TMI Blog2022 (9) TMI 357X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of the assessee cannot be compared with CUP method. Alternative submission before the TPO that in case CUP method cannot be applied, then RPM is suitable method for an assessee like traders/distributors - The predominant revenue from operations of the assessee is from trading in UPS and accessories. Although, the TPO claims that the assessee purchased more than 50% of goods from Indian suppliers, but on perusal of details filed by the assessee, said findings of the TPO appears to be not based on any evidences. On the other hand, the assessee has filed necessary details to prove that it is only engaged in the business of trading in UPS and accessories and its major revenue from operations for the year is from trading in UPS and accessories. Therefore, we are of the considered view that under these circumstances Resale Price Method (RPM) is suitable method for benchmarking transactions with its AEs. The TPO without considering above method has simply rejected arguments of the assessee and has adopted TNMM with Berry Ratio as PLI and benchmarked transactions of the assessee with AE. TNMM method adopted with Berry Ratio as PLI for benchmarking international transactions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ESI u/s.36(1(va) r.w.s. 2(24)(x) - HELD THAT:- If remittance to employees contribution to PF ESI is made on or before due date for filing of return of income u/s.139(1) of the Act, then there cannot be any disallowance u/s.36(1(va) r.w.s. 2(24)(x) of the Act. Hence, we direct the Assessing Officer to verify the issue with reference to date of remittance of PF ESI and in case, the Assessing Officer finds that the assessee has remitted PF ESI on or before due for filing of return of income u/s.139(1) of the Act, then the Assessing Officer is directed to delete additions made towards disallowance of employees contribution to PF ESI. - I.T.A.Nos.617/Chny/2015 & 572/Chny/2016 - - - Dated:- 7-9-2022 - SHRI V. DURGA RAO , JUDICIAL MEMBER AND SHRI G. MANJUNATHA , ACCOUNTANT MEMBER Appellant by : Mr. Hredai, Advocate Respondent by : Mr. Palani Kumar , CIT ORDER PER G. MANJUNATHA , AM : The appeal filed by the assessee in ITA No.617/Chny/2015 is directed against assessment order passed by the Assessing Officer u/s.143(3) r.w.s.144C(13) r.w.s 92CA(3) of the Act, in pursuant to the directions of DRP, Chennai dated 19.11.2014 issued under section 144C(5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d applied TNMM as most appropriate method. The assessee challenged order of the Assessing Officer before the Tribunal and the Tribunal vide its order dated 26.04.2017 in ITA Nos. 617/Mds/2015 572/Mds/2016 upheld TNMM with Berry Ratio as most appropriate method to benchmark international transactions of the assessee with its AEs. The assessee challenged order of the Tribunal before the Hon ble High Court of Madras and the Hon ble High Court in TCA No.725 726 of 2017 dated 23.11.2020 set aside appeals to the file of the Tribunal with a direction to reconsider the issue of most appropriate method for benchmarking international transactions of the assessee with its AEs with reason as to why and how CUP method is not most appropriate method in given facts and circumstances of the case. 3. The learned A.R for the assessee submitted that the assessee being distributor of UPS products in India has purchased UPS from its AE. The main source of income of the assessee is sale and service of UPS in India. The assessee has adopted CUP as most appropriate method and compared transactions with its AEs with similar transactions of third party importers from various countries after obtaining ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AM and Berry Ratio as PLI. The TPO arrived at 4 comparables with average Berry ratio of 0.55 as against the Berry ratio of assessee being -0.44 and made and adjustment of Rs. 11,64,40,050/- The Id. DRP vide order dt. 19.11.2014 upheld the order of the TPO. The Hon ble ITAT vide order dt. 26.04.2017 held that use of TNMM as MAM with Berry Ratio as PLI by the TPO was justified and confirmed the order of the DRP/TPO, During the course of the hearing the assessee submitted additional evidence and sought fresh search of comparable companies using RPM which was rejected by the Hon ble ITAT. The assessee further filed an appeal before the Hon ble High Court of Madras. The Hon ble High Court of Madras vide order dt. 23.11.2020 remanded the matter back to the ITAT and directed the ITAT to give reasons for rejection of CUP method as adopted by the assessee and adoption of TNMM by the TPO. Reasons for rejection of CUP Method: The brands that were taken for comparison by the assessee were entirely different from the assessee company. Under CUP Method the products which differ in respect of brand value, technology, cost of production, place of production, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon where the issue has been squarely covered. 5. We have heard both the parties, perused material available on record and gone through orders of the authorities below. The facts with regard impugned dispute are that the assessee is in the business of trading in UPS and accessories, has imported UPS from its AEs. The assessee has adopted CUP as most appropriate method and claimed that it has benchmarked import of UPS from its AE with third party importer transaction of similar products and such information has been obtained under RTI from Chennai Customs authorities. The assessee has filed a chart explaining transactions with import from its AEs with comparable imports of similar nature by third parties and claimed that price paid by the assessee for its imports from its AEs are at arm s length price. Alternatively, the assessee has made submission before the TPO that in case, CUP method cannot be adopted as most appropriate method, then RPM is suitable method for the assessee like traders / distributors and thus, filed relevant details to consider RPM as most appropriate method. The TPO has rejected CUP as well as RPM proposed by the assessee and has adopted TNMM with Berr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cessories. Although, the TPO claims that the assessee purchased more than 50% of goods from Indian suppliers, but on perusal of details filed by the assessee, said findings of the TPO appears to be not based on any evidences. On the other hand, the assessee has filed necessary details to prove that it is only engaged in the business of trading in UPS and accessories and its major revenue from operations for the year is from trading in UPS and accessories. Therefore, we are of the considered view that under these circumstances Resale Price Method (RPM) is suitable method for benchmarking transactions with its AEs. The TPO without considering above method has simply rejected arguments of the assessee and has adopted TNMM with Berry Ratio as PLI and benchmarked transactions of the assessee with AE. 8. Coming back to TNMM method. TNMM method is most appropriate method, where other methods cannot be adopted for benchmarking transactions of the assessee with its AEs, however, where other methods can be applied, then there is no need to go for TNMM as most appropriate method. Further, Berry Ratio is ratio of operating profits to operating expenses and Berry Ratio can be applied, where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,67,33,228/-. The assessee claims that it has made provision for warranty expenses based on historical trend and past experience. The assessee further claims that it has taken support from the decision of the Hon'ble Supreme Court in the case of M/s.Rotork Controls India (P) Ltd. Vs.CIT., 314 ITR 62 and argued that its case is squarely covered by the facts of the above case. The Assessing Officer has disallowed provision for warranty on the ground that the assessee has not provided basis for arriving provision created for warranty expenses and details regarding computation of expenditure has not been explained. 11. We have heard both the parties and considered relevant materials on record. We find that the Hon'ble Supreme Court had considered issue of provision for warranty in the case of M/s.Rotork Controls India (P) Ltd. Vs.CIT.,(supra) and held that if provision made for warranty is on the basis of historical trend and past experience and further, there is scientific basis for making provision, then same needs to be allowed as deduction. In this case, the assessee claims that it has to provide after sale service to customers on each and every UPS sold in India for whi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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