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2023 (3) TMI 1299 - AT - Income TaxTP Adjustment - comparable selection - exclusion of Lotus Labs as comparable by the DRP - HELD THAT:- As the company fails the RPT filters for the year under consideration. Accordingly respectfully following the decision of the coordinate bench in assessee’s own case [2023 (1) TMI 1114 - ITAT BANGALORE] we see no reason to interfere with the decision of the DRP. This ground of the Revenue is dismissed. Expenses by pharma companies - expenditure incurred towards freebies to doctors by the Pharma Agencies as disallowable u/s.37(1) - HELD THAT:- The additional evidence furnished by the assessee providing the details of expenditure and the breakup incurred on doctors goes to the root of the dispute, therefore for substantial justice the same is admitted and taken on record for adjudication. We remit the issue back to the AO to examine the nature of expenditure incurred by the assessee and to verify the issue afresh in the light of the recent judgement of the Hon'ble Supreme Court in the case of Apex Laboratories Pvt. Ltd. [2022 (2) TMI 1114 - SUPREME COURT] Ground Nos. 4 to 7 are allowed for statistical purposes. Disallowance of contribution towards gratuity funds - HELD THAT:- We noticed that the AO has not examined the details as per the directions of the DRP and has admitted that gratuity payment required further enquiry. AO has made disallowance considering the provisions of Section 144C(8) of the Act and sustained the disallowance. Since the AO has not verified the details of gratuity based on the details furnished by the assessee we remit the issue back to the AO with a direction to examine the details of payment of gratuity and decide the allowability accordingly. This ground is allowed for statistical purposes. Disallowance of expenditure incurred under Voluntary Retirement Scheme (VRS) - assessee in the original return inadvertently claimed deduction of entire VRS payment instead of 1/5th of the amount as per section 35DDA and filed revised return rectifying the same - AO disallowed the same on the reason that same was not disclosed in the tax audit report - HELD THAT:- We noticed that the AO has not examined the details as per the directions of the DRP and has made disallowance considering the provisions of Section 144C(8) and sustained the disallowance. Since the AO has not verified the details of spends towards VRS payments based on the details furnished by the assessee we remit the issue back to the AO with a direction to examine the details of and decide the allowability accordingly. These grounds are allowed for statistical purposes. TP adjustments @ 5% of the expenses reimbursed by the AE - HELD THAT:- In our view whether the mark-up of the cost of the services rendered by the Third Party can be applied for determining the ALP in the hands of the assessee should be examined from the angle of whether by making the payment on behalf of AE the assessee is performing any function or deploying any assets or has born any risks. DRP has not examined these facts based on the details furnished and has calculated an adhoc margin of 5% without any bench marking analysis and without attributing any reasons as to why the reimbursement is a separate international transaction. DRP has not considered the assessee’s submission that the entire expenses incurred on behalf of AE does not pertain to coordination of clinical trial segment since the AEs who have reimbursed the expenses are not those to whom clinical trial services are rendered by the assessee. The issue should be remitted back to the DRP to examine the various details and submissions furnished by the assessee and decide the issue in accordance with law. The DRP is directed to keep in mind the decision of the Hon’ble Delhi High Court in the case of Li and Fung India Pvt Ltd [2014 (1) TMI 501 - DELHI HIGH COURT] while deciding the issue. Accordingly this ground is allowed in favour of the assessee for statistical purposes
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