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TMI Blog2022 (12) TMI 1084X X X X Extracts X X X X X X X X Extracts X X X X ..... ng upward adjustment of Rs.26,64,145/- on notional interest on advance made to wholly subsidiaries/associated enterprises of the assessee. For this, the assessee has raised Ground Nos.2-6, which are argumentative and exhaustive and hence, need not to be reproduced. 2.1 The brief facts of the case are that the TPO while going through the accounts of the assessee noticed that it had an outstanding balance of interest free advance to its AEs namely Craftsman Automation Singapore Pte Ltd., and Craftsman Marine BV to the tune of Rs.43,29,000/- and Rs.7,64,34,000/- respectively. The AO applied average Libor + 200 bps and recomputed the upward adjustment by charging interest on Craftsman Automation Singapore Pte Ltd., at Rs.1,26,537/-, Craftsman Marine BV amounting to Rs.25,37,608/-. Therefore, he made upward adjustment of Rs.26,64,145/-. Aggrieved, the assessee moved to the DRP and the DRP also affirmed the action of the TPO/AO by observing in Para No.1.3.2 as under: "1.3.2 The main question is whether the assessee could have extended such interest free loan to any unrelated party similar to that of its AE without charging interest. Because, when independent enterprises deal with each ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s allowed. 4. The next issue in this appeal of the assessee is as regards to the order of the AO making disallowance of claim of deduction u/s.80JJAA of the Act, amounting to Rs.2,86,13,977/-. 4.1 Brief facts of the case are that the assessee claimed deduction u/s.80JJAA of the Act amounting to Rs.2,86,13,977/-. The AO during the course of assessment proceedings noticed from Column No.8 of Audit Report and particularly in Form No.10DA filed by assessee as per Rule 19AB of the Rules, wherein, it was certified that the number of new regular workmen entitled for deduction was 702 and at Column No.11. The AO required the assessee as to whether any of the regular workmen as mentioned in Column No.7 was employed for a period of less than 300 days during the previous year. The assessee explained before the AO that 354 number of newly recruited employees during the year was employed for less than 300 days. The AO noted that it was a cascading effect from AY 2006-07 onwards and the assessee's contention that new regular employees in respect of whom the claim was made on the basis that they have not completed 300 days in the preceding year and therefore, deduction in respect of such employ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Finance Act, 2018 w.e.f.01.04.2019 in the provisions of Sec.80JJAA of the Act, wherein, proviso was brought in the explanation after sub-section clause-2, is as under: "Provided further that where an employee is employed during the previous year for a period of less than two hundred and forty days or one hundred and fifty days, as the case may be, but is employed for a period of Two hundred and forty days or one hundred and fifty days, as the case may be, in the immediately succeeding year, he shall be deemed to have been employed in the succeeding year and the provisions of this section shall apply accordingly;". According to the Ld.Counsel for the assessee, this proviso is only explanatory and retrospective. He explained that the note on clauses to Finance Bill 2018 has explained the provision and reduced the period for which such employee is employed for 245 days or 150 days as the case may be. The relevant clause is explained as under: "It is further proposed to provide that where a new employee is employed during the previous year for a period of less than two hundred and forty days or one hundred and fifty days, as the case may be, but is employed for a period of two ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... labour; or any other workman employed for a period of less than three hundred days during the previous year. The deduction is allowable for 3 assessment years including the assessment year relevant to the previous year, in which such employment is provided. The main thrust of this section is to provide employment in the country and that should be permanent in nature. The provision is unambiguous and clearly spelt that the regular work man should have been employed for a period of at least 300 days during the previous year. Previous year defined in section- 3 of Act means the financial year, immediately preceding the assessment year. In the present case, that financial year is 2010-11. 4.6 He further argued that this issue was covered against the assessee company by ITAT in ITA No.1357 & 1358 of 2010 dated 17.03.2014. This decision was pertaining to AY 2006-07 and 2007-08. In para-5, exactly identical fact has been upheld by ITAT. He argued that the assessee filed a paper book on 10.10.2022 wherein they have relied upon the decision of the Hon'ble High Court of Karnataka in the case of CIT-LTU v. Texas Instruments India (P.) Ltd., (2021) 127 taxmann.com 59. This decision had n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion is actually rendered in favour of Revenue, where the ITAT categorically held that if some work men were employed for a period less than 300 days in the previous year then no deduction is allowable in respect of payment of wage to such work men. Having relied upon the decision of Bosch Ltd, the Hon'ble High Court ought to have upheld the disallowance made on this issue in the case of M/s Texas Instruments (India) Pvt Ltd also. The Senior Standing Counsel appeared for Revenue had clearly argued the same fact and that was discussed in paragraph 16. 7 of the decision. At paragraph 16.11 of the decision, the Hon'ble High Court committed another serious mistake wherein it was held that - The Income-tax Appellate Tribunal, while considering a similar situation as in Bosch Ltd. (supra) held that so long as the workman employed for 300 days, even if the said period is split into two blocks, i.e. the assessment year or financial year, the Assessee would be entitled to the benefit of Section 80JJ-AA in the next assessment year and so on so forthwith for a period of three years. The Income-tax Appellate Tribunal, having held to that effect, in our considered opinion, it would not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t into the statute as per Factories Act. ► Up to A Y 2016-17 it had continued with same set of facts. ► In Finance Act 2016, entire section was substituted. It was categorically held that emoluments cannot exceed Rs.25000/- per month. It was also amended that duration of employment was reduced into 240 days. The benefits were extended to all the industries. If it is for manufacturing apparels, the number of days of employment were reduced to 150 days. ► In Finance Act 2018, along with apparel industry, the benefit of reduced number of employments was extended to leather industries also. This amendment was w.e.f.1-4-2019. The relevant amendment relied upon by Hon'ble High Court is pertaining to A.Y. 2019-20 that was introduced in Finance Act, 2018, with effect from 1.4.2019. 4.8 Another argument made by the ld.CIT-DR, Dr.S.Palani Kumar, that it is impossible to perform as decided by the Hon'ble High Court and on account of the above set of facts, the said amendment cannot be applied to the A.Y 2011-12. The decision of Hon'ble High court was on account of incorrect assumption of law and facts. An amendment brought into the statute in Finance Act 2018 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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