Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2021 (8) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2021 (8) TMI 1362 - AT - Income TaxTP Adjustment - Comparable selection - Computation of margin of the comparable companies adopted by the TPO - HELD THAT:- On perusal of the financial, it is clear that comparable company, namely, Priya International Limited is having three segments for the relevant assessment year also. Out of the total revenue for the relevant assessment year, the sale of software/electronics is only to the tune - AO/TPO is directed to adopt the margin of Priya International Limited with regard to the segment of electronics alone. TP adjustment by directing the TPO to re-compute the arm's length price in the case of the Appellant at entity level - HELD THAT:- Bangalore Bench of the Tribunal in the case of IKA India Private Limited [2018 (10) TMI 49 - ITAT BANGALORE] had held that as per section 92 the transfer pricing adjustment has to be made with reference to the international transactions the assessee had undertaken with its AEs. In view of the clear directions of the Co-ordinate Bench order of the Tribunal in the case of IKA India Private Limited v. DCIT (supra) that the transfer pricing adjustment should be restricted to AEs related transaction, we direct the AO/TPO to re-compute the arm's length price of the assessee in respect of the international transaction it had entered with its AEs. Disallowance of interest expenses - allowable business expenditure - AO erred in disallowing the interest paid on account of statutory payments - CIT(A) erred in not deleting the said disallowance - HELD THAT:- The assessee had claimed as deduction in the Profit and Loss Account, interest expenditure on account of delayed payment of statutory dues - Whether the statutory payment are routed through the Profit and Loss account or not is immaterial for deciding the issue whether interest paid for the belated payment of statutory dues is compensatory or not (if the same is compensatory, the interest expenditure is allowable deduction u/s. 37 of the I.T. Act). Mumbai Bench of the Tribunal in the case of Chander K. Raichandani [2013 (2) TMI 713 - ITAT MUMBAI] had clearly held that the simple interest paid for belated payment of statutory dues is nothing but compensatory and allowable deduction u/s. 37 - we hold that the sum paid as interest for belated payment of statutory dues is an allowable deduction. Working capital adjustment - HELD THAT:- In terms of Rule 10B(1)(e)(iii) of the I.T. Rules, the net margin arising in comparable uncontrolled transactions should be taken into account the differences, if any, between the international transaction and the comparable uncontrolled transactions which could materially affect the amount of net profit margin in the open market. It is not the case of the TPO/DRP that differences in working capital requirements of the international transactions and the uncontrolled comparable transactions is not a difference which will materially affect the amount of net profit margin in the open market. If for reasons given by the Revenue Authorities working capital adjustment cannot be allowed to the profit margin, then the comparable uncontrolled transactions chosen for the purpose of comparison will have to be treated as not comparable in terms of Rule 10B(3) of the I.T. Rules. Assessee in the present case has given all the details required for working capital adjustment. Therefore, the Revenue Authorities were not justified in denying the claim of the assessee for deduction. Hence, the AO/TPO is directed to allow the working capital adjustment in the light of the material placed on record, after affording a reasonable opportunity of hearing to the assessee. It is ordered accordingly. Corporate Guarantee Commission - HELD THAT:- The corporate guarantee is an international transaction and there is no doubt that the arm's length price has to be computed with reference to the said transaction. However, in the instant case, it is the case of the assessee that amount of the subsidiary is lying with the assessee on account of advance for which no interest was being charged by the subsidiary. This factual aspect has not been examined neither by the AO/TPO nor by the DRP - We are of the view that the matter needs to be examined afresh by the AO/TPO and we remit the issue to the files of the AO/TPO. It is ordered accordingly.
|