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2019 (1) TMI 1870 - AT - Income TaxAdjustment made on account of income tax on brand usage royalty - HELD THAT:- We find that this issue is covered by the co-ordinate Bench decision of this Tribunal in assessee’s own case for assessment year 2005-2006 in [2018 (12) TMI 1515 - ITAT MUMBAI] application made by the assessee to RBI for brand usage agreement specifically mentions that the royalty to be remitted is net of taxes. Further, the approval was received from the RBI to remit the royalty on brand usage by the assessee @ 1 % net of taxes. Considering the brand usage agreement vis-à-vis the approval granted by RBI, it can be safely inferred that taxes were liability of J&J India under the terms of agreement. The assessee has entered into a commercial arrangement with J&J US and it has been so arranged that the payment of taxes have to be borne by the assessee being a commercial arrangement, the same should not be questioned while calculating arms length price. Reliance by the assessee on the decision of the Tribunal in the case of Dresser Rand India Pvt. Ltd. [2012 (10) TMI 127 - ITAT MUMBAI] is well founded. Considering the entire facts in totality in the light of the brand usage agreement and the approval of the RBI, the findings of the Ld. CIT(A) is set aside. The AO is directed to delete the addition. Adjustment made on account of payment of royalty on traded finished goods made by the assessee to Johnson & Johnson, USA - HELD THAT:- As perused the orders of the lower authorities and the material evidence brought on record in the form of paper book. In assessee's appeal, we have already held that the agreements between J&J India and J&J USA for payment of royalty has to be considered in the light of the approval of the RBI. We do not find any substance in the findings of the TPO that there is no need for paying royalty for technical/marketing know-how. We also do not find any force in the findings of the TPO that this royalty is deemed to be included in Brand royalty. The Ld. CTT(A) has rightly considered the relevant clauses of the agreement between J&J India and J&J USA. We, therefore, do not find any reason to interfere with the findings of the Ld. CIT(A). Technical know-how royalty payment at 2% / 4% instead of 1% as done by the ld.TPO - HELD THAT:- As relying on own case [2014 (2) TMI 978 - ITAT MUMBAI] payment of royalty has to be considered in the light of the agreement between the assessee and J&J USA. Adjustment made on account of service tax paid by the assessee on know-how royalty - HELD THAT:- We find that this issue is covered by the co-ordinate Bench decision of this Tribunal in assessee’s own case for assessment year 2005-2006 in [2018 (12) TMI 1515 - ITAT MUMBAI] after considering the agreements entered into between the assessee and J&J US and also the decision in the case of Dresser Rand India P. Ltd. [2012 (10) TMI 127 - ITAT MUMBAI] that the taxes were liability of the assessee- company under the terms of agreements and accordingly disallowance made by AO were deleted. Further, we also observe that liability of payment of service tax is of recipient of services and since assessee is the receiver of services, it is the liability of the assessee company to bear service tax. Hence we hold that TPO was not justified to state that liability of bearing service tax was of assessee-company. In view of above, we hold that disallowances made by TPO on account of taxes, services tax is not justified and we direct to delete the same. Adjustment made on account of sales and promotion expenses - HELD THAT:- Rule 10B specifically provides the procedure to be followed fordetermining Arm's Length Price. We observe that the TPO while suggesting the disallowance of 200.82 Lakhs out of the expenses incurred by assessee on publicity and sales promotion has not followed any of the method and therefore the said adjustment/disallowance suggested by TPO is outside its jurisdiction. During the course of hearing, id. DR submitted that the matter could be restored to TPO to decide afresh after considering the guidelines laid down in the case of L.G. Electronics India (P.) Ltd. [2013 (6) TMI 217 - ITAT DELHI]. Since no specific submissions were made and considering the fact that the assessee justified the payment of technical know-how royalty at the rate of 4% of net sales which is lower than Arm's length rate of 4.84% and the said fact, we have also discussed herein above in para 33 of this order, that the payment of royalty by assessee to its parent company is at Arm's Length, we do not find any justification to make the said disallowance of ₹ 200.82 lakhs as suggested by TPO towards the shares to be contributed by AE of the asses see-company. Therefore, we delete the said disallowance made by AO by allowing ground of the appeal taken by assessee. Grand credit in respect of retained MODVAT credit relating to opening stock - HELD THAT:- CIT(A) allowed relief to the assessee by following the decision of Hon'ble High Court in Mahalaxmi Glass Works[2009 (4) TMI 182 - BOMBAY HIGH COURT] which was also followed by his predecessors in A.Y. 2003-04 & A.Y. 2004-05. Considering the consistent view on the issue which was followed by Id. CIT(A), therefore, we do not find any justification to interfere in his order. Addition on account of payment on fees paid for legal counseling u/s 40A(2)(b) - HELD THAT:- We find that the Ld. CIT(A) has deleted the addition holding that for the payments for legal counseling, it is futile to think of comparables because counsels may not charge standard fee but may charge according to the issue involved. The Ld. CIT(A) further observed that if the AU wanted to disallow on the ground of excessive payment, he ought to have established excessiveness of the payment. This has not been done. Considering the decision of the Tribunal in assessee's own case, in the light of the observations made by the Ld. CIT(A), we do not find any reason to interfere with the findings of the Ld. CIT(A) . Depreciation on testing equipment provided to laboratories and hospitals free of charge - HELD THAT:- Similar issue was raised in the case of assessee's sister concern, namely, NR Jet Enterprises Limited has held that depreciation should be allowed on the testing equipment provided to laboratories and hospitals free of charge as the said equipments have been provided to the laboratories and hospitals for making profit from the sale of slides. The learned Departmental Representative did not contravene this position. Addition due to non-reconciliation of AIR data - HELD THAT:- As relying on SHRI S. GANESH [2016 (5) TMI 792 - BOMBAY HIGH COURT]assessee gave an explanation that the break-up as desired cannot be given and with regard to all payments. It is pointed out that at times, assessee receives fees directly from the clients or from the instructing Advocates or Chartered Accountants if such professionals have collected the amounts from the clients.Under these circumstances, the break-up as desired cannot be placed on record. An explanation which has been given by the assessee and accepted in the past has been now accepted by the Tribunal once again. Since it is accepted for the Assessment Year 2006-07, in the peculiar facts, in relation to the present assessee, we are of the view that this Appeal does not deserve to be entertained. It does not give rise to any substantial question of law,
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