Tribunal allows appeal on Transfer Pricing, dismisses late PF payment & education cess. Order dated 29th March 2023.

The Tribunal partly allowed the appeal, permitting the grounds related to the inapplicability of Transfer Pricing provisions under the Tonnage Tax Scheme. However, the Tribunal dismissed the grounds concerning late payment of Provident Fund contributions and the deduction of education cess. The order was issued on 29th March 2023.

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Issues Involved:
1. Applicability of Transfer Pricing (TP) provisions under the Tonnage Tax Scheme (TTS).
2. Addition on account of late payment of employees' contributions to Provident Fund.
3. Deduction of education cess and secondary and higher secondary education cess.

Summary:

1. Applicability of Transfer Pricing (TP) Provisions under Tonnage Tax Scheme (TTS):
The primary issue raised in grounds 1 to 5 was the confirmation of an addition of Rs. 84,76,769/- by the Dispute Resolution Panel (DRP) as made by the Assessing Officer (AO)/Transfer Pricing Officer (TPO) on account of TP adjustment concerning international transactions. The assessee argued that TP provisions are not applicable as its income is chargeable to tax under the Tonnage Tax Scheme. The assessee filed a return of income declaring Rs. 17,07,17,340/-, which was selected for scrutiny due to significant international and specified domestic transactions. The TPO proposed a TP adjustment of Rs. 84,76,769/-, which was added to the income. The DRP upheld the AO's action, stating that Chapter XII-G does not preclude the operation of Chapter X, and TP adjustments are necessary to prevent profit shifting. However, the Tribunal held that when an assessee opts for the Tonnage Tax Scheme and offers income on a presumptive basis, no TP adjustments are required, referencing the decision in Van Oord India Pvt. Ltd. Accordingly, grounds 1 to 5 were allowed.

2. Addition on Account of Late Payment of Employees' Contributions to Provident Fund:
Grounds 7 and 8 involved the confirmation of an addition of Rs. 10,39,487/- due to late payment of employees' contributions beyond the prescribed time under the Provident Fund. The Tribunal, referencing the Supreme Court decision in Chekmate Services Pvt. Ltd. vs. CIT, held that the issue is covered against the assessee. Consequently, grounds 7 and 8 were dismissed.

3. Deduction of Education Cess and Secondary and Higher Secondary Education Cess:
Ground 9 addressed the disallowance of a deduction for education cess and secondary and higher secondary education cess in computing profits and gains from business or profession. The Tribunal, considering the explanation inserted by the Finance Act, 2022 to section 40(ii) of the Act, concluded that education cess and secondary and higher secondary education cess are part of the tax and not deductible. Therefore, the ground raised by the assessee was dismissed.

Conclusion:
The appeal of the assessee was partly allowed. The Tribunal allowed grounds related to the applicability of TP provisions under the Tonnage Tax Scheme but dismissed grounds concerning the late payment of Provident Fund contributions and the deduction of education cess. The order was pronounced in the open court on 29th March 2023.

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