TaxTMI 
TaxTMI 
2019 (7) TMI 1826
X X X X Extracts X X X X
X X X X Extracts X X X X
....n of DRP in assessee's own case for A.Y. 2011-12 ignoring the fact that the above decisions were rendered in the context of addition made under section 37(1) and not under section 92CA(3) ? 3. Whether on the facts and circumstances of the case and in law the Ld.CIT(A) erred in deleting the adjustment of Rs. 20,38,53,136/- made by the AO/TPO on account of management services fees without appreciating that the transfer pricing proceedings are different and standards which are applicable to deductibility of expenditure in the context of normal provisions such as section 37 can't be applicable to the transactions between associated enterprises governed by the Transfer Pricing provisions ? 4. Whether on the facts and circumstances of the case and in law the Ld.CIT(A) erred in deleting the adjustment of Rs. 20,38,53,136/- made by the AO/TPO on account of management services fees relying on the decision of Hon'ble Pune Bench of ITAT in assessee's own case for A.Y. 2009-10 and decision of DRP in assessee's own case for A.Y. 2011-12 ignoring the fact that the assessee has failed to appreciate that not only the evidence regarding rendering of services by the AE....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ly, the case was selected for scrutiny. As the assessee filed audit report in form 3CEB detailing its international transactions during the year. A reference was made to the TPO u/s 92CA(1) of the Act for determination of arm's length price of the international transactions. The TPO passed an order u/s 92CA(3) of the Act dated 28.10.2016 recommending adjustment on account of (i) Management fees of Rs. 20,38,53,136/- and (ii) Royalty payment of Rs. 20,38,53,136/-. On receipt of the TPO's order, the Assessing Officer passed draft assessment order u/s 143(3) r.w.s. 144C(1) of the Act on 28.12.2016. Accordingly, the Assessing Officer passed final assessment order u/s 143 r.w.s. 144C(3) of the Act on 20.01.2017 determining the assessed income at Rs. 1,29,86,39,730/- by making the following additions/disallowances : (i) TP adjustment u/s 92CA(3) Rs. 40,77,06,272/- (ii) Warranty provision Rs. 30,00,000/- 5. Aggrieved with the final order of the Assessing Officer, the assessee preferred an appeal before the CIT(A). The CIT(A) allowed the appeal of the assessee and deleted the additions made by the Assessing Officer. 6. Aggrieved with the said decision of the CIT(A), the Revenue is in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....py placed on record) It is also submitted that it also bears vital notice that SIL has benchmarked its transactions under the TNMM at entity level. (Page 23 of TPO) Assessee's operating margin on operating revenue comes to 7.5 % vis-a- vis average PLI of OP to Sales 6.53% of external uncontrolled comparables. TNMM is a profit based method and the fees paid for management services for operational and strategic business decisions is an interlinked transaction which is subsumed in the operating cost and has directly contributed to the operating profits of assessee. A rate for the management services fees paid to a related party is thus determined indirectly by selecting a services rate that would give assessee post, management services fees operating profits that are similar to what an unrelated party would earn by using the services. The management services fees is therefore at arm's length. Reliance is placed on the decision of Honourable Pune Tribunal in the case of Walter Tools India P. Ltd. ITA 523/PUN/2016 A.Y. 2011-12 (Copy placed on record) wherein on identical facts Hon'ble Bench has held that on the basis of aggregation of the transaction of management service f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r providing the said services. The majority of support services are being rendered by the said concern to the assessee and the perusal of expenses debited by the assessee reflects that no major expenses have been incurred by the assessee and the benefits flow from AIPL to the assessee. The said benefits were for smooth carrying on of the business by the assessee and were incurred for the purpose of business. The assessee is the best judge to decide the expenditure it needs to incur for smooth carrying on of its business. The Assessing Officer cannot sit in judgment of businessman position in incurring any expenditure. The Hon'ble Supreme Court in Hero Cycles (P) Ltd. Vs. CIT (supra) have applied the ratio laid down by the Apex court in S.A. Builders Ltd. Vs. CIT(A) and another (2007) 288 ITR 1 (SC) and upheld the scope of commercial expediency, wherein it was held that The expression "commercial expediency" is an expression of wide import and includes such expenditure as a prudent businessman incurs for the purpose of business. The expenditure may not have been incurred under any legal obligation, but yet it is allowable as a business expenditure if it was incurred on grounds ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....le of Axles, Propeller Shafts and components thereof that are finally used by the Original Equipment Manufacturers (OEMs) in the manufacture of vehicles in the automotive industry segment. The sale order raised by the Customer on appellant invariably has a clause on warranty whereby an obligation is cast on appellant to ensure that the Axles, Propeller Shafts and components thereof are fully operational as per the requirements and specifications laid down by the Customer and desired performance is given to the Customer. The cost of goods sold necessarily include warranty cost. The product/performance warranty period spans 18 months from the date of sale of the products. On the basis of its past experience based on statistical information and technical assessments and review thereof, company creates Warranty provision in its books. Since the liability undertaken by the appellant to carry out the repairs, replacements of damaged part of goods sold by it during the warranty period is an existing accrued liability at the time of sale, the same is claimed as a deduction. Identical issue had come up before the Hon'ble Tribunal in appellant's own case for the A.Y. 2012-13 and on the backd....