Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2016 (6) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2016 (6) TMI 1282 - AT - Income TaxTransfer Pricing Adjustment - determination of arm’s length price - royalty payment - Held that:- The assessee is importing basically the breeder seeds and with the aid of technical know-how of its AE and assists in further developing seeds at the facilities located in various parts of the country. Thus, to say that there is no benefit to the assessee from such proprietary information, trademarks, technical know-how would not be correct. Even in third party situation, proprietary rights, information and license to use trademarks and know-how is provided or make available then it would not be free of cost. There is always a price which needs to be computed under the principles of “Arm’s Length Price”. Contention of the TPO as well as direction of the DRP that royalty payment has to be treated as “Nil” cannot be justified in the wake of not only the “technical collaboration agreement” but also the actual conduct of the parties and the assessee who has earned huge returns during carrying out its activity by exploiting these intangibles. The third party data have been rejected on the ground that, the agreement relates to the year 1995, whereas the payment has been made in 2006 by the assessee to its AE. However, we fail to understand if the terms of the agreement are still in force and has not been terminated then how the year of agreement will make a difference. If a similar payment has been made to the third party in this year, then, if other attributes of CUP are fulfilled then same has to be considered for the comparability analysis to benchmark the ALP of the payment. What is required to be seen is, whether the terms and conditions of the agreement with the third party and the terms and conditions of the agreement with the AE are similar or not. If they are similar, then definitely there is a situation of internal CUP, unless some material differences is shown between the two agreements or there is change in the facts from year 1995 to this year or any other criteria of significance. We find that the Tribunal in respect of ‘license manufacturing segment’ has restored back the matter to the file of the TPO for benchmarking the same by using CUP method. On the same principle, we are also in agreement that CUP method should be applied for benchmarking this transaction. Accordingly, we restore this issue to the file of the TPO/AO to examine the terms and conditions of the agreements with the third party and whether such terms are still relevant for the year under consideration and also the terms and conditions entered into by the assessee with its AE. Deduction of “other income” from the amount of profits eligible for deduction under section 80IB - Held that:- So far as the interest on employee loan is concerned, it cannot be held that same has direct or proximate connection with the business of the industrial undertaking. Moreover, this issue has been decided against by the Tribunal in assessee’s own case as admitted by the Ld. Counsel, therefore, so far as interest on employee loan at ₹ 28,523/-, the same has righty been disallowed by the AO. As regards the ‘other interest income’, no submissions have been made before us, therefore, on this score also we uphold the order of the AO denying the deduction claimed under section 80IB. As regards the ‘sale of scrap’, the Ld. Counsel before us has filed the details of miscellaneous income which is on account of sale of scraps. Since these evidences were not filed before the authorities below, therefore, same needs to be verified by the AO and accordingly, we are setting aside this issue for examining the same. Set off of losses of 80IB units against the profits of non 80IB units for working out the eligible profits under section 80IB - Held that:- We hold that each undertaking or unit is to be treated as independent and separate unit and it is those industrial undertaking which have a profit or gain are to be considered for computing the deduction. The loss making industrial undertaking would not come into picture at all. Thus respectfully following the aforesaid decision, we allow the claim of the assessee. Addition on account of closing stock on account of unutilized CENVAT credit - Held that:- if the addition of ₹ 19,00,63,130/- made to the closing stock on account of unutilized CENVAT credit is to be sustained, then corresponding adjustment should be made to the opening stock, purchases and sales and this proposition is covered in favour of the assessee by the order of the Tribunal in the assessee’s own case for the AY 2005-06. Thus, respectfully following the aforesaid decision, which in turn is based on the decision of Hon’ble Bombay High Court in the case of Mahalaxmi Glass Works Pvt. Ltd (2009 (4) TMI 182 - BOMBAY HIGH COURT ), we decide this issue accordingly and restore the matter to the file of the AO with similar direction. Disallowance of site restoration expenses - Held that:- Here the case of the assessee before us is that it has itself disallowed the provision and now it is being claimed on actual basis. We accept this contention that once it is undisputed fact that the assessee’s claim has been disallowed in the earlier years then, actual expenditure incurred in this year has to be allowed. Before us, the Ld. Counsel has also pointed out that, in AY 2009- 10, a similar expense on actual basis has been allowed. Accordingly, we direct the AO to allow the actual expenditure incurred during this year on site restoration cost. Accordingly, ground no. 5 is treated as allowed. Non-granting of TDS credit/short-deduction of TDS - Held that:- We direct the AO to verify the contention of the assessee and grant the credit after verification.
|