2019 (8) TMI 640 - AT - Income Tax

Appeal partially allowed for 2012-13, Transfer Pricing issues withdrawn via Mutual Agreement Procedure

The Tribunal partially allowed the appeal for Assessment Year 2012-13, withdrawing certain Transfer Pricing issues based on Mutual Agreement Procedure ... Disallowance of Employees’ Contribution to PF - the assessee had inadvertently disallowed employees’ contribution to PF in the revised return despite the fact that the amounts were remitted within the due dates and ought to have allowed the same as a deduction - HELD THAT:- We find that this issue was raised by the assessee before the DRP seeking the allowance of such deduction under section 43B. DRP brushed aside the assessee’s claim holding that in view of sub section 1 of section 144C since the claim does not relate to any variation made by the AO in the income / loss returned by the assessee for Assessment Year 2012-13, the objection is beyond the scope of the powers of the DRP. Whatever may be the fetters placed on the scope of the powers of the DRP, with due respect, there can be no estoppel against the application / operation of law as laid down by the Hon’ble jurisdictional High Court in the case of CIT Vs. Sabari Enterprises [2007 (7) TMI 169 - KARNATAKA HIGH COURT]. Even if the assessee has voluntarily disallowed this amount, since the same is contrary to the binding decision of the Hon’ble jurisdictional High Court (supra), assessee is well within its rights to make a fresh claim in accordance therewith. In this view of the matter, we hereby remand this issue of the assessee’s claim for being allowed deduction in respect of employees’ contribution to PF to the file of the AO for factual examination, verification and adjudication thereon and to allow the assessee’s claim if the same is found to be in accordance with the binding decision of Sabari Enterprises [supra] . Assessee shall be afforded adequate opportunity of being heard and to file details / submissions required in this regard, which shall be duly considered before deciding the issue. We hold and direct accordingly. - Assessee’s appeal is allowed for statistical purposes. TP Adjustment - Mutual Agreement Procedure (MAP) of the India – Japan DTAA - HELD THAT:- The assessee by way of this letter dated 21.03.2019 informs the Tribunal that the assessee has accepted the MAP resolution arrived at by the Competent Authorities of India and Japan and wishes to withdraw the grounds raised on Transfer Pricing issues in the present appeal. - In these circumstances, as narrated above, ground Nos. 1 to 8 and 9(b) raised by the assessee are rendered infructuous and are dismissed as withdrawn. Issues:1. Jurisdiction of the Assessing Officer over the Appellant2. Timeliness of passing the final assessment order3. Transfer Pricing Legal Issues4. Transfer Pricing Manufacturing Segment Issues5. Corporate Tax GroundsJurisdiction of the Assessing Officer over the Appellant:The appeal challenged the final assessment order under section 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961. The Appellant contended that the Assessing Officer (AO) lacked jurisdiction over the Appellant as another officer had initiated the assessment. The Appellant argued that the order passed without jurisdiction should be quashed. The issue of jurisdiction was a key point raised by the Appellant.Timeliness of passing the final assessment order:The Appellant raised concerns regarding the timeliness of the final assessment order, claiming it was passed beyond the period prescribed by law. The Appellant argued that the order was issued after one month from the receipt of directions from the Dispute Resolution Panel, which was deemed as untimely. This issue highlighted the importance of adherence to statutory timelines in assessment proceedings.Transfer Pricing Legal Issues:The Appellant contested the Transfer Pricing adjustments made by the Assessing Officer, Transfer Pricing Officer, and the Dispute Resolution Panel. The Appellant alleged errors in making the Transfer Pricing adjustment without proper justification, motive of tax evasion, and lack of clarity in the computation of adjustments. The Appellant raised legal issues concerning the Transfer Pricing adjustments and the procedural aspects followed by the authorities.Transfer Pricing Manufacturing Segment Issues:The Appellant challenged the rejection of segmental profit and loss statements, conducting a fresh Transfer Pricing analysis, and the selection of comparables. Issues related to enterprise-level and transactional differences, adjustments for various factors, and the application of prescribed ranges were raised. The Appellant argued against the treatment of certain comparables and the lack of adjustments for specific industry and business circumstances.Corporate Tax Grounds:Regarding Corporate Tax, the Appellant contended that certain deductions and credits were erroneously disallowed by the authorities. Specifically, the Appellant highlighted the disallowance of employees' contribution to PF and the non-recognition of advance tax paid and TDS amounts. The Appellant sought the allowance of these deductions and credits, emphasizing compliance with legal provisions and precedents.The Tribunal partially allowed the appeal for Assessment Year 2012-13, withdrawing certain Transfer Pricing issues based on Mutual Agreement Procedure (MAP) resolution. The Tribunal addressed the employees' contribution to PF issue, remanding it for further examination by the Assessing Officer in compliance with relevant legal precedents. The decision emphasized the importance of statutory compliance, jurisdictional clarity, and adherence to legal principles in tax assessments.