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2019 (1) TMI 1567 - AT - Income TaxTP adjustment - advertisement, marketing and sales promotion expenses [AMP] expenses - existence of an international transaction - HELD THAT:- As held by the Hon’ble Delhi High Court in the case of Sony Ericsson Mobile Communications [2015 (3) TMI 580 - DELHI HIGH COURT] if the Indian entity is the economic owner of the brand and is incurring AMP expenses for the purpose of promotion of such brand, benefit is only received by the Indian entity. It was submitted that the economic ownership of the brand rests with the assessee and accordingly, the assessee cannot be expected to seek compensation for the expenditure incurred on the asset economically owned by it. No Transfer Pricing adjustment on account of AMP expenses would be warranted. The aforesaid test is fully satisfied in the case of the assessee and the Transfer Pricing adjustment on account of AMP expenses made by the TPO is liable to be deleted. In the case in hand, the operating profit margin of the assessee is at 5.01% in the manufacturing segment and 4.52% in the distribution segment and the same is higher than that of the comparable companies at 4.04% in the manufacturing segment and 4.46% in the distribution segment. TNMM has undisputedly been satisfied. Since the operating margins of the assessee are in excess of the selected comparable companies, no adjustment on account of AMP expenses is warranted - decided in favour of assessee. TP adjustment - payment of royalty - selection of comparable - HELD THAT:- As decided in assessee's own case [ 2013 (6) TMI 217 - ITAT DELHI] we direct the TPO to determine the Arm’s Length royalty @ 4.05%. Transfer Pricing adjustment on account of Allocation of Asian Region Office Expenses - determination of ALP of intra group services - Revenue contends that the assessee has not adduced evidence sufficient to justify the need, benefit and arm’s length nature of intra group service charges paid to its AE - HELD THAT:- As in the light of the decision of CIT vs Lumax Industries Limited [2015 (10) TMI 2509 - DELHI HIGH COURT] we are of the opinion that once the assessee has satisfied the TNMM method i.e. the operating margins of the assessee are higher than those of the comparable companies [as mentioned elsewhere], no separate adjustment is warranted. The adjustment computed by the TPO/DRP on account of allocation of RHQ expenses is uncalled for and deserves to be deleted TP adjustment - payment of overseas marketing related services - TPO disallowed part of market survey expenses on account of non-furnishing of evidences - AR pointed out that the results of the survey undertaken by the AE were provided to the assessee in the form of a report and the report was submitted before the DRP who dismissed the same stating that it did not pertain to the current year, only incidental benefit has been derived by the appellant, and the services were in the nature of shareholder activities - HELD THAT:- We find that the facts have not been properly appreciated by the lower authorities. It appears that the evidences furnished by the assessee have been considered in the light of allocation of expenses by RHQ. In the interest of justice and fair play, we restore this issue to the file of the TPO. The assessee is directed to furnish evidences specifically mentioning the issues under consideration and the TPO is directed to verify the same and decide the issue afresh after giving reasonable opportunity of being heard to the assessee. Addition on account of Sales-tax subsidy - nature of receipt - revenue or capital receipt - HELD THAT:- As decided in assessee's own case [2010 (2) TMI 916 - ITAT, DELHI] it is a undisputed fact that none of the clause of the Notification issued under section 4-A of Trade Tax Act, 1948 had authorised the assessee to collect sales tax/trade tax - Nowhere in the Notification has it been stated that exemption from sales tax/trade tax was provided for the setting up of the eligible unit - Since the assessee has collected the sales tax as part of dealer's price, the sales tax element will be trading receipt in the hands of the assessee Provision for service warranty disallowance - HELD THAT:- We do not find any force in the findings of the DRP. When in A.Ys 2002-03, 2003-04, 2004-05 and 2007-08 this issue has been settled in favour of the assessee and against the Revenue, we do not find any reason why the same should not be followed for the year also. Respectfully following the findings of the coordinate benches, we direct the Assessing Officer to delete the addition Disallowance of deduction u/s 80JJAA - deduction in respect of additional wages paid in financial years 2005-06, 2006-07 and 2007-08 - employment equal to or more than 300 days in the subsequent year - AO has allowed the deduction in A.Y 2005-06 but disallowedin A.Y 2006-07 and 2007-08 - Scope of amendment - HELD THAT:- There is no dispute that he assessee satisfies all the conditions for claiming deduction u/s 80JJAA. The claim of the assessee is that the workmen who joined in the preceding year in which such workmen worked for less than 300 days should be considered provided that the period of employment of such workmen is equal to or more than 300 days in the relevant previous year. What the assessee contends is that new workmen, who did not fall in the category of “regular workmen”, on account of employment being for less than 300 days in the year of appointment, should be considered as “regular workmen” in the subsequent year, provided such workmen continue to be employed with the company and the total period of their employment is equal to or more than 300 days in the subsequent year. Thought this contention of the assessee has been take care of by the second proviso, but the same has been given effect from 1.4.2019. If the effect of the second proviso is given retrospectively, then the assessee’s claim of deduction is allowable. Memorandum explaining provisions of Finance Bill 2018 states that the amendment is intended to rationalize the deduction of 30% of additional wages “by allowing the benefit for a new employee who is employed for less than the minimum period during the first year but continues to remain employed for the minimum period in subsequent year. This amendment i.e. second proviso is clarifactory in nature and is intended to remove the anomaly so as to advance legislative intention of providing incentive to new worker for more than 300 days and must be given retrospective effect CIT Vs. Alom Extrusions Ltd [2009 (11) TMI 27 - SUPREME COURT] wherein held that where a proviso in section is inserted to remedy unintended consequences to make section workable the proviso which supplies obvious omission therein in required to be read retrospectively in operation particularly to give effect to section as a whole. Thus we direct the AO to allow claim of deduction u/s 80JJAA as claimed by the assessee. Levying of interest u/s 234B and 234C is mandatory though consequential to our decision. The Assessing Officer is directed to levy interest as per provisions of the law. Interest u/s 234C to be charged on the returned income.
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