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2019 (8) TMI 1119 - AT - Income TaxTP Adjustment - project Management (Pre-operative) service fees and pre-operating management fee - HELD THAT:- We find that the Revenue’s identical plea in support of adjustment of such payments arising out of arm’s length price being determined at Nil stands declined by the tribunal’s coordinate bench in NLC Nalco India Ltd V/s. DCIT [2016 (3) TMI 639 - ITAT KOLKATA] CIT(A) has also taken note of above various judicial precedents whilst coming to the conclusion that the TPO could not have adjusted assessee’s twin expenditure claims by holding that the arm’s length price thereof was nil in uncontrolled market conditions. We therefore confirm the CIT(A)’s findings under challenge as far as first head of project management (service fee) is concerned. Neither the TPO nor the AO have brought any material on record indicating assessee’s excessive element in the assessee’s excessive impugned payments. There is hardly any dispute that the statutory provision in question is applicable only for excessive component of the relevant heads of the expenditure than that in entirety. The Revenue’s further reliance on section 37 also carries no merit in view of our preceding findings taking into consideration various judicial precedents. The CIT(A) action deleting the upward adjustment is affirmed on both counts. Disallowance of assessee’s success fee payment - HELD THAT:- There existed an agreement between the assessee and the payee(s) regarding payment of “Success Fee” to M/s. HSBC. We further notice there is no rebuttal to the learned CIT(A) clinching findings that the sum in question is not ₹ 6 crores as per by the Assessing Officer, but ₹ 22.29 crores. It is for this correct figure that the assessee has paid the impugned success fee payment to M/s. HSBC going by corresponding agreement. Learned departmental representative fails to indicate any material in the case file which could suggest that the assessee’s corresponding agreement is not a valid one. As relying on WALCHAND AND COMPANY PVT. LIMITED. [1967 (3) TMI 2 - SUPREME COURT] to conclude that it is not open for the department to question commercial expediency of an assessee’s day to day running of business affairs We uphold the CIT(A)’s findings under challenge deleting the impugned addition. Disallowance of severance fees - prior period revenue expenditure - severing the tie from using intellectual property as well as trade name - DR reiterates the assessment findings that the Assessing Officer has rightly treated assessee’s severance expenditure as capital and not revenue expenditure - HELD THAT:- We see no substance in Revenue’s instant argument. It is clear from a perusal of corresponding agreement’s clauses that assessee had not acquired any asset but made the impugned payment in order to ensure smooth day to day running of its business affairs. It has chosen to part its ways with the payee in other words in lieu of the impugned severance fee not covered under any specific head of capital expenditure as per accounting standard (AS) issued by the Institute of Chartered Accountants of India. We thus affirm the CIT(A) findings qua this last issue as well.
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