TaxTMI 
TaxTMI 
TaxTMI 
2023 (10) TMI 1376
X X X X Extracts X X X X
X X X X Extracts X X X X
....der 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 the nature of outstanding receivables as loan advanced to Associated Entities ("AES"); 4.3....
X X X X Extracts X X X X
X X X X Extracts X X X X
.....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 corresponding interest under section 244A of the Act. 8. The Learned AO has erred on the facts and circumstances of the case and in law in proposing to initiate the penalty proceedings under secti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....dware 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 effect between the assessee and its AEs. The ld TPO concluded that the assessee did not consider the imputation of interest on outstanding receivables as a separate international transaction in the Transfer Pricing Study Report (TPSR). The ld TPO concluded that the provisions of section 92CA(2B) o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....see 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 adjustment made on account of receivables. This decision was also rendered by following the decision of Hon'ble Jurisdictional High Court in the case of Kusum Healthcare reported in 398 ITR 66 and many other Tribunal decisions. 9. The ld DR vehemently argued by placing reliance at page 495 of the a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ate 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. (2012) 345 ITR 241 (Delhi)." 11. From the perusal of the aforesaid decision, we find that Hon'ble High Court noted that there has to be a proper inquiry by the ld TPO by analyzing the statistics over a period of time to discern a pattern which would indicate that vis-a-vis the receivables for the supplies made to an AE, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....O/ 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 assessee are allowed for statistical purposes. 14. Ground No. 6 raised by the assessee is challenging the confirming the disallowance of deduction of Rs. 27,03,104/- u/s 80G of the Act in respect of donations made to various eligible institutions by the assessee. 15. We have heard the rival submissions and perused the materials available on record. The assessee claimed an amount of Rs. 54,06,208/- towards Corporate Social Responsibility (CSR) expenses ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tions 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. Accordingly, ground No. 7 is allowed for statistical purposes. 18. Ground No. 8 raised by the assessee is challenging the initiation of penalty proceedings u/s 270A of the Act which is premature for adjudication at this stage. Hence dismissed. 19. In the result, the appeal of the assessee for AY 2017-18 is allowed for statistical purposes. ITA No. 2377/Del/2022 (AY 2018-19) 20. The assessee has raised the following grounds of appeal for AY 201819:- "1. Tha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....umstances 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 computing income chargeable to tax under Profits and gains of business or profession' for the year under consideration. 6.3. 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 pertaining to eligible payments without appreciating that section 37 of the Act does not provides any restriction towards deduction under Chapter VI-A of the Act, which is otherwise eligible. 6.4. That on the facts and circumstances of the case and in law, the Learned AO has erred in not appreciating the intent of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 this stage and hence dismissed. 25. Ground No. 10 raised by the assessee is seeking proper credit of TDS amount. This aspect requires verification by the ld AO and accordingly, the said ground is restored to the file of the ld AO to decide the same in accordance with law. 26. In the result, the appeal of the assessee for AY 2018-19 in ITA No. 2337/Del/2022 is allowed for statistical purposes. 1430/Del/2022 (Revenue's appeal) 27. The only issue to be decided in this appeal of the revenue is as to whether the ld CIT(A) was justified in deleting the addition made on account of disallowance of employees contribution to PF and Labour Welfare fun....