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2016 (6) TMI 496 - AT - Income TaxDetermination of profit - Basis of mark at 8% on total overall cost - operating cost for rendering services to the group companies - Held that:- The assessee company engaged in development of IT parks, managerial and technical services to the industrial park and SEZ and income of the assessee is having direct nexus with the operations of SEZ sister concerns. For sister concerns, there is a operational difficulty to work 100% capacity due to various contributing factors like labour, wages and administrative cost. When the industrial park operates at optimum level due to volume of business it indirectly increase the service charges payable to the assessee and realistic inherent reasons for the method of accounting integrated with sister companies. The basis of the Assessing Officer to mark up 8% cost relying on the similar project consultancy of other assessee. The AO selected the profit percentage of other entities differ on management functionalities and business propositions. The ld. Assessing Officer has not conducted any independent investigation to support that there is under valuation of services by the assessee and no comparables of enterprises were provided to show that amount charged to the group company is reasonably very low. The Assessing Officer arbitarily relied on the findings of the assessee and marked up the cost by 8% without considering the submissions and valuable information on disputed issued of the assessee. The charging of fees is not definite measuring criteria as it differs from company policies. The assessee company clarified on chargeability of fees during construction stage and post construction with supporting evidence and analogy of service fees and the Revenue for the first time has raised such objections. Considering the above decision, we set aside the order of Commissioner of Income Tax (Appeals) and direct the Assessing Officer to delete the mark up and pass the orders.
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