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2025 (3) TMI 1085 - AT - Income TaxTP Adjustment - allocation of software cost received from its Associated Enterprises - HELD THAT - We find considerable cogency in the contention of the Ld. AR that the instant issue is fully covered by the order of the Coordinate Bench of the Tribunal in assessee s own case for A.Y. 2014-15 2021 (12) TMI 1428 - ITAT DELHI wherein the coordinate Bench upheld that the reimbursement received at cost does not require any mark-up. Further it is noted that Hon ble Supreme Court in the case of Engineering Analysis Centre of Excellence Pvt. Ltd. 2021 (3) TMI 138 - SUPREME COURT had also upheld the reference to OECD guidelines being persuasive in nature. In view of the aforesaid discussions and respectfully the aforesaid precedents we deem it fit and proper to direct the AO/TPO to delete adjustments in respect of reimbursement received. Accordingly Ground are allowed. Adjustment u/s. 92CA(3) - allocation of reimbursement received from its Associated Enterprises - HELD THAT - We find considerable cogency in the contention of the Ld. AR that the instant issue is fully covered by the order in assessee s own case for A.Y. 2014-15 2021 (12) TMI 1428 - ITAT DELHI wherein upheld that the reimbursement received at cost does not require any mark-up. It is noted that in this case the assessee relied on OECD guidelines which support that no mark-up is chargeable in reimbursements. Thus we deem it fit and proper to direct the TPO to delete such adjustment in respect of reimbursement received. Adjustment u/s. 92CA(3) on account of Corporate Guarantee Fee from AE - HELD THAT - We find considerable cogency in the contention of the Ld. AR that the instant issue is fully covered by the order of the Coordinate Bench of the Tribunal in assessee s own case for A.Y. 2014-15 wherein the coordinate Bench upheld the corporate guaranteed rate @0.25%. Adjustment on account of Inter unit Transfer Technical Textile Business Kashipur Division - assessee submitted that assessee s methodology was rejected without providing any reason - HELD THAT - We find considerable cogency in the contention that assessee s methodology was rejected without providing any cogent reason. In our view in various judicial precedents CUP method has been preferred over TNMM. Segmental margin of TTB segment computed by TPO @6.28% is incorrect as the segmental margin from the segmental results of assessee is 12.14% and hence no adjustment is warranted in any case. Accordingly we direct the TPO to delete the adjustment. Adjustment on account of Chemical Polymer Business - HELD THAT - Assessee s methodology was rejected without providing any cogent reason. In various judicial precedents CUP method has been preferred over TNMM. Segmental margin of CPB segment computed by TPO@ (-) 1.37% is incorrect as the segmental margin from the segmental results of assessee is reported at 33.34%. As further noticed that the PLI of eligible unit as computed by TPO is 16.32% which is again lower than the CPB segment s correct PLI. We further find force in the contention of the Ld. AR that DRP erred in computing the adjustment twice Rs. 40.23 lacs on cost side and Rs. 17.82 lacs on revenue side thus incorrectly applying the TNMM method. This issue needs proper verification by the TPO on the basis information supplied by the assessee we direct the TPO to determine the ALP on the basis of CUP method. Transfer of power by Captive Power Plant (CPP) at Bhiwadi - HELD THAT - Various judicial pronouncements advocated the adoption of SEB rates for benchmarking the electricity transfer and Rule of Consistency has also been followed by the assessee before Ld. DRP. The data of various discom rates obtained u/s 133(6) were not available in public domain hence cannot be used. It is also noted that no opportunity was given to examine and rebut the data. In view of the Tribunal decision in the case of Technimont ICB P Ltd. 2012 (7) TMI 1172 - ITAT MUMBAI we observed that assessee s internal CUP to be preferred over an external CUP which was not done. It is brought to our notice that in AY 2014-15 and AY 2015-16 similar bench marking was carried by the assessee adopting the CUP method based on SEB rates which was accepted by the AO in AY 2014-15 and on the basis of CBDT instruction no 3/2016 in AY 2015-16. Hence for the sake of bench marking the correct ALP on the electricity charges we are inclined to remit this issue back to the file of AO/TPO to redo the bench marking based on the decision of Jindal Steels and others 2023 (12) TMI 417 - SUPREME COURT and as per law. Purchase of Electricity from VRETPL - HELD THAT - Copy of sample invoices of power purchase by assessee from Tamil Nadu State Electricity Board (SEB) as an evidence to depict that the purchase rate of SEB is way higher than the rate charged by VREPL. We further note that detailed note explaining the basis of pricing of electricity and the benchmarking of the same in contrast to the rate of electricity purchase by the assessee from the SEB and the date of various discom rates obtained u/s 133(6) not available in public domain hence it cannot be used. Tribunal decision in the case of Technimont ICB P Ltd. 2012 (7) TMI 1172 - ITAT MUMBAI assessee s internal CUP to be preferred over an external CUP which was not done hence no adjustment is warranted in any case. Hence for the sake of bench marking the correct ALP on the electricity charges we are inclined to remit this issue back to the file of AO/TPO to redo the bench marking by following the decision of Hon ble Supreme Court in the case of Jindal Steel and others 2023 (12) TMI 417 - SUPREME COURT case and as per law. Sale of Electricity by WPP unit at Tamilnadu - HELD THAT - It is brought to our notice that in AY 2013-14 and 2014-15 the assessee had bench marked by adopting CUP method based on EB purchased by assessee for other units from Tamil Nadu State Electricity Corporation the same was accepted by the TPO and in AY 2015-16 accepted on the basis of CBDT instruction no 3/2016. Hence for the sake of bench marking the correct ALP on the electricity charges we are inclined to remit this issue back to the file of AO/TPO to redo the bench marking based on the decision of Jindal Steel and others 2023 (12) TMI 417 - SUPREME COURT case and as per law. Hence Ground Nos.40 to 43 are allowed as indicated above. Disallowance of deduction u/s. 32AC - assessee submitted that there is no requirement of certificate for claiming the deduction u/s 32AC - HELD THAT - We find that the assessee has submitted the relevant information on the claim of investment in new plant and machinery during the year. We direct the AO to consider the various information de novo after giving the proper opportunity of being heard to the assessee. The claim made by the assessee cannot be rejected mechanically and the assessee has made huge investments in the plant and machinery in order to claim the benefit u/s 32AC of the Act. Therefore we are remitting these grounds back to file of AO. Disallowance u/s. 14A - HELD THAT - We find considerable cogency in the contention of the AR that the instant issue is fully covered by the order of the Coordinate Bench of the Tribunal in assessee s own case for 2006-07 2007-08 2008-09 2010-11 2012-13 wherein the Bench deleted the similar additions. Disallowance of weighted deduction u/s. 35(2AB) - HELD THAT - Coming to the final assessment order the AO has wrongly disallowed all the deductions claimed by the assessee including the old 4 approved facilities. Therefore we direct the AO to allow the genuine claim of the assessee relating to approved facilities and disallow the excess deductions claimed by the assessee for the Gurgaon facility alone. In the result grounds raised by the assessee are partly allowed. Disallowance of all the deductions claimed by the assessee including the old 4 approved facilities - HELD THAT - As we direct the AO to allow the genuine claim of the assessee relating to approved facilities and disallow the excess deductions claimed by the assessee for the Gurgaon facility alone. In the result grounds raised by the assessee are partly allowed. Disallowance of depreciation of goodwill - HELD THAT - We find considerable cogency in the contention of the Ld. AR that the instant issue is fully covered by the order of the Coordinate Bench of the Tribunal in assessee s own case for years 2009-10 2012-13 2014-15 2015-16 wherein the Bench upheld that goodwill is an intangible asset and eligible for depreciation. Disallowance on account of inventories written off - HELD THAT -The assessee has failed to submit the rationale for claiming separately the write off of inventory. Therefore the submissions of the assessee are not appealing to us and we are inclined to sustain the additions made by the AO. Case relied by the assessee are on the facts that the relevant assessee s claimed the revaluation of inventory for reduction in the value of closing stock and the AO has rejected the same on the basis of non submission of item wise details or for other reasons. The Courts have decided the issues in favour of the assessee. The facts in the present case is distinguishable to facts of those decisions relied by the assessee. In the result grounds raised by the assessee are dismissed. Disallowance on account of software expenses - HELD THAT - We find considerable cogency in the claim of the assessee. It is settled law that the software expenses are allowable expenses which are recurring in nature and are meant to renew every year. Therefore we are inclined to direct the AO to delete the above software expenses. In the result the grounds raised by the assessee are allowed. Additional claim made with respect to allowance of additional depreciation @ 10% u/s. 32(1)(iia) - HELD THAT - We find considerable cogency in the contention of the AR that the instant issue is fully covered by the order of the Coordinate Bench of the Tribunal in assessee s own case for different assessment years specifically Assessment Year 2015-16 wherein the Bench remitted back the issue to the file of the AO and AO had allowed / granted its appeal effect order dated 22.03.2023 - we deem it fit and proper to remit back the issue to the file of the TPO with the similar directions.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment include:
2. ISSUE-WISE DETAILED ANALYSIS Transfer Pricing Adjustments The Tribunal considered various transfer pricing adjustments made by the Assessing Officer (AO) and Transfer Pricing Officer (TPO) concerning international transactions and specified domestic transactions. The Tribunal found that many of these adjustments were not justified, particularly where reimbursements were made at cost without any markup. The Tribunal relied on precedents from the assessee's own case in previous years and OECD guidelines, which suggest that no markup is required on cost-to-cost reimbursements. Relevant Legal Framework and Precedents The Tribunal referred to the OECD guidelines and previous decisions from the assessee's own case, which established that reimbursements at cost do not require a markup. The Tribunal also considered the Supreme Court's ruling in the case of Engineering Analysis Centre of Excellence Pvt. Ltd. vs. CIT, which upheld the reference to OECD guidelines as persuasive. Application of Law to Facts The Tribunal applied these principles to the facts of the case, concluding that the adjustments made by the AO and TPO were not warranted. The Tribunal directed the deletion of several adjustments, including those related to software expenses and reimbursement of expenses. Corporate Tax Issues The Tribunal addressed several corporate tax issues, including the disallowance of deductions under sections 32AC, 35(2AB), 80-IA, and 80-IC. The Tribunal found that the AO and DRP had erred in disallowing these deductions without proper justification or consideration of the evidence presented by the assessee. Key Evidence and Findings The Tribunal noted that the assessee had submitted substantial evidence to support its claims, including certificates from Chartered Accountants and documentation of investments in plant and machinery. The Tribunal found that the AO had failed to consider this evidence adequately. Depreciation of Goodwill and Inventory Write-offs The Tribunal considered the issue of depreciation on goodwill and inventory write-offs. It found that the assessee was entitled to depreciation on goodwill as an intangible asset, relying on precedents from the assessee's own case in previous years. However, the Tribunal upheld the disallowance of inventory write-offs due to a lack of satisfactory explanation from the assessee. Additional Claims and Procedural Issues The Tribunal addressed additional claims made by the assessee during assessment proceedings, including claims for additional depreciation and education cess deductions. The Tribunal found that these claims were either not pressed or were covered by precedents, and directed the AO to reconsider them in light of the evidence. 3. SIGNIFICANT HOLDINGS Core Principles Established
Final Determinations on Each Issue
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