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2017 (11) TMI 1743 - AT - Income TaxDownward adjustment in respect of payment of royalty to Associated Enterprises (AEs) - royalty payment is in excess of limits prescribed under the provisions of Foreign Exchange Management Act, 1999 - Held that:- In this case, the Technology Transfer Agreement has been signed on 1st January, 2009. The assessee utilized the technology of the AE during the preceding year. However, no expenditure was booked by the assessee on the reason that no invoice has been received from its AE during the preceding assessment year. The assessee claimed that all the sales in F.Y 2009-10 were ex-works, installation of which was completed by it in F.Y 2010-11. The assessee paid the royalty in the year in which installation and commissioning was completed. Before TPO, the assessee not furnished the details of "product sold date" and "ex-work" details in relation to each supply agreement along with the copies of relevant agreement for the Financial years 2009-10 to 2012-13 and it was also not proved that there was carry forward one year to another year. Before the DRP, there was no details provided by the assessee regarding date of installation and only furnished the product sold date for FY 2009-10 and no such details of other years were provided and the assessee failed to substantiate its own claim. AR made a plea that since the invoice has been received from the AE during the assessment year under consideration, it was subject to TDS and it is to be allowed. In our considered opinion, if the expenditure was crystallized and accrued in the assessment year under consideration, the same is to be allowed subject to deduction of TDS as held by Delhi High Court in the case of CIT v. SMCC Construction India [2010 (1) TMI 10 - HIGH COURT OF DELHI]. The assessee has to furnish the details of product sold date and date of completion of installation work with corresponding agreements. The AO/TPO should examine the same and decide the issue in the light of above judgments. This ground is remitted to the file of AO for fresh consideration. Downward adjustment in respect of management fee - Held that:- Regarding copy of correspondence with the AE for allocation of cost, it was observed by the DRP that no such document was furnished by the assessee. However, before us the assessee filed additional evidences for the A.Y 2012-13 as discussed in earlier para elsewhere in the order and we are in-principle agree with the contention of the assessee regarding the allowability of management fees and there is no requirement of transfer pricing adjustment on this issue, subject to verification of availing of actual services and allocation of its cost to the assessee. For the A.Y 2011-12, it was stated that all the relevant evidences were already available with the Assessing Officer/TPO and on that basis; it is required to be verified with regard to availing actual services and its allocation of cost to the assessee. Accordingly, this ground relating to Management fees is remitted to the file of ld. Assessing Officer for fresh consideration for both the assessment years and the Assessing Officer after going through the evidences filed by the assessee decide the issue fresh as indicated above. This ground is partly allowed for statistical purposes for both the assessment years. Disallowance u/s. 14A read with Rule 8D - Held that:- Isuue is decided in favour of the assessee and there cannot be any disallowance u/s.14A when there is no exempted income. This ground of appeal of the assessee for the A.Y 2012-13 is allowed. MAT - disallowance u/s.14A with Rule 8D while computing book profits u/s. 115JB of the Act - Held that:- We are of the opinion that this issue came for consideration before the Special Bench of the Tribunal in the case of Asstt. CIT v. Vireet Investments (P.) Ltd. [2017 (6) TMI 1124 - ITAT DELHI] wherein held that Sec.14A r.w. Rule 8D has no application while computing the book profit u/s.115JB of the Act. More so, in this case there is no exempted income, this provision cannot be applied. This ground of the assessee is allowed. Deduction of interest on service tax and TDS - allowable business expenditure - Held that:- Interest on delay in payment of service tax, which is only compensatory nature paid on account of delay in these payments and to be allowed as business expenditure. However, interest paid for delay in payment of TDS cannot be allowed as business expenditure. This ground raised by assessee in its appeal for the assessment year 2011-12 is partly allowed. Disallowance of spill over of additional depreciation u/s. 32(1)(iia) on plant and machinery put into use during the preceding year - disallowance of spill over of additional depreciation u/s. 32(1)(iia) on plant and machinery put into use during the preceding year - Held that:- Similar issue was considered by the Karnataka High Court in the case of Rittal India (P.) Ltd. [2015 (1) TMI 1248 - KARNATAKA HIGH COURT] as held tribunal has rightly held that additional depreciation allowed under section 32(i)(iia) of the Act is a one time benefit to encourage industrialization, and the provisions related to it have to be construed reasonably, liberally and purposively, to make the provision meaningful while granting additional allowance. We are in full agreement with such observations made by the Tribunal - decided in favour of assessee.
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