2020 (8) TMI 925 - AT - Income Tax

TP Adjustment - AE s transaction by adopting internal TNMM - HELD THAT - We remand the matter back in the present two years also to AO/TPO to undertake fresh analysis to bench mark the AE s transaction by adopting internal TNMM in preference to external TNMM and if the assessee is able to establish that he has undertaken similar international transaction with AE and non-AE in the same countries, external benchmarking will be done otherwise the AO/TPO will act in accordance with law. The entire TP issue in both the years is restored back to AO/TPO with the above directions for fresh decision by a speaking and reasoned order after affording reasonable opportunity of being heard to the assessee. Disallowance out of club expenses - We find that learned CIT(A) has decided the issue in cryptic manner without any discussion in respect of any judicial pronouncement on this issue. The judgment as noted above is very much relevant for deciding this issue and since the entire TP issue is being remanded to the AO/TPO for a fresh decision, we feel it proper to remand this issue also to the file of AO for a fresh decision after considering all judicial pronouncements on this issue along with the judgments noted above after allowing reasonable opportunity of being heard to the assessee and the AO should pass a speaking and reasoned order on this issue also. Accordingly, ground 2 is allowed for statistical purposes in both years.

Summary

Issues:
1. Transfer Pricing adjustment made by the AO
2. Disallowance of club expenses as capital in nature

Transfer Pricing Adjustment:
The appeals were filed against the common order of the CIT(A) for Assessment Years 2009-10 and 2010-11. The assessee raised grounds regarding TP adjustment and disallowance of club expenses. The assessee argued for adopting internal TNMM over external TNMM based on earlier Tribunal orders. The Tribunal referred to its previous orders and remanded the matter back to the AO/TPO for fresh analysis using internal TNMM. The Tribunal emphasized maintaining consistency and directed a speaking and reasoned order after affording a reasonable opportunity to the assessee.

Disallowance of Club Expenses:
The assessee raised the issue of disallowance of club expenses as capital in nature. The assessee argued that relevant judgments, including those of the Bombay High Court, were not considered by the AO or CIT(A). The Tribunal noted the lack of discussion on judicial pronouncements by the CIT(A) and decided to remand the issue back to the AO for a fresh decision. The Tribunal directed the AO to consider all judicial pronouncements on the issue, including the relevant judgments, and pass a speaking and reasoned order after allowing a reasonable opportunity for the assessee to be heard. Ground 2 was allowed for statistical purposes in both years, and both appeals of the assessee were allowed for statistical purposes.

In conclusion, the Tribunal remanded both the TP adjustment and the disallowance of club expenses issues back to the AO/TPO for fresh analysis and decision, emphasizing the importance of considering relevant judicial pronouncements and maintaining consistency with previous Tribunal orders.