TMI Blog2012 (3) TMI 132X X X X Extracts X X X X X X X X Extracts X X X X ..... er: The learned Commissioner of Income Tax (Appeals) [CIT (A)] had erroneously mentioned the assessed loss as Rs.l62,190,210 whereas the loss as per the assessment order under section 143(3) of the Income-tax Act, 1961 (the Act) was Rs.166,540,744. However, the learned Assessing Officer (AO) while passing the order giving effect to the CIT(A)'s order dated October 21, 2010 has considered the correct amount of assessed loss. Therefore, the above ground is not pressed. 2. Transfer Pricing Adjustment: The appellant wishes to state that with respect to the international transaction pertaining to the provision of technical assistance and engineering fee to its AEs, there is an existence of similar arrangement between Toyota Motor Corporation (TMC) and Kirloskar Systems Limited (KSL) entered on April 01, 1999. The same can be compared with the international transaction entered by the appellant with TMC. Given the similar nature of technical assistance between TMC and KSL, this transaction can be used as an internal CUP for benchmarking the international transaction between TMC and the appellant for the use of latter's technical assistance as the per diem rates charged a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. Assets costing less than Rs. 5,000 amounting to Rs. 2,847,328: The learned AO in the order giving effect to the CIT(A) s order has after verification of facts allowed the above amount of Rs.2,847,328, being the amount doubly disallowed towards the fixed assets costing less than Rs. 5,000 fully depreciated in the books of accounts. Therefore, the above ground is not pressed. 4. Prior period expenditure - Information Technology Support System implementation charges debited to profit and loss account: The learned CIT(A) has erred in not adjudicating the double disallowance of the prior period expenditure while upholding the disallowance of system implementation charges debited to the Profit and Loss account. The learned CIT(A) ought to have appreciated that the system implementation charges were incurred for the purpose of administrative functioning of the business and did not bring into existence any asset or advantage of enduring nature. The learned CITCA) has further not taken cognizance of the appellant's alternative submission that notwithstanding that the said expenditure is revenue in nature, should the said expenditure be disallowed as being capital in n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al assistance fees by holding that pro-rata break up of arm length price by the Transfer Pricing Officer into capital and revenue expenditure is unwarranted without appreciating the fact that the expenses incurred were in relation to EOU and that the EOU had not commenced the operation during the year. 3. The learned CIT(Appeals) erred in deleting the addition made on account of traveling and conveyance expenses forming part of technical assistance fee amounting to Rs. 1,14,96,326, without appreciating the fact that the expenses incurred were in relation to EOU and that the EOU had not commenced the operation during the year. 4. For these and such other grounds that may be urged at the time of hearing of the appeal, it is prayed that the order of the CIT(A) be set aside and that of the AO restored. 5. The appellant craves to leave/to add/alter/amend and/or delete any of the grounds on or before the hearing of the appeal. 4. From the above grounds it is gathered that the main grievance of both the parties relates to transfer pricing adjustments. 5. The facts in brief are that the assessee filed its return of income on 29.10.2004 declaring a loss of Rs.43,27,88,670, which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant had justified the transaction in the Transfer Pricing Documentation Report using the Transactional Net Margin Method (TNMM) in accordance with Rule l0A to 10D of the Income Tax Rules, 1962. The method used was further justified during the course of assessment and appeal proceedings. During the course of fact finding for the purpose of this appeal, the appellant noted the existence of similar transactions between TMC and Kirloskar Systems Limited (KSL) entered into on April 01, 1999. Since the transaction between TMC and KSL can be considered as comparable with the Appellant's transaction, it is imperative that the same be brought to the attention of the Honorable Tribunal, the Honorable Tribunal being the last fact finding authority. In this regard, the appellant wishes to place before the Honorable Tribunal the following documents: 1. Technical Assistance Agreement between TMC/AISIN TAKAOKA CO.,LTD. (Licensor) and KSL(Licensee) dated April 01, 1999. 2. Letter from TMC dated July 27, 2001 for amending Annexures F-2-1, G-2-2 (training fee paid to TMC) and H-2-1 (dispatching instructor of TMC) to the agreement mentioned in 1 above. 3. Assignment Agreement for Technical As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich it had received additional share capital infusion from TMC and Toyoto Industries Corporation (TICO). The said additional share capital was deposited in the Bank of Tokyo-Mitsubishi Ltd. (BOTM), Chennai and Nagoya and the assessee had earned interest income as well as exchange gain from the money deposited, so it is having critical bearing to demonstrate that there was a direct nexus between the interest income and exchange gain earned on the deployment of funds in the EOU. 12. The ld. counsel for the assessee requested that the aforesaid additional evidences may be admitted under Rule 29 of the Income-tax Appellate Rules, 1963 because these new evidences are germane for the purpose of determining the tax liability. 13. The ld. DR opposed the admission of additional evidences and submitted that the assessee ought to have filed those documents either before the AO or the ld. CIT(A) and since those documents were not furnished earlier, they shall not be admitted. Alternatively, it was stated that if these are to be admitted, then an opportunity needs to be given to the Assessing Officer. 14. We have considered the submissions of both the parties and carefully gone through th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be given for rebuttal to another party. 17. As regards to the admission of the additional evidence, the Hon ble Madras High Court in the case of Anaikar Trade and Estates (P) Ltd (No.2) vs. CIT, 186 ITR 313 has held as under: The Tribunal has discretion to allow the production of additional evidence under Rule 29 of the ITAT Rules, 1963 if the Tribunal requires any document to be produced or affidavit to be filed to enable it to pass orders or for any other substantial cause, it may allow the document to be produced or the affidavits to be filed. Even if there was a failure to produce the documents before the ITO and the A.A.C, the Tribunal has the jurisdiction in the interests of justice to allow the production of such vital documents. 18. In the present case also, the documents furnished by the assessee are vital which go to the root of the present controversy, so these are to be admitted in the interest of natural justice but these documents are required to be examined and considered at the level of the AO. We, therefore, set aside the impugned order and remand the present issue back to the file of the AO to be decided afresh in accordance with law after providing du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... court finds itself unable to pronounce judgment owing to a lacuna or defect in the evidence as it stands. In the context, it was further clarified that the ability to pronounce a judgment is to be understood as the ability to pronounce a judgment satisfactory to the IT mind of court delivering it. This position was reiterated again by the Hon ble Supreme Court in the case of Syed Abdul Khader Vs. Rami Reddy AIR, 1979 S.C. 553 cited by the Ld. Counsel for the assessee. In the case of Municipal Corp. of Greater Bombay Vs. Lala Panchan AIR 1965 S.C. 1008 cited by the Ld. Counsel for the assessee, it was observed by the Hon ble Supreme Court that the power to admit additional evidence does not entitle the appellate court to let in fresh evidence only for the purpose of pronouncing judgment in a particular way and it is only for removing a lacuna in the evidence that the appellate court is empowered to admit additional evidence. In the case of Arjan Singh V. Kartar Singh AIR 1951 S.C. 193, it was held that the discretion given to the appellate court by Order 41, Rule 27 of CPC to receive and admit additional evidence is not an arbitrary one but is a judicial one circumscribed by the lim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vital and important does not provide a substantial cause to allow its admission at the appellate stage. The admissibility of additional evidence depends on whether or not the substantial cause and not to enable the assessee or the Department to tender fresh evidence to support a new point or to make out a new case. In the case of N. Kamalam (supra) it was held that the provisions of Rule 27 of Order 41 of CPC, 1908 are not designed to help parties to patch up weak points and make up for omissions earlier made. 33. It is also well settled that once additional evidence is taken into consideration, it has to be read as part or the record and before drawing any inference on the basis of contents of that document admitted as additional evidence, an opportunity has to be given to the other side to explain or rebut the same. As held by Hon ble Madras High Court in the case of RSS Shanmugam Pillai Sons (supra), if the Tribunal finds that the documents filed are quite relevant and for the purpose of deciding the issue before it, it would be well within its powers to admit the evidence, consider the same on merits or remit the matter to the lower authorities for examining the same. in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ell as elaborate explanation offered by him assessee to rebut the same is voluminous running into several pages, which requires in-depth examination, we find that it would be fair and proper and in the interest of justice to restore the issue relating to PE to the file of the Assessing Officer for deciding the same afresh after examining the additional evidence as well as explanation offered by the assessee while rebutting the same. The assessee shall also be at liberty to adduce further evidence to support its case before the Assessing Officer who shall take into consideration the same in accordance with law. Since the other issues raised in this appeal related to the main issue of PE, we deem it appropriate to restore these issues also to the file of the Assessing Officer for fresh decision along with the main issue. In so far as the issue relating to the levy of interest u/s 234B is concerned, the Ld. Counsel for the assessee has contended before us that the same is squarely covered in favour of the assessee by the decision of Delhi Special bench of ITAT in the case of Motorola inc. Vs. Dy. CIT (2005) 95 ITD 269. We, therefore, direct the Assessing Officer to decide the issue re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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