TaxTMI 
TaxTMI 
2019 (4) TMI 1769
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....of the case and in law, the learned AO has exceeded his jurisdiction by making the following additions to the returned income/loss and disregarding the provisions of section 44 of the act read with rule 1 and 2 of the 1st schedule of the act which is self-contained court for assessment of income of insurance company and specifically prohibits any adjustment u/s 28 to 43B of the act, with regard to determine the taxable income of a life insurance company i. Rs. 25575000/- on account of fringe benefit tax provision under section 40 (a) (IC) Page | 2 ii. INR 943000 on account of provision of that that is under section 36 (1) (Viia) iii. INR 2385358/- on account of donation expenditure u/s 37 (1) 4. that the learned AO erred in facts and in law in making the addition of INR 9 048000/- from sale of investments credited to the profit and loss account (nontechnical account) by separating income from sale of investments credited to profit and loss account (non-technical account) from income from the business of insurance and considered the same as income from nonlife insurance business without having regard to the provisions of section 44 of the act. The learned AO failed to ap....
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....ing 31 days is the period for which the associated enterprise personnel provided short-term consultancy services thereby failing to appreciate that the actual corresponding number of days 143 (despite the said fact being duly furnished on record) e. not allowing the 5% range mentioned in proviso to section 90 2C (2) of the act while computing the arm's-length price for the consultation services provided by the associated enterprise. 6. The learned AO has erred in law and on facts in initiating penalty proceedings for furnishing inaccurate particulars u/s 271 (1) (c) of the act 3. Brief facts of the case shows that that assessee is a company engaged in the business of life insurance. It filed its return of income on 23/10/2006 declaring a loss of INR 580544350/-. It was found that assessee has entered into an international transaction and therefore reference was made to the transfer pricing officer on 27/10/2008. The learned transfer pricing officer examined the arm's-length price of the international transaction of (1) purchase of software of INR 605642, (2) short-term consultancy and assistant services of INR 6804099 (3) recharge from New York life in of INR 69238....
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....on of INR 25575000/- and disallowance of the provision of bad debt and donation paid of Rs. 3328358/- was made to the returned loss of Rs. 580544350/- making the assessed loss at INR 541409456/- . Assessee aggrieved with the order of the learned AO has preferred this appeal before us. 6. At the time of the commencement of the hearing the learned authorised representative submitted an application for admission of the additional ground vide letter dated 9/5/2018, wherein he proposed to raise following 2 additional grounds of appeal:- 1. That on the facts and circumstances of the case and in law, the DRP/AO erred in not allowing the exemption u/s 10 (34) of the act in respect of dividend income of INR 4 505772/- earned by the appellant during the previous year relevant to subject assessment year. 2. Without prejudice to ground of appeal number 3 relating to disallowance of donation of INR 2 385358/-, that on the facts and circumstances of the case and in law, the DRP/AO erred in not allowing deduction u/s 80 G of the act on the amount of donation paid by the appellant during the previous year relevant to subject assessment year. 7. Adverting to the application of the admissi....
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....e therefore submitted that the aforesaid additional grounds may kindly be admitted as they do not involve any fresh investigation of the facts and are legal in nature. 9. The learned departmental representative vehemently objected to the additional ground raised by the assessee and submitted that they have not been claimed in the original return of the income or before the learned assessing officer and 1st time raised before the coordinate bench and therefore they are not arising out of the order of the assessing officer or the learned DRP and therefore such ground cannot be raised before the tribunal for the 1st time. 10. The learned authorised representative vehemently referred to the order in case of the assessee's own case for assessment year 2010 - 11 wherein on identical facts and circumstances the assessee has raised ground of appeal regarding claim u/s 10 (34) of the act , which is recorded at para number 3 of the order of the coordinate bench. He referred to para number 5 of the order of the coordinate bench where identical additional ground with respect to the exemption under section 10 (34) of the act was admitted. He therefore submitted that this decision covers the....
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....f authorities below. In view of this fact the only question before us in the additional ground relates as to whether the provisions of section 10 (34) are applicable in the case of the assessee or not. Therefore, in our view, the recent decision of the honourable Bombay High Court in the case of Ultratech cement Ltd (supra), as relied upon by the learned departmental representative will not assist the revenue. We therefore admit the additional ground.‖ 12. In view of the above judicial precedent in assessee's own case for assessment year 2010 - 11, respectfully following the decision of the coordinate bench, we also admit the additional ground raised by the assessee with respect to the exemption under section 10 (34) of the act in respect of dividend income of INR 4 505772/-. 13. In the application for the additional ground of appeal, 2nd ground raised is with respect to the allowability of deduction u/s 80 G of the income tax act. The learned assessing officer has disallowed the donation which was claimed by the assessee is not adjustable under the provisions of section 44 of the act. As the disallowance has been made the alternate claim arising out of the disallowances ....
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...., its taxable profit is to be computed as per the provisions of section 44 read with provisions of rule 1 and 2 of the 1st schedule of the Act. Provision of section 44 starts with a non obstante clause which forbids any adjustment to the total income as provided u/s 28 to Section 43B of the Act, All these disallowances falls in that subset of sections, hence disallowances/ adjustment made by ld AO is not correct. He further stated that unlike rule 5 of schedule 1 which is applicable to general insurance companies which specifically disallows expenses not allowable under the provisions of section 30 to 43B there is no such specific mandate in provisions of rule 2 which applies to Life Insurance business as amended by Finance act, 1976. He further stated that prior to that amendment it specifically provided that expenditure not allowable u/s 30 to section 43B shall be added back. However there is no such provision in the impugned assessment year and therefore such adjustment cannot be made. He further relied on the decision of i. life insurance Corp of India in 119 ITR 900, ii. Gen insurance Corp 240 ITR 139, iii. Oriental insurance company 291 ITR 370 and iv. New India a....
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....er XIIH regarding fringe benefit constitute a self-contained code in itself and does not have any relation with the tax payable under the other provisions of the act. He otherwise stated that fringe benefit tax is not an allowable deduction but is an additional income tax and therefore even the income tax paid by the insurance company under section 44 of the act, the above sum is not deductible. Hence he stated that the addition has been rightly made by the learned assessing officer. He further stated that the non-obstante clause mentioned in the section 44 of the income tax act does not override the provisions of fringe benefit tax as it overrides only the provisions of the act relating to the computation of income chargeable under the head 'interest on securities',' income from property', ‗capital gains' or 'income from other sources'. In view of this he submitted that the learned assessing officer has correctly made the disallowance of the provision of fringe benefit tax. ii. With respect to the disallowance of provision for doubtful debts and the donation he also stated that his arguments with respect to the fringe benefit tax are also squarely applies to this issue. ....
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....ile computing the shareholders income. This implies that the assessee has accepted the view of the Revenue that the income in the shareholders a/c has to be computed under the normal provisions of the computation of income in Income Tax Act. Royalty paid by the assessee in our view cannot be regarded to be an expense relating to the life insurance business. Therefore there is nothing wrong caused to the Revenue as Royalty cannot be regarded to be liability incurred for life insurance business. We therefore set aside order of CIT(A) on this issue and delete the enhancement made by CIT(A) by Rs. 2,41,83,000/-. Thus this ground stands allowed.‖ 19. Further with respect to donation the coordinate bench in assessee's own case ( supra) in para no 94 has held as under :- "94. Ground Nos. 7 & 8 relates to the sustenance of disallowance of Rs. 2,50,00,000/-. made by the Assessing Officer on account of donation paid by the assessee. Ground no. 8 relates to the sustaining disallowance of Rs. 2500/- in respect of share issue expenses. While disposing of ground no. 6 in preceding paragraph, we held that the income of the assessee has to be computed in accordance with Rule 2 of First ....
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.... that the assessee is eligible for deduction under section 80G of the Income tax Act and the assessee had complied with the conditions as stipulated under section 80G. It is also not the case of the assessee that the assessee has incurred these expenses eligible for deduction under section 35CCA, 35CCB, 35CCC or 35CCD so that we have taken a view that while computing the income from insurance business, in view of specific provisions of section 44 no disallowance could have been made.' 20. While deciding on issue in case of general insurance Corp of India vs CIT in 240 ITR 139 the honourable Supreme Court while interpreting the provisions of section 44 of the income tax act has held that section 44 is a special provision governing computation of taxable income earned from business of insurance. It opens with a non-obstante clause and, thus, has an overriding effect over other provisions contained in the act. It mandates the authorities to compute the taxable income for business of insurance in accordance with the provisions of 1st schedule of the act. Then, honourable Supreme Court considered the provisions of rule 5 which were applicable for insurance business other than life ins....
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....nsurance the provisions of these rules will apply. Rule 2 provides the computation of income of the life insurance business. According to that rule profits and gains of life insurance business shall be taken to be the annual average of the surplus arrived at by adjusting the surplus or deficit disclosed by the actuarial valuation made in accordance with the Insurance Act, 1938 in respect of the last inter-valuation period ending before the commencement of the assessment year, so as to exclude from it any surplus or deficit included therein which was made in any earlier inter-valuation period. Rule 3 has been omitted w.e.f. 1-4-1977 which provides for certain deductions from the income. Rule 4 provides the mechanism for granting the credit of tax deducted at source against the income as computed in rule 2. Therefore, there is no reference of any deduction available to the assessee from the income computed as per rule 2. Similarly, nothing is provided to include or enhance the income computed under rule 2. 21. Therefore on the issue of provision of doubtful debts and donation which is been debited to the profit and loss account it is necessary for the assessee to prove that these 2....
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.... of the assessee is allowed. 23. Now we come to ground number 4 of the appeal wherein the addition of INR 9 048000/- from sale of investments credited to the profit and loss account separated from income from the business of insurance by the learned assessing officer and taxed as a non-life insurance business income. Thereby denying the benefit of provisions of section 44 of the act on the above sum. During the course of assessment proceedings the learned assessing officer noted that assessee has earned income of INR 9 048000/- on account of sale of investments. The learned AO was of the view that nature of income emanating from sale of investment partakes the character of income not from insurance business of the assessee however assessee has considered it is part of business of insurance. The main reason given by the assessee is that life insurance companies in India are governed by the provisions of the insurance act 1938 and insurance regulatory development authority act 1999 and rules framed there under. The assessee is in Indian insurance company and has been allowed the life insurance business license by IrDA. He further stated before the assessing officer that according t....
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....assessee that the above petition has been accepted by the revenue in earlier years and also consistent with the various decisions of the honourable Supreme Court. The learned AO considered the explanation of the assessee and rejected it as according to him the provisions of section 44 of the income tax act restricts only to the extent of income derived from life insurance business and in respect of other sources of income the normal charging sections are mandatorily applicable. Hence profit from sale of investment does not qualify to be income from life insurance business. With respect to the fact that in earlier year no such treatment has been given by the learned assessing officer and in past such profit on sale of investments has been considered as part of the insurance business, the learned AO stated that principles of res judicata do not apply to the income tax proceedings and if it is a mistake it ought to be rectified. Therefore he considered the income from sale of investment of INR 9 048000/- to be business income falling within section 28 of the act and added to the total income of the assessee separately. The learned DR P also upheld the action of the learned assessing o....
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....by authority of advance ruling in petition number 445 of 98 dated 30/04/2001 with squarely covers the issue in favour of the assessee. In view of this is submitted that the order of the learned assessing officer is not correct in treating the profits and gains of investment as separate business income. Alternatively in ground number 4.1 he raised the plea and stated that if this issue as per ground number 4 is decided against the assessee the assessee is eligible for relief as claimed in the ground number 4.1. 25. The learned departmental representative vehemently supported the order of the learned AO. The learned departmental representative mostly reiterated the argument that has been raised by the assessing officer in his order. 26. We have carefully considered the rival contention and perused the orders of the lower authorities. The only issue involved in this ground of appeal is whether the profit earned by the assessee on sale of its investment is chargeable to tax as part of insurance business or as a separate business. The provisions of section 44 of the income tax act is culled out earlier specifically provides that profits of insurance business specifically required ....
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.... of the directors or to control the management or policy decisions including by virtue of their shareholding or management rights or shareholders agreements or voting agreements; (c) whose sole purpose is to carry on life insurance business or general insurance business or re-insurance business or health insurancebusiness; ] (11) "life insurance business" means the business of effecting contracts of insurance upon human life, including any contract whereby the payment of money is assured on death (except death by accident only) or the happening of any contingency dependent on human life, and any contract which is subject to payment of premiums for a term dependent on human life and shall be deemed to include- (a) the granting of disability and double or triple indemnity accident benefits, if so provided in the contract of insurance, (b) the granting of annuities upon human life, and (c) the granting of superannuation allowances and 22[benefit] payable out of any fund applicable solely to the relief and maintenance of persons engaged or who have been engaged in any particular profession, trade or employment or of the dependents of such persons. 23[Explanation.-For ....
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....bentures (including bonds) and other rated & secured debt instruments as per Note appended to Regulations 4 to 9. Equity shares, preference shares and debt instruments issued by All India Financial Institutions recognized as such by Reserve Bank of India - investments shall be made in terms of investment policy guidelines, benchmarks and exposure norms, limits approved by the Board of Directors of the insurer. 2. Bonds or debentures issued by companies, rated not less than AA or its equivalent and A1 or equivalent ratings for short term bonds, debentures, certificate of deposits and commercial papers by a credit rating agency, registered under SEBI (Credit Rating Agencies) Regulations 1999 3. Subject to norms and limits approved by the Board of Directors of the insurer's deposits [including fixed deposits as per Regulation 3 (a) (8)] with banks (e.g. in current account, call deposits, notice deposits, certificate of deposits etc.) included for the time being in the Second Schedule to Reserve Bank of India Act, 1934 (2 of 1934) and deposits with primary dealers duly recognized by Reserve Bank of India as such. 4. Collateralized Borrowing & Lending Obligations (CBLO) cre....
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....art of his assets otherwise than in any of the approved investments as may be specified by the regulations subject to such limitations, conditions and restrictions therein 31. On Conjoint reading of all these provisions it is apparent that insurance companies are required to invest according to the rules provided by the IRDA of all its controlled funds. It is not the case of the assessee that assessee has invested funds other than its controlled funds. To get out of the provisions of section 44 of the income tax act it is the duty of the assessing officer to show that investment is not part of the insurance business of the assessee. However on our reading of the various regulatory provisions concerning the life insurance business, we find that assessee is investments are part of its insurance business. In view of this we do not subscribe to the view of the learned AO that investment is a separate and identifiable business of the assessee separate from life insurance business. 32. Further in case of the assessee for assessment year 2005 - 06 this issue arose and decided by the learned CIT - A in assessee's own case in favour of the assessee holding that profit or loss arising on....
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....8 to 43B, the profits and gains of any business of insurance, including any such business carried on by a mutual insurance company or by a co operative society, shall be computed in accordance with the rules contained in the First Schedule.' (emphasis supplied by us) 13. On circumspection of the prescription of section 44, it emerges that this section starts with a non-obstante clause (bold part) qua the computation of income chargeable under the head "interest on securities", "Income from house property", "Capital gains", or "Income from other sources" or in section 199 or in sections 28 to 43B ( italicized bold part). It provides that profits and gains of insurance business (normal part) shall be computed (normal italicized part) in terms of the rules contained in the First Schedule. Effect of the non- obstante clause in the section is that whatever is contained in the provisions specifically enumerated herein will be superseded and the profits and gains of any business of insurance shall be computed in accordance with the Rules contained in the First Schedule. When we read section 44 in juxtaposition to the First Schedule, it becomes vivid that the profits and gains of ....
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....ources' is contained in section 56(1) and the computation provision is contained in section 57. Coming to the income under the head 'Profits and gains of business or profession', the chargeability is enshrined in section 28, which provides that : 'The following income shall be chargeable to income-tax under the head "Profits and gains of business or profession".....' and the computation is contained in section 29, which mandates that :'The income referred to in section 28 shall be computed in accordance with the provisions contained in sections 30 to 43D. It is manifest from the above discussion that the computation of income under each head is separately enclosed in Chapter IV, which contains not only the charging but also the computation provisions. However, section 92 has been placed in a separate Chapter X, with the caption 'Special provisions relating to avoidance of tax'. Section 92 with the marginal note 'Computation of income from international transaction having regard to arm's length price', is the first section of this Chapter. Sub-section (1) provides that: 'Any income arising from an international transaction shall be com....
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....tries made in the books of account in respect of the previous year in which the international transaction was entered into. 16. This shows that when an assessee enters into an international transaction, second computation has to be necessarily made u/s 92. If the second computation results into a transfer pricing addition, such an addition is made to the income computed under the first computation. If on the other hand, the second computation results in reduction of the income computed under the first computation, the same is ignored and the assessment is finalized on the basis of first computation alone. This mechanism of two computations can be understood with the help of a simple illustration. An assessee has sale of Rs. 100/- to its AE and the AO computes income under the first computation at Rs. 6/-. Such first computation of income of Rs. 6/- gets enhanced by the second computation based on the transfer pricing adjustment of Rs. 15/-, if the ALP of the sale transaction to the AE is determined at Rs. 115/-. The resultant total income comes to Rs. 21/- (Rs. 6/- under the first computation plus Rs. 15/- under the second computation). Section 44, in our above illustration, has....
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....ons. If the intention had been to cover section 92 as well, then either a specific reference to section 92 would have been made or the italicized bold portion of the provision starting with 'relating to the computation of income' and ending with 'sections 28 to 43B' would have been omitted, in which case, section 44 would have read as : ''Notwithstanding anything to the contrary contained in the provisions of this Act, the profits and gains of any business of insurance, including any such business carried on by a mutual insurance company or by a co-operative society, shall be computed in accordance with the rules contained in the First Schedule'. This is not something unknown to the law. The Parliament has worded the non-obstante clause in relevant provisions in accordance with its intent. The immediately succeeding section 44A is again a special provision for deduction in the case of trade, professional or similar association. This provision too, like section 44, opens with a non obstante clause but overrides all the provisions of the Act, as is evident from its language, which says 'Notwithstanding anything to the contrary contained in this Act,....
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.... as per the first computation available under section 44 of the Act and the international transaction concerns with such income alone. It is not a case of starting the second computation u/s 92 without there being any first computation. 20. The reliance of the ld. AR on the judgments in the case of LIC v. CIT [1964] 51 ITR 773 (SC) and CIT v. Oriental Fire and General Insurance Co. Ltd., [2007] 291 ITR 370/161 Taxman 181 (SC), etc. is again not germane to the issue under consideration. In these judgments and the other decisions relied by the ld. Senior counsel, the Hon'ble Courts have held that the profits of insurance business are governed by the rules in Schedule and the Assessing Officer cannot make any adjustments in accounts. This proposition is obviously undisputed and cannot be called into question. But, in none of these decisions, there is any reference to the non-applicability of section 92, being the second computation dealing with the determination of the ALP of an international transaction of an assessee carrying on insurance business. Similarly, the assessee can't drive home any benefit from certain decisions including Cash Edge India (P) Ltd. v. ITO (Mumbai....
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....Sh. Tarnadeep Singh, the ld. counsel took up the proceedings for further arguments. During the course of such hearing, it was prima facie noticed that the ld. CIT(A) failed to deal with all the points raised in the order passed by the TPO. As such, it was considered expedient to properly examine the matter. It was accordingly directed to both the sides to file a copy of the Agreement pursuant to which the services were received by the assessee and also a copy of the Transfer pricing study report of the assessee for the year. Case was adjourned to 21.9.2017. Certain adjournments sought by the ld. AR on account of ill health, were also allowed. When the case eventually came up for hearing on 9.10.2017, the ld. DR placed on record a copy of the Agreement. The ld. AR wanted a week's time, impliedly, treating such a document as a paper book filed by the Revenue in terms of rule 18 of the ITAT Rules, 1963. Knowing well that the additional ground has not been accepted and the proceedings have started on merits, he sought time, inter alia, on the ground that similar legal issue has been heard by the Mumbai bench of the tribunal and the order is awaited. On a pertinent question, it was ....
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.... 24. We have noted above that the ld. DR placed on record a copy of agreement dated 31.01.2003 effective from 01.01.2002 (hereinafter also called 'the Agreement'). The same is accompanied by a letter dated 22.09.2017 from ACIT addressed to the CIT, DR. The Agreement has been entered into between the assessee and New York Life International, LLC, (NYLI) a company incorporated in the USA. 25. Article 1 of the Agreement containing 'Scope of services' provides through clause 1.1 that the services: 'shall be to advice and assist MNYL in devising Training Programme for MNYL Agent Advisors (hereinafter referred to as the 'Services.').' Clause 1.2 states that : 'NYLI will send trained personnel to the designated MNYL sites in India or abroad as required by MNYL to provide the Services.' Article II with the heading "NYLI as independent contractor" states that: 'NYLI agrees to perform the Services under this Agreement as an independent contractor. The personnel provided by or through NYLI to MNYL shall not be considered to be the employees of MNYL nor shall they have the authority to or be asked by MNYL to exercise management authority with res....
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....ar that the employees were to be paid on per day basis and even the time spent by NYLI personnel on travel etc. was to be paid by the assessee. Such payment was supposed to be made: 'within one month of the completion of the project or ......, whichever is later.' An overview of the above clauses makes it manifest that NYLI deputed its personnel to the assessee for devising Training Programme for the assessee's agent advisors. This discerns that the transaction was more of the nature of short-term assignment of employees and no 'consultancy services' were sought to be received by the assessee. That apart, NYLI itself is not a consulting company as it is engaged in the business of selling various insurance products and the entire emphasis of sending its personnel was to train and assist the assessee in its start up phase. Here it is pertinent to mention that the TPO has referred to two agreements i.e., one for training and one for actuarial services under which the employees were assigned to the assessee. These Agreements as per TPO's order were entered into on 07.12.2001 and were effective for a period of one year from 01.01.2001. These agreements were to te....
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....d in respect of health care, retirement benefits, human capital strategy, HR risk management, HR function strategy, performance management, etc US$ 440 for a Senior Health and Welfare Consultant and for an Actuary US$ 250 for a Consultant Rael & Letson Consultants and Actuaries Consultancy in the field of human resources, including health and welfare consulting. US $ 190 for an Actuary US$ 170 for a Consultant Argo Navis Consulting Consultancy in the field of customer relationship management, marketing technology, and business strategy. US$ 200 (no level specified) PricewaterhouseCooper s for a New York based Actuary Consulting in actuarial services US$ 500 for an Actuary Solomon Consulting Consultancy to law firms the field of strategic planning, organizational architecture, law practice acquisition, hiring procedures and system issues, compensation system, etc. US$ 195 to US$ 495 Ernst & Young Consultancy/solutions in the fields of audit, tax, corporate finance, enterprise risk management, valuation of intangibles, business performance, etc. US$ 250 for Senior Managers on tax advice Deloitte Touche Tohmatsu Consultancy/solutions in the fields of accounting, assu....
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....e equated to VP at NYLI. (e) The Senior Health and Welfare Consultant/Actuary and Consultant employed at Mercer Human Resource Consulting could be equated to SVP and AVP at NYLI, respectively. However, since no .level of employee specified in case of Mercer Human Resource Consulting could be equated 'to VP at NYLI, an average of the hourly charge-out rates for a Senior Health and Welfare Consultant/Actuary and of a Consultant, was considered to be appropriate for a level at Mercer Human Resource Consulting, which could be equated to VP at NYLI. (f) The Actuary and Consultant employed at Rael & Letson Consultants 'and Actuaries could be equated to SVP and AVP at NYLI, respectively. However, since no level of employee specified in case of Rael & Letson Consultants and Actuaries could be equated to VP at NYLI, an average of the hourly charge-out rates for an Actuary and of a Consultant, was considered to be appropriate for a level at Rael & Letson Consultants and Actuaries, which could be equated to VP at NYLI. (g) The New York based actuary could be equated to SVP at NYLI. (h) As regards, Argo Navis Consulting, the hourly charge-out rate of US$ 200 was not specifi....
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....y the appellant were lower than the rates determined by the modified CUP established by using only such rates as were actually charged from NYLI, the tested party, during the relevant period by independent service providers. 10.3 I accordingly decide this ground in favour of the appellant and hold that for AY 2002-03 the payments to NYLI made by the appellant for short term consultancy are at an arm's length price as substantiated by the CUP method. As a result I hereby delete the addition of Rs. 20,200,860/- inflicted by the TPO/AO for AY 2002-03." 32. It can be seen that in para 10.1, he set aside the finding of the Assessing Officer on secondment of employees vis-à-vis consultancy without considering that the NYLI assigned personnel to perform the 'Services' in the nature of advising and assisting the assessee 'in devising Training Programme' for its agents advisors, which is miles away from receiving 'consultancy services' as projected; and in para 10.2 he simply held that the rates prevailing in the international market for such services fairly represent the arm's length price without noticing that, firstly, the assessee made compar....
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....tions is adjusted to take into account the differences, if any, between the international transaction and the comparable uncontrolled transactions, or between the enterprises entering into such transactions, which could materially affect the amount of net profit margin in the open market; (iv) the net profit margin realised by the enterprise and referred to in sub-clause (i) is established to be the same as the net profit margin referred to in sub-clause (iii); (v) the net profit margin thus established is then taken into account to arrive at an arm's length price in relation to the international transaction. 34. Sub-clause (i) deals with the computation of the net operating profit margin realised by the enterprise from an international transaction in relation to costs incurred or sales effected or assets employed or to be employed by the enterprise or having regard to any other relevant base. Sub-clause (ii) provides that the net operating profit margin realised by a comparable uncontrolled transaction should be computed having regard to the same base as that taken in sub-clause (i) for the assessee. In the formula for calculating the profit margin under rule 10B(1)(e....
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....the initiation of penalty proceedings u/s 271 (1)( C ) of the act. At the time of hearing the learned authorised representative did not press it and therefore same are dismissed. 39. Now coming to the 1st additional ground raised by the assessee with respect to the allowability of the claim u/s 10 (34) of the income tax act. Identical issue has been decided by the coordinate bench in assessee's own case in [2018] 91 taxmann.com 477 (Delhi - Trib.)/[2018] 191 TTJ 897 (Delhi - Trib.) For assessment year 2010-11 as under:- 97. Now coming to the additional ground taken by the assessee which relates to the claim of deduction by the assessee u/ 10 (34) in respect of dividend income, we noted that this issue is duly covered by decision of Mumbai Bench of this Tribunal in case of ICICI Prudential Insurance Co. Ltd. (supra) in which under para 47 while dealing with similar issue following decision of General Insurance Corp of India (supra) by Bombay HC gave clearcut finding that assessee is entitled to exemption u/s 10(34) for the dividend income. We also noted while disposing of ground relating to applicability of S. 14A for disallowance of expenditure in respect of income not forming....