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2018 (3) TMI 1641 - AT - Income TaxTPA - ALP determination - benefit of margin of 5 % on the Alp determined - Held that:- AO has determined the ALP of sale Price of 3225 Tractors to AE by comparing the margin of the Tractors sold to AE with Tractors sold to NON AE adopting CUP using Internal Comparables. AO has compared the margin of the Sale of All tractors to AE with margin of sale of Tractors to Non AE which are various transactions of the sale of tractors to AE and which is not one price but multiple prices of sale of tractors, therefore, assessee deserves to be allowed the benefit of 5 % range and therefore we reverse the finding of the Lower Authorities and direct AO to grant benefit of margin of 5 % on the Alp determined by the ld TPO/AO and recompute the adjustment accordingly. In the result, Ground No 1 of the appeal is allowed accordingly. Disallowance of prior period expenses - Held that:- Merely because expenditure has been debited in the profit and loss account during the year neither it becomes the expenditure pertaining to this year more it becomes an expenditure pertaining to the prior years. It is the duty of the assessee to show that this expenditure has crystallized during the year and therefore they are incurred during the year. As the adequate details have not been produced before the Ld. assessing officer as well as before the Ld. CIT (A) we set aside the issue of the disallowance of commission paid by the assessee disallowed by the lower authorities holding that these are prior period expenditure. With respect to the sales incentive departmental representative could not controvert that how the issue with respect to the disallowance of ₹ 7.75 crores of sales incentive is not now squarely covered in favour of the assessee. No other judicial precedent was submitted before us. In view of this we reverse the finding of the lower authorities with respect to the disallowance of sales incentive of ₹ 7.75 crores indirect the Ld. assessing officer to delete the above disallowance as the expenditure is not a prior period expenditure but the expenditure pertaining to current year the assessee has incurred expenditure during the year based on crystallization. With respect to the other disallowance confirmed by the Ld. CIT(A) the basis of taxing income is accrual of income as well as actual receipt. If for want of necessary material, crystallizing the expenditure is not in existence in respect of which such income or expenses relates, the mercantile system does not call for an adjustment in the books of account on estimate basis. It is actually known income or expenses; right to receive or liability to pay, which has come to be crystallized, is to be taken into account under mercantile system of maintaining books of account. An estimated income or liability, which is yet to be crystallized, can only be adjusted as contingency item but not as an accrued income or liability of that year. Therefore, with respect to other expenditure along with the sales commission other than sales incentives expenses, we set aside the issue before the ld AO with a direction to assessee to submit the requisite details that the expenses have crystallized during the year. - Decided partly in favour of assessee
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