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2021 (7) TMI 681 - AT - Income TaxTP adjustment in respect of Brand royalty - assessee paid Brand royalty under two Agreements, first, at 0.5% under the Agreement dated 01-07-2008 and then again under another Agreement dated 05-04-2001 - duplicate amount of Royalty paid was directed to be disallowed - HELD THAT:- As the facts and circumstances of the assessee‟s ground for the year under consideration are admittedly similar to those of the preceding year, respectfully following the precedent, we set-aside the impugned order on this score and remit the matter to the file of AO/TPO for re-determining the ALP of the international transaction of payment of Royalty and disallow the duplicate payment of brand Royalty in terms indicated above in the Tribunal order for the assessment year 2009-10 above. This disposes of the assessee‟s ground of appeal. Disallowance of the full amount made u/s.37- assessee paid royalty for use of technical know-how and brand - AO held such payments as not having been incurred for business purposes - HELD THAT:- Since the technology and designs have been used by the assessee in its manufacturing, the royalty for the same cannot be said to be for non business purposes. Similarly, brand royalty has been paid for the use of brand on the products manufactured by it. Admittedly, the assessee was using the Brand name and logo on its manufactured products. These payments, therefore, cannot be considered as meant for non-business purpose, subject to the transfer pricing adjustment. We, therefore, approve the view point taken by the ld. CIT(A) in deleting the disallowance made by the AO u/s.37 of the Act. The Revenue‟s ground is thus dismissed. TP Adjustment - addition on account of payment of Management fees - assessee declared an international transaction of “Payment of Professional fee” - HELD THAT:- CIT(A) has given cogent reasons for deleting the disallowance inasmuch as the AO simply adopted the TPO‟s reasoning without showing as to how the same applied to the non-AE transactions as well. Further, the expenditure contains payment for Testing fees and also Generic service fee. To this extent, we approve the view taken by the ld. CIT(A). Thus, the ground of the Revenue is dismissed. Aggregation approach adopted for benchmarking transaction of Management Fees - HELD THAT:- International transaction of Management services was wrongly clubbed and should be separately benchmarked. Selection of MAM - TNMM adopted by the assessee as most appropriate method, which got disapproved by TPO - HELD THAT:- Assessee moved a Miscellaneous Application against the order of the Tribunal for the assessment year 2009-10 urging that a precise method for the ALP determination of Management Fees ought to have been directed by the Tribunal rather than leaving the matter open to the TPO‟s wisdom. The said Miscellaneous Application came to be dismissed by the Tribunal by holding that the TPO was free to adopt the most appropriate method on the facts and circumstances of the case. As the facts of this issue for the year under consideration are similar to those of the preceding year, following the view for such earlier year, we set-aside the impugned order on this score and remit the matter to the file of AO/TPO for a fresh determination of the ALP of the international transaction of payment of Management Service Fee in accordance with the observations and directions given in the Tribunal order passed for the assessment year 2009-10. Additional depreciation on foreign exchange fluctuation loss on repayment of loans, which were taken for purchase of capital assets - HELD THAT:- As noticed above that the assessee availed two loans, viz., first in the year 2002 and second in 2007 and repaid the same in the year under consideration resulting in incurring foreign exchange fluctuation loss. Such a loss is required to be capitalized in terms of section 43(1) read with section 43A. As regards the question of additional depreciation, the same is admissible in respect of assets acquired on or after 1.4.2005. Patently, no additional depreciation can be allowed to the assessee in respect of loan taken in the year 2002 and the claim will be valid for the loan taken in foreign currency for the purchase of asset in the year 2007. There is no discussion in the assessment order or the impugned order about the bifurcation of the amount of liability discharged by the assessee on account of foreign exchange fluctuation rate difference. On a pertinent query, the ld. AR did not have such figure of forex loss incurred by the assessee, liable to be capitalized for the purposes of additional depreciation, in respect of loan taken in the year 2007. We, therefore, set-aside the impugned order and remit the matter to the file of the AO for examining the detail of ₹ 1.82 crore and allow additional depreciation on forex loss only in respect of repayment of loan taken in the year 2007. In other words, no additional depreciation will be allowed in respect of new asset purchased by the assessee against the loan taken in the year 2002 which got discharged during the year under consideration resulting in foreign exchange fluctuation loss. TDS u/s 195 - Addition on account of commission - assessee paid commission to overseas agents - assessee submitted that the commission was paid to overseas agents for export orders/business procured by them in overseas territories and hence, deduction of tax at source was not warranted - HELD THAT:- As admittedly, the commission was paid by the assessee to overseas agents for procuring business in overseas territories, the amount of commission in the hands of the commission agents does not become chargeable to tax under the Act. The Hon‟ble Bombay High Court in CIT Vs. Gujarat Reclaim and Rubber Products Ltd.[2015 (12) TMI 1078 - BOMBAY HIGH COURT] has held that the assessee was not obliged to deduct tax at source on commission paid to overseas agent in similar circumstances as are instantly obtaining before us. In view of the foregoing discussion, we are satisfied that the ld. CIT(A) has taken an unexceptionable view and hence no interference is warranted in the impugned order on this score. This ground is not allowed.
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