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2022 (12) TMI 247 - AT - Income TaxTP Adjustment - selection of profit level indicator ( PLI'') for benchmarking the international transaction - HELD THAT - Even TPO has also accepted cash profit/cost as PLI for benchmarking the international transaction pertaining to ITeS in assessment years 2007 08 and 2008 09, in assessee s own case. DR could not show us any reason to deviate from the aforesaid orders and no change in facts and law was alleged in the relevant assessment year. The issue arising in the present case is recurring in nature and has been decided in favour of the assessee by the decisions cited supra. Thus, respectfully following the decision rendered by Hon ble jurisdictional High Court in assessee s own case 2016 (5) TMI 796 - BOMBAY HIGH COURT . we uphold the plea of the assessee and direct the TPO/Assessing Officer to consider profit before depreciation (PBDIT) as PLI for transfer pricing analysis. Accordingly, ground raised in assessee s appeal is allowed. Reallocation of certain expenses between 10A unit and non-10A unit - HELD THAT - We find that the lower authorities on the basis that the functions performed, services and products supplied by both the units are identical, allocated the impugned expenditure to STP unit, without considering whether such expenditure was in fact incurred in relation to the STP unit. The assessee has also filed an application dated 29/04/2014 seeking admission of additional evidence, inter-alia, in support of its claim. Thus, we deem it appropriate to remand this issue to the file of AO for de novo adjudication after examination of all the details, including the details filed before us by way of additional evidence, in respect of impugned expenditures incurred by the assessee. We further direct that if upon examination it is found that the expenditure pertains to the places where assessee has no STP unit then said expenditure should be excluded while computing profit of STP unit. Further, the assessee shall be at liberty to file any other detail in support of its claim vis- -vis the impugned expenditures before the Assessing Officer for necessary examination.Assessee s appeal is allowed for statistical purpose. Exclusion of communication expenses from both export turnover as well as the total turnover, while computing deduction u/s 10A - HELD THAT - We find that this issue is now decided in favour of the taxpayer by the Hon ble Supreme Court in CIT vs HCL technologies Ltd. 2018 (5) TMI 357 - SUPREME COURT . Accordingly, we direct the AO to exclude communication expenditure from the total turnover also to the extent it was excluded from the export turnover. Thus, ground raised in assessee s appeal is allowed. Consideration of servers as computers instead of plant and machinery for the non-STP unit - plea of the assessee that servers in non-STP units should be given similar treatment as was given in case of STP units and depreciation on the same should be charged at 60% - HELD THAT - We find that the lower authorities denied the claim of the assessee on the basis that the relevant details were not submitted by the assessee. In view of the above, we deem it appropriate to remand this issue to the file of AO for de novo adjudication after examination of all the details in respect of addition to fixed assets in non-STP units. Direct that upon examination, if it is found that servers are forming part of the fixed assets in non-STP units then depreciation on same should be charged at 60% in parity with approach adopted in case of STP units. Assessee is also directed to submit all the details in support of its claim. As a result, ground raised in assessee s appeal is allowed for statistical purpose. Computation of income of the STP unit - HELD THAT - Since, the issue is regarding the correct computation of deduction under section 10A of the Act and regarding same assessee s rectification application under section 154 of the Act is still pending, therefore, we deem it appropriate to remand this issue to the file of AO for necessary adjudication after consideration of all the details. Needless to mention that no order shall be passed without granting opportunity of hearing to the assessee. As a result, ground raised in assessee s appeal is allowed for statistical purpose. Disallowance u/s 40(a)(ia) - non-deduction of tax at source while making the payment - disallowance of expenditure, inter-alia, in the nature of training, office renovation, office equipment and property maintenance - HELD THAT - The assessee also incurred certain expenses, in nature of reimbursement of office expenses. As per the assessee, some of these expenditures have been capitalised for Income Tax purpose and debited to the profit and loss account. Assessee has also filed an application seeking admission of additional evidence, whereby the assessee has provided the sample copy of invoices in respect of these expenses as well as the details regarding the expenditure which has been capitalised and debited to the profit and loss account. Since, these details were not examined by the lower authorities, therefore, we considered it appropriate to remand this issue to the file of AO for de novo adjudication, by way of speaking order, after examination of all details, including the details filed before us by way of additional evidence. We further direct that upon examination, if it is found that any expenditure has already been capitalised by the assessee then said expenditure should be excluded. Assessee shall be at liberty to file any other detail in support of its claim. Disallowance of employees contribution to superannuation fund - HELD THAT - As per the assessee, employees contribution to superannuation fund was deposited on or before the due date of filing of return of income. However, the Revenue disallowed the claim of the assessee on the basis that said deposit was made after the due date prescribed in the relevant statute. We find that in CIT v/s Ghatge Patil Transports Ltd. 2014 (10) TMI 402 - BOMBAY HIGH COURT held that both employee s and employer s contributions are covered under the amendment to section 43B of the Act, relying upon the decision of the Hon ble Supreme Court in CIT v/s Alom Extrusions 2009 (11) TMI 27 - SUPREME COURT and therefore payment of employee s contribution on or before the due date of filing of return of income is allowable. We direct the Assessing Officer to delete the disallowance made under section 2(24)(x) read with section 36(1)(va) of the Act. As a result, ground raised in assessee s appeal is allowed. Grant of credit of tax deducted at source - rectification application u/s 154 is still pending - HELD THAT - Therefore, we direct the AO to grant the credit of tax deducted at source after necessary verification and as per law. Accordingly, ground raised in assessee s appeal is allowed for statistical purpose.
Issues Involved:
1. Assessment of total income. 2. Transfer pricing adjustments. 3. Deduction under section 10A. 4. Reallocation of expenses between 10A and non-10A units. 5. Exclusion of communication expenses from export and total turnover. 6. Depreciation on servers. 7. Computation of income for STP unit. 8. Disallowance of expenses under section 40(a)(ia). 9. Disallowance of employees' contribution to superannuation fund. 10. Credit for tax deducted at source. 11. Levy of interest under sections 234B and 234C. 12. Initiation of penalty proceedings under section 271(1)(c). Detailed Analysis: 1. Assessment of Total Income: The assessee's total income was assessed at Rs. 494,447,750 against Rs. 300,010,920 declared by the assessee. This issue is general and not separately adjudicated. 2. Transfer Pricing Adjustments: Grounds 2 to 12 pertain to transfer pricing adjustments. The Tribunal focused on ground no. 11 regarding the selection of profit level indicator (PLI) for benchmarking international transactions. The Tribunal upheld the assessee's plea to use Profit before Depreciation (PBDIT) as PLI, following precedents from the assessee's own case in previous years, thus allowing ground no. 11 and rendering other related grounds infructuous. 3. Deduction under Section 10A: Ground no. 13, which is general in nature, was not separately adjudicated. 4. Reallocation of Expenses Between 10A and Non-10A Units: The issue in ground no. 14 pertained to reallocating communication expenses, auditor's remuneration, and foreign exchange fluctuation expenses. The Tribunal remanded the issue to the Assessing Officer for re-examination, directing that expenses not related to the STP unit should be excluded from the profit computation of the STP unit. 5. Exclusion of Communication Expenses: Ground no. 16 dealt with excluding communication expenses from export turnover and total turnover while computing the deduction under section 10A. The Tribunal directed the Assessing Officer to exclude these expenses from both turnovers, following the Supreme Court's decision in CIT vs HCL Technologies Ltd. 6. Depreciation on Servers: Ground no. 18 involved treating servers as 'Computers' for the non-STP unit. The Tribunal remanded the issue to the Assessing Officer for de novo adjudication, directing that if servers are part of the fixed assets in non-STP units, depreciation should be charged at 60%. 7. Computation of Income for STP Unit: Ground no. 19 addressed the computation of income for the STP unit. The Tribunal remanded the issue to the Assessing Officer for necessary adjudication, considering the pending rectification application under section 154. 8. Disallowance of Expenses Under Section 40(a)(ia): Grounds 20 and 21 pertained to disallowance of various expenses for non-deduction of tax at source. The Tribunal remanded these issues to the Assessing Officer for de novo adjudication after examining all details, including additional evidence provided by the assessee. 9. Disallowance of Employees' Contribution to Superannuation Fund: Ground no. 22 involved disallowance of employees' contribution to the superannuation fund. The Tribunal directed the deletion of the disallowance, following the jurisdictional High Court's decision in CIT v/s Ghatge Patil Transports Ltd. 10. Credit for Tax Deducted at Source: Ground no. 23 related to the credit of tax deducted at source. The Tribunal directed the Assessing Officer to grant the credit after necessary verification, considering the pending rectification application. 11. Levy of Interest Under Sections 234B and 234C: Ground no. 24, concerning the levy of interest under sections 234B and 234C, was considered consequential and allowed for statistical purposes. 12. Initiation of Penalty Proceedings Under Section 271(1)(c): Ground no. 25, regarding the initiation of penalty proceedings, was dismissed as premature. Conclusion: The appeal was partly allowed for statistical purposes, with several issues remanded for further examination and adjudication by the Assessing Officer. The Tribunal provided clear directions for each remanded issue, ensuring a thorough reassessment.
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