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TMI Blog2016 (9) TMI 1301X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 143(3) read with section 144C(13) of the Income-tax Act, 1961 (hereinafter referred to as the 'Act') in pursuance of the directions issued by the Hon'ble Dispute Resolution Panel-I, Mumbai (hereinafter referred to as the 'DRP') on the following grounds, each of which are without prejudice to one another: A. General 1. on the facts and in the circumstances of the case and in law the learned AO based on directions of DRP erred in assessing the total income at Rs. 70,36,92,880 as against income computed as Nil by the Appellant, under the normal provisions of the Act. B. Transfer pricing adjustments On the facts and in the circumstances of the case and in law, the learned AO/Additional Commissioner of Income-tax (Transfer Pricing) - 1(1) ('TPO') has: Non consideration of comparability analysis as documented in the transfer pricing study report 2. erred in not considering/accepting the comparability analysis as documented by the Appellant in the Transfer Pricing study report for benchmarking the international transaction of payment of royalty to its Associated Enterprise ('AE') ie Matsushita Electric Works Limited ('MEW& ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Auditors Report under section 80lC and 80lB of the Act (ie Form 10CCB); Deduction under section 80IC of the Act on interest and rent 12. erred in holding that the Assessee has claimed deduction under section 80lC of the Act on interest income of Rs. 13,04,27,014 and rent income of Rs. 12,23,568; Reducing income pertaining to 80IB unit while re-computing the deduction under section 80IC of the Act 13. erred in reducing income pertaining to 80IB unit of Rs. 2,85,71,926 while re-computing the deduction under section 80IC of the Act without appreciating that the same was already set off against the losses of other units; Deduction in respect of scrap sales under section 80IC of the Act 14. erred in not allowing deduction under section 80IC on scrap sales derived from the manufacturing activity of the eligible Haridwar unit; 15. without prejudice to the above, should have reduced the scrap sales only of the Haridwar unit amounting to Rs. 1,19,22,639 on which deduction under section 80IC of the Act has been claimed, as against the scrap sales amounting to Rs. 12,40,48,000 which pertains to the entire entity; Deduction in respect of miscellaneous income under section 80IC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act of Rs. 85,71,578/- in respect of Daman Unit. In an assessment finalized under section 143(3) r.w.s. 144C(13) of the Act dated 4/12/2013, the Assessing Officer has determined the total income under normal provisions of the Act at Rs. 70,36,92,880/-, which inter-alia, included scaling down of deductions under section 80IC and 80IB of the Act to Rs. 54,45,48,186/- and also an adjustment to determine arm's length price of the international transactions at Rs. 17,23,45,725/-. The aforesaid assessment has been finalized in terms of the directions issued by the DRP vide order dated 20/11/2013 in response to the objections raised by the assessee against the draft assessment order passed by the Assessing Officer dated 4/2/2013. Before us, the assessee company is in appeal on the afore-stated Grounds of appeal, which we shall deal in seriatim. 4. In so far as Ground of appeal No.1 is concerned, the same is general in nature, which does not require any specific adjudication. Grounds of appeal Nos.2 to 9 involve issues relating to the determination of arm's length price of the international transaction of payment of royalty to associated enterprise. On these aspects, the Ld. Repre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n computed by the Assessing Officer, the Ld. Representative for the assessee referred to para-14 of the assessment order, where the Assessing Officer has tabulated the deduction allowable to the assessee under section 80IC of the Act and in this calculation he has started from the figure of Rs. 94,42,44,756/-, which is the profit of the business(net of profits/losses of all units). Further, it is seen that he has further reduced certain amounts from the aforesaid figure, on account of scrap sales, miscellaneous income, profit from trading activity, central excise incentives and income attributable to 80IB unit, etc. The Ld. Representative for the assessee pointed out that if starting point was the net business profit of the assessee the Assessing Officer ought to have adjusted the other profits/losses of all other units namely Haridwar, Daman(Unit 1 & 2), Daman(Unit -3), Daman(4), Kutch, Dharampur, Kundi, etc. to arrive at the profit of the Haridwar unit. In fact what the Ld. Representative for the assessee has sought to point out is a mathematical discrepancy in calculation of deduction allowable to the assessee under section 80 IC of the Act. Apart therefrom, it is sought to be p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tmental Representative referred to the discussion made by the DRP in para 3.4.1 and 3.4.2 to point out that there were certain inconsistency between the figure reported by the Auditor in Form No.10CCB showing the calculation of deduction under section 80IC of the Act and the figures of profit revealed by the audited final statements, and referred to the following discussion :- "This also means that the figure reported by the auditor in its from 10CCB at Rs. 158.02 is also not correct as it does not match with the audited financials attached to form 10CCB showing profits at Rs. 186,15,73,678/-, wherein the above mentioned expenses have been allocated on a different basis. In other words, there is a clear mismatch in the figure reported in the form 10CCB by the auditor and in the audited financials. It also means that the correct quantification of the amount eligible for deduction under section 80IC is not available or authenticated and the assessee is trying to claim the amount without proper verification. This also means that the amount worked out in the sheet submitted before us of 'unit wise computation of income for eligibility of 80 IC and 80IB', cannot be relied upon. Thus, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome eligible for 80IC benefits is carried out as per the methodology accepted in the past. On this aspect, in our view, there is an apparent mistake made by the Assessing Officer in computing the amount of deduction allowable to the assessee under section 80IC of the Act. Pertinently, the basis of allocation of administrative, sales and interest expenses, etc. adopted by the assessee to arrive at the eligible deduction under section 80IC is similar to that adopted for computing the deduction under section 80IB of the Act. Whereas, the Assessing Officer accepts the working of deduction under section 80IB of the Act as determined by the assessee, while on the other hand, determination of deduction under section 80IC of the Act has been tinkered with. This reflects inherent inconsistency on the part of the Assessing Officer on the issue of allocation of transactions of Head office and on account of administrative, sales and interest expenditure, etc. to the other manufacturing units, including those eligible for deduction under section 80 IB and 80 IC of the Act. For the said reasons, we deem it fit and proper to set-aside the matter back to the file of Assessing Officer, who shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upport of such claim:- (i) CIT vs. Sandhu Forging Limited, 336 ITR 0444 (Del) (ii) CIT & Another vs. Modi Xerox Ltd.,265 ITR 200 (All) (iii)Asia Investments Ltd. vs. DCIT, 90 ITD 0630 (Mum.Trib) (iv)CIT vs. Micro Turners, 205 Taxman 18. 9.1 On this aspect also, we deem it fit and proper to restore the matter back to the file of the Assessing Officer with a direction that while re-computing the eligible deduction u/s. 80IC of the Act, sale of scrap generated during the manufacturing and production process be included for the benefit of section 80IC of the Act. 10. In Grounds of appeal No.16 & 17, the assessee has agitated the action of the Assessing Officer in excluding a sum of Rs. 4,69,66,000/- as miscellaneous income. On this aspect, the Ld. Representative for the assessee pointed out that the miscellaneous income relatable to the Haridwar Unit was Rs. 17,01,687/- only and the Assessing Officer has erred in considering the miscellaneous income at Rs. 4,69,66,000/-, which pertains to the assessee as a whole. The Ld. Representative for the assessee submitted that the Assessing Officer may be directed to reduce the miscellaneous income relatable to the Haridwar Unit for th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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