TMI Blog2019 (10) TMI 1070X X X X Extracts X X X X X X X X Extracts X X X X ..... Expenses relate to, service fee paid by the company for R T Services obtained by the company, from another group company of the assessee i.e., ICT India Research Technology Centre (ICI). ICT is a company registered u/s 25 of the Act as a not for profit organization. ICT provides manufacturing and training support services to the assessee on cost to cost basis. Accordingly, the expenses covered under the head R T expenses pertain to the fee paid to ICT. ICT provides technical support and training to the manufacturing and marketing operations of Paints Business Division. The Tribunal after examining the services rendered by the ICT has given a factual finding that the assessee has not carried out any R T activities. The expenditure in question is incurred only for its manufacturing operations and local environmental compliance from HSE perspective. The assessee submitted that ICT also does not carry out any research and development activities for development of any new project/technology. It is primarily a captive support centre for the local India operation of the assessee. Thus, considering these facts, the Tribunal held that the expenditure on research and training does not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thout rejecting the books of account which is undisputedly statutorily audited. According to us, the AO cannot resort to estimation of disallowance without satisfying the condition laid down under sec. 145 of the Act. And, we do not countenance the ad hoc disallowance which action itself is per-se arbitrary in nature and has no sanction of law. Having said so, we are of the opinion that the AO is empowered to disallow the expenditure claimed by the assessee if there is deficiency in the vouchers or the bills supporting the incurrence of expenditure. AO atleast on test-check basis can verify the veracity of the expenditure and examine whether the claim made are allowable as per law, and the assessee to produce supporting bills/vouchers/proof of the expenditure, which the AO calls specifically for examination. Thus as discussed, once the assessee submits the details before the AO, then he can verify the veracity of the expenditure and if allowable by law, then it should be allowed in accordance to law. So, we set aside the impugned action of Ld. DRP/AO on this issue and remand the issue back to the file of AO for de novo adjudication - Appeal of the assessee is partly allowed for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 863,539/Kol/2016 612/Kol/2017 (ITAT, Kol.) iv) Organon (India) Pvt. Ltd. (ITA Nos. 633 2450/Kol/2017 (ITAT, Kol.) The Ld. AR also brought to the notice of the Bench that this issue is squarely covered in favour of the assessee by the decision of this Tribunal in its own case in ITA No. 560/Kol/2016 ITA No. 315/Kol/2016 vide order dated 28.08.2019. 5. On the other hand, the Ld. DR supported the action of the lower authorities in rejecting the contention of the assessee and relied on the order of the lower authorities and does not want us to interfere in the order of the lower authorities. 6. We have heard rival submissions and carefully gone through the material available on record. We also note that the issue in hand is squarely covered by the decision of this Tribunal, in assessee s own case in ITA No. 560/Kol/2016 ITA No. 315/Kol/2016 wherein the Tribunal by order dated 28.08.2019 has held that that the AMP expenses cannot be regarded as an international transaction as per section 92 B of the Act in the case of the assessee, so as to invoke provisions of section 92 of the Act. And since the AMP expendit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e context of those Assessees whose cases have been disposed of by that judgment and who did not dispute the existence of an international transaction regarding AMP expenses. In view of we note that the facts of the above case are identical to the present issue, thus the principle laid down by the Hon'ble Delhi High Court in the case of Maruti Suzuki India Limited (supra) are applicable to the instant case. Respectfully following the same we dismiss the ground of appeal filed by the Revenue. 6.2. The Kolkata C Bench of the Tribunal in the case of Organon India Pvt. Ltd. vs. DCIT in ITA Nos. 633 2459/Kol/2017, order dt. 24/10/2018, applied the ratio of decision in the case of Philips India Ltd vs ACIT in ITA No. 2489/Kol/2017 dated 4.4.2018 for Asst Year 2013-14, and came to a conclusion that the AMP expenditure is not an international transaction. 6.3. The argument of the ld. D/R that on facts the assessee is a distributor, is not emanating from the records. The assessee is engaged in manufacturing and supply activities. Thus, the argument of the ld. D/R is rejected on facts. The facts of the assessee s case and the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... action as per section 92 B of the Act. We also note that the issue in hand is squarely covered by the decision of this Tribunal in assessee s own case in ITA No. 560/Kol/2016 ITA No. 315/Kol/2016 wherein this Tribunal by order dated 28.08.2019 has held that the expenses in question covered under R T Expenses relate to, service fee paid by the company for R T Services obtained by the company, from another group company of the assessee i.e., ICT India Research Technology Centre (ICI). ICT is a company registered u/s 25 of the Act as a not for profit organization. ICT provides manufacturing and training support services to the assessee on cost to cost basis. Accordingly, the expenses covered under the head R T expenses pertain to the fee paid to ICT. ICT provides technical support and training to the manufacturing and marketing operations of Paints Business Division. The Tribunal after examining the services rendered by the ICT has given a factual finding that the assessee has not carried out any R T activities. The expenditure in question is incurred only for its manufacturing operations and local environmental compliance from HSE perspective. The assessee submitted that ICT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocess gaps. provided training to the marketing team on the product, the nature and feature of the products etc. necessary for sales and marketing of the Appellant's products in the designated market i.e. India. assisted the Quality department in handling product defect/ quality issue or redressing any product complaints from the customers. 8.2. A perusal of the above demonstrates that, on facts the assessee has not carried out any R T activities. The expenditure in question is incurred only for its manufacturing operations and local environmental compliance from HSE perspective. The assessee submitted that ICT also does not carry out any research and development activities for development of any new project/technology. It is primarily a captive support centre for the local India operation of the assessee. Thus, we are of the considered opinion that the expenditure on research and training does not constitute any international transactions on facts. We also find that the TPO/AO has not considered this expenditure incurred in the earlier years towards R T expenses, as international transactions. Thus, in view of the above d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... neous plea that agreement between assessee and ANCR was not placed before him, we set aside the order of ld. DRP/AO TPO and remand the matter back to TPO for fresh consideration and pass order in the light of the Tribunal's detailed analysis of the agreement between assessee and ANPAP which we decided supra. The TPO is directed to pass speaking order after giving proper opportunity to assessee on this issue. 10. Consistent with the view taken therein, as agreed by both the parties, we restore this issue to the file of the Assessing Officer, for fresh adjudication, in accordance with law. Accordingly, this ground of the assessee is allowed for statistical purposes. Since issue is identical, respectfully following the decision cited supra, we restore this issue back to the file of the AO for fresh adjudication in accordance to law. Accordingly, this ground of appeal of assessee is allowed for statistical purposes. 11. Ground no. 5 is against the action of AO/TPO in not giving appropriate effect to the order of Ld. DRP and making an addition of ₹ 4,93,09,294/- in relation to payment made on account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee s own case in AY 2014-15. So, he urged us to remand the matter back to TPO for de novo adjudication. Per contra, the Ld. DR contended that assessee company has to first demonstrate that its sister concern M/s. Akzo Novel Car Refinishes India Pvt. Ltd. is similar in functional profile and product similarly etc. and then only the TPO can consider the decision in M/s. Akzo Novel Car Refinishes and accept/reject comparables as decided by the Tribunal and apply the same to the assessee s case for adjudication of arms length consideration. 13. After hearing the rival submissions, we note that as per the assessee, the adjustment made by TPO towards contract Research Development Service (Contract R D) rendered to the AE is erroneous for not taking into consideration the Tribunal s decision in assessee s sister concern M/s. Akzo Novel Car Refinishes India Pvt. Ltd. wherein the Tribunal while adjudicating similar issue has excluded Pharma Companies from the list of comparables and which action of Tribunal has been followed by the Ld. DRP in assessee s own case for AY 2014-15. If that is the case, then we are inclined to set aside the impugned order and remand the is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claimed cash discount expenses and publicity and advertisement expenses in preceding years as well. However, the department has never questioned the said expenses in the past. Accordingly, the said expenditure should be allowed following the principle of consistency. For that, he relied on the following judicial precedents: i) Radhasoami Satsang Vs. CIT (1992) 193 ITR 321. ii) CIT Vs. A.K.J. Security Printers (2003) 264 ITR 276 and iii) CIT Vs. Neo Poly pack (P) Ltd. (2000) 12 Taxman 363. 15. On the other hand, the Ld. DR placed heavy reliance on the orders of the lower authorities and urged before the bench not to interfere in the order of the AO. 16. We have heard rival submissions and gone through the facts and circumstances of the case and the facts are not repeated again for the sake of brevity. The assessee has claimed deduction of the expenditure to the tune of ₹ 71 lakhs and ₹ 109.2 cr. on account of cash discount and publicity and advertisement expenses respectively. The AO has restricted the disallowance of the expenditure claimed to the tune of ₹ 35.50 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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