TaxTMI 
TaxTMI 
2022 (11) TMI 233
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....he Act was recalled and appeal was directed to be re-fixed for hearing. 3. In this appeal, the assessee has raised following grounds:- "1 Addition on account of reimbursement of expenses to AE as per order of TPO "(i) The Ld. CIT (A) erred in law and facts in upholding order of Transfer Pricing Officer (TPO)/AO making adjustment of Rs. 6,94,24,899/- to income on account of reimbursement of expenses to AE by determining ALP at Rs. Nil. The reasons given by him for doing so are wrong, contrary to the facts of the case and against the provisions of law. (ii) The CIT (A) erred in law and facts in upholding order of Transfer Pricing Officer (TPOVAO treating reimbursement of expenses as payment for services rendered by AE. The reasons given by him for doing so are wrong, contrary to the facts of the case and against the provisions of law. (iii) The Ld. CIT (A) ought to have held that there is no need to find ALP of reimbursement of expenses as there is no income content and it has not resulted into any direct or tangible benefit to the assessee. (iv) The Ld. CIT (A) erred in law and facts in upholding the order of A.O. in alternatively disa....
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.... its original return of income on 30.09.2009 declaring loss of Rs. 13,03,66,534. The return of income was subsequently revised on 31.03.2011 declaring current year loss of Rs. 12,64,10,325. During the course of assessment proceedings, reference was made to the Transfer Pricing Officer ('TPO‟) for determination of arm's length price of international transactions entered into by the assessee. During the course of transfer pricing assessment proceedings, the assessee was asked to provide the details of reimbursement made by the assessee to its AEs. In reply, assessee submitted that the expenses amounting to Rs. 6,94,24,899 were reimbursed to the AE pertaining to the pilot project, wherein the AE was involved in the process of implementation of FITA (future business and IT architecture), standardisation set across the KUONI Group Worldwide. The TPO vide order dated 30.11.2012 passed under section 92CA(3) of the Act held that the assessee has not proved that the services availed were essential and beneficial for its business. The TPO further held that the assessee has not been able to submit any credible evidence to prove that any services has been rendered by the AE. Accordingly,....
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....e subsequent year. Accordingly, it was submitted that there is no objection if entire amount of Rs. 6,94,24,899/- is disallowed under section 40(a)(ia) of the Act in the year under consideration. On the other hand, learned Departmental Representative ('learned DR') vehemently relied upon the orders passed by the lower authorities. 9. Since, in the present case, it is an accepted fact that no TDS has been deducted in respect of payment of Rs. 5,99,10,554/-, therefore, the same is disallowable under section 40(a)(ia) of the Act. Further, in respect of balance payment of Rs. 95,14,345/- nothing has been brought on record to show that tax was deducted at source. Accordingly, the balance payment is also disallowable under section 40(a)(ia) of the Act. It is plea of the assessee that in subsequent year the requisite tax has been deducted and, therefore, expenditure may be allowed as deduction in the subsequent year. Further, we find that the TPO has also made adjustment of Rs 6,94,24,899/- in absence of proof of rendition and benefit of the services to the assessee. In view of the above submission, we deem it appropriate to direct the AO to disallow the expenditure in this year by inv....
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....ard contracts on the basis of underlying purchases, sale contracts and there are no speculative contracts. 14. The Revenue has disallowed the loss arising on account of foreign exchange forward contract as a notional loss. We find that in CIT vs. D. Chetan & Company (2017) 390 ITR 36 (Bom.), following question of law came for consideration before the Hon'ble jurisdictional High Court: "Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in deleting the addition of "Mark to Market‟ Loss of Rs. 78,10,000/- made by the Assessing Officer on account of disallowance of loss on foreign exchange forward contract loss and not appreciating the fact that the said loss was a notional loss and hence cannot be allowed.?" 15. While deciding the same, the Hon'ble jurisdictional High Court observed as under: "7. The impugned order of the Tribunal has, while upholding the finding of the CIT (Appeals), independently come to the conclusion that the transaction entered into by the Respondent assessee is not in the nature of speculative activities. Further the hedging transactions were entered into so as to cover variation in for....
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....amonds (P) Ltd. (supra). In the above case, this court has held that forward contract in foreign exchange when incidental to carrying on business of cotton exporter and done to cover up losses on account of differences in foreign exchange valuations, would not be speculative activity but a business activity." 16. As is evident from the record, in the present case, the Revenue has disallowed the foreign exchange loss on the basis that the same is notional in nature. It is also not been denied that these contracts are entered into by the assessee in the course of its business of travel agent and tour operator. Therefore, respectfully following the aforesaid decision of Hon'ble jurisdictional High Court, we direct the AO to delete the addition made on account of disallowance of Mark to Market loss. As a result, ground no. 2 raised in assessee's appeal is allowed. 17. The issue arising in ground no. 3, raised in assessee's appeal, is pertaining to disallowance under Section 14A of the Act. 18. The brief facts of the case pertaining to this issue are: During the year under consideration, the assessee earned dividend income of Rs. 75,456, which was claimed as exempt from tax. Fu....