9911796707
TMI Blog2012 (6) TMI 575X X X X Extracts X X X X X X X X Extracts X X X X ..... mstances of the case and in law, 1. the order of the learned AO, based on directions of the Hon'ble DRP, erred in assessing the total income at Rs. 5,55,64,766 as against returned income of Rs. 2,07,682/- computed by the Appellant; Grounds of appeal relating to corporate tax matters 2. on the facts and in the circumstances of the case and in law, based on directions of DRP, the learned AO has erred in law and in fact by holding that the foreign currency expenses are towards technical services rendered outside India and should be reduced from "export turnover" while computing the profits eligible for deduction under section 10A of the Act; 3. on the facts and in the circumstances of the case and in law, based on directions of DRP, the learned AO has erred in law by not considering that, if foreign currency travel expenses are reduced from export turnover, an equal amount should also be reduced from total turnover for computing the deduction under section 10A of the Act. Grounds of appeal relating to transfer pricing matters On the facts and in the circumstances of the case and in law: 4. the learned AO/Transfer Pricing Officer ('TPO') erred in making an addition o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es using unreasonable comparability criteria; 11. the learned TPO erred in obtaining information which was not available in public domain by exercising powers u/s 133(6) of the Act and relying on the information for comparability analysis; 12. the learned AO/TPO erred in not considering the foreign exchange fluctuation gain (loss) as part of the operating income while computing the operating margin; 13. the learned AO/TPO erred in not considering the provisions written back as part of the operating income while computing the operating margin; 14. the learned AO/TPO erred in wrongly computing the operating margins of some of the comparable companies identified in the TP order; 15. the learned AO/TPO erred in not making suitable adjustments on account of differences in the risk profile of the Appellant vis-â-vis the comparables, while conducting comparability analysis; 16. the learned AO/TPO erred in computing the arms length price without giving benefit of +/- 5 percent under the proviso to section 92C of the Act; 17. the learned AO erred in levying interest of Rs. 1,02,55,066 and Rs. 626 u/s 234B and 234C of the Act respectively; 18. the learned AO erred, in law, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause the exemption u/s. 10A would go up if the figure of undertaking goes up. It was further stated that if the foreign currency, travelling expenses were to be reduced from the export turnover, an equal amount should also have been reduced from the total turnover for computing deduction u/s. 10A of the Act. It was further submitted that the adjustment made by the AO with respect to section 10A deduction was contrary to the various Tribunal rulings including the ruling of the Chennai Special Bench in the case of ITO v. Sak Soft Ltd. [2009] 313 ITR (AT) 353/30 SOT 55. Reliance was also placed on the following case laws: - CIT v. Gem Plus Jewellery India Ltd. [2010] 330 ITR 175/194 Taxman 192 (Bom). - CIT v. Tata Elxsi Ltd. [2012] 204 Taxman 321/17 taxmann.com 100 (Kar.) 7. In his rival submissions, the ld. CIT(DR) strongly supported the order of the AO that the issue of qualifying deduction of sub-section (4) of section 10A developed its mechanism of computing the same i.e., in respect of the profit derived from the qualifying export of articles, things or computer software, sale proceeds of which were received or were brought as required by the Act and which was to be determined ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y way of recovery of such expenses cannot be said to represent consideration for the goods exported since total turnover is nothing but the aggregate of the domestic turnover and the export turnover. In the formula prescribed by section 10B(4) the figure of export turnover has to be the same both in the numerator and in the denominator of the formula. It follows that the total turnover cannot include the two items of expenses recovered by the assessee and referred to in the definition of "export turnover." It has further been held that - "The common thread running through sections 80HHC, 80HHE and 80HHF is that they are all provisions granting relief to the assessees in respect of profits derived from export. The difference between Chapter III in which section 10B falls, and Chapter VI-A in which these sections fall, is that while the former excludes the income in question totally from the purview of total income and gives total exemption from tax, the latter gives deduction of a part of the profits and gains of the concerned business from the gross total income. Both, however, are chapters which give relief to assessees from taxation subject to the conditions bring fulfilled and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not been defined at all by Parliament for the purposes of section 10A. However, the expression "export turnover" has been defined. The definition of "export turnover" excludes freight and insurance. Since export turnover has been defined by Parliament and there is a specific exclusion of freight and insurance, the expression "export turnover" cannot have a different meaning when it forms a constituent part of the total turnover for the purposes of the application of the formula. A construction of a statutory provision which would lead to an absurdity must be avoided. Moreover, a receipt such as freight and insurance which does not have any element of profit cannot be included in the total turnover. Freight and insurance charges do not have any element of turnover. For this reason in addition, these two items would have to be excluded from the total turnover particularly in the absence of a legislative prescription to the contrary." 11. A similar view has been taken by the Hon'ble jurisdictional High Court in the case of Tata Elexi Ltd. (supra) and the relevant finding given therein reads as under : "The total turnover of the business carried on by the undertaking would cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t turnover' for the purposes of the numerator would be brought in as part of the 'export turnover' when it forms an element of the total turnover as a denominator in the formula. A construction of a statutory provision which would lead to an absurdity must be avoided. Moreover, a receipt such as freight and insurance which does not have any element of profit cannot be included in the total turnover. Freight and insurance charges do not have any element of turnover. For this reason in addition, these two items would have to be excluded from the total turnover particularly in the absence of a legislative prescription to the contrary - CIT v. Sudarshan Chemicals Industries Ltd. [2000] 163 CTR (Bom) 596: [2000] 245 ITR 769 (Bom) applied; CIT v. Lakshmi Machine Works [2007] 210 CTR (SC) 1: [2007] 290 ITR 667 (SC) and CIT v. Catapharma (India) (P) Ltd. [2007] 211 CTR (SC) 83: [2007] 292 ITR 641 (SC) relied on". 12. From the ratio laid down in the aforesaid judicial pronouncements by the Hon'ble jurisdictional High Court and Hon'ble High Court of Bombay, it is crystal clear that if an item is excluded from the export turnover, the same should also be excluded from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company and that the services provided by the assessee were for internal captive consumption. It was contended that for the purpose of establishing the ALP of its international transaction with its AE, the assessee had undertaken a transfer pricing (TP) study carried out by an independent external consultant and an analysis was undertaken to determine the functions performed, risks assumed and assets utilized by the assessee and its AE in respect of international transactions between them and based on the TP study, the external consultant concluded that the price adopted by the assessee in respect of its international transactions with its AE was at arms' length. It was contended that the Comparable Uncontrolled Price (CUP) method and Cost Plus Method (CPM) were determined as the most appropriate method to determine the ALP. While doing so, the Man Hour Rate charged by the assessee was compared with the hourly rates charged by leading software companies whose financial informations were available in the public domain. It was emphasized that no adjustment was made to take into consideration unproductive and idle hours and the differences in risks assumed since the upper range of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17. It was contended that the assessee justified its ALP for the international transactions by adopting CPM/CUP method for the financial year 2001-02 and the same was accepted by the TPO for financial year 2002-03. It was explained that the assessee was a captive service provider rendering its entire software services to its parent company for improving software being used in automobiles/aircraft engines manufactured by the holding company and thus the services were being provided under long term contract. It was pointed out that the assessee was not allowed to carry out similar business for any other customer due to the specialized nature of the work and the fact that the same was for internal consumption of the parent company, so it was difficult to find exact comparables which provided similar services due to lack of external informations. It was also pointed out that OECD guidelines called for adoption of CPM method in cases where long term buy and supply arrangements in the case of provision of services especially for contracted research and development was involved. It was stated that since the company was dedicated captive service provider under long term service arrangeme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... used for determining the ALP is reliable and correct, there can be no intervention by the Assessing Officer. It was stated that a plain reading of section 92C(3) of the Act reveals that the AO can determine the price only under the circumstances enumerated in clauses (a) to (d) of sub-section (3) of section 92C of the Act and since the comparability analysis undertaken by the assessee was based on wholly accepted transfer pricing principles, therefore in the absence of any information to the contrary, it was inappropriate to reject the comparability analysis of the assessee. Reliance was placed on the following case laws:-- - Dy. CIT v. Indo American Jewellery Ltd.[2010] 41 SOT 1 (Mum) - Sony India (P) Ltd. v. CBDT [2007] 288 ITR 52/[2006] 157 Taxman 125 (Delhi) - Mentor Graphics (Noida) (P.) Ltd. v. Dy. CIT [2007] 109 ITD 101/18 SOT 76 (Delhi) It was accordingly submitted that the TPO was bound to accept assessee's analysis on account of following reasons:-- - Analysis undertaken in accordance with the law. - Analysis undertaken by an external agency. - AO/TPO had no reasons to believe that the transactions were not at arms' length. 19. Ld. counsel for the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jected certain companies with onsite revenues greater than 75% of the export revenues, but did not consider this fact that software development activity comprises of both onsite and offshore developmental activities and the nature of activity remains the same irrespective of whether the company was engaged in providing onsite or offshore services. Since the activity remains software development, therefore it was not appropriate on the part of the TPO to reject the companies providing onsite services on the ground of functional dissimilarity. It was emphasized that as per "NASSCOM Strategic Review 2007 - IT Industry in India", the Indian IT industry comprises of both onsite and offshore services and as per the industry report, onsite revenues/services constitutes approximately 30% of the total IT revenues in the financial year 2004-05. It was also stated that the informations on onsite revenue and offshore revenue was not available or disclosed in the financial statements of most of the companies, but those were gathered by the TPO by exercising power conferred u/s. 133(6) of the Act, therefore it was not appropriate to reject the companies providing onsite services on the ground of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omparable, the said company was engaged in 2D/3D animation, special effects creation and game asset development, therefore the activities/services were in the nature of IT enabled services and not software development. The said company had rendered the services to the related parties to the extent of 31% of the total services revenues, therefore, this company should have been rejected as it did not satisfy related party transaction filter proposed by the TPO at the services income level. It was stated that the information provided by the TPO pursuant to notice u/s. 133(6) of the Act was contradictory to the related party transactions disclosure provided in the audited financial statements. It was also pointed out that the related profit margin of KALS was 44.07% which was on the higher side, therefore the said company could not have been considered as comparable with the assessee. 24. It was further stated that the TPO considered Infosys Technologies Ltd. (Infosys) as comparable, but the said company was having software services revenue at Rs. 9000 crores as compared to the assessee's Rs. 35 crores and the profit margin of the said company was at 40.38%, therefore the said com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax payers and the tax administration, but were not available to the assessee, therefore such informations qualified as secret comparables, as such the information was confidential in nature and usage of such secret comparables/information raised a number of concerns especially with respect to fairness and transparency of the process. It was accordingly submitted that the TPO used the powers u/s. 133(6) of the Act in a discretionary manner, so it was against the principles of natural justice. Reliance was placed on the following case laws:- - Philips Software Centre (P.) Ltd. v. Asstt. CIT [2008] 26 SOT 226 (Bang.) - Honeywell Automation India Ltd. v. Dy. CIT [I.T. Appeal No. 4(PN) of 2008, dated 10-2-2009] - Global Vantedge (P.) Ltd. v. Dy. CIT [2010] 37 SOT 1 (Delhi) 30. It was further submitted that the TPO did not consider the foreign exchange fluctuation gain (loss) as well as provision written back as part of the operating income while computing operating margin. It was pointed out that the TPO has considered extra-ordinary items for computing the operating margins while dealing with the comparable iGate Global Solutions Ltd., that company was introduced as a comparable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o stated that the assessee bears lesser business risk than independent comparable companies due to the nature of its revenue model because it guaranteed profits by way of mark-up on costs incurred regardless of its success or failure and it has been providing services to its AEs over the year which is growing year on year and making profits irrespective of the performance of the IT industry in India and that the assessee does not bear any risk of incurring loss due to under-utilisation of capacity or insufficient business from its AEs as it is compensatory on cost plus basis, while the independent companies have to bear the vagaries of economic and business factors that are prevailing in the industry and thus could either incur losses or earn profits based on market conditions. Therefore the benefit of risk adjustment should have been accorded to the assessee. Reliance was placed on the following case laws:- - Sony India (P.) Ltd. v. Dy. CIT [2008] 114 ITD 448 (Delhi) - Philips Software Centre (P.) Ltd. (supra) 32. It was further stated that the assessee computed risk adjustment in its case vis-à-vis comparable companies and provided the same to the TPO/AO, however the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act, however, subject to the condition that the AO has to give an opportunity of hearing to the assessee by serving a show cause notice as to why he should not do so. Therefore the selection of method for determining the ALP is not unfettered discretion of the tax payer, rather duty of the tax payer is to select such method for determining the ALP as is most appropriate having regard to all the relevant factors such as - nature of transaction, class of transaction, class of associated persons, functions performed by such persons or such other relevant factors as the Board may prescribe. 34. The ld. CIT(DR) stated that the TPO rejected the TP document maintained by the assessee because the assessee had not given either computation of gross mark-up or used mark-up in computing ALP by considering any other uncontrolled transaction or enterprises. It was stated that CUP method is one of the additional method for determining the ALP and this method is to be applied in the manner provided in Rule 10B(1)(a) of I.T. Rules, 1962. It was further stated that in CUP method, the price charged or paid, property transferred or services provided in a comparable uncontrolled transaction or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... compared. It was further stated that the contemporaneous data and proviso is applicable only in some specified conditions, but no material has been brought on record by the assessee to suggest that there were circumstances prevailing for application of the proviso. Therefore the TPO/DRP was justified in considering current financial year data. Reliance was placed on the following case laws:- - Aztec Software & Technology Service Ltd. (supra) - Mentor Graphics (Noida) (P.) Ltd. (supra) - Customer Services India (P.) Ltd. v. Asstt. CIT [2009] 30 SOT 486 (Delhi) - Symantec Software Solution v. Asstt. CIT [2011] 46 SOT 48/11 taxmann.com 264 (Mum.) - Avaya India (P.) Ltd. v. ACIT ITA 5150/Del/2010 - TNT India (P.) Ltd. v. Asstt. CIT [2011] 45 SOT 471/10 taxmann.com 161 (Bang.) - HoneyWell Automation India Ltd. (supra) - Haworth (India) (P.) Ltd. v. Dy. CIT [2011] 131 ITD 215/11 taxmann.com 76 (Delhi) - Dy. CIT v. BP India Service (P.) Ltd. - ITA No.4425/Mum/2010. 35. It was stated that the ld. counsel for the assessee raised several objections on six comparable companies viz., M/s. Megasoft Ltd., M/s. KALS Information System Ltd., M/s. Accel Transmatic Ltd., M/s. Tata Elxi Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstances and merely because expenses from cash of the sub-activities were not available, did not tantamount for rejection. It was further stated that financial statements furnished by the said company were segmental information and TPO computed operating profit on the basis of the said data, therefore M/s. Tata Elexsi Ltd. was rightly retained as comparable. 39. As regards to M/s. Infosys Technologies Ltd., the ld. CIT(DR) stated that the products revenue of the said company was only 3.95% to the total operating revenues, thus more than 96% of its revenues were from software development services and accordingly it qualifies filter of 75% from software development services. Therefore getting higher turnover did not necessarily mean that it would generate higher margin. It was further stated that the assessee had not demonstrated as to how the difference in turnover has influenced the result of the comparables. The ld. CIT(DR) contended that it is accepted economic principle and commercial practice that in highly competitive market conditions one can survive and sustain only by keeping low margin but high turnover. Reliance was placed on the decision of ITAT Mumbai "E" Bench in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(DR) submitted that segmental information/data furnished by M/s. iGate Global Solutions Ltd. revealed that the operating costs consisted of salaries & wages, selling, marketing, depreciation etc., but the TPO worked out extraordinary items after examining the financial statement for the F.Y. 2005-06 and rightly determined margin at 15.61% instead of 2.81% wrongly worked out by the assessee. It was also stated that similar objections had been raised before the DRP who held that margin in respect of iGate had been correctly worked out by the TPO, therefore there was no merit in the objection raised by the assessee. 44. As regards to the claim of the assessee for risk adjustment, the ld. CIT(DR) submitted that the TPO and DRP had rejected the assessee's claim on the ground that the assessee failed to bring any evidence on record to show that there existed any difference in the risk profile of comparable companies vis-à-vis of the assessee. It was pointed out that in order to take benefit of this adjustment, information should have been submitted along with the details under rule 10D of the Income-tax Rules, 1962 by the assessee. It was also pointed out that as per the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ately reflected in higher net profitability like in the case of M/s. Megasoft Ltd., therefore the argument of the ld. DR that revenues in the form of licence from third parties are akin to software development services was merely generic without any sound basis because the company M/s. Megasoft Ltd. was engaged in business of software development services on a company wise basis and had the said company provided segmental accounts for XIUS-BCIG and Blue Ally Division, it should not have been considered as a comparable and only the Blue Ally Division of the said company should have been considered as comparable. Similarly the company KALS has products of its own and hence should have been rejected as comparable because a break-up of product and services revenue was not available. It was further stated that the TPO had selected companies for issuing notices u/.s 133(6) of the Act on an arbitrary basis, particularly the responses of M/s. Sankhya Infotech and M/s. Megasoft Ltd. obtained u/s. 133(6) of the Act could not have been relied upon as those companies had provided contradictory information in their responses to the notices issued u/s. 133(6) of the Act. It was further stated th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20 comparables and subsequently issued another notice on 20.07.09 and proposed to adopt 14 companies as comparables, but in the final order the TPO selected 22 companies as comparables. In other words, 8 additional companies were considered as comparables apart from those which were proposed in the notice dated 20.07.09, copy of which is placed at pages 305 to 355 of the assessee's compilation. It therefore appears that new companies were adopted by the TPO as comparables without affording opportunity to the assessee to present its objections to their adoption. It is well settled that nobody should be condemned unheard as per the maxim audi alteram partem, but in the present case nothing is brought on record to substantiate that the TPO/AO while adopting additional comparables had provided opportunity of being heard to the assessee. Therefore this issue deserves to be set aside to be decided afresh at the level of the Assessing Officer. For the aforesaid view, we are fortified by the order dated 31.01.2012 of the ITAT 'A' Bench Bangalore in the case of Genesis Microchip (I) Pvt. Ltd., Bangalore v. DCIT, Circle 11(3), Bangalore in ITA No.1254/Bang/2010 for the A.Y. 2006 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to consideration the detailed discussion on various issues vide directions under sub-sections (5) & (8) of section 144C of the Act dated 08.09.10. The DRP directed to modify the assessment order after reworking the correct margin in the draft assessment order. In compliance to the above direction, the AO adopted the adjustment at Rs. 4,24,78,340 as against earlier adjustment of Rs. 4,26,43,555. Now the assessee is in appeal. 53. The ld. counsel for the assessee submitted that the assessee should have been given a standard deduction of 5% as provided under proviso to section 92C(2) of the Act before making adjustment for the transfer price. Reliance was placed on the following case laws: 1. Genisys Integrating Systems (India) (P.) Ltd. v. Dy. CIT [2012] 20 taxmann.com 715 (Bang.) 2. Tatra Vectra Motors Ltd. v. Dy. CIT [2012] 20 taxmann.com 131 (Bang.). 54. The ld. counsel for the assessee further submitted that the contention of the assessee was rejected by the DRP on the ground that amendment to proviso to section 92C was clarificatory in nature and therefore retrospective in effect. It was contended that the amendment to proviso to section 92C was not retrospective as clarifie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Vantadge (P.) Ltd. (supra) - Dy. CIT v. Basf India Ltd. [2010] 41 SOT 10 (Mum) (URO) - Deloitte Consultancy India (P.) Ltd. (supra) - Exxon Mobil Company India (P.) Ltd. (supra) - ST Micro Electronics (P.) Ltd. (supra) - ADP (P) Ltd. (supra) 57. After considering the submissions of both the parties and material on record, it is noticed that a similar issue has been adjudicated by the ITAT 'A' Bench Bangalore having the same constitution in the case of Tatra Vectra Motors Ltd. (supra) for the A.Y. 2006-07 wherein the relevant finding has been given in paras 12 to 17 of the order dated 31.01.2012, which read as under: "12. We have considered the submissions of both the parties and carefully gone through the material available on record. In the present case, the assessee has not disputed the adjustments u/s. 92CA of the Act, but challenging the working of ALP without giving benefit of the option available under the erstwhile proviso to section 92C(2) of the Act, so it becomes relevant to discuss the provisions contained in the erstwhile proviso to section 92C(2) of the Act, which was inserted by Finance Act, 2002 w.e.f. 1-4-2002 and reads as under: "Provided, that wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee does not exceed 5 per cent of the arithmetic mean. The arm's length price determined on application of the most appropriate method is only an approximation and is not a scientific evaluation. Therefore, the Legislature thought it proper to allow marginal benefit to assessees who opt for such benefit. In the case of an assessee who exercises the option and accepts the arm's length price even exceeding 5 per cent of the arithmetic mean determined by the tax authority as correct and is ready to pay tax on the difference between the price disclosed by him and the arm's length price the application of the proviso is not excluded. The legal position cannot be different in a case where minor variation of 5 per cent is not accepted and the arm's length price is further challenged in appeal. The mere fact of acceptance or non-acceptance of the arithmetic mean cannot be taken to be the determining factor relating to the right to contest the arm's length price in appeal. Such inference is not supported by the language of the provision. Both in the first as also in the second limb, the implications of the determined the arm's length price are the same except for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ile proviso which was inserted by Finance Act, 2002 with effect from 1.4.2002 read as under: "Provided that where more than one price is determined by the most appropriate method, the arm's length price shall be taken to be the arithmetical mean of such prices, or, at the option of the assessee, a price which may vary from the arithmetical mean by an amount not exceeding five percent of such arithmetical mean." As per the said Proviso, an option is available to the assessee for adjustment of +/-5% variation for the purposes of computing ALP. As per the Proviso, where more than one price is determined by the most appropriate method, the arm's length price shall be taken to be the arithmetical mean of such prices or at the option of the assessee, a price which may vary from the arithmetical mean by an amount not exceeding 5% of such arithmetical mean. The point made out by the assessee is based on the latter part of the Proviso whereby an option is given to the assessee to take an ALP which may vary from the arithmetical mean by an amount not exceeding 5% of such arithmetical mean. Firstly, the claim of the Revenue is that such benefit is not available to the present assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of the stated assessment year, which is prior to the insertion of the amended Proviso with effect from 1.10.2009. 22. We have carefully examined the rival stands on this aspect. The amended Proviso has been brought on the statute by the Finance (No. 2) Act, 2009 with effect from 1.10.2009. The Explanatory Notes to the provisions of Finance (No 2) Act, 2009 contained in circular No 5 of 2010 (supra) provides the objective behind the amendment of the Proviso. The Legislature noticed the conflicting interpretation of the erstwhile proviso by the assessee and the income-tax Department. The assessee's view was that the arithmetical mean should be adjusted by 5% to arrive at ALP, whereas the departmental view was that no such adjustment is required to be made if the variation between the transfer price and the arithmetical mean is more than 5% of the arithmetical mean. With a view to resolving this controversy, the Legislature sought to amend the proviso to section 92C(2), which has been reproduced by us in the earlier part of this order. In the said Circular, it has also been elaborated that the above amendment has been made applicable with effect from 1.4.2009 and will ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the following date shall be read: "1st April, 2009". In terms thereof, it is canvassed that the amended proviso has been made applicable with effect from 1.10.2009 and shall apply even to cases where proceedings were pending before the TPO on or after such date, irrespective of the assessment year involved and, therefore, in the instant case the benefit of the erstwhile proviso cannot be extended to the assessee. We have carefully pondered over the assertion made by the appellant that the Corrigendum is untenable in the eyes of law. Firstly, the said corrigendum does not bring out any preamble so as to throw light on the circumstances and the background in which the same has been issued. Secondly, it is well understood that the Explanatory Notes to the provisions of a Finance Act passed by the Parliament seeks to explain the substance of the provisions of the Act as intended by the Legislature. In fact, the Hon'ble Supreme Court in the case of K.P Varghese v. ITO 131 ITR 597 (Ker) emphasized the sanctity of the statements contained in the Explanatory Notes of the provisions and stated that the interpretation placed in such documents is binding interpretation of law. The conte ..... X X X X Extracts X X X X X X X X Extracts X X X X
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