TMI Blog2020 (10) TMI 718X X X X Extracts X X X X X X X X Extracts X X X X ..... our of assessee. Disallowance on account of trade price protection paid by the assessee - HELD THAT:- Following the order of the Co-ordinate Bench for A.Y. 2010-11 in assessee s own case [ 2020 (2) TMI 1038 - ITAT DELHI ] and for similar reasons hold that the disallowance on account of trade price protection was not warranted in the present case. We therefore, set aside the action of AO. Thus ground of appeal of the assessee is allowed. Disallowance of warranty expenses - HELD THAT:- As relying on case A.Y. 2010-11 in assessee s own case [ 2020 (2) TMI 1038 - ITAT DELHI ] disallowance was not warranted in the present case. We therefore, set aside the addition made by AO. Thus ground of appeal of the assessee is allowed. - ITA Nos. 6500 And 6501/Del/2017 - - - Dated:- 15-10-2020 - Sh. Anil Chaturvedi, Accountant Member And Ms Suchitra Kamble, Judicial Member For the Assessee : Shri Ankul Goyal, Adv., Ms. Sehr Chopra, Adv. For the Respondent : Shri Anupam Kant Garg, CIT-D.R. ORDER PER ANIL CHATURVEDI, AM: These two appeals filed by the assessee are directed against the order of Additional Commissioner of Income tax Special Range-6, New Del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... poration towards purchase of end user operating software, purchase of hardware and finished goods and purchase of software embedded in finished goods. It is further stated that resolution has been arrived between the Indian and Finnish Competent Authorities on the aforesaid issues raised before the Tribunal in the present appeal and the said resolution has been accepted by assessee vide letter dated 08.07.2019. The assessee therefore, submitted that in line with the condition precedent, as prescribed under Rule 44H of the Income Tax Rules, the assessee withdraws Ground No.3 to 5 and the residual ground of appeal that survives is as under: The Learned AO and Hon ble DRP have erred in disallowing the expenses amounting to INR 191,75,43,450 incurred by the appellant on trade offers provided by it to its distributors (HCL Infosystems Ltd as well as other distributors) under section 40(a)(ia) of the Act. 5. It was noted by the AO that assessee had offered trade incentives to the distributors amounting to ₹ 191,75,43,450/- which included ₹ 130,38,78,222/- offered to HCL Infosystems Ltd. The assessee was asked to show-cause as to why the amounts not be disallowed u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction of TDS. We find identical issue arose before the Co-ordinate Bench of Tribunal in assessee s own case in A.Y. 2010-11 and the same was decided by the co-ordinate Bench of tribunal by observing as under: We have heard both the parties and perused all the relevant material available on record. It can be seen from Clause 2, 7, 8, 9, 14 and 19 of the Agreement for the Supply of Cellular Mobile Phones between HCL and the assessee that relationship between the assessee and HCL is that of principal to principal and not that of principal to agent. The discount which was offered to distributors is given for promotion of sales. This element cannot be treated as commission. There is absence of a principal-agent relationship and benefit extended to distributors cannot be treated as commission under Section 194H of the Act. As regards to applicability of Section 194J of the Act, the Assessing Officer has not given any reasoning or finding to the extent that there is payment for technical service liable for withholding under Section 194J. Marketing activities have been undertaken by HCL on its own. Merely making an addition under Section 194J without the actual basis for the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evidences (including confirmation from dealers) submitted by the appellant in this regard and further in ignoring the fact that on the basis of similar conformations trade price protection provided to HCL Infosystems limited has been allowed. 4. The Ld AO and honorable DRP have erred in disallowing marketing expenditure incurred by the appellant amounting to INR 22,15,43,032 by way of issuance of handsets on a free of cost basis to employees dealers and After Marketing Servicing Centres ( AMSCs ) on the ground that the same would given in enduring benefit and cannot be claimed as revenue expenditure. 5. The Ld AO and Hon ble DRP have erred in not allowing current year depreciation in respect of the phones given to AMSC s for warranty purposes and to Dealers for promotional proposes even though these expenses were treated as capital expenses that it has also added in not allowing earlier year depreciation in respect of the FOC phones. 6. The above Grounds of appeals are independent and without prejudice to one another. 7. The appellant craves leave to add/ withdraw or amend any ground of appeal at the time of hearing. 12. Before us, at the outset, Learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection was not debited as an expenditure in the Profit and Loss account but was directly adjusted from the total sales affected. Thus, according to AO, in the absence of full details, it was not possible to verify the quantum of price protection allowed. AO therefore, concluded that assessee had failed to demonstrate that the price protection offered by the assessee to its distributor actual related to the business needs of the assessee company. He accordingly proposed the disallowance of ₹ 101,45,00,889/-. When the matter was carried before the DRP, DRP following the order of DRP for A.Y. 2007-08 directed the deletion of ₹ 605,717,793/- pertaining to payment makes to HCL Infosystems Limited and upheld the disallowance to be extent of ₹ 40,87,83,096/-. The AO accordingly in the final order upheld the disallowance to the extent directed by DRP. Aggrieved by the order of DRP, assessee is now before us. 16. Before us, Learned AR submitted that the issue is covered in assessee s favour by the decision of Tribunal in its own case for A.Y. 2010-11 2011-12. He submitted that identical issue arose in AY 2010-11 wherein the Co-ordinate Bench of Tribunal vide order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oned by the Assessing Officer. Ground No. 3 is allowed. 18. We further find that the order of 2010-11 was followed while deciding the issue in assessee s case in A.Y. 2011-12. Before us, the learned AR has submitted that the facts of the case in the year under consideration are identical to that of the A.Y. 2010-11 and 2011-12 and the aforesaid submission of Ld AR has not been controverted by the Revenue. Before us, Revenue has not placed any material on record to demonstrate the order in assessee s own case for A.Y. 2010-11 has been set-aside/stayed or over ruled by higher judicial forum. We therefore, following the order of the Co-ordinate Bench for A.Y. 2010-11 in assessee s own case and for similar reasons hold that the disallowance on account of trade price protection was not warranted in the present case. We therefore, set aside the action of AO. Thus ground of appeal of the assessee is allowed. 19. Ground No. 4 5 are connected and are with respect to disallowance of ₹ 22,15,43,032/-. 20. On pursuing the details of marketing expenses incurred by the assessee, AO noticed that the expenses under that head included cost of mobile handsets issued Free of Cost t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the present assessment year, the assessee is engaged in manufacture, import and sale of mobile handsets. The assessee has given mobile handsets to its employees, dealers, sale personnel etc. for free of cost and thus no longer owned the said handsets. Thus, the said cost was rightly taken as business expenditure by the assessee and was rightly reduced from the inventory. This issue is decided in favour of the assessee for A.Ys. 2003-04 by the Tribunal in ITA No. 2445/Del/2010 order dated 30.01.2018 which was also affirmed by the Hon'ble High Court in ITA No. 955/2018 order dated 31.08.2018. Thus, Ground No. 5 is allowed. 23. We further find that the order of 2010-11 was followed while deciding the issue by the co-ordinate Bench of Tribunal in A.Y. 2011-12. Before us, the learned AR has submitted that the facts of the case in the year under consideration are identical to that of the A.Y. 2010-11 and 2011-12 and the aforesaid contentions of the Ld AR has not been controverted by the Revenue. Before us, Revenue has not placed any material on record to demonstrate the order in assessee s own case for A.Y. 2010-11 has been setaside/ stayed or over ruled by higher judicial forum ..... X X X X Extracts X X X X X X X X Extracts X X X X
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