DODLA DAIRY LIMITED,HYDERABAD vs. DCIT CIRCLE -8(1), HYDERABAD

On the facts and circumstances of the case, and in law, the Ld. TPO erred in not following a consistent approach for SDT's on a year-on-year basis.

On the facts and circumstances of the case and in law, the Ld. AO/Ld. Panel erred in appreciating that deduction under section 80JJAA of the Act is to be claimed over a period of 3 years @ 30% for each year and the 80JJAA deduction claimed during the year comprises of 30% of the eligible claim for AY 2018-19 (being the 1st year of claim) and 30% of the eligible claim pertaining to AY 2017-18 (being the second year of such claim) and thereby erred in not granting the deduction under section 80JJAA amounting to INR 35,67,060 as per the Form 10DA filed by the Appellant for Assessment Year ('A.Y’) 2017-18 in accordance with provisions of section 80JJAA of the Act.

Apart from that the assessee company has filed before us letters dated 14.07.2023, 21.09.2023 and 22.04.2025, wherein it has raised additional grounds of appeal, which reads as under:

On the facts and circumstances of the case and in law, the final assessment order dated July 15, 2022 under section 143(3) read with section 144C(13) read with section 1448 of the Act passed by the Ld. AO, pursuant to the invalid and non-est directions passed by the Ld. DRP under section 144C(5) of the Act, is illegal, thus, making the final 5 ITA TP 466/Hyd/2022 and 1301/Hyd/2024 Dodla Dairy Limited. assessment order bad in law, null and void and thus, liable to be quashed.

Succinctly stated, the assessee company is engaged in the business of procuring, processing and selling milk and milk products across 11 states in India. The assessee company has 11 processing plants, 61 chilling centers and a wide distribution network across India. The asseessee company offers its products and services through 27 sales offices. The assessee company had e-filed its return of income for A.Y. 2018-19 on 29.11.2018, declaring an income of Rs. 35,30,28,430/-. Subsequently, the case of the 6 ITA TP 466/Hyd/2022 and 1301/Hyd/2024 Dodla Dairy Limited. assessee company was selected for complete scrutiny (CASS) under Section 143(2) of the Act.

During the course of the assessment proceedings, the A.O. made a reference u/s 92CA of the Act to the DCIT, T.P.-1, Hyderabad, for determination of the “Arm’s Length Price” (for short, “ALP”) of the specified domestic transactions reported by the assessee company for the subject year.

The Transfer Pricing Officer (for short “TPO”), vide his order passed under Section 92CA(3) of the Act, dated 31.07.2021 determined the ALP of the gain obtained on account of excess charging of overhead expenses by the Chilling Units of the assessee company by following “Other Method” at Rs. Nil. Accordingly, the TPO suggested an adjustment u/s 92CA(3) of the Act of Rs.19,43,26,338/- being the deduction claimed by the assessee company u/s 80IB on account of the excess charging of overhead costs by the chilling units.

Thereafter, the A.O. vide his draft assessment order passed under Section 143(3) r.w.s 144C of the Act, dated 16.09.2021, inter 7 ITA TP 466/Hyd/2022 and 1301/Hyd/2024 Dodla Dairy Limited. alia, gave effect to the directions of the TPO. u/s 92CA(3) of the Act and declined its claim for deduction u/s 80IB of the Act of Rs.19.43 crores (approx.). Apart from that, the A.O. proposed certain other additions/disallowances, viz. (i) disallowance u/s 14A of the Act: Rs.66,96,066/-; (ii). part disallowance of the assessee’s claim for deduction u/s 80JJAA: Rs.48,32,390/-; and (iii). disallowance of the interest expenditure on the amount advanced by the assessee company at a discounted rate of interest to its director: Rs.2,50,000/-

The assessee company being aggrieved with the order passed by the A.O. u/s 143(3) r.w.s. 144C(13) r.w.s. 144B of the Act, dated 15.07.2022 has carried the matter in appeal before us.

We have heard the learned Authorized Representatives of both parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that were pressed into service by them to drive home their respective contentions.

Shri Aashik Shah, C.A. the learned Authorized Representative (for short, “ld. AR”) for the assessee company, at the threshold of hearing of the appeal, submitted that as per instructions he seeks not to press some of the additional grounds, viz. (i). the additional grounds nos. 1 and 2 raised vide application dated 14.07.2023; and (ii). the additional ground of appeal no. 1 raised vide application dated 21.09.2023. Considering the aforesaid concession of the Ld. AR, the aforeentioned additional grounds of appeal raised by the appellant company vide its applications dated 14.07.2023 and 21.09.2023 are dismissed as not pressed.

Controversy involved in the present appeal lies in a narrow compass, i.e., whether or not the A.O/T.P.O. are right in law and facts of the case in rejecting the assessee’s claim for deduction of the profit derived from its chilling units on inter-unit transfer of milk u/s 80IB(11A) of the Act. Apart from that, the declining of the assessee’s claim for deduction u/s 80JJAA; disallowance u/s 14A r.w. Rule 8D; and disallowance of the interest corresponding to the amount advanced to the Managing Director are the other issues for which our indulgence has been sought for by the assessee/appellant.

As observed hereinabove, the assessee company is engaged in the processing/production and sale of milk and milk products in India, Singapore, Uganda and Kenya. The assessee company has in-house chilling and processing units to process the raw milk for manufacturing of milk and various milk products i.e. full cream, standardized, toned and double toned milk, ghee, curd, butter, paneer, flavored milk, butter milk, ice-creams, skimmed milk powder etc.

Before proceeding any further, we deem it fit to cull out the business model of the assessee company based on a “Chart” as had been placed on our record by the assessee/appellant, as under:

During the subject year, the assessee company had transferred chilled milk from its eligible units i.e. “Chilling Units” to the processing units and charged inter-unit transfer price on the same. On a perusal of the record, it transpires that the pricing mechanism adopted by the “Chilling units” for the transfer of chilled milk to the processing units is based on the aggregation of the following costs:

The issue involved in the present appeal hinges around the solitary aspect, i.e., the difference between the weighted average overhead cost (of the third party vendors) and the actual overhead costs (of the “chilling units” i.e. the eligible units of the assessee company), being included by the chilling units in the sale price of the milk transferred to its processing units and thus, considered as gain/loss by the said chilling units on which deduction is claimed u/s 80IB of the Act.

The A.O during the course of the draft assessment proceedings had made a reference u/s 92CA(3) of the Act to the TPO for the determination of the ALP of the Specified Domestic Transactions (SDT) of the asseseee company, viz. “transfer of chilled milk” by its “Chilling Units” to the “Processing Units”.

The TPO observed, that the chilling units of the assessee company had claimed deduction u/s 80IB(11A) of the Act. It was observed by him that the assessee company had in its TP study report, reported the transfer of chilled milk amounting to Rs. 844.40 15 ITA TP 466/Hyd/2022 and 1301/Hyd/2024 Dodla Dairy Limited. crores by its chilling units to the processing units as Specified Domestic Transactions (SDT’s). The TPO after referring to the pricing mechanism that was adopted by the chilling units for transferring chilled milk to the processing units, i.e., inter-unit transfers, observed that the same was reported by the assessee company to be at “arms length” by following the “Other method”.

The TPO analyzed the inter-unit transfer by the assessee company of chilled milk by its 48 chilling units to the processing units as reported in “Form 3CEB”. The TPO referring to Section 80IB(11A) of the Act r.w Rule 18BBB(2) of the I.T Rules, 1962, observed that the assessee company was obligated to have furnished an audit report of the accounts of each eligible unit that was claiming deduction u/s 80IB(11A) of the Act in “Form 10CCB”, along with the profit & loss account and balance sheet of each such eligible unit as if it was a distinct entity. However, it was observed by him that the assessee company had not furnished the audited financial statements, i.e., Profit & loss account, Balance sheets of the 48 eligible units reported in “Form 3CEB”. The TPO observed, that the 16 ITA TP 466/Hyd/2022 and 1301/Hyd/2024 Dodla Dairy Limited. assessee company had furnished a consolidated statement said to be the profit & loss accounts of the eligible units.

Thereafter, the TPO had referred to the inter-play between Section 92 and Sections 80IA/IB of the Act. It was observed by him that, as per the provisions of Section 92CA of the Act, any allowance for an expenditure or interest or allocation of any cost in relation to a specified domestic transaction shall be computed having regard to the arm’s length price. It was further observed by him, that as per the provisions of Section 80IA(8) of the Act, which was also applicable to the deduction allowable under Section 80IB, where any goods held for the purpose of eligible business are transferred to any other business carried on by the assessee company and the consideration for such transfer as recorded in the accounts of the eligible business does not correspond to the market value of such goods as on the date of transfer, then for the purposes of deduction u/ss. 80IB or 80IA of the Act, the profits and gains of the eligible 18 ITA TP 466/Hyd/2022 and 1301/Hyd/2024 Dodla Dairy Limited. business shall be computed as if the transfer has been made at the market value of such goods.

Shri. Ashik Shah, Ld. AR for the assess company, at the threshold of hearing of the appeal, had referred to the “written submissions” filed before us. The Ld. AR submitted that the A.O/TPO had grossly erred in law and facts of the case in suggesting/making an adjustment u/s 92CA(3) of the Act of Rs. 19,43,26,338/- by dislodging the pricing mechanism adopted by the chilling units for transferring the chilled milk to the processing units. Elaborating further on his contention, the Ld. AR submitted that the assessee company had in all fairness charged the overhead expenses on the chilled milk transferred to the processing units after considering the weighted average overhead costs of Rs. 3.53/- per liter that was charged by the third party vendors on the processing units of the assessee company. The Ld. AR submitted that as the overhead costs charged by the chilling units on the processing units was based on the weighted average overhead costs of Rs. 3.53/- per liter (supra) that was charged by multiple third party vendors on the assessee company, therefore, the same being at arm’s length was not liable to be dislodged. The Ld. A.R submitted that based on the aforesaid pricing mechanism adopted by the assessee company 25 ITA TP 466/Hyd/2022 and 1301/Hyd/2024 Dodla Dairy Limited.

The Ld. AR further submitted that the TPO had grossly erred in law and on facts of the case by wrongly observing that the assessee company had failed to submit the audited financial statements and also the copies of “Form 10CCB” for each of the chilling units, i.e., eligible units. The Ld. AR had drawn our attention 33 ITA TP 466/Hyd/2022 and 1301/Hyd/2024 Dodla Dairy Limited. to the observation of the TPO, wherein he had observed that the assessee company has not furnished the audited financial statements, i.e., profit and loss account, balance-sheet of the 48 eligible units reported in “Form 3CEB”. It was observed by him that the assessee company had not furnished the audited financial statements of the chilling units, and what was furnished was only a consolidated statement said to be containing profit & loss accounts of the various units. The Ld. AR rebutted the aforesaid observation of the TPO and submitted that the Rule 18BBB of the Income Tax Rules, 1962 prescribes that a separate report i.e. report in Form 10CCB is to be furnished by each undertaking of the assessee company claiming deduction u/s 80IB of the Act and the same shall be accompanied by the profit & loss account and balance-sheet of the undertaking, as if the undertaking were a distinct entity. Elaborating on his contention, the Ld. AR submitted that the assessee company had already submitted the complete set of copies of “Form 10CCB’s” and audited financial statements for each of its 31 eligible units that had claimed deduction u/s 80IB of the Act, as Annexure 1 and Annexure 2 & 3 to its submission dated 34 ITA TP 466/Hyd/2022 and 1301/Hyd/2024 Dodla Dairy Limited.

The Ld. AR submitted that the method adopted by the assessee company of comparing the difference between the actual overhead costs incurred by its chilling units and the weighted average overhead costs charged by the third party vendors (i.e. market rate) regarding the chilled milk transferred by them to the processing unit i.e. Rs.3.53/- per liter was the Most Appropriate Method (MAM) for computing the ALP of the inter unit transactions of transfer of chilled milk by the chilling units of the assessee company. The Ld. AR to buttress his claim, submitted that the said method of benchmarking the market value, i.e., the price at which the third party sells the goods to the non-eligible units of the assessee company, had been upheld by the Hon'ble Apex Court in the case of Jindal Steel Power Ltd (supra), and by the ITAT, 35 ITA TP 466/Hyd/2022 and 1301/Hyd/2024 Dodla Dairy Limited.

Elaborating further, the Ld. AR had, come forth with an alternative contention. The Ld. AR submitted that though the A.O./TPO had drawn adverse inferences for dislodging the assessee’s claim for deduction u/s 80IB(11A) of the Act on the transfer of milk by its chilling units to the processing units, but there is no whisper in their respective orders regarding the claim for deduction u/s 80IB(11A) of Rs. 2,05,64,816/- that was raised by the processing unit of the assessee company situated at “Indragiri”. The Ld. AR submitted that the total claim of deduction u/s 80IB(11A) of Rs.19,43,26,338/- raised by the assessee company during the subject year comprised of, viz. (i) deduction u/s 80IB(11A) pertaining 36 ITA TP 466/Hyd/2022 and 1301/Hyd/2024 Dodla Dairy Limited. to chilling units: Rs.17,37,61,522/-; and (ii) deduction u/s 80IB(11A) pertaining to the processing unit at “Indragiri”: Rs.2,05,64,816/-.

Elaborating further on his contention, the Ld. AR submitted that the processing unit of the assessee company in the normal course would receive milk from the chilling units and converted it into final products such as buttermilk, peda, paneer, etc. The Ld. AR submitted that its aforesaid processing plant at “Indragiri” had during the subject year claimed deduction of Rs.2.05 crores under Section 80IB(11A) which had been summarily declined for no reason.

The Ld A.R submitted that though the TPO had observed that the arm's length price of the profit computed on the amount of excess charging of overhead cost by the assessee's chilling unit was to be determined at Rs. Nil, but at no point of time during the course of the proceedings or even in the TP order, he had ever observed that the profits earned by the assessee's processing unit situated at “Indragiri” was also notional or artificial in nature, or had been claimed in the absence of any value added services being provided 37 ITA TP 466/Hyd/2022 and 1301/Hyd/2024 Dodla Dairy Limited. by the said processing plant. The Ld. DR submitted that as the profits earned by the aforesaid processing unit of the assessee company at “Indragiri” was eligible for claim of deduction under Section 80-IB(11A) of the Act, which neither the A.O. nor the TPO had ever questioned, therefore, there could be no justification for the A.O. to have declined the assessee's claim for deduction to the said extent.

It was, thus, Ld. AR's alternative claim that even if the observation of the TPO that the arm's length price of the profits earned by the chilling units ought to be considered as nil is to be accepted, the disallowance of the assessee's claim for deduction under Section 80IB(11A) of the Act, on the said basis could only be restricted to the profits earned by the chilling units, i.e., Rs. 17.38 crores. Accordingly, the Ld. AR submitted that, in absence of any basis or reason recorded by the authorities below, there could have been no justification for declining the assessee's claim for deduction of Rs. 2.05 crore (supra) u/s 80-IB(11A) of the Act regarding its processing unit situated at “Indragiri”.

Apropos the disallowance of the assessee's claim for deduction of expenses u/s 14A of the Act, the Ld. AR submitted that as the assessee company during the subject year, against the disallowance made by the A.O. u/s 14A of Rs. 66,96,066/-, had received exempt income of only Rs. 39,05,165/-, therefore the disallowance, if any, could have been restricted only to the extent of such exempt income received during the year. Apart from that, the Ld. AR submitted that as the assessee company during the subject year had sufficient own funds, therefore, there was no justification for the A.O. to have worked out the disallowance u/s 14A of the Act. The Ld. AR, to support his contention, had relied upon the judgment of Hon'ble Supreme Court in the case of Pr.CIT-4 Vs. Sintex Industries Ltd. (2018) 255 Taxman 171 (SC). The Ld. AR submitted that the Hon'ble High Court of Gujarat in the case of PCIT-4 Vs. Sintex Industries Ltd. (2017) Taxman 171 (Guj), had observed that as the assessee company before them had surplus funds of Rs. 2319.75 crores against which investment was made of Rs.111.09 crores, there was no question of making any disallowance of expenditure in respect of interest and administrative 39 ITA TP 466/Hyd/2022 and 1301/Hyd/2024 Dodla Dairy Limited. expenses u/s 14A of the Act. The Ld. AR submitted that, by drawing an analogy from the judgment of the Hon’ble High Court of Gujarat in the case of Sintex Industries Ltd. (supra), which thereafter had been approved by the Hon’ble Supreme Court, now when in the present case the assessee company had sufficient self-owned funds available with it to make investment in the exempt income-yielding investments, therefore, no disallowance of any part of the administrative expenses could have been made by the A.O. u/s 14A of the Act.

Apropos the disallowance of the assessee’s claim for deduction of interest expenditure u/s 37 of the Act pertaining to the amount of Rs.1.25 crores that was advanced by the assessee company to its Managing Director @ 9% p.a, the Ld. AR submitted that the A.O., taking cognizance of the fact that the assessee company had raised interest-bearing loans from banks ranging from 10% to 11% per annum, had initially vide his “draft assessment order” passed u/s 144C of the Act, dated 16.09.2021 proposed a disallowance of Rs. 2.50 lac of the excess portion of interest of 2% 40 ITA TP 466/Hyd/2022 and 1301/Hyd/2024 Dodla Dairy Limited.

Apropos the disallowance of the assessee's claim of deduction u/s 80JJAA of the Act of Rs. 48,32,390/-, the Ld. AR submitted that the assessee company's entitlement for deduction u/s 80JJAA of the Act amounted to Rs. 58,77,544/-, viz. (i). deduction pertaining to A.Y 2017-18 (being the second year of deduction): Rs. 35,67,060/-; and (ii). deduction for A.Y 2018-19: Rs. 23,10,484/-. Elaborating further on his contention, the Ld. AR submitted that, inadvertently, the assessee company had, in Form 10DA, certified its claim for deduction at Rs. 23,10,484/-, while for the same was claimed in the 42 ITA TP 466/Hyd/2022 and 1301/Hyd/2024 Dodla Dairy Limited. return of income at Rs. 35,75,814/-. The Ld. AR submitted that considering its entitlement for deduction for the immediately preceding year, i.e., AY 2017-18 of Rs. 35,67,060/- (being second year of claim) its total entitlement u/s 80JJAA worked out at Rs. 58,77,544/-. The Ld. AR, in support of his contention, had relied upon the order passed by the ITAT, Chennai in the case of Intimate Fashions India Pvt. Ltd. Vs. DCIT in IT(TP)A No.48/Chny/2019, dated 31.05.2023.

Per contra, Ms. U. Mini Chandran, Ld. CIT-Departmental Representative (for short, “Ld. CIT-D.R”), submitted that as the assessee company had, based on its artificial/notional profits on transfer of milk by its chilling units to the processing units, raised a claim for deduction u/s 80IB(11A) of the Act, therefore, the A.O./DRP had rightly declined the same. Apart from that, the Ld. CIT-DR submitted that, the claim for deduction u/s 80IB of the Act pre-supposes that the profits on which such claim is made are “derived from” the eligible units. Elaborating further on her contention, the Ld. CIT-DR submitted that the DRP had rightly 43 ITA TP 466/Hyd/2022 and 1301/Hyd/2024 Dodla Dairy Limited. observed that, as the assessee company had claimed deduction u/s 80IB(11A) of the Act on the artificial/notional profits, which by no means could be held to have been “derived from” the business of its eligible units, therefore, the same was not eligible for deduction under the said statutory provision.

Further, the Ld. CIT-DR submitted that, as the assessee company had failed to comply with the statutory obligation that was cast upon it u/s 80IA(7) of the Act read with Rule 18BBB(2) of the Income-tax Rules, 1962, which contemplates that a separate report in “Form 10CCB” accompanied by the Profit & Loss Account and Balance Sheet of each eligible undertaking was statutorily required to be furnished, therefore, the A.O. had, for the said reason, rightly held the assessee company as ineligible for claiming the deduction u/s 80IB(11A) of the Act. Apart from that, the Ld. CIT-DR submitted that the claim of the assessee company for deduction under section 80IB(11A) of the Act cannot be placed at par with claim of deduction under section 80IA(8) of the Act, as was the issue involved in the 44 ITA TP 466/Hyd/2022 and 1301/Hyd/2024 Dodla Dairy Limited. case before the Hon’ble Apex Court in CIT vs. Jindal Steel & Power Ltd., Civil Appeal No.13771 of 2015 & Ors, dated 06/12/2023.

Apropos the disallowance made by the A.O. u/s 14A of the Act, the Ld. CIT-DR submitted that, as the assessee company during the subject year had invested in exempt income-yielding investments, therefore, the A.O. had rightly worked out the disallowance u/s 14Ar.w. Rule 8D(2)(iii) of the Income-tax Rules, 1962. The Ld. DR submitted that there was no substance in the Ld. AR's claim that the disallowance u/s 14A was liable to be restricted to the extent of the exempt income received during the year. The Ld. DR, to support her claim, relied on the CBDT Circular No. 5/2014, dated 11.02.2014

The Ld. CIT-DR further submitted that, as the assessee company had diverted its interest-bearing funds for advancing loan at a discounted rate to its Managing Director, i.e., for a non-business purpose, therefore, the A.O. had rightly disallowed the corresponding discounted rate of interest element pertaining to the said loan, which, however, as per the directions of the DRP had already been restricted up to the date of repayment of the said loan.

The Ld. CIT-DR, on the issue of quantification of claim of deduction u/s 80JJAA of the Act, after arguing for some length, fairly submitted that the said aspect can be looked into by the A.O. in the backdrop of the extant law.

We have heard the learned Authorized Representatives of both parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by them to drive home their respective contentions.

We shall first deal with the issue as to whether or not the A.O. is justified in declining the assessee's claim for deduction u/s 80IB(11A) of the Act of Rs. 19,43,26,338/-. For adjudicating the aforesaid issue, we have to deal with the following three material aspects, viz.

Before proceeding any further, we deem it apposite to cull out for the sake of clarity and better understanding of the issue in hand, that as to whether or not the eligible units of the assessee company, i.e., chilling units, were engaged in the business of processing, preservation, and packaging of dairy products as contemplated under Section 80IB(11A) of the Act. We find that the CIT(A), NFAC, Delhi, vide his order dated 25.03.2025, passed in the assessee's own case for A.Y. 2012-13, had observed that the chilling units of 47 ITA TP 466/Hyd/2022 and 1301/Hyd/2024 Dodla Dairy Limited. the assessee company that were obligated to have cumulatively satisfied the carrying on of the aforementioned three activities, i.e., processing, preserving, and packaging of dairy products for claiming deduction under Section 80IB(11A) of the Act, had fulfilled the same, which, thus rendered it eligible for claiming deduction u/s 80IB(11A) of the Act, observing as under:

We shall now advert to the controversy involved in the present appeal before us, i.e., whether or not the assessee company had validly raised a claim for deduction u/s 80IB(11A) of the Act on the profit earned by its chilling units on the transfer of milk to its processing units.

As observed hereinabove, the primary reason that had weighed in the mind of the A.O/TPO for declining the assessee’s claim for deduction u/s 80IB(11A) of the Act, on the profit earned by its chilling units on transfer of milk to its processing units, was that the chilling units ought to have transferred the milk to the processing 55 ITA TP 466/Hyd/2022 and 1301/Hyd/2024 Dodla Dairy Limited. units at cost. In other words, the A.O/TPO had found it incomprehensible that the chilling units had transferred the milk to the processing units with a profit or markup.

We have given our thoughtful consideration and are unable to persuade ourselves to concur with the aforesaid observation of the A.O/TPO. Our aforesaid view that there is no restriction placed on the transfer of any goods held by the eligible units of the assessee to any other business carried on by the assessee company can safely be gathered on a bare reading of Section 80IA(8) of the Act. Section 80IA(8) of the Act postulates that where any goods held for the purpose of eligible business are transferred to any other business carried on by the assessee, and if the consideration for such transfer, as recorded in the books of account does not correspond to the market value of such goods as on the date of transfer, then, in such a situation, for the purpose of computing deduction under Section 80IB(11A) of the Act, the relevant profit from the eligible business shall be computed as if the transfer had been made at the market value as on the date of transfer.

Rather, our aforesaid conviction is further fortified on a perusal of Section 80IA(8) of the Act, which provides that the market value in relation to goods or services would mean the price at which such goods or services would ordinarily be sold in the open market.

Also, our aforesaid view is supported by the judgment of the Hon’ble Supreme Court in the case of CIT Vs. M/s. Jindal Steel and Power Ltd (Civil Appeal No. 13771 of 2015, dated 06.12.2023). The Hon’ble Apex Court, in its order, had observed that there was no dispute that the captive power plants of the assessee 59 ITA TP 466/Hyd/2022 and 1301/Hyd/2024 Dodla Dairy Limited. company, i.e., the eligible units were entitled for deduction u/s 80IA of the Act. The Hon’ble Apex Court referring to the provisions of sub- section (8) of Section 80IA of the Act, had observed, that the same contemplates that where any goods held for the purposes of the eligible business are transferred to any other business carried on by the assessee or where any goods held for the purposes of any other business carried on by the assessee are transferred to the eligible business but the consideration for such transfer as recorded in the accounts of the eligible business does not correspond to the market value of such goods as on the date of the transfer, then for the purpose of deduction under Section 80IA, the profits and gains of such eligible business shall be computed as if the transfer had been made at the market value of such goods as on that date. Also, the Hon’ble Apex Court had observed that the “Explanation” below the proviso to Section 80IA(8) defines the term “market value”, which means the price that such goods would ordinarily fetch on sale in the open market. Further, it was observed that in case the AO finds exceptional difficulties in computing the profits and gains of the eligible business in the manner specified in sub-section (8) of 60 ITA TP 466/Hyd/2022 and 1301/Hyd/2024 Dodla Dairy Limited.

We shall now deal with the pricing mechanism adopted by the chilling units of the assessee company for the inter-unit transfer of chilled milk to its processing units. As observed by us at length hereinabove, the assessee company had computed the profits earned by its chilling units, i.e., the eligible units, by comparing the actual overhead costs incurred by the chilling units with the weighted average overhead costs of Rs. 3.53/- per liter charged by third-party suppliers from whom the assessee company had during the subject year procured chilled milk.

We have given thoughtful consideration to the issue in hand and find no infirmity in the pricing mechanism that was adopted by the assessee company based on which its chilling units, i.e., the eligible units, had carried out inter-unit transfer of milk to the processing units. Ostensibly, the processing units of the assessee company had also procured milk from the third-party vendors and paid for, viz. (i). raw milk cost; and (ii). overhead costs at a negotiated fixed rate per liter. Admittedly, there is no dispute that the weighted overhead cost paid by the assessee company to the third 63 ITA TP 466/Hyd/2022 and 1301/Hyd/2024 Dodla Dairy Limited.

While the assessing officer accepted the claim of the assessee for deduction under Section 80-IA, he, however, did not accept the profits and gains of the eligible business computed by the assessee on the ground that those were inflated by showing supply of power to its own industrial units for captive consumption at the rate of Rs. 3.72 per unit. Assessing officer took the view that there was no justification on the part of the assessee to claim electricity charge at the rate of Rs. 3.72 for supply to its own industrial units when the assessee was supplying surplus power to the State Electricity Board at the rate of Rs 2.32 per unit. Finally, the assessing officer held that Rs. 2.32 per unit was the market value of electricity and on that basis, reduced the profits and gains of the assessee thereby restricting the claim of deduction of the assessee under Section 80-IA of the Act.

Reverting back to sub-section (8) of Section 80-IA, it is seen that if the assessing officer disputes the consideration for supply of any goods by the assessee as recorded in the accounts of the eligible business on the ground that it does not correspond to the market value of such goods as on the date of the transfer, then for the purpose of deduction under Section 80-IA, the profits and gains of such eligible business shall be computed by adopting arm's length pricing. In other words, if the assessing officer rejects the price as not corresponding to the market value of such good, then he has to compute the sale price of the good at the market value as per his determination. The explanation below the proviso defines market value in relation to any goods to mean the price that such goods would ordinarily fetch on sale in the open market. Thus, as per this definition, the market value of any goods would mean the price that such goods would ordinarily fetch on sale in the open market.

Black's Law Dictionary, 10th Edition, defines the expression "open market" to mean a market in which any buyer or seller may trade and in which prices and product availability are determined by free competition. P. Ramanatha Aiyer's Advanced Law Lexicon has also defined the expression "open market" to mean a market in which goods are available 69 ITA TP 466/Hyd/2022 and 1301/Hyd/2024 Dodla Dairy Limited. to be bought and sold by anyone who cares to. Prices in an open market are determined by the laws of supply and demand.

Therefore, the expression "market value" in relation to any goods as defined by the explanation below the proviso to sub- section (8) of Section 80 IA would mean the price of such goods determined in an environment of free trade or competition. "Market value" is an expression which denotes the price of a good arrived at between a buyer and a seller in the open market i.e., where the transaction takes place in the normal course of trading. Such pricing is unfettered by any control or regulation; rather, it is determined by the economics of demand and supply.

Under the electricity regime in force, an industrial consumer could purchase electricity from the State Electricity Board or avail electricity produced by its own captive power generating unit. No other entity could supply electricity to any consumer. A private person could set up a power generating unit having restrictions on the use of power generated and at the same time, the tariff at which the said power plant could supply surplus power to the State Electricity Board was also liable to be determined in accordance with the statutory requirements. In the present case, as the electricity from the State Electricity Board was inadequate to meet power requirements of the industrial units of the assessee, it set up captive power plants to supply electricity to its industrial units. However, the captive power plants of the assessee could sell or supply the surplus electricity (after supplying electricity to its industrial units) to the State Electricity Board only and not to any other authority or person. Therefore, the surplus electricity had to be compulsorily supplied by the assessee to the State Electricity Board and in terms of Sections 43 and 43A of the 1948 Act, a contract was entered into between the assessee and the State Electricity Board for supply of the surplus electricity by the former to the latter. The price for supply of such electricity by the assessee to the State Electricity Board was fixed at Rs. 2.32 per unit as per the contract. This price is, therefore, a contracted price. Further, there was no room or any elbow space for negotiation on the part of the assessee. Under the statutory regime in place, the assessee had no other alternative but to sell or supply the surplus electricity to the State Electricity Board. Being in a dominant position, the State Electricity Board 70 ITA TP 466/Hyd/2022 and 1301/Hyd/2024 Dodla Dairy Limited. could fix the price to which the assessee really had little or no scope to either oppose or negotiate. Therefore, it is evident that determination of tariff between the assessee and the State Electricity Board cannot be said to be an exercise between a buyer and a seller in a competitive environment or in the ordinary course of trade and business i.e., in the open market. Such a price cannot be said to be the price which is determined in the normal course of trade and competition.

Another way of looking at the issue is, if the industrial units of the assessee did not have the option of obtaining power from the captive power plants of the assessee, then in that case it would have had to purchase electricity from the State Electricity Board. In such a scenario, the industrial units of the assessee would have had to purchase power from the State Electricity Board at the same rate at which the State Electricity Board supplied to the industrial consumers i.e., Rs. 3.72 per unit.

Section 43A of the 1948 Act lays down the terms and conditions for determining the tariff for supply of electricity. The said provision makes it clear that tariff is determined on the basis of various parameters. That apart, it is only upon granting of specific consent that a private entity could set up a power generating unit. However, such a unit would have restrictions not only on the use of the power generated but also regarding determination of tariff at which the power generating unit could supply surplus power to the concerned State Electricity Board. Thus, determination of tariff of the surplus electricity between a power generating company and the State Electricity Board cannot be said to be an exercise between a buyer and a seller under a competitive 71 ITA TP 466/Hyd/2022 and 1301/Hyd/2024 Dodla Dairy Limited. environment or a transaction carried out in the ordinary course of trade and commerce. It is determined in an environment where one of the players has the compulsive legislative mandate not only in the realm of enforcing buying but also to set the buying tariff in terms of the extant statutory guidelines. Therefore, the price determined in such a scenario cannot be equated with a situation where the price is determined in the normal course of trade and competition. Consequently, the price determined as per the power purchase agreement cannot be equated with the market value of power as understood in the common parlance. The price at which the surplus power supplied by the assessee to the State Electricity Board was determined entirely by the State Electricity Board in terms of the statutory regulations and the contract. Such a price cannot be equated with the market value as is understood for the purpose of Section 80IA (8). On the contrary, the rate at which State Electricity Board supplied electricity to the industrial consumers would have to be taken as the market value for computing deduction under Section 80 IA of the Act.

Thus on a careful consideration, we are of the view that the market value of the power supplied by the State Electricity Board to the industrial consumers should be construed to be the market value of electricity. It should not be compared with the rate of power sold to or supplied to the State Electricity Board since the rate of power to a supplier cannot be the market rate of power sold to a consumer in the open market. The State Electricity Board's rate when it supplies power to the consumers have to be taken as the market value for computing the deduction under Section 80-IA of the Act.

That being the position, we hold that the Tribunal had rightly computed the market value of electricity supplied by the captive power plants of the assessee to its industrial units after comparing it with the rate of power available in the open market i.e., the price charged by the State Electricity Board while supplying electricity to the industrial consumers. Therefore, the High Court was fully justified in deciding the appeal against the revenue.” (emphasis supplied by us)

We shall now deal with the Ld. AR’s claim that the authorities below had grossly erred in law and on facts of the case in observing that the assessee had failed to submit the audited financial statements and also copies of “Form 10CCBs” of each of the chilling units (eligible units).

Before proceeding further, we deem it fit to cull out the Rule 18BBB of the IT Rules, 1962, which contemplates the furnishing of the audit report in Form 10CCB as under:

On a careful perusal of Rule 18BBB (supra), it transpires that the same contemplates the furnishing of the report in Form 10CCB, accompanied with profit & loss account and balance sheet of the 75 ITA TP 466/Hyd/2022 and 1301/Hyd/2024 Dodla Dairy Limited. undertaking or enterprise, as if the undertaking or enterprise were a distinct entity. Section 80IA(7) of the Act clearly provides that the deduction under sub-section (1) of Section 80IA from profits and gains derived from an undertaking shall not be admissible unless the accounts of the undertaking for the previous year relevant to the assessment year for which the deduction is claimed have been audited by the accountant as defined in “Explanation” below sub- section (2) of Section 288, and the assessee furnishes along with its return of income the report of such audit in the prescribed form duly verified by such accountant. Our aforesaid view is supported by the judgment of Hon’ble High Court of Delhi in the case of CIT Vs. Orient Ceramics and Industries Ltd [2011] 71 DTR 626 (Del). The Hon’ble High Court, had, inter alia, observed that the accounts of the eligible undertakings as a separate entity had to be audited and prescribed “Form 10CCB” was mandatory to be furnished for ascertaining the quantifying profits.

As the claim of the assessee company, viz. (i). that it had as per Rule 18BBB got its accounts audited as required u/s 80IB(11A) of the Act r.w. Section 80IA(7) and furnished the audit reports of all its eligible units in “Form 10CCBs” could not safely be gathered from the record, therefore, on a perusal of our “order sheet” noting, we find that the assessee company in the course of earlier hearing of the matter was called upon by the Tribunal to substantiate the same.

In compliance of the directions of the Tribunal, the assessee company, vide its letter dated 11.09.2025, had filed a “Chart” (Page 3 of compilation dated 11.09.2025), wherein it had provided the details of the acknowledgement numbers of “Form 10CCBs” furnished in case of 23 “chilling centers” and 1 “processing center” (situated at “Indragi”), and enclosed alongwith the same, viz. (i). 26 screen shots of e-portal account showing filing of the original/revised audit reports of the eligible units (Page Nos. 6 to 16); (ii). screen shots of e-portal account showing filing of the audit reports alongwith copies of the “audit reports” in case of 24 eligible units mentioned in the “Chart” (supra) against which it had claimed deduction u/s 80IB(11A) aggregating to Rs. 19,43,26,338/- (Page Nos. 17 to 136); (iii). copies of the profit & loss accounts and balance sheets (in 78 ITA TP 466/Hyd/2022 and 1301/Hyd/2024 Dodla Dairy Limited. tabular form) of 31 eligible units including 7 loss making units (Page Nos. 137 – 146); and (iv). computation of deduction u/s 80IB(11A) of 24 eligible units as mentioned in the “Chart” (Page Nos. 147 – 152).

Also, we find that Shri. Madhusudhana Reddy Ambavaram, authorized signatory and the whole time director of the assessee company, had filed before us an “affidavit”, dated 11.09.2025 in accordance with Rule 10 of the Income tax (Appellate Tribunal) Rules, 1963, Page Nos. 4 – 6). It is deposed by Shri. Madhusudhana Reddy Ambavaram (supra) in his “affidavit”, viz. (i). that the assessee company had filed its return of income for A.Y 2018-19 on 29.11.2018, declaring a total taxable income of Rs. 35.77 crores and had claimed deduction u/s 80IB(11A) of Rs. 19.43 crores, pertaining to the profits of its 24 eligible units which included both “chilling units” and “processing plant”; (ii). that the “Form 10CCBs” filed as per Rule 18BBB of the Income tax Rules, 1962, for each of the 24 eligible units claiming deduction under Section 80IB(11A) of the Act, were duly filed online by Mr. PSRVV Surya Rao, Chartered Accountant 79 ITA TP 466/Hyd/2022 and 1301/Hyd/2024 Dodla Dairy Limited.

On the other hand, the Ld. CIT-DR has placed on record a report dated 08.09.2025 of the Dy. CIT-8(1), Hyderabad, wherein it is stated by the latter that the “Form 10CCBs” of only 20 “Chilling centers” for the subject year, i.e. A.Y 2018-19 (copies filed alongwith the report) have been downloaded from ITBA/CPC, but neither of them is either found to be digitally signed nor the acknowledgement numbers are printed on the same.

We have given thoughtful consideration to the issue in hand, i.e., as to whether or not the assessee company had filed the audit reports in “Form 10CCB” r.w Rule 18BBB of its 24 eligible units (as per “Chart”) regarding which it had claimed deduction under Section 80IB(11A) of Rs. 19,43,26,338/-. On a perusal of the “Form 10CCBs” of the 24 eligible units alongwith their respective acknowledgements evidencing the filing of the same, as had been placed on our record by the assessee company, which is supported by the “affidavit” of Shri. Madhusudhana Reddy Ambavaram, authorized signatory and the whole time director of the assessee company, we are of the view that the assessee company had complied with the statutory obligation that was cast upon it to furnish the audit reports in “Form 10CCBs” of each of its 24 eligible units. At the same time, we find that the A.O., i.e., Dy. CIT, Circle 8(1), Hyderabad, had vide his report dated 08.09.2025, claimed that only 20 “Form 10CCBs” of the eligible units of the assessee company had been downloaded from the ITBA/CPC, and the same are neither digitally signed nor bear the acknowledgement numbers. Although the assessee company had placed on our record “Form 10CCBs” of 81 ITA TP 466/Hyd/2022 and 1301/Hyd/2024 Dodla Dairy Limited. the 24 eligible units alongwith the copies of the acknowledgements evidencing the filing of the same by the assessee company with distinct acknowledgement numbers, date of filing etc., Page Nos. 17 to 136, but we find that the report dated 08.09.2025 filed by the A.O states facts to the contrary. We, thus, in the backdrop of the aforesaid conflicting claims that have surfaced in the course of proceeding before us, are of the considered view, that the matter in all fairness requires to be set aside to the file of the Jurisdictional Assessing Officer (JAO), for the limited purpose of verifying the claim of the assessee company that it had filed the “Form 10CCBs” of its 24 eligible units which have claimed deduction u/s 80IB(11A) aggregating to Rs. 19,43,26,338/-. In case the claim of the assessee company is found in order, then the adverse inferences drawn in the hands of the assessee company regarding its claim for deduction u/s 80IB(11A) of the Act, on the said count, shall stand vacated.

Before parting on the aforesaid issue, we may herein observe that insofar the observation of the Dy. CIT, Circle 8(1), Hyderabad, vide his report dated 08.09.2025, that the “Form 10CCBs” of the 20 82 ITA TP 466/Hyd/2022 and 1301/Hyd/2024 Dodla Dairy Limited. eligible units of the assessee company that have been downloaded from the ITBA/CPC, are not found to be digitally signed, it would be relevant to pint out that during the year under consideration, i.e., A.Y 2018-19 the portal required the CA to upload “Form 10CCB” using DSC and the assessee would thereafter accept it via portal. However, the downloaded PDF from CPC/IT portal was system- generated and did not embed a visible signature of the CA. The DSC authentication existed in the backend system, ensuring that the CA had actually signed and submitted the form, but it was not displayed on the downloaded PDF. So, the downloaded PDF during the subject year did not show the CA’s DSC or a physical signature. We may herein observe that the said position, i.e., the portal would show the backend validation only and the downloaded copy would not show signature continued till A.Y. 2019-20, and it was only from the A.Y. 2021-22 that the portal was upgraded and the downloaded PDF started showing the CA’s digital signature details for transparency. We, thus, find the reason that as to why the DSC/physical signature of the CA is not visible in the copies of the downloaded “Form 10CCBs” filed by the assessee company for its “eligible units” for 83 ITA TP 466/Hyd/2022 and 1301/Hyd/2024 Dodla Dairy Limited.

Apropos the observation of the DRP that the assessee company has not complied with the requirements of Section 80IB(11A) r.w Rule 18BBB(2) as it had not determined the profits for the individual units by drawing a Profit & loss account which is mandatory for claiming deduction undersection 80IB(11A) of the Act, we are unable to persuade ourselves to concur with the same. As observed by us hereinabove, the assessee company had, though prepared the profit & loss accounts, balance sheets of each of its 24 eligible units, but had projected the same in a tabular form, Page Nos. 137 – 146 of APB. Further, we find that the said profit & loss accounts, balance sheets of the 24 eligible units had been certified by Mr. PSRVV Surya Rao Chartered Accountant [Membership No. 202367], Partner at A. Ramachandra Rao & Co. [FRN no. 002857S], as true and fair. Also, the deposition of Shri. Madhusudhana Reddy Ambavaram, authorized signatory and the whole time director of the assessee company, vide his “affidavit”, 84 ITA TP 466/Hyd/2022 and 1301/Hyd/2024 Dodla Dairy Limited. dated 11.09.2025 placed on our record under Rule 10 of the Income tax (Appellate Tribunal) Rules, 1963, (Page Nos. 4 – 6), wherein, he has, inter alia, deposed that the balance sheets, profit & loss accounts of the eligible units were certified by Mr. PSRVV Surya Rao Chartered Accountant [Membership No. 202367], Partner at A. Ramachandra Rao & Co. [FRN no. 002857S] further fortifies the aforesaid factual position. We may herein observe that, as the assessee had filed profit and loss accounts and balance sheets for all its “eligible units” in a year-wise tabular form, which reflect the income and expenses attributable to each eligible unit, therefore, the statutory obligation cast upon the assessee company for claiming deduction under Section 80IB(11A) of the Act r.w. Rule 18BBB of the Income tax Rules, 1963 is found to be duly complied. We, thus, are of the considered view that as the assessee company had furnished separate reports in “Form 10CCBs” for all its eligible units, i.e., chilling centers (the fact of filing of which as observed by us hereinabove is to be verified by the AO), which were accompanied by the Profit and loss accounts, balance sheets of the said respective units, in a year-wise tabulated form, thus, it had complied 85 ITA TP 466/Hyd/2022 and 1301/Hyd/2024 Dodla Dairy Limited. with the obligation that was cast upon it for claiming deduction u/s 80IB(11A) r.w Rule 18BBB of the Income Tax Rules, 1962.

As we have in terms of our aforesaid deliberations found the claim of the assessee company for deduction u/s 80IB(11A) of the Act in order, though subject to the verification by the A.O. that the “Forms 10CCB” of all the 24 units were furnished by the assessee company, therefore, we refrain from dealing with its alternative claim for deduction w.r.t its plant at “Indragi”, which, thus, is left open.

Apropos the observation of the DRP that as Section 80IB(11A) of the Act contemplates deduction of the profits and gains “derived from” the eligible unit, but the assessee’s method of allocating profits based on third party costs cannot be considered as profits derived from its eligible units, we are unable to concur with the same. As the profits of the “eligible units” of the assessee company, i.e., the chilling centers form the first degree source of their eligible income, therefore, we are unable to comprehend that as to how the same does not fall within the meaning of “derived from” the said respective 86 ITA TP 466/Hyd/2022 and 1301/Hyd/2024 Dodla Dairy Limited. eligible units, as observed by the DRP. The Grounds of appeal Nos. 2 to 8 are allowed in terms of our aforesaid observations.

The Ld. AR submitted that, as the assessee company during the subject year had sufficient interest-free funds to source the 87 ITA TP 466/Hyd/2022 and 1301/Hyd/2024 Dodla Dairy Limited. investment in the exempt income yielding investments of Rs. 66.96 crore, therefore, no disallowance of any part of the expenditure was called for u/s. 14A read with Rule 8D, in its hands.

We have thoughtfully considered the contentions advanced by the Ld. AR and are unable to persuade ourselves to subscribe to the same. As the A.O. had apparently made the disallowance u/s 14A read with Rule 8D(2)(iii), i.e., at 1% of the closing investments of Rs. 66.96 crores, therefore, we are unable to concur with the Ld. AR that the availability of interest-free funds/surplus with the assessee company to source the investments will justify its claim that no disallowance was called for in its case. In our view, as the disallowance u/s. 14A had been worked out by the A.O. by attributing part of the administrative expenses as having been incurred in the context of the investments made by the assessee company for earning exempt income, therefore, its claim that no such disallowance was called for in its case being devoid and bereft of any substance is accordingly rejected.

However, as the assessee company had, during the subject year earned an exempt income of Rs. 39,05,165/-, therefore, we are of the firm conviction that the disallowance in its case u/s. 14A could not have exceeded the amount of the exempt income so earned. Our aforesaid view can safely be gathered from the judgments of the Hon’ble High Court of Delhi in the case of, viz. (i). Pr. CIT Vs. McDonalds India Pvt. Ltd., dated 22.10.2018; (ii). Cheminvest Vs. CIT (2015) 378 ITR 33 ((Delhi); (iii). CIT Vs. Holicim India (P) Ltd. (2015) 57 taxmann.com 28 (Delhi); (iv). Joint Investments Pvt. Ltd. Vs. CIT (2015) 372 ITR 694 (Delhi); (v). CIT Vs. Takisha Engg. India Ltd. (2015) 370 ITR 338 (Delhi); and (vi). Pr. CIT Vs. Caraf Builders & Constructions (P) Ltd.

We thus, in terms of our aforesaid deliberations, direct the A.O. to restrict the disallowance u/s.14A read with Rule 8D, to the extent of the exempt income earned by the assessee company during the subject year, i.e., Rs. 39,05,165/-. The Grounds of appeal Nos. 10 to 12 are partly allowed as above.

We have thoughtfully considered the aforesaid contentions of the Ld. AR and find substance in the same. Admittedly, it is a matter of fact discernible from the record that the assessee company, during the subject year, had sufficient interest-free funds available with it to source the loan of Rs. 1.25 crore that was advanced to its Managing Director. We, thus, are of the firm conviction that in light of the availability of sufficient interest-free funds and surplus with the assessee company, which could safely be related to the amount of Rs. 1.25 crore (supra) that was advanced to its Managing Director, there was no justification for the A.O. to have concluded that part of the interest bearing funds raised by the assessee company were diverted for advancing the loan at a discounted rate, i.e.,@ 9% to its Managing Director and work out the disallowance of the differential interest @ 2% on the amount so advanced. Our aforesaid conviction 91 ITA TP 466/Hyd/2022 and 1301/Hyd/2024 Dodla Dairy Limited. is fortified by the judgment of the Hon'ble High Court of Bombay in the case of CIT Vs. Reliance Utilities and Power Ltd. (2009) 313 ITR 340 (Bombay). In the aforesaid case, the Hon'ble High Court, had observed that if there were funds available, both interest- free, and overdraft/loans were also taken, then a presumption would arise that the investments made by the assessee company would be out of interest-free funds generated or available with the company, if the interest-free funds were sufficient to meet the investments. We thus, in terms of our aforesaid deliberations, direct the A.O. to vacate the disallowance of Rs. 2,08,333/- (supra) that had been sustained by the DRP. The Ground of appeal no. 13 is allowed.

On a perusal of the assessment order, we find that the assessee company had in its return of income for A.Y. 2018-19 raised the claim for deduction u/s. 80JJAA of Rs. 71,42,874/-.

Before proceeding further, we deem it apposite to cull out Section 80JJAA for the better understanding of the controversy before us, which reads as under:

On a perusal of Section 80JJAA of the Act, we find that the same contemplates that where the gross total income of an assessee to whom section 44AB applies, includes any profits and gains derived from business, there shall, subject to the conditions specified in sub-section (2), be allowed a deduction of an amount equal to thirty per cent of additional employee cost incurred in the course of such business in the previous year, for three assessment years including the assessment year relevant to the previous year in which such employment is provided.

The Ld. AR had submitted that the assessee company had erroneously raised the claim for deduction u/s. 80JJAA of Rs. 71,42,874/-. Elaborating further on his contention, the Ld. AR, submitted that the assessee company during the subject year was entitled for the deduction u/s. 80JJAA of Rs. 58,77,544, which comprises of, viz. (i). 30% of the additional wages of Rs. 1,18,90,200/- paid by the assessee company in A.Y. 2017-18: Rs. 96 ITA TP 466/Hyd/2022 and 1301/Hyd/2024 Dodla Dairy Limited.

We have thoughtfully considered the contentions of the Ld. AR, and find substance in the same. In our considered view, though the assessee company had in its “Form 10DA” raised the claim of deduction for the year under consideration, i.e., A.Y. 2018-19, @ 30% of the additional wages of Rs. 77,01,612/- paid/payable for the subject year, i.e., at Rs. 23,10,484/-, but had inadvertently mentioned the same in its return of income at Rs.35,75,814/-. Also, we find substance in the Ld. AR's claim that it was entitled for the claim of deduction of an amount of Rs. 35,65,060/- that was allowed by the A.O. in the immediately preceding year, i.e., A.Y. 2017-18, being the second year (out of 3 years in which the same is allowable). However, as the aforesaid claim of the assessee company will require factual verification, therefore, we direct the A.O. to re-adjudicate the issue and, after carrying out necessary verification, re-quantify the claim of the assessee company for deduction u/s 80JJA of the Act. The Ground of appeal

As nothing has been averred in the context of Grounds of appeal Nos. 1 & 14, therefore, the same are dismissed as not pressed.

Resultantly, the appeal filed by the assessee company is partly allowed in terms of our aforesaid observations.

We shall now take up the assessee's appeal for AY 2021-2022. At the threshold of hearing of the appeal, we may herein observe that the solitary issue involved in the present appeal pertains to the disallowance of the assessee's claim for deduction u/s. 80IB(11A) of Rs. 38,77,30,867/- by the AO/DRP.

The learned Authorized Representatives of both parties were at consensus on the issue that the facts and the issue leading to the disallowance u/s. 80IB(11A) of Rs. 38.77 crores (approx.) in the 99 ITA TP 466/Hyd/2022 and 1301/Hyd/2024 Dodla Dairy Limited. present appeal remains the same as was there in the assessee's appeal for A.Y. 2018-19 in IT(TP)A No. 466/Hyd/2022.

We have perused the observations of the lower authorities and concur with the Ld. AR that the solitary issue involved in the present appeal, i.e., entitlement of the assessee company for claiming deduction u/s. 80IB(11A) of the Act during the subject year, remains the same as was there in its aforementioned appeal in IT(TP)A No.466/Hyd/2022 for A.Y 2018-19.

As the issue involved in the present appeal had been deliberated by us at length while dealing with the aforementioned appeal of the assessee company for A.Y 2018-19 in IT(TP)A No. 466/Hyd/2022, therefore, though our order therein passed shall apply mutatis mutandis for disposing of the captioned appeal for A.Y 2021-2022, but for the sake of clarity, we deem it apposite to hereinafter deal with the muti facet aspects pertaining to the said common issue in the backdrop of the specific facts involved in the case of the assessee company for the present year, i.e., AY 2021- 22. 100 ITA TP 466/Hyd/2022 and 1301/Hyd/2024 Dodla Dairy Limited.

We, in terms of our observations recorded while disposing of the assessee’s appeal for AY 2018-19 in ITA TP 466/Hyd/2022, are of a firm conviction that as the chilling units, i.e., eligible units of the assessee company had carried out inter-unit transfer of milk to the processing units as per the prevailing market value, a fact which has not been dislodged by the department either during the assessment or in the course of the proceedings before us, therefore, are unable to concur with the view taken by the A.O/TPO, who has held the arm’s length price of the inter-unit transfer at Rs. Nil and declined the claim of the eligible units for deduction u/s 80IB(11A) of the Act.

As the claim of the assessee company, viz. (i). that it had as per Rule 18BBB got its accounts audited as required u/s 80IB(11A) of the Act r.w. Section 80IA(7) and furnished the audit reports of all its eligible units could not safely be gathered from the record, therefore, a perusal of our record/order sheet noting reveals that the assessee company was called upon to substantiate the same. Further, the Ld. CIT-DR was also directed to obtain a report from the AO regarding the filing of “Form 10CCBs” by the assessee company 101 ITA TP 466/Hyd/2022 and 1301/Hyd/2024 Dodla Dairy Limited. in respect of its eligible units and verify whether the same were digitally signed/signed or not and whether or not proper acknowledgement numbers have been generated.

As is discernible from the record, it transpires that the assessee company in compliance to the directions that were earlier issued by the Tribunal, vide its letter dated 11.09.2025 filed a “Chart” (Page 3 of compilation dated 11.09.2025), wherein it has provided the details of the acknowledgement numbers of “Form 10CCB’s” furnished in case of its 31 eligible units, viz. (i) 29 “chilling centres”; and (ii). 2 “processing centres” situated at “Indragi” and “Gundrampally”. Also, the assessee company had enclosed the ‘Form 10CCBs” of the said 31 eligible units, Page 7 to 217 (bearing the digital signatures of its auditor, viz. Shri. Jayanth Srinivas Ganji) mentioned in the “Chart” (supra) against which it had claimed deduction u/s 80IB(11A) aggregating to Rs. 38,77,30,867/-; (iii). copies of the separate profit & loss accounts and balance sheets of the 31 eligible units (Page Nos. 225 – 286); and (iv). computation of 102 ITA TP 466/Hyd/2022 and 1301/Hyd/2024 Dodla Dairy Limited. deduction u/s 80IB(11A) of 31 eligible units as mentioned in the “Chart” (Page Nos. 287 – 293).

Also, we find that Shri. Madhusudhana Reddy Ambavaram, authorized signatory and the whole time director of the assessee company, had filed before us an “affidavit”, dated 11.09.2025 in accordance with Rule 10 of the Income tax (Appellate Tribunal) Rules, 1963, Page Nos. 4 – 6). It is deposed by Shri. Madhusudhana Reddy Ambavaram (supra) in his “affidavit”, viz. (i). that the assessee company had filed its return of income for A.Y 2021-22 on 23.02.2022, declaring a total taxable income of Rs. 133.12 crores and had claimed deduction u/s 80IB(11A) of Rs. 38.77 crores, pertaining to the profits of its 31 eligible units which included both “chilling centres” and “processing plants”; (ii). that the “Form 10CCBs” filed as per Rule 18BBB of the Income tax Rules, 1962, for each of the 31 eligible units claiming deduction under Section 80IB(11A) of the Act, were duly filed online by Mr. G. Jayanth Srinivas, Chartered Accountant [Membership No. 251026], Partner at G. Jayanth & Associates [FRN no. 021457S]; (iii). that the signed 103 ITA TP 466/Hyd/2022 and 1301/Hyd/2024 Dodla Dairy Limited. copies of all the “Form 10CCBs” downloaded from the Income-tax e-filing portal (along with the acknowledgement numbers) were being enclosed as “Annexure A”; and (iii). that balance sheets, profit & loss statements and the computations evidencing the deductions claimed for each of the eligible units were also certified by Mr. G. Jayanth Srinivas, Chartered Accountant [Membership No. 251026], Partner at G. Jayanth & Associates [FRN no. 021457S], as true and fair, and copies whereof were being annexed hereto marked as Annexure B and C.

Also, we find that the revenue on the other hand has placed on record a report dated 08.09.2025 of the Dy. CIT-8(1), Hyderabad, wherein it is stated by him that though the “Form 10CCBs” of 23 eligible units (copies enclosed), viz. (i). 21 “Chilling centers”; and (ii). 2 plants for the subject year, i.e. A.Y 2021-22 are available in the system, but some of the forms are neither digitally signed nor acknowledgement number are printed on them.

We have given thoughtful consideration to the issue in hand, i.e., as to whether or not the assessee company had filed the audit 104 ITA TP 466/Hyd/2022 and 1301/Hyd/2024 Dodla Dairy Limited. reports in “Form 10CCB” r.w Rule 18BBB of its 31 eligible units (as per “Chart”) regarding which it had claimed deduction under Section 80IB(11A) of Rs. 38,77,30,867/-. On a perusal of the “Form 10CCBs” of the 31 eligible units (digitally signed by the chartered accountant) alongwith the respective acknowledgement numbers endorsed on them evidencing the filing of the same, as have been placed on our record by the assessee company, which is supported by the “affidavit” of Shri. Madhusudhana Reddy Ambavaram, authorized signatory and the whole time director of the assessee company, we are of a firm conviction that the assessee company had complied with the statutory obligation that was cast upon it to furnish the audit reports in “Form 10CCBs” of each of its 31 eligible units. At the same time, we find that the A.O., i.e., Dy. CIT, Circle 8(1), Hyderabad, has vide his report dated 08.09.2025, claimed that only 23 “Form 10CCBs” of the eligible units of the assessee company are available in the system, which too are neither digitally signed nor bear the acknowledgement numbers on them. Although the fact that the “Form 10CCBs” of the 31 eligible units that have been filed by the assessee company bear the respective 105 ITA TP 466/Hyd/2022 and 1301/Hyd/2024 Dodla Dairy Limited. acknowledgement numbers and are found to be digitally signed by its chartered accountant, thus, dislodges the aforesaid claim of the A.O., but considering the fact that the report filed by the A.O states facts to the contrary, therefore, we are of the considered view that for the limited purpose of verifying the claim of the assessee company that it had filed “Form 10CCBs” of the 31 eligible units regarding which deduction u/s 80IB(11A) of Rs. 38,77,30,867/- have been claimed, the matter, in all fairness, be set aside to the file of the Jurisdictional Assessing Officer (JAO), who is directed to verify the aforesaid factual position regarding filing of “Form 10CCBs” by the assessee company. In case the claim of the assessee company is found in order, then the adverse inferences drawn in the hands of the assessee company regarding its claim for deduction u/s 80IB(11A) of the Act, on the said count, shall stand vacated.

As we have in terms of our aforesaid deliberations found the claim of the assessee company for deduction u/s 80IB(11A) of the Act in order, though subject to the verification by the A.O. that the “Forms 10CCB” of all the 31 units were furnished by the assessee 106 ITA TP 466/Hyd/2022 and 1301/Hyd/2024 Dodla Dairy Limited. company, therefore, we refrain from adverting to and adjudicating the alternative contention of the assessee company regarding its units at Indragiri and Gundrampally, which, thus are left open. The Ground of appeal No. 3 is allowed in terms of our aforesaid observations.

As nothing has been averred in the context of Grounds of appeal Nos. 1 & 4, therefore, the same are dismissed as not pressed.

Resultantly, the appeal filed by the assessee company is partly allowed in terms of our aforesaid observations.

To sum up, both the appeals of assessee company are partly allowed in terms of our aforesaid observations.