2018 (3) TMI 1862 - AT - Income Tax

TP Adjustment - assessee has not prepared segmental accounts initially and hence it could furnish only unaudited segmental accounts before TPO - HELD THAT - TPO has rejected the same doubting about its reliability. Subsequently, the assessee has prepared proper segmental accounts and got it audited and furnished the same before the learned CIT(A). We notice that the CIT(A) has refused to admit the same for technical reasons. As held by the Coordinate Bench in the case of Smt. Avan Gidwani 2016 (4) TMI 809 - ITAT MUMBAI the additional evidences furnished by the assessee in the form of audited segmental accounts may be vital documents that may be required to adjudicate the issue in judicious matter, particularly in view of the fact that the TPO has changed the methodology altogether to determine the ALP of international transactions. We admit the additional evidences. Since, the issue is required to be examine afresh, as per the plea of learned DR, we restore the issue relating to determination of arm s length price to the file of Assessing Officer/TPO for examining it afresh by duly considering the additional evidences furnished by the assessee. After hearing the assessee, they may take appropriate decision in accordance with the law. TP adjustment required to be made at entity level or to be restricted with the transactions entered between AE - HELD THAT -This issue has since been decided in the case of CIT Vs. M/s. Thyssen Krupp Industries India P. Ltd. 2015 (12) TMI 1076 - BOMBAY HIGH COURT wherein it was held that the adjustments should be restricted to transactions between the parties. CIT(A) has not adjudicated this issue. Since we have restored the matter relating to determination of arm s length price to the file of the AO/TPO, we prefer to restore this issue also to them. Deduction of foreign exchange loss on revaluation of debtors/creditors and advances/losses balances as at the year end - HELD THAT - Since facts relating to the claim of the assessee are already available on record, we admit the additional ground raised by the assessee. Since the same requires examination at the end of the Assessing Officer, we restore the same to the file of the AO with the direction to examine the same by duly considering accounting policy consistently followed by the assessee and take appropriate decision in accordance with law.

Summary

Issues:
1. Transfer Pricing Adjustment - Entity Level vs. Transactions
2. Rejection of Additional Evidences under Rule 46A
3. Deduction of Foreign Exchange Losses

Transfer Pricing Adjustment - Entity Level vs. Transactions:
The appeal concerned the determination of Transfer Pricing (TP) adjustments at the entity level or limited to transactions between associated enterprises. The Tribunal noted that the CIT(A) did not address this issue. Referring to a decision by the Bombay High Court, the Tribunal decided to restore this issue to the Assessing Officer (AO)/Transfer Pricing Officer (TPO) along with the matter of determining the arm's length price.

Rejection of Additional Evidences under Rule 46A:
The assessee requested the admission of audited segmental accounts as additional evidence, which the CIT(A) refused on technical grounds. The Tribunal, citing a precedent, admitted the additional evidence, emphasizing the importance of considering vital documents for a fair adjudication. The issue of determining the arm's length price was restored to the AO/TPO for re-examination based on the additional evidence.

Deduction of Foreign Exchange Losses:
The assessee sought a deduction for foreign exchange losses arising from revaluation of balances at year-end. Citing relevant legal precedents, the Tribunal admitted the additional ground raised by the assessee. The issue was remanded to the Assessing Officer for further examination, directing a review of the consistent accounting policy followed by the assessee.

In summary, the Tribunal addressed the issues of Transfer Pricing Adjustment methodology, admission of additional evidences under Rule 46A, and the deduction of foreign exchange losses. The Tribunal restored the matters to the Assessing Officer for re-examination, emphasizing the importance of fair adjudication and compliance with legal principles. The appeal was treated as allowed for statistical purposes, ensuring the assessee's right to be heard adequately.