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2017 (5) TMI 1491
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....ismissed. 2. First effective Ground of appeal(GOA. 1to 5 & 14 to 16) deals with Transfer Pricing (TP) Adjustments. During the assessment proceedings, the AO found that the assessee had entered into International Transactions (IT. s) with its Associated Enterprise (AE). Accordingly, he made a reference to the Transfer Pricing Officer (TPO), who vide his order dated, 28/10/20 and one, proposed an addition of Rs. 24.20 crores to the tractor division of the assessee. Based on his order the AO passed a draft assessment order and computed the income of the assessee at Rs. 1, 84,73,63,220/-. Aggrieved by the draft order, the assessee filed objections before the DRP. In pursuance of the directions of the DRP, the AO, in the final assessment order, made an addition of Rs. 27.48 crores, based on the computation done by the TPO that the entity level. The adjustment could be tabulated as under: SN. Particulars Amounts 1. Sales to Rs. 10,72,32,89,000/- 2 (a) AE Rs. 4,51,48,21,000/- 3 (b) Non-AE Rs. 6,20,84,68,000/- 4 Operating Expenses Rs. 10,00,06,68,000/- 5 Operating Profit Rs. 83,09,95,000/- 6 ALP Margin 9.974% 7 ALP Pro....
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....ssessee had to choose any of the methods prescribed by section 92C is the most appropriate method, that it had to maintain a record of uncontrolled transaction in line with the method selected as the most appropriate method, that it had to keep a record of the analysis performed to evaluate comparability of uncontrolled transaction with the IT. s. It had to maintain a record of the actual working carried out for determination of ALP including details of financial information used in applying the most appropriate method, that it was the responsibility of the assessee to provide data of profitability of AE segment and also of non-AE segment, the assessee had not complied with the documentation requirement prescribed by law, that by claiming proportionate adjustment it was making an inherent adjustment, that in the entity level profitability the profit aunts on the AE segment as well as the non-AE segment was same, that the argument of the assessee could be accepted provided it had furnished the relevant data for both the segments, that if separate profitability of the AE transactions was not furnished and the assessee would use entity level profits for compatibility the submission ma....
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....the DR, about the methodology adopted by the assessee for computing the ALP, we would like to refer to the judgment of the Hon'ble jurisdictional High Court in the case of APIL and it reads as under "4. The grievance of the Revenue is that in the absence of segmental accounts being maintained by the Respondent assessee, transfer pricing adjustment had to be done at entity level. XXXXX 8. Nevertheless, the distinction sought to be made by the Revenue is that the issue of non-keeping of segmental account by the assessee was not for consideration the above cases which were dismissed, as in this case. 9. This very issue/question as raised herein was raised by the Revenue in Pedro Aradlite Pvt. Ltd (supra). The question raised therein was as under : "Whether on the facts and law the Tribunal was justified in directing AO/TPO to benchmark as AE transactions without appreciating (a) the Assessee itself in its transferpricing study & report (TPSR) has chosen entity level PLI to benchmark the AE transactions; (b) the Assessee had itself failed to furnish audited segmental accounts and therefore, the TPO had's rightly applied rev....
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....ises are presumed to be at arm's length as there is no relationship which is likely to influence the price. If the contention of the Revenue is accepted, it would lead to artificially increase in the profits of transactions entered into with non-Associated Enterprises by applying the margin at entity level which is not the object of Chapter X of the Act. Absence of segmental accounting is not an insurmountable issue, as proportionate basis could be adopted as done by the Delhi High Court in Keihin Panalfa Ltd. (supra)." We also find that in the case of Keihin Panalfa Ltd. (supra), the Hon'ble Delhi High Court had approved the principle that in case of IT. s TP adjustment proportionate to that extent could be made. In short, in our opinion both the arguments, raised by the DR, before us, stand already negated by the Hon'ble courts. He had argued that if the assessee had not prepared segmental accounts and had computed the PLI at entity level then it could not take the benefit of the principles laid down in Alstom's case. The second argument of the DR was that the working proposed by the assessee on proportionate basis was based on an erroneous exemption that AE and non-AE had ear....
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.... to the file of the AO for fresh adjudication, in the interest of Justice. He is directed to verify the claim made by the assessee in light of the evidences produced before us. In case he is of the opinion that the claim made by the assessee cannot be allowed u/s. 35, then he should consider the availability of the expenditure u/s. 37 or section 32 of the Act. Second effective ground of appeal is decided in favour of the assessee, in part. 4. Third effective ground pertains to disallowance of expenses of Rs. 8.25 lakhs u/s. 40 of the Act. During the assessment proceedings, the AO found that the assessee had made payment of Rs. 8, 25,518/-to Fiat India Auto Mobiles India Private Ltd(FIAPL), that it had not detected tax at source while making the payment, that it was claimed that payment was on account of reimbursement of expenses to FIAPL. After calling for explanation in this regard from the assessee, the AO disallowed the expenditure holding that it had not detected tax. 4.1. Before the DRP, the assessee argued that it had transferred a substantial portion of its plant from Mumbai to Ranjangaon (near Pune), that it had to relocate some key staff members from Mumbai to new pl....
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....that by issuing a credit note of the party the entry was reversed. The AO did not allow the claim made by the assessee holding that the sale proceeds of the assessee were reduced from the block off assets and were never treated as revenue receipt, that the amount was capital in nature, that same was never considered a part of assessees income, that the conditions of section 36 (1) were not fulfilled, that deduction was not allowable u/s. 37, that the amount was capital in nature. 5.1. Before us, the AR argued that assessee had made a legal claim in accordance with law, that the increased amount was already deducted from the block of asset, that not allowing the claim would amount to double jeopardy. Alternatively, it was argued that amount should be added back to the WDV and the corresponding depreciation should be granted to the assessee. The DR stated that matter could be decided on merits. 5.2. We have heard the rival submissions. The AO had given a finding of fact that the sale proceeds were never treated as revenue receipt in books of accounts. Nothing was brought over notice to controvert the fact. Therefore, in our opinion the amount should be added back to the WDV and....
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.... Department had no right to split the full value of consideration and it reminds a different character of income. He placed reliance on the cases of Saurashtra Cement Ltd (325 ITR 422), Ram Nath Exports Ltd. (ITA 53 of 2006 of the Delhi High Court) and stated that liquidated damages received was to be consider-ed a part of sale consideration of the capital asset, that same should be treated as part of full value of consideration. The DR argued that in the supplementary MOU the amount of liquidated damages was mentioned as penal interest, that the same should be taxable as income from other sources, that the assessee itself had offered the interest portion as income from other sources. In the rejoinder, the AR submitted that the assessee had made a mistake by offering the interest portion to tax under wrong head of income, that later on the AO assessed it as income from other sources, that he did not tax at under the correct head of income i. e. capital gains, that the mistake committed by the assessee cannot be used against it by the AO, that the liquidated damages should be treated as part of full value of consideration and had to be charged under the head capital gains. 6.3....
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....der the head income from other sources. GOA-10 is decided against the assessee. 7. Last effective ground of appeal(GOA-11-13 & 20-21) pertains to allowability of unabsorbed depreciation and un-utilised scientific research allowance of the amalg-amating company and set off and carry-forward of business losses and unabsorbed depreciation of the earlier years in case of amalgamated company. The facts of the case are that New Holland Tractor India Private Ltd. (Amalgamating company) was amalgamated with the assessee with effect from 01/04/2007, that the assessee change it names to New Holland Fiat India Private Ltd. ,that it claimed set off/carry forward of three items in respect of amalgamating company, namely brought forward (B/F) business loss (Rs. 22.83 crores), unabsorbed appreciation (Rs. 111.79 crores) and un-absorbed scientific research expenses (Rs. 4.85 crores). 7.1. During the assessment proceedings, the AO did not allow the claim made by the assessee, as claimed by it, in the draft assessment order. The DRP did not issuing direction on the subject is the issue did not pertain any variation to the income of the assessee. While completing the assessment the AO allowed p....
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....while allowing the Assessee-respondents' claim follows the decision of the Gujarat High Court in General Motors India (P.) Ltd. v. Dy. CIT [2013] 354 ITR 244/[2012] 210 Taxman 20/25 taxmann. com 364 wherein on identical facts it was held that the unabsorbed depreciation for the Assessment Year 1997-98 upto Assessment Year 2001-02 could be allowed to be set off, if it was still unabsorbed on 1st April, 2001. The above decision also placed upon the CBDT circular No. 14 of 2001 dated 22nd November, 2001 to hold that any unabsorbed depreciation which is available on 1st day of April, 2001 would be dealt with in accordance with the provisions of Section 32(2) of the Act as amended by the Finance Act of 2001. Moreover, the Circular No. 14 of 2001 issued by the CBDT clarifies that restriction of eight years to carry forward and set off the unabsorbed depreciation has been dispensed with. Consequently, unabsorbed depreciation for the intervening periods between assessment 1997-98 upto 2001-02, if available in the assessment year 2002-03 would be allowable as part of carried forward depreciation from Assessment Year 2002-03 onwards. No decision contrary to the decision of the Gujarat Hi....