TaxTMI 
TaxTMI 
2014 (1) TMI 16
X X X X Extracts X X X X
X X X X Extracts X X X X
....26.10.2007 declaring total income of Rs.405,67,52,170/-. In the profit and loss account filed alongwith the said return, expenditure incurred on sales promotion and advertisement amounting to Rs.1109.81 lakhs was debitedd by the assessee which was inclusive of the expenditure of Rs.30,76,20,599/- incurred on television advertisement. On examination of the details of expenditure incurred by the assessee on sales promotion and advertisement, it was noticed by the AO that the expenditure incurred on television advertisement to the extent of Rs. 10.36 crores was related to corporate brand image. According to him, the said expenditure was of capital nature and treating the same as capital expenditure, he allowed only depreciation thereon which resulted in disallowance of Rs.777.80 lakhs. On appeal, the ld. CIT(A) deleted the said disallowance made by the AO for the following reasons given in his impugned order. i. In the facts and of the case the appellant has incurred expenses for its advertisement and sales promotion expenses at Rs.1109.81 lacs which is 3.30% of the gross sales vis-à-vis such percentage being at 3.28% in the immediate preceding year. ii. The appellant dur....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... on corporate brand, the details of such expenditure were as under:- From the aforesaid details, he held that the advertisement expenditure incurred under the head "Corporate Brand" is to be disallowed as it relates to enduring benefit. Such a distinction made by the Assessing Officer, in our opinion is wholly misplaced, because the expenditure on account of advertisement even for the product brands does highlight the name of the company. The brand name of the company is embedded in the product and the brand value of the product is also the brand value of the company, who owns the product. If any advertisement does not give the details of the product this does not ipso-facto means that it is not for the promotion of product. The product in the market is known by its brand which is owned by the company which creates the product. Making such kind of a distinction, that part of the advertisement is for the product which is revenue in nature and part of the advertisement for the corporate brand is capital expenditure is not appropriate. Even if there is a promotion of a corporate brand, it directly facilitates the business of the assessee and in the result has affect on th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hese transactions involving giving guarantees for AE's were referred by the AO to the TPO, the latter determined the arm's length rate of guarantee commission given by the assessee for its AE's at the rate of 3% relying on the same data as used by him in A.Y. 2006-07 to determine the arm's length rate of guarantee commission at 3%. Accordingly, addition of Rs.2.44 crores was made by the AO/TPO on account of TP adjustment in respect of commission/fees for the guarantees given by the assessee for its AE's. On appeal, the ld. CIT(A) deleted the addition made by the AO on this issue for the following reasons given in paragraph no. 9.3 of his impugned order :- 9.3 I have considered the facts of the case and submissions of the appellant as against the observation/findings of the AO/TPO in their order. This issue has been the subject matter of consideration even in the earlier years. For the A.Y.2005-06, the CIT(A) in the office while deciding the issue in favour of the appellant observed as under:- "26) I have considered the submission and persued the assessment order as well as the TPO's order. Guarantee fees or a financial loan guarantee is a commitment entered into by a parent c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....en though the learned A.R. relied on the decision of Four Soft Ltd. vs. CIT in ITA No.1495/Hyd?2010 dated 09.09.2011 for the proposition that in the absence of charging provision section 92B cannot be made applicable in respect of corporate guarantee, we, however, do not intend to go into the judicial expedition on this issue. Suffice to say that on the facts of the case itself, there is no need for making any adjustment. It is on record that HSBC Bank itself has charged on amount at 0.35% totaling to Rs.15,95,849/- on commercial considerations. It is also on record that the citybank has not charged any amount during the year but charged 0.25% in the immediately preceding year, the year in which the TPO has accepted the arm's length price. Assessee not only recovered the above cost incurred by it from the subsidiary company but also charged a mark-up @ 0.20% and recovered an amount of Rs.31,82,729/-. Therefore, in view of the above facts available on record there is no need for making any adjustment on the basis of the 'naked quote' available in the website of the Allahabad Bank, HSBC Bank and ICICI Bank where even the report itself indicate that the rates varied from 0.15% to 3%. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....takes of the client, the bank may not charge any guarantee commission which completely depends upon its evaluation, of a particular client. This is also evident from the fact that, in some of the years, in assessee‟s own case, no charges have been paid on account of guarantee commission as has been submitted by the learned Counsel for the assessee. Simply relying upon certain data from the market without carrying out any comparability analysis of the actual transactions undertaken, such an application of guarantee commission rate cannot be applied in a blanket manner in all the cases. In the present case, when there was an internal CUP in the form of bank guarantee charges, charged by the bank from the assessee, the same ought to have been first analysed and examined wherein the guarantee commission charged ranged between 0.25% to 0.35%. It is also an undisputed fact, that in the earlier years, the Tribunal has deleted the similar addition and no question of law on this score has been raised by the Department. Thus, under these facts and circumstances, we hold that no upward adjustment in the ALP in relation to charging of guarantee commission over and above 0.20% can be made....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ue disallowed the expenditure incurred by the assessee outside its in-house facilities while the Tribunal allowed the same. The Hon'ble Gujarat High Court upheld the decision of the Tribunal holding that merely because the prescribed authority segregated expenditure into two parts by itself could not be sufficient to deny the benefit to the assessee u/s 35(2AB). The issue involved the in the case of Cadila Health Care ltd.(supra) thus was entirely different and even the facts involved in the said case were different from the facts of the assessee's case in as much as the entire expenditure incurred by the assessee in that case on R & D was duly certified by the prescribed authority whereas in the case of the assessee, the same is not certified to be eligible R & D expenditure to the extent of Rs.54.34 lakhs. 14. The ld. Counsel for the assessee has also relied on the decision of the Ahmedabad bench of ITAT in the case of ACIT vs Torrent Pharmaceuticals Ltd. in ITA No.3569/Ahd/2004 dated 13.11.2009 in support of the assessee's case on the issue under consideration. In the said case, weighted deduction claimed by the assessee u/s 35(2AB) on account of R & D expenditure was partly ....