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2022 (6) TMI 1433 - AT - Income TaxTP Adjustment - determination of ALP in a case of services rendered by an AE and the benchmarking process - evidence for rendering services and demonstrating the benefit that the assessee received from the services rendered by the AE to the assessee - plea of the assessee has been that documentary evidence furnished by it has not been examined by the TPO, who has merely come to the conclusion that the assessee failed to prove the nature of services rendered by the AE for which the assessee made payment. HELD THAT:- There is force in the arguments of assessee, in as much as the TPO as well as the DRP ignored the documentary evidence filed by the assessee and have proceeded on the assumption that these details were general in nature and did not prove the rendering of services by the AE. It is also equally true that the bulk of evidence filed by the assessee have to be corelated with type of services rendered and it is necessary for the assessee to explain as to how these emails show that services were rendered by the AE. It is only on such analysis being provided by the assessee, can the TPO proceed to examine the rendering of services as well as benefit that the assessee might derive. In the matter of coming to the conclusion on the benefit that the assessee received, clear evidence cannot be insisted upon and the overall business scenario and type of services rendered have to be looked into. We also notice that similar payment made to the very same AE for similar services under the very same agreement, has been accepted to be at Arm’s Length in AY 2017-18 & 2018-19. We are, therefore, of the view that it would be just and appropriate to set aside the issue with regard to determination of ALP to the AO/TPO for fresh consideration in the light of law as explained above and the other observations in this order. The AO/TPO will afford opportunity of being heard to the assessee in the set aside proceedings, before deciding the issue. Determination of ALP in respect of international transactions whereby assessee paid a sum for Brand Promotion Expenses - HELD THAT:- We find that the TPO in the impugned assessment year i.e., AY 2013-14, on identical facts has taken a contrary view, which is to the effect that there is an element of indirect control. The DRP has not rendered any finding on this issue. We are of the view that, in the light of order of the TPO for AY 2016-17, the issue requires fresh examination by the TPO. We, therefore, set aside the order of the TPO and direct re-examination of the issue, whether FIFOTL can be considered as an AE? TP adjustment of Specified Domestic Transaction in respect of Sales Promotion Expenses for payment made to United East Bengal Football Pvt Ltd - HELD THAT:- As the reference to the TPO in respect of specified domestic transactions mentioned in clause (i) of sec.92BA is not valid, as the said provision has been omitted. Accordingly, we direct the AO to delete the addition relating to specified domestic transactions made u/s 92CA of the Act. We notice that the co-ordinate bench in the case of Textport Overseas [2017 (12) TMI 1719 - ITAT BANGALORE] has restored the matter to the file of the A.O. with the direction to examine the claim of expenditure in accordance with the provisions of section 40A(2) of the Act. Following the same, we restore this issue to the file of the AO with the direction to examine the claim of expenditure mentioned above in terms of the provisions of section 40A(2) of the Act. Accordingly, following the binding decision rendered by Hon'ble High Court of Karnataka in the case of Texport Overseas P Ltd [2019 (12) TMI 1312 - KARNATAKA HIGH COURT] we hold that the reference to the TPO in respect of specified domestic transactions mentioned in clause (i) of sec.92BA is not valid, as the said provision has been omitted. Accordingly, we direct the AO to delete the addition relating to specified domestic transactions made u/s 92CA. Depreciation on goodwill - assessee has submitted that it has acquired the brewery from Karnataka Breweries & Distilleries Ltd. through a process of demerger and acquisition and the difference between the cost of acquisition and the fair value of the assets is recognized as goodwill in the books of the assessee - AO disallowed the depreciation stating that the claim was not allowed in the earlier assessment year also - HELD THAT:- The coordinate Bench of this Tribunal in the assessee’s own case for AY 2007-08 [2016 (9) TMI 1527 - ITAT BANGALORE] has held that depreciation on goodwill is not allowable based on the facts of the case of assessee. Respectfully following that decision, we hold that depreciation on goodwill is not allowable. Accordingly, these grounds are dismissed. Disallowance of expenses u/s. 14A - HELD THAT:- It is settled law that disallowance u/s. 14A cannot exceed the amount of exempt income earned by the assessee. Thus we hold that the disallowance should be restricted to the amount of exempt income earned by the assessee. We direct accordingly. Disallowance of year end provisions u/s. 40(a)(ia) - AO disallowed the said amount stating that tax ought to have been deducted as of 31.3.2012 and only for remittance the assessee has time till the date of filing of the return which the assessee failed to comply - HELD THAT:- In the present case, we notice that the assessee has furnished the details of subsequent deduction of tax from the year end provisions and the details of payment made before the due date for filing the return of the assessee’s PB. Thus we remand this issue back to the AO to verify the details of payments and tax deducted and allow the expenditure where the TDS is remitted to the Government account on or before the due date for filing the return of income. The assessee may be given a reasonable opportunity of being heard. Disallowance u/s 43B - disallowing provision of service tax on sponsorship services and penalty on service tax - HELD THAT:- AO while arriving at the difference between the amount mentioned in the tax audit report (as not paid before the due date for filing the return of income) and the amount already disallowed by the assessee i.e., the difference between had arrived at an amount of Rs.3,50,30,965 which is wrong, whereas the correct amount is Rs.3,15,30,965. Further the assessee has already disallowed Rs.1,90,33,176 as penalty on service tax which fact has not been considered by the AO resulting in double disallowance to that extent. We, therefore, direct the AO to recompute the disallowance taking into consideration the above two disallowances already considered by the assessee in the computation and also correct the transposition error while arriving at the disallowance. Taxing capital receipt - AO has taken the market price of the shares of the assessee company which were allotted as a gain in the hands of the assessee - HELD THAT:- We hold that there is no income arising in the hands of the assessee for the notional profit computed by the AO. Hence the addition is deleted. Directions to verify and allow the credits for MAT and TDS while recomputing the income of the assessee. Computing the ALP considering the +/- 5 percent variation from the arm's length price as permitted under Section 92C(2).
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