Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2014 (3) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2014 (3) TMI 363 - ITAT DELHITransfer pricing adjustment – Selection of comparables –Capital Trust comparable - Held that:- The TPO has observed that primary business of the company is automobiles sales and service - a company cannot be excluded from the comparables merely for the reason of having low turnover - It is to be appreciated that no turnover filter was applied by either of the parities - The analysis needs to be carried out on the basis of functional profile and not on an arbitrary or adhoc criteria - the functional profile of Capital Trust Limited's consultancy segment is similar to that of Nortel India the same needs to be included in the final comparables for working the ALP – thus, the AO is directed to apply this comparable while working out the ALP – Decided in favour of Assessee. Comparability and the exclusion of Choksi, Rites and WAPCOS – Held that:- The decision in Deputy Commissioner of Income-tax, Circle 17(1), New Delhi Versus MCI Com India(P.) Ltd. [2012 (10) TMI 790 - ITAT DELHI] followed - Companies like EIL, Rites, Wapsos and TCE are engineering companies which provide end to end solutions – thus, they cannot be compared with assessees who provide marketing support services to the parent company - They were held to be functionally not comparable with thee engineering companies – these companies are functionally different and cannot be applied as appropriate comparable to the assessee – thus, they are to be excluded from TP adjustment while determining the ALP. Exclusion of Saket Projects Ltd – Held that:- Relying upon Exxon Mobil Company India (P.) Ltd. Versus Deputy Commissioner of Income-tax, Circle 3(1), Mumbai [2011 (6) TMI 385 - ITAT, MUMBAI] - The specific characteristics of services provided, assets employed, risk assumed i.e. the FAR of the comparable is decisive and inclusion or exclusion of comparables - The higher or lower rate of profit is nowhere prescribed as the determinative factor in this behalf - Higher profits achieved due to factors not mentioned in the rule then such case shall be continued to find place in the list of comparables. No comparable can be rejected merely on the basis of high margins if it is functionally comparable to the assessee or there is miner variation in functional similarity - The case of Saket Projects Ltd. has functional dissimilarity as it is organizing events with various kinds of sponsorships - The company in the division is earning revenue from selling event fees and offering space for rent which cannot be comparable with provision of marketing and sales support services - Saket Projects Ltd. has been rightly held as not an appropriate comparable. Working capital Adjustments – Held that:- Working capital adjustments are required to be made because these do impact the profitability of the company - Rule 10B(2)(d) also provides that the comparability has to be judged with respect to various factors including the market conditions, geographical conditions, cost of labour and capital in the market - Accounts receivable/payable effect the cost of working capital - Working capital adjustment cannot be denied to the assessee only on the ground that it had not made any claim in the TP study if it is possible to make such adjustment - Working capital adjustments are required as they will improve the parameters of comparability - the AO/TPO to make the working capital adjustment after necessary examination. Corporate additions – Excess revenue recognized – error in recomputation of total estimated revenue – Held that:- Assessee contended that the matter for AY 2006-07 has not yet been re-adjudicated by the AO as ordered - the relevant details submitted by the assessee have been overlooked by the AO and DRP – thus, the matter is again remitted back to the AO foe re-adjudication. Addition on account of expenses claimed in revised return – Held that:- The DRP directed the AO to merely check the records regarding the figure of revised income, there is no directions of any further enquiry - Thus AO has erred in exceeding her powers by going beyond the directions of the DRP and instead of verifying the figure went ahead to review the draft order - Thus AO's action in making an addition in this behalf i.e. disallowing expenses claimed by the assessee in its revised return of income is justified. Deduction u/s 40(a)(i) of the Act – Held that:- The decision in COMMISSIONER OF INCOME TAX Versus SMCC CONSTRUCTION INDIA FORMERLY MITSUI KENSETSU INDIA LTD [2010 (1) TMI 10 - HIGH COURT OF DELHI] followed - even if there was no claim in the return of the year in which the expenditure was incurred by the assessee, the deduction can be claimed in view of the provisions of Section 40(a)(i) in the year in which the tax has been deducted at source and paid to the government account –thus, the expenses are allowable – Decided in favour of Assessee. Claim of 'Warranty Expense – Held that:- As decided in assessee’s case in the earlier assessment years, as a normal rule when the provision for warranty is disallowed in earlier years, deduction then should be allowed in the year when actual expenses are incurred – thus, the ,atter remitted back to the AO for re-adjudication – Decided in favour of Assessee. Legal and professional fees paid to KPMG/ BSR & Co – Deduction u/s 40(a)(ia) of the Act - Held that:- Assessee contended that the requisite tax has already been deducted and deposited at the time of booking of actual expenses on receipt of the invoice - there is no default at the assessee's end and no disallowance is warranted in such a case - there cannot be a double levy of taxes on same income. Since the assessee duly deducted and deposited TDS on the basis of invoice received and any disallowance u/s 40(a)(ia) will lead to a double levy of taxes on the same income – thus, in accordance with section 40(a)(ia) of the Act, AO is directed to allow deduction for the expense in Assessment Year when tax was deducted and deposited by the assessee qua these expenses – Decided in favour of Assessee.
|