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2020 (3) TMI 212 - AT - Income TaxTransfer pricing adjustment made on payment of management fee to the Associated Enterprise (AE) - HELD THAT - Not only the AE has rendered services to the assessee under GSA, but the assessee is also in receipt of such services and has also benefited by such services. In fact, it has been submitted by the learned Authorised Representative that while making payment towards intra group services, the assessee has also deducted tax at source under section 195 . Thus, all these facts clearly go to prove that the assessee, indeed, has received certain specified services from the AE and payments have been made in consideration of such services. Therefore, the services rendered by the AE to the assessee certainly have some value attached to it which requires benchmarking under any of the methods prescribed under the statute. Transfer Pricing Officer accepts that some services have been rendered, however, he has made a general observation that such services do not have any value and has proceeded to determine the arm's length price on a purely on ad hoc basis. Whereas, the reading of the AAR ruling, referred to above, clearly demonstrate that highly specialized services, in fact, were rendered by the AE to its Indian subsidiary. Thus, on the basis of facts available on record, we have no hesitation in holding that the determination of arm's length price at nil is without any legal sanctity, hence, cannot be sustained. Accordingly, following the judicial precedents cited before us, we delete the addition made in this regard. TDS u/s 194H - Disallowance u/s 40(a)(ia) - HELD THAT - Identical view was expressed by the Tribunal while deciding the issue in assessment years 2008 09 and 2009 10. Pertinently, while implementing the direction of the Tribunal in assessment year 2007 08, the Assessing Officer vide order dated 30th December 2016, has allowed assessee s claim of discount given to the distributors which is evident from the copy of the order placed in the paper book. It is also the submissions of the learned Authorised Representative that though similar disallowance was made by the Assessing Officer in the assessment years 2013 14 and 2014 15, however, the DRP has allowed assessee s claim by deleting the disallowance. Considering the fact that while deciding identical issue in assessee s own case for the assessment year 2007 08, 2008 09 and 2009 10, the Tribunal has restored the issue to the Assessing Officer for fresh adjudication with specific direction, we are inclined to follow the same and restore the issue to the Assessing Officer for fresh adjudication with similar direction. Suffice to say, if similar claim made by the assessee was allowed by the Assessing Officer in assessment year 2007 08 and by the DRP in assessment years 2013 14 and 2014 15, then there should not be any difficulty in allowing assessee s claim. Disallowance of commission paid - HELD THAT - We are of the view that assessee s claim that the accruals of ₹ 2,30,66,201, was subjected to deduction of tax at source on receipt of invoice in subsequent years requires factual verification at the end of the Assessing Officer. Accordingly, we restore the issue to the Assessing Officer for fresh adjudication after verifying the material available on record or to be filed by the assessee and decide the issue in accordance with law after due opportunity of being heard to the assessee. Ground is allowed for statistical purposes. Short grant of TDS credited - HELD THAT - We direct the Assessing Officer to verify the TDS as per Form no.26AS, and grant credit to the assessee in accordance with law. This ground is allowed for statistical purposes. Disallowance of tax deducted on interest expenditure incurred in foreign currency - HELD THAT - As could be seen, the assessee had entered into a borrowing arrangement with Standard Chartered Bank on a net of tax basis. As per the terms of the agreement, the assessee has computed TDS on a net of tax basis and no tax has been separately debited to the Profit Loss Account. It is also a fact on record that as per the borrowing arrangement, the tax liability, if any, on payment of interest has to be borne by the assessee. Therefore, the tax withheld has to be allowed as expenditure to the assessee. We do not find any infirmity in the directions of the DRP. Ground is dismissed.
Issues Involved:
1. Transfer Pricing Adjustment on Payment of Management Fee to Associated Enterprise (AE). 2. Disallowance under Section 40(a)(ia) for Sales Scheme Expenditure. 3. Disallowance of Commission Paid. 4. Short Grant of TDS Credit. 5. Disallowance under Section 40(a)(ia) for Depreciation on Foster’s Brand. 6. Disallowance of Tax Deducted on Interest Expenditure Incurred in Foreign Currency. Detailed Analysis: 1. Transfer Pricing Adjustment on Payment of Management Fee to Associated Enterprise (AE) The core issue involved the addition of ?26,22,23,865 due to transfer pricing adjustment on the payment of management fees to AE. The assessee, engaged in brewing and selling beer, had entered into a General Service Agreement (GSA) with SABMiller Management (IN) B.V. for various business services. The Transfer Pricing Officer (TPO) questioned the arm's length nature of these payments, demanding proof of the benefits derived and the cost base. Despite the assessee providing extensive documentation, the TPO determined the arm's length price as nil. The tribunal noted that the TPO did not follow any prescribed methods under Section 92C r/w Rule 10B and failed to conduct an independent benchmarking. Citing precedents, the tribunal held that the adjustment made by the TPO was contrary to statutory provisions and deleted the addition. 2. Disallowance under Section 40(a)(ia) for Sales Scheme Expenditure The assessee challenged the disallowance of ?34,81,60,500 under Section 40(a)(ia), arguing that the discount offered to distributors was not commission and thus not subject to TDS under Section 194H. The tribunal noted that similar issues in the assessee's previous years had been remanded for fresh adjudication. Given that the Assessing Officer (AO) had allowed similar claims in the past, the tribunal restored the issue to the AO for fresh adjudication, emphasizing that there should be no difficulty in allowing the claim if similar facts were established. 3. Disallowance of Commission Paid The issue involved the disallowance of ?2,30,66,201 on the grounds that the assessee did not deduct TDS on accrued commission. The assessee contended that TDS was deducted and deposited in subsequent years upon receipt of invoices. The tribunal restored the issue to the AO for verification of the assessee's claim and directed a fresh adjudication. 4. Short Grant of TDS Credit The assessee raised the issue of short grant of TDS credit amounting to ?33,558. The tribunal directed the AO to verify the TDS as per Form 26AS and grant the appropriate credit in accordance with the law. 5. Disallowance under Section 40(a)(ia) for Depreciation on Foster’s Brand The Revenue challenged the deletion of disallowance of ?12,13,48,125 under Section 40(a)(ia) related to depreciation on Foster’s Brand. The tribunal noted that similar disallowances in previous years had been deleted by the tribunal. Upholding the DRP's decision, the tribunal dismissed the Revenue's ground, maintaining consistency with earlier rulings. 6. Disallowance of Tax Deducted on Interest Expenditure Incurred in Foreign Currency The Revenue contested the deletion of disallowance of ?78,03,184 related to tax deducted on interest expenditure. The tribunal observed that the borrowing arrangement with Standard Chartered Bank was on a net-of-tax basis, and the tax liability was borne by the assessee. The tribunal found no infirmity in the DRP's directions and dismissed the Revenue's ground. Conclusion: - The assessee's appeal was partly allowed, with significant relief granted on the transfer pricing adjustment and other disallowances. - The Revenue's appeal was dismissed, affirming the DRP's decisions on the disallowance of depreciation and interest expenditure. Order Pronounced: The order was pronounced in the open Court on 18.02.2020.
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