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2017 (11) TMI 802 - ITAT DELHIAddition on account of Project Procurement expenses - addition the same were not incurred for the purpose of - business - Held that:- On perusal of the documents, we find that these are mainly agreements between the assessee and commission agent, correspondence between the assessee and the commission agent, copy of invoices issued by the commission agent, evidence of payment released by the principal, copy of contract awarded to the assessee, letter by the assessee appointing the commission agent etc. In our opinion, these documents are not sufficient to demonstrate the actual services rendered by the commission agents. The assessee was required to explain the role of the commission agent in procuring contracts from the government agencies and other principle parties. The assessee was required to furnish documentary evidence, whether the commission agent represented before the parties, who awarded contract to the assessee and whether those commission agent participated in any contract awarding activity or any activity provided in the scope of work in the agreement. The documents submitted by the assessee are mostly computer-generated printouts of correspondence between the assessee and the commission agent. No evidence is available in paper book, as how these correspondences exchanged between the assessee and the commission agent, whether it was through post or whether it was through emails. The assessee has not produced any evidences supporting the technical expertise and experience of the commission agents in the field of services rendered. We are of the opinion that the fact of services rendered has to be examined in each year on the basis of the documentary evidences submitted by the assessee and therefore, issue in dispute cannot be treated as covered by the decision of the Tribunal in assessment year 2004-05. The documentary evidences in the year under consideration for establishing the services rendered need to be produced by the assessee and examined by the Assessing Officer afresh. Accordingly, we feel it appropriate to restore the issue to the file of the Assessing Officer to examine copy all the documents produced by the assessee. Accordingly, the ground of the appeal is allowed for statistical purposes. Transfer Pricing Adjustment - TPO accepted the most appropriate method and comparables selected by the assessee, however, he has taken PLI data of comparables for current year only as against multiple year data taken by the assessee - Held that:- On the issue of single year data versus multiple year data of comparables is concerned, we are of the opinion that for justifying multiple year data of comparables before the Ld. CIT- (A), the assessee contested variation in net profit of the comparables companies. In our opinion, merely variation in the profit cannot justify use of multiple year data until and unless, the reason for variation in the profit are linked to the cyclic nature of business transactions, having financial impact on more than one year. No factual information was brought on record in respect of the comparables other than presenting theoretical or general arguments supporting adoption of multiple year data. In the year under consideration before us, the Rule 10B(4) of the Income-tax Rules, 1962 (in short ‘the Rules’) has specifically provided for using the data of the relevant financial year and data of the two years prior to the relevant financial year could only be considered, if such data reveals facts which could have influence on the determination of the transfer price in relation to the transaction being compared. Before us, the assessee has not brought on record any evidences showing the influence of the cyclic nature of the transactions of the comparables or having financial impact of operational activity over the subsequent years. Thus learned CIT-(A) was not justified in deleting the transfer pricing addition without giving reasons for taking average of multiple year data for computing PLI of comparables. In view of above discussion, we set aside the finding of the Ld. CIT-(A) on the issue in dispute and restore that of Ld. TPO/AO. The ground of appeal is accordingly allowed. Disallowance out of telephone and car expenses - Held that:- In the instant case, the Ld. CIT-(A) has not given any finding on the basis of documents produced by the assessee before him whether the expenditure was incurred wholly and exclusively for the purpose of business or not. Since the Assessing Officer did not get opportunity to examine documents like call registers for telephones and logbook etc. of vehicles as same were neither produced before him in the assessment proceedings nor forwarded to him by the Ld. CIT-(A), the claim of the assessee has remained non-verified by the lower authorities. In the interest of justice, we feel it appropriate to restore the issue to the file of the AO to verify the documentary evidence supporting the claim of the assessee that the expenditures on telephone and car were incurred towards the business purpose only and decide the issue in dispute in accordance with law. The assessee shall be afforded adequate opportunity of being heard. The ground of the appeal is accordingly allowed for statistical purposes.
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