TMI Blog2020 (2) TMI 509X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 issue back to the Ld. TPO for fresh consideration Transfer pricing adjustment towards research training expenditure provided by the assessee to its AE for development and improvement of product of AEs - HELD THAT:- As relying on assessee's own case [ 2019 (10) TMI 1070 - ITAT KOLKATA] we delete the addition made by AO/TPO on account of transfer pricing adjustment towards research training expenditure provided by the assessee to its AE for development and improvement of product of AEs. Therefore, ground raised by the assessee is allowed. Disallowance of expenses u/s 37(1) - said expenses are not in the nature of advertisement and publicity - HELD THAT:- Revenue submitted that since the assessee has failed to produce the evidence/documents relating to these expenses during the assessment stage th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. A.L. Saini, AM For the Appellant : Shri Manoneet Dalal, Adv. Purba Banerjee, Advocate For the Respondent : Dr. P. K. Srihari, CIT(DR) ORDER PER DR. A. L. SAINI, AM: The captioned appeal filed by the assessee, pertaining to Assessment Year 2013-14, is directed against the fair assessment order passed by the Assessing Officer u/s 143(3) r.w.s 144C of the Income Tax Act, 1961 (hereinafter referred to as the Act ) dated 30.11.2017 which incorporates the directions given by the Dispute Resolution Panel (DRP) u/s 144C(5) of the Act dated 19.09.2017. 2. Ground No.1 and Ground No.6 raised by the assessee are general grounds, therefore, they do not require any adjudication. 3. Ground No.2 raised by the assessee relates to transfer pricing addition of ₹ 119,60,60,440/- made by the Assessing Officer/DRP towards compensation for advertisement, marketing and promotion (AMP) expenses. 4. At the outset itself, the ld. Counsel for the assessee invited our attention to the order dated 18.10.2019, passed by the Division Bench of this Tribunal in assessee s own case in ITA No.621/Kol/2017 for the Assessment Year 2012-13 whereby the issue relating to comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... saction does not represent the international transaction between the AE's therefore no question of determining the ALP of AMP transactions. We find force in the argument of the ld. AR in the given facts circumstances. Therefore, in our considered view the AMP cannot be regarded as international transaction. In holding so we find the support guidance from the judgment of Hon'ble Delhi High Court in the case of Maruti Suzuki India Limited Vs. CIT reported in 381 ITR 117 wherein it was held as under : 51. The result of the above discussion is that in the considered view of the Court the Revenue has failed to demonstrate the existence of an international transaction only on account of the quantum of AMP expenditure by MSIL. Secondly, the Court is of the view that the decision in Sony Ericsson Mobile Communications India (P.) Ltd. case (supra) holding that there is an international transaction as a result of the AMP expenses cannot be held to have answered the issue as far as the present Assessee MSIL is concerned since finding in Sony Ericsson to the above effect is in the context of those Assessees whose cases have been disposed of by that judgment and who ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e delete the addition made by AO/TPO on account of compensation for advertising, marketing and promotion expenses (AMP Expenses). Therefore, ground raised by the assessee is allowed. 8. Ground No.3 raised by the assessee relates to transfer pricing adjustment of ₹ 6,31,20,532/- determining arm s length price of intra-group services in respect of support services received from its AEs as Nil. 9. At the outset itself, the ld. Counsel for the assessee invited our attention to the order dated 18.10.2019, passed by the Division Bench of this Tribunal in assessee s own case in ITA No.621/Kol/2017 for the Assessment Year 2012-13 whereby the issue of determining arm s length price of intra-group services in respect of support services received from its AEs as Nil was discussed and remanded back to the file of the A.O/TPO. Learned counsel for the assessee submitted that the present issue is squarely covered by the aforesaid order of the Tribunal, a copy of which was also placed before the Bench. 10 Learned Departmental Representative relied upon the orders of the authorities below. 11 We see no reasons to take any other view of the matter than the view so taken by the Div ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 12 As the issue is squarely covered in favour of the assessee by the decision of the coordinate bench, in assessee`s own case and there is no change in facts and law and the Revenue is unable to produce any material to controvert the aforesaid findings of the Division Bench (supra). We find no reason to interfere in the said order of the Division Bench, therefore, respectfully following the judgment of the Coordinate Bench in assessee s own case we restore this issue back to the file of the A.O/TPO. Therefore, grounds raised by the assessee is allowed for statistical purposes. 13. Ground No.4 raised by the assessee relates to transfer pricing adjustment of ₹ 1,75,36,845/- towards contract research and develop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... file of TPO/A.O for fresh consideration the contention of assessee as well as ld. DR on this issue and to pass order afresh in the light of discussions made (supra) by a speaking order after giving opportunity to the assessee. 18 Ground No.5 raised by the assessee relates to transfer pricing adjustment of ₹ 8,78,78,120/- towards research training expenditure provided by the assessee to its AE for development and improvement of product of AEs. 19 At the outset itself, the ld. Counsel for the assessee invited our attention to the order dated 18.10.2019, passed by the Division Bench of this Tribunal in assessee s own case in ITA No.621/Kol/2017 for the Assessment Year 2012-13 whereby the issue relating to transfer pricing adjustment of research training expenditure provided by the assessee to its AE for development and improvement of product of AEs was considered and adjudicated in favour of assessee. Learned counsel for the assessee submitted that the present issue is squarely covered by the aforesaid order of the Tribunal, a copy of which was also placed before the Bench. 20 Learned Departmental Representative relied upon the orders of the authorities below. 21 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion. 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 services provided by ICT during the relevant financial year can be summarized as follows: assisted the Appellant in complying with various Health Safety and Environment (HSE) procedures mandated for the chemical industry in India. provided solutions for compliance of environmental regulations governed by various local authorities in India. provided assistance to the production department and the Company's factories in determining the appropriate mixture of various raw material components for achieving the desired colour and texture of the paint ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Division Bench (supra). We find no reason to interfere in the said order of the Division Bench, therefore, respectfully following the judgment of the Coordinate Bench in assessee s own case we delete the addition made by AO/TPO on account of transfer pricing adjustment of ₹ 8,78,78,120/- towards research training expenditure provided by the assessee to its AE for development and improvement of product of AEs. Therefore, ground raised by the assessee is allowed. 23. Ground No.7 raised by the assessee relates to disallowance of expenses amounting to ₹ 19,10,58,444/- u/s 37(1) of the Act on the ground that the said expenses are not in the nature of advertisement and publicity. 24 At the outset itself, the ld. Counsel for the assessee submitted the breakup of expenses disallowed u/s 37(1) of the Act, which is given below: (i) Maintenance exp of color solution machine ₹ 8,14,71,248/- (ii) Tinting Support / Materials Other Cos ₹ 9,39,10,043/- (iii) Inventory - mixing machines MM W/off for the period ₹ 40,02,475/- (iv) Mixing machine expenses ₹ 1,16,74,678/- 25 The ld. Counsel for the assessee submitted before the Bench ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e nature of these expenses before the Assessing Officer and therefore we direct the Assessing Officer to examine these expenses and adjudicate the issue in accordance with law. The ld. DR has no objection if the issue is remitted back to the file of Assessing Officer. Therefore we set aside the order of ld. DRP/A.O on this particular issue and remit the issue back to the file of the Assessing Officer to examine these expenses and adjudicate the issue in accordance with law. For statistical purposes, this ground of the assessee is allowed. 28. Ground No.8 raised by the assessee relates to disallowance of expenditure of ₹ 33,12,488/- u/s 14A of the Act without stating any cogent reasons for computation of disallowance made by the assessee. The assessee raised the issue of disallowance of expenditure u/s 14A of the Act while computing book profit u/s 115JB of the Act. 29. Brief facts qua the issue are that the assessee company earned dividend income from mutual funds of ₹ 33,12,488/-. The assessee suo moto disallowed ₹ 7,61,500. u/s 14A r.w.r. 8D, in its computation of income under the normal provision of the Act. The Assessing Officer computed disallowance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ery explicit in section 115JB of the Act. The items which are to be added to the net profit have been listed out in Explanation 1 to that section. The learned AO should adhere to that list and cannot travel beyond these items. Since there is no mention of Section 14A in the said Explanation 1 to Section 115JB, the same cannot be added to redetermine the quantum of Book Profit . The provisions of section 115JB relating to computation of book profit are amply clear and unambiguous. These provisions do not leave any room for adjustment by the assessing officer other than those mentioned in Explanation 1 to section 115JB to the net profit reflected in the accounts of any assessee and adjustment by way of disallowance u/s 14A is not included in the said explanation. This issue is also covered by the judgment of the Special Bench of Tribunal in the case of ACIT Vs. Vireet Investments (P) Ltd, in ITA No.502/Del/2012. Therefore, we direct the AO/TPO not to consider disallowance u/s 14A, while computing book profit u/s 115JB of the Act. 32. In the result, appeal of the assessee is partly allowed for statistical purposes. Order pronounced in the open court on this 07/02/2020. - - ..... 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