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TMI Blog2017 (1) TMI 1690X X X X Extracts X X X X X X X X Extracts X X X X ..... s and other automotive parts. Whereas, the Doowon India was incorporated in the year 2006 and the major clientele includes Hyundai and Volkswagon and the financial year 2009-10 is the second year of Business operations and filed the Return of income electronically on 23.11.2011 with total income of Rs. 2,11,60,734/-. Subsequently, the case was selected for scrutiny under CASS and notice u/s. 143(2) of the Act was issued. In compliance to the notice, Ld. AR of the assessee appeared from time to time and the Ld. AO found that the International Transactions with Associate Enterprise are more than Rs. 15 crores and made reference u/s. 92CA of the Act to the Transfer Pricing Officer, Chennai and relied on the Form No. 3CEB filed by the assessee whereas, the Ld. TPO vide order F. No. D-106/TPO-I/AY 2011-12 dated 30.01.2015 has made the downward adjustment of Rs. 12,75,48,826/- to the value of international transactions. Further, the Assessing Officer find that the assessee has made payment on technical fee to its foreign company and not complied provisions of section 9(1)(vii) r.w.s. 195 of the Act and the explanations were filed by the assessee by letter dated 03.03.2015. As the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther, the Ld. AR relied on the decision of Skoda Auto India (P) Limited Vs ACIT (30 SOT 319) Pune for claiming custom duty adjustment. Whereas, the Ld. TPO find the assessee company is not eligible for any custom duty adjustment and discussed on the Business operations and the stages of business activities and the circumstances at Page 4 to 7 of the order and came to a unilateral conclusion that the custom duty adjustment cannot be granted as the assessee has not substantiated with supporting evidence and the comparables have paid custom duty on imports. The Ld. TPO has selected comparables with an Average Arithmetic Mean of 8.45%. Whereas, the assessee's PLI is 5.42% and calculated the margin of comparables at 6.49% on international transaction and made an downward adjustment at Rs. 12,75,48,826/-. Whereas, the DRP on the basis of the objections of the assessee has directed the TPO to make the rectification of adjustment and the Ld. AO has restricted the Transfer Pricing Adjustment to Rs. 10,50,34,698/. The DRP relied on the earlier order passed in the assessment year 2009-10 and was set aside by the Tribunal and Ld. AR prayed for adjustment of custom duty and contra Ld. DR re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r opinion and in principle, the assessee should win on this ground too. One such decision relied upon by the assessee's counsel supports our finding relates to the decision of this bench of the Tribunal in the case of Skoda Auto India p Ltd 122 TTJ 699 (Pune) dated March 2009 wherein, it is held (in para 19 of the order) that, "No doubt , a higher import content of raw material by itself does not warrant an adjustment in operating margins, as was held in Sony India (P) Ltd.'s case (supra), but what is to be really seen is whether this high import content was necessitated by the extraordinary circumstances beyond assessee's control. As was observed by a Co-ordinate Bench of this Tribunal in the case of EGain Communication (P) Ltd. (supra) "the differences which are likely to materially affect the price, cost charged or paid in, or the profit in the pen market are to be taken into consideration with the idea to make reasonable and accurate adjustment to eliminate the differences having material effect". We do not agree with the AO that every time the assessee pays the higher import duty, it must be passed on to the customers or it must be adjusted for in negotiating the purchasing pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on this factual aspect without allowing the TPO to examine all the related relevant facts. We, therefore, deem it fit and proper to remit this matter to the file of the TPO for fresh adjudication in the light of our above observations." 38. The perusal of the impugned orders shows that the above cited guidelines by way of decision of this bench of the Tribunal in the case of Skoda Auto India p Ltd (supra) were not available to the revenue authorities. Therefore, we are of the opinion, the issue should be set aside to the files of the TPO with direction to examine the claim of the assessee relating to the import cost factor and eliminate the difference if any. However, the TPO/AO/DRP shall see to it that the difference in question is 'likely to materially affect' the price/profit in the open market as envisaged in sub rule (3) of Rule 10B of the Income tax Rules, 1962. Accordingly, ground 4(b) is allowed pro tanto." Accordingly, we direct the A.O. to give suitable adjustment against the custom duty component while determining the ALP. Considering the custom duty adjustment and co-ordinate bench decision, we remit the disputed issue to the file of AO for custom duty ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the DRP has confirmed the action of AO. Before us, the Ld. AR argued that the expenditure has to be allowed as deduction in which the corresponding tax is actually paid. We found the assessee company has incurred this expenditure towards the fee for technical services and we are of the opinion that the Assessing Officer should verify and grant the deduction in the year in which assessee company makes the TDS payment and Accordingly, we remit this issue to the file of the Assessing Officer. Further, the Assessing Officer has disallowed Rs. 1,77,300/- being interest paid on delay payment of TDS and the Ld. AR argued that the same cannot be disallowed u/s. 40(a)(ii) of the Act. We perused the Assessment Order and found that there are no proper clarifications available. The Assessing Officer observed that the interest paid for delay in filing Return and payment of advance tax is not allowed as Business expenditure while applying the same analogy, we are of the opinion that the interest paid on delayed payment of TDS cannot be allowed Accordingly we upheld the action of the Assessing Officer in disallowing the interest on delay payment of TDS Rs. 1,77,300/- and dismiss the assessee' ..... X X X X Extracts X X X X X X X X Extracts X X X X
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