TaxTMI 
TaxTMI 
2017 (10) TMI 1008
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.... by applying the provisions of the Rule 8D of the Income Tax Rules 1962,(Rules); (ii) The Assessing Officer erred in reducing the subsidy granted by SIPCOT from the cost of the asset and consequently disallowing depreciation amount of Rs. 2,38,665/-; (iii) The Assessing Officer erred in treating the export incentives on account of Focus Market Scheme and Focus Product Scheme amounting to Rs. 90,57,29,308/- as income for the previous year relevant to the assessment year 2012-13; (iv) The Assessing Officer erred in disallowing additional depreciation amounting to Rs. 17,87,956/- in respect of assets used in factories/workstations; (v) The Assessing Officer erred in disallowing an amount of Rs. 2,26,17,00,000/-, debited in the profit & loss account towards provisions for warranty; (vi) The Assessing Officer erred in restricting the claim of depreciation on UPS, Scanners and Printers at 15% as against the claim of 60% the difference amounting to Rs. 24,54,729/-; (vii) The Assessing Officer erred in disallowing guarantee charges amounting to Rs. 1,40,40,660/- paid to the assessee's parent company, Hyundai Motor Company, Korea by treating the same as capital expenditur....
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....ins of the tested party. The Transfer Pricing Officer erred in considering provision for doubtful advances/deposits and contingencies as operating while computing the operating margins of the tested party; (xiv) The Transfer Pricing Officer has considered the economic analysis submitted by the assessee, where the assessee had used single year margins in determining the operating margins of the comparable companies. Without prejudice to the same, the assesee requests the Panel to consider multiple year data on determining the operating margins of the comparable companies; (xv) The Transfer Pricing Officer have exceeded his jurisdiction and erred in making the adjustment towards a fees for a purported brand development service alleged to be provided by the assessee to its AE, without first establishing that there was any international transaction in this regard between the assessee and its AE, which can be subject to section 92 of the Act. 3. In this Writ Petition, the petitioner challenges the impugned order only with regard to the transfer pricing adjustment by contending that can be limited only to an international cross border transaction and in the petitioner's case, t....
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....lowing decisions were referred to. (a) M/s.Mobis India Ltd., vs. The Deputy Commissioner of Income Tax in I.T.A.No.2112/Mds/2011, dated 14.08.2013 (b) The Commissioner of Income Tax-1, Mumbai vs. ALSTOM Projects India Ltd., Income Tax Appeal No.362 of 2014, dated 14.09.2016; (c) CIT vs. M/s.Hindustan Unilever Ltd., in ITA No.1873 of 2013, dated 26.07.2016; (d) CIT vs. M/s.Tara Jewels Exports Pvt., Ltd., in ITA No.1814 of 2013, dated 05.10.2015; (e) CIT vs. Petro Araldite Pvt., Ltd., in ITA No.1804 of 2013, dated 24.11.2015; (f) CIT vs. M/s.Thyssen Krupp Industries India Pvt., Ltd., in ITA No.2201 of 2013, dated 02.12.2015; (g) CIT vs. M/s.Sumit Diamond (India) Pvt Ltd., in ITA No.1647 of 2013, dated 01.11.2016; (h) CIT vs. M/s.Firestone International (P) Ltd., in ITA No.1354 of 2013, dated 15.06.2015; (i) CIT vs. Keihin Panalfa Ltd in ITA No.11 of 2015, dated 09.09.2015; (j) Il Jin Electronics (I) (P) Ltd., vs. Assistant Commissioner of Income Tax in ITA No.438/Del/2008, dated 06.11.2009; (k) New Holland Fiat (I) Pvt., Ltd., vs. DCIT, Mumbai in ITA No.7574 of 2012, dated 03.05.2017; (l) M/s.Behr India Limited vs. The Assistant Commissioner of Income Tax in I....
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....nt on transactions other than an international transaction and the impugned order to the said extent amounts to usurpation of non-existence justification without the presence of the jurisdictional facts. Relying on the decisions of the Hon'ble Supreme Court in the case of UOI vs. Kamlakshi Finance Corpn., Ltd., reported in 1991 (55) ELT 433 (SC)., it is submitted that judicial discipline demands to give effect to orders of higher appellate authorities which are binding on the lower authorities and the revenue has to unreservedly follow the appellate authorities orders unless operation thereof has been suspended by a competent Court and mere fact of appeal having been filed against the order is no ground for not following it. To give a glimpse of the factual position, Mr.N.Venkatraman, referred to the tabulated statement giving the details of domestic car sales segment. It is submitted that the operating revenue (sales) is Rs. 13,543/-crores and the import of raw material and royalty payment from/to import from payments is Rs. 2362/- crores i.e., 17.74% and with regard to non-AE transactions i.e., domestic purchase import from third parties and administrative cost is Rs. 10,949/....
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.... It is possible that the margin of profit on costs related to international transactions is not the same as profit margin on costs related to non-international transaction, but ultimately overall profit margin is being shown. Thus, it is submitted that any impact on the basis of calculation of ALP has to be considered as adjustment under Section 92CA and the same cannot be proportionately reduced by considering that part of the purchases was from non-AE also. It is further submitted that whatever the reduction in margin of the assessee visa-a-visa comparables is on account of inflated purchases from AE and the same gets considered when the ALP is calculated by applying TNMM. It is further reiterated that if the petitioner is aggrieved by the order passed by the third respondent, their Assessing Officer, they can prefer appeal before the ITAT, which is the proper and appropriate forum. It is further submitted that the DRP under Section 144C(8) of the Act, has inherent power to confirm, reduce or enhance the variation proposed in the draft order and after considering all the materials, the DRP has recorded factual findings and issued the directions which would be implemented by the A....
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....quent year, unless there is some material change in facts. The first respondent has not been able to point out even a single distinguishing feature in respect of assessment year in question, which has prompted the first respondent to take a different view from the earlier assessment year, wherein TP adjustment was restricted to the extent of international transactions undertaken with the AE's of the petitioner. The respondent has filed a rejoinder affidavit to the counter affidavit meeting the factual averments set out by the petitioner. 10. Heard the learned counsels appearing for the parties and perused the materials placed on record. 11. Before deciding the question as to whether the transfer pricing adjustment should be limited only to an international cross boarder transaction i.e., in respect of imports made from AE's or otherwise, it would be first essential to decide as to the maintainability of the Writ Petition, as this is a preliminary objection raised by the Revenue. The DRP has issued the impugned direction under Section 144C(5) of the Act. Pursuant thereto, the third respondent, the petitioner's Assessing Officer has to pass an order under Section 144C(1....
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....roach this Court for appropriate remedy against the impugned direction, the third respondent would proceed to give effect to the order of the first respondent resulting in prejudice to the petitioner including demands for significant amount of taxes, resulting from the conclusions made in the impugned order passed by the first respondent. The challenge to the impugned order on the transfer pricing adjustment is largely based on the decisions relied on by Mr.N.Venkatraman, the earliest of which being in the case of CIT vs. Firestone International reported in 60 Taxmann.com 235 (Bombay). It is submitted that though an appeal has been filed before the Hon'ble Supreme Court against the order in Firestone (2016 73 Taxmann.com 39), there is no order of interim stay granted by the Hon'ble Supreme Court. Reliance was placed on the decision in the case of M/s.Mobis India Ltd., (supra), a decision of the jurisdictional Tribunal in the case of the petitioner's group company, in which the Tribunal took note of the decision in the case of Il Jin Electronics, holding that the adjustment for ALP has to be restricted to the purchase of raw material from the AE, which in the said case w....
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....ics etc. The assessee would admit that each assessment is an independent proceedings, but would state that in light of the decision of the jurisdictional Tribunal, judicial discipline demands that the order of the Tribunal as held in Kamlakshi Finance Corpn., Ltd.,(supra). What is important to note is that the decision of the Tribunal in Mobis was rendered on appreciation of the factual position and examination of the direction issued by the DRP, which was given effect to by the concerned Assessing Officer. Therefore, on facts, Mobis was granted relief by the Tribunal. 16. It is to be noted that though the petitioner has challenged the directions issued by the DRP in its entirety Mr.N.Venkatraman, confined his submissions only with regard to the enhancement made by DRP, and the assessee will challenge the other findings once the assessment is complete. Thus, it has to be seen whether the DRP has recorded any factual findings while disagreeing with the TPO with regard to computing quantum of adjustment. The finding recorded by the DRP in this regard is contained in paragraph 18.1, which is as follows:- "The argument of the assessee could have some force if the data in relation to....