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TMI Blog2019 (5) TMI 411X X X X Extracts X X X X X X X X Extracts X X X X ..... were heard together and are being disposed of by way of this consolidated order. ITA no. 4777/Mum./2016 Revenue's Appeal - A.Y. 2005-06) 3. In ground no.1, the Revenue has challenged allowance of assessee's claim of depreciation on non-compete fee. 4. Brief facts are, in the previous year relevant to the assessment year 1999-2000, the assessee had acquired the Glass Division from Nicholas Piramal India Ltd. In connection with the said acquisition, the assessee had paid an amount of Rs. 18 crore towards non-compete fee. The non-compete fee paid by the assessee was capitalized over various fixed assets in the ratio of their values estimated on a fair basis arrived at by the technical experts. In the return of income filed for the assessment year 1999-2000, the assessee claimed depreciation at the applicable rate depending upon the value allocated to the respective block of assets. Following the said methodology, the assessee also claimed depreciation in the impugned assessment year. Relying upon his decision in assessment year 1999-2000, the Assessing Officer disallowed assessee's claim of depreciation on the non-compete fee capitalized over different assets. The assessee chall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of depreciation by treating the non-compete fee as an intangible asset. The same view was reiterated by the Tribunal while deciding assessee's appeal for the assessment year 2006-07 in ITA no.5360/Mum./2010, dated 16th December 2016, and in assessment year 2011-12 in ITA no.157/Mum./2011, dated 4th January 2007. Therefore, facts being identical, following the consistent view of the Tribunal in the orders referred to above, as well as the decision of different High Courts cited supra, we uphold the decision of the learned Commissioner (Appeals) on the issue. Ground is dismissed. 9. Ground no.2 is on the issue of deletion of disallowance of interest on borrowed funds amounting to Rs. 1,41,56,808. 10. Brief facts are, in the financial year 1999-2000, the assessee had invested a sum of Rs. 25.87 crore in Ceylon Glass Co. Ltd., Sri Lanka, and in financial year 2002-03, it had invested Rs. 0.12 crore in Gujarat Glass U.S. Inc. USA. In the financial year 2001-02, the assessee had made further investment in Ceylon Glass Co. Ltd. and the total investment stood at Rs. 28.89 crore. The Assessing Officer was of the view that the investment made by the assessee in the aforesaid entities were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t year 2001-02, the Tribunal in ITA no.9645 and 9498/Mum./2004, dated 2nd March 2016, has decided the issue in favour of the assessee by holding that the investment of funds in sister concerns are for the purpose of business. The same view was reiterated by the Tribunal while deciding the issue in assessment year 2006-07, vide ITA no.8360/Mum./2010, dated 16th December 2016, and for the assessment year 2011-12 in ITA no.157/Mum./2016, dated 4th January 2017. Facts being identical, following the consistent view of the Tribunal in assessee's own case as referred to above, we uphold the decision of learned Commissioner (Appeals) on the issue. Ground raised is dismissed. 15. Ground no.3 relates to deletion of disallowance made of Rs. 9,84,533 on account of interest attributable to interest free loan to the sister concern and director. 16. Brief facts are, during the assessment proceedings, the Assessing Officer while verifying the financial statement of the assessee noticed that outstanding dew of Rs. 3 lakh from Shri Vijay Shah and Rs. 1,98,74,850, from Piramal Enterprises Ltd. have been shown as part of loans and advances. Being of the view that the assessee had advanced interest f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed of Rs. 14,85,755. Learned Commissioner (Appeals) while deciding the issue in appeal, allowed assessee's claim since the employees' contribution was paid within the grace period allowed under the PF Act and much before the due date of filing of return of income under section 139(1) of the Act. 22. We have considered rival submissions and perused material on record. Undisputedly, the assessee has paid the employees contribution to PF and pension fund within the grace period allowed under the relevant Acts. Moreover, such payments have been made by the assessee much before the due date of filing of return of income for the impugned assessment year as per section 139(1) of the Act. That being the case, following the decision of the Hon'ble Jurisdictional High Court in CIT v/s Ghatge Patil Transports Ltd., [2014] 368 ITR 749 (Bom.), we uphold the decision of learned Commissioner (Appeals) by dismissing the ground raised. 23. In ground no.5, the Revenue has challenged deletion of addition made on account of transfer pricing adjustment on the marketing fee paid to the Associated Enterprises (AE). 24. Brief facts are, during the year under consideration the assessee had paid mark ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribed in the statute. Further, he submitted, when the method applied by the assessee has been consistently followed over the years and accepted by the Department, in the absence of any material change in facts, the Transfer Pricing Officer cannot adopt a different approach in the impugned assessment year. He submitted, the transaction relating to sale of bottles and marketing fee are completely different transactions, hence, cannot be aggregated together for benchmarking. Thus, he submitted learned Commissioner (Appeals) decision on this issue should be upheld. 27. We have considered rival submissions and perused material on record. As could be seen from the facts on record, in the relevant previous year, the assessee had entered into various international transactions with its AEs, such as, sale of goods to AE in USA, royalty on sales received, sale of goods to AE in Sri Lanka and marketing fee paid to the AE in USA. It is relevant to observe, the assessee has benchmarked each of the aforesaid transactions separately by applying one of the prescribed methods. The Transfer Pricing Officer while determining the arm's length price of marketing services fee paid has aggregated it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allenged the aforesaid decision of the A.O. before the first appellate authority. 30. After considering the submissions of the assessee in the light of the decisions cited before him, learned Commissioner (Appeals) observed that the provision for doubtful debt made by the assessee is not for meeting a liability but for diminution in the value of the asset. Therefore, relying upon the judicial precedents cited before him the learned Commissioner (Appeals) reduced the disputed amount from the book profit. 31. The learned Departmental Representative relied upon the observations of the Assessing Officer. Whereas, the learned Authorised Representative strongly supported the view expressed by the learned Commissioner (Appeals). 32. We have considered rival submissions and perused material on record. As could be seen, the Assessing Officer has added back the provision for doubtful debt taking recourse to Explanation-1(c) to section 115JB(2) of the Act, as it is not set out for meeting any ascertained liability. However, the facts on record reveal that the amount in dispute is not a liability but debt receivable by the assessee. That being the case, Explanation-1(c) to section 115JB wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rest has to be computed on such loan as no such interest free loan would have been advanced by any third party. The Transfer Pricing Officer observed, the assessee had advanced loan to another AE at the interest rate of 7.3% to 8.4%. He also observed that RBI permits borrowing at a rate equivalent to 8.2% to 8.77%. Thus, he proposed an adjustment of Rs. 10,45,175, towards arm's length price of the interest on the interest free loan. Further, he noticed that the assessee had provided corporate guarantee without charging any guarantee commission. Thus, he proceeded to determine the arm's length price of corporate guarantee commission @ 3% which resulted in an adjustment of Rs. 73,19,047. The adjustments proposed by the Transfer Pricing Officer were added back by the Assessing Officer. The assessee challenged the aforesaid additions before the first appellate authority. 43. Learned Commissioner (Appeals) after considering the submissions of the assessee directed the Assessing Officer to compute the arm's length price of the interest on loan to AE by applying LIBOR rate instead of Prime Lending Rate (PLR) of RBI. As regards corporate guarantee commission, learned Commissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cision of the Tribunal in computing corporate guarantee fee @ 0.5%. In view of the aforesaid, we uphold the decision of the learned Commissioner (Appeals) on the issue. Grounds are dismissed. 47. In ground no.6, the Revenue has challenged the deletion of addition made on account of provision for doubtful advances while computing book profit under section 115JB of the Act. 48. This ground is identical to ground no.6 of ITA no.4777/Mum./ 2016. In view of decision in Para-32 of the order, we dismiss this ground. 49. In the result, appeal is dismissed. ITA no.4598/Mum./2016 Assessee's Appeal - A.Y. 2007-08) 50. The grounds raised by the assessee are in relation to determination of arm's length price of interest on interest free loans advanced to the AE and guarantee commission on corporate guarantee provided to the AE. 51. We have dealt with these issues while deciding corresponding ground being ground no.5 in Revenue's appeal in ITA no.4778/Mum./2016. Accordingly, these grounds are decided in terms of our decision in para-46 of the order. 52. In the result, appeal is partly allowed. ITA no. 4780/Mum./2016 Revenue's Appeal - A.Y. 2008-09) 53. The issue raised in g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from its AE on payment of Rs. 18,39,048. As alleged by the Transfer Pricing Officer, the assessee did not benchmark these transactions in the transfer pricing study report. He has further alleged that, though, the assessee submitted that he has benchmarked the transaction by applying comparable uncontrolled price (CUP) method, however, no details relating to CUP were furnished. Thus, the Transfer Pricing Officer concluded that the price paid by the assessee towards purchase of moulds is not at arm's length. Further, stating that there is no CUP available, on ad-hoc basis he made a downward adjustment of 25% to the price paid which resulted in an adjustment of Rs. 4,59,762. 67. The adjustment proposed by the Transfer Pricing Officer was added back to the income of the assessee. Though, the assessee challenged the aforesaid addition before learned Commissioner (Appeals), however, he did not interfere with the decision of the Transfer Pricing Officer. 68. The learned Authorised Representative submitted, due to non-availability of comparable uncontrolled transaction in public domain, the assessee benchmarked the transaction by obtaining a certificate from an independent valuer. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39;s length price by applying entity level TNMM. Needless to mention, before deciding the issue, the Assessing Officer must afford reasonable opportunity of being heard to the assessee. This ground is allowed for statistical purposes. 72. In the result, appeal is partly allowed. ITA no.4779/Mum./2016 Revenue's Appeal for A.Y. 2009-10 73. In ground no.1, the Revenue has challenged allowability of assessee's claim of depreciation on non-compete fee. 74. This ground is identical to ground no.1 of ITA no.4777/Mum./ 2016. Following our decision in Para-8 of the order, we dismiss the ground raised. 75. In ground no.2, the Revenue has challenged the deletion of disallowance of interest under section 36(1)(iii) of the Act. 76. This ground is identical to ground no.2 of ITA no.4777/Mum./ 2016. Following our decision in Para-14 of the order, we dismiss the ground raised. 77. In ground no.3, the Revenue has challenged deletion of disallowance of interest on borrowed funds towards interest free loan to the sister concern. 78. This ground is identical to ground no.3 of ITA no.4777/Mum./ 2016. Following our decision in Para-19 of this order, we dismiss the ground raised. 79. Grounds ..... X X X X Extracts X X X X X X X X Extracts X X X X
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