TMI Blog2016 (6) TMI 496X X X X Extracts X X X X X X X X Extracts X X X X ..... ny independent investigation to support that there is under valuation of services by the assessee and no comparables of enterprises were provided to show that amount charged to the group company is reasonably very low. The Assessing Officer arbitarily relied on the findings of the assessee and marked up the cost by 8% without considering the submissions and valuable information on disputed issued of the assessee. The charging of fees is not definite measuring criteria as it differs from company policies. The assessee company clarified on chargeability of fees during construction stage and post construction with supporting evidence and analogy of service fees and the Revenue for the first time has raised such objections. Considering the above decision, we set aside the order of Commissioner of Income Tax (Appeals) and direct the Assessing Officer to delete the mark up and pass the orders. - I.T.A. No.1255/Mds/2015 - - - Dated:- 28-4-2016 - SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER For The Appellant : Shri. Raghunathan Sampath, Adv For The Respondent : Shri. A.V.Sreekanth, IRS, JCIT ORDER PER G. PAVAN KUMAR, JUDICIAL MEMB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ected comparatively lower from the group companies. The personal costs incurred is more than the twice the Revenue collected. The ld. Assessing Officer further verified the shareholder pattern of the group companies and nature of services. The only question arises for reasons and basis of charging service charges to its sister concern and the assessee company replied through letter dated 08.08.2007 as under:- During construction stage:- Project management fee at the rate of 2% of asset company s construction cost. After construction stage:- (i) Project mangement fee at the rate of 2% on asset company s monthly revenue. (ii) Lease management fees at the rate of 1% per month on asset company s monthly revenue. (iii) Asset mangement fees at the rate of 0.5% per annum of asset company s project cost . The ld. Assessing Officer though considered the submissions and the shareholding pattern and list of employees is of the opinion the assessee has charges less amount in comparison with the other companies engaged in the similar business and relied on the information of M/s. Ashok Leyland Properties for the assessment year 2005-06, were the com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case and the submissions of the ld. Authorised Representative. I have also gone through the decisions relied on by the ld. Authorised Representative. As seen from the facts of the case the Assessing Officer has found that the fee charged from its group companies for project management services and asset management services, on the one hand, is below market rte and on the other hand the expenditure incurred by the appellant company for rendering such services is on the higher side. Therefore, the AO felt that the appellant should have incurred less expenditure or charged more fee from the group companies . Since the expenditure incurred by the appellant company is on the higher side, the AO has worked out mark up rate @ 8% on the expenditure incurred by the appellant company and arrived at total services income at _ 6,07,15,147 . By arriving at the services income at _ 6,07 , 15,147 , the AO has given credit to the expenditure of _ 5,62,17 , 729 debited to P L ale and the net income of _ 44,97 , 418 was brought to tax as per the computation of income . The decision of the AO appears to be in order. Since the services rendered by the appellant is only to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nexus with the operations of SEZ sister concerns. For sister concerns, there is a operational difficulty to work 100% capacity due to various contributing factors like labour, wages and administrative cost. When the industrial park operates at optimum level due to volume of business it indirectly increase the service charges payable to the assessee and realistic inherent reasons for the method of accounting integrated with sister companies. The basis of the Assessing Officer to mark up 8% cost relying on the similar project consultancy of other assessee. The ld. Assessing Officer selected the profit percentage of other entities differ on mangement functionalities and business propositions. The ld. Assessing Officer has not conducted any independent investigation to support that there is under valuation of services by the assessee and no comparables of enterprises were provided to show that amount charged to the group company is reasonably very low. The Assessing Officer arbitarily relied on the findings of the assessee and marked up the cost by 8% without considering the submissions and valuable information on disputed issued of the assessee. The charging of fees is not definite me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reement in the earlier Assessment Year, the assessment year under consideration and subsequent assessment year. Further, except the assessment year under consideration the Assessing Officer has not doubted the service charges received by the assessee under the same agreement and only in the assessment year under consideration, the Assessing Officer concluded that 'the price charged by. the assessee is undervalued. Though the doctrine of res judicate is not applicable in the matter of taxation however, when the facts and circumstances are identical and there is no change even in the price charged during the year under consideration in comparison to the earlier assessment year as well as subsequent assessment year the Assessing Officer is not permissible to take a different a view by picking and choosing a particular assessment year. Therefore, the rule of consistency demand, that the Assessing Officer cannot take a different view in a particular assessment year without point out any change in the facts and circumstances for that particular assessment year. Thus when the Assessing Officer has already accepted that this price charged by the assessee to the related parties under th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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