TMI Blog2015 (1) TMI 360X X X X Extracts X X X X X X X X Extracts X X X X ..... roposed by the AO, unlike the mandatory approval of the CIT of every order passed u/s 158BC. Jurisdiction of CIT u/s 263 - Erroneous and prejudicial to the interests of the Revenue – Held that:- U/s 92C(4) of the Act, it is clearly provided by the first proviso thereto that no deduction u/s 10A or u/s 10AA or section 10B or under chapter VIA shall be allowed in respect of the amount of income by which the total income of the assessee is enhanced after computation of income under sub-section (4) of 92C - the AO has initially aggregated the business income declared by the assessee and also the ALP adjustment and thereafter has allowed deduction u/s 10A - this is in clear violation of the provisions of sec.92C(4) of the Act and hence, the order of the AO is erroneous and prejudicial to the interests of the Revenue - the AO ought to have allowed deduction u/s 10A of the Act before aggregating ALP adjustment and thereafter should have added the ALP adjustment and computed the taxable income - If computation is to be made, then the claim of deduction u/s 10A would have to be restricted to the income from business available before deduction u/s 10A as rightly observed by the CIT – the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he final assessment order u/s 143(3) read with sec.144C(13) of the Act assessing the total taxable income at ₹ 6,90,00,048/-. While doing so, the AO has computed the income as under: Total income declared before claim of deduction u/s 10A Rs.32,59,19,968/- Add: difference in ALP as determined by the TPO Rs.11,35,16,498/- Rs.43,94,36,466/- Less: Deduction u/s 10A allowable Rs.41,57,35,312 Add: Income from other sources Rs.2,37,01,154/- Rs.4,52,98,884/- Total income assessed Rs.6,90,00,498/- 3. The CIT perused the assessment records of the assessee u/s 263 of the Act and observed that while finalizing the scrutiny assessment, the difference in ALP as determined by the TPO as per the directions of the DRP of ₹ 11,35,16,498/- has been added to the income from business and profession and thereafter 10A deduction has been allowed. The CIT observed that u/s 92C(4) of the Act, no deduction u/s 10A or chapter VIA shall be allowed on the total income enhanced on acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee was eligible for deduction u/s 10A with regard to the income earned by the STPI unit and all the relevant material was before the AO and after considering the same, the AO has taken one of the possible views and therefore the order cannot be said to be erroneous or prejudicial to the interests of the Revenue. He submitted that where two views are possible and the AO has adopted one of the views, then the order of the AO cannot be said to be erroneous. 7. The learned Departmental Representative, Shri T.S.N.Murthy, on the other hand, supported the orders of the CIT and submitted that the issue before the DRP was only determination of the ALP and not the computation of deduction u/s 10A of the Act. He submitted that though in the draft assessment order also, the AO has added the ALP adjustment to the income from profits and gains of business and thereafter has allowed the deduction u/s 10A of the Act, the DRP has not deliberated upon the computation part of the assessment order but has only decided on the adjustment to the ALP and has reduced the adjustment substantially. He submitted that it was in the final assessment order that the AO has computed the deduction u/s 10A of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 158BC of the Act. Every assessment order passed u/s 158BC requires mandatory approval of the CIT, whereas every assessment order involving transfer pricing issue does not require the prior approval of the DRP. U/s 144C, the AO shall pass and forward a draft assessment order to the relevant assessee who, thereafter shall, within 30 days of receipt of the draft order (a) file his acceptance of the variations to the AO; or (b) file his objections with the DRP and the AO. Sub-section (5) of sec.144C provides that the DRP, in a case where any objection is received shall issue the directions, as it thinks fit, for the guidance of the AO to enable him to complete the assessment. Sub-sec.(8) provides that the DRP may confirm, reduce or enhance the variations proposed in the draft order so, however, shall not set aside any proposed variation or issue any direction under sub-section (5) for further enquiry and passing of the assessment order. Thus, it can be seen that only where variations are made to the returned income of the assessee , that the AO has to forward the draft assessment order to the assessee and the assessee shall accept the variations or file objections with the DRP an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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