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2018 (11) TMI 130 - AT - Income TaxNon charging of interest from non-AEs - interest foregone by the assessee on outstanding receivables from non-AEs - Held that:- It is pertinent to mention here that a similar adjustment was made in assessment year 2009-10 and the DRP deleted the same by observing that the interest foregone by the assessee on outstanding receivables from non-AEs is higher than the interest foregone from AEs. For the sake of completeness of the adjudication, we find that the working capital adjustment subsumed in main international transaction has been accepted by the TPO inasmuch as working capital adjusted in operating margin of the comparable companies was taken by the TPO at 6.38% whereas appellant’s margin was 16.78% in respect of ‘Provision of network support services.’ The appellant’s margin is 16.60% whereas arm’s length margin accepted by the TPO was 7.01%. Once the working capital adjustment has been accepted, then, we do not find any merit in making further adjustment in respect of outstanding receivables. Adjustment made by the Assessing Officer. We, accordingly, direct the Assessing Officer to delete the addition Disallowance u/s 43B - disallowance on account of statutory liabilities payable - Held that:- AO has not properly appreciated the accounting entries in their due perspective. The marginal heading of section 43B clearly states that certain deductions to be allowed on actual payment. This means that if the assessee has claimed deductions, the same can be disallowed u/s 43B of the Act. However, in the case in hand, the assessee has not claimed any deduction as the input service tax and the output service tax have never been routed through the P&L Account. However, in the interest of justice and fair play, we restore this issue to the files of the Assessing Officer. The assessee is directed to explain the entries and the Assessing Officer is directed to verify the same. Disallowance of year end accruals - Held that:- Following the law laid down by the Hon'ble Apex Court in Rotork Controls India (P) Ltd. (2009 (5) TMI 16 - SUPREME COURT OF INDIA) we are of the considered view that when the taxpayer has worked out the liability by using a substantial degree of estimation by proving 95% of the invoices on the basis of historical trend, no disallowance can be made. So, we order to delete this addition. Addition on account of non-charging of mark-up on support service charges billed to AGNSI - Held that:- In case of a contract by both the parties who are admittedly resident Indian entities, they make the law for themselves which cannot be interfered unless contract is unlawful or specially barred by the law of the land. Moreover by such a decision of not charging mark up by the taxpayer on support services charges billed to AGNSI, no loss of tax has been caused to Revenue. So, the findings of the TPO/DRP that the taxpayer is not only to cut charges but mark up also is not sustainable in the eyes of law. So, we order to delete the addition on account of not charging of mark up on support services charges billed to AGNSI. Non-deduction of tax at source on reimbursement made to AT &T World Personnel Services Inc. (AWPS) - Held that:- Reimbursement made by the appellant company cannot be classified as FTS/FIS under the provisions of the Act and Indo-US DTAA. It would not be out of place to mention here that total tax deducted by the assessee u/s 192 of the Act is ₹ 1,97,36,176/- which is much higher than the withholding tax sought to be levied by the Assessing Officer which comes to 10% of ₹ 4,17,56,851/-. Considering the facts in totality, we direct the Assessing Officer to delete the impugned addition.
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