2016 (6) TMI 1369 - AT - Income Tax

Adjustment made u/s 92CA - HELD THAT - As regards adjustment made u/s 92CA of the Act, we are of the considered opinion that in the immediately preceding assessment year i.e. 2010-11, DRP deleted the addition on account of interest payment to AE in identical circumstances. We do not find any reason to take a different view in the current assessment year. Accordingly, we direct the TPO to follow the directions given by the DRP in the assessment year 2010-11 for this year also. Disallowance of the claim u/s 80JJAA - AO has disallowed the claim by holding that the assessee company had not employed new employees more than 100 during the previous year relevant to assessment year under consideration - HELD THAT - On a perusal of the provisions of section 80JJA of the Act, which is extracted below, we do not find that any such condition is imposed in the said provision. As requires to be satisfied that all other conditions mentioned in provisions of section 80JJA are fulfilled before allowing deduction u/s 80JJA of the Act. Therefore, this ground of appeal is also rest

Summary

Issues:
1. Disallowance of claim under section 80JJAA of the Income-tax Act, 1961.
2. Transfer pricing adjustment in respect of interest paid to Associated Enterprise.
3. Application of LIBOR rates for loans taken in previous years.
4. Compliance with directions of the Dispute Resolution Panel (DRP).
5. Interpretation of conditions for deduction under section 80JJAA.

Analysis:

Issue 1: Disallowance of claim under section 80JJAA
The appellant challenged the disallowance of the claim under section 80JJAA, contending that the lower authorities erred in holding that the new regular workmen employed should be more than 100. The tribunal observed that section 80JJAA allows a deduction of 30% of additional wages paid to new regular workmen without imposing a specific requirement of employing over 100 new employees. The matter was remanded back to the Assessing Officer for fresh adjudication in line with the provisions of the law.

Issue 2: Transfer pricing adjustment
The Transfer Pricing Officer (TPO) suggested an adjustment under section 92CA for interest paid to the Associated Enterprise. The Dispute Resolution Panel (DRP) directed the TPO to verify facts, but the appellant argued that the TPO did not comply with the DRP's directions. The tribunal noted that a similar addition for the previous assessment year was deleted by the DRP, and hence directed the TPO to follow the DRP's directions from the prior year.

Issue 3: Application of LIBOR rates
The appellant contested the application of LIBOR rates prevalent during a different financial year for loans taken in earlier years. The tribunal agreed with the appellant that the rates should align with the loan-taking dates and not the financial year in which the interest was calculated. This discrepancy was highlighted for further consideration.

Issue 4: Compliance with DRP directions
The tribunal emphasized the importance of the TPO adhering to the directions provided by the DRP, especially when similar issues had been resolved favorably for the appellant in previous assessments. Non-compliance with DRP directions was noted as a violation of procedural fairness and natural justice.

Issue 5: Interpretation of conditions for deduction under section 80JJAA
The tribunal clarified that while section 80JJAA does not mandate employing over 100 new regular workmen, all other conditions specified in the provision must be met for claiming the deduction. The appellant's appeal on this ground was allowed for further review by the Assessing Officer.

In conclusion, the tribunal partly allowed the appeal for statistical purposes, remanding certain issues back to the Assessing Officer for fresh adjudication and emphasizing compliance with legal provisions and previous directions.