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2016 (6) TMI 493 - AT - Income TaxTransfer pricing adjustment - determination of cost incurred by assessee towards marketing support service - whether the cost reimbursed to assessee by its AEs is to be included in the cost base for determining the NCP of assessee or not? - Held that:- in order to bring the tested party and comparables at level playing field, it is necessary that reimbursed cost should be considered in the cost base as well as part of income so as to neutralize any variation in the cost incurred by assessee towards carrying out marketing support services. Admittedly, at first place assessee has incurred all these expenses and then got reimbursed by its AEs. All risks incidental to these expenses were at assessee’s account and not AE. Ld. CIT(A) has very rightly excluded any allocation towards finance charges because assessee had received advance from its AEs. The statement given by Mr. Surjit Verma, referred to earlier, in the observation of ld. TPO, clearly showed that both employees coordinated with various agencies which were to conduct or organize these events. He has observed that research was also conducted on behalf of Seagram Martell, findings for which were communicated by Mr. Aditya Gooptu to Seagram Martell. In order to avoid repetition, we are not referring to the detailed activities performed by assessee noticed by ld. TPO, which we have reproduced earlier, while considering the TPO’s findings. It would suffice to observe that assessee played a vital role in all the activities done to promote sales of Seagram Martell Duty Free Ltd. in India and the meager amount of US$ 2500 p.m. was not at all justified considering the services rendered by assessee. We could appreciate assessee’s contention of not including the reimbursement of expenses as part of the cost base if income of Marketing Support Services did not include these reimbursements but that is not so. Ld. TPO has included the same Unascertained liability - provision appearing in the accounts of the assessee company on account of transit shortages - Held that:- Respectfully following the decision of Hon’ble Delhi High Court in assessee’s own case, we restore the matter to the file of AO to pass the order in terms of the observations made by Hon’ble Delhi High Court noted that the AO shall allow the actual transit breakages for A Y 2001-02 as revenue expenditure consistent with the settled legal position. The Assessees would also be permitted to get the benefit of the reversal of the provision for transit breakages made in the AYs in question accordance with law. Income returned by assessee under the head ‘business income' as 'income from other source' - Held that:- The issue was considered for AY 1998-99 and not 1999-2000 as submitted by assessee. Further, the interest income earned only on loans given to employees were considered. Therefore, we direct the assessee to furnish the details of interest earned on loans given to employees before AO and the AO will treat the said interest under the head “business income” and the balance interest is to be confirmed as income from other sources, as assessee has not furnished any details. In terms of aforementioned observations this ground is partly allowed for statistical purposes. Allocation of expenses to Marketing support Service segment and also for including the reimbursement of expenses as cost base and also for the income of this segment for computing the NCP of this segment confirmed Loss on account of foreign exchange rate fluctuation - Held that:- Respectfully following the decision of Hon’ble Jurisdictional High Court in the case of Woodward Governor India Pvt. Ltd. (2009 (4) TMI 4 - SUPREME COURT ), dismiss this ground of appeal, holding that the loss incurred by the assessee was a fate accomplice and not a notional one. Allowance of sales and marketing expenses - Held that:- Respectfully following the order of the ITAT in the case of M/s Seagram Distilleries Pvt. Ltd. (2015 (7) TMI 560 - ITAT DELHI), holding that the brand expenses were in revenue field and contributed towards profit earning process of the assessee, dismiss both these grounds raised by revenue
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