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2024 (12) TMI 904 - AT - Income TaxTP Adjustment - international transactions relating to sale of goods - assessee adopted other method as the most appropriate method - goods are sold on Bill To Ship To Model basis i.e. the billing is done to TCIPL and the goods are sold directly to third party i.e. Adama Agan Ltd AAL - HELD THAT - The undisputed fact is that the assessee was selling goods directly to AAL. The credit period was between 150-180 days and the assessee was bearing the cost of bill discounting credit risk arising from non-payment of dues by customers and also market risk where the prices keep on fluctuating in the international market. Post 29th August when the assessee started selling its goods through its AE TCIPL the actual days of credit were between 5-21 days with no credit risk and no market risk as both have been shifted to the AE TCIPL. As per the chart exhibited the assessee has clearly demonstrated the benefit in saving of interest. From the chart it can be seen that the actual difference of credit when the sales are made by AE to AAL is much less than the credit period when sales were made by the assessee directly to AAL. Since all the apprehensions of the DRP has been explained in the chart exhibited the impugned TP adjustment was uncalled for on the facts mentioned hereinabove. Therefore we direct the AO/TPO to delete the impugned TP adjustment. Ground Nos. 1 to 4 are allowed. Disallowance u/s 14A r.w.r. 8D - The undisputed fact is that the assessee has own interest free funds and has earned cash profits during the year under consideration. The interest free own funds are far more in excess of the investments and the cash flow statement already on record suggest that no borrowings have been invested in purchasing of investments. We further find that nowhere the AO has recorded his dis-satisfaction insofar as the suo moto disallowance of Rs. 18.61 Lakhs is concerned. AO has simply stated that some expenses need to be disallowed for earning exempt income without pointing out why the suo moto disallowance made by the assessee is not sufficient for earning the exempt income. Thus no merit in the impugned disallowance made u/s 14A. Decided in favour of assessee. Denial of deduction u/s 35(2)(ab) - AO noticed that the assessee has not filed certificate from DSIR in Form 3CL for claiming the above expenditure - As explained that under Rule 6 of the Income Tax Rules 1962 the Department of Scientific Industrial Research (DSIR) is required to submit its report to the Income Tax Authorities in Form 3CL and there is no requirement of the assessee to file the said Form but From No. 3CL is required to be submitted by the DSIR therefore failure to file the same cannot be attributed to the assessee. As relying on decision of Astec Lifesciences Ltd. 2023 (8) TMI 1079 - BOMBAY HIGH COURT allegation of failure to file the said Form cannot be attributed to petitioner. Thus taking a leaf out of the decision of Sun Pharmaceuticals Industries Ltd. 2017 (8) TMI 933 - GUJARAT HIGH COURT in principle we accept the contention that communication is between the prescribed authority and the Department and for the default in same the assessee cannot be made to suffer. However it would be open for the AO to verify the actual expenditure incurred by the assessee. With these directions Ground Nos. 11 to 15 are allowed.
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