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2018 (6) TMI 285 - AT - Income TaxTPA - Rejection of returned income - selection of comparables - application of Safe Harbour Rules - Held that:- The safe harbour rule are not arm’s length prices, but in the nature of presumptive taxation, which generally enthuse taxpayers to opt for the same, as a compromise for not having to be involved in protracted litigation - thus CIT(A) rejected the plea of the assessee for consideration of safe harbour rules and dismissed the same. Method of determining ALP - Held that:- The principle of TNMM class for functional compatibility and not product compatibility - assessee performed the search on “Non electrical Machinery' and Base Metals” and HCL also belonged to the same category of industry - It did not matter whether it manufactured steel or copper - such difference in product would not result in significant divergence in profitability - further TP provisions do not bar from taking Government Company as comparable. Computation of Arm's Length Price - Held that:- The borrower was situated in Thailand and there was an economic turmoil in the region which affected borrower’s capacity to borrow - this would have increased the credit worthiness and credit rating of the AE in Thailand, enabling to borrow from Siam Bank at a lesser rate - therefore, charging of premium over and above the rate of interest charged by Siam Bank to its AE in Thailand, is justified. Corporate guarantee provided to its AEs - Held that:- Following the judgement in case of BARTRONICS INDIA LTD. VERSUS DY. COMMISSIONER OF INCOME TAX, CIRCLE – 1 (2) , HYDERABAD. [2017 (9) TMI 1649 - ITAT HYDERABAD] it is held that corporate guarantee is not considered as an international transaction. Disallowance of 5% of general expenses - Held that:- CIT(A) found that that the expenses under the head “ General Expenses’ under the head Miscellaneous Expenses was booked at ₹ 4,10,64,429/- and not the amount of ₹ 6,61,00,053/- as taken by the AO - thus he disallowed 5% of the expenses booked under the head general expenses - we are in agreement with the observations made by the CIT(A) in this regard. Non-deduction of TDS for payment made u/s 40(a)(ia) - Held that:- Assessee had neither made an application before the Assessing Officer u/s.195(2) nor had filed the requisite details as mandated u/s.195(6), therefore, in our opinion, the CIT(A) rightly upheld the action of AO - thus appeal of the assessee is dismissed. Disallowance of foreign travel expenses - Held that:- We restrict the disallowance on foreign travel expenses to 10% as against 15% made by the AO and confirmed by the CIT(A). Accordingly, this ground of appeal of the assessee is partly allowed. Deduction u/s 80IA - Held that:- where any goods manufactured by the eligible undertaking is transferred to the other undertakings of the same assessee then for the purpose of computing the profits and gains of the eligible undertaking which would be allowable as deduction u/s.80IA of the Act. Accordingly, we remit the disputed issue to the file of AO, who shall examine and verify the issue afresh after providing adequate opportunity of hearing to the assessee Nature of income - amount paid by the assessee to UM Cables - Held that:- A trading receipt may contain a fraction of sum as taxable income, but in other cases such as interest, commission, transfer of rights of patents, goodwill or drawings for plant and machinery and such other transactions, it may contain large sum as taxable income under the provisions of the Act. It cannot be said that the amount paid by the assessee to UM Cables was in the nature of income in its hands.
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