9911796707
TMI Blog2023 (1) TMI 1110X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to Rs. 10,44,88,67,112/- in relation to Advertisement, Marketing and Sales Promotion Expenses [AMP] incurred by the assessee. 5. Briefly stated, the facts of the case are that the assessee is engaged in the trading, manufacturing, marketing and sale of electronic home appliances and I.T. products. It is also engaged in the import of finished goods i.e. Colour Television, Air Conditioners and Refrigerators from its holding company and associated group companies and selling the same in the local market. 6. In its telecommunication division, the assessee is engaged in the provision of after sales support services for Code Division Multiple Access [CDMA] technology based mobiles sold by LG Electronics Inc. Korea to Reliance in India. The international transactions undertaken by the assessee and the method applied to benchmark them are reproduced hereinbelow: SI.No. Nature of Transaction Value of international transaction (INR) Method Appliance and media division -Assembly segment 1. Import of raw material and components 22,158,285,520/- TNMM 2. Export of finished goods 12,608,941,573 3. Export of service spares 17,103,394/- 4. Import of cap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on behalf of its foreign Associated Enterprises [AE]. As the AE is nonresident and such transactions are in the nature of services, it is considered to be as an international transaction under which the assessee incurred AMP expenses towards promotion of brand/ marketing intangibles owned by the non-resident AE. 10. Thereafter, the TPO referred to the BLT and determination of cost/value of the transaction drawing full support from the decision of the Special Bench of this Tribunal. The TPO, for applying BLT, accordingly compared AMP expenditure incurred by the assessee as percentage of total turnover at 10.48% with average AMP expenditure of 1.82% of the following comparable companies: Name of the Company AMP/sales Allied Photographics India Ltd 0.02% HCL Info Systems Ltd 0.81% Infinite Retail Ltd 2.88% Vivek Ltd 3,59% Arithmetic Mean 1.82% 11. In light of the above, the TPO held that since AMP expenses incurred by the assessee as percentage of sales was more than similar percentage for comparable companies, the assessee had incurred such AMP expenditure on brand promotion and development of marketing intangibles for the AE. After charging mark-up of 14.8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on'ble Delhi High Court in the case of Whirlpool of India and pointed out that there is a tangible material in the form of Article 20 of the license agreement to demonstrate the existence of international transaction. 16. Referring to the Transfer Pricing study of the assessee, the ld. DR stated that the assessee has undertaken combined bench marking analysis by aggregating several international transactions whereby ALP determination of several international transactions have not been undertaken. 17. The ld. DR further stated that operating margin of the assessee is 3.70% as against 4.70% of the comparable companies which means that the profit margin of the assessee was lower than that of the comparable companies and, therefore, international transactions were not at arm's length price. It is the say of the ld. DR that the transaction by transaction benchmarking analysis is to be undertaken as opposed to aggregation approach adopted by the assessee. 18. The ld. DR concluded by saying that since the Tribunal in the preceding years has upheld the bench marking of AMP expenses by applying TNMM, the same may be applied in the year under consideration also but after making compar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs is followed. 22. In our considered opinion, it is not open to the Tribunal to deviate from the findings recorded in earlier years in the absence of change in facts or position in law. In other words, this Tribunal is bound by earlier decisions. 23. We draw full support from the decision of the Hon'ble Madras High Court in the case L.G. Ramamurthi 110 ITR 453 wherein the Hon'ble Madras High Court held that unless new facts are brought on record, the Tribunal shall not take a view which is different from the view taken by another bench for the earlier years. The relevant findings read as under: "19. .......... Even assuming that this court "on the earlier occasion had not given any finding with regard to the nature of the gift, whether it was real or sham, and merely went on to consider the question of law embedded in the question actually referred, to this court, still we are of the opinion that no Tribunal of fact has any right or jurisdiction to come to a conclusion entirely contrary to the one reached by another Bench of the same Tribunal on the identical facts. It may be that the members who constituted the Tribunal and decided on the earlier occasion are differen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l gifts and not sham ones." 24. In light of the above, and respectfully following the findings of the co-ordinate bench [supra] we direct the Assessing Officer /TPO to delete the impugned adjustment of Rs. 10,448,867,112/-. Accordingly, Ground No. 4 with all its sub-grounds is allowed. 25. For the sake of completeness, we would like to address to the specific issues raised by the ld. DR. 26. Firstly, the ld. DR has referred to Article 20 of Technical License Agreement which reads as under: "The licensee agrees to provide and make arrangements for advertisement, marketing and sales promotion in the licese territory for L.G. products manufactured by the licensor and those by the licensee at their cost." 27. In our understanding of the afore-stated Article, we are of the considered view that it only emphasizes that the advertisement, marketing and sales promotion expenses in relation to the products manufactured and/or distributed by the assessee would have to be incurred by the assessee as licensee and it would not be the responsibility of the L.G. Korea to incur such expenses. 28. We are of the considered view that in terms of technical licensee agreement, the assessee is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of any service in relation to AMP expenses incurred by the assessee as an independent full risk-bearing manufacturer/ distributor of the products manufactured/distributed in the Indian market. 34. Another point raised by the ld. DR relates to reimbursement of certain advertisement expenses by LG Korea. 35. As mentioned elsewhere, in terms of Article 20, LG Korea did not have any obligation whatsoever to indicate or reimburse advertisement expenditure in relation to sale of products by the assessee in India. It appears that the said reimbursement of AMP expenses have been made by LG Korea voluntarily and without any legal binding and by way of support the assessee. We find that similar reimbursement has been received by the assessee in earlier years and as mentioned elsewhere, this quarrel has been decided by this Tribunal in earlier Assessment Years in favour of the assessee and against the Revenue. 36. In so far as bench marking of AMP expense on aggregation basis applying TNMM is concerned, this Tribunal in assessee's own case, in Assessment Years 2008-09 and 2009-10 upheld the proposition that as long as operating margins of the assessee are higher than those of comparable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rofit of the interlinked transaction. This would be also in consonance with Rule 10B(1)(e), which mandates only arriving at the net profit margin by comparing the profits and loss account of the tested party with the comparable. The TNM Method proceeds on the assumption that functions, assets and risk being broadly similar and once suitable adjustments have been made, all things get taken into account and stand reconciled when computing the net profit margin. Once the comparables pass the functional analysis test and adjustments have been made, then the profit margin as declared when matches with the comparables would result in affirmation of the transfer price as the arm's length price. Then to make a comparison of a horizontal item without segregation would be impermissible." 38. It would be pertinent to mention here that the TPO did not dispute the combined benchmarking analysis undertaken by the assessee in its Transfer Pricing study in respect of all international transactions and, in fact, accepted the same to be at arm's length. The TPO has proceeded on the premise that an international transaction in respect of AMP expenses is to be bench marked separately applying BL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hout segregation would be impermissible." 33. Considering the aforementioned findings of the Hon'ble Jurisdictional High Court of Delhi In the case in hand, the operating profit margin of the assessee is at 5.01% in the manufacturing segment and 4.52% in the distribution segment and the same is higher than that of the comparable companies at 4.04% in the manufacturing segment and 4.46% in the distribution segment. TNMM has undisputedly been satisfied. Since the operating margins of the assessee are in excess of the selected comparable companies, no adjustment on account of AMP expenses is warranted." 40. The contention of the ld. DR that profit margin of assembly segment of the assessee is 3.70% whereas the same for comparable companies is at 4.70% cannot be accepted since the said margin is within arm's length range of +/- 5% as per proviso to section 92C92) of the Act. 41. Bench marking analysis of AMP expenses applying intensity approach can be understood from the following chart: S.No. Name of the company Operating profits on operating revenues Operating profits on operating revenues after AMP adjustment 1 Hitachi Home and Life Solution Limited NC NC 2 Pengu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levision 5% 5% 5 Samsung Electronics Co. Limited Videocon Appliances Limited Mar-99 Showcase of Reach-in-type and open type reach-incooler and open freezer 5% 5% 5 Victor Company of Japan Mirc Electronics Limited Apr-03 Colour Television Receiver Set and Subassemblies 5% 5% 7 SRS Labs Inc Salora International Limited Apr-03 Speaker 5% 3 Vilter Manufacturing Corporation Frick India limited Jan-03 Refrigeration Compressors 5% 8% 5 37. Out of the aforesaid 8 comparables, DRP/TPO considered only 3 comparables engaged in manufacture of colour television, viz., Toshiba Corporation, Japan, Kenwood Design Corporation and Victor Company of Japan and disregarded the remaining 5 comparables. Accordingly, the TPO arrived at average royalty rate of 4.50%. The DRP/TPO further made an adhoc adjustment of 1% from the average rate of royalty of 3 comparables of 4.5%, allegedly on the ground that the royalty agreement of the assessee is in perpetuity, while the agreement of the comparables is for a definite period. The DRP further observed that since the assessee has made payment of design and development charges to LGEK, the payment of royalty sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be applied to the present facts by considering the discount which a licensor with a perpetual license may allow or the premium which a licensor with a fixed term license may charge. It can be seen that the TPO downgraded 2% on this score and reduced the unadjusted comparable rate of 3.5% to the adjusted 1.5%. To put it differently, the TPO treated the premium charged by the comparable licensors on account of fixed term licenses at 57% (2/ 3.5*100), or in other words, the discount at such rate to the prevalent market rate on account of perpetual license. However, the DRP treated such discount for perpetual license at 22% (1/4.5*100). Considering the entirety of the facts and circumstances of the instant case, we find that the rate of premium on the license with fixed term at 22% is on a higher side. In our considered opinion, the rate of such premium should be restricted to 10% of the average rate of royalty of the comparable cases. 10.9. It has been held above that the DRP rightly considered three companies as comparable, whose average rate of unadjusted royalty comes at 4.5% within the meaning of sub- clause (i) of rule 10B(1)(a). When rate is discounted with 10% under sub-cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. DR vehemently stated that the evidences which have been brought on record do not pertain to the F.Y. 2009-10 relevant to the year under consideration. 51. The ld. DR further questioned the allocation of expenses in ratio of domestic sales as it results in higher allocation of the expenses to the Indian company and further questioned the allocation of president cost and general overheads of the AE. 52. Referring to earlier years decision of this Tribunal, the ld. DR stated that in earlier Assessment Years, factum of rendition of services was not disputed by the Revenue, but this year, the same is being challenged. 53. We have given thoughtful consideration to the rival contentions. In our considered opinion, the assessee is free to conduct business in the manner that the assessee deems fit and the commercial or business expediency of incurring any expenditure has to be from the assessee's point of view, which means that the Assessing Officer cannot step into the shooes of a business man. In our considered view, an item of expenditure has to be incurred wholly and exclusively for the purpose of business of the assessee and whether the assessee has derived any benefit from incur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the employees of the appellant 2519-2523 (Vol 6) Email dated 05-04-2009 10. Brand in depth study - Report dated October,2009 2524-2588 (Vol 7) In depth study to diagnose the current status of brand and to identify influencing factors for brand preference 11 Presentation on global communication campaign 2630-2677 (Vol 7) Report/presentation discussing marketing strategy for creating market awareness about innovative products offered by LG and to increase sales in Asian countries. Campaign was undertaken during April to December, 2009 with budget of USD 7.60 million (page 2632) 12 Marketing presentation on VC/AP (Air purifier) launch in India 2678-2698 (Vol 7) Report/presentation on launch of new products in India - July, 2009. Report contains Marketing Plan, Training Schedule etc. 13 Marketing Presentation dated July, 2009 2699-2807 (Vol 7) Presentation/ Report dated July 7, 2009 on Marketing Strategy, Product strategy and Design Lab and Corporate design. Contains analysis of marketing strategy of competitors 14 Email dated 3 October,2009 2124-2142 (Vol 6) Promotional and marketing material for launch of Borderless Series of TV. 57. In so far as allocation o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice of the services provided by the RHQ. The consultant determined ALP at Rs. 6,521/- per hour as against the comparable uncontrolled price of Rs. 11,670/- per hour. Since the hourly rate charged by RHQ is lower than comparable hourly rate of third parties transaction of regional head quarter charges meets the arm's length test. 52. The Revenue has made the adjustment holding that the assessee was not required to incur such expenditure which are duplicative in nature. In our considered view, the assessee is free to conduct business in the manner that assessee deems fit and the commercial or business expediency of incurring any expenditure has to be seen from the assessee's point of view. 53. The Hon'ble Delhi High Court in the case of CIT vs Reebok India Co Ltd ITA No 213/2014, while deleting transfer pricing adjustment made by the TPO on the basis of similar reasoning held as under: "183. On the question whether the royalty should have been paid or not, we are in agreement with the finding of the Tribunal that question of payment of royalty cannot be determined on the basis of profitability or earnings of the assessed, once it is accepted that know-how and technical infor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not approved. The Court's attention has also been drawn to the decision in Commissioner of Income Tax v. EKL Appliances Limited (2012) 345 ITR 241 wherein it was held that Rule 10B (1) (a) did not authorize disallowance of any expenditure on the ground that it was not necessary for the Assessee to have incurred such expense. It was observed that though the quantum of expenditure could be examined, the entire expenditure could not be disallowed on the ground that it was not necessary." 55. Further, the Hon'ble Delhi High Court in the case of CIT vs Cushman and Wakefield (India) Pvt Ltd. ITA 475 of 2012 has held that the authority of the TPO is to conduct a TP analysis to determine the ALP and not to determine whether the tax payer derives a benefit from the service. The Hon'ble Delhi High Court has opined that the determination of benefit to the tax payer is in the domain of the AO. The Hon'ble High Court held as follows: "34. The Court first notes that the authority of the TPO is to conduct a transfer pricing analysis to determine the ALP and not to determine whether there is a service or not from which the assessee benefits. That aspect of the exercise is left to the AO. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Each method is a package in itself, as it were, containing the necessary elements that are to be used as filters to judge the soundness of the international transaction in an ALP fixing exercise. If this were to be disturbed, the end result would be distorted and within one ALP determination for a year, two or even five methods can be adopted. This would spell chaos and be detrimental to the interests of both the assessee and the revenue. The second question is, therefore, answered in favour of the assessee; the TNMM had to be applied by the TPO/AO in respect of the technical fee payment too." 58. Considering the facts in totality in the light of the judicial decisions discussed hereinabove, the adjustment computed by the TPO/DRP on account of allocation of RHQ expenses is uncalled for and deserves to be deleted. Ground Nos. 5 to 5.5 are allowed." 60. Ground No. 7 relates to TP adjustment of Rs. 5,27,71,153/- in respect of international transaction of payment of export commission. 61. During the year under consideration, the assessee paid export commission of Rs. 8,86,08,280/- in respect of exports made using the marketing and distribution network of associated enterprises. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the issue afresh as per the directions of this Tribunal given in ITA No. 953/DEL/2014 for Assessment Year 2009-10. Ground No. 7 is allowed for statistical purposes. 68. Ground No. 8 relates to the adjustment to the service warranty charges received by the assessee by apportioning a margin of 32.95% on such cost of reimbursement. 69. Facts on record show that the TPO has made an adjustment of Rs. 19,17,39,195/- in respect of reimbursement of warranty service charges received from the AE on cost to cost basis. According to the TPO, the assessee is providing a service to the AE by servicing the warranty claims and, therefore, the assessee ought to have earned a mark-up of 32.95% on cost incurred for provisions of such services. 70. The ld. counsel for the assessee drew our attention to the decision of this Tribunal in assessee's own case for Assessment Year 2009-10 in ITA No. 953/DEL/2014 wherein the Tribunal has decided this issue in favour of the assessee. 71. The ld. DR vehemently contended that providing service warrantee to the customers is a contractual obligation of the assessee and its primary responsibility. It is the say of the ld. DR that since the assessee is providing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the royalty agreement and, therefore, determined ALP of this international transaction at NIL. 78. Before us, it was strongly submitted that R&D department for each product of the assessee determines the need for carrying out changes in the design or specifications of the product and seeks assistance from the AE in case it does not have the technical know-how to carry out such modifications and on such service, the technical team of the AE undertakes the development of the product in consultation with the assessee and in light of the specifications provided by the assessee. 79. It is the say of the ld. counsel for the assessee that design and development fee specification relates to the customization of products specific to the assessee. The ld. counsel for the assessee vehemently stated that the AE performs R&D activities on a global basis to develop platform technologies for new products. However, modifications and customization of these products are needed for certain markets as per their local regulations and cultural needs. 80. The ld. counsel drew our attention to the license agreement dated 01.07.2001 entered into by the assessee with the AE and pointed out that it clea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use intangible property, and 3. pricing a range of closely-linked products (e.g. in a product line) when it is impractical to determine pricing for each individual." 86. Similar guidance is given by the US and Australian TP Regulations on this issue and the same read as under: "The combined effect of two or more separate transactions (whether before, during, or after the taxable year under review) may be considered, if such transactions, taken as a whole, are so interrelated that consideration of multiple transactions is the most reliable means of determining the arm's length consideration for the controlled transactions. Generally, transactions will be aggregated only when they involve related products or services. The US regulations gives examples. One of the examples which is relevant to the issue is reproduced below: "Enters into a license agreement with SI. Its subsidiary, which permits SI to use a proprietary manufacturing process anil to sell the output from this process throughout a specified region. SI uses the manufacturing process and sells its output to S2, another subsidiary of P, which in turn resells (he output to uncontrolled parties in the specified region. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the assessed should be interfered in terms of the four clauses stipulated in Section 92C(3) of the Act, read with the Rules. It would, among other aspects, refer to the method adopted and whether reliability and authenticity of the arm's length determination is affected or corrupted. XXXXX 91. 91. In case the tested party is engaged in single line of business, there is no bar or prohibition from applying the TNM Method on entity level basis. The focus of this method is on net profit amount in proportion to the appropriate base or the PLI. In fact, when transactions are inter-connected, combined consideration may be the most reliable means of determining the arm's length price. There are often situations where closely linked and connected transactions cannot be evaluated adequately on separate basis. Segmentation may be mandated when controlled bundled transactions cannot be adequately compared on an aggregate basis. Thus, taxpayer can aggregate the controlled transactions if the transactions meet the specified common portfolio or package parameters. For complex entities or where one of the entities is not ‗plain vanilla distributor', it should be applied w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question of TP adjustment on account of AMP expenditure." 90. It would be pertinent to refer to the decision of the Hon'ble Delhi High Court in the case of Magneti Marelli Powertrain India Pvt Ltd ITA No..50/2014 for Assessment Year 2009-10 wherein the Hon'ble High Court held that having accepted TNMM as the most appropriate method in respect of all international transactions, it was not open to the TPO to subject only one element i.e. payment of technical assistance to an entirely different method. The Hon'ble High Court held as under: "17. As far as the second question is concerned, the TPO accepted TNMM applied by the assessee, as the most appropriate method in respect of all the international transactions including payment of royalty. The TPO, however, disputed application of TNMM as the most appropriate method for the payment of technical assistance fee of 38,58,80,000 only for which Comparable Uncontrolled Price ("CUP ) method was sought to be applied. Here, this court concurs with the assessee that having accepted the TNMM as the most appropriate, it was not open to the TPO to subject only one element, i.e payment of technical assistance fee, to an entirely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en by the assessee only to support financially its AE and, being transaction between a related party, the same has to be determined at ALP as done by the TPO and there is no error or infirmity in such determination. 98. We have given thoughtful consideration to the orders of the authorities below. Firstly, it is incorrect to say that no objection was raised in respect of write off of advance paid to AE treating the same as an international transaction. We find that a specific ground was raised. We further find that the advance was paid to the AE for supply of monitors, when the AE was a going concern carrying on business. When the company closed its operations in the year under consideration and went into bankruptcy proceedings, the advance so given was written off and claimed as deduction as trading loss. 99. Dehors whether the impugned transaction can be termed as an international transaction, the write off has to be allowed as a trading loss and also as a bad debt, as the same was given in the ordinary course of the business for purchase of monitors. We, therefore, do not find any reason in denying the write off. Further, bankruptcy certificate which is placed at pages 3414 to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riates during the year under consideration. 106. The ld. counsel drew our attention to the employment letters and Form No. 16 issued by the assessee. The ld. counsel further stated that while employing these expatriates, the assessee has followed a strict, well defined recruitment process, headed by the HRD of the assessee and expatriates hired by the assessee had to go through recruitment process of the assessee and were selected on the basis of their skills and merits. 107. The ld. counsel further stated that the assessee shares the job description of the persons to be hired with its AE LG Korea which recommends the names of the people having requisite skills for the relevant job description. It was stated that the expatriates were employed by the assessee for the purpose of its business and were not deputed by the holding company to serve its business. It was also strongly contended that during the period of employment of expatriates, the remuneration for services was directly paid by the assessee and LG Korea was not responsible to pay any remuneration or perquisite for performing their responsibilities. Salary was paid by the assessee after deducting tax at source in accorda ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee for the purpose of business of the assessee, and for such services they were paid remuneration directly by the assessee, on which tax was deducted at source as per the relevant provisions of the Act, which part has not been disputed by the revenue. 114. The decision of the Hon'ble Supreme Court in the case of Carborandum [supra] squarely apply on the facts of the case, in as much, as the assessee company had taken such expatriates on its payroll on the basis of various agreements of employment, and such expatriate employees worked under the direct control of the assessee company for day to day working. Considering the facts of the case in totality, it can be safely concluded that the expatriates were wholly and exclusively working for the business interest of the assessee and payment of salary to such expatriates is allowable u/s 37 of the Act. We, accordingly, direct the Assessing Officer to delete the impugned addition. Ground No. 11 is allowed. 115. Ground No. 12 relates to the treatment of sales tax subsidy of Rs. 84,07,00,774/- as taxable revenue receipt. 116. During the year under consideration, the assessee has received subsidies as under: - Subsidy fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose units which have started production or have carried out expansion or modernisation or backward integration etc. between 1.12.1994 and 31.03.2000. Para 2 of the notification specifies that the exemption or reduction in the rate of sales tax including the additional tax would not be more than 5 per cent of sale of goods. In case where tax rate was more than 5 per cent including additional tax, the balance was to be paid by the unit. Para7 (2) of the notification provides for the exemption of sales tax to the extent of exemption or reduction in tax. Item (2) of the Schedule includes Greater Noida Industrial Development Area wherein exemption from sales tax to the extent of 200 per cent of capital investment has been provided. None of the clauses of the Notification authorises the assessee to collect the sales tax and retain the same with it. The exemption of sales tax was available from the date of first sale or the date within the period of six months from the date of production, whichever is earlier. The said notification also provided that the eligibility certificate to the assessee will be issued by the joint/additional director of concerned Development Authority and the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the sale price have been retained by the assessee as excess sales consideration. At the year end the assessee has allocated the sales tax element from dealer's price and has claimed the same as capital subsidy. Therefore, the collection of dealers' price has been made in the ordinary course of trading activities. When the assessee is not permitted to collect the sales tax under the notification issued by the State Govt. the collection of sales tax as a part of dealers' price is nothing but constitutes a trading receipt........" 79. In A.Y 2003-04, the coordinate bench in ITA No. 3729/DEL/2009 has held as under: "In view of the above, Ld. Departmental Representative claimed that the issue is squarely covered in favour of the Revenue. However, ld. Counsel of the assessee submitted that the Tribunal has not considered the matter properly. He submitted that the appeal against the tribunal order is pending in the Hon'ble High Court of All. However, upon careful consideration, we find that there is no proper justification to deviate from the decision of the ITAT in assessee's own case. The appeal against the Tribunal order is still pending in Hon'ble High Court. Under the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... venue expenditure. Ground No. 10 is allowed." 45. Respectfully following the precedent, we direct the Assessing Officer/TPO to delete the impugned disallowance. Ground No. 10 is allowed. 124. Respectfully following the decision of the co-ordinate bench, we direct the Assessing Officer to delete the impugned disallowance. Ground No. 13 is, accordingly, allowed. 125. Ground No. 14 relates to the disallowance of export commission of Rs. 3,58,37,127/- paid to LG Electronics Inc. Korea holding the same to be diversion of income. 126. Facts on record show that the assessee exports CTVs to LG Group entities in the Middle East and South Asian countries and to some unrelated distributors outside India. LG Electronics Korea assists the assessee to increase the export of CTVs through its huge marketing network across the globe for which the assessee pays commission @ 4.50% of the export of CTVs made to various entities in the Middle East and South Asian countries. Such payment was disallowed by the Assessing Officer holding the same to be diversion of income. 127. Before us, the ld. counsel for the assessee has furnished some additions evidences u/r 29 of the ITAT Rules, 1962 with a p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on record by the assessee. Relevant findings of the co-ordinate bench read as under: "91. It is not in dispute that in A.Y 2007-08 this issue was decided against the assessee by the Tribunal. The assessee has filed application u/r 29 of the ITAT Rules for admission of additional evidence in support of payment of export commission to its AE. In our considered opinion, such additional evidences need to be verified before deciding this issue. We, accordingly, restore this matter to the file of the Assessing Officer. The assessee is directed to furnish relevant documentary evidences and the Assessing Officer is directed to consider the same and decide the same afresh after giving reasonable opportunity of being heard to the assessee. Ground No. 11 is treated as allowed for statistical purposes." 20. Respectfully following the findings of the co-ordinate bench, we restore this matter to the file of the Assessing Officer. The Assessing Officer is directed to consider the additional evidences and decide the same afresh after giving reasonable opportunity of being heard to the assessee. Ground Nos. 7 and 11 are allowed for statistical purposes." 130. Respectfully following the find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on u/s 80JJAA of the Act. For our convenience, section 80JJAA reads as under: "80JJAA. (1) Where the gross total income of an assessee, being an Indian company, includes any profits and gains derived from any industrial undertaking engaged in the manufacture or production of article or thing, there shall, subject to the conditions specified in sub-section (2), be allowed a deduction of an amount equal to thirty per cent of additional wages paid to the new regular workmen employed by the assessee in the previous year for three assessment years including the assessment year relevant to the previous year in which such employment is provided. (2) No deduction under sub-section (1) shall be allowed- (a) if the business is formed by splitting up or the reconstruction of an existing business. "Provided further that where an employee is employed during the previous year for a period of less than two hundred and forty days or one hundred and fifty days, as the case may be, but is employed for a period of two hundred and forty days or one hundred and fifty days, as the case may be, in the immediately succeeding year, he shall be deemed to have been employed in the succeeding year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case of R.B. Jodha Mal Kuthiala v. Commissioner of Income-tax, Punjab, Jammu & Kashmir and Himachal Pradesh (82 ITR 570), this Court said that one should apply the rule of reasonable interpretation. A proviso which is inserted to remedy unintended consequences and to made the provision workable, a proviso which supplies an obvious omission in the section and is required to be read into the section to give the section a reasonable interpretation, requires to be treated as retrospective in operation so that a reasonable interpretation can be given to the section as a whole. This view has been accepted by a number of High Court. In the case of Commissioner of Income-Tax v. Chandulal Venichand ([1994] 209 ITR 7), the Gujarat High Court has held that he first proviso to section 43B is retrospective and sales-tax for the last quarter paid before the filing of the return for the assessment year is deductable. This decision deals with assessment year 1984-85. The Calcutta High Court in the case of Commissioner of Income-tax v. Sri Jagannath Steel Corporation ([1991] 191 ITR 676), has taken a similar view holding that the statutory liability for sales-tax actually discharge after the e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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