TMI Blog2020 (4) TMI 293X X X X Extracts X X X X X X X X Extracts X X X X ..... was following this method consistently. Disallowance out of Expenditure in Foreign Currency - HELD THAT:- As decided in own case [ 2019 (11) TMI 1395 - ITAT DELHI] It is not in dispute that school fees of the children of the employees have been paid by the assessee company. We are of the considered view that if the same is treated as perquisites in the hands of the employees then the same takes the colour of the salaries. We, accordingly, restore this issue to the files of the AO. The assessee is directed to demonstrate that the school fees has been treated as perquisites in the hands of the employees and the AO is directed to examine the same and decide the issue afresh after giving a reasonable opportunity of being heard to the assessee. Disallowance out of Technical Training Expenditure - HELD THAT:- As decided in own case [ 2019 (11) TMI 1395 - ITAT DELHI] Chartered Accountant certificate clearly shows that it is a contra entry inadvertently shown under the head details of expenditure in foreign currency. We find that complete ledger accounts were given to the lower authorities which were not examined by them. In the interest of justice and fair play, we restore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 010-11, the directions of the DRP have attained finality. Further, we find that the facts and circumstances and underlying issues are identical during the year under consideration also. Therefore, considering the past history of the assessee, we do not find any reason to interfere with the findings of the DRP. Accordingly, Ground Nos. 1 to 3 are dismissed. Disallowance of TDS recoverable written off - HELD THAT:- As decided in M/S NOKIA SIEMENS NETWORKS INDIA [2018 (2) TMI 1783 - ITAT DELHI] it has become necessary to verify whether the assessee had recognized the income as and when the services are rendered or goods are dispatched and subsequently, whether the assessee written off the difference amount of deficit payment and the amount under the TDS certificate issued, in their books of accounts. It would be conveniently verified by the learned AO and if he finds that initially the assessee recognized the total invoice amount and subsequently, identified the bad debt with reference to the deficit payment by the party and the amount under TDS certificate issued. On verification of compliance with these two conditions, learned AO will allow this expense. Disallowance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... round of the appellant s business profile, we will now take up the assessee s appeal in ITA No. 909/DEL/2016. ITA No. 909/DEL/2016 [Assessee s appeal for A.Y 2011-12] 3. Ground No. 1 is general in nature and needs no adjudication. 4. Ground No. 2 relates to the addition on account of unearned revenue amounting to ₹ 62,84,26,537/-. 5. Ground No. 3 relates to disallowance of provision of liquidated damages. 6. Ground No. 4 relates to disallowance out of expenditure in foreign currency. 7. Ground No. 5 relates to disallowance out of technical training expenditure. 8. Ground No. 6 relates to TP adjustment. 9. At the very outset, the ld. counsel for the assessee drew our attention to the decisions of the co-ordinate bench in assessee s own case for Assessment Year 2011-12 and 2009-10 and stated that all the issues involved in the present appeal were considered by the Tribunal in earlier years and has decided in favour of the assessee and against the revenue. 10. The ld. DR could not bring any distinguishing decision in favour of the Revenue. 11. We have given thoughtful consideration to the orders of the authorities below. We find force in the conte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been rightly considered as business expenditure. The company is following the method on a consistent basis. When the payment was actually made the accounts were adjusted with reference to any remission or waiver that the company may get in respect of damages payable for the late delivery and the same was brought to tax u/s 41(1) of the IT Act, 1961 by crediting the liquidated damages account. The AO held that the provision made for liquidity damages amounting to ₹ 17,61,99,671/- is unascertained liability in the nature of contingent liabilities and, therefore, added the same. In terms of the purchase order, liquidated damages @ 0.5% per week subject to a maximum of 0.7% would be imposed. The company defaulted in the delivery terms, therefore, the above liability is as definite liability. Further, as the liability is determinable 0.05% per week subject to a maximum of 0.7%, therefore, the liability is also an ascertained liability. The liability to pay liquidated damages arose no sooner than there was a breach. The company had provided for the liquidated damages pertaining to the period of delay falling within the previous year in order to arrive at the tru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ordinate bench, we direct for the deletion of the addition of ₹ 57,93,45,721/-. The Ground no. 3 is accordingly allowed. 30. On finding parity of the facts with the facts of the year under consideration, we find no reason to differ with the findings of the coordinate bench. Respectfully following the same, we direct the Assessing Officer to delete the addition of ₹ 13,95,98,167/-. Ground No. 3 with all its sub-grounds is allowed. Disallowance out of Expenditure in Foreign Currency. 31. An identical issue was considered by the co-ordinate bench in Assessment Year 2010-11 [supra] vide Ground No. 4 of that appeal and has held as under: 32. We have carefully considered the rival contentions. It is not in dispute that school fees of the children of the employees have been paid by the assessee company. We are of the considered view that if the same is treated as perquisites in the hands of the employees then the same takes the colour of the salaries. We, accordingly, restore this issue to the files of the AO. The assessee is directed to demonstrate that the school fees has been treated as perquisites in the hands of the employees and the AO is directed to ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e adjustments have been made in respect of the international transaction under taken by the appellant namely provision of marketing support services and provision of warranty support services. We find that a similar transfer pricing adjustment was made in AY 2009- 10 in respect of market support service segment and the matter travelled upto the Tribunal and the coordinate bench in ITA No. 2810/Del/2014 has decided this issue as under: 44. We have heard the rival submissions and have given thoughtful consideration to the orders of the authorities below. It is an undisputed fact that the assessee has recharged the total cost of marketing team along with mark up of 3% from the AE, which means that the AE not only compensated the cost of marketing, team attributable towards the provision of marketing support services to AE by the assessee but also compensated the cost of marketing team attributable to the support provided by the marketing team to the assessee itself. This is not warranted as per the inter company agreement. In our considered opinion, considering the attribution to the services provided to the AE, vis a vis actual Revenue realised from the AE, margin of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e direct accordingly. Ground no. 7 is allowed. 37. In so far as technical support services is concerned, the TPO has used the same comparables as for warrantee support services and has made computation of ALP on the same lines which is as under: Operating cost 5,12,26,035/- Arm s length margin 29.15 Arm s length price 6,61,58,424/- Price shown in the international transactions 5,27,62,616/- Shortfall being adjustment u/s 92CA 1,33,95,608/- 38. It can be seen from the above chart that the Arm s length margin has been taken at the same rate of 29.15. In light of the above bench marking, we have carefully gone through the agreement exhibited at page 205 of the paper book [particular page 209]. At this juncture, it would be pertinent to mention here that the assessee entered into an Advance Pricing Agreement u/s 92CA of the Act with CBDT and agreement is dated 28.03.2016 and at page 13 under Appendix 1A, details of covered transactions between the assessee and the AEs relat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the DRP u/s 144C(5) of the Act dated 18.12.2014 for A.Y 2010-11. It is true that while making the disallowances, the Assessing Officer followed the findings given in A.Y 2010-11 and the DRP while deleting the disallowance have followed the directions given in A.Y 2010-11. Since the Revenue did not prefer any appeal for A.Y 2010-11, the directions of the DRP have attained finality. 45. Further, we find that the facts and circumstances and underlying issues are identical during the year under consideration also. Therefore, considering the past history of the assessee, we do not find any reason to interfere with the findings of the DRP. Accordingly, Ground Nos. 1 to 3 are dismissed. 46. Ground Nos. 4 to 10 relate to the exclusion of certain comparables from the final set of comparables for determining the ALP of the international transaction. 47. As mentioned in the case of assessee s appeal [supra], Advance Pricing Agreement has been entered into between the assessee and CBDT and at para 2 it has been mentioned that the agreement shall also apply to consecutive four rollback years commencing from the previous years 2009-10 to 2012-13 for category 2 and 3 transactions on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the said write off comprises of: a) TDS receivables ₹ 9.09 crores. b) Security deposits and advances ₹ 5.17 crores. 56. The Assessing Officer was of the opinion that since the assessee is not a banking company and in order to claim bad debts, the assessee was required to satisfy the conditions of section 36(2) of the Act, failing which the TDS receivable and security deposits and advances are not in the nature of income declared in earlier year. The Assessing Officer further observed that it is not understandable as to how the liability can be shifted to be recovered from the department and how the same can be written off. The claim of the assessee was denied by the Assessing Officer. 57. The assessee raised objections before the DRP and explained that the amount of ₹ 9.90 crores represents TDS deducted by customers in respect of which TDS certificates were not received and the said amount was no longer recoverable from the customers and since the amount cannot be recovered by the assessee, nor any claim would be given on account of TDS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uently, identified the bad debt with reference to the deficit payment by the party and the amount under TDS certificate issued. On verification of compliance with these two conditions, learned AO will allow this expense. Ground Nos.3 and 3.1 are allowed for statistical purposes. 63. Respectfully following the findings of the co-ordinate bench [supra] we direct accordingly. Ground No. 3 is treated as allowed for statistical purposes. 64. Ground No. 4 relates to disallowance of provision for liquidated damages. 65. An identical issue has been considered by us in assessee s appeal hereinabove in ITA No. 909/DEL/2016 vide ground No. 3. For our detailed reasoning given therein, Ground No. 4 is allowed. 66. Ground No. 5 relates to disallowance of utilization from provision for foreseeable losses. 67. During the course of scrutiny assessment proceedings, the Assessing Officer noticed that during the assessment proceedings of Assessment Year 2010-11, disallowances were made on account of provisions for liquidated damages and the assessee was asked to explain why similar disallowances should not be made during the year under consideration. 68. The assessee filed detailed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counsel for the assessee that the assessee has been consistently following a practice of first creating provision and in the year provision is created, it is added back in the computation of income and in the year when the actual losses are claimed, it is deducted in the computation of income. The ld. counsel for the assessee stated that this being the first year of actual claim of loss, the same should be allowed. 73. Per contra, the ld. DR strongly supported the findings of the TPO and stated that it is not known whether the claim has been actually verified by the Assessing Officer. 74. We have given thoughtful consideration to the orders of the authorities below. We have also considered the financial statements of the assessee for the earlier years. We find that in the balance sheet dated 31.03.2010, the assessee has shown provision of ₹ 1,91,66,65,000/- and as on 31.03.2009 provision was shown at 96,07,99,000/-. This provision included foreseeable loss on contracts amounting to ₹ 75,85,39,000/- in F.Y. 2009-10, ₹ 34,65,88,000/- for F.Y. 2008-09. The movement in the provisions carried in the books of account is as under: Particulars ..... X X X X Extracts X X X X X X X X Extracts X X X X
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