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2022 (1) TMI 337 - AT - Income TaxTP Adjustment of business support services - comparable selection - Functional dissimilarity - HELD THAT:- Axis Integrated Systems Limited was not a valid comparable in view of the fact that the entity level profitability taken by the TPO is incorrect. There was lack of segmental information. Financials of the company do not provide detailed description of the business operations of the company. Further, as per website extracts, Axis Integrated Systems Limited is engaged in providing consultancy with regard to Directorate General of Foreign Trade. Therefore, we hereby direct the Assessing Officer to exclude this comparable. Killick Agencies and Marketing Limited being functionally different and dissimilar to the assessee. We, therefore, direct the Assessing Officer/TPO to exclude this company from the list of comparables. Just Dial Limited operates a local search engine which assists general public in finding information pertaining to nearby area. Further, no segmental data is available and the company owns significant intangible assets in the form of goodwill, application development and unique phone numbers. We, therefore, hold that this is not a valid comparable and direct the Assessing Officer/TPO to exclude this company from the list of comparables. TDS u/s 194J/194H - Disallowance under section 40(a)(ia) of the Act on account of trade offers provided to distributors - HELD THAT:- As decided in own case [2020 (8) TMI 825 - ITAT DELHI] and [2020 (8) TMI 825 - ITAT DELHI] there is absence of a principalagent relationship and benefit extended to distributors cannot be treated as commission under Section 194H of the Act. As regards to applicability of Section 194J of the Act, the Assessing Officer has not given any reasoning or finding to the extent that there is payment for technical service liable for withholding under Section 194J. Marketing activities have been undertaken by HCL on its own. Merely making an addition under Section 194J without the actual basis for the same on part of the Assessing Officer is not just and proper. The Ld. DR’s contention that discounts were given by way of debit notes and the same were not adjusted or mentioned in the invoice generated upon original sales made by the assessee, does not seem tenable after going through the invoice and the debit notes. In fact, there is clear mentioned about the discount for sales promotion. Thus, on both the account the addition made by the Assessing Officer does not sustain. - Decided in favour of assessee Disallowance on account of trade price protection paid to distributors - allowable revenue expenditure u/s 37 or not? - HELD THAT:- As decided in own case [2020 (8) TMI 825 - ITAT DELHI] it is market practice that if there is any change in prices of handsets by competitors, change in life of mobile model, change in market demand of particular model which affects the sales, the distributor is protected by the Trade Price Protection. This is actually a commercial expediency in modern day technological changes which are very fast and vast. Besides, Trade Price Protection is offered to distributors on handsets which have not been subject to trade offers/discounts - so far as the instant year is concerned, we have already noted in the earlier paragraph that the requisite confirmations were filed before the Assessing Officer. Thus, this expenditure is allowable as revenue expenditure under Section 37(1). Disallowance of marketing expenditure incurred on account of issuance of handsets on Free of Cost (‘FOC’) basis - HELD THAT:- As decided in own case [2020 (8) TMI 825 - ITAT DELHI]the assessee is engaged in manufacture, import and sale of mobile handsets. The assessee has given mobile handsets to its employees, dealers, sale personnel etc. for free of cost and thus no longer owned the said handsets. Thus, the said cost was rightly taken as business expenditure by the assessee and was rightly reduced from the inventory. This issue is decided in favour of the assessee. Deduction towards amount of education cess and secondary and higher education cess paid - HELD THAT:- We find that this issue is no more res-integra as has been decided in favour of the assessee by the decision of the Co-ordinate Bench of the Tribunal following the judgment of the Hon’ble Bombay High Court in the case of Sesa Goa Ltd. [2020 (3) TMI 347 - BOMBAY HIGH COURT] Therefore, respectfully following the same, we hereby direct the Assessing Officer to delete the disallowance.
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