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2019 (4) TMI 1298 - AT - Income TaxTransfer pricing adjustment - Comparable selection - HELD THAT:- Vishal Information Technologies Ltd. - business model of the company is totally different from the assessee, as, it does not undertake the work itself but out sources it to third party vendors. This fact is clearly discernible from the low employee cost of the company which is evident from the financial statements filed in the paper book. Maple e–solutions Ltd. company cannot be treated as comparable due to unreliability of its financial data - the margin of the assessee would be within ±5% of the average margin of the rest of the comparables, we do not intend to examine the acceptability or otherwise of Datamatics Financial Services Ltd., Gold Stone Infratec Ltd., Asit C. Mehta Financial Services Ltd., as comparables to the assessee which is left open for adjudication, if arises, in any other assessment year in future. This ground is partly allowed. TP adjustment - interest paid on delayed settlement of traveler’s cheques (TCs) and pre–paid cards (PPCs) - Difference in interest rates - assessee has paid interest at LIBOR plus 200 basis points - HELD THAT:- The computation of interest by the Transfer Pricing Officer on the basis of RBI ECB rate is flawed since the interest paid by the assessee are to AEs located in foreign countries. In view of the aforesaid, we hold that the interest paid by the assessee to the AEs is at arm's length. The decisions relied upon by the learned Authorised Representative also support this view. Accordingly, the addition made is deleted. Ground is allowed. Addition on account of bad debt - embezzled by one of the employees of the company - Non–filing of FIR before the Police - HELD THAT:- The auditors have specifically mentioned about the embezzlement of fund by the employee. Further, the internal note of the company also bears testimony to the fact of the embezzlement. Non–filing of FIR before the Police may be due to various reasons. Therefore, for that reason alone, assessee’s claim that the amount in question was embezzled cannot be rejected. Having held so, it is seen from the auditor’s report that out of the amount of ₹ 15,23,996, the company could recover an amount of ₹ 4,70,000, and the balance amount of ₹ 10,53,996, could not be recovered. Thus, the quantum of loss suffered by the assessee is ₹ 10,53,996 and not ₹ 11,24,899, as claimed by the assessee. Further, though the loss incurred by the assessee on account of embezzlement may not be allowable as bad debt but certainly it has to be allowed as business loss. In view of the aforesaid, we direct the Assessing Officer to allow deduction for an amount of ₹ 10,53,996. Ground is partly allowed.
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