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2018 (12) TMI 986 - AT - Income TaxTPA - International transaction relating to reimbursement of expense to its Associated Enterprise AE - Held that - As decided in assessee s own case no upward adjustment is proposed to the income of the assessee in relation to the international transaction which was the subject matter of 6 benchmarking. Hence, the upward adjustment of ₹ 13.07.20.653/- made in the original order for the expat support services u/s 92(A(3) is thus reduced to NIL. AO is requested to take the necessary action. Thus we are of the considered opinion that the transfer pricing adjustment of ₹ 6.63 crores deserves to be deleted. We direct accordingly. Disallowance of 10% of the total staff welfare expenses - Held that - While deciding the objection raised by the assessee in respect of adhoc disallowance of 10%, the DRP has directed the Assessing Officer to delete the same by holding that the disallowance has to be on some basis. There is no dispute that the books of account of the assessee are audited and no specific defect has been pointed out by the Assessing Officer/TPO. Therefore, in our considered opinion, adhoc disallowance is unwarranted and deserves to be deleted as was deleted by the DRP in assessment year 2012-13 - decided in favour of assessee.
Issues:
1. Transfer pricing adjustment related to reimbursement of expenses to Associated Enterprise. 2. Adhoc disallowance of 10% of total staff welfare expenses. Transfer Pricing Adjustment Issue: The appellant's appeal was against an order regarding the addition of ?6.63 crores on account of transfer pricing to the appellant's income. This addition was made due to the international transaction related to reimbursement of expenses to its Associated Enterprise (AE) not satisfying the Arm's Length Price. The Tribunal considered the appellant's objection and previous Tribunal decisions. The Tribunal held that the ALP of the international transaction was not NIL, as concluded by the TPO. Referring to a previous case, the Tribunal emphasized that it is the prerogative of the assessee to conduct their business, and the necessity of expenses is not for Revenue authorities to decide. The TPO, after reconsideration, reduced the adjustment to NIL based on the Tribunal's directions. Consequently, the Tribunal directed the deletion of the transfer pricing adjustment of ?6.63 crores. Adhoc Disallowance Issue: The appeal also addressed the adhoc disallowance of 10% of total staff welfare expenses. The DRP's order for a subsequent assessment year was cited, where a similar disallowance was deleted. The Tribunal agreed with the assessee's contention that the adhoc disallowance lacked a proper basis, especially when the books were audited without specific defects highlighted. Consequently, the Tribunal allowed the deletion of the adhoc disallowance, as directed by the DRP for the subsequent year. In conclusion, the Tribunal partly allowed the appeal by the assessee, deleting both the transfer pricing adjustment and the adhoc disallowance. The decision was pronounced on 17.12.2018 by the Appellate Tribunal ITAT Delhi.
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