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TMI Blog2023 (3) TMI 458X X X X Extracts X X X X X X X X Extracts X X X X ..... rest expenditure. Therefore, to allege that the assessee accommodated its AEs in the guise of receivables would not be a correct proposition. Therefore, this addition is not sustainable. We order so. The corresponding grounds raised by the assessee stand allowed. Disallowance u/s 40(a)(i) - payment made to foreign entities - HELD THAT:- It emerges that the assessee could not file any documentary evidences in support of the payment so made to foreign entities. The claim of the assessee has to cross the hurdles of Sec.37(1) as well as the provisions of Sec.40(a)(i). We find that similar payments were made by the assessee in AY 2011-12 and adjudication of this issue was done by Tribunal [ 2019 (12) TMI 441 - ITAT CHENNAI] , it was held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DER Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by assessee for Assessment Year (AY) 2012-13 arises out of final assessment order dated 15.02.2017 passed by Ld. Assessing Officer (AO) u/s 143(3) r.w.s. 144C(5) pursuant to the directions of Ld. Dispute Resolution Panel-1, Bengaluru (DRP) u/s 144C(5) dated 30.12.2016. The Ld. Transfer Pricing Officer-2(1), Chennai (TPO) has determined Arm s Length Price (ALP) of international transactions u/s 92CA(3) vide order dated 27.01.2015. The grounds raised by the assessee read as under: - 1. The order of The Deputy Commissioner of Income Tax, Pondicherry Circle, Pondicherry dated 15.02.2017 u/s 143(3) r/w section 144C(5) of the Act for the above assessment year is cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct in the computation of taxable total income without assigning proper reasons and justification. 8. The DCIT failed to appreciate that having not properly examined the nature of services obtained and further having not noticed the actual payments for such services, the addition made in the computation of taxable total income on two counts was wrong, erroneous, unjustified, incorrect and not sustainable in law. 9. The DCIT failed to appreciate that the sustenance of the said addition for the payments made to the outsourced agencies without considering the prescription of DTAAs was wrong, erroneous, unjustified, incorrect and not sustainable in law. 10. The DCIT erred in disallowing Rs.1,64,24,085/- being the loss suffered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransfer Pricing Adjustment of AE Receivable 3.1 The assessee had outstanding receivable from its Associated Enterprises (AE). The Ld.TPO held that excessive outstanding receivables have to comply with Transfer Pricing (TP) provisions. The outstanding beyond comparable period was proposed to be treated as separate transaction of interest free advances as per Sec. 92B(1). The maximum credit period was accepted to be 90 days and outstanding receivables beyond that time period were benchmarked at prime lending rate of 14.4%. The same resulted in to an adjustment of Rs.57.14 Lacs. 3.2 Before DRP, the assessee submitted that it did not charge any interest from AE as well as non-AEs. No finance cost was incurred. The delayed realization w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee stand allowed. 4. Disallowance u/s 40(a)(i) 4.1 The assessee outsourced its work of editing and indexing etc. to foreign vendors and paid an amount of Rs.257.86 Lacs without deduction of tax at source, The same led Ld. AO to invoke the disallowance u/s 40(a)(i). The assessee submitted that TDS was not required in terms of Sec.195 since the vendors were foreign nationals and the services were rendered outside India. These vendors do not have permanent establishment in India and therefore, the income would not arise in India. However, the assessee could not produce any agreement to demonstrate the nature of services availed by the assessee. The services were termed as technical services u/s 9(1)(vii) which would require TD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5.2 Before Ld. DRP, the assessee submitted that it entered into forward contracts as an integral part of export business to safeguard against losses that could arise due to foreign exchange fluctuations on account of receivables from export. These transactions could not be termed as speculative transaction u/s 43(5). However, rejecting the same, Ld. DRP confirmed the stand of Ld. AO. Aggrieved, the assessee is in further appeal before us. 5.3 The Ld. AR explained that the assessee was exposed to foreign exchange risk which was sought to be covered by forex derivatives. Accordingly, these transactions could not be termed as speculative or notional loss in nature. The Ld. AR submitted that the quantum of transactions is commensurate with ..... X X X X Extracts X X X X X X X X Extracts X X X X
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