TMI Blog2022 (11) TMI 1351X X X X Extracts X X X X X X X X Extracts X X X X ..... T:- Assessee s own case for the assessment year 2009-10 [ 2022 (3) TMI 1511 - ITAT BANGALORE] direct the TPO to re-examine the issue raised . It is ordered accordingly. This ground is allowed for statistical purposes. Provision for warranty and warranty expenses - As per AO appellant has failed to substantiate the basis of creation of provision for warranty - DRP confirmed the disallowance of provision for warranty on the ground that the scientific basis of the creating the provision was not established - HELD THAT:- We notice that issue of allowability of warranty expenses was considered by the Tribunal in assessee s own case for AY 2009-10 [ 2022 (3) TMI 1511 - ITAT BANGALORE] We notice that the method of creation of warranty provision has not undergone change and is consistent with what is described in above order. Respectfully following the decision of the coordinate bench in assessee s own case we direct the AO to allow the provision made towards warranty. Disallowance u/s 40(a)(ia) of rebates given to customers - HELD THAT:- As per assessee s own case for AY 2010-11 [ 2023 (3) TMI 809 - ITAT BANGALORE] we remit this issue to the AO for verification of the agre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder, the AO has given credit of TDS less as against reflected in Form 26AS - HELD THAT:- We direct the AO verify and grant credit of TDS as appearing in Form 26AS in accordance with law after giving a reasonable opportunity of being heard. Forex loss addition - AO proposed a disallowance on the ground that no evidence was provided to substantiate the same - DRP deleted the addition - HELD THAT:- AO completely ignored the detailed workings on forex loss. Having mentioned in the order that sample invoice copies were submitted, the AO erred in contending that no evidences were provided by the assessee. DRP rightly appreciated that evidences demonstrating foreign exchange loss had been submitted and that the same cannot be said to be contingent liability. Decided against assessee. - IT(TP)A No.641/Bang/2016 And IT(TP)A No.642/Bang/2016 - - - Dated:- 11-11-2022 - Shri George George K., Judicial Member And Ms. Padmavathy S, Accountant Member For the Revenue : Shri Sri.Pradeep Kumar, CIT(DR)(ITAT), Bengaluru For the Assessee : Shri T. Suryanarayana, Advocate ORDER PER BENCH These cross appeals by the assessee and revenue are directed against final asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relief to the Assessee, the Revenue too has filed an appeal [IT(TP)A No.641/Bang/2016]. We shall first adjudicate assessee s appeal. IT(TP)A No.642/Bang/2016 (Assessee s appeal) 6. The assessee in the memorandum of appeal has raised 9 grounds and several sub-grounds pertaining to the transfer pricing adjustment which reads as follows and we will first adjudicate the same:- I. Transfer pricing 1. Order/ Directions bad in law and on facts 1.1 The order issued by the Joint Commissioner of Income-tax (`JCIT'), Large Tax Payers Unit (`LTU'), Bangalore [(`Assessing Officer') or (`A0')], under section 143(3) read with section 144C (13), pursuant to the directions issued by the Hon'ble Dispute Resolution Panel [`DRP' / Ld. Panel], is bad in law and on facts and is in violation of the principles of natural justice. 1.2 Without prejudice to the generality of the above, the order issued by the AO is bad in law insofar as the fact that the AO did not issue to Dell India Private Limited (`DIPL'), 'the Appellant or 'the Company'), a show cause notice, as per proviso to section 92C(3) of the Income-tax Act, 1961 ['the Act' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. Panel erred in upholding the actions of the AO/ TPO. 3. Determination of arm's length price by the TPO in relation to the Marketing Support Services segment (`MSS Segment') 3.1 The AO/ TPO erred in law in applying arbitrary filters to arrive at a fresh set of companies as comparables to the Appellant, without establishing functional comparability. The Ld. Panel erred in upholding the actions of the AO/ TPO. 3.2 The AO/ TPO erred in facts in arbitrarily rejecting companies based on their financial results without considering the functional comparability. The Ld. Panel erred in upholding the actions of the AO/ TPO. 3.3 The AO/ TPO also erred on facts in erroneously computing the margins of the assessee and companies identified as comparable by the TPO. The Ld. Panel erred in upholding the actions of the AO/ TPO. 4. Determination of arm's length price by the TPO in relation to the impugned ITeS Segment 4.1 The Ld. Panel and the AO/ TPO erred in law in applying arbitrary filters to arrive at a fresh set of companies as comparables to the Appellant, without establishing functional comparability, such as, (i) companies whose data for financial year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pital, (iv) risk profile and (v) working capital adjustment to account between the Appellant and the comparable companies. 8. Variation of 5% from the arithmetic mean The AO/ TPO erred in law in not granting the benefits of proviso to section 92C(2) of the Act available to the Appellant. 9. Relief The Appellant prays that the AO be directed to grant all such relief arising from the preceding grounds as also all relief consequential thereto. Bifurcation of marketing and business support services segment into ITES and MSS segments (Ground Nos.I(2) to I (4) and I(6) to I(7)) 7. The Assessee provides business support services to Dell Global B.V. Singapore Branch (DGBV) in relation to the products sold by the said entity to its customers in India. The business support services comprise of the following services: - Telephonic support services; - Marketing support services; and - Logistic support services. 8. The Assessee provides telephonic support services for standard problems to the customers who purchase the products sold by DGBV in India. In case an on-site service is required, the Assessee send third party service provider for such services. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We will look at the definition of ITES as defined in Rule 10TA(e) of the Income-tax Rules, 1962, which reads as under: information technology enabled services means the following business process outsourcing services provided mainly with the assistance or use of information technology, namely:- (i) back office operations; (ii) call centres or contact centre services; (iii) data processing and data mining; (iv) insurance claim processing; (v) legal databases; (vi) creation and maintenance of medical transcription excluding medical advice; (vii) translation services; (viii) payroll; (ix) remote maintenance; (x) revenue accounting; (xi) support centres; (xii) website services; (xiii) data search integration and analysis; (xiv) remote education excluding education content development; or (xv) clinical database management services excluding clinical trials, but does not include any research and development services whether or not in the nature of contract research and development services; 13. From the above definition, it is evident that merely because services are rendered using IT medium, they cannot be termed as ITES. We also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... benchmarked as Marketing Support Service. Accordingly, the TPO's benchmarking analysis with regard to Marketing Support Service would be considered applicable for this integrated Market Support Business Support Services. The TP analysis made by the TPO by taking comparables relating to IES segment are here by rejected. The TPO is accordingly directed to recompute the adjustment in line with the above direction. We also note here, that in view of the above, the objections raised in 22-26, against comparability analysis of comparables relating to ITES functions are rejected as infructuous. 7.8.2 The functions performed by the assessee under this segment are prima facie identical for the concerned assessment year and for the assessment year 2013-2014. For assessment year 2013-2014, when the DRP had held that services rendered by the assessee are in the nature of marketing and support services and since no appeal preferred by the Revenue to the ITAT, the matter had attained finality. Therefore, we are of the view that the entire TP issue raised under marketing support services segment needs to be examined afresh by the AO / TPO in the light of the DRP s directions for asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal in assessee s own case (supra) for has considered the issue of adjustment towards warranty cost and held as under 8.7. We have heard rival submissions and perused the material on record. The assessee had submitted that the amount of Rs.211.42 crore does not pertains to the sales made by the AEs in India and it pertains solely to the sales made by the assessee. The DRP in its directions held that the assessee was to show that expenses in relation to providing support services for AEs warranty obligation are either reduced from the cost or accounted for separately. The DRP in fact directed that since the services in relation to the warranty obligations are provided by third party service providers and the assessee is only coordinated for the same, no mark up is warranted. The relevant finding of the DRP in this regard reads as follows:- 6.6.6 The assessee is directed to demonstrate to the TPO that the above reimbursement has either been reduced from the costs or accounted for separately. In absence of such demonstration, the TPO can take the above to be a part of the warranty costs debited to the P L account and effect suitable adjustment. Since the services related ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not established. However, the DRP directed the AO to allow the actual expenditure of Rs. 224,26,51,541/- incurred towards warranty expenditure for which evidence was submitted by the Assessee. Aggrieved, the assessee is in appeal before the Tribunal. 24. The ld. AR made detailed written submission in this regard the extract of which is given below (i) The assessee has a scientific method of creating the provision and submits that the actual expenses incurred in servicing the customers under warranty period are being utilized from the warranty provision created for such purpose. The details are as follows:- Particulars Amount (INR) Opening balance of provision for warranty (A) 129,25,48,000/- Add: Provision for warranty created during the year (B) 216,52,00,176/- Less: Actual expenses incurred during the year (C) (224,26,51,541/-) Closing balance of provision for warranty (D) = A+B-C 121,50,96,466/- (ii) The methodology followed by the assessee in estimating the warrant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, in effect, leads to the same being credited to the Profit and Loss account in the subsequent year. j. Detailed submissions as regards the methodology of creating the provision is made before the AO in the submissions dated 23.01.2015 (at pages 559-564 of Volume 2 of the paper book)accompanied by complete back-up workings of the provision (at pages 577-581 of Volume 2 of the paper book). (iii) It is submitted that this issue is covered by the decisions of this Hon ble Tribunal in the Assessee s own case for the assessment year 2009-10 (Order dated 18.03.2022 passed in IT(TP)A No. 269/Bang/2014)- please see pages 906-909 of the caselaw compendium; and Assessee s own case for the assessment year 2010-11 (Order dated 18.08.2022 passed in IT(TP)A Nos. 562 and 400/Bang/2015) -at pages 955-961 of the caselaw compendium. 25. Without prejudice, the detailed invoice-wise listing of actual expenses incurred of Rs. 216.52 crores were produced before the AO vide submission dated 23.01.2015 at page 582-719, Volume 2 of the paper book, and therefore, it is submitted that the deduction ought to be allowed 26. The ld. DR supported the order of the DRP. 27. We have considered the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te before us that the basis on which the provision for warranty was made was identical in AYs 2002-03 2003-04 as well as in AY 2005-06. The Tribunal has in the appeal for the AYs 2002-03 2003- 04 after considering the method of providing for warranty liability by way of a provision, specified that the provision made was based on past history and was on scientific method of estimating liability on account of warranty claims. It is clear from the chart which has been extracted in the order of assessment that as and when the period of warranty expires, the assessee writes back the provision made in the books of account to the extent it relates to the warranty liability which the assessee does not incur and which was already provided by way of a provision and allowed as deduction in the past. It appears to us that the provision made by the assessee is scientific and is based on past history. We are also of the view that in view of the parity of basis of provision of warranty in AYs 2002-03 2003-04 and AY 2005-06, the ruling of the Tribunal in AYs 2002-03 2003-04 is squarely applicable to AY 2005- 06 also. For the reasons stated above, we do not find any merit in ground No. 3 ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovision for warranty as a deduction.' 12.5.2 There is no dispute before us that the basis on which the provision of warranty was made in assessment years 2002-2003, 2003-2004 and 2005-2006 as well as in the relevant assessment year is identical. The Tribunal in the above mentioned orders for assessment years 2002-2003, 2003-2004 and 2005-2006 after considering the method of providing for warranty liability by way of a provision, specified that the provisions made was based on past history and was a scientific method of estimating liabilities on account of warranty claims. For the relevant assessment year also, there are automatic reversals of the provision when products goes out of warranty period. For the purpose of estimating the warranty provision, the assessee takes into account only those units in respect of which the warranty period has not expired as on the date of estimation of provision. Accordingly, the system would automatically exclude those products for which the warranty period has expired and include only those products (i.e. products sold in past for which warranty period has not expired and products sold during the year with a warranty commitment) for which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue (finding reproduced supra at para 12.5.1). 12.5.4 As regards ITAT's order for assessment year 2005-2006, the issue of provision warrant arose in the Revenue's appeal before this Tribunal in IT(TP)A No. 1838/Bang/2013. Vide order dated 13-10-2017, the Tribunal dismissed the Revenue's appeal (finding reproduced supra at para 12.5). In the appeal filed by the Revenue before the Hon'ble High Court of Karnataka against the said order, the Revenue did not raise any ground on provision for warranty (copy of Hon'ble High Court judgment CIT v. Dell International Services India (P.) Ltd. [IT Appeal No. 236 of 2018, dated 9-11-2018] is placed on record). In view of the aforesaid reasoning and following the orders of the Tribunal in assessee's own case for assessment years 2002-2003, 2003-2004 and 2005-2006, we direct the A.O. to allow provision for warranty as a deduction. It is ordered accordingly. 28. We notice that the method of creation of warranty provision has not undergone change and is consistent with what is described in para 12.5.2 of the above order. Respectfully following the decision of the coordinate bench in assessee s own case we direct the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he AO made a disallowance of Rs. 50,10,07,784/-. 32. Before us, the ld. AR submitted that the sum of Rs. 50,10,07,784 represents rebate payment to distributors on which the provisions of TDS are not applicable. It was further submitted that the Assessee is in the business of manufacture and trading of computers along with related accessories that are sold goods through its distributors by adopting two models for distribution as described under: A. Bill to Order Under this model, the distributor undertakes to collate orders from the prospective customers on behalf of the Assessee and acts as an agent between the customer and Assessee for which the distributor earns commission at a prescribed rate on every successful order. The Assessee is ultimately responsible for all the risks and reward arising from such orders after the same is accepted. The entire obligation pertaining to fulfilment of orders is on the Assessee and not the distributor. The Assessee deducts applicable taxes at source on such commission paid to the distributors under bill to order model. B. Stock and Sell (SNS) In this model the distributors purchase final products from the Assessee at its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and gets compensated on a commission basis. The second model is where the products are sold to the distributor and the distributer get a rebate in the products purchased based on the business volume. When the relationship between the assessee and the distributor is on a principal to principal basis, the rebate /volume discount given by the assessee on the price of products sold to distributer cannot be characterized as commission in order to attract section 194H of the Act thereby there is no liability to deduct tax at source. We notice that the Hon ble jurisdictional High Court has expressed a similar view in the case of Bharti Airtel Ltd (supra) where it is held that 51. From the aforesaid clauses, it is clear that there is no relationship of principal and agency. On the contrary, it is expressly stated that the relationship is that of principal to principal. Secondly the Distributor/Channel Partner has to pay consideration for the Product supplied and it is treated as sale consideration. There is a Clause, which specifically states that after such sale of Products, the Distributor/Channel Partner cannot return the goods to the assessee for whatever reason. It is the Channe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tly followed by the appellant year-on-year should be accepted. Right to receive 3.5 The learned AO and the Honourable DRP has erred in not appreciating the fact that as per the terms of sale, the customer has an option to cancel the contract and seek refund of money. No cost incurred 3.6 The learned AO has erred in placing reliance on the order for AY 2010-11, wherein it was contended that, the appellant has deferred only the revenue and no corresponding cost has been deferred. 3.7 He ought to have appreciated the fact that there would be no associated costs (except Software License cost which is deferred) incurred during the current year in respect of services to be rendered in future. 3.8 The learned AO and the Honourable DRP ought to have appreciated that recognizing the entire consideration as income during the current year would tantamount to taxing the gross receipts and not the profits or gains arising from such sale. 3.9 Notwithstanding and without prejudice to the above, we submit that, should the deferred revenue be taxed in the current year, corresponding deduction for the costs to be given in order to tax the net profits and not the gross receip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dia in such year, accrues or arises or is deemed to accrue or arise to him in India during such year. It is submitted that during the year under consideration, to the extent of Rs. 139,17,21,213/-, no income accrued to the Assessee. In the Assessee s case, as the obligation to provide the warranty services which could involve outflow of resources like goods(spares) and services are yet to occur and hence, in line with the generally accepted accounting principles, revenue is recognized on a straightline basis over the period of contract. Any portion of consideration for which invoices have been raised but, some portion of the contract period pertains to subsequent year would be classified under other liabilities and the same would be recognized as revenue in the year in which obligation to provide the services arise . To illustrate, say the Company sells a laptop in December 2010 along with warranty for two years. In such a case, proportionate revenue towards warranty services for four months would be accounted in FY 2010-11 and the balance would be carried forward to the next two years and offered to tax based on time proportion. Thus, though the full consideration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We notice that the coordinate bench in assessee s own case for AY 2010-11, has dealt with a similar issue and held that 31. We heard the rival submissions and perused the materials on record. The main ground on which the DRP confirmed the order of AO is that the amount received towards warranty is not refundable even when the customer cancels the warranty agreement. The relevant extract from the DRP order reads as under Having heard the assessee we find that the assessee has stated that the amount so received on account of installation services and upsell warranty services was part of the goods sale process and not refundable to the payers even if the service could not be ultimately utilized by the customer. Even where such customer opts to cancel using the service being offered by assessee, the unutilized balance was not refundable. Thus, the amount paid was for outright purchase of services and not an advance to be appropriated against future use of the service. The assessee acquires the absolute right to utilize the amount so received. Thus, the income crystallizes as soon as a customer makes payment. The right to receive the income vests with the assessee as soon as th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raised pertaining to the year under consideration and the balance portion of the contract period that pertains to subsequent year is classified under other liabilities . The revenue thus deferred is recognized in the year in which obligation to provide the services arise. In Assessee s case, as the obligation to provide the warranty services which could involve outflow of resources like goods(spares) and services are yet to occur and hence it is submitted that in line with the generally accepted accounting principles, the revenue is recognized on a straight line basis over the period of contract. Under the Act, income accrues or arises when the assessee acquires a right to receive the same and the right to receive is coupled with the liability on the other party to make the payment. Further in relation to contracts for services extending beyond the financial year 2009-10 under consideration, the Assessee is under a contractual obligation to render the service to the customer in the subsequent years and the same would involve outflow of cost/resources for the Assessee. It is also important to note that, in case the contract is cancelled, the Assessee is liable to refund the conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eration to the rival submissions. Similar issue had arisen for consideration in the case of Punjab Tractors Co-op. Multipurpose Society Ltd. (supra) before the Hon'ble Punjab Haryana High Court. In that case the facts were that the assessee was engaged in the purchase and sale of tractors, motor cycles, etc., and doing their repairing. It had received advances from the buyers of tractors to cover their service charges for a period of one year after the expiry of initial warranty period. It had shown same on the liability side in the balance sheet for the assessment year 1978-79 under the head 'Post-Warranty Service Advances' (PWS Advances). It used to make adjustment of the amount received from PWS Advances Account to the Workshop Income Account during the quarter in which the work of repairs and services was done, and included the amount so adjusted as income of the relevant year. Out of the aggregate amount shown in PWS Advances Account, the Assessing Officer treated proportionate sum for the period covered as the assessee's income for the assessment year in question. The Commissioner invoked section 263 and held that the entire amounts received in the previous ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion sets. In the previous year ending 31st March, 1983, and 31st March, 1988 corresponding to the assessment years 1983-84 and 1988-89, respectively, the assessee had collected service charges, which were bifurcated into two items, one as pertaining to year and another pertaining to the subsequent assessment year and, therefore, excluded from consideration in determining the total income of year. The Assessing Officer treated it as income and taxed the same. The Tribunal has held that it is not taxable income. On a reference the Hon'ble Court held the amount that was received was only as charges for the services to be rendered in future. The services may be rendered or may not be rendered depending upon withdrawal of the money as and when the customer required. So, it is highly uncertain as to whether it would at all remain as income of the assessee. Only when the service is done the assessee has a right over the amount that was deposited. Till then, he has no right over the same. It is in that sense till then, it cannot be considered as an income of the assessee and is not eligible to tax. 95. The Mumbai ITAT in the case of IOT Infrastructure Energy Services Ltd. (supra) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e deleted. Gr.No.19 is accordingly allowed. 35. In the light of the decision of the coordinate bench of the Tribunal and considering the facts of the case as discussed above, we are of the view that claim of the assessee deserves to be accepted and the addition made by the AO as confirmed by the DRP is hereby deleted. This ground accordingly is allowed in favour of the assessee. 45. Respectfully following the decision of the coordinate bench we hold that the claim of the assessee deserves to be accepted and the addition made by the AO as confirmed by the DRP is hereby deleted. This ground accordingly is allowed in favour of the assessee. Disallowance of Marked to Market (MTM) Losses Ground No. II (4) 46. The relevant ground reads as under 4. Mark to Market Loss (MTM) - Rs. 284,364,000 4.1 The learned AO has erred in disallowing Mark to Market (MTM) loss on hedging transaction amounting to Rs 284,364,000 without appreciating the fact that such losses are incurred to mitigate foreign exchange fluctuation risk in relation to imports and the same is revenue in nature. 4.2 The learned AO has erred in considering the MTM loss as notional/contingent in nat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e AO by holding that in view of section 144C(13) of the Act, no further opportunity could be given to the assessee and the verification of details of earlier years was not possible. 50. The ld AR submitted that According to the Accounting for Derivatives as issued by the Institute of Chartered Accountants of India ( ICAI ) in March 2008, a company is required to provide for losses in respect of all outstanding derivative contracts as at the Balance Sheet date by marking them to market. The same is in line with the principle of prudence as enunciated in AS-1 Disclosure of Accounting Policies issued by the ICAI as well as notified under Section 145(2) of the Act. The fundamental principle of accrual, as recognized in AS-1, rests on the basic premise of recognition of expenses incurred during the year, even though the same may be discharged at a future date. If the same were to be disregarded and allowed only at the time of settlement, it would amount to rejecting the method of accounting adopted by the Assessee and substituting the same, in part, by cash method which is not justified. Hence, it is submitted that the recognition of MTM losses in the books of ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,10,11,994, which was offered to tax by netting off the same against the exchange loss for the year and a net exchange loss of Rs. 15,49,68,827 was debited to the profit and loss account. However, in the draft assessment order passed for the said AY, the AO had disallowed the gross amount of Rs. 24,59,80,821 and thereby accepting the accounting policy and the tax treatment given by the company on gain from MTM contracts amounting to Rs. 9,10,11,994. Without prejudice, if the MTM loss were to be disallowed, reversal of the said loss in the subsequent year should not be assessed to tax. 51. The ld AR submitted that the issue is covered by the decision of this Hon ble Tribunal in the Assessee s own case for AY 2009- 10(Order dated 08.04.2022 passed in M.P. Nos. 22 23/Bang/2022 in IT(TP)A Nos. 130 121/Bang/2014). 52. We heard the DR. We notice that the coordinate bench in assessee s own case (supra) has considered the issue of allowability of MTM losses and held that We notice that the Tribunal is consistently taking the view that the loss arising on revaluation of outstanding forward contracts entered to safe guard the underlying revenue assets cannot be considered as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O has erred in disallowing an amount of Rs. 6,213,963 out of the deduction claimed under section 40(a)(ia) of the Act during the current year without appreciating the fact that that details of TDS were submitted for a substantial amount of 27.51 crores out of the total disallowance of Rs. 28.13 crores. 55. During the course of assessment, the AO called for details of repairs and maintenance charges, sub-contracting charges and advertisement charges paid, along with details of tax deduction at source. Out of the total expenses debited of Rs. 199,29,17,376/, the assessee has provided evidence of TDS/ TDS not applicable for substantial sum of Rs. 198,96,59,335/-. However, for certain expenses as listed below, considering the volume of transactions, the assessee had not submitted the details of TDS and the AO made a disallowance of Rs. 32,54,369/- for want of evidence. Nature of expense Amount debited (INR) Evidence for TDS given (INR) Difference (INR) Repairs Maintenance 17,26,42,144/- 17,12,73,102/- 13,69,042/- Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ival submissions and perused the material on record. While we are not inclined to accept the contention advanced on behalf of the Appellant that an assessee cannot be directed to produce bills/supporting documents pertaining to entire amount of expenses claimed as deduction, we are also alive to the possible burden an assessee would be subjected to during the assessment proceedings in case such a direction is issued to the assessee. However, in cases where the bills and/or supporting documents called for during the assessment proceedings are not furnished, or have been furnished but the same are not found to be sufficient or satisfactory by the assessing officer, the assessing officer would, in our view, be justified in calling for any/all details and/or bills supporting documents as the Assessing Officer may deem fit. We note that the Appellant is under obligation to maintain proper books of accounts including voucher and documents to support the claim of expenditure. The Appellant has been subjected to statutory as well as tax audit for the relevant assessment year, and no qualifications regarding accounting systems followed by the Appellant or the books of accounts maintained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rect the AO verify and grant credit of TDS as appearing in Form 26AS in accordance with law after giving a reasonable opportunity of being heard. 62. Ground no. 7 and 8 are consequential and does not warrant separate adjudication. IT(TP)A No.641/Bang/2016 (Revenue s appeal) 63. Ground No.1 to 6 of the revenue appeal is with regard to the transfer pricing adjustment. These grounds do not warrant separate adjudication in view of the decision on the TP issues while considering the assessee s appeal in paragraph 14 herein above. 64. In corporate issues Ground no. (i) pertains to the forex loss addition deleted by the DRP. For the financial year 2010-11, an amount of Rs. 54,95,55,000/- was debited to the profit and loss account which is a net result of all kinds of foreign exchange loss/gain during the year i.e. loss/gain on realization of foreign currency amounts on account of transactions in foreign currency as well as re-statement of foreign currency balances as on the period closure as per the prescribed accounting policy being consistently followed by the Assessee 65. The AO proposed a disallowance of forex loss of Rs. 54,95,55,000/- on the ground that no evidenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee and is not notional or contingent in nature. Before the AO, the assessee had submitted the following: ledger extracts showing the accounting entries for forex gain/loss for the financial year 2008-09; Sample invoices the process adopted in accounting the forex gain/loss for each of the foreign currency transaction; voluminous back-up workings including monthly Foreign Currency Trial Balance substantiating the net forex gain or loss booked in the forex ledger extracts; Sample copies of intercompany summary extracts showing the invoice value in foreign currency for various transactions etc. 23.5.2 The AO completely ignored the detailed workings on forex loss. Having mentioned in the order that sample invoice copies were submitted, the AO erred in contending that no evidences were provided by the assessee. The DRP rightly appreciated that evidences demonstrating foreign exchange loss had been submitted and that the same cannot be said to be contingent liability. 23.5.3 Therefore, ground 5 is dismissed. 68. It is noticed that in the year under consideration the assessee has made relevant submissions in this regard before the AO at page 565- 557 of Vo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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