9911796707
TMI Blog2023 (6) TMI 866X X X X Extracts X X X X X X X X Extracts X X X X ..... tax Act, 1961 (the Act), passed in pursuance to the direction issued under Section 144C(5) of the Income-tax Act, 1961 (the Act) by the Dispute Resolution Panel- IV, Mumbai (the learned DRP) on 19th December, 2014, wherein the objections of the assessee against the draft order passed on 7th March, 2014, incorporating the adjustment proposed by the learned Transfer Pricing Officer-(1)(8), Mumbai (the learned TPO) as per order under Section 92CA(3) of the Act, dated 24th January, 2014, proposing an adjustment of Arms Length Price of international transaction of payment towards corporate charges was made and confirmed by the learned Dispute Resolution Panel is in challenge. 03. Assessee is a company engaged in the business of engineering, plant commissioning, design and build, performance monitoring and related service in the filled of waste water management. It started a new division to provide and receive engineering design services to the MWH group. This division is registered under the Software Technology Parks of India (STPI) scheme. The assessee provides different type of services. The scope of services offered by assessee is comprehensive and include field of investigation, la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services are rendered and commensurate benefits derived there from. He further held that the services are duplicative in nature and are in the form of shareholder' activity. Due to this an independent third party would not have made payment for this service. Accordingly, he treated the Arm's Length Price of management fees paid of Rs. 1,17,42,745/- as nil. The above adjustment was proposed by the order dated 24th January, 2014 passed under Section 92CA (3) of the Act by the learned Transfer Pricing Officer. 08. On receipt of the order of the learned Transfer Pricing Officer, the learned Assessing Officer passed a draft assessment order on 7th March, 2014 incorporating the above addition. The learned Assessing Officer further noted that the assessee has unbilled receivable of Rs. 4,29,93,962/- and the above sum is required to be included as income. The assessee did not reply and therefore, the learned Assessing Officer made an addition of the above sum to hold that unbilled revenue is recognized income of the assessee. It was also found that there is a mismatch between interest on fixed deposits disclosed in accounts of Rs. 43,41,094/- and amount shown in form no.26AS of Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant's total income and to re-compute its total income and tax thereon accordingly. 2:0 Re: Addition of Rs. 4,29,93,962/-on account of unbilled receivables: 2:1 The Assessing Officer/ the Dispute Resolution Panel have erred in treating the amount of Rs.4,29,93,962/- being unbilled receivables reflected in the Balance Sheet as the income of the Appellant. 2:2 The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject the unbilled revenue has already been considered by it as its income and hence no addition whatsoever in respect thereof is called for on this count as it amounts to a double addition and the stand taken by the Assessing Officer/the Dispute Resolution Panel in this regard is misconceived, erroneous and incorrect. 2:3 The Appellant submits that the Assessing Officer be directed to delete the addition of Rs.4,29,93,962/- and to re-compute its total income and tax thereon accordingly. 3:0 Addison of Rs. GBP32,202 on the basis of Individual Statement ["ITS"] 3:1 The Assessing Officer/the Dispute Resolution Panel have erred in making an addition of Rs 4,32,202/- to the total income of the Appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted that in determining the Arm's-Length Price the learned Transfer Pricing Officer and the Dispute Resolution Panel has not adopted any method. It was also submitted that the additional evidence submitted by the assessee showing the rendition of the services as well as the benefit derived by the assessee were completely ignored by the learned dispute resolution panel. He therefore submitted that the determination of the arm's-length price at rupees nil of the intragroup services is not proper. 012. With respect to the addition on account of unbilled services, He submitted that the above amounts are outstanding as current assets of the assessee. He submits that the above amount represents the work performed by the assessee till the end of the accounting year for which bill is yet to be raised. This income is always credited to the profit and loss account and therefore, it can be shown as an asset as unbilled revenue in current assets. He submits that when the income is already offered once, addition of the same once again amounts to double addition. He referred to the order of the co-ordinate Bench for A.Y. 2009-10, wherein vide order dated 3rd October, 2022 vide paragraph ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , emails and invoices of the associated enterprises proves that assessee has received those services. Before the learned dispute resolution panel assessee submitted email correspondence between the assessee and its associated enterprises to demonstrate that the services are availed from the associated enterprise and to justify the payments toward the corporate charges. The learned TPO in the remand proceedings held that these evidences are not sufficient to show that assessee has received any services and the benefits are derived out of it. Accordingly in the remand order the learned TPO reiterated the original TP order. In rejoinder submitted by the assessee on 10 December 2014 stating that these emails, agreements clearly shows that there is a rendition of the service and looking at the nature of the services assessee has received the benefits. It was further stated that merely because the learned TPO says that it is duplicative services and shareholders activity , , the arm's-length price of the same cannot be determined at rupees nil. We find that the nature of the services rendered to the assessee are with respect to IT network, legal services and risk management, planning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne the final invoices raised on the customer and the entry passed in the accounts at that stage amount is debited to the customer's account by crediting the unbilled receivable account. This shows that assessee is creating work in progress at the end of the year of the ongoing projects by crediting the same to the profit and loss account and creating a work in progress in the form of unbilled receivable. The learned AO, DRP has misconstrued the same and made the addition. Though in earlier years the issue has been set-aside to the file of the learned assessing officer for verification, however we do not find any reason to set-aside back to the file of the learned assessing officer because in unbilled receivable account being a debit balance could not have been created without making a credit entry to the revenue account. Before us the annual accounts are placed in the paper book. According to schedule P (A) (VI) clearly shows that unbilled receivable consisting of work in progress in respect of unfinished contracts are valued on the basis of percentage of the completion method, whereby the revenue is realized by reference to the stage of completion of the contract activity at t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, same is dismissed. 018. In the result appeal of the assessee for assessment year 2010-11 is allowed with above direction for statistical purposes. 019. For assessment year 2011-12 in ITA number 2133/M/2016 assessee has raised identical grounds. 020. Ground number one is with respect to the adjustment on account of arm's-length price of the international transaction of payment of management fee/corporate cost amounting to Rs. 23,032,255 which is determined by the learned transfer pricing officer at rupees nil and confirmed by the learned dispute resolution panel. The facts are identical to the ground number 1 of the appeal of the assessee for assessment year 2010-11. We have set-aside this ground back to the file of the learned AO/TPO. Therefore for the similar direction we set-aside ground number one of the appeal back to the file of the learned AO/TPO with similar direction. Accordingly same is allowed 021. Ground number two of the appeal is with respect to addition on account of unbilled serviceable amounting to Rs. 45,666,320/- which is identical to ground number 2 of the appeal of the assessee for assessment year 2010-11. This ground of appeal involves identical fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r verification, this ground of the appeal for all these years are set-aside to the file of the learned AO. Accordingly for all these years ground relating to addition on account of unbilled receivable is allowed with above direction.
028. For assessment year 2012-13 the assessee has not been granted credit for tax deduction at source of Rs. 912,536/-. For assessment year 2013-14 similarly tax credit of Rs. 28,300,548 is denied. On careful consideration, we direct the learned assessing officer to verify the above credit and if same is found in accordance with the law, Grant the same. In the result ground with related to non-granting of credit for tax deducted at source to the assessee is allowed for assessment year 2012-13 and 2013-14 with above direction.
029. Ground number 4 for assessment year 2012-13 and 2013-14 and ground number three with respect to the assessment year 2014-15 to 2017-18 are general in nature, no arguments were advanced, and therefore same are dismissed.
030. In the result all these eight appeals filed by the assessee are allowed for statistical purposes with above direction.
Order pronounced in the open court on 27.02.2023. X X X X Extracts X X X X X X X X Extracts X X X X
|
