TMI Blog2020 (12) TMI 723X X X X Extracts X X X X X X X X Extracts X X X X ..... sion that the AO/TPO was not justified in making the addition. As far as merits of the deletion of addition is concerned, no fallacy in the findings of CIT(A) has been pointed by the Revenue. Even on the issue of alleged violation of provisions of Rule 46A of I.T. Rules, we are of the view that deletion of addition was not based solely on the basis of the alleged additional evidence filed by the assessee but various other material factors as noted in the order. We find no reason to interfere in the order of CIT(A) and thus the grounds of Revenue are dismissed. TDS u/s 195 - Addition u/s 40(a) - addition on account of Global Account Manager(GAM) Expenses paid in foreign currency but no TDS was deducted - CIT(A) while deciding the issue in favour of the assessee has given a finding that the amount incurred by the assessee on account of GAM charges cannot be treated as payment of salary to non-resident but it was in the nature of reimbursement of expenses and the same was not liable for deduction for TDS - HELD THAT:- As in A.Y. 2001-02 2004-05 identical issue arose in assessee s own case and the issue was decided in assessee s favour by the Co-ordinate Bench of Tribunal and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - AO was of the view that UPS, printers etc. are not part and parcel of the computer but are part of machinery on which depreciation is to be allowed @ 25% and not @ 60% as claimed by the assessee - HELD THAT:- We find that identical issue of excess claim of depreciation arose in assessee s own case in A.Y. 2001-02, 2003-04 2004-05 wherein the Co-ordinate Bench of Tribunal has decided the issue in favour of the assessee. Before us, no distinguishing features in the facts of the case and that of the earlier years has been pointed out by the Revenue. Revenue has also not placed any material on record to demonstrate that the order of the tribunal in assessee s own case in earlier years has been set aside/overruled or stayed by higher judicial forum. - ITA No. 2128/Del/2011 - - - Dated:- 17-12-2020 - SH. ANIL CHATURVEDI, ACCOUNTANT MEMBER AND SH. KULDIP SINGH, JUDICIAL MEMBER Assessee by : Shri Deepak Chopra, Adv Shri Rohan Khare, Adv Shri Harpreet Singh, Adv Revenue by : Shri Ajit Kumar Singh, CIT-DR ORDER PER ANIL CHATURVEDI , AM : This appeal filed by the Revenue is directed against the order dated 10.03.2011 of the Commissioner of Income Tax (A)- XX, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reciation on computer accessories. 6. The appellant craves leave to add, alter or amend any ground of appeal raised above at the time of hearing. 5. The revenue thereafter vide letter dated 22.02.2018 raised additional ground which reads as under: 1. The Ld. CIT(A) erred by considering additional evidence in violence of provisions of Rule 46A of IT Rules 1962. The transfer pricing documentation/ and other additional evidence filed at her behest vide assessee s letter dated 16.02.2011, was never referred to the AO/ TPO. 6. With respect to the admissibility of the additional ground raised by the Revenue, the matter was heard by the Co-ordinate Bench of Tribunal and vide interim order dated 26.02.2018 (in ITA No.2128/Del/2011) proceeded to decide as to whether the additional ground raised by the Revenue in its appeal was admissible on the facts of the case. The Co-ordinate Bench of Tribunal after considering the submissions of both the parties and after relying on the various decisions cited therein held that there was no merit in the additional ground raised by the Revenue and accordingly the same was not admitted. Aggrieved by the interim order passed by the T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be Nil and accordingly the income of the assessee was enhanced by ₹ 13,59,65,489/-. 10. Aggrieved by the order of AO, assessee carried the matter before the CIT(A). The CIT(A) after considering the submissions of the assessee deleted the addition by observing as under: I have considered the above submissions made by the Appellant with regard to the payment for royalty. During the year, Expeditors India has provided/received logistics services to Group Companies as well as independent agents. The pricing basis in both cases has remained the same. Also, from the Form 3CEB, it is evident that during the year. Expediters India rendered/received these logistics services to/from more than 100 entities. However, the services, for which the royalty was paid, were only received from the US parent company. This fact has not been disputed by the TPO. He has also not disputed that the logistics services transactions was with multiple group entities. He has also not disputed that the 50/50 gross profit spilt was an arm s length remuneration for the logistics services. In the TP Order, on page 6, the TPO has mentioned that when the revenue was split on the basis of FAR analy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e by other industry players. A supplementary TNMM analysis carried out by the Appellant at my behest to check the impact of royalty payment on the Appellant s profit margin vis-a-vis that of independent comparable companies also shows that the ratio of operating profit to costs and sales of the Appellant is comparable to that of uncontrolled entities. I have been through the material placed on record and given the global nature of the logistics business of the Appellant, I agree with the beneficial nature of the services received. Based on the discussion hereinabove, it is fair to conclude that there is no meaningful analysis/evidence provided by the TPO to hold that the entire royalty payment should be reduced to zero. The Appellant has been able to demonstrate that the technical, operations and strategic services received by the Appellant in lieu of royalty payment have a direct business nexus and no independent company will provide such services free of charge. The benefits derived by the Appellant from the technical, operations and strategic services availed are critical to the smooth functioning of its business. The adequacy or quantum of the royalty payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been approved by Reserve Bank of India (RBI) and the payment of royalty has been accepted by the Revenue in all the earlier years and no adjustment has been made to the ALP transaction on account of royalty. He further submitted that CIT(A) apart from the supplementary TNMM analysis had considered various other factors to delete the addition and thus there was no violation of Rule 46A. He thus supported the order of CIT(A). 15. With respect to additional ground raised by the Revenue, he submitted that the Co-ordinate Bench of Tribunal vide interim order dated 26.07.2018 in ITA No.2128/Del/2011 had held the additional ground to be not admissible and against the order of Tribunal, Revenue had carried the matter before Hon ble Delhi High Court. The Hon ble High Court in order dated 04.12.2019 in ITA No.88/2019 declined to interfere with the order of Tribunal which according to Ld. AR would mean that the order of Tribunal on that ground has attained finality. 16. We have heard the rival submissions and perused all the materials available on record. The grievance of the Revenue is that CIT(A) has decided the issue in favour of the assessee by considering the supplementary TNMM ana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue of alleged violation of provisions of Rule 46A of I.T. Rules, we are of the view that deletion of addition was not based solely on the basis of the alleged additional evidence filed by the assessee but various other material factors as noted in the order. We find no reason to interfere in the order of CIT(A) and thus the grounds of Revenue are dismissed. 18. Second ground is with respect to deleting the addition of ₹ 63,03,854/- on account of Global Account Manager(GAM) Expenses. 19. During the course of assessment proceedings, it was noticed that assessee had paid a sum of ₹ 63,03,854/- on account of Global Account Management Expenses (GAM) to M/s Expeditors International of Washington Inc. in foreign currency but no TDS was deducted. The AO was of the view that the amount needs to be disallowed in view of the provision of Section 40(a) of the Act as assessee had failed to deduct TDS on such payment. The assessee was therefore asked to explain as to why the disallowance not be made u/s 40(a) to which the assessee inter alia submitted that assessee was not required to deduct any TDS on such payments. The submissions of the assessee was not found acceptable t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no distinguishing feature in the facts of the case in the year under consideration and that of A.Y. 2001-02 2004-05 has been pointed out by the Revenue. Further no fallacy in the findings has been pointed out by the Revenue before us. Revenue has also not placed any material on record to demonstrate that the order of the Tribunal in assessee s own case in earlier years has been set aside/overruled or stayed by higher judicial forum. In such a situation, we find no reason to interfere in the order of CIT(A). Thus the ground of appeal of the Revenue is dismissed. 24. Third ground is with respect to deleting the addition of ₹ 38,11,341/- on account of lease line expenses. 25. AO noted that during the year under consideration assessee had paid lease line expenses of ₹ 38,11,341/- to Expeditors International of Washington Inc but no TDS was deducted on such payments. The assessee was therefore asked to explain as to why disallowance of expenses not be made by invoking the provision of Section 40(a) of the Act to which assessee made the submissions which was not found acceptable to the AO. AO therefore disallowed the expenditure of ₹ 38,11,341/- u/s 40(a) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnish any reply. He further noticed that in A.Y. 2004-05 the royalty was capitalized and the amount was disallowed. He thereafter by following the decision of Hon ble Supreme Court in the case of Southern Switchgear Ltd. vs. CIT 232 ITR 359, disallowed 25% of the royalty and made disallowance of ₹ 3,39,91,372/-. 31. Aggrieved by the order of AO, assessee carried the matter before the CIT(A). CIT(A) while deciding the issue noted that the payment of royalty was an operational expenses and therefore revenue in nature and the ratio of the decision in the case of Southern Switchgear Ltd. (supra) relied by the AO was not applicable to the present facts. He also noted that the disallowance made by the AO amounts to double disallowance as the expenditure has already been disallowed by the TPO. He accordingly directed the deletion of ₹ 3,39,91,372/-. Aggrieved by the order of CIT(A), Revenue is now before us. 32. Before us, Learned DR supported the order of AO. 33. Learned AR on the other hand submitted that royalty payment by the assessee is a running royalty which an allowable expenditure u/s 37 of the Act and in support of which he placed reliance on the decision in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orted the order of AO. The Learned AR on the other hand supported the order of CIT(A) and further submitted that identical issue arose in assessee s own case in A.Y. 2001-02, 2003-04 2004-05 before the Tribunal and the matter was decided in assessee s favour by the Tribunal. 39. We have heard the rival submissions and perused all the materials available on record. The issue in the present ground is with respect to deleting the addition of ₹ 3,32,634/- on account of excess claim of depreciation on computer accessories. We find that identical issue of excess claim of depreciation arose in assessee s own case in A.Y. 2001-02, 2003-04 2004-05, wherein the Co-ordinate Bench of Tribunal has decided the issue in favour of the assessee. Before us, no distinguishing features in the facts of the case and that of the earlier years has been pointed out by the Revenue. Revenue has also not placed any material on record to demonstrate that the order of the tribunal in assessee s own case in earlier years has been set aside/overruled or stayed by higher judicial forum. In such a situation, we find no reason to interfere in the order of CIT(A). Thus the ground of appeal of the Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X
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