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2022 (6) TMI 1363
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....ction "guarantee" falls under Transfer Pricing Risk Parameter and such finding is given without bringing any material on record. 1.3. That the order of the learned TPO is void-ab-initio as the learned assessing officer has not followed the procedure laid down in Instruction No. 3 of 2016 and has referred the case u/s. 92CA of Income Tax Act, 1961 (Act) without recording the satisfaction as per Instruction No. 3 of 2016 and without providing an opportunity of being heard to the appellant. 1.4. That the learned lower authorities erred in law and on facts in holding that the CBDT Instruction is applicable for scrutiny cases selected manually and not for cases selected under Computer Aided Selection of Scrutiny. 1.5. That the finding of the learned lower authorities that the reason for selection of case for scrutiny is "Large value of international transactions in the nature of guarantee" reported in Sl. No. 15 of Form 3CEB is perverse since Form 3CEB does not show such large value. 2. TRANSFER PRICING ADJUSTMENT OF RS. 2,93,54,528/- 2.1. That the learned lower authorities erred in law and on facts in making an adjustment of Rs.2,93,54,528/-....
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....ough the same has been debited to profit and loss account and correspondingly reduced from the Trade Receivables in the Balance Sheet which amounts to write off. 4.2. That the learned lower authorities erred in law and on facts in adding provision for bad and doubtful debts of Rs.36,20,870/- to the book profits computed u/s. 115JB of the Act. 5. INTEREST EXPENDITURE CLAIMED U/S. 57(iii) OF THE ACT 5.1. That the learned lower authorities erred in law and on facts in disallowing interest expenditure of Rs.49,81,189/- claimed as deduction u/s. 57 of the Act even though such expenditure was incurred for earning the interest income of Rs. 60,13,880/- declared u/s. 56 of the Act under the head "Income from other sources". 5.2. Without prejudice to the above ground, that the learned lower authorities ought to have held that the above claim is in the nature of expenses incurred for the business and allowed the deduction u/s. 37 of the Act. Each of the above grounds are without prejudice to one another, the appellant seeks the leave of the Hon'ble Income Tax Appellate Tribunal to add, delete, amend or otherwise modify each or any of the groun....
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.... 17 of appeal memo). 3. The Ld.AR submitted that, the assessee has raised additional ground of appeal wherein following issue has been alleged before the Tribunal: "1. That the learned assessing officer erred in law and on facts in not carrying out the direction of the Hon'ble DRP in allowing depreciation on the sum of Rs.49,81,189/- 2. That the order passed on 24.03.2021 u/s. 143(3) r.w.s 144C of Income-tax Act, 1961 (Act) is barred by limitation as the reference to learned Transfer Pricing Officer is bad in law and therefore, the extended time limit u/s. 144C of the Act is not available for passing the assessment order." 4. It has been submitted that no new facts needs to be considered in order to dispose of the additional ground raised by the assessee vide application dated 22/06/2021. It is submitted that the additional ground no.2 is a legal issue that goes to the root cause of the proceedings. The Ld.AR, thus prayed for the admission of additional ground so raised by assessee. 5. On the contrary, the Ld.CIT.DR though opposed admission of the additional ground, could not bring anything on record which would challenge such a right available to ass....
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....3/2016 are not fulfilled. 10.3. It is clear that the learned assessing officer has not followed the binding instruction of CBDT and therefore, the reference to the TPO is bad in law. The learned TPO gets jurisdiction only if there is a valid reference u/s. 92CA of the Act. 10.4. The assessee relies on the decision of Hon'ble Delhi High Court in Indorama Synthetics (India) Limited Vs. Additional CIT 386 ITR 665, wherein at page 678, paragraph 22, it was held that the instruction no. 3 of 2016 is retrospective in operation and applies to all pending cases and even to a case where reference was made earlier prior to the issue of circular. The assessee relies on the following decisions wherein it was held that selection of a case for scrutiny contrary to the instructions of CBDT would make the assessment bad in law." 7.2 The Government in the budget speech promised to take appropriate steps in order to reduce litigation and providing certainty in taxation and had taken various steps relating to same by proposing to amend and incorporate new provisions in the Act"). 7.3 In continuation to their promise, the Central Board of Direct tax on 10/03/2016 took steps....
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....r scrutiny, either under the Computer Assisted Scrutiny Selection [CASS] system or under the compulsory manual selection system (in accordance with the CBDT's annual instructions in this regard for example, Instruction No. 6/2014 for selection in F.Y 2014-15 and Instruction No. 8/2015 for selection in F.Y 2015-16), on the basis of transfer pricing risk parameters [in respect of international transactions or specified domestic transactions or both] have to be referred to the TPO by the AO, after obtaining the approval of the jurisdictional Principal Commissioner of Income-tax (PCIT) or Commissioner of Income-tax (CIT). The fact that a case has been selected for scrutiny on a TP risk parameter becomes clear from a perusal of the reasons for which a particular case has been selected and the same are invariably available with the jurisdictional AO. Thus, if the reason or one of the reasons for selection of a case for scrutiny is a TP risk parameter, then the case has to be mandatorily referred to the TPO by the AO, after obtaining the approval of the jurisdictional PCIT or CIT. 3.3 Cases selected for scrutiny on non-transfer pricing risk parameters but also having internat....
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....an opportunity of being heard to the taxpayer before recording his satisfaction or otherwise. In case no objection is raised by the taxpayer to the applicability of Chapter X [Sections 92 to 92F] of the Act to these three situations, then AO should refer the international transaction or specified domestic transaction to the TPO for determining the ALP after obtaining the approval of the PCIT or CIT. However, where the applicability of Chapter X [Sections 92 to 92F] to these three situations is objected to by the taxpayer, the AO must consider the taxpayer's objections and pass a speaking order so as to comply with the principles of natural justice. If the AO decides in the said order that the transaction in question needs to be referred to the TPO, he should make a reference after obtaining the approval of the PCIT or CIT. 3.5 In addition to the cases to be referred as per paragraphs 3.2 and 3.3, a case involving a transfer pricing adjustment in an earlier assessment year that has been fully or partially set-aside by the ITAT, High Court or Supreme Court on the issue of the said adjustment shall invariably be referred to the TPO for determination of the ALP. 3....
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....n selected for scrutiny on the basis of Transfer Pricing Risk Parameters. Para 3.3 of the Instruction refers to following circumstances: • those cases which have been selected for scrutiny on Non- Transfer Pricing Risk Parameters, but also having International Transactions or Specified Domestic Transactions. • As per Para 3.3, if the AO identifies that the taxpayer has entered into international transactions or specified domestic transactions or both, but the taxpayer has either not filed the Accountant's Report under Section 92E at all or has not disclosed the said transactions in the Accountant's report, then the matter can be referred to the TPO by the AO. • As per para 3.3, the AO can refer the matter to the TPO if there has been a transfer pricing adjustment of Rs. 10 Crore or more in an earlier assessment year and such adjustment has been upheld by the judicial authorities or is pending in appeal. • The Instruction further goes on to clarify three situations in which the AO can refer the matter to the TPO. They are as under: 7.7 The Instruction further goes on to clarify three situations in which the AO can ref....
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....h the objections raised by the assessee and pass a speaking order in accordance with the provisions of the Act and as per the conditions laid down under the CBDT Instruction No. 3/2016 dated by this bench 10/03/2016? 7.10 It is noted by this bench that, Hon'ble Supreme Court has recently granted SLP against the decision of Hon'ble Delhi High Court, in an appeal filed by revenue, in case of, ACIT vs. Indo Rama synthetics reported in (2020) 114 taxmen.com 588. The issue that is pending to be decided by the Hon'ble Supreme Court is whether, the Assessing Officer was obliged to give assessee an opportunity of being heard before making reference to TPO on question of determination of ALP of alleged international transactions involving assessee and its AE. Under such it is not appropriate on behalf of this Tribunal to consider the argument raised by the Ld.AR on this issue. 7.11 In respect of the reliance placed by the Ld.AR on paragraph 3.2 of the instruction No.3(supra), there is no dispute that the case was selected for scrutiny to verify the transfer pricing risk factor, and that, the assessee had recorded the international transaction in form 3 CEB, the value of which, exceede....
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....over of AE and non-AE transaction under the trading segment. 10.1 Brief facts leading to this issue are as under: The assessee purchases certain finished products from its AE and 3rd parties. The products purchased are similar and therefore internal TNI members adopted to arrive the arm's length price. It is submitted that there is no dispute in respect of the method adopted for data mining the arm's length price. Assessee had also allocated expenses between the 2 segments being trading and manufacturing segment. The Ld.AR submits that the TPO did not dispute the allocation of expenses in respect of international transaction under the manufacturing segment to be at arms length however, the allocation of employee cost between the AE and non-AE transaction in trading segment was disputed. 10.2 The Ld.TPO called upon assessee to furnish the details of determining the employee cost of Rs. 82,05,919/- equally between AE and non-AE under the trading segment. The assessee before the Ld.TPO submitted that, the turnover of AE segment is Rs. 27 crores, whereas the turnover from Non AE segment is 3.12 crores approximately. However the value of purchases, efforts and time spent by the....
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.... the provision of Rs. 15,00,635 made during the FY 2015-16 was reversed in the accounting year i.e FY 2016-17. This is for the reason that the provision was made in the FY 2015-16 merely on an estimated basis to satisfy the relevant accounting standard. Since the liability did not exist in the next year, it was reversed in the FY 2016-17. It may be stated that in the computation of total income for AY 2017-18, the appellant had only claimed that a sum of Rs. 4,50,190 being the 30% of the provision disallowed in the AY 2016-17 should not be taken as income because of the disallowance in the earlier year. In other words, the balance sum of Rs. 10,50,445 which is credited to profit and loss account was offered to tax in AY 2017-18. It was offered to tax and tax was levied accordingly. If for any reason, the Hon'ble Tribunal were to hold that a sum of Rs. 10,50,445 is not to be allowed as a deduction, it is prayed that a direction may be given that the same amount should be excluded from the total income of the AY 2017-18. 11.3 On the contrary, the Ld.DR relied on the orders passed by authorities below. 11.4 We have perused the submissions advanced by both sides in the light ....
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....dingly reduced from the trade receivables it amounts to write off . The Ld.AR placed reliance on the decision of Hon'ble Supreme Court in case of Vijaya Bank vs. CIT & Anr. reported in 323 ITR 166 and decision of Hon'ble Bangalore Tribunal in case of Canara Bank vs. JCIT reported in 60 ITR (Trib) 1. 12.3 We have perused the submissions advanced by both sides in the light of records placed before us. 12.4 It is a claim of the assessee that the effect of bad debts written off has been taken into consideration in the books of account whereas revenue contends that assessee did not credit the amount in relation to bad debts in the profit and loss account in any of the years preceding to the year under consideration. We are of the view that the issue needs verification by the Ld.AO of the books of account and the financial statements. The Ld.AO is directed to verify the amount of provision for doubtful debts in the books of account and the book profit as be computed as per explanation 1 to section 115JB of the Act. 12.5 Needless to say that proper opportunity of being heard must be granted to assessee. Accordingly, this ground raised by assessee stands allowed. 13. Ground ....