TMI Blog2020 (4) TMI 526X X X X Extracts X X X X X X X X Extracts X X X X ..... ion under Section 10B of the Act without setting off of the loss, depreciation / Business pertaining to non-10B Units - HELD THAT:- We found that the CIT (Appeals) has relied on the jurisdictional High Court decision in YOKOGAWA INDIA LTD. [ 2011 (8) TMI 845 - KARNATAKA HIGH COURT] which was confirmed by the Hon'ble Supreme Court [ 2016 (12) TMI 881 - SUPREME COURT]. The learned Departmental Representative could not controvert the observations of the CIT (Appeals) with cogent evidence. Accordingly, we are not inclined to interfere with the order of CIT (A) on this disputed issue No TP adjustment is called for in this case. - C.O. No.82/Bang/2015, IT(TP)A No. 77/Bang/2015, 439/Bang/2016, 582/Bang/2016, 1502/Bang/2014, 1557/Bang/2014 (Asst. Year 2009-12) - - - Dated:- 5-2-2020 - SHRI A.K. GARODIA, ACCOUNTANT MEMBER AND SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER Assessee By: Shri Sathyanarayana Murthi, C.A. Revenue By: Ms. Neera Malhotra, CIT (D.R) ORDER These are the Cross appeals filed by the Assessee and Revenue against the order of CIT (Appeals) and Order/sec143 (3) r w s 144C (13) of the Act. And C.O. in revenue appeal by the assessee. Since th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot considering the correct amount of allowable expenses and inadmissible expenses while computing the total Income as per the asessment order. The comparative table is given below As the assessing officer: PARTICULARS EOU EOU NON EOU TOTAL Net Unit wise profit 7,45,07,014 7,04,07,979 (6,86,68,832) 7,62,46,161 Add: Inadmissible Expenses 2,66,71,680 2,04,55,355 4,49,40,845 9,20,67,880 Less: Allowable expenses 19,88,53,490 15,25,07,038 33,50,61,250 68,64,21,778 11,09,94,320 11,09,94,320 Total (9,76,74,796) (6,16,43,704) (46,97,83,557) (62,91,02,057) Add: interest disallowance 10,18,23,738 10,18,23,738 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .01.2013 and not suggested any Transfer Pricing Adjustment under Section 92CA of the Act. The Assessing Officer on perusal of the Balance Sheet as on 31.03.2009 found that the assessee has made advances to the sister concerns i. Gokaldas Images Infrastructure Pvt. Ltd. of ₹ 20,19,58,023 and ii. Hinduja Realtors Pvt. Ltd. of ₹ 85,87,05,910. The assessee has submitted the details of interest expenditure and explained the reasons for the advances to the sister concerns on commercial expediency and surplus funds available to the assessee. The Assessing Officer dealt on the issues in respect of the advances and on the claim of deduction under Section 10B of the Act. Whereas Ao is of the opinion that the assessee has diverted funds to the sister concerns without charging any interest over a period. Therefore the Assessing Officer worked out the interest disallowance @ 12% p.a on the 80% of the amount advanced ₹ 84,85,31,146 being₹ 10,18,23,738 and disallowance under Section 10B of the Act on the adjustment of profits and Assessed the total income of ₹ 15,77,21,683 and passed the order under Section 143(3) r.w.s. 92C of the Act dt.11.03.2013. Aggrieved by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dealt by the Assessing Officer at page 5 Para 8 of the assessment order and relied on the CIT(Appeals) order. 6. We heard the rival contentions and perused the material on record. On the first disputed issue of disallowance of interest by the AO, the learned Authorized Representative submitted that the CIT(Appeals) has erred in directing the Assessing Officer to rework the interest disallowance overlooking the facts that the advances made by the assessee to sister concerns are out of surplus funds available with the assessee, and no borrowed funds were utilized. Further there is also reimbursement of expenses on commercial expediency of business transactions. The Ld. AR referred to the order of CIT(Appeals) at paras 4.5 and 4.6 where the CIT(Appeals) has considered the submissions, findings of the AO and has directed the Assessing Officer to recalculate interest on advances considering the incremental increase in the current year. we found the co-ordinate bench of this Tribunal in assessee own case in ITA No.667/Bang/2013 and C.O. No.97/Bang/2013 dt.26.09.2014 for the Assessment Year 2008-09 (Gokaldas Images Pvt. Ltd. Vs. Addl. CIT) has dealt on the disputed issue at page 12 par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e stand taken by the assessee is contradictory. In any event, there is no material on record brought by the assessee to show that these were the real transactions. The CIT (A) in his order says that complete details submitted by the assessee with regard to the sum of ₹ 29.17 crores were forwarded to the Assessing Officer for comments and the Assessing Officer has not given any adverse comment in the remand report. The CIT (A)'s order is also silent about the nature of the contract between the assessee and HRPL and as to how the damages of ₹ 29.17 crores arose. The terms of the agreement carrying out improvements to the building for which a sum of ₹ 24.6 crores was advanced by the assessee to HRPL have also not been brought on record. In these circumstances, we are of the view that the issue requires a fresh consideration by the Assessing Officer and therefore the Order of the CIT (A) is set aside. The assessee is directed to file the required documents to substantiate its case before the Assessing Officer. The Assessing Officer is directed to consider the same and decide the issue in accordance with law after affording the assessee an opportunity of being hear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10B without setting off of losses (depreciation/business) pertaining to non 10B units against the profit of 10B units by placing reliance on the decision of Hon'ble High Court of Karnataka in the case of M/s Yokogawa India Ltd., but without appreciating the fact that deduction u/s 10B has to be allowed from the total income of the assessee, and as per Section 2(45) Of the IT Act, the total income should be computed from various sources after set off of losses from one source against income from Other sources under the same head of income in terms of Section 70(1). 5. For these and other grounds that may be urged at the time of hearing, it is prayed that the order of the CIT(A) in so far as it relates to the above grounds may be reversed and that of the Assessing Officer may be restored. 6. The appellant craves leave to add, alter, amend and / or delete any of the grounds mentioned above. 10. At the time of hearing, the learned Departmental Representative submitted that the Ground No.1 is general in nature and Ground No.2 is in respect of the observations of the CIT (Appeals) on calculating the interest on Advances. Whereas the Ld.AR submitted that the CIT (Appeals) ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the decision of Hon'ble High Court of Karnataka in the case of M/s Yokogawa India Ltd., but without appreciating the fact that deduction u/s 10B has to be allowed from the total income of the assessee, and as per Section 2(45) of the IT Act, the total income should be computed from various sources after set off of losses from one source against income from other sources under the same head of income in terms of Section 70(1). 3. On the facts and in the circumstances of the case the Dispute Resolution Panel erred in directing the TPO/AO to adopt the Cost Plus Method for determining the ALP and the TP document of the assessee be accepted as in earlier years without appreciating the fact that the TPO has given detailed reasoning for rejecting the Cost Plus Method adopted by the assessee for determining ALP. 4. For these and Other grounds that may be urged at the time of hearing, it is prayed that the directions of the Dispute Resolution Panel in so far as it relates to the above grounds may be reversed. 5. The appellant craves leave to add, alter, amend and / or delete any of the grounds mentioned above. 16. At the time of hearing, the learned Departmental Represen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al of revenue. 19. The assessee has filed C.O. No.82/Bang/2015 in support of the DRP. Since the Revenue appeal is dismissed, C.O. is infructuous and dismissed . In the result, the Revenue appeal and C.O. of the assessee are dismissed. 20. For the Asst. Year 2011-12 in ITA 439/Bang/2016, the assessee has filed grounds of appeal as under : On the facts and circumstances of the case, the learned Assessing Officer erred in disallowing notional interest of ₹ 14,21,84,775 on the receivable amount outstanding from Gokaldas Images Infrastructure Pvt. Ltd. on the ground that the same is capital in nature. 21. The learned Authorized Representative has made submissions in respect of disallowance of interest and learned Departmental Representative has supported the orders of the DRP. We found that this issue on usage of funds is dealt in assessee own case for the Asst. Year 2009-10 in ITA No.1502/Bang/2014 where the matter was restored to the file of Assessing Officer for fresh consideration. Accordingly, we restore the disputed issue to the file of the Assessing Officer on the similar directions for fresh consideration and decide as per provisions of law and a provide a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above, we accept the objection of the assessee and hold that no TP adjustment is called for in this case. The facts and circumstances involved in the issue for the current year being identical, we find no reason to deviate from the stand taken by the DRP last year and accordingly, accept the objection of the assessee and direct the AO not to make any TP adjustment on this account. 24. We have already dealt on this issue for the Asst. Year 2010-11 in Revenue s appeal ITA No.77/Bang/2015 and the same decision shall apply. The learned Departmental Representative could not controvert the observations of the DRP with cogent evidence. Accordingly, we are not inclined to interfere with the order of DRP on this disputed issue and confirm the same and dismiss the grounds of appeal of the Revenue. 25. In the result, the assessee's appeal is allowed for statistical purposes and revenue s appeal is dismissed. 26. Net Result, the IT(TP)A Nos.1502/Bang/2014 Assesse appeal the IT(TP)A1557/Bang/2014 Revenue appeal for Asstyear2009-2010 are partly allowed for statistical purposes. IT(TP)A No.77/Bang/2015 revenue appeal and C.O. No.82/Bang/2015 Assessee Co for Asst Year2010-2011 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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