M/s. Honeywell Automation India Limited, Pune V. ACIT, Circle-7, Pune

ITA 359/PUN/2013

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 4043 (ITAT-PUNE)
• Duration Of Justice: 5 year(s) 8 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-11-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 10-10-2018
• Assessment Year: 2008-2009
• Appeal Filed On: 04-02-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: RHEA AMAR
• Keywords: Transfer pricing; Rectification of order; Principle of natural justice; International transaction; Commercial expediency; Revised return
• Section: 10AA; 80IB; 139(5); 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUN E . , , , ! BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO. 359/PUN/2013 # # / ASSESSMENT YEAR : 2008-09 M/S. HONEYWELL AUTOMATION INDIA LIMITED, 56/57, HADAPSAR INDUSTRIAL ESTATE, HADAPSAR, PUNE 411 013 PAN : AAACT3904F ....... / APPELLANT / V/S. ACIT, CIRCLE-7, PUNE / RESPONDENT ASSESSEE BY : SHRI KAMAL SAWHNEY & MS. RHEA AMAR REVENUE BY : SHRI RAJEEV KUMAR, CIT-DR / DATE OF HEARING : 10.10.2018 / DATE OF PRONOUNCEMENT : 02.11.2018 / ORDER PER D. KARUNAKARA RAO, AM : THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF DRP/TPO/AO INVOLVING A.Y. 2008-09. 2. GROUNDS RAISED BY THE ASSESSEE READ AS UNDER : ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HON'BLE DRP AND CONSEQUENTIALLY THE LEARNED AO HAS: GENERAL 1. ERRED IN ASSESSING THE TOTAL INCOME AT RS. 90,95 ,94,040 AS AGAINST INCOME OF RS. 65,78,09,980 (AS PER THE REVISED COMP UTATION OF INCOME FILED BY THE APPELLANT WITH THE LEARNED AO DURING THE COU RSE OF ASSESSMENT PROCEEDINGS); 2 ITA NO.359/PUN/2013 M/S. HONEYWELL AUTOMATION INDIA LTD., A. DENIAL OF TAX HOLIDAY CLAIM UNDER SECTION 10A OF THE ACT AMOUNTING TO RS. 5,22,56,867 WITH RESPECT TO SOFTWARE TECHNOLOGY PARKS ('STP') OPERATIONS; RS. 2,37,68,534 WITH RESPECT TO ELECTRO NIC HARDWARE TECHNOLOGY PARKS (EHTP') OPERATIONS OF THE APPELLA NT AND TAX HOLIDAY CLAIM UNDER SECTION 10AA OF THE ACT AMOUNTING TO RS . 1,87,497 WITH RESPECT TO SPECIAL ECONOMIC ZONE ('SEZ') OPERATIONS OF THE APPELLANT 2. ERRED IN RECOMPUTING THE DEDUCTION UNDER SECTION 10A AT RS. 11,39,56,076 AS AGAINST RS. 16,62,12,943 WITH RESPE CT TO STP OPERATIONS, RS. 5,18,31,824 AS AGAINST RS. 7,56,00,358 WITH RES PECT TO EHTP OPERATIONS AND DEDUCTION UNDER SECTION 10AA AT RS. 4,08,873 AS AGAINST RS.5,06,370 CLAIMED BY THE APPELLANT IN THE RETURN OF INCOME FILED ON 30 SEPTEMBER 2008, THEREBY DENYING DEDUCTION UNDER SEC TION 10A TO THE EXTENT OF RS. 7,60,25,40/AND UNDER SECTION 10AA TO THE EXTENT OF RS. 1,87,497; INVOKING THE PROVISIONS OF SECTION 10A(7) AND SECTI ON 10AA(9) READ WITH SECTION 801A( 10) IN THE APPELLANT'S CASE 3. ERRED IN INVOKING THE PROVISIONS OF SECTION 10A( 7) AND SECTION 10AA(9) READ WITH SECTION 80IA(10) IN THE APPELLANT'S CASE, ON THE GROUND THAT TRANSACTIONS BETWEEN THE APPELLANT AND ITS ASSOCIAT ED ENTERPRISES ARE ARRANGED TO PRODUCE MORE THAN ORDINARY PROFITS; 4. FAILED TO APPRECIATE THAT PROVISIONS OF SECTION 10A(7) AND SECTION 10AA(9) READ WITH SECTION 80IA (10) COULD ONLY BE I NVOKED WHERE BOTH THE CONNECTED PARTIES ARE TAXABLE IN INDIA AND THERE IS TAX EROSION IN INDIA DUE TO 'ARRANGEMENT' BETWEEN THOSE PERSONS AND NOT OTHERWISE; USAGE OF ARITHMETIC MEAN AS PER THE TRANSFER PRICIN G STUDY REPORT FOR DETERMINATION OF 'ORDINARY PROFITS' FOR THE PURPOSE OF SECTION 10A(7) AND SECTION 10AA(9) READ WITH SECTION 80IA(10) 5. ERRED IN LAW BY ADOPTING THE ARITHMETIC MEAN OF OPERATING MARGINS EARNED BY COMPARABLE COMPANIES AS PER THE TRANSFER PRICING STUDY REPORT AS BENCHMARK OF 'ORDINARY PROFITS' COMPUTED FOR THE PURPOSES OF SECTION 10A(7) AND SECTION 10AA(9) READ WITH SECTION 80IA(1 0); APPELLANT EARNING MORE THAN ORDINARY PROFITS. 6. ERRED IN CONCLUDING THAT THE PROFITS EARNED BY T HE APPELLANT ARE MORE THAN ORDINARY PROFITS FROM ITS STP OPERATIONS, WITH OUT APPRECIATING AND CONSIDERING THE BUSINESS MODEL UNDER WHICH THE APPE LLANT OPERATES; 7. FAILED TO APPRECIATE THAT THE RATES CHARGED BY T HE APPELLANT TO ITS ASSOCIATED ENTERPRISE ('AE') WERE COMPARABLE WITH T HE RATES CHARGED TO OTHER CUSTOMERS ('NON-AE') AND THE RATES CHARGED IN EARLIER YEARS; 8. FAILED TO APPRECIATE THAT THE ONUS IS ON THE DEP ARTMENT TO PROVE WITH SUBSTANTIAL EVIDENCES THAT THE BUSINESS OF THE APPE LLANT IS 'ARRANGED' SO AS TO HAVE SUPERNORMAL PROFITS AND MERE INFERENCES WITHOUT SUBSTANTIATING THE ALLEGATIONS WOULD NOT SUFFICE; 9. SHOULD HAVE APPRECIATED THAT THE APPELLANT HAS O FFERED TO TAX SIMILAR LEVEL OF PROFITS IN EARLIER AND LATER YEARS IN CASE OF STP OPERATIONS AND HENCE THE APPELLANT COULD NOT BE CONSIDERED TO HAVE EARNED 'MORE THAN ORDINARY PROFITS' DURING THE YEAR UNDER APPEAL; 3 ITA NO.359/PUN/2013 M/S. HONEYWELL AUTOMATION INDIA LTD., B. DENIAL OF ADDITIONAL TAX HOLIDAY CLAIM OF RS.6,0 4,42,900 UNDER SECTION 10AA OF THE ACT ARISING PURSUANT TO THE RETROSPECTI VE AMENDMENT TO SECTION 10AA(7) OF THE ACT BY FINANCE ACT 2010 10. ERRED BY DENYING ADDITIONAL TAX HOLIDAY BENEFIT (AMOUNTING TO RS 6,04,42,990) CLAIMED BY THE APPELLANT DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS BY WAY OF FILING A REVISED T AX COMPUTATION WITH THE LEARNED AO COMPUTED CONSIDERING IMPACT OF THE R ETROSPECTIVE AMENDMENT TO SECTION 10AA(7) OF THE ACT BY FINANCE ACT 2010; C. DENIAL OF ADDITIONAL TAX HOLIDAY BENEFIT UNDER S ECTION 10A AND 10AA OF THE ACT CLAIMED DURING THE ASSESSMENT PROCEE DINGS BY WAY OF FILING REVISED COMPUTATION OF INCOME, COMPUTED CONS IDERING INCLUSION OF EXPORT PROCEEDS REALISED BUT NOT CONSIDERED IN THE RETURN OF INCOME AS PART OF 'ELIGIBLE EXPORT TURNOVER' FOR THE PURPOSES OF C LAIMING DEDUCTION UNDER SECTION 10A AND 10AA OF THE ACT 11. ERRED BY DENYING ADDITIONAL TAX HOLIDAY BENEFIT UNDER SECTION 10A AND 10AA OF THE ACT (AMOUNTING TO RS 55,24,290) CLA IMED BY THE APPELLANT DURING THE ASSESSMENT PROCEEDINGS BY WAY OF FILING OF REVISED COMPUTATION OF INCOME, COMPUTED BY INCLUSION OF EXP ORT PROCEEDS REALISED BUT NOT CONSIDERED IN THE RETURN OF INCOME AS 'ELIG IBLE EXPORT TURNOVER' FOR THE PURPOSES OF CLAIMING DEDUCTION UNDER SECTION 10A AND 10AA OF THE ACT; D. DENIAL OF TAX HOLIDAY CLAIM AMOUNTING TO RS.2,37 ,68,534 IN RESPECT OF ELECTRONIC HARDWARE TECHNOLOGY PARKS (EHTP) OP ERATIONS OF THE APPELLANT. 12. ERRED IN INVOKING THE PROVISION OF 10A(7) OF TH E ACT TO APPELLANTS EHTP UNIT DESPITE THE FACT THAT MARGINS OF COMPARAB LE COMPANIES CONSIDERED RELATES TO SOFTWARE SERVICES SEGMENT AND CANNOT BE COMPARED WITH MARGINS EARNED BY EHTP UNIT WHICH WAS ENGAGED IN MANUFACTURING OF ELECTRONIC PARTS/COMPONENTS; E. DENIAL OF CREDIT FOR ADDITIONAL TAXES DEDUCTED A T SOURCE CLAIMED BY THE APPELLANT DURING THE COURSE OF ASSESSMENT PROCE EDINGS BY WAY OF FILING REVISED COMPUTATION OF INCOME. 13. ERRED IN DENYING CREDIT FOR ADDITIONAL TAXES DE DUCTED AT SOURCE (TDS) (AMOUNTING TO RS.69,35,684) CLAIMED BY THE AP PELLANT DURING THE ASSESSMENT PROCEEDINGS BY WAY OF FILING REVISED COM PUTATION OF INCOME. F. TRANSFER PRICING ADJUSTMENT UNDER PROVISIONS OF CHAPTER X OF THE ACT IN RESPECT OF INTERNATIONAL TRANSACTIONS. 14. ON THE FACTS AND IN LAW, THE LEARNED AO AND THE LEARNED TRANSFER PRICING OFFICER ('TPO') ERRED IN DETERMINING AND DR P HAS ERRED IN CONFORMING THE ARM'S LENGTH PRICE FOR INTERNATIONAL TRANSACTIONS IN RESPECT OF AVAILING OF INTRA-GROUP SERVICES, I.E. ADMINISTR ATIVE AND MANAGERIAL SERVICES BY THE APPELLATE FROM ITS AE AT RS. NIL AS AGAINST THE SUM OF RS. 7,53,73,889 AS DETERMINED BY THE APPELLANT AND THEREBY PROPOSING AN ADJUSTMENT OF RS. 7,53,73,889. 15. ON THE FACTS AND IN LAW, THE LEARNED AO/TPO ERR ED IN DISREGARDING THE SERVICE AGREEMENT, INVOICES, NOTE ON ADMINISTRA TIVE AND MANAGERIAL SERVICES, DETAILED WORKING OF ADMINISTRATIVE AND MA NAGERIAL SERVICES, US REGULATIONS AND DETAILED DOCUMENTARY EVIDENCES FILE D BY THE APPELLANT FROM TIME TO TIME TO SUBSTANTIATE THE RECEIPT OF SE RVICES, BENEFITS DERIVED 4 ITA NO.359/PUN/2013 M/S. HONEYWELL AUTOMATION INDIA LTD., THERE FROM. 16. ON THE FACTS AND IN LAW, THE LEARNED AO/TPO ERR ED IN QUESTIONING THE COMMERCIAL EXPEDIENCY FOR AVAILING SUCH SERVICE S AND NOT APPRECIATING THE JURISPRUDENCE THAT THE LEARNED AO/TPO CANNOT GO BEYOND HIS POWERS IN QUESTIONING COMMERCIAL DECISION OF THE ASSESSEE. 17. ON THE FACTS AND IN LAW, THE LEARNED AO/TPO AND THE HON'BLE DRP ERRED IN DISREGARDING THE TRANSFER PRICING DOCUMENT ATION MAINTAINED BY THE APPELLATE USING THE TRANSACTION NET MARGIN METH OD ('TNMM') AND ERRONEOUSLY AND INAPPROPRIATELY APPLIED NO METHOD T O DETERMINE THE ARM'S LENGTH PRICE AS NIL, WITHOUT PROVIDING ANY COMPARAB LE TRANSACTION AND WITHOUT ANY COGENT REASONING, THEREBY DISREGARDING RULE 10B AND RULE 10C. 18. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED AO ERRED IN INITIATING PENALTY PROCEEDING U NDER SECTION 27(1)(C) OF THE ACT. 3. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE GROUNDS AND SUBMITTED THAT THEY INVOLVE TP ISSUE S ON ONE SIDE, I.E. (GROUND NOS. 14 TO 17) AND THE CORPORATE ISSUES ON T HE OTHER, I.E. (GROUND NOS. 2 TO 13). TP ISSUES ON GROUND NOS. 14 TO 17 4. REGARDING THE TP ISSUES, I.E. GROUND NOS. 14 TO 17, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUES RAISED IN THESE GROUNDS ARE IDENTICAL BOTH ON FACTS AND ON LAW TO THAT OF THE ISSUES S ETTLED VIDE THE ADVANCED PRICING AGREEMENTS (APA) MADE U/S.92CC OF THE I.T. ACT, 19 61. BRINGING OUR ATTENTION TO THE ADVANCED PRICING AGREEMENT , LD. COUNSEL SUBMITTED THAT IT WAS AGREED UPON BETWEEN THE ASSESSE E AND THE CBDT VIDE AGREEMENT DATED 30-03-2017 ON THE AP OF THE INTR A-GROUP MANAGERIAL & ADMINISTRATIVE SERVICES AND THE SAME IS RELEV ANT FOR THE A.YRS. 2015-16 TO 2019-20. 5 ITA NO.359/PUN/2013 M/S. HONEYWELL AUTOMATION INDIA LTD., 5. REFERRING TO THE ISSUES IN THE PRESENT ASSESSMENT YE AR UNDER CONSIDERATION, I.E. A.Y. 2008-09, LD. COUNSEL FAIRLY SUBMITTED TH AT THIS YEAR IS NOT ACTUALLY COVERED BY THE SAID AGREEMENT. HO WEVER, HE BROUGHT OUR ATTENTION TO VARIOUS DECISIONS AS WELL AS THE FACTS RELEVANT TO THE YEAR UNDER CONSIDERATION AND SUBMITTED THAT THE ISSUE STANDS COVERED BY THE SAID ADVANCED PRICING AGREEMENT FOR THIS YEAR ALSO. IN TH IS REGARD, HE FILED THE FOLLOWING WRITTEN SUBMISSIONS : ON MARCH 2017, THE APPELLANT HAS ENTERED INTO A UN ILATERAL APA WITH CBDT FOR THE TRANSACTION OF AVAILING OF CENTRALIZED MANAGEMENT, ADMINISTRATIVE AND OTHER SERVICES FROM HONEYWELL IN TERNATIONAL INC., USA (H11) (TRANSACTION I). THE AGREEMENT IS VALID FROM A.Y. 2011-12 TO A.Y. 2014-15 (ROLLBACK PERIOD) AND AY.2015-16 TO 2019-20 (APA PERIOD). THOUGH, A.Y. 2008-09 IS NOT COVERED UNDER THE APA, THE APPELLANT WISHES TO SUBMIT THAT THE FACTS OF THE SAID TRANSACTION AR E SIMILAR TO THE FACTS AS COVERED IN THE APA YEAR. UNDER THE APA, TRANSACTIONAL NET MARGIN METHOD (TN MM) WAS SELECTED THE MOST APPROPRIATE METHOD AND THE AE; I.E. H11 AS TESTED PARTY. 5.1 FURTHER, BRINGING OUR ATTENTION TO THE DECISION OF COOR DINATE BENCH OF THE TRIBUNAL IN THE CASE OF ABICOR BINZEL PRODUCTIO N (INDIA) PVT. LTD. VS. DY.CIT IN ITA NOS.2253 TO 2255/PUN/2014 AND IT A NO.139/PUN/2014, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN THIS CASE THE APA IS FOUND APPLICABLE TO THE EARLIER ASSESSMENT YEARS IN THOSE CASES, AS THE CASE MAY BE, WHEN THE FACTS OF THE A.Y. 200 8-09 ARE SIMILAR TO THAT OF THE ASSESSMENT YEAR COVERED IN THE APA. F OR 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 INT O APA, THE COORDINATE BENCH OF THE TRIBUNAL IN THE ASSESSMENT YEAR 2009-1 0 HAS DIRECTED ASSESSING OFFICER TO DECIDE THE ISSUE IN ACCORDANCE WITH THE TERMS AND CONDITIONS OF APA AS NATURE OF TRANSACTIONS ARE SIM ILAR. .. 6 ITA NO.359/PUN/2013 M/S. HONEYWELL AUTOMATION INDIA LTD., IF THEY ARE OF SIMILAR NATURE, THE SAME CAN BE DECI DED AFRESH IN LINE WITH THE TERMS AND CONDITIONS OF APA. THE APPEALS OF THE ASSESSEE ARE THUS, ALLOWED FOR STATISTICAL PURPOSE WITH AFORESAID DIRE CTIONS. 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 ENTER ED INTO ADVANCE PRICING AGREEMENT (APA) WITH CBDT COVERING NINE YEA RS 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 S HOULD BE APPLIED TO THE YEAR UNDER CONSIDERATION ALSO AS THE INTERNATIONAL TRANSACTIONS ENTERED INTO BY THE ASSESSEE WITH ITS AES IN THE INSTANT AS SESSMENT YEAR ARE IDENTICAL TO THE INTERNATIONAL TRANSACTIONS WHICH W ERE PART OF THE APA PROCEEDINGS. THE GROUNDS OF APPEAL RAISED BY THE A SSESSEE ARE THUS, ALLOWED. 3. IN THE CASE OF RANBAXY LABORATORIES LTD. VS. ACIT ( ITA NO.196/DEL/2013) IT IS CLEAR THAT IF THE INTERNATIONAL TRANSACTIONS ARE SAME IN THE YEAR OF APA AND THE YEAR FOR WHICH ROLLBACK IS APPLIED, ROL L BACK IS ALLOWED TO THE ASSESSEE ON CERTAIN NORMAL CONDITION OF FILING RETU RN OF INCOME, REPORT OF ACCOUNTANT AND A REQUEST IN SPECIFIED FORMAT. OFFC OURSE, IT HAS ALSO NORMAL REVENUE SAFEGUARDING EXCLUSION CLAUSES OF IN COME GOING BELOW THE RETURNED INCOME AND WHERE ITAT HAS PASSED AN ORDER ON THE SUBJECT. THEREFORE EVEN THE RULES PROVIDE THAT IF THE INTERN ATIONAL TRANSACTIONS ARE SAME IN THE YEAR OF APA AND IN THE PAST YEAR THAN B OTH THE PARTIES, ASSESSEE AND CBDT MAY AGREE FOR APPLYING THE AGREEM ENTS CONTAINED IN APA AGREED. NEEDLESS TO SAY THAT LD.TPO/AO SHALL GIVE DUE WEIGH TAGE TO THE ADVANCE PRICING AGREEMENT SIGNED BY THE ASSESSEE WITH CBDT ON OTHER ISSUES ALSO (OTHER THAN THE ISSUE OF SELECTION OF TESTED PARTY) FOR DETERMINATION OF ALP AND IN CASE OF ANY DIVERGENT VIEW, THE ASSESSEE SHA LL BE GRANTED AN ADEQUATE OPPORTUNITY TO SUBSTANTIATE ANY CLAIM/ARGU MENTS ON THE MANNER OF DETERMINATION OF ALP. 4. IN THE CASE OF RBS INDIA DEVELOPMENT CENTRE PVT. LTD. VS. ACIT (ITA NO.5538/DEL/2010), THE TPO DID NOT TAKE INTO CONSID ERATION OTHER INCOME WHICH WAS IN THE NATURE OF OPERATING INCOME. THE A R PLACED THE APA BEFORE THE HONBLE BENCH AND POINTED OUT THAT THE O THER INCOME WAS PART OF OPERATING INCOME AS PER THE TERMS OF THE AGREEME NT. THE ISSUE WAS RESTORED BACK TO THE FILE OF THE LD. AO/TPO FOR VER IFICATION OF THE ASSESSEES CLAIM. 6. CONSIDERING THE ABOVE, WE ARE OF THE OPINION THAT THE MATTER SHOULD BE REMANDED TO THE FILE OF AO/TPO, AS THE CASE MAY BE, FOR THE PURPOSE OF COMPARING THE FACTS OF THE CASE AND THE RE LEVANT TERMS OF AGREEMENT BETWEEN THE CBDT AND THE ASSESSEE. AO IS D IRECTED TO 7 ITA NO.359/PUN/2013 M/S. HONEYWELL AUTOMATION INDIA LTD., EXAMINE THE FACTS CLOSELY AND CONCLUDE THE ASSESSEE ON THE ISSUE OF APPLICABILITY OF APA TO THE ASSESSEES CASE FOR THE YEAR U NDER CONSIDERATION IN PRINCIPLE. AO IS ALSO DIRECTED TO CONSIDER THE ABOVE CITED DECISIONS OF PUNE BENCH OF THE TRIBUNAL AS WELL AS DELH I BENCH OF THE TRIBUNAL FOR THE 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. CORPORATE ISSUES 7. REGARDING THE NON CORPORATE ISSUES, LD. COUNSEL FOR T HE ASSESSEE BROUGHT OUR ATTENTION TO GROUNDS A2 TO A9 AND SUBMITT ED THAT ALL THESE GROUNDS DEAL WITH THE CLAIM OF DEDUCTION OF THE ASSESSEE U /S.10A, 10AA OF THE ACT FOR THE A.YRS. 2006-07 AND 2007-08. GROUND 1 IS GENERAL IN NATURE AND THE SAME CAN BE DISMISSED AS SUCH. MENTIONIN G THAT THIS ISSUE IS ACTUALLY COVERED ISSUE, IN THE ASSESSEES OWN CA SE FOR THE EARLIER ASSESSMENT YEARS BY THE ORDER OF TRIBUNAL VIDE ITA NO.1 8/PUN/2011, DATED 25-02-2015, LD. COUNSEL SUBMITTED THAT, LIKE IN OTHER YEARS, AO DECIDED TO REDUCE THE PROFITS BY INVOKING THE PROVISIONS O F SECTION 10A(7) R.W.S. 80IA(10) OF THE ACT. IT IS ALSO SUBMITTED THAT, ON SIM ILAR FACTS, THE TRIBUNAL GRANTED RELIEF TO THE ASSESSEE IN THE SAID EARLIER YEAR. LD. COUNSEL FOR THE ASSESSEE FURNISHED WRITTEN SUBMISSIONS IN T HIS REGARD. HE RELIED ON THE ANOTHER ORDER OF THE TRIBUNAL IN THE CAS E OF EATON INDUSTRIES LTD IN ITA NO.2544/PUN/2012, DATED 30-10-201 7 AND JURISDICTIONAL HIGH COURT JUDGMENT IN THE CASE OF SMITH IND IA PVT. LTD. IN ITA NO.1382/2013, DATED 24-06-2015 WHERE THE HONBLE HIGH COU RT HELD THAT THE EXTRAORDINARY PROFITS CANNOT AUTOMATICALLY LEA D TO THE CONCLUSION THAT THERE IS ARRANGEMENT BETWEEN THE PARTIE S. ON HEARING 8 ITA NO.359/PUN/2013 M/S. HONEYWELL AUTOMATION INDIA LTD., BOTH THE SIDES ON THIS ISSUE, WE PROCEED TO EXTRACT THE WRITTEN SUBMISSIONS HERE AS UNDER : GROUNDS A2 - A9 DENIAL OF TAX HO L IDAY U/S 10A & 10AA ON THE GROUND THAT MARGINS SHOWN BY THE APPELLANT ARE HIGHER THAN THE MARGINS OF THE COMPA R ABLES 1. THE APPELLANT IS AN INDIRECT SUBSIDIARY OF HONEYWEL L INC. USA AND IS ENGAGED IN THE BUSINESS OF PROVIDING SOFTWARE SERVI CES AND INDUSTRIAL AUTOMATION MANUFACTURING TO ITS GROUP COMPANIES . FOR AY 2008-09 IT HAD TWO SOFTWARE TECHNOLOGY PARKS LOCATED IN PUNE & CHENNAI (S.10A UNITS) AND AN SEZ UNIT (S . 10AA UNIT) LOCATED AT PUNE. 2. FOR THE YEARS UNDER CONSIDERATION, THE APPELLAN T HAD CLAIMED THE FOLLOWING DEDUCTIONS FROM ITS TOTAL INCOME: AY SECTION 10A DEDUCTION SECTION 10AA DEDUCTION PAGE REFERENCE 2008-09 RS.7,60,25,401 (STP 5,22,56,867 EHTP 2,37,68,534 RS.1,87,497 PG. 40 OF THE APPEAL SET. 3. THE AO HOWEVER GRANTED ONLY A PARTIAL DEDUCTION OF THE ABOVE SUMS BY INVOKING SECTION 10A(7)/10AA(9) OF THE ACT READ WITH SECTION 80IA ( 10) OF THE ACT ON THE GROUND THAT THE APPELLANT W AS CLAIMING A SUBSTANTIALLY HIGHER DEDUCTION THAN THE ORDINARY PROFITS OF THE C OMPARABLE ENTITIES. 4. IN COMING TO THIS CONCLUSION THE AO HAS PRIMARILY RELIED ON THE REASONING ADOPTED BY ITS PREDECESSORS FOR AY 2006-07 & 2007-08. THIS IS EVIDENT FROM A BARE READING OF THE FINAL ASSESSM ENT ORDER FROM PG. 6 ONWARDS - (PAGE 12 OF THE APPEAL SET) . 5. IN THE PREVIOUS ASSESSMENT YEARS, THE AO HAD COME TO THE CONCLUSION THAT AS 81 % OF THE SHAREHOLDING OF THE APPELLANT WAS HELD BY THE US ENTITY (HONEYWELL LNC. USA) THERE EXISTED A CLOS E CONNECTION WITH THE APPELLANT AS A RESULT OF WHICH THE INDIAN ENTITY WA S GENERATING SUBSTANTIALLY HIGHER PROFITS COMPARED TO THE COMPARABLE COMPANIES . IT WAS ON THIS BASIS THAT PROVISIONS UNDER SECTION 10A(7) READ WITH SECT ION 801A WERE INVOKED AND THE DEDUCTION WAS RESTRICTED TO THE AGGREGATE M ARGINS EARNED BY THE COMPARABLE ENTITIES.' 6. THE ABOVE CONTENTIONS OF THE AO WERE CONFIRMED BY THE LD. CIT(A) DURING THE PROCEEDINGS FOR AY 2007-08 WHEREIN IT WA S HELD THAT THE KEY FACTORS REQUIRED FOR THE AO TO INVOKE ITS POWERS U/ S.10A R.W S. 80IA ARE 'CLOSE CONNECTION' AND 'ARRANGEMENT' BETWEEN THE AP PELLANT AND THE OTHER PERSONS AND SUCH ARRANGEMENT PRODUCED MORE THAN 'OR DINARY PROFITS' IN THE ELIGIBLE BUSINESS. 9 ITA NO.359/PUN/2013 M/S. HONEYWELL AUTOMATION INDIA LTD., 7. IN THE PRESENT CASE, THE AO AS ALSO THE LD. DRP HAVE FOLLOWED THE ORDERS OF THEIR SUPERIORS/PREDECESSORS AND REDUCED THE EXTENT OF THE DEDUCTION TO THE AGGREGATE MARGINS EARNED BY THE CO MPARABLES. THIS IS EVIDENT FROM A PERUSAL OF THE FINAL ASSESSMENT ORDE R WHEREIN THE AO HAS HELD AS FOLLOWS: 'AFTER GOING THROUGH THE SAID WRITTEN SUBMISSION, I FOUND MYSELF UNABLE TO DEVIATE FROM THE DECISION TAKEN BY MY PRE DECESSOR AS THE SAID DECISION WAS CORRECTLY TAKEN BY HIM. ' 8. THE ISSUE IN REGARDS THE ABOVE IS SQUARELY COVE RED BY THE JUDGMENT OF THIS HON'BLE TRIBUNAL IN THE APPELLANT'S OWN CAS E FOR AY 2006-07 & AY 2007-08. IN ITA 18/PUNE/2011 ORDER DATED 25.02.2015 THIS HON'BLE TRIBUNAL HAS HELD THAT: I. PARA 23 .............THE EXISTENCE OF SUBSTANTI AL OR MORE THAN ORDINARY PROFITS BY ITSELF DOES NOT SUFFICIENTLY EM POWER THE AO TO DISREGARD THEM AND DETERMINE THE PROFITS WHICH HE M AY CONSIDER TO BE REASONABLY DEEMED TO HAVE BEEN DERIVED THEREFROM IN OTHER WORDS THE IMPORT OF THE EXPRESSION 'SO ARRANGED' HA S TO BE READ IN CONJUNCTION WITH THE LEGISLATIVE INTENT THAT THERE SHOULD NOT BE ANY ABUSE OF TAX CONCESSION BY MANIPULATION OF PROFITS. THEREFORE, SECTION 10A(7) R.W.S. 80-IA(10) OF THE ACT CAN BE I NVOKED ONLY WHERE IT IS SHOWN THAT THE COURSE OF BUSINESS IS SO ARRAN GED WHICH REFLECTS AN ABUSE OF TAX CONCESSION WHEREBY THE BUSINESS TRA NSACTED BETWEEN TWO ENTITIES IS SO ARRANGED, WHICH PRODUCES TO THE ASSESSEE MORE THAN THE ORDINARY PROFITS WHICH MIGHT BE EXPECTED TO ARISE IN SUCH ELIGIBLE BUSINESS. II. THE MERE EXISTENCE OF (I) A CLOSE CONNECTION BE TWEEN THE ASSESSEE AND THE OTHER PERSON; AND, (II) MORE THAN ORDINARY PROFITS IS NOT SUFFICIENT TO JUSTIFY INVOKING OF SECTION 80 -IA (10) OF THE ACT IN THE ABSENCE OF THERE BEING ANY MATERIAL TO SAY THAT THE COURSE OF BUSINESS BETWEEN THEM IS 'SO ARRANGED' TO ABUSE THE TAX CONCESSIONS GRANTED U/S 10A OF THE ACT BY MANIPULAT ING PROFITS BETWEEN ASSOCIATED PERSONS. 9.. IT WAS ON THIS BASIS THAT THE HON'BLE BENCH CAM E TO THE CONCLUSION THAT THE REVENUE WAS UNABLE TO JUSTIFY THE BUSINESS BETWEEN THE APPELLANT AND THE AE HAD BEEN ARRANGED TO PRODUCE MORE THAN O RDINARY PROFITS. 'OSTENSIBLY, IN THE PRESENT CASE, THE REVENUE WOULD HAVE TO JUSTIFY THAT THE COURSE OF BUSINESS BETWEEN ASSESSEE AND THE ASS OCIATED ENTERPRISES HAS BEEN 'SO ARRANGED' WHICH PRODUCES T O THE ASSESSEE MORE THAN THE ORDINARY PROFITS WHICH MIGHT BE EXPEC TED TO ARISE IN SUCH ELIGIBLE BUSINESS WITH THE INTENTION OF ABUSING THE TAX CONCESSION GRANTED IN SECTION 10A OF THE ACT. ' 10. FURTHER, IN REGARDS THE EXPRESSION ARRANGED T HE HONBLE BENCH HELD THAT A MERE AGREEMENT BETWEEN THE APPELLANT AND THE ASSOCIATED ENTERPRISES FOR TRANSACTING BUSINESS IS NOT ENOUGH TO INVOKE SE CTION 80-IA (10) OF THE ACT. THE SAME IS PROVIDED FOR EASY REFERENCE : PARA 27......IN OTHER WORDS, AS PER THE REVENUE, T HE EXISTENCE OF CLOSE CONNECTION AND HIGH PROFITS WOULD LEAD TO A PRESUMP TION THAT THERE IS AN ARRANGEMENT WITHIN THE MEANING OF SECTION 80-I A(10) OF THE ACT. THE AFORESAID PLEA, IN OUR VIEW, NOT ONLY BELIES TH E LANGUAGE OF SECTION 80-IA(10) BUT ALSO THE LEGISLATIVE INTENT WHICH SEE KS TO CURTAIL THE ABUSE OF TAX CONCESSION BY MANIPULATION OF PROFITS BETWEE N ASSOCIATED 10 ITA NO.359/PUN/2013 M/S. HONEYWELL AUTOMATION INDIA LTD., CONCERNS. THEREFORE, AN ARRANGEMENT WHICH IS REFER RED TO IN SECTION 10A(7) R.W.S.80-IA(10) OF THE ACT HAS TO BE ONE WHI CH IS PREFACED BY AN INTENTION TO ABUSE THE TAX CONCESSIONS, AS PER THE INTENDMENT OF THE LEGISLATURE. THEREFORE, EXISTENCE OF A MERE AGREEM ENT TO DO BUSINESS IS NOT ENOUGH TO FULFIL THE REQUIREMENT OF SECTION 10A (7) R.W.S. 80-IA(10) OF THE ACT IN THE CONTEXT OF THE WORDS THE COURSE OF BUSINESS BETWEEN THEM IS SO ARRANGED. 11. IN ADDITION TO THE ABOVE, RELIANCE IS ALSO PLAC ED ON A RULING OF THE COORDINATE BENCH OF THIS HONBLE TRIBUNAL IN THE CA SE OF EATON INDUSTRIES PVT. LTD. VS. ACIT (ITA 2544/PUN/2012 ORDER DATED 3 0-10-2017) WHEREIN IT WAS HELD THAT : ONCE THE ARMS LENGTH PRICE OF INTERNATIONAL TRANS ACTIONS OF PROVISION OF ENGINEERING DESIGN SERVICES HAS BEEN A CCEPTED...BY THE TPO IN THE TRANSFER PRICING ORDER, THEN THE ASSESSI NG OFFICER CANNOT RE-EXAMINE THE SAID TRANSACTION TO ALLEGE THAT THE ASSESSEE HAD EARNED MORE THAN ORDINARY PROFITS AS COMPARED TO TH OSE OF COMPARABLES. ABSENT ANY EVIDENCE BROUGHT ON RECOR D BY AO TO SHOW THAT THE MAN-HOUR RATES CHARGED BY ASSESSEE WE RE EXCESSIVE AND ALSO TO ESTABLISH THAT THERE WAS AN ARRANGEMENT BETWEEN THE ASSESSEE AND ITS AES TO CHARGE SUCH EXCESSIVE RATES , WHICH RESULTED IN MORE THAN ORDINARY PROFITS IN THE HANDS OF ASSESSEE, ITAT HOLDS THAT WHERE THE ASSESSEE HAD ADOPTED A P RICE MECHANISM BASED ON THIRD PARTY COMPARABLES, WHICH I N TURN, HAS BEEN ACCEPTED BY THE TPO TO BE AT ARMS LENGTH PRIC E, THERE IS NO MERIT IN THE ORDER OF ASSESSING OFFICER IN APPLYING THE PROVISIONS OF SECTION 10A(7) R.W.S. 80IA(10) OF THE ACT. 12. FURTHER, THIS ISSUE ALSO STANDS SETTLED IN FAVO UR OF THE APPELLANT BY THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN TH E CASE OF CIT V. SCHMETZ INDIA PVT. LTD. (ITA NO.1382/2013 DATED 24-06-2015) WHEREIN THE HONBLE COURT HAS HELD AT PARA 8 AS UNDER : SO FAR AS QUESTION (A) & (B) ARE CONCERNED, WE FIN D THAT THE TRIBUNAL HAS CONSIDERED THE ENTIRE EVIDENCE AND ON FACTS COM E TO THE CONCLUSION THAT THE PROFITS EARNED BY KANDLA DIVISI ON OF THE RESPONDENT-ASSESSEE IS NOT ABNORMALLY HIGH DUE TO A NY ARRANGEMENT BETWEEN THE RESPONDENT-ASSESSEE AND ITS GERMAN PRINCIPAL. THE TRIBUNAL CORRECTLY HELD THAT EXTRAO RDINARY PROFITS CANNOT LEAD TO THE CONCLUSION THAT THERE IS AN ARRA NGEMENT BETWEEN THE PARTIES. THIS WOULD PENALIZE EFFICIENT FUNCTIO NING. FURTHER, THE AUTHORITIES HAVE ALSO RECORDED A FINDING THAT THE I NDUSTRIAL SEWING MACHINE NEEDLES IMPORTED AND TRADED BY THE MUMBAI D IVISION ARE DIFFERENT FROM THOSE MANUFACTURED & EXPORTED BY THE KANDLA DIVISION. CONSEQUENTLY, THIS ALSO NEGATIVES ANY AR RANGEMENT BETWEEN THE PARTIES TO SHOW EXTRAORDINARY PROFITS I N RESPECT OF ITS KANDLA DIVISION SO AS TO CLAIM DEDUCTION UNDER SECT ION 10A OF THE ACT. THESE ARE FINDINGS ONE OF FACT. THE APPELLAN T-REVENUE HAVE NOT BEEN ABLE TO SHOW THAT THE FINDINGS ARE PERVERSE OR ARBITRARY. IN THE CIRCUMSTANCES, QUESTION (A) AND (B) AS FORMULATED B Y THE APPELLANT/REVENUE DO NOT RAISE SUBSTANTIAL QUESTION S OF LAW IN THE PRESENT FACTS AND ARE THEREFORE DISMISSED. ' 11 ITA NO.359/PUN/2013 M/S. HONEYWELL AUTOMATION INDIA LTD., IT IS ALSO PERTINENT TO NOTE THAT THE SLP PREFERRED BY THE REVENUE DEPARTMENT AGAINST THE ABOVE RULING OF THE HON'BLE HIGH COURT HAS BEEN DISMISSED - SLP CC NO 2013/2016 DATED 08.02.2016. 13. SINCE THE ABOVE RULINGS OF THE HON'BLE HIGH COU RT AS WELL AS THE HON'BLE TRIBUNAL WERE GIVEN ON A LATER DATE THE BEN EFIT OF THE SAME WAS NOT AVAILABLE WITH THE AO, THE LD. DRP, HENCE FOLLO WING THE SAME IT IS HUMBLY SUBMITTED THAT THE PRESENT DISALLOWANCE BE D ELETED AND THE APPELLANT BE ALLOWED TO CLAIM THE ENTIRE DEDUCTION AS PER ITS REVISED COMPUTATION OF INCOME. 7.1 CONSIDERING THE ABOVE STATED POSITION AND ALSO BINDING NATURE ON THE ISSUE IN THE ASSESSEE OWN CASE AS WELL AS JURISDICTIO NAL HIGH COURT JUDGMENT IN THE CASE OF CIT VS. SCHMETZ INDIA PVT. LTD., W E ARE OF THE OPINION THAT THE AO HAS NOT MADE OUT A CASE THAT THER E EXISTS AN ARRANGEMENT AND THE SAID ARRANGEMENT IS MALAFIDE AND IT FA LLS IN THE MISCHIEF OF THE PROVISIONS OF SECTION 80IA(10) R.W.S. 10A(7) OF TH E ACT. ACCORDINGLY, THE GROUNDS NOS. 2 TO 9 RAISED BY THE ASSESSEE ARE ALLOW ED. 8. IN VIEW OF THE RELIEF GRANTED TO THE ASSESSEE IN THIS R EGARD, WE FIND ADJUDICATION OF THE GROUND NO.12, BEING RAISED WITHOUT PREJ UDICE, BECOMES AN ACADEMIC EXERCISE. THEREFORE, THE SAID GROUND IS DISMISSED AS ACADEMIC. GROUND NO.1 IS GENERAL IN NATURE AND THE S AME IS DISMISSED. THAT LEAVES GROUND NO.B10 AND C11 REMAINS FOR ADJUDICATION. 9. REGARDING THE ISSUE RAISED IN GROUNDS B10 AND C11, TH E BACKGROUND FACTS INCLUDE THAT THERE WAS AN AMENDMENT T O THE PROVISIONS OF SECTION 10A(7) OF THE ACT. BY THIS AMENDMENT, THE TOTAL TURNOVER OF THE BUSINESS OF THE ASSESSEE STANDS REPLA CED BY THE TOTAL TURNOVER OF THE BUSINESS CARRIED ON BY THE UNDERTAKING . AS A RESULT, THE TOTAL TURNOVER OF UNDERTAKING IS A RELEVANT AND HAS SIGNIFIC ANT EFFECT ON THE ALLOWABLE DEDUCTION OUT OF THE ELIGIBLE PROFITS. DURING THE 12 ITA NO.359/PUN/2013 M/S. HONEYWELL AUTOMATION INDIA LTD., ASSESSMENT PROCEEDINGS, GIVING EFFECT TO THE SAID AMENDED PROVISION OF SECTION 10(7) OF THE ACT, ASSESSEE FILED REVISED TAX COMPUT ATION BEFORE THE ASSESSING AUTHORITIES. THE SAID REVISED COMPUTATION IS SUP PLIED BY THE ASSESSEE IN THE WRITTEN SUBMISSIONS IN A TABULAR FORM. IN THE SAID REVISED COMPUTATION OF INCOME, ASSESSEE MADE A CLAIM OF AD DITIONAL TAX HOLIDAY BENEFIT AMOUNTING TO RS.55,24,290/- WHICH IS NOTHING B UT EXPORT PROCEEDS RECEIVED BY THE DATE OF MAKING OF THE SAID REVIS ED COMPUTATION. AO DENIED THE SAME WITHOUT GIVING ANY REASONING. GROUND NO.11 IS RELEVANT IN THIS REGARD. 10. BEFORE US, ON THE SAID ISSUES, LD. COUNSEL FOR THE AS SESSEE SUBMITTED THAT THE SAID REJECTION BY THE AO MERELY CITIN G THE HONBLE SUPREME COURTS JUDGMENT IN THE CASE OF GOETZ INDIA LT D. 284 ITR 323 (SC) IS NOT SUSTAINABLE. THE JUDGMENT IS RELEVANT FOR THE PROPOSITION THAT ASSESSEE IS ALLOWED TO MAKE ADDITIONAL CLAIMS BY WAY OF RE VISED RETURN OF INCOME BEFORE THE AO. IN THIS REGARD, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT IT IS THE DUTY OF THE AO TO MAKE THE ASS ESSMENT IN TUNE WITH THE PROVISIONS OF THE ACT WHICH INCLUDES AMENDED PROV ISIONS OF THE ACT. BUT AO CONVENIENTLY REJECTED THE ASSESSEES REV ISED COMPUTATION WHICH IS MADE BASED ON THE AMENDED LAWS OF SECTION 10A( 7) OF THE ACT. IN THIS REGARD, LD. COUNSEL FOR THE ASSESSEE FILED WRITTEN S UBMISSIONS AND RELIED ON THE DECISION OF CIT VS. PRUTHVI BROKERS AND SHAREHOLDERS PVT. LTD. 349 ITR 336 AND MANY OTHERS AND THEY ARE RELEVANT FOR THE LEGAL PROPOSITION THAT THE CIT(A) IS UNDER OBLIGATION TO CONSIDER THE REVISED COMPUTATION OF INCOME AS THERE ARE NO FETTERS IMPOSED BY THE COURT ON THE APPELLATE AUTHORITIES. WE PROCEED TO EXTRACT THE CO NTENTS OF THE SAID WRITTEN SUBMISSIONS APPLICATION TO THESE GROUNDS : 13 ITA NO.359/PUN/2013 M/S. HONEYWELL AUTOMATION INDIA LTD., 1. THE INTENTION OF THE LEGISLATION WAS ALWAYS TO GIVE BENEFIT RETROSPECTIVELY INCLUDING FOR YEARS AY 2006-07,2007-08 AND 2008-09 IN WHOSE CASE THE DUE DATE FOR FILING THE REVISED RETURN HAD ALREADY EXPI RED. THEREFORE, THE LEGISLATORS WHILE INTRODUCING THE RETROSPECTIVE AME NDMENT WERE VERY MUCH AWARE AND INTENDED TO ALLOW BENEFIT OF SUCH RETROSP ECTIVE AMENDMENT BY FINANCE ACT 2010 FOR EARLIER YEARS DURING THE COURS E OF ASSESSMENT / APPELLATE PROCEEDINGS. 2. THE AO HAS NOT REJECTED THE FACT THAT THE AMEND MENT IS APPLICABLE TO THE APPELLANT, BUT HE HAS JUST NOT ACCEPTED THE REVISED COMPUTATION. FOR THE ABOVE, THE APPELLANT WISHES TO RELY ON THE CIRCULAR NO 14 (XL-35) OF 11 APRIL 1955 WHICH IS ISSUED BY THE CBDT WHICH EXP LAINS THE ROLE OF THE ASSESSING OFFICERS WHILE CONDUCTING ASSESSMENTS. 'OFFICERS OF THE DEPARTMENT MUST NOT TAKE ADVANTAGE OF IGNORANCE OF AN ASSESSEE AS TO HIS RIGHTS. IT IS ONE OF THEIR DUTIE S TO ASSIST A TAXPAYER IN EVERY REASONABLE WAY, PARTICULARLY IN THE MATTER OF CLAIMI NG AND SECURING RELIEFS AND IN THIS REGARD THE OFFICERS SHOULD TAKE THE INI TIATIVE IN GUIDING A TAXPAYER WHERE PROCEEDINGS OR OTHER PARTICULARS BEFORE THEM INDICATE THAT SOME REFUND OR RELIEF IS DUE TO HIM. THIS ATTITUDE WOULD, IN TH E LONG RUN, BENEFIT THE DEPARTMENT FOR IT WOULD INSPIRE CONFIDENCE IN HIM T HAT HE MAY BE SURE OF GETTING A SQUARE DEAL FROM THE DEPARTMENT. ALTHOUGH , THEREFORE, THE RESPONSIBILITY FOR CLAIMING REFUNDS AND RELIEFS REST S WITH ASSESSEES ON WHOM IT IS IMPOSED BY LAW, OFFICERS SHOULD: A) DRAW THEIR ATTENTION TO ANY REFUNDS OR RELIEFS TO W HICH THEY APPEAR TO BE CLEARLY ENTITLED BUT WHICH THEY HAVE OMITTED TO CLAIM FOR SOME REASON OR OTHER; B) FREELY ADVISE THEM WHEN APPROACHED BY THEM AS TO TH EIR RIGHTS AND LIABILITIES AND AS TO THE PROCEDURE TO BE ADOPTED F OR CLAIMING REFUNDS AND RELIEFS. ' AS CAN BE NOTED, THE CIRCULAR PROVIDES THAT THE OFF ICERS OF TAX DEPARTMENT MUST NOT TAKE ADVANTAGE OF IGNORANCE OF A TAXPAYER AND THAT ALTHOUGH THE RESPONSIBILITY FOR CLAIMING REFUNDS AND RELIEFS RES TS WITH THE TAXPAYER, THE OFFICERS SHOULD DRAW THE ATTENTION OF TAXPAYER TO A NY REFUND OR RELIEF TO WHICH HE IS ENTITLED TO AND WHICH HE HAS OMITTED TO CLAIM . THEY SHOULD FREELY ADVISE THE TAXPAYERS, WHEN APPROACHED, AS TO THEIR RIGHTS AND LIABILITIES AND AS TO THE PROCEDURE TO BE ADOPTED FOR CLAIMING REFUNDS AND RELIEFS. JUDICIAL PRECEDENTS WHEREIN SUPREME COURT DECISION IN CASE GOETZE (INDIA) LTD (RELIED BY THE AO) HAS BEEN DISCUSSED AND IT HA S UPHELD THAT CLAIMS MADE BY THE ASSESSEE IN THE ASSESSMENT PROCEEDINGS SHOULD BE ALLOWED 1. CIT V. PRUTHVI BROKERS AND SHAREHOLDERS (P.) LTD . [2012] 349 ITR 336 (PAGE 115 TO 124 OF THE LEGAL PAPER BOOK - CT) - THE BOMBAY HIGH COURT HAS STATED THAT ASSESSING OFFICER MAY NOT BE ENTITLED T O GRANT A DEDUCTION OR AN EXEMPTION ON THE BASIS OF A REVISED COMPUTATION OF INCOME , THERE WAS NO SUCH FETTER ON THE APPELLATE AUTHORITIES. THE EXTRACT OF THE CASE LAW IS GIVEN BELOW: 'IT IS CLEAR TO US THAT THE SUPREME COURT DID NOT H OLD ANYTHING CONTRARY TO WHAT WAS HELD IN THE PREVIOUS JUDGMENTS TO THE EFFE CT THAT EVEN IF A CLAIM IS NOT MADE BEFORE THE ASSESSING OFFICER, IT CAN BE MADE BEFORE THE APPELLATE AUTHORITIES. THE JURISDICTION OF THE APPE LLATE AUTHORITIES TO ENTERTAIN SUCH A CLAIM HAS NOT BEEN NEGATED BY THE SUPREME COURT IN THIS JUDGMENT. IN FACT, THE SUPREME COURT MADE IT CLEAR THAT THE ISSUE IN THE CASE WAS LIMITED TO THE POWER OF THE ASSESSING AUTHO RITY AND THAT THE 14 ITA NO.359/PUN/2013 M/S. HONEYWELL AUTOMATION INDIA LTD., JUDGMENT DOES NOT IMPINGE ON THE POWER OF THE TRIBU NAL UNDER SECTION 254. ' 2. E-FUNDS INTERNATIONAL INDIA (P) LTD (PAGE 69 TO 73 OF THE LEGAL PAPER BOOK - CT) - THE HIGH COURT HAS CONSIDERED THE EFFECT OF THE D ECISION OF THE SUPREME COURT IN GOETZE (INDIA) LTD AND STATED THAT WHILE A N ASSESSING OFFICER MAY NOT BE ENTITLED TO GRANT A DEDUCTION OR AN EXEMPTION ON THE BASIS OF A REVISED COMPUTATION OF INCOME, THERE WAS NO SUCH FETTER ON THE APPELLATE AUTHORITIES. THIS COURT NOTED THAT THE DECISION IN GOETZE (INDIA ) LTD. (SUPRA) 'WOULD NOT APPLY IF THE ASSESSEE HAD NOT MADE A NEW CLAIM BUT HAD ASKED FOR RE- COMPUTATION OF THE DEDUCTION'. 3. WESTERN INDIA SHIPYARD LTD. [2015) 379 ITR 289 ( DELHI HC) (PAGE 102-103 OF THE LEGAL PAPER BOOK - CT) - WHILE AN ASSESSING OFFICER MAY NOT BE ENTITLED TO GRANT A DEDUCTION OR AN EXEMPTION ON THE BASIS OF A REVISED COMPUTATION OF INCOME, THERE WAS NO SUCH FETTER ON THE APPELLATE A UTHORITIES. 4. CHICAGO PNEUMATIC INDIA LTD. V DCIT 15 SOT 252 [ 2007] (PAGE 76 - 91 OF THE LEGAL PAPER BOOK - CT) (MUMBAI ITAT) - IN THIS CASE, THE TAXPAYER WHO HAD MADE CLAIMS IN THE ORIGINAL RETURN REVISED THE CLAI M FOR DEDUCTION UNDER SECTIONS 80HH AND 80-I OF THE ACT DURING THE COURSE OF ASSESSMENT PROCEEDINGS WITHOUT FILING A REVISED RETURN. THE IT AT CONSIDERED CIRCULAR NO. 14(XL- 35) OF 1955 , DATED 11-4-1955 AND DECISION OF THE SC IN THE CAS E OF GOETZE (SUPRA). IT NOTED THAT A CIRCULAR HAS BEEN I SSUED BY THE CBDT TO GRANT RELIEFS/REFUNDS WHILE COMPLETING THE ASSESSMENT PRO CEEDINGS, EVEN THOUGH SUCH CIRCULAR MAY BE AT VARIANCE WITH THE LAW, BUT THE SAME WOULD BE BINDING ON THE SUBORDINATE INCOME-TAX AUTHORITIES. IT ALSO HELD THAT AS THE CIRCULAR ISSUED IN 1955 HAS NOT BEEN WITHDRAWN, THE SAME HAS BINDING FORCE ON THE SUBORDINATE AUTHORITIES EVEN AS ON DATE. 5. RAMCO INTERNATIONAL [IT APPEAL NO.417 OF 2008] ( PAGE 100-101 OF THE LEGAL PAPER BOOK-CT) - PUNJAB AND HARYANA HIGH COURT - WHERE A DEDUCTION UNDER SECTION 80IB WAS CLAIMED THROUGH FORM 10CCB IN THE ASSESSMENT WITHOUT FILING A REVISED RETURN, THE HONORABLE HIGH COURT H ELD THAT THERE WAS NO REQUIREMENT OF FILING ANY REVISED RETURN TO CLAIM T HE DEDUCTION. 6. DCIT V ESSAR OIL LTD [ITA NO. 4177/MUM/2000] - T HE AO REJECTED A CLAIM FOR GRANT OF FULL DEDUCTION OF EXPENSE ON R & D AS ONLY A PARTIAL CLAIM WAS MADE IN THE RETURN OF INCOME. THE AO DENIED THE DED UCTION ON THE BASIS THAT THE CLAIM WAS MADE THROUGH A LETTER IN THE COURSE O F ASSESSMENT PROCEEDINGS WITHOUT FURNISHING A REVISED RETURN. THE CIT(A) ALL OWED THE TAXPAYER'S CLAIM. BEFORE THE [TAT, THE TAX AUTHORITIES RELIED ON THE DECISION OF THE SC IN GOETZE (INDIA) (SUPRA). THE ITAT UPHELD THE CIT(A)'S ORDE R AFTER REFERRING TO CBDT CIRCULAR NO. 14 (XL- 35) OF 1955 DATED 11-4-1955 AN D HELD THAT THE CIRCULAR WAS BINDING ON THE LOWER TAX AUTHORITIES. 7. MOSER BEAR INDIA LTD V JCIT [108 ITD 80] (2007) (DEL) (PAGE 92 - 99 OF THE LEGAL PAPER BOOK- CT) - THE HON'BLE ITAT UPHELD THE CLAIM OF THE TAXPAYER . IT OBSERVED THAT THE RELIANCE PLACED BY THE TAX AUTHOR ITIES ON THE DECISION IN GOETZE (INDIA) WAS MISPLACED AS THE DECISION WAS GIVEN IN A DIFFERENT CONTEXT WHEN COMPARED TO THE PROVISIONS OF SECTION 10A/10B WHICH ARE A CODE IN ITSELF AND CONTAIN SCHEME OF TAXATION FORMULATED BY GOVERNMENT FOR TAXABILITY OF UNITS SET UP IN THE EXPORT PROCESSING ZONE. IMPOSSIBILITY OF PERFORMANCE - THE RETROSPECTIVE AM ENDMENT WAS INTRODUCED BY THE FINANCE BILL 2010 WHICH GOT PRESIDENTIAL ASS ENT ON 8 MAY 2010 I.E AFTER THE TIME LIMIT SPECIFIED UNDER SECTION 139(5) OF THE ACT FOR FILING THE REVISED RETURN OF INCOME FOR THE YEAR UNDER CONSIDE RATION. 15 ITA NO.359/PUN/2013 M/S. HONEYWELL AUTOMATION INDIA LTD., RECTIFIED ORDER - THE AO HAS GIVEN EFFECT TO THE TA XES PAID AS PER THE REVISED COMPUTATION OF INCOME, HOWEVER HAS REJECTED THE CLA IM IN THE REVISED COMPUTATION, WHICH PROVES THE CONTRADICTORY STAND O F THE AO. IV. GROUND C11 - ERRED BY DENYING ADDITIONAL TAX HO LIDAY BENEFIT UNDER SECTION 10A AND 10AA OF THE ACT (AMOUNTING TO RS. 5 5,24,290) CLAIMED BY THE APPELLANT DURING THE ASSESSMENT PROCEEDINGS BY WAY OF FILING OF REVISED COMPUTATION OF INCOME, COMPUTED BY INCLUSION OF EXP ORT PROCEEDS REALIZED BY NOT CONSIDERED IN THE RETURN OF INCOME AS 'ELIGIBLE EXPORT TURNOVER' FOR THE PURPOSES OF CLAIMING DEDUCTION UNDER SECTION 10A AND 10AA OF THE ACT THE ISSUES UNDER THIS GROUND COVER ISSUES UNDER GRO UND B 10, ONCE THAT GROUND IS ALLOWED, THIS CLAIM IS CONSEQUENTIAL. HOW EVER, THIS AMOUNT IS AN ADDITIONAL CLAIM, (RE-COMPUTATION OF THE ORIGINAL C LAIM) AND WILL NEED TO BE ADDRESSED BY THE ITAT. AS PER THE REVISED COMPUTATION OF INCOME, THE REVIS ED CLAIM UNDER SECTION 10A AND 10AA WAS RECOMPUTED. WHILE FILING THE ORIGI NAL RETURN / COMPUTATION, THE EXPORT TURNOVER EARNED BY THE SPEC IFIC UNIT WAS REDUCED BY THE UNREALISED EXPORT TURNOVER. THEREFORE WHILE FIL ING THE REVISED CLAIM IN THE REVISED COMPUTATION, THE APPELLANT HAS ALSO RELOOKE D AT THE UNREALISED EXPORT TURNOVER FOR FY 2007-08. 10.1 CONSIDERING THE ABOVE, WE ARE OF THE VIEW THAT THIS ISSUE RAISED VIDE B10 AND C11 SHOULD ALSO BE REMANDED TO THE FILE OF A O FOR FRESH ADJUDICATION. AO SHALL PASS A SPEAKING ORDER GIVING CONC LUSIONS ON THE MERITS OF EACH OF THE ISSUES RAISED IN THE SAID REVISED COM PUTATION OF INCOME. AO SHALL GRANT REASONABLE OPPORTUNITY OF BEING HEA RD TO THE ASSESSEE IN ACCORDANCE WITH THE SET PRINCIPLES OF NATURAL JUSTICE. ACCORDINGLY, THE GROUND NOS. B10 AND C11 RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 02 ND DAY OF NOVEMBER, 2018. SD/- SD/- ( /VIKAS AWASTHY) ( . /D. KARUNAKARA RAO) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / PUNE; / DATED : 02 ND NOVEMBER, 2018. SATISH 16 ITA NO.359/PUN/2013 M/S. HONEYWELL AUTOMATION INDIA LTD., ' ) / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT(APPEALS)- 4. THE PR.CIT 5. , , ' , / DR, ITAT, A BENCH, PUNE. 6. % / GUARD FILE. / BY ORDER, // TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE.