×Latest Case Laws on Income Tax by various Income Tax Appellate Tribunals in India
These are the latest case laws decided by various Income Tax Appellate Tribunals (ITAT) of India on Income Tax which have been published recently. The case laws are open for discussion and we invite expert comments from our members on its applicability and effect on relevant issues.
17-05-2019, Dongfang Electric Corporation, Section 144C(5), Tribunal Kolkata
The captioned two appeals filed by theAssessee, pertaining to Assessment Years 2007-08 and 2008-09, are directed against fair assessment orders passed by the Assessing Officer u/s 143(3)/144C(13) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’), which incorporate the findings of the ld. Dispute Resolution Panel under section 144C (5) of the Act.
2.Since, the issues involved in these two appeals are common and identical; therefore, these appeals have been heard together and are being disposed of by this consolidated order. For the sake of convenience, the grounds as well as the facts narrated in assessee`s appeal in ITA No.2563/Kol/2017,for Assessment Year 2007-08, have been taken into consideration for deciding the above appeals en masse.
3. The solitary grievance of the assessee in this appeal is that the ld. Assessing Officer/DRP erred in law and on facts and circumstances in making a transfer pricing adjustment of Rs.90,31,04,234/- by applying Transactional Net Margin Method(TNMM), whereas as per assessee only Comparable Uncontrolled Price Method(internal-CUP) is applicable.
Note: In this appeal, the assessee has also raised a technical ground stating that impugned assessment order is time barred, as there is no valid reference of International Transactions to Ld TPO in terms of section 92CA(1) of the Act, consequent to which extended period for passing assessment order is not available. The ld Counsel informs the Bench that the assessee reserves his right to challenge the validity of reference made by AO to Ld TPO in terms of section 92CA(1 ) of the Act. However, the ld Counsel for the assessee did not press this technical ground before the Bench therefore, we do not djudicate the same.
4. The facts of the case which can be stated quite shortly are as follows: In the assessee`s case, vide decree of Hon'ble Supreme court of India in the case of Director of Income Tax (In l. Taxation) versus Dongfang Electric Corp. in Civil Nos. 11006-1007 of 2013, dated 09.12.2013, the Assessing Office has been directed by the Hon'ble Supreme Court to consider the assessment afresh. Accordingly, a reference under section 92CA(1) of the IT Act, 1961 was made by
Assessing Officer, to Ld. Transfer Pricing Officer (TPO). The assessee had not filed Form 3CEB along with its return of income for AY 2007-08.The assessee is a company incorporated in the People's Republic of China. It is engaged mainly in turnkey contracting and sub-contracting for power projects, development and consultation for power equipment technology etc. During the Financial Year 2006- 07, relevant to A.Y. 2007-08, it was carrying out work on two contracts for erection and commissioning of turnkey projects for thermal power plants. These contracts had been awarded by the West Bengal Power Development Corporation Limited for the project at Sagardighi and by Durgapur Projects Limited at Durgapur, both in the State of West Bengal. It is claimed that the assessee is a Permanent Establishment (PE) in India during the relevant assessment year within the meaning of Article 5 of the Double Taxation Avoidance Agreement (DTAA) between India and the People's Republic of China. lt filed its return of income for AY 2007-08 with the office of DDIT(IT)-1(1), Kolkata. On the basis the Profit andLoss account submitted by the assessee for Assessment Year 2007-08, it was observed that the assessee had disclosed a loss to the tune of Rs.67,11,07,016/- (before FBT) for its PE in India. This loss had basically arisen on account of expenses incurred to the tune of Rs.332,80,55,124/- (inclusive of depreciation of Rs.4,54,98,363/-). During the relevant assessment year, the assessee had shown revenues to the tune of Rs.265,69,48,108/- for its PE in India from West Bengal Power Development Corporation Limited and Durgapur Projects Limited.
5. The contracts entered into by the assessee with the Indian parties suggest the scope of the contract, which is as follows:
(a).Offshore supply: Procurement and supply (overseas) of equipment (including spare parts, tools and tackles) for thermal power plant; and
(b).Onshore Supplies and Services: Local supply, design and engineering, construction, fabrication erection, installation, testing and commissioning of thermal power plant in India, transportation of the overseas supply of equipments from the Indian port of destination to the site or place of business of the buyer and inland insurance charges.
The activities mentioned above i.e. (a) offshore supply and (b) onshore supply & services, were being rendered by the assessee on the basis of two separate contracts entered into between it and the respective contracting parties in India. Thus, each activity as mentioned above was guided by a separate contract .Simpliciter, the supply of the plant & machinery and equipments for erection and commissioning of the power projects was undertaken through a separate contract between the assessee and the individual parties concerned. As this supply of plant & machinery was to take place outside the territorial waters of India, it was termed