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2015 (2) TMI 363 - HC - Income TaxDisallowance of Advertisement expenditure - Held that:- One of the functions being performed by the assessee was to advertise and promote the channels and to earn subscription revenue. Another function was to secure/procure advertisements. The assessee earned 15 per cent. commission for the last mentioned function. The assessee was earning revenue in view of the said functions being performed. Expenditure incurred on advertisement was clearly relatable and laid out for the purpose of business of the respondent-assessee and was not extraneous or unconnected with the same. Consequently, it could not have been disallowed as was done by the Assessing Officer on the ground that it was not laid out or incurred wholly or exclusively for the purpose of business. - Decided in favour of assessee. Transfer pricing adjustment - income earned, i.e., price paid for the service rendered, goods sold, etc - Held that::- The Transfer Pricing Officer is required to select appropriate method specified in section 92C of the Act and determine/compute the arm's length price. In the present case, the Transfer Pricing Officer did not make any adjustment and has accepted the transfer pricing between the respondent-assessee and the related enterprises, i.e., the compensation paid or retained by the respondent-assessee in view of the functions performed, risk assumed and asset deployed, etc. Once we hold that one of the functions to be performed by the respondent-assessee was to incur the advertisement and promotion expenditure, then the expenditure incurred for the said purpose should be allowed under section 37(1) of the Act, as incurred wholly and exclusively for purpose of the said assessee. However, adequate compensation/price should be paid for the same by the associated enterprise, with reference to the functions, risk and assets. In case, the respondent-assessee was not being paid adequate consideration or compensated by its associated enterprise, necessary adjustments could have been made by the Transfer Pricing Officer in accordance with the Act. - Decided in favour of assessee.
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