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TMI Blog2014 (2) TMI 555X X X X Extracts X X X X X X X X Extracts X X X X ..... ance on the ground that the expenditure being personal in nature cannot be made in the case of a company – Relying upon the decision in case of Sayaji Iron & Engg. Co Versus Commissioner of Income Tax [2001 (7) TMI 70 - GUJARAT High Court] - DRP has not pointed out the expenses which are not in connection with business activity of the assessee inspite of facts that the details were filed by assessee before DRP – Decided in favour of assessee. Professional sponsorship – In earlier years the expenditure were Rs.2.23 crores and Rs.4.36 crores in assessment year 2001-02 and assessment year 2002-03 respectively under the head "Professional Sponsorship" - Whereas in the assessment year under consideration the total expenditure incurred is of Rs.23,11,26,595 - The assessee filed only scanty details of the foreign visits of doctors etc - The addresses of doctors and the organizers have not been given in the details filed by assessee even before us - The assessee was not able to justify with documentary evidence that entire expenditures had been incurred by the assessee for the purpose of its business - The earlier orders as referred to by ld. AR could not be considered as precedent in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orked out to 4.84% on sales and therefore royalty of 4% paid by assessee to J&J US is lesser than Arm's Length of 4.84% - No disallowance can be made by TPO on the basis that there was no necessity by the assessee to pay royalty at the enhanced rate of 4% as it was excessive and unnecessary. Rule 10B(1) of Income Tax Rules, 1962 does not authorize the TPO to make disallowance of any expenditure on the ground that it was not necessary or prudent for the assessee to have incurred the same - Such kind of observations and thereafter to make disallowance by TPO while considering the price at Arm's Length are outside his purview - The quantum of expenditure can be examined by TPO as per law but in judging the allowbility thereof as business expenditure, TPO has no authority to disallow the entire expenditure or part thereof on the ground that the said expenditure is excessive - The TPO has to examine whether price paid or the amount paid was at Arm's length under the provisions of Transfer Pricing and its Rules - It is relevant to state that the Ld.AR stated that the average royalty paid by assessee is comparable and it is lower than the Arm's Length rate of 4.84% as per information a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r foreign purchases. 3. Before we proceed to adjudicate this appeal, we consider it relevant to state that, we heard the appeal on 14.10.2013. However, while going through the order of TPO, it was observed that TPO in his order for the assessment year under consideration and while suggesting adjustments to be made in respect of the payment of royalty by the assessee on technical know-how as well as brand usage etc stated that similar disallowances were also made by him in his orders for assessment years 2003-04 to 2005-06 and on similar lines suggested the disallowances in the assessment year under consideration i.e. assessment year 2006-07; which are being disputed by the assessee in ground Nos.12 to 17, as mentioned hereinabove. In view of above, the matter was fixed for clarification on 30.10.2013. Ld. AR submitted that appeals for assessment years 2003-04 to 2005-06 are still pending before ld. CIT(A) but the appeal for the assessment year under consideration i.e. assessment year 2006-07 has come up to the Tribunal because this appeal is arising out of order of DRP and whereas in the preceding assessment years there was no constitution of DRP and the appeals were to be filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . CIT(A) and the appeal filed before Tribunal is pending. He has stated that in order to keep the issue alive the expenses are being treated as capital expenses. DRP also confirmed the action of AO on the ground that the issue has not attained finality. Hence, this appeal by the assessee. 4.2 At the time of hearing, the ld.AR submitted that the Tribunal in assessee's own case for assessment years 1997-98, 1998-99 and 1999-2000 in ITA Nos.145/Mum/2001, 2054/Mum/2003 and 2055/Mum/2003, respectively, by a common order dated 18.1.2013 by relying on its own decision in the case of assessee itself for assessment year 1991-92 in ITA No.1146/Mum/1997 has held that the said expenditure is revenue expenditure. He submitted that similar issue on identical facts again came before Tribunal for assessment years 2000-01 and 2001-02 in ITA Nos.2774/Mum/2004 and 9106/Mum/2004 and the Tribunal by its order dated 15.2.2013 decided the issue in favour of the assessee by following its earlier order in assessee's own case. He submitted that the same issue again came up before the Tribunal on identical facts for assessment year 2002-03 in ITA No.4070/Mum/2007 and the Tribunal by order dated 28.8.2013 h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iven to the AO stated that the issue is settled by the decision of various courts and the AO is directed to adjust opening stock of purchase and closing stock by including various duties and re-work out the disallowance. AO while passing assessment order added an amount of Rs.3,88,15,192/- to the total income of the assessee-company. Hence, assessee is in appeal before the Tribunal. 5.2 During the course of hearing, ld. AR submitted that the assessee follows exclusive method of accounting to determine the value of cost of goods sold. Hence, excise duty paid on closing stock is a part of inventories in the balance sheet. The AR submitted that similar issue was considered by Tribunal in the assessee's own case for assessment years 2000-01 and 2001-02 vide order dated 15.2.2013 (supra) and the Tribunal by considering its own order for AY 1999-2000 in ITA No.2680/Mum/2003 dated 18.1.2013 restored the matter to AO. He submitted that the issue for this assessment year be restored to the AO to decide it afresh as per direction of the Tribunal in respect of assessment year 1999-2000. Ld. DR has not disputed the above submission of ld. AR. 5.3 We have considered the submission of ld. Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,230/-. Hence, this appeal by the assessee. 6.2 At the time of hearing, ld. AR conceded that the above issue is covered against the assessee and the amount of cash discount is allowed to the assessee on actual basis by the Tribunal in the preceding assessment years. In view of above submissions of ld. AR, Ground No.3 of the appeal taken by assessee is rejected. 7. Ground No.4 of appeal of assessee reads as under : "4. The AO erred in law and in facts by disallowing 10% of the payments made to Crawford Bailey Co. aggregating to Rs.107,373 under section 40A(2)(b) of the Act on the ground that they are excessive and unreasonable. Without prejudice to the above, the Hon'ble DRP has erred in law and in facts in by not passing a reasoned order with respect to the above ground and accordingly, the order should be quashed. 7.1 AO, on perusal of tax audit report, observed that the assessee company paid to Crawford Bailey Co. aggregating to Rs.10,73,728/- and stated that it falls within the definition of persons referred to under section 40A(2)(b) of the Act. AO by following the assessment order of previous year, disallowed 10% of the said amount which comes to Rs.1,07,373/- u/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure on the ground that the same have not been incurred for purposes of business. Without prejudice to the above, the Hon'ble DRP has erred in law and in facts by not passing a reasoned order with respect to the above ground and accordingly, the order should be quashed." 8.1 AO has stated that the assessee had debited to profit and loss account a sum of Rs.42,46,34,000/- under the head "Travelling Expenses". Assessee was asked to give proof of payments made. That assessee filed its reply vide letter dated 18.12.2009, the details of which are given by AO at page 20 of the assessment order. AO, disallowed entire expenditure on the ground that the assessee has not provided complete details of the expenditure to find out the personal element and the genuineness of expenditure. In the objection filed before DRP, the assessee contended that AO never demanded bills and vouchers, which were available with the assessee. That same were produced before DRP. DRP after considering the details, filed by assessee, observed that element of personal use and that some expenses not having any connection with the business activity of the assessee could not be ruled out and accordingly direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arties and orders of authorities below as well as earlier orders of the Tribunals (supra). We agree that the disallowance on the ground that the expenditure being personal in nature cannot be made in the case of a company, in view of the decision of the Hon'ble Gujarat High Court in the case of Sayaji Iron Engg. Co (supra) and also in the case of Dinesh Mills Ltd. V/s VIT (2004) 268 ITR 502 (Guj). However, we observe that DRP has also stated that some of the expenditure claimed are not connected with business activity of the assessee. However, DRP has not pointed out the expenses which are not in connection with business activity of the assessee inspite of facts that the details were filed by assessee before DRP, as mentioned in the order of DRP itself. In view of above said adhoc disallowance of Rs.3,27,50,973/- out of travelling expenses claimed by assessee is not justified. Accordingly, we delete the same by allowing Ground No.5 taken by assessee. 9. Ground No.6 of appeal of assessee reads as under : "6. The learned AO erred in law and in facts by disallowing on ad-hoc basis 50% of the expenditure incurred towards professional sponsorship amounting to Rs 115,563,298 on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot produced any proof from the doctors and various other persons sponsored by the assessee for foreign visits as to how it was related to assessee's business. DRP has stated that keeping in view scanty details provided by assessee before the AO as well as before the DRP, DRP is of the view that unproved expenses cannot be considered for business purposes. However, DRP has stated that it cannot be denied that some of the expenses are necessary for the purposes of business and accordingly suggested to make disallowance of 50% of such expenses. Therefore, the AO was directed to allow 50% of the expenses claimed by assessee. Accordingly, AO inconfirmity with the direction of DRP added Rs.11,55,63,298/- to the total income of the assessee. Hence, assessee is in further appeal before us. 11. During the course of hearing, ld. AR referred pages 754 to 787 of the paper book and submitted that division wise detailed break-up of expenditure incurred for professional sponsorship was furnished before the AO. The ld. AR further submitted that there are guidelines for sponsoring the doctors to attend the conferences etc and referred pages 788 to 800 of the paper book which is a copy from the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on decision of ITAT in ITA No.925/Mum/2007 dated 19.7.2013 in the case of Merck Ltd V/s Dy.CIT. 13. We have carefully considered the orders of authorities below and also the submissions of the ld. Representatives of the parties. We have also considered the earlier orders of the Tribunal dated 15.2.2013 relating to assessment year 2001-02 and dated 28.8.2013 relating to assessment year 2002-03 (supra). We have also considered the cases referred to by assessee in its note. There is no dispute to the fact that the assessee could not file requisite details to justify that expenditure incurred by the assessee aggregating to Rs.23,11,26,595/- was wholly and exclusively for business purposes of the assessee. We observe that the assessee has placed reliance on the earlier orders of the Tribunal that similar expenses were allowed by Tribunal by confirming the deletion of 10% disallowance made by AO and deleted by ld. CIT(A). However, we observe that in the assessment year 2001-02 the total expenses incurred by assessee was Rs.2.23 crores and in assessment year 2002-03 it was Rs.4.36 crores under the head "Professional Sponsorship"; and whereas in the assessment year under consideration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hospitals etc across the country" 17. We have heard ld. Representatives of the parties and have perused the orders of authorities below. We observe that the assessee claimed depreciation in respect of testing equipments installed at various laboratories, doctors clinics and hospitals etc for the purpose of their own business / profession. AO has stated that the said equipments installed by assessee at the clinics of doctors, laboratories etc could not be considered being used by assessee for the purpose of its business and accordingly disallowed the claim of depreciation of Rs.63,69,962/-, which was also confirmed by DRP in its direction. 18. At the time of hearing, the ld. AR referred the decision of the Tribunal in assessee's own case for assessment years 2000-01 and 2001-02, order dated 15.2.2013 (supra), and also Tribunal decision for assessment year 2002-03 dated 28.8.2013 (supra), wherein the Tribunal considered similar issue on identical facts and by following the decision in the case of N R Jet Enterprises Ltd in ITA No.4474/Mum/2004, Mumbai Tribunal, dated 28.5.2008, a sister concern of the assessee, wherein the depreciation was allowed on the testing equipment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order should be quashed; 22. The AO has stated that the assessee was asked to furnish details of production and sale of items manufactured by the assessee company. It was noticed that there is a variation in actual amount of production, its sales and closing stock. That on being asked to furnish reasons for short fall, the assessee stated that it was due to distribution of various types of samples. The AO has stated that the reply of the assessee was evasive and to investigate the matter further, further details/explanations were asked from the assessee. The AO has stated that the assessee vide letter dated 18.12.2009 furnished the details but they were not filed division-wise, nor the details of the persons, institution, agents with address, samples and amount were filed. The AO has stated that genuineness of distribution of samples was not established. Therefore, the assessee was asked to submit details of total sales, free samples and link with purchase or production to establish the difference. The AO has stated that the assessee filed its reply vide letter dated 24.10.2009; which has been stated by AO at pages 33 to 36 of the Assessment Order. It is observed that the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, DRP restricted the disallowances to 75% of the expenditure claimed by assessee and directed the AO accordingly. 23. In view of above, AO made disallowance of Rs.11,85,03,996/- being 75% of the claim of the assessee of Rs.15,80,05,328/-. Hence, assessee is in appeal before the Tribunal. 24. Ld. AR submitted that the assessee filed division-wise break-up of free samples distributed and the details of which are also placed at pages 806 to 1014 of the paper book. He submitted that distribution of free samples is one of the promotional avenues to promote the product. That it is a normal trade practice. He submitted that there is a sufficient control in regard to distribution of free samples. Ld. AR referred the decision of Hon'ble Bombay High Court in the case of Brihan Maharashtra Sugar Syndicate Ltd.(supra) and the decision of Hon'ble Apex Court in the case of in the case of Smithkline Beecham Pharmaceuticals (India) Ltd. (supra) and submitted that free samples were given due to commercial exigency. He submitted that the assessee has also paid Fringe Benefit Tax in respect of the said expenditure incurred and therefore the expenditure cannot be disallowed. The ld. AR placed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... how he incurred the expenditure and why there is no documentary proof for such expenditure." We agree with the ld. AR that it is a commercial practice in the line of business of the assessee, to give free samples to promote its product. However, the assessee is expected to maintain details to enable the AO to verify as to whether the said samples had been given by assessee wholly and exclusively in connection with its business. On perusal of the details placed at pages 805 to 1014 of the paper book, we observe that the names with address are not given and therefore on the basis of details placed, AO could not verify genuineness of claim of the assessee. Further the contention of the assessee that it has paid Fringe Benefit Tax (FBT) and therefore no disallowance be made, has no merits. Payment of Fringe Benefit Tax (FBT) does not establish that expenditure has been incurred by the assessee for its business purpose. In view of above and considering the details placed before us and the decisions relied upon by ld. AR, we are of the considered view that on the facts and in the circumstances it will be fair and reasonable to restrict disallowance to 2% of the claim of assessee which co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w-royalty at the rate of 4% and Brand Royalty at the rate of 2%, net of taxes on net sales. 27.2 The TPO has stated that the assessee company set up its operation in India in the year 1957. TPO has stated that the assessee has paid technical know-how royalty at the rate of 4% for its product, in spite of the fact that some of the products were introduced by the assessee company long ago and the technology is fully adapted for such products. That only updating to technology, if available with its AE Johnson and Johnson, USA (hereinafter to be referred as J JUS) would be required. He has stated that the assessee company is having full-fledged Government approved Research and Development Facilities (R D) which are not only being used for adopting the technology but the improvement of products and also for developing the process, which resulted into making products suitable in the Indian climate/conditions. That R and D facilities of the assessee-company are so advanced that the same are being shared with group entities. He has stated that the assessee company had entered into an agreement with its AE, J J US to pay royalty for know-how received from its AE J J US at the rate of 2% o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the expenses for marking and promotion of branded products which are more than 10% of sale value. The business power of brand name/trade mark is not only because of ownership of these with J J US, but the actual efforts of the assessee-company. 27.4 The TPO has stated that if the expenses on technical services fee, trade mark fee, R D facilities and sales promotion expenses are considered together, the assessee company viz J J India is spending about 15% of the turnover towards these expenses. The TPO relying on his orders for assessment years, 2003,04, 2004-05 and 2005-06 has stated that if these expenses are considered together, the assessee is not required to make any payment for the use of trade mark/ brand name. 27.5 Further, TPO has stated that the assessee-company did not submit the informations regarding Technical services fees and trade mark fee charged by J J US to other manufacturing/trading entities of the group in the Asia Pacific and European Countries. That in the absence of these details, it is not possible to factually verify whether the royalties paid by assessee-company are in line with what is paid by other entities. He has stated it is not known whether oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Arm's length considering the volume of the transactions of the assessee. That the total sales of the assessee are Rs.1381.46 crores and the expenses are Rs.1271.53 crores. The contribution of royalty in the total expenses is about 4.21%. The assessee company has paid trademark license fee and technical service fee for all the business divisions which have international transactions. In the TNMM, if the controlled transactions are not benchmarked separately, it will be difficult to say that the transactions are at Arm's Length or not. The TPO has summarized the discussions on the issue of payment of royalty in para 6.1.1 and thereafter he has stated that on the basis of order for assessment year 2005-06, the payment of technical know how fee at the rate of 1% for all the manufactured product for the consumer segment, pharmaceutical segment and medical devices and brand royalty at the rate of 1% would be the Arm's Length royalty payable by assessee company. He has stated that this view is supported from the fact that from 1.6.1994 to 30.6.2002, the assessee had been paying technical know-how royalty at the rate of 2% only and no brand royalty was being paid though the assessee was u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reement dated 21.11.1994. The said agreement covered certain specific products as mentioned in the agreement. Subsequently, the assessee entered into a fresh agreement on 14.3.2002 and as per that agreement the scope was enhanced to cover various new products dealt by assessee-company and also some additional technical /marketing assistance was included. Ld. AR submitted that the additional technical /marketing assistance included under the agreement dated 14.3.2002 relates to marketing plan and strategy, the distribution net work, technological solution and programmes for information management etc. He submitted that copies of agreements dated 21.11.1994 and 14.3.2002 are placed in the paper book No.1 at pages 128 to 149 and at pages 150 to 175 respectively. Ld. AR submitted that it was proposed to revise technical know - how royalty from 2% to 4% and RBI accorded its approval vide letter dated 26.6.2002, copy placed at pages 179 of the paper book. He submitted that thereafter the assessee entered into a supplemental Technical know-how agreement on 29.8.2002 enhancing the royalty payable to its AE, J J US from 2% to 4% on sales, and copy of the said agreement is placed at pages 17 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dia P. Ltd. V/s DCIT in ITA No.3509/Mum/2008 (Assessment Year: 2004-05),order dated 31.7.2012 held that the royalty is to be remitted net of taxes and deleted the disallowance made by AO/ld. CIT(A). He submitted that the said issue is covered in view of the order of Tribunal in assessee's own case. 29.3 Ld AR further submitted that the TPO also suggested the disallowance of service tax paid by assessee. He submitted that service tax paid is not an international transaction and the same is out side the purview of International Transaction and therefore, the TPO was not justified to disallow service tax paid by assessee on the royalty paid to J J US. Ld. AR referred the decision of ITAT, Mumbai Bench in the case of DCIT V/s Starlite [2010] 40 SOT 421 (MUM.) and submitted that the Tribunal has held that adjustment if any arising due to computation of ALP are to be restricted only to International Transaction and not to be applied to entire turnover of the assessee. He submitted that the payment of service tax on the royalty paid by assessee to J J US is not international transaction and therefore, the same is outside the scope of TPO to make adjustment by suggesting disallowance. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... J J US, a reference was made to the website http://dipp.nic.in/ ('the website), a website of the Secretariat of Industrial Assistance('SIA'). The website contains details of royalty approvals granted by the SIA and the RBI. A search was conducted on the website to identify approval granted by the SIA/RBI in respect of royalty payments made between third parties in consideration for provision of technical know-how/marketing know-how for consumer healthcare products, pharmaceutical products and medical devices. Based on the analysis, the average royalty rate for the comparable technical know-how/marketing know-how approvals worked out to 4.84% on sales. Based on such analysis and the fact that royalty of 4% paid by assessee to J J US was lower than the arm's length rate of 4.84%. Hence royalty paid by the assessee to J J US meets the arm's length text. 32. We have considered the submissions of ld Representatives of the parties and the orders of authorities below as well as the material placed on record. We have also carefully considered earlier order of Tribunal in assessee's own case for assessment year 2002-03(supra) and also the cases placed on paper book. 33. We observe that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g, it was pointed out that TPO cannot dictate to the assessee as to how assessee should conduct its business and the assessee can incur expenditure. It is a fact that a similar issue was considered by ITAT in assessee's own case for assessment year 2002-03 vide order dated 28.8.2013 (supra) and the Tribunal held (vide para 49) that the agreement between the assessee-company and J J US for payment of royalty is to be considered in the light of approval of RBI. The Tribunal has also observed that there is no substance in the findings of the TPO that there is no need for paying royalty for technical/marketing know-how and accordingly confirmed the order of ld. CIT(A) by dismissing the ground of appeal taken by department before Tribunal on similar facts except that technical know-how royalty paid in the assessment year 2002-03 was at the rate of 2% whereas in the assessment year under consideration it is at the rate of 4% on sales. However, it was contended that payment of royalty at the enhanced rate of 4% is paid as per agreement entered into between the assessee-company and J J US dated 29.8.2002, copy placed at pages 176 to 178 of the paper book. That it was submitted that payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground that it was not necessary or prudent for the assessee to have incurred the same. It is relevant to state that the Ld.AR stated that the average royalty paid by assessee is comparable and it is lower than the Arm's Length rate of 4.84% as per information available on "website" of SIA which provides rate which is approved by SIA/RBI. We are of the considered view that the TPO cannot suggest the disallowance merely because as per his assumption it is excessive though the payment is at Arm's length. In view of above, we are of the considered view that the disallowance suggested by TPO and confirmed by DRP/AO of the royalty paid by assessee, when he has not found that the payment is not at arm's length/excessive under any of the method as prescribed u/s 92C(1) of the Act, can not be made under the Transfer Pricing Provisions. Therefore, we direct to delete the same and consequential Ground Nos.14 and 15 of the appeal taken by assessee are allowed. 34. In respect of Ground taken by assessee for making disallowance on account of tax, service tax paid by assessee on the payment of royalty, we observe that the said issue has already been considered by Tribunal in assessee's own ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he AO, transfer pricing adjustment should be made only on the allowed publicity and sales promotion expenses. 37. Relevant facts are that the TPO has stated that the assessee incurred publicity and sales promotion expenses of Rs.163.27 crores during the relevant financial year. The TPO has stated that said expenses on publicity and sales promotion has resulted into higher sales on which correspondingly higher royalty has been paid to the parent company J J US. Therefore, the benefit of higher publicity and sales promotion expenses are accrued to the parent company J J US but the cost thereof is not apportioned to the parent company. The TPO sought explanation from the assessee as to why the cost of arrangement as emanating from the records, is resulting into the benefit to the parent AE, but not apportioned as per section 92(2) of the Act. The TPO stated that the assessee and the parent company J J US should have shared sales promotion expenses in the ratio of royalty to sales or would have renegotiated a lower royalty rate. The assessee filed its reply stating interalia that assessee is engaged in the business of distributing the products in the Indian Market on its own account. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ores. Hence, TPO disallowed Rs.200.82 lakhs from the publicity and sales promotion expenses incurred towards cost allocable to parent company. DRP after considering the submissions of the assessee company confirmed the action of the TPO. Accordingly the AO disallowed a sum of Rs.200.82 lakhs while making assessment. Hence, assessee is in appeal before the Tribunal. 38. During the course of hearing, ld. AR submitted that it was an adhoc disallowance made by TPO and relied on the decision of Mumbai Bench of Tribunal in the case of Kodak India Pvt. Ltd. V/s Addl. Commissioner of Income Tax in ITA No.7349/Mum/2012 (AY 2008-09) dated 30.04.2013 and submitted that the Tribunal deleted similar kind of adjustment suggested by TPO on the ground that TPO cannot make a disallowance which is not within the precinct of specific method prescribed under section 92C(1) of the Act. He submitted that no adhoc disallowance can be made under the Transfer Pricing provisions. 39. On the other hand, ld. DR supported the order of AO/TPO and submitted that to consider marketing expenses the cost plus method could be applied. Since TPO has not followed any specific method as 2006-07 is the first year, t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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