2015 (10) TMI 998 - AT - Income Tax

Transfer price adjustment - upward adjustment of ALP - contention of the Ld. A.R. was that for the purpose of determining the ALP for the transactions related to the assessee company with that of its AEs, internal comparison would be more appropriate than the external comparison - Held that - Assessee has produced all the relevant materials to arrive at the segmental profitability with the assessee s AEs. This avowal of the Ld. A.R. had been objected by the Ld. D.R. The Ld. A.R. further submitted that the assessee had produced a certificate from the Chartered Accountant with respect to the segmental financial breakup relating to profitability with AE and non-AE transactions.Considering these facts and circumstances of the case, we are of the considered view that the matter is required to be remitted back to the file of the Ld.TPO to once again verify as to whether the segmental financial break up relating to profitability from AEs and non-AE are available to the satisfaction of the Revenue. If the assessee is able to establish the same, then the Ld. TPO shall pass appropriate order as per law and merits considering the case laws cited by the Ld. AR herein above - Decided in favour of assessee for statistical purposes. Disallowing U/s. 40(a)(ia) - A.R. submitted that the amount was expenses incurred during the assessment year 2008-09 which was already disallowed by the Revenue for non-deduction of tax in that assessment year and Revenue had inadvertently disallowed the same once again - Held that - D.R agreed before us that the matter may be sent back to the file of Ld. Assessing Officer to verify the contention of the Ld. A.R., and if the same was double disallowance, then the addition made based on such disallowance may be deleted. Considering the submissions of both the Ld. A.R. and the Ld. D.R, in the interest of justice we hereby remit back the matter to the file of Ld. Assessing Officer to verify the contention of the Ld. A.R. and if it is found to be in order then the addition made based on such disallowance for the relevant assessment year shall be deleted. - Decided in favour of assessee for statistical purposes.

Summary

Issues involved:
1. Transfer pricing adjustment - upward adjustment of ALP for Rs. 2,32,79,189.
2. Disallowance under section 40(a)(ia) for Rs. 15,20,849.

Issue 1 - Transfer pricing adjustment - upward adjustment of ALP for Rs. 2,32,79,189:
The appellant contested the adoption of the entity level margin of 23.21% instead of the A.E segment margin of 45.41% for determining the Arm's Length Price (ALP). The Revenue argued that the appellant did not maintain books of accounts as per Rule 10D, hindering verification of segmental profits with AEs and unrelated parties. The appellant provided ALP registers and profit details, advocating internal comparison for ALP determination. The Tribunal noted discrepancies and remitted the matter to the TPO for reevaluation, emphasizing the need to verify segmental financial data.

Issue 2 - Disallowance under section 40(a)(ia) for Rs. 15,20,849:
The appellant challenged the disallowance of Rs. 15,20,849, contending it was already disallowed in the previous assessment year, resulting in duplicity. The Revenue acknowledged the possibility of double disallowance and agreed to reassess the matter. The Tribunal decided to remit the issue back to the Assessing Officer for verification and potential deletion of the addition. Consequently, the appeal was allowed for statistical purposes.

The judgment highlighted the importance of maintaining accurate financial records for transfer pricing assessments and emphasized the need for thorough verification before making disallowances to prevent duplicity. The case laws cited by the parties underscored the significance of consistent application of transfer pricing principles and adherence to procedural requirements for tax assessments.