Assistant Commissioner of Incometax v. Audco India Ltd.

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The Tax Publishers2012 TaxPub(DT) 1051 (Mum-Trib) : (2011) 047 SOT 0420 INCOME TAX ACT, 1961 --Deduction under section 80HHc--Computation profit on sale of DEPB licence--AO was directed to reconsider the claim of assessee in the light of the decision in the case of CIT v. Kalpataru Colours & Chemicals (2010) 192 Taxman 435 (Bom) : 2010 TaxPub(DT) 2051 (Bom-HC), after providing reasonable opportunity of being heard to assessee. Income Tax Act, 1961 Section 80HHC INCOME TAX ACT, 1961 --Transfer pricing--Computation of ALPWithin 5 per cent tolerance limit--Since the aggregate difference between the sale price charged from related party and Arms length price was only 3.35 per cent which was well within the 5 per cent of the tolerance limit permitted byu law, therefore, addition amde by AO under section 92(A) was deleted. Income Tax Act, 1961 Section 92CA(3) IN THE ITAT, MUMBAI 'L' BENCH D.K. AGARWAL, J.M. & RAJENDRA SINGH, A.M. Asstt. CIT v. Audco India Ltd. ITA No. 2642 (Mum) of 2009 A.Y. 2002-03 16 November, 2010 Appellant by : Heena Doshi Respondent by : Ajit Kumar Sinha ORDER *D.K. Agarwal, J.M.* This appeal preferred by the revenue is directed against the order dated 12-2-2009 passed by the learned Commissioner (Appeals) for the assessment year 2002-03. 2. Briefly stated facts of the case are that the assessee company is engaged in the business of manufacture of industrial valves and oil field equipments of various types, sizes and pressure ratings and actuators, filed return declaring total income of Rs. 16,03,84,020. The assessing officer noted that the assessee has claimed deduction under section 80-IB of the Income-tax Act, 1961 (the Act) in respect of its industrial unit and deduction under section 80HHC in respect of its export business. The assessee was asked to show cause as to why deduction under section 80HHC shall not be computed after excluding the amount received on sale of DEPB Rs. 1,51,93,915 and the interest on Income-tax refund Rs. 27,92,000 in view of the amendment by the Taxation Laws (Amendment) Act, 2005. The assessing officer after considering assessees explanation that the assessee is eligible for deduction on transfer of DEPB under section 80HHC as the assessee fulfilled both the conditions as mentioned under 3rd proviso to sub-section (3) of section 80HHC of the Act, observed that the assessee has failed to discharge his onus to prove that it had the necessary option and further observed that in view of the DEPB Scheme the assessee is not entitled for deduction under section 80HHC in respect of the profit on DEPB as per 1st proviso below sub-section (3) of section 80HHC of the Act. Apart from this the assessing officer further observed that the assessee has entered into international transactions with associated parties as per details furnished in Form No.3 CEB filed along with the return of income. The assessing officer made reference to the Transfer Pricing Officer (TPO) for computing the arms length price under section 92CA. The TPO vide his report dated 13-12-2006 has made an order for upward adjustment of Rs. 7,28,865. The assessing officer after considering the assessees submission in this regard rejected the same and made disallowance of Rs. 7,28,865 under section 92CA(3) of the Act and accordingly completed the assessment at an income of Rs. 19,97,08,280 vide order dated 26-12-2006 passed under section 143(3) read write section 147 of the Act. On appeal, the learned Commissioner (Appeals) on the issue of deduction under section 80HHC in respect of profit on DEPB held that assessee has satisfied both the conditions given in the proviso to section 80HHC and hence the assessee is entitled to the deduction under section 80HHC in respect of profit of Rs. 1,51,93,918. On the issue of addition of Rs. 7,28,865 under section 92CA(3) he held that there is no case for adjustment of Rs. 7,28,865 and accordingly he deleted the addition made by the assessing officer. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2012 TaxPub(DT) 1051 (Mum-Trib) : (2011) 047 SOT 0420

INCOME TAX ACT, 1961

--Deduction under section 80HHc--Computation profit on sale of DEPB licence--AO was directed to reconsider the claim of assessee in the light of the decision in the case of CIT v. Kalpataru Colours & Chemicals (2010) 192 Taxman 435 (Bom) : 2010 TaxPub(DT) 2051 (Bom-HC), after providing reasonable opportunity of being heard to assessee.

Income Tax Act, 1961 Section 80HHC

INCOME TAX ACT, 1961

--Transfer pricing--Computation of ALPWithin 5 per cent tolerance limit--Since the aggregate difference between the sale price charged from related party and Arms length price was only 3.35 per cent which was well within the 5 per cent of the tolerance limit permitted byu law, therefore, addition amde by AO under section 92(A) was deleted.

Income Tax Act, 1961 Section 92CA(3)

IN THE ITAT, MUMBAI 'L' BENCH

D.K. AGARWAL, J.M. & RAJENDRA SINGH, A.M.

Asstt. CIT v. Audco India Ltd.

ITA No. 2642 (Mum) of 2009

A.Y. 2002-03

16 November, 2010

Appellant by : Heena Doshi

Respondent by : Ajit Kumar Sinha

ORDER

D.K. Agarwal, J.M.

This appeal preferred by the revenue is directed against the order dated 12-2-2009 passed by the learned Commissioner (Appeals) for the assessment year 2002-03.

2. Briefly stated facts of the case are that the assessee company is engaged in the business of manufacture of industrial valves and oil field equipments of various types, sizes and pressure ratings and actuators, filed return declaring total income of Rs. 16,03,84,020. The assessing officer noted that the assessee has claimed deduction under section 80-IB of the Income-tax Act, 1961 (the Act) in respect of its industrial unit and deduction under section 80HHC in respect of its export business. The assessee was asked to show cause as to why deduction under section 80HHC shall not be computed after excluding the amount received on sale of DEPB Rs. 1,51,93,915 and the interest on Income-tax refund Rs. 27,92,000 in view of the amendment by the Taxation Laws (Amendment) Act, 2005. The assessing officer after considering assessees explanation that the assessee is eligible for deduction on transfer of DEPB under section 80HHC as the assessee fulfilled both the conditions as mentioned under 3rd proviso to sub-section (3) of section 80HHC of the Act, observed that the assessee has failed to discharge his onus to prove that it had the necessary option and further observed that in view of the DEPB Scheme the assessee is not entitled for deduction under section 80HHC in respect of the profit on DEPB as per 1st proviso below sub-section (3) of section 80HHC of the Act. Apart from this the assessing officer further observed that the assessee has entered into international transactions with associated parties as per details furnished in Form No.3 CEB filed along with the return of income. The assessing officer made reference to the Transfer Pricing Officer (TPO) for computing the arms length price under section 92CA. The TPO vide his report dated 13-12-2006 has made an order for upward adjustment of Rs. 7,28,865. The assessing officer after considering the assessees submission in this regard rejected the same and made disallowance of Rs. 7,28,865 under section 92CA(3) of the Act and accordingly completed the assessment at an income of Rs. 19,97,08,280 vide order dated 26-12-2006 passed under section 143(3) read write section 147 of the Act. On appeal, the learned Commissioner (Appeals) on the issue of deduction under section 80HHC in respect of profit on DEPB held that assessee has satisfied both the conditions given in the proviso to section 80HHC and hence the assessee is entitled to the deduction under section 80HHC in respect of profit of Rs. 1,51,93,918. On the issue of addition of Rs. 7,28,865 under section 92CA(3) he held that there is no case for adjustment of Rs. 7,28,865 and accordingly he deleted the addition made by the assessing officer.