9911796707
TMI Blog2023 (9) TMI 741X X X X Extracts X X X X X X X X Extracts X X X X ..... global level. If the AMP expenditure incurred by them benefited indirectly in the local/ international market it would not mean that it was an IT. The basic purpose of introducing the various provisions of chapter X, as stated earlier, was to prevent tax evasion in the transactions undertaken between an Indian entity and its overseas AE. In our opinion, a perceived/notional indirect benefit to the AE, due to incurring of certain expenditure by an assessee in India, is not covered by the TP provisions. It is a fact that the payment under the head AMP expenditure was made to third parties and that those parties were located in India. Thus we hold that the decisions made by the TPO / AO towards transfer pricing adjustment on account of AMP expenditure be deleted. Accordingly, these grounds raised by the assessee are allowed. Disallowance of payment of royalty on technology paid - HELD THAT:- Payment of royalty towards trademark for the year under consideration is based on the same agreement, which is considered by the co-ordinate bench for the assessment year 2009-10 [ 2021 (2) TMI 1358 - ITAT MUMBAI] Therefore we are of the view that the issue is covered by the above decision for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rvices rendered by Cadbury Holdings Limited be deleted. Disallowance u/s 14A - assessee computed a suo motu disallowance - assessee submitted before the Assessing Officer that the investments are made out of surplus funds available with the assessee and that the assessee did not borrow any funds in order to make investments - HELD THAT:- It is now a settled position that when the own funds are available, no disallowance is warranted under section 14A read with rule 8D. For the year under consideration, the reserves and surplus of the company as on 31/03/2011 is at Rs. 89, 988.09 lakhs and the investments made stands at Rs. 12, 881.07 lakhs, therefore, we see merit in the contention of the Ld.AR that no disallowance is warranted u/s 14A - Thus no disallowance towards interest is warranted under section 14A r.w.r.8D of the Act. With regard to the contention that the suo motu disallowance we notice that the Assessing Officer in the OGE passed for AY 2009-10 has deleted the disallowance made under section 14A and therefore we see merit in the submission of the ld AR that the suo moto disallowance based on the salary of employees in treasury department is being accepted by the revenue. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, we delete the addition made in this regard. Non grant of MAT - AR submitted that the MAT credit is carried forward from A.Y. 2010-11 and the credit was modified due to additions made in the assessment order for A.Y. 2010-11 - HELD THAT:- We are of the view that this issue needs to be factually examined for the purpose of allowing the credit towards carried for MAT credit from AY 2010-11. Therefore, we remit the issue back to the Assessing Officer to examine the status of the assessment order passed for AY. 2010-11 and accordingly give credit for the carried forward MAT for the year under consideration. Levy of interest u/s 234A - HELD THAT:- We notice that the AO has recorded in the assessment order that the assessee has filed the return of income on 30/11/2011. Therefore, as per the provisions of section 234A, no interest is leviable in assessee s case. Accordingly, the interest levied is deleted. Levy of Interest u/s 234C - As submitted by AO has levied interest u/s 234C on the assessed income whereas the provisions of section 234C talks about levy of interest on income returned - HELD THAT:- We accordingly remit the issue back to the Assessing Officer with a direction to exa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccordingly the additional ground is not admitted for adjudication. 3. The assessee Mondelez India Foods Private Ltd (formerly known as Cadbury India Limited) is a subsidiary of Cadbury Overseas Ltd UK which holds 58.63% and Cadbury Mauritius Ltd which holds 38.97% of the equity shareholding while the balance 2.41% equity share holding is held by Indian public company comprising of various shareholders. The assessee was incorporated in the year 1948 as Cadbury Fry (India) Private Limited. The Assessee was initially set up for processing imported chocolates and Bournvita, over the years, it expanded to cover a range of products in the chocolate, sugar confectionery and malted food drinks segment. The chocolate business contributes about 75% of assessee's turnover, whereas, malted food drinks contribute remaining 25%. Assessee operates in food segment of the fast moving consumer goods industry. The assessee is in the business of manufacturing and marketing of malted food drinks, cake, powder chocolates, toffees, drinking chocolate and sugar confectionery. The assessee has its factories at Thane, Induri in Maharashtra and Malanpur, Buddi and Bangalore and marketing branches at Del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... brand in India. The TPO was of the view that since the assessee is not the legal owner of the brand in India, the AMP expenses incurred by the assessee translates into development of AEs brand and, therefore, the assessee needs to be compensated. The TPO selected the following list of comparables to arrive at the arithmetic mean of AMP expenses to sales at 5.01%: S.No. Particulars AMP expenses (in Rs) Sales (in Rs) AMP expenses to Sales (%) 1 Anmol Biscuits Ltd 4,84,64,373 2,40,18,06,508 2.02% 2 Britannia Industries Ltd 3,04,14,61,000 42,13,71,16,000 7.22% 3 Haldiram Foods Intl. Ltd 36,60,70,012 6,78,29,09,448 5.40% 4 Nutrine Confectionery Co. Ltd 10,96,00,000 1,52,17,00,000 7.20% 5 Priya Food Products Ltd 2,4,93,943 6,66,67,039 5.21% 6 Surya Foods & Agro Ltd 36,87,89,359 4,73,68,11,191 7.79% 7 Veeramani Biscuits Industries Ltd 5,35,582 22,38,92,180 0.24% Arithmetic Mean 5.01% Based on the above, the TPO computed the adjustment in respect of the excessive AMP expenses incurred by the assessee as under:- Particulars Amount Net sales of the Assessee Rs. 27,61,70,20,000 AMP Expenses incurred by the assessee Rs. 3,00,36,49,311 AMP Exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cifically submitted that there is no arrangement or agreement with the overseas A.E. for incurring AMP expenditure. It is also apparent the expenditure was wholly and exclusively incurred for marketing assessee's own products and the payment was made to third parties in India. Therefore, it is outside the purview of international transaction as defined under section 92B of the ACT. As could be seen, the Transfer Pricing Officer ignoring the submissions made by the assessee had assumed that a benefit has accrued to the overseas A.E. on account of AMP expenditure incurred by the assessee. The learned Commissioner (Appeals) has upheld the adjustment / addition proposed by the Transfer Pricing Officer simply relying upon his order passed in assessee's own case for assessment year 2005-06. Notably, while deciding assessee's appeal for assessment year 2005-06 the Tribunal vide order passed in ITA no. 5470/Mum./2012, dated 18th May 2016, has decided the issue in favour of the assessee holding as under:- "3.4. We have heard the rival submissions and perused the material before us. Before proceeding further, it would be useful to understand the philosophy and to consider the historical ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... market share in the year under appeal, that it had debited AMP expenses, amounting to Rs. 85.15 crores to its P& L a/c, that the net turnover of the assessee was of Rs. 766.21 crores, that it was 11.11% of the sales recorded by the assessee during the year, that it had also paid royalty amounting to Rs. 13.56 crores for the same period, that the TPO computed Rs. 1.52 crores(1.78%) as the cost apportioned/allocable out of the A&M cost incurred by the assessee for the benefit accruing to the AE, that he restricted the cost to Rs. 71 lakhs(being0.87% of Rs. 85.15 crores)in view of the disallowance/ adjustment in income made on account of royalty for trade mark, that the average AMP expenditure by the leading FMCG companies for the period 2001-05 was 10.28%, that the AMP expenditure incurred by the assessee during the same period was 10.45%, that the assessee had contended that its profitability(PBT to sales ratio) @10.85%was much higher compared to the average profitability of the comparables at the rate of 3.57%, that the FAA had held that higher rate profitability could not be a justification of this proportionate expenditure, that in the appellate proceedings the FAA had proposed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee is factually correct that it had incurred the AMP expenditure for creating product awareness and to recall the value of existing products and that it had a local marketing strategy of making advertisement/slogans in the local language. In our opinion, KUCH MEETHA HO JAY campaign proves the claim made by the assessee. The TPO had ignored the fact that films/TV advertisements of the assessee had the local messaging concept. Such local advertisement campaigns can never be held to be driven towards serving the interests of the AE. It is also a fact that new multinational players in the industry had entered the Indian market. The commercial wisdom of any assessee, in such a situation, would compel it to be innovative and to spent reasonable expenditure for maintaining its position in the market. The TPO/FAA had not controverted the fact that the AE was the owner of intellectual property of the "Cadbury" brand and that it was responsible for promoting the brand all over the globe and that the brand related exercise at the cost of the AE for the overall brand positioning and management benefited the assessee also in an indirect manner. Nothing has been brought on record to prove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be an international transaction with a certain disclosed price. The transfer pricing adjustment envisages the substitution of the price of such international transaction with the ALP. 54. Under Sections 92B to 92F, the pre-requisite for commencing the TP exercise is to show the existence of an international transaction. The next step is to determine the price of such transaction. The third step would be to determine the ALP by applying one of the five price discovery methods specified in Section 92C. The fourth step would be to compare the price of the transaction that is shown to exist with that of the ALP and make the TP adjustment by substituting the ALP for the contract price. 55. Section 928 defines 'international transaction' as under: "Meaning of international transaction. 928.(1) For the purposes of this section and sections 92, 92C, 92D and 92E, "international transaction" means a transaction between two or more associated enterprises, either or both of whom are non-residents; in the nature of purchase, sale or lease of tangible or intangible property, or provision of services, or lending or borrowing money, or any other transaction having a bear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e) to Section 92B are described as an 'International transaction'. This might be only an illustrative list, but significantly' it does not list AMP spending as one such transaction. 58. In Maruti Suzuki India Ltd. (supra), one of the submissions of the Revenue was: "The mere fact that the service or benefit has been provided by one party to the other would by itself constitute a transaction irrespective of whether the consideration for the same has been paid or remains payable or there is a mutual agreement to not charge any compensation for the service or benefit. "This was negatived by the Court by pointing out; "Even if the word 'transaction' is given its widest connotation, and need not involve any transfer of money or a written agreement as suggested by the Revenue, and even if resort is had to Section 92F (v), which defines 'transaction' to include 'arrangement', 'understanding' or 'action in concert', 'whether formal or in writing', it is still incumbent on the Revenue to show the existence of an 'understanding' or an 'arrangement' or 'action in concert' between MSIL and SMC as re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red common objective or purpose is the sine qua non for the relationship of "persons acting in concert" to come into being" 60. The transfer pricing adjustment is not expected to be made by deducing from the difference between the 'excessive' AMP expenditure incurred by the Assessee and the AMP expenditure of a comparable entity that an international transaction exists and then proceeding to make the adjustment of the difference in order to determine the value of such AMP expenditure incurred, for the AE. In any event, after the decision in Sony Ericsson (supra), -- the question of applying the BLT to determine the existence-of an-international transaction involving AMP expenditure does not arise. 61. There is merit in the contention of the Assessee that a distinction is required to be drawn between a 'function' and a 'transaction' and that every expenditure forming part of the function, cannot be construed as a 'transaction'. Further, the Revenue's attempt at re-characterising the AMP expenditure incurred as a transaction by itself when it has neither been identified as such by the Assessee or legislatively recognised in the Explan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an adjustment had to be made. The -burden is on the Revenue to first show the existence of an international transaction. Next, to ascertain the disclosed 'price' of such transaction and thereafter ask whether it is an ALP. If the answer to that is in the negative the TP adjustment should follow. The objective of Chapter X is to make adjustments to the price of an international transaction which the AEs involved may seek to shift from one jurisdiction to another. An 'assumed' price cannot form the reason for making an ALP adjustment. " 71. Since a quantitative adjustment is not permissible for the purposes of a TP adjustment under Chapter X, equally it cannot be permitted in respect of AMP expenses either. As already noticed herein before, what the Revenue has sought to do in the present. case is to resort to a quantitative adjustment by first determining whether the AMP spend of the Assessee on application of the BLT, is excessive, thereby evidencing the existence of an international transaction involving the AE. The quantitative determination forms the very basis for the entire TP exercise in the present case. 74. The problem with the Revenue's approac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eeded is a clear statutory scheme encapsulating the legislative policy and mandate which provides the necessary checks against arbitrariness while at the same time addressing the apprehension of tax avoidance." 64. In the absence of any machinery provision, bringing an imagined transaction to tax is not possible. The decisions in CIT v. B.C. Srinivasa Setty (1981) 128 ITR 294 (SC) and PNB Finance Ltd. v, CIT (2008) 307 ITR 75 (SC) make this position explicit. Therefore, where the existence of an international transaction involving AMP expense with an ascertainable price is- unable to be shown to exist, even if such price is nil, Chapter X provisions cannot be invoked to undertake a TP adjustment exercise. 65. As already mentioned, merely because there is an incidental benefit to the foreign AE, it cannot be said that the AMP expenses incurred by the Indian entity was for promoting the brand of the foreign AE. As mentioned-in- Sassoon -J David-(supra)- "the--fact that- somebody other than the Assessee is also benefitted by the expenditure should not come in the way of an expenditure being 'allowed by way of a deduction under Section 10 (2) (xv) of the Act (Indian Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being identical, respectfully following the aforesaid decision of the Co-ordinate Bench in assessee's own case, we delete the addition made by the Assessing Officer towards transfer pricing adjustment on account of AMP expenditure. Ground raised is allowed. 24. Therefore, respectfully following the above decision of Coordinate Bench in assessee's own case in turn relying on the decision of Assessment Year 2006-07. These issues are settled in favour of the assessee. Therefore, we are inclined to accept the submission of Ld. AR. Accordingly, these grounds raised by the assessee are allowed." 24. Therefore, respectfully following the above decision of Coordinate Bench in assessee's own case in turn relying on the decision of Assessment Year 2006-07. These issues are settled in favour of the assessee. Therefore, we are inclined to accept the submission of Ld. AR. Accordingly, these grounds raised by the assessee are allowed." 10. Respectfully following the above decision of the co-ordinate bench, we hold that the decisions made by the TPO / AO towards transfer pricing adjustment on account of AMP expenditure be deleted. Accordingly, these grounds raised by the assessee are allowed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd) and held that - "10. 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 ITA No. 7539/Mum/2012 for AY 2008-09 in assessee's own case on merits. For the sake of clarity, the same is reproduced below:- With regard to disallowance of payment of royalty on trademarks paid to Cadbury Schweppes Overseas Ltd 3.3.2 It is admitted position that the issue stood squarely covered in assessee's favor by the decision of this very bench in assessee's own case for AY 2006-07 wherein the matter has been concluded in the following manner: - 7. We have considered rival submissions and perused materials on record. As could be seen from the order of the Transfer Pricing Officer, he has determined the arm's length price of royalty payment on trademark to SCOL at zero. In other words, he has disallowed royalty payment on trademark at 1% while allowing royalty payment on technical knowhow at 1.25% of net sales. The reasoning on which the Assessing Officer has denied royalty payment on trademark are basically that as per the terms of earlier agreement approved by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id by other comparables and even group companies has not been disputed either by the Transfer Pricing Officer or by the learned Commissioner (Appeals). It is also relevant to note, identical dispute relating to payment of royalty for trademark at 1% over and above royalty paid for technical knowhow at 1.25% and its allowability came up for consideration before the Tribunal in assessee's own case for assessment year 2002-03 to 2005-06. While deciding the issue in the aforesaid assessment years, the Tribunal held that the payment of royalty on trademark to CSOL at 1% of sales is allowable and at arm's length. In fact, decision of the Tribunal has also been accepted by the Revenue. In this context, we may refer to the relevant observations of the Tribunal while deciding identical issue in assessee's own case for assessment year 2005-06, in ITA no.5470/Mum/2012, dated 18th May 2016, which is as under: - "2.3. We have heard the rival submissions and perused the material before us. We find that while deciding the appeal for AY 2002-03(supra) the Tribunal has decided the issue as under:- "37. We have heard the detailed arguments from both the sides. The basic issue is the correctnes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rk usage is within the arms" length and does not call for any adjustment." Respectfully, following the above order, and the order for subsequent AY.s we decide the Ground of Appeal No.1 in favour of the assessee." 8. There being no difference in factual position in the impugned assessment year, respectfully following the consistent view of the Tribunal on identical issue in assessee's own case as referred to above, we hold that the royalty payment on trade mark to SCOL @ 1% of net sales is at arm's length, hence, no further adjustment is required. Accordingly, we delete the disallowance made by the Assessing Officer. Ground raised is allowed. Respectfully following the aforesaid view of Tribunal in assessee's own case, we delete the impugned adjustment of Rs. 1300.22 Lacs as made by Ld. AO in the final assessment order. Nothing has been shown to us that the aforesaid ruling is not applicable to the year under consideration. Ground No.3 stand allowed. With regard to disallowance of payment of royalty on on technology paid to Cadbury Adams USA LLC 3.4.2 We find that this issue is covered by the decision of this Tribunal for AY 2006-07 wherein it has been held as under: - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ogy. It is the contention of the learned Sr. Counsel for the assessee that the amendment agreement executed on 24th December 2007, shall operate retrospectively from 1st January 2006, to emphasize this fact, the learned Sr. Counsel for the assessee has sought to produce letter dated 26th April 2016, issued by Mondelez International as additional evidence. From a perusal of the aforesaid letter, it appears that it has been issued to clarify that as per the original agreement executed on 1st June 2006, effective from 1st January 2006, the parties to the agreement intended to transfer and avail technical knowhow / knowledge relating to the licensed product along with trademark. Considering the submissions of the learned Sr. Counsel for the assessee that in subsequent assessment years royalty paid by the assessee @ 2.7% of sales was accepted by the Transfer Pricing Officer, the letter dated 26th April 2016, sought to be produced by the assessee as additional evidence, in our view, is of much significance since it will have a crucial bearing in determining whether CAUSA has authorised the assessee to use technical knowhow along with trademark, hence, is admitted as additional evidence. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on a better footing. Hence, Ground No. 5 stand allowed. " 11. Therefore, respectfully following the above decision of Coordinate Bench in assessee's own case in turn relying on the decision of Assessment Year 2008-09. These issues are settled in favour of the assessee. Therefore, we are inclined to accept the submission of Ld. AR. Accordingly, these grounds raised by the assessee are allowed." 14. It is noticed that the payment of royalty towards trademark for the year under consideration is based on the same agreement, which is considered by the co-ordinate bench for the assessment year 2009-10. Therefore we are of the view that the issue is covered by the above decision for the year under consideration also. Accordingly, we delete the TP adjustment made by the TPO towards payment of royalty on technology paid to Cadbury Adams USA LLC, and Cadbury Enterprises Pte Ltd. These grounds are allowed in favour of the assessee. Disallowance of regional service fees paid to Cadbury Enterprises Pte Ltd. Singapore (Cadbury Schweppes Asia Pacific Pte Limited merged with Cadbury Enterprises Pte Ltd) (Ground No.25 to 28) 15. The TPO during the transfer pricing proceedings noticed that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... follow the prescribed method u/s 92C:- i) Kodak India Pvt. Ltd. (2013) 37 taxmann.com 233 (Mum) ii) Barclays Bank PLC vrs. ADIT (90 taxmann.com 378) (Mum) iii) Vedanta Ltd. Vrs. PCIT (ITA 303/2018, C.M.Appl. 10257/2018). 15. For the sake of clarity, the decision of ITAT in the case of Kodak India Pvt. Ltd. is reproduced below:- I. Section 92B, read with section 92C, of the Income-tax Act, 1961 - Transfer pricing -Meaning of international transaction - Assessment year 2008-09 - Assessee, an Indian company sold its medical imaging business to 'C' Ltd. another Indian company for USD 13.543 million - Being domestic transaction, assessee returned its income, disclosing sale transaction as a normal domestic transaction - Assessing Officer found that sale transaction of imaging business by assessee to 'C' Ltd. was pursuant to a larger sale transaction, on global basis, wherein holding company of assessee sold its imaging business to 'C' Inc. i.e., holding company of 'C' Ltd. on global basis - Thus, on suo moto assumption of jurisdiction over impugned transaction, TPO, proceeded to determine ALP -TPO determined ALP, based on worldwide revenue break ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in section 92C(1) and therefore the TPO's computation of ALP based on adhoc assumptions is not correct. We notice that the TPO while arriving at the ALP has used the estimated salary and also used earlier years man hours to determine the current year man hours spent. In the above decision, the coordinate bench has considered the issue of determination of ALP by the TPO and has held that the TP adjustment is not tenable by relying on the decision in the case of Kodak India Pvt. Ltd (supra) where it is held that - 64. On the other legal issue that whether the TPO was correct to employ an alien method for arriving at the ALP. Once again, relevant section is very clear, which reads, "The arm's length price in relation to an international transaction shall be determined by any of the following methods, being the most appropriate method, having regard to the nature of transaction or class of transaction or class of associated persons or functions performed by such persons or such other relevant factors as the Board may prescribe." 65. It is important to take note of the word "shall" used in the section. No doubt that under the General Clauses Act, shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er section 92C requiring the computation of ALP by any of the prescribed methods, it does not fall in the realm of the TPO or for that matter any other authority to breach such mandate and apply or direct to apply any other method. Going by the dictate of the provision as subsists under sub-section (1) of section 92C, there can be absolutely no doubt on adoption of any single method of those set out in section. Rule 10B has specified a set procedure to be followed for determining the ALP distinctly under the five methods. It is equally not permissible to invent a new procedure and try to fit such procedure within any of the existing procedures prescribed as per these methods. No one is authorized to add one ore more new steps in the prescribed procedure or to substitute any other mechanism with the prescribed under the rule. It is neither possible to invent a method nor to substitute a new methodology in place of the one prescribed in the rule." 67. We cannot accept the arguments of the DR that the word any has been used in section 92C(1), which could give leeway to the TPO to ascribe to a non-specific method. Word any, is founded on the suffix, "of the following method ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the Hon'ble Tribunal passed the order in M.A. vide order dated 31/08/2021 substituting the earlier finding. The relevant extract of the Tribunal order in M.A. is as given below:- "3. The contents of misc. application insofar as assessee's Prayer-(a) is concerned, the same is reproduced below:- Ground 11 to 13 - Transfer pricing adjustment on-account- of payment of service fees to Cadbury Holding Limited 7. During the year under consideration, MIFPL has availed services from Cadbury Schweppes Asia Pacific Pte Limited ('CSAPL') (covered by ground no. 8 to 10) and Cadbury Holding Limited ('CHL') (covered by ground 11 to 13). The Hon'ble ITAT while passing the order for AY 2009-10, allowed payment of service fees by MIFPL to CSAPL (covered by ground no. 8 to 10) stating that; a. The method followed by TPO for making adjustment was not a method prescribed under the Act. b. Further relying on the decision of the coordinate bench in case of Kodak India Pvt., Barclays Bank PLC and Vedanta Ltd., it was held that matter cannot be remanded back when the TPO has failed to follow the prescribed method under section 92C. (Refer Para 14 on page 13 of the ITAT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decisions of the coordinate bench in assessee's own case for AY 2009-10 and in the case of Kodak India Private Ltd., (supra) we hold that the TP adjustment towards global services rendered by Cadbury Holdings Limited be deleted. Disallowance under section 14A - Ground No.33 20. In the statement of income, the assessee has claimed income of Rs. 4,99,80,342. The assessee computed a suo motu disallowance of Rs. 42, 29, 990/- in the computation and before the DRP revised the disallowance to Rs. 3,44, 215/- under section 14A of the Act. The Assessing Officer issued a show cause notice requiring the assessee to explain as to why disallowance under section 14A read with rule 8D should not be made. The assessee submitted before the Assessing Officer that the investments are made out of surplus funds available with the assessee and that the assessee did not borrow any funds in order to make investments. Accordingly, the assessee submitted that no borrowings cost is incurred by the assessee. The Assessing Officer did not accept the submissions of the assessee and proceeded to compute the disallowance as below:- "(Amount in Rs. ) 1 Amount of expenditure directly relating to exe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the identical ground has already been decided by the Coordinate Bench of ITAT in ITA No. 7539/Mum/2012 for AY 2008-09 in assessee's own case on merits. For the sake of clarity, which is reproduced below:- 5.1 During assessment proceedings, it transpired that the assessee earned exempt income of Rs. 16.18 crores which mainly comprised-off of dividend on mutual funds. The assessee, inter-alia, submitted that Rule 8D was not applicable to year under consideration. It was also submitted that assessee's surplus funds were invested in Liquid Mutual Fund and the same were withdrawn as per business requirements. The attention was also drawn to the fact there were two persons in the Treasury department to manage mutual funds investment on regular basis and the total salary paid to them was Rs. 9.20 Lacs therefore, a part of the same could be disallowed. The arguments were also raised to submit that investments were made out of reserves and surplus. However, not satisfied, Ld. AO, applying Rule 8D, worked out aggregate disallowance of Rs. 233.04 Lacs which comprised-off of direct disallowance u/r 8D(2)(i) for Rs. 9.20 Lacs, interest disallowance u/r 8D(2)(ii) for Rs. 80.56 Lacs and indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce to the file of Ld. AO for re-adjudication in the light of suo-moto disallowance offered by the assessee. As held earlier, no interest disallowance would be justified, keeping in view the assessee's financial parameters. Ground No. 14 stand partly allowed. 32. Therefore, respectfully following the above decision of Coordinate Bench in assessee's own case in turn relying on the decision of Assessment Year 2008-09. These issues are settled in favour of the assessee. Therefore, we are inclined to accept the submission of Ld. AR. Accordingly, these grounds raised by the assessee are allowed. 23. Respectfully following the above decision, we hold that no disallowance towards interest is warranted under section 14A r.w.r.8D of the Act. With regard to the contention that the suo motu disallowance we notice that the Assessing Officer in the OGE passed for AY 2009-10 has deleted the disallowance made under section 14A and therefore we see merit in the submission of the ld AR that the suo moto disallowance based on the salary of employees in treasury department is being accepted by the revenue. We therefore remit the issue of verification of direct / indirect expense disallowance to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt of forex derivative transaction and not hedging. The Assessing Officer further held that the assessee did not settled the future contracts but chose to terminate it and, therefore, the loss arising should be a speculation loss. The DRP upheld the disallowance made by the Assessing Officer. 25. The Ld.AR submitted that the issue is covered in favour of the assessee in assessee's own case for A.Y. 2009-10 and the facts being identical for the year under consideration prayed for a similar relief. 26. We heard the parties and perused the materials on record. We notice that the co-ordinate bench in assessee's own case has considered a similar issue for A.Y. 2009-10 and held that - "33. Before us, Ld. AR brought to our notice para 7.1 to 7.11 of AO order and para 12 of DRP order and submitted that the similar issue has already been decided by the Coordinate Bench of ITAT in the case of London Star Diamond Co. (I) Pvt. Ltd. vrs. DCIT (2013) 38 taxmann.com 338 (Mum-Trib) on merits in favour of the assessee. 34. On the other hand, Ld. DR relied on the orders passed by revenue authorities, however he conceded that this ground is covered by the order of ITAT 35. Considered the riv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it I Rs. 40,09,53,686/- 2. Buddi Unit II Rs. 89,89,76,037/- 29. During the course of assessment, the Assessing Officer called on the assessee to furnish the break up of the deduction claimed under section 80IC. The Assessing Officer also observed that with respect to expenses claimed against the sale of Baddi Units as compared to expenses against sales of remaining units were disproportionate. Accordingly, the Assessing Officer called on the assessee to explain as to why the expenses should not be allocated proportionately on the basis of sale and the amount of deduction under section 80IC should not be recomputed accordingly. The assessee submitted before the Assessing Officer that all direct expenses which can be identified have been allocated unit-wise. With regard to the allocation of indirect expenses, the assessee submitted a detailed note on the basis of allocation and also the reason for variations of profits with respect to Buddy units. The Assessing Officer, after considering the submissions of the assessee, was of the view that there was a huge difference in the profitability ratio of 80IC units and non 80IC units, i.e. the profit ratio of Baddi Unit I is 19.40% and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses as claimed in the return of income for the purpose of deduction under section 80IC thereby accepting the method of allocation followed by the assessee for allocating O&E expenses. It is also noticed that there is no change in the method of allocation followed by the assessee for AY 2011-12 also. Considering the decision of the coordinate bench and the OGE passed by the Assessing Officer, we delete the disallowance made by the Assessing Officer and hold that the assessee be allowed the deduction under section 80IC as claimed in the return of income. Addition on account of Annual Information Report - Ground No.37 32. The Assessing Officer noticed that an aggregate income of Rs. 7,87,612/- was appearing in AIR information which had not been reconciled by the assessee with respect to books of account. Accordingly, the Assessing Officer made an addition of the said amount and also allowed to claim credit of TDS on the same. On objections raised before the DRP, the DRP deleted the addition to the extent of Rs. 5, 42, 939/- and confirmed the balance amount of Rs. 2,45,454/-. 33. The Ld.AR submitted that the addition cannot be made solely based on the information in the AIR. In this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 234C 39. It is submitted by the ld AR that the Assessing Officer has levied interest under section 234C on the assessed income whereas the provisions of section 234C talks about levy of interest on income returned. We accordingly remit the issue back to the Assessing Officer with a direction to examine the records and re-compute the interest under section 234C as per the provisions of the said section. 40. The appeal for AY 2011-12 is allowed in favour of the assessee. I.T.A. No.1518/Mum/2017 - A.Y. 2012-13 41. The assessee for the assessment year 2012-13, filed the return of income on 30.11.2011 declaring an income of Rs. 172, 81, 99, 840. The case was selected for scrutiny and the statutory notices were duly served on the assessee. The TPO made the following TP adjustment - Sr.No. Transaction Amount (in Rs. ) 1. Disallowance of Advertising and Marketing expenses 1,29,99,370 2. Disallowance on royalty on technology paid to CEPT 38,74,027 3. Disallowance of receipt of services from CHL 1,43,40,046 4. Disallowance of receipt of services from CEPT 13,16,46,960 Total 144,98,30,403 The DRP confirmed the TP adjustments. The Assessing Officer besides the TP ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
