TaxTMI 
TaxTMI 
2019 (6) TMI 995
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.... 1) The learned DRP erred in directing the Assessing Officer to restrict the claim for depreciation under Section 32 of the Act on computer peripherals @15% as against the rate of 60% claimed by the Appellant. 2) The learned DRP erred in confirming the action of the Transfer Pricing Officer / Assessing Officer that the actual sales price and arms length price of each related party transaction are to be compared product wise independently and not on an aggregate country-wise basis for exports made to the AEs. 3) The learned DRP erred in confirming the disallowance of Rs. 49,83,562/-being the reimbursement of advertisement expenses made by the Appellant Company to its Associated Enterprise during the year. 4) The learned DRP erred in directing the Assessing Officer to make an addition of Rs. 22,02,204/- considering arm's length price of guarantee commission @ 3% in respect of the guarantee given on behalf of Godrej Sara Lee (Bangladesh) Pvt. Ltd and Godrej Sara Lee (Lanka) Pvt. Ltd. 5) The learned DRP erred in confirming the action of the Transfer Pricing Officer in concluding that the Appellant Company was rendering a significant function of a....
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....e AO had correctly invoked provision of section 80IA(10) of the Act. 1.4 The Ld. Sr. Counsel representing assessee [AR], at the outset, placed on record ground wise chart to submit that most of the issues in crossappeals are covered by the earlier orders which squarely apply to the facts of the present case. The same were confronted to Ld. CIT-DR, who while fairly conceding the same, placed reliance on the stand of lower authorities. In this background, we proceed to adjudicate the grounds raised in revenue's appeal first. 1.5 The name of the assessee namely M/s Godrej Sara Lee Ltd. was changed to M/s Godrej Housing Products Ltd. which got merged into another group entity namely, M/s Godrej Consumer Products Ltd. from AY 2011-12 and accordingly, the assessment has been framed in the name of amalgamated company. Revenue's Appeal : ITA No. 1211/Mum/2015 2.1 Briefly stated the assessee being resident corporate assessee stated to be engaged in trading and manufacturing of insecticides / Air Care products was assessee u/s 143(3) r.w.s.144C(13) on 27/12/2014 at Rs. 6374.04 Lacs after certain additions / disallowances / Transfer Pricing [TP] Adjustment as against returned r....
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..... 14.74 Crores was also denied on the basis of re-allocation of certain expenses like miscellaneous expenses, conveyance & travelling, rates and taxes, advertising and publicity and schemes and promotions, as done in the earlier years. In other words, entire deduction of Rs. 104.19 Crores was denied to the assessee. 3.1 Aggrieved, the assessee agitated the same before Ld. DRP vide directions dated 14/11/2014 and submitted that Ld. AO erred in disregarding the method of allocation of expenses as consistently adopted by the assessee. The Ld. DRP noted that similar claim arose in AYs 2005- 06 to 2009-10 wherein the matter was decided against the assessee by CIT(A) / DRP. However, the Tribunal in AYs 2005-06 & 2006-07, after considering the decision of Hon'ble Supreme Court rendered in Consolidated Coffee Ltd. V/s State of Karnataka [248 ITR 432], decided the issue in assessee's favor. Following the same, Ld. DRO directed Ld. AO not to restrict the claim of the assessee for deduction u/s 80-IB/80-IC by reallocating common indirect expenses. 3.2 The invocation of Section 80-IA(10) was also overruled by Ld. DRP by following the directions of Ld. DRP in earlier AYs 2008-09 & 2009-10....
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....e has not challenged the order of Tribunal for both these years in further appeal. Respectfully following the consistent stand, we direct Ld. AO to allow depreciation @60% on the computer peripherals. Ground No. 1 stand allowed. 8.1 In ground No. 10, the assessee is aggrieved by addition of Rs. 42.51 Lacs, being un-reconciled amount reflected in Annual Information Return [AIR]. The said addition stem from the fact that AIR information reflected time deposits made by assessee aggregating to Rs. 39.36 Lacs with ICICI Bank, Alwarthiunagar Branch. The assessee submitted that no such transactions have taken place. Another discrepancy of Rs. 3.15 Lacs was also noted which the assessee could not reconcile. Resultantly, aggregate amount of Rs. 42.51 Lacs was added to the income of the assessee. 8.2 The Ld. Sr. Counsel has drawn our attention to the letter dated 05/12/2014 to impress upon the fact that no such transactions were entered into by the assessee with ICICI Bank. Reliance has been placed on various decisions of the Tribunal to submit that mistaken reporting could not entail additions in the hands of the assessee. 8.3 We find that the stated issue is matter of reconcili....
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....the same. The Ld. DRP confirmed the stand of Ld. TPO. 9.4 Regarding reimbursement of market survey fees, it was submitted by the assessee that Sara Lee was the world leader in household and body care business and made products under various global brands. The group incurred various costs globally to develop the market of said brands by appointing advertising agencies, incurring various marketing costs, developing marketing strategies, running advertising programs etc. for the benefits of group entities worldwide. Similar other costs were stated to be incurred by the group to generate and obtain new rights, information and experience for the benefit of all the group companies. The group was also stated to be providing marketing concepts, marketing assistance and support and other experience and informative data concerning the marketing of the products under Sara Lee brand at considerable cost. As part of the arrangement, an agency i.e. Grey Global was stated to be appointed as the worldwide advertising agency for supporting Kiwi brand of products. Grey Global provided support for the Kiwi brand development to Sara Lee worldwide and since the assessee sold Kiwi product in India, a....
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.... i.e. own product brands as well as product brands of AE. 9.8 However, disregarding assessee's various submissions, Ld. AO proceeded to compute the ALP of the same. Adopting 9.76% as ALP of AMP expenditure, Ld. TPO worked out TP adjustment of Rs. 416.42 Lacs. The working of the same has already been given in para 11 of Ld. TPO's order. Although the assessee agitated the same before Ld. DRP, however, the submissions could not find favor with Ld. DRP who confirmed the stand of Ld. TPO, in this regard. 9.10 Aggrieved by the above TP adjustments, the assessee is in further appeal before us. 10. We have considered the rival submissions as made before us on the above stated issues and also deliberated on the judicial pronouncements as cited before us. So far as the ALP of Export Sales is concerned, we find that Ld. DRP confirmed the adjustment by relying upon the order of DRP for AYs 2008-09 & 2009-10 which were challenged by the assessee before this Tribunal. The Tribunal in ITA No. 598/Mum/2013 order dated 11/03/2015 for AY 2008-09, has approved the clubbing / aggregation approach as adopted by the assessee and reversed the stand of Ld. DRP. This order has subsequently been....
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....d. 12.1 The third TP adjustment pertains to ALP of intra group services. The Ld. Sr. Counsel, assailing the TP adjustment, submitted the payment under question was reimbursement to AE at cost. The cost was allocated in the ratio of sale of Kiwi Products worldwide. Reliance has been placed on the decision of Hon'ble High Court of Delhi rendered in CIT V/s EKL Appliances Ltd. [24 Taxmann.com 199] for the submissions that Ld. TPO had no authority to disallow entire expenditure. Reliance has also been placed on the decision of this Tribunal rendered in CLSA India P. Ltd. V/s DCIT [101 Taxmann.com 388] for the submissions that Ld. TPO has not followed any prescribed method while computing ALP of the transactions. 12.2 The Ld. CIT-DR controverted the same by submitting that as per OECD guidelines on Intra-Group services, it was incumbent on the part of the assessee to establish that the said services were, in fact, rendered and secondly, the charges paid for availing such services were at Arm's Length Principal and commensurate with benefits derived by the assessee. Our attention has bene drawn to Chapter VII-Special Considerations for Intra- Group Services to submit that no eviden....
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....he arguments of Ld. CIT-DR that in the absence of complete information, Ld. TPO was precluded to proceed with determination of ALP of these transactions. The primary onus to provide complete TP documentation was on assessee. No doubt, OECD guidelines makes it imperative for the assessee to demonstrate that the services were, in fact, received and thereafter, it was to be established that the price paid for these services was at Arm's Length. Therefore, in the aforesaid circumstances, we deem it fit to restore the matter back to the file of Ld. TPO for re-determination of ALP of these transactions with a direction to the assessee to demonstrate cost allocation keys, evidences in support of the receipt of services etc. Needless to add that sufficient opportunity of being heard shall be granted to the assessee. Ground No. 3 stands allowed for statistical purposes. 13.1 For Ground Nos. 5 to 9, Ld. Sr. Counsel laid down various propositions in the written submissions. The primary arguments revolve around the facts that proposed TP adjustment for AMP expenditure is contrary to transfer pricing provisions contained in Chapter-X of the Act as laid down in decisions of this Tribunal in J....
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....decision of the Hon'ble Delhi High Court in Maruti Suzuki India Ltd. (supra), unless, there is an arrangement between the assessee and the AE for incurring AMP expenditure, it cannot be considered as international transaction under section 92B of the Act. Further, the Hon'ble Court has held that no adjustment for determination of arm's length price with regard to AMP expenditure can be made by resorting to bright line test or any other similar method which is not provided in the statute. Undisputedly, the decision in Maruti Suzuki India Ltd. (supra) was delivered by the Hon'ble Delhi High Court at a later point of time and after taking note of its own decision in Sony Ericson Mobile Communications (supra). Therefore, the ratio laid down in Maruti Suzuki India Ltd. (supra) would prevail. Moreover, the ratio laid down in Maruti Suzuki India Ltd. (supra) would be applicable to the present appeal since facts are more or less similar. Like in Maruti Suzuki India Ltd. (supra), the assessee before us is involved in manufacturing activity, hence, the AMP expenditure incurred in India by making payment to third parties in India certainly is connected with such manufacturing ....