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2016 (10) TMI 1335 - AT - Income TaxTP Adjustment - arm’s length price of the international transactions made by the AO on account of corporate expenses - HELD THAT:- In the present case, it is an admitted fact that the assessee could not procure summary of the invoices raised on it by its AE and could not furnish the specific details or complete break-up of how the cost had been allocated, during the proceeding before the TPO/DRP. Therefore, this issue was set aside to the file of the TPO/AO in the appeal relating to the assessment year 2008-09 and the said order has been followed by the ITAT [2016 (2) TMI 1306 - ITAT DELHI]. Since the facts for the year under consideration are identical to the facts involved in the preceding years. So, respectfully following the earlier order [2014 (9) TMI 517 - ITAT DELHI] the issue under consideration is set aside to the file of the AO/TPO to be adjudicated afresh in accordance with law after providing due and reasonable opportunity of being heard to the assessee. Adjustment on account of payment of royalty - HELD THAT:- As decided in own case [2016 (2) TMI 1306 - ITAT DELHI] TPO proposed the transfer pricing adjustment with Nil ALP of the international transaction of `Payment of royalty’ on the ground that no such payment was warranted and further no cost benefit analysis on this count was brought to his notice and as such the payment of royalty was not required. AO in his final assessment order has taken the ALP at Nil on the basis of recommendation of the TPO without carrying out any independent investigation in terms of the deductibility or otherwise of such payment in terms of section 37(1) of the Act. As per the ratio decidendi of Cushman & Wakefield India (P.) Ltd.[2014 (5) TMI 897 - DELHI HIGH COURT] the TPO was required to simply determine the ALP of this transaction unconcerned with the fact, if any benefit accrued to the assessee and thereafter, it was for the AO to decide the deductibility of this amount u/s 37(1) of the Act. Thus we set aside the impugned order on this score and remit the matter to the file of AO/TPO for deciding it in conformity with the law laid down above. Ad-hoc disallowance on account of advertising and sales promotion expenses incurred by the assessee - assessee submitted that the AO had not brought any evidence on record to substantiate that the sales promotion and advertising expenses was not incurred by the assessee for the business purposes - HELD THAT:- AO made the impugned disallowance without pointing out any specific instances where expenses were not incurred for the business purposes. He made a general remark that the disallowance on ad-hoc basis was required to prevent leakage of revenue but no basis has been given to make the disallowance @ 5%. In the instance case, the DRP confirmed the action of the AO by observing that the onus lies on taxpayer to adduce evidence in support of claims of expenditure - no cogent reason has been given that the ad-hoc disallowance @ 5% made by the AO was justified, particularly when nothing is brought on record to substantiate that the expenses incurred by the assessee were not related to its business - in the absence of any specific item pointed out by the AO for non-business purposes out of the expenses incurred during the course of carrying on the business on account of sales promotion and advertising of the products, the ad-hoc disallowance @ 5% was not justified - we delete the ad-hoc disallowance.
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