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2020 (12) TMI 719 - AT - Income TaxTP Adjustment - AO while framing the assessment made a reference under Sec. 92CA(1) to the TPO for determining the ALP of the international transactions of the assessee for the year under consideration - selection of MAM - HELD THAT - We are unable to sustain the determination of the ALP of the regional management services received by the assessee from its AE, viz. Henkel AG Company, KGaA, at Rs. nil by the TPO without resorting to any transfer pricing exercise as per any of the method prescribed in Sec.92C(1) of the Act, as against that determined by the assessee by adopting TNMM as the most appropriate method. We thus in terms of our aforesaid deliberations vacate the addition towards TP adjustment made by the AO/TPO. The Grounds of appeal No. 1 to 8 are allowed in terms of our aforesaid observations. Disallowance of professional charges - Allowable business expenses u/s 37 - HELD THAT - Claim of the assessee before the lower authorities, as well before us, that as the aforesaid legal and professional fees incurred by it was neither in the nature of a capital expenditure nor of a personal nature, therefore, the same having been incurred wholly and exclusively for the purpose of its business was allowable as a revenue expenditure under Sec. 37 - assessee except for raising the aforesaid hollow contention had absolutely failed to substantiate its claim of having incurred the aforesaid expenditure in the course of its business. Except for placing on record the bifurcated details of professional charges incurred during the year under consideration, we find that, the assessee had failed to place on record any such material which would substantiate its claim of having incurred the so called professional charges wholly and exclusively for the purpose of its business. Accordingly, in the absence of any supporting documentary evidence which would justify the aforesaid claim of expenditure so raised by the assessee, we find no infirmity in the view taken by the A.O/DRP who in our opinion had rightly disallowed the same. - Decided against assessee. Deduction of sales promotion expenditure on account of travel under taken by its employees for attending a conference - HELD THAT - We find, that the impugned amount as claimed to have been paid by the assessee to M/s Cox and Kings Ltd. towards travel expenses by Air of its employees for the purpose of attending a conference. Except for harping on the aforesaid unsubstantiated details the assessee had failed to place on record any such material which would substantiate its claim that the aforesaid expenses were actually incurred in the course of its business towards travel expenses of its employees for attending a conference. Accordingly, in the absence of any material supporting the claim of the assessee of having incurred the aforesaid expenses wholly and exclusively in the course of its business, we find no infirmity in the view taken by the lower authorities who had rightly rejected the same. We thus uphold the disallowance carried out by the AO. - Decided against assessee. Claim for deduction of sales promotion expenses - Expenses incurred towards purchase of gold coins etc. which are stated to have been distributed as gifts to clients in the normal course of its business - HELD THAT - A.O in the absence of any supporting documentary evidence which would establish the factum of incurring of the aforesaid expenses by the assessee in the course of its business, had thus, disallowed the same. Before us, the assessee except for placing on record the bifurcated details of the gifts which are stated to have been given to certain persons, had however, failed to place on record any such material which could fortify its claim of having incurred the said expenditure wholly and exclusively for the purpose of its business. Accordingly, in the absence of any material having been placed on record by the assessee which would persuade us to dislodge the view taken by the A.O, we thus, finding no infirmity in the view therein taken by him uphold the disallowance - Decided against assessee.
Issues Involved:
1. Transfer Pricing Adjustment 2. Disallowance of Professional Charges 3. Disallowance of Sales Promotion Expenses Issue-Wise Detailed Analysis: 1. Transfer Pricing Adjustment: The primary issue pertains to the Transfer Pricing Officer (TPO) and Dispute Resolution Panel (DRP) determining the Arm's Length Price (ALP) of regional management services at Rs. NIL, against the assessee's claim of Rs. 2,61,63,288/-. The TPO concluded that the assessee failed to provide sufficient documentary evidence to substantiate the receipt of services. The assessee, in rebuttal, provided various documents, including the regional service agreement, debit notes, and detailed descriptions of services received. The Tribunal found that the assessee had indeed provided substantial evidence of receiving the services, such as the regional service agreement and cost-benefit analysis. Additionally, the Tribunal noted that the TPO exceeded his jurisdiction by determining the ALP at NIL without following any prescribed methods under Sec. 92C(1) of the Act. The Tribunal vacated the TP adjustment of Rs. 2,61,63,288/- made by the AO/TPO. 2. Disallowance of Professional Charges: The assessee claimed a deduction of Rs. 3,62,693/- for professional charges paid to M/s Desai & Dewanji, purportedly for consulting fees related to an acquisition. The AO disallowed this deduction due to the lack of detailed substantiation from the assessee. The DRP upheld this disallowance. The Tribunal agreed with the lower authorities, noting that the assessee failed to provide concrete evidence to justify the expenditure as being incurred wholly and exclusively for business purposes. Consequently, the disallowance of professional charges was upheld. 3. Disallowance of Sales Promotion Expenses: The assessee claimed deductions for sales promotion expenses, including Rs. 19,68,708/- paid to M/s Cox & Kings Ltd. for travel expenses related to a conference and Rs. 1,84,946/- for the purchase of gold coins distributed as gifts. The AO disallowed these expenses due to insufficient evidence proving that they were incurred for business purposes. The DRP upheld these disallowances. The Tribunal found that the assessee failed to substantiate these claims with adequate documentation. Therefore, the disallowances of Rs. 19,68,708/- and Rs. 1,84,946/- were upheld. Conclusion: The Tribunal partly allowed the appeal, vacating the TP adjustment but upholding the disallowances of professional charges and sales promotion expenses. The order was pronounced on 09.12.2020.
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