Appellate tribunal modifies transfer pricing adjustments, R&D expenses treatment, and reassesses for A.Y. 2013-14, 2014-15. &Dexpenses

The appellate tribunal addressed transfer pricing adjustments, selection of comparables, addition under section 92CA, treatment of R&D expenditure, liability written back, corporate guarantee commission, and modification of TPO and AO orders for A.Y. 2013-14 and 2014-15. The tribunal directed reassessment by the TPO, allowing certain grounds raised by the assessee and remanding the assessment for further consideration in accordance with the law.

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Issues:
Transfer pricing adjustments based on TNMM method, selection of comparables, consideration of internal comparables, addition under section 92CA, treatment of R&D expenditure, treatment of liability written back, corporate guarantee commission, and modification of TPO and AO orders.

Transfer Pricing Adjustments (Issues 1-4):
The appeals involved transfer pricing adjustments for A.Y. 2013-14 and 2014-15. The assessee challenged the rejection of Cost Plus Method (CPM) analysis in favor of Transactional Net Margins Method (TNMM). The internal comparables submitted by the assessee were not considered for comparability analysis. The tribunal directed the TPO to conduct a detailed analysis using TNMM based on the internal comparables submitted by the assessee. Grounds 2-4 raised by the assessee were allowed for statistical purposes.

Selection of Comparables (Issue 5):
The assessee contested the selection of comparables like AVT Natural Products Limited and Synthite Industries Limited, which did not pass quantitative filters. The tribunal remanded the entire assessment for transfer pricing adjustment to the TPO for de novo consideration, including the selection of comparables. Ground 5 was considered academic pending the TPO's reassessment.

Addition under Section 92CA (Issue 6):
The TPO and DRP made additions under section 92CA of the Income-tax Act, 1961, alleging profit shifting from India to associated enterprises outside India. The tribunal directed a fresh analysis by the TPO based on the directions provided, allowing the issue to be considered afresh in the remand proceedings.

Treatment of R&D Expenditure and Liability Written Back (Issues 7-8):
The treatment of R&D expenditure for PL1 calculation and the classification of "Liability written back" as non-operating income were challenged by the assessee. The tribunal did not provide a specific ruling on these issues in the given summary.

Corporate Guarantee Commission (Issue 9):
The assessee disputed the characterization of corporate guarantee given to associated enterprises as an international transaction under Section 92B. The tribunal directed a review of the commission charged for guarantees given to associated enterprises, allowing the issue to be reconsidered by the TPO.

Modification of TPO and AO Orders (Issue 10):
The assessee sought modification of the TPO and AO orders based on the grounds raised during the hearing. The tribunal partly allowed the grounds raised by the assessee for statistical purposes, pending the TPO's reassessment.

In conclusion, the appellate tribunal addressed various issues related to transfer pricing adjustments, selection of comparables, addition under section 92CA, treatment of R&D expenditure, liability written back, corporate guarantee commission, and modification of TPO and AO orders for the assessment years 2013-14 and 2014-15. The tribunal provided specific directions for reassessment by the TPO, allowing certain grounds raised by the assessee and remanding the assessment for further consideration in accordance with the law.

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