Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2015 (10) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2015 (10) TMI 2794 - AT - Income TaxDisallowance of 25% of the royalty and treating the same as capital expenditure - assessee entered into a license and technical assistance agreement (royalty agreement) with its parent company for licensing of the technical information including method of manufacture and improvements with respect to the products and technical services - HELD THAT:- It is pertinent to note that for the year under consideration, royalty paid by the assessee was under the same agreement as it was paid for the assessment year 2004-05. The Hon’ble High Court has decided this issue [2015 (1) TMI 240 - KARNATAKA HIGH COURT] after considering the relevant clauses of the agreement and therefore, the issue of payment of royalty is now covered by the decision of the Hon’ble High Court in the assessee’s own case. Respectfully following the decision of the Hon'ble jurisdictional High Court, we allow the claim of the assessee and the addition made by the AO on this account is deleted. Disallowance of doubtful advances written off - assessee did not produce any break-up of the amounts as well as advances and as per the AO the advances were capital in nature - HELD THAT:- New facts have been brought before us by the assessee stating that the assessee has now restricted the claim after netting the amount payable to WMS to the balance of amount ₹ 1,34,000/- only which was to be written off on this account as against the original claim of ₹ 1,14,05,413/-. Further, the assessee has produced additional evidence which is required to be verified and examined. Accordingly, in the facts and circumstances and in the interest of justice, we set aside this issue to the record of the AO to adjudicate the same after considering the facts as well as the additional evidence brought before us. This ground is partly allowed for statistical purposes. Disallowance of administrative fee by invoking the provisions of sec.40A(2) - excess payment to the related party - assessee has submitted that the provisions of sec.40A(2) are not applicable to the said transaction when the assessee has already reported the transaction as international transaction which was referred by the AO to the TPO for determination of the ALP - HELD THAT:- There is no dispute that the transaction has been reported by the assessee as international transaction which was also accepted by the AO and the TPO as an international transaction. Thus, once a particular transaction is admitted as international transaction then the same falls in the ambit of the provisions of X chapter of the Act which are specific provisions to deal with such transactions between the assessee and its AE. Therefore, once the transaction is undisputedly subject matter of Chapter X of the IT Act, then the other general provisions of the Act cannot be applied simultaneously. AO, having considered the transaction being international transaction and making a reference to the TPO for determination of the ALP cannot go back to the provisions of sec.40A(2) for determining the reasonableness of the price paid by the assessee. Our attention was invited by assessee that for the assessment year 2001-02 to 2002-03 the payment in question was subjected to MAP and only 25% is charged to tax. Therefore, it was accepted by the department that the services were rendered by the AE to the assessee in India. We further note that the AO has not conducted any inquiry or investigation to find out the excessiveness of the payment made by the assessee to its AE. In the case in hand, when the AO has not conducted any inquiry or brought out any material on record to prove that payment made by the assessee is excessive and unreasonable making an adhoc disallowance by invoking the provisions of sec.40A(2) of the Act is not justified. TP adjustment in respect of administrative service fee - HELD THAT:- TPO is not empowered to determine the ALP at nil though the quantum/size has to be decided along with ALP to be determined as per Chapter X of the Act. The assessee has also filed additional evidence in support of its claim that the AE has rendered services. Since additional evidence filed by the assessee is relevant and material document in adjudicating the issue, and further when the TPO has not determined the ALP as per the provisions of chapter X as well as the IT Rules, therefore, in the facts and circumstances in the case as well as in the interest of justice, the issue is set aside to the record of the AO/TPO for adjudication of the same after considering the relevant evidence as well as in the light of the above observations. Levy of interest u/ss.234A and 234B is mandatory and consequential. Therefore, no separate finding is required.
|