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2014 (12) TMI 805 - AT - Income TaxAddition of difference in sales Application of AS-7 issued by ICAI - Held that:- The assessee has been following AS-7 right from its inception - no adverse inference has been drawn in earlier AYs in so far as the method of recording sales in the books is concerned - section 145 provides is that the Accounting Standards which have been notified by the Central Government have to be mandatorily followed by the assessee - but this does not mean that the assessee cannot follow the other Accounting standards issued by ICAI - The ICAI is the highest accounting body of the country created by an Act of parliament therefore accounting standards issued by it cannot be brushed aside lightly - the Central Government has notified only two accounting standards - if the method of accounting followed by the assessee is in contravention to the notified accounting standards, the provisions of Sec. 145 will prevail - This does not mean that if the assessee is following a particular accounting standard issued by ICAI which is not notified by the Central Government, the method of accounting of the assessee would be out-rightly rejected - As there is no doubt that the assessee has been consistently following accounting standard-7, the method followed by the assessee has to be accepted there was no justification in not accepting the sales recorded by the assessee in its books of accounts as per Accounting Standard AS-7 thus, the order of the CIT(A) is set aside Decided in favour of assessee. Amortization of cost of specific equipment disallowed Held that:- Assessee has followed a particular method of claiming depreciation/amortization - However, the Income tax Act u/s. 32 specifically provides the method of computing the depreciation and the Income Tax Rules provide the relevant rates - All assessees are bound to follow the rates prescribed under the rules and compute the depreciation as per the procedure laid down u/s. 32 of the Act - The assessee has followed none thus, the order of the CIT(A) is upheld Decided against assessee. Transfer pricing adjustment - International transaction with AE - The TPO has arrived at the ALP of this international transaction at Nil on the basis that the assessee was awarded a single contract work in the earlier years and more than 85% of the contract had already been assigned to various sub-contractors including AEs on back to back basis Held that:- The assessee JV came into existence with 5 independent enterprises coming together for executing the contract for DMRC - as per the agreement between the assessee and its JV partners, overhead office expenses of the respective JV partners were to be allocated to the assessee with a cap of 8.5% of the turnover of the assessee - the TPO has not brought out any fact to indicate that the extents of overhead expenses are in excess of any overhead expenses debited in any of the comparable or the set of comparable there was no defect has been pointed out by the TPO on the documentation maintained by the assessee as required under the relevant rules the charge of overhead cost had been examined in the earlier years also - considering the facts in totality and keeping in mind that such allocation of overhead expenses has been right from the inception of JV, there was no reason to accept the conclusion reached by the TPO. Determination of ALP of Tunnel ventilation charges paid to AE Samsung Corpn. Held that:- The assessee has retained a gross profit margin of 12.5% of the VAC works - assessee has done no portion of the work and the entire job was sub-contracted on back to back basis - there can be no allocation of the cost of the VAC work - the assessee has awarded this sub-contract to Samsung Corpn., based on the lowest bidding by the AE - The TPO has also not brought on record any comparable or set of comparable in support of the adjustment on account of excess cost claimed thus, the order of the TPO is set aside and directed to delete the adjustments made on account of arms length price in relation to these international transactions entered into by the assessee with its AE Decided in favour of assessee.
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