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2022 (12) TMI 683 - AT - Income TaxTP Adjustment - Exclusion of Nile Ltd. as comparable in applying Transaction Net Margin Method (TNMM) - HELD THAT:- Though the Department has impliedly accepted Nile Ltd. as a comparable while computing TNMM, but since the issue of segmental accounts was not raised/examined at any earlier point in time by the Department, it is not possible to ascertain whether the facts in respect of Nile Ltd. as a comparable in the earlier years are same as compared to facts prevailing in the present year. Department has raised the issue of comparability of Nile Ltd. as a comparable with the assessee for the first time during the year under consideration and in any of the earlier years, this issue was not considered or analysed by the Department. Further, though the assessee made factual and legal submissions on this issue before CIT(Appeals) in support of the acceptability of Nile Ltd. as a comparable, however, he also inadvertently omitted to make any observation/given any findings in respect of the same in the appellate order. In our considered view, in the interests of justice, this ground is being restored to the file of Ld. CIT(Appeals) for adjudication on this aspect in light of the arguments put forward by the counsel for the assessee on this issue on whether it would be appropriate for Nile Ltd. to be excluded as comparable, since as per the assessee it is one of the eminent players in this line of business and exclusion thereof would render the entire exercise of computation of ALP meaningless in the instant set of facts. On this issue, the file is being restored to Ld. CIT(Appeals) for fresh adjudication after giving due opportunity of hearing to the assessee. ALP of loan given by the assessee to foreign subsidiary at the rate of interest Swiss Libor + 200 basis points - HELD THAT:- We observe that the assessee has itself charged the lesser interest by 25 basis points (bps) as compared to what was quoted by Citibank. This fact was also observed by Ld. CIT(Appeals) in the appellate order. In view of the above, in the interest of justice, we are restricting the addition to interest rate at Swiss Libor plus 150 basis points, equivalent to the quotation obtained by the assessee from Citibank in respect of the said loan. In the result, ground of the assessee's appeal is partly allowed. Disallowance being administrative expenses u/s 14A - HELD THAT:- As in the assessee's own case for the immediately preceding assessment year 2009-10, as against disallowance of 0.5% of the average investment, which works out to Rs. 3,22,431/-, in our view, the disallowance may be restricted to a lump-sum disallowance of Rs. 250,000/- towards administrative cost incurred on maintaining investments in tax free funds. Interest expenditure u/s 36(1)(iii) - AO made disallowance out of interest paid by the assessee on the ground that the assessee had made investment in various subsidiaries on which no interest has been charged - HELD THAT:- We observe that this issue has been decided in favour of the assessee in the assessee's own case before ITAT vide [2019 (3) TMI 2006 - ITAT AHMEDABAD] Addition on account of royalty payment - disallowance of royalty paid for the usage of trademarks to Pfaulder Inc. USA. - AO held that the assessee has not been able to explain the basis of royalty payment - HELD THAT:- As in the assessee's own case for assessment year 2010-11 [2019 (3) TMI 2006 - ITAT AHMEDABAD] thus following the decision in the assessee's own case, which are concurring with the observations made by Ld. CIT(Appeals) in the appellate order as well, we are hereby dismissing the Department's appeal on this issue. Disallowance of education expense - HELD THAT:- We observe that in the case of Mallige Medical Centre (P.) Ltd [2015 (4) TMI 547 - KARNATAKA HIGH COURT] the High Court held that where daughter of managing director of assessee-company which was running a hospital was sent abroad for acquiring specialised knowledge in medical field and after acquiring same, she was working with assessee, expenses incurred towards daughter's education were to be allowed under section 37(1) - In the case of Kostub Investment Ltd [2014 (2) TMI 1072 - DELHI HIGH COURT], the High Court held that where expenditure on higher education of employee had an intimate and direct connection with assessee's business, it would be appropriately deductible, even though such an employee was son of a Director. In the case of Aswathanarayana & Eswara [2018 (9) TMI 967 - MADRAS HIGH COURT] the High Court held that expenditure by firm on partner's foreign education was to be allowed when post graduate course underwent was directly related to profession carried on by firm. CIT(Appeals) has not erred in facts and in law in deleting the additions made by the AO, considering the facts of the present case.
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