9911796707
TMI Blog2012 (6) TMI 622X X X X Extracts X X X X X X X X Extracts X X X X ..... 2) The Ld CIT(A) has further erred in upholding disallowance of provisions of Rs. 51,53,103 towards leave encashment. (3) That interest u/s 234D of the Act is chargeable for the period beginning from 1.6.2003. 2. Briefly stated relevant facts of the case for the AY 2001-02 are that the assessee formerly called Tata Honeywell Ltd and being a listed company, has been jointly promoted by Honeywell Inc., USA and Tata group in India, each of whom held 40% of the paid-up share capital of the company in the relevant financial year and the balance 20% was held by the public. Assessee has multiple segments of the business. One segment of the business carried on by the assessee is of designing, supply/erection of automation equipments mainly to the customers in India. The revenues derived from this segment are not eligible for exemption/deduction under Section 10A. The other segment of business is provision of engineering/designing services relating to industrial/business automation systems to overseas customers (substantially to Honeywell associates) from set-up in Software Technology Parks (STP) in Pune and in Chennai. The revenues from this segment of business are claimed ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, in this financial year, in order to ensure a greater synergy and sharing of best business practices, etc., the domestic engineering group was also physically sitting along with export engineering group. The intention was to share the best practices between domestic and global engineering services. However, we were not very successful in this experiment, resulting in a large customer dissatisfaction issue, due to which this group was de-merged from F.Y.2001-02 onwards. In the financial accounting system for Salary, this group was given one common department code. In order to cope the expenses attributable for the export of services, we have identified the total man-hours that were billed by this group for both domestic and export services. The salary expenses pertaining to STP1 wee taken in this ratio. We have a primavera software package which is basically used for project scheduling and time tracking. Based on the primavera data, the man-hours attributable to STP1 were computed. The details are attached in Annexure VII. While doing this, supervisory and idle time man-hours were not captured. Hence, the allocation of salary to the extent of this has been understated. We believe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alary and wages grouping, the total High Specs salary cost is Rs. 31.57 lacs. Erroneously, this amount has also got apportioned at 45.7% only to the STP unit. The entire amount needs to be charged to the STP unit and as such, the different of Rs. 17.14 lacs needs to be further debited to the STP profit and Loss account." It is thus admitted by the assessee that the STP profits are over stated by Rs. 17.14 lacs. 2.6 Wrong claim of exemption u/s 10A for profit on reimbursement of travel expenses. Vide letter dt.26-2-2004, the assessee has submitted detailed revenue breakup of the STP units for A.Y.2001-02. In this it is noticed that the revenue of Rs. 17.10 crores includes a sum of Rs. 54 lacs by way of "Debit Note". Vide order sheet entry dt.4-3-2004, it was explained by Shri Sowani that this represented the discount given by the travel agent on the foreign travel undertaken by the employees of the company, which was fully reimbursed by Honeywell Inc. At the original bill price of the travel agent. However, by letter dt.10-3-204, it as submitted as under. "In our submission dt.26-2-2004, we had stated that the amount of Rs. 54 lacs is received towards the reimbursement of expense ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lacs of learning and development expenses incurred for the entire company. This allocation is in the ratio of manpower employed in the STP units to the total man power employed in the company, which is 98 out of 850. Thus, the STP profits would come down further by Rs. 6.52 lacs. 2.8. No allocation of manpower costs towards "Sale Through Physical". In the detailed revenue breakup submitted by the assessee vide letter dt.26-2-2004, it is seen that out of the total revenue of Rs. 17.10 crores, revenue of Rs. 27 lacs is due to "Sale through Physical". Against this sale no manpower costs have been allocated as the number of hours taken for allocation were based on the offshore and on-site work only. Vide order sheet entry dt.11-3-2004, Shri Sowani accepted that some salary/manpower cost should further be allocated to the STP Units against the "Sale through Physical", the quantification of which was not possible at this stage. It is similarly seen that the manpower costs relating to the NODCO sales of Rs. 1.79 crores and "others" Rs. 42 lacs, is similarly not been debited/allocated in the STP Profit and Loss account. 2.9 Discrepancy between Annual Reports to STP1 and P&L account: As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... As such, there is a difference between the Profit and Loss account and the STP1 return as in the former, only salary costs for export engineering has been taken into account." 2.9.5. It is thus claimed that the wage bill or the manpower costs of the STP units has been wrongly reported to the Software Technology Park of India in the annual Returns submitted by the assessee company. 2.10. Allocation of manpower costs and no DTA Sales: It is also noticed that the total Salaries and Wages shown in the Annexure II to the Profit and Loss account of the STP units, come to Rs. 4.65 cr. Out of this only 45.7% has been allocated o the SATP units and remaining salary expenses have been allocated to the domestic business of he assessee company. It was stated by Shri Sowani that such an allocation has never been done n the past nor in future, after the A.Y.2001-02. In this connection, it is also seen that the STP units are required to be Custom Bonded and he sales made from the STP units in the domestic tariff area should be reported Software Technology parks of India. In the current F.Y. the assessee company has not reported any domestic tariff area sales to the Software technology parks of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of billable man hours; (iii) wrong allocation Hi Spec salaries; (iv) Learning & Development costs; (v) allocation of manpower costs towards sale through physical (vi) non consideration of the reimbursement of the expenses to the extent of Rs. 54 lakhs etc. Thus, as per the AO, failure to make proper debit of the correct expenditure, the profits of the STP units are inflated. In response to the same, the assessee admitted the same and submitted that these mistakes are inadvertent and due to software deficiencies. Assessee made written submission in this regard as detailed in para 4.18 and 4.19 of the impugned order. These are extracted as under for completeness of the order. They are: "4.18 Pursuant to the enquiry made by me regarding the manner in which the assessing officer came to ascertain the exact amounts of mistakes in the allocation of expenses and the causative factors thereof, following submissions have been filed before me in the course of appellate proceedings. a. Non-allocation of idle tie/supervisory costs (page 5 of the assessment order, para 2.3) In the Profit & Loss account of the STP unit, the salary cost was charged off at 45.7% of the total salary c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrectly. However, while applying the proportion of 45.7%, the same was erroneously applied to the Hi Spec division's salaries of Rs. 31.57 which resulted into understatement of Hi Spec salaries by 54.3% (i.e. 100% less 45.7%) which resulted into lower cost allocation off Rs. 17.14 lacs (i.e.311.57 lacs x 54.3%) d. Learning & Development costs (page 8 of the assessment order, para 2.7) Total learning and development costs during the year under consideration were Rs. 556.57 lacs, which comprises of (i) Foreign Trainings Expenses Rs.3.39 lacs (ii) Inland Training Expenses Rs.53.18 lacs As all training facilities/programs area arranged by one of the support departments, i.e. Human Resources and Administration, the accounting for the same does not happen separately for each business unit. As such these expenses were not captured in the profit & loss account. For the purpose of estimating the amount of learning & development expenses to be apportioned to the STP unit, the same is considered on an power basis. During the year under consideration, the total number of employees working for the Company are 850, out of which a list of 98 employees was placed befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the above, the assessee raised this issue before the CIT(A) and made various submissions. The case of the assessee in their own words on this issue are enlisted as under: (Para 4.18 Page 11/17, Para 4.19/Pg 13 of CIT(A) order are relevant. (1) The errors were caused due to inadvertent errors due to sheer human fallibilities in applying the allocation principles. (2) Regarding travel costs reimbursement of Rs. 54 lacs, it was urged that there was no dispute about the eligibility of exemption thereof; the only issue was that the though the claim was increased to that extent in A Y 2001-02, there was corresponding understatement of claim in A Y 2000-01. In other words, it was timing difference only. (3) Regarding the returns filed with the STP authorities, clarifications were provided to the CIT (A) as per paras 4.21 to 4.24 on page 14 of the order of CIT (A). (4) In particular, it was pointed out that the AO had erred in recording the finding that the salary costs had declined despite the increase in the number of employees, as clarified in para 20 on page 13 of the appellate order. The finding of the AO was incorrect as per the facts on record. (5)& ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have not refuted the correctness of the clarifications submitted in respect of STP returns and other related issues. (6) The AO did not find any flaw, in the course of remand proceedings, regarding the clarifications, explanations and reconciliation provided with reference to the alleged dichotomy between the profits/costs percentage as calculated in the compensation revision proposal for F Y 2001-02 vis-a-vis actual numbers for that year relevant to A Y 2002-03, as noted by the CIT (A). (7) The appellant is a public limited company quoted on the stock exchange whose accounts are audited by statutory auditors. The company has drawn up its accounts by adopting well recognised method of accounting and the accounting standards notified. In working out the claim for deduction u/s 10A some insignificant errors and that too regarding allocation of common expenses came to occur. The accounts of appellant company as a whole were complete and correct and there were no omissions in the said accounts. Provisions of Sec. 10A do not require maintenance of separate set of accounts and sub section 5 thereof only requires that the deduction claimed be certified. The working of pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sue; 6) In the remand report (page 29 to 36 of the paper book filed by the assessee), the A.O submitted that the same cannot be treated as profit derived by the undertaking on which exemption/deduction u/s 10A of I.T.; 7) It is inconceivable that such a proposal was prepared and sent by the marketing department without the concurrence of account department in a reputed organization; 8) The learned CIT(A) has accepted the details filed before him on the issue but does not seem to have verified and adjudicated upon the issue; 9) The learned counsel of the assessee has also stated that since learned A.O. has not commented adversely in respect of reconciliation during the course of reassessment proceedings for A.Y. 1999-2000, it can be said that the A.O. has accepted the reconciliation in respect of debit notes. This argument has no basis as stand of the A.O. is always clear that debit notes do not represent income of the undertaking from export of articles or thing or computer software. Merely because the A.O. at any given point of time that too in a different assessment year has not commented adversely does not lead to the conclusion that he has accepted the reconciliation. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there was no reason for rejection of the books of accounts. He further submitted that the errors were unintended and it was not the case of the A.O that accounts were fudged or manipulated. He also submitted that these were arithmetical mistakes being of inadvertent nature. * The submissions of the learned counsel are bereft of merit. The books of accounts of the assessee were audited and despite resource crunch and paucity of time the A.O was able to detect a number of defects in allocation of various expenses. * The argument that the defect represented only 6 % of total amount and therefore trivial in nature is also needs to be rejected. In fact the defects are not trivial but horrible in nature. The learned counsel of the assessee is trying to trivialize the issue. In a blood test only 2 to 5 ml of blood sample is taken for analysis in a pathological laboratory in order to arrive at a conclusion. Entire blood of the body is not considered for analysis. * Coming to the issue of mistake being inadvertent in nature, it is submitted that the learned counsel of the assessee could not throw any light on the issue despite repeated query of the Bench. * As f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rguments and the same are produced as under. 1. The errors of allocation of expenses were not trivial; rather, they were horrible. Replies : The nature and effect of the errors should lead any authority to a fair and reasonable conclusion that they were caused by human fallibilities. Preponderance of probability weighs in favour of this conclusion rather than the proposition canvassed by the learned DR. It is submitted that the appellant is a public limited company quoted on the stock exchange whose accounts are audited by statutory auditors. The company has drawn up its accounts by adopting well recognised method of accounting and the accounting standards notified. In working out the claim for deduction u/s 10A some insignificant errors and that too regarding allocation of common expenses came to occur. The accounts of appellant company as a whole were complete and correct and there were no omissions in the said accounts. Provisions of Sec. 10A do not require maintenance of separate set of accounts and sub section 5 thereof only requires that the deduction claimed be certified. The working of profits of 10 A undertaking was based on the information culled out from the accounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted that that the sale invoices contained in the said bill books were not entered in the accounts. c. Based on above, the authorities reached an uncontroverted finding that the assessee in that case had dealings outside the accounts and therefore, the accounts were rejected and finally, the Supreme Court confirmed this finding. d. It is respectfully submitted that the facts of the case decided by the Supreme Court are materially distinct from the facts of the case before the Honourable Tribunal. By no stretch of imagination, the assessee could have contended, in that case, that the omissions in the accounts were unintended or unimportant. Admission of dealings outside the accounts can certainly not fall within these terms. However, the mistakes of allocation of expenses caused due to human failures do fall within the ambit of these terms used by the Supreme Court. It is submitted that to place the facts in the present appeal of the assessee with the facts before the Supreme Court, on the same footing, will be grossly unfair and unreasonable. (5) The details (of reimbursements) were never filed before the A.O. during the course of assessment proceedings for A.Y. 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t by the marketing department without the concurrence of account department in a reputed organization. Replies At the very initial stage before the AO the then CFO of the assessee company had made submission in writing that the compensation revision proposal was not validated or confirmed by the accounts department. Please see para 2.12.2 on page 11 of the assessment order. (8) The learned CIT(A) has accepted the details filed before him on the issue but does not seem to have verified and adjudicated upon the issue. Replies Here again, the submission of the learned DR is not as per the finding on the records. In para 4.42 on page 22 of the appellate order, the learned CIT(A) has categorically rendered a finding that the Assessing Officer has not pointed out any flaw in the explanation of the appellant. In fact, this is the very grievance of the assessee that despite this finding, the learned CIT(A) rejected the case of the assessee. (9) The learned counsel of the assessee has also stated that since learned A.O. has not commented adversely in respect of reconciliation during the course of reassessment proceedings for A.Y. 1999-2000, it can be said that the A.O. has accepted the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the Assessing Officer, in my opinion no further relief is deserved by the Appellant on this score. Therefore, while deciding the issue besides examining the issue of reimbursable expenses finding on the issue of two comparable cases which also happen to be the basis for arriving at the profit margin of cost plus 50% by the AO and also approved by the learned CIT(A) is a must. Replies (a) First, the concluding part of the contentions advanced by the learned DR need to be dealt with. It is respectfully submitted that the AO did not base his estimate on the profits of the alleged comparable cases. Rather, it needs specific emphasis that the AO based his estimate on the profit margin reflected in the flawed compensation revision proposal. Therefore, finding of the CIT(A) that the AO had given sufficient set-off with reference to the profit margins of comparable cases is contrary to the process of estimation employed by the AO. (b) Without prejudice, the flaws in the findings of the learned CIT(A), with respect, are as under. (c) The dissimilarities with the STP undertakings of the assessee with regard to functions, risks and resources employed have been brou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to elucidate the scope of the provisions of section 145 of the Act. The amended provisions apply to this case and the said amended provisions read as under: 13. Section 145 relating to "Method of accounting'. Section 145 as applicable to AY 91-92 reads as under : (1) Income chargeable under the head "Profits and gains of business or profession" or "Income from other sources" shall be subject to the provisions of sub-section (2), be computed in accordance with either cash or mercantile system of accounting regularly employed by the assessee. (2) The Central Government may notify in the Official Gazette from time to time accounting standards to be followed by any class of assessees or in respect of any class of income. (3) Where the Assessing Officer is not satisfied about the correctness or completeness of the accounts of the assessee, or where method of accounting provided in sub-section (1) or accounting standards as notified under sub-section (2) have not been regularly followed by the assessee, the Assessing officer may make an assessment in the manner provided in section 144. A. Sub-section and (3) above is same as the sub section (2) of the pre am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o maintain relevant registers or any other books described in the list "with all the transactions properly recorded in accordance with the set principles of accounting, makes the accounts of the assessee incomplete. Regarding the "correctness" of the accounts, in our opinion, it refers to the quality or accuracy or reliability of the accounts maintained by the assessee and it covers the reconcilable mistakes or errors in accounts. Thus, the completeness refers to list of books of accounts and entries therein and the accuracy refers to the quality/accuracy/reliability of the accounts of the assessee. Regarding the rejection of books of accounts, 'accepting the books of accounts of the assessee is a rule and rejecting the same is an exception'. This is the principle in existence. In order to arrive at such conclusions by the AO, it must be shown that the AO has taken into consideration relevant factors and not omitted to consider the material before him. 14. In the light of the above scope of the provisions, we need to apply the above to the facts of the present case, where there is undisputed and excess mistakes in the accounts. It is a fact the said inaccuracy amounts to R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in matters of maintenance of the books of such exempt undertakings. Without going into the reasons, whether bona fide or otherwise, we are of the considered opinion, the AO has rightly rejected the books as per the provisions of section 145(3) of the Act. Accordingly the relevant grounds of the appeal are dismissed. Issue of Estimation of Profits of the STP Units 15. In the preceding paragraphs, we have upheld the AO's decision in rejecting the books of the accounts for the detailed reasons mentioned therein. That leaves the issue of the 'best judgment' assessment in the manner prescribed in section 144 of the Act. At the end of the assessment, the AO held that only the sum of Rs. 5,69,99,894/- is the allowable profits and the same is eligible for exemption u/s 10A of the Act. Otherwise claim of the assessee is Rs. 11,95,79,294/-. The difference, being Rs. 6,25,79,400/- is disallowed and added to the total income returned for the AY 2001-02. Whereas, for the AY 2002-03, the assessee's claim of exemption u/s 10A is Rs. 15.41 cr (rounded off) and the AO restricted the exemption claim to Rs. 8.51 cr only. It resulted in making addition of Rs. 6.9 cr for the AY 2002- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur Marking Dept was incorrect and should not be treated as the base for financial year 2000-01". Thus, the AO came to the conclusion that the said book results of the assessee are not credible and assessee has explanation to justify the same. Further, he came to the conclusion that the figures in the CRP are actual and not mere estimates as contended by the assessee. AO reasoned that the assessee, the alliance partner of such repute shall not submit the CRP in casual manner too. Further, the AO collected the book results of the comparable companies i.e. Wipro Technologies Ltd and Geometric Software Ltd and concluded that their profit margins vary from 20-25% only against the profit margin of 69.96%. 17. Thus the AO considered the incongruous profit margins of various segments of the assessee i.e. domestic and STP unnits cum the high pitched margins of the STP units on one side and the lower profit margins of the comparable cases i.e. Wipro and Geometric Software companies on the other and rejected the book results of the assessee. Resultantly, keeping in tune with the provisions of section 145(3) of the Act the AO assumed the powers of the best judgment assessment and procee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the 'reimbursement of expenditure'. Assessee got reimbursement of the expenditure amounting Rs. 2.29 cr incurred on their employees' travel abroad. Of course, the said figure should be Rs. 54 lakhs for the AY under consideration as per the AO vide discussion on page 7 of the AO's order. Actually, the assessee submitted additional evidence relating the said 'debit notes' relating to the said reimbursement of expenditure before the CIT(A) and the AO opposed the admission of the same in the remand proceedings. As per the AO the provisions of rule 46A does not permit admission of such additional evidence. On the other hand, the case of the assessee is that there is no role of 46A and it is merely a case of other explanation before the CIT(A) and pleaded for considering the said debit notes during the first appellate proceedings. As per the assessee, if these debit notes are considered, there will be hardly any difference between the CRP figures and the book results. As per the assessee, if these debit notes are to be factored in the working made by the Marketing division, the dichotomy between the profit margin worked out by it and that as per the P & L account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sp; Though the AO did not base the estimate on the profit ratios of the alleged comparable cases, out of abundant caution, the dissimilarities with the STP undertakings of the assessee with regard to functions, risks and resources employed have been brought on record as per pages 51 to 54 of the paper book. In particular, reference is invited to pages 53 and 54 of the paper book where the variegated activity profiles of the alleged comparable cases of WIPRO and Geometric Software are placed on the records as distinguished from the restricted activity of the assessee. There is neither any finding either by the AO or the CIT(A) nor any information has been provided by these enterprises in their responses to the AO pursuant to the enquiries conducted by him as to the profits earned by these enterprises from the activities similar to those performed by the assessee. (d) The CIT (A) has erred giving the finding in para 4.44 on page 24 of the appellate order that these dissimilarities cannot cause significant variations in the comparative profits. On the other hand, on the basis of settled principles applicable to theory of transfer pricing, such dissimilarities strike at the very ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the premise, therefore, the revised estimate of profits will work to 163% (153%+10%) of costs in A Y 2001-02 as against 232% claimed in return of income and 50% allowed by AO. From the arguments of the assessee, profits at 40% over the cost works out to STP profits @ 153% for the AY 2002-03. Similarly, for the AY 2001-02, the revised profits will work out to 163% including the 10% allowed by the AO for this year. 22. Per contra, Ld DR for the revenue vehemently supported the estimations of the AO and prayed for confirming the order of the CIT(A). On the issue of 'debit notes', Ld DR made the following written submissions and they are extracted as under: * The details were never filed before the A.O during the course of assessment proceedings for A.Y 2001-02 which is the lead year of investigation on the issue. * The details were submitted before the learned CIT (A) as additional evidence which was admitted by him after obtaining the remand report of the A.O. * In the remand report dated 6/11/2006 (page 29 to 36 of the paper book filed by the assessee), the A.O not only objected to admission of additional evidence but also submitted that that the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es or thing or computer software. Merely because the A.O at any given point of time that too in a different assessment year has not commented adversely does not lead to the conclusion that he has accepted the reconciliation. The issue needs to be examined in totality and not on the basis of alleged silence of the AO in a different Assessment year. * Proposal made by the assessee to Honeywell Inc, USA for revision of the terms of alliance agreement was made in August 2002.However ,the proposal was based on actual financial numbers for F.Y 2001-02. In a best judgment assessment the A. O was perfectly justified in taking the profit margin being 40 % plus cost as one of the base. * It is not correct to state that only profit margin of revision statement being 40% on cost was considered by the A.O while estimating the profit margin of cost plus 50% in the assessment order. In this regard para2.12.6 of page 13 of the Assessment Order may kindly be referred to. In the above quoted Para the A.O has made the following remarks "It is thus seen that companies of good standing and repute engaged in similar work have been earning profit margin of 20-25% during A.Y.2001-02 against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the preceding paragraphs for the AY 2001-02, we find that the turnover is 17.09 cr and profits works out to Rs. 11.95 cr i.e. works out to 69.92%. Considering the cost as per the assessee, the % of profit of the STP units on Cost works out to 232.49%. Whereas the assessee's data of the % of profit of the STP units on Cost work as per the CRP is only 40%. Further, the assessee's rejected books advocates for 69.96% over the cost. However, rejecting above claims, the AO allowed the % of profit of the STP units on Cost at Rs. 50% for the AY 2001-02. All these data worked out without considering the reimbursement of the expenditure, which is the subject matter of dispute before us. AO considered the comparable cases, which are other are not accepted by the assessee as comparables on many grounds. With regard to these 'reimbursed expenses', the case of the assessee is that if the same are considered the gap in the profits margins are greatly reconcilable and consequently, the unreconciled gap works out to negligible one and it should be ignored and consequently, the book results should be accepted. Further, the assessee is of view that the AO accepted the need for consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he profit, how they are profits, derived from the assessee's eligible undertakings and eligible for exemption? CIT(A) has not attended to this part of the arguments raised before him despite the matter remanded by him to the assessing officer during the first appellate proceedings. What are the facts of these reimbursed expenditure, whether these reimbursements of the travel expenditure of the employee of the company have profit element, at all if such profits and if the answer is positive, if such profits, unrelated to the export activity per se, constitutes 'profits and gains derived from the undertaking from the export of such article or things or computer software' and therefore eligible profits for claim of exemption u/s 10A of the Act etc. CIT(A) has not dealt with relevant submissions before rejection of the assessee's submissions. 25. So far as the admission of the additional evidence is concerned, we find there is no error on part of the CIT(A) in both admitting, remanding and considering the same while deciding the issue. However, we object the order of the CIT(A) in his failure to reason out as to how such reimbursements are taken care of by the 10% set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the material or data gathered by him for this purpose both from internal as well as the external sources. Thus, we can not approve the 'best judgment assessment' made by the AO and sustained by the CIT(A) in the present form. Therefore, we are of the considered opinion, the AO must make 'best judgment assessment' as per the manner provided in section 144 of the Act and for this we have decided to set aside the order of the CIT(A) for this limited purpose. It goes without saying that the AO must grant reasonable opportunity of being heard to the assessee. Assessee is directed to furnish any and every relevant information to advance his case for making of the best judgment as per the provisions of section 145(3) of the Act. CIT(A) is also directed to consider the existing supreme court judgment in the case of the Liberty India Ltd. v. CIT [2009] 317 ITR 218/183 Taxman 349. in the set aside proceedings at the time of deciding the issue relating to if the said reimbursed receipts constitutes 'profits and gains derived from the undertaking from the export of such article or things or computer software' ones and eligible for exemption u/s 10A of the Act. Accordin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f-explanatory that the incurring of liability should be certain during the year and such liability should be capable of estimation with reasonable certainty. Actual method of estimation was accepted by the Apex Court as the capable one. Therefore, we find no reason to interfere with the claim of the assessee. Consequently, the decisions of the revenue authorities on this disallownce are reversed. Accordingly, the ground 2 of the assessee's appeal for the AY 2001-02 is allowed. 30. Ground 3 of the appeal for the AY 2001-02 relates to the provisions of section 234D of the Act. The is common ground to the assessee's appeal for the AY 2002-03. Assessee is of the opinion, the amended provisions of this section are applicable to the impugned AYs. On the other hand, the AO/ CIT(A) are of the view that they are operative from 1.6.2003 prospectively. Before us, both parties mentioned that the issue is now settled at the level of the Special Bench of the Tribunal Mumbai Bench in the case of ITO v. Ekta Promoters [2008] 113 ITD 79. We have heard the parties and perused the said citation and find that the ratio of the same covers the case under consideration. In view of the importance ..... X X X X Extracts X X X X X X X X Extracts X X X X
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