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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 ..... onvenience 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 Rs. 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 income was determined at Rs. 63,91,28,960/-. Aggrieved by the order of Assessing Officer, assessee carried the matter before Ld.CIT(A), who vide consolidated order dated 11.03.2019 (in appeal Nos.PN/CIT(A)-6/DCIT Cir-8/247/13-14, PN/CIT(A)-6/DCIT Cir-8/217/14-15 and PN/CIT(A)-6/DCIT Cir-8/129/15-16) allowed the appeals of the assessee. Aggrieved by the order of Ld.CIT(A), Revenue is now in appeal before us and has raised the following grounds : 1. The order of the Ld. CIT(A) is contrary to law and to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng 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 identical facts for A.Y. 2008-09 in assessee‟s own case, claim of excess profit of Rs. 70,33,19,220/- was disallowed in respect of deduction u/s 10A of the Act and the facts in the case of assessee in the year under consideration were similar to that of A.Y. 2008-09. With respect to assessee‟s objection for comparing the operating profit margins declared by JDIPL were also not found to be acceptable to the Assessing Officer as he noted that the issue of similarity of business module of JDIPL with that of assessee was extensively dealt with in the assessment order for A.Y. 2008-09 and it was held that JDIPL meets all the pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng 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 was an arrangement between the assessee and its associated enterprises to charge such excessive rates, which has resulted in more ordinary profits in the hands of assessee, there is no merit in the exercise carried out by the Assessing Officer. Where tile assessee had adopted a price mechanism based on third party comparables, which in turn, has been accepted by the TPO to be at arm's length price, there is no merit in the order of Assessing Officer in applying the provisions of section 10A(7) r.w.s. 80IA(10) of the Act. The basic requirement for applying the said provisions of the Act is an arrangement between the parties to earn more than ordinary profits and in the abs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt 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 been admitted as such by the AO in his assessment orders. In view of this, respectfully following the decision of the ITAT in the appellant's own case for A. Y. 08-09, I am of the view that the action of the AO in curtailing the deduction u/s 10A is without basis. The addition of Rs. 44,52,73,422 for A.Y. 09-10, Rs. 25,21,83,710 for A.Y. 10-11 & Rs. 17,91,68,636 for A.Y. 11-12 is deleted. Grounds 2 to 4 for A.Y. 9-10, 2 to 5 for A.Ys 10-11 & 11-12 are allowed. In view of this, ground 5 for A.Y. 09-10 & ground 6 for A.Y. 10-11 are rendered infructuous. 5.3 Before parting, I also have to point out that there is not much difference in the figures of PBT (profit before tax) in the case of the appellant for the A.Ys 09-10 to 14-15. However, the PAT (profit af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 down by the Hon'ble Bombay High Court 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." 9. Before us, no distinguishing feature in the facts of the case under consideration and that of A.Y. 2008-09 was pointed by the Revenue nor the Revenue has pointed out any fallacy in the findings of CIT(A). We further find that the Revenue has not placed any contrary binding decision in its support nor placed any material on record to demonstrate that the order of the Co-ordinate Bench of the Tribunal in assessee‟s own case for A.Y. 2008-09 has been set aside / overruled / stayed by Higher Judicial Foru ..... X X X X Extracts X X X X X X X X Extracts X X X X
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