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2022 (11) TMI 681 - AT - Income TaxTP adjustment - reimbursement of expenses on the ground that the same pertained to Assessment Year 2007-08 (and not the relevant Assessment Year 2008-09), a period prior to the execution of the Inter-Corporate Agreement - HELD THAT:- As per Clause 5 of Schedule-17 of Notes to Accounts forming part of the financial statements for the Financial Year 2007-08 relevant to Assessment Year 2008-09 dealing with related parties disclosures, the reimbursement made to the related parties for the Assessment Year 2008-09 was INR 3,98,09,317/- as opposed to INR 7,87,13,678/- for the Assessment Year 2007-08. Thus, it clear that the aforesaid amount of INR 7,87,13,678/- was not debited to the Profit & Loss Account for the Assessment Year 2008-09. Since the deduction for the aforesaid amount was not claimed by the Appellant while computing taxable income for the Assessment Year 2008-09, the question of making the disallowance or addition of the same during the relevant previous year does not arise. Accordingly, Ground No. 2.1 raised by the Appellant is allowed and addition is deleted. TP adjustment - upward adjustment of ALP of transaction of purchase of asset - HELD THAT:- In the case before us, the TPO has determined ALP by computing WDV of the Asset without making any effort to identify a comparable transaction or the price paid by third party. Further, while doing so the TPO has taken depreciation rate of 60% as per the provisions of the Act without considering any other factor(s). Therefore, we delete the transfer pricing addition - Ground No. 2.2 raised by the Appellant is allowed. Addition of reimbursement of out of pocket expenses by the Appellant to its AE - HELD THAT:- TPO/AO has not pointed out any defect/discrepancy in the bills/supporting documents furnished by the Appellant which constitute 78% of the out of pocket expenses reimbursed by the Appellant to its AE. The Appellant has not furnished bills/supporting documents which constitute balance 22% out of pocket expenses reimbursed and only 3.5% of the total expenses reimbursed by the Appellant to its AEs for the relevant assessment year. In view of the aforesaid facts, we are inclined to accept the submission advanced by the Ld. Authorised Representative for the Appellant that the Appellant has substantially complied with the directions given by the Assessing Officer and therefore, in our view, the TPO/AO was not justified in making additions - Further, in our view, the TPO has also failed to determine the ALP of the transaction and has, in effect, made disallowance holding that the Appellant had failed to substantiate the claim. Accordingly, in view of the aforesaid, we delete the addition - Ground No. 2.3 raised by the Appellant is allowed. Computation of loss - Appellant submitted that while computing the total loss the Assessing Officer has committed computation error - HELD THAT:- Assessing Officer has incorrectly added the depreciation amount of INR 48,04,318/- to arrive at incorrect figure of loss of INR 10,68,91,995/- instead of correct figure of INR 11,65,00,631/-. In view of the aforesaid, the Assessing Officer is directed to increase the amount of loss by the amount of by the depreciation amount of INR 48,04,318/-. Ground No. 5 raised by the Appellant is allowed. Disallowance after carrying out verification of total expenses incurred by the Appellant during the relevant previous year but prior to execution of the Inter-Corporate Agreement - HELD THAT:- Having perused the material on record including invoices, we concur with the Assessing Officer to the extent of disallowance being payments made by the Appellant for arrival/departure tax briefing for employees and tax returns for employees only. In our view, the aforesaid amount was not incurred wholly and exclusively for the benefit of the Appellant and was for the personal benefit of employees. The aforesaid amount has also not been taxed as prerequisite in the hands of the employees. Accordingly, disallowance is confirmed while balance disallowance is deleted. In view of the aforesaid, Ground No. 7 is partly allowed.
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