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TMI Blog2018 (5) TMI 2084X X X X Extracts X X X X X X X X Extracts X X X X ..... ance with law, after affording the assessee adequate opportunity of being heard and to make submissions and file details etc required which shall be duly considered. Computation of deduction under Section 10A - seeking parity between export turnover and total turnover - exclusion of expenses incurred on freight and travel in foreign currency from both export turnover as well as the total turnover - HELD THAT:- This issue is no longer res integra and is covered by the judgment in the case of Tata Elxsi Ltd. [ 2011 (8) TMI 782 - KARNATAKA HIGH COURT] wherein it has been held that if certain expenses are excluded from export turnover, the same should be excluded from total turnover. Thus we reverse the decision of the learned CIT (Appeals) and direct the Assessing Officer to compute the deduction under Section 10A of the Act by reducing the said expenses from both export turnover and total turnover. Charging of interest under Section 234B 234D - HELD THAT:- The charging of interest is consequential and mandatory and the Assessing Officer has no discretion in the matter. This proposition has been upheld by the Hon'ble Apex Court in the case of Anjum H. Ghaswala 2001 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies do not resort to dilatory tactics. 13. The appellant submits that it is settled principle that the words sufficient cause should receive a liberal construction so as to advance substantial justice. 14. The Appellant submits that it is settled principle that when substantial justice and technical considerations are pitted against each other, the cause of substantial justice is to be preferred. 15. The Appellant submits that the delay in filing appeal has been caused due to peculiar circumstances of the case and would fall under the realms of sufficient cause . 16. The Appellant submits that grave and irreparable loss will be caused to the Appellant, if the condonation of delay is refused, which may result in a meritorious matter being thrown out at the very threshold and the cause of justice being defeated. WHEREFORE, the appellant prays that the Hon'ble Tribunal be pleased to accept the appeal in Form 36 and condone the delay. 1.1.2 The learned Authorised Representative was heard and reiterated the submissions made by the assessee in the Affidavit. Reliance was also placed on the following judicial pronouncements for condonation of delay in filing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.1 The assessee company, a wholly owned subsidiary of Flowserve Corporation, USA, is engaged in the manufacture of pumps, valves and precision mechanical seals. For the year under consideration, the assessee filed its return of income on 31.10.2007 declaring total income of ₹ 13,56,34,717. The return was processed under Section 143(1) of the Act and the case was subsequently taken up for scrutiny. In view of the international transactions entered into by the assessee with its Associated Enterprises (AE) in the year under consideration, the Assessing Officer made a reference to the Transfer Pricing Officer (TPO) for determining the Arm's Length Price (ALP) thereof. The TPO passed an order under Section 92CA of the Act dt. 27.10.2010 proposing an aggregate adjustment of ₹ 4,36,75,742; which comprised of adjustments of ₹ 1,17,94,751 under the Design Services Segment and ₹ 3,18,80,991 towards management charges. After receipt of the TPO's order, the Assessing Officer passed the draft order of assessment for Assessment Year 2007-08 under Section 143(3) r.w.s. 144C of the Act dt. 6.12.2010, incorporating, inter alia, the above Transfer Pricing Adjustm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Services Segment. The entire management charges of ₹ 7,70,99,285 was added to income of the assessee by way of an adjustment by treating its ALP to be NIL. Before us, the learned Authorised Representative for the assessee submitted a copy of the letter of the Assessing Officer dt. 27.7.2017 conveying the MAP resolution of Management Charges for five years, ie. Assessment Years 2007-08 to 2011-12 in the case on hand and therefore the grounds raised under Management Charges stands withdrawn. 4. The revised grounds of appeal filed after withdrawal of the appeal/grounds related to Management Charges. I. Transfer Pricing 1. The learned Assessing Officer ( AO ) and the learned Additional Commissioner of Income Tax (Transfer Pricing - I), Bangalore ( Transfer Pricing Officer or TPO ) grossly erred in law and facts of the case in determining the arm's length price ( ALP ) of the international transaction of the Appellant and thereby making an adjustment of ₹ 11,794,751 with respect to the design and engineering services rendered by the Appellant u/s. 92CA of the Income Tax Act. A. Design and engineering services 2. That on the facts and circums ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by adjusting the following expenses from the Export Turnover: 6.2. The learned AO has erred in reducing foreign travel expenditure incurred in foreign currency from Export Turnover unit by considering the same as attributable to providing technical services outside India for the purpose of computing the deduction under section 10A and 10B of the Act. 6.3. The learned AO ought to have appreciated that the STPI unit of the Appellant is engaged in creating drawings using CAD/CAM software's per the specifications and inputs provided by the group companies and hence, there would be no instances of technical services being provided outside India. 6.4. The learned AO erred in ignoring the fact that freight expenditure pertaining to the EOU unit of ₹ 3,217,117 was incurred towards carriage of goods from the factory to the custom station in India and not towards delivering goods Jut side India and should not be reduced from the Export Turnover of the 10B unit of the Appellant. 6.5. The learned AO ought to have observed that the definition of 'Export Turnover' as per section 10A and 10B of the Act provides that 'freight, telecommunication charges or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et of comparable companies applying the employee cost filter of 25% on sales, etc. which are extracted hereunder :- Ground No. 2.2.1: The Learned Transfer Pricing Officer ( Ld. TPO )/Learned Assessing Officer ( Ld. AO ) and Hon'ble Dispute Resolution Panel ( Hon'ble DRP ) erred in not rejecting the following companies from the list of comparable companies proposed by the Ld. TPO: Accentia Technologies Limited; Asit C Mehta Financial Services Limited; Bodhtree Consulting Limited; Caliber Point Business Solutions Limited; Eclerx Services Limited; HCL Comnet Systems Services Limited; ICRA Techno Analytics Limited; Informed Technologies India Limited Infosys BPO Limited; Maple E-solutions Limited; Mold-Tek Technologies Limited; R Systems International Limited; Spanco Limited; Vishal Information Technologies Limited; Wipro Limited; and Accurate Data Converters Limited Reason for filing Additional Ground of Appeal The Appellant submits that a ground pertaining to rejection of companies not comparable to the Appellant has already been included in the gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. TPO or before the Hon'ble DRP due to lack of relevant details during that time. However, subsequent to filing the Form 36B, the Appellant has come to the notice that by way of various tribunal rulings the above-mentioned companies have been directed to be rejected. Therefore, by applying similar approach the Appellant humbly request the Hon'ble bench members to reject the above-mentioned companies. 6.2.2 We have heard the rival contentions on the issue of raising of the additional grounds (supra), the reasons cited by the assessee for raising the same and material on record. After due consideration of the assessee's plea, we are of the view that since the issues raised could go to the very root of the transfer pricing dispute before us and would not require examination of fresh facts other than those already on record, in keeping with the principles laid down by the Hon'ble Apex Court in the case of NTPC Ltd. (229 ITR 383) (SC) we admit the additional grounds raised for consideration and adjudication. 6.3.1 In the course of proceedings before the Bench, the learned Authorised Representative for the assessee drew our attention to Ground No. 2.1, where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contra, the learned Departmental Representative while agreeing to the proposal that the issue requires a fresh examination, pointed out that the assessee has identified itself as an ITES provider in the search process. 6.5.1 We have carefully considered the submissions made and the material on record and are of the view that it was not correct to characterize the assessee as providing ITES. First of all, the TPO does not appear to be following a consistent position over the years. Further, in Assessment Year 2011-12, Revenue has also accepted the services rendered by this segment as 'Engineering Design Services'. We also find that the characterization is not in tune with the functional analysis done in the TP Study as the TPO has not brought on record any evidence which might establish that the characterization has to be ITES only. In view of the unclear/unestablished factual position as emerges from an appreciation of the details on record, we deem it appropriate to remand the matter back to the file of the TPO and direct that the characterization of the assessee shall be done in accordance with law, after affording the assessee adequate opportunity of being heard an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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