TaxTMI 
TaxTMI 
TaxTMI 
2017 (5) TMI 1491
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....ppeal(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 Profit Rs. 99,74,66,626/- 8 ALP Revenue Rs. 10,99,81,34,626/- 9 ALP of AE Revenue ....
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....d 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 made by the assessee about the segment results would be devoid of any evidences, that the assessee had disclose....
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....nt 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 revised PLI at the entity level to determine the ALP ? At the above hearing, the Revenue accepted that even in the absence of segmental accounts, the adjust-ment h....
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....he 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 earned the same percent is of profit. After considering the above and respectfully following the judgments of the Hon'ble Bombay and the Delhi High Courts relied upon by us in the earlier paragraphs, w....
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....t 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 place, that out of business expediency it asked its sister concern to advance lump sum amounts to its employees towards cost of expenses, that it reimbursement of expenditure to its sister concern, that it was a pur....
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.... 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 the assessee should be allowed depreciation accordingly. Fourth effective ground of appeal (GOA-9 and 18) is allowed, in part. 6. Fifth effective ground(GOA-10) deals with liquidated damage, amounting to Rs. 8.20 crores. ....
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....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. We have heard the rival submissions. We find that the assessee itself had included the disputed amount a part of total consideration and had increased the sale figure from Rs. 598 crores Rs. 606.2 crores, that during the assessment p....
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....malg-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 partial relief as under: Nature Amount Assessment Years Amounts Allowed/Disallowed B/F business loss 22.83 lakhs AY. 02-03 to 04-05 22.83 lakhs Unabsorbed Dep. 111.79 crores Allowed for AY. s. 02-03 to 04-05 Disallowed for the AY.....