2019 (3) TMI 1247 - AT - Income Tax

MAT u/s 115JB - jurisdiction of AO to alter the book profit u/s 154 through rectification order - upward adjustment in respect of international transaction regarding 80IC deduction to the book profit of the assessee u/s 115JB - adjustment specified in Explanation (1) section 115JB - HELD THAT - AO has no jurisdiction to alter the book profit u/s 154 of the Act. On an examination of Explanation (1) to section 115JB of the Act, we find as rightly held by the CIT(A) that there was no clause specified in respect of upward adjustment of international transaction. Regarding the decision in Berkadia Services India Pvt.Ltd. vs DCIT 2014 (11) TMI 840 - ITAT HYDERABAD as relied by the CIT(A) in its order that the CO-ordinate Bench of Hyderabad Tribunal held that when the income having been finally assessed by the AO as per the normal provisions of the Act, the issue in respect of TP adjustment would become academic in nature. CIT(A) rightly placed reliance on the order of Co-ordinate Bench of Hyderabad Tribunal and as we discussed above, the AO completed assessment under normal provisions of the Act and he has no jurisdiction to add upwards adjustment as recommended by the TPO to the book profit. - decided against revenue

Summary

Issues:
1. Appeal filed by Revenue against CIT(A) order for AYs 2009-10 & 2011-12.

Analysis:

Issue 1: Appeal against CIT(A) order for AYs 2009-10 & 2011-12
The Appellate Tribunal ITAT Kolkata heard appeals by the Revenue against the CIT(A) order for AYs 2009-10 & 2011-12. The AO initially determined the gross total income and allowed deductions under section 80IC of the Income Tax Act, 1961. Subsequently, an upward adjustment was made by the AO based on the TPO's recommendation regarding international transactions. The CIT(A) held that the upward adjustment was not specified under section 115JB of the Act, and thus, the adjustment made by the AO was deleted. The ITAT Kolkata referred to a similar case adjudicated by the ITAT Hyderabad "B"- Bench, where it was held that the AO's power to make adjustments to book profit is limited to additions and reductions provided in Explanation to section 115JB. As the adjustments did not include TP adjustments, the addition made by the AO was deemed unsustainable and deleted. The ITAT Kolkata upheld the CIT(A)'s decision, stating that the AO had no jurisdiction to add upward adjustments recommended by the TPO to the book profit. The appeals by the Revenue for both AYs 2009-10 & 2011-12 were dismissed based on these findings.

Issue 2: Similarity in facts and circumstances for AY 2011-12
For AY 2011-12, the facts and circumstances were found to be identical and similar to those of AY 2009-10. Consequently, the grounds raised by the Revenue in the appeal for AY 2011-12 were also dismissed. In the final result, both appeals by the Revenue were dismissed by the ITAT Kolkata. The decision was pronounced in open court on 08.02.2019.

This detailed analysis covers the issues involved in the legal judgment delivered by the ITAT Kolkata regarding the appeals filed by the Revenue against the CIT(A) order for AYs 2009-10 & 2011-12.