2017 (4) TMI 55 - AT - Income Tax

Attributation of profits on offshore revenues - Held that - Assessing Officer estimated taxable income in respect of offshore activities at 25% of the gross revenues. Admittedly, similar issue on the very same facts, has come before this Bench of the Tribunal in assessee s own case for the assessment year 2006-07. The Tribunal had restored the issue to the file of the Assessing Officer with a direction that an afresh exercise be undertaken and attributation of profits on offshore revenues be determined. Consequent to such direction, the Assessing Officer, for the assessment year 2006-07, adopted 10% as the profit attributation on offshore revenues. As the Department has itself come to this decision on these very facts, we have no hesitation in applying the same percentage to the year under consideration. The Assessing Officer is directed to adopt 10% as the profit attributation on offshore revenues for the impugned assessment year 2007-08. Disallowances u/s 40(a)(i) and section 40(a)(ia) - Held that - We set-aside the issue to the file of the Assessing Officer for fresh adjudication de-novo in accordance with law. The assessee states that its claim for deduction of expenses were disallowed u/s 40(a)(i) and section 40(a)(ia) in the earlier year and are being claimed in the current assessment year 2007-08. This claim has to be verified. Hence, we set aside the same to the file of the Assessing Officer. In the result, ground is allowed for statistical purposes.

Issues Involved:
1. Taxability of revenues earned from Outside India operations
2. Taxability of revenues from Inside India operations
3. Transfer pricing grounds
4. Taxability of interest of income-tax refund
5. Levy of interest under Section 234B of the Act
6. Levy of interest under Section 234D of the Act

Taxability of revenues earned from Outside India operations:
The appeal challenged the assessment of total income against the returned loss, specifically disputing the taxability of revenues from operations outside India. The appellant argued that the loss incurred in executing contracts in India should have been considered while estimating taxable income. The tribunal partially allowed the appeal, directing the Assessing Officer to adopt 10% as the profit attribution on offshore revenues for the relevant assessment year, based on a similar decision in a prior case involving the same facts.

Taxability of revenues from Inside India operations:
The appeal contested the taxing of revenues from inside India operations under Section 44BB on a deemed profit basis of 10%, despite the appellant submitting audited accounts showing losses. Additionally, the appellant claimed allowances under various sections which were not granted. However, the appellant chose not to press these grounds due to the desire to avoid prolonged litigation, as they had ceased operations in 2007. The tribunal dismissed these grounds not pressed by the appellant, clarifying that the dismissal should not set a precedent.

Transfer pricing grounds:
The appeal raised multiple transfer pricing issues, including adjustments in the arm's length price of international transactions and disallowances of certain payments. The tribunal dismissed some grounds not pressed by the appellant to avoid prolonged litigation. However, on the issue of profit attribution on offshore revenues, the tribunal directed the Assessing Officer to adopt 10% as the profit attribution, following a similar decision in a previous case.

Taxability of interest of income-tax refund:
The appeal challenged the treatment of interest income as business income and the subsequent tax rate applied. The tribunal did not address this issue specifically in the detailed analysis provided.

Levy of interest under Section 234B of the Act:
The appeal contested the levy of interest under Section 234B of the Act. The tribunal did not provide a detailed analysis of this issue in the judgment.

Levy of interest under Section 234D of the Act:
The appeal disputed the levy of interest on excess refund under Section 234D of the Act. The tribunal did not delve into this issue in the detailed analysis presented.

This comprehensive analysis covers the key issues involved in the legal judgment, detailing the arguments raised by the appellant, the tribunal's decisions, and the implications for each issue addressed.

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