9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2023 (10) TMI 1376 - AT - Income TaxTP adjustment - imputing interest on outstanding receivables from AEs - HELD THAT - There has to be a proper inquiry by the ld TPO by analyzing the statistics over a period of time to discern a pattern which would indicate that vis-a-vis the receivables for the supplies made to an AE, the arrangement reflects an international transaction intended to benefit the AE in some way. On perusal of the orders of the Tribunal in assessee s own case for earlier years, this aspect of the decision Kusum Healthcare 2017 (4) TMI 1254 - DELHI HIGH COURT had not been addressed in those years. Further whether the ld TPO had examined the pattern of receivables from the AE by the assessee is also not discernable. Hence, we are in agreement with the ld DR in principle on this issue. But we find that the AR had also made an alternative argument that assessee had already recovered alleged short fall on account of delayed receivables by way of excess service income received from its AE thereby obviating requirement for any further adjustment on account of notional interest on delayed receivables. The aforesaid working, in our considered opinion, requires factual verification of the ld AO/ TPO. Hence, we deem it fit to restore the entire issue in dispute to the file of the ld AO/ TPO to consider the applicability of the decision of Kusum Healthcare (supra) in its true spirit vis a vis the pattern followed by the assessee and also alternative argument made by the ld AR with regard to the aforesaid workings and decide the entire issue in accordance with law. AR also made an alternative argument with regard to the adoption of LIBOR 200 basis points as against 400 basis points by placing reliance on certain decisions. The ld AO/ TPO is also directed to examine this alternative argument of the ld AR while deciding this issue. Accordingly, ground Nos. 3 to 5 raised by the assessee are allowed for statistical purposes. Disallowance of deduction u/s 80G - donations made to various eligible institutions by the assessee - HELD THAT - It is not in dispute that contributions made by the assessee are made to eligible institutions which are enjoying exemption u/s 80G - The fact that those contributions were made only to eligible institutions are not in dispute before us. We find that all the institutions listed in the tabulation are enjoying exemption u/s 80G of the Act and accordingly, assessee would be entitled for deduction u/s 80G of the Act thereon, irrespective of the fact that it is made as part of CSR obligations. The assessee in the instant case had duly complied the provisions of Companies Act, 2013 read with CSR rules thereon and as per the provisions of the Income Tax Act had also voluntarily disallowed the CSR expenditure while computing the taxable income. Since, the donee institutions are eligible institutions enjoying exemption u/s 80G assessee has claimed deduction u/s 80G of the Act which is also provided in the statute itself to the assessee. Hence, denial of deduction u/s 80G of the Act to the assessee would result in gross injustice. We direct the ld AO to grant deduction u/s 80G to the assessee. Accordingly, the ground No. 6 to 6.6 raised by the assessee are allowed. Disallowance of employees contribution to PF and Labour Welfare fund (LWF) - HELD THAT - It is not in dispute that the employees contribution to provident fund and LWF were deposited by the assessee to the Government account beyond the due dates prescribed under the respective acts but well before the date of filing the return of income. We find that the recent decision of Checkmate Services Pvt. Ltd Vs. CIT 2022 (10) TMI 617 - SUPREME COURT decided issue in favour of revenue.
Issues Involved:
1. Transfer Pricing Adjustment 2. Denial of Deduction under Section 80G 3. Computation of Refund and Interest under Section 244A 4. Initiation of Penalty Proceedings under Section 270A 5. Disallowance of Employees' Contribution to PF and Labour Welfare Fund (LWF) Summary of Judgment: 1. Transfer Pricing Adjustment: The assessee challenged the transfer pricing adjustment made by the AO/TPO regarding imputing interest on outstanding receivables from AEs. The TPO considered these receivables as a separate international transaction and applied an interest rate of LIBOR plus 400 basis points. The Tribunal noted that the TPO did not receive invoice-wise details of outstanding receivables from the assessee and relied on the average balance method. The Tribunal referred to the Delhi High Court's decision in Kusum Healthcare, highlighting the need for a proper inquiry into the pattern of receivables. The Tribunal restored the issue to the AO/TPO for reconsideration, directing them to examine the pattern of receivables and the alternative argument regarding excess service income recovery. 2. Denial of Deduction under Section 80G: The assessee claimed deductions under Section 80G for donations made to eligible institutions, which the AO disallowed, arguing that CSR expenses mandated by law cannot be considered voluntary donations. The Tribunal found that the contributions were made to eligible institutions and directed the AO to grant the deduction, emphasizing that denial would result in gross injustice. 3. Computation of Refund and Interest under Section 244A: The assessee challenged the computation of interest on refund under Section 244A. The Tribunal directed the AO to reconsider the claim and compute the interest in accordance with the law. 4. Initiation of Penalty Proceedings under Section 270A: The initiation of penalty proceedings under Section 270A was deemed premature for adjudication and thus dismissed. 5. Disallowance of Employees' Contribution to PF and Labour Welfare Fund (LWF): The revenue appealed against the deletion of the addition made on account of disallowance of employees' contribution to PF and LWF. The Tribunal referred to the Supreme Court's decision in Checkmate Services Pvt. Ltd, which held that such contributions must be deposited on or before the due date specified in the respective laws. The Tribunal allowed the revenue's appeal, upholding the disallowance. Conclusion: The appeals of the assessee for AYs 2017-18 and 2018-19 were allowed for statistical purposes, and the appeal of the revenue for AY 2018-19 was allowed. The Tribunal directed the AO/TPO to reconsider the transfer pricing adjustments and the computation of refund interest while granting the deduction under Section 80G and upholding the disallowance of employees' contributions to PF and LWF.
|
