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TMI Blog2025 (3) TMI 708X X X X Extracts X X X X X X X X Extracts X X X X ..... and promotion expenses - HELD THAT:- As relying on assessee own case we hold that the advertisement, marketing and promotion expenses do not an international transaction and accordingly, the TP adjustment made by the ld. Transfer Pricing Officer/ AO is directed to be deleted. The ground is accordingly allowed. Determination of arms' length price in respect of the provisions of Contract, Research & Development Services (CRDS) to the Associated Enterprises (AE) - Comparable selection - HELD THAT:- Both ADTL and TCG cannot be taken as a comparable while computing the transfer pricing adjustment in regard to the contract, research and development services. The said two companies are excluded. Admittedly, the average comes to only 10.52% which is well within the 3% margin which is permissible. Consequently, the addition made on account of the said transfer pricing adjustment stands deleted. Disallowance of expenses u/s 14A in relation to earning of exempt income - HELD THAT:- We note that there is no exempt income during the year and therefore, no disallowance is called for u/s 14A of the Act read with Rule 8D of the Rules. The case of the assessee was squarely covered by the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y not accepting the Arm's Length Price as recorded by the assessee in the books of accounts. 04. The facts in brief are that the assessee filed the return of income on 13.02.2001, declaring income at ₹ 251,22,39,330/-, which was revised on 25.03.2022, to ₹ 263,59,62,360/-. The case was selected for scrutiny and statutory notices duly issued and served upon the assessee. The assessee, Philips India Limited, is a subsidiary company of the Netherlands-based Koninklijke Philips N.V. (KPNV). The company business segment comprises of (a) Personal Health (b) health care systems which includes development services. The company has manufacturing facilities in Pune, Maharashtra and software development center in Bangalore. The company exports Healthcare equivalent under contact manufacturing. The company sells its products in India through independent distributors and modern trade. The ld. AO observed that the assessee had entered into international transactions u/s 92 of the Act and accordingly, reference was made to the Transfer Pricing Officer to determine the Arms Length Price u/s 92CA of the Act. The Transfer Pricing Officer accordingly, computed the TP adjustment of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the Profit Level Indicator of 28.02% and Sasken Technologies Ltd., which have profit level indicator at 17.20%. The counsel of the assessee argued in detail as to why Tata Elxsi ltd is not comparable to the assessee as has been held in the f9ollowing decisions: i. Wipro GE Healthcare (P.) Ltd. vs. ACIT [2023] 154 taxmann.com 97 (Bangalore - Trib.)[17-05-2023] ii. Infineon Technologies India (P.) Ltd. vs. Deputy Commissioner of Income-tax [2024] 159 taxmann.com 245 (Bangalore - Trib.)[10-01-2024] iii. Mavenir Systems (P.) Ltd. vs. Deputy Commissioner of Income Tax [2023] 152 taxmann.com 655 (Bangalore - Trib.)[23-03-2023] iv. Infor (India) (P.) Ltd. vs. Assistant Commissioner of Income-tax [2022] 143 taxmann.com 68 (Hyderabad - Trib.)[25-08-2022] 08. Similar in the case of Sasken Technologies Ltd., the assessee submitted that the same should not be considered as comparable for the following reasons: "Functionally not comparable - Sasken is engaged in providing diversified services such as product engineering and digital transformation providing concept-to-market, chip-to- cognition R&D services. Engaged in R&D activities and owns intangible property The company is co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties and own the intellectual property in the form of technology and brand and thus cannot be compared with the assessee. The case of the assessee find support from the case of the Wipro GE Healthcare (P.) Ltd. vs. ACIT (supra). Similarly, we note that the second comparable taken by the AO post Dispute Resolution Panel order i.e. Sasken Technologies Limited is also not comparable to the assessee for the reason that the same is not functionally comparable and is engaged in the R&D activities and owns intangible properties which is not there in the case of the assessee. Moreover, the comparable lacks, the segmental information. The case find support from the decision of Mavenir Systems (P.) Ltd. vs. DCIT (supra), wherein the Hon'ble ITAT has held that the company is not functionally comparable due to its having R&D activities and own huge patents which is not akin to captive service provider and the relevant paras no. 4.4 to 6.3 of the same are extracted below:- "4.4 Sasken Communication Technologies Ltd. 4.4.1 It is submitted that this comparable has been excluded by the Ld.TPO as it is involved in R&D activities and owns huge patents. We have hereinabove excluded Infosys Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibunal in Kusum Healthcare (P). Ltd v. Asstt. CIT [2015] 62 taxmann.com 79 deleted addition by considering the above principle, and subsequently Hon'ble Delhi High Court in Pr. CIT v. Kusum Health Care (P.) Ltd. [2018] 99 taxmann.com 431/[2017] 398 ITR 66, held that, no interest could have been charged as it cannot be considered as international transaction. He also placed reliance upon decision of Hon'ble Delhi Tribunal in case of Bechtel India (P.) Ltd. v. Dy. CIT [2016] 66 taxmann.com 6 which subsequently upheld by Hon'ble Delhi High Court vide order dated 21/07/16 in ITA No. 379/2016, also upheld by Hon'ble Supreme Court vide order dated 21/07/17, in CC No. 4956/2017." 010. We note that in case both the above comparables are excluded out of the comparable companies, the average mean of the comparable companies will work out to 11.66%, whereas the margin of the appellant is 9.44% which falls within 3% and therefore, no TP adjustment is required to be made. Accordingly, we direct the ld. Transfer Pricing Officer/ AO to exclude these two companies. The ground no.2 is allowed. 011. The issue raised in ground no.3 is against the transfer pricing adjustment of ͅ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. Having heard rival submission and perusing the material on record we find that issue is squarely covered by the decisions of the Co-ordinate Benches in earlier assessment years in assessee's own case from AY 2010-11 to 2015-16. Accordingly we set aside the DRP direction on this issue and direct the AO/TPO to delete the adjustment made and consequently ground no. 3 is allowed." 016. Considering the facts of the instant assessment year being similar to ones as decided by the co-ordinate Bench in assessee's own case, we hold that the advertisement, marketing and promotion expenses do not an international transaction and accordingly, the TP adjustment made by the ld. Transfer Pricing Officer/ AO is directed to be deleted. The ground is accordingly allowed. 017. Ground no.5 is general in nature which is qua the Rule of consistency and does not require any specific adjudication. 018. Ground no. 6 is in regard to the determination of arms' length price in respect of the provisions of Contract, Research & Development Services (CRDS) to the Associated Enterprises (AE). It was submitted by the Ld. AR of the assessee that the assessee is engaged in the provisions of CRDS to this AE. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 018] 90 taxmann.com 15 (Delhi) and (c) Evonik Degussa India Private Limited Vs. DCIT (OSD), Circle-3(1) [ITA No. 7767/Mum/2012, AY 2008-09] to support his arguments. 020. It was the submissions that if the said two companies which are functionally different and not comparable with the assessee's business are excluded, then, the average would come to 10.52% as against 9.59% disclosed by the assessee and the same would be within the acceptable variation and consequently, the transfer pricing adjustment was liable to be deleted. 021. In reply, the Ld. DR vehemently supported the order of the DRP. It was the submission that the two comparable which are being objected to by the assessee were very much comparable in so far as both the companies were also undertaking research and they were also in the same line as the medical field. It was the submission that the submissions of the assessee have already been considered by the TPO and the DRP and the same have already been rejected and nothing new has been pointed out by the assessee, which would call for any modification to the order of the TPO or DRP. It was the submission that the adjustment as made is liable to be upheld. 022. We ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, no disallowance is called for u/s 14A of the Act read with Rule 8D of the Rules. The case of the assessee was squarely covered by the decision of the co-ordinate bench in assessee's own case in A.Y. 2016-17 in ITA No. 226/KOL/2021 dated 6th September, 2022, wherein the co-ordinate Bench held that no disallowance is required to be made where the assessee has not earned any exempt income. Besides the case of the assessee find support from the decisions of PCIT Vs. Era Infrastructure (India) Ltd. [2022] 141 taxmann.com 289 (HC Delhi), Syama Prasad Mookerjee Port Vs. DCIT [2024] 162 taxmann.com 122 (Kolkata-Trib.), DCIT Vs. SP Port Maintenance (P) Ltd. [2024] 164 taxmann.com 752 (Mumbai-Trib.), ACIT VS. Mitsui & Co. India (P.) Ltd. [2023] 155 taxmann.com 19 (Delhi- Trib.). Considering the above decisions, we are inclined to direct the ld. AO to delete the addition. Hence, ground no.7 is allowed. 026. The issue raised in ground no.8 is against the direction of ld. Dispute Resolution Panel confirming the addition of ₹ 27,08,766/- by the ld. AO in the draft assessment order u/s 41(1). 027. The facts in brief are that the ld. AO observed during the course of assessment proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd he added the same to the income of the assessee which was confirmed by the ld. Dispute Resolution Panel. 031. After hearing the rival contentions and perusing the materials available on record, we find that the issue is squarely covered by the decision of the co-ordinate Bench in assessee 's own case from AO 200-10 to 2016-17, which are already available in the Paper Book. Accordingly, we set aside the ld. Dispute Resolution Panel direction and direct the ld. AO to delete the addition. Accordingly, the ground no.9 is allowed. 032. The issue raised in ground no.10, is against the disallowance of deduction u/s 80G of the Act. 033. The facts in brief are that during the year the assessee claimed deduction u/s 80G of ₹ 4,84,70,669/-. Accordingly, the ld. AO called upon the assessee to furnish the details thereto which was supplied by the assessee vide his submission dated 31.01.2022, wherein the assessee furnished all the details in respect of the donations made. The ld. AO observed that the assessee has incurred expenses amounting to ₹ 11,00,15,130/- on account of corporate social responsibility in accordance with Companies Act, 2013, out of this amount, the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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