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2013 (6) TMI 591 - AT - Income TaxTransfer Pricing Adjustment - Advertisement, marketing and sales promotion expenses (AMP expenses) - Held that:- Upon careful consideration the Special Bench decision of LG Electronics [2013 (6) TMI 217 - ITAT DELHI] it has been deduced that the selling expenses do not lead to brand promotion and the selling expenses have to be excluded from the AMP expenses for the purpose of bench marking analysis - remit the issue back to the files of the TPO with directions that expenditure in connection with the sales as mentioned above cannot be brought within the ambit of advertisement, marketing and promotions expense for determining the cost / value of the international transactions & after deducting the selling price from the AMP expenses TPO shall decide the issue of AMP expenses by applying the proper comparables after hearing the assessee. In favour of assessee for statistical purposes. Adjustment on account of royalty expenses - Held that:- Agreeing with the contention of the assessee that assessee is free to conduct business in the manner that assessee deems fit and the commercial and business expediency of incurring any expenditure is to be seen from the assessee's point of view. It is a settled law that the Revenue cannot sit into the shoe of the assessee and decide what is prudent for the business. See CIT, Bombay Vs. Walchand and Co. Private Ltd.[1967 (3) TMI 2 - SUPREME Court] the expenditure has to be adjudged from the point of view of the businessman and not of revenue. It is on the basis of the same agreement the royalty was paid in earlier years wherein the payment has not been held to be non-bonafide expenditure by the TPO. Thus the TPO's conclusion that there is no benefit to the assessee from the payment of royalty is unsustainable. Furthermore, assessee has duly submitted comparable instances to bench mark royalty thus, the observation of the TPO that comparable instances were not given by the assessee does not hold water any more. As assessee has sought to justify the payment of the royalty on the basis that in the case of the assessee the concerned Ministry of Government Of India has scrutinized the payment of royalty and granted the approval, the payment cannot be regarded as non-bonafide so as to hold the arms length price thereof as NIL. The assessee has rightly considered the comparable uncontrolled price method for determining the arms length price. Thus the conclusion of the TPO that the arms length price of the royalty payment should be NIL without specifying any cogent basis is not sustainable TPO's determination is on the basis of assumption and surmises. Hence, the adjustment made by the TPO is liable to be deleted. In favour of assessee. Disallowance u/s. 40(a)(ia) - short deduction of TDS - Held that:- As DRP has duly directed the AO to verify the assessee's submissions as to whether the payment in question was subject to the TDS and the TDS amount was paid to the government treasury or not AO has not properly looked into the matter. Thus remit this issue to the files of the AO to verify whether the assessee has deducted and paid tax at source from such payment to ICC which was claimed to be deposited with the Government treasury on 28.9.2007. In favour of assessee for statistical proses.
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