2021 (5) TMI 537 - AT - Income Tax

Enhancement u/s 92CA - MAP margin - as per assessee mutual agreement procedure MAP resolution has already attained finality qua its international transactions with its overseas associated enterprises AEs in USA - HELD THAT - The assessee s international transactions in these three assessment years 2005-06, 2006-07 and 2007-08 covered under the above MAP are to the extent of 94.7%, to 96% and 93% forming subject matter of the ALP in these assessment years. Coming to the remaining international transactions with associated enterprises in other jurisdictions i.e. Singapore etc., the Revenue fails to dispute that even the Transfer Pricing Officer has not drawn any distinction qua the ALP in all the substantive grounds raised herein. We thus hold that the MAP margin of 15.49%, 15.34% and 15.76% deserves to be applied qua the remaining portion of non-USA based international transactions as well. Disallowance u/s 37 - Expenditure on improvements to leasehold premises - revenue or capital expenditure - HELD THAT - We find no merit in Revenue s stand disallowing assessee s claim in view of (i) CIT vs. Citi Financial Consumer Fin Ltd. 2011 (3) TMI 622 - DELHI HIGH COURT ; (ii) Amway India Enterprises vs. DCIT 2008 (11) TMI 432 - ITAT DELHI and (iiii) CIT vs. Amway India Enterprises 2011 (11) TMI 4 - DELHI HIGH COURT holding that such improvements are in the nature of revenue expenditure only. The impugned disallowance is directed to be deleted therefore. Penalty u/s 271(1)(c) - Addition on enhancement in its income on the ground that it had failed to disclose the correct figures - HELD THAT - From a perusal of CIT(A) s lower appellate order in quantum proceedings that the corresponding mistake in omitting to adopt correct figures in assessee s form 3 CEB had been made at the TPO s end which stood admitted in his letter dated 7.2.2011 than involving any concealment of particulars or furnishing of inaccurate particulars of income at taxpayer s behest. This clinching fact has gone unrebutted from revenue side during the course of hearing. We thus accept assessee s instant penalty appeal and direct the Assessing Officer to delete the impugned penalty.

Summary

Issues Involved:
- Appeals related to Assessment Year 2005-06 involving cross appeals, cross objections, and penalty proceedings.
- Appeals for Assessment Years 2006-07 and 2007-08 based on Dispute Resolution Panel directions.
- Consideration of mutual agreement procedure (MAP) resolution and its impact on international transactions.
- Disallowance of improvements to leasehold premises claimed as capital expenditure.
- Penalty appeal regarding enhancement of income disclosure.

Analysis:

Assessment Year 2005-06:
- The appeals for this assessment year included quantum appeals, cross appeals, and penalty proceedings. The mutual agreement procedure (MAP) resolution dated 24.9.2020 regarding international transactions with overseas associated enterprises in the USA was highlighted. The MAP finalization under Rule 46G of the Income Tax rules, 1962, covered a significant portion of the international transactions. The appeals related to substantive grounds and transfer pricing mechanisms were dismissed as infructuous based on the finalized MAP margin. The disallowance of improvements to leasehold premises as capital expenditure was overturned, citing relevant case law supporting the claim as revenue expenditure. The penalty appeal concerning the enhancement of income disclosure was allowed due to a mistake made at the Transfer Pricing Officer's end, not the taxpayer's concealment.

Assessment Years 2006-07 and 2007-08:
- The appeals for these years were based on Dispute Resolution Panel directions. The appeals were dismissed as infructuous or withdrawn in light of the finalized MAP margin and resolution regarding international transactions.

Conclusion:
- For Assessment Year 2005-06, the assessee's appeal was partly accepted, the Revenue's Cross appeal was dismissed, and the Cross Objection was dismissed as infructuous. The penalty appeal was allowed. Appeals for Assessment Years 2006-07 and 2007-08 were dismissed as infructuous or withdrawn. The decision was pronounced in open court on 24/03/2021.