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TMI Blog2014 (11) TMI 550X X X X Extracts X X X X X X X X Extracts X X X X ..... that:- Following the decision in M/s. Castrol India Ltd. Versus Addl. Commissioner of Income-tax [2014 (1) TMI 78 - ITAT MUMBAI] - The copy of certificate of the engineer of vendor is not sufficient to allow the claim of assessee at higher rate of 80% - The assessee has failed to furnish the product catalogue and certificate from the competent authorities to establish the nature and use of the asset to show that it is energy saving device eligible for depreciation at higher rate of 80% - The assessee has also not produced any evidence in support of its alternative claim of depreciation at the rate of 60% applicable to computer systems - Decided against assessee. Disallowance relating to IT cost deleted – Held that:- Following the decision in M/s. Castrol India Ltd. Versus Addl. Commissioner of Income-tax [2014 (1) TMI 78 - ITAT MUMBAI] – it has been held that in so far as the allocation/reimbursement of COE3 expenses is concerned, the assessee has submitted before us that there is no dispute about the fact that significant costs were incurred related to COE3 project deployed by the BP group worldwide and the assessee company as a part of the said group had derived benefit - the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AX [2010 (2) TMI 211 - SUPREME COURT] followed and the disallowance made made on account of assessee's claim for bad debts written off is deleted – Decided in favour of assessee. - ITA No. 8191/Mum/2010, ITA No. 8359/Mum/2010, ITA No. 8371/Mum/2010 - - - Dated:- 14-11-2014 - Shri R. C. Sharma, AM And Shri Vivek Varma, JM,JJ. For the Petitioner : Shri Apurva Shah Shri Dhanesh Bafna For the Respondent : Shri J. Premanand ORDER Per R. C. Sharma (A. M. ) The assessee and Revenue have filed cross appeals against the order of CIT(A) for A.Y. 2005-06. The assessee has also filed appeal against the order of CIT(A) for assessment year 2006-07. 2. Since common grounds are involved in all the years under consideration, therefore, all these appeals were heard together and are now disposed of by this consolidated order. 3. In the A.Y.2005-06, the first grievance of the assessee relates to assessee s eligibility u/s.80IB in respect of different nature of income. 3.1 Learned AR placed on record order of Tribunal in assessee s own case for the A.Y.2002-03 2003-04, wherein the issue has been decided by the Tribunal. The observation of the Tribunal at page 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e by themselves as they contain both substantive as well as procedural provisions. The word 'derived from' is narrower in connotation as compared to the words 'attributable to'. By using the expression 'derived from' Parliament intended to cover sources not beyond the first degree. The assessee has claimed deduction u/s 801B in respect of receipts which are incidental to the business and so beyond the first degree. Respectfully following the said decision of Hon'ble Supreme Court, we uphold the order of the learned CJT(Appeals) on this issue confirming the disallowance made by the A 0 u/s 801B in respect of first four items of other income. 27. Respectfully following the order of the Tribunal dated 141h September 2012(supra) passed in assessee's own case for A.Y. 2002-03, we uphold the impugned order of the id. CIT(A) confirming the disallowance made by the AO on account of assessee's claim for deduction u/s 801B in respect of first four items of other income and delete the said disallowance to the extent it was in respect of income from insurance claim. Ground no. 9 is of the assessee's appeal is partly allowed. 3.2 We have considere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l at page 20 21 para 38 are as under :- 35 We have heard the arguments of both the sides on this issue and also perused the material on record. Although the Id. Counsel for the assessee has relied on the copy of certificate of the engineer of vendor placed at page no. 291 of his paper-book in support of the assessee's claim for higher deprecation at the rate of 80%, we agree with authorities below that the same is not sufficient to allow the claim of assessee at higher rate of 80%. The assessee has failed to furnish the product catalogue and certificate from the competent authorities to establish the nature and use of the asset to show that it is energy saving device eligible for depreciation at higher rate of 80%. The assessee has also not produced any evidence in support of its alternative contention raised before us claiming depreciation at the rate of 60% applicable to computer systems. We therefore, find no merit in ground no. 14 raised by the assessee in its appeal and dismiss the same. 5.2 We have considered rival contentions and found that in assessee s own case the claim of higher rate of depreciation on energy saving devices were declined. Respectfully follo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eployed by the BP group worldwide and the assessee company as a part of the said group had derived benefit thereof. As submitted by him, the dispute is about the basis of allocation and want of details in this regard. He has submitted that the copies of invoices raised in this regard by the AEs were furnished by the assessee along with respective allocation keys. Keeping in view this submission made by the learned counsel for the assessee as well as on perusal of the relevant details available on record, we agree with the contention of the learned counsel for the assessee that there is no justification in the action of the TPO in ignoring all these details and taking the ALP of the relevant transactions at Nil. In our Opinion, it is incumbent impomi the TPO to work out the ALP of the relevant transactions by following some authorized method and the entire cost borne by the assessee cannot he disallowed by taking the ALP at Nil keeping in view the facts and circumstances of the case and the relevant details furnished by the assessee. The learned counsel for the assessee in this regard has submitted that in the subsequent years i.e. assessment years 2005-06 and 2006-07, a similar iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f internal sales) as compared to the results of the benchmarking analysis. Accordingly, the arms length price/ rate at which royalty is paid is not in dispute here. The Appellant being a public limited company and taking into account corporate governance considerations, has voluntarily restricted the payment of royalty to 10% of its profit in the TCA between the Appellant and Castrol Ltd., UK. As per the said agreement, the amount of Royalty payable shall be 3.5.% of internal sale which was further capped to 10% of profits. The alternative limit of 10% of profits is voluantary limit that has been self imposed by the Appellant. The Appellant highlighted that the Royalty actually paid based on 10% of profits is substantially lower than what it would have paid based on the SIA approval. Had the Appellant paid royalty @ 3.5% on internal sales. the payment of royalty would be almost ₹ 23.94 crores more than what it has actually paid. The effective royalty paid by the appellant works out to 1.68% of sales as against the approval obtained of 3.5% of sales. Also as per the agreement, the appellant is required to pay royalty on profits as long as the royalty payment does not exce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that neither these comparables selected by the assessee in its TP study report were rejected by her nor any new comparables were selected by her by making a fresh search in order to show that the payment of royalty by the assessee to its AE was not at arm's length. She simply relied on the approval of SIA to hold that any royalty paid by the assessee on exports and other income was not allowable and disallowed the royalty payment to the extent of ₹ 40,51,486/- treating the same as the royalty paid by the assessee in respect of exports sale and other income. We are unable to agree with this strange method followed by the TPO to make a TP adjustment in respect of royalty payment which is not sustainable either in law or on the facts of the case. She has neither rejected the method followed by the assessee to bench-mark the transaction in respect of payment of royalty nor has been adopted any recognized method to determine the ALP of the said transactions. The approval of SIA adopted by the TPO as basis to make TP adjustment in respect of royalty payment was untenable and even going by the said basis wrongly adopted by the TPO, no TP adjustment in respect of royalty payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TAT, while adjudicating the Revenue's appeal for Assessment Year 2001-02 (ITA No. 3245/Mum/2005) has held that expenditure on advertisement films is revenue expenditure and not capital expenditure. 12.2 Consistent with this view and the view taken by me while deciding the appeal for Assessment Year 2002-03 and Assessment Year 2004-05, direct the Assessing Officer to allow expenditure on advertisement films. Accordingly ground no. 12 is allowed. 8.1 We found that the issue is covered by the order of the Tribunal in assessee s own case for A.Y.2003-04. The precise observation of the Tribunal for A.Y.2003-04 are as under :- 41. As regards the issue raised in ground no. 2 relating to the disallowance made on account of advertisement expenses, it is observed that this issue is squarely covered in favour of the assessee by the order of the Tribunal dated 30th July 2009 (supra) for A.Y. 2001-02 wherein order of the Id. CIT(A) deleting the similar disallowance made by the AO on account of advertisement expenses treating the same as capital expenditure was upheld by the Tribunal following its order in assessee's own for A.Y. 1998-99. Respectfully following the said dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... next grievance of the assessee relates to claim of CENVAT u/s.145A. 13.1 We found that exactly similar issue has been dealt by the Tribunal in its order for A.Y.2003-04. The relevant observation of the Tribunal at para 16 page 24 is as under :- 24 As regards the issue raised in ground no. 8 relating to addition made on account of MODVAT credit by including the same in the value of closing stock, the Id. Representatives of both the sides have agreed that a similar issue has already been decided in assessee's own case for A.Y. 2001-02 wherein the same was restored by the Tribunal to the file of AO vide order dated 30th July 2009 passed in ITA No. 2363/Mum/2005 with a direction to make the adjustment on account of excise duty also to the value of opening stock as well as sales and purchase in accordance with section 145A. Respectfully following the said order of the Tribunal, we restore this issue to the file of AO for deciding the same afresh as per same directions as given by the Tribunal in A.Y. 2001-02. Ground no. 8 of the assessee's appeal is accordingly treated as allowed for statistical purposes. 13.2 We have considered rival contentions and gone through the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Court, we delete the disallowance made on account of assessee's claim for bad debts written off and allow ground no. 11 of the assessee's appeal. 15.2 We have considered rival contentions. In view of the decision of the Hon ble Supreme Court in the case of TRF Limited, 323 ITR 397(SC), we do not find any infirmity in the order of CIT(A) for directing to allow claim of bad debts. 16. The next grievance of the assessee relates to disallowance of long service awards. 16.1 This has been dealt by the AO at para 11. The Tribunal in A.Y.2001-02 (ITA No.2363/Mum/2005, dated 30-7-2009) has dealt this issue in favour of assessee. The precise observation of the Tribunal is as under :- 14. Ground (iii) of the revenue is against the deletion of disallowance of ₹ 21,45,832/- on account of long service award. This issue is also covered by the decision of this bench of the Tribunal in assessee s own case for the earlier assessment year wherein at paragraph 2 on page 2, the tribunal has followed the decision taken by the co-ordinate bench for the assessment year 1999-2000 and 1998-99 and upheld the deletion of the addition by the CIT(A). Consistent with the view taken t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s have agreed that this issue is squarely covered against the assessee and in favour of the Revenue by the order of the Tribunal dated 13th April 2009 (Supra) passed in assessee's own case for A.Y. 2001-02, wherein the similar issue was decided against the assessee by following the decision of the Hon'ble Bombay High Court in the case of Scope Industries Pvt. Ltd. 289 ITR 195 as well as that the Tribunal in assessee's own case for A.Y. 2000-01. Respectfully following these judicial pronouncement we decide this issue against the assessee and dismissed ground no. 13 of its appeal. 18.2 We have considered rival contentions and perused the order of the Tribunal in assessee s own case for A.Y.2001-02. The issue with regard to claim of depreciation of assets of Silvasa unit was declined by the Tribunal in assesse s own case by following the decision of Hon ble Bombay High Court in the case of Scope Industries Pvt. Ltd., 289 ITR 195. Respectfully following the order of the Tribunal, we confirm the action of the lower authorities for decline of claim of depreciation on assets of Silvasa unit. 19. In the result, appeals of the assessee (i.e. ITA Nos. 8191 8371/Mum/2010) an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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