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2015 (9) TMI 962 - AT - Income TaxTransfer Pricing adjustment - Upward adjustment due to brand promotion expense attributable to the assessee’s holding company - Held that:- Considering the facts of the case which is identical to the case decided by the Special Bench of the Tribunal in the case of LG Electronics India Pvt Ltd. [2013 (6) TMI 217 - ITAT DELHI ] and in the case Ford India Pvt. Ltd [2013 (6) TMI 458 - ITAT CHENNAI] we hereby direct the Ld. Assessing Officer to delete the adhoc addition of 1% on sales which is treated as brand development fee by following the decision of the Tribunal cited supra. The aforesaid decisions of the Tribunal has also held that Bright Line Test would be the best method for determining developer of the intangible property, which the Ld. A.R. claimed that such test was made on the assessee by the Ld. DRP; however no additions were made because on the computation of the same it was found not warranted. The same was also not controverted by the Ld. D.R. Therefore, we hereby restrain ourselves from remitting back the matter for the computation of bright line test. - Decided in favour of the assessee. Addition on account of advertisement and sales promotion expenses which ought to have been receivable from the assessee’s holding company U/s.92B - Held that:- we hereby accept the concept of Bright Line Test (BLT) as held by our predecessors with respect to the concept of Bright Line Test for distinguishing between the routine and non-routine expenditure incurred on advertisement and brand promotion wherein advertisement and marketing promotion expenses to the extent incurred by uncontrolled comparable distributors is to be regarded within the “Bright Line Limit” of the routine expenses and the advertisement and market promotion expenses incurred by the distributors beyond such “Bright Line Unit” constituted non-routine expenditure resulting in creation of economic ownership in the form of marketing intangibles which belong to the owner of the brand. However, in this case even after computing the ALP by following the Bright Line Test the Ld.TPO has deleted the addition ₹ 76.63 crores. - Decided against assessee. Disallowance being royalty paid by the assessee to its Holding Company M/s.HMC Korea - Held that:- TPO has herself accepted the high-tech technology passed on to the assessee company by its Holding Company and also after details study of 35 licenses arrived at a conclusion that the royalty payment of 4.7% is prevalent in the automotive sector. Therefore from these circumstances, we do not find it appropriate on the part of the Revenue to make addition on account of ALP of royalty payment. Therefore, we hereby delete the addition made by the Ld.TPO following the directions of Ld. Members of the DRP. - Decided in favour of the assessee. Disallowance of depreciation on capital subsidy - Held that:- The matter requires a categorical finding as to how the cash received as subsidy from SIPCOT has been utilized by the company in order to address merits of the case. Therefore, we hereby remit the issue back to the file of Ld. DRP in order to examine the complete facts of the issue in the light of the various decisions cited by the Ld. A.R and pass appropriate order as per merits and law.- Decided in favour of the assessee for statistical purposes. Disallowance U/s.14A - Held that:- In the present case before us, the details of investment made were not brought before us. But as pointed out by the assessee Rule 8D was introduced by the Income Tax Fifth Amendment Rules, 2008 with effect from 24.03.2008. Therefore, it would not be applicable to the case of the assessee for the assessment year 2007-08. Moreover under such circumstances, various judicial authorities have held that 2% to 5% of the dividend earned may be disallowed in order to justify the provisions of Section.14A of the Act. However, in the present case before us, the Ld. A.R. has claimed that the assessee had not received any dividend during the year, which has not been rebutted by the Ld. D.R. Therefore, we hereby hold that disallowance of Section 14A of the Act for ₹ 5,29,910/- is not warranted and accordingly, we direct the Ld. Assessing Officer to delete the same - Decided in favour of the assessee. Disallowance of expenditure towards 100 cars given to Police Department - Held that:- The expenditure incurred by the assessee was not incidental to carrying on the business and there is no commercial expediency in incurring this expenditure and therefore, the view of the learned Judicial Member is upheld. Therefore by the majority view, this ground raised by the assessee is dismissed. - Decided against assessee. Addition on account of export incentives accrued to the assessee on target plus scheme and focus market scheme - Held that:- The export incentive towards target plus scheme is bestowed as a reward in order to encourage the accelerating growth in exports. The incentive on target plus scheme is also nothing but an entitlement for a duty credit based on incremental exports which should be substantially higher than the general annual export target that is fixed. The incentive on focus market scheme is to offset high freight cost and other externalities to select international market with a view to enhance India’s export competiveness in these countries. It is pertinent to note that the assessee will be entitled to such benefit only after verification of the claim of the assessee by the relevant Govt. authorities and issuance of the license by such Government authorities. Therefore, the facts of the assessee’s case are similar to the facts of the case decided by the Hon’ble apex Court Excel Industries Ltd., reported in [2013 (10) TMI 324 - SUPREME COURT], thus we hereby hold that the notional income computed by the assessee cannot be treated as taxable income of the assessee during the relevant to assessment year, however the same shall be taxed in the previous year in which the assessee has received the licenses and derived such income. Thus, this issue is also decided in favour of the assessee. Disallowance of additional depreciation in respect of assets used in regional offices - Held that:- The assessee is entitled to additional depreciation if it has satisfied the condition that it is engaged in the business of manufacture or production of any article or thing. There is no condition stipulated in the Act that additional depreciation shall be allowed only if the asset is deployed in the factory of the assessee and not the office of the assessee. Therefore, we accept the argument of the Ld. A.R. and reject the observations of the Revenue on this regard and accordingly direct the Ld. Assessing Officer to allow the claim of additional depreciation of ₹ 8,52,500/- if the other conditions of the Act remains satisfied. - Decided in favour of the assessee. Disallowance of credit for the tax deducted at source - Held that:- A.R. has also not furnished the details of the TDS claimed by the assessee and the amount disallowed by the Revenue. Therefore, in the interest of justice we remit this matter back to the file of the Ld. Assessing Officer for examining the relevant documents furnished by the assessee and pass appropriate speaking order as per merits and law after giving opportunity to the assessee of being heard. - Decided in favour of the assessee for statistical purposes.
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