Date Of Judgment 19-06-2018, Ita v. Deputy Commissioner Of Income Tax

IN THE HIGH COURT OF KARNATAKA, BENGALURU DATED THIS THE 19 DAY OF JUNE 2018 PRESENT THR HON’BLEK DR.JUSTICE VINBBT KOTHARI ANT) THR HON’BLE MRS..JUSTICK S.SUJATHA I.T.A. No.83/2017 BETWEEN : OKF TECHNOLOGIES P. LTDNo.13/5, SINGASANDRA, 13 KM,HOSUR ROADBANGALORE -560068. _. APPELLANT (BY SRI K.R.VASUDEVAN, ADV.)| AND : DBPUTY COMMISSIONEROF INCOME TAX.CIRCLE — 12/3], BMTC BUILDING80 FEET ROAD, KORAMANGALABBENGALURU-560095._. RESPONDENT. (BY SRI ARAVIND.K.V., ADV.) THIS APPEAL IS FILED UNDER SECTION 2Q60-A OFINCOME TAX ACT, 1961, ARISING OUT OF ORDER DATED31.03.2016 PASSED IN IT [TPJA No.1339/BANG/2011, FOR THEASSESSMENT YEAR 2007-08, PRAYING TO FORMULATE THESUBSTANTIAL QUESTION OF LAW As STATED ABOVE ANDANSWER THR SAMB IN FAVOUR OF THER APPKHLLANT AND BIC THIS APPEAL COMING ON FOR ADMISSION, THIs DAY,|Dr. VINEET KOTHARI, J©, DELIVERED THE FOLLOWING: 2/9 JU DBiGMENT Mr. K.R. Vasudevan,Adv. for Appellant -AssesseeMr. Aravind.K.V.,Adv. for Respondent - |Revenue Heard the learned Counsel for the parties. ? The Assessee has filed the present Appealunder Section 260-A of the Income Tax Act, 1961 |'Act’for short], aggrieved by the observations made by thelearned Income Tax Appellate Tribunal in Paragraph-260oT the.impugnedOrderdated3o1L.03.201forAssessment Years 2006-07 and 2007-08. 3.TheissueinvolvedbeforethelearnedTribunal was to benchmarking of the value of the group.IT expenses shared by the Assessee-Company and paidto its Associate Enterprise M/s. SKF Data Services,sweden, where the adjustments were made undersection 92C of the Act required further investigationand therefore the learned Tribunal remanded the matter|back to the Assessing Officer. Date of Judgment 19-06-2018, ITA No.83/2017 SKF Technologies [India] P. Ltd. Vs. Deputy Commissioner of Income Tax 3/9 4Theotherissueraisedforthesaid AssessmentYearsaboveWa Salsoabout.thedisallowance under Section 4Ofa|jia] of the Act for notdeducting the tax at source for such payments of shareof cost of group IT services rendered by the AssociateEnterprise M/s. SKF Data Services, Sweden. 5.It was contended before the learned Tribunalby the Assessee that both the disallowances, namely,adjustments under Section 92CA of the Act anddisallowance under Section 4O/a|lia] of the Act could notbe made simultaneously on same account. 6.On both the issues, learned Tribunal hasremanded the case back to the Assessing Officer forfurther enquiry into the relevant facts in view of theguidelines given by the learned Tribunal. The relevantportion of the order of the learned Tribunal in thisregard is quoted below tor ready reference: Date of Judgment 19-06-2018, ITA No.83/2017 SKF Technologies [India] P. Ltd. Vs. Deputy Commissioner of Income Tax 4/9 “23. We have perused the orders andheard the rival contentions. AO had in the draftassessment order noted that'assessee had notdeducted tax at source on payments effected|to SKF Data Services, Sweden.As per the AO’no supporting evidence was filed by the assesseeto show that these were reimbursement ofexpenditure. AO also noted thatasSSsSecCSSCCselling its entire product line in India and|there could not be any services rendered byM/s SKF Data Services in Sweden, for suchbusinessoperations.AccordingTohim,payments were unrelated to business of assesseein India. What we find is thatnone of the lowerauthorities had carefully looked into the|“make available” clause in Article 12(4) of|the DTAA between India and Canada— whichwas called into operation by the assessee. Lowerauthorities did not look into the applicability ofthe DTAA in relation to thealleged cost sharingpassed on by M/s SKF Data _ ServicesSweden, to the assessee for the IT relatedservices.Questionwhethertechnical services were rendered by M/s SKF Dataservices, Sweden, to the asseesee and how farthe “make available” clause was or was not 5/9 5/9 satisfied were never verified either by the TPO orthe DRP.In our opinion, this aspect also'requires a fresh look by the AO.We set aside.the orders of the authoritieson the aspect ofdisallowances u/s.4O(aj(ia) of the Act alsoand remit it back to the file of the AO for'considerationinaccordancewithlaw,Ground.II(1) of the assessee stands allowedfor statistical purpose. D4.This leaves us with two other groundtaken by the assessee which appears in appealfor A.Y.2007-08. First one relates to set off ofcarry forward loss. As per the assessee, carryforwardlossjorA. Y.2O006-OWdasRs.41,95,29,825/- and not Rs.10,96,29,092/-..Ld. AR submitted that tf the correct figure of carry|forward of loss ts considered then there would beno positive income for the impugned assessmentYyedr. IS.since the question is regarding whatwas the actual carry forward loss available to theassessee for A. Y.2006-O07, we are of the opiniothat it is an aspect which can be verified by theAO. We therefore direct the AO to verify and givethe assessee the benefit of actual carry forward Date of Judgment 19-06-2018, ITA No.83/2017 SKF Technologies [India] P. Ltd. Vs. Deputy Commissioner of Income Tax 6/9 of loss as assessed for A.Y.2006-O07, for theimpugned assessment year. Ground II(2) isallowedfor statistical purpose. YI6.Vide its ground II(3),grievance oftheOBO SOR H1sthatdisallowanceofexpenditure towards group IT services were|considered twice, once u/s 4Ofaj}(ia) of the Actand again u/s 92CAof the Act. What we find isthatbench marking of the international|transactions u/s 92CA of the Act, is entirely|different from allowance of disallowance ofan expenditure u/s 37 of the Act.We havealready set aside the issue regarding benchmarking of group IT services rendered by SKFData Services, Sweden, to the assessee, back tothe file of the AO/TPO for consideration afresh.Irrespective of any addition made, under ALPpricing provisions, application of Section 40(a)(ta)of the Act can definitely be done by the AO.Since these two provisions apply in altogetherdifferent independent spheres, we do notfind any merit in this ground taken_ by theassessee. Ground Il(3) of the assessee standsdismissed.” Date of Judgment 19-06-2018, ITA No.83/2017 SKF Technologies [India] P. Ltd. Vs. Deputy Commissioner of Income Tax 7/9 T Learned Counsel for the Assessee Mr. K.R.|Vasudevan, urged before the Court that though theissues have been remanded by the learned Tribunal, butthe observations made by the learned Tribunal inParagraph-26 that irrespective of any additions madeunder ALP pricing provisions, additions u/s 4O[al]/ia| ofthe Act can also be definitely be made by the AO, sinceboth these provisions apply in altogether differentindependent spheres, gives rise to a_ substantialquestion of law which deserves to be decided by thisCourt at this stage. 8.Learned Counsel for the Revenue, however,supported the impugned Order of the learned Tribunal. QOHaving heard the learned Counsel for theparties, we are of the opinion that since both the issueswith regard to TP adjustments under Section 92CA ofthe Act as well as disallowances under Section 40{a|}ia]of the Act, the matter is remanded back by the learned Date of Judgment 19-06-2018, ITA No.83/2017 SKF Technologies [India] P. Ltd. Vs. Deputy Commissioner of Income Tax 8/9 Tribunal to the Assessing Officer, the observations madeby the learned Tribunal in Paragraph-26 will dependupon the findings of facts which are arrived at again bythe Assessing Officer upon such remand by Tribunal. 10,Therefore, we consider it appropriate to leavethe said question of law open for consideration afterappropriate orders are passed upon fresh enquiry by thelearned Assessing Officer, upon such remand byTribunal. Date of Judgment 19-06-2018, ITA No.83/2017 SKF Technologies [India] P. Ltd. Vs. Deputy Commissioner of Income Tax 8/9 Tribunal to the Assessing Officer, the observations madeby the learned Tribunal in Paragraph-26 will dependupon the findings of facts which are arrived at again bythe Assessing Officer upon such remand by Tribunal. 10,Therefore, we consider it appropriate to leavethe said question of law open for consideration afterappropriate orders are passed upon fresh enquiry by thelearned Assessing Officer, upon such remand byTribunal. 11.We leave the said contention of the learned|Counsel for the Assessee open to be raised before thelearned Assessing Officer upon such remand. AS issubmitted before the Court, no such fresh orders ispassed by the learned Assessing Officer so far. If thesaid question again arises and is raised, once the matterreaches this Court through the order of the learnedTribunal, the said question will be open to be raisedbefore this Court. 9/9 With these observations, the Appeal is disposed of.No costs. AN /- Sd/-.JUDGE. Sd/-.JU DGE