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2016 (12) TMI 1819 - AT - Income TaxTransfer Pricing adjustments - engineering services rendered by the assessee to its Associated Enterprises abroad - imputing of interest on alleged delay in collection of receivables from Associated Enterprises. - Disallowances of employee’s contribution to Provident Fund - Disallowance u/s.14A - working capital adjustment - HELD THAT:- In so far as imputing interest on delayed payment from Associated Enterprise was concerned, observation of the ld. DRP was that the extended payment terms given to Associated Enterprise without charging interest was exigible to a transfer pricing adjustment, even if commercial expediency was shown by the assessee. As for assessee’s claim for depreciation on goodwill, observation of the ld. DRP was that no such disallowance made by the ld. Assessing Officer and no claim was preferred by the assessee during the assessment proceedings. Coming to the disallowance for delayed remittance of employee’s contribution of Provident Fund, observation of the ld. DRP was that judgment of Hon’ble Jurisdictional High Court in the case of CIT vs. Madras Radiators and Pressing Ltd [2002 (12) TMI 36 - MADRAS HIGH COURT] went in favour of the Revenue and it was rightly disallowed by the ld. Assessing Officer. In so far as disallowance u/s.14A of the Act was concerned, ld. DRP held that such disallowance was justified even though assessee had not earned any exempted income. DRP had disposed off the grounds taken by the assessee in a summary manner without properly considering the objections raised by the assessee. As for the comparables sought to be excluded/included by the assessee, the ld. DRP had not compared the functional profile of those companies with that of the assessee before deciding on the desirability of their exclusion /inclusion. Working capital adjustment sought by the assessee was concerned, ld. DRP had not considered the present position of law as laid by a plethora of decisions of this Tribunal which mandated such adjustment as a necessary one while computing profit level indicator. As for interest on delayed receivables, ld. DRP had not dealt with the objections of the assessee against comparing the receivables with pure loans, without considering the commercial expediency factor. On the claim of depreciation of goodwill, ld. DRP had not given any finding why the claim made for the first time before it could not be considered. As for the remittances to employer contribution to Provident Fund, ld. Departmental Representative had not considered the effect of Section 43B on such claim, where remittances of the deducted amount were made before the due date of filing the return. Coming to the disallowance made u/sec. 14A of the Act, the ld. DRP had not adjudicated as to how such disallowance could be made where the claim of the assessee was that it had not earned any exempt income. We are of the opinion that all the issues raised by the assessee requires a fresh look by the ld. DRP. We therefore set aside the orders of the ld. DRP as well as ld. Assessing Officer and remit all the issues raised by the assessee to the ld. DPR for consideration afresh in accordance with law. Thereafter, ld. Assessing Officer shall reframe the assessment for the impugned assessment year considering such directions.
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