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Facts
The assessee, a service provider to its group entities, filed its return of income for AY 2020-21. The Assessing Officer (AO) made transfer pricing adjustments related to interest on outstanding receivables, added unbilled revenue to the total income, restricted the exemption claimed under Section 10AA, and determined the Minimum Alternate Tax (MAT) liability. The assessee challenged these adjustments before the Dispute Resolution Panel (DRP) and subsequently before the ITAT.
Held
The ITAT remitted the issues of transfer pricing adjustment on outstanding receivables, addition of unbilled revenue, and the grant of exemption under Section 10AA back to the AO for fresh consideration, directing adherence to DRP directions and prior tribunal orders. The computation of book profit for MAT under Section 115JB was also remitted to the AO for rectification. Other grounds were considered consequential or rejected as premature for adjudication.
Key Issues
1. Validity of transfer pricing adjustment on outstanding receivables. 2. Addition to income on account of unbilled revenue. 3. Restriction of exemption claimed under Section 10AA. 4. Computation of book profit for Minimum Alternate Tax (MAT) under Section 115JB. 5. Erroneous initiation of penalty proceedings under Section 270A.
Sections Cited
143(3), 144C(13), 144B, 153, 92B, 92CA, 10AA, 115JB, 234C, 243A, 234B, 270A, 40(a)(ia), 288A, 143(1), 143(2), 92B(2), 92CA(3)
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Income Tax Appellate Tribunal, “C” BENCH : BANGALORE
Before: SHRI. LAXMI PRASAD SAHU & SHRI. KESHAV DUBEY
Per Laxmi Prasad Sahu, Accountant Member :
This appeal filed by the assessee is against the Order passed by the CIT(A) vide DIN and Order No.ITBA/AST/S/143(3)/2024-25/1066211732(1) dated 28.06.2024, under section 143(3) r.w.s 144C(13) read with section 144B of the Income-tax Act, 1961, on the following grounds of appeal:
1. That on the facts and in the circumstances of the case and in law, the Ld. AO was not justified and rather grossly erred in law and in facts, in computing the assessed income at INR 65,59,54,350 as against the IT(IT)A No.1635/Bang/2024 Page 2 of 17 returned income of INR 25,32,17,273 filed by the Appellant under normal provisions of the Act.
2. That on the facts and in circumstances of the case and in law, the Ld. AO erred in passing the Final order of assessment beyond the outer time limit allowed under Section 153 r.w.s 144C(13) of the Act and thereby the final assessment order dated 28 June 2024 is time barred and liable to be quashed; Part I - Transfer pricing adjustments: 3. That on the facts and in circumstances of the case and in law, the Ld. AO/ Ld. Transfer Pricing Officer ('Ld. TPO')/ Hon'ble Dispute Resolution Panel ('Hon'ble DRP') grossly erred by not accepting the economic analysis undertaken by the Appellant in accordance with the provisions of the Act read with the Income Tax Rules, 1962 ('Rules') and making an adjustment of INR 84,04,860; 4. Grounds against imputing interest on outstanding receivables due from AEs Adjustment of INR 84,04,860 4.1. That on the facts of the case and in law, the Ld. TPO/ Hon'ble DRP has grossly erred in not appreciating that outstanding receivables is not covered in the definition of international transaction as defined u/s 92B of the Act in the facts and circumstances of the case; 4.2. That on the facts of the case and in law, the Ld. TPO/ Hon'ble DRP has grossly erred in not appreciating that the receivables are consequential/ closely linked to the principal transaction of provision of services and hence haveb aggregated for determination of ALP under TNMM; 4.3. That on the facts of the case and in law, the Ld.TPO/DRP has grossly erred in notappreciating the fact that the working capital ariFistments und-taken take into account the impact of outstanding receivables of the controlled transactions vis-à-vis the uncontrolled transactions in determining the arm's length margial and no separate benchmarking is required; 4.4. That on the facts of the case and in law, the Ld. TPO/ Hon'ble DRP has grossly erred in not appreciating the facts and circumstances surrounding the receivables and re-characterising the outstanding receivables as unsecured loans advanced to AEs; 4.5. That on the facts of the case and in law, the Ld. TPO/ Hon'ble DRP has grossly erred in not following any statutorily prescribed method and without doing any comparability benchrnarking as prescribed under Chapter X of the Act. 4.6. That on the facts of the case and in law, the Ld. TPO/ Hon'ble DRP has grossly erred in not gymeating that there is no interest burden on the Appellant, being a debt free company and mot following the IT(IT)A No.1635/Bang/2024 Page 3 of 17 rationale laid down by Hon'ble Supreme Court in the case of Bechtel India Pvt Ltd. (SC-4956/2017-TP). Without prejudice to the above 4.7. That on the facts of the case and in law, the Ld. TPO/ Hon'ble DRP has grossly erred in considering SBI Prime Lending Rate ('PLR') for imputing notional interest on foreign currency denominated receivables instead of LIBOR; 4.8. That on the facts of the case and in law, the Ld. TPO/ Hon'ble DRP has grossly erred in considering credit period of 45 days instead of the industry average credit period; 4.9. That on the facts of the case and in law, the Ld. TPO/ Hon'ble DRP has grossly erred in not considering weighted average realization days of invoices; 4.10. That on the facts of the case and in law, the Ld. TPO/ Hon'ble DRP has grossly erred in not appreciating that the Act itself provides for a longer credit period of 90 days for repatriation of money in the event of primary adjustment; 4.11. That on the facts of the case and in law, the Ld. TPO/ DRP has grossly erred in notallowing credit period as allowed by RBI; 4.12. That on the facts of the case and m law, the Ld 170/ Horeble DRP has grossly erred in failing to follow the principle of consistency, by not following the directions given by Hon'ble ITAT for the same issue in Appellants macaw for AY 2017-18 and AY 2018-19. 4.13. That on the facts of the case and in law, the Ld. AO has grossly erred in not considering consequential deduction on the transfer pricing adjustment made of INR 84,04,860 under section 10AA of the Act. Part II - Corporate tax adjustments: 5. Grounds against addition on account of unbilled revenue amounting to INR 81,26,36,474 5.1 That on the facts of the case and in law, the Ld. AO has grossly erred in making addition of INR 81,26,36,474 towards Unbilled revenue mentioning that the same is not offered to tax, without considering the fact that the same is already forming part of Revenue from operations and thereby resulting in double taxation of the Unbilled revenue. 5.2 That on the facts of the case and in law, the Ld. AO has grossly erred by not considering the directions of Ld. DRP.
6. Grounds in relation to consequential grant of exemption u/s 10AA of the Act: 6.1 That on the facts of the case and in law, the Ld. AO has grossly erred in restricting the exemption u/s 10AA of the Act to extent of 50% of Export IT(IT)A No.1635/Bang/2024 Page 4 of 17 profits by disregarding the fact that the subject year (AY 2020-21) is 5th year of operations and eligible for exemption of 100% of the Export profits. 6.2 That on the facts of the case and in law, the Ld. AO, while computing consequential exemption u/s 10AA of the Act has grossly erred in considering the details provided in Form 56F filed for AY 2021-22 instead of considering the details in Form 56F filed for subject year under appeal (i.e., AY 2020-21).
7. That on the facts of the case and in law, the Ld. AO has grossly erred in stating that the return of income filed by the Appellant has been processed u/s 143(1) of the Act and an intimation has been issued on 11 October 2021 by assessing income at INR 87,66,35,100 without considering the fact that such intimation was neither issued to the Appellant nor made available in the income tax e-filing portal. That on the facts and in the circumstances of the case and in law, the 8. Ld. AO grossly erred in considering the total income at INR 1,27,93,72,180 in the 'Computation sheet' provided with respect to the final assessment order vis-a-vis assessed income of INR 65,59,54,350 determined as per Final order of assessment, thereby resulting in an erroneous adjustment to extent of INR 62,34,17,823.
9. That on the facts of the case and in law, in the 'Computation sheet', the Ld. AO grossly erred in considering the deemed total income u/s 115JB as INR 1,27,93,72,176 vis-à-vis of INR 66,58,47,259 as per the Return of income filed by the Appellant, without considering that the no adjustments were made to book profits u/s 115JB of the Act in the Final assessment order.
10. That on the facts of the case and in law, the Ld. AO has grossly erred in not allowing MAT credit brought forward from earlier years while computing tax liability as per normal provisions of the Act in the subject assessment year.
11. That on the facts of the case and in law, the Ld. AO has grossly erred re-computing the interest under section 234C of the Act on the assessed income instead of returned income.
That on the facts of the case and in law, on disposal of appeal, material adjustments would be required in computing total income, tax, interest under section 243A and 234B of the Act. Necessary directions may please be given in this regard.
13. Ground on erroneous initiation of penalty under section 270A of the Act
IT(IT)A No.1635/Bang/2024 Page 5 of 17
That on the facts of the case and in law, Ld. AO was not justified and rather grossly erred in law and in facts by initiating penalty proceedings under section 270A of the Act by falsely stating that the Appellant has under-reported income which is in consequence of misreporting thereof. The above grounds of appeal are mutually exclusive and without prejudice to each other. The Appellant prays for leave to add, alter, amend and / or modify any of the grounds of appeal at or before the hearing of the appeal.
Briefly stated, the facts of the case are that assessee filed its return of income on 05.02.2021 for Assessment Year 2020-21 showing annual income of Rs.25,32,17,280/- and MAT under section 115JB of the Act amounting to Rs.66,58,47,259/-. The case was selected for scrutiny and notice U/S 143(2) was issued and duly served upon the assessee. Subsequently, other statutory notices were issued to the assessee through ITBA portal which was duly served to the assessee. The AB InBev GCC Services India Pvt. Ltd., incorporated in 2014. GCC was set up to provide a range of centralized back-office services in the nature of finance, accounting, administrative, human resources etc., in support of its group entities business. The tax payer is engaged in providing IT enabled back-office support services to its group entities as a captive service provider. The tax payer, through its STPI Unit viz., GAC is engaged in providing analytical support services to its group entities. Analytical support services involve using data that is generated from the business transactions / interactions with customers. It is primarily engaged in analysing such business data in order to provide insights to ABI Group entities for effective decision making.
3. On perusal of the documents submitted, as per Form 3CEB, assessee had undertaken international transaction with its AE totaling Rs.533,28,81,816/-. The case was selected for scrutiny only the reason that large value transactions in services including transactions under section 92B(2) of the Act in comparison of production and distribution of beer and provision for procurement services (T.P.Risk Parameter) and Deemed international transactions by person other than
IT(IT)A No.1635/Bang/2024 Page 6 of 17 AE in pursuance of a prior agreement. (T.P. Risk Parameter). Therefore, in accordance with the provisions of section 92CA of the Act, the international transactions entered into by the assessee with the Associated Enterprises were referred to the Transfer Pricing Officer (TPO) for determining the Arm’s Length Price with the prior approval of the Pr. Commissioner of Income Tax. The learned TPO, after determining the ALP suggested for an adjustment under ITeS segment for Rs.41,28,11,497/- and interest on receivables for Rs.84,04,860/-. Accordingly, the total adjustment suggested by the TPO after adjustment under section 92CA of the Act of Rs.42,12,16,356/- vide its Order dated 29.03.2023 after receipt of the Order under section 92CA(3) of the Act, the AO proceeded to pass draft Assessment Order and made adjustment towards international transaction for Rs.42,12,16,356/-. Further, on verification of the financial statement of note No.2, 12.14, it was seen that the assessee has shown unbilled revenue of Rs.92,43,44,589/-. Assessee was requested to submit the details with explanation for unbilled revenue. Assessee failed to explain that the said amount should not be added to the total income and further assessee was requested to submit all supporting documents on or before 11.08.2023. Assessee submitted detailed reply and submitted chart which is incorporated by the AO in his Order. Assessee submitted that the unbilled revenue of the aforesaid amount is included in the revenue in the profit & loss account. But the invoices are not raised for unbilled revenue. On perusal of the financial statement, it was noted by the AO that the total turnover which is liable for GST is Rs.511,37,90,553/- (Rs.468,33,37,489/-) + (Rs.42,63,99,393/-) + (Rs.40,53,671/-) and as per GST returns total turnover raised is Rs.499,20,82,438/-. This difference between these 2 was treated as unbilled revenue which is amounting to Rs.12,17,08,115/- (Rs.511,37,90,553/-) - (Rs.49,20,82,438/-). The unbilled revenue is included in the profit & loss account. As per profit & loss account where the GST is liable for Rs.511,37,90,553/-( Rs. 468,33,37,489)+ (Rs. 42,63,99,393)+ ( Rs. 40,53,671) the AO noted that there is still difference in actual amount and taxed amount of Rs.81,26,36,4742/- was treated as unbilled revenue. The AO further
IT(IT)A No.1635/Bang/2024 Page 7 of 17 observed that the assessee has not submitted any supporting documentary evidences such as copy of invoices or agreements to establish that unbilled revenue of Rs.81,26,36,474/- is included in the turnover for the year under consideration and the same is offered for tax for the year ending 31.03.2020 and the same was added. Further, on examination of the financial statement, assessee was requested to submit the party wise details of expenses with documents, evidences, bills and agreement copies, ledger accounts for the below items in the specified format:
Sl. No. Nature of Expenses Amount in Rs. 30% Reason for Disallowance
7,77,97,127 2,33,39,138 Bills and supporting 1 Repairs & Maintenance Building documents
40,82,36,816 12,24,71,045 2 Traveling and conveyance
3 Legal and Professional Fees 81,03,36,404 24,31,00,921
4 Security charges 25.669,299 77.00,790 u/s.40(a)(ia) of the Act Business support expenses 5 6,63,36,957 1,99,01,087
15,34,21,251 4,60,26,375 6 Rent
Total 154,17,97,854 46,25,39,356
4. Assessee was requested to submit the reply with all documents on or before 11.08.2023 but the assessee failed to submit its reply till the date of Order. Hence, in the absence of documentary evidence and TDS details of these expenses, 30% of the total expenses were proposed to be disallowed and added back to the total income of the assessee. Resultantly, the proposed addition is Rs.46,25,39,356/- which comes to 30% of total expenses as tabulated in para 7.2
IT(IT)A No.1635/Bang/2024 Page 8 of 17 of his Order. Accordingly, the AO assessed the income at Rs.194,96,09,459/- and passed Draft Order under section 144C(1) of the Act on 22.08.2023.
Aggrieved from the above proposed addition against the draft Assessment Order, assessee filed objection before the learned DRP. On 20.09.2023 vide its objections dated 19.09.2023 which is placed at appeal set page Nos.93 to 341 justifying the objections of the AO as per draft Assessment Order. The learned DRP virtually accepted the objections raised before them and learned DRP gave direction on 30.05.2024. After receipt of the directions, the AO proceeded to pass final Assessment Order on 28.06.2024 and determined the income as under:
Amount Description
Total Income as General Provisions of the Act 25,32,17,273
Addition on account of Transfer Pricing Order as Add : 84,04,860 discussed in para 5.5 Add : Addition on account of unbilled revenue 81,26,36,474 (-)41,83,04,256 Less: Consequential deduction/exemption u/s. 10AA Total Taxable Income (Rounded off u/s. 288A) 65,59,54,350
Aggrieved from the above Order, assessee filed appeal before the ITAT. The learned Counsel reiterated the submissions made before the lower authorities and in respect of interest on receivables, the learned Counsel submitted that similar issue has been decided by the Co-ordinate Bench of the Tribunal in assessee’s own case in IT(TP)A No.290/Bang/2022 for the Assessment Year 2017-18 vide Order dated 14.11.2022 and he requested that the Order passed for Assessment Yer 2017-18 may be followed for this year also.
IT(IT)A No.1635/Bang/2024 Page 9 of 17 7. On the other hand, the learned DR relied on the Order of the lower authorities and stated that if the assessee’s own case for Assessment Year 2017- 18 is followed then he has no objection to that.
Considering the rival submissions, we noted that the Co-ordinate Bench has held as under on the issue of interest on receivables :
“2.10 It was argued by Ld.AR that, the authorities below disregarded business/commercial arrangement between the assessee and its AE’s, by holding outstanding receivables to be an independent international transaction. The Ld.AR placed reliance on decision of Hon’ble Delhi Tribunal in Kusum Healthcare Pvt. Ltd. vs. ACIT reported in (2015) 62 Taxmann.com deleted addition by considering the above principle, and subsequently Hon’ble Delhi High Court in Pr. CIT vs. Kusum Health Care Pvt. Ltd. reported in (2017) 398 ITR 66, held that no interest could have been charged as it cannot be considered as international transaction. Reliance was also placed on the decision of Hon’ble Delhi Tribunal in case of Bechtel India vs DCIT reported in (2016) 66 taxman.com 6 which was subsequently upheld by Hon’ble Delhi High Court vide order dated 21/07/16 in also upheld by Hon’ble Supreme Court vide order dated 21/07/17, in CC No. 4956/2017. 2.11 It was submitted by the Ld.AR that, outstanding receivables are closely linked to main transaction and so the same cannot be considered as separate international transaction. He also submitted that when the company agree to provide for extending credit period with mutual consent and it does not provide any interest clause in case of delay there cannot be any chargeability of interest. He alternatively argued that the working capital adjustment takes into account the factors related to delayed receivables and no separate adjustment is required in such circumstances. Without prejudice to the above contention, it was submitted that the outstanding receivables need not be treated as a separate international transaction as if same could be benchmarked using a combined transaction approach, by combining the outstanding receivables with the main international transaction of provision of services due to the fact that receivables are a result of the international transactions of the Assessee.
On the contrary Ld.CIT.DR submitted that interest on receivables is an international transaction and Ld.TPO rightly determined its ALP. In support of the contentions, he placed reliance on decision of Hon’ble Delhi Tribunal order in Ameriprise India Pvt. Ltd. vs. ACIT reported in 2015- TII-347-ITAT-DEL-TP wherein it is held that, interest on receivables is an international transaction and the transfer pricing
IT(IT)A No.1635/Bang/2024 Page 10 of 17 adjustment is warranted. He stated that Finance Act, 2012 inserted Explanation to Section 92B, with retrospective effect from 1.4.2002 and sub-clause (c) of clause (i) of this Explanation provides that: (i) the expression "international transaction" shall include— (c) capital financing, including any type of long-term or shortterm borrowing, lending or guarantee, purchase or sale of marketable securities or any type of advance, payments or deferred payment or receivable or any other debt arising during the course of business;....’ . 3.1 Ld.CIT.DR submitted that expression ‘debt arising during the course of business’ refers to trading debt arising from sale of goods or services rendered in course of carrying on business. Once any debt arising during course of business is an international transaction, he submitted that any delay in realization of same needs to be considered within transfer pricing adjustment, on account of interest income short charged or uncharged. It was argued that insertion of Explanation with retrospective effect covers assessment year under consideration and hence under/non-payment of interest by AEs on debt arising during course of business becomes international transactions, calling for computing its ALP. He referred to decision of Hon’ble Delhi Tribunal in Ameriprise (supra), in which this issue has been discussed at length and eventually interest on trade receivables has been held to be an international transaction. Referring to discussion in said order, it was stated that Hon’ble Delhi Bench in this case noted a decision of the Hon’ble Bombay High Court in the case of CIT vs. Patni Computer Systems Ltd., reported in (2013) 215 Taxmann 108, dealt with question of law as under: “(c) `Whether on the facts and circumstances of the case and in law, the Tribunal did not err in holding that the loss suffered by the assessee by allowing excess period of credit to the associated enterprises without charging an interest during such credit period would not amount to international transaction whereas section 92B(1) of the Income-tax Act, 1961 refers to any other transaction having a bearing on the profits, income, losses or assets of such enterprises?” 3.2 Ld.CIT DR submitted that, while answering above question, Hon’ble Bombay High Court referred to amendment to section 92B by Finance Act, 2012 with retrospective effect from 1.4.2002. Setting aside view taken by Tribunal, Hon’ble Bombay High Court restored the issue to file of Tribunal for fresh decision in light of legislative amendment. It was thus argued that non/under-charging of interest on excess period of credit allowed to AEs for realization of invoices, amounts to an international transaction and ALP of such international transaction has to be determined by Ld.TPO. 3.3 In so far as charging of rate of interest is concerned, he relied on decision of the Hon’ble Delhi High Court in CIT vs. Cotton Naturals (I) Pvt. Ltd. reported in (2015) 276 CTR 445 holding that currency in which such amount is to be re-paid, determines rate of interest. He, therefore, IT(IT)A No.1635/Bang/2024 Page 11 of 17 concluded by summing up that interest on outstanding trade receivables is an international transaction and its ALP has been correctly determined. We have perused the submissions advanced by both the sides in the light of the records placed before us.
This Bench referred to decision of Special Bench of this Tribunal in case of Instrumentation Corpn. Ltd. v. Asstt. DIT in and 1549 (Kol.) of 2009, dated 15-7-2016, held that outstanding sum of invoices is akin to loan advanced by assessee to foreign AE., hence it is an international transaction as per explanation to section 92 B of the Act. Alternatively, it also argued by the Ld.AR that in TNMM, working capital adjustment subsumes sundry creditors. In such situation computing interest on outstanding receivables as loans and advances to associated enterprise would amount to double taxation. Hon’ble Delhi Tribunal in case of Orange Business Services India Solutions Pvt. Ltd. vs. DCIT in vide its order dated 15.2.2018 has observed that: “There may be a delay in collection of monies for supplies made, even beyond the agreed limit, due to a variety of factors which would have to be investigated on a case to case basis. Importantly, the impact this would have on the working capital of the assessee would have to be studied. It went on to hold that, there has to be a proper inquiry by the TPO by analysing the statistics over a period of time to2 discern a pattern which would indicate that vis-à-vis the receivables for the supplies made to an AE, the arrangement reflected an international transaction intended to benefit the AE in some way. Similar matter once again came up for consideration before the Hon’ble Delhi High Court in Avenue Asia Advisors Pvt. Ltd. vs. DCIT (2017) 398 ITR 120 (Del). Following the earlier decision in Kusum Healthcare (supra), it was observed that there are several factors which need to be considered before holding that every receivable is an international transaction and it requires an assessment on the working capital of the assessee. Applying the decision in Kusum Health Care (supra), the Hon’ble High Court directed the TPO to study the impact of the receivables appearing in the accounts of the assessee; looking into the various factors as to the reasons why the same are shown as receivables and also as to whether the said transactions can be characterized as international transactions.” 4.1 In view of the above, we deem it appropriate to set aside this issue to Ld.AO/TPO for deciding it in conformity with the above referred judgment. Needless to say, the assessee will be allowed a reasonable opportunity of being heard in accordance with law. We also direct the Ld.TPO that in the event the WCA subsumes the outstanding receivables, no separate characterisation is to be made. However for those receivables that fall out of the WCA pertaining to year under consideration, then, the rate of interest to be charged must LIBOR + 300 basis points in IT(IT)A No.1635/Bang/2024 Page 12 of 17 accordance with the principles laid down by Hon’ble Delhi High Court in case of CIT vs. Cotton Naturals (I) Pvt. Ltd., reported in (2015) 276 CTR 445 by considering a credit of 90 days.”
Respectfully following the above judgment, we are remitting the issue back to the AO for fresh consideration after giving reasonable opportunity of being heard to the assessee and decide the issue as per law. Considering the credit period of 90 days, this ground raised by the assessee stands allowed for statistical purposes.
Corporate Tax Adjustments : Grounds relating to addition on account of unbilled revenue amounting to Rs.81,26,36,474/-.
The next issue raised by the assessee in ground Nos.5 to 5.2 is towards unbilled revenue of Rs.81,26,36,474/-. During the course of assessment proceedings, it was observed that the assessee has unbilled revenue which is appearing in the financial statements. In this regard, assessee was asked to justify the difference with cogent documents with documentary evidence such as copy of invoice, arguments to establish that unbilled revenue of Rs.81.26 Crores are included in the turnover for the year under consideration whether the same is offered to tax during the year ending 31.03.2020 or not. The AO observed that this amount of Rs.81.26 Crores towards unbilled revenue has not been offered for taxation during the year. Hence, the same amount of Rs.81,26,36,474/- was added to the total income of the assessee. In this regard, assessee raised objection before the learned DRP and detailed explanations were filed. The learned DRP obtained factual report from the AO. During the objection raised before the DRP, assessee submitted that against the unbilled revenue, no invoices have been raised. Therefore, as the invoices were not issued for INR Rs.46,27,589/- the same has been categorized under the head unbilled revenue in the assets side of balance sheet forming part of the audited financial statement of the company. It was also submitted that the unbilled revenue created during the year is already
IT(IT)A No.1635/Bang/2024 Page 13 of 17 formed part of the revenue is recognized by the assessee in its P & L A/c and offered to tax in the return of income adding the same to the total income tantamount to double taxation. Assessee further submitted that details of the turnover to be considered from GSTR 9 annual return of the assessee instead of GSTR 3B Monthly return. The AO has considered the turnover from GSTR 3B which is the monthly return filed with the GST authorities. Assessee had practical difficulties once GSTR 3B is uploaded, it cannot be rectified. In the draft Assessment Order, the AO has noted that the assessee is unable to justify that documentary evidence such as copy of invoice or agreements to establish that unbilled revenue of Rs.81.26 Crores is not part of taxation. In this regard, in the response filed against the show cause notice on 11.08.2023, the assessee has already submitted that the unbilled revenue represents the amount of revenue accounted in statement of P & L A/c for which no invoices were raised to customers on 31.03.2020 and the same is already offered to tax. However, the AO has mentioned wrongly that assessee is unable to submit supporting documentary evidences such as copy of invoices agreements without taking into consideration the submission of the assessee. After receipt of the factual report of the AO, the learned DRP brought it to the knowledge of the assessee and assessee has filed reconciliation statement which is incorporated in the learned DRP’s Order. Assessee filed response against the factual reports filed by the AO and the assessee also submitted that the auditor’s certification in GSTR 9C on the turnover and reconciliation statement and GSTR 9 has not been examined. The reconciliation statement is also furnished. Assessee has filed written submissions which is placed on record and is considered.
On the other hand, learned DR relied on the Order of the lower authorities and submitted that the learned DRP have given direction to AO as per para 2.19.3 which is as under:
IT(IT)A No.1635/Bang/2024 Page 14 of 17 “2.19.3 Having considered the submissions and details available in records, the Panel note that the AO has made an addition of Rs 81.26,34,474/- towards unbilled revenue not offered to tax. While arriving at the said figure, AO has not considered the correct turnover as given in GST return 9C. Further, the AO has also not considered the unbilled revenue of last previous year, which was the opening figure for the year under consideration. Therefore, with the above observations, AO is directed to recompute the addition on account of unbilled / revenue. Hence, the ground raised on this issue is partly allowed.”
12. Considering the rival submissions, we noted that the AO has observed that during the course of assessment proceedings, assessee did not furnish invoices and agreement. In the opinion of AO, assessee has not offered for taxation to the unbilled revenue of Rs.81.26 Crores and during the proceedings before the learned DRP, assessee has filed detailed figures reported in GSTR 3B and GSTR 9, annual return and audit certificate in GSTR 9C and after examining the details, the learned DRP has given direction as noted supra. Considering the observations of the learned DRP and arguments advanced by the learned Counsel, we are remitting this issue back to the file of AO for fresh examination to reconcile the difference in the turnover reported in GSTR 9 and GSTR 9C. We direct the AO to examine the agreements if any in this regard and further direct to get turnover figure from the GST authorities if it is possible reported as per GSTR monthly return and annual return and the turnover reported that the GST authorities shall be considered the turnover for the year. Accordingly, this issue is allowed for statistical purposes.
Further, the assessee has raised grounds 6 to 6.2 for not granting of exemption under section 10AA of the Act to the extent of 50% of the export profits by disregarding that the subjected year 2020-21 is 5th year of operation and eligible for exemption for 100% of the export profits. Assessee has further raised issue that while computing exemption under section 10AA of the Act, the AO has not considered the details provided in Form 56F. Considering the submissions of the assessee, the factual reports were called for from the AO and IT(IT)A No.1635/Bang/2024 Page 15 of 17 it was brought to the knowledge of the assessee. In response, assessee also filed explanations detailing the turnover as per GSTR and Form No.26AS among the SEZ unit and non-SEZ unit. The DRP observed as under:
“2.21.3 Having considered the submission, the Panel observed that thisground is consequential in nature and subject to addition made to taxpayer return income related to SEZ unit. Since, the enhanced profit in the case of taxpayer is subject tore-computation by the AO, the Panel is of the opinion that this ground is premature for adjudication. For statistical purposes, the grounds raised by the taxpayer on this issue is rejected.”
14. After considering the submissions from both the sides, since this is consequential effect, the AO is directed to decide the issue in line with the direction of learned DRP noted supra.
In the result, this issue is allowed for statistical purposes.
Ground No.7 raised by the assessee is not emanating from the Order of the learned DRP nor from the final Assessment Order. Ground No.8 is relating to wrong consideration of figures to be corrected by the AO. In ground Nos.9 and 10, assessee has raised issue regarding computation of profit under section 115JB of the Act under MAT provision.
This issue is consequential in nature. The assessee submitted that while computing book profit, there is no adjustment towards book profit in the final Assessment Order. However, while computing tax at Sl. No.19, the deemed income under section 115JB of the Act has been considered at Rs.1,27,93,72,176/- which needs to be rectified. In this regard, the learned Counsel for the assessee submitted that in assessee’s own case in IT(TP)A No.290/Bang/2022, similar issue was raised which has been decided at para No.5 in which it has been held as under:
IT(IT)A No.1635/Bang/2024 Page 16 of 17 “5.2 In this regard, with respect to adjustment on account of deferred tax, we humbly submit that as per Section 115JB of the Act: Explanation 1.—For the purposes of this section, "book profit" means the profit as shown in the statement of profit and loss for the relevant previous year prepared under sub-section (2), as increased by— if any amount referred to in clauses (a) to (i) is debited to the statement of profit and loss or if any amount referred to in clause (j) is not credited to the statement of profit and loss. and as reduced by. — (viii) the amount of deferred tax, if any such amount is credited to the statement of profit and loss. 5.3 In light of the above, as per explanation to Section 115JB(2) of the Act, the amount of deferred tax, if any, credited to statement of profit and loss is to be reduced while calculating the amount of book profits as per MAT provisions. 5.4 Accordingly, in the instant case, the deferred tax which has been credited to statement of profit and loss account amounting to INR 16,57,043 was reduced while computing the book profits in the return of income filed by the Assessee. However, the same is not considered in the computation sheet annexed to the Order passed by the Ld. AO.” Respectfully following the above judgement we restore this issue to the AO for fresh consideration and decide the issue as per law.Accordingly these ground raised by assessee stands allowed for statistical purposes.”
18. Therefore, the AO is directed to compute profit in above terms and decide the issue as per lawn. Ground Nos.11 and 12 are consequential in nature. Ground No.15 is also consequential in nature.
Respectfully following the above judgment, we are remitting this issue back to the file of AO in light of the above judgment decided and issued as per law.
IT(IT)A No.1635/Bang/2024 Page 17 of 17 20. In the result, appeal is allowed for statistical purposes.