2023 (4) TMI 75 - ITAT BANGALORE

TP Adjustment - comparable selection - Turnover filter - HELD THAT:- Tribunal consistently holding that turnover filter is very important and the companies having turnover of Rs.1 crore to Rs.20 crores have to be taken as a particular range and the assessee is in that range having turnover of Rs.29.91 crores. The companies which also have turnover of Rs.1 crore to Rs.200 crores only should be taken into consideration for the purpose of making TP study. This view of ours was fortified by the order of the coordinate bench of the Bangalore Tribunal in the case of Autodesk India Pvt. Ltd. [2018 (7) TMI 1862 - ITAT BANGALORE].

Thus we direct the AO to exclude the 6 companies from the list of comparables whose turnover is more than Rs.200 crores in the assessment year under consideration since the turnover of the assessee company in Rs.9,91 crores in AY 2006-07.

Comparables on the basis of RPT filter - Where the RPT exceeds 15%, such companies should not be taken as comparable companies. See FCG Software Services India Ltd. [2016 (1) TMI 1359 - ITAT BANGALORE]

Functional dissimilarity - Companies functionally dissimilar with that of assessee need to be deselected.

Provision for obsolescence of inventory - submission of the assessee in this regard is that there is no distinction between provision and write off when it comes to treatment in the books of accounts and the issue of obsolescence of stock - HELD THAT:- The disallowance has been deleted by the Tribunal in Assessee's own case for AY 2004-05. The Revenue appeal before High Court of Karnataka [2016 (6) TMI 1463 - KARNATAKA HIGH COURT] in on this issue is answered in favour of the assessee - we are inclined to decide the above issue in favour of assessee.

Loss on exchange fluctuation - HELD THAT:- Currency cannot be treated as stock or shares because inherently they have different characteristic. In the case of the assessees, the foreign exchange exposure for the "relevant period" specified by "R.B.I" regulations is quiet substantial in order to justify the forex derivative transactions made by the assessee through Government recognized channel, otherwise the RBI would not have entertained these transactions and would have restrained the banks from entering into such transaction with its clients. Decided in favour of assessee.

Provision for sales tax and customs duty - HELD THAT:- We set aside the issue to the file of AO to pass fresh order in conformity with the decision of coordinate Bench of Delhi in case of NHPC Ltd [2014 (12) TMI 214 - ITAT DELHI].

Disallowance of Legal and Professional fees - AO has made the disallowance for documentary evidence - HELD THAT:- We are of the opinion that assessee has to establish the genuineness of the expenditure by filing the requisite details. In the present case, assessee produced the recipient’s details along with details of TDS and other evidence supporting the claim. Had the AO have any doubt, he should have made further enquiry by summoning the respective party, which he failed to do so. Hence, in our opinion, the expenditure cannot be disallowed only on surmises and conjectures. Accordingly, we allow the ground taken by the assessee.

Provision for expenses (disallowed as Contingent Liability) - AO has made the disallowance under the premise that assessee was not able to furnish the kind of litigation expenses and nature of litigation - HELD THAT:- We are of the opinion that assessee has to establish the genuineness of the expenditure/provisions by filing the requisite details and details of TDS. If the assessee furnishes these details, the claim of assessee to be allowed. In the present case, it is not the case of revenue that this expenditure is bogus. The assessee has furnished the details called for by AO u/s 142(1) of the Act. There is no failure on the part of the assessee to substantiate the claim, we allow the ground taken by the assessee.

Dealer Commission - Addition made for want of documentary evidence - HELD THAT:- In this case assessee has filed all the details called for by AO and Ld. D.R. is not able to point out the lapse on the part of the assessee, hence, this ground of appeal is allowed by placing reliance on the earlier order of the Tribunal for the assessment year 2005-06 [2017 (4) TMI 1527 - ITAT BANGALORE] as noted that in the case of receipt of this commission by those parties, the department has accepted it. However, in the hands of assessee it was treated as not incurred by the assessee, which is incorrect. Books of accounts of the assessee is not rejected by challenging the entries in the books of accounts. On this point also, we are of the opinion that the claim of assessee is to be allowed as genuine - thus allow the ground taken by the assessee.

Miscellaneous expenses - AO has made the disallowance for want of documentary evidence - HELD THAT:- We are of the opinion that assessee has to establish the genuineness of the expenditure by filing the requisite details. In the present case, assessee produced the recipient’s details along with details of TDS. Had the AO have any doubt, he should have made further enquiry by summoning the respective party, which he failed to do so. Hence, in our opinion, the expenditure cannot be disallowed only on surmises and conjectures. Accordingly, we allow the ground taken by the assessee.