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2019 (10) TMI 1070 - ITAT KOLKATATP adjustments - advertising, marketing and promotion expenses (AMP Expenses) - international transaction - HELD THAT:- The issue in hand is squarely covered by the decision of this Tribunal, in assessee’s own case [2019 (9) TMI 1065 - ITAT KOLKATA] wherein the Tribunal by order dated 28.08.2019 has held that that the AMP expenses cannot be regarded as an international transaction as per section 92 B of the Act in the case of the assessee, so as to invoke provisions of section 92 of the Act. And since the AMP expenditure is not an international transaction, the TP adjustment made in this regard need to be deleted - Thus we hold that the AMP expenditure in question is not an international transaction, therefore, the TP adjustment made in this regard is hereby directed to be deleted and this ground of appeal of assessee is allowed. TP adjustment with respect to research and training expenditure (R&T Expenditure) - HELD THAT:- As in assessee’s own case [2019 (9) TMI 1065 - ITAT KOLKATA] held that the expenses in question covered under R&T Expenses relate to, service fee paid by the company for R&T Services obtained by the company, from another group company of the assessee i.e., ICT India Research & Technology Centre (ICI). ICT is a company registered u/s 25 of the Act as a “not for profit” organization. ICT provides manufacturing and training support services to the assessee on cost to cost basis. Accordingly, the expenses covered under the head ‘R&T expenses’ pertain to the fee paid to ICT. ICT provides technical support and training to the manufacturing and marketing operations of Paints Business Division. The Tribunal after examining the services rendered by the ICT has given a factual finding that the assessee has not carried out any R&T activities. The expenditure in question is incurred only for its manufacturing operations and local environmental compliance from HSE perspective. The assessee submitted that ICT also does not carry out any research and development activities for development of any new project/technology. It is primarily a captive support centre for the local India operation of the assessee. Thus, considering these facts, the Tribunal held that the expenditure on research and training does not constitute any international transaction, therefore, the TP adjustment made in this regard is hereby directed to be deleted and this ground of appeal of assessee is allowed. Determining arm’s length price of intra-group services in respect of support services received from its AEs as nil - Enhancement of income - HELD THAT:- As in assessee’s own case [2019 (9) TMI 1065 - ITAT KOLKATA] though the DRP observes that nature of service provided by ANCR are in the nature of service for strategic and operations and helps in achieving corporate objectives by aligning workforce and organizational objectives in the field of marketing HR, Finance, Management Services, Purchases etc., held it as stewardship services. We note that TPO has not carried out any exercise to determined the arms length price of benefit, service etc. as per the most appropriate method as envisaged in sec. 92C(1) of the Act. Since the TPO has not carried out the exercise which he ought to have carried out as envisaged by the Act on the erroneous plea that agreement between assessee and ANCR was not placed before him, we set aside the order of ld. DRP/AO & TPO and remand the matter back to TPO for fresh consideration - we restore this issue back to the file of the AO for fresh adjudication in accordance to law. Accordingly, this ground of appeal of assessee is allowed for statistical purposes. Adjustment towards contract research and development services rendered to AE - HELD THAT:- Adjustment made by TPO towards contract Research & Development Service (Contract R&D) rendered to the AE is erroneous for not taking into consideration the Tribunal’s decision in assessee’s sister concern M/s. Akzo Novel Car Refinishes India Pvt. Ltd. wherein the Tribunal while adjudicating similar issue has excluded Pharma Companies from the list of comparables and which action of Tribunal has been followed by the Ld. DRP in assessee’s own case for AY 2014-15. If that is the case, then we are inclined to set aside the impugned order and remand the issue back to the Ld. TPO for fresh consideration Disallowance of cash discount on sales and disallowance of publicity and advertisement expenses - assessee failed to produce enough documentary evidence to substantiate the same - non rejection of books of accounts - HELD THAT:- AO has resorted to ad hoc disallowance of expenditure claimed by the assessee without rejecting the books of account which is undisputedly statutorily audited. According to us, the AO cannot resort to estimation of disallowance without satisfying the condition laid down under sec. 145 of the Act. And, we do not countenance the ad hoc disallowance which action itself is per-se arbitrary in nature and has no sanction of law. Having said so, we are of the opinion that the AO is empowered to disallow the expenditure claimed by the assessee if there is deficiency in the vouchers or the bills supporting the incurrence of expenditure. AO atleast on test-check basis can verify the veracity of the expenditure and examine whether the claim made are allowable as per law, and the assessee to produce supporting bills/vouchers/proof of the expenditure, which the AO calls specifically for examination. Thus as discussed, once the assessee submits the details before the AO, then he can verify the veracity of the expenditure and if allowable by law, then it should be allowed in accordance to law. So, we set aside the impugned action of Ld. DRP/AO on this issue and remand the issue back to the file of AO for de novo adjudication - Appeal of the assessee is partly allowed for statistical purposes.
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