TMI Blog2017 (1) TMI 1617X X X X Extracts X X X X X X X X Extracts X X X X ..... ating income of the assessee and the comparables and the grounds of appeal raised by the Revenue are thus, dismissed. TDS u/s 195 - Non deduction of tds on professional fees - case of assessee was that it was reimbursement of cost of allocated expenses and was not technical fees under section 9(1)(vii) or under Article 12 of India-Luxembourg Treaty - whether charges paid to associate enterprises are allowable where tax deducted has not been paid in account of treasury - Held that:- In view of the plea raised by the assessee, we direct the Assessing Officer to verify the contentions of assessee with regard to payment of tax at source and in case the same has been paid within time or before the due date of filing the return of income, then the same are to be allowed as expenditure in the hands of assessee. Further, where the entries are on account of reimbursement of expenses and the assessee can establish its claim by verification from bills, then such reimbursements are not amenable to tax to deduction. Certain entries have been reversed and credited to expenditure account itself in the accounting year itself. The Assessing Officer is to verify the same and decide the issue acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase, the learned CIT(A) has erred both on facts and in law in confirming addition made by the AO of an amount of ₹ 12,00,000I- on account of rate difference. (ii) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in holding that the amount of ₹ 12,00,000I- is not an ascertained liability ignoring the details of the supplier's invoices in respect of the same submitted by the appellant. 4(i) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in not adjudicating the contention of the assessee that TPO has erred in taking operating profit/operating cost as the PLI as against PBID/sales taken by the appellant. (ii) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in not adjudicating the contention of the appellant that the TPO has erred in taking PLI as profits before interest but after depreciation. (iii) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in not adjudicating the contention of the appellant that export incentives such as refund of duty having nexus with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax(Appeals) may be vacated and that of the Assessing officer be restored. 5. First, we shall take up the appeal filed by the Revenue, wherein the solitary issue raised is against computation of operating margins of assessee and comparable companies by including export incentives as operating income. 6. Briefly, in the facts of the case, the assessee for the year under consideration had filed its return of income declaring loss of ₹ 3.38 crores. The case of the assessee was taken up for scrutiny. The assessee had entered into international transactions with its associate enterprises at ₹ 58,26,19,745/-, hence, reference under section 92CA(1) of the Act was made for computation of arm's length price in relation to the international transactions. The Transfer Pricing Officer (in short the TPO ) did not accept the benchmarking of international transactions undertaken by the assessee and made an upward adjustment of ₹ 3,75,85,000/- under section 92CA(3) of the Act. The assessee was show caused as to why its income should not be enhanced to that extent. The assessee placed reliance on the submissions made before the TPO. The Assessing Officer determined the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Welspun Zucchi Textiles Ltd. Vs. ACIT in ITA No.6539/Mum/2009 and DCIT Vs. Welspun Zucchi Textiles Ltd. in ITA No.898/Mum/2010, relating to assessment year 2005 -06, order dated 11.01.2013, wherein it was held that operating income would include exports benefits. The learned Authorized Representative for the assessee referred to the decision of Hon ble Supreme Court in CIT Vs. Sterling Foods (supra) and pointed out that for computing the profits and gains eligible for the benefit under section 80HH of the Act, the term used is derived from which means direct nexus between profits and gains and industrial undertaking. However, the definition of operating income was much wider. The learned Authorized Representative for the assessee further pointed out that in case the appeal of Revenue is dismissed, then the grounds of appeal raised by the assessee against the TP adjustment except allowing working capital adjustment may not be adjudicated. 11. We have heard the rival contentions and perused the record. The limited issue which arises in the appeal filed by the Revenue is against computation of operating margins. The CIT(A) while applying TP provisions to the international transa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the first plea was that there was no requirement to deduct tax at source and an alternate plea was raised which has been not considered that the assessee has deducted tax at source and deposited the same in the Government account and in some cases, the same was within time and in some cases, the same was after the due dates. There were few bills which were reimbursement of expenses and hence, not eligible for deduction of tax at source. Our attention was drawn to the submissions made before the CIT(A) at page 510 of Paper Book with special reference to page 532 of the Paper Book and the summary of payments disallowed under section 40(a)(i) of the Act due to non-deduction of tax under section 194 of the Act, which is placed at page 414 of the Paper Book. 16. The learned Departmental Representative for the Revenue on the other hand, placed reliance on the order of CIT(A). 17. We have heard the rival contentions and perused the record. The limited issue which arises before us is without going into the merits of the submissions made before the Assessing Officer and CIT(A), that the charges paid to associate enterprises are allowable where tax deducted has not been paid in accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re tabled at pages 11 and 12 of the appellate order. The CIT(A) noted that some of the invoices were before close of the year and the others were after close of the year. The CIT(A) was of the view that the assessee could have straight away claimed the deduction on account of accrued expenditure, which was not done and as far as other invoices were concerned, the CIT(A) held that the assessee had not furnished any evidence for arriving at particular quantum of provisions. In view thereof, the CIT(A) held that the said amount could not be considered as an ascertained liability and the same may be contingent liability and the order of Assessing Officer was confirmed. 21. The assessee is in appeal against the order of CIT(A). 22. The learned Authorized Representative for the assessee before us has filed the list of invoices raised for price increase in February and March, 2008. Some of the invoices were raised in April, 2008 and in July, 2008 and two of the invoices were raised on 29.03.2008. The total amount debited was ₹ 12,03,084/- plus charges. The learned Authorized Representative for the assessee before us has pointed out that the goods were supplied to the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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