2024 (3) TMI 1115 - ITAT DELHI

TP Adjustment - adjustment to the value of international transaction as against adjustment made by the TPO with reference to entire turnover of the assessee - HELD THAT:- TP adjustment cannot be made with reference to entire turnover of the assessee and ought to be restricted to the value of international transactions. We draw support from the decision of Hindustan Unilever [2018 (10) TMI 1611 - SC ORDER] Keihin Panalfa Ltd [2016 (5) TMI 203 - DELHI HIGH COURT] and Tara Jewel Exports [P] Ltd [2015 (12) TMI 1130 - BOMBAY HIGH COURT].

Respectfully following [supra], TP adjustment made by the TPO and sustained by the ld. CIT(A) cannot be sustained and is liable to be deleted as difference between operating profit margin of the assessee at 3.85% and that of comparable companies at 6.19% is 2.34%, no TP adjustment is warranted in terms of Proviso 92C(2) and if we look at the list of comparables exhibited elsewhere, we find that except for Hindustan Motors Limited, all other companies selected by the TPO are engaged in manufacture and sale of commercial vehicles and are therefore, functionally not comparable with the assessee, a company engaged in the manufacture and sale of passenger vehicles. - Decided against revenue.

Deduction u/s 43B - disallowance of amount of Excise Duty actually paid on purchase inputs and included in RG 23A Part II - HELD THAT:- A similar issue was considered by this Tribunal in [2018 (10) TMI 1398 - ITAT DELHI] and Hon'ble High Court of Delhi in assessee’s own case [2017 (12) TMI 590 - DELHI HIGH COURT]. The Assessing Officer is directed to decide the issue as per the directions given in earlier A.Ys 2009-10 and 20101-11 mentioned hereinabove to verify the claim and if found proper be allowed for deduction for amount forming part of RG 23A balance to the extent it has been directly paid to custom authorities. Ground Nos. 2.3 and 2.4 are allowed for statistical purposes.

Excess consumption of raw materials and components to be deleted placing reliance on two factors, namely, that the net difference of stock is negligible in tune with the observations of the Hon’ble Apex Court in M/s Maruti Suzuki India Ltd [2015 (8) TMI 493 - SUPREME COURT] and that the Tribunal has taken similar view in the assessee’s own case in the earlier assessment years including the immediately preceding year.

Disallowance u/s 14A - excess of own funds - HELD THAT:- As the assessee had surplus funds and that no disallowance of interest was called for u/s 14A of the Act.

Disallowance u/s 35DDA - HELD THAT:- Similar as per assessee’s own case [2017 (11) TMI 1632 - ITAT DELHI] A.Y 2008-09 we follow the decisions above and direct the Assessing Officer to allow the deduction under section 35DDA being 1 /5th of the total expenditure incurred by the appellant company, in respect of payment made to its employees under the voluntary retirement scheme.

TDS u/s 195 - Disallowance of payments made outside India u/s 40(a)(ia) - HELD THAT:- The co-ordinate bench in A.Y 2001-02 [2009 (5) TMI 1013 - ITAT DELHI] commission has been paid to the agents for the sale of the vehicles and re- imbursement of advertisement expenses incurred outside India. Obviously, these expenditures incurred outside India does not make them taxable in India under the Act and the non-resident itself is not taxable in India. Thus provisions of Section 195 will not be attracted in the case of these payments and the CIT (A) was right in deleting the disallowances made.

Nature of receipt - Sales Tax Subsidy - revenue or capital receipt - HELD THAT:- Hon'ble High Court of Delhi in [2017 (12) TMI 474 - DELHI HIGH COURT] answered the said issue in favour of the Assessee and against the Revenue to be treated as revenue receipt.

Not allowing set off of brought forward depreciation - Scope of amendment brought in provisions of section 32(2) of the Act by the Finance Act, 2001 w.e.f 01.04.2002 wherein it has been provided that unabsorbed depreciation could be used to set off against any head of income except salary - HELD THAT:- The claim was denied by the Assessing Officer placing reliance on pre-amended provision of section 32 of the Act.We are of the considered view that the Assessing Officer should consider the set off as per the amended provisions of the Act. We order accordingly and direct the Assessing Officer to consider the same as per relevant provisions of law. This ground is allowed for statistical purposes.

Excise Duty paid under protest - HELD THAT:- As decided in own case AY 2006-07 while dealing with 'Excise duty paid under protest' by holding that first the Profit and loss account be recast as per 'Inclusive method' in terms of section 145A and then some adjustments as stated above be separately made. Such directions are fully applicable pro tanto to the customs duty paid under protest. The AO is directed to follow the same - While following the same for AY 2007-08, Tribunal set aside the matter to the file of the Assessing Officer to decide it afresh as decided above by the ITAT after affording opportunity of being heard to the assessee. Thus this Ground is allowed for statistical purposes.

Disallowing liabilities on account of increased prices - HELD THAT:- There is no dispute that the same method of accounting is regularly and consistently followed by the assessee as such rule of consistency is applicable as per which under the similar facts and circumstances, department ought to follow same approach on an issue in other assessment years. We, therefore, respectfully following the reasoning adopted by the coordinate Bench of this ITAT for the AY 2007-08 [2016 (5) TMI 1469 - ITAT DELHI] set aside the matter to the file of the AO with direction to decide the issue afresh after affording opportunity of being heard to the assessee as per the first appellate order on the issue in the assessment year 2003-04.

Under valuation of stock - HELD THAT:- CIT(A) was convinced that the assessee has maintained complete records, matching of returned vehicles with sales returned report, finished goods stock report and finished goods stock valuation report. CIT(A) gave a factual finding that the vehicles which have been returned during the year and have remained unsold have been included in the closing stock of finished goods and have been accounted in the books of account.

No factual error has been pointed out in the findings of the ld. CIT(A). We, therefore, do not find any reason to interfere with the findings of the ld. CIT(A). This ground is dismissed.

Disallowance of long term capital loss as speculative loss - HELD THAT:- The co-ordinate bench in A.Y 2001-02 [2009 (5) TMI 1013 - ITAT DELHI] held that redemption of the preference shares cannot be held to be the sale of the shares and as there is no sale of the shares, there is no question of this being treated a speculative loss on the sale. It is further noticed that the revenue has not raised any specific ground that such shares were not held as stock-intrade and it is noticed that the shares are held by the assessee as investment. In the circumstances, we are of the view that this loss on the redemption of the preference shares cannot be treated as speculative loss.

Expenses incurred on club membership - HELD THAT:- As decided in own case A.Y 2009-10, [2018 (10) TMI 1398 - ITAT DELHI] such expenditure is allowed as business expenditure.