TMI Blog2019 (11) TMI 1097X X X X Extracts X X X X X X X X Extracts X X X X ..... books dealt in and has noted that the average royalty expense per book title works out to ₹ 3,640/-. The average royalty expense per author works out to ₹ 6,240/-. The aforesaid payments were made by cheque and wherever applicable TDS was deducted and deposited. The said expenditure is thus allowed in the hands of assessee. In such circumstances, we find no merit in the Ground No.1 of appeal raised by the Revenue and the same is dismissed. Estimating the work in progress of the journals - HELD THAT:- The assessee claims to have shown the value of work in progress on the basis of actual expense incurred for the unfinished journals. In the absence of any evidence found on the contrary, there is no merit in estimating the value of work in progress. Upholding the order of CIT(A), we dismiss Ground No.2 of the appeal raised by the Revenue. Addition on account of foreign travelling expenses - allowable business expenses - HELD THAT:- adhoc disallowance out of foreign travel expenses is not warranted in the case of the assessee. The aforesaid expenditure was incurred by the assessee for attending the annual meets and other business conferences and hence, were undert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A)-44, New Delhi, dated 19.02.2015 relating to assessment year 2009-10 passed under section 143(3) of the Income-tax Act, 1961 (in short Act ). 2. The Revenue has raised following grounds in this appeal:- 1. The Ld. CIT(A) has erred in law and on facts in deleting the addition of ₹ 21,33,659/- made by the AO by admitting the additional evidences as well as the assessee has failed to furnish the relevant details of payments made to various authors. 2. The Ld. CIT(A) has erred in law and on facts in deleting the addition of ₹ 17,82,362/- made by the AO on account of addition made on account of enhancing the amount of work in progress of journals as the assessee has not valued the stock of journal on the date of Balance Sheet. 3. The Ld. CIT(A) has erred in law and on facts in deleting the addition of ₹ 7,56,935/- made by the AO on account of foreign travelling expenses as the assessee failed to submit proper explanation of frequent foreign travel. 4. The Ld. CIT(A) has erred in law and on facts in deleting the addition of ₹ 1,17,20,448/- made by the AO on account of trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e evidences filed by the assessee before the CIT(A), were sent to the Assessing Officer for filing Remand Report, which the Assessing Officer failed to file. Further, the CIT(A) has minutely gone into the details and allowed the claim of the assessee. He also pointed out that the Assessing Officer after receiving the details filed by the assessee, never raised any query regarding the addresses of the authors. 7. We have heard rival contentions and perused the record. The first issue raised by the Revenue is against the admission of additional evidence by the CIT(A). The grievance of the Revenue in this regard is that the said evidence on which reliance was placed by the CIT(A), was not filed before the Assessing Officer and was also not confronted by the CIT(A) to the Assessing Officer. On the perusal of record, we find that the assessee had furnished the basic details of name of parties to whom the aforesaid payment was made. The Assessing Officer denied the claim of the assessee on the ground that the addresses of the parties to whom the aforesaid payment has been made, was not available. First of all, no such query was raised by the Assessing Officer during the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th over 1200 books authored by around 700 authors and 31 Journals. The appellant has stated that the average royalty expense per book title (with around 1,200 books) works out to ₹ 3,640. The average royalty expense per author (with around 700 authors) works out to ₹ 6,240/-. The appellant has stated that all payments towards royalty have been made by crossed cheques to the concerned authors and TDS, wherever applicable, has also been deducted and deposited. I have carefully considered the submission of the appellant Considering the facts of the case, I am of the view that the Assessing Officer has made the disallowance of ₹ 21,33,659/- out of royalty based on conjectures and surmises. Accordingly, the Assessing Officer is directed to delete the addition made in this regard. 8. The above said findings of the CIT(A) reflect that though several reminders were issued to the Assessing Officer but he failed to file the Remand Report. Even on merits, the issue has been considered elaborately by the CIT(A) as to the number of books dealt in and has noted that the average royalty expense per book title works out to ₹ 3,640/-. The average royalty exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer, hence the addition. 13. We have heard rival contentions and perused the record and evidences filed by the assessee and find no merit in the order of the AO in estimating the work in progress of the journals. The assessee claims to have shown the value of work in progress on the basis of actual expense incurred for the unfinished journals. In the absence of any evidence found on the contrary, there is no merit in estimating the value of work in progress. Upholding the order of CIT(A), we dismiss Ground No.2 of the appeal raised by the Revenue. 14. The Ground No.3 raised by the Revenue is against the deletion of addition of ₹ 7,56,935/- made by the Assessing Officer on account of foreign travelling expenses. 15. Briefly in the facts of the case relating to the issue, the assessee had incurred an expenditure of ₹ 30,27,734/- on foreign travelling expenses. The Assessing Officer noted that the assessee was selling the books and journals published by its AEs. However, he was of the view that such huge expenses and frequent visits of foreign travel were not properly explained as what was the business purpose for which such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regarding the cost of services the assessee company has tried to show a margin of 47.11. Out of these the assessee has sold 2,88,35,230/- to the AEs. The Assessing Officer further observed that the assessee company not been able to support the profitability on cost of services. The assessee had charged cost of services at ₹ 62,64,489/-. The Assessing Officer then made cost allocation on account of rent area, administration cost and selling and distributing expenses and reworked the cost of services provided by the assessee to its AE. The Assessing Officer applied cost plus method and in the final analysis made adjustment, observing that adjustment of ₹ 1,17,20,448/- is to be made at twice of the above additional costs to the assessee i.e. 58,60,224/- (₹ 7,04,656 + 38,64,200 + 12,91,368/-). 20. The CIT(A) noted that the Assessing Officer had held that allocation of the cost was not correctly made by the assessee and had applied cost plus method. Further, as the assessee had agreed that it had understanding of charging 100% of the cost of services from the AEs, the Assessing Officer had taken 100% profit on the additional cost of rendering the servic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. The Ld. DR for the Revenue after taking us through the facts of the case pointed out that the Assessing Officer had separated the transaction of provision of services to the AE and made an adjustment by estimating the cost. She also pointed out that the Assessing Officer had applied cost plus method and doubled the cost allocated. Referring to the order of CIT(A), she stressed that u/s 92C of the Act, arms length price of each transaction have to be determined, but the CIT(A) has not benchmarked the margins of the assessee and the margins of the comparables in this regard. 22. The Ld.AR for the assessee took us through the transfer pricing report of the assessee placed at pages 41 to 75 of the Paper Book. Our attention was drawn to page 49 which gave over view of the activities of the assessee and page 51 wherein international transactions undertaken by the assessee were specified. He then referred to the reply filed before the Assessing Officer dated 02.12.2011 placed at pages 1 to 6 and the Annexure at page 7 of the Paper Book. He stressed that at the behest of the Assessing Officer, segmental P L A/c of provisions of services to the AE was filed. Our attention ..... X X X X Extracts X X X X X X X X Extracts X X X X
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