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2020 (12) TMI 723 - AT - Income TaxTP Adjustment - addition on account of Arm s Length Price (ALP) - TPO noted that Assessee had paid royalty to Expeditors International of Washington Inc - TPO also concluded that with the payment of royalty, the profitability of the assessee has reduced in comparison to its peer group companies thus held the ALP of the international transaction on account of royalty payment to be Nil and accordingly the income of the assessee was enhanced - CIT-A deleted the addition - HELD THAT - CIT(A) has considered the supplementary TNMM analysis to check the impact of royalty payment on assessee s profit margin that of independent comparable companies to come to a conclusion that the ratio of operating profit to cost at sales of the assessee is comparable to that of uncontrolled entities but we are of the view that her decision to grant relief is not based solely on the aforesaid supplementary analysis furnished by the assessee at the behest of CIT(A). CIT(A) has taken into consideration various other factors (which are extracted herein above) to come to the conclusion that the AO/TPO was not justified in making the addition. As far as merits of the deletion of addition is concerned, no fallacy in the findings of CIT(A) has been pointed by the Revenue. Even on the issue of alleged violation of provisions of Rule 46A of I.T. Rules, we are of the view that deletion of addition was not based solely on the basis of the alleged additional evidence filed by the assessee but various other material factors as noted in the order. We find no reason to interfere in the order of CIT(A) and thus the grounds of Revenue are dismissed. TDS u/s 195 - Addition u/s 40(a) - addition on account of Global Account Manager(GAM) Expenses paid in foreign currency but no TDS was deducted - CIT(A) while deciding the issue in favour of the assessee has given a finding that the amount incurred by the assessee on account of GAM charges cannot be treated as payment of salary to non-resident but it was in the nature of reimbursement of expenses and the same was not liable for deduction for TDS - HELD THAT - As in A.Y. 2001-02 2004-05 identical issue arose in assessee s own case and the issue was decided in assessee s favour by the Co-ordinate Bench of Tribunal and the order of the Tribunal has been upheld by the Hon ble Delhi High Court. Before us, no distinguishing feature in the facts of the case in the year under consideration and that of A.Y. 2001-02 2004-05 2011 (12) TMI 104 - DELHI HIGH COURT has been pointed out by the Revenue. Further no fallacy in the findings has been pointed out by the Revenue before us. Revenue has also not placed any material on record to demonstrate that the order of the Tribunal in assessee s own case in earlier years has been set aside/overruled or stayed by higher judicial forum. In such a situation, we find no reason to interfere in the order of CIT(A). Addition on account of lease line expenses - No deduction of tax u/s 40(a) - CIT- A deleted addition - HELD THAT - identical issue arose in assessee s own case in A.Y. 2001-02 2004-05 wherein the issue was decided in favour of the assessee by the Co-ordinate Bench of Tribunal. We further find that the order of Tribunal in favour of the assessee was upheld by the Hon ble Delhi High Court. Before us, no distinguishing feature in the facts of the case and that of A.Y. 2001-02 2004-05 has been pointed out by the Revenue. Further no fallacy in the findings of CIT(A) has been pointed before us by the Revenue. Addition on account of royalty expenses - assessee was asked to show has to why the amount not be considered to be payment which is in the nature of enduring advantage and should not be capitalized and disallowed - CIT-A deleted the addition - HELD THAT - Before us the Ld AR has submitted that the royalty paid by the Assessee in subsequent years has been accepted by the Revenue as no disallowance has been made by the Revenue. The aforesaid contention of the Ld AR has not been controverted by the Revenue. We further find that CIT(A) while deleting the addition has given a finding that the payment on account of royalty is an operational expenses and revenue in nature and therefore the ratio of decision of Hon ble Apex Court in the case of Southern Switchgear 1997 (12) TMI 105 - SC ORDER are not applicable. He has further given a finding that the royalty has already been disallowed by the TPO and the disallowance once again made by the AO results in double disallowance. Before us, no fallacy in the findings of CIT(A) has been pointed out by the Revenue. Excess claim of depreciation on computer accessories - AO was of the view that UPS, printers etc. are not part and parcel of the computer but are part of machinery on which depreciation is to be allowed @ 25% and not @ 60% as claimed by the assessee - HELD THAT - We find that identical issue of excess claim of depreciation arose in assessee s own case in A.Y. 2001-02, 2003-04 2004-05 wherein the Co-ordinate Bench of Tribunal has decided the issue in favour of the assessee. Before us, no distinguishing features in the facts of the case and that of the earlier years has been pointed out by the Revenue. Revenue has also not placed any material on record to demonstrate that the order of the tribunal in assessee s own case in earlier years has been set aside/overruled or stayed by higher judicial forum.
Issues Involved:
1. Deletion of addition on account of Arm's Length Price (ALP) for royalty payment. 2. Deletion of addition on account of Global Account Manager (GAM) Expenses. 3. Deletion of addition on account of lease line expenses. 4. Deletion of addition on account of royalty expenses. 5. Deletion of addition on account of excess claim of depreciation on computer accessories. Detailed Analysis: 1. Deletion of Addition on Account of Arm's Length Price (ALP) for Royalty Payment: The Tribunal addressed the issue of the addition of ?13,59,65,489/- made by the AO based on the TPO's determination of the ALP for royalty payments as nil. The CIT(A) had deleted the addition, noting that the TPO's conclusions lacked basis and analysis. The CIT(A) observed that the royalty payment was justified by the technical, operational, and strategic services received from the US parent company, which were critical for the business. The Tribunal upheld the CIT(A)'s decision, noting that the deletion was not solely based on supplementary TNMM analysis but also on various other factors, including the business model and the approval from RBI. The Tribunal found no fallacy in the CIT(A)'s findings and dismissed the Revenue's grounds. 2. Deletion of Addition on Account of Global Account Manager (GAM) Expenses: The AO had disallowed ?63,03,854/- for GAM expenses due to non-deduction of TDS. The CIT(A) deleted the addition, noting that the expenses were reimbursements and not salary payments, thus not liable for TDS. The Tribunal upheld the CIT(A)'s decision, citing that similar disallowances in earlier years (A.Y. 2001-02 & 2003-04) were deleted by the Tribunal and upheld by the Hon'ble Delhi High Court. The Tribunal found no distinguishing features in the facts of the current year and dismissed the Revenue's appeal. 3. Deletion of Addition on Account of Lease Line Expenses: The AO disallowed ?38,11,341/- for lease line expenses due to non-deduction of TDS. The CIT(A) deleted the addition, noting that the expenses were not for consultancy or technical services and thus not liable for TDS. The Tribunal upheld the CIT(A)'s decision, referencing similar deletions in earlier years (A.Y. 2001-02 & 2004-05) which were upheld by the Hon'ble Delhi High Court. The Tribunal found no distinguishing features and dismissed the Revenue's appeal. 4. Deletion of Addition on Account of Royalty Expenses: The AO disallowed 25% of the royalty payment, considering it a capital expenditure. The CIT(A) deleted the addition, noting that the royalty payment was an operational expense and revenue in nature. The CIT(A) also noted that the disallowance amounted to double disallowance as the TPO had already disallowed the expenditure. The Tribunal upheld the CIT(A)'s decision, noting that the royalty payment was accepted as revenue expenditure in subsequent years and found no fallacy in the CIT(A)'s findings. The Tribunal dismissed the Revenue's appeal. 5. Deletion of Addition on Account of Excess Claim of Depreciation on Computer Accessories: The AO disallowed ?3,32,634/- for claiming 60% depreciation on computer accessories, treating them as machinery eligible for 25% depreciation. The CIT(A) deleted the addition, following the Tribunal's decision in A.Y. 2003-04. The Tribunal upheld the CIT(A)'s decision, noting that similar issues in earlier years were decided in favor of the assessee and upheld by the Hon'ble Delhi High Court. The Tribunal found no distinguishing features and dismissed the Revenue's appeal. Conclusion: The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s deletions of additions on account of ALP for royalty payment, GAM expenses, lease line expenses, royalty expenses, and excess claim of depreciation on computer accessories. The Tribunal found no fallacy in the CIT(A)'s findings and noted that similar issues in earlier years were decided in favor of the assessee and upheld by higher judicial forums.
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