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2018 (3) TMI 211 - AT - Income TaxDetermination of Arm s Length Price (ALP) for Management Support Services - Held that - Determination of ALP for Management Support Services at Rs. NIL is unwarranted and accordingly the upward adjustment made by the ld TPO in the sum of 339, 17, 83, 606/- is deleted. Determination of Arm s Length Price (ALP) for AMP expenses - Held that - We find that the ld TPO ld AO and the ld DRP had categorically accepted the basic fact that the assessee is a manufacturer and also engaged in distribution of products. While this is so we are not able to comprehend the argument advanced by the ld DR that assessee is only a distributor and thereby the decision of Sony Ericsson would apply to the case. We find that since the assessee is a manufacturer cum distributor as accepted by the lower authorities the decision rendered in Maruti Suzuki (2015 (12) TMI 634 - DELHI HIGH COURT) would be applicable to the assessee s case since the contention of the ld DR that assessee is only distributor is not emanating from the records of the lower authorities. We find that the issue under dispute before us is squarely addressed by this tribunal in assessee s own case for the Asst Year 2011-12 thus the upward adjustment made by the ld TPO and upheld by the ld DRP in the sum of 1, 03, 59, 000/- is hereby directed to be deleted. Lease rental paid for motor car taken on finance lease - Held that - We find that the issue under dispute is covered by the decision of the Hon ble Supreme Court in the case of ICDS Ltd. (2013 (1) TMI 344 - SUPREME COURT) in favour of the assessee Depreciation on moulds - Held that - AR stated that the moulds were owned by the assessee and used for the purpose of its business. Further the moulds were exclusively used in the plastic factory by the job workers/co-makers to whom moulds were given by the assessee to be used in the plastic factory under its control and supervision and prayed that depreciation @ 30% would be eligible on the said moulds. We find that this issue has been considered by this tribunal in assessee s own case for the Asst Year 2011-12 as held AR has just verbally submitted that in most of the products which appears to be true. But as such no documentary evidence was filed in support of the assessee s claim. However in the interest of justice and fair play we are inclines to restore this matter to the file of AO for fresh adjudication in accordance with the law. espectfully following the aforesaid judicial precedent we restore this matter to the file of the ld AO for fresh adjudication Non grant of deduction u/s 80G - Held that - We find that there is no discussion in the assessment order regarding this and hence we deem it fit and appropriate to restore this issue to the file of the ld AO to verify the claim of deduction u/s 80G of the Act with the receipts and other relevant documents to be produced by the assessee before the ld AO. Accordingly the Ground No. 9 raised by the assessee is allowed for statistical purposes. Short deduction of tds - Held that - Since the issue involves only verification of certificates/Form 26AS as the case may be we hereby direct the ld AO to kindly verify the necessary evidences in this regard and grant TDS credit if eligible to the assessee
Issues Involved:
1. Determination of Arm’s Length Price (ALP) for Management Support Services (MSSA) 2. Determination of ALP for Advertisement and Marketing Promotion (AMP) Expenses 3. Disallowance of Lease Rentals 4. Depreciation on Moulds 5. Non-Grant of Deduction u/s 80G 6. Short Credit of Tax Deducted at Source 7. Levy of Interest u/s 234B, 234D, and 244A 8. Initiation of Penalty u/s 271(1)(c) Detailed Analysis: 1. Determination of Arm’s Length Price (ALP) for Management Support Services (MSSA) The assessee, part of the Royal Philips Organisation, engaged in various international transactions with its associated enterprises (AEs), including Management Support Services (MSSA). The Transfer Pricing Officer (TPO) applied the Comparable Uncontrolled Price (CUP) Method, questioning the economic and commercial value of the services received and the benefits derived. The TPO concluded that the services rendered were in the nature of stewardship activities and thus determined the ALP to be NIL, resulting in an upward adjustment of ?339,17,83,606/-. The Dispute Resolution Panel (DRP) upheld the TPO’s decision, emphasizing the necessity to prove tangible and direct benefits derived from such services. The DRP referenced judicial precedents such as CIT v. EKL Appliances and Bombardier Transportation India (P.) Ltd., which emphasized the need for a benefit test. Upon appeal, the Tribunal noted that similar issues were resolved in favor of the assessee in previous assessment years (2009-10, 2010-11, and 2011-12). The Tribunal observed that the assessee had provided substantial evidence of benefits derived from MSSA and noted the principle of consistency. Consequently, the Tribunal deleted the upward adjustment made by the TPO. 2. Determination of ALP for Advertisement and Marketing Promotion (AMP) Expenses The assessee incurred AMP expenses to promote its sales in India. The TPO considered these expenses as services rendered to the AE for promoting the brand and categorized them as an international transaction, applying the Bright Line Test (BLT), resulting in an upward adjustment of ?1,04,03,155/-. The DRP upheld the TPO’s decision, referencing the Sony Ericsson case and BEPS guidelines, which support the imposition of a mark-up on AMP expenses. However, the Tribunal, referencing its earlier decision in the assessee’s case for AY 2011-12 and the Delhi High Court’s ruling in Maruti Suzuki India Ltd., held that AMP expenses could not be considered an international transaction. The Tribunal deleted the upward adjustment made by the TPO. 3. Disallowance of Lease Rentals The assessee claimed lease rentals for motor cars taken on finance lease, which the AO treated as capital expenditure based on earlier tribunal decisions. The DRP upheld this view. However, the Tribunal, referencing the Supreme Court’s decision in I.C.D.S. Ltd. v. CIT, allowed the deduction of lease rentals, recognizing the assessee as entitled to claim such deductions. 4. Depreciation on Moulds The AO disallowed excess depreciation claimed on moulds, restricting it to 15% instead of 30%, arguing that the assessee was not engaged in rubber and plastic industries. The DRP upheld this view. The Tribunal, referencing its decision in the assessee’s case for AY 2011-12, restored the matter to the AO for fresh adjudication, allowing the assessee to produce necessary documents to support its claim. 5. Non-Grant of Deduction u/s 80G The AO did not grant the deduction claimed u/s 80G. The Tribunal restored the issue to the AO for verification of the claim with relevant documents to be produced by the assessee. 6. Short Credit of Tax Deducted at Source The AO granted less credit for TDS than claimed by the assessee. The Tribunal directed the AO to verify the necessary evidences and grant the correct TDS credit. 7. Levy of Interest u/s 234B, 234D, and 244A The issues regarding the levy of interest u/s 234B, 234D, and 244A were deemed consequential and did not require specific adjudication. 8. Initiation of Penalty u/s 271(1)(c) The Tribunal noted that the issue of penalty initiation would be decided afresh by the AO while giving effect to the Tribunal’s order. Conclusion: The Tribunal allowed the appeal of the assessee for statistical purposes, directing fresh adjudication on certain issues and deleting the adjustments made by the TPO concerning MSSA and AMP expenses. The Tribunal emphasized the principle of consistency and the necessity of proving tangible benefits derived from intra-group services.
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