TMI Blog2018 (12) TMI 691X X X X Extracts X X X X X X X X Extracts X X X X ..... in factual aspects, we find no merit in the orders of authorities below. Accordingly, we direct the Assessing Officer to delete the addition made on account of disallowance of management service fees. Disallowance of provision made for warranty - Held that:- The issue raised in the present appeal is similar where the assessee is following systematic manner of creating provision for warranty and there is no change in factual aspects, hence, we find no merit in the orders of authorities below in not allowing the claim of assessee. Accordingly, we direct the Assessing Officer to delete the addition. Claim of deduction for employer’s contribution to the employees’ superannuation and gratuity funds - Held that:- We find merit in the plea of assessee since after respective trusts were created, the approval was sought from the Commissioner in time. However, the said approval was granted later but from retrospective effect. So, once the approval has been given by the Commissioner by passing orders in respect of Group Gratuity Fund and Employees’ Superannuation Fund, then contribution made by the assessee to the aforesaid funds is to be allowed in its hands as deduction. Accordingly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eof and was wholly and exclusively for the legitimate needs of the appellant's business. 5. The learned DRP and the AO failed to appreciate that learned TPO had erred in exceeding the jurisdiction by judging the royalty payments through benefit test, which is not based on any of the method applicable to the relevant previous year as per Section 92C of the Income Tax Act 1961. The learned TPO failed to appreciate that the royalty agreement with AE had resulted into a bundle of benefits viz. know how, technical upgradation, brand, quality testing, product improvements and improvisation, access to global technical information and collaboration and assistance to the appellant and substantial savings in terms of improved productivity, better utilisation of material, manpower and machines over the period. 6. The learned DRP and the AO failed to appreciate that the Appellant had referred to and compared the rates of royalty paid to the AE with that of external uncontrolled comparable's viz. Federal Mogul, Climate Systems India Ltd., Sona Okegawa Precision Forgings Ltd., Eicher Motors Ltd., Swaraj Engines Ltd., Pragya Tools Ltd. that were in the similar business of manufactur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce of the fees in his draft order had failed to appreciate that the criteria adopted by him in disallowing the entire expenses were not at all relevant and applicable to invoke the provisions of Section 37. It is prayed that the disallowance of the service fees be deleted. Ground of Appeal 3: The learned DRP and the AO erred in confirming the disallowance ₹ 56,00,000/- made by the A.O. in his draft order though the warranty provision made in the preceding year/s had been allowed to the appellant on the backdrop of same set of facts. The learned DRP and the AO failed to appreciate that the AO in his draft order had erred in disallowing the said amount of warranty provision allegedly on the ground that the said amount represented provision for unforeseen liability. It is prayed that the disallowance of warranty provision be deleted. Ground of Appeal 4: The learned DRP and the AO erred in confirming the disallowance made by the A.O. in his draft order wherein the learned AO in his draft order had not dealt with the claim of the appellant for deduction of the amount of contribution paid as the employer to the employees' superannuation and gratuity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee s own case for assessment years 2009-10 to 2011-12 in respect of transfer pricing adjustment on account of royalty paid under the Technology Licensing Agreement and the issue has been decided by the Tribunal vide para 50 with order in assessment year 2009-10 in ITA Nos.251/PUN/2014, 1327/PUN/2014 and CO No.06/PUN/2015, dated 10.02.2017 and the said proposition has been followed in assessment year 2010-11 in ITA Nos.1321/PUN/2015 1350/PUN/2015, order dated 27.10.2017 and in assessment year 2011-12 in ITA No.376/PUN/2016 826/PUN/2016, order dated 09.02.2018. Since the issue has already been decided in favour of assessee and the TPO had made additions following earlier years and also the DRP had confirmed the order of TPO not following its order in earlier years to keep the issue alive, we find no merit in the aforesaid additions. Following the same parity of reasoning as in earlier years, we allow the claim of assessee. Consequently, sub-grounds of appeal No.1 to 8 in ground of appeal No.I are allowed. 7. Now, coming to sub-ground of appeal No.2 in ground of appeal No.II, where corporate issues have been raised. The first issue raised is against disallowance of manag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on grounds of commercial expediency. Where there is nexus between the expenditure incurred and the purpose of business, then the revenue cannot put itself in the arm chair of the businessman to decide how much of the expenditure is reasonable. Applying the above said proposition laid down by the Hon ble Supreme Court, we hold that the expenditure incurred by the assessee on management fees in order to facilitate smooth running of its business is an allowable expenditure in the hands of assessee. Similar expenditure has been allowed in the hands of assessee in preceding year. Another aspect of the issue is that the said management fees is to be taxed in the hands of recipient and even the service tax has been paid by the recipient, evidence of which is placed in the Paper Book. Once the commercial expediency of expenditure is established, then the same is to be allowed as business expenditure in the hands of assessee. We hold so. The ground of appeal No.5 raised by the assessee is thus, allowed. 9. Since the issue has been covered in favour of assessee and there is no change in factual aspects, we find no merit in the orders of authorities below. Accordingly, we direct the Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nuation and gratuity funds at ₹ 92,03,983/-. The assessee had applied for approval from the Commissioner of Employees Superannuation Fund and Employees Gratuity Fund. The said approval was sought by the assessee from the Commissioner in respect of group gratuity fund on 01.07.2001 and for employees superannuation fund on 31.03.1998. The assessee did not receive the said approval, hence it suo motu disallowed the employer s contribution to employees Superannuation and Gratuity funds of ₹ 92,03,983/- in computing its total income at the time of filing the return of income being contribution paid to funds which were not approved at that point of time. Subsequently, the assessee received approvals from the Commissioner with retrospective effect in respect of Gratuity Fund from assessment year 1998-99 and Superannuation Fund from assessment year 2001-02. The said communications are placed at pages 54 and 55 of Paper Book. Hence, before the DRP it took the plea that the said Contributions paid by the assessee, be allowed in its hands. The DRP in view of the ratio laid down by the Hon'ble Supreme Court in Goetze India Ltd Vs CIT (2006) 284 ITR 323 (SC), rejected the clai ..... X X X X Extracts X X X X X X X X Extracts X X X X
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