IN THE ITAT NEW DELHI BENCH ‘I’
Assistant Commissioner of Income-tax
Versus
Bechtel India (P.) Ltd.
IT APPEAL NOS. 4338, 4339 & 4573 (DELHI) OF 2011
CROSS-OBJECTION NO. 374 (DELHI) OF 2011
[ASSESSMENT YEARs 2004-05 AND 2005-06]
DECEMBER 21, 2012
ORDER
ITA No.4338/Del/2011
1. This appeal by the Revenue is directed against the order of learned CIT(A)-XX, New Delhi dated 29th July, 2011 for the AY 2004-05.
2. Ground No.1 of the Revenue’s appeal reads as under:-
“The ld.CIT(A) has erred on facts and in law in deleting addition of Rs. 6,93,21,169/- made on account of Arm’s Length Price.”
3. Though it was the Revenue’s appeal, at the outset, it was stated by the learned counsel for the assessee that the assessee derives income from the business of designing engineering projects. That during the year under consideration, the Transfer Pricing Officer (TPO) has considered the assessee to be in the business of IT/IT-enabled services and accordingly, the assessee’s transactions with the AE were benchmarked for determining the arm’s length price. That the learned CIT(A) accepted the assessee’s contention that the assessee derives income from engineering, drawing and design services and accordingly, he accepted that the assessee’s international transactions were at arm’s length price. The learned counsel submitted that in AY 2008-09, the TPO himself accepted that the assessee company is involved in the business of engineering, drawing and designing services. He, however, fairly pointed out that the CIT(A), while accepting the comparables given by the assessee in the field of engineering, drawing and design services, has not allowed any opportunity to the AO/TPO to rebut the comparables given by the assessee. He, therefore submitted that either the order of the learned CIT(A) should be sustained or the matter can be set aside to his file or even to the file of the TPO.
4. The learned DR, on the other hand, stated that on the facts of the assessee’s case, it would be fair if the matter is set aside to the file of the TPO and he is directed to readjudicate the issue in the light of his own order for AY 2008-09.
5. In view of the above submission of both the parties, we set aside the orders of the authorities below on this point and restore the matter to the file of the Assessing Officer and direct him to again refer the matter to the TPO for determining the arm’s length price afresh in the light of his order for AY 2008-09 treating the assessee company as involved in the business of engineering, design and drawing. Needless to mention that AO/TPO while readjudicating the issue will allow adequate opportunity of being heard to the assessee.
6. Ground No.2 of the Revenue’s appeal reads as under:-
“The ld.CIT(A) has erred on facts and in law in deleting disallowance of Rs. 11,95,737/- on account of deduction u/s 80HHE of the I.T. Act.”
7. At the time of hearing before us, it was pointed out by the learned counsel for the assessee that the Assessing Officer recomputed the deduction permissible under Section 80HHE by increasing the total turnover – (i) by the amount of adjustment made by the TPO and (ii) reimbursement of the expenses. He submitted that the TPO has enhanced the value of international transactions by Rs. 6,93,21,169/-. Therefore, if at all it was to be considered, it should have been considered by increasing the assessee’s income and the export turnover. The total turnover cannot be increased without increasing the export turnover. The adjustment made by the TPO was in relation to the value of the international transactions, therefore, any increase therein will first increase the export turnover, then the total turnover and finally, the total income. The Assessing Officer cannot simply increase the total turnover by the said amount. He fairly pointed out that Section 92C(4) provides that no deduction under Chapter VI-A shall be allowed in respect of the amount of income by which the total income is enhanced as per the computation under Section 92C. Therefore, the Assessing Officer is not at all justified in enhancing the total turnover by the adjustment made under Section 92C. With regard to the increase of total turnover by reimbursement of expenses, it was pointed out by the learned counsel that this issue is covered in favour of the assessee by the decision of the Tribunal in assessee’s own case for AY 2001-02 & 2002-03 vide ITA Nos.4278/Del/2005 and 1803/Del/2006. He, therefore, submitted that the order of the learned CIT(A) on this point is in accordance with law and therefore, the same should be sustained.
8. The learned DR, on the other hand, relied on the order of the Assessing Officer.
9. We have carefully considered the arguments of both the sides and perused the material placed before us. We find that the Assessing Officer, while computing deduction under Section 80HHE, increased the total turnover of the assessee. The working of the Assessing Officer under Section 80HHE is reproduced below for ready reference:-
“The deduction u/s 80HHE of the Act is recalculated as under.
