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2018 (10) TMI 2033 - ITAT PUNEDisallowance of Capital Cost Allocation - AR has pointed that as per cost allocation policy the cost of services is allocated on the basis of head count or any other basis as may be mutually decided by the parties depending on the nature of services - HELD THAT:- AO has not disputed the receipt of services by the assessee. An ad hoc disallowance of 25% i.e. Rs.45 lacs out of total corporate cost allocation has been made by the AO for the reason that the allocation of cost has been made on subjective basis. The reasoning for making such disallowance in arbitrary manner is without any merit. Once, the AO has accepted the genuineness of expenditure and the services rendered, ad hoc disallowance of 25% of the expenditure on mere presumptions or assumptions is not sustainable. No reasoning whatsoever has been given by the AO to show that the expenditure disallowed is not for the business of assessee. We do not find any infirmity in the directions of DRP reversing the findings of AO in draft assessment order on this count. Accordingly, ground No. 1 raised in the appeal by Revenue is dismissed. Disallowance of warranty expenses - DR submitted that while making provision for warranty the assessee has failed to show that the provision was made on some scientific and systematic basis - HELD THAT:- The manner and the basis for making the provision in all the assessment years including the assessment year under appeal is identical. This fact has not been disputed by the Revenue. Therefore, we are of considered that the principle of consistency demands the provision created by the assessee for warranty deserves to be allowed. We further observe that the assessee has followed average of percentage of “Free of Cost” dispatches on sales made in past three years for creating provision for warranty. In addition the assessee has made provision for Rs.49 lacs towards warranty for supplies made to one of its major customer. The provision for warranty created by the assessee is based on well calculated scientific method. The assessee has made warranty provision in line with the principles enunciated in the case of Rotork Controls India Pvt. Ltd [2009 (5) TMI 16 - SUPREME COURT]. TP adjustment - international transactions pertaining to payments made to AEs for Corporate Support Services - HELD THAT:- DR has not able to controvert the findings of Co-ordinate Bench in 2008-09 [2018 (6) TMI 1266 - ITAT PUNE] No contrary decision has been brought to our notice by the Revenue on similar issue. It is also not disputed that the nature of services received by the assessee from the AEs in the assessment year under appeal are in any manner different from the services received by the assessee from its AEs in assessment year 2008-09. Thus, in view of undisputed facts we follow the order of Tribunal in assessee’s own case and allow ground Nos. 2 to 4 raised in the appeal by assessee in same terms. Adoption of internal TNMM for benchmarking manufacturing segment - HELD THAT:- Co-ordinate Bench following its own decision in assessment year 2007-08 [2015 (5) TMI 644 - ITAT PUNE] upheld internal TNMM for the purpose of benchmarking international transactions of purchase of raw material and components from AEs as well as sale of finished goods effected to AEs. The Tribunal further observed that since the profitability under the AE segment was higher than that of the transactions under third party segment, no adjustment on account of arm’s length price was required to be made. The ld. AR submitted that there has been no change in the facts of the case vis-à-vis assessment years 2007-08, 2008-09, 2009-10 and 2010-11. Hence, on principle of consistency the ground Nos. 1 to 3 raised by Revenue deserves to be rejected.
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