SRF LTD.,NEW DELHI vs. ACIT, NEW DELHI

(Assessment Year: 2013-14) SRF Limited, vs. ACIT, Circle 1, C – 8, Commercial Complex, LTU, New Delhi. Safdarjang Development Area, New Delhi – 110 016. (PAN : AAACS0206P) (APPELLANT) (RESPONDENT) ASSESSEE BY : Shri Pradeep Dinodia, CA Shri Ravi Kumar, CAR Shri Shubham, CA REVENUE BY : Shri S.K. Jadhav, CIT DR Date of Hearing : 15.10.2025 Date of Order : 12.12.2025 O R D E R PER S. RIFAUR RAHMAN, ACCOUNTANT MEMBER :

3. We find that additional ground raised

by the assessee is legal ground which does not require any examination of facts and hence deserves to be admitted in view of the Hon’ble Supreme Court judgment in case of NTPC v. CIT 229 ITR 383 which has held that legal claims could be admitted at any stage of appellate proceedings.

4. In the grounds of appeal, the assessee has raised the following grounds:

1. The Ld DRP/AO have erred in law and on facts, and in the circumstances of the appellant’s case in making an addition/adjustment of Rs. 53,24,861/- on account of the order of the Transfer Pricing Officer (TPO) u/s 92CA(3) and making an addition of Rs.1,22,17,185/- on account various non-transfer pricing addition/disallowances.

2. The Ld DRP/AO have grossly erred in not granting an additional claim/allowances, amounting to Rs.1,51,92,99,091/- made by the assessee during the course of assessment proceedings, on account of transfer of CERs and cancellation of CER contracts, short claim of deduction u/s 10A(1A), interest subsidy under TUF scheme, additional depreciation, depreciation on goodwill, deduction of VRS expenditure and of disallowance of ESIC & EPF employee contributions. GROUNDS OF OBJECTIONS IN RESPECT OF TRANSFER PRICING ADJUSTMENTS Corporate Guarantee

3. The Ld. DRP/TPO and consequently the Ld. AO have grossly erred in holding that extending of corporate guarantee by the assessee to the lending institution of the AEs constitutes an international transaction u/s 92B of the Act.

4. The Ld. DRP/TPO and consequently the Ld. AO have grossly erred in law and on facts and in the circumstances of the appellant’s case in making an upward adjustment of Rs. 53,24,861/- by imputing the arm’s length corporate guarantee fee rate @ 0.5%.

5. The Ld DRP/TPO and consequently the Ld. AO have grossly erred in law and on facts in making an arm’s length adjustment in respect of in effectuated corporate guarantee extended by the assessee (206 Million Baht) against which the AEs have not availed any loan from bank during the assessment year.

6. The Hon’ble ITAT may be pleased to hold:- 6.1 That the act of giving corporate guarantee by the appellant on behalf of the AEs is not an international transaction and, therefore, not amenable to any adjustment under Chapter X of the Income Tax Act. 6.2 In the alternative and without prejudice to the above, the Hon’ble ITAT may be pleased to hold that no adjustment is required as 0.25% charged by the appellant as corporate guarantee fee from its wholly owned subsidiary/AEs is at arm’s length and thus upward adjustment of Rs. 53,24,861/- be directed to be deleted. GROUNDS OF OBJECTIONS IN RESPECT OF CORPORATE TAX ISSUES Disallowance u/s 14A 7. The Ld. DRP/AO have erred in law and in facts and in the circumstances of the assessee by enhancing the disallowance u/s 14A of the Act, to the tune of Rs.1,17,18,925/- which is wholly untenable in law and based on conjectures and surmises.

9. That the Ld. DRP/ AO has grossly erred in law and on the facts & circumstances of the assessee in attributing interest u/r 8D(2)(ii) although all loans were explained to be for specific business purpose.

10. That the Ld. AO be directed to delete the enhancement of disallowance of Rs.1,17,18,925/- made u/s 14A of the IT Act. Donation to SRF Vidhalaya Chennai 11. The Ld. DRP/AO have erred in law and in facts and in the circumstances of the assessee by disallowing Rs.4,20,000/- on account of donation made to SRF Vidhalaya School Chennai without appreciating that the payment was in the nature of staff welfare expense allowable as a deduction u/s 37(1) of the Income Tax Act, 1961.

12. That the Ld. AO be directed to allow deduction of Rs.4,20,000/- u/s 37 of the IT Act. Disallowance of Rs.78,260/- on account of short deduction of TDS 13. The Ld. DRP/AO have erred in law, on facts and in the circumstances of the case in notionally disallowing a sum of Rs.78,260/- on alleged short deduction of TDS on wholly illegal, erroneous and untenable grounds. The Hon’ble ITAT may be pleased to direct the learned AO to delete the addition of Rs.78,260/-. Computation of book profits under MAT and allowance of TDS credit 14. The Ld AO has erred in computing the book profits under MAT provisions at Rs.6,78,65,08,494/-.

15. The Ld AO while computing the book profits u/s 115JB of the Act, has not considered the items to be deducted, viz Dividend income Rs. 4,73,22,931/- and provision no longer required Rs.29,42,803/- as also the items to be added viz Provision for doubtful debts Rs.44,45,956/-, provision for doubtful advances Rs.1,04,911/- and provision for doubtful investments Rs.1,54,10,239/-.

16. The Ld. AO have erred in not allowing the TDS and TCS credit to the extent of Rs.4,62,613/- while computing the tax payable vide its final order u/s 143(3)/144C(5) dt 30.11.2015. Claims made during the assessment proceedings 17. The Ld DRP/AO have erred in law and on the facts of the assessee's case in not admitting and allowing the following additional allowances/claims made by the assessee, during the course of assessment proceedings and subsequently before Ld DRP. a) exclusion of Rs.728,108,110 /- received by the assessee on account of transfer of Carbon emission reductions (CERs) from the taxable income of the assessee its being a capital receipt not liable to tax under the Act. b) exclusion of Rs.64,17,01,413/- received by the assessee on account of cancellation of contracts relating to transfer CERs its being a capital receipt not liable to tax under the Act. c) claim of additional deduction of Rs.8,36,29,209/- u/s 10A(1A) being the difference of eligible deduction Rs.78,29,37,496/-, and deduction actually claimed Rs.69,93,08,277/- by the assessee in its return of income due to a pure calculation error. d) exclusion of Rs.3,21,55,428/- received by the assessee on account of interest subsidy under Technology Up gradation Fund (TUF) its being a capital receipt not liable to tax. e) allowance of remaining additional depreciation @ 10% u/s 32(1)(iia) amounting to Rs.2,50,78,490 /- f) allowance of depreciation of Rs.60,52,923/- on goodwill which was inadvertently left to be claimed while filing the tax return. g) allowance of deduction u/s 35DDA, of Rs.23,88,577/- being the amortization amount of VRS expenditure, which was left to be claimed while filing the tax return. h) claim for allowance of employees contribution to employees state insurance contribution (ESIC) and provident fund amounting to Rs.1,84,941/- paid late but before due date of filing of tax return u/s 139(1).

18. That the LD DRP/ AO failed to appreciate that the taxes are leviable& recoverable in accordance with law and legal claims are required to be entertained at any stage of the proceedings. That the order of the Ld. Assessing Officer dated 30th November 2015 19. is bad in 5law.

20. The above grounds are without prejudice to each other.

21. The appellate craves the leave to add, amend or alter all or any of the grounds of appeal

. ADDITIONAL GROUNDS RAISED BEFORE THE ITAT [Ground Nos. 22 to 25]

22. That the Ld. AO have grossly erred in law and on the facts & circumstances of the assessee’s case in making the addition of Rs.1,17,18,925/- on account of disallowance u/s 14A of the Act while computing the book profits u/s 115JB of the Act, even when provisions of section 115JB do not provide for such disallowance and by not following the judicial precedent of the Hon’ble Delhi Tribunal in the case of Vireet Investment (P.) Ltd. [2017] 82 taxmann.com 415 (Delhi- Trib.) (Special Bench) including the other judicial precedent of the Hon’ble Tribunals, which have held that the computation u/s 115JB is to be made without restoring the computation as computed u/s 14A r.w.r. 8D.

23. That on the facts & circumstances of the case and in law, the capital receipts on account of transfer of Certified Emission Reduction (‘CER’s) / (‘Carbon Credits’) amounting to Rs.72,81,08,110/- may held to be excluded from the computation of ‘book profits’ under section (‘u/s’) 115JB of the Income-tax Act, 1961 (‘the Act’).

24. That on the facts & circumstances of the case and in law, the capital receipts on account of cancellation of contracts relating to transfer of Certified Emission Reduction (‘CER’s) / (‘Carbon Credits’) amounting to Rs.64,17,01,413/- may held to be excluded from the computation of ‘book profits’ under section (‘u/s’) 115JB of the Income-tax Act, 1961 (‘the Act’).

25. That on the facts & circumstances of the case and in law, the capital receipts on account of interest subsidy under Technology Upgradation Fund (‘TUF’) Scheme amounting to Rs.3,21,55,428/- may held to be excluded from the computation of ‘book profits’ under section (‘u/s’) 115JB of the Income-tax Act, 1961 (‘the Act’).

Exclusion of the excise duty component embedded in the sales in respect of Laminated Fabrics Business, Kashipur, Uttrakhand – Rs.485.65 Lacs 26. That on the facts & circumstances of the case and in law, the Hon’ble ITAT may be pleased to direct the Ld. AO to exclude the excise duty subsidy or exemption embedded in the sales effected by the eligible Laminated Fabrics Business unit of the assessee located at Kashipur, Uttrakhand worked out on reverse calculation mechanism to the tune of Rs.485.65 Lacs from the total income of the assessee by treating the same as capital receipt not chargeable to tax under normal provisions of the Income-tax Act, 1961 (‘the Act’).

27. That on the facts & circumstances of the case and in law, the Hon’ble ITAT may be pleased to direct the Ld. AO to exclude the excise duty subsidy or exemption embedded in the sales effected by the eligible Laminated Fabrics Business unit of the assessee located at Kashipur, Uttrakhand worked out on reverse calculation mechanism to the tune of Rs.485.65 Lacs from the computation of book profits under section 115JB of the Act by treating the same as capital receipt not chargeable to tax under minimum alternative tax (‘MAT’) provisions of the Act.

“10. Apropos grounds no.16 to 20 relating to adjustment of Rs.2,40,32,125/- u/s. 92CA(3) of the Act on account of Corporate Guarantee Fee from AE are concerned, ld. Counsel for the assessee submitted that ITAT has reversed the order of the DRP for the AY 2014-15 and AY 2012-13 and also AY 2010- 11 in assessee’s own case. He further submitted that this issue is fully covered by the order of the coordinate Bench of ITAT in the assessee's own case for A.Y. 2014-15, wherein ITAT upheld that the corporate guaranteed rate @ 0.25%. It was further submitted that not considering the fact that the AEs have furnished a counter guarantee to the assessee, therefore, assessee is completely indemnified against any risk of default on the part of the AEs. It was further concluded that corporate guarantees does not involve any cost and therefore are out of the ambit of international transactions u/s. 92B of the Act thus not subject to assessment under Chapter-X. It was further submitted that TPO/DRP has rejected the valid comparable data obtained by the assessee in the form of quotation received from HDFC bank without assigning any cogent reason for such action. In view of the above, he requested that no adjustment is required as @0.25% charged by the assessee as corporate guarantee fee from its AE’s is at arms’ length and thus upward adjustment of Rs.2,40,32,125/- be directed to be deleted.

11. Aggrieved by the order of DRP, assessee is now before us.

12. Before us, Learned AR reiterated the submissions made before the lower authorities. He thereafter submitted that identical issue arose in assessee’s own case in A.Y. 2010-11, 2012-13 wherein the Coordinate Bench of Tribunal has upheld the corporate guarantee rate @ 0.25%. He further submitted that the Hon’ble ITAT had reversed the order of DRP for A.Y. 2012-13 & 2010-11 in assessee’s own case. He pointed to the relevant orders of the Tribunal placed in the paper book. He therefore submitted that since assessee had charged 0.25% as corporate guarantee fee to its AEs, no adjustment is required and therefore the adjustment proposed by the AO be deleted.

13. Learned DR on the other hand took us to the finding of the DRP and supported the order of DRP.

13. It is pertinent to note that even TPO has used general bank rates obtained from various Indian banks. These bank guarantee rates are also in the nature of offers which are general rates and not specific to the assessee. Therefore, the approach of assessee’s specific quotation saying the same as offers while on the other hand he himself uses the general bank guarantee rates which are again the offers and that too far from being comparable to the case.

14. Further the issue of using bank guarantee rates for benchmarking corporate guarantee transaction has been put to rest by the Hon’ble Supreme Court in case of Glenmark Pharmaceuticals Ltd. [2019] 107 taxmann.com 445 (SC), where in the judgment of Hon’ble Bombay High Court was upheld. Further, DRP in assessee’s own case in subsequent years rejected the TPO’s approach of using India band guarantee rates for benchmarking corporate guarantee. Therefore, bank guarantee rates as applied by the TPO is not an appropriate comparable while benchmarking the said transaction and hence approach of TPO is rejected.

11. The ground nos.07 to 10 relating to disallowance u/s. 14A of the Act amounting to Rs.1,17,18,925/- are concerned, ld. AR submitted that assessee received exempt dividend income of Rs.4,73,22,931/- and suo-moto disallowed an amount of Rs. 27,31,368/- u/s 14A r.w.r. 8D(2)(iii) being 0.50% of average value of investments of Rs. 54,62,73,678/- (which is not in dispute). He submitted that the assessee made investment made out of own surplus funds. He brought to our notice page 6 of the paper book that the average value of investments related to tax free income is Rs. 5,462.74/- lakhs and total amount of reserves & surplus as on 31.03.2011 is Rs. 1,57,848.12/- lakhs, therefore, assessee’s reserves & surplus are 28.89 times of investments.

12. Further, he submitted that during the year, the assessee has earned Cash profits of Rs. 91,350.26 Lakhs (calculated as (PBT+ Depreciation+ Finance costs) as is evident from the assessee’s audited financial statements. The AO attributed disallowance of interest cost of Rs. 1,17,18,925/- u/s 14A r.w.r. 8D(2)(ii) on the basis of average investments & total assets and same has been upheld by the DRP. ITAT in the assessee's own case in different years i.e., in A.Y. 2006-07, A.Y. 2007-08, A.Y. 2008- 09, A.Y. 2009-10, A.Y. 2010-11, A.Y. 2012-13 and in the recent judgement held for A.Y. 2016-17 wherein the appellate forum had deleted the additions made u/r 8D2(ii) of the Rules. Also, the DRP in A.Y. 2014-15 and CIT(A) in A.Y. 2015-16 upheld no disallowance u/s 14A rwr 8D2(ii).

13. On the other hand, ld. DR relied upon the orders of the authorities below, but he did not controvert the contention of the ld. AR for the assessee that the issue is covered in favour of the assessee by the decision.

14. Considered the rival submissions and material placed on record. We find that the instant issue is fully covered by the order of the Coordinate Bench of the Tribunal in assessee's own case for 2006-07, 2007-08, 2008-09, 2010-11, 2012-13 & 2016-17 wherein the Bench deleted the similar additions. The relevant findings of ITAT in for AY 2016-17 is reproduced as under:- “34. Apropos Grounds no.48 to 54 relating to disallowance u/s. 14A of the Act amounting to Rs.15,32,818/- are concerned, ld. Counsel for the assessee submitted that the issue is fully covered by the orders of the ITAT, DRP and CIT(A) in assessee’s own case in different years wherein, the appellate forum had deleted the additions made u/s. 8D2(ii) of the Rules.

35. Ld. DR of the Revenue relied upon the orders of the authorities below, but she did not controvert the contention of the ld. AR for the assessee that the issue is covered in favour of the assessee by the decision of the Tribunal in assessee’s own case in the assessment years 2006-07, 2007-08, 2008-09, 2010-11 & 2012-13 and neither produced any contrary decision.

36. Considered the rival submissions and material placed on record. We find considerable cogency in the contention of the Ld. AR that the instant issue is fully covered by the order of the Coordinate Bench of the Tribunal in assessee's own case for 2006-07, 2007-08, 2008-09, 2010-11 & 2012-13 wherein the Bench deleted the similar additions. In view of the aforesaid discussions and respectfully the aforesaid precedents, we deem it fit and proper to direct the AO to delete such disallowance of Rs.15,32,818/- in the light of the aforesaid precedents in assessee’s own case. Accordingly, Grounds No.48 to 54 are allowed in the aforesaid manner.”

15. In view of the aforesaid discussions and respectfully the aforesaid precedents, we deem it fit and proper to direct the AO to delete such disallowance of Rs.1,17,18,925/- in the light of the aforesaid precedents in assessee’s own case. Accordingly, Grounds No.07 to 10 are allowed in the aforesaid manner.

16. Coming to additional ground no. 22 raised by the assessee pertains to the incorrect computation of book profits under section 115JB (MAT) of the Act, 1961, by making an addition of Rs. 1,17,18,925/- on account of enhanced disallowance under section 14A rwr 8D2(ii).

17. The AO, while completing the assessment, enhanced the book profit under section 115JB by adding back the disallowance computed under section 14A read with Rule 8D. The disallowance so made under normal provisions was also added to the computation of book profit under MAT, resulting in an increase of Rs.1,17,18,925/-. Ld. AR submitted that the issue is covered in favour of the assessee by the decision of ITAT, in the assessee's own case in different years i.e., in A.Y. 2010-11 and A.Y. 2015-16. In the judgment held for A.Y. 2010-11 wherein the appellate forum had deleted the similar disallowance u/s 14A r.w.r. 8D(2)(ii) in respect of computation of book profits u/s 115JB of the Act.

19. Considered the rival submissions and material placed on record. The relevant findings of ITAT in for AY 2010-11 is reproduced as under:-

“37. As to the disallowance u/s 14A while computing book profits u/s 115JB of the Act, the reliance was placed upon the Delhi ITAT (Special Bench) ruling in the case of Vineet Investment (P.) Ltd. [2017] 82 taxmann.com 415 (Delhi - Trib.) (SB) wherein the judgment was based upon the decision of Hon’ble Delhi High Court in the case of Bhushan Steel [IT Appeal No. 593 of 2015] in which the HC upheld the decision of the Tribunal in holding that disallowance under section 14A read with Rule 8D cannot be added while computing book profits as per section 115JB as Explanation to that section does not specifically mention section 14A of the Income-tax Act, 1961. The bench hereby notes that Review Petition filed by Revenue has been dismissed by Hon'ble High Court.

38.We, therefore delete the disallowance u/s 14A r.w.r. 8D(2)(ii) of Rs.59,64,109/- in respect of computation of book profits u/s 115JB of the Act”.

20. The issue is anyway stands fully covered by the judicial precedents on the issue and particularly by the orders of the Coordinate Bench of the Tribunal in assessee's own case wherein the bench has deleted the similar additions. In view of the aforesaid discussions and respectfully the aforesaid precedents, we deem it fit and proper to direct the AO to delete such disallowance of Rs.1,17,18,925/- in the light of the aforesaid precedents in assessee’s own case. Accordingly, Grounds No.22 is allowed in the aforesaid manner.

21. With regard to Grounds no.11 & 12 relating to disallowance made by AO of an amount of Rs. 4,20,000/- paid by the assessee to SRF Vidyalaya School Chennai which has been claimed as business expenditure u/s 37(1) of the Income Tax Act, 1961 on the ground that school, which runs within the compound of textile business of the assessee, gives preference to children of employees of the company. The ld. AR submitted that assessee has taken the initiative to tap good talent across the industry and has taken a step towards the general welfare of the employees of the company.

22. The assessee placed reliance on the decision of the Coordinate Bench of the Tribunal in assessee's own case for A.Y. 2009-2010 and A.Y. 2010-11 wherein the coordinate Bench deleted such addition.

23. On the other hand, ld. DR of the Revenue did not submit any objections. 24. Considered the rival submissions and material placed on record. The relevant extracts of the order for the A.Y. 2010-11 is reproduced below : “26. Next issue is the disallowance made by AO of an amount of Rs. 4,28,000/- paid by the assessee to SRF Vidyalaya School Chennai which has been claimed as business expenditure u/s 37(1) of the Income Tax Act, 1961 on the ground that school, which runs within the compound of textile business of the assessee, gives preference to children of employees of the company. The ld. AR submitted that assessee has taken the initiative to tap good talent across the industry and has taken a step towards the general welfare of the employees of the company. 27. The assessee placed reliance on the judgment of the Hon’ble Mumbai High Court in the case of Mahindra & Mahindra Ltd. v. CIT[TS-25-HC-2003 (Bom)] wherein it was held that such expense, being in the nature of staff welfare expenses should be treated as business expenditure. The relevant extract of judgment is reproduced hereunder: “The Tribunal has given a finding of fact which shows that M/s. Mahindra & Mahindra had paid Rs. 92,500 to an Education Society which runs the School in which children of the employees of the Company study. We do not wish to interfere with this finding of fact. The Tribunal has held that the amount should be allowed as business expenditure because it was incurred predominantly for staff welfare. In the circumstances, we answer the question in the affirmative i.e. in favour of the assessee and against the Department.”

25. No doubt the instant issue is fully covered by the order of the Coordinate Bench of the Tribunal in assessee's own case for A.Y. 2009-10 and 2010-11, wherein the Bench deleted similar addition. In view of the aforesaid precedents, we deem it fit and proper to direct the AO to delete such disallowance of Rs.4,20,000/- in the light of the aforesaid precedents in assessee’s own case. Accordingly, Grounds No.11and 12 are allowed.

26. Apropos Grounds no. 13 relating to Disallowance of Rs. 78,260/- on account of short deduction of TDS.

27. Ld. DR of the Revenue relied upon the orders of the authorities below, noted from the CPC data that there was a notional default on account of short deduction of TDS amounting to Rs. 7,826/-. but he did not controvert the submissions of the ld. AR, vide its detailed submission dated 17.03.2015, furnished all necessary explanations and documentary evidence, including a screenshot of the TRACES portal [P. No. 774–776 of CLC], demonstrating that the default has subsequently been rectified. Further, an updated screenshot from the TRACES portal dated 22.07.2024 [P. No. 774–778 of CLC] clearly shows that there is no short deduction or non-deduction of TDS outstanding against the assessee.

28. Considered the rival submissions and material placed on record. We find that ld. AR has produced conclusive evidence from the TRACES portal to establish that no default subsists. The DRP has also failed to appreciate the factual correction available on record and has simply upheld the action of the Ld. AO without assigning cogent reasons.

31. The assessee, while computing the book profit under section 115JB, had not made corresponding additions or reductions in respect of provisions for doubtful debts, doubtful investments, dividend income, and provisions no longer required. The omission was inadvertent, as these items were dealt with under normal provisions but not appropriately reflected in the computation under MAT. Further, the AO, while computing the book profit under section 115JB, did not consider the above adjustments after being pointed out by the assessee:

 Addition of Rs. 44,45,956/- and Rs. 1,04,911/- relating to provisions for doubtful debts,  Addition of Rs. 1,54,10,239/- relating to provisions for doubtful investments, and  Reduction of Rs. 4,73,22,931/- on account of dividend income, and Rs. 29,42,803/- on account of provisions no longer required.

32. The Ld. AR of the assessee submitted that the matter is squarely covered by the decision of the ITAT in its own case for A.Y. 2012–13, where an identical issue was remitted back to the file of the AO for proper adjudication after verification.

33. Considered the rival contentions, perused the relevant findings and as well as material referred to before us at the time of hearing. The relevant findings of the decision of coordinate Bench in assessee’s own case for AY 2012-13 is reproduced below:

38. In grounds no. 21 and 22 the assessee has pleaded to exclude certain receipts viz., CER receipts, subsidy under TUF, from the computation of book profits u/s 115JB. Further assessee has sought to exclude/include certain provisions written back /created from the computation of book profits u/s 115JB of the Act. The claim for exclusion/inclusion of such items in computation of book profits was made by the assessee before lower authorities. However the lower authorities did not entertain the additional claim of the assessee. The items sought to be excluded / included through above grounds are as under: Capital receipts a) Exclusion of Rs. 4,39,72,72,157/- received by the assessee on account of transfer of Carbon emission reductions (CERs) from the book profit of the assessee. b) Exclusion of Rs. 3,08,96,338/- on account of interest subsidy received under the TUF Scheme. c) Exclusion of excise duty component amounting to Rs.11,81,58,510/- on sale affected by eligible unit u/s 80-IC (Kashipur unit) of worked out on reverse calculation mechanism being capital receipt in nature. Other exclusions/inclusions d) Exclusion of Rs. 35,02,570/- on account of provisions for doubtful debts written back. e) Exclusion of Rs. 4,00,00,000/- on account of provisions for doubtful advances written back. f) Exclusion of Rs. 1,54,10,239/- on account of provisions for investments written back. g) Inclusion of Rs. 22,66,432/- on account of provision for doubtful debt created. h) Inclusion of Rs. 7,64,706/- on account of provision for doubtful advances created i) Inclusion of Rs. 9,07,600/- on account of provision for doubtful advances created 39. The assessee placed reliance upon the following judgments to exclude capital receipts from book profits u/s 115JB. • Binani Industries Ltd. [TS-111-ITAT-2016(Kol) • L.H. Sugar Factory Ltd. (ITA Nos 417, 418 & 339/LKW/2013) also approved by Hon'ble Allahabad High Court [2016-TIOL-1942-HC-ALL High Court-IT]. • PCIT v. Ankit Metal & Power Ltd. [416 ITR 591 2019] Cal High Court • Alok Industries Ltd. [TS-313-ITAT-2018] “40. In respect of exclusion of other items from book profits the assessee has submitted that as per Explanation 1 to section 115JB of The Income Tax Act, 1961, the amount withdrawn from any reserves should be reduced from the net profit to determine book profits. It was argued that when such provision was originally made, the same was added to the book profits u/s 115JB and thus it is logical to reduce the amount of provisions written back from such book profits . “41. We have heard the rival contentions, perused the relevant findings and as well as material referred to before us at the time of hearing. The issue involves additional claim which were not adjudicated by the lower authorities. We therefore set aside the issues relating to computation of books profits back to the file of AO to decide the same in accordance with law after granting a reasonable opportunity of being heard to the assessee. The assessee shall be free to file such documents, explanations, submissions as it deems fit in respect of this claim”. In respect of exclusion of other items from book profits the assessee has submitted that as per Explanation 1 to section 115JB of The Income Tax Act, 1961, the amount withdrawn from any reserves should be reduced from the net profit to determine book profits. It was submitted that when such provision was originally made, the same was added to the book profits u/s 115JB and thus it is logical to reduce the amount of provisions written back from such book profits”.

35. Apropos Grounds no. 16 relating to Short Credit of TDS & TCS of Rs. 4,62,613/- it is stated that assessee claimed TDS and TCS credit of Rs. 7,81,339/- and Rs. 29,269/- respectively in the revised return filed on 29.03.2013. However, the AO allowed credit of only Rs. 3,47,995/-, resulting in short credit of Rs. 4,62,613/-. The assessee filed rectification applications u/s 154 dated 23.02.2016 and 01.03.2017 seeking correction.

39. The ld. AR of the assessee at the outset submitted that this issue is fully covered by the various order of ITAT in assessee’s own case which has been referred to in the summary chart placed before us. The relevant facts are, during the year it is stated to have received Rs.72,81,08,110/-from transfer of 8,50,000 units of Carbon Emission Reduction (CER) and on account of cancellation of contracts relating to transfer of CER’s amounting Rs. 64,17,01.413/-. In return of income, the assessee offered such receipts as revenue receipts and paid tax thereon. During the course of assessment proceedings, assessee claimed before AO that the receipt on account of CER to be capital receipts and contended that the same should be excluded from taxable income.

40. The AO as well as DRP did not entertain the claim of the assessee for the reason that no revised return was filed by the assessee claiming the aforesaid amount as capital receipts. They were of the view that the claim of the assessee cannot be allowed in the absence of revised return of income filed by the assessee and for the aforesaid conclusion, they relied on the decision of Hon’ble Supreme Court in the case of Goetze India Ltd [2006] 284 ITR 323 (SC).

 Alembic Limited [ITA Nos. 553/2017 & 554/2017] (Gujarat High Court 28.08.2017)  L.H. Sugar Factory Pvt. Ltd. [2016-TIOL-1942-HC-ALL-IT]  Ambika Cotton Mills Ltd. [TS-144-HC-2021(MAD)]  LancoTanjore Power Co. Ltd. [[2021] 434 ITR 671 (Madras)]  Tamil Nadu Newsprint & Papers Ltd. [[2021] 130 taxmann.com 213 (Madras)]  Arun Textiles Pvt. Ltd. [2016-TIOL-2212-HC-MAD-IT]  Rajasthan State Mines and Minerals Ltd. [2017-TIOL-2297- HC-RAJ- IT]  Shree Cement Ltd. [ dated 22.08.2017]  Subhash Kabini Power Corporation Ltd. {[2016] 69 taxmann.com 394 (Karnataka)}  Dodson Lindblom Hydro Power Pvt. Ltd. [2019-TIOL-531- HC-MUM- IT]  My Home Power Ltd. {[2014] 46 taxmann.com 314 (Andhra Pradesh)}

44. Further, Ld. AR submitted that the issue raised in the present ground is fully covered by the orders of the ITAT in the assessee's own case in different years i.e., A.Y. 2006- 07, A.Y.2007-08, A.Y. 2008-09, A.Y. 2009-10, A.Y. 2010-11 and A.Y. 2012-13, wherein the ITAT held that receipts from transfer of CER’s are capital in nature i.e. capital receipts, not chargeable to tax under the Act.

45. Learned DR on the other hand did not controvert the factual submissions made by AR but however placed reliance on the orders of lower authorities.

“24. Ground Nos. 3 & 6(i) and Additional Ground No.10 are interconnected therefore considered together. These grounds are with respect to the treatment to the amount received on account of Carbon Emission Reduction (CERs) amounting toRs.3,48,37,38,617/-.

27. Aggrieved by the order of AO, Assessee carried the matter before CIT(A). Before CIT(A), assessee sought the exclusion of receipts on account of CER certificates by treating it to be capital receipt. To support its contentions, before CIT(A), it was inter alia submitted by the assessee that the assessee had its refrigerant manufacturing facility at Jhiwana, Rajasthan for the production of HCFC-22. Manufacture of HCFC-22 generates HFC-23, a green house gas. Assessee had an option to emit such green house gas (HFC-23) in the air without impacting its business of production of HCFC-22. The assessee, however, reduced the emission of green house gas namely HFC-23 in the atmosphere by Thermal Oxidation for reducing emission of green house gas for which it received Carbon Emission Reduction Certificates (CERs) in terms of Kyoto Protocol.

During the year, assessee had transferred 38,45,000 Carbon Emission Reduction Certificates and had received Rs.348,37,38,617/- which was recognized as revenue and disclosed in the Profit and Loss account. It was assessee’s contention that the aforesaid amount was a capital receipt and therefore it should have been excluded while computing the total taxable income.

28. CIT(A) has noted that assessee had not claimed the amount as capital receipt in the return of income that was filed by it nor had the Assessee filed revised return of income to claim the aforesaid amount as capital receipt. Since the issue was not considered by the AO in the assessment order and since it was claimed to be capital receipt for the first time before CIT(A), CIT(A) sought report from AO.

29. Before CIT(A), assessee made the submissions which were not found acceptable to CIT(A). CIT(A) was of the view that though CIT(A) had co- terminus power of the assessing officer but he does not have the power to entertain such claim of deduction without the assessee filing revised return. On the merits of the issue, the reliance placed by the assessee on the decision of Tribunal in the case of M/s. My Home Power Ltd. (supra) was not found acceptable to CIT(A) as he was of the view that the decision in the case of My Home Power Ltd. (supra) was not applicable to the facts of the case of the assessee as the facts were distinguishable. While distinguishing the facts, he noted that in the case of the assessee, the production of green house gas namely HFC-23 was a byproduct of the business, the reduction of which had resulted into the issuance of carbon credit certificate whereas in the case of My Home (supra), it was a case where the assessee was in the business of power generation. He, thereafter by relying on the decision of Cochin Bench of Tribunal in the case of Apollo Tyres Ltd. held that the proceeds out of CER to be Revenue receipt and taxable u/s 2(24)(vd) r.w.s 28(iv) of the Act.

30. Aggrieved by the order of CIT(A), assessee is now before Tribunal.

32. Learned DR on the other hand did not controvert the factual submissions made by Learned AR but however supported the order of lower authorities.

34. It is an undisputed fact that the assessee in the return of income filed had offered the receipts on transfer of CEC credits as revenue receipts and thus offered it to tax but during the course of assessment proceedings before AO, assessee had claimed it to be capital receipt and had sought its exclusion from total income. The claim of the assessee was denied by the AO for the reason that the assessee had not filed revised return of income claiming the receipts to be capital receipts and for which AO had placed reliance on the decision of Hon’ble Apex Court in the case of Goetze India Ltd. (supra). The order of AO was upheld by CIT(A). On the issue of claim being made for the first time before the Appellate Authorities, we find that Hon’ble Gujarat High Court in the case of CIT vs. Mitesh Impex [2014] 46 taxmann.com 30 (Gujarat), after considering various decisions cited in the decision, has held the decision of the Supreme Court in the case of Goetze (India) Ltd. (supra) is confined to the powers of the assessing officer and accepting a claim without revised return. It has further held that any ground, legal contention or even a claim would be permissible to be raised for the first time before the appellate authority or the Tribunal when facts necessary to examine such ground, contention or claim are already on record. The relevant observations of the Hon’ble High Court are as under: “38. It thus becomes clear that the decision of the Supreme Court in the case of Goetze (India) Ltd. (supra) is confined to the powers of the assessing officer and accepting a claim without revised return. This is what Supreme Court observed in the said judgment while distinguishing the judgment in the case of National Thermal Power Co. Ltd.(supra) and that is how various High Courts have viewed the dictum of the decision in the case of Goetze (India) Ltd.(supra). When it comes to the power of Appellate Commissioner or the Tribunal, the Courts have recognized their jurisdiction to entertain a new ground or a legal contention. A ground would have a reference to an argument touching a question of fact or a question of law or mixed question of law or facts. A legal contention would ordinarily be a pure question of law without raising any dispute about the facts. Not only such additional ground or contention, the Courts have also, as noted above, recognized the powers of the Appellate Commissioner and the Tribunal to entertain a new claim for the first time though not made before the assessing officer. Income-tax proceedings are not strictly speaking adversarial in nature and the intention of the Revenue would be to tax real income.

26. Thus, sale of carbon credits is to be considered as capital receipt. This ground is allowed.”

5.1 The above order of the Hyderabad Bench has been confirmed by the Hon’ble High Court of Andhra Pradesh. Next, the judgment of Hon’ble High Court of Gujarat in case of Gujarat Flourochemicals Ltd. [ITA Nos. 11/2019 & 28/2019], wherein the facts as noted by the Tribunal are similar with the facts of the assessee, has held the issue in favour of assessee. Undoubtedly, the facts of said case are similar to the case of the assessee which goes a long way to support the claim of the assessee. 5.2 The coordinate bench in case of Malana Power Co. Ltd. [ITA Nos. 2281/Del/2013, 1550/Del/2015 & 3957/Del/2015] while adjudicating the additional ground of carbon credits held as under: 5. We have heard the rival submissions in respect of the assessee’s plea for admission of additional grounds and it is our considered opinion that the additional grounds raise a purely legal issue, the facts of which are already available on record. It is well settled that legal ground can be raised any time as per the ratio laid down by the Hon'ble Supreme Court in the case of NTPC Ltd. Vs CIT reported in 229 ITR 383 (SC), therefore, these are admitted.”

“6. Coming to the merits of the additional grounds of appeal raised by the assessee, we find that this issue is covered in favour of the assessee by the judgment of the Hon’ble Allahabad High Court in the case of Pr. Commissioner of Income Tax vs. L.H. Sugar Factory Pvt. Ltd. reported in 392 ITR 568 (All.) wherein the Hon’ble Allahabad High Court had held that income from sale of carbon credits/profits from sale of carbon credits is capital in nature. We also find that ITAT Bangalore Bench in the case of Subhash Kabini Power Corpn. Ltd. vs. CIT reported in (2015)

37. ITR (T)106 (Bang.Trib.) had held that once the Assessing Officer had allowed the assessee’s claim of deduction u/s 80-IA in respect of income derived from sale of carbon credits, such order was not amendable u/s 263 of the Act. This order of ITAT, Bangalore Bench was also upheld by the Hon’ble Karnataka High Court.” “6.1 Further, ITAT Hyderabad Bench in the case of CIT Vs. My Home Power Ltd. Hyderabad in held that carbon credit receipts are capital in nature. This order of ITAT Hyderabad Bench was subsequently upheld by the Hon'ble Andhra Pradesh High Court in 365 ITR 82.” “6.2 Accordingly, respectfully following the ratio of the settled judicial precedent as aforementioned, we allow the additional grounds raised by the assessee and hold that the income from sale of carbon credits is capital in nature.” 5.3 Coming to the judgments relied upon by the AO and the Ld. CIT(A) and which have been further relied by the Ld. DR, we are of opinion that such cases do not support the case of revenue. As pointed out by the Ld. AR, the order of the Cochin Bench of the Tribunal in the case of Apollo Tyres Ltd.{[2014] 47 taxmann.com 416 (Cochin Trib.)}had already been analyzed by the Hon’ble Allahabad High Court in the case of L.H. Sugar Factory Pvt. Ltd. (supra) which held it ‘not to be good in law’. The other order of the ITAT Ahmedabad Bench in the case of Kalpataru Power Transmission Ltd.{[2016] 68 taxmann.com 237 (Ahm. Trib.)}has been overruled by the later judgment of same bench of Ahmedabad Bench of the Tribunal in the same case of Kalpataru Power Transmission Ltd.[2019-TIOL-1424- ITAT-AHM].In view of the fact that case laws relied upon by the revenue have already been overruled by higher court or by the same court in later judgment, we are not inclined to consider those judgments while adjudicating the issue under consideration. 5.4 We also borrow some reasoning from the fact that Ministry of Finance has inserted a specific provision in form of section 115BBG in the Act which is effective from 1st April, 2018 and will accordingly apply from assessment year 2018-19 and subsequent years. The rate of taxation provided in said section is 10% (in addition to applicable surcharge and education cess). This also corroborates the case of the assessee that CERs are not regular business receipts arising from business of the assessee and this fact has also been recognized by the Government and, therefore, need arose to bring a special provision under the Act and that too at concessional rate of tax. Further, in any case, in view of amendment being applicable from assessment year 2018-19, the taxability in year concerned, which is AY 2006-07, is not governed by said provisions and hence the taxability of carbon credits need to be decided in light of extant judicial position. 5.5 We are in complete agreement with the Ld. AR that the issue in no longer res integra in view of several judgments of Hon’ble High Courts. In the following cases, the Hon’ble High Courts have decided the issue in favour of assessee by holding carbon credits as capital receipts not liable to tax: i. Alembic Limited [ITA Nos. 553/2017 & 554/2017] (Gujarat High Court 28.08.2017) ii. L.H. Sugar Factory Pvt. Ltd. [2016-TIOL-1942- HC- ALL-IT] iii. Ambika Cotton Mills Ltd. [TS-144-HC- 2021(MAD)] iv. LancoTanjore Power Co. Ltd. [[2021] 434 ITR 671 (Madras)] v. Tamil Nadu Newsprint & Papers Ltd. [[2021]130 taxmann.com 213 (Madras)] vi. Arun Textiles Pvt. Ltd. [2016-TIOL-2212-HCMAD- IT] vii. Rajasthan State Mines and Minerals Ltd. [2017- TIOL- 2297-HC-RAJ-IT] viii. Shree Cement Ltd. [ dated 22.08.2017] ix. Subhash Kabini Power Corporation Ltd. {[2016] 69 taxmann.com 394 (Karnataka)} x. Dodson Lind blom Hydro Power Pvt. Ltd. [2019- TIOL-531-HC-MUM-IT] xi. My Home Power Ltd. {[2014] 46 taxmann.com 314 (Andhra Pradesh)} 5.6 Further, we are not aware of any contrary judgment of any High Court on the issue nor the Ld. DR could point out any contrary judgment on the issue. Therefore, respectfully following the ratio of the Hon’ble High Courts as discussed above as well the orders of the ITAT including the jurisdictional bench of the Tribunal, we are of the view that carbon credits/CERs are in nature entitlement accrued to the assessee on account of its efforts to reduce the emission of harmful greenhouse gases. They have arisen due to environmental concerns and therefore cannot be said to be ‘connected with’ or ‘incidental to’ the business activities of assessee. The assessee is engaged in the business of refrigerants, engineering plastics and industrial yarns etc. and is not into the business of trading of carbon credits. All these findings of facts have been given by the coordinate bench in assessee’s own case in subsequent years in AY 2007-08 and AY 2010- 11 which have been placed before us. We, therefore, hold that carbon credits are not offshoot of business but offshoot of environmental concerns and hence not chargeable to tax. The receipts arising from transfer of carbon credits are in the nature of capital receipts not subjected to tax in terms of section 28(iv) read with section 2(24)(vd) of the Act. The claim of the assessee raised in grounds of appeal from 1 to 3 is hereby allowed. 6.0 Connected with the above, another issue raised by the assessee, by way of additional ground of appeal no.4, is the exclusion of carbon credits from the book profits computed under section 115JB of the Act. It was submitted that the above additional ground is legal ground, all the facts are available on record. The learned authorised representative relied upon the several judicial precedents on this issue. …………….. 6.4 It is a settled law that a capital receipt is not liable to tax under the Act unless it is specifically included in the definition of income u/s 2(24) of the Act and chargeable under any of the charging provisions of the Act. Once a particular receipt is treated as capital receipt, the same cannot be brought to tax in garb of ‘minimum alternative tax’ applicable on book profits computed u/s 115JB of the Act. The ratio of judgment delivered by the Hon’ble High Court of Calcutta in case of Ankit Metal & Power Ltd. [2019] 109 taxmann

93. (Cal) is worth mentioning. In Para no. 27, the Hon’ble Court held that: “27. In this case since we have already held that in relevant assessment year 2010-11 the incentives 'Interest subsidy' and 'Power subsidy' is a 'capital receipt' and does not fall within the definition of 'Income' under Section 2(24) of Income Tax Act, 1961 and when a receipt is not on in the character of income it cannot form part of the book profit under Section 115JB of the Act, 1961. In the case of Apollo Tyres Ltd. (supra) the income in question was taxable but was exempt under a specific provision of the Act as such it was to be included as a part of the book profit. But where a receipt is not in the nature of income at all it cannot be included in book profit for the purpose of computation under Section 115JB of the Income Tax Act, 1961. For the aforesaid reason, we hold that the interest and power subsidy under the schemes in question would have to be excluded while computing book profit under Section 115 JB of the Income Tax Act, 1961.” 6.5 Further ITAT, Lucknow Bench, in case of L.H. Sugar Factory Ltd. (ITA No. 717 & 418/LKW/2013 and others), held as under: - “4. We have considered the rival submissions. We find that the issue in dispute as per Ground No. 1 of appeal is regarding nature of receipt on account of sale of carbon credit and in the case of CIT Vs. My Home Power Ltd. (Supra) also, the dispute before Hon’ble Andhra Pradesh High Court was this as to whether the amount received by the assessee on transfer of carbon credit is capital receipt or Revenue receipt. It was held by Hon’ble Andhra Pradesh High Court in that case that carbon credit is not an offshoot of business but an offshoot of environmental concerns and no assets is generated in the course of business but it is generated due to environmental concerns and therefore, it was held that the Tribunal has correctly held that this is a capital receipt and it cannot be business receipt of income and in this manner, Hon’ble Andhra Pradesh High Court has upheld the Tribunal’s order in that case. The dispute in the present case is also regarding nature of receipt on account of transfer of carbon credit. Ld. DR of the Revenue could not point out any difference in facts in the present case and in the case of CIT Vs. My Home Power Ltd. (Supra) and therefore, respectfully following this judgment of Hon'ble Andhra Pradesh High Court, we decline to interfere in the order of Ld. CIT(A) on this issue. Accordingly, Ground No.1 of the Revenue is rejected.”

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

36. Before us, Revenue has not pointed to any distinguishing feature in the facts of the case in the year under consideration and that of the earlier years. Revenue has also not placed any material on record to demonstrate that the order of Tribunal in assessee’s own case for A.Y. 2006-07 has been stayed/set aside/overruled by higher judicial forum. In view of the aforesaid facts, we hold that the AO was not justified in considering the receipt from CERs to be revenue receipts. We, therefore, direct the AO to consider the receipts on transfer of CER to be capital receipt. Since the amount is held to be capital receipt, it cannot be considered for the purpose of computing book profit u/s 115JB of the Act. Thus the grounds of assessee are allowed”.

48. It is an undisputed fact that the assessee in the return of income filed had offered the receipts on transfer of CER proceeds and cancellation of contracts relating to transfer of CER’s credits as revenue receipts and thus offered it to tax but during the course of assessment proceedings before AO, assessee had claimed it to be capital receipt and had sought its exclusion from total income. The claim of the assessee was denied by the AO for the reason that the assessee had not filed revised return of income claiming the receipts to be capital receipts and for which AO had placed reliance on the decision of Hon’ble Apex Court in the case of Goetze India Ltd. (supra). The order of AO was upheld by DRP. We also find that Hon’ble Gujarat High Court in the case of CIT vs. Mitesh Impex [2014] 46 taxmann.com 30 (Gujarat), after considering various decisions cited in the decision, has held the decision of the Supreme Court in the case of Goetze (India) Ltd. (supra) is confined to the powers of the assessing officer and accepting a claim without revised return. But it does not bar the appellate authorities to entertain the legitimate claim.

50. Before us, ld. DR has not controverted the factual matrix from earlier decision nor has pointed to any distinguishing feature in the facts of the case in the year under consideration and that of the earlier years. Revenue has also not placed any material on record to demonstrate, that the order of coordinate Bench in assessee’s own case for A.Y. 2006-07 & A.Y. 2009-10 and in case of judicial precedents by the Hon’ble Delhi High Court in INS Finance & Investment (P) Ltd. [TS-379-HC-2024 (DEL)] and the Hon’ble Supreme Court in Saurashtra Cement Ltd. [192 Taxman 300 (SC)], in which held that amount received on account of cancellation of auction is a capital receipt not chargeable to tax, been stayed/set aside/overruled. In view of the aforesaid facts, we hold that the AO / DRP were not justified in considering the receipt of transfer of CER proceeds and cancellation of contracts relating to transfer of CER’s as revenue receipts. We, therefore, direct the AO to consider the receipts on transfer of CER and cancellation of CER’s contract to be capital receipt. Since the amount is held to be capital receipt, it cannot be considered for the purpose of computing book profit u/s 115JB of the Act and AO shall also exclude the same from computation of books profits under MAT. Thus, the various grounds of assessee are allowed on this issue.

54. The Assessing Officer, however, did not entertain the revised claim on the ground that it was not made in the original return of income. The Dispute Resolution Panel, while upholding the Assessing Officer’s view, placed reliance on the decision of the Hon’ble Supreme Court in Goetze (India) Ltd. v. CIT [(2006) 284 ITR 323 (SC)] to hold that a fresh claim not made in the return cannot be entertained during the course of assessment.

56. On the other hand, ld. DR of the Revenue relied upon the findings of the lower authorities.

57. Considered the rival submissions and perused the material placed on record. The limited issue for adjudication is whether the assessee is entitled to the additional deduction of Rs. 8,36,29,209/- under section 10A(1A) on account of the rectification of an inadvertent computational error. It is not in dispute that the assessee’s unit is otherwise eligible for deduction under section 10A and that the relevant figures of export turnover, total turnover, and book profit have been accepted by the Assessing Officer. The only issue pertains to the quantum of deduction incorrectly certified in the original Form 56 due to an error in calculation. The revised certificate issued by the same Chartered Accountant clearly corrects this error and substantiates the assessee’s computation.

59. In the present case, the assessee has substantiated its claim with a revised certificate and complete supporting documents. The mistake being clerical and arithmetical in nature, denial of the additional deduction merely on the ground of procedural technicality would defeat the substantive justice envisaged under the Act. We, therefore, hold that the authorities below erred in rejecting the claim solely on procedural grounds without examining the correctness of the computation. The Assessing Officer is directed to verify the revised working and supporting evidence furnished by the assessee and, upon due verification, allow the additional deduction of Rs. 8,36,29,209/- under section 10A(1A) of the Act.

67. Further reliance has been placed on the judgment of the Hon’ble Delhi High Court in PCIT v. Ansal Properties & Infrastructure Ltd. [2024] 460 ITR 341 (Delhi), where it was held that merely because an assessee inadvertently offers a receipt for taxation, the Revenue cannot levy tax if the receipt does not constitute income under the law. The Hon’ble Court emphasized that tax cannot be levied merely on admission or mistake and that the charge must flow from the statute.

“52. Ground No.8 including the sub grounds are with respect to non adjudication of the claim by CIT(A) of additional depreciation, seeking of indexation benefit for long term capital gains and treating the TUF subsidy as revenue receipts.

53. Before CIT(A), assessee had made claim for additional depreciation, seeking indexation benefit for Long Term Capital Gains and considering TUF subsidy as capital receipt. CIT(A) noted that all the aforesaid claims were neither made in the return of income nor during the course of the assessment proceedings. He was therefore of the view that the claims were not entertainable before him in view of the decision rendered by Hon’ble Apex Court in the case of Goetze India Ltd. (supra). He, accordingly denied the claims made by the assessee. Aggrieved by the order of CIT(A), assessee is now before Tribunal. ……… 58. With respect to the treatment of Technology up-gradation fund (TUF) subsidy it is submitted Assessee had obtained loan of Rs.4000.00 lakhs from State Bank of India and Rs.3500.00 lakhs from State Bank of Mysore under the TUF scheme. As per the subsidy scheme, assessee was eligible for the interest subsidy @5%. It was submitted that while computing the taxable income assessee netted the interest subsidy received (Rs.2,64,67,432/-) with the interest expenditure (Rs.42,00,28,785/-) and the net interest expenditure of Rs.39,35,61,353/- was claimed as expenditure. It was submitted that since interest subsidy under TUF Scheme was a capital receipt and not taxable and therefore the benefit be allowed to the receipt of interest subsidy. He submitted that before CIT(A), assessee had raised additional ground with respect to treating the TUF subsidy of Rs.2,64,67,432/- as capital receipt for which the necessary details like loan agreements, working of interest and judicial precedents were submitted. He pointed to the aforesaid contentions made before CIT(A) in the letter addressed to CIT(A), the relevant pages being at from pages 135 to 140 of the paper book. He submitted that CIT(A) did not entertain the additional claim and rejected the claim of the assessee. The reason for rejecting the claim of the assessee was that the claim was neither made in the return of income nor during the assessment proceedings CIT(A) followed the decision of Hon’ble Apex Court in the case of Goetze India Ltd. (supra).

60. Learned DR on the other hand did not controvert the factual submissions made by Learned AR but however supported the order of lower authorities.

61. We have heard the rival submissions and perused the material available on record. The issue raised in the present grounds is about CIT(A) not entertaining and adjudicating the claims made before him for the first time. On the issue of the claim being disallowed as it was made for the first time before CIT(A), we have herein above at para 34 & 35 have held that CIT(A) was not justified in not deciding the claim made by the assessee for the first time before him and CIT(A) should have decided the claim of the assessee. We for the same reasons hold that CIT(A) has erred in not deciding the claim made before him for the first time and should have decided the claim of the assessee. ………… 64. With respect to the issue of interest subsidy on TUF scheme, we find that identical issue arose in assessee’s own case in A.Y. 2012-13 (ITA No.5784/Del/2016 order dated 24.02.2020) where the issue was restored back to the AO by observing as under: “Claim 2. Interest subsidy under Technology Upgradation Fund (TUF) Scheme:

23. During the year, Assessee had obtained loan of Rs. 6,250 Lacs from SBI and Rs. 3,500 Lacs from State Bank of Mysore under TUF Scheme issued by the ministry of textile, Government of India. Whether the Loan was utilized as per the scheme is not under question. Under the TUF scheme, the assessee was eligible for 5% Interest subsidy calculated on the loan outstanding which amounted to Rs. 3,08,96,338/-. The assessee made such additional claim vide letter dated 16.02.2016 before the AO. The AO did not entertain the additional claim of the assessee. The DRP did not admit the additional claim of the assessee relying on the judgment in Goetzee (India) Limited vs CIT 284 ITR 323.

The Assessing Officer is directed to exclude the said amount from the taxable. In the result, Ground No. 17(d) raised by the assessee is allowed. 71. The assessee submitted that the receipt on account of TUF subsidy being capital in nature and therefore ought to be excluded from the computation of book profits under section 115JB of the Act. In support of its contention, the assessee relied upon various judicial precedents including:

 CIT v. Ankit Metal & Power Ltd. [TS-410-HC-2019 (Cal.)], wherein it was held by the Hon’ble Calcutta High Court that capital receipts which are not in the nature of income cannot form part of book profits under section 115JB. Harinagar Sugar Mills Ltd. v. CIT [2019-TIOL-1242-HC-MUM-IT]  (Bombay High Court), where it was similarly held that capital subsidy cannot be included in book profit computation. Other Tribunal decisions such as Ultimate Flexipack Ltd., Reliance Industries  Ltd., Alok Industries Ltd., Nilgiri Tea Estate Ltd., and Harrisons Malayalam Ltd.

55. Learned DR on the other hand did not seriously controvert the submissions made by Learned AR and also did not object to the prayer for remitting the issue back to AO for verification.

This additional benefit in the form of additional allowance under section 32(1)(iia) is onetime benefit to encourage the industrialization and in view of the decision of Supreme Court in the case of Bajaj Tempo Ltd. vs. CIT [1992] 196 ITR 188/62 Taxman 480, the provision related to it have to be constructed reasonably, liberally and purposively to make the provision meaningful while granting the additional allowance.

Similarly in case of TCPL Packaging Ltd. (supra), the Mumbai Bench has held that remaining additional depreciation claimed can be allowed in immediately succeeding year which could not be allowed in the year of acquisition on the ground that new plant and machinery has been put to use for less than 180 days.

46. The Finance Act, 2015, has amended the law by inserting third proviso to section 32(1)(iia) – applicable w.e.f. 1st April 2016 to allow the claim of additional depreciation for assets put to use for less than 180 days in subsequent Assessment Year.

“63. Since the facts of the case in the year under consideration are identical to that of A.Y. 2014-15, we for the reasons given while deciding the issue A.Y. 2014-15 and for similar reasons, restore the issue back to the file of AO and direct him to decide the issue afresh in accordance with law. The AO shall be free to call for such information and explanations as he deems fit to adjudicate the claim of the assessee. Assessee shall also be free to file such documents, explanations, submissions as it deems fit in respect of this claim. Needless to state that the AO shall grant adequate opportunity of hearing to the assessee”. b) A.Y. 2016-17 (P. no. 392- 394 of Case law compliance) 53. Apropos Grounds No. 77 & 78 relating to additional claim made with respect to allowance of additional depreciation of Rs.17,36,90,694/- @ 10% u/s 32(1)(iia) of the Act are concerned, ld. Counsel for the assessee submitted that the issue is fully covered by the orders of the ITAT in assessee’s own case in different years wherein, the ITAT remitted back the issue to the file of the AO in the assessment years 2009-10, 2010-11, 2012-13, 2014-15 and 2015-16. Further, it has been submitted that same had been allowed / granted by AO vide its appeal effect order dated 22.3.2023”. “54. Ld. DR of the Revenue relied upon the orders of the authorities below, but she did not controvert the contention of the ld. AR for the assessee that the issue is covered in favour of the assessee by the decision of the Tribunal in assessee’s own case in the assessment years 2009-10, 2010-11, 2012-13, 2014-15 and 2015-16 and neither produced any contrary decision”. “55. Considered the rival submissions and material placed on record. We find considerable cogency in the contention of the Ld. AR that the instant issue is fully covered by the order of the Coordinate Bench of the Tribunal in assessee's own case for different assessment years specifically Assessment Year 2015-16 wherein the Bench remitted back the issue to the file of the AO and AO had allowed / granted its appeal effect order dated 22.03.2023.In view of the aforesaid discussions and respectfully the aforesaid precedents, we deem it fit and proper to remit back the issue to the file of the TPO with the similar directions. Accordingly, the Grounds No.77& 78 are allowed for statistical purposes”.

“43. Apropos Grounds no.66 to 70 relating to disallowance of depreciation of goodwill amounting to Rs.14,36,387/- are concerned, ld. Counsel for the assessee submitted that the issue is fully covered by the order of the ITAT in assessee’s own case in different years wherein, the ITAT upheld that goodwill is an intangible assets and eligible for depreciation.

45. Considered the rival submissions and material placed on record. We find considerable cogency in the contention of the Ld. AR that the instant issue is fully covered by the order of the Coordinate Bench of the Tribunal in assessee's own case for years 2009-10, 2012-13, 2014-15 & 2015-16 wherein, the Bench upheld that goodwill is an intangible asset and eligible for depreciation. In view of the aforesaid discussions and respectfully following the aforesaid precedents, we deem it fit and proper to direct the TPO to delete such disallowance of Rs.14,36,387/- in light of the aforesaid precedents in assessee’s own case. Accordingly, the Grounds No.66 to 70 are allowed in the aforesaid manner”.

No. 17(g) is allowed.

95. Apropos Grounds no.17(h) relating the issue of Claim for allowance of employees contribution to ESIC & PF is not pressed in view of the judgment of the Hon’ble Supreme Court in the case Checkmate Services P. Ltd. [TS-791-SC-2022]. This ground no. 17(h) is hereby dismissed.

96. Apropos Additional Ground No. 26 and Ground No.27 are interconnected therefore considered together wherein the assessee has raised claim for exclusion of excise duty component on account of it being a capital receipt both from computation of normal taxable income as well from book profits.

97. The Ld. AR of the assessee submitted that issues under both the grounds are fully covered by the order of the ITAT in the assessee's own case wherein the ITAT remitted the matter back to the file of Ld. AO.

98. Ld. DR of the revenue did not controvert the contention of the ld. AR.

99. Considered the rival submissions and material placed on record. The relevant findings of decision of the coordinate bench of the Tribunal for the A.Y 2012-13 is reproduced below: “36. Facts as submitted to us are that during the financial year, one of the unit at Technical textiles business at Kashipur has made sale amounting to Rs.1,26,53,28,518/- inclusive of excise duty. Excise duty component on such sales come to Rs. 11,81,58,510/- by reverse working mechanism. Such excise duty component, as claimed by the assessee being in the nature of capital receipt, be excluded from the taxable income of the assessee. The AO did not entertain the additional claim of the assessee. The DRP did not admit the additional claim of the assessee relying on the judgment in Goetze (India) Limited vs CIT (supra)”. “37. Having heard the assessee, we hereby remand back the issue to the file of the AO for fresh adjudication. The assessee shall be free to file such documents, explanations, submissions as it deems fit in respect of this claim”. “38. In grounds no. 21 and 22 the assessee has pleaded to exclude certain receipts viz., CER receipts, subsidy under TUF, from the computation of book profits u/s 115JB. Further assessee has sought to exclude/include certain provisions written back /created from the computation of book profits u/s 115JB of the Act. The claim for exclusion/inclusion of such items in computation of book profits was made by the assessee before lower authorities. However the lower authorities did not entertain the additional claim of the assessee. The items sought to be excluded / included through above grounds are as under: Capital receipts a) Exclusion of Rs. 4,39,72,72,157/- received by the assessee on account of transfer of Carbon emission reductions (CERs) from the book profit of the assessee. b) Exclusion of Rs. 3,08,96,338/- on account of interest subsidy received under the TUF Scheme. c) Exclusion of excise duty component amounting to Rs.11,81,58,510/- on sale affected by eligible unit u/s 80-IC (Kashipur unit) of worked out on reverse calculation mechanism being capital receipt in nature. Other exclusions/inclusions d) Exclusion of Rs. 35,02,570/- on account of provisions for doubtful debts written back. e) Exclusion of Rs. 4,00,00,000/- on account of provisions for doubtful advances written back. f) Exclusion of Rs. 1,54,10,239/- on account of provisions for investments written back. g) Inclusion of Rs. 22,66,432/- on account of provision for doubtful debt created h) Inclusion of Rs. 7,64,706/- on account of provision for doubtful advances created i) Inclusion of Rs. 9,07,600/- on account of provision for doubtful advances created” “39. The assessee placed reliance upon the following judgments to exclude capital receipts from book profits u/s 115JB. • Binani Industries Ltd. [TS-111-ITAT-2016(Kol) • L.H. Sugar Factory Ltd. (ITA Nos 417, 418 & 339/LKW/2013) also approved by Hon'ble Allahabad High Court [2016-TIOL-1942-HC-ALL High Court-IT]. • PCIT v. Ankit Metal & Power Ltd. [416 ITR 591 2019] Cal High Court • Alok Industries Ltd. [TS-313-ITAT-2018]” “40. In respect of exclusion of other items from book profits the assessee has submitted that as per Explanation 1 to section 115JB of The Income Tax Act, 1961, the amount withdrawn from any reserves should be reduced from the net profit to determine book profits. It was argued that when such provision was originally made, the same was added to the book profits u/s 115JB and thus it is logical to reduce the amount of provisions written back from such book profits”. “41. We have heard the rival contentions, perused the relevant findings and as well as material referred to before us at the time of hearing. The issue involves additional claim which were not adjudicated by the lower authorities. We therefore set aside the issues relating to computation of books profits back to the file of AO to decide the same in accordance with law after granting a reasonable opportunity of being heard to the assessee. The assessee shall be free to file such documents, explanations, submissions as it deems fit in respect of this claim”.

100. Respectfully following the earlier order in assessee’s own case for AY 2012-13 we hereby remit back the issues to the file of the AO for fresh adjudication. The assessee shall be free to file such documents, explanations, submissions as it deems fit in respect of this claim. Accordingly, Grounds No.26 and 27 are allowed for statistical purposes.

(Assessment Year: 2013-14)

1. The Ld DRP/AO have erred in law and on facts, and in the circumstances of the appellant's case in making an addition/adjustment of ~ 1,16,44,2321- on account of the order of the Transfer Pricing Officer (TPO) u/s .92CA(3) and making an addition/denying deductions of Rs.2,64,82,12,160/- on account various non-transfer pricing addition/disallowances.

2. The Ld DRP/AO have grossly erred in not granting an additional legal claim/allowances, amounting to Rs.36,76,55,189/- made by the appellant during the course of assessment proceedings, on account of profit based deduction in respect of its Wind Power Plant (eligible unit), and remaining additional depreciation.

3. That the final assessment order u/s 143(3) r.w.S. 144C of the Act dated 18th May, 2017 is bad in law. The additions/disallowances made by Id AO are wholly illegal, untenable and on erroneous grounds. GROUNDS OF OBJECTIONS IN RESPECT OF TRANSFER PRICING ADJUSTMENTS Corporate Guarantee - Rs.1,07,03,134/-

4. The Ld. DRP/TPO and consequently the Ld. AO have grossly erred in law and on facts and in the circumstances of the appellant's case in making an upward adjustment of Rs.1,07,03,134/- by imputing the arm's length corporate guarantee fee rate @ 0.5% instead of 0.25% actually charged by appellant from its AEs [wholly owned subsidiaries] based on the specific quotations obtained from HDFC Bank & ICICI Bank under the CUP method.

5. The Ld DRP/TPO and consequently the Ld. AO have grossly erred on facts in not considering that the AEs have furnished counter guarantee of equal amounts on back to back terms to the appellant, therefore appellant is completely indemnified against any risk of default on the part of its AEs.

6. The Ld. DRP/TPO and consequently the Ld. AO have grossly erred in not appreciating the fact that corporate guarantee has been extended by the appellant, being the parent company on behalf of its wholly owned subsidiary, as a matter of business prudence and to protect its own commercial interest. The appellant does not incur any cost by extending such corporate guarantee to its AEs nor assumes any risk as entire capital/assets of its AEs are held directly or indirectly by the appellant.

7. The Hon'ble ITAT may be pleased to hold:- 7.1 That extension of corporate guarantee by the appellant on behalf of its AEs [wholly owned subsidiaries] is not an international transaction and, therefore, not amenable to any adjustment under Chapter X of the Income Tax Act. 7.2 In the alternative and without prejudice to the above, the Hon'ble ITAT may be pleased to hold that no adjustment is required as 0.25% charged by the appellant as corporate guarantee fee from its AEs [wholly owned subsidiaries] is at arm's length and thus upward adjustment of Rs.1,07,03,134/- be directed to be deleted. 7.3 That the corporate guarantee fee benchmarked by the appellant under CUP method based on specific quotations obtained from HDFC Bank & ICICI Bank be held at arm's length. Interest on foreign currency loans/Delayed receivables Rs.9,41 ,098/- 8. The Ld. DRP/TPO and consequently Ld. AO have grossly erred in law and on facts and in the circumstances of the appellant's case in proposing an upward adjustment of Rs.9,41,098/- (using LlBOR+250 basis points i.e. 3.513% as ALP) on the ground that interest charged by the appellant on foreign currency loan granted to its AE @ LlBOR+225 basis points and delayed receivables from its AE @LlBOR+250 does not meet the arm's length principle.

9. That out of adjustment of Rs.9,41 ,098/-, the Ld TPO/AO has grossly erred in law and on the facts by making a mistake apparent from record in making an upward adjustment to the extent of ~4,24,438/- in respect of delayed receivables as the same is already at arm's length [@ LlBOR+250 bps] in accordance with the Ld DRP directions.

10. The Ld DRP/TPO and consequently the Ld. AO have grossly erred on facts in: 10.1 disregarding the comparability analysis of 6 companies carried out by the appellant in its TP study which determined the comparable uncontrolled transactions at LlBOR+218 basis points as a benchmark, without affording any cogent reason. 10.2 not appreciating the internal comparable uncontrolled price (CUP) data available at LIBOR + 225 basis points, being the rate at which a foreign bank (Citi Bank) has granted the loan during the year to the same AE.

10.3 ignoring the fact that appellant's average cost of borrowing is LlBOR+148 basis points, whereas it has charged LlBOR+225 basis points, which is 77 basis points higher from its AE.

11. The Hon'ble ITAT may be pleased to hold that the interest charged by the appellant from its overseas wholly owned subsidiary at LIBOR plus 225 basis points is at arm's length and no adjustment is required therein and thus delete the aforesaid adjustment of Rs.9,41,098/-. GROUNDS OF OBJECTIONS IN RESPECT OF CORPORATE TAX ISSUES Disallowance u/s 14A 12. The Ld. DRP/AO has erred in law and in facts and in the circumstances of the appellant by enhancing the disallowance u/s 14A of the Act, to the tune of Rs.72,78,1151- which is wholly untenable in law and based on conjectures and surmises.

13. The Ld. DRP/AO has while enhancing disallowance u/s 14A of the Act, grossly erred in holding that the entire amount of interest expense of Rs.55,83,87,549/- is indirectly attributable for earning a dividend income of Rs.6,47,53,729/-.

14. That the Ld. DRP/ AO has grossly erred in law and on the facts & circumstances of the appellant in attributing interest u/r 8D(2)(ii) although all loans were explained to be for specific business purpose.

15. That the Ld. DRP/AO has failed to appreciate the fact that the appellant's owned funds/reserves far exceeded the investments, therefore no interest should be attributed u/r 8D(2) of the IT Rules.

16. Without prejudice to above, the Id. DRP/AO has erred in law and in facts of the case by wrongly computing the disallowance u/s 14A at Rs.1,13,23,2871- instead of Rs.81,88,5791- by considering incorrect values of the opening balance of investments and closing balance of total assets as per Rule 8D(2)(ii).

17. That the Ld. AO be directed to delete the enhancement of disallowance of Rs.72,78,115/- made u/s 14A of the IT Act. Addition of CERs as revenue receipts - Rs.2,62,69,14,276/- 18. The Id. DRP/AO has grossly erred in law and in facts and circumstances of the case in treating the amount received by the appellant on account of transfer of CER entitlements as revenue in nature and thus adding the same to the taxable income of the appellant.

20. The Hon'ble ITAT may be pleased to delete the addition of Rs.2,62,69,14,276/-. Disallowance of depreciation of Goodwill 21. The Ld. DRP/AO have erred in law and in facts and in the circumstances of the appellant by not granting the allowance of depreciation of Rs.34,04,769/- on goodwill arising on account of excess payment by the appellant for purchase of Business Units from SRF Polymers.

22. The Hon'ble ITAT may be pleased to grant the allowance of depreciation on Goodwill of Rs.34,04,769/-. Disallowance of weighted deduction u/s 35(2AB) 23. The Ld. DRP/AO have erred in law and in facts and in the circumstances of the appellant by disallowing the claim of weighted deduction u/s 35(2AB) in respect of in-house research facility to extent of Rs.1,06,15,000/- being the amount short approved by DSIR.

24. The Hon'ble ITAT may be pleased to grant the weighted deduction u/s 35(2AB) for Rs.1,06,15,000/-. Computation of book profits under MAT 25. The Ld DRP/AO has grossly erred in making additions of the following items while computing the book profits u/s 115JB of the Act :- 25.1 enhanced addition of ~ 72,78,115/- on account of enhanced disallowance u/s 14A of the Act. 25.2 addition of Rs.34,04,769/- on account of deprecation of goodwill claimed under IT Act, while MAT provisions do not provide for such disallowance.

26. The Id DRP/AO has grossly erred in not considering the following additions/reductions from book profits as made by the appellant in its computation of book profits u/s 115JB of the Act:- 26.1 addition of f 17,59,950/- on account of provisions for doubtful debts/advances, 26.2 reduction off 47,33,356/- on account of withdrawal from revaluation reserves. 26.3 reduction of f 19,16,1711- on account of provision of doubtful debts/advance written back.

27. The Ld DRP/AO has grossly erred in law and on the facts of the case in not excluding the amount received from transfer of CERs amounting to Rs.2,62,69,14,276/-, being a capital receipt in nature, from the book profits under section 115JB of the Act. Other Claims made during the assessment proceedings 28. The Ld DRP/AO has grossly erred in law and on the facts of the case, in not allowing the following allowances/claims made by the appellant during the course of the assessment proceedings: (a) claim of profit based deduction under section 80-IA amounting to Rs.17,66,44,282/- in respect of its Wind Power Plant (WPP) which was inadvertently left to be claimed while filing the return of income. (b) allowance of remaining additional depreciation @ 10% U/S 32(1 )(iia) amounting to Rs.19,10,10,907/- Non-Grant of Brought Forward Losses and Deduction under Chapter VI- A of the Act 29. The Ld. AO has grossly erred in law and facts of the case by not allowing the set off of brought forward assessed Long Term Capital Losses against current year's Long Term Capital Gains to the extent of Rs/17,43,51,303/- while computing the total income of the appellant. 30. The Id. AO has grossly erred in law and facts and circumstances of the case in not granting deduction u/s 80G to the extent of Rs/5,02,500/- (50% of Rs.10,05,000/-), which has been claimed by the assessee in its return of income, while computing the total income in the final order of the appellant. 31. The Ld. AO has erred in law & circumstances of the case by initiating penalty proceedings u/s 271 (1)( c) of the Act.

33. The appellate craves the leave to add, amend or alter all or any of the grounds of appeal

. Exclusion of the excise duty component embedded in the sales in respect of Technical Textile Business, Kashipur, Uttrakhand – Rs.1,839.80 Lacs "34. That on the facts & circumstances of the case and in law, the Hon'ble ITAT may be pleased to direct the Ld. AO to exclude the excise duty subsidy or exemption embedded in the sales effected by the eligible Technical Textile Business unit of the assessee located at Kashipur, Uttrakhand worked out on reverse calculation mechanism to the tune of Rs. 1,839.80 Lacs from the total income of the assessee by treating the same as capital receipt not chargeable to tax under normal provisions of the Income-tax Act, 1961 ('the Act') .

35. That on the facts & circumstances of the case and in law, the Hon'ble ITAT may be pleased to direct the Ld. AO to exclude the excise duty subsidy or exemption embedded in the sales effected by the eligible Technical Textile Business unit of the assessee located at Kashipur, Uttrakhand worked out on reverse calculation mechanism to the tune of Rs. 1,839.80 Lacs from the computation of book profits under section 115JB of the Act by treating the same as capital receipt not chargeable to tax under minimum alternative tax ('MAT') provisions of the Act."

104. We find that additional ground raised by the assessee is legal ground which does not require any examination of facts and hence deserves to be admitted in view of the Hon’ble Supreme Court judgment in case of NTPC v. CIT 229 ITR 383 which has held that legal claims could be admitted at any stage of appellate proceedings.

105. Apropos Ground Nos. 1 to 3 are general in nature, hence, not adjudicated and dismissed as such.

108. Ld. AR of the assessee brought to our notice relevant facts, the assessee had extended foreign currency loans of USD 9,000,000 to its wholly owned subsidiary, SRF Global B.V. (Netherlands), and charged interest at the rate of 6M LIBOR + 225 basis points (3.513% p.a.). The said rate was benchmarked using the Comparable Uncontrolled Price (CUP) Method, supported by a sanction letter from Citibank, which had advanced a loan to the same AE at 6M LIBOR + 225 bps. The TPO, however, disregarded the assessee’s benchmarking and adopted 6-month LIBOR + 450 bps as the arm’s length rate, based on a quotation obtained from SBI under section 133(6). The DRP, while relying on its own directions in earlier assessment years (A.Ys. 2011–12 & 2012–13), moderated the rate to LIBOR + 250 bps. However, in giving effect, the AO erroneously sustained an adjustment of ₹4,24,438/- relating to delayed receivables, even though such interest was already charged at LIBOR + 250 bpsas per the DRP’s accepted rate. Eventually, an upward adjustment of ₹9,41,098/- was made.

18. TPO noted that assessee had given a loan of 4 million USD to its subsidiary, M/s. SRF Overseas Ltd., Dubai and had charged interest at 6 months LIBOR + 2.5% per annum on the loan amount. TPO noted that the subsidiary company to whom the loan was given was incurring losses and was not rated by credit rating agency. As per the information obtained by AO from CRISIL Ltd, the annualized average yield of AA- Rated Company was 10.83%. According to the TPO, since the subsidiary company was a loss making company, the annualized average yield should be the average for the companies with credit rating of BBB+, BBB- & BBB which works out to 14.29%. According to the TPO, the markup that should have been charged by the assessee from its AEs should be the difference of 14.29% and 10.83% which comes to 3.4%. Apart from that, according to TPO, a mark up towards the administrative cost at 0.50% also should have been charged by the assessee from its AE. TPO, therefore, proposed that interest that should have been charged by the assessee from its AE should be LIBOR+534 BPP but assessee had only charged LIBOR + 250 BPP. Assessee was show caused as to why an adjustment should not be made for the difference. Before TPO, assessee made detailed submissions which were not found acceptable by TPO. TPO, thereafter, computed the interest that should have been charged by the assessee from its AE to be Rs.36,03,975/-. Based on the adjustment suggested by TPO, AO in the draft assessment order proposed upward adjustment to the extent of Rs 36,03,975/-. Aggrieved by the order of AO, assessee carried the matter before CIT(A) who for the reasons noted by him in his order vide para 4.3 of his order, upheld the order of AO.

19. Aggrieved by the order of CIT(A), assessee is now in appeal before the Tribunal.

• ACIT v. Crompton Greaves Ltd. [(2019) 111 taxmann.com 338 (Mum-Trib.)]; • Cummins India Ltd. v. DCIT [96 taxmann.com 576 (Pune- Trib.)]; • CIT v. Sun Pharmaceutical Industries Ltd. [(2017) 85 taxmann.com 80 (Guj.)], upheld by the Hon'ble Supreme Court [SLP dismissed on 28.07.2018]; • Carborundum Universal Ltd. v. ACIT [TS-581-ITAT-2025 (Chny)]; • Natural Remedies Pvt. Ltd. [TS-36-ITAT-2021 (Bang)]; • DCIT v. STP Ltd. [2021-TIOL-128-ITAT-KOL]. • Minilec India (P.) Ltd. v. ACIT [(2018) 93 taxmann.com 213 (Pune- Trib.)] All these decisions consistently hold that DSIR's role, prior to 01.07.2016, was confined to approval of the R&D facility, not of the expenditure incurred.

"Para l l -Further still, in Pune Tribunal decision in the case of Cummins India Ltd. v. Dy. CIT /2018J 96 taxmann.com 576 (Pune-Trib.) / P.No. 1166-1189 of CLCJ, which is a decision directly on the issue at hand, it has been held, inter alia, to the fact that though the Rules stipulate the filing of audit report before the prescribed authority by availing the deduction under section 35(2AB). The provision of the Act prescribed or approved to be granted by the prescribed authority vis-a-vis the expenditure from year-to-year; that the amendment was brought in by the 1ncome Tax amendment Rules with effect from 1-4-2016, wherein, a separate part has been inserted for certifying the amount of expenditure from year-to-year and the amended Form No. 3CL, thus, lays down the procedure to be followed by the prescribed authority; that prior to the said amendment, no such procedure; methodology was prescribed; and that therefore, in the absence of any such procedure or methodology, the Assessing Officer had erred in curtailing the expenditure and consequent weighted deduction claimed under section 35(2AB) on the summons that the prescribed authority had approved the part of the expenditure in Form No. 3CL." "Para 12:-1t would also be apt to reproduce here under the provisions substituted in clause (b) of sub-rule (7 A) of rule 6, as brought in by the amendment effective from 1-7-2016, as above: 'The prescribed authority shall furnish electronically its report,- (i) in relation to the approval of the in-house research and development facility in Part A of Form No. 3CL; (U) quantifying the expenditure incurred on in house research and development facility by the company during the previous year and eligible for weighted deduction under sub section (2AB) of section 35 in Part B of Form No. 3CL." "Para 13:-Hitherto, the provision was as follows: 'The prescribed authority shall submit its report in relation to the approval of in-house facility and development facility in Form No. 3CL to the Director General (Income Tax Exemptions) within sixty days of its granting approval. ' The above also makes it amply clear that prior to the amendment, i.e., .up to 30-6-2016, it was not required to quantify the expenditure and it was only with effect from 1-7- 2016, that this mandate has been put in place. " "Para 14:- The year under consideration is assessment year 2009-10 and, for this year, the amendment was not applicable. Therefore, the assessee is right in contending that the non-approval of the expenditure claimed by DSIR did not entitle the Assessing Officer to make the disallowance and the Commissioner (Appeals) to confirm the same. This does also take care of a without prejudice contentions raised by the assessee, to the fact that deduction of actual expenditure of Rs. 28.35 lakh be allowed to the assessee under the provisions of section 35(1)(i) and 35(1)(iv). These provisions of allowing 100 per cent deduction of expenditure on in-house scientific research, irrespective of the approval of the unit and the certification of the expenditure, where the actual expenditure, as in the case of the assessee is verified by the Statutory Auditor and certified by the Independent Auditor and Tax Auditor. " "Para 15:- The assessee is found correct in contending that the Commissioner (Appeals) has observed that the extent of the expenditure was never verified by the Assessing Officer. Thus, according to the assessee it goes to confirms that the Assessing Officer disallowed the claim without due application of mind. This contention of the assessee is correct, as evident from the assessment order itself, wherein the ground (or the disallowance was the non- approval of the expenditure claimed by the DSIR. "

• The assessee's in-house R&D facility was duly approved by DSIR. • The expenditure was fully supported by documentary evidence and certified by statutory auditors. • The DSIR's short approval was issued after the due date for filing the revised return and without giving reasons for such disallowance.

In view of these facts, we are of the considered opinion that the Assessing Officer erred in restricting the weighted deduction to the amount approved by DSIR in Form No. 3CL. Since the approval of the facility was in place and the expenditure has not been found bogus or inflated, the assessee is entitled to the full deduction claimed.

• MIT Mohan Singh Kahlon v. DCIT [2013] 39 taxmann.com 145 (Chandigarh- Trib.) • Mrs. Meena S. Banerji v. ITO [2007] 14 SOT 569 (Mum.-Trib.) • Anchor Pressings (P.) Ltd. v. CIT [1986] 27 Taxman 295 (SC) • International Tractors Ltd. v. DCIT [2021] 127 taxmann.com 822 (Del.) • Oracle (OFSS) BPO Services Ltd. [TS-27-HC-2019 (Del.)] • E-Funds International India Pvt. Ltd. [TS-587-HC-2015 (Del.)] • CIT v. Sam Global Securities Ltd. (2014) 360 ITR 682 (Del.) • Shree Bhavani Power Projects (P.) Ltd. v. ITO [2024] 165 taxmann.com 733 (Del.) It was contended that since the assessee furnished all requisite documents, the claim was bona fide and the AO ought to have examined the same in accordance with law.

49. Learned DR on the other hand supported the order of lower authorities.

51. In view of the aforesaid facts, we are of the view that the claim of the assessee of the deduction U/S 80IA of the Act merits consideration and adjudication by the AO. We therefore set aside the issue back to the file of AO to consider the same on merits after considering the submissions made by assessee and in accordance with law. The AO shall be free to call for such information and explanations as he deems fit to adjudicate the claim of the assessee. Needless to state that AO shall grant adequate opportunity of hearing to the assessee and the assessee shall also be at liberty of file such documents, explanations and submissions as deemed fit in respect of its claim. Thus the ground of assessee is allowed for statistical purposes". The Ld. AR submitted that while assessing the total income of the assessee, the AO is statutory bound under the law to verify the claim of the assessee with documentary evidence and after due verification of the same. Also, even if some deduction or allowance has been inadvertently reported incorrectly, the AO should have granted the correct deduction after due verification. For this purpose, the reliance is placed on the judgment of IT AT Chandigarh in case of MIT Mohan Singh Kahlon [2013] 39 taxmann.com 145 (Chandigarh- Trib.). The relevant extract of the above case law is below:- "Para 9:- In facts, under section 143(3) of the Act, the AO while making the assessment of total income or of total loss, in case of any assessee, on the basis of such assessment is bound to consider the following points: (iii) Any evidence produced by the assessee on the dates specified in the notice from time to time and such other evidence, as the AO may require the assessee to produce on specified points, and (iv) All relevant material gathered by him even deduction or exemption or relief not claimed in the return, can be claimed under scrutiny proceedings." "Para 10:- When a notice under section 143(2) has been issued and proceedings of Assessment under section 143(3) are in progress, the assessee can put forth any claim for deduction or exemption or relief, which was not claimed in the return of income and the same shall have to be considered by the AO. Under section 143(2), the Assessing Officer can verify any understated income, excessive loss claimed or underpaid tax, in any manner, can be verified by the Assessing Officer under section 143(3). The Assessing Officer has to ensure that on the basis of evidence obtained during proceedings of regular assessment, he has to compute correct income of the assessee. " "Para 11:- Accordingly, we allow the appeal of the assessee, and direct the AO to compute the income on the basis of revised computation field by the assessee during the assessment proceedings".

If on the basis of material placed on record, the assessee is entitled to claim any deduction but forgets to make his claim in the return or in the course of assessment proceedings, then the assessee is entitled to make such claim by moving application under section 154 for rectification since non-granting of deduction/exemption would amount to mistake apart from record. The ratio of this judgment is based on the principle that the Assessing Officer is duty bound to grant the exemption/deduction even where assessee failed to claim the same. The relevant observations of the Apex Court are as under:-

An obligation is imposed on the ITO by section 84 of the IT Act, 1961, to grant relief thereunder and the relief cannot be effused merely because the assessee had omitted to claim the relief, but the mere existence of such an obligation on the ITO is not sufficient. Precise factual material and clear data must be contained in the record sufficient to enable the ITO to consider whether the relief should be granted under section 84. In the absence of such material, no fault can be found with the ITO for not making an order under section 84 favoring the assessee. "

155. With regard to ground no.29relates to not allowing the set off of brought forward assessed Long Term Capital Losses against current year's Long Term Capital Gains to the extent of Rs.17,43,51,303/- while computing the total income of the assessee. The assessee submitted that the relief has been given by the AO vide his Rectification Order dated 19.07.2017 passed u/s 154 r.w.s. 143(3) of the Act. Thus, the Ground no 29 has not been pressed before us and hence dismissed as such.

156. Apropos ground no.30 relates not granting deduction u/s 80G to the extent of Rs.5,02,500/- (50% of Rs. 10,05,000/-), which has been claimed by the assessee in its return of income, while computing the total income in the final order of the assessee. The ld. AR submitted that the relief has been given by the AO vide his Rectification Order dated 19.07.2017 passed u/s 154 r.w.s. 143(3) of the Act. Thus, the Ground no.30 has not been pressed before us and hence dismissed.

157. Apropos Ground nos.31 to 33 are consequential in nature and hence do not require any adjudication.

158. With regard to additional ground nos.34 & 35, this ground is covered by our above decision in for AY 2011-12 vide paras 96 to 100 and respectfully following the same, this ground is allowed for statistical purposes. 159. In the result, the appeal being is partly allowed as indicated above. Order pronounced in the open court on this 12th day of December, 2025.