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2019 (12) TMI 370 - AT - Income TaxTransfer Pricing (TP) adjustment - payment of corporate charges - assessee was receiving the intra group services from its AEs, which were allocated among the group companies - benchmarking of international transaction with AEs - The margin of the assessee worked out to 25.54% as against the mean margins of comparables selected by the assessee, at 14.79%. The TPO however, was of the view that the assessee had failed to establish its case of receipt of economic and commercial benefits from such payment - Held that:- where the assessee had demonstrated the need for the services and had also produced evidence of availment of such services and had also established the benefit derived from the said services, and where those services were neither deliberative in nature nor were shareholder activities, then the said availment of the intra-group services being inter linked with the other international transaction, then the same should be benchmarked on aggregate basis by adopting the Transactional Net Margin Method as the most appropriate method. - Upward additions deleted. Interest on foreign currency loan extended to the AE. - TPO applied the Comparable Uncontrolled Price method to benchmark the aforesaid international transaction - Held that:- where the transaction is in foreign currency, then the rate of interest is to be applied is LIBOR plus. In the present case, it may also be pointed out that the loan was advanced after taking permission of the RBI and even the rate of interest was approved. - no transfer pricing adjustment needs to be made in the hands of the assessee on account of interest on foreign currency loan wherein the assessee himself had charged interest @ LIBOR + 150 basis points. - Additions deleted. Re-characterizing the inter-company receivables as unsecured loan extended by the assessee to its AEs. - Held that:- where the operating profit margin shown by the assessee from its transactions with its AEs was higher than the mean margins of the comparable companies, then no separate adjustment could be made on account of imputing interest on outstanding receivables. In any case, the aforesaid receivables have been received by the assessee as and when due and the same could not be re-characterized as unsecured loan. - Adjustments deleted. Depreciation of goodwill arising out of amalgamation - methodology approved as part of scheme of amalgamation - Held that:- the assessee to be entitled to claim depreciation on goodwill, as per the rates applicable for the year under consideration. Claim of deduction u/s 43B of the Act in respect of leave encashment and gratuity paid - Amount was paid before due date of filing of return - Held that:- inadvertently, the assessee did not claim the said deduction in the return of income filed for the year under consideration. We hold that the assessee is entitled to the aforesaid claim subject to verification by the Assessing Officer. Sundry credit balances outstanding from past three years - addition u/s 41(1) - According to AO, the liability had seized to exist. - Held that:- where the creditors are outstanding in the books of accounts of the assessee and they have not been reversed, then such outstanding balance of creditors cannot be treated as income of the assessee. - Additions deleted. Capital loss - Computation of capital gain on sale of shares - The Assessing Officer has disallowed the loss claimed by the assessee on the ground that the method adopted by the assessee for valuing its shares on the date of sale suffers from ambiguity. - Held that:- Assessing Officer cannot make any adjustment/addition by not accepting the sale consideration received by the assessee. The reference to the valuation report which was filed by the Assessing Officer before the RBI cannot be the basis for reworking the capital gains in the hands of the assessee, where the assessee had entered into equity purchase agreement dated 25.08.2011, wherein 800 shares were sold by the assessee at a price of JPY 35 million. - Claim of loss is allowed.
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