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2019 (11) TMI 705 - ITAT MUMBAITransfer Pricing Adjustment - ALP adjustment - assessee has benchmarked the transaction on TNMM basis - HELD THAT:- As decided in MERCK LIMITED VERSUS DY. COMMISSIONER OF INCOME TAX, RANGE 6 (3) , MUMBAI AND VICA-VERSA [2016 (3) TMI 1105 - ITAT MUMBAI] We do not think benefit test has too much relevance in the arm’s length price ascertainment. When evaluating the ALP of a service, it is wholly irrelevant as to whether the assessee benefits from it or not; the real question which is to be determined in such cases is whether the price of this service is what an independent enterprise would have paid for the same. In case TPO can demonstrate that the consideration for similar services, under the CUP method, is NIL, he can very well do so. That’s not, however, his case. He only states that these services are not worth the amount paid by the assessee. Such band statements and sweeping generalizations cannot help the case of the revenue authorities. The assessee has benchmarked the transaction on TNMM basis, and unless the revenue authorities can demonstrate that some other method of ascertaining the arm’s length price on the facts of this case will be more appropriate a method of ascertaining the arm’s length price, the TNMM cannot be discarded. In the present case, though a finding is given to the effect that no services are rendered, in the light of the contradictions in this finding and the observations above, it is clear that in effect commercial expediency of this payment is questioned. That exercise, in our considered view- particularly in the light of Hon’ble Delhi High Court’s judgment in the case of EKL Appliances [2012 (4) TMI 346 - DELHI HIGH COURT] , cannot be conducted in the course of ascertaining the arm’s length price. In view of the above discussions, as also bearing in mind entirety of the circumstance, it is clear that the impugned ALP adjustment is contrary to the scheme of the Act. The authorities below have been swayed by the considerations which were not germane to the issue. We, therefore, uphold the grievances of the assessee and direct the Assessing Officer to delete the ALP adjustments in respect of the payment of fees for technical services. The assessee gets the relief accordingly. Disallowance u/s 14A r.w.r. 8D - assessee had offered suo-moto disallowance - After adjusting the suo-moto disallowance of ₹ 1.13 Lacs as made by the assessee, Ld. AO proposed additional disallowance - HELD THAT:- Additional disallowance as made by Ld. AO would not be sustainable in view of the fact that the assessee had already offered suo-moto disallowance in its computation of income which far exceed the exempt income earned by the assessee during the year under consideration. Therefore, by deleting the impugned addition of ₹ 2,404/-, we allow this ground of appeal. Depreciation on Fictitious assets - HELD THAT:- Upon perusal of chart, we find that this issue would go back to the file of Ld.AO for re-adjudication de-novo on similar lines as directed by coordinate bench of this Tribunal in assessee’s own case for AYs 2007-08 & 2008-09, ITA No. 3943-44/Mum/2013 order dated 25/01/2017. The Ld. AO is directed to re-adjudicate the same in the light of stand taken in AYs 2007-08 & 2008-09 pursuant to the aforesaid directions of the Tribunal. Disallowance u/s 145A - HELD THAT:- Upon perusal of chart, we find that this issue would also go back to the file of Ld.AO for re-adjudication de-novo on similar lines as directed by co-ordinate bench of this Tribunal in assessee’s own case for AYs 2007- 08 & 2008-09. AO is directed to re-adjudicate the same in the light of stand taken in AYs 2007-08 & 2008-09 pursuant to the aforesaid directions of the Tribunal. The ground stand allowed for statistical purposes. Disallowance u/s 43B - provision for leave encashment - AR had drawn attention to para 12.2 of the Ld. DRP’s order to submit that there was actually a write-back of ₹ 7.55 Lacs during the year and therefore, no disallowance would be warranted - HELD THAT:- Keeping in view the submissions made, we direct Ld. AO to re-adjudicate the same de-novo in the light of submissions made by Ld. AR. The ground stand allowed for statistical purposes. Interest u/s 234 and initiation of penalty - HELD THAT:- These grounds being consequential, would not require any specific adjudication. The Ld. AO is directed to compute interest in accordance with law.
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