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2019 (1) TMI 389 - AT - Income TaxDisallowance of expenses of Royalty, technical knowhow fees and annual charges of Microsoft licencing fee by determining the ALP at NIL - Held that:- As decided in assessee's own case relating to AY 2008-09 restored the issues to the file of the AO for examining them afresh, as the Tribunal held the assessee to be “Licenced Manufacturer”. Disallowance of ASP Management fee - assessee paid the said amount to its AE w.e.f. 01.01.2008 as per the Administrative Service agreement entered between the parties - Held that:- Since various services claimed to have received by the assessee are related to its manufacturing activities, in our view, the assessee was justified in aggregating the same with other items of international transactions. With regard to the sufficiency of evidences to prove the receipt of services and the benefits derived therefrom, we are of the view that, in the interest of natural justice, the assessee may be provided with one more opportunity to furnish other evidences. Accordingly we set aside the order passed by the AO/TPO and restore the same to his file for examining it afresh. We also direct the tax authorities to examine this issue in an objective manner by properly considering the explanations and evidences furnished by the assessee. Addition made on account of difference in income found in Form 26AS and that reported by the assessee - Held that:- We notice that the Ld DRP has also restored this issue to the file of the AO with the direction to examine the reconciliation statement filed by the assessee and grant relief in respect of reconciled items of income. The ld A.R submitted that the assessee has furnished additional evidences to reconcile the income and TDS and accordingly prayed that this matter may be restored to the file of the AO. Since the assessee could reconcile the difference further, we are of the view that the same requires examination at the end of the AO. Accordingly we restore this issue to the file of the AO. Addition relating to Warranty Expenses - Held that:- TPO was not justified in taking such a view without bringing any corroborative material. We notice that the TPO has not doubted the genuineness of expenses, but has only questioned the necessity of incurring these expenses. He has further observed that the assessee has incurred the expenses only in certain Countries and not in other Countries. The question of necessity of incurring expenses is beyond the scope of the tax authorities. Hence, what is required to be seen is whether the assessee has incurred these expenses and they are related to the business activities of the assessee. Accordingly the reasoning given by the TPO to determine ALP at NIL, in our view, is not sustainable. Accordingly we uphold the view taken by Ld DRP on this issue. Addition on account of TP adjustment made on purchase of patterns - Held that:- As in the case of Warranty expenses, we notice that the TPO has determined ALP at nil by doubting the explanations of the assessee. The TPO has taken the view that the Bill of Entry describes the product imported by the assessee as Spare Parts for pumps, while the assessee claimed the same as Design Patterns. Further, the TPO has doubted the valuation also. The claim of the assessee is that it has capitalised the cost of Design Patterns. Further the reasoning given by the TPO to determine the ALP at NIL, in our view, is not justified, as the TPO has only doubted the claim of the assessee on surmises. Accordingly we are of the view that the Ld DRP was justified in directing the AO not to make any addition as opined by TPO. Addition relating to ASP management fee - Held that:- The revenue has raised the ground under erroneous impression that the Ld DRP has granted relief to the assessee. In fact, the Ld DRP has confirmed the addition and hence this ground of the revenue is erroneous and liable to be rejected. Addition relating to club membership fee - Held that:- We notice that the Hon’ble Supreme Court in the case of United Glass Manufacturing Co. Ltd (2012 (9) TMI 914 - SUPREME COURT) has held that the club membership fees incurred for employees is allowable as deduction u/s 37(1) of the Act. Accordingly we do not find any infirmity in the order passed by Ld DRP on this issue. Addition on account of difference in income as per Form 26AS - Held that:- We notice that the Ld DRP has also restored this issue to the file of the AO with the direction to examine the reconciliation statement filed by the assessee and grant relief in respect of reconciled items of income. The ld A.R submitted that the assessee has furnished additional evidences to reconcile the income and TDS and accordingly prayed that this matter may be restored to the file of the AO. Since the assessee could reconcile the difference further, we are of the view that the same requires examination at the end of the AO. Accordingly we restore this issue to the file of the AO. Addition made on account of difference in income found in Form 26AS and that reported by the assessee - Held that:- Since the assessee could reconcile the difference further, we are of the view that the same requires examination at the end of the AO. Accordingly we restore this issue to the file of the AO. In this year, one more plea has been put forth by the assessee. It was submitted that the AO has assessed unreconciled income between the books of the assessee and Form 26AS, but did not give credit for corresponding TDS amount. As stated that the assessee has moved a rectification petition before the AO, but the same has not been disposed of. There should not be any dispute that the TDS amount corresponding to the income assessed by the AO should be given credit. Accordingly we direct the AO to give credit of TDS amount relating to corresponding income.
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