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2017 (5) TMI 1738 - AT - Income TaxTP Adjustment - benchmarking the Direct Sales Compensation (‘DSC’) - commission @ 2% for the indenting services received by the assessee from its AEs - HELD THAT:- Aassessee while arriving at the average commission rate of 3.62% in respect of the aforesaid two concerns, viz. M/s Sumitomo Corporation India Pvt. Ltd. and M/s Bayer Material Science Pvt. Ltd., for the year under consideration, viz. A.Y. 2008-09, had in respect of M/s Bayer Material Science Pvt. Ltd.[2011 (12) TMI 393 - ITAT MUMBAI] adopted the commission rate of 5% that was upheld by the Tribunal in the assesses own case for A.Y. 2006-07 and A.Y. 2007-08, as there was no transfer pricing adjustment in the hands of the said concern during the year under consideration. We have given a thoughtful consideration to the aforesaid facts and are of the considered view that the contention of the assessee in the light of the order passed by the Tribunal in its own case for the preceding years, therein warrants acceptance. We, thus in the light of our aforesaid observations direct the A.O. to adopt 3.62% as the appropriate rate for benchmarking the Direct Sales Compensation (‘DSC’) received by the assessee from its AEs. The Ground of appeal No. 1 to 1.3 raised by the assessee before us are thus allowed. Addition @10% of the expenses incurred on Global Work Space Solutions/Facilities Management - HELD THAT:- Now when the assessee had substantiated its claim towards the expenses on the basis of material made available on the record, then the disallowance of any part of such expense on adhoc basis stood ruled out. We are further not persuaded to accept the observations of the lower authorities that the disallowance of 10% of GWS expenses were carried out in conformity with adhoc disallowance carried out by the A.O in the immediately preceding year, viz. A.Y. 2007-08, which thereafter had been sustained by the Tribunal vide its order [2015 (12) TMI 1838 - ITAT MUMBAI] of the assessee. We find that unlike the case of the assessee for the year under consideration, the disallowance of ₹ 2.98 crores, i.e @10% of the expenses was upheld by the Tribunal in A.Y. 2007-08, for the reason that the assessee had failed to substantiate its claim of expenses on the basis of supporting bills, which therein justified carrying out of adhoc disallowance @ 10.21% in the hands of the assessee. We thus in light of our aforesaid observations, are thus of the considered view that the half hearted approach of the A.O , which can safely be held to be based on misconceived facts, thus cannot be sustained. We thus direct the A.O to delete the addition/disallowance - Decided in favour of assessee. Disallowance of write off of earnest money deposit - claim of assessee as a revenue loss under Sec. 37 r.w Sec. 28 - HELD THAT:- Advance by the assessee at the start of the project, and thus was never taken into account by the assessee as its income during the year under consideration, or in any of the previous years, therefore, the same did not satisfy the conditions contemplated u/s 36(1)(vii) r.w.s. 36(2) of the ‘Act’, and as such could not be allowed as a ‘bad debt’ in the hands of the assessee - assessee had alternatively claimed that as the said loss had been suffered by the assessee in the normal course of its business, therefore, the same was allowable under Sec. 37 r.w Sec. 28 of the ‘Act’. We are of the considered view that as the said claim of the assessee requires to be tested against the facts of the case, therefore, we restore the issue to the file of the A.O who shall verify the entitlement of the assessee towards claim of the aforesaid amount as a revenue loss under Sec. 37 r.w Sec. 28 of the ‘Act’ - Issue allowed for statistical purposes. Non granting of credit of TDS - HELD THAT:- If it emerges from the records that a short credit of TDS had been given to the assessee, then the requisite remedial action be taken and the balance credit of the TDS be allowed in the hands of the assessee. We further direct the A.O. to verify the contention of the assessee that no refund had been received by the assessee, while for a fact to the contrary had been recorded by the A.O. The A.O. is herein directed to verify the factual position in respect of both of the aforesaid contentions of the assessee and give the necessary consequential effect, as per law. Disallowance of bad debts - ‘bad debts’ written off as part of the operating expenses of the CoEE segment, which had been benchmarked by the assessee applying TNMM - HELD THAT:- Characterizing of the writing off of the debt by the assessee as an operating expense by the DRP, would in no way adversely affect the operating margin of the assessee, as the PLI of the assessee, as claimed by the Ld. A.R continues to remain within the parameters of +/-5% variation, as a result whereof no TP adjustment would be called for in the hands of the assessee in respect of the CoEE segment to which such ‘bad debts’ so pertain, wherein the benchmarking for the said segment had been carried out by adopting TNMM. We thus not being impressed by the aforesaid observations of the lower authorities are thus not persuaded to subscribe to the same, and as such direct the A.O to delete the addition/disallowance so made in the hands of the assessee.
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