TaxTMI 
TaxTMI 
2020 (4) TMI 747
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...., in disallowing the payments made to local software vendors under Section 40(a)(i) of the Act. 4. Without prejudice to the above, the learned AO has erred in law, and on facts. in not restricting the disallowance under Section 40(a)(i) to the extent of amount which is outstanding or 'payable' at the end of the year. 5. The learned AO, has erred in law, and on facts, in treating the expenses incurred by the Appellant on media advertisement as capital in nature, without appreciating the fact that? the expense did not provide any enduring benefit to the Appellant. 6. The learned AO, has erred in law, and on facts, in disallowing sales promotion and advertisement expense of Rs. 4,96,11 ,362 under Section 37(1) of the Act. 7. The learned AO has erred in law, and on facts, by levying interest of Rs. 13,92,24,998 under Section 234B of the Act. 8. The learned AO has erred in law, and on facts, in initiating penalty proceedings under Section 271(1)(c) of the Act. Brief facts of the case are as under: 2. Assessee is a company and filed its return of income on 28/11/11, declaring total income of Rs. 33,16,17,482/-. The case was selected for scrutiny and notice under 143 (2) wa....
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....tain cases. Assessee submitted that for these activities, assessee imports certain components and parts from its associated enterprises in relation to its manufacturing activity and also imports laptops, monitors, projectors another finished products from its associated enterprises for distribution in India, without any corresponding royalty charged from the AE's. 7. Assessee submitted that it bears all internal risk and receives limited assistance from its AE is in respect of its operations. It was submitted that during assessment proceedings before Ld. TPO, international transactions undertaken by assessee with associated enterprises was examined and accepted to be at arm's length, under manufacturing and distribution segments. However, adverse observation was made by Ld. TPO that assessee incurred huge expenses for purposes of advertisement, market promotion and development of intangibles of AEs and concluded that such expenses should be reimbursed by AE along with a mark-up. Ld. TPO thus computed adjustment at Rs. 1,56,75,58,922/-. 8. DRP upon analysing submissions of assessee, directed Ld. AO/TPO to delete proposed addition on account of AMP expenses. However, it was directe....
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....ubmitted that what has been disallowed by Ld.AO/TPO is only the advertisement expenses amounting to Rs. 4,96,11,362/-, and that these expenses have been incurred wholly and exclusively for the purpose of assessee's business and no enduring benefit is derived by assessee. Placing reliance on pages 859-862 of paper book part-II, Ld. AR submitted that these cannot be considered to be capital in nature. He placed reliance upon decision of Hon'ble Karnataka High Court in case of CIT vs Indo Nisan Foods Ltd., reported in (2013) 35 Taxmann.com 637, decision of Hon'ble Bombay High Court in case of CIT vs Asian Paints (India) Ltd., reported in (2016) 75 Taxmann.com 152 and decision of Hon'ble Delhi High Court in case of CIT vs Spice Distribution Ltd., reported in (2015) 54 Taxmann.com 325. Ld. AR submitted that all these decisions are placed in paper book at page 307-316. 13.2 On the contrary, Ld. CIT DR placed reliance upon orders passed by authorities below. 13.3 We have perused submissions advanced by both sides in light of records placed before us. In the decisions relied upon by Ld. AR Hon'ble Courts have discussed the tests of enduring benefit. Hon'ble Court, have opined that expe....
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.... Ld. AR submitted that, identical issue in assessee's own case for assessment year 2004-05 to 2006-07 has been dealt with as under: We have heard the learned Departmental Representative as well as learned Authorised Representative and considered the relevant material on record. At the outset we note that this is a recurring issue for last several assessment years and has been decided in favour of the assessee by this Tribunal. This Tribunal in assessee's own case for A. Ys : 2007 - 08 & 2008 - 09 vide order dt. 4.11.2015 in ITA Nos. 1179 & 1180/Bang/2012 has held in paras 9 to 12 as under: 9. We have also heard the teamed Departmental Representative and considered the facts and materials on record including the decisions cited before us. 9.1 While dealing with the issue in the order dated 30-1-2009 in TA No. 774/Bang/2010 it has been observed as under: "5. We have heard the rival contentions and perused the material available on record. We are of the considered view that the assessee's case dearly fans in line with the legal ratio set out by the various appellate decisions cited at Bar in so far as the provision for warranty stood crystallized as soon as the sate was made ....
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....; (b) it makes a provision for warranty only when the customer makes a claim; and (c) it provides for warranty at 2% of turnover of the company based on past experience (historical trend).......... Under the circumstances, the third option is most appropriate because it fulfills accrual concept as well as the matching concept. For determining an appropriate historical trend, it is important that the company has a proper accounting system for capturing relationship between the nature of the sales, the warranty provisions made and the actual expenses incurred against it subsequently"...... If warranty provisions are based on experience and historical trend(s) and if the working is robust then the question of reversal in the subsequent two years, in the above example, may not arise in a significant way'. 11. In the assessee's own case in identical facts for the immediately preceding year, the Tribunal in FA No.22/Bang/2011 assessment year 2006-07 vide order dated 16.032012 has decided the issue in favour of the assessee, following the orders of the Tribunal for earlier years namely. 2004-05 and 200506. 12. Following the above decisions for the earlier years passed by the C....
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.... and therefore it is directly attributable to business of assessee, which is an allowable expenditure. Accordingly, respectfully following decision of Hon'ble Supreme Court in case of CIT vs Woodward Governor India (P) Ltd., (supra), we dismiss this ground raised by revenue. 19. Ground No. 6-10 are against AMP expenditure being deleted by Ld. AO. At the outset it has been submitted that this issue stands covered in favour of assessee by its own decision for assessment year 2012-13 and 2013-14 vide order dated 10/05/19 in IT(TP)A No. 502/B/2017 and IT(TP)A No. 2837/B/2017 respectively. 19.1 On the contrary, Ld. CIT DR placed reliance upon orders passed by Ld. TPO. 19.2 We have perused submissions advanced by both sides in light of records placed before us. It is observed that for assessment year 2012-13 and 2013-14 in assessee's own case identical issue has been analysed in detail and held as under: "21. We notice that the above said decision squarely applies to the facts of the present case. In his arguments, the Ld. A.R also submitted that the economic ownership of brand lies in the hands of the assessee. As noticed earlier, the revenue has not shown that there existed any....