9911796707
TMI Blog2016 (8) TMI 1157X X X X Extracts X X X X X X X X Extracts X X X X ..... ibution of the beads activity. We therefore, do not find any infirmity with the findings of the Ld. CIT (A) in determining the cost base by considering those expenses which could be directly linked with the production and distribution activity of the assessee for its AE. Selection of comparable - Held that:- Regarding the submissions advanced by both the parties relating to the inclusion/exclusion of the 2 comparables being Goldiam International Ltd. and Punit Commercials Ltd, is it is observed that the annual report submitted by the assessee, was not available on the database at the time of TP proceedings. The plea advanced by the Ld. AR is that, in the event these companies are included then the correct margin as per the annual accounts must be considered. We accordingly set aside these to the Ld. TPO for verification of the data provided in the annual accounts of these 2 companies and to calculate the gross margin by using the correct figures. X X X X Extracts X X X X X X X X Extracts X X X X ..... ad made provision for doubtful debts and doubtful advances amounting to ₹ 44,52,550/-. These alleged debts and advances were doubtful of recovery and therefore it was written off as irrecoverable, in the accounts of the assessee. Ld. AO disallowed the said provision by holding that section 36 (1) (vii) mandates that the amount of any debt or part thereof, which is written off as irrecoverable in the accounts of the assessee for the previous year could only be deducted while computing the income of the assessee company and the assessee has no where mentioned that it has written of the said amount in the books of account during the year under consideration. 3. Aggrieved by the order of the Ld. A.O., the assessee preferred an appeal before the Ld. CIT (A). The Ld. CIT (A) deleted the disallowance by relying upon the decision of Hon'ble Supreme Court in the case of Vijay bank versus CIT and Anr., reported in (2010) 323 ITR 166. 4. Aggrieved by the order of the Ld. CIT (A) the revenue is in appeal before us now. 5. Ld. D.R. submitted that the assessee has not squared up the individual creditors account though the amount has been provided for in the balance sheet for the year un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IVIDUAL ACCOUNT OF EACH DEBTOR IN ACCOUNT BOOKS- NOT JUSTIFIED-PROVISIONS APPLY TO BANKING AS WELL AS NON-BANKING ASSESSE.ES- INCOME-TAX ACT, 1961, SS. 36(1)(vii), 41(4). BUSINESS INCOME-DEEMED PROFITS-DEDUCTION ALLOWED - PART RECOVERY LATER OF DEDUCTION ALLOWED-INCOME-TAX ACT, 1961, s. 41(4). Section 36(1)(vii) of the Income-tax Act, 1961, dealing with allowance of bad debts written off by the assessee, covers banking as well as non-banking assessees. After April 1, 1989, a mere provision for bad debt will not be entitled to deduction under section 36(1)(vii). If an assessee debits an amount of doubtful debt to the profit and loss account and credits the assets account like sundry debtors account that would constitute a write off of an actual debt. However, if an assessee debits provision for doubtful debts to the profit and loss account and makes a corresponding credit to the "current liabilities and provisions" on the liabilities side of the balance-sheet, then it would constitute a provision for doubtful debt. In the latter case, the assessee would no) be entitled to deduction after April 1, 1989. SOUTHERN TECHNOLOGIES LTD. v. JOINT (IT [2010] 320 ITR 577 (SC) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h submissions made by the Ld. A.R. that the issue whether the provision as provided for by the assessee is debited to the profit and loss account should be allowed as deduction under section 36 (1) (vii) in spite of the fact that the individual debtors account has not been written off as settled by the Hon'ble Supreme Court in the case of Vijaya bank versus CIT and Anr. (supra). We therefore, do not find any infirmity in the order of the Ld. CIT (A) in deleting the disallowance made by the Ld. AO. 8.1 Accordingly ground No. 1 raised by the revenue stands dismissed. 9. As regarding the transfer pricing adjustments the facts are as under: 9.1 Assessee is a globally famous brand for Crystal and Crystal related products. It is a wholly owned subsidiary of Swarovski international Holdings AG (F I H) during the year under consideration assessee was 100% EOU in Pune and was engaged in job work coating raw beads and polishing the sale to its AE's amounting to ₹ 57,598,485/-. The assessee had country sales office with Crystal component division and consumer goods division in New Delhi. The sales activity commenced from November 2000. The domestic units at New Delhi was carrying out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Ld. TPO due to in availability of the data. 9.5 Aggrieved by the order of the ld. TPO the assessee preferred an appeal before the Ld. CIT (A). The Ld. CIT (A) agreed with the contentions of the assessee and deleted the adjustments made in respect of the cost base and excluded the expenses like repair and maintenance, electricity, insurance and depreciation, which was not directly connected with the international transaction entered into by the assessee with its AE. 9.6 In respect of the abnormal gross markup in case of the 2 comparable companies, the Ld. CIT(A) recomputed the same due to the availability of the annual report on the public domain by then, which was not available at the time of preparing the TP report. The Ld. CIT (A) calculated the average gross markup over cost at 15.17% and computed the arms length price as under: Costs base as taken by TPO Rs.4,39,99,036/- Arm's Length Price (cost plus 15.17%) Rs.5,06,73,690/- Amount received Rs.5,75,98,485/- 9.7 Aggrieved by the order of the Ld. CIT (A) the revenue is in appeal before us now. 9.8 The Ld. DR submitted that assessee maintained separate accounts for its Pune and Delhi units. He submitted that Pun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it markups the ld.AR submitted that the Ld. TPO has not followed rule 10 B. He submitted that gross profit markup over cost of 19 comparable showing average gross markup 15.71% was submitted before the Ld. TPO and the Ld. TPO has taken gross profit markup of 17 companies for FY 2002-03 which includes abnormal, gross but profit markup of 374% and 630% in case of 2 companies which are highly abnormal and should have been excluded while calculating the average gross margin over cost in case of the comparable companies. The ld. DR further submitted that the TPO excluded 2 comparable companies from the calculation as their financials were not available for FY 2002-03. 9.11 Ld. AR submitted that the ld. TPO has wrongly considered the gross profit markup of Goldiam International Ltd. and Punit Commercials Ltd. He referred to the annual accounts placed on record before as, wherein the gross profit markup over cost has been worked out to be 16.83% and 11.79% respectively. He submitted that in the event these comparables are included, correct margin as derived from the annual reports may be taken. 10. We have perused the orders of the authorities below and the paper book filed by the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
