9911796707
TMI Blog2024 (9) TMI 147X X X X Extracts X X X X X X X X Extracts X X X X ..... of all the material facts. As the impugned notice is issued beyond the period of four years, the respondent could not have assumed the jurisdiction on the basis of the audit objections. Reduced exchange gain on sale of shares of MAP - The assessee has made full disclosure in computation of income as well as in the revised return of income during the course of regular assessment. The petitioner has explained in detail in the objections with regard to issue of transaction with MAP which has been allowed to have not been disclosed but the respondent failed to consider the same while disposing of such objection. On perusal of the material available on record, we are of the opinion that there is no failure on the part of the petitioner to disclose fully and truly all material facts at the time of original assessment and therefore, as per proviso to Section 147 of the Act, the respondent could not have assumed the jurisdiction for reopening the assessment. Decided in favour of assessee. - HONOURABLE MR. JUSTICE BHARGAV D. KARIA AND HONOURABLE MR. JUSTICE NIRAL R. MEHTA Appearance: For the Petitioner(s) No. 1 : Mr B S Soparkar (6851). For the Respondent(s) No. 1 : Mr. Varun K. Patel (38 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as issued with regard to transaction of software services distributed by MUK as marketing support services and taking MUK as tested party and risk adjusted margin comparable on cost (VAE) at 11.99% as the Arm s Length Return for MUK. The petitioner filed reply dated 30th September 2016. However, disregarding the submissions of the petitioner, the Transfer Pricing Officer (TPO) made upward adjustment in relation to transactions with MUK at Rs. 9,46,41,120/- vide order dated 25th October, 2016 passed under Section 92CA (3) of the Act. [5.5] The Assessing Officer during the course of regular assessment proceedings issued notice under Section 142 (1) of the Act on 29th July 2016 asking details relating to debits / credits in profit and loss account on account of foreign exchange fluctuations. The petitioner filed detailed submissions on 16th September, 2016, 7th October, 2016 and 22nd November, 2016. Thereafter, the assessment order under Section 143 (3) of the Act was passed on 30th December, 2016 assessing the income of the petitioner at Rs. 54,73,25,590/- inter alia making Transfer Pricing addition of Rs. 9,50,69,182/-. [5.6] The petitioner thereafter received notice under Section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... argin on sales adopted by the assessee-company to margin on VAE. The comparable company selected by the TPO (hocomm Ltd. And Touchstone Group PLC) were entrepreneurs carrying associated risks like financial, Inventory and capital risk and hence the comparison with the AE was made, after risk adjustment The arithmetic mean of the, PLI (Le return on VAE) of the comparables identified was computes at 22.78% However, these companies were carrying out their work as full risk entrepreneur in marketing business whereas MUK was a captive marketing support company, Accordingly, the margins of the comparable companies were required to be recomputed after conducting the risk assessment. For the purpose of carrying out a risk adjustment, TPO relied upon the decision of the Banglore ITAT in the case of Philips Software Centre Private Limited (26 SOT 226) Bangalore. In the said case, the ITAT held that the difference between the Prime lending Rate of the bank could be considered as a normal risk bearing return, the Bank rate was considered as a risk free return and accordingly, the difference between the two was attributed to the additional risk and accordingly the requisite PLI was computed at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gain on sale of MAP shares of Rs. 1,88,72,839/- from the net profit under the head Profit and Gains of Business or Profession stating that the same is being shown separately. Further, it was seen from the profit and loss a/c, that the said item was not found credited. However, in computation of income said item was not shown separately. This has resulted into underassessment of income of Rs.92,37,424/-. [5.8] The petitioner filed objection on 26th May 2021 which was disposed of by the respondent vide order dated 11th November 2021. [6] Being aggrieved, the petitioner has preferred this petition. [7] Learned advocate Mr. B. S. Soparkar for the petitioner submitted that so far as the issue based upon the mark up on direct cost of MUK to be made at 9.17% after accounting for foreign exchange risk of 1% instead of 12% mark up was made by the Transfer Pricing Officer (TPO), is nothing but mere change of opinion on the part of the respondent for reopening of the assessment. It was submitted that the Arm s Length Price (ALP) in relation to provisions of marketing support service provided by the associated enterprise (AE) Mastek (UK) Limited (AE-MUK) to the petitioner cannot be said to hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... up while calculating the Arms Length Price (ALP), the TPO has failed to consider foreign exchange risk of 1% which was considered by the audit objection party and therefore when there was no consideration for foreign exchange risk by the TPO, it cannot be said to mere change of opinion resulting into under assessment of Rs. 1,60,75,800/-. It was further submitted that similarly, the exchange gain on sale of MAP shares of Rs. 1,88,72,839/- from the net profit under the head Profit and Gains of Business or Profession stating that the same is being shown separately has also resulted into under assessment of income of Rs. 92,37,424/-. It was therefore submitted that the contentions raised by the petitioner are contrary to the facts on record and no interference be made in the impugned notice as the respondent Assessing Officer had assumed the jurisdiction to reopen the assessment after application of mind and after thorough analysis of the record available with the department. [9] Considering the submissions made by the learned advocates for the respective parties, the facts which emerge from the record are to the effect that the TPO, while determining the ALP and making upward adjust ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
