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09-01-2019, Alfa Laval India, Section 38, 41(1), 43B, Tribunal Pune

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1 week 10 hours ago #8352 by amit
Section - 38, 41(1), 43B, 28(iv)
Order Date - 09-01-2019
Favouring - Revenue Partly allowed for statistical purposes
Court - Tribunal Pune
Appellant - DCIT
Respondent - Alfa Laval India Ltd.
Justice - D. KARUNAKARA RAO AM & PARTHA SARATHI CHAUDHURY JM
Citation - 119Taxpundit148
Appeal No. - ITA No. 2638/PUN/2016
Asstt. Year - 2011-12

Order

PER : PARTHA SARATHI CHAUDHURY

This appeal preferred by the Revenue emanates from the order of Ld. CIT(Appeals)-13, Pune dated 04.07.2016 for the assessment year 2011-12 as per following grounds of appeal on record.

“1.Whether on the facts and circumstances of the case the Ld. CIT(A) erred in holding that the domestic market segment and the export market segment were distinct and not comparable and thereby, the application of the cost plus method adopted by the TPO was incorrect?

2. Whether on the facts and in the circumstances of the case, the Ld.CIT(A) was justified in holding that discount of Rs.72,74,168/- received on pre-payment of liability under the 'Sales Tax Deferral Scheme', as not a remission or cessation of liability u/s 41(1)?

3. Whether on the facts and circumstances of the case the Ld. CIT(A) erred in deleting the disallowance of IT service charges of Rs.6,22,64,471/- by holding that the above expenditure was in the nature of revenue expenditure?

4. Whether on the facts and circumstances of the case the Ld. CIT(A) was justified in deleting the addition on account of IT service charges of Rs. 6,22,64,471/-, ignoring that on similar issue for A.Y.2008-09 the Hon'ble ITAT has restored the matter to the file of AO for fresh verification?

5. Whether on the facts and circumstances of the case the Ld. CIT(A) erred in deleting the disallowance of Rs.21,32,932/- u/s.14(A) ignoring that AO has clearly recorded in his order that he is not satisfied with the quantum of expenses allocated by the assessee against exempt income?

6. The appellant craves leave to add, amend or alter any of the above grounds of appeal.”

2. The brief facts in this case are that the assessee company is a subsidiary of Alfa Laval AB, Sweden and is engaged in manufacturing and sale of plate and spiral head exchanges, decanters and separators and also executes complete projects and systems for its customers. The assessee company has three divisions’ viz. Equipment division, the Projects division and the Parts and Services division. The Equipment division of the company is engaged in manufacture and sale of plate and spiral exchangers, decanters and separators etc. whereas the Projects division is engaged in installation and Commissioning of projects, plants and systems. The parts and services division is engaged in trading of spares and components and servicing related activities.

3. The international transactions entered into by the assessee during the assessment year 2011-12 are as follows:

4. The assessee aggregated all its international transaction of the equipment division in its Transfer Pricing Study Report. According to the assessee, its international transactions are required to be aggregated because the same are closely interlinked, therefore, it used the Transactional Net Margin Method (TNMM) to benchmark its international transactions. The assessee stated that the net operating margin over sales of its Equipment division was of 13.77% which was higher than the average net operating margin of the comparable companies. Therefore, its international transactions

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