TMI Blog2019 (4) TMI 1774X X X X Extracts X X X X X X X X Extracts X X X X ..... ble. The return depends upon the functions performed by the legal owner, assets it uses, and the risks assumed; and if the legal owner does not perform any relevant function, uses no relevant assets, and assumes no relevant risks, but acts solely as a title holding entity, then the legal owner of the intangible will not be entitled to any portion of the return derived by the MNE group from the exploitation of the intangible other than the Arm s Length compensation if any for holding the title. It would be very difficult to treat AMP as separate international transaction and any attempt to benchmark such a presume transaction in any manner would be a very difficult exercise. The entire finding and approach of the TPO and DRP has been purely based on hypothesis and one of the agreement entered in the earlier year for a limited period of six months and this has been stated to be a material so as to determine that there was an international transaction qua AMP expenditure in this year. Such a presumption based on said agreement cannot be inferred in this year at all as, firstly, it was for a very limited period in one of the earlier year as stated above; and secondly, each year h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ORDER PER AMIT SHUKLA JM: The aforesaid cross appeals have been filed by the assessee as well as by the Revenue against the directions dated 30.12.2014 given by the Ld. Dispute Resolution Panel-I, New Delhi (DRP), u/s.144C (5) for the Assessment Year 2010- 11. We will first take up the assessee s appeal wherein the assessee has challenged; firstly, transfer pricing adjustment of ₹ 9,96,08,173/- on account of advertisement, marketing and promotion (AMP expenses); and secondly, addition of ₹ 3,86,63,023/- on account of bad debts. 2. The facts in brief are that the assessee, CASIO India Ltd. is a wholly owned subsidiary of CASIO Japan and undertakes marketing of CASIO products in India manufactured by its parent company and is acting as an independent distributor of CASIO products. During the year, assessee has undertaken the following international transactions as reported in TP study report: - Sl. No Type of International Transaction Total value of Transaction (INR) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ely domestic transaction undertaken with a third party and it is not an international transaction within the purview of Section 92B. Apart from that, it was also stated that commission on sale could not be added in AMP expenses. By incurring AMP expenditure, the actual beneficiary is the assessee-company only, because it helps in promoting and increasing the sales of the assessee in India and profit from such sales is of assessee only and no economic benefit whatsoever has arisen to the AE. 4. Ld. TPO rejected the assessee s contention and strongly relied upon the decision of ITAT Special Bench in the case of LG Electronics India Ltd. vs. ACIT, Circle-3, Noida, ITA No.5140/Del/2011 to conclude that AMP expenditure is an international transaction which needs to be bench marked separately. He also rejected the assessee s contention that commission on sales should be excluded from AMP expenses on the ground that commission on sales is an expense that is critical for pushing and promoting the brand and there is a direct link between the dealer and distributor and the effort to promote a certain product. He noted that AMP/sales ratio in the case of assessee is 7.5% and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontrolled comparables. To the extent assessee's marketing effort is greater than the routine effort (as indicated by a comparison with the average AMP expenditure incurred by comparables), it needs to be compensated for the excessive marketing effort. 5. TPO further rejected the assessee s contention that incurring of such AMP expenditure has resulted in increase in sales by bringing more customers into the net of the company or to retain old customers and held that consistently incurring higher AMP though results in increase in sales but also directly benefits the overseas AE from whom CASIO products are imported for resale in Indian market. He further held that AMP expenses are not domestic transactions, because earlier assessee had an agreement with AE for support of its AMP activities, and therefore, it falls under the ambit of international transaction. The assessee had also tried to demonstrate by way of an alternate argument to point out that even in the cases of comparables, the average AMP expenditure was around assessee s ratio, i.e., 5.75% and the list of such various comparables have been given at pages 16 to 19 of the TPO s order. TPO also noted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al property rights relating to marketing vests with AE, therefore, AMP promotes in creating intangibles for the AE. DRP further observed that the assessee has not submitted any agreement with the third party through which it has done its publicity and advertisement and it has also not furnished copies of advertisement provided in print media. The DRP proceeded on the premise that there was an involvement of the AE with regard to strategy factors relating to product placement and assessee has not submitted any agreement with the AE as was there in the earlier year. The DRP has also incorporated the terms of earlier agreement in the impugned order. Regarding issue of availability of material on record to hold whether AMP expenditure in addition to the expenditure benchmarked for routine distribution functions was in the nature of services to the AE or not, DRP had made following observations:- 1. The TPO has brought sufficient material on record to justify that the taxpayer had entered into the exercise of development of marketing intangibles for its AE- by incurring of expenditure as well as by application of services without being suitably compensated. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roviding it with the necessary information and opinion also by measuring the effect of the activities carried out in its territory. (Bold portion - Emphasis Supplied) The second party shall carry out the necessary advertising and promotional activities to expand the business of the products concerned at its own cost and own decision within its territory. The purchase price for the second party shall be decided successively by the discussion between the first and second party; From the above Clauses of the MOU, it is observed that the taxpayer is agreement - bound to carry out activities for the promotion of products of its AE. It has further been stipulated that the taxpayer is bound to furnish information to AE in respect of such activities carried out by it. This makes it amply clear that-the taxpayer is engaged in activities relating to promotion of brand and development of marketing intangibles for its AE. The taxpayer has also submitted a clarification from its AE which is reproduced hereunder: Casio Computer Co., Ltd hereby, certify that the management of Casio India Company Private Limited and its mark ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... OC OP OP/Sal es NP NP/sal es GP GP/sal es AMP AMP % Intang % RPT Savex Computers Ltd. 1161.1 4 1161.1 9 1119.6 6 41.53 3.58 18.83 1.62 101.7 6 8.76 1.92 0.17 0.00 0.02 Nouveau Global Ventures Ltd. 133.91 133.76 133.17 0.59 0.44 0.25 0.19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - 324.2 3 -5.24 432.0 2 6.98 0.7 0.01 0.01 0.55 Spanco Ltd. 1182.9 5 1299.5 1 1163.7 3 135.7 8 11.48 - 107.7 5 -9.11 288.4 4 24.38 0.81 0.07 0.38 0.73 Jupiter Internation al Ltd. 189.1 185.53 177.08 8.45 4.47 4.5 2.38 24.41 12.91 6.61 3.50 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 34.26 128.5 9 12.3 7 0.17 10.2 8 Adit Ecommerc e Pvt. ltd. 1.64 1.64 1.8 -0.16 -9.76 -0.1 -6.10 0.15 9.15 0 0.00 4.27 13.4 1 Average 2.94 -1.23 11.28 1.62 11. However, after detailed discussion, the DRP observed that Bright Line Test is nothing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reads as under: Outsourcing of Advertisement agreement This agreement was presented as of 25th April 2007 by and between CASIO COMPUTER CO. LTD. duly organized and existing under and by virtue of the laws and regulations of Japan and having its principal office at 6-2 Hon- machi 1 chome Shibuya- Ku, Tokyo 151-8543, Japan (hereinafter referred to as CASIO ), and CASIO INDIA CO., PVT, LTD. duly organized and existing under the laws and regulations of India and having its principal office at 217- A, Okhla Industrial Estate, Phase- III, New Delhi 110020 (hereinafter called CASIO INDIA). Article 1: Subject Strictly for the increased sales and enhancement of the brand image and reputation of Casio Watch Clock in India, Casio India Co. carries out local promotion on behalf of Casio, CasioIndia shall make advance planning for such local promotion activities and furnish Casio with the schedule and its relevant estimated quotation before execution for possible comments, suggestions and alternations and final approval by Casio. Article 2: Indemnification In any case, CASIO I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat such an agreement would be there for this Assessment Year also. From the very terms of the agreement it can be seen that, it was only for the limited period of six months, i.e., for 25th April, 2007 to 30th September, 2007. He further submitted that assessee is an independent and full-fledged distributor having entire risk of distribution and sales of CASIO products. The entire marketing strategy has been independently planned and executed by CASIO India and it is the assessee alone which conducts marketing activities like market research, creation of product, brochure, monitoring, market demand, formulating market strategy and budgets. The assessee alone was responsible for deciding types of marketing activities to be performed and determines independently the appropriate advertisement and marketing mixed in telephone, newspaper magazines, road shows etc. From nowhere, it can be inferred that any AMP expenditure has been incurred either on behest on AE or for providing any kind of benefit to the AE. The assessee has been independently purchasing the finished goods and spare parts from the AE and selling the same in carrying out the sales activity in India entirely at its own r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e further submitted that the assessee undisputedly is a distributor of its AE and brand is owned by the AE and therefore any value addition created by AMP expenses directly benefits the AE. The assessee before the DRP has admitted that it has been adequately compensated by premium return for excess of AMP spend through sale of products in the Indian market and its pricing policy for various International transactions. Under these facts, findings of Hon ble High Court of Delhi in the case of Sony Ericson in para 52 53 is squarely applicable as in present case also the assessee has admitted that it has been compensated properly for all function on entity level i.e. distribution and other functions. The relevant portion of judgement of Hon ble Delhi High Court in the case of Sony Ericson in ITA No. 16/2014 is reproduced as under: 52. The contention that AMP expenses are not international transactions has to be rejected. There seems to be an incongruity in the submission of the assessee on the said aspect for the simple reason that in most cases the assessed have submitted that the international transactions between them and the AE, resident abroad included the cost ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relatively weak brand. He concluded that the promotion of the co-branding of Maruti-Suzuki had resulted in (a) promotion of the trade mark of the AE; (b) the use of the trade mark Maruti' of the MSIL; (c) reinforcement of the Suzuki trademark which was a weak brand as compared to Maruti in India and; (d) impairment of the value of the Maruti trademark due to co-branding process. 18. Subsequent decision by Hon ble High Court in case of Whirlpool India Ltd. ITA No. 610/2014 has followed decision of in the case of Maruti Suzuki being manufacturer; though in those cases no brand was owned by the assessee. In any case the decision of Maruti is not applicable in distributor s case. In past year, there has been compensation/subsidy from AE to the assessee for performing and enhancing brand building of AE. Overall functions including distributions AMP during this year is similar. Therefore, during this year also the assessee is performing AMP functions on behalf of AE. Thus, he submitted that AMP expense may be held as an International Trisection and bench making of AMP has to be done in accordance with the decision of Hon ble Delhi High Court in the case of Sony E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bring the products to the customers' attention. * Local marketing strategy is independently planned and executed by Casio India. Casio India conducts marketing activities such as performing market research, creation of product brochures, monitoring market demand, formulating marketing strategies and budgets. Casio India is responsible for deciding the types of marketing activities to be performed and the timing of these activities in India. Casio India determines the appropriate advertising and marketing mix in television, newspaper, magazine, cinema, print, road shows and technical training seminars. Packaging and Labelling * Packaging and labelling activities involve the determination of the manner in which a product is packaged and labeled for shipment to a customer and the execution of those decisions. Packaging and labelling requirements are often affected by the legal and regulatory environment of both the party shipping and party receiving the product. * Products are dispatched by the manufacturers in the final packed condition along with an instruction manual. However, Casio India inserts a warrant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39;s customers. Casio India also received as product guarantee fee from Casio Japan. * The functions performed by Casio India and its AEs, are summarized in the table below: Business Risk/ Market Risk * Business risk arises when a firm is subject to adverse sales conditions due to either increased competition in the marketplace, adverse demand conditions within the market, or the inability to develop markets or position products to service targeted customers. * Casio India bears the market risk since it is also responsible for marketing the goods to ensure that the targeted sales volume results in recovery of purchase price, related expenses and a reasonable margin. Casio India is responsible for any price fluctuation in the market and for any under-recovery of fixed or variable costs. Further, Casio India has to bear the impact of any lack of demand in the Indian market for any product though due to its trading business it has the flexibility to discontinue slow moving models without any significant costs. * In summary, the market risks potentially faced by Casio India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in the products. Also since Casio Japan provides a product guarantee fee to Casio India, the product liability risk is shared by the transacting entities. * However in exceptional cases such as an inherent product fault or recall which impacts a group of prod which is due to product quality issue, the costs (including product recall) involved are borne by the product manufacturer. Credit and Collection Risk * When an entity supplies products or services to a customer in advance of customer payment, the firm runs risk of default of such payment. * Since the AEs export goods to their group entity (i.e. Casio India), they bear a limited credit and collection r L In relation to payment due to Casio India from the endcustomers in the Indian market, Casio India bearing related credit and collection risks such as delay in collection of receivables, bad debts, etc. Foreign Exchange Risk * Exchange rate risk relates to the potential variability of profits that can arise because of changes in foreign exchange rates and arises whenever the transacting currency of an entity is differen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re of transaction described in the section will also include mutual agreement and the arrangement between the parties for allocation or apportionment or any contribution to any cost or expenses incurred or to be incurred in connection with benefit, services and facility provided to any of such parties. Relevant Explanation to Section 92B as inserted by the Finance Act, 2012 reads as under: - i. the expression international transaction shall include- (b) the purchase, sale, transfer, lease or use of intangible property, including the transfer of ownership or the provision of use of rights regarding land use, copyrights, patents, trademarks, licences, franchises, customer list, marketing channel, brand, commercial secret, know-how, industrial property right, exterior design or practical and new design or any other business or commercial rights of similar nature; Clause (ii) of the said explanation reads as followsii. the expression intangible property shall include- (a) marketing related intangible assets, such as, trademarks, trade names, brand names, logos; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eing any corresponding binding obligation on the other or any such kind of an arrangement actually existing in wring or oral or otherwise, it cannot be characterized as international transaction within the scope and definition of Section 92B (1). 22. The Hon'ble Delhi High Court in the case of Maruti Suzuki, Whirlpool and Bausch Lomb have categorically held that for an international transaction to exist within a meaning of Section 92B, the onus is on the Revenue to show there existed an agreement and understanding or arrangement that Indian entity would enter in AMP expenditure for or on behalf of AE which owns the brand. In absence of such an action and concern , no functional transaction can said to exist. In the case of Whirlpool India Ltd., the Hon'ble Jurisdictional High Court has laid down the following principle:- (a) Sections 92B to 92F contemplate the existence of an international transaction as a pre-requisite for commencing the TP exercise. The Court observed that to begin with there has to be an international transaction with a certain disclosed price. The TP adjustment envisages the substitution of the price of such internat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t cannot be shown that such an international transaction was entered into by the assessee. In Court s words, It is in this context that it is submitted and rightly by the Assessee that there must be machinery provision in the Act to bring an international transaction involving AMP expense under the tax radar. In the absence of clear statutory provision giving guidance as to how the existence of an international transaction involving AMP expense, in the absence of an express agreement in that behalf', should be ascertained and further how the ALP of such a transaction could be ascertained, it cannot be left entirely to surmises and conjectures of the IPO. (Para 39). g) The Court further held that after the invalidation of the Bright line test by the Delhi High Court in Sony Ericsson (supra), existence of an international transaction of AMP expenditure has to be established de hors the Bright line test. There is nothing in the Act which indicates how, in the absence of the Bright line test, one can discern the existence of an international transaction as far as AMP expenditure is concerned. 23. Here, in this case, it has been vehemently argued fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l for SMC for the purposes of promoting the brand of SMC. 24. The Ld. CIT DR has also referred to the decision of Hon'ble Delhi High Court in the case of Sony Ericsson Mobile Communication India Pvt. ltd. to contend that mere incurrence of AMP expenditure in respect of brand not owned by the assessee has to be treated as international transaction. Ultimately the case of the department is that, such an international transaction has to be benchmarked as per BLT to arrive at ALP. Both the inferences by the department is not tenable in view of the Hon'ble Delhi High Court in the judgment in the case of Maruti Suzuki India Pvt. Ltd. wherein the ratio of Sony Ericsson judgement has been explained in the following manner: - 41. Having considered the above submissions, the Court proceeds to analyse the decision in Sony Ericsson Mobile Communications India (P.) Ltd. (supra) to determine if it conclusively answers the issue concerning the existence of an international transaction as a result of incurring of AMP expenditures by an Assessee. 42. As already noticed, the judgment in Sony Ericsson Mobile Communications India (P.) Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... existence of an international transaction involving AMP expenses, Mr. Srivastava only referred to Section 92F (ii) which defines ALP to mean a price which is applied or proposed to be applied in a transaction between persons other than AEs in uncontrolled conditions . Since the reference is to 'price' and to 'uncontrolled conditions' it implicitly brings into play the BLT. In other words, it emphasizes that where the price is something other than what would be paid or charged by one entity from another in uncontrolled situations then that would be the ALP. The Court does not see this as a machinery provision particularly in light of the fact that the BLT has been expressly negatived by the Court in Sony Ericsson Mobile Communications India (P.) Ltd. (supra). Therefore, the existence of an international transaction will have to be established de hors the BLT. 69. There is nothing in the Act which indicates how, in the absence of the BLT, one can discern the existence of an international transaction as far as AMP expenditure is concerned. The Court finds considerable merit in the contention of the Assessee that the only TP adjustm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee on application of the BLT, is excessive, thereby evidencing the existence of an international transaction involving the AE. The quantitative determination forms the very basis for the entire TP exercise in the present case. 72. As rightly pointed out by the Assessee, while such quantitative adjustment involved in respect of AMP expenses may be contemplated in the taxing statutes of certain foreign countries like U.S.A., Australia and New Zealand, no provision in Chapter X of the Act contemplates such an adjustment. An AMP TP adjustment to which none of the substantive or procedural provisions of Chapter X of the Act apply, cannot be held to be permitted by Chapter X. In other words, with neither the substantive nor the machinery provisions of Chapter X of the Act being applicable to an AMP TP adjustment, the inevitable conclusion is that Chapter X as a whole, does not permit such an adjustment. {Emphasis in bold is ours} 25. Further in the judgment of Sony Ericsson Mobile Communication Pvt. Ltd. (supra), the High Court itself has distinguished the cases before it wherein there were cases which already themselves had accepte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nding comparables. We would prefer to observe, that an Assessing Officer/ TPO can go and must examine the question whether the assessee is performing functions of a pure distributor or performing distribution and marketing functions, in the latter case, he must examine and ascertain whether the transfer price takes into consideration the marketing function, which would include AMP functions. This would ensure adequate transaction price and hence assure no loss of revenue. When the distribution and marketing functions are interconnected and reliable comparables are available, arm's length price could be computed as a package, if required and necessary by making adequate adjustments. When the Assessing Officer/TPO comes to the conclusion that it is not possible to compute arm's length price without segregating and dividing distribution and marketing or AMP functions, he can so proceed after giving justification and adequate reasons. At that stage, he would have apportioned the price received or the compensation paid by the foreign AE towards distribution and marketing or AMP functions. The TPO can then apply an appropriate method and compute the arm's length price of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal asset and it would be fallacious to treat any kind of AMP expenditure leading to brand building. The brand building not only lead to enhancement of the value of the brand and benefits the brand owner but also helps simultaneously the brand exploiter, like distributor brand building on one hand it falls in realm of capital and brand promotion is targets towards sales of goods which is in the realm of revenue transaction, therefore, any distributor which increase AMP expenditure for promoting the sales of its goods is not guided by motive of enhancing brand value but purely by enhancing its sales. Increase in brand value happens at a very slow pace over a long period of time and there cannot be direct co-relation between AMP expenditure and brand value because brand value depends upon numerous other factors which may not be linked with AMP expenditure. The most important component of brand is its reliability and quality of goods and image in the minds of the customers. In order to link AMP expenditure with brand value it has to be demonstrated that brand value has gone up over a period of long time and portion of this enhancement is attributable to successful AMP campaign conduct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an old established business from a new business at its first start. The goodwill of a business must emanate from a particular centre or source. However, widely extended or diffused its influence may be, goodwill is worth nothing unless it has power of attraction sufficient to bring customers home to the source from which it emanates. Goodwill is composed of a variety of elements. It differs in its composition in different trades and in different businesses in the same trade. One element may preponderate here and another element there. To analyse goodwill and split it up into its component parts, to pare it down as the Commissioners desire to do until nothing is left but a dry residuum ingrained in the actual place where the business is carried on while everything else is in the air, seems to me to be as useful for practical purposes as it would be to resolve the human body into the various substances of which it is said to be composed. The goodwill of a business is one whole, and in a case like this it must be dealt with as such. For my part, I think that if there is one attribute common to all cases of goodwill it is the attribute of locality. For goodwill has no independent exis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omers you have, which has reference to brand goodwill, compared to a baseline of an unknown brand. It is in this manner that value of the brand or brand equity is calculated. Such calculations would be relevant when there is an attempt to sell or transfer the brand name. Reputed brands do not go in for advertisement with the intention to increase the brand value, but to increase the sales and thereby earn larger and greater profits. It is not the case of the Revenue that the foreign AEs are in the business of sale/transfer of brands. 109. The aforesaid position finds recognition and was accepted in CIT v. B.C. Srinivasa Setty [1981] 128 ITR 294 (SC) , a decision relating transfer to goodwill. Goodwill it was held was a capital asset and denotes benefits arising from connection and reputation. A variety of elements go into its making and the composition varies in different trades, different businesses in the same trade, as one element may pre-dominate one business, another element may dominate in another business. It remains substantial in form and nebulous in character. In progressing business, brand value or goodwill will show progressive increase, but in fallin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by itself, does not confer any right ultimately to retain returns derived by MNE group from exploiting the intangibles, even though such returns is initially accruing to the legal owner as a result of its legal /contractual right to exploit the intangible. The return depends upon the functions performed by the legal owner, assets it uses, and the risks assumed; and if the legal owner does not perform any relevant function, uses no relevant assets, and assumes no relevant risks, but acts solely as a title holding entity, then the legal owner of the intangible will not be entitled to any portion of the return derived by the MNE group from the exploitation of the intangible other than the Arm s Length compensation if any for holding the title. 28. Otherwise also, it would be very difficult to determine the impact of increase intensity of advertisement function on profit margin, the impact of advertisement on sale cannot be determined or quantified in a particular year, and therefore, even if AMP expenditure is to be compared with other comparables by applying any method, it would be very difficult to make reasonably accurate adjustment to the profit margins of the comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as declared as bad debts and written off in books of accounts though the provision as made in FY 2000-01 and no deduction was claimed on account of the same. It was further submitted by the assessee that as per as per normal business prudence and in accordance with generally accepted accounting principles, ₹ 4,36,84,216/- had been written off from the Books of Accounts in the FY 2009- 0. However, the same was routed through the Profit Loss account. The amount of provision that was created in FY 2001-02 was written back amounting to ₹ 4,36,84,216/- and simultaneously an expense of ₹ 4,36,84,216/- was booked as the bad debts written off. Therefore, in effect there was no impact on the profit and loss account as it was credited and debited with the same amount. Subsequently, on account of credit entries worth ₹ 50,21,193/- the taxpayer claimed bad debts of ₹ 3,86,63,023/- in the computation of Income for AY 2010-11. The break-up of the sum of ₹ 4,36,84,216/- was given as under: S. No. Name of Company Outstanding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment year 2010-11 contains a sub item provisions no longer required written back of ₹ 5,96,96,810/-, the break-up of which is as under: Expense for which the provision is written back Amount (in Rs.) Amount of Tax Audit Fees for FY 2008-09 5,929 Amount of 10A Audit Fees for FY 2008-09 7,170 Provision for Special Additional Duty Refund for February and March 2008 5,120 Provision for Watch Scheme 6,04,816 Expense Wrongly booked (698) Provision for doubtful debts 4,36,84,216 Interest paid u/S 234C of the Act incorrectly booked as advance tax (21,201) Provision for Income Tax provided in FY 2005-06 to FY 200809 reversed as MAT credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd simultaneously expenses for the same amount was booked as bad debt written off. Thus, it has been submitted that there was no impact on the P L account as it was credited and debited with the same amount. Further, there were certain credit entries aggregating to ₹ 50,21,193/- shown as other income from realization of debtors and after reducing the same, finally bad debt was claimed as ₹ 3,86,63,023/- in the computation of income for the Assessment Year 2010-11. There is no dispute that amount which was considered as sales in the earlier financial year, was outstanding for a long period pertaining to aforesaid five entities, the details of which has been incorporated above. 35. Before us, the ld. counsel has also filed copy of ledger account of these parties right from the financial year 1998-99 onwards. Since assessee has credited other items the details of which has been incorporated by the DRP as reproduced above and net debt was claimed in the return of income. This amount of ₹ 3,86,63,023/- ostensibly is part of the same amount of ₹ 4,36,84,216/- which was actually in the nature of bad debt and has been written off in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essing Officer would not be applicable in the case of the assessee because that was applicable only for SEZ, whereas the assessee is a STP unit. 39. After hearing both the parties and on perusal of the relevant findings given in the impugned orders, we find that it is an undisputed fact that assessee has claimed deduction u/s.10A for its STP unit. By the Finance Act, 2000 Section 10A was substituted w.e.f. 01.04.2001 wherein it was provided that deduction of profits and gains derived by an undertaking for the export of article, thing or computer software will be for the period of 10 consecutive Assessment Year beginning with the Assessment Year relevant to the previous year in which the undertaking to manufacture or produce such article, thing or computer software. The proviso to the said section provided that deduction shall not be allowed after 1st day of April, 2010. Later on, by Finance Act, 2010, there was an amendment in the proviso to Section 10A (1), whereby the sunset clause was extended by one more year, i.e., Assessment Year 2011-12. The impact of said amendment would be that the unit set up in financial year 2001-02 will get full tenure of deduction, whe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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