TaxTMI 
TaxTMI 
2018 (4) TMI 1595
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.... Ld. CIT(Appeals) is bad in law. 2. 2.1. That the Ld CIT(Appeals) has erred in both law and on facts in confirming the disallowance of expenditure incurred on management service fees amounting to Rs. 18,38,562, on the ground that the same is a capital expenditure and in not accepting the appellant's claim that it is in the nature of revenue expenditure. ii. The Ld CIT(appeals) has grossly erred in doing so, as this amount has been consistently allowed as a revenue expenditure in all the preceding years; 3. 3.1. That the Ld CIT(Appeals) has erred in both law and on facts in confirming the disallowance of expenditure incurred on software and EDP charges amounting to Rs. 10,46,963 paid to Swarovski Hong Kong Ltd. on the ground that the same is a capital expenditure and in not accepting the appellant's claim that it is in the nature of revenue expenditure. ii. The Ld CIT(appeals) has grossly erred in doing so, as this amount has been consistently allowed as a revenue expenditure in all the preceding years. 4. That the Ld CIT(Appeals) has erred in both law and on facts in disallowing two third of expenditure incurred on advertisement and ....
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....(1) dated 03.11.2009 was issued and served upon the assessee. In response to these notices, the CA and Authorised Representative of the assessee appeared from time to time and filed necessary details and other related documents/evidences which were placed on record by the Assessing Officer. The Assessing Officer made total addition of Rs. 1,87,12,849/- towards disallowance of management service fee, software & EDP charges and Advertisement & Publicity expenses. 4. Being aggrieved by the Assessment Order, the assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee. 5. The Ld. AR submitted that there is no Transfer Pricing issue in the present appeal. As relates to Ground No. 2, the Ld. AR submitted that this year is the first year of dispute. In earlier years and subsequent years, the expenditure incurred on management service fees was accepted by the Revenue department. The Ld. AR submitted that in subsequent years, the CIT(A) vide order dated 28.01.2017 held in para 6.1.3.3 that " In my considered opinion, from the above it can be construed that the underlying purpose of the appellant in incurrence of management fee expenditure is to acq....
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....or the A.Y. 2004-05, we hold that the entire amount of advertisement and publicity expenses should be allowed as deduction in the year of incurring itself. It is however, made clear no further deduction for 2/3rd of the total expenditure for the earlier years be granted as the same will lead to double deduction. If such a deduction has already been allowed, then the same should be reversed to that extent. This ground of the Revenue is not allowed." 8. As relates to Ground No. 5, 7, 8, and 9, the Ld. AR submitted that the same are consequential. 9. As relates to Ground No. 6 the same is not pressed by the Ld. AR. 10. The Ld. DR submitted that ground No. 2, nature of services is vague. The Ld. DR relied upon the orders of the CIT(A) and Assessing Officer. As relates to Ground No. 3, the Ld. DR submitted that computer peripherals are capital expenditure and rightly disallowed by the Assessing Officer. As relates to Ground No. 4, the Ld. DR relied upon the order of the Assessing Officer and the CIT(A). 11. We have heard both the parties and perused all the record. As relates to Ground No. 1, the same is general and therefore not adjudicated herein. Ground No. 2 is relating ....
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....ground that benefit will accrue over a period of 3 years. The Ld. AR submitted that this issue has been allowed in favour of the assessee in A.Y. 2005-06 and 2004-05 which is quoted hereinunder: ITA Nos.5621 & 5496/DEL/2014 "14.2 After considering the rival submissions and perusing the relevant material on record, we find that this issue is no more res integra in view of the judgment of the Hon'ble jurisdictional High Court in CIT vs. Citi Financial Consumer Fin. Ltd. (2011) 335 ITR 29 (Del) in which it has been held that the entire expenditure on publicity and advertisement is allowable fully in the year in which it is incurred. We, therefore, uphold the impugned order on this score. Similar view has been taken by the Tribunal in the assessee's own case for A.Y. 2002-03. It is however, made clear that no further deduction for the remaining 2/3rd of the total expenditure, directed to be allowed by the AO in subsequent two years, be granted as the same will lead to double deduction. If such a deduction has been allowed, then the same be accordingly reversed pro tanto. This ground of the Revenue is not allowed." ITA Nos.5622 & 5497/DEL/2014 "6.2 Bo....
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.... and in law, the Ld. Assessing Officer and Ld.TPO erred in invoking,and the Ld. DRP erred in confirming the action of Ld. AO / Ld. TPO in invoking the provisions of Section 92F(v) of the Act in relation to the AMP expenses incurred by the Appellant by construing that the Appellant and its overseas AE had an arrangement, understanding or acted in concert. 5. On facts and in law, the Ld. AO and the Ld. TPO erred in holding, and the Ld. DRP erred in confirming the action of Ld. AO / Ld. TPO in holding that by incurring excessive AMP expenses, the Appellant led to creation of a marketing intangible in India (the legal ownership of which vested with the overseas AE), and that a direct benefit arose to the overseas AE on account of the same, for which an appropriate compensation to the Appellant from overseas AE was necessary. 6. On facts and in law, the Ld. AO and Ld. TPO erred in failing to apply, and the Ld. DRP erred in confirming the action of Ld. AO / Ld. TPO in failing to apply any of the methods prescribed under section 92C(1) of the Act as the 'most appropriate method' for benchmarking the alleged international transaction of AMP expenses incurred by the Appell....
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....ule 10B(2) of the Rules. 12. On facts and in law, the Ld. AO and Ld. TPO erred in considering, and the Ld. DRP erred in confirming the action of Ld. AO / Ld. TPO of considering certain selling related expenses (as provided in table below) under the ambit of AMP expenses allegedly leading to creation of marketing intangible: Nature of Expenses Amount (in Rs.) Commission on sales 25,342,705 Discounts (other than cash discounts) 13,577,321 Point of Purchase Materials 11,591,693 Catalogue/Newspaper/Calendar/Bill 8,394,607 Board/Hoarding/Signage/Visuals/Graphics Distribution expenses 2,573,983 Miscellaneous expenses (printing expenses, travelling/boarding/lodging expenses, sampling expenses, market research expenses, courier expenses etc.) 1,803,745 Total 63,284,054 13. On facts and in law, the Ld. AO and Ld. TPO erred in imputing, and the Ld. DRP erred in confirming the action of Ld. AO / Ld. TPO of imputing (in an arbitrary and adhoc manner), a profit mark-up of 12.25% on the allegedly excessive AMP expenses incurred by the Appellant, thereby disregarding the provisions of Rule 10B of the Rules. Corporate tax adjustment....
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....e, the AO has erred and the DRP has further erred in holding that the expenditure incurred by the appellant on advertisement and publicity will benefit the entire range of Swarovski products i.e. the holding company based in Austria. 20. The AO / DRP has erred in law and in facts by referring to judgments pronounced by the Hon'ble Courts in various cases without appreciating their applicability to the facts of the case. 21. Without prejudice to the above that advertisement and publicity expenses shall not be disallowed, the AO / DRP has erred in not allowing the consequential deduction or depreciation on advertisement and publicity expenses which was disallowed in earlier years 22. The AO has erred in proposing and the DRP has further erred in confirming the disallowance of interest paid on late deposit of service tax of Rs. 9,601 under section 37(1) and 40(a) of the Act. 23. That on the facts and circumstances of the case and in law, the Ld. AO has erred in initiating penalty proceedings under section 271(1)(c) of the Act as per the impugned order consequential to the above disallowances. 24. On the facts and in law, the Ld. AO erred in....
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....Vide reply dated 05.12.2013, the assessee submitted that an amount of Rs. 1,69,49,032/- was paid to M/s D. Swarovski & Co. for providing operational IT services and for individual business application development services. The assessee furnished the reasons for treating such expenditure as revenue in nature. The assessee submitted that under the respective agreement, D. Swarovski & Co. provided services related to internet browsing services, providing VPN access including security authentication, documentation and data management, antivirus management and security checks etc. to the assessee which are of the similar nature as provided by D. Swarovski & Co. in the last year as well. The assessee contended that such expenses should be allowed as business expenditure under section 37(1) since the above expense is incurred towards carrying out business operations of the assessee more efficiently and there is no capital asset or benefit of enduring nature which is acquired by the company. The Assessing Officer held that these expenses are squarely covered under capital asset as computer and software. In this case reliance was placed on the decision of CIT Vs. Arawali Construction Co. Pv....
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....anagement and conduct of assessee's business to be carried on more efficiently or more profitably while leaving the fixed capital untouched, the expenditure would be on revenue account, even though the advantage may endure for an indefinite period. There may be cases where expenditure, even if incurred for obtaining an advantage of enduring benefit, may, nonetheless, be on revenue account and the test of enduring benefit may break down. It is not every advantage of enduring nature acquired by an assessee that brings the case within the principle laid down in this test. The assessee spent substantial amount out of its own resources for increasing popularity, awareness and visibility of the Swarovski brand though various ways and means both within India. The representatives of the assessee contended that the efforts leading to increased awareness and visibility of Swarovski brand will benefit the assessee company in the form of increased sales and turnover and thereby the expenditure justifiable. In the detailed submission on the issue the assessee basically contended that the expenditure was incurred on visual medium like lifestyle magazines, catalogues, mailers, public relation....
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....h amount. Therefore, an amount of Rs. 2,67,75,393/- was disallowed and added to the income of the assessee. 19. The Assessing Officer while dealing with disallowance of Interest on late deposit of TDS & service tax observed that the assessee claimed rate & taxes. Vide questionnaire dated 09.01.2014 assessee was asked to submit the detail of rate & taxes justify the claim in the preview of provision of Income Tax Act. Vide reply dated 05,02.2014 assessee submitted the detail of the above expenses and the Assessing Officer observed that assessee paid interest of Rs. 28070/- on late payments of service tax, WCT and TDS. The submission of the assessee were duly considered but the Assessing Officer did not find the same as satisfactory. The Assessing Officer held that in the case of Bharat Commerce & Industries v. CIT (1998) 230 ITR 733 (SC) the Hon'ble Supreme Court held that interest on late payment of TDS or any tax is as good as payment of taxes. Accordingly, interest on tax cannot be taken out of preview of tax. This decision was also followed by the Ahmedabad Bench of ITAT in the case of Income Tax Officer v. Royal Packaging which has held that interest for late payment of ....
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....nsaction is not proved, the matter would end there and then, calling for no transfer pricing addition. If, on the other hand, the international transaction is found to be existing, then the TPO will determine the ALP of such an international transaction in the light of the relevant judgments of the Hon'ble High Court, after allowing a reasonable opportunity of being heard to the assessee." The Ld. AR also relied upon the decision of Nikon India Pvt. Ltd. Vs. DCIT [ITA No. 6314/del/2015, A.Y 2011-12,] wherein the Tribunal held as under: "19. We have heard the rival submissions and perused the relevant material on record. The ld. AR tried to harp on certain agreements and other documents to buttress his point that there was no international transaction on account of AMP expenses in terms of the judgment in the case of Whirlpool (supra). On perusal of the order of the TPO, it emerges that there is no discussion about any of these documents. Since the TPO held AMP expenses to be an international transaction, he did not have any occasion to consider these documents in the light of the judicial view now available for consideration. Respectfully following the Tribunal orders o....