Appeal partly allowed for fresh assessment. Disallowance of interest upheld.

The Tribunal partly allowed the appeal for statistical purposes, admitting fresh evidence and remanding the issue of correct characterization and benchmarking to the TPO for a fresh assessment. The disallowance of interest on the late deposit of TDS was upheld based on judicial precedent. The order was pronounced on 28th September 2016.

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Issues Involved:
1. Incorrect assessment of income by the Assessing Officer (AO).
2. Addition due to difference in arm's length price of international transactions.
3. Disallowance of interest on late deposit of TDS.
4. Levying of interest under Section 234B of the Income Tax Act.

Issue-Wise Detailed Analysis:

1. Incorrect Assessment of Income:
The assessee contested the AO's assessment under section 144C read with section 143(3) of the Income Tax Act, 1961, which assessed the income at Rs. 2,89,58,299 against the returned income of Rs. 39,43,589. The AO's assessment was challenged on the grounds of factual and legal errors.

2. Addition Due to Difference in Arm's Length Price:
The AO/TPO made an addition of Rs. 2,44,78,815 based on the order under section 92CA(3) of the Act. The assessee argued that the DRP/AO incorrectly characterized the company as providing 'financial advisory services' and compared it with companies engaged in stock broking and trading of shares, which are not functionally comparable. The DRP/AO disregarded the benchmarking analysis using internal TNMM and rejected certain companies as comparables while including others that were not functionally comparable. The assessee requested the admission of fresh evidence and remand to the TPO for correct characterization, highlighting that the taxpayer is a low-risk-bearing captive service provider. The Tribunal admitted the fresh evidence and remanded the issue back to the TPO for a fresh assessment.

3. Disallowance of Interest on Late Deposit of TDS:
The AO disallowed an amount of Rs. 5,35,894 as interest on the late deposit of TDS, considering it not an allowable expenditure. The DRP upheld this addition. The Tribunal, following judicial precedent, rejected the ground for disallowance, maintaining that the interest on late deposit of TDS is not an allowable expenditure under the Act.

4. Levying of Interest Under Section 234B:
The assessee also challenged the levy of interest under Section 234B of the Income Tax Act. However, specific arguments or decisions on this issue were not detailed in the judgment.

Conclusion:
The Tribunal partly allowed the appeal for statistical purposes. The fresh evidence was admitted, and the issue of correct characterization and benchmarking was remanded to the TPO for a fresh assessment. The disallowance of interest on the late deposit of TDS was upheld based on judicial precedent. The order was pronounced in the open court on 28th September 2016.

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