TP adjustment - specified domestic pricing u/s 92BA(iii) r.w.s. 80IA (8) - assessee is engaged in the business of generation, transmission and distribution of electricity - TP Range Computed for Purchase Cost from All Maharashtra Units excluding ASCI list (only Internal CUP, TPO and MSEDCL - TPO has determined the tariff rate as determined by Maharashtra Electricity Regulatory Commission at 4.60 per unit and DRP had directed to determined the ALP at Rs. 3.71 per unit. - HELD THAT:- As accepted by the DRP, whether the price shown by the assessee for purchase is at arm’s length price or not. The fundamental principle is to determine the arm’s length price under the transfer pricing provision is to benchmark and to see whether the cost of purchase of electricity with the AE is comparable with the uncontrolled transactions having similar functions and providing similar goods and services, especially if one adopts external CUP method, and also to have broad comparable data to see the percentile range under the Rules.
Thus, if we analyze from the above computation of comparables as taken by the TPO and DRP, it can be seen that the median range is well within the price shown by the assessee and therefore, we hold that same are at arm’s length price and no further TP adjustment was required to be done.
There is a slight fallacy in the order of the DRP while constructing the data set of comparables. DRP has added extra landing cost of Rs. 0.57 per unit to the MERC approved rate of all comparables in case of MSEDCL Order for AY 2017-18. DRP has assumed the difference between the MERC approved cost in case of MSPGCL of Rs. 3.51 per unit and the per unit rate of Rs. 4.08 as per the reply received from MSPGCL in response to the notice u/s. 133(6), being Rs. 0.57 (Rs. 4.08 – Rs. 3.51) as the landing cost and uniformly applied the same to the cost per unit of all comparables considered as per the MERC order in case of MSEDCL.
The average cost per unit of power purchased from MSPGCL of Rs. 3.51 per unit has been considered by the DRP on the basis of MERC order of MSEDCL which includes the cost of thermal, hydro and gas power, whereas MSPGCL in response to the Notice u/s. 133(6) has provided the average cost per unit in case of thermal power only, since the same is comparable transaction with respect to the transfer of thermal power from Rinfra G to Rinfra D. Thus, the difference as reconciled above is not on account of landing cost and therefore, Rs. 0.57 per unit added to the cost per unit of all comparables was wrongly considered by the DRP
As on the basis of DRP order also, if the revised TP range is computed, then the middle range is between 3.14 to 4.08, and therefore, the ALP rate of assessee Rs. 3.24 is at ALP. Thus, from all the angles if determination of ALP is taken within as per the working of revenue authorities in a proper perspective, there is no case of any transfer pricing adjustment. Accordingly, the TP adjustment made is hereby deleted.
Disallowance made u/s 14A r.w.r. 8D - HELD THAT:- ITAT in assessee”s own case for AY 2015-16 [2021 (5) TMI 351 - ITAT MUMBAI] after following the various decisions held that disallowance u/s 14A worked out as per rule 8D should be after considering only those investments on which exempt income has been received during the year. Therefore, following the precedence of the earlier order, the disallowance is only restricted for considering the purpose of rule 8D(ii) only on those investments on which exempt income has been received during the year. Accordingly, the disallowance made by the AO and confirmed by the DRP in both the assessment years is hereby deleted.
Expenditure on replacement of meters - HELD THAT:- The replacement of meter does not increase the Assessee”s generation or distribution capacity. In fact assessee replacing old meters by new meters which resulted in better readings of the electricity/ current consumption and do not in any way enhance the capital assets or the quantity of power supply. Accordingly, the same is rightly claimed as revenue expenditure. Moreover, this issue has been covered by the decision of Hon’ble Bombay High Court in assessee”s own case [2012 (10) TMI 1144 - ITAT MUMBAI], [2014 (11) TMI 1236 - ITAT MUMBAI] for AY 2006-07 to AY 2009-10 and also by ITAT Mumbai [2012 (10) TMI 1144 - ITAT MUMBAI], [2014 (11) TMI 1236 - ITAT MUMBAI], [2017 (6) TMI 1181 - ITAT MUMBAI], [2017 (12) TMI 1121 - ITAT MUMBAI], [2018 (12) TMI 1882 - ITAT MUMBAI], [2019 (11) TMI 1357 - ITAT MUMBAI], [2021 (5) TMI 351 - ITAT MUMBAI] deceptively for AY 2002-03 to AY 2015-16. Accordingly, the disallowance of expenditure made by the AO in both the assessment years is hereby deleted.
Allocation of head office expenses for computing deduction u/s 80IA - Assessee submitted that the head office expenses should not be allocated while computing the profits of the eligible 80IA undertaking - AO has allocated commonly incurred head office expenses to all undertakings on the basis of turnover resulting in reduced profits of eligible 80IA undertaking stating that the head office expenses have been incurred for running and administration of all the units/activities of the assessee company including the activities of the eligible units - HELD THAT:- We find that that this issue is now covered by the decision of Hon’ble Bombay High Court in assessee”s own case for [2012 (10) TMI 1144 - ITAT MUMBAI], [2014 (11) TMI 1236 - ITAT MUMBAI] AY 2006-07 to AY 2009-10 and also by ITAT Mumbai for [2012 (10) TMI 1144 - ITAT MUMBAI], [2014 (11) TMI 1236 - ITAT MUMBAI], [2017 (6) TMI 1181 - ITAT MUMBAI], [2017 (12) TMI 1121 - ITAT MUMBAI], [2018 (12) TMI 1882 - ITAT MUMBAI], [2019 (11) TMI 1357 - ITAT MUMBAI], [2021 (5) TMI 351 - ITAT MUMBAI] deceptively AY 2002-03 to AY 2015-16. Thus, we direct the AO to allow the deduction u/s 80IA against gross total income. Accordingly, this ground raise is both the assessment years are allowed.
Short Grant of TDS credit - HELD THAT:- As we find that the AO has not granted credit for TDS as the same did not reflect in Form 26AS of the assessee. As stated the TDS credit pertains to entities merged with the assessee in whose Form 26AS credit for TDS was reflected. Assessee had submitted the Form 26AS of the respective companies and the merger order which was not considered by the AO. Before the DRP, assessee had sought rectification of the final assessment order u/s. 143(3) in which credit for TDS was not granted, however no rectification order u/s. 154 has been passed till date - we direct the AO after examining; allow this issue in accordance with law in both the assessment years. Accordingly, this ground is allowed.
Disallowance u/s 14A while computing book profit u/s 115JB - HELD THAT:- We find that this issue is covered by the decision of ITAT in assessee”s own case for AY 2013-14 to AY 2015-16 [2019 (11) TMI 1357 - ITAT MUMBAI], [2021 (5) TMI 351 - ITAT MUMBAI] wherein it was held that no disallowance u/s. 14A is required to be made for computing book profits u/s. 115JB.
Depreciation allowed on replacement of meters added to the books profit u/s 115JB - HELD THAT:- We find that the AO has failed to appreciate the depreciation allowed by him in the assessment had not been debited to profit and loss account and therefore could not be added back under clause (g) for computing book profit u/s 115JB of the Act. Therefore, the assessee has rightly claimed expenditure incurred on replacement of meters as revenue expenditure in the computation of income. Accordingly, this ground is allowed.
Deduction u/s 80G - HELD THAT:- Since DRP has given direction the AO to verify the claim and grant deduction u/s 80G, the deduction u/s 80G is to be allowed against the gross total income subject to the limits provided in the section, we do not find any infirmity in such direction. Accordingly, this ground is allowed for statistical purposes.
Computation of book profit u/s 115JB which is loss as per profit and loss account as raised in AY 2018-19 - DRP has accepted the Assessee”s claim and directed the AO to rectify the error by passing a rectification order in the matter, however, no rectification order u/s. 154 has been passed till dat - HELD THAT:- Since DRP has given direction the AO to rectify the error by passing a rectification order in the matter, therefore we reiterate the same and direct the AO to rectify the error by passing a rectification order in the matter which has not been passed till dated. Accordingly, this ground is allowed for statistical purposes.