Deputy Commissioner of Income-tax, V. Aam Services India Pvt. Ltd., Pune

ITA 553/PUN/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 9159 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 10 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 19-12-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 24-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: PRAMOD N JADHAV
• Keywords: Transfer pricing
• Section: 143(3); 80HHC; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE , , . , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI D. KARUNAKARA RAO , AM . / ITA NO. 553 /P U N/201 5 / ASSESSMENT YEAR : 20 1 0 - 1 1 THE DY. COMMISSIONER OF INCOME TAX, CIRCLE 1(1), PUNE . / APPELLANT VS. AAM SERVICES INDIA PVT. LTD., 401, WEIKFIELD INFO PARK, PUNE NAGAR ROAD, PUNE 411014 . / RESPONDENT PAN: AAECA7428H / APPELLANT BY : SHRI RAJEEV KUMAR, CIT / RESPONDENT BY : SHRI PRAMOD N. JADHAV / DATE OF HEARING : 20 . 0 3 . 201 8 / DATE OF PRONO UNCEMENT: 23 . 0 3 .201 8 / ORDER PER SUSHMA CHOWLA, J M : TH E APPEAL FILED BY THE REVENUE IS AGAINST THE ORDER OF D CIT , CIRCLE - 1 (1), PUNE , DATED 24 . 0 2 .201 5 RELATING TO ASSESSMENT YEAR 20 1 0 - 1 1 PASSED UNDER SECTION 143(3) R.W.S. 144C(13) OF THE IN COME - TAX ACT , 1961 (IN SHORT THE ACT) . 2. THE REVENUE HAS RAISED THE FOLLOWING GROUND OF APPEAL: - ITA NO. 553 /P U N/20 1 5 AAM SERVICES INDIA PVT. LTD. 2 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. DISPUTE RESOLUTION PANEL ERRED IN DIRECTING THE ASSESSING OFFICER TO EXCLUDE THE EXPENSES PER TAINING TO EARLIER YEAR FOR COMPUTATION OF THE PLI OF THE YEAR UNDER CONSIDERATION AS THE SAME PERTAINS TO EARLIER YEAR AND NOT FORMING EXPENDITURE OF THIS YEAR. 3. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE POINTED OUT THAT THE ONLY ISSUE RA ISED IN THE PRESENT APPEAL IS AGAINST ORDER OF DISPUTE RESOLUTION PANEL (DRP) IN EXCLUDING EXPENSES PERTAINING TO EARLIER YEAR FOR COMPUTATION OF PLI OF THE YEAR UNDER CONSIDERATION. 4. BRIEFLY, IN THE FACTS OF THE CASE, THE TRANSFER PRICING OFFICER (TPO) HAD PASSED THE ORDER UNDER SECTION 92CA(3) OF THE ACT DATED 15.01.2014 PROPOSING TP ADJUSTMENT OF 2.69 CRORES. THE ASSESSING OFFICER PASSED DRAFT ASSESSMENT ORDER ON 04.03.2014. THEREAFTER, THE DRP ISSUED DIRECTIONS UNDER SECTION 144C OF THE ACT VIDE ORDER DATED 26.12.2014. THE FINAL ASSESSMENT ORDER WAS PASSED UNDER SECTION 143(3) R.W.S. 144C(13) OF THE ACT ON 24.02.2015, AGAINST WHICH THOUGH, THE DRP HAD GIVEN CERTAIN DIRECTIONS, BUT TP ADJUSTMENT OF 2.69 CRORES WAS MADE. THEREAFTER, AN ORDER WAS PASSED UNDER SECTION 154 OF THE ACT ON 23.04.2015, WHEREIN NO ADDITION WAS MADE IN THE HANDS OF AS SESSEE. THE TPO WHILE MAKING TRANSFER PRICING ADJUSTMENT IN THE HANDS OF ASSESSEE HAD WORKED OUT THE PLI OF ASSESSEE BY INCLUDING EXPENSES PERTAINING TO EARLIER YEARS. 5. THE ISSUE WHICH ARISES IN THE PRESENT APPEAL IS WHETHER PRIOR PERIOD EXPENSES WER E OPERATING COST AND THE SAME HAD TO BE INCLUDED OR EXCLUDED WHILE COMPUTING PLI FOR THE YEAR UNDER CONSIDERATION. 6. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAS REFERRED TO THE PROFIT AND LOSS ACCOUNT PLACED AT PAGE 7 OF PAPER BOOK AND P OINTED OUT ITA NO. 553 /P U N/20 1 5 AAM SERVICES INDIA PVT. LTD. 3 THAT THE SAID AMOUNT WAS DEBITED TO PROFIT AND LOSS ACCOUNT. HOWEVER, IN THE COMPUTATION OF INCOME, COPY OF WHICH IS PLACED AT PAGE 31 OF PAPER BOOK, THE ENTIRE PRIOR PERIOD EXPENSES WERE ADDED BACK TO THE PROFIT OF THE YEAR. HE FURTHER REFERR ED TO THE RATIO LAID DOWN BY THE PUNE BENCH OF TRIBUNAL IN ACIT VS. DANA INDIA TECHNICAL CENTRE PVT. LTD. IN ITA NO.592/PN/2013, RELATING TO ASSESSMENT YEAR 2008 - 09, ORDER DATED 30.03.2016. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE LIMITED ISSUE WHICH ARISES IN THE PRESENT APPEAL IS AGAINST DETERMINATION OF PLI FOR THE YEAR UNDER CONSIDERATION. THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HAD DEBITED CERTAIN PRIOR PERIOD EXPENSES AND THE ISSUE IS WHETHER THE SAME ARE TO BE E XCLUDED WHILE DETERMINING THE PLI FOR THE YEAR UNDER APPEAL. THE PERUSAL OF DETAILS FILED BY THE ASSESSEE AND COMPUTATION OF INCOME AT PAGE 31 OF PAPER BOOK REFLECTS THAT THE ASSESSEE HAD NOT CLAIMED PRIOR PERIOD EXPENSES AS EXPENSES FOR THE YEAR UNDER CO NSIDERATION AND ENTIRE PRIOR PERIOD EXPENSES WERE ADDED WHILE DETERMINING THE GROSS TOTAL INCOME OF THE YEAR UNDER CONSIDERATION. THE SAID COMPUTATION OF INCOME IS PLACED AT PAGE 31 OF PAPER BOOK. 8. THE LIMITED ISSUE IS THAT WHERE THE EXPENDITURE HAS NOT BEEN CLAIMED AS DEDUCTION , THEN HOW THE SAME COULD BE CONSIDERED WHILE DETERMINING PLI FOR THE YEAR UNDER CONSIDERATION. WE FIND NO MERIT IN THE ISSUE RAISED BY THE REVENUE IN THIS REGARD . THE DRP HAS DIRECTED VIDE PARA 2.4.1 TO EXCLUDE EARLIER YEAR EXPENSES FOR DETERMINING PLI OF THE YEAR UNDER APPEAL. 9. WE FIND SIMILAR ISSUE AROSE BEFORE THE TRIBUNAL IN ACIT VS. DANA INDIA TECHNICAL CENTRE PVT. LTD. (SUPRA) AND IT WAS HELD AS UNDER: - ITA NO. 553 /P U N/20 1 5 AAM SERVICES INDIA PVT. LTD. 4 12 THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE F AIRLY CONCEDED BEFORE US THAT OUT OF TOTAL LOSSES OF APPROXIMATELY RS.62 LAKHS, LOSSES TO THE TUNE OF ABOUT RS.35 LAKHS RELATE TO EARLIER YEAR AND THE BALANCE LOSSES RELATE TO THIS YEAR. THE MUMBAI SPECIAL BENCH OF TRIBUNAL IN THE CASE OF PRAKASH L. SHAH REPORTED IN 115 ITD 167 (SB) HAD HELD THAT GAIN DUE TO EXCHANGE RATE DIFFERENCE IN THE YEAR OF RECEIPT ON ACCOUNT OF EARLIER EXPORTS AND ALLOWANCE OF DEDUCTION UNDER SECTION 80HHC OF THE ACT IN SUCH LATER YEAR WAS NOT SUSTAINABLE. FOLLOWING THE SIMILE, WE HOLD THAT WHILE COMPUTING PLI FOR THE YEAR UNDER CONSIDERATION, THE LOSS ARISING ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION TO THE TUNE OF RS.35,31,729/ - IS TO BE EXCLUDED. HOWEVER, THE LOSS ARISING ON ACCOUNT OF EXPORT PROCEEDS REALIZED FROM EXPORTS OF RELEVANT YEAR ARE TO BE CONSIDERED WHIL E COMPUTING PLI OF THE ASSESSEE. IN VIEW THEREOF, WE MODIFY THE ORDER OF CIT(A) AND DIRECT THE ASSESSING OFFICER TO RE - COMPUTE THE PLI IN THE HANDS OF ASSESSEE AND FOREIGN EXCHANGE FLUCTUATION LOSSES OF THE EARLIER YEARS ARE TO BE KEPT OUT OF CALCULATION OF PLI FOR THE YEAR UNDER CONSIDERATION. THE GROUND OF APPEAL NO.2 IS PARTLY ALLOWED. 10. THUS, WE DISMISS THE GROUND OF APPEAL RAISED BY THE REVENUE. 1 1 . IN THE RESULT, APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED ON THIS 23 RD DAY OF MARCH , 201 8 . SD/ - SD/ - ( D.KARUNAKARA RAO ) (SUSHMA CHOWLA ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 23 RD MARCH , 201 8 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT ; 2. T HE RESPONDENT; 3. THE DRP, PUNE ; 4. THE DIT (TP/IT), PUNE ; 5. THE DR A , ITAT, PUNE; 6. GUARD FILE. / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE