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2021 (3) TMI 71 - ITAT PUNETDS u/s 194J - A&M expenses - Non deduction of TDS - whether the impugned expense falls within the meaning of managerial services thereby attracting the provisions of section 194J ? - HELD THAT:- This expenditure was incurred on running of various trade promotion schemes which is designed and controlled by the appellant company. However, these schemes were administered through the selling and distribution network of the HUL. The claims made for selling and distribution network of sub-distributors was settled by HUL and reimbursed the same by the appellant company. It is vehemently contended that the expenses were wholly and exclusively incurred by the appellant company in order to promote the sales of products and the genuineness of the expenditure had not been doubted by the Assessing Officer. The very fact that the Assessing Officer had invoked the provisions of section 40(a)(2b) of the Act goes to suggest that the genuineness of business expenditure is beyond the doubt. Whether the subject payment was made for managerial services or not is of no relevance in view of the fact that the expenditure is only in the nature of reimbursement of cost to HUL. It had not resulted in any income to the HUL. Therefore, in the absence of income in the hands of the payee, the question of deduction of tax at source does not arise having regard to the ratio of the judgement in the case of CIT vs. Siemens Aktiongesellschaft [2008 (11) TMI 74 - BOMBAY HIGH COURT] as held the reimbursement of expenses cannot be regarded as a revenue receipt and as the assessee received nothing in excess of the actual expenditure incurred. Therefore, the question of deduction of tax at source does not arise. Thus neither the impugned expenditure falls within the ambit of “managerial services” as defined in section 9(1)(vii) of the Act nor liable to deduct tax at source u/s 194J of the Act. Therefore, the Assessing Officer was not justified in invoking the provisions of section 40(a)(ia) of the Act to disallow the A&M expenses. TDS u/s 194J - Addition on account of management cost - AO disallowed the expenditure for non-deduction of tax at source treating the same as expenditure under the provision of managerial services - HELD THAT:- Mere reimbursement of salary of employees does not constitute provision of managerial services. When the expenditure is a mere reimbursement of salary of employees deputed, the question of deduction of tax at source does not arise. Therefore, we are of the considered opinion that the provisions of section 194J of the Act have no application to the subject payment. Accordingly, the Assessing Officer is not justified in invoking the provisions of section 40(a)(ia). TDS u/s 194H - Disallowance on account of selling discount given to HUL - HELD THAT:- The relationship between the appellant and the distributor was that of the principal to principal. No services were rendered by the distributor to the appellant company and what was offered to the distributor was discount under the sales promotion schemes and, therefore, it cannot be said that the discount is in the nature of commission within the meaning of Explanation 1 to section 194H of the Act as held by the Hon’ble Jurisdictional High Court in the case of Intervet India Pvt. Ltd.. [2014 (4) TMI 353 - BOMBAY HIGH COURT] and CIT vs. Piramal Healthcare [2015 (1) TMI 873 - BOMBAY HIGH COURT] - thus we are of the considered opinion that the impugned expenditure does not fall within the meaning of commission thereby attracting the provisions of section 194H. Transfer Pricing adjustment in respect of A&M expenses - international transaction - HELD THAT:- The Revenue had failed to discharge the initial burden upon it with regard to showing the existence of international transactions between the assessee and its AE and apparently there is no material referred to by the lower authorities to show that the assessee had incurred the expenditure in advertising and marketing expenses in order to promote the brand value of the foreign AE. The reference made in clause 15 of the agreement is misplaced as rightly submitted by the ld. Sr. Counsel, the incurring of expenditure on advertising is only with regard to the protection of patent and trade mark of the AE and not to promote brand value of foreign AE. In the absence of existence of international transaction, the question of determination of arm’s length price of the transactions does arise.
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