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2016 (8) TMI 869 - ITAT DELHI

2016 (8) TMI 869 - ITAT DELHI - TMI - Disallowance of the entire purchase - CIT(A) sustaining the disallowance made by TPO and treatment of purchase consideration for trademark as NIL - Held that:- It is not necessary for the assessee to show that any legitimate expenditure incurred by him was also incurred out of necessity. It is also not necessary for the assessee to show that any expenditure incurred by him for the purpose of business carried on by him has actually resulted in profit or incom .....

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PO/AO, because it is a business decision of the assessee company and accordingly, when assessee purchased an intangible asset, what is required under the law is to examine whether the price paid by the assessee is arms length price or not. The TPO has no role to play in examining the decision of commercial nature. Under the guise of TPO provisions, the TPO cannot determine the ALP at NIL as held by the Hon'ble Delhi High Court in the case of EKL Appliances Ltd., {2012 (4) TMI 346 - DELHI HIGH CO .....

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ayment for trademark and the issue relating to the depreciation on trade mark need to be examined afresh. Accordingly we set aside the order of Assessing Officer/TPO/CIT (A) on this issue and restore the same to the file of the TPO for examination of the same afresh in accordance with the law, after affording necessary opportunity of being heard. - Decided in favour of assessee for statistical purposes. - ITA No.1894/Del/2013, ITA No.1898/Del/2013, ITA No.2244/Del/2013, ITA No.2245/Del/2013 - Da .....

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ains to assessment year 2009-10 and has been preferred by the Department against order dated 13.2.2013 passed by the Ld. CIT (A) - XX, New Delhi whereas I.T.A. 2245/Del/2013 also pertains to assessment year 2009-10 and has been filed by the assessee. Since all the appeals were heard together, for the sake of convenience, they are being disposed of through this common order. ITA Nos. 1898/Del/2013 & 2244/Del/2013 2. The assessee, M/s Fabindia Overseas Pvt. Ltd (hereinafter referred to as FOPL .....

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cted by the TPO with respect to purchase of trademark. The ALP of the international transaction of purchase of trademarks was treated as 'Nil' under CUP method. The details of the total disallowances made during assessment year 2007-08 are as under:- Returned Income 179591758 Add Disallowance of deprecation on trade mark 12500000 Disallowance of fee paid to ROC as to increase in authorised capital & incidental professional charges 24378 Disallowance of deduction claimed u/s 80-G 1250 .....

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ggrieved, the assessee carried the matter to the Ld. First Appellate Authority who partly allowed the assessee s appeal and now both the Department as well as the assessee has filed cross appeals before the Tribunal. The grounds of appeal raised by the assessee are as under:- 1. That on the facts and circumstances of the case and in law, the Hon ble Commissioner of Income Tax (Appeals)- XX, New Delhi ( CIT(A) ) has erred in disallowing the entire purchase consideration amounting to ₹ 5,00, .....

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hts in the said trademark. 1.3. That on the facts and circumstances of the case and in law, the Hon ble CIT (A) has wrongly concluded that the Appellant was the economic owner of the said trademark. 1.4. That on the facts of the case, the Hon ble CIT(A) has erred in upholding Ld. sustaining the rejection of the valuation methodology of M/s CRA International ( CRA ), an international valuer, submitted by the Appellant for valuation of the said trademark. 1.4.1 That on the facts and circumstances .....

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circumstances of the case and in law, CIT(A)/ Ld. TPO have grossly erred in rejecting Transaction Net Margin Method ( TNMM ) as the Most Appropriate Method ( MAM ) for determination of the Arm s Length Price ( ALP ) of the consideration payable by the Appellant to its AE for the purchase of the said trademark. 1.7 That on the facts and circumstances of the case and in law, the Hon ble CIT(A) has grossly erred in upholding Ld. TPO s application of Comparable Uncontrolled Price ( CUP ) as the MAM .....

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nsider the submissions furnished by the Appellant in relation to repair and was not justified in making a disallowance amounting to ₹ 6,60,029/- from the ₹ 25,00,000/- disallowed by the AO. 4. That on the facts and circumstances of the case and in law, the Ld. AO has grossly erred initiating penalty proceedings against the Appellant under Section 271(l)(c) of the Income Tax Act, 1961. All of the above grounds of appeal are without prejudice and notwithstanding each other. The Appella .....

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ndia. In order to make a transfer of business carried on by the Indian branch, to the new company i.e. the Assessee, an agreement was entered into between Fabindia Inc., US and the assessee on 16th December, 1976. Pursuant to the said agreement, the business as was carried on by Fabindia Inc. at New Delhi was transferred to the assessee with effect from 20th December, 1976. This transfer was effected after obtaining approval from the Reserve Bank of India which was granted vide their letter date .....

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name Fabindia by the assessee to Fabindia Inc. The assessee has been using the brand name FABINDIA'' since then for sale of its products in India, as was used by Fabindia Inc. without payment of any royalty. The Ld. AR submitted that Fabindia Inc. was incorporated in US and continued to carry on business in US as before. The brand name and trademark Fabindia which was built/owned by Fabindia Inc. US continued to be owned by Fabindia Inc. excepting that the assessee was allowed the use o .....

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hat in the year 2006, the assessee, taking into account its expansion plans including proposals of new investors approached Fabindia Inc., US for assignment of rights in respect of Brand name/ trademark to the assessee. The US authorities based on the application as filed by Fabindia Inc. on 6th April 2006, accorded registration in its name vide certificate issued to Fabindia Inc. dated 29th May, 2007. An agreement for assignment of trademark was made between Fabindia Inc. and the assessee dated .....

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he valuation of US brand name, trademark rights and M/s CRA International US, a renowned valuer, vide their report dated 21st July, 2006 made valuation of the said trademark rights, which formed the basis for negotiation of the price between the two parties. The Ld. AR emphasized that the rights obtained by the assessee pursuant to the US trademark constitute valuable rights for the assessee, entitling it to carryon business under the trademark in the territory of US. Fabindia Inc. was already e .....

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world s largest economy in terms of business. Therefore, it became imperative for the assessee to purchase the trademark from Fabindia Inc. on an outright purchase basis to protect the interest of its business and its stakeholders. It was submitted that the assessee has expanded in the recent years in the Indian market by setting up of its outlets all over India. Based on the success it had achieved in the Indian market, the assessee had proposed to set up and expand its business overseas. It ha .....

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itted that the learned TPO has held that Fabindia Inc. has not contributed towards development of the brand and that by registering the trade mark, it was not entitled to receive ₹ 5 crores for the trade mark from the assessee. In this regard, it may be noted that it is a fact that Fabindia Inc. was the original owner of the brand i.e. trade mark and in the transaction under consideration, it has sold US rights relating to the trade mark to the assessee. It was submitted that the Ld. TPO h .....

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t it is immaterial whether or not the trade mark is registered so far as existence of trade mark is concerned. Even under the Indian trade mark laws, unregistered trade mark have been recognized, meaning thereby that trade mark can be unregistered. The Ld. AR submitted that the ld. TPO has erred in observing that the assessee has paid the aforesaid sum for use of the trade mark in the Indian territory. It was submitted that the amount was rather paid for acquiring rights for the US territory, wh .....

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right at all. Itwas submitted that the trade mark remains the property of the user. No third party could claim the ownership of the trade mark and seek registration without the permission of the user i.e. Fabindia Inc. In view of the above, even the observation of the Ld. TPO that FOPL (i.e. the assessee) has developed the inherent value of the trade mark is erroneous, as the rights have been acquired for US territory only, which has been recognized by the US authorities. The whole determination .....

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R also summarized the reasons for purchase of trade mark before the Bench and submitted that the assessee has also attracted various investors from US including P.B. investors from US. Mr. James Wolfensohn, former President of World Bank invested in the company in the year 2007 by subscribing to the shares at a large premium. It was also one of the conditions of the said investor that FOPL (i.e. the assessee) should acquire the rights in respect of trademark from Fabindia Inc., necessary for pro .....

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t the assessee purchased the trade mark to have legitimate and exclusive right over the trade mark in its endeavour to expand its business outside the territory of India besides expansion in India, which was driven by commercial expediency of the business. It was submitted that trade mark is a valuable intangible right vested with the owner and the assessee could not have expanded its business in US market without having ownership rights of the trade mark. Further, the assignment of the trade ma .....

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t value of the said trademark. M/s CRA International Inc., vide its report dated July 21, 2006, provided a realistic value estimate of the said trade mark which after negotiation resulted in finalization of the consideration of the said mark to be ₹ 5 crore in totality, which was a meager sum in terms of brand valuation principles and also considering the potential of the assessee to explore the US market and in view of the worldwide value of its brand name FABINDIA . In accordance with th .....

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little logical sense that the brand should now have to pay to acquire a trademark that it itself has been responsible for. It was submitted that the Ld. TPO while holding this has ignored the fact that the assessee is paying for acquiring the rights relating to the US territory, the valuation of which has been made strictly on the basis of US related projections and criteria. As the assessee is not paying anything for acquiring a right for a territory other than the US, the observation of the L .....

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after mutual discussions and negotiations between the parties that the price was fixed at ₹ 5 crore. As the said amount was falling between the price ranges as determined in the Valuation report, the amount has been considered as representing fair market value of the trade mark. It was submitted that the Ld. TPO has erred in understanding the standard disclaimer clause , generally given in such valuations, out of the context. As regards Ld. TPO s observations that the operations in the US .....

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ircumstances, projections are not termed as false or erroneous in the absence of non-effecting of the sales. It is, therefore, submitted that mere fact that Fabindia Inc. has not conducted business effectively or was not intending to carry on the same, does not diminish the value of the trademark. In this regard, it may be noted that even in the cases where the businesses are altogether closed, the brands are sold at value determined on the basis of the accepted methods of valuation. 8. It was f .....

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w of the decision of Hon ble High Court of Delhi in the case of CIT v Vibhu Talwar [2011] 11 taxmann.com 419 (Delhi). 9. On the issue of rejection by the AO of the method used to determine arm s length price, the Ld. AR submitted that the Ld. TPO, without appreciating the submissions made by the assessee for justification of arm s length price of the trade mark purchased from its Associated Enterprise and evidences placed on record to substantiate the same, erroneously treated the arm s length p .....

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ntical transaction/transactions, as opted by the assessee, the valuation determined by the registered valuer could be the most appropriate means under CUP method . In view of this, it was submitted that the Ld. TPO ought to have accepted the price band determined in the valuation report. 10. Making his submissions on the impugned order, the Ld. AR submitted that the issue involved is a case of purchase of trade mark and therefore the Ld. CIT (A) has grossly erred in linking it with Advertising, .....

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Ld. AR also relied on the decision of the Hon'ble Delhi High Court in the case of CIT vs EKL Appliances 345 ITR 241 (Del) for the proposition that it is not necessary for the assessee to show that any legitimate expenditure incurred by it was also incurred out of necessity. It is also not necessary for the assessee to show that any expenditure incurred by it for the purpose of business carried by it has actually resulted in profit or income either in the same year or in any of the subsequen .....

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sessee benefits. 11. The Ld. AR also drew the attention of the Bench to copies of various documents relating to the purchase of trade mark and placed on the paper book. 12. On the issue of sustenance of disallowance of ₹ 6,60,029/- out of ₹ 25,00,000/- incurred on repairs and maintenance, the Ld. AR submitted that out of the above amount of ₹ 6,60,029/- the disallowance of ₹ 2,54,912/- was on account of expenditure incurred at the residence of the MD, ₹ 34,375/- was .....

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ed that the specific disallowances need to be examined afresh. The Ld. AR submitted that disallowance was made by the on an ad-hoc basis and the Ld. CIT (A) rejected the assessee s plea without any cogent reasoning. The same was made only on estimation basis. It was submitted that the AO in his remand report dated September 21, 2012 has himself noted that the disallowance was not made out of repair and maintenance expenses due to the reason that bills/ vouchers were not produced. It was submitte .....

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/maintenance. 13. On ground no. 2 of the department s appeal for AY 2007-08 pertaining to disallowance on account of general charges, the Ld. AR submitted that the addition amounting to ₹ 50,000/- was made on estimation basis without any basis and cogent reasoning and the same has been rightly deleted by the Ld. CIT(A). It was submitted that these expenses were incurred not for bringing into existence any advantage of enduring nature to the assessee and that the details of expenditure were .....

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le. It was submitted that the settled proposition in law is that merely because claim was filed by the assessee as a bad debt under section 36(l)(vii), the same could not be disallowed even after finding that it was a business loss to and the same was to be considered while computing its business income u/s 28 of the Act. I.T.A. Nos. 1894/Del/2013 & 2245/Del/2013 15. The ld. AR submitted that as far as the assessee s appeal is concerned, the solitary ground pertains to the issue of depreciat .....

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1) of the Income Tax Act, 1961, as the expenditure do not relate to any expense on renovation etc. of any building in place. The repair and maintenance expenses are general in nature which is very much necessary for smooth running of the business of the assessee. It was submitted that the expenditure is revenue in nature as it does not provide any enduring benefit to the assessee and are mere general repair and maintenance expenses. 16. On the issue of disallowance of interest and ground no. 2 o .....

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ed. The condition stipulated for admissibility of business expenditure in terms of provisions of Section 36(l)(iii) of the Act, is that the same is expended for the purposes of the business. The assessee had borrowed the funds to invest in an entity to enlarge the scope of its business and enter a new geographical market with ease. The funds were borrowed with a purpose to enlarge the business of the assessee. 17. In response, for both the years, the Ld. DR placed heavy reliance on the Assessing .....

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NIL and as such his observations merit a serious consideration. On the grounds in the Department s appeals, the Ld. DR strongly supported the Assessing Officer s orders. 18. We have heard the rival submissions and perused the relevant material placed on record. Before proceeding to adjudicate the issue of purchase of trade-mark and depreciation thereon, it will be worthwhile to refer to some precedents laid down by the Hon ble Delhi High Court as well as the co-ordinate Benches of the ITAT. The .....

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ociated enterprises in their commercial or financial relations which differ from those which would be made between independent enterprises then any profit which would, but for those conditions, have accrued to one of the enterprises, but, by reason of those conditions, if not so accrued, may be included in the profits of that enterprise and taxed accordingly. By seeking to adjust the profits in the above manner, the arm s length principle of pricing follows the approach of treating the members o .....

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lled transaction ordinarily should be based on the transaction actually undertaken by the associated enterprises as it has been structured by them, using the methods applied by the taxpayer insofar as these are consistent with the methods described in Chapters II and III. In other than exceptional cases, the tax administration should not disregard the actual transactions or substitute other transactions for them. Restructuring of legitimate business transactions would be a wholly arbitrary exerc .....

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ransaction differs from its form. In such a case the tax administration may disregard the parties characterization of the transaction and recharacterise it in accordance with its substance. An example of this circumstance would be an investment in an associated enterprise in the form of interest -bearing debt when, at arm s length, having regard to the economic circumstances of the borrowing company, the investment would not be expected to be structured in this way. In this case it might be appr .....

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ure practically impedes the tax administration from determining an appropriate transfer price. An example of this circumstance would be a sale under a long-term contract, for a lump sum payment, of unlimited entitlement to the intellectual property rights arising as a result of future research for the term of the contract (as previously indicated in paragraph 1.10). While in this case it may be proper to respect the transaction as a transfer of commercial property, it would nevertheless be appro .....

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sets of circumstances described above, the character of the transaction may derive from the relationship between the parties rather than be determined by normal commercial conditions as may have been structured by the taxpayer to avoid or minimize tax. In such cases, the totality of its terms would be the result of a condition that would not have been made if the parties had been engaged in arm s length dealings. Article 9 would thus allow an adjustment of conditions to reflect those which the .....

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undertaken and structured by the associated enterprises. It is of further significance that the guidelines discourage re-structuring of legitimate business transactions. The reason for characterisation of such re-structuring as an arbitrary exercise, as given in the guidelines, is that it has the potential to create double taxation if the other tax administration does not share the same view as to how the transaction should be structured. 18. Two exceptions have been allowed to the aforesaid pri .....

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n fact, the CIT (Appeals) has referred to and applied them and his decision has been affirmed by the Tribunal. These guidelines, in a different form, have been recognized in the tax jurisprudence of our country earlier. It has been held by our courts that it is not for the revenue authorities to dictate to the assessee as to how he should conduct his business and it is not for them to tell the assessee as to what expenditure the assessee can incur. We may refer to a few of these authorities to e .....

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s earned . In CIT v. Walchand & Co. etc., (1967) 65 ITR 381, it was held by the Supreme Court that in applying the test of commercial expediency for determining whether the expenditure was wholly and exclusively laid out for the purpose of business, reasonableness of the expenditure has to be judged from the point of view of the businessman and not of the Revenue. It was further observed that the rule that expenditure can only be justified if there is corresponding increase in the profits wa .....

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to be considered by the Supreme Court again in CIT v. Rajendra Prasad Moody , (1978) 115 ITR 519, and it was observed as under: - We fail to appreciate how expenditure which is otherwise a proper expenditure can cease to be such merely because there is no receipt of income. Whatever is a proper outgoing by way of expenditure must be debited irrespective of whether there is receipt of income or not. That is the plain requirement of proper accounting and the interpretation of Section 57(iii) cann .....

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akes the position stronger. 20. In the case of Sassoon J. David & Co. Pvt. Ltd. v. CIT, (1979) 118 ITR 261 (SC), the Supreme Court referred to the legislative history and noted that when the Income Tax Bill of 1961 was introduced, Section 37(1) required that the expenditure should have been incurred wholly, necessarily and exclusively for the purposes of business in order to merit deduction. Pursuant to public protest, the word necessarily was omitted from the section. 21. The position emerg .....

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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 authorise 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 fa .....

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an never be a criterion to judge allowability of an expense; there is certainly no authority for that. What the TPO has done in the present case is to hold that the assessee ought not to have entered into the agreement to pay royalty/ brand fee, because it has been suffering losses continuously. So long as the expenditure or payment has been demonstrated to have been incurred or laid out for the purposes of business, it is no concern of the TPO to disallow the same on any extraneous reasoning. A .....

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s as to why it was suffering losses continuously and these have been referred to by us earlier. Full justification supported by facts and figures have been given to demonstrate that the increase in the employees cost, finance charges, administrative expenses, depreciation cost and capacity increase have contributed to the continuous losses. The comparative position over a period of 5 years from 1998 to 2003 with relevant figures have been given before the CIT (Appeals) and they are referred to i .....

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akefield (India)(P) Ltd 367 ITR 730 (Del.) : This is the distinction between the jurisdiction of the AO and the TPO; the TPO determines whether the stated transaction value represents the ALP or not (including whether the ALP is nil), while the AO makes the decision as to validity of the deduction under section 37. This means the decision as to whether the expenditure was "laid out or expended wholly and exclusively for the purposes of the business" is a fact determination or verificat .....

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as under : 5. We have considered the rival contentions and perused the paper books on record running into pages 513 in two Volumes. As seen from the record, assessee has conducted study report and placed necessary invoices, details, reports before the TPO. As rightly pointed out by the DRP, the assessee has capitalized the purchase price of the website and has not debited to the P&L A/c, therefore, the addition of the income as determined by the TPO was not called for. However, the disallowa .....

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h went unanswered. On a question was raised by the TPO that whether there is any need for purchase of such intangible, we are of the view that what is to purchase and what not to purchase is not in the domain of the AO, because it is a business decision of the assessee company and accordingly, when assessee purchased an intangible asset, what is required under the law is to examine whether the price paid by the assessee is arms length price or not. The TPO has no role to play in examining the de .....

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the site and also that assessee company generated revenues of ₹ 4.47 crores constituting 45% of the total revenues from Bharatstudent.com. Even after explaining that the intangible asset was actually used by the assessee in earning the revenues to the company of ₹ 4.47 crores, what else is required to establish is not understandable. Further, the assessee also furnished the valuation report where the valuer adopted the cost method and the assessee has paid only the cost incurred by .....

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the value shown by the assessee. In the absence of any counter report by the TPO/DRP or separate valuation done by the TPO, the assessee's valuation has to be accepted as it was supported by an independent valuer, who determined the cost price on the actual expenditure incurred by the AE. Considering the totality of the facts of the case, we are of the opinion that the website purchased by the assessee has to be considered at Arm's length. To this extent, the observation of the DRP stan .....

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ITAT in Zuari Cement Ltd. vs. DCIT in 57 taxmann.com 206 (Hyderabad Trib.) has held as under: Leave alone that amount; even the sub license fee for the use of trade mark is also faulty. Under the guise of TPO provisions, the TPO cannot determine the ALP at NIL as held by the Hon'ble Delhi High Court in the case of EKL Appliances Ltd., {supra). Therefore, rejecting the entire payment without there being any analysis on the CUP method cannot be accepted. In the guise of analyzing the transact .....

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alcementi Group brand which is used by assessee-company. The TPO's analysis of AMP expenses are also not correct. Even though Italcementi Group was being used from earlier years, AMP expenses of current year also included in this, which is not correct. Moreover, Italcementi Group itself is a 50% shareholder in the assessee-company from the beginning. Therefore, it cannot be stated that 'Zuari Cements' is exclusive brand owner of the Birla Group in exclusion of Italcementi Group. The .....

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y, even though consisted of three senior officers, did not apply its mind to the valid objections raised by assessee. In view of this, without deciding the merits of various issues, we set aside the orders and direct the TPO to re-consider the entire order and analyse them in fresh, first by determining the most appropriate method and then analyzing the transactions under the provisions of the TP. The orders of the TPO/DRP on the TP issues are therefore set aside and the entire issue on TP analy .....

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e assessee that he proposes to treat the impugned transaction as a sham one nor did he call for any objection from the assessee in that regard. The Learned A.R also relied up on host of case law in connection with this issue. Further the observation of DRP with regard to the trade mark registration, though defended before us by the assessee, requires examination at the end of the Assessing Officer/TPO. Accordingly we are of the view that the ALP of the impugned royalty payment and the issue rela .....

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expenditure incurred by him was also incurred out of necessity. It is also not necessary for the assessee to show that any expenditure incurred by him for the purpose of business carried on by him has actually resulted in profit or income either in the same year or in any of the subsequent years. The only condition is that the expenditure should have been incurred wholly and exclusively for the purpose of business and nothing more. It is this principle that inter alia finds expression in the OE .....

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lay in examining the decision of commercial nature. Under the guise of TPO provisions, the TPO cannot determine the ALP at NIL as held by the Hon'ble Delhi High Court in the case of EKL Appliances Ltd., {supra}. Therefore, rejecting the entire payment without there being any analysis on the CUP method cannot be accepted. In the guise of analyzing the transactions in the CUP method, the TPO has not brought any evidence on record to reject the payment made to Fab India Inc. In the instant case .....

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er affording necessary opportunity of being heard. In the result, Ground nos. 1 & 2 of the assesee s appeal are allowed for statistical purposes. 24. As far as ground no. 3 of the assessee s appeal and ground no. 1 of the Department s appeal in Assessment Year 2007-08 are concerned, the Ld. CIT(A) has dealt with the issue in para 6.6 of the impugned order as under:- 6.6. I have carefully examined the issue. The case laws cited by the appellant are not applicable to the facts and circumstance .....

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s examined the invoices amounting to ₹ 6,60,029/- and on the basis of this he has made an estimation to disallow ₹ 25,00,000/-. As there is no basis for this estimated disallowance, I am upholding the addition only to the extent of ₹ 6,60,029/-. Balance amount of the addition should be deleted by the AO. The AO is directed accordingly. 25. In view of specific finding recorded by the Ld. CIT (A), we find no reason to interfere and uphold his findings. Hence, ground no. 3 of asse .....

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itted that disallowances have been made without considering the invoices placed on record. In one case, invoice for ₹ 1,664/- was filed as additional evidence vide letter dated 19th June, 2012 on which remand report was called from the AO. On this invoice under General charges , no specific comments were given by the AO. On perusal of the invoice for the 8 entries in respect of which disallowance was made, it is clear that the expenditure was in the nature of upgradation of Tally software, .....

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wability of amount claimed as bad debts. The specific finding of the Ld. CIT (A) is in paras 8.1 to 8.3 of the impugned order, the same are reproduced as under:- 8.1 The Appellant has made payment of insurance premium twice to United India Insurance Company during the FY 2004-05 and the excess amount paid was debited to insurance company. On failure to get the refund/ adjustment of the same, the Appellant written off the said amount as irrecoverable during the year under consideration. 8.2 The A .....

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usiness and is expended wholly and exclusively for the purpose of the business. The appellant further submitted that there is no presumption under the law regarding recovery of payment from a government enterprise. I hold that, under these circumstances, AO was not correct in disallowing the claim of the appellant. AO is directed to allow ₹ 46,945/- as bad debts. 29. In view of the specific findings of the Ld. CIT(A), we decline to interfere and dismiss ground no. 3 of the Department s app .....

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the same reasoning and observations, we allow these grounds by restoring the issue to the file of the TPO for allowing depreciation on trade marks after the determination of ALP in Assessment Year 2007-08 as per our directions. Ground no. 4 of the assessee s appeal is dismissed as being premature. 32. As far as ground no. 1 of the Department s appeal in AY 2009-10 is concerned, the issue has been examined at length in para 5 of the impugned order as under:- 5. Ground No. 3 is on the issue of dis .....

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ubmitted that the expenditure has been incurred mainly on routine business maintenance expenses and small repairs, for smooth and efficient conducting of its business and were required to be incurred at regular intervals owing to commercial expediency of the business, which does not lead to coming into existence of any capital asset adding to the profit making apparatus of the business and as such, no enduring benefit can be said to have,been derived from such expenditure, as the same is regular .....

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tantly incurred, the benefit derived is ephemeral in nature due to the nature of business of the appellant. This is further so as the showrooms of the appellant company are leased premises. Against the specific disallowances made by the AO, the appellant has given its specific reply and submitted that the expenditure included painting, floor repair, Door Repairs, Almirah repair & remodeling, Drawers repair, polishing, purchase of MDF boxes & Jelly filled wires, AMC payment for EPABX syst .....

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ing of fire extinguishers and Job Work charges. In support of its contentions, the invoices were also placed on records, which substantiate the claim of the appellant. The appellant has submitted that the AO has not appreciated the above invoices during the course of assessment proceedings and that all the above expenditure is revenue in nature and has relied on the decision of jurisdictional High Court in Delhi Cloth and General Cotton Mills [1981] 6 Taxman 53 (Delhi), wherein the Hon ble High .....

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enditure enables the management to run the business more efficiently and profitably. no disallowance is permissible. Further, in respect of Invoice No. 252, 254 and 291 for the amount of ₹ 3,40,000/-, ₹ 30,000/- and ₹ 1,68,750/- regarding purchase of Label Deactivator, Electronic article surveillance system, etc, it has also submitted that the said amount has been already capitalized in its books of account which is clearly evident from the fixed Assets schedule and as such, no .....

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34. The last issue for adjudication is ground no. 2 of the Department s appeal for Assessment Year 2009-10 where the Department is contesting the deletion of addition of ₹ 3,73,973/- on account of interest payment on borrowed funds. The issue has been dealt in para 6 of the impugned order which reads as under:- 6. Ground No. 4 is on the issue of disallowance of interest payment on borrow of funds holding that the funds were used for acquisition of a company and therefore not for the purcha .....

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ested in East Limited, its associate company, for entering into the UK market, as the latter was in the same industry and business and having common Ethos 85 Philosophy as of the appellant s and it also had excellent management team, strategic store locations, which were imperative for a size of the business that the appellant was carrying on, to enter into a new market. In effect, the appellant submitted that the main purpose of the investment was to acquire controlling interest for launching . .....

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5th January 2009, using its funds of ₹ 7,50,00,000/- raised on overdraft limit. The said funds were repaid on 19th January 2009 i.e. the appellant used its overdraft limit for 13 days on which the bank has charged a sum of ₹ 3,73,973/- as interest. The AO disallowed the aforesaid interest holding that the appellant is not an investment company. It is the submission of the appellant that being an investment company is not a relevant criteria to claim deduction of interest u/s 36( 1)(i .....

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