9911796707
TMI Blog2013 (6) TMI 591X X X X Extracts X X X X X X X X Extracts X X X X ..... tains to Corporate Tax issue. In this regard it has been urged that the Assessing Officer has erred in disallowing a sum of Rs. 36,69,882/- u/s. 40(a)(ia). (3) Another issue raised is that Assessing Officer has erred in levying interest u/s. 234B and 234C of the Act. The assessee company is engaged in the business of trading of footwear, apparel, accessories, sports equipments etc. and providing exports related consultancy services on behalf of group companies. It is a subsidiary company of M/s Reebok Mauritius Company Ltd. The international transaction entered into by the assessee company are as under:- S.No. Nature of transaction Method used by assessee Amount 1 Import of apparels and footwear for resale. RPM 34,75,63,922/- 2 Royalty CUP 15,28,77,527/- 3 Identification of factories in India for sourcing/exporting the goods. TNMM 73,87,878/- 4 Reimbursement of other expenses. advertisement and No benchmarking 44,67,273/- Total 51,22,96,600/- 3. TPO considered the above transactions. TPO proposed an upward adjustment of Rs. 51,82,80,551/- to the income of the assessee being the difference between the arm's length price of reimbursement of AM ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ordingly proposed an adjustment of Rs. 50,82,80,551/- on account of the alleged brand building activity undertaken by the assessee for the AE. The DRP directed the Assessing Officer to reduce the mark up to 12.50% and accordingly reduced the adjustment to Rs. 49,72,06,126/-. 6. Now the assessee is in appeal before us. We have heard the rival contentions and perused the records. 7. We find that a Special Bench of the Tribunal was constituted by the President, in the case of LG Electronics India Pvt. Ltd. Noida vs. ACIT, Circle-3, Noida bearing I.T.A. No. 5140/Del/2011 to decide as to whether the Assessing Officer /TPO was justified in making transfer pricing adjustment in relation to advertisement, marketing and promotion expenses incurred by the assessee. The appellant had also intervened before the Special Bench. 7.1 The Special Bench has recently pronounced its decision vide order dated 15.1.2013. The Special Bench has in principle held that benchmarking of AMP expenses, being an international transaction was permissible under the TP regulations. The matter has been sent back to the TPO to readjudicate the ALP in the light of the factors enumerated in para 17.4 of the majority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It shows that abundant caution has been taken by the legislature in not disturbing the finality of the assessment due to retrospective operation of sub- section (2B) in cases set out in sub- section (2C). The acceptance of the contention of the ld. AR to consider sub- section (2B) as prospective, would not only make sub-section (2B) but sub- section (2C) also as dormant and non- existent. Obviously an interpretation which makes a valid piece of legislation as redundant, does not merit acceptance. The purpose intended to be achieved in validating the jurisdiction of the TPO on the earlier transactions not referred to him by the AO on one hand and also not disturbing the finality of assessments already. completed on the other, has been properly achieved by the respective dates from which sub- sections (2A), (2B) and (2C) have been given effect to. 7.20. The Id. counsel for the appellant also contended that if sub- section (2B) is considered as retrospective in operation, then all other sub-sections of sec. 92CA will loose the worth of their existence. This argument was developed to contend that if the TPO is to be permitted to determine ALP in respect of any transaction, then sub- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... doctrine of incorporation. Our view is fortified by the judgment of the Hon'ble Supreme Court in the case of CIT Vs. Pawan Kumar Laddha [(2010) 324ITR 324 (SC)) . 7.22. Now we take up the contention raised by the Id. counsel for some of the interveners on harmoniously interpreting sub-section (2B) by limiting its scope only to such transactions which the assessee perceives as international transactions but fails to report. We are not convinced with such interpretation. A line of distinction sought to be drawn by. the ld. counsel between two types of international transactions for which the assessee has not furnished audit report, viz., which is an international transaction as. per assessee's version and which is not so, has no statutory sanction. There is no such cue, even remotely, in the language of sub-sec. (2B). The reference to international transaction in sub-sec. (2B), for which the assessee has not furnished report u/s 92E is unqualified. If we interpret sub-sec. (2B) in the way suggested by the Id. AR, it would amount to doing violence to the unambiguous language of the provision by importing certain words in it, which is obviously impermissible; The primary rule is that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the three necessary ingredients as culled out from a bare reading of section 92B are fully satisfied in the present case. There is a transaction of creating and improving marketing intangibles by the assessee for and on behalf of its foreign AE; the foreign AE is non-resident; such transaction is in the nature of provision of service. Resultantly, we hold that the Revenue authorities were fully justified in treating the transaction of brand building an international transaction in the facts and circumstances of the present case." 7.2 Since it is a lengthy order, it will not be desirable to reproduce extensively as the order can be referred independently. The glimpses of the observations and conclusions of Special Bench may be found at various other places also, but we have tried to secure the gist of the conclusions as best possible as above. 7.3 Further the Hon'ble Delhi Bench of the Tribunal in the above case of Canon India Pvt. Ltd. vs. DCIT (I.T.A. No. 4602/Del/2010) while remitting the matter, directed the TPO to exclude expenses incurred on trade discount, volume rebate, cash discount, commission etc. 7.4 Further, the Chandigarh Bench of the Tribunal in the case of GlaxoS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing expenses do not lead to brad promotion and the selling expenses have to be excluded from the AMP expenses for the purpose of bench marking analysis. 11. Accordingly, we remit the issue of AMP expenses to the files of the TPO with the following directions:- i) Expenditure in connection with the sales as mentioned above cannot be brought within the ambit of advertisement, marketing and promotions expense for determining the cost / value of the international transactions. However, the TPO shall examine the veracity of description and quantification of the amount of selling expenses and accordingly, allow the assessee's claim. ii) After deducting the selling price from the AMP expenses as mentioned above, the TPO shall decide the issue of AMP expenses by applying the proper comparables after hearing the assessee and keeping in view the Special Bench directions in this behalf. 12. II. Apropos adjustment on account of royalty expenses:- expenses:- In this case TPO noted that assessee has made the payment of royalty amounting to Rs. 15,28,77,527/- to the Associated Enterprises. In the transfer pricing report, the transfer of royalty was benchmarked using the CUP method as the mos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t benefit analysis with regard to the payment of royalty. TPO noted that no such cost benefit analysis was carried out by the assessee. TPO noted that assessee has referred that royalty is being paid for technology. As per Clause 1 of the Technology License Agreement dated 01.10.2002 between Reebok International Ltd. and Reebok India Company, the assessee has been provided data, documentation, drawings and specifications relating to inventions, designs, formulae, process and similar property, referred to as 'know-how. Clause 2 of the same agreement, grants the assessee non exclusive, non transferrable right to utilize the technology in the manufacture and distribution of Reebok Products in India. 12.7 Referring to the above, the TPO observed that the technology should have helped the assessee in earning better margins. However, the TPO noted that it is not reflected in the margin of the assessee over the past three years, inspite of growth in sales. TPO further referred to the following analysis of the profitability of the assessee in the past three years:- F.Y.s. 2005-06 2006-07 2007-08 Sales (WSP) 252.5 366.2 451.23 Royalty 6.82 9.62 15.29 Net Profit 17.76 32.81 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rough the engine of the technology. There are returns from intangible assets such as distribution systems, trained workforce, etc. Allowances need to be made for them. In the absence of any data provided by the taxpayer, it is impossible to know what percentage of profits the licensee would like to share at an arm's length after removing the returns from assets employed and other economic factors which may not arise solely through the engine of the technology. * The tax payer did not give the details of royalty rates in the industry. In view of the detailed discussions in the preceding paragraphs the arm's length price of royalty is determined at Rs. NIL in place of Rs. 15,28,77,527/-. The amount of Rs. 15,28,77,527/- is treated as adjustments u/s. 92C as the value of royalty transactions in uncontrolled conditions is treated as Rs. NIL under CUP and in the absence of any substantiation to show that substantial benefit has accrued to the taxpayer." 12.11 Assessee filed the objections in this regard before the DRP. The DRP affirmed the action of the TPO. 13. Now the assessee is in appeal before us. 14. We have heard the rival contentions in light of the material produced and pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of technology. A description of the technology provided by the associated enterprises is submitted as under: a. The PUMP technology: The PUMP technology is proprietary inflatable shoe technology that automatically provides the wearer with a custom fit. A pump chamber that is inflated with air from The Pump wraps around the foot and expands inward eliminating any gaps within the shoe. This uniform glove-like wrapping of the foot results in a customized fit and feel. b. DMX technology: The DMX technology provides cushioning using a heel-to-forefoot, active airflow system that delivers Cushioning when and where it is needed. Since the introduction multiple versions of DMX have been developed to meet the performance demands of various activities. In 2004, Reebok introduced its new DMX Micro technology, which provides low-profile cushioning using moving air in a system that does not ''bottom-out'' on impact. Another important development of DMX is the new DMX Shear which provides horizontal cushioning by allowing the heel of the shoe to move independently from the rest of the shoe, cushioning both vertically and horizontally. c. 3D Ultralite technology: The 3D Ultralite technolog ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt depends upon the technology provided by the associated enterprise and in the absence of the technology the appellant would not be able to undertake manufacturing of goods. The appellant has been able to profitably survive and grow in a competitive industry, where continuous innovation is a prerequisite, solely due to the technology provided by the associated enterprise. The payment of royalty, therefore, it would be appreciated, is a consideration in terms of agreement with the associated enterprises for availing license to use their proprietary technology. In other words, the payment of royalty is necessary cost incurred for obtaining know-how for manufacture of products by the appellant. The comparative profitability analysis over two years, done by the TPO, cannot lead to the inference that tangible benefit has not been derived by the appellant from the know-how provided by the AE, more so considering that similar payment of royalty has been accepted to be at arm's length in earlier years. The profitability of the appellant can be lower due to various business reasons and lower profitability in the current year as compared to previous year cannot form the basis for arrivin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ely" for the purpose of business and nothing more. It is this principle that inter alia finds expression in the OECD guidelines, in the paragraphs which we have quoted above. XXX So long as the expenditure or payment has been demonstrated to have been incurred or laid out for the purposes of business, it is no concern of the TPO to disallow the same on any extraneous reasoning. As provided in the OECD guidelines, he is expected to examine the international transaction as he actually finds the same and then make suitable adjustment but a wholesale disallowance of the expenditure, particularly on the grounds which have been given by the TPO is not contemplated or authorised." It is respectfully submitted that as long as an item of expenditure has been incurred wholly and exclusively for the purpose of business of the assessee, whether or not such expenditure actually benefits the assessee is an irrelevant consideration for the purpose of determination of ALP. The Hon'ble Tribunal in the case of M/s. Ericsson India Pvt. Ltd. vs. DCIT (ITA No. 5141/Del/2011), too, following the law laid down by the Hon'ble jurisdictional High Court, held that "................. it would be wrong to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned CIT-Departmental Representative are of no benefit to the Revenue. The reasonableness of expenditure in the present circumstances and facts of case cannot be doubted and accordingly the AO is directed to allow the claim of the assessee and the order of learned CIT(A) is reversed. Thus, ground no. 3 of the assessee is allowed." Further, recently in the case of SC Enviro Agro India Ltd vs DCIT (ITA No 2057 & 2058/Mum/2009) the Hon'ble Mumbai Bench of the Tribunal held that "The TPO has to examine whether the price paid or amount paid was at arms length or not under the provisions of Transfer Pricing and its rules. The rule does not authorize the TPO to disallow any expenditure on the ground that it was not necessary or prudent for assessee to have incurred the same." Further, the Hon'ble Delhi Bench of the Tribunal in the case of AWB India Pvt Ltd vs Addl. CIT (ITA No 4454/Del/2011) held as under: "As also settled by judicial decisions (supra), the revenue authorities are not empowered to question the commercial wisdom of the assessee and it is entirely for the assessee to take such decisions as favour the advancement of the assessee's business." The assessee company h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e RBI has been succinctly recorded by the TPO in his order as well. He still chose to propose adjustment in respect of full payment. In our considered opinion, when the rate of royalty payment and fee for drawings etc. has been approved or deemed to have been approved by the RBI, then such payment has to be considered at ALP. We, therefore, direct to delete addition of Rs.4.29 crore made by the A.O. in this regard." Reliance in this regard is also placed on the decision of Delhi Bench of Tribunal in the case of DCIT vs. Sona Okegawa Precision Forgings Limited (ITA No. 5386/Del/2010), wherein the Hon'ble Tribunal while dealing with the disallowance of royalty expense made by the TPO, held as under: "We have duly considered the rival contentions and gone through the record carefully. To our mind, there are two aspects. The first aspect is whether the royalty paid by the assessee @ 3% is excessive and not computed at arm's length price. We find that the assessee has placed on record copy of the letter dated 0.4.1993 written by the RBI, Exchange Control Department to M/s. Sona Steering System Ltd. wherein royalty @3% on domestic sales subject to taxes for a period of five years was a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Income-tax Act provides five methods for determination of arm's length price of an 'international transaction'. The mandate of the TPO, it is respectfully submitted, is limited to application of any of the five prescribed methods as the most appropriate method. The aforesaid has been clarified by the CBDT in Instruction No. 3 of 2003 dated 20-05-2003 as under: "- - - In order to maintain uniformity of procedure and to ensure that work in this important area proceeds smoothly and effectively, the following guidelines are hereby issued: (i) Reference to Transfer Pricing Officer (TPO): The power to determine arm's length price in an international transaction is contained in sub-section (3) of section 92C. However section 92CA provides that where the Assessing Officer considers it necessary or expedient so to do, he may refer the computation of arm's length price in relation to an international transaction to the TPO. Sub-section (3) of section 92CA provides that the TPO after taking into account the material available with him shall, by an order in writing, determine the arm's length price in accordance with sub-section (3) of section 92C. Sub-section (4) of section 92CA prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owing the method which is not authorized under the Act or rules. We, therefore, hold that the Arm's Length Price determined by the TPO and adopted by the Assessing Officer to the extent of royalty payable to the CA Inc Management, USA is not as per the procedure prescribed and same cannot be sustained. We, therefore, direct the Assessing Officer to adopt the Arm's Length Price of the royalty payable to CA Inc Management, USA as declared by the assessee in both the years." (emphasis supplied) The aforesaid decision has also been affirmed by the Hon'ble High court. Reliance in this regard is also placed on the decision of Mumbai Bench of Tribunal in the case of Dresser-Rand India P. Ltd. vs. ACIT (supra), wherein, the Hon'ble Tribunal has held as under: "As it is an allocation of costs on the basis of actual costs and the fact of expenditure is not even in dispute, the dispute is confined to the basis on which cost allocations must take place, and since we find the basis of allocation of costs as reasonable, no interference is really called for. In any case, we have noted that the assessee has adopted TNMM as most appropriate method, and the revenue authorities have neither made a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cing Officer under section 92CA(3) of the Act cannot be sustained."(emphasis supplied) Reliance in this regard is also placed on the decision of the Hon'ble Delhi Bench of the Tribunal in the case of Hero Motocorp Ltd vs Addl CIT (ITA No 5130/Del/2010), wherein the Hon'ble Tribunal, while deleting a similar transfer pricing adjustment, held as under: "Even otherwise, there is no basis or justification for the TPO for arriving at the conclusion that the arm's length price for model fee should have been only to the extent of 25% of the payment made towards model fee. The TPO has not given any basis or justification for his conclusion that only 25% of the model fee paid by the assessee would be the arm's length price. He has not applied any of the methods prescribed under Section 92C(1) of the IT Act for determining the arm's length price." Further, the Hon'ble Special Bench in the case of LG Electronics India Pvt Ltd (supra) held as under: "As regards the contention that methods are tools for determining the ALP, we find that there no dispute the main purpose of Chapter X is to determine the ALP of an international transaction, but such determination can be done only by way of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CUP method. It is submitted that for application of CUP, availability of comparable uncontrolled transaction is a prerequisite. The TPO, however, determined the arm's length price on the basis of assumptions and surmises. In view of the aforesaid, it is respectfully submitted that the adjustment made by the TPO is liable to be deleted. Reliance in this regard is placed on the decisions of the Hon'ble Delhi Bench of the Tribunal in the case of AWB India Pvt Ltd vs Addl CIT (ITA No 4454/Del/2012). The Hon'ble Tribunal held as under: "27. Further, the TPO applied the CUP method for benchmarking the international transaction pertaining to availing of management services, discarding the TNMM applied by the assessee. While doing so, as correctly pointed out, the TPO remained oblivious of the fact that Rule 10B(1)(a) of the Rules stipulates 'comparable' and 'uncontrolled transactions', both of which elements are absent herein. Only a general observation was made by the TPO, to the effect that no independent party would have made payment in uncontrolled circumstances. In 'CIT vs. EKL Appliances Ltd.', vide order dated 29-03- 2012 passed in ITA Nos. 1068/2011 and 1070/2011 (copy placed on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herein the Hon'ble Tribunal held as under: "Facts this year in which royalty has been paid based on the same agreement as in earlier are identical. Therefore, respectfully following the decision of the Tribunal in assessee's own case in assessment years 2003-04 and 2004-05 (supra), we set aside the order of CIT(A) and delete the addition made" 14.2 Ld. Departmental Representative on the other hand submitted that the international transactions of payment of royalty should satisfy the benefit test. He argued that in this case the payment of royalty has not resulted in benefit to the assessee. He submitted that the benefit must be tangible and not passive. In this regard, Ld. Departmental Representative placed reliance upon the decision of the ITAT, Mumbai Bench in the case of Deloittee Consulting India Pvt. Ltd. vs. DCIT I.T.A. No. 579, 1272, 1273/Mum/2011; ITAT, Pune, Bench decision in the case of Patni Computer Systems Ltd. vs. DCIT in I.T.A. Nos. 426 & 1131/PN/06 and ITAT, Delhi Bench decision in the case of Ericsson India Private Ltd. vs. DCIT in I.T.A. No. 5141/Del/2011. 14.3 Assessee in the rejoinder has made the following submissions:- "It is submitted that the entire busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee is not a relevant criteria for determination of arm's length of an expenditure incurred by the assessee. Further, recently in the case of SC Enviro Agro India Ltd vs DCIT (ITA No 2057 & 2058/Mum/2009) the Hon'ble Mumbai Bench of the Tribunal held that "The TPO has to examine whether the price paid or amount paid was at arms length or not under the provisions of Transfer Pricing and its rules. The rule does not authorize the TPO to disallow any expenditure on the ground that it was not necessary or prudent for assessee to have incurred the same." Reliance is also placed on the following decisions wherein it has been held that the TPO cannot make transfer pricing adjustment on the basis whether or not an expenditure benefits the assessee is not relevant for determination of ALP: - M/s. Ericsson India Pvt. Ltd. vs. DCIT (ITA No. 5141/Del/2011) - Dresser Rand India Pvt Ltd vs Addl. CIT (ITA No 8753/Mum/2010) - LG Polymers India Pvt. Ltd vs Addl. CIT (ITA No 524/Vizag/2010) - KHS Machinery (P) Ltd. vs. ITO : 146 TTJ 692 - SC Enviro Agro India Ltd vs DCIT (ITA No 2057 & 2058/Mum/2009) - AWB India Pvt Ltd vs Addl. CIT (ITA No 4454/Del/2011) The appellant applied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany. Therefore, under these facts and circumstances, in our opinion, the order passed by the TPO on this aspect is based on no evidence and the same is liable to set aside qua the impugned adjustment". The decision of the Hon'ble Tribunal supports the case of the appellant and does not advance the case of the ld. DR. The Hon'ble Tribunal held that that no compensation is warranted if it is shown that no concrete and tangible benefit has accrued to the assessee. However, in the instant case, the appellant has demonstrated that it received significant benefits in the form of technical know-how and assistance in consideration of payment of royalty. Payment of royalty has not been held to be a non-bona fide expenditure in the earlier years. Further, in the earlier years, TNMM has been accepted to be the most appropriate method for the purpose of benchmarking the international transaction of payment of royalty. In assessment year 2004-05, the Transfer Pricing Officer, applying TNMM, determined the arm's length price of international transaction of payment of royalty at Rs 3,12,29,088 as against the actual payment of Rs 4,42,11,041. However, the addition made by the TPO was deleted by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Rules." The appellant also seeks to place reliance on the following decision, wherein similar international transactions of payment of royalty, pursuant to approval of the Government, has been held to be at arm's length and adjustment made by the TPO holding arm's length price to be NIL, was deleted: - DCIT vs. Sona Okegawa Precision Forgings Limited (ITA No. 5386/Del/2010) - Hero Motocorp Limited vs Addl CIT (ITA No 5130/Del/2010) - ThyssenKrupp Industries India Ltd vs Addl CIT (ITA No. 6460/Mum/2012) - Abhishek Auto Industries Ltd. vs. Commissioner of Income Tax (ITA No 1433/Del/2009) Further, in the case of SKOL Breweries relied upon by the Ld DR, the assessee justified the transaction of payment of royalty solely on the basis of press note issued by the government of India without placing on record any comparable uncontrolled transaction. However, the appellant in the Transfer Pricing study and during the assessment proceedings has place on record the comparable uncontrolled transactions for benchmarking of international transactions of royalty." 14.6 We have carefully considered the submissions as above. 14.7 We find that in this case the assessee has made the paym ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt research and development activity on its own and totally depends upon the associated enterprise for provision of technology. The new products are designed and developed largely in the US based Research and Development and product creation centre of the AE. The assessee regularly access this Tech Packages for use in local development and manufacturing processes for the footwear and apparel styles manufactured locally in India which is largely the adaptations of the globally developed styles. The aforesaid technology has been patently by the AEs and therefore, cannot be used with out the permission of the AE. Thus, we agree with the submissions of the assessee that entire business of the assessee depends upon the technology provided by the AE and without the license to use such technology, the assessee would not be able to continue this business. 14.10 Further the premium value of the product allows the assessee to increase the sales and charge higher price which the leads to higher profitability. It would also be noted that during the relevant previous year the total revenue of the assessee increased to Rs. 451.97 crores from Rs. 360.95 crores in the preceding previous year regi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TR 381, wherein it was held that "in applying the test of commercial expediency for determining whether an expenditure was wholly and exclusively for business, the expenditure has to be adjudged from the point of view of the businessman and not of revenue". 14.13 We further note that it is on the basis of the same agreement the royalty was paid in earlier years. In earlier years the payment of royalty has not been held to be non-bonafide expenditure by the TPO. On these basis also the TPO's conclusion that there is no benefit to the assessee from the payment of royalty is unsustainable. In view of the foregoing discussions, we hold that payment of royalty in this case satisfies the benefit test. The benefit is undoubtedly tangible and it not passive as argued by the Ld. Departmental Representative. 14.14 Furthermore, assessee has duly submitted comparable instances to bench mark royalty as under:- (i) Instances of royalty paid by third party licensees/ distributors (ii) Agreement between Double D'Import S.A.R.I (France) with Adidas International for payment of royalty @ 12% (iii) Agreement of sportsvision with Adidas international for payment of royalty @ 10% (iv) Agreement o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on which TDS needs to be deducted as per provisions of Chapter XVII-B of the I.T. Act, 1961. Assessing Officer asked the assessee to make the reconciliation statement of expenses and TDS. Referring to the said reconciliation, Assessing Officer observed that there was a short deduction of Rs. 36,69,882/- In view of this non-deduction at source on the payment, Assessing Officer proposed to disallow the same u/s. 40(a)(ia) of the Act. 17. Before the DRP, assessee submitted that the payment in question was made to ICC and tax was deducted at source and paid to the Government. However, this entry was not reflected in the TDS return due to a dispute with ICC which had claimed that this tax was not deductible at source on the payment made to them. Accordingly, Assessee submitted that if the tax has been deducted at source and paid to the Government, then it cannot be a case of disallowance u/s. 40a(ia) merely on the ground that this amount was not shown in the TDS return filed by the assessee. Considering the above, DRP observed that in view of the factual position stated by the assessee that it was not a case on which disallowance was warranted. However, it directed the Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X
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