TMI Blog2017 (5) TMI 1593X X X X Extracts X X X X X X X X Extracts X X X X ..... e write off for obsolesce of such identified items is allow able deduction as per the case laws relied by the Ld. AR. In fact no provision is created in books of accounts but only the nomenclature of provision for obsolesce is used. In the balance sheet also no such provision is appearing either in the liabilities side or as reduction from asset side not the Ld. D/R could point out any such provision in the balance sheet. Therefore the disallowance confirmed by the Ld. CIT(A) is deleted. Traveling expenses disallowance - Held that:- Assessee has produced entire module, bill and vouchers of expenses for verification as desired. However, in making disallowance out of the above expenses after submission of month wise details of the expenses by the assessee,AO has not required assessee to furnish the details of any specific expenses. We also note that on these expenses, FBT is paid and that such adhoc disallowance is not made in the past and in A.Y. 07-08, the DRP has directed the AO not to make such adhoc disallowance. In these facts and circumstances, we direct the AO to delete the disallowance TDS u/s 194H - TDS liability on gifts and trade incentives - Held that:- The observ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... failure of which attracted section 40(a)(ia)? (v) Whether the Tribunal was legally justified in deleting the addition of ₹ 16,17,24,306/- and allowing deduction u/s37, on account of gifts and trade incentives and holding that section 194H would not apply specifically when neither any satisfactory supporting evidence/documents were available nor the same were incurred wholly and exclusively for the purpose of business? (vi) Whether the Tribunal was legally justified in deleting the addition of ₹ 50,00,000/- made on account of misc. expenses which were neither verifiable as no supporting evidence was available and also the same could not be established to have been incurred wholly and exclusively for the purpose of business? 3. Counsel for the appellant has contended that the Tribunal has committed serious error in following the decision of Bombay High Court and though the matter which was first preferred by the Revenue in case of DCIT vs. Starlite 133 TTJ 425 (Mum.) (Trib.) which was remanded back and the other two appeals in the case of DCIT vs . Ankit Diamond 8 ITR (Trib.) 487 and CIT vs. Super Diamonds IT Appeal No.298/2013, both were admitted be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authorized to determine the net operational profits at the enterprise level but he shall determine only ALP of international transaction. Therefore, transfer pricing adjustments suggested by TPO is illegal against the law. In case of Huntsman Advanced Materials (India) (P.) Ltd. Vs. DCIT (Mum.) (Trib.), it was held that adjustment for arm's length price is to be made only in respect of assessee's transactions with associated enterprises instead of its entire turnover of trading segment. The other casesrelied by the assessee are also to the same effect. Therefore, if the operating margin difference of 3.83% is applied to the transaction with the AE of ₹ 64.68 crores, the adjustment would be of ₹ 2.47 crores which is within the permissible range of 5% (5% of ₹ 64.08 crores is 3.23 crores) as provided in proviso to sec. 92C(2). Hence, the adjustment made by the TPO is not sustainable. 3.11 We are also convinced with the other arguments of Ld. AR that out of the 5 companies selected by the TPO, 2 companies namely, Procter and Gambel Hygiene and Healthcare Ltd. and International Flavours and Fragrances (India) Ltd. cannot be considered as proper com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnational transaction entered by the assessee with the AE even at entity level is at arm s length and therefore the adjustment made by the AO is not justified. Hence, the addition of ₹ 15,75,28,786/- made by the AO is deleted. Ground No. 1(iii) of the assessee is therefore allowed. 3.2 Identical view was taken by this Court in the case of CIT vs. M/s Sakata Inx. Ltd. in DB Income Tax Appeal No.63/2012, decided on 18.05.2017 along with other connected appeals. 3.3 In that view of the matter, in our considered opinion the view taken by the Tribunal is required to be accepted. 4. In so far as the issue No.(ii) is concerned, the Tribunal while considering the case in para 4.1 has observed as under: 4.1. After considering the rival submission, we noted that the details of inventory written off as well as procedure for written off is explained before the AO and the same is also placed before us at PB Page 421-664. We also find that similar issue is decided by this Bench in A.Y. 03-04 in ITA No. 188/JP/07 dated 09.08.2010 in assessee s favour and followed in A.Y. 04- 05 in ITA No. 180/JP/09 dated 27.05.2011 and in A.Y. 05-06 in ITA No. 1234/JP/2010 dated 11.02.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur of the assessee and against the department. 5. In so far as issue No.(iii) with regard to travelling expenses is concerned, counsel for the appellant has contended that the expenses which were made out of which the substantial amount was allowed, however, ₹ 50,00,000/- was disallowed by the Assessing Officer was required to be upheld in view of the fact that the same was not allowable in view of the circular of CBDT. However, the Tribunal in para 5 5.1 has specifically observed as under: 5. The third ground of appeal is against disallowance of ₹ 50 lacs out of travelling and conveyance expenses. We noted that AO made lumpsum disallowance out of expenses of ₹ 9,94,33,712/- on the ground that assessee has not filed supporting evidence to justify the claim which is approved by the DRP. The Ld. AR contended that the AO has wrongly stated that assessee has not filed supporting evidence to justify the claim and failed to explain the nature and purpose of expenses and therefore it lacks verification. The system of internal control is such that no expenses are booked without appropriate approval and evidence of expenses. To produce the voluminous files of vou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons and Commissioner of Income Tax vs. General Atlantic (P) Ltd. [2016] 384 ITR 0271 (Bom). 6.1 Counsel for the appellant has contended that the expenses made were not admissible under Section 37 of the Act, where the income was disproportionate to the turn-over. 6.2 In that view of the matter, the Tribunal has seriously committed an error in allowing expenses. 6.3 However, counsel for the respondent has taken us to para 6.3 where the Tribunal summarizing the same observed as under: 6.3 After considering the rival submission, we find that Group M Media India Pvt. Ltd. is an Indian Co. as is evident from the company master details placed at Paper Book Page 17. From the same, it is noted that this company is incorporated on 29.11.2001 having registered office at Mumbai. Therefore, it is an Indian Co. as defined u/s 2(26) and is a company resident in India u/s 6(3). All payment made to this company towards advertisement charges is in Indian currency. Tax is deducted at source on such payment u/s 194C. Sec. 195 is applicable when payment is made to a non resident. Admittedly, payment to Group M Media India Pvt. Ltd. is a payment to resident and not a non resident. Ther ..... X X X X Extracts X X X X X X X X Extracts X X X X
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