While working out the profits and gains which qualify for deduction under Section 80HH, one has to necessarily restrict the income which is derived from the industrial undertaking and nothing beyond. Thus, for the purpose of Section 80HH, the income of that industrial undertaking which got into the reckoning of the book profit for the purposes of Section 32AB has to be identified and that alone would be included in the profits and gains of the industrial undertaking for the purpose of working out the relief under Chapter VIA.
We observe that the assessee can either captively consume the electricity generated or can sell the same to the Tamil Nadu Electricity Board at Rs. 2.70 per unit. The assessee is refrained from directly selling generated electricity to the consumers. The assessee has no other option but to sell the electricity generated to the Tamil Nadu Electricity Board at the predetermined rates.
In the present case the Tribunal found that the DVO’s report is based on his opinion, and not on any material, which could form the basis of reopening of the cases, and thus it can at best be treated as an information, which will not be sufficient material for recording ‘reason to believe’ to proceed in the matter. The opinion of the DVO, as to what would be reasonable percentage of architects fees and the supervision charges by the Directors, would not constitute tangible material for exercising powers of reopening the assessment.
As CA certificate did not conform to the provisions contained in the regulations which requires that the certificate of the Chartered Accountant should be in confirmation of the Audited Accounts of the promoters/applicant for the five years preceding the date of the application. We are unable to approve the observations made by SAT that “neither the regulations nor the eligibility criteria in Form A requires the applicant to produce the annual accounts of the promoter.”
The above factual matrix of the case nowhere proves that the assessee had either concealed the income or furnished any inaccurate particulars. The very fact that it had duly mentioned the consideration in the year of receipt itself proves its bona fides. In this regard, we fortify our opinion from the hon’ble Bombay High Court judgment in the case of Metal Rolling Works Ltd. (supra).
Admittedly the assessee is involved in the manufacturing activity also and marketing its own products i.e. iron powder. Apart from that, the assessee is importing iron product and marketing the same that is a trading activity. Nothing has been brought out on record by the DRP as well as the TPO that the assessee has to incur cost for the sales achieved by the parent company as in the case of its own marketing.
From the decision of the hon’ble Delhi High Court in the case of CIT v. Hindustan Coco Cola Beverages (P.) Ltd. [2011] 331 ITR 192 (Delhi) it is clear that ‘business or commercial rights of similar nature’ are not manufactured or produced over-night, but are brought into existence by experience and reputation. The non-compete fee is outcome of an agreement entered into between two parties.
AO is directed to give an opportunity to assessee for cross examining persons whose statements are used against assessee. The statements have been recorded from the Indian personnel and might have been examined with reference to the Indian Company, however, assessee’s contention that being a foreign company, it has a right to cross examine the persons who gave statements cannot be denied. It is already on record that assessee has made the request before AO as well as the DRP on this issue. Therefore, we direct AO to allow the assessee to cross examine the individuals whose statements were recorded and were relied upon by the Revenue so that assessee can contest/justify/accept the statements.
In the case of Cushman and Wakefield (S) Pte. Ltd. (supra), the applicant was a foreign company incorporated in Singapore. It was engaged in the business of rendering services in connection with acquisition, sales and dealings in real estate and other services such as, advisory and research facilities management, project management etc. in the field of real estate.
The payment by CRS & Sons Co. Ltd., on the basis of franchise agreement to various persons cannot be treated as payment to Directors who have substantial interest in the company and Section 2 (24) (iv) cannot be invoked.
