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2013 (12) TMI 241 - AT - Income TaxAddition on account of sale of films The assessee was involved in export to various countries - As regards U. S. and U. K. markets are concerned, the assessee has set-up wholly owned subsidiary namely GPIL in U. K. (Garware Polyester International Ltd.) GPF, U. S. A., (Global Pet Films IMC), to undertake the marketing, promotion, business development and distribution of the assessee's products Held that:- The approach of the Transfer Pricing Officer of comparing high volume associate enterprises transactions with low volume solitary transactions of the appellant with its non-associate enterprises customers does not meet with comparability standards required under the comparable uncontrolled price method The comparison done by the Transfer Pricing Officer is not permissible in terms of law and on facts Decided against Revenue. Adjustment on account of commission paid to associated enterprise The Transfer Pricing Officer has made the adjustment in commission rate of 12.5 percent paid to the associate enterprises - The commission rate paid to the non-associate enterprises foreign agents which were ranging from three percent to 10 percent - Held that:- The arm's length rate of commission @ 10% has been determined with regard to several agency arrangements of appellant with its non-associate enterprises foreign agents - Internal comparable uncontrolled price - Rate of 10 percent is quite reasonable when it is analysed with a case where there is less risk and commission rates ranges between three percent and 10 percent The CIT(A) has given the benefit of arm's length range of +/- five percent in terms of the proviso to section 92C - The statute does not provide any kind of standard deduction - The benefit of +/- five percent given by the learned Commissioner (Appeals) is set aside Partly allowed in favour of Revenue. Disallowance of interest related to capital work-in progress under section 36(1) (iii) Held that:- Following assessee's own case for the assessment year 2004-05 - The proviso of section 36(1) (iii) as amended by the Finance Act, 2003, with effect from April 1, 2004 - Proportionate interest has to be disallowed in view of the amended provisions The issue restored to the files of AO. Levy of interest u/s 234B - Shortfall of payment of advance tax payable under section 115JB Held that:- Following Emami Ltd [2011 (6) TMI 163 - CALCUTTA HIGH COURT] - any provisions which has been amended retrospectively, no interest under section 234B is chargeable - The amended provision of section 115JB having come into force with effect from April 1, 2001 - The assessee cannot be branded as a defaulter in payment of advance tax Decided in favour of assessee. Deduction under section 80HHC on the book profit under section 115JB Held that:- Following Ajanta Pharma Ltd. v. CIT [2010 (9) TMI 8 - SUPREME COURT] - If the dichotomy between "eligibility" of profit and "deductibility" of profit is not kept in mind then Section 115JB will cease to be a self-contained code. In Section 115JB, as in Section 115JA, it has been clearly stated that the relief will be computed under Section 80HHC(3)/(3A), subject to the conditions under sub-clauses (4) and (4A) of that Section. The conditions are only that the relief should be certified by the Chartered Accountant. Such condition is not a qualifying condition but it is a compliance condition. Therefore, one cannot rely upon the last sentence in clause (iv) of Explanation to Section 115JB (subject to the conditions specified in sub-clauses (4) and (4A) of that Section) to obliterate the difference between "eligibility" and "deductibility" of profits as contended on behalf of the Department. - We need to keep in mind the Upward and Downward Adjustments and if so read it becomes clear that clause (iv) covers full export profits of 100% as "eligible profits" and that the same cannot be reduced to 80% by relying on Section 80HHC(1B) Decided in favour of assessee. Depreciation on know-how fees Held that:- Following assessee's own case for the assessment year 2002-03 - The learned Commissioner of Income tax (Appeals) has not examined the issue - The Assessing Officer should examine as to whether depreciation claimed on technical know-how is different from the one-sixth deduction of expense on technical know-how claimed by the assessee under section 35AB The issue was set aside for fresh adjudication.
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