Hyundai Motor India Engg. Pvt. Vs DCIT (ITAT Hyderabad)
Hyundai Motor India appeal: Including bad debts and provision for bad and doubtful debts as operating expenses is necessary for the purpose of computing profit and loss of comparable companies, the margins of comparable companies
Very recently in Hyundai Motor India Engg. Pvt. Ltd. vs. DCIT [ITA No. 87/Hyd/2017 A.Y.2012-13, decided on 08.06.2018], one of the ground was that on the facts and the circumstances of the case and in law, the AO/DRP erred in confirming the TPO’s stand of treating the provision for bad and doubtful debt and bad debts written off as non-operating expenses for the purpose of margin computation of comparable companies as selected by TPO.
This appeal was preferred by the assessee against the order passed under section 143(3) r.w.s. 92CA r.w.s.144C of the Income Tax Act, 1961 (in short ‘the Act’) dated 05/12/2016 relating to AY 2012-13.
Brief facts of the case were that the assessee being a private limited company, furnished its return of income for the AY 2012-13 on 26/11/2012 electronically under section 139(1) of the Income Tax Act, 1961 (in short ‘the Act’) declaring a total income of Rs. 7,67,05,660 and paid tax amounting to Rs. 134,13,799.
During the year under consideration, the assessee company had entered into international transactions to an extent of Rs. 7,66,94,920, and hence, reference was made to the Transfer Pricing Officer (TPO) with prior approval of Pr. CIT – 2, Hyderabad for determining Arm’s Length Price under section 92CA of the IT Act.
Assessee-company’s Profile:
The assessee company was engaged in providing/rendering R&D support services in respect of CAD and CAE tools in designing the automobile parts and is into modelling and iterative simulation. It receives the basic design from its group company. With respect of CAD modelling, it made a 3-D CAD modelling data of vehicle components using CAD software tools primarily CTIA. The CAE modelling services using Hypermesh comprises o finite modelling for the computer simulation which would involve breaking down the model in various structures.
As per the audited statement of accounts, the financials of the assessee were as under:
