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2022 (12) TMI 246 - AT - Income TaxTP Adjustemnt - TPO included 10% addition of the total quantum on import of machinery and tools without any supporting documents and had asked for standard deduction /- 5% - Assessee prayed that the matter may be remanded back to TPO with a direction to deal the arbitrary addition of 10% - net loss on the foreign currency transactions - whether it is only the notional loss or paper loss and it was not a crystallized loss? - HELD THAT - We considered the issues and relied on the documents available on record. All the issues together are remanded back to the learned AO for de novo adjudication. AO should consider afresh on the basis of the above mentioned discussion. Assessee pointed out that the foreign exchange loss is a genuine loss which is not at all a notional loss. The Assessee was also directed to submit all relevant documents before the learned Assessing Officer to substantiate its claim. Nonetheless, a reasonable opportunity should be allowed to the Assessee for redressal of its grievances. Disallowance payment of profit which is of the Employees State Insurance - HELD THAT - The issues were highly discussed in different orders in the Co-ordinate Benches. He mentioned that the payment was made before the due date of filing the return u/s.139(1) of the Act. But at this moment, we are unable to verify the payment details. So, the issue is remanded back to the learned Assessing Officer for further adjudication. Disallwoance u/s 14A r.w.r. 8D - HELD THAT - Assessee mentioned that no expenditure was incurred for the Assessment Year 2013 2014, the controversial situation on the fact between the Revenue and parties. The issue is further remanded back to the learned Assessing Officer for further verification in the light of the Assessee s payment. The Assessee should be given a reasonable opportunity to substantiate his claim. Disallowance u/s.40(ia) - non-deduction of TDS and Royalty and Guarantee Fees and Professional Charges - HELD THAT - Assessee mentioned about the CBDT Circular No.5/2015 dated 15.07.2005 and mentioned that the TDS deduction in the previous year but paid in the subsequent year after the time limit prescribed u/s.200(1) of the Income Tax Act, 1961 shall be allowed for deduction. The amount was remitted for the Assessment Year 2011 2012 and 2012 2013. The other issue related to the disallowance of expenses in relation to the scientific research and all the issues are remanded back to the learned AO for further adjudication as because at this stage as there is no such sufficient documentation for adjudicating the issue under factual matrix.
Issues Involved:
1. Foreign Exchange Fluctuation Loss (FEFL) as non-operative expenses. 2. Adjustment towards usage of diesel in place of electricity supplied by Tamil Nadu Electricity Board (TNEB). 3. Payment of Provident Fund and Employees State Insurance, Guarantee Fee payment, and applicability of TDS. 4. Disallowance under Section 14A of the Income Tax Act. 5. Disallowance under Section 40(ia) related to non-deduction of TDS, Royalty, Guarantee Fees, and Professional Charges. Detailed Analysis: 1. Foreign Exchange Fluctuation Loss (FEFL) as Non-Operative Expenses: The Assessee contended that the FEFL should be considered as non-operative expenses due to its extraordinary nature, citing significant volatility in exchange rates between the period of negotiation and actual import. The Assessee referenced judgments from ITAT, New Delhi and ITAT, Chennai to support this claim. The Tribunal acknowledged the argument, emphasizing that exchange rate fluctuations are normal economic conditions that should be considered when determining the Arm's Length Price (ALP). The issue was remanded back to the Transfer Pricing Officer (TPO) for reconsideration, directing them to provide considerable exchange fluctuation adjustment while determining the ALP. 2. Adjustment Towards Usage of Diesel in Place of Electricity Supplied by TNEB: The Assessee sought an adjustment for additional costs incurred due to using diesel generators instead of electricity from TNEB during a power crisis in Tamil Nadu. The TPO argued that the Assessee was operating beyond its installed capacity, leading to increased power costs irrespective of the power source. The Tribunal noted that the Assessee had not provided detailed workings for the adjustment and remanded the issue back to the TPO for further consideration, instructing the Assessee to submit all relevant documents to substantiate the claim. 3. Payment of Provident Fund and Employees State Insurance, Guarantee Fee Payment, and Applicability of TDS: The Assessee argued that payments towards Provident Fund and Employees State Insurance were made before the due date of filing the return under Section 139(1) of the Act. However, due to the lack of verification of payment details, the Tribunal remanded the issue back to the Assessing Officer for further adjudication. Additionally, the Assessee contended that the TPO included a 10% addition on import of machinery and tools without supporting documents and requested a standard deduction of +/- 5%. This matter was also remanded back to the TPO for reconsideration. 4. Disallowance Under Section 14A of the Income Tax Act: The Assessee claimed that investments were made purely for strategic purposes and should not attract disallowance under Section 14A. The Tribunal noted the controversial situation on the facts between the Revenue and the Assessee and remanded the issue back to the Assessing Officer for further verification, instructing that the Assessee be given a reasonable opportunity to substantiate the claim. 5. Disallowance Under Section 40(ia) Related to Non-Deduction of TDS, Royalty, Guarantee Fees, and Professional Charges: The Assessee referenced CBDT Circular No. 5/2015, arguing that TDS deductions made in the previous year but paid in the subsequent year should be allowed for deduction. The Tribunal found insufficient documentation to adjudicate the issue and remanded it back to the Assessing Officer for further adjudication, emphasizing the need for sufficient documentation. Conclusion: The Tribunal remanded all issues back to the Assessing Officer for de novo adjudication, directing the Assessee to submit all relevant documents to substantiate their claims. The Tribunal emphasized that a reasonable opportunity should be given to the Assessee for redressal of grievances. The appeals were allowed for statistical purposes.
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