Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2022 (7) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2022 (7) TMI 487 - AT - Income TaxTP adjustment on account of advertisement and marketing expenses (AMP) - Primary and secondary adjustment - primary adjustment in respect of AMP expenses relating to marking and sales segment and Rs. 162.02 crores relating to manufacturing segment - TPO also made secondary adjustment of Rs.3.51 crores on the AMP adjustment made in manufacturing segment on account of payment made for training to saloon customers and promotional goods treating the same as advance payments - HELD THAT:- We noticed that the issue of primary adjustment relating to AMP expenses and secondary adjustment on account of training, saloon, promotional goods have been deleted by the Coordinate Bench in assessee’s own case [2020 (8) TMI 795 - ITAT MUMBAI] taking the view that the primary and secondary adjustments made in the hands of the assessee in respect of AMP expenses are not sustainable. Since there is no change in the facts, following the decision rendered by the Coordinate Benches in the earlier years in assessee’s own case, we direct the Assessing Officer/TPO to delete primary transfer pricing adjustment made in respect of AMP expenses in both AY 2016-17 and secondary adjustment made in AY 2016-17. Disallowance of claim of depreciation on good will - HELD THAT:- We notice that the issue relating to claim of depreciation on good will has been restored to the file of AO in the immediately preceding year and hence the decision taken by the AO in that year shall have bearing on this claim made during the instant year. Accordingly, we restore this issue to the file of AO for examining it in accordance with the decision taken by him in the immediately preceding year. Disallowance of claim of Provision for expenses - HELD THAT:- There is distinction between “accrual of liability” and “liability to pay for expenses”. There should not be any dispute that the “accrued liability” cannot be considered as “unascertained liability”. Accrued liability is an ascertained liability, but the liability to pay it has not arisen. We notice that the the tax officials have been carried away by the fact that the liability to pay shall arise upon the assessee only after the receipt of the relevant bills and have not considered its accrual. The fact that there was an obligation upon the assessee to pay for the liability as a result of past event cannot be denied. By belated receipt of bills, the payment only gets postponed, but not the liability that has already accrued to the assessee. It is also fact that the assessee has been providing for known expenses and losses year after year and the said provision has been verified by the statutory auditors of the assessee company. The Ld A.R submitted that the provision for expenses so created has been accepted by the AO in the past. Accordingly, we are of the view that the tax authorities are not justified in holding that the Provision for expenses is an unascertained liability. As per the accounting principles discussed above, it is an ascertained liability and the same is eligible for deduction while computing total income. Accordingly, we direct the AO to delete the disallowance of Provision for expenses.
|