TMI Blog2015 (11) TMI 174X X X X Extracts X X X X X X X X Extracts X X X X ..... e of late payment of the ESIC - Held that:- It is an undisputed fact that the assessee has deposited employees share of contribution towards ESIC before the due date of filing return under the Act. The Hon'ble Bombay High Court in the case of CIT Vs. Ghatge Patil Transports Ltd. (2014 (10) TMI 402 - BOMBAY HIGH COURT) by placing reliance on the decision of CIT Vs. Alom Extrusions Ltd. reported as (2009 (11) TMI 27 - SUPREME COURT) has held that the assessee would be entitled to deduction of contribution of employees welfare funds where the amount has been deposited before the due date of filing of return under the provisions of Income Tax Act. - Decided in favour of assessee. - ITA No. 2483/PN/2012 - - - Dated:- 16-9-2015 - Shri R. K. Panda, AM And Shri Vikas Awasthy, JM For the Petitioner : Shri Kishore Phadke For the Respondent : Shri S.K. Rastogi ORDER Per Vikas Awasthy, JM This appeal by the assessee is directed against the assessment order dated 11-10-2012 passed u/s. 143(3) r.w.s. 144C of the Income Tax Act, 1961 (hereinafter referred to as the Act ) for the assessment year 2008-09. In appeal the assessee has challenged the assessment order and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r in the draft assessment order dated 07-12- 2011. The DRP upheld the findings of TPO for considering the sales commission as NIL. As regards delay in payment of ESIC, the DRP held that the amount was not deposited within the due date specified under the relevant statute, therefore, is not allowable as deduction. Thus, the DRP confirmed the findings of TPO as well as the Assessing Officer on both the issues. Based on the directions of DRP the Assessing Officer vide impugned order made addition in respect of both the above counts. 3. Shri Kishore Phadke appearing on behalf of the assessee submitted, that the assessee has been claiming payment of commission in the preceding and the subsequent assessment years. No disallowance has been made by the Department in assessment proceedings u/s. 143(3) in the past. It is for the first time in the assessment year under appeal that the objections have been raised by the Department on payment of sales commission. The TPO has erred in holding that the assessee has not derived any export benefit for which commission of ₹ 21,18,200/- is paid to AE. The DRP has also not considered the objections of the assessee and have rejected the same i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee has not been able to bring anything on record to prove that services has been actually rendered by AE to it, the authorities were justified in considering ALP to be NIL. The ld. DR vehemently supported the findings of authorities below on both the issues agitated by the assessee in appeal and prayed for dismissing the appeal of the assessee. 5. We have heard the submissions made by the representatives of rival sides and have perused the orders of the authorities below. We have also considered the decisions on which both the sides have placed reliance. The TPO has disallowed the payment of sales commission to AE on the ground that the assessee has not been able to justify the need of services. Further, the assessee has not been able to demonstrate as to how the services were actually rendered by the AE. The ld. AR of the assessee has placed on record a copy of agreement with Scarpa Colombo of Italy. The ld. AR of the assessee has submitted that it was with the efforts of AE that the assessee could get export orders from Fiat and General Motors. The commission to AE is paid on the exports made to the aforesaid two companies. The ld. AR has also pointed out that the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ided the agreements which were entered not during the year but in the earlier year and has been paying the service fee termed as management fee accordingly. This claim is not arising for the first time in this year but, is also there in the earlier years and later years. The assessee is part of a worldwide group and they have placed some corporate centers for guidance of various units run by them across the globe. It was submitted that the costs being incurred by the centers are being shared by various units and the assessee's share in this year has come to 5 per cent. of the receipts payable to NFO Worldwide Inc., USA and at 4 per cent. to NFO Asia Pacific Ltd. Hongkong on the net revenues. These amounts are within the norms prescribed for payment of fees to various group companies of similar nature. There is no dispute with reference to services being provided by the group companies to the assessee and the assessee also paid various other amounts including royalty. As submitted by the assessee, even though some correspondence was placed on record with reference to the advise given to the assessee, providing a concrete evidence with reference to the services in the nature of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sively' for the purpose of business and nothing more. It is this principle that, inter alia, finds expression in the OECD guidelines, in the paragraphs which we have quoted above. 22. Even rule 10B(1)(a) does not authorize disallowance of any expenditure on the ground that it was not necessary or prudent for the assessee to have incurred the same or that in the view of the Revenue the expenditure was unremunerative or that in view of the continued losses suffered by the assessee in his business, he could have fared better had he not incurred such expenditure. These are irrelevant considerations for the purpose of rule 10B. Whether or not to enter into the transaction is for the assessee to decide. The quantum of expenditure can no doubt be examined by the Transfer Pricing Officer as per law but in judging the allowability thereof as business expenditure, he has no authority to disallow the entire expenditure or a part thereof on the ground that the assessee has suffered continuous losses. The financial health of the assessee can never be a criterion to judge allowability of an expense ; there is certainly no authority for that. What the Transfer Pricing Officer has done i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 24. Respectfully following the above, we are of the opinion that the Transfer Pricing Officer went beyond his jurisdiction in denying the payment outrightly, whereas, his role is limited to determining the arm's length price. In the guise of determination of the arm's length price, the Transfer Pricing Officer cannot question the business decision of payment and determine that no services were rendered. In that view of the matter, the direction of the Transfer Pricing Officer cannot be upheld at all. 8. In view of the aforesaid decisions and the facts of the case we are of the opinion that in the present case, the TPO has gone beyond his jurisdiction in questioning necessity to pay sales commission and in determining the value of commission paid as NIL. The assessee has placed on record the agreement according to which the commission is paid. The financial records of the assessee company to show that there has been increase in the export sales since the time the assessee has engaged the services of AE. The Revenue has not disputed the financial results and the figure of export sales furnished by the assessee. 8.1 The ld. DR in support of his submissions has pl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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