M/s Tejas Networks Limited , Bangalore V. Assistant Commissioner of INcome Tax Circle-1 LTU, Bangalore

ITA 764/BANG/2017

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 0675 (ITAT-BANGALORE)
• Duration Of Justice: 5 year(s) 1 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 03-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMER SINGH MEENA
• Keywords: Capital asset converted into stock in trade; Transfer pricing; International transaction; Initiation of penalty proceedings; Commercial expediency; Rule 8D; Set aside
• Section: 37; 271(1)(c); 92C; 143(3); 92B; 14A; 144C; 143(2); 13; 92CA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES “A”, BANGALORE Before Shri Chandra Poojari, AM & Shri George George K, JM IT(TP)A No.764/Bang/2017 : Asst.Year 2012-2013 IT(TP)A No.205/Bang/2018 : Asst.Year 2013-2014 M/s.Tejas Networks Limited Plot No.25, JP Software Park Electronic City Phase-I Hosur Road, Bangalore – 560 100. PAN : AABCT1670M. v. The Assistant Commissioner of Income-tax, Circle – 1, LTU Bangalore. (Appellant) (Respondent) Appellant by : Sri.S.Annamalai, Advocate Respondent by : Sri.Sumer Singh Meena, CIT-DR Date of Hearing : 19.05.2022 Date of Pronouncement : 31.05.2022 O R D E R Per George George K, JM : These appeals at the instance of the assessee are directed against final assessment orders dated 31.01.2017 and 23.11.2017, passed u/s 143(3) r.w.s. 144C of the I.T.Act. The relevant assessment years are 2012-2013 and 2013- 2014. We shall first adjudicate IT(TP)A No.764/Bang/2017 pertaining to the assessment year 2012-2013. IT(TP)A No.764/Bang/2017 (Asst.Year 2012-2013) 2. The brief facts of the case are as follows: The assessee is a company engaged in the business of design, development, manufacture of telecommunication equipments. For the assessment year 2012-2013, the return IT(TP)A Nos.764 /Bang/2017 & Or. M/s.Tejas Networks Limited. 2 of income was filed on 29.11.2012 declaring a loss of Rs.195,00,73,873. The assessment was selected for scrutiny and notice u/s 143(2) of the I.T.Act was issued on 08.08.2015. During the course of assessment proceedings, it was noticed that the assessee had undertaken international transactions with its Associated Enterprises (AEs) exceeding Rs.15 crore, therefore, the matter was referred to the Transfer Pricing Officer (TPO) to determine the Arm’s Length Price (ALP) of the said international transaction. The TPO vide order dated 29.01.2016 determined the adjustment u/s 92CA of the I.T.Act at Rs.53,41,875 towards corporate guarantee commission. Pursuant to the TPO’s order, draft assessment order was passed on 01.10.2009 incorporating the above mentioned TP adjustment. Further, the A.O. had made several corporate tax additions / disallowances. Aggrieved by the draft assessment order, the assessee filed objections before the Dispute Resolution Panel (DRP). The DRP vide its directions dated 19.12.2016, partly accepted the objections raised by the assessee. Pursuant to the DRP’s directions, final assessment order dated 31.01.2017 was passed. Aggrieved by the final assessment order, the assessee has filed this appeal by raising the following grounds:- I. Transfer Pricing 1. The learned Assessing Officer ("learned AO"), learned Transfer Pricing Officer ("learned TPO'") and the Honourable Dispute Resolution Panel ("Hon'ble DRP") grossly erred in adjusting the transfer price by INR 53,41,8751- of the Appellant's international transactions with its Associated Enterprises ("AEs") u/s 92CA of the Income-tax Act, 1961 ("'the Act"). IT(TP)A Nos.764 /Bang/2017 & Or. M/s.Tejas Networks Limited. 3 2. The learned AO/learned TPO/Hon'ble DRP erred in rejecting the TP documentation maintained by the Appellant by invoking provisions of sub-section (3) of 92C of the Act. 3. The learned AO/learned TPO/Hon'ble DRP erred in not appreciating the fact that the transfer pricing proceedings initiated by the learned AO u/s 92CA of the Act are without any jurisdiction and ought to be quashed. 4. The learned AO/learned TPO/Hon'ble DRP erred In imputing guarantee commission with respect to corporate guarantee provided by the Appellant to its AE. 5. The learned AO / learned TPOI Hon'ble DRP erred in ignoring the fact that Guarantee in the instant case is not an international transaction as it does not have any bearing on the profits, income, losses or assets of the business of the Appellant. 6. The learned AO / learned TPO / Hon'ble DRP erred in not appreciating the fact that guarantee extended should ideally be viewed as a shareholder's activity performed by the Appellant to implement the group strategic decision. 7. The learned AO / learned TPO /Hon'ble DRP erred in not appreciating the fact that Explanation to Section 92B of the Act as amended by Finance Act. 2012 does not alter the basic character of the definition of 'International transaction' u/s 92B, Without prejudice to the above grounds, the learned AO/learned TPO/Hon'ble DRP erred in not appreciating the fact that Explanation to Section 92B though stated to be clarificatory and stated to be effective from I SI April 2002, cannot be treated as retrospective in nature as confirmed by the various Tribunal decisions. 8. The learned AO /learned TPO / Hon’ble DRP failed to appreciate that the guarantee provided to AEs is purely based on strategic commercial expediency and business centric decision. II. Corporate Tax 10. Disallowance of provision for commission 10.1 The learned AO / Hon'ble DRP erred in concluding that provision for commission expenses amounting to INR 1,628,858, is a contingent liability, not crystalized during the year. 10.2 The learned AO / Hon'ble DRP failed to appreciate the fact that the Appellant has accounted for such expenditure based on accepted accounting principles, and any IT(TP)A Nos.764 /Bang/2017 & Or. M/s.Tejas Networks Limited. 4 expenditure recognized in the books of account based on the same, cannot be held to be contingent in nature. 10.3 The learned AO / Hon'ble DRP ought to have appreciated that if a business liability arises in an accounting year, the deduction should be allowed in that year, although the liability may have to be discharged at a future date. 10.4 The learned AO / Hon'ble DRP ought to have appreciated that the liability towards commission expenses has been determined based on the sales made during Financial Year ('FY') 2011-12, and hence, the same cannot be considered as a contingent liability. Accordingly, the same is allowable as deduction under section 37 of the Act. 11. Disallowance of sales expenses 11.1 The learned AO / Hon'ble DRP erred in disallowing sales expense amounting to NR 5,259,690. 11.2 The learned AO / Hon'ble DRP ought to have appreciated that the same is a business expenditure allowable under section 37 of the Act. 11.3 The Hon'ble DRP failed to consider the supporting documents submitted during the course of the hearing. Accordingly, the honourable DRP erred in disallowing such expenditure. 12. Disallowance of certain expenses as 'prepaid expenses' 12.1 The learned AO/ Hon'ble DRP have erred in concluding that the expenses amounting to INR 2,026,124, appearing under miscellaneous expenses with a narration 'prepaid expenses', are actually prepaid in nature. 12.2 The learned AO/ Hon'ble DRP have failed to appreciate that these amounts are initially accounted as prepaid expenses (which are classified under assets), and then the same are debited to the statement of profit and loss. The same is done on a monthly basis for the relevant time periods, by the ERP system directly. As the entry is posted by ERP directly, the narration is given as 'prepaid expenses'. 12.3 The learned AO/ Hon'ble DRP has failed to appreciate that these amounts are a transfer of expenses from the prepaid expenses ledger to the miscellaneous expenses ledger, as an accrual for the relevant months. IT(TP)A Nos.764 /Bang/2017 & Or. M/s.Tejas Networks Limited. 5 12.4 The learned AO/ Hon'ble DR? ought to have appreciated that any expense prepaid for a particular period, are deferred and claimed only in the year in which benefit of the same is utilized. Accordingly, the learned AO and the honorable DRP ought to have held that such expenses are allowable as deduction. 13. Disallowance of expenditure under section 14A of the Act by applying the provisions of Rule 8D of the Income-tax Rules, 1962 ('the Rules') 13.1 The learned AO/ Hon'ble DRP erred in making an additional disallowance amounting to INR 10,745,904, under section 14A of the Act read with Rule 8D(2)(ii) of the Rules, despite the fact that no borrowed funds have been utilized for the purposes of investment in mutual funds, and hence no interest expenditure has been incurred for earning exempt income. 13.2 The learned AO/ Hon'ble DRP erred in not appreciating the fact that the secured loans were borrowed solely for the purpose of meeting working capital requirements, which was also evident from the loan agreements. 13.3 The learned AO erred in not discharged the onus of proof, in relation to his contention that there is nexus of investments with the borrowed funds. Accordingly. the adjustment made by the learned AO is without basis and contrary to the provisions of the law. 14. Disallowance of provision for obsolete inventory 14.1 The learned AO/ Hon'ble DRP erred in concluding that provision for inventory amounting to INR 25,459,065, is a contingent liability. 14.2 The learned AO/ Hon'ble DRP failed to appreciate the fact that the Appellant has accounted for such expenditure based on accepted accounting principles, and any expenditure recognized in the books of account based on the same, cannot be held to be contingent in nature. 14.3 The learned AO/ Hon'ble DRP failed to appreciate the fact that section 145A of the Act provides that the valuation of inventory for the purposes of determining the income chargeable under the head 'Profits and gains of business or profession' shall be in accordance with the method of accounting regularly employed by the assessee. IT(TP)A Nos.764 /Bang/2017 & Or. M/s.Tejas Networks Limited. 6 15. Initiation of Penalty Proceedings The learned AO has erred in initiating proceedings under section 271(1)(c) of the Act without having regard to the fact that the appellant has fully disclosed all the facts in the return of income and that the appellant has not concealed income. The Appellant craves leave to add, alter, amend, rescind or modify the grounds herein above, or produce further documents, facts and evidence, before or at the time of hearing this appeal. For the above and any other grounds which may be raised at the time of hearing, it is prayed that necessary relief may be provided.” We shall adjudicate the above grounds as under: Grounds 1 to 9 (Transfer Pricing Adjustment) 3. In the above ground, the assessee has raised the issue of imputing guarantee commission with respect of corporate guarantee provided by the assessee to its AEs. The assessee during the course of hearing had limited submission that the matter needs to be remanded back to the TPO to make TP adjustment in respect of corporate guarantee at 0.50%. The learned AR in this context relied on the ITAT order in assessee’s own case in IT(TP)A No.468/Bang/2015 & Ors. for assessment years 2010-2011 and 2011-2012 (order dated 09.02.2022). 3.1 The learned Departmental Representative submitted that all the grounds raised by the assessee agitates the issue that corporate guarantee provided by the assessee to its AEs does not come within the purview of international transaction u/s 92B of the I.T.Act. IT(TP)A Nos.764 /Bang/2017 & Or. M/s.Tejas Networks Limited. 7 3.2 We have heard rival submissions and perused the material on record. The Tribunal in assessee’s own case for assessment years 2010-2011 and 2011-2012 (supra), on identical facts, had restored the matter to A.O. to make TP adjustment in respect of corporate guarantee at 0.50%. The relevant finding of the Tribunal reads as follows:- “7. With regard to Ground Nos.1.7 to 1.9 are on the issue of imputing Guarantee Commission with respect to the corporate guarantee provided by the assessee to its Associated Enterprises. After hearing both the parties, this issue is covered by the orders of the Tribunal in Medrich Limited Vs. ACIT in ITA No.1574/Bang/2019 dated 12.4.2021, in the case of M/s. Manipal Global Education Services Pvt. Ltd. Vs. Deputy Commissioner of Income-tax in ITA No.236/Bang/2015 and in the case of Xchanging Solutions Ltd. Vs. Deputy Commissioner of Income-tax (2017) 78 taxmann.com 54, wherein it was directed to AO/TPO to make TP adjustments in respect of corporate guarantee at 0.50% for the assessment years under consideration. In view of the above order, we decide these issues in favour of the assessee.” 3.3 In view of the above order of the Tribunal in assessee’s own case, which is identical to the facts of the instant case, we direct the AO / TPO to restrict the addition to 0.50% instead of 3%. Ground 10 (Disallowance of provision for commission) (Corporate Tax Issue) 4. The above ground is with regard to the disallowance of provision for commission. The same was disallowed citing that it is contingent in nature. The learned AR submitted that the liability has accrued as a result of the service performed by the service provider in securing purchase orders. The assessee is following the mercantile system of accounting and has accounted for such liability in the subject assessment IT(TP)A Nos.764 /Bang/2017 & Or. M/s.Tejas Networks Limited. 8 year. The learned AR also submitted that the issue is covered in favour of the assessee by the order of the Tribunal in assessee’s own case for assessment year 2014-2015 in IT(TP)A Nos. 2848 & 3191/Bang/2018 (order dated 08.10.2021). The relevant finding of the Tribunal reads as follows:- “13. We heard the parties on this issue and perused the record. A careful perusal of first line of clause No.3.3 of the agreement entered by the assessee with Md. Ziaul Hassan Khan, which is extracted above, would show that “the assessee shall pay service fee (commission) to the agent after the sales made pursuant to this agreement are closed”, i.e., the commission shall accrue after the sales is finalized. However, the same shall become due for payment only after receipt of money from the customer. On a reading of whole of clause 3.3 of the agreement, we are of the view that the commission expenditure shall accrue as and when the sales is finalized. Hence, we are of the view that the Ld. CIT(A) was not justified in taking the view that the commission expenditure shall become due only when the payment is received from the customers. In the case of KCP Ltd. (supra), the Hon’ble A.P. High Court has upheld the view of the Tribunal in holding that the liability to pay commission accrues when orders were secured by agents and not when supplies were effected by the assessee. 14. There is one more angle with regard to the claim of the assessee. Under “revenue cost matching principle”, all expenses incurred in generating the revenue should be provided for in the books of account and also under the “Principle Prudence”, all known liabilities have to be provided for in the books of account. In the instant case, the assessee is aware that it would be liable to pay commission amount to Md. Ziaul Hassan Khan when the sales is finalized and this commission expenditure is related to the revenue generated during the year under consider. Hence it is also a known liability for this year. Hence, as per accounting principles discussed above, the said commission expenditure should be provided for in the books of accounts when the relevant sales are accounted. On this count also, the claim of the assessee is admissible. Accordingly, we are of the view that the commission expenditure claimed by the assessee is allowable in the year under consideration. Accordingly, we set aside the order passed by Ld. CIT(A) on this issue and direct the A.O. to allow the commission expenditure claimed by the assessee.” 4.1 The learned DR, on the other hand, supported the orders of the Income Tax Authorities. IT(TP)A Nos.764 /Bang/2017 & Or. M/s.Tejas Networks Limited. 9 4.2 We have heard rival submissions and perused the material on record. We find that the issue is squarely covered by the order of the coordinate bench of the ITAT Bangalore in favour of the assessee in its own case, and therefore, direct the A.O. to allow these expenses in computing the total income of the assessee. Therefore, this ground is allowed. Ground 11 (Disallowance of sales expenses) (Corporate Tax Issue) 5. The above ground is with regard to the disallowance of sales expenses to the extent of Rs.52,59,590. The assessee submits that these expenses are in respect of certain sales made and offered to tax which is renegotiated during F.Y. 2011-2012 and amended purchase order issued by the customer. The excess amount billed was accounted as sales expenses and the equivalent amount is written off from the customer receivable account as bad debt. The AO / DRP disallowed these expenses stating that the assessee has failed to produce proper evidence. 5.1 We have heard rival submissions and perused the material on record. The assessee claims to have submitted a credit note raised on ITI Ltd and also furnished details of billing done in assessment years 2009-2010 and 2010-2011 (which is written off in the subject year). In the interest of natural justice, we remand the matter back to the file of the A.O. to examine the evidence as referred above and allow the claim of the assessee as per the provisions of the Act. IT(TP)A Nos.764 /Bang/2017 & Or. M/s.Tejas Networks Limited. 10 Therefore, this ground is allowed for statistical purposes. Ground 12 (Disallowance of certain expenses as `prepaid expenses’ (Corporate Tax Issue) 6. The above ground is dealing with the disallowance of the prepaid expenses of Rs.20,26,124. The AO / DRP has disallowed the same citing lack of documentary evidence. The assessee has submitted that the following documents have been furnished during the course of assessment proceedings: * Miscellaneous expenses ledger highlighting the prepared expenses and giving month wise details for the financial year 2011-2012 to which expense relates, * Summary of prepared expenses document wise showing month wise apportionment of expenses where the expense pertaining to two or more months. * Sample invoices relating to subscription charges to magazine where the expense relates to three months. 6.1 Since lack of documentary evidence is the primary reason for making this addition and given the claim of the Assessee that it has already been submitted before subordinate authorities, in the interest of justice we deem it appropriate to remand the matter back to the file of AO to consider this issue of fresh by allowing the Assessee to file necessary documents in support of the claim. Therefore, this ground is allowed for statistical purposes. IT(TP)A Nos.764 /Bang/2017 & Or. M/s.Tejas Networks Limited. 11 Ground 13 (Disallowance of expenditure under section 14A of the Act by applying the provisions of Rule 8D of the I.T.Rules (Corporate Tax Issue) 7. With regard to the above ground, which is dealing with the allowance of expenditure under section 14A read with Rule 8D, the assessee has disallowed 0.5% under section 14A, on suo moto basis. The assessee has submitted that their own interest free funds is in far excess of investments made by the assessee. consequently no disallowance is warranted out of interest expenditure. The Assessee has placed reliance on the ruling of coordinate bench in its own case for the AY 2014-15 in ITA 2848 & 3191/Bang/ 2018 (order dated 08.10.2021), wherein the issue has been held in its favour. The relevant extract is as follows:- “23. We heard the parties and perused the record. A perusal of balance sheet furnished by the assessee would show that the assessee is having own funds of Rs.334.12 crores while the investments made by the assessee stand at Rs.4.58 crores only. Admittedly, the own funds available with the assessee is in far excess of the investments made by the assessee. Accordingly, as per decision rendered by Hon’ble Karnataka High Court in the case of Micro Labs Ltd. 383 ITR 490, no disallowance out of interest expenditure is called for. Accordingly, we confirm the decision rendered by Ld. CIT(A) in deleting this disallowance for the reasons stated above. 24. In the result, the appeal filed by the assessee is treated as allowed and the appeal of the revenue is dismissed.” 7.1 We have heard rival submissions and perused the material on record. We follow the above ruling as the learned DR has not distinguished and also considering that the facts remain the same. We accordingly direct the AO to delete this addition, thereby allowing this ground in favour of the assessee. IT(TP)A Nos.764 /Bang/2017 & Or. M/s.Tejas Networks Limited. 12 Ground 14 (Disallowance of provision for obsolete inventory) (Corporate Tax Issues) 8. The above ground is with respect to the disallowance of provision for obsolete inventory to the extent of Rs.2,54,59,065. The DRP has held that the provision in respect of inventory is not an allowable deduction and the same can be allowed only when it is completely written off as inventory from the books of account. 8.1 The assessee has submitted that valuation of stock at the close of the accounting is a necessary part of determining trading result for the subject. The valuation of closing stock is normally done at cost or at net realisable value whichever is lower. As per the assessee the same is in compliance with the accounting standard notified under section 145(2) of the Act. It is also claimed that the assessee has reversed this provision and offered the same to tax in the AY 2014-2015. In support of the above contention, the learned AR placed reliance on the judgment of the Hon’ble jurisdictional High Court in the case of CIT vs. IBM India Ltd [230 Taxman 544]. 8.2 We have heard rival submissions and perused the material on record. The judgment of the Hon’ble jurisdictional High Court has not been considered by the Revenue Authorities. The said judgment is directly dealing with the issue on hand, hence, we deem it appropriate to remand the matter back to the file of the AO to consider the relevance of the jurisdictional High Court ruling as cited above with the facts in the present case. Accordingly, we allow this ground IT(TP)A Nos.764 /Bang/2017 & Or. M/s.Tejas Networks Limited. 13 for statistical purposes. 9. In the result, ITA No.764/Bang/2017 is partly allowed. IT(TP)A No.205/Bang/2018 (Asst.Year 2013-2014) 10. The grounds raised read as follows:- “I. Transfer Pricing The grounds mentioned hereinafter are without prejudice to one another 1.1. The learned Assessing Officer ("learned AO"), learned Transfer Pricing Officer ("learned TPO") and the Honourable Dispute Resolution Panel ("Hon'ble DRP· grossly erred in adjusting the transfer price by INR 4,03,14,755 with respect to the corporate guarantee provided by the Appellant on behalf of its Associate Enterprise ("AE") U/S 92CA of the Income-tax Act, 1961 ("the Act"). 1.2. The learned AO / learned TPO / Hon'ble DRP have ignored the fact that guarantee in the instant case is not an international transaction. 1.3. The learned AO /learned TPO / Hon'ble DRP erred in not considering that as per the amendment to the Explanation to Section 92B of the Income-tax Act, 1961 granting of a corporate guarantee, does not have any bearing on profits, income losses or assets of the enterprise and, therefore, it is outside the ambit of international transaction' to which ALP adjustment can be made. 1.4. The learned AO /learned TPO /Hon'ble DRP erred by imputing guarantee commission with respect to the corporate guarantee provided by the appellant to its AEs 1.5. The learned AO / learned TPO / Hon'ble DRP have erred in arbitrarily arriving at the arm's length commission rate at 3% while computing the transfer pricing adjustment. 1.6. The AO/TPO /Hon'ble DRP failed to appreciate that the guarantee provided to AEs is purely based on strategic commercial expediency and business centric decision. 1. 7. The learned AO/TPO erred in not considering the fact that there was no fresh issue of corporate guarantee by the IT(TP)A Nos.764 /Bang/2017 & Or. M/s.Tejas Networks Limited. 14 Appellant on behalf of its AEs during the FY 2012-13. II. Corporate Tax 2. Disallowance of provision for commission 2.1. The learned AO / Hon'ble DRP erred in concluding that provision for commission expenses amounting to INR 1,001,040, is a contingent liability, not crystalized during the year. 2.2. The learned AO / Hon'ble DRP failed to appreciate the fact that the Appellant has accounted for such expenditure based on accepted accounting principles, and any expenditure recognized in the books of account based on the same, cannot be held to be contingent in nature. 2.3. The learned AO / Hon'ble DRP ought to have appreciated that if a business liability arises in an accounting year, the deduction should be allowed in that year, although the liability may have to be discharged at a future date. 2.4. The learned AO / Hon'ble DRP ought to have appreciated that the liability toward commission expenses has been determined based on the sales made during Financial Year ('FY') 2012-13, and hence, the same cannot be considered as contingent liability. Accordingly, the same is allowable as deduction under section 37 of the Act. 3. Disallowance of expenditure under section 14A of the Act by applying the provisions of Rule 8D of the Income- tax Rules, 1962 ('the Rules') 3.1. The learned AO / Hon'ble DRP erred in making an additional disallowance amounting to INR 2,984,310, under section 14A of the Act read with Rule 8D(2)(iii) of the Rules, despite the fact that no borrowed funds have been utilize for the purposes of investment in mutual funds, and hence no interest expenditure has been incurred for earning exempt income. 3.2. The learned AO / Hon'ble DRP erred in not appreciating the fact that the secure loans were borrowed solely for the purpose of meeting working capital requirements, which was also evident from the loan agreements. . 3.3. The learned AO erred in not discharged the onus of proof, in relation to his contention that there is nexus between investments and borrowed funds Accordingly, the adjustment IT(TP)A Nos.764 /Bang/2017 & Or. M/s.Tejas Networks Limited. 15 made by the learned AO is without basis and contrary to the provisions of the law. 4. Disallowance of provision for obsolete inventory 4.1. The learned AO / Hon'ble DRP erred in concluding that provision for inventory amounting to INR 39,794,197, is a contingent liability. 4.2. The learned AO/ Hon'ble DRP failed to appreciate the fact that the Appellant has accounted for such expenditure based on accepted accounting principles, and any expenditure recognized in the books of account based on the same, cannot be held to be contingent in nature. 4.3. The learned AO/ Hon'ble DRP failed to appreciate the fact that section 145A of the Act provides that the valuation of inventory for the purposes of determining the income chargeable under the head 'Profits and gains of business or profession' shall be in accordance with the method of accounting regularly employed by the assessee. 5. Initiation of Penalty Proceedings 5.1. The learned AO has erred in initiating proceedings under section 271(1)(c) of the Act without having regard to the fact that the appellant has fully disclosed all the facts in the return of income and that the appellant has not concealed income. The Appellant craves leave to add, alter, amend, rescind or modify the grounds herein above, or produce further documents, facts and evidence, before or at the time of hearing this appeal. For the above and any other grounds which may be raised at the time of hearing, it is prayed that necessary relief may be provided.” Ground 1 (1.1 to 1.7) (Transfer Pricing Adjustment) 11. The issue raised in the above grounds were dealt by us in assessment year 2012-2013 (supra). Following the reasons stated therein from paragraphs 3 to 3.3, above, which is identical to the facts of the instant year, we direct the AO / IT(TP)A Nos.764 /Bang/2017 & Or. M/s.Tejas Networks Limited. 16 TPO to restrict the addition to 0.50% instead of 3%. Ground 2 (2.1 to 2.4) (Disallowance of provision for commission) (Corporate Tax Issues) 12. The issue raised in the above grounds, has been considered by us in the assessment year 2012-2013 (supra). For the reasoning given in paragraph 4 to 4.2, above, we direct the A.O. to allow these expenses in computing the total income of the assessee by following the decision of the Co- ordinate Bench of the ITAT Bangalore Benches in assessee’s own case for assessment year 2014-2015 (supra). Ground 3 (3.1 to 3.3) (Disallowance of expenditure u/s 14A of the Act by applying the provisions of Rule 8D of the Income-tax Rules, 1962 (Corporate Tax Issues) 13. The issue raised in the above grounds has considered by us in the assessment year 2012-2013 (supra). For the reasoning given in paragraph 7 to 7.1, we direct the A.O. to delete the addition. Grounds 4 (4.1 to 4.3) (Disallowance of provision for obsolete inventory) (Corporate Tax Issues) 14. The issue raised in the above ground has considered by us for assessment year 2012-2013 (supra). For the reasons stated therein from paragraph 8 to 8.1 above, we remand the matter back to the files of the A.O. to consider the relevance of the judgment of the Hon’ble jurisdictional High Court in the case of CIT v. IBM India Ltd. (supra). Accordingly, we allow this ground for statistical purposes. IT(TP)A Nos.764 /Bang/2017 & Or. M/s.Tejas Networks Limited. 17 Ground 5 (5.1) Initiation of Penalty Proceedings 15. The learned AR did not raise any argument with regard to the above ground, hence, the same is dismissed. 16. In the result, the appeals filed by the assessee are partly allowed. Order pronounced on this 31 st day of May, 2022. Sd/- (Chandra Poojari) Sd/- (George George K) ACCOUNTANT MEMBER JUDICIAL MEMBER Bangalore; Dated : 31 st May, 2022. Devadas G* Copy to : 1. The Appellant. 2. The Respondent. 3. The DRP-2, Bangalore. 4. The Pr.CIT, Bangalore. 5. The DR, ITAT, Bengaluru. 6. Guard File. Asst.Registrar/ITAT, Bangalore