2021 (8) TMI 1391 - AT - Income Tax

Rectification of mistake - mistake being apparent on the face of record - Ground 11 to 13 - Transfer pricing adjustment on account of payment of service fees to Cadbury Holding Limited - method followed by TPO for making adjustment was not a method prescribed under the Act. HELD THAT - We find that the related facts and circumstances of the issue raised by the assessee in the grounds no.11 to 13 of the present appeal is materially identical to the issue decided by us vide grounds no.8 to 11, in Para 14, 15 and 16, wherein we have allowed the issue while following the decision of the Co ordinate Bench of the Tribunal rendered in Kodak India Pvt. Ltd. 2013 (11) TMI 667 - ITAT MUMBAI . Since the issue raised in these grounds no.11 to 13, are identical to the issue decided by us in grounds no.8 to 11 vide Para 14, 15 and 16, as aforesaid, consistent with the view taken therein, we set aside the impugned order passed by the learned CIT(A) and allow these grounds. Corporate tax adjustment on account of alleged excess deduction u/s 80-IC of the Act - We notice that the Co ordinate Bench has accepted the method of allocation with regard to interest, VRS decrease in stock, direct expenses, direct marketing cost and selling distribution expenses, royalty and technical fees. The bench has remitted back to AO only the other overhead for verification. Now before us, it is brought to our notice that all operational and establishment expenses were uniformly allocated and there is no separate category of Other Overheads . Accordingly, we also deem it fit to remit only for limited purpose of verification of aspect of allocation method adopted to the file of the Assessing Officer. Accordingly, the ground raised by the assessee is allowed for statistical purposes. Misc. application is allowed.

Summary

Issues:
1. Rectification sought in the order dated 17th February 2021 for ITA no.2214/Mum./2014, for the assessment year 2009-10.
2. Transfer pricing adjustment on payment of service fees to Cadbury Holding Limited.
3. Corporate tax adjustment due to alleged excess deduction under section 80-IC of the Act.

Issue 1: Rectification sought in the order dated 17th February 2021
The assessee filed a misc. application seeking rectification in the order dated 17th February 2021 for ITA no.2214/Mum./2014, for the assessment year 2009-10. The prayers included adopting findings for Ground no.11 and 13 similar to Ground no.8 to 10 and rectifying the error of remanding the matter back to the Assessing Officer for verification of "other overheads" under section 80-IC of the Act. The Tribunal found the mistake apparent on the record and proceeded to rectify the errors as requested by the assessee.

Issue 2: Transfer pricing adjustment on payment of service fees to Cadbury Holding Limited
Regarding the transfer pricing adjustment on payment of service fees to Cadbury Holding Limited, the Tribunal noted that the facts and issues in relation to services availed from Cadbury Schweppes Asia Pacific Pte Limited (CSAPL) and Cadbury Holding Limited (CHL) were similar. The Tribunal had allowed the payment of service fees to CSAPL in a previous order for AY 2009-10, stating that the TPO's method for making adjustments was not prescribed under the Act. As both transactions were benchmarked using TNMM, the Tribunal decided to apply the findings for CSAPL to CHL as well. The Tribunal rectified the mistake and allowed Grounds no.11 to 13 based on the consistent view taken in the earlier decision.

Issue 3: Corporate tax adjustment under section 80-IC of the Act
In the case of alleged excess deduction under section 80-IC of the Act, the Tribunal considered the reduction of the deduction in respect of the assessee's unit at Baddi, Himachal Pradesh. The AO had reduced the deduction by altering the allocation of certain items to the unit, which was similar to a reduction made in a previous year. The Tribunal had remitted the matter for verification of "other overheads" in the earlier year. The assessee argued that in the current year, all operational and establishment expenses were uniformly allocated, and there was no separate category of "other overheads" requiring verification. The Tribunal agreed with the assessee's submission and allowed Ground 28 for statistical purposes, noting that if no other overhead allocation was found, the issue would be decided in favor of the assessee.

In conclusion, the Tribunal allowed the misc. application, made necessary corrections in the order, and pronounced the order in the open court on 31.08.2021.