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2018 (6) TMI 1563 - AT - Income TaxTPA - Addition on ‘protective’ basis on account of the difference in ALP of the international transaction of advertisement, marketing and promotion expenses (AMP expenses) by applying Bright Line Test. - Held that:- It is well settled proposition under the jurisdiction of Hon'ble Delhi High Court in the case of Sony Erricson [2015 (3) TMI 580 - DELHI HIGH COURT] that Bright Line Test Method cannot be applied for making any kind of adjustment under AMP expenses. Disallowance of provision for warranty - Held that:- A past event that leads to a present obligation is called as an obligating event. The obligating event is an event that creates an obligation which results in an outflow of resources. It is only those obligations arising from past events existing independently of the future conduct of the business of the enterprise that is recognized as provision. For a liability to qualify for recognition there must be not only present obligation but also the probability of an outflow of resources to settle that obligation. Where there are a number of obligations, (e.g. product warranties or similar contracts) the probability that an outflow will be required in settlement, is determined by considering the said obligations as a whole. In the case of the assessee, we find that such an estimation based on actuarial certificate has been approved in the earlier year. We direct the Assessing Officer to allow the provision for warranty. Addition u/s.40(a)(ii) - deduction on account of interest paid on delay in deposit of TDS - Held that:- Interest charged on the late deposit of TDS is an allowable deduction as interest paid is compensatory in nature - principle amount of TDS has been allowed as deduction and consequently interest thereof should also be allowed as deduction. AO has made the disallowance under the provision of Section 40(a)(ii) which merely provides for disallowance of taxes applicable on profits and gains earned by the assessee. Disallowance of TDS made by the Assessing Officer ostensibly is not sustainable. Accordingly, we hold that no disallowance on interest can be made u/s.40(a)(ii).
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