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163 orders · Page 4 of 4
The Tribunal held that the CIT(A) erred by not providing the AO an opportunity to examine the additional evidence submitted by the assessee and provide a remand report. This violated principles of natural justice.
The Tribunal noted that notices were not effectively served and compliance was not ensured. In the interest of justice, the assessee was granted a final opportunity to substantiate the grounds of appeal.
The Tribunal granted permission to the assessee to withdraw the appeal. Consequently, the appeal was dismissed as withdrawn.
The tribunal held that the CIT(A) is obligated to dispose of appeals on merits, even if ex-parte, and cannot dismiss them solely for non-prosecution. The matter requires verification of details.
The Tribunal found that the CIT(A) deleted additions based on a reconciliation statement filed for the first time without giving the Assessing Officer an opportunity to rebut it. Therefore, the matter was remanded for verification of the reconciliation statement.
The Tribunal dismissed the Revenue's appeal. Regarding the TP adjustment (Grounds 2-4), the Tribunal noted that the CIT(A) had considered the significant increase in sales to the AE in FY 2014-15, indicating a distress sale due to Nokia's shutdown. The CIT(A) also considered that the goods were resold by the AE to Nokia at a lower price or used as raw materials, resulting in further losses for the AE. The Tribunal found merit in the CIT(A)'s conclusion that FY 2014-15 was an extraordinary year and deleted the TP adjustment. Regarding the disallowance of preliminary expenses (Ground 5), the judgment text provided does not contain the Tribunal's specific finding or reasoning on this issue. Regarding the sale of assets as a slump sale (Ground 6), the Tribunal held that for a transaction to be a slump sale, there must be a transfer of an undertaking for a lump sum consideration without assigning values to individual assets. In this case, individual asset sale values were identified, and the profit/loss was calculated asset-wise. Furthermore, the fixed asset schedule showed that the 'Plant & Machinery' block continued to exist, and the manufacturing unit was not sold as a whole. The Tribunal concluded that the transaction was a sale of individual assets, not a transfer of an undertaking, and upheld the CIT(A)'s deletion of the addition. Grounds 1 and 7 were general.
The Tribunal held that the cash receipt was part of the disclosed sale consideration of immovable property and not a loan or deposit attracting Section 269SS. Furthermore, the assessee had a reasonable cause due to medical exigency, protected under Section 273B.
The Tribunal held that the reasons provided by the assessee for the inordinate delay of 2,085 days do not constitute 'sufficient cause' as per law. The Tribunal found no infirmity in the CIT(A)'s order dismissing the appeal as time-barred.
The Tribunal held that the filing of Form 67 within the prescribed due date is directory, not mandatory, following various judicial pronouncements. The Tribunal noted that the DTAA provisions override the Act and Rules, and procedural delays should not curtail substantive relief. Consequently, the matter was restored to the AO for verification of Form 67 and a decision in accordance with the law.
The Tribunal held that the Resale Price Method (RPM) is the most appropriate method for benchmarking the international transactions of the assessee. The reasoning was based on the assessee being a full-fledged distributor that bears significant risks, including inventory, foreign exchange, and credit risks. The Tribunal noted that the Berry Ratio, used by the TPO under TNMM, is not suitable in cases where the value of goods is directly linked to the quantum of profit and profits are not solely dependent on expenses incurred. Furthermore, the Berry Ratio is applicable only in specific cases like stripped-down distributors with no financial exposure or risk in distributed goods. The Tribunal found that the TPO erred in applying TNMM with Berry Ratio, especially since the assessee's operating expenses were minimal compared to the purchase cost of machinery. Crucially, the Tribunal noted that the TPO himself, in giving effect to a previous Tribunal order for AY 2011-12, had accepted RPM as the most appropriate method after considering similar facts and risks borne by the assessee. Given the identical facts and the prior acceptance of RPM by the TPO, a further remand was deemed a futile exercise. The appeal of the assessee for both assessment years was allowed.
The Tribunal addressed several grounds. Regarding the disallowance of provision for obsolescence (Grounds 3 & 3.1), it was held that mere provision for old stock is not allowable as a deduction; loss accrues only at the time of sale. This aligns with a previous decision in the assessee's own case. However, the alternate prayer for adjustments to opening and closing stock was allowed. Regarding depreciation on software (Ground 4), the Tribunal followed the jurisdictional High Court decision in CIT vs. Computer Age Management Services P. Ltd. and the Tribunal's own prior ruling, deciding in favour of the assessee, allowing higher depreciation. Regarding disallowance u/s.40(a)(i) for reimbursement of seconded employees' cost (Grounds 5, 5.1 & 5.2), the Tribunal, following its own decision in the assessee's own case, held that these payments were reimbursements of actual salary, had suffered TDS u/s.192, and the risk and reward were with the assessee, thus deleting the disallowance. The revenue's appeal was partly allowed for statistical purposes. The judgment notes that the specific findings on issues 1, 2, 4, 5, and 6 of the assessee's grounds were not explicitly detailed in the provided extract, but the overall outcome suggests these were either decided in favour of the assessee or were part of the revenue's appeal being partly allowed.
The Tribunal held that the appeal filed by the assessee before it was not maintainable. The reasoning was that the DRP had dismissed the assessee's objections as infructuous because the AO had already passed a final assessment order, and the DRP's jurisdiction is limited to draft assessment orders proposing variations, not final orders. The Tribunal observed that no direct appeal can be made to the ITAT against an order of the DRP in such circumstances. Therefore, the appeal was dismissed as infructuous. No specific issue was left undecided.
The Tribunal admitted the additional ground regarding foreign exchange gain/loss, finding it to be a factual-cum-legal issue with available data and a reasonable explanation for its late submission based on a subsequent Tribunal decision. The Tribunal held that foreign exchange fluctuation gain should be treated as operating income, as it accrues in the normal course of operations and was treated as business income by the AO for total income computation. This decision would make the primary transaction's margin at arm's length. Regarding outstanding receivables, the Tribunal, following its own precedent in the assessee's own case for AY 2020-21, held that while outstanding receivables are an international transaction, no separate adjustment is warranted if the primary transaction is at arm's length. The Tribunal noted that the assessee did not charge interest on outstanding payables from AEs and applied parity principles by not charging interest on outstanding receivables from non-AEs. Therefore, the adjustment for outstanding receivables was not required as the overall profit margin in the primary transaction was at arm's length. The appeal was partly allowed.