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2020 (2) TMI 1176 - AT - Income TaxAddition to the opening and closing stock of inventories - HELD THAT:- Merely relying upon the orders passed by his predecessor–in–office in assessee’s own case for the assessment year 1996–97 onwards, learned Commissioner (Appeals) has upheld the addition made by the Assessing Officer. Notably, while deciding assessee’s appeals for the assessment years 1996–97, 1997–98, 1998–99, 2000–01 and 2001–02, the Tribunal in Hon'ble Supreme Court in CIT v/s Woodward Governor India Pvt. Ltd., [2009 (4) TMI 4 - SUPREME COURT] held that the value of closing stock is not to include the liability on account of exchange fluctuation. Thus, ultimately, the Tribunal deleted the addition made to the opening and closing stock. Following the aforesaid decision, the Tribunal again decided the issue in favour of the assessee in the assessment year 2003–04, in an appeal being by deleting the addition made on account of adjustment made to the closing stock. The same view was reiterated by the Tribunal over and again while deciding assessee’s appeal in the assessment year 2004–05. Thus, following the consistent view of the Tribunal in the preceding assessment years, as referred to above, the addition made by the Assessing Officer on account of adjustment to the opening and closing stock has to be deleted. Disallowance u/s 14A r/w rule 8D - HELD THAT:- Now it is fairly well settled that rule 8D is applicable from the assessment year 2008–09. Therefore, the Assessing Officer has completely gone wrong in computing the disallowance under section 14A of the Act by applying rule 8D. Considering the relevant facts, we are of the view that disallowance under section 14A of the Act in the impugned assessment year should be restricted to 5% of the dividend income earned during the year. These grounds are partly allowed. Addition on account of reimbursement of cost incurred on behalf of the Associated Enterprises (AEs) - HELD THAT:- Undisputedly, both the Assessing Officer and learned Commissioner (Appeals) have recorded a concurrent finding of the fact that the assessee has failed to furnish any supporting evidence to demonstrate that the reimbursement made by the AEs was at arm's length price. Therefore, the Transfer Pricing Officer has added a mark–up of 12.5% on estimate basis to the cost incurred for determining the arm's length price of the service provided. Before us, the assessee has furnished certain additional evidences by way of Debit Notes to demonstrate that the reimbursement was on the basis of actual cost incurred without any mark–up. In our considered opinion, the additional evidences furnished by the assessee will have a crucial bearing in deciding the arm's length nature of transaction with the AEs. We are inclined to admit the additional evidences furnished by the assessee. However, since these evidences were not furnished either before the Assessing Officer or before learned Commissioner (Appeals), to provide a fair opportunity to the Revenue to evaluate the evidences and take a decision on the matter, we are inclined to restore the issue to the Assessing Officer for fresh adjudication after due opportunity of being heard to the assessee. Adjustment to the arm's length price of the international transaction with the AE has to be made qua the international transaction and cannot be made at the entity level - Admission of additional ground - HELD THAT:- It is the contention of the learned Authorised Representative that if the arm's length price is computed purely on the basis of transaction with the AE, the margin will fall within ±5% of the margin of the comparables requiring no further adjustment. Therefore, the issues raised regarding acceptability or otherwise of certain comparables may not have to be decided in the impugned assessment year. Keeping in view the aforesaid submissions of the assessee, we restore the issue back to the file of the Assessing Officer for computing the margin of the assessee by taking into consideration only the transaction with the AE and not at entity level. In case, it is found that assessee’s margin falls within ±5% of the margin of the rest of the selected comparables, there may not be any need for adjudicating the dispute relating to the comparables in the impugned assessment year. However, the issues relating to the comparables are kept open for adjudication if they arise in any other assessment year in future.Additional ground is allowed for statistical purposes
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