2018 (5) TMI 1003 - AT - Income Tax

Addition on the issue of upward adjustment made by the AO/TPO in the arm s length price - Held that - Transfer pricing addition to this extent and the CIT(A) dealt with certain aspects of the determination of ALP, against which the assessee filed its separate appeal. This appeal was tagged with the assessee s cross-appeal for the instant year in which computation of ALP in respect of three international transactions, has been challenged. We are disposing off the assessee s appeal by a separate order. Thus, it becomes evident that the ground raised by the Revenue alleging the deletion of addition of ₹ 1.50 crore and odd does not arise out of the impugned order and is hereby dismissed as infructuous. Addition being stamp duty charges paid for leasehold premises - revenue or capital expenditure - Held that - It is noticed that the stamp duty was paid for a property taken on lease by the assessee. It is a one-time payment and has no relation with the term of lease. The mere fact that the lease will continue for three years, would not make one time revenue expenditure, capital. As the expenditure incurred by the assessee is in respect of taking of a property on hire, in our considered opinion, no fault can be found in the opinion of the CIT(A) deleting this addition. He has rightly referred to several judgments in the impugned order in deleting the addition under similar circumstances. Similar view has been taken by the Hon ble Bombay High Court in CIT VS. Cinecita (P.) Ltd. (1982 (2) TMI 58 - BOMBAY High Court). His view is, therefore, countenanced.

Summary

Issues:
1. Deletion of addition in arm's length price adjustment
2. Deletion of stamp duty charges addition for leasehold premises

Analysis:
1. The first issue pertains to the deletion of an addition in the arm's length price adjustment. The Revenue challenged the deletion of an upward adjustment made by the Assessing Officer/Transfer Pricing Officer (AO/TPO) of ?1,50,93,300. However, it was clarified that the CIT(A) did not delete this specific addition but dealt with aspects of determining the arm's length price (ALP). The Tribunal noted that the ground raised by the Revenue was incorrect and dismissed it as infructuous since the CIT(A) did not delete the mentioned amount. The appeal related to the computation of ALP in international transactions, which was addressed separately.

2. The second issue concerns the deletion of an addition of ?31,86,933 representing stamp duty charges paid for leasehold premises. The Assessing Officer had disallowed a portion of the stamp duty charges, considering it as an enduring benefit to the assessee due to the lease. However, the CIT(A) overturned this decision, leading to the Revenue's appeal before the Tribunal. Upon review, the Tribunal observed that the stamp duty payment was a one-time expense for a property taken on lease, not linked to the lease term. The Tribunal agreed with the CIT(A)'s reasoning, citing various judgments, including the decision of the Bombay High Court in CIT VS. Cinecita (P.) Ltd. (1982) 28 CTR 250 (Bom), to support the deletion of the addition. Consequently, the Tribunal dismissed the appeal, upholding the CIT(A)'s decision.

In conclusion, the Tribunal dismissed the Revenue's appeal concerning the deletion of additions in the arm's length price adjustment and stamp duty charges for leasehold premises, based on the reasoning provided in the judgment and relevant legal precedents.