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2020 (11) TMI 811 - AT - Income TaxProcedure prescribed u/s 144C - validity of draft assessment order where AO did not attach the notice of demand - Whether the whole assessment proceedings is liable to be quashed as illegal - whether the action of the AO in issuing Notice of Demand along with the draft assessment order would vitiate the assessment proceedings - HELD THAT:- In the instant case, there is no dispute that the assessing officer has consciously passed the draft assessment order by correctly mentioning that the same is passed u/s 143(3) r.w.s 144C of the Act. The assessee has also understood the same as draft assessment order and accordingly filed its objections before Ld DRP. The Ld DRP has also passed its directions in pursuance of objections filed by the assessee. In our view, the question of applicability of sec.292B of the Act does not require consideration in the instant case. Earlier that the assessing officer, in the instant case, has passed the draft assessment order u/s 143(3) r.w.s. 144C of the Act. The assessee has also, in terms of sec.144C of the Act, filed its objections before the Ld DRP. After the receipt of the directions from Ld. DRP, the assessing officer has passed the final assessment order. Except for attaching a notice of demand along with the draft assessment order, everything has been done in accordance with the law. Whether the notice of demand attached with the draft assessment order would make the said draft assessment order as final order and consequently, the whole assessment proceedings is liable to be quashed as illegal. In our view, the answer should be negative. As rightly pointed by Ld D.R, the notice of demand issued along with the draft assessment order is a legal nullity and does not exist in the eyes of law, since no valid demand could be raised under the draft assessment order. In our considered view, a document, which is held to be a legal nullity, cannot vitiate the assessment proceeding and the assessment order. - Decided against assessee. TP Adjustment - goods sold to Associated Enterprises (AEs) - NP Determination - HELD THAT:-There should not be any dispute that the methodology consistently followed to work out net profit year after year should be followed in this year also. It should not be tinkered with, unless proper reasons are given. The TPO has not given any reason as to why he did not consider above said two expenses while working out net profit margin of “Domestic – Personal care division”. Hence the workings made by TPO is liable to rejected. We have noticed that the net profit margin worked out by the assessee in “Domestic – Personal care division” was 10.70%. The net profit margin worked out for “Exports to AEs” was 12.01%. Hence the net profit margin earned in the exports to AEs division is higher than its comparable “Domestic – Personal care division”. Hence it has to be held that the international transactions of making exports to AEs are at arms length and hence no T.P adjustment is called for. Accordingly, we direct deletion of Transfer pricing adjustment made in respect of Exports to AEs. TP adjustment made in respect of Advertisement and Marketing expenses - TPO took the view that the assessee is incurring huge amount towards Selling and Marketing Expenditure with a view that these expenses go to increase the brand name owned by the Parent company - HELD THAT:- It is admitted that the legal ownership was transferred to HGH due to business necessity/compulsion. Hence the transfer of legal ownership is an internal arrangement between related parties, which was made on account of business necessities. The right to exploit the brand name, logo, trademarks etc., continue with the assessee only. Hence, the assessee is also beneficiary of AMP expenses or the promotion of brand. In this view of the matter also, the question of making T.P adjustment in respect of AMP expenses on account of “brand promotion” does not arise. Hence, on this reasoning also, the impugned TP adjustment on AMP expenses is liable to be quashed Following the decision rendered by the Tribunal in AY 2013-14 and 2011-12, [2018 (7) TMI 1964 - ITAT BANGALORE] we direct the AO to delete the transfer pricing adjustment made in respect of Selling and Marketing expenses. Transfer pricing adjustment made in respect of royalty - TPO noticed that the assessee has got “Research and Development” unit - assessee has obtained product registration in foreign countries - HELD THAT:- As relying on own case it cannot be taken that the AEs have exploited the product registration/license obtained by the assessee from various Governments. Hence the question of payment of royalty does not arise. Accordingly, we set aside the order passed by AO/TPO on this issue and direct the AO to delete this T.P adjustment
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