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2020 (8) TMI 795 - AT - Income TaxTP Adjustment - adjustment on account of advertisement and marketing expenses (AMP) - HELD THAT - We have also gone through the orders of Tribunal for various earlier years. We have noted that the TPO while passing the order under section 92CA basically followed the order for AY 2014-15. We have further noted that in appeal for AY 2014-15 held that being of the considered view that as the revenue had failed to discharge the onus that was cast upon it as regards proving that there was any 'understanding' or an 'arrangement' or 'action in concert' as per which the assessee had agreed for incurring of AMP expenses for brand building of its AE, viz. L‟Oreal S.A., France, the TP adjustment of ₹ 354.73 crores in respect of AMP expenses cannot be sustained and is liable to be vacated. Adjustment on account of payment for packaging design, cost, training to Saloon customers and promotional goods - Admission of additional evidence - HELD THAT - Considering the decision of Tribunal for earlier year on alternate adjustment and the fact that the assessee has filed the aforesaid additional evidence for the first time before the Tribunal and the fact that we have already held that the additional evidence furnished by the assessee has direct relevance qua the grounds of appeal, which required consideration and verification at the end of AO, therefore, we remit the issue to the file of AO for consideration and decision on the issue afresh. AO/TPO is also directed to follow the order of Tribunal for AY 2014-15 as well. Needless to order that before deciding the issue, the AO shall grant opportunity to the assessee. Depreciation of goodwill - assessee submits that he acquired goodwill pursuant to acquisition of business from Rahul Healthcare, the valuation of business and goodwill cannot be questioned by revenue authorities - HELD THAT - A perusal of draft assessment order shows that the assessee failed to discharge the source of goodwill‟. The ld. DRP while considering the objections of the assessee though deleted disallowance of cost of acquisition of goodwill, however, the depreciation claimed on goodwill was upheld. In our view the AO as well as ld. DRP have not considered the aforesaid submission of the assessee that the assessee acquired not only tangible assets but also bundle of intangible assets collectively called goodwill, which includes various permits, employee, and contracts, though the assessee in Annexure-2 of its reply dated 21.12.2018 has specifically contended about its claim of goodwill‟ . Considering the facts that neither the AO nor the ld. DRP considered the aforesaid facts as placed before us, therefore, we remit these grounds of appeal to the file of AO to consider these issues afresh by considering the aforesaid submission of the assessee and the evidences and pass the order in accordance with law. The AO shall consider the decision of Hon‟ble Apex Court in Smifs Securities Ltd 2012 (8) TMI 713 - SUPREME COURT and Delhi High Court in Triune Energy Services (P.) Ltd. 2015 (11) TMI 1218 - DELHI HIGH COURT Income from other sources taxed twice - HELD THAT - We remit these grounds of appeal to the file of AO, with the direction to verify the fact and rectify the order if the same income of ₹ 1.98 Crore is taxed twice in the assessment order. The assessee also directed to explain the fact and provide necessary information/document to the assessing officer for passing the order in accordance with law. Deduction in respect of Education Cess - As per DR this ground of appeal is raised belatedly - HELD THAT -Considering the decision of Hon‟ble Bombay High Court in Sesa Goa 2020 (3) TMI 347 - BOMBAY HIGH COURT we admit the ground of appeal and direct the AO to consider the claim of assessee and allow appropriate relief in accordance with the decision of Hon‟ble Bombay High Court in Sesa Goa (supra) wherein it was held that Education Cess and Higher and Secondary Education Cess are liable for deduction in computing income chargeable under head of 'profits and gains of business or profession‟. In the result, this ground of appeal allowed for statistical purposegrant the credit of self-assessment tax and re-compute the interest under section 234A and 234B afresh in accordance with law. Needles to say that before re-computing the interest under section 234A and 234B, the AO shall grant opportunity of hearing to the assessee. Interest u/s 234A and 234B - HELD THAT - We direct the AO to grant the credit of self-assessment tax and re-compute the interest under section 234A and 234B afresh in accordance with law.
Issues Involved:
1. Adjustment on account of Advertisement, Marketing, and Promotion (AMP) expenses. 2. Alternate adjustment on account of payment for packaging design cost, training to salon customers, and promotional goods. 3. Disallowance of depreciation on goodwill. 4. Income from other sources considered twice. 5. Deduction in respect of Education Cess. 6. Short grant of self-assessment tax and incorrect levy of interest under sections 234A and 234B. 7. Initiation of penalty proceedings under section 271(1)(c). Detailed Analysis: 1. Adjustment on Account of Advertisement, Marketing, and Promotion (AMP) Expenses: The Tribunal noted that the Transfer Pricing Officer (TPO) made an addition of ?256.56 crores on account of AMP expenses, treating them as international transactions. The assessee argued that AMP expenses were incurred wholly and exclusively for its business in India, with no benefit passed to the Associated Enterprises (AEs). The Tribunal referenced its earlier decisions for Assessment Years (AY) 2008-09 to 2014-15, where it was held that AMP expenses do not constitute an international transaction under Section 92B of the Act. The Tribunal reiterated that without any 'understanding' or 'arrangement' for incurring AMP expenses for brand building of its AE, the provisions of Chapter-X could not be invoked. Consequently, the Tribunal allowed the grounds related to AMP expenses in favor of the assessee. 2. Alternate Adjustment on Account of Payment for Packaging Design Cost, Training to Salon Customers, and Promotional Goods: The Tribunal admitted additional evidence provided by the assessee, which had direct relevance to the issue. The lower authorities had previously made adjustments due to insufficient documentation. The Tribunal restored the issue to the file of the AO/TPO for fresh consideration, directing them to follow the Tribunal's order for AY 2014-15, which emphasized that the TPO should not apply the benefit test. The Tribunal instructed the AO/TPO to grant an opportunity to the assessee before making a decision. 3. Disallowance of Depreciation on Goodwill: The Tribunal considered the assessee's acquisition of business from Rahul Healthcare, which included tangible and intangible assets collectively termed as goodwill. The lower authorities had disallowed depreciation on goodwill, questioning its valuation and documentation. The Tribunal referenced the Supreme Court's decision in CIT Vs. Smifs Securities Ltd., which held that goodwill is an asset eligible for depreciation under Section 32. The Tribunal remitted the issue back to the AO for fresh consideration, instructing the AO to consider the assessee's submissions and relevant case laws, and to provide an opportunity for hearing. 4. Income from Other Sources Considered Twice: The Tribunal noted the assessee's claim that income from other sources amounting to ?1.89 crore was considered twice. The Tribunal restored the issue to the AO for verification and rectification if required, directing the AO to grant an opportunity to the assessee to explain and provide necessary information. 5. Deduction in Respect of Education Cess: The Tribunal admitted the ground related to the deduction of Education Cess, referencing the Bombay High Court's decision in Sesa Goa Ltd., which held that Education Cess is a deductible item. The Tribunal directed the AO to consider the claim and allow appropriate relief in accordance with the High Court's decision. 6. Short Grant of Self-Assessment Tax and Incorrect Levy of Interest Under Sections 234A and 234B: The Tribunal directed the AO to grant credit for the self-assessment tax paid by the assessee and to re-compute the interest under sections 234A and 234B. The AO was instructed to provide an opportunity for hearing to the assessee before re-computing the interest. 7. Initiation of Penalty Proceedings Under Section 271(1)(c): The Tribunal deemed the ground related to the initiation of penalty proceedings as premature and did not adjudicate on it. Conclusion: The appeal was partly allowed, with several issues remitted back to the AO for fresh consideration and verification, ensuring that the assessee is granted an opportunity for hearing before any final decision. The Tribunal's decisions were consistent with its earlier rulings and relevant case laws, providing a comprehensive resolution to the issues raised by the assessee.
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