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Satyam Venture Engg. Services Pvt. Ltd. Versus Asst. Commissioner of Incometax, Central Circle – 3 (2) , Hyderabad

2016 (5) TMI 715 - ITAT HYDERABAD

Reopening of assessment - Held that:- The series of reassessment proceedings were initiated by the AO on the back drop of Satyam episode without applying mind or without cogent evidence on record. It was done mechanically, as it is evident from the fact that the earlier years reopening assessments were dismissed by the coordinate bench of this Tribunal.

Moreover, the findings and conclusion drawn in the final assessment orders are nothing but same findings of the AO in the original as .....

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ailed to report in the form 3CEB - Held that:- Assessee has not charged any interest to AE as well as non-AE entities. Moreover, the TPO has considered only the account receivable of AE without considering the account payable to AEs. It is pertinent to note that account payable to AE and its affiliates are ₹ 28,58,98,204 compared to account receivables from AE and its affiliates of ₹ 26,88,97,856. We find that the account payables are more than the account receivables from AE. Hence, .....

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evenue : Shri Mohan Singh Singhania Both these appeals are preferred by the Assessee against the orders of ACIT, central circle 3(2), Hyderabad, both dated 27/02/2015 for assessment years 2005-06 and 2010-11. The same were clubbed and heard together and, therefore, find it convenient to dispose of these appeals by way of this consolidated order. ITA No. 431/Hyd/2015 for AY 2005-06 2. The brief facts of the case are, Assessee is a Joint Venture Company between Satyam Computer Services Ltd (Now ta .....

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the AY 2005-06 on 30.10.2005, declared a total income of ₹ 4,77,83,592/-. Subsequently, the assessment was completed u/s 143(3) of the Income Tax Act 1961 on 17/12/2008 by making an addition of ₹ 4,08,45,798/- after considering the findings of TPO vide order u/s 92CA(3) of the Act dated 20.06.2008. Aggrieved by this order, Assessee preferred an appeal before CIT(A), which was dismissed by the CIT(A) by upholding the order of the AO. Aggrieved with the above order, Assessee preferred .....

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information called for. The AO also referred the case to TPO again after reopening the assessment u/s 147 and considered the report of TPO dated 30.12.2013, finalized the assessment u/s 143(3) r.w.s 147 and 144C as under: 1. Adjustment u/s 92CA as suggested by the TPO ₹ 3,23,99,937 2. Capital investment subsidy ₹ 3,75,000 3. Disallowance of Exemption u/s 10A ₹ 5,27,39,154 Total disallowance by AO ₹ 8,55,14,091 2.3 Before finalizing the above order, AO forwarded the draft .....

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peal before us: 1. The order of the learned Assessing Officer is erroneous in law and on the facts of the case. 2. On the facts and in the circumstances of the case, the learned Assessing Officer erred in reopening the assessment uls.l47 of the Act. after having completed the assessment originally u/s 143(3). 3. On the facts and in the circumstances the reopening of assessment O/s. 147 is not correct as the reassessment resulted in additions exactly as in original assessment. 4. The reference to .....

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ore completion of the reassessment. Transfer Pricing Adjustment 6. The learned Assessing Officer ( AO ) / Transfer Pricing Officer ( TPO ) / Dispute Resolution Panel DRP) erred in making the transfer pricing adjustment ofRs.3,23,99,937/, comprising of an adjustment of ₹ 3,20,92,192, in respect of sales commission paid and a further adjustment of ₹ 3,07.745 in respect of engineering services. 7. The learned AO / DRP erred in denying the +/- 5% option to the arm's length price dete .....

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rges incurred in foreign currency from the total turnover, also, despite catena of decisions in favour of such exclusion." 4. The main issues raised by the Assessee in the above grounds are: a. Ground 1 being general, does not need any adjudication b. Ground 2 to 5, relating to reopening of the assessment u/s 147. c. Ground 6 to 9, relating to transfer pricing adjustments. d. Ground 10, relating to Non Transfer pricing additions. (relating to 10A disallowances). 5. Ground 2 to 5. Reopening .....

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engineering services and commission payment to one of the AE i.e. Venture Global (USA), after excluding telecommunication charges from export turnover to arrive the deduction u/s 10A and addition on account of capital investment subsidy. Subsequently, on appeal CIT(A) dismissed the assessee's appeal and now the assessee's appeal is pending before the Hon'ble ITAT. 2. During the year 2004-05, assessee claimed ₹ 4,64,47,567 as sales commission to Venture Global, USA - one of the .....

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payment to Venture Global and accordingly the arm's length price on the commission payment is to be NIL as against the payment claimed by assessee of ₹ 4,64,47,567 and ALP determined by the TPO of ₹ 1,43,55,375 on the facts misled by the assessee. 3. Further, there is also a legal dispute between Venture Global and Satyam Computers, the promoters of the assessee company wherein Venture Global alleged excess levy of certain administrative charges on services rendered to TRW, a ma .....

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ent of income chargeable to tax. The assessee company neither disclosed the above dispute in its annual report for the AY 2004-05 nor disclosed during the original assessment proceedings. 4. Given the fact that the assessee company being a joint venture company promoted by Satyam Computer Services Ltd. under the Chairmanship of Shri B. Ramalinga Raju, who having confessed to the fact that the accounts of SCSL were fudged and charged with several offences by the investigating agencies in the afte .....

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ssment for AY 2005-06. For the above detailed reasons, it is proposed to issue notice to the assessee u/s 148 of the IT Act to reopen the assessment in the assessee's case for the assessment year 2005-06 for bringing to tax the income chargeable to tax which has escaped assessment." 5.1 Ld AR submitted that the reasons furnished above were identical to the reasons furnished for in the earlier years except the reason no 3. For reasons 1,2 and 4, he submitted that the assessment reopened .....

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ment. They are highlighted by the Ld AR in the below chart, which he submitted during the appellate proceedings: S. No. Reason for reopening Adjustment/addition in reassessment Remarks 1 ALP for the commission paid to Venture should be assessed at Rs. NIL ALP was taken at ₹ 1,43,55,375 as was originally assessed The reason did not survive. 2 Dispute between Satyam Computer Services Ltd. and Venture as to administrative charges No addition was made on this count The reason did not survie 3 .....

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the same as done in original assessment. 6 Increase of disallowance of deduction claimed u/s 10A This was a new addition not specified in the reasons for reopening. 5.3 Ld AR submitted that the reason no 3, which the AO narrated in the reasons for reopening, has no relevance to the assessee. These transactions were legal disputes between Venture Global and Satyam Computers, who are promoters of the Assessee company. However, the AO has not investigated anything in the reassessment proceedings. I .....

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e AO cannot refer to the TPO, when the TPO had already examined the records relating to the International transactions and given its report. There is no fresh material enumerated which warranted the AO to refer the matter to TPO. 6. Ld DR on the other hand submitted that there was no prejudice caused to the Assessee except there was adjustment made to the allowance u/s 10A. He justified the reassessment proceedings and relied on the reassessment order. On the reason no 3, AR submitted that it is .....

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both the sides and based on the information and submissions made by the counsels, we are of the view that the series of reassessment proceedings were initiated by the AO on the back drop of Satyam episode without applying mind or without cogent evidence on record. It was done mechanically, as it is evident from the fact that the earlier years reopening assessments were dismissed by the coordinate bench of this Tribunal. 8.1 Moreover, the findings and conclusion drawn in the final assessment orde .....

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he AO. 9. With regard to other grounds, since we have quashed/cancelled the reassessment proceedings u/s 147, the grounds become infructuous, hence, no adjudication is required. 10. In the result, appeal of the assessee is allowed. ITA No. 432/Hyd/2015 11. Assessee filed its return for the AY 2010-11 on 30/10/2010, declared total income of ₹ 43,62,886 and claimed refund of ₹ 72,08,345. The case was selected for scrutiny and a notice u/s 143(2) was served on assessee on 13/09/2010. As .....

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/- which assessee was failed to report in the form 3CEB. Aggrieved with the above addition, the assessee has raised objections before the Dispute Resolution Panel (DRP). 13. The DRP vide its direction dated 24/12/2014, gave its decision as under: "It is seen that the TPO has only worked out the interest rate on the receivables due to the assessee. He has not considered the fact that out of the total receivables, ₹ 6,59,65,875 was due from Satyam Computer Services Ltd., which cannot be .....

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the DRP, AO has completed the assessment u/s 143(3). 15. Aggrieved with the above order, assessee in appeal before us and raised the following grounds: "1. The order of the learned Assessing Officer is erroneous in law and on the facts of the case. Transfer Pricing Adjustment 2. The learned Assessing Officer ( AO ) / Transfer Pricing Officer ( TPO ) / Dispute Resolution Panel (DRP) erred in making the transfer pricing adjustment ofRs.65,40,787. 2.1 The learned Assessing Officer ( AO ) / Tra .....

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8377; 30.1l crores. 2.2 The learned Assessing Officer ( AO ) ought to have appreciated that there were no specific instructions from the DRP confirming the TPO's order to charge notional interest of ₹ 65,40,787 and hence the Assessing Officer is not justified in making the adjustment of ₹ 65,40,787 while computing total income. PRAYER: The appellant claims relief in terms of the above grounds for Satyam Venture Engineering Services Pvt. ltd." 16. The ld. AR submitted that th .....

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