Fujikawa Power vs NFAC

PER MANISH AGARWAL, AM :

The captioned appeal is filed by the assessee against the final assessment order dated 27.10.2021 passed u/s 143(3) r.w.s. 144C(13) r.w.s. 144B of the Income Tax Act, 1961 [“the Act”] pertaining to assessment year 2017-18.

Brief facts of the case are that the assessee company is engaged in the business of manufacturing of batteries and battery plates, lead oxide and other plastic part of the batteries. The return of income was filed on 28.10.2017, declaring total income of INR 27,41,69,130/-. The case was selected under CASS for scrutiny for the reasons specified domestic transaction and expenditure of personal nature. Since the assessee has entered into specified domestic transactions, the AO has made reference to Transfer Pricing Officer (“TPO”) for determination of Arm’s Length Price (“ALP”) of domestic transaction. The assessee has made following specified domestic transactions:-

The TPO vide order passed u/s 92CA(3) of the Act has accepted the comparables taken by the assessee however, has further included Six more comparables for benchmarking the transactions and median OP/OC was worked out at 7.46% as against 9.28% calculated by the assessee which has resulted into the adjustment of INR 1.66 crores. The TPO further hold that the operating profit for the purpose of deduction u/s 80IC of 7.46 is Rs. 28.42 crores and suggest the AO to reduce the amount deduction claimed by the assessee u/s 80IC accordingly. The AO thereafter, passed the draft assessment order u/s 144C dated 31.03.2021 wherein AO proposed the addition on account of adjustment in the ALP by the TPO. Against the said order, assessee filed objections before the ld. DRP, who vide its order dated 16.09.2021 served on 29.9.2021 dismissed the objections raised by the assessee. Thereafter, the AO passed the final assessment order on 27.10.2021 u/s 143(3) r.w.s. 144C(13) r.w.s. 144B of the Act wherein the adjustment of Rs. 1.66 crores as per TPO order has been included. Besides this, deduction claimed u/s 80-IC was reduced to INR 7,10,50,000/- as against INR 10,18,32,523/- claimed by the assessee and total income of the assessee stood assessed at INR 32,15,81,655/-.

Against the said order, assessee is in appeal before the Tribunal by taking following Grounds of appeal:-

During the course of hearing, Ld.AR for the assessee vide letter dated 01.02.2023 raised additional Grounds of appeal and submits that additional grounds of appeal taken goes to the root of the matter and thus, deserves to be accepted being purely legal ground and placed reliance on the judgement of Hon’ble Supreme Court in the case of C.I.T. vs. Ponni Sugars and Chemicals Ltd. [306 ITR 392] (SC). The additional Grounds of appeal so raised by the assessee reads as under:-

With respect to Ground of appeal No.1 raised by the assessee, Ld. AR for the assessee submits that TPO in the final set of comparables has included one company i.e. Unik Techno Systems Pvt. Ltd. which as per ld. AR is functionally dissimilar since it is engaged in manufacturing of machines used for manufacturing batteries whereas the assessee manufactured the batteries. For this, ld. AR drew our attention to the printout taken from the official website of the company’s products range manufactured by the it as per which Unik Techno Systems Pvt. Ltd. is engaged in the business of manufacturing of machines for battery manufacturing.

Ld.AR drew our attention to the facts that Hon’ble Dispute Resolution Panel (“DRP”) while confirming the action of AO/TPO of including the Unik Techno Systems Pvt. Ltd. as valid comparable has wrongly considered the functions performed by other company having almost similar name i.e. M/s Unik Batteries Pvt. Ltd. as against Unik Techno Systems Pvt. Ltd. taken by the TPO in the final set of comparables. As per ld. AR this error of considering the wrong company by ld. DRP resulted into the error of appreciation of functions challenged by the assessee. He thus, prayed that the company Unik Techno Systems Pvt. Ltd. being functionally dissimilar, deserves to be excluded from the final set of comparables.

On the other hand, Ld. CIT DR for the Revenue vehemently supported the orders of the TPO and DRP and submits that DRP has considered this aspect in para 3.5.1 of its order and if the claim of the assessee that DRP has erred in considering the different company, matter may be sent back to AO/TPO for verification. Ld. CIT DR further submits that assessee has filed screenshot of the website of both Unik Techno Systems Pvt. Ltd. and M/s Unik Batteries Pvt. Ltd. however, besides this, neither the segmental results were filed nor any other documents were filed and therefore, he requested that the matter may be sent back to the AO/TPO for necessary verification.

In re-joinder, Ld.AR for the assessee submits that since beginning, stated that Unik Techno Systems Pvt. Ltd. is manufacturing different product which is evident from the reply submitted and reproduced by the TPO at page 05 of the order. He thus, requested for the exclusion of the Unik Techno Systems Pvt. Ltd. from the final set of valid comparables.

Heard the contentions of both the parties at length and perused the material available on record. The TPO has included Unik Techno Systems Pvt. Ltd. as one of the valid comparable. The assessee in its reply filed against the show cause notice dated 05.01.2021 before TPO, has submitted that Unik Techno Systems Pvt. Ltd. is not engaged in the business of manufacturing of batteries rather it is engaged in the manufacturing and trading of machines which are used to manufacture batteries. Before us, Ld.AR for the assessee filed the screen shot from the official websites of the company from which it is clear that it is manufacturing machines for manufacturing the batteries. The screenshot so submits are reproduced as under:-

It is further observed that website address https://www.unikbatteries.com/traction-battery referred by ld. DRP in para 3.5.1 of the order actually relates to M/s Unik Batteries Pvt. Ltd.

From the above discussions, it is clear that M/s Unik Batteries Pvt. Ltd. is a different company which is engaged in the business of manufacturing of batteries whereas assessee was requesting to exclude M/s Unik Techno Systems Pvt. Ltd. from the final set of comparables and therefore, DRP has wrongly compared the function performed by assessee with the functions of company which was never be the part of final set of comparables taken by TPO for benchmarking the transactions.

In the light of the above, we find that M/s. Unik Techno Systems Pvt. Ltd. is functionally dissimilar and cannot be included in the final set of comparable. Accordingly, we direct AO/TPO to exclude the same from the final set of comparables. Ground of appeal No.1 raised by the assessee is thus, allowed.

Ground of appeal Nos.2 to 7 are not pressed hence, not adjudicated.

Apart from Grounds of appeal taken in the appeal memo, assessee has raised two additional Grounds of appeal, wherein Excise Duty exemption available to assessee as capital receipt and thus, requested for the reduction of the same out of the total income declared in the return of income filed. The assessee further claimed corresponding reduction in the amount of book profit computed u/s 115JC of the Act for the purpose of charging AMT.

Ld. CIT DR for the Revenue very strongly opposed the admission of additional grounds of appeal and also challenged the submission of the additional evidences in support of additional grounds without making separate prayer for the admissions of additional evidences. Ld. CIT DR submits that for the first time assessee made claim via additional grounds of appeal and this claim was neither raised before the AO nor before ld. DRP and assessee has failed to submit as to why these Grounds of appeal were not taken before the lower authorities. Ld. CIT DR further submits that in support of the additional grounds taken, the assessee has filed additional evidences however, no application under Rule 29 of the ITAT Rules is filed. Ld. CIT DR submits that on perusal of the evidences filed alongwith additional grounds of appeal clearly established that the new claim made through additional grounds is not purely a legal ground and require verification on the part of the AO with respect to the additional evidences now submitted, thus the same should not be admitted. He filed a detailed written submission which is considered and placed on records.

Considering the contentions of both the parties and perused the material available on record, we find that in the additional ground of appeal, the assessee has made fresh claim that Excise duty exemption available to it is a Capital receipt. This claim was not made before the lower authorities and was made for the first time before the Tribunal and in support various documents are submitted. On perusal of the additional grounds of appeal and the details filed, it is observed that admission of a fresh claim in the appellate proceedings is purely a legal issue and whether the assessee is eligible for such claim and what would be the correct amount of claim is purely a question of fact. Regarding the argument of ld. CIT DR that no new fresh claim could be made at this stage, the Hon’ble Apex Court in the case of Goetz India Ltd. vs CIT reported in (2006) 284 ITR 323 (SC) has held that no fresh claim could be made before the AO otherwise than by way of revised return however, the Hon’ble Court further clarified that decision is limited to the power of the assessing authority and does not impinge on the power of appellate authorities. In the case of CIT v. Jai Parabolic Springs Ltd. reported in (2008) 306 ITR 42 (Delhi) the AO disallowed the claim of the assessee on the ground that “since the claim for the deferred revenue expenditure of INR 15,58,500/- was not claimed by the assessee in the return of income for the assessment year 1990-91, the same is not allowed”. Their Lordships after considering the decision of the Hon‟ble Apex Court in the case of Goetze (India) Ltd. (supra) has held as under (Head note):-

In the case of National Thermal power Co. Ltd. vs. CIT reported in (1998) 229 ITR 383(SC), the hon’ble Supreme Court has held that

The CBDT as back as in 1955 issued a circular No. 14(XL-35), dated 11^th April, 1955 wherein the Board has recognized the fact that responsibility for claiming refunds and relief rests with the assessee as imposed by law, even then the Board has directed the officers to draw the attention of the assessee in respect of any refunds or reliefs to which they are eligible, which they have not claimed for some reason or other. The Board later issued Circular F.No.81/27/65-IT(B) dated 18^th May,1965, defining the duties of PROs in providing assistance to the public in filing correct return and making eligible claims. In the case of Essar Oil Ltd. the Co-ordinate Bench of ITAT Mumbai in ITA No. 3661 & 2827/Mum/2000, after considering various CBDT Circulars and the decision of the Hon’ble Apex Court in the case of NTPC Ltd. (229 ITR 303); UCO Bank (237 ITR 889) and in the case of Shelly Products and Anr. (261 ITR 367) and various decisions and Circulars has held as under:

However, in all the aforementioned cases, the relevant material in support of fresh claim was available with the lower authorities and requires no fresh verification of facts but in the instant case, claim of the assessee whether the Excise Duty Exemptions is not forming part of income in terms of section 2(24)(xviii) of the Act and is a capital receipt and further the nature and intent of the Incentive Scheme under which the assessee was entitled for Excise Duty exemption is required to the examined with reference to the eligibility under the respective scheme and nature of activity carried out by the assessee. Further the amount claimed as capital receipt also needs to be verified. All these facts have to be decided after verification of the records and details now filed by the assessee before us, which were not available with the lower authorities. On the other hand, the assessee relied upon various judicial pronouncements in support of the claim made where it is not clear whether the claim was made for the first time before the appellate authorities or was made before the AO. It was also contended by ld. CIT DR that assessee has filed additional evidences containing the working of the amount of incentive which were not examined by the lower authorities.

In the light of above discussion and by respectfully following the judgements of the Hon’ble Supreme Court in the case of NTPC Ltd. (supra) and in the case of Goetz (India) Ltd. (supra) and of Hon’ble Jurisdictional High Court in the case of Jai Parabolic Springs Ltd (supra), we admit the additional grounds of appeal. However, the allowability of claim has to be examined with reference to the nature of the Incentive Scheme and other parameters and also with reference to section 2(24)(xviii) of the Act, thus this issue is remand back to the file of the AO to decide the same in accordance with law after providing reasonable opportunity to the assessee. The AO is also directed to verify and decide as per law whether the Excise Duty exemption is capital receipt, not taxable under the normal provision of Act and under AMT as per section 115JC of the Act. With these directions, additional grounds of appeal raised by the assessee are allowed for statistical purposes.

In the result, appeal of the assessee is partly allowed.

Order pronounced in the open Court on 06.03.2026.