2022 (3) TMI 1469 - AT - Income Tax

Tribunal grants assessee's appeals for 2012-13 and 2013-14 assessments, remands Transfer Pricing and MAT credit issues.

M/s. Amicorp Management India Pvt. Ltd., Versus The Income Tax Officer, Ward – 1 (1) (3), Bangalore. And M/s. Amicorp Management India Pvt. Ltd., Versus The Deputy Commissioner of Income Tax, Circle – 1 (1) (2), Bangalore.

The Tribunal allowed the appeals filed by the assessee for the assessment years 2012-13 and 2013-14 for statistical purposes. The issues regarding the ... TP Adjustment - markup to 5% computed by the Ld.AO on the net reimbursement of costs by the AE - AR submitted that assessee made payments to the 3rd party vendor’s towards these expenses and across charged to its group companies at cost without any element of markup - HELD THAT:- We note that identical issue arose before the Coordinate Bench of this Tribunal in assessee’s own case for A.Y. 2011-12 wherein the issue has been remanded to the Ld.AO, THUS we are of the view that the issue need to be remanded back to the Ld.AO to consider the claim in accordance with law. In the event the expenditure incurred, against which reimbursement is made by the AE, forms part of working capital adjustment, no further adjustment is warranted. We also note that there are receivables which are also being reimbursed by the AE which also needs to be subsumed in the working capital adjustment in order to escape the rigors of adjustments. Restricting the minimum alternate tax credit set of as per the provisions of section 115JAA - HELD THAT:- Assessee is directed to file requisite documents in support of the claim. The Ld.AO shall verify the details and consider the claim in accordance with law. Issues Involved:1. Transfer Pricing Adjustment on Recovery of Expenses2. Mark-up on Net Reimbursements3. Minimum Alternate Tax (MAT) Credit Set-off4. Levying Incorrect Interest under Section 234B5. Initiation of Penalty Proceedings under Section 271(1)(c)Detailed Analysis:1. Transfer Pricing Adjustment on Recovery of Expenses:The primary issue raised by the assessee was the non-acceptance of the economic analysis concerning the recovery of expenses from associated enterprises (AEs). The Assessing Officer (AO) and the Dispute Resolution Panel (DRP) held that the international transaction was not at arm's length, resulting in a Transfer Pricing (TP) adjustment of Rs. 6,09,708 for the assessment year 2012-13 and INR 13,13,200 for the assessment year 2013-14. The assessee argued that the reimbursement of expenses was on a cost-to-cost basis without any markup. The DRP observed that the expenses incurred for AEs were similar to those incurred by AEs for the assessee, and both acted as mere facilitators. Consequently, the DRP concluded that no separate adjustment for loss of profit was required.2. Mark-up on Net Reimbursements:The AO/DRP imposed a 5% mark-up on net reimbursements towards finance costs for funds blocked by the assessee in facilitating payments on behalf of its AEs. The assessee contended that the cost of resources and time involved in making arrangements was already included in the total cost base for the purpose of markup, which was 20%. The Tribunal referred to a similar case (M/s Kirby Building Systems India Limited) and concluded that a 5% mark-up on reimbursements was justified. However, the Tribunal remanded the issue back to the AO to verify if the expenditure incurred formed part of the working capital adjustment. If it did, no further adjustment would be warranted.3. Minimum Alternate Tax (MAT) Credit Set-off:The AO restricted the MAT credit set-off to the amount claimed by the assessee in its return of income, contrary to the provisions of Section 115JAA of the Income-tax Act. The Tribunal directed the assessee to file requisite documents supporting the claim, and the AO was instructed to verify the details and consider the claim in accordance with the law.4. Levying Incorrect Interest under Section 234B:The assessee argued that the AO levied incorrect interest of INR 9,27,832 under Section 234B of the Act. However, this issue was not separately adjudicated in the Tribunal's order.5. Initiation of Penalty Proceedings under Section 271(1)(c):The AO initiated penalty proceedings under Section 271(1)(c) of the Act. The Tribunal did not separately address this issue in the detailed analysis.Conclusion:The Tribunal allowed the appeals filed by the assessee for both assessment years 2012-13 and 2013-14 for statistical purposes. The issues regarding the TP adjustment and mark-up on reimbursements were remanded back to the AO for re-examination. The MAT credit set-off issue was also remanded for verification and consideration in accordance with the law. The Tribunal emphasized the need for proper opportunity to be granted to the assessee during the re-examination process.