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2018 (9) TMI 1938 - ITAT VISAKHAPATNAMTDS u/s 194J - Disallowance u/s 40(a)(ia) - professional charges paid without deduction of tax at source - HELD THAT:- There is no dispute that the payments made to Ms.K.Jyothi and Mr.K.Venkateswara Rao represent the professional charges and the assessee is required to deduct the tax at source and to remit to Government of India account u/s 194J of the Act. Therefore, we do not see any reason to interfere with the order of the Ld.AO and uphold the disallowance. The assessee’s appeal on this ground is dismissed. Adhoc disallowance @10% of the foreign travel expenses - HELD THAT:- AR did not place any evidence to controvert the finding of the AO and to establish the relevance and genuineness of the expenditure with foreign visits made by the Director and the purpose and nature of expenses. Therefore, we do not find any reason to interfere with the order of the Ld.AO. The disallowance made by the AO is upheld and the appeal of the assessee on this ground is dismissed. ALP adjustment towards interest on advances given by the assessee to its Associate Enterprise (AE) - HELD THAT:- If the funds are repatriated to India as observed by the Ld.DRP there would be substantive reduction in the interest cost and potential increase in the profit of the company. Therefore, having observed that the advance is not a trade advance, we hold that the interest is chargeable on the advances given to the AE. The assessee has incurred huge financial cost including the interest on working capital. As rightly observed by the Ld.DRP, had the assessee did not divert the funds, the tax payer would have saved the interest to the extent of diversion of funds. Therefore, the arguments of the Ld.AR not to charge the interest on interest free funds given or advance to the AE is not acceptable and we hold that the AO has rightly made the adjustment. As relying on ACIT, Circle 1(1), Guntur Vs. CCL Products (India) Ltd. [2017 (9) TMI 1737 - ITAT VISAKHAPATNAM] we direct the AO to charge the interest @2% more than the LIBOR which is reasonable and at arms length. Accordingly, the assessee’s appeal on this ground is partly allowed. This issue is involved for the assessment year 2011-12 and 2012-13 and the appeal of the assessee is partly allowed for both the assessment years. Interest on receivables - HELD THAT:- In the instant case the PLI is higher than comparable cases and the TPO held that no ALP adjustment is required with regard to profit margin. The assessee contended that having accepted that the PLI is higher than the comparable cases the potential loss of interest is taken care and embedded in the sale price.The department has not given the specific details such as what was the period of recovery, what was the delay, what was the reasonable delay etc.,thus the department has not made out a case for charging the interest on dealy. The revenue also did not controvert the submission of the assessee that due to higher margins and the long term relations and business considerations the right of interest is waived - we hold that there is no justification for charging the interest on receivables in the case of the assessee, accordingly, we delete the interest levied on receivables and allow the appeals of the assessee Disallowance u/s 36(1)(va) r.w.s. 2(24)(x) towards delayed payment of employees contribution to Provident Fund - HELD THAT:- Issue is squarely covered by the decision of Hon’ble Supreme Court in the case of CIT Vs. Alom Extrusions [2009 (11) TMI 27 - SUPREME COURT]. In this case, though the assessee has not remitted the employers contribution before the stipulated date of 15th of succeeding month, the assessee had remitted the entire amount before filing the return of income. Therefore, we hold that the assessee is entitled for deduction if the employer contribution is paid before filing the return of income before the due date. Accordingly, appeal of the assessee on this ground is allowed. Granting exemption u/s 10A on enhanced profits on account of additions made by the AO on domestic front towards disallowance u/s 40(a)(ia) and towards foreign travel expenses - HELD THAT:- As relying on Gem Plus Jewellery India Ltd. [2010 (6) TMI 65 - BOMBAY HIGH COURT] assessee is entitled for deduction u/s 10A on account of the disallowances/additions made by the AO other than ALP adjustments. Accordingly, we direct the AO to grant exemption u/s 10A on the disallowance made by the AO in respect of section 40(a)(ia) and 36(a)(va) and the adhoc disallowance on foreign travel expenses. Appeals of the assessee are partly allowed.
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