2016 (6) TMI 208 - AT - Income Tax

Tribunal dismisses Revenue's appeal, upholds deduction under section 80IA(5), disallows disallowance under section 14A

The Jt. Commissioner of Income Tax, Range – 6, Pune Versus Suttati Enterprises Pvt. Ltd. and Vica-Versa

The Jt. Commissioner of Income Tax, Range – 6, Pune Versus Suttati Enterprises Pvt. Ltd. and Vica-Versa - TMI Issues Involved:1. Validity of the assessment order dated 30.12.2011.2. Validity of the reference to the Transfer Pricing Officer (TPO).3. Deduction under section 80IA(5) of the Income-tax Act, 1961.4. Apportionment of administrative expenses to the EOU unit.5. Disallowance under section 14A read with Rule 8D.Issue-wise Detailed Analysis:1. Validity of the Assessment Order Dated 30.12.2011:The assessee argued that the assessment order dated 30.12.2011 was barred by limitation. The CIT(A) held that the reference to the TPO was valid, and thus, the time limit for completion of the assessment was extended to 31.12.2011. The Tribunal found that the assessment should have been completed by 31.12.2010 since the assessee did not have an Associated Enterprise (AE) and no international transactions were carried out. Consequently, the assessment order dated 30.12.2011 was held to be invalid and barred by limitation.2. Validity of the Reference to the Transfer Pricing Officer (TPO):The CIT(A) justified the reference to the TPO based on the agreement between the assessee and Cummins Turbo Technologies, USA, considering Cummins as a deemed AE under section 92A(2)(i) of the Act. However, the Tribunal found that the assessee and Cummins did not fulfill the conditions laid down in section 92A(1) of the Act to be considered as associate enterprises. Therefore, the reference to the TPO was not justified, and the assessment should have been completed by 31.12.2010.3. Deduction Under Section 80IA(5) of the Income-tax Act, 1961:The Revenue's appeals challenged the deduction claimed under section 80IA(5) by the assessee for profits from windmill operations. The Tribunal upheld the CIT(A)'s decision that the assessee had the option to pick the initial assessment year and only the losses from the initial assessment year were to be carried forward, not the losses of earlier years. The Tribunal dismissed the Revenue's appeals, citing the CBDT Circular No.1/2016 and the precedent set by the Pune Bench of the Tribunal.4. Apportionment of Administrative Expenses to the EOU Unit:The assessee challenged the apportionment of Rs. 3 lakhs out of administrative expenses to the EOU unit. However, this issue did not survive as the Tribunal held the assessment order to be beyond limitation.5. Disallowance Under Section 14A Read with Rule 8D:The assessee's appeal included a challenge to the disallowance of Rs. 1,07,837/- under section 14A read with Rule 8D. However, this ground was not pressed by the assessee and was dismissed as not pressed.Conclusion:The Tribunal dismissed the Revenue's appeals and partly allowed the assessee's appeal. The assessment order dated 30.12.2011 was held to be invalid and barred by limitation. The reference to the TPO was not justified as there was no AE involved. The deduction under section 80IA(5) was upheld in favor of the assessee, and the apportionment of administrative expenses issue did not survive. The disallowance under section 14A was dismissed as not pressed.