DCIT, New Delhi V. M/s. G S Engineering & Constructions India Pvt. Ltd., Gurgaon

ITA 3980/DEL/2015

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 4113 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 4 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-10-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2010-2011
• Appeal Filed On: 15-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY GOEL
• Keywords: Transfer pricing; International transaction

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH A : NEW DELHI) BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.3980/DEL./2015 (ASSESSMENT YEAR : 2010-11) DCIT, CIRCLE 10 (1), VS. M/S. G S ENGINEERING & CO NSTRUCTIONS NEW DELHI. INDIA PVT. LTD., 288A, UDYOG VIHAR, PHASE IV, GURGAON 122 016 (HARYANA). (PAN : AACCG6057G) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI G.C. SRIVASTAVA, ADVOCATE SHRI PARICHAY SOLANKI, CA REVENUE BY : SHRI SANJAY GOEL, CIT DR DATE OF HEARING : 24.10.2018 DATE OF ORDER : 29.10.2018 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : THE APPELLANT, DCIT, CIRCLE 10 (1), NEW DELHI (HERE INAFTER REFERRED TO AS THE REVENUE) BY FILING THE PRESEN T APPEAL, SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 31.03.2015 PASSE D BY LD. CIT (APPEALS)-44, NEW DELHI QUA THE ASSESSMENT YEAR 201 0-11 ON THE GROUND THAT :- ITA NO.3980/DEL./2015 2 WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE & IN LAW, THE LD. CIT (A) ERRED IN DELETING THE ADDIT ION OF RS.12,84,15,358/- MADE ON ACCOUNT OF EXCLUSION OF T P ADJUSTMENT FOR CLAIMING DEDUCTION U/S 10A. 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICA TION OF THE CONTROVERSY AT HAND ARE : ASSESSEE IS INTO THE BUSI NESS OF RENDERING ENGINEERING DESIGN SERVICES TO ITS PARENT COMPANY I .E. GS ENGINEERING & CONSTRUCTION CO. LTD., KOREA AND ENTE RED INTO INTERNATIONAL TRANSACTIONS FOR PROVISION OF ENGINEE RING SERVICES WITH ITS ASSOCIATED ENTERPRISES, GS ENGINEERING & CONSTR UCTION CO. LTD., KOREA. THE ASSESSEE HAS VOLUNTARILY MADE TP ADJUSTMENT OF RS.12,84,15,358/- TO THE VALUE OF INTERNATIONAL TRA NSACTIONS OF PROVISION OF ENGINEERING SERVICES AND TOWARDS REIMB URSEMENT OF COST OF ASSETS. BUT NO CORRESPONDING ADJUSTMENT WA S MADE WITH THE FINANCIAL STATEMENTS OF ASSESSEE SINCE THE BOOKS OF ACCOUNT ARE PREPARED ON RECEIPT OR ACCRUAL BASIS AND NOT ON ANY DEEMING FICTION PROVIDED UNDER THE ACT. THE ASSESSEE HAS INCLUDED AMOUNT OF VOLUNTARY TP ADJUSTMENT IN THE PROFIT OF THE UNDERT AKING AS WELL AS THE TOTAL TURNOVER OF THE UNDERTAKING FOR THE PURPO SE OF SECTION 10A CALCULATION AS THE PROCEEDS WERE NOT RECEIVED IN TE RMS OF FOREIGN EXCHANGE. AO DENIED THE BENEFIT OF SECTION 10A ON THE GROUND THAT TP ADJUSTMENT DOES NOT HAVE DIRECT NEXUS WITH THE I NCOME OF THE ASSESSEE AND ONLY THE INCOME ARISING FROM MAIN BUSI NESS OF THE ITA NO.3980/DEL./2015 3 UNDERTAKING OF THE ASSESSEE ARE TO BE EXEMPTED UNDE R SECTION 10A AND THEREBY MADE ADDITION OF RS.12,84,15,358/-. 3. ASSESSEE CARRIED THE MATTER BY WAY OF APPEAL BEF ORE THE LD. CIT (A) WHO HAS DELETED THE ADDITION NOW UNDER CHAL LENGED BY PARTLY ALLOWING THE APPEAL. FEELING AGGRIEVED, THE REVENUE HAS COME UP BEFORE THE TRIBUNAL BY WAY OF FILING THE PR ESENT APPEAL. 4. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. UNDISPUTEDLY, ASSESSEE HAS ENTERED INTO INTERNAT IONAL TRANSACTIONS WITH ITS AE DURING THE YEAR UNDER ASSE SSMENT AND HAS SUO MOTU MADE TP ADJUSTMENT OF CONFIRMED THE ADDITI ON BY DISMISSING THE APPEAL TO THE VALUE OF INTERNATIONAL TRANSACTIONS OF PROVISIONS OF ENGINEERING SERVICES AND TOWARDS REIM BURSEMENT OF COST OF ASSETS. IT IS ALSO NOT IN DISPUTE THAT ASS ESSEE HAS SUO MOTU INCLUDED AMOUNT OF VOLUNTARY TP ADJUSTMENT IN THE P ROFIT OF UNDERTAKING AND ALSO IN THE TURNOVER BUT HAS NOT IN CLUDED THE SAME IN EXPORT TURNOVER FOR THE PURPOSE OF SECTION 10A C ALCULATION AS THE SALE PROCEEDS WERE NOT RECEIVED IN TERMS OF THE FOR EIGN EXCHANGE. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE IS NOT HAVING ANY OTHER UNIT ELIGIBLE FOR EXEMPTION U/S 10A. ITA NO.3980/DEL./2015 4 6. THE LD. AR FOR THE ASSESSEE CONTENDED THAT THE I SSUE IN CONTROVERSY IS SQUARELY COVERED IN ITS FAVOUR IN IT S OWN CASE FOR AY 2009-10 DECIDED BY THE COORDINATE BENCH OF THE TRIB UNAL IN ITA NO.3956/DEL/2014 ORDER DATED 05.04.2018. HOWEVER, ON THE OTHER HAND, LD. DR FOR THE REVENUE RELIED UPON THE ASSESS MENT ORDER PASSED BY THE AO. 7. COORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES O WN CASE FOR AY 2009-10 (SUPRA), BY RELYING UPON THE DECISION IN IGATE GLOBAL SOLUTIONS LTD. VS. ACIT (2008) 24 SOT 3 (BANG.) RENDERED BY ITAT BENCH OF BANGALORE AND CONFIRMED BY HONBLE HI GH COURT OF KARNATAKA, DECIDED THE ISSUE IN CONTROVERSY IN F AVOUR OF THE ASSESSEE BY RETURNING FOLLOWING FINDINGS :- 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RELEVANT RECORDS, ESPECIALLY THE IMPUGNED ORDER. WE FIND THA T THE ASSESSEE HAS CLARIFIED THAT (I) IT DOES NOT HAVE ANY BUSINES S OTHER THAN THE UNIT WHICH IS ELIGIBLE FOR EXEMPTION U/S. 10A, (II) THE VOLUNTARY TP ADJUSTMENT HAS BEEN MADE IN RESPECT OF INTERNATI ONAL TRANSACTION INVOLVING EXPORT OF ENGINEERING DESIGN SERVICES AND (III) THE VOLUNTARY TP ADJUSTMENT HAS BEEN MADE THR OUGH A DISCLOSURE IN FORM 3CEB AND IS NOT AN AD-HOC ADDITI ON IN THE INCOME TAX RETURN. THE ASSESSEE HAS EXCLUDED VOLUNT ARY TP ADJUSTMENT FROM 'EXPORT TURNOVER' IN LINE WITH THE COMPUTATION MECHANISM PRESCRIBED IN SECTION 10A. THE TPO HAS NO T MADE ANY ADJUSTMENT IN HIS ORDER DATED 10/09/20012 PASSE D U/S 92CA(3). THE ASSESSEE HAS EXPLAINED THAT THE PROVIS O TO SECTION 92C(4) IS NOT APPLICABLE IN ITS CASE AS THE ASSESSE E HAS ON ITS OWN DETERMINED ITS TOTAL INCOME IN THE RETURN OF INCOME HAVING REGARD TO THE ARM'S LENGTH PRICE. THE ASSESSEE HAS RELIED ON THE DECISION OF THE ITAT, 'B' BENCH PUNE DECISION DATED 12.03.2018 IN THE CASE OF APPROVA SYSTEMS PVT. LTD. VS. DCIT P ASSED IN ITA NO. 1051/PUN/2015 (AY 2011-12) WHEREIN ON SIMILAR F ACTS AND BY RESPECTFULLY FOLLOWING THE ITAT, BANGALORE IN TH E CASE OF IGATE GLOBAL SOLUTIONS LTD. VS. ACIT (2008) 24 SOT 3 (BANG.) AND HON'BLE HIGH COURT OF KARNATAKA DECISION IN THE CASE OF ITA NO.3980/DEL./2015 5 CIT & ANR. VS. IGATE GLOBAL SOLUTIONS LTD., THE CLA IM FOR DEDUCTION U/S.10A OF THE ACT IN RESPECT OF SUO-MOTO TP ADJUSTMENT MADE BY THE ASSESSEE, WAS ALLOWED. IT WA S ALSO NOTED THAT ITAT BANGALORE IN THE CASE OF IGATE GLOBAL SOL UTIONS LTD(SUPRA) HAS HELD THAT 'FROM THE MEMO EXPLAINING THE PROVISIONS OF FINANCE BILL, 2006 AS WELL AS FROM TH E LITERAL MEANING OF THE WORD 'ENHANCED', IT IS CLEAR THAT IF INCOME INCREASED, AS A RESULT OF COMPUTATION OF AIM'S LENG TH PRICE, THEN SUCH INCREASE IS NOT TO BE CONSIDERED FOR DEDUCTION UNDER SECTION 10A. IN THE INSTANT CASE, THE ASSESSEE HIMSELF HAS COMPUTED THE ARM'S LENGTH PRICES AND HAS DISCLOSED THE INCOME ON THE BASIS OF ARM'S LENGTH PRICES. IT IS NOT A CASE, WHERE THERE IS AN ENHANCEMENT OF INCOME DUE TO DETERMINATION OF ARM'S LENGTH PRICE. HENCE, IT WAS RIGHTLY HELD THAT ASSESSEE WAS ENTITLED TO DEDUCTION UNDER SECTION 10A IN RESPECT OF INCOME DE CLARED IN THE RETURN OF INCOME ON THE BASIS OF COMPUTATION OF ARM 'S LENGTH PRICE. WE ARE OF THE CONSIDERED VIEW THAT THE FACTS IN THE PRESENT CASE ARE EXACTLY SIMILAR TO THE FACTS AS IN THE CAS E OF IGATE GLOBAL SOLUTIONS LTD(SUPRA). THEREFORE, THE LD. CIT(A) RES PECTFULLY FOLLOWING THE DECISION OF THE ITAT BANGALORE IN THE CASE OF IGATE GLOBAL SOLUTIONS LTD(SUPRA), HAS HELD THAT THE ASSE SSEE IS ELIGIBLE FOR DEDUCTION U/S 10A IN RESPECT OF INCOME DECLARED IN THE RETURN OF INCOME ON THE BASIS OF COMPUTATION OF ARM'S LENG TH PRICE. ACCORDINGLY, HE DIRECTED THE A.O. TO ALLOW THE CLAI M FOR DEDUCTION OF RS. 4,32,49,245/- U/S 10A IN THE INSTA NT CASE, WHICH DOES NOT NEED ANY INTERFERENCE ON OUR PART, HENCE, WE UPHOLD THE ACTION OF THE LD. CIT(A) AND REJECT THE GROUNDS RAI SED BY THE REVENUE. 8. KEEPING IN VIEW THE FACT THAT DURING THE YEAR UN DER ASSESSMENT, THE ASSESSEE HAS MADE VOLUNTARY TP ADJU STMENT QUA ITS INTERNATIONAL TRANSACTION FOR PROVIDING ENGINEERING DESIGN SERVICES TO ITS AE, HAVING BEEN DISCLOSED IN FORM 3CEB, AND HAS EXCLUDED THE SAME FROM EXPORT TURNOVER IN ACCORDANCE WITH A COMPUTATION MECHANISM PROVIDED IN SECTION 10A SUO MOTU TP ADJUS TMENT MADE BY THE ASSESSEE IS LIABLE TO BE ALLOWED U/S 10A OF THE ACT. WHEN THE TPO HAS NOT MADE TP ADJUSTMENT U/S 92CA(3), PRO VISO TO SECTION 92C(4) IS NOT APPLICABLE IN CASE OF THE ASS ESSEE BECAUSE THE ITA NO.3980/DEL./2015 6 ASSESSEE HAS DETERMINED ITS TOTAL INCOME IN ACCORDA NCE WITH THE ARMS LENGTH PRICE. 9. SO, FOLLOWING THE DECISION RENDERED BY THE ITAT, BANGALORE BENCH IN CASE OF IGATE GLOBAL SOLUTIONS LTD. VS. ACIT (SUPRA) AND DECISION RENDERED BY THE DELHI BENCH OF THE TRIBUNA L IN ASSESSEES OWN CASE FOR AY 2009-10 WHICH ARE SQUARELY APPLICABLE TO THE ISSUE IN CONTROVERSY AND IN VIEW OF THE FACT THAT T HE ASSESSEE HAS HIMSELF DETERMINED ITS ARMS LENGTH PRICE AND HAS D ISCLOSED ITS INCOME ON THE BASIS OF ARMS LENGTH PRICE, THE ASSE SSEE IS ENTITLED TO DEDUCTION U/S 10A QUA THE INCOME DECLARED IN THE RE TURN OF INCOME ON THE BASIS OF COMPUTATION OF ARMS LENGTH PRICE. SO, THE LD. CIT (A) HAS RIGHTLY DIRECTED AO TO ALLOW THE CLAIM OF T HE ASSESSEE SUO MOTU TP ADJUSTMENT MADE BY THE ASSESSEE QUA ITS INT ERNATIONAL TRANSACTIONS U/S 10A OF THE ACT. SO, FINDING NO IL LEGALITY OR PERVERSITY IN THE IMPUGNED ORDER PASSED BY THE LD. CIT (A), PRESENT APPEAL FILED BY THE REVENUE IS HEREBY DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 29 TH DAY OF OCTOBER, 2018. SD/- SD/- (R.K. PANDA) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 29 TH DAY OF OCTOBER , 2018 TS ITA NO.3980/DEL./2015 7 COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-44, NEW DELHI 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.