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2021 (8) TMI 609 - AT - Income TaxTP Adjustment - addition made on account of adjustment to the arm’s length price (ALP) of export commission paid to the overseas associated enterprises (AE) - HELD THAT:- In none of the assessment years till assessment year 2001-02, the TPO has proposed any adjustment to the rate at which export commission was paid to the AE. It is evident, only in assessment years 2002-03 & 2003-04, TPO has proposed adjustment. It is further relevant to observe, in assessment year 2004-05, though, the TPO had made an adjustment to the rate of export commission by determining the ALP at 6.6%; however, in an appeal preferred by the assessee Commissioner (Appeals) has deleted such adjustment. Against the decision of Commissioner (Appeals), the department has not preferred any further appeal. It is also evident, in assessment year 2005-06, the TPO himself has accepted the commission paid at 12.5% to be at arm’s length. Even applying the rule of consistency and past history relating to similar transaction, the export commission paid at 12.5% has to be accepted to be at arm’s length. In view of the aforesaid, we are inclined to delete the adjustment made to the ALP of export commission paid to the AE. This ground is allowed. Disallowing full deduction of VRS and early retirement incentive granted to employees - HELD THAT:- As respectfully following the decisions of the co-ordinate bench in assessee’s own case,[2014 (8) TMI 831 - ITAT MUMBAI] we allow the deduction claimed by the assessee. Disallowance of depreciation on obsolete assets - claim disallowed simply for the reason that similar claim made by the assessee in preceding assessment years has been disallowed - HELD THAT:- As decided in own case [2014 (8) TMI 831 - ITAT MUMBAI]depreciation was allowable on obsolete assets to the assessee. Disallowance of interest expenditure u/s 14A - HELD THAT:- We find, while deciding identical issue in preceding assessment years [2014 (8) TMI 831 - ITAT MUMBAI] the Tribunal has deleted the disallowance of interest expenditure made under section 14A. Disallowance being expenditure incurred towards computer software charges - HELD THAT:- As decided in own case [2014 (8) TMI 831 - ITAT MUMBAI] expenditure had not created any new asset or new source of income. It was held that expenditure was revenue in nature. Addition u/s 145(A) of the Act on account of unutilised modvat credit - HELD THAT:- As decided in own case [2014 (8) TMI 831 - ITAT MUMBAI] valuation of purchase and sale of goods and inventory has to tie made on the basis of method of accounting regularly followed and further adjustment is required to be made to include the amount of any tax, duty, cess to bring the goods to the place of its location condition on the date of the valuation. Therefore, under the provision u/s 145A adjustment on account of lax, duty etc has to be made at all stages that is, opening stock, purchases and safes and losing stock - Adjustment u/s 145A has to be made both to tha opening stock and closing stock. This issue therefore in our view requires fresh examination. Disallowance of deduction claimed under section 80HHC - availability of deduction under section 80HHC of the Act on sales-tax set off - HELD THAT:- The issue with regard to allowing claim of deduction in respect of sales tax set off and refund, the assessee is not eligible in view of Explanation (baa) to Section 80HHC. Accordingly, we dismiss this ground of assessee's appeal and direct the AO to reduce the amount of sales tax refund from the eligible profit for computing claim of deduction u/s.80HHC. Restore the issue back to the file of the assessing officer for reducing only the net receipt from the eligible business profit in terms of Explanation (baa) to section 80HHC. Bad debts recovered should be excluded from the eligible profit for computing deduction under section 80HHC of the Act. Disallowance of bad debts written off - HELD THAT:- As per the amended provision of section 36(1)(vii) of the Act, any bad debt written off in the books of account as irrecoverable is an allowable deduction. The effect of the aforesaid statutory provision has been lucidly explained by the Hon’ble Apex Court in case of TRF Ltd [2010 (2) TMI 211 - SUPREME COURT]. Therefore, once the conditions of section 36(1)(vii) are fulfilled, assessee’s claim has to be allowed. Keeping in view the uncontroverted factual position that the conditions of section 36(1)(vii) are satisfied, we allow assessee’s claim. This ground is allowed. Addition/enhancement made to the ALV need to be deleted. Computation of deduction under section 80HHC - As sales tax set off and refund are not eligible for deduction in view of Explanation (baa) to section 80HHC. Therefore, 90% of such receipt has to be excluded from the business profits as well as turnover for computing deduction under section 80HHC. Penalty u/s 271(1)(c) - HELD THAT:- For addition on account of Transfer Pricing adjustment relating to payment of commission as rightly observed by Commissioner (Appeals), such disallowances cannot automatically lead to the conclusion that the assessee has either furnished inaccurate particulars of income or has concealed its income. We also agree with Commissioner (Appeals) that the issues relating to disallowances/additions, based on which penalty has been imposed are debatable issues on which more than one opinion is possible - transfer pricing adjustment was made on purely estimate basis. Thus, as rightly held by learned Commissioner (Appeals), such additions/disallowances, based on difference of opinion, cannot lead to the inference that assessee has either furnished inaccurate particulars of income or concealed its income so as to levy penalty under section 271(1)(c) On record that while deciding the appeal arising out of the quantum proceeding, learned Commissioner (Appeals) has granted relief to the assessee in respect of the aforesaid additions/disallowances which further goes to prove that these are debatable issues. In any case of the matter, while deciding the quantum appeals of the assessee and the revenue in the earlier part of the order, we have deleted all the disallowances/additions based on which penalty under section 271(1)(c) of the Act was imposed. That being the case, the penalty order passed u/s 271(1)(c) cannot survive. Accordingly, we uphold the decision of learned Commissioner (Appeals) on the issue by dismissing the grounds raised by the revenue.
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