TaxTMI 
TaxTMI 
2017 (2) TMI 230
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....of 667 days. Assessee filed a condonation petition by stating as under: "3.1 The appellate order passed by the C.I.T(Appeals) was received by the assessee on 18-11-2008. Appeal to the Hon'ble ITAT was to have been filed on or before 16-02-2009. As already submitted, the assessee company is a joint venture between Satyam Computer Services Ltd., [SCSL] and Venture Global Engineering LCC, USA. In January, 2009, a major event having unprecedented repercussions on the assessee's affairs occurred in that the then promoter and Chairman of SCSL, Sri B.Ramalinga Raju, submitted a letter to the Board of Directors, the Securities and Exchange Board of India, and the Stock Exchanges acknowledging manipulation in accounts of SCSL running into several hundreds of crores. Considering the circumstances in the case of SCSL, and on a request made by it, the company Law Board extended time limit for filing various returns/documents upto 31st December, 2009 and later again till 30-062010 in the case of SCSL. 3.2 Having regard to the upheaval in the Sat yam group there was a major dislocation of work in the assessee company throwing accounting work out of gear. Since all the transactions bet....
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....scretion of the court, it was submitted that length of the delay is not the matter but acceptability of the explanation is the only criteria. It was submitted that due to various investigations by various authorities, the matters of assessee could not be attended to. It was submitted that the Co-ordinate Bench of Delhi in the case of Foramer France Vs. DCIT [2 ITR (Trib) 773] (Del) has elaborated the principles relying on various Supreme Court judgments and formulated certain principles reiterating them. It was submitted that the delay may be condoned and the appeal may be admitted to render substantial justice to assessee. 4. Ld. DR however, objected to the petition filed by assessee seeking condonation of the delay. It was submitted that the explanation furnished does not make out a case for sufficient cause, which is distinguishable from reasonable cause. The averments of dislocation caused by the admission of impropriety and malfeasance by the Chairman of its parent company is no more than a part of the factual backdrop, with no demonstrable casual nexus to the everyday happenings at the assessee company more so as continuing without remit for the entire duration of 667 days. ....
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....is sufficient and reasonable cause for not preferring the appeal in time. Both the Ld. Counsels relied on various case law for and against the condonation. What we notice is that the case law are rendered on certain fact conditions. However, it is the appreciation of the facts and examining whether there is sufficient and reasonable cause in preferring the appeal belatedly which can decide the issue. As submitted by assessee, various statutory authorities investigations have lead to dislocation of the administrative work, consequently, we are satisfied that there is reasonable and sufficient cause in not preferring the appeal in time. Accordingly, the delay in filing the appeal is condoned and the appeal is maintained. 7. As far as assessee's appeals are concerned, the issue mainly in all the years is with reference to disallowance of commission paid to one of the promoter Venture Global Engineering Services LLC (Venture). Assessee-company, SVES was incorporated on 03-01-2000 as a private limited company with two companies as promoters i.e., Satyam Computer Services Ltd., India and Venture (Group), USA. These two promoters hold share capital in assessee-company in equal proportion....
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....visions of Section 37(1). However, in subsequent years of 2006-07 to 2008-09, even though AO was following the earlier year's orders of disallowing the commission to Venture of Satyam sales, however, disallowed the entire commission paid to Venture on all sales, In different years there are different methodologies adopted by the Revenue, purportedly disallowing commission paid to Venture on Satyam Sales. In addition to the above issue, there are two other issues, one arising out of re-working out of deduction u/s. 10A and other issue is with reference to adjustment made under TP provisions on an hourly basis payment by the TPO. For the sake of clarity, appeals in AY. 2004-05 are decided here under. AY 2004-05: 9. In AY. 2004-05, assessee has preferred an appeal in ITA No. 1590/Hyd/2010 and the only cross-appeal by the Revenue is in ITA No. 217/Hyd/2009. In this year, assessee filed return of income declaring total income of Rs. 1,25,02,860/- after claiming deduction u/s. 10A. Assessee claimed an amount of Rs. 1,90,26,559/- as exempted u/s. 10A. AO has excluded certain expenditure involving communication expenses and also foreign exchange in providing technical services outside Ind....
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....Referring to the agreements placed on record and also other correspondence between the parties, it was the submission of Ld. Counsel that Venture Group being the leader in the automotive services has entered into a joint venture with Satyam and it was agreed upon between the parties that on all the sales, except from the orders of Venture Group, assessee-company has to pay 10% commission. Referring to the order of the TPO, it was the submission of the Ld. Counsel that TPO has wrongly considered the Satyam as affiliate of Venture, whereas Satyam is not an affiliate of Venture but a competitor and an independent promoter of assessee-company. Referring to the terms of the agreement, it was submitted that no commission was paid on sales made to Venture or to its affiliates and referred to the schedule placed on record that commission was paid on all the orders received from other companies, including orders routed through Satyam. It was further submitted that Satyam was also in the business of providing CAD/CIM services to various automotive companies and they have placed a consolidated order to Satyam and part of which was in turn ordered to assessee-company. Such orders are from inde....
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....od could not be regulated as most appropriate method for determining ALP. Ld. Counsel however, submitted that even though the TPO has analysed the issue on CUP method, Ld. CIT(A) modified the order so as to disallow the amounts u/s. 37(1) and Revenue is not in appeal on the above issue. In view of that, it was submitted that the arguments on CUP method are academic in nature in this year and assessee is mainly contesting disallowance made u/s. 37(1). 12. Ld. DR however, reiterated the orders of the TPO and the order of the CIT(A) in coming to a conclusion that there is no need to pay commission to Venture on the sales made by Satyam as Satyam is one of the promoter companies and accordingly, the expenditure cannot be considered as wholly and exclusively for the purpose of business. 13. We have considered the rival contentions and perused the orders of the authorities. As rightly pointed out by the Ld. Counsel, even though Ld.TPO invoked the CUP method and determined the ALP at NIL so as to disallow part of the commission paid to Venture on the so called sales made to Satyam, on the reason that 'Satyam is an affiliated company and no commission need to be paid on sales made to the....
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....The sales made to Satyam, whether directly placed by the Satyam or indirectly passed on from the orders received from other automotive companies form part of domestic sales of assessee-company and commission is payable to Venture from the agreement. In view of this, we do not see any reason to disallow the amount of commission, particularly with reference to sales made to/orders received from Satyam. Assessee also placed on record that most of the orders received from Satyam are part of consolidated orders received from various other automobile/ automotive companies like Ford, a part of which was passed to assessee-company. We also notice that TPO/AO has no objection for payment of commission to Venture per se. Out of the total claim of commission of Rs. 3,66,00,492/- in this year, the AO/TPO disallowed only an amount of Rs. 85,64,314/-. This amount was also paid to Venture on the domestic sales made to Satyam. These sales are not made to any affiliated company of Venture. Therefore, the commission is payable to Venture. Accordingly, the same is allowable u/s. 37(1) of the Act. In view of this, we direct the AO to allow the amount. The ground is considered allowed for statistical p....
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.... aspect of the issue, the adjustment made by the TPO is otherwise required to be deleted since the difference in the rates charged from AE & non-AEs is within the 5% range provided u/s.92C(2) of the Act. Benefit of +/-5% variation in terms of proviso to S.92C(2) is allowed in view of the decision of ITAT, Kolkata in the case of Development Consultants (P) Ltd (115TTJ577) & ITAT, Delhi in the case of Sony India Pvt. Ltd.(supra) where it has been held in para 163.4 as under -. "163.4 The other view is the one accepted by Kolkata 'A' Bench of the Tribunal in the case of Development Consultants (P) Ltd. Vs DCIT, Circle 2, Kolkata (ITA No. 79 & BO/KOL/200B) decided on 4.4.200B . As per the said decision, the benefit of second limb of the proviso was allowed to the taxpayers although the price disclosed by it was more than 5% of arithmetic mean. The decision of the Coordinate Bench is binding on us and we are inclined to follow the same. That apart, we are of the view that Kolkata Bench of the Tribunal has taken a right view of the provision. We are to go by the language of the provision and when we do so, we do not see anything in the language to restrict the application of t....
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....sion on the sale made to Satyam. Ld. Counsel submitted that in the year 2004-05, Ld. CIT(A) has converted the disallowance under the TP provisions to the disallowance u/s. 37(1), whereas in this assessment year, Ld.CIT(A) confirmed the order of TPO of disallowing the entire amount. In addition to the objections with reference to the CUP method when there are no comparable cases, it was the contention that Satyam cannot be considered as an affiliate company. Ld. Counsel further submitted that the agreement with Venture is independent of sales made to all others, except to Venture Group and Satyam cannot be considered as 'part of Venture Group'. 20.1. It was further submitted that there were disputes between the two promoter companies and in later year, commission was not paid and has disallowed by assessee-company as suo motto adjustment under the TP provisions. It was contended that for the impugned assessment year, the amount is to be paid as per the agreement on which there is no dispute. 21. For the reasons stated in AY. 2004-05, we agree with the contention of assessee that the TPO cannot disallow the amount paid to Venture as the agreement under which assessee is operating c....
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....rdingly, AO is directed to work out deduction, after excluding the so called communication expenses determined by him, from both export turnover and total turnover. This view was supported by the decision of the Hon'ble Bombay High Court in the case of CIT Vs. Gem Plus Jewellery India Ltd., [330 ITR 175] (Bom) and also Special Bench decision of the ITAT, Chennai in the case of ITO Vs. Sak Soft Ltd. [313 ITR (AT) 353] wherein it has been held that communication charges etc., attributable to the delivery of the computer software outside India which are to be reduced from the export turnover should also be reduced from the total turnover as well while computing the deduction u/s. 10A. Accordingly the ground is considered allowed. 24. In the result, the appeal in ITA No. 197/Hyd/2011 is allowed. ITA No. 354/Hyd/2011 (AY. 2006-07) 25. This appeal by assessee is against the order of the DRP, Hyderabad dt. 24-09-2010, raising grounds 1 to 6 and also an additional ground on the issue of not excluding foreign currency which was considered as part of communication expenses. This additional ground being legal in nature, is allowed after due consideration. 26. Ground No.2 pertains to addi....
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....llowed. 29. Ground No. 5 pertains to exclusion of the disallowances made under TP provisions from export turnover. The AO in his wisdom has excluded the amounts disallowed under TP provisions from export turnover. We are unable to understand how the TPO can exclude the additions being made under the TP provisions. The addition of difference of export of engineering services (contested in Ground No. 2) of Rs. 4,12,493/- and also the amount of Rs. 4,83,27,840/- being commission disallowed on entire sales paid to Venture Global were the amounts considered. These can not be considered as 'communication expenses' so as exclude from export turn over. Moreover, when these amounts are disallowed out of the expenditure claims/adjustments made, it will result in increasing the profits of assessee-company, but in no way can be considered as 'turnover' so as to exclude from the export turnover. There is no legal base for the AO/TPO to exclude the profits from the export turnover and so the computation made by the AO is not according to the provisions of law. As there is no legal base to exclude the amount from export turn over, we direct the TPO not to exclude the above amounts from either ex....
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....No. 1138/Hyd/2013 (AY. 2008-09) 37. In this appeal, assessee has filed 10 revised grounds. Out of which, Ground Nos. 2 & 3 on reopening of assessment are withdrawn. 38. Ground No. 4 pertains to the issue of reference made to special audit u/s. 142(2A). It was the contention that assessee's accounts are not cumbersome and reference was made with an intention to gain time which constitutes misuse of provisions of law. However, after considering the order of the AO and the circumstances in which Satyam Group was operating at the relevant point of time, we are of the opinion that, AO has exercised his jurisdiction to refer the matter to special u/s. 142(2A) for valid reasons and accordingly this ground is rejected. 39. Ground No. 5 pertains to exclusion of communication charges from export turnover. It was also contention that AO excluded the branch expenses as part of communication charges which are not to be included. The branch expenses cannot be considered as communication expenses unless there is a finding that these are incurred for delivery of products or services as per the provisions and do fall within the definition. AO is directed to examine this issue after giving due op....