SUSHEE INFRA & MINING LIMITED,HYDERABAD vs. ACIT., CENTRAL CIRCLE-2(2), HYDERABAD

3 ITA.No.1390 /Hyd./2024 alleging that the Assessee earned more than 'ordinary profits in respect of the eligible unit of the Assessee and its AE. d. not appreciating that none of the conditions set out in section 92C(3) of the Act are satisfied in the present case. e. disregarding the arm's length price (ALP) as determined by the Assessee in the Transfer Pricing (TP) documentation maintained in terms of section 92D of the Act read with Rule 10D of the Income-tax Rules, 1962 (‘Rules’). f. modifying the comparability analysis in the TP documentation and in conducting a fresh comparability search based on application of additional filters in determining ALP. g. including certain companies in the final comparable set that are not comparable to the Assessee in terms of functions performed, assets employed and risks assumed.

4 ITA.No.1390 /Hyd./2024 d. not appreciating that none of the conditions set out in section 92C(3) of the Act are satisfied in the present case. e. disregarding the arm's length price ('ALP") as determined by the Assessee in the Transfer Pricing (TP) documentation maintained in terms of section 92D of the Act read with Rule 100 of the Income-tax Rules, 1962 ('Rules'). f. modifying the comparability analysis in the TP documentation and in conducting a fresh comparability search based on application of additional revised filters in determining ALP. g. including certain companies in the final comparable set that are not comparable to the Assessee in terms of functions performed, assets employed and risks assumed 5. That on the facts and circumstances of the case, the Ld. AO has erred in not granting credit under Section 115JAA of the Act amounting to Rs.10,93,41,440 6. That on the facts and circumstances of the case, the Ld. AO has erred in considering the TDS at Rs.9,42,69,564 as against Rs.10,21,50,744 7. That on the facts and circumstances of the case, the Ld. AO erred in the levy of the interest under Section 234A and 234B of the Act 8. The Appellant craves leave to add, amend, alter, vary and/or withdraw any or all the above grounds of appeal. Each of the Grounds are without prejudice to each other.”

3. Ground No.1 is regarding validity of assessment order passed by the Assessing Officer being barred by limitation provided u/sec.153 of the Income Tax Act, 1961 [in short “the Act”].

5 ITA.No.1390 /Hyd./2024 4. The learned AR of the Assessee submitted that, the Assessing Officer has passed the impugned order beyond the time limit prescribed u/sec.153(4) of the Act. Therefore, in view of the Judgment of Hon’ble Madras High Court in the case of CIT vs., Roca Bathroom Products (P) Ltd., [2022] 445 ITR 537 (Mad.) the assessment order is invalid and void abinitio.

6 ITA.No.1390 /Hyd./2024 adjudication before the Hon’ble Supreme Court, the same is kept open and Assessing Officer is directed to give effect to the Judgment of Hon’ble Supreme Court in the case of Roca Bathroom Products (P) Ltd., (supra) as per the outcome of the proceedings pending before the Hon’ble Supreme Court.

No.2 is regarding disallowance of claim of deduction u/sec.80IA of the Income Tax Act, 1961. The learned AR of the Assessee submitted that, the assessee has undertaken certain infrastructure projects under sub-contract from it’s related party being Joint Venture [in short “JV”] and Special Purpose Vehicle [in short “SPV”] which were awarded by the State Government in favour of the related party and the same were executed by the assessee under the sub-contract between the assessee and the related party. Thus, learned AR of the Assessee submitted that the assessee has claimed deduction u/sec.80IA of the Act in respect of the project which were eligible for the deduction. However, the Assessing Officer and the learned DRP has disallowed the claim on the ground that the assessee has not entered into any 7. ITA.No.1390 /Hyd./2024 agreement with the Government as a mandatory condition u/sec.80IA(4) of the Income Tax Act, 1961. The learned AR has submitted that this claim of the assessee was considered and allowed by this Tribunal in assessee’s own case for the assessment years 2008-2009 to 2014-2015. Therefore, this issue is covered by the earlier decisions of this Tribunal in assessee’s own case.

8 ITA.No.1390 /Hyd./2024 of Hon’ble Delhi High Court in the case of Pr. CIT-2 vs., M/s. Celebi Delhi Cargo Management India Pvt. Ltd., in ITA.No.619/2019, Dated 30.01.2025. He has relied upon the orders of the authorities below.

Sl.No. Name of the Site Self Capacity 80IA claim JVs/SPVs etc. Amount 1. Manipur Self Executed 8,05,27,769 2. Sushee Arunachal 142,85,10,227 SPV Highways Limited 3. Sushee Prasad JV Executed in JVs 14,37,87,788 Total 165,28,25,784 9.1. Out of these three projects, the first project is executed by the assessee itself as it was awarded to the assessee by the Government, whereas the other two projects were awarded to the related party of the assessee namely Sushee Arunachal Highways Limited and M/s. Sushee Prasad Joint Venture, respectively. These related parties, then sub-contracted these projects to the assessee for 9 ITA.No.1390 /Hyd./2024 execution. Thus, the assessee reported these transactions with two related parties as specified domestic transaction in the Form-3CEB report. At the outset, we note that the claim of deduction u/sec.80IA of the Act was already considered by this Tribunal in assessee’s own case for the preceding assessment years i.e., for the assessment years 2008-2009 to 2014-2015. However, the earlier order of the Tribunal would not help the case of assessee, if the projects are not the same which were the subject matter of the earlier assessment years and there is a subsequent amendment in the provisions of sec.80IA of the Act in the shape of 2nd proviso which reads as under :

“Provided further that nothing contained in this section shall apply to any enterprise which starts the development or operation and maintenance of the infrastructure facility on or after the 1st day of April, 2017.”

9.2. Thus, in absence of the clarity on the point whether these projects being the infrastructure facilities were started for development or operation and maintenance by the assessee on or after 1st April, 2017, no conclusive

10 ITA.No.1390 /Hyd./2024 finding can be given on this issue. Accordingly, this issue is remanded to the record of the Assessing Officer for verifying the relevant facts in terms of second proviso to sec.80IA(4) of the Income Tax Act, 1961 and then, decide this issue in accordance with law.

Name of the AE Nature of Amount (Rs.) MAM Adopted Transaction SUSHEE IVRCL 2558530275 Other Method ARUNACHAL CONTRACT HYWAYS REVENUE LIMITED SUSHEE CONTRACT 403052595 Other Method PRASAD JV REVENUE

12 ITA.No.1390 /Hyd./2024 apportionment of the expenditure, the TPO has proposed the TP adjustment in para11.2.4 to 13 as under :

“11.2.4. Final set of comparables considered by the TPO : As the taxpayer has not raised any objection against the comparable companies as proposed by the TPO in the show cause notice issued, the final set of comparable companies considered by the TPO is as mentioned in para. 10.2.5 above. 11.2.5. Computation of Arm's Length Price: The median of the weighted average Profit Level indicators is taken as the arm's length margin. Based on this, the arm's length price of the of the specified domestic transactions entered into with the associated enterprises (AE's) Le Sushee Arunachal Highways Limited is computed as under: Methodology : For the reasons discussed above, TNMM is taken as most appropriate method. Profit Level Indicator : Operating profit to operating cost as the Profit Level Indicator. Comparable: As discussed above Data used: Data pertaining to the FY 2020-21, FY 2019-20 and 2018-19 as mandated under Rule 10B (5),

13 ITA.No.1390 /Hyd./2024 Computation of Arm's Length Price: The median of the Profit Level indicators is taken as the arm's length margin.

Based on this, the arm's length price is computed as under: (Rs in lakhs) Operating cost of the eligible unit (OC) 2427.21 Operating Revenue of the eligible unit (OR) 4030.53 Operating Profit (OP) 1603.32 OP/OC 66.05% Arm's length margin 13.70% Arm's length price (ALP) (100+ALM) *OC 2759.73 Excess profit claimed/Adjustment (difference of ALP & OR) 1270.8

Accordingly, the sum of Rs.12,70,80,000/- is hereby suggested as adjustment in respect of Specified Domestic Transaction entered with the AE i.e Sushee Prasad JV.

12. The summary of total adjustment made on various specified domestic transactions are as under:

S.No. Nature of adjustment Adjustment (Rs.) 1. Specified Domestic Transactions entered with Sushee Arunachal Rs. 131,62,27,000/- Highways Ltd 2. Specified Domestic Transactions Rs. 12,70,80,000/- entered with Sushee Prasad JV Total Rs.144,33,07,000/-

14 ITA.No.1390 /Hyd./2024 13. Thus, the total TP adjustment on specified domestic transactions is computed at Rs.144,33,07,000/-. The Assessing Officer is required to rework the deduction u/s 801A of the taxpayer accordingly.”

15 ITA.No.1390 /Hyd./2024 and the same was transferred by the AE to the assessee, then, even under CUP, the transaction is at arm’s length and no adjustment is called for. The TPO has not determined the ALP on the revenue received by the assessee from AE, but, he has re-calculated the income of the assessee from the said project by re-allocating the cost between eligible entities and non-eligible entities. Further, the TPO has held that the excess profit claimed by the assessee is required to be adjusted and deduction u/sec.80IA to be denied on the said amount. Thus, the TPO has travelled beyond his jurisdiction while giving the finding on the claim of deduction u/sec.80IA of the Act and re- calculation of the profit of the assessee. Thus, he is submitted that the assessee produced all the relevant record including records pertaining to correspondence between the AE and the Government, under which, there was a final settlement of the bills of the AE which was transferred to the assessee. Once the payment was settled between the AE and the Government and the same was transferred to the assessee, then, there is no question of any shifting of profit

16 ITA.No.1390 /Hyd./2024 or understatement of the profit by the assessee. Thus, he has contended that the addition made by the Assessing Officer on account of TP adjustment is unsustainable in the eye of law and liable to be deleted.

17 ITA.No.1390 /Hyd./2024 undertaken by the assessee under sub-contract from the AE. The very object of the Transfer Pricing proceedings is to determine the ALP and to ensure that the assessee should not shift it’s profit to the AE, whereas the TPO has proceeded in the reverse direction to re-calculate the profit of the assessee by disallowing the expenditure on the premise that the assessee has allocated/apportioned more expenditure to the non-eligible projects/enterprise and thereby, showing excess profit/income in respect of 80IA eligible units/enterprises. This is not the jurisdiction of the TPO to question the allocation of the expenditure between eligible and non-eligible units of the assessee. The TPO ought to have examine the price of the transactions with the related party as reported being specified domestic transactions and then, to determine the ALP. Undisputedly, the assessee has received sub-contract receipts from the related parties as it was received from the Government being the principal contractor for execution of the infrastructure facilities. Though, the contract was originally awarded to the related party/AE of the assessee by the 18 ITA.No.1390 /Hyd./2024 Government, Ministry of Road Transport and Highways, however, the infrastructure projects were executed by the assessee under sub-contract with the related party and, therefore, the entire receipt from the Government was passed-on to the assessee. Therefore, once the entire receipt was transferred by the AE to the assessee without any mark-up or reduction, then, the price between the Government and the AE is a Comparable Uncontrolled Price and the same is also received by the assessee amounting to ALP. Once there is a Comparable Uncontrolled Price under the same contract, then, the price received by the assessee from the AE cannot be questioned as not at arms’ length. It was an arrangement of back-to-back contract between the assessee and related party and, therefore, the price paid by the Government was passed-on by the AE to the assessee, which has executed the projects and thus, in our considered view, the said price received by the assessee is at arm’s length without having any scope of any shifting of profit to the AE. The entire proceedings conducted by the TPO is in the reverse directions to verify and ascertain that the 19 ITA.No.1390 /Hyd./2024 assessee has shown excessive profit from these projects by allocating more expenditure to the non-eligible units. That issue is completely beyond the scope of determination of ALP and subject matter of assessment. Once the TPO has found that assessee is showing more profit from these projects and the amount received from the AE is not in dispute, then, the claim of deduction u/sec.80IA of the Act being a separate matter and subject matter of the assessment proceedings, cannot be taken-up by the TPO. These benchmarking of specified domestic transactions by the assessee on the basis that the price received by the AE from the Government is an independent third party transaction and would be a Comparable Uncontrolled Price, then, we do not find any fault in the said benchmarking on behalf of the assessee. The TPO has rejected the said analysis and benchmarking done by the assessee on the ground that the computation of profit by assessee in respect of sec.80IA eligible unit, is not correct due to excess allocation of expenditure to the non-eligible unit. That issue is purely a corporate issue and will not change the price of 20 ITA.No.1390 /Hyd./2024 the specified domestic transactions. Thus, the approach of the TPO is beyond the Transfer Pricing Provisions of the Act. Accordingly, in view of the above facts and circumstances, we hold that rejection of the benchmarking done by assessee under CUP method on the part of the TPO and adopting ‘Another Method’ by the TPO is highly arbitrary and unjustified. The entire thrust of the TPO to reject the benchmarking of the assessee and adopting ‘Another Method’ was to re-allocate the cost/expenditure between the 80IA eligible units and non-eligible units and then, re- determined the financial results of each of the unit of the assessee instead of the reported financial results duly audited. Accordingly, the addition made by the Assessing Officer on account of TP adjustment is not sustainable and liable to be deleted. We order accordingly.

22. Both the learned AR for the Assessee and the Learned DR for the Revenue have fairly submitted that this is also a fresh ground raised by the assessee for the first time before the Tribunal and, therefore, it requires proper

22 ITA.No.1390 /Hyd./2024 verification at the level of the Assessing Officer. Therefore, in the given facts and circumstances of the case, we find that the instant issue requires proper verification at the level of the Assessing Officer. Accordingly, the Assessing Officer is directed to verify and examine this claim of short credit on account of TDS as raised by the assessee.

Order pronounced in the open Court on 24.09.2025.