heard admissibility of the raised being purely o fresh facts, therefore decision of Hon’ble S
ITR 283 (SC).
5. Briefly stated, fa is a public limited co of power and operat across India includi
Rajasthan and H consideration, the as ITA Nos. 37

and circumstances of the case as well as ute resolution Panel has erred in conf
Learned Assessing Officer in making a of Rs 10,32,75,726/ - to the Arms Leng providing interest to its associated dering the facts and circumstances of th assessee also filed an additio disallowance u/s 14A of the :
and circumstances of the case as well
Dispute resolution Panel has erred in con
Learned Assessing Officer without appre
Delhi Tribunal Special bench in the cas
58 /TRT) 313) wherein it has been conc investments are to be considered for alue of investment which yielded ng year."
rival submission of the parties additional ground. We find th of legal nature without requiring
, same was admitted for adjudic
Supreme Court in the case of N acts of the case are that the ass ompany involved in the busines tion and maintenance of powe ng in the states of Karnataka
Himachal
Pradesh.
For the ssessee filed its return of income
JSW Energy Ltd
4
714 & 3713/MUM/2024
in law, the firming the an upward gth Price in enterprises he case."
onal ground in e Act, which is l as in law, nfirming the eciating the se of Vireet cluded that computing d exempt on the issue of hat the ground g investigation of cation in view of NTPC Ltd. 229
sessee company ss of generation r plants spread a, Maharashtra, e year under e on 15.02.2021

declaring total inc provisions of the Inco profit of Rs.66,87,76
income filed by the a notices under the Ac of scrutiny proceedin transactions carried enterprises
(AEs), determination of a transactions to the ld order dated 20/07/2
draft assessment ord the adjustments mad order, the assessee p were disposed off on Ld. DRP, the Ass assessment order on assessment order, th raising grounds as re
6. Before us, the L containing page 1 to 7. The ground No relates to upward a ITA Nos. 37

ome at Rs.145,43,82,260/- ome-tax Act, 1961 (in short ‘the 6,855/- u/s 115JB of the Act assessee was selected for scrutin t were issued and complied with ngs, the Assessing Officer notice d out by the assessee with therefore, he referred th arm’s length price of those d. Transfer Pricing Officer (TPO
2023 of ld TPO, the Assessing der to the assessee on 31.08.202
de by the Ld. TPO. Against the d preferred objections before the n 30.05.2024. Pursuant to the essing Officer passed the i
12.06.2024. Aggrieved with the he assessee is in appeal befor eproduced above.
Ld. Counsel for the assessee file
214. o. 1 (Revised) of the appeal o adjustment of Rs.10,32,75,726/
JSW Energy Ltd
5
714 & 3713/MUM/2024
under regular e Act’) and book
. The return of ny and statutory h. In the course ed international its associated he matter for e international
). On receipt of Officer issued a 23 incorporating draft assessment
Ld. DRP, which direction of the impugned final e impugned final re us by way of ed a Paper Book of the assessee
/- to the arm’s length price in relati to its associated ente
7.1 The facts in brie are that during the assessment year und interest of Rs.6,14
agreement dated enterprises namely J agreement, the borro at the rate of three m
, which would be co interest on said loan agreement also conta the rate of one perc default in repaymen amended from time
Under amendment d at the rate of six mon made six monthly, s due was deferred to amended on 22.02. from United Sates
Interest due date wa loan was changed
ITA Nos. 37

ion to provision of interest on erprises.
ef qua the issue in dispute as n financial year 2019-2020 i.e.
der consideration, the assessee
4,49,281/- in respect of loan(
26.07.2010
entered into w
SW Energy Minerals (Mauritius ower was required to pay intere month’s London Inter Bank Offer omputed on the basis of 360
was payable every year on 31st ained provision for charging of p centile at the discretion of len nt of loan. The said agreement to time up to the year under dated 31.03.2012, interest wa nths LIBOR and period of intere simultaneously, the first paym
30.09.2012. Thereafter, again
.2012 where loan amount limit
Dollar(U ) 42 Million to U as further deferred to 30.09.201
three years to four years fro
JSW Energy Ltd
6
714 & 3713/MUM/2024
loans extended noted by the AO relevant to the was to receive
(s) granted vide with associated
) Ltd. As per the est to the lender red Rate(LIBOR) days year. The t December. The penal interest at nder in case of t was modified/
r consideration.
as made payable est payment was ment for interest agreement was t was enhanced 50 Million.
3 and tenure of om the date of disbursement. Again
18.07.2013 and 27. Million to UDS 54 M deferred to 30.09.20
20.07.2014 on 31.0
concerned, the loan a and the assessee d interest to 31.03.20
suo-motu adjustmen transaction of receip from 19/07/2010 to of the final assessme
7.2 The assessee b the interest paymen method. The assesse
2019-2020 the loan amounted to Rs.330
financial year
20
agreement/amended entity. The amendm debts and working c loan to be disbursed of loan. According t agreement was carrie
ITA Nos. 37

n the loan agreement was .09.2013, revising the loan lim
Million and payment of interest d
014. The agreement was agai
07.2015. As far as year under agreement was lastly amended deferred the first installment
19. The Assessing Officer has t made by the assessee to th t of interest on each tranches
25/2/2020, which is available nt order.
benchmarked the international nt under Comparable uncontro ee also submitted that during th outstanding with associated e
.96 crores, which was disburse
10-11
onwards in tranche agreements between assessee ments include utilisation of loan capital needs and also to increa to AE with increase in time limi to the assessee, the last amen ed out on 16/12/2016 and sai
JSW Energy Ltd
7
714 & 3713/MUM/2024
s modified on mit from U 50
due was further n amended on consideration is on 16.12.2016
for payment of reproduced the he international of loan released on pages 7 to 9
l transaction of olled price(CUP) he financial year enterprises was ed to them from es, based on e and Mauritius n for paying off ase the limits of it for repayment ndment to loan id last amended agreement was in fo therefore, there was loan agreement and h financial year 2016
year. In the transfer p to credit rating of A assessee with other results carried out on rate was the appr commercial and eco precaution, the asses at LIBOR plus a m considered as an Accordingly, the as Rs.6,14,49,281/- ch accordance with the regulatory considerat
7.3 However, the a point on LIBOR an transaction at Rs. 16
offered additional Rs price of the interest t
P
Amount in 3CEB
Amount in 3CEB
ITA Nos. 37

orce during the year under con no change in the terms and co hence the benchmarking analys
6-17, was applicable to the cu pricing report submitted, the as AEs and compared loan tran interbank loan transactions b n databases and concluded that ropriate arms length rate c onomic reasons, however by ssee further suo-motu offered th median of 300 basis points arm’s length interest rate ssessee submitted that intere harged by the assessee was arm’s length rate based on the tion.
assessee considered additional nd computed arms length pr
6,59,18,029/- in the return of in s. 10,44,68,748/- as quantum ransaction as under:
Particulars
Amoun
(as reported in books)
6,14,49,2
(with regards to ALP)
16,59,18
JSW Energy Ltd
8
714 & 3713/MUM/2024
nsideration and onditions of the sis concluded in urrent financial ssessee referred sactions of the based on search t LIBOR interest considering the abundant and hat interest rate
(bps) could be for the loans.
est amount at s justified in commercial and spread of basis rice of interest ncome filed and of arm’s length nt in INR
281
,029

Difference offere
7.1 The Ld. TPO ho of the assessee. The assessee, which were of ultimate utilisation in which loan was should have search applicable for borrow databases like Bloom did not determine th the AE in accordanc
92C(2) and also the being reliable, he re assessee. The ld TPO earlier years and pro keeping in mind curr conditions of tenor o
The ld TPO mentione
2014-15, 2015-16 , 2
the assessee had ac therefore, the floating case of assessee and was to be ascertain
Manager’ tool and ac the rates applicable
ITA Nos. 37

ed to tax
10,44,68
owever was not convinced with TPO rejected the comparables e located in South Africa geogra n of loans instead of Mauritius given. The TPO observed tha hed for comparable interest wers in Mauritius geography fr mberg. The ld TPO concluded th he arm’s length rate of interest ce with the provisions of sect information or data used by th ejected the comparison analysi
O referred to the loans taken by oposed to compare ‘Blooomberg rency of loan, geography of borro of loan, security given, repaym ed that ld TPO in earlier AYs 20
2016-17 , 2017-18 and 2018-1
ctually not received any interes g rate of interest would not be a d instead the appropriate fixed ned from ‘Bloomberg databas ccordingly interest rates should e for fixed rates loan. He
JSW Energy Ltd
9
714 & 3713/MUM/2024
8,748
the explanation selected by the aphy i.e. country i.e. the country at the assessee on loan data rom appropriate hat the assessee receivable from tion 92C(1) and he assessee not is made by the y the assessee in g database’ rate ower, terms and ment of loan etc.
12-13, 2013-14,
9 has held that st from the AE, applicable in the rate of interest se’ using ‘Swap d be charged at considered the Mauritius entity as t in different tranches five years. The ld
Bloomberg database fixed interest rate p concluded that fac consideration being rate should be applie of order of ld TPO is r
“6.4.3 As the in AY 2012-1
database the loan transacti
Financial

F
2010-11
2011-12
2012-13
2013-14
2014-15
2015-16
2016-17
2017-18
7.2 The assessee ob fixed interest rate for already rejected the f justified floating rate length price compu
ITA Nos. 37

the borrower and also consider as well as no interest paymen
TPO used ‘Swap Manger’ to for converting a floating rate of ost inputting certain paramete ts and circumstances for th same to AYs from 2012-13 to ed for different years of loan. Th reproduced as under:
e facts of the case are same in this year a 13 to AY 2016-17, accordingly, as per corresponding Fixed rates of interest ap ions is stated below:
Floating rate of interest
Fixed rate
LIBOR + 389 bps
8.0
LIBOR + 575 bps
9.4
LIBOR + 600 bps
8.2
LIBOR + 382 bps
5.4
LIBOR + 352 bps
6.7
LIBOR + 352 bps
6.7
LIBOR + 612 bps
7.4
LIBOR + 725 bps
9.1
bjected of converting floating ra r the reasons, firstly, the ITAT fixed rate of interest applied by of interest in the case of the as utation. Secondly, while mak
JSW Energy Ltd
10
714 & 3713/MUM/2024
red loans issued nt for more than ool available in f interest rate to ers. The ld TPO he year under 2018-19, fixed he relevant part as that were Bloomberg pplicable for e of interest

03%
40%
23%
43%
71%
71%
43%
11%
ate of interest to T in AY 2012-13
y the ld TPO and sessee for arm’s king search of comparables over the of incorporation etc w used to arrive comp parameters like cred tenor/maturity of loa each loan/tranche b was first advanced agreements had been from the date of is computing fixed rate inputted in the Swap of the transaction.
7.3 But the ld TP observing as under:
1. The obje hereunder:
1. The asses an inconsiste
• The asses
"Security Sta
It was expla that the scr search did indeed appli for the other
• Furthermo that for FY 2
has not bee
ITA Nos. 37

e database, filters like country were not applied consistently, parables was very broad and d dit rating of borrower, countr an etc., fourthly, rate of loan based on the year in which sai to the AE, disregarding the n amended to extend the tenure ssuance of respective tranche of interest , various parameter p Manager tool need to be correc
PO rejected the contention o ections of the assessee are dealt ssee's claim that the search was unde ent basis is not correct.
ssee has stated in his submission atus" filter has not been applied for FY ained to the AR during the course of th reenshot taken at the time of under not capture the said filter - howeve ied to "Include All" - which has also FY's.
re, the Assessee has stated in his s
2011-12, the country of incorporation ( en specified / not applied and ins
JSW Energy Ltd
11
714 & 3713/MUM/2024
of risk, country thirdly, criteria did not consider ry of borrower, was applied on id loan/tranche fact that loan e retrospectively e, lastly, while rs required to be ct with the facts of the assessee t with as ertaken on n that the Y 2010-11. he hearing rtaking the er, it was been done submission
(Mauritius) stead, the country of r explained to the interest pertains spe from the scre
1. Furtherm tranche in 2
years) - the amended th dates as we the search h loans to be r
2. Ideally, comparable in Mauritius
Bloomberg. T by the entity entity which the entity in applied by rates prevail
3. Since, the rate of inter the provision the informa computation correct, hen provisions of determine th
4. So far a Mumbai ITAT
Benchmarkin is concerned achieve fina assessee's is not accep
7.4
Accordingl to interest to be recei
ITA Nos. 37

risk has been taken as India. It w o the AR during the course of the he spread taken for the said year (i.e.
ecifically to Mauritius only - as can b eenshot provided. Se more, given that the AE had taken
2010 (which at the time - was for a p e AE and the Assessee have time a he agreement to increase the interes ell as the tenure of the loans. Given has been undertaken after consideri repayable on 31.3.2020. the assessee should have sea interest on loan data applicable for s geography from appropriate datab
This is because the repayments has t y in Mauritius and it is in the cash fl h will repay the assessee's loan and n South Africa. External CUP has bee the TPO by searching for appropria ling in the borrower geography (Maurit e assessee had not determined the ar rest receivable from the AE in accord ns of section 92C(1) and 92C(2), and ation or data used by the ass of the arms' length price is not r nce the same deserves to be reje f section 92C(3)(a) and 92C(3)(c) are he ALP.
as the assessee's contention that th
T has accepted the assessee's withou ng Methodology for A.Y. 2011-12 and d, it is seen that the said issue ality at the higher stages. There reliance on the above mention pted.
ly, the ld TPO calculated the adj ived from the AE as follows:
JSW Energy Ltd
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714 & 3713/MUM/2024
was again earing that 575 BPS) be verified n the first period of 3
and again t payment the above, ing all the arched for borrowers bases like to be done flow of this not that of n correctly ate interest tius) rms' length dance with also since sessee in reliable or ected and invoked to he Hon'ble ut prejudice d 2012-13
is yet to efore, the ned order justment

“1. 1. Ac follows:
Tranche
Date of init
Disburseme
1
19-Jul-10
2
21-May-1
3
29-JUI-10
4
1-Oct-10
5
4-Nov-10
6
3-Dec-10
7
21-Mar-1
8
27-Apr-1
9
30-May-1
10. 27-Jun-11
11. 29-Aug-11
12
11-Nov-11
13. 18-Oct-12
14
30-Nov-12
15
7-Dec-12
16
23-Jul-13
17
24-Jun-14
18
9-Oct-15
19
9-May-16
20. 6-Jun-16
21
19-Aug-16
22. 30-Sep-16
23
6-Jan-17
24
9-Jun017
25
19-Sep-17
26
29-Nov-17
ITA Nos. 37

ccordingly, the adjustment is calc ial ent
FY of initial disbursement
Amt
Disbursed
(U )
Rate of Interest
(PA)
0
FY 2010-11 17,50,000
8.03%
2
FY 2012-13
-10'000
8.23%
0

FY 2010-11 17,50,000

FY 2010-11
10,00,000
8.03%
0
FY 2010-11 30,00,000
8.03%
0
FY 2010-11 2,00,00,000
8.03%
11
FY 2010-11
2,70,000
8.03%
1
FY 2011-12
25,00,000
9.40%
1
FY 2011-12
28,00,000
9.40%
FY 2011-12
10,000
9.40%
1
FY 2011-12
85,00,000
9.40%
1
FY 2011-12
4,000
9.40%
2
FY 2012-13
12,00,000
8.23%
2
FY 2012-13
11,55,000
8.23%
FY 2012-13
58,20,000
8.23%
3
FY 2013-14
36,00,000
5.43%
4
FY 2014-15
25,000
6.71%
FY 2015-16
3,50,000
6.71%
6
FY 2016-17
50,000
7.43%

FY 2016-17
50,000
7.43%%
6
FY 2016-17
3,00,000
7.43%
6
FY 2016-17
1,85,000
7.43%
FY 2016-17
-10,69,519
7.43%
7
FY 2017-18
11,100
9.11%
7
FY 2017-18
04,50,000
9.11%
7
FY 2017-18
2,000
9.11%
JSW Energy Ltd
13
714 & 3713/MUM/2024
ulated as f t
Interest Amt
(U )
31.3.2020
1,40,525
823
1,40,525
80,300
2,40,900
16,06,000
21,681
2,35,000
2,63,200
940
7,99,000
376
98,760
95,057
4,78,986
1,95,480
1,678
1,678
3,715
3,715
22,290
13,746
079,465
1,011
-40,995
182

Exchange Rate
Arm's Leng
Amount offered by Adjus
1. Summary
In view of the above international transa stands as below:
Sr.
Internationa
1. Interest rece enterprises

Total

ITA Nos. 37

e as on 31/03/2020
75
gth Interest (INR)
26,91
y Assessee in Form 3CEB
(INR)
16,59
tment (INR);
10,32
y of Adjustments:
e discussion the total adjustments m actions reported by the assessee for A al Transactions :
eivable on loans given to associated
DRP, the assessee reiterated
TPO and relied on the deci
Ltd. v. DCIT [ITA No. 5855/D d the contention of the assess d to the contention of conversion to f s of the view that the terms of the er from the actual conduct of th e terms of the agreement requires
8
FY 2017-18
4,00,000
9.11%
8
FY 2017-18
1,34,788
9.11%
8
FY 2017-18
10,95,681
9.11%
8
FY 2018-19
-68,33,050
9.11%
9
FY 2018-19
-10,00,000
9.11%
FY 2019-20
-5,00,000
9.11%
FY 2019-20
-5,00,000
9.11%
FY 2019-20
-8,00,000
9.11%
FY 2019-20
-5,00,000
9.11%
al
4,43,00,000

JSW Energy Ltd
14
714 & 3713/MUM/2024
5.39
1,93,755
9,18,029
2,75,726
made to the Y 2020-21
Adjustment
Amount (INR)
10,32,75,726
10,32,75,726
the submission sion of Cotton
Del/2012]. But, ee observing as fixed rate, agreement he parties.
s that the 36,440
12,279
99,817
-6,22,491
-91,100
-45,550
-45,550
-72,880
-45,550
35,70,683

interest paym each year, th wherein no has been th with AY 201
is for AY 2
transaction different from not elapsed f decision of applicable to whether the same interes the moot po action of con to be in orde
As regards t incorporation years, it is Mauritius ev for South Af to be consid agreement b and hence
Mauritius.
The other ob the AE has has arrived a application,
In this regar though credi the credit ra sacrosanct a agency but b it is seen th
AE's entities for Mauritius
Bloomberg d
With regard
Panel are as ITA Nos. 37

ments have to be made within a fixed he conduct of the parties is contrary to interest or capital has been paid till he Department's contention in all yea
12-13 till AY 2018-19. The Hon'ble IT 2012-13 which is the first year of when actual facts would not h m the terms of the loan or considerabl from the advance of the first tranche.
the Hon'ble ITAT for the said ye o the later years. In uncontrolled tra e assessee would have agreed to r st rate under same facts and circum oint. The answer is definitely no. He nverting it to fixed interest rates term er.
the claim that the country of risk and n has not been applied uniformly fact that the loan was availed by ven though the ultimately it was used frica. Here the ultimate end user is no dered as the loan was availed as p between the assessee and the Mauri the country of borrower is rightly bjections of the assessee is that credi not been considered by the TPO. The at the credit rating of the AE using the whereas the TPO has not considered rd, it is the observation of the Panel it rating of the borrower is an importa ating arrived at by the assessee is as it has not been provided by an ind by using a software called 'Riskcalc'.
at assessee has taken the credit rat s in South Africa, whereas it should s. Hence the Id TPO's benchmarking database is found to be correct.
d to the other contentions, the findin s follows:
JSW Energy Ltd
15
714 & 3713/MUM/2024
d period in o the terms date. This rs starting
TAT's order f the loan have been le time has Hence the ear is not ansactions receive the mstances is ence TPO's ms is found country of over the the AE in in projects ot required part of the itius entity taken as it rating of e assessee e 'Riskcalc'
the same.
that even ant criteria, s also not dependent
Moreover, ing for the have been g using the ngs of the Security sta clarified tha same has be Country of b as loan was to be made b
Tenure - the each year's t
Hence the gr
7.4 Before us, the L of the Tribunal dated
2012-13, wherein th methodology adopted ascertained from the benchmark the loan the assessee of bench
7.5 On the contrary the parties significan upon stipulating fixe no such interest pay that the initial terms agreement dated 31 M semi-annually, with 2012, based on the 6
at 3 years from the interest payments w
ITA Nos. 37

atus not applied uniformly - the Id at it was a mistake in the screensho een applied uniformly.
borrower - As discussed it should be s availed by AE there and repayment by the Mauritius entity
Id TPO has applied the tenure as app tranches separately.
round of objection is dismissed.”
Ld. counsel for the assessee reli d 07.11.2019 for assessment ye he Tribunal has rejected the d by the Ld. TPO i.e. using i e Bloomberg database using Sw given to the AE and upheld the hmarking using floating rate int y, the Ld. DR submitted that ac ntly diverged from the contractu d timeline for interest payment yment had been made. The Ld of the loan, as agreed upon in March 2012, provided that inter the first installment due by 3
6-month LIBOR rate. The loan t e original agreement, however were made as per the stipu
JSW Energy Ltd
16
714 & 3713/MUM/2024
TPO has ot and the e Mauritius ts are also plicable for ied on the order ear 2011-12 and e benchmarking interest rate as wap Manager to e methodology of erest.
ctual conduct of ual terms agreed and in practice d. DR submitted the restatement rest was payable
30th September tenure remained r, in reality, no lated schedule, undermining the ass were adhered to. Th time to support that a continuous change
Amendment No limit of U 42 m the first interest
2013. The tenur delay in the f discipline require
Amendment No.
September 201
U 54 million. T once again defe timeline even tho
Amendment No.
was extended fro payment now p extension highligh reflective of the a Amendment No further extended disbursement. Th
ITA Nos. 37

sessee's claim that the terms of he ld DR referred numerous am the loan transaction has under in its structure and tenure, as . 7 (22 November 2012): The million was increased to U 5
payment date was deferred to re of the loan remained at 3 y first payment indicated that ed by the agreement was not follo
. 8 (18 July 2013) & Amendm
3): The loan limit was further
The first installment for interest erred to 30 September 2014, ugh the official tenure remained
. 10 (20 July 2014): The tenu om 3 years to 4 years, with the pushed to 30 September 2015
hts that the original loan terms w actual financial arrangement.
. 11 (31 July 2015): The loa d from 4 years to 5 years from he first installment for interest
JSW Energy Ltd
17
714 & 3713/MUM/2024
f the agreement mendments over rgone, indicating detailed below:
e original loan
50 million, and 30 September years, but the the financial owed.
ment No. 9 (27
r increased to payment was extending the at 3 years.
ure of the loan e first interest
5. This formal were no longer an tenure was m the date of payment was now deferred to departure from th
Amendment No remained at 5
deferred yet agai
7.6 According to the date for interest pay were being postpone pattern of repeated extend the tenure of original loan agreeme
The consistent postp the loan terms sugge length basis. Hence, based its decision for that decision inapplic
7.7 Further, the Ld that the loan should original agreement w
However, the Depart have referred to a floa arrangements betwee
(AE) show that this ITA Nos. 37

31 March 2017, demonstrating he initial agreement.
. 12 (16 December 2016): Th years, but the first interest p in to 31 March 2019. e ld DR, this continuous exten yments reflects that the finan ed, contrary to the agreed-up amendments to defer interest f the loan demonstrates that th ent have been fundamentally al ponement of interest payments est that the AE was not operati the original facts upon which t r AY 2012-13 have materially ch cable to the subsequent years.
d. DR submitted that the asses have a floating rate of interest was linked to the LIBOR rate (6-m tment submits that while the ating rate, the actual conduct a en the assessee and its Associ s is no longer applicable. Des
JSW Energy Ltd
18
714 & 3713/MUM/2024
g a continued he loan tenure payment was nsion of the due ncial obligations pon terms. This t payments and he terms of the ltered over time.
and changes to ing on an arm's he Hon'ble ITAT hanged, making ssee had argued t, citing that the months LIBOR).
agreement may and the financial iated Enterprise spite the terms requiring semi-annu received by the asses comply with the inter structure ineffective.
7.8 The Ld. DR f established transfer p interest charged sh reference points for which provides relev reliable source for d should be computed which better reflect t than the floatin never implemented.
7.9 The Ld. DR su form", should be ackn courts in several
Holdings BV v. Unio
Hon'ble Supreme Co and substantive aspe
The ld DR relied up submission that, give rate of interest shou
ITA Nos. 37

ual interest payments, no inte ssee from its AE for several years rest payment schedule renders further submitted that in ac pricing principles, the arm's len hould be ascertained using t fixed-rate loans. Bloomberg's vant data for fixed-rate loan tra determining such rates. Therefo based on the applicable fixed-r the economic reality of this tran ng rate originally agreed ubmitted that the concept of "
nowledged , which has been em rulings, including Vodafone on of India(2012) 341 ITR1 ( urt held that tax liability must ects of a transaction rather tha pon the said decision to furth en the lack of actual interest pa ld be applied in order to accur
JSW Energy Ltd
19
714 & 3713/MUM/2024
erest has been s. This failure to the floating rate ccordance with ngth rate for the the appropriate
Swap Manager, ansactions, is a ore, the interest rate loan terms, nsaction, rather d upon but "substance over mphasized by the International
SC) , where the t reflect the real n its legal form.
her buttress the ayments, a fixed rately reflect the substance of the tr reality of this transac
7.10 The Ld. DR als lower authorities tha applied during the Transfer Pricing Off factually incorrect. S the non-capturing of due to a technical o application of the filte
7.11 The Ld. DR f geography for deter
Mauritius, where the and not South Afric
The transfer pricing should be based on profiles associated w of the funds. The rep
Mauritius-based AE, of this entity, not tho be considered for be the TPO, which focus market, is appropria as reflected in OECD
ITA Nos. 37

ansaction, which better reflec ction.
so rejected the arguments of at the "Security Status" filter wa transfer pricing analysis con ficer. She submitted that this She submitted that the TPO ha the "Security Status" in the sea oversight in the screenshot, no er.
further submits that the co rmining the arm's length rate e AE (i.e., the immediate borr a, where the funds were ultim g rules mandate that extern n the specific economic cond with the borrower, not the ultim payment obligations of the loan and it is the financial and econ ose of the South African operatio enchmarking the loan. The met sed on interest rates prevailing i te and in line with internationa
D Transfer Pricing Guidelines,
JSW Energy Ltd
20
714 & 3713/MUM/2024
ct the economic assessee before as not uniformly nducted by the s contention is as clarified that arch results was ot in the actual orrect borrower e of interest is rower) is based, mately deployed.
al comparables itions and risk mate destination n are tied to the nomic conditions ons, that should thod applied by in the Mauritius al best practices which prioritize the geographic and transactions.
7.12 The Ld. DR furt detailed in the pre extensions over the y of the arm's length correct tenure applic terms at the time of d
8. We have heard the relevant material the grounds raised is the international tran associated enterprise floating rate of inter primary contention applying floating rate has been decided by 2012-13 in ITA No. 2
8.1 The Tribunal(sup assessee advanced u enterprise namely M received interest of th of unsecured loan h
ITA Nos. 37

risk profile of the borrower i ther submitted that the tenure evious paragraphs, has unde years, which directly affects th h interest rate. The TPO has cable to each tranche of the loa disbursement, and subsequent a rival submissions of the parti ls on record. The issue in dispu s regarding adjustment made by nsaction of the interest to be re es applying fixed rate of interes rest i.e. LIBOR applied by the of the assessee is that ide e of interest vis-a-vis fixed rate the Tribunal in assessment ye
452 & 2316/Mum/2017 in favo pra), in assessment year 2011-12
nsecured loans of ₹ 115.19 cror
/s JSW Energy Minerals Mauri he 13.82 lakhs. The said loan w having tenure of three years. T
JSW Energy Ltd
21
714 & 3713/MUM/2024
in pricing such of the loans, as ergone multiple e determination s considered the an based on the amendments.
ies and perused ute involved in y the Ld. TPO to eceived from the t as against the e assessee. The entical issue of e of the interest ar 2011-12 and our of assessee.
2 noted that the res to associated tius limited and as in the nature
The currency of interest payment as US dollars. The inter to be computed as trenches during the y at three months ave
0.30% for actual nu
AE. The relevant fact
(supra), are extracted
“2.9.2 The as to invest in approval from reference to in Reserve Bank rate being ch the South Af other than sh prime +2%.
provided to L loan advance
South Africa to JSW Energ the South Af entity would
LIBOR from S it was subm acquire the a was at Arm
Regulations.
regulatory res be more than companies ou
2.9.3 Withou assessee ben
External Com
ITA Nos. 37

well as principal repayment wa rest rate was stated to be floati per LIBOR. The loan was ad year and accordingly, the intere erage LIBOR rate ranging bet mber of days for which loan w ts for AY 2010-11, reproduced d as under:
ssessee explained that non-residents who
South Africa by means of loan capita m South African Reserve Bank particula ntended repayment dates and interest ra k will not agree to interest rates in excess harged by non-resident shareholders on frican subsidiaries but loans from non-r hareholder may be allowed to carry in The relevant extracts of the regulatio
Learned TPO. It was submitted that int ed to Mauritius Entity was ultimately u since JSWEMML further advanced the s gy South Africa Ltd. [JSWENRSAL] and in frican Reserve Bank regulation, the M not be able to charge any interest mo
South African Entity. In the aforesaid back mitted that the intra group transaction asset is South Africa and therefore, tra m's Length Price as prescribed in the In nutshell, it was submitted that straints of South Africa, the interest rate c n LIBOR rate for any borrowings from an utside South Africa.
ut prejudice to the above submissio nchmarked the loan transaction on the mparable Uncontrolled Price [CUP] Me
JSW Energy Ltd
22
714 & 3713/MUM/2024
as said to be in ing interest rate dvanced in five est was charged tween 0.29% to was used by the by the Tribunal o wished al needs arly with ates. The of prime loans to residents terest at ns were tra-group tilized in said loan n view of Mauritius ore than kground, was to ansaction e Indian due to could not ny group ons, the basis of ethod by comparing the with similar c loans. The AE rating was de
BBB+) which Selecting the Africa/USA,
243.83 basis
243.83 basis be US Dollar against Rs.13
The assessee loans were a have any fo domestic bor workings sub 2.9.4 Howeve that the regu
Regulations w advanced to Further, the re into account appropriate r
Price for inter rendered in Taxman 103/
permitted by R transactions, be examined
Provisions un
2.9.5 Proceed methodology of the fact whereas the further, the cr than BBB+ as TPO conclude was required advanced fro assessee, in ITA Nos. 37

e interest rates at which the independen credit ratings would be able to obtain int
E was selected as the tested party and etermined to be Baa1 (Moody; equivalen h fall in the lower medium investmen e borrower country to be Mauritiu the assessee arrived at mean ALP m s points over LIBOR. Applying the sp point to LIBOR, the ALP interest was com rs 367598 (INR Equivalent Rs.164.13 L
3.82 Lacs charged by the assessee from e, in support of LIBOR, also submitted advanced from internal accruals and it foreign borrowings. The weighted ave rrowings was computed as 10.14% as bmitted by the assessee.
er, upon due consideration, the Ld. TPO ulatory restriction imposed under South would not be determinative since the lo
Mauritius entity and not to South Africa egulatory authority of any country would the transfer pricing provisions to determ rates which could be considered as Arm rest payment. Drawing analogy from the Coca-Cola India Inc. v. Asstt. CIT [20
/309 ITR 194 (Punj & Har.) that the roya
RBI would not represent ALP of any inter
Ld. TPO opined that determination of AL d from the point of view of Transfer der the Income Tax Act.
ding further, finding defects in the as to benchmark the same by External CUP that comparable entities were based loans was advanced to Mauritius en redit rating of Mauritius AE would be mu s adopted by the assessee for benchmar ed that the search process was not pro to be rejected. The argument that the loa om internal accruals was also rejected s the opinion of Ld. TPO, failed to prov
JSW Energy Ltd
23
714 & 3713/MUM/2024
nt parties tra-group its credit nt to S&P nt grade.
us/South margin of pread of mputed to Lacs) as m its AE.
that the t did not erage of per the O opined h African oan was an entity.
not take mine the m' Length decision
009] 177
alty rates rnational
LP was to r Pricing ssessee's
P in view in USA ntity and uch lower rking, Ld.
oper and ans were since the ve nexus between inter vis loans adva
2.9.6 The Ld.
outbound loa no company w security as t those prevaili prevailing in determine th
Although the pronounceme appropriate b certain vital decisions. Ra
Tribunal rend
[2013] 33 tax that lending s the assessee would have e
2.9.7 Finally, rate on the ba the tested p benchmarking
Ld. TPO, co
Corporate Bon market. Apply cost of borrow worked out t
Prime Lending nothing but 3
7.5%. The AL out to be 15%
out of three transactions.
Rs.441.61 La learned TPO's charged by th thus proposed
ITA Nos. 37

rest free funds available with the assess anced to its AE.
. TPO also came to a conclusion that int n was not to be benchmarked with LIBO would like to advance loans outside India the interest rate in India would be high ing in the developed country. Therefore, t
India would be an appropriate bench he ALP of loans advanced by Indian e assessee placed reliance on certain nts for the submission that LIBOR w benchmark rate, however Ld. TPO opin aspects remained to be considered in t ather reliance was placed on the dec dered in Aurionpro Solutions Ltd. v. A xmann.com 187 (Mum. - Trib.) for the co should not be below the cost of the borro and the assessee should earn income arned by advancing loans to third parties
, Ld. TPO proceeded to work out the m asis of above factors. The assessee was arty and External CUP method was u g the aforesaid transaction. External CUP uld be the Bank Prime Lending Rat nd Rates or the cost of borrowings in the ying the average spread of 2.89% to as wing i.e. 10.14%, cost of domestic borrowi to be 13.03%. Relying upon safe harb g Rate was worked out to be 10.50%, wh
3% spread over State Bank of India bas
LP based on Corporate Bond Rates was %. Finally, the most conservative rate i.e rates, was adopted to benchmark th
The ALP interest, thus, worked ou acs as per computations made in para s order. Adjusting the interest of Rs.13.82
he assessee from its AE, the net TP adj d, worked out to be Rs.427.78 Lacs.
JSW Energy Ltd
24
714 & 3713/MUM/2024
see vis-à- terest on OR since a without her than the rates hmark to entities.
judicial would be ned that the cited cision of Addl. CIT onclusion owings of which it s.
mean ALP taken as used for P, as per te [PLR], domestic ssessee's ings was or rules, hich was e rate of s worked e. 10.5%, e stated ut to be a 5.8 of 2 Lacs as justment,

aforesaid TP adjustment was incorpo order dated
17/04/2014. The a at it did not want to pursue the matter be lution Panel and expressed its intention to rough normal appellate channel of Ld the assessment order was passed by Ld which was subjected to further appeal b e authority.
Ld. first appellate authority, the assesse ttention to the fact that similar benchma wn case for immediately succeeding yea s been done by Ld. TPO himself in its sub 29/01/2016 adopting LIBOR rates as t led out the application of Corporate Bon e or Cost of Borrowing rate etc. Relian alia, on the decision of Hon'ble Delhi Hig
CIT v. Cotton Naturals (I) (P.) Ltd. [2
m
523/231
Taxman
401
to supp that LIBOR would be appropriate bench h outbound loan transactions. The list hich has also affirmed the said view, a essee during appellate proceedings, has a n page nos. 18-19 of the appellate with assessee's submissions, Ld. CIT(A) round by observing as under: —
dered the submissions of the assessee, th he assessment order and the material on t from the above that the end use of int acquire the asset company in South Afric dent that the JSWEMML was not able t more than LIBOR from JSW South Afr
L), which had a direct impact on the apability of JSWEMML to JSWEL of not m assessee submitted that with respect actions, the interest rate is determined b ncy rate (LIBOR/EURIBOR) and the sa
JSW Energy Ltd
25
714 & 3713/MUM/2024
rated in assessee efore Ld.
o contest d. CIT(A).
d. AO on efore Ld.
ee, inter- arking, in ar i.e. AY bsequent the base nd Rate, nce was igh Court
2015] 55
port the hmarking of other as relied also been e order.
allowed he views record.
tra-group ca and it to charge frica Ltd.
interest more than to cross by using ame has been upheld a judicial decisi
Thus, conside the view take years i.e. AY loan has been is a well set transactions, benchmarking assessee is a Aggrieved as us.”
8.2 The Tribunal(su rate, of interest for th the learned TPO him
LIBOR plus some sp benchmarked the tra
Tribunal supported decision of the Hon
Cotton Naturals (I) P on the basis of LIBO
LIBOR represents in entities having highe assessee itself has as benchmarking the in of ‘lower medium inv adopt certain spread
Tribunal is reproduce
ITA Nos. 37

as an appropriate benchmarking rate in v ions which have been mentioned above.
ering the above view taken by the appel en by the TPO in appellant's own case
12-13 & AY 13-14, the transaction of in n benchmarked using the LIBOR Rate an ttled law that with respect to the cross
LIBOR has been considered as an app g and thus, this ground of appeal raise allowed.
aforesaid, the revenue is in further appe upra) rejected the benchmarkin he reason that in succeeding as mself carried out benchmarking pread over of basis points. But ansaction applying only the LIBO the finding of the Ld. CIT(A) n’ble Delhi High Court in the P Ltd(supra), but directed to det
OR plus some spread over poin nterbank rates which are applic est credit rating. The Tribunal ssigned a rating of Baa1 /BBB+
nternational transaction. The sa vestment-grade’ rating, the Tribu d over the LIBOR. The relevan ed as under:
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26
714 & 3713/MUM/2024
variolous llant and for later terest on nd also it s border propriate d by the al before g applying fixed ssessment years on the basis of t the Ld. CIT(A)
OR. Though, the relying on the case of CIT Vs termine the ALP nts, because the cable in case of noted that the to its AE, while aid rating being unal directed to nt finding of the “2.14
Now consideration the facts and authority has of LIBOR onl rate, in our applicable in same is also f assigned a ra the transactio investment gr merely on the not be justifie
TPO, the ass basis points o
Ld. TPO's ord been disputed
ALP interest h are of the computed by reasonable an confirm the A assessee in th
The impugne
TPO/Ld. AO assessee in te
& 2 stands d
No. 4 stands p
8.3 Based on the ab
Tribunal in assessme of interest i.e. LIBOR against the fixed rat relevant finding of t reproduced as under ITA Nos. 37

the only question that survives n is the determination of ALP rate keeping circumstances of the case. The Ld. first a s confirmed the determination of ALP on t ly without any spread-over. However, opinion, represent inter-bank rates wh case of entities having highest credit ra fortified by the fact that the assessee, it ating of Baa1/BBB+ to its AE while bench ons. The said rating represents 'lower rade rating. Therefore, the determination e basis of LIBOR, in our considered opinio ed. During the course of proceedings be sessee had arrived at mean spread of over LIBOR which is evident from page no der. The computation of the same has d by the revenue. Applying LIBOR + spre has been worked out to be Rs.1,64,13,24
considered opinion that this spread the assessee was undisputed, quite f nd the same was to be accepted. Accordi
ALP rate of LIBOR + 2.4383% as compute he alternative submissions made before d order stand modified to that extent.
is directed to recompute the income erms of our direction. Accordingly, Groun dismissed. Ground No.3 stand allowed.
partly allowed.”
bove finding for assessment ye ent year 2012-13 also accepted
R with certain spread over of e of interest adopted by the lea the Tribunal for assessment y
:
JSW Energy Ltd
27
714 & 3713/MUM/2024
for our g in view appellate the basis the said hich are ting. The tself, has hmarking medium n of ALP n, would efore Ld.
f 243.83
os. 5-6 of nowhere ead-over,
41/-. We over as fair and ingly, we ed by the Ld. TPO.
The Ld.
e of the nd Nos. 1
Ground ar 2011-12, the the floating rate basis points as arned TPO. The year 2012-13 is “3.7.4 Upon c year are pari transactions conditions. W
TPO proceede out by the disregarding the contractua be rewritten o of the transac the facts that had agreed months' LIBO up to 31/03/
DRP at para the original a before Ld. DR difference sin floating rates we have uph same view, w during procee lower author
Rs.491.07 La proceedings
243.88
bps/
respectively.
would be adju the amount o
No.1 stand pa
8.4 Thus, Tribunal the interest in asses was no change in the to assessment year 2
noted the terms of th
ITA Nos. 37

careful consideration, we find that the fac i-materia with the facts of AY 2011-12. arise out of same contractual term
We also find force in the submissions that ed on the basis of wrong parameters as assessee before lower authorities, co the contractual terms. It is settled posi al terms agreed to between the parties c or obliterated and reclassification or sub ction was not permitted. Nothing on reco t as per the terms of the contract, the b to pay the lender interest at rates eq
OR prevailing on the date of each interest p
/2012. The said fact has also been note
2.29 of its directions. The only allegatio agreement dated 26/07/2010 was not p
RP. However, the same would not mak nce we have already confirmed the appli of interest for AY 2011-12. Since in AY 2
held the working made by assessee, ta we upheld the workings made by the a edings before learned TPO. Accordingly, w rities to accept alternative TP adjust acs as worked out by the assessee before Ld. TPO based on LIBOR + sp
/163.8
bps for AYs
2011-12
&
The interest already charged by the a usted from the same and the net amount of TP adjustment for the impugned AY.
artly allowed.”
(supra) has mainly applied the ssment year 2012-13 for the re e contractual terms in AY 2012-
2011-12. The Tribunal(supra) h he contract that borrower had ag
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28
714 & 3713/MUM/2024
cts of this The loan ms and t learned s pointed ompletely ition that could not bstitution ord rebut borrower ual to 3
payment d by Ld.
n is that produced ke much ication of 2011-12, aking the assessee we direct tment of e during pread of 2012-13
assessee t shall be Ground e floating rate of eason that there
13 as compared has particularly greed to pay the lender interest rates date of the interest pa
8.5 Before us, the circumstances in th substantial change a and 2012-13. We fin associated enterpris interest payments wi has amended agreem installment of paym
31.03.2019. The ld interest i.e. LIBOR is case of assessee in ea to three years at the time. However in the the loan amount has loan has got substan made payable only o first tranche of the lo practical purposes, t is in the nature of lon
8.6 Therefore, the consideration being circumstances in ass
ITA Nos. 37

s equal to 3 months LIBOR pr ayment of two 31/03/2012. Ld. DR however submitted he year under consideration h as compared to the assessmen nd that in the beginning, the a es agreed for a quarterly an ith limited tenure of loan. Ther ment at least 10 times and ext ment of the interest from s
DR submitted that the floati charged in case of loan of smal arlier years, where parties agree time of entering the loan agreem current assessment year unde s consistently increased and th ntially changed and first instal on 31.03.2019 i.e. almost nine oan agreement dated 26.07.201
the loan extended to the associa ng term loan.
facts and circumstances of t g altered as compared to sessment year 2011-12 and 20
JSW Energy Ltd
29
714 & 3713/MUM/2024
revailing on the that facts and has under gone nt year 2011-12
assessee and its nd six monthly reafter, assessee tended the first six months to ing rate of the ll tenure like the ed for tenure up ment for the first er consideration, he tenure of the llment has been e year after the 0. Therefore, all ated enterprises the year under the facts and 12-13, the ratio of the decision of th facts of the instant c of the assessee.
8.7 The next objecti entity as the country that loan was availe used in South Africa correctly considered borrower as Mauritiu agreement between
Accordingly, we rejec
8.8 Next contention fixed rate of the inte base applying ‘Swap fixed rate of the inte assessee to its assoc term period loan in t amendments from tim way of conduct of t period loans in natur in repayment of ins nature of high risk l assessee’s loan tran
LIBOR rate i.e. floati
ITA Nos. 37

he Tribunal (supra) is not app case. Accordingly, we reject the ion of the assessee is considerin y of the loan borrower, the Ld ed by the AE in Mauritus even a. We are of the opinion that th the Mauritius entity and the us as the loan has been availed the assessee and the Ma t the contention of the assessee n of the assessee is against ap erest by the Ld. TPO, using ‘B
Manager tool’, converting the fl erest. In our opinion, the loans ciated enterprises might be tem the beginning years, but in view me to time and adding of the fu he parties, the loans have bec re. Further, nonpayment of the i stallments has made the loan loans. In such circumstances, c nsactions under CUP method ing rate of the interest, may no JSW Energy Ltd
30
714 & 3713/MUM/2024
licable over the first contention ng the Mauritius d. TPO has held n though it was he Ld. TPO has country of the d as part of the auritius entity.
e in this rega pplication of the Bloomberg’ data floating rate into granted by the mporary or short w of subsequent urther loans, ,by come long term interest or delay ns being in the comparability of d invoking only ot be correct as the LIBOR interest ra short term nature, w case, the assessee its AE as below Baa1/
grade’. The assessee circumstances as co itself has included 30
additional spread ove loan.
8.9 But, no instanc between two indepen been applied was bro question is whether transaction from da floating rate with app an independent trans has also not com transaction of long relying on CUP met methods prescribed u price and can’t adopt interest into fixed rat
8.10 In view of abov back to the file of t
ITA Nos. 37

ate is applied in interbank loan where party’s credit score is ve self has mentioned credit score o
BBB+, which is a ‘lower medi itself has also accepted the cha ompared to the assessment yea
00 basis points to the LIBOR alo er points to compensate high ris ce of any loan transaction of lo ndent parties where floating rate ought to our notice by the asse the assessee has relied on a atabase of long term nature propriate spread has been appli saction. The answer is in negat mpared transactions of asses term loan between two indep thod. The ld AO/TPO is boun under the law for determination t arbitrary method of converting te of interest.
ve, we feel it appropriate to res the ld AO/TPO for benchmark
JSW Energy Ltd
31
714 & 3713/MUM/2024
n transactions of ery high. In the of the Mauritius ium investment nge in facts and ar 2011-12 and ong with certain sk nature of the ong term nature e of interest has essee. Thus, the any of the CUP of loan where ied by parties in tive. The ld TPO ssee with any pendent parties nd to follow the n of arms length g floating rate of store the matter king of the loan transaction of the a under the law treatin loan transaction with ground No. 1 of the a 9. The ground No.
assessee relates to d the Act. The brief f
Assessing Officer no 31.03.2020 in exemp of Rs.28,71,57,235/- which was claimed a earned the assesse account of expenses investment. The Ass the suo-motu disall rejected the suo-mot
Rule 8D of Income-ta disallowance of Rs.4
disallowance of Rs.4,181,59,866/-. B disallowance should
However, the Ld. DRP introduced to sectio amendment was trea
ITA Nos. 37

assessee using appropriate m ng the transaction of the assess h appropriate risk involved. Acc appeal is allowed for statistical p
. 2 and additional ground of th disallowance of Rs.41,81,59,86
facts qua the issue in disput oted investment of Rs.5416.80
pt income yielding assets and d
- earned during the year unde as exempt. But against the said ee made disallowance of Rs s incurred for carrying out the sessing Officer however was no owance by the assessee and tu disallowance by the assesse ax Rules, 1962( in short the ‘R
1,86,03,000/- and after reducin
Rs.4,43,134/-, he made
Before the Ld. DRP, the assessee be restricted to the extent of ex
P rejected the contention in view on 14A from financial year 2
ated by the Ld. DRP as clarificat
JSW Energy Ltd
32
714 & 3713/MUM/2024
method provided see as long term ordingly, we the puposes.
he appeal of the 66/- u/s 14A of te are that the 0 crores as on dividend income r consideration, exempt income
.4,43,134/- on e activity of the ot satisfied with d therefore, he ee and invoking
Rules’),computed ng the suo-motu addition of e submitted that xempted income.
w of amendment
2001. The said tory amendment necessitated due to w the Ld. DRP upheld t
9.1 Before us, the L on the issue in d dissatisfaction was r motu disallowance co referred to the para order and submitte financials of the com the suo-motu compu ready reference, re reproduced as under “4.10 Further make such management.
They require market trend and sale of s correct to say nominal expe make investm including ma decisions are Directors for w
"expenditure"
only direct ex of whether th managerial o expenses wh
14A of the Ac
4.11 On peru noted that As also has incu
ITA Nos. 37

wrong use and misinterpretation the action of the Ld. AO.
Ld. counsel for the assessee assa dispute primarily on the gr recorded by the Assessing Offic omputed based by the assessee.
a 4.10 and 4.11 of the impugn ed that Assessing Officer h mpany and duly expressed his di utation of disallowance by the elevant para of the assessm
:
r, it is also pertinent to mention that a com huge investment without existence o
Investment decisions are very compl substantial market research, day-to-da ds and decisions with regard to acquisi hares at the most appropriate time. It is y that investments are made without in enditure. It is difficult to accept that a ment without incurring any expenses anagement or administrative expenses a e generally taken in the meetings of which administrative expenses are incur
" occurring in section 14A would take in xpenditure but also all forms of expenditu hey are fixed, variable, direct, indirect, a or financial. Assessee failed to consi ile calculating the disallowances made ct.
usal of the Financial of the assessee c ssessee has borrowed funds of Rs. 1333
urred interest expenses & other borrowin
JSW Energy Ltd
33
714 & 3713/MUM/2024
ns. Accordingly, ailed the finding round that no cer qua the suo-
But the Ld. DR ned assessment has referred to issatisfaction on e assessee. For ment order is mpany cannot of a prudent lex in nature.
ay analysis of tion, retention therefore, not ncurring no or company can s whatsoever as investment the Board of rred. The term its sweep not ure regardless administrative, ider all such under section company, it is 3.08 crore and ng cost on the same amoun provided any indirect expen invested the f average cost exempt incom the interest e under section 4.12 In view accounts of th
21, the under for not offerin r.w. Rule 8D as under:
8D. (1) Where of the assesse
(a) the corre assessee; or (b) the claim incurred, in relation to under the Act of expenditur provisions of s
I (2) The expe of the total i namely:—
(i) the amoun not form part
(ii) an amoun monthly (iave of investment total income :
Provided that not exceed the In view of the 14A of the A accordance w
ITA Nos. 37

nting to Rs. 321.95 crore Ae the asse nexus of source between borrowed funds nses, therefore, it can be considered that funds out from common pool only. Hence, of funds i.e. interest expense is also me yielding investments. But assessee fail expenses while calculating the disallow n 14A of the Act.
of the aforesaid discussion and having he assesses of the previous year relevant rsigned is not satisfied with the action of ng disallowance accordance to section 1
of the Rules. For better clarity, Rule 8D e the Assessing Officer, having regard to ee of a previous year, is not satisfied with ectness of the claim of expenditure m made by the assessee that no expendit income which does not form part of the t for such previous year, he shall determin re in relation to such income in accorda sub-rule (2).
enditure in relation to income which does income shall be the aggregate of follow t of expenditure directly relating to incom of total income; and nt equal to one per cent of the annual a erage of the opening and closing balance t. income from which does not or shall no t the amount referred to in clause (i) and c e total expenditure claimed by the assess e above, the amount of expenditure disa ct in relation to such income is hereby with the provisions of Rule 8D of the Incom
JSW Energy Ltd
34
714 & 3713/MUM/2024
essee has not s and direct or assessee has , the weighted related to the led to consider wances made regard to the t to A.Y. 2020- f the assessee
14A of the Act is reproduced o the accounts h—
made by the ture has been e total income ne the amount ance with the s not form part wing amounts, me which does average of the es of the value ot form part of clause (ii) shall see.]
allowable u/s.
determined in me Tax Rules,

Nature of Investment
1

Unquoted Investment

Unquoted Investment

Unquoted Investment

Unquoted Investment

Unquoted Investment
6

Unquoted Investment

Unquoted Investment

Unquoted Investment
10
Unquoted Investment

Unquoted Investment

Unquoted Investment

Unquoted Investment

Unquoted Investment

The amount relation to suc provisions of R
ITA Nos. 37

r, in absence of the average of monthly the assessee, when specifically asked the details of exempt yielding investm the basis of submission of the assessee which are as under:
Fig

Name of the Company

As on 31s
March 20

t
JSW Energy (Barmer) Ltd
(Formerly known as Raj
Westpower Ltd)
1726.05

t
Jaigad Power Transco Ltd

t
JSW Energy (Raigarh) Ltd

t
JSW Power Trading Co. Ltd
(formerly known as JSW
Green Energy Ltd)
70.05

t
JSW Energy (Kutehr) Ltd
0
t
JSW Hydro Energy Ltd
(Formerly known as Himachal
Baspa Power Company Ltd)
2046.01

t
JSW Solar Ltd
0.12

t
JSW Electric Vehicles Pvt Ltd

t
Toshiba JSW Power systems
Pvt Ltd

t
Power Exchange India Ltd

t
MJSJ Coal Ltd

t
JSW Power Trading Co. Lt
2.87

t
JSW Realty & Infrastructure
Pvt Ltd
2.54

Total 4172.81

of expenditure disallowance u/s 14A ch income is hereby determined in accord
Rule 8D of the Income Tax Rules, 1962. JSW Energy Ltd
35
714 & 3713/MUM/2024
y investments d in the show ment has been and financial gure in crore st
020
As on 31st
March 2019

of the Act in dance with the Particulars

Any amount of expenditur income

Amount equal to 1% of an balances of value of invest as discussed above

Month

Opening yearly value

Total monthly av

14A disallowanc
Total amount disallowed u
9.2 Accordingly, thi for relying on the dec own case (ITA No. 66
the instant year disti
9.3 The next argu assessee is that only income need to be co rule 8D(2) of the Ru decision of the Specia
Ltd. (82 taxmann.c whether investments considered while com
14A of the Income decision of Hon’ble D
(ITA No. 486/2014 a ITA Nos. 37

A re which is directly relating to exempt
N nnual average of opening and closing tment whose income is or shall be exempt
4
Closing yearly value

Average

verage
Not available ce
41,86,03,000
under section 14A r.w. Rule 8D
4
is contention of the Ld. counsel cision of the Hon’ble Bombay H
69 of 2018) cannot be considere nguishable.
ment advanced by the Ld. c y those investment which has onsidered for the purpose of disa ules. In support of Ld. counse al Bench in the case of Vireet In com 415). In said case the s that did not yield exempt inc mputing disallowance under Rul
Tax Act. The Special Bench
Delhi High Court in CIT vs. Holc and 299/2014), wherein it is r
JSW Energy Ltd
36
714 & 3713/MUM/2024
Amount (Rs.)
NIL
41,86,03,000
41,86,03,000
for the assessee
High Court in its ed being facts of counsel for the yielded exempt allowance under el relied on the nvestment Pvt.
core issue was come should be le 8D of Section referred to the cim India (P) Ltd ruled that if no exempt income (suc
Section 14A cannot acknowledged confli decision dated 5th A relied on CIT v. Rajen hold that even if no disallowed. However,
Court's ruling in Holc judicial hierarchy, m
Hon’ble Supreme Co distinguished, as it "Income from Other different language an High Court rulings supported the positio be made if no exe
Assessing Officer’s exempt income was guaranteed and depe
Tribunal reaffirmed investment purposes unless actual exemp
Tribunal accordingly investments that di
ITA Nos. 37

h as dividend) is earned in a be invoked. The Special Ben icting views, particularly the August, 2009 in Cheminvest L ndra Prasad Moody [1978] 115
o income was earned, expense
, the Tribunal followed the Hon cim India (P) Ltd (supra), as per making it binding within its ju ourt's decision in Rajendra Pra related to Section 57(iii) (de r Sources") and not Section 1
nd intent. The Special Bench no (Punjab & Haryana, Gujarat, on that disallowance under Sect empt income is earned and a stance that investments coul s rejected because dividend ends on company decisions. The d that business expenditure s cannot be disallowed unde pt income is generated. The Sp y, ruled in favor of the assess id not yield exempt income
JSW Energy Ltd
37
714 & 3713/MUM/2024
a financial year, nch of Tribunal
Special Bench
Ltd., which had ITR 519 (SC) to s could still be n’ble Delhi High r the principle of uri iction. The asad Moody was ductions under 14A, which has oted that Several and Allahabad) tion 14A cannot accordingly the ld have yielded income is not e Special Bench e incurred for er Section 14A pecial Bench of ee, stating that should not be considered for disall
1962. 10. We have heard this argument, the Ld to the letter and spre
2014 of the CBDT an in Finance Act, 202
section 14A. The L inserted to clarify th applied to the entir investments that hav
Ld. DR referred to th of ACIT v. Williams taxmann.com 164 a 2022 is having retro
High Court in the ca has held that the exp is prospective in nat
ACIT v. Williamson with the higher judic the instant case. Acc the Hon’ble Special B
(supra), we direct the u/s 14A of the Act in ITA Nos. 37

lowance under Rule 8D of Inc rival submission of the partie d. DR submitted that this argum ead of law clarified by way of C nd more recently by way of amen
22 which was inserted in the d. DR submitted that said e hat the provisions of section 14
re investment portfolio not m ve yielded exempt income durin he decision of the Guwahati Ben son Financial Services Ltd. re and held the amendment by way spective effect. But we find tha ase of Era Infrastructure Pvt. Lt planation inserted by way of Fin ture and therefore, ratio in the Financial Services (supra) bei cial forum cannot be applied o cordingly, respectfully following
Bench in the case of Vireet Inves e Assessing Officer to restrict t n respect of investments only wh
JSW Energy Ltd
38
714 & 3713/MUM/2024
come-tax Rules, es in relation to ment is contrary
Circular No. 1 of ndment brought
Explanation to explanation was 4A have always merely to those ng the year. The nch in the case eported in 140
y of Finance Act, at Hon’ble Delhi td. 448 ITR 674
nance Act, 2022
decision of the ing inconsistent over the facts of g the decision of stment Pvt. Ltd.
he disallowance hich had yielded exempted income. Th appeal of the assess purposes.
11. The ground No disallowance of exp
Rs.41,81,59,866/- w the Act.
12. We have heard the relevant material been allowed in fa assessment year 20
02.06.2017. Relevan under:
“7. Next Grou of the Act. It assessee's ow of the assess the Hon'ble
30/4/2015) w the opinion t
Respectfully f we decide the 12.1 A similar view h in ITA No. 1336/Mu reproduced as under “7. In so far a to computatio
Act. The Ass
ITA Nos. 37

he ground No. 2 and additiona see is accordingly allowed partl o. 3 of the appeal of the ass penses u/s 14A of the Act while computing the book profi rival submissions of the parti s on record. We find that an ide avour of the assessee by th
008-09 in ITA No. 1334/Mu nt finding of the Tribunal is und is about computation of book profit u
It was brought to our notice that the wn case in 2006-07 had decided the issu see, that the appeal filed by the departm
Bombay High Court (ITA No.1468 of was dismissed. In these circumstances, that the order of the FAA has to be following the order of the Tribunal for A e fifth Ground against the AO.”
has been taken in the assessmen um/2015. Relevant finding of :
as the second Ground is concerned, the sa on of ‘book profit’ in terms of section 11
sessing Officer, while computing book p
JSW Energy Ltd
39
714 & 3713/MUM/2024
al ground of the ly for statistical sessee relate to amounting to it u/s 115JB of ies and perused entical issue has he Tribunal in um/2015 dated reproduced as u/s. 115JB
Tribunal in ue in favour ment before f 2013 dt.
, we are of confirmed.
AY 2006-07, nt year 2010-11
the Tribunal is ame relates
15JB of the profit under section 115JB under section Assessing Off consideration while comput
CIT(A) has di two counts F
2006-07, the No.244/Bang issue and up decision of th
DCIT, ITA No the CIT(A) not exempt incom the P&L
A expenditure c unworkable. I
Officer has be 8. Before us, decision of th year 2006-07
the CIT(A), co by any highe the part of th the impugned out by the CIT hold so. Thus
CIT(A) is affirm
12.2 Respectfully fol assessee is allowed a the disallowance whi
Act. The ground No. 3
13. The ground No Rs.53,10,000/- u/s 3
for abandoned projec
The brief facts qua
Officer observed expe
ITA Nos. 37

JB, added the amount of disallowance n 14A of the Act. The assessee contended fficer that there was no justification for n the disallowance under section 14A ting book profit under section 115JB of t isagreed with the stand of the Assessing
Firstly, according to the CIT(A), in assess e Tribunal in assessee’s own case ga/2010 dated 22/2/2013 has considere pheld the stand of the assessee following e Tribunal in the case of Essar Teleholdin o.3850/Mum/2010 dated 27/07/2011. ticed that in this year, assessee has not e me and, therefore, no such income was ccount.
As a consequence, no cor can be identified and, thus, the provi
In this manner, the addition made by the een deleted.
it was a common point between the part he Tribunal in assessee’s own case for a 7 dated 22/2/2013(supra) which has reli ontinues to hold the field as it has not b er authority. As a consequence, we find he CIT(A) in relying upon the precedent a d addition. Moreover, even the factual asp
T(A) is unexceptional and deserves to be s, on Ground of Appeal No.2 also, the dec med.”
lowing the same, the ground o and the Assessing Officer is di ile computing the book profit u/
3 of the appeal is accordingly al o. 4 of the appeal relate to 37 of the Act holding that expen ct was in the nature of the capi the issue in dispute are that enditure of Rs.51,10,000/- on th
JSW Energy Ltd
40
714 & 3713/MUM/2024
e computed d before the taking into of the Act, the Act. The g Officer on sment year vide ITA ed a similar g an earlier ngs Ltd. vs.
. Secondly, earned any credited to rresponding isions were e Assessing ties that the assessment ied upon by een altered no error on and deleting pect brought upheld. We cision of the of appeal of the irected to delete
/s 115JB of the lowed.
disallowance of nditure incurred ital expenditure.
t the Assessing he project which was not materialized
Officer as why the s expenditure, the as incurred for obtaini value(CV) coal in its plant to reduce depe implemented due to Officer rejected the Firstly, the assessee progress in its book nature though due to was not impleme distinguished the dec case of Tamilnadu M assessee. Secondly, the expenditure bein allowable u/s 37 of t the assessee firstly feasibility reports co
01.04.2013 wherein to the fulfillment of t not meet those cond the Act, which is not and exclusively for th also rejected the alt
ITA Nos. 37

d. In response to the query o aid expenditure may not be tre ssessee responded that said ing feasibility report for use existing high CV coal based po endency on high CV coal whic o some technical reasons. The contention of the assessee fo e itself has treated the same as s of accounts and therefore, it o some technical reasons said f nted.
The Assessing
Offic cision of the Hon’ble Madras Hi
Magesite Ltd. v. ACIT (supra) rel according to the Assessing Offic ng in the nature of capital expen the Act. The Ld. DRP rejected th y on the ground that expens ould be considered u/s 35D in 1/10th expenditure could be am the conditions prescribed but t ditions and attempted to get be allowable as the expenses was he purpose of business. Second ternative claim of the said exp
JSW Energy Ltd
41
714 & 3713/MUM/2024
f the Assessing eated as capital d expense was of low calorific ower generation ch could not be e Ld. Assessing or two reasons.
capital work-in- t was capital in feasibility report er accordingly igh Court in the ied upon by the cer writing off of nditure was not he contention of es incurred on ntroduced w.e.f.
mortized subject the assessee did enefit u/s 37 of incurred wholly dly, the Ld. DRP penses as short term capital loss on feasibility report was came into existence any capital asset, he capital cannot be trea observed that capital capital loss as per th
Ld. DRP while any ex value comes under triggered when there
Before us, the ld. cou the Hon’ble Madras H
(supra) and decision case of Deputy Comm
(2003) 263 ITR 357
revenue in nature. O of the Ld. DRP and s reports are governed and therefore, not eli that expenses must business and not to submitted that the e purposes and hence evaluating new busi benefit for the busi
ITA Nos. 37

the ground that in view of pr s prepared, was abandoned, n and therefore, there could no ence the treatment of item ap ated as short term capital loss.
l expenditure as per accounting he Act are altogether different. A xpenditure which creates assets capital expenditure whereas e is a loss consequent to the tr unsel for the assessee relied on High Court in the case Tamilnad n of the Hon’ble High Court of missioner of Income-tax v. Assa
7 wherein it is held that such n the contrary, the Ld. DR relie submitted that expenses incurr d by the specific provision u/s igible u/s 37 of the Act which ex be wholly and exclusively for be capital or personal in natu expenditure was intended for e e capital in nature because th iness opportunity aimed to cr iness. The Ld. DR submitted
JSW Energy Ltd
42
714 & 3713/MUM/2024
roject for which no capital asset t be transfer of ppearing in the The Ld. counsel g treatment and According to the of the enduring capital loss is ransfer of asset.
n the decision of du Magesite Ltd.
Gauhati in the am Asbestos Ltd.
h expenses are d on the finding red on feasibility
35D of the Act xplicitly express the purpose of ure. The Ld. DR enduring benefit he assessee was reate long term that feasibility report in question wa viability of an investm
(CV) coal which woul thus the expenditur assessee’s trade for operational costs an creating enduring be Ld. DR relied on the the case of CIT v. J.
985 and decision of CIT v. Shri Digvijay C
14. We have heard the relevant material provide for allowing t for the purpose of t capital or personal nature of capital or section 37 of the Ac whether the expend nature of the capita assessee has filed a c perusal of the same, was to replace the r existing plants, the a ITA Nos. 37

as obtained with the objective o ment that would result in the ac ld direct impact on increasing p re confers upon the enduring r securing long term advantag nd therefore, such expenditure nefit, therefore, it was capital in decision of the Hon’ble Bomba
.K. Chemicals Ltd. reported in the Hon’ble Gujarat High Cour
Cement Co. Ltd. (1986) 53 CTR 2
rival submissions of the parti ls on record. The section 37 of the expenses as incurred wholly the business and not being in expenditure. Thus, if expend r personal nature, it will go o ct. Therefore, in the case we h diture incurred on feasibility r al expenditure or not. The Ld.
copy of the said feasibility repor we find that purpose behind o aw material used for the powe assessee was using high calorific
JSW Energy Ltd
43
714 & 3713/MUM/2024
of evaluating the cquisition of low profitability and g benefit to the ge by reducing e was aimed as n character. The ay High Court in (1994) 207 ITR rt in the case of 274 (Gujarat).
ies and perused f the Act clearly y and exclusively n the nature of diture is in the out of ambit of have to examine report is in the counsel for the rt before us. On obtaining report er plants. In the c value (CV) coal and said feasibility r material as low calor plant and machiner change of the raw m were required to be c intended for long t therefore, the expend capital expenditure.
14.1 Now, we find expenditure incurred the Act subject to f rejected the eligibility providing an opportu restore this matter b direction to the asse its eligibility u/s 35D verification may allow
14.2 The alternative the appeal for allowin way of feasibility rep agree with the finding we uphold the same.
are accordingly allow no. 5 of the appeal is ITA Nos. 37

report has been obtained for s rific value and necessary chang ry for power generation smoot material various components of t changed. Thus the feasibility/pr term enduring benefit to the diture incurred on the same is that the legislature has spec d on such feasibility/project rep fulfilling certain conditions. Th y of the assessee u/s 35D witho unity of being heard on the issu ack to the file of the Assessing ssee to file necessary documen
D of the Act and the Assessing O w the deduction in accordance w claim of the assessee raised in ng short capital loss is also not port, no capital asset came int g of ld DRP on the issue in disp
The ground No. 4 of the appeal wed for statistical purposes, whe dismissed.
JSW Energy Ltd
44
714 & 3713/MUM/2024
substituting raw ges in the entire thly. In view of the power plant roject report was e assessee and in the nature of cifically allowed port u/s 35D of he ld DRP has ut examining or ue. Therefore, we
Officer with the nts in support of Officer after due with law.
ground no. 5 of allowable as by o existence. We ute, accordingly l of the assessee ereas the ground

o. 6 of the appeal relates t laimed u/s 80IA of the Act dis he facts in brief qua the issue ed deduction of Rs.69,30,25,027
ing Officer further observed tha
Unit No. 1, Unit No. 2, Unit No g deduction u/s 80IA of the Act the details of computation of three units i.e. income of Rs
; Rs.33,54,25,991/- from from Unit No. 4 and inc rom Unit No. 1. The aggregate of Rs.9,41,59,903/- has been s unt and therefore, according to fit was eligible for deduction u/s eduction of Rs.69,30,25,027/
from the profit from Unit No. 3
consideration loss incurred fr he Assessing Officer, the asses om Unit No. 1 amounting to Rs e show cause notice, the ass which have been cited in the by the Assessing Officer. After m of the assessee was rejected ng to the Assessing Officer dedu
JSW Energy Ltd
45
714 & 3713/MUM/2024
o deduction of sallowed by the e in dispute are 7/- u/s 80IA of at assessee was . 3 and Unit No.
t. The Assessing f deduction that .32,22,78,846/-
Unit No. 3 ; curred loss of e profit from all shown from the o the Assessing s 80IA of the Act
/- claimed for 3 and Unit No. 4
om Unit No. 1. ssee has not set
.92,11,43,970/- sessee relied on submission of considering the d mainly on the uction u/s 80IA is in respect of eligib to 80AB of the Act allowed with referenc
According to the Ass net income after sett for deduction in resp setting off loss of Un decision of the Hon’b in the case of Bajaj
Hon’ble Supreme C
(supra). The Assessi cited in the impugned the Assessing Officer
16. We have heard the relevant material assessee has relied o authorities. The core be computed in resp eligible business or profit of all the un reference, the releva extracted as under:
“Deductions industrial infrastructu
ITA Nos. 37

ble business, the Ld. Assessing and according to which deduc ce to income included in the gro sessing Officer ,the gross total i ting off of losses. Therefore, ass pect of aggregate profit from all nit No. 1. The Assessing Office ble High Court Punjab & Hary
Motors Pvt. Ltd. (supra) and ourt in the case of Synco I ing Officer also relied on the d order. The Ld. DRP also uphe and rejected the objection of th rival submissions of the parti ls on record. Before us, the Ld.
n the decision which was cited issue in dispute is whether the pect of profit of each undertak deduction has to be compute nits engaged in eligible busine ant provisions of section 80IA s in respect of profits and undertakings or enterprises ure development, etc.
JSW Energy Ltd
46
714 & 3713/MUM/2024
Officer referred ction has to be oss total income.
income includes sessee is eligible l the units after er relied on the ana High Court decision of the Industries Ltd.
other decisions eld the finding of he assessee.
ies and perused counsel for the before the lower e deduction is to king engaged in ed on aggregate ess. Fore ready of the Act are gains from engaged in 80-IA. [(1) includes any enterprise fr business bei there shall, i this section, assessee, a of the profit consecutive a (2) The dedu of the asses assessment in which the to operate telecommuni develops 48[*
of sub-sect transmission renovation a distribution l
[Provided t maintains infrastructur clause (c) of provisions of words "fifte substituted.]
(3)……………
(4)……………
(5) Notwiths of this Act, t which the p purposes of sub-section f the initial a year, be com only source year relevan subsequent assessment
ITA Nos. 37

Where the gross total income of y profits and gains derived by an und rom any business referred to in sub-se ing hereinafter referred to as the eligi in accordance with and subject to the be allowed, in computing the total deduction of an amount equal to hun ts and gains derived from such bus assessment years.]
uction specified in sub-section (1) may ssee, be claimed by him for any te years out of fifteen years beginning e undertaking or the enterprise develop any infrastructure facility or sta ication service or develops an indust
***] a special economic zone referred to tion
(4)]
or generates power or n or distribution of power [or undertak and modernisation of the existing tra lines [***]] :
that where the assessee develops or or develops, operates and ma re facility referred to in clause (a) or f the Explanation to clause (i) of sub-s of this sub-section shall have effect en years", the words "twenty yea
]”
…..
…..
tanding anything contained in any o the profits and gains of an eligibl provisions of sub-section (1) apply determining the quantum of deducti for the assessment year immediate assessment year or any subsequen mputed as if such eligible busine e of income of the assessee during nt to the initial assessment year90
assessment year up to and i year for which the determination is to JSW Energy Ltd
47
714 & 3713/MUM/2024
an assessee dertaking or an ection (4) (such ible business), e provisions of income of the ndred per cent siness for ten y, at the option en consecutive from the year ps and begins arts providing trial park 47[or o in clause (iii) r commences kes substantial ansmission or operates and aintains any r clause (b) or section (4), the as if for the rs" had been other provision le business to shall, for the ion under that ely succeeding nt assessment ess were the the previous and to every including the o be made.

0IA(5) clearly specify that for m of deduction , the computa le business is the only source o
, all the three units are engaged ing electricity, therefore we are e of computation of deduction u assessee, the aggregate profit three units have to be taken.
usiness can’t be set-off agains iness for computing deduction f allowing deduction is for pr generation of the particular ss of those products and not p ore, aggregate profit of different gible for deduction u/s 80IA urpose of deduction. In suppor f Hon’ble Supreme Court in Income Tax-I vs M/S Relian
) on 28 April, 2021 in Civil Ap rt of which is reproduced as und ntion of the Revenue is that sub-secti mputation of quantum of deduction be by taking it as the only source o e language of sub-section (5) make lated in sub-section (1) is only with e business’ which indicates that there deduction cannot exceed the ‘business
JSW Energy Ltd
48
714 & 3713/MUM/2024
the purpose of ation has to be f income. In the d in the ‘eligible e of the opinion u/s 80IA of the t of the eligible
Certainly, loss st the aggregate u/s 80IA of the romotion of the products and promotion of an t undertaking of should only be rt , we also rely n the case of ce Energy Ltd ppeal No. 1328
der:
on (5) of Section eing limited from of income. It is es it clear that h respect to the e is a cap in sub- s income’. On the other hand, it is th only to determinatio by treating the ‘elig submitted by Mr.
computation of ded
2002-03 as accepte into account the prof income’. He submitt to the treatment to b not concerned with allowed. To explain
(1) of Section 80-IA
The amount of d under Section 80-
492,78,60,973 /-. T income from the ‘eli source of income for 80-IA. The question deduction so compu cannot be determine
14. It will be useful the Revenue as wel
Court was concerne is in pari materia to “ 80-I(6) Notwithsta this Act, the profits the business of a h or other powered c shall, for the purpo sub- section (1) for initial assessment computed as if such hotel or the busines craft were the only years relevant to th assessment year up determination is to that for the purpose sustained in other d
ITA Nos. 37

he case of the Assessee that sub-sec on of the quantum of deduction unde gible business’ as the only source of Vohra, learned Senior Counsel, uction under Section 80-IA for the a ed by the Assessing Officer, was arriv ofits from the ‘eligible business’ as th ted that, however, sub-section (5) is a be given to the deduction under sub- s h the extent to which the compute the interplay between sub-section (5)
, it will be useful to refer to the facts deduction from the ‘eligible busin
-IA for the assessment year
20
There is no dispute that the said am igible business’ under Section 80-IA r the purposes of computing deductio n that arises further with reference uted to arrive at the ‘total income’
ed by resorting to interpretation of sub l to refer to the judgment of this Cour ll as the Assessee. In Synco Industr ed with Section 80-I of the Act. Sectio
Section 80-IA(5), is as follows:
anding anything contained in any ot and gains of an industrial undertak otel or the business of repairs to ocea raft to which the provisions of sub-s oses of determining the quantum of r the assessment year immediately year or any subsequent assess h industrial undertaking or ship or the ss of repairs to ocean-going vessels o source of income of the assessee dur he initial assessment year and to ev p to and including the assessment ye be made.” It was held in Synco In e of calculating the deduction under S divisions or units cannot be taken into JSW Energy Ltd
49
714 & 3713/MUM/2024
ction (5) pertains er sub-section (1) f income. It was that the final assessment year ved at by taking e ‘only source of step antecedent section (1) and is ed deduction be and sub-section s of this Appeal.
ness’ computed
002-03
is Rs.
mount represents and is the only on under Section to allowing the of the Assessee b- section (5).
rt relied upon by ries (supra), this on 80-I(6), which ther provision of king or a ship or an-going vessels section (1) apply deduction under succeeding the sment year, be e business of the or other powered ring the previous very subsequent ear for which the ndustries (supra)
Section 80-I, loss o account as sub- section (6) contempl shall be taken into the Court conclude computation of ded the treatment to be g income of the assess
Court in Canara W emphasize the purp the question that a computation of the p
E, as it then existed the manufacture of existed, permitted d to the business of ge of power or of const of the articles or thi argued on behalf o ancillaries industry by the assessee in t agreement with the the profits and gain
E cannot be reduc industries owned by 15. In the case be IA(5) by the Appell
However, we have c as it has a bearing
IA of the Act. We h
80- IA of the Ac deduction under treating ‘eligible b
Sub-section (5) cann the deduction under was made by the le phrase ‘derived … f submission that the possible construction not necessary for us
ITA Nos. 37

lates that only profits from the indust account as it was the only source of d that Section 80-I(6) of the Act de uction whereas Section 80-I(1) of th given to such deductions in order to a see. The Assessee also relied on the j
Workshops (P) Ltd., Kodialball, Mang pose of sub-section (5) of Section 80- arose for consideration before this C profits for the purpose of deduction un d, after setting off the loss incurred by f alloy steels. Section 80-E of the deductions in respect of profits and ga eneration or distribution of electricity o ruction, manufacture or production of ings specified in the list in the Fifth S of the Revenue that the profits from of the assessee must be reduced by t the manufacture of alloy steels. This C submissions made by the Revenue.
ns by an industry entitled to benefit un ced by the loss suffered by any ot y the assessee.
efore us, there is no discussion ab late Authority, nor the Tribunal and considered the submissions on behalf on the interpretation of sub-section (1
hold that the scope of sub-section ct is limited to determination o sub-section (1) of Section 80-IA business’ as the ‘only source of inc not be pressed into service for readin r sub-section (1) only to ‘business inco earned Senior Counsel for the Revenu from’ in Section 80-IA (1) of the Act e intention of the legislature was to giv n to deduction admissible under this s to deal with this submission in view
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714 & 3713/MUM/2024
trial undertaking income. Further, ealt with actual e Act dealt with arrive at the total judgment of this galore (supra) to -IA. In this case,
Court related to nder Section 80- y the assessee in Act, as it then ains attributable or any other form f any one or more
Schedule. It was m the automobile the loss suffered
Court was not in It was held that nder Section 80- ther industry or bout Section 80- the High Court.
lf of the Revenue
1) of Section 80- n (5) of Section of quantum of of the Act by come’.
ng a limitation of ome’. An attempt ue to rely on the in respect of his ve the narrowest sub-section. It is w of the findings recorded above. For qua the issue of the 16.2 The Hon’ble Su to take business inco profit and gain of th take profit of eligible
16.3 Accordingly, we
Ld. CIT(A) in the iss same. The ground No dismissed.
17. The ground No.
of write off non-mov brief facts qua the is write off Rs.2.01 cror spares and reduced spare recognized in profit and loss accou submitted during t mistake added while provisions of the Act
Rs.29,48,977/- out assessee was rejecte claimed by way of fi the contention of the ITA Nos. 37

r the aforementioned reasons, the App extent of deduction under Section 80
upreme Court has rejected the p ome of the assessee i.e. income he business or profession, inst business as a single source of in e do not find any infirmity in t sue in dispute and accordingly o. 6 of the appeal of the assesse
7 of the appeal relate to claim ving stores and spares to Rs.29
ssue in dispute are that it had res towards write off of non-mo
Rs.1.71 crores being provision earlier years. Hence, net expe unt was of Rs.29,48,977/- only he assessment proceedings t e computing taxable income un t and requested to reduce the of total income. But said co ed by the Assessing Officer as ling revised return. The Ld. DR e assessee. Before us, the Ld.
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714 & 3713/MUM/2024
peal is dismissed
0-IA of the Act.
plea of Revenue under the head tead directed to ncome.
the order of the y we uphold the ee is accordingly of the assessee
9,48,977/-. The d debited actual oving stores and n of non-moving nses debited to y. The assessee that it was by nder the normal said amount of ntention of the s same was not RP also rejected counsel for the assessee relied on the the case of Pruthvi B taxmann.com 23 (Bo
Court in the case o
35/2019).
18. We have heard the relevant materials rejected by the Asse claim was not filed b that if the claim is b same should be exa subject to provisions the issue in dispute
Officer for examining account of write off n the appeal is accordin
19. In ground No.
allowing the claim of was inadvertently offe
19.1 We have heard the relevant materi identical to issue dec is also restored back
ITA Nos. 37

e decision of the Hon’ble Bomba
Brokers and Shareholders report ombay) and decision of the Hon of International Tractor Ltd. v.
rival submissions of the parti s on record. The claim of the as essing Officer mainly for the re by way of revised return. We ar bonafide and within the provis amined by the Assessing Offic s of law. Therefore, we set asid and restore the matter back t g the claim of the assessee of Rs non-moving stores and spares. G ngly allowed for statistical purpo
8 also the assessee is aggr f gratuity amounting to Rs.109, fered twice in the computation in rival submissions of the parti als on record. The issue in cided in ground No. 7 and there k to the file of the Assessing Offi
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714 & 3713/MUM/2024
ay High Court in ted in (2012) 23
n’ble Delhi High
DCIT (ITA No.
ies and perused sessee has been eason that said e of the opinion sions of the law cer and allowed e the finding on o the Assessing
.29,48,977/- on Ground No. 7 of oses.
rieved with not ,98,529/- which ncome.
ies and perused dispute being efore, this issue ficer for deciding afresh. Ground No.
statistical purposes
ITA No. 3713/MUM/
20. The grounds rais as under:
1. On the fac law, the Ho confirming the upward adjus transaction
Enterprises, w of the case.
2. On the fac law, the Hon appreciating t w/s.801A an any effect on 3. On the fac law, the Ho confirming th making a di
Income Tax circumstances
4. On the fac law, the Hon appreciating t the appellan amendment m retrospective e
5. On the fac law, the Ho confirming th making an a disallowance
ITA Nos. 37

8 of the appeal is accordin
/2024
ed by the assessee in its appeal cts and circumstances of the case as w n'ble Disputed Resolution Panel has e action of the Ld. Assessing Officer in m stment of Rs. 32.51,731/- on account of of purchases of steel from the A without considering the facts and circum cts and circumstances of the case as w n'ble Disputed Resolution Panel has erre the fact that the profit of the appellant is nd making any upward adjustment will the Tax cts and circumstances of the case as w n'ble Disputed Resolution Panel has he action of the Learned Assessing O isallowance of Rs.9,80.000/- u/s. 14A
Act 1961. without considering the fa s of the case.
cts and circumstances of the case as w n’ble Disputed Resolution Panel has erre the fact that during the year under cons nt has not earned any exempt inco made in Finance Act, 2022 has not hav effect.
cts and circumstances of the case as w n'ble Disputed Resolution Panel has he action of the Ld. Assessing Of addition of Rs.9,80,000/- on account of of expenses us. 14A of the Income Tux A JSW Energy Ltd
53
714 & 3713/MUM/2024
ngly allowed for l are reproduced well as in erred in aking an f alleged
Associate mstances well as in ed in not s exempt not have well as in erred in Officer in A of the acts and well as in ed in not ideration me und ving any well as in erred in fficer in f alleged et. -

1961, while c without appre computing the 1961. The ap delete the sai
20. The briefly state engaged in generation income filed by the a In the course of transaction of purcha
Officer (ld TPO) fo adjustment made by Officer in the draft a transfer pricing adju made disallowance u in regular income as 20.1 The ground Nos pricing adjustment purchase of steel. Th assessee operates eig
135 MW each that pr fuel. During the year exemption benefit in 80IA of the Act. The those power plants associated enterprise
ITA Nos. 37

computing the book profit w/s. 115J3 of eciating the fact no such addition is to be e book profit us. 115JB of the Income appellant craves leave to add, amend, id ground of appeal.”
ed facts of the case are that th n of power through power plant assessee was subjected to scruti scrutiny proceedings, a spe ase of steel was sent to the Ld T for arm’s length price deter y the Ld. TPO was included by ssessment order. The Ld. DRP ustment. Further, the Assessi u/s 14A of the Act amounting to well as in book profit.
s. 1 and 2 of the appeal relates to the specified domestic tran he brief facts qua the issue in d ght numbers of power plants w roduced 1008 MW power by usi r under consideration, the asses n respect of eight power genera e assessee explained that for s, the assessee purchased es (AE). For the purpose of benc
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714 & 3713/MUM/2024
f the Act, made in Tax Act, alter or he assessee was ts. The return of iny assessment.
cified domestic
Transfer Pricing rmination. The y the Assessing upheld the said ing Officer also o Rs.9,80,000/- s to the transfer nsaction of the dispute are that which comprises ng lignite as the ssee claimed tax ating units u/s maintenance of steel from its chmarking these transactions, the a between price of asso steel plant. The asse using quotation from claimed that it accep associated enterprise associated enterprise
Ld. TPO noted that t into higher deduction assessee submitted always purchased at the Ld. TPO/AO that was baseless by inc increase in expense corresponding dedu transaction is tax neu price of the steel wa contention of the ass relevant observation
“The assess always pur accepted in there. In this is enjoying goods to ta revenue and Further, the profits and t
ITA Nos. 37

ssessee has submitted a com ociated enterprises and ALP for essee applied other method for m the independent 3rd parties. Th pted the lowest quotation whic es and therefore, steel was purc es instead from the independe the profit of the assessee was in n u/s 80IA of the Act. Before th that being a prudent business the lower quotation and thus t t assessee has earned more than creasing the purchase price of es will reduce the gross tot ction u/s 80IA of the Act utral and therefore, no adjustm as required. The Ld. TPO howe sessee. The Ld. DRP also upheld of the Ld. DRP is reproduced as see's argument that a prudent busi rchase goods at the least possible a situation when related party tran s case, the transaction is with a relate tax holiday. In this case, the AE w ax holiday units at a lower cost r d consequently their profits leading to tax holiday units will show higher thus claiming greater deduction. Hen
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714 & 3713/MUM/2024
mparison chart purchase of the r benchmarking he assessee had ch was from its chased from the ent parties. The nflated resulting he Ld. TPO, the sman goods are the allegation of n ordinary profit f the steel. The al income and but the entire ment to purchase ver rejected the d the same. The s under:
inessman will cost can be nsaction is not ed party which will be selling reducing their o lower taxes.
than ordinary nce, as per the mandate of entity enjoyi
Also since on non-eligible would decre not tax neutr
In the consid right recour relevant adj
21. We have heard the relevant materia steel made from the a quotation from third way of reducing purc which is exempted adjustment had bee quotations received transferring the good increasing the profit which is tax exempt.
the goods have bee quoted by the indepe not examined the ve should have examine actually happened du parties and therefore price/ adjustment sh data provided by the ITA Nos. 37

f Section 80-IA (10), the transaction ing tax holiday should be the arm's nly one unit is enjoying tax holiday, a unit at a price lower than the arm's ease its profit and consequently its pr ral.
dered view of the panel, the Ld. TPO rse in determining the ALP and justment.”
rival submissions of the parti als on record. In the case the p associated enterprises is below t party. The Ld. AO and TPO o chase price, the assessee has u/s 80IA of the Act and the en made on the basis of th from the other parties. The p ds from the related party to the t in the hands of the entity i.
The assessee has not able to co en transferred at price lower endent party. But we find that eracity of the independent part ed the independent steel purcha uring the relevant period betwe e, after applying the CUP metho hould have worked out rather e assessee using the other met
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714 & 3713/MUM/2024
n price for an s length price.
ny sale by the s length price rofit. Thus it is has taken the making the ies and perused purchase of the the independent observed that by increased profit erefore, upward he data of the purpose behind e assessee is for .e. the assessee ontrovert as why than the price the ld TPO has ties as the TPO ase transactions een independent od, arms length than relying on thod. Therefore, the approach of the A Ld. DRP is fallacious the finding of the As the AO/TPO for analy
CUP method by w transactions for the s
Nos. 1 and 2 of the for statistical purpose
22. The ground No.
u/s 14A of the Act there is no exemp consideration by the Hon’ble Delhi High C
33 , we hold that no was by the assessee ground No. 3 and 4 o
23. The ground No.
for earning exempted u/s 115JB of the Ac in ITA No. 3714/M therefore, this ground

ITA Nos. 37

AO and the TPO which has bee s and not reliable and according ssessing Officer and restore the yzing the transfer pricing adjus way of quoting data of th sale of steel during relevant per appeal of the assessee are acco es.
. 3 and 4 of the appeal relates t amounting to Rs.9,80,000/- pt income earned during th assessee. Respectfully following
Court in the case of Chem inves o addition could be made if no e in year under consideration.
of the appeal are accordingly allo
5 of the appeal relates to maki d income u/s 14A while compu ct. The identical issue has been Mum/2024 in the case of JS d is allowed in favour of the asse
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714 & 3713/MUM/2024
n upheld by the gly, we set aside matter back to tment using the he independent riod. The ground ordingly allowed to disallowance
. Undisputedly, he year under g the decision of sted ltd 378 ITR exempt income
. Therefore, the owed.
ing disallowance uting book profit n decided by the SW Energy Ltd.
essee.

Copy of the Order forward
1. The Appellant
2. The Respondent.
3. CIT
4. DR, ITAT, Mumbai
5. Guard file.

////

ITA Nos. 37

oth the appeals are allowed part ced in the open Court on 26/0
d/-
S
AJAGOPAL)
(OM PRAK
MEMBER
ACCOUNTA ded to :

BY ORDER

(Assistant Re

ITAT, Mu

JSW Energy Ltd
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714 & 3713/MUM/2024
tly for statistical
03/2025. d/-
KASH KANT)
ANT MEMBER
R, gistrar) umbai