Contact us   Feedback   Annual Subscription   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2015 (12) TMI 33 - ITAT BANGALORE

2015 (12) TMI 33 - ITAT BANGALORE - TMI - Transfer pricing adjustment - selection of comparable externally - Held that:- As the TPO had erred in choosing an external comparable, when there was an internal comparable uncontrolled transaction which the assessee had taken in its TP study. - Decided in favour of assessee

Disallowance u/s. 40(a)(i) relating to the payments of “bio-study expenses” - Held that:- DRP correctly deleted the disallowance following the decision of the Hon’ble jur .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nd should be allowed as deduction under section 36(1)(va) of the Act read with section 43B of the Act if the said payments are made on or before the due date for filing the return of Income. See COMMISSIONER OF INCOME-TAX Versus ANZ INFORMATION TECHNOLOGY P. LTD. [2009 (9) TMI 69 - KARNATAKA HIGH COURT ] - Decided in favour of assessee - IT(TP)A No.214/Bang/2015, IT(TP)A No.179/Bang/2015 - Dated:- 9-10-2015 - SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER For .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

its name to Agila Specialties Private Limited with effect from July 2, 2010. The assessee company is engaged in the business of manufacture and marketing of pharmaceutical products, besides product development and has a well-diversified portfolio of products across product group. This, inter-alia, includes penicillins, high potency drugs and general injectables. The sterile injectables / parental products are typically administered through intravenous and intramuscular routes. 3. During the Fina .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e on 14.10.2010 declaring a loss of ₹ 376,181,078, claiming a refund of ₹ 1,025,499. During the course of assessment proceedings, the international transactions entered into by the Assessee were referred by the Assessing Officer to the Transfer Pricing Officer [TPO] for determination of arm s length price [ALP] under section 92CA of the Income-tax Act, 1961 [ the Act ]. Simultaneously, the assessment proceedings were initiated under section 143(2) of the Act. The AO issued a draft as .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

allowance Under section 40(a)(i) of the Act 15,064,297 Disallowance on account of belated remittance of employees contribution to PF & ESI account 7,621 Total assessed income (256,046, 157) 5. Aggrieved the assessee preferred appeal before the DRP. The DRP partially upheld the assessment of ₹ 66,771,307 made by the AO to the income of the assessee. The DRP upheld the TPO s action of rejecting segmental data/allocation keys pertaining to transactions related to AE/ non-AE treating it as .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

o us that the sale of formulations being one of the segments, the assessee has adopted internal TNMM and the arm s length analysis is at 8.80% in the case of AE and 8.51% in the case of non-AE. It was submitted that assessee is engaged in the manufacturing and supply of generic products in the nature of sterile injectable for AEs as well as non-AEs. The primary pharmaceutical segment of the Assessee is the manufacturing segment wherein the functions involved in the manufacturing for both AEs as .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

case of M/s. Technimont ICB Pvt. Ltd. v. Addl. CIT in ITA No.4608/Mum/2010. 8. The ld. counsel for the assessee also brought to our notice that in the subsequent year i.e., AY 2011-12 the TPO has accepted internal comparability. 9. We have heard both the parties. Ground No.3 of the concise grounds of appeal reads as follows. The other grounds are not being considered by us as the same were not pressed. 3. The Honorable DRP has erred in law and on facts in upholding the TPO s/AO s act of rejectin .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ch of the Tribunal in the case of M/s. Technimont ICB Pvt. Ltd. v. Addl. CIT in ITA No.4608/Mum/2010 for AY 2005-06, order dated 17.7.2012 is relevant. In para 10 of the said order, the Tribunal held as under:- 10. Clause (i) of Rule 1OB(e) stipulates that net profit margin from an international transaction with an AE is computed in relation to cost incurred or sales effected or assets employed etc. Clause (ii) is material for the present purpose. It provides that the net profit margin realized .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

enterprise ………………… from a comparable uncontrolled transaction and the other part talks of the net profit margin realised ……………… by an uncontrolled enterprise from a comparable uncontrolled transaction . It transpires that whereas the first part refers to the profit margin from internal comparable uncontrolled transactions, the second part refers to profit margin from an external comparable uncontrolled tra .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

(internal) from a comparable uncontrolled transaction and, thereafter, it points towards net profit margin realized by an unrelated enterprise (external) from a comparable uncontrolled transaction. Thus where potential comparable is available in the shape of an uncontrolled transaction of the same assessee, it is likely to have higher degree of comparability vis-â-vis comparables identified amongst the uncontrolled transactions of third parties. The underlying object behind computing ALP o .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rge same in case of an internal comparable. The effect of difference due to such inherent factors on comparison made with the third parties, gets neutralized when comparison is made with internal comparable. Ex consequenti, it follows that an internal comparable uncontrolled transaction is more noteworthy vis-â-vis its counterpart i.e. external comparable. 11. It has also been brought to our notice that in the subsequent year i.e. AY 2011-12, the TPO has accepted the internal comparability .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

profit margin of that enterprise itself from a third party, it is always safe and advisable to have recourse to such internal comparable case. …………. 14. Hence we are of the opinion that the TPO had erred in choosing an external comparable, when there was an internal comparable uncontrolled transaction which the assessee had taken in its TP study. The assessee s appeal is allowed. 15. In the result, the assessee s appeal is allowed. IT(TP)A No.179/Bang/2015 (Revenue s .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s selected by the TPO and that the accurate details of debtors and creditors of the assessee and the comparables were not available. 3. The DRP erred in deleting the disallowance of ₹ 1,50,64,297/- u/s 40(a)(i) relating to the payments of bio study expenses following the decision of the Jurisdictional High Court in the case of De beer India Minerals Pvt Ltd (2012) 346 ITR 467 and the decision of the AAR in the case of M/s. Anapharma without appreciating the fact that the payment made for t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ssessee u/s 36(1)(va) amounting to ₹ 7621/- without appreciating the fact that the assessee has not remitted the employees contribution towards the provident fund & ESI within the due date and as such these sums are an income in the hands of the assessee in terms of Section 2(24)(x) r.w.s. 36(1)(va). 6. The DRP failed to appreciate the fact that the employees contribution to PF/ESI is to be allowed u/s 36(1)(va), if such contributions are remitted within the due dates prescribed under .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ond ground becomes infructuous, as we have already decided the same issue in ground No.3 of the assessee s appeal in IT(TP)A No.214/Bang/2015. 19. Ground Nos. 3 & 4 merely state that the DRP erred in deleting the disallowance of ₹ 1,50,64,297 u/s. 40(a)(i) relating to the payments of bio-study expenses following the decision of the Hon ble jurisdictional High Court in the case of De beer India Minerals Pvt. Ltd. (2012) 346 ITR 467, which decision has not been accepted by the department .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ed that for the FY 2009-10, there were certain instances of delay in remitting the employees contribution to ESI account amounting to ₹ 7,621 within the due date prescribed under the relevant Act but deposited the same within the due date of filing of return of income under section 139(1) of the Act (i.e. within September 30, 2010). The details of delay and date of remittance of ESI payment is as under: Month Amount Due date of Remittance Actual date of remittance April 2009 1,290 May 21, .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

employees shall be deductible in the hands of the assessee only when such sum is credited by the assessee to the employee s account in the relevant fund or funds on or before the due date. For the said purpose, the due date means a date by which the assessee, as an employer, is required to, credit an employee s contribution to the employee s account in the relevant fund. The provisions of section 43B of the Act stipulate that certain expenses are deductible given only on actual payment. Clause ( .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Act In the instant case, the Company, in respect of employee s contribution to ESI, has paid such sum after the due date prescribed under the ESI Act however, before the due date for filing of the return of income as provided under section 139(1) of the Act. Even in cases where the contribution has been made after the due date prescribed under section 36(1)(va) of the Act, such sum is still entitled for deduction, if the same has been contributed to the fund on or before due date for filing of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

1), wherein the assessee had made contributions toward PF and ESI after the close of the accounting year but before the due date for filling of the return under s.139(1) of the Income-tax Act, 1961, held that the payments made could not be disallowed even if made beyond the period prescribed under section 36(1)(va) of the Act. • In the case of Strides Arcolab Limited (2013) (ITA No. 2111 of 2012) (the holding company of the assessee) the Honourable Mumbai High Court, relying on the decision .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version