Wabco India Limited, CHENNAI V. DCIT, CHENNAI

ITA 1018/CHNY/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8211 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 19-11-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 05-05-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MILIND MADHUKAR BHUSARI
• Assessee Lawyers: BALASUBRAMANIYAM
• Keywords: Transfer pricing; International transaction; Earning of tax free income
• Section: 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI , . ! , '!# BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER ./ I.T.A. NO.1018/MDS/2015 ' $ %$ / ASSESSMENT YEAR : 2010-2011 WABCO INDIA LIMITED, PLOT NO.3(SP) III MAIN ROAD, AMBATTUR INDUSTRIAL ESTATE CHENNAI 600 058 VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 3(2) CHENNAI. [PAN AAFCA 6421P ] ( / APPELLANT) ( /RESPONDENT) &' ( ) / APPELLANT BY : SHRI. BALASUBRAMANIYAM, ADV *+&' ( ) /RESPONDENT BY : SHRI. MILIND MADHUKAR BHUSARI, CIT. ( , / DATE OF HEARING : 19-11-2015 -.% ( , / DATE OF PRONOUNCEMENT : 20-01-2016 / O R D E R PER G. PAVAN KUMAR, JUDICIAL MEMBER : THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF THE DISPUTE RESOLUTION PANEL, CHENNAI DAT ED 16.12.2014 PASSED U/S.143(3) R.W.S. 144C AND U/SEC 144C(5) O F THE INCOME TAX ACT. ITA NO.1018/MDS/2015 :- 2 -: 2. THE ASSESSEE HAS RAISED GROUNDS IN RESPECT OF DISAL LOWANCE U/S. RULE 14A OF THE ACT AND DIRECTION TO ASSESSING OFFICER TO ALLOW EXPENDITURE WHICH WAS NOT CLAIMED IN EARLIER YEARS AND CREDIT OF TDS ON THE BASIS OF TDS CERTIFICATES. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE C OMPANY IS IN THE BUSINESS OF MANUFACTURER OF ACTUATION SYSTEM , TOOL DEVELOPMENT AND SOFTWARE SERVICES FOR THE ASSESSMENT YEAR FILED RETURN ON INCOME ON 01.10.2011 DISCLOSING TAXABLE INCOME OF 9110,38, 43,104/- AND RETURN WAS PROCESSED U/S.143(1) OF THE ACT ON 29.03 .2012. SUBSEQUENTLY, CASE WAS SELECTED FOR SCRUTINY AND NO TICE WAS ISSUED U/S.143(2) OF THE ACT BY THE ASSESSING OFFICER, COM PANY WARD III(1), CHENNAI FOLLOWED BY ANOTHER NOTICE BY THE ACIT, COM PANY CIRCLE III(3), CHENNAI. IN COMPLIANCE TO THE NOTICE, THE ASSESSEE HAVING INTERNATIONAL TRANSACTIONS FILED COPY OF FORM 3CEB REPORT DATED 30.09.2010. THE ASSESSING OFFICER BASED ON THE REP ORT FOUND THAT THE ASSESSEE HAS ENTERED INTO INTERNATIONAL TRANSACTION S EXCEEDING 916 CRORES WITH ITS ASSOCIATED ENTERPRISES. THE LD. ASS ESSING OFFICER WITH THE APPROVAL OF CIT-I, CHENNAI REFERRED TO THE TR ANSFER PRICING OFFICER FOR COMPUTATION OF ARMS LENGTH PRICE IN RELATION TO THE INTERNATIONAL TRANSACTION. THE TPO BASED ON THE SUBMISSIONS OF T HE ASSESSEE AND THE TRANSACTIONS ENTERED BY THE SOFTWARE DEVELOPMEN T SECTOR OF THE ITA NO.1018/MDS/2015 :- 3 -: ASSESSEE COMPANY WITH THE ASSOCIATED ENTERPRISES FO UND THAT TRANSACTION WAS NOT WITHIN ARMS LENGTH PRICE AND MA DE UPWARD ADJUSTMENT OF 981,48,600/- AND PASSED THE ORDER NO. C.R.NO.W303/TPO III/AY 2010-11, DATED 31.12.2013. THE ASSESSING OFFICER AFTER RECEIPT OF THE ORDER OF THE TPO CONSI DERED THE UPWARD ADJUSTMENTS AND DISALLOWANCE AND MADE DRAFT ASSESSM ENT ORDER DATED 17.03.2014 AND SERVED ON THE ASSESSEE. THE ASSESSE E AGGRIEVED BY THE DRAFT ASSESSMENT ORDER FILED OBJECTIONS WITH TH E DISPUTE RESOLUTION PANEL IN FORM 35A ALONGWITH ENCLOSURES ON 21.04.201 4 WITHIN 30 DAYS FROM DATE OF RECEIPT OF ORDER. THE HONBLE DISPUTE RESOLUTION PANEL BY ORDER DATED 16.12.2014 VIDE F.NO. DRP/CHE/36/2014-1 5 DIRECTED THE TPO/ASSESSING OFFICER TO RECOMPUTED THE SAME. THE TPO UPWARD ADJUSTMENT OF 981,48,600/- IS REDUCED AND NO ADJUST MENT TO BE MADE AS PER THE DIRECTIONS OF DISPUTE RESOLUTION PANEL. THE ASSESSING OFFICER UPON RECEIPT OF ORDER OF THE DISPUTE RESOL UTION PANEL PASSED ASSESSMENT ORDER BY MAKING DISALLOWANCE U/S.14A AND AS THE ASSESSEE COMPANY RECEIVED DIVIDEND OF 944,021/- AND CLAIMED EXEMPTED. THE ASSESSING OFFICER FOUND THAT ASSESSEE HAS DISALLOWE D U/SEC.14A THE SAME AMOUNT IN THE COMPUTATION OF INCOME. THE ASSES SING OFFICER ISSUED SHOW CAUSE NOTICE DATED 7.1.2014 FOR WORKING OUT DISALLOWANCE U/S.14A AND AS PER THE RULE 8D DISALLOWANCE WORKED OUT TO 91,70,000/. THE COMPANY IS HAVING ENOUGH CASH FLOW GENERATION A ND THERE IS NO ITA NO.1018/MDS/2015 :- 4 -: EXPENSES AND INTEREST ATTRIBUTABLE TO EARN THE SUCH EXEMPT INCOME. BUT ON THE DEEMING PROVISIONS APPLICABILITY THE ASS ESSING OFFICER MADE DISALLOWANCE TO THE EXTENT 91,25,919/- AFTER ADJUS TING DISALLOWANCE MADE BY THE COMPANY SUOTMOTTU IN THE DRAFT ASSESSME NT ORDER. THE ASSESSEE APPEALED AGAINST 14A DISALLOWANCE BUT DISP UTE RESOLUTION PANEL HAS CONFIRMED THE ASSESSING OFFICER ORDER. T HE ASSESSING OFFICER ON THE BASIS OF DIRECTIONS OF DISPUTE RESOLUTION PA NEL REDUCED THE UPWARD ADJUSTMENT TO NIL AND MADE AN ADDITION UNDER RULE 14A RWS 8D OF 91,25,919/- AND ASSESSED TOTAL INCOME AT 9110 ,38,43,104/- U/S.143(3) R.W.S.144C DATED 20.02.2015 WITH ASSESSE D INCOME. AGGRIEVED BY THE ORDER OF THE DISPUTE RESOLUTION PA NEL, THE ASSESSEE FILED AN APPEAL BEFORE THE TRIBUNAL . 4. BEFORE THE TRIBUNAL, THE LD.AR REITERATED THAT THE ASSESSEE RECEIVED EXEMPTED INCOME OF 944,021/- AND VOLUNTARI LY DISALLOWED THE SAID AMOUNT IN COMPUTATION OF INCOME AT THE TIME O F FILING RETURN. BUT IN THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICE R HAS INVOKED DEEMING PROVISIONS UNDER SEC.14A R.W.S. 8D AND MADE ADDITIONAL DISALLOWANCE OF 91,25,919/-. THE LD. AUTHORISED RE PRESENTATIVE SUBMITTED THAT THE DISALLOWANCE CANNOT EXCEED EXEMP T INCOME EARNED BY THE ASSESSEE AT THE TIME OF HEARING. THE LD. AU THORISED REPRESENTATIVE FILED WRITTEN SUBMISSIONS AND RELIED ON THE DECISION OF ITA NO.1018/MDS/2015 :- 5 -: DELHI HIGH COURT IN THE CASE OF JOINT INVESTMENTS PRIVATE LTD. VS. CIT IN ITA NO.117/2015 DATED 25.02.2015 AND MUMBAI TRIBUNAL ORDER IN THE CASE OF DAGA GLOBAL CHEMICALS LTD VS. ACIT IN ITA NO.5592/MUM/2012, DATED 1.1.2015 AND DELHI TRIBUNAL DECISION IN THE CASE OF SAHARA INDIA FINANCIAL CORPORATION LTD VS. DCIT (20 14) 105 DTR 1. BASED ON THE FINDINGS OF THE ABOVE DECISIONS, THE LD. AUTHORISED REPRESENTATIVE VEHEMENTLY ARGUED THAT TH E DISALLOWANCE U/S.14A R.W.S. RULE 8D CANNOT EXCEED EXEMPTED INCOM E. 5. CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 6. WE AFTER HEARING THE LD. COUNSEL AND ALSO JUDGMENT RELIED BY THE ASSESSEE COMPANY, WE ARE OF THE OPINION THAT T HE ADDITION MADE BY THE ASSESSING OFFICER BASED ON THE DEEMING PROVI SIONS IS ON THE HIGHER SIDE COMPARED TO THE EXEMPTED INCOME EARNED BY THE ASSESSEE AND THE SAME WAS DISALLOWED. IN VIEW OF THE DECISI ONS OF HIGH COURT AND TRIBUNAL AND BY APPLYING DECISION OF JOINT INVESTMENTS PRIVATE LTD (SUPRA), WE REMIT THE MATTER TO THE ASSESSING OFFICER TO VER IFY THE CLAIM AND RESTRICT THE DISALLOWANCE TO THE EXTENT O F EXEMPTED INCOME. 7. THE ASSESSEE HAS RAISED GROUND IN RESPECT OF PROVI SION MADE TOWARDS AUDIT FEES. THE ASSESSEE HAS MADE PRO VISIONS OF AUDIT FEES OF 912,00,000/-FOR THE ASSESSMENT YEAR 2009-20 10. SINCE TDS ITA NO.1018/MDS/2015 :- 6 -: WAS NOT DEDUCTED ON AUDIT FEES AND NO CLAIM WAS MAD E IN EARLIER YEAR. THE ASSESSEE HAS MADE TAX PAYMENT IN THE ASSE SSMENT YEAR 2010-11. IN THE ASSESSMENT PROCEEDINGS, THE L.D AU THORISED REPRESENTATIVE REQUESTED THE ASSESSING OFFICER TO A LLOW THE DEDUCTION BUT THE ASSESSING OFFICER HAS OVERLOOKED THE SUBMIS SIONS. WHEN THE OBJECTION WAS RAISED BEFORE DISPUTE RESOLUTION PANE L ON THIS GROUND. THE HONBLE DISPUTE RESOLUTION PANEL HAS DIRECTED T HE ASSESSING OFFICER BUT ASSESSING OFFICER HAS NOT FOLLOWED THE DIRECTIONS OF DISPUTE RESOLUTION PANEL. IN SUPPORT OF THE PAYMENT LD.AR PRODUCED AUDIT FEE INVOICE RAISED BY THE AUDITOR AND 26AS OF AUDITOR R EFLECTING AUDIT FEE PAYMENT AND TDS DEDUCTED BY THE COMPANY. CONSIDERIN G THE GENUINESS OF THE PAYMENT AND WE RELY ON THE DECI SION OF COCHIN BENCH OF THE TRIBUNAL IN THE CASE OF M/S. TERMO PENPOL LTD VS. ACIT IN ITA NO.410/COCH/2014, DATED 12.12.2014 WHEREIN HELD AS UNDER:- NOW COMING TO THE ALTERNATIVE CONTENTION OF THE L D.COUNSEL FOR THE ASSESSEE THAT IT HAS TO BE ALLOWED IN THE YEAR IN WHICH THE TAX WAS PAID, THIS TRIBUNAL IS OF THE CONSIDERED OPINIO N THAT IN VIEW OF PROVISOS TO SECTION 40(A)(IA) AND 40(A)(I) THE DEDU CTION CLAIMED BY THE ASSESSEE HAS TO BE ALLOWED IN THE YEAR IN WH ICH THE TAX WAS ACTUALLY PAID BY THE ASSESSEE. THE LD.DR ALSO HAS N O OBJECTION TO ALLOW THE CLAIM OF THE ASSESSEE IN THE YEAR IN WHIC H THE TAX WAS ACTUALLY PAID BY THE ASSESSEE. IN VIEW OF THE ABOVE , THE ASSESSING OFFICER SHALL VERIFY THE ACTUAL PAYMENT OF TAX BY T HE ASSESSEE ON THE EXPENDITURE CLAIMED AND THEREAFTER ALLOW THE CL AIM IN THE YEAR IN WHICH THE TAX WAS ACTUALLY PAID. ITA NO.1018/MDS/2015 :- 7 -: WE DIRECT THE ASSESSING OFFICER TO VERIFY THE CLAIM OF AUDIT FEES AND ALLOW THE DEDUCTION BASED ON THE TDS PAYMENTS IN TH E ASSESSMENT YEAR 2010-2011 AND SIMILARLY ASSESSING OFFICER IS DIRECTED TO CONSIDER TDS CREDIT AND FRINGE BENEFIT TAX PAID AS PER CBDT CIRCULAR NO.2/2010, DATED 29.10.2010 FOR THE ASSESSMENT YEAR 2010-2011 TOWARDS ADVANCE TAX AND ALLOW THE CLAIM AFTER VERIF ICATION IN ACCORDANCE WITH LAW. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED COURT ON WEDNESDAY, THE 20TH DAY OF JANUARY, 2016, AT CHENNAI. SD/- SD/- ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER ( . ! ) (G. PAVAN KUMAR) /JUDICIAL MEMBER / CHENNAI / / DATED:20.01.2016. KV 0 ( *',23 43%, / COPY TO: 1 . &' / APPELLANT 3. 5, () / CIT(A) 5. 389 *',' / DR 2. *+&' / RESPONDENT 4. 5, / CIT 6. 9 $ : / GF