ETT LTD (FORMERLY KNOWN AS INDIAN EXPRESS MULTIMEDIA LTD),NEW DELHI vs. CIT, CENTRAL-II, NEW DELHI

Fit for Publication Sd/- sd/- (AM) (JM) IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘B’, NEW DELHI BEFORE SH. AMIT SHUKLA, JUDICIAL MEMBER AND SH. ANADEE NATH MISSHRA, JUDICIAL MEMBER ITA No. 3341/DEL/2018 Assessment Year: 2013-14

M/s. ETT Ltd. (formerly Commissioner of Income known as Indian Express Vs. Tax, Central – II Multimedia Ltd.) New Delhi 17 Hemkunt Colony, New Delhi -110048 PAN AAACI2839Q (APPELLANT) (RESPONDENT)

Appellant by Sh. R. S. Singhvi, CA Sh. Satyajeet Goyal, CA, V.K. Sabharwal, Adv., Respondent by Ms. Rachna Singh, CIT DR Date of hearing: 13.09.2018 & 01.02.2019 Date of Pronouncement: .O2.2019 ORDER PER AMIT SHUKLA, JM:

The aforesaid appeal has been filed by the assessee against impugned order dated 31.03.2018, passed u/s 263 by Ld.

Commissioner of Income Tax (Central)-II, New Delhi for the A. Y. 2013-14.

10.08.2015, however, after disallowing deduction of Rs.56,420/- which was 30% of net water charges on the ground that same did not relate to the business of the assessee. Assessment was completed at an income of Rs.56,420/- and under book profit u/s 115 JB at Rs.44,35,247/-.

on various dates, which is running into almost 200 pages, the copy of which has been placed in the paper book from pages 4 to 201 before us. However, the Ld. CIT without giving any credible rebuttal on assessee’s submissions and documents placed has made following observations: - “I have perused the assessment records and submissions made by the assessee in this case. During the year under consideration, the assessee has claimed deduction of Rs.161,37,41,713/- u/s 80 IA for which no Substantial enquire/investigation was conducted by the AO. Assessing Officer failed to conduct enquiry/investigation of exact amount of profit earned on sale of industrial park and subsequently allowability of deduction u/s 80IA. Every assessment year is a separate assessment and Assessing Officer examined the condition for allowability' deduction u/s 80IA independently irrespective of the fact that assessee has previously claimed deduction u/s 80IA or not in the instant case AO has not at all initiated the requisite enquiry with regards to deduction claimed u/s 80IA. It was incumbent on the AO to have noticed the distinguishing feature vis-a-vis the preceding year to the effect that while during preceding year the assessee received only rental/maintenance receipts, during the year under reference the whole infrastructure facility has been sold off for a substantial consideration and profit is claimed exempt. It was the duty of the AO to minutely examine the eligibility of claim and true eligible quantum of exemption to be allowed. AO completely failed in examining this aspect and in bringing any evidence on record in this behalf. Assessee has made specified domestic transaction of

Rs.208,47,12,830/- with Noida Towers Ltd. and assessee himself admitted that transactions were made much higher price then prevailing circle rate. In this regard, Assessing Officer failed to conduct requisite enquiry/investigation to find out the -arm’s length price of the transaction and failed to make reference to TPO which was he was supposed to make as per the CBDT guidelines instruction no 3/2003 and subsequent directions of CBDT. Condition for reference to TPO is squarely applicable to the facts of this case but the AO had passed assessment order without referring the issue of specified domestic transaction for determining arm’s length price. Thus, the action of the AO in completing the assessment without making an enquiry through reference to TPO as per CBDT guidelines and subsequently allowing deduction u/s 80IA made the assessment erroneous and prejudicial to the interest of the revenue. The AO also failed to examine applicability or otherwise of Sec. 80 IA (8). Further, the AO had not conducted requisite enquiry/investigation on exempt income earned by the assessee and applicability of the provision of section 14A of the IT Act, r.w.s. Rule 8D of the IT Rule.”

and the assessment proceedings are restored hack to the file of the Assessing Officer on the issue of examination / verification / allowability of deduction u/s 80IA and the quantum of deduction u/s 801A, if at, all the claim itself is valid and applicability of Sec.l4A on exempt income. The AO is directed to frame the assessment afresh as per the provisions of the Income Tax Act, after duly examining the specified domestic transactions through reference to the TPO as per Board’s guidelines and considering the report of the TPO on receipt of order u/s. 92 CA (3) of the IT Act 1961 and after affording due opportunity to the assessee. AO shall also consider the applicability or otherwise of Sec. 80IA (8) as per law. The AO shall note that no other error/prejudice to the interest of / the revenue has been noted by the undersigned or has been confronted to the assessee and therefore, the/ A.O. is directed to restrict himself while framing fresh assessment to the issues discussed above and consider the same as per law after giving due opportunity of being heard to the assessee.”

2 2009-10 9,67,17,690/- 9,67,07,521/- 9,67,07,521/- U/s 143 (3) dated 20.12.11 3 2010-11 13,56,83,504/- 13,42,94,655/- 13,42,94,655/- U/s 143 (3) dated 20.03.13 4 2011-12 10,96,07,770/- 10,66,71,593/- 10,66,71,593/- U/s 143 (3) dated 20.11.13 5 2012-13 4,97,68,662/- 4,92,42,252/- 4,92,42,252/- U/s 143 (3) dated 02.07.14 6 2013-14 1,61,37,41,713/ 161,36,85,293/ 161,36,293/- U/s 143 (3) dated 10.08.15

Thereafter, he also drew our attention to reply dated 23.07.2015 before AO, wherein the assessee has given detailed justification for claim of deduction u/s 80 IA which was given in the form detailed note, the copy of which is appearing at pages 291 to 318 of the paper book. Thereafter, vide letter dated 29.07.2015, the assessee had also filed copy of ‘business transfer agreement’ for sale of the undertaking on slum sale basis to its 100% subsidiary, M/s Noida Tower Private Limited and had also filed ‘Related Part Transaction (RPT)’ as mentioned in Form No.10 CCB. It has also filed transfer pricing report in Form No. 3 CEB, wherein the entire detail of domestic transfer pricing with the related party was shown to justify the ALP of the transaction. For ascertaining the correct market value of the property of the undertaking which was sold to the subsidiary, assessee had also filed detailed ‘Valuation report’ from the Govt. Approved Valuer. It was after examining the entire documents which was submitted in response to various queries raised by the Ld. Assessing Officer from time to time, specifically with regard to the claim of deduction u/s 80IA, AO has allowed major amount. In view of these facts and assessment records that various queries were raised by the Assessing Officer on this point and had examined all the documents filed before him, goes to show that the Assessing Officer has not only carried out thorough enquiry but has also applied his mind before allowing the substantial amount of the claim. Thus, it cannot be held that no enquiry as was required by him has been conducted by him or there is no application of mind.

assessee has filed the details of investments in mutual funds and also demonstrated before the Assessing Officer that money received from sale consideration from sale of industrial park were invested in Mutual Funds, which was evident from bank statements filed during the course of assessment proceedings. The Ld. Assessing Officer had even discussed the matter with the various representatives of the assessee regarding the relation of expenditure incurred with reference to the investment. It was duly clarified before the Assessing Officer that interest on bank loan amounting to Rs.1,79,46,655/- was already paid back before making the investments as the bank loan was fully paid from the sale consideration of industrial park and only the balance amount was invested in mutual funds, therefore, there was no question of disallowance u/s 14A. In support, sanction letter of the bank loan alongwith the bank loan statement and details of financial expenses were filed before the Assessing Officer. Further, mutual funds were invested through consultant broker and no direct or indirect expenditure was incurred on the dividend income on such investments. The Assessing Officer after examining all these facts and the requisite details and documents placed on record has accepted the assessee’s contention; and therefore, to say that no enquiry was made by Assessing Officer before accepting the assessee’s claim is baseless and is not maintainable. In any case, even if any such addition was to be made, then affect would have been ‘nil’, because, the tax effect would still be nil. All the queries and the letters filed during the course of assessment proceedings were pointed out before us.

carried out detailed examination and verification and after due diligence has passed the assessment order, then same cannot be held to be erroneous on the ground of lack of any enquiry. Even the Ld. CIT has not pointed out as to what further enquiry was required to be done by the Assessing Officer; and even if there was any enquiry which was lacking, then same should have been conducted by CIT himself before coming to conclusion that assessment order passed by the Assessing Officer was erroneous and prejudicial to revenue. In support, of his contention, that once in the earlier year claim u/s 80 IA has been allowed then in subsequent year it cannot be disallowed, he strongly relied the judgment of Hon’ble Delhi High Court in the case of DIT Vs. Jyoti Foundation was reported in (2013) 357 ITR 388. He also strongly relied upon the Judgment of Hon’ble Delhi High Court PCIT Vs. Delhi Airport Metro Express Private Limited ITA No.705/Del/2017 order dated 05.09.2017. He further submitted that if Assessing Officer after making proper and detailed enquiry has taken view, then Ld. Commissioner cannot revised the assessment order so as to conduct enquiry once again and in support he relied on upon the judgment of Hon’ble Bombay High Court in the case of CIT Vs. Nirav Modi (2017) 390 ITR 292.

Taxman 291, wherein the judgment of Hon’ble Gujarat High Court (399 ITR 242) has been confirmed. In this case exactly similar issues were involved and it was held by the Hon’ble High Court that developer would not be denied of deduction u/s 80 IA on the profit earned by a form activity developing the infrastructure facility and proviso does not deprive developer even after the facility is transferred to some other. Thus, on this point also, the view taken by Ld. CIT is unsustainable.

/ cancel the assessment order. Accordingly, he submitted that the impugned order deserves to be quashed.

specified domestic transaction to the TPO so as to examine the correct arms length price of the same. Thus, non-reference of specified domestic transaction by the Assessing Officer to the TPO shows that proper enquiry as required has not been done. She thus strongly relied on the order of the Ld. CIT.

assessment order as erroneous. He submitted that first of all following facts needs to be clarified in the case of the assessee: -  Firstly, the appellant company only entered into specified domestic transaction during the year under consideration as referred to u/s 92BA of the Act.  Secondly, the specified domestic transaction of sale of undertaking was duly reported in Form 3CEB of the Act.  Lastly, the case was selected for scrutiny u/s 143(3) on non-TP parameter. Thus, the observation of the ld. CIT is misconceived and erroneous, because CBDT Instruction No.3/2003 was only applicable to international transaction u/s.92B and not to specified domestic transaction u/s.92BA. In any case, the assessment order was passed on 10.08.2015 and as on date, that there was no CBDT Instruction or guidelines for reference for specified domestic transaction to the TPO; hence, there cannot be any allegation of any non-compliance of CBDT Instruction by the Assessing Officer. He further brought to our notice that CBDT had issued another Instruction No.15/2015, dated 16.10.2015 which superseded the old Instruction No.3/2003 which too was applicable to international transaction u/s.92B only and not to specified domestic transaction u/s.92BA. In this instruction CBDT has explicitly recognized the absence of any instruction with reference to domestic transaction as defined u/s.92BA. Further, he drew our attention to the relevant guidelines of the CBDT in the Instruction No.15/2015, wherein CBDT has directed that in case of specified domestic transaction u/s.92BA, where the case has been selected on non TP parameter and the domestic transaction has been reported in

form no.3CEB, the Assessing Officer is not required to refer the issue to the TPO for determining the Arm’s Length Price. Hence, in these circumstances, it is evident that at the time of passing of the assessment order there was no CBDT instruction with reference to specified domestic transaction u/s.92BA, and therefore, Assessing Officer was not obliged to refer the matter to the TPO. In any case without prejudice, he submitted that even under CBDT Instruction No.3/2016 dated 10th March, 2016 also, the conditions provided for making a reference to the TPO was not satisfied, because here in this case, assessee has filed an accountant’s report and has declared all the transaction undertaken, and therefore, once all these transactions have been reported along with transfer pricing document, then it is not necessary that Assessing Officer should have compulsorily made reference to the TPO. Thus, there has been no violation of whatsoever of any instruction of CBDT and accordingly, the observation of the ld. CIT is wholly erroneous.

 Transfer pricing regulations have been extended vide Finance Act 2012 to include transactions entered into with domestic related parties or by an undertaking with other undertakings of the same entity for the purposes of section 40A, Chapter VI-A and section 10AA. Domestic transfer pricing provisions are applicable from Assessment Year 2013-14 onwards.  Further, Instruction No.3/2016 is an amendment of earlier circulars; therefore, this should be read in the earlier circular.

to the TPO by the AO, after obtaining the approval of the jurisdictional PCIT or CIT.  where the taxpayer has not filed the Accountant's report under Section 92E of the Act but the international transactions or specified domestic transactions undertaken by it come to the notice of the AO;  where the taxpayer has not declared one or more international transaction or specified domestic transaction in the Accountant's report filed under Section 92E of the Act and the said transaction or transactions come to the notice of the AO; and  where the taxpayer has declared the international transactions or specified domestic transactions in the Accountant's report filed under Section 92E of the Act but has made certain qualifying remarks to the effect that the said transactions are not international transactions or specified domestic transactions or they do not impact the income of the taxpayer.  a case involving a transfer pricing adjustment in an earlier assessment year that has been fully or partially set-aside by the IT AT, High Court or Supreme Court on the issue of the said adjustment shall invariably be referred to the TPO for determination of the ALP. An Important caveat 3.7 For administering the transfer pricing regime in an efficient manner, it is clarified that though AO has the power under Section 92C to determine the ALP of international transactions or specified domestic transactions, determination of ALP should not be carried out at all by the AO in a case where reference is not made to the TPO. However, in such cases, the AO must record in the body of the assessment order that due to the Board's Instruction on this matter, the transfer pricing issue has not been examined at all.

DECISION

u/s 263 to form a different opinion or take a divergent view. These principles are well settled by the judgments of Hon’ble Supreme Court in the case of Malabar Industrial Company Limited vs. CIT (2000) 243 ITR 83; and CIT vs. Max India Limited (2007) 295 ITR 282 and reiterated by various courts. Now, in the light of the settled principles we have to see, whether the Ld. CIT was correct in law and in facts in cancelling the assessment order on the points raised by him in impugned order. As discussed above the issues raised by the Ld. CIT for canceling the assessment order and passing a fresh assessment are as under: - i. The Assessing Officer has not conducted substantial enquiry or investigation while allowing the claim of deduction of Rs.161,37,41,713/- u/s 80 IA, as he has failed to conduct enquiry of exact amount of profit earned on sale of Industrial park and subsequently allowability of deduction u/s 80 IA. ii. Assessing Officer has failed to examine that assessee has shown specified domestic transaction of Rs. 208,47,12,830/- with its subsidiary, Noida Towers Limited and the transaction was at higher price than the prevailing circle rate. iii. Assessing Officer has failed to conduct requisite enquiry / investigation to determine the arm’s length price of the transaction by not making reference to the TPO, which he was supposed to make as per the CBDT guidelines. iv. Assessing Officer has also filed to examine applicability or otherwise of section 80 IA (8).

v. Assessing Officer has not conducted requisite enquiry / investigation on exempt income earned by assessee and applicability provision of section 14A r/w Rule 8D.

III. Proposed Condition: Commencement of IT Park shall be made on or before April 2005. Actual: It was much before April 2005. IV. Proposed Condition: Under taking shall provide all infrastructure facility for common use such as roads, water supply and sewerage, generation and distribution of power, air conditioning etc. Actual: The company was providing all these facilities at the IT Park which are verifiable from the balance sheet & profit & loss account of the company. V. Proposed Condition: Minimum number of industrial units shall not be less than four. Actual: Ten

detailed justification for deduction claimed u/s 80 IA which gives the entire history and background alongwith all the notification and approval granted by various governmental authorities. All these documents were placed before the Assessing Officer in response to queries raised by him. With regard to sale of undertaking to subsidiary of the assessee namely, M/s. Noida Towers Private Limited, assessee has filed the ‘business transfer agreement’ entered for sale of undertaking dated 12.03.2012 alongwith the ‘Valuation Report’ of the Govt. Approved Valuer dated 10.03.2012, wherein the valuation of the property has been done as per the prevailing market rate and the value of the entire property was determined at Rs. 205 crores, and the said valuation report contains drawings, pictures, comparative sale instances and various schedules to arrive at the market rate. Not only that, before the Assessing Officer the assessee has also filed detailed report of the Accountant regarding the ‘related party transaction’ undertaken by the assessee with its subsidiary in Form No. 3 CEB alongwith the transfer pricing document wherein, the entire details of the specified domestic transaction and the manner in which arms length price has been determined has been provided. Thus, entire transfer pricing document was filed to justify arm’s length price of the sale of industrial park alongwith Approved Valuer’s Report determining the market value of the property under transfer. After calling for all these evidences and examining the entire facts brought on record, the Ld. Assessing Officer has examined the allowability of claim u/s 80 IA and in fact has made part disallowance on such deduction. Hence, it cannot be held that Assessing Officer has not conducted any enquiry or investigated the issue which he was required to do so before allowing the claim of deduction u/s 80 IA or

has allowed without examining the assessee’s transaction with its subsidiary, Noida Towers Private Limited.

Till the passing of the assessment order on 10.08.2015, only CBDT Instruction No.3/2003 dated 20.05.2003 was applicable. Further, another instruction was issued by the CBDT being Instruction No.15/2015 dated 16.10.2015, superseding the old Instruction No. 3/2003 (which too was after the passing of the assessment order), there also the guidelines were only with respect to international transaction u/s 92B and not specified domestic transaction. In fact, in paragraph 7 with regard to the applicability of the said instruction, CBDT has made following remarks: - The above guidance is applicable only to transfer pricing provisions in respect of international transactions. Similar guidance in respect of transfer pricing provisions pertaining to specified domestic transactions are under consideration of the CBDT. Till such time the guidance pertaining to specified domestic transactions is not issued, paragraph 3.5 of this Instruction shall apply to the effect that where a case has been selected for scrutiny on non-TP parameters and the case also involves specified domestic transactions with AEs, the case shall not be referred to the TPO irrespective of the value of the specified domestic transaction or aggregate value of all specified domestic transactions. The only exception to this would be a case selected for scrutiny on non-TP parameters where the AO comes to know that the taxpayer has entered into specified domestic transaction or transactions but the taxpayer has either not filed the Accountant's report under section 92E of the Act or has not disclosed the said specified domestic transaction or transactions

in the Accountant's report filed. In such exceptional situations, the AO may refer the matter to the TPO after providing an opportunity of being heard to the taxpayer.

Thus, even after the completion of the assessment, there was no such guideline or instruction by the CBDT pertaining to specified domestic transaction. This clarification by the CBDT makes it abundantly clear that till the passing of the assessment order there was no such guideline or instruction to the Assessing Officer for making any reference to the TPO for specified domestic transaction. Once, that is so, we fail to understand as to where was the violation or contravention of any CBDT instruction by the Assessing Officer. Hence, it would be incorrect to ascribe any dereliction on the part of the Assessing Officer that he has failed to conduct requisite inquiry to find out the Arm’s Length Price for the transaction, by failing to make reference to the TPO that he was supposed to make as per the CBDT guidelines. The observation of the ld. CIT for holding the assessment order to be prejudicial to the interest of the revenue, for the reason that the Assessing Officer has not followed the CBDT Instruction No.3/2003 cannot be sustained at all.

Assessing Officer at the time of passing the assessment has to see the instructions available at the relevant time and he cannot visualize that in future some kind of guideline or instruction would come on the basis of which he has make the assessment. If such a plea is accepted then in wake of each and every subsequent instruction, all the assessment orders can be held to be erroneous and prejudicial to the interest of the revenue, which cannot be permitted under law and equity.

referred to the TPO by the AO, after obtaining the approval of the jurisdictional Principal Commissioner of Income-tax (PCIT) or Commissioner of Income-tax (CIT). The fact that a case has been selected for scrutiny on a TP risk parameter becomes clear from a perusal of the reasons for which a particular case has been selected and the same are invariably available with the jurisdictional AO. Thus, if the reason or one of the reasons for selection of a case for scrutiny is a TP risk parameter, then the case has to be mandatorily referred to the TPO by the AO, after obtaining the approval of the jurisdictional PCIT or CIT. 3.3 Cases selected for scrutiny on non-transfer pricing risk parameters but also having international transactions or specified domestic transactions, shall be referred to TPOs only in the following circumstances: (a) where the AO comes to know that the taxpayer has entered into international transactions or specified domestic transactions or both but the taxpayer has either not filed the Accountant’s report under Section 92E at all or has not disclosed the said transactions in the Accountant’s report filed; (b) where there has been a transfer pricing adjustment of Rs. 10 Crore or more in an earlier assessment year and such adjustment has been upheld by the judicial authorities or is pending in appeal; and (c) where search and seizure or survey operations have been carried out under the provisions of the Income-tax Act and findings regarding transfer pricing issues in respect of international transactions or specified domestic transactions or both have been recorded by the Investigation Wing or the AO. 3.4 For cases to be referred by the AO to the TPO in accordance with paragraphs 3.2 and 3.3 above, in respect of transactions having the following situations, the AO must, as a jurisdictional requirement, record his satisfaction that there is an income or a potential of an income arising and/or being affected on determination of the ALP of an international transaction or specified domestic transaction before seeking approval of the

PCIT or CIT to refer the matter to the TPO for determination of the ALP: where the taxpayer has not filed the Accountant's • report under Section 92E of the Act but the international transactions or specified domestic transactions undertaken by it come to the notice of the AO; where the taxpayer has not declared one or more • international transaction or specified domestic transaction in the Accountant's report filed under Section 92E of the Act and the said transaction or transactions come to the notice of the AO; and where the taxpayer has declared the international • transactions or specified domestic transactions in the Accountant's report filed under Section 92E of the Act but has made certain qualifying remarks to the effect that the said transactions are not international transactions or specified domestic transactions or they do not impact the income of the taxpayer. In the above three situations, the AO must provide an opportunity of being heard to the taxpayer before recording his satisfaction or otherwise. In case no objection is raised by the taxpayer to the applicability of Chapter X [Sections 92 to 92F] of the Act to these three situations, then AO should refer the international transaction or specified domestic transaction to the TPO for determining the ALP after obtaining the approval of the PCIT or CIT. However, where the applicability of Chapter X [Sections 92 to 92F] to these three situations is objected to by the taxpayer, the AO must consider the taxpayer's objections and pass a speaking order so as to comply with the principles of natural justice. If the AO decides in the said order that the transaction in question needs to be referred to the TPO, he should make a reference after obtaining the approval of the PCIT or CIT. 3.5 In addition to the cases to be referred as per paragraphs 3.2 and 3.3, a case involving a transfer pricing adjustment in an earlier assessment year that has been fully or partially set-aside

by the ITAT, High Court or Supreme Court on the issue of the said adjustment shall invariably be referred to the TPO for determination of the ALP.”

[Emphasis added is ours]

 lastly, if transfer pricing adjustments have been made in the earlier assessment years which has been fully or partially set aside by the courts. It is only under the circumstances mentioned in the CBDT guidelines, the Assessing Officer can make a reference to the TPO and not otherwise. If such conditions are found to exist then only, Assessing Officer after providing opportunity to the assessee and after recording satisfaction can refer the matter to the TPO for determining the LP after obtaining the approval of PCIT or CIT.

international transaction or specifying domestic transaction. If all the requisite details and Accountant’s Report has been filed and Assessing Officer was satisfied with such report, then he is not supposed to make a reference to the TPO unless the conditions specified for making reference has been satisfied.

section referred to as the transferee undertaking), the deduction under sub – section (1) shall be allowed to such transferee undertaking for the remaining period in the ten consecutive assessment years as if the operation and maintenance were not so transferred to the transferee under taking:”

i. Profits made by an assessee who develops the industrial park, i.e., build / construct and sale the same. ii. Profits made by an assessee who develops and operates the industrial park. It can be lease out for a period and then sell the same. iii. Profits made by an assessee who though may not have constructed but maintains and operates the industrial park. There is no condition which has been laid down that, if an industrial park developed by an assessee which is being operated by him and then sell the same to another person, then the profits derived from such sale is not eligible for deduction u/s 80 IA. This precise issue had come up for consideration before the Hon’ble Gujarat High Court in the case of PCIT Vs. Nila Baurat Engineering Limited (supra), wherein their Lordships were discussing the similar proviso appearing below clause (i) of sub section 4 of section 80 IA. Their Lordships after discussing the similar proviso observed and held as under: - 5. “As per the proviso, thus, where any infrastructure facility is transferred to another enterprise for the purpose of operating and maintaining such facility in accordance with the agreement of the Central or State Government or the local or statutory authority, the section would apply to the transferee enterprise as if it were the enterprise to which this clause applies and the deduction from profits and gains would be available to such transferee enterprise for the unexpired period during which the transferor enterprise would be entitled to the deduction, had the transfer not taken place. 6. The proviso to sub-section (4) thus makes an enabling provision providing a deeming fiction whereby upon transfer of any infrastructure facility for the purpose of operating and maintaining, the transferee could claim the deduction for the remainder of the period. The crucial words here are "the transfer

of infrastructure for the purpose of operating and maintaining' and thus the transferee who would now step in the shoes of the transferor for the limited purpose of operation and maintenance, could claim deduction on the profit element arising out of such activity. We may recall, under sub-section (4) of Section 80IA of the Act, an enterprise carrying on the business of developing, or operating and maintaining, or developing, operating and maintaining infrastructure facility would be eligible for deduction. Thus this provision itself envisages that in a given project the developer and person who maintains and operates may be different. Merely because the person maintaining and operating the infrastructure facility is different from the one who developed it, would not deprive the developer the deduction under the said section on the income arising out of such development. By virtue of the operation of the proviso, the developer would not be derived of the benefit of deduction under sub-section (1) of Section 80 IA on the profit earned by it from its activity of developing the infrastructure facility. The proviso does not operate as to depriving the developer of the benefit of the deduction even after the facility is transferred for the purpose of maintenance and that derived from the activity of maintenance and operation thereof.”

goods or services held for the purposes of the eligible business are transferred to any other business carried on by the assessee or to any eligible business, then consideration for such transfer should correspond to the market value of such goods as on the date of transfer. It provides that the profits and gains from transfer or sale of the eligible business should be computed as if the transfer has been made at market value of such goods or services. This provision itself clarifies that profits from transfer of the eligible business is a business income eligible for deduction u/s 80 IA. In fact, this provision endorses our view that the profits from transfer of eligible business are eligible for deduction u/s 80 IA.

gets satisfied. Hence applicability of section 80IA (8) has been examined by the Assessing Officer

for earning of such exempt income or no such expenditure has been incurred, then having regard accounts to the assessee AO has to his satisfaction with the correctness of the assessee’s claim that no expenditure have incurred relation to earning of exemption of income. If AO is satisfied or having regard to the accounts no expenditure can be attributed then no disallowance is called for. Nothing has been brought on record by Ld. CIT that satisfaction could have been arrived having regard to the accounts maintained by the assessee that some disallowance is called for. There is no whisper by the Ld. CIT as to why disallowance u/s 14 A was called for on the facts of the case. The disallowance under section 14A is not automatic whenever there is any kind of exempt income. It has to be seen with regard to nature of expenses debited and whether any expenditure can be calculated. Thus, simple observation that AO should have examine the applicability of 14A without any specific finding or examination of facts and material on record, Ld. CIT cannot set aside the assessment.

far as prejudicial to the interest of the revenue. Such an enquiry or exercise by the Ld. CIT is completely lacking in the present case. If the Assessing Officer has carried out detailed enquiry and has examined all the records called upon by him after raising queries, then Ld. CIT without pointing out as to how such an enquiry is inadequate or not proper cannot set aside the assessment. Even the fiction created by Explanation 2 to section 263 wherein it is deemed that assessment order is erroneous and prejudicial to the interest of revenue if the order passed by the Assessing Officer is without making enquiries or verification which should have been done. Here in this case, we have already found that Assessing Officer has made proper enquiries and verification after calling for all the records and after applying his mind has allowed the deduction in accordance with law. The Ld. CIT now cannot sit on the judgment of the Assessing Officer without pointing out any legal or factual infirmity or without carrying out his own enquiry. He simply cannot set aside the order of the Assessing Officer stating that no proper enquiry has been done. Accordingly, in view of our discussion and finding given above, we set aside the impugned order of Ld. CIT passed u/s 263 and uphold the assessment order dated 11.08.2015. The impugned order thus, stands quashed.

sd/-

(ANADEE NATH MISSHRA) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER 25.2.2019

Date:- .02.2019 *NEHA* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI Date of dictation 21/2/2019 Date on which the typed draft is placed before the dictating Member Date on which the typed draft is placed before the Other member Date on which the approved draft comes to the Sr.PS/PS Date on which the fair order is placed before the Dictating Member for Pronouncement Date on which the fair order comes back to the Sr. PS/ PS Date on which the final order is uploaded on the website of ITAT Date on which the file goes to the Bench Clerk Date on which file goes to the Head Clerk. The date on which file goes to the Assistant Registrar for signature on the order Date of dispatch of the Order

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH: ‘B’: NEW DELHI) BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI ANADEE NATH MISSHRA, ACCOUNTANT MEMBER ITA No.- 3341/DEL/2018 (Assessment Year: 2013-14) M/s. ETT Ltd. (formerly known as Indian Commissioner of Income Tax, Express Multimedia Ltd.) Vs. Central – II, 17 Hemkunt Colony, New Delhi New Delhi, Pin- 110048 PAN No: AAACI2839Q APPELLANT RESPONDENT

Assessee by : Shri R. S. Singhvi, CA Shri Satyajeet Goyal, CA, Shri V.K. Sabharwal, Adv. Shri Dinesh Kumar, CA Revenue by : Ms. Rachna Singh, CIT DR

ORDER (Continued from Paragraph 36 at Page 38 of Order of Esteemed Judicial Member) PER: ANADEE NATH MISSHRA, AM

(37) I have the perused the order authored by esteemed Judicial Member, wherein he has proposed to allow the appeal of the assessee. I concur, for the reasons stated in this separate order, that the impugned revision order dated 31.03.2018 passed U/s 263 of Income Tax Act, 1961 (“IT Act”, for short), deserves

to be quashed. The grounds of appeal; and the prayer made by the Assessee in this appeal, are as follows: “1. That the orders passed u/s 263 by the Pr. CIT, Central –II on 31.03.2018 was perverse to the law and to facts of the case, on holding that the assessment order passed by the Assessing Officer on 10.08.2015 was perverse to the law in so far as it is prejudicial to the interest of revenue. 2. That on the facts and circumstances of the case, the orders passed by the Pr. CIT(A) U/s 263 of the Act were further not in consonance of the provisions of law contained u/s 263 of the Income Tax Act 1961, as the same were passed on having borrowed information / reference passed upon to him by the JCIT. 3. That the Ld. Pr. CIT(A) failed to consider that the assessment order as completed by the Assessing Officer after due process of law and only after taking into consideration the entire supporting evidence produced, filed and placed upon records by the appellant company during assessment proceedings. 4. That the orders passed u/s 263 of the Act for the A.Y. 2013-14 is not tenable merely because of having difference of opinion between the Ld. Pr. CIT and the Assessing officer while allowing the claim of deduction to the appellant company u/s 80-IA to the tune of Rs. 161,36,85,296/-, without appreciating that the same has already been considered and allowed in the preceding years. Also after thorough examination and verification of the material adduced. 5. That the orders passed u/s 263 of the Act is further wrong because the Ld. Pr. CIT has not lawfully drawn his satisfaction on the basis of evidence if any be collected or placed upon records prior to hold that the orders passed were erroneous in so far as it is prejudicial to the interest of revenue. 6. That while holding so, that the orders passed are erroneous and prejudicial to the interest of revenue, the same has not been corroborated with any evidence material on the basis of which he has hold so. 7. That the Ld. Pr. CIT has further not considered and relied upon the documents produced, filed and placed before him including the judgments relied upon as cited by the appellant company in support of their contention for claiming and allow of deduction u/s 80-IA of the Act, as the Ld. Pr. CIT has not commented upon them either way. 8. That the orders passed by the Ld. Pr. CIT u/s 263 was further perverse to the law and to the facts of the case, as the Assessing Officer was not any material either collected or ever possessed that the transfer of business does not correspond to the market value of goods,

though the cogent evidences have been adduced by the appellant company before the Assessing Officer in support of deduction claimed u/s 80- IA of the Act. 9. That the Ld. Pr. CIT has only assumed the jurisdiction contained u/s 263 of the Act only on the basis of his mere presumption and guess work without the support of any material that the orders passed by the Assessing Officer were erroneous and prejudicial to the interest of revenue. 10. That the Ld. Pr. CIT has failed to consider also, the copies of documents filed and placed upon records by the appellant company vide letter dated 08.02.2018, the copies of which were also produced before the Assessing Officer in support of deduction claimed u/s 80-IA of the Act. 11. That the Ld. Pr. CIT has further failed to appreciate, that since the entire material has been produced in support of the deduction claimed u/s 80-IA before the concerned Assessing Officer by the appellant company and the same has been taken into consideration by the Assessing officer while passing the order, therefore, the order passed could not be presumed and to have been opined either erroneous or prejudicial to the interest of revenue. 12. That the appellant company assails their rights to amend, alter or change any grounds of appeal of any time even during the course of hearing of instant appeal. PRAYER 1. That the orders passed u/s 263 by the Ld. Pr. CIT on 31.03.2018 thereby setting aside the assessment order passed by the Assessing Officer on 10.08.2015 thereby directing the Assessing Officer for conducting denovo enquiry with regard to the deduction allowed u/s 80-IA of the Income Tax Act 1961 to the appellant company, may please be quashed and the orders passed by the Assessing officer on 10.08.2015 may please be restored back. 1. That the other relief which this Hon’ble course may please be deems fit and proper on the facts and in the circumstances of the case.” (37.1.1) The facts of the case, and the submissions made by the two sides have been narrated by the esteemed Judicial Member in foregoing paragraphs 2 to 20. There is no need to repeat them.

(37.1.2) For ready reference, the Assessment Order dated 10.08.2015 of the Assessing Officer (“AO’, for short), passed U/s 143(3) of IT Act, is reproduced as under: “Return of income declaring an income of Rs. Nil was filed on 28-09-2013 and has also filed revised return declaring an income Rs. Nil on 07-01-2014. The return was processed u/s 143(1) at the returned income. Subsequently, the case was selected for scrutiny. Statutory notices u/s 143(2) & 142(1) were issued alongwith a detail questionnaire. In response to notices, Shri Vinod Sahni, FCA and Shri Vaibhav Gupta, CA, Authorized Representative of the assessee Company attended and furnished the details as called for books of account produced which were put to test check. The total income of the assessee constitutes income from business and profession and income from other source. Nature of Business The assessee company is engaged in the business of Real Estate and developing, running and maintenance of IT Parks. Disallowances for computing deduction u/s 80IA of the income tax Act. The assessee company has claimed deduction u/s 80IA since last five years and this being the 6lh year had filed computation and justification for the same. The assessee has also filed notification dated 26.09.2006 issued by Ministry of Commerce and Industries where by the Govt. of India has approved the proposal of the assessee for setting up and industrial park in terms of industrial park scheme 2002. The assessee has complied with all the condition laid down u/s 80IA. However in computing the total receipts eligible for deduction the assessee has included Water charges Rs. 56,420/- which is 30% of net water charges received (Rs. 1,88,065). Since, the partially water charges are not the related to business of the assessee the same does not qualified u/s 80IA of the I.T. Act. Keeping in view the details filed and after discussion with assessee’s representative, total income declared by the assessee is calculated as under: Gross Total Income as declared by assessee 1,61,37,41,713 LESS:- Deduction u/s 80IA as claimed by assessee. 1,61,37,41,713/- Income disallowed for the purpose of 80IA- Parking charges Hence allowable deduction u/s 80IA (-) 56,420/- 1.61,36,85,293/- 1,61,36,85,293/- Total Income 56,420/-

Assessed u/s 143(3) of the I.T, Act at total income of Rs. 56,420/-. Tax on Rs. 56,420 @ 30% = Rs. 16,926 Education Cess @ 3% = Rs. 508 Total Tax Rs. 17,434/- Calculation of MAT u/s 115JB Books Profit Rs. 44,35,247/- Tax on Book Profit of Rs. 44,35,247 @ 19.05 % MAT credit Rs. 8,45,137/-. allowed to the assessee is Rs. 8,27,703/- Since the tax on Book Profit of Rs. 44,35,247/- u/s 115JB is more than the tax on regular income as assessed at Rs. 56,420/- above, the income u/s 115JB is assessed. Issue Demand notice u/s 156 of the Act. Give credit for prepaid taxes.”

(37.1.3) Also for ready reference, the impugned order dated 31.03.2018 of the Ld. Commissioner of Income Tax Central-II, New Delhi (“Ld. CIT”, for short) passed U/s 263 of IT Act is also reproduced as under:

“Revision order u/s 263 of the IT Act 1961- in respect of the assessment orders passed u/s 143(3 ) of the IT Act 1961 dated 10.08.2015 for A.Y. 2013-14

The assessee had filed its return of income on 28.09.2013 declaring NIL income and has also filed revised return declaring an income of Rs. NIL on 07.01.2014. Assessment u/s 143(3) of the l.T. Act was completed on 10.08.2015, by the Assessing Officer, Central Circle-16, New Delhi at an income of Rs. 56,420/- (taxed on book profit of Rs.44.35,247/- u/s 115JB). 2. On examination of the assessment records, it was observed that the assessment order passed by the A.O. u/s 153C/143(3) of the Income Tax Act, on 10.08.2015 for the year under consideration is erroneous, as well as prejudicial to the interests of the revenue to the extent that assessment was completed without proper examination/verification. The assessing officer completed the assessment without proper examination/verification of allowabilty of deduction u/s 80IA and transfer pricing issue. A show cause notice as per the provisions of section 263 of the IT Act was issued to the assessee on 11.10.2017 to file its submissions on 07.11.2017 observing as under:-

It is seen that from the records that the assessee has claimed the deduction of Rs. 161 crores under Section 80IA of the Act. The assessee has shown Rs. 153 crores under the head ‘Sale of Industrial Park (Net) ' in the statement of its profit and loss and has claimed the 801A deduction on such amount. The AO has failed to make enquiry with regard to the deduction under Section 80IA and allowed the claim of the assessee. Section 80IA is available in respect of profit and gains derived by an undertaking from any business as referred u/s 80IA(4). The assessee in the instant case had claimed the deduction under Section 80IA(4)(iii) for operating and maintaining the Industrial Park, thus the approach of AO accepting the sale of Industrial Park as eligible for deduction under Section 80IA prima facie appears to be erroneous so as to cause prejudice to the interest of Revenue. It is seen that from the records that the assessee had earned exempt income of Rs. 77,65,278/- during the relevant previous year. The AO has failed to make enquiry with regard to the expenses attributable to the earning of exempt income even the same had been a reason for selection the case under CASS. Thus the approach of AO in not calling for the details of expenses attributable to earning of exempt income prima facie appears to be erroneous so as to cause prejudice to the interest of Revenue. It is seen that from the records that the assessee has sold its undertaking to its 100% subsidiary M/s Noida Towers Private Limited during the relevant previous year, thus the provisions of domestic transfer pricing were applicable to such transaction. The AO has not scrutinized such transaction from DTP standpoint, thus the approach of AO in not scrutinizing such huge transaction prima facie appears to be erroneous so as to cause prejudice to the interest of Revenue. 3. The assessee was asked to show-cause as to why, in the light of above facts contained in the show-cause notice, the assessment order passed in its case by the Assessing Officer, Central Circle-16, New Delhi on 10.08.2015 may not be considered as erroneous and prejudicial to the interest of Revenue as per the provisions of section 263 of the Income Tax Act, 1961. Assessee was given an opportunity to file its submissions on the issues raised in the show-cause notice. On 07.11.2017, CA/AR of the assessee Sh. Vinod Sahni filed Power of Attorney and requested for adjournment for I month. Therefore, the case was adjourned to 29.11.2017 at 11:00 AM. Again on 29.11.2017, CA/AR of the assessee Sh. Vinod Sahni filed letter in which he requested for adjournment, the case was adjourned to 11.12.2017. On 11.12.2017, Sh. Vinod Sahni, CA & AR & Sh. Dinesh Kumar on behalf of the assessee company appeared and submitted that Assessing officer had asked the assessee company to submit a detailed note and supporting documents for claiming deduction us/ 801A. In reply to that the assessee company submitted a letter dated 23.07.2015 providing detailed note alongwith five

annexure which include notification by CBDT notifying the assessee company as industrial Park eligible for deduction u/s 801A and audit report u/s 801A in Form No. 10CCB in support of claim of deduction u/s80IA. A full set of documents submitted at the time of assessment proceedings are attached as annexure. Further Ld. AO asked information about the claim of deduction in earlier years also, in support of which the assessee company submitted assessment order of those years. These facts are also stated in the assessment order u/s 143(3) of the IT Act, for the AY under reference and while passing the order the Ld. Assessing Officer has also disallowed part of the deduction claimed by the assessee company which indicates the depth in which Ld. Assessing Officer went into the claim of deduction u/s80IA. From the above facts it is evident that the Ld. Assessing Officer was fully aware of the claim of the assessee company and has enquired fully before passing the assessment order. In the instant, case the assessee company, as mentioned in point no.2 above, has developed and operated an Industrial park and has sold the same during the year under consideration and has claimed the deduction as allowed in sub section 4(iii) of section 801A. The above facts were made to the knowledge of Ld. AO has accepted the claim of the assessee company. Therefore, it is evident that the assessee company had claimed the deduction u/s 80IA 4(iii) for developing and operating the industrial park and not only for operating and maintaining as contemplated in the SCN. Hence, while allowing the deduction u/s 80IA 4(iii) the Ld. AO has applied his mind and fully verified the facts before passing the order. The Ld. AO has allowed the deduction as per the provisions of this section only and order u/s 143(3) was not an erroneous order. For the exempt income claimed of Rs. 77,65,278/-, assessee submitted that exempt income earned from dividend earned from investment made in mutual fund and issue was examined during assessment proceeding. Further assessee submitted that assessee company has sold industrial park/undertaking to its 100% subsidiary M/s Noida Towers Pvt. Ltd. the undertaking was sold at much higher price than prevailing circle rate of Noida authority. The facts were discussed at the time of assessment and since there was no revenue effect further no documents were asked by the A.O. Further, the case was fixed for hearing on 10.01.2018, on the given date neither anybody attended nor any reply submitted by the assessee. On 08.02.2018 Sh. Vinod Sahni, CA & AR & Sh. Dinesh Kumar on behalf of the assessee company appeared and submitted supporting documents in support of sale of industrial park and they were requested to submit the further details by 23.02.2018. On 23.02.2018 Sh. Vinod Sahni, CA & AR & Sh. Dinesh Kumar on behalf of the assessee company appeared and

submitted the reply in support of deduction u/s 80-IA, exempt income earned etc. 4. I have perused the assessment records and submissions made by the assessee in this case. During the year under consideration, the assessee has claimed deduction of Rs. 161,37,41,713/- u/s 80IA for which no substantial enquiry/investigation was conducted by; the AO. Assessing Officer failed to conduct enquiry/investigation of exact amount of profit earned on sale of industrial park and subsequently allowabilty of deduction u/s 80IA. Every assessment year is a separate assessment and Assessing Officer examined the condition for allowabilty' deduction u/s 80IA independently irrespective of the fact that assessee has previously claimed deduction u/s 80IA or not. In the instant case AO has not at all initiated the requisite enquiry with regards to deduction claimed u/s 80tA. It was incumbent on the AO to have noticed the distinguishing feature vis-a-vis the preceding year to the effect that while during preceding year the assessee received only rental/maintenance receipts, during the year under reference the whole infrastructure facility has been sold off for a substantial consideration and profit is claimed exempt. It was the duty of the AO to minutely examine the eligibility of claim and true eligible quantum of exemption to be allowed. AO completely failed in examining this aspect and in bringing any evidence on record in this behalf. Assessee has made specified domestic transaction of Rs.208,47,12,830/- with Noida Towers Ltd. and assessee himself admitted that transactions were made much higher price then prevailing circle rate. In this regard, Assessing Officer failed to conduct requisite enquiry/investigation to find out the .arm's length price of the transaction and failed to make reference to TPO which was he was supposed to make as per the CBDT guidelines instruction no 3/2003 and subsequent directions of CBDT. Condition for reference to TPO is squarely applicable to the facts of this case but the AO had passed assessment order without referring the issue of specified domestic transaction for determining arm's length price. Thus, the action of the AO in completing the assessment without making an enquiry through reference to TPO as per CBDT guidelines and subsequently allowing deduction u/s 80IA made the assessment erroneous and prejudicial to the interest of the revenue. The AO also failed to examine applicability' or otherwise of Sec.801A(8), Further, the AO had not conducted requisite enquiry/investigation on exempt income earned by the assessee and applicability of the provision of section 14A of the IT Act, rws Rule 8D of the IT Rule. 5. Also, reliance on the issues of lack of enquiry may be placed on the apex court decision in the case of Ram Pyari Devi Saraogi Vs CIT (67 1TR 84) and in the case of Smt. Tara Devi Agarwal Vs CIT (88 ITR 323) that lack of enquiry would render order of the assessment as erroneous

and prejudicial to the interest of revenue. The Hon'ble Delhi High has also held in the case of ITO versus DG Housing Projects Limited, (2012) 343 FIR 329 (Delhi) as under: "10. Revenue does not have any right to appeal to the first appellate authority against an order passed by the Assessing Officer. Section 263 has been enacted to empower the CJT to exercise power of revision and revise any order passed by the Assessing Officer, if two cumulative conditions are satisfied. Firstly, the order sought to be revised should he erroneous and secondly, it should be prejudicial to the interest of the Revenue. The expression "prejudicial to the interest of the Revenue" is of wide import and is not confined to merely loss of tax. The term "erroneous" means a wrong/incorrect decision deviating from law. This expression postulates an error which makes an order unsustainable in law. 11. The Assessing Officer is both an investigator and an adjudicator. If the Assessing Officer as an adjudicator decides a question or aspect and makes a wrong assessment which is unsustainable in law, it can be corrected by the Commissioner in exercise of revisionary power. As an investigator, it is incumbent upon the Assessing Officer to investigate the facts required to be examined and verified to compute the taxable income. If the Assessing Officer fails to conduct the said investigation, he commits an error and the word "erroneous" includes failure to make the enquiry. In such cases, the order becomes erroneous because enquiry or verification has not been made and not because a wrong order has been passed on merits. 12. Delhi High Court in Gee Vee Enterprises v. Additional Commission of Income-Tax, Delhi-1, (1975) 99 HR 375, has observed as under: - (1) "The reason is obvious. The position and function of the Income-tax Officer is very different from that of a civil court. The statements made in a pleading proved by the minimum amount of evidence may be accepted by a civil court in the absence of any rebuttal. The civil court is neutral. It simply gives decision on the basis of the pleading and evidence which comes before it. The Income-tax Officer is not only an adjudicator but also an investigator. He cannot remain passive in the face of a return which is apparently in order but calls for further inquiry. It is his duty to ascertain the truth of the facts slated in the return when the circumstances of the case are such as to provoke an inquiry. The meaning to be given to the word "erroneous" in section 263 emerges out of this context. It is because it is incumbent on the Income-tax Officer to further investigate the facts stated in the return when circumstances would make such an inquiry prudent that the word "erroneous" in section 263 includes the failure to make such an inquiry. The order becomes erroneous because such an inquiry has not been made and not because there is anything wrong with the order if all the facts stated therein are assumed to be correct.”

I, thus, hold that the assessment order passed in the case of the assessee by the Assessing Officer, Central Circle-16, New Delhi on 10.08.2015 u/s 143(3) is erroneous and prejudicial to the interest of revenue. Thus, the said assessment is set aside and the assessment proceedings are restored back to the file of the Assessing Officer on the issue of examination/verification/allowabilty of deduction u/s 801A and the quantum of deduction u/s 80IA, if at, all the claim itself is valid and applicability of Sec.14A on exempt income. The AO is directed to frame the assessment afresh as per the provisions of the Income Tax Act, after duly examining the specified domestic transactions through reference to the TPO as per Board’s guidelines and considering the report of the TPO on receipt of order u/s. 92CA(3) of the l.T. Act 1961 and after affording due opportunity to the assessee. AO shall also consider the applicability c otherwise of Sec, 80IA(8) as per law. The A.O. shall note that no other error/prejudice to the interest c the revenue has been noted by the undersigned or has been confronted to the assessee and therefore the A.O. is directed to restrict himself while framing fresh assessment to the issues discussed above and consider the same as per law after giving due opportunity of being heard to the assessee.”

(37.2) This appeal is against the aforesaid revision order dated 31.03.2018 Under Section (‘U/s’ for short) 263 of IT Act passed by the Ld. Commissioner of Income Tax, Central-II, New Delhi. In his impugned revision order dated 31.03.2018; Ld. CIT has held the Assessment Order dated 10.08.2015 of the AO passed U/s 143(3) of IT Act, to be erroneous and prejudicial to the interests of Revenue, on two issues. The first issue pertains to the assessee’s claim for deduction U/s 80IA of IT Act. The second issue pertains to applicability of the provisions of section 14A of IT Act, read with Rule 8D of Income Tax Rules, 1962 (’IT Rules’, for short). On both the issues, the Ld. CIT has not specifically indentified the exact error in the order of the AO; and he has also not clearly specified the exact prejudice caused to Revenue- except that he opined that the AO did not conduct enquiry / investigation adequately. The opinion of the Ld. CIT that the order of the AO was erroneous and

prejudicial to the interest of Revenue; is based on the foundation of the following conclusions of fact as expressed by the Ld. CIT in his impugned revision order dated 31.03.2018: i) In paragraph 4 of the aforesaid impugned order dated 31.03.2018, the Ld. CIT has alleged that no substantial enquiry/investigation was conducted by the Assessing Officer (‘AO’ for short) for assessee’s claim of deduction U/s 80IA of IT Act. A little later in the same paragraph, the Ld. CIT has escalated the allegation against the AO by observing that AO has not at all initiated the requisite enquiry with regards to deduction claimed U/s 80IA. Later, in the same paragraph, the Ld. CIT went on to state that it was the duty of the AO to minutely examine the eligibility of claim and true eligible quantum of exemption to be allowed (U/s 80IA of IT Act) and alleged that the AO completely failed in examining this aspect and in bringing any evidence on record in this behalf.

ii) The Ld. CIT has alleged that the AO failed to conduct requisite enquiry/investigation to find out the arm’s length price of the transaction and failed to make reference to TPO which he was supposed to make as per the CBDT guidelines / instruction no 3/2003 and subsequent directions of CBDT.

iii) The Ld. CIT has alleged that the condition for reference to TPO is squarely applicable to the facts of this case but the AO had passed assessment order without referring the issue of specified domestic transaction for determining arm’s length price. iv) The Ld. CIT has alleged that the AO had not conducted requisite enquiry/investigation on exempt income earned by the assessee and applicability of the provision of section 14A of the IT Act, read with Rule 8D of the IT Rule.

(38) Perusal of Assessment Order dated 20.03.2013 U/s 143(3) of IT Act shows that return of income declaring an income of Rs. 12,18,222/- was filed on 27.09.2010. The return was processed U/s 143(1) on 07.05.2011 at the returned income. Subsequently, the case was selected for scrutiny. Statutory notice U/s 143(2) and 142(1) were issued along with a detailed questionnaire. In response to notices, Authorized Representatives of the assessee attended and furnished the details as called for. Books of account were also produced by the assessee, which were test checked by the AO. During the assessment proceedings, various details filed by the assessee before the AO are summarized as under: i) Vide letter dated 22.09.2014: a) Original Power of Attorney b) Copy of Acknowledgement and Computation of taxable income for the AY 2013-14

c) Copy of audited Balance sheet along with all Schedules for the year ended 31.03.2013. d) Copy of Tax Audit Report for the year ended 31.03.2013. e) Copy of Form-3CB, Form-29B and 10CCB with acknowledges for the year ended 31.03.2013. ii) Vide letter dated 23.06.2015: a) Copy of ITR, Balance Sheet etc. b) Details and history of Business activities. c) Copy of Memorandum of Association. d) Details of Share Capital pending for allotment. e) Details of Secured and Unsecured Loans. f) Detail of addition to Fixed Assets. iii) Vide letter dated 01.07.2015: a) Details of Sundry Creditors above Rs. 1 Lac. b) Details of Sundry Debtors above Rs. 1 Lac. c) Details of Statutory Liabilities. d) Details of other liabilities. e) Party wise Sale and Purchase and Manufacturing expenses. iv) Vide letter dated 20.07.2015: a) Details of Financial Expenses. b) Details of Foreign Travelling. c) Details of Capital Gains/loss.

d) Bank Statement. e) Creditors account with no transaction. f) Assessment order for 2012-13. g) Copy of TDS return. v) Vide letter dated 23.07.2015: a) Justification of Deduction U/s 80IA. b) Details of Investment in Mutual Funds . vi) Vide letter dated 29.07.2015: a) Copy of agreement for sale of business undertaking between ETT Limited (i.e. the assessee) and Noida Towers Private Limited. vii) Vide letter dated 06.08.2015: a) Details of related party transactions mentioned in form 10CCB. b) Reconciliation of income with service tax return. c) Domestic transaction with associated enterprises.

(38.1) Perusal of the Assessment Order shows that the total income of the assessee was determined at Rs. 16,09,314/- by the AO vide aforesaid order dated 20.03.2013, keeping in view the details filed by the assessee, and after discussion with assessee’s representative, wherein additions were made on account of addition U/s 40A(7) of IT Act and on account of partial disallowance of assessee’s claim of deduction U/s 80IA of IT Act. Revision proceedings U/s 263 of IT Act were initiated by the Ld. CIT vide show cause notice U/s 263 of IT Act, dated 11.10.2017. During the revision proceedings U/s 263

of IT Act, the assessee made written submissions, running into a total of 198 pages, vide separate letters dated 11.12.2017, 08.02.2018 and 23.02.2018. A short gist of the submissions made by the assessee before the Ld. CIT is reproduced as under: (38.1.1) Gist of written submissions vide letter dated 11.12.2017 The assessee company has received show cause notice u/s 263 (“SCN”). Assessee company’s point-wise reply is hereunder:

1) Reply to Point No. 2 (a): With regard to deduction U/s 80 IA, we draw your kind attention to the fact that the Ld. Assessing Officer had asked the assessee company to submit a detailed note and supporting documents for claiming deduction U/s 80IA. In Reply to that the assessee company submitted a letter dated 23/07/2015 providing detailed note along with five annexures which include notification by CBDT notifying the assessee company as Industrial Park eligible for deduction u/s 80 IA and audit report u/s 80 IA in Form No. 10CCB in support of claim of deduction u/s 80IA. A full set of documents submitted at the time of assessment proceedings are attached as Annexure. There were detailed discussions on documents submitted and claim of deduction between Ld. Assessing Officer and the AR of the assessee company during various assessment proceedings. Further Ld. Assessing Officer asked information about the claim of deduction in earlier years also, in support of which the assessee company submitted assessment order of those years. These facts are also stated in the assessment order U/s 143(3) of the Income Tax Act for the Assessment year under reference and while passing the order the Ld. Assessing Officer has also disallowed part of the deduction claimed by the assessee company which indicates the depth in which Ld. Assessing Officer went into the claim of deduction u/s 80IA. From the Above facts it is evident that the Ld. Assessing Officer was fully aware of the claim of the assessee company and has enquired fully before passing the assessment order. The assessee company has developed the industrial park at plot no. 15 & 16, Sector 16-A, Noida, District- Noida, Uttar Pradesh-201301 and had applied under industrial park scheme 2002 to claim deduction u/s 80 IA of the income tax Act. The CBDT has issued the notification dated 17th November 2006 notifying the assessee company as “the undertaking, being developed and being maintained and operated by the assessee company as an Industrial park for the purpose of section 80-1A (4) (Hi)”. The said sub section is reproduced here below:

“80-IA(4)(iii) any undertaking which develops, develops and operates or maintains and operates an industrial park or special economic zone notified by the Central Government in accordance with the scheme framed and notified by that Government for the period beginning on the 1st day of April, 1997 and ending on the 31st day of March, 2006: Provided that in a case where an undertaking develops an industrial park on or after the 1st day of April, 1999 or a special economic zone on or after the 1st day of April, 2001 and transfers the operation and maintenance of such industrial park or such special economic zone, as the case may be, to another undertaking (hereafter in this section referred to as the transferee undertaking), the deduction under subsection (1) shall be allowed to such transferee undertaking for the remaining period in the ten consecutive assessment years as if the operation and maintenance were not so transferred to the transferee undertaking:

Provided further that in the case of any undertaking which develops, develops and operates or maintains and operates an industrial park, the provisions of this clause shall have effect as if for the figures, letters and words "31st day of March, 2006", the figures, letters and words "31st day of March, 2011" had been substituted;”

This indicates that there are three distinct categories of profits contemplated as eligible for the benefit of the deduction under Section 80-IA(4)(iii), 1. Profits made by an assessee who builds / constructs / an industrial Park and immediately sells, it (“develops”) 2. Profits made by an assessee who builds / constructs an Industrial Park, leases it out for a period, and then sells it (“develops and operates”) Profits made by an assessee who, without 3. havingconstructed it, merely maintains and operates an Industrial Park (“maintain and operates”) In the instant case, the assessee company, as mentioned in point no. 2 above, has developed and operated an industrial park and has sold the same during the year under consideration and has claimed the deduction as allowed in Sub -Section 4(iii) of section 80IA. The above facts were made to the knowledge of Ld. Assessing Officer during various discussions and the same was cross verified by him from the Income Tax Act and only thereafter the Ld. Assessing Officer has accepted the claim of the assessee company. Therefore, it is evident that the assessee company had claimed the deduction U/s 80IA 4(iii) for developing and operating the industrial park and not only for operating and maintaining as contemplated in the SCN.

Hence while allowing the deduction u/s 80IA4(iii) the Ld A.O. has applied his mind and fully verified the facts before passing the order. The Ld. Assessing Officer has allowed the deduction as per the provisions of this section only and order u/s 143(3) was not an erroneous order.

2) Reply to Point No. 2 (b): During the assessment year under reference the assessee company has earned dividend income amounting to Rs. 77,65,278/-. The dividend was earned from mutual fund investments made during the year. During the assessment proceedings the assesse company filed details of investments in mutual fund along with income earned thereof. The money was invested out of sales consideration received from sale of industrial park. The same was evident from bank statements filed during the assessment proceedings. The Ld. Assessing Officer discussed the matter with the AR of the assesse company and was explained about the relation of expenditure incurred with reference to investment made. It was clarified that the interest on bank loan amounting Rs.1,79,46,655/ was related to the period before making the 'investment as the bank loan was fully paid from the sales consideration of 'industrial park and only the balance amount of consideration was invested in mutual funds. In support of this the AR filed the sanction letter of the bank loan along with bank loan statement and detail of financial expenses. Further it was also explained that closing balance of current investment is nil and of non-current investment is Rs.83,509/- as at the end of the year under reference. We also wish o submit that mutual fund investment was made through consultant broker and no direct/indirect expenditure was incurred/required to be incurred to earn dividend income on such investment and the Assessing Officer was made well aware about these facts during the assessment proceedings. Since the Ld. Assessing Officer has cross checked all the above facts and AR has submitted he requisite details and documents with reference to investment, the question of no enquiry was made by the Ld. Assessing Officer is absolutely wrong, baseless and not tenable. In addition to above we also wish to submit that any additions of upto Rs.3,86,28,233/- was of nil effect to revenue as there would have been be no change to taxable income of the assesse company for the relevant assessment year due to deduction u/s 80IA amounting Rs.165,14,13,241/- which was restricted to the amount of gross total income of Rs.161,27,85,008/-. Hence, even if there was any addition due to expenditure related to dividend income there would have not been any additional tax revenue for the year under reference. From the above it is evident that there was no erroneous assessment by the Ld. Assessing Officer with reference to exempt income of Rs.77,65,278/- and there was no revenue loss either.

3) Reply to Point No. 2 (c): The Assessing Officer had given a questionnaire dated 16/06/2015 which has 23 questions/ requirements against which the assesse company had submitted various documents and statements during the assessment proceedings for the year under reference. After verifying various documents and evidences submitted by the assesse company the books of accounts were produced before the Assessing Officer and was test checked by him. These facts are also mentioned in the first paragraph of the assessment order passed by the Ld. Assessing Officer. Reproducing verbatim for your reference - ‘In response to notices, Shri Vinod Sahni, FCA and Shrl Vaibhav Gupta, FCA Authorized Representative of the assesse company attended and furnished the details as called for books of account produced which were put to test check.’ Hence the question of passing the order in haste does not arise at all and fact that assessment order is erroneous and is prejudice to the interest of revenue is unfound. 4) Reply to Point No. 2 (d): The assesse company is engaged in the business of real estate development and has earned rental income on industrial park building during the year under reference. There was difference of Rs. 42,13,138/- in the amount of rent received as shown in the service tax return compared to as shown in the profit & loss account for the year. The AR has filed the reconciliation statement during the assessment proceeding explaining the reason for difference. As submitted earlier that the assesse company has sold the industrial park during the year and the rental income which was earned by the assesse company on that industrial park only has stopped from the date of sale i.e. 23rd May 2012. The rent was received every month in advance and full month rent of May 2012 has been included in the service tax return. However, as the industrial park building was sold on 24rd May 2012 the assesse company needed to transfer 8 days rent to the purchaser and the same was of Rs.42,13,138/-. The assesse company has duly transferred the same and that led to the difference between rent amount shown in the profit & loss account and service tax return. The Ld. Assessing Officer asked for the reconciliation and the same above facts were explained to him while submitting the reconciliation statement vide letter dated 06/08/2015. The facts were so evident from the records produced before the Assessing Officer that no further explanation was needed by the Ld. Assessing Officer.

Hence, the question of erroneous order by the Assessing Officer does not arise at all. 5) Reply to Point No. 2 (e):

As submitted earlier the assesse company has sold industrial park / undertaking during the year under reference. The same was sold to its 100% subsidiary M/s Noida Towers Pvt. Ltd. The Assessing Officer asked the AR to produce documents in support of domestic transfer priding guideline. In response to that the AR filed copy of 3CEB Form and explained the transaction verbally. The undertaking was sold at much higher price than the prevailing circle rate of the Noida Authority. A valuation report was also obtained by the assesse company from the approved independent valued, who valued it at Rs.205,94,90,864/- lower than the sale price which was Rs.208,47,12,83C/-. The facts were discussed at the time of assessments and since there was no revenue effect further documents were not asked by the Ld. Assessing Officer. Hence, there is no loss of revenue and the basic documents with regard to domestic transfer pricing was submitted during the assessment proceedings, the question of erroneous assessment order does not arise on this ground. 6) Reply to Point No. 2 (f): The assesse company has suffered losses on sale of current investment of Rs.29,41,25,518/- during the year under reference. The AR has filed script wise profit & loss details of the above loses during the assessment proceedings. The losses were on account of purchase and sale of equity shares through SEBI registered broker M/s Religare Securities Limited at recognized stock exchanges. The assesse company also paid Securities Transaction Tax (STT) on all the share transactions. These facts were explained to the Ld. Assessing Officer and original bills/contract notes/ ledger accounts of broker were produced during test check of books of accounts which were duly verified by the Ld. Assessing Officer. He accepted the loss claimed by the assessee after being satisfied from the supporting produced before him and had passed the order thereafter only.

From the above facts it is evident that the Ld. Assessing Officer has duly verified the claim of loss by the assesse company and question of erroneous order does not arise.

7) Reply to Point No. 2(g):

The assesse company transferred the shares of wholly owned subsidiary company M/s Valley Computech Ltd. to its another wholly owned subsidiary company M/s Auxin Engineering Ltd. The transaction was made at face value of Rs. 2,56,71,500/-, the cost of which was Rs. 126,21,65,200/- and the book loss of Rs. 1,23,64,93,700/- on sale of share was debited to the profit & loss account. The sale of shares to its subsidiary company is not regarded as transfer u/s 47(iv) of the Income

Tax Act. Accordingly the sale was not treated as transfer under the Income Tax Act and the assesse company has also not claimed any loss on the same in its income tax return for the year.

The above facts were discussed in detail with the Ld. Assessing Officer and he was totally satisfied with the explanation provided and provisions of law applicable on such transfer. Further, there was no loss of revenue in this transaction. Hence, the order was not erroneous and also not prejudice to the interest of the revenue. From the above point wise reply of all the issues raised in the letter dated 11th October I 2017 we can conclude that: a) There were number of hearings during the assessment proceedings and hundreds of documents were submitted; b) All the details and documents were verified by the Ld. Assessing Officer and all his questions were answered; c) Books of accounts were produced and test check was done by the Ld. Assessing Officer; d) There was no loss of revenue on any issues raised in the SCN dated 11lh October 2017; e) The assessment order was not erroneous and also not prejudice to the interest of revenue on any account. On the above facts we hereby pray not to initiate proceedings u/s 263 of the Income tax Act, for the Assessment Year 2013-14 against the assessee company. ETT LIMITED ASSESSMENT YEAR 2013-14 Note for Claiming Deduction u/s 80IA:- • ETT Limited (formerly known as Indian Express Multimedia Limited) was incorporated on November 11, 1993 and the name got changed to ETT Limited on 01/06/2007, a copy of the fresh certificate of incorporation consequent upon change of name is attached as Annexure-I. The company is engaged in developing, operating and maintaining the IT Park.

• ETT Limited had constructed and developed an IT Park at 15-16, Sector 16A, Noida, which was declared functional in March’2004 by the Noida Authority. The assessee company applied for exemption in terms of section 80-IA • with the Ministry of Commerce & Industry in September 2005. • As per section 80IA(1)- “Where the gross income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in sub-section (4) (such business being hereinafter referred to as the

eligible business), there shall, in accordance with the subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction of an amount equal to hundred per cent of the profits and gains derived from such business for ten consecutive assessment year.]” Further, the sub section (2) of section 80-IA states that "the deduction • specified in sub-section (1) may, at the option of the assessee, be claimed by him for any ten consecutive assessment years out of fifteen years beginning from the year in which the undertaking or the enterprise develops and begins to operate any infrastructure facility or starts providing telecommunication service or develops an industrial park ……….” Further 80-IA(4)(iii) states that: • ‘‘any undertaking which develops, develops and operates or maintains and operates an industrial park [or special economic zone] notified by the Central Government in accordance with the scheme framed and notified by that Government for the period beginning on the 1st day of April, 1997 and ending on the 31st day of March, [2006]: [Provided that in a case where an undertaking develops an industrial park on or after the 1st day of April, 1999 or a special economic zone on or after the 1st day of April, 2001 and transfers the operation and maintenance of such industrial park or such special economic zone, as the case may be, to another undertaking (hereafter in this section referred to as the transferee undertaking), the deduction under subsection (1) shall be allowed to such transferee undertaking for the remaining period in the ten consecutive assessment years as if the operation and maintenance were not so transferred to the transferee undertaking. ”

On the basis of application by the assessee company and after due • diligence the Ministry of Commerce & Industry granted approval to the Company vide notification dated 17th November 2006 under the provisions of Section 80-IA of the Income Tax Act, 1961 to declare area as an Industrial Park for 100% Income Tax exemption. A copy of the notification dated 17/11/2006 is attached as Annexure-ll. • The assessee company has received the approval in terms of the Industrial park Scheme, 2002, notified by the department in exercise of powers u/s 80IA, sub section 4(iii) of the Income Tax Act-1961.The Industrial park at plot no-15 & 16, sector-16A, Noida is duly notified industrial park vide notification no. 347/2006.F.no-178/122/2006-ITA-l. The notification received by the assessee company clearly stated that • “now, therefore, in exercise of the powers conferred by clause (iii) of sub section (4) of section 80-IA of the said Act, the Central Government hereby notifies the undertaking, being developed and being maintained and operated by M/s Indian Express Multimedia Limited, Noida, as an industrial park for the purposes of the said clause (iii).

The notification has given certain terms and conditions for • such deduction under the Income Tax Act. The detailed conditions are specified in the Annexure to the notification.

Few of the major conditions imposed by the notification were as follows: • 1. Proposed condition : 90% of the allocable area was earmarked for industrial use. The proposed industrial activities were defined in the notification itself

Actual : 90.01% of the total area was for allowed industrial use only in the year under consideration as evident from the half yearly return filed. 2. Proposed condition : Investment required was minimum of Rs.43 crores Actual : Rs.46.13 crores were invested by the assessee company as evident from the balance sheet. 3. Proposed Condition : Commencement of IT Park shall be made on or before April 2005

Actual : Much before April 2005

Actual : The companies is providing all these facilities at the IT Park and can be cross verified from the balance sheet & profit & loss account of the company.

Actual: Ten

• The assessee company has fulfilled all those terms and conditions on which the approval of the Government of India has accorded for setting up of an industrial park. The company has leased out its premises for approved industrial activities to six tenants (occupying more than 90% of Industrial activity area) and complying with the terms of above said notification. The company is also filing return regularly to Ministry of Commerce & Industry in to the prescribed form-IPS-ll stating all the compliances which has been duly accepted by Ministry. The company has also provided infrastructure development including water supply, 100% power back up through DG sets, centralized air-conditioning services through chillers and other

facilities for common use of Industrial activity as also referred in clause 3 of the said notification and amount received against is credited to Profit and Loss account under the head Of Maintenance charges received. A copy of the returns filed in form IPS-II of the relevant period is attached as Annexure-lll. As stated above the IT Park developed by the company got functional  in the year 2004-05, a copy of the completion certificate dated 17/06/2004 issued by Noida Authority is attached as Annexure-iv The company has given part of the premises on rent in the financial year 2004-05, which shows the commencement of operation at the IT Park. However the approval from the Ministry came in the month of November 2006 and accordingly the company has not claimed any deduction u/s 80-IA in the Assessment Years 2005-06, 2006-07 and 2007-08. The company started claiming the deduction in the Assessment Year 2008-09 and claiming the same continuously thereafter.  The assessment u/s 143(3) was completed in four of the last Seven years (i.e. period between A.Y. 2005-06 to A.Y. 2012-13). Out of these seven years the assesse company has claimed deduction u/s 80-IA only for the A.Y. 2008-09, 2009-10, 2010-11, 2011-12, 2012- 13 & 2013-14. The assessment for the a.y. 2012-13 was completed in July 2014 by your office only and the claim of the assessee for deduction u/s 80-IA has been accepted after detailed verification by the concerned officer. The assessee company has already submitted a detailed  computation of deduction u/s 80-IA along with copy of the certificate issued by the Chartered Accountants required for claiming deduction. A copy of both the documents is attached again as Annexure-V In view of above the assesse company has rightly claimed the deduction u/s 80-IA of the Income Tax Act and shall be allowed the same while making the assessment for the A.Y. 2013-14.” (38.1.1.1) Gist of written submissions vide letter dated 08.02.2018 Further to our submission dated 11/12/2017 and as required by your good self, we are submitting following information and documents: 1) Reconciliation of Income with Service Tax Return: - A sheet showing Reconciliation of Income with Service Tax Return, Copy of Service tax return and copy of ledger account is attached herewith as Annexure I. 2) Sale of Industrial Park to its Subsidiary and Subsequent to IL.FS:- As submitted earlier the assessee company has sold an industrial park

located at Plot No. 15 & 16 at Sector 16A Noida to its wholly owned subsidiary M/s Noida Towers Pvt. Ltd. and subsequently the ownership of that subsidiary was transferred to IL & FS group. All these transactions are supported by valuation report of industrial park and various agreements between the parties. The transaction was made at Arm’s Length Price as evident from the valuation report and other supporting documents which are described hereunder and attached as Annexure-II.

- In support of transaction was made at Arm’s Length Price a copy of Valuation report along with transfer pricing study & report and Agreement for sale of Business undertaking between ETT Limited and Noida Towers Pvt. Ltd. - In support of subsequent transfer a) Investment Agreement between IL&FS Trust company Ltd with Noida Towers Pvt. Ltd. and b) Escrow Agreement between ETT Limited and Noida Towers Pvt. Ltd. and c) Copy of valuation report of shares of M/s Noida Towers Pvt. Ltd. 3) Capital Gain Statement in support of Losses: - A details showing date wise & Script wise purchase and sale of share are attached herewith as Annexure III. 4) Clarification loss on sale of Non - Current Investment: - As submitted earlier, the assessee has transferred shares of subsidiary M/s Valley Computech Pvt Ltd to its another Subsidiary M/s Auxin Engineering Ltd for the purpose of internal restructuring only. Further Capital loss arising on sale of Non- current investment was not claimed in the income tax return. 5) Methodology for computing profit on Sales of Industrial Park: - The assessee company has developed only one industrial park till assessment year under consideration and has sold the same in this year. Till the date of sale the industrial park was rented out to various parties, all the rental incomes and maintenance charges are recognized as business income. Deduction u/s 80IA was claimed as per notification dated 17th November 2006 in all the years. The profit on sale of industrial park is shown under the head business income and deduction u/s 80IA is claimed under the same notification. The assessee company has got the notification for claiming deduction u/s 80IA for the undertaking being developed and being maintained and operated by the assessee company. The assessee company has developed the industrial park and after maintaining and operating for some years sold the same and has claimed the deduction. Copies of all previous assessment years are attached in support of claim of the assessee company of deduction u/s 80IAare attached as Annexure IV.

On the above facts we hereby pray not to initiate proceedings u/s 263 of the Income tax Act, for the Assessment Year 2013-14 against the assesse company.”

(38.1.1.2) Gist of written submissions vide letter dated 23.02.2018

Further to our submission dated 08/02/2018 and as required by your good self, we are submitting following information and documents: 1) Deduction U/s 80 IA In the earlier hearings we have submitted that the assessee company was a developer of an Industrial park situated in Noida and has operated and maintained the same for some years and later on sold it and has earned business income on which it has claimed deduction u/s 80IA under sub clause (iii) of clause 4. Your good self has raised certain points and asked for the clarification with regard to allowability of deduction u/s 80-IA (4) (iii) to the developer of the an Industrial Park. In support of our claim of deduction we are producing herewith following documents and information for your reference : a) Amendment in Finance Act 1999 and Circular No. 779 dated 14-09-1999 issued by CBDT on finance act 1999 : There was an amendment in finance act 1999 in Section 80 IA which has resulted in* enhancement of its scope for the infrastructure activities eligible for exemption. Prior to this amendment section 80-IA (4D) states and we quote “this section applies to any undertaking which begins to operate an industrial park notified by the Central Government in accordance with the scheme framed and notified by that Government for the period beginning on the 1st day of April, 1997 and ending on 31st day of March, 2002”. The finance act 1999 has amended the section and brought in 80- IA(4)(iii) in place of 80-IA (4D) which states as under. ‘‘Any undertaking which develops, develops and operates or maintains and operates an industrial park notified * by the Central Government in accordance with the scheme framed and notified + by that Government for the period beginning on the 1st day of April, 1997 and ending on the 31st day of March, 2002”. CBDT further clarified that with this amendment, it is made clear that any enterprises engaged in developing, maintaining and operating the infrastructure facility or maintaining and operating the infrastructure facility

or only developing the infrastructure facility would also be eligible for exemption under this clause, (a copy of circular by CBDT on finance act is attached for your reference as Annexure-1. Further the memorandum of the Finance Act 1999 states as under “An undertaking or a project for (i) developing, (ii) developing and operating, or (Hi) maintaining and operating an industrial park which has been notified by the Central Government under clause (iii) of sub-section (4) of section 80-IA is also included in the definition of infrastructure facility and is, thus, within the scope of exemption under this clause”. Copies of the relevant amendments and portion of memorandum to Finance Act 1999 is attached herewith as Annexure-2. From all the above amendments and the intention of the law to bring these amendments it is quite evident that the deduction u/s 80-IA (4)(iii) is allowable to the assessee company on the develop and sale of Industrial Park. b) Some judgments in which courts have allowed the deduction U/s 80-IA for developing infrastructure facilities are as follows : Please refer to our discussion on the allowability of deduction u/s 80- IA (4)(iii) to a developer of an Industrial Park and your quarries on any judgments on the matter, we are producing herewith copies of some of the judgments similar to the matter under assessment: i) Parnika Commercial & Estates (P.) Ltd. v. Addl CIT Range New Delhi [2016] 72 taxmann.com 177 (Delhi - Trib.) : In which it was stated that Section 80-IA , intends to cover the entities carrying out development or operation and maintenance or development, operation & maintenance of infrastructure facility. As per CBDT Circular Nos. 779. dated 14-9-1999 and 794, dated 9-8-2000, the developer is also eligible to claim deduction under section 80-IA irrespective of fulfilling the condition of operating and maintaining or developing, maintaining and operating, which ultimately culminated into Amendment under section 80IA, in Finance Act 2001. To avoid misuse of the aforesaid amendment, an Explanation was inserted in section 80-IA, in the Finance Act-2007 and 2009, to clarify that mere works contract would not be eligible for deductions under section 80-IA(4). But, certainly, the Explanation cannot be read to debar the eligibility of the developer. Thus, the aforesaid Explanation was inserted, certainly, to deny the tax holiday to the entities who does only works contract or sub-contract as distinct from the developer. The explanatory memorandum to the Finance Act, 2003 states that the purpose of the tax benefit has all along been to encourage

investment in development of infrastructure sector and not for the persons who merely execute the civil construction work as a contractor. It categorically states that the deduction under section 80-IA is available to developers who undertake entrepreneurial and investment risk and not for the contractors, who undertakes only business risk. After the amendment, the section 80-IA(4) read as (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining any infrastructure facility. Prior to amendment the word 'or' between three activities was not there and after the amendment 'or' has been inserted with effect from 1-4- 2002 by Finance Act, 2001. Therefore, the entities who carry out any of the above activities shall be entitled to claim deduction under this section. ii) Jaypee Infratech Ltd V. Commissioner of Income-tax, Noida [2015] 57 taxmann.com 397 (Delhi - Trib.): Section 80-IA of the Income-tax Act, 1961 - Deductions - Profits and gains from infrastructure undertakings (Infrastructure undertaking) - Assessment year 2009-10 - Assessee-company was engaged in business of developing, operating and maintaining, 'road including toll road' - It entered into a concession agreement with TEA for development, operation and maintenance of six lane expressway/toll road - In terms of agreement, assessee- company was also granted by TEA, rights for land development of 25 million sq. mts. of land along proposed expressway for commercial, amusement, industrial, institutional, and residential development - Assessee's case was that since one of its avowed objects was residential and institutional development consisting of sale of plots and buildings, those activities of housing and sale of land etc. were an integral part of proposed highway project - Assessee filed its return claiming deduction under section 80-IA(4) in respect of income from sale or sub-lease of land assigned to it under concession agreement - Assessing Officer allowed assessee's claim - Whether on facts business activities of assessee-company fell within ambit of clause(a) of Explanation to section 80-IA(4)(i) and, thus, Assessing Officer was justified in allowing assessee's claim - Held, yes [Para 57], iii) ACIT v. Bharat Udyog Ltd. [2008] 24 SOT 412 (Mumbai): Section 80-IA of the Income-tax Act, 1961 - Deductions - Profits and gains from infrastructure undertakings - Assessment year 2002-03 - Whether assessee being engaged in 'developing' infrastructural facility, i.e., road, and not engaged in 'operating and maintaining', said facility, is entitled to benefits of deduction under section 80- IA(4) - Held, yes

This indicates that there are three distinct categories of profits contemplated as eligible for the benefit of the deduction under Section 80-IA(4)(ii.i), 1. Profits made by an assessee who builds / constructs / a industrial Park and immediately sells, it (“develops”) 2. Profits made an assessee who builds / constructs an (“develops and operates”) 3. Profits made by an assessee who, without having constructed it, merely maintains and operates an Industrial Park (“maintain and operates”) In the instant case, the asseesee company, as mentioned in point no. 2 above, has developed and operated an industrial park and has sold the same during the year under consideration and has claimed the deduction as allowed in Sub - Section 4(iii) of section 80IA. Therefore it is evident that the assessee company had claimed the deduction U/s 80IA 4(iii) for developing and operating the industrial park and not only for operating and maintaining as mentioned in the show cause notice. 2) Expenses in relation to earn exempt income of Rs. 77,65,278/- The assessee company has earned Exempt income by way of dividend on mutual funds which was invested from the money received on sale of industrial park and all the loans were repaid before the sale of industrial park as it was a condition in the business transfer agreement. Since investment were after transfer and interest cost was before transfer there' is no correlation between the interest expense and exempt income earned. A copy of ledger of Investment in mutual fund, dividend earned, Loan statement, interest expense are attached herewith as Annexure-3. 3) Detail of Investment in Valley Computech Limited Please find attached detail of investment in M/s Valley Computech Limited as Annexure-4. 4) Book Loss debited to the profit & loss account are eligible as deduction for computing Profit u/s 115JB of the Income Tax Act. Section 115JB of the Income Tax Act specifies various amount by which the book profit as shown in the profit and loss account for the relevant previous year is to be increased or decrease to arrive at the

profit or loss to be considered for calculating the Minimum Alternate Tax (MAT) liability. Such adjustments however do not include increasing the book profits by the loss arising on account of sale of investment. The accounting loss on transfer of shares in Valley Computech is debited to the profit and loss account of the assessee company, based on the treatment prescribed as per the Accounting Standards and as duly certified by the statutory auditors of the company. As per the provisions of Income Tax Act the net profit as decreased by the loss on sale of capital asset and as certified by the statutory auditors of ETT Ltd. cannot be increased by the assessing officer and thus be made liable to MAT, placing reliance of the Supreme Court decision in the case of Apollo Tyres Ltd. (2000)255 ITR 273, wherein the Apex Court held that, where the accounts of the assessee are certified by the statutory auditors of the company, the assessing officer can make only adjustments which are specifically permitted u/s 115J of the Income Tax Act and cannot restate the book profits. A copy of judgment is attached herewith as Annexure-5. The above facts were discussed in detail with the learned AO and he was totally satisfied with the explanation provided and provisions of law applicable on such transfer. Further, there was no loss of revenue in this transaction. Hence, the order was not erroneous and also not prejudice to the interest of the revenue. On the above facts we hereby pray not to initiate proceedings u/s 263 of the Income tax Act, for the Assessment Year 2013-14 against the assesse company.”

(39) It is not clear from perusal of records as to what was the cause of action for initiation of proceedings U/s 263 of IT Act; such as, whether there was any audit objection, or whether any other new information from outside the assessment records were received by the Ld. CIT. Be that as it may, numerous hearings were fixed by the Ld. CIT, including on 07.11.2017, 29.11.2017, 11.12.2017, 10.01.2018, 08.02.2018 and 23.02.2018. Eventually the aforesaid impugned order dated 31.03.2018 was passed by the Ld. CIT on 31.03.2018. Thus, it is seen that although the revision proceedings U/s 263

of IT Act prolonged for a few months, the impugned order was passed by the Ld. CIT on the last day of limitation period, i.e. on 31.03.2018. A perusal of the aforesaid impugned revision order dt. 31.03.2018 passed U/s 263 of IT Act shows that although submissions made by the assessee vide aforesaid written submissions dated 08.02.2018 and 23.02.2018 have been mentioned; the contents of these submissions have not at all been discussed by the Ld. CIT. Even as far as aforesaid written submissions dated 11.12.2017 is concerned, only a small portion of it has found mention in aforesaid impugned revision order dated 31.03.2018 passed by Ld. CIT U/s 263 of IT Act. Thus, it is obvious that the material brought by the assessee for the consideration of Ld. CIT have not been fully factored in by the Ld. CIT; and the Ld. CIT has not fully dealt with the entire force of assessee’s submissions before making an adverse decision against the assessee. Moreover, the Ld. CIT has observed in a cryptic, summary and non- speaking manner in aforesaid order dated 31.03.2018, that the AO had not conducted requisite enquiry / investigation on exempt income earned by the assessee and applicability of the Provision of Section 14A of the IT Act, read with Rule 8D of I.T. Rules, 1962; without dealing with submissions made and materials placed by the assessee before the Ld. CIT vide aforesaid Letters dated 11.12.2017 and 23.02.2018, as per foregoing paragraphs (38.1.1) and (38.1.1.2) of this order. It is also found, in view of foregoing paragraph (37.2) (i) of this order, that the allegations of the Ld. CIT against the AO, narrated by him in paragraph 4 of the aforesaid order dated 31.03.2018, fluctuate in severity and description. From these

features of the aforesaid order dated 31.03.2015 of Ld. CIT; it can be concluded that the order has been passed by Ld. CIT in a hasty manner, without due applications of mind, without fully taking into consideration the submissions made and materials placed by the assessee before Ld. CIT, and without dealing with the full force of assessee’s submissions and contentions; and part of the order is also cryptic, summary and non-speaking in nature. An order such as this, is liable to be quashed. (40) As already mentioned in paragraphs (37.2)(i) and (39) of this order, the Ld. CIT has varyingly alleged that no substantial enquiry / investigation was conducted by the AO for assessee’s claim of deduction U/s 80-IA of IT Act; that the AO has not at all initiated the requisite enquiry with regards to deduction claimed U/s 80-IA of the IT Act; and that that it was the duty of the AO to minutely examine the eligibility of claim and true eligible quantum of exemption to be allowed (U/s 80IA of IT Act) and alleged that the AO completely failed in examining this aspect and in bringing any evidence on record in this behalf. All of these allegations, while varying in severity and description, are, however, contrary to materials on record. In paragraph (38) of this order, a list of various details filed by the assessee during assessment proceedings, has been summarized. In paragraph (38.1) of this order, the partial disallowance made by the AO out of assessee’s claim for deduction U/s 80-IA of IT Act has been mentioned. In paragraphs (38.1.1), (38.1.1.1) and (38.1.1.2) of this order, a gist of the submissions made by the assessee and the materials brought by the assessee for the consideration of the Ld. CIT during

proceedings U/s 263 of IT Act, have been included wherein the assessee has elaborately explained the enquiries / investigations conducted by the AO and how the AO examined this aspect and brought evidences on record in this behalf. In paragraphs 22, 23 and 24 of the order of esteemed Judicial Member, he has elaborately explained the enquiries / investigations conducted by the AO and how the AO examined this aspect and brought evidences on record in this behalf. In view of the foregoing, it is readily inferred that the allegations and conclusions of fact expressed by the Ld. CIT as per foregoing paragraph (37.2)(i) are such, which cannot be drawn by any reasonable person or authority on the disclosed state of facts. Such being the case, the factual conclusions and the allegations of the Ld. CIT as per foregoing paragraph (37.2)(i) are held to be patently perverse. (40.1) Coming to conclusions of fact and allegations as per paragraphs (37.2)(ii) and (37.2)(iii) of this order as expressed by the Ld. CIT in his impugned revision order dated 31.03.2018 passed U/s 263 of IT Act; useful reference may be made to paragraphs 24, 25, 26, 27, and 28 of the order of the esteemed Judicial Member, wherein he has clearly established that not only the AO conducted requisite enquiry / investigation to find out the arm’s length price of the transactions, but also that mandatory reference to TPO in respect of specified domestic transactions was not applicable for determining arm’s length price. Useful reference may also be made to paragraph (38) of this order, containing a list of various details filed by the assessee during assessment proceedings. Further reference may also be made to paragraphs (38.1.1), (38.1.1.1) and (38.1.1.2) of this order, containing a gist of the

submissions made by the assessee and the materials brought by the assessee for the consideration of the Ld. CIT during proceedings U/s 263 of IT Act. In view of the foregoing, once again, allegations made and conclusions of fact drawn by the Ld. CIT as per forgoing paragraphs (37.2)(ii) and (37.2)(iii) are such, which cannot be drawn by any reasonable person or authority on the disclosed state of facts. Therefore, these allegations and conclusions of fact are also held to be suffering from patent perversity. (40.1.1) Now, coming to the allegation and conclusion of fact expressed by the Ld. CIT as per paragraph (37.2)(iv) of this order, useful reference may be made to foregoing paragraphs (38.1.1) and (38.1.1.2), containing gist of assessee’s submissions, including on applicability of Section 14A of IT Act read with Rule 8D of IT Rules; made before the Ld. CIT during proceedings U/s 263 of IT Act. In paragraph 34 of his order, Ld. Judicial Member has held: “Now, coming to the issue of applicability of provision of section 14A, the assessee before the Assessing Officer has filed all the relevant details for investment made in mutual funds on which assessee has earned dividend income of Rs. 77,65,278/-. It has also been brought on record before the Assessing Officer that entire money invested in the mutual funds were out of sales consideration received from the sale of industrial park and this was shown from the bank statements filed during the course of assessment proceedings. Before the Assessing Officer this issue was discussed thread bare and it was specifically pointed out that interest on bank loan amounting to Rs. 1,79,46,655/- related to the period prior to making of the investment and the bank

loan was fully paid from the sale consideration of the industrial park, i.e, bank loan was fully paid before making the investment in the mutual funds. In such a situation ostensibly, no interest could have been disallowed. The closing balance of current investment was’ nil’ and non-current investment was only Rs. 83,509/- at the end of year. It was also stated before the Assessing Officer that no direct or indirect expenditure was incurred to earned the dividend income. After verifying these facts Assessing officer accepted the assessee’s plea and no disallowance were made.” The esteemed Judicial Member, again in paragraph 34 of his order, has observed: “….There is no whisper by the Ld. CIT as to why disallowance u/s 14A was called for on the facts of the case. The disallowance under section 14A is not automatic whenever there is any kind of exempt income. It has to be seen with regard to nature of expenses debited and whether any expenditure can be calculated.” In view of the foregoing, once again, allegation and conclusion of fact expressed by the Ld. CIT as per forgoing paragraph (37.2)(iv) are such, which cannot be drawn by any reasonable person or authority on the disclosed state of facts. Therefore, this allegation and conclusion of fact, are also held to be suffering from patent perversity. (40.2) In view of the foregoing paragraphs (40), (40.1) and (40.1.1), it is held that all the allegations and conclusions of fact as expressed by the Ld. CIT in his impugned revision order dated 31.03.2018, as per paragraph (37.2) of this order, suffer from patent perversity. Thus, the allegation and conclusions of fact, which form the foundation of the aforesaid impugned revision order dated 31.03.2018 of

Ld. CIT, passed U/s 263 of IT Act; suffer from patent perversity. Accordingly, the aforesaid impugned revision order dated 31.03.2018 passed U/s 263 of IT Act is held to be a perverse order, having no legitimate foundation on which it can stand, and is liable to be quashed. (41) Useful reference may be made to decided judicial precedents, in support of the view that a perverse order of an authority is wrong and is liable to be quashed. In the case of Kejriwal Enterprises and Another v. CIT 260 ITR 341 (Calcutta), the Hon’ble High Court held: “When an authority draws a conclusion which cannot be drawn by any reasonable person or authority on the disclosed state of facts, then a perverse decision is entered and a perverse decision is wrong….” In the case of Pyarelal Mittal vs. ACIT 291 ITR 214 (Gauhati), the Hon’ble High Court took the view that the appellate authority is competent to interfere when the findings of fact by the lower authority are perverse and contrary to materials on record. In the case of DCIT v. H.V. Shantharam 261 ITR 434 (Karnataka), the Hon’ble High Court held that perverse conclusions and findings could not be sustained. In the case of CIT v. B.L. Passi 254 ITR 225 (Delhi), the Hon’ble High Court took the view: “….a finding on a question of fact can be challenged as erroneous where ….the finding is so per verse or unreasonable that no person acting judicially and property instructed on law could have arrived at it.” In the case of CIT v. Nova Promoters and Finlease (P) Ltd. 342 ITR 169 (Delhi), Hon’ble High Court held that findings of facts, based on irrelevant material or by ignoring the relevant material, cannot be upheld. It was also held by the

Hon’ble High Court, relying on DIT v. Bharat Diamond Bourse 259 ITR 280 (SC), that perverse findings of fact of the lower authority, or if the findings are such that no person acting judicially and property instructed as to the relevant law could have come to the determination under appeal, are not binding on the appellate authority. In the case of Santosh Hazri v. Purushottam Tiwari 251 ITR 84 (SC), Hon’ble Supreme Court held: “….if the appraisal of the evidence by the trial court suffers from a material irregularity or is based on inadmissible evidence or on conjectures and surmises, the appellate court is entitled to interfere with the finding of fact.” In the case of DIT v. Bharat Diamond Bourse 259 ITR 280 (SC), Hon’ble Apex Court held that perverse findings of fact can be disturbed and interfered with. In the case of Mehta Parikh and Co. v. CIT 30 ITR 181 (SC), Hon’ble Supreme Court held: “…The court would be entitled to intervene if it appears that the fact finding authority has acted without any evidence or upon a view of the facts, which could not reasonably be entertained or the facts found are such that no person acting judicially and property instructed as to the relevant law would have come to the determination in question.” In the case of Edwards (Inspector of Taxes) v. Bairstow and Another. 28 ITR 579 (HL), cited with approval in Mehta Parikh and Co. v. CIT (supra) it was so held: “If the case contains anything ex facie which is bad law and which bears upon the determination, it is obviously erroneous in point of law. But, without any such misconception appearing ex facie, it may be that the facts found are such that no person acting judicially and properly instructed as to the relevant law could have

come to the determination under appeal. In those circumstances, too, the court must intervene.” It was further held in Edwards (Inspector of Taxes) v. Bairstow and Another (supra), that pure finding of fact may be set aside if it appears that the Commissioners have acted without evidence or upon a view of the facts which could not reasonably be entertained. (42) In view of the foregoing discussion and the views expressed in paragraphs (39), (40), (40.1), (40.1.1) , (40.2) and (41) I concur with the esteemed Judicial Member in quashing the impugned revision order dated 31.03.2018 of Ld. CIT, passed U/s 263 of IT Act. Accordingly, the impugned revision order dated 31.03.2018 of Ld. CIT, passed U/s 263 of IT Act, is quashed. For statistical purposes the appeal is allowed. Order pronounced in Open Court on 26th day of March, 2019. Sd/- 26/03/19 (ANADEE NATH MISSHRA) ACCOUNTANT MEMBER I, fully concur with aforesaid order of my Ld. Brother. Sd/- (AMIT SHUKLA) JUDICIAL MEMBER Dated: 26.03.2019 (Bidhan) Fit for Publication Sd/- Sd/ (A.N.M) (A.S.) AM JM