2017 (5) TMI 477 - ITAT HYDERABAD

TP adjustment related to Interest on Loan - Held that:- There is no need for any adjustment on this account, as assessee has already received 6.37% interest which is more than the Singapore prime lending rate of 5.38%. In view of that, we delete the addition made by the AO/TPO/ DRP.

TP adjustment related to Corporate Guarantee - Held that:- Considering the Co-ordinate Bench decision given in the case of Asian Paints Ltd. Vs. CIT (2014 (5) TMI 880 - ITAT MUMBAI ) we however, direct the AO/TPO to consider only 0.27% as the guarantee commission on the amount involved.

TP adjustment related to Interest on Mobilization advance - Held that:- since assessee-company is not charging any interest from the AEs and non-AEs and also not paying any interest on the amounts received by it from the main contractor, this adjustment is not warranted. As seen from the order of the TPO in the next year AY 2013-14 stated with regard to receivables it is noticed from the information filed that the company is not exporting and supplying any goods or services to AEs. The balances appearing in the Balance Sheet are mobilization advances which are to be adjusted against future supply bills and hence no adverse inference is drawn, thus no adjustment is required on the issue of mobilization advances during the impugned year also.

Disallowance of sub-contract expenditure - Held that:- It is a fact that the assessee-company, had been carrying out contract works on a national level with Turn Over running into crores of rupees. It naturally, requires time for any company working at such a huge platform to retrieve all the information sought for by the department which involves great amount of time, manpower etc. When the information that' is sought for, involves a matter of huge quantum documentation of money, the company is bound to take time in complying with sanctioning or approval process from various internal departments of the company in order to maintain confidentiality norms entered with such third party. Therefore, if compliance could take naturally long time, then the AO is expected to give adequate and proper time to the assessee before he completes his assessment. Hence, the assessment completed by the AO on 31-03-2015, without providing sufficient and reasonable time to the assessee to furnish the required information, is against the principles of natural justice.

We direct the AO to independently examine the claim of sub contract expenditure. In case assessee billed and offered the said contract receipts, AO is directed to accept the sub contract payments, as assessee received the corresponding amounts from main contractor and offered the same for taxation. In case there is any failure or the nexus was not fully established, Assessee agrees that being a subcontractor a small percentage of the expenditure can be estimated for disallowance, following the principles laid down by the Coordinate Benches as relied upon above. In that event, AO is directed to disallow only a certain percentage of the above amount, if necessary. The addition made is accordingly deleted and the issue of examination of impugned sub contract payments is restored to AO to consider afresh as directed.

Disallowance on account of License Membership, Subscriptions & Access Fee - Held that:- Since the AO disallowed specific expenditure, we direct him to provide the quantification of the said expenditure and to what nature of expenditure the supporting bills or vouchers are not provided by assessee. After furnishing the details of the disallowance of ₹ 24,99,777/- to assessee, assessee is directed to furnish the supporting bills or vouchers. AO is accordingly directed to examine this issue again. In case assessee fails to furnish the relevant vouchers/justify the expenditure, disallowance to that expenditure can be made. With these observations, the issue in this ground is set aside to the file of AO to examine the same afresh.

Disallowance on account of Miscellaneous and Entertainment expenses - Held that:- AO quantified the expenditure as un-vouched expenditure at ₹ 27,58,572/-, the quantification of which was not furnished to assessee. However, in this case, he has quantified the amount for disallowance at 20% of the above amount. As seen from the earlier ground, AO disallowed 100% of the amount un-vouchered and in this case, AO disallowed 20% of the amount un-vouched, Thus, there is no consistency in the AO’s approach. We are of the opinion that in case AO furnishes the details of un-vouchered expenditure quantified and assessee could furnish the necessary details as directed in earlier ground, AO is directed to accept the same to the extent assessee could furnish the vouchers. AO is however, directed to restrict the disallowance to 10% of the above expenditure instead of 20% made in the order. With these observations, the issue is again restored to the AO for fresh examination.