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TMI Blog2019 (6) TMI 1738X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the addition on account of IT Services Charges of Rs. 2,82,35,265/-, ignoring that on similar issue for A.Y. 200809, the Hon'ble ITAT has restored the matter to the file of the AO for fresh verification?" 3. "Whether on the facts and circumstances of the case and in law, the Ld. CIT (A) erred in deleting the disallowance of Rs. 7,85,222/- u/s 14A ignoring that AO has clearly recorded in his order that he is not satisfied with the quantum of expenses allocated by the assessee against exempt income?" 4. The appellant craves leave to add, amend or alter any of the above grounds of appeal." 3. Before us, at the outset, ld. Counsel for the assessee brought our attention to the grounds and submitted that the Revenue questioned the decision of the CIT (A) in matters relating to (i) correctness of the cost plus method as not the most appropriate method (MAM); (ii) revenue nature of IT services charges incurred by the assessee and (iii) the deletion of disallowance u/s 14A of the Act. 4. Mentioning that the identical issues, which were adjudicated by the Tribunal for various assessment years including the immediate preceding assessment year 2012-13, ld. Counsel brought ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (PLI) with respect to its domestic segment of the traded spares @ 136.15% wherein the PLI in the case of the export of the traded spares to AE is @46.02%. With the result, the TPO made the adjustment of Rs. 1,56,00,000/- to the assessee's international transaction of export of spares." The Co-ordinate Bench of the Pune Tribunal on the issue has held and observed as follows: "7. With regard to the first ground, at the time of hearing, the Ld. AR of the assessee invited our attention to the Para 2.1.1 to 2.1.4 at pages 10 to 18 of the Ld. CIT(A)'s order wherein on the issue as per the reasons appearing therein, Ld. CIT (A) has provided relief to the assessee which is on record. The Ld. AR submitted that TPO has made an addition while determining ALP of the international transactions relating to the Equipment Division. The assessee has adopted TNMM as the most appropriate method for determining ALP. The TPO held that the cost plus method is the more suitable than TNMM. However, the Ld. CIT (A) has held that TNMM is to be applied following the order of the Co-ordinate Bench, ITAT in assessee's own case for assessment year 2008-09 to 2010-11. The ITAT has held that TNMM is th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... GMM Pfaudler Ltd., 'the two concerns are not functionally comparable. Now, looking at the margins of balance four concerns which were selected by the assessee and as pointed out by the learned Authorized Representative for the assessee that the margins of said concerns are much below the margins shown by the assessee at 19.48% and consequently, no adjustment is to be made in the hands of assessee on this account. We also accept the aggregation approach applied by the assessee under the said equipment division as similar aggregation approach has been applied by the TPO in all the earlier years and even by the Tribunal in assessment year 2008-09 Consequently, we delete the addition of Rs. 8,87,590/- made in the division of export of equipments." 14. In view of similarity of the issue, we apply the parity of reasoning as in assessment year 2009-10 to decide the issue in favour of the assessee. The TPO is thus, directed to exclude five concerns i.e. Axtel Industries Ltd., Anup Engineering Ltd., Thermax Ltd., Walchandnagar Industries Ltd. and GMM Pfaudler Ltd. and after excluding the said comparables, the average margin of balance comparables work to 14.01% against which, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... para 5 to 8 of the order of the Tribunal (supra) and the same are extracted hereunder :- "5. With regard to ground No. 2 in the grounds of appeal, the Ld. AR of the assessee submitted that the issue has been restored back to the file of the Assessing Officer for verification in assessee's own case in the aforesaid decision in ITA No. 2638/PUN/2016 for the assessment year 2011-12. 6. We have perused the case records and analyzed the facts and circumstances in this case. This issue relates to the deletion of disallowance of IT service charges. That in our decision in assessee's own case in ITA No. 2638/PUN/2016 for the assessment year 2011-12, we have observed and held as follows: "17. We have perused the case record and heard the rival contentions. We find that in assessee's own case for assessment year 2008-09 and 2010-11, this issue has been remitted back to the file of Assessing Officer for verification. Relevant part of the order in ITA No. 1351/PUN/2015 for assessment year 2010-2011 wherein the order of Tribunal for assessment year 2008-09 has considered is as under: "16. In the facts relating to the issue, the assessee during the year under cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer for fresh verification. The direction given by the Tribunal to assessment year 2008-09 are required to be followed. Considering the same and perusing the said order of the Tribunal (supra), we are of the opinion the said issue is remanded with identical direction to the file of the Assessing Officer for fresh adjudication. The Assessing Officer shall decide the issue afresh after granting reasonable opportunity of being heard to the assessee. Accordingly, ground no. 2 and 2a raised by the Revenue is allowed for statistical purposes. 10. Ground no. 3 relates to the disallowance u/s 14A of the Act. In this regard, ld. Counsel brought our attention to the contents of para 9 of the assessment order and submitted that the satisfaction recorded by the Assessing Officer is identical to that of the satisfaction recorded by the Assessing Officer for the assessment year 2012-13. The ld. Counsel for the assessee, bringing our attention to para 9 and 10 of earlier order of the Tribunal in assessee's own case for the assessment year 2012-13 (supra), submitted that this issue is squarely covered in favour of the assessee by the said decision of the Tribunal (supra). 11. O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ermined the amount of expenditure in relation to such income by applying rule 8D of the Rules. Ostensibly, the action of the Assessing Officer cannot be upheld unless he has complied with the pre-requisite of invoking rule 8D of the Rules, namely, recording of an objective satisfaction with regard to the claim of the assessee that an expenditure of Rs. 5,00,000/- has been incurred in relation to the exempt income, is incorrect. In order to examine the aforesaid compliance with the pre-condition, we have perused the para 4 to 4.2 of the assessment order and find that no reasons have been advanced as to why the disallowance determined by the assessee was found to be incorrect, having regard to the accounts of the assessee. The only point made by the Assessing Officer is to the effect that "the said disallowance was not acceptable". In-fact, we find that the assessee made detailed submissions to the Assessing Officer, which have been reproduced by the CIT (A) in para 3.2.1 of his order. As per the assessee, the determination of disallowance u/s 14A of the Act of Rs. 5,00,000/- was based on the employee costs and other costs involved in carrying out this activity. Further, as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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