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2012 (6) TMI 286 - ITAT DELHITransfer pricing - Computing operating-margin (OP) - eimbursement of advertisement expenses - held that:- reimbursement of advertisement expenses by the AEs constitutes the OP to be included for the purpose of determining operating margin. Making adjustment to the arm's length price in respect of difference in functions performed, risks undertaken and the assets employed. - ad-hoc adjustment. - held that:- deduction by 20% is a reasonably accurate adjustment. Deduction u/s 35DDA - expenditure on Voluntary Retirement Scheme (the VRS) - held that:- the assessee has not discharged the burden that all the units constituted only one business. - it has not been proved that the closed business of manufacturing goods was a part and parcel of the overall business of the assessee. - the assessee is entitled to deduction of one-fifth of the expenditure u/s 35DDA as claimed. Legal and professional charges - Capital or revenue expenditure - held that:- although the expenditure grants benefit of enduring nature but it does not lead to creation of an asset and, therefore, it should be allowed in five years, as done in the case of the VRS payments. The AO is directed to allow 1/5th of the expenses in this year and balance in next four years in equal installments. Depreciation of assets - closer of the unit - held that:- neither the building nor the machinery or plant in Dharuhera unit were owned by the assessee or used by it on account of closure of the unit and transfer of the assets in this year. - the provisions contained in section 32 regarding ownership and user come into play. As the assessee is neither the owner of the assets nor the assets have been used in the business of the assessee, the assessee is not entitled to deduct depreciation. Advertisement and sales promotion expenses. - held that:- there is no allegation that any part of the expenditure relates to products in which the assessee is not dealing in the normal course of its business. The expenses by way of advertisement and sales promotion are revenue in nature. Addition on account of deposit of sales-tax under protest – Held that:- CIT (Appeals) was right in granting relief to the assessee Provision made by the assessee for import duty payable - held that:- this is merely a book entry. - the provision should be excluded for working out the OP in the case of the assessee.
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