TaxTMI 
TaxTMI 
TaxTMI 
2019 (7) TMI 121
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.... to the order dated 05.04.2017, passed by the Tribunal in assessee's own case in I.T.A. Nos. 127 & 309/Kol/2016, for assessment year 2011-12, whereby the issue of advertisement and sales promotion expenses has been discussed and adjudicated in favour of the assessee. The ld. Counsel for the assessee submitted that the present issue is squarely covered by the above said order of the Tribunal, a copy of which is also placed before the Bench. 6. The ld. DR relied upon the orders of the authorities below. 7. We see no reason to take any other view of the matter then the view so taken by the division bench of this Tribunal in assessee's own case vide order dated 05.04.2017. In this order, the Tribunal has inter alia observed as follows: "18. The first issue to be decided in the appeal of the revenue is as to whether the ld CITA was justified in deleting the disallowance made in the sum of Rs. 29,33,729/- towards advertising and sales promotion expenses. 18.1. The brief facts of this issue is that the assessee debited a sum of Rs. 1,32,97,395/- on account of advertising and sales promotion in its profit and loss account. During the course of assessment proceedings, the assessee fil....
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....f disallowance of sales promotion expenses in the sum of Rs. 24,98,748/-. With regard to the disallowance of puja expenses, the reliance placed on the decision of Chennai Tribunal supra by the ld AR is well founded wherein the tribunal by placing reliance on the decision of Hon'ble Madras High Court in the case of CIT vsAruna Sugars Ltd reported in 132 ITR 718 (Mad) allowed the deduction towards puja expenses. Hence respectfully following the same, we do not find any infirmity in the order of the ld DRP in deleting the disallowance on account of puja expenses in the sum of Rs. 4,34,531/-. Hence the ground no. 1 raised by the revenue is dismissed." 8. As the issue is squarely covered in favour of the assessee by the decision of Coordinate Bench in assessee's own case (supra) in I.T.A. Nos. 127&309/Kol/2016forA.Y2011-12, and there is no change in facts and law and the revenue is unable to produce any material to controvert the above said findings of the Co-ordinate Bench. Therefore, respectfully following the decision of Coordinate Bench we allow ground No. 3raised by the assessee. 9. Ground No. 4 raised by the assessee relates to disallowance of miscellaneous expenses, that is, ad....
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....l settled that the commercial expediency of the transaction had to be looked into from the point of view of the businessman and not from the point of view of the revenue. Hence we hold that the ld CITA had rightly deleted the disallowance of miscellaneous expenses in the sum of Rs. 1,74,38,629/-. Accordingly, the Ground No. 2 raised by the revenue is dismissed." 13. As the issue is squarely covered in favour of the assessee by the decision of Co-ordinate Bench in assessee's own case (supra) in I.T.A. Nos. 127 & 309/Kol/2016 for assessment year 2011-12, and there is no change in facts and law and the revenue is unable to produce any material to controvert the above mentioned findings of the Co-ordinate Bench. We find no reason to interfere in the said order of the co-ordinate Bench and the same is hereby upheld. Therefore, respectfully following the decision of Co-ordinate Bench we allow ground No. 4 raised by the assessee. 14. Ground No. 5 raised by the assessee relates to ad hoc 20%disallowance of travelling expenses of Rs. 59,37,080/-. 15. At the outset, the ld. Counsel for the assessee submitted before us that the travelling expenses has been allowed by the Assessing Office....
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.... year. On these reasoning, in the absence of any material change justifying the Revenue to take a different view of the matter - and, if there was no change, it was in support of the assessee - we do not think the question should have been reopened and contrary to what had been decided by the Commissioner of Income-tax in the earlier proceedings, a different and contradictory stand should have been taken." We are of the view that the above cited precedents on principle of consistency are squarely applicable to the assessee under consideration. Therefore, we delete the addition of Rs. 59,37,080/-. 17. Ground No. 6 raised by the assessee relates to disallowance of foreign exchange fluctuation loss amounting to Rs. 1,55,65,867/-. 18. At the outset itself, the ld. Counsel for the assessee submitted before that the Assessing Officer has allowed foreign exchange fluctuation loss at the assessment stage itself in A.Y.2011-12 (vide PB 1125). The Counsel also submitted that in assessment year 2012-13 also the Assessing Officer has allowed foreign exchange fluctuation loss at the assessment stage itself (vide PB 1203 and 1204). The ld Counsel submitted that there is no change in the facts....
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....anel (DRP). The Hon'ble DRP considered the issue and observed that section 56(2)(viib) of the Act deals with the share value received in excess of fair market value by the assessee though the share application money was received in 2011-12, it was lying in the balance sheet of the assessee and was converted into shares only in FY 2012-13. Thus, the consideration was actually received in the share account in FY 2012-13 i.e. A.Y. 2013-14. The section 56(2)(viib) will therefore apply in the assessee's case. The DRP noticed that Assessing Officer in his order did not satisfy with the valuation report and the submission of the assessee was found unacceptable. The assessee was not submitted any arguments in this regard before the ld DRP. Therefore, the objection of the assessee was dismissed by the ld DRP. 23. Aggrieved, by the order of the ld DRP/AO, the assessee is in appeal before us. At the outset itself, the ld counsel for the assessee submitted that the application money was received in F.Y. 2011-12 and shares got allotted in F.Y. 2012- 13,therefore, the provision of section 56(2)(viib) does not apply. In the instant case, share application money was received by the company from ....
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....c) of[Explanation] to clause (23FB) of section 10;] Therefore, it is abundantly clear that section 56(2)(viib) of the Act does not apply to non resident. Hence, the disallowance made by the AO under section 56(2)(viib) of the Act, should be deleted. We note that Hon`ble DRP also did not consider the aforesaid facts before passing the order. To substantiate its claim, the assessee submitted before us the following documents: i) Valuation Certificate-pg No. 252 to 271 of Paper Book Part I ii) CS Certificate- pg No. 272 of Paper Book Part 1 iii) Pg 275- Letter mentioning about non-applicability of 56(2)(viib) of Paper Book Part 1 iv) DRP Submission-pg No. 338 to 340 of Paper Book Part 1 Hence, considering the above facts and circumstances, we delete the addition of Rs. 92,63,192/- 25. Ground No. 8 raised by the assessee relates to determination of arm's length price by TPO / A.O. for management and other administrative services received by the assessee by considering the ALP as NIL. 26. When this issue was called out for hearing, the ld. Counsel for the assessee invited our attention to the order dated 05.04.2017, passed by the Tribunal in assessee's own case in I.T.A. Nos. 12....
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.... assessee had clearly demonstrated that management services have resulted in effective cost savings by way of an effective purchase function, technical assistance in relation to certain products being provided by AE (the expertise of which was not available with assessee) and other ancillary functions like IT management for which the assessee did not have requisite staff to perform functions. The services were necessary for the assessee to function efficiently and stay relevant in terms of cost competency, fix day to day IT related issues, etc. The assessee made detailed submissions regarding management services to substantiate the benefit received from it vide its submissions dated 13.1.2015. The assessee even demonstrated the cost incurred for rendering management services by the AE and the losses incurred by AE for the years ending 2010 and 2011 thereon, thereby proving that despite the recovery of management fees from the assessee, the AE had only incurred losses. We find that the assessee had clearly demonstrated the necessity of paying the management fees to its AE in detail together with the various benefits derived by it and for this purpose, it had also produced the entire....
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....ues by having common attestation functions across the globe would greatly assist in the consolidation at global level and hence to that extent the necessity of AE rendering the managerial services to the assessee and its group companies is justified. Once the same is justified, there is no harm in making payment for those services. We hold that the ld TPO ought not to have determined the ALP of the management charges at Rs Nil by stating that the same need not be incurred by the assessee on the grounds of commercial expediency. This, in our considered opinion, would be beyond the jurisdictional powers of the ld TPO. The duty of the ld TPO would be to determine the ALP of a particular transaction and he cannot get into the propriety of the transaction while determining the ALP. We find that the ld DRP observed that though the direct and ostensible visible benefit to the assessee by availing such services is not clear from the data furnished, yet, it may be reasonably assumed that the assessee did garner some nominal benefits by availing such services in the form of trouble shooting at times to resolve certain issues. This goes to prove that the ld DRP had also agreed to the benefits....
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....ders to conduct this activity is a matter that lies within the assessee's exclusive domain, and cannot be second- guessed by the Revenue." [brackets provided by us] 16.1. We also find that the co-ordinate bench of this tribunal in the case of DCIT vs Bata India Ltd reported in (2016) 69 taxmann.com 120 (Kolkata Trib) dated 6.4.2016 had considered the decisions of Hon'ble Delhi High Court in the case of CIT vs EKL Appliances Ltd (2012) 345 ITR 241 (Del) ; CIT vs Cushman & Wakefield (India) (P) Ltd (2014) 367 ITR 730 (Del) and co-ordinate bench of Mumbai Tribunal in the case of Dresser Rand India (P) Ltd vs. Addl CIT (2011) 47 SOT 423 (Mum) and applied the principles emanating out of those judgements and applied the same to the facts of the case in Bata India Ltd. In the said case (i.e Bata India Ltd supra) it was observed as under:- 27. The Hon'ble High Court of Delhi in the case of CIT v. EKL Appliances Ltd.[2012] 345 ITR 241/24 taxmann.com 199/209 Taxman 200 as well as CIT v. Cushman & Wakefield (India) (P.)Ltd.[2014] 367 ITR 730/46 taxmann.com 317 (Delhi), rendered similar ruling as was rendered in the case of Dresser-Rand India (P.) Ltd. (supra).In the case of Cushma....
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....ssessee has established the nature of services including quantum of services received by the related party, that services were provided in order to meet specific need of the Assessee for such services, the economic and commercial benefits derived by the Assessee of intragroup services. 16.2. We also find that in the recent decision of the Hon'ble Delhi High Court in the case of Knorr-Bremse India (P) Ltd vs ACIT reported in (2016) 380 ITR 307 (Del) wherein the relevant head notes is reproduced hereinbelow :- Section 92C of the Income-tax Act, 1961 - Transfer pricing - Computation of arm's length price (Comparables and adjustments/Adjustments - General) - Assessment year 2007-08 - Whether answer to issue whether a transaction is at an arm's length price or not is not dependent on whether transaction results in an increase in assessee's profit; mere failure to establish that transactions resulted in a profit does not indicate that they were not at an arm's length price and even if profit is established, it does not necessarily follow that transaction was at an arm's length price - Held, yes [Para 21] We find that this judgement had approved the earlier decisio....