Home Case Index All Cases Income Tax Income Tax + HC Income Tax - 2013 (6) TMI HC This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2013 (6) TMI 104 - HC - Income TaxInterest income - operating income or not? - Transfer pricing adjustment - Whether loss on sale of fixed assets, interest paid to income tax, office closure cost, amount paid to telephone adalat are abnormal costs to be excluded while computing the operating expenses? - Held that:- Questions concerned are essentially are of fact and do not give rise to any substantial questions of law. Whether a particular activity of the assessee i.e. the interest generating activity in this case, should be taken into consideration in the determination of the ALP is a question which needs to be decided considering the nature of the business of the assessee, which is referred to as “business model” in the transfer-pricing jargon. It has been rightly observed by the Tribunal that such a consideration is not relevant for the purpose of determining the operating income of an assessee for the purposes of transfer pricing regulations. The Tribunal‟s view that in such circumstances the interest income cannot be considered to be its operating income is essentially a question of fact to be gathered from the nature of the assessee's business and its business profile - no substantial questions of law meriting scrutiny of this Court. Whether the appellant is entitled to the benefit of +5% range mentioned in Proviso 92C(2) while computing the Arm’s Length Price - Held that:- This controversy need not detain any more, as it has been put at rest by the amendment made to section 92C by the insertion of sub-section (2A) by the Finance Act, 2012 with retrospective effect from 01.04.2002. Having regard to the amendment made with retrospective effect from the assessment year 2002-03, which is the year before us, no substantial question of law can be said to arise. Expenses relating to closure of the business - whether were abnormal expenses and cannot be considered while arriving at the ALP - Tribunal noted that closure of the Indian units would automatically reduce the costs of the associated enterprisetherefore, would be a relevant issue for inclusion in the operating costs - Held that:- Tribunal failed to keep in mind that even according to the AO the assessee was being compensated for its agency and market support service by way of handling commission and fixed service fee. It seems rather remote that considering the nature of the remuneration received by the assessee from its associated enterprise, the payment of compensation on closure of the Indian offices would have any impact on the transfer pricing issue or in the fixing of the ALP. It therefore, appears that having regard to the nature and manner in which the assessee is remunerated for its services, the payment of compensation to the Indian units on their closure would represent abnormal costs which have to be excluded in the determination of the ALP. The income tax authorities as well as the Tribunal have erred in holding to the contrary - in favour of the assessee. Attribution of the allocation of overhead expenses to trading of goods segment vis-a-vis attributing it to agency support services - Held that:- It is nobody's case that the expenses were not incurred. It is also not the case of the revenue that the bifurcation of the indirect expenses on the basis of revenues is not an appropriate “allocation key”. The decision of both the CIT (A) and the ITAT is based on the undisputed figures submitted by the assessee. These figures have also been scrutinized by the transfer pricing officer. Therefore, no perversity in the decision of the Tribunal because it is based on the evidence embedded in the books of accounts themselves. The charge of perversity raised by the revenue seems to be unjustified. T- no substantial question of law arises.
|