AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2023 (3) TMI 809
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....es to its AEs, reimbursement and recovery of expenses to/from its AEs. We shall discuss the functions performed under each of the segments while discussing the adjustment determined by the TPO. 3. In the TP study maintained for the year under consideration, the Assessee treated all the international transactions as being at arm's length. During the year, the Assessee also recovered certain advertisement expenses from Intel USA ("Intel") and Microsoft USA ("Microsoft"). Since the transactions were with unrelated parties, the assessee did not benchmark the same. During the course of assessment proceedings, reference was made to the Transfer Pricing Officer (TPO). The TPO passed an order dated 30.01.2014 under Section 92CA of the Income-tax Act, 1961 ("the Act") determining a TP adjustment aggregating to Rs. 14,50,39,631/-, comprising of the following: A. Adjustment determined by bifurcating the marketing and business support services segment into ITES segment (adjustment of Rs. 2,47,46,975/-) and MSS segment (adjustment of Rs. 2,75,92,656/-); and B. Adjustment of Rs. 9,27,00,000/- determined in respect of the warranty expenses. 4. Pursuant to TP adjustment, a draft assessment....
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....d TPO / Hon'ble DRP erred in not considering provision of doubtful debts as non-operating item. 20. The learned AO / learned TPO / Hon'ble DRP erred in using data as at the time of assessment proceedings, instead of that available as on the date of preparing the TI documentation for comparable companies while determining arm's length price. 21. Business Support Services 21.1 The learned AO / learned TPO / Hon'ble DRP erred in arbitrarily arriving at segmental profit/loss with respect to business support services segment and bifurcating it in technical support services and marketing support services. 21.2 The learned AO / learned TPO / Hon'ble DRP erred in analyzing the business support services segment and accordingly, erred in not appreciating the fact that the services cannot be segregated as the activities of the same are intertwined. 22. Technical Support Services 22.1 The learned AO / learned TPO / Hon'ble DRP erred in arbitrarily arriving at segmental profit wish respect of technical support services segment. 22.2 The learned AO / learned TPO / DRP erred in rejection of comparability analysis carried in the TP documentation and in ....
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.... learned TPO / Hon'ble DRP erred in excluding companies are functionally comparable to the assessee. Specifically, the Appellant believes that the IT(TP)A Nos.400 & 562/Bang/2015 Page 7 of 73 following companies should be accepted by the learned AO/learned TPO: * New Age Entertainment Limited * Concept Communication Limited * India infoline Marketing Services Limited * Marketing Consultants & Agencies Limited * Coloscemn Media Private Limited 23.5 The learned AO / learned TPO erred in not following the directions of the DRP and erred in not giving the relief for allowing working capital adjustment. 24. Warranty Cost 24.1 The learned AO / learned TPO / Hon'ble DRP erred in not following the directions given by the Hon'ble DRP and arbitrarily identifying the warranty cost recoverable and imposing a markup on the said warranty cost. 24.2 The learned AO / learned TPO / Hon'ble DRP erred in not considering the fact that the cost of providing warranty had already recovered with a mark-up and therefore, any further adjustment is unwarranted. 24.3 The learned AO / learned TPO / Hon'ble DRP erred in not appreciating the fact that the adjustm....
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....he AE on behalf of the AE. Since the so called ITES are being rendered to third parties, it cannot be subject matter of TP assessment. The ld AR also submitted that the major post-sales support in relation to the warranty support and co-ordination, i.e., call centre support is not being provided by the Assessee directly to its AEs. The Assessee has outsourced these services to another Group Entity in India which is compensated at an arm's length mark-up of cost plus 15%. The ld AR drew our attention to the decision of this Tribunal in the Assessee's own case for the assessment year 2009-10 (Order dated 18.03.2022 passed in IT(TP)A Nos. 269 and 217/Bang/2014) and submitted that the above issue is squarely covered by this decision. 12. The ld DR supported the orders of lower authorities 13. We heard the rival submissions and perused the material on record. We will look at the definition of ITES as defined in Rule 10TA(e) of the Income-tax Rules, 1962, which reads as under:- "information technology enabled services" means the following business process outsourcing services provided mainly with the assistance or use of information technology, namely:- (i) back office operations;....
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....promotion services. The technical services are provided to the customers of products, and as such cannot be compared to the function of provision of ITES service. Therefore. we are no in agreement with the TPO's view in comparing such services to call entre activity, and there is no information for the TPO to take such a view. Besides, we note that all these functions is provision of logistics support, marketing support and technical support have interrelation in the facts & circumstances of the case. Therefore, it would not be appropriate to segregate them into Technical Services & Marketing Supports services. Accordingly, the TPO's action in such segregated analysis is disapproved. The TPO is directed to consider the Marketing support and Technical Support as an integrated function and such integrated revenue of these two activities may be benchmarked as Marketing Support Service. Accordingly, the TPO's benchmarking analysis with regard to Marketing Support Service would be considered applicable for this integrated Market Support & Business Support Services. The TP analysis made by the TPO by taking comparables relating to IES segment are here by rejected. The TPO is a....
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....ort services includes call centre support, cost for third party services for assistance to customers of the AEs, etc. The cost of spares and parts to be replaced under the warranty are borne by the AEs. 18. The TPO made an adjustment on the basis that the Assessee had not made any recovery towards the warranty services and the out of pocket warranty charges paid to third parties and the same was upheld by the DRP. 19. The ld AR submitted that the Assessee has in fact recovered the expenses incurred in respect of the warranty services, with a mark-up of 5%. Therefore, no further adjustment is warranted. The ld AR also submitted that the above issue is squarely covered by the decision of this Hon'ble Tribunal in the Assessee's own case for the assessment year 2009-10 (supra). 20. We heard the DR. We notice that the coordinate bench of the Tribunal in assessee's own case (supra) for has considered the issue of adjustment towards warranty cost and held as under :- "8.7. We have heard rival submissions and perused the material on record. The assessee had submitted that the amount of Rs.211.42 crore does not pertains to the sales made by the AEs in India and it pertains solely to th....
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....tflow of cost/resources would occur only in subsequent period when the actual service are rendered and no cost would be incurred in the current period which requires deferral. The learned AO and the Honourable DRP ought to have appreciated that recognizing the entire consideration as income during the current year would tantamount to taxing the gross receipts and not the profits or gains arising from such sale. Right to receive The Honourable DRP has erred in stating that the appellant has the right to receive the income as even when customers opt to cancel the contract, the unutilized balance was not refundable to the customers. The learned AO and the Honourable DRP ought to have appreciated that as per the terms of sale, the customer has an option to cancel the contract and seek refund of money, if any, already paid. Further, the learned AO and Honourable DRP ought to have appreciated that the said method of accounting has been consistently followed by the appellant year-on-year. Notwithstanding the above contention, if the deferred revenue is taxed in the current year, corresponding relief ought to be provided in the subsequent year where the same is offered to....
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.... be provided in future. the income would accrue only during such period and not in current financial year. * The above view has been upheld by many appellate authorities in various judicial precedents wherein it was held that, "Deposits or advances received by the assessee became trading, receipts when the assessee became entitled to appropriate the same to its income at the time of rendering the service- * The learned AO also ought to have appreciated the upward and downward movement in the deferred revenue account for various financial year which demonstrate the fact that the income has been offered to tax in the respective year of accrual. The movement of deferred revenue account is submitted below: FY 08-09 FY 09-10 FY 10-11 FY 11-12 2,169.175,957 3,418,045,943 1,422,129,676 3,648,364,071 * The learned AO has erred in not accepting the matching concept of accounting enunciated by the Generally Accepted Accounting Principles. The assessee Company, in line with the matching principles of accounting, has recognized the revenue in respect of contracts spanning over current financial year would be recognized proportionately in the year of providing the servi....
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....ief ought to be provided in the future years where the same is offered to tax." 27. The working for deferred service income was provided before the DRP vide submissions dated 12th November 2014 giving the order-wise listing of the consideration deferred to subsequent year out of current year sales and the consideration deferred during the earlier years recognized as revenue during the current year on accrual basis containing, inter-alia, the following details were made available :- i. Order number ii. Invoice date iii. Invoice period iv. The amount of income which falls outside FY 2009-10 and deferred and amount recognized during the year v. Sample invoice copies 28. The AO's observation is that there is no deferral of cost. There will be no deferred cost for such income as the same has not been incurred. Since the services are to be rendered in the future years, the Assessee has neither recognized revenue to this extent, nor the cost to be incurred in this regard. The cost will be incurred in the subsequent year and thus, booked in the respective year. 29. In AY 2009-10, when originally the difference between service tax returns and the financial statements were....
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....he applicable product and services return policy for Customer's geographic location, Customer may terminate this Service within a defined number of days of Customer's receipt of the Supported Product by providing Dell with written notice of cancellation. If Customer cancels this Service within that period, Dell will send Customer a full refund less the costs of support claims, if any, made under this Service Description. However, if that period has transpired since Customer's receipt of the Supported Product, Customer may not cancel this Service except as provided by an applicable state/country/province law which may not be varied by agreement. Dell may cancel this Service at any time during the Service term for any of the following reasons: Customer fails to pay the total price for this Service in accordance with the invoice terms; Customer refuses to cooperate with the assisting analyst or on-site technician; or Customer fails to abide by all of the terms and conditions set forth in this Service Description. If Dell cancels this Service, Dell will send Customer written notice of cancellation at the address indicated on Customer's invoice. The notice....
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....imilar issue and held that - "91. We have carefully considered the rival submissions. The first aspect which we would like to clarify is that it was not correct on the part of the AO to characterize the sum of Rs.5,38,22,153 as undisclosed income. The income is disclosed in the books of accounts but is not recognized for the purpose of income tax computation because of the Assessee's accounting policy which in turn is based on AS-9 of ICAI. The second aspect which has to be clarified is that the deferment of revenue as not pertaining to the relevant AY 2009-10 is also substantiated by the Assessee and the basis of deferral of revenue is clearly given in paper book no.7 pages 1620 to 1897. Therefore there can be no dispute that the income deferred did not pertain to AY 2009-10, if one were to accept that deferral of income, though it has accrued to an Assessee, is possible. The principal question therefore that needs to be addressed is regarding whether deferring revenue is permissible under the mercantile system of accounting followed by the Assessee where income that accrues or arises to an Assessee has to be regarded as income. 92. The learned counsel for the Assessee in....
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....system of accounting, the taxability is to be based on receipt basis and not on accrual basis. Receipt, either accrued or deemed, is not made a condition precedent to taxability. Profits or gains are taxable if they have accrued or have arisen or are, under the Act, deemed to have accrued or arisen to the assessee in the accounting year. Generally, income must accrue first, receipt normally follows the accrual. In other words, the right to receive must come into existence before the actual receipt takes place. Receipt, by itself, is not sufficient to attract tax. It is only receipt as 'income' which would attract tax. Every receipt by the assessee is, therefore, not necessarily income in his hands. It bears the character of income at the time when it accrues in the hands of the assessee and then it becomes eligible to tax. What is relevant to determine whether money received is income or simply an advance, is the initial character of the receipt and not the head under which the amount is credited in the books of account. If no income has resulted, it cannot be said that income accrued merely on the ground that the assessee has been following the mercantile system of account....
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....d not represent income of assessee at time of raising progress bills and same therefore had no effect whatsoever on income of assessee, which was recognised by method of percentage of completion. The Assessing Officer, however, held that amount due to customers as shown by assessee was nothing but understatement of its profits and added same to total income of assessee. On further appeal the question before the Tribunal was as to whether amount due to customers as shown by assessee was nothing but receipt of advance before accrual of income and, therefore, same could not be treated as income of assessee at point of receipt. The Tribunal held in favour of the Assessee. 96. As far as the decision of the Tribunal in the case of Optum Health & Technology (India) (P.) Ltd., is concerned, as rightly contended by the learned counsel for the Assessee the facts were that the sums were received in advance and in respect of the sums received services were also performed but still the Assessee did not recognize revenue but postponed recognition based on the bills raised on the clients for services performed. Though there are observations in the order of the Tribunal that postponement of rec....
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....the issue. For a proper adjudication of the issue and for substantial cause, the additional evidence is admitted and taken on record. We also notice that the DRP has not considered the evidences submitted by the assessee before the DRP. Therefore we remit this issue to the AO for verification of the evidence afresh and decision in accordance with law, after giving a reasonable opportunity of being heard to the assessee. Advances written off (Ground No.3) 40. The assessee had debited an amount of Rs.12,24,49,541 as advances written off comprising of the following:- - Fixed deposit to sales tax dept - Rs. 17,10,000 - Service tax receivable - Rs.10,76,66,451 - Receivable from Intel towards reimbursement of advertising expenditure - Rs.1,30,73,090. 41. The AO rejected the claim of the assessee on that ground that deposit with sales tax department and service tax receivable cannot be written off as these are due from Government. With regard to Intel the AO did not allow the claim as no evidence of income admitted in the earlier year was furnished. The DRP allowed receivables from Intel based on further evidences submitted. However, the DRP confirmed the disallowance with re....
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....unt as and when recovered is offered to tax has merits. It is submitted that the amount in the year under consideration is claimed basis the actual write off against the reversal of the provisions. The fact that provisions when created during the assessment year 2008-09 and 2009-10 are disallowed in the computation is substantiated by the computation statement relating to these years which were submitted as part of paper book. Given this the amount claimed as deduction on actual write off if disallowed will result in double disallowance provided the provisions are reversed and credited to the P&L account of the year under consideration. This fact needs to examined based on evidences submitted in order to decide on the allowability of the advances write off. We therefore remit this issue back to the AO to verify the claim of the assessee factually based on evidences and allow the claim accordingly after giving an opportunity of being heard to the assessee. Provision for warranty and warranty expenses (Ground No.4) 45. The Assessee had created a provision of Rs. 171,64,00,000/- towards its obligation to provide warranty services, which it claimed as a deduction. Out of the same, R....
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....faults reported and costs incurred in servicing them. e. The assessee neither creates the provision customer wise nor the utilization of such provision for warranty would be tracked customer wise. The tracking is based on the products and not customers. The warranty service for products sold is carried out based on the service tag number ascribed to each such product. Hence, non-submission of the list of customers for whom the warranty expense has been incurred cannot be the basis to conclude that the assessee does not create provision for warranty on a scientific basis, as has been done by the AO. f. Further, there are automatic reversals of the provision when products go out of warranty period. For the purpose of estimating the warranty provision, the assessee takes into account only those units in respect of which the warranty period has not expired as on the date of estimating the provision. g. Thus, the closing provision as on 31st March 2010 represents the cost involved for servicing the units for which the warranty period has not expired as on that day. h. Accordingly, the system would automatically exclude those products for which the warranty period has expired....
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.... India (P.) Ltd. v. Dy. CIT [2018] 89 taxmann.com 44 (Bang. - Trib.), reads as follows:- "21. We have given a very careful consideration to the rival submissions. The basis on which provision for warranty was made by the assessee was that the Assessee has arrived at a model for ascertaining the warranty cost, based on the type of equipment, periodicity of warranty and nature of commitment. The Assessee has a specialized warranty accounting team which tracks the incidents reported for each product country-wise and associated cost of providing warranty services. The total sales are divided into various categories of IT hardware products based on the warranty periods attached to each such product. The faults are tracked on the basis of a unique identification number attached to each IT hardware so as to identify cases of faults. The warrant cost is a product of the Field Incident Rate i.e., the number of repairs and the Cost per Incident. Field Incident Rate is determined based on the actual faults reported over the earlier years, the Cost per Incident is determined a scientific basis based on the past experience, which is the sum of the following: - Cost of Spare Parts; - Cos....
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....a detailed methodology of estimating the warranty provision before the AO vide its submission on 17-3-2006 for AY 2003-04. An extract of the acknowledged copy of the same is attached herewith as Annexure 2. Please find below a summary of the same: The company has arrived at a model for ascertaining the warranty cost, based on the type of equipment, periodicity of warranty and nature of commitment. The company has a specialized warranty accounting team which tracks the incidents reported of reach product country-wise and associated cost of providing warranty services. The total sales are divided into various categories of IT hardware products based on the warranty periods attached to each such product. The fault are tracked on the basis of a unique identification number attached to each IT hardware so as to identify cases of faults." He also placed a chart in the paper book showing methodology of provision for warranty: From the above details, it is clear that provision for warranty is made following scientific method. From the chart it is also clear that as against provision of Rs. 144,114,000/- an amount of Rs. 11,97,00,000/- was utilized in the subsequent year which is al....
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....apitulate the background of the Tribunal order for assessment years 2002-2003 and 2003-2004. In the first round, the Tribunal vide its order dated 16-12-2017 (in ITA Nos.362/Bang/2007 & 363/Bang/2007) dismissing the appeals filed by the Revenue. The said order was challenged by the Revenue before the Hon'ble High Court of Karnataka in CIT v. Dell International Services India (P.) Ltd. [IT Appeal Nos. 448 and 449 of 2008. The Hon'ble High Court of Karnataka vide judgment dated 26-9-2012, remanded the matter to the Tribunal to decide the issue in the light of Hon'ble Supreme Court's judgment in Rotork Controls India (P.) Ltd. v. CIT [2009] 180 Taxman 422/314 ITR 62 (This is what is referred to by the AO in page 25, para 3 in the assessment order for assessment year 2009- 2010). After remand, this Tribunal further remanded the matter to the Assessing Officer vide order dated 13-2-2015. The same was challenged by the assessee before the Hon'ble High Court of Karnataka in Dell International Services India (P.) Ltd. v. Asstt. CIT [2017] 88 taxmann.com 451/[2016] 382 ITR 37 (Kar.), set aside the remand order passed by the Tribunal and directed the Tribunal to decide th....
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....the amount of Rs. 41,56,91,891/-, an amount of Rs. 20,37,71,038/- represented rebate which was not subject to TDS, the DRP directed the AO to verify the details submitted by the assessee and restrict the disallowance to the extent that tax has not been deducted or not paid within the stipulated period. In the final assessment order the AO made a disallowance of Rs.20,37,71,038 stating that the payments attract provisions of section 40(a)(ia) for non-deduction of tax at source u/s.194H. 54. The ld AR submitted that the sum of Rs. Rs.20,37,71,038 represents rebate payment to distributors on which the provisions of TDS are not applicable. It was further submitted that the Assessee is in the business of manufacture and trading of computers along with related accessories that are sold goods through its distributors by adopting two models for distribution as described under: A. Bill to Order Under this model, the distributor undertakes to collate orders from the prospective customers on behalf of the Assessee and acts as an agent between the customer and Assessee for which the distributor earns commission at a prescribed rate on every successful order. The Assessee is ultimately re....
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.... The ld. DR relied on the orders of the lower authorities. 57. We have considered the rival submissions and perused the material on record. The assessee is distributing the products under two models i.e. Sales through distributors who act as agents and gets compensated on a commission basis. The second model is where the products are sold to the distributor and the distributer get a rebate in the products purchased based on the business volume. When the relationship between the assessee and the distributor is on a principal to principal basis, the rebate /volume discount given by the assessee on the price of products sold to distributer cannot be characterized as commission in order to attract section 194H of the Act thereby there is no liability to deduct tax at source. We notice that the Hon'ble jurisdictional High Court has expressed a similar view in the case of Bharti Airtel Ltd (supra) where it is held that - "51. From the aforesaid clauses, it is clear that there is no relationship of principal and agency. On the contrary, it is expressly stated that the relationship is that of principal to principal. Secondly the Distributor/Channel Partner has to pay consideration for t....
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....n finance lease and that the Assessee has claimed deduction of lease rental which is a capital expenditure and disallowed an amount of Rs. 7,58,53,797. Following the directions issued in the Assessee's case for the AY 2009-10, the DRP confirmed the disallowance. 62. Before us, the ld. AR submitted that the AO has brought to tax the entire principal portion of lease rentals amounting to Rs. 7,58,53,797/-in the current year, although the entire lease rental income does not accrue in the first year and the same ought to be taxed as and when they accrue over the lease period. The lease is a cancellable lease at the option of the lessee (clause 21). Hence, considering the entire lease rental as income accrued for the year and taxing the same in the current year is incorrect. It was further submitted that the AO has accepted that the interest component of the lease would accrue as and when the same is due. The same ought to apply for the principal component as well. Thus, the entire principal portion of the lease rentals does not accrue in the current year but accrues over the period of the lease. The ld. AR further submitted that this issue is covered in the Assessee's favour by the de....
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....does not accrue in the first year as the same ought to be taxed as and when they accrue over the lease period we hold that the amount of Rs.7,58,53,797 does not accrue to the assessee in the year under consideration and therefore delete the addition made by the AO in this regard. This ground is allowed in favour of the assessee. Deduction of provision disallowed under section 40(a)(ia) in AY 2009-10 reversed in the current AY (Ground No. 7) 66. During the AY 2009-10, the Assessee had suo motu made a disallowance of Rs. 22,05,17,807/-, being provision created towards various items, on which taxes were not deducted at source. In the AY 2010-11 under consideration, the Assessee reversed the same in its accounts and claimed the expenditure on actual basis on which taxes were deducted at source. Since the aforesaid amount of Rs. 22,05,17,807/- had already been offered to tax in the previous AY, the Assessee claimed the deduction of the same in the computation of income for AY 2010-11. During the course of hearing the AO called on the assessee to furnish the details of tax deducted at source on the amount claimed as deduction. Since the assessee was able to furnish evidences of tax de....
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....perused the materials on record. The chart showing details of the section 40(a)(ia) allowance claimed in the year under consideration which is submitted as additional evidence is extracted below Sl No Nature of expenses Amount of provision disallowed in AY 2009-10 u/s 40(a)(ia) (A) Listing with the actual invoices raised in AY 2010-11 (B) C=(A-B) Reversal entries made out of the amounts mentioned in (A) (D) Balance (C-D) 1. Advertising 7,26,35,204 7,15,90,630 10,44,574 6,80,93,152 2. Repairs and Maintenance 2,70,56,573 - 2,70,56,573 2,66,24,360 4,32,213 3. Freight Charges 11,66,34,963 11,48,59,720 17,75,243 - 17,75,243 4. Audit Fees 41,91,067 48,66,723 (6,75,656) 41,91,070 - 22,05,17,807 19,13,17,073 2,92,00,734 9,89,08,582 22,07,456 72. According to the ld AR the accounting practice of the assessee is to make the provision for expenses 31st March of the financial year and reverse the same on the 1st day of April of subsequent financial year. The assessee disallowed the provision made on 31st March of 2009 in the computation of income for the assessment year 2009-10. The same amount is claimed as a deductio....
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....tantiated by the evidences submitted by the assessee whereby it is demonstrated that there is no doubt allowance expenditure then the assessee would be entitled to claim the amount disallowed in the previous assessment year as otherwise it would amount to double disallowance. We therefore remit the issue back to the AO to verify the ledger and general entries of the assessee for the year under consideration and allow the expenditure in accordance with law. The assessee may be given a reasonable opportunity of being heard in this matter. The appeal is allowed in favour of the assessee for the statistical purposes. Disallowance of expenditure - repairs and maintenance (Ground No. 8 73. During the course of assessment proceedings the Assessee had submitted ledger extract of repairs and maintenance expenses incurred along with details of TDS wherever applicable. The AO identified certain line items in the ledger submitted as under and proposed disallowance for an amount of Rs. 25,68,87,844/- for want of evidence and also holding the same to be capital in nature. Sl. No. Particulars Amount (in Rs.) 1 Post 2006 22,349,449 2 SW Schedule accrual 201,145,200 3 Amort of Comsoft....
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.... software license and support services from Dell Global was revenue in nature while directing the allowance of Rs. 22,34,94,650 and in effect accepted that the payments towards software license and support services is revenue in nature. Therefore the ld AR prayed that the items at sl. Nos. 3, 5, 6 and 7 which are in the nature of software license and support services should also be allowed on the basis of the aforesaid explanation. Reliance was placed on CIT v. N.J. Invest India P. Ltd. [2013] 32 taxmann.com 367 (Gujarat). 78. The ld. DR supported the orders of lower authorities. 79. We have considered the rival submissions and perused the material on record. We notice that the assessee has submitted details pertaining to the amount disallowed by the AO and that the lower authorities have not examined the same. We therefore remit this issue to the AO with a direction to verify the evidence submitted in the form of agreements with Comsoft and the journal entries by the assessee and decide afresh in accordance with law. 80. Ground Nos. 9 raised is with regard to short credit of TDS. The ld AR submitted that in the final assessment order, the AO has given credit of TDS of Rs. 11,13....
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.... Smart debits deferred revenue account 124,88,69,986 4. Goods in transit (GIT) 31,72,61,000 5. Internal consumption as per sales ledger 10,32,79,473 6. Scrap sales considered for sales tax return 70,04,566 7. Other items taxable for both service tax and sales tax 58,55,31,514 Total 319,62,03,391 8. Rejection of VAT refund claimed as deduction (3,050,789) 86. The AO rejected the above reconciliation submitted by the assessee and made an addition to the tune of Rs.319,62,03,391/-. The DRP granted relief to the Assessee in respect of all the additions, except the addition on account of deferred revenue i.e., smart debits deferred revenue of Rs. 124,88,69,986. The AO deleted the additions in the final assessment order in accordance with the directions of the DRP. The revenue is in appeal against the final order of the AO. 87. The ld DR supported the order of AO with regard to each line item of reconciliation and prayed that the order of the DRP to be dismissed. 88. The ld AR reiterated the submissions made before the lower authorities. The ld AR submitted that the evidences supporting each line item of reconciliation was submitted before the DRP and the DRP....
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....covered as expense on cost to cost basis from DGBV in addition to the business support service charges. During the financial year 2009-10, the Assessee has reported a turnover of Rs. 39,45,43,757/-in its sales tax returns towards this purpose but it is not a turnover/revenue for the Assessee as the same is recovered from DGBV on cost to cost basis. Hence such an amount has been adjusted in the revenue reconciliation. We notice that before the AO, the Assessee had given sample evidences for Rs. 4,04,63,437/- in the form of e-log report for the state of Tamil Nadu which contains the details of the customer, type of spare issued, date of issuance etc. (Please see submission dated 04.02.2014 filed before the AO at Volume 4, pages 1447 read with 1679-1830). Before the DRP, the Assessee submitted the balance details in the form of e-log reports for all the other states amounting to Rs. 35,40,80,320/- (Please see page 683 of Volume 2 of the paperbook)and also the summary of the warranty replacement and break-up of such cost across states(Page 2290 of volume 6 of the paperbook). Sample delivery challans were also furnished at pages 2503 to 2524 of Volume 6 of the paperbook to demonstrate t....
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....n be followed: Option 1 : The closing balance of GIT can be directly reduced from the amount of raw materials consumed. Option 2: The closing balance of GIT is shown as part of movement in the opening and closing balance of stock. 93. It is submitted that in the financials for FY 2009-10, the Assessee had adopted Option-1 and the amount of cost was directly reduced from "Raw Materials and Components Consumed" under Cost of Materials in Schedule 13. However, in FY 2010-11, Option-2 was adopted for disclosure in the financial statements by way of considering the GIT amount as part of the opening and closing stock in Schedule 13 to account for the cost. It was also submitted that upon adopting Option 2 for FY 2010-11, the previous figures for FY 2009-10 have also been re-grouped and shown as part of opening and closing stock and that it is clear from the Schedule 13 to financials that the differential GIT amount of Rs. 317,261,000 has been directly adjusted with Raw Materials consumed in FY 2009-10 and in the financial statements for FY 2010-11, the same has been shown as an adjustment in the movement of stock. In view of the above we are of the view that the Assessee has not c....
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....nd deposited with appropriate taxing authority. Few sample copies of invoices were produced before the DRP vide submission dated 12.11.2014 (at pages 2305-2306 of Volume 6 of the paperbook read with pages 3657-4029 of Volume 7). After considering the facts as explained above we are of the considered view that while the duties/taxes are included in the turnover for the purposes of the other laws, they are not 'revenue' to the Assessee. Therefore, we uphold the decision of the DRP in accepting the contention that same are not to be considered as revenue in the financials. Export turnover not part of sales tax return 98. We notice that the invoice-wise listing for the same were produced before the DRP vide submission dated 12.11.2014 at pages 2307 of Volume 6 of the paper book read with pages 4031-4032 of Volume 7) and the DRP after the perusal of the above supporting evidences has deleted the addition made in this regard. We therefore see no reason to interfere with the decision of DRP. Disallowance of VAT refund claimed as deduction 99. An amount of Rs.30,50,789 pertaining to VAT refund was offered to tax in AY 2010-11 by way of crediting to the Sales account and a copy of the....
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..... The assessee failed to furnish any satisfactory explanation for the difference. Hence this expenditure of Rs. 15,56,565/- was rightly considered as unexplained expenditure u/s. 69C of the Act and added back. 106. The ld. AR submitted that the difference between amount debited as travelling & conveyance and the amount as per the partywise break-up submitted amounting to Rs.15,56,565 represents an amount initially debited under repairs and maintenance and subsequently reclassified under other heads of expense in the Profit and Loss account or amount subsequently reversed. The ld AR further submitted that the entire amount for which the break-up has been submitted is debited to the Profit and Loss account and accounted in the regular books of accounts, the same cannot be disallowed under Section 69C as the source for the said expenditure is automatically explained. Reliance was placed on CIT vs. Radhika Creations [Reported in [2011] 10 taxmann.com 138 (Delhi). 107. We have considered the rival submissions and perused the material on record. We notice that the assessee has submitted the party wise breakup of the expenses and has submitted that the difference in the amount as per br....
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....argin realised by the taxpayer in the international transaction shall alone be computed under the TNMM method. 111. The ld. AR For the FY 2009-10, the Assessee had debited a net foreign exchange loss of Rs. 154,969,000 to its profit and loss account. The said foreign exchange loss had arisen on account of the below:- Particulars Amount (in Rs.) Gain on account of forward contract entered by the Assessee (91,011,994) Realized and unrealized net exchange loss arising on account of various transactions in foreign currency 245,980,821 Net foreign exchange loss debited to Profit and Loss account 154,969,000 112. The assessee had submitted the workings along with the bank confirmation for the gain accounted on forward contracts. With respect to the realized and unrealized loss, the Assessee had explained the process adopted in booking the forex gain/loss for each of the foreign currency transaction. It is submitted that the exchange loss of Rs.15,49,69,000 claimed as deduction represents realized and unrealized net exchange loss arising on account of various transactions in foreign currency. These losses are accounted in accordance with the principles laid down in Accounting St....
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....ed in accounting the forex gain/loss for each of the foreign currency transaction; ➢ voluminous back-up workings including monthly Foreign Currency Trial Balance substantiating the net forex gain or loss booked in the forex ledger extracts; ➢ Sample copies of intercompany summary extracts showing the invoice value in foreign currency for various transactions etc. 23.5.2 The AO completely ignored the detailed workings on forex loss. Having mentioned in the order that sample invoice copies were submitted, the AO erred in contending that no evidences were provided by the assessee. The DRP rightly appreciated that evidences demonstrating foreign exchange loss had been submitted and that the same cannot be said to be contingent liability. 23.5.3 Therefore, ground 5 is dismissed." 114. Respectfully following the above decision of the Tribunal in assessee's own case for AY 2009-10 (supra), we dismiss the ground of the revenue. 115. Ground No.6 raised by the revenue is regarding disallowance of other liabilities. During the assessment proceedings, the Assessee had submitted party wise details of Sundry Creditors for an amount of Rs. 1376,60,54,348. Out of the s....