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TMI Blog2020 (7) TMI 98X X X X Extracts X X X X X X X X Extracts X X X X ..... ld. D.R. Be that as it may, we hold strong conviction that as the implicit view of the A.O while allowing the assessee s claim for deduction u/ss. 10A and 10B of the Act, cannot be held to be erroneous , therefore, the CIT was divested of exercising his revisional jurisdiction u/s 263 of the Act. - Decided in favour of assessee. - ITA No. 2299/MUM/2018, ITA No.3817/MUM/2017 - - - Dated:- 30-6-2020 - Shri Pramod Kumar (Vice President) And Shri Ravish Sood (Judicial Member) For the Assessee : Sh. Percy Pardiwala, Senior Advocate, And Sh. Madhur Aggarwal, A.Rs For the Revenue : Shri A. Mohan, CIT D.R ORDER PER RAVISH SOOD, JM The captioned appeals filed by the assessee company are directed against the respective orders passed by the Commissioner of Income-tax (LTU), Mumbai (hereinafter referred to as CIT ), for A.Y 2009-10, dated 24.03.2017 and A.Y 2011-12, dated 02.02.2018, which in turn arises from the assessment orders passed by the A.O u/s 143(3) r.w.s 144C(13), dated 27.02.2015 and 26.02.2016 for the said respective years. As the issue involved in the present appeals is inextricably interlinked or in fact interwoven, therefore, the same are being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition adopted by the Appellant is in fullest conformity with the decision of CIT v. I-Gate Global Solutions Ltd. (supra). The learned CIT has further failed to appreciate the fact that the Appellant h. not furnished inaccurate particulars of income in its Return of Income. The Appellant craves leave to add, alter, amend or vary from the above grounds of appeal at or before the time of hearing. 2. Briefly stated, the assessee company which has been formed after amalgamation of five companies of the Shell group on 1st January 2009 (effective date) is engaged in the business of marketing motor spirit (petrol) and high speed diesel through retail outlets, providing shared services to its group companies worldwide, manufacturing and trading of modified bitumen, emulsion, lubricants and coolants and providing IT enabled services in relation to scientific and technical consultancy to its group companies. The assessee company had e-filed its return of income for A.Y 2009-10 on 30.09.2009, declaring a total loss of ₹ 212,01,77,460/-. Subsequently the assessee filed a revised return of income on 24.03.2011, declaring a total loss of ₹ 204,62,84,368/-. In the revised ret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perusal of the records, it was observed by the CIT that the assessee company in its return of income had claimed deductions u/s 10A of ₹ 1,51,41,483/- and u/s 10B of ₹ 46,24,77,668/-. It was noticed by the CIT that though the A.O in the backdrop of the overall loss suffered by the assessee during the year had disallowed its claim for deductions u/ss. 10A and 10B of the Act, in his draft assessment order, but thereafter, as per the directions of the DRP the said deductions were allowed without adjusting the losses of the ineligible undertaking. To sum up, it was observed by the CIT that pursuant to the directions of the DRP, the deductions u/s 10A and 10B were allowed qua the eligible undertakings of the assessee. On a scrutiny of the working of deduction u/s 10A, it was noticed by the CIT that the assessee company had added an amount of ₹ 6,01,40,750/- towards deemed mark-up of 10% of the sales bill revenue of its transactions with the related overseas parties. In the backdrop of the aforesaid fact, the CIT held a conviction that the addition on account of deemed mark up was made by the assessee in order to bring the international transactions within arm s length ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the A.O u/s 143(3) r.w.s 144C(13), dated 27.02.2015 may not be revised for withdrawing the excess deductions u/s 10A of ₹ 15,14,1483/- and u/s 10B of ₹ 32,17,33,266/- that was wrongly allowed by the A.O. In reply, the assessee objected to the assumption of jurisdiction by the CIT u/s 263 of the Act. As is discernible from the records, the assessee had objected to the proposed withdrawal of the deductions which were allowed by the A.O u/ss. 10A and 10B of the Act, on multiple grounds viz. (i). that as the issue as regards the proposed denial of deductions u/ss. 10A and 10B by the A.O, vide his draft assessment order u/s 143(3) r.w.s 144C(1) of the Act, dated 28.03.2013, was a subject matter of objection before the DRP, therefore, the same thereafter could not be a subject matter of proceedings u/s 263 of the Act; (ii). that the twin conditions required for invoking revisional jurisdiction u/s 263 viz. (a). the order of the A.O sought to be revised is erroneous; and (ii). it is prejudicial to the interest of the revenue, had not been satisfied; (iii). that the A.O after making necessary enquiries as regards the entitlement of the assessee towards claim of deductions u/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 17.07.2016, however, no reference to the said judicial pronouncements was made by the revisional authority in his order passed u/s 263 of the Act. It was vehemently submitted by the ld. A.R, that as the implicit view taken by the A.O as regards the entitlement of the assessee towards claim of tax-holiday on suo motto adjustment made by the assessee in its return of income was supported by the judgment of the Hon ble High Court of Karnataka in the case of CIT Vs. I-Gate Global Solutions Ltd. (ITA No. 452/2008), dated 17.06.2015, therefore, the same could not be categorized as a mistaken view of law, which would have justified invoking of the revisional jurisdiction by the CIT u/s 263 of the Act. The ld. A.R submitted that the view taken by the A.O was also found to be in conformity with certain orders of the Tribunal viz. ITAT, Hyderabad in Sumtotal Systems India Pvt. Ltd. Vs. DCIT (ITA No. 255/Hyd/20015); dated 23.09.2016 and ITAT, Bangalore in Austin Medical Solutions Pvt. Ltd. Vs. ITO [IT(TP) A. No. 542/Bang/2012), dated 17.07.2016. Apart from that, it was submitted by the ld. A.R that the view adopted by the CIT blatantly militated against the literal interpretation of Sec. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourselves to subscribe to the view taken by the CIT. On a perusal of the records, we find that the assessee in the course of the revisional proceedings had emphasized before the CIT that its claim for deductions u/ss. 10A and 10B was rightly allowed by the A.O vide his order passed u/s 143(3) r.w.s 144C(13), dated 27.02.2015. In order to buttress its said claim, the assessee in its reply dated 16.12.2016 to the SCN , dated 09.11.2016 issued by the CIT, had at Para 2.20 specifically relied upon the judgment of the Hon ble High Court of Karnataka in the case of CIT Vs. I-Gate Global Solutions Ltd. (ITA No. 452/2008), dated 17.06.2015 and the orders of the Tribunals viz. Sumtotal Systems India Pvt. Ltd. Vs. DCIT (ITA No. 255/Hyd/20015); dated 23.09.2016 AND Austin Medical Solutions Pvt. Ltd. Vs. ITO [IT(TP) A. No. 542/Bang/2012), dated 17.07.2016 . In fact, we find that even the copies of the judgment of the High Court and the orders of the Tribunal formed part of the aforesaid reply of the assessee, as Annexure 19 to 21. However, very strangely, we find that no reference to the said judicial pronouncements/orders was made by the revisional authority in his order passed u/s 26 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh Court of Karnataka in the case of I-Gate Global Solutions Ltd. (supra), dated 17.06.2014, was available on the date when the assessment was framed by the A.O, vide his order passed u/s 143(3) r.w.s 144C(13), dated 27.02.2015. At this stage, we may also observe that no judgment of any High Court taking a contrary view has been brought to our notice by the ld. D.R. Be that as it may, we hold strong conviction that as the implicit view of the A.O while allowing the assessee s claim for deduction u/ss. 10A and 10B of the Act, cannot be held to be erroneous , therefore, the CIT was divested of exercising his revisional jurisdiction u/s 263 of the Act. Apart from that, we find that an order passed by the CIT under Sec. 263 of the Act, on identical facts, in the assessee s own case for the immediately succeeding year i.e A.Y 2010-11 had been set aside by the Tribunal, vide its order passed in Shell India Markets Pvt. Ltd. vs. CIT, LTU, Mumbai [ITA No. 4911/Mum/2018, dated 15.01.2020]. In its said order, it was inter alia observed by the Tribunal that in the backdrop of the order of the Hon ble High Court of Karnataka in the case of CIT Vs. I-Gate Global Solutions Ltd. (ITA No. 452/2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... our of the Appellant. The learned CIT has tailed to appreciate that the decision of 1-Gate (supra) has not been litigated further by the Income-tax department. On the facts and M the circumstances of the case and in law, the learned CIT has legally erred in denying the Appellant due deduction of ₹ 39,73,71,366/-, claimed under section 10B of the Act. 4. Initiation of penalty proceedings and section 271(1)(c) of the Act. 4.1 On the facts and in the circumstances of the case and in lass, the teamed CIT has legally erred in direction the AO to initiate penalty proceedings under Section 271(1)(c) for furnishing inaccurate particulars of income. The learned CIT has failed to appreciate the fact that the position adopted by the Appellant is in fullest conformity with the decision of CIT v. I-Gate Global Solutions Ltd. (supra). The learned CIT has further failed to appreciate the fact that the Appellant has not furnished inaccurate particulars of income in its Return of Income. The Appellant craves leaves to add, alter, amend or vary from the above grounds of appeal at or before the time of hearing. 12. Briefly stated, the assessee company had e-filed its retur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee. On a perusal of the records, it was observed by the CIT that the assessee company in its return of income had claimed deduction u/s 10B of ₹ 145,90,88,649/-. It was noticed by the CIT that though the A.O in the backdrop of the overall loss suffered by the assessee during the year had in the draft assessment order disallowed its claim for deduction u/s. 10B of the Act, but thereafter, as per the directions of the DRP the said deduction was allowed without adjusting the losses of the ineligible undertaking. To sum up, it was observed by the CIT that pursuant to the directions of the DRP the deduction u/s 10B was allowed by the A.O qua the eligible undertaking of the assessee. On a scrutiny of the working of deduction u/s 10B of the Act, it was observed by the CIT that the assessee company had added a deemed mark up of ₹ 51,58,46,895/- in respect of transactions with the related overseas parties. In the backdrop of the aforesaid fact, the CIT held a conviction that the addition on account of deemed mark up was made by the assessee in order to bring the international transactions within arm s length price. Observing, that as per the proviso to Sec. 92C(4) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .O pursuance to an adjustment referred by the TPO ; and (v). that the allowing of the assessee s claim for deduction u/s 10B was supported by the judgment of the Hon ble High Court of Karnataka in the case of CIT Vs. I-Gate Global Solutions Ltd. (ITA No. 452/2008), dated 17.06.2015, and the orders of the Tribunals viz. Sumtotal Systems India Pvt. Ltd. Vs. DCIT (ITA No. 255/Hyd/20015); dated 23.09.2016 and Austin Medical Solutions Pvt. Ltd. Vs. ITO [IT(TP) A. No. 542/Bang/2012), dated 17.07.2016. However, the CIT did not find favor with the claim of the assessee and directed the A.O to withdraw the deduction allowed u/s 10B in light of the observations recorded in his order passed u/s 263 of the Act. 16. Aggrieved, the assessee has challenged the order passed by the CIT in appeal before us. It was submitted by the ld. Authorised Representatives for both the parties that the issue involved in the present appeal, in so far it pertained to the entitlement of the assessee towards claim of deduction u/s 10B of the Act was concerned, was identical to that involved in its appeal for A.Y 2009-10 in ITA No. 3817/Mum/2017. As the facts and the issue involved in the present appeal of the a ..... 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