TaxTMI 
TaxTMI 
2021 (2) TMI 1329
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....rder. We shall first advert to the cross- appeals for A.Y. 2009-10. The assessee has assailed the impugned order on the following grounds of appeal before us: "Ground No.1: 1. On the facts and in the circumstances of the case and in law, the learned AO, under the directions issued by the DRP, erred in disallowing a sum of Rs.26,92,193 under Section 14A of the Income Tax Act, 1961 ('the Act') having failed to appreciate that the Appellant company has not incurred any expense directly in relation to the earning of tax free income. The Appellant prays that the sum of Rs.26,92,193 be allowed as business expenditure and the disallowance may kindly be deleted. 2. Without prejudice to the above, on the facts and in the circumstances of the case and in law, the learned AO, under the directions issued by the DRP, erred in computing the disallowance as per the method prescribed under Rule 8D(2)(ii) of the Income Tax Rules, 1962 ('the Rules') without considering the specific facts in the Appellant's case. The Appellant prays that disallowance of proportionate interest expenditure under Section 14A of the Act read with Rule 8D(2)....
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....neurial licensed manufacturers as is the case of the Appellant; iii. presuming that there existed an arrangement and consequently a transaction between the Appellant and its AE and thereby erred in contending that the AE ought to compensate the Appellant towards the alleged excessive AMP spend; iv. presuming without any direct or indirect evidence that the Appellant had incurred non-routine AMP expenses and that the AMP expenses incurred by the Appellant benefited the AE; and v. confirming the adjustment despite the fact that the advertisements were product specific and not brand specific and disregarding the fact that many of the products manufactured by the Appellant were India specific. The Appellant therefore prays that appropriate relief be granted. 2. Without prejudice to the above, on the facts and in the circumstances of the case and in law, the learned AO, under the directions issued by the DRP, erred in considering third party market research expenses and manufacturing standard costs, being in the nature of selling & distribution expenses, for computing the alleged excessive AMP spend of the Appellant. The Appellant th....
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.... e) not granting the economic adjustments to the Appellant on account of differences between risk profile, working capital cycle of the Appellant vis-a-vis the comparables; and f) not granting the (+/-) 5% range benefit available under proviso to section 926(2) of the Act. Accordingly, the Appellant prays that the addition of Rs. 61,55,480 may kindly be deleted. Ground No 6: 1. Without prejudice to Ground No. 1 to 5 above and in the alternative, on the facts and in circumstances of the case, the learned AO, under the directions issued by the DRP, has erred in consequently not revising the profit from the Baddi unit eligible for deduction under Section 80IC of the Act by the amount of Advertising, Marketing and Promotion expenditure alleged to have not been incurred for the purpose of business of Appellant's undertaking. The Appellant prays that the learned AO be directed to recompute the deduction under Section 8oIC of the Act by adjusting the Advertising and Marketing expenditure considered as not having been incurred for the purpose of business of Appellant's undertaking. The Appellant craves leave to add to, omi....
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.... by the AE Rs.156,55,14,780/- 2. Research & Development Services segment` Rs.61,55,480/- Total Rs.157,165,70,260/- 4. After receiving the order passed by the TPO under Sec. 92CA(3), dated 28.01.2013, the A.O passed a draft assessment order under Sec. 143(3) r.w.s 144C(1), dated 25.02.2013 wherein he proposed to assess the income of the assessee company under the normal provisions at Rs.232,59,02,620/- and the "book profit' under Sec. 115JB at Rs.335,27,33,202/-. 5. Aggrieved, the assessee assailed the additions/disallowances that were proposed by the A.O vide his draft assessment order before the Dispute Resolution Panel-1, Mumbai (for short 'DRP'). After deliberating on the issues that were raised before him in the backdrop of the contentions advanced by the assessee, the DRP issued directions vide its order passed under Sec. 144C(5), dated 31.10.2013. 6. The A.O after receiving the order passed by the DRP under Sec. 144C(5), dated 31.10.2013, therein framed the assessment under Sec. 143(3) r.w.s 144C(13), dated 30.12.2013 wherein he inter alia made the following additions/disallowances: Sr. No. Particulars Amount 1. Disallow....
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....d to Rs. 38,32.89 lacs. Apart from that, it was submitted by the ld. A.R that during the year in question it had made a fresh investment of only Rs.73.83 lacs. To sum up, it was the claim of the ld. A.R that as the assessee had substantial owned funds to justify the investments made in the exempt income yielding assets, thus, no disallowance of any part of the interest expenditure was called for under Rule 8D(2)(ii) in its hands. Adverting to the disallowance made by the A.O under Sec. 14A r.w Rule 8D(2)(iii), it was submitted by the ld. A.R that the A.O while computing the said disallowance had wrongly included the investments which though had not yielded any exempt income during the year under consideration. In support of his aforesaid contention the ld. A.R relied on the order of the ITAT special bench in the case of ACIT & Anr. Vs. Vireet Investment Pvt. Ltd. (2017) 165 ITD 27 (Del)(SB). In the backdrop of his aforesaid contentions, it was submitted by the ld. A.R that the A.O be directed to re-compute the disallowance under Rule 8D(2)(iii) after excluding the investments which had not yielded any exempt income during the year in question. 10. Per contra, the ld. Departmenta....
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.... a narrow compass. As per the AIR information, it was gathered by the A.O that the assessee had made certain payments using credit cards, as under: Sr. No. Name and address Transaction amount Transaction party 1. George Joseph No. 79/8C Sunny Brooks NXT to Wipro Corporation, office Sajapur Road, Bangalore- 56 Rs. 2,88,727 Citi Bank 2. Colgate- Palmolive, Main St. Hiranandani Grds, Powai, Mumbai 76 Rs. 11,46,49,356 American Express Bank 3. George Joseph No.79/8C Sunny Brooks NXT to Wipro Corporation, office Sajapur Road, Bangalore 56 3,99,249 American Express Bank On being queried as regards the expenditure stated to have been incurred by Mr. George Joseph, it was the claim of the assessee that the same pertained to travel, hotel and food expenses of the aforesaid person who was rendering his services as the sales manager of the assessee company. However, as the assessee failed to produce any details, data or supporting primary records, the A.O, thus, vide his draft assessment order proposed to disallow the aforesaid expenditure aggregating to Rs.6,87,976/-. Objections filed by the assessee to the proposed disallowance of the afores....
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....present the same before the A.O. Apart from that, we find that the DRP had also observed that the documents furnished by the assessee did not instil much of confidence. We have given a thoughtful consideration and are of the considered view that as the aforesaid expenses were incurred by an employee of the assessee company viz. Mr. George Joseph, sales manager, by purportedly using the credit cards of the assessee company, the same, thus, could not have been summarily discarded by the lower authorities. Although, we are not oblivious of the fact that the assessee could not substantiate that the expenses in question were incurred wholly and exclusively for the purpose of its business, but then, we also cannot shut our eyes to the fact that the documentary evidence produced by the assessee before the DRP were considered by the panel with a half hearted approach. On the one hand the panel had declined to admit the documents produced by the assessee as 'additional evidence', while for at the same time it had given general observations as regards the same. Be that as it may, in our considered view the matter in all fairness requires to be restored to the file of the A.O for fresh ad....
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....ec. 80IC had been restricted by both the lower authorities. It was averred by the ld. A.R that the restriction of the assessee's claim for deduction under Sec. 80IC by the A.O/DRP by attributing only 75% of the scrap sales to the manufacturing activity of the assessee's industrial undertaking was not as per the mandate of law. It was submitted by the ld. A.R that as per Sec. 80IC, the gross total income of an assessee including any profits and gains derived by an undertaking or an enterprise from an eligible business therein contemplated was to be allowed as a deduction while computing the total income of the assessee. It was averred by the ld. A.R that as the generation and the consequential sale of scrap pursuant to the manufacturing activity of the industrial undertaking was inextricably linked or in fact interwoven with the manufacturing activities of the assessee, the same, thus, was undeniably formed part of the profit and gains derived by the industrial undertaking from its eligible business. In order to buttress his aforesaid claim the ld. A.R had relied on the judgment of the Hon'ble High Court of Allahabad in the case of CIT & Anr. Vs. Modi Xerox Ltd. (2014) 365 ITR 200 (....
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....had a direct and immediate nexus with its industrial undertaking, the same, thus, was eligible for deduction u/s 80-HH of the Act. Observations of the Hon'ble High Court for the sake of clarity are reproduced as under: "Now we come to the Question No. 11 which relate to deduction under Section 80- HH before the Assessing Officer. Under Section 80- HH, the assessee was entitled to the deduction equal to 20% of the gross total income of the assessee, which includes any profit and gains derived from the industrial undertaking. The assessee's case is that income of Rs. 63,66,932/- was deducted treating to be income from other sources and deduction under Section 80-HH was not given on the aforesaid amount of Rs. 63,66,932/-. The assessee filed appeal against the said order and the Appellate Authority in Paragraph No. 6.2 directed the Assessing Officer to take the income from the sale of Scrap by xerographic equipment unit and Toner, Developer, Photocopier unit as profit of the said unit. The said order has been confirmed by the Tribunal. Learned counsel for the appellant submitted that the Assessing Officer has rightly not deducted the said income from the profits ....
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....as profit of the Industrial Under-taking and the same should not have been reduced from the net assessable income adopted by the A.O. for the purpose of section 80HH. Reliance was place on the decision of Madras High Court in the case of CIT, Tamilnadu-III Vs. Wheels India Ltd., 141-ITR-745 to the effect that the sale of Scrap was as income of the priority Industry and, hence, relief u/s 80-I was available in respect of these units. After considering the submissions of the appellant, I direct the A.O. to take the income from sale of Scrap by xerographic equipment Unit and Toner, Developer, Photocopier Unit as profit of the said Units (and not income from other sources) for purpose of deduction u/s 80HH. However, as I have held in the case of the appellant in previous asst. year that the income/profit derived by the appellant by service and trading Unit does not constitute income from Industrial Undertaking, other income of Rs. 29,28,427 (out of claim of Rs. 83,66,932) concerning this unit has to be reduced from the above said net assessable income taken by the A.O." The Commissioner has clearly directed for including the income from the Scrap generated by specifie....
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.... than the actual conduct of the business of generation and distribution of electricity." 6. The word "derived" has been construed as far back in 1948 by the Privy Council in CIT v. Raja Bahadur Kamakhaya Narayan Singh [1948] 16 ITR 325 when it said (page 328) : "The word 'derived' is not a term of art. Its use in the definition indeed demands an enquiry into the genealogy of the product. But the enquiry should stop as soon as the effective source is discovered. In the genealogical tree of the interest land indeed appears in the second degree, but the immediate and effective source is rent, which has suffered the accident of non-payment. And rent is not land within the meaning of the definition." The proposition laid down by the Hon'ble Apex Court that the said case was to the effect that the word derived from under Section 80- HH has to be understood as something which has immediate nexus with the industrial undertaking. In the present case, the scrap generated from the aforesaid three units has direct and immediate nexus with the industrial undertaking since the said scrap has been generated from the manufacturing process itself. Thus, we are....
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....ables were either Indian companies which owned their brands developed by it or companies with significant foreign shareholding, therefore, the AMP expenses in the case of the assessee could safely be taken at a lower figure i.e 8% of its net sales. Accordingly, the A.O considered 8% as the 'bright line' for AMP expenses, and thus, was of the view that expenditure over and above the aforesaid amount was required to be borne by the assessee's foreign AE, viz. Colgate- Palmolive, USA, that was the owner of the 'Colgate' brand and the other brands in India. TPO observed that the ratio of AMP expenses incurred by the assessee worked out at 16.03% of its net sales, as under : "A. Net Sales : Rs.1694,81,35,000/- B. Advertising & Sales Promotion : Rs. 271,71,68,000/- C. Advertisement, Marketing & Promotion (AMP) Expenses as a percentage of Sales (B/Ax 100%) : 16.03%" In the backdrop of his aforesaid deliberations, the TPO was of the view that the assessee was supposed to be reimbursed the aforesaid AMP expenses that were incurred by it on behalf of its AE, viz. Colgate-Palmolive, USA, along with a mark up of 15% on the said expenditure. Backed by h....
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....djustment under Sec. 92CA(4) of Rs.31,63,26,783/-. 23. Aggrieved, the assessee had assailed the aforesaid TP adjustment made by the A.O/TPO towards AMP expenses. It was submitted by the ld. A.R that the issue herein involved was squarely covered by the order of the Tribunal in the assessee's own case for A.Y 2005-06 and A.Y. 2007-08 in ITA No. 6073/Mum/2014 and ITA No. 2778/Mum/2011, respectively. It was submitted by the ld. A.R that the Tribunal on the basis of exhaustive deliberations had struck down the TP adjustment that was made by the A.O/TPO w.r.t AMP expenses by relying on a host of judicial pronouncements. In order to buttress his aforesaid claim the ld. A.R took us through aforesaid order of the Tribunal passed in the assessee's own case for the aforesaid preceding years. 24. Per contra, the ld. D.R relied on the orders of the lower authorities. 25. We have heard the authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by them to drive home their respective contentions. On a perusal of the order passed....
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....ate his stand. The aforesaid methodology, as per settled legal position, is not a recognized methodology and not one of the prescribed methods as envisaged by Rule 10B. 5.4 Upon due consideration, we find that the facts of the above case are quite similar to facts in the decision of Mumbai Tribunal rendered in Johnson & Johnson Ltd. Vs. CIT [43 Taxmann.com 15] wherein it has held as under:- 37. Relevant facts are that the TPO has stated that the assessee incurred publicity and sales promotion expenses of Rs.163.27 crores during the relevant financial year. The TPO has stated that said expenses on publicity and sales promotion has resulted into higher sales on which correspondingly higher royalty has been paid to the parent company J&J US. Therefore, the benefit of higher publicity and sales promotion expenses are accrued to the parent company J&J US but the cost thereof is not apportioned to the parent company. The TPO sought explanation from the assessee as to why the cost of arrangement as emanating from the records, is resulting into the benefit to the parent AE, but not apportioned as per section 92(2) of the Act. The TPO stated that the assessee and the paren....
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....TPO stated that the cost is restricted to 200.82 lakhs (being 1.23% of Rs.163.27 crores) in view of disallowance/adjustment in income made on account of royalty on technical know-how, the income tax, R&D cess and service tax paid thereon aggregating to Rs.41.27 crores out of total payment of Rs.58.37 crores. Hence, TPO disallowed Rs.200.82 lakhs from the publicity and sales promotion expenses incurred towards cost allocable to parent company. DRP after considering the submissions of the assessee company confirmed the action of the TPO. Accordingly the AO disallowed a sum of Rs.200.82 lakhs while making assessment. Hence, assessee is in appeal before the Tribunal. 38. During the course of hearing, ld. AR submitted that it was an adhoc disallowance made by TPO and relied on the decision of Mumbai Bench of Tribunal in the case of Kodak India (P.) Ltd. v. Addl. CIT [2013] 37 taxmann.com 233 and submitted that the Tribunal deleted similar kind of adjustment suggested by TPO on the ground that TPO cannot make a disallowance which is not within the precinct of specific method prescribed under section 92C(1) of the Act. He submitted that no adhoc disallowance can be made under the....
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.... made and considering the fact that the assessee justified the payment of technical know-how royalty at the rate of 4% of net sales which is lower than Arm's length rate of 4.84% and the said fact, we have also discussed herein above in para 33 of this order, that the payment of royalty by assessee to its parent company is at Arm's Length, we do not find any justification to make the said disallowance of Rs.200.82 lakhs as suggested by TPO towards the shares to be contributed by AE of the assessee company. Therefore, we delete the said disallowance made by AO by allowing ground No.18 of the appeal taken by assessee. Upon further appeal by revenue [80 Taxmann.com 269], Hon'ble Bombay High Court has upheld the aforesaid view of the Tribunal by making the following observations:- 4. Re Question (l) :- (i) The impugned order of the Tribunal allowed the Respondent- Assessee's appeal before it by deleting the addition of Rs.200.82 lakhs being the transfer pricing adjustment on account of sales promotion and publicity expenses being payable by the Respondent- Assessee' parent M/s. Johnson & Johnson, USA. This on the ground that the Transfer Pricing Off....
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....gh Court, in Bausch & Lomb Eyecare (India) (P.) Ltd. [381 ITR 237] where Hon'ble Court after considering various judgments has elaborately discussed the issue in the following manner:- 51. The central issue concerning the existence of an international transaction regarding AMP expenses requires the interpretation of provisions of Chapter X of the Act, and to determine whether the Revenue has been able to show prima facie the existence of international transaction involving AMP between the Assessee and its AE. 52. At the outset, it must be pointed out that these cases were heard together with another batch of cases, two of which have already been decided by this Court. The two decisions are the judgement dated 11th December 2015 in ITA No. 110/2014 (Maruti Suzuki India Ltd. v. Commissioner of Income Tax) and the judgment dated 22nd December 2015 in ITA No. 610 of 2014 (The Commissioner of Income Tax-LTU v. Whirlpool of India Ltd.) and many of the points urged by the counsel in these appeals have been considered in these two judgments. 53. A reading of the heading of Chapter X ["Computation of income from international transactions having regard to arm'....
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....ther person and the associated enterprise." 56. Thus, under Section 92B(1) an 'international transaction' means- (a) a transaction between two or more AEs, either or both of whom are nonresident (b) the transaction is in the nature of purchase, sale or lease of tangible or intangible property or provision of service or lending or borrowing money or any other transaction having a bearing on the profits, incomes or losses of such enterprises, and (c) shall include a mutual agreement or arrangement between two or more AEs for allocation or apportionment or contribution to the any cost or expenses incurred or to be incurred in connection with the benefit, service or facility provided or to be provided to one or more of such enterprises. 57. Clauses (b) and (c) above cannot be read disjunctively. Even if resort is had to the residuary part of clause (b) to contend that the AMP spend of BLI is "any other transaction having a bearing" on its "profits, incomes or losses", for a 'transaction' there has to be two parties. Therefore for the purposes of the 'means' part of clause (b) and the 'includes' part of clause (c), the Revenue has to sho....
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....n 20(4) (b) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997. In para 44, it was observed as under: "The other limb of the concept requires two or more persons joining together with the shared common objective and purpose of substantial acquisition of shares etc. of a certain target company. There can be no "persons acting in concert" unless there is a shared common objective or purpose between two or more persons of substantial acquisition of shares etc. of the target company. For, de hors the element of the shared common objective or purpose the idea of "person acting in concert" is as meaningless as criminal conspiracy without any agreement to commit a criminal offence. The idea of "persons acting in concert" is not about a fortuitous relationship coming into existence by accident or chance. The relationship can come into being only by design, by meeting of minds between two or more persons leading to the shared common objective or purpose of acquisition of substantial acquisition of shares etc. of the target company. It is another matter that the common objective or purpose may be in pursuance of an agree....
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....ted as such will lead to sending the tax authorities themselves on a wild-goose chase of what can at best be described as a 'mirage'. First of all, there has to be a clear statutory mandate for such an exercise. The Court is unable to find one. To the question whether there is any 'machinery' provision for determining the existence of an international transaction involving AMP expenses, Mr. Srivastava only referred to Section 92F (ii) which defines ALP to mean a price "which is applied or proposed to be applied in a transaction between persons other than AEs in uncontrolled conditions". Since the reference is to 'price' and to 'uncontrolled conditions' it implicitly brings into play the BLT. In other words, it emphasises that where the price is something other than what would be paid or charged by one entity from another in uncontrolled situations then that would be the ALP. The Court does not see this as a machinery provision particularly in light of the fact that the BLT has been expressly negatived by the Court in Sony Ericsson. Therefore, the existence of an international transaction will have to be established de hors the BLT. ....... ....
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....the context of a domestic transaction involving two or more related parties, reference may be made to Section 40 A (2) (a) under which certain types of expenditure incurred by way of payment to related parties is not deductible where the AO "is of the opinion that such expenditure is excessive or unreasonable having regard to the fair market value of the goods." In such event, "so much of the expenditure as is so considered by him to be excessive or unreasonable shall not be allowed as a deduction." The AO in such an instance deploys the 'best judgment' assessment as a device to disallow what he considers to be an excessive expenditure. There is no corresponding 'machinery' provision in Chapter X which enables an AO to determine what should be the fair 'compensation' an Indian entity would be entitled to if it is found that there is an international transaction in that regard. In practical terms, absent a clear statutory guidance, this may encounter further difficulties. The strength of a brand, which could be product specific, may be impacted by numerous other imponderables not limited to the nature of the industry, the geographical peculiarities, economic ....
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....curring AMP expenditure could be subject matter of TP adjustments in terms of Sec.92 of the Act. Therefore, the same is distinguishable on facts. Similarly, the decisions rendered in BMW India Private Limited and Perfetti Van Melle India Pvt. Ltd. has been rendered in a situation where there existed an agreement between the assessee and its AE to undertake Advertisement and Sales promotion. The case law of Cushman & Wakefied is not related with determination of ALP of AMP expenditure and further in that case the benchmarking of reimbursement of expenses was not done by the assessee. Hence, the cited case laws could not help the revenue on factual matrix. The case law of Maruti Suzuki India Ltd., in fact, support the stand of the assessee which is evident from the fact that Ld. DRP, in AY 2011-12, following the ratio of this decision deleted the impugned additions and allowed the appeal of the assessee. 5.7 To conclude, respectfully following the ratio of decision of Hon'ble Bombay High Court as cited above along with the cited decisions of Hon'ble Delhi High Court, we upheld the order of Ld. first appellate authority and dismiss this ground of revenue's appeal. The assesse....
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....orded hereinabove. The Grounds of appeal Nos. 1 to 4 raised by the revenue before us are accordingly dismissed. 30. The appeal of the revenue is dismissed in terms of our aforesaid observations. A.Y: 2010-11 IT No. 1925/Mum/2015 (Assessee's appeal) ITA No. 1852/Mum/2015 (Revenues appeal) 31. We shall now deal with the cross-appeals for A.Y 2010-11. The assessee has assailed the impugned order on the following grounds of appeal before us: "Ground No 1; 1. On the facts and in the circumstances of the case and in law, the learned AO, under the directions issued by the DRP, erred in disallowing a sum of Rs. 14,39,636 under Section 14A of the Income Tax Act, 1961 ('the Act') having failed to appreciate that the Appellant company has not incurred any expense directly in relation to the earning of tax free income. The Appellant prays that the sum of Rs. 14,39,636 be allowed as business expenditure and the disallowance may kindly be deleted. 2. Without prejudice to the above, on the facts and in the circumstances of the case and in law, the learned AO, under the directions issued by the DRP, erred in computing the disallowance as p....
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....iated Enterprise ('AE'). 1.1 On the facts and in the circumstances of the case and in law, the learned AO erred in: i. disregarding that the issue of marketing intangibles is not relevant to entrepreneurial licensed manufacturers as is the case of the Appellant; ii. presuming that there existed an arrangement and consequently a transaction between the Appellant and its AE and thereby erred in contending that the AE ought to compensate the Appellant towards the alleged excessive AMP spend; iii. presuming without any direct or indirect evidence that the Appellant had incurred non-routine AMP expenses and that the AMP expenses incurred by the Appellant benefited the AE; and iv. confirming the adjustment despite the fact that the advertisements were product specific and not brand specific and disregarding the fact that many of the products manufactured by the Appellant were India specific. The Appellant therefore prays that appropriate relief be granted. 2. Without prejudice to the above, on the facts and in the circumstances of the case and in law, the learned AO, under the directions issued by the DRP, erred in co....
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....mpanies without appropriate reasons from the comparability analysis carried out by the Appellant; d) failing to provide any structured search process and arbitrarily selecting 2 additional companies as comparable without appreciating that the companies were functionally different from the assessee; e) not granting the economic adjustments to the Appellant on account of differences between risk profile, working capital cycle of the Appellant vis-avis the comparables; and Accordingly, the Appellant prays that the addition of Rs. 69,81,039 may kindly be deleted. Ground No 5; 1. Without prejudice to Ground No. i to 5 above and in the alternative on the facts and in circumstances of the case, the learned AO, under the directions issued by the DRP, has erred in consequently not revising the profit from the Baddi unit eligible for deduction under Section 8oIC of the Act by the amount of Advertising, Marketing and Promotion expenditure alleged to have not been incurred for the purpose of business of Appellant's undertaking. The Appellant prays that the learned AO be directed to recompute the deduction under Section 80IC of the Act b....
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..... Extra ordinary AMP expenses to be reimbursed by AE Rs.108,00,22,597 2. Research and development/testing services segment Rs.95,88,825/- Total Rs.108,96,11,422/- After receiving the aforesaid order of the TPO, the A.O vide a draft assessment order passed under Sec.143(3) r.w.s 144C(1), dated 03.03.2014 inter alia proposed the following additions/disallowances to the returned income of the assessee: Sr. No. Particulars Amount 1. TP adjustment under Sec. 92CA(4) Rs.108,96,11,422/- 2. Disallowance under Sec. 14A Rs. 14,39,636/- 3. Restriction of the deduction claimed by the assessee under Sec. 80IC Rs.321,50,73,750/- (as against the claim of deduction under Sec. 80IC of Rs.324,25,70,303/-) On the basis of his aforesaid deliberations, the A.O assessed the income under the normal provisions at Rs.285,39,76,643/- and determined the 'book profit' under Sec.115JB at Rs.487,58,27,806/-. Objecting to the additions/disallowances proposed by the A.O the assessee carried the matter before the DRP. After deliberating on the contentions advanced by the assessee the DRP passed its order under Sec. 144C(5), dated 08.1....
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.... 38. Per contra, the ld. D.R relied on the orders of the lower authorities. 39. We have heard the authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements pressed into service by the respective parties in context of the issue under consideration before us. As the facts and the issue herein involved remains the same as was there before us in the assessee's appeal for the immediately preceding year i.e A.Y. 2009-10 in ITA No. 1431/Mum/2014, therefore, our order therein passed shall apply mutatis mutandis for the purpose of disposing off the present issue. Accordingly, we herein vacate the disallowance made by the A.O under Sec. 14A r.w. Rule 8D(2)(ii). On a similar footing, we herein restore the issue as regards computing of the disallowance under Rule 8D(2)(iii) to the file of the A.O, with a direction to exclude the investments which had not yielded any exempt income during the year under consideration while computing the 'average value of investments' for working out the disallowance therein contemplated. The Ground of appeal No. 1 is partly allowed....
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....f its claim of deduction under Sec. 80IC before us. Insofar, the restriction of the assessee's claim for deduction under Sec. 80IC w.r.t scrap sale is concerned, we find, that as the facts and the issue therein involved remains the same as were there before us in the assessee's appeal for the immediately preceding year for A.Y 2009-10, in ITA No. 1431/Mum/2014, thus, our order therein passed in context of the said issue shall apply mutatis mutandis for the purpose of disposal off the present issue for the year under consideration. As regards the assessee's claim that the foreign exchange gain on raw and packing material duly formed part of its eligible profits for the purpose of claim of deduction under Sec. 80IC of the Act, the ld. A.R had relied on an order of the Hon'ble High Court of Bombay in the case of CIT Vs. Rachna Udhyog (2010) 230 CTR 72 (Bom). Although, the aforesaid order was passed in context of the pari materia provisions contemplated in Sec. 80IB of the Act, however, we find that the same seizes the issue under consideration before us. In its aforesaid order, it was observed by the Hon'ble High Court that the deduction under Sec. 80IB was allowable in respect of the....
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....'s claim that the A.O/DRP had erred in making an adjustment towards AMP expenses of Rs.108,00,22,597/- to the income of the assessee on the basis of a baseless presumption that the assessee by incurring the aforesaid expenses had benefitted its AE, viz. Colgate-Palmolive, USA. As the facts and the issue pertaining to the TP adjustment made by the A.O/TPO w.r.t the AMP expenses remains the same as were there before us in the assessee's appeal for the immediately preceding year i.e A.Y. 2009-10 in ITA No. 1431/Mum/2014, therefore, our order therein passed shall apply mutatis mutandis for the purpose of disposal of the issue in hand. Accordingly, in terms of our observations recorded while dealing with the issue while disposing off the assessee's appeal for A.Y.2009- 10, we herein vacate the addition made by the A.O/DRP towards AMP expenses of Rs.108,00,22,597/-. The Ground of appeal No. 3 is allowed in terms of our aforesaid observations. 46. We shall now advert to the alternative contention of the assessee that in case if the AMP expenditure is sustained, then, its entitlement for deduction under Sec.80IC would be liable to be revised accordingly. As we have already vacated the a....
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....erein took us through the relevant pages of the APB and also drew support from certain judicial pronouncements which are dealt with by us, as under: 49. Alphageo (India) Limited: It was submitted by the ld. A.R that the aforesaid company viz. Alphageo (India) Ltd. was included by the TPO in the final list of comparables in the assessee's own case for A.Y. 2008-09, which, on appeal was however vacated by the Tribunal vide its order passed in ITA No. 6766/Mum/2012, dated 31.07.2020 (copy placed on record). The ld. A.R took us through the aforesaid order of the Tribunal in the assessee's own case, and submitted, that the Tribunal after referring to the functional profile of the aforementioned company, had observed, that unlike the assessee which was in the business of providing testing related services to its AE, viz. Colgate-Palmolive, USA, the aforesaid company was engaged in the business of providing seismic survey and related services. In the backdrop of the aforesaid facts, it was submitted by the ld. A.R that the Tribunal considering the functional disparity had excluded the aforesaid company from the final list of comparables by observing as under: "22. We have h....
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....ke a different view and by adopting a consistent approach, we, herein direct the A.O/TPO to exclude Alphageo (I) Ltd. from the final list of comparables. 52. PCG Life Sciences ltd: The ld. A.R at the very outset took us through the director's report of the aforementioned company for the year under consideration. It was submitted by the ld. A.R that the aforementioned company was engaged in the business of providing contract research arising out of the contract predominantly outside India and was a single segment company. Our attention was drawn by the ld. A.R to the bifurcated details of the turnover of the aforesaid company, which revealed that 1/3rd of its income was from the sale of chemical compounds i.e 329961 grams valued at Rs.328,560,432/-. In the backdrop of the aforesaid facts, it was submitted by the ld. A.R that in the absence of any segment information the aforementioned company whose turnover comprised of substantial portion of sales could not have been adopted as a comparable for benchmarking the international transactions of the assessee for the year under consideration. In order to support its aforesaid claim the ld. A.R relied on the order of the ITAT 'K' be....
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.... wherein is placed the relevant extracts from the Annual Financial Statements of M/s. TCG Lifesciences Ltd. which show that the total sales have been classified as 'contract research operations' - Rs.86,68,09,176/-, which are stated to include sale of chemical compounds valued at Rs.31,93,33,202/-. The Annual Financial Statements clearly brings out that not only the sale of chemical compounds is substantial, but even the segmental data relating to the research operations is not available so as to facilitate comparison with assessee's activity of providing support services in connection with research and development to its associated enterprises. Thus, in view of the aforesaid fact-situation, the aforesaid concern is liable to be excluded from the final set of comparables. Thus, on this aspect, assessee succeeds." Accordingly, in the backdrop of our aforesaid observations, we are of a strong conviction that the lower authorities had erred in including the aforesaid company as a comparable for benchmarking the international transactions of the assessee for the year under consideration. We, thus, direct the A.O/TPO to exclude the aforesaid company from the final list of compara....
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.... speaking order after affording an opportunity of being heard to the assessee. (B) Fortis Clinical Research Limited: 59. It was submitted by the ld. A.R that as the functional profile of the aforementioned comparable was the same as that of the assessee, therefore, there was no justification in summarily discarding of the same as a comparable by the TPO/DRP. In order to buttress his aforesaid claim the ld. A.R. took us through the financial statements of the assessee company and that of the aforementioned company. It was submitted by the ld. A.R that no cogent reason was given by the lower authorities for excluding the aforementioned company from the final list of comparables. 60. Per contra, the ld. D.R could not controvert the aforesaid contentions advanced by the counsel for the assessee. 61. We have heard the authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record. Admittedly, it is a matter of fact borne from the record that the TPO/DRP had not given any cogent reason for excluding the aforementioned company selected by the assessee as a comparable from the final list of comparables. In our c....