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2014 (4) TMI 926 - AT - Income TaxTransfer pricing adjustment Determination of ALP Transaction of Royalty for use of trademark and technical know-how Held that:- The payment of royalty on technical knowhow, the assessee has been paying to its parent AE right from 1993, as, other group companies are paying across the globe - It has been accepted by the TPO that the payment does not affect the profitability of the assessee - In any case the payment of royalty on technical knowhow is at par with the similar payments from the group companies in other countries & region - Besides this, the payment is made as per the approval given by the RBI and SIA, Government of India - there cannot be any scope of doubt that the royalty payment on technical knowhow is not at arms length - For Royalty payment on trademark usage, the assessee, is paying a lesser amount, if the payments are compared with the payments towards trademark usage, by the other group companies using the Brand Cadbury in other parts of the world - the royalty payment on trademark usage is within the arms' length and does not call for any adjustment thus, the order of the CIT(A) upheld Decided against the revenue. Allowability of 50% of expenses - Renovation of office complex and other expenses to electric installation Held that:- The CIT(A) taking into consideration the submissions placed, along with the evidence and details, pertaining to the issues of various renovation jobs, allowed benefit to the extent of 50% on the interior designs work and supply and installation of electrical items - the CIT(A) has allowed only 50%, though, on adhoc basis, the expense, which are quite reasonable thus, the order of the CIT(A) upheld Decided against the revenue. Disallowance of expenses on rural development Held that:- The assessee has placed reliance on CIT v Madras Refineries Ltd. [2003 (11) TMI 47 - MADRAS High Court] - this case has not been considered by the CIT(A) - the issue should be held against the assessee, following the order of the coordinate Bench in the preceding year, but the fact that the assessee factory is located in the village belts at Induri, near Mumbai and Malana, in Madhya Pradesh - The upliftment of these areas, though not directly relatable to the business of the assessee but is certainly a matter of good corporate governance through corporate citizen, which is encouraged by the government thus, in the interest of justice and the current need for being a better corporate citizen, the issue is remitted to the file of the AO, who shall re-examine the nature of expenses Decided in favour of Assessee. Miscellaneous income and trade discounts Held that:- The decision in Cadbury India Limited Versus Addl. Commissioner of Income tax, Range-5(1) Mumbai [2012 (12) TMI 682 - ITAT, Mumbai] followed - Miscellaneous income which included trade discounts, miscellaneous sales, sales tax, excise duty etc. had to be included in the total turnover except the sales tax and excise duty which did not contain an element of turnover Decided in favour of Assessee. Reduction of gross interest - Computation of deduction u/s 80HHC Held that:- The decision in Cadbury India Limited Versus Addl. Commissioner of Income tax, Range-5(1) Mumbai [2012 (12) TMI 682 - ITAT, Mumbai] followed - 90% of net interest income is required to be reduced after deducting expenses incurred having nexus with earning of interest income thus, the matter is remitted back to the AO for working out 90% of net interest income Decided in favour of Assessee. Payments made to third party manufacturers Held that:- The decision in Cadbury India Limited Versus Addl. Commissioner of Income tax, Range-5(1) Mumbai [2012 (12) TMI 682 - ITAT, Mumbai] followed - Assessee was following mercantile system of accounting as per which contractual liability accrued on the date of its ascertainment and was allowable in the year of ascertainment - the liability was pending and therefore, it had not been incurred during the year thus, the order of CIT(A) disallowing the claim is upheld - Decided against Assessee.
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