TaxTMI 
TaxTMI 
2017 (5) TMI 1593
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....ion of Rs. 8,28,35,757/- made on account of inventories written off specifically when neither any details were furnished by the company and nor there was any supporting evidence to justify and establish that the inventories were actually destroyed? (iii) Whether the Tribunal was legally justified in deleting the addition of Rs. 50,00,000/- made on account of traveling and conveyance expenses specifically when the company neither specified the nature and purpose of expenses nor any supporting evidence was filed to justify the claim? (iv) Whether the Tribunal was legally justified in deleting the addition of Rs. 36,70,04,056/- and allowing deduction u/s 37 on account of advertisement and sales promotion expenses specifically when the payment was made to a foreign company which was liable to deduction of tax at source in view of section 195, the failure of which attracted section 40(a)(ia)? (v) Whether the Tribunal was legally justified in deleting the addition of Rs. 16,17,24,306/- and allowing deduction u/s37, on account of gifts and trade incentives and holding that section 194H would not apply specifically when neither any satisfactory supporting evidenc....
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....djustment is to be restricted to the international transaction and not to the entire turnover of the assessee. In case of DCIT Vs. Starlite 133 TTJ 425 (Mum.) (Trib.), it was held that adjustments, if any, arising due to computation of ALP should be restricted only to the international transactions & not to the entire turn over of the assessee company. No addition can be made to total transactions under Chapter X. Such things are done only when AO invokes section 144. Therefore, AO was directed to restrict adjustments, if any, only to international transactions, which are found by him to have taken place at a price other than ALP. In case of DCIT Vs. Ankit Diamonds 8 ITR (Trib.) 487 (Mum.), it was held that Determination of ALP of an international transaction has to be only at the transaction level or at the level of a class of transactions. TPO is not authorized to determine the net operational profits at the enterprise level but he shall determine only ALP of international transaction. Therefore, transfer pricing adjustments suggested by TPO is illegal & against the law. In case of Huntsman Advanced Materials (India) (P.) Ltd. Vs. DCIT (Mum.) (Trib.), it was held that ad....
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.... margin of 12.67% of the assessee as determined by the TPO. Even the determination of operating margin of 12.67% by the TPO without excluding the other unrelated expenses of Rs. 2.37 crores comprising of depreciation on let out building Rs. 99.7 lacs, write off of fixed assets of Rs. 17.24 lacs and VRS expenses of Rs. 119.95 lacs is not correct. If these expenses are excluded, the operating margin of assessee became 13.25%. This margin is comparable with the margin of 13.43% of Colgate Palmolive India Ltd. Considering all these factors and also the fact that the TPO himself has admitted that assessee is a market leader and it will be extremely difficult to identify the comparables and the fact that neither in earlier years nor in subsequent years any adjustment has been made by comparing the results at entity level, we hold that the international transaction entered by the assessee with the AE even at entity level is at arm's length and therefore the adjustment made by the AO is not justified. Hence, the addition of Rs. 15,75,28,786/- made by the AO is deleted. Ground No. 1(iii) of the assessee is therefore allowed." 3.2 Identical view was taken by this Court in the case of CIT ....
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....m asset side not the Ld. D/R could point out any such provision in the balance sheet. Therefore the disallowance of Rs. 3,64,71,703/- confirmed by the Ld. CIT(A) is deleted." Following the orders of the Tribunals in case of the assessee, the claim of the inventory written off of Rs. 8,28,35,757/- is allowed and hence the addition made by the AO is deleted. This ground is therefore allowed." 4.1 The observations made by the Tribunal in the earlier year where appeal was preferred but this question was not admitted and today an application was also moved for amending or adding question of law which has been rejected by us. 4.2 In that view of the matter, the view taken by the Tribunal is required to be accepted in favour of the assessee. 4.4 In that view of the matter, the issue is answered in favour of the assessee and against the department. 5. In so far as issue No.(iii) with regard to travelling expenses is concerned, counsel for the appellant has contended that the expenses which were made out of which the substantial amount was allowed, however, Rs. 50,00,000/- was disallowed by the Assessing Officer was required to be upheld in view of the fact that the sam....
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....e such adhoc disallowance. In these facts and circumstances, we direct the AO to delete the disallowance of Rs. 50 lacs made by him." 5.1 Counsel for the appellant has contended that the expenses which were paid as Fright Benefit Tax (FBT) and the dispute was referred to the Dispute Resolution Penal (DRP) where the dispute was for the assessment year 2007-08. 5.2 Therefore, we accept the observations made by the Tribunal in para 5.1 and in that view of the matter the issue is answered in favour of the assessee. 6. Regarding issue No.(iv) & (v) counsel has relied upon the decision of the Supreme Court in the case of Commissioner of Income Tax. vs. Alfa Laval (India) Ltd. [2007] 295 ITR 0451 and the decision of Bombay High Court in the case of Commissioner of Income Tax vs. Retilal Becharlal & Sons and Commissioner of Income Tax vs. General Atlantic (P) Ltd. [2016] 384 ITR 0271 (Bom). 6.1 Counsel for the appellant has contended that the expenses made were not admissible under Section 37 of the Act, where the income was disproportionate to the turn-over. 6.2 In that view of the matter, the Tribunal has seriously committed an error in allowing expenses. 6.3 However, c....