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2018 (3) TMI 1199 - AT - Income TaxTPA - assessee had treated CPM as most appropriated method, whereas TPO applied TNMM for benchmarking the IT's - Held that:- In the case under consideration, we do not find any reasoned and justifiable finding has been given by the TPO for not following CPM. But, it is also true that the assessee had not followed all the steps as required by the provisions of Rule 10B(c)of the Rules. It is said that the object and purpose of TP adjustment is to ensure that the controlled taxpayers are given tax parity with uncontrolled taxpayers by determining their true taxable income. Costs or expenses incurred for services provided or in respect of property transferred, when made subject matter of the ALP by applying the CPM, cannot be again factored or included as a part of interconnected international transaction and subjected to the ALP, once it has been considered as per sub rule (c)(i). It is found that the TPO has not given due attention to the functional profiles of the assessee as well as of the AE/non-AE's. We find that the TPO had clubbed sales to the SAARC countries for arriving at the net profit to cost ratio. But, in our opinion, transactions with AE should not have been compared with the SAARC countries’ transactions. In short, the departmental authorities as well as the assessee had not followed the proper method to benchmark the IT's entered in to, during the year under consideration, by the assessee. Being the first year of TP adjustment, it was natural. Matter needs further verification of facts and application of the provisions of law which are very clear as on today. The confusion or ambiguity about applying the method or procedure is over and orders or higher judicial authorities are available as to how to apply CPM. Therefore, we are restoring back the matter to the file of the TPO/AO for fresh adjudication. Writing off under the head capital advances - Held that:- The basic analogy for allowing write-off is to consider the real nature of the transaction. The advances were made for the running of business. The expenditure was not incurred for a new project, neither it was totally disconnected with the business activities carried out by the assessee. The disputed amount was advanced for tractor divison of the assessee in the normal coursr of business. - Decided in favour of the assessee. Addition of provision for doubtful debts u/s. 115JB - Held that:- AR fairly considered that the issue had to be decided against the assessee, because of the retrospective amendment to the section. Accordingly, we dismiss ground of assessee. Addition of provision for warranty u/s. 115JB - MAT - Held that:- As found that in the AY. 1989-90, the AO had considered provision for warranty as an and admissible expenditure on the ground that such provisions was in the nature of contingent lability, that in the subsequent assessment years he considered the enhanced portion of warranty provisions as this allowable expenditure, that the Tribunal has reverse the order of the departmental authorities, while deciding the appeal for the AY. s 1989-90 to 1991-92, that the Tribunal had held that provision for warranty was not contingent lability, that the FAA, while deciding the appeal for the AY. 1997-98, had allowed the claim made by the assessee in respect of provisions for warranties. If we consider the principles laid down in the case of Rotork Controls India Pvt. Ltd. (2009 (5) TMI 16 - SUPREME COURT OF INDIA), then it becomes clear that the assessee had followed a scientific method and had considered the historical data to arrive at the correct book profit, as per the provisions of section 115 JB of the Act. - Decided in favour of assessee
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