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2023 (3) TMI 655 - AT - Income TaxTP Adjustment - Advertising Marking and Promotion(AMP) - assessee pointed that the distribution agreement in the impugned assessment year is the same and is renewed automatically on year to year basis - HELD THAT - There is no change/modification in the terms and conditions of the distribution agreement. Tribunal has been consistently relying on same distribution agreement while passing the order in the preceding assessment years. A copy of the distribution agreement has been placed before us - Revenue has not been able to controvert the submissions of assessee nor any decision contrary to the decision of Tribunal in assessee s own case has been furnished by the Revenue. Thus we find no reason to take a contrary view hence ground of the appeal are allowed in similar terms. TP Adjustment on account of Convention Expenses incurred in normal course of business - HELD THAT - Admittedly the TPO/DRP had made a similar alternative adjustment in respect of the convention expenses in the case of the assessee for the aforementioned preceding years viz. A.Y. 2011-12 A.Y. 2012-13 and A.Y. 2013-14. We have perused the orders of the Tribunal for the said respective years and find that the said alternative adjustment on appeal was vacated by the Tribunal. Accordingly finding ourselves to be in agreement with the view taken by the Tribunal in respect of the issue under consideration in the aforementioned preceding years we vacate the said alternative adjustment made by the TPO/DRP. TP Adjustment on account of reimbursement of expenses - primary contention for the assessee is that the TPO had made adjustment - TPO had made adjustment of Rs.1, 22, 62, 124/- however the DRP enhanced the adjustment to Rs.4, 04, 53, 708/-. It is contended that before enhancement no show cause notice was issued to the assessee - HELD THAT - Taking into consideration entirety of facts we deem it appropriate to restore this issue back to the file of AO for denovo consideration after affording reasonable opportunity of hearing to the assessee in accordance with law. Consequently ground of the appeal are allowed for statistical purpose. Working capital adjustment while computing operating margin of comparable companies - HELD THAT - After allowing working capital adjustment the operating margin of the assessee company was within permissible 3% range of tolerance limit of revised arm s length mean of comparable companies. Consequently the adjustment in assessment year 2014-15 was deleted. In the impugned assessment year the ground are restored back to the file of AO with similar directions. Disallowance of expenditure on account of payments to Doctors/Convention expenses printing and equipment hiring charges grants to medical association accommodation expenses of the medical practitioners conducting of medical education meetings expenditure on food travel facilities registration charges car hiring charges etc. - HELD THAT - Expenditure on medical practitioners be restored to Assessing Officer for reconsideration in the light of decision rendered by Hon ble Supreme Court of India in the case of Apex Laboratories Pvt. Ltd. 2022 (2) TMI 1114 - SUPREME COURT Without commenting on merits of the issue raised they are restored to the file of Assessing Officer for adjudication in accordance with the decision rendered in the case of Apex Laboratories Pvt. Ltd. vs. DCIT(supra). Disallowance of depreciation on buildings - HELD THAT - The stand of the assessee is that building in question forms part of the block of assets and continue to exist even after manufacturing was discontinued. We find that for similar reasons in assessment year 2008-09 assessee s claim on depreciation on plant machinery and building was disallowed by the Assessing Officer. Non-granting of credit of TDS - HELD THAT - The issue is restored back to the file of AO for the limited purpose of ascertaining the correct amount of TDS credit to be allowed to the assessee. AO is directed to re-examine the issue and grant TDS credit accordingly.
Issues Involved:
1. TP Adjustment on Advertising, Marketing, and Promotion (AMP) Expenses 2. TP Adjustment on Convention Expenses 3. TP Adjustment on Reimbursement of Expenses 4. TP Adjustment on Import of Finished Goods 5. Disallowance of Expenditure on Medical Practitioners 6. Disallowance of Depreciation on Buildings 7. Non-Granting of Depreciation on Non-Compete Fee 8. Non-Granting of TDS Credit 9. Charging of Interest u/s 234A and 234B Detailed Analysis: 1. TP Adjustment on Advertising, Marketing, and Promotion (AMP) Expenses: The assessee challenged the TP adjustment of Rs. 95,07,33,625/- on AMP expenses. The Tribunal noted that similar adjustments were made in previous years, and consistently decided in favor of the assessee. The Tribunal reiterated that AMP expenses incurred by the assessee do not indicate an agreement for sharing AMP expenses with the AE. The Tribunal referenced its previous rulings and the Delhi High Court's decisions, emphasizing that incidental benefits to the AE do not constitute an international transaction. Hence, the Tribunal allowed the appeal on these grounds. 2. TP Adjustment on Convention Expenses: The assessee contested the addition of Rs. 38,11,76,234/- for convention expenses. The Tribunal referred to its previous decisions, where similar issues were resolved in favor of the assessee. It was held that convention expenses incurred in the normal course of business could not be considered as AMP expenses. The Tribunal allowed the grounds related to convention expenses, following the precedent set in earlier years. 3. TP Adjustment on Reimbursement of Expenses: The assessee disputed the adjustment of Rs. 4,04,53,708/- for reimbursement of expenses. The Tribunal noted that the DRP enhanced the adjustment without issuing a show-cause notice, violating principles of natural justice. The Tribunal restored the issue to the Assessing Officer for a fresh examination, directing them to provide a reasonable opportunity for the assessee to present their case. 4. TP Adjustment on Import of Finished Goods: The assessee partially pressed the grounds related to the TP adjustment of Rs. 24,14,13,278/- on the import of finished goods, specifically seeking working capital adjustment. The Tribunal referred to its previous decision in the assessee's case for the assessment year 2014-15, where the issue was restored to the TPO for reconsideration. The Tribunal directed the Assessing Officer to re-examine the working capital adjustment, allowing the grounds for statistical purposes. 5. Disallowance of Expenditure on Medical Practitioners: The assessee challenged the disallowance of Rs. 43,09,51,084/- on payments to doctors and related expenses. The Tribunal restored the issue to the Assessing Officer for reconsideration in light of the Supreme Court's decision in Apex Laboratories Pvt. Ltd. vs. DCIT, which held that such expenditures are not allowable under section 37(1) of the Act. 6. Disallowance of Depreciation on Buildings: The assessee contested the disallowance of Rs. 58,298/- for depreciation on buildings. The Tribunal noted that similar disallowances were made in previous years and consistently allowed by the Tribunal. It was held that once an asset forms part of the block of assets, it loses its individual identity, and depreciation should be allowed. The Tribunal allowed the ground. 7. Non-Granting of Depreciation on Non-Compete Fee: The assessee argued for the depreciation on non-compete fee paid in the assessment year 2002-03. The Tribunal referred to its previous decisions, where depreciation on non-compete fees was allowed as an intangible asset. The Tribunal directed the Assessing Officer to allow depreciation on the opening WDV of the non-compete fee, following the precedent set in earlier years. 8. Non-Granting of TDS Credit: The assessee claimed short credit of TDS amounting to Rs. 7,00,000/-. The Tribunal restored the issue to the Assessing Officer for re-examination to ascertain the correct amount of TDS credit and directed to grant the credit accordingly. 9. Charging of Interest u/s 234A and 234B: The assessee challenged the charging of interest under sections 234A and 234B. The Tribunal noted that charging of interest under these sections is mandatory and consequential. Hence, the grounds were dismissed. Additional Ground on Education Cess: The assessee raised an additional ground for claiming deduction on education cess but chose not to press it. Consequently, the additional ground was dismissed as not pressed. Conclusion: The appeal was partly allowed, with several issues restored to the Assessing Officer for reconsideration, and some grounds allowed based on precedents set in previous years. The Tribunal emphasized adherence to principles of natural justice and consistency with past decisions.
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