TaxTMI 
TaxTMI 
2020 (11) TMI 451
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....directions issued by Ld. Dispute Resolution Panel (DRP). 2. At the time of hearing, the Ld. AR submitted that the assessee is pressing grounds numbered as 4 (b) to 4(d) and ground No.6. Accordingly, the remaining grounds are dismissed as not pressed. The ground Nos.4(b) to 4(d) relates to Transfer Pricing adjustment made in respect of specified domestic transactions and ground No.6 relates to interest charged u/s 234A of the Act. 3. The assessee company is engaged in the business of providing energy management solutions to telecom and telecom tower operators. During the year under consideration the assessee has entered into specified domestic transaction with its associated enterprises as detailed below: Specified Domestic transact....
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.... cost 1150146747 Operating profits 50895002 Operating profits/Operating revenue 4.24% The segmental financials of the taxpayer for the F.Y. 2014-15 as computed by the TRPO are as under: Particulars Amount in INR Total income 1209752366 Less: Other income 34204985 Total Operating income 1175547381 Total expenses 1171416508 Less: Finance cost 21243109 Total Operating expenses 1150173399 Total Operating Profit 25373982 OP/OC 2.21% OP/OR 2.16% 6. The assessee had also sought for working capital adjustment and it was rejected by the TPO by observing that the adjustments cannot be provided in a generic manner without showing as to how difference in working capi....
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....ring into an agreement dated 8.5.2014. The assessee purchased business of GE Power as a going concern on slum sale basis on mutually agreed terms and conditions as laid out in the agreement. Post the purchase of business, the name of the assessee was changed to M/s. Lineage Power Pvt. Ltd. 9. As per the agreement, all the contracts entered into by GE Power hither to shall be transferred to the assessee. It was noticed the assessee had entered into a lease agreement for fixed period of 9 years with a lock in period of 9 years. The submissions made in respect of the lease agreement before Ld. DRP are extracted below. • "The Agreement on page 21 para 6.1.3 clause (iii) also provides that the lease agreement as entered into by G....
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....s premises through which it was conducting its existing business operations, communicated its concern to GE Power that it could not take over the lease premises and bear the rental expenditure as it would increase its operating cost and impact its working capital requirements. • GE Power, realizing the fact that the Assessee had reservation on taking over the lease property and this would act as a hinderance in successful transfer of the business to the Assessee, as a matter of business prudence agreed to bear the cost of rental expenditure for further period of 24 months post the business transfer and such amount would be transferred immediately to the Assessee. Post 24 months, the Assessee had to bear the rental expense. Acco....
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....5, Assessee occupied the above leased property for a period of 9 months starting from 01.07.2014 and ending on 31.03.2015. During FY 2014-15, Assessee has incurred a total of Rs. 2,75,55,090/- as rental expenditure. Out of the said expenditure, Rs. 2,54,94,368/- was relating to the premises for which it had received reimbursement from GE Power. Accordingly, while computing its operating margins, the Assessee considered Rs. 2,75,55,090/- as part of its operating cost and the reimbursements received in respect of rental expenditure amounting to Rs. 2,54,94,3681-. as part of operating revenue. The reimbursement received is also offered to Tax by the Assessee. • However, while computing operating margin of the Assessee, the learned....
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....e. Accordingly, a sum of Rs. 2,54,94,368/- was appropriated towards the rental expenditure during the year under consideration and accordingly, the assessee has treated the above said amount as reimbursement received by it towards rental expenditure. It is pertinent to note that the assessee has paid rent of Rs. 2,75,55,090/- during the year under consideration. 12. The question that arises is whether the reimbursement amount received by the assessee can be ignored while considering the rental expenditure as operating expenditure. 13. In our considered view, it is imperative to examine as to whether the assessee has utilised the premises for which rental has been paid for the purpose of business carried on by the assessee. If the said....