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2018 (10) TMI 51 - AT - Income TaxTPA - ALP determination - upward transfer pricing adjustment - comparable selection - Held that:- The net profit margin earned by the Assessee from the controlled international transaction was 22.96% in comparison to the average net profit margin earned by the comparables chosen by the Assessee at 12.78%. If one were to proceed on the basis of the comparable selected by the assessee and apply its profit margin of 12.78%, the Assessee’s profit margin of 22.96% is higher. Hence the comparison of the net profit margin of the international transaction of the Assessee in comparison to the net profit margin of the comparables is much better and the addition so made by the TPO & AO is wholly wrong and incorrect and therefore, we delete both the upward transfer pricing adjustment made by TPO/AO Availability of exemption u/s 10A to the assessee is no bar to applicability of sections 92C and 92CA. To conclude, we are of the view that since we accept the comparable companies selected by the assessee ( Zenith Exports and Eastern Silk Ind Ltd)as even though the assessee has got a higher RPT and, however, since the TPO has accepted these comparable for AY 2010-11, we agree with the Ld. CIT(A) that this company should not be excluded as a comparable. We also accept the profit level indicators (PLI) computed by the assessee and we reject the seven comparables selected by the Ld TPO. Therefore, we delete the transfer pricing adjustment made by the TPO in assessment year 2008-09 and 2009-10. Liability to pay MAT u/s 115JB of companies eligible for claiming deduction u/s 10A - Held that:- Up to assessment year 2007-08, the 10A, & 10B units were not supposed to pay minimum alternate tax (MAT) under section 115JB of the Act. However, on or after assessment year 2008-09 these 10A & 10B companies should pay minimum alternate tax (MAT) under section 115JB of the Act. Therefore, we note that the companies eligible for claiming deduction u/s 10A are continued to remain liable to Minimum Alternate Tax (MAT) made u/s 115JB of the Act. The issue before us is relating to A.Y. 2008-09 and A.Y. 2009-10, therefore, we are of the view that assessee company is liable to pay MAT. Therefore, we allow this ground raised by the Revenue. Addition u/s 14A - Held that:- As relying on the judgment of Hon’ble Bombay High Court in the case of CIT vs. Reliance Utilities Power Limited [2009 (1) TMI 4 - BOMBAY HIGH COURT] and CIT vs. HDFC Pvt. Ltd. [2014 (8) TMI 119 - BOMBAY HIGH COURT], we delete the addition under Rule 8D (2) (ii). As regards the disallowance made by the Assessing Officer u/s 14A r.w.r 8D(2)(iii) we direct the Assessing Officer to compute the disallowance in line of the judgment of jurisdictional Tribunal in the case of REI Agro India [2013 (5) TMI 582 - ITAT KOLKATA] and therefore, Assessing Officer is directed to consider only those shares and investments in respect of dividend income has been earned during the year. Disallowance of depreciation - Held that:- The assets on which the company has claimed the depreciation was being used by the Company for keeping records and books of accounts of the company. Therefore, the flat was being used for the purpose of business, hence, the depreciation should be allowed to the assessee company. We note that the same issue of depreciation has been allowed to the assessee in the preceding years hence, to maintain the rule of consistency such depreciation has to be allowed in this year as well especially in the light of the fact that the Assessing Officer has not brought any material on record to prove that such flat was used for the purpose other than the business. That being so, we decline to interfere in the order passed by the ld. CIT(A) Addition on account of unexplained investment - AO disallowed an amount on account of information available in the AIR data, which was treated to be unexplained investment - Held that:- This matter has been duly explained by the assessee before the AO and the Assessing Officer had overlooked the explanation submitted by the assessee. CIT(A) has co-terminus power as the Assessing Officer has, that is, the CIT(A) has all the powers as the Assessing Officer has, and in the assessee’s case ld CIT(A) had examined the documents. Since the said issue had been explained before the Assessing Officer by the assessee and the CIT(A) accepted the same evidence in continuous of the explanation submitted by the assessee before the Assessing Officer, and the fact that the ld. CIT(A) has co-terminus power, therefore, we do not find any infirmity in the order passed by the ld. CIT(A) and his order on this issue is hereby confirmed.
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