TaxTMI 
TaxTMI 
2022 (6) TMI 1571
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....together and dispose of by this common order. We will start with ITA No. 2682/Ahd/2016 for assessment-year 2011-12. ITA No. 2682/Ahd/2016 FOR ASSESSMENT-YEAR 2011-12: 3. Brief facts are such that the assessee filed return declaring a total income of Rs. 65,62,710/-. The Ld. AO selected case for scrutiny and issued statutory notices from time to time. Finally the Ld. AO completed assessment vide order dated 27.04.2015 u/s 143(3) at a total income of Rs. 9,19,72,230/- after making several additions. Being aggrieved by this order, the assessee filed appeal to Ld. CIT(A). The Ld. CIT(A) allowed part-relief to the assessee. Against the order of Ld. CIT(A), the revenue has filed this appeal and now before us. GROUNDS: 4. The revenue has raised following grounds: "1. The Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs. 4,85,58,403/- made by the AO on account of upward adjustment proposed by the TPO by determining arm's length price without properly appreciating the facts of the case and the material brought on record. 2. The Ld. CIT(A) has erred in law and on facts by rejecting CUP as MAM without properly appreciating the facts of ....
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.... Ld. AO made a reference to the Transfer Pricing Officer ["Ld. TPO"] u/s 92CA for determining the Arm's Length Price ["ALP"] of the "international transactions" done by assessee. In the course of proceeding before Ld. TPO, the assessee submitted the details of international-transactions with the supportive documents including the Transfer Pricing Study Report ["TPSR"]. On perusal of TPSR, the Ld. TPO observed that the assessee has benchmarked international transactions according to the Comparable Uncontrolled Price Method ["CUP method"]. The Ld. TPO found the CUP method in order and accepted the same. Hence there was no dispute between the assessee and Ld. TPO / AO in so far adoption of CUP method as the Most Appropriate Method is concerned. However, the Ld. TPO found that the assessee has done several transactions on different dates with its AEs as well as Non-AEs. The Ld. TPO further found that the prices charged by the assessee in certain sales-transactions of MCCP, CCS and SSG to its AEs were lower than the prices charged in the sale-transactions made to Non-AEs on the same dates (or on nearest dates in cases wherever data of same dates were not available). Hence those tran....
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....assessee with AEs and Non-AEs strictly on the same date. However, if the data of same date was not available, the Ld. TPO made a comparison on the nearest dates which too were very close to the dates of transactions. This comparison and calculation has been noted on Page No. 13, 14, 34, 35 of the Order dated 21.01.2015 passed by Ld. TPO u/s 92CA(3) and the Annexure-A, B and C annexed to that Order. Based on such exercise, the the Ld. TPO proposed an upward adjustment of Rs. 4,85,58,403/- in Para No. 7 of his Order as under: Transaction Upward adjustment Sale of MCCP 1,23,16,469/- Sale of CCS 2,68,84,692/- Sale of SSG 93,57,242/- Total 4,85,58,403/- 7. On receipt of aforesaid Order from Ld. TPO, the Ld. AO passed assessment-order in conformity with the same and made an addition of Rs. 4,85,58,403/-, as proposed by Ld. TPO, to the taxable income of assessee. Being aggrieved, the assessee carried matter to Ld. CIT(A). 8. Before proceeding further, it is noteworthy that the assessee had choosen CUP Method all along upto the completion of assessment by Ld. AO but during the first appellate-proceeding before Ld. CIT(A), the assessee made submission not....
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....ransactions in view of the decisions / judgements cited in the preceding paras." Thus, as far as CUP method is concerned, the Ld. CIT(A) concluded arm's length of the transactions with AEs on the basis of aggregation-rule / average-price, without going into various adjustments claimed by the assessee before Ld. TPO. 9.2 TNMM: The assessee made following submission to Ld. CIT(A) vide letter dated 02/05/2016, as noted on Page No. 42 of the order of Ld. CIT(A): "1.25 Without prejudice to above, although the Appellant had selected CUP method as the most appropriate method ("MAM"), the Appellant based on the fact that the AE and Non-AEs considered for benchmarking analysis are in different geographies; though CUP is used as the MAM. However, it is not possible to make accurate adjustments for determination of ALP. In view of the same, the Appellant hereby submit corroborative analysis using TNMM, discussed below in detail. Further, the Appellant would like to submit that the purpose of the Transfer Pricing is determination of the ALP, which can also be justified using one or more methods. 1.26 In this regard, we respectfully submit the benchmarking analysi....
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....e differences between the international transaction and the comparable uncontrolled transaction and thus avoided the requirement of Rule 10B(1)(a). 1.15 It is clear from the above discussion that CUP requires very high degree of comparability and there should be no difference for which accurate adjustments cannot be made. In the case of the Appellant, accurate adjustments for the following reasons may be challenging. 1.16 In this regard, the Appellant respectfully submits that considering the terms of the Agreement between the Appellant and its AE and other factors, there may be differences between the international transactions and comparable transactions considered for CUP, for which making accurate adjustments may not be possible. 1.19. In view of above discussion, the Appellant respectfully submits that the Appellant was not given opportunity by the learned TPO to put forth its contentions in support of the various adjustments sought by the Appellant to account for the differences between the international transaction and the comparable uncontrolled transaction. Moreover, the Appellant has got the opportunity for the first time before your Honour to p....
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....pellant had originally selected the CUP as the MAM in its transfer pricing documentation, but as the Associated Enterprises (AEs') and Non-AEs are in different geographies and it was not possible to make accurate adjustments for differences in geographic conditions affecting the economics of business, it took the support from the TNMM method as MAM. This is because in the Income-tax Rule No. 10B(1)(a) the CUP method is restricted by applicability of strict comparability parameters and the ability to make accurate adjustment is a prerequisite before applicability of this method. 2.37. In view of the same, the contention of the Appellant is found correct and the transactions with the AE were also found on ALP even as per the TNMM method being the most appropriate method. The objection raised by the TPO in his remand report that the Appellant cannot change the method during the course of Appellate proceedings is not correct. As observed by number of decisions of Hon'ble High Court and Tribunals as discussed above, the Appellant cannot be precluded from benchmarking its transactions with the help of any method other than the one which is taken for consideration in its ....
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....rder on the basis of CUP method. According to Ld. DR, once CUP method had been selected, enforced and acted upon at all stages before completion of assessment by the assessee itself, it was neither lawful nor logical on the part of the assessee to suddenly advance the TNMM before Ld. CIT(A) on the premises, firstly that the Ld. TPO has not given opportunity to the assessee to explain the adjustments in CUP method and secondly by submitting that the accurate adjustments required in CUP method may not be possible. Ld. DR further submitted that the Ld. CIT(A) was not justified in accepting TNMM overruling the objection raised by Ld. AO in remand-report. 10.2 CUP Method: For the sake of completeness, the Ld. DR also contested that the Ld. CIT(A) was not justified to accept aggregation-theory because all transactions undertaken by the assessee were done on varying rates and they were independent of each other and the Ld. TPO has made a systematic date-wise comparison of the transactions with AEs vis-à-vis the transactions with Non-AEs and thereafter arrived at an upward adjustment of Rs. 4,85,58,403/-. Ld. DR placed a heavy reliance on the decision of this Ahmedabad Bench i....
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....her method as most appropriate method at any stage of proceeding. In support of this proposition, the Ld. AR advanced following decisions: (a) Luxottica India Eyewear P.Ltd. (ITA No.1115/Del/2014) - Delhi ITAT (b) Pfizer limited Vs. ACIT (ITA No. 3729/Mum./2008) - Mumbai ITAT (c) Chemtex Global Engineers P. Ltd. (ITA No. 3590/Mum/2010) - Mumbai ITAT (d) Mattel Toys (I) (P.) Ltd. vs. DCIT (ITA No.2476 & 2801/Mum/2008) -Mumbai ITAT (e) Daikin Air Conditioning India (P.) Ltd. (ITA No. 2922 & 5293/Delhi/2011 - Delhi ITAT Ld. AR further carried our attention to the data of TNMM noted by Ld. CIT(A) on Page No. 42 of his order [reproduced earlier] to show that the NCP% earned by assessee in the transactions with AEs was much higher, according to both internal TNMM and external TNMM. 11.3 With these submissions, the Ld. AR concluded that the Ld. CIT(A) was justified in deleting the upward addition made by Ld. AO and hence there is no need to interfere with the order of Ld. CIT(A). Accordingly, the Ld. AR requested to uphold the deletion. 12. We have considered rival submissions of both sides, perused the material held on record and care....
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....is. 3.10 Another example where a taxpayer's transactions may be combined is related to portfolio approaches. A portfolio approach is a business strategy consisting of a taxpayer bundling certain transactions for the purpose of earning an appropriate return across the portfolio rather than necessarily on any single product within the portfolio. For instance, some products may be marketed by a taxpayer with a low profit or even at a loss, because they create a demand for other products and/ or related services of the same taxpayer that are then sold or provided with high profits (e.g. equipment and captive aftermarket consumables, such as vending coffee machines and coffee capsules, or printers and cartridges). Similar approaches can be observed in various industries. Portfolio approaches are an example of a business strategy that may need to be taken into account in the comparability analysis and when examining the reliability of comparables." Analysis: These OECD guidelines clearly prescribe that "Ideally, in order to arrive at the most precise approximation of fair market value, the arm's length principle should be applied on a transaction by tra....
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....alysis: This 1st Proviso to section 92C(2) prescribes that if more than one price is determined by the most appropriate method, the arm's length price shall be taken to be the arithmetical mean of such prices. Basically such situations may arise in CUP method, when multiple prices of the same transaction on the same date (or nearest date) are available. In that case, arithmetic mean has to be taken. Rule 10B(1)(a)(i): "10B. (1) For the purposes of sub-section (2) of section 92C, the arm's length price in relation to an international transaction or a specified domestic transaction shall be determined by any of the following methods, being the most appropriate method, in the following manner, namely :- (a) comparable uncontrolled price method, by which,- (i) the price charged or paid for property transferred or services provided in a comparable uncontrolled transaction, or a number of such transactions, is identified; (ii) such price is adjusted to account for differences, if any, between the international transaction or the specified domestic transaction and the comparable uncontrolled transactions or between the enterpri....
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....n a part from an entity to an another entity and, therefore the entire transaction is to be taken into account rather than evaluating individual transaction on a separate basis. These few examples do not match with the facts of this appeal. The transactions under scrutiny in this appeal were neither of same 'product-line' nor 'routed-in-parts', nor with the purpose of 'portfolio-approach'; therefore prima facie this adjustment is uncalled-for. In the case of Tara Ultimo Put. Ltd. 30 Taxman.com 184 (Mum.), the Respected Co-ordinate Bench has at one place opined that the application of CPM has to be on transaction basis rather than on global basis. According to the Bench, this fundamental scheme of cost plus method is also evident from the plain wordings of Rule 10B as well. Even also in our considered opinion, each international transaction as defined in section 92(1) is to be computed having regard to the arm's length price. Section 92(1) is worded in this manner, quote "(1) Any income arising from an international transaction shall be computed having regard to the arm's length price." Unquote. So the article 'an' has significance. A....
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....lhi, (2015) 64 taxmann. Com 210: "9. Reverting to the facts of the extant case, we find that the assessee has entered into transactions with two parties, namely, India Glycols Ltd. and Petron Engineering Construction Ltd. Total revenue from rendering of service to these two parties is Rs. 8,08,550/-. In all, there are 8 invoices raised by the assessee, viz. seven on India Glycols Ltd. and one on Petron Engineering Construction Ltd., as under: Date Invoice No. Name of the company Amount 21.04.2004 6-2302-3-LHTD-04 India Glycols Limited 2,80,000 05.05.2004 6-2302-3-LHTD-05 India Glycols Limited 24,000 05.07.2004 6-2302-3-LHTD-06 India Glycols Limited 24,000 22.07.2004 6-2302-3-LHTD-07 India Glycols Limited 2,00,000 08.08.2004 6-2302-3-LHTD-08 India Glycols Limited 1,22,000 05.11.2004 6-2302-3-LHTD-09 India Glycols Limited 90,000 10.01.2005 6-2302-3-LHTD-10 India Glycols Limited 24,000 19.05.2004 6-2375-1-LHTD-007 Petron Engineering Construction Ltd. 44,550 Total 8,08,550 10. Copies of these invoices were admittedly filed before the AO....
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....ddle East India Pvt. Ltd. Vs. DCIT-8(2), Mumbai - ITA No. 2255/Mum/2014 "3. Second ground of appeal as about addition made on account of rejection of Comparable Uncontrolled Price (CUP) in respect of the international transactions entered into by the assessee with its Associated Enterprises (AEs). During the assessment proceedings, the AO made a reference to the Transfer Pricing officer (TPO) to determine the Arm's Length Price (ALP) of the international transactions of the assessee. During the TP proceedings, the TPO found that the assessee has used CUP method to justify the ALP, that it has used data which provided comparable rates for the imported products, that where the data was not available on the date of import of goods, it had used the data of nearest date, that in case of multiple transactions on the same day for various quantities it had taken an average (arithmetical mean) of all rates to arrive at the ALP rate, that it had used the date of the place from where the goods were imported, that it had entered into 245 international transactions Out of the total transactions, he made adjustments. After receiving the order of the TPO, the AO issued a draft order ....
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....d in the transaction was 5 lakh Kgs. (Pg.92 of the Paper book). In these circumstances, we are of the opinion, that the data of nearest date has to be taken as valid comparable. Considering these peculiar facts, we are of the opinion that the decision of the DRP cannot be endorsed. 4. Second transaction is of purchase of 19.54 lakh Kgs. of Toluene @ Rs. 47.86 per Kg. The material was purchased on 05.06.2008. As the data for that day was not available the assessee used average rate of CUP data of 29.05.2008. However, the TPO took the lowest rates from the data used by the assessee and held that there were six transactions ranging from 75000kg. to 5 lakhs Kgs., that price range varied from Rs. 44.18 to Rs. 55.91, that the assessee had purchased huge quantity that such bulk purchase would have resulted in lower purchase price, that the assessee had extrapolated the price to fit itself in to +5% band, that the data field was mathematically unreasonable. The DRP upheld the order of the TPO. 4.1. Before us, the AR argued that volume of the transactions did not impact the rates, that trend did not indicate that volumes affected the rates, that the TPO had cherry picked t....
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....al at the rate which fits within the + 5% range of the CUP rate. The transaction is at arm's length. 6. The next transaction pertains to Mosstanol L. The assessee had imported 4 lakh Kgs of Mosstanol L on 16.12.08 @Rs.15.13 per kg. The TPO compared Mosstanol L with Ethyl Alcohol (Pg107 of the PB) as the TPO had made the adjustment made on wrong comparables, the addition made by him is deleted. 7. Now we would take the import of Mono Ethylene Glycol (MEL). On 27.1.09 the assessee had imported 9.91 lakhs Kgs of MRL @ Rs. 25.87 per Kg. As the comparable date for that date was not available it used the data of 31.1.2009. As against the rate of Rs. 26.71 per Kg the TPO took the average of Rs. 21.74 per Kg based on the data of 23.1.2008. The DRP following its order for the earlier transaction upheld the order of the TPO. 7.1. Before us, the AR contended that the assessee had used CUP dated 30.1.2009, that the TPO had used 23.1.2009, but the date used by the TPO was further away than the CUP which the assessee had used. The DR supported the order of the DR. 7.2. We find that the assessee had imported MEL on 27.1.2009 @ Rs. 25.87 per Kg, that the CUP....
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....the assessee and supports the revenue's stand that the data of same date or nearest date must be taken for comparison. If there are multiple data on the same date or nearest date, then only average of those data has to be taken. Gulbrandsen Chemicals (P) Ltd. Vs. DCIT (2017) 79 taxmann.com 105, ITAT Ahmedabad: "4. The ascertainment of arm's length price of the assessee's transactions with its AEs came up for scrutiny before the Transfer Pricing Officer. During these proceedings, the TPO noted that the assessee has sold 60,10,855 kg of ANH to its AE on an average price of Rs.38.07. He noted that there was a huge difference in the prices at which the assessee has sold ANH to its AE vis-à-vis the prices at which he has sold the same product to its non AEs. Taking the price at which the assessee has sold the product to its non AE as a valid internal CUP (comparable uncontrolled price), the TPO computed the arm's length price of sale to the AE. The assessee adopted the highest price at which the sale was made to non AE as the internal CUP. The difference was thus worked out, as per tables given in the transfer pricing order, at Rs.1,19,09,726. Th....
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....losely related transactions" and that "Thus, the closely linked transactions can, in a given situation, be components of single composite transaction". Their Lordships have then added that "The assessee would, however, have to prove that although each sale and each provision of service is priced separately, they were all provided under one composite agreement which constitutes one international transaction". Similarly, in the case of Sony Ericsson Mobile Communication India Pvt Ltd Vs CIT [(2015) 374 ITR 118 (Del)], Hon'ble Delhi High Court has observed that, "There is considerable tax literature and text that CUP method, i.e. comparable uncontrolled price method, RP method, i.e. resale price method, and CP method (i.e. cost plus method) can be applied to a transaction or a closely linked or continuous transactions". Their Lordships have, in this backdrop, put in a word of caution that "thus, it would be inappropriate to proceed with the arm's length price computation methods with a preconceived notion of singularity as a statutory mandate" and that "clubbing of closely linked, which could include continuous transactions, may be permissible and not ostracised". Clearly, the....
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....: Facts of this case clearly indicate that there was a long-term ongoing arrangement between the assessee and his AE. The Hon'ble Court accepted that the aggregation-rule is acceptable in "certain situations". Moreover in this decision, the Hon'ble Court has gone by the past-history of the assessments of assessee. Further, the last sentence of the decision categorically states "Having said that, we must clarify that we refrain from making any observations on merits regarding application of aggregation principle in general and that our conclusions are confined to peculiar facts, including the accepted past history, of this case." In the present appeal before us, the assessee has not produced agreement with its AE to the Ld. TPO. This fact is clearly admitted by the assessee himself and noted by Ld. CIT(A) on Page No. 35 of the CIT(A)'s order. Further if we look into the working of ALP made by Ld. TPO in Annexure-A, B and C to his Order u/s 92CA(3), it is clearly visible that the assessee has sold the same product to its AEs at different rates on different dates. The very fact of selling the same product to AEs on different rates prove that the assessee ....
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....dinate bench in CIT versus Essar Steels Ltd (Supra). The facts in that particular cases were that the appellant had considered all the transaction with its associated enterprise in totality by aggregating the same. The Transfer Pricing Officer picked up only two transactions where the price charged was less than the average market price and also beyond 5% permissible band width to make the addition ignoring other transactions where the average price charged was more. On careful consideration of the above decision, it is apparent that if the transactions are the interlinked transactions then the ALP should be considered of export of goods on aggregate basis. It can be established in many ways that transactions are interlinked, one of the illustrative way is supply of goods billed separately but the purchase order is common and the rates are also predetermined with adjustments on account of material prices. Before us, no such data is available or any other information by which we can say that the transactions of export to associated enterprise are interlinked transactions. It is also clear that merely because they are the export of the same goods over a period to the Associated Enter....
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.... and marketing them in American markets. The appellant had the confidence to adopt CUP methodology which is the traditional method to justify its Arm's Length. It filed full details, in this regard, before the TPO as well as the undersigned. While passing the order, the TPO ignored this data by dismissing it as general in nature. 4.8 The aggregate sale to an AE at USA is only Rs.2,13,64,571/-, which is hardly 1% of the total sales of the company. It does not appear probable that for such a small turnover, which would hardly have any material affect on the income, the appellant would have tried to shift its profits." 4.9 More importantly, the aggregate difference of Rs.6,94,310/- between sale of L&T LLC (Rs.2,13,64,571/-) Arm's Length Price (Rs.2,06,70,261/-) is only 3.35% and is well within the 5% of the tolerance limit permitted by the law. It is observed from the details filed by the appellant before the TPO as well as at the appellate stage that the prices realized from unrelated parties for an item is not uniform but higher or lower than the prices charged to related party (L&T LLC). That is to say that there are transactions for which data has been fu....
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....the total sales of the assessee which could hardly have any material effect on income. The Hon'ble Co-ordinate Bench has just confirmed the findings concluded by Ld. CIT(A). We can also observe that the decision was given way-back in 2010 and the transfer pricing concepts were relatively new at that time. In our respectful submission to the Hon'ble Co- ordinate Bench, this decision does not discuss on the merits of the applicability or non-applicability of aggregation-rule. Therefore, with due respect, we are not inclined to follow this decision. (f) Conclusion: Having made an extensive analysis of the submission of both sides and the relevant material on aggregation-theory, now we proceed to conclude. Firstly, we observe that section 92(1) of the Income-tax Act, 1961 mandates in stricter terms the computation of ALP of each international-transaction and does not allow aggregation as such. However, Rule 10A(d) of Income-tax Rules, 1962 defines "transaction" as including "a number of closely linked transactions" and therefore aggregation of closely-linked transactions is possible. That means, unless the characteristic of "closely-linked" is satisfi....
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....reconsideration in the light of the said agreement and the Appellant would strive to provide all possible support to complete the assessment proceedings before due date of completion of assessment (please refer to Page No. 209 of the Paper Book for the relevant submission). However, the learned AO issued the order without again referring the matter to the learned TPO." If we allow the demand of assessee without even verifying the logic behind aggregation / averaging, it would become a wrong precedent, much fatal not only to this assessee but also to any other taxpayer or even to the revenue. If an absolute conclusion is made that annual- averaging is to be done for determining ALP in all cases or any case, it may so happen that in another year the arithmetic is against assessee i.e. the annual-average-pricing of AEs is lower than the annual- average-pricing of Non-AEs. In that case, the revenue would be claiming that all transactions done during the year are not at arm's length price and therefore annual-average-pricing of Non-AEs should be taken as ALP and based thereon addition to taxable income is warranted. This way the assessee shall be put in a serious problem. S....
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....method, having regard to the nature of transaction or class of transaction or class of associated persons or functions performed by such persons or such other relevant factors as the Board may prescribe, namely :- (a) comparable uncontrolled price method; (b) resale price method; (c) cost plus method (d) profit split method; (e) transactional net margin method; (f) such other method as may be prescribed 15 by the Board. It can be seen that the words "shall be determined by any of the following methods, being the most appropriate method" clearly demonstrate that the ALP shall be determined by one of the various methods enumerated in (a) to (f). Further, such one method must be the most appropriate method. Thus, this section clearly prohibits an assessee or revenue from adopting two methods. Therefore, the assessee has to make his stand crystal clear about the selection of method, be it CUP method or TNMM. This stand is absent or ambiguous in the order of Ld. CIT(A). (b) Secondly, the Ld. CIT(A) has considered that (i) as per internal TNMM, the assessee earned NCP of 22.47% from AEs which is more than 11....
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.... Method. Hence the assessee must make it stand crystal clear about Most Appropriate Method. [Refer Para No. 12.2(a)]. (iii) If the assessee selects CUP method: (a) The assessee has not proved legal justification to apply aggregation-theory. Hence an opportunity must be given to the assessee to prove the same. [Refer Para No. 12.1(f)]. (b) The assessee has claimed that no opportunity was given to it to prove the adjustments to be made in the price-variations. Therefore, it would be fair and appropriate to give an opportunity to the assessee to explain the adjustments. [Refer Para No. 9.2]. (iv) If the assessee selects TNMM: The TNMM data supplied by assessee has not been verified by lower authorities. Therefore, the data must be verified to arrive at a proper conclusion [Refer Para No. 12.2(b)]. 14. In view of above discussions, we are of the considered view that the matter requires reconsideration at the level of Ld. AO / TPO. We therefore remit this issue back to the file of Ld. AO who shall give adequate opportunity to the assessee, consider submissions of the assessee and come to a proper conclusion. Accordingly, Ground No. 1 to 3 ....
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....r observed that the source of income qua the agents is not the sale made from India but their own activities undertaken on foreign soil. Ld. CIT(A), therefore, observed that the commission income was not earned in India and hence not taxable in India on any basis under section 5 or 9(1). Ld. CIT(A) further also observed that neither section 195 nor section 40(a)(i) were attracted in the circumstance. Ld. CIT(A) also observed that the assessee paid commission to 6 agents, out of which 5 were old agents to whom commission was paid in earlier years as well and only 1 agent was new. Ld. CIT(A) perused various documents filed by the assessee and recorded a finding about the genuineness of services and payment of commission. With these, the Ld. CIT(A) deleted the disallowance. 18. Ld. DR supported the order of Ld. AO and particularly argued that since the assessee has paid commission without deducting TDS, the disallowance-provision of section 40(a)(i) is attracted. Therefore, the Ld. AO has rightly made disallowance which must be upheld. 19. Per contra, Ld. AR contested that the impugned commission payment was made to the agents who were located in foreign countries and rendered s....
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....in India in the hands of payees. We further observe that the issue is well covered by the decision of ITAT, Ahmedabad in assessee's own case for assessment- year 2013-14 and the applicability of the said decision is not controverted by the revenue on facts or in law. Therefore, following the same view, we hold that the commission-payment was not chargeable to tax in India and neither TDS u/s 195 nor the disallowance u/s 40(a)(i) is attracted. Regarding genuineness of commission-payment, we observe that the assessee has given sufficient documentary evidences to prove the services of agents and payment of commission. It is also observed that the assessee has paid commission to majority of the agents in preceding years as well and the same stood allowed as deduction. We also find that the Ld. CIT(A) has given a reasoned order on this point and deleted the disallowance. Therefore, we uphold the deletion made by Ld. CIT(A). With this, Ground No. 4 of the Revenue is dismissed. GROUND No. 5 and 6: 21. In Ground No. 5, the revenue has claimed that the Ld. CIT(A) has erred in deleting the disallowances made by Ld. AO while computing deduction u/s 10B of the Act. Further in Ground ....
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....h & Co. KG, Germany ("JRS") at an agreed-price and thereafter JRS is re-selling the same goods in Germany to different customers. Ld. AR submitted that per terms and conditions agreed upon, JRS shall remit 50% of the difference of agreed price and ultimate sale-price charged by JRS from its own customers, as profit-share, to the assessee. Ld. AR submitted that during the year under consideration, the assessee received a sum of Rs. 2,73,58,615/- on account of such profit-share through banking-channel which is evidenced by the copies of the Foreign Inward Remittance Certificates (FIRCs) issued by State Bank of India and submitted to Ld. AO during assessment-proceeding. Ld. AR submitted that the receipt of Rs. 2,73,58,615/- is nothing but an additional consideration related to the sale of goods and therefore it is essentially and certainly a part of the business-receipt of assessee. Ld. AR also submitted that the actual character of the receipt of Rs. 2,73,58,615/- is additional consideration related to sales made to JRS, although the nomenclature "Misc. income" has been used in books of account. Relying upon following decisions, Ld. AR contested that the description in the books of a....
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....no change was required, (ii) common expenses have been allocated between Unit-I and Unit-II in the ratio of quantities sold by them. Ld. AR further argued that the mistake in allocation of expenses at the time of filing return, does not mean that the books of account were incomplete or incorrect. Ld. AR submitted that the Ld. AO has not pointed out any specific defect in the books of account. Hence the rejection of books of account by invoking section 145(2) is not tenable. Notwithstanding this, Ld. AR made an additional submission that the Ld. CIT(A) has not approved the rejection of books by Ld. AO but in the Grounds of Appeal, the appellant-revenue has not raised any ground challenging the action of Ld. CIT(A). (iv) Regarding Revised COI, Ld. AR submitted that it is an established proposition that the deduction u/s 10B has to be computed on the basis of correct profit of the eligible business. Ld. AR submitted that at the time of filing return of income, certain mistakes occurred in computation of deduction u/s 10B which the assessee came to discover during the course of assessment-proceeding. Therefore, in order to provide correct working of deduction u/s 10B, the asse....
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.... is credited as "Misc. income / other income" in the books of account. The assessee has proved by clinching evidences that it has received (ii) through banking channel. It is the claim of the assessee that (ii) receipt is also a part of sale-price and in any case it is definitely a business-receipt. As against this, the revenue's impression is that (i) is sale-price but (ii) is misc. income / other income. This mis-understanding, as we feel, is created due to the accounting head "misc. income" used by the assessee. We observe that (ii) is in the form of additional consideration related to the sales-made by the assessee to JRS. We find sufficient force in the submission of Ld. AR that the nomenclature used by the assessee as "Misc. Income / Other Income" is not decisive, we have to look into the true nature of receipt. Thus, we are persuaded to hold that the receipt of Rs. 2,73,58,615/- is a business- receipt. Regarding interest income of Rs. 1,28,777/-, we observe that the assessee has received interest of 1,21,486/- from Uttar Gujrat Vij Company Ltd. (UGVCL) on security deposit made for the purpose of business and Rs. 7,291/- as interest from bank. We observe that the....
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....contemplated under Section 10B of the Act." In CIT Vs. Motorola India Electronics (P) Ltd. (2014) 16 taxmann. Com 167 (Karnataka), interest income earned from inter-corporate loans and deposits in lying in EEFC account was held as eligible for deduction u/s 10B. Similarly, the Full Bench of Karnataka High Court in CIT Vs. Hewelett Packard Global Soft Ltd. (2017) 87 taxmann.com 182 has held that interest on bank deposits is eligible for 100% exemption u/s 10A and 10B. In the light of these decisions, we are of the considered view that the Misc. income of Rs. 2,73,58,615/- and interest income of Rs. 1,28,777/- are eligible for deduction u/s 10B. (ii) Regarding impact of disallowance of commission related to Unit-II (Rs. 1,82,240/-) on deduction u/s 10B, we find that this issue does not survive in view of the fact that we have already upheld the deletion of disallowance made by Ld. CIT(A) in earlier paragraph. Therefore, this issue becomes infructuous. (iii) Regarding re-allocation of expenses, we observe that the approach adopted by the assessee is correct in as much as the expenses specifically debited in Unit-I and Unit-II are treated as directly related to ....