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These are the latest case laws decided by various Income Tax Appellate Tribunals (ITAT) of India on Income Tax which have been published recently. The case laws are open for discussion and we invite expert comments from our members on its applicability and effect on relevant issues.

06-09-2019, Nalco Water India, Section 144C(13), 92C(2), Tribunal Pune

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5 days 4 hours ago #10768 by amit
Section - 144C(13), 92C(2), 234B, 271(1)(c), 263
Order Date - 06-09-2019
Favouring - Assessee Partly
Court - Tribunal Pune
Appellant - Nalco Water India Limited
Respondent - ACIT
Justice - SUSHMA CHOWLA, JM & ANIL CHATURVEDI, AM
Citation - 919Taxpundit89
Appeal No. - ITA No.742/PUN/2017
Asstt. Year - 2012-13

Order

PER : SUSHMA CHOWLA, JM:

The appeal filed by assessee is against order of ACIT, Circle-2, Pune, dated 23.02.2017 relating to assessment year 2012-13 passed under section 143(3) r.w.s. 144C(13) of the Income-tax Act, 1961 (in short „the Act‟).

2. The grounds of appeal raised by assessee read as under:-

General

1. On the facts and in the circumstances of the case and on the law prevailing on the subject, the learned AO/Transfer Pricing Officer ("TPO"), pursuant to the directions of the Hon'ble DRP, has erred in making a transfer pricing adjustment of INR 7,95,78,453 to the value of international transactions by modifying the benchmarking methodology adopted by the Appellant and concluding that certain international transactions of the Appellant do not meet the arm's length test. The learned AO has also erred in disallowing depreciation of INR 64,09,577 on the assets installed at the premises of the Appellant's customers, by holding that the same were not used for the purpose of its own business. Corporate Taxation

2. On the facts and in the circumstances of the case and on the law prevailing on the subject, the learned AO / TPO pursuant to the directions of the DRP has erred in holding that the amount of INR 65,19 47,000 received by the Appellant during the year under consideration as subvention money is a "revenue receipt" exigible to tax.

3. On the facts and in the circumstances of the case and on the law prevailing on the subject, learned AO pursuant to the directions of the DRP erred in disallowing depreciation of INR 64,09,577 on plant and machinery on the ground that the plant and machinery were installed at customer's premises and hence were not 'put to use' in the business of the Appellant. Transfer Pricing Considering the value of Management charges paid to Associated Enterprises at Rs. Nil:

4. On the facts and in the circumstances of the case and on the law prevailing on the subject, the learned AO/ TPO, pursuant to the directions of the Hon'b e DRP, has erred in rejecting the methodology adopted by the Appellant for benchmarking the international transactions of payment of headquarter common expenses and allocation of management assistance related fees.

5. On the facts and in the circumstances of the case and on the law prevailing on the subject, the learned AO/ TPO, pursuant to the directions of the Hon'ble DRP, has erred in determining the arm's length price of the international transactions of payment of headquarter common expenses and allocation of regional management assistance fees, by the Appellant to its Associated Enterprises, as 'Nil', without applying any specific method as prescribed by law and without carrying out any comparability analysis.

6. On the facts and in the circumstances of the case and on the law prevailing on the subject, the learned AO/ TPO pursuant to the directions of the Hon'ble DRP, has erred in holding that the Appellant has not demonstrated the need and the receipt of services under the headquarter common expenses and the allocation of regional management assistance, ignoring substantive documentary evidences submitted by the Appellant before the learned TPO/additional evidences submitted before the Hon'ble DRP, demonstrating the need, actual receipt of the services and benefits therefrom.

Rejecting the Comparable Uncontrolled Price as the most appropriate method for benchmarking the international transactions pertaining to "Royalty" and determining its ALP by aggregating it with other international transactions of the "manufacturing segment"

7. On the facts and in circumstances of the case and on the law prevailing on the subject, the learned AO/TPO, pursuant to the directions of the Hon'ble DRP, has erred in rejecting the benchmarking analysis conducted by the Appellant pertaining to the international transaction of payment of Royalty to its Associated Enterprise ('AE'), wherein the Assessee had considered Comparable Uncontrolled Price as the most appropriate method, for determining the arm's length nature of the said transaction. Erroneous consideration of aggregate of specialty chemicals and equipment segments for computation of arm's length price of the international transactions pertaining to the manufacturing segment.

8. On the facts and in the circumstances of the c se and on the law prevailing on the subject, the learned AO, pursuant to the directions of the Hon'ble DRP, has erred, in considering the aggregate of specialty chemicals and equipment segments for the purposes of computation of the Profit Level Indicator ('PLI') for the purposes of computation of the arm's length price for the international transactions of the Appellant pertaining to the manufacturing segment.

9. On the facts and in the circumstances of the case and on the law prevailing on the subject, the learned AO/ TPO, pursuant to the directions of the Hon'ble DRP, has erred in modifying the benchmarking analysis, as conducted by the Appellant, using Transactional Net Margin Method for benchmarking its international transactions pertaining to manufacturing segment and thereby modifying the set of comparables. In doing so, the learned AO / TPO / DRP has erred in:

i. adding / rejecting certain companies in the final set of comparables which were functionally not similar to the Appellant's manufacturing segment, and

ii. rejecting the fresh search submitted as additional evidence. Not restricting the transfer pricing adjustment to the value of "international transactions":

10. On the facts and in circumstances of the case and on the law prevailing on the subject, the learned AO/ TPO, pursuant to the directions of the Hon'ble DRP, has erred by not restricting the transfer pricing adjustment in proportion to the quantum of the international transactions. Subsidy received

11. Without prejudice to Ground No.2, on facts and in the circumstances of the case and on the law prevailing on the subject, the learned AO/ TPO, pursuant to the directions of the Hon'ble DRP, has erred in treating the amount of subsidy received from its AE as 'non-operating income'.

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