TaxTMI 
TaxTMI 
TaxTMI 
2016 (9) TMI 1362
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....ransactions undertaken by the assessee to its AE during the relevant previous year. 5. Ld. AR submitted that Assessing Officer had rejected the CUP method adopted by the assessee for valuing the international transactions undertaken by it and substituted it with TNM method. As per the ld. AR, while applying TNM Method, TPO/Assessing Officer made a fundamental mistake in calculating the PLI of the assessee, without segregating the international transactions undertaken. Ld. AR further submitted that the assessee's ratio of profit before interest and taxes to sales was 9.27% whereas the TPO had adopted 4.37%. As per the ld. AR, the arithmetic mean of the Profit Level Indicator (PLI) of the comparables selected by the TPO for benchmarking the international transactions of the assessee came to 10.98%. Contention of the ld. AR was that if assessee's working of its own PLI at 9.27% was accepted then this fell within +/-5% of the arithmetic mean of the PLI of the comparables. Thus according to him, there was no requirement for making any adjustment for ALP. Ld. AR submitted that the Assessing Officer had took the profits on enterprise basis, considering the company as a whole without segr....
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..... Assessee had given a work out of its own PLI to the TPO through its letter dated 27.2.2008 and as per this work out its PLI came to 6.46%. In such work out assessee had segregated its transactions separately for export. As per the assessee, for the export sales, profit ranged was 6.46% ad this was comparable with the average PLI of the related comparables. However, TPO refused to accept this. He was of the opinion that the PLI of the company as a whole alone could be considered and not for the export segments also. This view of the TPO was confirmed by the DRP. Assessment was completed accordingly making an upward revision of Rs. 41,36,103/- for understating its international transactions with the AE. 9. Now before us, relying on Sec. 92C of the Act, ld. AR submitted that determination of ALP had to be done in relation o international transactions undertaken by the assessee. According to him, when working out the PLI, profits earned by the assessee from international transactions alone had to be considered and not from the company as a whole. Reliance was placed on the decision of Mumbai Bench of the Tribunal in the case of CIT vs Tej Diam, [2010] 37 SOT 341. 10. Per contra, ld.....
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....eciating the fact. As per the ld. AR, the DRP confirmed the view taken by the TPO disregarding assessee's contention. Submission of the ld. AR was that Rule 8D was not applicable for the impugned assessment year. 14. Per contra, the ld. DR submitted that assessee itself had accepted disallowance of 2% vis-à-vis the exempt income. 15. We have considered the rival contentions and perused the orders of the authorities below. There is no dispute that Rule 8D was not applicable for the impugned assessment year. Nevertheless we also find that assessee had itself agreed for disallowance of 2% of the exempt income. Even when Rule 8D is not applicable, in our opinion, a disallowance u/s 14A could be made for the simple reason that assessee would have incurred some expenditure for earning the exempt income. Co-ordinate Benches of this Tribunal has been taking a consistent view that prior to the period when Rule 8D could be applied, disallowance of 2% of exempt income would suffice. Accordingly, we restrict the disallowance to 2% of the exempt income. Ordered accordingly. Ground No.3 is partly allowed. 16. In the very same Ground No.3 assessee has assailed disallowance of interest o....
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....ten off the debts during the relevant previous year. The DRP took a view that assessee had claimed the deduction on a premise that for the year ended 31.3.2005 the provision was added back while computing its income for assessment year 2005-06. However, as per the ld. DR in the copy of the return filed for assessment year 2005-06 no such add back was there. We are of the opinion that the issued requires a fresh look by the Assessing Officer. If the assessee had written off the debts in its books of account and if the debt had came out of its trading transactions, then the claim has to be allowed. However, the facts are not clear on record. We, therefore, set aside the orders of the authorities below and remit the issue back to the file of the Assessing Officer for deciding afresh in accordance with law. 24. Vide Ground 5, the grievance raised by the assessee is disallowance of 20% of commission and discounts paid to customers. 25. Ld. AR submitted that assessee had claimed discount(others) of Rs. 3,19,55,499/-, commission on exports of Rs. 10,18,845/-, sales commission of Rs. 16,52,365/- and discount on hundies of Rs. 8,12,170/-. As per the ld. A.R assessee had furnished full inf....
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....ies for the reason that assessee could not produce any evidence towards expenditure by the said London Liaison Office. Explanation of the assessee was that Liaison Office worked on behalf of all the group companies and M/s Amalgamations Pvt Ltd one of the group companies made payment to London Liaison Office and recovered share of expenditure from the individual companies. We are of the opinion that except for giving this explanation, which was not supported by any evidence, assessee had not given any details of the services rendered by the London Liaison Office nor any correspondence with them. Assessee also could not show the need of Liaison Office and why the payments were routed through a holding company. In such circumstances, the disallowance was rightly made. We do not find any reason to interfere with the orders of the lower authorities. Ground No.6 is dismissed. 32. Vide Ground No.7 grievance of the assessee is that the lower authorities disallowed 10% of the expenditure of Rs. 2,41,62,616/- incurred towards marketing incentives. 33. Ld. AR submitted that assessee had printed market incentive coupons valued at Rs. 2,41,62,616/- and distributed amongst its dealers during ....
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.... year also. Accordingly, we set aside the orders of the authorities below and remit the issue back to the file of the Assessing Officer/TPO for considering the claim of the assessee for benchmarking its international transactions considering the PLI of the international transactions alone and not on an undertaking basis. Ordered accordingly. Ground No.2 and 3 of the appeal are allowed for statistical purposes. Needless to say other issues with regard to adjustment made for arm's length pricing shall remain open. 41. Vide Ground No.3, grievance raised by the assessee is with regard to disallowance of Rs. 72,87,449/- u/s 14A of the Act. 42. We find that similar had come up in assessee's appeal for assessment year 2006-07 vide its Ground No.3, We have held in para 15 that disallowance of 2% of the exempt income would suffice in the facts and circumstances of the case. Similar directions are given here also. Ground No.3 is partly allowed. 43. Vide Ground No.4, grievance raised by the assessee is on disallowance of additional depreciation of Rs. 20,15,922/- being residual of such depreciation claimed in the immediately preceding year. 44. Ld. AR submitted that the issue whether carr....
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....nery or plant shall be allowed as deduction under clause (ii)." 7. Clause (iia) of section 32(1) of the Act, as it now stands, was substituted by the Finance Act, 2005, applicable with effect from April 1, 2006. Prior to that, a proviso to the said clause was there, which provided for the benefit to be given only to a new industrial undertaking, or only where a new industrial undertaking begins to manufacture or produce during any year previous to the relevant assessment year. 8. The aforesaid two conditions, i.e., the undertaking acquiring new plant and machinery should be a new industrial undertaking, or that it should be claimed in one year, have been done away by substituting clause (iia) with effect from April 1, 2006. The grant of additional depreciation, under the aforesaid provision, is for the benefit of the assessee and with the purpose of encouraging industrialisation, by either setting up a new industrial unit or by expanding the existing unit by purchase of new plant and machinery, and putting it to use for the purpose of business. The proviso to clause (ii) of the said section makes it clear that only 50 per cent. of the 20 per cent. would be allowable, if the new p....
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....ward from the earlier year since assessee had put the new assets in use for a period less than 180 days in such earlier year. In view of the judgment of the Karnataka High Court in Rittal India Pvt. Ltd(supra) we find that the assessee is entitled to claim the balance amount in the succeeding year. Disallowance is deleted. Ground No.4 stands allowed. 48. Vide Ground No.5, grievance of the assessee is with regard to disallowance of interest on a loan of Rs. 3,15,00,000/- given to its subsidiary. 49. The issue raised by the assessee is similar to the one raised in its appeal for assessment year 2006-07 as ground No.3. We have held at in para 19 that such disallowance was not justified in view of the judgment of Apex Court in the case of S.A. Builders (supra). Since the facts and circumstances are the same for the impugned assessment year also, we delete the disallowance. Ground No.4 of the assessee stands allowed. 50. Vide Ground No.6, grievance of the assessee is with regard to a disallowance of bad debts of Rs. 31,89,221/- written off. 51. We find that similar issue regarding disallowance of bad debt had come up in assessee's appeal for assessment year 2006-07 also as Ground No....