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2020 (1) TMI 861 - AT - Income TaxTP Adjustment - AMP expenses addition - international transaction - assessee complains that there is no material on record to support the conclusion of the Ld. TPO that the transaction of incurring the AMP expenses amounts to international transaction in terms of section 92B and therefore, such adjustment is not tenable - HELD THAT - These international transactions are identical all through the years and for the assessment year 2008-09 this issue was dealt with by the Hon ble jurisdictional High Court and by way of the decision reported in 2015 (12) TMI 1188 - DELHI HIGH COURT Hon ble High Court held that there does not exist any arrangement or undertaking between the assessee and the associated enterprises in connection with incurring of the AMP expenses. Thus we hold that the transfer pricing adjustment cannot be sustained and has to be deleted we accordingly allow grounds No. 3 to 3.21. Alternative disallowance on account of expenses incurred for AMP - Case of the assessee is that for promotion of the sales of products produced/traded and marketed in India, the assessee had incurred such an expenditure; that the said expenditure was incurred at the local level to ensure the availability and visibility of the products - HELD THAT - As gone through the order of the Hon ble High Court wherein it was held that merely because there is an incidental benefit to Whirlpool USA, it cannot be said that the AMP expenses incurred by the assessee were for promoting the brand of Whirlpool USA. It was further held that the fact that somebody other than the assessee is also benefited by the expenditure, should not come in the way of an expenditure being allowed by way of deduction under section 10 (2) (xv) of the Income Tax Act, 1922 and therefore the Hon ble High Court held the issue in favour of the assessee. We also find from the orders in assessee s own case for assessment years 2009-10 to 2014-15 that the Tribunal followed the above decision of the Hon ble High Court. Disallowance of R D expenses, addition on the basis of Form 26AS and disallowance on the basis of an AIR information - HELD THAT - DRP directed the Assessing Officer to allow the R D expenditure not eligible for weighted deduction under section 35(2AB) as deduction u/s 37. We do not find anything illegal or irregular in such a course adopted by the Ld. DRP for the assessment year 2014-15 and we deem it just and proper to extend a similar treatment to the case of the assessee for this year also. We therefore direct the Assessing Officer to allow the deduction under section 37 (1) of the Act of the Act. Addition on the basis of form 26AS - Tribunal in assessee s own case for assessment year 2010-11 to 2014-15 we find that on the assessee reporting to have possessing all the relevant information to reconcile the difference between the income recorded in the books of accounts vis a vis form 26AS, the Tribunal took a view to direct the Assessing Officer to tally the data base of Revenue in the light of details to be filed by the assessee. In consonance with the view taken by the Tribunal for the earlier assessment years on this issue, we set aside the issue to the file of the Assessing Officer for a similar exercise and the assessee is directed to produce the relevant documents before the Assessing Officer. Ground No. 6 is therefore, allowed for statistical purpose. Addition on the basis of AIR information - AO held that the assessee has not been able to provide the supporting documents to establish the genuineness of the transaction and therefore the said sum is liable to be added to the income of the assessee - As submitted on behalf of the assessee that the assessee had located the relevant supporting documents and when a similar question had arisen in the earlier assessment years from 2010-11 to 2012-13, the Tribunal set aside the matter to the file of the Assessing Officer for verification of information/documents to be submitted by the assessee and to take a view. This factual statement by the Ld. AR is not controverted by the Ld. DR. We therefore, taking a similar view set aside the issue to the file of thelearned Assessing Officer with a direction to the assessee to produce the relevant information/documents before the Assessing Officer and the Assessing Officer to verify the same and decide the issue afresh Addition being the expenditure on account of the expenditure amount paid to the employees of the assessee at the time of marriage of their daughters - HELD THAT - We deem it just and necessary that the allowance of this expenditure in the earlier years needs verification vis a vis the details furnished by the assessee. We therefore set aside the issue to the file of the learned Assessing Officer to carry out such an exercise of verification. Disallowance towards foreign tax credit - HELD THAT - Set aside this issue to the file of the Assessing Officer with a direction to the assessee to produce the requisite certificate before the learned Assessing Officer, on which the learned Assessing Officer will take a fresh view after verification.
Issues Involved:
1. Transfer Pricing Adjustment of ?1,17,75,930/- 2. Disallowance of AMP Expenses of ?67,81,91,285/- 3. Disallowance of R&D Expenses of ?8,21,000/- 4. Addition based on Form 26AS of ?5,14,537/- 5. Disallowance based on AIR Information of ?15,37,130/- 6. Disallowance of Insurance Premium Payment of ?18,640/- 7. Disallowance of Daughter Marriage Fund of ?35 Lacs 8. Disallowance of Foreign Tax Credit of ?98,13,926/- Detailed Analysis: 1. Transfer Pricing Adjustment of ?1,17,75,930/-: The assessee argued that the Transfer Pricing Officer (TPO) did not dispute the benchmarking analysis for international transactions and accepted them at arm’s length price. The TPO, however, conducted a benchmarking analysis of the Advertisement, Marketing, and Sales Promotion (AMP) expenses incurred by the assessee for products branded "Whirlpool." The assessee contended that these expenses were incurred independently without any reference to overseas Associated Enterprises (AEs) and were for local market needs. The Tribunal noted that similar issues were previously resolved in favor of the assessee by the High Court and Tribunal for assessment years 2008-09 to 2014-15. Thus, the transfer pricing adjustment was deleted. 2. Disallowance of AMP Expenses of ?67,81,91,285/-: The assessee claimed that the AMP expenses were incurred to promote sales of products in India and were not for promoting the brand of the AEs. The TPO, however, held that these expenses promoted the AE’s brand and were not wholly and exclusively for the assessee’s business. The Tribunal referred to the High Court’s decision for the assessment year 2008-09, which held that incidental benefits to Whirlpool USA did not imply AMP expenses were for promoting the AE’s brand. Following this, the Tribunal allowed the grounds in favor of the assessee. 3. Disallowance of R&D Expenses of ?8,21,000/-: The assessee incurred R&D expenses and claimed a 200% deduction under section 35(2AB) of the Act. The Assessing Officer disallowed ?16,42,000/- (200% of ?8,21,000/-) not approved by the Department of Science and Industrial Research (DSIR). The assessee argued that even if the weighted deduction was not accepted, the actual expenditure should be allowed under section 37(1) of the Act. The Tribunal directed the Assessing Officer to allow the deduction under section 37(1). 4. Addition based on Form 26AS of ?5,14,537/-: The addition was based on differences between the income recorded in the books and Form 26AS. The assessee sought reconciliation, similar to previous years (2010-11 to 2014-15), where the Tribunal directed the Assessing Officer to verify the data. The Tribunal set aside the issue to the Assessing Officer for reconciliation. 5. Disallowance based on AIR Information of ?15,37,130/-: The Assessing Officer disallowed the amount due to lack of supporting documents. The assessee located the relevant documents and requested verification, similar to previous years (2010-11 to 2012-13). The Tribunal set aside the issue to the Assessing Officer for verification. 6. Disallowance of Insurance Premium Payment of ?18,640/-: The Assessing Officer disallowed the amount based on AIR report discrepancies. The assessee provided additional evidence under rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963, showing an error in data uploading. The Tribunal admitted the additional evidence and set aside the issue to the Assessing Officer for verification. 7. Disallowance of Daughter Marriage Fund of ?35 Lacs: The assessee argued that the provision for employees’ daughter marriage fund was a longstanding practice and was allowed in previous years. The Assessing Officer disallowed it, stating it was not for business purposes. The Tribunal directed the Assessing Officer to verify the details and allowance in previous years. 8. Disallowance of Foreign Tax Credit of ?98,13,926/-: The assessee claimed foreign tax credit but could not furnish the certificate during assessment. The Tribunal noted that in the previous year (2013-14), the issue was set aside for verification. The Tribunal directed the Assessing Officer to verify the certificate and take a fresh view. Conclusion: The appeal was allowed in part for statistical purposes, with several issues set aside to the Assessing Officer for verification and fresh consideration. The Tribunal followed consistent views from previous years and allowed additional evidence where necessary.
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