TMI Blog2022 (12) TMI 1078X X X X Extracts X X X X X X X X Extracts X X X X ..... Disallowance u/s. 14A u/r 8D(2)(iii) - AO rejecting assessee s plea that it had not availed any loan for investment and the investments were out of own funds - HELD THAT:- We find that similar issue in AY 2012-13 thus the issue of disallowance u/r 8D(2)(ii) as well as u/r 8D(2)(iii) stand restored back to the file of Ld. AO on similar lines - AO shall take consistent view as taken on AY 2012-13 on this issue. This ground stand allowed for statistical purposes. Disallowance u/s. 40(a)(ia) - short deduction of tax - assessee paid connectivity expenses for dedicated leased lines provided by various vendors and deducted TDS @ 2% - A.O opined that the tax should have been deducted at 10% - HELD THAT:- The Tribunal, in latest decision for AY 2012-13 relying upon decision for AY 2009-10 [ 2015 (12) TMI 1328 - ITAT CHENNAI] held that disallowance u/s 40(a)(ia) is not attracted in case of short deduction of tax at source. Respectfully following the consistent view of Tribunal, the impugned disallowance stand deleted. Disallowance of provision for inventory - assessee created provision towards provision for inventories which was stated to be towards slow moving and obsolete tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) r.w.s. 144C pursuant to the directions of Ld. Dispute Resolution Panel-2, Bengaluru (DRP) u/s 144C(5) dated 13-09-2017. The assessee carried out certain international transactions with its Associated Enterprises (AE) which were subjected to determination of Arm s Length Price (ALP) before Ld. Transfer Pricing Officer-2, Chennai (TPO) vide order dated 31-10- 2016. Incorporating the proposed adjustment, draft assessment order was passed by Ld. AO on 30-12-2016 which was subjected to further objections before Ld. DRP. Subsequently, final assessment order was passed by Ld. AO pursuant to the directions of Ld. DRP which is in further appeal before us. The grounds raised by the assessee read as under: - 1. General On the facts and the circumstances of the case, the impugned order passed by the learned Deputy Commissioner of Income Tax / Assessing Officer ('AO') / Transfer Pricing Officer ('TPO') is erroneous and contrary to the principles of natural justice and bad in law. Grounds in relation to transfer pricing adjustment made by the AO/TPO The learned TPO and the learned AO, under the directions issued by the Hon'ble Dispute Resolution Panel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there was any binding agreement /arrangement between the AEs and the Appellant which obligated the Appellant for rendering brand building services, 2.8 Erred in law and on facts in disaggregating the marketing function from the distribution function and separately considering the AMP expenses as an international transaction, even after accepting the arm's length nature of the margins earned by the Appellant in the distribution segment, 2.9 Erred in law and on facts in making the brand fee adjustment having reference to the reimbursement of advertisement and marketing costs received by the Appellant in AY 2009-10, without appreciating the start-up nature of the Roca operations of the Appellant in AY 2009-10 vis-a-vis the operations in AY 2013-14, 2.10 Erred in making an adjustment contrary to the position taken in a subsequent year wherein, for similar set of facts, upon submission of similar arguments in response to the show-cause notice issued for AY 2014-15, the TPO appreciated the economic and commercial rationale of the marketing and distribution functions performed by the Appellant and accepted the arm's length nature of the international transaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate of depreciation prescribed under Part A (III) (5) of New Appendix I to the Income-tax Rules, 1962 ('the Rules') with respect to software. 7. Erred in law on facts in disallowing claim of provision created for VAT assessment demand amounting to INR 900,000 under section 36 of the Act. 7.1 Erred in law and on fact by disallowing the provision for VAT assessment demand contending that the expenditure is not relatable to the impugned assessment year. 7.2 Erred in appreciating the fact that the Company remitted the demand within the due date of filing return under section 139(1) of the Act and accordingly eligible for claim under section 43B of the Act. 8. Erred in law and on facts in Initiating penalty u/s 271(1)(c) of the Act 8.1 Erred in law and on facts in initiating penalty u/s 271(1)(C) pf the Act that an adjustment which has resulted from a mere difference of opinion between the learned AO / Transfer Pricing Officer ('TPO') and the Appellant. 8.2 The AO failed to appreciate that the Appellant had acted in good faith and with due diligence, and therefore it was not a case of deemed concealment in terms of Explanation 7 to se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Advertisement Media- Parryware Expenses incurred in relation to advertisements displayed in media and newspapers 64,434,325 Advertisement Media Roca 26,196,090 Total Advertisement Expenses 90,630,415 Selling Distribution Expenses (Non-AMP) Catalog, market research, dealer support, customer care, dealer events, agency fees Total Selling distribution Expenses (Non-AMP) Roca and Parryware 188,249,213 Total Advertisement and Selling Distribution expenses 278,879,627 The Ld. TPO show caused the assessee as to why 1% of gross sales be not considered as brand building exercise for AE as done in last year. 4.2 The assessee submitted that the AMP expenses were less than that of comparable companies and there was no legal basis for this adjustment. The assessee also relied on the decision of Hon ble Delhi High Court in the case of Maruti Suzuki I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lea that it had not availed any loan for investment and the investments were out of own funds. The various other pleas were also rejected. Finally, applying Rule 8D, Ld. AO computed disallowance of Rs.74.11 Lacs which was interest disallowance u/r 8D(2)(ii) for Rs.44.63 Lacs and indirect expense disallowance u/r 8D(2)(iii) for Rs.29.47 Lacs. The Ld. DRP confirmed the same against which the assessee is in further appeal before us. 5.2 We find that similar issue in AY 2012-13 has been adjudicated by Hon ble Madras High Court (TCA No.775 of 2018 dated 04.12.2018) as under: - 13. The Assessing Officer is required to decide as to whether it was correct for disallowing the interest on debentures under Section 14A of the act when the assessee s case is that the interest expenditure was incurred on debenture issued in the financial year 2008-09 for the specific purpose of acquiring the company in the past and not for investment in future. Furthermore, the assessing officer has to consider the submission of the assessee that the interest incurred by the assessee is specifically towards acquisition of shares in M/s Glamouroom Taps Pvt. Ltd. which company subsequently stood amalgamated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statements of the assessee, it could be ascertained that the assessee is valuing the inventories at lower of cost price or net realizable value which is prescribed method of valuation of inventories. The Ld. AR has submitted that same method has been adopted to value the inventories. This being the case, no further deduction of provision would be admissible to the assessee since any decrease in value of inventories at year-end would subsume in method of valuation as adopted by the assessee. In other words, when the valuation is done on lower of cost or net realizable value then any decrease in value of obsolete or slow moving stock on valuation date would automatically take care of the loss suffered by the assessee on this account. Accordingly, a separate provision made, in this regard, could not be allowed to the assessee. The Ld. AR has cited many case laws to support this deduction. However, in the given factual matrix, the same are not applicable. Therefore, the adjustment made by Ld. AO, in this regard, could not be faulted with. The corresponding grounds raised by the assessee stand dismissed. 8. Depreciation on software: 8.1 The assessee claimed depreciation @ 60% ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
