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2016 (9) TMI 1288 - AT - Income TaxTPA - non consideration of additional evidences - Held that:- Keeping in view the fact that additional evidences brought on record by the assessee before the ld. TPO/ld. DRP have not been considered and the fact that identical issue in assessee’s own case has already been restored back for fresh adjudication by the AO qua AY 2007-08 and AY 2008-09, we deem it expedient to restore this issue as to the manufacturing segment to the file of AO who shall adjudicate after providing an opportunity of being heard to the assessee. International transaction relating to contract and R&D and made a suo motu adjustment - Held that:- TPO has examined separate segmental account in respect of transaction by transaction segment. However, by following the rule of consistency, the TPO is required to decide the issue de novo after providing an opportunity of being heard to the assessee. So, ground no.5 is determined in favour of the assessee and the matter is restored to the TPO. Foreign currency fluctuation needs to be taken into account for TP adjustment both for comparable companies as well as tested party. So, this ground is also required to be restored to the TPO to make fresh adjustment regarding distribution segment by taking into account foreign currency fluctuation duly demonstrated by the assessee in view of the observations made herein before. Disallowance of 3/4th of the advertisement and sales promotion expenses and 4/5th of the recruitment expenditure - Held that:- Undisputedly, identical issue was dealt with by the coordinate Bench in assessee’s own case qua AY 2002-03 and AY 2003-04, orders of which are available at pages 64 to 81 of the paper book. Disallowance on account of advertisement and sales promotion expenses to the tune of ₹ 6,32,85,750/- and recruitment expenditure to the tune of ₹ 1,12,88,617/- made by the AO and confirmed by ld. DRP are allowable on the ground that these expenditure have not resulted into acquisition of any asset by the assessee company nor any enduring additions have been accrued to the assessee. So, by following the order passed by the coordinate Bench in assessee’s own case qua AY 2002-03 and AY 2003-04, grounds no.7 & 8 are determined in favour of the assessee as AO/DRP have erred in disallowing 3/4th of the advertisement and sales promotion expenses amounting to ₹ 6,32,85,750/- and 4/5th of the expenditure of the recruitment expenditure to the tune of ₹ 1,12,88,617/-. However, AO to verify the exact period of contract to compute the expenses incurred by the assessee and disallow the expenses if the same are found to be not attributable to the year under assessment. Disallowance of 3/4th of the licences - Held that:- Keeping in view the settled principle and the facts and circumstances of the case, expenditure incurred by the assessee on licences and permits being necessary to run the business without which assessee’s unit would have stopped, which are revenue in nature and cannot be deferred to another 5 years. Even otherwise, licence fee for one year has been claimed by the assessee in the year under assessment itself. Eligible for exemption u/s 10A - Held that:- The ratio of the judgment in case of TEI Technologies (P.) Ltd. (2012 (9) TMI 47 - DELHI HIGH COURT ) is that implication of exemption provisions contained u/s 10A is that the particular income which is exempt from tax does not enter in the field of taxation and is not subject to any computation. So, the business loss of non-eligible units could not be set off against profits of the undertaking eligible for exemption u/s 10A as section 10A unit is not taxable at all. However, section 10A deduction will not affect for TP adjustment nor this profit is to be deducted. So, in these circumstances ground are required fresh consideration by the AO who shall verify the correctness of the claim of the assessee regarding expenses and deduction u/s 10A of the Act
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