ITAT partially allows appeal on transfer pricing, disallowances, deductions, and interest for AY 2014-15

The ITAT partially allowed the appellant's appeal against the Ld. AO/TPO's order concerning transfer pricing analysis, disallowances under sections 14 A and non-granting of deduction under section 10AA, carry forward of unabsorbed depreciation, and interest under sections 234 A/B for the assessment year 2014-15. The ITAT directed a reassessment of the transfer pricing analysis, re-verification of disallowances and deductions, and consideration of unabsorbed depreciation and interest issues, emphasizing the appellant's right to be heard. The order was issued on 26th February 2020.

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Issues involved:
1. Transfer pricing analysis and selection of comparables by the Transfer Pricing Officer (TPO).
2. Disallowance under section 14 A and non-granting of deduction under section 10AA of the Act.
3. Carry forward and set off of unabsorbed depreciation.
4. Interest under sections 234 A/B.

Transfer Pricing Analysis:
The appellant, a company providing information technology services, challenged the order passed by the Ld. ACIT Circle regarding the transfer pricing analysis for the assessment year 2014-15. The Ld. TPO determined the arm's length price (ALP) of international transactions with associated enterprises using TNMM instead of CUP method. The TPO selected comparables with an average margin of 29.40%, resulting in a proposed adjustment of Rs.41,00,84,082. The appellant argued that the TPO misunderstood its business model and selected inappropriate comparables. The ITAT observed that the TPO's analysis was flawed as it did not consider the actual business model of the appellant. The ITAT directed the TPO to revisit the transfer pricing analysis, considering the appellant's business model and selecting functionally similar comparables.

Disallowance under Section 14 A and Section 10AA Deduction:
The Ld. AO disallowed Rs.23,90,960 under section 14 A and did not grant a deduction under section 10AA for certain foreign currency expenditures. The DRP upheld the TPO's findings on transfer pricing but excluded ICRA Techno Analytics Ltd. The ITAT directed the Ld. AO to re-verify the submissions of the appellant regarding these issues and to allow the claim if found correct, emphasizing the need for a proper opportunity for the appellant to be heard.

Carry Forward of Unabsorbed Depreciation and Interest under Sections 234 A/B:
The issues related to the carry forward and set off of unabsorbed depreciation and interest under sections 234 A/B were also raised. The ITAT directed the Ld. AO to verify the submissions of the appellant on these matters and to allow the claim if found valid, ensuring the appellant's right to be heard.

In conclusion, the ITAT set aside the appeal to the Ld. AO/TPO partly for statistical purposes, directing a reevaluation of the transfer pricing analysis, verification of disallowances and deductions, and consideration of carry forward and set off of unabsorbed depreciation and interest issues. The order was pronounced on 26th February 2020.

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