2009 (12) TMI 668 - AT - Income Tax

Transfer pricing Adjustment - determination of the Arm’s Length Price in respect of transactions entered into by the assessee with related parties - whether transaction between the appellant and its associated enterprise exceed the total amount of revenue earned from clients by the appellant and RCS together? - Whether Assessing Officer/TPO have erred while determining the ALP by taking appellant as the tested party as opposed to the analysis carried out by the appellant in which RCS was accepted as the tested party?

HELD THAT:- The assessee nor the ld. D.R. for the revenue have been able to point out any basis or material or criteria to controvert or to rebut the findings and conclusion arrived at by the ld. CIT(A) except by relying upon their respective stand taken before the ld. CIT(A). Though the ld. counsel for the assessee made a specific submission about the benefit of adjustment of ± 5 per cent to be given while determining the Arm’s Length Price, the ld. counsel for the assessee has not been point out as to how and in what manner, the order of ld. CIT(A) in rejecting this claim of the assessee is improper and unjustified.

Since both the parties have not been able to controvert the findings recorded by the ld. CIT(A) or point out any material to enable us to take a view other than view taken by the ld. CIT(A), We are inclined to uphold the order of ld. CIT(A) on the point of determination of Arm’s Length Price in respect of the transactions entered into by the assessee with its associate enterprises, namely, RCS Centre Corpn. Therefore, the order of ld. CIT(A) is upheld, and the grounds raised by the assessee as well as by the revenue on this issue are rejected.

Similarly, in the assessment year 2004-05, an identical issue about the determination of Arm’s Length Price is involved and in that year, the ld. CIT(A) determined the Arm’s Length Price in the same manner or basis as done in the assessment year 2003-04. The ld. CIT(A) has also decided the issue about the adjustment of + 5 per cent as per proviso to section 92C(2) in the same manner as have been decided by him in the assessment year 2003-04.

Thus, in the light of the decision, we have taken in assessment year 2003-04, the identical ground about the determination of Arm’s Length Price raised by the revenue as well by the assessee in the assessment year 2004-05 are rejected.

Computation of deduction u/s 10A - Whether interest from fixed deposit, etc., and miscellaneous income should be taken into account for the purpose of computing deduction? - HELD THAT:- In the light of proposition laid down by the Hon’ble Supreme Court in the case of Liberty India [2009 (8) TMI 63 - SUPREME COURT], we do not find any merit in the claim of the assessee that interest from fixed deposit, etc., and miscellaneous income should be taken into account for the purpose of computing deduction u/s 10A. Thus, these grounds raised by the assessee are rejected.

Setting off of the brought forward business loss and unabsorbed depreciation - whether is to be made before or after allowing deduction u/s 10A? - CIT(A) as well ld. AO has set off the brought forward business losses and unabsorbed depreciation before allowing deduction u/s 10A - HELD THAT:- From the facts narrated in immediately preceding para, it becomes clear that the assessee has itself made a claim to set off brought forward losses against the income for assessment year 2003-04 and no claim of deduction u/s 10A was made with regard to the profit determined before setting off of brought forward loss pertaining to the assessment year 2002-03. However, in the present assessment year 2004-05, the assessee has advanced a claim that deduction under section 10A should be claimed before making set off of brought forward unabsorbed business loss and unabsorbed depreciation

In the light of the two decisions in the case of Yokogawa India Ltd.[2006 (8) TMI 448 - ITAT BANGALORE] and Changepond Technologies (P.) Ltd. [2008 (2) TMI 486 - ITAT MADRAS-A], and in the light of decision of Hon’ble Karnataka High Court in the case of Himatasingike Seide Ltd.[2006 (8) TMI 125 - KARNATAKA HIGH COURT], it is, thus, clear that the unabsorbed depreciation or unabsorbed business loss in respect of eligible section 10A unit or division or undertaking is to be set off against the profit of the same eligible section 10A unit or undertaking for the purpose of determining the amount of deduction available u/s 10A.

We, therefore, do not find any justification cause to interfere with the order of the ld. CIT(A) whereby the ld. CIT(A) has upheld the order of the AO in setting-off of unabsorbed business losses or unabsorbed depreciation in respect of eligible unit brought forward from assessment year 2002-03 against the profit of same eligible unit for the purpose of determining the amount of deduction available u/s 10A to the assessee in the present assessment year 2004-05.

Therefore, this ground raised by the assessee is decided against the assessee and in favour of the revenue.