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2012 (9) TMI 434 - AT - Income TaxComputation of Arm's length price - disallowance for administration charges/rebate being reimbursement of expenses - Held that:- As admitted that there was no element of profit in the transactions of payments made by the assessee to The parent company Braitrim U.K (BUK) which in turn was paid by BUK to its retailers. This is an expenditure, incurred by the assessee, routed through BUK, necessarily to get new customers via BUK. The assessee further submitted that there was no dispute by the AO, on the factum of payment of commission by the assessee to BUK and BUK to its retailers, which is the reason, that the AO had infact, restricted the addition only to the amount determined by the DRP. As seen from the reconciliation, that the assessee has recorded its expenditure on the basis of sales made by it to the manufacturers, whereas BUK has recorded them on the basis of invoices raised by them on the assessee, which is at a later date/time - As that the deduction allowed by the AO is on the basis of the direction of the DRP, which had based its findings on the amounts recorded in its books in the earlier year and the expenditure booked for the current year for which BUK raised invoices in the subsequent year, then there cannot be any reason for disallowance in the current year, because, the assessee, being a company, has to follow mercantile system of accounting and guided by the accounting standards, wherein the assessee has to record its expenditure of commission/discount at the time of making its sales, irrespective of the date of raising of invoice by BUK. - As the assessee submission of reconciliation had not been submitted before the DRP it would be just and reasonable if the assessment order is set aside and the matter is restored to the file of the DRP with the directions to consider the reconciliation statement - in favour of assessee for statistical purposes.
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