TATA AUTO COMP SYSTEMS LTD, MUMBAI V. ASST CIT CIR 2(3), MUMBAI

ITA 7596/MUM/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3446 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-06-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: K
• Next Hearing Date: 14-04-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 24-12-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A K JAIN; MRS SASMITA MISHRA
• Assessee Lawyers: R MURALIDHAR
• Keywords: Transfer pricing; International transaction; Earning of tax free income; Revised return
• Section: 143(3); 14A; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL K BENCH, MUMBAI ., !' #$ #$ #$ #$ .#. %&', ( )*+ )' BEFORE SHRI D. MANMOHAN, V.P. AND SHRI P.M. JAGTAP, AM )./ I.T.(TP)A. NO. 7596/MUM/2012 ( - . $/. - . $/. - . $/. - . $/. / / / / ASSESSMENT YEAR : 2008-09) M/S TATA AUTOCOMP SYSTEMS LIMITED, BOMBAY HOUSE, 24, HOMY MODY STREET, FORT, MUMBAI 400 001. / VS. ASSTT. COMMISSIONER OF INCOME-TAX-CIR. 2(3), 5 TH FLOOR, R.NO. 552, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020. +0 ( )./ PAN : AAACT1848E ASSESSEE BY : SHRI R. MURALIDHAR REVENUE BY : SHRI A.K. JAIN & MRS. SASMITA MISHRA )$ 1 '( / // / DATE OF HEARING : 12-3-2013 2/ 1 '( / DATE OF PRONOUNCEMENT : 12-6-2013 *3 / O R D E R PER P.M. JAGTAP, A.M . . .. .# ## #. .. . %&' %&' %&' %&', ,, , ( )*+ ( )*+ ( )*+ ( )*+ : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF ASSTT. COMMISSIONER OF INCOME TAX (2)(3) [A.O.], MUMBAI DT D. 25.12.2012 PASSED U/S 143(3) R.W.S. 144-C OF THE INCOME TAX ACT, 1961 . 2. THE ISSUE RAISED IN GROUND NO. 1 RELATES TO THE DISALLOWANCE OF ` 32,42,666/- MADE BY THE A.O. ON ACCOUNT OF PAYMENT MADE BY THE ASSESSEE IT(TP)A NO. 7596/M/12 2 TO M/S TATA SONS LTD. ON ACCOUNT OF SUBSCRIPTION TO WARDS TATA BRAND EQUITY AND BUSINESS PROMOTION SCHEME. 3. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY W HICH IS ENGAGED IN THE BUSINESS OF PROVIDING SERVICES TO THE GLOBAL AUTOMO TIVE INDUSTRIES. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILE D BY IT ON 30-9-2008 DECLARING TOTAL INCOME OF ` 51,05,63,935/- WHICH WAS SUBSEQUENTLY REVISED TO ` 52,34,36,910/-. IN THE PROFIT AND LOSS FILED ALON G WITH THE SAID RETURN, AN AMOUNT OF ` 32,42,666/- WAS DEBITED BY THE ASSESSEE ON ACCOUNT OF SUBSCRIPTION PAID TO TATA SONS LTD. TOWARDS TATA BR AND EQUITY AND PROMOTION SCHEME. WHILE JUSTIFYING ITS CLAIM FOR T HE SAID PAYMENT, THE FOLLOWING SUBMISSIONS WERE MAINLY MADE ON BEHALF OF THE ASSESSEE BEFORE THE A.O:- BY ENTERING INTO THE AGREEMENT, THE ASSESSEE BECAME ENTITLE TO USE AND ASSOCIATED ITSELF WITH TATA NAME, MARKS AND MARKETIN G INDICA FOR THE COMPANYS PRODUCTS AND SERVICES. THE TATA SONS LTD., PROTECTS AND ENFORCES THE COLL ECTIVE IMAGE AND GOODWILL OF THE TATA GROUP, ORGANIZE CORPORATE IDEN TITY, COORDINATE MAJOR CAMPAIGN INVOLVING PROMOTION AND DEVELOPMENT OF TAT A NAME, ENGAGE THE SERVICE OF SPECIALIST AND PROFESSIONAL CONSULTANTS FOR ENER GIZING AND ENHANCING THE OVERALL TATA BRAND ETC. BY ENTERING INTO THE AGREEMENT, TATA SONS LTD. HAD GRANTED NON EXCLUSIVE AND ON ASSIGNABLE SUBSCRIPTION TO USE TAT A NAME AND MARKETING INDICA. THE ASSESSEE JUSTIFIED THE PAYMENT STATING THAT THE MAIN GOAL TO FORMULATE THE SCHEME WAS TO JUSTIFY A DIVERSE AND D IFFUSE ENTERPRISE AND MAKE IT CAPABLE OF FACING THE CHALLENGE FROM INTERNATIONAL BRAND NAMES, POST LIBERALIZATION. THE ASSESSEE COMPANY HAS DERIVED HUGE BENEFITS IN T HE FORM OF INCREASE SALES AND ALSO OTHER OPERATIONAL EFFICIENCIES. IN THE PAST ASSESSMENT YEARS THE SIMILAR PAYMENT HA S BEEN ALLOWED AS DEDUCTION. THE ASSESSEE RELIED ON THE DECISION IN TH E CASE OF RADHASOAMI SATSANG VS. CIT (1992)193 ITR 321(SC). IT(TP)A NO. 7596/M/12 3 4. THE A.O. DID NOT FIND MERIT IN THE ABOVE SUBMISS IONS MADE BY THE ASSESSEE ON THIS ISSUE FOR THE FOLLOWING REASONS GI VEN IN THE ASSESSMENT ORDER:- THE ASSESSEE COMPANY WAS INCORPORATED ON 17.10.199 5 WITH THE NAME TATA AUTOCOMP SYSTEMS LTD. THEREFORE, THE ASSESSEE COMPANY HAD BEEN USING THE NAME TATA SINCE THEN. IT IS NOT A CASE WHERE PRIO R PERMISSION WAS REQUIRED TO USE THE TATA NAME AT THE TIME OF INCORPORATION. THE AFORESAID ARRANGEMENT OF PAYMENT OF SUBSCRIPTIO N TOWARDS BRAND EQUITY WAS ENTERED ONLY ON 04.06.2001 I.E. MORE THA N FIVE YEARS AFTER THE INCORPORATION. BY USING TATA WORD IN ITS NAME SINCE T HEN ITSELF GIVES THE ASSESSEE RIGHT TO USE TATA BRAND. FURTHER, IT IS SEEN THAT THE MAJOR HOLDING (74%) OF THE ASSESSEE COMPANY IS WITH TATA INDUSTRIES LTD. TATA MOTORS LTD, AND T ATA SONS LTD. ALL THESE THREE COMPANIES HAVE BEEN USING THE NAME TATA SINCE LONG. AS REGARDS ASSESSEES SUBMISSION THAT THE SIMILAR CL AIM HAD BEEN ALLOWED IN PAST, IT MAY BE NOTED THAT THIS PARTICUL AR ISSUE WAS NEVER EXAMINED IN PAST. FURTHER, PERPETUITY OF A MISTAKE CANNOT BE AL LOWED TO CONTINUE. SINCE, THIS ISSUE HAD NEVER BEEN EXAMINED IN PAST AND HAD BEEN ALLOWED WITHOUT ANY VERIFICATION, WITH DUE RESPECT TO THE RATIO OF THE DECISION IN THE CASE OF RADHASOAMI SATSANG VS. CIT (1992) 193 ITR 321 (SC), IT IS SUBMITTED THAT THE SAME IS NOT APPLICABLE TO THE PRESENT CASE. THE SIMILAR ISSUE IS INVOLVED IN THE CASE OF TATA C HEMICAL LTD. A GROUP COMPANY OF THE TATA GROUP WHEREIN, DRP HAVE CONFIRME D THE PROPOSED ADDITION ON THE GROUND OF DISALLOWANCE OF BRAND EQUITY SUBSC RIPTION. FOR THE REASONS GIVEN ABOVE, THE A.O. PROPOSED DISA LLOWANCE OF ` 32,42,666/- ON ACCOUNT OF SUBSCRIPTION PAID BY THE ASSESSEE TO TATA SONS LTD. IN THE DRAFT ASSESSMENT ORDER AGAINST WHICH OBJECTION WAS FILED BY THE ASSESSEE BEFORE THE DRP. THE DRP FOUND THE OBJECTION OF THE ASSESSEE T O BE UNSUSTAINABLE KEEPING IN VIEW THAT A SIMILAR ISSUE WAS BEING AGIT ATED BY THE DEPARTMENT AT VARIOUS APPELLATE FORUMS. CONSEQUENTLY, FINAL DISA LLOWANCE OF ` 32,42,666/- WAS MADE BY THE A.O. ON THIS ISSUE. 5. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE LD. COU NSEL FOR THE ASSESSEE, AT THE OUTSET, HAS INVITED OUR ATTENTION TO THE COPY OF RE LEVANT AGREEMENT ENTERED IT(TP)A NO. 7596/M/12 4 INTO BY THE ASSESSEE COMPANY WITH TATA SONS LTD. ON 4 TH JUNE, 2001 PLACED AT ASSESSEES PAPER BOOK PAGE NO. 207 TO 225 IN ORDER TO POINT OUT THE OBLIGATION OF TATA SONS TO LOOK AFTER THE ENTIRE BRAND OF TATA GROUP. THE SAID OBLIGATION BEING RELEVANT IN THE PRESENT CONTEXT ARE EXTRACTED BELOW FROM PAGE NO. 210 AND 212 OF THE ASSESSEES PAPER BOOK:- A) TO PROTECT AND PROMOTE THE INTERESTS GENERALLY O F THE SUBSCRIBER BOTH IN INDIA AND ABROAD. TO THIS END, THE SUBSCRIBER HEREB Y AUTHORIZES THE PROPRIETOR TO ACT ON ITS BEHALF IN PROTECTING AND ENFORCING THE C OLLECTIVE IMAGE AND GOODWILL OF THE GROUP AND PREVENTING ANY NEWLY DEVELOPED MARK O R SYMBOL FROM BEING USURPED AND/OR DILUTED IN ANY WAY. B) TO ORGANIZE PERIODICALLY AS MAY BE DEEMED NECESS ARY CORPORATE IDENTITY AND BRAND PROMOTIONAL ACTIVITIES AND CAMPAIGNS THRO UGH VARIOUS MEDIA INCLUDING ELECTRONIC /TELECOMMUNICATION/SATELLITE C OMMUNICATION MEDIA (E.G. TATA WEBSITE) ETC. PRINTING AND PUBLISHING OF PROMOT IONAL MATERIAL AND SUCH OTHER ACTIVITIES AS IN THE OPINION OF THE BOARD OF DIRECTORS OF THE PROPRIETOR COMPANY, WILL ENHANCE THE TATA BRAND EQUITY AND CORRE SPONDINGLY BENEFIT THE BUSINESS OF THE SUBSCRIBER. C) TO CO-ORDINATE MAJOR CAMPAIGNS INVOLVING THE PRO MOTION AND DEVELOPMENT OF THE BUSINESS NAME MARKS AND MARKETIN G INDICA. D) TO ENGAGE THE SERVICES OF SPECIALIST AGENCIES BO TH NATIONAL AND INTERNATIONAL AS THE NEED MAY BE TO ENERGISE AND EN HANCE THE OVERALL TATA BRAND EQUITY WHICH EVENTUALLY COULD RESULT IN A GR EATER MARKET SHARE FOR THE PRODUCTS AND SERVICES OF THE SUBSCRIBER AND HELP IN THE PRESERVATION AND VINDICATION OF THE TRUST AND CONFIDENCE REPOSED BY CUSTOMERS, BUSINESS ASSOCIATES, STOCKHOLDERS AND THE SOCIETY IN GENERAL . E) TO ENGAGE PROFESSION CONSULTANTS FOR CONDUCTING INDUSTRY/ORGANIZATIONAL STUDIES/RESEARCH FOR THE FORMULATION OF GROUP BUSIN ESS STRATEGIES AND POLICIES THAT WOULD ASSIST THE SUBSCRIBING COMPANIES TO EMER GE AS BUSINESS LEADERS IN THE EVOLVING MARKETS. F) FOR THE ATTAINMENT OF THE OVERALL OBJECTIVES OF THE TATA BRAND EQUITY & BUSINESS PROMOTION SCHEME AND INTERACTING CLOSELY W ITH THE PARTICIPATING TATA COMPANIES IN A CERTAINLY CO-ORDINATED MANNER, ENGAG E AND SET UP A TEAM OF SENIOR PERSONNEL AND/OR ADVISORS/CONSULTANTS AND/OR SPECIALISTS FIRMS AS WELL AS PROVIDE THEM WITH THE NECESSARY SUPPORTING STAFF AND FACILITIES TO PERFORM THEIR FUNCTIONS. G) TO TAKE STEPS TO MAKE AVAILABLE A POOL OF SHARAB LE RESOURCES OF THE TATA GROUP INCLUDING MANAGERIAL TALENT TRAINED IN TATA VAL UES TO THE SUBSCRIBER. H) TO PROVIDE NECESSARY GUIDANCE TO THE SUBSCRIBER IN ORDER TO ENSURE APPRAISE THE PERFORMANCE OF THE SUBSCRIBER IN VARIO US AREAS OF ITS ACTIVITY AND TO GUIDE AND ASSIST THE SUBSCRIBER IN THE ATTAINMENT O F HIGHER STANDARDS OF QUALITY OF ITS PRODUCTS, SERVICES AND MANAGEMENT. IT(TP)A NO. 7596/M/12 5 I) TO ADOPT THE JRD QUALITY VALUE AND/OR OTHER SUCH PRO CESS AS A MEANS OT APPRAISE THE PERFORMANCE OF THE SUBSCRIBER IN VARIO US AREAS OF ITS ACTIVITY AND TO GUIDE AND ASSIST THE SUBSCRIBER IN THE ATTAI NMENT OF HIGHER STANDARDS OF QUALITY OF ITS PRODUCTS. SERVICES AND MANAGEMENT. J) TO PROVIDE SUCH SUPPORT AND ASSISTANCE TO THE SU BSCRIBER AS THE BOARD OF DIRECTORS OF THE PROPRIETOR COMPANY MAY CONSIDER NECESSARY IN CERTAIN CIRCUMSTANCES INCLUDING SECURING THE SUPPORT OF GRO UP COMPANIES TO THE EXTENT AND IN A MANNER PERMISSIBLE UNDER THE PREVAL ENT LAWS. K) TO ENCOURAGE SUPPORT TO THE SUBSCRIBERS BUSINES S FROM GROUP COMPANIES SUBJECT TO THE AVAILABILITY OF PRODUCTS AND SERVICE S OF A DESIRABLE QUALITY AT COMPETITIVE RATES. L) TO UNDERTAKE ACTIVITIES WHICH IN THE OPINION OF THE BOARD OF DIRECTORS OF THE PROPRIETOR COMPANY ARE ESSENTIAL FOR THE PURPOS E OF PROMOTING, DEVELOPING, MAINTAINING, MANAGING AND LEGALLY PROTECTING THE BU SINESS NAME, THE MARKS AND MARKETING INDICA IN INDIA AND ABROAD AND THEREB Y ENDEAVOR TO PROMOTE THE BUSINESS OF THE SUBSCRIBER TO ACHIEVE GREATER PROFI TABILITY AND ENHANCEMENT OF STAKEHOLDER VALUE. M) TO UNDERTAKE MEASURES TO PRESERVE THE STABILITY OF THE MANAGEMENT OF THE SUBSCRIBER IN ORDER TO PROTECT THE LARGER INTER ESTS OF ITS STAKEHOLDERS. N) TO PROVIDE RESOURCES FOR AVAILING SERVICES IN TH E AREAS OF- 1. FINANCIAL AND STRATEGIC MANAGEMENT. 2. LEGAL AND ECONOMIC MATTERS. 3. MANAGEMENT DEVELOP0MENT AND HUMAN RESOURCES. 4. CORPORATE COMMUNICATIONS. 5. COMMUNITY SERVICES. O) FOR THE PURPOSES OF PROMOTING THE BUSINESS OF TH E SUBSCRIBER TO PROVIDE ASSISTANCE IN ACCESSING THE NETWORK OF DOMESTIC AND INTERNATIONAL BUSINESS CONTACTS AND AVAILING THE SERVICES OF THE DOMESTIC AND OVERSEAS OFFICES OF THE PROPRIETOR AND THE GROUP COMPANIES. P) TO INSTITUTIONALISE MECHANISMS TO SHARE AND PROP AGATE BEST MANAGEMENT PRACTICES AMONGST THE SUBSCRIBING COMPANIES. Q) TO MANAGE AND SUPERVISE THE IMPLEMENTATION OF TH E SCHEME AND ENSURE COMPLIANCE WITH THE TERMS OF THIS AGREEMENT AND THE CODE. THE LD. COUNSEL FOR THE ASSESSEE HAS ALSO INVITED O UR ATTENTION TO THE RELEVANT PORTION OF THE AGREEMENT DTD 4 TH JUNE, 2001 AT PAGE 218 CONTAINING SUBSCRIPTION CLAUSE WHEREBY THE ASSESSEE WAS OBLIGE D TO PAY THE SUBSCRIPTION AT THE STIPULATED RATE TO TATA SONS LTD. FOR THE SE RVICES RENDERED IN CONNECTION WITH MAINTAINING AND PROMOTING THE ENTIRE BRAND AND IMAGE OF TATA GROUP. IT(TP)A NO. 7596/M/12 6 6. AS FURTHER SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE, M/S RALLIS INDIA LTD., ANOTHER COMPANY BELONGING TO TATA GROU P HAD ALSO ENTERED INTO A SIMILAR AGREEMENT WITH M/S TATA SONS AND THE SUBSCR IPTION PAID AS PER THE SAID AGREEMENT TOWARDS TATA BRAND EQUITY AND BUSINE SS PROMOTION SCHEME WAS DISALLOWED BY THE A.O. THE LD. CIT(A), HOWEVER , ALLOWED THE SAME AND THE TRIBUNAL VIDE ITS ORDER DTD. 30-8-2011 PASSED IN IT A NO. 5701/MUM/2008 FOR A.Y. 2004-05 UPHELD THE ORDER OF THE LD. CIT(A) ON THIS ISSUE. THE COPY OF THE SAID ORDER IS PLACED ON RECORD AT PAGE 1 TO 21 OF T HE COMPILATION OF THE JUDGMENTS FILED BY THE LD. COUNSEL FOR THE ASSESSEE AND A PERUSAL OF THE SAME SHOWS THAT A SIMILAR ISSUE WAS DECIDED BY THE TRIBU NAL IN FAVOUR OF THE ASSESSEE BY AGREEING WITH THE VIEW OF THE LD. CIT(A ) THAT THE PAYMENT IN QUESTION NOT ONLY PERMITTED THE USE OF TATA NAME BU T ALSO GAVE AN OPPORTUNITY TO THE ASSESSEE TO INFORM THE BUSINESS WORLD THAT IT WAS HAVING THE BACK UP OF EXCELLENCE, WITH A CODE OF CONDUCT A ND A PROMISE OF QUALITY. IT WAS HELD THAT THE FACT THAT THE TATA GROUP WAS ALRE ADY HAVING AN INFRASTRUCTURE AND BRAND EQUITY WAS WELL ESTABLISHE D AND BY MAKING SUCH A CONTRIBUTION, THE ASSESSEE COMPANY WAS BENEFITED IN ITS DAY-TO-DAY BUSINESS. THE TRIBUNAL ALSO FOUND THAT A SIMILAR ISSUE WAS DE CIDED IN FAVOUR OF THE ASSESSEE IN CASE OF HARRISONS MALAYALAM REPORTED IN 19 SOT 363 WHEREIN THE PAYMENT MADE FOR ACQUIRING NON-EXCLUSIVE LICENCE TO USE THE LOGO FOR THE PURPOSE OF BUSINESS WAS HELD TO BE ALLOWABLE U/S 37 (1) OF THE ACT BEING THE EXPENDITURE WHOLLY AND EXCLUSIVELY INCURRED FOR THE PURPOSE OF BUSINESS. IT IS PERTINENT TO NOTE THAT IN THE CASE OF TATA STEEL, A NOTHER COMPANY BELONGING TO TATA GROUP, A SIMILAR SUBSCRIPTION PAID BY THE ASSE SSEE COMPANY TO TATA SONS LTD. WAS PROPOSED TO BE DISALLOWED BY THE A.O. IN THE DRAFT ASSESSMENT ORDER FOR A.Y. 2008-09 AND WHEN THE ASSESSEE OBJECT ED TO THE SAID DISALLOWANCE BEFORE THE DRP BY RELYING ON THE DECIS ION OF THE TRIBUNAL IN THE CASE OF RALLIS INDIA LTD. (SUPRA), THE DRP DIRECTED THE A.O. TO ALLOW THE SAID EXPENDITURE AFTER VERIFYING AS TO WHETHER THE DEPAR TMENT HAS ACCEPTED THE SAID DECISION OF THE TRIBUNAL. ON VERIFICATION, TH E A.O. FOUND THAT NO APPEAL IT(TP)A NO. 7596/M/12 7 WAS FILED BY THE DEPARTMENT AGAINST THE ORDER OF TH E TRIBUNAL PASSED IN THE CASE OF RALLIS INDIA LTD. GIVING RELIEF TO THE ASSE SSEE ON THE ISSUE OF BRAND EQUITY SUBSCRIPTION AND ACCORDINGLY HE ALLOWED SIMI LAR SUBSCRIPTION PAID BY TATA STEEL LTD. IN THE FINAL ASSESSMENT COMPLETED U /S 143(3) R.W.S. 144-C OF THE ACT VIDE ORDER DTD. 27-11-2010. IT IS THUS CLEA R THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION O F THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF RALLIS INDIA LTD. WHIC H HAS ALSO BEEN ACCEPTED BY THE DEPARTMENT. RESPECTFULLY FOLLOWING THE SAID DEC ISION OF THE TRIBUNAL, WE DELETE THE DISALLOWANCE MADE BY THE A.O. ON ACCOUNT OF SUBSCRIPTION PAID BY THE ASSESSEE TO TATA SONS LTD. TOWARDS BRAND EQUITY AND PROMOTION SCHEME AND ALLOW GROUND NO. 1 OF ASSESSEES APPEAL. 7. THE ISSUE RAISED IN GROUND NO. 2 RELATES TO THE DISALLOWANCE OF ` 1.06 CRORES MADE BY THE A.O. U/S 14-A READ WITH RULE 8-D OF THE INCOME TAX RULES, 1962. 8. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSE E HAD RECEIVED DIVIDEND INCOME OF ` 16,83,27,131/- WHICH WAS CLAIMED TO BE EXEMPT FROM TAX. AS PER THE REVISED RETURN FILED BY THE ASSESS EE, THE DISALLOWANCE OF ` 1,34,95,120/- WAS MADE U/S 14-A OF THE ACT ON ACCO UNT OF EXPENSES ATTRIBUTABLE TO THE SAID EXEMPT INCOME. THE SAID D ISALLOWANCE WAS WORKED OUT BY THE ASSESSEE ON ACCOUNT OF INTEREST AT ` 1,28,72,969/- BEING 35% OF THE TOTAL INTEREST WHICH, ACCORDING TO THE ASSESSEE , WAS THE RATIO BETWEEN THE INVESTMENT FETCHING TAX FREE INCOME AND TOTAL INVES TMENT. THE BALANCE DISALLOWANCE OF ` 6,22,151/- WAS MADE ON ACCOUNT OF SALARY PAID TO A TREASURY PERSON WHO, ACCORDING TO THE ASSESSEE, WAS LOOKING AFTER THE ACTIVITY OF EARNING TAX FREE INCOME. AS REGARDS THE OTHER EX PENSES, IT WAS CONTENDED ON BEHALF OF THE ASSESSEE BEFORE THE A.O. THAT IT H AD MADE INVESTMENT IN SEVERAL SUBSIDIARIES AND JOINT VENTURE COMPANIES ON WHICH THE EXEMPT INCOME IN THE FORM OF DIVIDEND WAS RECEIVED. IT WA S CLAIMED THAT THE ASSESSEE WAS PROVIDING ADMINISTRATIVE SUPPORT TO THESE COMPA NIES AND THE FEES IT(TP)A NO. 7596/M/12 8 CHARGED FOR SUCH SERVICES AMOUNTING TO ` 25.87 CRORES HAVING BEEN ALREADY OFFERED TO TAX, THERE WERE NO ADMINISTRATIVE EXPENS ES ATTRIBUTABLE TO THE EARNING OF EXEMPT INCOME. 9. THE SUBMISSIONS MADE BY THE ASSESSEE AS ABOVE WE RE NOT FOUND ACCEPTABLE BY THE A.O. FOR THE FOLLOWING REASONS:- O AS REGARDS CONSIDERING THE INTEREST PORTION ATTRIBU TABLE TO TAX FREE INCOME IT IS SEEN THAT THE ASSESSEE HAS PROPORTIONA TELY WORKED OUT THE CORRESPONDING AMOUNT. HOWEVER, THE ASSESSEE HAS NOT WORKED OUT THE RATION CORRECTLY. IT IS SEEN FROM THE BALANCE SHEET THAT THE AVERAGE OF TOTAL INVESTMENT IS RS.30450/- LAKHS [I.E., (35165 +25735 )/2] AND THE AVERAGE VALUE OF RS.79155 LAKHS [I.E., (88287 +70025)/2]. I T GIVES A RATIO OR 38.47% AND THE INTEREST DISALLOWABLE U/S. 14A COMES TO RS.1,41,95,393/- O DURING THE YEAR UNDER CONSIDERATION, THERE IS AN IN CREASE IN THE INVESTMENT LIKE INVESTMENT IN AUTOMOTIVE COMPOSITE SYSTEM INTERNATIONAL LTD., TATA AUTOCOM MOBILITY TELEMATIC LTD. TC SPINK LTD. TATA FIECOSA AUTOMOTIVE SYSTEM LTD., TATA VISTEON AUTOMOTIVE LTD ., HAS GONE UP. FURTHER, THERE IS A NEW INVESTMENT IN TATA AUTOCOM GY BATTERIES PVT. LTD. O THE DECISION TO MAKE FURTHER INVESTMENT IN THE SHAR ES CANNOT BE TAKEN BY A PERSON WHO HANDLES THE TREASURY SECTION. THE DECISION FOR FURTHER INVESTMENT IS ALWAYS TAKEN BY BOARD OF DIRE CTORS. FURTHER, THE BOARD OF DIRECTORS TAKES THE DECISION ONLY AFTER GO ING THROUGH THE VARIOUS REPORTS FROM THE SUBORDINATES LIKE CHIEF FINANCIAL OFFICER ETC. THEREFORE, THERE IS ALWAYS INVOLVEMENT OF DIRECTORS AND HIGHER EXECUTIVES IN THE DECISION MAKING PROCESS FOR MAKING INVESTMENTS IN T HE COMPANIES WHETHER SUBSIDIARY COMPANY OR OTHERWISE. THUS, THER E IS ALWAYS AN ELEMENT OF EXPENDITURE INVOLVED WHICH IS DIRECTLY L INKED WITH DIVIDEND INCOME. O THEREFORE, THE ASSESSEES CONTENTION TO CONSIDER ON LY SALARY TO A TREASURY PERSON IS NOT CORRECT AND REJECTED. FOR THE REASONS GIVEN ABOVE, THE A.O. WORKED OUT T HE TOTAL DISALLOWANCE OF EXPENSES U/S 14-A AT ` 2,94,20,393/- BY APPLYING RULE 8-D AND SINCE THE ASSESSEE HAD ALREADY OFFERED A DISALLOWANCE OF ` 1,34,95,120/-, A FURTHER DISALLOWANCE OF ` 1,59,25,273/- U/S 14A WAS PROPOSED BY THE ASSESSEE IN THE DRAFT ASSESSMENT ORDER. THE SAID DISALLOWANCE WAS OBJECTED BY THE ASSESSEE BEFORE THE DRP. THE DRP FOUND THE ACTION OF THE A. O. IN MAKING THE IT(TP)A NO. 7596/M/12 9 DISALLOWANCE U/S 14-A R.W.R. 8-D TO BE PROPER. BEF ORE THE DRP, THE ASSESSEE FURNISHED THE WORKING OF DISALLOWANCE TO BE MADE U/ S 14-A BY APPLYING RULE 8-D POINTING OUT CERTAIN MISTAKES COMMITTED BY THE A.O. WHILE COMPUTING THE SAID DISALLOWANCE. AS PER THE DIRECTION OF THE DRP , THE A.O. VERIFIED THE SAID WORKING AND FOUND THAT THE CORRECT DISALLOWANCE TO BE MADE U/S 14-A AS PER RULE 8-D WAS ` 1.07 CRORES ON ACCOUNT OF INTEREST EXPENDITURE AND ` 1.34 CRORES ON ACCOUNT OF OTHER ADMINISTRATIVE EXPENSES. ACCORDINGLY, HE RESTRICTED THE DISALLOWANCE U/S 14-A OF THE ACT TO ` 1,06,04,880/-IN THE FINAL ASSESSMENT. 10. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE DISALLOWANCE U/S 14-A OF THE ACT OFFERED BY THE ASSESSEE WAS WORKED OUT ON REASONABLE BASIS AND THE A.O. HAD ALSO ACCEPTED THE SAME IN PRINCIPL E IN SO FAR AS IT WAS RELATED TO INTEREST EXPENDITURE. HE SUBMITTED THAT THE A.O., HOWEVER, WORKED OUT THE RATIO BETWEEN THE TAX FREE INVESTMENT AND T OTAL INVESTMENT AT 37.47% AS AGAINST 35% TAKEN BY THE ASSESSEE AND INCREASED THE DISALLOWANCE ON ACCOUNT OF INTEREST TO THAT EXTENT. HE INVITED OUR ATTENTION TO THE WORKING MADE BY THE A.O. IN THIS REGARD AS GIVEN AT PAGE 81 OF THE ASSESSEES PAPER BOOK AND POINTED OUT THAT THE ACTUAL RATIO OF TAX F REE INVESTMENT TO TOTAL INVESTMENT WAS 34.02% WHICH WAS TAKEN BY THE ASSESS EE AS 35%. AS REGARDS THE DISALLOWANCE ON ACCOUNT OF ADMINISTRATIVE EXPEN SES, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE COMPANY WA S PROVIDING ADMINISTRATIVE SUPPORT SERVICES TO THE CONCERNED SU BSIDIARIES AND JOINT VENTURE COMPANIES AND SINCE THE AMOUNT OF ` 25.87 CRORES CHARGED FOR SUCH SERVICES WAS OFFERED TO TAX, THE ADMINISTRATIVE EXP ENSES INCURRED BY THE ASSESSEE WERE ATTRIBUTABLE TO THE SAID TAXABLE INCO ME AND NOT TO THE TAX FREE INCOME. HE SUBMITTED THAT THE SALARY PAID TO ONE S TAFF MEMBER WORKING IN THE TREASURY DEPARTMENT WAS OFFERED BY THE ASSESSEE FOR DISALLOWANCE U/S 14- A OF THE ACT AND THE SAME BEING A REASONABLE BASIS ADOPTED BY THE ASSESSEE FOR OFFERING THE DISALLOWANCE U/S 14-A OF THE ACT, THERE WAS NO JUSTIFICATION TO IT(TP)A NO. 7596/M/12 10 MAKE ANY FURTHER DISALLOWANCE ON ACCOUNT OF ADMINIS TRATIVE EXPENSES. HE CONTENDED THAT BESIDES THE SALARY PAID TO THE SAID STAFF MEMBER, THERE WAS NO OTHER EXPENDITURE REQUIRED TO BE INCURRED BY THE AS SESSEE TO MAKE INVESTMENTS IN THE SUBSIDIARIES AND JOINT VENTURE C OMPANIES AND THERE BEING NO REASON WHATSOEVER GIVEN BY THE A.O. TO SHOW HIS SATISFACTION THAT DISALLOWANCE OFFERED BY THE ASSESSEE WAS NOT REASON ABLE, THERE WAS NO JUSTIFICATION TO MAKE FURTHER DISALLOWANCE U/S 14-A OF THE ACT. 11. THE LD. D.R., ON THE OTHER HAND, SUBMITTED THAT THE BASIS GIVEN BY THE ASSESSEE TO ALLOCATE ONLY THE SALARY OF ONE STAFF MEMBER WORKING IN THE TREASURY DEPARTMENT FOR OFFERING DISALLOWANCE U/S 1 4-A OF THE ACT WAS NOT FOUND TO BE REASONABLE AND ACCEPTABLE BY THE A.O. F OR THE SPECIFIC REASONS GIVEN IN THE ASSESSMENT ORDER. HE CONTENDED THAT S ATISFACTION TO THIS EFFECT WAS RECORDED BY THE A.O. IN THE ASSESSMENT ORDER AN D HAVING FOUND THAT THE WORKING OF DISALLOWANCE OFFERED BY THE ASSESSEE U/S 14-A OF THE ACT WAS NOT REASONABLE, THE A.O. HAD NO OPTION BUT TO APPLY RUL E 8-D(2)(III) TO QUANTIFY THE DISALLOWANCE TO BE MADE U/S 14-A OF THE ACT ON ACCO UNT OF ADMINISTRATIVE EXPENSES. 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND AL SO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IN THE REVISED RETUR N FILED FOR THE YEAR UNDER CONSIDERATION, THE DISALLOWANCE U/S 14-A OF THE ACT WAS OFFERED BY THE ASSESSEE ON ACCOUNT OF INTEREST AMOUNTING TO RS. 1, 28,72,969/- AND ON ACCOUNT OF OTHER EXPENSES AT RS. 6,22,151/-. THE D ISALLOWANCE ON ACCOUNT OF INTEREST WAS WORKED OUT BY THE ASSESSEE AT 35% OF T HE TOTAL INTEREST ADOPTING THE RATIO OF TAX FREE INVESTMENT TO TOTAL INVESTMEN T AND THIS BASIS WAS ACCEPTED BY THE TPO IN PRINCIPLE. AS PER THE WORKI NG GIVEN BY THE TPO, THE RATIO BETWEEN TAX FREE INVESTMENT AND TOTAL INVESTM ENT, HOWEVER, WAS 38.47% AND NOT 35% AS TAKEN BY THE ASSESSEE AND ACCORDINGL Y THE DISALLOWANCE U/S 14-A OF THE ACT ON ACCOUNT OF INTEREST WAS INCREASE D BY HIM TO RS. IT(TP)A NO. 7596/M/12 11 1,41,95,393/- IN THE DRAFT ASSESSMENT ORDER. AT TH E TIME OF HEARING BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE HAS MADE AN AT TEMPT TO SHOW THAT THE RATIO OF 38.47% WORKED OUT BY THE TPO IS NOT CORREC T AND THE SAME ACTUALLY IS LESS THAN 35%. IT IS, HOWEVER, OBSERVED THAT IN TH E FINAL ASSESSMENT ORDER, THE DISALLOWANCE ON ACCOUNT OF INTEREST U/R 8-D(2)( II) WAS MADE BY THE ASSESSEE ONLY TO THE EXTENT OF RS. 1.07 CRORES AS P ER THE DIRECTION OF THE DRP AND THE SAME BEING LOWER THAN THE AMOUNT OF DISALLO WANCE OFFERED BY THE ASSESSEE U/S 14-A OF THE ACT ON ACCOUNT OF INTEREST , WE ARE OF THE VIEW THAT THE ASSESSEE CANNOT BE SAID TO HAVE ANY GRIEVANCE O N THIS ISSUE. 13. AS REGARDS THE DISALLOWANCE OFFERED BY THE ASSE SSEE U/S 14-A OF THE ACT ON ACCOUNT OF OTHER EXPENSES AT RS. 6,22,141/-, IT IS OBSERVED THAT THE SAID AMOUNT REPRESENTED SALARY PAID TO A TREASURY PERSON WHICH, ACCORDING TO THE ASSESSEE, WAS THE ONLY EXPENDITURE ATTRIBUTABLE TO THE EARNING OF EXEMPT DIVIDEND INCOME. THE STAND TAKEN BY THE ASSESSEE O N THIS ISSUE BEFORE THE AUTHORITIES BELOW AS WELL AS BEFORE US IS THAT IT W AS PROVIDING ADMINISTRATIVE SUPPORT TO SEVERAL SUBSIDIARIES AND JOINT VENTURE C OMPANIES FROM WHOM THE EXEMPT DIVIDEND INCOME HAD BEEN RECEIVED AND THE AM OUNT CHARGED FOR SUCH SERVICES TO THE TUNE OF RS. 25.87 CRORES HAVING BEE N ALREADY OFFERED TO TAX, THERE WERE NO ADMINISTRATIVE EXPENSES SEPARATELY AT TRIBUTABLE TO THE EXEMPT INCOME. WE ARE UNABLE TO ACCEPT THIS STAND OF THE A SSESSEE. THE INVESTMENT ACTIVITY OF THE ASSESSEE RESULTING IN EXEMPT DIVIDE ND INCOME OF RS. 16.83 CRORES WAS THE SUBSTANTIAL ACTIVITY AND IT CANNOT B E ACCEPTED THAT THIS ENTIRE ACTIVITY WAS LOOKED AFTER AND HANDLED BY ONE TREASU RY PERSON DRAWING THE SALARY OF RS. 6,21,151/-. THE ADMINISTRATIVE EXPENS ES INCURRED BY THE ASSESSEE THUS WERE CERTAINLY ATTRIBUTABLE TO THE IN VESTMENT ACTIVITY ALSO WHICH FETCHED THE EXEMPT OF DIVIDEND INCOME OF RS. 16.83 CRORES AND THE SAME THEREFORE WERE REQUIRED TO BE ALLOCATED TO THE EXEM PT DIVIDEND INCOME ON SOME REASONABLE BASIS. THE BASIS ADOPTED BY THE AS SESSEE TO ATTRIBUTE THE ADMINISTRATIVE EXPENSES ONLY TO THE EXTENT OF SALAR Y OF ONE TREASURY STAFF THUS IT(TP)A NO. 7596/M/12 12 WAS NOT REASONABLE AND THE FINDINGS TO THIS EFFECT WAS RECORDED BY THE A.O. IN PARA 7.4 OF HIS FINAL ORDER GIVING SPECIFIC REASONS FOR NOT ACCEPTING THE SUBMISSIONS MADE BY THE ASSESSEE TO JUSTIFY THE QUA NTUM OF DISALLOWANCE OFFERED U/S 14-A OF THE ACT. HAVING FOUND THAT THE DISALLOWANCE OFFERED BY THE ASSESSEE ON ACCOUNT OF ADMINISTRATIVE EXPENSES U/S 14-A OF THE ACT WAS NOT REASONABLE, THE A.O., IN OUR OPINION, WAS FULLY JUS TIFIED IN APPLYING THE BASIS OR THE FORMULA GIVEN IN RULE 8-D(2)(III) OF THE INC OME TAX RULES, 1962 TO COMPUTE THE DISALLOWANCE U/S 14-A OF THE ACT ON ACC OUNT OF OTHER EXPENSES. WE ARE, THEREFORE, OF THE VIEW THAT THE DISALLOWANC E U/S 14-A AS COMPUTED BY THE A.O. IS QUITE REASONABLE AND CONFIRMING THE SAM E, WE DISMISS GROUND NO. 2 OF ASSESSEES APPEAL. 14. THE ISSUE RAISED IN GROUND NO. 3 RELATES TO THE ADDITION OF RS. 2.61 CRORES MADE BY THE A.O. BY WAY OF TRANSFER PRICING ADJUSTMENT IN RESPECT OF ASSESSES INTERNATIONAL TRANSACTIONS PERTAINING TO REIMBURSEMENT OF REWORK CHARGES TO ITS ASSOCIATED ENTERPRISE. 15. DURING THE YEAR UNDER CONSIDERATION, THE ASSESS EE COMPANY HAD MADE A PAYMENT OF RS. 2,67,90,359/- TO ITS ASSOCIATE CON CERN TKT TOWARDS REIMBURSEMENT OF REWORK CHARGES. THIS INTERNATIONAL TRANSACTION OF THE ASSESSEE COMPANY WITH ITS AE, INTER ALIA, WAS REFER RED BY THE A.O. TO THE TPO FOR DETERMINING ITS ARMS LENGTH PRICE. BEFORE THE TPO, IT WAS EXPLAINED BY THE ASSESSEE THAT IT HAD ENTERED INTO A BUSINESS AR RANGEMENT WITH FORD FOR PROVIDING COMPONENTS AS PER THEIR SPECIFICATIONS. I T WAS SUBMITTED THAT SOMETIME WHEN THE GOODS WERE SHIPPED TO FORD OR WER E ENROUTE, FORD WOULD MAKE CHANGES IN DESIGN SPECIFICATIONS OF THE COMPON ENTS BEING SUPPLIED BY THE ASSESSEE. IT WAS SUBMITTED THAT IT WAS IMPERATI VE FOR THE ASSESSEE TO MAKE NECESSARY CHANGES AND RESHIP THE COMPONENTS WHICH C OULD HAVE INVOLVED SUBSTANTIAL COST. IT WAS CLAIMED THAT IN ORDER TO MINIMIZE SUCH COST, THE ASSESSEE REQUESTED ITS ASSOCIATE CONCERN TKT TO GET THE REWORK DONE FROM THIRD PARTIES IN EUROPE AND REIMBURSED THE COST PAI D BY TKT TO THE SAID IT(TP)A NO. 7596/M/12 13 PARTIES FOR SUCH REWORK DONE ON BEHALF OF THE ASSES SEE. IT WAS CONTENDED THAT THE TRANSACTION OF GETTING THE REWORK DONE THUS WAS ACTUALLY BETWEEN THE ASSESSEE COMPANY AND THE EUROPEAN SERVICE PROVIDERS AND TKT MERELY FACILITATED THE PAYMENTS TO EUROPEAN SERVICE PROVID ER ON BEHALF OF THE ASSESSEE. IT WAS PLEADED THAT THE SAID TRANSACTION THUS WAS ACTUALLY DONE WITH THE THIRD PARTY DULY COMPLYING THE ARMS LENGT H PRINCIPLE. IN ORDER TO VERIFY THE CLAIM OF THE ASSESSEE ON THIS ISSUE, THE TPO REQUIRED THE ASSESSEE TO SUBMIT THE DOCUMENTARY EVIDENCE TO SHOW THE NEED OF SERVICE AVAILED FROM TKT, THE EVIDENCE OF SUCH SERVICE AND THE FACT THAT THE REIMBURSEMENT WAS CLAIMED ON COST TO COST BASIS. IN REPLY, THE FOLLO WING SUBMISSION WAS MADE BY THE ASSESSEE :- 1. DOCUMENTS EVIDENCING DEFECT WERE NOR READILY AVA ILABLE AS THE RELEVANT PERSONNEL HAD LEFT THE COMPANY. FURTHER, T KT HAD APPLIED FOR LIQUIDATION AND THE RECORDS WERE IN OFFICIAL CUSTOD Y OF THE LIQUIDATOR. 2. TKT IS MERELY IN A FACILITATION ROLE AND THE TRA NSACTION WAS ACTUALLY BETWEEN TACO AND THE THIRD PARTY EUROPEAN SERVICE PROVIDERS. 3. SAMPLE COPIES OF THIRD PARTY INVOICES IN RESPECT OF REWORK CHARGES WERE SUBMITTED WHICH ITSELF SHOULD BE CONSIDERED AS EVIDENCE OF NEED AND RECEIPT OF SERVICE. 4. PROPOSAL OF COMPUTATION OF ARMS LENGTH PRICE AT RS.NIL WITHOUT CONCLUDING ON MOST APPROPRIATE METHOD AND WITHOUT C ONDUCTING ANY BENCHMARKING ANALYSIS DOES NOT COMPLY WITH ITPR. 16 . THE ABOVE SUBMISSION MADE BY THE ASSESSEE WAS NOT F OUND ACCEPTABLE BY THE A.O. FOR THE FOLLOWING REASONS GIVEN IN HIS ORDER:- 1. EVIDENCE OF THE NEED OF REWORK IS NOT SUBMITTED. NO EVIDENCE WAS FURNISHED TO PROVE THAT GOODS EXPORTED WERE DEFECTI VE. 2. THERE IS NO EVIDENCE THAT THE SERVICE HAS BEEN A CTUALLY RENDERED ON THE REWORK. 3. THERE IS NO EVIDENCE THAT THE SAID SERVICE WAS R ENDERED ON COST TO COST BASIS. 4. REASON THAT EVIDENCE IS NOT AVAILABLE IS NOT AVA ILABLE BECAUSE THE RELEVANT PERSONNEL HAVE LEFT THE COMPANY AND RECORD S WERE IN THE OFFICIAL CUSTODY OF THE LIQUIDATOR IS NOT ACCEPTABLE BECAUSE THE DOCUMENTS OUGHT IT(TP)A NO. 7596/M/12 14 TO BE MAINTAINED IN THE COMPANY AND LEAVING OF PERS ONNEL OF THE COMPANY HAS GOT NO RELEVANT TO THE SAME. 5. SINCE THE ASSESSEE COULD NOT ESTABLISH BY EVIDEN CE THAT GOODS WERE DEFECTIVE AND SERVICES WERE CARRIED OUT, IT WI LL BE PRESUMED THAT NO SERVICE OF REWORK WAS RECEIVED BY THE ASSESSEE. 6. IN VIEW OF PRINT NO 5 ABOVE, NO PERSON IN UNCONT ROLLED SITUATION WILL MAKE PAYMENT. IN VIEW OF THE REASONS GIVEN ABOVE, THE ARMS LENGT H PRICE OF THE REIMBURSEMENT OF REWORK CHARGES WAS TAKEN BY THE TP O AS NIL AND THE TP ADJUSTMENT WAS WORKED OUT BY HIM AT RS. 2,67,90,359 /- WHICH WAS PROPOSED TO BE ADDED IN THE DRAFT ASSESSMENT ORDER. THE ASS ESSEE OBJECTED TO THE SAID ADDITION BEFORE THE DRP BUT COULD PRODUCE THE EVIDE NCE IN RESPECT OF THE REIMBURSEMENT OF REWORK CHARGES BEFORE THE DRP ONLY TO THE EXTENT OF RS. 6,42,640/-. THE DRP ACCORDINGLY DIRECTED THE A.O. T O REDUCE THE TP ADJUSTMENT ON THIS ISSUE BY RS. 6,42,640/- AND THUS FINALLY ADDITION OF RS. 2,61,47,719/- WAS MADE BY THE A.O. TO THE TOTAL INC OME OF THE ASSESSEE ON THIS ISSUE. 17. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES O N THIS ISSUE AND ALSO PERUSED THE RELEVANT MATERIAL PLACED ON RECORD. AS SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE, REJECTION OF PRODUCTS SUP PLIED BY THE ASSESSEE IS A COMMON FEATURE AND INSTEAD OF BRINGING BACK THE REJ ECTED GOODS FOR REPAIRS AND RESHIPMENT, THE ASSOCIATED ENTERPRISE IN EUROPE IS REQUESTED BY THE ASSESSEE TO GET THE REPAIR WORK DONE FROM THE LOCAL PARTIES IN ORDER TO SAVE COST. THE EXPENSES INCURRED FOR SUCH REPAIR BY THE ASSOCIATED ENTERPRISE ON BEHALF OF THE ASSESSEE IS SUBSEQUENTLY REIMBURSED O N ACTUAL BASIS AND AS SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE, SIMILAR REIMBURSEMENT MADE IN THE EARLIER AS WELL AS SUBSEQUENT YEARS HAS BEEN ACCEPTED BY THE A.O. HE HAS ALSO PLACED ON RECORD COPIES OF SOME S AMPLE INVOICES AT PAGE NO. 304 TO 306 OF THE ASSESSEES PAPER BOOK TO SHOW THA T ONLY THE ACTUAL PAYMENT MADE BY IT TO THIRD PARTIES FOR REPAIR WORK DONE FO R THE ASSESSEE WAS CLAIMED IT(TP)A NO. 7596/M/12 15 BY THE ASSOCIATED ENTERPRISE ON COST TO COST BASIS WITHOUT CHARGING ANY PROFIT. AS A MATTER OF FACT, SOME OF SUCH INVOICES PERTAINI NG TO THE YEAR UNDER CONSIDERATION WERE PRODUCED BY THE ASSESSEE BEFORE THE DRP SHOWING THE REIMBURSEMENT OF ACTUAL REPAIR EXPENSES TO THE ASSO CIATED ENTERPRISE TO THE EXTENT OF RS. 6,42,640/- AND ACCEPTING THE SAME, TH E DRP DIRECTED THE A.O. TO GIVE RELIEF TO THE ASSESSEE TO THAT EXTENT. THE ASS ESSEE, HOWEVER, HAS NOT BEEN ABLE TO PRODUCE THE DOCUMENTARY EVIDENCE IN RESPECT OF OTHER TRANSACTIONS INVOLVING THE REIMBURSEMENT OF ACTUAL REPAIR EXPENS ES TO ITS ASSOCIATED ENTERPRISE FOR THE REASON THAT THE FILE CONTAINING THE SAID DOCUMENTARY EVIDENCE HAS BEEN LOST AND EVEN THE CONCERNED ASSOC IATED ENTERPRISE HAS GONE INTO LIQUIDATION. ALTHOUGH THIS STAND OF THE ASSESSEE IS DULY SUPPORTED BY EVIDENCE IN THE FORM OF FIR ETC., WE FELT THAT T HE RELEVANT DOCUMENTARY EVIDENCE WHICH IS VERY CRUCIAL TO SUPPORT THE CASE OF THE ASSESSEE ON THIS ISSUE, CAN STILL BE PROCURED BY IT FROM THE RECORDS OF ITS ASSOCIATED ENTERPRISE EVEN THOUGH IT IS UNDER LIQUIDATION. EVEN OTHERWISE , THE SAID DOCUMENTARY EVIDENCE CAN ALSO BE OBTAINED BY THE ASSESSEE FROM THE THIRD PARTIES WHO ACTUALLY DONE THE REPAIR WORK. WHEN THIS FEELING W AS CONVEYED TO THE LD. COUNSEL FOR THE ASSESSEE AT THE TIME OF HEARING, HE AGREED THAT EFFORTS CAN BE MADE TO OBTAIN THE EVIDENCE FROM EITHER OF THESE SO URCES. HE, HOWEVER, HAS SUBMITTED THAT EVEN IF THE EFFORTS SO TAKEN BY THE ASSESSEE DO NOT BRING THE DESIRE RESULTS FOR ANY REASON, THE ARMS LENGTH PRI CE OF THE REPAIR WORK DONE CANNOT BE TAKEN AS NIL AND THE SAME HAS TO BE DET ERMINED ON THE BASIS OF THE RELEVANT PAST AND FUTURE DATA. WE FIND MERIT I N THIS CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE. THE SAME, HOWEVER, IS ONL Y AN ALTERNATIVE CONTENTION AND WHAT IS RELEVANT TO BE SEEN FIRST IS THE DIRECT EVIDENCE TO PROVE THAT THE AMOUNT IN QUESTION WAS REIMBURSED BY THE ASSESSEE T O THE ASSOCIATED ENTERPRISE ON COST TO COST BASIS AND THE INVOICES R AISED BY THE THIRD PARTY FOR REPAIR WORK IS A VITAL EVIDENCE IN THIS REGARD WHIC H CAN CLEARLY ESTABLISH THE ARMS LENGTH PRICE OF THE REPAIR WORK DONE. WE, TH EREFORE, RESTORE THIS ISSUE TO THE FILE OF THE A.O. FOR DECIDING THE SAME AFRESH I N THE LIGHT OF EVIDENCE TO BE IT(TP)A NO. 7596/M/12 16 PRODUCED BY THE ASSESSEE IN SUPPORT OF ITS CLAIM ON THIS ISSUE AS DISCUSSED ABOVE. IF THE ASSESSEE FAILS TO PRODUCE SUCH EVIDE NCE, THE A.O. IS DIRECTED TO CONSIDER THE ALTERNATE CONTENTION OF THE ASSESSEE O N THIS ISSUE IN ACCORDANCE WITH LAW. GROUND NO. 3 OF ASSESSEES APPEAL IS ACC ORDINGLY TREATED AS ALLOWED FOR STATISTICAL PURPOSE. 18. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFO RE THE TRIBUNAL, THE ASSESSEE HAS FILED AN ADDITIONAL GROUND SEEKING A D IRECTION TO THE A.O. TO GIVE CREDIT FOR TAX DEDUCTED AT SOURCE AMOUNTING TO RS. 44,96,139/- AS PER THE TDS CERTIFICATES RECEIVED BY IT SUBSEQUENTLY ALTHOU GH THE CORRESPONDING INCOME WAS ALREADY OFFERED TO TAX BY THE ASSESSEE I N THE RETURN OF INCOME FILED DURING THE YEAR UNDER CONSIDERATION. 19. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES O N THIS ISSUE AND ALSO PERUSED THE RELEVANT MATERIAL PLACED ON RECORD. KEE PING IN VIEW THE RATIO OF THE VARIOUS JUDICIAL PRONOUNCEMENTS RELIED UPON BY THE ASSESSEE IN ITS APPLICATION FOR ADMISSION OF THE ADDITIONAL GROUND AND HAVING REGARD TO THE FACT THAT THE LD. D.R. HAS ALSO NOT RAISED ANY OBJE CTION TO THE ADMISSION OF THE SAID ADDITIONAL GROUND, WE ADMIT THE ADDITIONAL GRO UND FILED BY THE ASSESSEE AND DIRECT THE A.O. TO CONSIDER AND ALLOW THE CLAIM OF THE ASSESSEE FOR TDS AMOUNTING TO RS. 44,96,139/- AFTER NECESSARY VERIFI CATION IN ACCORDANCE WITH LAW. THE ADDITIONAL GROUND OF THE ASSESSEE IS ACCO RDINGLY TREATED AS ALLOWED. 20. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALL OWED. 4 '5 - .4' 63 +$' 7 1 %' 8 ORDER PRONOUNCED IN THE OPEN COURT ON 12- 6-2013. . *3 1 2/ ( 9*5 12-06-2013 1 & SD/- SD/- - (D. MANMOHAN) (P.M. JAGTAP ) !' /VICE PRESIDENT ( )*+ / ACCOUNTANT MEMBER MUMBAI ; 9* DATED 12-6-13 IT(TP)A NO. 7596/M/12 17 $.-.)./ RK , SR. PS *3 1 D-'6E FE/' *3 1 D-'6E FE/' *3 1 D-'6E FE/' *3 1 D-'6E FE/'/ COPY OF THE ORDER FORWARDED TO : 1. 0G / THE APPELLANT 2. DH0G / THE RESPONDENT. 3. I () / THE ACIT(2)(3), MUMBAI. 4. I / DRP -1, MUMBAI/ACIT (TP) II(2) MUMBAI 5. E$L& D-'- , , / DR, ITAT, MUMBAI K BENCH 6. &. M / GUARD FILE. *3) *3) *3) *3) / BY ORDER, )HE' D-' //TRUE COPY// / // /) % ) % ) % ) % ( DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI