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2021 (8) TMI 3 - AT - Income TaxTransfer pricing adjustment - comparable selection - functional dissimilarity - HELD THAT:- Assessee provides IT enabled services to its AE through the use of IT infrastructure which includes use of online software, live information services, research on international data base, thus companies functinally dissimilar with that of assessee need to be deselected from final list of comparables. Disallowance u/s. 40a(ia) - no TDS exemption certificate was submitted in respect of rental payments made to Annapurn Builders -short deduction of TDS - HELD THAT:- CIT(A) has given direction to the Assessing Officer to verify whether the copies of non deduction of tax/deduction tax at lower rate was filed before the Assessing Officer before passing of the assessment order and if that be so then no disallowance can be made. It has been informed by the ld. counsel that ld. Assessing Officer will give effect to the order of the ld. CIT(A) vide order dated 27.09.2018 has accepted this fact that in case of payment to M/s Annapurna Builders, assessee has produced TDS exemption certificate and himself has deleted the disallowance. Accordingly, this ground is treated as infructuous. In so far as short deduction of TDS, rather TDS deducted at lower rate in the case of M/s Hind Hosiery Mills Pvt. Ltd, again no disallowance can be made in view of the judgment of Hon’ble Calcutta High Court in the case of CIT vs. S.K. Tekriwal [2012 (12) TMI 873 - CALCUTTA HIGH COURT]. Accordingly, this issue is decided against the revenue. Disallowance u/s.40A(2) - HELD THAT:- On perusal of the relevant finding given in the impugned order, we find that first of all Assessing Officer without any reason or material facts on record had simply disallowed 50% on the ground that there is no justification for giving such huge amount of remuneration. Such an ad hoc reasoning cannot be accepted as AO has to justify that such a remuneration paid is not commensurate with the services rendered by the Managing Director having regard to the services rendered and market value of its services. The profile of Managing Director and the services rendered by him as incorporated in the impugned appellate order and also looking to the fact that the subsequent assessment year the increase remuneration has been accepted, and therefore, the disallowance made u/s.40A(2)(b) cannot be sustained. Thus, the Revenue’s appeal is dismissed.
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