9911796707
TMI Blog2015 (10) TMI 2723X X X X Extracts X X X X X X X X Extracts X X X X ..... der of the CIT (A)-15, Mumbai for the assessment year 2003-2004. In this appeal, assessee raised the following grounds which read as under: "1. The Ld CIT (A) erred in not allowing the additional claim of the appellant company of INR 4,36,058/- being contributions to provident fund etc made by the appellant company and which were paid before filing the return of income. 2. The Ld CIT (A) erred in confirming the disallowance of INR 11,34,779/- being expenses towards customs duty, duty drawback, etc., which although pertaining to earlier years were actually crystallized during the assessment year under consideration. 3. (i) The Ld CIT (A) erred in confirming the disallowance of INR 35,64,988 being the amount in respect to unreconciled sundry creditors. (ii) The Ld CIT (A) erred in not considering the submission of the appellant company in correct perspective. 4. The Ld CIT (A) erred in confirming the disallowance of INR 11,62,250 being travelling expenses of the sales team incurred during the year. 5. The Ld CIT (A) erred in confirming the disallowance of INR 47,78,416/- being expenses incurred under the head Advertisement and Sales Promotion. 6. The Ld CIT (A) er ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said report no prior period expenses are debited to the profit and loss account. He further submitted that forfeiture of customs duty / lapse of duty drawback are allowable expenditure under section 37 of the Act. In support of this, he relied on various precedents. On the other hand, Ld DR relied on the orders of the Revenue Authorities. On hearing both the parties and on perusal of the relevant material placed before us, we find this matter should be remanded to the file of the AO with a direction to examine and adjudicate the issue afresh after affording a reasonable opportunity of being heard to the assessee. Accordingly, Ground no.2 is allowed for statistical purposes. 6. Ground no.3 relates to the disallowance of unreconciled sundry creditors of Rs. 35,64,988/-. During assessment proceedings, AO called for explanation in this regard and on perusal of the same, AO observed that the assessee debited an excess amount of Rs. 35,64,988/- against the confirmation from the creditors. Accordingly, AO disallowed the said amount considering the assesseed‟s failure to reconcile the difference. On appeal, CIT (A) confirmed the AO‟s decision and upheld the disallowance m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been held that any sum representing the estimated expenditure which had to be incurred by the assessee in discharging a liability. Alternatively, it is the submission of the assessee that since the expenses are actually incurred during the FY 2003-2004, the expenses should be allowed for AY 2004-05 corresponding to the FY 2003-2004. After hearing both the Ld Representatives in this regard, we are of the opinion that this matter should also be remanded to the file of the AO to adjudicate the issue afresh in the light of the above mentioned Apex Court judgment and also considering the relevant material available on the subject after affording a reasonable opportunity of being heard to the assessee. Accordingly, Ground no.4 raised by the assessee is statistically allowed. 7. Ground no.5 Relates to the disallowance of expenses under the head advertisement and sales promotion of Rs. 47,78,416/-. Briefly stated, in the P & L Account, assessee debited an amount of Rs. 1,34,59,595/- under the head „customer / trade promotions‟ grouped under the head „advertisement and sales promotion‟. In the assessment, AO observed that the assessee has furnished only a breaku ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fer Pricing Issues 11. Ground no.8 relates to the addition of Rs. 4,40,82,451/- made in respect of Transfer Pricing adjustment made in respect of the international transaction related to import of finished goods. Briefly stated relevant facts include that the assessee (Mettel) is an indirectly wholly owned subsidiary of Mattel Inc. USA. During the year, assessee recorded manufacturing and distribution segments. Like in earlier AY, the assessee imported high end Toys from its AE for sale third parties in India worth Rs. 6.44 crores. Assessee benchmarked the said international transaction by applying TNMM method initially and subsequently substituted the same with RPM method. Application of 'most appropriate method' is the subject matter of dispute before the Tribunal in AY 2002-03. Assessee claims, being a distributor, the RPM is the most appropriate one. In the AY 2003-2004, assessee benchmarked the transaction by using RPM method and the TPO rejected the same. Instead, he applied the TNMM method. Assessee is of the view that being a distributor, the RPM is most appropriate method. Rejecting the same, the TPO computed adjustment of INR 4,50,53,151/- after considering the ALP at 0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dia (P) Limited in ITA No. 5085/Mum/2010 which is relevant for the proposition that with the internal comparables, the higher degree of comparability is achieved. 12. On the other hand, Sri Mahesh Shah, Ld Sr DR for the Revenue (on rottion duty) argued stating that the assessee not merely a distributor for applying the internal RPM of the assessee. He relied heavily on the order of the AO / TPO / CIT (A) and traced the correspondence of the TRO with the assessee on the requirement of benchmarking the impugned international transactions with AE by using the TNMM and the external comparable. Considering the non compliance, TPO proceeded to under take the ALP studies by using his six comparables which were selected by the assessee in the AY 2002-03. 0.75% is the average operating margin of the said comparables. TPO rejected the RPM and the GP margins of the assessee. On the issue of the covered nature of the issues relating to the „most appropriate method‟ and the related issues, Ld Sr DR is of the view that the order of the Tribunal for the AY 2002-03 needs to distinguished as the same do not deal with the issue of AMP expenditure and the intangibles created by such expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom page 13 of his write up). Further, compiling the data on AMP, he tried to make out that the expenditure incurred by the assessee on advertisement is on higher side with 3.06% where the comparables registered on that advertisement a/c varying from 0.001% to 0.38% to 1.98%. Thus, Ld DR argued that the Tribunal, without going into the facts relating to 1. marketing intangibles; and 2. Value additions such as packaging, delivery methods etc, approved the RPM method in the asst year 2002-03. He pleaded for distinguishing the same and approve the order of the AO/TPO/CIT(A) on this issue. 13. We have heard both the parties and perused the orders of the AO / TPO / CIT (A) as well as the written submissions of both the parties. Relevance of the Order of the Tribunal for the AY 2002-03: on this issue, the undisputed fact is that the said orders primarily deal with the most appropriate method of account between the RPM and the TNMM. In that year, the assessee initially conducted the ALP studies based on the TNMM and substituted the RPM during the proceedings before the revenue authorities. The said order is categorical in mentioning that the assessee is a distributor in that year. Rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on how the Tribunal has come to the finding of fact that there are no market intangibles and value addition to the resold products in that year. Further, it is a fact that the said order of the tribunal was made after the impugned orders are made. The same was available to the TPO /CIT(A) at the relevant point of time. Before us, the counsels also indicated for remanding to AO for decision on the above issues in the light of the said order of the Tribunal if the facts are similar. Of course, Ld counsels both the parties vehemently argued on the issue of the similarity of the facts relating the AY 2002-03 and the instant year. Further, the new contention of the Ld DR revolves around the huge AMP expenses incurred by the assessee and their contribution to the generation of value addition to the products imported from the AE and the marketing intangibles. Ld DR‟s arguments are essentially focussed on the creation of the „intangibles‟ ie brand or other commercial rights etc and therefore, he justifies the adopting of the TNMM. After hearing both the parties and perusing the written submissions, we find the order of the Tribunal for the AY 2002-2003 should make lot o ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
