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Income Tax Appellate Tribunal, “K” BENCH,
Before: SHRI G.S. PANNU, AM & SHRI RAVISH SOOD, JM
स िवाईकीतारीख /Date of Hearing : 17.02.2017 घोर्णाकीतारीख /Date of Pronouncement : 17.05.2017 आदेश / O R D E R
PER RAVISH SOOD, JM:
The present appeals filed by the assessee are directed against the orders passed by the A.O u/s 143(3) r.w.s. 144C (13) of the Income Tax Act, 1961 (for short ‘Act’) for A.Y. 2008-09 and A.Y. 2009-10, dated. 31.10.2012 and 02.12.2013, respectively. Since, some of the issues raised in both these appeals are identical, therefore, for the sake of convenience they are clubbed and disposed of in this consolidated order. We herein first take up the appeal for A.Y. 2008-09, marked as A.O had raised the following grounds of appeal:-
1. Ground No 1 1.1. On the facts and circumstances of the case and in law, the Deputy Commissioner of Income-tax 8(2), Mumbai (Ld. AO'), under the directions of the Hon'ble Dispute Resolution Panel ('Ld. DRP') erred both, on facts and in law, in confirming the addition of Rs.7,70,87,718 to the income of the appellant, on account of the transfer pricing ('TP') adjustment u/s 92CA(3) of the Income Tax Act. 1961 (the 'Act') made by the Learned Transfer Pricing Officer ('TPO'), by holding that the international transaction of 'receipt of direct sales compensation' of the Appellant does not satisfy the arm's length principle envisaged under the Act.
The Appellant prays that the arm's length price of the international transaction of receipt of direct sales compensation as computed by the Appellant be accepted and consequently the TP adjustment of Rs. 7,70,87,718 be deleted.
1.2. The Ld. DRP and the Ld. AO (following the directions of the Ld. DRP) erred on facts and in law- a) in rejecting the methodology adopted by the Appellant for benchmarking the impugned international transaction, without giving any cogent reasons; b) by stating that no Functions, Asset and Risk analysis of the Appellant and its Associated Enterprises ('AEs') was submitted by the Appellant; c) by stating that the Appellant is not a mere commission agent but is also engaged in the business of developing market for the AE and servicing the installations of the AE despite the fact that no such submission has been filed by the Appellant; d) by applying the Profit Split Method ('PSM') without analyzing whether the PSM is the most appropriate method in facts of the Appellant's transaction pertaining to receipt of direct sales compensation; e) by stating that PSM should be applied and arrived at the ad-hoc profit split ratio of 50:50 to determine the rate of direct sales compensation.
The Appellant prays that the Ld. AO be directed to delete the TP adjustment of Rs.7,70,87,718 made on mere assumptions and surmises under section 92CA(3) of the Act.
1.3. On a without prejudice basis, the Ld. DRP and the Ld. AO (under the directions of the Ld. DRP) erred in not following the directions issued by the Ld. DRP for AY 2006- 07 and AY 2007-08 wherein on identical facts, the Ld. DRP has determined the arm's length rate for direct sales compensation as 5%.
Ground No 2 2.1. On the facts and circumstances of the case and in law, the Ld. AO, under the directions of the Ld. DRP, erred in disallowing the expenditure of Rs.6,28,43,080, being 10% of expenses in relation to facilities management on an estimated basis.
2.2. The Appellant prays that the Ld. AO be directed to delete the ad-hoc disallowance of Rs.6,28,43,080, being 10% of expenses incurred on facilities management.
3. Ground No 3 3.1 On the facts and circumstances of the case and in law, the Ld. AO, under the directions of the Ld. DRP, erred in disallowing an amount of Rs.4,00,000 representing write off of earnest money deposit.
3.2. The Appellant prays that the Ld. AO be directed to delete the disallowance of Rs.4,00,000. 4. Ground No 4 4.1. On the facts and circumstances of the case and in law, the Ld. AO, erred in granting credit of tax deducted at source ('TDS') to the extent of Rs.4,24,81,616 only as against Rs.4,73,63,440 claimed by the Appellant. 4.2. The Appellant prays that the Ld. AO be directed to give the balance credit in respect of TDS of Rs.48,81,824(i.e. Rs.4,73,63,440 less Rs.4,24,81,616).
5. Ground No 5 5.1. On the facts and circumstances of the case and in law, the Ld. AO erred in stating that refund of Rs.4,58,80,144 has been issued to Appellant.
5.2. The Appellant prays that the Ld. AO be directed to grant refund after considering the fact that no refund has been received by the Appellant till date.
6. Ground No 6 6.1. On the facts and in the circumstances of the case and in law, the Ld. AO erred in charging interest under section 234D of the Act of Rs.51,38,009. 6.2. The Appellant prays that the Ld. AO be directed to delete the interest charged under section 234D of the Act.
7. Ground No 7 7.1. On the facts and circumstances of the case and in law, the Ld. AO erred in granting interest under section 244A of the Act of Rs.8,96,857 only.
7.2. The Appellant prays that the Ld. AO be directed to grant Interest under section 244A of the Act upto date of grant of refund.
The Appellant craves leave to add, alter, amend, substitute or withdraw all or any of the Grounds of Appeal herein and to submit such statements, documents and papers as may be considered necessary either at or before the appeal hearing so as to enable the Hon'ble Tribunal members to decide these according to the law”.
Briefly stated, the facts of the case are that the assessee company is an indenting agent of its AEs engaged in installation services of ware control systems. The assessee had e-filed its return of income on 30.09.2008 declaring Nil income, after setting off brought forward losses amounting to Rs.6,56,33,007/-. The return of income filed by the assessee was processed as such u/s 143(1) of the ‘Act’. The case of the assessee was thereafter taken up for scrutiny assessment u/s 143(2).
That as per the agreements with the AEs, the assessee received commission @2% for the indenting services. The assessee was required to receive the requirements such as hardware, machinery etc. from the clients in India and put orders to the AEs abroad. The assessee raised invoices in the name of the AEs for the service rendered. During the year under consideration the assessee had received Direct Sales Compensation, Marketing Services (DSC) of Rs.2,27,73,329/- from its AEs, viz. Johnson Controls (S) Pvt. Limited Singapore (Rs.43,46,544/-), York International Pvt. Ltd. Singapore (Rs.1,76,16,925/-) and from York (Shanghai) Air Conditioning & Refrigeration International Trading Company Ltd., China (Rs.8,09,860/-) @ 2% of the sales made by the respective AEs to third parties in India.
5. That during the course of the assessment proceedings the A.O made a reference u/s 92CA(1) of the ‘Act’ to the Transfer Pricing Officer, Mumbai (TPO) on 30.04.2010 for determination of the Arm’s Length Price (ALP) in relation to the international transactions detailed in the audit report in ‘Form No. 3CEB’ of the assessee.
BEFORE THE TPO:-
That during the course of proceedings it was observed by the TPO that the assessee had during the year carried out the following international transactions: - Sr. No. Details of International Transactions Amount (in Crores) 1 Provision of engineering services 14.03 2 Purchase of materials 1.82 3 Purchase of finished goods 2.80 4 Direct Sales Compensation 2.28 (Marketing services) 5 Reimbursement of expenses (received) 4.02 6 Reimbursement of expenses (paid) 0.30 Total 25.25 The TPO observed that the assessee company (JCIPL) was a wholly owned subsidiary of M/s Johnson Controls Inc. US (‘JC US’) and was engaged in the business of developing, engineering, marketing and servicing building automation and control products for a diversity of comfort conditions. The business of the assessee company was divided into two segments, viz. Centre of Excellence in Engineering (‘CoEE’) segment and the Project and Services segment. The assessee was appointed as a concessionaire by the AEs, and as per the terms of the agreements between the assessee and the AEs, the assessee acting as a coordinator/canvasser was to promote the products manufactured by the AEs, in India. That in lieu of the services rendered, the assessee was to receive Direct Sales Compensation (‘DSC’) on products sales of the AEs to the Indian Customers.
The TPO in order to verify as to whether the commission @ 2% for the indenting services received by the assessee from its AEs was Arm’s Length compensation, thus called upon the assessee to submit comparable instances of the rates at which DSC was received by other Johnson Controls Group entities. The assessee in compliance to the aforesaid direction of the TPO, therein furnished sample copies of two comparable agreements between the Johnson Controls Group entities, as under: - Support service provider Service recipient Rate of DSC York Philippines Inc, York International 2% Philippines Pte. Ltd. Singapore York Air Conditioning and York International 2% Refrigeration (Thailand) Ptd. Limited, Co. Ltd., Thailand Singapore The TPO, however, being of the view that as the agreements relied upon by the assessee were with the group entities itself, which could not be taken as a comparable uncontrolled transaction, thus declined to take cognizance of the same. The TPO further rejecting the benchmarking analysis conducted by the assessee, as per which it was claimed that in the case of indenting the CUP method was the most appropriate method, therein adopted the Profit Split Method (‘PSM’) as the most appropriate one and 50% of the said profit on the transactions was considered appropriate. The TPO thus quantified the ALP of the commission @ 10.64% of sales, and as such quantified the relatable profits at Rs. 12,11,54,110/-. The net TP adjustment suggested by the TPO thus worked out to Rs. 9,83,80,781/-.
DRAFT ASSESSMENT ORDER:- 8. The A.O. on receiving the order passed by the TPO u/s 92CA(3), dated 19.10.2011, therein proposed the followings additions vide his ‘draft assessment order’ passed u/s 143(3) r.w.s 144(C), dated. 16.12.2011:-
(i). The A.O proposed adjustment of Rs.9,83,80,781/- as suggested by the TPO to the total income of the assessee.
(ii). The A.O. proposed disallowance of expenditure of Rs. 6,28,43,080/- from Facility Management business.
(iii). The A.O. proposed disallowance of ‘Write off’ of earnest money of Rs. 4,00,000/-. .
The A.O. thus deliberating on the aforesaid issues, therein proposed to assess the income of the assessee company at Rs.13,66,80,870/-.
BEFORE THE DRP:-
9. The assessee assailing the draft assessment order passed by the A.O. u/s 143(3) r.w.s 144(C), therein carried the matter before the DRP, who disposed of the objections raised by the assessee, as under: -
(i) As regards the TP adjustment of Direct Sales Compensation (DSC) of Rs.9,83,80,781/-:
The DRP after deliberating on the objections raised by the assessee in respect of the upward TP adjustment of Rs.9,83,80,781/- proposed by the TPO u/s 92CA(3) of the ‘Act’, therein dealt with the same as under:-
(a). The assessee objected to the rejection by the TPO of the method which was adopted to benchmark transactions pertaining to receipt of DSC. The DRP observed that though as per the terms of the agreement remuneration to the assessee was fixed at 2% of the sales, however, as claimed by the assessee that it was not merely a commission agent, but was also engaged in the business of developing market for the AEs and servicing their installations in India, therefore, observed that the TPO had rightly concluded that the assessee had not benchmarked the compensation @ 2% correctly. The DRP observed that as the two instances of commission relied upon by the assessee were transactions between group companies and therefore, were controlled transactions, the same had rightly not been considered by the TPO to benchmark the AEs transactions. The DRP further upheld the rejection of the CUP method, and adoption of the Profit Split Method ('PSM') to benchmark the transactions. The DRP further observed that in the absence of FAR of assessee and its AEs, the splitting of 50% profit in the hands of the assessee could not be faulted with.
(b). The DRP dealing with the contention of the assessee that the TPO had erred in observing that the sale price charged by the AEs on sales to third parties in India was too huge to justify the ‘low’ commission of 2% on sales, without appreciating the fact that the higher sales resulted in a higher commission for the assessee, therein referred to the five samples of sales on the basis of which the TPO had concluded that the profit margins indeed was substantially high and as such warranted higher remuneration, and P a g e | 11 upheld the same. The DRP however observing that the TP had split the profit on 50:50 basis taking GP/Cost ratio of 21.28%, therein directed the TPO to modify his order and split the profit by taking GP/Sales ratio of 17.54%.
(c). The DRP dealing with the objection of the assessee that the TPO had erred in applying the Profit Split Method ('PSM') without analyzing as to whether the same was an appropriate method as regards receipt of DSC, as well as had most arbitrarily carried out cherry picking of sample invoices without taking into consideration the functions assumed, assets utilized, and the risks assumed by the assessee and the AEs, therein observed that the TPO had in all fairness going by the fact that it was impossible to analyze the entire population, had thus carried out random selection of data, which could safely be held to be well established and scientific statistical procedure. It was further observed by the DRP that in case the assessee was not satisfied with the randomness of the data, which in any case was not picked up by the TPO but was offered by the assessee itself, then it was open to the assessee to have challenged the adoption of the said data before the TPO, which however was never done. The DRP finally concluded that as the assessee had not done any FAR of its AEs and of itself, therefore, in the absence of the relevant documents and information, it was impossible for the TPO to have done the same. The DRP thus on the basis of his aforesaid observations, therefore, dismissed the objection of the assessee as regards adoption of the Profit Split Method (‘PSM’) for determining the arm’s length of the Direct Sales Compensation (‘DSC’) by the assessee.
(d) The assessee further objected that the TPO had erred in ignoring the comparable arrangements existing within the group, which substantiated that the group followed a consistent pricing policy. The DRP however, observing that as the comparable instances quoted by the assessee were in the nature of controlled transactions taking place within the group entities, thus did not find favor with the said objection of the assessee and rejected the same.
(e). The assessee further objected to the failure of the TPO to consider the directions issued by the DRP in the case of the assessee for A.Y. 2006-07, wherein on identical facts, the DRP had determined the arm’s length rate for DSC as 5%. The DRP after deliberating on the aforesaid contentions of the assessee therein observed that as during the year under consideration the TPO had demonstrated that the assessee was entitled to 50% of profits and accordingly invoked PSM, applied 50:50 ratio and determined ALP remuneration to the assessee, therefore in the backdrop of the fact that the principle of res judicata does not apply in Income Tax proceedings, thus declined to disturb the evaluation matrix of the TPO.
(f). The Assessee further objected before the DRP that the TPO had erred in granting the benefit of +/- 5% range as envisaged by the proviso to Section 92C(2) of the ‘Act’, however, the DRP rejected the said contention of the assessee at the threshold by referring to Section 92C(2A) which had been made available on the statute vide the Finance Act, 2012, w.r.e.f 01.04.2002. P a g e | 13
(ii) As regards disallowance of expenses of Rs. 6,28,43,080/- in relation to Facilities Management:
(a). The assessee further submitted before the DRP that the A.O. had erred in proposing to disallow expenses of Rs.6,28,43,080/- being 10% of the expenses in relation to Facilities Management, and therein requested that the A.O. be directed to delete the said proposed disallowance. The DRP after perusing the order of the A.O. in the backdrop of the submissions of the assessee, therein observed that the A.O. had examined the issue in all fairness. The DRP observed that the A.O. during the course of proceedings before him had sought to verify the transactions of the assessee with different parties, but however, no replies were received by him. The A.O. thereafter brought the aforesaid state of affairs to the notice of the assessee, but the assessee failed to act upon the same and did not obtain the confirmations of the respective parties, as a result whereof the A.O. being left no other alternative, thus guided by a similar disallowance made by his predecessor in the immediately preceding year, which thereafter was sustained by the DRP, therein carried out a disallowance @ 10%. The DRP thus on the basis of his aforesaid observations rejected the objection of the assessee and sustained the disallowance of Rs.6,28,43,080/-.
(iii) As regards disallowance of ‘Write off’ of earnest money of Rs.4 lac (a). The assessee further objected to the proposed disallowance of the ‘write off’ of earnest money deposit of Rs. 4 lac claimed by the assessee as a revenue loss in its books of P a g e | 14 account. The DRP held that as the assessee had failed to come forth with any justification in respect of the write off of the aforesaid earnest money deposit of Rs. 4 lac, but had only taken support of a general narration, therefore declined to disturb the said proposed action on the part of the A.O.
(iv) As regards short credit of TDS, non issuance of refund and proposed levy of interest u/s 234B - and interest u/s 234D:
(a). The assessee further submitted before the DRP that the A.O. vide his draft assessment order had erred in proposing to give credit of TDS to the extent of Rs.4,24,81,616/- only, as against Rs.4,73,63,440/- claimed by the assessee. It was thus submitted by the assessee that the A.O. be directed to give the balance credit of TDS of Rs. 48,81,824/- (i.e. Rs.4,73,63,440/- less Rs.4,24,81,616/-). The assessee further averred before the DRP that the A.O. had erred in stating that refund of Rs.4,58,80,144/- had been issued to the assessee, while for no such refund was received by the assessee till date, despite the fact that a rectification application was filed by the assessee on 21.09.2011. The assessee thus submitted that the A.O. be directed to grant refund after considering the fact that no refund had been received by the assessee till date. The assessee further objected to the proposed levy of interest u/s 234B of Rs.17,89,295/- and interest u/s 234D of Rs.68,82,022/-. The DRP after deliberating on the aforesaid contentions of the assessee, therein declined to P a g e | 15 deal with the same, for the reason that neither of the said objections dealt with variations of income and loss.
The DRP thus on the basis of his aforesaid observations therein directed the A.O. to give effect to his aforesaid directions as per the provisions of section 144C(13) of the Act.
BEFORE THE A.O:-
10. The A.O. after receiving the order of the DRP passed u/s 144C(5) of the ‘Act’, dated 28.09.2012, gave effect to the directions of the DRP and made the following additions/disallowances in the hands of the assessee:-
Particulars Amt (Rs.) Amt (Rs.) Total Income as per return (before set off of loses) 65,633,07 Add:Addition / Disallowances (i) Addition under section 92CA(3). 77,087,718 (ii) Disallowance of expenditure from facility management business. 62,843,080 (iii) Miscellaneous expenses write off of deposits. 400,000 140,330,798 Less: Brought forward losses Business Loss 46,575,785 205,963,805 Unabsorbed depreciation 44,000,214 90,575,999 , and thus assessed the income of the assessee at Rs.11,53,87,810/-.
11. The assessee being aggrieved with the order passed by the A.O. u/s 143(3) r.w.s 144C(13), had therein carried the matter in P a g e | 16 appeal before us. That during the course of hearing of the appeal it was submitted by the Ld. Authorized representative (for short ‘A.R’) of the assessee that Ground of appeal No. 1 to 1.3 were covered by the earlier order passed by the Tribunal in the assesses own , viz. M/s Johnson Controls India Pvt. Ltd. vs. DCIT-8(2), Mumbai, (ITA No. 8722 & 8855/Mum/2011) for A.Y 2006-07 and A.Y. 2007-08. The Ld. A.R drew our attention to the relevant extracts of the order of the Tribunal, wherein the A.O. was directed to adopt 3.63% as the appropriate rate of ALP for benchmarking the Direct Sales Compensation (‘DSC’) income received by the assessee from its AEs, by observing as under:-
“We have heard both the parties on this issue relating to the appropriate method of accounting. We find there are decisions to denounce for PSM and the choice is between the CUP and TNMM as the best appropriate method in matters of indenting international transactions. One of the decisions cited above also supports the CUP as the most appropriate method. Therefore, we are of the opinion, in principle, we agree with the Ld. Counsel's argument that Internal CUP is the most appropriate method in this kind of factual situation. The next limb of this issue relates to the percentage of commission in ALP studies. It is an admitted fact that the assessee offered the commission income i.e. 2% in accordance with the bilateral agreement with the AE. Relying on the PSM, TPO benchmarked the same applying ad-hoc percentage of 10% out of AE profit margin of 16%. Considering the unfairness of such percentage, DRP restricted the same to 5%. Before us, Ld. Counsel for the assessee brought our attention to page 335 of the paper book and submitted that the rate of commission range from P a g e | 17 1.35% (Cisco Systems (India) Private Ltd. (ITA No. 1410/Bang/2010) to 5% (Bayer Material Science Private Limited vs. ACIT (ITA No.7977/Mum/2010). He also brought our attention to the Tribunal's order in the case of Sumitomo Corporation India Private Limited (supra) and submitted that this is the case where the internal CUP was approved as most appropriate, where the rate of percentage of commission of 2.26% was found to be the ALP. However, Ld. Counsel for the assessee submitted that ALP in the present case may be finalized with the Bench and requested for not remanding the matter to the Revenue for one more round.
9. On the other hand, on this issue of rate of commission, Ld. DR for the Revenue argued for considering 5% as an appropriate ALP as held by the Tribunal in the case of Bayer Material Science Private Limited (supra).
We have heard both the parties on this issue of the appropriate rate of commission and find the rate of 1.35% (in the case of Cisco Systems (supra) and 1.49% [in the case of Hoganas India Private limited vs. DCIT No.1463/PN/2010] have to be rejected considering the rates approved in the case of Sumitomo Corporation (2.26%) (supra) and Bayer Material Science (5%) (supra). In our opinion, to remove the statistical error, if any, the average of these two comparables should be considered to arrive at the appropriate rate of ALP for benchmarking the impugned transactions. Accordingly, 3.63%, should be appropriate rate to be adopted by the AO for calculating the adjustments to be made. Thus, we partly allow the relevant grounds of the assessee as the case may be. Accordingly, AO is directed to P a g e | 18 adopt 3.63% as appropriate rate of ALP for benchmarking the impugned transactions.”
Thus, in the backdrop of the aforesaid facts, it was averred by the Ld. A.R that keeping in view the order passed by the Tribunal in the case of the assessee company for the preceding years, viz. A.Y. 2006-07 and A.Y. 2007-08, the appropriate rate of ALP for benchmarking of the Direct Sales Compensation (‘DSC’) received by the assessee from its AEs could not have been taken by the A.O. in excess of 3.63%. The Ld. A.R further in the backdrop of the aforesaid facts relied on the basis which was accepted by the Tribunal for benchmarking of the transactions of Direct Sales Compensation (‘DSC’) in the preceding years, viz. A.Y. 2006-07 and A.Y. 2007-08, i.e average of the commission rate in the case of the aforesaid two concerns, viz. M/s Sumitomo Corporation India Private Ltd. and M/s Bayer Material Science Private Ltd. It was thus on the aforesaid footing submitted by the Ld. A.R that the average of the commission rates of the said two concerns, which had been accepted by the department in the respective assessment/appeals of the aforesaid concerns during the year under consideration, viz. A.Y. 2008-09, as under:- Particulars Rate of commission accepted Sumitomo Corporation India Pvt. Ltd. 2.23% vs. Addl CIT (ITA No. 328/Del/2014) Bayer Material Science Pvt. Ltd. 5%* (ITA No. 7977/Mum/2010) Average 3.62% , thus in all fairness be taken as the arm’s length commission rate in the hands of the assessee. Thus on the basis of his aforesaid submission, it was averred by the Ld. A.R that the 3.62% would be the appropriate rate to be adopted by the AO for calculating the adjustments to be made. Per contra, the Ld. Departmental Representative (for short ‘D.R’) heavily relied on the orders of the lower authorities and submitted that the DRP had rightly determined the ALP for direct sales compensation received by the assessee from its AEs at 8.77%.
We have heard the Authorized Representatives for both the parties, perused the orders of the lower authorities and the material produced before us. We have given a thoughtful consideration to the facts of the case and are of the considered view that the Tribunal while disposing of the appeals of the assessee for A.Y. 2006-07 and A.Y. 2007-08, vide order dated 31.12.2013, had held that CUP and TNMM were the most appropriate methods for benchmarking the transaction of Direct Sales Compensation (‘DSC’). We find that the assessee had submitted before the Tribunal in respect of its appeals for the aforesaid preceding years, viz A.Y. 2006-07 and A.Y. 2007-08 certain case laws, where on similar facts the ALP of commission was decided by the Tribunal. We find that the Tribunal after deliberating on the following case laws relied upon by the assessee, had therein taken the arm’s length commission rate of 3.63% :- vs. Addl CIT (ITA No.5095/Del/2011) 2.26% Bayer Material Science Private Ltd. (ITA No. 7977/Mum/2010) 5% Average 3.63% We have perused the facts of the case and are of the considered view that the issue involved in the present appeal is squarely covered by the order passed by the Tribunal in the assessee’s own case for the A.Y. 2006-07 and A.Y. 2007-08 (ITA No. 8722 & 8855/Mum/2011, dated 31.12.2015), wherein the Tribunal had directed the A.O to adopt 3.63% as the appropriate rate of ALP for benchmarking the Direct Sales Compensation (‘DSC’) in the hands of the assessee. We find that the assessee by relying on the rates of commission which had been accepted in the case of the said two concerns, viz. M/s Sumitomo Corporation India Pvt. Ltd. and M/s Bayer Material Science Pvt. Ltd., in their respective assessment/appeals for the year under consideration, viz. A.Y. 2008-09, had therein submitted that the aforesaid average rate of commission of 3.62% (supra), in all fairness, be taken as the arm’s length commission rate in the hands of the assessee. We have also observed that the assessee while arriving at the average commission rate of 3.62% in respect of the aforesaid two concerns, viz. M/s Sumitomo Corporation India Pvt. Ltd. and M/s Bayer Material Science Pvt. Ltd., for the year under consideration, viz. A.Y. 2008-09, had in respect of M/s Bayer Material Science Pvt. Ltd.(supra) adopted the commission rate of 5% that was upheld by the Tribunal in the assesses own case for A.Y. 2006-07 and A.Y. 2007-08, as there was no transfer pricing adjustment in the hands of the said concern during the year under consideration. We have given a thoughtful consideration to the aforesaid facts and are of the considered view that the contention of the assessee in the light of the order passed by the Tribunal in its own case for the preceding years, therein warrants acceptance. We, thus in the light of our aforesaid observations direct the A.O. to adopt 3.62% as the appropriate rate for benchmarking the Direct Sales Compensation (‘DSC’) received by the assessee from its AEs. The Ground of appeal No. 1 to 1.3 raised by the assessee before us are thus allowed in terms of our aforesaid observations.
14. The assessee had further assailed before us the disallowance by the A.O of 10% of the expenses incurred on Global Work Space Solutions/Facilities Management, therein leading to an addition of Rs.6,28,43,080/- in the hands of the assessee. It was submitted by the Ld. A.R that the income from Global Work Space Solutions/Facilities Management (for short ‘GWS’) had during the year increased by 114% (approximately to Rs.73,79,04,723/- in A.Y. 2008-09 as compared to Rs.34,53,59,501 in A.Y. 2007-08). The Ld. A.R submitted that as against the aforesaid increase in income, the expenditure of GWS increased to Rs.62,84,30,804/-, as against Rs.29,22,15,696/- incurred in A.Y. 2007-08, therein witnessing an increase of approximately 115%. The Ld. A.R submitted that the Gross profit margin had reduced marginally to 14.85% in A.Y. 2008-09 , as against the GP margin of 15.35% in A.Y. 2007-08. It was submitted by the Ld. A.R that the minimal fall in gross margin by 0.51% was because of competitive market scenario and customer preferences, as a result of which the assessee company was compelled to increase its focus on quality of service and thus compromised, though only to some extent, on its gross margins, which therein resulted into comparative decline during the year under consideration. The Ld. A.R assailing the ad-hoc disallowance carried out by the A.O., therein submitted that during the course of the proceedings, the assessee as directed by the A.O, had vide its submissions dated 17.08.2011 submitted party vise details of purchases and labour expenses exceeding an amount of Rs. 10 lac, wherein the details like name of the vendor, address, PAN, and the amount of the expenditure stood duly reflected. It was thus submitted by the Ld. A.R that total amount for which such party vise details were provided amounted to Rs.55 crores (approx), which as against the total expenditure of GWS of Rs.62,84,30,804/-,therein worked out to 89% of the total expenses. The Ld. A.R further averred that the copies of the invoices on expenditure of GWS of Rs.82,22,049/-, as asked for by the DRP, were also furnished on a sample basis. The Ld. A.R thus in the backdrop of the aforesaid facts submitted that the A.O. had most arbitrarily and without any basis disallowed 10% of the expenditure on GWS, which thus was liable to be vacated. Per contra, the Ld. D.R relied on the orders of the lower Authorities and submitted that on account of failure on the part of the assessee to substantiate the genuineness and veracity of the aforesaid expenses, the lower authorities had therein gone by the disallowance carried out in the case of the assessee for the immediately preceding year, and thus in all fairness had carried out disallowance of 10% of the aforesaid expenses. The Ld. D.R thus submitted that the aforesaid addition/disallowance made by the A.O may be sustained.
We have heard the Authorized Representative for both the parties, perused the orders of the lower Authorities and the material produced before us. We are of the considered view that P a g e | 23 in the backdrop of the contentions of the assessee that out of total expenditure of GWS of Rs.62,84,30,804/-, it had as directed by the A.O, placed on record the party vise details of purchases and labour expenses exceeding an amount of Rs. 10 lac, wherein the complete details like name of the vendor, address, PAN, and the amount of the expenditure stood duly reflected. The assessee had further submitted before us that it had also furnished copies of invoices of expenditure on GWS aggregating to Rs. 82,22,049/- on a sample basis during the course of the DRP proceedings. We have given a thoughtful consideration to the contentions of the assessee and the facts of the case. We are of the considered view that in the case of companies which are having large volume of transactions, it would be practically difficult to bring all evidences to substantiate the expenses in one go. Hence, the ledger account copies are furnished to the tax authorities, which normally are verified on a test check basis. We find that as averred by the Ld. A.R, the assessee had furnished complete party vise details of purchases and labour expenses exceeding an amount of Rs. 10 lac, as directed by the A.O, as well as furnished copies of invoices of expenditure on GWS aggregating to Rs. 82,22,049/- on a sample basis during the course of the DRP proceedings. We have given a thoughtful consideration to the facts of the case and are of the considered view that now when the assessee in compliance to the directions of the A.O had placed on record substantial material, viz. complete party vise details of the purchases and labour expenses exceeding Rs. 10 lac amounting to Rs. 55 crores (aprox), which worked out to about 89% of the total GWS expenses, as well as had furnished with the A.O the copies of invoices of expenditure on GWS aggregating to Rs.
82,22,049/-, for verification on sample basis, therefore in the backdrop of the said factual matrix, we are unable to persuade ourselves to subscribe to the adhoc disallowance carried out by the A.O. We are of the firm view that where an assessee had substantiated his claim towards an expenditure by placing on record documentary evidence, then the A.O remains under a statutory obligation to act upon such material and adjudicate on merits the entitlement of the assessee towards such claim of expenditure. We thus in the backdrop of our aforesaid observation, are thus of the considered view that now when the assessee as directed by the A.O had furnished the party vise details of purchases and labour expenses exceeding Rs. 10 lac, which worked out to 89% of the total GWS expenses, as well as had furnished copy of invoices on sample basis, then in case the A.O had certain doubts and reservations as regards genuineness of the said expenditure, then he could have verified the same on his own, and could have disallowed any part of such expense after clearly recording his reasons for so doing. We are of the considered view that now when the assessee had substantiated its claim towards the expenses on the basis of material made available on the record, then the disallowance of any part of such expense on adhoc basis stood ruled out. We are further not persuaded to accept the observations of the lower authorities that the disallowance of 10% of GWS expenses were carried out in conformity with adhoc disallowance carried out by the A.O in the immediately preceding year, viz. A.Y. 2007-08, which thereafter had been sustained by the Tribunal vide its order dated. 31.12.2015, passed in of the assessee. We find that unlike the case of the assessee for the year under consideration, the disallowance of Rs. 2.98 crores, i.e @10% of the expenses was upheld by the Tribunal in A.Y. 2007- 08, for the reason that the assessee had failed to substantiate its claim of expenses on the basis of supporting bills, which therein justified carrying out of adhoc disallowance @ 10.21% in the hands of the assessee. We thus in light of our aforesaid observations, are thus of the considered view that the half hearted approach of the A.O , which can safely be held to be based on misconceived facts, thus cannot be sustained. We thus direct the A.O to delete the addition/disallowance of Rs.6,28,43,080/-, and thus order accordingly. The Ground of appeal No. 2 is thus allowed.
16. That the assessee being aggrieved with the disallowance of an amount of Rs.4 lac pertaining to the write off of earnest money deposit by the A.O., had therein carried the matter in appeal before us. The Ld. A.R submitted that the assessee in the normal course of its business had given earnest money at the start of a project, which thereafter on the failure of the party to pay back the same was thus written off and claimed by the assessee as a revenue loss, being a debt gone bad. It was submitted by the Ld. AR that the A.O. failing to appreciate the facts of the case in the right perspective, had thus erred in disallowing the aforesaid amount which was claimed as a revenue loss by the assessee. Per contra, the Ld. D.R relied upon the order of the lower Authorities.
We have heard the Authorized Representatives for both the parties, perused the orders of the lower authorities and the material produced before us. We are of the considered view that as the aforesaid amount of Rs.4 lac was given as an advance by the assessee at the start of the project, and thus was never taken into account by the assessee as its income during the year under consideration, or in any of the previous years, therefore, the same did not satisfy the conditions contemplated u/s 36(1)(vii) r.w.s. 36(2) of the ‘Act’, and as such could not be allowed as a ‘bad debt’ in the hands of the assessee. We however find that the assessee had alternatively claimed that as the said loss had been suffered by the assessee in the normal course of its business, therefore, the same was allowable under Sec. 37 r.w Sec. 28 of the ‘Act’. We are of the considered view that as the said claim of the assessee requires to be tested against the facts of the case, therefore, we restore the issue to the file of the A.O who shall verify the entitlement of the assessee towards claim of the aforesaid amount as a revenue loss under Sec. 37 r.w Sec. 28 of the ‘Act’. Needless to say, the A.O shall during the course of the set aside proceedings afford opportunity to the assessee to substantiate its aforesaid claim. The Ground of appeal No. 3 is allowed for statistical purposes.
18. That it was further submitted by the Ld. A.R that the A.O. had erred in granting credit of TDS to the extent of Rs.4,24,81,616/- only, as against Rs.4,73,63,440/- so claimed by the assessee. It was submitted by the Ld. A.R that the A.O. may be directed to give the balance credit in respect of the TDS of Rs.48,81,824/-[i.e. Rs.4,73,63,440 (minus) Rs.4,24,81,616/-]. That it was further submitted by the Ld. A.R that the A.O. had erred in stating that the refund of Rs. 4,58,80,144/- had been issued to the assessee, and therein submitted that the A.O. be directed to issue the refund after considering the fact that no refund had been received by the assessee till date.
We have given a thoughtful consideration to the aforesaid contentions of the assessee and are of the considered view that the adjudication of the same would call for perusal of the facts available on the record of the lower Authorities. We thus in all fairness direct the A.O. to consider the aforesaid contentions of the assessee, and in case if it emerges from the records that a short credit of TDS of Rs.48,81,824/- (supra) had been given to the assesse, then the requisite remedial action be taken and the balance credit of the TDS be allowed in the hands of the assessee. We further direct the A.O. to verify the contention of the assessee that no refund of Rs.4,58,80,144/- had been received by the assessee, while for a fact to the contrary had been recorded by the A.O. The A.O. is herein directed to verify the factual position in respect of both of the aforesaid contentions of the assessee and give the necessary consequential effect, as per law. The Ground of appeal No. 4 and Ground of appeal No. 5 are thus allowed for statistical purposes.
That the Ld. A.R had further assailed the charging of interest u/s 234D of Rs.51,38,009/-, as well as the calculation of interest u/s 244A of Rs.8,96,857/- by the A.O. We herein restore the aforesaid issues also to the file of the A.O., who is herein directed to re-compute the aforesaid interest u/s 234D and 244A of the ‘Act’. The Ground of appeal No. 6 and Ground of appeal No. 7 are thus allowed for statistical purposes.
The appeal of the assessee for A.Y. 2008-09, marked as is partly allowed in terms of our aforesaid observations.
I.T.A. No(s) 691/M/2014 (A.Y. 2009-10) 1. We now advert to the appeal of the assessee for A.Y. 2009- 10, wherein the assessee challenging the assessment order passed by the A.O under Sec. 143(3) r.w.s 144C(13), had raised the following grounds of appeal:-
“1. Ground No 1 On the facts and circumstances of the case and in law, the Deputy Commissioner of Income-tax 8(2), Mumbai ('Ld. AO'), under the directions of the Hon'ble Dispute Resolution Panel ('Ld. DRP') erred both, on facts and in law, in confirming the transfer pricing ('TP') adjustment under section 92CA(3) of the Income Tax Act, 1961 (the Act) made by the Learned Transfer Pricing officer ('Ld. TPO') of Rs.14,78,66,852 by rejecting the transfer pricing analysis conducted by the Appellant.
The Appellant prays that the transfer pricing analysis conducted by the Appellant be accepted and consequently the TP adjustment of Rs.14,78,66,852 be deleted.
2. Ground No2 On the facts and circumstances of the case and in law, the Ld. AO, under the directions of the Ld. DRP erred both, on facts and in law, in confirming the addition of Rs.13,52,29,899 to the income of the appellant, on account of the TP adjustment under section 92CA(3) of the Act made by the Ld. TPO, by applying the Profit Split Method and holding that the international transaction of 'receipt of direct sales compensation' of the Appellant does not satisfy the arm's length principle envisaged under the Act.
The Appellant prays that the arm's length price of the international transaction of receipt of direct sales compensation as computed by the Appellant be accepted and consequently the TP adjustment of Rs.13,52,29,899 be deleted.
3. Ground No. 3 On the facts and circumstances of the case and in law, the Ld. AO, under the directions of the Ld. DRP erred both, on facts and in law, in confirming the disallowance made by the Ld. TPO on account of bad debts of Rs.1,26,36,953 written off by the Appellant, without appreciating the fact that the said amount has been considered as an operating expense for the purpose of computation of operating margins for the CoEE segment, which has been benchmarked using TNMM and also accepted by the Ld. AO/Ld. TPO to be at arm's length.
The Appellant prays that the amount of bad debts written off by the Appellant be allowed and consequently the TP adjustment of Rs.1,26,36,953 be deleted.
Ground No. 4 On the facts and circumstance of the case and in law, the Ld. A.O., erred in granting credit of tax deducted at source ('TDS') to the extent of Rs.3,89,13,845/- only as aginat Rs.3,98,90,197/- claimed by the Appellant.
The appellant prays that the Ld. A.O. be direct to give the balance credit in respect of TDS of Rs.9,76,352/- (i.e. Rs.3,98,90,197/- less Rs.3,89,13,845/-).
Ground No. 5 On the facts and circumstances of the case and in law, the Ld. AO has erred in initiating the penalty proceedings under section 271(1)(c) of the Act.
The Appellant prays that the Ld. AO be directed to drop the initiation of penalty proceedings under section 271(1)(c) of the Act.”
3. Briefly stated, the facts of the case are that the assessee had e-filed its return of income for A.Y. 2009-10 on 30.09.2009 declaring loss of (Rs.7,08,88,790/-), which was processed as such u/s 143(1) of the Act. The case of the assessee was thereafter taken up for scrutiny assessment u/s 143(2).
4. That during the course of assessment proceedings the A.O. made a reference to the Transfer Pricing Officer (‘TPO’) for the determination of arm’s length price in respect of the assessee’s international transactions with its associate enterprises (AEs).
The TPO after perusing the international transactions of the assessee with its AEs in the backdrop of the contentions of the assessee, therein carried out a TP adjustment of Rs.13,52,29,899/- in respect of value of international transactions of Direct Sales Commission (‘DSC’) received by the assessee from its AEs, and a further adjustment of Rs.1,26,36,953/- in respect of ‘bad debts’ written off. The TPO thus proposed a total adjustment of Rs.14,78,66,854/- in the hands of the assessee.
6. The A.O. on receipt of the order of the TPO passed u/s 92CA(3), dated 22.01.2013, therein going by the suggestion of the TPO, therein proposed to carry out a total adjustment of Rs.14,78,66,852/- (supra) vide his draft assessment order, dated 06.03.2013.
7. The assessee being aggrieved with the additions/disallowances proposed by the A.O vide his draft assessment order. u/s 143(3) r.w.s 144C(1) of the Act, dated 06.03.2013, therein filed objections before the Dispute Resolution Panel-1, Mumbai (DRP). The DRP disposed of the objections raised by the assessee before him, as under:-
(i). As regards the TP adjustment of Direct Sales Compensation (DSC) of Rs.13,52,29,899/-:
The DRP after deliberating on the objections raised by the assessee in respect of the upward TP adjustment of Rs.13,52,29,899/- pertaining to the DSC received by the assessee from its AEs, as proposed by the TPO u/s 92CA(3) of the ‘Act’, therein adopted the observations arrived at by him in the case of the assessee for A.Y. 2008-09 and disposed of the objections of the assessee and principally upheld the order of the TPO. However, the DRP observing that the TPO had split the profit between the assessee and AEs on 50:50 basis, taking GP/Cost ratio of 32.50%, therein directed the TPO to modify his order and split the profit by taking GP/Sales ratio of 24.27%.
(ii). As regards disallowance of ‘bad debts’ of Rs. 1,26,36,953/-:
The DRP further deliberating on the contentions of the assessee as regards the disallowance of ‘bad debts’ of Rs.1,26,36,953/- by the TPO as operating expenses for the purposes of computation of operating margins of the assessee, therein observed that the allowability of the debts written off u/s 36(1)(vii) was not in dispute, but the issue involved was as to whether such AE bad debts written off was an international transaction, and whether any commensurate benefit had been received on such write off. The DRP after deliberating on the contentions of the assessee, therein concluded that there could be no reason to write off an AE debt for the reasons of invoicing disputes, and as such upheld the order of the TPO.
7. The A.O. after receiving the order of the DRP passed u/s 144C(5) of the Act, dated 05.04.2013, gave effect to be directions of the DRP and made the following additions/disallowances in the hands of the assessee:- Particulars Amt (Rs.) Amt (Rs.) Total loss as per return (before set off of loses) (70,888,790) Add:Addition / Disallowances (i) Addition under section 92CA(3). 147,866,852 (ii). Earnest Money Deposit W/off. 92,833 147,959,735 ,and thus assessed the income of the assessee at Rs.77,070,945/-.
The assessee being aggrieved with the order of the A.O had therein carried the matter in appeal before us. The assessee had assailed before us the upwards TP adjustment aggregating to Rs. 147,866,852/- made by the A.O/TPO, viz. upward adjustment of DSC of Rs.13,52,29,899/-, and disallowance of ‘bad debts’ of Rs. 1,26,36,953/-.
We find that the A.O going by the directions of the DRP had therein made an upward TP adjustment of Rs.13,52,29,899/- as regards the DSC received by the assessee from its AEs. The Ld. A.R. had brought to our notice that the identical issue was involved in the appeal of the assessee for A.Y. 2008-09, marked as Ld. D.R.
10. That in the backdrop of the contentions raised by the Ld. A.R before us for A.Y. 2008-09, it was submitted by him that the average commission rate of 3.63% of the two parties which had been accepted by the Tribunal in the assessee own case for A.Y. 2007-08, viz. M/s Sumitomo Corporation India Private Ltd. and M/s Bayer Material Science Private Ltd., worked out at 3.93% during the year under consideration, as under:-
Particulars Rate of commission accepted Sumitomo Corporation India Pvt. Ltd. 2.86% vs. Addl CIT (ITA No. 328/Del/2014) Bayer Material Science Pvt. Ltd. 5% (ITA No. 7977/Mum/2010) Average 3.93% The Ld. A.R thus submitted that average commission rate of 3.93%, which had been worked out on the basis of the observations of the Tribunal in the preceding years, may therein be taken for benchmarking the Arms length compensation, i.e DSC in the hands of the assessee.
We have heard the Authorized representatives for both the parties, perused the orders of the lower authorities and the material produced before us. We are of the considered view that the identical issue was involved in the appeal of the assessee marked as before us. We thus going by our observations and reasoning adopted while disposing of the appeal of the assessee for A.Y. 2008-09, therein direct the A.O to take the average commission rate of 3.93% which had been worked out by looking into the commission rates of the aforesaid concerns, viz. M/s Sumitomo Corporation India Private Ltd. and M/s Bayer Material Science Private Ltd., for benchmarking the Arms length compensation (DSC) in the hands of the assessee. Thus in the backdrop of our aforesaid observations, we herein adjudicate the present issue in terms of our order passed while disposing of the ‘Grounds of appeal No. 1 to 1.3’ in the appeal of the assessee for A.Y. 2008-09, marked as and our decision passed in context of the issue under consideration in the said appeal shall principally in light of our aforesaid observations, apply mutatis mutandis in the present appeal also.
12. We now take up the disallowance by the A.O of the ‘bad debts’ of Rs. 1,26,36,953/-. We find that the assessee had incurred the aforesaid ‘bad debt’ during the year pertaining to CoEE segment, which as claimed by the assessee was due to dispute regarding the work done by the assessee. The Ld. A,R had submitted before us that P a g e | 35 the assessee which is not a captive service provider of the AEs in the CoEE segments, therein raises bills on the AEs on the basis of hours spent. The Ld. A.R submitted that a dispute surfaced between the assessee and the AEs on the issue as to whether the work for which bill was raised was as per the agreed scope of work, or not. It was due to this dispute, the assessee had written off the debts which pertained to F.Y. 2006-07, 2007-08 and 2008-09, as bad. The Ld. A.R further submitted that as the AEs had disputed the time spent by the assessee on their project, therefore to resolve the said dispute the assessee decided to reverse the disputed invoices, and as such the entry showing write off of the bad debts was passed by the assessee in its books of accounts. We find that as observed by the DRP, the allowability of the debts written off u/s 36(1)(vii) is not in dispute, but the issue involved was whether such AE bad debts written off is an international transaction, and whether any commensurate benefit had been received on such write off. We had observed that the DRP had upheld the disallowance of the ‘bad debts’ by the TPO, by holding a conviction that there could be no justifiable reason to write off an AE debt for the reasons of invoicing disputes. The DRP had further held that the assessee had failed to demonstrate as to why the invoices raised even in the relevant previous year has also been written off. It was further observed by the lower authorities that neither the assessee had placed any evidence on record regarding any dispute with the AE regarding the invoices raised and subsequently written off, nor brought on record any cogent reason with verifiable evidence to demonstrate the justification for non recovery of AEs debts.
13. We have heard the authorised representatives for both the parties, perused the orders of the lower authorities and the material produced before us. We find that it is the contention of the assessee that the TPO had considered the ‘bad debts’ written off as part of the operating expenses of the CoEE segment, which had been benchmarked by the assessee applying TNMM. The assessee had averred before the lower authorities that the TPO had made an adjustment of Rs. 1.26 crores also on account of such ‘bad debts’, considering the same as operating expenses, however despite that as the PLI of the assessee was within Arms length, therefore no TP adjustment was called for in the hands of the assessee. We have given a thoughtful consideration to the facts of the case. We find from the records that the allowability of the ‘bad debts’ under Sec. 36(1)(vii) is not in dispute. We after perusing the orders of the lower authorities are of the considered view that the reasons on the basis of which adverse inferences had been drawn in respect of the ‘bad debts’ claimed by the assessee are, viz. (i). there can be no justifiable reason to write off an AE debt for the reason of invoicing disputes; (ii).the assessee had failed to justify the write off of the debt on the basis of any evidence regarding any dispute with the AE; (iii). the assessee had not furnished any cogent reason with verifiable evidence to demonstrate the justification for non-recovery of AEs debts. We in light of the fact that the DRP had categorically conceded that allowability of the aforesaid amount as ‘bad debt’ under Sec. 36(1)(vii) was not in dispute, therefore do not divulge and go any further on the said issue.
We further find that the assessee had claimed that the PLI of the assessee on the treatment of the ‘bad debts’ as an operating expenses, would not be adversely hit, and is found to be within the arms length, thus no TP adjustment could have been made in the hands of the assessee. That as regards the observations of the DRP as to whether the writing off by the assessee of the debt recoverable from P a g e | 37 the AEs, would therein lead to any commensurate benefit on such writing off of the AEs debt as bad, we are of the considered view that characterizing of the writing off of the debt by the assessee as an operating expense by the DRP, would in no way adversely affect the operating margin of the assessee, as the PLI of the assessee, as claimed by the Ld. A.R continues to remain within the parameters of +/-5% variation, as a result whereof no TP adjustment would be called for in the hands of the assessee in respect of the CoEE segment to which such ‘bad debts’ so pertain, wherein the benchmarking for the said segment had been carried out by adopting TNMM. We thus not being impressed by the aforesaid observations of the lower authorities are thus not persuaded to subscribe to the same, and as such direct the A.O to delete the addition/disallowance of Rs. 1,26,36,953/-(supra) so made in the hands of the assessee. The Ground of appeal No. 3 is allowed in terms of our aforesaid observations.
15. The ‘Ground of appeal No. 1’ is disposed of in terms of our observations recorded while disposing of the ‘Grounds of appeal No. 2 & 3’.
16. That it was further submitted by the Ld. A.R that the A.O. had erred in granting credit of TDS to the extent of Rs.3,89,13,845/- only, as against Rs.3,98,90,197/- so claimed by the assessee. It was submitted by the Ld. A.R that the A.O. may be directed to give the balance credit in respect of the TDS of Rs.9,76,352/-[i.e. Rs.3,98,90,197/-(minus) Rs.3,89,13,845/-].
17. We have given a thoughtful consideration to the aforesaid contentions of the assessee and are of the considered view that the adjudication of the same would call for perusal of the facts available on the record of the lower Authorities. We thus in all fairness direct the A.O. to consider the aforesaid contentions of the assessee, and in case if it emerges from the records that a short credit of TDS of Rs.9,76,352/- (supra) had been given to the assessee, then the requisite remedial action be taken and the balance credit of the TDS be allowed in the hands of the assessee, as per law. The Ground of appeal No. 4 is thus allowed for statistical purposes.
The Ground of appeal No. 5 raised before us in respect of initiation of penalty proceedings u/s 271(1)(c) is premature, and thus dismissed.
19. The appeal of the assessee for A.Y. 2009-10, marked as is partly allowed in terms of our aforesaid observations.
Order pronounced in the open court on 17/05/2017. (G.S. PANNU) (RAVISH SOOD) लेखासदस्य /Accountant Member न्यायिकसदस्य/Judicial Member म ुंबईMumbai; धििाुंकDated : 17.05.2017