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2019 (7) TMI 1992 - AT - Income TaxTP adjustment for payment of royalty - trademark royalty paid to Cadbury Schweppes Overseas Limited[CSOL] Assessee is a listed company engaged in manufacturing and marketing of malted food and drinks and chocolates - Cadbury India had entered into Technical Assistance and Royalty Agreement with AE M/s. CSOL for availing itself of the benefits of the said technical know-how developed by CSOL relating to the manufacturing, processing, distributing and marketing of products as well as the benefits of the continuing research and development undertaken by CSOL - HELD THAT:- It transpires that this issue was earlier remitted by the Tribunal to the TPO. However, learned Counsel of the assessee submitted that in the last year there was issue of fresh documents. He submitted that this year all documents are there. He submitted that the TPO has held that arm's length price should be nil without applying any material. Learned counsel claimed that the TPO has held that no benefit accrues to the assessee. Learned counsel referred to several case laws for the proposition that benefit test is not for TPO. As we note that this Tribunal in assessee's own case for A.Y. 2006-07 [2018 (11) TMI 1762 - ITAT MUMBAI] hold that the royalty payment on trade mark to SCOL @ 1% of net sales is at arm's length, hence, no further adjustment is required. Accordingly, we delete the disallowance made by the Assessing Officer. We note that the AO as well as learned CIT(A) have also based their decision on their earlier orders. Since ITAT has considered those orders and remitted the issue to the file of the Assessing Officer, we deem it appropriate to follow the precedent and set aside the issue to the file of the Assessing Officer. The Assessing Officer is directed to consider the issue afresh keeping in mind additional submissions being made by learned counsel. Disallowance of payment of royalty on technology paid to Cadbury Adams USA LLC. - HELD THAT:- As decided in own case A.Y. 2006-07 [2018 (11) TMI 1762 - ITAT MUMBAI] assessee has also availed technical know-how from CAUSA. Further, the Departmental Authorities don dispute the genuineness or authenticity of the amended agreement. What they are disputing is the date from which the amended agreement is effective. If the departmental authorities in the subsequent assessment years have allowed payment of royalty both for trademark and technical know-how, there is no reason why it should not be allowed in the impugned assessment year, since, it cannot be said that the assessee was manufacturing 'Halls' brand products without obtaining the required technical know-how. Accordingly, we hold that payment of royalty to CAUSA is at arm's length. The ground is allowed. Disallowance of service fees paid to Cadbury Schweppes Asia Pacific Pte. Limited. - HELD THAT:- As on careful consideration we find that learned CIT(A) in this case has followed his earlier order of previous assessment year. It was this order of learned CIT(A) which was remitted by the ITAT to the file of the TPO for examination with direction. In these circumstances in our considered opinion the issue needs to be remitted to the TPO with the same directions as above. We order accordingly. Disallowance of depreciation on marketing know-how in pursuance of worldwide stock and asset purchase agreement between Pfizer US and Cadbury UK. - HELD THAT:- Tribunal in assessee's own case for A.Y. 2006-07 [2018 (11) TMI 1762 - ITAT MUMBAI] has decided this issue and allowed the claim of the assessee following the consistent view of the Tribunal on this issue in assessee's own case in the preceding assessment years, we allow assessee's claim of depreciation Determining profits eligible for deduction u/s 80-IC - Allocation of expenditure at Baddi unit - HELD THAT:- We agree with the submissions of the learned counsel of the assessee, as regards allocation of interest, voluntary retirement scheme and decrease in stock. As agreed by learned counsel above the fact that no VRS expenditure pertains to the employees of Baddi unit may be checked by the Assessing Officer. As regards operation/establishment expenses, we find considerable cogency in the allocation key used by the assessee for direct expenses, direct marketing cost and selling and distribution expenditure, royalty and technical fees. We approve the same subject to factual verification by the Assessing Officer. We find that the method of allocation of other overhead as mentioned above appears to be opaque. We remit the same to the Assessing Officer for verification.
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