TMI Blog2021 (7) TMI 666X X X X Extracts X X X X X X X X Extracts X X X X ..... he nature of personal expenditure cannot be allowed as deduction - as per assessee expenditure towards club membership fees was for business purpose and without providing adequate opportunity of being heard to the assessee, the Assessing Officer has treated same as personal in nature - HELD THAT:- No merit in the arguments of assessee that membership fees paid to Madras club is having bearing on business of the assessee - club membership fees paid is definitely in the nature of personal expenditure, unless the assessee demonstrates with evidence that it has been incurred for the purpose of promoting business of the assessee. In this case, the assessee has not produced any details to prove that club membership fees paid to Madras club is having been incurred for the purpose of promoting business of the assessee - there is no error in the findings recorded by the Assessing Officer to disallow club membership fees paid to Madras club and hence, we are inclined to uphold the findings of the DRP and reject the ground taken by the assessee. Disallowance of interest on delayed statutory payments - HELD THAT:- As regards interest on delayed payment of income-tax, there is no dispute w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fer Pricing: 2.1 The TPO and DRP erred in rejecting the transfer pricing documentation/benchmarking conducted by the Appellant without providing any cogent reasons for the same. 2.2 The DRP, AO and TPO erred in considering Acropetal Technologies Limited ( Acropetal ) as a comparable company when the Appellant had demonstrated that the Company is not comparable and that in the year under assessment, Acropetal earned exorbitant margins. 2.3 The DRP, AO and TPO erred in considering Vama Industries Limited ( Vama ) as a comparable company despite demonstrating that Vama is functionally different from the Appellant. 2.4 The DRP, AO and TPO erred in disregarding the usage of multiple year data for comparability analysis. 2.5 The DRP, AO and TPO erroneously applied the export turnover filter, despite, the Appellant demonstrating various practical difficulties in applying the filter. The DRP, AO and TPO erred in introducing the filter without providing any threshold for application of the said filter. 2.6 The DRP and TPO erred in excluding comparable companies which were otherwise comparable to the Appellant by applying incorrect filters. 3 Corporate Tax. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in computed by the assessee at 18.57%. Thus, the TPO has recomputed arm's length price of international transactions by taking comparable margin of 27.98% and made TP addition of ₹ 4,94,25,547/-. 5. Pursuant to transfer pricing adjustment as suggested by TPO, the Assessing Officer has passed draft assessment order u/s. 143(3) r.w.s. 144C(I) of the Act on 15th November, 2016 and made TP adjustment of ₹ 4,94,25,547/-, as suggested by the TPO. The Assessing Officer had also made two corporate tax adjustment of disallowance of membership fees paid to clubs for employees of the assessee for ₹ 1,68,540/- and has also made disallowance of interest paid for delayed remittance of service tax for ₹ 1,40,951/-. The assessee has filed objections against draft assessment order passed by the Assessing Officer before the Dispute Resolution Panel-2, Bangalore and challenged re-characterization of TP study and inclusion of certain comparables. The assessee has also challenged additions made by the Assessing Officer towards disallowance of club membership fees and disallowance of interest paid for delayed remittance of statutory payments. 6. The learned DRP vide its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned DR, on the other hand, strongly supporting the order of TPO as well as DRP directions, submitted that mere allegations of fraud and high margins is not a ground to exclude a company from the list of comparables, when FAR analysis of the company are similar to the assessee. 9. We have heard both the parties, perused materials available on record and gone through orders of the authorities below. The TPO has included M/s. Acropetal Technologies Ltd. as comparable to determine operating margin of the assessee company. The Assessing Officer has included M/s. Acropetal Technologies Ltd. as comparable by rejecting objections filed by the assessee on the ground that mere allegation of fraud and high margins is not a reason for exclusion of company, when FAR analysis are similar to functions carried out by the assessee. We have given our thoughtful consideration to reasons given by the Assessing Officer to include M/s. Acropetal Technologies Ltd. as comparable and arguments advanced by the learned A.R. for the assessee in light of SEBI report on alleged irregularities in the financials of the company and find that SEBI has clearly stated that the company has committed a fraud in ut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer has disallowed membership fees paid to Madras Club on the ground that it is in the nature of personal expenditure cannot be allowed as deduction. It was claim of the assessee before lower authorities that expenditure towards club membership fees was for business purpose and without providing adequate opportunity of being heard to the assessee, the Assessing Officer has treated same as personal in nature. 11. Having heard both sides and considered materials available on record, we do not find any merit in the arguments of the learned AR for the assessee that membership fees paid to Madras club is having bearing on business of the assessee. Further, club membership fees paid is definitely in the nature of personal expenditure, unless the assessee demonstrates with evidence that it has been incurred for the purpose of promoting business of the assessee. In this case, the assessee has not produced any details to prove that club membership fees paid to Madras club is having been incurred for the purpose of promoting business of the assessee. Therefore, we are of the considered view that there is no error in the findings recorded by the Assessing Officer to disallow club membersh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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