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1/9 IN THE HIGH COURT OF KARNATAKA, BENGALURU
DATED THIS THE 19TH DAY OF JUNE 2018
PRESENT
THE HON’BLE DR.JUSTICE VINEET KOTHARI
AND
THE HON’BLE MRS.JUSTICE S.SUJATHA
I.T.A. No.83/2017
BETWEEN : SKF TECHNOLOGIES [INDIA] P. LTD No.13/5, SINGASANDRA, 13TH KM, HOSUR ROAD BANGALORE-560068.
...APPELLANT
(BY SRI K.R.VASUDEVAN, ADV.)
AND : DEPUTY COMMISSIONER OF INCOME TAX CIRCLE – 12[3], BMTC BUILDING 80 FEET ROAD, KORAMANGALA BENGALURU-560095.
…RESPONDENT
(BY SRI ARAVIND.K.V., ADV.)
THIS APPEAL IS FILED UNDER SECTION 260-A OF INCOME TAX ACT, 1961, ARISING OUT OF ORDER DATED 31.03.2016 PASSED IN IT [TP]A No.1339/BANG/2011, FOR THE ASSESSMENT YEAR 2007-08, PRAYING TO FORMULATE THE SUBSTANTIAL QUESTION OF LAW AS STATED ABOVE AND ANSWER THE SAME IN FAVOUR OF THE APPELLANT AND ETC.
THIS APPEAL COMING ON FOR ADMISSION, THIS DAY, Dr. VINEET KOTHARI, J., DELIVERED THE FOLLOWING:
Date of Judgment 19-06-2018, ITA No.83/2017 SKF Technologies [India] P. Ltd. Vs.
Deputy Commissioner of Income Tax
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J U D G M E N T
Mr. K.R. Vasudevan, Adv. for Appellant - Assessee Mr. Aravind.K.V., Adv. for Respondent - Revenue
Heard the learned Counsel for the parties.
The Assessee has filed the present Appeal under Section 260-A of the Income Tax Act, 1961 ['Act' for short], aggrieved by the observations made by the learned Income Tax Appellate Tribunal in Paragraph-26 of the impugned Order dated 31.03.2016 for Assessment Years 2006-07 and 2007-08.
The issue involved before the learned Tribunal was to benchmarking of the value of the group IT expenses shared by the Assessee-Company and paid to its Associate Enterprise M/s. SKF Data Services, Sweden, where the adjustments were made under Section 92C of the Act required further investigation and therefore the learned Tribunal remanded the matter back to the Assessing Officer.
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Deputy Commissioner of Income Tax
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The other issue raised for the said Assessment Years above was also about the disallowance under Section 40[a][ia] of the Act for not deducting the tax at source for such payments of share of cost of group IT services rendered by the Associate Enterprise M/s. SKF Data Services, Sweden.
It was contended before the learned Tribunal by the Assessee that both the disallowances, namely, adjustments under Section 92CA of the Act and disallowance under Section 40[a][ia] of the Act could not be made simultaneously on same account.
On both the issues, learned Tribunal has remanded the case back to the Assessing Officer for further enquiry into the relevant facts in view of the guidelines given by the learned Tribunal. The relevant portion of the order of the learned Tribunal in this regard is quoted below for ready reference:
Date of Judgment 19-06-2018, ITA No.83/2017 SKF Technologies [India] P. Ltd. Vs.
Deputy Commissioner of Income Tax
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“23. We have perused the orders and heard the rival contentions. AO had in the draft assessment order noted that assessee had not deducted tax at source on payments effected to SKF Data Services, Sweden. As per the AO no supporting evidence was filed by the assessee to show that these were reimbursement of expenditure. AO also noted that assessee was selling its entire product line in India and there could not be any services rendered by M/s SKF Data Services in Sweden, for such business operations. According to him, payments were unrelated to business of assessee in India. What we find is that none of the lower authorities had carefully looked into the “make available” clause in Article 12(4) of the DTAA between India and Canada which was called into operation by the assessee. Lower authorities did not look into the applicability of the DTAA in relation to the alleged cost sharing passed on by M/s SKF Data Services, Sweden, to the assessee for the IT related services. Question whether any technical services were rendered by M/s SKF Data Services, Sweden, to the asseesee and how far the “make available” clause was or was not
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Deputy Commissioner of Income Tax
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satisfied were never verified either by the TPO or the DRP. In our opinion, this aspect also requires a fresh look by the AO. We set aside the orders of the authorities on the aspect of disallowances u/s.40(a)(ia) of the Act also and remit it back to the file of the AO for consideration in accordance with law, Ground.II(1) of the assessee stands allowed for statistical purpose.
This leaves us with two other ground taken by the assessee which appears in appeal for A.Y.2007-08. First one relates to set off of carry forward loss. As per the assessee, carry forward loss for A.Y.2006-07 was Rs.41,95,29,825/- and not Rs.10,96,29,092/-. Ld. AR submitted that if the correct figure of carry forward of loss is considered then there would be no positive income for the impugned assessment year.
Since the question is regarding what was the actual carry forward loss available to the assessee for A.Y.2006-07, we are of the opinion that it is an aspect which can be verified by the AO. We therefore direct the AO to verify and give the assessee the benefit of actual carry forward
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Deputy Commissioner of Income Tax
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of loss as assessed for A.Y.2006-07, for the impugned assessment year. Ground II(2) is allowed for statistical purpose.
Vide its ground II(3), grievance of the assessee is that disallowance of expenditure towards group IT services were considered twice, once u/s 40(a)(ia) of the Act and again u/s 92CA of the Act. What we find is that bench marking of the international transactions u/s 92CA of the Act, is entirely different from allowance of disallowance of an expenditure u/s 37 of the Act. We have already set aside the issue regarding bench marking of group IT services rendered by SKF Data Services, Sweden, to the assessee, back to the file of the AO/TPO for consideration afresh. Irrespective of any addition made, under ALP pricing provisions, application of Section 40(a)(ia) of the Act can definitely be done by the AO. Since these two provisions apply in altogether different independent spheres, we do not find any merit in this ground taken by the assessee. Ground II(3) of the assessee stands dismissed.”
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Deputy Commissioner of Income Tax
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Learned Counsel for the Assessee Mr. K.R. Vasudevan, urged before the Court that though the issues have been remanded by the learned Tribunal, but the observations made by the learned Tribunal in Paragraph-26 that irrespective of any additions made under ALP pricing provisions, additions u/s 40[a][ia] of the Act can also be definitely be made by the AO, since both these provisions apply in altogether different independent spheres, gives rise to a substantial question of law which deserves to be decided by this Court at this stage.
Learned Counsel for the Revenue, however, supported the impugned Order of the learned Tribunal.
Having heard the learned Counsel for the parties, we are of the opinion that since both the issues with regard to TP adjustments under Section 92CA of the Act as well as disallowances under Section 40[a][ia] of the Act, the matter is remanded back by the learned
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Deputy Commissioner of Income Tax
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Tribunal to the Assessing Officer, the observations made by the learned Tribunal in Paragraph-26 will depend upon the findings of facts which are arrived at again by the Assessing Officer upon such remand by Tribunal.
Therefore, we consider it appropriate to leave the said question of law open for consideration after appropriate orders are passed upon fresh enquiry by the learned Assessing Officer, upon such remand by Tribunal.
We leave the said contention of the learned Counsel for the Assessee open to be raised before the learned Assessing Officer upon such remand. As is submitted before the Court, no such fresh orders is passed by the learned Assessing Officer so far. If the said question again arises and is raised, once the matter reaches this Court through the order of the learned Tribunal, the said question will be open to be raised before this Court.
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Deputy Commissioner of Income Tax
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With these observations, the Appeal is disposed of. No costs.
Sd/- JUDGE
Sd/- JUDGE
AN/-