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2018 (4) TMI 496 - AT - Income TaxTransfer Pricing adjustment – purchase of raw materials and components - selecting AE as the tested party and CPM as MAM - Held that:- As observed that assessee has not provided any details regarding FAR of AE to ascertain it to be less complex in nature. In fact assessee has only filed a letter dated 12/01/16 which demonstrates the total sales earned by AE with assessee during financial year relevant to the assessment year under consideration. It is observed from the submission dated 13/01/16 filed by assessee before ld.DCIT which is in response to the show cause notice dated 04/01/2016 that, assessee do not have financials of its AE as the same are not available on the public domain. Appendix B at page B- 933 is profitability details for products of Driveline Division (being AEs), having 100% external sales during the year ended 31/12/11. Further it is observed that the comparables selected are single set without having regard to the functions and geographical dissimilarities. It is further pertinent to observe that the most appropriate method used by assessee against AE as tested party is cost plus method. We fail to understand how the margins would be comparables in a Cost Plus Method, which is required for determining ALP of an international transaction. We also do not see any reason to set aside this issue to Ld.TPO, as assessee has categorically submitted before authorities below regarding non-availability of financial details of AE. Even before us Ld.AR did not submit there being a possibility of obtaining complete financial details of A.E. We therefore reject the arguments advanced by Ld.AR in respect of selecting AE as the tested party and CPM as MAM. Disallowance of provision for warranty claims - Held that:- Claim allowed as relying on assessee's own case [2017 (9) TMI 1157 - ITAT DELHI] wherein held hat the provision for warranty claim is an allowable expenditure. Disallowance of welfare expenditure under the head ‘miscellaneous expenditure’ - Held that:- The expenditure incurred by assessee is in the nature of corporate social responsibility which is considered to be an allowable expenditure subject to fulfilment of the conditions specified in section 32 to 36 of the Act. As assessee has not filed any details regarding these expenses before us, we are unable to ascertain whether necessary criteria as stipulated under section 32-36 of the Act stands fulfilled. We are therefore inclined to set aside this issue back to the file of Ld. AO for due verification. Disallowance due to difference in the stock - Held that:- The facts of the present case assessee has not been able to demonstrate exact reason of loss and measures taken in order to compensate for the loss of stock. We are therefore unable to appreciate the arguments advanced by Ld.AR. - Decied against assessee.
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