TaxTMI 
TaxTMI 
2020 (5) TMI 354
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....wing grounds: That on the facts and circumstances of the case and in law, 1. The order of the learned Transfer Pricing Officer ("TPO")/ AO and directions of the Hon'ble DRP are based on incorrect interpretation of law and therefore are bad in law. GROUNDS OF OBJECTION RELATING TO TRANSFER PRICING MATTERS 2 The learned TPO and the learned AO grossly erred in determining a transfer pricing adjustment on account of the interest on outstanding receivables amounting to Rs. 3,25,37,057. 3. The learned TPO and the learned AO have erred, in law and in facts, by considering the outstanding dues from the AEs to be in the nature of loan and not considering the business/ commercial expediencies of the arrangement. 4. The learned TPO and the learned AO have erred, in law and in facts, by treating the outstanding receivables from Associated Enterprises (AEs") as a separate international transaction and not considering the same to be closely linked with the main transaction of provision of service to AE. 5. Without prejudice to the above, the learned TPO and the learned AO have erred, in law and in facts, in not providing the benefit of working capital adjustment by adjusting th....
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....d, in law and on facts, in disallowing stamp duty of Rs. 5,13,360 paid by the Appellant on registration of lease deed with stamp authorities, on the basis that the same is capital in nature, without appreciating the fact that such stamp duty is a revenue expenditure eligible for deduction u/s 37 of the Act. b. The learned AO/ Hon'ble DRP has erred, in law and on facts, in relying on the judgement of Karnataka High Court in case of Hotel Rajmahal vs CIT (Kar) 152 ITR 218, without appreciating the fact that the stamp duty was incurred for the renewal of lease deed for an existing premise, therefore would be a revenue expenditure. Provision for expenses for normal tax computation 13. The learned AO/ Honble DRP has erred, in law and on facts, in disallowing provision for expenses of Rs. 10,11,320 created by the Appellant for the subject AY, under section 37 of the Act, on the basis that invoice for such expense has not been raised during the subject AY and hence such expense is contingent in nature, without appreciating that: a. The Appellant has actually incurred such expenditure during the AY 2013-14; b. The Appellant has recorded such expenditure in the books of accoun....
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....tice under section 142 (1) of the act and questionnaire was issued to assessee. In response to statutory notices, representatives of assessee appeared before Ld.AO and filed requisite details from time to time. 3. Ld.AO observed that assessee had international transaction exceeding Rs. 15 crores and therefore case was referred to Transfer Pricing officer for determining arms length price in respect of international transaction. 4. Upon receipt of the reference, Ld.TPO called for economic details of international transaction between assessee and associated enterprises in Form 3 CEB. Ld.TPO observed that following was international transaction reported in the documents filed by assessee: Particulars Amount (in Rs.) Provision of by Bio-equivalents study services 51,60,61,586/- 5. Ld.AO observed that assessee used OP/OC as PLI and TNMM as method for determining margin of assessee at 29.92%. Ld.TPO also observed that non-AE segment margin was determined by assessee at 7.41% and therefore is no adverse inference was drawn in respect of the international transaction. 6. However, Ld.TPO from the trans-apprising study observed that assessee had a realised amounts of Rs. 61,14,96,50....
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....n Corpn. Ltd. v. Asstt. DIT in ITA No. 1548 and 1549 (Kol.) of 2009, dated 15-7-2016, , this argument stands rejected. 11.2. Admittedly, this issue has been consistently sent back by this Tribunal to Ld.TPO to verify whether these outstanding receivables have been subsumed in computing working capital adjustment in the hands of assessee where TNMM has been used as most appropriate method. Admittedly in the present case assessee has used TNMM to compute ALP of the transaction. 11.3. We note that all these submissions have been addressed by coordinate bench of this Tribunal in case of Instrumentation Corpn. Ltd. v. Asstt. DIT(supra), which is reproduced hereunder: Ld.AR placed reliance on decision of Delhi Tribunal in Kusum Healthcare Pvt.Ltd vs. ACIT reported in (2015) 62 Taxmann.com 79, deleted addition by considering the above principle, and subsequently Hon'ble Delhi High Court in Pr. CIT vs. Kusum Health Care Pvt. Ltd. (2017) 398 ITR 66 (Del), held that no interest could have been charged as it cannot be considered as international transaction. He also placed reliance upon decision of Delhi Tribunal in case of Bechtel India vs DCIT reported in (2016) 66 taxman.com 6 which su....
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.... Delhi Tribunal in Ameriprise (supra), in which this issue has been discussed at length and eventually interest on trade receivables has been held to be an international transaction. Referring to discussion in said order, it was stated that Hon'ble Delhi Bench in this case noted a decision of the Hon'ble Bombay High Court in the case of CIT vs. Patni Computer Systems Ltd., (2013) 215 Taxmann 108 (Bom.), which dealt with question of law: (c) `Whether on the facts and circumstances of the case and in law, the Tribunal did not err in holding that the loss suffered by the assessee by allowing excess period of credit to the associated enterprises without charging an interest during such credit period would not amount to international transaction whereas section 92B(1) of the Income-tax Act, 1961 refers to any other transaction having a bearing on the profits, income, losses or assets of such enterprises?' 3.5.6. She submitted that, while answering above question, Hon'ble Bombay High Court referred to amendment to section 92B by Finance Act, 2012 with retrospective effect from 1.4.2002. Setting aside view taken by Tribunal, Hon'ble Bombay High Court restored the issue to file of Trib....
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....fit the AE in some way. Similar matter once again came up for consideration before the Hon'ble Delhi High Court in Avenue Asia Advisors Pvt. Ltd. vs. DCIT (2017) 398 ITR 120 (Del). Following the earlier decision in Kusum Healthcare (supra), it was observed that there are several factors which need to be considered before holding that every receivable is an international transaction and it requires an assessment on the working capital of the assessee. Applying the decision in Kusum Health Care (supra), the Hon'ble High Court directed the TPO to study the impact of the receivables appearing in the accounts of the assessee; looking into the various factors as to the reasons why the same are shown as receivables and also as to whether the said transactions can be characterized as international transactions." 3.5.8. In view of the above, we deem it appropriate to set aside the impugned order on this issue and remit the matter to the file of the Assessing Officer/TPO for deciding it in conformity with the above referred judgment. Needless to say, the assessee will be allowed a reasonable opportunity of being heard in such fresh proceedings. Accordingly these ground raised by assessee....
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....DRP while considering the issue has observed as under: Panel: the contentions of the assessee are considered. The lease is for 5 years and the expenditure towards registration are incurred for that purpose. On the same issue, i.e., Registration and legal charges incurred for leaving a building is held to be capital expenditure by Karnataka High Court in the following case. * Hotel Rajmahall vs CIT (Kar) 152 ITR 218" DRP took following view: "With respect to the claim of depreciation on this amount it is seen that the assessee is not the owner of the asset and hence depreciation is not allowable. Ground is rejected." 12.5. The disallowance has resulted in enhancing the claim of deduction under section 80 IB (8A) of the act. The disallowance has been made because of the statutory provisions under section 37 and as a consequence of such disallowance there is an increase in the income in the hands of assessee. We are therefore unable to accept the contentions of authorities below that in computing deduction under section 80 IB (8A) of the act in the hands of assessee the disallowance so made ought to be ignored. We direct the Ld.AO to compute the deduction under section 80 IB....