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TMI Blog2020 (1) TMI 130X X X X Extracts X X X X X X X X Extracts X X X X ..... e appeals filed by the Revenue are for different assessment years but the facts and issues involved in all the three appeals are identical except for the assessment year and the amounts involved and therefore the submissions made by him while arguing one appeal would be equally applicable to the other appeal also and therefore, both the appeals can be heard together. The aforesaid submission of the ld.AR has not been objected to by ld.DR. We therefore for the sake of convenience proceed to dispose of all the three appeals by a consolidated order but however, we proceed with narrating the facts for assessment year 2009-10. 3. The relevant facts as culled out from the material on record are as under :- The assessee is a company stated to be engaged in the business of design engineering and testing services to Eaton group companies and business support services to Eaton Corporation USA. The assessee electronically filed its return of income for A.Y. 2009-10 on 30.10.2009 declaring total income at ₹ 19,38,55,536/-. The case was taken up for scrutiny. Thereafter, assessment was framed u/s 143(3) of the Act vide order dated 26.03.2013 and the total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claimed tax holiday benefit u/s 10A of the Income-tax Act, 1961 (hereinafter referred to as the Act‟) in respect of revenue earned at ₹ 58,16,07,422/- from provision of engineering services and customer support services. The Assessing Officer on comparing the details submitted by the assessee noticed that on the sales turnover of ₹ 117.4 crores, the assessee had made net profit of ₹ 68.4 crores after tax, which according to him, was extraordinarily high. The Assessing Officer pointed to the assessee that M/s. John Deere (India) Pvt. Ltd. (JDIPL) which was operating in similar type of business had shown operating profits of 16.95%. The assessee was therefore asked that in view of provisions of section 10A(7) of the Act, why the operating profit ratio of JDIPL not be applied in its case and the claim u/s 10A of the Act should not be restricted to that extent. The assessee made the submissions were not found to be acceptable to the Assessing Officer. The Assessing Officer was of the view that the profitability declared by JDIPL has to be considered as ordinary profit which is expected to arise in the eligible business. The Assessing Officer also noted that on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the CUP methodology. The assessee in the transfer pricing study report to benchmark the Engineering Design Services had applied CUP method as the most appropriate method and the transaction was declared to at arm's length. The TPO in the order passed under section 92CA(3) of the Act has accepted the arm's length price of Engineering Design Services as declared by the assessee. The assessee had shown net profit of 68.02% during the year under consideration, which as per the assessee, was not more than ordinary profits since it was providing high end Engineering Design Services. Once the arm's length price of international transactions of provision of Engineering Design Services has been accepted i.e. Man Hourly rates charged by the assessee for providing such services have been accepted by the TPO in the transfer pricing order, then the Assessing Officer cannot re-examine the said transaction to allege that the assessee had earned more than ordinary profits as compared to those of comparables. In the absence of any evidence being brought on record by the Assessing Officer to show that the rates charges by the assessee were excessive and also to establish that there w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e existed an arrangement between assessee and its associated enterprises to earn more than ordinary, there is no merit in the aforesaid curtailment of deduction under section 10A of the Act. In this regard, we place reliance on the ratio laid down by the Hon'ble Bombay High Court in CIT Vs. Schmetz India Pvt. Ltd. (supra), where the SLP filed has been rejected by the Hon'ble Supreme Court. We also place reliance on the ratio laid down in Honeywell Automation India Ltd. vs. DCIT (supra) and in assessee's own case relating to assessment year 2006-07. Hence, grounds of appeal Nos.3 to 8 are allowed. 5.2 It is evident from the above that the ITAT has categorically held that the AO has failed to prove that there existed an arrangement between the assessee and its AE to earn more than ordinary profits and therefore the action of the AO in curtailing the deduction 10A is without basis. The ITAT has also held that once the Arms Length Price is accepted by the TPO, it is not open for the AO re-examine the transaction and hold that there are more than ordinary profits. The facts before me for these three AYs are identical to the A.Y. 08-09, which in fact has be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 23;s favour by observing as under: 15. Applying the said principle to the facts of present case, we find that the assessee in its Engineering Design Development Services which was STPI unit shown net profit margin of 68.02%. The international transactions undertaken by the assessee with its associated enterprises in which PLI was 205% by taking OP/OC was accepted by the TPO to be at arm's length and no adjustment was made in the hands of assessee with regard to said division. The Assessing Officer however, was of the view that the assessee had earned more than ordinary profits in the Engineering Design Services division and consequently, curtailed the deduction claimed under section 10A of the Act. The question which is raised before us vide grounds of appeal No.3 to 8 is whether in such circumstances, the deduction claimed under section 10A of the Act can be curtailed. Where the Department has failed to prove that there existed an arrangement between assessee and its associated enterprises to earn more than ordinary, there is no merit in the aforesaid curtailment of deduction under section 10A of the Act. In this regard, we place reliance on the ratio laid d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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