TaxTMI 
TaxTMI 
2013 (6) TMI 909
X X X X Extracts X X X X
X X X X Extracts X X X X
....2,34,36,910/-. In the profit and loss filed along with the said return, an amount of Rs. 32,42,666/- was debited by the assessee on account of subscription paid to Tata Sons Ltd. towards TATA brand equity and promotion scheme. While justifying its claim for the said payment, the following submissions were mainly made on behalf of the assessee before the A.O:- * "By entering into the agreement, the assessee became entitle to use and associated itself with TATA name, marks and marketing Indica for the company's products and services. * The Tata Sons Ltd., protects and enforces the collective image and goodwill of the Tata Group, organize corporate identity, coordinate major campaign involving promotion and development of Tata name, engage the service of specialist and professional consultants for energizing and enhancing the overall Tata brand etc. * By entering into the agreement, Tata Sons Ltd. had granted non exclusive and on assignable subscription to use TATA name and marketing Indica. * The assessee justified the payment stating that the main goal to formulate the scheme was to justify a diverse and diffuse enterprise and make it capable of f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as being agitated by the Department at various appellate forums. Consequently, final disallowance of Rs. 32,42,666/- was made by the A.O. on this issue. 5. We have heard the arguments of both the sides and also perused the relevant material available on record. The ld. counsel for the assessee, at the outset, has invited our attention to the copy of relevant agreement entered into by the assessee company with Tata Sons Ltd. on 4th June, 2001 placed at assessee's paper book page No. 207 to 225 in order to point out the obligation of Tata Sons to look after the entire brand of TATA group. The said obligation being relevant in the present context are extracted below from page No. 210 and 212 of the assessee's paper book:- "a) To protect and promote the interests generally of the Subscriber both in India and abroad. To this end, the Subscriber hereby authorizes the Proprietor to act on its behalf in protecting and enforcing the collective image and goodwill of the Group and preventing any newly developed mark or symbol from being usurped and/or diluted in any way. b) To organize periodically as may be deemed necessary corporate identity and brand promotional activi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....criber as the Board of Directors of the Proprietor Company may consider necessary in certain circumstances including securing the support of Group companies to the extent and in a manner permissible under the prevalent laws. k) to encourage support to the Subscriber's business from Group companies subject to the availability of products and services of a desirable quality at competitive rates. l) to undertake activities which in the opinion of the Board of Directors of the Proprietor Company are essential for the purpose of promoting, developing, maintaining, managing and legally protecting the Business Name, the Marks and Marketing Indica in India and abroad and thereby endeavor to promote the business of the Subscriber to achieve greater profitability and enhancement of stakeholder value. m) To undertake measures to preserve the stability of the management of the Subscriber in order to protect the larger interests of its stakeholders. n) To provide resources for availing services in the areas of- 1. Financial and Strategic Management. 2. Legal and Economic matters. 3. Management Develop0ment and Human Resources. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt made for acquiring non-exclusive licence to use the logo for the purpose of business was held to be allowable u/s 37(1) of the Act being the expenditure wholly and exclusively incurred for the purpose of business. It is pertinent to note that in the case of Tata Steel, another company belonging to TATA group, a similar subscription paid by the assessee company to Tata Sons Ltd. was proposed to be disallowed by the A.O. in the draft assessment order for A.Y. 2008-09 and when the assessee objected to the said disallowance before the DRP by relying on the decision of the Tribunal in the case of Rallis India Ltd. (supra), the DRP directed the A.O. to allow the said expenditure after verifying as to whether the department has accepted the said decision of the Tribunal. On verification, the A.O. found that no appeal was filed by the department against the order of the Tribunal passed in the case of Rallis India Ltd. giving relief to the assessee on the issue of brand equity subscription and accordingly he allowed similar subscription paid by Tata Steel Ltd. in the final assessment completed u/s 143(3) r.w.s. 144-C of the Act vide order dtd. 27-11-2010. It is thus clear that this issue....
X X X X Extracts X X X X
X X X X Extracts X X X X
.....e., (88287 +70025)/2]. It gives a ratio or 38.47% and the interest disallowable u/s. 14A comes to Rs. 1,41,95,393/- During the year under consideration, there is an increase in the investment like investment in Automotive Composite System International Ltd., Tata Autocom Mobility Telematic Ltd. TC Spink Ltd. Tata Fiecosa Automotive System Ltd., Tata Visteon Automotive Ltd., has gone up. Further, there is a new investment in Tata Autocom GY Batteries Pvt. Ltd. The decision to make further investment in the shares cannot be taken by a person who handles the Treasury Section. The decision for further investment is always taken by Board of Directors. Further, the Board of Directors takes the decision only after going through the various reports from the subordinates like Chief Financial Officer etc. Therefore, there is always involvement of Directors and higher executives in the decision making process for making investments in the companies whether subsidiary company or otherwise. Thus, there is always an element of expenditure involved which is directly linked with dividend income. Therefore, the assessee's contention to consider only salary to a treasury ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....fered by the assessee for disallowance u/s 14A of the Act and the same being a reasonable basis adopted by the assessee for offering the disallowance u/s 14-A of the Act, there was no justification to make any further disallowance on account of administrative expenses. He contended that besides the salary paid to the said staff member, there was no other expenditure required to be incurred by the assessee to make investments in the subsidiaries and joint venture companies and there being no reason whatsoever given by the A.O. to show his satisfaction that disallowance offered by the assessee was not reasonable, there was no justification to make further disallowance u/s 14-A of the Act. 11. The ld. D.R., on the other hand, submitted that the basis given by the assessee to allocate only the salary of one staff member working in the Treasury department for offering disallowance u/s 14-A of the Act was not found to be reasonable and acceptable by the A.O. for the specific reasons given in the assessment order. He contended that satisfaction to this effect was recorded by the A.O. in the assessment order and having found that the working of disallowance offered by the assessee u/s 1....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ttributable to the exempt income. We are unable to accept this stand of the assessee. The investment activity of the assessee resulting in exempt dividend income of Rs. 16.83 crores was the substantial activity and it cannot be accepted that this entire activity was looked after and handled by one Treasury person drawing the salary of Rs. 6,21,151/-. The administrative expenses incurred by the assessee thus were certainly attributable to the investment activity also which fetched the exempt of dividend income of Rs. 16.83 crores and the same therefore were required to be allocated to the exempt dividend income on some reasonable basis. The basis adopted by the assessee to attribute the administrative expenses only to the extent of salary of one Treasury staff thus was not reasonable and the findings to this effect was recorded by the A.O. in para 7.4 of his final order giving specific reasons for not accepting the submissions made by the assessee to justify the quantum of disallowance offered u/s 14-A of the Act. Having found that the disallowance offered by the assessee on account of administrative expenses u/s 14-A of the Act was not reasonable, the A.O., in our opinion, was full....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he assessee :- "1. Documents evidencing defect were nor readily available as the relevant personnel had left the company. Further, TKT had applied for liquidation and the records were in official custody of the liquidator. 2. TKT is merely in a facilitation role and the transaction was actually between TACO and the third party European service providers. 3. Sample copies of third party invoices in respect of rework charges were submitted which itself should be considered as evidence of need and receipt of service. 4. Proposal of computation of arm's length price at Rs.NIL without concluding on most appropriate method and without conducting any benchmarking analysis does not comply with ITPR". 16. The above submission made by the assessee was not found acceptable by the A.O. for the following reasons given in his order:- "1. Evidence of the need of rework is not submitted. No evidence was furnished to prove that goods exported were defective. 2. There is no evidence that the service has been actually rendered on the rework. 3. There is no evidence that the said service was rendered on cost to cost basis. 4. R....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r under consideration were produced by the assessee before the DRP showing the reimbursement of actual repair expenses to the Associated Enterprise to the extent of Rs. 6,42,640/- and accepting the same, the DRP directed the A.O. to give relief to the assessee to that extent. The assessee, however, has not been able to produce the documentary evidence in respect of other transactions involving the reimbursement of actual repair expenses to its Associated Enterprise for the reason that the file containing the said documentary evidence has been lost and even the concerned Associated Enterprise has gone into liquidation. Although this stand of the assessee is duly supported by evidence in the form of FIR etc., we felt that the relevant documentary evidence which is very crucial to support the case of the assessee on this issue, can still be procured by it from the records of its Associated Enterprise even though it is under liquidation. Even otherwise, the said documentary evidence can also be obtained by the assessee from the third parties who actually done the repair work. When this feeling was conveyed to the ld. Counsel for the assessee at the time of hearing, he agreed that effor....