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2016 (2) TMI 924 - AT - Income TaxExcusion of Exchange Rate Fluctuation from the total turnover for the purpose of the deduction u/s. 80HHC. Transfer pricing adjustment - Held that:- The assessee has paid commission to its AE and we find that the basis for the payment of commission has also been given to justify it to be at arm’s length. The TPO/A.O has nowhere denied that the weighted average rate of commission paid by the assessee is 7.84% as against 11% paid to unrelated party. We also find that in his appellate order, the First Appellate Authority has observed the rate of commission ranging from 0.38% to 33.33%, the assessee’s rate is at 3%. We also find that none of the revenue authorities below have brought any comparable case on record to show that the payment of commission by the assessee is not at arm’s length. On the contrary, we find that the A.O. has disallowed merely because he was of the opinion that no services have been rendered. This finding is beyond the provisions of Chapter 10 of the Act in as much as under chapter 10, the TPO/A.O. has to see whether the international transaction entered by the assessee is at arm’s length or not. There are other provisions in the act wherein the A.O. can test the genuineness of the transaction but in any case not under Chapter 10 of the Act. As mentioned elsewhere, no comparable case have been brought on record which could justify that the payment of 3% + 1% overriding commission is not at arm’s length, we set aside the findings of the ld. CIT(A) and direct the A.O. to delete the entire transfer pricing adjustment made by it Disallowance of investment written off in MJPL for computing profits u/s. 115JB - Held that:- . There is no doubt that the assessee has written off the investments made in MJPL. Thus, it can be said with certainty that no provision has been made and it is a case of write off only. Therefore in our considered opinion, the amended provisions do not apply on the facts of the case. Accordingly, we set aside the findings of the ld. CIT(A) and direct the A.O to delete while computing the book profit u/s. 115JB of the Act. Inter unit transactions cannot be considered as sales to form part of the total turnover for the computation of deduction u/s. 80HHC of the Act Disallowance of expenses incurred on behalf of Sun Pharmaceutical Industries taking recourse to the provisions of section 40(b) - Held that:- In our understanding of the law an expenditure is allowable if it is incurred for the purposes of the business of the assessee and not for the purposes of earning profit. As per the agreement between the assessee company and the partnership firm, the assessee had assisted the partnership firm in carrying on its business by using its network for marketing the pharmaceuticals products successively. Thus, it cannot be said that the expenditure incurred by the assessee are not for the purposes of its business. Since the assessee is holding 95% in the partnership firm it becomes the duty of the assessee to promote the business of the partnership firm, in the capacity of the majority stake holder. Incidentally, the revenue authorities have not brought anything on record which could suggest that the expenditures have not been incurred for the purposes of business. Be it assessee’s business or the business of the partnership firm where the assessee is a majority stake holder. Therefore, in our considered opinion, the expenditures incurred by the assessee company deserves to be allowed and we direct the A.O to delete the addition
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