9911796707
TMI Blog2022 (11) TMI 1351X X X X Extracts X X X X X X X X Extracts X X X X ..... he warranty services and the out of pocket warranty charges paid to third parties and the same was upheld by the DRP - HELD THAT:- Assessee s own case for the assessment year 2009-10 [ 2022 (3) TMI 1511 - ITAT BANGALORE] direct the TPO to re-examine the issue raised . It is ordered accordingly. This ground is allowed for statistical purposes. Provision for warranty and warranty expenses - As per AO appellant has failed to substantiate the basis of creation of provision for warranty - DRP confirmed the disallowance of provision for warranty on the ground that the scientific basis of the creating the provision was not established - HELD THAT:- We notice that issue of allowability of warranty expenses was considered by the Tribunal in assessee s own case for AY 2009-10 [ 2022 (3) TMI 1511 - ITAT BANGALORE] We notice that the method of creation of warranty provision has not undergone change and is consistent with what is described in above order. Respectfully following the decision of the coordinate bench in assessee s own case we direct the AO to allow the provision made towards warranty. Disallowance u/s 40(a)(ia) of rebates given to customers - HELD THAT:- As per assessee s own case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in favour of the assessee. TDS credit - As submitted that in the final assessment order, the AO has given credit of TDS less as against reflected in Form 26AS - HELD THAT:- We direct the AO verify and grant credit of TDS as appearing in Form 26AS in accordance with law after giving a reasonable opportunity of being heard. Forex loss addition - AO proposed a disallowance on the ground that no evidence was provided to substantiate the same - DRP deleted the addition - HELD THAT:- AO completely ignored the detailed workings on forex loss. Having mentioned in the order that sample invoice copies were submitted, the AO erred in contending that no evidences were provided by the assessee. DRP rightly appreciated that evidences demonstrating foreign exchange loss had been submitted and that the same cannot be said to be contingent liability. Decided against assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... too has filed an appeal [IT(TP)A No.641/Bang/2016]. We shall first adjudicate assessee's appeal. IT(TP)A No.642/Bang/2016 (Assessee's appeal) 6. The assessee in the memorandum of appeal has raised 9 grounds and several sub-grounds pertaining to the transfer pricing adjustment which reads as follows and we will first adjudicate the same:- "I. Transfer pricing 1. Order/ Directions bad in law and on facts 1.1 The order issued by the Joint Commissioner of Income-tax (`JCIT'), Large Tax Payers Unit (`LTU'), Bangalore [(`Assessing Officer') or (`A0')], under section 143(3) read with section 144C (13), pursuant to the directions issued by the Hon'ble Dispute Resolution Panel [`DRP' / Ld. Panel], is bad in law and on facts and is in violation of the principles of natural justice. 1.2 Without prejudice to the generality of the above, the order issued by the AO is bad in law insofar as the fact that the AO did not issue to Dell India Private Limited (`DIPL'), 'the Appellant or 'the Company'), a show cause notice, as per proviso to section 92C(3) of the Income-tax Act, 1961 ['the Act']. 1.3 The directions issued by the Ld. Panel did ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. Determination of arm's length price by the TPO in relation to the Marketing Support Services segment (`MSS Segment') 3.1 The AO/ TPO erred in law in applying arbitrary filters to arrive at a fresh set of companies as comparables to the Appellant, without establishing functional comparability. The Ld. Panel erred in upholding the actions of the AO/ TPO. 3.2 The AO/ TPO erred in facts in arbitrarily rejecting companies based on their financial results without considering the functional comparability. The Ld. Panel erred in upholding the actions of the AO/ TPO. 3.3 The AO/ TPO also erred on facts in erroneously computing the margins of the assessee and companies identified as comparable by the TPO. The Ld. Panel erred in upholding the actions of the AO/ TPO. 4. Determination of arm's length price by the TPO in relation to the impugned ITeS Segment 4.1 The Ld. Panel and the AO/ TPO erred in law in applying arbitrary filters to arrive at a fresh set of companies as comparables to the Appellant, without establishing functional comparability, such as, (i) companies whose data for financial year (`FY') 2010-11 was not available, (ii) companies with ITeS serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant and the comparable companies. 8. Variation of 5% from the arithmetic mean The AO/ TPO erred in law in not granting the benefits of proviso to section 92C(2) of the Act available to the Appellant. 9. Relief The Appellant prays that the AO be directed to grant all such relief arising from the preceding grounds as also all relief consequential thereto." Bifurcation of marketing and business support services segment into ITES and MSS segments (Ground Nos.I(2) to I (4) and I(6) to I(7)) 7. The Assessee provides business support services to Dell Global B.V. Singapore Branch (DGBV) in relation to the products sold by the said entity to its customers in India. The business support services comprise of the following services: - Telephonic support services; - Marketing support services; and - Logistic support services. 8. The Assessee provides telephonic support services for standard problems to the customers who purchase the products sold by DGBV in India. In case an on-site service is required, the Assessee send third party service provider for such services. The technical support services include services in relation to products sold by DGBV which are under warra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under: "information technology enabled services" means the following business process outsourcing services provided mainly with the assistance or use of information technology, namely:- (i) back office operations; (ii) call centres or contact centre services; (iii) data processing and data mining; (iv) insurance claim processing; (v) legal databases; (vi) creation and maintenance of medical transcription excluding medical advice; (vii) translation services; (viii) payroll; (ix) remote maintenance; (x) revenue accounting; (xi) support centres; (xii) website services; (xiii) data search integration and analysis; (xiv) remote education excluding education content development; or (xv) clinical database management services excluding clinical trials, but does not include any research and development services whether or not in the nature of contract research and development services;" 13. From the above definition, it is evident that merely because services are rendered using IT medium, they cannot be termed as ITES. We also notice that the coordinate bench of the Tribunal in assessee's own case has considered the same issue and held that - "7.8 We have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be considered applicable for this integrated Market Support & Business Support Services. The TP analysis made by the TPO by taking comparables relating to IES segment are here by rejected. The TPO is accordingly directed to recompute the adjustment in line with the above direction. We also note here, that in view of the above, the objections raised in 22-26, against comparability analysis of comparables relating to ITES functions are rejected as infructuous." 7.8.2 The functions performed by the assessee under this segment are prima facie identical for the concerned assessment year and for the assessment year 2013-2014. For assessment year 2013-2014, when the DRP had held that services rendered by the assessee are in the nature of marketing and support services and since no appeal preferred by the Revenue to the ITAT, the matter had attained finality. Therefore, we are of the view that the entire TP issue raised under marketing support services segment needs to be examined afresh by the AO / TPO in the light of the DRP's directions for assessment year 2013-2014. It is ordered accordingly." 14. In the year under consideration, the facts are similar to that of assessment year 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssions and perused the material on record. The assessee had submitted that the amount of Rs.211.42 crore does not pertains to the sales made by the AEs in India and it pertains solely to the sales made by the assessee. The DRP in its directions held that the assessee was to show that expenses in relation to providing support services for AEs warranty obligation are either reduced from the cost or accounted for separately. The DRP in fact directed that since the services in relation to the warranty obligations are provided by third party service providers and the assessee is only coordinated for the same, no mark up is warranted. The relevant finding of the DRP in this regard reads as follows:- "6.6.6 The assessee is directed to demonstrate to the TPO that the above reimbursement has either been reduced from the costs or accounted for separately. In absence of such demonstration, the TPO can take the above to be a part of the warranty costs debited to the P&L account and effect suitable adjustment. Since the services related to warranty are being handled by a third party and the assessee is being used only as a medium, the TPO is not correct in charging a markup on this amount. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Assessee. Aggrieved, the assessee is in appeal before the Tribunal. 24. The ld. AR made detailed written submission in this regard the extract of which is given below (i) The assessee has a scientific method of creating the provision and submits that the actual expenses incurred in servicing the customers under warranty period are being utilized from the warranty provision created for such purpose. The details are as follows:- Particulars Amount (INR) Opening balance of provision for warranty (A) 129,25,48,000/- Add: Provision for warranty created during the year (B) 216,52,00,176/- Less: Actual expenses incurred during the year (C) (224,26,51,541/-) Closing balance of provision for warranty (D) = A+B-C 121,50,96,466/- (ii) The methodology followed by the assessee in estimating the warranty cost and tracking the related expenses is briefly explained as under:- a. The assessee has a specialized warranty accounting team which tracks the incidents reported and associated cost of providing warranty services for each of the product; b. The total sales are divided into various categories of IT hardware products based on the warranty period attached to each such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... book). (iii) It is submitted that this issue is covered by the decisions of this Hon'ble Tribunal in the Assessee's own case for the assessment year 2009-10 (Order dated 18.03.2022 passed in IT(TP)A No. 269/Bang/2014)- please see pages 906-909 of the caselaw compendium; and Assessee's own case for the assessment year 2010-11 (Order dated 18.08.2022 passed in IT(TP)A Nos. 562 and 400/Bang/2015) -at pages 955-961 of the caselaw compendium. 25. Without prejudice, the detailed invoice-wise listing of actual expenses incurred of Rs. 216.52 crores were produced before the AO vide submission dated 23.01.2015 at page 582-719, Volume 2 of the paper book, and therefore, it is submitted that the deduction ought to be allowed 26. The ld. DR supported the order of the DRP. 27. We have considered the rival submissions and perused the material on record. We notice that issue of allowability of warranty expenses was considered by the Tribunal in assessee's own case for AY 2009-10 (supra) where it was held that - "12.5 We have heard rival submissions and perused the material on record. As regards the provision for warranty, the learned AR explained that the methodology followed by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on account of warranty claims. It is clear from the chart which has been extracted in the order of assessment that as and when the period of warranty expires, the assessee writes back the provision made in the books of account to the extent it relates to the warranty liability which the assessee does not incur and which was already provided by way of a provision and allowed as deduction in the past. It appears to us that the provision made by the assessee is scientific and is based on past history. We are also of the view that in view of the parity of basis of provision of warranty in AYs 2002-03 & 2003-04 and AY 2005-06, the ruling of the Tribunal in AYs 2002-03 & 2003-04 is squarely applicable to AY 2005- 06 also. For the reasons stated above, we do not find any merit in ground No. 3 raised by the revenue and accordingly the same is dismissed." 12.5.1 Similar view has been held by the Tribunal in assessee's own case for assessment year 2002-2003 and 2003-2004 in ITA Nos.362 & 363/Bang/2007 (order dated 18-3-2016,). The relevant finding of the Tribunal reads as follows:- '5. Learned AR of the assessee submitted that in the earlier order, though the Hon'ble Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arranty liability by way of a provision, specified that the provisions made was based on past history and was a scientific method of estimating liabilities on account of warranty claims. For the relevant assessment year also, there are automatic reversals of the provision when products goes out of warranty period. For the purpose of estimating the warranty provision, the assessee takes into account only those units in respect of which the warranty period has not expired as on the date of estimation of provision. Accordingly, the system would automatically exclude those products for which the warranty period has expired and include only those products (i.e. products sold in past for which warranty period has not expired and products sold during the year with a warranty commitment) for which warranty period has not expired. Thus, based on the above accounting methodology, as the reversals get adjusted with the provision required to be created in the subsequent years, it, in effect, leads to the same being credited to the profit and loss account in the subsequent year. In view of the parity of basis of provision for warranty for assessment years 2002-2003, 2003-2004, 2005-2006 and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;ble High Court of Karnataka against the said order, the Revenue did not raise any ground on provision for warranty (copy of Hon'ble High Court judgment CIT v. Dell International Services India (P.) Ltd. [IT Appeal No. 236 of 2018, dated 9-11-2018] is placed on record). In view of the aforesaid reasoning and following the orders of the Tribunal in assessee's own case for assessment years 2002-2003, 2003-2004 and 2005-2006, we direct the A.O. to allow provision for warranty as a deduction. It is ordered accordingly. 28. We notice that the method of creation of warranty provision has not undergone change and is consistent with what is described in para 12.5.2 of the above order. Respectfully following the decision of the coordinate bench in assessee's own case we direct the AO to allow the provision made towards warranty. Since we have directed the AO to allow the entire provision made towards warranty, the alternate claim of the ld AR to consider the amount actually spent substantiated by evidences has become academic and does not warrant adjudication. Disallowance under section 40(a)(ia) of rebates given to customers [Ground No. II(2)] 29. The relevant ground reads as u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibution as described under: A. Bill to Order Under this model, the distributor undertakes to collate orders from the prospective customers on behalf of the Assessee and acts as an agent between the customer and Assessee for which the distributor earns commission at a prescribed rate on every successful order. The Assessee is ultimately responsible for all the risks and reward arising from such orders after the same is accepted. The entire obligation pertaining to fulfilment of orders is on the Assessee and not the distributor. The Assessee deducts applicable taxes at source on such commission paid to the distributors under bill to order model. B. Stock and Sell (SNS) In this model the distributors purchase final products from the Assessee at its own risk and in turn sell the same to the ultimate customer or a sub distributor at a predetermined price. The title in the goods is passed on to the distributor upon delivery of goods subsequent to sale by the Assessee. It is the responsibility of the distributor thereafter to sell such goods to the consumers and any unsold goods would not be returned back to the Assessee. Further, the distributor shall make the payments in relatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereby there is no liability to deduct tax at source. We notice that the Hon'ble jurisdictional High Court has expressed a similar view in the case of Bharti Airtel Ltd (supra) where it is held that - 51. From the aforesaid clauses, it is clear that there is no relationship of principal and agency. On the contrary, it is expressly stated that the relationship is that of principal to principal. Secondly the Distributor/Channel Partner has to pay consideration for the Product supplied and it is treated as sale consideration. There is a Clause, which specifically states that after such sale of Products, the Distributor/Channel Partner cannot return the goods to the assessee for whatever reason. It is the Channel Partner and the Distributor who have to insure the products and the godowns at their cost. They are even prevented from making any representation to the retailers unless authorized by the assessee. What is given by the assessee to its Distributor/ Channel Partner is a trade discount. It is not commission. 60. It is the contention of the assessee that the clauses of the agreement with its distributors demonstrate that the transactions in relation to rebate/discount are on a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght to have appreciated the fact that there would be no associated costs (except Software License cost which is deferred) incurred during the current year in respect of services to be rendered in future. 3.8 The learned AO and the Honourable DRP ought to have appreciated that recognizing the entire consideration as income during the current year would tantamount to taxing the gross receipts and not the profits or gains arising from such sale. 3.9 Notwithstanding and without prejudice to the above, we submit that, should the deferred revenue be taxed in the current year, corresponding deduction for the costs to be given in order to tax the net profits and not the gross receipts. 3.10 Notwithstanding the above contention, if the deferred revenue is taxed in the current year, corresponding relief ought to be provided in the subsequent year where the same is offered to tax." 38. The Assessee is engaged in the business of sale of computer hardware, and also offers warranty service to the customers, which represents a contractual obligation on part of the Assessee to provide services for a defined period for a given consideration agreed. Though the entire sale price for warranty i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ightline basis over the period of contract. Any portion of consideration for which invoices have been raised but, some portion of the contract period pertains to subsequent year would be classified under "other liabilities" and the same would be recognized as revenue in the year in which obligation to provide the services arise. • To illustrate, say the Company sells a laptop in December 2010 along with warranty for two years. In such a case, proportionate revenue towards warranty services for four months would be accounted in FY 2010-11 and the balance would be carried forward to the next two years and offered to tax based on time proportion. Thus, though the full consideration for providing the service is agreed and received during the FY 10-11, the obligation to service the customer arises over a period of time in FY 10-11 (4 months), 11-12(12 months) and 12-13 (8 months). Thus, the contracts which are extending beyond the current financial year, the consideration towards such contracts should also be assessed to tax on annual basis in which the services are provided. Until such consideration is recognized as revenue, the same shall be classified under other liabilities. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the customer. Even where such customer opts to cancel using the service being offered by assessee, the unutilized balance was not refundable. Thus, the amount paid was for outright purchase of services and not an advance to be appropriated against future use of the service. The assessee acquires the absolute right to utilize the amount so received. Thus, the income crystallizes as soon as a customer makes payment. The right to receive the income vests with the assessee as soon as the services are purchased by customers. Since, the assessee employed mercantile system of accounting, income would accrue with receipt and it cannot be considered as advance income, which could be deferred for tax purpose." 32. However it is submitted that upon cancellation of the contract, the Assessee has to refund the entire consideration less cost of services already rendered. On perusal of a sample warranty terms (pages 2527- 2540, relevant page 2537, Volume 6 of the paperbook) we notice that the assessee would refund the money upon premature cancellation of warranty service. The extract of the clause in the agreement is reproduced below for reference:- "Cancellation. Subject to the applicable pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is coupled with the liability on the other party to make the payment. Further in relation to contracts for services extending beyond the financial year 2009-10 under consideration, the Assessee is under a contractual obligation to render the service to the customer in the subsequent years and the same would involve outflow of cost/resources for the Assessee. It is also important to note that, in case the contract is cancelled, the Assessee is liable to refund the consideration received originally, less cost of services already rendered. From the detailed working and sample invoices submitted before the DRP (pages 2294 and 2541 to 3192 of Volume 6 of the paperbook) that the when the services are rendered in a particular year, the revenue deferred to such year is recognized as revenue during such year (amortised) and offered to tax and therefore it is clear that the Assessee has been recognizing the revenue periodically on the basis of accrual and offered them to tax. 34. The coordinate bench of the Tribunal in the case in Schneider Electric IT Business India Pvt. Ltd. v. JCIT, LTU [ITA Nos. 299/Bang/2014 and 218/Bang/2014) dated 30.04.2019] has considered a similar issue and hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces Account to the Workshop Income Account during the quarter in which the work of repairs and services was done, and included the amount so adjusted as income of the relevant year. Out of the aggregate amount shown in PWS Advances Account, the Assessing Officer treated proportionate sum for the period covered as the assessee's income for the assessment year in question. The Commissioner invoked section 263 and held that the entire amounts received in the previous year towards PWS Advances were trading receipts of the year directly connected with the business of servicing and repairs of tractors. He, accordingly, set aside the assessment. On appeal, the Tribunal upheld the Assessing Officer's action disagreeing with the finding of the Commissioner. On reference, the Hon'ble Punjab & Haryana High Court held as follows: "The taxability of income normally depends upon the system of accounting followed by the assessee. Even in the case of an assessee following the mercantile system of accounting, a mere claim, by the assessee in respect of an amount without the right to claim cannot form the basis for taxability. Where the assessee follows the cash system of accounti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thdrawal of the money as and when the customer required. So, it is highly uncertain as to whether it would at all remain as income of the assessee. Only when the service is done the assessee has a right over the amount that was deposited. Till then, he has no right over the same. It is in that sense till then, it cannot be considered as an income of the assessee and is not eligible to tax. 95. The Mumbai ITAT in the case of IOT Infrastructure & Energy Services Ltd. (supra) had to deal with identical case. The facts of that case were that the Assessee had not offered for tax an amount being difference between progress billing as on 31-3- 2007 and cumulative revenue booked as per accounts as on 31-3- 2007 in respect of three contracts. The assessee explained to Assessing Officer that progress billing was inclusive of advances received from customers which amount did not reflect work performance. It was also explained that progress billing was done not only for amount of work done but also for mobilisation and other advances receivable by it as per terms of relevant contract and that mobilisation and other advances received by assessee by raising progress billings did not represent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The relevant ground reads as under - "4. Mark to Market Loss (MTM) - Rs. 284,364,000 4.1 The learned AO has erred in disallowing Mark to Market (MTM) loss on hedging transaction amounting to Rs 284,364,000 without appreciating the fact that such losses are incurred to mitigate foreign exchange fluctuation risk in relation to imports and the same is revenue in nature. 4.2 The learned AO has erred in considering the MTM loss as notional/contingent in nature without appreciating that such losses arise out of a contractual obligation existing as of the reporting date and the same cannot be of contingent nature. 4.3 The learned AO has erred in not placing reliance on the judicial precedents quoted by the appellant which deals with issue of MTM loss being ruled in favor of appellant. 4.4 The learned AO has erred in placing reliance on CBDT Instruction 3, 2010 and disallowing the MTM loss without considering the fact that the transaction was for hedging and not for speculative purpose. DRP directions not followed by AO 4.5 The learned AO has erred in not following the directions of the Honourable DRP which has directed to allow the MTM loss if MTM gain was offered to tax in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -1, rests on the basic premise of recognition of expenses incurred during the year, even though the same may be discharged at a future date. If the same were to be disregarded and allowed only at the time of settlement, it would amount to rejecting the method of accounting adopted by the Assessee and substituting the same, in part, by cash method which is not justified. • Hence, it is submitted that the recognition of MTM losses in the books of accounts is in accordance with the AS notified under Section 145 of the Act as the above accounting principles of prudence and accrual require accounting for MTM loss as at the Balance Sheet date. • It is submitted that the principles of accounting should be applied for the purpose of ascertaining taxable profits of a business as long as they are not in contradiction with any express provisions of the statute. • It is a settled position that any expenditure not being in the nature of capital or personal expense, and laid out wholly and exclusively for the purpose of business or profession carried out by the assessee would be allowable as a deduction. In the present case, the MTM loss having arisen on account of hedging i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... own case for AY 2009- 10(Order dated 08.04.2022 passed in M.P. Nos. 22&23/Bang/2022 in IT(TP)A Nos. 130&121/Bang/2014). 52. We heard the DR. We notice that the coordinate bench in assessee's own case (supra) has considered the issue of allowability of MTM losses and held that - We notice that the Tribunal is consistently taking the view that the loss arising on revaluation of outstanding forward contracts entered to safe guard the underlying revenue assets cannot be considered as notional loss and accordingly the same is eligible for deduction while computing total income. The following observations made by the co-ordinate bench in the case of M/s Quality Engineering and software Technologies P Ltd (supra) are relevant:- "4.5.11 As discussed earlier, in the case on hand, there has been an existing contract with a binding obligation accrued against the assessee when it entered into forex forward contracts. The forward contracts are in respect of consideration for export proceeds, which are revenue items. There is an actual contract for sale of merchandise. In this factual matrix, it is clear in our view that the transaction in question will not qualify to be called as speculat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the volume of transactions, the assessee had not submitted the details of TDS and the AO made a disallowance of Rs. 32,54,369/- for want of evidence. Nature of expense Amount debited (INR) Evidence for TDS given (INR) Difference (INR) Repairs & Maintenance 17,26,42,144/- 17,12,73,102/- 13,69,042/- Sub-contracting charges 66,23,06,308/- 66,09,18,054/- 13,88,254/- Advertisement 31,40,80,812/- 31,35,83,739/- 4,97,073/- Total 32,54,369 56. In the return of income, the assessee also claimed allowance of an amount of Rs. 28,13,64,044/- u/s.40(a)(ia) and the details pertaining to the same were also called for by the AO. The AO disallowed an amount of Rs. 62,13,963/- out of the deduction claimed under section 40(a)(ia) of the Act on the ground that the details of TDS were not furnished for the same. 57. The ld AR submitted that the assessee had entered into innumerable transactions, of which certain portion of expenses may not attract TDS and further, providing details of every line of item of expenses may not be practically possible. The ld AR also submitted that the AO ought to have appreciated that despite the same, the assessee had provided substantial informa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no qualifications regarding accounting systems followed by the Appellant or the books of accounts maintained by the Appellant have been made by the Auditors in the audit report and has certified the financial statements to be true and correct after carrying out verification on test check basis. Further, the TPO/Assessing Officer has not pointed out any defect/discrepancy in the bills/supporting documents furnished by the Appellant which constitute 78% of the out of pocket expenses reimbursed by the Appellant to its AE. The Appellant has not furnished bills/supporting documents for INR 42,40,116/- which constitute balance 22% out of pocket expenses reimbursed and only 3.5% [(42,40,116/11,85,22,998) x 100] of the total expenses reimbursed by the Appellant to its AEs for the relevant assessment year. In view of the aforesaid facts, we are inclined to accept the submission advanced by the Ld. Authorised Representative for the Appellant that the Appellant has substantially complied with the directions given by the Assessing Officer and therefore, in our view, the TPO/Assessing Officer was not justified in making additions of INR 42,40,116/-. Further, in our view, the TPO has also faile ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proposed a disallowance of forex loss of Rs. 54,95,55,000/- on the ground that no evidence was provided to substantiate the same. The DRP, relying on the directions issued in the Assessee's own case for the assessment years 2009-10 and 2010- 11,allowed the Assessee's objections and accordingly. The revenue is appeal against the final order of assessment passed in accordance with the directions of the DRP. 66. The ld AR submitted that the exchange loss of Rs.54,95,55,000/- claimed as deduction represents realized and unrealized net exchange loss arising on account of various transactions in foreign currency. These losses are accounted in accordance with the principles laid down in Accounting Standard - 11 (AS-11). AS-11 requires a foreign currency transaction to be initially recognized using the exchange rate as on the date of the transaction. However, at each balance sheet date, the foreign currency monetary items would be required to be reported using the closing rate. Thus, in line with the requirement of AS -11, the Company has recorded each and every transaction entered into in foreign currency at the exchange rates prevailing as on the date of the transaction and has subsequ ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
