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2022 (11) TMI 1341 - AT - Income TaxTP Adjustment - recovery of expenses made by the Appellant from its AEs during the relevant previous year - HELD THAT:- Both, TPO and DRP have simply cited non-submission of third party invoices as the reason for making the transfer pricing adjustment treating the same at par with the reimbursement of out-of-pocket expenditure incurred despite the Appellant taking a position that deduction was never claimed in the return of income which fact has not been challenged/controverted by the Revenue during appellate proceedings before us. The third party invoices submitted during the assessment proceedings were accepted. It was not the case of the Revenue that some mark-up was been charged by the Appellant while making recoveries from AEs. Accordingly, transfer pricing adjustment made by the Assessing Officer is deleted. Reimbursement of Out-of-Pocket expenses - AO had vide Remand Report conveyed his consent for admission of additional evidence in the form of third-party invoices and requested the DRP to decide the issue on merits - HELD THAT:- Remand this issue back to DRP for fresh adjudication as per law after giving Appellant a reasonable opportunity of being heard. While doing so the DRP shall take into consideration the thirdparty-invoices already filed by the Appellant and the Remand Report, dated 21.10.2013, submitted by Assessing Officer in respect of the same as well as any further invoices/documents that may be filed by the Appellant before DRP to support the claim. Accordingly, addition on account of the transfer pricing adjustment is set aside. Nature of expenditure - Disallowance of Software Expenses - Appellant appearing before us submitted that the aforesaid expenses were disallowed on the ground that the same were capital in nature and depreciation @ 60% was allowed in respect of the same - HELD THAT:- Ground No. 5 raised in the appeal is dismissed as not pressed. The Assessing Officer is directed to allow depreciation in respect of the aforesaid amount at the rate of 60% as per law. TP adjustment - reimbursement of software maintenance expenses (connectivity charges) - HELD THAT:- On closure scrutiny we note that the amount of USD 5,440/- is the sum total of amount reflected in column with heading Supply and Installation –"Total Monthly Cost" and the column with heading 'Manage and Maintain (per Month)'. On perusal of "Tesla Scope Statement" it becomes clear that project is for obtaining Global IP VPN connection to help in connectivity between Chullora, Sydney, Australia and Mumbai, India. Thus, the connectivity expenses are separate from Software Maintenance Expenses - Further, as per the Project Closure Report and the monthly intra-group account statements, the same are being reimbursed at cost. TP addition is deleted. Ground No.3 is allowed. Allowability of lease payment - addition u/s 37(1) - HELD THAT:- we note that in cash flow statement lease rent paid on finance lease has been shown under the head "cash flow from the financing activity" . Under Schedule 15 – "Operating and Administrative Expenses" forming part of financial statement for the previous year relevant to the Assessment Year 2009-10, rent is shown as INR 5,50,82,263/-, and warehouse and facility charges are shown at INR 3,45,86,682/-. Further, Schedule 17 – Notes to Accounts mentioned the maturity profile of finance lease obligations. Thus, it is not clear whether the payment of INR 1,00,59,111/- pertain to operating or finance lease obligations of the Appellant. Further, before the Assessing Officer as well as before the DRP the Appellant has maintained the position that the payments pertain to finance lease. In view of the aforesaid facts, we hold that the issue requires verification by the Assessing Officer. Deduction as bad debt written off - HELD THAT:- In our view, the amount is in the nature of advance for purchases in respect of which goods were never received resulting in loss from business operations. Accordingly, the issue is remanded back to the file of AO to examine the allowability of deduction representing negative balance of creditors written off during the relevant previous year in terms of Section 37 of the Act after giving appellant an opportunity of being heard. Ground raised by the Appellant is allowed for statistical purposes. Granting of tax credit - HELD THAT:- As the issue is remanded to the file of Assessing Officer with the directions to verify amount of tax credit available and grant the benefit of the same to the Appellant as per law. In case, on verification the Assessing Officer is of the view that credit is not available, the Appellant would be granted reasonable opportunity of being heard to justify its claim. Ground No. 10 is allowed for statistical purposes.
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