2013 (9) TMI 474 - AT - Income Tax

ITAT upholds CIT(A)'s decisions, reduces disallowance under Section 14A, deletes addition under Section 92CA(3).

The ITAT upheld the CIT(A)'s decisions on all issues, dismissing both the Revenue's appeal and the assessee's cross objection. The disallowance under ... Adjustment of arm's length price - purchase of Edible Oil - Malaysian Palm Oil Board (MPOB) - reliance on the data / quotation of 'Oil World'. - price benefit of +/-5% - Held that:- CIT(A) by well reasoned order has given a finding that the Oil World is an independent organization established in 1958 in Germany and provides independent forecasting services for oil seeds, oils and meals and providing primary information and professional analysis. He has further noted that the quotation adopted by Assessee from oil world is for Malaysia and not for Germany. The quotation on is an independent authentic trade quotation which cannot be ignored without any valid reason. He has further noted that no adjustment under section 92 (C) was required as all the prices at which the purchases were made were less than 5% of the arithmetical mean of the quotation from MPOB and Oil World. He has further noted that the assessee had entered into contract with A.E on long term basis for continuous supply of constant quality as to ensure continuity in production which was also an important factor for considering the ALP. - Decided against the revenue. Disallowance of expenditure - Prior period expenditure - Held that:- CIT(A) while upholding the disallowance the expenses has noted that the assessee has not submitted any evidence to prove the that the expenses crystallized during the year either before the Assessing Officer or before CIT(A). From the paper book placed on record it is seen that the statement of expenses very clearly indicates that the expenses relates to A.Y. 2000-01 - Decided in favour of Revenue. Issues Involved:1. Disallowance under Section 14A.2. Addition under Section 92CA(3) of the Income Tax Act.3. Prior period expenses.Issue-wise Detailed Analysis:1. Disallowance under Section 14A:The Revenue appealed against the CIT(A)'s decision to restrict the addition under Section 14A to Rs. 7,536/- from Rs. 75,360/-. The Assessing Officer (AO) had noted that the assessee received a dividend of Rs. 1,21,565/-, which was exempt under Section 10(33) of the Act. The AO disallowed administrative expenses proportionate to the dividend income due to the absence of specific evidence from the assessee. The CIT(A) agreed with the AO on the need for disallowance but corrected a calculation error, reducing the disallowance to Rs. 7,536/-. The ITAT upheld the CIT(A)'s decision, finding no reason to interfere as the Revenue could not controvert the findings.2. Addition under Section 92CA(3) of the Income Tax Act:The AO noticed that the assessee had international transactions with an associated enterprise (AE) involving the purchase of edible oil. The Transfer Pricing Officer (TPO) suggested an adjustment of Rs. 58,48,771/- based on the price differential between the AE's price and the Malaysian Palm Oil Board (MPOB) price. The CIT(A) deleted this addition, noting that the assessee used the Comparable Uncontrolled Price (CUP) method, averaging quotations from MPOB and Oil World. The CIT(A) found that the Oil World quotation was an independent, authentic trade quotation and that the transactions were within 5% of the arithmetical mean of the quotations, justifying no adjustment under Section 92(C). The ITAT upheld the CIT(A)'s decision, as the Revenue could not present contrary evidence.3. Prior Period Expenses:The assessee's cross objection included a ground regarding the disallowance of Rs. 5,67,308/- as prior period expenses. The AO rejected the claim, noting that the assessee failed to substantiate that the liabilities for these expenses crystallized during the relevant year. The CIT(A) upheld the AO's decision, emphasizing that the assessee did not provide proof of the expenses accruing in the relevant year. The ITAT agreed with the CIT(A), finding no reason to interfere as the evidence indicated that the expenses related to an earlier year.Conclusion:The ITAT dismissed both the Revenue's appeal and the assessee's cross objection, upholding the CIT(A)'s decisions on all issues. The order was pronounced in open court on 21/06/2013.