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2020 (2) TMI 347 - AT - Income TaxTP Adjustment - comparable selection - HELD THAT:- Assessee provides IT services and IT enabled services to its group companies. Assessee is engaged in building and maintaining the local information technology infrastructure and assists global teams in supporting the technology environment and usage, thus companies functionally dissimilar with that of assessee need to be deselected from final list. Computing incorrect operating margins of comparables by not granting appropriate working capital and risk adjustments - HELD THAT:- Transfer pricing analysis is estimation and not an exact science. One has to see that, reasonable adjustment must be made where ever it is needed, so as to bring both comparable and test party on same footing. In present facts of case, DRP may be correct in denying working adjustment due to unavailablity required data, however there is no merit in observations of DRP/TPO as supported by Ld.CIR DR, in denying working capital adjustment due to absence of details for working out adjustments in comparable companies chosen. If we appreciate the argument advanced by Ld.CIT DR, there would remain no comparables for the purpose of comparibility analysis to determine ALP of an international transaction, and this would be fatal to entire exercise of transfer pricing analysis. Regarding comparable companies, one has to fall back upon only on information available in public domain. If that information is insufficient, it is beyond the power of Assessee to produce correct information about comparable companies. Revenue on the other hand has sufficient powers u/s.133(6) to compel production of required details from comparable companies. If this power is not exercised to find to get information required, then it is no defense to say that Assessee has not furnished required details to deny any adjustment on account of working capital differences. Therefore this objection of DRP is not sustainable. Therefore in, endeavor should be made to bring in comparable companies for the purpose of broad comparison and working capital adjustment claimed by Assessee should be analysed, keeping in mind, OECD guidelines. Based on the above discussions, and respectfully following decision of coordinate Bench of this Tribunal in the case of Huawei Technologies India (P.) Ltd. [2018 (10) TMI 1796 - ITAT BANGALORE] we direct working capital adjustment to be computed and to allow as per actuals, after considering exclusion/inclusion of comparable companies in the final set of comparables as discussed hereinabove. Disallowance u/s 14A - HELD THAT:- Admittedly, there is no exempt income earned by assessee during the year, as has been noted by Ld.AO in impugned order. Under such circumstances, ratio of Hon’ble Madras High Court which has been approved by Hon’able Supreme Court in case of Chittinad Logistics Ltd [2017 (4) TMI 298 - MADRAS HIGH COURT] is squarely applicable. Respectfully following the same we direct Ld.AO to delete addition made under section 14 a read with rule 8D for year under consideration. Disallowance u/s 43 B towards leave encashment and bonus paid to the employees - admission of additional documents - HELD THAT:- On perusal of order passed by DRP, it is noted that assessee had filed various documents which was called for by ACIT however the same has not been considered. Assessee’s is really filing these documents before this Tribunal to consider claim of leave encashment and bonus paid to employees in accordance with law. We do not find any reason not to allow request of Ld.AR, as it is in consonance with principles of natural Justice. We therefore admit the additional evidence filed by assessee and send it back to Ld.AO for verification. Ld.AO shall verify the documents filed by assessee and consider the claim as per law. Needless to say that proper opportunity must be granted to assessee of being represented. Disallowance of provision for expenses under section 40 (a) (i)/(ia) on account of non-deduction of tax at source pertaining to other payables and pertaining to related parties - HELD THAT:- As it has been admittedly submitted by both sides that assessing officer has not followed the directions of DRP, we are of the opinion that the issue needs to be set-aside to Ld.AO. AO shall verify the details filed by assessee and consider the claim is in accordance with law. Needless to say that proper opportunity of being heard should be granted to assessee. Accordingly these grounds raised by assessee stands allowed for statistical purposes.
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