AI Drafter 
TaxTMI 
TaxTMI 
2023 (1) TMI 1110
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....ates to Transfer Pricing adjustment amounting to Rs. 10,44,88,67,112/- in relation to Advertisement, Marketing and Sales Promotion Expenses [AMP] incurred by the assessee. 5. Briefly stated, the facts of the case are that the assessee is engaged in the trading, manufacturing, marketing and sale of electronic home appliances and I.T. products. It is also engaged in the import of finished goods i.e. Colour Television, Air Conditioners and Refrigerators from its holding company and associated group companies and selling the same in the local market. 6. In its telecommunication division, the assessee is engaged in the provision of after sales support services for Code Division Multiple Access [CDMA] technology based mobiles sold by LG Electronics Inc. Korea to Reliance in India. The international transactions undertaken by the assessee and the method applied to benchmark them are reproduced hereinbelow: SI.No. Nature of Transaction Value of international transaction (INR) Method Appliance and media division -Assembly segment 1. Import of raw material and components 22,158,285,520/- TNMM 2. Export of finished goods 12,608,941,573 ....
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....that there is no change in the nature of transaction in the year under consideration and, therefore, the stand taken by the department in earlier years followed. 9. The TPO was of the firm belief that the assessee company has incurred expenses for creating and improving marketing intangibles on behalf of its foreign Associated Enterprises [AE]. As the AE is nonresident and such transactions are in the nature of services, it is considered to be as an international transaction under which the assessee incurred AMP expenses towards promotion of brand/ marketing intangibles owned by the non-resident AE. 10. Thereafter, the TPO referred to the BLT and determination of cost/value of the transaction drawing full support from the decision of the Special Bench of this Tribunal. The TPO, for applying BLT, accordingly compared AMP expenditure incurred by the assessee as percentage of total turnover at 10.48% with average AMP expenditure of 1.82% of the following comparable companies: Name of the Company AMP/sales Allied Photographics India Ltd 0.02% HCL Info Systems Ltd 0.81% Infinite Retail Ltd 2.88% Vivek Ltd 3,59% Arithmetic Mean 1.82% ....
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....Corporation acquired controlling interest in Maruti Suziki, Maruti brand had already built a huge reputation. 15. Again pointing to the decision of the Hon'ble Jurisdictional High Court of Delhi in the case of Whirlpool of India Ltd, the ld. DR stated that while delivering the judgment in earlier Assessment Years, this Tribunal has followed the decision of the Hon'ble Delhi High Court in the case of Whirlpool of India and pointed out that there is a tangible material in the form of Article 20 of the license agreement to demonstrate the existence of international transaction. 16. Referring to the Transfer Pricing study of the assessee, the ld. DR stated that the assessee has undertaken combined bench marking analysis by aggregating several international transactions whereby ALP determination of several international transactions have not been undertaken. 17. The ld. DR further stated that operating margin of the assessee is 3.70% as against 4.70% of the comparable companies which means that the profit margin of the assessee was lower than that of the comparable companies and, therefore, international transactions were not at arm's length price. It is the say of the ....
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....iture does not result in an international transaction and the assessee cannot be expected to seek compensation for such expenses unilaterally incurred by it from the AE." 21. As mentioned elsewhere, the TPO at page 14 of his order has himself categorically mentioned that there is no change in the nature of transaction in the year under consideration and, therefore, the stand taken in earlier years is followed. 22. In our considered opinion, it is not open to the Tribunal to deviate from the findings recorded in earlier years in the absence of change in facts or position in law. In other words, this Tribunal is bound by earlier decisions. 23. We draw full support from the decision of the Hon'ble Madras High Court in the case L.G. Ramamurthi 110 ITR 453 wherein the Hon'ble Madras High Court held that unless new facts are brought on record, the Tribunal shall not take a view which is different from the view taken by another bench for the earlier years. The relevant findings read as under: "19. .......... Even assuming that this court "on the earlier occasion had not given any finding with regard to the nature of the gift, whether it was real or sham, and mere....
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....d have referred the case to a Full Bench of the Tribunal, consisting of three or more members for which there is provision in the Act itself. 29. Under these circumstances, we are clearly of the opinion that the Tribunal completely erred in coming to the conclusion it did, at variance with and opposed to the conclusion of the Tribunal on the earlier occasion, namely, that the gifts in the present cases constituted real gifts and not sham ones." 24. In light of the above, and respectfully following the findings of the co-ordinate bench [supra] we direct the Assessing Officer /TPO to delete the impugned adjustment of Rs. 10,448,867,112/-. Accordingly, Ground No. 4 with all its sub-grounds is allowed. 25. For the sake of completeness, we would like to address to the specific issues raised by the ld. DR. 26. Firstly, the ld. DR has referred to Article 20 of Technical License Agreement which reads as under: "The licensee agrees to provide and make arrangements for advertisement, marketing and sales promotion in the licese territory for L.G. products manufactured by the licensor and those by the licensee at their cost." 27. In our understanding of the afore-....
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.... is not clear why a presumption should be drawn that since an incidental benefit might enure to the brand of Whirlpool USA, a proportion of the AMP expenses incurred must be attributed to it." 33. Nothing has been brought on record by the Revenue to demonstrate that there is a direction from LG Korea to incur certain minimum level expenditure on AMP. Therefore, we are of the considered view that the said Article in TLA does not provide for or result in rendering of any service in relation to AMP expenses incurred by the assessee as an independent full risk-bearing manufacturer/ distributor of the products manufactured/distributed in the Indian market. 34. Another point raised by the ld. DR relates to reimbursement of certain advertisement expenses by LG Korea. 35. As mentioned elsewhere, in terms of Article 20, LG Korea did not have any obligation whatsoever to indicate or reimburse advertisement expenditure in relation to sale of products by the assessee in India. It appears that the said reimbursement of AMP expenses have been made by LG Korea voluntarily and without any legal binding and by way of support the assessee. We find that similar reimbursement has been receive....
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.... adopted and whether reliability and authenticity of the arm's length determination is affected or corrupted. XXXXX 101. However, once the Assessing Officer/TPO accepts and adopts TNM Method, but then chooses to treat a particular expenditure like AMP as a separate international transaction without bifurcation/segregation, it would as noticed above, lead to unusual and incongruous results as AMP expenses is the cost or expense and is not diverse. It is factored in the net profit of the interlinked transaction. This would be also in consonance with Rule 10B(1)(e), which mandates only arriving at the net profit margin by comparing the profits and loss account of the tested party with the comparable. The TNM Method proceeds on the assumption that functions, assets and risk being broadly similar and once suitable adjustments have been made, all things get taken into account and stand reconciled when computing the net profit margin. Once the comparables pass the functional analysis test and adjustments have been made, then the profit margin as declared when matches with the comparables would result in affirmation of the transfer price as the arm's length price.....
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....le. The TNM Method proceeds on the assumption that functions, assets and risk being broadly similar and once suitable adjustments have been made, all things get taken into account and stand reconciled when computing the net profit margin. Once the comparables pass the functional analysis test and adjustments have been made, then the profit margin as declared when matches with the comparables would result in affirmation of the transfer price as the arm's length price. Then to make a comparison of a horizontal item without segregation would be impermissible." 33. Considering the aforementioned findings of the Hon'ble Jurisdictional High Court of Delhi In the case in hand, the operating profit margin of the assessee is at 5.01% in the manufacturing segment and 4.52% in the distribution segment and the same is higher than that of the comparable companies at 4.04% in the manufacturing segment and 4.46% in the distribution segment. TNMM has undisputedly been satisfied. Since the operating margins of the assessee are in excess of the selected comparable companies, no adjustment on account of AMP expenses is warranted." 40. The contention of the ld. DR that profit margin of....
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.... and selected the following comparables for the purpose of bench marking analysis: Name of Foreign Collaborator Name of Indian Company Date of approval Items of Manufacture Royalty Rates Domestic Royalty Rates- Export Duration of the agreement (Years) Toshiba Corporati on Japan Videocon International Limited Sep-99 Colour Television Receivers 4% 3% 7 Hitachi Limited Volta Limited Nov-99 Steam fired vapour 5% 5% 5 Eatco Williams Group Blue Star Limited Jan-03 Invicts PAC usage of Air Conditioning 5% 5% 5 Kenwood Design Corporation Videocon International Limited Mar-99 Television 5% 5% 5 Samsung Electronics Co. Limited Videocon Appliances Limited Mar-99 Showcase of Reach-in-type and open type reach-incooler and open freezer 5% 5% 5 Victor Company of Japan Mirc Electronics Limited Apr-03 Colour Television Receiver Set and Subassemblies 5% 5% 7 SRS Labs Inc Salora International Limited Apr-03 Speaker 5% 3 Vilter Manufacturing Corporation Frick India limited Jan-03 Refrigeration Compressors ....
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....here can be no quarrel on the fact that, other things being equal, a landlord intending to have a tenant for a long-term may compromise some amount of rent, in comparison with a landlord finding a tenant requiring the premises for a short-term. The rate of rent in a former case will be lower for a variety of reasons, such as, not undergoing the process of finding a tenant every now and then, fear of the property remaining vacant for some time after the exit of the first tenant and incurring costs at the time of each let out. Difference between the rent charged by the landlord or paid by the tenants in the afore discussed two situations is nothing but a discount allowed to a tenant of longterm on the available market rate of rent. This analogy can be applied to the present facts by considering the discount which a licensor with a perpetual license may allow or the premium which a licensor with a fixed term license may charge. It can be seen that the TPO downgraded 2% on this score and reduced the unadjusted comparable rate of 3.5% to the adjusted 1.5%. To put it differently, the TPO treated the premium charged by the comparable licensors on account of fixed term licenses at....
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...., has decided the issue in favour of the assessee and against the Revenue. 49. The ld. DR vehemently stated that this transaction was reported as an international transaction and was benchmarked applying TNMM on aggregation basis. It is the say of the ld. DR that this international transaction was not bench marked by the assessee separately. The ld. DR strongly contended that since there was a mark-up of 5% over and above the cost, therefore, the same was required to be benchmarked applying the most appropriate transfer pricing method. 50. The ld. DR further questioned why charges are being paid for brand management services when brand belonged to LG Korea and not to the assessee and therefore, questioned the requirement of marketing, planning and training services. The ld. DR vehemently stated that the evidences which have been brought on record do not pertain to the F.Y. 2009-10 relevant to the year under consideration. 51. The ld. DR further questioned the allocation of expenses in ratio of domestic sales as it results in higher allocation of the expenses to the Indian company and further questioned the allocation of president cost and general overheads of the AE. 52....
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....arding marketing and PR initiative launched by the associated enterprise 2311-2313 (Vol 6) Video and other promotional material in connection with 'FI Rocks with Golden Ticket' project launched by the associated enterprise 6 Email dated April 2009 regarding marketing and PR initiative launched by the associated enterprise 2314-2318 (Vol 6) Promotional material in connection with marketing project launched by the associated enterprise 7 Email dated May 8, 2009 regarding strategy training workshop organised by the associated enterprises 2319-2328 (Vol 6) Email dated May, 8, 2009 8 Copy of Detailed presentation on 'Developing Strategy and problem solving' 2329-2518 Detailed presentation on strate. development - May 22nd and 23rd, 2009 9 Email communication between Corporate marketing team of the associated enterprise and the employees of the appellant 2519-2523 (Vol 6) Email dated 05-04-2009 10. Brand in depth study - Report dated October,2009 2524-2588 (Vol 7) In depth study to diagnose the current status of brand and to identify influencing factors for brand preference 11 Presentation on global communication cam....
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....onducted with a view of imparting soft skills to the employees of the assessee company and for this purpose, executives from the RHQ visit the assessee company. 50. In so far as the allegation that these are share holder services, we do not find any merit in this argument of the Revenue. Services are provided by LG Electronics Singapore Pte Ltd, which is not a shareholder of the assessee company and was created to provide managerial support services to various entities in the region, in the form of undertaking market research, market performance analysis, conducting consumer interviews engaging the services of third party consultants for undertaking market/industry analysis, provision of supply chain management services, provision of after sale services etc. and such activities cannot be termed as share holder activity. 51. We find that the assessee engaged a third party consultant to determine the arm's length price of the services provided by the RHQ. The consultant determined ALP at Rs. 6,521/- per hour as against the comparable uncontrolled price of Rs. 11,670/- per hour. Since the hourly rate charged by RHQ is lower than comparable hourly rate of third partie....
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....given by the TPO is not only erroneous for the reasons stated above, but is also contrary to the Rules. Depending upon the method selected, net profit or gross profit of the assessed has to be compared with profit margins of related enterprise. The formula prescribed under the Rules does not accept the ratiocination adopted and applied by the TPO. 54. The Hon'ble Delhi High Court in the case of CIT vs Lumax Industries Limited ITA No 102/2014 held that the Transfer Pricing provisions do not authorize disallowance of any expenditure on the basis that it was not necessary for the assessee to incur the expenditure. The Hon'ble Court held as under: "16. On the question of addition made by the AO on account of ALP for the payment of royalty, learned counsel for the Assessee has rightly referred to the decision in Commissioner of Income Tax v. Sony Ericsson Mobile Communication (2015) 374 ITR 118 where the determination of the ALP of the royalty paid as Nil was not approved. The Court's attention has also been drawn to the decision in Commissioner of Income Tax v. EKL Appliances Limited (2012) 345 ITR 241 wherein it was held that Rule 10B (1) (a) did not authorize di....
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.... warranted. 57. Same view was taken by the Hon'ble Delhi High Court in the case of Magneti Marelli Powertrain India Pvt. Ltd. ITA No 350/2014 wherein the Hon'ble High Court held as under: "17. As far as the second question is concerned, the TPO accepted TNMM applied by the assessee, as the most appropriate method in respect of all the international transactions including payment of royalty. The TPO, however, disputed application of TNMM as the most appropriate method for the payment of technical assistance fee of 38,58,80,000 only for which Comparable Uncontrolled Price ("CUP") method was sought to be applied. Here, this court concurs with the assessee that having accepted the TNMM as the most appropriate, it was not open to the TPO to subject only one element, i.e payment of technical assistance fee, to an entirely different (CUP) method. The adoption of a method as the most appropriate one assures the applicability of one standard or criteria to judge an international transaction by. Each method is a package in itself, as it were, containing the necessary elements that are to be used as filters to judge the soundness of the international transaction in an AL....
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....R strongly contended that export commission cannot justifiably be paid in respect of expenses on advertisement incurred by LG Korea when LG brand does not belong to the assessee and prayed for rejection of the additional evidence. 66. A perusal of the additional evidence shows that the same indicates brand promotion expenses incurred by LG Korea for promoting its brand name and overseas marketing and network. The assessee has been providing access to the overseas marketing/network which is continuously developed and maintained by the AE, because of which the assessee is able to export its product in these markets. It is not in dispute that the assessee has no office set up or infrastructure outside India to undertake exports and it is also not disputed by the Revenue that the assessee is able to secure orders for exports in the overseas market through the network and basis the established brand name of LG Korea. 67. In any case, in our considered view, the Assessing Officer shall examine the additional evidence and decide the issue afresh as per the directions of this Tribunal given in ITA No. 953/DEL/2014 for Assessment Year 2009-10. Ground No. 7 is allowed for statistical p....
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....e borne by manufacturing entity i.e. the AE. In such a scenario, the assessee is only acting as a pass through. The entire cost incurred in providing warranty services is reimbursed by the AE and now, such reimbursement, in our considered view, there is no basis for charging of mark-up by the assessee. 75. Further, we find that the facts are identical to the facts considered by this Tribunal in ITA No. 953/DEL/2014 for Assessment Year 2009-10. Therefore, considering the facts in totality, in light of the decision already taken on this issue by this Tribunal, we direct the Assessing Officer/TPO to delete the impugned adjustment. Ground No. is 8 allowed. 76. Ground No. 9 relates to the TP adjustment of Rs. 43,46,50,613/- in respect of international transaction of payment of design and development charges. 77. Facts on record show that the assessee has paid a sum of Rs. 43.46 crores on account of payment for design and development services rendered by the AE. The TPO was of the firm belief that design and development services are covered under the royalty agreement and, therefore, determined ALP of this international transaction at NIL. 78. Before us, it was strongly submi....
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....ee were earning average margin of 3.70% as against margin of the assessee at 4.70% for manufacturing segment. As mentioned elsewhere, and for the sake of repetition, we have to state that OPM of the assessee is within +/- 5% range of the comparable companies and, therefore, international transaction entered into by the assessee has to be considered being at arm's length. 85. For this proposition, we draw support from the TP Guidelines for multinational corporations and tax administrations by the Organization for Economic Co-operation and Development [OECD] which state the following on aggregation of transactions: "3.9 Ideally, in order to arrive at the most precise approximation of arm 's length conditions, the arm's length principle should be applied on a transaction-by-transaction basis. However, there are often situations where separate transactions are so closely linked or continuous that they cannot be evaluated adequately on a separate basis. Examples may include I. some long-term contracts for the supply of commodities or services, 2. rights to use intangible property, and 3. pricing a range of closely-linked products (e.g. in a product line) when it is i....
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....most appropriate method, then it would be inappropriate for the Revenue to treat a particular expenditure as a separate international transaction. The relevant findings read as under: "82. There is considerable tax literature and text that CUP Method, i.e. Comparable Uncontrolled Price Method, RP Method, i.e. Resale Price Method and CP Method, i.e. Cost Plus Method can be applied to a transaction or closely linked, or continuous transactions. Profits Split Method and TNM Method grouped as ‗transactional profit methods', can be equally effective and reliable when applied to closely linked or continuous transactions. Thus, it would be inappropriate to proceed with the arm's length computation methods, with a pre-conceived suppositions on singularity as a statutory mandate. Clubbing of closely linked, which would include continuous transactions, may be permissible and not ostracized. Aggregation of closely linked transactions or segregation by the assessed should be tested by the Assessing Officer/TPO on the benchmark and the exemplar; whether such aggregation/ segregation by the assessed should be interfered in terms of the four clauses stipulated in Section 92....
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....arm's length price. Then to make a comparison of a horizontal item without segregation would be impermissible. 89. The above decision of the Hon'ble High Court of Delhi was followed in the case of Maruti Suzuki India Ltd 381 ITR 117 wherein the Hon'ble High Court held that as long as the operating margins of the assessee are higher than those of the comparable companies, no transfer pricing adjustment is warranted. The relevant findings read as under: "86. In Sony Ericsson it was held that if an Indian entity has satisfied the TNMM i.e. the operating margins of the Indian enterprise are much higher than the operating margins of the comparable companies, no further separate adjustment for AMP expenditure was warranted. This is also in consonance with Rule 10B which mandates only arriving at the net profit by comparing the profit and loss account of the tested party with the comparable. As far as MSIL is concerned, its operating profit margin is 11.19% which is higher than that of the comparable companies whose profit margin is 4.04%. Therefore, applying the TNMM method it must be stated that there is no question of TP adjustment on account of AMP expenditure.....
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....f AE written off during the year under consideration. 94. Facts on record show that the assessee had paid advance to its AE for supply of monitors. However, the AE closed its operations and went into liquidation due to bankruptcy and, therefore, could not refund the advance received. The assessee had no choice but to write off the advance. The TPO disallowed the write off holding that no documents have been furnished by the assessee to demonstrate that the assessee has filed case for recovery of advance. 95. Before us, the ld. counsel for the assessee vehemently stated that the amount written off does not fall within the purview of Chapter X of the Act as the same does not arise from an international transaction and, therefore, does not require determination of ALP. 96. On the other hand, the ld. DR drew our attention to the findings of the TPO at Para 15 of his order and pointed out that bankruptcy occurred during FY 2010-11, which is subsequent to the year under consideration. 97. The ld. DR further stated that the entire transaction is doubtful and there was no need for giving the impugned advance and the impugned advance was given by the assessee only to support fin....
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....turing consumers electronics and home appliances. During the year under consideration, in order to manufacture such technologically advanced goods, the assessee has employed 3,970 people including 42 expatriates, who were also on the payroll of LG Korea. 104. During the course of scrutiny assessment proceedings and on examination of the claim, the AO disallowed the salary amounting to Rs. 36,33,50,841/- paid to the said 42 expatriates by holding that the said expatriates were of the holding company/AE LG Korea and were serving the business interest of the holding company and, therefore, salaries paid to such expatriates by the assessee was not incurred wholly and exclusively for the business interests of the assessee. 105. Before us, the ld. counsel for the assessee stated that there is no dispute that the expatriates were employees of LG Korea earlier and therefore, continued to have lien on their employment with LG Korea. But during the year under consideration were in total employment with, and were working under the direct control and supervision of the assessee. It is the say of the ld. AR that the assessee was legal and economic owner of such expatriates during the year....
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....at employees. On perusal of the agreement it clearly shows that the expatriates were wholly and exclusively working for the business interest/benefit of the assessee and were not entitled to render service of any nature whatsoever to any other person. It is also true that the assessee follows a well-defined recruitment process which is headed by HRD of the assessee. 112. Process of recruitment, as exhibited at page 405 of the paper book Volume II, shows that a requisition for recruitment is raised to the HRD and on such a receipt of such a requisition, the HRD evaluates job requirement and requisite skills and competencies to fill vacant posts. Thereafter, requisition is made to LG Korea. Based on job profile, LG Korea nominate its employees and thereafter HRD of the assessee shortlists the employees from pool of names suggested by LG Korea and conducts independent interviews and finally the assessee takes final decision of recruitment. 113. Considering the entire factual matrix, the only logical conclusion that can be drawn is that, such expatriates were employees of the assessee during the year under consideration and worked under the direct control and supervision of the a....
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....2012 for assessment year 2008-09 vide Ground No. 8 of that appeal. The relevant findings of the co-ordinate bench read as under: "78. We have given thoughtful consideration to the orders of the authorities below. We have also considered the orders of the coordinate bench in assessee's own case and the various judicial decisions relied upon by the ld. AR. In A.Y 2002-03, the coordinate bench in ITA No. 1404/DEL/2007 has held as under: "9. We have heard both the parties and gone through the material available on record. In this case the assessee had collected sales tax as a part of dealers' price. At the year end the sales tax portion, which formed the part of dealers' price had been bifurcated and has been claimed as capital subsidy. We have also gone through the Notification No. 1179 dated 31.03.1995 issued by the State Government of Uttar Pradesh. The State Govt. has provided sales tax exemption with an objective to promote the development of certain industries which have been set up or undertaken modernisation, diversification, backward integration by way of fixed capital investment of Rs.50 crores or more. The exemption of from sales tax or benefit of r....
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....ears has been provided to the extent of 100 per cent, next three years 75 per cent, next two years 50 per cent and next two years 25 per cent. In all exemption from sales tax was provided for 10 years. 10. Neither the certificates issued by Greater Noida Industrial Development Authority nor the Notification issued by the State Govt. authorises the assessee to collect sales tax from its customers. The assessee has been exempted from collecting the sales tax from customers on the sales made with effect from 27th March, 1998. In fact, the ld. counsel for the assessee made a statement at the bar, during the course of hearing, that neither the Notification has authorized the assessee to collect sales tax nor the assessee had collected the sales tax as such. The assessee had included the element of sales tax in the dealers' price as a sale price of the product. In the States other than Uttar Pradesh, the sales tax so collected as a part of dealers' price has been paid to respective State Governments, whereas in the case of the assessee, since the assessee was not liable to pay sales tax, as exemption has been provided to the extent of 200 per cent of fixed capital invest....
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....,56,06,674/- to LG Korea for the right to use technology and know how for manufacture and sale of goods. Basis the findings given in earlier Assessment Years, the Assessing Officer disallowed royalty amounting to Rs. 124,29,24,672/- being net of transfer pricing adjustment of Rs. 53,26,82,002/-. 123. An identical issue was considered by this Tribunal in assessee's own case in Assessment Year 2008-09 ITA No. 6253/DEL/2012 and in Assessment Year 20009-10 in ITA No. 953/DEL/2014. The relevant findings read as under: "43. Ground No. 10 relates to disallowance of Rs. 97,71,71,875/- out of aggregate royalty amounting to Rs. 1,39,59,59,821/- paid to LG Electronics, Korea holding the same to be in the nature of capital expenditure. 44. A similar issue was decided in favour of the assessee by the Tribunal in assessee's own case in ITA No. 6253/DEL/2012 for assessment year 2008-09 vide Ground No. 10 of that appeal. The relevant findings of the co-ordinate bench read as under: "88. We find that the Tribunal in assessee's own case for A.Y. 2007-08 has decided this issue in favour of the assessee and against the Revenue. Respectfully following the findings of the c....
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....st the assessee by the Tribunal. The assessee has filed application u/r 29 of the ITAT Rules for admission of additional evidence in support of payment of export commission to its AE. In our considered opinion, such additional evidences need to be verified before deciding this issue. We, accordingly, restore this matter to the file of the Assessing Officer. The assessee is directed to furnish relevant documentary evidences and the Assessing Officer is directed to consider the same and decide the same afresh after giving reasonable opportunity of being heard to the assessee. Ground No. 11 is treated as allowed for statistical purposes." 129. Similar finding was given in Assessment Year 2009-10 in ITA No. 953/DEL/2014 and the same read as under: "18. In addition to this, in Ground No. 11, the assessee has objected to the disallowance of export commission of Rs. 10,43,12,616/- which includes TP adjustment of Rs. 3,52,34,484/-. 19. The assessee has filed an application u/r 29 of the ITAT Rules for admission of additional evidence in support of payment of export commission to AEs. Similar application was filed in assessment year 2008-09 and the Tribunal, after consi....
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....g to Rs. 44,50,635/-. The said amount pertained to deduction in respect of additional wages paid in financial years 2005-06, 2006-07 and 2007-08. The Assessing Officer has allowed the deduction in respect of claim pertaining to the A.Y under consideration amounting to Rs. 15.44 lakhs and disallowed the claim of deduction pertaining to A.Y 2006-07 and 2007-08 amounting to Rs. 29.06 lakhs. 94. Before us, the ld. AR contended that due to the amendment in section 80JJAA of the Act, the assessee is very much entitled for the claim of deduction. It is the say of the ld. AR that the only dispute is whether workmen who joined the assessee company in the earlier years and worked for less than 300 days in that year and therefore, were not regarded as "regular workmen" in that year. It is the say of the ld. AR that if the amendment is considered in its true perspective, such workmen will be considered as "regular workmen" in the subsequent years in which their period of employment becomes equal to or more than 300 days. 95. Per contra, the ld. DR stated that the amendment brought in section 80JJAA is w.e.f. 1.4.2019 and, therefore, the same is not applicable for the year und....
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.... assessee's claim of deduction is allowable. Memorandum explaining provisions of Finance Bill 2018 states that the amendment is intended to rationalize the deduction of 30% of additional wages "by allowing the benefit for a new employee who is employed for less than the minimum period during the first year but continues to remain employed for the minimum period in subsequent year. 99. In our considered opinion, this amendment i.e. second proviso is clarifactory in nature and is intended to remove the anomaly so as to advance legislative intention of providing incentive to new worker for more than 300 days and must be given retrospective effect. For this proposition, we draw support from the judgment of the Hon'ble Supreme Court in the case of Allied Motors Pvt. Ltd Vs. CIT 224 ITR 677 [SC]. The relevant finding of the Hon'ble Supreme Court reads as under: "In the case of Goodyear India Ltd. v. State of Haryana and Anr. (188 ITR 402) this court said that he rule of reasonable construction must be applied while construing a statute. Literal construction should be avoided if it defeats the manifest object and purpose of the Act. Therefore, in the wel....