TaxTMI 
TaxTMI 
2016 (3) TMI 590
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....ue (In Rs.) 1. Import of finished goods CPM 21,47,37,577/- 2. Import of SKD/ CKDS CPM 60781404/- 53125477/- 3. Purchase capital goods CPM 9,20,663/- 4. Royalty CUP 16,46,156/- 5. Commission received TNMM 14,11,595/- 6. Cost recharge - 40,940/- 7. Reimbursement of Expenses by AE to Daikin for publicity and service warranty - 82,89,550/- 3. The assessee company was selling products like water cooler and airconditioners. Out of the total revenue, sale of air-conditioners was 86.24% and 13.72% from water coolers as per the segmental account prepared by assessee. The assessee company manufactured as well as traded in these products. Ld. TPO has noticed that the imports of material was restricted primarily to air-conditioner segment. He further noted that in the total activity of assessee company 63% was import contribution and remaining 37% was indigenous. The assessee company, during the year, had imported both raw-material in the nature of compressor, SKD units as well as finished goods. Ld. TPO examined the P&L A/c of the assessee company from which it transpired that there was an ....
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....d. The applicability of CUP is ruled out because of the fact that assessee company does not purchase similar goods/ services from unrelated party. The Associated Enterprises also said to be not selling these goods/ services to unrelated parties. Applicability of Resale Price Method and Cost Plus Method has elaborately been discussed above, thus, TNMM is most appropriate method which can be sued to benchmark international transaction." 6. PLI was taken as OP/OR. Ld. TPO carried out search and selected following comparables: - Blue Star Ltd.; - Videocon International Ltd.; - Voltas Ltd.; and - Whirlpool India. 7. He noted that these comparables were earning margin of 4.09% whereas assessee was incurring loss and, therefore, he determined the required adjustment at Rs. 141268918/- observing as under: "It is seen from the above that the comparables are earning a margin of 4.09% upon their total revenue in the business line of the assessee company. In order to benchmark international transactions entered by the assessee Transactional Net Margin Method was held to be most appropriate method. Applying the margin of comparables on total re....
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....rm's length price; 2 Selecting the Appellant as a tested. party instead of Daikin Industries limited, Japan; 3 Rejecting the certified cost sheets submitted by the Appellant in support of transfer price of imports; 4 Confirming the comparability analysis carried out by the learned TPO, in particular the inclusion of companies which have substantial difference in the functions, assets and risk analysis as compared to the Appellant; 5 Computing the net margin of the Appellant in determination of the arm's length price after including interest on working capital; 6 Not giving the appellant sufficient opportunity to explain I clarify / further substantiate the losses at net level; 7 Not granting the appellant the option of a price which may vary from the arithmetic mean by an amount not exceeding five percent of such arithmetic mean as per the Act; 8 Rejecting the secondary benchmarking analysis considering the gross level analysis conducted by the Appellant; and 9 Mechanically following the order passed under section 92CA(3) by the learned TPO and completely ignoring the submissions made by the appellant t....
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....ment authorities as well as the appellate Courts should take into consideration such a plea before them provided, it is demonstrated as to how a change in the method will produce better or more appropriate ALP on the facts of the case. Accordingly, we reject the contentions of the learned Departmental Representative and also the observations of the Assessing Officer and the learned Commissioner (Appeals) that the assessee cannot resort to adoption of RPM method instead of TNMM. 12. Ld. DR referred to page 12 of ld. CIT(A)'s order and pointed out that assessee did not produce certified cost sheets so as to enable the ld. CIT(A) to verify the veracity of the cost of the associated enterprises considered by the assessee while applying the cost plus method. He further pointed out that assessee submitted alternative analysis which could not be accepted because the transfer pricing document cannot be substituted at appellate stage. 13. We have considered the rival submissions and have perused the record of the case, Admittedly ld. TPO while selecting new comparables did not provide any opportunity to assessee for filing its objections. He rejected the cost plus method adopted by as....
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....t is in appeal before us and has taken following grounds of appeal: "1. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition made on a/c of advertisement and publicity expenditure. 2. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition made on a/c of depreciation on Exclusive Business Rights (Goodwill). 3. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition made on a/c of depreciation on patents, trademarks and intellectual property rights acquired by the assessee company from Seil Aircon Ltd. 4. The appellant craves to leave, to add, alter or amend any ground of appeal raised above at the time of the hearing. 18. Brief facts apropos ground no. 1 are that assessee had claimed a sum of R. 5,21,51,834/- on account of expenses incurred during the year on account of advertisement and publicity. The assessee's reply has been reproduced in the assessment order in which it was submitted that marketing costs incurred during the product campaign were deferred and amortized over a period of 4 years....
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....eatment of the products already being dealt by the assessee. The assessee had relied on various case laws which have been mentioned at page 15 of the CIT(A)'s order. Ld. CIT(A) deleted the addition in view of the submissions made by assessee. 22. At the outset ld. counsel for the assessee submitted that this issue is covered by the order of the Tribunal in assessee's own case in ITA no. 1346 & 404/Del/2010 for AY 2002-03. The department's appeal filed against this order has also been dismissed by Hon'ble Delhi High Court vide order dated 31.7.2013. 23. We have considered rival submissions and perused the entire material available on record. We find that Tribunal in ITA no. 1346 & 1404/Del/2010 in para 14 has observed as under: "14. After considering the pleadings of both sides and case laws relied upon, we are of the view that the revenue has failed to bring out a case to establish that any capital assets had come into existence. Further, as held by the Hon'ble High Court, there is no concept of deferred revenue expenditure in Income-tax laws. The genuineness of the expenditure has not been doubted by the revenue authorities. Keeping all these facts in view and f....
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....rder dated 23.12.2011 rendered in ITA no. 1346/Del/2010 & 1404/Del/2010 has decided the issue in favour of the assessee by observing as under: 4. In the ground no.2 of revenue's appeal, the issue involved is deleting the addition of Rs. 37,50,000/- made by the Assessing Officer claimed as 'Goodwill' by the assessee on account of depreciation on WDV paid to Usha International Ltd. for acquiring business and commercial rights. 5. Ld. DR relied on the order of the Assessing Officer. On the other hand, the learned AR submitted that the assessee company has purchased marketing , rights along with employees and premises and also trade names etc. from 'Usha International Ltd under the business agreement dated 1st May, 2000. As per the agreement, the Usha International Ltd. was not to compete with the assessee company for 20 years in the marketing of air-conditioners and water coolers of M/s. SIEL Aircon Ltd. The learned AR submitted that this agreement was for business rights, therefore, eligible for depreciation under section 32 of the Income-tax Act as intangible assets. He further pleaded that the exclusive business rights as defined in the agreement w....
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....ve business rights." The ITAT vide Para 7 of their order held as under: "In these circumstances, we are of the view that the ld. CIT(A) was right in holding that the assessee was entitled to the depreciation in regard to the purchase of the exclusive business rights to the extent of Rs. 1,73,00,000 and directing the AO to grant depreciation on the same. In regard to the amount of Rs. 27,00,000 as paid by the assessee, as it has not been shown that this amount had been paid for any specific rights, the same would have to be treated as goodwill and the depreciation on the same cannot be granted. In the circumstances, the findings of the Ld. CIT(A) on this issue is modified to the extent that the AO is directed to grant the depreciation on the consideration of Rs. 173,00,000/- paid to UIL for the purchase of the exclusive business rights which are to be treated as intangible assets. The action of the AO in disallowing the depreciation on the goodwill to the extent of Rs. 27,00,000 is confirmed." Ld. AR pleaded that the facts are same and there is no change in the circumstances, therefore, the order of the CI'I' (A) may be upheld: 6.....
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....ty rights which include patents, trademarks, etc. etc. and paid Rs. 10,93,00,000/-. The amount was capitalized in books as pat fit and trademark and the same is treated as' intangible assets. These intellectual property rights have not been registered in the name of assessee company. The assessee company claimed depreciation as per section 32 of Income-tax Act read with Schedule for depreciation @ 25%. The Assessing Officer disallowed the same by following the order of earlier year. The CIT (A) has granted the relief to the assessee by following the decision of ITAT in assessee's own case for assessment year 2001-02 where the ITAT has held as under:- "A perusal of the purchase price consideration as per the business purchase agreement entered into between the assessee and SAL shows that the consideration has been 'paid for the intellectual property rights. Intellectual property rights are immovable asset. It is also an intangible asset as per the provisions of section 32 (1) (ii) of the Act. It is also undisputed that the 'assessee has used the intellectual property rights in its business and there has been no claim against the assessee for the use of the s....