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2014 (5) TMI 958 - AT - Income TaxTransfer pricing adjustment Computation of deduction u/s 10B of the Act - Held that:- Following M/s. Honeywell Electrical Devices & Systems India Ltd. Versus The Assistant Commissioner of Income Tax [2014 (5) TMI 728 - ITAT CHENNAI] - The TPO has accepted the segmental results in assessment year 2005-06 and 2006-07 on the contract manufacturing transactions with AE for arriving at ALP while computing relief u/s 10B of the Act - The TPO/ DRP has not given any valid reasons as to why segmental results shall not be considered for determining ALP of transactions with AE having accepted very same segmental results of the assessee for the purpose of computing deduction u/s 10B of the Act - there is no valid reason for not accepting the segmental reports in determining ALP on the AE sales for the AY 2007-08. TPO/ DRP approach in comparing external comparables margin with entity level margin of the assessee is wrong since segmental results are available and as per the segmental results the margin in contract manufacturing segment was at 20.89% and this margin should have been compared with the margin of external comparables which stood at 8.87% instead of the entity level margin 1.08% since entity sales consists of both contract manufacturing segment which meant for export done and local segment which is engaged in domestic sales - In the current year also i.e. assessment year 2008-09, the net cost plus margin of the assessee in contract manufacturing segment is 10.77% which is more than the net cost plus margin of 9.55% on the external comparables of the Transfer Pricing Officer and therefore there is no need for upward adjustment to be made on the AE sales of the assesse the AO is directed to set aside the addition made towards upward adjustment of purchase price on determination of ALP with AE Decided in favour of Assessee. Provision for discount cessation of liability - Held that:- Following M/s. Honeywell Electrical Devices & Systems India Ltd. Versus The Assistant Commissioner of Income Tax [2014 (5) TMI 728 - ITAT CHENNAI] - when the liability is ascertained and not quantifiable during the year and is simply a contingent based on estimates, the same cannot be allowed as deduction - the assessees version clearly states that the only reason for creating a provision and not charging the same as an expenses is because of the fact that the exact quantification could not be undertaken for the various reasons - the basis for the provision is simply adhoc and arbitrary - It depends on the facts of each and every case to come to a conclusion as to whether the liability is ascertained or unascertained one and it cannot be generalized Assessee contended that they had reversed excess provision which was disallowed in earlier year - as the provision was disallowed in earlier year, reversal made during this assessment year ought to be allowed as deduction while computing total income of the year the AO is directed to verify the claim of the assessee. Reduction in personal expenses Expenses incurred in foreign currency Training and marketing/business promotion from export turn over Held that:- Following M/s. Honeywell Electrical Devices & Systems India Ltd. Versus The Assistant Commissioner of Income Tax [2014 (5) TMI 728 - ITAT CHENNAI] - travel expenses incurred in foreign currency have to be excluded both from export turnover as well as from total turnover for the purpose of computing relief u/s 10A of the Act the AO is directed to exclude the travel expenses incurred in foreign exchange from export turnover as well as total turnover for the purpose of computing relief u/s 10A of the Act Decided in favour of Assessee.
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