2022 (2) TMI 1337

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....n the meaning of Section 92BA of the Act. 3. The details of Specified Domestic Transactions entered during the year were as follows: Sl.No. Specified domestic transaction Amount (Rs.) Most appropriate method Remarks 1 Purchase of Raw Materials 12,29,33,814 CUP Method The purchase of raw materials by assessee from Nutrikraft India Pvt Ltd (NIPL)is at same price as purchased by NIPL from third parties. 2 Purchase of Finished Goods 155,56,30,968 TNMM The assessee has considered its elated party NIPL as a tested party for trading segment. The margin earned by NIPL is lower when compared to margin earned by 3^rd parties and therefore purchase price of the assessee is at arm's length. 3 Managerial Remuneration 6,72,99,383 Other Method The remuneration is commensurate with the qualification, experience, expertise of the directors and hence considered as at arm's length 4  Reimbursement of expenses 8,99,95,940 Other Method Reimbursements are at cost and therefore at arm's length. With respect to purchase of finished goods, the assessee in its TP study had selected NIPL as tested party. This was for the re....

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....low : Sl.No. Company Name Weighted Average Margin [OP/OR] (%) 1 Godrej Agrovet Ltd 6.72 2 Taiyo Feed Mill Pvt. Ltd. 6.82 3 B V Bio-Corp Pvt. Ltd. 7.26 4 Baramati Cattle feeds Pvt. Ltd. 9.70   Average 7.63 8. The TPO adopted entity level figures to make TP adjustment. The revised adjustment computed by TPO was as below : Particulars Formula Amount (in Rs.) Taxpayers operating revenue OR 2,53,29,55,927 Taxpayers operating cost OC 2,60,76,39,391 Taxpayers operating profit OP  -7,74,82,813 Taxpayers PLI PLI=OP/OC  -3.06% Average Margin of comparable set M   7.63% Arm's Length Price ALP=(1-M)*OR   233,96,91,380 Total operating cost   OR 2,60,76,39,391 Shortfall being adjustment   ALP-OC 26,79,48,011 9. The addition as above was made to the total income of the assessee in the final Assessment Order by the AO against which the assessee has preferred the present appeal before the Tribunal. 10. We shall take up for consideration ground No.4 raised by the assessee as a preliminary ground as it goes to the root of th....

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....ervices referred to in subsection (8) of section 80-IA; (iv) any business transacted between the assessee and other person as referred to in sub-section (10) of section 80-IA; (v) any transaction, referred to in any other section under Chapter VI-A or section 10AA, to which provisions of subsection (8) or sub-section (10) of section 80-IA are applicable; or (vi) any other transaction as may be prescribed, and where the aggregate of such transactions entered into by the assessee in the previous year exceeds a sum of twenty crore rupees. Section 92(2), as amended provided that where in an international transaction or specified domestic transaction, two or more associated enterprises enter into a mutual agreement or arrangement for the allocation or apportionment of, or any contribution to, any cost or expense incurred or to be incurred in connection with a benefit, service or facility provided or to be provided to any one or more of such enterprises, the cost or expense allocated or apportioned to, or, as the case may be, contributed by, any such enterprise shall be determined having regard to the arm's length price of such benefit, servic....

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....e Hon'ble Karnataka High Court and hence the order of the DRP is unsustainable. The question is whether the transactions in question can be said to be an SDT. On this issue, as rightly pointed out by the learned counsel for the assessee, the decision of the ITAT in the case of Textport Overseas Pvt.Ltd. (supra) has been confirmed by the Hon'ble Karnataka High Court in the very same case of Texport Overseas Pvt. Ltd. in ITA No.392/2018 order dated 12.12.2019, with the following observations:- "5. Having heard learned Advocates appearing for parties and on perusal of records in general and order passed by tribunal in particular it is clearly noticeable that Clause (i) of Section 92BA of the Act came to be omitted w.e.f. 01.04,2019 by Finance Act, 2014. As to whether omission would save the acts is an issue which is no more res-intigra in the light of authoritative pronouneenient of Hon'ble Apex Court in the matter of KOBLAPUR CANESUGAR WORKS LTD. v. UNION OF INDIA reported in AIR 2000 SC 811 whereunder Apex Court has examined the effect of repeal of a statute visa-vis deletion/addition of a provision in an enactment and its effect thereof. The import of Section 6 of Gene....

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.... passed by the TPO and. DRP is unsustainable in the eyes of law. The said finding is based on the authoritative principles enunciated by the Hon'ble Supreme Court in Kolhapur Canesugar Works Ltd referred to herein supra which has been followed by Co-ordinate Bench of this Court in the matter of M/s.GE Thermometrias India Private Ltd., stated supra. As such we are of the considered view that first substantial question of law raised in the appeal by the revenue in respective appeal memorandum could not ITA No.2936/Bang/20180 M/s. Sobha City, Bangalore arise for consideration particularly when the said issue being no more res Integra." 16. Since the decision rendered by the Hon'ble High Court of Karnataka is binding on this bench of Tribunal sitting in Bengaluru, we follow the same. Accordingly, we hold that the reference to the TPO in respect of specified domestic transactions mentioned in clause (i) of sec.92BA is not valid, as the said provision has been omitted. Accordingly, we direct the AO to delete the addition relating to specified domestic transactions made u/s 92CA of the Act. 17. We however notice that the co-ordinate bench in the case of Textport Overseas (su....

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....dditional evidence. During the remand proceedings, the AO accepted that transactions with creditors are genuine, except for three namely, KS Enterprises, Ritesh Kumar Vasant Kumar & Manoj Traders for Rs.30,94,014/- Rs.5,17,710 and Rs.16,75,369/- respectively. The Appellant vide letter dated 24.02.2021 submitted that it has inadvertently mentioned PAN of Manoj Traders as AXFPS8517S instead of AXFPS8517C & also provided PAN of KS Enterprises. The DRP directed the AO to delete the necessary additions after verifying the genuineness of KS Enterprises & Manoj Traders. 20. Pursuant to the aforesaid direction of the DRP, the AO before passing the impugned order issued notice u/s 142(1) of the Act dated 19.04.2021 to the assessee requesting details of KS Enterprises & Manoj Traders. Against this, the assessee vide response dated 21.04.2021 (Pg 854-855 of Paper Book I) filed the following details: Name of the Party Supportings Reference KS Enterprises Copy of Ledger extract Pg 856-857 of Paper Book-I   Copy of Confirmation Letter Pg 359 of Paper Book-I   Bank Statements Pg 860-875 of Paper Book-I   Purchase register along with samp....