TMI Blog2023 (1) TMI 1110X X X X Extracts X X X X X X X X Extracts X X X X ..... d under trademark LG manufactured by the assessee and not towards promoting the brand name of the AE. In such circumstances, the alleged excess AMP expenditure does not result in an international transaction and the assessee cannot be expected to seek compensation for such expenses unilaterally incurred by it from the AE - Thus we direct the Assessing Officer /TPO to delete the impugned adjustment. Excessive AMP expenses have been incurred by the assessee so as to benefit AE - HELD THAT:- Nothing has been brought on record by the Revenue to demonstrate that there is a direction from LG Korea to incur certain minimum level expenditure on AMP. Therefore, we are of the considered view that the said Article in TLA does not provide for or result in rendering of any service in relation to AMP expenses incurred by the assessee as an independent full risk-bearing manufacturer/ distributor of the products manufactured/distributed in the Indian market. Reimbursement of certain advertisement expenses by LG Korea - HELD THAT:- As mentioned elsewhere, in terms of Article 20, LG Korea did not have any obligation whatsoever to indicate or reimburse advertisement expenditure in relatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch expenditure is, according to us, irrelevant consideration for the purpose of determination of ALP. There is no dispute that the brand LG is owned by LG Korea but such expenses are incurred for undertaking marketing or promoting sale of the group companies which includes the assessee. Therefore, it can be safely concluded that the same has been incurred for the purpose of the business of the assessee in ordinary course of its business. As already decided the quarrel relating to the aggregate bench marking while deciding Ground No. 4 relating to AMP expenses and the same reasoning would fully apply here also. Allocation of expenses in proportion to sale - HELD THAT:- We find that the same is supported by the decision of the Hon'ble Madras High Court in the case of Manjushree Plantations Ltd [ 1979 (2) TMI 11 - MADRAS HIGH COURT ] which has been approved by the Hon'ble Apex Court in the case of Consolidated Coffee [ 2000 (11) TMI 136 - SUPREME COURT ] and also supported by the Hon'ble Delhi High Court in the case of EHPT India Pvt Ltd [ 2011 (12) TMI 49 - DELHI HIGH COURT ] Thus we do not find any merit in the transfer pricing adjustment in respect of all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lled transaction to undertake/provide benefit in one controlled transaction to compensate for the benefit received in the other controlled transaction. Accordingly, benefit received should be set off against the benefit provided. Clubbing of closely linked transactions has also been upheld in the case of Sony Ericsson Mobile Communications [ 2015 (3) TMI 580 - DELHI HIGH COURT ] wherein the Hon'ble Jurisdictional High Court held that clubbing of closely linked, including continuous transactions, is permissible in appropriate cases. In the same breath, the Hon'ble High Court 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 do not find any merit in the TP adjustment in respect of international transaction of payment of design and development charges. We, accordingly, direct the Assessing Officer/TPO to delete the same. TP adjustments in respect of amount outstanding in the account of AE written off during the year under consideration - HELD THAT:- Dehors whether the impugned transaction can be termed as an internati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... delete the impugned addition. Ground is allowed. Treatment of sales tax subsidy as taxable revenue receipt - HELD THAT:- The findings given by this Tribunal in Assessment Year 2009-10 [ 2019 (2) TMI 2062 - ITAT DELHI] as held neither the certificates issued by Greater Noida Industrial Development Authority nor the Notification issued by the State Govt. authorises the assessee to collect sales tax from its customers. The assessee has been exempted from collecting the sales tax from customers on the sales made with effect from 27th March, 1998 The assessee had included the element of sales tax in the dealers' price as a sale price of the product. In the States other than Uttar Pradesh, the sales tax so collected as a part of dealers' price has been paid to respective State Governments, whereas in the case of the assessee, since the assessee was not liable to pay sales tax, as exemption has been provided to the extent of 200 per cent of fixed capital investment, the sales tax element which is embedded in the sale price have been retained by the assessee as excess sales consideration. At the year end the assessee has allocated the sales tax element from dealer s price an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PER N.K. BILLAIYA, ACCOUNTANT MEMBER:- This appeal by the assessee is preferred against the order dated 12.01.2015 framed u/s 144C r.w.s 143(3) of the Income-tax Act, 1961 [hereinafter referred to as 'The Act']. 2. The representatives of both the sides were heard at length, the case records carefully perused alongwith the written submissions filed by the assessee and with the assistance of the ld. Counsel, we have considered the documentary evidences brought on record in the form of Paper Book in light of Rule 18(6) of ITAT Rules. 3. Ground Nos. 1 to 3 are general in nature and, therefore, need no adjudication. 4. Ground No. 4 with all its sub-grounds relates to Transfer Pricing adjustment amounting to Rs. 10,44,88,67,112/- in relation to Advertisement, Marketing and Sales Promotion Expenses [AMP] incurred by the assessee. 5. Briefly stated, the facts of the case are that the assessee is engaged in the trading, manufacturing, marketing and sale of electronic home appliances and I.T. products. It is also engaged in the import of finished goods i.e. Colour Television, Air Conditioners and Refrigerators from its holding company and associated group co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11,563,842/- 17. Amount written off 19,341,427/- 18. Payment of licensee fee 844,220/- 19. Reimbursement of advertising and other expenses to LGE1L 169,946,209/- 20. Reimbursement of advertising and other expenses to AEs 3,953,460/- Warranty services for CDMA Handsets division 21. Import of service spares 457,179,046/- TNMM 22. Provision of warranty services 48,624,777/- No Benchmarking 23. Reimbursement of in-warranty expenses to LGEIL 287,792,110/- No Benchmarking 7. The assessee, during the year under consideration, has incurred the following expenditure on AMP expenses: PARTICULARS AMOUNT [RS.] AMOUNT [RS.] Advertisement expenses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Infinite Retail Ltd 2.88% Vivek Ltd 3,59% Arithmetic Mean 1.82% 11. In light of the above, the TPO held that since AMP expenses incurred by the assessee as percentage of sales was more than similar percentage for comparable companies, the assessee had incurred such AMP expenditure on brand promotion and development of marketing intangibles for the AE. After charging mark-up of 14.88%, the TPO proposed adjustment of Rs. 10,44,88,67,112/- on account of the alleged brand building activity undertaken by the assessee for the AE. The computation is as under: COMPUTATION OF TP ADJUSTMENT Rs. Value of sales 106,726,728,417 AMP / Sales of the comparables 1.82% Amount that represents bright line 1,942,426,457 Expenditure on AMP by assessee 11,185,822,454 Expenditure in excess of bright line 9,243,395,997 Mark-up at 14.88 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the assessee has undertaken combined bench marking analysis by aggregating several international transactions whereby ALP determination of several international transactions have not been undertaken. 17. The ld. DR further stated that operating margin of the assessee is 3.70% as against 4.70% of the comparable companies which means that the profit margin of the assessee was lower than that of the comparable companies and, therefore, international transactions were not at arm s length price. It is the say of the ld. DR that the transaction by transaction benchmarking analysis is to be undertaken as opposed to aggregation approach adopted by the assessee. 18. The ld. DR concluded by saying that since the Tribunal in the preceding years has upheld the bench marking of AMP expenses by applying TNMM, the same may be applied in the year under consideration also but after making comparability adjustment on account of AMP expenses. 19. Strong reliance was placed by the ld. DR on the decision of the Hon'ble Punjab and Haryana High Court in the case of Knorr Bremse India Pvt. Ltd 380 ITR 307 20. We have given thoughtful consideration to the orders of the authorities below a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e decision of the Hon'ble Madras High Court in the case L.G. Ramamurthi 110 ITR 453 wherein the Hon'ble Madras High Court held that unless new facts are brought on record, the Tribunal shall not take a view which is different from the view taken by another bench for the earlier years. The relevant findings read as under: 19. . Even assuming that this court on the earlier occasion had not given any finding with regard to the nature of the gift, whether it was real or sham, and merely went on to consider the question of law embedded in the question actually referred, to this court, still we are of the opinion that no Tribunal of fact has any right or jurisdiction to come to a conclusion entirely contrary to the one reached by another Bench of the same Tribunal on the identical facts. It may be that the members who constituted the Tribunal and decided on the earlier occasion are different from the members who decided the case on the present occasion. But what is relevant is not the personality of officers presiding over the Tribunal or participating in the hearing, but the Tribunal as an institution. If it is to be conceded that simply because of the change in the per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds is allowed. 25. For the sake of completeness, we would like to address to the specific issues raised by the ld. DR. 26. Firstly, the ld. DR has referred to Article 20 of Technical License Agreement which reads as under: The licensee agrees to provide and make arrangements for advertisement, marketing and sales promotion in the licese territory for L.G. products manufactured by the licensor and those by the licensee at their cost. 27. In our understanding of the afore-stated Article, we are of the considered view that it only emphasizes that the advertisement, marketing and sales promotion expenses in relation to the products manufactured and/or distributed by the assessee would have to be incurred by the assessee as licensee and it would not be the responsibility of the L.G. Korea to incur such expenses. 28. We are of the considered view that in terms of technical licensee agreement, the assessee is the exclusive licensee for the Indian territory and it is no one s case that LG Korea is directly selling products in the Indian market. 29. From the above Article, we cannot infer, nor it can be inferred, that excessive AMP expenses have been incurred by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o reimbursement of certain advertisement expenses by LG Korea. 35. As mentioned elsewhere, in terms of Article 20, LG Korea did not have any obligation whatsoever to indicate or reimburse advertisement expenditure in relation to sale of products by the assessee in India. It appears that the said reimbursement of AMP expenses have been made by LG Korea voluntarily and without any legal binding and by way of support the assessee. We find that similar reimbursement has been received by the assessee in earlier years and as mentioned elsewhere, this quarrel has been decided by this Tribunal in earlier Assessment Years in favour of the assessee and against the Revenue. 36. In so far as bench marking of AMP expense on aggregation basis applying TNMM is concerned, this Tribunal in assessee s own case, in Assessment Years 2008-09 and 2009-10 upheld the proposition that as long as operating margins of the assessee are higher than those of comparable companies, no adjustment on account of AMP expenses is warranted. The relevant findings of this Tribunal read as under: 33. Considering the aforementioned findings of the Hon'ble Jurisdictional High Court of Delhi In the case in ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The TNM Method proceeds on the assumption that functions, assets and risk being broadly similar and once suitable adjustments have been made, all things get taken into account and stand reconciled when computing the net profit margin. Once the comparables pass the functional analysis test and adjustments have been made, then the profit margin as declared when matches with the comparables would result in affirmation of the transfer price as the arm's length price. Then to make a comparison of a horizontal item without segregation would be impermissible. 38. It would be pertinent to mention here that the TPO did not dispute the combined benchmarking analysis undertaken by the assessee in its Transfer Pricing study in respect of all international transactions and, in fact, accepted the same to be at arm s length. The TPO has proceeded on the premise that an international transaction in respect of AMP expenses is to be bench marked separately applying BLT. 39. Similar contention was raised in Assessment Year 2008-09 and this Tribunal observed as under: 31. The Revenue has strongly objected for the aggregated bench marking analysis for the AMP. According to the Revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 5.01% in the manufacturing segment and 4.52% in the distribution segment and the same is higher than that of the comparable companies at 4.04% in the manufacturing segment and 4.46% in the distribution segment. TNMM has undisputedly been satisfied. Since the operating margins of the assessee are in excess of the selected comparable companies, no adjustment on account of AMP expenses is warranted. 40. The contention of the ld. DR that profit margin of assembly segment of the assessee is 3.70% whereas the same for comparable companies is at 4.70% cannot be accepted since the said margin is within arm s length range of +/- 5% as per proviso to section 92C92) of the Act. 41. Bench marking analysis of AMP expenses applying intensity approach can be understood from the following chart: S.No. Name of the company Operating profits on operating revenues Operating profits on operating revenues after AMP adjustment 1 Hitachi Home and Life Solution Limited NC NC 2 Penguin Electronic Limited 0.41% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yalty Rates- Export Duration of the agreement (Years) Toshiba Corporati on Japan Videocon International Limited Sep-99 Colour Television Receivers 4% 3% 7 Hitachi Limited Volta Limited Nov-99 Steam fired vapour 5% 5% 5 Eatco Williams Group Blue Star Limited Jan-03 Invicts PAC usage of Air Conditioning 5% 5% 5 Kenwood Design Corporation Videocon International Limited Mar-99 Television 5% 5% 5 Samsung Electronics Co. Limited Videocon Appliances Limited Mar-99 Showcase of Reach-in-type and open type reach-incooler and open freezer 5% 5% 5 Victor Company of Japan Mirc Electronic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e find that the TPO determined comparable average rate of 3.5% of the companies having fixed term agreements. Considering the fact that the assessee had a perpetual license, he discounted the uncontrolled royalty rate by 2%, thereby calculating the arm's length royalty rate at 1.5%. The DRP computed average rate of royalty of three comparable companies at 4.5% and, thereafter, reduced 1% on account of limited period of license used by the comparables vis-avis the assessee using the perpetual license. 10.8. There can be no quarrel on the fact that, other things being equal, a landlord intending to have a tenant for a long-term may compromise some amount of rent, in comparison with a landlord finding a tenant requiring the premises for a short-term. The rate of rent in a former case will be lower for a variety of reasons, such as, not undergoing the process of finding a tenant every now and then, fear of the property remaining vacant for some time after the exit of the first tenant and incurring costs at the time of each let out. Difference between the rent charged by the landlord or paid by the tenants in the afore discussed two situations is nothing but a discount allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter sales support, etc. In consideration for services, the assessee, during the year under consideration, has paid a sum of Rs. 29,48,69,099/- to its associated enterprise. The TPO did not accept the transaction to be at arm s length and determined the ALP of such services at NIL holding that no specific benefit has been derived by the appellant. 48. Before us, it was strongly contended by the ld. counsel for the assessee that this Tribunal in assessee s own case in Assessment Years 2008-09 and 2009-10, has decided the issue in favour of the assessee and against the Revenue. 49. The ld. DR vehemently stated that this transaction was reported as an international transaction and was benchmarked applying TNMM on aggregation basis. It is the say of the ld. DR that this international transaction was not bench marked by the assessee separately. The ld. DR strongly contended that since there was a mark-up of 5% over and above the cost, therefore, the same was required to be benchmarked applying the most appropriate transfer pricing method. 50. The ld. DR further questioned why charges are being paid for brand management services when brand belonged to LG Korea and not to the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esentation dated February, 2010 2 Market Trend and Competitor information - Early Warning Indicator 2143-2150 (Vol 6) Analysis of Market share trend and competitor analysis dated September, 2009 3 Review Report dated October 2009 2167-2207 (Vol 6) Presentation/ report on exploring performance of marketing activities and identifying areas for improvement in relationship with retailers. 4 Report on DCR study - India, 2009 2208-2310 (Vol 6) Evaluation of appellant s marketing activities and discussion on further strengthen dealer relationship 5 Email dated August 2009 regarding marketing and PR initiative launched by the associated enterprise 2311-2313 (Vol 6) Video and other promotional material in connection with FI Rocks with Golden Ticket project launched by the associated enterprise 6 Email dated April 2009 regarding marketing and PR initiative launched by the associated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Madras High Court in the case of Manjushree Plantations Ltd 130 ITR 908 which has been approved by the Hon'ble Apex Court in the case of Consolidated Coffee 248 ITR 432 and also supported by the Hon'ble Delhi High Court in the case of EHPT India Pvt Ltd 350 ITR 41. 58. Considering the facts of the case in totality in light of the judicial decisions discussed hereinabove, and considering the past history of the assessee, we do not find any merit in the transfer pricing adjustment in respect of allocation of Asian Regional Headquarter expenses and direct the Assessing Officer/TPO to delete the same. Ground No. 6 is allowed. 59. For the sake of completeness, we would like to refer to the decision of this Tribunal given in Assessment Year 2008-09 in ITA No. 6253/DEL/2012 which is as under: 49. In our humble opinion, it is the prerogative of the assessee to decide as to whether or not the services are required. Documentary evidences brought on record show that significant services were rendered by RHQ benefitting the assessee to name a few such services, brand analysis, product analysis, market analysis, etc. Further, we find that the RHQ engages third party renowned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was hopeless and useless. The finding of the Assessing Officer/TPO, that the assessee had not derived any commercial benefit as technology and know-how had not resulted in any substantial profit increase, has been rightly rejected as totally unsustainable. Profitability of the assessed could have been lower or varied due to various reasons and lower profitability in one or more years cannot lead to the conclusion that no benefits were derived or technology was unproductive. The justification given by the assessee for lower profits on account of bad debts, high rent, increase in legal cost stand highlighted and accepted by the Tribunal. 184. Transfer pricing provisions, as noted above, recognise separate entity principle. Therefore, as a sequitur, it follows that the AE is a separate entity and when it avails and secures advantage of technical know-how, it should pay arm s length price for the right to use. The arm s length price would be the fair market price of the technical know-how, which is licensed. ****** ****** ****** 185. Royalty payable for availing the right to use would depend upon corresponding price, which would have been paid by an independent or unrelate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Additional Commissioner of Income Tax, 2012 (13) ITR (Trib) 422. 35. The TPO s Report is, subsequent to the Finance Act, 2007, binding on the AO. Thus, it becomes all the more important to clarify the extent of the TPO s authority in this case, which is to determining the ALP for international transactions referred to him or her by the AO, rather than determining whether such services exist or benefits have accrued. That exercise of factual verification is retained by the AO under Section 37 in this case. Indeed, this is not to say that the TPO cannot after a consideration of the facts state that the ALP is nil given that an independent entity in a comparable transaction would not pay any amount. However, this is different from the TPO stating that the assessee did not benefit from these services, which amounts to disallowing expenditure. That decision is outside the authority of the TPO . 56. Considering this issue from another angle in the light of the decision of the Hon ble Delhi high Court in the case of CIT vs Lumax Industries Limited ITA No 102/2014 we are of the opinion that once the assessee has satisfied the TNMM method i.e. the operating margins of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perating margin of the appellant 3.70% was within +/- 5% of the margin of the comparable companies at 4.70%, the transaction was considered to be at arm s length. 62. However, this approach of the assessee was negated by the TPO who was of the firm belief that since the assessee does not have any marketing infrastructure in the overseas markets, AMP/sales ratio of the appellant 1.82% shall be regarded as the arm s length rate of export commission, and accordingly, made addition of Rs. 5,27,71,153/-. 63. Before us, the ld. counsel for the assessee drew our attention to the decision of this Tribunal in the case of the assessee in Assessment Year 2009-10 and pointed out that since certain additional evidences were filed by the assessee in Assessment Year 2009-10, the quarrel was restored to the file of the Assessing Officer to be decided in light of the additional evidences. 64. It is the say of the ld. counsel for the assessee that similar application for admission of additional evidence has been filed for the year under consideration. 65. Per contra, the ld. DR objected to this contention of the ld. counsel for the assessee and vehemently stated that additional evidence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e mark-up on the same. 72. The ld. DR further stated that there is no reciprocity in the arrangement and the mark up should have been charged for providing warranty support services. Once again, referring to the combined TNMM analysis, the ld. DR contended that the same does not benchmark this transaction and even otherwise, the margin of the assessee is less than that of the comparable companies. The ld. DR also contended that adjustment relating to products such as monitors compressors which are not covered under royalty agreement should be sustained. 73. After considering the rival contentions, we are of the considered view that the assessee, as an independent distributor, has sold the products purchased from the AE in the domestic market and has earned profit margin of 5.78% from such sale. In our considered opinion, warrantee is an inherent obligation of the assessee while selling products to third party customers. To discharge such obligation, the assessee has engaged third party service providers and entire functions related to rendering of such warranty services are performed by such third party service providers. 74. It is an undisputed fact that the products are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ional and separate consideration for new models designed and developed by the AE for the assessee as provided under clause 4.2 of the agreement. 81. The ld. counsel for the assessee further pointed out that out of the total design and development fee of Rs. 43,46 crores, a sum of Rs. 16,01 crores relates to products such as monitors and compressors which are not covered under royalty agreement. 82. Strong reliance was placed on the decision of the co-ordinate bench in the case of Denso India Ltd ITA No. 1857/DEL/2014 and Mitsubishi Electric Automotive India Pvt Ltd in ITA No. 312/DEL/2015. 83. The ld. counsel for the assessee further stated that for the purpose of applying the TNMM, operating profit was computed after taking into consideration payment towards design and development fee to the AE and since the operating margin of the assessee is in the range +/- 5% with that of the comparable companies, no adjustment is required. 84. We have given thoughtful consideration to the orders of the authorities below qua the rival contentions. At the very outset, we have to reiterate that the international transactions entered into by the assessee have been aggregated for the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n evaluating the arm's length character of the royalty paid by SI to P, it may be appropriate to consider the arm's length character of the transfer prices charged by SI to S2 and the aggregate profits earned by SI and S2 from the use of the manufacturing process and the sale to uncontrolled parties of the products produced by SI 87. Rule 10A(d) of the Rules provides that closely linked transactions can be considered together. In light of the above discussion, we are of the considered view that it is possible to conduct combined evaluation of interlinked transactions and it is equally possible for the AE involved in the controlled transaction to undertake/provide benefit in one controlled transaction to compensate for the benefit received in the other controlled transaction. Accordingly, benefit received should be set off against the benefit provided. 88. Clubbing of closely linked transactions has also been upheld by the Hon'ble Delhi High Court in the case of Sony Ericsson Mobile Communications [supra] wherein the Hon'ble Jurisdictional High Court held that clubbing of closely linked, including continuous transactions, is permissible in appropriate cases. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e applied when necessary and applicable comparables on functional analysis, with or without adjustments are available. Otherwise, the TNM Method should not be adopted or applied on account of being an inappropriate method. XXXXX 101. However, once the Assessing Officer/TPO accepts and adopts TNM Method, but then chooses to treat a particular expenditure like AMP as a separate international transaction without bifurcation/segregation, it would as noticed above, lead to unusual and incongruous results as AMP expenses is the cost or expense and is not diverse. It is factored in the net profit of the inter- linked transaction. This would be also in consonance with Rule 10B(1)(e), which mandates only arriving at the net profit margin by comparing the profits and loss account of the tested party with the comparable. The TNM Method proceeds on the assumption that functions, assets and risk being broadly similar and once suitable adjustments have been made, all things get taken into account and stand reconciled when computing the net profit margin. Once the comparables pass the functional analysis test and adjustments have been made, then the profit margin as declared when matc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stance fee, to an entirely different (CUP) method. The adoption of a method as the most appropriate one assures the applicability of one standard or criteria to judge an international transaction by. Each method is a package in itself as it were, containing the necessary elements that are to be used as filters to judge the soundness of the international transaction in an ALP fixing exercise. If this were to be disturbed, the end result would be distorted and within one ALP determination for a year, two or even five methods can be adopted. This would spell chaos and be detrimental to the interests of both the assessee and the revenue. The second question is, therefore, answered in favour of the assessee; the TNMM had to be applied by the TPO/AO in respect of the technical fee payment too. 91. Considering the facts of the case in totality in light of the aforestated judicial decisions, we do not find any merit in the TP adjustment in respect of international transaction of payment of design and development charges. We, accordingly, direct the Assessing Officer/TPO to delete the same. Ground No. 9 is accordingly, allowed. 92. Ground No. 10 relates to the transfer pricing adj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... certificate which is placed at pages 3414 to 3422 of the paper book Volume IX clearly shows the fact that the liabilities in the books of AE were far more than the book value of assets and the AE was not even able to pay the debt due to third-party creditors. 100. Even assuming that the impugned transaction falls within the ambit of international transaction between two AEs, then also, the TPO is obliged under the law to determine ALP by following any one of the prescribed methods of determining the ALP as detailed in section 92C(1) of the Act. This has also been clarified by the Central Board of Direct Taxes in Instruction No. 3 of 2003 dated 20.05.2003. 101. Facts on record show that the TPO has not applied any one of the prescribed methods in Section 92C(1) of the Act to determine ALP before disallowing the write off. In view of the above, we direct the AO/TPO to delete the impugned disallowance. Ground No 10 is, accordingly, allowed. 102. Ground No. 11 relates to the disallowance of salary of Rs. 36,33,50,841/ paid to expatriates u/s 37(1) of the Act holding that the expatriate employees work under direct control of LG Korea. 103. Briefly stated, that the facts of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid by the assessee after deducting tax at source in accordance with the provisions of the Act and the same has been accepted by the revenue. 108. Reliance was placed on the decision of the Hon'ble Supreme Court in the case of Carborandum 108 ITR 335. 109. Per contra, the ld. DR strongly supporting the findings of the Assessing Officer, pointed out that it is LG Korea who nominates its employees for the purpose of deputation to the assessee. The ld. DR pointed out that only employees from LG Korea have been seconded to the assessee. It was further stated by the ld. DR that expatriates continued to have lien over their employment while on deputation in India, which clearly establishes a continuous action between the assessee and LG Korea. It was further contended that the expatriates come to India and work under the control of LG Korea reported to them and do not resign from their employment in Korea. 110. The ld. DR further contended that the AO/DRP has only contributed 25% cost of the salary of expats to the alleged PE of LG Korea in India. 111. We have considered the orders of the authorities below and have given thoughtful consideration to the rival submissions. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er consideration, the assessee has received subsidies as under: - Subsidy from Maharashtra Government - Rs. 58,64,82,702/- - Subsidy from Uttar Pradesh Government - Rs. 25,42,18,072/- 117. The subsidy from Maharashtra Government was in respect of manufacturing unit in Ranjangaon, Pune. In order to encourage the dispersal of industries to the less developed areas of the State, the Maharashtra Government has announced for Industrial Policy of Maharashtra State Government 2001. Objective of the said policy is to accelerate the flow of investment and creating large scale employment opportunities. 118. An identical issue was considered by this Tribunal in assessee s own case in Assessment Year 2008-09 ITA No. 6253/DEL/2012 and in Assessment Year 20009-10 in ITA No. 953/DEL/2014. All the issues raised by the ld. counsel and the reliance on the decisions have been duly considered by this Tribunal in earlier Assessment Years. Therefore, we do not find any reason to divulge from the decision taken in the earlier years. 119. The findings given by this Tribunal in Assessment Year 2009-10 in ITA No. 953/DEL/2014 read as under: 41. An identical issue was considered and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee will be issued by the joint/additional director of concerned Development Authority and the same will be produced before the concerned assessing officer. The Addl. Director Industries, Greater Noida Industrial Development Authority, vide letter No. 1344 dated 23/06/1999 issued eligibility certificate to the assessee. As per this certificate fixed capital investment is of Rs.51,57,95,446/- . The date of commencement of production is 9/03/1998 and the first sale was affected on 27th March, 1998. The assessee applied for exemption from trade tax [sales tax] vide application dated 10/09/1998. The exemption from trade tax [sales tax] was provided from 27th March, 1998 to 26th March, 2013 for a period of 15 years or till the time the exemption of sales tax was availed of to the extent of 200 per cent of fixed capital investment i.e. Rs.1,02,75,90,892/- whichever was earlier. This certificate also provided the items i.e. Colour TV, Washing machine and Air-conditioners on which exemption from sales tax was provided. Another certificate was issued on 27th September, 2000 vide letter No. 1519 in respect of printed circuit voice for CTV number 8,12,000 and Micro-wave Oven 1,00,000. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee s own case. The appeal against the Tribunal order is still pending in Hon ble High Court. Under the circumstances, the judicial propriety mandates that we adhere to the decision of the Tribunal in assessee s own case. Accordingly, respectfully following the precedent as above, we uphold the order of the Ld. Commissioner of Income Tax(A). 80. We find that the assessee s appeal against the order of the Tribunal for A.Y 2002-03 is pending before the Hon'ble High Court. Judicial propriety mandates that we adhere to the decision of the coordinate bench in assessee s own case. Respectfully following the precedents [supra] we decline to interfere with the findings of the CIT(A). Ground No. 8 is accordingly dismissed. 42. Respectfully following the precedent, we decline to interfere with the findings of the DRP. Ground No. 9 is accordingly dismissed. 120. Respectfully following the decision of the co-ordinate bench, Ground No. 12 is dismissed. 121. Ground No. 13 relates to the disallowance of Rs. 124,29,24,672/- paid to LK Electronics Inc. Korea holding the same to be in the nature of capital expenditure. 122. During the year under consideration, the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of income. 127. Before us, the ld. counsel for the assessee has furnished some additions evidences u/r 29 of the ITAT Rules, 1962 with a prayer to admit the same in line with the earlier Assessment Years. 128. A perusal of the Tribunal order in assessee s own case in Assessment Year 2008-09 ITA No. 6253/DEL/2012 and in Assessment Year 20009-10 in ITA No. 953/DEL/2014 show that similar disallowance was made for which additional evidences were admitted and the matter was remanded by the Tribunal to the Assessing Officer for fresh adjudication. Relevant findings in ITA No. 6253/DEL/20112 for Assessment Year 2008-09 read as under: 89. Ground Nos. 11 11.1 pertain to disallowance of payment of export commission of Rs. 8,78,45,287/- holding the same to be diversion of profits to LG Electronics Korea LGEK . 90. An identical issue was considered by the coordinate bench in A.Y 2007-08 and has decided the same against the assessee. The ld. AR contends that certain documents were not furnished by the assessee and if the same are considered as additional evidence, the issue may be set aside for fresh adjudication. 91. It is not in dispute that in A.Y 2007-08 this issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter giving reasonable opportunity of being heard to the assessee. Ground Nos. 7 and 11 are allowed for statistical purposes. 130. Respectfully following the findings of the co-ordinate bench, we direct accordingly. Ground No. 14 is allowed for statistical purposes. 131. Ground No. 15 relates to the restriction of the deduction claimed u/s 80JJAA of the Act at Rs. 20,01,771/- 132. Facts on record show that the assessee claimed deduction u/s 80JJAA amounting to Rs. 40,79,577/- in respect of Noida Unit and Rs. 96,65,389/- in respect of Pune unit. The Assessing Officer, following the findings given in earlier Assessment Years, allowed the claim of deduction to the extent of Rs. 20,01,771/- and disallowed Rs. 1,17,43,195/-. 133. We find that an identical quarrel arose in Assessment Year 2008- 09 and 2009-10 and this Tribunal in ITA No. 6253/DEL/2012 and in Assessment Year 20009-10 followed in ITA No. 953/DEL/2014 has decided this issue as under: 92. Ground Nos. 12 12.1 relate to disallowance of deduction under section 80JJAA of the Act to the extent of Rs. 29,06,091/- 93. Facts on record show that the assessee claimed deduction u/s 80JJAA of the Act amountin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ployed for a period of two hundred and forty days or one hundred and fifty days, as the case may be, in the immediately succeeding year, he shall be deemed to have been employed in the succeeding year and the provisions of this section shall apply accordingly; . 97. The claim of the assessee is that the workmen who joined in the preceding year in which such workmen worked for less than 300 days should be considered provided that the period of employment of such workmen is equal to or more than 300 days in the relevant previous year. What the assessee contends is that new workmen, who did not fall in the category of regular workmen , on account of employment being for less than 300 days in the year of appointment, should be considered as regular workmen in the subsequent year, provided such workmen continue to be employed with the company and the total period of their employment is equal to or more than 300 days in the subsequent year. Thought this contention of the assessee has been take care of by the second proviso, but the same has been given effect from 1.4.2019. 98. If the effect of the second proviso is given retrospectively, then the assessee s claim of deduct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a High Court in the case of Commissioner of Income-tax v. Sri Jagannath Steel Corporation ([1991] 191 ITR 676), has taken a similar view holding that the statutory liability for sales-tax actually discharge after the expiry of accounting year in compliance with the relevant stature is entitled to deduction underSection 43B. The High Court has held the amendment to be clarificatory and, therefore, retrospective. The Gujarat High Court in the above case held the amendment to be curative and explanatory and hence retrospective. The Patna High Court has also held the amendment inserting the first proviso to be explanatory in the case of Jamshedpur Motor Accessories Stores v. union of India and Ors. ([1991] 189 ITR 70.), It was held that amendment inserting first proviso to be retrospective. The special leave petition from this decision of the Patna High Court was dismissed. The view of the Delhi High Court, therefore, that the first proviso to section 43B will be available only prospectively does not appear to be correct. As observed by G.P. Singh in his Principles of statutory Interpretation, 4th Edn. Page 291, It is well settled that if a statute curative or merely declaratory of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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