Ita/1/2016 Of Pr. Commissioner Of Income Tax Gurgaon v. M/S Itw India Ltd Level-1 Lotus Plaza

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH ITA No.1 of 2016 (O&M)Date of decision: 23.4.201 The Principal Commissioner of Income Tax, Gurgaon .....- Appel M/s [TW India Limited ....mesponden CORAM: HON’BLE MR. JUSTICK AJAY KUMAR MITTALHON’ BLE MR. JUSTICEK DARSHAN SINGH 1. Whether Reporters of local papers may be allowed to see the judgment?2. To be referred to the Reporters or not?YES3. Whether the judgment should be reported in the Digest? Present: Mr. Tajender K.Joshi, Advocate for the appellant.Mr. Rishab Kapoor, Advocate for the respondent. | Ajay Kumar Mittal, J. inThis appeal has been preferred by the appellant-revenue underSection 260A of the Income Tax Act, 1961 (in short, “the Act’) against theorder dated 27.3.2015 Annexure A.4 passed by the InCOME‘TaAppellate Tribunal, Hyderabad Bench 'B’', Hyderabad (in short, “theTribunal”) in ITA No.206/HYD/2009 for the assessment year 2004-05claiming following substantial questions of law:- 1) Whether on the facts and circumstances of the case, the ITATwas justified in law in holding that two separate deductionsunder section SOHHC and SOIB are allowable to the assesseeon the same profits and gains in contravention of section8OIB(13) read with section 8OIA(9) of the Act?was justified in law in holding that two separate deductionsunder section SOHHC and SOIB are allowable to the assesseeon the same profits and gains in contravention of section8OIB(13) read with section 8OIA(9) of the Act? 11) Whether 1n view of the facts and circumstances of the case, theTribunal erred in law in not allowing the amount of deductionallowed under section 8OIB to be reduced from the businessprofits to compute deduction under section 8HHC on theresultant profits?Tribunal erred in law in not allowing the amount of deductionallowed under section 8OIB to be reduced from the businessprofits to compute deduction under section 8HHC on theresultant profits? l11) Whether on the facts and circumstances of the case, the Hon'bleITAT erred in law in not adjudicating about inclusion of exportbenefits to be part of profit from exports to AE and notadjudicating about allowance of variation to the extent of (+/-)3% while determining the ALP of international transaction?”ITAT erred in law in not adjudicating about inclusion of exportbenefits to be part of profit from exports to AE and notadjudicating about allowance of variation to the extent of (+/-)3% while determining the ALP of international transaction?” ? A few facts relevant for the decision of the controversyinvolved as narrated in the appeal may be noticed. The assessee companyfurnished its return of income for the assessment year 2004-05 on30.10.2004 declaring income ofLy40,19,33,216/- after claiming deductionunder sections SOHHC and SOIB oft the Act. Assessment under sectio143(3) of the Act was completed on 29.12.2006, Annexure A.2 at a totalincome ofLv43,03,52,979/-. The assessee had claimed deduction undersection 80IB of the Act on the profits and gains derived from the industrialunit situated at Silvassa to the tune oftv1,90,96,190/- and also claimeddeduction under Section 80HHC of the Act amounting tovO$5,40,817/- onthe profits derived from exports made from all the divisions includingindustrial unit of Silvassa. The Assessing Officer, in view of the provisions| ITA No.1 of 2016 ITA No.1 of 2016 contained in section 80IB(13) read with section 801A(9) of the Act reducedthe deduction of|1,93,22,532/- allowable under section SOIB of the Act1.e. 30% of=a6,44,08,441/- from the profits and gains of business tocalculate profits of the business for computation of the deduction underSection 8OHHC of the Act. Accordingly, the Assessing Officer allowed thededuction under Section 8SOHHC of the Act at|77,75,288/- as against theassessee's claim of=a$5,40,817/- in its return of income. Further theAssessing Officer noticed that the assessee had entered into internationaltransactions with its associated enterprises involving export of finishedgoods amounting to-LV9 22,35,092/- and other international transactions.The Assessing Officer made a reference to the Transfer Pricing Officer(TPO) under Section 92CA(1) of the Act to determine the Arm's LengthPrice (ALP) of these international transactions. On the basis of TPO'sorder, total addition ofLT2,66,59,178/- was made by the Assessing Officerto the total income of the assessee on account of transfer pricingadjustments. Aggrieved by the order, the assessee filed appeal before theCommissioner of Income Tax (Appeals) [CIT(A)]. Vide order dated3.12.2008, Annexure A.3, the CIT(A) partly allowed the appeal andconfirmed the order passed by the Assessing Officer in allowing deductionunder section SOHHC of the Act at.=a77,/75,288/- with reference to theligible profits of the business after reducing the amount of deductionallowed under section 80IB of the Act. Further, the CIT(A) sustained theaddition ofan1,02,47,642/- out of total addition ofan2,45,98,456/-involving export of manutactured goods and confirmed the addition onaccount of transfer pricing adjustments towards commission payment of ITA No.1 of 2016 zy20,60,722/-. Not satisfied with the order, the assessee filed appeal beforethe Tribunal. The department also filed cross appeal. Vide order dated27.3.2015, Annexure A.4, the Tribunal partly allowed the appeal filed bythe assessee and dismissed the revenue's appeal as infructuous. Hence theinstant appeal by the revenue. 3]We have heard learned counsel for the parties.4 After perusing the averments made in the appeal and hearinglearned counsel for the parties, we find that the initial order dated21.12.2006, Annexure A.] under Section 92CA(3) of the Act which wasrectified under Section 154 of the Act on 28.12.2006 was passed by theAdditional Commissioner of Income Tax (Transfer Pricing), Hyderabad,The final assessment order dated 29.12.2006, Annexure A.2 was passed bythe Deputy Commissioner of Income Tax, Circle 2(1), Hyderabad. Even theappeal was filed by the assessee before the CIT(A) at Hyderabad. Furtherappeal by the assessee and cross appeal by the revenue were filed before theTribunal at Hyderabad. Since the initial process of assessment was started atHyderabad and the final assessment was framed by the Assessing Officer atHyderabad, this court lacks territorial jurisdiction to adjudicate the matter. InThe Commissioner of Income Tax, Faridabad Vs. M/s Motorola India Ltd. (2010) 326 TTR 156, where the assessment was framed by theAssessing Officer at Bangalore, the Revenue in that case, had sought tojustify the filing of the appeal in this Court on the ground that the assesseerespondent had requested for transfer of the case from Bangalore toGurgaon on 02.01.2002 and the case was transferred from Bangalore toGurgaon on 20.05.2005 under Section 127 of the Act. The Division BenchGURBAX SINGHak this Court, while repelling the aforesaid contention had noticed as under:2016.05.09 10:26I attest to the accuracy andintegrity of this documentHigh Court Chandigarh InThe Commissioner of Income Tax, Faridabad Vs. M/s Motorola India Ltd. (2010) 326 TTR 156, where the assessment was framed by theAssessing Officer at Bangalore, the Revenue in that case, had sought tojustify the filing of the appeal in this Court on the ground that the assesseerespondent had requested for transfer of the case from Bangalore toGurgaon on 02.01.2002 and the case was transferred from Bangalore toGurgaon on 20.05.2005 under Section 127 of the Act. The Division BenchGURBAX SINGHak this Court, while repelling the aforesaid contention had noticed as under:2016.05.09 10:26I attest to the accuracy andintegrity of this documentHigh Court Chandigarh “The decision of the High Courts are binding on thesubordinate Courts and authorities or Tribunals under itssuperintendence throughout the territory 1n relation to which itexercises jurisdiction but it does not extend beyond itsterritorial jurisdiction. In other words, the decision of one HighCourt 1s not a binding precedent for another High Court or forCourts or Tribunals outside its territorial jurisdiction. Thedoctrine of precedents and rule of binding efficacy of law laiddown by the High Court within its territorial jurisdiction, thequestions of law arising out of decision in a reference, has to bedetermined by the High Court which exercises territorialJurisdiction over the situs of the Assessing Officer and 1f 1t wasotherwise then it would result in serious anomalies as anassessee affected by an assessment order at Bombay mayinvoke the jurisdiction of Delhi High Court to take advantageof a suitable decision taken by it. Thus, such an assessee mayavoid application of inconvenient law laid down by theJurisdictional High Court of Bombay. On the basis of theaforementioned reasoning, the Division Bench sustained theobjection that the jurisdiction to entertain the application undersub-section (1) and (2) of Section 256 of the Act vested in theHigh Court of Bombay and not of Delhi. We are in respecttulagreement with the aforementioned reasoning of the DelhiHigh Court. Accordingly, we hold that the preliminaryobjection raised by learned counsel for the assessee-respondent1S sustainable. AAAA AAAA AXAK A conjoint reading of the aforementioned provisions makes itevident that the Director General or Chief Commissioner orCommissioner 1S empowered to transfer any case from one ormore Assessing Officers subordinate to him to any otherAssessing Officer. It also deals with the procedure when thecase 1S transferred from one Assessing Officer subordinate to aDirector General or Chief Commissioner or Commissioner to an Assessing Officer who is not subordinate to the sameDirector General, Chief Commissioner or Commissioner. Theaforementioned situation and the definition of expression ‘case’in relation to jurisdiction of an Assessing Officer 1s quiteunderstandable but it has got nothing to do with the territorialjurisdiction of the Tribunal or High Courts merely becauseSection 127 of the Act dealing with transfer has beenIncorporated in the same chapter. Therefore, the argumentraised 1s completely devoid of substance and we have nohesitation to reject the same. In view of the above, the appeal is dismissed by sustaining thepreliminary objection that this Court has no_ territoriaJurisdiction over an order passed by the Assessing Officer atBangalore. Accordingly, these appeals are returned to therevenue appellant for their filing before the competent court ofJurisdiction in accordance with law.” Similar order was passed by this Court in ITA No.49 of 2012ECommissioner of Income Tax (Central) Gurgaon vs. M/s ParabolicDrugs Limited],decided on 11.10.2012. 4]In view of the above, this court has no territorial jurisdiction to}adjudicate upon the lis over an order passed by the Assessing Officer, 1.e.Deputy Commissioner of Income Tax, Circle 2(1), Hyderabad, the completepaper book of appeal including application for condonation of delay 1sreturned to the appellant-revenue for filing before the competent court ofJurisdiction in accordance with law. Similar order was passed by this Court in ITA No.49 of 2012ECommissioner of Income Tax (Central) Gurgaon vs. M/s ParabolicDrugs Limited],decided on 11.10.2012. 4]In view of the above, this court has no territorial jurisdiction to}adjudicate upon the lis over an order passed by the Assessing Officer, 1.e.Deputy Commissioner of Income Tax, Circle 2(1), Hyderabad, the completepaper book of appeal including application for condonation of delay 1sreturned to the appellant-revenue for filing before the competent court ofJurisdiction in accordance with law. (Ajay Kumar Mittal)Judge| April 23,20161$> (Darshan Singh)Judge|