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2022 (10) TMI 219 - AT - Income TaxRoyalty receipt - Quantification of royalty adjustment - HELD THAT - We find that on the same agreement ITAT in earlier years have given a finding and has directed the rates at which royalty should be charged. Now ld. DR for the Revenue is finding fault in the aforesaid order and arguing that the same need not to be followed. However we are of the considered opinion that order of the ITAT in assessee s own case in earlier years need to be followed for the principles of judicial discipline. It is also not the case that Hon ble Delhi High Court has reversed the orders of ITAT We direct that in case of Dabur Nepal (P) Ltd. royalty is quantified at nil the case of Dabur International UAE royalty is quantified at 0.75% of FOB sales and in case of Asian Consumer Care Ltd. Bangladesh royalty is quantified at 0.75% of FOB sales. Corporate guarantee charges - TPO determined arm s length price of providing corporate guarantee @ 75% of interest - HELD THAT - We find that in assessee s own case ITAT has for three successive years given orders which have not been reversed by the Hon ble jurisdictional High Court hence we are not convinced with the reasoning of ld. DR for the Revenue to depart from the aforesaid order of ITAT in assessee s own case - Since the above order of ITAT is in assessee s own case and we are not convinced with the reasoning of the ld. DR to depart from the same we follow the order of aforesaid coordinate Bench of the Tribunal and direct accordingly. Interest on loan to AE - TPO adopted PLR 3% and imputed rate of interest @ 14.88% - HELD THAT - We find that in assessee s own case ITAT has upheld the deletion by the ld. CIT (A). ITAT has duly found that the same was in accordance with the Hon ble Delhi High Court decision in the case of CIT vs. Cotton Naturals (I) Pvt. Ltd. 2015 (3) TMI 1031 - DELHI HIGH COURT ITAT has also referred to other decisions. In this view of the matter we are not convinced with the reasoning given by the ld. DR for the Revenue to distinguish the ITAT decision in assessee s own case. Accordingly we uphold the order of ld. CIT (A) on this issue and deletion of the addition. Interest on receivables - TPO held that interest rate of 14.88% would be the arm s length interest for the receivables form the AE - CIT (A) gave relief to the assessee on a finding that assessee does not charge interest from its unrelated parties also and that the net margin of the assessee in these transactions with AEs is significantly higher - HELD THAT - Upon careful consideration we are not in agreement with the submission of ld. DR. It is no doubt that after the amendment receivables are an international transaction which needs to be benchmarked separately but as rightly pointed out by the ld. CIT (A) above that the margin of the assessee both in FMCG and non-FMCG segment is much higher than the comparables. Hence since benchmarking under both the segments has been accepted in the transfer pricing we do not find any infirmity in the order of ld. CIT (A) that there is no reason to separately benchmark receivables. Deduction u/s 80IB and 80IC by further allocation of Head Office expenses to eligible units - HELD THAT - As decided in own case 2021 (2) TMI 1250 - ITAT DELHI units are eligible for the deduction u/s 80IB/80IC which is identical to that of earlier years i.e. 2007-08 and 2009-10. Hence the CIT(A) has rightly allowed this deduction. It is pertinent to note that similar allocation of expenses and depreciation made by the Assessing Officer in A.Y. 2008-09 was also deleted by the Tribunal. Belated payment of employees contribution of ESI under section 36(1)(va) r.w.s. 2(24)(x) - HELD THAT - This issue is now covered in favour of the assessee even after the amendment as held by ITAT Delhi Benches. ITAT Delhi in the case of M/s. Express Roadway 2021 (10) TMI 514 - ITAT DELHI has followed Hon ble Delhi High Court decision in the case of CIT vs. AIMIL Ltd. 2009 (12) TMI 38 - DELHI HIGH COURT and SPL Industries 2010 (7) TMI 81 - DELHI HIGH COURT for the proposition that such additions are not sustainable if the impugned payments are done upto the date of filing of return of income for the concerned assessment year. Hence we uphold the order of ld. CIT (A). Disallowance u/s 14A read with Rule 8D - HELD THAT - We find that the facts in the present case are also not in dispute that assessee has not earned any exempt income. In this view of the matter disallowance u/s 14A read with Rule 8D is not permissible hence this ground of Revenue s appeal stands dismissed. Additional claim of the assessee on account of refund of excise duty on capital subsidy and claim of expenses on stock option scheme on the reasoning that the same was not claimed by filing revised return of income - HELD THAT - We note that ITAT in assessee s own case for AYs 2006-07 2017 (4) TMI 1521 - ITAT DELHI AY 2007-08-2008-09 2021 (2) TMI 1250 - ITAT DELHI to 2009-10 2022 (1) TMI 1145 - ITAT DELHI had admitted the claim and remanded the matter to the file of AO for adjudication. Moreover in Goetze India Ltd. case 2006 (3) TMI 75 - SUPREME COURT has expounded that decision in that case would not impinge upon the power of the ITAT in admitting the claims otherwise than by revising the return of income. Since consistently ITAT in assessee s own case had admitted such claims and remanded the file to AO to adjudicate the same as per law we follow the same and admit these two claims - Accordingly this issue is remitted to the file of AO to adjudicate as per law.
Issues Involved:
1. Deletion of additions made by the AO on account of interest on corporate guarantee, royalty, interest on loan advanced, interest on bills receivable, deduction under sections 80IB and 80IC, PF, ESI & EPS contribution, and notional expenditure on exempted income. 2. Reciprocal arrangement and Transfer Pricing Analysis regarding brand royalty and corporate guarantee. 3. Non-admission of additional grounds of appeal by CIT (A) despite remand report. Detailed Analysis: 1. Royalty (Grounds No. 1 to 5 of assessee's appeal and Ground No. 2 of Revenue's appeal): The AO noted that the assessee did not receive any royalty from its Associated Enterprises (AEs) during the year, despite historical payments. The AO computed royalty based on sales to the AEs. The CIT (A) referenced ITAT's earlier decisions, directing the AO/TPO to delete or adjust the royalty charges as per the established rates: nil for Dabur Nepal (P) Ltd., 0.75% for Dabur International UAE, and 0.75% for Asian Consumer Care Ltd. The ITAT upheld this approach, emphasizing judicial discipline and consistency with previous rulings. 2. Corporate Guarantee Charges (Grounds No. 6 to 8 of assessee's appeal and Ground No. 1 of Revenue's appeal): The TPO determined the arm's length price for corporate guarantees at varying rates. The CIT (A) adjusted these rates to 0.50% for all guarantees. The ITAT, following its earlier decisions, directed rates of 0.30% for guarantees to HSBC Bank Egypt SAE, NSGB Bank Egypt, and Royal Bank of Scotland, UAE, aligning with previous years' rulings. 3. Loan to AE (Ground No. 3 of Revenue's appeal): The TPO adopted an interest rate of 14.88% for a loan to Dermoviva Skin Essentials, USA. The CIT (A) referred to the Hon'ble jurisdictional High Court decision in CIT vs. Cotton Naturals (I) Pvt. Ltd., directing the use of LIBOR for benchmarking. The ITAT upheld the CIT (A)'s decision, emphasizing consistency with the High Court's ruling and previous ITAT decisions. 4. Receivables (Ground No. 4 of Revenue's appeal): The TPO applied a 14.88% interest rate for receivables from the AE. The CIT (A) noted that the assessee did not charge interest from unrelated parties and had higher net margins than comparables, thus no separate benchmarking was required. The ITAT upheld this approach, agreeing with the CIT (A)'s reasoning. 5. Deduction under Sections 80IB and 80IC (Ground No. 5 of Revenue's appeal): The AO restricted deductions by reallocating Head Office expenses. The CIT (A) granted relief, noting that similar adjustments were consistently deleted in previous years. The ITAT upheld the CIT (A)'s decision, referencing its earlier rulings. 6. PF, ESI & EPS Contribution (Ground No. 6 of Revenue's appeal): The CIT (A) deleted the addition for belated payments, referencing ITAT Delhi Benches' decisions that such payments are allowable if made before filing the return. The ITAT upheld this deletion. 7. Notional Expenditure on Exempted Income (Ground No. 7 of Revenue's appeal): The AO made a disallowance under section 14A read with Rule 8D. The CIT (A) deleted this addition, following ITAT's previous decisions. The ITAT upheld the CIT (A)'s deletion, noting the absence of exempt income. 8. Non-Admission of Additional Grounds (Grounds No. 11 & 12 of assessee's appeal): The CIT (A) did not admit additional claims for excise duty refund and stock option scheme expenses, citing the need for a revised return. The ITAT admitted these claims and remanded the issues to the AO for adjudication, consistent with its earlier decisions. Conclusion: The ITAT upheld the CIT (A)'s decisions on most issues, emphasizing consistency with previous rulings and judicial discipline. The additional claims by the assessee were admitted and remanded for adjudication. The appeals were allowed for statistical purposes.
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