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TMI Blog2020 (2) TMI 1668X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tribunal held that TNMM is to be applied and the margins of assessee are to be compared with average margins of external comparable companies. Action of AO/TPO in excluding export incentive while computing the operating margin of the assessee in export to AEs segment - Similar issue had come up before this Tribunal in assessee s own case for A.Y. 2011-12 [ 2018 (9) TMI 1691 - ITAT PUNE] wherein it has been held that export incentive is to be included as part of operating income while determining operating margin of assessee.3. In view of the above, we hold that export incentives are to be considered as operating income of assessee, while benchmarking international transactions of assessee, ground raised by the assessee is allowed. Considering PLI as operating profit to total cost as against operating profit to sales, without proving cogent reasons - HELD THAT:- The identical issue had come up before this Tribunal for A.Y. 2011-12 [ 2018 (9) TMI 1691 - ITAT PUNE] wherein the Co-ordinate Bench considering the earlier orders of Tribunal in assessee s own case held the PLI of net profit to sales is to be accepted. Not granting the benefit of 3 percent as per proviso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egal and professional fees related to R D unit was called for. In response, the same was submitted by the assessee. Perusal of details, the AO observed that electricity bills and legal fees does not specify that it was incurred for R D unit only and it cannot be held that this expenditure was solely incurred for R D unit only. Disallowance of claim of additional depreciation - HELD THAT:- As in the case of in the case of Commissioner of Income Tax Vs. Shri T.P. Textiles Pvt. Ltd. [ 2017 (3) TMI 739 - MADRAS HIGH COURT] and in both these cases, it has been unanimously observed and held that the assessee can claim balance depreciation in the subsequent assessment year. The Hon‟ble Bombay High Court was of the opinion that there emerges no reason to take a different view from that taken by the aforesaid two High Courts, examining the situation at considerable length. Therefore, appeal of the Revenue was dismissed by the Hon‟ble Jurisdictional High Court. Respectfully, following the binding judgment of the Hon‟ble Jurisdictional High Court, we allow ground raised by the assessee - ITA No. 160/PUN/2018 - - - Dated:- 19-2-2020 - SHRI ANIL CHATURVEDI, ACC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gures from the cost centres. Thereby, rejected aggregation approach adopted by the assessee and proceeded to determine ALP on transaction wise. It was submitted before the DRP by the assessee that this issue covered in its favour of assessee by an order of ITAT, Pune Benches for A.Ys. 2005-06 and 2006-07 which upheld the aggregation approach, but however the DRP taking into consideration, the appeal is pending before the Hon ble High Court of Bombay, confirmed the view of AO/TPO in this regard. We find that as rightly pointed by the ld. AR the similar issue had come up before this Tribunal latest by in A.Y. 2011-12 wherein the Tribunal placing reliance in earlier orders passed in assessee s own case upheld the aggregation approach adopted by the assessee to benchmark international transactions in manufacturing activity. The relevant portion at para 15 in consolidated order dated 25-09-2018 is reproduced here-in-below : 15. We find that similar issue arose before the Tribunal in assessee‟s own case in earlier years and the Tribunal in assessment year 2009-10 vide paras 8 to 10 has decided the said issue in favour of assessee holding that various activities undertaken by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iew of our decision in ground Nos. 3.1 and 3.2, the ground No. 4.1 raised by the assessee become academic, requiring no adjudication. 11. Ground No. 5.1 raised by the assessee challenging the action of AO/TPO in excluding export incentive while computing the operating margin of the assessee in export to AEs segment. 12. Heard both parties and perused the material available on record. Similar issue had come up before this Tribunal in assessee s own case for A.Y. 2011-12 wherein it has been held that export incentive is to be included as part of operating income while determining operating margin of assessee. The relevant portion of para 21 is reproduced here-in-below : 21. We find that similar issue has been decided by the Hon‟ble Bombay High Court in CIT Vs. Welspun Zucchi Textiles Ltd. (supra) and it has been laid down that DEPB benefit arising to the assessee therein was operating revenue includable in arriving at operating profit. The said proposition of jurisdictional High Court has been applied by the Pune Bench of Tribunal in Carraro India Pvt. Ltd. Vs. ACIT (supra) and it has been held that export incentives and scrap sales are to be included as operating inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -5% is available if the variation does not exceed the said tolerance margin. The ground of appeal No.6.1 is thus, allowed. 19. In view of the above, we direct the AO/TPO to give benefit of range of 5% if the variation does not exceed the said tolerance margin, thus, ground No. 7.1 raised by the assessee is allowed. 20. Ground Nos. 8.1 to 8.4 raised by the assessee challenging the action of AO/TPO in respect of addition on account of management fee. 21. Heard both parties and perused the material available on record. The ld. AR submitted that the advance pricing agreement entered into between the assessee and the Central Board of Direct Taxes (CBDT) in A.Y. 2014-15. He submits that it supplies guidelines to the previous year. i.e. A.Y. 2013-13 and prayed to remand the matter to the file of AO/TPO to examine the same on the issue of applicability of advance pricing agreement involving the management service fee. The ld. AR also placed on record of order of this Tribunal in the case of M/s. Honewell Automation India Limited Vs. ACIT in ITA No. 359/PUN/2013 for A.Y. 2008-09, dated 02-11-2018, wherein, on perusal of the same, we note that A.Y. in that appeal was 2008-09 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case may be, when the facts of the A.Y. 2008-09 are similar to that of the assessment year covered in the APA. For the sake of convenience, the same are extracted here as under : 1. In the case of Abicor Binzel Production (India) Pvt. Ltd. Vs. Dy.CIT (ITA Nos. 2253 to 2255/PUN/2014 In the light of fact that assessee has entered into APA, the Coordinate Bench of the Tribunal in the assessment year 2009-10 has directed Assessing Officer to decide the issue in accordance with the terms and conditions of APA as nature of transactions are similar. .. If they are of similar nature, the same can be decided afresh in line with the terms and conditions of APA. The appeals of the assessee are thus, allowed for statistical purpose with aforesaid directions. 2. In the case of Abicor Binzel Production (India) Pvt. Ltd. Vs. Dy.CIT (ITA No.139/PN/2014) The assessee has made a request since it had entered into Advance Pricing Agreement (APA) with CBDT covering nine years from AY 2010-11 to AY 2013-14 under rollback provisions and from AY 2014-15 to 2018-19 being the balance APA period, similar proposition should be applied to the year under consideration also as the intern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he legal proposition of deciding the issue in the light of APAs. Accordingly, the grounds Nos. 14 to 17 raised by the assessee are allowed for statistical purposes. 22. In view of the above, the issue raised in ground Nos. 8.1 to 8.4 we deem it proper to remand the issue to the file of AO/TPO to consider the issue afresh in terms of advance pricing agreement. Ground Nos. 8.1 to 8.4 raised by the assessee are allowed for statistical purposes. 23. Ground Nos. 9.1 to 9.5 raised by the assessee questioning the action of AO/TPO on disallowance of expenses u/s. 14A of the Act. 24. Heard both parties and perused the material available on record. Similar issue had come up before this Tribunal for A.Y. 2012-13 wherein the Tribunal placed reliance in the order of A.Y. 2010-11 along with the details placed therein in page 385 of the paper book held the same reasons shall apply to the year under consideration therein. The relevant portion of paras 4 to 7 are reproduced here-in-below : 4. Ground No.6 pertains to the disallowance of expenses u/s.14A of the Income Tax Act, 1961 (hereinafter referred to as the Act‟). 5. The Assessing Officer dealt with this issue at Page-5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he file of AO/TPO to decide this issue in terms of finding of this Tribunal in assessee s own case in A.Y. 2012-13. Accordingly, ground Nos. 9.1 to 9.5 raised by the assessee are allowed for statistical purposes. 26. Ground Nos. 10.1 to 10.4 raised by the assessee challenging the action of AO/TPO in disallowance of deduction u/s. 35(2AB) of the Act. 27. The facts relating to the issue on hand is that the assessee has claimed weighted deduction of Rs.94.14 crores u/s. 35(2AB) of the Act in respect of its in-house R D facility as approved by the Department of Scientific Industrial Research (DSIR). The AO asked the assessee to file the details of expenditure incurred and the approval given by the DSIR. On perusal of the submissions the AO observed that the DSIR has not approved expenditure of Rs.12.87 crores out of the total expenditure of Rs.47.07 crores. The assessee was asked to explain why proportionate deduction u/s. 35(2AB) of the Act should not be disallowed to the extent of the amount disallowed by the DSIR. The assessee contended before the AO that the DSIR has apparently made some mistake in approving the expenditure as above since they have not furnished the reaso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s used for scientific research, the matter should be referred to the appropriate authority whose decision will be final. In this case the appropriate authority is the DSIR. The DSIR has certified the quantum of eligible R D expenditure for the purposes of weighted deduction u/s. 35(2AB), the figure cannot be tampered with by ITAT. Even if the assessee is right in that, there is a mistake in the certificate issued by the DSIR, which we don't know, the same can only be rectified by DSIR and not the ITAT in appellate proceedings. We note that the details of electricity expense and legal and professional fees related to R D unit was called for. In response, the same was submitted by the assessee. Perusal of details, the AO observed that electricity bills and legal fees does not specify that it was incurred for R D unit only and it cannot be held that this expenditure was solely incurred for R D unit only. 28. Heard both parties and perused the material available on record. Similar issue has been decided by this Tribunal in A.Y. 2012-13 in assessee s own case. The relevant portion of para 12 is reproduced herein- below : 12. Both the parties herein agreed, the facts a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of Rs.2,55,68,424/-, against which the assessee is before us. 32. Heard both parties and perused the material available on record. The identical issue had come up before this Tribunal for A.Y. 2012-13. The relevant portion of para 15 is reproduced here-in-below : 15. The Ld. AR of the assessee invited our attention to the decision of the Hon‟ble Bombay High Court in the case of the Pr. Commissioner of Income Tax-14 Vs. M/s. Godrej Industries Ltd., Income Tax Appeal No.511 of 2016 for assessment year 2007-08 wherein the question before the Hon‟ble High Court was as follows: Whether on the facts and circumstances of the case and in law, the Tribunal is right in law in holding that the Assessee is entitled to 50% of the additional depreciation under section 32(1)(iia) of the IT Act, 1961? The Hon‟ble Bombay High Court on this issue has held and observed as follows: 5. Having heard Counsel for the Revenue and for the Assessee, we notice that the Assessee's claim of additional depreciation arises out of clause (iia) of sub-section 1 of Section 32 of the Act. Clause (ii) of sub- section 1 of Section 32 of the Act recognizes the depreciation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll be allowed as deduction under clause (ii) . The word shall used in the said clause is very significant. The benefit which is to be granted is 20 per cent additional depreciation. By virtue of the proviso referred to above, only 10 per cent can be claimed in one year, if plant and machinery is put to use for less than 180 days in the said financial year. This would necessarily mean that the balance 1 0 per cent additional deduction can be availed of in the subsequent assessment year, otherwise the very purpose of insertion of clause (iia) would be defeated because it provides for 20 per cent deduction which shall be allowed. It has been consistently held by this Court, as well as the apex court, that the beneficial legislation, as in the present case, should be given liberal interpretation so as to benefit the assessee. In this case, the intention of the legislation is absolutely clear, that the assessee shall be allowed certain additional benefit, which was restricted by the proviso to only half of the same being granted in one assessment year, if certain condition was not fulfilled. But, that, in our considered view, would not restrain the assessee from claiming the balanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a) read along with relevant proviso would have us come to the conclusion that, there is no limitation in the assessee claiming the balance 10 per cent of additional depreciation in the succeeding assessment year. 10.2:- As a matter of fact, with effect from April 2016 the ambiguity, if any, in this regard in the mind of the Assessing Officer stands removed by virtue of the Legislature incorporating in the Statute the necessary clarificatory amendment. 10.3:- . . .. 11:- We may only indicate that during the course of the arguments our attention was drawn to the Memorandum explaining the provisions in Finance Bill 2015 whereby the aforementioned amendment was brought about. 11.1:- The relevant part of the memorandum is extracted hereafter:- To remove the discrimination in the matter of allowing additional depreciation on plant or machinery used for less than 180 days and used for 180 days or more it is proposed to provide that the balance 50 per cent of the additional depreciation on new plant or machinery acquired and used for less than 180 days which has not been allowed in the year of acquisition and installation of such plant or machinery shall be a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a High Court in the case of Commissioner of Income Tax and another Vs. Rittal India Pvt. Ltd., 380 ITR 423 and the decision of the Hon‟ble Madras High Court in the case of in the case of Commissioner of Income Tax Vs. Shri T.P. Textiles Pvt. Ltd., 394 ITR 483 and in both these cases, it has been unanimously observed and held that the assessee can claim balance depreciation in the subsequent assessment year. The Hon‟ble Bombay High Court was of the opinion that there emerges no reason to take a different view from that taken by the aforesaid two High Courts, examining the situation at considerable length. Therefore, appeal of the Revenue was dismissed by the Hon‟ble Jurisdictional High Court. Respectfully, following the binding judgment of the Hon‟ble Jurisdictional High Court, we allow ground No.8 raised by the assessee. 33. Thus, in view of the above, ground Nos. 11.1 to 11.4 raised by the assessee are allowed. 34. In ground No. 12.1 the assessee has assailed initiation of penalty proceedings u/s. 274 r.w.s. 271(1)(c) of the Act, it was agreed by the ld. AR that it is the ground raised by the assessee is pre-mature at this stage. Hence, requires no a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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