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2022 (11) TMI 1352 - ITAT BANGALORETP adjustment - Adjustment determined by bifurcating the marketing and business support services segment into ITES segment and MSS segment - HELD THAT:- For assessment year 2013-2014 when the DRP had held that services rendered by the assessee are in the nature of marketing and support services and since no appeal preferred by the Revenue to the ITAT, the matter had attained finality. Therefore, we are of the view that the entire TP issue raised under marketing support services segment needs to be examined afresh by the AO / TPO in the light of the DRP’s directions for assessment year 2013-2014. Thus respectfully following the decision of the coordinate bench of the Tribunal, we remit the issue back to the AO/TPO for fresh consideration in the light of the DRP’s directions for assessment year 2013-2014. It is ordered accordingly. Adjustment determined in respect of warranty cost -TPO made an adjustment on the basis that the Assessee had not made any recovery towards the warranty services and the out of pocket warranty charges paid to third parties and the same was upheld by the DRP - AR submitted that the Assessee has in fact recovered the expenses incurred in respect of the warranty services, with a mark up of 5%. Therefore, no further adjustment is warranted - HELD THAT:- We notice that the coordinate bench of the Tribunal in assessee’s own case for the assessment year 2009-10 [2022 (3) TMI 1511 - ITAT BANGALORE] since the services related to warranty are being handled by a third party and the assessee is being used only as a medium, the TPO is not correct in charging a markup on this amount. Hence, the objection relating to markup on the warranty cost is upheld. The TPO cannot charge a markup on warranty amount as such services are not rendered by the assessee to its AE - Respectfully following the above decision we direct the TPO to re-examine the issue raised in ground no.5 afresh. It is ordered accordingly. TDS u/s 194H - Disallowance u/s 40(a)(ia) of rebates given to customers - assessee submitted before the AO that taxes were not liable to be deducted at source on the rebate given to distributors - AO was of the view that the transaction was between principal and agent and not principal to principal basis and therefore the assessee was obliged to deduct tax at source u/s. 194H - HELD THAT:- Respectfully following assessee’s own case for AY 2010-11 [2023 (3) TMI 809 - ITAT BANGALORE] we remit this issue to the AO for verification of the agreements which the assessee has entered into with the distributors in relation to discount/rebate transactions and decide the allowability after giving reasonable opportunity of being heard to the assessee. This ground is allowed for statistical purposes. Disallowance of deferred revenue - AO brought to tax the deferred revenue by holding that the Income-tax Act does not provide for the concept of deferred revenue - HELD THAT:- As relying on assessee own case for AY 2010-11 [2023 (3) TMI 809 - ITAT BANGALORE] held that when the services are rendered in a particular year, the revenue deferred to such year is recognized as revenue during such year (amortised) and offered to tax and therefore it is clear that the Assessee has been recognizing the revenue periodically on the basis of accrual and offered them to tax - claim of the assessee deserves to be accepted and the addition made by the AO as confirmed by the DRP is hereby deleted. This ground accordingly is allowed in favour of the assessee. Disallowance of fixtures and stores interiors expenses - expenditure was claimed as being revenue in nature and deductible under Section 37(1) of the Act for the reason that the said expenditure was incurred for maintaining uniformity in the franchisee stores and the Assessee neither owns nor derives any enduring benefit on such expenditure - HELD THAT:- We notice that the coordinate bench of the Tribunal in the case of M/s. NIKE India Pvt. Ltd. [2022 (7) TMI 1329 - ITAT BANGALORE] has considered a similar issue wherein AO has erroneously held that there was no termination clause in the agreement of lease and that the lease is permanent. We find that the lease is for a period of 4 years only and the assessee was to pay for lease rental as well interest-free security deposit for the lease and also that the assessee is required to incur the expenditure for interior and exterior works for carrying on the business as per 'brand' specifications - it cannot be said that the assessee is deriving an enduring benefit nor can it be said that any capital asset has been created in favour of the assessee. The quantum of expenditure cannot determine the nature of the expenditure. Therefore, we hold that this expenditure is revenue in nature. In assessee’s case, the expenses are incurred for the purpose of refurbishing the showroom which provides the customers an environment where these products are sold in Dell exclusive stores We hold the expenses incurred by the assessee towards fixture and stores interiors expenses is an allowable expenses and the claim made by the assessee is directed to be accepted. This ground is allowed in favour of the assessee.
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