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TMI Blog2022 (9) TMI 511X X X X Extracts X X X X X X X X Extracts X X X X ..... of law have been proposed for our consideration: "(a) Whether on the facts and circumstances of the case and in law, the Income Tax Appellate Tribunal ('ITAT') was justified in holding that no adjustment was merited in the hands of the assessee on account of payment of Management Fees to Associated Enterprise (AE) without appreciating the fact that the assessee had failed to establish rendering of actual services commensurate with the payment made and also tangible beneft derived by the assessee from receipt of such services? (b) Whether on the facts and circumstances of the case and in law, the ITAT was justified in holding that services were rendered by the AE and were also benefiting the assessee ignoring that in the para 20 of the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d? (f) Whether on the facts and circumstances of the case and in law, the ITAT was justified in allowing the losses suffered by newly set up EOU against its other business income?" 3. Briefly stated the material facts are as under: The assessee company is a part of the Sandvik Group being a subsidiary of Sandvik AB Sweden. The company Sandivik AB Sweden is stated to be a holding company of the assessee, besides a few others. The assessee company is engaged in the business of manufacturing of hard material specialized tools which are used in drilling besides tubes, pipes and wires. Return of income was fled by the assessee for the assessment year 2005-06. During the relevant assessment year, the assessee had made a provision for Finished ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal evidence to prove that it had actually received management services from Sandvik AB Sweden. The CIT(A) referred the additional evidence to the A.O., who in turn, referred the same to the TPO., who submitted a remand report dated 01st April, 2013 on the additional evidence so referred, held that the evidence produced by the assessee did not show that any service was received from Sandvik AB Sweden with whom the assessee had executed the agreement for providing management services. 5. The CIT(A) upon consideration of the remand report as also the terms and conditions of the agreement came to a conclusion that the view expressed by the TPO was unsustainable, inasmuch as Sandvik AB Sweden was the "providing party" and it was the group com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Swedish Legislation, meaning that the operations are conducted on behalf of Sandvik AB & any profits or losses are included in the accounts of Sandvik & other legal units providing management services. (iii) (Footnote 1) "Such Companies working as Commissionaires for Sandvik AB which are also providing services in accordance with this service agreement & which therefore constitutes parts of the providing party in the context of this service agreement, are primarily AB Sandvik Coromant, AB Sandvik Hard Materials, AB Sandvik Process Systems, AB Sandvik Steel & AB Sandvik Tamrock Tools. Also other units working as commissionaires can constitutes parts of the providing party". A reading of the aforementioned clauses of the agreement make ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Officer in this regard. Further, even the Hon'ble Supreme Court in Retork Controls India (P) Ltd Vs. CIT reported in 314 ITR 62(SC) had upheld the provision for warranty made by the said assessee in its books of account and its admissibility being on scientific basis. Following the same simili of reasoning, we uphold the order of CIT(A) in this regard and dismiss the grounds of appeal No.2 and 4 raised by the Revenue." 10. We have noticed that an appeal preferred by the Revenue, being ITA No.50/2017, against the Order of the Tribunal for the assessment year 2004-05 was dismissed on the ground that the assessee had been consistently following the method of evaluating the stock which had been accepted by the Revenue. 11. We cannot persuad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undertaking begins to manufacture or produce. Consequently, it is evident that the basis on which the assessment has sought to be reopened is belied by a plain reading of the provision. The Assessing Officer was plainly in error in proceeding on the basis that because the income is exempted, the loss was not allowable. All the four units of the assessee were eligible under Section 10B. Three units had returned a profit during the course of the assessment year, while the Crab Stick unit had returned a loss. The assessee was entitled to a deduction in respect of the profits of the three eligible units while the loss sustained by the fourth unit could be set off against the normal business income. In these circumstances, the basis on which th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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