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TMI Blog2019 (9) TMI 1506X X X X Extracts X X X X X X X X Extracts X X X X ..... of quality difference and deleting the addition made by TPO / AO by applying CUP to arrive at ALP in respect of Bisoprolol Fumerate without giving adjustment for quality as claimed by the assessee ? (b) Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in deleting adjustments in respect of technical consultancy fees ? (c) Whether on the facts and in the circumstances of the case and in law, the Tribunal was right in deleting disallowance on share buyback expenditure without appreciating that it is a capital expenditure and not allowable u/s. 37 of the Income Tax Act, 1961? (d) Whether on the facts and in the circumstances of the case and in law, the Tribunal was right in confirming delet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... LP of the imported API. On application of CUP, the TPO determined the ALP at Rs. 36,831/- per kg and ALP for purchase of 345 kgs was adjusted at Rs. 1.27 crores and the transfer pricing adjustment of Rs. 1.03 crores was made being the excess amount paid. (b) Being aggrieved, the respondent carried the issue in appeal to the Tribunal. The impugned order of the Tribunal held that the application of CUP method to the facts of this case is the most appropriate method to determine the ALP. In fact, this was so conceded by the respondent in view of the binding decision of the co-ordinate bench of the Tribunal in the case of Serdia Pharmaceuticals India Pvt. Ltd. Vs. ACIT, (2011) 44 SOT 391. However, it was the contention of the respondent that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce in the open market. This has to be factored in while determining the ALP as has been recognized in the aforementioned rule 10B(1)(a)(ii) of the Income Tax Rules. Moreover, the TPO himself has accepted this price adjustment on account of perception of quality by allowing the adjustment at 10% in the Assessment Year 2010-11. (d) In the above view, the question (a) as proposed does not give rise to any substantial question of law. Thus, not entertained. 4. Regarding question (b) : (a) The respondent had made a payment of Rs. 3 crores to its one AE viz. M/s. Merck KGaA in terms of consultancy agreement between the above AE and itself. The agreement provided that the AE will give technical consultancy in various areas to the respondents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder of the Tribunal deleted the dis-allowance of expenses incurred in share buyback. This by following the decision of Delhi High court in CIT Vs. Selan Exploration Technology Ltd. (2010) 188 Taxmann 1. In the above case, it was held that share buyback expenditure incurred by the respondent did not result in a benefit of an enduring nature as after the buyback the capital employed had gone down. Thus, the expenditure incurred has not resulted in bringing into existence any new asset, thus was not in the nature of the capital expenditure. On the aforesaid basis, the Delhi High Court held that once it is held that the expenditure is not capital in nature, then, the expenditure is allowable under Section 37 of the Act as a revenue expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ote that the words "wholly and exclusively" used in Section 37 of the Act does not mean "necessarily". Thus, it is for the assessee to decide whether the expenditure should be incurred in the course of his business and once it is found that it is incurred wholly and exclusively for the purposes of business, then it is deductible under Section 37 of the Act. It further records that it is relevant to note that an attempt was made to introduce the word "necessity" in Section 37 of the Income Tax Bill of 1961. However, this had led to public protest and resulted in dropping the word "necessity" when the Income Tax bill of 1961 was passed into the Income Tax Act, 1961. Thus, the view of the Tribunal on this issue cannot be faulted as it is in ac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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