2014 (1) TMI 172 - AT - Income Tax

Addition on account of Arm s Length Price Purchases made from Indian branch to its AE Held that - Following Income-tax Officer, Ward 16(3), New Delhi Versus Tianjin Tianshi India (P.) Ltd. 2011 (5) TMI 669 - ITAT DELHI - Once the transactions involved are international transactions within the meaning of section 92B(1) of the Act, the Transfer Pricing Provisions have rightly been involved - the issue pertaining to transfer pricing remitted back to the files of the Assessing Officer Decided in favour of Assessee. Disallowance u/s 40(a)(iii) of the Act Delay in deposition of taxes Salaries paid to expatriate employees withheld Held that - The TDS amount deducted should be paid on or before the due date specified in sub-section (1) of section 139, and if the amount is paid after the due date specified in sub-section (1) of section 139, such sum shall be allowed as deduction in computing the income of the previous year in which such tax has been deducted - this will also apply to deduction u/s. 40(a)(iii) thus, the issue is remitted back to the file of the Assessing Officer - The Assessing Officer shall allow the salary expenditure if the amount of tax deducted at source has been paid on or before the date specified in sub-section (1) of section 139 Decided in favour of Assessee.

Summary

Issues:
1. Addition of Rs. 9,06,95,297/- on account of Arm's Length Price.
2. Disallowance of Rs. 30,58,627/- under section 40(a)(iii) of the Act.

Analysis:

1. Addition of Rs. 9,06,95,297/- on account of Arm's Length Price:
The appellant contested the addition made by the Assessing Officer regarding the Arm's Length Price, arguing that the provisions of Chapter X of the Income Tax Act were not intended for transactions where there was no possibility of shifting taxable income outside India. The Tribunal decided to remit this issue back to the Assessing Officer for further verification and decision, allowing the appellant an opportunity to present their case adequately. The Departmental Representative cited a previous decision in favor of the Revenue, while the appellant's counsel sought to present arguments against this decision, leading to the Tribunal's decision to revisit the issue.

2. Disallowance of Rs. 30,58,627/- under section 40(a)(iii) of the Act:
Regarding the disallowance under section 40(a)(iii), the Assessing Officer disallowed the expenditure due to a delay in depositing taxes withheld from salaries paid to expatriate employees. The appellant argued that the section did not specify a time limit for tax payment and referred to relevant case laws to support their contention. The Dispute Resolution Panel (DRP) affirmed the disallowance, emphasizing the importance of timely tax deposits. However, upon review, the Tribunal referred to the provisions of section 40(a)(ia) and concluded that the tax deducted should be paid by the due date specified in the Act for deduction to be allowed. The Tribunal remitted this issue back to the Assessing Officer for further consideration, ensuring the appellant's right to be heard.

In conclusion, the Tribunal allowed the appeal for statistical purposes, indicating a favorable outcome for the appellant. The detailed analysis of both issues demonstrates the Tribunal's thorough examination of the legal arguments presented and the decision-making process followed to ensure procedural fairness and adherence to relevant tax laws and precedents.