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2013 (5) TMI 852 - AT - Income TaxTPA - payment of royalty by the assessee to its AE - Held that:- Royalty payment cannot be disallowed on the basis of the so-called benefit test and the domain of the TPO is only to examine as to whether the payment based on the agreement adheres to the arm’s length principle or not See Ericsson India [2012 (11) TMI 1 - ITAT, DELHI]. That being so, the action of the TPO in the present case, to make the disallowance mainly on the ground of the benefit test, is unsustainable in law. - Decided in favour of assessee Disallowance of provisions of warranty u/s 37(1) - Held that:- Undisputedly, the assessee was making the provisions on actual warranty basis for the unexpired warranty period, providing warranty of one year on the products which it was selling. It created provision for warranty for the unexpired period of warranty as at the end of the year, on a percentage of the actual warranty expenses during the immediately prior period, on the sales made. It has not been shown as to how this basis of making provision for warranty is not scientific. Moreover, similar provision for warranty was not disallowed in the earlier years, upto Assessment Year 2005-06.- Decided in favour of assessee Disallowance of provisions for leave encashment u/s 43B - Held that:- As to whether there has indeed been a double addition, needs to be verified by the Assessing Officer by confirming as to whether or not the assessee had made the disallowance itself and the amount had not been carried to the Profit & Loss Account. For this purpose, the matter is remitted to the file of the Assessing Officer, to be decided afresh in accordance with the law, on affording adequate and due opportunity to the assessee Disallowance u/s 14A of the Act read with Rule 8D - assessee has contended before us that the assessee had itself worked out a disallowance of ₹ 12,61,008/-; that however, neither the Assessing Officer, nor the DRP adjudicated on the aspect as to how such disallowance made by the assessee itself was incorrect or not acceptable - Held that:- The matter needs verification by the Assessing Officer, for which purpose, it is remitted to the file of the Assessing Officer. The Assessing Officer shall re-adjudicate the matter in accordance with law on affording adequate opportunity to the assessee, particularly verifying the aforesaid averments made by the assessee. Disallowance of depreciation on computer peripherals @ 60%, is erroneous. See BSES Yamuna Power [2010 (8) TMI 58 - DELHI HIGH COURT]
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