TMI Blog2020 (12) TMI 719X X X X Extracts X X X X X X X X Extracts X X X X ..... he aforesaid legal and professional fees incurred by it was neither in the nature of a capital expenditure nor of a personal nature, therefore, the same having been incurred wholly and exclusively for the purpose of its business was allowable as a revenue expenditure under Sec. 37 - assessee except for raising the aforesaid hollow contention had absolutely failed to substantiate its claim of having incurred the aforesaid expenditure in the course of its business. Except for placing on record the bifurcated details of professional charges incurred during the year under consideration, we find that, the assessee had failed to place on record any such material which would substantiate its claim of having incurred the so called professional charges wholly and exclusively for the purpose of its business. Accordingly, in the absence of any supporting documentary evidence which would justify the aforesaid claim of expenditure so raised by the assessee, we find no infirmity in the view taken by the A.O/DRP who in our opinion had rightly disallowed the same. - Decided against assessee. Deduction of sales promotion expenditure on account of travel under taken by its employees for attendin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2015 for A.Y. 2011-12. The assessee has assailed the impugned order on the following grounds of appeal before us: Grounds relating to Transfer Pricing adjustment 1. Looking to the facts and circumstances of the case and in law, the DRP has erred in directing and the TPO/AO has erred in making an 100% adjustment of the entire expenditure on account of regional management charges (RMC) thereby computing a total transfer pricing adjustment of ₹ 2,61,63,288/- on the ground that the claim of services availed does not get proved without issuing any specific show cause notice to this effect. 2. Looking to the facts and circumstances of the case and in law, the DRP has erred in directing and the TPOIAO has erred in making an 100% adjustment of the expenditure on account of regional management charges on the ground that the claim of services availed does not get proved in spite of evidence establishing the fact of receipt of services by the assessee. 3. Looking to the facts and circumstances of the case and in law, the DRP has erred in directing and the TPO has erred in determining the Arms Length Price at Rs. NIL in respect of the expenditure on account of regional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10. Looking to the facts and circumstances of the case and in law, the DRP has erred in directing and the AO has erred in making disallowance of expenditure on account of Sales promotion expenses ₹ 19,68,708/paid to Cox Kings Ltd. on the ground that details thereof were not provided and it was not substantiated that the same was for the purpose of business. 11. Looking to the facts and in the circumstances of the case and in law, the DRP has erred in directing and the AO has erred in making disallowance of expenditure aggregating ₹ 1,84,946/- debited to Sales promotion expenses incur red on account of purchase of gold coin etc. and distributed as gifts on the ground that details as to whom the gifts were given was not provided and that i t was not possible to ver i fy the genuineness of the expenditure. 12. The appellant craves leave to add, to alter, to amend, to withdraw, to delete the above grounds of appeal or any one of them at the time of hearing. 2. Briefly stated, the assessee company which is primarily engaged in the business of manufacturing/trading of chemicals is a joint venture company wherein 51% of the equity is held by Henkel AG Co. KGaA, G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (3) r.w.s 144C(1), dated 27.02.2015 before the Dispute Resolution Panel-1, Mumbai (for short DRP ). The DRP vide its order passed under Sec.144C(5), dated 14.11.2015 rejected the objections filed by the assessee. 5. The A.O after receiving the order passed by the DRP under Sec. 144C(5), dated 14.11.2015 therein passed the final assessment order under Sec. 143(3) r.w.s. 144C(13) of the Act, dated 31.12.2015 and assessed the income of the assessee at ₹ 20,39,25,170/-. 6. The assessee being aggrieved with the order passed by the A.O under Sec. 143(3) r.w.s 144C(13), dated 31.12.2015 has carried the matter in appeal before us. The ld. Authorized Representative (for short A.R ) for the assessee took us through the issues on the basis of which the assessment order had been assailed before us. It was submitted by the ld. A.R that the TPO had exceeded his jurisdiction and worked out the ALP of the regional management services received by the assessee from its AE, viz. Henkel AG Company KGaA at Rs.nil, as against that shown by the assessee at ₹ 2,61,63,288/-. It was submitted by the ld. A.R that the TPO had inter alia arrived at the ALP of the regional management servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue pertaining to sufficiency of the documentary evidence in support of the regional management services received by the assessee from its AE, viz. Henkel AG Company KGaA, had therein assumed the jurisdiction which was exclusively vested with the A.O under Sec. 37 of the Act. It was further submitted by the ld. A.R that the TPO by determining the ALP of the regional management services at Rs. Nil without following any one of the prescribed methods contemplated in law had clearly exceeded his jurisdiction. It was averred by the ld. A.R that the TPO/DRP had erred in observing that the assessee had failed to establish rendering of regional management services by its AE viz. Henkel AG Company KGaA in lieu whereof an amount of ₹ 2,61,63,288/- was therein paid to the latter. In order to buttress his claim that the observations of the TPO/DRP were contrary to the facts borne from the records the ld. A.R took us through the relevant pages of the assessee s paper book. Further, the ld. A.R assailed the corporate additions/disallowances made by the A.O while framing the assessment, viz. (i) disallowance of professional charges; and (ii) disallowance of sales promotion expenses. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,61,63,288/-, observing as under: Nature of services as per submission letter dated 13.12.2014 Amount paid to AEs (as submitted by the assessee vide submission letter dated 13.12.2014 Documentary evidence submitted by assessee (as submitted by assessee vide letter dated 11.12.2014 31.12.2014) TPOs comments Regional Planning Guiding services Assessee has failed to provide the amount paid to AE for availing this service Copy of regional service agreement dated 1.1.2010 debit notes raised by AE The assessee has not produced any documentary evidences in support of actual services received. By mere submission of agreement copy and debit notes, the claim of service availed does not proved. Marketing Assessee has failed to provide the amount paid to AE for availing this service -copy of regional service agreement dated 1.01.2010 -debit notes raised by AE. -email correspondence (annexure 6E of submitted dated 31.12.2014) The assessee has not produced any documentary evidences ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PO at nil without following any one of the prescribed methods contemplated in Sec.92C(1) of the Act. In the backdrop of the aforesaid facts, the assessee has assailed the determination of the ALP of the regional management services by the AO/TPO at Rs. nil primarily on two grounds viz. (i) that the AO/TPO had erroneously observed that the assessee had failed to place on record supporting documentary evidence which would establish receipt of regional management services by the assessee from its AE; and (ii) that the AO/TPO had erred in law in determining the ALP of the international transactions of rendering of regional management services to the assessee by its AE at nil i.e without following any one of the prescribed methods contemplated in Sec.92C(1) of the Act. 9. We shall first deal with the assessee s claim that supporting documentary evidence clearly establishing rendering of regional management services by the AE was duly placed on record in the course of the proceedings before the lower authorities, viz. (i) copy of regional management services agreement , dated 23.11.2010 executed between the assessee and its AE i.e Henkel AG Company KGaA; (ii) details of regional ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f regional management services by the AE to the assessee company were filed in the course of the proceedings before the lower authorities. In fact, the assessee had also placed on record the complete details of the payments made by the assessee to its AE for provision of regional management services. Cost benefit analysis of regional management cost (RMC) pertaining to a range of regional services rendered by the AE within the group, viz.(i) regional planning and guiding services; (ii) regional marketing services; (iii) regional supply and chain operational support services; and (iv) regional safety, health and environment support compliance services, therein explaining the benefits derived by the assessee from the services rendered by the AE were also filed by the assessee before the lower authorities in order to drive home its claim of having received the aforesaid services along with benefit derived therefrom. In the backdrop of the aforesaid documentary evidence, we are unable to comprehend as to how the AO/TPO had concluded that the assessee had failed to furnish the requisite documentary evidence which would substantiate rendering of regional management services by the AE, vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the group companies in day to day manner it would be difficult to place on record concrete evidence, but then, the same can be established and perceived after considering the way business is conducted. Interestingly, the Tribunal had compared the advisory services rendered by the assessee before them to its group companies with the role played by an anaesthesiologist while assisting a surgeon in an operation. It was observed by the Tribunal that just like in a case where an operation is performed by a surgeon the sutures and scars therein left would evidence the role of the surgeon but that of an anaesthesiologist cannot be similarly evidenced on the basis of similarly placed evidence. The Tribunal while concluding as hereinabove had observed as under: even though some correspondence was placed on record with reference to the advise given to assessee, providing a concrete evidence with reference to the services in the nature of specific activities is difficult, like proving the role of an anesthesian in an operation conducted by a surgeon. There may be an evidence of operation being performed by the Doctor in the form of sutures or scars etc, which can be proved later but th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to sustain the determination of the ALP of the regional management services received by the assessee from its AE, viz. Henkel AG Company, KGaA, at Rs. nil by the TPO without resorting to any transfer pricing exercise as per any of the method prescribed in Sec.92C(1) of the Act, as against that determined by the assessee at ₹ 2,61,63,288/- by adopting TNMM as the most appropriate method. We thus in terms of our aforesaid deliberations vacate the addition towards TP adjustment of ₹ 2,61,63,288/- made by the AO/TPO. The Grounds of appeal No. 1 to 8 are allowed in terms of our aforesaid observations. 11. We shall now advert to the other disallowances made by the A.O while framing the assessment. As is discernible from the assessment order, the assessee had claimed deduction of professional charges of ₹ 3,62,693/- which were stated to have been paid to M/s Desai Dewanji. It was the claim of the assessee in the course of the assessment proceedings that the aforesaid amount was paid towards consulting fee pertaining to an acquisition carried out by it. However, as the assessee failed to substantiate its aforesaid claim by placing on record the details of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee has assailed the disallowance of the aforesaid sales promotion expenses in appeal before us. The ld. A.R in the course of hearing of the appeal had drawn our attention to the bifurcated details of the sales promotion expenses for the year under consideration. On a perusal of the aforesaid details, we find, that the impugned amount of ₹ 19,68,708/- is claimed to have been paid by the assessee to M/s Cox and Kings Ltd. towards travel expenses by Air of its employees for the purpose of attending a conference. However, except for harping on the aforesaid unsubstantiated details the assessee had failed to place on record any such material which would substantiate its claim that the aforesaid expenses were actually incurred in the course of its business towards travel expenses of its employees for attending a conference. Accordingly, in the absence of any material supporting the claim of the assessee of having incurred the aforesaid expenses wholly and exclusively in the course of its business, we find no infirmity in the view taken by the lower authorities who had rightly rejected the same. We thus uphold the disallowance of ₹ 19,68,708/- carried out by the AO. The Gr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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