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2022 (6) TMI 1266 - AT - Income TaxTP Adjustment - Arms Length Price adjustment on account of payment of Royalty - Admittedly, the royalty was paid @ 5% of domestic sales and 8% of the export sales in consideration of receipt of technology in the form of know-how, technical training and technical assistance for the purpose of manufacturing the compressors. The TPO determined the ALP of the royalty payment at 3% of the sales by taking it as appropriate benchmark - HELD THAT:- TPO adopted this benchmark considering the transaction of payment of royalty by it’s A.E. i.e., Wuxi Atlas Copco Compressor Co Ltd., which is undisputedly controlled transactions, and the difference between two and the actual price was suggested as TP adjustment u/s 92CA of the Act without even going into the issue whether the approval of payment of RBI will constitute a CUP method or not. The issue in the present ground of appeal was adjudicated by Co-ordinate Bench of this Tribunal in assessee’s own case for A.Y. 2010-11 [2021 (9) TMI 635 - ITAT PUNE] - Decided against revenue. ALP adjustment on account of receipt of commission for Marketing Services - main contention of the appellant is that the functions undertaken by the assessee for selling the product is significantly different from what is undertaken for the purpose of earning the commission income from A.E - CIT-A deleted the adjustments - only bone of contention between the Department and the assessee is exclusion of the cost of material consumed and the depreciation in the total cost for the purpose of determining the percentage of marketing cost to the total cost - HELD THAT:- The reasoning given by the TPO that these two segments of the cost does not contribute to profit does not stand to any reason, in as much as the depreciation and the material actually contributes to the profits in the manufacturing segment. An identical issue was examined by the Co-ordinate Bench of this Tribunal in assessee’s own case for A.Y. 2010-11 [2021 (9) TMI 635 - ITAT PUNE] issue decided in favour of assessee. Prepayment of liability under Sales Tax Defferal Scheme - CIT-A deleted the addition - HELD THAT:- The issue in the ground of appeal is no more res integra as the issue was decided in favour of assessee by the Hon’ble jurisdictional High Court in the case of CIT vs. Sulzer India Limited. [2014 (12) TMI 267 - BOMBAY HIGH COURT] wherein it was held that when the sales tax liability was discharged at Net Present Value, the difference between the sales tax liability and NPV of the sales tax liability cannot be brought to tax within the provisions of section 41(1) of the Act applying the ratio of the decision of Hon’ble High Court of Karnataka in the case of CIT vs. McDowell & Co Ltd [2014 (11) TMI 272 - KARNATAKA HIGH COURT] We do not find any reason to interfere with the order of ld. CIT(A) and we do not find any merit in the present ground of appeal. In the circumstances, this ground of appeal filed by the Revenue stands dismissed. Nature of expenses - expenditure incurred on the renovation of lease premises - allowability of expenditure incurred on items interior decoration, etc on the rented premises which are used for the business purpose of the assessee - HELD THAT:- The identical issue was examined by the Co-ordinate Bench of this Tribunal in assessee’s own case for A.Y. 2010-11 [2021 (9) TMI 635 - ITAT PUNE] wherein after making reference to the provisions of Explanation (1) to section 32 and the decisions of Hon’ble Madras High Court in the cases of CIT Vs. ETA Travel Agency Pvt. Ltd. [2019 (8) TMI 932 - MADRAS HIGH COURT] and CIT Vs. Viswams [2019 (4) TMI 1127 - MADRAS HIGH COURT] held expenditure incurred on rented premises cannot be treated as revenue in view of the plain provisions of Explanation 1 to Sec.32 of the Act. The ld.CIT(A) is in total ignorance of the provisions of Explanation 1 of Sec.32 of the Act held it to be revenue in nature. The decision relied upon by the learned counsel has no application after insertion of Explanation 1 of Sec.32 of the Act. In the above circumstances, we reverse the order of ld.CIT(A) and restore the issue in this ground to the file of Assessing Officer. Thus we are of the considered opinion that this is a fit case to remand to the file of Assessing Officer with a direction to verify the true nature of expenditure i.e. whether revenue or capital and also examine the applicability of Explanation (1) to section 32(1) of the Act, even in respect of expenditure incurred is revenue in nature. Thus, this ground of appeal is partly allowed for statistical purposes. Disallowance of the minimum expenditure - AO found that out of the miscellaneous expenses, the assessee could not produce supporting documents, details, vouchers - HELD THAT:- During the course of assessment proceedings, the respondent / assessee company could not furnish the evidence, bills, vouchers etc to the extent of Rs.2,59,407/- out of the total Miscellaneous Expenditure. On appeal before ld.CIT(A), ld.CIT(A) restricted the disallowance to Rs.1,00,000/- which is in accordance with the decision of his order in assessee’s own case for the earlier assessment years. On the principle of consistency, we uphold the order of ld.CIT(A). Accordingly, this ground of appeal stands dismissed. Addition of commission expenditure - HELD THAT:- Admittedly, the appellant had filed the primary details such as name, address, invoice, payment made etc. However, the assessee could not furnish the confirmations from payees and for want of the confirmations, Assessing Officer made disallowance. The ld.CIT(A) following the decision of his order in assessee’s own case in earlier years has deleted the addition. From the material on record, it is clear that the respondent / assessee had discharged the onus cast upon it by filing the primary details. Mere inability to furnish the confirmation letters from the recipients cannot be the reason to disallow the commission expenditure without causing any further enquiries by the Assessing Officer as to the genuineness or otherwise of the expenditure. The identical issue was examined by the Co-ordinate Bench of this Tribunal in assessee’s own case for A.Y. 2010-11 [2021 (9) TMI 635 - ITAT PUNE] held that there is no material on record exhibiting the nongenuineness of the expenditure - CIT(A) is justified in deleting the commission expenditure and accordingly, this ground of appeal is dismissed.
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