TMI Blog2021 (8) TMI 908X X X X Extracts X X X X X X X X Extracts X X X X ..... uidated damages incurred by the assessee pursuant to breach of contractual arrangements - HELD THAT:- As decided in ow case [ 2019 (12) TMI 667 - ITAT DELHI] the charges pertain to contractual obligation which was not complied with but the AO held it as penalty. The matter has been remanded back to the file of the AO for fresh examination in the assessment year 2014 -15 as well as 2013014. We have given due consideration to the observations of the ld. DRP, the expense also do not pertain to the year in question. Hence, the AO is hereby directed to examine the issue afresh with regard to the allowability of the expenses per se and also the year to which the expenses belong to. Interest on Foreign Term Loan - AO disallowed the interest paid on foreign term loan as no TDS was deducted by the assessee - AO disallowed it on the grounds that the assessee failed to deduct TDS on the interest credited in the books whereas the assessee submitted that only an amount of ₹ 5,06,995/- has been accrued on the loan received - HELD THAT:- As DRP referred the matter to the AO for factual verification. Since, it is a matter of factual verification, we decline to interfere with the order o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e opinion, that it was necessary or expedient to refer the matter to the learned Additional Commissioner of Income Tax, International Tax Transfer Pricing - 1 (1), New Delhi ( Ld. TPO ) for computation of arm s length price ( ALP ). 3. That on facts and circumstances of the case and in law, the Ld. AO/Ld. TPO/Hon ble Dispute Resolution Panel ( Hon ble DRP ) have erred, in making an adjustment of INR 4,41,74,915 in relation to the international transaction pertaining to purchase of capital goods from AEs without determining the ALP of the transaction in accordance with the provisions of Section 92CA(3) read with Section 92C(3) of the Act. 3.1 That on facts and circumstances of the case and in law, the Ld. TPO/the Ld. AO have erred in making/upholding the transfer pricing adjustment in relation to the international transaction pertaining to purchase of capital goods from AEs without issuing any show cause notice to the Appellant or granting an opportunity of being heard which violates the principle of natural justice. 3.2 That on facts and circumstances of the case and in law, the Hon ble DRP erred in observing that the Appellant did not provide any evidence to su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion portion of such alleged markup would have been considered as deduction while computing the income chargeable to tax under the head PGBP for AY 2016-17. The remaining amount would not have been considered for the purpose of computing the income chargeable to tax. 3.8 That on the facts and circumstances of the case and in law, the Ld. AO/Ld. TPO/Hon ble DRP have erred in making/upholding additional transfer pricing adjustment at the rate of 15% of INR 3,84,12,970 without appreciating that once the entire amount of INR 3,84,12,970 has been proposed to be disallowed by the Ld. TPO, any additional adjustment for depreciation would result in dual adjustment. 3.9 That on the facts and circumstances of the case and in law, the Ld. AO/Ld. TPO/Hon ble DRP have erred in reducing the amount of depreciation allowance without simultaneously reducing the revenue earned by the Appellant on such depreciation cost since the Appellant was remunerated on cost plus basis for provision of CSD services its AEs and the cost base for such international transaction included the amount of depreciation on purchase of capital goods. Corporate Tax Grounds 4. That on the facts and circu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er 2020 passed pursuant to directions of the Hon ble DRP without considering the order of the Ld. TPO passed under section 154 of the Act dated 26 March 2021 reducing the amount of TP addition to INR 4,41,74,915/-. 8. That on the facts and circumstances of the case and in law, the Ld. AO, has erred in computing the tax payable by considering the assessed income at INR 170,50,50,356/- instead of assessed income of INR 111,30,04,560/-. 9. That on the facts and circumstances of the case and in law, the Ld. AO, has erred in considering returned income of INR 61,88,16,224 /- as against INR 61,86,41,220/- 10. That on the facts in the circumstances of the ease and in law, the Ld. AO has erred in levying interest under section 234B of the Act. 11. That on facts in the circumstances of the case and in law, the Ld. AO has erred in initiating penalty proceedings under section 271(1)(c) of the Act mechanically and without recording any adequate satisfaction for its initiation. 3. The moot issue regarding the Transfer Pricing raised by the assessee relates to adjustment on account of capital goods purchased from AE. During the year, the assessee purchased capital goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chase of capital goods does constitute a separate international transaction in terms of express statutory provisions contained in Section 92B(1) read with explanation (1)(a) and needs to be separately benchmarked, especially for the purpose of calculating depreciation and other cost related expenses as held by the Delhi Bench of the ITAT in Honda Motorcycle Scooters India Pvt. Ltd. Vs ACIT (2015) 56 taxmann.com 237 . The contention of the assessee that the ALP of international transaction pertaining to purchase of capital goods from AEs has been determined along with the other transactions covered under the CSD segment of the assessee under combined transaction approach, cannot therefore be accepted. The panel also notices the fact that the assessee apart from mere making a bald statement that the ALP of international transaction of capital goods is included in other transactions under CSD segment has not filed either before the TPO or before this panel. The purchase bills of these goods in the hands off its AE and necessary evidence as to whether the AE has sold these goods to the assessee at the same price at which they were purchased by the AE or with any markup value. Nor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regulations, the TPO was obligated to determine the ALP of an international transaction by applying the most appropriate method and not by any adhoc method. Reliance was placed on Lumax Industries Ltd. Vs ACIT in ITA No. 5252/Del/2011, AWB India Pvt. Ltd. Vs DCIT in ITA No. 6480/Del/2012, MC Retail Pvt. Ltd. Vs ACIT in ITA No. 1777/M/2016, ACIT Vs Koch Chemical Technology Group (India) Ltd. in ITA No. 8091/Mum/2011, 7236/Mum./2020, 7958/Mum/2011, TNS India Pvt. Ltd. Vs ACIT in ITA No. 944/H/07, 194 74/H/08, 793/H/09, 654 655/H/10 7/H/2012 and NLC Nalco India Ltd. in ITA No. 529/Kol/2008 in this regard. The contention of the assessee is well founded but this contention can hold good only if the relevant material is made available to the TPO or before this panel, which is a continuation of assessment proceedings in terms of law explained by the Hon ble Bombay High Court in Vodafone India Services (P) Ltd. Vs Union of India (2013) 39 taxmann.com 201. However, even after the TPO undertook the benchmarking in the manner as he did, no evidence was made available to this panel in the form of purchase bills of these goods in the hands off its AE and necessary evidence as to whether t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ional transaction and such determination of ALP for ' an' international transaction as per section 92C(1) is done as per the most appropriate method, being one of the methods given in the provision. To put it simply, each international transaction is viewed separately and independent of other international transactions for determining its ALP by using one of the given methods, which is the most appropriate method having regard to the nature of transaction or class of transaction or functions performed, etc. It is impermissible to combine all the international transactions for determining their ALP in a unified manner when such transactions are diverse in nature . 8. Since, the assessee has been denied proper opportunity, the TPO and the ld. DRP did not have the benefit of examining the purchase of capital goods, the issue of allowability or not of the markup of 8% charged by the AE has not been determined as per the approved methods, we hereby deem it fit to remand the matter to the file of the ld. DRP to determine the ALP as per the approved methods after giving an opportunity to the assessee to make their submissions. The assessee is also hereby directed to comply with ..... X X X X Extracts X X X X X X X X Extracts X X X X
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