ABAN OFFSHORE LIMITED,CHENNAI vs. DCIT, CORP CIRCLE 1(1), CHENNAI

PER S. R. RAGHUNATHA, ACCOUNTANT MEMBER:

6. The ld.CIT(A) erred in not considering that the ld.AO ought to have appreciated the fact that allowable expenditure is Rs.75,00,000 i.e., 1/fifth of the total expenditure allowable from AY 2010-11 onwards i.e, from AY 2010-11 to AY 2014-15.

:-2-: ITA. No:556/Chny/2024

7. The ld.CIT(A) ought to have appreciated the fact that ld.AO erred in not giving the tax credit u/s. 90 to the assessee to the extent of the taxed paid in foreign country.

8. The ld.CIT(A) ought to have appreciated the fact that ld.AO erred in not considering the fact that the assessee is eligible to take MAT credit under the provision of section 115JB of the Act.”

Facts of the case: 3. The assessee is a company engaged in the business of Investment holdings in companies engaged in offshore drilling services. The assessee for the A Y 2014-15 filed its return of income on 28/11/2014, admitting total income of Rs.16,02,59,960/-. Subsequently, the company filed a revised return of income on 26/11/2015 declaring Rs.NIL income after claiming current year loss of Rs.112,66,71,006/-. The case was selected for scrutiny under CASS and referred to the DCIT, Transfer pricing -1(1), Chennai for determination of the Arm’s length price in respect of the international transactions entered into by the assessee during the financial year 2013-14. The TPO passed an order U/s.92CA(3) of the Act dated 13/10/2017 proposing a total upward adjustment of Rs.20,69,69,338/- to the ALP of assessee’s transaction of extension of corporate guarantee on behalf of its AE. The AO issued a draft assessment order dated 28/12/2017 passed U/s.143(3) r.w.s.92CA of the :-3-: ITA. No:556/Chny/2024 Act. Subsequently, DRP directions were passed on 28/09/2018 and the final assessment order was passed on 30/11/2018 assessing the total income of Rs.327,31,22,381/-.

:-4-: ITA. No:556/Chny/2024 5. The assessee filed an application dated 14/12/2020 for rectification U/s.154 of the Act, to rectify the following mistakes apparent on record: (i) Relief U/s.90 of Rs.1,17,02,382/- (ii) MAT credit not considered (iii) To allow 1/5th deduction U/s.35D of Rs.75,00,000/- which is eligible for 5 years from A.Y. 2010-11 to A.Y.2014-15. However, the AO rejected the application of rectification by an order dated 21/01/2022, as there are no mistakes apparent on record:

I. Deduction U/s.35D of Rs.75.00 Lakhs: The ground no. 6 raised by the assessee against the action of the ld.CIT(A) disallowing the claim of the assessee of Rs.75.00 Lakhs U/s.35D of the Act. The brief facts as noted by the AO are as under: “3] Deduction u/s 35D: The Hon'ble ITAT while disposing your appeal for the AY 2010-11 and 2011-12 vide its order in and 267/Mds/2016 and ITA No.927/Mds/2015 and 668/Mds/2016 dated 14.09.2016 allowed relief for disallowance u/s 35D by deleting the same. Accordingly, the total disallowance of Rs,3,75,00,000/- needs to be allowed in five equal installment from AY 2009-10. In this connection, it is reminded that the total claim u/s 35D to the extent of Rs.3,75,00,000/- was allowed from 2009-10 to 2013-14 as claimed by the assessee in their rectification petition for AY

:-5-: ITA. No:556/Chny/2024 2010-11. However, in the submission before the Hon'ble ITAT, the assessee made an elusive claim of deduction u/s 35D for AY 2014- 15 which is not considered in this rectification order.”

:-6-: ITA. No:556/Chny/2024 spent by the assessee during the assessment year 2010-11, and the same was eligible for 1/5th deduction for 5 years U/s.35D of the Act i.e. upto assessment year 2014-15 (being 5th installment). The issue has been separately dealt by the Tribunal orders stated supra and therefore, the ld.AR has prayed for allowing the deduction u/s. 35D of the Act of Rs.75.00 lakhs for the assessment year 2014-15 being the last installment of 1/5th deduction which has been spent during the assessment year 2010-11.

8. Per contra, the Ld.DR relied on the orders of the lower authorities and prayed for confirming the order of the Ld.CIT(A).

:-7-: ITA. No:556/Chny/2024 u/s. 35 of the Act, in their order in for assessment year 2009-10. Similarly, the same amount of Rs.3.75 crores which has been spent during the A.Y. 2010-11, had been allowed to claim for 5 assessment years u/s. 35D of the Act from the assessment years 2010-11 to 2014-15 in their order in ITA No. 585/Mds/2015 dated 14.09.2016 for assessment year 2010-11. Therefore, it is noted that the lower authorities have erred in understanding the facts properly and passed the orders erroneously by disallowing the deduction of 1/5th expenditure of Rs.75.00 lakhs for the assessment year 2014-15, which the assessee is eligible as per the orders of the Tribunal (Supra) and hence, we are of the considered view that the lower authorities erred in disallowing the deduction U/s.35D of the Act. Therefore, we delete the impugned disallowance of Rs.75.00 Lakhs U/s.35D of the Act and allow the ground No.6 of the appeal of the assessee.

II. Relief U/s.90 of Rs.1,17,02,382/- 10. The assessee raised a ground no. 7 against the action of the Ld.CIT(A), confirming the action of the AO by disallowing the withholding tax and Relief U/s.90 of the Act, of Rs.1,17,02,382/-. The AO while denying the above claim of the assessee held as under: “1] Relief u/s 90: For the impugned AY 2014-15, relief u/s 90 claimed to the tune of Rs.1,17,02,382/- was disallowed after detailed discussion of the provisions of DTAA, nature of income from Singapore elaborated in :-8-: ITA. No:556/Chny/2024 para 6.8 of the order u/s 143(3) r.w.s. 144C dated 30.11.2018. The same is reproduced for ready reference : The assessee company has incurred expenditure on interest of Rs.159,39,10,000/- for various loans and including for financing the foreign subsidiary as per the details furnished by them. The assessee in its submissions relating to disallowance u/s 14A, etc. has claimed exclusion of interest received from AHPL on the ground that interest paid and received are relatable.

While the interest received is shown under the head, “Income from Other Sources', the interest directly relating to loans advanced to AHPL are claimed as part of "Business Expenditure". If these related expenditure together and netted, then it would clearly show that no positive income related to the income taxed in Singapore is offered in India. Further, as per para 6.11 of the said order, it was also ensured that in case, the assessee furnishes any proof that real income in respect of interest received/paid has been offered as partof taxable income, then it would be entitled to relief accordingly. But till date, the assessee had not offered any proof for the income offered for taxation, instead making a vague claim through petition u/s 154 repeatedly. On this ground the direction of DRP against assessee's objection also incorporated in the order u/s 143(3) i.e.

The submissions of the assessee have duly been considered. As regards these objections, it is important to examine as to whether any variation has been caused to the income or loss as returned by the assessee during the year under consideration not. The scope of Reference to Dispute Resolution Panel is as per sub sec.2 of sec. 144C of the Act i.e. the assessee can file his objections only in relation to such variation" as is referred to in sub section 1 of sec. 144C. Sub section 1 of section 144C refers to any variation in the income or loss returned' as made by the AO as is prejudicial to the interest of the assessee. The above objections do not at all relate to any such variation made by the AO in income or loss as returned by the assessee in its return for A. Y. 2014-15.Hence, the above objections cannot be adjudicated by this Panel, being beyond its scope of powers. Accordingly, this objection is not accepted.'

:-9-: ITA. No:556/Chny/2024 Inspite of all these facts of the case, the assessee is having the habit of rising the same issue repeatedly without any proof is nothing but a presumption and suppression of facts based on which no rectification can be entertained. Accordingly, the claim raised in the rectification petition is rejected.

Aggrieved by the action of the AO, the assessee preferred an appeal before the ld.CIT(A) and the ld.CIT(A) is held as under : “3.10 The rival contentions are mirrored against the Honourable ITAT's order. The Honourable ITAT in its order has mentioned as under: "22. The next ground is with regard to disallowing the claim of relief u/s 90 of the Act of Rs.17 ,63,24,330/- and ignoring the direction of the DRP without verifying the facts on records." As seen from the above finding of the Assessing Officer, it is seen that DRP has not given any such direction and in fact refused to go into the matter. Secondly, Honourable ITAT held as under with respect to the above issue: "In view of the above, following the above order of the Tribunal, we are inclined to hold that once, the interest income subject to tax in any manner in the hands of the assessee, corresponding tax credit to be given. Accordingly, this ground is remitted to the Assessing Officer to examine the issue in the light of our above findings." With respect to the above direction given, the Assessing Officer has clearly stated as under in his rectification order: "But till date, the assessee had not offered any proof for the income offered for taxation, instead making a vague claim through petition u/s 154 repeatedly.”

:-10-: ITA. No:556/Chny/2024 the rectification proceedings by the Assessing Officer and the same has been confirmed by the ld.CIT(A) is erroneous and prayed for remanding the issue to the Assessing Officer for verification and to allow in accordance with law.

8.1 The ld.AR submitted that, as per the provision of section 90 of the Income Tax Act the assessee is eligible to claim tax credit paid on the foreign income earned and same income is liable to tax in the resident state. In the case under consideration the income from foreign country was offered to tax by the assessee same can be evident from Return of Income filed, the assessee is entitled to get tax credit to the extent the taxes paid in foreign country on the foreign income. The fact that the withholding taxes have been deducted by on the income earned by the assessee is evident from the Confirmation of payment for sec 45 withholding tax received from Singapore Tax Authorities are submitted before Ld. AO during assessment proceedings.

8.2 The ld.AR pointed out that the same issue has been already been decided by the Tribunal in favour of the assessee, in assessee's own case for AY 2010-11, AY 2011-12, AY 2012-13, AY 2015-16 & AY 2016- 17 vide IT A No 585, 267/Mds/2016, Para 23, 450/Mds/2017, Para 21, 86/CHNY/2019, Para 43 and 30/CHNY/2021 Para 10.5 of the order where in the Hon'ble ITAT has held that once the interest income subject to :-11-: ITA. No:556/Chny/2024 tax in any manner in the hands of the assessee, the corresponding tax credit to be given. Therefore, in view of the order of IT AT for AY 2010-11 & 2011-12, AY 2012-13 and AY 2015-16 the withholding tax relief u/s 90 of the Act has to be allowed. The extract of Para 43 of ITAT order of AY 2015-16 vide IT(TP)A No. 86/CHNY/2019 as reproduced below: "43. The assessee has earned the interest income of Rs. 8,67,00,000/- from M/s. Aban Holdings Pot. Ltd. 'Which is Singapore registered company and withholding the tax equivalent to INR Rs. 1,12,96,962/- has been deducted by M/s. Aban Holding Pvt. Ltd. under the Singapore Income Tax Act. The assessee has claimed credit of the same in his return of income. The AO has denied the claim made by the assessee. Before us, the assessee has submitted that since the income of the foreign country was offered for tax by the assessee, the assessee is entitled to get advance credit to tile extent tax paid in foreign country. We find that this issue has been considered by the Co-ordinate Bench of this Tribunal in assessee's own case in for A 2012-13 vide order dated 19.06.2017, the issue is remitted back to the file of AO. For the sake of convenience, the relevant portion of the order is extracted as under: "21. After hearing both the parties, we are of the opinion that the similar issue was considered by the Tribunal in assesse's own case in ITA Nos.585/Md5/2015 & 267/Mds/2016 for the assessment years 2010-11 and 2011-12 dated 14.9.2016 wherein Tribunal held that: "23. We have heard both the parties and perused the material on record. This issue came for consideration in assessee's own case in I. T.A.No.1159/Mds/2012 challenging the action of the CIT(A) in restricting the assessee's claim of relief u/s 90 of the Act dt 224,67,411/- to the extent of tax payable in India on net income of ( 516,93,732/- i.e difference between interest earned from M/s AHPL and interest paid on borrowings made for advancing the loans to M/s AHPL. The Tribunal while adjudicating the grounds, placed reliance on the order of the Tribunal in the case of Bank of Baroda vs CIT in 1. T.A.No.2927/Mds/2011 dated 25.7.2014 wherein the Tribunal has given a direction that the income of the branches of the assessee shall also taxable in India i.e it would be included in the return of income filed by the assessee in India and whatever taxes have been paid by the branches in the other contracting states i.e the source country, credit of such taxes shall be given. Thereafter, the Tribunal in this case remitted the issue to the file of the Assessing Officer to decide afresh in the light of the above order of the Tribunal in the case of Bank of Baroda in I.T.A.No.2927/Mum/2011 dated 25.7.2014. Later assessee filed MA in MA Nos. 95 & 96/Mds/2016 stating that the direction given by the Tribunal is not appropriate. Since the assessee has no income from any branches in :-12-: ITA. No:556/Chny/2024 Singapore, that decision cannot be applied to the assessee's case. The Tribunal while adjudicating the said MA vide order dated 29.7.2016 held as follows: "We have heard the rival submissions and perused the material on record. In our opinion, the interpretation of the order of the Tribunal by the Id. AR is misconceived. The Tribunal was of the opinion that if the income from foreign country is offered to tax by the assessee by whatever means, the assessee has to get tax credit to the extent the tax was paid in foreign country. In other words, once the income is included either in the Profit & Loss Account or in the return of income, the corresponding tax credit on the same income has to be given. Accordingly, we are of the opinion that there is no need of apprehension for the assessee that the Assessing Officer will misinterpret the order of the Tribunal. Therefore, we do not find any merit in the argument of the ld. AR. Accordingly, the miscellaneous petition is dismissed." In view of the above, following the above order of the Tribunal, we are inclined to hold that once the interest income subject to tax in any manner in the hands of the assessee, the corresponding tax credit to be given. Accordingly, this ground is remitted to the AO to examine the issue in the light of our above findings." Respectfully following the aforesaid order of the Tribunal, this issue is remitted to the file of ld. Assessing Officer and decide accordingly. Hence, this ground of appeal is partly allowed." We therefore respectfully following the order of the Co-ordinate Bench-of this Tribunal, we set aside the order passed by tire AO and remit the 1natter back to the file of AO. We direct the AO to follow the order passed by the Tribunal for AY 2012-13 and pass order thereupon."

8.3 Further, the AR stated that, the assessing officer while giving effect to the directions of the Hon'ble ITAT for AY 2010-11, AY 2011-12 have given the assessee the credit of taxes paid outside India u/s 90 of the Act while passing the orders u/s 143(3) rws 254 of the Act dated 04.01.2018. Also, the Hon'ble ITAT in the assessee's own case for AY 2012-13 in the order vide dated 19.06.2017 in has allowed the same vide Para No. 21. Also, the assessing officer

:-13-: ITA. No:556/Chny/2024 while giving effect to the directions of the Hon'ble ITAT for the AY 2012-13 on 30.11.2018. Also, has allowed the tax credit relief to the assessee company following the directions of the Honourable ITAT. The ld.AR prayed to allow the Claim of Withhold of Tax Credit relief u/s 90 of the Act.”

9. The ld.DR relied on the orders of the lower authorities and stated that, the assessee has not produced any evidence before the lower authorities in support of the claim of relief U/s.90 and hence prayed for confirming the orders of the Ld.CIT(A).

:-14-: ITA. No:556/Chny/2024

III. DISALLOWANCE OF MAT CREDIT: 12. The next ground raised by the assessee in Ground No.8 is MAT credit not considered by the AO, which is confirmed by the Ld.CIT(A). The findings of the AO on this issue is as under :

:-15-: ITA. No:556/Chny/2024 “2] MAT credit not considered: On verification of the details available in this office and the data available in the system, it is found that there is exist no MAT Credit for any years and as per the return of income filed form the AY 2014-15 on 28.11.2014assessee itself had not claimed any tax credit u/s 115JB by putting 0 in column no 40f Part B TTI computation of tax liability on total income in the return. Further, the assessment for the impugned AY was completed u/s 143(3) rws 144C under normal of provision by assessing income at Rs.327,31,22,380/- and resulting tax demand Rs.108,12,29,300/ whereas the book profit and tax claimed in the return as per schedule MATC was Rs.43,45,34,753/- and in the schedule right from 2006-07 to 2014-15 no MAT credit was claimed for any of the years. Considering the above facts, this claim is also rejected.

:-16-: ITA. No:556/Chny/2024 Further, the assessment for the impugned AY was completed u/s 143(3) rws 144C under normal of provision by assessing income at Rs.327,31,22,380/- and resulting tax demand Rs.108,12,29,300/ whereas the book profit and tax claimed in the return as per schedule MATC was Rs.43,45,34,753/- and in the schedule right from 2006-07 to 2014-15 no MAT credit was claimed for any of the years. Considering the above facts, this claim is also rejected. No proof whatsoever was also produced before me and therefore ground of appeal no. 7 is also dismissed.”

Aggrieved by the action of the ld.CIT(A), in upholding the order of the AO, the assessee is before us.

:-17-: ITA. No:556/Chny/2024 credit was claimed for any of the years and hence, the claim of the assessee was rejected, therefore, prayed for dismissal of the ground of the appeal of the assessee.