TaxTMI 
TaxTMI 
2019 (2) TMI 796
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....ssment order dated September 29, 2011 (received by the Appellant on October 19, 2011) passed under section 143 (3) read with section 144C (13) of the Income Tax Act, 1961 ("the Act") is not in accordance with the law and therefore not sustainable. Transfer Pricing ("TP") Adjustment - Rs. 179,778,755 That the Hon'ble Dispute Resolution Panel, New Delhi ("the DRP") has erred both in law and on facts by summarily rejecting the Appellant's objections to the draft order dated December 09, 2010 passed by the Ld. AO under section 143(3) read with section 144C(1) of the Act. The Hon'ble DRP while issuing directions under section 144C(5) of the Act did not consider the facts and merits of Appellant's objections to the proposed adjustments, and merely relied on the reasoning given by the Additional Commissioner of Income-tax, Transfer Pricing Officer-1 (2) vide order under section 92CA(3) of the Act dated October 11, 2010 ("TP Order"). On the facts and in the circumstances of the case, the Ld. TPO and the Ld. AO have erred in proposing and the Hon'ble DRP has further erred in confirming the transfer pricing adjustment of Rs. 179,778,755 without due appli....
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....e applicable provisions of Section 92C of the Act. 1.6. By summarily disregarding the Appellant's replies vide submission dated July 26, 2010 in response to the queries raised vide show-cause notice dated July 1, 2010. In this regard, the Ld. TPO has erred: 1.6.1. By computing freight cost-to-freight income ratio in the case of Balmer Lawrie & Co Limited and by not appreciating the nexus of freight cost-tofreight income ratio vis-a-vis the net profit margin ("NPM") of a company. 1.6.2. By rejecting Transport Corporation of India Limited from the set of comparable companies identified by the Appellant on the grounds of "functional dissimilarity" by citing misplaced and inappropriate reasons based on his conjecture and surmises. 1.6.3. By following an inconsistent approach by accepting Balmer Lawrie & Co Limited having similar functional/ asset profile as that of Transport Corporation of India Limited. 1.7. By disregarding the approach followed by the Appellant for benchmarking international transaction pertaining to receipt of management services. In this regard, the Ld. TPO has artificially created separate business segments on falla....
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....ion given by the Hon'ble DRP to establishing a nexus between the exempt income and expenditure incurred 2.3. By levying the interest u/s 234B and 234D of the Act. 2.4. By withdrawing interest u/s 244A of the Act as no interest u/s 244A of the Act has been granted to Appellant earlier. 2.5. By initiating penalty for furnishing inaccurate particulars of income. The above 'Grounds of Appeal' are all independent and without prejudice to one and another. The Appellant craves leave to supplement, to cancel, amend, add and/or otherwise alter/modify any or all the grounds of the appeal stated hereinabove." ITA No. 2434/Del/2014 A.Y. 2009-10 1. Transfer Pricing Adjustment - Rs. 12,09,03,662 That the Hon'ble Dispute Resolution Panel, New Delhi ("the DRP") has erred both in law and on facts by summarily rejecting the Appellant's objections to the draft order dated March 08, 2013 passed by the Ld. AO under Section 143(3) read with Section 144C(1) of the Act. The Hon'ble DRP while issuing directions under Section 144C(5) of the Act did not consider the facts and merits of Appellant's objections to the proposed adj....
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....n relation to exempt income, therefore, provisions of section 14A read with Rule 8D cannot be invoked; * without recording a finding that any specific and identifiable expenditure has been incurred by the appellant for earning exempt income. 3. The Ld. AO has erred on facts and in law in directing levy of interest under Section 234B and 234C of the Act. 4. The Ld. AO erred on facts and in law in initiating penalty proceedings under Section 271(1) (c) of the Act for concealment / furnishing inaccurate particulars of income. The Appellant prays for leave to add, alter, rescind from or withdraw any of the above grounds of appeal at or before the time of hearing of the appeal. ITA NO. 1739/Del/2015 A.Y. 2010-11 1. Transfer Pricing Adjustment - Rs. 13,25,27,364 That the Hon'ble Dispute Resolution Panel, New Delhi ("the DRP") has erred both in law and on facts by summarily rejecting the Appellant's objections to the draft order dated March 25, 2014 passed by the Ld. AO under Section 143(3) read with Section 144C(1) of the Act. The Hon'ble DRP while issuing directions under Section 144C(5) of the Act did not consider the fa....
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....of exempt income and hence no disallowance was made under residuary clause of Rule 8D; * disregarding that since no expenditure has been incurred by the appellant in relation to exempt income, therefore, provisions of Section 14A read with Rule 8D cannot be invoked; * without recording finding that any specific and identifiable expenditure has been incurred by the appellant for earning exempt income. The Ld. A.O has erred on facts and in law in directing levy of interest under Section 234B and 234C of the Act. 4. The Ld. AO erred on facts and in law in initiating penalty proceedings under Section 271(1) (c) of the Act for concealment/ furnishing inaccurate particulars of income. The Appellant prays for leave to add, alter, rescind from or withdraw any of the above grounds of appeal at or before the time of hearing of the appeal. ITA No. 1297/Del/2016 A.Y. 2011-12 1. Transfer Pricing Adjustment - Rs. 20,25,42,955 That the Hon'ble Dispute Resolution Panel, New Delhi ("the DRP") has erred both in law and on facts by summarily rejecting the Appellant's objections to the draft order dated February 17, 2015 p....
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....f the Act read with Rule 8D of the Rules: * by not appreciating that Ld AO has himself admitted that neither any direct nor indirect expenditure has been incurred by appellant in relation to earing of exempt income and hence no disallowance can be made under residuary clause of Rule 8D; * disregarding that since no expenditure has been incurred by the appellant in relation to exempt income, therefore, provisions of section 14A read with Rule 8D cannot be invoked; * without recording finding that any specific and identifiable expenditure has been incurred by the appellant for earning exempt income. Without prejudice to the above, on the facts and in the circumstances of the case and in law, the Ld. AO has erred in considering 0.5% of opening value of investments as against 0.5% of average value of investments while computing disallowance and the Hon'ble DRP has erred in confirming the disallowance of Rs. 1,92,585 under Section 14A of the Act read with Rule 8D of the Rules. ITA No. 6135/Del/2016 A.Y. 2012-13 1. Pricing Adjustment - Rs. 29,29,71,236 That the Hon'ble Dispute Resolution Panel, New Delhi ("the DRP") h....
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....39;ble DRP has also erred in law and facts by summarily disregarding allocation sheets filed with the Hon'ble DRP as additional evidences, despite accepting the same on record. Corporate Tax Adjustment - Rs. 5,12,90,218 On the facts and in the circumstances of the case and in law, the Ld. AO has erred in not allowing the claim action of additional income of Rs. 5,12,90,218 erroneously booked in accounts and offered to tax in return of income filed for subject assessment year by not appreciating that: * During subject assessment year certain erroneous accounting entries were passed and erroneously credited the Profit and Loss Account under the head "Net gain on foreign currency transactions and translation". * The said error was rectified during AY 2014-15 (or FY 2013-14) by debiting the Profit and Loss Account under the head foreign currency transactions and translation account and the said amount was suo moto disallowed by the appellant in the computation of income for AY 2014-15 being prior period item; * The said amount pertains to AY 2012-13 and in AY 2014-15 it reflects reversal of additional income erroneously included in subject a....
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....er u/s 92CA(3) of the Act, in respect of international transaction entered into by the assessee during F.Y. 2006-07. The transfer pricing order dated 11.10.2010 was passed directing the Assessing Officer to make total addition of Rs. 17,97,78,755/- in respect of payment of management fee (Rs.5,16,58,369/-) and income from freight forwarding (Rs.12,81,20,386/-). The Assessing Officer passed draft assessment order and the assessee filed objections before the Dispute Resolution Panel (DRP). The DRP with certain direction disposed off the objections of the assessee vide order dated 08.08.2011. Thereafter, the Assessing Officer made addition on account of arm's length price for Rs. 17,97,78,755/- and on account of disallowances under Section 14A of the Act for Rs. 1,00,000/-. 4. Being aggrieved by the Assessment Order, the assessee filed the present appeal before us. 5. The Ld. AR submitted that the TPO held that transaction of payment made by the assessee to its AEs on account of management consultancy services of Rs. 5,16,58,369/- should be segregated from the transaction of freight forwarding. The Ld. AR further submitted that after segregating the aforesaid transaction, the TP....
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....ontradictory. The Ld. AR submitted that if only segmental data of the Balmer, Lawrie & Co. Ltd. is taken and on the segmental data aforesaid filter of freight cost/freight income is applied then the ratio would be 35.17% and therefore, the aforesaid comparable would become incomparable even as per the filter of the TPO. Thus, the Ld. AR submitted that even if the aforesaid filter is applied correctly, the comparable Balmer, Lawrie & Co. Ltd. would be rejected and in such circumstance, NPM of assessee would not require any adjustment under Section 92CA(3) of the Act. The Ld. AR further submitted that Balmer, Lawrie & Co. Ltd. earns its revenue from manufacturing, trading, turnkey projects and services and operates in different business segments such as industrial packaging, logistics services, travel and tours, greases and lubricants and others. Besides that Balmer, Lawrie & Co. Ltd. is government company and was granted status of mini ratna I PSC in A.Y. 2006-07. Therefore, there is difference in functional profile of Balmer, Lawrie & Co. Ltd. from the assessee company. The Ld. AR relied upon the decision of the Hon'ble Delhi High Court in case of Rampgreen Solutions P. Ltd. v. ....
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....ure on exempt income. Therefore, we do not see any valid ground to interfere in the findings given by the Assessing Officer. Ground No. 2 is dismissed. 11. As regards Ground Nos. 3, 4 and 5, the same are consequential, hence are not adjudicated at this juncture. 12. In result, appeal being ITA No. 5682/Del/2011 A.Y. 2007-08 filed by the assessee is partly allowed for statistical purpose. 13. Now we are taking up the ITA No. 2434/Del/2014 for A.Y. 2009-10. As regards the issue of Transfer pricing relating to intra group services which arose in A.Y. 2009-10, the Ld. AR submitted that the expenses are interlinked. It was further submitted that for A.Y. 2005-06 and 2006-07, the TPO did not dispute that the management fee has been paid to its AE for the services provided by the AEs to the assessee company and these services are interlinked transaction with the freight forwarding services, whereas for A.Y. 2007-08, the TPO took the value of the transaction at Nil by benchmarking the payment of management fee as separate transaction. For A.Y. 2008-09, the assessee company furnished TP documentation, however, transactions of the assessee was not disturbed. Thereafter again from A.....
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.... no further investment has been made and therefore no expense incurred. The change in investment balance is on account of re-investment of dividend income. Thus, the Ld. AR submitted that this addition does not sustain. 17. The Ld. DR relied upon the Assessment Order and the order of the TPO. 18. We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that no further investment has been made and therefore no expense incurred. The change in investment balance is on account of re-investment of dividend income, since the "ABN AMRO Cash Mutual Fund" plan was a Dividend Reinvestment Plan. Thus, Ground No. 2 is allowed. 19. In result, appeal being ITA No. 2434/Del/2014 for A.Y. 2009-10 is allowed. 20. Now we are taking up ITA No. 1739/Del/2015 A.Y. 2010-11. As regards the Transfer Pricing issue, the same is identical with that of A.Y. 2009-10, therefore, the findings expressed hereinabove are applicable in the present assessment year as well. Ground No. 1 is therefore, allowed. 21. As regards Ground No. 2, relating to disallowance u/s 14A, the same is also identical with that of A.Y. 2009-10, therefore, the findings....