TaxTMI 
TaxTMI 
2023 (10) TMI 1376
X X X X Extracts X X X X
X X X X Extracts X X X X
....w Delhi (the Learned TPO"), the draft assessment order and the final assessment order passed by the National Faceless Assessment Centre, Delhi ("Learned AO") pursuant to the directions of Dispute Resolution Panel 1, New Delhi ("Hon'ble DRP"), are bad in law and contrary to provisions in law 2. The learned AO following the order of the learned TPO and the Hon'ble DRP has erred in law and on the facts of the case in making an upward adjustment of INR 4,02.41,692 and INR 27,03,104 on account of interest on delayed receivables and disallowance of deduction u/s 80G respectively. Part 1-Transfer Pricing Grounds 3. That on facts of the case and in law, the Hon'ble DRP/ Learned TPO/ Learned AO have erred in rejecting the economic analysis undertaken by the Appellant by conducting a fresh economic analysis for the impugned transactions. 4. That on facts and in law, the Hon'ble DRP/Learned TPO/ Learned AO have grossly erred by charging interest on credit period granted by the company under normal trade practices: 4.1. by Identifying outstanding receivables as a separate international transaction; 4.2. by re-characterizing ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....re that the disallowance of deduction under Section 80G of the Act by way of CSR contribution was limited to clauses (iiihk) and (iiihl) of section 80G(2) of the Act (i.e. Clean Ganga Fund and Swacch Bharath Kosh) and not to be extended to other donations to various trusts and institutions which are otherwise eligible under section 80G of the Act. 6.5. That on the facts and circumstances of the case and in law, the Learned AO has erred in stating that the amount grouped under CSR contributions has not been paid by the Appellant on a voluntary basis and the same is not eligible to be claimed as deduction under section 80G of the Act. 6.6. That on the facts and circumstances of the case and in law, the Learned AO has erred in disregarding the various judicial precedents relied upon by the Appellant which hold that donations satisfying the condition of section 80G of the Act shall be allowable as deduction even if the same are made pursuant to contribution by way of CSR. Part II-Consequential grounds of appeal 7. That on the facts and circumstances of the case and in law, the Learned AO has grossly erred in computing the amount of refund and the cor....
X X X X Extracts X X X X
X X X X Extracts X X X X
....) together with the Most Appropriate Method (MAM) used by the assessee for benchmarking the same are as under:- S. No. Transaction Type Transaction Value (non us segment) Method used for determining the price 1. Purchase of hardware and software for local distribution 155033679 TNMM 2. Provision of GCC support Services 2489690928 TNMM 3. Provision of software support Services 954659566 TNMM 4 Availing of professional services 12785131 TNMM 5. Subvention income 107394187 TNMM 6. Reimbursement of Expenses by AEs 23601270 Other method 7 Reimbursement of Expenses to AEs 187142084 TNMM 7. During the course of assessment proceedings before the ld TPO, the details of outstanding receivables from AEs by the assessee and details of outstanding payables to AEs were called for. From the perusal of the details filed by the assessee on outstanding receivables, the ld TPO concluded that the assessee had recovered its dues from its AEs beyond the agreed credit period. The agreed credit period was considered as 60 days from the date of receipt of goods by the ld. TPO as there was no agreement to this....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng capital adjustment has been granted by the ld TPO on the outstanding receivables and outstanding payables while benchmarking the SWD and GCC segments of the assessee for both the years. No adverse inference was drawn by the ld TPO with regard to working capital adjustment margins used by the assessee for benchmarking international transaction for distribution segments for both the years. The assessee had not granted any credit period to its AEs with regard to date of realization of invoices as per the agreement. The ld TPO had granted 60 days credit period to be a reasonable period. We find that the ld DRP while deciding this issue of imputation of interest on outstanding receivables for AY 2017-18, had relied on the directions given by it for AY 2016-17 which is evident from page 111 of its directions. The ld DRP in page 115 of its directions at para 3.7.2 had stated that the factual matrix of AY 2016-17 remains the same for AY 2017-18 also. We find that this Tribunal in assessee's own case for AY 2016-17 in ITA No. 772/Del/2021 dated 06.05.2022 by placing reliance on the Tribunal decision for AY 2015-16 in ITA No. 7890/Del/2019 dated 21.11.2019 had deleted the transfer pricing....
X X X X Extracts X X X X
X X X X Extracts X X X X
....which will have to be investigated on a case to case basis. Importantly, the impact this would have on the working capital of the Assessee will have to be studied. In other words, there has to be a proper inquiry by the TPO by analysing the statistics over a period of time to discern a pattern which would indicate that vis-à-vis the receivables for the supplies made to an AE, the arrangement reflects an international transaction intended to benefit the AE in some way. 11. The Court finds that the entire focus of the AO was on just one AY and the figure of receivables in relation to that AY can hardly reflect a pattern that would justify a TPO concluding that the figure of receivables beyond 180 days constitutes an international transaction by itself. With the Assessee having already factored in the impact of the receivables on the working capital and thereby on its pricing/profitability vis-à-vis that of its comparables, any further adjustment only on the basis of the outstanding receivables would have distorted the picture and re-characterised the transaction. This was clearly impermissible in law as explained by this Court in CIT v. EKL Appliances Ltd. (201....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt) --------------------------------- (D) 65,77,20,573 1,12,41,08,640 2,49,83,27,233 Excess amount received by Appellant from its AEs E(C*D) 2,11,12,830 4,00,18,268 11,01,76,231 Total excess margin earned AEs 17,13,07,329 adjustment made on account of outstanding receivables 4,88,40,680 13. The aforesaid working, in our considered opinion, requires factual verification of the ld AO/ TPO. Hence, we deem it fit to restore the entire issue in dispute to the file of the ld AO/ TPO to consider the applicability of the decision of Hon'ble Delhi High Court rendered in Kusum Healthcare (supra) in its true spirit vis a vis the pattern followed by the assessee and also alternative argument made by the ld AR with regard to the aforesaid workings and decide the entire issue in accordance with law. The ld AR also made an alternative argument with regard to the adoption of LIBOR +200 basis points as against 400 basis points by placing reliance on certain decisions. The ld AO/ TPO is also directed to examine this alternative argument of the ld AR while deciding this issue. Accordingly, ground Nos. 3 to 5 raised by the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing exemption u/s 80G of the Act and accordingly, assessee would be entitled for deduction u/s 80G of the Act thereon, irrespective of the fact that it is made as part of CSR obligations. The assessee in the instant case had duly complied the provisions of Companies Act, 2013 read with CSR rules thereon and as per the provisions of the Income Tax Act had also voluntarily disallowed the CSR expenditure while computing the taxable income. Since, the donee institutions are eligible institutions enjoying exemption u/s 80G of the Act, the assessee has claimed deduction u/s 80G of the Act which is also provided in the statute itself to the assessee. Hence, denial of deduction u/s 80G of the Act to the assessee would result in gross injustice. We direct the ld AO to grant deduction u/s 80G of the Act to the assessee. Accordingly, the ground No. 6 to 6.6 raised by the assessee are allowed. 17. Ground No. 7 raised by the assessee is challenging the error in computing the interest on refund u/s 244A of the Act. This matter requires factual verification by the ld AO and we direct the ld AO to reconsider the claim of interest u/s 244A of the Act and decided the same in accordance with law. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... ITAT in Appellant's own case for AY 2012-13, AY 2013-14, AY 2014-15, AY 2015-16 and AY 2016-17: 4.6. by disregarding the fact that the Hon'ble ITAT had placed reliance on the order passed in case of Kusum Health Care Private Limited (ITA No. 765/2016) by the Hon'ble High Court of Delhi 5. That once working capital adjustment is granted no separate adjustment on account of outstanding receivables is maintainable. Part II-Corporate Tax Grounds 6. Denial of deduction under Section 80G. 6.1. That on the facts and circumstances of the case and in law, the Learned AO has erred in disallowing the deduction of INR 21,47.646/- claimed under section 80G of the Act towards donation to various eligible institutions by incorrectly holding that that any expenses incurred by the Appellant towards Corporate Social Responsibility (CSR) cannot be allowed as deduction under section 80G of the Act. 6.2. That on the facts and circumstances of the case and in law, the Learned AO has erred in denying deduction under section 80G of the Act without appreciating that the Appellant had suo-moto disallowed the corresponding CSR expense while c....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... TDS as per Form 26AS amounting to Rs. 27,051." 21. Ground Nos. 1 to 6.6 raised by the assessee for AY 2018-19 are identical with grounds raised thereon in AY 2017-18. Hence, the decision rendered by us herein above in AY 2017-18 in the said grounds shall apply mutatis mutandis to AY 2018-19 also in view of the identical facts except with variance in figures. 22. Ground No. 7 raised by the assessee is challenging the starting point of computation of income by the ld AO. We have gone through the said ground and we are in agreement with the same. The ld AO is accordingly directed to start the computation of total income with the return of income and not from intimation u/s 143(1) of the Act. Accordingly, ground No. 7 raised by the assessee is hereby allowed. 23. Ground No. 8 raised by the assessee is challenging the chargeability of interest u/s 234B of the Act which is consequential in nature. We make it clear that interest u/s 234 C of the Act should be charged only on the returned income not on the assessed income. 24. The ground No. 9 raised by the assessee is challenging the initiation of penalty proceedings u/s 270A of the Act, which is premature for adjudication at....
X X X X Extracts X X X X
X X X X Extracts X X X X
....employer's obligation to deposit the amounts retained by it or deducted by it from the employee's income, unless the condition that it is deposited on or before the due date, is correct and justified. The non-obstante clause has to be understood in the context of the entire provision of Section 43B which is to ensure timely payment before the returns are filed, of certain liabilities which are to be borne by the assessee in the form of tax, interest payment and other statutory liability. In the case of these liabilities, what constitutes the due date is defined by the statute. Nevertheless, the assessees are given some leeway in that as long as deposits are made beyond the due date, but before the date of filing the return, the deduction is allowed. That, however, cannot apply in the case of amounts which are held in trust, as it is in the case of employees‟ contributions- which are deducted from their income. They are not part of the assessee employer's income, nor are they heads of deduction per se in the form of statutory pay out. They are others‟ income, monies, only deemed to be income, with the object of ensuring that they are paid within the due date specified in....