TaxTMI 
TaxTMI 
2017 (10) TMI 1609
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..... China. The assessee has its sufficient presence in India in order to carry on its business in India through the project office referred to as "Dongfang Electric Corporation Kolkata Project Office". Admittedly, since the year 2004 the said Kolkata Project Office has served as the Permanent Establishment (PE) in India in the context of taxation under the Indian Income-tax Act, 1961 and the India-China Double Taxation Avoidance Agreement [hereafter referred to as 'DTAA'] 2. In the year 2004, the assessee entered into two separate contracts; one with the 'The West Bengal Power Development Corporation Limited (WBPDCL), for setting up Units 1 & 2 (2 X 300 MW) for the Sagardighi Thermal Power Projects at Murshidabad, West Bengal and the other with 'The Durgapur Projects Limited(DPL)' for setting up units 7(1 x 300 MW) for the Durgapur Project Power Station at Durgapur, West Bengal. Each contract was divided into two distinctly separate parts, the details of which are as under: WBPDCL (a) Contract No. SgTPP/1/(SgMP-1 Supply)/03/2004 dated August 26, 2004 for supply of equipment and materials of Main Plant Turnkey Package (SgMP-1) Units 1 & 2....
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....e entire contract was treated as a single point responsibility of DEC, China and non-performance of any part or portion of the contract was to be deemed as a breach of the whole contract. 4. In February, 2005 the assessee made separate applications u/s 197 of the Income-tax Act, 1961 (the Act) in respect of the aforesaid two projects, in which the following submissions were made: Supply of equipment overseas is not taxable in India both under the Domestic Law as well under the Indo-China DTAA and hence, should not be subjected to tax deduction at source; and Local supply and services portion should be subjected to tax deduction at source at NIL rate since the company expects to incur substantial loss on such services. Section 44BBB of the Act will be applicable to the company's case and company will opt for taxation on net income basis under sub-section (2) of the said section, which requires maintenance of regular books of accounts u/s 44AA as well as preparation of accounts and getting the same audited as required u/s 44AB, which are subject to scrutiny by the Assessing Officer u/s 143(3) of the Act. 5. After considering the assessee's submissions separa....
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....n respect of receipts from offshore supply, but the petitioner shall maintain a separate account of receipt and expenditure in respect of operation relating to offshore supply contract carried out by the PE in India (with proper documentation and supporting evidence), the profit, from which shall be clubbed with the profits from local supply and services portion, and if there is any tax liability, after giving credit for TDS from local supply and services contract, the same shall be paid by the petitioner by way of advance-tax. Local supply, erection and services The order of the assessing officer is confirmed. The tax shall continue to be deducted @ 4.182% of the receipts for local supplies & services till the completion of the contract, even if, there is actual loss/lesser income, after exercising option u/s.44BBB(2) of the I.T .ACT., by the petitioner. It is considered necessary to do so, because, there may be some profit attributable to offshore supply, which can, only be determined after regular assessment. In the result, the revision petition is partly allowed." Effect of such order was duly given on 01.07.2005." 3. The assessee filed the following ....
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....s 15,493,243 as income from other sources instead of business income and taxing the same @10% on the gross basis under India-China Double Taxation Avoidance Agreement. 6. On the facts and in the circumstances of the case, the AO erred in granting TDS credit of Rs 34,139,225 instead of Rs 34,204,212 as claimed by the appellant resulting into a short grant of TDS to the extent of Rs 65,187. 7. On the facts and in the circumstances of the case and, the AO erred in levying interest under section 234D of the Act. 8. On the facts and in the circumstances of the case and, the Assessing Officer erred in granting short credit of interest under section 244A of the Act. 9. On the facts and circumstances of the case and in law, the AO has erred in initiating penalty proceedings under sections 271 (1 )(c) of the Act." Assessment Year 2010-11 "1. On the facts and in the circumstances of the case, the DRP and consequentially the impugned order erred in rejecting the Appellant's claim that the reference made by the AO to Transfer Pricing-Officer (TPO') is erroneous and bad in law and against the interest if natural justice. 2. On the....
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....n the facts and circumstances of the case in making an adjustment of Rs 54,693,572 by applying Transfer Pricing provisions and thereby rejecting the book results of the Project Office which were arrived at in consonance with Article 7(1) of Double Taxation Avoidance Agreement between India and China read with Article 5 thereof. 9. Without prejudice to the above grounds, the adjustment of Rs. 54,693,572 made by the AO/ TPO/ DRP vide impugned order is bad in law and on the facts and circumstances of the case as the same has been made:- (i) By applying Transactional Net Margin Method and rejecting Comparable Uncontrolled Price method or Profit Split Method for determining the amount of profit; (ii) By taking into consideration the comparable which differ in many aspects in context of business activities of the Project Office of the Appellant in India; (iii) Without making adjustments necessary to account for differences in the comparable; (iv) By adopting the cost base without appreciation of the scope of activities undertaken by the Project Office; (v) Without appreciating that the appellant is making overall loss on the said proj....
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....ome Tax Act, 1961 by Assessing Officer ('Assessing Officer') to the Transfer Pricing Officer ('TPO'). 1(b) Without prejudice to all other grounds of appeal taken herein, that on the facts and in the circumstances of the case and in law, determination of existence of specific international transaction being an exercise within exclusive jurisdiction of the Assessing Officer before making any reference to the TPO, determination of existence of international transaction by TPO and subsequent determination of ALP is beyond specific and distinct jurisdictions conferred in law and consequently the resultant demand in invalid and unenforceable in law. 9(i) That on the facts and in the circumstances of the case, Learned Dispute Resolution Panel erred in routinely upholding the FAR analysis and transfer pricing adjustment made by the TPO even while finding the FAR to be grossly different on facts." 4. These additional grounds are admitted for both the Assessment Years as they raise legal issues and as they do not require investigation into any fresh facts. All the facts are on record. 5. For both the Assessment Years, we take up the first issue, as to ....
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....ssment Year 2010-11. Reliance was placed on the following case laws:- * Strategic Credit Capital Pvt. Ltd. & Ors., Versus Ratnakar Bank Ltd. [395 ITR 391] * Amiya Bala Paul vs. CIT (2003) 6 SCC 342 * SPL's Siddhartha Ltd [2012] 345 ITR 223 5.3. He submitted that there is no reference made by the AO to the TPO, in terms of section 92 CA of the Act, the assessment order for the Assessment Year 2009-10, was required to be passed by 31/12/ 2012, and as the assessment order was passed on 31/01/2014, the assessment is barred by limitation and that similar is the position for assessment year 2010-11. As it is the duty of the AO under the law, to decide the existence of an international transaction, and thereafter take approval from the competent authority and refer the particular international transaction/s to the TPO for the determination of ALP, whereas in the case on hand, the TPO was trying to discover the existence of an international transaction, without a reference from the Assessing Officer. 5.4. He further submitted that DEC, China and the DEC-PO are not AEs, and that there is no international transaction. He further submits that DEC ....
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....IT), for his proposal for making a reference to the TPO of certain transactions of the assessee company for determination of the ALP u/S 92CA of the Act and the DIT(IT) vide his letter dt. 27/12/2011, granted approval to the proposal and this letter for duly forwarded to the ADIT(IT), Range-1, Kolkata & to the DIT(TP), Kolkata for necessary action. He vehemently contended that there is no dispute that the order was passed by the TPO on a reference by the assessing officer on 27/12/2011 and that no authority has interfered with the jurisdiction of either the AO or the TPO. He submitted that the assessee is trying to import the restrictions under section 148 to a reference by the TPO under section 92CA(3) of the Act. On the letter dt. 03/01/2012, he submitted that it was a mere reminder. On the mentioning by the TPO in his order under section 92 CA (3) of the Act on 30/01/2013 for the Assessment Year 2009-10, that the reference was received on 03/01/2011, he submitted that it was the date on which the TPO received the reminder and argued that but the Assessing Officer's letter was dt.27/12/2011, and it was received on the same day by the TPO. On a query from the Bench, no letter ....
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....s the date of making the transfer pricing reference to the TPO. 25. The contention of the assessee is not well founded. In the instant case, the AO sent the proposal for making reference to the TPO on 26.12.2011 to be approved by the Ld. DIT (International Taxation), Kolkata and the Ld. DIT accorded his approval on 27.12.2011. The reference as approved by the Ld. DIT was also communicated to the DIT(Transfer Pricing), Kolkata on 27.12.2011. Thereafter, the letter referred to above was written by the AO in a routine manner just to reaffirm the fact that the international transactions entered into by the assessee stood referred to the Transfer Pricing Officer in terms of approval granted for the same by the Ld. DIT(International Taxation), Kolkata on 27.12.2011. Even at the cost of repetition, it is placed on record that the Ld.DIT(International Taxation), Kolkata accorded his approval for marking the reference to the TPO on 27.12.2011 vide letter No. DIT(IT)/Kol/TP-Approval/SS/2010-11/1760 and the copy of this letter was also sent to the Ld.DIT(Transfer Pricing), Kolkata on the very same day i.e. 27.12.2011 for taking necessary action. The reference was received by the offi....
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....10, at page 1, para 7, stated as follows:- 1. Date of reference by the AO Case records reveal that the approval for reference to the TPO for determination of Arms Length Price u/s 92CA of the I.T. Act, 1961 in this case for A.Y. 2009-10 was obtained from the DIT office on 27.12.2011 vide DIT office letter DIT(IT/Kol/TP-approval/55/2010-11/760 dated 27.12.2011. The copy of approval for reference was also sent by the office of DIT(IT), Kolkata to the DIT(TP), Kolkata for necessary action at his end. In that order of approval, the AO was directed to submit the relevant documents to the DIT(TP). The chain of events do establish that a reference was duly made to the TPO and the TPO had passed his order observing due process of law. Certified copy of the document i.e. approval of the DIT(IT), Kolkata, which is available in the file is enclosed. (Annexure-I). Copy of page of issue register maintained in the office of Director of Income Tax (International Taxation) is also enclosed as per annexure-1A. DRP had also considered the matter and were of the opinion that it was a valid TP reference within the time limit permitted by Statute. 2. Date of Dispatch of reference l....
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....erence u/s 92CA(1) of the Act, for both the impugned assessment years by the Assessing Officer to the T.P.O. Only letters of approval obtained for making the reference are available on record, right from the stage of assessment proceedings. 9. In view of the above discussion, we agree with the contentions of the ld. Counsel for the assesse, that the assessment orders passed for both the assessment years are barred by limitation as there is no valid reference by the Assessing Officer to the T.P.O and consequently the limitation specified u/s 153(1) of the Act, applies.. As we have held that both the assessment are barred by limitation, we do not adjudicate the other issues that were argued before us as it would be an academic exercise. 10. In the result, both the appeals of the assessee are allowed. Kolkata, the 25th day of October, 2017. ============= Document 1 à¤à¤¾à¤°à¤¤ सरकार GOVERNMENT OF INDIA आयकर निदेशक ( अंतरà¥à¤°à¤¾à¤·à¥à¤Ÿà¥à¤°à¥€à¤¯ कराधान ) का कà¤....
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.... of 17 At in Dongfeng Elective Con معلم Document 3 कशà¥à¤¯à¥‡à¤¨ जयन à¤à¤¾à¤°à¤¤ सरकार GOVERNMENT OF INDIA आयकर निदेशक (अंतरà¥à¤°à¤¾à¤·à¥à¤Ÿà¥à¤°à¥€à¤¯ कराधान) का कारà¥à¤¯à¤¾à¤²à¤¯ Office of the Director of Income Tax (Intl. Taxation) Aayakar Bhawan (Poorva), 110, Shantipally, Kolkata - 700 107. DITIT&TP)/KOV/Approval/55/2012-13/2436, To, The Deputy Director of Income Tax, (International Taxation), 1(1) Kolkata उप/सहायक आयकर लिय the Oy/Asst. Director 1(1) 77/RECEIVED 6 DEC 2012 Tel: Fax: 033- 033- दूरà¤à¤¾à¤·: 033- फैकà¥à¤¸: 033- Dated: 06/12/2012 2.1992195 Madam, International अंतराषà¥à¤Ÿà¥à¤°à¥€à¤¯ 7. Kolkata Taxation करà....