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2019 (5) TMI 1745 - AT - Income TaxTP Adjustment - comparable selection - HELD THAT:- Assessee in its transfer pricing study for contract software development (CSD) services provided to the Associated Enterprises (AEs) determine the arm’s length price applying Transactional Net Margin Method (TNMM). The Operating Profit to Total Cost (OP/TC) was taken as profit level indicator (PLI) in the TNMM analysis thus companies functionally dissimilar with that of assessee need to be deselected from final list. Disallowance u/s 37(1) on account of prior period expenditure - HELD THAT:- Additional evidence was not considered the matter in that respect is remanded back to the Assessing Officer relating to the Corporate Tax issue. Ground are remanded back to the AO/Transfer Pricing Officer for fresh adjudication after taking into account the additional evidence. Disallowance under Rule 8D of Income-tax Rules, 1962 read with section 14A - HELD THAT:- Since in the instant case, the assessee has not earned any exempt income during the year under consideration, no disallowance can be made under section 14A of the Act, respectfully following the decision of Hon’ble Delhi High Court in the case of Cheminvest Ltd. [2015 (9) TMI 238 - DELHI HIGH COURT] . The disallowance made by the lower authorities is accordingly deleted. The ground no. 16.2 of the appeal is accordingly allowed. Since the disallowance under section 14A has already been deleted Interest expenses under section 36(1)(iii) - assessee failed to justify that the advance was for any commercial expediency or any business benefit has been accrued to the assessee - HELD THAT:- No addition on account imputed interest attributable to allegedly interest free advances is called for and that a nexus is required to exist and be proved between the borrowing and lending of funds. Disallowance on account of contribution to labour welfare fund - HELD THAT:- Parties have agreed that identical question of disallowance was involved in immediately preceding assessment year 2012-13, which has been restored to the file of the learned Assessing Officer for deciding a fresh in accordance with law. Thus, respectfully following the finding of the Tribunal in [2017 (11) TMI 1725 - ITAT DELHI] while deciding the ground No. 14 and 15 of this appeal), we restore this issue to the file of the Ld. Assessing Officer for deciding afresh in accordance with law. The ground of the appeal is accordingly allowed for statistical purposes. Allowing set off of brought forward business losses of the earlier years - HELD THAT:- We find that this is the issue of the examination of the claim of the assessee and verification of the updated position of the same by the Assessing Officer, thus, we feel it appropriate to restore this issue also to the file of the Assessing Officer for examining and verification of the claim of the set off of brought forward business losses and allow the same in accordance with law.
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