TaxTMI 
TaxTMI 
2023 (1) TMI 1320
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....ppeals.Nos.927 & 940/PUN./2011 arising against the CIT(A)-1, Pune's order dated 29.11.2010 passed in Case No. PN/CIT(A)-1/Addl.CIT, R-1,Pn/217/08-09, in proceedings u/s. 143(3) of the Income Tax Act, 1961 (in short "the Act"). 1.1. Second assessment year 2006-07 involves the assessee's appeal ITA.No.1377/PUN./2010 directed against DCIT, Circle-1(1)'s assessment dated 19.10.2010 framed in consequence to the "DRP" Pune's directions dated 13.09.2010 in proceedings u/s. 144C(13) r.w.s. 143(3) of the Income Tax Act, 1961 (in short "the Act"). 1.2. Third assessment year 2007-08 contains the assessee's appeal ITA.No.1578/PUN./2011 directed against the Addl. CIT, Range-1, Pune's assessment dated 13.10.2011 framed as per the DRP Pune's directions dated 26.09.2011, in proceedings u/s. 143(3) r.w.s. 144C of the Income Tax Act, 1961 (in short "the Act"). 1.3. Fourth assessment year 2008-09 involves assessee's appeal ITA. No. 2596/PUN./2012 directed against the DCIT, Circle-1(1)'s assessment dated 25.10.2012 framed as per the DRP Pune's directions dated 05.09.2012, in proceedings u/s. 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 (in short "the Act"). 1.4. Fifth assessment year....
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....ucceeding paragraphs. 4. The assessee's appeal ITA.No.927/PUN./2011 raises the following 18 substantive grounds : 1. "The impugned order of the CIT(A) is bad in law, illegal, untenable and contrary to facts and law as enunciated by the Hon. Courts, as the same is based on presumptions and without appreciation of basic facts, it is therefore prayed that the same deserves to be set aside and the valid claims of the appellants allowed in toto. 2. The impugned order of the CIT(A) is untenable as it proceeds to make adhoc disallowance of expenditure purely based on presumptions without citing any specific reasons as to how the expenditure under different heads is not for the business of appellants, and completely ignores to consider the detailed factual explanations offered at the time of assessment and the appellate proceedings. Re: Disallowance of service charges including reimbursements 3. CIT(A) erred in disallowing the appellant's business expenditure representing service charges including reimbursements and restricting the same to the 30% of the claim. 4. CIT(A) erred in disallowing 30% of the Service charges including reimbursem....
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.... the contention that traveling expenses were incurred wholly for the purpose of business of the Appellants and deserve to be allowed in toto, the CIT(A) erred in not allowing even 70% of such expenses as it is allowed in the case of service charges paid by the Appellants to CCI Inc. Re: Disallowance of depreciation on coolers: 12. CIT(A) has erred in disallowing the depreciation amounting to Rs. 9,68, 12,420/- on coolers merely on the basis that they were disallowed by the predecessor in the earlier years. 13. The CIT(A) failed to appreciate that the activity of placing coolers directly results in increased sales of appellants products and has a immediate nexus with the business. Further the CIT(A) failed to appreciate that the coolers were placed as part of the joint promotion activity undertaken for appellants business. 14. CIT(A) has failed to appreciate that: (a) The Appellant's sales are directly linked to the sale of the final beverages as the product of the appellant has no other commercial use except as ingredient in the manufacture of beverages. (b) The coolers were an important marketing tool used by the appellants....
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....ges to 30% of the total disallowance made by the A.O. without assigning any reason and without appreciating the fact that the addition was made on account of failure on the part of the assessee to prove that such expenses were incurred wholly and exclusively for the purpose of business of the assessee. 4. On the facts and circumstances of the case, the learned Commissioner of Income-tax (Appeals) grossly erred in allowing the assessee, the expense borne by the assessee relating to other business concern, which has resulted in excess debiting of expenses thereby leading to artificially lowering of profits thus causing huge loss to the revenue. 5. For these and such other reasons as may be urged at the time of hearing, the order of the Ld. Commissioner of income-tax (Appeals) may be vacated and that of the Assessing officer be restored. 6. The appellant craves leave to add, amend, alter or delete any of the above grounds of appeal during the course of appellate proceedings before the Hon'ble Tribunal." 6. Learned counsel submits at the outset that the assessee's 1^st, 2^nd and 18^th substantive grounds are general in nature. Rejected accordingly. ....
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.... terms. 11. This assessee's appeal ITA.No.927/PUN./2011 is partly accepted in above terms. Necessary computation shall follow as per law. ITA.No.1377/PUN./2011 - A.Y. 2006-07 [Assessee's Appeal] : 12. Learned DR at the outset filed his petition dated 03.01.2003 that the department had appointed its Special Counsel vide letter dated 01.12.2013 who is not present today. We find no reason to adjourn the assessee's instant appeal once it is noticed that all the issues raised herein are covered ones only. We thus reject the Revenue's instant adjournment petition. 13. The assessee appears to have raised its substantive ground nos.1 to 2.1.0 on both corporate as well as transfer pricing issues. It's former substantive ground-1 involving [sub- grounds 1.1 to 1.9] pleads twin grievances of disallowance of advertisement, sales and marketing expenditure as well as depreciation on coolers, involving varying sums. Needless to say, the assessee has already succeeded on both these issues in the first and foremost assessment year 2005-06 in preceding paragraph. The Revenue could hardly pinpoint any distinction on the assessee's arrangement of having incurred advertising and sales promo....
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....of Sec. 144C(13) r.w.s. 144C(5) of the Act. He has not carried-out any verification as per his detailed discussion in page-5 para-2 of the assessment order. Faced with this peculiar situation and in view of the clinching fact that the assessee may not be able to completely verify its detailed evidence of assessment year 2007-08 in the year 2023, we deem it appropriate to restrict the impugned disallowance of Rs. 94,20,48,306/- to that @ 5% only. Ordered accordingly. 19. It next transpires that the assessee's 2^nd substantive grievance of transfer pricing adjustment [sub-grounds 2.1 to 2.18] deserves to be restored back to the learned DRP as we have done in assessment year 2006-07 deduction in preceding paragraph. Both the learned representatives are ad idem during the course of hearing that there is no distinction involved in the impugned assessment year 2007-08 qua the same. We thus adopt judicial consistency to adopt the very course of action herein as well in the same terms. These assessee's 2nd substantive ground stand set aside to the learned DRP for its afresh adjudication as per law. 20. Further there arises purely a legal question in the impugned assessment year regar....
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....of the latter cross- appeal ITA. No. 860/PUN./2014. 25. Coming to the assessee's latter substantive grounds involving the transfer pricing adjustment issues, we note with the able assistance coming from both the sides that it's former limb involving ALP of service charges and other reimbursements deserves to be set aside to learned DRP whereas the latter aspect of "AMP" expenses has to be decided against the department as per our detailed discussion in preceding paragraph. We order accordingly. 26. This appeal ITA.No.815/PUN./2014 is partly accepted in above terms. ITA.No.516/PUN./2015 - A.Y. 2010-11 [ Assessee's appeal] : 27. Sixth assessment year 2010-11 involves assessee's and Revenue's cross-appeals ITA. No. 516 & 539/PUN./2015. 28. We note at the outset that both these parties raise their first and foremost identical substantive ground qua issue of expenditure of reimbursements which we have already decided in assessee's favour and against the Revenue. We thus reject the Revenue's instant cross-appeal ITA.No.539/PUN./2015 for this precide reason alone by adopting judicial consistency. 29. The assessee's remaining twin substantive grounds of depreciation on co....
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....the learned lower authorities action inter alia, disallowing reimbursements of marketing support services expenses in entirety [except in assessment year 2007-08], restricted travelling expenditure disallowance to 10%, restored the taxpayer's transfer pricing grounds involving service charges [including reimbursements paid to branch office] back to DRP and deleted the ALP adjustments relating to advertisement and marketing promotion "AMP" expenses, respectively. Ordered accordingly. 36. To sum-up, the assessee's appeals ITA.Nos. 927/PUN/2011, 1377/PUN./2010, 1578/PUN./2011, ITA.No. 2596/PUN./2012, ITA.No. 815 /PUN./2014 are partly allowed, ITA.No. 516/PUN./2015, ITA.No.830/PUN./2016, ITA.No.988/ PUN./2017, ITA.Nos.176 & 1960/PUN./2018, ITA.No.1691/ PUN./2019 and ITA.No. 271 /PUN./2021 are allowed in above terms. These Revenue's appeal ITA.No.940/PUN./ 2011, ITA.No.539/PUN./2015, ITA.No.860/PUN./2014 and ITA.No.822/Pun./2016 are dismissed in the above terms. A copy of this common order be placed in the respective case files. Order pronounced in the open Court on 12^th January, 2023. ============= Document 1 8. Ground Nos. 7, 8, 9, 10, 11, 12, 13, 14, 15 and 16 relates ....
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....ted as under: "The assessee pays services charges to CCI Inc in the form of reimbursement of expenses with a mark-up of 5%. The said arrangement has been approved by the RBI. The said service charges have been held by the Tribunal in AY 1997-98 to have been incurred wholly and exclusively for the business purpose of the assessee and to be allowable as a deduction. In the transfer pricing proceedings of the assessee, the TPO has taken the view that the charges paid by the assessee are "excessive" and that the assessee ought to have paid a lesser amount to CCI Inc. Interestingly, in CCI Inc's assessment, its TPO has taken a diametrically opposite view and held that the assessee has paid CCI Inc "less" and ought to have paid a larger amount. The other important point to be borne in mind is that if the assessee implements what the TPO is suggesting i.e. pay CCI Inc a lesser amount the interests of the revenue will be adversely affected. This is because while the assessee pays tax at the lower rate of 33.99%, CCI Inc pays tax at the higher rate of 42.23%. The result is that a lesser payment of service charg....
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....owed the +5% variation while computing the ALP of the assessee's international transaction with CCI Inc. Accordingly, the submissions of the assessee are that the Hon'ble DRP may be pleased to: (1)Delete the adjustment proposed by the AO/TPO to the service charges (It may be noted that the whole of the service charges has already been disallowed by the AO); (2)Confine the adjustment to the sum of Rs. 1,60,90,037 being the 5% mark- up charged by CCI Inc; (3)Allow the assessee the benefit of the 5% adjustment as per the Proviso to s. 92C. 8.1 We have considered the submission of the A.R. and have also gone through the assessment record and we are of the opinion that: the assessee in its TP report has not given FAR analysis in respect of this transaction and has only referred that the analysis remains the same as what has been conducted for the period ending 31st March, 2002. Resolut pute Panel Document 5 Coca-Cola Page 12 of 16 A.Y. 2006-07 The CCI Inc. renders services to CCIPL i.e. the assessee company and also provides support services to other two group companies in India viz. Hindustan Coca Cola ....
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....unt to the business support services alone because the employees would also be engaged in product / manufacturing as well. The total employee cost including those involved in product is not correctly representing the services availed by CCIPL as its manufacturing unit is in Pune and employees relating to the manufacturing and the relevant management for production and manufacturing is based at Pune. It is only the other functions which are beyond the production / manufacturing that it receives as business support services from its AE. Further, the cost of the company of all employees including management of the company other than those Solution spute Panel Pung Document 7 Coca-Cola Page 14 of 16 A.Y. 2006-07 directly involved in production / manufacturing is referred to common activities of any manufacturing company encompassing Accounting. Budgeting, Statutory Compliance, Provision of Technical Know-how, Marketing Support, Business Development and restructuring, Compliance with International Standards and Distribution Activities etc. Further, the assessee has not stated as to any special business suppo....