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2018 (10) TMI 203 - AT - Income TaxTPA relating to merchandising activity - MAM selection - TPO has rejected the CUP and has applied TNMM and on appeal, the Ld. CIT (A) has modified the use of TNMM by the TPO and has applied RPM - comparable selection - Held that:- As apparent from the entire factual matrix that the issue has not been dealt with properly by the lower authorities so as to reach a logical and reasonable conclusion. Similarly, with respect to the international transaction relating to sale of rice, the assessee has applied CUP which was based on quotations of a broker whereas the TPO has applied TNMM. TPO has included comparables like Satnam Ovedrseas Ltd. and KRBL Ltd. which were into manufacturing whereas the assessee’s case is that it was only into trading activity. Further, the Ld. CIT (A), while confirming the inclusion of Satnam Overseas Ltd. and KRBL Ltd., has also included FCI and KRIBHCO Ltd. to which the assessee’s objection is that these both were hugely subsidized companies whereas the assessee did not have any benefit of any subsidy and, therefore, the PLI would be at a great variance if these two companies were considered as comparables. Thus, the assessee is aggrieved by the action of both the lower authorities in respect of trading segments also and analysis of the factual matrix shows that the lower authorities have also not duly considered the averments of the assessee in respect of the trading transactions. The facts in AY 06-07 and in the year under consideration are identical except the fact that during the year under consideration, the assessee was not into any manufacturing activity except processing of crude oil. Accordingly, in view of the facts and circumstances of the case, we deem it appropriate to remit the entire issue of transfer pricing to the office of the Assessing Officer/ TPO who will readjudicate the issue de novo. Disallowance of miscellaneous expenses - CIT(A) had entertained fresh evidences/submissions filed by the assessee without affording a reasonable opportunity to the Assessing Officer - Held that:- AR has submitted that he has no objection if the issue is restored to the file of the Assessing Officer for verification. Accordingly, we restore the issue of disallowance of miscellaneous expenses to the file of the Assessing Officer with the direction to examine the claim of the assessee in light of the details and evidences which the assessee would like to file in this regard and thereafter adjudicate the issue in accordance with law after giving proper opportunity to the assessee to present its case. Thus, ground no. 1 of the department’s appeal stands allowed for statistical purposes. Addition on account of restricting the claim of the assessee on managerial remuneration - Held that:- It is undisputed that the issue is covered in favour of the assessee by the judgment of Nonsuch Tea Estate (1974 (11) TMI 5 - SUPREME COURT). However, it is the contention of the department that the Assessing Officer was not given an opportunity to examine and consider the letter of approval based on which the Ld. CIT(A) has allowed relief to the assessee. Looking into the facts of the case, we find that since the letter of approval has emanated from a government body and the same has been duly examined and considered by an Income Tax authority whose power is co-terminus with the power of the Assessing Officer, there is no need to interfere with the findings of the Ld. CIT (A) Disallowance of quality allowance paid to dealers - assessee did not provide ledger accounts and other documentary evidences in support of the claim whereas the CIT (A) allowed relief to the assessee on the ground that the Assessing Officer had not asked the assessee to provide ledger accounts and other documentary evidence and had only asked the assessee to explain the nature and methodology of calculating the quality allowance - Held that:- The fact does remain that the documentary evidences in support of the assessee’s claim of deduction in respect of quality allowance was not examined by either of the lower authorities. Accordingly, it will be in the fitness of things if the issue is restored to the file of the Assessing Officer for re-examining the issue in light of all the documentary evidences which the assessee would wish to submit in support of its claim after giving due opportunity to the assessee. We direct accordingly and ground no. 3 of the department’s appeal stands allowed for statistical purposes. Unsubstantiated legal and professional expenses - substantial increase in the legal and professional expenses in the year under consideration as compared to the immediately preceding year - Held that:- CIT (A), while allowing relief to the assessee, has given relief to the assessee on the ground that the expenses were incurred in the normal course of business and further that the Assessing Officer could not question the commercial expediency of the assessee. However, the fact remains that the evidences in support of the expenses having been incurred were not examined at any stage. Accordingly, this issue is also restored to the file of the Assessing Officer for the purpose of examining the issue afresh in light of the evidences and explanations which the assessee might like to file in this regard. The Assessing Officer is directed to afford a proper opportunity to the assessee before adjudication of the issue. Depreciation on computer peripherals - @25% as against 60% - Held that:- We are in agreement with the averments of the Ld. AR that the issue stands covered in favour of the assessee by a judgment of the Hon’ble Delhi High Court in the case of BSES Rajdhani Power Ltd. (2010 (8) TMI 58 - DELHI HIGH COURT) and accordingly, we find no reason to interfere with the findings of the Ld. CIT(A) on this issue allowing depreciation @ 60%. Disallowance on account of service income receivable written off during the year - Held that:- Restore this issue to the file of the Assessing Officer with the direction that the Assessing Officer should verify whether the impugned amounts were written off during the year under consideration or not and if they have been so written off, he is directed to allow the same as deduction
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