TMI Blog2019 (1) TMI 1870X X X X Extracts X X X X X X X X Extracts X X X X ..... Dresser Rand India Pvt. Ltd. [ 2012 (10) TMI 127 - ITAT MUMBAI] is well founded. Considering the entire facts in totality in the light of the brand usage agreement and the approval of the RBI, the findings of the Ld. CIT(A) is set aside. The AO is directed to delete the addition. Adjustment made on account of payment of royalty on traded finished goods made by the assessee to Johnson Johnson, USA - HELD THAT:- As perused the orders of the lower authorities and the material evidence brought on record in the form of paper book. In assessee's appeal, we have already held that the agreements between J J India and J J USA for payment of royalty has to be considered in the light of the approval of the RBI. We do not find any substance in the findings of the TPO that there is no need for paying royalty for technical/marketing know-how. We also do not find any force in the findings of the TPO that this royalty is deemed to be included in Brand royalty. The Ld. CTT(A) has rightly considered the relevant clauses of the agreement between J J India and J J USA. We, therefore, do not find any reason to interfere with the findings of the Ld. CIT(A). Technical know-how royalty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the said disallowance of ₹ 200.82 lakhs as suggested by TPO towards the shares to be contributed by AE of the asses see-company. Therefore, we delete the said disallowance made by AO by allowing ground of the appeal taken by assessee. Grand credit in respect of retained MODVAT credit relating to opening stock - HELD THAT:- CIT(A) allowed relief to the assessee by following the decision of Hon'ble High Court in Mahalaxmi Glass Works[ 2009 (4) TMI 182 - BOMBAY HIGH COURT] which was also followed by his predecessors in A.Y. 2003-04 A.Y. 2004-05. Considering the consistent view on the issue which was followed by Id. CIT(A), therefore, we do not find any justification to interfere in his order. Addition on account of payment on fees paid for legal counseling u/s 40A(2)(b) - HELD THAT:- We find that the Ld. CIT(A) has deleted the addition holding that for the payments for legal counseling, it is futile to think of comparables because counsels may not charge standard fee but may charge according to the issue involved. The Ld. CIT(A) further observed that if the AU wanted to disallow on the ground of excessive payment, he ought to have established excessiveness of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome tax on brand usage royalty. At the outset, we find that this issue is covered by the co-ordinate Bench decision of this Tribunal in assessee s own case for assessment year 2005-2006 in ITA No.2547/Mum/2017 dated 26.12.2018 except for variance in figures, wherein it was held as under:- 8. We have considered the submission of the parties and have gone through the order of authorities below. We have noted that similar ground of appeal was raised before Tribunal in assessee's own case for A.Y. 2002-03 in ITA No. 4092/Mum/2007 and the co-ordinate bench of Tribunal passed the following order: 34. We have heard the rival submissions, perused the orders of the lower authorities and also the copy of agreement submitted alongwith application to RBI as exhibited at pages 1143 to 1145 of the Paper book. We find that the application made by the assessee to RBI for brand usage agreement specifically mentions that the royalty to be remitted is net of taxes. Further, the approval was received from the RBI to remit the royalty on brand usage by the assessee @ 1 % net of taxes. Considering the brand usage agreement vis- -vis the approval granted by RBI, it can be safely inferred that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elevant clauses of the agreement between J J India and J J USA. We, therefore, do not find any reason to interfere with the findings of the Ld. CIT(A). 15.Considering the decision of Tribunal in assessee's own case for A.Y. 2002- 03 in ITA No. 4092/Mum/2007 and in ITA No. 4070/Mum/2007, which was followed in A.Y. 2006-07 in ITA No.83/Mum/201 1 and in A.Y. 200809 and A. Y. 2009-10 in ITA No. 829/Mum/2014, on identical ground, we confirmed the order of Id. CIT(A). In the result, ground no.4 of the appeal is dismissed. 3.1. Respectfully following the said decision, ground No.2 raised by the Revenue is dismissed. 4. Ground No.3 raised by the Revenue is with regard to the action of the ld.CIT(A) in allowing the technical know-how royalty payment at 2% / 4% instead of 1% as done by the ld.TPO. We find that this issue is also covered by the order of the Tribunal in assessee s own case (supra) for assessment year 2005-2006, wherein it was held as under:- 17.We have considered the submission of the parties and find that in assessee's own case for A.Y. 2002-03 in ITA No. 4092/Mum/2007 and ITA No. 4070/Mum/2007, the Tribunal passed the following order: 55. We have co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s were liability of the assessee- company under the terms of agreements and accordingly disallowance made by AO were deleted. Further, we also observe that liability of payment of service tax is of recipient of services and since assessee is the receiver of services, it is the liability of the assessee company to bear service tax. Hence we hold that TPO was not justified to state that liability of bearing service tax was of assessee-company. In view of above, we hold that disallowances made by TPO on account of taxes, services tax is not justified and we direct to delete the same. Hence, Ground Nos.12, 13 and 17 of the appeal taken by assessee are allowed. 12.Considering the decision of Tribunal in assessee's own case for A.Y. 2006- 07 in ITA No. 83/Mum/201 1, which was followed in A.Y. 2008-09 in ITA No.133/Mum/2012 and in A.Y. 2009-10 in ITA No. 829/Mum/2014, on identical ground, we confirmed the order of Id. CIT(A). In the result, ground no.2 3 of the appeal are dismissed. 5.1. Respectfully following the said decision, ground No.4 raised by the Revenue is dismissed. 6. Ground No.5 raised by the Revenue is with regard to the action of the ld.CIT(A) in deleting the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the parties. We observe that the TPO has suggested disallowance on the ground that the AE of the assessee viz J J US is reaping the benefit of higher royalty amount as a result of higher sales realized by assessee by incurring higher expenses by way of publicity and sales promotion undertaken by assessee and therefore the parent company of the assesseecompany should share some of the expenses. It is a fact that TPO while suggesting any disallowance/adjustment has to state that the transactions between the assessee -company and its AE is not at Arms Length. The TPO is to determine the Arms length by following one of the method and /or most appropriate method as prescribed in section 92C(l) of the Act. The TPO cannot suggest adjustment/disallowance on the basis of his assumptions that the payment is excessive though it is at arm's length. Similar issue was also considered by ITAT Murnbai Bench in the case of Kodak India Pvt. Ltd.(supra). Further, Rule 10B specifically provides the procedure to be followed fordetermining Arm's Length Price. We observe that the TPO while suggesting the disallowance of 200.82 Lakhs out of the expenses incurred by assessee on publicity and sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been brought on record. We, therefore, do not find any reason to interfere with the findings of the Ld. CIT(A). Ground No. 3 is accordingly dismissed. 28.Considering the decision of Tribunal in assessee's own case for A.Y. 200203 in ITA No.4092/Murn12007, identical ground, we confirmed the order of Id. CIT(A). In the result, ground no.8 of the appeal is dismissed. 29.Ground No.9 relates to MODVAT credit relating to opening stock. The id. AR of the assessee submits that it is settled legal position that to give impact to the provision of section 145A, in case tax, duty, cess or fees areadded to the value of closing stock than opening stock also would have to be grossed up with excise duty. Otherwise, it would result into following a hybrid system of accounting i.e. neither the exclusive method nor inclusive method. The Id. AR submits that in assessee's own case for A.Y. 1999-2000 in ITA No. 2680/Mum/2003, the similar issue was restored back to the file of Assessing Officer vide order dated 18.01.2013. Against the order of Tribunal, the revenue filed appeal before the jurisdictional High Court and the same has been rejected vide order dated 28.03.2016 in ITA No. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the Ld. CIT(A) has deleted the addition holding that for the payments for legal counseling, it is futile to think of comparables because counsels may not charge standard fee but may charge according to the issue involved. The Ld. CIT(A) further observed that if the AU wanted to disallow on the ground of excessive payment, he ought to have established excessiveness of the payment. This has not been done. Considering the decision of the Tribunal in assessee's own case, in the light of the observations made by the Ld. CIT(A), we do not find any reason to interfere with the findings of the Ld. CIT(A). Ground No. 7 is accordingly dismissed. 37.Considering the decision of Tribunal in assessee's own case for A.Y. 2002- 03 in ITA No.4092/Mum/2007, which was followed in A.Y. 2006-07, A.Y. 2003-04 A.Y. 2004-05, we confirm the order of Id. CIT(A). In the result, ground no. 11 of the appeal is dismissed. 10.1. Respectfully following the said decision, ground No.9 raised by the Revenue is dismissed. 11. Ground No.10 raised by the Revenue is with regard to the action of the ld.CIT(A) in allowing depreciation on testing equipment provided to laboratories and hospitals fre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted that out of total amount of ₹ 5,10,050, an amount of ₹ 3,86,650 was in respect of receipt of MCGM, which was accounted in the books of MCGM in the month of March 2007 relevant to the assessment year 2007-2008. However, the same were accounted by the assessee in the month of April 2007 relevant to the assessment year 2008-2009 as the assessee had received the information of such transaction in the month of April 2007 only. Further, in respect of remaining alleged receipts of ₹ 1,23,400, the assessee submitted that it does not have any information about any such payment made by MCGM and accordingly the same were not accounted by the assessee. In other words, the assessee categorically denied any transaction with MCGM to the tune of ₹ 1,23,400 before the ld.AO. However, the ld.AO proceeded to dismiss the same and proceeded to make addition of entire difference between the accounted data and the AIR information to the tune of ₹ 5,10,050 in the assessment. It was pleaded before the ld.CIT(A) that no addition could be made merely on the basis of AIR information alone. Reliance was also placed on the decision of the Hon ble jurisdictional High Court i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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