TaxTMI 
TaxTMI 
TaxTMI 
2025 (10) TMI 702
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....1)(va) of the Act. Subsequently, the case was selected for scrutiny under CASS for the following reasons: "1. Deemed International Transactions 2. Large value of international transactions 3. Transactions with Company whose Registration has been Cancelled by MCA 4. Duty Drawback 5. Lower amount disallowed u/s 40(a)(ia) in ITR (Part A-OI) in comparison to audit report 6. Large "any other amount allowable as deduction" claimed in Schedule BP of return 7. Expenses incurred for Earning Exempt Income 8. Difference in ICDS adjustments reported in Form 3CD and ITR." 3. Accordingly statutory notices u/s 143(2) and 142(1) of the Act were issued and served on the assessee in response to which the assessee filed the requisite details. Since the assessee has entered into certain international transactions, the Assessing Officer referred the matter to the Transfer Pricing Officer (TPO) for determining the Arm's Length Price (ALP) of the international transactions. The TPO vide order dated 28.07.2021 passed u/s 92CA(3) of the Act proposed an upward adjustment of Rs. 1,78,97,091/- to the international transactions relating....
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....eeded degree of reliability. 2.1 On the facts and circumstances of the case the Ld. CIT(A) erred in deleting the addition of Rs. 1,11,75,451/- u/s. 40(a)(ia) of the Act without appreciating the fact that the auditor had disallowed the expenses on account of non-deduction of TDS which has been duly disallowed in the ITR for AY 2017-18 on account of non-deduction of TDS under provisions of section 40(a). Thus, the Ld. CIT(A) has deleted the disallowance without appreciating that these were actual expenses incurred during AY 2017-18 by the assessee and not the "provisions for expenses" on which TDS was not deducted. 2.2 On the facts and circumstances of the case the Ld. CIT(A) erred in not appreciating the fact that the assessee had also failed to furnish any documentary evidence that TDS was deducted during the AY 2018-19 and deposited on such expenses. 3. On the facts and circumstances of the case the Ld. CIT(A) erred in deleting the addition of Rs. 7,51,15,458/- on account of ICDS Adjustment not disclosed by the assessee without appreciating the fact that all adjustments arising due to ICDS need to be considered in the computation of taxable income wherea....
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.... has adopted TNMM Method for benchmarking the international transaction of export of traded spares to the AEs. Further, the assessee company has selected 6 companies as comparable for trading activity. From the submissions filed by the assessee, the TPO noted that W R T Sales & Services Pvt. Ltd. is involved in Wholesale on a fee or contract basis. (Includes commission agents, commodity brokers and auctioneers and all other wholesalers who trade on behalf and on the account of others). W R T Sales & Services Pvt. Ltd. is into the distribution of Kirloskar Products and not into manufacturing. Hence he noted that both the companies i.e. ALIPL and WRT Sales & Services Pvt. Ltd. operate in totally diverse sectors without any basic comparison to their product lines. Considering this, he rejected the companies considered as comparable to the assessee company and method of benchmarking (i.e TNMM) was also rejected. The TPO considered CPM as the Most Appropriate Method while comparing internal comparables. Further, the TPO also observed that the export of manufactured equipment to AEs is at Rs. 327.88 Crs as against the domestic sales at Rs. 391.78 Crs. During the course of TP proceedings,....
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....lant's case for Assessment year 2009-10 and 2010-11 has accepted the submission of appellant company and held that TNMM was the most appropriate method to benchmark its international transaction of traded spares and internal comparison was not appropriate. The TNMM adopted by appellant company and comparing net operating margins of the respective segments with average of the net operating margins derived by the comparable companies is appropriate. Respectfully following such precedents, appeal on this ground is allowed." 11. Aggrieved with such order of the Ld. CIT(A) the Revenue is in appeal before the Tribunal. 12. The Ld. DR heavily relied on the order of the TPO / Assessing Officer and the grounds raised by the Revenue on this issue. 13. The Ld. Counsel for the assessee on the other hand drew the attention of the Bench to the order of the Tribunal in assessee's own case for the immediately preceding assessment year vide ITA No.1723/PUN/2024 order dated 29.04.2025 for assessment year 2017-18, copy of which is placed at pages 96 to 104 of the paper book. He submitted that identical issue has been decided by the Tribunal and the grounds raised by the Revenue on this i....
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.... domestic market. Since the goods manufactured in India are exported to AE as well as sold in the domestic market, ld. TPO was of the view that Cost Plus method is the most appropriate method for benchmarking the international transaction relating to export of equipments to AE. We further observe that ld. CIT(A) granted relief to the assessee following the decision of this Tribunal taken in assessee's own case for past years. The latest one for A.Y. 2013-14 vide ITA No.1945/Pun/2017 order dated 20.06.2019 deals with the very same issue and this Tribunal has held that the claim of the assessee of adopting TNMM for calculating the ALP for the international transaction deserves to be allowed in light of the settled legal proposition in favour of the assessee and also observing that the comparison of profit margin of export market segment with that of domestic market segment is not proper. Thus, respectfully following the same, we hold that Cost Plus method adopted by the TPO deserves to be rejected and held to be unsustainable. Therefore no interference is called for in the finding of ld.CIT(A). Grounds of appeal No.1(a),(b), and (c) raised by the Revenue are dismissed." 15. In abs....
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....provision for expenses on which TDS was not deducted. Rejecting the various explanations given by the assessee the Assessing Officer made addition of Rs. 1,11,75,451/- u/s 40(a)(ia) of the Act. 19. Before the Ld. CIT(A) it was submitted that the following amounts are disallowed under clause 21(b) of the Tax Audit Report for assessment year 2018-19: Particulars Amount (Rs.) Disallowance 40(a)(ia): Commission or Brokerage 1,64,52,362 49,35,709 40(a)(ia) Payments to contractors or sub contractors 1,79,916 53,975 40(a)(ia): Fees for professional or technical services 2,63,09,030 78,92,709 40(a)(i): Sum payable outside India or to a Non-resident 49,93,112 49,93,112 Total 1,78,75,505 4,79,34,420 1.2 Above mentioned amounts referred to the provisions amounts / accrued expenses, hence disallowed under section 40(a)(i) and 40(a)(ia) under clause 21(b) of Tax Audit Report and the same is reflected in return of income under "Schedule BP: Computation of income from business or profession, Part A, Serial no.16" on page no.86 ......" 20. It was submitted that the assessee company has claimed deduction in respect of amounts disa....
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....f the Appellant on this ground. The Appeal is allowed on this ground." 23. Aggrieved with such order of the Ld. CIT(A) the Revenue is in appeal before the Tribunal. 24. The Ld. DR submitted that the assessee claimed before Ld. CIT(A) that the provisions for expenses on which TDS was not deducted in earlier years, was reversed against the actual expenditure booked during the year i.e. AY 2018-19. However, the assessee has not furnished any documentary evidence regarding the actual expenditure incurred against such provisions during the year AY 2018-19 i.e. head of expenditure, party name, respective ledgers etc. He submitted that these expenses were disallowed for non-deduction of TDS in AY 2017-18 as per assessee's own submission. Further from the audit report and ITR filed for AY 2017-18 by the assessee it is seen that the auditor has disallowed these expenses on account of non-deduction of TDS which has been duly disallowed in the ITR on account of non-deduction of TDS under the provisions of section 40(a)(ia). He further submitted that from the books of account of the assessee it was established that these were actual expenses incurred during AY 2017-18 and not the "pr....
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....assessee drew the attention of the Bench to the disallowance of expenditure u/s 40, the details of which are as under: Schedule 2 Disallowances of expenditure u/s 40 Description Expenses Disallowance 40(a)(i) / (ia) / (ib): Default in TDS / Equalisation Levy 40(a)(i): Sum payable outside India or to a Non-resident 49,93,112 40(a)(ia): Commission or Brokerage 1,64,52,362 40(a)(ia): Fees for professional or technical services 2,63,09,031 40(a)(ia): Payments to contractors or sub contractors 1,79,916 1,78,75,505 Total Disallowance 1,78,75,505 Expenses without TDS / Eq. Levy disallowed earlier B/F Amount B/F Amount on which TDS / Eq. Levy done Deduction in current year 40(a)(i): Sum payable outside India or to a Non-resident - AY 2017-18 82,70,044 82,70,044 82,70,044 40(a)(ia): Fees for professional or technical services - AY 2017-18 52,76,000 52,76,000 15,82,800 40(a)(ia): Commission or Broke....
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.... net increase in the profit due to ICDS of Rs. 41,90,75,017/- which is shown in ITR as "any other item or items of addition u/s 28 to 44DA" and the remaining amount of Rs. 6,03,58,168/- is on account of amount directly credited to the retained earnings. The Assessing Officer, therefore, confronted the assessee to explain the discrepancy with detailed note. He also asked the assessee to submit the detailed computation of net increase in profit of Rs. 48,58,47,490/- along with applicable ICDS. 32. It was submitted that the assessee had accounted Mark to Market gain / loss on forward contracts which were recorded for future assets / liabilities in the books of accounts as per the accounting policy followed by the company of Rs. 6,44,01,765/- and Rs. 5,49,58,751/- respectively. Accordingly, the impact of the same was considered for ICDS valuation totaling to Rs. 11,93,60,516/- and out of the above Rs. 6,03,58,168/- has not been credited to Profit & Loss account and instead has been directly credited to Retained earnings. Since this amount has not been accounted through Profit & Loss account, the same has not been considered by the assessee company again in its computation of income.....
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....It is clear that expenses which has been debited to P/L should only be considered as addition to ICDS and expenses giving effect to retained earnings should not be added to income. Appellant has duly submitted details of the mark to market adjustment as per Ind AS and its impact considered in P&L and retained earnings. In the submission given to substantiate its case the Appellant has also given relevant workings and documentary evidences to justify its claim of ICDs adjustment. This clearly indicates that the Appellant has duly considered the disallowance of the amount actually debited to Profit & Loss account. Considering this factual position, I am inclined to agree with the Appellant. Therefore I allow this ground of appeal and the disallowance made by the assessing officer is deleted. The Appeal is allowed on this ground. 37. Aggrieved with such order of the Ld. CIT(A) the Revenue is in appeal before the Tribunal. 38. The Ld. DR submitted that the decision of the Ld. CIT(A) is not acceptable since all adjustments arising due to ICDS need to be considered in the computation of taxable income. He submitted that the statement of adjustments owing to ICDS shall form part of ....
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....t include assets and liabilities existing at the end of the previous year. (4) The premium of discount that arises on the contract is measured by the difference between the exchange rate at the date of the inception of the contract and the forward rate specified in the contract. Exchange difference on the contract is the difference between : (a) the foreign currency amount of the contract translated at the exchange rate at the last day of the previous year, or the settlement date where the transaction is settled during the previous year, and (b) the same foreign currency amount translated at the date of inception of the contract or the last day of the immediately preceding previous year, whichever is later (5) Premium, discount or exchange difference on contracts that are intended for trading or speculation purposes, or that are entered into to hedge the foreign currency risk of a firm commitment or a highly probable forecast transaction shall be recognised at the time of settlement." 40. He submitted that as per the said provisions, Mark to Market gain or loss is relevant only in the books of account and for income tax purpose, it has to be i....
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....Assessing Officer and the Ld. CIT(A) and the paper book filed on behalf of the assessee. We find the Assessing Officer in the instant case made addition of Rs. 7,51,15,458/- being the income of the assessee on account of not disclosing the increase in profit due to ICDS adjustment as reported in audit report in Form No.3CD. We find the Ld. CIT(A) deleted the addition, the reasons of which have already been reproduced in the preceding paragraphs. We do not find any infirmity in the order of the Ld. CIT(A) on this issue. The assessee in the instant case has clearly demonstrated that it has correctly computed and disclosed the increase in profit in ICDS adjustment. The assessee before us also demonstrated by drawing our attention to the various disclosures made in the audited accounts and the computation statement. The Ld. DR could not controvert the details given by the assessee substantiating the adjustment as per Indian Accounting Standard, its impact, working and documentary evidences to justify its claim of ICDS adjustment. Therefore, in absence of any distinguishable features brought on record by the Ld. DR we do not find any infirmity in the order of the Ld. CIT(A) on this issu....
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.... in the books of accounts. These are yearly items of provisions in the nature of contingent which the assessee company disallows in return and reversal, if any, out of it is claimed subsequently. 46. However, the Assessing Officer was not satisfied with the submissions made by the assessee in absence of complete details to his satisfaction. According to him, the assessee has not provided any bifurcation of the amount added back in the computation under the head disallowance u/s 37 of Rs. 12.73 crores for assessment year 2018-19 for which it was not possible to check whether the assessee has added back any amount related to the reversal of provision of liquidated damages in that account. Similarly in absence of any details of bad debts actually written off during the year the Assessing Officer was not satisfied with the submissions made by the assessee towards reversal of provisions for doubtful debts of Rs. 2,94,96,845/-. So far as the provision for project costs disallowed earlier now written back at Rs. 36,87,805/- is concerned, the same was also rejected by the Assessing Officer on the ground that the assessee has not provided any bifurcation. The Assessing Officer accordingl....
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....owed (Reversed/ Write off) Net Effect of Allownce & Disallowance 2017-18 15,32, 13,692 10,95,08,644 4,37,05,048 1,69,81,530 6,06,86,584 4,37,05,054 2018-19 10,95,08,644 10,08,25,758 -86,82,886 1,15,73,754 2,02,56,631 -86,82,877 5.4.2 Provision for Doubtful Debts AY Opening Balance (A) Closing Balance (B) Difference (B-A) Amount Disallowed (new provision) Amount Allowed (Reversed/ Write off) Net Effect of Allownce & Disallowance 2017-18 14,19,65,772 15,49,60,163 1,29,94,391 1,29, 94,391 - 1,29, 94,391 2018-19 15,49,60,163 11,65,79,738 3,83,80,425 - 3,83,80,425 -3,83,80,425 5.4.3 Provision for Project Provision Cost AY Opening Balance (A) Closing Balance (B) Difference (B-A) Amount Disallowed (new provision) Amount Allowed (Reversed/ Write Off) Net Effect of Allownce & Disallowanc 2017-18 18,18, 11,930 18,73,65,809 55,53,879 4,53,04,267 3,97,50,388 55,53,879 2018-19 18,73,65,809 18,36,78,004 36,87,805 - -36,87,805 -36,87,805 The above figures are considered from our Audited Financials. ....
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....losed herewith as Annexure-2 for Your Honour's reference." 48. Based on the arguments advanced by the assessee, the Ld. CIT(A) deleted the addition by observing as under: "6.3 I have carefully considered the facts of the case and submission filed by the appellant. I agree with the appellant's contention that Appellant Company consistently follows policy of disallowing incremental provision and claims deduction for decrease in net provisions. Further, from verification of computation of income it is seen that the appellant company has disallowed the provisions of these expenses in earlier years. The Appellant has submitted that similar treatment was given to project provision costs, liquidated damages, doubtful debts in AY 2020-21 and AY 2021-22 which has been accepted by the learned AO, Assessment Unit, NFAC. Similarly it is accepted in earlier years also. 6.4 It can be seen that the Appellant has disallowed the provision made during the year. Similarly such provision made in earlier years has also been added back. In such case, the write back of such provision has to be allowed as a deduction. Considering this factual position, I am inclined to agree w....