TaxTMI 
TaxTMI 
2015 (7) TMI 110
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....in the assessee claimed exemption u/s 10B of the Act. The assessment was completed u/s 143(3) of the Act on 29-3-2006. The CIT -1, Visakhapatnam vide his order u/s 263 of the Act noticed from the computation of income that an amount of Rs. 4,09,45,804/- was added to the taxable income towards transfer pricing adjustment. As per the provisions of section 10B(3) of the Act the deduction is allowed on the sale proceeds that are brought to India in convertible foreign exchange. As the increased profit of Rs. 4,09,45,804/- added on account of transfer pricing adjustment was not brought into India, the CIT-1, Vishakhapatnam held that the order u/s 143(3) of the Act dtd. 29-3-2006 was erroneous and prejudicial to the interest of Revenue. The CIT-1 further noticed that the export turnover was to the tune of Rs. 6.56 crores, therefore, the A.O. should have referred the matter to the Transfer Pricing Officer (TPO) for the determination of arm's length price as per Instruction No. 3 of CBDT dated 20-5-2003. The CIT -1 accordingly directed the A.O. to refer the question of determination of transfer pricing to the TPO and finalise the assessment de novo. 4. Pursuant to the direction of the C....
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....ouched upon issues that were not directed by the Commissioner in the proceedings u/s 263 of the Act. However, it needs to be stated that the Commissioner of Income tax (Appeals) being the first appellate authority, his powers under the Act are coterminous with that of the assessing officer, and further he is vested with plenary powers do what an assessing officer can do as well do that an assessing officer has failed to do in accordance with law. Since a decision has been rendered to the effect that the expenditure incurred at Mumbai on research and development has a direct nexus with the export business of the appellant at Vizag, and such expenditure must have to be treated as an integral revenue expenditure of the appellant's export business, the grounds relating to this issue have been rendered redundant and otiose." Aggrieved by this, the assessee is before us. 6. Before us, the ld. Counsel for the assessee reiterated what has been submitted before the lower authorities. It is the say of the ld. Counsel that the ld. CIT(A) has admitted that the A.O. has travelled beyond the scope of the directions issued by the CIT-1 u/s 263 of the Act yet the ld. CIT(A) confirmed the ass....
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.... Rs. 50,26,347/- was claimed. The A.O. further noticed that the assessee itself has admitted that foreign exchange to the tune of Rs. 4,09,45,804/- was not realized in India within six months, therefore, as per the provisions of section 10B(3) of the Act the assessee was not entitled for the exemption. The assessee was asked to explain its claim. The assessee vide its letter dated 13-11-2009 stated that all the export turnover reported in the books have been received in convertible foreign exchange within the stipulated time, therefore, the claim of exemption should be allowed. This submission of the assessee did not find favour with the A.O. who was of the firm belief that the increased profit of Rs. 4,09,45,804/- on account of transfer pricing adjustment was not brought into India by the assessee in convertible foreign exchange therefore deduction u/s 10B has to be recalculated after excluding the amount of Rs. 4,09,45,804/-. The assessee carried this matter before the ld. CIT(A) but without any success. 10. Before us, the ld. Counsel for the assessee vehemently submitted that the provisions of section 92-C(4) would come into operation only when the enhancement of export incom....
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....ssessee is enhanced after computation of income under this sub-section." Section 92-C(3) read as under:- 92C. (3) Where during the course of any proceeding for the assessment of income, the Assessing Officer is, on the basis of material or information or document in his possession, of the opinion that- (a) the price charged or paid in an international transaction or specified domestic transaction] has not been determined in accordance with subsections (1) and (2); or (b) any information and document relating to an international transaction or specified domestic transaction] have not been kept and maintained by the assessee in accordance with the provisions contained in sub-section (1) of section 92D and the rules made in this behalf; or (c) the information or data used in computation of the arm's length price is not reliable or correct; or (d) the assessee has failed to furnish, within the specified time, any information or document which he was required to furnish by a notice issued under subsection (3) of section 92D, the Assessing Officer may proceed to determine the arm's length price in relation to the said international transaction or specified domestic t....
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....enefit of section 10B of the Act then, every tax payer will first under-price its sale with associated enterprises and thereafter suo moto enhance the sale price by making transfer pricing adjustment and claiming the deduction u/s 10B of the Act, stating that the under- price sale originally declared by the assessee in its books of account have been brought in India in convertible foreign exchange thereby keeping a certain portion of the sale abroad. 16. In our considered opinion and understanding of the law and the understanding of the legislative intention, we cannot permit the assessee to stretch the benevolent provision to avail the benefit which the legislature never intended to. In the case in hand, there is no dispute that the assessee has under priced its services to AE's and therefore made transfer pricing adjustment suo moto. This peculiar conduct of the assessee, if allowed to claim deduction u/s 10B of the Act will go against the legislative intention. We, therefore, decline to interfere with the finding of the lower authorities. In our considered opinion, the assessee is not entitled for deduction u/s 10B of the Act in respect of the addition of Rs. 4,09,54,804/- su....