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TMI Blog2019 (5) TMI 1796X X X X Extracts X X X X X X X X Extracts X X X X ..... findings of the Co-ordinate Bench. We find no reason to interfere in the order of the division bench and the same is hereby upheld. Therefore, respectfully following the decision of Co-ordinate Bench we allow ground raised by the assessee. Adjustments made by the TPO on a without prejudice basis in respect of the other segments namely consumer Lifestyle Distribution, Healthcare distribution and Healthcare contract Manufacturing division - HELD THAT:- As decided in own case [2018 (3) TMI 211 - ITAT KOLKATA] issue is squarely covered in favour of the assessee. Nature of expenses - lease rent paid in respect of motor cars - revenue or capital expenditure - HELD THAT:- As the issue is squarely covered in favour of the assessee by the decision of Co-ordinate Bench in assessee s own case [2018 (4) TMI 503 - ITAT KOLKATA] and there is no change in facts and law and the revenue is unable to produce any material to controvert the above said findings of the Co-ordinate Bench. We find no reason to interfere in the said order of the Co-ordinate Bench and the same is hereby upheld. Excess depreciation to the tune of 15% claimed by the company on moulds - HELD THAT:- As the issue is squarely cov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vour of the assessee. The ld. Counsel for the assessee submitted that the present issue is squarely covered by the above said order of the Tribunal, a copy of which is also placed before the Bench. 6. The ld. DR relied upon the orders of the authorities below. 7. We see no reason to take any other view of the matter then the view so taken by the division bench of this Tribunal in assessee's own case vide order dated 04.04.2018. In this order, the Tribunal has inter alia observed as under: "6. We have heard the rival submissions and perused the materials available on record including the paper book of the assessee. We find that similar issue had cropped up before this tribunal in assessee's own case for the Asst Years 2009-10 , 2010-11 , 2011-12 and 2012-13 and similar arguments were advanced by both the sides. We find that in the order passed for the Asst Year 2011-12, this tribunal had held as under:- 10. We have heard the rival contentions & perused the materials available on record. In the instant case the TPO has treated the MSSA received by the assessee as stewardship services and for the benefit of AE. Accordingly the TPO valued the ALP of these services at NIL value. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ancial research, warranties and guarantees, credit management, the establishment and management of finance and lease companies and all further banking activities, including long-term finance plans; iv. development of data processing d. fiscal and legal matters , including patents, trademarks and customs duties, particularly in international transactions ; e. personal matters particularly with respect to : i. the selection and training of personnel ; ii. an adequate personnel policy; f. insurances; g. admittance at the Company's specific request and at mutually agreed terms of a reasonable number of employees of the Company to its premise to the extent to which Philips has the free right to do so, so that they can acquaint themselves with commercial and other knowledge as specified above, familiarize themselves with the organization of the Philips Concern and with working methods used by it or receive advice on specific matters in the fields described above; h. sending at the Company's specific request such experts from Philips to the Company's offices as may be agreed between the parties for such period or periods as may be agreed between them to advise the Company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry of emails from Pages 333 to 378 and further emails which are enclosed in Exhibit II from pages 800 to 854 of Paper Book. He also referred to the exclusion of 12000000 Euros towards the Shareholder function costs in the overall cost allocation to the assessee company which is enclosed in page 795 of the Paper Book. We find that the assessee had also furnished before the lower authorities , the details of specific benefits derived by it on each of the emails corresponded between the assessee and KPENV comprising of various services rendered by KPENV pursuant to the MSSA. In fact the benefits derived from each of the services is furnished in the separate column in the said reply dated 11.1.2013 before the ld TPO which is also enclosed as Exhibit II in the Paper Book filed by us. The ld TPO simply replied in his remand report filed before the ld DRP to these emails and the reply of the assessee by stating that the services rendered are only in the nature of control, supervisory and monitoring functions. The assessee in turn filed rejoinder to this remand report by specifically pointing out the benefits derived from each of the services and also by objecting to the remand report of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.1. Hence based on the aforesaid order of ld DRP in the hands of KPENV for the Asst Year 2009-10, we find that the ld DRP had treated the receipts of Management Support Services Charges from assessee herein (i.e. Philips India Ltd) in the hands of KPENV as FTS or Royalty and made it taxable in India. So once the same is accepted as FTS or Royalty in the hands of KPENV, the nature of payment cannot be different in the hands of the assessee herein by simply placing reliance on the benefit test, even though the benefits derived by the assessee pursuant to MSSA has been elaborated in detail by the assessee by way of substantial cost reduction. We also find that the assessee had paid service tax of ₹ 14,87,24,134/- on payment of Management Support Service Charges of ₹ 125,27,30,863/-. 4.3. We find that the ld DR argued that assessee had not proved that services were received by the assessee and had derived commercial and economic benefits out of the MSSA. He argued that only general reply was given by the assessee with regard to the benefits derived. He argued that these services were rendered by KPENV to other group companies also and quantum of benefit vis a vis the ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Transfer Pricing Officer's authority in this case, which is to determining the arm's length price for international transactions referred to him or her by the Assessing Officer, rather than determining whether [such services exist or benefits have accrued. That exercise - of factual verification is retained by the Assessing Officer under Section 37 in this case.] Indeed, this is not to say that the Transfer Pricing Officer cannot -after a consideration of the facts - state that the arm's length price is 'nil' given that an independent entity in a comparable transaction would not pay any amount. However, this is different from the Transfer Pricing Officer stating that the assessee did not benefit from these services, which amounts to disallowing expenditure. That decision is outside the authority of the Transfer Pricing Officer. 36. In this case, the issue is whether an independent entity would have paid for such services. Importantly, in reaching this conclusion, neither the Revenue, nor this Court, must question the commercial wisdom of the assessee, or replace its own assessment of the commercial viability of the transaction. The services rendered by CWS a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er pricing analysis. The basis for the costs incurred, the activities for which they were incurred, and the benefit accruing to the Taxpayer from those activities must all be proved to determine first, whether, and how much, of such expenditure was for the purpose of benefit of the Taxpayer, and secondly, whether that amount meets ALP criterion. In the present case however, the arrangement between the AE and the Assessee is not a cost sharing arrangement but a payment for specific services rendered. To this extent the above observations of the Hon'ble High Court may not be relevant to the present case. 28. The following aspects would require consideration in order to identify intragroup services requiring arm's length remuneration: - Whether services were received from related party. - Nature of services including quantum of services received by the related party. - Services were provided in order to meet specific need of recipient of the services. - The economic and commercial benefits derived by the recipient of intragroup services. - In comparable circumstances an independent enterprise would be willing to pay the price for such services? - An independent t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... following the judicial precedents relied upon hereinabove, we hold that the determination of ALP for Management Support Services at Rs NIL is unwarranted and accordingly the upward adjustment made by the ld TPO in the sum of ₹ 300,40,09,360/- is deleted. Accordingly, the Ground Nos. 2, 4.1. and 4.3. raised by the assessee are allowed. " 8. As the issue is squarely covered in favour of the assessee by the decision of Coordinate Bench in assessee's own case (supra) in I.T.A. No. 2489/Kol/2017 forA.Y 2013-14, and there is no change in facts and law and the revenue is unable to produce any material to controvert the above said findings of the Co-ordinate Bench. Therefore, respectfully following the decision of Co-ordinate Bench we allow ground No. 2 raised by the assessee. 9. Ground No. 3 raised by the assessee relates to determination of arm's length price for advertising , marketing and promotion (AMP) expenses. 10. When this issue was called out for hearing the ld. Counsel for the assessee invited our attention to the order dated 04.04.2018, passed by the Tribunal in assessee's own case in I.T.A. No. 2489/Kol/2017, for assessment year 2013-14, whereby the issue of arm's len ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view of the court the Revenue has failed to demonstrate the existence of an international transaction only on account of the quantum of AMP expenditure by MSIL. Secondly, the Court is of the view that the decision in Sony Ericsson Mobile Communications India (P) Ltd. case (supra) holding that there is an international transaction as a result of the AMP expenses cannot be held to have answered the issue as far as the present Assessee MSIL is concerned since finding in Sony Ericsson to the above effect is in the context of those Assessees whose cases have been disposed of by that judgment and who did not dispute the existence of an international transaction regarding AMP expenses." In view of we note that the facts of the above cases are identical to the present issue, thus, the principle laid down by the Hon'ble Delhi High Court in the case of Maruti Suzuki India Limited (supra) are applicable to the instant case. Respectfully following the same we dismiss the ground of appeal filed by the Revenue. Respectfully following the same, the upward adjustment made by the ld TPO and upheld by the ld DRP is hereby directed to be deleted. Accordingly, the Grounds 3 , 4.2 & 4.3. raised by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Income Tax (1992) 193 ITR 0321 (SC) "We are aware of the fact that, strictly speaking, res judicata does not apply to IT proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. One these reasoning, in the absence of any material change justifying the Revenue to take a different view of the matter-and, if there was no change, it was in support of the assessee-we do not think the question should have been reopened and contrary to what had been decided by the CIT in the earlier proceedings, a different and contradictory stand should have been taken. We are, therefore, of the view that these appeals should be allowed and the question should be answered in the affirmative, namely, that the Tribunal was justified in holding that the income derived was entitled to exemption under ss. 11 and 12 of the IT Act of 1961." 15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estyle Distribution, Healthcare distribution, Healthcare contract Manufacturing division etc, have been discussed and adjudicated in favour of the assessee. The ld. Counsel for the assessee submitted that the present issue is squarely covered by the above said order of the Tribunal, a copy of which is also placed before the Bench. 24. The ld. DR relied upon the orders of the authorities below. 25. We see no reason to take any other view of the matter then the view so taken by the division bench of this Tribunal in assessee's own case vide order dated 07.02.2018. In this order, the Tribunal has inter alia observed as under: "13. The Ground No. 13 raised by the assessee is without prejudice to the grounds raised by it in Grounds 2 to 5, wherein the ld TPO concluded that an adjustment may be required to be made to the international transactions of the assessee in relation to its other segments, if it is held later in judicial proceedings that intra-group service charges is actually required to be paid. In this regard, the observations of the ld TPO in para 61.5 page 164 of his order would be relevant and the same are reproduced hereunder for the sake of convenience:- 61.5. Witho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to produce any material to controvert the above said findings of the Co-ordinate Bench. We find no reason to interfere in the said order of the Co-ordinate Bench and the same is hereby upheld. 28. Ground No. 8 raised by the assessee relates to use of non-contemporaneous data by the TPO. At the outset itself, the ld. Counsel for the assessee informs the Bench that the assessee does not want to press this ground, therefore we dismiss the ground as not pressed. 29. Ground No. 9 raised by the assessee relates to disallowance of ₹ 15,52,53,987/- being lease rent paid in respect of motor cars treating the same as capital expenditure. 30. When this issue was called out for hearing, the ld. Counsel for the assessee invited our attention to the order dated 04.04.2018, passed by the Tribunal in assessee's own case in I.T.A. No. 2489/Kol/2017, for assessment year 2013-14, whereby the issue of lease rental paid in respect of motor cars treating the same as capital expenditure has been discussed and adjudicated in favour of the assessee. The ld. Counsel for the assessee submitted that the present issue is squarely covered by the above said order of the Tribunal, a copy of which is al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee herein is a lessee and is entitled for deduction towards lease rentals paid towards cars taken on finance lease. He also stated that the lessor had confirmed that it had claimed depreciation in the relevant Asst year on the said cars which were leased out to the assessee. He further placed reliance on the decision of the Hon'ble Rajasthan High Court in the case of Rajshree Roadways vs UOI reported in 263 ITR 206 (Raj) wherein it was held that the lessee would be entitled to the deduction of rent paid by him and the benefit of the depreciation shall be available to owner of the asset. Further the Special Leave Petition (SLP) filed by the department against the said decision before the Hon'ble Supreme Court has been dismissed. He further placed reliance on the co-ordinate bench decision of this tribunal in the case of The Royal Bank of Scotland N.V. vs DDIT in ITA No. 1738/Kol/2009, 1926/Kol/2010 , 519/Kol/2011 and 1805/Kol/2012) dated 13.4.2016 wherein on identical matter, the issue was decided in favour of the assessee. In response to this, the ld DR fairly conceded that the issue is covered by the decision of the Hon'ble Supreme Court in the case of ICDS Ltd supra. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12.2017 wherein it was held as under:- "27. We have heard the rival contentions and perused the material available on record. In the instant case, issue relates to depreciation claimed by the assessee @ 30% on moulds on the ground that these are used in plastic factories. However, the amount of depreciation claimed by the assessee on moulds was disallowed by the assessee on the ground that higher rate of depreciation on moulds is available only if these are used in the plastic factory. The view taken by the AO was subsequently confirmed by the Ld. DRP. Now the issue before us arose whether assessee is eligible for depreciation on moulds at higher rate in the given facts and circumstances. It is undisputed fact that assessee has been claiming depreciation on moulds @ 30% in all the earlier years which was granted by the Revenue and no dispute with regard to rate of depreciation arose in the earlier years despite the fact that the assessments for earlier years were framed u/s 143(3) of the Act. In this regard, we observe that the assessee was allowed depreciation at higher rate in all the earlier years and no disallowance was made on account of this. However, we note that similar d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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