AI Drafter 
TaxTMI 
TaxTMI 
2026 (4) TMI 1785
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....ad earlier issued draft assessment order dated 18.03.2015 u/s 143(3) r.w.s. 144C of the Act wherein the AO proposed an addition of Rs.5,86,84,422/- (sic. Rs.5,86,94,422/-) on account of ALP adjustment u/s 92C as proposed by ld. TPO in its Transfer pricing order dated 29.01.2015 passed u/s 92CA(3) and a disallowance of Advance written off of Rs.52,53,000/- were made by the AO, which were subjected to challenge by the assessee by filing objection before the ld. DRP which culminated into an order passed by ld. DRP dated 23.12.2015 u/s 144C(5) of the Act. The AO passed assessment order dated 30.01.2016 in pursuance to directions given by ld. DRP which assessment order is in challenge in appeal by the assessee before us. 1.2 The appeal in ITA No. 3186/Del/2017 for ay: 2011-12 has been filed by the assessee against the rectification order, dated 27.03.2017 passed by the learned JCIT, Special Range-3, New Delhi u/s 143(3) r.w.s. 144C of the 1961 Act wherein addition of Rs.10,40,25,237/- by making disallowance u/s 40(a)(i) was made vide aforesaid rectification order pursuant to directions given by ld. DRP vide its order dated 23.12.2025 u/s 144C(5), as however these additions could not ....
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....tional Net Margin Method ('TNMM') as the most appropriate method ('MAM') for benchmarking impugned international transaction under a combined transaction approach and instead applying Comparable Uncontrolled Price ('CUP') Method merely based on presumptions, and holding the arm's length value of the transaction to be 'NIL', without furnishing details of price charged in any comparable uncontrolled transaction; 3.3 Arbitrarily holding, based on presumptions, that the services received by the Appellant had NIL value and in doing so have grossly erred in: 3.3.1 not appreciating the business efficacy nor the benefit and corresponding economic or commercial value derived by the Appellant from the corporate management services received by it from the AE; 3.3.2 holding that the services received by the Appellant are routine and generic in nature and could have been performed in-house or have been obtained locally and need not have been availed from AE; 3.3.3 holding that neither the Appellant has received any service and/ or any special or exclusive benefit in lieu of the payment made by it for services availed nor was there was any need for suc....
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....has failed to appreciate that the aforesaid claim was a revision of an existing claim already claimed in the return of income, on account of inadvertent error and not a fresh claim on account of omission on the part of the Appellant. 7.2 Further, the Hon'ble DRP has grossly omitted in addressing the objection raised by the appellant on the aforesaid action of the Ld. AO while issuing direction to the Ld. AO. 8. The ld. AO has erred, on the facts and circumstances of the case and in law, it not allowing additional MAT Credit(amounting to INR 1,36,75,898/-) as claimed by the Appellant during the course of assessment proceedings. In doing so, the Ld. AO has failed to appreciate the settled legal position that MAT Credit entitlement becomes a vested right for the Assessee in the year in which such tax is paid under Section 115JA r/w 155JAA of the Income Tax Act, 1961. 9. Without Prejudice to the Grounds hereinabove, and in view of the facts and circumstances of the case and in law, the order dated 30.01.2026 passed by the Assistant Commissioner of Income Tax, Circle 9(1), New Delhi is illegal and void ab-initio, being passed in contravention of the provisions....
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.... further enquire into the nature of the reimbursements and to determine whether the same qualify as FTS are void-ab- initio and beyond the powers of the Hon'ble DRP. This is in view of the specific limitation imposed by Section 144C(8) of the Act which restricts the issuance of directions for further enquiry by the Hon'ble DRP. Accordingly, the addition made by the Ld. AO following such invalid directions of the Hon'ble DRP is bad in law and ought to be set aside. Disallowance on account of reimbursement of salary of expatriate employees 6. Without prejudice to the above, the Ld. AO and Ld. DRP have erred on facts and in law while holding that the reimbursement of salary of expatriate employees paid by the appellant to its foreign group companies amounting to INR 8,34,61,865 was in the nature of 'Fee for Taxable Services' ('FTS') under provisions of the Act as well as the relevant Double Taxation Avoidance Agreement (DTAA). 6.1 In doing so, the Ld. AO and Ld. DRP have grossly erred in placing reliance on the judgement of Delhi High Court in the case of Centrica India Offshore Private Limited vs. CIT (364 ITR 336) without appreciating the distinguished fac....
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...., the Ld. AO has erred in disallowing reimbursements amounting to INR 2,05,63,372, paid by the appellant to foreign group entities in relation to certain other expenses, under the provisions of Section 40(a)(i) of the Act. 7.1 While doing so, the Ld. AO has failed to appreciate, without giving any opportunity of being heard to the appellant, that such reimbursements do not qualify as FTS under the provisions of the Act as well as the relevant DTAA and hence, do not require any taxes to be withheld at source by the appellant. 7.2 While doing so, the Ld. AO has failed to understand that such reimbursements were purely on cost to cost basis, with any income element and hence, did not require any taxes to be withheld at source. The above grounds of appeal are without prejudice to each other. The Appellant craves leave to alter, amend or withdraw all or any of the Grounds of Objections contained herein or add any further grounds as may be considered necessary either before or during the hearing of the objections. 2. First we will take up appeal of the assessee in ITA No. 1909/Del/2016. This is second round of litigation before the Tribunal. In the ....
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....al course of business and their subsequent non recovery and consequent write-off in the books of accounts by the Appellant constituted a valid business expenditure to be allowed to the Appellant. Ground No. 7 7.1 The Ld. AO has erred, on the facts and circumstances of the case and in law, in not allowing additional MAT credit (amounting to INR 1,36,75,898) as claimed by the Appellant during the course of assessment proceedings. In doing so, the Ld. AO has failed to appreciate that the aforesaid claim was a revision of an existing claim already claimed in the return of income, on account of an inadvertent error and not a fresh claim on account of omission on the part of the Appellant. 7.2 Further, the Hon'ble DRP has grossly omitted in addressing the objection raised by the appellant on the aforesaid action of the Ld. AO while issuing directions to the Ld. AO." 2.2 Thereafter, the Tribunal passed an order dated 05.08.2022 in MA No. 555/Del/2019, wherein the directions were issued to the Registry by the Tribunal to fix the case for hearing before the Division Bench of Delhi Tribunal for adjudication of Grounds no.6 & 7 as directed by Hon'ble Delhi Hi....
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.... the conditions are met. 4.2 We have heard rival submissions and perused the materials available on record. We observed that the assessee is engaged in the business of manufacturing automotive components i.e. pistons and piston rings. We have observed that the assessee has claimed to have written off advances etc. to the tune of Rs.52,53,000/- by way of debit to Profit and Loss account, and it is claimed that the said amount of advances, EMD, security deposits were paid on business account. The AO disallowed the said write off as complete details were not furnished, and moreover as per AO the same amounts were not routed through P&L account and the same were not taken into account while computing Income. Even during proceedings conducted by AO as directed by ld. DRP, the assessee did not filed details. Now, the assessee has claimed that the advances etc. written off in the Profit and Loss Account were advances, EMD, security deposits etc. towards business purposes which could not be recovered, and it is prayed that the same may be either allowed u/s 36(2) as bad debts or be allowed as business loss u/s 37(1). The primary onus is on the assessee to prove that the advances, EMD, s....
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....of Rs. 1,36,75,898/-. During the course of assessment proceedings, the assessee brought this to the notice of the AO by filing its claim before the AO but the AO rejected the said claim on the ground that the assessee has not filed revised return of income to claim such MAT credit. The AO rejected the claim of the assessee by relying on the decision of Hon'ble Supreme Court in the case of Goetze India Limited v. CIT reported in 284 ITR 323(SC). Our attention was drawn by ld. Counsel for the assessee to the order of the authorities below. It is submitted that the assessee raised objection before ld. DRP on this issue vide objection no. 10 which is duly recorded in the order of the ld. DRP, but ld. DRP has not given any directions on this issue.The details of said mistake as claimed by the assessee before the ld. DRP vide objection filed in Form No. 35 A, reads as under:- "Federal Mogul Goetzo (India) Limited Annexure to Form 35A Assessment Year 2011-12. In this regard we would like to submit that the Ld. AO has failed to consider the Assessee's contention that there were some mistake apparent from record in return of income for year under assessme....
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....d the Ld. DR submitted that assessee has not claimed correct carry forward of MAT credit in the return of income field by the assessee with the department. The assessee has also not filed revised return of income with the department, and that the authorities below have rightly denied the carry forward of aforesaid MAT credit. After hearing both the parties, we are of the considered view that assessee has claimed that due to inadvertent mistake while filing return of income of the assessee, the provision for income-tax under normal provision was stated at Rs. 176,44,612/- which was in-fact income computed under the normal provisions of income-tax, while the correct provision of income-tax as per assessee's version ought to be Rs. 52,93,384/-, which led to lower carry forward of MAT credit. It is submitted that the said mistake was brought to the notice of the AO during the course of assessment proceedings by filing the aforesaid claim, but the AO denied the said claim of carry forward of MAT credit as the said claim was not filed vide revised return of income. By that time, the time allowed for filing of revised return of income had expired. The assessee raised the objection before ....
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....h were paid towards inspection charges, Koronite coating charges, engineering support and tooling charges, so as to decide whether the same are in the nature of FTS and if it is held by the AO that these are not FTS, no additions shall be made. If the same are held to be FTS by the AO, then disallowance u/s 40(a)(i) shall be made by the AO as no Tax was deducted at source by the assessee. by invoking provisions of section 40(a)(i) of the 1961 Act, but inadvertently the AO did not made the aforesaid additions to the tune of Rs. 10,40,25,237/- u/s 40(a)(i) as directed by ld. DRP while framing assessment order dated 30.01.2016 passed by the AO u/s 143(3) r.w.s. 144C of the 1961 Act. The AO rectified the aforesaid mistake vide rectification order dated 27.03.2017 passed by the AO u/s 154 r.w.s. 143(3) r.w.s. 144C of the 1961 Act, by holdings as under: "2. On perusal of assessment records, it was observed that DRP-1, New Delhi vide its order u/s 144C(5) dated 23.12.2015 had given direction to make disallowance u/s 40(a)(i) amounting to Rs. 10,40,25,237/- Out of this, DRP had instructed to examine the facts and determine whether reimbursement amounting to Rs 2,05,63,372/- pertai....
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....in respect of an order passed u/s 143(3) in pursuance to the directions of ld. DRP, we hold that this appeal filed by the assessee is maintainable which has been filed by the assessee against rectification order passed by the AO u/.s 154 read with Section 143(3) read with Section 144C which is proposing to rectify the assessment order date 30.01.2016 passed by the AO u/s 143(3) r.w.s. 144C which assessment order was passed by the AO in pursuance of directions dated 23.12.2015 issued by ld. DRP u/s 144C(5) of the 1961 Act. Thus, preliminary objection of ld. CIT-DR stand rejected. 9.2 It was submitted by ld. Counsel for the assessee that ld. DRP had issued directions, inter-alia, for enhancement of the income of the assessee to the tune of Rs. 10,40,25,237/-, out of which Rs. 8,34,61,865/- were towards reimbursement of salary of seconded employees and related expenditure such as travel cost and relocation charges to its group entities by holding the same as FTS on which the assessee had failed to deduct TDS u/s 195 and hence disallowance u/s 40(a)(ia). Further, ld. DRP directed AO to provide an opportunity to the assessee to furnish complete details with respect to remaining amoun....
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....1.2016 did not made aforesaid additions to the tune of Rs. 10,40,25,237/- as was directed by ld. DRP. The directions of ld. DRP are binding on the AO and he is bound to follow the same. Reference is drawn to the provisions of Section 144C(10) and 144(13) of the 1961 Act. Inadvertantly, the AO did not made the addition while passing assessment order dated 30.01.2016. The AO invoked powers u/s 154 to rectify its mistake apparent from record i.e non making the additions as were directed by ld. DRP. The AO issued notice u/s 154 of the 1961 Act to the assessee. The assessee did not participated in the rectification proceedings conducted by the AO, which led to passing of rectification order dated 27.03.2017 by the AO u/s 154, wherein additions to the tune of Rs. 10,40,25,237/- was made by the AO. The service of notice u/s 154 dated 20.03.2017 is disputed by the assessee. It is observed that the AO issued notice u/s 154 dated 20.03.2017 while ex-parte rectification order was passed on 27.03.2017. Principles of natural justice are clearly breached as proper and adequate opportunity of heard was not provided to the assessee before passing rectification order dated 27.03.2017 by the AO. Fur....