TMI Blog2013 (8) TMI 442X X X X Extracts X X X X X X X X Extracts X X X X ..... e - Decided in favour of assessee. - IT Appeal No. 8670 (Mum.) of 2010 - - - Dated:- 23-7-2013 - I. P. Bansal And P. M. Jagtap , JJ. For the Appellant : Sunil M. Lala, Yogesh Thar and Harsh Shah. For the Respondent : Ajeet Kumar Jain. ORDER:- PER : I.P. Bansal, Judicial Member - This is an appeal filed by the assessee. It is directed against assessment order dated 7/10/2010 passed under section 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 (the Act). The assessee has filed concise grounds which read as under: I. On the facts and in the circumstances of the case, the Learned Transfer Pricing Officer (hereinafter referred to as Ld.TPO ) and the Learned Assessing Officer (hereinafter referred to as Ld. AO ) have erred in proposing, and the Hon'ble Dispute Resolution Panel (hereinafter referred to as Hon'ble DRP ) has erred in confirming (under Section 144C(6)), the addition of ₹ 3.83 crores to the income of the appellant for AY 2006-07 under section 92CA(3). II. On the facts and in the circumstances of the case, the Ld. TPO and the Ld. AO have erred in proposing and the Hon'ble DRP has erred in confirming the rejection ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts have been made beyond the grace period. VIII. b. He failed to appreciate and ought to have held that Payments for ₹ 1,81,496 and ₹ 4,83,519 were made before the due date. Balance payment of ₹ 1,37,835 was made on 22.11.2005 i.e. before due date of filing of return of income. VIII. c. The appellant prays that the aforesaid disallowance of 8,02,850/- be deleted. IX. Disallowance u/s 40 (a) (ia): IX. a. On the facts and circumstances of the case and in law, the Ld. AC erred in disallowing a sum of ₹ 1,71,38,714/- (65,36,243 + 1,06,02,471) u/s 40(a)(ia) on the alleged ground that no details of TDS were submitted during assessment proceedings. IX. b. He failed to appreciate and ought to have held TDS was deducted on all the items disallowed by the Ld. AC. However, due to voluminous nature, only sample evidences were submitted before the Ld. AC and Hon'ble DRP. IX. c. The appellant, therefore, prays that the Ld. AC be directed to delete the aforesaid disallowance. X. Set off of accumulated losses and depreciation allowance: X. a. On the facts and circumstances of the case and in law, the Ld. AC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n transactions with AEs are of purchases (4 transaction totalling to ₹ 69.32 Crores (41.25+4.39+13.68+9.99)), we need to benchmark the arm's length price of purchases. The OP/ Sales percentage of comparables is 6.49%. Operating Cost(OC) of Power segment is 100- 6.03=93.94% of Sales of ₹ 891.21 crores, i.e., ₹ 837.20 crores, which includes AE cost of ₹ 69.32 crores. The Arm's Length Operating Costs are 100 - 6.49 = 93.51% of Sales of ₹ 891.21 crores, i.e., ₹ 833.37 crore Therefore, this calls for a Transfer Pricing Adjustment of ₹ 837.20 - 833.37 = ₹ 3.83 crores, which is beyond 5% of the AE costs of ₹ 69.32 crores. 4. Firstly, it is the case of the assessee that Ld. TPO while making the adjustment has considered the entire turnover whereas according to well established law TP adjustment can be made only in respect of transactions entered into by the assessee with its AEs. Such proposition is contended to be supported by various decisions relied upon by the Ld. AR as under: Sr.No. Name Citation 1. Emerson Process Management ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate Adjustment on Cost 0.32 Since adjustment of 0.32 Crores is within the 5% variation range no addition can be made 4.2 Thus it was pleaded by Ld. AR that no adjustment should have been made as the difference, if any, is between the mean margin of comparable and of the assessee is much below of the 5% of the international transactions. 5. However, Ld. DR relied upon the orders passed by AO and Ld. DRP. 6. We have carefully considered the rival submissions in the light of material placed before us. So far as it relates to contention that TP adjustment is permissible only on AE transactions the same is required to be accepted as it is supported by aforementioned decisions. Therefore, we have no hesitation in holding that Ld. TPO was wrong in making TP adjustment on non-AE transactions. The adjustment, if any, should be limited to the AE transactions. Now the question will arise that whether the adjustment will fall within the safe harbour of +/- 5%. The copy of chart submitted by Ld. AR was also given to Ld. DR who could not dispute the fact that even applying the mean margin taken by Ld. TPO, the difference in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowance should be made. We direct accordingly. For statistical purposes this ground is considered as allowed in the manner aforesaid. 11. Apropos Ground No.9, it is the case of Ld. AR that TDS on all the items has duly been deducted and paid. Only due to voluminous nature sample evidences were submitted before the AO and Ld. DRP. He, therefore, submitted that in the interest of justice matter may be restored back to the file of AO as assessee is in a position to produce all the evidences to show that TDS has duly been deduced and paid to the Government Treasury for the disallowed amount. 12. Ld. DR relied upon the orders passed by AO and Ld. DRP. 13. After hearing both the parties and considering their submissions we restore this issue to the file of AO with a direction to re-adjudicate this issue after giving the assessee a reasonable opportunity of hearing. If the amount of TDS has been deducted and paid to the Government Treasury then no disallowance should be made under section 40(a)(ia) of the Act. 14. Apropos Ground No. 10; this issue relates to brought forward loss and unabsorbed depreciation relating to amalgamated company namely Alstom Transport Ltd., whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der the circumstances fresh certificate dated 16/12/2009 was obtained and filed before AO under honest plea that the said certificate was misplaced. The permission was sought to submit the certificate. He submitted that Ld. DRP did not admit such evidence with the observation that certificate appears to be back dated. Ld. AR submitted that the matter may be restored back to the file of AO as the assessee has obtained the affidavit from the concerned Chartered Accountant to refute the allegation made in the order of Ld. DRP that the certificate appears to be back dated. 16. On the other hand, Ld. DR relied upon the orders of AO and Ld. DRP. 17. We have heard both the parties on this issue. After hearing both the parties and considering the facts and circumstances of the case which have been described in detail in the aforementioned para, we consider it just and proper to restore this issue to the file of AO with a direction to re-adjudicate the same as per law after giving the assessee a reasonable opportunity of hearing. We direct accordingly. For statistical purposes this ground is treated as allowed. 18. In the result, the appeal filed by the assessee is partly allowed f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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