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2025 (4) TMI 470 - AT - Income TaxTP adjustment in the SWD segment - HELD THAT - We find merit in the assessee s claim and direct the AO to consider the rectified giving-effect order and thereby delete the entire adjustment in the SWD segment. Hence the ground of appeal of the assessee is hereby allowed. Addition on account of TP adjustment in the trading/distribution of the test and measurement equipment segment - HELD THAT - We find the TPO on wrong assumption of facts proceeded to change the assessee s working of PLI by the changing the value of operating revenue but the profit earned remained the same. Therefore in our considered opinion the adjustment made by the TPO on wrong assumption of facts shall not be sustained. We upheld the assessee s computation methodology and held that the TPO s adjustments were not justified. The revenue recognition approach adopted by the assessee was deemed consistent with prior years and aligned with legal precedents. Once the assessee PLI margin is accepted there no TP adjustment required to be made as the margin of the assessee is better than the margin of the comparables selected by the TPO. Accordingly the main ground appeal of the assessee is allowed whereas other grounds relating to the issue for selection of comparable and other adjustment such Risk and working capital in computation of margin become infructuous. Hence the ground of appeal of the assessee is allowed. Benchmarking the interest on outstanding receivables - TPO rejected the assessee contention that the receivables transaction should not be separately benchmarked as it was part of an overall business arrangement with the AE - whether or not the outstanding receivables from AEs are an international transaction? - HELD THAT -It is pertinent to note TPO has given categorical finding that the assessee was asked to provide invoice details of receivable from AEs but the assessee failed. Hence the TPO in absence of necessary details proceeded to calculate the interest by taking opening and closing value of receivables. AR before us submitted that the invoice details were furnished before the learned DRP but the same was not considered. Therefore, we are inclined to set aside the issue to file of the TPO for fresh consideration to the extent of calculation of interest for each and every invoice for extended credit period allowed or credit period allowed over and above the agreed credit period. The assessee is directed to provide the necessary evidence regarding the agreed credit period and also invoice wise details in order to calculate correct amount of interest on the delayed receivables. Rate of interest - TPO has taken LIBOR 450 basis points whereas the assessee on strength of case law argued that the rate of interest should be LIBOR 200 basis point - HELD THAT - We hold that the appropriate rate interest shall be LIBOR 200 Basis point. In view of the above detailed discussion the ground of appeal raised by the assessee is hereby allowed for statistical purposes. Disallowances of CSR expenditure claimed u/s 80G - HELD THAT - Authorities below have erred in denying claim of assessee u/s 80G of the Act. We also note that authorities below have not verified nature of payments qualifying exemption under section 80G of the Act and quantum of eligibility as per section 80G(1). Long-term capital gain in computation sheet - HELD THAT - We note that the impugned adjustment was made in the computation sheet without affording the opportunity of being heard to the assessee. Hence we set aside the issue to file of the AO with the direction to provide reasonable opportunity to the assessee to rebut the adjustment and if the assessee rebuttal is found as per law the impugned adjustment shall be deleted. Hence the ground of appeal of the assessee is hereby allowed for statistical purposes. Short granting of TDS credit - AO has not provided the credit of TDS deducted by an entity which merged with the assessee - HELD THAT - We set aside the issue to the file of the AO with direction to verify the claim of the assessee and allow the credit of TDS as per the law. Hence the ground of appeal of the assessee is hereby allowed for statistical purposes.
ISSUES PRESENTED and CONSIDERED
The core legal issues considered in this judgment include:
ISSUE-WISE DETAILED ANALYSIS 1. Consideration of Rectified Giving-Effect Order The Tribunal found that the AO erred by not considering the rectified giving-effect order dated July 12, 2024, issued by the TPO, which deleted the entire TP adjustment in the SWD segment. The Tribunal directed the AO to consider this rectified order and delete the adjustment, allowing the assessee's appeal. 2. TP Adjustment in Trading/Distribution Segment The TPO had recomputed the assessee's operating revenue by including the gross value of sales made through AEs, which the Tribunal found unjustified. The Tribunal upheld the assessee's aggregation approach and computation methodology, as previously accepted in prior assessment years, and found the TPO's adjustments were not justified. The Tribunal allowed the appeal, deeming the revenue recognition approach consistent with prior years and aligned with legal precedents. 3. Benchmarking Interest on Outstanding Receivables The Tribunal recognized the outstanding receivables as an international transaction requiring separate benchmarking. However, it found the TPO's approach of calculating interest on the aggregate value of receivables incorrect. The Tribunal set aside the issue for fresh consideration, directing the TPO to calculate interest for each invoice for the extended credit period. It also held that the appropriate interest rate should be LIBOR + 200 basis points. 4. Disallowance of CSR Expenditure under Section 80G The Tribunal found that CSR-related donations made to specified funds or charitable institutions qualify for deduction under section 80G, despite the mandatory nature of CSR expenditure under section 135 of the Companies Act, 2013. The Tribunal set aside the findings of the learned DRP and directed the AO to delete the addition, allowing the appeal. 5. Adjustment against Long-Term Capital Gain The Tribunal noted that the AO made an adjustment in the computation sheet without providing the assessee an opportunity to be heard. The Tribunal set aside the issue to the AO for verification, allowing the assessee to rebut the adjustment. 6. Short Granting of TDS Credit The Tribunal directed the AO to verify the claim of TDS credit for an entity that merged with the assessee, allowing the credit as per the law. 7. Levy of Interest under Sections 234C and 234A The Tribunal found the issue consequential and dismissed it as infructuous. SIGNIFICANT HOLDINGS The Tribunal established several core principles:
The Tribunal's final determinations on each issue reflect a commitment to procedural fairness and adherence to established legal principles, allowing the appeal partly for statistical purposes.
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