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2023 (3) TMI 1433 - ITAT DELHITP adjustment - Advertisement, Marketing and Promotion (AMP) expenses, alleged to have been incurred on behalf of the Associated Enterprises (AEs) - international transaction or not? - HELD THAT:- As we find, the TPO has made the adjustment to AMP expenses by treating it as international transaction coming within the definition of section 92B of the Act and has computed the adjustment applying Bright Line Test (BLT) method. It is observed, while deciding identical issue in assessee’s own case for assessment year 2008-09, the Tribunal in order [2022 (1) TMI 1082 - ITAT DELHI] has held that the transaction relating to AMP expenses will not fall in the category of international transaction. Thus we restore the issue to the Assessing Officer with similar direction. Adjustment made to ALP of Information Technology (IT) support services provided by the assessee to its AEs - assessee is a resident corporate entity engaged in the business of manufacturing, marketing and selling of wrist watches and after selling services - HELD THAT:- Assessee provided services in ITES segment. In fact, in the order passed under section 92CA(3) of the Act, the TPO himself has stated that the assessee provides limited IT help desk and support services to the AEs. In spite of such factual position established on record, the TPO has gone forward to re-characterize the assessee as a software development service provider and selected fresh comparables in the software development segment. Unfortunately, Commissioner (Appeals) has also completely misconceived the facts by approving the re-characterization of the assessee. As observed, similar erroneous approach was adopted by the TPO while proposing adjustment to similar transaction with the AEs in assessment year 2011-12. While deciding assessee’s objections on the issue, learned DRP accepted assessee’s business profile as an IT service provider and directed the AO/TPO to select comparables in ITES segment. However, the TPO again selected comparables providing Knowledge Process Outsourcing (KPO) services. While deciding the issue in appeal, the Tribunal in [2018 (12) TMI 1852 - ITAT DELHI] rejected the comparables selected by the TPO. It is relevant to observe, while dismissing Revenue’s appeal against the decision of the Tribunal in assessment year 2011-12, the Hon’ble Jurisdictional High Court upheld the decision of the Tribunal holding the assessee as an ITES segment company. Addition on account of advance written off - assessee has debited certain amounts on account of advances written off - as deduction claimed by the assessee does not satisfy the condition of section 36(2) of the Act, the Assessing Officer disallowed the deduction - HELD THAT:- As could be seen from the facts on record, certain trade advances in relation to the business operations could not be recovered even after long lapse of time. Therefore, the assessee has written them off in its books of account. In our view, the Assessing Officer made a fundamental error by holding that the deduction claimed comes under section 36(2) of the Act. Undisputedly, the trade advances were in course of business. Therefore, if the assessee was unable to recover such advances, it can be treated as business loss, hence, allowable. Accordingly, we uphold the decision of Commissioner (Appeals) on the issue. Spreading over of expenditure - Payment for stamp duty and brokerage for office lease - as per AO since, the period of lease is for five years, the brokerage expenditure has to be spread over the period of lease - HELD THAT:- It is a fact on record that the assessee has incurred the brokerage expenditure in the year under consideration. Therefore, the expenditure has to be allowed in the year under consideration. Merely because the lease of office premises is for particular period, the expenditure actually incurred on brokerage cannot be spread over the period of lease. Accordingly, we uphold the decision of learned Commissioner (Appeals) on the issue.
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