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TMI Blog2019 (5) TMI 319X X X X Extracts X X X X X X X X Extracts X X X X ..... opinion that in the given facts of this case, the issue at best is debatable. It is also important to notice that during the proceedings, it became evident that the assessee had wound up the operations. What the TPO and later the AO desired the assessee to do, was to include in hindsight, the income amounts which it had not received and offer a higher rate of return or profit. The Court is of the opinion that the setting aside of the penalty amount cannot be characterised as unreasonable. No substantial question of law arises. - ITA 422/2019 & CM APPL. 19849/2019 - - - Dated:- 29-4-2019 - MR. S. RAVINDRA BHAT AND MR. PRATEEK JALAN JJ. Appellant Through: Mr. Ruchir Bhatia, Sr. Std. Counsel. Respondent Through: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts incurred on keeping itself ready to perform services to only to its AEs 2. The AO applied the TPO s logic and proceeded to impose penalty by invoking Explanation (7) to Section 271(1)(c). The assessee s appeal to the Commissioner was unsuccessful. The Tribunal by its impugned order set aside the penalty and held as follows:- 10. We have heard the rival submissions and also perused the relevant finding given in the impugned orders. It is not in dispute that assessee is a wholly owned subsidiary of its foreign AE was set up as a 100% captive service provider to cater information technology services and software development/ IT solutions to RSA group of companies. There was an operating loss of 13.23% on the cost. Thou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . TPO should have identified the comparable in similar line then would have analysed the capacity utilisation and made suitable adjustment without such analysis the entire basis adopted by the TPO to make the TP adjustment is wholly vitiated not only on facts but also under the law. 11. Another bizarre approach of the AO while computing the income of the assessee is that, he has given deduction u/s 10A on such transfer pricing adjustment which is against the provision of law as proviso below section 92C(4) categorically provides that no such deduction u/s 10A is allowable for transfer pricing adjustments made u/s 92C. Be that as it may be, if the computation of the AO is taken into consideration, then addition for ALP to the exte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmined by the TPO, the difference between what is offered and what ought to have been offered becomes not only taxable but subject to penalty. 4. This Court is of the opinion that in the given facts of this case, the issue at best is debatable. It is also important to notice that during the proceedings, it became evident that the assessee had wound up the operations. What the TPO and later the AO desired the assessee to do, was to include in hindsight, the income amounts which it had not received and offer a higher rate of return or profit. 5. In these circumstances, the Court is of the opinion that the setting aside of the penalty amount cannot be characterised as unreasonable. No substantial question of law arises. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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