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TMI Blog2020 (11) TMI 367X X X X Extracts X X X X X X X X Extracts X X X X ..... d. CIT (A), if so requires - Decided in favour of assessee for statistical purposes. Disallowance of loss incurred on the jobs commenced prior to 1st April, 2003 and after 1st April, 2003 respectively - HELD THAT:- AO has not applied his mind by examining the extensive submissions made by the taxpayer rather proceeded to make this addition by bluntly following its own order passed in AY 2009-10 and confirmed by the ld. CIT (A) in taxpayer's own case, which is no more in existence having been set aside by the Tribunal for de novo assessment, it would not be in the interest of justice to consider the arguments addressed by the taxpayer before the Tribunal as the same are required to be examined first by the AO by examining the facts of the case at hand in entirety, otherwise it will cause prejudice to the Revenue who has merely decided this issue by following its own order for AY 2009-10 which is no more in existence. So, this issue is also remitted back to the AO to decide afresh. Disallowance u/s. 40A(2)(b) - expenses having been incurred on behalf of its sister concern being not related to the business of the taxpayer company - HELD THAT:- When sub-contracted value f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it the case back to ld. DRP to decide afresh in the light of what has been discussed hereinbefore, after providing an opportunity of being heard to the taxpayer. Needless to say that ld. DRP is also directed to take into account the rule of consistency as the LIBOR of the taxpayer has been accepted for charging interest on delayed receipts of receivables in the subsequent years. So, transfer pricing issue is decided in favour of the taxpayer for statistical purposes - ITA No.1058/Del./2015 , ITA No.1245/Del./2015 - - - Dated:- 21-10-2020 - N. K. Billaiya , Member ( A ) And Kuldip Singh , Member ( J ) For the Appellant : Sukesh Kumar Jain , CIT , DR For the Respondents : Salil Kapoor , Ananya Kapoor and Soumya Singh , Advocates ORDER PER KULDIP SINGH , JUDICIAL MEMBER Present cross appeals filed by the assessee as well as by the revenue are being disposed off by way of composite order to avoid repetition of discussion. 2. Appellant, DCIT, Circle 4 (1), New Delhi (hereinafter referred to as 'the Revenue') by filing the present appeal sought to set aside the impugned order dated 24.12.2014 passed by the AO in consonance with the orders passed by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowance made in earlier Assessment years without appreciating that principle of res judicata does not apply to Income Tax proceedings. 3.3. The Ld. AO/DRP have erred in law and on facts and circumstances of the case in making the disallowance on a selective basis which has resulted in timing-difference only. GROUND 4: DISALLOWANCE OF BUSINESS LOSSES IN RESPECT OF CONTRACTS COMPLETED DURING THE YEAR INR 5,31,08,347/- 4.1. That the Ld. AO/DRP have erred in law and on facts and circumstances of the case in making the addition of INR 5,31,08,347 on account of losses incurred on pre 2003 as well as post 2003 projects completed during the current financial year as per regularly followed method of accounting. 4.2. That the Ld. AO/DRP were not justified in making the addition without appreciating the fact that the impugned contracts were completed at a realizable value lower than the estimated contract revenue and thereby losses had been booked upon completion of such contracts as per the extant accounting standard. 4.3. The Ld. AO/DRP have erred in law and on facts and circumstances of the case in making the disallowance of INR 5,31,08,347 without considering the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Appellant from transactions with unrelated parties and account receivables of the AE for transactions with unrelated parties available in the context of the outstanding receivables from AE - Not considering account receivables as closely linked to the main transaction and failing to undertake a transaction approach - Using data collected by exercising powers u/s. 133(6) of the Act 7.2 The Ld. TPO/DRP have vitiated the principles of natural justice by not giving commenting/addressing the detailed analysis and technical arguments submitted by the Appellant with respect to the internal com parables i.e., account receivables of the Appellant from transactions with unrelated parties and account receivables of the AE for transactions with unrelated parties available in the context of the outstanding receivables from AE relying on erroneous factors such as safe harbour rules which are not relevant to decide such issue. 4. Briefly stated the facts necessary for adjudication of the controversy at hand are: Consulting Engineering Services (India) Pvt. Ltd. (CES), the taxpayer is into proving multi-disciplinary services starting from feasibility studies/DPR to detail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r carried the matter before the ld. DRP by way of filing objections who has partly allowed the same. Ld. DRP enhanced the addition of ₹ 45,54,546/- to ₹ 90,81,362/- made by the TPO on account of interest on delayed receipt on receivables from CES LLC. Feeling aggrieved, the taxpayer has come up before the Tribunal by way of filing the appeal. 12. At the same time, ld. DRP allowed the expenses of ₹ 4,82,26,872/- claimed by the taxpayer incurred on jobs completed in earlier years disallowed by the AO and has allowed the disallowance of expenses of ₹ 8,462/- claimed to have been incurred by the taxpayer towards entrance fee and subscription, which have been challenged by the Revenue by way of filing the cross appeal. 13. We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the Revenue authorities below in the light of the facts and circumstances of the case. CORPORATE GROUNDS GROUNDS NO. 1 2 (ITA NO. 1245/DEL/2015) (TAXPAYER'S APPEAL) 14. Grounds No. 1 2 of ITA No. 1245/Del/2015 (taxpayer's appeal) are general in nature, hence need no specific adjud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the taxpayer, if any, by providing an opportunity of being heard. Ground No. 3 of taxpayer's appeal is allowed for statistical purposes. GROUND NO. 4 (ITA NO. 1245/DEL/2015) (TAXPAYER'S APPEAL) 19. AO/DRP have disallowed an amount of ₹ 4,93,79,643/- and ₹ 37,28,704/- being loss incurred on the jobs commenced prior to 1st April, 2003 and after 1st April, 2003 respectively. 20. Ld. AR for the taxpayer contended that AO/DRP have not considered the fact that taxpayer was applying Completed Contract Method and has also not brought on record any material to show that these losses were not genuine. 21. On the other hand, ld. DR for the Revenue contended that this issue is identical to the issue before the AO as well as ld. CIT(A) in AY 2009-10 which has been remitted back to the AO by the Tribunal for de novo determination. 22. Keeping in view the undisputed fact that while deciding this issue also, the AO has not applied his mind by examining the extensive submissions made by the taxpayer rather proceeded to make this addition by bluntly following its own order passed in AY 2009-10 and confirmed by the ld. CIT (A) in taxpayer's own case, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... our of the taxpayer. GROUND NO. 1 (ITA NO. 1058/DEL/2015) (REVENUE'S APPEAL) 25. AO rejected the claim of the taxpayer qua expenses of ₹ 4,82,26,872/- on the ground that there is no job-wise details, vouchers or other evidences and absence of method of recognition of revenue followed by the taxpayer by following its own order for AY 2009-10. However, ld. DRP treated these expenses incurred on the job completed in the earlier years. 26. Ld. DRP has examined this issue at length in para 9.1 to 9.4.5. During the DRP proceedings, a remand report was called from the AO qua the claim of expenditure under the direct expenses amounting to ₹ 2,35,32,318/- and accordingly, AO confirmed the vouchers examined by him on test check basis and has not made any adverse comment and decided the issue in favour of the taxpayer by returning following findings:- Thus, it is evident that: (a) Such expense pertain to numerous projects, both pre 2003 and-post 2003, (b) The direct component of expenditure is direct expenses which aggregate to ₹ 2,25,32,318/-, (c) The taxpayer has made allocation of personnel cost under the head direct time which agg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim of the taxpayer that. direct time and indirect time cost is nothing but allocation of salary expenses claimed under the head personnel expenses and if he so satisfied, no disallowance on this account shall be made. However, if the AO proposes any addition on account of non verifiable nature of such expenses, tie shall record reasons as to how such expenses are not verifiable or how the genuineness of such expenses is in doubt. 27. We are of the considered view that ld. DRP has reached the conclusion by deleting the disallowance made by the AO being the expenses pertaining to numerous projects i.e., pre-2003 and post-2003 after calling remand report from the AO. Ld. DR for the Revenue has failed to point out any infirmity and irregularity in the aforesaid findings. So, we find no perversity or illegality in the deletion of disallowance made by the ld. DRP, hence ground no. 1 of Revenue's appeal is determined against the Revenue. GROUND NO. 2 (ITA NO. 1058/DEL/2015) (REVENUE'S APPEAL) 28. Ld. DRP deleted the disallowance of expenses of ₹ 8,462/- claimed by the taxpayer having been incurred toward entrance fee and subscription by returning followin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is that the ld. DRP enhanced the addition without issuing prior notice to the taxpayer. Ld. AR for the taxpayer also contended that it is a foreign loan and in all the subsequent years, the ld. DRP accepted LIBOR rate of the taxpayer. 33. Undisputedly, the amendment made by the Finance Act, 2012 in section 92B is prospective in nature having been held in number of orders passed by the Tribunal viz. Rusabh Diamonds vs. ACIT (2016) 48 ITR (T) 707 (Mumbai), Jindal Steel Power Ltd. vs. ACIT in ITA No. 893/Del/2014 and DCIT vs. Spentex Industries in ITA No. 4954/Del/2014. 34. It is contended by the ld. AR for the taxpayer that when taxpayer has not charged any interest on delayed payment on receivables, there is no question of making adjustment for interest on receivables from AE and relied upon the decision rendered by coordinate Bench of the Tribunal in ACIT vs. Gitanjali Exports Corporation Ltd. (2017) 81 taxmann.com 452 (Mumbai). 35. Furthermore, we are of the considered view that when ld. DRP has enhanced addition on account of delayed payment on receivable without giving any notice to the taxpayer for said enhancement, the addition in question is not sustainable being h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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