IN THE ITAT CHENNAI BENCH ‘A’
Assistant Commissioner of Income-tax
Versus
Handy Waterbase India (P.) Ltd.
IT APPEAL NO. 1429 (MDs.) OF 2012
C.O. NO. 147 (MDs.) OF 2012
[ASSESSMENT YEAR 2007-08]
SEPTEMBER 18, 2012
ORDER
Abraham P. George, Accountant Member – These are appeal and cross-objection of the Revenue and assessee respectively, against an order dated 15.3.2012 of Commissioner of Income Tax (Appeals)-XII, Chennai, for the impugned assessment year.
2. Appeal of the Revenue is taken up first for disposal.
3. Sole grievance raised by the Revenue is that CIT(Appeals) deleted an addition of Rs. 5.52 Crores made for difference in arm’s length price by the Assessing Officer. As per the Revenue, the Assessing Officer had not made such an addition based on Section 92(3) of Income-tax Act, 1961 (in short ‘the Act’) but had, on the other hand, applied Section 10B read with Section 80-IA(10) of the Act for such addition. Further, as per the Revenue, Assessing Officer had restricted the exemption claimed under Section 10B, by such amount and included it as income under the head “income from other sources” rightly.
4. Facts apropos are that assessee had filed its return of income for the impugned assessment year on 19.10.2007 declaring an income of Rs. 35,93,390/-. Assessee was engaged in sale and export of pasteurized crab meat. During the course of assessment proceedings, it was noted by the Assessing Officer that assessee had entered in international transactions with its Associate Enterprise for a sum exceeding Rs. 15 Crores. Assessing Officer referred it to Transfer Pricing Officer (TPO) for determination of the arm’s length price.
5. TPO vide his order dated 2.7.2010 fixed the arm’s length price of the sales effected by the assessee to its Associate Enterprise at Rs. 18,79,25,631/-. Sale price shown in the books by the assessee, for its sales to the Associate Enterprise was Rs. 24,32,24,499/-. In other words, the profit level indicated by the assessee was much higher than the one determined by the TPO based on comparables. Net margin indicated by the assessee was 44.08%, whereas, the one determined by the TPO was 21.66%. Assessing Officer was of the opinion that receipts of the assessee from its sales to the Associate Enterprise was in excess of the arm’s length price and such excess was nothing but income from other sources. The difference came to Rs. 5,52,98,818/- .
6. Though a draft assessment order in the above lines was given to the assessee, it exercised its option for filing an appeal against the assessment order and did not opt to move the Dispute Resolution Panel (DRP). Accordingly, assessment was completed on the lines of the draft assessment order. In such assessment order, Assessing Officer considered the sum of Rs. 5,52,98,818/- as income from other sources, as mentioned above. Further, for calculating the deduction under Section 10B of the Act, Assessing Officer applied the formula mentioned hereunder:-
