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2022 (6) TMI 1232 - AT - Income TaxTP Adjustment - comparable selection - TPO had excluded companies having turnover of less than Rs.1 crore, however, the AO / TPO has not put upper limit to turnover for exclusion of companies having high turnover - HELD THAT:- We direct the AO / TPO to exclude the mentioned six companies [Larsen & Toubro Infotech Limited, Mindtree Limited, Persistent Systems Limited, R S Software (India) Limited, Infosys Systems Limited AND Thirdware Solutions Limited] since it is having turnover exceeding Rs.200 crore. It is ordered accordingly. Interest on outstanding receivables from AE - TPO did not consider the assessee’s submission that the trade receivables are not separate international transaction and impact if any, gets subsumed by way of working capital adjustment - HELD THAT:- The Tribunal in assessee’s own case for assessment year 2008-2009 (2016 (10) TMI 1211 - ITAT BANGALORE) had directed AO / TPO to determine afresh the ALP in respect of providing SWD services by considering the proper working capital adjustment in comparable prices. It was held by the Tribunal that in case after giving necessary adjustment, the international transaction of the assessee is found to be at arm’s length, then there is no question of separate adjustment on account of allowing credit period from receivables from AE. Taking a consistent stand, we direct the AO / TPO to redo the transfer pricing analysis in respect of interest on outstanding receivables by taking into account the directions of the Tribunal in assessee’s own case. Advances to the employees against their salary for meeting expenses on food and travel while working on clients deliverables / projects - advances which could not be recovered has been written of to the profit and loss account of the assessee for the relevant assessment year and claimed as allowable expenses / business loss in terms of section 37(1) r.w.s. 28 - HELD THAT:- The claim made by the assessee is not towards bad debt u/s 36(1)(vii) of the I.T.Act, but under the provisions of section 28 of the I.T.Act as business or trade loss. Giving advance to the employees as well as vendors were essential and wholly and exclusively linked to the business of the assessee. The loss if any is an incidental business loss. In this context, we rely on the judgment of the Hon’ble Delhi High Court in the case of Triveni Engineering & Industries Limited [2010 (9) TMI 26 - DELHI HIGH COURT] - Further, the advances given to the vendors, which is non-recoverable, is also allowable as business loss. This proposition has also been upheld by the Hon’ble Apex Court in the case of Mysore Sugar Co. Ltd.[1962 (5) TMI 3 - SUPREME COURT]. Since the A.O. has not examined the claim of deduction u/s 37(1) r.w.s. 28 of the I.T.Act, we deem it appropriate to restore the issue to the files of the A.O. for de novo consideration. The assessee is directed to furnish necessary evidences before the A.O. The A.O. is directed to dispose of the matter expeditiously after affording a reasonable opportunity of hearing to the assessee. Disallowance on an adhoc basis 10% of the per diem allowance granted to the employees - company paid aggregate amount as per diem to the employees travelling for business / official purposes outside India to cover actual expenses of meals, travel, laundry and miscellaneous expenses etc - HELD THAT:- The per diem is given to the employees to meet daily expenses for foreign travels. The expenses are reimbursed on the basis of self-declaration of the employees. Since, these amounts are small amounts, reimbursement are given based on the self-declaration given by the employees. Per diem allowance is very minimal amount to meet the daily need and is not disproportionate or unreasonable. In this context, we rely on the judgment of the Hon’ble jurisdictional High Court in the case of CIT v. Symphony Marketing Solutions India (P.) Ltd. [2016 (5) TMI 693 - KARNATAKA HIGH COURT] wherein it was held that "per diem allowance of $50 to $75 paid by the assessee to its employees on official trips to the USA and Europe to be reasonable” We are of the view that adhoc disallowance of 10% of per diem by AO and confirmed by the DRP is uncalled for. Therefore, we delete the disallowance.
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