TaxTMI 
TaxTMI 
2018 (5) TMI 1822
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....ansactions with its Associated Enterprises (AEs): Sr. No. Nature of International Transaction Total value Method Adopted For Benchmarking 1 Import of Raw Material (Calcite Chips) From Imerys Minerals Malaysia Sdn. 21,14,53,306 CUP 2 Import of Raw Material Imerys Asia Pacific Pte. Ltd. 2,30,84,775 CUP 3 Import of Raw Material from Imerys Mineral Taiwan Ltd. 6,09,997 CUP 4 Import of Calcium Carbontes Power From Imerys Malaysia 8,42,784 CUP 5 Royalty Payable To Imerys Singapore For Use of Technology and Know how 48,88,234 TNMM 6 Reimbursement of Expenses To Imerys Singapore. 7,58,793 NA Total 24,16,37,889 3. The assessee adopted CUP as the most appropriate method to benchmark its international transaction except payment of royalty. To benchmark the royalty paid to Imerys Singapore for use of technology and know-how, the assessee applied Transactional Net Margin Method (TNMM) as the most appropriate method. The assessee selected 8 companies as comparables in TP study report. However, Transfer Pricing Officer (TPO) selected only 4 companies as comparables for benchmarking the....
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....t for A.Y. 2010-11 by treating 'write back of provision of doubtful debts' as non-operating income. If 'write back of provision of doubtful debts' is treated as non- operating then even bad debts should also be treated as non-operating expenses. 4. Inappropriate treatment of foreign exchange gain/loss as non operating in nature while computing operating margins of the Appellant and comparable companies for A.Y. 2010-11. Without prejudice to the above grounds of appeal, erred by treating foreign exchange gain/loss as non-operating item of income/expenditure, while computing the operating margin of the Appellant and comparable companies for A.Y. 2010-11." 5. Not pressed 6. Not pressed. 7. Not granting benefit of variation of 5% Erred by computing the arm's length price, without taking into account the lower 5% variation from the mean arm's length price determined, which is permitted to and which has been opted for by the Appellant under the provisions of Section 92C(2) of the Act. Other grounds 8. Erroneous levy of interest under section 234B, 234C and 234D of the Act. Without prejudice t....
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....s per mutual understanding of the assessee and Ballarpur Industries Limited, the billing for supply of WGCC is done on cost plus basis, which includes total cost as increased by a specified margin. The ld. AR submitted that during the period relevant to assessment year under appeal, Ballarpur Industries Limited raised objection with regard to inferior quality of WGCC received from assessee. The total value of alleged inferior quality of WGCC supplied was to the tune of Rs. 3,27,90,000/-. Though material was utilized by Ballarpur Industries Limited but payment was not made to the assessee for supplying inferior quality of input. The assessee had no other option but to reduce the value of such material supplied from the total sales. The Authorities below raised objection to the method of reduction of such amount from sales. The DRP observed that assessee should have claimed the amount as bad debts. The ld. AR submitted that the assessee did not raise any legal dispute with Ballarpur Industries Limited on the issue of quality of material supplied as the entire production of the assessee is consumed by Ballarpur Industries Limited. Thus, it was on account of commercial expediency and t....
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....eating 'writing back of provision of doubtful debts' as non -operational income. For coming to such conclusion, the DRP has placed reliance on 'Safe Harbour Rules'. The ld. AR contended that 'Safe Harbour Rules' were introduced on 18.09.2013 and are prospective in nature i.e. they would be applicable from assessment year 2013-14. The same would not apply to assessment year under appeal i.e. assessment year 2010-11. In support of his submission, the ld. AR placed reliance on the following decisions: i) Haworth ( India) (P) Ltd. Vs. DCIT, ITA No. 281/PUN/2014 for assessment year 2009-10 decided on 30.10.2017. ii) CGI information Systems and Management Consultants Pvt. Ltd. Vs. DCIT, ITA No. 1227/Bang/2012. 8. In respect of ground No. 4, the ld. AR submitted that Authorities below have erred in not considering foreign exchange gain/loss as non-operating in nature. The ld. AR submitted that in the case of Approva System Pvt. Ltd Vs. CIT(A)-IT/TP in ITA No.1788 & 1803/PN/2013 for assessment year 2009-10 decided on 13.01.2015, the Co-ordinate Bench of Tribunal has held that foreign exchange gain/loss is operating in nature. The Authorities below have placed reliance ....
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....see. It is not the case of Revenue that the claim made by the assessee is false/ incorrect. Further, it is a settled law that entitlement of any deduction cannot depend on the treatment accorded to such entries by assessee. The existence or the absence of entries in the books of account is not determinative of such claim. The Authorities below have taken hyper-technical and pedantic view in rejecting the assessee's claim of 'writing off' of the amount, not received from Ballarpur Industries Limited against supply of WGCC, though the assessee has 'written off' the amount by reducing sales price. The manner in which assessee has given accounting treatment to the irrecoverable sales may not be the typical desired method of book entry but it will have the same effect on financial results as is writing off of 'Bad Debts'. Accordingly, we allow assessee's claim to the extent of Rs. 3,27,90,000/- i.e amount irrecoverable from Ballarpur Industries Ltd. against supply of WGCC. 11. The second segment of disallowance with respect to reduction in sales price is difference in stock. The assessee deployed National Survey Engineers to carry out physical survey of stock. As per physical survey ....
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....essee has filed Director's report along with Balance Sheet, P & L account and notes to account of Calchem Industries (India) Ltd for Financial Year 2009-10 as additional evidence. Accordingly, we deem it appropriate to remit the issue back to the file of TPO/Assessing Officer for considering additional evidences filed by assessee and deciding the issue of inclusion/exclusion of the abovesaid company from the list of comparables. Thus, ground No. 2 raised in appeal by assessee is allowed for statistical purposes. 13. In ground No. 3 of appeal, the assessee has assailed incorrect computation of operating margin. The TPO while computing operating margin has considered 'write back of provision for doubtful debts' as nonoperating in nature. The DRP rejected assessee's submission by placing reliance on 'Safe Harbour Rules'. It is an undisputed fact that 'Safe Harbour Rules' were introduced on 18.09.2013. Safe Harbour Rules does not apply retrospectively and hence, they would not have application on the assessment year under appeal. The Hon'ble Delhi High Court in the case of Pr. CIT Vs. M/s. Cashedge India Pvt. Ltd in ITA No. 279/2016 decided on 04.05.2016 has held that "Safe Harb....
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....012 - Mumbai Tribunal 5. M/s. Mercedes Benz Research & development India Pvt. Ltd. Vs. DCIT (IT/TP A.No.1222/Bang/2011 -Bangalore Tribunal 6. M/s. Trilogy E-Business Software India Private Ltd., Vs. DCIT, ITA No.1054/Bang/2011 - Bangalore Tribunal 7. Sumit Diamond (India) Pvt. Ltd. Vs. ACIT - ITA No.7148/Mum/2012 - Mumbai Tribunal 8. M/s. Foursoft Ltd. Vs. The Dy.CIT - ITA No.1495/Hyd/2010 9. Techbooks International Pvt. Ltd. Vs. ACIT - ITA No.722 - Delhi Tribunal 10. M/s. CISCO Systems (India) Private Ltd. Vs. The Dy.CITIT/ TP A.No.271/Bang/2014 - Bangalore Tribunal 11. M/s. Midteck (India) Ltd. Vs. The Dy.CIT-IT(TP) A.No.70/Bang/2014 - Bangalore Tribunal 12. M/s. Petro Araldite Pvt. Ltd. The Dy.CIT - ITA No.1538/Mum/2014 - Mumbai Tribunal 13. ACIT Vs. NGC Network India Pvt. Ltd. - ITA No.5307/M/2008 22.1 Respectfully following the decisions of the different Benches of the Tribunal, we set aside the order of the CIT(A) on this issue and direct the Assessing Officer to consider foreign exchange fluctuation gain as part of the operating income of the assessee." Respectfully following the sam....