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2015 (7) TMI 871 - AT - Income TaxTransfer pricing adjustment - most appropriate method - CIT(A) deleted addition - Held that:- Nothing has been placed to justify that the TPO has rightly adopted the resale method to determine the Arm's Length Price whereas the assessee is 100% exporter. Since the CIT(A) has adopted the TNMM method following the method adopted by TPO in succeeding year to determine the Arm's Length Price, we find no infirmity in his order. Moreover, having noticed the difference between two PLIs in the range of +5%, the CIT(A) has rightly deleted the additions as no adjustment was required for such difference. Since we find ourselves in agreement with CIT(A), we confirm the same. T.P.O. himself has adopted the TNMM method for determining the Arm's Length Price but while determining the same he has not taken into account the variation in closing stock. Before the CIT(A), the assessee took a specific plea that while determining the Arm's Length Price as per the TNMM method, the TPO has not considered a sum of ₹ 22,57,58,291/- being variation in closing stock in order to arrive on the figure of operating cost. The assessee has given the figure of correct calculation before the CIT(A) and CIT(A) has examined both the calculations i.e. assessee as well as TPO and having noticed that there was factual error in the TPO's calculation, the CIT(A) has held that the average PLI of other comparables, as compared by TPO himself, comes to 8.11%. Since the PLI of the assessee is 9.56%, which is more than the average PLI of comparables, there was no reason for the TPO for any adjustment. No defect in the order of CIT(A) was pointed out by learned D.R. therefore, we find ourselves in agreement with his order and accordingly we confirm the same. - Decided against revenue. Disallowance of the expenses incurred on study to abroad of Shri Hammad Rahaman, son of the Director and Shri Ebbad Rahman - CIT(A) allowed claim - Held that:- A clear finding is given by CIT(A) that no finding has been recorded by the Assessing Officer that the expenditure claimed by the assessee was excessive in relation to any other such case of the expenditure on the professional course of B. Tech. in U.K. from University, College, Northampton (U.K.). In the absence of any such finding of the Assessing Officer on the basis of some material available on the record that the expenses claimed by the assessee are excessive or unreasonable, the disallowance made by the Assessing Officer u/s 40A(2)(b) is not sustainable. Hence, we do not find any reason to interfere in the order of CIT(A). - Decided against revenue. Disallowance of remuneration of ₹ 1,20,000/- paid to Shri Hammad Rahaham - disallowance on the ground that Shri Hammad Rahaham was studying in abroad and was doing whole time course of technical education then how he could spare time for business activities - CIT(A) has reexamined the entire issue and allowed the salary of ₹ 1,20,000/- per month - Held that:- Shri Hammad Rahaham is also one of the Directors of the assessee company who was sent abroad for doing a technical course. Undisputedly, Shri Hammad Rahaham was not available in India for rendering any services to the assessee company therefore, any payment of remuneration for the services rendered by him for the company, cannot be allowed in the light of the fact that the assessee has borne all the expenses for his technical course to be undertaken in abroad. Since there is no evidence that he has rendered any services to the assessee company, we are of the view that no remuneration can be paid to the assessee only for the simple reason that the Board has passed a resolution in this regard. Only those expenses can be allowed, which are incurred for the business purposes of the assessee. We, therefore, do not agree with the finding of CIT(A) and accordingly set aside his order in this regard and restore that of the Assessing Officer. - Decided in favour of revenue.
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