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2017 (10) TMI 1440 - AT - Income TaxTP adjustment - exclusion of amounts written back for computing the operating margin of the assessee - HELD THAT:- In the case of Gillete Diversified Operations Pvt. Limited [2016 (4) TMI 1349 - ITAT DELHI], the Co-ordinate Bench of the Tribunal, Delhi had decided the issue in favour of the assessee and held that if the reversal of provision / write back is on account of revenue in nature, it should be included as part of operating income and if the liabilities originally created were on account of capital items then their write back cannot be considered to be a normal instances of business and hence to be excluded as operating income. The aforesaid order of the Tribunal has also been accepted by the Revenue as no appeal on the issue that whether write back is to be excluded for working out the operating profits has been preferred by the Revenue before the Hon’ble Delhi High Court meaning hereby that the issue of write back is to be considered as part of operating income has attained finality. Before us, Revenue has also not placed any contrary binding decision in its support. Also in the case of Sony India (P) Ltd [2018 (7) TMI 825 - ITAT DELHI] hold that the amount of write back of ₹ 37.49 crores which is on account of amounts written back of expenses / liabilities is to be considered as part of operating income. Before us, assessee also submitted that if the write back amount of ₹ 37.49 crores is included as operating income, the operating margin would works out to 42.94% as against the operating margin of 14.36% of the comparable companies and therefore the transactions of the assessee with it’s A.E’s would be at arms length requiring no adjustment to the income. We find that on this issue there is no finding of TPO. We therefore for the limited purpose of verifying the aforesaid contention of assessee remit the issue to the file of TPO - Ground of the assessee is allowed for statistical purposes. provision for warranty expenses disallowance u/s 37 - provision @ 1.15% of the total sales turnover uniformly on all the products - unascertained liability and not an accrued liability - contingent liability - HELD THAT:- We find that identical issue arose in assessee’s own case in earlier years. The AO was directed by the Co-ordinate Bench of Tribunal to decide the issue after examining the nature of business, nature of products manufactured, past history of warranty claims, methods adopted by the assessee for acquiring the provision and decide the issue keeping in mind the decision in the case of Rotork Controls India (P) Limited Vs. CIT [2009 (5) TMI 16 - SUPREME COURT OF INDIA]. The issue is identical to that of earlier years of assessee and since in earlier year, the issue was remitted back to AO, we therefore for similar reasons restore the issue back to the file of AO to decide the issue afresh. - Appeal of the assessee is allowed for statistical purpose.
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