DCM SHRIRAM INDUSTRIS LTD,NEW DELHI vs. DCIT CIRCLE-7(1), NEW DELHI

Briefly the facts are, the assessee is a company stated to be engaged in the business of manufacturing of sugar, industrial fiber, alcohol, power and organic and fine chemicals. The assessee filed its return of income for A.Y. 2018-19 declaring total income at Rs. 13,25,33,541/- as per normal provisions of the Act and book profits of Rs. 68,20,48,545/- as per the provisions of section 115JB of the Act. The case of the assessee was taken up for scrutiny and a reference under section 92CA of the Act was made to the TPO for determination of ALP in respect of specified domestic transactions. Certain transfer pricing adjustment as well non-transfer pricing additions were made in the final assessment order, which are agitated by the appellant before us in the following concise grounds of appeal. “1. The Ld. AO has erred in law and on facts, and in the circumstances of the appellant's case in making an addition/adjustment of 107,01,24,795/- on account of transfer pricing issue as per the order of the transfer pricing officer (TPO) u/s 92CA(3) of the Act. 2. That the Ld. AO/TPO has erred in not entertaining/allowing the following additional claims of the assessee raised during the course of assessment proceedings: a. With respect to the transfer pricing issues in relation to the re- determination of value of steam transferred and consequent enhancement of deduction u/s 80-IA of the Act. b. With respect to the corporate tax issues in relation to (i) treating the sale of renewable energy certificates (RECs) as revenue receipts and (ii) by not reversing the inadvertent suo-moto disallowance made by the assessee u/s 14A of the Act. 3. That the final assessment order u/s 143(3) r.w.s. 144C(13) of the Act dated 26th July, 2022 is vitiated being bad in law being passed in 3

That without prejudice to above grounds, the Ld. DRP/TPO and consequently the Id. AO have erred in law and facts and in circumstances of the case in making an adjustment of ₹107,01,24,795/- in respect of specified domestic transaction of transfer of steam by eligible power unit to non-eligible unit [at its cost of production] by treating its arm's length price /cost of production at NIL on wholly erroneous, superficial and arbitrary grounds. 6. That the Ld. DRP/TPO and consequently the Ld. AO have erred in law and on facts and circumstances of the case in not following rule of consistency by disregarding that same methodology has been followed by appellant since assessment year 2006-07 which has also been approved by the Id. CIT(A) in assessee's own case for A.Υ. 2015-16. 7. It is prayed before Hon'ble Tribunal that adjustment made by the Ld. AO in respect of transfer of steam may kindly be deleted by upholding the assessee's approach of transferring the steam at its cost of production. Enhanced Claim raised during the assessment proceedings as well as before the Id. DRP 8. That the Id. TPO and consequently the Ld. AO have erred in not entertaining the submissions of assessee to re-determine the arm's length price of steam transferred from eligible unit to non eligible units at ₹4,57,73,00,068/- [instead at its cost of production at ₹1,07,01,24,795/-], which is computed by multiplying the equivalent quantity of such steam in terms of unit of electricity (KWH) as certified by the Chartered Engineer with the ALP rate of electricity. 4

That the Id. TPO and consequently the Id. AO have erred in not allowing the consequential enhancement of deduction u/s 80-IA of the Act claimed by the assessee from ₹47,78,80,266/- to ₹3,98,50,55,539/-, by considering the equivalent value of steam as determined above in ground no. 8 (viz. 24,57,73,00,068/-) and also limiting the same to GTI. GROUNDS OF APPEAL WITH RESPECT TO THE CORPORATE TAX ISSUES Claim made during the assessment proceedings and before the Id. DRP Sale Proceeds of Renewable Energy Certificates (RECs) inadvertently suo-moto offered to tax by the assessee instead of treating the same as Capital receipts not liable to tax-20,76,97,397/- 10. That the Id. DRP/AO has erred in law and on the facts and in the circumstances of the case, by disregarding the additional allowance/claim raised by the assessee during the course of assessment proceedings treating the sale proceeds of renewable energy certificates (RECs) amounting to 220,76,97.397/-not liable to tax being capital receipts in nature. 11. Without prejudice to above, the Ld. DRP and consequently the Ld. AO have erred in law by not entertaining the alternate claim of the assessee that REC receipts anyway would from part of eligible power plant of the assessee and therefore erred in not allowing the deduction u/s 80-IA in respect such REC receipts. Taxability under MAT u/s 115JB 12. That the Id. DRP/Id. AO has erred in not granting the claim of the assessee that profit on sale proceeds of renewable energy certificates (RECs) amounting to 20,76,97,397/- which is in the nature of capital receipt/profits should also be excluded, while computing the book profits u/s 115JB of the Act. Reversal of Suo-moto disallowance made by the assessee u/s 14A of the Act of ₹6,13,402/- 13. The Ld. DRP/AO have erred in law and on facts of the assessee's case in not allowing the additional allowance/claim of the assessee made during the course of assessment proceedings, that suo-moto disallowance of ₹6,13,402/- made by assessee u/s 14A of Act be reversed both from the 5

2 That the Id. AO has erred in taking an imaginary figure of ₹68,32,26,303/-as book profits u/s 115JB of the Act while the correct book profits as per return of income is ₹68,20,48,545/-. 1.3 That the Id. AO has erred in raising an incorrect demand on account of DDT payable [1,41,67,650/-] and interest u/s 115P [268,00,472/-] completely ignoring that DDT amounting to ₹1,41,67,650/- has been duly paid by the assessee on time. Other grounds 15. That the penalty proceedings initiated u/s 270A of the Act are on wholly illegal and untenable grounds since there was no concealment of any income nor submission of inaccurate particulars of income, nor any other default according to law by the assessee. 16. That the Ld. A.O has erred in law in charging interest u/s 234B of the Act on wholly illegal and untenable grounds. 6

That each ground of objection is independent and without prejudice to other grounds of appeal raised herein. 18. The appellate craves the leave to add, amend or alter all or any of the grounds of appeal.”

These are general and summarized version of specific grounds which are dealt along with the other specific grounds as below and hence are not adjudicated and are hereby dismissed.

Apropos the ground no.5 to 7, the issue involved is transfer pricing adjustment of Rs 1,07,01,24,795/- to the arm’s length price (ALP) of the specified domestic transaction relating to transfer of steam from eligible captive power unit to non-eligible units. The assessee applied ‘Other Method’ as the most appropriate method to benchmark the said transaction of transfer of steam at its cost of production without any mark-up on the same.

However, the TPO disregarded the methodology of the assessee and re- determined the ALP of the steam to NIL on following grounds: - 7

During the course of hearing, ld. AR at the very outset submitted that the issue is fully covered by assesssee’s own order of this Tribunal for AY 2016-17 (ITA No. 539/Del/2021) and AY 2017-18 (ITA No. 1000/Del/2022) [PB Pg.no 401 and 402] wherein the identical issue has been allowed by this tribunal in assessee’s favour and consequential TP adjustment on steam was deleted. The relevant extract of ITAT’s order is reproduced herewith as follows: -

We have considered rival submissions and perused the materials on record. As could be seen from the materials on record, the TP adjustments have been made in the final assessment orders by stating that against the decision of Commissioner (Appeals) in assessment year 2015-16 the department has preferred appeal. However, in the affidavit filed before us, the Assessing Officer has admitted that no appeal has been filed by the department against the order of Commissioner (Appeals) in assessment year 2015-16. That being the factual position, in terms with the direction of learned DRP no addition 9

The ld. AR pointed out that while adjudicating this issue of transfer of steam in the current year, the DRP took note of the fact that in assessee’s own case in assessment year 2015-16, learned Commissioner (Appeals) has decided the issue in favour of the assessee [Pg no 328-333 of PB]. Accordingly, ld. DRP directed the Assessing Officer to verify the fact whether any appeal against the decision of Commissioner (Appeals) has been preferred before the higher forum or not and it was also directed that in case it is found that no appeal has been preferred by the department against the CIT(A) order, the adjustment should be deleted. The ld. AR emphasised the DRP directions which are given at Para no 3.3.3 of the said directions and reproduced for the sake of reference:

It was strongly contented by the ld. AR that while completing the final assessment, the Assessing Officer / Transfer pricing officer has violated the said binding directions of the DRP by retaining the above adjustment in the TPO appeal giving effect order as well as in the final assessment order. The ld. AR strongly objected this action of lower authorities in not deleting the adjustments inspite of the binding directions of the DRP as per provisions of section 144C(13) of the Act.

The case of ld. AR is that it is an undisputed fact that no appeal has been preferred by the tax department against the CIT-(A)’s order for AY 2015-16. This fact is also supported by the findings of the coordinate bench of the ITAT in its orders for preceding assessment years in appellant’s own case. Ld. AR further referred the assessing officer’s affidavit placed on record. In the affidavit filed [Pg no 425-427 of PB], the Assessing Officer has admitted that no appeal has been filed by the department against the order of CIT-(A) in AY 2015-16. 10. On the other hand, ld. DR submitted that no appeal could have been filed by the department against the CIT-(A) order for AY 2015-16 as said appeal was dismissed by the CIT(A) on this particular issue. Referring to the finding of CIT(A) on page no 58 and 59 of CIT-(A)’s order, the ld. DR stated that as borne out of the facts in that year, the assessee did not claim any deduction u/s 80-IA as its gross total income was negative in that particular year, therefore, the appeal of the assessee has been dismissed as infructuous in nature. It was further stated that, no appeal could have been filed before ITAT as no tax effect was involved in that particular appeal. The ld. DR also relied 11 11. In the rejoinder, ld. AR reiterated that scope of lis is limited to the examination whether the assessing officer has correctly followed the directions of the DRP or not. According to the ld. AR the assessing officer as well TPO has abhorrently flouted the binding directions of the DRP, as inspite of undisputed position that no appeal has been filed against the CIT(A)’ order for AY 2015-16, the adjustment has been incorrectly retained. Moreover, the tax authorities have themselves admitted by way of affidavit filed in the earlier years before this bench that no such appeal has been filed and taking cognizance of the affidavit in the preceding assessment years, the ITAT has already allowed this issue in the favour the assessee [PB page no 401-402].

As regards, the finding of CIT-(A) in its order for AY 2015-16, the ld. AR in its rejoinder submitted that CIT(A) has dealt this issue on its merits. The ld. AR referred to CIT-(A)’s order wherein the finding on merits of issue was given before dismissing the appeal on technical ground, as no deduction was actually claimed by the assessee.

Lastly, the ld. AR relied upon the recent judgement of Hon’ble High Court of Delhi (ITA no 566/2023) in assessee’s group company case namely 12

It was also informed that no adjustment on account of transfer of steam has been made by TPO in AY 2020-21 and the issue has been accepted at that level. It was thus submitted that adjustment on account transfer of steam should be deleted following the rule of consistency. Several judgements as listed below were relied upon by the ld.AR in support of this contention: - a. CIT v. GE India Technology Centre Pvt. Ltd. [2020-TII-50-HC-KAR- TP] b. Godrej & Boyce Manufacturing Company Limited [TS-176-SC-2017] 13

Considered the rival submissions and perused the material placed on record. Undisputedly, the issue is covered by the orders of coordinate bench in assessee’s own case for preceding AY 2016-17 and 2017-18 where on similar facts, the addition made on transfer of steam was deleted. The limited issue is that in the year under consideration, the DRP have given same directions as earlier years directing the Assessing Officer to verify whether any appeal against the decision of Commissioner (Appeals) for AY 2015-16 has been preferred before the higher forum or not and it was also directed that in case it is found that no appeal has been preferred by the revenue against the CIT(A) order, the adjustment should be deleted. It is undisputed in light of revenue’s own admission in affidavit placed on record no appeal has been filed by the revenue against the order of CIT(A) for AY 2015-16. It is not apprehensible that once it is admitted that no appeal has been filed by the revenue then how it can ignore the binding directions of DRP. Inspite of clear directions of DRP, the assessing officer has still made the adjustment contrary to such directions. This is clear transgression of mandate of scheme of dispute resolution provided u/s 144C of the Act. Sub-section (10) of section 144C of the Act provides that every direction of DRP is binding upon 14

In view of above facts, and respectfully following the decision of coordinate benches and judgment of Hon’ble High Court in case of sister company, the transfer pricing adjustment made in respect of transfer of steam is hereby deleted and hence grounds of appeal no.5 to 7 raised by the assessee in this respect are allowed.

The next issue which relates to above issue is, with reference to re- determination of ALP of steam transferred from eligible unit to non-eligible units and consequent enhancement of deduction under section 80IA of the Act. The contention raised is that assessee’s power plant has transferred the steam to non-eligible units at cost. However, based on the methodology accepted by the higher appellate authorities in various other cases, the ALP of the steam should be determined based on the value arrived at the converting the steam into equivalent quantity of electricity in Kwh and thereafter multiply the equivalent quantity of electricity with the market rate of electricity. The conversion of steam into equivalent quantity of electricity is done on the basis of certificate obtained from chartered engineer. 18. It was submitted by the AR that this issue was raised by the assessee in course of proceedings before TPO and AO. Even, before DRP, a specific plea was raised to consider the enhanced claim of deduction against which DRP directed the AO to pass a speaking order in this regard. The ld. TPO/AO chose to remain silent on the issue of re-determination of ALP and consequential enhancement of deduction u/s 80-IA and hence ignored the directions of DRP which is again in violation of section 144C(13) of the Act. 16

During the course of hearing, the ld. AR submitted that this issue is covered by assessee’s own order for AY 2016-17 (ITA No. 539/Del/2021) and AY 2017-18 (ITA No. 1000/Del/2022) (PB pg no 402-403) wherein on identical issue, the matter was remitted back by the ITAT to the file of the Assessing officer to re-determine the ALP of the said transaction with consequential enhancement of deduction. The relevant extract of ITAT’s order is reproduced herewith as follows: -

Having heard the parties and considering the fact that neither the Assessing Officer, nor learned DRP have examined this particular claim of the assessee, we are inclined to restore this issue to the file of 17

The ld. AR further relied upon judgements wherein this methodology to value steam expressed in terms of equivalent units of electricity was accepted and in addition placed reliance on the DRP direction in assessee’s group concern namely SRF Limited in AY 2016-17 wherein said methodology of determining the value of steam was propounded [PB Pg. no 392-396].

On the other hand, ld. DR countered the above claim of the assessee by first relying upon provisions of section 80-IA(5) and 80AC of the Act which provides that no deduction shall be allowed unless the such claim is raised by a return of income filed on or before the due date mentioned in section 139(1) of the Act. He further placed reliance on the various judgments as listed below to contend that no additional claim should be allowed to the assessee as such additional claim has not been claimed in the return of income filed u/s 139(1) of the Act but claimed before the lower tax authorities during the course of assessment proceeding for the first time: - a) Pr. CIT vs. Wipro Ltd. [2022] 140 taxmann.com 223/288 Taxman 491/446 ITR 1 (SC) b) Patel Brass Works Pvt. Ltd. Vs. ACIT [ITA no. 60/RJT/2020] 22. The ld. DR further placed reliance on Rule 18BBB along with the above cited judgements in support of its contentions. The relevant rule is reproduced herewith as follows: - “18BBB. (1) The report of the audit of the accounts of an assessee, which is required to be furnished under sub-section (7) of section 80- IA or sub-section (7) of section 80-I, except in the cases of multiplex theatres as defined in sub-section (7A) of section 80-IB or convention centres as defined in sub-section (7B) of section 80-IB or hospitals in rural areas as defined in sub-section (11B) of section 80-IB, shall be in Form No. 10CCB.

In the rejoinder, ld. AR however, distinguished its case by stating that all the above judgments and provisions of Act and rules are not applicable to the case in hand as the assessee has not claimed any new or fresh claim of deduction before the tax authorities but only the enhancement of claim of determination arising from the correct determination of ALP of the transaction of steam. It was further stated that such enhanced claim and 19

The ld. AR filed a separate note to distinguish the judgments cited by DR to contend that claim of 80-IA deduction was duly raised in the return of income originally filed before the due date of filing of return and now the assessee is only seeking the correction of claim already raised and hence, the judgments cited by DR is not applicable on the assessee by relying upon the following judicial precedents: - a) PCIT vs. Oracle (OFSS) BPO Services Ltd. [2019] 102 taxmann.com 396(Delhi)

The aforesaid position may be contrasted with Section 80-IA(7), and which is principally concerned with deductions that may be claimed and the Audit Report being made available for examination by the AO. In these writ petitions, we are in any case concerned solely with whether a failure to digitally upload the Audit Report could be said to be destructive. It is for the aforenoted reasons that we are inclined to hold that Wipro Limited (supra) is distinguishable and that it would be the principles enunciated in G.M. Knitting (supra) which would govern the present matters.”

The ld. AR further relied on the judicial precedent in the case of sister concern namely DCM Shriram Limited for AY 2016-17 (ITA no 704/Del/2021) wherein the coordinate bench of Tribunal had distinguished the ld. DR’s reliance on Wipro Ltd. (supra) as follows: - “47. Now by taking additional grounds of appeal, the assessee has made revised / additional claim of INR 2,99,49,20,010/- of deduction u/s 80 IA towards transfer of steam from eligible units to non-eligible units. The assessee has claimed that it is based on the order of Hon’ble DRP-II, New Delhi dated 26.03.2021 in case of group concerns M/s. SRF Ltd. for AY 2016-17 where the additional claim was considered and allowed by the Hon’ble DRP. The assessee’s claim is that the Hon’ble DRP while allowing the additional claim in the case of group concern M/s. SRF Ltd. placed reliance on the certificate issued by Chartered Engineer. As the Ld. DRP had issued directions only on 26.03.2021, it was not possible for the assessee to 22

Considered the rival submissions and perused the material placed on record. The issue is covered by the orders of coordinate bench in assessee’s own case for preceding AY 2016-17 and 2017-18 where on similar facts, the enhanced claim of deduction u/s 80-IA was restored to the file of Assessing Officer for verifying assessee’s claim and deciding the issue in accordance with law. The limited issue is that in year under consideration, the assessee raised its enhanced claim of deduction u/s 80-IA before ld. TPO/AO along with relevant documents to substantiate its enhanced claim. The ld. TPO/AO did not entertain the claim of the assessee and chose to remain silent in their respective orders. Aggrieved by this approach of lower authorities, assessee raised objections before ld. DRP where DRP gave directions directing the Assessing Officer to consider the submission of the assessee and pass a speaking order. However, the ld. TPO/AO again choose to ignore the 24

Further, as stated by the ld. AR, the coordinate bench in case of DCM Shriram Ltd. (ITA no 704/Del/2021) has in clear terms distinguished the judgment of supreme court in case of Wipro Limited (Supra) on the similar facts and issue.

Thus, in view of above facts, and respectfully following the decision of coordinate benches, we are inclined to restore this issue to the file of the Assessing Officer for verifying assessee’s claim and deciding the issue in accordance with law. However, the Assessing Officer is directed to provide reasonable opportunity of being heard to assessee. The grounds 8 and 9 are allowed for statistical purposes.

The next issue arising for consideration vide ground no. 10 to 12 is concerning the nature and character of receipts from sale of Renewable Energy Certificates (RECs), whether capital or revenue. During the year under consideration, the assessee received Rs. 20,76,97,397/- on account of sale of such REC’s which as per assessee was inadvertently treated as revenue receipt and the same was offered for tax by the assessee in AY 2018- 19. However, later during the proceeding before the assessing officer, the assessee following the ratio of the judgment of Hon'ble Andhra Pradesh High Court in the case of My Home Power Ltd ([(2014) 46 taxmann.com 314 (Andhra Pradesh)]), raised the claim to treat the same as capital receipt not liable to tax. The lower tax authorities did no entertain the above claim of the assessee. 30. Further, the DRP disposed of the claim of assessee by rejecting the same relying on its previous directions for the AY 2016-17 wherein the said claim was denied on the ground that department’s SLP in case of My Home Power Ltd. (Supra) has been admitted by the Supreme Court. Following the DRP directions, the AO rejected the claim of the assessee. 31. During the course of hearing, ld. AR highlighted that this issue of whether REC is a capital or revenue receipt is fully covered by assessee’s own case by ITAT for AY 2015-16 (ITA no. 1841/Del/2020), AY 2016-17 (ITA No. 26

We have perused the order passed by co-ordinate Bench of the Tribunal in assessee’s own case in ITA No.312/M/2019 for A.Y. 2015-16 order dated 24.05.2021 which is on identical issue and decided the same in favour of the assessee by following the decision rendered by Hon’ble Andhra Pradesh High Court in case of CIT vs. My Home Power Ltd. (2014) 365 ITR 082 (AP) by returning following findings: “7. Considered the submissions of the learned Counsel for both the parties and perused the material on record. While going through the judicial pronouncements relied upon by the learned Counsel for the assessee, we find that the issue for our adjudication is squarely covered by the aforesaid decisions relied upon by the learned Counsel wherein in one of the cases relied upon in CIT v/s My Home Power Ltd., [2014] 365 ITR 082 (AP) (supra) filed by the Revenue, the Hon’ble Andhra Pradesh High Court held that the Tribunal had factually found that Carbon Credit was not off–shoot of business but off–shoot of environmental concerns and no asset was generated in course of business but it was generated due to environment concerns. Further we find that the Hon’ble A.P. High Court agreed with the factual analysis as the assessee carried on business of power generation and Carbon Credit was not even directly linked with power generation. It is held that on sale of excess Carbon Credits income was received and the Tribunal correctly held that it is capital receipt and could not be a business receipt or income. 28

On the other hand, ld. DR placed reliance on a new section 115BBG of the Act which was inserted vide Finance Act, 2017 applicable from 01.04.2018 onwards which provides for taxation of carbon credits at the rate of 10%. Against this, the ld. AR in its rejoinder submitted that the said section applies only to carbon credits and not on RECs. It was further submitted by ld. AR that RECs maybe treated as akin to carbon credit but cannot be treated as same as carbon credits. The ld. AR also pointed out the explanation to newly inserted section 115BBG specifically provides the definition of carbon credits as reduction of one tonne of carbon dioxide emissions or emission of its equivalent gases which validated by the United Nations Framework on climate change and which can be traded in market at its prevailing market 31

Another issue connected with the above is whether the receipts from RECs, being in the nature of capital receipts, will form part of book profit computed under section 115JB of the Act? 34. The ld. AR submitted that the RECs being in the nature of the capital receipts shall not form part of book profit to be computed under section 115JB of the Act. For this, ld. AR again relied upon the order of Tribunal in assesse’s own case for AY 2016-17 and AY 2017-18 (PB Pg no 420), relevant extract of which is reproduced herewith as follows: -

4 It is a settled law that a capital receipt is not liable to tax under the Act unless it is specifically included in the definition of income u/s 2(24) of the Act and chargeable under any of the charging provisions of the Act. Once a particular receipt is treated as capital receipt, the same cannot be brought to tax in garb of ‘minimum alternative tax’ applicable on book profits computed u/s 115JB of the Act. The ratio of judgment delivered by the Hon’ble High Court of Calcutta in case of Ankit Metal & Power Ltd. [2019] 109 taxmann 93 (Cal) is worth mentioning. In Para no. 27, the Hon’ble Court held that:

6 We, therefore, respectfully following the aforesaid ratio of Hon’ble High Court hold that Carbon credits being the capital receipts cannot be brought to tax as book profits and are, thus, liable to be excluded from the computation of book profits u/s 115JB. The additional ground of appeal no.4 of the assessee is thus allowed.

Thus, respectfully following the ratio laid down by Coordinate Bench, as aforesaid, we hold that the receipts from sale of RECs, being in the nature of capital receipts, should be excluded for the purpose of computing book profit under section 115JB of the Act. Grounds are allowed to the extent indicate above.”

Considered rival submissions in the light of decisions relied upon and perused materials placed on record. Undisputedly, the assessee has set up a captive power plant for generating power. It generates powers by means of renewable energy using non-fossil fuel such as molasses. It is a fact on record that the assessee has received RECs issued by CERC. REC as referred, are basically issued to incentivize generation of power through renewable energy so as to reduce the effect of emissions, which impact clean environment and leads to global warming. Thus, if we apply the test of purposive interpretation, it can be seen that the object of REC and carbon credits are 34

Thus, in our view, the decisions cited by learned counsel for the assessee and more particularly, the decisions of the Coordinate Benches discussed hereinabove, clearly support the case of the assessee that the receipts from RECs are not in the nature of revenue receipt. Therefore, we hold that the amounts received by the assessee from sale of RECs, being in the nature of capital receipts, are not taxable at the hands of the assessee.

With regard to the issue of whether the receipts from RECs, being in the nature of capital receipts, will form part of book profit computed under 35

The next issue relates to disallowance under section 14A of the Act read with rule 8D while computing income both under the normal provisions as well as under section 115JB of the Act.

The ld. AR briefly stated the facts that in the year under consideration, the assessee had not earned any exempt income either by way of dividend or even otherwise, however, the assessee suo motu made some disallowance under section 14A of the Act read with Rule 8D(2)(iii). In the objections raised before DRP, the assessee contended that since the assessee had not earned any exempt income in these years, no disallowance under section 14A read with Rule 8D can be made. While deciding the issue, DRP, having found that identical issue arising assessment year 2015-16 has been decided in 36

The case of ld, AR is that it is an undisputed fact that no appeal has been preferred by the tax department against the CIT-(A)’s order for AY 2015-16. This fact is also supported by the findings of this bench in its orders for preceding assessment years in appellant’s case. Ld. AR further referred the assessing officer’s affidavit placed on record. In the affidavit filed, the Assessing Officer has admitted that no appeal has been filed by the department against the order of CIT-(A) in AY 2015-16. (PB P.no 425-427)

Further, the ld. AR submitted that this issue is covered by the order of ITAT in assesse’s own case for AY 2016-17 and AY 2017-18.(P.no 406 & 407 of PB) 37

The ld. DR did not raise any contention on this issue and relied on the order of assessing officer.

Considered rival submissions and perused materials placed on record. Admittedly, in the assessment year under dispute, the assessee has not earned any exempt income. Therefore, as per the settled legal principles, no disallowance under section 14A read with Rule 8D is called for. It is observed, while deciding assessee’s appeal on identical issue in assessment years 2011-12, 2013-14 and 2015-16, learned Commissioner (Appeals), considering the fact that the assessee had not earned any exempt income, deleted the disallowance under section 14A. In an affidavit furnished before us the Assessing Officer has admitted that department has not preferred any appeal against the decision of Commissioner (Appeals) in assessment year 2015-16. Therefore, in view of specific directions of DRP, the disallowance cannot be sustained. Accordingly, we delete it. Grounds are accordingly allowed. 44. With regard to the inclusion of book profit under section 115JB, we hereby follow the judgement of Special Bench in the case of Vireet Investment [2017] 82 taxmann.com 415 (Delhi-Trib.) where it is held that no addition could be made on account of disallowance under section 14A to the book 38

The last and final issue which survives is the issue raised in ground nos. 14 in assessment year in consideration. In this ground, assessee has raised the issue of various mistakes apparent from record in the assessment order, which are as under:

Learned DR also agreed for remitting back of the above remaining issue to the Assessing Officer for verification.

Considered the rival submissions and perused the materials placed on record. As could be seen, grievance of the assessee is against various computational errors committed by Assessing Officer while computing deduction under various provisions of the Act as well as computation of income. As stated before us by learned counsel for the assessee, a rectification application in this regard is pending for disposal before the Assessing Officer. Considering the above, we direct the Assessing Officer to verify assessee’s claim with reference to the rectification application filed under section 154 of the Act and thereafter carry out necessary rectification, if warranted, after providing reasonable opportunity of being heard to the assessee. These grounds are allowed for statistical purposes. 49. Ground Nos.15 and 16 raised by the assessee in respect of initiation of penalty proceedings u/s 270A and interest u/s 234B which are pre-mature at this stage and therefore, are dismissed. 41

Ground nos 17 and 18 raised by the assessee, being general grounds are dismissed. 51. In the result, the appeal filed by the assessee is allowed in above terms.