Tribunal partially allows appeal, remands transfer pricing, FBT issues for review. Recomputation of deduction ordered. Dismissed addition for bogus purchases.

The Tribunal partly allowed the assessee's appeal. The issues concerning transfer pricing adjustment and FBT credit were remanded to the AO for reconsideration. The AO was directed to recompute the deduction under section 10AA without setting off brought forward losses first. The Tribunal dismissed the addition for bogus purchases.

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Issues Involved:
1. Addition towards upward adjustment of Rs. 18,68,812 in respect of value of international transactions with associate enterprises.
2. Set off of brought forward losses of Rs. 2,14,77,088 of AY 2009-10 before allowing exemption u/s 10AA.
3. Non-grant of credit of FBT of Rs. 25,000 paid on 15.6.2009 towards regular income tax.
4. Addition made on account of bogus purchase of Rs. 2,813.

Detailed Analysis:

1. Addition towards upward adjustment of Rs. 18,68,812 in respect of value of international transactions with associate enterprises:
The assessee appealed against the addition of Rs. 18,68,812 made by the Assessing Officer (AO) on account of transfer pricing adjustment. The assessee, engaged in manufacturing and exporting jewellery, had entered into international transactions with associated enterprises. The Transfer Pricing Officer (TPO) noted that the assessee provided a credit period beyond 365 days to associated enterprises and imputed interest at 10.75% on delayed export receivables, resulting in the addition. The assessee argued that it did not charge interest on delayed payments from both associated and non-associated enterprises, citing the Hon'ble Bombay High Court's judgment in CIT v. Indo American Jewellery Ltd. The Tribunal found merit in the assessee's argument and noted the need to compare the delay in realization of export proceeds from associated and non-associated enterprises. The matter was remanded to the TPO/AO for re-examination, keeping the principles from the Indo American Jewellery case in mind. Other arguments raised by the assessee were kept open for consideration during the remand proceedings.

2. Set off of brought forward losses of Rs. 2,14,77,088 of AY 2009-10 before allowing exemption u/s 10AA:
The assessee contested the AO's decision to set off brought forward losses before allowing the deduction under section 10AA. The AO had set off the entire brought forward loss of Rs. 2,14,77,088 before allowing the deduction, which reduced the exemption claim. The assessee argued that the exemption under section 10AA, falling under Chapter III, should take precedence over the set-off provisions under Chapter VI. The Tribunal referred to the Hon'ble Bombay High Court's judgment in CIT v. Black And Veatch Consulting Pvt. Ltd., which held that deductions under section 10A should be allowed before setting off brought forward losses. The Tribunal found the AO's approach incorrect and directed the AO to recompute the deduction under section 10AA without setting off the brought forward losses first.

3. Non-grant of credit of FBT of Rs. 25,000 paid on 15.6.2009 towards regular income tax:
The assessee claimed that the AO did not grant credit for the Fringe Benefit Tax (FBT) of Rs. 25,000 paid, which should be adjusted against regular income tax as per CBDT Circular No. 2120 dated 29/1/2010. The Tribunal restored the matter to the AO to allow the appropriate relief in accordance with the law, as the Departmental Representative had no objection.

4. Addition made on account of bogus purchase of Rs. 2,813:
The assessee's grievance regarding the addition of Rs. 2,813 for bogus purchases was not addressed by the Tribunal and was accordingly dismissed.

Conclusion:
The appeal of the assessee was partly allowed. The Tribunal remanded the issues related to transfer pricing adjustment and FBT credit to the AO for reconsideration and directed the AO to recompute the deduction under section 10AA without setting off brought forward losses first. The addition for bogus purchase was dismissed.

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