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TMI Blog2018 (12) TMI 691X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tax Transfer Pricing Officer -11, Pune (TPO). 2. The learned DRP and AO erred in confirming the adjustment to the transacted value of royalty which had arisen as a consequence of the ALP of royalty determined at nil by the learned TPO by following the order for the preceding A.Y. 2011-12 without appreciating that identical issue had come up before the DRP for the preceding A.Y. 2011-12 and before the Honourable CIT Appeals for the A.Y. 2010-11 and on the backdrop of identical set of facts in respect of the same royalty the upward adjustment made to the royalty were deleted in both the years. 3. The learned DRP in confirming the upward adjustment to the royalty erred in deviating from its own directions issued for the preceding assessment year in appellant's own case in respect of the same continued agreement for royalty. (Para 2.14 Page 13 of DRP order) 4. The learned DRP and the AO erred in not appreciating the fact that the royalty paid to the A.E. pursuant to Technology Licensing agreement was for use of new and latest licensed technology comprising of technical know-how, information and technical assistance developed during the term of the agreement for the manufacture ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the operating expenses and the operating profit used in the PLI working of OP to Sales and the said operating profit margin was found to be comparable with the mean PLI of external uncontrolled comparable's and consistent with ALP principle and therefore accepted by the TPO under TNMM in benchmarking the international transactions at the entity level. It is prayed that the upward adjustment made to the ALP of the royalty be deleted. 11. Non-TP Corporate issues Ground of Appeal 2: The learned DRP and the AO erred in confirming the disallowance of the entire amount of fees for business support services termed management fees Rs. 18,56,30,048/- paid for the various services provided to the appellant by the Indian group co-venturer company. The learned DRP and the AO failed to appreciate that the A.O. in his draft order had erred in questioning the necessity of payment of fees and drew adverse inferences by discrediting the comprehensive documentary evidences furnished before him in substantiation of the appellant's claim of the actual receipt of such services wholly and exclusively and for the legitimate business purposes. The learned DRP and the AO failed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... first issue raised by assessee vide ground of appeal No.I with sub-grounds of appeal No.1 to 8 is against TP adjustment made of Rs. 18,56,30,048/- in respect of transacted price of royalty paid to associated enterprises. Brief facts relating to the issue are that the assessee was engaged in the business of manufacture and sale of propeller shafts and light axles in the automotive industry segment. The assessee had entered into Technology Licensing Agreement with its associated enterprises AE Dana Corporation USA. Royalty was paid @ 2.85% of net sales by the assessee for the use of licensed technology in the manufacture of the said products pursuant to the renewal of the licensing agreement on 30.03.2007 for light axles and 14.06.2008 for propeller shafts, for a period of five years. The Transfer Pricing Officer (TPO) following earlier years, made the aforesaid upward adjustment in the hands of assessee, which was confirmed by Dispute Resolution Panel (DRP) and final assessment order was issued by the Assessing Officer, against which the assessee is in appeal. 7. Now, coming to sub-ground of appeal No.2 in ground of appeal No.II, where 6. We find that similar issue arose before th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es to be charged for providing the said services. The majority of support services are being rendered by the said concern to the assessee and the perusal of expenses debited by the assessee reflects that no major expenses have been incurred by the assessee and the benefits flow from AIPL to the assessee. The said benefits were for smooth carrying on of the business by the assessee and were incurred for the purpose of business. The assessee is the best judge to decide the expenditure it needs to incur for smooth carrying on of its business. The Assessing Officer cannot sit in judgment of businessman position in incurring any expenditure. The Hon'ble Supreme Court in Hero Cycles (P) Ltd. Vs. CIT (supra) have applied the ratio laid down by the Apex court in S.A. Builders Ltd. Vs. CIT(A) and another (2007) 288 ITR 1 (SC) and upheld the scope of commercial expediency, wherein it was held that The expression "commercial expediency" is an expression of wide import and includes such expenditure as a prudent businessman incurs for the purpose of business. The expenditure may not have been incurred under any legal obligation, but yet it is allowable as a business expenditure if it was incurr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company creates warranty provision in its books. Since the liability undertaken by the assessee to carry out the repairs, replacements of damaged part of goods sold by it during the warranty period was an existing accrued liability at the time of sale, the same was claimed as a deduction. 12. We find that similar issue of claim of provision for warranty had arisen before the Tribunal in assessee's own case in assessment year 2011-12 (supra) and the Tribunal vide para 8 in turn, relying on the decision of the Apex Court in the case of Rotork Controls India P. Ltd. Vs. CIT reported in 314 ITR 62 (SC), allowed the claim of assessee. 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 of Rs. 56 lakhs. The sub-ground of appeal No.3 in ground of appeal No.II is thus, allowed. 13. Now, coming to the last issue of claim of deduction for employer's contribution to the employees' superannuation and grat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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