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2022 (12) TMI 1078 - ITAT CHENNAITP adjustment on AMP expenditure - TPO show caused the assessee as to why 1% of gross sales be not considered as brand building exercise for AE as done in last year - HELD THAT:- From the facts, it emerges that this adjustment made by Ld. TPO is primarily guided by adjustment made in the earlier years. Similar issue, in AY 2012-13, has been adjudicated by this Tribunal in assessee’s favor for the reason that determination as done by Ld. TPO at 1% of gross sales is adhoc figure and not a figure arrived by calculation or method as provided in Sec. 92C(1) much less Rule 10AB of Income Tax Rules, 1962. Therefore, the adjustment so made without following any prescribed method is not sustainable and accordingly, deleted. We find that similar factual matrix exist in this year. TPO has merely presumed that there exist an arrangement between the assessee and its AE for promotion of the brand. No such arrangement has been shown to us. Therefore, taking a consistent stand in the matter, the impugned adjustment stand deleted. The corresponding grounds stands allowed. Disallowance u/s. 14A u/r 8D(2)(iii) - AO rejecting assessee’s plea that it had not availed any loan for investment and the investments were out of own funds - HELD THAT:- We find that similar issue in AY 2012-13 thus the issue of disallowance u/r 8D(2)(ii) as well as u/r 8D(2)(iii) stand restored back to the file of Ld. AO on similar lines - AO shall take consistent view as taken on AY 2012-13 on this issue. This ground stand allowed for statistical purposes. Disallowance u/s. 40(a)(ia) - short deduction of tax - assessee paid connectivity expenses for dedicated leased lines provided by various vendors and deducted TDS @ 2% - A.O opined that the tax should have been deducted at 10% - HELD THAT:- The Tribunal, in latest decision for AY 2012-13 relying upon decision for AY 2009-10 [2015 (12) TMI 1328 - ITAT CHENNAI] held that disallowance u/s 40(a)(ia) is not attracted in case of short deduction of tax at source. Respectfully following the consistent view of Tribunal, the impugned disallowance stand deleted. Disallowance of provision for inventory - assessee created provision towards provision for inventories which was stated to be towards slow moving and obsolete traded goods on account of diminishment in the value of stock held in the course of business - HELD THAT:- From the financial statements of the assessee, it could be ascertained that the assessee is valuing the inventories at lower of cost price or net realizable value which is prescribed method of valuation of inventories. When the valuation is done on lower of cost or net realizable value then any decrease in value of obsolete or slow moving stock on valuation date would automatically take care of the loss suffered by the assessee on this account. Accordingly, a separate provision made, in this regard, could not be allowed to the assessee. The Ld. AR has cited many case laws to support this deduction. However, in the given factual matrix, the same are not applicable. Therefore, the adjustment made by Ld. AO, in this regard, could not be faulted with. The corresponding grounds raised by the assessee stand dismissed. Depreciation on software - @60% or 25% - HELD THAT:- The bench, noticing the entries in Appendix I of Income Tax Rules, 1962, held that the rate of depreciation mentioned at III(5) for computers including computer software would be 60%. Considering the same, we direct Ld. AO to allow depreciation of 60% on software. Provision for VAT assessment demand - HELD THAT:- From the fact, it emerges that this liability pertains to earlier years. In such a case, the same could be allowed to the assessee only upon crystallization of the liability. From assessee’s submissions, it is quite clear that the liability has been crystalized only on 04.04.2013 and therefore, the deduction of mere provision in this year could not be allowed to the assessee. It is very clear that this is a prior period item and the liability, in this respect, has not crystallized during this year. Therefore, the corresponding grounds stand dismissed. No other ground has been urged in the appeal.
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