TMI Blog2015 (10) TMI 2509X X X X Extracts X X X X X X X X Extracts X X X X ..... r which the royalty payment was made. Thus the Court is not inclined to frame a question on the issue of deletion of the addition sought to be made by the AO for the AYs in question on account of ALP of the payment of royalty. Adjustment under Section 115JB on account of provision for retirement benefits - Held that:- ITAT noted that the provision was made on the basis of actual valuation and was not a contingent liability. Reference was made to the decision in Bharat Earth Movers v. Commissioner of Income Tax (2000 (8) TMI 4 - SUPREME Court ). The order of the ITAT upholding the order of CIT (A) is not found to be perverse. The Court declines to frame a question on this issue. Disallowance of expenses on account of foreign trips of the Director of the Assessee after holding that the visits made to USA and Dubai were for the business purposes. The disallowance by the AO of the said expenses was found to be not justified. Since the above finding turned purely on facts, the order of the CIT (A) as affirmed by the ITAT, does not give rise to any substantial question of law. Disallowance of the expenses on account of provision for warranty - ITAT deleted it since the provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for 7 years has been renewed from time to time. 3. In 1994 Stanley acquired a 12.61% stake in the Assessee. According to the Assessee, it has been immensely benefitted from its collaboration with Stanley. Its turnover was ₹ 53 crores in AY 1994-95 and ₹ 230.08 crores in AY 2004-05. In AY 2005-06 its turnover was ₹ 294 crores. The Assessee states that it enjoyed a 60% market share of the Indian auto lighting industry. Another fact which has relevance and which has not been disputed is that the expenses incurred by the Assessee on account of payment towards royalties to Stanley for AY 1985-86 to 2003-04 has been allowed by the Revenue under Section 37 (1) of the Act as expenditure incurred wholly and exclusively for the purposes of business of the Assessee. 4. The Assessee states that during the previous years relevant to AYs 2004-05 and 2005-06, Stanley s stake amounted to 19.41% which was less than the minimum percentage of 26% which was necessary to make it an Associated Enterprise ( AE ). During this time the share of Indian promoters in the equity share capital of the Assessee was 39.06%. The remaining shares were held by public and financial institution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was no need for any technology because Stanley s technical personnel were in full-time employment of the Assessee. Further since the moulds, drawings and other raw materials had been purchased from Stanley, no further technology was required for manufacturing the auto lights. It was also observed that the Assessee s Engineers did not visit Japan for training. However, no separate addition on account of royalty was made because the adjustment under TNMM was more than the royalty payment. 9. The AO passed an assessment order dated 20th December 2006 on the basis of the aforementioned report of the TPO and made additions both on account of payment of royalty and disallowance of foreign travelling expenses. 10. The appeal by the Assessee against the said order was disposed of by an order dated 30th September 2010 by the Commissioner of Income Tax (Appeals) [ CIT (A) ]. For AY 2004-05 the CIT (A) observed that the adjustment made on the basis of net profit margin of Phoenix Lamps Limited ( Phoenix') was not justified since Phoenix was situated in a Special Economic Zone ( SEZ ) and as such, was enjoying certain benefits which were not available to the Assessee. It was also no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s could not be given go-bye to determine ALP of the international transaction. 15. A similar approach was adopted by the ITAT in dealing with the appeals related to AYs 2004-05 and 2005-06. It was held that the Assessee had actually received technical assistance from Stanley. Further the employment of the expatriates of Stanley ensured that the technology provided was properly applied by the Assessee to the production of licensed products. Further, no mark-up on remuneration of expatriates was charged by Stanley. It was also factually found that during AY 2004-05 technology in respect of the new models of Maruti, Honda was received. Merely because the Assessee had purchased moulds, designs, bulbs, sockets, lenses etc. from Stanley, it did not mean that the technology was not required. Importantly it was noticed by ITAT that for AYs 2004-05 and 2005-06 the entire sale (on which royalty was paid as a percentage) was made to Original Equipment Manufacturers ( OEM ). Therefore, had there been no collaboration agreement with Stanley, there would have been no sales to the OEM s which were in collaboration with Japanese companies. The ITAT also observed that the determination of ALP b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f foreign trips of the Director of the Assessee after holding that the visits made to USA and Dubai were for the business purposes. The disallowance by the AO of the said expenses was found to be not justified. Since the above finding turned purely on facts, the order of the CIT (A) as affirmed by the ITAT, does not give rise to any substantial question of law. 22. On the issue of disallowance of the expenses on account of provision for warranty, the ITAT deleted it since the provision was made by the assessee based on actual warranty expenses incurred for the unexpired warranty period. As rightly pointed out by learned counsel for the Assessee the question is covered in its favour by the decisions in Rotork Controls Pvt. Ltd. v. Commissioner of Income Tax (2009) 314 ITR 62 (SC) and Commissioner of Income Tax v. Becton Disckinsion (2013) 29 Taxmann.com 80 (Del). Therefore, no substantial question of law arises as regards this issue as well. 23. On the last issue concerning depreciation on computer peripherals @ 60%, learned counsel for the Revenue does not dispute that the question stands answered in favour of the Assessee by the decision in Commissioner of Income Tax v. BSES ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
