TMI Blog2016 (1) TMI 1280X X X X Extracts X X X X X X X X Extracts X X X X ..... ee obtained concessions from the "J&J USA", in lieu of AMP expenditure contributing to the brand development, we are of the opinion that the AO's jurisdiction in this regard should revolve around all the assessee's explanations justifying the AMP expenditure of the assessee. Further, we have also considered the "remand guidelines" issued by the Tribunal in this regard, in connection with many other cases placed before us and find the said guidelines shall apply equally and AO should restrict his remand jurisdiction to the guidelines issued by the Tribunal in those cases. Accordingly, all the grounds relating to the TP issues are allowed for statistical purposes. Disallowance of interest expenditure claimed u/s 36(1)(iii) - Held that:- We find it relevant to remand the matter to the file of the AO for fresh adjudication on this issue after analysing existence of the interest free funds and applying the ratio of the jurisdictional High Court judgment in the case of Reliance Utilities (2009 (1) TMI 4 - BOMBAY HIGH COURT). In any case, in principle, we cannot approve the charging of notional interest when the assessee has raised the invoice to receive the amount relatable to the sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO to decide the alternative grievance of the assessee that if the cash discount reserve was not allowed in the earlier assessment year, the right back of the same would amount to double taxation, therefore, the same should be deleted after due verification. Considering the same, remand this matter to the file of the AO with identical directions. Disallowance of depreciation on testing equipment - Held that:- The depreciation should be allowed on the testing equipment provided to laboratories and hospitals free of charge as the said equipments have been provided to the laboratories and hospitals for making profit from the sale of slides. Short grant of credit of TDS - Held that:- When an assessee approaches the Assessing Officer with requisite details and particulars in the form of TDS certificate as an evidence against any mismatched amount, the said Assessing Officer will verify whether or not the deductor has made payment of the TDS in the Government Account and if the payment has been made, credit of the same should be given to the assessee. Considering the same, we direct the AO to grant the balance credit of the TDS ie ₹ 7,428/- after verification of the relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g to the Bright Line Method‟, the TPO considered six of the comparables ie (1) Dabar India Limited; (2) Emami Limited; (3) Godrej Consumer Products Limited; (4) Jyothi Laboratories Limited; (5) Marico Limited and (6) V V F Limited and treated the said AMP expenditure leading to the development of brand is a deemed international transaction and applied the average percentage of AMP expenses to net sales and held that the assessee‟s average AMP to net sales of 18.69% is not at Arm‟s Length and applied the Bright Line Test‟ (BLT). TPO determined the same at ₹ 133,01,90,388/- as adjustment to be made on account of reimbursement of brand promotion and marketing intangibles . AO added the same in his order dated 2.1.2014 made u/s 143(3) r.w.s 144C(13) of the Act. Further, the TPO also suggested the adjustment on account of royalty‟ amounting to ₹ 57,35,03,000/-. The total adjustments suggested by the TPO worked out to ₹ 190,36,93,388/-. Essentially, the TPO treated the AMP expenditure, the brand promotion / development expenditure is a deemed international transaction and applied the BLT relying on the Special Bench decision of the IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gment in the case of Sony Ericsson (supra). 5. On the other hand, Ld DR for the Revenue mentioned that remanding the matter, so proposed by the Ld Counsel for the assessee, may be done keeping all the issues open including the benchmarking of all the transactions initially accepted by the AO / TPO involving J J US‟. Ld DR also relied on the said judgment of the Hon‟ble Delhi High Court in the case of Sony Ericsson (supra) for the proposition that this kind of AMP expenses to the brand development is a deemed international transaction. However, he accepted the fact of rejection of the BLT‟ by the said Hon‟ble High Court. He also relied on various decisions of the Tribunal to support his case that the instant case requires remanding for de novo inspection of the TPO. 6. We have heard both the parties on this issue of benchmarking the AMP expenses qua the brand development and find the AO / TPO relied heavily on the Special Bench decision of ITAT, Delhi in the case of L.G. Electronics India Pvt Ltd (supra) in making the adjustments and in applying the BLT‟ in benchmarking the AMP expenditure. It is an undisputed fact that the Hon‟ble Delhi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore us and find the said guidelines shall apply equally and AO should restrict his remand jurisdiction to the guidelines issued by the Tribunal in those cases. Accordingly, all the grounds relating to the TP issues (Ground nos. 14 to 28) are allowed for statistical purposes. 8. Ground nos. 41 and 42 relates to the disallowance of ₹ 1.27 Crs out of interest expenditure claimed u/s 36(1)(iii) of the Act. In this regard, at the outset, Ld Counsel for the assessee submitted that this issue has come up for the first time in this year (AY 2009-2010). Explaining the facts relating to this disallowance, Ld Counsel for the assessee submitted that the assessee debited to the P L Account an amount of ₹ 10.60 Crs. The said amount is the current account balance of M/s. DePuy Medical Pvt Ltd (DePuy India), which is the subsidiary of the assessee. On scrutiny of the said account, AO / TPO has found out that the loan was utilised by the assessee to bear various overhead expenditure of its subsidiary company as well. Assessee segregated the relatable overhead expenditure such as loan, salary, office expenses etc and raised invoice for receiving the same from the subsidiary company. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8223; payment. In this regard, at the outset, Ld Counsel for the assessee submitted that an identical issue was decided by the Tribunal in favour of the assessee in assessee‟s own case for the AY 2002-03 in ITA No.4092/M/2007, dated 28th August 2013, copy of which is placed at pages 217 to 244 of the paper book. He further brought our attention the paper book pages 245 to 290, wherein the copies of the Tribunal‟s decisions in assessee‟s own cases for the AY 2006-07 in ITA No.83/M/2011, dated 5.2.2014 and for the AY 2008-09 in ITA No.7133/M/2012, dated 19.2.2014, and mentioned that the similar ground was adjudicated in favour of the assessee by the Tribunal relying on the ITAT‟s decision for the AY 2002-03. In this regard, it is the submission of the Ld Counsel for the assessee that the present grounds may also be decided in the same lines considering the identicalness of the issues involved. After hearing both the parties and on perusal of the cited decisions of the Tribunal in assessee‟s own cases (supra) and also considering the commonality of the issues involved in those appeals decided by the Tribunal (supra) and that of the ones raised in Ground n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -how royalty payment on sale of traded finished goods amounting to ₹ 15.82 Crs. In these grounds, assessee also raised another issue without prejudice to the above that even if the royalty paid by J J India on traded goods is to be disallowed, the disallowance should be restricted to the royalty paid on traded goods upto 30th June, 2008 since effective date of supplemental agreement is 1st July, 2008 which specifically provides for payment of royalty on traded products. Referring to the instant grounds, Ld Counsel for the assessee brought our attention to the agreements entered into between J J India and J J US for payment of technical / marketing know-how royalty. In this regard, he brought our attention to the agreements placed at pages, 339 to 392 of the paper book, which contains the Exhibits 1 to 4. He also mentioned that relevant additional evidence dated 17.9.2013 was also filed before the DRP. Further, Ld Counsel for the assessee submitted that an identical issue was decided by the Tribunal in assessee‟s own case for the AY 2002-03 in ITA No.4070/M/2007, dated 28.8.2013, wherein the Tribunal dismissed the Departmental appeal on this issue, relying on the earlier ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... als decided by the Tribunal for the AYs 2002-03; 2006-07 and 2008-09 (supra) and the issue involved in the instant ground, we allowed the Ground no.9 in favour of the assessee. 15. Ground no.10 relates to the disallowance of tax and R D cess paid on technical know-how royalty amounting to ₹ 8.22 Crs. In this regard, at the outset, Ld Counsel for the assessee brought our attention to decision of the Tribunal in assessee‟s own case for the AY 2002-03 in ITA No.4092/M/2007, dated 28.8.2013 (pages 217 to 244 (para 42) of the paper books is relevant) and mentioned that an identical issue was decided by the Tribunal, wherein the ITAT deleted the disallowance on the ground that the payment of royalty at Arm‟s Length and hence the payment arising on account of such royalty should not be disallowed. He also brought our attention to another decision of the Tribunal for the AY 2006-07 in assessee‟s own case [pages 245 to 275 (para 35) are relevant in this regard] in ITA No.83/M/2011 (supra), wherein while deciding the similar issue, ITAT relied on the decision of the Pune Tribunal in the case of Kirloskar Ebara Pumps 48 DTR (Pune) (Trib) 348, wherein it has been hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. Ground nos.29 and 30 relate to the disallowance of cost of production of advertisement films amounting to ₹ 6.05 Crs. Briefly stated relevant facts in this regard are that the assessee incurred 14.88 Crs towards publicity expenses‟ during the year under consideration. Out of the said amount, ₹ 6.05 Crs pertains to purchase cost of films and other production expenses for producing advertisement films and commercials to be used as TV spots‟ for advertisement. In the assessment, AO opined that the said expenses debited to the production of advertisement film accounts cannot be accepted as revenue expenditure‟ and disallowed the same by treating as capital expenditure‟. On appeal, DRP confirmed the said disallowance. Accordingly, AO made the said disallowance. Before us, Ld Counsel for the assessee brought our attention to various decisions of the Tribunal in assessee‟s own cases for the AYs 1997-98 to 1999-2000 [ITA Nos.145/M/01 and others]; AY 2001-02 and 2002-03 [ ITA Nos.2772/M/2004 and 9106/M/04]; AY 2002-03 [ ITA Nos. 4070/M/07]; AY 2006-07 [ ITA No.83/M/2011] and for AY 2008- 09 in ITA No.7133/M/2012, copies of which are placed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 145A of the Act. Further, the Tribunal also directed the AO to give corresponding benefit in the opening stock in view of the judgment of jurisdictional High Court in CIT vs. Mahalaxmi Glass Works P. Ltd [2009] 318 ITR 116 (Bom.). After hearing both the parties and respectfully following the said decision of the Tribunal in the earlier years (supra), we remand this issue to the file of the AO with identical directions. Accordingly, Ground no.31 raised by the assessee is allowed for statistical purposes. 19. Ground nos. 32 and 33 relate to the disallowance of provision for reserve for cash discount ₹ 1224/-. Without prejudice to the above, it is also reasoned by the assessee that considering the fact that in AY 2008-2009, the similar provision for cash discount was not allowed as a deduction, and therefore, the write back of the same is not taxable in the year under consideration. Before us, Ld Counsel for the assessee briefed the facts which include that in the AY 2008-09, assessee claimed a deduction of ₹ 8,48,235/- on account of provision for cash discount. In the assessment, AO allowed only the discount actually availed of ₹ 2,64,331/- and the balance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e adjudicating the similar issue in favour of the assessee in the above said appeal, the Tribunal relied on the decision of the ITAT in the assessee‟s sister concern namely NR Jet Enterprises Limited vide ITA No.4474/M/2004, dated 28.5.2008, wherein it was held that the depreciation should be allowed on the testing equipment provided to laboratories and hospitals free of charge as the said equipments have been provided to the laboratories and hospitals for making profit from the sale of slides. We, respectfully following the said decision of the Tribunal, as well as following the principle of consistency, allowed the issue raised in Ground nos. 34 and 35 of the appeals in favour of the assessee. 21. Referring to Ground nos. 36 to 40, Ld Counsel for the assessee mentioned that the said grounds are not pressed. Accordingly, Ground nos. 36 to 40 are dismissed as not pressed. 22. Ground no.43 relates to the short grant of credit of TDS amounting to ₹ 7,428/-. During the assessee claimed total TDS credit of ₹ 2,35,39,455/-. In the assessment after considering the submissions of the assessee, AO granted credit of TDS of ₹ 2,35,32,027/- with short of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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