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2018 (4) TMI 1735 - AT - Income TaxTP Adjustment - AMP expenses addition - HELD THAT - The issue is covered in favour of the assessee as per the Hon ble Delhi High Court decision in the assessee s own case 2015 (12) TMI 1333 - DELHI HIGH COURT held it did not give rise to a dispute that there is no international transaction involving the Assessee therein and its AEs. In fact each of the Assessees were receiving subsidies/subventions from their respective AEs. The second factor taken note of by the Court is that as BLT was invalidated as a means of determining the existence of an international transaction the onus was on the Revenue to show the existence of an international transaction. In the present case the existence of such a transaction was ascertained only by applying the BLT. For the above reasons the Court is satisfied that the case of the present Appellant would not stand covered by the decision in Sony Ericsson 2015 (3) TMI 580 - DELHI HIGH COURT Question (i) is accordingly answered in favour of the Assessee and against the Revenue. Transfer pricing adjustment on account of royalty paid on sales to associated enterprises - HELD THAT - As decided own case 2017 (5) TMI 469 - DELHI HIGH COURT Referring to comparative clauses based on the agreement in the case of the assessee and its sister concern were pari materia and-consequently the payments were revenue in nature. Disallowance of royalty and technical guidance fee alternatively made under section 37(1) - HELD THAT - Respectfully following the decision of the Hon ble high court in assessee s own case the disallowance under section 37 (1) on account of royalty and technical guidance fees cannot be upheld. Therefore ground of the appeal of the assessee is allowed accordingly. Double disallowance of Royalty - payment made by the assessee on account of royalty has already been disallowed by the TPO - HELD THAT - As per the submissions of the Ld. AR since the payment of royalty to the extent of 76, 96, 000 has already been disallowed in the transfer pricing order further disallowance to that extent has resulted in double disallowance of the same amount which is impermissible under the provisions of the Act. Since the Royalty issue is already decided in ealier Ground this contention of the assessee is accepted. Disallowance of provision for service coupons - HELD THAT - In the case of the appellant the provision of after sales services has also been made based on the past business history of the appellant and therefore it cannot be said that it is made on arbitrary basis. Further the contention of the Id. AO is not correct stating that assessee claims excess expenditure in one year because in the year of sales itself assessee claims the expenditure related to sales and when the liability ceases on completion of time same is reversed in the profit and loss account and offered as income. Therefore we are of the view that claim of the assessee for deduction of after sales service expenditure is in accordance with Accounting standard 29 issued by the Ministry of corporate affairs which is mandatorily to be followed by the assessee further quantification of such expenditure has been made on the basis of the past history. Disallowance of provision or warranty - HELD THAT - The warranty provisons were disallowed in subsequent years for 1997- 98 1998-99 2001-02 which was deleted by the Tribunal vide order dated 31/7/2006 since no disallowance of provisions for warranty was made in any of the preceding year and the said provision was consistently allowed by the Revenue due to the decision of the Tribunal. This issue is also covered in favour of the assessee. Ground Nos. 6 to 6.2 is allowed. Short credit of advance tax - HELD THAT - It can be seen that short credit of advance tax was not at all verified by the Assessing Officer. Therefore it will be appropriate to remand this issue to the file of the Assessing Officer for further verification. Needless to say the assessee be given full opportunity of hearing by following principals of natural justice. Ground is partly allowed for statistical purpose.
Issues Involved:
1. Transfer Pricing Issues 2. Advertisement, Marketing, and Sales Promotion Expenses (AMP Expenses) 3. Royalty in respect of exports made to associated enterprises 4. Corporate Tax Issues: Disallowance of Royalty and Technical Guidance Fees 5. Disallowance of Provision for Service Coupons 6. Disallowance of Provision for Warranty 7. Short credit of advance tax 8. Short credit of tax deducted at source (TDS) 9. Levy of interest under section 234B of the Income Tax Act Detailed Analysis: Transfer Pricing Issues: The primary issue pertains to the addition of ?11,34,76,600 to the income of the appellant due to the alleged difference in the arm’s length price of international transactions. The Tribunal found that the adjustment made by the Transfer Pricing Officer (TPO) was unwarranted. The Dispute Resolution Panel (DRP) had directed the TPO to make adjustments applying the Cost Plus Method, following the order for AY 2011-12. However, this was contested by the appellant, citing that similar adjustments were deleted in previous years by the Tribunal and upheld by the Delhi High Court. The Tribunal allowed the grounds in favor of the appellant, holding that the Revenue had not demonstrated the existence of an international transaction involving AMP expenses. Advertisement, Marketing, and Sales Promotion Expenses (AMP Expenses): The DRP had directed the TPO to make adjustments for AMP expenses, which was contested by the appellant. The Tribunal noted that the issue was covered in favor of the appellant by the Delhi High Court's decision for AY 2008-09, which held that the appellant was incurring AMP expenses for its own benefit and not at the behest of the associated enterprise (AE). The Tribunal allowed the grounds in favor of the appellant, following the precedent set by the Delhi High Court and the Tribunal's own decisions in previous years. Royalty in respect of exports made to associated enterprises: The TPO had determined the arm’s length price of the royalty payment for exports to AE at NIL, which was contested by the appellant. The Tribunal found that this issue was covered in favor of the appellant by the orders of the Tribunal for AY 2007-08 to AY 2011-12, which were not challenged by the Revenue before the High Court. The Tribunal allowed the grounds in favor of the appellant, following the precedent set by the Tribunal and the High Court's decision for AY 2008-09. Corporate Tax Issues: Disallowance of Royalty and Technical Guidance Fees: The assessing officer had disallowed royalty and technical guidance fees as capital expenditure, allowing depreciation instead. The appellant contested this, arguing that the expenditure had been allowed as revenue deduction in previous years. The Tribunal noted that the issue was covered in favor of the appellant by the Tribunal's orders for AY 2007-08 to AY 2011-12 and the Delhi High Court's decision in the appellant's own case for AY 2008-09. The Tribunal allowed the grounds in favor of the appellant, following the precedent set by the Tribunal and the High Court. Disallowance of Provision for Service Coupons: The assessing officer had disallowed the provision for service coupons, which was contested by the appellant. The Tribunal found that this issue was covered in favor of the appellant by the Tribunal's order for AY 2011-12, which held that such provisions were allowable as deductions under section 37(1) of the Income Tax Act. The Tribunal allowed the grounds in favor of the appellant. Disallowance of Provision for Warranty: The assessing officer had disallowed the provision for warranty, which was contested by the appellant. The Tribunal found that this issue was covered in favor of the appellant by the Tribunal's orders for previous years, which had treated the provision for warranty expenses as eligible business deduction. The Tribunal allowed the grounds in favor of the appellant. Short credit of advance tax: The appellant claimed short credit of advance tax to the extent of ?2,27,300. The Tribunal remanded this issue to the assessing officer for verification, directing that the appellant be given full opportunity of hearing. Short credit of tax deducted at source (TDS): The appellant claimed short credit of TDS to the extent of ?16,889. The Tribunal remanded this issue to the assessing officer for verification, directing that the appellant be given full opportunity of hearing. Levy of interest under section 234B of the Income Tax Act: The appellant contested the levy of interest under section 234B. The Tribunal held that this ground was consequential and did not adjudicate it at this juncture. Conclusion: The appeal of the appellant was partly allowed for statistical purposes, with several grounds being decided in favor of the appellant based on precedents set by the Tribunal and the Delhi High Court in the appellant's own case and similar cases.
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