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TMI Blog2014 (2) TMI 380X X X X Extracts X X X X X X X X Extracts X X X X ..... nting to Rs. 734,896 (iv) Payment for specific services for Jaldhaka project, amounting to Rs. 2,379,000 (v) Payment towards technical services received, amounting to Rs. 2,870,036 2. The learned AO erred in making an addition of Rs. 7,000,000 on account of disallowance of interest under section 14A of the Act. The deduction has been made by the AO to account for the cost of funds utilized in making an investment in shares by the assessee and ignoring the following contentions of the assessee: (i) No interest bearing funds were used for making the investment; and (ii) Investment did not earn any dividend income or any other tax free income. 3. Brief facts are: The assessee is engaged in the business of manufacturing and sale of engineering goods like hydro turbine, governors etc. for undertaking execution of turnkey engineering procurement constructions contracts involving installations, commissioning services, rehabilitation and civil works of Hydro Power pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aining costs. 4.1 Ld. Counsel contends that since DRP did not give any reasons or findings in not excluding the above amounts, additional evidence is filed before us vide application dated 7-5-2013 to substantiate the nature of above transactions to be excluded from the ambit of technical services, since this evidence was never asked and aditions have been made in summary manner, the admission of documents become important for adjudication of tax liability. Besides, assessee was prevented by a sufficient cause in filing the same. 4.2 It is pleaded that: (a) no actual services have been received. (b) Assessee did not need the services and has not received any tangible benefits from the services. (c) The services received are in the nature of shareholders services. 4.3 It is further pleaded by ld. Counsel that: (i) To substantiate the receipt of services, copies of AE invoices, technical reports, calculation etc. received in relation to specific projects are available. (ii) The services received can be directly correlated to the various projects execute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iate method. (v) No comparable uncontrolled transaction has been provided by the TPO for application of CUP method. 4.7 Assessee in support of his contentions relies on ITAT Mumbai order in the case of CA Computer Associates (P.) Ltd. v. Dy. CIT [2010] 37 SOT 306 and ITAT Delhi order in the case of AWB India (P.) Ltd. v. Addl. CIT [IT Appeal No. 4454 (Delhi) of 2011]. 4.8 It is further pleaded that the TPO erred in questioning the commercial rationale of the business expenditure incurred by the assessee which is not tenable as TPO cannot question the wisdom of a commercial decision or a transaction. The power of the TPO is restricted to determine the appropriate ALP only. Reliance is placed on: - Abhishek Auto (ITAT Delhi) - LG Polymers (ITAT Vishakhapatnam) - EKL Appliances (Delhi High Court) - Dresser Ran (ITAT Mumbai) - McCann Erickson (Delhi ITAT) - Ericsson India Pvt. Ltd. (ITAT Delhi) - AWB India Pvt. Ltd. (ITAT Delhi). 4.9 The other major ground of the assessee pertai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... centage of sales. The profits of loss made by the assessee is of no consequence. Besides that the assessee is also called upon to make a payment for supposed technical assistance. There is obviously no benefit being received if the assessee is left in losses. It had been brought out in the show cause notice that the profits in the year under consideration could not wife out the carried forward losses. Under these circumstances, there is very little justification for payment of royalty also. However, no interference is made in that transaction since it is a composite payment. There is definitely no justification for a separate payment on account of supposed receipt of technical services. The assessee was asked to submit a copy of the JV agreement. It has failed to do so. All things considered, it can be said that neither the JV agreement nor the arrangement of the JV entity i.e. the assessee with its AE's is at arm's length." 6. Ld. Counsel for the assessee immediately reverted and contends that observation is not correct as JV agreement was produced before the TPO as well as DRP. Therefore, the entire order starts on a wrong premise and it shows the non appreciation of the record ..... X X X X Extracts X X X X X X X X Extracts X X X X
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