TMI Blog2016 (11) TMI 1734X X X X Extracts X X X X X X X X Extracts X X X X ..... beyond the normal credit period, there is no interest cost to the assessee. Moreover, there is no such agreement whereby interest is to be charged on such a delayed payment. From the summary of payment submitted it is seen that the billing is done on quarterly basis and, accordingly, the payment is being received. Therefore, the delay is not wholly on account of late payment by the A.Es only. Moreover, the T.P. adjustment cannot be made on hypothetical and notional basis until and unless there is some material on record that there has been under charging of real income. Thus, on the facts and circumstances of the case, we are of the opinion that addition an account of notional interest relating to alleged delayed payment in collection of receivables from the A.Es, is uncalled for on the facts of the present case and is, accordingly, deleted. Addition of foreign travel expenses - HELD THAT:- As entire disallowance is based on mere conjectures and surmises. In fact, what the DRP records that the details of expenses are inadequate and not fully satisfactory . In our considered opinion, the aforesaid inference of the DRP is not based on any factual support and, in fact, not e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s interest on perceived delay in collection of receivables from the associates enterprises. The Appellant prays that the aforementioned notional addition be deleted. 3. On the facts and in the circumstances of the case and in law, the Hon'ble DRP erred in directing and the learned AO erred in not allowing deduction in respect of foreign travel expense of Rs. 27,00,124/- (being 25% of the total foreign travel expense of Rs. 1,08,00,496). It is prayed that the AO be directed to delete the disallowance of foreign travel expense. 3. Before we proceed to adjudicate the respective Grounds of appeal, the brief background is that the appellant is a company incorporated under the provisions of the Companies Act, 1956 and is a wholly owned subsidiary of Evonik Degussa GmbH, Germany. For the assessment year under consideration, it filed a return of income declaring total income of Rs.5,81,54,328/-, which has been subject to a scrutiny assessment whereby the total income has been assessed at Rs.7,51,45,270/- after making certain additions/disallowances, which are the subject matter of appeal before us in terms of the abovestated Grounds of appeal. 4. The issue in Ground of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rformed by the assessee in the course of rendering support services to the associated enterprises in connection with research and development. Notably, the support services provided by the assessee are in the nature of laboratory research and analytical/testing facilities for certain products developed and/or manufactured by the associated enterprises. From the order of authorities below as well as other material on record, it emerges that assessee provided assistance to its associated enterprises in conducting and co-ordinating testing, trials and experiments; interpretation of results of various such trials; assistance in literature search and any other services required by the associated enterprises with respect to the above. It is also emerging from record that in order to perform such functions, assessee is maintaining laboratory premises and employing necessary infrastructure suitable for such research and analytical testing. 6. The first plea of assessee is that the TPO erred in including M/s. Celestial Labs Ltd. in the final set of comparables since the said concern is functionally dissimilar. The learned representative pointed out that in the preceding Assessment Year 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been reproduced by the TPO in para 6.1 of his order. The submissions put forth by the assessee show that M/s. Celestial Labs Ltd. is a concern engaged in software development which, inter-alia, also included development of software products. The order of Tribunal dated 21.11.2012 (supra) brings out that the functional profile of the said concern has been found to be incomparable with the activities undertaken by the assessee in the course of providing support services to its associated enterprises in connection with research and development. Considering the aforesaid precedent and also that the fact-position in the instant year is pari materia with that noted by the Tribunal in Assessment Year 2007-08 (supra), the said concern is directed to be excluded from the final set of comparables for the purpose of comparability analysis. 8. Secondly, the plea of assessee is for exclusion of M/s. TCG Lifesciences Ltd. from the final set of comparables on the ground that more than 35% of the total revenues earned by the said concern are from sale of chemical compounds and, therefore, such a concern is incomparable with the tested activities of the assessee, which does not involve sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parables and, therefore, the matter is restored back to the file of Assessing Officer who shall verify the aforesaid contention of assessee and accordingly delete the addition of Rs.1,28,41,639/-. At this stage, we may also note that the other pleas raised by the assessee in its Grounds of appeal with regard to addition of Rs.1,28,41,639/- are rendered academic and have not been adverted to, and they are kept open, since necessary relief already stands allowed to the assessee. Thus, insofar as Ground of appeal no. 1 is concerned, assessee succeeds, as above. 12. The next Ground raised by the assessee is with respect to addition of Rs.14,49,180/- made by the Assessing Officer on the basis of order of TPO on account of interest on delay in realisation of dues from associated enterprises. On this aspect of the matter, it was a common point between the parties that an identical addition has been dealt with by the Tribunal in the case of assessee for Assessment Year 2007-08 vide order dated 21.11.2012 (supra), wherein the addition has been deleted. In particular, our attention has been invited to the following discussion in the order of Tribunal dated 21.11.2012 (supra) :- 23. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave been made by the A.E. beyond the normal credit period, there is no interest cost to the assessee. Moreover, there is no such agreement whereby interest is to be charged on such a delayed payment. From the summary of payment submitted by the learned Counsel, it is seen that the billing is done on quarterly basis and, accordingly, the payment is being received. Therefore, the delay is not wholly on account of late payment by the A.Es only. Moreover, the T.P. adjustment cannot be made on hypothetical and notional basis until and unless there is some material on record that there has been under charging of real income. Thus, on the facts and circumstances of the case, we are of the opinion that addition an account of notional interest relating to alleged delayed payment in collection of receivables from the A.Es, is uncalled for on the facts of the present case and is, accordingly, deleted. 13. Since it was a common point between the parties that the aforesaid decision is squarely applicable in the instant year also, and in order to ensure consistency, the impugned addition of Rs.14,49,180/- is directed to be deleted. Thus, on this aspect, assessee succeeds. 14. The last add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e purpose of visits has been placed in the Paper Book. Inspite of such details being available on record, the lower authorities have gone by mere generalized observations, which are devoid of any factual support. In Assessment Year 2009-10 the Tribunal vide its order dated 18.9.2014 (supra) upheld the disallowance of 10%, but it took note of observations of the lower authorities that some of the airway bills were not in the name of assessee-company . Quite clearly, even the adhoc disallowances are also required to be founded on certain specific discrepancies, an aspect which is conspicuous by its absence in the orders of authorities below for the year under consideration. Therefore, in our view, no disallowance can be upheld in this year on the basis of the order of Tribunal for Assessment Year 2009-10, which has been rendered in the background of specific findings of the lower authorities in that year. Considering the entirety of circumstances, in our view, in the absence of any specific discrepancy/infirmity having been brought out by the lower authorities, the adhoc disallowance of 25% of foreign travel expenses is untenable and is hereby directed to be deleted. Thus, on this a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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