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TMI Blog2020 (11) TMI 451X X X X Extracts X X X X X X X X Extracts X X X X ..... nditure, then both rental expenditure and reinvestment of reimbursement received by the assessee should be excluded while computing PLI of the assessee. We feel it proper to restore this issue to the file of A.O./TPO to examine it afresh in the light of discussions made (supra). Working capital adjustment - it was the submissions of the assessee that the relevant details have been furnished to the tax authorities - A.R. submitted that the assessee would be in a position to furnish explanations and information in this regard to the A.O./TPO. In view of the above, we are of the opinion that the claim of working capital adjustment also requires examination at the end of A.O./TPO - we restore the issue of transfer pricing adjustment to the file of A.O./TPO. Interest charged u/s 234A - submission of the assessee that the return of income has been filed by it within the due date prescribed u/s 139(1) of the Act and hence no interest is chargeable u/s 234A of the Act. Since the facts relating to this issue also require examination, we restore this issue also to the file of A.O. Appeal filed by the assessee is treated as allowed for statistical purposes. - IT(TP)A No.2309/Bang/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ked out at 2.16% by TPO. For the sake of convenience, we extract below the workings furnished by the assessee and also the working made by the TPO. The financials of the taxpayer for the F.Y. 2014-15 as per the TP document in respect of AE transactions are as under: Particulars Total amount Total revenue 1209752366 Less: Other income 3151104 Less: Interest received on fixed deposits 5559513 Operating Revenue 1201041750 Total cost: 1171416508 Less: Finance cost 21243109 Less: Preliminary Expenses Written off 26652 Operating cost 1150146747 Operating profits 50895002 Operating profits/Operating revenue 4.24% The segmental financials of the taxpayer for the F.Y. 2014-15 as computed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of M/s. GE Power Electronics India Power Limited by entering into an agreement dated 8.5.2014. The assessee purchased business of GE Power as a going concern on slum sale basis on mutually agreed terms and conditions as laid out in the agreement. Post the purchase of business, the name of the assessee was changed to M/s. Lineage Power Pvt. Ltd. 9. As per the agreement, all the contracts entered into by GE Power hither to shall be transferred to the assessee. It was noticed the assessee had entered into a lease agreement for fixed period of 9 years with a lock in period of 9 years. The submissions made in respect of the lease agreement before Ld. DRP are extracted below. The Agreement on page 21 para 6.1.3 clause (iii) also provides that the lease agreement as entered into by GE Power shall be taken over by the Assessee and the premises as previously occupied by GE Power will now be taken on lease by the Assessee. GE Power had originally entered into a lease agreement with Sita Ratan Foundation Pvt. Ltd. (Sub-lessee, who had taken properly on lease from Sri. Ramesh Chand Nahar who was the sole and absolute owner of the immovable property situated at survey No. 186 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Three Hundred and Five only) in fixed deposits maintained with banks (*Fixed Deposits ); and Since, the lessor had sold the said premises to M/S MNG Estates Private Limited; the Assessee entered into a lease agreement with M/s. MNG Estates Private Limited on 01.07.2014 (Rent Agreement attached as Annexure 5). As per lease Agreement, Page 8 Clause b(1)(i) the Assessee had obligation to open fixed deposit with Canara bank, Accordingly, the Assessee transferred the amount received from GE power to Escrow account with a standing instruction to transfer every month a predetermined amount of rent to the account of Mis MNG Estates Private Limited (copy of communication to Canard Bank providing the instructions attached as Annexure 6). For the balance period of 15 months the Assessee agreed to provide a bank guarantee to the lessor (break-up of Rent calculation attached as Annexure 7). For FY 2014-15, Assessee occupied the above leased property for a period of 9 months starting from 01.07.2014 and ending on 31.03.2015. During FY 2014-15, Assessee has incurred a total of ₹ 2,75,55,090/- as rental expenditure. Out of the said expenditure, ₹ 2,54,94,368/- was relat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bursement amount received by the assessee can be ignored while considering the rental expenditure as operating expenditure. 13. In our considered view, it is imperative to examine as to whether the assessee has utilised the premises for which rental has been paid for the purpose of business carried on by the assessee. If the said premises has been so utilised, then the rental expenditure should be taken as operating expenditure. It is an undisputed fact that M/s. GE Power has given the money to the assessee only in respect of rental expenditure burden that is going to be borne by the assessee. In that case, the reimbursement of rental expenditure, in our view, is intricately related to the rental expenditure. Accordingly, if rental expenditure is considered as an operating expenditure, then the reimbursement should be set off against the rental expenditure and net rent expenditure should be taken as operating expenditure. On the other hand, if the rental expenditure is not considered as operating expenditure, then both rental expenditure and reinvestment of reimbursement received by the assessee should be excluded while computing PLI of the assessee. 14. Since the above facts ..... X X X X Extracts X X X X X X X X Extracts X X X X
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