GE India Technology Centre Pvt Ltd vs. DRP (Karnataka High Court)

DATE: (Date of pronouncement)
DATE: August 17, 2011 (Date of publication)

Click here to download the judgement (geindia_drp_powers.pdf)

If AO has allowed s. 10A deduction, DRP cannot withdraw it

The assessee claimed deduction of Rs. 32.18 crores u/s 10A. The AO passed a draft assessment order u/s 144C in which he allowed s. 10A deduction though he reduced the quantum by Rs. 44.49 lakhs. When the assessee filed objections before the Dispute Resolution Panel (“DRP”), it took the view that the assessee was not at all entitled to s. 10A deduction as it was engaged in “research & development”. On the alternative plea that the assessee was engaged in providing “engineering design services”, the DRP directed the AO to examine the claim on merits. The assessee filed a Writ Petition claiming that the directions given by the DRP was beyond jurisdiction. This was dismissed by the single judge. On appeal by the assessee, HELD allowing the appeal:

(i) As the AO had accepted that the assessee was eligible for s. 10A deduction and had only proposed a variation on the quantum, the DRP had no jurisdiction to hold that the assessee was not at all eligible for s. 10A deduction;

(ii) The DRP’s direction that the AO should decide the alternate claim of the assessee having regard to the material is also without jurisdiction. If such orders and directions are permitted to be allowed, it would defeat the object of the alternate dispute resolution.

Note: While u/s 144C(8), the DRP has no power to “set aside” the proposed variation or direct “further enquiry“, it is entitled to “enhance” the proposed variation.

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