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Reckitt Benckiser (India) Limited, Deputy Commissioner of Income Tax Versus Joint Commissioner of Income Tax, Reckitt Benckiser (India) Limited

2016 (5) TMI 1253 - ITAT KOLKATA

TDS u/s 192 - reimbursement of salary of seconded employees - Disallowance under section 40(a)(i) for want of TDS - payment made by the assessee to M/s. RBESL-UK towards expatriate fees - Held that:- Claim of the assessee of having paid and deducted tax at source from the amount in question as salary income is duly supported by TDS certificates issued in Form No. 16 and the same, in our opinion, is sufficient not only to establish that the amount in question is already subjected to TDS but also .....

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duct tax at source from the amount in question paid to M/s. RBESL-UK towards reimbursement of salary paid to expatriate employees and the disallowance made by the Assessing Officer under section 40(a)(i) for the alleged failure of the assessee to deduct tax at source is not sustainable. See M/s. Nagase India Pvt. Limited (2014 (5) TMI 44 - ITAT MUMBAI) and Temasek Holdings Advisers India Pvt. Limited [2013 (9) TMI 48 - ITAT MUMBAI] - Decided in favour of assessee

Disallowance on accou .....

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e as submitted by the ld. counsel for the assessee resulting into no loss with the Revenue. Having regard to all these facts of the case, it cannot be said that the estimate made by the assessee of the provisions for marketing expenses was not reliable. In our opinion, the provision for marketing expenses was rightly recognized and made by the assessee being its liability for the expenses of its business and the disallowance made by the Assessing Officer and confirmed by the ld. CIT(Appeals) mer .....

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s below only on the ground that the resultant benefit was not confined to the year under consideration and the same was partly available even in the subsequent year. The ratio of the decision of Core Health Care Limited (2008 (10) TMI 74 - GUJARAT HIGH COURT ) and Ashima Syntex Limited (2008 (10) TMI 298 - ITAT AHMEDABAD-B) thus is squarely applicable in the facts of the present case and respectfully following the same, we delete the disallowance made by the Assessing Officer and confirmed by th .....

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the Assessing Officer in the ratio of sales of each unit. We, therefore, find no justifiable reason to interfere with the impugned order of the ld. CIT(Appeals) confirming the disallowance made by the Assessing Officer on account of assessee's claim for deduction under section 80IA to the extent of ₹ 47,34,361/- Decided against assessee

Transfer Pricing Adjustment - Held that:- As rightly submitted by the ld. D.R., the fact that the export of PCMX, which constituted about 1/3 r .....

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ecific query raised by us, the ld. counsel for the assessee has not been able to explain the basis on which these segmental financials showing OP/TC of the export of the assessee-company to its AE at 7.96% are taken. In our opinion, the OP/TC of the relevant transactions worked out by the assessee, therefore, cannot be taken as basis for bench marking the relevant transactions by adopting TNMM and it would be more appropriate to take the OP/TC at the entity level by taking into consideration the .....

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sessing Officer/Transfer Pricing Officer with a direction to do afresh the exercise of determining the ALP of the relevant international transactions of the assessee-company with its AEs by following TNMM and by taking OP/TC at entity legal as PLI. - Decided in favour of assessee for statistical purposes.

Determination of rate of tax payable by the assesese on capital gain arising from the sale of flats - Held that:- Although the ld. counsel for the assessee has relied on certain judi .....

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rgeable to tax at the rate applicable to short-term capital gains irrespective of the holding period.

Disallowance u/s 14A by applying Rule 8D - Held that:- Rule 8D is applicable only prospectively from AY 2008-09. As further held by the Hon'ble Bombay High Court in the case of Godrej & Boycee Manufacturing Co. Limited (2010 (8) TMI 77 - BOMBAY HIGH COURT ), disallowance under section 14A for the years prior to 2008-09 is required to be determined on some reasonable basis. In this re .....

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ty of loss suffered by the assessee on abandoned capital WIP - Held that:- The issue involved therein relating to the deductibility of loss suffered by the assessee on abandoned capital WIP is squarely covered in favour of the assessee by the decision of the Hon'ble Calcutta High Court in the case of Benani Services Limited -vs.- CIT [2015 (3) TMI 849 - CALCUTTA], wherein it was held that expenditure incurred for construction/ acquisition of new facility, which was subsequently abandoned at work .....

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during the course of its normal business and the loss suffered as a result of non-recovery of the said deposits was a loss incidental to the business of the assessee. The ld. CIT(Appeals), in our opinion, therefore was fully justified in allowing the claim of the assessee for the said loss and we find no infirmity in the impugned order of the ld. CIT(Appeals) giving relief to the assessee on this issue - Decided in favour of assessee - I.T .A. No. 1671/KOL/ 2008, I.T .A. No. 1024/KOL/ 2009, I.T .....

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and 2004-05. Since some of the issues involved in these appeals are common and inter-linked, the same have been heard together and are being disposed of by a single consolidated order for the sake of convenience. 2. First we take up the appeal of the assessee for A.Y. 2003-04 being ITA No. 1671/KOL/2008, which is directed against the order of the ld. Commissioner of Income Tax (Appeals)-XII, Kolkata dated 13.06.2008. 3. The issue raised in Ground No. 1 of this appeal relates to the disallowance .....

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f ₹ 68,78,30,020/-. During the course of assessment proceedings, it was noticed by the Assessing Officer that the assessee-company has made a payment of ₹ 1.35 crores to M/s. RBESL-UK towards expatriate fees. The assessee-company was called upon by the Assessing Officer to explain the nature of this payment as well as to furnish the details of tax, if any, deducted at source therefrom. In reply, it was submitted by the assessee that the said payment was made to M/s. RBESL-UK towards .....

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re compensation paid to the said employees and the same was duly deposited. It was contended that the amount of ₹ 1.35 crores in question thus was paid by the assessee-company to M/s. RBESL-UK towards reimbursement of salary paid by the said company on behalf of the assessee-company and it could not be treated as fees for technical services. 5. The explanation offered by the assessee was not found acceptable by the Assessing Officer for the following reasons given in the assessment order:- .....

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company of the assessee and Jose Ernesto Blanch Borau and marked as Employment Agreement under which Mr. Jose Ernesto Blanch Borau was to serve in Reckitt Benckiser plc as the Regional Marketing Director, South Asia. It also contained the other terms and conditions relating to employment. Although it has been claimed by the assessee company that they have entered in to a separate Employment agreement with Mr. Jose Emesto Blanch Borau but the same could not be produced despite being given several .....

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er of M/s, RBESL U.K. As per the agreement produced in. the course of hearing M's, RBESL is neither a party to these agreements nor in any way connected with these agreements. This clearly shows that there are two limbs of this transaction. The first one is the transaction between the assessee company and RBSEL by which the assessee company was supposed to pay the expatriate fees to these company for the services to be rendered. These services can be rendered either from outside India or thr .....

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resident of U.K. The taxability of these payments will be determined as per the provisions of DTAA between India and UK. As per the provisions of the DTAA, the Income of RBESL is taxable in India if either it has a permanent establishment in India or it is rendering fees for technical services royalty. Let us examine whether these payments would qualify as fees for technical services. Para 4 of Article 13 of the DTTA states that For the purposes of paragraph 2 of this Article, and subject to pa .....

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t of the property for which a payment described in paragraph 3(b) of this Article is received: or (c) make available technical knowledge, experience, skill, know how or processes, or consist of the development and transfer of a technical plan or technical design. The services which were rendered by these two Executives clearly falls in clause (c ) of article ) 3 of the DTAA. These two Executives being the In-charge of Sales and Marketing function arc making available the technical knowledge, exp .....

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their salary receipts as they stayed in India for more than one year. So the assessee has failed to pay taxes/deduct TDS on the first limb of the transaction i.e, the payment by the assessee company to RBSEL The assessee's payment of tax for the second limb of the transaction i.e. the payment from RBESL to these employees will not help because the assessee is required to deduct pay taxes on the first limb of the transaction as well as per the provisions of the Income Tax Act read with the pr .....

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his payment. Section 40(a)(i) comes into apply which clearly states that when the assessee has failed to deduct TDS for any sum payable outside India on which the tax has not been deducted, the same is not to be allowed as deduction while computing the income of the assessee". The Assessing Officer thus invoked the provisions of section 40(a)(i) and disallowed the payment of ₹ 1.35 crores made by the assessee to M/s. RBESL-UK towards expatriate fees. 6. The disallowance made by the As .....

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the assessee-company to M/s. RBESL-UK. The employment agreement under which the two expartriate employees worked with the assessee-company was also produced by the assessee. It was also brought to the notice of the ld. CIT(Appeals) by the assesese-company that tax at source on the entire salaries paid to the said employees including that part which was paid by M/s. RBESL-UK and subsequently reimbursed was also duly made and deposited. It was contended that the amount in question paid to M/s. RBE .....

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der, he proceeded to confirm the disallowance made by the Assessing Officer under section 40(a)(i). 7. The ld. counsel for the assessee, at the outset, invited our attention to a copy of the employment agreement placed at page no. 9 to 21 of the paper book and pointed out the relevant clauses of the said agreement to show that the amount of salaries paid to the concerned two employees was to be partly paid in local currency and partly in foreign currency. He submitted that the part of salary pay .....

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RBESL-UK and subsequently reimbursed by the assessee-company thus was already subjected to TDS as salary income and there was no question of making any disallowance under section 40(a)(i) for the alleged failure of the assessee to deduct tax at source. In support of this contention, he relied on the decisions of Mumbai Bench of this Tribunal in the case of ACIT -vs.- Nagase India Pvt. Limited (ITA Nos. 7866 & 8022/Mum./2011 dated 05.03.2014) and in the case of Temasek Holdings Advisers India .....

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these infirmities in the relevant documentary evidence produced by the assessee as well as other infirmities specifically pointed out by the Assessing Officer clearly show that the claim of the assessee of having paid the amount in question as reimbursement to salaries paid to its employees was not genuine and as held by the Assessing Officer, the said payment being in the nature of fees for technical services, tax was liable to be deducted which the assessee clearly failed to do. He contended t .....

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though this claim of the assessee is duly supported by an employment agreement, the same has not been found to be reliable evidence by the authorities below on the basis of same infirmities and anomalies pointed out by them. At the time of hearing before us, the ld. D.R. has also taken the same stand. However, the fact, which is not in dispute, is that tax at source was duly deducted by the assessee from the entire salaries paid to the concerned two employees including that part, which was paid .....

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and the concerned two employees. In the case of Nagase India Pvt. Limited (supra), a similar fact situation was involved, inasmuch as, the amount paid by the assessee on account of reimbursement of salary was disallowed by the Assessing Officer under section 40(a)(i) for want of TDS. However, keeping in view that the assessee had already deducted tax under section 192 on entire salary reimbursed by him, it was held by the Tribunal that there was no case of disallowance under section 40(a)(i). I .....

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situation was involved in the case of Temasec Holdings Advisors India Pvt. Limited (supra), wherein Mumbai Bench of ITAT held that the assessee was not liable to deduct TDS under section 194 on the reimbursement of salary of seconded employees. Keeping in view these decisions of Coordinate Bench of this Tribunal in the case of M/s. Nagase India Pvt. Limited (supra) and Temasek Holdings Advisers India Pvt. Limited (supra) and having regard to all the facts of the case, we are of the view that th .....

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615/- made by the Assessing Officer and confirmed by the ld. CIT(Appeals) on account of provision made for marketing expenses. 11. As noticed by the Assessing Officer during the course of assessment proceedings, the assessee had made a provision of ₹ 19.90 crores for marketing expenses. He, therefore, required the assessee to furnish the complete details showing the nature and basis of provision made for marketing expenses. In reply, the following submission was made by the assessee in wri .....

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ction 145 of the Act and the accounts are audited and provision made as per the prescribed accounting policies should not be disallowed unless specifically provided in the provision of the Act. Further, out of the provision of ₹ 199,033,162/-, a substantial amount has been paid subsequently and balance is likely to be paid in due course. Hence, no disallowance is warranted on this account. Without prejudice to the aforesaid submission, please note that in case of write back of the aforesai .....

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antile system of accounting, was entitled to create provision only against ascertained liabilities. In this regard, he found from the relevant details filed by the assessee that out of the provision of ₹ 19.90 crores made by the assessee, the actual amount spent was only ₹ 18.20 crores and the balance amount of ₹ 1.69 crores was found to be excess. He held that this excess provision was liable to be disallowed not being pertinent to the year under consideration and accordingly .....

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in the subsequent years under section 41(1) at the same rate, there was no loss to the Revenue. The ld. CIT(Appeals), however, did not find merit in the stand of assessee and rejecting the same, he proceeded to confirm the disallowance made by the Assessing Officer on account of excess provision made for marketing expenses. 14. The ld. counsel for the assessee explained the nature of provision made for marketing expenses and submitted that such provision is required to be made in the relevant y .....

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found to be excess, is being offered to tax in the subsequent years at virtually the same rate, the disallowance made in the year under consideration on account of such excess provision is not justified. 15. The ld. D.R., on the other hand, submitted that the provision made by the assessee for marketing expenses on estimated basis is always found to be on the higher side. He submitted that it is not clear as to why there should be difference between provision made and actual amount of expenses .....

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rketing expenses in the facts and circumstances of the case. In this regard, a useful reference may be made to the decision of Hon'ble Supreme Court in the case of Rotork Controls Indi (Pvt.) Limited -vs.- CIT reported in 314 ITR 62 cited by the ld. counsel for the assesese, wherein it was held by the Hon'ble Apex Court that "a provision can be recognized when (a) an enterprise has a present obligation as a result of a past event, (b) it is probable that an outflow of resources will .....

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s that the provision so made was excess going by the amount actually required by the assessee subsequently to settle the obligation and accordingly a disallowance to the extent of such excess provision amounting to ₹ 1.69 crores was made by him. The Assessing Officer thus finally objected to the quantum of provision made by the assessee for marketing expenses on the ground that the estimate made by the assessee of the amount of obligation is not reliable. 17. At the time of hearing before .....

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e the obligation and only the balance amount of ₹ 1.69 crores, which is less than 10% of the total provision made by the assessee remained excess. Moreover, such excess provision was subsequently reversed by the assessee and offered to tax as the same rate as submitted by the ld. counsel for the assessee resulting into no loss with the Revenue. Having regard to all these facts of the case, it cannot be said that the estimate made by the assessee of the provisions for marketing expenses was .....

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relates to the disallowance of ₹ 1,76,50,483/- made by the Assessing Officer and confirmed by the ld. CIT(Appeals) on account of cost of films produced by the assessee for the purpose of business promotion. 19. In the advertisement expenses debited to the Profit & Loss Account, the cost incurred on production of films was included by the assessee- company. In this regard, explanation offered by the assessee before the Assessing Officer was that the films produced for business promotio .....

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mpany that the films produced for promotion are of two categories, one is audio/visuals, which are produced for small events and normally aired for not more than one month and second is the regular films, which are normally aired for not more than one year. In this regard, the Assessing Officer found that the assessee has incurred expenses on production of films throughout the year including the month of February and March, 2003. According to him, even going by the assessee's submission that .....

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s), reliance was placed by the assessee on the decision of the Hon'ble Calcutta High Court in the case of CIT -vs.- Berger Paints India Limited reported in 254 ITR 503 to contend that advertisement expenses which are normally to be treated as revenue expenses since the memory of purchasing market is short and the advertisement is needed from year to year. It was also submitted that the life span of regular Ad-films is about a year and since expenses on production of such films are required t .....

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of the case. He accordingly confirmed the disallowance made by the Assessing Officer on this issue. 21. The ld. counsel for the assessee submitted that the life of Ad-films is generally above one year and on this basis alone, the Assessing Officer held that the expenses incurred on production of films at the end of the year under consideration will have its benefit even in the subsequent year. He contended that the Assessing Officer as well as ld. CIT(Appeals) however completely ignored the fact .....

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eals) has allowed similar expenditure which is challenged by the Revenue in the appeal filed before the Tribunal. He also contended that the Assessing Officer himself has accepted the nature of expenditure in question as revenue by not treating the same as capital and this being so, there is no question of attributing the same to the next year on pro-rata basis under the Income Tax Act. In support of this contention, the ld. counsel for the assessee relied on the decision of the Ahmedabad Specia .....

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e by the Assessing Officer and confirmed by the ld. CIT(Appeals) on pro-rata basis is fully justified. He also contended that such disallowance on pro-rata basis is worked out by the Assessing Officer on the basis of working given by the assessee himself and the assessee therefore, is not justified to find fault in such disallowance made by the Assessing Officer on pro-rata basis. 23. We have considered the rival submissions and also perused the relevant material available on record. It is obser .....

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nd accordingly made a disallowance on pro- rata basis and deferred the same to the subsequent year. In this regard, the ld. counsel for the assessee has relied on the decision of Ahmedaba d Special Bench of this Tribunal in the case of Ashima Syntex Limited (supra), wherein the question relating to the treatment to be given to the deferred revenue expenditure under the Income Tax Act had come up for consideration. In this regard, it was held by the Tribunal that the deferred revenue expenditures .....

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e was nothing brought on record to suggest that any asset, tangible or intangible, had been created by incurring the expenditure in question and it was held by the Tribunal that the deferred revenue expenditure was rightly claimed by the assessee as deduction in the year in which it was incurred. 24. In the case of Core Health Care Limited (supra) cited by the ld. counsel for the assessee, a similar issue was involved inasmuch as substantial expenditure was incurred by the assessee on a special .....

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o the year of expenditure and this is an ordinary incident of a running business. Accordingly, the advertisement expenses incurred by the assesese to create brand image was held to be allowable as revenue expenditure by the Hon'ble Gujarat High Court. In the present case also, there is no dispute that the expenditure in question incurred by the assessee on production of Ad-films is revenue expenditure and the same is disallowed on pro-rata basis by the authorities below only on the ground th .....

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ficer and confirmed by the ld. CIT(Appeals) on account of cost of Ad-films on pro-rata basis. Ground No. 3 of the assessee's appeal is accordingly allowed. 25. The issue raised in Ground No. 4 of the assessee's appeal relates to the disallowance made by the Assessing Officer and confirmed by the ld. CIT(Appeals) on account of assessee's claim for deduction under section 80IA to the extent of ₹ 47,34,361/-. 26. In the return of income filed for the year under consideration, the .....

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uld not produce the product-wise details of debts written off as required by the Assessing Officer. In the absence of these details and the failure of the assessee to explain and justify and the basis adopted by it for allocation of indirect expenses, the Assessing Officer proceeded to allocate the expenses in the ratio of sales of each unit and work out the profit of the eligible unit of the assessee at Hosur at ₹ 5,37,66,504/-. Accordingly, the claim of the assessee for deduction of S .....

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are not available with the assessee and in the absence of the same, there is nothing to dispute the allocation of indirect expenses made by the Assessing Officer in the ratio of sales of each unit. We, therefore, find no justifiable reason to interfere with the impugned order of the ld. CIT(Appeals) confirming the disallowance made by the Assessing Officer on account of assessee's claim for deduction under section 80IA to the extent of ₹ 47,34,361/- and upholding the same, we dismiss .....

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alia, of export of raw materials and finished goods for a total value of ₹ 2,59,44,394/-. The assessee-company had also entered into international transactions with its AEs of import of Micro-Wax for a value of ₹ 1,73,153/- during the year under consideration. In order to ascertain the Arm's Length Price (in short 'ALP') of these international transactions, a reference under section 92CA(1) of the Act was made by the Assessing Officer to the Transfer Pricing Officer (in s .....

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7.96% was within the permissible range of deviation of the average OP/TC of five entities selected as comparables, the price charged to its AEs for export of raw materials and finished products was claimed by the assessee to be at Arm's Length. The TNMM adopted by the assessee to bench mark these international transactions was not disputed by the TPO. He, however, noted from the working of OP/TC made by the assessee of all the relevant international transactions that the export made by the .....

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essee to show-cause as to why the loss shown in the cost audit report should not be taken as an actual result for the purpose of determining the ALP of the relevant international transactions by using TNMM. In reply, it was submitted by the assessee that the cost audit report was for the calendar year of 2002, while the working made by it of OP/TC of the relevant international transactions was for the financial year 01.04.2002 to 31.03.2003. The Assessing Officer, however, noted from the relevan .....

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AE at 3.54%. He also noted that the entities selected by the assessee as comparables in the Transfer Pricing Study Report were dealing in detergent and soap and the same, therefore, were not comparables. He also noted that the assessee- company had entered into voluminous transactions with third parties during the year under consideration and the same representing internal comparables were more appropriate to adopt for the purpose of comparability analysis. He accordingly worked out the OP/TC o .....

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ansactions with AEs involving import of Wax, Comparable Uncontrolled Price (in short 'CUP') method was adopted by the assesese as the most appropriate method to Bench mark these transactions. In this regard, the claim of the assessee-company was that since no marking was charged by the Associated Enterprises in these transactions, the price charged was at arm's length. In this regard, it was found by the TPO that the assessee has imported the same product at ₹ 184/- per Kg. fro .....

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passed under section 92CA(3) dated 17.03.2006, the total Transfer Pricing Adjustment required to be done in respect of the international transactions of the assessee with its AE was worked out by the TPO at ₹ 19,56,989/- and consequently the addition to that extent was made by the assessee to the total income of the assesee in the assessment completed under section 143(3) vide an order dated 27.03.2006. On appeal, the ld. CIT(Appeals) confirmed the said addition made by the Assessing Offic .....

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onal transactions nor the working made by the assessee of OP/TC of such transactions. He submitted that the TPO, however, adjusted the OP/TC worked out by the assessee on the basis of cost audit report where the loss was shown in respect of export of one product, i.e. PCMX. He contended that the said cost audit report, however, was prepared for the calendar year of 2002 while the working made by the assesese of OP/TC of the relevant international transactions was for the financial year 2002-03. .....

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which was not available in case of domestic sales. He submitted that the ALP determined by the TPO thus suffers from various infirmities and mistakes and if at all the Bench- marking done by the assessee in the Transfer Pricing Study Report is also not found acceptable for any defects, the matter may be sent back to the TPO for doing the exercise of determination of ALP afresh. 32. The ld. D.R., on the other hand, submitted that even though the cost audit report was for the calendar year, 2002 .....

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by the assessee to point out that the OP/TC of the five comparables selected by the assessee was worked out by using multiple year data of three years. He also pointed out that the products dealt in by the said entities taken as comparables are not exactly similar or comparables to that of the assessee. He further contended that the export of PCMX constituted nearly 33% of the total export of the assessee-company to its AEs and the fact that the export of PCMX had resulted in loss as shown in th .....

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creates doubt about the reliability of the segmental financials taken by the assessee to work out the OP/TC of its export with AEs at 7.96%. It is pertinent to note here that nothing has been brought on record either before the authorities below or before us to shows that the figures reported in the cost audit report showing the loss in the export of PCMX are not correct. In reply to a specific query raised by us, the ld. counsel for the assessee has not been able to explain the basis on which .....

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OP/TC of the entities which are functionally similar by taking the financial data of only the relevant year and not on the basis of multiple year data as taken by the assesese in the Transfer Pricing Study Report, which is not permissible as per the relevant Rules. We, therefore, set aside the impugned order of the ld. CIT(Appeals) on this issue and restore the matter to the file of the Assessing Officer/Transfer Pricing Officer with a direction to do afresh the exercise of determining the ALP o .....

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the same may be applied to the relevant international transactions of the assessee-company to work out the ALP and the TP Adjustment. As the TPO is now directed to take OP/TC at entity level to bench mark the relevant international transactions of the assessee with its associated enterprises by adopting TNMM, no separate bench marking is required to be done in case of the international transactions of the assessee-company with its AE involving import of Wax and the same can be bench marked on t .....

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2015 at ₹ 10,00,000/- for filing the appeal by the Revenue before the Tribunal and this position clearly evident from the grounds raised by the Revenue in this appeal is not disputed even by the ld. D.R. In Circular No. 21/2015 (supra) recently issued by the CBDT, the monetary limit for filing the appeals by the Revenue before the Tribunal has been increased to ₹ 10,00,000/- and as clarified in the said Circular, the said monetary limit is applicable retrospectively even to the appe .....

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o. 1024/KOL/2009 (assessee's appeal) and ITA No. 973/KOL/2009 (Revenue's appeal), which are directed against the order of ld. CIT(Appeals)-XII, Kolkata dated 30.03.2009. 36. As regards the Ground No. 1 raised in the appeal of the assessee for AY 2004-05, it is observed that the issue involved therein relating to the disallowance made by the Assessing Officer under section 40A(i) and confirmed by the ld. CIT(Appeals) on account of payment made by the assessee to RBESL-UK towards expatriat .....

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or AY 2004-05, the assessee has challenged the disallowance of ₹ 60,54,560/- made by the Assessing officer under section 40A(i) and confirmed by the ld. CIT(Appeals) on account of payment made for availing connectivity services without deduction of tax at source. 38. During the year under consideration, the assesee-company had made payment of ₹ 16,54,516/- for global connectivity to Reckitt Benckiser India Limited as reimbursement. According to the Assessing Officer, the said amount .....

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g Officer. 39. We have heard the arguments of both the sides and also perused the relevant material available on record. The limited contention raised by the ld. counsel for the assesese is that the tax from the amount in question has been deducted and paid by the assesee in assessment year 2009-10 and the assessee, therefore, is eligible to claim deduction for the same in AY 2009-10. Since the appeal of the assessee for AY 2009-10 is pending before the Tribunal, the assessee is at liberty to ra .....

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es is similar to Ground No. 2 involved in the appeal of the assessee for AY 2003-04, which has already been decided by us in the foregoing portion of this order. Following our conclusion drawn in AY 2003-04, we delete the disallowance made by the Assessing Officer and confirmed by the ld. CIT(Appeals) on this issue and allow Ground No. 3. 41. The issue involved in Ground No. 4 of the assessee's appeal for AY 2004-05 relates to the determination of rate of tax payable by the assesese on capit .....

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the sale thereof at normal rate applicable to short-term capital gain. On appeal, the ld. CIT(Appeals) upheld the action of the Assessing Officer on this issue by observing that the provisions of section 50 were clearly applicable to the capital gains arising on account of sale of depreciable assets not only for computation but also for the rate of tax. 43. We have heard the arguments of both the sides on this issue and also perused the relevant material available on record. Although the ld. co .....

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rising from the sale of depreciable assets is chargeable to tax at the rate applicable to short-term capital gains irrespective of the holding period. We, therefore, find no merit in Ground No. 4 raised by the assesee and dismiss the same. 44. The issue raised in Ground No. 5 relates to the disallowance made by the Assessing Officer under section 14A which is confirmed by the ld. CIT(Appals) by applying Rule 8D. 45. In the year under consideration, the assesese-company had earned interest of  .....

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the exempt income and made a disallowance of ₹ 4,91,323/- under section 14A. On appeal, the ld. CIT(Appeals) held that Rule 8D of Income Tax Rules was applicable to the year under consideration with retrospective effect as held by the Hon'ble Mumbai Special Bench of ITAT in the case of Daga Capital Management Pvt. Limited (ITA No. 8057/Mum./2003 dated 20.10.2008). He accordingly directed the Assessing officer to re-compute the disallowance to be made under section 14A by applying Rule .....

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ble only prospectively from AY 2008-09. As further held by the Hon'ble Bombay High Court in the case of Godrej & Boycee Manufacturing Co. Limited (supra), disallowance under section 14A for the years prior to 2008-09 is required to be determined on some reasonable basis. In this regard, it is observed that the Coordinate Benches of this Tribunal has taken a consistent view by holding that disallowance under section 14A to the extent of 1% of the exempt income would be fair and reasonable .....

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capital WIP is squarely covered in favour of the assessee by the decision of the Hon'ble Calcutta High Court in the case of Benani Services Limited -vs.- CIT reported in 233 Taxman 340, wherein it was held that expenditure incurred for construction/ acquisition of new facility, which was subsequently abandoned at work-in-progress stage is allowable in order to write off as incurred wholly and exclusively for the purpose of business. Respectfully following the said decision of the Hon'bl .....

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the foregoing portion of this order. Following our conclusion drawn in AY 2003-04, we uphold the impugned order of the ld. CIT(Appeals) on this issue and dismiss ground No. 7. 49. The issue raised in Ground No. 8 relating to the addition of ₹ 2,38,356/- made by the Assessing Officer and confirmed by the ld. CIT(Appeals) on account of T.P. adjustment has not been pressed by the ld. counsel for the assessee at the time of hearing before us. The same is accordingly dismissed as not pressed. 5 .....

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s accordingly dismissed. 51. As regards the Revenue's appeal for AY 2004-05, it is observed that the issue involved in Ground No. 1 raised therein relating to the assessee's claim for deduction on account of expenditure incurred for production of Ad-films is similar to the one involved in Ground No. 3 of the assessee's appeal for AY 2003-04, which has already been decided b y us in the foregoing portion of this order. Following our conclusion drawn for AY 2003-04, we uphold the impug .....

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