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TMI Blog2017 (6) TMI 981X X X X Extracts X X X X X X X X Extracts X X X X ..... ent order dated October 14, 2010 passed by the learned Assessing Officer ("AO") under section 143(3) read with section 144C of the Income-tax Act, 1961 ("Act") is not in accordance with the law and is contrary to the facts and circumstances of the present case and in any case violation of principle of equity and natural justice. 2. Deduction under section 80JJAA of the Income-tax Act, 1961 2.1 The Honourable Dispute Resolution Panel ("DRP") and the learned AO ("Ld AO") have erred in denying the deduction under section 80JJAA of the Income-tax Act, 1961 ("the Act"). They have erred in disregarding the decision of the jurisdictional ITAT in the case of Texas Instruments (India) Private Limited ("TI India") for the assessment years 2001-02 and 2002-03, wherein the deduction claimed by the appellant under section 80JJAA has been allowed. 2.2 The Honourable DRP and Ld AO have erred in not appreciating that the "workman" defined in the Industrial Disputes Act includes persons involved in various types of activities and from out of such different types of persons only one category viz supervisor drawing wages in excess of Rs. 1,600/- is excluded and the employees of the appellant w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng its own Transfer Pricing study. 3.6 The Hon'ble DRP and the ld. AO have erred in law and on facts by adopting the financial data for a single year (ie the FY 2005-06 of the comparables) as against the multiple year data considered by the assessee. 3.7 The ld. AO/Hon'ble DRP have erred in law by upholding the TPO's conclusion that it is mandatory to use data pertaining to the financial year 2005-06 only (ie, the year in which international transactions are carried out). 3.8 The ld. AO/Hon'ble DRP have erred in law by upholding the TPO's action of exercising his powers under section 133(6) of the Act to obtain selective information which was not available in public domain and relying on the same for comparability purposes. 3.9 The Hon'ble DRP and the ld. AO have failed to consider the differences in the risk profile of the assessee and the comparables and rejected the risk adjustments made by the assessee. 3.10 The Hon'ble DRP and the ld. AO have erred in stating that the foreign exchange loss/gain is not dependent upon the operations carried out by the assessee and is a result of various extraneous factors and therefore have erred in consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d financials were used, the assessee has predominantly considered the segmental information of the consolidated financials relating to the software development segment and hence having considered the details relating to the software development segment, the rejection of the said comparables is unjustified. 3.22 The Honorable DRP and ld. AO have erred in law by not providing the assessee the benefit of the +/- 5 per cent range as prescribed under the Act. 3.23 The impugned order of assessment dated December 14, 2009 was made based on an order dated October 30, 2010, purportedly under section 92CA made by the JDIT, TPO II, Bangalore. However, the said transfer pricing order is made without jurisdiction and hence invalid. In view of the provisions of the Act and the notifications, it is evident that the JDIT, TPO II, Bangalore, who made the order purportedly under section 92CA of the Act on October 30, 2009 acted without proper jurisdiction. Hence, the said order is invalid and void ab initio. 3.24 Without prejudice to all of the above, the learned DRP, TPO and AO have erred in not accepting the argument that the transfer pricing provisions will not apply when taxpayer's i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon'ble High Court remitted the matter to the record of Tribunal for deciding another aspect of the issue regarding the condition of completion of 300 working days during the year as contemplated u/s. 80JJAA of the Act. Therefore as far as the issue of the new employees appointing during the year under consideration without any supervisory role had already been decided by the decision of this Tribunal vide order dt.21.12.2006 in assessee's own case for the Assessment Years 2001-02 & 2002-03. However the issue of the condition of 300 days employment during the year under consideration is concerned this issue was decided against the assessee in the remand proceedings in pursuant to the directions of Hon'ble High Court. The finding of the Tribunal in assessee's own case on this issue vide order dt.29.12.2016 in paras 7 to 10 as under : " 7. We have considered the rival submissions as well as the relevant material on record. There is no dispute regarding the objects for which this provision of Section 80JJAA was inserted in the Act vide Finance Act, 1998 w.e.f. 1.4.1999. The Memorandum explaining the provision of Finance No.2 Bill as reported in 231 ITR 233 Statute as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f an assessee includes any profits and gains derived from the manufacture of goods in a factory, there shall, subject to the conditions specified in sub-section (2), be allowed a deduction of an amount equal to thirty per cent of additional wages paid to the new regular workmen employed by the assessee in such factory, in the previous year, for three assessment years including the assessment year relevant to the previous year in which such employment is provided. (2) No deduction under sub-section (1) shall be allowed- [(a) if the factory is acquired by the assessee by way of transfer from any other person or as a result of any business re-organisation;] (b) unless the assessee furnishes along with the return of income the report of the accountant, as defined in the Explanation below sub-section (2) of section 288 giving such particulars in the report as may be prescribed. Explanation.-For the purposes of this section, the expressions,- (i) "additional wages" means the wages paid to the new regular workmen in excess of [fifty] workmen employed during the previous year : Provided that in the case of an existing factory, the additional wages shall be nil if the incr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 5th June of previous year and not thereafter. There is no doubt that the Legislature has not intended while providing this incentive of generation of employment opportunity that it should be only at the beginning of each financial year but the employment is generally given throughout the year depending upon the demand and supply of the workmen in the industry. Even otherwise the definition of workmen as given under Explanation to Section 80JJAA is not an inclusive definition but certain categories of workmen are excluded such as a casual workman, a workman employed through contract labour or any other workman employed for a period of less than 300 days during the previous year. All these three categories of employment excluded from the definition of regular workmen itself shows that these three categories of workmen cannot be otherwise considered as regular workmen. Therefore we find force in the contention of the ld. Senior counsel that this condition of 300 days of employment during the previous year should be read as 300 days in a year from the date of employment. It is to be noted that once a workman is employed as a regular workman by an undertaking/assessee then in the abse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mined will be the amount of deduction under section 80JJAA of the Act. 11. There is no dispute that the case of assessee is of an existing undertaking. Therefore, for computing additional wages the percentage increase in the number of regular workmen has to be determined with reference to the workmen employed in the undertaking as on the last day of the preceding year. From the order of ld. CIT(A) we find that in this case, the increase in the number of regular workmen has been determined with reference to regular workmen and not with reference to workmen employed in the undertaking as on the last day of the preceding year. For computation of deduction in respect of regular workmen employed for 300 days or more in previous year 2002-03 relevant to assessment year 2003-04, the Assessing Officer has not computed deduction with reference to new regular workmen in excess of 100 workmen employed during the year. For this purpose as discussed above the percentage increase in the number of regular workmen has to be determined with reference to workmen employed in the undertaking as on the last day of the preceding year. This has also not been done. We, therefore, set aside the matter t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year 2001-02. The order of CIT(A) is upheld in this regard." A similar view has been taken by the Delhi Bench of this Tribunal in the case of LG Electronics India Pvt. Ltd. Vs. ACIT (supra) in paras 12 & 13 as under : " 12. As regards the merits of the case, regarding claim u/s 80JJAA the section reads as under:- "(1) Where the gross total income of an assessee being an Indian Company includes any profits and gains derived from any industrial undertaking engaged in the manufacture or production of articles of things there shall subject to the conditions specified in sub section (2) be allowed as deduction of an amount equal to 30% of additional wages paid to the new regular workmen employed by the assessee in the previous year for three assessment years including the assessment year relevant to the previous year in which such employment is provided." 13. The explanation to section defines regular workmen which does not include:- a) Casual Worker. b) Any other workmen employed for a period of less than 300 days during the previous year. c) A workmen employed through contract labour. The definition of new workmen in section along with explanation clearly provides that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of 300 days employment during the previous is decided against the assessee. 8. For the Assessment Year 2004-05, the assessee has challenged the order of CIT (Appeals) and raised the following grounds : 1. " The learned CIT(A) has erred in passing an order which is bad in law and on facts. 2. Denial of the claim of deduction under section 80JJAA of the Act 2.1. The learned CIT(A) erred in law and on facts in not allowing deduction under section 80JJAA of the Act to the extent of Rs. 67,962,013, as claimed in the return of income. 2.2. Without prejudice to the above, the learned CIT(A) has erred in law and on facts in upholding the action of the Assessing Officer ("AO") in disallowing the deduction earlier allowed to the extent of Rs. 11,724,254. 2.3. The learned CIT(A) and AO have erred in law and on facts in holding that the Appellant does not satisfy the eligibility criteria in respect of the new regular workmen employed during the financial year relevant for the Assessment Year ("AY") 2004-05. 2.4. The learned CIT(A) has erred in law and on facts in misinterpreting the directions of the Commissioner of Income Tax ("CIT") and in holding that the AO had not ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder Section 263 had travelled beyond the jurisdiction. Thus the learned Authorised Representative has submitted that the limited issue in the remand proceedings was for the Assessing Officer to verify whether the employees employed by the assessee was in the supervisory category or workmen whereas the Assessing Officer has denied the claim of the assessee on the ground that the workmen have not worked for 300 days during the year under consideration. 10. On the other hand, the learned Departmental Representative has submitted that even on the issue of the workmen or supervisory category, the Assessing Officer has given the finding that the assessee has failed to produce any evidence to show that the employment of these engineers are not in the nature of supervisoy. 11. In rebuttal, the learned Authorised Representative has submitted that the assessee produced the relevant details vide letter dt.5.8.2013 at page No.105 of the paper book. 12. We have considered the rival submissions as well as the relevant material on record. In the first round of litigation for the Assessment Year 2004-05, the Tribunal while setting aside the issue to the record of the Assessing Officer in paras ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer while passing the order dt.20.12.2011 denied the claim without giving effect the directions of the Tribunal to verify the factual position. Subsequently, the CIT passed a revision order under Section 263 dt.16.1.2013 and directed the Assessing Officer to verify whether the condition stipulated for the grant of deduction under Section 80JJAA as directed by the Tribunal are satisfied in the case of the assessee. The Assessing Officer then passed the order dt.16.1.2014 in pursuant to the revision order under Section 263 and denied the claim by following the order of the earlier assessment year. We find that for the earlier assessment year, the issue of nature of employment whether it is supervisory or not has been decided in favour of the assessee. However, this issue is pending before the Hon'ble High Court for the Assessment Years 2001-02 and 2002-03. 13. As regards the issue of satisfying the condition of not less than 300 days of employment during the previous year, we find that this issue does not germane from the order of this Tribunal in the first round of appeal as the limited aspect remitted to the Assessing Officer for verification was whether any pers ..... X X X X Extracts X X X X X X X X Extracts X X X X
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