2023 (3) TMI 458

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....spute Resolution Panel-1, Bengaluru (DRP) u/s 144C(5) dated 30.12.2016. The Ld. Transfer Pricing Officer-2(1), Chennai (TPO) has determined Arm's Length Price (ALP) of international transactions u/s 92CA(3) vide order dated 27.01.2015. The grounds raised by the assessee read as under: - 1. The order of The Deputy Commissioner of Income Tax, Pondicherry Circle, Pondicherry dated 15.02.2017 u/s 143(3) r/w section 144C(5) of the Act for the above assessment year is contrary to law, facts, and in the circumstances of the case. 2. The DCIT erred in mechanically adopting the directions of the DRP vide order dated 30.12.2016 in computing the taxable total income for the Assessment Year under consideration without assigning proper....

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....ents for such services, the addition made in the computation of taxable total income on two counts was wrong, erroneous, unjustified, incorrect and not sustainable in law. 9. The DCIT failed to appreciate that the sustenance of the said addition for the payments made to the outsourced agencies without considering the prescription of DTAAs was wrong, erroneous, unjustified, incorrect and not sustainable in law. 10. The DCIT erred in disallowing Rs.1,64,24,085/- being the loss suffered in dealing in forex derivatives on the misconstruction of section 43(5) of the Act and consequently erred in adding back such sum in the computation of taxable total income both under normal computation as well as in the MAT regime without ass....

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.... outstanding beyond comparable period was proposed to be treated as separate transaction of interest free advances as per Sec. 92B(1). The maximum credit period was accepted to be 90 days and outstanding receivables beyond that time period were benchmarked at prime lending rate of 14.4%. The same resulted in to an adjustment of Rs.57.14 Lacs. 3.2 Before DRP, the assessee submitted that it did not charge any interest from AE as well as non-AEs. No finance cost was incurred. The delayed realization was beyond the control of the assessee and not to bestow any benefit on the AE. It was also submitted that the assessee was a zero debt company and it did not have any borrowings from external sources and therefore, it was not required to pay an....

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....ke the disallowance u/s 40(a)(i). The assessee submitted that TDS was not required in terms of Sec.195 since the vendors were foreign nationals and the services were rendered outside India. These vendors do not have permanent establishment in India and therefore, the income would not arise in India. However, the assessee could not produce any agreement to demonstrate the nature of services availed by the assessee. The services were termed as technical services u/s 9(1)(vii) which would require TDS u/s 195. Accordingly, disallowance u/s 40(a)(i) was made by Ld. AO. 4.2 The position remained the same before Ld. DRP and the assessee could not submit requisite documentary evidences in support of its claim. Accordingly, this issue was held ag....

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....sactions could not be termed as speculative transaction u/s 43(5). However, rejecting the same, Ld. DRP confirmed the stand of Ld. AO. Aggrieved, the assessee is in further appeal before us. 5.3 The Ld. AR explained that the assessee was exposed to foreign exchange risk which was sought to be covered by forex derivatives. Accordingly, these transactions could not be termed as speculative or notional loss in nature. The Ld. AR submitted that the quantum of transactions is commensurate with the forex exposure of the assessee and represented by underlying assets. Considering the same, we restore this issue back to the file of Ld. AO for fresh consideration with a direction to the assessee to substantiate its claim. 6. Disallowance u/s 14....