Delhi High Court - Orders
Pr. Commissioner Of Income Tax -7 vs Vedanta Ltd on 9 February, 2024
Author: Yashwant Varma
Bench: Yashwant Varma, Purushaindra Kumar Kaurav
$~13
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ ITA 602/2023
PR. COMMISSIONER OF INCOME TAX -7 ..... Appellant
Through: Mr. Puneet Rai, Sr.SC with Mr.
Ashvini & Mr. Rishabh, Jr.SCs.
versus
VEDANTA LTD ..... Respondent
Through: Mr. Neeraj Jain, Mr. Aniket D.
Agrawal, Mr. Deepesh Jain and
Mr. Abhisek Singhvi, Advs.
CORAM:
HON'BLE MR. JUSTICE YASHWANT VARMA
HON'BLE MR. JUSTICE PURUSHAINDRA KUMAR
KAURAV
ORDER
% 09.02.2024
1. The Principal Commissioner of Income Tax ["PCIT"] has instituted the present appeal assailing the order of the Income Tax Appellate Tribunal ["ITAT"] dated 21 September 2020 and proposes the following questions of law for our consideration: -
a. Whether on the facts and circumstances of the case and in law, the ITAT erred in treating the liquidated damages of Rs.3,22,94,880/- as capital receipt in absence of any documentary evidence to prove the same?
b. Whether on the facts and circumstances of the case and in law, the ITAT erred in accepting the submissions of the assessee placing reliance on the decision of the Supreme Court in CIT vs. Saurashtra Cement Ltd. [(2010) 11 SCC 84]?
This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 23/02/2024 at 21:25:54 c. Whether on the facts and circumstances of the case and in law, the ITAT has erred in deleting the Transfer Pricing Adjustment ["TPA"] of Rs. 1,44,69,443/- in respect of Rs.6,47,69,217/- received from its Associated Enterprises ["AEs"] towards SAP maintenance services?
d. Whether on the facts and circumstances of the case and in law, the ITAT has erred in deleting the disallowance under Section 14A of the Income Tax Act, 1961 ["Act"] of an amount of Rs.857.04 crores in Income under Section 14A of the Act?
e. Whether on the facts and circumstances of the case and in law, the ITAT has erred in deleting the addition of Rs.21,76,13,205/- being 50% additional depreciation under Section 32AC of the Act? f. Whether on the facts and circumstances of the case and in law, the ITAT has erred in deleting the addition of Rs.15,50,36,663/- under Section 80GGB of the Act?
2. Insofar as question (f) is concerned, we note from the ultimate conclusions recorded by the ITAT that it has held that if, upon necessary verification, it be found that the assessee is eligible to claim deductions under Section 80GGB of the Act, the same would merit being allowed. It is for the aforesaid purposes that the matter has been remitted to the Assessing Officer ["AO"] for necessary verification. In view of the aforesaid, we do not find any justification to entertain the appeal on that question.
3. Questions (a) and (b) pertain to liquidated damages received This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 23/02/2024 at 21:25:54 and treated by the assessee as a capital receipt. The ITAT has taken into consideration the decision of the Supreme Court in Saurashtra Cement to hold that they were liable to be treated as capital receipts and further noted that the authorities below had failed to bear in consideration that intangible assets in respect of which liquidated damages were received were also liable to be viewed as Capital Goods. In view of the aforesaid, we find that the view as expressed by the ITAT merits no interference.
4. That, then takes us to question (c) as proposed. We find that the appeal raises issues which would merit further consideration and the said question would consequently be sufficient to warrant admission of the appeal.
5. Insofar as question (d) which pertains to the deletion of the disallowance under Section 14A of the Act, we find that the ITAT has essentially taken note of identical issues which were considered in Assessment Years ["AYs"] 2009-10, 2010-11, 2011-12, 2012-13 and 2013-14. Against the view so taken, the Department is stated to have filed an appeal before the Goa Bench of the Bombay High Court in respect of AY 2009-10 which has been admitted by an order dated 29 September 2013. The disallowance also appears to have been confirmed by the Dispute Resolution Panel ["DRP"] in AY 2012-13 and in respect of which an appeal is stated to be pending before the ITAT, Delhi. A similar disallowance for AY 2013-14 is stated to be presently engaging the attention of the concerned CIT(A).
6. In order to resolve the issue which appears to be arising repeatedly and is presently engaging the attention of authorities at different levels, we admit the instant appeal on the aforenoted question also.
This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 23/02/2024 at 21:25:54
7. Insofar as question (e) is concerned, the issue pertains to the extraction of iron ore. The ITAT has taken note of the interpretation accorded to Section 32(1)(iia) as well as Section 32AC of the Act by the Supreme Court in CIT v. Sesa Goa Ltd. [(2004) 13 SCC 548]. We deem it apposite to extract the following passages from that decision: -
"9. The reasoning given by the High Courts, in the decisions noted by us earlier, is, in our opinion, unimpeachable. This Court had, as early as in 1961, in Chrestien Mica Industries Ltd. v. State of Bihar [(1961) 12 STC 150 (SC)] defined the word "production", albeit, in connection with the Bihar Sales Tax Act, 1947. The definition was adopted from the meaning ascribed to the word in the Oxford English Dictionary as meaning "amongst other things that which is produced; a thing that results from any action, process or effort, a product; a product of human activity or effort". From the wide definition of the word "production", it has to follow that mining activity for the purpose of production of mineral ores would come within the ambit of the word "production" since ore is "a thing", which is the result of human activity or effort. It has also been held by this Court in CIT v. N.C. Budharaja& Co. [1994 Supp (1) SCC 280 : (1993) 204 ITR 412] that the word "production" is much wider than the word "manufacture". It was said : (SCC pp. 286-87, paras 7-8) "The word „production‟ has a wider connotation than the word „manufacture‟. While every manufacture can be characterised as production, every production need not amount to manufacture. ...
The word „production‟ or „produce‟ when used in juxtaposition with the word „manufacture‟ takes in bringing into existence new goods by a process which may or may not amount to manufacture. It also takes in all the by-products, intermediate products and residual products which emerge in the course of manufacture of goods."
10. It is, therefore, not necessary, as has been sought to be contended by the learned counsel for the Revenue, that the mined ore must be a commercially new product. The decisions and other authorities on the definition of the word "ore", as cited by the appellant, are irrelevant."
This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 23/02/2024 at 21:25:55 In view of the aforesaid, we find that no question of law can be said to arise therefrom.
8. The appeal shall consequently stand admitted on the following questions of law: -
a. Whether on the facts and circumstances of the case and in law, the ITAT has erred in deleting the TPA of Rs. 1,44,69,443/- in respect of Rs.6,47,69,217/- received from its AEs towards SAP maintenance services?
b. Whether on the facts and circumstances of the case and in law, the ITAT has erred in deleting the disallowance under Section 14A of the Act of an amount of Rs.857.04 crores in income under Section 14A of the Act?
9. Consequently, list again on 26.04.2024.
YASHWANT VARMA, J.
PURUSHAINDRA KUMAR KAURAV, J.
FEBRUARY 09, 2024/neha This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 23/02/2024 at 21:25:55