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2019 (2) TMI 2062 - AT - Income TaxTP adjustment - Advertisement, Marketing and Sales Promotion Expenses [AMP] incurred by the assessee - HELD THAT:- As gone through the statement of expatriate employees which are extracted at pages 10 and 11 of the order of the TPO. A perusal of the statements show that LG Korea has control over the operations of LG, India. However, because of such services, the assessee has charged Asia Regional Headquarter expenses, but nowhere it proves that the assessee has incurred AMP expenses for the brand building of its AE. On the other hand, we find force in the contention of the ld. AR. An identical issue has been considered and decided by the Tribunal in assessee’s own case [2019 (1) TMI 1567 - ITAT DELHI] as held that Revenue has failed to demonstrate by bringing tangible material evidence on record to show that an international transaction does exist so far as AMP expenditure is concerned. Therefore, we hold that the incurring of expenditure in question does not give rise to any international transaction as per judicial discussion hereinabove and without prejudice to these findings, since the operating margins of the assessee are in excess of the selected comparable companies, no adjustment is warranted. TP adjustment - Arm’s Length rate for international transaction of payment of royalty at 3.5% as against royalty paid @ 5% by the assessee - HELD THAT:- As decided in assessee own case [2019 (1) TMI 1567 - ITAT DELHI] we direct the TPO to determine the Arm’s length royalty @ 4.05%. Ground No. 5 is partly allowed. International transaction of allocation of Asia Regional Head Quarters expenses allegedly holding that no specific services were received by the assessee in consideration for such payments - HELD THAT:- As decided own case [2019 (1) TMI 1567 - ITAT DELHI] the adjustment computed by the TPO/DRP on account of allocation of RHQ expenses is uncalled for and deserves to be deleted. TP adjustment in respect of service warrantee charges received by the assessee by applying margin of 26% on such reimbursement - HELD THAT:- The assessee is not acting as an agent or a service provider for the associated enterprise but is seeking reimbursement of the actual cost incurred by it. While making payment for third-party costs for services rendered by independent service providers, the assessee does not perform any service, discharge any function, or undertake any risk whatsoever and such payments are for the services rendered by independent service providers. This is clearly mentioned in the TP documentation also. In our view, such external costs being in the nature of pass-through costs, are not to be recovered along with a mark-up and a cost to cost reimbursement satisfies the arm’s length principle. The operating margin of the assessee in the distribution segment at 4.52% is higher than that of the comparable companies at 3.93% and the after sale warrantee is closely linked with distribution function of the assessee. Therefore, no adjustment on account of international transaction of reimbursement of warranty claims is warranted on the facts of the case. Our view is fortified by the decision of Sony Ericsson Mobile Communications [2015 (3) TMI 580 - DELHI HIGH COURT] held that Clubbing of closely linked transactions is permissible in appropriate cases. The Hon’ble High Court further held that once the Revenue accepts the TNMM as the most appropriate method, then it would be inappropriate for the Revenue to treat a particular expenditure as a separate international transaction. We find that the arrangement of receiving reimbursement for warranty transaction on actual cost basis was accepted to be at arm’s length by the DRP in assessment year 2007-08 and by the TPO in assessment year 2008-09. Considering the facts of the case in totality we do not find any merit in the impugned TP adjustment. Addition by treating sales tax subsidy as taxable revenue receipt - HELD THAT:- As decided in assessee own case [2010 (2) TMI 916 - ITAT, DELHI] collection of dealers' price has been made in the ordinary course of trading activities. When the assessee is not permitted to collect the sales tax under the notification issued by the State Govt. the collection of sales tax as a part of dealers' price is nothing but constitutes a trading receipt - Respectfully following the precedents we decline to interfere with the findings of the CIT(A). Ground is accordingly dismissed. Disallowance of aggregate royalty paid to LG Electronics, Korea holding the same to be in the nature of capital expenditure - HELD THAT:- As relying on assessee own case [2019 (1) TMI 1567 - ITAT DELHI] we direct the Assessing Officer to treat royalty payment as revenue expenditure. Deduction claimed by the assessee u/s 80JJAA - HELD THAT:- An identical issue was considered and decided by the Tribunal in assessee’s own case in [2019 (1) TMI 1567 - ITAT DELHI] direct the Assessing Officer to allow claim of deduction u/s 80JJAA of the Act as claimed by the assessee. Charging of interest u/s 234B, 234C and 234D - HELD THAT:- Levy of interest is mandatory, though consequential to our decision. The Assessing Officer is directed to levy interest as per the provisions of the law. Interest u/s 234C to be charged on the returned income. Error in granting benefit of advance tax / self assessment tax/TDS credited - HELD THAT:- We find that there is some error in granting tax credit to the assessee in respect of advance tax, self assessment tax and TDS. We direct the Assessing Officer to give credit to the assessee after verifying the tax challan /TDS certificates. Grounds are allowed for statistical purposes.
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