In Ronak Industries, the Tribunal held, relying on Narang Industries, that the Tribunal has the power to extend stay beyond 365 days. This decision of the Tribunal was challenged by the department in the Bombay High Court by specifically raising a question as to the applicability of the Third Proviso to s. 254(2A) as amended w.e.f 1.10.2008. The High Court, vide order dated 22.10.2010, dismissed the department’s appeal. As such, the Tribunal’s order holding that there was power to extend stay even after 365 days stood affirmed

The First proviso to s.92C(2) (pre amendment by F (No 2) Act 2009 w.e.f. 1.10.09) which provides that “where more than one price is determined by the most appropriate method, the arms length price shall be taken to be the arithmetical mean of such prices or at the option of the assessee, a price which may vary from the arithmetical mean of an amount not exceeding five per cent of such arithmetical mean” is clear that the assessee has an option when there is arithmetical mean involved while computing the ‘arm’s length price’ and it happens only if more than one price is determined by the most appropriate method. The First Proviso becomes operational where more than one comparable price is determined. The assessee at his option can make claim of deduction out of the arithmetic mean not exceeding 5%

It is settled law that a Direct Stay Application filed before the Tribunal is maintainable and it is not the requirement of the law that assessee should necessarily approach the CIT before approaching the Tribunal for grant of stay. It does not make any difference whether the assessee filed any application before the Revenue and not awaited their decisions before filing application before the Tribunal or directly approached the Tribunal without even filing the applications before the Revenue authorities, when there exists threat of coercive action by the AO

On facts, the business of the assessee predominantly was trading in shares though it also had investments in shares. The AO has not disputed the assessee’s claim that the dividend had been received on shares purchased for trading purposes. Interest on borrowed funds used for trading activity is allowable u/s 36(1)(iii) and it cannot be treated as expenditure for earning dividend income which is incidental to the trading activity. If the real purpose was to use borrowed funds for trading purposes and incidentally there is tax-free dividend, it cannot be said that the interest has been incurred for earning the dividend income (Wallfort Share & Stock Brokers 326 ITR 1 (SC), Godrej & Boyce 234 DTR 1 (Bom), Emraid 284 ITR 586 (Bom), Leena Ramchandranan (Ker) & Eicher 101 TTJ (Del) 369 followed)

S. 14A permits a disallowance of “expenditure incurred by the assessee” and not of “allowance admissible” to him. There is a distinction between “expenditure” and “allowance”. The expression “expenditure” does not include allowances such as depreciation allowance. Accordingly, depreciation cannot be the subject matter of disallowance u/s 14A (ratio of Nectar Beverages 314 ITR 314 (SC) followed)

In respect of FY 2001-02, the assessee used data pertaining to AYs 1999-2000 & 2000-01. While the argument that at the time of TP study, the data relating to relevant comparable for FY 2001-02 is acceptable, the assessee has to adopt the data available for the TP study at the time of filing of the return. By the time of filing of return, the data relevant to FY 2001-02 was available. Further, prior year data is relevant only if the assessee is able to prove that the pricing pattern of the assessee for the relevant financial year has been influenced by the market conditions/business cycle/product life cycle of the earlier years (which is not there in the courier business). The OECD guidelines are not of binding nature and even the Proviso to Rule 10B (4) provides that any subsequent year data cannot be considered. The contemporaneous data of relevant financial year is to be used for making the comparable analysis for arriving at the ALP unless it is proved otherwise

Even if interest on surplus funds is assessed as “business income”, it has to be excluded in computing the ‘operating profits’ because if it is included, one is computing the “return on investment” which is an inappropriate profit level indicator for a service provider. As the PLI is the Operating Margin on Cost, neither the interest income nor interest expenses is a relevant factor. The essential element is the cost incurred for the operating activity which has to be taken into account