TaxTMI 
TaxTMI 
2024 (1) TMI 488
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.... The CIT(A) erred in upholding the penalty levied by the AO on account of deduction claimed u/s by reducing 90% of the entire other income by way of interest, miscellaneous income, etc. GROUND III: The CIT(A) erred in upholding the penalty levied by the AO on account of deduction claimed by reducing the profits determined u/s 80IB from the "profits of the business" compute purpose of deduction u/s 80HHC by invoking the provisions of Section 80IB(13) r.w.s 80IA(9). GROUND IV: The CIT(A) erred in upholding the penalty levied by the AO under Section 271(1(c) of the adjustment made by the Transfer Pricing Officer in respect of international transaction. export of finished goods. 3. Besides this, assessee has also raised following additional ground reads as under:- Additional Ground No. V On the facts and in the circumstances of the case and in law the Ld. Assessing Officer (the AO) erred in initiating the penalty proceedings without specifying the reason for penalty initiation under section 274 r.w.s. 271(1) (c) of the Act. The Appellant prays that the notice initiating penalty is ambiguous in the absence of clear....
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....gs by disregarding certain incomes amounting to Rs. 331.98 lakhs Disallowance upheld by the CIT(A) Dismissed (Para 9.1 - 9.6) Penalty deleted [Para3.3(viii)&(ix)] (Page 27) Reduction in claim of deduction u/s, 80IB by allocating certain head office expenses like salary, depreciation, interest on turnover basis to profits derived from Honda unit and Kundaim unit Disallowance upheld by the CIT(A) Allowed (Para 8.1 - 8.7) Penalty deleted [Para3.3(viii)&(ix)] (Page 27) - Disallowance in respect of depreciation tin left behind assets at vicks vaporub unit location at Honda Location amounting to Rs. 9.83 Lakhs 983,147 Disallowance upheld by the CIT(A) Allowed (Para 7. 1-7.5) Penalty deleted [Para 3.3(x] (Page 28) - Reduction on claim u/s 80HHC by reducing 90% of entire other income by way of interest and miscellaneous income amounting to Rs. 118.40 Lakhs 2,890,433 Disallowance upheld by the CIT(A) to the extent of Rs. 22,55,107 Ground not pressed (Para 10.1) Penalty upheld [Para 3.3(xi)] (Page 28) Ground II Claim of deduction u/s. 80HHC in respect of profits from 80IB units Allowed (Para ll.l-11.6) P....
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....elevant to the Assessment Year 2001-02. However, this position has been disputed by the Revenue. 6.9. On perusal of Audit Report in Form 10CCB filed by the Assessee in support of its claim for deduction at the rate of 100% in respect of Vaporub-10 gm Unit, we find that it has been stated as under (a) Paragraph 8. Date of Commencement of Operation by the Undertaking: 01/04/2000 (b) Paragraph 18 - (a) Has the industrial undertaking received any machinery or plant on transfer which was previously used for any purpose No, (b) If yes, please specify value of machinery received on transfer: Not Applicable, (c) Total Value of machinery or plant used in the business: INR 2,77,70,116/- and (f) number of workers employed in the manufacturing process: 16 (c) Paragraph 19 Total Sales of the Undertaking: INR 31,23,96,364/- (d) Paragraph 21 Profits and Gains derived by the undertaking/enterprise from the eligible business: INR 10,81,22,810/- (e) Deduction under section 80IB INR 10,81,22,810/- We note that while the case set up by the Assessee is that old plant and machinery was used it was less than 20%, Form 10CCB states th....
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....nt & machinery of specified value was deployed/used to set-up Vaporub- 10 gm Unit as claimed by the Assessee. The Assessing Officer had returned a finding that the Assessee had merely bifurcated the written down value of plant and machinery amongst the units on a pro-rata basis and the same has gone uncontroverted during the appellate proceedings. Though, the Vaporub-10 gm Unit is claimed to set-up during the Assessment Year 2001-02, it cannot be said that the claim made by the Assessee has been accepted by the Revenue in any of the preceding years. In absence of the supporting documents/details which support the claim of the Assessee as aforesaid, we are not inclined to accept the contention of the Assessee that deduction under Section 80IB of the Act is available for 100% of the profits from Vaporub-10 gm Unit. Accordingly, Ground No. III raised by the Assessee is dismissed. 7. In the course of hearing, we had asked the ld. Counsel to demonstrate that common machinery which is used in the new Vicks unit is less than 20% which has been claimed by the assessee and at the time of original quantum proceedings, same could not be substantiated, the ld. Counsel submitted the workings....
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....g of inaccurate particulars and accordingly, penalty levied by the ld. AO is deleted. 10. In so far as levy of penalty on account of deduction claimed u/s. 80HHC by reducing the profit determined u/s. 80IIB, the assessee's case has been that while calculating deduction u/s. 80HHC, 90% of the other income of Rs. 11,84,04,966/- which comes to Rs. 10,65,64,469/- has been reduced relying upon Annexure 'B' to Form 10CCAC issued by the Auditor. On the other hand, the ld. AO while calculating the deduction u/s. 80HHC reduced 90% of entire other income, instead of 90% of income by way of interest, miscellaneous income etc. of Rs. 10,65,64,469/- as computed by the assessee. However, this ground was not pressed before the Tribunal due to small quantum of the amount involved. 11. We find that the deduction claimed by the assessee was based on Auditor's report in Form 10CCAC and only issue is of the other income of Rs. 13,604/- which was not considered for deduction by the assessee. This other income was in the form of foreign exchange having direct nexus with its operating business income. Since it is a debatable issue and assessee's claim was based on Auditor's report, therefore, penal....
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....market. Since internal method of comparability could not be applied, the assessee benchmarked the aforesaid international transaction of export of finished goods by using external Transactional Net Margin Method (TNMM") as the most appropriate method instead of Internal TNMM. 15. However, the Ld. TPO preferred to use Internal TNMM instead over external TNMM applied by the assessee and benchmarked the transaction by comparing the international transaction of export of Vicks Vaporub with the domestic sales of Vicks Vaporub and ultimately made a TP addition of Rs. 1,65,00,000. 16. The assessee challenged the TP addition before the ld.CIT(A). It was observed by the ld. CIT (A) that the functions, assets and risks qua the exports are different from the sale in domestic market and hence, the ld. CIT(A) held that the export transactions could not be compared with the domestic transaction. Accordingly, the ld. CIT (A) rejected the TPO's approach (basis which penalty was initiated by the Ld. AO). Therefore, the ld. CIT(A) directed the Appellant to provide a comparable set of low-risk manufacturers which was comparable to assessee's international transaction. However, the ld. C....