TMI Blog2022 (2) TMI 1337X X X X Extracts X X X X X X X X Extracts X X X X ..... mentioned in clause (i) of sec.92BA is not valid, as the said provision has been omitted. Accordingly, we direct the AO to delete the addition relating to specified domestic transactions made u/s 92CA. As pointed out by D.R, the co-ordinate bench, in the case of Texport overseas P Ltd, has restored the matter to the file of the A.O. with the direction to examine the claim of expenditure in accordance with the provisions of section 40A(2) - we restore this issue to the file of the AO with the direction to examine the claim of expenditure mentioned above in terms of the provisions of section 40A(2) of the Act. In view of the above conclusion, we refrain from adjudicating other issues raised by the assessee in the grounds of appeal with regard to correctness of determination of ALP of the SDT. Addition u/s 68 - assessee has failed to prove the genuineness, identity and creditworthiness of the creditors - failure of the assessee to furnish copy of stock register - HELD THAT:- This cannot be a proper reason for rejecting the claim of the assessee when the confirmation letter, purchase register along with sample invoices were furnished by the assessee. Assessee also submitted tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considered its elated party NIPL as a tested party for trading segment. The margin earned by NIPL is lower when compared to margin earned by 3 rd parties and therefore purchase price of the assessee is at arm s length. 3 Managerial Remuneration 6,72,99,383 Other Method The remuneration is commensurate with the qualification, experience, expertise of the directors and hence considered as at arm s length 4 Reimbursement of expenses 8,99,95,940 Other Method Reimbursements are at cost and therefore at arm s length. With respect to purchase of finished goods, the assessee in its TP study had selected NIPL as tested party. This was for the reason that database do not contain any companies, which are engaged in trading of animal feeds and only comparables engaged in manufacturing of animal feeds were available. If assessee is taken as tested party, no comparables would be available. The Assessee selected 18 comparables in its Transfer Pricing study. The Operating Cost Margin ( OCM ) of Manufacturing segmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. Comparables and margins as adopted by the TPO after DRP directions are tabulated below : Sl.No. Company Name Weighted Average Margin [OP/OR] (%) 1 Godrej Agrovet Ltd 6.72 2 Taiyo Feed Mill Pvt. Ltd. 6.82 3 B V Bio-Corp Pvt. Ltd. 7.26 4 Baramati Cattle feeds Pvt. Ltd. 9.70 Average 7.63 8. The TPO adopted entity level figures to make TP adjustment. The revised adjustment computed by TPO was as below : Particulars Formula Amount (in Rs.) Taxpayers operating revenue OR 2,53,29,55,927 Taxpayers operating cost OC 2,60,76,39,391 Taxpayers operating profit OP -7,74,82,813 Taxpayers PLI PLI=OP/OC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecified Domestic Transactions (SDT) with effect from AY 2013-14. The Finance Act, 2012 introduced Section 92BA giving the meaning of SDT and it provided as follows: SECTION 92BA: MEANING OF SPECIFIED DOMESTIC TRANSACTION. For the purposes of this section and sections 92, 92C, 92D and 92E, specified domestic transaction in case of an assessee means any of the following transactions, not being an international transaction, namely:- (i) any expenditure in respect of which payment has been made or is to be made to a person referred to in clause (b) of sub-section (2) of section 40A. (ii) any transaction referred to in section 80A; (iii) any transfer of goods or services referred to in subsection (8) of section 80-IA; (iv) any business transacted between the assessee and other person as referred to in sub-section (10) of section 80-IA; (v) any transaction, referred to in any other section under Chapter VI-A or section 10AA, to which provisions of subsection (8) or sub-section (10) of section 80-IA are applicable; or (vi) any other transaction as may be prescribed, and where the aggregate of such transactions entered into by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ill not be affected by omission of the rule. In the absence of any such provisions in the statute or in the rule, the pending proceeding will lapse under rule under which the notice was issued or proceeding being omitted or deleted. 15. With regard to the contention that there could be no addition u/s.92BA in view of the subsequent deletion of the aforesaid provisions by the Finance Act, 2017, the DRP refused to follow the decision of ITAT in the case of Textport Overseas Pvt.Ltd. (supra). The learned AR reiterated submissions made before the DRP and brought to our notice that the decision of the ITAT in the case of Textport Overseas Pvt.Ltd. (supra) has been confirmed by the Hon ble Karnataka High Court and hence the order of the DRP is unsustainable. The question is whether the transactions in question can be said to be an SDT. On this issue, as rightly pointed out by the learned counsel for the assessee, the decision of the ITAT in the case of Textport Overseas Pvt.Ltd. (supra) has been confirmed by the Hon ble Karnataka High Court in the very same case of Texport Overseas Pvt. Ltd. in ITA No.392/2018 order dated 12.12.2019, with the following observations:- 5. Having he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch judgment has also been taken note of by the tribunal while repelling the contention raised by revenue with regard to retrospectivity of Section 92BA(i) of the Act. Thus, when clause (i) of Section 92BA having been omitted by the Finance Act, 2017, with effect from 01.07.2017 from the Statute the resultant effect is that it had never been passed and to be considered as a law never been existed. Hence, decision taken by the Assessing Officer under the effect of Section 92BI and reference made to the order of Transfer Pricing Officer-TOP under Section 92CA could be invalid and bad in law. 7. It is for this precise reason, Tribunal has rightly held that order passed by the TPO and. DRP is unsustainable in the eyes of law. The said finding is based on the authoritative principles enunciated by the Hon'ble Supreme Court in Kolhapur Canesugar Works Ltd referred to herein supra which has been followed by Co-ordinate Bench of this Court in the matter of M/s.GE Thermometrias India Private Ltd., stated supra. As such we are of the considered view that first substantial question of law raised in the appeal by the revenue in respective appeal memorandum could not ITA No.2936/Bang/2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble in the instant case. The amount payable to trade creditors being genuine, addition is liable to be deleted. 14. The lower authorities have erred in making additions u/s 68 amounting to Rs. 52,87,093/- without appreciating that Sec 68 cannot be invoked for making additions w.r.t outstanding balance of trade creditors as both purchase and sale of goods have been accepted by the same authorities. 19. In the draft assessment order the AO has made an addition of Rs. 3,97,93,505/- u/s 68 of the Act on the ground that the assessee has failed to prove the genuineness, identity and creditworthiness of the creditors. The details were filed before DRP as additional evidence. During the remand proceedings, the AO accepted that transactions with creditors are genuine, except for three namely, KS Enterprises, Ritesh Kumar Vasant Kumar Manoj Traders for Rs.30,94,014/- Rs.5,17,710 and Rs.16,75,369/- respectively. The Appellant vide letter dated 24.02.2021 submitted that it has inadvertently mentioned PAN of Manoj Traders as AXFPS8517S instead of AXFPS8517C also provided PAN of KS Enterprises. The DRP directed the AO to delete the necessary additions after verifying the genuinene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 (Delhi - Trib.) (Pg 1044 1045 of Paper Book II) CIT, Agra vs Pancham Dass Jain [2006] 156 TAXMAN 507 (ALL.) (Pg 1048 1050 of Paper Book II) The learned DR relied on the order of the AO. 23. We have carefully considered the rival submissions. From the perusal of the final Assessment Order (paragraph 4.5) it is clear that the only reason given by the AO for not accepting the genuineness of the transaction with M/s. Manoj Traders and M/s. K. S. Enterprises is failure of the assessee to furnish copy of stock register. In our view, this cannot be a proper reason for rejecting the claim of the assessee when the confirmation letter, purchase register along with sample invoices were furnished by the assessee. The learned Counsel for the assessee also submitted that payments have been made to all the 3 parties and that evidence would demonstrate that the trade creditors were genuine. Taking into account these circumstances, we are of the view that it would be just and appropriate to set aside the issue with regard to the addition of Rs.52,87,093/- to the AO for consideration afresh in the light of the evidence already filed by the assessee and also in the light of the furth ..... X X X X Extracts X X X X X X X X Extracts X X X X
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