TMI Blog2022 (8) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... off against the income computed under the head Profits Gains of Business or Profession ? - HELD THAT:- As decided in M/S YOKOGAWA INDIA LTD. [ 2016 (12) TMI 881 - SUPREME COURT] from reading provisions of section 10A it is more than clear that the deductions contemplated therein is qua the eligible undertaking of an assessee standing on its own and without reference to the other eligible or non-eligible units or undertakings of the assessee. Thus, it was held that though section 10A, as amended, is a provision for deduction, the stage of deduction would be while computing the gross total income of the eligible undertaking under Chapter IV and not at the stage of computation of the total income under Chapter VI. - Decided in favour of assessee. Correct head of income - treatment of lease rent received - whether chargeable to tax as income from house property as per AO or under the head business profit as per assessee - HELD THAT:- As decided in the case of CIT Vs Shambu Investment Pvt. Ltd. [ 2001 (3) TMI 77 - CALCUTTA HIGH COURT] has held as under Where prime object of the assessee under the agreement was to let out the portion of the said property to various occupants b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Asst. Commissioner of Income-tax, 10(2), Mumbai (the learned Assessing Officer) for A.Y. 2005-06, against the order of the Commissioner of Income-tax (Appeals)-15, Mumbai [the learned CIT (A)] dated 8th June, 2010. 02. ITA No. 5975/Mum/2010 is filed by the assessee and ITA No. 6219/Mum/2010 is filed by the learned Assessing Officer. Assessee has once again filed Cross Objection no. 157/Mum/2011 in ITA No. 157 /Mum/2011 for the same assessment year. 03. Assessee in ITA No. 5975/Mum/2010 has raised following grounds of appeal:- This Appeal is against the Order of the Commissioner of Income Tax (Appeals) - 15 Mumbai, and relates to the Assessment Year 2005-2006, 1) The learned Commissioner of Income Tax (Appeals) erred in holding that in computing the deduction under Section 10A of the Act the loss of one eligible unit was required to be set off against the profit of the other eligible unit, and that the said loss could not be set off against the income computed under the head Profits Gains of Business or Profession . 2) The learned Commissioner of Income Tax (Appeals) erred in confirming the action of the Assessing Officer in taxing the lease rent received fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the action of the Assessing Officer in allocating notional expenditure aggregating to Rs.3,82,733/- towards the earning of exempt dividend income and thereafter reducing only the net dividend income, while computing book profits u/s. 115JB of the Act. 10) The learned Commissioner of Income Tax (Appeals) erred in confirming the action of the Assessing Officer in relying on the provisions of Section 14A of the Act and Rule 8D of the Rules while computing the amount liable for being added back to the book profits to be computed under section 115JB of the Act. 04. The learned assessing officer has raised following grounds of appeal:- 1. On the facts and circumstances of the case and are as well as in Law, the learned CIT (A) has erred in holding that the operating margin earned by the assessee company for its international transaction is higher than the arithmetic mean of margins of comparable companies , the assessee company is considered to have earned an Arm s-length operating margin in respect of the transactions with its associated enterprises 2. on the facts and circumstances of the case as well as in Law, the learned CIT (A) has erred in deciding that as th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... while computing profit u/s 115 JB of the Act. d. The adjustment on account of Arm s Length Price of international transaction of ₹5,84,12,442/- was also made. Assessee is providing Solution in the domain of engineering and technology services. It provides software technology and development services in the area of CAD CAM CAE and PDM. The assessee entered into three types of international transactions. Assessee paid ₹5,01,50,314/- for availing of marketing support services and rendered on site services of ₹3,63,91,932/-and also rendered support services of ₹6,83,41,998/-. These transactions were benchmarked by the assessee by adopting the Transactional Net Margin Method (TNMM) as the most appropriate method taking net margin as profit level indicator. Assessee selected 28 comparables, whose margin was 9.76% where as assessee‟s margin was 20.27% and therefore, according to assessee the international transactions are at Arm s Length Price. Reference was made to The Additional Commissioner Of Income Tax, Transfer Pricing 1 (3) Mumbai (the learned TPO). The learned TPO found that assessee has taken a multiple year data and for other reasons he rejecte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned CIT A that operating margin earned by the assessee company is higher than the arithmetic mean of the margins of the comparable company and therefore the international transactions are at Arm s-length. 010. The learned DR supported the order of the learned assessing officer/transfer pricing officer whereas the learned authorised representative submitted that learned AO does not have any grievance with respect to the comparability analysis but has merely challenged the finding of the learned CIT A. 011. We have carefully considered the rival contentions. In fact the learned CIT A has categorically, after including/excluded certain comparables computed the arithmetic mean of the comparable companies at 18.30%, compared with the margin of the assessee as computed by the TPO at 20.34% and as the margin of the assessee is higher than the margin of the comparables, he deleted the transfer pricing adjustment. Here, the learned assessing officer is not aggrieved with any of the comparables included or excluded by the learned CIT A. Therefore, we do not find any merit in any of the 2 grounds raised by the learned assessing officer. Accordingly, those are dismissed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts of the case in hand because in the case of the Hon‟ble Supreme Court, the commercial asset of the business were temporarily put out of use and let out to another person and on this temporary let out, the Hon‟ble Supreme Court held that the yield of income by way of commercial asset is the profit of the business. However, in the case in hand, the let out was not temporary, more so the leased out premises were never got vacated but were sold subsequently therefore the decision of the Hon‟ble Supreme Court do not support the case of the assessee. The assessee has also not submitted the copy of lease agreement neither before the Revenue authorities nor before us. 9.1. The Ld. Counsel for the assessee reiterated its alternative claim that the income should be taxed under the head Other Sources‟. It is the say of the Ld. Counsel that the Ld. CIT(A) has himself contradicted his own evaluation of facts. On the one hand, the Ld. CIT(A) has observed that the provisions of Sec. 56(2)(iii) are applicable where the machinery, plant or furniture are let out alongwith building and letting out of building is inseparable from the letting out of said machinery, plant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er has disallowed ₹2,23,000/- under Section 14A of the Act invoking the provisions of rule 8D which is not in existence for A.Y. 2005-06. Therefore, disallowance cannot be upheld, hence deleted. However, though the disallowance as per Rule 8D of the Rules is deleted but section 14A cannot be ignored. In earlier years for A.Y. 2002-03, 2004-05 and 2006-07 in assessee‟s own case the disallowance of ₹1 lacs upheld by the co-ordinate bench. Therefore, respectfully following the same, for this year also we uphold the disallowance of ₹1 lacs. 026. Ground nos. 9 to 10 are with respect to disallowance under Section 14A of the Act whether to be added while computing the book profit under Section 115JB of the Act as per Rule 8D of the Rules or not. The learned Assessing Officer while computing the disallowance under Section 14A of the Act as per Rule 8D of the Rules in the normal computation of income has also, while working out the book profit, added identical amount to the book profit. Therefore, as per ground no. 9 and 10, assessee has agitated the same. On careful consideration, we find that there is no relation of disallowance under Section 14A of the Act whil ..... X X X X Extracts X X X X X X X X Extracts X X X X
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