DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE - 1(1), PUNE vs. M/S. APPLIED MICRO CIRCUITS INDIA PRIVATE LIMITED, PUNE

Briefly stated, the facts of the case are that the assessee company is engaged in the business of designing and development of chip, integrated circuits and storage components and providing allied services for its holding company AMCC, USA. The assessee filed return declaring total income at Rs. Nil and book profit of Rs.2,25,12,625/- u/s.115JB of the Act. The assessee claimed deduction u/s.10A of the Act at Rs.2.05 crore on the income of its STPI unit. Because of certain international transactions entered into by the assessee, the AO made a reference to the Transfer Pricing Officer (TPO) for determining the arm‟s length price of the international transactions. The TPO passed order u/s.92CA(3) of the Act proposing transfer pricing adjustment of Rs.2,74,67,960/-. In the first appeal, the transfer pricing adjustment was reduced to Rs.2,20,29,573/-. The Assessing Officer invoked Explanation 7 to section 271(1)(c) of the Act and imposed penalty of Rs.74,87,850/- on the amount of transfer pricing addition sustained in the first appeal. The ld. CIT (Appeals) deleted the penalty, against which the Revenue has come up in appeal before the Tribunal.

3. We have heard the rival contentions through Virtual court and gone through the relevant material on record. It is seen that the transfer pricing addition sustained by the ld. CIT(Appeal) at Rs.2.20 crore, which forms the bedrock of the penalty, came up for consideration before the Tribunal. Vide order (ITA No.1250/PUN/2015) dated 24.11.2017, the Tribunal has deleted the said addition. A copy of the order has been placed at page 5 onwards of the paper book. The AO, while giving effect to the order passed by the Tribunal, has determined total income of the assessee at Rs.36,117/-. Since the very foundation of imposition of penalty, being the transfer pricing addition of Rs.2.20 crore, does not survive any more, we do not find any reason to disturb the view taken by the ld. CIT(Appeals) in deleting penalty u/s.271(1)(c) of the Act. The same is hereby upheld.

In the result, appeal of the Revenue is dismissed.

The CIT(Appeals)-13, Pune.