TMI Blog2020 (2) TMI 1176X X X X Extracts X X X X X X X X Extracts X X X X ..... view was reiterated by the Tribunal over and again while deciding assessee s appeal in the assessment year 2004 05. Thus, following the consistent view of the Tribunal in the preceding assessment years, as referred to above, the addition made by the Assessing Officer on account of adjustment to the opening and closing stock has to be deleted. Disallowance u/s 14A r/w rule 8D - HELD THAT:- Now it is fairly well settled that rule 8D is applicable from the assessment year 2008 09. Therefore, the Assessing Officer has completely gone wrong in computing the disallowance under section 14A of the Act by applying rule 8D. Considering the relevant facts, we are of the view that disallowance under section 14A of the Act in the impugned assessment year should be restricted to 5% of the dividend income earned during the year. These grounds are partly allowed. Addition on account of reimbursement of cost incurred on behalf of the Associated Enterprises (AEs) - HELD THAT:- Undisputedly, both the Assessing Officer and learned Commissioner (Appeals) have recorded a concurrent finding of the fact that the assessee has failed to furnish any supporting evidence to demonstrate that the reim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing out of ITA no.4398/Mum./2010), ITA no.3406/Mum./2010 - - - Dated:- 21-2-2020 - Shri Saktijit Dey, Judicial Member And Shri N.K. Pradhan, Accountant Member For the Assessee : Shri Jitendra Jain For the Revenue : Shri Suhas Kulkarni ORDER PER SAKTIJIT DEY. J.M. This bunch consists of a set of cross appeals and a cross objection by the assessee arising out of a common order dated 24th March 2010, passed by the learned Commissioner of Income Tax (Appeals) 15, Mumbai, pertaining to the assessment year 2005 06. ITA no.3406/Mum./2010 Assessee s Appeal A.Y. 2005 06 2. In grounds no.1 to 3, the assessee has challenged the aggregate addition made of 58,26,392, to the opening and closing stock of inventories. 3. Brief facts are, during the assessment proceedings, the Assessing Officer noticed that an amount of ₹ 39,18,000 has been debited towards foreign exchange fluctuation loss in respect of raw materials and finished goods. Noticing this, the Assessing Officer called upon the assessee to file the details of foreign exchange fluctuation gain. After perusing the response filed by the assessee, the Assessing Officer was of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r evident, merely relying upon the orders passed by his predecessor in office in assessee s own case for the assessment year 1996 97 onwards, learned Commissioner (Appeals) has upheld the addition made by the Assessing Officer. Notably, while deciding assessee s appeals for the assessment years 1996 97, 1997 98, 1998 99, 2000 01 and 2001 02, the Tribunal in ITA no.4543/Mum./2001 Ors., dated 31st May 2010, following decision of the Hon'ble Supreme Court in CIT v/s Woodward Governor India Pvt. Ltd., [2009] 312 ITR 254 (SC) held that the value of closing stock is not to include the liability on account of exchange fluctuation. Thus, ultimately, the Tribunal deleted the addition made to the opening and closing stock. Following the aforesaid decision, the Tribunal again decided the issue in favour of the assessee in the assessment year 2003 04, in an appeal being ITA no.6350/Mum./2008, vide order dated 16th July 2010, by deleting the addition made on account of adjustment made to the closing stock. The same view was reiterated by the Tribunal over and again while deciding assessee s appeal in the assessment year 2004 05, in ITA no.1630/Mum./ 2009, dated 17th November 2014. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the disallowance under section 14A of the Act by applying rule 8D. Considering the relevant facts, we are of the view that disallowance under section 14A of the Act in the impugned assessment year should be restricted to 5% of the dividend income earned during the year. These grounds are partly allowed. 14. In grounds no.7 and 8, the assessee has challenged the addition made of ₹ 43,64,399, on account of reimbursement of cost incurred on behalf of the Associated Enterprises (AEs). 15. Brief facts are, the Transfer Pricing Officer, in the course of proceedings before him, noticed that the AEs have reimbursed the assessee the actual expenditure incurred on their behalf. Thus, he called upon the assessee to furnish the details of recovery of expenditure along with invoices. As alleged by the Transfer Pricing Officer, vide letter dated 16th September 2008 the assessee simply submitted that the expenditure represents third party cost incurred on behalf of the AEs, hence, were reimbursed at cost. However, the assessee expressed its inability to furnish any supporting evidence on the plea that such evidences are in possession of third party service provider. Thus, in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at arm's length price. Therefore, the Transfer Pricing Officer has added a mark up of 12.5% on estimate basis to the cost incurred for determining the arm's length price of the service provided. Before us, the assessee has furnished certain additional evidences by way of Debit Notes to demonstrate that the reimbursement was on the basis of actual cost incurred without any mark up. In our considered opinion, the additional evidences furnished by the assessee will have a crucial bearing in deciding the arm's length nature of transaction with the AEs. Therefore, we are inclined to admit the additional evidences furnished by the assessee. However, since these evidences were not furnished either before the Assessing Officer or before learned Commissioner (Appeals), to provide a fair opportunity to the Revenue to evaluate the evidences and take a decision on the matter, we are inclined to restore the issue to the Assessing Officer for fresh adjudication after due opportunity of being heard to the assessee. These grounds are allowed for statistical purpose. 19. In view of our decision in grounds no.7 and 8, ground no.9, which is a without prejudice issue raised by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Industries India Pvt. Ltd., ITA no.2201/2013, dated 02.12.2015; and iv) Thyssen Krupp Industries India Pvt. Ltd. v/s ACIT, [2017] 27 taxmann.com 334 (Mum.). 23. Thus, he submitted, the matter may be restored back to the Assessing Officer/Transfer Pricing Officer for computing the arm's length price by considering the transactions with the AE only. 24. The learned Departmental Representative submitted, since the aforesaid issue has been raised for the first time through additional grounds, it requires verification by the Assessing Officer/Transfer Pricing Officer. 25. We have considered rival submissions and perused the material on record. At the outset, we must observe that the issue raised by the assessee in the additional grounds of the cross objection is a purely legal issue and can be decided on the basis of facts already available on record. Therefore, we are inclined to admit the additional ground. It is the contention of the learned Authorised Representative before us that any adjustment to the arm's length price of the international transaction with the AE has to be made qua the international transaction and cannot be made at the entity level. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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