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2013 (7) TMI 380 - AT - Income TaxTransfer pricing adjustment - retrospective applicability of sec. 92CA(2B) - powers of assessing officer to make such reference and the powers of TPO to furnish report in this behalf - Held that:- Respectfully following the Special Bench judgment in the case of L.G. Electronics India (2013 (6) TMI 217 - ITAT DELHI) these legal grounds are to be decided against the assessee as a consequence thereof, the relevant grounds raised in the memo of appeal, touching these legal aspects stand dismissed. Advertisement, marketing and sales promotion expenses - Scope of AMP Expenses - Whether the AO justified in holding that the assessee should have earned a mark up from the Associated Enterprise in respect of AMP expenses alleged to have been incurred for and on behalf of the AE? - Held that:- Merit in the argument of assessee as there being no objection or adverse comment in respect thereof coming from any of the lower authorities i.e. AO/ TPO, DRP and also ld. CIT(DR), there is no justification in setting aside these expenses for verification again to AO/TPO as supported by judgment in the case of M/s Glaxo Smitkline Consumer Healthcare Ltd. (2012 (4) TMI 279 - ITAT CHANDIGARH). The figures mentioned at Placitum 'E' of the table are set aside back to the file of AO/TPO to decide the issue of AMP expenses by applying the proper comparables after hearing the assessee - grounds about TP adjustments in respect of AMP expenses are partly allowed for statistical purposes. Provision for warranty disallowed - Held that:- The assessee has been consistently following the 4 step method for quantifying the provision for warranty. The amount and procedure of provision for warranty in respective years and consumption of provision of warranty ranges between 99.99% to 62.08%. As in the case of Rotork Controls India (P) Ltd. (2009 (5) TMI 16 - SUPREME COURT OF INDIA) has clearly held that the provision for meeting warranty claims on the sales effected which are computed on the accrual basis by a scientific method and taking into account the past practice, is an allowable expenditure, thus in the present case the provision for warranty on accrual basis on the basis of sales is an allowable deduction. Unrealized subsidy - Held that:- It is a trite law that every receipt does not tantamount to income, as per charging sections 4 & 5 of the I.T. Act. From the record it clearly emerges that the subsidy provided by CSPL is in lump sum with specific direction that this amount is to be spent only for specified purposes and the unspent amount is to be held in trust for and on behalf of CSPL. This is duly confirmed by CSPL and this fact is further corroborated by the fact that unutilized amount is not credited to the P&L A/c but taken to balance-sheet as a current liability. Once it is acknowledged as current liability assessee does not become owner of this amount and the receipt of unspent amount does not become income of the assessee. Besides, this method of accounting has been followed by the assessee consistently unspent subsidy being not income of the assessee but a liability to be spent for specified purposes and recoverable for non-utilization for specific purposes cannot be treated as income of the assessee. Club expenses - Held that:- The issue is squarely covered in favour of the assessee by cases of Samtel colour Ltd. (2009 (1) TMI 26 - DELHI HIGH COURT) and Nestle India Ltd. (2007 (4) TMI 180 - DELHI HIGH COURT). Besides, DRP itself has allowed the expenditure in AY 2008-09. Thus allow club expenses. Depreciation on printers, scanners, UPS and switches etc. - 60% or 15% - Held that:- As decided in CIT v. BSES Yamuna Power Ltd. [2010 (8) TMI 58 - DELHI HIGH COURT] computer accessories and peripherals form an integral part of a computer system and therefore, depreciation has to be allowed at the rate of 60%. Claim of double taxation relief in respect of deduction of tax in Japan for A.Y. 2008-09 - the tax withheld by Canon Japan comes to Rs. 42,76,065/- against which the assessee has claimed foreign tax credit amounting 24,44,934/- in accordance with Article 23 of Indo-Japan DTAA - profit margin of 3.35% by AO as against 8.63% given to assessee - Held that:- When the eligible income from STPI is sought to be determined and the relevant facts and figures are available, in such circumstances, the income from software development from STPI unit is to be estimated by taking relevant figures and not adopting adhoc approach by applying the lower profit margin of 3.35% which is relatable to trading activities. Merit in the contention of the assessee and 8.63% being undisputed income from the export of software to STPI double taxation benefit claimed by the assessee as per Article 23 of Indo-Japan DTAA is justified and is to be allowed. This ground of the assessee is also allowed. Appeals filed by the assessee are partly allowed for statistical purposes.
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