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2016 (1) TMI 1280 - AT - Income TaxTPA - adjustments in respect of Advertising, Marketing and Promotion (AMP) expenditure - Held that:- AO / TPO relied heavily on the Special Bench decision of ITAT, Delhi in the case of L.G. Electronics India Pvt Ltd (2013 (6) TMI 217 - ITAT DELHI) in making the adjustments and in applying the "BLT" in benchmarking the AMP expenditure. It is an undisputed fact that the Hon'ble Delhi High Court has rendered a judgment in the case of Sony Ericsson Mobile Communications India Pvt Ltd (2015 (9) TMI 484 - ITAT DELHI), reversing the said Special Bench decision in the case of L.G. Electronics (supra). As on today, the "BLT" is not to be applied in such benchmarking exercise of the AMP expenditure. AP / TPO is statutorily bound to apply the existing methods mentioned in the IT Act, 1961 / IT Rules, 1962. We, accordingly, remand the issue, that revolves around the TP adjustment of ₹ 133.02 (rounded of), to the file of the AO / TPO to benchmark these transactions De novo TP adjustment to the entire international transactions - Held that:- On considering the undisputed fact that the assessee obtained concessions from the "J&J USA", in lieu of AMP expenditure contributing to the brand development, we are of the opinion that the AO's jurisdiction in this regard should revolve around all the assessee's explanations justifying the AMP expenditure of the assessee. Further, we have also considered the "remand guidelines" issued by the Tribunal in this regard, in connection with many other cases placed before us and find the said guidelines shall apply equally and AO should restrict his remand jurisdiction to the guidelines issued by the Tribunal in those cases. Accordingly, all the grounds relating to the TP issues are allowed for statistical purposes. Disallowance of interest expenditure claimed u/s 36(1)(iii) - Held that:- We find it relevant to remand the matter to the file of the AO for fresh adjudication on this issue after analysing existence of the interest free funds and applying the ratio of the jurisdictional High Court judgment in the case of Reliance Utilities (2009 (1) TMI 4 - BOMBAY HIGH COURT). In any case, in principle, we cannot approve the charging of notional interest when the assessee has raised the invoice to receive the amount relatable to the subsidiary company without rejecting the books of accounts of the assessee. Accordingly, this part of the grounds is allowed for statistical purposes. Disallowance of tax on brand usage royalty - Held that:- It is not for the AO to question the commercial arrangements entered into by the assessee. As well, the RBI has approved the payment of brand royalty net of taxes and in this regard the RBI‟s approval dated 14th March, 2002 is relevant. Accordingly, considering the above, we allow the Ground of the appeal. Disallowance of service tax paid on brand usage royalty - Held that:- We have perused the cited decisions of the Tribunal in assessee's own cases in general and for the AY 2006-07 in particular, wherein the Tribunal held that the taxes are liability of the assessee based on the terms of agreement. Further, the Tribunal observed that the liability of payment of service tax is of recipient of the services and since, assessee is receiver of the services, it is assessee’s liability to bear the service tax and hence no disallowance is called for service tax paid by the assessee. Considering the above as well as keeping in view the commonality of the issues involved in the appeals decided by the Tribunal (supra) and that of the ones raised in Ground no.4 and 5 of the instant appeal, we allowed these grounds in favour of the assessee. Technical know-how royalty payment on sale of traded finished goods - Held that:- In assessee's own case for the AY 2002-03 Tribunal dismissed the Departmental appeal on this issue, relying on the earlier decision of the ITAT, by holding that the royalty payments have to be considered in the light of the agreement between the assessee and the J&J US and upheld the order of the CIT (A). We of the opinion that the royalty payments have to be considered in the light of the above cited agreements (Exhibits 1 to 4) between the assessee and J&J US. - Decided in favour of assessee R&D cess and tax cannot be treated as international transactions. Disallowance made on account of service tax paid on brand royalty deleted. Teat the expenses incurred on production of advertisement films as "revenue expenditure" Disallowance of provision for reserve for cash discount - Held that:- Tribunal in assessee's own case for the AY 2008-2009 wherein the Tribunal, while restoring the matter to the file of the AO, directed the AO to decide the alternative grievance of the assessee that if the cash discount reserve was not allowed in the earlier assessment year, the right back of the same would amount to double taxation, therefore, the same should be deleted after due verification. Considering the same, remand this matter to the file of the AO with identical directions. Disallowance of depreciation on testing equipment - Held that:- The depreciation should be allowed on the testing equipment provided to laboratories and hospitals free of charge as the said equipments have been provided to the laboratories and hospitals for making profit from the sale of slides. Short grant of credit of TDS - Held that:- When an assessee approaches the Assessing Officer with requisite details and particulars in the form of TDS certificate as an evidence against any mismatched amount, the said Assessing Officer will verify whether or not the deductor has made payment of the TDS in the Government Account and if the payment has been made, credit of the same should be given to the assessee. Considering the same, we direct the AO to grant the balance credit of the TDS ie ₹ 7,428/- after verification of the relevant record as per the provisions of the Act and in accordance with law.
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