AI Drafter 
TaxTMI 
TaxTMI 
2023 (3) TMI 391
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....rence was made to the Transfer Pricing Officer (TPO) u/s. 92CA of the Act to benchmark the transactions reported in form Form- 3 CEB. The TPO made adjustments in respect of Provision of engineering design services Rs. 2,44,54,113/-. In respect of payment of management fee, the TPO held that there was no need for payment of fees for such services and determined the cost of management services as 'Nil' and made adjustment of Rs.74,05,940/-. The Assessing Officer in line with the order of TPO passed draft assessment order dated 23/03/2013 making addition in respect of TP adjustment. Further, the Assessing Officer observed that the assessee has entered into an asset purchase agreement dated 20/03/2009 with MWH ResourceNet (India) Pvt. Ltd. for sale of Pune division on slump sale basis. The Assessing Officer observed that the assessee has not furnished Form 3CEA to substantiate working of net worth as enshrined in section 50B of the Act. The Assessing Officer disallowed assessee's claim of carry forward of loss and determined the loss at 'Nil'. 2.1 The Assessing Officer further disallowed assessee's claim of deduction Rs.56,51,407/- u/s 10A in respect of Pune unit and also in respect....
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....id form was not initially filed but subsequently the same was filed before the Assessing Officer on 23/03/2013. The said form is at page 173 of the paper book. The Assessing Officer before taking cognizance of Form 3CEA filed by the assessee passed the draft assessment order on 22/03/2013. This fact was brought to the notice of DRP. The DRP considered the same and yet held the slump sale as international transaction u/s 92B. The DRP further erred in holding that the transaction of slump sale between two AEs was controlled by foreign holding company i.e. a non-resident AE, hence, it is an international transaction. The ld.Counsel for the assessee asserted that the provisions of section 92B are attracted only where there is transaction between two companies and at least one of them is a non-resident. The conditions of section 92B are not satisfied hence, the transaction of slump sale does not fall within the ambit of international transaction. In support of his submission the ld.Counsel for the assessee placed reliance on the decisions rendered in the case of Regus Business Centre Pvt. Ltd. vs. ITO in ITA No.1110/Mum/2017 for Assessment Year 2012-13 decided on 16/07/2020 and in the c....
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....pect of the above issues. 7.1 In respect of ground No.3 of appeal, the ld. Departmental Representative submitted that the TPO and DRP have rightly held the transaction of purchase of assets between assessee and MWH Resource Net (India) Pvt. Ltd. as international transaction. Both the aforesaid companies are subsidiary of a foreign holding. No such transaction would have been possible without the consent of foreign holding company. Thus, in effect the transaction is controlled by foreign holding company. The ld. Departmental Representative further pointed that both the signatories to the asset purchase agreement are on Board of Directors of both the companies. To substantiate her contentions, the ld. Departmental Representative referred to the asset purchase agreement and the Director's Report of the assessee company at page 252 of the paper book. The ld. Departmental Representative further pointed that MWH ResourceNet (India) Pvt. Ltd. is a 100% subsidiary of MWH Europe Ltd. Thus, in effect the transaction between the assessee and the MWH ResourceNet (India) Pvt. Ltd. is an international transaction. MWH ResourceNet (India) Pvt. Ltd. is merely a face of the foreign AE. The ld. D....
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.... The aforesaid prayer of ld. Departmental Representative cannot be considered in an appeal by the assessee. If the Revenue is aggrieved by the order of Assessing Officer, the recourse was available to the Revenue under the Act. The Revenue cannot seek relief against the assessee in an appeal by the assessee. The addition in the hands of assessee can only be made on the issues dealt with and included in computation of income in assessment order. Since, adjustment in respect of engineering and design services and payment of management charges have not been made in the final assessment order such adjustment cannot be given effect to. 9.2 In somewhat similar situation the Co-ordinate Bench in the case of Sandvik Asia P. Ltd. vs. ACIT(supra) held as under:- "7. In this context, the learned counsel for the assessee explained that the TPO in his order dated 28.10.2011 had proposed an addition of Rs.60,48,143/- in respect of international transactions of the assessee's manufacturing wire segment which was also proposed by the Assessing Officer in the draft assessment order under Section 143(3) read with Section 144C(1) dated 26.12.2011 and also upheld by the DRP. Further, i....
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....sessment order. Liberty is granted to the assessee for raising this issue again in case the aforesaid additions are made in the assessment order, in accordance with law. Consequently, ground No.1 & 2 of the appeal are dismissed as premature. 10. In ground No.3 of the appeal assessee, has raised following issue: Treating the transaction of slump sale entered into by the appellant with MWH ResoruceNet (India) Pvt. Ltd. - An Indian entity as an international transaction. Before we proceed to decide this issue it would be relevant to refer to the meaning of 'international transaction' as per section 92B of the Act, as was applicable to the assessment year under consideration. "92B. (1) For the purposes of this section and sections 92, 92C, 92D and 92E, "international transaction" means a transaction between two or more associated enterprises, either or both of whom are non-residents, in the nature of purchase, sale or lease of tangible or intangible property, or provision of services, or lending or borrowing money, or any other transaction having a bearing on the profits, income, losses or assets of such enterprises, and shall include a mutual agreement or arrangement be....
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....on cannot be regarded as 'international transaction. The meaning of international transaction 'contained in section 92B of the Act is plain and clear. It does not envisage that if a resident AE is a subsidiary of a foreign holding company, the transaction between such Indian subsidiary and another Indian company would fall within the ambit of international transaction as defined u/s. 92B of the Act. Thus, we do not agree with the findings of authorities below that the transaction of slump sale between the assessee and MWH ResourceNet (India) Pvt. Ltd. is an international transaction. 10.1 Another facet of slump sale transaction is that the assessee has not furnished Form 3CEA along with the return of income. The assessee purportedly filed form 3CEA on 23/03/2013 before the Assessing Officer during draft assessment proceedings. However, the draft assessment order was already passed on 22/03/2013 i.e. a day prior to the filing of form 3CEA. The assessee pointed this fact during the course of objection raised before the DRP. However, no finding was given by the DRP on this issue. It is relevant to mention here that filing of Form 3CEA was a mandatory requirement for determining the....
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....tion u/s 10A of the Act. Therefore, the assessee was asked to explain the same. The assessee submitted that the other income being credit balances, return of fixed deposit interest and reversal of the provisions for expenses are wholly and exclusively for and connected to the purpose of business of the Pune unit, hence the assessee is entitled to claim deduction on the same. The Assessing Officer rejected the contentions of assessee for the reason that assessee had not furnished the nature of the credit balances written off and the provisions reversed nor any documentary evidence was furnished to substantiate that those are wholly and exclusively connected to the business of eligible unit. The Assessing Officer further observed that interest on fixed deposits are not purely derived from the business of undertaking. Hence, deduction u/s.10A of the Act on other income was disallowed. 14. Against the draft assessment order, the assessee preferred objections before the DRP. The DRP after recording facts came to the conclusion in para No. 4.1 of the directions that the accounts and various reports submitted before them are not reliable. Therefore, the same were rejected. The DRP held....
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....'other income' Rs.8,35,191/-. Hence, the same was disallowed. The Assessing Officer in the draft assessment order allowed deduction u/s 10A of the Act to the extent of Rs. 61,953,579/-. The DRP not satisfied with the nature of documentation, accounts maintained by the assessee upheld rejection of books of account of the assessee. In paragraph 4.1 of the directions, the DRP held that the accounts and various reports of the assessee are not reliable. The DRP further issued directions to the Assessing Officer that no deduction u/s. 10A of the Act should be allowed to the assessee. We find that the DRP after holding that the accounts of the assessee are not proper, erred in coming to the conclusion that assessee did not earn any profit from eligible undertaking. In fact, there is no link between the first conclusion about unreliable nature of the books of account of the assessee and denial of deduction u/s.10 A of the Act. The deduction u/s.10 A of the Act is allowable on the profit of eligible undertaking. Therefore, assuming that the accounts of the assessee are not reliable, it cannot be held that assessee did not earn any profit from the eligible undertaking. The assessee is eligib....