TMI Blog2021 (7) TMI 681X X X X Extracts X X X X X X X X Extracts X X X X ..... een used by the assessee in its manufacturing, the royalty for the same cannot be said to be for non business purposes. Similarly, brand royalty has been paid for the use of brand on the products manufactured by it. Admittedly, the assessee was using the Brand name and logo on its manufactured products. These payments, therefore, cannot be considered as meant for non-business purpose, subject to the transfer pricing adjustment. We, therefore, approve the view point taken by the ld. CIT(A) in deleting the disallowance made by the AO u/s.37 of the Act. The Revenue‟s ground is thus dismissed. TP Adjustment - addition on account of payment of Management fees - assessee declared an international transaction of Payment of Professional fee - HELD THAT:- CIT(A) has given cogent reasons for deleting the disallowance inasmuch as the AO simply adopted the TPO‟s reasoning without showing as to how the same applied to the non-AE transactions as well. Further, the expenditure contains payment for Testing fees and also Generic service fee. To this extent, we approve the view taken by the ld. CIT(A). Thus, the ground of the Revenue is dismissed. Aggregation approach adopted f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eciation, in respect of loan taken in the year 2007. We, therefore, set-aside the impugned order and remit the matter to the file of the AO for examining the detail of ₹ 1.82 crore and allow additional depreciation on forex loss only in respect of repayment of loan taken in the year 2007. In other words, no additional depreciation will be allowed in respect of new asset purchased by the assessee against the loan taken in the year 2002 which got discharged during the year under consideration resulting in foreign exchange fluctuation loss. TDS u/s 195 - Addition on account of commission - assessee paid commission to overseas agents - assessee submitted that the commission was paid to overseas agents for export orders/business procured by them in overseas territories and hence, deduction of tax at source was not warranted - HELD THAT:- As admittedly, the commission was paid by the assessee to overseas agents for procuring business in overseas territories, the amount of commission in the hands of the commission agents does not become chargeable to tax under the Act. The Hon‟ble Bombay High Court in CIT Vs. Gujarat Reclaim and Rubber Products Ltd.[ 2015 (12) TMI 1078 - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessee paid Royalty for last eight years and most of the Royalty Agreements had expired. He further did not find any logic in the assessee‟s contention of payment of brand royalty for the use of Carraro name and logo as the same was part of the assessee‟s own name. He held that the additional and new brand royalty payments were nothing but an excuse taken for perpetual payments. Considering these facts, he determined Nil ALP of the international transaction of brand royalty and accordingly proposed transfer pricing adjustment of ₹ 70,52,220/-. When the matter came up before the AO for passing the assessment order, he observed that the assessee paid total Royalty of ₹ 2,36,20,250/-. He took note of the fact that the TPO proposed transfer pricing adjustment in respect of Brand Royalty at ₹ 70,52,220/-. The AO made two observations in his order on the royalty payment. Firstly, he treated payment of Royalty as a capital expenditure subject to depreciation @25%. Secondly, he held that the total amount of Royalty paid at ₹ 2.36 crore was not paid for any business purpose. Invoking the provisions of section 37 of the Act, he made the addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich is plainly not permissible. Deduction can be allowed for payment of royalty for use of trade mark license etc. only once and not twice. As royalty for use of trade mark license in respect of steering axle and accessories for 35 and 55 HP tractors is covered within the payment of ₹ 26.39 lakh, whose ALP has been determined by the TPO, at the transacted value, the amount of royalty paid by the assessee for use of trade mark license once again under the second agreement for which the TPO proposed TP adjustment of the full amount of ₹ 75.41 lakh, cannot be allowed once again. Thus, royalty paid for use of trade mark license pertaining to steering axle and accessories for 35 and 55 HP tractors, included in the amount of ₹ 75.41 lakh is required to be disallowed as a duplicate payment. The ld. AR was fair enough to concede this position. He submitted certain details, as per which a sum of ₹ 4,95,166/- has been calculated as duplicate amount of royalty that could be disallowed. While making such a calculation, the ld. AR made a departure from the submission made on the earlier date as per which royalty paid at the rate of 2% for use of technical know-how and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eating Royalty as a capital expenditure and holding the amount to be covered disallowance u/s 37 . In this regard, it is observed that similar issue came up for consideration before the Tribunal in the assessee‟s own case for the immediately preceding assessment year 2009-10, which has been discussed in paras 13 and 14. The Tribunal overturned the action of the AO in capitalizing the royalty payment by relying on its orders passed for the assessment years 2003-04, 2004-05 and 2005-06. Since the facts and circumstances of the instant grounds are admittedly similar, following the view taken for the immediately preceding assessment year 2009-10 and earlier years, we countenance the stand point of the ld. CIT(A) in not treating the Royalty as capital expenditure. These grounds of the Revenue fail. 8. To sum up, only the transfer pricing adjustment in respect of Brand royalty is required to be made in accordance with the direction given above out of the total disallowance of ₹ 2.36 crore made by the AO. Rest of the addition is hereby ordered to be deleted. 9. Ground nos. 3 4 of the assessee‟s appeal are against the confirmation of transfer pricing a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , inter alia, held that the assessee for the year under consideration (i) did not prove the factum of receipt of the services from its AEs; (ii) wrongly adopted the Foreign/AE as tested party; (iii) wrongly applied the TNM method. The Tribunal in its order for the assessment year 2009-10 has dealt with such issues. It referred to the extensive material placed before it for holding that assessee did avail services from its AE. Similar material for the instant year, running into more than 1500 pages, has been placed on record which amply demonstrates that the assessee did avail Management services. Following the view taken for the preceding year, we hold that the assessee did avail services from its AE and the authorities below were not justified in coming to the conclusion that no services were obtained by the assessee. 13. The TPO did not approve the Foreign/AE taken as a tested party for the preceding year as no comparable uncontrolled transaction was cited. The Tribunal has discussed this issue in paras 21 to 24 of its order and held that the Foreign/AEs could not be taken as tested parties. Since the facts and circumstances are admittedly similar, following the preced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en in the Tribunal order passed for the assessment year 2009-10. Needless to say, the assessee will be allowed reasonable opportunity of hearing in such fresh determination. The ground taken by the Revenue is dismissed and that by the assessee is allowed for statistical purpose. 17. Ground no.6 of the Revenue‟s appeal is against allowing additional depreciation. The assessee claimed additional depreciation on foreign exchange fluctuation loss amounting to ₹ 1,82,06,905/- on repayment of loans, which were taken for purchase of capital assets in the years 2002 and 2007. Such loss of was capitalized by the assessee on which additional depreciation u/s.32(1)(iia) was claimed amounting to ₹ 27,53,105/-. The AO held that the additional depreciation was admissible only on `new‟ plant and machinery acquired and installed after 31st day of March 2005 by an assessee engaged in the manufacturing or production of any article or thing etc. The claim of the assessee was thus jettisoned. The ld. CIT(A) overturned the assessment order on this point. 18. It is seen that the assessee took loans in the calendar years 2002 and 2007 for purchase of cer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taken in the year 2002 and the claim will be valid for the loan taken in foreign currency for the purchase of asset in the year 2007. There is no discussion in the assessment order or the impugned order about the bifurcation of the amount of liability discharged by the assessee on account of foreign exchange fluctuation rate difference. On a pertinent query, the ld. AR did not have such figure of forex loss incurred by the assessee, liable to be capitalized for the purposes of additional depreciation, in respect of loan taken in the year 2007. We, therefore, set-aside the impugned order and remit the matter to the file of the AO for examining the detail of ₹ 1.82 crore and allow additional depreciation on forex loss only in respect of repayment of loan taken in the year 2007. In other words, no additional depreciation will be allowed in respect of new asset purchased by the assessee against the loan taken in the year 2002 which got discharged during the year under consideration resulting in foreign exchange fluctuation loss. 19. The next ground of the Revenue is against the deletion of addition on account of commission. The factual scenario of this ground is that th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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