HP INDIA SALES PRIVATE LIMITED ,BANGALORE V. .DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-3(1)(1), BANGALORE

ITTPA 1468/BANG/2024

AI Insights

The case involves HP India Sales Private Limited appealing against the order of the Dispute Resolution Panel (DRP) and the Transfer Pricing Officer (TPO), which treated the company's AMP expenses as an international transaction and made a corresponding TP adjustment. The Tribunal found that similar issues had been previously decided in favor of the assessee in earlier assessment years, referencing decisions by the Delhi High Court in Maruti Suzuki India Ltd. and Sony Ericsson Mobile Communications India (P.) Ltd., which disallowed the use of the 'bright line test' for such adjustments. Additionally, the Tribunal addressed the disallowance of a deduction for leave encashment payments, which the AO had rejected based on the claim not being included in the original tax return.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 24871 (ITAT-BANGALORE)
• Duration Of Justice: 4 month(s) 3 day(s)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 11-12-2024
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2020-2021
• Appeal Filed On: 07-08-2024
• Other Referred Cases: Maruti Suzuki India Ltd. v. CIT, Sony Ericsson Mobile Communications India (P.) Ltd. v. CIT, Allegis Services India (P.) Ltd. v. Assistant CIT
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NEERA MALHOTRA
• Assessee Lawyers: SHARATH RAO; VAIDEHI
• Keywords: Set aside; Business income; Revised return; Transfer pricing; International transaction; Business expenditure; Corroborative evidences; Depreciation; Fair market value; Initiation of penalty proceedings; Charitable institution; Ineligible deduction
• Section: 32; 22; 13; 234B; 37; 92; 37(1); 92B; 10B; 92C; 80G; 92F; 20

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH, BANGALORE BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI KESHAV DUBEY, JUDICIAL MEMBER IT(TP)A No.1468/Bang/2024 Assessment Years : 2020-21 HP India Sales Private Limited, No.24, Kothari Arena, Hosur Main Road, Adugodi , Bangalore – 560 030. PAN – AAACC 9862 F Vs. The Dy. Commissioner of Income Tax, Central Circle – 3(1)(1), Bengaluru. NCLT, New Delhi. APPELLANT RESPONDENT Assessee by : Shri Sharath Rao - CA, Smt. Vaidehi – CA and Shri Dhiraj –Advocate Revenue by : Ms. Neera Malhotra, CIT (DR) Date of hearing : 21.11.2024 Date of Pronouncement : 11.12.2024 O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: This is an appeal filed by the assessee against the order passed by the ld. CIT (A) - 11, Bengaluru dated 12/06/2024 in ITA No. ITBA/ AST/S/143(3)/2024-25/1065606334(1) for the assessment year 2020-21. 2. The assessee in the memo of appeal has raised the following grounds of appeal: IT(TP)A No.1468/Bang/2024 Page 2 of 26 . “Assessment and reference to the Learned Transfer Pricing Officer are bad in law 1. The assessment order passed by the National Faceless Assessment Centre, Delhi ('Ld. AO'), under section 143(3) read with section 144C(13) and 144B of the Income-tax Act, 1961 ('the Act') dated 12th June 2024, is bad in law and on facts 2. The Ld. Panel/ Ld. AO/ Ld. TPO erred in law and on facts in rejecting the benchmarking analysis conducted by the Appellant in the Transfer Pricing Study ('TP Study') Transfer Pricing grounds Grounds pertaining to the alleged Advertisement, Marketing and Promotion ('AMP') expenses 3. AMP expenditure is not an international transaction 3.1. The Ld. Panel / Ld. AO / Ld. TPO erred in law and on facts by alleging that the unilateral AMP expenditure, being payments made to third parties, is an \"international transaction\" as per the provisions of section 92B of the Act 3.2. The Ld. Panel / Ld. AO / Ld. TPO erred in law and on facts in not considering the favourable jurisdictional rulings of the Income-tax Appellate Tribunal ('the Hon'ble Tribunal') in the Appellant's own case of AY 2012-13, AY 2017-18 and AY 2018-19 and the orders issued by Commissioner of Income-tax (Appeal) for AY 2014-15 and AY 2016-17 wherein it was held that AMP is not an international transaction 3.3. The Ld. Panel / Ld. AO / Ld. TPO erred in law and on facts by disregarding various favourable judicial and specific jurisdictional pronouncements wherein it was held that AMP is not an international transaction 3.4. The Ld. Panel / Ld. AO / Ld. TPO erred in law and on facts in not appreciating that there was no agreement, understanding or arrangement between the Appellant and the Associated Enterprises ('AEs') with respect to the alleged AMP expenditure 3.5. The Ld. Panel / Ld. AO / Ld. TPO erred in law and on facts in presuming that an international transaction of brand promotion for the AE has taken place without bringing on record any tangible and reliable evidence on the benefits derived by the AE 3.6. The Ld. Panel / Ld. AO / Ld. TPO erred in law and on facts in concluding that the Appellant contributes to the development, enhancement, maintenance, protection, and exploitation ('DEMPE') functions of the alleged marketing intangible as a result of incurring AMP expenditure 3.7. The Ld. Panel / Ld. AO / Ld. TPO erred in law and on facts in concluding that the distribution and alleged AMP expenses are two distinct functions and failed to appreciate that the AMP expenses is at arm's length by applying the Transactional Net Margin Method ('TNMM') by the Appellant, as accepted by the Ld. TPO 3.8. The Ld. Panel / Ld. AO / Ld. TPO erred in law and on facts by failing to appreciate that even after including the mark-up determined on the alleged AMP expense, the overall adjusted net margin earned by the Appellant will still be at arm's length 3.9. The Ld. Panel / Ld. AO / Ld. TPO erred in law and on facts in not appreciating that the marketing activity performed by the Appellant is an IT(TP)A No.1468/Bang/2024 Page 3 of 26 . essential part of its distribution function and the expenses are incurred towards increasing the sales of its products in India 3.10. The Ld. Panel / Ld. AO / Ld. TPO erred in law and on facts by failing to consider that the alleged AMP expenses were incurred exclusively in relation to the Appellant's business, which is also evident from the fact that the expenditure have been allowed by the Ld. AO under section 37 of the Act 3.11. The Ld. Panel / Ld. AO / Ld. TPO erred in law and on facts in appreciating the Appellant' s commercial expediency incurring the AMP expenditure cannot be questioned 4. Application of the Bright Line Test ('BLT') 4.1. The Ld. Panel / Ld. AO / Ld. TPO erred in law and on facts in applying the BLT to determine the quantum of the alleged AMP expenses 5. Selling expenses cannot be considered as part of the AMP expense 5.1. The Ld. Panel / Ld. AO / Ld. TPO erred in law and on facts in considering the various selling expenses incurred by the Appellant to be in the nature of AMP expenses 6. Other grounds on AMP expenses 6.1. Without prejudice, the Ld. Panel / Ld. AO / Ld. TPO erred in law and on facts in not reducing the profit already earned on the alleged AMP expenses as part of the distribution function from the alleged AMP profit, thus resulting in a cascading effect on the transfer pricing adjustment 6.2. Without prejudice to the above, the Ld. Panel / Ld. AO / Ld. TPO erred in recognizing that even if a mark- up is to be applied on AMP, the same could have been charged only on the value-added expenses incurred by the Appellant and not on the entire quantum. 6.3. Without prejudice, the Ld. Panel / Ld. AO / Ld. TPO erred in law and on facts in not allowing the AMP intensity adjustment in light of the ruling of the Hon'ble Delhi Tribunal in the case of Luxottica India Eyewear Private Ltd. 7. Grounds related to the benchmarking and exclusion of the companies selected as comparables in the final set for the alleged AMP expenses 7.1. Without prejudice, the Ld. Panel / Ld. AO / Ld. TPO erred in law and on facts in carrying out the new search for identifying comparable companies in order to determine the mark-up that the Appellant should have recovered from the AE in relation to the alleged AMP expenses 7.2. The Ld. Panel / Ld. AO / Ld. TPO erred in law and on facts by selecting companies whose functions were not similar to that of the Appellant 7.3. The Ld. Panel / Ld. AO / Ld. TPO erred in law and on facts by undertaking an erroneous computation of estimated routine AMP expenditure of the comparable companies 7.4. The Ld. Panel / Ld. AO / Ld. TPO erred in selecting Axience Consulting Pvt. Ltd. IT(TP)A No.1468/Bang/2024 Page 4 of 26 . 7.5. The Ld. Panel / Ld. AO / Ld. TPO erred in selecting Fcbinterface Communications Pvt. Ltd. 7.6. The Ld. Panel / Ld. AO / Ld. TPO erred in selecting Y R S K Marketing & Branding Solutions Pvt. Ltd. 7.7. The Ld. Panel / Ld. AO / Ld. TPO erred in selecting Proactive In & Out Advertising Pvt. Ltd. 7.8. The Ld. Panel / Ld. AO / Ld. TPO erred in selecting Affle (India) Ltd. 7.9. The Ld. Panel / Ld. AO / Ld. TPO erred in selecting Just Dial Ltd. 7.10. The Ld. Panel / Ld. AO / Ld. TPO erred in selecting Majestic Research Services & Solutions Ltd. 7.11. The Ld. Panel / Ld. AO / Ld. TPO erred in selecting Daps Advertising Ltd. 7.12. The Ld. Panel / Ld. AO / Ld. TPO erred in selecting Maagh Advertising & Mktg. Services Ltd. 7.13. The Ld. Panel / Ld. AO / Ld. TPO erred in selecting Bright Advertising Pvt Ltd. 7.14. The Ld. Panel / Ld. AO/ Ld. TPO erred in selecting Scarecrow Communications Ltd. 7.15. The Ld. Panel / Ld. AO / Ld. TPO erred in selecting Pressman Advertising Ltd. 7.16. The Ld. Panel / Ld. AO / Ld. TPO erred in selecting S V Media Pvt. Ltd. 7.17. The Ld. Panel / Ld. AO/ Ld. TPO erred in selecting Lintas India Pvt. Ltd. 7.18. The Ld. Panel / Ld. AO / Ld. TPO erred in selecting Saatchi & Saatchi Pvt. Ltd. 8. Trading Segment 8.1. The Ld. Panel/ Ld. AO/ Ld. TPO erred in law and on facts in the use of the incorrect Profit Level Indicator ('PLI') by considering Operating Profit / Operating Cost ('OP/OC') instead of Operating Profit / Operating Revenue ('OP/OR') 8.2. The Ld. Panel/ Ld. AO/ Ld. TPO has erred in law and on facts in computing the margins of the Appellant by including \"loss on sale of fixed assets\" as operating expense and excluding \"provision for doubtful debts, written back\", \"miscellaneous income\" and \"re-measurement gains on defined benefit plans\" as non-operating income 8.3. The Ld. Panel/ Ld. AO/ Ld. TPO in law and on facts in rejecting Best IT World India Pvt. Ltd. selected by the Appellant in its TP Study Corporate Tax Grounds 9. Disallowance of corporate social responsibility expenses claimed as deduction under section 80G of the Act — INR 38,840,585 9.1. The Ld. Panel/ Ld. AO have erred in law and on facts in disallowing an amount of INR 38,840,585 claimed as deduction under section 80G of the Act, holding that the contributions towards Corporate Social Responsibility ('CSR') of the Appellant were not eligible for the said deduction under section 80G of the Act. 9.2. The Ld. Panel / Ld. AO have erred in law by concluding that the deduction under section 80G of the Act is available only for the payments grouped as donations and not for CSR contributions. 9.3. The Ld. Panel / Ld. AO have erred by concluding that the deduction under section 80G of the Act wherein there is no explicit provisions under the law to disallow the claim under section 80G of the Act, in respect of CSR contributions. IT(TP)A No.1468/Bang/2024 Page 5 of 26 . 9.4. The Ld. Panel / Ld. AO have erred in law by disregarding the fact that the deductions claimed under section 80G of the Act pertained to eligible payments specified under section 80G of the Act. 9.5. The Ld. Panel / Ld. AO have erred in law and on facts in stating that the amount grouped under CSR contributions has not been paid by the Appellant on a voluntary basis, and hence the same is not eligible to be claimed as deduction under section 80G of the Act. 10. Consequential relief - Claim towards payment of leave encashment INR 19,736,841 10.1. The Ld. Panel / Ld. AO have erred in not granting relief towards leave encashment payments of INR 1,97,36,841 made during the year under section 43B of the Act. Consequential grounds 11. Initiation of penalty proceedings 11.1. On the facts of the case and in law, the Ld. AO erred in initiating penalty proceedings under section 270A of the Act 12. Erroneous levy of interest under Section 234B of the Act The Ld. AO erred in erroneous levy of interest under section 234B of the Act, as no interest is leviable 12. 1 Erroneous levy of interest under Section 234B of the Act 12.1. The Ld. AO erred in erroneous levy of interest under section 234B of the Act, as no interest is leviable based on returned income” 3. The issues raised by the assessee in Grounds No. 1 and 2 of the appeal are general in nature and do not require any specific adjudication. Therefore, these grounds are dismissed. 4. The issue raised in Ground No. 11 pertains to the initiation of penalty proceedings under Section 270A of the Income Tax Act. As this matter is premature at this stage, it is dismissed accordingly. 4.1 The issue in Ground No. 12 relates to the levy of interest under Section 234B of the Act. Since the levy of interest under Section 234B is consequential in nature and dependent on the outcome of the assessment, this ground is also dismissed. 5. The interconnected issue raised by the assessee in Grounds No. 3 to 8 of its appeal pertains to the action of the learned DRP/TPO/AO in IT(TP)A No.1468/Bang/2024 Page 6 of 26 . treating the Advertisement, Marketing, and Promotion (AMP) expenses as an international transaction and subsequently making an upward Transfer Pricing (TP) adjustment on account of these AMP expenses. 6. The necessary facts are that the assessee, HPISPL, is a subsidiary of Alpha Holding One BV (holding 99.99% equity) and is engaged in providing a range of technology products and services to Indian consumers, enterprises, and the education market. The assessee primarily imports computers and computer peripherals from its associated enterprise (AE) for resale in India. The traded goods include commercial PCs, workstations, storage solutions, servers, printers, and related supplies. The assessee is also involved in the distribution of laptops, monitors, projectors, and peripheral products. 7. During the relevant financial year, the assessee entered into various international transactions with its AEs, including the import of goods, spare parts, and raw materials, purchase of software licenses, purchase of fixed assets, re-export of goods, commission income, and recovery/reimbursement of expenses. These transactions were benchmarked using the Transaction Net Margin Method (TNMM) and were found to be at arm’s length by the Transfer Pricing Officer (TPO). 8. However, the TPO observed that the assessee had incurred expenditures amounting to ₹1742 million, classified under \"advertising and business promotion\" (AMP). According to the TPO, these AMP expenses were related to specific products or brands belonging to the AEs. The TPO held that the assessee had performed an additional function of AMP services for its AEs, resulting in the creation of IT(TP)A No.1468/Bang/2024 Page 7 of 26 . intangible assets such as goodwill and brand value for the AEs. Consequently, the TPO concluded that the assessee was entitled to compensation from its AEs for performing these additional functions. 8.1 To benchmark the AMP expenses, the TPO applied the \"Other Method\" as the most appropriate method. The TPO identified a set of comparable entities to compute the average AMP expenses incurred by those entities. Based on this, the TPO calculated an excess AMP expenditure incurred by the assessee at ₹150,93,60,200/-, attributing this amount to services rendered for the AEs. Furthermore, the TPO selected another set of comparables to determine the margin to be charged by the assessee on AMP expenses incurred on behalf of the AEs. The arm’s length rate of margin was computed at 19.97%, leading to an upward adjustment of ₹181,07,79,431/-. 9. The assessee filed objections before the Dispute Resolution Panel (DRP). The DRP, in its directions dated 31-05-2024, confirmed the findings of the TPO, subject to verification of certain issues and recalculation. In the final assessment order, the AO recalculated the upward adjustment to ₹180,74,58,840/-. 10. Being aggrieved by the directions of the DRP, the assessee has filed an appeal before this Tribunal. 11. The learned AR before us contended the issue on hand is covered in favour of the assessee in its own case in the earlier assessment years by virtue of the order of the ITAT. The facts of the case in the earlier IT(TP)A No.1468/Bang/2024 Page 8 of 26 . year and the year under consideration are identical. Therefore, the issue on hand is to be decided in favor of the assessee. 12. On the other hand, the learned DR before us vehemently supported the order of the authorities below. 13. We have heard the rival submissions and carefully perused the material on record. We note that an identical issue, as raised in Grounds No. 6 to 9 and their sub-grounds, was adjudicated by the Tribunal in the assessee's own case for the A.Y. 2012-13 in IT(TP)A No. 524/Bang/2017. This decision was subsequently followed by the Tribunal in the assessee's own cases for the AYs 2016-17, 2017-18, and 2018-19 in IT(TP)A Nos. 483/Bang/2024, 283/Bang/2022, and 773/Bang/2022, respectively. In these rulings, the Tribunal relied on the principles laid down by the Hon’ble Delhi High Court in the case of Maruti Suzuki India Ltd. v. CIT, reported in (2016) 381 ITR 117 (Delhi), and Sony Ericsson Mobile Communications India (P.) Ltd. v. CIT, reported in (2015) 374 ITR 118 (Delhi). Following these judgments, the Tribunal directed the Assessing Officer (A.O.) to delete the AMP Transfer Pricing (TP) adjustment and the corresponding markup thereon. The relevant findings of the Bangalore Bench of the Tribunal in the assessee’s own case for AY 2012-13, dated 18-08-2022, are extracted as under: 8. We have heard rival submissions and perused the material on record. The issue as to whether AMP expenditure is an international transaction or not was considered by the Delhi High Court in Maruti Suzuki India Ltd. 381 ITR 117 and it was held as under:- “Step wise analysis of statutory provisions 62. If a step by step analysis is undertaken of Sections 92B to 92F, the sine qua non for commencing the transfer pricing exercise is to show the existence of an international transaction. The next step is to determine the price of such transaction. The third step would be to determine the ALP by applying one of the five price discovery methods specified in Section 92C. The fourth step would be to compare the IT(TP)A No.1468/Bang/2024 Page 9 of 26 . price of the transaction that is shown to exist with the ALP and make the transfer pricing adjustment by substituting the ALP for the contract price. 63. A reading of the heading of Chapter X [\"Computation of income from international transactions having regard to arm's length price\"] and Section 92 (1) which states that any income arising from an international transaction shall be computed having regard to the ALP, Section 92C (1) which sets out the different methods of determining the ALP, makes it clear that the transfer pricing adjustment is made by substituting the ALP for the price of the transaction. To begin with there has to be an international transaction with a certain disclosed price. The transfer pricing adjustment envisages the substitution of the price of such international transaction with the ALP. 64. The transfer pricing adjustment is not expected to be made by deducing from the difference between the 'excessive' AMP expenditure incurred by the Assessee and the AMP expenditure of a comparable entity that an international transaction exists and then proceed to make the adjustment of the difference in order to determine the value of such AMP expenditure incurred for the AE. And, yet, that is what appears to have been done by the Revenue in the present case. It first arrived at the 'bright line' by comparing the AMP expenses incurred by MSIL with the average percentage of the AMP expenses incurred by the comparable entities. Since on applying the BLT, the AMP spend of MSIL was found 'excessive' the Revenue deduced the existence of an international transaction. It then added back the excess expenditure as the transfer pricing 'adjustment'. This runs counter to legal position explained in CIT v. EKL Appliances Ltd. (2012) 345 ITR 241 (Del), which required a TPO \"to examine the 'international transaction' as he actually finds the same.\" In other words the very existence of an international transaction cannot be a matter for inference or surmise. 65. As already noticed, the decision in Sony Ericsson has done away with the BLT as means for determining the ALP of an international transaction involving AMP expenses. Revenue's contentions 66. It is contended by the Revenue that the mere fact that the Indian entity is engaged in the activity of creation, promotion or maintenance of certain brands of its foreign AE or for the creation/promotion of new/existing markets for the AE, is by itself enough to demonstrate that there is an arrangement with the parent company for this activity. It is urged that merely because MSIL and SMC do not have an explicit arrangement/agreement on this aspect cannot lead to the inference that there is no such arrangement or the entire AMP activity of the Indian entity is unilateral and only for its own benefit. According to the Revenue, \"the only credible test in the context of TP provisions to determine whether the Indian subsidiary is incurring AMP expenses unilaterally on its own or at the instance of the AE is to find out whether an independent party would have also done the same.\" It is asserted: \"An independent party with a short term agreement with the MNC will not incur costs which give long term benefits of brand & market development to the other entity. An independent party will, in IT(TP)A No.1468/Bang/2024 Page 10 of 26 . such circumstances, carry out the function of development of markets only when it is adequately remunerated for the same.\" 67. Reference is made by Mr. Srivastava to some sample agreements between Reebok (UK) and Reebok (South Africa) and IC Issacs & Co and BHPC Marketing to urge that the level of AMP spend is a matter of negotiation between the parties together with the rate of royalty. It is further suggested that it might be necessary to examine whether in other jurisdictions the foreign AE i.e., SMC is engaged in AMP/brand promotion through independent entities or their subsidiaries without any compensation to them either directly or through an adjustment of royalty payments. Absence of a machinery provision 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 wildgoose chase of what can at best be described as a 'mirage'. First of all, there has to be a clear statutory mandate for such an exercise. The Court is unable to find one. To the question whether there is any 'machinery' provision for determining the existence of an international transaction involving AMP expenses, Mr. Srivastava only referred to Section 92F (ii) which defines ALP to mean a price \"which is applied or proposed to be applied in a transaction between persons other than AEs in uncontrolled conditions\". Since the reference is to 'price' and to 'uncontrolled conditions' it implicitly brings into play the BLT. In other words, it emphasises that where the price is something other than what would be paid or charged by one entity from another in uncontrolled situations then that would be the ALP. The Court does not see this as a machinery provision particularly in light of the fact that the BLT has been expressly negatived by the Court in Sony Ericsson. Therefore, the existence of an international transaction will have to be established de hors the BLT. 69. There is nothing in the Act which indicates how, in the absence of the BLT, one can discern the existence of an international transaction as far as AMP expenditure is concerned. The Court finds considerable merit in the contention of the Assessee that the only TP adjustment authorised and permitted by Chapter X is the substitution of the ALP for the transaction price or the contract price. It bears repetition that each of the methods specified in S.92C (1) is a price discovery method. S.92C (1) thus is explicit that the only manner of effecting a TP adjustment is to substitute the transaction price with the ALP so determined. The second proviso to Section 92C (2) provides a 'gateway' by stipulating that if the variation between the ALP and the transaction price does not exceed the specified percentage, no TP adjustment can at all be made. Both Section 92CA, which provides for making a reference to the TPO for computation of the ALP and the manner of the determination of the ALP by the TPO, and Section 92CB which provides for the \"safe harbour\" rules for determination of the ALP, can be applied only if the TP adjustment involves substitution of the transaction price with the ALP. Rules 10B, 10C and the new Rule 10AB only deal with the determination of the ALP. Thus for the purposes of Chapter X of the Act, what is envisaged is not a IT(TP)A No.1468/Bang/2024 Page 11 of 26 . quantitative adjustment but only a substitution of the transaction price with the ALP. 70. What is clear is that it is the 'price' of an international transaction which is required to be adjusted. The very existence of an international transaction cannot be presumed by assigning some price to it and then deducing that since it is not an ALP, an 'adjustment' has to be made. The burden is on the Revenue to first show the existence of an international transaction. Next, to ascertain the disclosed 'price' of such transaction and thereafter ask whether it is an ALP. If the answer to that is in the negative the TP adjustment should follow. The objective of Chapter X is to make adjustments to the price of an international transaction which the AEs involved may seek to shift from one jurisdiction to another. An 'assumed' price cannot form the reason for making an ALP adjustment. 71. Since a quantitative adjustment is not permissible for the purposes of a TP adjustment under Chapter X, equally it cannot be permitted in respect of AMP expenses either. As already noticed hereinbefore, what the Revenue has sought to do in the present case is to resort to a quantitative adjustment by first determining whether the AMP spend of the Assessee on application of the BLT, is excessive, thereby evidencing the existence of an international transaction involving the AE. The quantitative determination forms the very basis for the entire TP exercise in the present case. 72. As rightly pointed out by the Assessee, while such quantitative adjustment involved in respect of AMP expenses may be contemplated in the taxing statutes of certain foreign countries like U.S.A., Australia and New Zealand, no provision in Chapter X of the Act contemplates such an adjustment. An AMP TP adjustment to which none of the substantive or procedural provisions of Chapter X of the Act apply, cannot be held to be permitted by Chapter X. In other words, with neither the substantive nor the machinery provisions of Chapter X of the Act being applicable to an AMP TP adjustment, the inevitable conclusion is that Chapter X as a whole, does not permit such an adjustment. 73. It bears repetition that the subject matter of the attempted price adjustment is not the transaction involving the Indian entity and the agencies to whom it is making payments for the AMP expenses. The Revenue is not joining issue, the Court was told, that the Indian entity would be entitled to claim such expenses as revenue expense in terms of Section 37 of the Act. It is not for the Revenue to dictate to an entity how much it should spend on AMP. That would be a business decision of such entity keeping in view its exigencies and its perception of what is best needed to promote its products. The argument of the Revenue, however, is that while such AMP expense may be wholly and exclusively for the benefit of the Indian entity, it also enures to building the brand of the foreign AE for which the foreign AE is obliged to compensate the Indian entity. The burden of the Revenue's song is this: an Indian entity, whose AMP expense is extraordinary (or 'non- routine') ought to be compensated by the foreign AE to whose benefit also such expense enures. The 'non- routine' AMP spend is taken to IT(TP)A No.1468/Bang/2024 Page 12 of 26 . have 'subsumed' the portion constituting the 'compensation' owed to the Indian entity by the foreign AE. In such a scenario what will be required to be benchmarked is not the AMP expense itself but to what extent the Indian entity must be compensated. That is not within the realm of the provisions of Chapter X. 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 92B 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? 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) (a) under which certain types of expenditure incurred by way of payment to related parties is not deductible where the AO \"is of the opinion that such expenditure is excessive or unreasonable having regard to the fair market value of the goods.\" In such event, \"so much of the expenditure as is so considered by him to be excessive or unreasonable shall not be allowed as a deduction.\" The AO in such an instance deploys the 'best judgment' assessment as a device to disallow what he considers to be an excessive expenditure. There is no corresponding 'machinery' provision in Chapter X which enables an AO to determine what should be the fair 'compensation' an Indian entity would be entitled to if it is found that there is an international transaction in that regard. In practical terms, absent a clear statutory guidance, this may encounter further difficulties. The strength of a brand, which could be product specific, may be impacted by numerous other imponderables not limited to the nature of the industry, the geographical peculiarities, economic trends both international and domestic, the consumption patterns, market behaviour and so on. A simplistic approach using one of the modes similar to the ones contemplated by Section 92C may not only be legally impermissible but will lend itself to arbitrariness. What is then needed is a clear statutory scheme encapsulating the legislative policy and mandate which provides the necessary checks against arbitrariness while at the same time addressing the apprehension of tax avoidance. 76. As explained by the Supreme Court in CIT v. B.C. Srinivasa Setty (1979) 128 ITR 294 (SC) and PNB Finance Ltd. vs. CIT (2008) 307 ITR 75 (SC) in the absence of any machinery provision, bringing an imagined international transaction to tax is fraught with the danger of invalidation. In the present case, in the absence of there being an international transaction involving AMP spend with an ascertainable price, neither the substantive nor the machinery provision of Chapter X are applicable to the transfer pricing adjustment exercise.” IT(TP)A No.1468/Bang/2024 Page 13 of 26 . 9. The decision of the Delhi High Court in Sony Ericsson Mobile Communications India (P.) Ltd. v. CIT [2015] 374 ITR 118 was followed and it was held that the bright line test followed by the Revenue in making the AMP TP adjustment cannot be accepted. In the present case also, no material is brought on record by the TPO to establish the existence of an arrangement, understanding or action in concert with the AE for incurring the AMP expenses for the benefit of the AE. Merely because the AE has a financial interest, it cannot be presumed that AMP expenses incurred by the assessee are at the instance or on behalf of the associated enterprise. In the absence of any international transaction relating to AMP expenses, the impugned TP adjustment cannot be sustained. Moreover, the TPO having accepted the ALP of other international transactions at the entity level, proceeded to make a separate TP adjustment for the AMP expenses. At para 4.2 of the TPOs order, the TPO has given a finding that the net margins earned by the taxpayer from the product segment is 3.82% and that at the entity level is 7.29%. The margin earned by the taxpayer at the entity level as calculated by the TPO is 2.50%. Hence, no adverse inference drawn by the TPO in respect of the distribution segment results. Thus, the TPO has accepted the entity level margins earned by the assessee but proceeded to make TP adjustment on AMP expenses. The Hon’ble Delhi High Court in Sony Ericsson Mobile Communications India (P.) Ltd. v. CIT [2015] 374 ITR 118 held that once the revenue accepts the entity level margins as per the most appropriate method, it would be inappropriate to treat a particular expenditure as a separate international transaction. It was held that such an exercise would lead to unusual and absurd results. Relevant observations from the above decision in this context are as under:- “101. However, once the Assessing Officer/TPO accepts and adopts TNM Method, but then chooses to treat a particular expenditure like AMP as a separate international transaction without bifurcation/segregation, it would as noticed above. lead to unusual and incongruous results as AMP expenses is the cost or expense and is not diverse. It is factored in the net profit of the inter-linked transaction. This would be also in consonance with Rule 10B(J)(e), which mandates only arriving at the net profit margin by comparing {he profits and loss account of the tested party with the comparable. The TN/v! 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 com parables 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. 10. Similarly, in the case of Maruti Suzuki India Ltd v CIT [2016] 381 ITR 117 at para 86 of the judgment, the Hon’ble Delhi High Court held as under:- \"MSIL's higher operating margins IT(TP)A No.1468/Bang/2024 Page 14 of 26 . 86. In Sony Ericsson Mobile Communications India (P.) Ltd. (supra) it .was held that if an Indian entity has satisfied the TNMM i.e. the operating margins of the Indian enterprise are much higher than the operating margins of the comparable companies, no further separate adjustment for AMP expenditure was warranted. This is also in consonance with Rule 10B which mandates only arriving at the net profit by comparing the profit and loss account of the tested party with the comparable. As far as MSIL is concerned. its operating profit margin is 11.19% which is higher than that of the comparable companies whose profit margin is 4.04%. Therefore, applying the TNMM method it must be stated that there is no question of TP adjustment on account of AMP expenditure.” 11. Respectfully following the above judgment of the Hon’ble Delhi High Court, we delete the AMP TP adjustment of Rs. 25,09,60,200 and the mark up thereon amounting to Rs. 3,93,75,655. 13.1 Before us, the Revenue has not placed any material on record demonstrating that the decision of the Tribunal in the assessee's own case, as discussed above, has been set aside, stayed, or overruled by higher judicial authorities. Furthermore, no material has been presented pointing out any distinguishing features between the facts of the earlier assessment years and those of the year under consideration. 13.2 In light of this, and respectfully following the order of the Tribunal in the assessee’s own case as discussed above, we hereby direct the Assessing Officer (AO)/ TPO to delete the adjustment made by him. Accordingly, the grounds of appeal raised by the assessee are hereby allowed. 14. The next issue raised by the assessee in ground 9 of its appeal is that the learned DRP/AO erred in disallowing corporate social responsibility expense for Rs. 3,88,40,585/- claimed as deduction under section 80G of the Act. IT(TP)A No.1468/Bang/2024 Page 15 of 26 . 14.1 The assessee during the year under consideration incurred expenditure of Rs. 8,04,06,961/- on account Corporate Social Responsibility (CSR) as mandated by section 135 of companies Act 2013. The assessee while computing the business income under the Act, disallowed the entire amount of CSR expenditure in accordance with the provision of section 37 of the Act. However, the assessee claimed that the CSR expenses amount includes an amount of Rs. 7,78,81,170- which was contributed/donated to the specified fund or charitable institution under section 80G of the Act and eligible for deduction @ 50% of the sum donated. Thus, the assessee while computing total income chargeable to tax claimed deduction under section 80G of the Act for an amount of Rs. 3,88,40,585/- being 50% of amount donated. 14.2 The assessee in support of its claim contended that the CSR- related donations qualifying under Section 80G of the Act are distinct from general CSR expenses disallowed under Section 37(1) Act. Since the claim under Section 80G pertains to eligible donations made to approved entities, the disallowance under Section 37(1) of the Act does not impact the eligibility for deduction under Section 80G of Act. 14.3 However, the AO disagreed with the contention of the assessee. The AO held that deduction under section 80G of the Act available for the sum paid as donation. The term donation refers to an amount paid voluntary by a person. On the other hand, CSR is mandatory not voluntary. Therefore, amount incurred on account of compulsion under the provision of section 135 of the companies cannot be said as donation. The AO further observed that the CSR made compulsory with view to share the burden of Government by the certain class of IT(TP)A No.1468/Bang/2024 Page 16 of 26 . corporate. If any deduction on such expenditure of CSR activity is allowed as deduction under the provision of the Act, then the purpose of sharing the burden of Government will defeat. Therefore, the legislator vide Finace Act 2014 inserted an explanation 2 to section 37 of the Act and explained the expenditure incurred on CSR cannot be allowed as deduction. Similarly vide Finance Act 2015 some of the clauses of section 80G of the Act (such as sub-clause (iiihk) & (iiihl) of clauses (a) of section 80G(2) of the Act) also amended wherein it was specified sum paid by the assessee as donation to “the Swachh Bharat Kosh or the Clean Ganga Fund out of CSR will not eligible for deduction. 14.4 The AO based on the above proposed to disallow the claim of the assessee made under section 80G of the Act. 14.5 The aggrieved assessee preferred to file objections before the learned DRP. The learned DRP vide direction dated confirm the finding of the AO by observing as under: “2.38.1 Having perused the facts of the case and submission made by the assessee, it was seen by the panel that during the year under consideration the assessee has donated an amount of Rs. 3,88,40,585/- and claimed the same as CSR expense. However, the company has claimed deduction of 50% of this amount as eligible donation under section 80G. 2.38.2 The Panel is of the view that the donation made by taxpayers from CSR expenditure should not be eligible for deduction u/s 80G of the I.T Act,1961. In this regard, it is pertinent to mention here about Memorandum to the Finance (no 2) Act, 2014, wherein it was mentioned that the ob/ective of CSR is to share burden of Government in providing social services by companies having net worth /turnover/profit above a threshold. if such expenses are allowed as tax deduction, this would result in subsidizing of around one third of such expenditure. The existing provision of section 37(1) of the IT Act provide that deduction of any expenditure, which is not mentioned specifically in section 30 to 36 of the Actt shall be allowed if the same is incurred wholly and exclusively for the purpose of carrying on any business or profession. As the CSR expenditure is not incurred for the purpose of carrying on business, such IT(TP)A No.1468/Bang/2024 Page 17 of 26 . expenditure can not be allowed as under the existing provisions of section 37 of the IT Act. Hence, interpretation of Memorandum to the Finance (no 2) Act, 2014 can also be extended for deduction u/s 80G of the CSR expenditure as allowing the same will defeat the primary purpose of introducing CSR i.e. sharing of burden of Government. 2.38.3 In view of the above, the Panel finds no infirmity in the action of the AO of disallowing deduction u/s 80G of the Act. Accordingly, this ground of objection is hereby rejected. 14.6 Being aggrieved by the direction of learned DRP the assessee is in appeal before us. 14.7 The learned AR before us contended the assessee cannot be denied the benefit of section 80G of the Act for the donation paid to the eligible organization approved under section 80G of the Act despite such payment was made to comply the CSR activities. 14.8 On the other hand, the learned DR before us vehemently supported the order of the authorities below. 15. We have heard the rival contentions of both the parties and perused the materials available on record. The issue revolves around whether CSR-related donations made to specified funds or charitable institutions, which qualify under Section 80G of the Act, can be claimed as deductions despite the mandatory nature of CSR expenditure under Section 135 of the Companies Act, 2013, and its disallowance as a business expense under Section 37(1) of the Act. 15.1 In this regard we note that Section 37(1) pertains solely to the computation of income from business or profession, and its scope is confined to allowing or disallowing expenditures incurred for business IT(TP)A No.1468/Bang/2024 Page 18 of 26 . purposes. On the other hand, Section 80G provides deductions for donations made to specified funds and institutions while computing the total income of the assessee. The disallowance of CSR expenditure under Explanation 2 to Section 37(1) applies only in the context of determining business income and does not preclude an assessee from claiming deductions under Chapter VIA (which includes Section 80G) for eligible donations. 15.2 While CSR expenditure is mandatory under Section 135 of the Companies Act, 2013, the assessee retains discretion over the recipients of such contributions. When such contributions are made to approved institutions or funds under Section 80G of the Act, they qualify as \"donations\" for the purposes of that section, even if incurred under a statutory obligation. The term \"donation\" under Section 80G includes both voluntary contributions and mandatory payments made to specified entities. The mandatory nature of CSR expenditure does not dilute its eligibility for deduction under Section 80G of the Act, as the deduction depends on the nature of the recipient and compliance with conditions specified in Section 80G of the Act. 15.3 The AO cited the Finance Act, 2015, which specified that contributions made under CSR to certain funds like the Swachh Bharat Kosh and the Clean Ganga Fund would not be eligible for deduction under Section 80G of the Act. These amendments apply only to specific funds and do not impose a blanket restriction on deductions for all CSR- related donations under Section 80G of the Act. Contributions to other approved charitable funds or institutions remain eligible for deduction if the conditions under Section 80G are met. IT(TP)A No.1468/Bang/2024 Page 19 of 26 . 15.4 We also note that the coordinate bench of this Tribunal in case of Allegis Services India (P.) Ltd. v. Assistant CIT bearing ITA No. 1693/Bang/2019 order dated 29-4-2020, involving identical issue has decided as under: '10. Section 135 of Companies Act, 2013 requires companies with CSR obligations, with effect from 1-4-2014. Finance (No.2) Act, 2014 inserted new Explanation 2 to sub-section (1) of section 37, so as to clarify that for purposes of sub-section (1) of section 37, any expenditure incurred by an assessee on the activities relating to corporatesocialresponsibility referred to in section 135 of the Companies Act, 2013 shall not be deemed to be an expenditure incurred by the assessee for the purposes of the business or profession. 11. This amendment will take effect from 1-4-2015 and will, accordingly, apply to assessment year 2015-16 and subsequent years. 12. Thus, CSR expenditure is to be disallowed by new Explanation 2 to section 37(1), while computing Income under the Head 'Income form Business and Profession'. Further, clarification regarding impact of Explanation 2 to section 37(1) of the Income-tax Act in Explanatory Memorandum to The Finance (No.2) Bill, 2014 is as under: \"The existing provisions of section 37(1) of the Act provide that deduction for any expenditure, which is not mentioned specifically in section 30 to section 36 of the Act, shall be allowed if the same is incurred wholly and exclusively for the purposes of carrying on business or profession. As the CSR expenditure (being an application of income) is not incurred for the purposes of carrying on business, such expenditure cannot be allowed under the existing provisions of section 37 of the Income-tax Act. Therefore, in order to provide certainty on this issue, it is proposed to clarify that for the purposes of section 37(1) any expenditure incurred by an assessee on the activities relating to corporatesocialresponsibility referred to in section 135 of the Companies Act, 2013 shall not be deemed to have been incurred for the purpose of business and, hence, shall not be allowed as deduction under section 37. However, the CSR expenditure which is of the nature described in section 30 to section 36 of the Act shall be allowed deduction under those sections subject to fulfilment of conditions, if any, specified therein.\" 13. From the above it is clear that under Income-tax Act, certain provisions explicitly state that deductions for expenditure would be allowed while computing income under the head, \"Income from Business and Profession\" to those, who pursue corporatesocialresponsibility projects under following sections. ♦ Section 30 provides deduction on repairs, municipal tax and insurance premiums. ♦ Section 31, provides deduction on repairs and insurance of plant, machinery and furniture. ♦ Section 32 provides for depreciation on tangible assets like building, machinery, plant, furniture and also on intangible IT(TP)A No.1468/Bang/2024 Page 20 of 26 . assets like know-how, patents, trademarks, licenses. ♦ Section 33 allows development rebate on machinery, plants and ships. ♦ ?Section 34 states conditions for depreciation and development rebate. ♦ Section 35 grants deduction on expenditure for scientific research and knowledge extension in natural and applied sciences under agriculture, animal husbandry and fisheries. Payment to approved universities/research institutions or company also qualifies for deduction. In-house R&D is eligible for deduction, under this section. ♦ ?Section 35CCD provides deduction for skill development projects, which constitute the flagship mission of the present Government. ♦ ?Section 36 provides deduction regarding insurance premium on stock, health of employees, loans or commission for employees, interest on borrowed capital, employer contribution to provident fund, gratuity and payment of security transaction tax. ♦ Income Tax Act, under section 80G, forming part of Chapter VIA, provides for deductions for computing taxable income as under: ♦ Section 80G(2) provides for sums expended by an assessee as donations against which deduction is available. (a) Certain donations, give 100% deduction, without any qualifying limit like Prime Minister's National Relief Fund, National Defence Fund, National Illness Assistance Fund etc., specified under section 80G(1)(i). (b) Donations with 50% deduction are also available under section 80G for all those sums that do not fall under section 80G(1)(i). Under section 80G(2) (iiihk) and (iiihl) there are specific exclusion of certain payments, that are part of CSR responsibility, not eligible for deduction u/s 80G. 14. In our view, expenditure incurred under section 30 to 36 are claimed while computing income under the head, 'Income form Business and Profession\", where as monies spent under section 80G are claimed while computing \"Total Taxable income\" in the hands of assessee. The point of claim under these provisions are different. 15. Further, intention of legislature is very clear and unambiguous, since expenditure incurred under sections 30 to 36 are excluded from Explanation 2 to section 37(1) of the Act, they are specifically excluded in clarification issued. There is no restriction on an expenditure being claimed under above sections to be exempt, as long as it satisfies necessary conditions under sections 30 to 36 of the Act, for computing income under the head, \"Income from Business and Profession\". 16. For claiming benefit under section 80G, deductions are considered at the stage of computing \"Total taxable income\". Even if any payments under section 80G forms part of CSR payments(keeping in mind ineligible deduction expressly provided u/s.80G), the same would already stand excluded while computing, IT(TP)A No.1468/Bang/2024 Page 21 of 26 . Income under the head, \"Income form Business and Profession\". The effect of such disallowance would lead to increase in Business income. Thereafter benefit accruing to assessee under Chapter VIA for computing \"Total Taxable Income\" cannot be denied to assessee, subject to fulfilment of necessary conditions therein. 17. We therefore do not agree with arguments advanced by Ld.Sr.DR. 18. In present facts of case, Ld.AR submitted that all payments forming part of CSR does not form part of profit and loss account for computing Income under the head, \"Income from Business and Profession\". It has been submitted that some payments forming part of CSR were claimed as deduction under section 80G of the Act, for computing \"Total taxable income\", which has been disallowed by authorities below. In our view, assessee cannot be denied the benefit of claim under Chapter VI A, which is considered for computing 'Total Taxable Income\". If assessee is denied this benefit, merely because such payment forms part of CSR, would lead to double disallowance, which is not the intention of Legislature. 19. On the basis of above discussion, in our view, authorities below have erred in denying claim of assessee under section 80G of the Act. We also note that authorities below have not verified nature of payments qualifying exemption under section 80G of the Act and quantum of eligibility as per section 80G(1) of the Act.' 15.5 In view of the above elaborated discussion and following the finding of coordinate bench in the above mentioned case we hereby set aside the finding of learned DRP and direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is hereby allowed. 16. The next issue raised by the assessee is that the learned DRP/AO erred in not providing deduction on account of consequential claim of leave encashment for Rs. 1,9,36,841/-. 16.1 The assessee, during the draft assessment proceedings, submitted that it had made a payment of ₹1,97,36,841 towards leave encashment during the year under consideration. However, the assessee did not claim the same in the ITR for the year, as it had already claimed the leave encashment on an accrual basis in A.Y. 2012-13. The claim for IT(TP)A No.1468/Bang/2024 Page 22 of 26 . leave encashment made in A.Y. 2012-13 was, however, disallowed by the Assessing Officer (AO). Consequently, the assessee requested that the leave encashment payment be allowed in the year under consideration on a payment basis, as the expense was actually paid in the current year. However, the AO did not accept the assessee’s submission and disallowed the claim. 16.2 The aggrieved assessee carried the matter before the ld. DRP. The ld. DRP, after examining the case, observed that the assessee had not made any claim for leave encashment in the ITR for the year under consideration. Thus, the ld. DRP held that the AO cannot entertain any claims that were not made in the original return of income or in a revised return filed by the assessee. In this regard, the ld. DRP referred to the judgment of the Hon'ble Orissa High Court in the case of Orissa Rural Housing Development Corporation Ltd. vs. ACIT, W.P. (C) No. 4554 of 2011, and the judgment of the Hon'ble Supreme Court in the case of Goetz India Ltd. (284 ITR 323). 16.3 The learned DRP, therefore, directed that the claim for leave encashment made by the assessee cannot be entertained unless it was claimed in the return of income or a revised return. 16.4 Being aggrieved by the direction of the learned DRP the assessee is in appeal before us. 16.5 The learned AR before us contended the assessee cannot be denied the benefit of deduction of leave encashment on payment basis IT(TP)A No.1468/Bang/2024 Page 23 of 26 . despite the fact it was not claimed in the income tax return provided it is genuine and bona-fide claim. 16.6 On the other hand, the learned DR before us vehemently supported the order of the authorities below. 17. We have carefully considered the submissions of both parties, as well as the facts and circumstances of the case. The issue at hand is whether the leave encashment payment of ₹1,97,36,841, made during the year under consideration, can be allowed on a payment basis, despite the fact that it was not claimed in the Income Tax Return (ITR) for the relevant year. 17.1 The assessee made the payment for leave encashment during the year under consideration. However, the claim was not made in the ITR for the relevant year, as the assessee had previously claimed the same on an accrual basis in A.Y. 2012-13, which was disallowed by the Assessing Officer (AO). In this case, the assessee now seeks to claim the leave encashment on a payment basis. 17.2 The law under Section 37(1) of the Income Tax Act allows deductions for business expenses that are incurred for the purpose of business. The claim for leave encashment, being a legitimate business expense, can be allowed on the payment basis in the year in which the payment is actually made. This is consistent with established tax principles and accounting standards. IT(TP)A No.1468/Bang/2024 Page 24 of 26 . 17.3 The assessee’s claim was not made in the return of income for the current year. The Dispute Resolution Panel (DRP) and the Assessing Officer (AO) relied on the Supreme Court's judgment in Goetz India Ltd. (284 ITR 323), which placed restrictions on raising new claims before the AO if not made in the return of income or a revised return. 17.4 However, it is important to note that Goetz India Ltd. places this restriction only on the AO, and does not impose any similar restriction on the Tribunal. As per judicial interpretations, the Tribunal has the discretion to entertain new claims, even if they were not made in the original or revised return of income, provided the claim is legal in nature and supported by valid evidence. In the present case, the leave encashment payment is a legitimate expense, and the claim is legally valid under the payment basis. 17.5 The Tribunal, in exercise of its judicial discretion, has the power to accept new claims, especially where the claim is legal in nature and the assessee has provided the necessary supporting documents to substantiate the payment. This discretion is based on the principle of fair play and justice, which allows the Tribunal to ensure that legitimate claims are not denied merely due to technicalities. 17.6 While we acknowledge that the claim made by the assessee is legally valid and the Tribunal has the discretion to entertain it, for the sake of fairness and justice, it is appropriate to remand the matter to the Assessing Officer (AO) for fresh verification. The AO should verify the payment details and ensure that the leave encashment payment has been made during the year under consideration. Additionally, the AO IT(TP)A No.1468/Bang/2024 Page 25 of 26 . should examine the necessary documentation and supporting evidence for the claim as per the provisions of the Income Tax Act. In light of the legal validity of the claim and the discretion available to the Tribunal to entertain such claims, we accept the leave encashment claim made by the assessee. However, in the interest of justice and fair play, we remand the matter to the file of the AO for fresh verification of the payment and necessary documentation. The AO is directed to verify the claim in accordance with the law and take an appropriate decision. Thus, the issue is remanded to the file of the AO for necessary verification, with the direction to examine the leave encashment payment on a payment basis, considering the documentation provided by the assessee. The AO shall complete the verification and pass a fresh order in accordance with the law. Hence, the ground of appeal of the assessee is allowed for statistical purposes. 18. In the result appeal of the assessee is partly allowed for statistical purposes. Order pronounced in court on 11th day of December, 2024 Sd/- Sd/- (KESHAV DUBEY) (WASEEM AHMED) Judicial Member Accountant Member Bangalore Dated, 11 December, 2024 / vms / IT(TP)A No.1468/Bang/2024 Page 26 of 26 . Copy to: 1. The Applicant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR, ITAT, Bangalore. 6. Guard file By order Asst. Registrar, ITAT, Bangalore "