TaxTMI 
TaxTMI 
2019 (4) TMI 2124
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..... The group was operating in 28 countries with a turnover of 10.9 billion Euros in 2011. 2.1 The assessee operates two business segments namely manufacturing business and tooling business. In its manufacturing business, assessee is engaged in the manufacture and sale of head and rear lighting for the automotive OEM customers and not for after sales market. The manufacturing plant is located in Chennai, commenced its commercial production of lamps from Aug 2010 and hence, this assessment year i.e AY 2012-13 is the first full year of its manufacturing operations. The primary customer during AY 2012-13 is Nissan India Pvt.Ltd. In its TP study , the assessee has prepared and submitted the segmental analysis of the tooling and manufacturing segment and has demonstrated the arm's length nature of each of these independent segments by adopting the Transactional Net Margin Method (TNMM) as the most appropriate method (MAM) with operating margin (operating profit to sales) as the profit level indicator(PLI). However, the TPO had rejected the segmented profit and loss account and had aggregated the segments to determine the arm's length nature of the transactions on entity level. On the d....
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....dia (48.60%) Renault India (30.45%) Nissan Spain (20.95%) Tools were sold to Renault India, but lighting assembly were not sold to Renault India. This provides evidence that sale of tools and lighting are not directly linked. Assets Fixed Assets (68 Cr.) Current assets(inventory, debtors etc Manufacturing Facility Employee Inventory Significant assets invested in manufacturing business. Almost no assets (except inventory work-in-progress) for trading activity. Functions Manufacturing Quality control, Warranty, Procurement, Localization Trading Sub-contracting Fundamentally different FAR Insignificant functions in tooling segment Risks Entrepreneurial risk Investment risk, Capacity utilization risk, quality risk, credit risk, market risk, manpower risk Minimal risk Negligible Different risk profile Completely opposite profile AE Role Technical and professional support services Full-fledged support substantial, AE transactions AE's role is reflected inquantum of transactions in each segment. Lower role, lower transactions. Characterisation Entrepreneur Low risk trading Exactly opposite Characterizations and plead....
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.... India Ltd. vs. DCIT [69 taxmann.com 383], Hon'ble ITAT of Delhi; * India Pistons Ltd. [75 taxmann.com 99], Hon'ble ITAT of Chennai; * Tej Diam [37 SOT 341 (Mum.)], Hon'ble ITAT of Mumbai; * Axa Technologies Shared Services (P) Ltd. [76 taxmann.com 102], Hon'ble ITAT of Bangalore; * Avineon India (P) Ltd. [41 taxmann.com 334], Hon'ble ITAT Hyderabad; and * Ankit Diamonds[43 SOT 523], Hon'ble ITAT of Mumbai. 3.3 The AR submitted that though the assessee has submitted detailed additional evidences before the Hon. DRP to demonstrate the arm's length nature of the above transactions on transaction-bytransaction basis, the Hon'ble DRP did not have sufficient time to accept the additional evidences considering the lack of time (hearing on 8.12.2016 and last date for issuing directions was 31.12.2016) in seeking remand report from the TPO. Therefore, the additional evidences could not be admitted by the Hon. DRP. The documents could not be submitted to AO/TPO due to floods in Chennai during the month of November and December, 2015. Relied upon the following judicial pronouncements in support of its contention that if there are sufficient cau....
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....e determining the ALP of the international transactions with the AEs, the TPO has aggregated all transactions and has adopted an entity level approach by computing the margins earned by the assessee disregarding the two varied business segments. In doing so, the AO/TPO has not restricted the additions only to the international transactions with the AEs. He relied on the following judicial precedents:- Mobis India Ltd. ITA No.2112/Mds/2011., ITAT., Chennai Demag Cranes &Components India P.Ltd (2015) 59 Taxmann.com 184 (ITAT., Pune Bench) New Holland Fiat (I) P.Ltd (2017) 81 taxmann.com 337 ITAT., Mumbai Alstom Projects India Ltd.(2017) 88 taxmann.com 465 (High Court of Bombay) Cornell Overseas P.Ltd (2017) 78 Taxmann.com 76(ITAT., Delhi ) 5.1 We have considered the rival submissions. We do not have any hesitation in holding that the transfer pricing adjustment should be restricted to the international transactions only and it cannot be applied to uncontrolled transactions. While determining ALP of international transactions, benchmarking has to be done only on AE transactions and not for entire turnover. Therefore, we direc....
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....as not claimed a deduction in computing the profit & loss account to the extent of Rs. 23.3 Crores, the disallowance made by AO is not justified and placed reliance on the following judicial pronouncements: ITO vs. P.C. Developers Private Limited (ITA No 4167/Del/lO) Hon'ble ITAT of New Delhi; DCIT vs. M/s S.P Real Estate (ITA No. 866/Hyd/2010) Hon'ble ITAT of Hyderabad; Aditya Housing & Infrastructure Development vs. DCIT (1 366/Hyd/2014), Hon'ble ITAT of Hyderabad; DCIT vs. Aditya Housing & Infrastructure Development vs. DCIT (959/Hyd/2013) Hon'ble ITAT of Hyderabad; Unique Enterprises vs. ITO (ITA No 5109!Mum12008), Hon'ble ITAT of Mumbai; ACIT vs. Godavari Developers (ITA No 918/Hyd/201 1), Hon'ble ITAT of Hyderabad; ACIT vs. Dreams Construction (ITA No. 1013/PN/2009) Hon'ble ITAT of Pune; Egwood Industries Private Limited vs. DCIT (ITA No.1230/Hyd/2013), Hon'ble ITAT of Hyderabad. 6.3 Without prejudice to the above, the Ld DR submitted that TDS was deducted and paid on an amount of Rs. 223,852,872/ on or before the due date u/s 139(1), out of Rs. 134,540,647/- consumed and charged as expenditure during ....
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....he Ld. AR submitted that the DRP failed to provide the benefit of nondiscrimination under Article 26 of India - France DTAA and Article 24 of India - Japan DTAA. Pleaded that in accordance with the respective non -discrimination Articles, the disbursements of an Indian assessee to a resident of(France/Japan) shall, for the purpose of determining the taxable profits of such Indian assessee, be deductible under the same conditions, as if they had been paid to a resident of India. 6.4 Further, the Ld AR submitted that there is mistake apparent on record in computing the disallowance for the current year (FY 2011-12). The assessee has disallowed a sum of INR 11,53,65,746/-, pertaining to prior years. The Ld. AO had disallowed an amount of INR 19,86,01,478/- u/s 40(a)(ia) on account of non-deduction of TDS and this includes an amount of INR 11,53,65,746/- disallowed by the appellant in AY 2012-13. This has resulted in dual disallowance. Therefore, prayed that directions may be issued to the Ld. AO that the sum of INR 11.53 Cr, which is a mistake apparent on record, details of which are separately provided in the paper book etc, should be rectified in the computation of income. The Ho....
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....refore, we deem it fit to remit those issues back to the AO /TPO for reexamination / verification on the basis of materials to be furnished by the assessee. The assessee has also pleaded that there is a mistake apparent on record in computing the disallowance for the current year (FY 2011-12), submitting that it has disallowed INR 11,53,65,746/-, pertaining to prior years. However, the AO had disallowed INR 19,86,01,478/- u/s 40(a)(ia) on account of non-deduction of TDS which included INR 11,53,65,746/- disallowed by the appellant in AY 2012-13. This has resulted in dual disallowance. Therefore, it prayed that directions may be issued to the AO to correct the mistake apparent on record, details of which are separately provided in the paper book. Therefore, we remit this issue also back to the file of the AO / TPO for re-examination/ verification and due decision in accordance with law. The assessee shall place all relevant materials before the A.O./TPO, on all the above issues and comply to the requirements of A.O./TPO in accordance with law. The A.O/TPO shall after affording effective opportunity to the assessee shall decide them in accordance with law. 7. The next issue is the....
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....tax collected formed part of the trading receipts. In the instant case, the amount had been added by the AO u/s.43B of the Act. All the authorities below had given a factual finding that the assessee never claimed deduction u/s.43B of the Act and therefore section 43B of the Act is not applicable." 7.2 Since the disallowed sums were not claimed as an expenditure, the assessee pleaded that in accordance with the jurisdictional High Court decision, the AO cannot make the disallowance. In order to appreciate the issue, we have gone through the assessment order. The relevant portion is extracted as under:- "6.Disallowance u/s.43B: On perusal of the computation of taxable income and Tax Audit report it was observed that Service Tax amounting to Rs.28,13,873/- and sales tax & VAT amounting to Rs.92,88,085/- were not paid however the same amount was not disallowed by the assessee company while computing the taxable income. As per the provision of section 43B of Income Tax Act, 1961, statutory due is allowed on actual payment basis. In view of the above legal fact the amount of statutory due of Rs.1,21,01,958/- are disallowed and added back to the income of th....