TaxTMI 
TaxTMI 
2021 (11) TMI 879
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....djudicate the above issues as under: Transfer Pricing Adjustment : (Ground Nos. 4 to 21) 3. All the grounds raised relate to Arm's Length Price (ALP) adjustment made for expenditure incurred by the assessee for advertising, marketing and sales promotion expenses (AMP). The assessee for the relevant assessment year had incurred expenditure amounting to Rs. 45.68 crore as advertisement and sales promotion expenses (AMP). In the transfer pricing study, the assessee did not disclose AMP expenses as an item of international transaction. For the relevant assessment year, the assessee had paid royalty of Rs. 30.39 crore to its AE and the assessee had followed CUP method to bench mark the same. 3.1. The TPO took the view that the AMP expenses incurred by the assessee is on the higher side and hence, by applying bright line test, split the AMP expenses into routine expenses and non-routine expenses. The TPO chose to adopt "Profit Split Method" to bench mark both royalty and AMP expenses. For this purpose, the TPO re-worked the profit margin of the assessee by considering only routine AMP expenses and the same worked out to 22.10%. The TPO worked out the profit margin of comparable co....
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....lit Method, since the existence of international transactions in AMP expenses is required to be shown separately, we are of the view that this issue requires fresh examination at the end of AO/TPO. Accordingly, we set aside the order passed by the AO on AMP expenses and restore the same to the file of AO/TPO for examining it afresh. After affording adequate opportunity of being heard, the AO/TPO may take appropriate decision in accordance with law." 3.6. In view of the above order of the Tribunal, which is identical to the facts of the instant case, we restore the issue of determination of ALP of AMP expenses to the files of AO/TPO. The AO/TPO is directed to afford a reasonable opportunity of hearing to the assessee and take a decision in accordance with law. It is ordered accordingly. Corporate Tax Issue (Ground Nos. 22 to 27) 4. During the course of assessment proceedings, the AO noticed that the assessee had claimed depreciation of Rs. 1,35,90,554 on intangible assets as detailed below:- Particulars WDV as on 1 April 2015 Depreciation for the FY 2015-2016 Design and Technical Knowhow 3,02,79,551 75,69,888 Vendor Network Relationship 2,40,82,663 60,20,666 Total de....
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....lowed on a technical basis. Supposing the assessee does not allocate the expenses under the head design and technical know-how and it prefers to allocate the same under the head goodwill. There is no dispute for the depreciation on the goodwill as held by the Honourable Supreme Court in the case of smifs securities Ltd. reported in 348 ITR 302 wherein it was held as under: 4. Explanation 3 states that the expression 'asset' shall mean an intangible asset, being know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature. A reading the words 'any other business or commercial rights of similar nature' in clause (b) of Explanation 3 indicates that goodwill would fall under the expression 'any other business or commercial right of a similar nature'. The principle of ejusdem generis would strictly apply while interpreting the said expression which finds place in Explanation 3(b). 5. In the circumstances, we are of the view that 'Goodwill' is an asset under Explanation 3(b) to Section 32(1) of the Act. 6. One more aspect needs to be highlighted. In the present case, the Assessing Office....
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....ent of Hon'ble High Court of Bombay in case of HSBC asset management India Pvt. Ltd. reported in 47 taxmann.com 286 wherein it was held as under: "Having perused this Appeal Memo including the impugned orders, we are of the opinion that the Delhi High Court judgment has been delivered on 5th November 2012 and the impugned order was passed on 15th June 2011. The Tribunal has essentially based its conclusion on the consistent stand of the Assessee and that of the Assessing Officer. In dealing with the shift in stand for the subject assessment year, the Tribunal found that this claim of depreciation was raised in the assessment year 2003-2004. The Assessee claimed that it is allowable as per the provisions of Income Tax Act on block of assets under the head "intangible assets". The Assessing Officer allowed the claim for that assessment year by an order under Section 143(3) dated 28.03.2006. The Tribunal then, proceeds to hold that when the Assessing Officer had to allow depreciation on the written down value of the block of assets, then, it cannot in the present assessment year dispute the opening written down value of the block of assets nor can he examine the correctness or o....
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....021 seeking deduction of the same while computing the total income chargeable to Income-tax. The learned AR submitted that education cess ought to be allowed as a deduction in view of the judgment of the Hon'ble Bombay High Court in the case of Sesa Goa Limited v. JCIT [(2020) 423 ITR 426 (Bom.)]. 5.2. The learned Departmental Representative present was duly heard. 5.3. We have heard rival submissions and perused the material on record. The issue raised in the additional ground is a pure legal issue, which does not require any verification of facts. Therefore, we admit the same for adjudication. The Hon'ble Bombay High Court in the case of Sesa Goa Limited v. JCIT (supra) had held education cess is an allowable expenditure as the word "cess" is conspicuously absent under the provisions of section 40(a)(ii) of the I.T. Act. The relevant finding of the Hon'ble High Court reads as follows:- "23. If the legislature intended to prohibit the deduction of amounts paid by a Assessee towards say, "education cess" or any other "cess", then, the legislature could have easily included reference to "cess" in clause (ii) of Section 40(a) of the I.T. Act. The fact that the legisla....