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2018 (12) TMI 1515 - AT - Income TaxAdjustment made on account of income tax on brand usage royalty - Held that:- We find that the 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-ŕ-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 arm's 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. Addition on account of unrecorded production - Held that:- The special auditor after extensive study of production process did not find any issue against the assessee. Based on the Audit Report, no addition was made in A.Y. 1993-94. Copy of Assessment Order and Audit Report is placed on record. Further, based on the said Audit Report, no addition was made in A.Y. 1993-94. The ld. AR further submits that similar addition was made for A.Y. 2002-03 and the Tribunal on the basis of decision of A.Y. 1991-92 deleted the addition. By following the order of Tribunal, similar issue was decided in favour of assessee by Tribunal in A.Y. 2003-04 & A.Y. 2004-05. Copy of which placed on record. The ld. DR for the Revenue after going through the various as referred by ld. AR not disputed the factual position canvassed by ld. AR of the assessee. 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 ld. CIT(A), therefore, we do not find any justification to interfere in his order. Disallowance of depreciation on testing equipment - Held that:- As decided in assessee's own case in A.Y. 2000- 01 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. Respectfully following the Tribunal order passed in another group concern of the assessee, whose facts have not been distinguished by the ld. DR, we uphold the impugned order on this issue. disallowance of 10% of payment made to Crawford Bailey & Co. - addition u/s 40A - Held that:- As decided in assessee's own case for A.Y. 2002- 03 AO has disallowed invoking provisions of Sec. 40A(2)(b) on fees paid for legal counseling. 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 AO 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).
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