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2016 (6) TMI 172 - AT - Income TaxTransfer pricing adjustment - TPO disallowed 50% of the region allocation expenses amounting to ₹ 4. 50 crores on the ground that there was no proper basis of allocation and backup calculations were not shared, that the DRP had increased the disallowance to hundred percent of the regional allocation expenses - Held that:- In the case under consideration actually the TPO had DRP have completely taken over the role of the AO. Instead of deciding the ALP of the IT. s reported by the assessee, they have decided the issue of allowability of expenditure incurred by it. Therefore, in our opinion, their order are not in accordance with the provisions of the Act. As far as comparables of BPO services are concerned it is enough to say that the TPO and the DRP had not dealt with the objections raised by the assessee about the comparables selected by the TPO(Pg. 601-10 of the PB). We do not find even a single word about the objection of the assessee with regard to the comparables. The TPO is authorized to select the comparables, but it is his duty not only to mention the methodology of selection process and to meet the objections raised by the assessee about the selection process or the selected comparables. Considering the above, we hold that the assessee had produced all the necessary documents and that the TPO and the DRP did not consider the same while passing/issuing the order/Directions. Therefore, in the interest of justice, we are of the opinion that the matter should be restored back to the file of the DRP who would decide the both the issues afresh after affording a reasonable opportunity of hearing to the assessee. Objections raised by the assessee, with regard to comparables have to be dealt case by case - Decided in favour of assessee in part Disallowance made u/s. 14A - Held that:- Provision of Rule 8D cannot be applied for the year under appeal, as held by the Hon’ble Bombay High Court as in the case of Godrej Boyce Mfg Ltd. (2010 (8) TMI 77 - BOMBAY HIGH COURT ). However, a reasonable disallowance could be made. It is a fact that the assessee had made investment in the AE. s. , that the AO had not proved that interest free funds were used by the assessee to make the investments. Considering these facts we are of the opinion that the matter needs further verification. Therefore, in the interest of justice, we are restoring back the issue to the file of the AO for fresh adjudication. He is directed to afford a reasonable opportunity to the assessee of being heard. Addition made on account of mis-match of AIR data - Held that:- We find that in this case the addition was made only on the basis of AIR report, that the assessee had specifically mentioned that the entries did not pertain to it. In our opinion, the AO should have made further investigation before making the addition. If the disputed amount pertained to receipt of rent it was not difficult for the AO to find out the facts. But, he chose not to make any enquiry and made the addition. We are of the opinion that only on the basis of AIR information no addition should be made-specially when there is no other material with the AO to demonstrate that the assessee had received income more than what was declared by it. In the case under consideration, it is found that except for the information available in the form of AIR the AO had nothing in his possession to prove that the assessee had received the amount in question. - Decided in favour of assessee Disallowance of deduction of ₹ 18. 41 lakhs u/s. 10A - Held that:- The assessee suo-motu had excluded the disputed amount from the turn over while computing the deduction u/s. 10A of the Act, that the AO/DRP erred in disallowing the same amount, that the assessee suffered double disallowance. We are of the opinion that the matter should be reexamined by the AO and the amount in question should not be disallowed twice
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