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TMI Blog2015 (4) TMI 369X X X X Extracts X X X X X X X X Extracts X X X X ..... given by the DRP for the AY 2007-08 could not have been challenged by the Revenue before the Tribunal and was binding. Thus ITDC cannot be considered as a comparable company to qualify for inclusion in the final set of comparables for determining the ALP of the assessee’s international transaction. The impugned order on this issue is set aside. - Decided against assessee. National Research Development Corporation Ltd., Panacea Biotech and Suven Life Science - Once the TPO selected the three companies in his original order, which were not adversely commented in the remand report, it implied that they survived for the consideration of the ld. first appellate authority. In such a situation, it became the duty of the ld. CIT(A) to either include the same in the final set of comparables or give reasons for their exclusion. Since there is no whisper in the impugned order about the comparability or otherwise of these three companies, we consider it appropriate to remit this matter to the file of the ld. first appellate authority for deciding it afresh as per law, after allowing a reasonable opportunity of being heard to the assessee. - Decided in favour of assessee for statistical pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d international travel holiday trip to its employees. This is nothing but a part of package to the employees. By no standard, these two expenses can be considered as not allowable. - Decided in favour of assessee. - ITA No.5853/Del/2011 - - - Dated:- 29-1-2015 - SHRI R.S. SYAL AND SHRI A.T. VARKEY, JJ. For The Assessee : Shri Nageswar Rao, Shri Aniket Shri Deepak Agrawal, Advocates. For The Department : Shri Peeyush Jain, CIT, DR ORDER PER R.S. SYAL, AM: This appeal by the Revenue arises out of the order passed by the CIT(A) on 31.10.2011 in relation to the assessment year 2005-06. 2. The first two grounds are against the deletion of addition of ₹ 80,99,741/- made by the Assessing Officer (AO) on account of transfer pricing adjustment. 3. Briefly stated, the facts of the case are that the assessee was established in India in June, 2003 as a 100% subsidiary of Honda R D Company Ltd, Japan, for undertaking research and development activities in relation to Honda Automobile and Power Equipment companies. Since research and development was to be mainly carried out by the Japanese company, the assessee was floated for conducting research and deve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PO vide his remand report dated 14.12.2010, a copy of which is available on record, reiterated that the activities carried out by the assessee were rightly classified by him as R D. As regards six comparables chosen by the assessee, the TPO agreed with the first three companies as correctly comparables. The remaining three companies at sl. nos. iv) to vi) of the above list were held to be incomparable. The ld. CIT(A), after considering the submissions advanced on behalf of the assessee along with the remand report of the TPO, came to hold that apart from the three companies admitted by the TPO to be comparable, another company, namely, ITDC, was also comparable. This position about the inclusion of ITDC in the final set of comparables was taken by the ld. CIT(A) in the light of the direction given by the Dispute Resolution Panel (DRP) for its inclusion in the list of comparables for the assessment year 2007-08. On the basis of the results of these four companies, the ld. CIT(A) held that no addition was called for. The Revenue is aggrieved against the deletion of the addition on account of transfer pricing adjustment. 6. We have heard the rival submissions and perused the releva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be specified by R D; and (3) Such other services as the parties hereto may from time to time agree upon. 8.3. A bare perusal of the contents of Article 1 clearly brings out that the assessee undertook to carry on Market research; Design research and concept making; Product planning and proposals; Study, analysis and development of the products; Technical consultation about its holding company s designated products, etc. Article 2 provides for performing services in the nature of filing and processing of applications for patents, models and designs, trademarks and copyright, etc. 8.4. At this juncture, it is apposite to note the contents of para 1 of the Article 3, which reads as under:- Article 3. Ownership of Proprietary Rights. 1. R D (i.e. the Japanese company) shall exclusively own or have the right to use all ideas, concepts, inventions, patents, utility models, designs, trademarks, copyrights, drawings, records and any and all work results conceived, generated or produced during, or as a result of, the services performed by HRID (i.e. the assessee company) under this Agreement (the Work Results ) 8.5. Para 1 of the Article 3 makes the things manifest abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee has outlined the activity as: New model introduction, Development, Direction, Survey, etc., and Development plan support , Self Start Development, Launch Support , Graphics change, Launch support. The third classification under the first division is Existing Products: Survey, Report, despatch . The assessee has outlined the activity done by it with the description as Competitors New Model product performance investigation , Honda Bike, competitors bike rusting condition survey , Competitors future plan forecast and strategy survey. In the last classification under this division, namely, Quality improvement , there is a mention of Market quality countermeasure support , MP quality regular investigation. The second Division in this table is Power Product Division. It has again classifications, such as, R D Structure , Local Development , Factory Support sale , Market Study and Information gathering dispatch. Against such classifications, there is again reference to some sort of research, such as, : Power volume line separation of AC/DC of electric power Genset , EU 3 5 Local Adaptability execution. Even a cursory look at the outline of the work carrie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... member of national and international travel and tourism organizations. Given the nature of activities carried out by the assessee vis- -vis Indian Tourism Development Corporation, we fail to appreciate as to how these two can be considered as comparable with each other. ITDC is in entirely different business activity bearing no resemblance worth the name with the assessee s nature of activity, which is R D. We find no reason to uphold the impugned order on this score, which frustrated the view taken by the TPO in his remand report on the issue of incomparability of ITDC. 8.9. As regards the reliance of the ld. CIT(A) on the DRP s inclusion of ITDC in the list of comparables for the AY 2007-08, we find that the same does not merit acceptance for two reasons. First, the direction given by the DRP for a later year can have no binding force in the context of an earlier year. The second reason is that the Department, even if aggrieved by the direction given by the DRP on 12.7.2011 for the assessment year 2007-08 could not have filed appeal against the order passed by the AO giving effect to such direction. Sub-section (2A) to section 253 empowering the Revenue to file appeal against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s shown to have been purchased on 30.9.2004. On going through the details of additions to fixed assets, the AO observed that many assets were purchased/put to use for less than 180 days. The assessee, on being called upon to furnish the details in this regard, submitted copy of bills, but did not file any evidence regarding putting to use the above assets. It was, therefore, held by the AO that the claim of depreciation was to be restricted to 50%. The assessee contended before the ld. CIT(A) that these assets were purchased on 30.09.2004 and put to use on the same date as these were earlier being used by Liaison office of the parent company which was operating in the same premises in which the assessee was carrying on its operations during the relevant period. It was further submitted that: No physical movement of assets was required since the appellant company was operating from the same premises as that of the L.O. It was, therefore, claimed that these second-hand assets were immediately put to use by the assessee. The ld. CIT(A) deleted the disallowance by observing that the assessee produced invoices raised by Writer Relocations (Packing and Moving Company) which transported ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch amounting to ₹ 23.56 lac were held to be not allowable. The ld. CIT(A) ordered for the deletion of these two additions. 11.2. After considering the rival submissions and perusing the relevant material on record, it is patent from the assessment order that the repair expenses amounting to ₹ 11.61 lac were incurred in respect of rented accommodation provided by the assessee to its employees. We fail to appreciate as to how this expenditure cannot be allowed as deduction when the employees to whom such rented premises were allotted, on which the repair work was carried out, were discharging duties for the assessee company. This is an expenditure incurred for the welfare of its employees and deserves to be allowed. As regards the other expenses amounting to ₹ 23.56 lac, we again find that the assessee allowed international travel holiday trip to its employees. This is nothing but a part of package to the employees. By no standard, these two expenses can be considered as not allowable. We, therefore, uphold the impugned order on this issue. These two grounds fail. 12. In the result, the appeal is partly allowed. The order pronounced in the open court on 29. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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