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2019 (3) TMI 1135
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....14,52,340 in respect of various eligible undertakings established after A.Y. 2005-06, viz. Airoli, Noida SEZ, Hyderabad and Gandhinagar SEZ. b. In assuming jurisdiction to disallow the deduction u/s 10A/10AA in respect of such undertakings by observing and holding that the new units/undertakings have been formed by splitting up of a business already in existence since the 1980s, and that the profits and gains of the units/undertakings subsequently setup by the Company are not eligible for deduction u/s 10A/10AA of the Income-tax Act 1961. c. In denying the deduction u/s 10A/10AA in respect of such eligible undertakings on the basis of the nature of business etc. d. In re-examining the conditions of eligibility of deduction u/s 10A/10AA in respect of various undertakings established in earlier years. The Assessing Officer ought to have appreciated that the eligibility conditions in respect of splitting up of business already in existence is required to be complied with in the year of formation of the undertaking. e. In relying on various observations and conclusions recorded in the assessment order for earlier years and thereby not allowing deduct....
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....fficer to delete disallowance u/s 10A(7) rws 801A(10) when in fact the assessee has earned substantial excessive profits as discussed in Assessment Order. 5. The DRP has erred in directing the Assessing Officer to delete disallowance u/s FBT paid in Australia not treating it as income tax. 6. The Hon'ble DRP erred in allowing assessee's claim u/s 40a(i) in respect of disallowance made in connection with foreign remittance made towards software and other services where TDS was not deducted. 5. The learned Authorized Representative for the assessee pointed out that major of the issues raised in cross appeals are covered by the order of Tribunal in assessee's own case relating to assessment year 2010-11. 6. The ground of appeal No.1 raised by assessee and the Revenue are linked and in respect of deduction claimed under section 10A/10AA of the Act in respect of certain eligible undertakings of the company. The assessee had established different undertakings in different assessment years and had claimed them to be independent new units / undertakings. However, the case of Revenue was that the new units / undertakings were formed by splitting of business already in ex....
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....ablished in assessment year 2009-10 and TTC (BPO) undertaking established in assessment year 2009-10. The Tribunal in assessee"s own case vide consolidated order dated 06.06.2016, in ITA No. 1338/PN/2010 relating to assessment year 2006-07, ITA No. 1451/PN/2011 relating to assessment year 2007-08, ITA No. 2507/PN/2012 relating to assessment year 2008-09 and ITA No. 282/PN/2014 relating to assessment year 2009-10 had individually considered the various undertakings established by the assessee from year to year and had also relied upon the order of Tribunal in assessment year 2005-06 and directed the Assessing Officer to allow the deduction u/s. 10A of the Act to the said eligible units. The only new undertaking which has been established in the current year is at Hyderabad. Following the parity of reasoning as in the earlier years, we direct the Assessing Officer to allow the deduction u/s. 10A of the Act in respect of various undertakings established by the assessee from year to year, except new undertaking at Hyderabad which we shall decide separately. As per the undertakings claimed as TTC (BPO) the same was established in assessment year 2009-10 and the Tribunal has in ITA No....
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....o pages 19 to 22 of Paper Book and pointed out that only 15% of employees were transferred from old unit, whereas the limit prescribed by CBDT is 50%. 11. The learned Departmental Representative for the Revenue on the other hand, pleaded that substantial number of employees have been transferred, hence it cannot be said to be case of new unit being established. 12. We have heard the rival contentions and perused the record. In order to avail the deduction under section 10A of the Act, requirement for the assessee was to fulfill the conditions laid down by the CBDT vis-à-vis employees transferred from existing undertaking. However, no such condition is imposed under the Act, but the CBDT had prescribed that where more than 50% employees are transferred, then it is case of splitting up or re-construction of business already in existence. During the year under consideration, the assessee had established new unit at Gandhi Nagar, wherein it made investment in the fixed assets to the tune of Rs. 4.23 crores. Further, the assessee had also filed list of employees, wherein the employees to the extent of 15% were transferred from old unit to Gandhi Nagar unit. Since it had ful....
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....rovisions of section 14A(2) of the Act. The Assessing Officer has noted the fact that similar disallowance was made in earlier year which was though allowed by DRP, but the appeal is pending before the Tribunal and hence, he computed disallowance under section 14A of the Act read with Rule 8D of the Rules at Rs. 6,02,73,236/-. Since the assessee had already disallowed sum of Rs. 50 lakhs, the additional disallowance was worked out at Rs. 5,52,73,236/-. The DRP had allowed the said claim of assessee in turn, relying on its order for earlier year. The Tribunal in assessee's own case relating to assessment year 2010-11 (supra) had decided the issue vide paras 34 and 35 and had held that in the absence of any satisfaction being recorded by the Assessing Officer before making aforesaid disallowance under section 14A of the Act, then there is no merit in the disallowance made by the Assessing Officer. Reliance in this regard was placed upon the ratio laid down by the Hon'ble Supreme Court in Godrej & Boyce Manufacturing Co. Ltd. Vs. DCIT & Anr. (2017) 394 ITR 449 (SC). The relevant findings of Tribunal are in paras 34 and 35 at pages 18 to 20 of the order of Tribunal, which read as u....
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....f the Act read with rule 8D of the Rules merely prescribe a formula for determination of expenditure incurred in relation to income which does not form part of the total income under the Act in a situation where the Assessing Officer is not satisfied with the claim of the assessee. Whether such determination is to be made on application of the formula prescribed under rule 8D or in the best judgment of the Assessing Officer, what the law postulates is the requirement of a satisfaction in the Assessing Officer that having regard to the accounts of the assessee, as placed before him, it is not possible to generate the requisite satisfaction with regard to the correctness of the claim of the assessee. It is only thereafter that the provisions of section 14A(2) and (3) read with rule 8D of the Rules or a best judgment determination, as earlier prevailing, would become applicable." (underline provided by us for emphasis) 18. Following the same parity of reasoning and since the issue was also decided by the Assessing Officer on the basis that similar disallowance was made in earlier year, we allow the claim of assessee in entirety and dismiss the ground of appeal No.2 raised ....
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....mparables, provisions of section 10A(7) of the Act were not attracted. The relevant findings of Tribunal are in paras 24 to 27 at pages 14 to 16 of the order. 23. In the facts of present case also the Assessing Officer noted that net profit margins earned by assessee were 31.77%. However, the profit margins earned by 7 companies were 9.33% (mean margins). The Assessing Officer thus, had invoked provisions of section 10A(7) r.w.s. 80IA(10) of the Act and held the assessee to have earned more than average profits than its comparable companies and where 26% of export of services were provided by the assessee to its group companies, there was close business connection between group companies which enabled the assessee to show more than ordinary profits. The Assessing Officer thus, computed disallowance of BPO business carried out from NDA-58, TTC BPO and also from Noida, SEZ and disallowance under section 10A(7) of the Act in respect of BPO business was made at Rs. 35,15,727/-. The Assessing Officer re-computed the deduction allowable under section 10A of the Act in respect of other undertakings. The DRP held that in the absence of any arrangement made between the parties, there was....
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....nds of assessee. 31. We have heard the rival contentions and perused the record. Under clause (ic) of section 40(a) of the Act, it is provided that fringe benefit tax paid under Chapter XIIH is not to be allowed as deduction while computing income under the head 'Profits & gains or profession'. In other words, FBT paid in India under the provisions of the Act is not to be allowed as deduction but there is no such embargo in respect of FBT paid in Australia. We uphold the findings of DRP in this regard that FBT paid in Australia is not covered by clause (ic) of section 40(a) of the Act. 32. Similar is the proposition laid down by Mumbai Bench of Tribunal in ACIT Vs. Shipping Corporation of India in ITA No.5556/Mum/2007, along with CO No.294/Mum/2007, relating to assessment year 2003-04, order dated 23.12.2010. Accordingly, the ground of appeal No.5 raised by Revenue is dismissed. 33. Now, coming to last issue raised by Revenue i.e. deletion of disallowance made under section 40(a)(ia) of the Act in respect of overseas payments. The issue raised by Revenue is in respect of non deduction of tax at source out of certain payments made by the assessee to its associated enterpris....