TaxTMI 
TaxTMI 
2021 (4) TMI 159
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....the assessee's instant batch of five cases raise many of the identical substantive grounds. These appeals are taken up together therefore for the sake of convenience and brevity. We treat A.Y. 2010-11 involving ITA No. 140/Hyd/2015 as the lead assessment year containing the following substantive grounds: "1. On the facts and in the circumstances of the case and in law, the Assessment Order ('Order') passed by the Learned Assessing Officer ('Ld. AO') under the directions of Ld. Panel as per section 143(3) read with section 144C of the Income Tax Act, 1961 ('Act') is bad in law. 2. On the facts and in the circumstances of the case and in law, the Ld. AO erred in rejecting the Transfer Pricing ('TP') documentation maintained by the Assessee by invoking provisions of sub-section 3 of section 92C of the Act and contending that the information or data used in the computation of the arm's length price is not reliable or correct. 3. On the facts and in the circumstances of the case and in law, the Ld. AO erred in arbitrarily determining the arm's length price of Royalty paid to the AE as NIL instead of Rs. 9,537,451, in....
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....aise additional 10 substantive ground that the learned lower authorities ought to have allowed education cess amount of Rs. 32,49,207/- as a deduction u/s. 37(1) of the Act. 5. The Revenue, on the other hand, has vehemently opposed the assessee's petition moved at this belated stage and that too, without explaining its act and conduct in not having agitated the very issue before the lower authorities. 6. We have given our thoughtful consideration to the foregoing rival arguments qua admission of the assessee's additional substantive ground No. 10 that its education cess amount of Rs. 32,49,207/- ought to have been treated as an allowable deduction. Hon'ble apex court's landmark decision in National Thermal Power Co. Ltd., Vs., CIT [229 ITR 383] (SC) as considered the All Cargo Global Logistics Ltd., Vs. DCIT (2012) [137 ITD 217] (SB) (Mumbai) holds that this tribunal can very well entertain such legal ground so as to determine correct tax liability of an assessee subject to the condition that all the relevant facts form part of the records. We make it clear that the disallowance of education cess has nowhere been contested at the Revenue's behest on facts.....
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.... popcorn in the Indian market. This transaction was combined with purchase of raw materials, since the royalty payment pertains to license to sell popcorn. Other than this no further information or justification was provided. Therefore the taxpayer was requested to provide and satisfy the benefit test vide this office letter dated 08-07-2013. In its reply filed on 19-08-2013, he taxpayer stated that the company is in the business of edible oils and foods. In order to have a wide and recognizable presence in the foods market, the company entered the pop corn market and for this purpose company entered into an agreement with ConAgra Inc., selling pop corn under the brand name 'ACT II'. The tangible benefit that the company derived is that it has been able to add approximately Rs. 61 crores to its turnover. The taxpayer has also compared the payment of royalty with a report from Business Standard. As per the report during FY 10, the royalty paid by some of the top brands ranged from 0.15 to 4.44 of the net sales. The lowest of 0.19% is that of the taxpayer itself. The contention of the taxpayer has been considered. As per the Agreement between ConAgra Foods lnc., and ....
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....he year 1997. Agro Tech Foods Ltd., (ATFL) is segmented under the following categories: Branded Oils and Foods - led by the flagship brand, Sundrop, ATFL has expanded its brand portfolio through acquisition of the Rath vanaspati brand from SIEL Ltd. It also sells unrefined mustard oil under the Sudham brand. Health World Dried Green Peas brings to the consumer healthy, fresh green peas. Snack Pack is the only shelf stable pudding in the country; Swiss Miss is the only Hot Cocoa Mix available to Indian consumers. Sourcing and Institutional Business - The sourcing and Institutional Business (SIB) division in ATFL started off as a Commodity Trading Team for the main purpose of sourcing edible oils for the Brand Edible Oils Groups. Its profile kept Widening with sourcing of other Agri commodities like rice, wheat, soya DOC & Mustard covering both Trading & Export. Food Services - The food service business of the taxpayer in India supplying food products such as Lamb Weston, oils, popcorn to the hotels, restaurants and catering establishments. The food service business also deals in large packs of Sundrop oils, Cristal brand of oil, ACT " Popcorn, tom....
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....of new consumers for Sundrop with the launch of Sundrop Gelcille & Freshite in the oils category. -Increase penetration of popcorn 3.Future plan of action -New flavors for instant. Microwave popcorn & vending corn. -Local production/packaging of currently imported food items. 4.Expenditure on R&D a) Capital b) Recurring c) Total d) Total R&D expenditure as percentage of turnover Rs.Millions 0.91 22.04 22.95 0.35% In subsequent para of the annual report, the company has reported its strategy as regards the popcorn as under: 7.1.3. In the Snacks Category your company continued its focus on Act II popcorn, through sustained national media presence for the brand, significant increase in retail distribution and increasing awareness of the category. In view of the above discussion, it is clear that it is the which has benefited from the presence of the taxpayer in Indian market since long and which has already developed a brand name itself. The AE has used the robust marketing and distribution channel already available with the taxpayer. The AE is also enjoying the benefits of the R&D on popcorn by the taxpayer. What AE....
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....orting documents- a. The benefits derived from the receipt of services. b. Whether the payment made is commensurate with the benefits received. c. Whether as a result of such payment, the recipient of the services, the taxpayer, resulted in any economic or commercial value to enhance its commercial position. The expected benefit must be sufficiently direct and substantial so that an independent recipient, in similar circumstances, would be prepared to pay for it. If no benefit has been provided (or was expected to be provided), the service cannot be charged for. d. Whether the services are actually rendered. If yes please quantify such services in terms of actual expenditure incurred and commensurate benefits derived there from. e. The determination of an arm's length charge must take into consideration the amount that an arm's length entity is prepared to pay for such a service in comparable circumstances. f. The taxpayer's level of documentation and evidence to show that the services are actually rendered by the AEs to the taxpayer. If the services are actually rendered, the level of documentation and also evidence....
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....e benefit test which it was show caused to establish. In a nut shell the conditions as per the SOW were not fulfilled, but still the payment was made; there are no benefits which have been derived; payment is not established to be commensurate with the benefit received; there is no economical/commercial enhancement; and no independent person would be willing to pay this amount without any benefit. Thus the Arm's length Price of Professional Charges paid is held to be Nil. Arm's length Price of professional charges : Rs. NIL Price paid : Rs. 2,13,94,873/- Adjustment (downward) : Rs. 2,13,94,873/- Thus the arm's length price of the payment of professional charges is Rs. NIL and the excess payment of Rs. 2,13,94,873/- is treated as adjustment u/s. 92CA of IT. Act and the total income of the taxpayer will be enhanced accordingly u/s. 92CA(3) of the I.T. Act". Suffice to say these adjustments on the twin counts of royalty as well as professional services stand upheld upto the Dispute Resolution Panel's (DRP) directions, finally culminating in the impugned addition. 9. Both parties reiterate their respective vehement stan....
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....er has nowhere applied even a single comparable in his discussion so as to come to in the impugned NIL cost of the assessee's professional/technical services availed. We thus accept the assessee's third and fourth substantive grounds in this lead A.Y. 2010-11 to delete the impugned royalty and technical services payments adjustments of Rs. 95,37,451/- and Rs. 2,13,94,873/-; respectively. Same order to follow in assessee's ground Nos. 1 to 5 for A.Y. 2011-12. Ground Nos. 1 and 3 in A.Ys. 2012-13, 2013-14 and 2014-15 involving varying sums qua these twin heads adjustments; respectively are accepted in assessee's favour in foregoing terms since not involving any distinction on facts. 13. We stay back in A.Y. 2010-11. The assessee's sixth and 7th substantive grounds seek to reverse the lower authorities' action disallowing its advertisement and sales promotion expenditure of Rs. 8,66,71,253/- u/s. 37(1) of the Act for the sole reason that the same need to be amortized u/s. 35D of the Act. The Revenue's stand herein supports the impugned disallowance that all these expenses have been correctly amortized u/s. 35D of the Act being capital in nature thereby e....
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.... disallowance/addition of Rs. 32,49,207/-. The Revenue vehemently contended that such a claim is not allowable being a 'tax' u/s. 40(a)(ii) of the Act. Hon'ble Bombay High Court's recent decision in Sesa Goa Ltd., Vs. JCIT [ 423 ITR 426] (Bom) and Chambal Fertilisers & Chemicals Ltd., Vs. JCIT (ITA No. 52 & 68 of 2018) (2019) [107 taxmann.com 484] (Rajasthan) rely on the CBDT circular dt. 18-05-1967 to hold that the expression 'tax' in the above statutory provision does not include a 'cess'. We thus accept the assessee's instant 10th substantive ground in A.Y. 2010-11. Same order to follow in its corresponding substantive grounds No. 12 in A.Ys. 2011-12 & 2012-13, 6th substantive ground in A.Y. 2013-14 and 12th substantive ground in A.Y. 2014-15; respectively. The assessee's lead appeal 140/Hyd/2015 is partly allowed in above terms. 16. We next move on to A.Y. 2011-12. The assessee's first to 7th, 11th and 12th substantive grounds already stand adjudicated in preceding paragraphs. Coming to 8th and 9th substantive grounds raising the issue of Section 14A disallowance along with consequential MAT provisions u/s. 115JB of the Act invo....
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....de the corresponding block of assets viz-a-viz assessee's capital expenditure as per law. 20. We are now left with the assessee's 11th substantive ground qua addition of the alleged refund issue u/s. 143(1) of the Act along with Section 234D interest involving sums of Rs. 37,47,653/- and Rs. 6,55,839/-; respectively. The assessee's only case is that it had not received any refund and therefore, the impugned addition is not sustainable. The Revenue, on the other hand, pleaded that this issue requires factual verification. We thus, restore the same back to the Assessing Officer to delete the impugned addition on the two counts of refund and interest after necessary factual verification. This ground is taken as accepted for statistical purposes. This appeal ITA No. 487/Hyd/2017 is partly allowed. 21. Now comes assessee's appeal 2170/Hyd/2017. It transpires at the outset that all of its six substantive grounds i.e., transfer pricing adjustment on royalty (1 to 3) reimbursement of expenses (4), deduction of capital expenditure viz-a-viz depreciation (5) and education cess and secondary education cess (additional ground) already stand adjudicated in preceding ....