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2018 (10) TMI 419 - AT - Income TaxTPA - treatment to be given to the provision for bad and doubtful debts for determining the operating margin - Held that:- As Assessee has submitted that if the provision for bad and doubtful debts as reduced from the operating cost for the purpose of computing the operating margin of the assessee-company and arm’s length price of the international transactions of the assessee-company with its Associated Enterprises is determined by applying the average operating profit margin of the comparables as selected by the TPO, the same would fall within the tolerance limit of 5% as compared to the price actually charged by the assessee-company to its AEs for the said international transactions, the benefit of which is being claimed in additional Ground No. 2. We accordingly direct the Assessing Officer/TPO to re-compute the difference between the arm’s length price of the international transactions of the assessee company with its AEs as determined by them and the price charged by the assessee-company by taking its operating margin after excluding the provision for bad and doubtful debts and if the same is found within the tolerance limit of 5%, the Assessing Officer/TPO is directed to delete the addition made on account of transfer pricing adjustment. The additional Ground No. 2 of the assessee’s appeal is accordingly allowed. Disallowance on account of employer’s contribution to P.F. and Pension Fund and employees contribution to P.F. and Pension Fund - Held that:- The same are squarely covered in favour of the assessee by the decision of the Hon’ble Supreme Court in the case of CIT –vs.- Alom’s Extrusions Limited [2009 (11) TMI 27 - SUPREME COURT] and CIT –vs.- Vinay Cement Limited [2007 (3) TMI 346 - SUPREME COURT OF INDIA], wherein it was held that the employer’s/employees contribution towards Provident Fund and Pension Fund paid before the due date of filing of the return of income for the relevant year cannot be disallowed under section 43B, even if it has been paid after the due date as per relevant Acts. Penalty u/s 271(1)(c) - addition on account of transfer pricing adjustment - Held that:- Even the addition made on account of transfer pricing adjustment and disallowance of employees contribution towards Provident Fund, etc. as sustained by the ld. CIT(Appeals) are found to be not sustainable by us while disposing of the quantum appeals as held in the foregoing portion of this order. Consequently the penalty imposed under section 271(1)(c) in respect of the said addition is not sustainable and the impugned order of the ld. CIT(Appeals) cancelling the penalty imposed by the Assessing Officer is liable to be upheld on this ground also
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