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2021 (10) TMI 1358 - AT - Income TaxTP Adjustment - Comparable selection - HELD THAT:- Companies functionally dissimilar with that of assessee software development service segment need to be deselected from final list. Also companies having huge turnovers need to be deselected. ALP adjustment pertaining to interest on receivables - HELD THAT:- As directed the TPO to allow credit period as per agreement between assessee and its AEs - if it turned out that no such period was specified, the credit period would be 90 days only - HELD THAT:- There is hardly any dispute that the learned lower authorities have gone by SBI short term deposit rates which is in the nature of a loan or cash transaction involving domestic deposits rather than LIBOR rate in international transactions, involving the very business segment. Coming to the Revenue’s argument that this tribunal has already directed the TPO to go by the agreement between an assessee and its AEs, we quote Technimont ICB Pvt. Ltd [2013 (9) TMI 595 - ITAT MUMBAI] and Sabic Innovative Plastic India Ltd. [2013 (9) TMI 596 - ITAT AHMEDABAD] that an AE could not be adopted as a tested party since lacking uncontrolled comparable transactions. As in CIT Vs B R Constructions [1992 (6) TMI 13 - ANDHRA PRADESH HIGH COURT] holds that a co-ordinate bench decision not taking into consideration the relevant law and facts; as the case may be, is not a binding precedent. We therefore accept the assessee’s instant ground for this precise reason alone and delete the impugned ALP adjustment. Management and consultancy fee involving ALP adjustments - HELD THAT:- We are of the view that the learned TPO needs to re-examine the entire issue in light of the assessee’s foregoing submissions accordingly pin-pointing; prima-facie, a cost to cost reimbursement arrangement between itself, its AE and the ultimate payee M/s.KPMG qua the services in issue. We further wish to quote here the foregoing judicial procedents decision that the benefit test also not to be applied whilst determining “NIL Arm’s Length Price” on the ground that the taxpayer had not in fact derived any benefit from the international transactions in issue. The assessee shall also be at liberty to file its additional evidence; if any, in consequential proceedings as well. Allow education cess paid as a deduction - HELD THAT:- Revenue on the other hand quotes Section 40(a)(ii) of the Act that a “cess” very much forms part of the clinching statutory expression “tax” employed therein. And that it is too late now for the assessee to make the impugned claim once the same had not been recorded in the corresponding books of account as well. We find no merit in the Revenue’s foregoing arguments in light of Sesa Goa Ltd, [2020 (3) TMI 347 - BOMBAY HIGH COURT], Chambal Fertilizers and Chemicals Ltd [2018 (10) TMI 589 - RAJASTHAN HIGH COURT] holding the impugned cess as an allowable deduction in light of CBDT’s circular dt.18-05-1967 that education cess is not included in “tax” u/s.40(a)(ii) of the Act. We therefore direct the AO to frame consequential computation as per law. Foreign tax payment as a deduction - allowance of foreign tax credit claim u/s.91(1) - HELD THAT:- Section 91 of the Act is a specific provision dealing with foreign tax credit to be granted in case of taxes paid in the specified countries i.e. except Pakistan which comes under the latter sub-section 2 thereof. If we go by the assessee’s analogy that foreign tax credit to the specified extent u/s.91(1) “of a sum calculated on such doubly taxed income at the Indian rate of tax of the said country, whichever is the lower, or at the Indian rate of tax if both the rates are equal” is allowable for the purpose of granting credit and the remaining component is to be granted deduction under Chapter-IV of the Act, the same would render the former specific provision itself as otiose going contrary to “generalia specialism non derogant” which means that a specific provision prevails over the general one. We thus adopt stricter interpretation and conclude whatever is the assessee’s unallowable foreign tax credit claim u/s.91(1) since exceeding the specified limit, would not be entitled for business expenditure u/s.37.The assessee fails in this ground.
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