9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2017 (5) TMI 1593 - HC - Income TaxTPA - Adjustment made in the Arms Length Price of international transaction by taking into account TNMM at entity level - Held that - Considering the fact that the TPO himself has admitted that assessee is a market leader and it will be extremely difficult to identify the comparables and the fact that neither in earlier years nor in subsequent years any adjustment has been made by comparing the results at entity level, we hold that the international transaction entered by the assessee with the AE even at entity level is at arm s length and therefore the adjustment made by the AO is not justified. See CIT ALWAR VERSUS M/S SAKATA INX (INDIA) LTD 2017 (5) TMI 1586 - RAJASTHAN HIGH COURT Addition on account of inventories written off - Held that - The disallowance confirmed by the ld. CIT(A) only for the reason that these items are not actually destroyed and is only a provision can t be upheld for the reason that item wise details of the same is filed, these are the identified items and have been subsequently destroyed as per the regular procedure followed. The write off for obsolesce of such identified items is allow able deduction as per the case laws relied by the Ld. AR. In fact no provision is created in books of accounts but only the nomenclature of provision for obsolesce is used. In the balance sheet also no such provision is appearing either in the liabilities side or as reduction from asset side not the Ld. D/R could point out any such provision in the balance sheet. Therefore the disallowance confirmed by the Ld. CIT(A) is deleted. Traveling expenses disallowance - Held that - Assessee has produced entire module, bill and vouchers of expenses for verification as desired. However, in making disallowance out of the above expenses after submission of month wise details of the expenses by the assessee,AO has not required assessee to furnish the details of any specific expenses. We also note that on these expenses, FBT is paid and that such adhoc disallowance is not made in the past and in A.Y. 07-08, the DRP has directed the AO not to make such adhoc disallowance. In these facts and circumstances, we direct the AO to delete the disallowance TDS u/s 194H - TDS liability on gifts and trade incentives - Held that - The observation of AO that services has been received by the assessee against these payment and therefore he should have deducted tax at source on the value of the gift is ill founded in as much as the payment is not against the services but against the sale of goods to the distributors and therefore TDS provisions are not applicable. Adhoc miscellaneous expenses disallowance not permissible - bills and vouchers of expenses as desired were produced for verification and examined on test check basis. - Assessee appeal allowed.
Issues Involved:
1. Adjustment for ? 15.75 crores in the Arms Length Price (ALP) of international transactions. 2. Deletion of addition of ? 8,28,35,757/- on account of inventories written off. 3. Deletion of addition of ? 50,00,000/- on account of traveling and conveyance expenses. 4. Deletion of addition of ? 36,70,04,056/- on account of advertisement and sales promotion expenses. 5. Deletion of addition of ? 16,17,24,306/- on account of gifts and trade incentives. 6. Deletion of addition of ? 50,00,000/- on account of miscellaneous expenses. Issue-wise Detailed Analysis: 1. Adjustment for ? 15.75 crores in the Arms Length Price (ALP) of international transactions: The Tribunal held that the adjustment for ? 15.75 crores made in the ALP of international transactions by taking into account the Transactional Net Margin Method (TNMM) at the entity level should be restricted to the international transactions and not the entire turnover. The Tribunal cited cases such as DCIT vs. Starlite, DCIT vs. Ankit Diamonds, and Huntsman Advanced Materials (India) (P.) Ltd. vs. DCIT to support its decision. The Tribunal concluded that the adjustment made by the TPO was incorrect and against the law, and thus, deleted the addition of ? 15.75 crores. 2. Deletion of addition of ? 8,28,35,757/- on account of inventories written off: The Tribunal noted that the details of inventory written off and the procedure for write-off were explained before the AO and found satisfactory. The Tribunal referred to its earlier decisions in the assessee's favor for previous assessment years, where similar issues were decided. The Tribunal concluded that the claim of inventory written off of ? 8,28,35,757/- is allowed, and the addition made by the AO is deleted. 3. Deletion of addition of ? 50,00,000/- on account of traveling and conveyance expenses: The Tribunal observed that the AO made a lump sum disallowance of ? 50,00,000/- out of the total expenses of ? 9,94,33,712/- without requiring the assessee to produce specific details. The Tribunal noted that the assessee had paid Fringe Benefit Tax (FBT) on these expenses, and such ad hoc disallowance was not made in the past. The Tribunal directed the AO to delete the disallowance of ? 50,00,000/-. 4. Deletion of addition of ? 36,70,04,056/- on account of advertisement and sales promotion expenses: The Tribunal found that the payment made to Group M Media India Pvt. Ltd. was to an Indian company and not a non-resident, and thus, Section 195 was not applicable. The Tribunal also noted that the AO did not dispute the genuineness of the payment. Regarding trade incentives, the Tribunal observed that similar incentives were allowed in earlier years and that the TDS provisions were not applicable. The Tribunal deleted the disallowance of ? 36,70,04,056/- and ? 16,17,24,303/- made by the AO. 5. Deletion of addition of ? 16,17,24,306/- on account of gifts and trade incentives: The Tribunal held that the AO's observation that the assessee should have deducted tax at source on the value of the gift was ill-founded. The Tribunal noted that the payment was against the sale of goods to distributors and not for services. The Tribunal deleted the disallowance of ? 16,17,24,303/- made by the AO. 6. Deletion of addition of ? 50,00,000/- on account of miscellaneous expenses: The Tribunal found that the AO made the disallowance without specifying any particular expenses that were not verifiable or not incurred wholly and exclusively for business purposes. The Tribunal noted that the AO had verified the bills and vouchers on a test-check basis. The Tribunal deleted the ad hoc disallowance of ? 50,00,000/- made by the AO. Conclusion: The appeal stands disposed of with all issues answered in favor of the assessee and against the department.
|
