2019 (7) TMI 1999 - AT - Income Tax

TP Adjustment - PLI of the assessee as determined by the TPO is 6.01% against the PLI of 8.90% of the comparables - HELD THAT - On the facts relating to the PLI of the assessee the TPO/Assessing Officer erroneously considered the PLI figure of 3.87% instead of 6.01%. This errors gave rise to the TP adjustment of Rs. 4, 94, 95, 000/-. If the figure of 3.87% is considered there shall be no TP adjustment warranted in view of the benefits of /-5%. Assessee submitted that this fact can be verified at the level of the AO/TPO. Considering the said factual position and subject to the verification of these claims of the assessee by the Assessing Officer the figure of 6.01% should be taken as PLI of the assessee at the entity level. In that case no adjustments are required in view of the facts that the average of PLI of the comparables qua the assessee s profits margin fall within the range of /-5% of the ALP. TPO/Assessing Officer is directed to verify the above figures of PLI of the assessee after giving opportunity to the assessee as per the settled principles of natural justice. Prior period expenses - treating the rebate allowed to a customer as prior period expense and thereby disallowing the same - HELD THAT - As evident that the relevant sales took place and duly accounted in the books in the assessment year 2005-06 and the assessee made an adjustment by way of rebate to the same in the current assessment year 2006-07. The income-tax authorities disallowed the claim of rebate in sales for want of the evidences leading to the grant of such rebate in sales and booking the same in the year under consideration. The assessee could not improve his case even before us. Considering the same we are of the opinion the order of the DRP and the AO is fair and reasonable on this issue and it does not call for any interference. Accordingly the relevant ground relates to the corporate addition is dismissed.

Summary

Issues:
1. Transfer Pricing Adjustments
2. Non-TP/General/Consequential Issues

Transfer Pricing Adjustments:
The appeal was filed against the Assessing Officer/TPO/DRP's order for the assessment year 2006-07. The assessee raised 16 grounds, with grounds 2 to 11 related to TP adjustments and grounds 1 and 12 to 16 related to other issues. The dispute revolved around correcting typographical mistakes in PLI-related calculations and granting benefits under section 92C(2) of the Act. The Assessing Officer proposed an addition of Rs. 4,73,14,991/- in the draft assessment order, which was confirmed by the DRP. The Tribunal in the first round restored the issue back to the DRP. In the second round, the Assessing Officer quantified adjustments of Rs. 4,94,95,000/- based on PLI discrepancies. The Tribunal found errors in the PLI figures considered by the TPO/Assessing Officer, leading to a TP adjustment. The Tribunal directed verification of the PLI figures and allowed the assessee's appeal on this ground, rendering other TP grounds academic and premature.

Non-TP/General/Consequential Issues:
Regarding non-TP issues, the DRP disallowed a prior period expense of Rs. 5,63,234/- claimed by the assessee as a rebate. The Tribunal upheld the disallowance, stating that the rebate was claimed in the current year for sales made in the previous year without sufficient evidence. The Tribunal dismissed other non-TP grounds either for not being pressed or being general, consequential, or premature. The appeal of the assessee was partly allowed, and the order was pronounced on July 17, 2019.