TaxTMI 
TaxTMI 
2018 (8) TMI 2130
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.... (a) T.P Adjustment of Rs.1579.94 lakhs (b) Consideration of Liquidated damages as direct expenses for the purpose of computing Gross Profit margin. (c) Disallowance of employees contribution to PF and ESI. 3. The assessee company is an Indo-Russian Joint Venture company. The Ministry of Defence of Government of India procured different military hardware and software from Russian company for use by Indian Armed forces. The primary objective of forming the assessee company was to improve "after sales product and services support" for the military hardware and software supplied by its Russian AE. The "after sales services" are primarily provided by the Russian AE through the products supplied by it and technical emplo....
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....ss the same in its report. 6. The Ld A.R further submitted that segregation of composite services is not justified when they are interlinked with each other. In this regard, he took support of the decision rendered by the Tribunal in the following cases:- (a) Boskalis International Dredging International CV vs. DDI (2014)(47 taxmann.com 150)(Mumbai - Trib) (b) ACIT vs. Gates India (P) Ltd (ITA No.75/Del/2011 dated 31.7.2017) The ld A.R submitted that the Tribunal, in the above cited cases, have held that the closely linked transactions or composite transactions have to be examined by considering totality of the transactions. 7. With regard to the comparables, the Ld A.R submitted that proper opportunity was not pr....
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....ion of ALP of the transactions entered by the assessee with its AE to the tile of AO/TPO for examining them afresh by duly considering the various contentions of the assessee. 10. The second issue urged by the assessee relates to the decision of TPO in including liquidated damages as part of direct expenses. The Ld A.R submitted that the liquidated damages are in the nature of damages paid by the assessee for the breach of contract terms and hence the liquidated damages cannot be considered to be part of cost incurred in rendering the services. Accordingly he submitted that the TPO was not correct in law in including the liquidated damages as part of direct expenses for the purpose of computing gross profit margin. In support of his prop....
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....hich event is only a contingency and cannot be a regular feature of the business. Moreover, there is nothing on record to show the basis on which provision was made by the assessee for liquidated damages and whether there is any policy consistently adopted by the assessee in making such provision. Having regard to this fact of the case, we find it difficult to accept the contention of the Ld. Counsel for the assessee that the provision for the liquidated damages is a part of operating expenses and the same needs to be taken into account for the purpose of computing OPM. We, therefore, reject the contention raised by the assessee on this issue. Consistent with the view taken by the co-ordinate bench in the above said case, we hold that th....