TaxTMI 
TaxTMI 
2014 (5) TMI 958
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....aw, the Transfer Pricing Officer and the Assessing Officer under the directions issued by Hon'ble Dispute Resolution Panel ('DRP'): 2. Erred in law and in facts by arbitrarily substituting the segmental analysis provided by the Appellant with an entity-wide aggregated approach to test the international transactions of the Appellant. 3 Erred in law and facts in adopting entity level approach without considering the functions of the appellant with regard to the manufacturing and distribution segments. Further, failed to follow the principle of consistency in not taking cognizance of the fact that segmented approach was accepted in AY 2005-06. 4 Erred in facts in making erroneous observation by placing reliance on the segmented financials of the previous year in rejecting the segmented accounts of the Appellant. 5 Erred in facts in ignoring the reason for difference in proportion of common expenses allocated between segments in r....
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.... and the decision of this Tribunal for the assessment year 2007-08. Similar issue came up before the Tribunal for the preceding assessment year and the Tribunal in paras 17 to 21 held as under:- "17. Heard both sides. Perused the orders of lower authorities and the case law relied on. The reason given by the Transfer Pricing Officer and DRP for not accepting the segment results are that the assessee has not shown the same in the audited financial accounts and the segment reporting was done only for transfer pricing purposes. They have also stated that allocation of expenses between the contract manufacturing segment and non AE local/domestic segments are abnormal. In so far as the reason that the assessee has not shown the segmental report/results in audited financial accounts and therefore, such segmental results cannot be accepted for ALP has not been accepted by this Tribunal in the case of 3i Infotec Ltd. Vs. ITO in ITA No.21/Mds/2013 vide order dated 7.5.2013. This Tribunal in the above cited case held that even though segmental reports are not show in audited financial accounts, they have to be ac....
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.... It is also the observation of the DRP that low employee cost combined with higher depreciation in contract manufacturing segment indicates that the assessee did not apportion the employee cost to contract manufacturing segment appropriately. In this regard, we find that the figures adopted by the Transfer Pricing Officer / DRP in their orders in analyzing these facts and coming to the decision/conclusion to reject the segmental results of the assessee is wrong. For example in the above extracted para from DRP order the employee cost was taken at 1.88 crores as against the correct figure of 2.10 crores. Similarly, other expenses and depreciation was taken at 0.59 crores and 18.50 crores as against the correct figures of Rs. 1.88 crores and 0.58 crores respectively. The Transfer Pricing Officer in his order at page 9 has taken the figures of material cost, employee cost and other expenses at Rs. 2.10 crores, Rs. 1.88 crores and Rs. 0.59 crores as against the correct figures of Rs. 1.39 crores, Rs. 2.10 crores and Rs. 1.88 crores respectively for analysis. The Transfer Pricing Officer and DRP have taken wrong figures in respect of these expenses in analyzing and rejecting the segment....
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.... profit of 8.87% on the external comparables of the Transfer Pricing Officer, there is no need for any upward adjustment to be made on the AE sales of the assessee. Hence, we direct the Assessing Officer to delete the addition of Rs. 7.18 crores made towards upward adjustment of purchase price on determination of ALP with Associated Enterprise." 7. This Tribunal held that the Transfer Pricing Officer has accepted the segmental results in assessment year 2005-06 and 2006-07 on the contract manufacturing transactions with AE for arriving at ALP while computing relief under section 10B of the Act. The Transfer Pricing Officer / DRP has not given any valid reasons as to why segmental results shall not be considered for determining ALP of transactions with AE having accepted very same segmental results of the assessee for the purpose of computing deduction under section 10B of the Act. The Tribunal came to the conclusion that there is no valid reason for not accepting the segmental reports in determining ALP on the AE sales for the assessment year 2007-08. The Tribunal further observed that Transfer Pricing Officer/ DRP approach in comparing external comparables margin with entity leve....
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....ch additional ground. The counsel places copy of assessment order for the assessment year 2009-10 dated 13.05.2013 passed under section 143(3) read with section 144C(3) and referring to para 3.4 of the order submits that the Assessing Officer allowed the provision on discounts actually passed on to the customers during the assessment year 2009-10. Therefore, he pleads that a direction be given to Assessing Officer to allow the actual discounts of Rs. 2,73,03,455/-passed on to the customers as deduction for the assessment year 2007-08 as was allowed in the assessment year 2009-10. 23. The Departmental Representative has no serious objection in directing the Assessing Officer to verify and allow the claim of the assessee in respect of actual discount passed on to the customers as deduction, as similar claim was allowed by the Assessing Officer in the assessment year 2009-10. 24. Heard both sides. Perused the orders of the lower authorities. As far as the claim of the assessee that provision for discount should be allowed as deduction is concerned, the issue is decided against the assessee by the co-ordinate Bench of this Tribunal in the assessee's own case for the assessment year 2....
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.... of the Tribunal in directing the Assessing Officer to rectify the alleged mistake of inclusion of the unascertained liability in the book profit could not be upheld." 10. Thus, it becomes evidentially clear that when the liability is ascertained and not quantifiable during the year and is simply a contingent based on estimates, the same cannot be allowed as deduction. In the given case, the assessee's version, as put forth in para 6.4 of the appellate order, clearly states that the only reason for creating a provision and not charging the same as an expenses is because of the fact that the exact quantification could not be undertaken for the various reasons. In our opinion, the basis for the provision is simply adhoc and arbitrary. It depends on the facts of each and every case to come to a conclusion as to whether the liability is ascertained or unascertained one and it cannot be generalised. The discounts given to meet out a particular target to the Channel Partners and further discounts given to the customers are not specifically specified and nobody knows as to what would be the exact position when transactions take place. There is no past history of this assessee. Therefore,....