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2016 (5) TMI 764 - AT - Income TaxDisallowance on account of delayed deposit of ‘Employees ‘contribution towards PF - Held that:- After examining these provisions, the Hon'ble Supreme Court and High Court have held that if the contribution is deposited y the appellant before the due date of submission of its Return, it will be entitled to deduction - vide the Apex Court decision in CIT vs Vinay Cement Ltd. (2007 (3) TMI 346 - Supreme Court of India ) and CIT vs Alom Extrusions Ltd. (2009 (11) TMI 27 - SUPREME COURT ). - Decided in favour of assessee. Disallowance on account of contribution to Bata Workers Sickness Benefit Society - Held that:- There was a valid agreement entered into between the parties and enforceable in law against each other. Therefore, it became legal obligation of the assessee-company to make the contribution to the society and as such the contribution to the society was not hit by section 40A(9) as such an obligation fell within the last part of the said section that the contribution was made by the assessee-company to a fund required to be set up by or under any other law for the time being in force. Besides, there was no dispute that the fund was constituted bona fidely for the welfare of its employees in the smooth running of the business and, hence, the said contribution was to be allowed under section 37(1). - Decided in favour of assessee. Disallowance on account of payment of technical collaboration fees paid to a company incorporated in Canada - “Payment of Royalty” - what is the approach that has to be adopted for determining ALP in the case of cost contribution agreement which is akin to the arrangement in the present case between the Assessee and its parent company? - as claimed by the Assessee that since, the rate of royalty paid by the assessee at 1.5% was lower than the rate of royalty paid by the comparable uncontrolled enterprises in a similar condition, the Assessee claimed that the price paid in the transaction was to be regarded as having been undertaken at arms length price? - Held that:- Assessee in its Transfer Pricing Documentation, for the purpose of benchmarking, applied Comparable Uncontrolled Price ("CUP") method as the most appropriate method. For application of CUP, the assessee identified following four comparable companies from the Secretariat for Industrial Assistance (SIA) database engaged in providing similar services paying an average rate of royalty of 3.95% and 3.5% on domestic sales and export sales respectively. The TPO, however, following the Transfer Pricing assessment order for assessment year 2003-04, determined the arm's length price of payment of royalty as 'nil' allegedly holding that no services were actually received by the assessee. The entire amount paid to Bata Ltd., Canada was therefore added to the total income of the Assessee by way of adjustment to the ALP. The TPO has not disputed the most appropriate method for determination of ALP chosen by the Assessee viz., CUP method and comparability of the companies set out in the TP study of the Assessee with the Assessee. The arithmetic mean of the comparables chosen by the Assessee in its TP study was average rate of royalty of 3.95% and 3.5% on domestic sales and export sales respectively. The claim of the Assessee that the rate of royalty paid by the assessee at 1.5% was lower than the rate of royalty paid by the comparable uncontrolled enterprises in a similar conditions has therefore to be accepted. The price paid by the Assessee to its AE has therefore to be held as at Arm’s Length.- Decided in favour of assessee.
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