9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2011 (2) TMI 707 - AT - Income TaxArms length price - The issue raised in the ground relates to the proper appreciation of the first proviso to section 92(C)(2) of the Act - Considering the multiple prices involved as per the first proviso at the option of the assessee the assessee is entitled to the benefit of reduction of 5% from the arithmetic mean of such prices - First proviso to section 92C(2) of the Act is required to the explained here and same as existed at the relevant point of time reads as follows. provided that where more than one price is determined by the most appropriate method the arms length price shall be taken to be the arithmetical mean of such prices or at the option of the assessee a price which may vary from the arithmetical mean of an amount not exceeding five per cent of such arithmetical mean - In the assessee s case undisputedly there are three comparable price data and further it is a fact that as per the said first proviso the assessee exercised the option too - The said first proviso has direct application to the facts of the case and the assessee is entitled for deduction not exceeding 5% out of the arithmetic mean - Consequently the impugned order of the CIT(A) is required to be reversed on this issue relating to the applicability of the first proviso to the assesse Decided in the favour of the assessee Regarding deduction u/s. 80HHC Whether excise duty and sales tax are excluded for the purpose of calculating deduction u/s. 80HHC - Supreme Court in the case of Lakshmi Machine Works 290 ITR 667(SC) Held that the issue has to be decided in favour of the assessee Accordingly appeal is dismissed Regarding inclusion of income from scrap sale discount and commission inspection and testing charges job work and income derived from the suppliers for the purpose of 80HHC deduction should be referred to the files of the AO for re-adjudication after considering various binding judgments on each issue - Assessee is directed to file the evidences to support his case and also the copies of the decisions/judgments if any which shall be taken into cognizance by the I.T. Authorities while adjudicating the issue afresh - In the result all the four appeals are decided pro-tanto
Issues Involved:
1. Applicability of the first proviso to section 92C(2) of the Income Tax Act. 2. Exclusion of excise duty and sales tax from the total turnover for calculating deduction under section 80HHC. 3. Inclusion of various incomes in the total turnover for calculating deduction under section 80HHC. 4. Allowability of provision for warranty expenses. 5. Directions to the Assessing Officer (AO) to verify and allow claims. Issue-wise Detailed Analysis: 1. Applicability of the First Proviso to Section 92C(2) The assessee, engaged in manufacturing and sale of IC Engines, had international transactions referred to the Transfer Pricing Officer (TPO), who determined these transactions were not at arm's length. The TPO used 61 comparable prices, finally relying on three, to compute the arithmetic mean for the arm's length price. The assessee argued for a 5% reduction from the arithmetic mean under the first proviso to section 92C(2). The Tribunal referred to multiple judicial decisions (SAP Labs India Pvt. Ltd., Soni (I) Pvt. Ltd., and others) supporting the assessee's claim for a 5% deduction. The Tribunal concluded that the assessee is entitled to this deduction, reversing the CIT(A)'s order. 2. Exclusion of Excise Duty and Sales Tax from Total Turnover The Revenue's appeal contested the CIT(A)'s direction to exclude excise duty and sales tax from the total turnover for calculating deduction under section 80HHC. Both parties agreed that this issue was settled by the Supreme Court in Lakshmi Machine Works (290 ITR 667), supporting such exclusion. Consequently, the Tribunal dismissed this ground, favoring the assessee. 3. Inclusion of Various Incomes in Total Turnover for Section 80HHC Deduction The Revenue challenged the inclusion of income from scrap sale, discounts, commissions, inspection and testing charges, job work, and supplier payments in the total turnover for section 80HHC deduction. The Tribunal noted that both the AO and CIT(A) had not provided detailed reasoning in their orders. Therefore, the Tribunal remanded this issue back to the AO for re-adjudication, directing the assessee to provide supporting evidence and judicial decisions for each type of income. 4. Allowability of Provision for Warranty Expenses The Revenue's appeal also contested the CIT(A)'s direction to allow the provision for warranty expenses, arguing it was a contingent liability. The Tribunal found that the CIT(A)'s directions were appropriate and did not exceed his powers. It was noted that the assessee had received similar relief in earlier assessments. The Tribunal dismissed the Revenue's grounds, upholding the CIT(A)'s directions. 5. Directions to the AO to Verify and Allow Claims Regarding the direction to the AO to verify the assessee's claims for new engine performance inspection fees, the Revenue argued that it amounted to setting aside the assessment, which was beyond the CIT(A)'s powers. The Tribunal found no error in the CIT(A)'s directions, noting they did not constitute a setting aside of the assessment order. The Tribunal dismissed this ground, affirming the CIT(A)'s directions. Conclusion: - The assessee's appeals were partly allowed, granting the 5% deduction under section 92C(2). - The Revenue's appeal on excluding excise duty and sales tax was dismissed. - The issue of including various incomes in the total turnover was remanded to the AO. - The Revenue's grounds on the provision for warranty expenses and the directions to the AO were dismissed. - All four appeals were decided pro-tanto.
|
