Bad Debt Claims, MAT Credit Corrections, and Rectification Orders Remanded for Verification and Natural Justice

ORDER

Ramit Kochar, Accountant Member.- The appeal in ITA No.1909/Del/2016 for assessment year: 2011-12 has been filed by the assessee against the assessment order dated 30.01.2016 passed by the learned ACIT, Circle-9(1), New Delhi u/s 143(3) r.w.s. 144C of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) wherein addition of Rs.5,24,63,542/- on account of ALP adjustment u/s 92C and also disallowance of Advance written off of Rs.52,53,000/- were made in the hands of the assessee, which assessment order has been passed by the AO in pursuance of the directions given by the Ld. DRP dated 23.12.2015 u/s 144C(5) of the Act. The AO had earlier issued draft assessment order dated 18.03.2015 u/s 143(3) r.w.s. 144C of the Act wherein the AO proposed an addition of Rs.5,86,84,422/- (sic. Rs.5,86,94,422/-) on account of ALP adjustment u/s 92C as proposed by ld. TPO in its Transfer pricing order dated 29.01.2015 passed u/s 92CA(3) and a disallowance of Advance written off of Rs.52,53,000/- were made by the AO, which were subjected to challenge by the assessee by filing objection before the ld. DRP which culminated into an order passed by ld. DRP dated 23.12.2015 u/s 144C(5) of the Act. The AO passed assessment order dated 30.01.2016 in pursuance to directions given by ld. DRP which assessment order is in challenge in appeal by the assessee before us.

1.2 The appeal in ITA No. 3186/Del/2017 for ay: 2011-12 has been filed by the assessee against the rectification order, dated 27.03.2017 passed by the learned JCIT, Special Range-3, New Delhi u/s 143(3) r.w.s. 144C of the 1961 Act wherein addition of Rs.10,40,25,237/- by making disallowance u/s 40(a)(i) was made vide aforesaid rectification order pursuant to directions given by ld. DRP vide its order dated 23.12.2025 u/s 144C(5), as however these additions could not be earlier made by the AO inadvertently due to omission in its assessment order dated 30.01.2026 passed u/s 143(3) read with Section 144C of the 1961 Act , and hence rectification order dated 27.03.2017 passed by the AO u/s 154. The said addition was directed to be made by ld. DRP by way of enhancement to the additions proposed by the AO vide its draft assessment order dated 18.03.2015.

2 . The grounds of appeal raised by the assessee in its appeals filed with the Income-Tax Appellate Tribunal, Delhi Benches, New Delhi, reads as under:-

“That on the facts and circumstances of the case, and in law:

1. The Assessment Order passed by the Ld. Assessing Officer (‘Ld. AO’) in pursuance of the directions issued by the Ld. Dispute Resolution Panel (‘Ld. DRP’) is a vitiated order as the Ld. DRP erred in confirming the arbitrary transfer pricing adjustment made by the Ld. AO/Ld. Transfer Pricing Officer (‘Ld. TPO’) with respect to the international transaction pertaining to availing of corporate management services by the Appellant from its associated enterprise (‘AE’).

2. Without prejudice to other grounds, the Ld. DRP erred in ignoring that the Ld. TPO/Ld. AO committed a gross mistake in presuming that the revenue authorities are empowered to question the commercial decision of the Appellant; and in not appreciating the jurisprudence that the Ld. AO/Ld. TPO cannot go beyond their powers to question the commercial wisdom of the Appellant’s decision of incurring the corporate management expenses.

3. The Ld. DRP erred in confirming the addition to income of the Appellant by Rs.5,24,63,532 by holding that the international transaction pertaining to availing of corporate management services (‘impugned international transaction’) from the AE does not satisfy the arm’s length principle envisaged under the Income-tax Act, 1961 (‘the Act’). In doing so, the Ld. DRP has grossly erred in confirming the Ld. AO/Ld. TPO’s action of:

3.1 disregarding the benchmarking approach and methodology followed by the Appellant for determining the arm’s length price (‘ALP’) for availing of corporate management services in its transfer pricing (‘TP’) documentation maintained under section 92D of the Act read with Rule 10D of the Income-tax Rules, 1962 (‘Rules’);

3.2 rejecting use of Transactional Net Margin Method (‘TNMM’) as the most appropriate method (‘MAM’) for benchmarking impugned international transaction under a combined transaction approach and instead applying Comparable Uncontrolled Price (‘CUP’) Method merely based on presumptions, and holding the arm’s length value of the transaction to be ‘NIL’, without furnishing details of price charged in any comparable uncontrolled transaction;

3.3 Arbitrarily holding, based on presumptions, that the services received by the Appellant had NIL value and in doing so have grossly erred in:

3.3.1 not appreciating the business efficacy nor the benefit and corresponding economic or commercial value derived by the Appellant from the corporate management services received by it from the AE;

3.3.2 holding that the services received by the Appellant are routine and generic in nature and could have been performed in-house or have been obtained locally and need not have been availed from AE;

3.3.3 holding that neither the Appellant has received any service and/ or any special or exclusive benefit in lieu of the payment made by it for services availed nor was there was any need for such services/ payments; thereby challenging the commercial wisdom of the Appellant in making such payment while passing the order in contrast with the recent judicial pronouncements in this regard;

3.3.4 concluding that there is duplication of services happening in the Appellant’s case, and hence, the payment of management service fee was not warranted;

3.3.5 holding that the ability of the AE to render such services has not been demonstrated, ignoring the fact that the AE, having specialized knowledge and skills and being in the industry/ business for a long lime, is better equipped for rendering such services;

3.3.6 disregarding the detailed submissions and evidentiary documents submitted by the Appellant during the assessment proceedings/DRP proceedings.

4. Without prejudice to other grounds, the Hon’ble DRP has erred in ignoring the fact, brought on record before the AO, that INR 13,339,973 of the corporate management fee, shown payable by the Assessee to the AE, was reversed in the following year (FY 2011-12).

5. That on facts and in law, the Ld. AO has erred in initiating penalty proceedings under section 271(i)(c) of the Act mechanically and without recording any satisfaction for its initiation.

The above grounds of appeal are without prejudice to each other.

The Appellant craves leave to alter, amend or withdraw all or any of the Grounds of Objections contained herein or add any further grounds as may be considered necessary either before or during the hearing of the objections.”

The assessee has also raised additional grounds of appeal before the Tribunal, which reads as under:

6. The Ld. AO , on facts and in law , has erred in disallowing the advances written off amounting to INR 52,53,000 under the provisions of Section 36(2) of the Act. In doing so , the Ld. AO has failed to appreciate that such advances were given during the normal course of business and their subsequent non-recovery and consequent write off in the books of accounts by the Appellant constituted a valid business expenditure to be allowed to the Appellant.

7.1 The Ld. AO has erred, on the facts and circumstances of the case and in law, in not allowing additional MAT credit (amounting to INR 1,36,75,898) as claimed by the Appellant during the course of assessment proceedings . In doing so , the Ld. AO has failed to appreciate that the aforesaid claim was a revision of an existing claim already claimed in the return of income, on account of inadvertent error and not a fresh claim on account of omission on the part of the Appellant.

7.2 Further, the Hon’ble DRP has grossly omitted in addressing the objection raised by the appellant on the aforesaid action of the Ld. AO while issuing direction to the Ld. AO.

8. The ld. AO has erred, on the facts and circumstances of the case and in law, it not allowing additional MAT Credit(amounting to INR 1,36,75,898/-) as claimed by the Appellant during the course of assessment proceedings . In doing so , the Ld. AO has failed to appreciate the settled legal position that MAT Credit entitlement becomes a vested right for the Assessee in the year in which such tax is paid under Section 115JA r/w 155JAA of the Income Tax Act, 1961.

9. Without Prejudice to the Grounds hereinabove, and in view of the facts and circumstances of the case and in law, the order dated 30.01.2026 passed by the Assistant Commissioner of Income Tax, Circle 9(1), New Delhi is illegal and void ab-initio , being passed in contravention of the provisions of Section 144C including the mandatory binding directions of DRP issued under Section 144C(10) r/w 144C(13) of the Income Tax Act, 1961.

The Grounds of appeal raised by the assessee in memo of appeal filed with the Tribunal , reads as under:

“Legal validity of the impugned rectification order

1. On facts and peculiar circumstances of the case and in law, the impugned/ purported rectification order passed by the Ld. Assessing Officer (‘Ld. AO’) under Section 154 of the Income-tax Act, 1961 (‘the Act’) enhancing the income of the appellant by INR 10,40,25,237, is illegal, bad in law and void-ab-initio for the reason that it is not in compliance with the provisions of Section 144C(13) of the Income-tax Act (‘the Act’) and therefore barred by limitation.

2. On the facts and circumstances of the case and in law, the Ld. AO has grossly erred in the impugned/ purported rectification order under the garb of provisions of Section 154 of the Act, which intends to incorporate the directions of the Hon’ble DRP, which were omitted be incorporated in the final assessment order and is accordingly illegal and bad in law.

3. On the facts and circumstances of the case and in law, the impugned/purported rectification order has been passed in grave violation of principles of nature justice since the Ld. AO did not provide reasonable opportunity of being heard to the appellant and is accordingly, bad in law and illegal.

In view of the above grounds, the purported rectification order ought to be quashed and set aside.

4. On the fact and circumstances of the case, and in law, the Ld. DRP has erred in law in directing the Ld. AO to enhance the income of the appellant by invoking the provisions of Section 144C(8) of the Act without appreciating that there is no disallowance/variation proposed by the Ld. AO under Section 40(a)(i) of the Act in the draft assessment order.

4.1 The Ld. DRP failed to appreciate that the insertion of explanation below sub section 8 of Section 144C of the Act was to make an enhancement on the variation made in the draft assessment order and not to raise a fresh issue which is not the subject matter of draft assessment order.

5. On the facts and circumstances of the case and in law, the directions of the Hon’ble DRP to the Ld. AO to further enquire into the nature of the reimbursements and to determine whether the same qualify as FTS are void-ab- initio and beyond the powers of the Hon’ble DRP. This is in view of the specific limitation imposed by Section 144C(8) of the Act which restricts the issuance of directions for further enquiry by the Hon’ble DRP. Accordingly, the addition made by the Ld. AO following such invalid directions of the Hon’ble DRP is bad in law and ought to be set aside.

6. Without prejudice to the above, the Ld. AO and Ld. DRP have erred on facts and in law while holding that the reimbursement of salary of expatriate employees paid by the appellant to its foreign group companies amounting to INR 8,34,61,865 was in the nature of ‘Fee for Taxable Services’ (‘FTS’) under provisions of the Act as well as the relevant Double Taxation Avoidance Agreement (DTAA).

6.1 In doing so, the Ld. AO and Ld. DRP have grossly erred in placing reliance on the judgement ofDelhi High Court in the case of Centrica India Offshore Private Limited v. CIT (364 ITR 336) without appreciating the distinguished facts of the appellant in its own merits:

6.1.1 The expatriate employees were transferred not to support the appellant to build up its operations in India in the initial years (as done in the case of Centrica) but to facilitate and oversee the ongoing operations of the appellant in various capacities

6.1.2 The appellant was the legal and economic employer of the expatriate employees and not the foreign group companies.

6.1.3 The expatriate/ transferred employees were reporting to and working under the exclusive control and supervision of the appellant and it was the appellant who undertook full responsibility for work performed by them as well as had the right to take disciplinary action against the employees in case of default.

6.1.4 The expatriate employees derived their right to receive remuneration from the appellant who bore/ paid salary expense of these expatriates and was also responsible for tax withholding required under the Act.

6.1.5 The appellant had the sole right to terminate the employment of expatriate employees and these employees had severed all ties with the foreign group companies.

6.1.6 The expatriate employees were exclusively working for the appellant and in no manner supporting the business of the respective foreign group companies

6.1.7 It was only at the request and for the convenience of the expatriate employees that the salary was disbursed by the foreign group companies and was subsequently reimbursed by the appellant without any element of mark-up/profit embedded in the payment.

6.2 The Ld. AO has erred on the facts and circumstances of the case and in law in:

6.2.1 not appreciating that even if it was to be accepted that the expatriate employees were providing services on behalf of the foreign group companies in India, the payments did not constitute FTS under the provisions of the Act or the relevant DTAA

6.2.2 disallowing the entire amount of reimbursements in the hands of the appellant and not computing the appropriate amount of sum chargeable to tax in India in the hands of the recipient foreign group companies in accordance with the directions of the Ld. DRP as well as CBDT Circular no. 3/2015 dated 12.02.2015

7. On facts and circumstances of the case and in law, the Ld. AO has erred in disallowing reimbursements amounting to INR 2,05,63,372, paid by the appellant to foreign group entities in relation to certain other expenses, under the provisions of Section 40(a)(i) of the Act.

7.1 While doing so, the Ld. AO has failed to appreciate, without giving any opportunity of being heard to the appellant, that such reimbursements do not qualify as FTS under the provisions of the Act as well as the relevant DTAA and hence, do not require any taxes to be withheld at source by the appellant.

7.2 While doing so, the Ld. AO has failed to understand that such reimbursements were purely on cost to cost basis, with any income element and hence, did not require any taxes to be withheld at source.

The above grounds of appeal are without prejudice to each other.

The Appellant craves leave to alter, amend or withdraw all or any of the Grounds of Objections contained herein or add any further grounds as may be considered necessary either before or during the hearing of the objections.

2. First we will take up appeal of the assessee in ITA No. 1909/Del/2016. This is second round of litigation before the Tribunal . In the first round of litigation, the assessee submitted before the Tribunal that it wish to withdraw its appeal in ITA no. 1909/Del/2016 on the grounds that it has filed an APA application with CBDT which has been concluded, and the Tribunal vide its order dated 9^th January, 2019 in ITA No.1909/Del/2016 dismissed the appeal of the assessee as being withdrawn. The assessee filed MA with the Tribunal and pleaded that the assessee also raised ground No.6 & 7 as an additional Ground which required adjudication, but while filing an application dated 9^th January, 2019 for withdrawal of appeal , it inadvertently withdrew its appeal as corporate tax grounds raised vide additional ground of appeal vide ground no. 6 and 7 required adjudication . The Ld. AR of the assessee drew attention of the Bench to the additional ground Nos. 6 & 7 raised by assessee before the Tribunal, which requires adjudication. It was submitted that the assessee has withdrawn the appeal on the ground that it has entered into Advance Pricing Agreement with CBDT, but, however, ground No.6 and 7 which are corporate tax grounds required adjudication by the Tribunal, but while its order dated 23^rd September, 2020 in MA No.555/Del/2019 , the Tribunal dismissed the MA on the grounds that the power u/s 254(2) of the 1961 Act are limited , the Tribunal cannot review its own order and further that the Statute did not permit Tribunal to rectify its own order due to any mistake or omission on the part of the counsel. It was submitted that being aggrieved by the dismissal of its MA by the Tribunal vide its order dated 23^rd September, 2020, the assessee filed writ petition before the Hon’ble Delhi High Court which was listed as Federal Mogul Goetze (India) Ltd. v. Asstt. CIT  [2021] 439 ITR 204 (Delhi)/WP(C)11330/2021, and Hon’ble Delhi High Court vide its order dated 22^nd October, 2021 in WP(C) 11330/2021 was pleased to quash the order dated 23^rd September, 2020 passed by the Tribunal in MA No.555/Del/2019 , and directed the Tribunal to take up assessee’s appeal in ITA No. 1909/Del/2016 , and Hon’ble High Court directed Tribunal to adjudicate so far as issues pertaining to ground No.6 & 7 , which reads as under:

“Ground No.6

The Ld. AO, on facts and in law, has erred in disallowing the advance written off amounting to INR 52,53,000/- under the provisions of Section 36(2) of the Act. In doing so, the Ld. AO has failed to appreciate that such advances were given during the normal course of business and their subsequent non recovery and consequent write-off in the books of accounts by the Appellant constituted a valid business expenditure to be allowed to the Appellant.

Ground No. 7

7.1 The Ld. AO has erred, on the facts and circumstances of the case and in law, in not allowing additional MAT credit (amounting to INR 1,36,75,898) as claimed by the Appellant during the course of assessment proceedings. In doing so, the Ld. AO has failed to appreciate that the aforesaid claim was a revision of an existing claim already claimed in the return of income, on account of an inadvertent error and not a fresh claim on account of omission on the part of the Appellant.

7.2 Further, the Hon’ble DRP has grossly omitted in addressing the objection raised by the appellant on the aforesaid action of the Ld. AO while issuing directions to the Ld. AO.”

2.2 Thereafter, the Tribunal passed an order dated 05.08.2022 in MA No. 555/Del/2019 , wherein the directions were issued to the Registry by the Tribunal to fix the case for hearing before the Division Bench of Delhi Tribunal for adjudication of Grounds no.6 & 7 as directed by Hon’ble Delhi High Court.

3. Accordingly, we now proceed to adjudicate Ground no. 6 and 7 as raised by the assessee vide additional grounds of appeal filed with the Tribunal.

4 .Ground No.6 pertains to advances amounting to Rs.52,53,000/- written off by assessee under the provision of Section 36(2) of the Act. The Ld. Counsel for the assessee submitted that the assessee has made business advances to various vendors during the normal course of business which had become irrecoverable , and hence the said advances were written off in the books of accounts . Prayers were made that the said business advances so written off in the books of accounts should be allowed either as deduction u/s 36(2) of the Act or alternatively u/s 37 of the Act as business loss. Our attention was drawn to page 423 to 431 of the Paper Book, wherein details of such advances written off are placed. Our attention was also drawn to the order of the learned DRP , wherein ld. DRP directed AO to examine the facts and allow the said amount as bad debts in terms of Section 36(2) or as business loss, if the required conditions are found to have been fulfilled. It was submitted that the AO while passing the order has not allowed the benefit of the deduction either under Section 36(2) nor under Section 37(1). Reliance was placed on decision of Hon’ble Supreme Court in the case of T.R.F Ltd v. CIT 323 ITR 397 (SC). Prayers were made by ld. Counsel for the assessee that the matter can be restored back to the file of the AO for examination of these advances, EMD, security deposits etc. , and accordingly the AO can allow the same after examination if the same were incurred for business purposes. The Ld. CIT-DR drew our attention to the orders of the AO as well as DRP and submitted that assessee itself has not given complete details of these advances , earnest money deposits and securities deposits etc. paid by it , and the assessee could not prove that the said amount of Rs.52,53,000/- was for business purposes. It was submitted by ld. CIT-DR that the AO gave opportunity of hearing to the assessee to furnish complete details, but the assessee did not submitted the details which is duly recorded in the assessment order. Our attention was drawn to the assessment order. It was prayed by ld. CIT DR that the matter can be restored back to the file of AO for examination, and accordingly AO can allow , if all the conditions are met.

4.2 We have heard rival submissions and perused the materials available on record. We observed that the assessee is engaged in the business of manufacturing automotive components i.e. pistons and piston rings. We have observed that the assessee has claimed to have written off advances etc. to the tune of Rs.52,53,000/- by way of debit to Profit and Loss account, and it is claimed that the said amount of advances , EMD, security deposits were paid on business account . The AO disallowed the said write off as complete details were not furnished , and moreover as per AO the same amounts were not routed through P&L account and the same were not taken into account while computing Income. Even during proceedings conducted by AO as directed by ld. DRP, the assessee did not filed details . Now, the assessee has claimed that the advances etc. written off in the Profit and Loss Account were advances , EMD, security deposits etc. towards business purposes which could not be recovered, and it is prayed that the same may be either allowed u/s 36(2) as bad debts or be allowed as business loss u/s 37(1). The primary onus is on the assessee to prove that the advances , EMD, security deposits etc advanced by it were for business purposes and that it is not recoverable now , thus to be claimed as business loss. Section 37(1) clearly stipulate that any expenditure not being an expenditure of the nature described in Section 30 to 36 shall be allowed as deduction while computing income from business or profession provided the same is incurred wholly and exclusively for the purposes of business, such expenditure is not a personal expenses nor it is a capital expenditure . Further, Section 37(1) is to be read with Explanations which , inter alia, stipulates that the expenditure incurred by the assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purposes of business or profession of the assessee. Thus, it requires examination/investigation whether all conditions are met, and the said expenditure is not hit by provisions of Section 37(1) read with explanations. . Thus, It is incumbent upon the assessee to prove that such amount is allowable as deduction u/s 36(2) as bad debt or u/s 37(1) as business loss, and all the stipulated conditions under statute are met. Thus, the assessee can claim deduction u/s 36(2) and/or 37 of the Act provided ingredients of these Sections are complied with. We have observed that the assessee has not discharged the primary onus caste upon it as even complete details are not filed by the assessee. Both the parties are at ad-idem that the matter can be restored to the file of the AO for denovo determination of this issue.Under these facts and circumstances and keeping in view fairness to both the parties in the interest of justice, we are restoring the matter back to the file of the AO for fresh determination of this issue, and the assessee is directed to file complete details before the AO for redetermination of the aforesaid issue.We order accordingly.

5. Ground No.7 relates to the denial of the claim of the assessee for MAT credit to the tune of Rs. 1,36,75,898/- to be carry forward .The assessee has claimed that it inadvertently showed the income-tax deduction to the tune of Rs.1,76,44,612/- in its return of income filed with the department as against the provision of Income-tax to the tune of Rs.53,93,384/- computed under the normal provisions of the 1961 Act, which as per assessee led to short carry forward of MAT credit to the tune of Rs. 1,36,75,898/-. During the course of assessment proceedings, the assessee brought this to the notice of the AO by filing its claim before the AO but the AO rejected the said claim on the ground that the assessee has not filed revised return of income to claim such MAT credit. The AO rejected the claim of the assessee by relying on the decision of Hon’ble Supreme Court in the case of Goetze (India) Ltd. v. CIT 284 ITR 323 (SC). Our attention was drawn by ld. Counsel for the assessee to the order of the authorities below. It is submitted that the assessee raised objection before ld. DRP on this issue vide objection no. 10 which is duly recorded in the order of the ld. DRP, but ld. DRP has not given any directions on this issue.The details of said mistake as claimed by the assessee before the ld. DRP vide objection filed in Form No. 35 A, reads as under:-

“Federal Mogul Goetze (India) Limited

Annexure to Form 35A

Assessment Year 2011-12.

In this regard we would like to submit that the Ld. AO has failed to consider the Assessee’s contention that there were some mistake apparent from record in return of income for year under assessment. The Assessee has stated that in the computation of Income of AY 2011-12 , the income under normal provisions was computed as Rs. 17,644,612 after setting off brought forward losses and depreciation. Thus, the tax under normal provisions on the same should have been INR 5,293,384 , but due to some inadvertent mistake it was shown at Rs.17,644,612 which is equal to the total income as per normal provisions due to which MAT credit had not been correctly computed.

Due to this mistake, the MAT credit to be carried forward is understated by INR 13,675,898 (computation as per below table). This is evident from Schedule MATC of the ITR.

Thus, it was submitted to the Ld. AO to give the correct credit of MAT taxes paid vide submission dated 12 March 2015 (enclosed as Item 14 of the Paperbook). The Ld. AO rejected the Assecse’s claim stating that for claiming the above MAT credit, the Assessee should have revised its return of income.

Even the contention of the Assessee find support from the CBDT Circular No. 14(XI-35) dated 11.04.1955. wherein it was stated that it is the duty of the officers of the department to assist a taxpayer in every reasonable way, particularly in the matter of claiming and securing reliefs and in this regard the officers should take the initiative in guiding a taxpayer where proceedings or other particulars before them indicate that some refund or relief is due to him.

Also, in case of ACIT vis. Vaishno International (2010-T101-142-DEL] it was held that wrong mentioning of section should not be construed in such a way which deprived an assessee from the legitimate deduction. In this case the court placed strong reliance on CBDT Circular No. 14(XI-35) dated 11.04 1955

Based on material on record and judicial pronouncement, the Assessee, accordingly requests Hon’ble Panel to review the objection raised above and provide relief to the Assessee in this regard.”

5.2 On the other hand the Ld. DR submitted that assessee has not claimed correct carry forward of MAT credit in the return of income field by the assessee with the department. The assesse has also not filed revised return of income with the department, and that the authorities below have rightly denied the carry forward of aforesaid MAT credit. After hearing both the parties, we are of the considered view that assessee has claimed that due to inadvertent mistake while filing return of income of the assessee, the provision for income-tax under normal provision was stated at Rs. 176,44,612/- which was in-fact income computed under the normal provisions of income-tax , while the correct provision of income-tax as per assessee’s version ought to be Rs. 52,93,384/- , which led to lower carry forward of MAT credit . It is submitted that the said mistake was brought to the notice of the AO during the course of assessment proceedings by filing the aforesaid claim, but the AO denied the said claim of carry forward of MAT credit as the said claim was not filed vide revised return of income. By that time, the time allowed for filing of revised return of income had expired. The assessee raised the objection before ld. DRP but the ld. DRP did not issue directions with respect to aforesaid ground of objection. It is well settled that the claim which could not be raised before the assessing authorities could be raised before appellate authorities except where there is a specific bar vide stipulated in the statute itself. The interest of justice is paramount and has to prevail vis-a-vis technicalities. Thus, we admit this claim of the assessee to be eligible for the carry forward of the correct MAT credit, however, the computation made by the assessee requires examination/scrutinization/ verification by the authorities below in accordance with law, and for the limited purpose of proper verification and determination of the correct amount of MAT credit to be carried forward, we are restoring the matter back to the file of the AO. We order accordingly.

6. This appeal in ITA No. 1909/Del/2016 for assessment year 2011-12 is allowed for statistical purposes.

7. This appeal in ITA No.3186/Del/2017 for assessment year 2011-12 has been filed by the Assessee against the rectification order dated 27.03.2017 passed by the ld. JCIT, Special Range-3, New Delhi u/s 143(3) r.w.s. 144C/154 of the 1961 Act.

8. The brief fact of the case are that the assessment u/s 143(3) r.w.s 144C of the Act was completed by AO on 30.01.2016 , wherein the income was assessed by the AO at an income of Rs.7,53,61,150/- as against returned income of Rs. 1,76,44,610/- , after making disallowance on account of ALP adjustment of Rs.5,24,63,542/- and disallowance of advances written off by the assessee to the tune of Rs.52,53,000/-. The Ld. DRP while issuing directions dated 23.12.2015 u/s 144C(5) of the 1961 Act against the draft assessment order dated 18.03.2015 passed by the AO u/s 143(3) r.w.s. 144C of the 1961 Act , proposed enhancement of the income of the assessee to the tune of Rs. 10,40,25,237/- , out of which Rs. 8,34,61,865/- were towards reimbursement of salary of seconded employees and related expenditure such as travel cost and relocation charges to its group entities by holding the same as FTS on which the assessee had failed to deduct TDS and hence disallowance u/s 40(a)(ia). Further , ld. DRP directed AO to provide an opportunity to the assessee to furnish complete details with respect to remaining amount of Rs. 2,05,63,372/- which were paid towards inspection charges, Koronite coating charges, engineering support and tooling charges , so as to decide whether the same are in the nature of FTS and if it is held by the AO that these are not FTS, no additions shall be made. If the same are held to be FTS by the AO, then disallowance u/s 40(a)(i) shall be made by the AO as no Tax was deducted at source by the assessee. by invoking provisions of section 40(a)(i) of the 1961 Act, but inadvertently the AO did not made the aforesaid additions to the tune of Rs. 10,40,25,237/- u/s 40(a)(i) as directed by ld. DRP while framing assessment order dated 30.01.2016 passed by the AO u/s 143(3) r.w.s. 144C of the 1961 Act. The AO rectified the aforesaid mistake vide rectification order dated 27.03.2017 passed by the AO u/s 154 r.w.s. 143(3) r.w.s. 144C of the 1961 Act, by holdings as under:

“2. On perusal of assessment records, it was observed that DRP-1, New Delhi vide its order u/s 144C(5) dated 23.12.2015 had given direction to make disallowance u/s 40(a)(i) amounting to Rs. 10,40,25,237/- Out of this, DRP had instructed to examine the facts and determine whether reimbursement amounting to Rs 2,05,63,372/- pertaining to inspection charges Korinite coating charges, engineering support and to link recharge are also FTS and clearly suggested to disallow amount of Rs.8,34,61,865/-. However, the same left to be added while computing the total taxable income of the assessee while passing order u/s 143(3) rws 144C dated 30.01.2016. Accordingly, a notice u/s 154 dated 20.03.2017 was sent to the assessee requiring it to appear in person or through an Authorized Representative in the office of the undersigned on 27.03.2017. The assessee neither appeared personally nor sent any written submission explaining the facts leading to this disallowance. Accordingly, it is inferred that assessee has nothing to say in the matter.

3 As the mistake is apparent from record, necessary rectification u/s 154 is needed to be done.

4 In the light of the above stated facts, the income of the assessee is re-computed u/s 154/143(3) r.w.s 144C as under:

Income as per order dated 30.01.2016 : 7,53,61,150/-

Add : 10,40,25,237/-

Disallowance u/s 40(a)(i)

9. Aggrieved , the assessee has filed an appeal before the Tribunal. At the outset Ld. CIT-DR submitted that this appeal filed by the assessee is not maintainable as the rectification order passed by the AO u/s 154 of the Act is challengeable before ld. CIT(A) and not before the Tribunal , but the assessee has filed first appeal before the Tribunal which is not maintainable. The Ld. Counsel for the assessee on the other hand submitted that the rectification order is passed u/s 154 r.w.s. 143(3) r.w.s. 144C of the 1961 Act. The ld. Counsel for the assessee drew our attention to provisions of Section 253(1)(d) of the Act , and submitted that this appeal filed by the assessee before the Tribunal is maintainable in view of provisions of Section 253(1)(d) of the 1961 Act which clearly stipulates that appeal shall lie with the Tribunal against the order passed under Section 143(3) or section 147 or section 153A or section 153C in pursuance to the directions of the DRP order or an order passed u/s 154 in respect of such order. Thus, keeping in view specific provisions of Section 253(1)(d) wherein it is clearly stated that the first appeal shall lie before the Tribunal against the rectification order passed u/s 154 in respect of an order passed u/s 143(3) in pursuance to the directions of ld. DRP , we hold that this appeal filed by the assessee is maintainable which has been filed by the assessee against rectification order passed by the AO u/.s 154 read with Section 143(3) read with Section 144C which is proposing to rectify the assessment order date 30.01.2016 passed by the AO u/s 143(3) r.w.s. 144C which assessment order was passed by the AO in pursuance of directions dated 23.12.2015 issued by ld. DRP u/s 144C(5) of the 1961 Act. Thus, preliminary objection of ld. CIT-DR stand rejected.

9.2 It was submitted by ld. Counsel for the assessee that ld. DRP had issued directions, inter alia, for enhancement of the income of the assessee to the tune of Rs. 10,40,25,237/- , out of which Rs. 8,34,61,865/- were towards reimbursement of salary of seconded employees and related expenditure such as travel cost and relocation charges to its group entities by holding the same as FTS on which the assessee had failed to deduct TDS u/s 195 and hence disallowance u/s 40(a)(ia). Further , ld. DRP directed AO to provide an opportunity to the assessee to furnish complete details with respect to remaining amount of Rs. 2,05,63,372/- which were paid towards inspection charges, Koronite coating charges, engineering support and tooling charges , so as to decide whether the same are in the nature of FTS and if it is held by the AO that these are not FTS, no additions shall be made. If the same are held to be FTS by the AO, then disallowance u/s 40(a)(i) shall be made by the AO as no Tax was deducted at source by the assessee. It was submitted that the directions of ld. DRP are binding on the AO . Our attention was drawn to provisions of Section 144C(10) and 144C(13). It was submitted by ld. CIT-DR that the AO due to inadvertent mistake did not made the aforesaid addition while passing assessment order dated 30.01.2016. The AO rectified its mistake by passing rectification order dated 27.03.2017 u/s 154 r.w.s. 144C /143(3). It was submitted by that the AO gave an opportunity to the assessee by issuing notice dated 20.03.2017 u/s 154 to explain its stand, but it is stated that the assessee did not submitted any response/reply to the aforesaid notice. It was submitted by ld. Counsel for the assessee that no opportunity was given by AO as the assessee did not received any such notice u/s 154 dated 20.03.2017. The AO rectified the assessment order dated 30.01.2016 by passing rectification order dated 27.03.2017. We have considered rival contentions and perused the material on record. We have observed that ld. DRP has directed for enhancement of income to the tune of Rs. 10,40,25,237/- , out of which Rs. 8,34,61,865/- were towards reimbursement of salary of seconded employees and related expenditure such as travel cost and relocation charges to its group entities by holding the same as FTS on which the assessee had failed to deduct TDS u/s 195 and hence disallowance u/s 40(a)(ia). Further , ld. DRP directed AO to an opportunity to the assessee to furnish complete details with respect to remaining amount of Rs. 2,05,63,372/- which were paid towards inspection charges, Koronite coating charges, engineering support and tooling charges , so as to decide whether the same are in the nature of FTS and if it is held by the AO that these are not FTS, no additions shall be made. If the same are held to be FTS by the AO, then disallowance u/s 40(a)(i) shall be made by the AO as no Tax was deducted at source by the assessee. We have observed that AO while passing assessment order dated 30.01.2016 did not made aforesaid additions to the tune of Rs. 10,40,25,237/- as was directed by ld. DRP. The directions of ld. DRP are binding on the AO and he is bound to follow the same. Reference is drawn to the provisions of Section 144C(10) and 144(13) of the 1961 Act. Inadvertantly, the AO did not made the addition while passing assessment order dated 30.01.2016. The AO invoked powers u/s 154 to rectify its mistake apparent from record i.e non making the additions as were directed by ld. DRP. The AO issued notice u/s 154 of the 1961 Act to the assessee. The assessee did not participated in the rectification proceedings conducted by the AO, which led to passing of rectification order dated 27.03.2017 by the AO u/s 154, wherein additions to the tune of Rs. 10,40,25,237/- was made by the AO. The service of notice u/s 154 dated 20.03.2017 is disputed by the assessee. It is observed that the AO issued notice u/s 154 dated 20.03.2017 while ex-parte rectification order was passed on 27.03.2017. Principles of natural justice are clearly breached as proper and adequate opportunity of heard was not provided to the assessee before passing rectification order dated 27.03.2017 by the AO. Furthermore, the assessee has now moved an application dated 20.04.2023 before the Tribunal for admission of additional evidences containing 77 pages under Rule 29 of the Income-Tax (Appellate Tribunal) Rules, 1963, wherein Secondment agreements dated 23.05.2006 and 30.04.2008 are filed as well the assessee has claimed to have filed details and documents w.r.t. reimbursements by way of additional evidences, as it is claimed that the same could not be earlier filed before lower authorities. It is claimed that these additional evidences goes to the root of the matter. It is claimed that the employees are seconded by group companies. It is claimed that the said employees have relinquished their charge with overseas group entities and are now working solely for the assessee. It is claimed that these employees are now working under control and supervision of the assessee, and the group companies does not exercise any control over these seconded employees. It is claimed that the salary are paid to overseas group entities by way of actual reimbursements as these employees have sought payment overseas so that they can meet their family and personal commitments abroad, and hence the assessee is making payment to the group AE abroad by way of reimbursement of actual salary, and these group entities are in-turn making payment to these seconded employees. It is claimed that these are merely reimbursement of salary expenses. It is also claimed that tax has been deducted at source by the assessee while making payments to employees u/s 192B. However, no tax was withheld u/s 195. It is claimed that these are not FTS as no technical knowledge is made available by these seconded employees. It is claimed that no technical services are rendered by these employees. Similarly, for the expnedture incurred towards inspection charges, tooling charges, Koronite coating charges, engineering support charges , it is claimed that these are not FTS. These additional evidences now submitted by the assessee before the Tribunal for the first time requires verification and examination . It is considered fit and appropriate to set aside and restore the matter back to the file of the ld. DRP for fresh determination of the issue after giving proper opportunity of being heard to the assessee. The proceedings before ld. DRP are extension of assessment. All the contentions are kept open i.e. on merits, facts and on legal grounds. The ld. DRP to admit evidences filed and/or contentions raised before it by the assessee before determination of the issue. We clarify that we have not commented on the merits of the issue and all contentions are kept open. The ld. DRP shall pass the order uninfluenced by any of the observations by us in this order. We order accordingly.

10. In the result, the appeal of the assessee in ITA No. 3186/Del/2017 for assessment year 2011-12 is allowed for statistical purposes.

11. In the result, the appeals of the assessee in ITA Nos. 1909/Del/2016 and 3186/Del/2017 , both for assessment year 2011-12 are allowed for statistical purposes.