TMI Blog2023 (9) TMI 741X X X X Extracts X X X X X X X X Extracts X X X X ..... obal level. If the AMP expenditure incurred by them benefited indirectly in the local/ international market it would not mean that it was an IT. The basic purpose of introducing the various provisions of chapter X, as stated earlier, was to prevent tax evasion in the transactions undertaken between an Indian entity and its overseas AE. In our opinion, a perceived/notional indirect benefit to the AE, due to incurring of certain expenditure by an assessee in India, is not covered by the TP provisions. It is a fact that the payment under the head AMP expenditure was made to third parties and that those parties were located in India. Thus we hold that the decisions made by the TPO / AO towards transfer pricing adjustment on account of AMP expenditure be deleted. Accordingly, these grounds raised by the assessee are allowed. Disallowance of payment of royalty on technology paid - HELD THAT:- Payment of royalty towards trademark for the year under consideration is based on the same agreement, which is considered by the co-ordinate bench for the assessment year 2009-10 [ 2021 (2) TMI 1358 - ITAT MUMBAI] Therefore we are of the view that the issue is covered by the above decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment towards global services rendered by Cadbury Holdings Limited be deleted. Disallowance u/s 14A - assessee computed a suo motu disallowance - assessee submitted before the Assessing Officer that the investments are made out of surplus funds available with the assessee and that the assessee did not borrow any funds in order to make investments - HELD THAT:- It is now a settled position that when the own funds are available, no disallowance is warranted under section 14A read with rule 8D. For the year under consideration, the reserves and surplus of the company as on 31/03/2011 is at Rs. 89, 988.09 lakhs and the investments made stands at Rs. 12, 881.07 lakhs, therefore, we see merit in the contention of the Ld.AR that no disallowance is warranted u/s 14A - Thus no disallowance towards interest is warranted under section 14A r.w.r.8D of the Act. With regard to the contention that the suo motu disallowance we notice that the Assessing Officer in the OGE passed for AY 2009-10 has deleted the disallowance made under section 14A and therefore we see merit in the submission of the ld AR that the suo moto disallowance based on the salary of employees in treasury department is b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the total turnover, we see no reason to sustain the addition, we delete the addition made in this regard. Non grant of MAT - AR submitted that the MAT credit is carried forward from A.Y. 2010-11 and the credit was modified due to additions made in the assessment order for A.Y. 2010-11 - HELD THAT:- We are of the view that this issue needs to be factually examined for the purpose of allowing the credit towards carried for MAT credit from AY 2010-11. Therefore, we remit the issue back to the Assessing Officer to examine the status of the assessment order passed for AY. 2010-11 and accordingly give credit for the carried forward MAT for the year under consideration. Levy of interest u/s 234A - HELD THAT:- We notice that the AO has recorded in the assessment order that the assessee has filed the return of income on 30/11/2011. Therefore, as per the provisions of section 234A, no interest is leviable in assessee s case. Accordingly, the interest levied is deleted. Levy of Interest u/s 234C - As submitted by AO has levied interest u/s 234C on the assessed income whereas the provisions of section 234C talks about levy of interest on income returned - HELD THAT:- We accordi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ground No.38 Ground No.38 Levy of interest under section 234A of the Act Ground No.39 Ground No.39 Levy of interest under section 234C of the Act Ground No.40 Ground No.40 2. The assessee also raised an additional ground in both AY 2011-12 and AY 2012-13 contending the validity of final assessment order passed under section 143(3) r.w.s.144C relying on the decision of the Hon'ble Madras High Court in the case of Roca Bathroom Products Private Limited (WA No.1517 and 1519 of 2021 dated 9th June 2022). However during the course of hearing the ld AR did not press for the admission of additional grounds. Accordingly the additional ground is not admitted for adjudication. 3. The assessee Mondelez India Foods Private Ltd (formerly known as Cadbury India Limited) is a subsidiary of Cadbury Overseas Ltd UK which holds 58.63% and Cadbury Mauritius Ltd which holds 38.97% of the equity shareholding while the balance 2.41% equity share holding is held by Indian public company comprising of various shareholders. The assessee was incorpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 4,17,51,000/- (4)Denial of deduction under section 80IC Unit I Rs. 6, 25, 43, 786/- Unit II Rs. 21,85,37,371/- (5) Addition on account of difference in AIR Rs. 2,45,454/- 4. The Assessing Officer passed a draft assessment order against which the assessee raised objections before the DRP. The DRP gave marginal relief to the assessee with respect of depreciation claimed on marketing know how and sustained the TP adjustment as well as the other additions / disallowance made by the Assessing Officer. The assessee is in appeal before the Tribunal against the final order of assessment passed pursuant to the directions of the DRP. TRANSFER PRICING ADJUSTMENTS Adjustment on account of advertising, marketing promotion expenses Ground No.2 to 18 5. The TPO noticed that the assessee is incurring huge expenses on advertisement, marketing and promotion on Cadbury brand in India. The TPO was of the view that since the assessee is not the legal owner of the brand in India, the AMP expenses incurred by the assessee translates into development of AEs brand and, therefore, the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 Marketing Consultants and Agencies Pvt Ltd 9.80% 2 Best Mulyakan Consultants Ltd 8.82% 3 Cyber Media Research Ltd (Formerly I D C (India) Ltd) 10.33% 4 HCCA Business Services Pvt Ltd NA 5 Hindustan Housing Co. Ltd NC-Significant RPT 6 Crystal Hues Ltd 11.27% 7 Quadrant Communication Ltd 15.84% 8 Indus Technical and Financial Consultants Ltd 12.05% Average 11.35% 7. Accordingly, the TPO arrived at the TP adjustment as per below working:- Particulars Amount Expenditure incurred for developing the intangibles Rs.1,61,01,97,731 Mark-up on Expenditure incurred for developing the intangibles (%) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18th May 2016, has decided the issue in favour of the assessee holding as under: 3.4. We have heard the rival submissions and perused the material before us. Before proceeding further, it would be useful to understand the philosophy and to consider the historical background of the TP provisions. It is said that the purpose and object of introduction of the provisions contained in Chapter X is to prevent an assessee from avoiding payment of tax by transferring income yielding assets to non-residents even while retaining the power to enjoy the fruits of such transactions i.e. the income so generated. As a concept, it is not totally a new idea. A reference to the provisions of section 42(2)to the Indian Income Tax Act, 1922, could be made in this regard-as it was a somewhat similar section and dealt with the trans-border transactions. The provisions of the said section broadly provided that where a non-resident carried out business with the person resident in the taxable territory and it appeared to the AO that on account of a close connection between such persons the business was so arranged that the business conducted by the resident with the non-resident either yielded no p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o) @10.85%was much higher compared to the average profitability of the comparables at the rate of 3.57%, that the FAA had held that higher rate profitability could not be a justification of this proportionate expenditure, that in the appellate proceedings the FAA had proposed further addition, that finally he upheld the order of the TPO and confirmed the addition of Rs. 71 lakhs, that there was no contractual obligation to recover money from the AE, that it was separately paying royalty for use of brand and trademark. There is no reason for not holding that the increased AMP expenditure led to enhanced sales and profitability, that for the purpose of analysing the AMP expenditure incurred by and the comparables it is necessary to consider various factors. If factors like growth rate, nature of business, number of products launched, territories serviced and turnover/profits achieved have necessarily to be considered for determining the AMP expenses. The entire expenditure was focused on the Indian consumer and it is evident from the local flavour/ language/concepts. It is also an undeniable fact that new players were entering India after liberalisation-era started. If the expenditur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... brand and that it was responsible for promoting the brand all over the globe and that the brand related exercise at the cost of the AE for the overall brand positioning and management benefited the assessee also in an indirect manner. Nothing has been brought on record to prove that the assessee was directly or indirectly promoting the global brand rather than promoting its own products. In our opinion, there exists a fine but very important distinction between products promoted and nurtured by an assessee and the brand owned and supported by its AE. In the modern world both exist and play different and specified roles. Therefore, until and unless some -thing positive is brought on record about sharing/incurring AMP expenditure under the head by an assessee on behalf of its AE, it cannot be held that it should have recovered some amount from the AE as the expenditure by it indirectly helped in augmenting the brand value owned by its overseas AE. In the case under consideration, the assessee was incurring expenditure for its products whereas the AE was looking after the ground at global level. If the AMP expenditure incurred by them benefited indirectly in the local/ international ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... means a transaction between two or more associated enterprises, either or both of whom are non-residents; in the nature of purchase, sale or lease of tangible or intangible property, or provision of services, or lending or borrowing money, or any other transaction having a bearing on the profits, income, losses or assets of such enterprises, and shall include a mutual agreement or arrangement between two or more associated enterprises for the allocation or apportionment of, or any contribution to, any cost. or expense incurred or to be incurred in connection with a benefit, service or facility provided or to be provided to anyone or more of such enterprises. (2) A transaction entered into by an enterprise with a person other than an associated enterprise shall, for the purposes 'of sub-section (1), be deemed to be a transaction entered into between two associated enterprises, if there exists a prior agreement in relation to' the relevant transaction between such other person and the associated enterprise, or the terms of the relevant transaction are determined in substance between such other person and the associated enterprise. 56. Thus, under Section 92B(1) an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tanding' or 'action in concert', 'whether formal or in writing', it is still incumbent on the Revenue to show the existence of an 'understanding' or an 'arrangement' or 'action in concert' between MSIL and SMC as regards AMP spend for brand promotion. In other words, for both the 'means', part and the 'includes' part of Section 928 (1) what has to be definitely shown is the existence of transaction whereby MSIL has been obliged to incur AMP of a certain level for SMC for the purposes of promoting the brand of SMC. 59. In Whirlpool of India Ltd. (supra), the Court interpreted the expression acted in concert and in that context referred to the decision of the Supreme Court in Daiichi Sankyo Company Ltd. v.. Jayaram Chigurupati 2010(6)MANU/SC/0454/2010, which arose in the context of acquisition of shares of Zenotech Laboratory Ltd. by the Ranbaxy Group. The question that was examined was whether at the relevant time the Appellant, i.e., 'Daiichi Sankyo Company and Ranbaxy were acting in concert within the meaning of Regulation 20(4) (b) of the Securities and Exchange Board of India (Substantial Acquisition of Sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue's attempt at re-characterising the AMP expenditure incurred as a transaction by itself when it has neither been identified as such by the Assessee or legislatively recognised in the Explanation to Section 92 B runs counter to legal position explained in CIT vs. EKL Appliances Ltd. (supra) which required a TPO to examine the 'international transaction' as he actually finds the same. 62. In the present case, the mere fact that B L, USA through B L, South Asia, Inc holds 99.9% of the share of the Assessee will not ipso facto lead to the conclusion that the mere increasing of AMP expenditure by the Assessee involves an international transaction in that regard with B L, USA. A similar contention by the Revenue, namely the fact that even if there is no explicit arrangement, the fact that the benefit of such AMP expenses would also encure to the AE is itself self sufficient to infer the existence of an international transaction has been negatived by the Court in Maruti Suzuki India Ltd. (supra) as under: 68. The above submissions proceed purely on surmises and conjectures and if accepted as such will lead to sending the tax authorities themselves on a wild ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al transaction involving the AE. The quantitative determination forms the very basis for the entire TP exercise in the present case. 74. The problem with the Revenue's approach is that it wants every instance of an AMP spend by an Indian entity which happens to use the brand of a foreign AE to be presumed to involve an international transaction. And this, notwithstanding that this is not one of the deemed international transactions listed under the Explanation to Section 928 of the Act. The problem does not stop here. Even if a transaction involving an AMP spend for a foreign AE is able to be located in some agreement, written (for e.g., the sample agreements produced before the Court by the Revenue) or otherwise, how should a TPO proceed to benchmark the portion of such AMP spend that the Indian entity should be compensated for? 63. Further, in Maruti Suzuki India Ltd. '(supra) the Court further explained the absence of a 'machinery provision qua AMP expenses by the following analogy: 75. As an analogy; and for-no other purpose; in the context of a domestic transaction involving two or more related parties, reference may' be made to Section 40 A (2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so benefitted by the expenditure should not come in the way of an expenditure being 'allowed by way of a deduction under Section 10 (2) (xv) of the Act (Indian Income Tax Act, 1922) if it satisfies otherwise the tests laid down by the law . Considering the facts-like absence of an agreement between the assessee and the AEs. for sharing AMP expenses, payment made by the assessee under the head AMP to the domestic parties, failure of the TPO prove that expenses were not for the business carried out by the assessee in India-and following the judgments of the Hon ble Delhi High Court delivered in the case of Bausch and Lomb(India)Pvt.Ltd(supra), we are of the opinion that the transaction-in - question was not an international transaction and that the TPO had wrongly invoked the provisions of Chapter X of the Act for the said transaction. 3.4.4. With regard to the submissions of the AR that the issue of AMP should be restored back to the file of the AO, we want to mention that law as a concept is supposed to evolve with passage of time-it cannot be static always. Non availability of a particular decision of the higher forum cannot justify the restoration of issue/cases to the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the decisions made by the TPO / AO towards transfer pricing adjustment on account of AMP expenditure be deleted. Accordingly, these grounds raised by the assessee are allowed. Disallowance o payment of royalty on technology paid to Cadbury Adams USA LLC, to Cadbury Enterprises Pte Ltd and Cadbury Schweppes Asia Pacific Pte Limited (now merged with Cadbury Enterprises Pte Ltd) Ground Nos.19 to 24 11. During the year under consideration, the assessee has paid a royalty of Rs. 1.77 crores to Cadbury Adams LLP, USA for the use of trademark related to Halls Brand and other licensed products. The assessee has entered into an agreement with Cadbury Adams LLC, USA dated 01/06/2006 for payment of royalty at 2.7% of the relevant sales. Further, the assessee has entered into a deed of amendment dated 24/12/2007 whereby the original deed entered by the assessee for payment of royalty at 2.7% was sought to be amended to incorporate the technical know how technology also. The TPO noticed that Cadbury Adams LLC, USA was only a special licensor of the trademark of Halls and what it owned was only the trademark and not the technical know how and technology in the licensed product. Acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... technical knowhow at 1.25% of net sales. The reasoning on which the Assessing Officer has denied royalty payment on trademark are basically that as per the terms of earlier agreement approved by the Government, the assessee can pay royalty for technical knowhow at the maximum rate of 2%, whereas, the assessee has paid royalty both for technical knowhow and trademark aggregating to 2.25%. He has also referred to the Press Note issued by the Government clarifying that royalty payment cannot exceed 2% and further the royalty payment for technical knowhow subsumes royalty payment for trademark. In this context, the Transfer Pricing Officer has also referred to similar dispute arising in the preceding assessment years. It is evident that the learned Commissioner (Appeals) has upheld the disallowance of royalty payment of trademark simply relying upon the order passed by him in assessee s own case for assessment year 2005 06. As could be seen from the material available on record, the assessee has entered into agreement with its current company in the year 1993, for availing technical knowhow for which it was required to pay royalty @ 2%. Subsequently, the assessee has entered into fres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd that while deciding the appeal for AY 2002-03(supra) the Tribunal has decided the issue as under:- 37. We have heard the detailed arguments from both the sides. The basic issue is the correctness of ALP on the royalty payments made by the assessee company to its parent AE on account of technical knowhow and trademark usage. 38. From the arguments of the DR, made on behalf of the TPO, the agreement for paying royalty on technical know-how at 1.25% and trademark usage at 1.25%, were overlapping and thus, TNMM method used by the assessee was incorrect. According to the TPO, the best method to ascertain ALP in the interest case was CUP, as the transactions were controlled. This was reasonable, as no data was available from independent source to benchmark the transactions. 39. On going through the records and the orders of the revenue authorities, we find that in so far as the payment of royalty on technical knowhow concerned, the assessee has been paying to its parent AE right from 1993, as, other group companies are paying across the globe. It has been accepted by the TPO that the payment does not effect the profitability of the assessee, if we are to examine the is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... With regard to disallowance of payment of royalty on on technology paid to Cadbury Adams USA LLC 3.4.2 We find that this issue is covered by the decision of this Tribunal for AY 2006-07 wherein it has been held as under: - 22. We have considered rival submissions and perused materials on record. Undisputedly, the assessee has paid royalty to CAUSA @ 2.7% of net sales as per the agreement executed on 1st June 2006. It is the claim of the assessee that the payment of royalty is for use of trademark as well as technical knowhow. However, the Transfer Pricing Officer after examining the agreement between the assessee and CAUSA has opined that the agreement only provided for use of trademark and it does not provide for use of technical knowhow. It is the say of the Transfer Pricing Officer that since as per the Government guidelines, payment of royalty on trade mark under the automatic route is fixed at the maximum rate of 1%. Royalty paid for trademark at 2.7% is not at arm's length. Accordingly, he has allowed payment of royalty for trademark at 1%. While doing so, the Transfer Pricing Officer has also observed that the agreement executed in December 2007, amend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditional evidence, in our view, is of much significance since it will have a crucial bearing in determining whether CAUSA has authorised the assessee to use technical knowhow along with trademark, hence, is admitted as additional evidence. Even, without taking cognizance of the aforesaid additional evidence, the original as well as amended agreement make it abundantly clear that assessee has also availed technical knowhow from CAUSA. Further, the Departmental Authorities don dispute the genuineness or authenticity of the amended agreement. What they are disputing is the date from which the amended agreement is effective. If the departmental authorities in the subsequent assessment years have allowed payment of royalty both for trademark and technical knowhow, there is no reason why it should not be allowed in the impugned assessment year, since, it cannot be said that the assessee was manufacturing Halls brand products without obtaining the required technical knowhow. Accordingly, we hold that payment of royalty to CAUSA is at arm s length. The ground is allowed. Respectfully following the same, we delete the impugned addition of Rs. 87.61 Lacs. Ground No.4 stand allowed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Disallowance of regional service fees paid to Cadbury Enterprises Pte Ltd. Singapore (Cadbury Schweppes Asia Pacific Pte Limited merged with Cadbury Enterprises Pte Ltd) (Ground No.25 to 28) 15. The TPO during the transfer pricing proceedings noticed that the assessee has entered into service agreement dated 21/10/2005 with Cadbury Enterprises Pte Ltd for availing certain services such as business strategy, financial planning and accounting supply chain, co-ordination and planning human resources legally and marketing, etc. The assessee during the year under consideration, had made a payment of Rs. 2,89,05,785 towards availing these services where the AE has charged cost plus 5% for providing the services. The TPO was of the view that the nature of services of rendered by AE are not in the nature of on-call services and that the assessee could neither furnish any evidence to show the actual rendering of services nor could show the actual cost incurred by the AE. The TPO applied CUP method and worked out the man-hour rate of the employee on the estimated salary cost of Rs. 11,00,000 per month. This estimate of the salary cost by the TPO was based on the increments that may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng company of assessee sold its imaging business to 'C' Inc. i.e., holding company of 'C' Ltd. on global basis - Thus, on suo moto assumption of jurisdiction over impugned transaction, TPO, proceeded to determine ALP -TPO determined ALP, based on worldwide revenue break up amongst countries and concluded that India accounted for 1.4 per cent thereof, which came to USD 32.9 million as against USD 13.54 million shown by assessee - Accordingly, an adjustment of Rs. 79.96 crore was made - Whether since transactions entered into by holding foreign companies and subsidiary Indian companies were independent of each other and there was no international element involved in sale of imaging segment by assessee of its business to 'C' Ltd., authorities below were not justified in invoking transfer pricing provisions in respect of assessee's transaction - Held, yes - Whether, therefore, impugned adjustment made by revenue authorities was to be set aside - Held, yes [paras 49 and 63] [In favour of assessee] Section 92C of the Income-tax Act, 1961 - Transfer pricing - Computation of arm's length price [Others] - Assessment year 2008-09 - Whether while determini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n or class of transaction or class of associated persons or functions performed by such persons or such other relevant factors as the Board may prescribe. 65. It is important to take note of the word shall used in the section. No doubt that under the General Clauses Act, shall can be used as may or vice versa, but the Hon'ble Supreme Court of India in the case of CIT v. Anjum M.H. Ghaswala, [2001] 252 ITR 1/119 Taxman 352, sitting in Constitution Bench explained the exact premise of the word shall . The case was pertaining to the levy of interest under section 234B on Chapter XIXA of the Income-tax Act, i.e. Settlement Commission. In the decision, the Hon'ble Supreme Court held, 'Nextly, the Commission has elaborately discussed the object of introduction of Chapter XIX-A in the Act, the history behind the introduction and schematic rationalisation of the provisions of Chapter XIX-A brought about through Finance Act, 1987 to hold that in exercising its power under Chapter XIX-A it has almost an unbridled power to arrive at a settlement. This exercise of purposive interpretation by looking into the object and scheme of the Act and legislative intendment woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e cannot accept the arguments of the DR that the word any has been used in section 92C(1), which could give leeway to the TPO to ascribe to a non-specific method. Word any, is founded on the suffix, of the following methods being the most appropriate method . Therefore, the ambit of the word any in section 92C(1) has been restricted within the precinct of the five specific methods. This gathers strength from the fact that even in the Rules, relevant Rule 10B provides with the similar wordings. 68. Taking into account the clear and unambiguous wordings of the provisions of the Income-tax Act and Rules and respectfully following the decision of the Special Bench in the case of LG Electronics India (P.) Ltd. (supra), we hold that even on this legal issue, the assessee succeeds. Therefore, respectfully following the above decisions of the co-ordinate bench, we delete the TP adjustment. Disallowance of Global Service Fee paid to Cadbury Holdings Ltd Ground Nos. 29 to 31 18. The assessee has entered into service agreement dated 30/12/2008 (with effect from 01/01/2008) for availing services from its AE Cadbury Holding Ltd (CHL) where the services rendered are in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the coordinate bench in case of Kodak India Pvt., Barclays Bank PLC and Vedanta Ltd., it was held that matter cannot be remanded back when the TPO has failed to follow the prescribed method under section 92C. (Refer Para 14 on page 13 of the ITAT order for AY 2009-10) Since, facts and issues in relation to services availed from CSAPL (i.e. ground no. 8 to 10) and facts and issues in relation to services availed from CHL (i.e. ground 11 to 13) are identical and as both the transactions have been benchmarked by MIFPL using TNMM, findings of ITAT for ground no. 8 to 10 are to be applied for ground no. 11 to 13 as well. The Tribunal has erroneously relied on the order for A.Y. 2008-09, this being a mistake apparent from record may be rectified and the findings given in Para 14 to 16 may be adopted for Ground No. 11 to 13 also. 4. In view of the submissions of the learned Counsel for the assessee and since the mistake being apparent on the face of record, we proceed to rectify the mistakes. 5. The concluding part, vide Para 19 and 20 of grounds No.11 to 13, of the impugned order dated 17th February 2021, passed in assessee s appeal being ITA no.2214/Mum./2014, for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gly, the assessee submitted that no borrowings cost is incurred by the assessee. The Assessing Officer did not accept the submissions of the assessee and proceeded to compute the disallowance as below:- (Amount in Rs. ) 1 Amount of expenditure directly relating to exempted income 3,44,215/- 2 A X B ------ C A= Interest 3,38,94,979/- B= Average Value of Investment 84,659,97,500/- C=Average Value of Total Assets 14,48,07,70,000/- Interest not directly relating to any particular income or receipt 19,80,217/- 3 Amount equal to half percentage of Average value of investments income of which does not form part of total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ings, it transpired that the assessee earned exempt income of Rs. 16.18 crores which mainly comprised-off of dividend on mutual funds. The assessee, inter-alia, submitted that Rule 8D was not applicable to year under consideration. It was also submitted that assessee s surplus funds were invested in Liquid Mutual Fund and the same were withdrawn as per business requirements. The attention was also drawn to the fact there were two persons in the Treasury department to manage mutual funds investment on regular basis and the total salary paid to them was Rs. 9.20 Lacs therefore, a part of the same could be disallowed. The arguments were also raised to submit that investments were made out of reserves and surplus. However, not satisfied, Ld. AO, applying Rule 8D, worked out aggregate disallowance of Rs. 233.04 Lacs which comprised-off of direct disallowance u/r 8D(2)(i) for Rs. 9.20 Lacs, interest disallowance u/r 8D(2)(ii) for Rs. 80.56 Lacs and indirect expense disallowance u/r 8D(2)(iii) for Rs. 143.28 Lacs. The direct expense disallowance u/r 8D(2)(i) for Rs. 9.20 Lacs is the same disallowance which has been offered by the assessee against Treasury department expenses. The disallow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stand partly allowed. 32. Therefore, respectfully following the above decision of Coordinate Bench in assessee s own case in turn relying on the decision of Assessment Year 2008-09. These issues are settled in favour of the assessee. Therefore, we are inclined to accept the submission of Ld. AR. Accordingly, these grounds raised by the assessee are allowed. 23. Respectfully following the above decision, we hold that no disallowance towards interest is warranted under section 14A r.w.r.8D of the Act. With regard to the contention that the suo motu disallowance we notice that the Assessing Officer in the OGE passed for AY 2009-10 has deleted the disallowance made under section 14A and therefore we see merit in the submission of the ld AR that the suo moto disallowance based on the salary of employees in treasury department is being accepted by the revenue. We therefore remit the issue of verification of direct / indirect expense disallowance to the file of Ld. AO for re-adjudication in the light of suo-moto disallowance offered by the assessee i.e. of Rs. 3, 44, 215/- keeping in mind the fact that for AY 2009-10 the suo motu disallowance based on salary of employees in trea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion loss. The DRP upheld the disallowance made by the Assessing Officer. 25. The Ld.AR submitted that the issue is covered in favour of the assessee in assessee s own case for A.Y. 2009-10 and the facts being identical for the year under consideration prayed for a similar relief. 26. We heard the parties and perused the materials on record. We notice that the co-ordinate bench in assessee s own case has considered a similar issue for A.Y. 2009-10 and held that 33. Before us, Ld. AR brought to our notice para 7.1 to 7.11 of AO order and para 12 of DRP order and submitted that the similar issue has already been decided by the Coordinate Bench of ITAT in the case of London Star Diamond Co. (I) Pvt. Ltd. vrs. DCIT (2013) 38 taxmann.com 338 (Mum-Trib) on merits in favour of the assessee. 34. On the other hand, Ld. DR relied on the orders passed by revenue authorities, however he conceded that this ground is covered by the order of ITAT 35. Considered the rival submission and material placed on record. We notice from the records that the identical ground has already been decided by the Coordinate Bench of ITAT in the case of London Star Diamond Co. (I) Pvt. Ltd. vr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... course of assessment, the Assessing Officer called on the assessee to furnish the break up of the deduction claimed under section 80IC. The Assessing Officer also observed that with respect to expenses claimed against the sale of Baddi Units as compared to expenses against sales of remaining units were disproportionate. Accordingly, the Assessing Officer called on the assessee to explain as to why the expenses should not be allocated proportionately on the basis of sale and the amount of deduction under section 80IC should not be recomputed accordingly. The assessee submitted before the Assessing Officer that all direct expenses which can be identified have been allocated unit-wise. With regard to the allocation of indirect expenses, the assessee submitted a detailed note on the basis of allocation and also the reason for variations of profits with respect to Buddy units. The Assessing Officer, after considering the submissions of the assessee, was of the view that there was a huge difference in the profitability ratio of 80IC units and non 80IC units, i.e. the profit ratio of Baddi Unit I is 19.40% and Buddy Unit II comes to 15.82% whereas the profit ratio of non 80IC units is onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 80IC thereby accepting the method of allocation followed by the assessee for allocating O E expenses. It is also noticed that there is no change in the method of allocation followed by the assessee for AY 2011-12 also. Considering the decision of the coordinate bench and the OGE passed by the Assessing Officer, we delete the disallowance made by the Assessing Officer and hold that the assessee be allowed the deduction under section 80IC as claimed in the return of income. Addition on account of Annual Information Report Ground No.37 32. The Assessing Officer noticed that an aggregate income of Rs. 7,87,612/- was appearing in AIR information which had not been reconciled by the assessee with respect to books of account. Accordingly, the Assessing Officer made an addition of the said amount and also allowed to claim credit of TDS on the same. On objections raised before the DRP, the DRP deleted the addition to the extent of Rs. 5, 42, 939/- and confirmed the balance amount of Rs. 2,45,454/-. 33. The Ld.AR submitted that the addition cannot be made solely based on the information in the AIR. In this regard, the Ld.AR place reliance on Reliance Apex Networks Ltd (ITA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer has levied interest under section 234C on the assessed income whereas the provisions of section 234C talks about levy of interest on income returned. We accordingly remit the issue back to the Assessing Officer with a direction to examine the records and re-compute the interest under section 234C as per the provisions of the said section. 40. The appeal for AY 2011-12 is allowed in favour of the assessee. I.T.A. No.1518/Mum/2017 - A.Y. 2012-13 41. The assessee for the assessment year 2012-13, filed the return of income on 30.11.2011 declaring an income of Rs. 172, 81, 99, 840. The case was selected for scrutiny and the statutory notices were duly served on the assessee. The TPO made the following TP adjustment Sr.No. Transaction Amount (in Rs. ) 1. Disallowance of Advertising and Marketing expenses 1,29,99,370 2. Disallowance on royalty on technology paid to CEPT 38,74,027 3. Disallowance of receipt of services from CHL 1,43,40,046 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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