Turbo Gears (India) Pvt. Ltd., Pune V. ACIT, Circle 1(2), Pune

ITA 1629/PUN/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 7232 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-01-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 03-08-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 28-08-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANIL CHAWARE
• Keywords: Depreciation; Transfer pricing; International transaction
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE , . . , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI R.K. PANDA, AM . / ITA NO. 16 29 /P U N/20 1 3 / ASSESSMENT YEAR: 20 08 - 09 CARRARO INDIA PVT. LTD., (SUCCESSOR OF TURBO GEARS INDIA PVT. LTD.,) B - 2/3, MIDC, RANJANGAON, DIST. PUNE 412210 . / APPELLANT PAN: AAACT0217B VS. THE ASST. COMMISSIONE R OF INCOME TAX, CIRCLE - 1(2), PUNE . / RESPONDENT . / ITA NO. 16 73 /P U N/201 3 / ASSESSMENT YEAR: 20 08 - 09 THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE - 1(2), PUNE . / APPELLANT VS. CARRARO INDIA PVT. LTD., (SUCCESSOR OF TURBO GEARS INDIA PVT. LTD.,) B - 2/3, MIDC, RANJANGAON, DIST. PUNE 412210 . / RESPONDENT PAN: AAACT0217B ASSESSEE BY : S HRI RAJENDRA AGIWAL REVENUE BY : S /S HRI ANIL CHAWARE & SUHAS KULKARNI / DATE OF HEARING : 24 . 11 .201 6 / DATE OF PRONOUNCEMENT: 19 . 0 1 .201 7 ITA NO S. 1 6 29 & 1 6 73 /PN/201 3 M/S. CARRARO INDIA PVT. LTD. 2 / ORDER PER SUSHMA CHOWLA, JM: THE CROSS APPEAL S FILED BY THE ASSESSEE AND REVENUE ARE AGAINST ORDER OF CIT (A) - I T/TP , PUNE , DATED 21 . 0 6 .201 3 RELA TING TO ASSESSMENT YEAR 20 08 - 09 ORDER PASSED UNDER SECTION 143(3) R.W.S. 1 44C(4) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) . THE ACT) . 2. THE CROSS APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 3 . THE ASSESSEE IN ITA NO. 1 6 29 /PN/201 3 HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : - APPEAL : - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) [CIT(A)] IS BAD, BOTH IN THE EYE OF LAW AND ON FACTS. 2(I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING THE ACTION OF THE A O IN DISALLOWING AN AMOUNT OF R S .25,52,557/ - BY TREATING THE SAME AS PROFESSIONAL FEE INVOKING THE PROVISIONS OF SEC TION 40(A)(I) OF THE ACT. (II) THAT THE ABOVE SAID ADDITION HAS BEEN MADE REJECTING THE CONTENTION OF THE ASSESSEE THAT THE COST CONTRIBUTION ARRANGEMENT DOES NOT FALL WITHIN THE DEFINITION OF FEE FOR TECHNICAL SERVICES. DEFINITION OF FEE FOR TECHNICAL SERVICES. 3(I) ON THE FACTS AND CIRCU MSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING ADDITION MADE BY THE A O OF AN AMOUNT OF R S .12, 00,000 I - ON ACCOUNT OF RATE DIFFERENCE. (II) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRE D BOTH ON FACTS AND IN LAW IN HOLDING THAT THE AMOUNT OF R S .12, 00,000 I - IS NOT AN ASCERTAINED LIABILITY IGNORING THE DETAILS OF THE SUPPLIER'S INVOICES IN RESPECT OF THE SAME SUBMITTED BY THE APPELLANT. 4(I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN NOT ADJUDICATING THE CONTENTION OF THE ASSESSEE THAT TPO HAS ERRED IN TAKING OPERATING PROFIT/OPERATING COST AS THE P LI AS AGAINST PBI D /SALES TAKEN BY THE APPELLANT. AGAINST PBI D /SALES TAKEN BY THE APPELLANT. ITA NO S. 1 6 29 & 1 6 73 /PN/201 3 M/S. CARRARO INDIA PVT. LTD. 3 (II) ON THE FACTS AND CIRCUMST ANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN NOT ADJUDICATING THE CONTENTION OF THE APPELLANT THAT THE TPO HAS ERRED IN TAKING PLI AS PROFITS BEFORE INTEREST BUT AFTER DEPRECIATION. III) ON THE FACTS AND CIRCUMSTANCES OF TH E CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN NOT ADJUDICATING THE CONTENTION OF THE APPELLANT THAT EXPORT INCENTIVES SUCH AS REFUND OF DUTY HAVING NEXUS WITH THE IMPORTED MATERIAL AND DIRECTLY IMPACTING THE PROFITABILITY SHOULD BE TREAT ED AS PART OF OPERATING INCOME. (IV) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN NOT ADJUDICATING THE CONTENTION OF THE APPELLANT THAT FOREIGN EXCHANGE LOSS BEING NON - OPERATIVE EXPENDITURE SHOULD N OT BE CONSIDERED WHILE COMPUTING PLI. (V) ON THE FACT AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN NOT ADJUDICATING THE CONTENTION OF THE APPELLANT THAT THE ADJUSTMENTS SHOULD BE MADE ONLY TO EXPORT SALES I.E. INTERNATIONAL TRANSACTIONS ONLY AND NOT TO OVERALL SALES I.E. ENTERPRISE LEVEL. (VI) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN NOT ADJUDICATING THE ISSUE OF ADJUSTMENT FOR RISK AND WORKING CAPIT AL. (VII) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN NOT ADJUDICATING THE CONTENTION OF THE APPELLANT THAT THERE ARE A COMPUTATIONAL/CALCULATION ERRORS MADE BY THE TPO. 4. THE REVENUE IN ITA NO. 1673/PN/2013 HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) IS CONTRARY TO LAW AND TO THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) GROSSL Y ERRED IN DIRECTING THE ASSESSING OFFICER TO VERIFY THE COMPUTATION OF THE OPERATING MARGIN OF THE COMPARABLE COMPANIES AND OF THE ASSESSEE BY INCLUDING, AMONG OTHER THINGS, EXPORT INCENTIVES AS OPERATING INCOME WITHOUT APPRECIATING THAT EXPORT INCENTIVES ARE BASED ON THE CLAIMS OF THE GOVERNMENT AND, THEREFORE, CANNOT BE CONSIDERED AS BEING IN THE NATURE OF INCOME FROM THE BUSINESS OF THE UNDERTAKING AS WAS HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF COMMISSIONER OF INCOME - TAX VS. STERLING FOODS, (19 99) 237 ITR 579. 3. THE LEARNED COMMISSIONER OF INCOME - TAX ( APPEALS) GROSSLY ERRED IN FAILING TO APPRECIATE THAT INCLUSION OF EXPORT INCENTIVES IN OPERATING INCOME WOULD RESULT IN SHIFTING SUCH INCENTIVES OFFERED BY THE GOVERNMENT TO AN INDIAN COMPANY FROM ONE TAX JURISDICTION TO ANOTHER TAX JURISDICTION WHICH IS CLEARLY AGAINST THE TRANSFER PRICING PROVISIONS UNDER THE INDIAN INCOME - TAX LAW. 4. FOR THESE AND SUCH OTHER GROUNDS AS MAY BE URGED AT THE TIME OF THE HEARING, THE ORDER OF THE LEARNED CO MMISSIONER OF INCOME - TAX ( APPEALS) MAY BE VACATED AND THAT OF THE ASSESSING OFFICER BE RESTORED. ITA NO S. 1 6 29 & 1 6 73 /PN/201 3 M/S. CARRARO INDIA PVT. LTD. 4 5. FIRST, WE SHALL TAKE UP THE APPEAL FILED BY THE REVENUE, WHEREIN THE SOLITARY ISSUE RAISED IS AGAINST COMPUTATION OF OPERATING MARGINS OF ASSESSEE AND COMPA RABLE COMPANIES BY INCLUDING EXPORT INCENTIVES AS OPERATING INCOME. 6. BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION HAD FILED ITS RETURN OF INCOME DECLARING LOSS OF RS.3.38 CRORES. THE CASE OF THE ASSESSEE WAS TAKEN UP FOR SCRUTINY. THE ASSESSEE HAD ENTERED INTO INTERNATIONAL TRANSACTIONS WITH ITS ASSOCIATE ENTERPRISES AT RS. 58,26,19,745/ - , HENCE, REFERENCE UNDER SECTION 92CA(1) OF THE ACT WAS MADE FOR COMPUTATION OF ARM'S LENGTH PRICE IN RELATION TO THE INTERNATIONAL TRANSACTIONS. THE TRANSFER PRICING OFFICER (IN SHORT THE TPO) DID NOT ACCEPT THE BENCHMARKING OF INTERNATIONAL TRANSACTIONS UNDERTAKEN BY THE ASSESSEE AND MADE AN UPWARD ADJUSTMENT OF RS. 3,75,85,000/ - UNDER SECTION 92CA(3) OF THE ACT. THE ASSESSEE WAS SHOW CAUSED AS TO WHY ITS INCOME SHOULD NOT BE ENHANCED TO THAT EXTENT. THE ASSESSEE PLACED RELIANCE ON THE SUBMISSIONS MADE BEFORE THE TPO. THE ASSESSING OFFICER DETERMINED THE INCOME AFTER MAKING ADDITION OF RS.3.75 CRORES. 7. BEFORE THE CIT(A), THE C ONTENTION OF ASSESSEE WAS THAT ADJUSTMENT MADE BY THE TPO FELL WITHIN +/ - 5% OF SAFE HARBO U R RULES. THE TPO HAD COMPUTED AVERAGE PLI OF THE COMPARABLE COMPANIES AT 9.43%, WHEREAS THE PLI OF ASSESSEE WAS OF 4.11% AND THE CASE OF ASSESSEE WAS THAT NO ADJUST MENT WAS TO BE MADE IN CASE VARIATION OF 5% OF ARITHMETIC MEAN OF MARGINS OF COMPARABLE COMPANIES WITH THE ASSESSEE. THE CIT(A) ON VERIFICATION, FOUND THE CONTENTION OF ASSESSEE TO BE CORRECT AND WAS OF THE VIEW THAT NO ADJUSTMENT IS REQUIRED TO BE MADE, WHERE APPELLANT S OPERATING MARGINS FELL WITHIN 5% OF AVERAGE OPERATING MARGINS OF COMPARABLE COMPANIES. HOWEVER, THE CIT(A) FELT DURING VERIFICATION THAT THE ITA NO S. 1 6 29 & 1 6 73 /PN/201 3 M/S. CARRARO INDIA PVT. LTD. 5 ASSESSING OFFICER HAD NOT CORRECTLY COMPUTED THE OPERATING MARGINS OF COMPARABLE COMPANIES. THE REFORE, THE ASSESSING OFFICER WAS DIRECTED TO VERIFY THE SAME BY INCLUDING INTEREST AS OPERATING EXPENDITURE AND INCL UDING EXPORT INCENTIVES AND SCRAP SALES AS OPERATING INCOME. ON THE OTHER HAND, THE INTEREST INCOME IN THE NATURE OF INCOME FROM OTHER SOU RCES SHOULD BE EXCLUDED FOR COMPUTING OPERATING MARGINS OF COMPARABLE COMPANIES AND THE ASSESSEE. SINCE THE MAIN GROUNDS OF APPEAL ON TRANSFER PRICING WAS DECIDED IN FAVOUR OF THE ASSESSEE, THE OTHER GROUNDS OF APPEAL ON TRANSFER PRICING WERE HELD TO BE I NFRUCTUOUS AND WERE NOT DECIDED BY CIT(A) . 8. THE REVENUE IS IN APPEAL AGAINST THE ORDER OF CIT(A) IN DIRECTING THE ASSESSING OFFICER TO VERIFY THE COMPUTATION OF OPERATING MARGINS OF COMPARABLE COMPANIES AND OF ASSESSEE BY INCLUDING EXPORT INCENTIVES AS OPERATING INCOME. 9. THE CASE OF THE REVENUE IS THAT THE SAME ARE NOT TO BE INCLUDED AS INCOME FROM BUSINESS OF THE UNDERTAKING AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. STERLING FOODS (1999) 237 ITR 579 (SC ) . THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE POINTED OUT THAT DIRECTIONS OF CIT(A) TO INCLUDE EXPORT BENEFITS IN OPERATING INCOME WHILE MAKING TP ADJUSTMENT WAS NOT CORRECT. 10. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE ON THE OTHER HAND, POINTED OUT THAT UNDER THE TP PROVISIONS, THE OPERATING INCOME HAS WIDER CONNOTATION. HE REFERRED TO THE SAFE HARBO U R RULES, WHICH DEFINES THE OPERATING INCOME I.E. OPERATING INCOME MEANS IN THE COURSE OF BUSINESS. RELIANCE WAS PLACED ON THE RATIO LAID DOWN BY MUMBAI BE NCH OF TRIBUNAL IN WELSPUN ZUCCHI TEXTILES LTD. VS. ACIT IN ITA NO.6539/MUM/2009 AND DCIT VS. WELSPUN ZUCCHI ITA NO S. 1 6 29 & 1 6 73 /PN/201 3 M/S. CARRARO INDIA PVT. LTD. 6 TEXTILES LTD. IN ITA NO.898/MUM/2010, RELATING TO ASSESSMENT YEAR 2005 - 06, ORDER DATED 11.01.2013 , WHEREIN IT WAS HELD THAT OPERATING INCOME WOULD INCLUDE EXPORTS BENEFITS. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE REFERRED TO THE DECISION OF HONBLE SUPREME COURT IN CIT VS. STERLING FOODS (SUPRA) AND POINTED OUT THAT FOR COMPUTING THE PROFITS AND GAINS ELIGIBLE FOR THE BENEFIT UNDER SE CTION 80HH OF THE ACT, THE TERM USED IS DERIVED FROM WHICH MEANS DIRECT NEXUS BETWEEN PROFITS AND GAINS AND INDUSTRIAL UNDERTAKING. HOWEVER, THE DEFINITION OF OPERATING INCOME WAS MUCH WIDER. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE FURTH ER POINTED OUT THAT IN CASE THE APPEAL OF REVENUE IS DISMISSED, THEN THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE AGAINST THE TP ADJUSTMENT EXCEPT ALLOWING WORKING CAPITAL ADJUSTMENT MAY NOT BE ADJUDICATED. 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERU SED THE RECORD. THE LIMITED ISSUE WHICH ARISES IN THE APPEAL FILED BY THE REVENUE IS AGAINST COMPUTATION OF OPERATING MARGINS. THE CIT(A) WHILE APPLYING TP PROVISIONS TO THE INTERNATIONAL TRANSACTIONS UNDERTAKEN BY THE ASSESSEE OBSERVED THAT THE OPERATIN G MARGINS HAVE NOT BEEN CORRECTLY WORKED OUT AND MADE CERTAIN DIRECTIONS FOR EXCLUSION / INCLUSION OF CERTAIN ITEMS OF EXPENDITURE / INCOME . THE REVENUE IS IN APPEAL ONLY AGAINST INCLUSION OF EXPORT INCENTIVES IN THE OPERATING INCOME WHILE COMPUTING OPERA TING MARGINS OF THE ASSESSEE AND THE COMPARABLE COMPANIES. THE MUMBAI BENCH OF TRIBUNAL IN WELSPUN ZUCCHI TEXTILES LTD. VS. ACIT (SUPRA) HAD HELD THAT THE DEPB BENEFIT RECEIVED DURING THE YEAR UNDER CONSIDERATION SHOULD BE CONSIDERED AS PART OF TURNOVER O F THE ASSESSEE FOR WORKING OUT THE PROFIT MARGINS TO MAKE THE COMPARISON OF LIKE TO LIKE AND SIMILAR TO SIMILAR, WHERE SUCH DEPB BENEFIT WAS TAKEN INTO ACCOUNT IN THE COMPARABLE CASES WHILE WORKING OUT THEIR PROFIT MARGINS. ITA NO S. 1 6 29 & 1 6 73 /PN/201 3 M/S. CARRARO INDIA PVT. LTD. 7 12. WE FURTHER FIND THAT THE HO NBLE BOMBAY HIGH COURT IN CIT VS. WELSPUN ZUCCHI TEXTILES LTD. IN INCOME TAX APPEAL NO.1 286 OF 201 4 , JUDGMENT DATED 06.01.2017 HAVE HELD THAT DEPB WAS INCLUDABLE IN ARRIVING AT THE OPERATING PROFIT AND THE APPEAL OF REVENUE WAS DISMISSED. FOLLOWING THE S AME PARITY OF REASONING, WE HOLD THAT EXPORT INCENTIVES WERE TO BE INCLUDED AS OPERATING INCOME OF THE ASSESSEE AND THE COMPARABLES AND THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE THUS, DISMISSED. 13. NOW, COMING TO THE APPEAL OF ASSESSEE. THE GROUND OF APPEAL NO.1 RAISED BY THE ASSESSEE IS GENERAL IN NATURE AND THE SAME IS DISMISSED. 14. THE GROUND OF APPEAL NO.2 RAISED BY THE ASSESSEE IS AGAINST THE DISALLOWANCE OF SUM OF RS.25,52,557/ - BY TREATING THE SAME AS PROFESSIONAL FEES AND IN VIEW OF NON - DEDUCTION OF TAX AT SOURCE, THE SAME WAS DISALLOWED BY INVOKING THE PROVISIONS OF SECTION 40(A)(I) OF THE ACT. 15. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THE ASSESSEE HAD PAID CERTAIN CHARGES TO ITS ASSOCIATE ENTERPRISE S FOR SHARING INTRA GLOBAL SERVICES. BEFORE THE ASSESSING OFFICER, THE CASE OF ASSESSEE WAS THAT IT WAS REIMBURSEMENT OF COST OF ALLOCATED EXPENSES AND WAS NOT TECHNICAL FEES UNDER SECTION 9(1)(VII) OR UNDER ARTICLE 12 OF INDIA - LUXEMBOURG TREATY. THE ASS ESSING OFFICER ON THE OTHER HAND, HELD IT TO BE PROFESSIONAL FEES AND ELIGIBLE FOR TAX DEDUCTION AT SOURCE AND BECAUSE OF NON - DEDUCTION, THE SAID AMOUNT WAS DISALLOWED UNDER SECTION 40(A)(I) OF THE ACT. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESS EE POINTS OUT THAT BEFORE THE CIT(A), THE FIRST PLEA WAS THAT THERE WAS NO REQUIREMENT TO DEDUCT TAX AT SOURCE AND AN ALTERNATE PLEA ITA NO S. 1 6 29 & 1 6 73 /PN/201 3 M/S. CARRARO INDIA PVT. LTD. 8 WAS RAISED WHICH HAS BEEN NOT CONSIDERED THAT THE ASSESSEE HAS DEDUCTED TAX AT SOURCE AND DEPOSITED THE SAME IN THE GOVERNM ENT ACCOUNT AND IN SOME CASES, THE SAME WAS WITHIN TIME AND IN SOME CASES, THE SAME WAS AFTER THE DUE DATES. THERE WERE FEW BILLS WHICH WERE REIMBURSEMENT OF EXPENSES AND HENCE, NOT ELIGIBLE FOR DEDUCTION OF TAX AT SOURCE. OUR ATTENTION WAS DRAWN TO THE SUBMISSIONS MADE BEFORE THE CIT(A) AT PAGE 510 OF PAPER BOOK WITH SPECIAL REFERENCE TO PAGE 532 OF THE PAPER BOOK AND THE SUMMARY OF PAYMENTS DISALLOWED UNDER SECTION 40(A)(I) OF THE ACT DUE TO NON - DEDUCTION OF TAX UNDER SECTION 194 OF THE ACT, WHICH IS PL ACED AT PAGE 414 OF THE PAPER BOOK. 16. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE ON THE OTHER HAND, PLACED RELIANCE ON THE ORDER OF CIT(A). 17. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE LIMITED ISSUE WHICH ARISES BEF ORE US IS WITHOUT GOING INTO THE MERITS OF THE SUBMISSIONS MADE BEFORE THE ASSESSING OFFICER AND CIT(A) , THAT THE CHARGES PAID TO ASSOCIATE ENTERPRISES ARE ALLOWABLE WHERE TAX DEDUCTED HAS NOT BEEN PAID IN ACCOUNT OF TREASURY . THE LEARNED AUTHORIZED REPRE SENTATIVE FOR THE ASSESSEE ADMITTED THAT THERE IS NO DISPUTE ON MERITS. HOWEVER, IN RESPECT OF AFORESAID PAYMENTS, THE ASSESSEE HAD DEDUCTED TAX AT SOURCE AND PAID THE SAME INTO THE ACCOUNT OF TREASURY EITHER WITHIN TIME ALLOWED OR BEFORE THE DUE DATE OF FILING THE RETURN OF INCOME AND IN SOME CASES IN SUCCEEDING YEAR AND IN SOME CASES, IT WAS NOT DEDUCTED AT ALL. ANOTHER ASPECT OF THE EXPENSES WAS THAT SOME OF EXPENSES WERE AKIN TO REIMBURSEMENT WHICH WERE SUPPORTED BY BILLS AND CERTAIN ENTRIES WERE REIM BURSED AND CREDITED TO THE EXPENDITURE ACCOUNT. ALL THESE DETAILS ARE AVAILABLE AT PAGE 414 OF THE PAPER BOOK IN TABULATED FORM. IN VIEW OF THE PLEA RAISED BY THE ASSESSEE, WE DIRECT THE ASSESSING OFFICER TO VERIFY THE CONTENTIONS OF ITA NO S. 1 6 29 & 1 6 73 /PN/201 3 M/S. CARRARO INDIA PVT. LTD. 9 ASSESSEE WITH REGARD TO PAYMENT OF TAX AT SOURCE AND IN CASE THE SAME HAS BEEN PAID WITHIN TIME OR BEFORE THE DUE DATE OF FILING THE RETURN OF INCOME, THEN THE SAME ARE TO BE ALLOWED AS EXPENDITURE IN THE HANDS OF ASSESSEE. FURTHER, WHERE THE ENTRIES ARE ON ACCOUNT OF REIMBU RSEMENT OF EXPENSES AND THE ASSESSEE CAN ESTABLISH ITS CLAIM BY VERIFICATION FROM BILLS, THEN SUCH REIMBURSEMENTS ARE NOT AMENABLE TO TAX TO DEDUCTION. CERTAIN ENTRIES HAVE BEEN REVERSED AND CREDITED TO EXPENDITURE ACCOUNT ITSELF IN THE ACCOUNTING YEAR IT SELF. THE ASSESSING OFFICER IS TO VERIFY THE SAME AND DECIDE THE ISSUE ACCORDINGLY. ACCORDINGLY, WE REMIT THIS ISSUE BACK TO THE FILE OF ASSESSING OFFICER TO DECIDE THE SAME IN LINE WITH OUR DIRECTIONS AND IN ACCORDANCE WITH LAW. THE GROUND OF APPEAL NO .2 RAISED BY THE ASSESSEE IS THUS, ALLOWED FOR STATISTICAL PURPOSES. 1 8 . NOW, COMING TO THE THIRD GROUND OF APPEAL WHICH IS AGAINST DISALLOWANCE OF RS.12 LAKHS ON ACCOUNT OF RATE DIFFERENCE. 19 . BRIEF FACTS RELATING TO THE ISSUE ARE THAT THE ASSESSEE HAD MADE PROVISION FOR RATE DIFFERENCE OF RS.12 LAKHS. THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY THE SAID PROVISION SHOULD NOT BE ADDED BACK TO ITS INCOME AS IT WAS NOT ACTUALLY INCURRED. THE ASSESSEE POINTED OUT THAT THE PROVISION WAS MADE ON ESTIMATE BA SIS . THE ASSESSING OFFICER REJECTED THE CLAIM OF ASSESSEE HOLDING THAT THE SAME WAS NOT AN ASCERTAINED LIABILITY AND ADDITION OF RS.12 LAKHS WAS MADE. 2 0 . BEFORE THE CIT(A), THE ASSESSEE FILED COMPLETE DETAILS OF INVOICES I.E. LIABILITY ACCRUED ON ACCO UNT OF REVISION OF RATE BY THE PARTIES WHICH ARE TABLED AT PAGES 11 AND 12 OF THE APPELLATE ORDER. THE CIT(A) NOTED THAT SOME OF THE INVOICES WERE BEFORE CLOSE OF THE YEAR AND THE OTHERS WERE AFTER CLOSE OF THE YEAR. THE CIT(A) WAS OF THE VIEW THAT THE A SSESSEE COULD HAVE STRAIGHT AWAY CLAIMED ITA NO S. 1 6 29 & 1 6 73 /PN/201 3 M/S. CARRARO INDIA PVT. LTD. 10 THE DEDUCTION ON ACCOUNT OF ACCRUED EXPENDITURE, WHICH WAS NOT DONE AND AS FAR AS OTHER INVOICES WERE CONCERNED, THE CIT(A) HELD THAT THE ASSESSEE HAD NOT FURNISHED ANY EVIDENCE FOR ARRIVING AT PARTICULAR QUANTUM OF PROVISIONS. IN VIEW THEREOF, THE CIT(A) HELD THAT THE SAID AMOUNT COULD NOT BE CONSIDERED AS AN ASCERTAINED LIABILITY AND THE SAME MAY BE CONTINGENT LIABILITY AND THE ORDER OF ASSESSING OFFICER WAS CONFIRMED. 2 1 . THE ASSESSEE IS IN APPEAL AGAINST THE OR DER OF CIT(A). 2 2 . THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE BEFORE US HAS FILED THE LIST OF INVOICES RAISED FOR PRICE INCREASE IN FEBRUARY AND MARCH, 2008. SOME OF THE INVOICES WERE RAISED IN APRIL, 2008 AND IN JULY, 2008 AND TWO OF THE INV OICES WERE RAISED ON 29.03.2008. THE TOTAL AMOUNT DEBITED WAS RS.12,03,084/ - PLUS CHARGES . THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE BEFORE US HAS POINTED OUT THAT THE GOODS WERE SUPPLIED TO THE ASSESSEE AND THE AMOUNT WAS DEBITED AND INVOIC ES WERE RAISED, HOWEVER, THE EXPENSES WHICH WERE BOOKED IN THIS YEAR , THE PAYMENTS THEREOF WERE MADE IN SUBSEQUENT YEAR. SO, IT CANNOT BE SAID TO BE AN UN ASCERTAINED LIABILITY BUT IS AN ACCRUED LIABILITY. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASS ESSEE DREW OUR ATTENTION TO THE DETAILS OF PAYMENTS PLACED AT PAGE 504 OF THE PAPER BOOK. 2 3 . THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE PLACED RELIANCE ON THE ORDER OF CIT(A). 2 4 . WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE CLAIM OF ASSESSEE WAS IN RESPECT OF PROVISION MADE IN THE BOOKS OF ACCOUNT FOR RATE DIFFERENCE OF RS.12 LAKHS. THE ASSESSEE FAILED TO FILE COMPLETE INFORMATION BEFORE ITA NO S. 1 6 29 & 1 6 73 /PN/201 3 M/S. CARRARO INDIA PVT. LTD. 11 THE ASSESSING OFFICER. HOWEVER, BEFORE THE CIT(A), IT HAS FILED DATE - WISE DETAILS OF INVOICES RAISED, PARTY - WISE, UNDER WHICH THE SAID PROVISION ON ACCOUNT OF RATE DIFFERENCE WAS MADE. THE SAID EXPENDITURE WAS DEBITED BECAUSE OF RATE DIFFERENCE IN THE MONTHS OF FEBRUARY AND MARCH, 2008 I.E. RELATING TO THE FINANCIAL YEAR 2007 - 08. THE ASSESSING OFFICER WAS OF THE VIEW THAT IT IS CONTINGENT LIABILITY. WE FIND NO MERIT IN THE ORDERS OF AUTHORITIES BELOW, WHERE THE PROVISION ON ACCOUNT OF RATE DIFFERENCE IS MADE IN THE BOOKS OF ACCOUNT AGAINST THE GOODS SUPPLIED BY THE RESPECTIVE PARTIES AND INVOICES HAVE BEEN RECEIVED FROM THE SAID PARTIES AGAINST RATE DIFFERENCE , DETAILS OF WHICH ARE AVAILABLE WITH THE ASSESSEE. FURTHER, THE ASSESSEE HAS MADE THE PAYMENTS IN RESPECT OF SAID EXPENDITURE IN THE SUCCEEDING YEAR. IN SUCH CIRCUMSTANCES, IT IS NOT AN UN ASCERTAINED LIABILITY BUT AN ACCRUED LIABILITY, WHICH HAS BEEN RECOGNIZED BY THE ASSESSEE AND THERE IS NO QUESTION OF IT BEING CONTINGENT LIABILITY, SINCE THE ASSESSEE HAS ALREADY BOOKED PURCHASES IN RESPECT THEREOF. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO ALLOW THE PROVISION OF RS.12 LAKHS IN THE HANDS OF ASSESSEE. THE GROUND OF APPEAL NO.3 RAISED BY THE ASSESSEE IS THUS, ALLOWED. 2 5 . THE GROUND OF APPEAL NO.4 RELATES TO VARIOUS ASPECTS OF TRANSFER PRICING, BUT THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE HAS FAIRLY POINTED OUT THAT THE SAID GROUNDS OF APPEAL BECOME ACADEMIC IF THE APPEAL OF THE REVENUE IS DISMISSED. HE HOWEVER, CONTENDED THAT WORKING CAPITAL ADJUSTMENT SHOULD BE ALLOWED. WE FIND NO MERIT IN THE SAID PLEA OF ASSESSEE SINCE THE ADJUSTMENT MADE BY THE TPO / ASSESSING OFFICER WAS WITHIN +/ - 5% RANGE AND NO ADJUSTMENT MERITS TO BE MADE IN THE HANDS OF ASSESSEE ON ACCOUNT OF ARM'S LENGTH PRICE OF INTERNATIONAL TRANSACTIONS. ACC ORDINGLY, WE DISMISS THE GROUND OF APPEAL NO.4 ITA NO S. 1 6 29 & 1 6 73 /PN/201 3 M/S. CARRARO INDIA PVT. LTD. 12 RAISED BY THE ASSESSEE AS ACADEMIC. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE THUS, PARTLY ALLOWED. 2 6 . IN THE RESULT, APPEAL OF REVENUE IS DISMISSED AND THE APPEAL OF ASSESSEE IS PARTLY ALLOWED. ORD ER PRONOUNCED ON THIS 19 TH DAY OF JANUARY , 201 7 . SD/ - SD/ - ( R.K. PANDA ) ( SUSHMA CHOWLA ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; D ATED : 19 TH JANUARY , 201 7 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : THE APPELLANT ; 1. THE APPELLANT ; 2. THE RESPONDENT; 3. THE CIT(A) - IT/TP, PUNE ; 4. THE DIT (TP/IT), PUNE ; 5. THE DR A , ITAT, PUNE; 6. GUARD FILE . / BY ORDER , // TRUE COPY // ASSISTANT REGISTRAR