2023 (7) TMI 975 - AT - Income Tax

TP Adjustment - As argued AO has made TP adjustment in spite of the fact the TPO has passed an order u/s. 92CA r.w.s. 254 of the Act clearly stating the transfer pricing adjustment to be NIL - HELD THAT - We accept this contention of the ld. AR and direct the AO to pass consequential order to the TPO s order dated 18.1.2023 considering the TP adjustment at Nil. The ground of the assessee on this issue is allowed. Disallowance u/s. 14A - HELD THAT - We are of the opinion that though the AO in the computation of total income has noted the relief allowed by the ITAT, yet he has retained the addition of Rs. 1,37,500. Since the addition u/s. 14A has been deleted by the Tribunal vide order cited supra, we direct the AO to pass consequential order. Deduction u/s. 80G - HELD THAT - AO has not dealt on the aspects, prima facie, considered the contributions as not voluntary but a legal obligation and has accepted the genuineness of the contributions. We are of the opinion, that the matter has to be considered for examination and verification of facts subject to the assessee satisfying the requirements of claim u/s. 80G of the Act. Accordingly, we restore the entire disputed issues to the file of A.O. for fresh examination and verification. TDS u/s 195 - Disallowance u/s. 40(a)(ia) - secondment of employees - HELD THAT - Respectfully following the views expressed in Abbey Business Services India (P.) Ltd.'s case 2020 (12) TMI 570 - KARNATAKA HIGH COURT , Cholamandalam MS General Insurance Co. Ltd.'s case 2009 (1) TMI 19 - AUTHORITY FOR ADVANCE RULINGS , Mark Spencer Reliance India (P.) Ltd. 2013 (11) TMI 317 - ITAT MUMBAI , Faurecia Automotive Holding 2019 (7) TMI 402 - ITAT PUNE , we are of the view that the reimbursement made by the assessee in India to overseas entity, towards the seconded employees cannot be regarded as Fee For technical Services Since the Tribunal on an earlier occasion for the AYs 2011-12 to 2014-15 2015-16 to 2018-19 has held that there is no violation of provision of section 195, assessee cannot be held to be an assessee in default u/s. 201(1) of the Act, there is no question of disallowance of any expenditure u/s. 40(a)(ia) of the Act.

Summary

Issues Involved:
1. Transfer Pricing Adjustment
2. Disallowance under Section 14A
3. Deduction under Section 80G
4. Disallowance under Section 40(a)(ia)

Summary:

1. Transfer Pricing Adjustment:
The Tribunal addressed ground Nos. 2 & 3 regarding a transfer pricing adjustment amounting to Rs. 61,43,50,100. The assessee argued that the AO erroneously made a TP adjustment despite the TPO's order stating the adjustment was NIL. The Tribunal accepted this contention and directed the AO to pass a consequential order considering the TP adjustment at NIL.

2. Disallowance under Section 14A:
The assessee contested the disallowance of Rs. 1,37,500 under Section 14A, arguing that no exempt income was earned during the financial year. The Tribunal, referencing its earlier decision and judicial precedents, directed the AO to delete the addition as no exempt income was earned by the assessee.

3. Deduction under Section 80G:
The assessee claimed a deduction of Rs. 1,12,60,750 under Section 80G, which the AO disallowed. The Tribunal noted that the AO failed to verify the details and documents furnished by the assessee. The Tribunal directed the AO to pass a consequential order in compliance with its earlier direction to verify the claim.

4. Disallowance under Section 40(a)(ia):
The Tribunal examined the disallowance of Rs. 48,25,91,738 related to the secondment of employees. The assessee argued that the reimbursement of salary was on a cost-to-cost basis and had already suffered TDS under Section 192, negating the need for further TDS under Section 195. The Tribunal, referencing its earlier decision and multiple judicial precedents, held that the reimbursement did not constitute "fees for included services" and directed the deletion of the addition under Section 40(a)(ia).

Conclusion:
The appeal was partly allowed for statistical purposes, with the Tribunal directing the AO to pass consequential orders in line with its findings on each issue.