TaxTMI 
TaxTMI 
TaxTMI 
2025 (10) TMI 933
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....in short), the same have been referred to Transfer Pricing Officer ('TPO' in short) DC/ACIT(TP)-3(2), Chennai for determination of Arm's Length Price ('ALP' in short). The TPO passed an order u/s.92CA(3) on 31.10.2016 proposing certain Transfer Pricing (TP) adjustment. Incorporating the same, Draft assessment order was passed on 28.12.2017 which was further subjected to Assessee's objections before DRP. Pursuant to the directions of DRP dated 25.09.2017, final assessment order has been passed on 16.11.2017. 3. Aggrieved by the order of the AO the assessee is in appeal before us. 4. During the course of appellate proceedings, the Ld. Counsel for the assessee has restricted arguments to three specific issues: (i) provision for consumer loyalty, (ii) disallowance under section 14A, and (iii) transfer pricing (TP) adjustment related to the claim u/s. 80IC of the Act. For the first two issues, the assessee placed reliance on the order of the Co-ordinate Bench of the Tribunal in the Assessee's own case for earlier assessment years, vide ITA Nos. 518, 505- 507/2018 dated 29.05.2024 which held as under: 3.4 We have heard rival contentions and gone through fac....
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.... formulated leave encashment scheme. It was held, following the judgment in Metal Box Company of India (supra), that the provision made by the assessee for meeting the liability incurred under leave encashment scheme proportionate with the entitlement earned by the employees, was entitled to deduction out of gross receipts for the accounting year during which the provision is made for that liability. The principle which emerges from these decisions is that if the historical trend indicates that large number of sophisticated goods were being manufactured in the past and in the past if the facts established show that defects existed in some of the items manufactured and sold then the provision made for warranty in respect of the army of such sophisticated goods would be entitled to deduction from the gross receipts under Section 37 of the 1961 Act. It would all depend on the data systematically maintained by the assessee. It may be noted that in all the impugned judgments before us the assessee(s) has succeeded except in the case of Civil Appeal Nos. of 2009 - Arising out of S.L.P.(C) Nos.14178-14182 of 2007 - M/s. Rotork Controls India (P) Ltd. v. Commissioner of Income Tax, Chennai....
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....4,341/- and under rule 8D(2)(iii) being administrative expenses, an amount equal to 0.5% of the average value of investment at Rs. 14,39,635/-, thereby the AO disallowed total expenses relatable to exempt income u/s.14A r.w. rule 8D(2) at Rs. 22,53,976/-. Aggrieved, assessee preferred appeal before CIT(A). The CIT(A) confirmed the action of the AO and dismissed the ground of assessee's appeal. Aggrieved, now assessee is in appeal before the Tribunal. 4.2 We have heard rival contentions and gone through facts and circumstances of the case. The ld.counsel for the assessee took us through the assessment order and stated that the AO while computing disallowance of expenses relatable to exempt income has not even discussed what is the quantum of dividend income or he has not discussed what is the quantum of disallowance suo-motto made by the assessee whereas, assessee has made suo-motto disallowance of Rs. 2,500/-. The AO simpliciter reproducing the provisions of section 14A applied straight formula as provided under rule 8D(2) for invoking (i), (ii) & (iii) limbs. The ld.counsel for the assessee stated that the AO has not examined the investment made and the expenditure incurr....
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....), the assessee has raised the following grounds: "The grounds hereinafter taken by the Appellant are without prejudice to one another. 1. The Hon'ble Dispute Resolution Panel, Bangalore ('DRP') erred in ignoring the submissions made by the Appellant with regard to the Upward adjustment made of profits of 80-IC units and submissions made in case of disallowance of provision made for customer loyalty programme. I. Transfer Pricing 2. The Hon'ble DRP/ learned Assessing Officer ('AO') / Transfer Pricing Officer (TPO) erred in ignoring the transfer pricing analysis undertaken by the Appellant in accordance with provisions of the Income-tax Act, 1961 ('the Act') read with Income-tax Rules, 1962 ('the Rules'). 3. The Hon'ble DRP / learned AO / TPO thereby erred in making an addition of Rs. 63,17,93,601 to the total income of the Appellant on account of variance in profit margins of the tax holiday units vis-à-vis non-tax holiday units. 4. Upward Adjustment of profits Rs. 63,17,93,601 a. The Hon'ble DRP / learned AO / TPO erred in adjusting the profits of tax holiday units....
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.... above, the learned AO erred in ignoring the segment margin analysis done by the Company and erred in computing the correct profit margin earned by the tax holiday units i.e. Dehradun and Pantnagar units of the Appellant. k. The Hon'ble DRP erred in not taking into the consideration the details furnished before them as a part of submission for adjudicating the same and not commenting on the reasonableness of the analysis as submitted by the Appellant in response to the allegation brought in by the TPO / ΑΟ on account of manual profit manipulation. l. The Hon'ble DRP has erred in merely following the earlier year DRP directions and has not adjudicated the facts for the year under consideration." 8. Facts of the case are that the Assessee is engaged in the manufacturing and sale of jewellery and watches and has various units, including tax holiday units at Pantnagar and Dehradun and non-tax holiday units at Hosur. The Transfer Pricing Office ('TPO' in short) proposed an adjustment of Rs. 63,17,93,601/- on the ground that the tax holiday units reported significantly higher margins compared to non-tax holiday units. The TPO rejected the Transf....
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....e on the basis of records before us that both these units at Faridabad and Rudrapur unit were manufacturing different products. Faridabad units manufactures gears for tractors and bigger trucks whereas Rudrapur unit produces 3rd & 4th gear for small truck manufactured by Tata Motors Ltd and is contract manufacturer. The Rudrapur unit procures semi finished goods in the form of shaft/blank from Faridabad unit and the same is further subjected to manufacturing processes for production of 3rd & 4th gears as such. During the year, specified domestic transactions between eligible unit and non-eligible unit were made and ALP was determined at 22.10 cr. Similarly Rudrapur unit also does some job work for non eligible unit which was transferred at a price of Rs. 4.11 cr. The assessee followed CPM as most appropriate method on the strength of the reasoning that the direct and indirect cost were available as per costing records CAS-4 which were duly certified by CA and a gross profit margin of 10% was added to arrive at the transfer price. The TPO proposed the adjustment in the arm's length price on the ground that there is huge difference in profit margin of both the units. We note that the....