TaxTMI 
TaxTMI 
TaxTMI 
2017 (12) TMI 1774
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....t also provides a wide range of systems and equipment for civil and military airplanes and helicopters. Return of income for the assessment year 2011-12 was filed on 29/11/2011 declaring 'nil' income. The assessee- company also reported the following international transactions in its 92CE report: The assessee-company also submitted Transfer Pricing (TP) study report applying TNMM as the most appropriate method and 12 comparables were selected by the tax-payer in respect of software development services segment where profit margin was calculated at 13.71%. The Assessing Officer (AO) selected the case for scrutiny and referred the matter to the Transfer Pricing Officer (TPO) for the purpose of bench marking international transaction. 3. The TPO accepted the transfer pricing study report submitted by the assessee company in respect of software development services segment, receipt and re-imbursement by comparing the net margins under TNMM and held that International transactions relating to software development service, receipt and reimbursement are at arm's length and therefore no transfer pricing adjustment was suggested by the TPO. However, in respect of management f....
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....: 9. Before us, learned counsel for the assessee submitted that for assessment year 2006-07 in ITA No.1261/Bang/2010 dated 31/12/2014 and for assessment year 2007-08 in ITA No.1169/Bang/2011 dated 25/1/2017, the Hon'ble Tribunal has set aside this issue to the file of the AO. Therefore, it is submitted that the issue may be restored back to the file of the AO for fresh consideration. 10. We heard rival submissions and perused the material on record. The issue of determining ALP adjustment in respect of management fee to intra-group services, had come up before the co-ordinate bench to which the Hon'ble Accountant Member is the author, in the case of M/s. 3M India Ltd.,in IT(TP)A No.725/Bang/2011 dated 13/05/2016. No ALP adjustment can be made in respect of intra-group services for the reason that no benefit was derived by the assessee-company by incurring such expenditure and also the TPO cannot question necessity of incurring such expenditure. This Tribunal held that it is incumbent upon the assessee- company to prove that services are actually received by the assessee- company and failing to do so may result in ALP adjustment. The mandatory condition or making no ALP ad....
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....eciding a question under Section 12(2) of the Income Tax Act". It was further held in this case that "it is not necessary to show that the expenditure was a profitable one or that in fact any profit was earned". In CIT v. Walchand & Co. etc., (1967) 65 ITR 381, it was held by the Supreme Court that in applying the test of commercial expediency for determining whether the expenditure was wholly and exclusively laid out for the purpose of business, reasonableness of the expenditure has to be judged from the point of view of the businessman and not of the Revenue. It was further observed that the rule that expenditure can only be justified if there is corresponding increase in the profits was erroneous. It has been classically observed by Lord Thankerton in Hughes v. Bank of New Zealand, (1938) 6 ITR 636 that "expenditure in the course of the trade which is unremunerative is none the less a proper deduction if wholly and exclusively made for the purposes of trade. It does not require the presence of a receipt on the credit side to justify the deduction of an expense". The question whether an expenditure can be allowed as a deduction only if it has resulted in any income or profits cam....
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....nremunerative or that in view of the continued losses suffered by the assessee in his business, he could have fared better had he not incurred such expenditure. These are irrelevant considerations for the purpose of Rule 10B. Whether or not to enter into the transaction is for the assessee to decide. The quantum of expenditure can no doubt be examined by the TPO as per law but in judging the allowability thereof as business expenditure, he has no authority to disallow the entire expenditure or a part thereof on the ground that the assessee has suffered continuous losses. The financial health of assessee can never be a criterion to judge allowability of an expense; there is certainly no authority for that. What the TPO has done in the present case is to hold that the assessee ought not to have entered into the agreement to pay royalty/ brand fee, because it has been suffering losses continuously. So long as the expenditure or payment has been demonstrated to have been incurred or laid out for the purposes of business, it is no concern of the TPO to disallow the same on any extraneous reasoning. As provided in the OECD guidelines, he is expected to examine the international transacti....
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....Fouress Pvt. Ltd. vs. DCIT in ITA Nos.847 & 847/Bang/2014 dated 30/12/2015 held as follows: ............Thus, the assessee failed to discharge the burden of proving that the expenditure laid out were incurred wholly and exclusively for the purpose of business. We may further add that the Hon'ble Supreme Court in the case of CIT Vs Imperial Chemical Industries (Ind.) Pvt. Ltd (1969) 74 ITR 17 has unequivocally held that the burden of proving that a particular expenditure had been aid out or incurred wholly and exclusively for the purpose of business entirely lies on the assessee. The discharge of the burden had to be effective and meaningful and not to cover up by merely book entries and paper work. The mere fact of payment of commission by account payee cheques and compliances with the TDS provisions shall not alone enable the assessee to claim deduction unless and amount has been expended wholly and exclusively for the purpose of business. 11. A Co-ordinate Bench Tribunal of Delhi in the case of Kanu Kitchen Kulture (P)Ltd Vs DCIT (2013) 28 ITR (T) 49 (Del.-Trib.) held that whether the assessee failed to demonstrate the services rendered by the commission agent, the commiss....
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.... seems a bit out of place that the parties entered into an oral business relationship involving such huge amounts of money over a period of time". 13, The Co-ordinate Bench of Delhi in the case of Printer House Pvt.Ltd. Vs DCIT (Del.) authored by Accountant Member, after referring to the above precedence on this issue held as follows: "Thus, having regard to the ratio laid down in the above cases that in the absence of proof in support of the services rendered by the commission agent, no commission can be allowed as a deduction. Therefore, we dismiss the appeal filed by the assessee and allow the appeals filed by the revenue". 14. In the present case, the learned CIT(A) had not examined any evidence to show that the agents have actually rendered their services. The learned CIT(A) had totally misdirected himself by examining the issue from the angle of tax deducted at source and he had failed to examine whether the services are actually rendered by the commission agents or not. Therefore, we are unable to sustain the order of the learned CIT(A) and hold that the commission payments in question are not allowable keeping in view the ratio laid down in the cases cited supra. The as....
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.... second innings to make good its case. Reliance can be placed on the following decision of the ITAT: i. Asst. CIT vs. Anima Investment Ltd. (2000) 73 ITD 125(Delhi); ii. Asst. CIT vs. Arunodoi Apartments (P) Ltd. (2002) 123 Taxman 48(Gau.) The Courts have held that appeals are not to be decided for giving 'one more innings' to the lower authorities in the appellate jurisdiction. i. Rajesh Babubhai Damania vs. CIT (2001) (251 ITR 541)(Guj. ii. CIT vs. Harikishan Jethalal Patel (1987) 168 ITR 472 (Guj) Remand not for the benefit of the party seeking it to fill up gaps. Even the Hon'ble jurisdiction High Court in the case of Karnataka Wakf Board vs. State of Karnataka, reported in AIR 1996 Kar.55 at pages 63 & 64 held as under: "Where the party had an opportunity of adducing evidence in the case but with open eyes failed to adduce that evidence, the case should not be remanded to give a second chance to the party to adduce that evidence. The policy of the law is that once that matter has been fairly tried between the parties, it should not, except in special circumstances, be reopened and retrieved. In a recent decision their Lordships of the Supreme Court l....