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2022 (11) TMI 363 - ITAT DELHITP Adjustment - transaction of payment of royalty - HELD THAT:- As in not in dispute that Sony Corp has invested significant amount and efforts in developing, manufacturing intangibles and for which it should be suitably remunerated and since the assessee has received license to use these value intangibles during the course of its operations in India, the assessee was duty bound to pay royalty for the simple reason that Sony Corp would not allow any third party to use its intangible properties created through large amount of investment without receiving any sort of consideration. It is also not in dispute that the assessee has licensed technology and trade mark from Sony Corp and further licensed them to OEMs and the OEMs manufacture these goods based on technology sub licensed by the assessee and sells them back to the assessee for which the assessee pays royalty at an agreed percentage of net selling price and this payment of royalty by the assessee instead of OEMs is due to commercial necessity and payment of royalty transaction is already bench marked under TNMM. Considering the facts of the case in totality, we do not find any merit in the TP adjustment in respect of transaction of payment of royalty and accordingly direct the Assessing Officer to delete the adjustment - This ground with all its sub-grounds is allowed and accordingly, grievances raised vide Ground Nos. 1 to 40.6 become otiose. TP adjustment in respect of transaction of provision of Advisory Services - We find force in the concession made by the ld. counsel for the assessee and the ld. DR. We find that the DRP has, in fact, summarily rejected the contentions/objections of the assessee without giving any detailed findings on facts. Therefore, we restore this issue to the file of the DRP. The DRP is directed to decide the objections raised by the assessee by a detailed and speaking order after affording reasonable and adequate opportunity of being heard to the assessee. Accordingly, Ground Nos. 41 and 42 with all its subgrounds are allowed for statistical purposes. TP adjustment in respect of outstanding receivables - We find that the objections of the assessee have been suitably addressed by the DRP by extending credit period from 30 days to 60 days, netting off payables and charging of interest of net receivables and acceptance of LIBOR instead of SBI base rate. We, therefore, do not find any reason to interfere with the findings of the DRP. AO is directed to follow the directions of the DRP in letter and spirit and apply LIBOR rate without any further addition. Grounds Nos. 43 to 46 are accordingly decided as per our above directions. Disallowance of stock valuation loss - As we have to state that the observations/comments by the Assessing Officer on application of Accounting Standard – 2 is without any merits and, in fact, uncalled for. Secondly, it is an undisputed fact that the assessee has been consistently following the same method of valuation of closing stock which was cost or net realizable value, whichever is lower. Thus we direct the Assessing Officer to delete the impugned addition/disallowance. Disallowance of expenses on corporate social responsibility u/s 115JB of the Act by treating it as apportion of profits - None of the clauses above provides that CSR expenses have to be added to book profit. Except for the wild imagination of the Assessing Officer by no stretch of imagination, it can be said expenditure on CSR expenses is a transfer to/from reserve. Hon'ble Apex Court in Apollo Tyers [2002 (5) TMI 5 - SUPREME COURT] have clearly laid down that the AO or assessee, none can tinker with book profit disclosed in audited account. It is not the case that the accounts have not been prepared as per accepted accounting principle. Once the accounts have been prepared in accordance with standards in this regard, this tinkering by the Assessing Officer has no sanction of law. We have no hesitation in setting aside the addition to book profit in this regard. MAT computation u/s 115JB - As provision for warrantee is an ascertained liability, therefore, we direct the Assessing Officer to consider it as an allowable deduction in computing the book profit u/s 115JB. Non grant of deduction u/s 80G - We direct the Assessing Officer to consider the same as per the provisions of law. The assessee is directed to furnish necessary evidences in support of its claim and the Assessing Officer is directed to examine the same and decide the issue after affording reasonable and adequate opportunity of being heard to the assessee. This issue is allowed for statistical purposes.
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