2021 (12) TMI 1324 - AT - Income Tax

TP adjustment in respect of international transactions of Intra Group Services provided by the assessee to its Associated Enterprises (AE) - HELD THAT - Revenue intends to keep issues alive however could not controvert view taken in respect of these issues as there has been no contrary observation/material evidences brought out on record by ld. CIT DR. It has been admitted by him that facts and circumstances of the services received by assessee for the year under consideration are same vis- -vis assessment year 2010-11 and other preceding assessment years. We are therefore inclined to follow the same view. Respectfully following view taken by this Tribunal in assessment year 2010-11 and other preceding assessment years orders of which are placed in paper book addition made by Assessing Officer stands deleted. To maintain the rule of consistency we follow the earlier order of Tribunal and decide the issue in favour of the assessee and the addition made being T P adjustment on account of intra group services provided by the assessee to its AE is deleted. TP adjustment of interest payment on loan - HELD THAT - This Tribunal for the assessment years 2011-12 to 2014-15 2018 (7) TMI 1955 - ITAT NEW DELHI remitted this issue to the record of the TPO for undertaking benchmarking analysis in accordance with the directions of this Tribunal for the assessment year 2010-11. Disallowance of branch office expenditure and expenditure incurred due to non-producing of production sharing contracts - HELD THAT - We fail to see any such provision in the act that if the other party in the joint-venture do not agree to share the particular cost the cost incurred by one of the partners of that joint-venture becomes the expenditure not for the purpose of the business of that partner. No such provision has also been brought to our notice by the revenue. It is also not the case of the revenue that details of those expenditure are not available before them or Assessee has furnished incomplete information for its allowability. Further no judicial precedent was cited before us by revenue which says that such expenditure are not allowable to the Assessee. Accordingly these grounds raised by the assessee stands allowed. Disallowance of head office expenses - HELD THAT - The fact that business model has not undergone any change since the AY 2010-11 and by following the decision rendered by the coordinate Bench of the Tribunal in taxpayer s own case for AY 2010-11 we are of the considered view that the cost of services availed of by the taxpayer required by PSC with regard to its standard of operation including the quality of execution of work access to latest industry information and global updates safety of its employees and the environment etc. cannot be disallowed merely on the ground that the said expenses have not been borne by the joint venture partner particularly when it is not disputed by the Revenue that the expenditure were made for commercial expediency.To maintain the rule of consistency we follow the earlier order of Tribunal and decide the issue in favour of the assessee and allow this ground of assessee s appeal. Disallowance of depreciation and depletion - HELD THAT - We deem it proper to restore the issue to the file of the Assessing Officer with a direction to give an opportunity to the assessee to substantiate its case. The Assessing Officer shall decide the issue as per fact and law after giving due opportunity of being heard to the assessee. We hold and direct accordingly. The ground raised by the assessee on this issue is allowed for statistical purposes - To maintain the rule of consistency we follow the earlier order of Tribunal and restore this issue to the record of Assessing Officer with the same directions for deciding the same afresh after giving a reasonable opportunity of hearing to the assessee. Accordingly this ground of appeal is allowed for statistical purposes. Disallowance of inventory written off - HELD THAT - After hearing both the sides and considering the totality of the facts of the case we deem it proper to restore the issue to the file of the Assessing Officer with a direction to give an opportunity to the assessee to substantiate his case. The Assessing Officer shall decide the issue as per fact and law after giving due opportunity of being heard to the assessee. We hold and direct accordingly. The ground raised by the assessee on this issue is allowed for statistical purposes. Disallowance of deduction of Education Cess - assessee claimed deduction on account of education cess paid before the due date of filing the return of income - AO disallowed the claim of the assessee being part of the Income-tax which is not an allowable deduction - HELD THAT - The dispute under consideration is purely legal in nature as the facts are not in dispute. As in the case of Chambal Fertilizers and Chemicals 2018 (10) TMI 589 - RAJASTHAN HIGH COURT and Sesa Goa Ltd. 2020 (3) TMI 347 - BOMBAY HIGH COURT wherein after considering the CBDT Circular it has been held that the assessee is eligible to claim the deduction of the cess as per the provisions of Section 37 of the Income Tax Act. In the absence of any contrary decision of jurisdictional High Court or any other high Court the decisions relied upon by the ld. Sr. counsel are binding on this Tribunal. Respectfully following the above decisions this issue is decided in favour of the assessee and the claim of deduction on account of education cess is allowed. Short credit of TDS - HELD THAT - Assessing Officer is directed to verify the correct TDS credit available to the assessee and then to allow the same. Interest on refund u/s. 244A - HELD THAT - We note that the refund of tax is consequential to the outcome of the appeal filed by the assessee. Therefore the Assessing Officer is directed to consider the consequential effect of the refund and interest there upon u/s. 244A of the Act.

Summary

Issues Involved:
1. Erroneous disallowance of payment made towards intra-group services.
2. Erroneous rejection of Transactional Net Margin Method (TNMM) and selection of Comparable Uncontrolled Price (CUP) Method.
3. Erroneous application of CUP method.
4. Disregard of past ITAT decisions and DRP directions.
5. Questioning of commercial expediency.
6. Erroneous application of CUP for determining arm's length interest rate.
7. Disallowance of branch office expenditure.
8. Disallowance of expenditure on non-producing Production Sharing Contracts (PSCs).
9. Disallowance of head office expenditure.
10. Disallowance of depreciation.
11. Disallowance of inventory written off.
12. Claim for deduction of cess.
13. Violation of principles of natural justice.
14. Short credit for Tax deducted at source.
15. Short grant of interest under section 244A.
16. General grounds including initiation of penalty proceedings.

Detailed Analysis:

1. Erroneous Disallowance of Payment Made Towards Intra-Group Services:
The Tribunal noted that an identical issue had been considered in the assessee's own case for the assessment years 2010-11 to 2014-15, where the Tribunal decided in favor of the assessee. Following the principle of consistency, the Tribunal deleted the addition made on account of transfer pricing adjustment for intra-group services provided to its AE.

2. Erroneous Rejection of TNMM and Selection of CUP Method:
The Tribunal observed that similar issues had been decided in favor of the assessee in previous years. The Tribunal maintained the consistency and decided the issue in favor of the assessee, rejecting the CUP method applied by the TPO/AO/DRP.

3. Erroneous Application of CUP Method:
Without prejudice to the selection of TNMM, the Tribunal found that the CUP method was applied erroneously by considering the amount approved by the JV partner. The Tribunal followed its earlier decisions and deleted the addition.

4. Disregard of Past ITAT Decisions and DRP Directions:
The Tribunal noted that the TPO/AO/DRP had disregarded the decisions of the ITAT and directions of the DRP for earlier years despite similar facts and circumstances. The Tribunal followed its earlier rulings and decided in favor of the assessee.

5. Questioning of Commercial Expediency:
The Tribunal found that the TPO/AO/DRP erred in questioning the commercial expediency of the appellant in availing intra-group services and changing the interest rate on ECB. The Tribunal followed its earlier decisions and ruled in favor of the assessee.

6. Erroneous Application of CUP for Determining Arm's Length Interest Rate:
The Tribunal noted that this issue had been remitted to the TPO for benchmarking analysis in previous years. Following the same approach, the Tribunal set aside the issue to the TPO/Assessing Officer for fresh consideration.

7. Disallowance of Branch Office Expenditure:
The Tribunal observed that similar disallowances had been decided in favor of the assessee in earlier years. Following the principle of consistency, the Tribunal allowed the expenditure incurred by the branch office.

8. Disallowance of Expenditure on Non-Producing PSCs:
The Tribunal noted that this issue was covered by its earlier decisions in favor of the assessee. The Tribunal allowed the expenditure incurred on non-producing PSCs.

9. Disallowance of Head Office Expenditure:
The Tribunal found that this issue had been adjudicated in favor of the assessee in previous years. The Tribunal allowed the head office expenditure, maintaining consistency with earlier rulings.

10. Disallowance of Depreciation:
The Tribunal noted that the issue of depreciation had been considered in earlier years, and the matter was remitted to the Assessing Officer. Following the same approach, the Tribunal restored the issue to the Assessing Officer for fresh consideration.

11. Disallowance of Inventory Written Off:
The Tribunal observed that this issue had been decided in favor of the assessee in previous years. The Tribunal restored the issue to the Assessing Officer for fresh consideration, following the earlier order.

12. Claim for Deduction of Cess:
The Tribunal relied on the decisions of the Hon'ble Rajasthan High Court and the Hon'ble Bombay High Court, which held that education cess is an allowable deduction. The Tribunal allowed the claim for deduction of education cess.

13. Violation of Principles of Natural Justice:
The assessee did not press this ground during the hearing. Accordingly, the Tribunal dismissed this ground as not pressed.

14. Short Credit for Tax Deducted at Source:
The Tribunal directed the Assessing Officer to verify the correct amount of TDS credit and allow the same after verification.

15. Short Grant of Interest Under Section 244A:
The Tribunal noted that the refund of tax is consequential to the outcome of the appeal. The Tribunal directed the Assessing Officer to consider the consequential effect of the refund and interest thereon under section 244A.

16. General Grounds:
The Tribunal noted that these grounds were general in nature and did not require specific adjudication.

Conclusion:
The appeal of the assessee was partly allowed, with several issues being decided in favor of the assessee based on the principle of consistency and following earlier Tribunal decisions. Some issues were remitted to the Assessing Officer for fresh consideration.