2015 (10) TMI 2723 - AT - Income Tax

Disallowance u/s 43B in respect of contribution to PF - Held that - For the AY 2002-2003 in the assessee‟s own case, wherein the Tribunal adjudicated the identical issue and allowed the assessee‟s claim u/s 43B of the Act. On perusal of the said decision of the Tribunal for the AY 2002-03 in the assessee‟s own case we direct the AO to examine and apply the ratio laid down in the said Tribunal‟s order. Disallowance of prior period expenses - Held that - As submitted that forfeiture of customs duty / lapse of duty drawback are allowable expenditure under section 37 of the Act. In support of this, he relied on various precedents. On hearing both the parties and on perusal of the relevant material placed before us, we find this matter should be remanded to the file of the AO with a direction to examine and adjudicate the issue afresh after affording a reasonable opportunity of being heard to the assessee. Accordingly, Ground no.2 is allowed for statistical purposes. Disallowance of unreconciled sundry creditors - Held that - AR submitted that even after repeated requests, the Revenue Authorities have not provided the relevant material filed by the creditors in response to the notice issued u/s 133(6) of the Act as well as the basis on which the amount debited by the assessee‟ has been arrived to determined the shortfall. As well, the Revenue Authorities also have not provided sufficient opportunity to furnish the reconciliation which is against the principle of natural justice. Considering the above, Ld AR requested to remand the matter to the file of the AO for fresh consideration and decision in the matter. Disallowance of travelling expenses for sales team - Held that - AR relied on the Apex Court judgment in the case of Calcutta Co Ltd 1959 (5) TMI 3 - SUPREME COURT wherein it has been held that any sum representing the estimated expenditure which had to be incurred by the assessee in discharging a liability. Alternatively, it is the submission of the assessee that since the expenses are actually incurred during the FY 2003-2004, the expenses should be allowed for AY 2004-05 corresponding to the FY 2003-2004 - this matter should also be remanded to the file of the AO to adjudicate the issue afresh Disallowance of expenses under the head advertisement and sales promotion - Held that - AR submitted that since, the assessee is method of accounting is mercantile system the treatment given by the assessee is correct and no disallowance is called for. After hearing Ld Representatives of both the parties, we find it relevant to remand the matter to the file of the AO to examine and adjudicate the issue after granting a reasonable opportunity of being heard to the assessee. Disallowance of travelling and conveyance expenses - Held that - In assessee s own case for the AY 2002-2003 wherein the identical issue was adjudicated by the Tribunal and restored the matter to the file of the AO with a direction to verify whether the plant and machinery were used for other than the manufacturing purpose, and directed to grant depreciation in case such plant and machinery were used. Therefore, it is prayed that considering the commonality of the issue, the matter may be decided in the same lines. Transfer Pricing adjustment made in respect of the international transaction related to import of finished goods - Held that - We remand this issue of most appropriate method to the file of the CIT (A) to decide the same after hearing the assessee and in the light of the order of the Tribunal for the AY 2002-2003. CIT (A) is also directed to pass a speaking order on the other aspects of benchmarking events i.e selection of comparables.

Issues Involved:

1. Disallowance of contribution to provident fund.
2. Disallowance of prior period expenses.
3. Disallowance of unreconciled sundry creditors.
4. Disallowance of travelling expenses.
5. Disallowance of advertisement and sales promotion expenses.
6. Disallowance of travelling and conveyance expenses.
7. Disallowance of depreciation on plant and machinery.
8. Transfer pricing adjustment related to import of finished goods.
9. Standard deduction on Arm's Length Price.

Detailed Analysis:

1. Disallowance of Contribution to Provident Fund:
The assessee contested the disallowance of Rs. 4,36,058/- under section 43B of the Act for contributions to the provident fund. The tribunal directed the Assessing Officer (AO) to apply the ratio from the Tribunal's order for AY 2002-03 in the assessee's own case, thereby allowing the claim.

2. Disallowance of Prior Period Expenses:
The AO disallowed Rs. 11,34,779/- as prior period expenses, which the CIT (A) confirmed. The tribunal remanded the matter back to the AO to examine and adjudicate afresh after providing a reasonable opportunity to the assessee.

3. Disallowance of Unreconciled Sundry Creditors:
The AO disallowed Rs. 35,64,988/- due to the assessee's failure to reconcile differences with creditors. The tribunal remanded the issue back to the AO to allow the assessee to furnish reconciliation and other relevant material.

4. Disallowance of Travelling Expenses:
The AO disallowed Rs. 11,62,250/- for lack of substantiation. The tribunal remanded the matter to the AO to reconsider the issue in light of the Apex Court judgment in Calcutta Co Ltd (37 ITR 1)(SC) and other relevant material.

5. Disallowance of Advertisement and Sales Promotion Expenses:
The AO disallowed Rs. 47,78,416/- due to insufficient details provided by the assessee. The tribunal remanded the issue back to the AO for fresh examination and adjudication after granting a reasonable opportunity to the assessee.

6. Disallowance of Travelling and Conveyance Expenses:
The assessee did not press this ground, leading to its dismissal.

7. Disallowance of Depreciation on Plant and Machinery:
The AO disallowed Rs. 14,53,206/- on the grounds that the plant and machinery were not put to use. The tribunal directed the AO to apply the decision from the Tribunal's order for AY 2002-03 in the assessee's own case and adjudicate afresh.

8. Transfer Pricing Adjustment Related to Import of Finished Goods:
The AO made an adjustment of Rs. 4,40,82,451/- using the Transactional Net Margin Method (TNMM) instead of the Resale Price Method (RPM). The tribunal remanded the issue back to the CIT (A) to decide in light of the Tribunal's order for AY 2002-03, considering whether the assessee is merely a distributor or involved in value addition and marketing intangibles.

9. Standard Deduction on Arm's Length Price:
The Revenue contested the CIT (A)'s relief of Rs. 9,70,700/- @ 5% of Arm's Length Price. The tribunal noted that the issue is covered by the amended provisions and remanded the related TP adjustments raised by the assessee to the AO. Accordingly, the Revenue's grounds were allowed.

Conclusion:
The assessee's appeal and cross-objection were allowed for statistical purposes, with several issues remanded for fresh adjudication. The Revenue's appeal was allowed. The tribunal emphasized the need for the AO and CIT (A) to reconsider the issues in light of prior Tribunal decisions and relevant legal principles.

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