TMI Blog2023 (9) TMI 1114X X X X Extracts X X X X X X X X Extracts X X X X ..... nature of payment is towards the research programme which would benefit the assessee in long term and the same should be allowed as a deduction under section 37(1). Thus payment to CCI towards research program is incurred for the purpose of assessee's business and therefore should be allowed as a deduction under section 37(1). Payment made to Royal Hospital For Women amount is paid towards sponsoring the luggage prize at their annual dinner. Nothing has been brought on record by the assessee to substantiate the claim that sponsoring the prize at the dinner would help the business of the assessee. For the purpose of claiming deduction under section 37(1), it is important for the assessee to establish that the expenditure is incurred wholly and exclusively for the purpose of business, which, in our opinion, is not established by the assessee with respect to the payment made to Royal Hospital For Women. We hold that the amount paid towards sponsoring of prize at the dinner of the Royal Hospital For Women Foundation cannot be held to be incurred for the purpose of the business of the assessee. Accordingly, we uphold the order of the CIT(A) to this extent. This ground raise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dit should be provided for taxes paid in overseas jurisdiction in respect of section 10AA eligible income in India as per the tax credit provisions of respective DTAA - HELD THAT:- AR brought to our attention that the list of countries involved for the year under consideration from which we notice that the countries listed are same as considered in the above decision of the coordinate bench. Therefore, respectfully following the above decision of the coordinate bench, we hold that the foreign tax paid shall be eligible for the 9 countries as listed in the order of the co-ordinate bench. This ground of the assessee is allowed. Deduction u/s 10AA should be on commercial profit or income from business or profession - HED THAT:- As similar issue in assessee s own case for A.Y. 2012-13 [ 2022 (4) TMI 1558 - ITAT MUMBAI] we remand the issue to the file of the Assessing Officer for de novo consideration of the issue keeping in mind the decision of the Hon ble Supreme Court in the case of Vijay Industries Ltd [ 2019 (3) TMI 171 - SUPREME COURT] This ground is allowed for statistical purpose. State taxes paid in overseas countries - assessee submitted that the state taxes paid i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the use of copyright in the computer software, and did not give rise to any income taxable in India, as a result of which the persons referred to in section 195 of the Act were not liable to' deduct any tax at source under section 195. Disallowance u/s 14A - AO held that the assessee has not worked out any expenditure relatable to earning the exempt income and that it is difficult to believe that such a meager expense is incurred for earning the huge exempt income - HELD THAT:- We notice that the assessee has made a very detailed submission before the Assessing Officer with regard to the suo motu disallowance - AO in his finding, has simply stated that he is not satisfied with the correctness of the claim of expenditure since the amount disallowed by the assessee is very meager. It is the settled position that the AO cannot invoke the provisions of disallowance under section 14A read with rule 8D without recording any cogent reasons as to why he is not satisfied with the correctness of the claim of the assessee. Mere recording that the amounts being meager compared to the exempt income earned, cannot be construed as recording of satisfaction. Therefore, CIT(A) has correctl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been brought on record by the learned Departmental Representative to persuade us to disturb the finding of learned Commissioner (Appeals) on these issues. In view of the aforesaid, we do not find any merit in the grounds raised by the Revenue on the issues. Accordingly, grounds are dismissed. Provision of loans to AE - HELD THAT:- Lower authorities have not considered the submissions of the assessee that extending the loan is part of shareholder activity. Therefore respectfully following the assessee's own case for AY 2012-13 [ 2022 (4) TMI 1558 - ITAT MUMBAI] we remit the issue back to the Assessing Officer / TPO for denovo adjudication after giving a reasonable opportunity of being heard to the assessee. This ground is accordingly allowed for statistical purposes. Provision of guarantee to AEs - HELD THAT:- We hold the provision of guarantee as an international transaction and direct the assessing officer to charge guarantee commission at the rate of 0.5% following the decision of the Hon'ble jurisdictional High Court in Everest Canto Cylinders Ltd [ 2015 (5) TMI 395 - BOMBAY HIGH COURT] . Adjustment made towards receipt of brand royalty from AE - HE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der section 40(a)(ia) Ground 6 Deleting the disallowance of year-end provisions made under section 40(a)(ia) Ground 7 Allowing foreign tax credit in respect of income pertaining to section 10A/10AA eligible units in India Ground 8 Restricting the TP adjustment made on account of provision of softwares and consultancy services by relying on CIT(A) s order in assessee s case Ground 9 Provision of performance guarantee and lease guarantee Ground 10 Deleting the adjustment made on account of receipt of brand royalty from AE Ground 11. 3. The assessee is a company engaged in business of export of computer software providing e-solutions, BPO activities and other management consultancy activity. The assessee filed the return of income for assessment year 2014-15 on 28/11/2014 declaring a total income of Rs. 13450,10,54,480/- and the book profits under section 115JB of the Income-tax Act, 1961 (in short, the Act) declared at Rs. 12725,88,06,235/- The case was selected for scrutiny and the statutory notices duly served on the assessee. A reference was made to the Transfer Pricing Officer (TPO, in short) in order to compute the arm s length p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 37(1) of the Act. The Assessing Officer did not accept the submissions of the assessee and proceeded to make the disallowance towards the same. On appeal, the CIT(A) held that impugned amount being classified by the assessee as donation is not an item eligible for deduction under section 37(1). The CIT(A) appeals further held that the MOU between the assessee and CCI is signed after the relevant financial year and therefore it was not established that the payment CCI is wholly and exclusively for the purpose of business. With regard payment to Royal Hospital the CIT(A) held that the same is for the Annual Dinner and therefore could not for the purpose of business of the assessee. Accordingly the CIT(A) upheld the disallowance. 7. The Ld.AR before us reiterated the submissions made before the lower authority. The Ld.AR further submitted that the payment to CCI is incurred purely for development of certain skills of the employees and accordingly in the nature of normal business expenditure which is allowable under section 37(1) of the Act. The Ld.AR in this respect drew our attention to the MOU entered into with CCI (page 1 of paper book) and the details of fellowship program ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pediency towards the payment which has not been established in the given case. With regard to the reliance placed by the Ld.AR in the case of Mysore Kirloskar Ltd (supra), the Ld.DR submitted that in that case, the payments were made to government agency and therefore, the same cannot be compared with the payments made by the assessee to private units. Accordingly, the Ld.DR submitted that the payments are not to be allowed as a deduction. 10. The Ld.AR, to counter the contention that the MOU is signed after the date relevant to the year under consideration, drew our attention to the Board resolution approving the payment was during the financial year and, therefore, on that basis, the payments were made and accordingly claimed as deduction. 11. We heard the parties and perused the material on record. The assessee has made a payment of Rs. 3,00,31,600/- to CCI as approved by the Board vide resolution dated 16/01/2014. On perusal of the MOU entered into between the assessee and CCI, we notice that as part of the research programme towards which, the impugned payment is made by the assessee, the employees of the assessee would undergo training in the theory of disruptive innova ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d for admission of the additional evidence. The Ld.DR strongly objected to the admission of the additional evidence and supported the order of the lower authority. 13. We heard the parties and perused the material on record. We notice that the issue of allowability of advertisement expenditure came up before the co-ordinate bench in assessee s case for A.Ys. 2009-10, 2010-11, 2012-13 2013-14. It is further noticed that the co-ordinate bench has been remitting the issue back to the Assessing Officer for the reason that the assessee has submitted the additional evidence before the Tribunal for the first time and the same is not examined by the lower authorities. The relevant observation of the Hon ble Tribunal in the order for AY 2012-13 (ITA No.797/Mum/2018 dated 11.04.2022) is extracted as below:- 4.1. We have heard rival submissions and perused the materials available on record. At the outset both the parties before us agreed that this issue is already covered by the Co-ordinate Bench decision of this Tribunal in assessee s own case for A.Y.2009-10 in ITA No.5713/Mum/2016 dated 30/10/2019 wherein it was held as under:- 23. We have considered rival submissions and p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to afford a fair opportunity to the Department to verify the authenticity of assessee's claim vis-a-vis the additional evidences furnished before us, we restore the issue to the Assessing Officer for de novo adjudication after providing reasonable opportunity of being heard to the assessee. We make it clear, our aforesaid direction is only with regard to the experience certainty expenditure of ₹ 5.28 crore. The decision of learned Commissioner (Appeals) on this issue is modified to this extent only. 4.2. We find that assessee had furnished the additional evidences for the A.Y.2012-13 in respect of the aforesaid issue vide letter dated 30/12/2019 before us. Respectfully following the aforesaid decision in assessee s own case, the ground No.2 raised by the assessee and ground No.4 raised by the Revenue for A.Y. 2012-13 are disposed of in the above mentioned terms. 14. The assessee for the year under consideration also has submitted the additional evidence for the first time before Tribunal. Therefore respectfully following the above decision of the co-ordinate bench in assessee s own case, we remit the issue back to the Assessing Officer with similar direction wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 64 (ITAT Mumbai) Tech Mahindra Business Services Ltd vs DCIT 130 taxmann.com 250 (ITAT, Kolkata) 18. The Ld.DR, on the other hand, submitted that the interest on deposits cannot be claimed to be eligible for deduction under section 10AA since the same is not derived from the business of the undertaking. The Ld.DR further submitted that though the Assessing Officer has not disputed including the interest income as part of profits from business, in reality, the nature of income is that it should be taxed under the head Income from other sources . Therefore, the Ld.DR submitted that the provisions of sub section (7) of section 10AA with regard to the computation cannot be applied in assessee s case. 19. We heard the parties and perused the material on record. The lower authorities have denied the benefit of deduction under section 10AA on the interest income earned by the assessee for the reason that the claim is not made through filing the revised return. In Goetze (India) Ltd.(supra) the Hon'ble Supreme Court held that the assessee can make a claim for deduction, which has not been claimed in the return, only by filing a revised return within the time allowed. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the Gross Total Income of the Undertaking , which may arise from different specified activities in these provisions and other incomes may exclude interest income from the ambit of Deductions under these provisions, but exemption under Section 10-A and 10B of the Act encompasses the entire income derived from the business of export of such eligible Undertakings including interest income derived from the temporary parking of funds by such Undertakings in Banks or even Staff loans. The dedicated nature of business or their special geographical locations in STPI or SEZs. etc. makes them a special category of assessees entitled to the incentive in the form of 100% Deduction under Section 10-A or 10-B of the Act, rather than it being a special character of income entitled to Deduction from Gross Total Income under Chapter VI-A under Section 80-HH, etc. The computation of income entitled to exemption under Section 10-A or 10-B of the Act is done at the prior stage of computation of Income from Profits and Gains of Business as per Sections 28 to 44 under Part-D of Chapter IV before Gross Total Income as defined under Section 80-B(5) is computed and after which the consideration of va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther rule of equal importance is that laws relating to economic activities should be viewed with greater latitude than laws touching civil rights such as freedom of speech, religion etc. It has been said by no less a person than Holmes, J., that the legislature should be allowed some play in the joints, because it has to deal with complex problems which do not admit of solution through any doctrinaire or strait-jacket formula and this is particularly true in case of legislation dealing with economic matters, where, having regard to the nature of the problems required to be dealt with, greater play in the joints has to be allowed to the legislature. The court should feel more inclined to give judicial deference to legislative judgment in the field of economic regulation than in other areas where fundamental human rights are involved. Nowhere has this admonition been more felicitously expressed than in Morey v. Doud [351 US 457 : 1 L Ed 2d 1485 (1957)] where Frankfurter, J., said in his inimitable style: In the utilities, tax and economic regulation cases, there are good reasons for judicial self-restraint if not judicial deference to legislative judgment. The legislature after all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Division Bench of this Court in the case of M/s. Motorola India Electronics (P) Ltd.(supra) and we do not agree with the view taken by the subsequent Division Bench on 10/04/2014 in the present case. 23. We further notice that a similar view is expressed by the Jurisdictional High Court in the case of Symantee Software India P Ltd (supra) while considering the deduction under section 10A of the Act. It is relevant to mention here that the manner of computing deduction under section 10A as per the provisions of subsection (4) of the said section is similar to subsection (7) of section 10AA and therefore the ratio of the above decisions rendered in the context of deduction under section 10A would equally be applicable to deduction claimed under section 10AA. Accordingly respectfully following the above decision of the jurisdictional High Court and also the Full Bench of the Hon ble Karnataka High Court, we hold that interest income is also to be considered for the purpose of arriving at the profits eligible for deduction under section 10AA. The Assessing Officer is directed to re-compute the deduction under section 10AA accordingly. The ground no.4 of the appeal is thus allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dia, he did not grant relief either under section 90 or 91 of the Act. The assessee challenged the aforesaid decision of the Assessing Officer before the first appellate authority. 28. Learned Commissioner (Appeals), after considering the submissions of the assessee and taking note of the decision of the Hon'ble Karnataka High Court in Wipro Ltd. v/s DCIT, [2015] 62 taxmann.com 26 (Kar.) bifurcated the foreign tax credit into three parts i.e., tax paid in USA, tax paid in other DTAA countries and tax paid in non-DTAA countries. Thereafter, he directed the Assessing Officer to allow tax credit in respect of tax paid in USA even on the income which is exempt from tax in India under section 10A / 10AA of the Act. However, in respect of tax paid in other DTAA and non- DTAA countries, learned Commissioner (Appeals) held that no tax credit will be available in respect of income which is exempt from tax in India under section 10A / 10AA of the Act. While the assessee has challenged the decision of learned Commissioner (Appeals) on non-grant of tax credit in respect of taxes paid in other DTAA countries and non-DTAA countries, the Department is aggrieved with the decision of learn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t for taxes paid overseas in respect of section 10A/10AA eligible income. In support of his contention, the learned Sr. Counsel put strong reliance upon the decision of the Hon'ble Karnataka High Court in Wipro Ltd. (supra).The learned Sr. Counsel submitted, when no decision of the Hon'ble Jurisdictional High Court is available on the issue and the only decision of a High Court which is available is that of the Hon'ble Karnataka High Court, even though, the decision is of a non-jurisdictional High Court, however, this being the only decision available on the issue, it will be binding when there is no contrary decision of another High Court is available. For such proposition, he relied upon the following decisions:- i) CIT v/s Smt. Nirmalabai K. Davekar, [1990] 186 ITR 242 (Bom.) Tata Consultancy Services Ltd. ii) CIT v/s Highway Construction Co. Pvt. Ltd., [1996] 217 ITR 234 (Gauhati); and iii) CIT v/s Maganlal Mohanlal Panchan (HUF), [1994] 210 ITR 580 (Guj.). 30. The learned Departmental Representative strongly relying upon the observations of the Assessing Officer submitted, since all income of section 10A/10AA eligible units are exempt and not su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich is taxed in USA. In similar context, the Court also referred to the tax treaty with Canada where the provisions does not allow credit for tax paid in Canada if the income is not subjected to tax in India. With regard to country's with which India does not have any agreement for avoidance of double taxation, the Court observed that as per section 91 of the Act, the assessee would be eligible to avail tax credit. Thus, on a careful reading of the aforesaid judgment of the Hon'ble Karnataka High Court, it becomes clear that where the respective tax treaty provides for benefit for foreign tax paid even in respect of income on which the assessee has not paid tax in India, still, it would be eligible for tax credit under section 90 of the Act. Like Article 25 of the Indo-USA treaty, treaties with various other countries such as Indo-Denmark, IndoHungary, Indo-Norway, Indo-Oman, Indo-US, Indo Saudi Arabia, IndoTaiwan also have similar provision providing for benefit of foreign tax credit even in respect of income not subjected to tax in India. However, Indo-Canada and Indo-Finland treaties do not provide for such benefit unless the income is subjected to tax in both the countr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otal income of the assessee, deduction shall be allowed on certain percentage of profits and gains derived from . . The meaning of the term Profits and gains derived is expounded by the Hon ble Supreme Court in the case of Vijay Industries Ltd 103 taxmann.com 454 (SC) that the same refers to profits which are commercial profits without deducting depreciation and investment allowance as per the Act. The Ld.AR further submitted that the similar view is expressed by the co-ordinate bench of the Tribunal in the case of Reliance Industries Ltd (ITA 7299/Mum/2017 and also in assessee s own case for A.Y. 2012-13 and 2013-14. 31. The Ld.DR. on the other hand, relied on the order of the lower authorities. 32. We heard the parties and perused the materials on record. We notice that the co-ordinate bench has considered similar issue in assessee s own case for A.Y. 2012-13 (supra) wherein it is held that 6.3. In respect of claim of deduction u/s.10AA of the Act on commercial profit, the ld. AR before us placed reliance on the provisions of Section 80HH of the Act and also argued that the language of Section 80HH and Section 10AA are pari materia in as much as both the sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eduction, which otherwise would mean that as per provisions of section 40(a)(ii) r.w.s. 2(43) deduction for those taxes paid overseas which are not eligible for any relief as per provisions of section 90 or 91 is allowable. The Assessing Officer did not accept the submissions of the assessee and held that state taxes paid cannot be claimed as a deduction. The CIT(A) held that amendment brought to section 40(a)(ii) clearly shows the legislative intent that state taxes paid overseas can be claimed as a deduction. Accordingly, the CIT(A) held that state taxes paid in USA is not eligible for relief under section 90 / 91 and, therefore, directed the Assessing Officer to factually verify and give relief to the assessee. 36. The Ld.DR, in this regard submitted that section 40 contains various provisions with regard to deductions that are not allowable. Therefore, the CIT(A) erred in giving directions to allow the deduction under section 40(a)(ii). However, the Ld.DR argued that the benevolent provisions of the Act should be interpreted strictly and accordingly, the deduction claimed by the assessee cannot be allowed. 37. The Ld.AR, on the other hand, reiterated that section 40(a)(ii ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 90 of the Act. The aforesaid submissions of leaned Sr. Counsel for the assessee, prima facie, is acceptable if one has to strictly go by the meaning of tax , defined under section 2(43) of the Act, as it only refers to tax paid under the provisions of the Act. It is also worth mentioning, the State taxes paid by the assessee in DTAA countries are not eligible for relief under section 90 of the Act. Therefore, the issue which arises is, whether it can be allowed as deduction under section 37 of the Act. No doubt, in assessee's own case in assessment year 2005-06, the Tribunal in the order referred to above following its own decision in DCIT v/s Tata Sons Ltd., [2011] 43 SOT 27 (Mum.), has held that the State taxes paid overseas cannot be allowed as deduction in view of the provisions of section 40(a)(ii) of the Act. However, the aforesaid legal position has substantially changed after the decision of the Hon'ble Jurisdictional High Court in Reliance Infrastructure Ltd. (supra). While interpreting the provisions of section 2(43) of the Act, vis-a- vis section 40(a)(ii) of the Act, the Hon'ble Court held that the tax which has been paid abroad would not be covered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relied on the order of the Assessing Officer. The Ld.DR further submitted that the CIT(A) has followed the decision in the earlier years and has not given any independent finding. The Ld.DR further contended that the royalty is embedded in the software imported and, therefore, tax could have been deducted on the same. 42. The Ld.AR, on the other hand, submitted that the payment made by the assessee towards purchase of software is for acquiring of copyrighted article and not for transfer of any right in a copyright. Accordingly, it cannot be concluded as royalty under the provisions of section 9(1)(vi) of the Act and, therefore, not taxable. The Ld.AR accordingly submitted that no disallowance under section 40(a)(i) is warranted since provisions of section 195 do not apply. The Ld.AR further submitted that even under the applicable DTAA, the payment for purchase of software cannot be regarded as royalty since the definition of royalty under the DTAA is narrower than the definition in the Act. With regard to the software for trading purposes, the Ld.AR submitted that the assessee does not obtain any licence from the seller and only earns margin on trading or reselling of such soft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the order passed by the Tribunal in assessee's own case for the assessment year 2005-06, held that the expenditure incurred on software products acquired for internal use is a capital expenditure, hence, the assessee is entitled to depreciation thereon. However, in respect of payment made towards software products acquired for re-sale / trading purpose, learned Commissioner (Appeals) agreed with the Assessing Officer that it is in the nature of royalty, hence, the assessee was required to deduct tax at source. 7.2. We find that the ld. AR argued that the amendment brought out by the Finance Act, 2012 will not have any retrospective effect based on the principle of impossibility of performance , since assessee cannot be expected to deduct tax at source in respect of transactions effected in earlier years. This argument has to be dismissed as the year under consideration is A.Y.2012-13 where amendment has been brought. 7.3. The ld. AR further argued that even under the applicable DTAA, the payment for purchase of software cannot be regarded as royalty , since the definition of royalty under DTAA is narrower than the definition in the Act. The ld. AR without prej ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act, to do or authorise the doing of certain acts in respect of a work . In the case of computer programmes, section 14(b) specifically speaks of two sets of acts: the seven ads enumerated in clause (a) and the eighth act of selling or giving on commercial rental or offering for sale or for commercial rental any copy of the computer programme. All the seven acts set out in clause (a) delineate how the exclusive right with the owner of the copyright may be parted with. In essence, such right is referred to as copyright, and includes the right to reproduce the work in any material form, issue copies of the work to the pub tic, perform the work in public or make translations or adaptations of the work. The definition of an in fringing copy contained in section 2(m) of the 1957 Act, in relation to a computer programme, i. e., a literary work, means reproduction of the work. Thus, the right to reproduce a computer programme and exploit the reproduction by way of safe, transfer, licence, etc., is at the heart of the exclusive right. Section 14(b)(ii) of the 1957 Act was amended twice, first in 1994 and then again in 1999, with effect from January 15, 2000. What is conspicuous ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is also licensed is the right to use the copyright embedded therein, is wholly incorrect. The licence for the use of a product under an end-user licence agreement cannot be construed as the licence spoken of in section 30 of the 1957 Act, as such end-user licence agreement only imposes restrictive conditions upon the end-user and does not part with any interest relatable to any rights mentioned in section 14(a) and (b) of the 1957 Act The ownership of copyright in a work is different from the ownership of the Physical material in which the copyrighted work may happen to be embedded. Any ruling on the more expansive language contained in the Explanations to section 9(vi) of the Income-tax Act, 1961 would have to be ignored if it is wider and less beneficial to the assessee than the definition cont wined in the DTAA, in terms of section 90(2) of the Act read with Explanation 4 there-to.. and article 3(2) of the DTAA Further, the expression copyright has to be understood in the context of the statute which deals with it, it being acc4Tted that municipal laws which apply in the contracting States must be applie4 unless there is any repugnancy to the terms of the DTAA. By no st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 9(1)(vi) of the Act. in short, there must be transfer by way of licence or otherwise, of all or any of the rights mentioned in section 14(b) read with section 14(a) of the 1957 Act. Indian tax laws use the expression in respect of as synonymous with the expression on the expression in respect of , when used in a taxation statute, is only synonymous with the words on or attributable to . This accords with the meaning to be given to the expression in respect of contained in Explanation 2(v) to section 9(1)(vi) of the income-tax Act, 1961 and would not in any manner make the expression otiose. STATE OF MADRAS V. SWASTIX TOBACCO FACTORY [1966] AIR 1966 SC 1000; [1966] 3 SCR 79 relied on. While Explanation 2(v) to section 90Xvi) of the Ad, when it speaks of all of any rights...in respect of copyright is more expansive than the DTAA provision, which speaks of the use of or the right to use any copyright, when it comes Jo the expression use of, or the right to use , the same position would obtain under Explanation 2(v) to section 9(1)(vi)of the Ad, inasmuch as, there must, under the licence granted or sale made; be a transfer of any of the rights containe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en technology relating to transmission by a satellite, optic fibre or other similar technology was only regulated by Parliament for the first time through the Cable Television Networks (Regulation) Act, 1995, much after 1976. For all these reasons, it is clear that Explanation 4 to section 9(1)(vi) of the Act is no clarificatory of the position as of June 1, 1976, but in fact, expands that posit ion to include what is stated therein, by the Finance Act, 2012. Notification No, 21 of 2C'12 dated June 13, 2012 being issued after Explanation 4 was inserted could not be invoked to assert that Explanation 4 clarifies the legal position as it always stood. It is only when the non-resident is liable to pay income-tax in India on income deemed to arise in India and no deduction of tax at Source is made under section 195(1) of the Income-tax Act, 1961 or such person has, after applying section 195(2) of the Act, not deducted such proportion of tax as is required, that the consequences of a failure to deduct and pay, reflected in section 201 of the Act, follow by virtue of which the resident-payee is deemed an assessee in default , and thus, is made liable to pay tax, interest and penalt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e entry into force provisions, unlike the rest of the provisions in the OECD Mode! Tax Convention on Income and on Capital, depend on the domestic laws of contracting States. Persons are not obligated to do the impossible, i.e., to apply a provision of a statute when it was not actually and factually on the statute book. Thus the person mentioned in section. 195 of the Act cannot be expected to do the impossible, namely, to apply the expanded definition of royalty inserted by Explanation 4 to section 9(1 Xvi) of the Act, Or the assessment years. at a time when such Explanation was not actually and factually in the statute. CIT v. NGC NETWORKS (INDIA) Pvt Ltd, 120211432 ITR 326 (Born) approved. After the 1999 amendment of section 141))(ii) of the 1957 Act, what is conspicuous by its absence is the phrase regardless of whether such copy has been sold or given on hint on earlier occasions . This is a statutory recognition of the doctrine of first sale or principle of exhaustion. The doctrine of first sale or principle of exhaustion is dependent, in the first place, upon legislation which either recognises or refuses to recognise the doctrine (thereby continuing to ve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... copies (without the right to reproduce the software), the rights in relation to these acts of distribution should be disregarded in analysing the character of the transact ion for tax purposes. Payments in these types of transactions would be dealt with as business profits. From the positions taken by India (in the capacity of an OECD non-member) with regard to article 12 of the OECD Model Tax Convention and the OECD Commentary, which use the language reserves the right to and is of the view that some of the payments referred to may constitute royalties , it is not at all clear what exactly the nature of these positions is. This is in contrast with the categorical language used by India in its positions taken with respect to other aspects ( India does not agree to ). Mere positions taken with respect to the OECD Commentary do not alter the DTAA 's provisions, unless the latter are actually amended by way of bilateral renegotiation. The OECD Commentary on article 12 of the OECD Model Tax Convention incorporated in the DTAM will continue to have persuasive value as to the interpretation of the term royalties contained therein, DIT v. NEW SKIES SATELLITE BV 12016138 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to accrue in India under section 9(I)(vi) of the Income-tax Act, 1961 thereby making it incumbent upon all such persons to deduct tax at source and pay such tax deductible at source under section. 195 of the Act; Held, (i) that in all these cases, the licence that was granted under the enduser licence agreement, was not a licence in terms of section 30 of the 1957 Act, which transferred an interest in all or an of the rights contained in sections 14(a) and 14(b) of the 1957 Act, but a licence which imposed restrictions or conditions for the use of computer software. Thus, none of the end user licence agreements was referable to section 30 of the 1957 Act, inasmuch as section 30 'that Act spoke of granting an interest in any of the rights mentioned in sections 14(a) and 14(b) of that Act. The end-user licence agreements did not grant any such right or interest, least of all a right or interest to reproduce the computer software, In fact, such reproduction was expressly interdicted, and it was also expressly stated that no vestige of copyright was at all transferred, either to the distributor or to the end-user. What was licensed by the foreign, non-resident supplier to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ruling of the Authority for Advance Rulings in CITRIX SYSTEMS ASIA PACIFIC Pry. LTD., In re (2012] 343 ITR 1 (AAR) reversed. The real nature of the transaction must be looked at upon reading the agreement as a whole. 7.6. In view of the above, the ground No.1 raised by the Revenue is hereby dismissed. The real nature of the transaction must be looked at upon reading the agreement as a whole. 7.6 In view of the above, the ground No.1 raised by the Revenue is hereby dismissed. 44. Respectfully following the above decision of the coordinate bench the ground of the revenue is dismissed. 45. Since we have dismissed the revenue s ground for the reason that the purchase of software entitles the assessee only the right to use the copyrighted article and not any right in the copyright, therefore, the alternate submissions made by the Ld.AR with regard to section 40(a)(i) not applicable to depreciation on software treated as capital in nature has become academic and does not warrant any separate adjudication. Disallowance under section 14A Ground 3 46. The assessee, in the return of income, has claimed an amount of Rs. 28,56,30,503/- as dividend income exempt u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made voluntary disallowance of expenses of Rs. 51,58,068/- in the return of income. The ld. AO merely observed that he was not satisfied with regard to the correctness of the claim of expenditure made by the assessee and directly applied the computation mechanism provided in Rule 8D(2) of the Income Tax Rules and made disallowance as under:- (i) Under Rule 8D(2)(i) - Rs. 51,58,068/- (ii) Under Rule 8D(2)(ii) - Rs. 85,38,991/- (iii) Under Rule 8D(2)(iii) - Rs. 14,58,97,513/- Total Rs. 15,95,94,572/- Less voluntary disallowance made by the assessee - Rs. 51,58,068/- Amount disallowed u/s. 14A Rs. 15,44,36,504/- 8.2. We find that assessee had duly given the basis of its voluntary disallowance of Rs. 51,58,068/- before the ld. AO together with explanation thereon. The assessee had also submitted before the ld. AO that it has sufficient interest free funds in its kitty for making investments and accordingly, in view o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... compared to the exempt income earned, cannot be construed as recording of satisfaction. Therefore, respectfully following the ratio laid down by the coordinate bench in assessee s own case, we hold that the CIT(A) has correctly deleted the addition made by the Assessing Officer for want of recording of objective satisfaction with cogent reasons. This ground of the revenue is dismissed. Advertisement Expenses (Brand building expenses) Ground 4 51. The Assessing Officer noticed that the assessee has incurred a substantial amount of Rs. 125.59 crores towards advertising which is in the nature of promotional and publicity activities. The Assessing Officer held that these expenses are more in the nature of brand building expenses and called on the assessee to file the details and the reason as to why the same cannot be treated as capital in nature. The assessee filed the details of the expenses stating that these expenses are incurred towards advertisement in newspaper, marketing of its products, etc. which is incurred in the normal course of business and is incurred routinely every year. Therefore, the assessee submitted that it cannot be treated as capital in nature. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness name. The assessee submitted that TDS under section 194J is made on payments made to Tata Sons Ltd. The Assessing Officer held that the payment is for the overall brand building of the assessee company and accordingly, the same is in the nature of capital expenditure which is an intangible asset. The Assessing Officer allowed depreciation @25% on the payments and accordingly made a disallowance of R.29,34,75,023/-. On further appeal, the CIT(A) deleted the addition. 55. The Ld.DR relied on the order of the Assessing Officer. 56. The Ld.AR submitted that the expenditure in respect of payment towards brand equity is the business expenditure for the reason that the subscription fees paid is for the purpose of carrying out normal business activity of the company and that tax under section 194J has been deducted on the payment. The Ld.AR further submitted that the Tata brand is owned by Tata Sons Ltd and the payment is required to be made annually by all subscribers of the Tata group and, therefore, should be allowed as a deduction. During the course of hearing the ld AR drew our attention to the Trade Mark registered in the name of Tata Sons Ltd., (page 370 to 372 of paper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee on account of subscription paid to Tata Sons Ltd. towards TATA brand equity and promotion scheme. While justifying its claim for the said payment, the following submissions were mainly made on behalf of the assessee before the A.O:- By entering into the agreement, the assessee became entitle to use and associated itself with TATA name, marks and marketing Indica for the company s products and services. The Tata Sons Ltd., protects and enforces the collective image and goodwill of the Tata Group, organize corporate identity, coordinate major campaign involving promotion and development of Tata name, engage the service of specialist and professional consultants for energizing and enhancing the overall Tata brand etc. By entering into the agreement, Tata Sons Ltd. had granted non exclusive and on assignable subscription to use TATA name and marketing Indica. The assessee justified the payment stating that the main goal to formulate the scheme was to justify a diverse and diffuse enterprise and make it capable of facing the challenge from international brand names, post liberalization. The assessee company has derived huge benefits in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We have heard the arguments of both the sides and also perused the relevant material available on record. The ld. counsel for the assessee, at the outset, has invited our attention to the copy of relevant agreement entered into by the assessee company with Tata Sons Ltd. on 4th June, 2001 placed at assessee s paper book page No. 207 to 225 in order to point out the obligation of Tata Sons to look after the entire brand of TATA group. The said obligation being relevant in the present context are extracted below from page No. 210 and 212 of the assessee s paper book:- a) To protect and promote the interests generally of the Subscriber both in India and abroad. To this end, the Subscriber hereby authorizes the Proprietor to act on its behalf in protecting and enforcing the collective image and goodwill of the Group and preventing any newly developed mark or symbol from being usurped and/or diluted in any way. b) To organize periodically as may be deemed necessary corporate identity and brand promotional activities and campaigns through various media including electronic /telecommunication/satellite communication media (e.g. TATA Website) etc. printing and publishing of pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the prevalent laws. k) to encourage support to the Subscriber s business from Group companies subject to the availability of products and services of a desirable quality at competitive rates. l) to undertake activities which in the opinion of the Board of Directors of the Proprietor Company are essential for the purpose of promoting, developing, maintaining, managing and legally protecting the Business Name, the Marks and Marketing Indica in India and abroad and thereby endeavor to promote the business of the Subscriber to achieve greater profitability and enhancement of stakeholder value. m) To undertake measures to preserve the stability of the management of the Subscriber in order to protect the larger interests of its stakeholders. n) To provide resources for availing services in the areas of 1. Financial and Strategic Management. 2. Legal and Economic matters. 3. Management Develop0ment and Human Resources. 4. Corporate Communications. 5. Community Services. o) For the purposes of promoting the business of the Subscriber to provide assistance in accessing the network of domestic and international business contacts and ava ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in the case of Tata Steel, another company belonging to TATA group, a similar subscription paid by the assessee company to Tata Sons Ltd. was proposed to be disallowed by the A.O. in the draft assessment order for A.Y. 2008-09 and when the assessee objected to the said disallowance before the DRP by relying on the decision of the Tribunal in the case of Rallis India Ltd. (supra), the DRP directed the A.O. to allow the said expenditure after verifying as to whether the department has accepted the said decision of the Tribunal. On verification, the A.O. found that no appeal was filed by the department against the order of the Tribunal passed in the case of Rallis India Ltd. giving relief to the assessee on the issue of brand equity subscription and accordingly he allowed similar subscription paid by Tata Steel Ltd. in the final assessment completed u/s 143(3) r.w.s. 144-C of the Act vide order dtd. 27-11-2010. It is thus clear that this issue is squarely covered in favour of the assessee by the decision of the co-ordinate Bench of this Tribunal in the case of Rallis India Ltd. which has also been accepted by the department. Respectfully following the said decision of the Tribunal, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een considered by the co-ordinate bench and held in favour of the assessee from A.Y. 2009-10. 62. We heard the parties and perused the material on record. We notice that the co-ordinate bench in assessee s own case for A.Y. 2012-13 has considered the similar issue and held that 10.1. We have heard rival submissions and perused the materials available on record. We find that assessee always submitted that it had made payment of commission to non-resident agents who are operating outside India. It was specifically submitted that no part of the agents income arises in India. The payments are remitted directly abroad. The payments are not covered by any of the deeming provisions u/s.9 of the Act and the same is not in the nature of interest, royalty, fees for technical services etc., Accordingly, it was pleaded that the payment of commission to non-resident agents are not chargeable to tax in India u/s. 5 r.w.s. 9 of the Act in the hands of the non-residents and hence, there is no obligation on the part of the assessee to deduct tax at source in terms of Section 195(1) of the Act. 10.2. We find that this issue was the subject matter of adjudication in assessee s own cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is deducted at source as per the provisions of the Act. The Assessing Officer did not accept the submissions of the assessee and held that the provision of the Act pertaining to deduction of tax at source require the payer to deduct tax at source at the time of payment or credit whichever is earlier and that if the amount is credited to a suspense account or any other account of whatever name called, even then, is called for deduction of tax at source. Since in assessee s case not tax is deducted at source, the Assessing Officer made the disallowance under section 40(a)(ia) towards the entire provision made by the assessee. The CIT(A) by relying on his own decision for the earlier assessment year, deleted the disallowance made by the Assessing Officer. 65. The Ld.DR submitted that the claim of the assessee that the payees / parties are not identifiable while making the provision is not acceptable since assessee being a huge corporate entity would have proper internal systems to record each and every transaction. The Ld.DR further submitted that the provisions are claimed to be made on estimate basis in order to suppress profits and that the submissions of the assessee that corr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions of expenses which are reversed in the subsequent year are not liable for deduction of tax at source as such provisions are made only for the purpose of preparation of annual financial statements in accordance with applicable accounting principles/standards 16. I first take up the part I on the matter of disallowance u/s 40(a)(ia). The Assessing Officer called for explanation of the assessee who stated inter alia that a. Entry concerned is made as per accounting standards and policy b. The person concerned to whom sum is payable is not identifiable from the entry c. Tax deduction at source is effected when the person to whom sum payable is identified and thereafter Form 16A is issued. d. Certain case decision is cited The Assessing Officer overruled the assessee and reasons recorded by him included the following: A. Even when sum is credited to suspense account tax deduction at source is to be made B. Bangalore ITAT in case of IBM India Pvt Ltd [TS-305-ITAT-2015(Bang] has stated that even when sum is credited to suspense account tax deduction at source is to be effected and this included provision 17. The matter is examined. The primary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nders it wrong. There are admissible and inadmissible provisions. The disallowance made sans valid reasons has no locus stand/. The heading of the disallowance and the computation statement mentions the same as disallowance under section 40(a)(i)2 which leaves doubt as to whether there is an unambiguous finding regarding eligibility under section 37. As an emphatic finding which is reason based is not; present in the assessment order, the alternate disallowance under section 37 is also held not in order, 20. Part III of the ground is against adding the same in computation of Book Profit under section 115JB. I had deleted the substantive addition on both counts. Keeping in view this decision, the Assessing Officer is directed to recompute book profit under section 115JB. 21. In view of discussion above, he Assessing Officer is directed to delete the addition of Rs 2,6551677,983.Parts I, II and III of the ground is disposed of accordingly. 18.2. We find that provision has been made in the books by the assessee as per the standard accounting practices followed by it and that since the accounts of the company are closed within short period after the end of the year, bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia). He referred to page number 265 of the paper-book that gives details of provision on which TDS was not paid. As per the AR bills for the said expenditure were not received during the year under consideration. As per the AR, the appellant company would make year-end provisions based on services rendered by various lenders/professionals. These provisions represented cost of various activities carried out by the company during the relevant financial period. Since, the company was following the Mercantile system of accounting it was required to account for such expenses, even though the concerned parties had not submitted their bills or such bills were pending for approval based on the internal system. At that point of time, since bills from the contractors had not been raised though that was owed by the company in favour of any specific party. Such a debt would be owed only on receipt of the bills and after it had been passed following the procedure. Only at that point of time relationship of debtor and creditor was established and was also an obligation to pay that would amount within the agreed period of time. The obligation, to deduct tax at source from the account of a specifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 70. As regards the TP adjustment, both the assessee and the revenue raised grounds as detailed in the earlier part of this order. Since the grounds raised by both parties are against the same adjustment for the purpose of adjudication the grounds raised by the assessee and the revenue are considered together. Ground 6 of assessee's appeal is general and does not warrant any adjudication. TP adjustment on provision of software and consultancy services Ground 7 of assessee and Ground 9 of revenue 71. The assessee is a leading global information technology consulting services and outsourcing company having worldwide presence for more than 20 years. The assessee carries out overseas operations through a web of foreign subsidiaries, which act as marketing and sales support companies of the assessee. The assessee has entered into the following international and specified domestic transactions for the year under consideration. During the year under consideration, the assessee has entered into various international transactions and specified domestic transactions. With regard to the software consultancy services provided to the AE, the assessee in the transfer pricing st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 24.05% Cognizant Technology Solutions India Pvt Ltd 19,740 12,177 7,563 62.11% Wipro Ltd 38,757 30,386 8,471 27.55% TCS India 64,673 44,220 20,453 46.25% 73. On the basis of above comparisons carried out, the assessee has considered its transactions 3 with AE to be at arm s length. The TPO held that AE is the least complicated entity and, therefore, should be considered as the tested party. The TPO selected companies based in US and used the same set of comparables as were used in assessee s own case for A.Y.2006-07 where the TPO updated the margins of the year under consideration. The excluded payments made by AEs to assessee as pass-through cost. The TPO also computed the margins from the consolidated financials of the said comparable companies instead of looking into stand alone financials. The assessee submitted that the said comparable companies have got significant related party transactions and there is a huge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction by selecting itself as a tested party by adopting Transactional Net Margin Method (TNMM) as the Most Appropriate Method (MAM) with Operating Profit / Operating Cost (OP/OC) as the Profit Level Indicator (PLI) for benchmarking the receipts from the said services. The assessee submitted that it had rendered software development, technical and consultancy services to its Associated Enterprises (AEs) on the basis of specific requests received from them by it. The assessee also submitted that the charges for the services rendered were determined on the basis of mutual negotiation between the parties. The assessee gave a complete description of functions performed, assets employed and risks assumed (FAR analysis) while rendering this provision of software, technical and consultancy services. These facts are brought out in detail by the assessee in its TPSR as well as in the order of the ld. TPO vide pages 5-8 of the order. The assessee selected comparable companies wherein the arithmetic mean margin was arrived at 11.28%. The assessee s margin for provision of IT services was 34.99%. The assessee in its TP study report mentioned that the margins earned by AE were better than that e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arties in the course of hearing as well as in the written note, we are of the view that the decision of learned Commissioner (Appeals) on the aforesaid issues are unassailable. As regards the issue of appropriate PLI, we are of the view that considering the nature of activity performed by the assessee as well as the AEs, it cannot be said that the A.Es are not bearing any risk. Rather the facts on record reveal that the AEs performed the role of risk bearing distributors. It is well brought out by learned Commissioner (Appeals) in his order that the AEs are bearing credit risk and risk of default by client. In fact, the assessee through proper evidences has demonstrated instances where the credit risk with reference to part cancellation of contract has been borne by the AEs without compensation from the assessee. The documentary evidences in this regard furnished by the assessee were thoroughly examined not only by learned Commissioner (Appeals) but they were also produced before us. Thus, from the aforesaid facts, it becomes clear that significant marketing functions are being performed and distribution and marketing risk are being taken by the AEs. On examination of the financial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is is either forthcoming from the order of the Transfer Pricing Officer or could be brought to our notice by learned Departmental Representative. On the contrary, on a thorough and careful reading of the impugned order of learned Commissioner (Appeals), we are of the view that learned Commissioner (Appeals) has taken pains to examine in detail the alternative benchmarking done by the assessee with foreign comparables and after detailed analysis has shortlisted the final comparables to be considered for comparability analysis. No convincing argument or evidence has been brought on record by the learned Departmental Representative to persuade us to disturb the finding of learned Commissioner (Appeals) on these issues. In view of the aforesaid, we do not find any merit in the grounds raised by the Revenue on the issues. Accordingly, grounds are dismissed. 12.5. Hence, the ground No.5 raised by the assessee and ground No.9 raised by the Revenue are disposed off in the above mentioned terms. 76. Respectfully following the above decision of the coordinate bench, we see no reason to interfere with the decision of the CIT(A) and the grounds of the assessee and revenue are disposed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itself the assessee has taken a stand that loans and advances to the AEs are in the nature of quasi equity, hence, cannot be treated as loan simpliciter. It is relevant to observe, the transfer pricing adjustment made on account of interest is in respect of loans advanced to four overseas AEs. From the details available on record, it is noticed that major portion of loans advanced to TCS Ibero America, is for acquisition of downstream subsidiary and about 20% of the advance was for working capital. Money advanced to TCS FNS Pty. Ltd., Australia, was purely for acquisition of downstream subsidiary. Similarly, advance to TCS Asia Pacific Pty. Ltd., is for acquisition of downstream subsidiary. Only the advance made to TCS Morocco is for working capital requirement. It is further noted, major part of advances made to TCS Ibero America, TCS FNS Pty. Ltd. and TCS Morocco have been converted to equity subsequently. It is also a fact on record that before learned Commissioner (Appeals), the assessee has filed a detailed written submission on 27th March 2014, elaborately discussing the nature of advance made to the AEs and the purpose for which such advances were made. It was submitted by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purposes. 13.8. Respectfully following the same, the ground No.6 raised by the assessee is allowed for statistical purposes. 80. For the year under consideration also we notice that the lower authorities have not considered the submissions of the assessee that extending the loan is part of shareholder activity. Therefore respectfully following the above decision of the coordinate bench we remit the issue back to the Assessing Officer / TPO for denovo adjudication after giving a reasonable opportunity of being heard to the assessee. This ground is accordingly allowed for statistical purposes. Provision of guarantee to AEs Ground 9 of assessee's appeal and Ground 10 of revenue's appeal 81. The TPO noticed that the assessee has provided gurantees to third parties / bank on behalf of its AE. These guarantees include performance guarantee, corporate guarantee as well as financial guarantee. The assessee submitted that the performance guarantees of the assessee are in the nature of shareholder activity and is for the benefit of assessee and there is no explicit benefit for the AE. The assessee further submitted that without prejudice, if there is an adjustm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mises, occupied by the AE. The details of guarantees given i.e performance, financial and others are tabulated in page 32 of the order of the ld. TPO. The ld. TPO made transfer pricing adjustment in respect of guarantee services amounting to Rs. 28,74,94,665/- in his order. We find that the entire gamut of this issue has already been addressed by this Tribunal in assessee s own case in A.Y.2009-10 in ITA No.5713/Mum/2016 and IT(TP)A No.5823/Mum/2016 dated 30/10/2019 wherein it was held as under:- 43. We have considered rival submissions and perused the material on record. We have also applied our mind to the decisions relied upon. Insofar as the contention of learned Sr. Counsel for the assessee that provision of guarantee is not an international transaction as per section 92B of the Act, we are unable to accept such contention. In our considered opinion, after introduction of Explanation-(i)(c) to section 92B of the Act, with retrospective effect from 1st April 2002, provision of guarantee to AEs has to be considered as an international transaction. Different Benches of the Tribunal have also expressed similar view on the issue. Therefore, we hold that the provision of guara ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee to Tata and Sons Ltd as deduction under section 37(1), thereby accepting the submission that the brand is not owned by the assessee. The ld AR further presented same line of arguments to submit that the TPO is not correct in making any TP adjustment towards the notional fees on the brand that is not owned by the assessee, which the TPO held as to be received by the assessee. 87. The ld DR relied on the order of TPO 88. We heard the parties and perused the material on record. We have in the earlier part of this order already held that the fee paid by the assessee towards the brand to Tata and Sons Ltd. is not capital in nature for the reason that the brand is not owned by the assessee. Accordingly there cannot be any royalty that needs to be charged on the brand since assessee is not the owner of the brand and there cannot be any TP adjustment towards the amount that ought to have been received by the assessee towards brand royalty. We therefore see no infirmity in the order of the CIT(A). This ground of the revenue is dismissed. 89. In result assessee's appeal in I.T.A. No.5199/Mum/2019 and revenue appeal in I.T.A. No.5904/Mum/2019 are partly allowed. Order pro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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