TMI Blog2017 (6) TMI 981X X X X Extracts X X X X X X X X Extracts X X X X ..... t year, the issue of nature of employment whether it is supervisory or not has been decided in favour of the assessee. However, this issue is pending before the Hon'ble High Court for the Assessment Years 2001-02 and 2002-03. As regards the issue of satisfying the condition of not less than 300 days of employment during the previous year, we find that this issue does not germane from the order of this Tribunal in the first round of appeal as the limited aspect remitted to the Assessing Officer for verification was whether any person employed in the supervisory role was included in the list of workmen as claimed by the assessee. Therefore even if the Assessing Officer has made a reference about the employment of less than 300 days, this issue is not emanating from the proceedings as remanded by the Tribunal. Since this issue is still pending before the Hon'ble High Court therefore to keep this issue open as per the outcome of the proceedings pending before the Hon'ble High Court, we direct the Assessing Officer to take necessary step only after the decision of Hon'ble High Court. - I.T.(T.P) A. No.1478/Bang/2010 - - - Dated:- 19-5-2017 - SHRI VIJAY PAL RAO, JUDICIAL MEMBER, AN ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 144C of the Act, following the directions of the Dispute Resolution Panel ( DRP ), when the order of the DRP was not in accordance with section 144C(5) of the Act. The DRP in the case of the Appellant was comprised of a Director of Income-tax ( DIT ) and two Commissioners of Income-tax ( CIT ). As per section 144C(15) of the Act, DRP means a collegium of three CITs constituted by the Central Board of Direct Taxes ( CBDT ) for this purpose. Rule 3(2) of the (Dispute Resolution Panel) Rules, 2009 ( DRP Rules ) also authorises the CBDT to name three CITs to the panel. The term 'CIT is defined under section 2(16) of the Act, while 'DIT' is defined as a separate authority as per section 2(21) of the Act. Hence, the order dated September 28, 2010 passed by the DRP cannot be considered to be a direction issued under section 144C(5) of the Act. 3.2 The Hon'ble DRP and the ld. AO have erred in law and on facts in upholding the adjustment to the arm's length price made by the learned TPO to the income of the assessee, based on the order, purportedly under section 92CA of the Act, passed by the learned Joint Director of Income-tax (Transfer Pricing - II). The Hon' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the comparable companies. The Hon'ble DRP has erred in rejecting the appellant's contention that the comparables need not be filtered based on whether they earn export revenues or not. 3.12 The ld. AO/Hon'ble DRP have erred in law and on facts in upholding the rejection of comparables selected by the Appellant in the TP study on the grounds that they were incurring consistent loss, when the Appellant had applied the filter of rejecting companies with consistent losses in selecting the comparable companies. 3.13 The ld. AO/Hon'ble DRP have erred in law and on facts in upholding the TPO's action of applying the onsite revenues filter in selecting the comparable companies. 3.14 The ld. AO/Hon'ble DRP have erred in law and on facts in upholding the TPO's action of rejecting certain comparables based on non-contemporaneous data. 3.15 The ld. AO/Hon'ble DRP have erred in law and on facts in upholding the TPO's action of applying the 25% employee cost filter in selecting the comparable companies. 3.16 The ld. AO/Hon'ble DRP have erred in law and on facts in upholding the TPO's action of applying the 'diminishing revenue&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts in upholding the arm's length margin of 18.95 per cent (subject to the revision by the DRP to the margin of Megasoft Limited) as proposed by the learned TPO to the software development segment of the Appellant 3.26 The ld. AO and the Hon'ble DRP have erred in law and on facts, by upholding the adjustment of ₹ 493,913,018 (ie after considering the revision of the margin of Megasoft Limited) to the income of the Appellant in respect of the international transactions in connection with software development segment undertaken by the Appellant with its associated enterprise. 3. Ground No.1 is general in nature and no specific adjudication is called for. 4. At the time of hearing, the learned Authorised Representative of the assessee has submitted that the Transfer Pricing dispute has been resolved between the parties under MAP and therefore the assessee does not press Ground No.3 in respect of TP issue. The learned Departmental Representative has no objection if Ground No.3 is dismissed as not pressed in view of the Resolution of TP issue under MAP. Accordingly, the Ground No.3 of the assessee's appeal is dismissed being not pressed in pursuant to the disp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unities In order to encourage the employers to further generate more employment opportunities, it is proposed to insert a new section, i.e., 80JJAA to provide an incentive in the form of a special deduction against business profits of a company. This deduction would be over and above the expenditure on wages or salary, which is otherwise allowable as business expenditure to the company. The quantum of deduction is proposed to be thirty per cent, of the aggregate wages or salary paid to the new workers provided the following conditions are satisfied : In the case of a new undertakings, the number of workers should be at least 100. In the case of an existing undertaking, having a minimum of at least hundred employees, the total number of new employees should be at least ten per cent, more than the existing number of employees. The deduction in such cases would be allowed at the 30% of the additional wages to the new workmen. For the purposes of claiming the benefit, the term worker shall have the same meaning as workman as defined in the Industrial Disputes Act. Such and employee should be a regular worker and should have been employed for a period of at least 300 day ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar workman , does not include- (a) a casual workman; or (b) a workman employed through contract labour; or (c) any other workman employed for a period of less than three hundred days during the previous year; (i) workman shall have the meaning assigned to it in clause (s) of section 2 of the Industrial Disputes Act, 1947 (14 of 1947); Thus it is clear that in case of an industrial undertaking the additional wages paid to the new regular workmen in excess of 100 workmen employed during the previous year and further the number of regular workmen employed during the year should not be less than 10% of the existing number of workmen employed as on last date of the preceding year. The dispute before us is not regarding number of workmen but is pertaining to the regular workmen as defined under clause (ii) of Explanation to Section 80JJAA of the Act. This definition of regular workmen exclude certain categories of workmen as enumerated in the clause (ii). As per sub-clause (e) any workmen employed for a period of less than 300 days during the previous year will not be included in the definition of regular workmen for the purpose of Section 80JJAA. We find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 300 days are not relevant. 8. Though the language employed in the provision appears to militate with the intention of the Legislature as expressed in the Memorandum explaining the provision as well as against the very object and scheme of the provision of the providing incentive for generating more employment opportunities in the industry however, this may be an omission in the provision which can be supplied only by an Act of Legislature through proper amendment. Therefore as per the existing provisions of Section 80JJAA, the additional wages paid to regular workmen who have been employed for a period of not less than 300 days during the previous year is eligible for deduction under section as this view has been consistently taken by this Tribunal in various cases relied upon by the ld. DR. In the case of Panacea Biotech Ltd. Vs. ACIT (supra), the Delhi Bench of this Tribunal has held in para 10 to 13 as under : 10. Now we will explain the method of computation of deduction under section 80JJAA of the Act. In case of a new industrial undertaking we have to first find out whether number of workmen [(i.e., category (b) + (c ) + (d)] employed during the previous year is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in a case if the assessee fulfils both the conditions that workmen employed during the year were 100 and percentage increase of regular workmen as compared to last day of preceding year is not less than 10 per cent, the assessee will be eligible for the benefit in excess of 100 workmen employed. In other words the law does not require that in every year the number of regular workmen appointed should be more than 100 and only excess of 100 regular workmen so employed will be eligible for benefit of section 80JJAA of the Act. The ld. CIT(A) as well as Assessing Officer have gone wrong in excluding 100 regular workmen out of 236 workmen employed during previous year relevant to assessment year 2003- 04. The Assessing Officer will bear in mind this position of law while computing additional wages for the purposes of deduction under section 80JJAA of the Act. 13. As regards the disallowance of additional wages in respect of new regular workmen employed in the previous year relevant to the assessment year 2001-02, Sh. Salil Agarwal, the ld. counsel for the assessee has fairly conceded that increase in the number of regular workmen with reference to the existing regular workmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w employees employed in the preceding year for eligibility u/s 80JJAA. Form No.10DA which is required for making claim u/s 80JJAA also does not have any column in respect of employee employed during the preceding year. The argument taken by Ld AR that employees employed in the preceding year who had not completed 300 days in that year should be taken in the current year when he completes 300 days is of no force. In view of the above, we do not see any reason to interfere in the order of ld CIT(A) We find that the co-ordinate bench of this Tribunal in the case of Bosch Ltd. Vs. ACIT (supra) has also taken similar view. 9. Therefore in view of the decisions of this Tribunal on this point and to maintain the rule of consistency, we hold that the assessee has not fulfilled the condition of employing the new regular workmen in excess of 100 workmen and further an increase of 10% of the existing number of workmen employed by the assessee as on last date of preceding year. The Assessing Officer has filed the remand report and the assessee has also accepted this fact that during the previous year relevant to the Assessment Year 2001-02, the number of workmen who were employed from 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the limited aspect of verifying if the workmen employed by the Appellant were employed in supervisory capacity or not. 2.5. The learned CIT(A) has erred in law and on facts in not adjudicating on the issue of whether the Ld AO had erred in law and on facts in concluding that employees employed for a period of less than 300 days could not be considered as regular workmen. The Appellant submits that each of the above grounds is independent and without prejudice to one another. Further, the Appellant craves leave to add, alter, vary, omit, substitute or amend the above grounds of appeal, at any time before or at, the time of hearing, of the appeal. 9. The learned Authorised Representative of the assessee has submitted that in the first round of appeal the Tribunal remitted the matter to the record of the Assessing Officer vide order dt.22.9.2010 for verification of the fact whether the employees claimed to have been employed during the year under consideration are in the supervisory category or not. The learned Authorised Representative has pointed out that in the giving effect order, the Assessing Officer did not examined the issue as directed by the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erused the material on record. The Bangalore Bench of the Tribunal in assessee's own case for the asst. years 2001-02 and 2002-03 had allowed the claim of deduction u/s 80JJAA for the following reasons:- Deduction u/s 80JJAA was claimed by the appellant in r/o employees who had joined as engineers in their respective fields such as Systems Engineer, Test Engineer, Software Design Engineer, IC Design Engineer, Lead Engineer etc. The deduction was claimed in r/o engineers who were not in the category of supervisory control. As per the Notification issued by the Government of Karnataka, the appellant engaged in the development of software was covered by the Industrial Disputes Act, 1947. Finally, the appellant appeared to fulfil all the conditions laid down for purposes of eligibility for deduction u/s 80JJAA. 2.8 In the instant case, the issue was remitted by the CIT(A) to the file of the Assessing Officer to verify whether the entire claim of deduction u/s 80JJAA is to be allowed. The argument of the learned DR is that the assessee has made claim for those employees in the supervisory category and who were drawing a pay in excess of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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