9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2019 (11) TMI 1097 - AT - Income TaxAdmission of additional evidence by the CIT(A) - grievance of the Revenue in this regard is that the said evidence on which reliance was placed by the CIT(A), was not filed before the Assessing Officer and was also not confronted by the CIT(A) to the AO - Addition of royalty expenses - HELD THAT - AO denied the claim of the assessee on the ground that the addresses of the parties to whom the aforesaid payment has been made, was not available. First of all, no such query was raised by the Assessing Officer during the assessment proceedings and hence non-compliance by the assessee. However, details were filed by the assessee before the CIT(A), who in turn forwarded the same to the Assessing Officer for Remand Report, which was never filed by the Assessing Officer. In such scenario, the CIT(A) verified the details filed by the assessee Findings of the CIT(A) reflect that though several reminders were issued to the Assessing Officer but he failed to file the Remand Report. Even on merits, the issue has been considered elaborately by the CIT(A) as to the number of books dealt in and has noted that the average royalty expense per book title works out to ₹ 3,640/-. The average royalty expense per author works out to ₹ 6,240/-. The aforesaid payments were made by cheque and wherever applicable TDS was deducted and deposited. The said expenditure is thus allowed in the hands of assessee. In such circumstances, we find no merit in the Ground No.1 of appeal raised by the Revenue and the same is dismissed. Estimating the work in progress of the journals - HELD THAT - The assessee claims to have shown the value of work in progress on the basis of actual expense incurred for the unfinished journals. In the absence of any evidence found on the contrary, there is no merit in estimating the value of work in progress. Upholding the order of CIT(A), we dismiss Ground No.2 of the appeal raised by the Revenue. Addition on account of foreign travelling expenses - allowable business expenses - HELD THAT - adhoc disallowance out of foreign travel expenses is not warranted in the case of the assessee. The aforesaid expenditure was incurred by the assessee for attending the annual meets and other business conferences and hence, were undertaken for business purposes. Accordingly, we uphold the order of the CIT(A) and dismiss the Ground No.3 of the appeal raised by the Revenue. Transfer pricing adjustment made on account of export of services - assessee had applied Transactional Net Margin Method and compared its margins with the mean margins of the comparables selected by it - AO observed the allocation of cost was not correctly made by the assessee and he re-worked cost and doubled the cost, in the garb applying cost plus method and made an addition - HELD THAT - There is no basis in the exercise carried out by the Assessing Officer as the Cost Plus method has not been correctly applied. Even otherwise, where the assessee had provided the segmentals at the behest of the Assessing Officer, which in turn were worked out after allocating the cost either on actual or on turn over basis, then the same cannot be rejected. First of all, there is no merit in segregating one transaction of provisions of services to AE and separately benchmarking the same. Secondly, AO had not disturbed the aggregated margins shown by the assessee in respect of various international transactions undertaken by the assessee. In any case, the segmental for this transaction of provision of services were filed at the behest of the AO, under which the assessee had allocated the expenses majorly on actual basis and some on turn over basis. The methodology adopted by the assessee cannot be faulted with; even otherwise there is no merit in allocating the selling and distribution cost to the segment of provision of services. The allocation of rent was higher by the assessee and even the administration and journal expenses were allocated on turn over basis. In such facts and circumstances, the margins shown by the assessee on standalone basis also need to be accepted. Accordingly, we find no merit in the order of the Assessing Officer in this regard. Thus, Ground No.4 raised by the Revenue in this appeal is dismissed.
Issues Involved:
1. Deletion of addition of ?21,33,659/- related to royalty payments. 2. Deletion of addition of ?17,82,362/- related to work in progress of journals. 3. Deletion of addition of ?7,56,935/- related to foreign traveling expenses. 4. Deletion of transfer pricing adjustment of ?1,17,20,448/- related to export of services. Issue-wise Detailed Analysis: 1. Deletion of addition of ?21,33,659/- related to royalty payments: The Revenue contended that the CIT(A) erred in law and on facts by deleting the addition made by the AO due to the assessee's failure to furnish relevant details of payments made to various authors. The AO had disallowed 25% of the outstanding royalty, amounting to ?21,33,659/-, due to the lack of addresses of the royalty payees. The CIT(A) allowed the claim after verifying the details provided by the assessee, including the names, titles, addresses, and amounts of royalty payable. The CIT(A) noted that the AO had not raised any queries regarding the addresses during the assessment proceedings and failed to file a Remand Report despite several reminders. The Tribunal upheld the CIT(A)'s decision, finding no merit in the Revenue's appeal, and dismissed Ground No.1. 2. Deletion of addition of ?17,82,362/- related to work in progress of journals: The AO had enhanced the income by ?17,82,362/- by estimating the work in progress at 10% of the sale value of journals, as opposed to the 2.67% shown by the assessee. The CIT(A) deleted the addition, noting that the work in progress was based on actual expenditure incurred for unfinished journals and not related to the sale value. The Tribunal agreed with the CIT(A), finding no merit in the AO's estimation based on conjectures and surmises, and dismissed Ground No.2. 3. Deletion of addition of ?7,56,935/- related to foreign traveling expenses: The AO had disallowed 25% of the foreign traveling expenses, amounting to ?7,56,935/-, due to the lack of proper explanation for the business purpose of frequent foreign travels. The CIT(A) accepted the assessee's explanation that the travels were for attending global executive committee meetings and discussing critical business issues. The Tribunal upheld the CIT(A)'s decision, noting that the expenses were incurred for business purposes and dismissing Ground No.3. 4. Deletion of transfer pricing adjustment of ?1,17,20,448/- related to export of services: The AO had made a transfer pricing adjustment of ?1,17,20,448/- by applying the cost-plus method and reworking the cost allocation for services provided to the AE. The CIT(A) deleted the addition, noting that the assessee had correctly allocated costs and applied the Transactional Net Margin Method (TNMM) to determine the arm's length price. The Tribunal found no merit in the AO's exercise of segregating one transaction and reworking costs without a basis. The Tribunal upheld the CIT(A)'s decision, dismissing Ground No.4. Conclusion: The Tribunal dismissed the appeal filed by the Revenue, upholding the CIT(A)'s decisions on all grounds. The Tribunal found that the CIT(A) had correctly evaluated the evidence and applied the law, and the AO's additions were based on conjectures and surmises without proper basis. The order was pronounced in the open court on 20th November 2019.
|
