TaxTMI 
TaxTMI 
2019 (1) TMI 389
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.... of Royalty, technical knowhow fees and annual charges of Microsoft licencing fee by determining the ALP at NIL. (b) Disallowance of ASP Management fees (c) Addition on account of difference in income as per Form 26AS. 4. We heard the parties and perused the record. The first issue relates to the disallowance of Royalty, technical knowhow fees and annual charges of Microsoft licencing fee. We have considered an identical issue in the assessee's own case in ITA No.6059/Mum/2013 relating to AY 2008-09 and we have restored the issues to the file of the AO for examining them afresh, as the Tribunal held the assessee to be "Licenced Manufacturer". For the sake of convenience, we extract below the operative portion of the order passed in Ay 2009-10 (supra):- "9. We heard the parties and perused the record. We notice that the tax authorities have considered the assessee as a "Contract Manufacturer" and accordingly disallowed the Royalty and Technical knowhow expenses. In the written submissions, the assessee has demonstrated that the purpose of obtaining approval for sales from its AE is to avoid competition between the AEs. The assessee has also submitted th....
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....e of different names, which according to assessee refers to same company, referred above. The assessee has furnished a document from Commercial Register of the Canton of Zurich to show that both the names refer to the same company. In any case, this transaction has also not been benchmarked under any of the recognised methods by the TPO. Accordingly we restore this issue also to the file of AO/TPO for examining it afresh." Following the decision rendered for AY 2008-09, we restore these issues to the file of the AO/TPO with identical directions. 5. The next issue contested by the assessee relates to the disallowance of ASP Management fee of Rs. 380.03 lakhs. The assessee paid the above said amount to its AE w.e.f. 01.01.2008 as per the Administrative Service agreement entered between the parties. The TPO noticed that the assessee did not make such payment in the earlier years. The assessee submitted that the AE has provided various services in the nature of marketing, business intelligence, support and tracking systems, general management, finance and control support. As per the agreement, 25% of total costs incurred by the AE for Asia Pacific Region shall be charged on the a....
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....ufficiently prove the receipt of various services from its AE. He also pleaded that the assessee may be provided with one more opportunity to prove the receipt of services and also benefit derived therefrom. 8. Since various services claimed to have received by the assessee are related to its manufacturing activities, in our view, the assessee was justified in aggregating the same with other items of international transactions. With regard to the sufficiency of evidences to prove the receipt of services and the benefits derived therefrom, we are of the view that, in the interest of natural justice, the assessee may be provided with one more opportunity to furnish other evidences. Accordingly we set aside the order passed by the AO/TPO and restore the same to his file for examining it afresh. We also direct the tax authorities to examine this issue in an objective manner by properly considering the explanations and evidences furnished by the assessee. 9. The last issue relates to the addition made on account of difference in income found in Form 26AS and that reported by the assessee. We notice that the Ld DRP has also restored this issue to the file of the AO with the directi....
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....e adjustment made by the TPO is not warranted and accordingly directed the AO not to make the same. 14. We heard the parties on this issue. There is no dispute with regard to the fact that the assessee has exported the pumps manufactured by it to its AE as well as non-AEs. As per the terms of sales, the assessee has provided warranty on the pumps so sold. There should not be any dispute that it is quite normal business practice to provide warranty on the goods sold. The assessee has so arranged its affairs that is has requested its AE located in other Countries to provide warranty services on the product and get reimbursement from it. The assessee has considered the same to be cost effective and also operationally convenient to meet the warranty requirements. The TPO has taken the view that the post sale risks shall be the responsibility of the overseas AEs. In our view, the TPO was not justified in taking such a view without bringing any corroborative material. We notice that the TPO has not doubted the genuineness of expenses, but has only questioned the necessity of incurring these expenses. He has further observed that the assessee has incurred the expenses only in certain C....
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....ified, as the TPO has only doubted the claim of the assessee on surmises. Accordingly we are of the view that the Ld DRP was justified in directing the AO not to make any addition as opined by TPO. 18. The next issue contested by the revenue relates to addition of ASP management fee. The revenue has raised the ground under erroneous impression that the Ld DRP has granted relief to the assessee. In fact, the Ld DRP has confirmed the addition and hence this ground of the revenue is erroneous and liable to be rejected. 19. The last issue contested by the revenue relates to the disallowance of club membership fee of Rs. 36,291/- paid to M/s Golden Swan Country Club. The AO disallowed the same by holding it as Capital expenditure. The Ld DRP deleted the same by following the decision rendered by Hon'ble Punjab & Haryana High Court (name and citation not given). 20. We heard the parties on this issue and perused the record. We notice that the Hon'ble Supreme Court in the case of United Glass Manufacturing Co. Ltd (2012 (9) TMI 914) has held that the club membership fees incurred for employees is allowable as deduction u/s 37(1) of the Act. Accordingly we do not find any infirmit....
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....O/TPO with similar directions. 24. The last issue relates to the addition made on account of difference in income found in Form 26AS and that reported by the assessee. We notice that the Ld DRP has also restored this issue to the file of the AO with the direction to examine the reconciliation statement filed by the assessee and grant relief in respect of reconciled items of income. The ld A.R submitted that the assessee has furnished additional evidences to reconcile the income and TDS and accordingly prayed that this matter may be restored to the file of the AO. Since the assessee could reconcile the difference further, we are of the view that the same requires examination at the end of the AO. Accordingly we restore this issue to the file of the AO. 25. We shall now take up the appeal filed by the Revenue for AY 2010-11. The only issue urged therein relates T.P adjustment made on Warranty Expenses claim of the assessee. The assessee claimed Warranty expenses to the tune of Rs. 397.64 lakhs. The TPO determined the same as NIL and the Ld DRP has reversed the decision of the TPO. Hence revenue is aggrieved. An identical issue was considered by us in AY 2009-10 and we have conf....
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....ave considered an identical issue in the assessee's own case in ITA No.6059/Mum/2013 relating to AY 2008-09 and we have restored the issues to the file of the AO for examining them afresh, as the Tribunal held the assessee to be "Licenced Manufacturer". We have followed the order passed in AY 2008-09 in AY 2009-10 and accordingly restored these issues to the file of the AO/TPO. Following the orders passed in the above said two years, we restore these issues in this year also to the file of the AO/TPO with identical directions. 28. The next issue contested by the assessee relates to the disallowance of ASP Management fee. This issue was considered by us in the earlier paragraphs in AY 2009-10 and 2010-11. We have restored the same to the file of AO/TPO for examining it afresh. Following the same, we restore this issue to the file of AO/TPO in this year also with similar directions. 29. The next issue relates to disallowance of SAP software related support expenses. The Ld A.R submitted that the Ld DRP has not given any direction on this issue and accordingly prayed that this issue may be restored to Ld DRP. Accordingly we restore this issue to Ld DRP for examining it afresh an....