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2018 (1) TMI 450 - AT - Income TaxTransfer Pricing Adjustment - Held that:- We find that the Tribunal had dealt with all the issues of TP adjustments in detail, that the TPO had benchmarked the IT's of the assessee at entity level, that the Tribunal found that the benchmarking was within the permissible limit( +/- 5%), that the IT's were held to be at arm’s length, that it was further held that all other adjustments like payment of royalty, receiving of royalty, advertisement and sales promotion and advertisement, adjustment out of R&D cess, payment of service tax, research and innovation development related services and under3 charging for central services were subsumed once assessee's margin at entity level for AE’s transactions was at arm's length, that the ITAT had deleted the entire transfer pricing adjustment made for that year, that the Hon’ble Bombay High Court dismissed the appeal filed by the departments on this issue of deletion of adjustment(2016 (7) TMI 1245 - BOMBAY HIGH COURT ). Nothing has been brought on record that the facts for the year under consideration are different in any manner, except for the amount involved, from the facts of the last AY. Therefore, following the order of the Tribunal for that year, and the aforesaid judgment of the Hon’ble Bombay High Court for the same year, we decide the effective ground of appeal in favour of the assessee. Disallowance under section 14A - Held that:- AO has not pointed out as to why the disallowance made by the assessee was not acceptable. In our opinion the provisions of section 14A read with rule 8D of the Rules cannot be applied mechanically. The AO is supposed to give a clear-cut finding as to how and why the provisions of the section14A are applicable and as to why the disallowance made by the assessee is not acceptable. In the cases of Aditya Birla Finance Ltd. (2017 (6) TMI 827 - ITAT MUMBAI), the Tribunal has held that the AO, without giving any finding about the suo motu disallowance made by the assessee, cannot make any addition u/s. 14A r. w. r. 8D of the Rules. Disallowance of expenses incurred on shifting of office, treating it as a capital expenditure - Held that:- We find that the AO and the DRP has held that the expenditure incurred by the assessee was transactional expense, that the assessee has claimed that expenditure was incurred for a temporary site and that before shifting to the new office premises the assessee had incurred the expenditure. From the order of the AO the factual position is not emerging clearly. Therefore, we are of the opinion that matter needs to be further verified by the AO. In the interest of Justice, we are restoring back the issue to the file of the AO for fresh adjudication. disallowance u/s 36(1)(va) - delayed payment of PF/ESIC dues - Held that:- As the payment towards PF/ESIC were made within the grace period, therefore, in our opinion, the AO should not have made any disallowance. Relying upon the cases referred to by the AR and the matter of Ghatge Patil (2014 (10) TMI 402 - BOMBAY HIGH COURT)of the Hon’ble Bombay we decide the ground in favour of the assessee Interest income - treated as income from other sources or busniss income - Held that:- If surplus available with an assessee earns interest from the deposits made by it, then it cannot be taxed under the head business income. In short, the DRP has rightly observed that the assessee is not in the business of money-lending/earning income from its business. Therefore, in our opinion there is no need to disturb the directions of the DRP. Last ground of appeal is decided against the assessee. TP adjustments on the ground that the variation was within 5% limit of ALP specified - Held that:- n assessee's own case for the AY. 2006-07 the TPO had applied entity level approach for benchmarking the IT. s, that the Tribunal had approved the bechmarking, that it had held that the assessee's margin fitted within +/-5% arm's length range, that the Tribunal deleted the entire TP adjustment made for that year, that the Hon’ble Bombay High Court had dismissed the appeal filed by the department in that regard. In our opinion, the issue of TP adjustment has attained finality. Until and unless the AO brings new facts for making TP adjustment there is no need to discuss the issue in length. - Decided against revenue Allocating interest expenses only to units claiming Section 10A & 10B exemption and not to units claiming section 80 IB & 80IC deductions - Held that:- We find that out of total interest expense of ₹ 2178 lakhs and expenditure of ₹ 2064 lakhs was incurred on export packing credit and export bills discounting, that the interest-expenditure pertained to exports, that the DRP directed to the AO to allocate the same to Section 10A and Section 10 B units. As the units claiming deduction u/s. 80 IB and 80IC were not engaged in exports and therefore no interest could be allocated to those units. While deciding the appeal, filed by the assessee, for the AY. 2006-07 the Tribunal [2012 (12) TMI 458 - ITAT MUMBAI] held interest could not be allocated to 80IB and 80 IC units also confirmed by HC. Adjusted value of closing stock - Held that:- We are of the opinion that the directions of the DRP do not suffer from any legal infirmity. Closing Balance of an year automatically becomes Opening Balance for the later year. Therefore, we are unable to comprehend the logic behind raising the ground. Secondly, the AO as per the judgment of Goetz India cannot entertain a new claim without filing a fresh return of income. But, the appeallate authorities can allow the new claim made for the first time before them, as held by the Bombay High Court in the case of Pruthvi Brokers & Shareholders (2012 (7) TMI 158 - BOMBAY HIGH COURT) Non allocating interest for working disallowance u/s. 14A - Held that:- As we have endorsed the views of the DRP that the interest expenses had to be allocated to Section 10A and Section 10B units having direct nexus with exports business. Therefore, in our opinion the DRP had rightly held that same could not be again considered for disallowance u/s. 14A of the Act.
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