TMI Blog2018 (11) TMI 264X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 80IA(10) r.w.s. 10A(7) of the Act. - ITA No. 359/PUN/2013 - - - Dated:- 2-11-2018 - Shri D. Karunakara Rao, AM And Shri Vikas Awasthy, JM For the Assessee : Shri Kamal Sawhney Ms. Rhea Amar For the Revenue : Shri Rajeev Kumar, CIT-DR ORDER PER D. KARUNAKARA RAO, AM : This appeal is filed by the assessee against the order of DRP/TPO/AO involving A.Y. 2008-09. 2. Grounds raised by the assessee read as under : On the facts and in the circumstances of the case and in law, the Hon'ble DRP and consequentially the learned AO has: General 1. erred in assessing the total income at ₹ 90,95,94,040 as against income of ₹ 65,78,09,980 (as per the revised computation of income filed by the Appellant with the learned AO during the course of assessment proceedings); A. Denial of tax holiday claim under section 10A of the Act amounting to ₹ 5,22,56,867 with respect to Software Technology Parks ('STP') operations; ₹ 2,37,68,534 with respect to Electronic Hardware Technology Parks ( EHTP') operations of the Appellant and tax holiday claim under section 10AA of the Act amounting to ₹ 1,87,497 with res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39;arranged' so as to have supernormal profits and mere inferences without substantiating the allegations would not suffice; 9. should have appreciated that the Appellant has offered to tax similar level of profits in earlier and later years in case of STP operations and hence the Appellant could not be considered to have earned 'more than ordinary profits' during the year under appeal; M/s. Honeywell Automation India Ltd., B. Denial of additional tax holiday claim of ₹ 6,04,42,900 under section 10AA of the Act arising pursuant to the retrospective amendment to section 10AA(7) of the Act by Finance Act 2010 10. erred by denying additional tax holiday benefit (amounting to ₹ 6,04,42,990) claimed by the appellant during the course of the assessment proceedings by way of filing a revised tax computation with the learned AO computed considering impact of the retrospective amendment to section 10AA(7) of the Act by Finance Act 2010; C. Denial of additional tax holiday benefit under section 10A and 10AA of the Act claimed during the assessment proceedings by way of filing revised computation of income, computed considering inclusion of export ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to time to substantiate the receipt of services, benefits derived there from. 16. On the facts and in law, the learned AO/TPO erred in questioning the commercial expediency for availing such services and not appreciating the jurisprudence that the learned AO/TPO cannot go beyond his powers in questioning commercial decision of the assessee. 17. On the facts and in law, the learned AO/TPO and the Hon'ble DRP erred in disregarding the transfer pricing documentation maintained by the Appellate using the Transaction Net Margin Method ('TNMM') and erroneously and inappropriately applied no method to determine the arm's length price as NIL, without providing any comparable transaction and without any cogent reasoning, thereby disregarding Rule 10B and Rule 10C. 18. On the facts and in the circumstances of the case and in law, the learned AO erred in initiating penalty proceeding under section 27(1)(c) of the Act. 3. At the outset, Ld. Counsel for the assessee brought our attention to the grounds and submitted that they involve TP issues on one side, i.e. (Ground Nos. 14 to 17) and the corporate issues on the other, i.e. (Ground Nos. 2 to 13). TP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /2014 In the light of fact that assessee has entered into APA, the Coordinate Bench of the Tribunal in the assessment year 2009-10 has directed Assessing Officer to decide the issue in accordance with the terms and conditions of APA as nature of transactions are similar. .. If they are of similar nature, the same can be decided afresh in line with the terms and conditions of APA. The appeals of the assessee are thus, allowed for statistical purpose with aforesaid directions. 2. In the case of Abicor Binzel Production (India) Pvt. Ltd. Vs. Dy.CIT (ITA No.139/PN/2014) The assessee has made a request since it had entered into Advance Pricing Agreement (APA) with CBDT covering nine years from AY 2010-11 to AY 2013-14 under rollback provisions and from AY 2014-15 to 2018-19 being the balance APA period, similar proposition should be applied to the year under consideration also as the international transactions entered into by the Assessee with its AEs in the instant assessment year are identical to the international transactions which were part of the APA proceedings. The grounds of appeal raised by the assessee are thus, allowed. 3. In the case of Ran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntion to Grounds A2 to A9 and submitted that all these grounds deal with the claim of deduction of the assessee u/s.10A, 10AA of the Act for the A.Yrs. 2006-07 and 2007-08. Ground 1 is general in nature and the same can be dismissed as such. Mentioning that this issue is actually covered issue, in the assessee s own case for the earlier assessment years by the order of Tribunal vide ITA No.18/PUN/2011, dated 25-02-2015, Ld. Counsel submitted that, like in other years, AO decided to reduce the profits by invoking the provisions of section 10A(7) r.w.s. 80IA(10) of the Act. It is also submitted that, on similar facts, the Tribunal granted relief to the assessee in the said earlier year. Ld. Counsel for the assessee furnished written submissions in this regard. He relied on the another order of the Tribunal in the case of Eaton Industries Ltd in ITA No.2544/PUN/2012, dated 30-10-2017 and jurisdictional High Court judgment in the case of Smith India Pvt. Ltd. in ITA No.1382/2013, dated 24-06-2015 where the Hon ble High Court held that the extraordinary profits cannot automatically lead to the conclusion that there is arrangement between the parties. On hearing both the sides on this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 'arrangement' between the Appellant and the other persons and such arrangement produced more than 'ordinary profits' in the eligible business. 7. In the present case, the AO as also the Ld. DRP have followed the orders of their superiors/predecessors and reduced the extent of the deduction to the aggregate margins earned by the comparables. This is evident from a perusal of the final assessment order wherein the AO has held as follows: After going through the said written submission, I found myself unable to deviate from the decision taken by my predecessor as the said decision was correctly taken by him. 8. The issue in regards the above is squarely covered by the judgment of this Hon'ble Tribunal in the Appellant's own case for AY 2006-07 AY 2007-08. In ITA 18/Pune/2011 order dated 25.02.2015 this Hon'ble Tribunal has held that: i. Para 23 .............The existence of substantial or more than ordinary profits by itself does not sufficiently empower the AO to disregard them and determine the profits which he may consider to be reasonably deemed to have been derived therefrom in other words the import of the expression so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n intention to abuse the tax concessions, as per the intendment of the legislature. Therefore, existence of a mere agreement to do business is not enough to fulfil the requirement of section 10A(7) r.w.s. 80-IA(10) of the Act in the context of the words the course of business between them is so arranged. 11. In addition to the above, reliance is also placed on a ruling of the Coordinate Bench of this Hon ble Tribunal in the case of Eaton Industries Pvt. Ltd. Vs. ACIT (ITA 2544/Pun/2012 Order dated 30-10-2017) wherein it was held that : Once the arm s length price of International Transactions of provision of Engineering Design Services has been accepted...by the TPO in the transfer pricing order, then the Assessing Officer cannot re-examine the said transaction to allege that the assessee had earned more than ordinary profits as compared to those of comparables . Absent any evidence brought on record by AO to show that the man-hour rates charged by assessee were excessive and also to establish that there was an arrangement between the assessee and its AEs to charge such excessive rates, which resulted in more than ordinary profits in the hands of assessee, ITAT holds t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure on the issue in the assessee own case as well as jurisdictional High Court judgment in the case of CIT Vs. Schmetz India Pvt. Ltd., we are of the opinion that the AO has not made out a case that there exists an arrangement and the said arrangement is malafide and it falls in the mischief of the provisions of section 80IA(10) r.w.s. 10A(7) of the Act. Accordingly, the grounds Nos. 2 to 9 raised by the assessee are allowed. 8. In view of the relief granted to the assessee in this regard, we find adjudication of the ground No.12, being raised without prejudice, becomes an academic exercise. Therefore, the said ground is dismissed as academic. Ground No.1 is general in nature and the same is dismissed. That leaves Ground No.B10 and C11 remains for adjudication. 9. Regarding the issue raised in grounds B10 and C11, the background facts include that there was an amendment to the provisions of section 10A(7) of the Act. By this amendment, the total turnover of the business of the assessee stands replaced by the total turnover of the business carried on by the undertaking . As a result, the total turnover of undertaking is a relevant and has significant effect on the allow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he has just not accepted the revised computation. For the above, the Appellant wishes to rely on the Circular No 14 (XL-35) of 11 April 1955 which is issued by the CBDT which explains the role of the assessing officers while conducting assessments. Officers of the Department must not take advantage of ignorance of an assessee as to his rights. It is one of their duties to assist a taxpayer in every reasonable way, particularly in the matter of claiming and securing reliefs and in this regard the Officers should take the initiative in guiding a taxpayer where proceedings or other particulars before them indicate that some refund or relief is due to him. This attitude would, in the long run, benefit the Department for it would inspire confidence in him that he may be sure of getting a square deal from the Department. Although, therefore, the responsibility for claiming refunds and reliefs rests with assessees on whom it is imposed by law, officers should: a) draw their attention to any refunds or reliefs to which they appear to be clearly entitled but which they have omitted to claim for some reason or other; b) freely advise them when approached by them as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. Western India Shipyard Ltd. [2015) 379 ITR 289 (Delhi HC) (page 102-103 of the legal paper book - CT)- while an Assessing Officer may not be entitled to grant a deduction or an exemption on the basis of a revised computation of income, there was no such fetter on the appellate authorities. 4. Chicago Pneumatic India Ltd. v DCIT 15 SOT 252 [2007] (page 76 - 91 of the legal paper book - CT)(Mumbai ITAT) - In this case, the taxpayer who had made claims in the original return revised the claim for deduction under sections 80HH and 80-I of the Act during the course of assessment proceedings without filing a revised return. The ITAT considered Circular no. 14(XL- 35) of 1955, dated 11-4-1955 and decision of the SC in the case of Goetze (Supra). It noted that a circular has been issued by the CBDT to grant reliefs/refunds while completing the assessment proceedings, even though such circular may be at variance with the law, but the same would be binding on the subordinate income-tax authorities. It also held that as the Circular issued in 1955 has not been withdrawn, the same has binding force on the subordinate authorities even as on date. 5. Ramco International [IT Appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he purposes of claiming deduction under Section 10A and 10AA of the Act The issues under this ground cover issues under Ground B 10, once that ground is allowed, this claim is consequential. However, this amount is an additional claim, (re-computation of the original claim) and will need to be addressed by the ITAT. As per the revised computation of income, the revised claim under Section 10A and 10AA was recomputed. While filing the original return / computation, the export turnover earned by the specific unit was reduced by the unrealised export turnover. Therefore while filing the revised claim in the revised computation, the Appellant has also relooked at the unrealised export turnover for FY 2007-08. 10.1 Considering the above, we are of the view that this issue raised vide B10 and C11 should also be remanded to the file of AO for fresh adjudication. AO shall pass a speaking order giving conclusions on the merits of each of the issues raised in the said revised computation of income. AO shall grant reasonable opportunity of being heard to the assessee in accordance with the set principles of natural justice. Accordingly, the Ground Nos. B10 and C11 raised by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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