2021 (7) TMI 892 - AT - Income Tax

TP Addition - application of the TNMM as the most appropriate method - HELD THAT - As found as an admitted position that the facts and circumstances of the instant appeal are similar to those of the earlier years. Tribunal has passed orders starting from assessment year 2009-10 to 2015-16, whose copies have been placed on record. In the lead order, which has been followed in later years, the application of the TNMM as the most appropriate method has been accepted in preference to the CUP method as applied by the TPO. After giving certain directions, matter has been sent back to the AO/TPO for deciding the issue accordingly. DR fairly conceded that the facts and circumstances of the instant appeal are mutatis mutandis similar to those of earlier years. Respectfully following the precedent, we set-aside the impugned order and remit the matter to the file of AO/TPO for deciding this issue afresh in accordance with the directions given by the Tribunal in assessee's own case for the earlier assessment years Deduction for Education Cess and Secondary and Higher Education Cess paid on income-tax while computing the Income from Business and Profession for the year under appeal - Admission of additional ground - HELD THAT - Having gone through the subject matter of the additional ground taken by the assessee, it is apparent that the same raises a pure question of law. We, therefore, admit the same. On merits, it is found that the issue raised through the additional ground is no more res integra in view of the judgment of Hon'ble jurisdictional High Court in Sesa Goa Lt. 2020 (3) TMI 347 - BOMBAY HIGH COURT in which it has been held that Education Cess is not disallowable expenditure u/s. 40(a)(ii) of the Act. Similar view was earlier taken by the Hon'ble Rajasthan High Court in Chambal Fertilisers and Chemicals Ltd. and Another 2018 (10) TMI 589 - RAJASTHAN HIGH COURT . We, therefore, direct the AO to ascertain the correct amount of education cess and then allow a deduction for it, after allowing opportunity of hearing to the assessee.

Summary

Issues:
- Condonation of delay in filing the appeal due to lockdown
- Dismissal of certain grounds not pressed by the appellant
- Transfer pricing addition confirmed by the AO
- Application of TNMM vs. CUP method in determining ALP
- Setting aside the impugned order and remitting the matter for fresh assessment
- Additional ground raised for deduction of Education Cess and Higher Education Cess
- Admissibility of additional ground by the Tribunal
- Merits of the additional ground based on legal precedents

Condonation of Delay:
The appellant's appeal was filed belatedly by 3 days, citing the lockdown due to COVID-19 as the reason. The delay was condoned as the ld. DR did not object, and the appeal was admitted for hearing and disposal on merits.

Dismissal of Grounds:
The ld. AR did not press ground Nos. 5 and 6 due to the smallness of the amount, resulting in their dismissal as "not pressed."

Transfer Pricing Addition:
The key issue in this appeal was against the confirmation of a transfer pricing addition of ?14,56,09,180. The TPO rejected the TNMM applied by the assessee and instead used the CUP method, resulting in a proposed adjustment. The AO incorporated this adjustment in the final assessment order, leading to the appeal before the Tribunal.

Application of TNMM vs. CUP Method:
The Tribunal found that the facts and circumstances of the current appeal were similar to earlier years where the TNMM was accepted as the most appropriate method over the CUP method. Following precedent, the impugned order was set aside, and the matter was remitted for fresh assessment in line with the Tribunal's directions in the assessee's earlier case.

Additional Ground for Deduction:
The appellant raised an additional ground seeking a deduction for Education Cess and Secondary and Higher Education Cess paid on income tax. The Tribunal admitted this ground, citing the jurisdiction to examine pure questions of law, especially if they impact the tax liability of the assessee.

Merits of Additional Ground:
Based on legal precedents, including judgments from the jurisdictional High Court, it was established that Education Cess is not disallowable expenditure. The AO was directed to ascertain the correct amount of education cess and allow a deduction after providing an opportunity of hearing to the assessee.

In conclusion, the appeal was partly allowed for statistical purposes, and the matter was pronounced in the Open Court on 15th July 2021.