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2022 (9) TMI 1658 - AT - Income Tax


ISSUES PRESENTED and CONSIDERED

The Tribunal considered several issues raised by the appellant concerning the assessment order for the assessment year 2016-17. The core legal questions included:

1. Determination of arm's length price for intra-group services and adjustments related to advertisement, marketing, and promotion expenses.

2. Adjustment for contract research and development services.

3. Treatment of rental payments for motor cars as capital expenditure.

4. Disallowance of depreciation on moulds.

5. Disallowance under Section 14A of the Income Tax Act, 1961.

6. Deduction claim related to education cess.

7. Short grant of tax deducted at source/tax collected at source.

ISSUE-WISE DETAILED ANALYSIS

1. Determination of Arm's Length Price for Intra-Group Services and Advertisement, Marketing, and Promotion Expenses

The Tribunal examined the issue of determining the arm's length price for intra-group services received by the appellant. The appellant's counsel argued that this issue was recurring and had been consistently decided in favor of the appellant in previous assessment years by the Co-ordinate Benches of the Tribunal. The Tribunal concurred, noting that the issue was indeed covered by prior decisions and directed the Assessing Officer (AO) to delete the adjustments made.

Similarly, for the adjustment related to advertisement, marketing, and promotion expenses, the Tribunal found that this issue was also previously decided in favor of the appellant. The Tribunal set aside the Dispute Resolution Panel's (DRP) direction and instructed the AO to delete the adjustments.

2. Adjustment for Contract Research and Development Services

The appellant's counsel informed the Tribunal that the AO had already rectified this issue through an order dated 21.09.2021, granting relief to the appellant. Consequently, this ground was deemed redundant and dismissed.

3. Treatment of Rental Payments for Motor Cars as Capital Expenditure

The appellant contested the DRP's decision to treat rental payments for motor cars as capital expenditure. The Tribunal noted that this issue was recurring and had been consistently decided in favor of the appellant in previous years. Following the Co-ordinate Benches' decisions, the Tribunal allowed this ground, setting aside the DRP's direction.

4. Disallowance of Depreciation on Moulds

The Tribunal addressed the issue of disallowance of depreciation on moulds, which had been restored to the AO for fresh verification in previous years. The Tribunal followed the precedent set by the Co-ordinate Benches and restored the issue to the AO for fresh verification in accordance with the Act's provisions.

5. Disallowance under Section 14A of the Income Tax Act, 1961

The Tribunal considered the disallowance under Section 14A, where the appellant had not received any dividend income. The Tribunal referred to the Supreme Court's decision in CIT vs. Chettinad Logistics Pvt. Ltd., which established that no disallowance could be made in the absence of exempt income. The Tribunal set aside the DRP's order and directed the AO to delete the disallowance.

6. Deduction Claim Related to Education Cess

The appellant's claim for deduction related to education cess was dismissed as the Tribunal found the issue to be covered against the appellant.

7. Short Grant of Tax Deducted at Source/Tax Collected at Source

The Tribunal determined that the issue of the short grant of TDS/TCS required further examination by the AO. The Tribunal restored the issue to the AO for verification and directed the appellant to provide necessary evidence to support their claim.

SIGNIFICANT HOLDINGS

The Tribunal's significant holdings included:

- The Tribunal consistently followed the decisions of Co-ordinate Benches in the appellant's own case for recurring issues, thereby setting aside the DRP's directions and directing the AO to delete adjustments where applicable.

- The Tribunal upheld the principle that no disallowance under Section 14A could be made in the absence of exempt income, aligning with the Supreme Court's decision in CIT vs. Chettinad Logistics Pvt. Ltd.

- The Tribunal restored certain issues to the AO for fresh verification, emphasizing the need for proper examination and adherence to legal provisions.

Overall, the Tribunal's determinations were largely in favor of the appellant, allowing several grounds and directing the AO to make necessary adjustments or verifications as per established precedents and legal principles.

 

 

 

 

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