2018 (5) TMI 1314 - ITAT PUNE

TPA - ALP determination - aggregation approach adopted by the assessee for benchmarking its manufacturing activities rejection - Held that:- Benchmarking the international transactions of assessee, wherein the assessee was engaged in manufacturing activities, then we hold that various activities are to be aggregated for determining the arm's length price of its international transactions.

Direct the Assessing Officer that while determining the PLI to adopt net profit to sales in order to benchmark the international transactions

Benefit of range of +/-5% is available if the variation does not exceed the said tolerance margin. The ground of appeal is thus, allowed.

International transactions of procurement support services provided to associated enterprises are to be aggregated and benchmarked along with international transactions under the manufacturing activities.

Deduction under section 80IB computation - Held that:- The said issue is covered against the assessee by the earlier order of Tribunal and wherein, the Tribunal following the same parity of reasoning as in assessment years 2007-08 and 2008-09 had upheld the orders of authorities below in allocating head office expenses, Director’s salary, etc to Daman unit and upheld the re-computation of deduction under section 80IB of the Act. - Decided against assessee

Claim of deduction under section 35(2AB) - expenditure incurred on Research & Development activity - whether where the facility has been recognized and necessary certification is issued by the prescribed authority, the assessee can avail the deduction in respect of expenditure incurred on in-house R&D facility? - Held that:- The amendment brought in by the IT (Tenth Amendment) Rules w.e.f. 01.07.2016, wherein separate part has been inserted for certifying the amount of expenditure from year to year and the amended form No.3CL thus, lays down the procedure to be followed by the prescribed authority. Prior to the aforesaid amendment in 2016, no such procedure / methodology was prescribed. In the absence of the same, there is no merit in the order of Assessing Officer in curtailing the expenditure and consequent weighted deduction claim under section 35(2AB) on the surmise that prescribed authority has only approved part of expenditure in form No.3CL. We find no merit in the said order of authorities below.

The Courts have held that for deduction under section 35(2AB) first step was the recognition of facility by the prescribed authority and entering an agreement between the facility and the prescribed authority. Once such an agreement has been executed, under which recognition has been given to the facility, then thereafter the role of Assessing Officer is to look into and allow the expenditure incurred on in-house R&D facility as weighted deduction under section 35(2AB) of the Act. Accordingly, we hold so. Thus, we reverse the order of Assessing Officer in curtailing the deduction claimed under section 35(2AB)