2018 (4) TMI 1588 - AT - Income Tax

Tribunal directs reassessment on tax deductions & transfer pricing, emphasizes detailed orders for proper adjudication.

M/s. US Technology International Pvt. Ltd. Versus The Joint Commissioner of Income-tax, Special Range, Trivandrum.

The Tribunal partially allowed the appeal for statistical purposes, directing reconsideration by the Assessing Officer and the DRP on grounds related to ... Rejection of alternative claim of tax deduction u/s. 10A - claim was not granted by the AO on the reason that DRP was of the opinion that as per section 144C(2) the assessee can file its objections only in relation to such “variation” as referred to in sub-section (1) of sec. 144C - Held that:- The alternative claim of the assessee is to be allowed as held by various judicial pronouncements if the assessee has satisfied the conditions required for claiming deduction u/s. 10A of the Act. Therefore AO must in all fairness consider the documents for the basis of the claim and ascertain whether they are proper and after verifying them, pass appropriate order as to whether the benefit of section 10A should be granted - as the issue was not examined by the Assessing Officer and it was rejected at the threshold, we remit this issue to the file of the Assessing Officer for his fresh consideration and for complying with the requirements of section 10A of the Act. Decided in favour of assessee for statistical purposes. Order passed by the ld. DRP as a non-speaking order - Held that:- This Tribunal in many of such cases have restored the issue to the file of DRP for passing a speaking order on each of the objection of the assessee raised before it. It is a fit case where the entire matter should be restored back to the file of DRP to pass a detailed order stating all the objections of the assessee and disposing them by giving a cogent and germane reason for adjudication of the objections of the assessee. We direct accordingly. After receiving the order from DRP, the Assessing Officer will again pass order u/s 144C(13) and the present assessment passed by the Assessing Officer is set aside as the DRP is directed to readjudicate the objections raised by the assessee as per directions give above. We direct accordingly. These grounds of appeal of the assessee are allowed for statistical purposes. Issues:1. Disallowance of tax holiday claimed under section 10B of the Act2. Rejection of alternative claim of tax deduction u/s. 10A of the I.T. Act3. Reference to TPO by the Assessing Officer4. Transfer pricing adjustments related to software development services segment5. Erroneous data used by the TPO6. Providing appropriate adjustments to comparable companies7. Variation of 5% from the arithmetic meanIssue 1: Disallowance of tax holiday claimed under section 10B of the ActThe assessee did not press this ground of appeal, leading to its dismissal.Issue 2: Rejection of alternative claim of tax deduction u/s. 10A of the I.T. ActThe Assessing Officer rejected the alternative claim of deduction u/s. 10A, stating that objections should relate to variations made by the Assessing Officer. The Tribunal found the claim valid based on judicial pronouncements and remitted the issue for fresh consideration by the Assessing Officer.Issue 3: Reference to TPO by the Assessing OfficerThe ground regarding reference to TPO was not pressed by the assessee and was dismissed.Issue 4: Transfer pricing adjustments related to software development services segmentThe DRP did not provide a speaking order on the objections raised by the assessee, leading to a non-speaking order. Citing a similar case, the Tribunal directed the matter to be restored to the DRP for a detailed order addressing all objections raised by the assessee.Issue 5: Erroneous data used by the TPOThis issue was part of the transfer pricing adjustments and was addressed collectively with other related adjustments.Issue 6: Providing appropriate adjustments to comparable companiesThe Tribunal directed the matter to be restored to the DRP for a detailed order addressing all objections raised by the assessee regarding transfer pricing adjustments.Issue 7: Variation of 5% from the arithmetic meanThis issue was part of the transfer pricing adjustments and was addressed collectively with other related adjustments.In conclusion, the Tribunal partially allowed the appeal for statistical purposes and directed the matter to be reconsidered by the Assessing Officer and the DRP on various grounds related to tax deductions and transfer pricing adjustments. The Tribunal emphasized the importance of providing detailed, speaking orders on objections raised by the assessee for proper adjudication.