2019 (7) TMI 379 - AT - Income Tax

TP adjustment - determining arm's length price of Head Office General Administrative expenses eligible to be claimed u/s 44C - HELD THAT - Though TPO has determined the arm's length price of the Head Office expenditure allocated to the assessee at nil, however, ultimately there is no financial implication on the issue as the assessee had not claimed such expenditure as deduction either in the Profit Loss account or the computation of income. AO has also not made any addition in the assessment order. In aforesaid view of the matter, the issue raised in this ground is of mere academic importance, hence, we do not consider it necessary to delve any further into the issue. However the merits of the issue i.e., whether the Transfer Pricing Officer is competent to determine the arm's length price of the Head Office, General and Administrative expenditure at Rs. Nil, is an important legal issue which has to be decided keeping in view the provisions of the Act as well as relevant case laws. Therefore, while making it clear that we have not expressed any opinion on the merits of the issue as raised in this ground, we leave it open for adjudication if the issue arises in assessee s case for any other assessment year in future. With the aforesaid observations, the ground raised is dismissed as infructuous. Levy of interest under section 234C - HELD THAT - Transaction could not be completed due to a technical glitch at RBI s payment gateway. This fact was communicated to the assessee by its banker. In fact, the banker also issued a certificate to this effect. Thus, from the facts on record it is evident, insofar as the assessee is concerned, it had made the payment of advance tax on the due date i.e., 15th June 2009. The transaction relating to the aforesaid payment could not be completed on 15th June 2009, for reasons beyond the control of the assessee. Therefore, the delay of one day in making payment of advance tax is not attributable to the assessee. That being the case, levy of interest under section 234C is unjustified. Since all the factual details relating to the payment were available before Commissioner (Appeals), she should have adjudicated the issue on merit instead of directing the AO to verify. Accordingly, we direct the Assessing Officer to delete the interest charged under section 234C of the Act. Ground is allowed.

Summary

Issues:
1. Determination of arm's length price of Head Office General & Administrative expenses under section 44C of the Income-tax Act, 1961.
2. Levy of interest under section 234C of the Act.

Issue 1: Determination of arm's length price of Head Office General & Administrative expenses under section 44C of the Income-tax Act, 1961:

The appeal was filed challenging the order passed by the Commissioner (Appeals) regarding the assessment year 2010-11. The Transfer Pricing Officer found that an amount was allocated to the assessee by the Associated Enterprise towards Head Office, General, and Administration expenses. Despite the assessee justifying the expenditure, the Transfer Pricing Officer determined the arm's length price at nil due to lack of satisfactory evidence. The Assessing Officer observed that the assessee did not claim the expenditure in the Profit & Loss account or as a deduction. The issue was considered of academic importance as no financial implication arose. The Tribunal did not delve further into the issue but highlighted the importance of deciding the competence of the Transfer Pricing Officer to determine the arm's length price for future assessment years. The ground was dismissed as infructuous.

Issue 2: Levy of interest under section 234C of the Act:

The Assessing Officer charged interest under section 234C for non-payment of advance tax. The assessee contended that a technical issue caused a one-day delay in payment, which was beyond their control. The Assessing Officer rejected the claim to reduce or waive the interest. The Tribunal found that the delay was not attributable to the assessee and the interest levy was unjustified. The Tribunal directed the Assessing Officer to delete the interest charged under section 234C. The ground challenging the interest levy was allowed, and the appeal was partly allowed.

In conclusion, the Tribunal addressed the issues of determining the arm's length price of expenses and the levy of interest under section 234C. The Tribunal highlighted the importance of future assessments in determining the competence of the Transfer Pricing Officer. The Tribunal ruled in favor of the assessee regarding the interest levy, directing the Assessing Officer to delete the interest charged.