TMI Blog2015 (7) TMI 769X X X X Extracts X X X X X X X X Extracts X X X X ..... foreign subsidiaries because income from investment in foreign subsidiaries is taxable. In the present year also, there are some investments in foreign subsidiaries; for example, ₹ 1,62,645/- in Super Tannery U.K. (Ltd.). Hence, in the present year also, we decide this issue on similar line and restore the issue to the file of the Assessing Officer for recomputing the disallowance after excluding the investment in foreign subsidiary. - Decided in favour of assessee for statistical purposes. Transfer pricing adjustment - adoption of most appropriate method - selection of comparable - Held that:- CIT(A) has adopted the same comparables which were adopted by TPO in the next year and hence, the selection of comparables is proper. Regarding the exclusion of Duty Drawback from operating profit of the assessee company, this finding is given by learned CIT(A) that export entitlements are an integral part and parcel of the operating profits of a company and therefore, export entitlements are not an extraordinary item of income or an item of income which is unrelated to the ordinary activities of the assessee company. Apart from this, this is also very important that even if the exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee. - ITA No.470/LKW/2013,ITA No.629/LKW/2013,C.O.No.39/Lkw/2013 - - - Dated:- 17-7-2015 - Shri Sunil kumar Yadav and Shri A.k. Garodia, JJ. For the Petitioner : Shri P. K. Kapoor, C.A. For the Respondent : Shri Amit Nigam, D. R. ORDER PER A. K. GARODIA, A.M. There is one appeal of the assessee for assessment year 2008-09 which is directed against the order of learned CIT(A)-I, Kanpur dated 25/03/2013. Apart from this, there is one Revenue s appeal for assessment year 2007-08 which is directed against the order of learned CIT(A)-I, Kanpur dated 24/05/2013 and there is Cross Objection of the assessee for the same assessment year i.e. 2007-08. All these appeals were heard together and are being disposed of by this common order for the sake of convenience. 2. First we take up the appeal of the assessee for assessment year 2008- 09 i.e. I.T.A. No.470/Lkw/2013. Ground No. 1 2 are as under: 1. BECAUSE the duty drawback and other investments as received by the appellant form part of the income derived from the industrial undertaking qualifying for exemption under section 80IB(10) and view to the contrary as has been taken by the CIT(Appeals) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the assessee in its appeal for assessment year 2009-2010 for assessment year 804/Lkw/2013, which was heard on 17/06/2015. It was agreed that in the present year also, this issue can be decided on similar line. 7. We have considered the rival submissions. We find that in assessment year 2009-2010, this issue was decided by us on the basis that the Assessing Officer should recompute the disallowance u/s 14A after excluding the investment in foreign subsidiaries because income from investment in foreign subsidiaries is taxable. In the present year also, there are some investments in foreign subsidiaries; for example, ₹ 1,62,645/- in Super Tannery U.K. (Ltd.). Hence, in the present year also, we decide this issue on similar line and restore the issue to the file of the Assessing Officer for recomputing the disallowance after excluding the investment in foreign subsidiary. Accordingly, these grounds are also allowed for statistical purposes. 8. In the result, the appeal of the assessee stands allowed partly for statistical purposes. 9. Now we take up the Revenue s appeal i.e. I.T.A. No.629/Lkw/2013 for assessment year 2007-08. In this appeal, the Revenue has raised t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O order for that year dated 28/10/2011 available on pages 203 to 206 of the paper book. The only difference is that in this year, the TPO has held that when even after excluding the Duty Drawback amount from operating income of the assessee also, the difference is within the range of (+) (-) 5%, no adjustment is called for. In our considered opinion, such a finding of TPO in next year is not relevant to hold that in each and every case, the Duty Drawback amount should be reduced from the operating income of the assessee. In our considered opinion, such deduction of Duty Drawback income from the operating income of the assessee will be called for if the same has been reduced from the operating income of the comparables. It is a different case that even after making such deduction from the operating income of the assessee, no addition was proposed by the TPO in the next year because the difference was within the range of (+)(-) 5% even after doing so. In our considered opinion, such deduction of Duty Drawback etc. from operating income of the assessee will be called for if the income of the comparables is after excluding the same. In the present case, the calculation of the PLI of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6744 4894060 -256968 4711446 195116294 39233958 4154162 1106100 Interest 6296000 3848152 3851370 16360619 705473 86188667 3479817 6378348 4971000 Operating profit 27740000 34054696 8745430 16103651 5416919 283305151 42713775 10532510 1603200 Total Expenditure 305210000 46190064 662410892 1479099461 113989001 2043067391 239297057 440746785 3050720 %of OP/TC 9.09% 7.37% 1.32% 1.09% 4.75% 13.87% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... correct, give relief to the assessee as directed above . 11.1 From the above paras from the order of learned CIT(A), we find that CIT(A) has adopted the same comparables which were adopted by TPO in the next year and hence, the selection of comparables is proper. Regarding the exclusion of Duty Drawback from operating profit of the assessee company, this finding is given by learned CIT(A) that export entitlements are an integral part and parcel of the operating profits of a company and therefore, export entitlements are not an extraordinary item of income or an item of income which is unrelated to the ordinary activities of the assessee company. Apart from this, this is also very important that even if the export incentives entitlement is excluded from the operating income of the assessee company, such exclusion has to be made from the operating income of the comparables company also. Without excluding the export incentives entitlement from the operating income, the average PLI of the comparable company in the present case is 7% as compared to 3.67% of the assessee company which is within the tolerance range of 5% as stipulated in the Income Tax Act, 1961. Since this is not the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions of Learned A.R. of the assessee that this direction of CIT(A) is amounting to restoring the matter back to the file of the Assessing Officer which is not permissible and even if he considered that some recalculations of calculations is necessary, he should have done so himself or he should have obtained remand report but after giving this finding that he himself has verified the calculations from the balance sheet of each of the comparables and they are part of the record and also in public domain, this direction of CIT(A) is uncalled for. We, therefore, hold that this unnecessary direction of CIT(A) is not proper particularly when there is no power available with the CIT(A) to remand the matter to Assessing Officer. We, therefore, modify the direction of CIT(A) by holding that since CIT(A) has already verified the calculations on the basis of material available on record and available in public domain, the Assessing Officer should give relief to the assessee as decided by CIT(A) of ₹ 1,00,47,451/- and there is no necessity of recalculation of the calculations. Accordingly, this ground of the Cross Objection is allowed. 19. Ground No. 3 of the Cross Objection is as u ..... X X X X Extracts X X X X X X X X Extracts X X X X
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