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TMI Blog2021 (4) TMI 202X X X X Extracts X X X X X X X X Extracts X X X X ..... e voluminous data submitted by assessee. Ld. DRP merely observed that the clinical trials are not conducted on its own, the assessee neither has personnel nor infrastructure to conduct such trials, therefore, it cannot be termed as technical service. Hence, he rejected the submissions of the assessee without actually verifying the data before them. Therefore, it is fit case for restoring the matter to the AO/TPO for fresh adjudication of the matter on merits. Accordingly, these grounds raised by the assessee are allowed for statistical purposes. Disallowance u/s. 36(1)(iii) - sufficiency of own funds - HELD THAT:- Since, assessee has sufficient funds and by following the above decision, no disallowance of interest u/s. 36(1)(iii) of the Act is warranted. Accordingly these grounds raised by the assessee are allowed. Education Cess allowability - Addition u/s 40(a)(ii) - d eductible expenses u/s. 37 - whether the expression any rate or tax levied as it appears in Section 40(a)(ii) includes cess ? - HELD THAT:- As decided in SESA GOA LIMITED [ 2020 (3) TMI 347 - BOMBAY HIGH COURT] The CBDT Circular, is binding upon the authorities under the IT Act like Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndia P. Ltd.[ 2012 (10) TMI 127 - ITAT MUMBAI] that the taxes were liability of the assessee company under the terms of agreements and accordingly disallowance made by AO were deleted. Further, we also observe that liability of payment of service tax is of recipient of services and since assessee is the receiver of services, it is the liability of the assessee company to bear service tax. Hence we hold that TPO was not justified to state that liability of bearing service tax was of assessee-company. In view of above, we hold that disallowances made by TPO on account of taxes, services tax is not justified and we direct to delete the same. Disallowance of entire technical know how royalty payment on traded goods - HELD THAT:- As decided in own case. [ 2019 (1) TMI 1870 - ITAT MUMBAI] as already held that the agreements between J J India and J J USA for payment of royalty has to be considered in the light of the approval of the RBI. We do not find any substance in the findings of the TPO that there is no need for paying royalty for technical/marketing know-how. We also do not find any force in the findings of the TPO that this royalty is deemed to be included in Brand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounds raised by the assessee are alternative pleas, which requires no adjudication. He brought to our notice para 9.27 10.11 of TPO order and para 8.2 of Ld. DRP order and submitted that the similar issue has already been decided by the Coordinate Bench of ITAT in assessee's own case for Assessment Year : 2008-09 (ITA No. 6142/Mum/2017) on merits in favour of the assessee. 6. On the other hand, Ld. DR relied on the orders passed by revenue authorities, however he conceded that these ground are covered by the order of ITAT. 7. Considered the rival submission and material placed on record. We are adjudicating the grounds No. 2, 3 5 and all other grounds are dismissed which are alternative pleas and academic in nature. We notice from the records that the identical ground has already been decided by the Coordinate Bench of ITAT in ITA No. 6142/Mum/2017 for AY 2008-09 in assessee's own case on merits. For the sake of clarity, which is reproduced below:- 15. Thus, it is to be understood from the decision of the Hon'ble Delhi High Court in Maruti Suzuki India Ltd. (supra), unless, there is an arrangement between the assessee and the AE for incurring AMP expenditu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ust put it on record, the decision of the Hon'ble Delhi High Court in Maruti Suzuki India Ltd. (supra) has subsequently been followed not only by the same High Court in a number of other cases but also by different Benches of Tribunal, including Mumbai Benches, insofar it relates to the issue whether AMP expenditure incurred in India gives rise to international transaction with the AEs. It is relevant to observe, the DRP has upheld the adjustment made by the Transfer Pricing Officer simply for the reason that the Department has no remedy available against an order of the DRP favourable to the assessee. As regards the decisions relied upon by the learned Departmental Representative as noted herein before, on a careful analysis of each one of these decisions we are of the considered opinion that they will not be of any help to the Department, since, they were rendered prior to the decision of the Hon'ble Delhi High Court in Maruti Suzuki India Ltd. (supra) and all of them proceeded on the basis of the decision rendered in Sony Ericson Mobile Communications (supra). In view of the aforesaid, we hold that the AMP expenditure incurred by the assessee not being an international t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are allowed for statistical purposes. Ground No. 26 with regard to adjustment u/s. 145A of the Act. 12. This ground is not pressed by the assessee, therefore this ground becomes infructuous as not pressed. Ground No. 27 to 28 with regard to disallowance u/s. 36(1)(iii) of the Act. 13. Before us, Ld. AR brought to our notice para 11 of TPO order and para 15 of Ld. DRP order and submitted that the similar issue has already been decided by the Coordinate Bench of ITAT in assessee's own case and the decision of Jurisdictional Bombay High Court in the case of Reliance Utilities, wherein the Hon'ble Bombay High Court observed that assessee has interest free funds, therefore no disallowance u/s. 36(1)(iii) is warranted. 14. On the other hand, Ld. DR relied on the orders passed by revenue authorities. 15. Considered the rival submission and material placed on record. We notice from the records that the identical ground has already been decided by the Coordinate Bench of ITAT in assessee's own case and ITAT had restored the issue to the AO to analyse the existence of interest free funds and while applying the judgment of Hon'ble Jurisdictional Bomba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Circular, is binding upon the authorities under the IT Act like Assessing Officer and the Appellate Authority. The CBDT Circular is quite consistent with the principles of interpretation of taxing statute. This, according to us, is an additional reason as to why the expression cess ought not to be read or included in the expression any rate or tax levied as appearing in Section 40(a)(ii) of the IT Act. 28. In the Income Tax Act, 1922, Section 10(4) had banned allowance of any sum paid on account of 'any cess, rate or tax levied on the profits or gains of any business or profession'. In the corresponding Section 40(a)(ii) of the IT Act, 1961 the expression cess is quite conspicuous by its absence. In fact, legislative history bears out that this expression was in fact to be found in the Income Tax Bill, 1961 which was introduced in the Parliament. However, the Select Committee recommended the omission of expression cess and consequently, this expression finds no place in the final text of the provision in Section 40(a)(ii) of the IT Act, 1961. The effect of such omission is that the provision in Section 40(a)(ii) does not include, cess and consequently, cess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arrangement, the same should not be questioned while calculating arms length price. Reliance by the assessee on the decision of the Tribunal in the case of Dresser Rand India Pvt. Ltd. in ITA No. 3509/M/08 is well founded. Considering the entire facts in totality in the light of the brand usage agreement and the approval of the RBI, the findings of the Ld. CIT(A) is set aside. The AO is directed to delete the addition of ₹ 60,00,000/-. Ground No. 13 is allowed. 9. Considering the decision of Tribunal in assessee's own case for A.Y. 2002-03 which was followed in A.Y. 2006-07 in ITA No. 83/Mum/2011, for A.Y. 2008-09 in ITA No. 7133/Mum/2012 and further in A.Y. 2009-10 in ITA No. 829/Mum/2014, on identical ground, we confirmed the order of Ld. CIT(A). In the result, ground No. 1 of the appeal is dismissed. 2.1. Respectfully following the said decision, ground No. 1 raised by the Revenue is dismissed. 26. Therefore, respectfully following the above decision, we reject the contention of revenue. Accordingly, this ground raised by the revenue is dismissed. Ground No. 2 6 with regard to Service Tax paid on brand usage royalty paid and on know how royalty p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R D cess paid on technical know-how royalty on traded goods and manufactured products by allowing ground No. 16 of the appeal taken by the assessee. 28. Therefore, respectfully following the above decision, we reject the contention of revenue. Accordingly, these ground raised by the revenue are dismissed. Ground No. 3 with regard to disallowance of entire technical know how royalty payment on traded goods. 29. Considered the rival submissions and material placed on record on these grounds. We notice from the record that the identical ground has already been decided by the Coordinate Bench of ITAT in ITA No. 4161/Mum/2017 for Assessment Year 2007-08 in assessee's own case on merits. For the sake of clarity, which is reproduced below:- 3. Ground No. 2 raised by the Revenue is with regard to the action of the ld. CIT(A) in deleting the adjustment made on account of payment of royalty on traded finished goods made by the assessee to Johnson Johnson, USA. We find that this issue is also covered by the decision of this Tribunal in assessee's own case (supra) for assessment year 2005-2006, wherein it was held as under:- 14. We have considered the submiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was held as under:- 17. We have considered the submission of the parties and find that in assessee's own case for A.Y. 2002-03 in ITA No. 4092/Mum/2007 and ITA No. 4070/Mum/2007, the Tribunal passed the following order: 55. We have considered the submissions and perused the orders. As we have already held hereinabove that the payment of royalty has to be considered in the light of the agreement between the assessee and J J USA, for the same reasons, we do not find any reason to interfere with the findings of the Ld. CIT(A). 18. Further, on similar issue for A.Y. 2006-07 in ITA No. 83/Mum/2011 dated 05.02.2014 the tribunal passed the following order: 55. We have considered the submissions and perused the orders. As we have already held hereinabove that the payment of royalty has to be considered in the light of the agreement between the assessee and J J USA, for the same reasons, we do not find any reason to interfere with the findings of the Ld. CIT(A). Ground No. 2 is accordingly dismissed. 19. Considering the decision of Tribunal in assessee's own case for A.Y. 2002-03 in ITA No. 4092/Mum/2007 and in ITA No. 4070/UM/2007, which was foll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd No. 5 raised by the Revenue is dismissed. 34. Therefore, respectfully following the above decision, we reject the contention of revenue. Accordingly, this ground raised by the revenue is dismissed. Ground No. 7 with regard to depreciation on testing equipments. 35. Considered the rival submissions and material placed on record on these grounds. We notice from the record that the identical ground has already been decided by the Coordinate Bench of ITAT in ITA No. 7133/Mum/2012 for Assessment Year 2008-09 in assessee's own case on merits. For the sake of clarity, which is reproduced below:- 36. Ground No. 31 32 relate to the disallowance of depreciation claimed on testing equipments. This grievance of the assessee was considered by the DRP vide Objection No. 13 at page-18 of its order wherein the DRP has followed his own finding for A.Y. 2006-07. Similar issue was considered by the Tribunal for A.Y. 2000-01, 2001-02, 2002-03 and 2006-07 in ITA Nos. 2774/M/04, 9106/M/04, 4070/M/07 and 83/M/2011. We find that the Tribunal in A.Y. 2006-07 has considered this issue at para-16 of its order and at para-18, the Tribunal has considered its finding of the Co-ordinat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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