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2016 (11) TMI 375 - AT - Income TaxTransfer pricing adjustment - comparability - Held that - There is no reason given by the ld. CIT(A) regarding rejection of various comparables by the TPO and hence, we feel it proper to restore the entire matter on TP issues to the file of the ld. CIT(A) for fresh decision by way of speaking and reasoned order after providing adequate opportunity of being heard to both sides. Interest payable to Central Excise Department disallowed Trade mark expenses - Nature of expenses - revenue v/s capital - Held that - The payment in question cannot be said to be a payment in the nature of royalty because, in the present case, fixed lump sum was paid for purchase of trade markSince the nature of asset acquired is a capital asset eligible for depreciation u/s 32 of the Act, it cannot be allowed as a revenue expenditure and therefore, this ground of the assessee is rejected. Claim of deduction u/s 80JJAA - AO held that sec.80JJAA was restricted to additional wages paid to employees who have worked for more than 300 days during the relevant period irrespective of whether they were employed on a permanent basis or otherwise - Held that - As per provisions of section 80JJAA as reproduced above, the deduction is allowable for three years including the year in which the employment is provided. Hence, in each of such three years it has to be seen that the workmen was employed for at least 300 days during that previous year and that such work men was not a casual workmen or workmen employed through contract labour. Therefore, if some work men were employed for a period less than 300 days in the previous year then no deduction is allowable in respect of payment of wage to such work men in the present year even if such work men was employed in the preceding year for more than 300 days but in the present year, such work men was not employed for 300 days or more. In this view of the matter, we find no infirmity in the order of the ld.CIT(A) on this issue upholding the action of the DCIT in not granting the deduction u/s 80JJAA in respect of the workmen who were employed by the appellant during the year but whose duration of working in that year was less than 300 days. Grant of deduction u/s 35(2AB) - Held that - In the present case, 21.09.2004 is the date of issuing of notification notifying the automobile components as eligible articles for deduction u/s 35(2AB) of the Act. In a case, where an industry is in the list of approved industry, but the assessee applies for approval of its unit after the start of the previous year and the same is approved by DSIR, then deduction can be allowed from April even if the approval is granted on a later date in the same year. But in the present case, till 20th September, 2004, automobile components was not an approved article for deduction u/s 35(2AB) and therefore, the approval granted after this date cannot relate back prior to this and therefore, we find no infirmity in the order of the ld. CIT(A). This ground of appeal of the assessee is rejected, because on both these aspects of the matter, there is no infirmity in the order of the ld. CIT(A) i.e. regarding netting of reimbursement of expenses and date of notification.
Issues Involved:
1. Transfer Pricing (TP) issues regarding the exclusion of certain comparables. 2. Deduction for provision made towards interest payable to Central Excise and Sales Tax Departments. 3. Treatment of expenditure towards trademark as capital expenditure versus amortization. 4. Deduction under Section 80JJAA for workmen employed for less than 300 days. 5. Deduction under Section 35(2AB) on gross versus net expenditure incurred on scientific research. 6. Depreciation on intangible assets. 7. Additional grounds raised by the assessee for the assessment year 2006-07. Detailed Analysis: 1. Transfer Pricing (TP) Issues: The assessee challenged the CIT(A)'s decision to dismiss their claim for excluding certain comparables due to high profit or loss, and the lack of adjustments for differences in risk profiles. The Tribunal noted that the CIT(A) had upheld the TPO's order without providing reasons. Consequently, the Tribunal restored the matter to the CIT(A) for a fresh decision with a speaking and reasoned order after providing both parties an opportunity to be heard. 2. Deduction for Provision Made Towards Interest Payable: The Tribunal noted that this issue was previously decided against the assessee in their own case for the assessment year 2004-05. Respectfully following the precedent, the Tribunal rejected the assessee's ground for deduction of the provision made towards interest payable to the Central Excise and Sales Tax Departments. 3. Treatment of Expenditure Towards Trademark: The assessee argued that the expenditure towards trademark should be treated as revenue expenditure and amortized over 36 months, citing consistency from earlier years. The Tribunal found that the CIT(A) correctly treated the expenditure as capital expenditure eligible for depreciation under Section 32(1)(ii) and rejected the assessee's claim. The Tribunal reasoned that the life of the asset is not relevant for determining its character as capital or revenue expenditure. 4. Deduction Under Section 80JJAA: The assessee contended that deduction under Section 80JJAA should be granted for workmen employed for less than 300 days. The Tribunal upheld the CIT(A)'s decision, stating that the statutory language is clear and unambiguous, and the deduction is only for workmen employed for at least 300 days during the previous year. 5. Deduction Under Section 35(2AB): The assessee argued for deduction on gross expenditure incurred on scientific research. The Tribunal upheld the CIT(A)'s decision, which was based on the DSIR certificate indicating that the deduction should be on net expenditure after reducing related income. The Tribunal also noted that the notification for automobile components as eligible articles for deduction under Section 35(2AB) came into effect from 21-09-2004, and therefore, the deduction could not be granted for expenditure incurred before this date. 6. Depreciation on Intangible Assets: The Tribunal upheld the CIT(A)'s decision to allow depreciation on intangible assets, following the precedent set in the assessee's own case for earlier years (2003-04 and 2004-05). The Tribunal found no reason to deviate from the earlier decisions. 7. Additional Grounds Raised by the Assessee for AY 2006-07: The Tribunal noted that the grounds raised by the assessee for the assessment year 2006-07 were identical to those raised for the assessment year 2005-06. Since no difference in facts was pointed out, the Tribunal decided these grounds in line with the decisions made for the assessment year 2005-06, rejecting the assessee's grounds. Conclusion: The cross appeals of the assessee and revenue for the assessment year 2005-06 were partly allowed. The appeal of the assessee for the assessment year 2005-06 under Section 154 was dismissed. The cross appeals of the assessee and revenue for the assessment year 2006-07 were also dismissed.
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