TaxTMI 
TaxTMI 
2018 (10) TMI 236
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....he business of trading of machines used for counting, accepting, sorting and authentication of cash. These machines are primarily used in banks. The Company also renders after sales support and maintenance services to its customers using such machines. 3. The following international transactions u/s 92CA(1) of the Act were referred to the TPO by the ACIT, Circle -1(1), Gurgaon: Sr. No. Transaction Associated Enterprise Arm's length price (as determined by the assessee) (Lacs) Method adopted 1. Purchase of finished Goods De La Rue Cash Systems, UK 102394067 De La Rue Cash Systems Ltd. Wanchai Hong Kong 8905287 De La Rue Cash Systems INC., USA 2544902 DeLaRue SDN BHD, Malaysia 182.900 De La Rue Cash Systems Benelux, Netherland 271030 2. Cross Charges (Received) De La Rue Cash Systems UK 12779478 De La Rue Cash Systems, Dubai 1149323 De La Rue Cash Systems, The Netherlands 1399633 3. Management Charges IS Service Cost Group Insurance Charges (Paid) De La Rue Cash Systems, UK 11876701 4. Bank Charges Other Charges (Paid)  ....
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.... No Yes 1.62 No No 4 Iris Computers Ltd Not selected- Insufficient 2.31% Information Yes 2.21% No No 1.83 No No 5 Priya Ltd 1.81% Yes 2.38% Yes 3.82% No Yes 2.90 No No 6 CMS Computers Ltd 1.71% Yes 1.24% Yes 17.05% No No -6.50 No No 7 Kilburn Office Automation Ltd 16.52% Yes 20.82 % Yes 15.77% No Yes 17.56 Yes Yes Average 1.29 2.98 8. It would be pertinent to mention here that not only the business profile of the assessee has not changed during the year under appeal, but also the business profile of all the aforesaid comparables is same as they were in A.Ys 2007-08 and 2008-09. We could not find any justifiable reason for not accepting the comparables which were considered by the TPO himself in earlier A.Ys. Moreover, two comparables, namely, Compuage Inforcom Ltd and Priya Limited, which were directed to be included in list of comparables by the DRP have not been directed so in A.Y 2010-11 by the DRP itself. Once again, no justifiable reasoning has been given. 9. We have given thoughtful consideration to the business profiles of the ....
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....as been decided that forex gain/loss is part of the operating profit, the same view has to be taken for AY 2010-11 also. We accordingly, direct the Assessing Officer/TPO to treat the forex gain in AY 2010-11 as part of operating profit for determination of operating profit margin. Ground No. 2.1(a) of AY 2010-11 is allowed. 17. Ground No. 2.5(b) in A.Y 2009-10 relates to liabilities and provisions written back. 18. The lower authorities have treated the same as non-operating in nature placing reliance on Safe Harbor Rules. The notification of CBDT issued on 18.09.2013 on Safe Harbor Rules define concept of operating expense, operating revenue and operating profit respectively. 19. In our considered view, the liabilities and provisions written off in earlier years were taken as part of operating profit, therefore, when the same are written back, they must be considered as operating in nature for computation of operating profit margin. We direct accordingly. 20. In A.Y 2010-11, Ground No. 2.1(b) and (c) relate to treatment of income of Rs. 1,05,07,777/- received by the assessee from rendering management support services to its AEs as non-operating in nature and notionally attribu....
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....ntee to the extent of 1.25% of the sales as against the provision made at 5%. 26. Before us, the ld. AR vehemently stated that the warrantee is in-built in the purchase order/agreement and the liability on account of warrantee is integral part of sales Revenue. It is the say of the ld. AR that since the entire sales revenue is accounted as revenue, therefore, corresponding deduction for warrantee provision should also be allowable. The ld. AR further pointed out that on similar facts in assessee's own case, the Tribunal has decided this issue in favour of the assessee in ITA No. 5017/DEL/2012 for A.Y 2007-08. 27. Per contra, the ld. DR strongly supported the findings of the lower authorities. 28. We have carefully considered the orders of the authorities below qua the issue. In our understanding of the facts, we find that the machines are supplied to various parts of the country and there are different costs of providing warrantee services in different parts, which mean that in some regions there are few machines but to meet the warrantee obligations, engineers have to be stationed there. The distance of the machine from the engineer's location is also a relevant factor, since l....
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....asis for disallowing the assessee's claim in the current year, particularly when assessee had given specific basis for making this warranty provision. Assessee's claim is fortified by the decision relied upon by Ld. CIT(A). Accordingly, we see no reason to interfere in the order of Ld. CIT(A) on the issue in question. Accordingly, order of Id. CIT(A) is upheld." After looking to the order of the ITAT for Assessment Year 2007-08, the ITAT have dismissed appeal of the Revenues by holding that merely because the assessee had returned back the provisions in subsequent year cannot be a basis for disallowing the assessee's claim in the current year, particularly when the assessee had given specific basis for making warranty provisions. The Hon'ble Apex Court in case of Rotork Controls India (P) Ltd. (supra) has given the criteria which are fulfilled by the assessee herein. Thus, issue is squarely covered in favour of the assessee and, therefore, Ground No. 1 and 1.1 of the assessee's appeal is allowed." 29. As no distinguishing decision has been brought in favour of the Revenue, respectfully following the findings of the coordinate bench [supra], this ground is d....