TaxTMI 
TaxTMI 
2018 (5) TMI 581
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.... DCIT, Circle 5 (1) 31/05/13 under section 143 (3)/144C Assessee 2. It has been submitted by Ld.AR that grounds raised by assessee and Revenue in their respective appeals are more or less identical on the transfer pricing issues, barring slight difference in corporate tax issues. 2.1. For sake of convenience Ld.AR started arguing for Assessment Year 2005-06. Assessment Year 2005-06 2.2. Brief facts of the case for the year under consideration are as under: Assessee filed its return of income for year under consideration declaring loss of Rs. 1,65,43,08,282/- on 31/10/2005. The case was selected for scrutiny and statutory notices were issued, in response to which representatives of assessee appeared before Ld.AO from time to time and filed requisite details. 2.3. Ld.AO during assessment proceedings observed that assessee is a company engaged in business of manufacture of optical and magnetic, storage media. The product range includes recordable compact discs (CD-R) rewritable compact disc (CDRW), pre-recorded CD/DVD, digital versatile discs in optical media and compact cassettes, micro floppy disks and digital audio tapes in magnetic media segment. 2.4. Ld.AO r....
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....gh its subsidiaries to Imation Corporation (which is a joint venture partner in M/s GDM), or to other related parties of assessee. This is recorded by Ld.TPO in paragraph 10.2 at page 32-33 of his order that assessee refused to furnish relevant data of tested party selected by it and having regard to decision of this Tribunal in the case of Ranbaxy Laboratories Ltd vs. ACIT reported in 167 Taxmann 30., Ld.TPO rejected submissions of assessee regarding AE as tested party since its details were not easily available in public domain to test comparability. 2.9. It is recorded by Ld.TPO that details were called for in respect of products sold by assessee in domestic market and to submit profitability from exports to Associated Enterprises and to non-Associated Enterprises in response to which, assessee vide order sheet entry dated 18/02/2008 informed that no details of above could be prepared. 2.10. Ld.TPO accordingly rejected transfer pricing studies conducted by assessee by observing as under: "In view of the above stated reasons, the transfer pricing analysis carried out by the assessee was held as unreliable. The transfer pricing methodology of assessee was not found acceptabl....
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....10 B of the Act, with reference to remittance of foreign exchange against export proceeds. Assessee was asked to show cause as to why unrealised export proceeds should not be disallowed for purposes of deduction under section 10 B of the Act, more so since assessee failed to produce any order of extension of time for this purpose by RBI. 2.13. Ld.AO after considering submissions made by assessee rejected the claim and denied benefit under section 10 B, as there was no direct and proximate nexus between the said income and manufacturing activity of eligible undertaking. 2.14. Ld.AO observed that assessee during the year credited P&L account of eligible unit by a sum of Rs. 46,10,308/- and Rs. 1,09,59,410/- under the head 'miscellaneous income'. Ld.AO rejected said sums as in eligible under section 10 B, since it had no direct and proximate nexus with the manufacturing activity of assessee. 2.15. Ld. AO observed during the assessment proceedings that assessee incurred Rs. 37,73,17,928/- towards expenditure on royalty and fees for technical services. It was observed that royalty was paid in connection with grant of license/ intellectual property rights to assessee by various ....
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....om the business of the undertaking. 2.1 That the Commissioner of Income-tax (Appeals) erred on facts and in law in not appreciating that the aforesaid gain on account of sale of forward exchange contract constituted profit and gains derived from the business of the undertaking eligible for deduction under section 10B of the Act. 3. That the Commissioner of Income-tax (Appeals) erred on facts and in law in disallowing a sum of Rs. 57,40,656 alleging the same to be incurred for earning exempt dividend income invoking provisions of section 14A of the Act. 3.1 That the Commissioner of Income-tax (Appeals) erred on facts and in law in observing that ".................. when the appellant is having both interest bearing and interest free funds, it cannot be said that from which bucket investment in mutual fund has been made as the money in fungible ............" 3.2 That the Commissioner of Income-tax (Appeals) erred on facts and in law in holding that since the appellant has taken long term loan of Rs. 2,94,35,40,490, it could not be said that the investment in mutual fund to the tune of Rs. 1,52,64,47,694 has not been made out of the borrowed funds. ....
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.... the appellant. 4.5 Without prejudice that the Commissioner of Income-tax (Appeals) erred on facts and in law in computing profitability from sales made to AE and non-AE , by considering incorrect number of units sold for the two segments, ie. 97,69,62,220 units being principal item of product sold as per form 3CEB as sales to AE and 1,15,99,46,265 units being the balancing figure considering total units of principal and non principal item of sold as per form 3CD, as sales to non-AE. 4.6 Without prejudice that the Commissioner of Income-tax (Appeals) erred on facts and in law in computing profitability from sales made to AE and non-AE, by ignoring directly identified royalty expenditure. 4.7 Without prejudice that the Commissioner of Income-tax (Appeals) erred on facts and in law in ignoring profitability of AE and non AE segment computed as per the certificate issued by Chartered Accountant. 4.8 Without prejudice that the Commissioner of Income-tax (Appeals) erred on facts and in law in not allowing benefit of +/- 5% as per proviso to section 92C(2) of the Act. The appellant craves leave to add, alter, amend or vary from the aforesaid grounds of....
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....sallowed by Ld.AO out of Rs. 10,54,47,600/-. In our view, authorities below upheld this addition due to lack of evidence, in respect of the said sum having been realised by assessee even within extended time granted by RBI Circular(supra). On the contrary the claim of the assessee is that the amount was realised within the period allowed by Circular dated 01.07.2005. 4.7. Before us also Ld.AR has not placed evidence on record to substantiate the realisation of export proceeds of Rs. 3,53,61,363/ was on or before the period allowed by Circular dated 01.07.2005. We therefore set aside this issue to Ld.AO for granting one more opportunity to assessee to substantiate by way of evidence regarding receipt of said sum on or before the period allowed by Circular dated 01.07.2005 to the satisfaction of Ld.AO. In the event no evidence is provided by assessee, the addition may be upheld. 4.8. In the result the ground raised by assessee stands allowed for statistical purposes. 5. Ground No. 2 This ground raised by assessee against disallowance of deduction under section 10 B of the Act on account of sale of forward exchange contract amounting to Rs. 4,25,37,688/-. 5.1. Ld.AR sub....
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.... provisions of Rule 8D of I.T. Rules, 1962 are not applicable. He submitted that Rule 8D is prospective in nature and is applicable from Assessment Year 2008-09. He placed reliance upon the decision of Hon'ble Supreme Court in the case of Godrej and Boyce vs. CIT reported in (2017) 81 Taxman.com 111. 6.2. Ld.AR submitted that for purposes of computing disallowance as per Rule 8D, Assessing Officer has to record satisfaction regarding expenditure that is allocable for earning exempt income, having regards to accounts of assessee. He submitted that there is no such satisfaction that has been recorded by Ld.AO and therefore disallowance made by him is without jurisdiction. 6.3. On the contrary Ld. CIT DR placed reliance upon orders of authorities below. 6.4. We have perused the submissions advanced by both the sides in the light of records placed before us. 6.5. We agree with submissions advanced by Ld.AR in respect of non applicability of Rule 8D for year under consideration. Accordingly we are of considered opinion that Assessing Officer was wrong in computing disallowance under section 14 A as per formula laid down by Rule 8D. 6.6. However as per section 14 A (1) dis....
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....es directly to the third party customers. The support is drawn from the Delhi Bench of Tribunal in the case of Globe Vantedge (P) Ltd. vs. DCIT (ITA No. 2763 & 2764/D/2009) wherein it is held that adjustment on account of arm's length price of international transactions cannot exceed the maximum arm's length price i.e. the amount received by the associated enterprise from the customer and the actual value of international transactions. The Hon'ble Jurisdictional High Court vide order dated 14.3.2013 (in ITA Nos 1828/2010, 1829/2010 & 1254/2011) had dismissed the revenue's appeal against the said order of the Tribunal. The Special Leave Petition (SLP) of the revenue against the said order has also been dismissed by the Supreme Court vide order dated 2.1.2014. Reliance is also placed on the judgment of Hon'ble High Court in the case of Sony Ericsson Mobile Communications India (P) Ltd. vs. CIT 374 ITR 118 wherein it has been held as under: "77. As a concept and principle Chapter X does not artificially broaden, expand or deviate from the concept of "real income". "Real income", as held by the Supreme Court in Poona Electricity Supply Co. Ltd. v. CIT [1965] 57 ITR 521, means ....
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.... Audited financials Allocated to AE and non-AE segments in the ratio of factory cost 11. Royalty and technical know how Audited Financials On actual basis between AE and non-AE It was submitted that while preparing segmental accounts Ld.TPO made certain errors and inflated the profit margins in non-AE segment. 7.2. On the contrary Ld. CIT DR submitted as under: * Regarding 1st limb of argument regarding foreign AE as tested party, he submitted that there is no dispute regarding such a situation, subject to availability of complete financials of such tested party. He submitted by placing reliance upon paragraph 10.2-10.3 of Ld. TPO order that assessee failed to furnish entire details in respect of financials of tested party being GDM Dubai. He submitted that only function of GDM Dubai was to market manufactured products of assessee. And therefore sale invoices assumed paramount importance. He further submitted that assessee had not furnished details of profitability in terms of internal division. Further it is observed from limited financials of tested party placed at page 351 of paper book that there were related party tra....
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..... In view of this, I find no fault with TPO's approach of taking appellant as tested party instead of GDM". 7.5. Financials of AE placed at pages 342-358 of paper book being the audited report prepared by independent auditor for the year under consideration, wherein at page 351 policy adopted while preparing consolidated financial statement in respect of trade receivables and revenue recognition is placed, which reads as under: " Trade receivables Trade receivables are carried at original invoice amount (which in foreign impairment of these receivables. A provision for impairment of trade receivables is established when there is objective evidence that the group will not be able to collect all amounts due according to original terms of the receivables. A provision is made for the difference between the carrying amount and the recoverable amount. Bad debts are written off during the year in which they are identified. Revenue recognition Revenue comprises the invoice value of goods sold net of valueadded tax and discounts, after eliminating sales within the group. Revenue from sale of goods is recognised when significant risks and rewards of own....
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.... to benchmark the international transaction. Ld.TPO shall then consider the foreign AE to be a tested party. Ld.TPO shall then verify is the Foreign AE could be considered as least complex with minimum adjustments and for which comparables are available easily on public domain. 7.10.In the event assessee is not able to provide complete details as recorded hereinabove, Ld.TPO shall consider assessee to be the tested party in the light of arguments advanced by assessee in 2nd limb of his argument, which has attained finality as SLP has been dismissed by Hon'ble Supreme Court in the case of CIT vs. Global Vantage Pvt.Ltd., in cc No. 21808/2013 vide order dated 2/01/2014, wherein Hon'ble Supreme Court upheld decision of Hon'ble High Court in the case of CIT vs. Global Vantage Pvt.Ltd in TA No. 1828/2010 vide order dated 14/03/13. To succeed in this argument assessee shall provide all the details to ascertain the correct value of transaction received by A.E. 7.11. Accordingly this ground raised by assessee stands allowed for statistical purposes. 8. Accordingly appeal filed by assessee stands partly allowed for statistical purposes. 8. ITANo.1139/Del/2013 (Department's appea....
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....d in 95 TTJ 216 has held that insurance claim etc. have direct nexus with industrial undertaking. And therefore, Ld.CIT(A) directed to include the miscellaneous income for deduction u/s 10B of the Act. We do not find any infirmity in the observations of Ld.CIT(A) and accordingly the same is upheld. 8.7. Accordingly this ground raised by revenue stands dismissed. 9. Ground No. 2 This ground has been raised by revenue against the deleting of disallowance of Rs. 11,50,83,87/- on account of royalty/technical know-how. 9.1. Ld.CIT DR submitted that assessee is engaged in business of manufacture and selling of removable storage media being magnetic media. It was submitted that technology in optical media industry is constantly changing and evolving and new formats keep on being invented by different players for which they own IPR. Ld.CIT DR submitted that manufacturer of product has capability to produce product however needs license of such IPR for production and has to pay royalty. Assessee in the present case is using technology licensed by various intellectual property parties like Philips, Hitachi, Taiyo, Samsung among others for manufacture of products against payment o....
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....efits. 9.7. Certain facts as observed by Ld.CIT (A) are that know-how are owned by owners and assessee was granted right to use for period of time till agreement continues to exist. And that upon termination, assessee has to discontinue manufacturing activities and sale of products where the use of such know-how is applicable. 9.8. Further Ld.AO observed that assessee has been using know-how since 2003. Ld.TPO observed that agreements entered into by assessee with these parties have been renewed from time to time automatically and assessee is allowed to sell products manufactured with the help of such know-how worldwide. Further agreement with M/s HP grants assessee an exclusive sub-license to reproduce, use and display the HP trade marks in the territory assigned to assessee and assessee is free as per terms of agreement to contract out the manufacturing of HP branded products to HP approved 3rd parties and to appoint distributors for sale or distribution of HP branded products within the territory. 9.9. From the clauses referred to by Ld.AO in his order, it appears that, assessee acquired merely right to draw upon technical knowledge of foreign companies for a limited pu....
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....s. 2,35,98,40,176/- which had included loss from Geater Noida unit. Ld.AO thus observed that assessee was claiming double deduction of loss for Greater Noida unit at Rs. 10,95,56,02,820/-. Assessee was asked to show cause as to why claim of carry forward loss of return of this unit should not be disallowed. 12.2. Ld. AO noted from P&L account that assessee debited provision of doubtful debts and advances of Rs. 3,88,50,137/-. Assessee was asked to show cause vide letter dated 07/03/06, as to why this should not be disallowed as it is mere provision, that is contingent liability which is not allowable as per IT Act. Assessee vide reply dated 24/03/06, submitted that this amount would not form part of book profit under section 115 JB by claiming that it is an ascertained liability. Ld.AO rejected submissions advanced by assessee and made addition in hands of assessee to the extent of provision shown as bad and doubtful. The Ld. AO rejected the assessee's contentions on the ground that assessee claimed it to be ascertained liability but has not given any documentary evidence regarding the actuarial valuation of the same. The Ld.AO was of the opinion that if there are any hopes of g....
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....not business activity of the assessee. It was submitted that this was only single transaction entered into by assessee of purchase of shares during the year under consideration. 12.5. Ld. AO rejected contentions of assessee and disallowed indexation of Rs. 94,279/-. Ld. AO thus computed the speculative loss of Rs. 7,500/-which was allowed to be carried forward. 12.6. Ld.AO further observed that assessee undertook international transaction with associated enterprise being M/s Glyphics Media Inc. (GMI) USA as under: Sl. No. Description of transaction Method Value (in Rs.) 1. Sale of CDs and Floppies CUP 201726762 2. Purchase of CD writer and printer CUP 356534 As the value of international transaction was more than Rs. 5 crores, with the approval of Ld.CIT, Delhi, the case was transferred to Transfer Pricing Officer (Ld.TPO) for determining arm's length price. During the Transfer Pricing proceedings Ld.TPO observed that most appropriate method applied by assessee was CUP in respect of sale of finished products to GMI. The methodology adopted was as under: I. entire sales to GMI (AE) during financial year 2002-03 were sorted on ....
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....eferred appeal before Ld.CIT (A). The Ld.CIT (A) after considering various submissions advanced by assessee partly allowed the appeal. 12.11. Aggrieved by the order of Ld. CIT (A), assessee as well as revenue are in appeal before us. ITA 883/Del/2008 (Assessee's appeal) "1.That the Commissioner of Income-tax (Appeals) erred on facts and in law in sustaining the addition of Rs. 9387137 to the appellant's income on account of the alleged difference in the arm's length price of the international transactions, upholding the findings in the order passed by the Transfer Pricing Officer (TPO) I other assessing officer. 2. That the Commissioner of Income-tax (Appeals) erred on facts and in law in not holding that the reference made by the assessing officer to the TPO merely on the basis that the value of international transactions exceeded Rs. 5 crores was unlawful and not in accordance with section 92CA(1) of the Act. 3. That the Commissioner of Income-tax (Appeals) erred on facts and in law in not appreciating that reference made by the assessing officer to the TPO under section 92CA(1) of the Act without recording satisfaction that it was necessa....
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....eals) erred on facts and in law in holding that while claiming 10% loading on account of geographical market difference has not brought on record sufficient evidence to substantiate this claim. 11. That the Commissioner of Income-tax (Appeals) erred on facts and in law in not appreciating that in order to make a comparison of like with like and for application of CUP method, adjustment was ought to be made on account of the geographical differences in the international transactions and comparable uncontrolled transactions. 12. That the Commissioner of Income-tax (Appeals) erred on facts and in law in disregarding the conclusive evidences placed on record by the appellant to justify the adjustment on account of geographical differences in respect of prices of international transactions of export of COs in USA and the prices of export of COs to unrelated parties in European countries. 13. That the Commissioner of Income-tax (Appeals) erred on facts and in law in not appreciating that the adjustment on account of geographical difference was made on the basis of instances of purchase of similar product by an unrelated party in Europe and USA during the releva....
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....ination of arm's length price in the transaction between the appellant and its subsidiary GMI. 23. That the Commissioner of Income-tax (Appeals) erred on facts and in law in enhancing the income of the appellant by a sum of Rs. 7508100 on account of alleged difference in computation of adjustment of the arm's length price of international transactions as per section 92C(2) of the Act. 24. That the Commissioner of Income-tax (Appeals) erred on facts and in law in holding that, if the arm's length price falls outside the tolerance band. Transfer Pricing adjustment would have to be made for the difference between the arm's length price determined by the assessing officer based on the arithmetical mean of the prices and the price shown by the assessee. 25. That the Commissioner of Income-tax (Appeals) erred on facts and in law in holding that the TPO was justified in taking the arm's length price at the arithmetical mean of prices without allowing for reduction of up to 5% in respect of transactions where the transfer prices fell short of the tolerance band of 95% of the arm's length price. 26. That the Commissioner of Income-....
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....id conclusion it is apparent that the CIT(A) has not disputed that geographical adjustment is to be allowed for comparing two sets of transactions. However on the facts of the case of the assessee on the ground as sufficient evidence was not brought on record to substantiate the claim. The question therefore which emerges is that are there sufficient claim of the assessee. The assessee has relied on big map index to contend that US is a lower price market as comparable Europe. It has also been contended that assessee is a recent entrant in US market for export of CDs and does not have any presence or brand recognition. It has been stated that products are sold in USA through various shopping malls/super markets which follow just in time (JIT) approach i.e., the retailer would rent out a shelf space to the distributor who is required to supply/place on the shelf his products in specified quantity for sale to the customer. It has been stated that the distributor has to maintain requisite inventory and is to replenish the requisite quantity of CDs as soon as the shelf stock is reduced to a maintain level and the cost of operations for the distributor in USA is much higher. Also, it ha....
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....ment of Hon'ble High Court in the case of Sony Ericsson Mobile Communications India (P) Ltd. vs. CIT 374 ITR 118 wherein it has been held as under: "77. As a concept and principle Chapter X does not artificially broaden, expand or deviate from the concept of "real income". "Real income", as held by the Supreme Court in Poona Electricity Supply Co. Ltd. v. CIT [1965] 57 ITR 521, means profits arrived at on commercial principles, subject to the provisions of the Act. Profits and gains should be true and correct profits and gains, neither under nor over stated. Arm's length price seeks to correct distortion and shifting of profits to tax the actual income earned by a resident/domestic AE. The profit which would have accrued had arm's length conditions prevailed is brought to tax. Misreporting, if any, on account of non-arm's length conditions resulting in lower profits, is corrected." 13.4. On the contrary Ld.CIT DR placed reliance upon his arguments advanced for Ground No. 4 in assessment year 2005- 06 (supra). 13.5. We have perused the submissions advanced by both the sides in the light of the records placed before us. 13.6. On perusal of the order pass....
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....terest on bank deposits or staff loan would be entitled to 100% exemption of deduction under section 10 A/10 B of the Act. He also placed reference to the decision of Hon'ble Delhi High Court in the case of Riviera Furnishing vs. ACIT reported in 237 Taxmann 520, wherein, interest on FDRs which were under lien with bank for facilitating letter of credit and bank guarantee facilities was held to be qualifying for deduction under section 10 B of the Act. 14.3. On the contrary Ld. CIT DR submitted by placing reliance upon the orders of authorities below that interest earned on LC should be treated as income from other sources. He submitted that it does not have a direct nexus with the export activity and therefore cannot be treated as part of income for the computation of deduction under section 10 A/10 B. 14.4. We have perused the submissions advanced by both the sides in the light of the records placed before us. 14.5. On perusal of the observations of Ld. CIT (A) in para 14.3.9 of his order, it is an admitted fact that assessee is engaged in the business of export of CDs and that interest income has been earned from the deposits made with the bank for obtaining letters of ....
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....acility for the export business. The argument on behalf of the assessee is that but for such a stipulation by the bank there was no need for the exporter to keep the money in fixed deposit and therefore the income earned from such fixed deposits bears a direct nexus to the business activity itself. Given the repeated affirmation by the Hon'ble Supreme Court of three judgments of the Kerala High Court on the same issue, we are inclined to follow the view expressed by the Kerala High Court on each of these occasions. We accordingly hold that interest earned on fixed deposits for the purposes of availing credit facilities from the bank, does not have an immediate nexus with the export business and therefore has to necessarily be treated as income from other sources and not business income." 14.7. It is observed from order of Ld.CIT (A) that assessee earned interest from deposits made with banks for obtaining letters of credit. As these letters of credit are utilised for purposes of export activity carried on by assessee, it has to be understood having direct link with export business, as has been appointed by Hon'ble Delhi High Court in the case of Sri Ram Honda Equip (supra), ....
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....roneous and contrary to facts and law. 2. The Ld.CIT(A) erred in holding that provision for bad & doubtful debts at Rs. 3,88,50,137/- adjusted by A.O. in the computation of book profit u/s 115 JB of the Act is an ascertained liability while relying on the decision of Hon'ble Delhi High Court in the case of M/s HCL Commet System & Services Ltd. 292 ITR 299, the facts of which are not applicable to the case. Had it been ascertained liability, the assessee company would have made corresponding entries in the books of accounts. 3. The Ld.CIT(A) erred in holding that the proviso to s.73A of the Act is not applicable to assessee company in respect of indexation benefit of Rs. 94,279/- against long term capital gains of Rs. 1,01,779/- whereas the principal business of the assessee company is not business of banking or granting of loans and advances, sale and purchases of shares of other companies. 4. The Ld.CIT(A) has erred in allowing relief towards book profit enhanced by A.O. by Rs. 4,66,60,747/- towards profit u/s 10A by way of exclusion of receipts and expenses of the unit on the ground that due to losses no deduction was claimed u/s 10A while relying on th....
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....sions advanced by both the sides in the light of the records placed before us. Ld. CIT (A) has observed as under: "14.2.4. In the instant case, the A.O. has observed that trading in shares is not a primary activity of appellant and the shares were shown as investment in the balance sheet. However, no other evidences have been brought on record by A.O. to come to conclusion that business of dealing in shares was conducted by the appellant. Under these circumstances, it cannot be held that solitary transaction of sale of shares to be part of carrying on business of trading in shares. This view is also fortified by another decision of Delhi bench of Tribunal in CIT vs. VIP Growth Fund Ltd. in ITA 2930/del/1993. Under the circumstances and respectfully following the decision of jurisdictional Tribunal, I am of the considered view that the A.O. had erred in treating the sale transaction as speculative business of appellant under explanation to s.73 of the Act. Accordingly, the A.O. is directed to allow long term capital loss at Rs. 1,01,779/- instead of Rs. 7,500/-. Thus, grounds of appeal no.4, 4.1 and 4.2 succeed." 17.4. It is an admitted position that this is the sole tra....
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....ll settled in view of the judicial pronouncements quoted by the appellant in its submissions. The jurisdictional Delhi tribunal in the case of appellant itself for assessment year 2001-2 has analysed in detail various judicial decisions on this issue and has come to the conclusion that the adjustments in terms of clause (ii)/(f) of explanation to section 115 JB of the act has to be for the amounts credited/debited to the profit and loss account and not the actual deduction of the eligible units under section 10 A/10 B of the act. In the present case the AO had based his entire computation of book profit under section 115 JB of the Act on the basis of computation made in A.Y 2001-02 and the same has been reversed by the ITAT vide order dated 19/06/07 in ITA No. 2448/D/06. Therefore, respectfully following the jurisdictional Tribunal in the appellant's own case, I direct the AO to recompute the book profit under section 115 JB of the act by considering the revised return filed by the appellant taking into account the following: (i) starting point for computation of book profit should be the net profit taken as per the books of account maintained by the appellant as per the c....
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....ed by the respondent assessee in the books of account maintained under the companies act 1956. 9. It may be noted here that the only addition made by the assessing officer in the present case was on account of change of method of depreciation from straight-line method, which was the method adopted by the respondent assessee in the books of accounts maintained under the companies act, 1956. The assessing officer adopted and applied the written down value method, which is a method specified under section 32 of the act. This is not permissible in view of the limited mandate and stipulation that explanation 1. 10. In view of the aforesaid position, we have to hold that the order passed by the tribunal does not require interference and accordingly we do not think any substantial question of law arises for consideration." From the above it is observed that issue before Hon'ble High Court for assessment year 2001-02 was not regarding amount of income to which section 10 A/10 B applies, but was in respect of change of computation adopted by Ld.AO in computing depreciation for that assessment year. In the present case, we observe that directions of Ld. CIT (A) in rec....
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.... related parties. It is not possible to ascertain, whether GDM was supplying products through its subsidiaries to Imation Corporation, which is a joint venture partner of GDM or to other related parties of the assessee. In this situation, correctness of the transfer pricing methodology adopted by assessee can not be ascertained, that too when assessee had not shared complete financial details of the tested party with the TPO. The argument of the assessee that the joint venture partner Imation Corpn. has 51 % share and assessee has 49% share ,and therefore it has no access to financials of M/s GDM cannot be accepted. In joint venture, both the partners share the profits in the ratio of their ownership. Further, by assessee's own admission GDM was established to expand the business of the assessee in the export market. It may be mentioned that in UAE where GDM is located has almost NIL tax. The business structure of the assessee which GDM is an important link cannot solely depend on the joint venture partner M/s Imation Corpn. In these circumstances, the next issue for determination revolves around selection of new tested party in case where assessee has not furnished re....
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....way to benchmark the international transactions. 12. Summary of reasons for rejecting the transfer pricing studies conducted by the assessee: The reasons for rejecting the transfer pricing study of the assessee are summarized hereunder: (i) The selection of GDM as a tested party was incorrect as both sales and cost were controlled transactions. Normally, the profit level indicator should be uncontrolled to ascertain arm's length price. (ii) Assessee had failed to furnish complete financials of the tested party. It is matter of record that no details of sales made by GDM to other parties was filed. The assessee was specifically asked vide order sheet entry dated 02.02.2009 to furnish details of sales made by GDM Dubai to other AEs and details of controlled transactions. From the details furnished, it is not possible to ascertain the profitability of the tested party from controlled and uncontrolled transactions, as sales were being made to other associate enterprises, which in turn were making further sales to related parties. (iii) Assessee had also not furnished details of internal division wise profitability for application of internal cost plu....
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....as observed that assessee had not disallowed any expenditure for purposes of earning exempt income under section 14 A of the Act. Ld.AO accordingly computed disallowance under section 14 A read with rule 8D of the Act at Rs. 78,43,390/-. 19.8. Aggrieved by the order of Ld. AO, assessee is in appeal before us now. 20. ITA No.4484/Del/13 1. That the assessing officer erred on facts and in law in completing assessment under section 143(3) read with section 144C of the Income-tax Act, 1961 ("the Act") at a Nil income (after set off of brought forward losses) as against the returned loss of Rs. 19,34,62,334 under the normal provisions of the Act. 2. That the assessing officer/TPO erred on facts and in law in making an addition to the extent of Rs. 93,34,07,831 to the appellant's income on account of the alleged difference in arm's length price of the international transactions, on the basis of the finding in the order passed under section 92CA(3) by the Transfer Pricing Officer (TPO). 2.1 That the assessing officer/TPO erred on facts and in law in not appreciating that the international transactions entered into with the associated enterprise wer....
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.... the Act while making the impugned TP adjustment on account of the alleged difference in the arm's length price of the 'international transactions' . 3. That the assessing officer erred on facts and in law in restricting the deduction under section 10B of the Act in respect of A-164, Noida Unit, at Rs. 26,64,82,025 as against Rs. 27,41,51,004 claimed by the appellant. 3.1 That the assessing officer erred on facts and in law in reducing profit on sale of forward contract of Rs. 1,78,86,099, foreign exchange fluctuation loss of Rs. 2,90,79,685 from profits and gains of A-164, Noida Unit, holding the same to be not in the nature of income derived from the business of export of the said undertaking. 3.2 That the assessing officer erred on facts and in law in holding that profit or loss from exchange rate fluctuation are directly linked to the time when export proceeds are realized and, therefore, cannot be said to be incidental to the activities of export and cannot be regarded as income generated from the export business. 3.3 That the assessing officer erred on facts and in law in holding that profit on sale of forward contract cannot be....
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....curred for earning the aforesaid dividend income from the investment made in the Portfolio Management Scheme of the Mutual Fund. 5.2 That the assessing officer erred on facts and in law in holding that investment activity was not passive activity but was well informed and coordinated activity involving input from the various sources and acumen of senior management functionary and hence there was cost in-built into such investment activity. 5.3 That the assessing officer erred on facts and in law in holding that the appropriate cost of composite funds needed to be allocated towards earning of exempt income. 5.4 That the assessing officer erred on facts and in law in applying Rule 8D of the Income Tax Rules 1962 for computing disallowance under section 14A of the Act, not appreciating that the said rule cannot have retrospective operation. 5.5 Without prejudice, that the assessing officer erred on facts and in law in applying sub-section (2) of section 14A without recording his satisfaction about the correctness of the claim of the assessee in respect of the expenditure incurred for earning the said income. 5.6 That the assessing officer e....
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....ssee to establish AE to be less complex for considering it to be the tested party. In the event assessee is able to prove before Ld. TPO by way of sufficient documentation which is publicly available, Ld. TPO shall then consider foreign AE to be the tested party. In terms of computation of PLI, a consistent approach may be taken for assessment year 2005-06 as well as 2006-07 since the facts and circumstances are found to be similar. 20.6. Accordingly this ground raised by assessee stands allowed for statistical purposes. 21. Ground No. 3 This ground has been raised by assessee in respect of miscellaneous income comprising of write back of credit balances as well as insurance claim amounting to Rs. 2,90,79,265/- for the purposes of computing deduction under section 10 B of the Act. It is observed that this ground is similar to Ground No.1 of Revenues appeal for assessment year 2005-06. 21.1. Both Ld.AR as well as Ld. CIT DR reiterated similar arguments as raised for assessment year 2005-06. 21.2. It is observed that we have decided this issue in favour of assessee for assessment year 2005-06 by holding as under: "8.4. We have perused the submissions advanced ....