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TMI Blog2023 (1) TMI 1197X X X X Extracts X X X X X X X X Extracts X X X X ..... of production, sales and distribution of Whirlpool appliances. During the previous year under consideration, assessee entered into a number of international transactions with AEs and applied Transactional Net Margin Method (TNMM) to bench mark the transaction. 5. Having carried out the economic analysis, as aforesaid, the assessee claimed the international transaction with the AE to be at arm's length. The TPO, though, accepted assessee's benchmarking of the international transactions with the AE, however, he noticed that the assessee has incurred expenditure of Rs.60,75,36,000 towards AMP which works out to 1.39% of the sales. Therefore, he called upon the assessee to show-cause why the transaction relating to AMP expenditure should not be benchmarked separately, since, by incurring such expenditure the assessee has promoted the brand/market intangibles owned by the foreign AE. In its reply, assessee strongly objected to proposed action of the TPO and submitted that AMP expenditure incurred by the assessee cannot be treated as an international transaction as per the definition contained under Section 92B of the Act. The TPO, however, was not convinced with the submissions of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to demonstrate that there exists an international transaction in relation with incurring of AMP expenses to promote the brand of the AE. Thus, he submitted that the issue is squarely covered in favour of the assessee. Without prejudice, he submitted, the BLT method applied by the TPO has been rejected by the Hon'ble Delhi High Court on numerous occasions. Finally, he submitted, in assessee's own case in assessment years 2014-15 and 2015-16 the issue has been decided in favour of the assessee by the Tribunal. 10. Learned Departmental Representative submitted, the facts of the impugned assessment year are different from the preceding assessment years. Therefore, the decision of the Hon'ble Delhi High Court and the Tribunal in earlier years would not apply. Proceeding further, he submitted, in the impugned assessment year, the TPO has made the substantive addition by using Transactional Net Margin Method (TNMM) which was not the case in the preceding assessment years. Thus, he submitted, the issue stands in a different footing in the impugned assessment year. Without prejudice, he submitted, if the bench is of the view that the decision in the preceding assessment years are a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the TPO to treat AMP expenses as international transaction. The objection is disposed off accordingly." 12. As could be seen, in no uncertain terms, learned DRP has observed that the factual matrix of the case in the impugned assessment year remains same as in earlier years i.e. assessment years 2014-15 and 2015-16. Thus, in sum and substance, it has to be concluded that there is no difference in factual position between the preceding assessment years and the impugned assessment year, in so far as, the disputed issue is concerned. Having held so, we proceed to examine how this issue has been decided in preceding assessment years in assessee's own case. 13. It is observed, for the first time, this issue cropped up in assessee's own case in assessment year 2008-09. The TPO while determining the ALP of international transaction between the assessee and the AE held that AMP expenditure incurred by the assessee is basically to promote the brand of the AE, hence, would come within the ambit of international transaction. Accordingly, he determined the ALP of AMP expenses and proposed an adjustment. When the matter travelled to the Tribunal, following the decision of Special Bench of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal in assessment year 2015-16, we delete the adjustment. Grounds are allowed. 16. Ground nos. 4 to 4.4 are in respect of disallowance of AMP expenses under Section 37 of the Act. As could be seen, in tune with the order passed by the TPO, the Assessing Officer held that since the AMP expenses amounting to Rs.60,67,69,273 was incurred for promoting the brand of the AE, it cannot be regarded as the expenditure incurred wholly and exclusively for the purpose of assessee's own business. Accordingly, he disallowed the expenses. 17. Learned counsel for the assessee submitted, the issue is squarely covered by the decisions of the Hon'ble Delhi High Court and the Tribunal in assessee's own case in preceding assessment years. 18. The learned Departmental Representative could not controvert the aforesaid submission of the assessee. 19. Having considered rival submissions, we notice that while deciding identical issue in assessment year 2008-09 the Hon'ble Delhi High Court has taken a view favourable to the assessee, while dismissing the appeal filed by the Revenue. The aforesaid decision of the Hon'ble Delhi High Court has been consistently followed by the Tribunal while d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erence of Rs.26,20,527. Accordingly, he restricted the disallowance to that extent. 23. Before us, learned counsel for the assessee submitted, before the authorities below, the assessee has furnished all necessary details to reconcile the difference between the statement of credit card and actual vouchers. In this context, he drew our attention to the factual paper book. He submitted, the Assessing Officer has not explained how difference works out to Rs.26,20,527. He submitted, the actual difference between the AIR information and assessee's record is only to the extent of Rs.1,35,450 and not what has been disallowed by the Assessing Officer. Without prejudice, he submitted, no disallowance can be made based on AIR information. Finally, he submitted, while considering similar nature of dispute in assessee's own case in assessment year 2015-16, the Tribunal has restored the matter back to the Assessing Officer to verify the evidences filed by the assessee. 24. The learned Departmental Representative relied upon the observations of the Assessing Officer. 25. We have considered rival submissions and perused the material available on record. It is evident, in compliance with the di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such provision is offered for taxation at the time of filing the return and the actual amount paid during the year is claimed as expenditure. According to the Ld. AR it has been the practice of the assessee quite for a long time and all through these years no disallowance was made by the learned Assessing Officer. Learned Assessing Officer, however, disallowed the expenditure claimed by the assessee on the basis that the assessee is not a company registered under section 25 of the Companies Act so as to carry out welfare activities and the expenditure incurred in marriage of the employees' daughters is not wholly and exclusively for the purpose of business of the assessee. 22. Basing on the de4cision of the Hon'ble Apex Court in the case of Shahzada Nand & Sons vs. CIT 108 ITR 358, Ld. AR submitted that the ex-gratia compensation paid to an employee is an allowable expenditure. He further submitted that under section 37(1) of the Act, deduction is admissible for expenditure incurred wholly and exclusively for the purpose of business and such expenditure is justified by business consideration and incurred out of commercial expediency is allowable deduction. He drew our attention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eceivable by the assessee as on 31.03.2016 was Rs.4,70,37,331. Thus, the assessee suffered a net loss of Rs.80,00,000, which is an allowable expenditure. In this context, he drew our attention to notes to the financial statement and submitted that the loss may be allowed. 34. Strongly relying upon the observations of the Assessing Officer and learned DRP, the learned Departmental Representative submitted, when assessee's claim has not been settled by the insurer in the impugned assessment year, assessee's claim cannot be allowed. 35. We have considered rival submissions and perused the material available on record. The facts on record clearly reveal that the loss of Rs.80,00,000 claimed by the assessee is only in the nature of a provision and is a projected figure. No material has been placed on record before us to demonstrate that the insurer has settled the claim in the financial year relevant to assessment year under dispute. On a specific query from the bench, learned counsel for the assessee has submitted that the insurance claim was settled in the next financial year relevant to assessment year 2017-18. Learned counsel was not able to furnish any documentary evidence, being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out of the expenditure claimed towards travelling and conveyance. 45. While examining the expenditure claimed by assessee on travelling and conveyance, assessing officer disallowed 10% out of such expenditure purely on ad hoc basis. 46. Learned DRP upheld such disallowance. 47. Before us, learned counsel for the assessee submitted, not only assessee maintains regular books of account but the accounts are also audited. He submitted, in course of assessment proceedings, assessee has furnished complete details of all the expenditure incurred on travelling and conveyance. He submitted, without properly verifying the evidences filed by assessee, assessing officer has disallowed a part of the expenditure. Thus, he submitted, disallowance made should be deleted. 48. Learned Departmental Representative strongly relied upon the observations of the assessing officer and learned DRP. 49. We have considered rival submissions and perused the material on record. 50. It is evident, the assessing officer has rejected a part of the expenditure incurred on conveyance and traveling purely on ad hoc basis. He has not pointed out any deficiency either in the accounts maintained by the assessee o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act. 59. We have heard the parties and perused the material available on record. 60. As could be seen, Learned DRP while deciding assessee's objection on the issue has directed the assessing officer to allow foreign tax credit as per law. Assessing Officer has disallowed assessee's claim of foreign tax credit, on the reasoning that the assessee failed to furnish any certificate from the parties indicating the details of income and quantum of tax withheld thereon. It is the allegation of the Assessing Officer that, though, in the reply dated 10.03.2021, the assessee stated that statement of reconciliation of income received from foreign sources along with the copy of certificate received from the parties are enclosed, however, no such enclosure was found on e-filing portal. Thus, in absence of the required documentary evidences, Assessing Officer disallowed the claim of foreign tax credit. 61. Before us, learned counsel for the assessee submitted, during the year under consideration, two of the overseas associated enterprises of assessee had withheld tax aggregating to Rs.1,17,50,021. He submitted, before the departmental authorities, assessee had furnished the details of tax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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