TaxTMI 
TaxTMI 
2018 (1) TMI 1366
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....ax, Transfer Pricing Officer-II ('Ld TPO'), under section 92CA(I) of the Income-tax Act, 1961 ('Act") was validly made, thereby failing to appreciate that the Ld AO had not recorded any reasons under section 92CA of the Act which made it expedient and necessary for him to make a reference under that provision; 3.That the Ld. CIT(A) has grossly erred in confirming an adjustment of Rs. 14,609,814/- out of the total adjustment of Rs. 23,640,603/- made by the Ld. AO to the returned income of the appellant, and in doing so, has grossly erred in: i. confirming the action of the Ld AO/ Ld TPO of rejecting the benchmarking analysis carried out by the appellant in its TP Study and conducting a fresh search, using different filtration criteria, to select comparables based on h is own conjectures and surmises; ii. confirming the action of the Ld AO/ Ld TPO of relying on arbitrary financial criteria for selecting comparables, thereby disregarding the functions-assets-risk profile of the companies being considered; iii. confirming the action of the Ld AO/ Ld TPO of considering the current year (i.e financial year 2002-03) data for comparability analysis, despite the fact tha....
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....on of the Ld AO/ Ld TPO of denying the benefit of (+/-) 5 percent [as per proviso to section 92C(2) of the Act] to the appellant; xii. disregarding judicial pronouncements in India. 4. That the Ld. CIT (A) grossly erred in confirming the disallowance of an amount of Rs. 54,886,377/- on account of Provision for Warranty, without appreciating that the issue stands covered in favour of the appellant, in view of order of the Hon'ble ITAT for the AY 2000-0 I & 2001-02 and that the said order was followed by the predecessor of the CIT(A) in AY 2002-03. 4.1 That the Ld. CIT (A) grossly erred on facts and in law, in confirming the disallowance of an amount of Rs. 54,886,377/- being the provision for warranty, on the grounds that such provision was contingent in nature and should have been allowed on an actual basis, in the year of occurrence of the event and no: in the year in which the provision is made. 4.2 That the Ld. CIT (A) grossly erred in law and on facts in merely confirming the conclusion of the Ld. AO that the provision for warranty made on the past experience has no relevance, since mobile technology was improving rapidly and went on to presume that in view of the impro....
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....nd Bangalore. Ld.AO after considering the submissions and details advanced by assessee, passed assessment order making following additions/disallowances: Sl. No. Particulars Amount in Rs. 1. Addition on account of Foreign Travelling Expenses 57,23,201 2. Addition on account of provisions for warranty 5,48,86,377 3. Addition on account of marketing expenses 39,98,939 4. Addition on account of closing stock 2,68,17,770 5. Addition on account of provision for obsolescence of inventory 8, 50, 084 6. Transfer pricing addition in pursuance of order under section 92CA (3) of the act 2,36,40,603 Ld. CIT (A) confirmed addition made by Ld. AO by relying upon order of his predecessor for assessment year 2000-01 and 2001-02. 3. Aggrieved by the order passed by Ld. AO, assessee preferred appeal before Ld.CIT(A) who allowed the claim of assessee in respect of transfer pricing addition, and foreign travel expense. The addition made by Ld.AO in respect of marketing expenses, provision for warranty, provision for obsolescence of inventory and closing stock was confirmed by Ld. CIT (A). 4. Aggrieved by the order of Ld. CIT (A) assessee is in appeal before us n....
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.... in the case of assessee for Assessment Year 2006-07 in ITA no.551/Del/2010 dt. 24.11.2011 after considering provisions of sec.92C has held as under. "6. We have carefully considered the submissions in light of the material produced and precedent relied upon. It is an undisputed fact that on the same set of facts and in the same business model the assessee has been provided the working capital adjustments in the preceding assessment years. Under the circumstances, in our considered opinion, it was incumbent upon the TPO to consider the same in the current year. 6.1. In this regard we place reliance upon the decision of the Hon 'ble Jurisdictional High Court in the case CIT Vs. Dalmia Promoters Developers (P) Ltd. 281 ITR 346 wherein it was held that for rejecting the view taken in earlier assessment years, there must be material change in the fact, situation or in law. In this case, clearly there is neither any change in the fact, situation or in law. Hence, on the anvil of 'the Hon'ble Jurisdictional High Court decision (Supra), the TPO should grant the assessee appropriate working capital adjustment. Accordingly, the matter is remitted to the file of the Assessing....
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....n cost and therefore they are risk insulated entity whereas the comparables chosen are independent companies and there's full risk associated with the normal enterprise real venture. As robust data was not available before Ld. TPO, he did not grant any adjustment in regard to the risk undertaken by the comparables vis-a-vis no risk undertaken by assessee. 7.5. Ld. CIT (A) is silent on the issue. The comparables that has been retained by Ld. CIT (A) does have very high/abnormal profit margins. 7.6. In anyways we have already set aside the issue regarding comparables selected/retained by Ld. CIT (A) back to the file of Ld. TPO in the appeal filed by the revenue for assessment year 2003-04 in ITA No. 2380/del/2010 vide order dated 06/12/2017. Accordingly it would be just to set aside this issue regarding granting of working capital and risk adjustment back to the file of Ld. TPO for re- computation, on the basis of data made available to him. 7.7. Accordingly these ground raised by the assessee stands allowed for statistical purposes. 8. Ground No. 4- 4.2 This ground raised by the assessee relates to the disallowance of warranty expenses claimed by the assessee for the year under....
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....We find from the order of the CIT as well as ITAT that the explanation given by the assessee was that this provision was made on the basis of past experience and other relevant consideration. The very fact that the provision for lesser amount is made in spite of the fact that as well as had indicates in this issue would itself demonstrate that there was a proper application of mind on the part of the assessee in making this provision. Merely on this ground, the Assessing Officer could not have disallowed the provision to the extent of 25% and thus the Income Tax Appellate Tribunal rightly allowed the entire provision towards warranty. We may also observe here that such provision has been made in preceding as well as subsequent Assessment Years and has been allowed in full by the ITAT and affirmed by this Court. Therefore, no question of law arises." 8.7. We do not find any material difference in the factual circumstances for the year under consideration vis-a-vis assessment year 2000-01 and 2001-02. Therefore applying the principle of consistency, respectfully following the decision of Hon'ble Delhi High Court in assessee's own case in the preceding assessment years we allow the c....
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.... to the copies of the orders placed in the paper book. He submitted that unless this issue is decided by this Tribunal it would never reach to a logical conclusion. He submitted that in the interest of natural Justice the issue may be considered and decided for the year under consideration so as to attain some certainty. 9.7. On the contrary Ld. DR placed reliance upon the orders of Ld. AO and submitted that the issue may be set aside to the file of Ld. AO for verification of the issue as has always been consistently done by this Tribunal in the other assessment years. 9.8. We have perused the submissions advanced by both the sides and the light of the records placed before us and the orders of this Tribunal in assessee's own case relied upon by both the sides. Ld.AR while contesting the issue had categorically submitted that assessee do not have bills of having been issued to its employees/dealers etc free of cost. He thus submitted that setting aside the issue back to Ld.AO for verification would not serve any purpose. 9.9. Under such circumstances in our considered opinion we find it fit and proper to decide the issue in the light of the records placed before us, orders passe....
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....dingly this ground raised by assessee stands allowed. 10.1. This ground raised by assessee stands allowed. 11. Ground No. 7 This ground has been raised against the disallowance of 25% of provision for stock obsolescence by treating the same as unexplained. 11.1. Ld. AR submitted that assessee had debited a sum of Rs. 3,400, 339/-as provision for obsolete inventory. It was submitted by assessee before the authorities below that the provision represents the value of non-moving inventory of spare parts and accessories of the mobile handsets which had been faced out of the market due to technological advancements. Assessee had therefore made 100% provision for the value of non-moving inventory of spare parts/accessories of phone models which has been faced out. Ld.AR further submitted that the provision towards obsolete inventory was in accordance with global company policy for obsolescence of assessee which has been submitted before the authorities below. Our attention was drawn at pages 539-540 where the submissions advanced by assessee before Ld. CIT (A) was made vide letter dated 07/12/07. 11.2. It has been submitted by Ld.AR therein that the method has been consistently follo....