2020 (1) TMI 722 - AT - Income Tax

TP Adjustment - ALP of royalty paid to the Associated Enterprises (AE) - HELD THAT - Identical dispute relating to the determination of arm s length price of royalty paid to the AE arose in assessment year 2010 11 and the Transfer Pricing Officer, on more or less on similar reasoning, has determined the arm s length price of royalty paid to the AE at nil. When the dispute ultimately came up for consideration before the Tribunal in the order referred to above, the Co ordinate Bench restored the issue back to the Assessing Officer/Transfer Pricing Officer - Thus we restore the issue back to the file of the Assessing Officer / Transfer Pricing Officer for fresh adjudication keeping in view the directions of the Tribunal as reproduced above Addition made of Sales Tax refund received under the incentive scheme - HELD THAT - Various documentary evidences which are part of record before us were either not available before the Departmental Authorities or even if available, were not considered by them. Since, learned DRP has made a categorical observation that various evidences were not furnished by the assessee to support its claim, we are of the view that the entire issue relating to assessee s claim of Sales Tax refund / subsidy being a capital receipt requires fresh consideration in the light of various documentary evidences, including, the MoU between the Government of Maharashtra and M M. Further, the assessee is also required to meet the allegation of learned DRP that various documentary evidences were not furnished to support its claim. The assessee is also required to properly explain the impact of the observations made in Annexure C to the eligibility certificate regarding eligibility of the assessee for payment of IPS. Since, all these aspects have not been considered properly for whatever may be the reason, we are inclined to restore this issue to the file of the Assessing Officer for de novo adjudication after providing reasonable opportunity of being heard to the assessee. The assessee is at liberty to furnish further evidences, if required, to prove its claim. The Assessing Officer must consider not only the evidences filed but also the submissions made by the assessee while deciding the issue. Grounds are allowed for statistical purposes.

Summary

Issues Involved:
1. Adjustment to the arm's length price (ALP) of royalty paid to the Associated Enterprises (AE).
2. Addition of Sales Tax refund received under the incentive scheme.
3. Set-off of long-term capital gain and income from other sources against current year's business loss.
4. Levy of interest under section 234D and recovery of interest under section 244A.
5. Initiation of penalty proceedings under section 271(1)(c) of the Income Tax Act, 1961.

Detailed Analysis:

1. Adjustment to the ALP of Royalty Paid to the AE:
The assessee challenged the additions made to the ALP of royalty paid to the AE. The Transfer Pricing Officer (TPO) had determined the ALP of the royalty at nil, suggesting an adjustment of ?54,50,830. The TPO did not accept the assessee's justification based on Reserve Bank of India guidelines and comparable royalty rates from a database. The Tribunal, referencing an identical issue in the assessee's case for the assessment year 2010-11, restored the issue back to the Assessing Officer/Transfer Pricing Officer for fresh adjudication, following the Tribunal's previous directions. The Tribunal found that the TPO had not properly considered the benchmarking analysis report submitted by the assessee. The issue was restored to the file of the Assessing Officer/Transfer Pricing Officer for fresh adjudication.

2. Addition of Sales Tax Refund Received Under the Incentive Scheme:
The assessee argued that the Sales Tax refund received under the industrial policy scheme was a capital receipt and not taxable. The Assessing Officer and the Dispute Resolution Panel (DRP) rejected this claim, stating that the refund was received from another group company, not directly from the State Government, and no eligibility certificate was issued in the assessee's name. The Tribunal found some merit in the assessee's argument that the refund was part of a consortium's investment project, supported by a Memorandum of Understanding (MoU) with the Government of Maharashtra. However, the Tribunal noted that various documentary evidences were either not available or not considered by the Departmental Authorities. The Tribunal restored the issue to the Assessing Officer for de novo adjudication, allowing the assessee to furnish further evidence.

3. Set-off of Long-Term Capital Gain and Income from Other Sources Against Current Year's Business Loss:
The assessee claimed that the Assessing Officer allowed the set-off in the assessment order but failed to reflect it in the computation sheet. The Tribunal directed the Assessing Officer to look into the matter and allow the assessee's claim in accordance with the law.

4. Levy of Interest Under Section 234D and Recovery of Interest Under Section 244A:
These grounds were considered consequential and did not require adjudication.

5. Initiation of Penalty Proceedings Under Section 271(1)(c):
These grounds were not pressed by the assessee and were dismissed.

Conclusion:
The appeals were partly allowed for statistical purposes, with specific directions for fresh adjudication on the issues of ALP adjustment for royalty and the taxability of the Sales Tax refund. The Tribunal emphasized the need for proper consideration of all relevant evidences and submissions.