JUNGHEINRICH LIFT TRUCK INDIA PRIVATE LIMITED,MUMBAI vs. ACIT-CIRCLE 15(1)(2), MUMBAI

This appeal is filed by the assessee against the assessment order by The Assistant Commissioner Of Income Tax, Circle 15 (1) (2), Mumbai (The Learned AO) for assessment year 2018 – 19 dated 31/7/2022 passed in pursuance to the direction of the learned CIT DRP – 1, Mumbai – 3 (the learned DRP) dated 27/6/2022 determining total income of the assessee at ₹ 3,36,19,430/–.

Assessee has preferred appeal on following grounds :-

Before referring to the grounds of appeal, we refer to the facts of the case. Brief facts of the case shows that assessee is a company engaged in the business of buying and selling of trucks and spares and also engaged in agency business, renting of trucks, installation services, warranty services and maintenance activities for the lift trucks. Assessee filed its return of income at rupees Nil. Return of income was picked up

The only international transaction in dispute is reimbursement of expenses, which has been determined by the assessee to be at arm's-length price by adopting any other method. During the year under consideration the assessee has paid ₹ 3,251,464/– to its associated enterprise and claimed the same amount to be on account of reimbursement of expenses. In transfer pricing study report it was stated that associated Enterprises incurred certain expenses such as travelling, consulting and advertisement, which are initially borne by the associated enterprise and then cross-charged to the assessee company without any markup. The assessee submitted that these transactions were undertaken for administrative convenience and having regard to the fact that the transactions were undertaken on cost to cost basis the said transactions were considered by the assessee company to be in compliance with the arm's-length principle on application of other method as the most appropriate method.

The learned transfer pricing officer disputed the above transaction asking the assessee to furnish back to back invoices of the expenses incurred by the AE and explanation for necessity of such arrangement. Assessee could furnish only three Sample debit notes raised by the associated Enterprises on the assessee and the narration of expenses stated in the above debit notes is corporate licensing and maintenance including Microsoft and ASAP for three quarters whereas the

The learned AO further noted that assessee has claimed foreign exchange loss of ₹ 69,539,201/–. The learned AO found that the foreign remittance loss of ₹ 36,584,150 incurred by the assessee was not supported with detailed calculation of the loss. Assessee furnished the date of booking and the date of payment of purchases, expenses reimbursement and freight charges on account of which foreign remittance loss of the above amount is claimed. On questioning, the assessee submits that the loss of this amount is on account of foreign remittances and pertained to realized losses. Assessee also stated that foreign exchange loss pertaining to capital items have already been disallowed by the assessee in the return of income thus, balance loss claimed by the assessee is of revenue nature and therefore same is allowable. Assessee submitted the details of the foreign exchange remittances showing the amount of expenditure in foreign currency, date of booking of expenditure in the books of accounts, exchange rate on date of booking of expenditure in the books of accounts, amount of expenditure debited to profit and loss account on date of booking, date of actual

Accordingly the draft assessment order under section 144C of the act was passed on 29/9/2021 wherein in the normal computation of income the learned assessing officer made an adjustment proposed by the learned transfer pricing officer of ₹ 3,251,464 and further made a disallowance of foreign exchange loss under section 43AA of the act of ₹ 43,547,496/– determining the total income at ₹ 40,582,774/–.

Assessee preferred objection before the learned dispute resolution panel wherein the directions were issued on 27/6/2022

Accordingly the learned AO passed the assessment order under section 143 (3) read with section 144C (13) of the act dated 31/7/2022 wherein the transfer pricing adjustment of ₹ 3,251,464 and disallowance of foreign exchange loss on remittance under section 43AA of the act of ₹ 36,584,150 was retained in the total income of the assessee was determined at ₹ 33,619,430/–. The book profit was also increased by the above to adjustments, consequently book profit was determined at ₹ 36,921,437/–.

The assessee is aggrieved with the above order and is in appeal before us. We heard the rival contention and perused

Ground number 1 is with respect to the reimbursement of expenditure where the learned assessing officer has determined the arm's-length price of the international transaction at Rs. Nil for the reason that assessee has failed to furnish the requisite details with respect to the actual rendition of the services, benefit derived by the assessee and services are rendered not duplicative in nature. The assessee submitted only the simple invoices before the lower authorities. Only 3 sample debit notes raised by AE were produced before lower authorities. Those were also produced before us at page number 256 – 258 of the paper book. On perusal of these debit memos, we find that the narration of the services are in a foreign language. Except the address of the assessee and the amount in Euro, everything else is in foreign language. The three invoices/debit notes shows that two debit notes are of Euro 9225, and one debit note of Euro 11,118. In the transfer pricing study report at page number 67 of the paper book refers to the expenses with related to travelling, consulting, advertisement etc whereas before the learned dispute resolution it was claimed that these are certain expenses pertaining to travelling, SAP related charges and advertisement. It is merely a statement by the assessee before the lower authorities that it is a cost-to-cost payment . However assessee did not furnish any back-to-back invoices of those expenses incurred. The English words in the debit notes refers to the Microsoft and SAP details for three quarters. The two quarters pertaining to 2017 and first quarter of 2018. The details are not also supported by any agreement. We fail to understand that how the lower authorities have reached at a conclusion on the 3 Sample debit notes which are in a foreign language. Assessee has also not narrated the facts properly that how the above expenditure

Second ground of appeal is with respect to disallowance of foreign exchange losses. During the course of assessment proceedings the learned assessing officer asked the assessee about the details of the foreign exchange loss of ₹ 69,539,201/– the assessee submitted the summary of such losses and also bifurcated that into revenue account as well as on capital account. Assessee also submitted a detailed with respect to the amount credited on the income side and amount debited on expenditure side. The learned assessing officer disallowed the same holding that assessee could not furnish the complete detail. Before the learned dispute resolution panel the assessee submitted the additional evidences. Those evidences are uploaded on ITBA website and AO was asked to furnish the remand report. Before the passing of the direction by the DRP, no such remand report from the AO was received. There is no finding of learned dispute resolution panel that whether such additional evidences were admitted or not. However the learned dispute resolution panel agreed with the finding of the learned AO. On reading of page number 27 of the direction of the learned dispute resolution panel, it is apparent that assessee was asked to provide the detail within the period of 2 days only. Therefore, it is apparent that assessee was not provided enough time to furnish the requisite details. The learned dispute resolution panel has also not given any finding on the same. The assessee has also made certain

In the result appeal of the assessee is allowed for statistical purposes.