TaxTMI 
TaxTMI 
2018 (11) TMI 264
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....EHTP') operations of the Appellant and tax holiday claim under section 10AA of the Act amounting to Rs. 1,87,497 with respect to Special Economic Zone ('SEZ') operations of the Appellant 2. erred in recomputing the deduction under section 10A at Rs. 11,39,56,076 as against Rs. 16,62,12,943 with respect to STP operations, Rs. 5,18,31,824 as against Rs. 7,56,00,358 with respect to EHTP operations and deduction under section 10AA at Rs. 4,08,873 as against Rs. 5,06,370 claimed by the Appellant in the return of income filed on 30 September 2008, thereby denying deduction under section 10A to the extent of Rs. 7,60,25,40/and under section 10AA to the extent of Rs. 1,87,497; Invoking the provisions of section 10A(7) and section 10AA(9) read with section 801A( 10) in the Appellant's case 3. erred in invoking the provisions of section 10A(7) and section 10AA(9) read with section 80IA(10) in the Appellant's case, on the ground that transactions between the Appellant and its associated enterprises are arranged to produce more than ordinary profits; 4. failed to appreciate that provisions of section 10A(7) and section 10AA(9) read with s....
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....claimed during the assessment proceedings by way of filing revised computation of income, computed considering inclusion of export proceeds realised but not considered in the return of income as part of 'eligible export turnover' for the purposes of claiming deduction under section 10A and 10AA of the Act 11. erred by denying additional tax holiday benefit under section 10A and 10AA of the Act (amounting to Rs. 55,24,290) claimed by the Appellant during the assessment proceedings by way of filing of revised computation of income, computed by inclusion of export proceeds realised but not considered in the return of income as 'eligible export turnover' for the purposes of claiming deduction under section 10A and 10AA of the Act; D. Denial of tax holiday claim amounting to Rs. 2,37,68,534 in respect of Electronic Hardware Technology Parks ('EHTP') operations of the Appellant. 12. erred in invoking the provision of 10A(7) of the Act to Appellant's EHTP unit despite the fact that margins of comparable companies considered relates to software services segment and cannot be compared with margins earned by EHTP unit which was engaged in manufactur....
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.... submitted that they involve TP issues on one side, i.e. (Ground Nos. 14 to 17) and the corporate issues on the other, i.e. (Ground Nos. 2 to 13). TP issues on Ground Nos. 14 to 17 4. Regarding the TP issues, i.e. Ground Nos. 14 to 17, Ld. Counsel for the assessee submitted that the issues raised in these grounds are identical both on facts and on law to that of the issues settled vide the Advanced Pricing Agreements (APA) made u/s.92CC of the I.T. Act, 1961. Bringing our attention to the Advanced Pricing Agreement, Ld. Counsel submitted that it was agreed upon between the assessee and the CBDT vide agreement dated 30-03-2017 on the AP of the Intra-group Managerial & Administrative Services and the same is relevant for the A.Yrs. 2015-16 to 2019-20. 5. Referring to the issues in the present assessment year under consideration, i.e. A.Y. 2008-09, Ld. Counsel fairly submitted that this year is not actually covered by the said agreement. However, he brought our attention to various decisions as well as the facts relevant to the year under consideration and submitted that the issue stands covered by the said Advanced Pricing Agreement for this year also. In this regard, he ....
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....t year are identical to the international transactions which were part of the APA proceedings. ...The grounds of appeal raised by the assessee are thus, allowed." 3. In the case of Ranbaxy Laboratories Ltd. Vs. ACIT (ITA No.196/Del/2013) "it is clear that if the international transactions are same in the year of APA and the year for which rollback is applied, roll back is allowed to the assessee on certain normal condition of filing return of income, Report of accountant and a request in specified format. Offcourse, it has also normal revenue safeguarding exclusion clauses of income going below the returned income and where ITAT has passed an order on the subject. Therefore even the rules provide that if the International Transactions are same in the year of APA and in the past year than both the parties, assessee and CBDT may agree for applying the agreements contained in APA agreed. ... Needless to say that Ld.TPO/AO shall give due weightage to the Advance Pricing agreement signed by the assessee with CBDT on other issues also (other than the issue of selection of tested party) for determination of ALP and in case of any divergent view....
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....13, dated 24-06-2015 where the Hon'ble High Court held that the extraordinary profits cannot automatically lead to the conclusion that there is arrangement between the parties. On hearing both the sides on this issue, we proceed to extract the written submissions here as under : "Grounds A2 - A9 Denial of tax holiday u/s 10A & 10AA on the ground that margins shown by the Appellant are higher than the margins of the comparables 1. The appellant is an indirect subsidiary of Honeywell Inc. USA and is engaged in the business of providing Software services and industrial automation manufacturing to its group companies. For AY 2008-09 it had two Software Technology Parks located in Pune & Chennai (S.10A units) and an SEZ Unit (S. 10AA Unit) located at Pune. 2. For the years under consideration, the appellant had claimed the following deductions from its total income: AY Section 10A Deduction Section 10AA Deduction Page Reference 2008-09 Rs.7,60,25,401 (STP - 5,22,56,867 EHTP - 2,37,68,534 Rs.1,87,497 Pg. 40 of the Appeal Set. 3. The AO however granted onl a partial deduction of the above sums by invoking secti....
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....ived therefrom in other words the import of the expression "so arranged" has to be read in conjunction with the legislative intent that there should not be any abuse of tax concession by manipulation of profits. Therefore, section 10A(7) r.w.s. 80-IA(10) of the Act can be invoked only where it is shown that the course of business is so arranged which reflects an abuse of tax concession whereby the business transacted between two entities is so arranged, which produces to the assessee more than the ordinary profits which might be expected to arise in such eligible business. ii. The mere existence of (i) a close connection between the assessee and the other person; and, (ii) more than ordinary profits is not sufficient to justify invoking of section 80-IA (10) of the Act in the absence of there being any material to say that the course of business between them is "so arranged" to abuse the tax concessions granted u/s 10A of the Act by manipulating profits between associated persons. 9.. It was on this basis that the Hon'ble Bench came to the conclusion that the revenue was unable to justify the business between the Appellant and the AE had been arranged to produ....
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....cessive rates, which resulted in more than ordinary profits in the hands of assessee, ITAT holds that "Where the assessee had adopted a price mechanism based on third party comparables, which in turn, has been accepted by the TPO to be at arm's length price, there is no merit in the order of Assessing Officer in applying the provisions of section 10A(7) r.w.s. 80IA(10) of the Act." 12. Further, this issue also stands settled in favour of the appellant by the judgment of the jurisdictional High Court in the case of CIT V. Schmetz India Pvt. Ltd. (ITA No.1382/2013 dated 24-06-2015) wherein the Hon'ble Court has held at Para 8 as under : "So far as question (a) & (b) are concerned, we find that the Tribunal has considered the entire evidence and on facts come to the conclusion that the profits earned by Kandla division of the respondent-assessee is not abnormally high due to any arrangement between the respondent-assessee and its German Principal. The Tribunal correctly held that extraordinary profits cannot lead to the conclusion that there is an arrangement between the parties. This would penalize efficient functioning. Further, the authorities have also recorded a....
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....ndertaking". As a result, the total turnover of undertaking is a relevant and has significant effect on the allowable deduction out of the eligible profits. During the assessment proceedings, giving effect to the said amended provision of section 10(7) of the Act, assessee filed revised tax computation before the assessing authorities. The said revised computation is supplied by the assessee in the written submissions in a tabular form. In the said revised computation of income, assessee made a claim of additional tax holiday benefit amounting to Rs. 55,24,290/- which is nothing but export proceeds received by the date of making of the said revised computation. AO denied the same without giving any reasoning. Ground No.11 is relevant in this regard. 10. Before us, on the said issues, Ld. Counsel for the assessee submitted that the said rejection by the AO merely citing the Hon'ble Supreme Court's judgment in the case of Goetz India Ltd. 284 ITR 323 (SC) is not sustainable. The judgment is relevant for the proposition that assessee is allowed to make additional claims by way of revised return of income before the AO. In this regard, Ld. Counsel for the assessee submitted that it ....
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....entitled but which they have omitted to claim for some reason or other; b) freely advise them when approached by them as to their rights and liabilities and as to the procedure to be adopted for claiming refunds and reliefs. " As can be noted, the Circular provides that the officers of tax department must not take advantage of ignorance of a taxpayer and that although the responsibility for claiming refunds and reliefs rests with the taxpayer, the officers should draw the attention of taxpayer to any refund or relief to which he is entitled to and which he has omitted to claim. They should freely advise the taxpayers, when approached, as to their rights and liabilities and as to the procedure to be adopted for claiming refunds and reliefs. Judicial precedents wherein Supreme Court decision in case Goetze (India) Ltd (relied by the AO) has been discussed and it has upheld that claims made by the assessee in the assessment proceedings should be allowed 1. CIT v. Pruthvi Brokers and Shareholders (P.) Ltd. [2012] 349 ITR 336 (page 115 to 124 of the legal paper book - CT)- The Bombay High court has stated that Assessing Officer may not be entitled to grant a d....
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....cular issued in 1955 has not been withdrawn, the same has binding force on the subordinate authorities even as on date. 5. Ramco International [IT Appeal No.417 of 2008] (Page 100-101 of the legal paper book-CT) - Punjab and Haryana High Court - where a deduction under section 80IB was claimed through Form 10CCB in the assessment without filing a revised return, the Honorable High Court held that there was no requirement of filing any revised return to claim the deduction. 6. DCIT v Essar Oil Ltd [ITA No. 4177/MUM/2000] - The AO rejected a claim for grant of full deduction of expense on R & D as only a partial claim was made in the return of income. The AO denied the deduction on the basis that the claim was made through a letter in the course of assessment proceedings without furnishing a revised return. The CIT(A) allowed the taxpayer's claim. Before the [TAT, the Tax authorities relied on the decision of the SC in Goetze (India) (Supra). The ITAT upheld the CIT(A)'s order after referring to CBDT circular No. 14 (XL- 35) of 1955 dated 11-4-1955 and held that the circular was binding on the lower Tax authorities. 7. Moser Bear India Ltd ....