LM WIND POWER BLADES (INDIA) PVT. LTD.,,BANGALORE vs. JCIT, SPECIAL RANGE-4, BANGALORE

The brief facts of the case are that the assessee is in the business of manufacture, sale and servicing of fiber glass reinforced plastic rotor blades

The assessee company was also having international transactions and therefore the AO had referred the same to the TPO for determining the arms length price in respect of such international transactions. The Ld.TPO had also made an adjustment of Rs. 30,74,99,157/- u/s. 92CA of the Act. Thereafter the AO had passed a draft assessment order against which the assessee filed their objections before the Ld.DRP. The assessee had also filed some additional documents in respect of the corporate tax issues. The Ld.DRP had considered the objections filed by the assessee and confirmed the transfer pricing adjustment made by the Ld.TPO whereas set aside the disallowance made u/s. 37(1) of the Act in respect of the salary, rent, equipment hire charges and professional fees. The Ld.DRP had modified the disallowance made u/s. 37(1) of the Act in respect of the travel expenses, miscellaneous expenses, repairs to machinery and consumption of stores and spares and refixed the disallowance at 20% of the claim made by the assessee even though the assessee had furnished the details by way of additional evidence before the Ld.DRP. The Ld.DRP had not given any valid

As against the said order, the assessee is in appeal before this Tribunal.

At the time of hearing, the Ld.AR submitted that the TP adjustment made in respect of the payment of sales commission, management service fees and information technology fees were resolved through MAP between the Indian and Denmark competent authorities and to that effect, an agreement was also executed and the resolution agreed by the competent authorities of both the countries were communicated to the assessee on 29/08/2024 in which the entire TP adjustment has been relieved. The Ld.AR also furnished a copy of the said communication dated 29/08/2024 and therefore, the issue in respect of the TP adjustments are not required to be adjudicated and based on the said MAP resolution, the Ld.AR agreed to withdraw the said grounds raised by the assessee. The Ld.AR also filed a letter dated 23/09/2024 seeking the permission of this Tribunal for withdrawing the above TP grounds. The Ld.AR submitted that in respect of the corporate tax issues in which the 20% expenses were disallowed, the Ld.AR submitted that the authorities have not mentioned any defects in the documents furnished by the assessee by way of additional evidence before the Ld.DRP and therefore, the adoption of 20% is without any basis and it is an arbitrary one. The Ld.AR also invited our attention to the application filed for submission of the additional evidence which is available in page 147 of the paper book filed by the assessee and submitted that the assessee had given a clear picture about the various expenses incurred by the assessee and also the details for the said expenses. The Ld.AR submitted that along with the said additional evidence, the details as sought for by the AO has been enclosed. The Ld.AR also relied on the remand report of the AO furnished before the Ld.DRP and submitted that the remand report also does not point out what are all the other documents required than the

The Ld.DR submitted that the AO as well as the Ld.DRP had considered the details furnished by the assessee and gave a finding that the vouchers produced, most of it were self debit vouchers and the authenticity of which cannot be substantiated entirely. The Ld.DR also submitted that there is always an element of personal travels being undertaken in the garb of company related works. Therefore, the Ld.DR submitted that the disallowance of the 20% of the expenses on various counts are in order and relied on the findings of the Ld.DRP as well as the remand report given by the AO and prayed to confirm the said additions by dismissing the appeal.

We have heard the arguments of both sides and perused the materials available on record.

In respect of the TP issue, we have perused the communication sent by the CBDT, Foreign Tax & Tax Research Division – 1 dated 29/08/2024 in which it was agreed that the entire TP adjustment of Rs. 30,74,99,157/- was

The remaining grounds to be adjudicated by this Tribunal is about the corporate tax grounds in which the 20% of the travel expenditure, miscellaneous expenditure, expenditure incurred towards repairs to machinery and expenditure incurred towards consumption of stores and spares were disallowed u/s. 37(1) of the Act. In the paper book, the assessee had furnished the various details about the above said expenditure by way of Annexures – C5, C6, C7 & C8. The above said details were furnished before the Ld.DRP by way of additional evidence. We have perused the said details furnished by the assessee and the said details covered the entire expenditure incurred by the assessee. The only allegation made by the AO as well as the Ld.DR is that the vouchers are self made vouchers and therefore, its authenticity cannot be substantiated entirely. The Ld.DRP had only on assumption had disallowed the expenditure at 20% of the total expenses.

The Ld.DRP had also assumed that there is an element of personal travels being undertaken in the garb of company related works which shows that the Ld.DRP also not sure about the personal travels undertaken by the staff of the company. We have perused the Annexure – C5 at page 159 in respect of the travel expenses in which all the details were furnished by the assessee. In such circumstances, the finding given by the Ld.DRP is only on assumption and on that basis, the disallowance could not be made.

Similarly, the assessee furnished the details about the miscellaneous expenses incurred by way of Annexure – C6. We have also perused the annexure available at page 177 of the paper book and satisfied that the assessee had furnished all the details about the parties and therefore, there is no point in disallowing the 20% of the expenditure. Even the 20%

Insofar as the details of the repairs & maintenance of machinery, we have also perused the Annexure – C7 available at page number 178 of the paper book in which the details about the parties were furnished by the assessee and in such circumstances, the 20% disallowance by the Ld.DRP is without any basis and only on assumption which cannot be sustained.

Insofar as the details of stores and spares, we have also perused the Annexure – C8 available at page number 190 of the paper book in which the details about the parties were furnished by the assessee and in such circumstances, the 20% disallowance by the Ld.DRP is without any basis and only on assumption which cannot be sustained.

We have also perused the remand report given by the AO in which also the AO had not pointed out any specific instances in which no details were furnished by the assessee except saying that the authenticity of the vouchers could not be verified. In the various annexures, the assessee had furnished details such as the PAN of the parties and in such circumstances, the AO can conduct enquiry to verify the authenticity of the said vouchers and the non-enquiry by the AO would not disentitle the assessee from claiming the expenses as business expenditure. From the various details furnished by the assessee in the application to accept the additional evidence, we found that the assessee had furnished all the details to the AO and therefore, the disallowance of the expenditure at 20% on the total expenditure is without any basis. We, therefore, allow the ground raised by the assessee in respect of the corporate tax grounds raised in ground nos. 4 to 7.

The assessee had also raised a ground that the MAT credit was claimed by the assessee u/s. 115JAA of the Act in the return of income and

Insofar as the interest levied u/s. 234A, 234B and 234C, the AO is directed to compute the same after giving effect to this order.

In the result, the appeal filed by the assessee is partly allowed.