NISSAN MOTOR INDIA PRIVATE LIMITED,KANCHEEPURAM V. DCIT CORPORATE CIRCLE 4(2), CHENNAI

ITTPA 29/CHNY/2019

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The case involves M/s. Nissan Motor India Pvt. Ltd., which appealed against the order of the Assessing Officer concerning the transfer pricing adjustments made for the Assessment Year 2013-14. The primary issues revolved around the selection of comparables for benchmarking, the treatment of export incentives and subsidies, and the provision for warranty. The Tribunal found that the comparables selected by the Transfer Pricing Officer were functionally dissimilar and directed their exclusion. It was also determined that the export incentives and subsidies should be treated as operating income, and the provision for warranty should be allowed as an expense. The Tribunal's decision was based on the principles of fair assessment and the need to accurately reflect the economic realities of the transactions in question.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 126661 (ITAT-CHENNAI)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 23-04-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2013-2014
• Other Referred Cases: DCIT Vs. Atmel R&D India (P) Ltd., NTPC Ltd vs. CIT, Welspun Zucchi Textiles Ltd vs. CIT, Infrasoft Ltd vs. DIT, Rotorks Control (I) Ltd vs. CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A. SASIKUMAR
• Assessee Lawyers: AJIT TOLANI
• Keywords: Set aside; Business income; Revised return; Transfer pricing; International transaction; TDS; Double taxation relief
• Section: 143(3); 195; 13; 40(a)(ia); 20

Judgement Text

"आयकर अपीलीय अिधकरण, ’डी’\u0001यायपीठ, चे ई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘D’ BENCH: CHENNAI \u0001ी एबी टी. वक , ाियक सद\u0011 एवं एवं एवं एवं \u0001ी अिमताभ शु\u0018ा, लेखा सद क े सम\u001b BEFORE SHRI ABY T. VARKEY, JUDICIAL MEMBER AND SHRI AMITABH SHUKLA, ACCOUNTANT MEMBER IT (TP) A No.29/Chny/2019 िनधा\u000eरण वष\u000e/Assessment Year: 2013-14 M/s. Nissan Motor India Pvt. Ltd., Plot No.1A, SIPCOT Industrial Park, Mattur Post, Oragadam, Sriperumbudur, Kanchipuram District, Tamil Nadu-602 105. v. The DCIT, Corporate Circle-4(2), Chennai. [PAN: AACCN 0695 D] (अपीलाथ\u0016/Appellant) (\u0017\u0018यथ\u0016/Respondent) अपीलाथ\u0016 क\u001a ओर से/ Appellant by : Mr.Ajit Tolani, Advocate & Mr. Darpan Kirpalani, Advocate (Virtual) \u0017\u0018यथ\u0016 क\u001a ओर से /Respondent by : Mr. A. Sasikumar, CIT सुनवाई क\u001a तारीख/Date of Hearing : 28.03.2025 घोषणा क\u001a तारीख /Date of Pronouncement : 23.04.2025 आदेश / O R D E R PER ABY T. VARKEY, JM: This is an appeal preferred by the assessee against the order of the Assessing Office passed under Section 143(3)/144C(13) of the Income Tax Act, 1961 (hereinafter in short ‘the Act’) dated 21.01.2019 for Assessment Year 2013-14 (hereinafter in short ‘AY’) pursuant to the DRP directions dated 10.01.2019. 2. Grounds of appeal raised by the assessee are as under: The grounds of appeal listed below are independent and without prejudice to each other. 1. GENERAL GROUND 1.1. The lower authorities had, in the facts and circumstances of the case, erred in passing orders with u of the Appellant by misapplying the provisions of the Act, by adopting faulty assessment procedure to finalize the adjustment, such as, but not limited to, rejection of transfer pricing study, analysis of the f Appellant and those of the comparable companies, selection of inappropriate comparables, erroneous accounting treatment of certain items, erroneous computation of profit margins of the comparable companies and not granting appropriate economic adjustments. 2. TRANSFER PRICING ADJUSTMENT AND AFTER-SALES SEGMENT 21. The lower authorities had erred in the facts and circumstances of the case and in law, in making an upward adjustment to the Appellant's inter transactions in the Cars and After 2.2 Segmentation between Export and Domestic Segment 2.2.1. The lower authorities had erred in the facts and circumstances of the case and in law, by not appreciating the fact that net margins of t in the exports segment is higher than the net margins of the comparables selected by the lower authorities and hence at arm's length. 2.2.2. The lower authorities had erred in the facts and circumstances of the case and in law, by erroneously submitted in relation to the segmentation between the export and domestic profitability of the Appellant 2.3. Comparables adopted by the lower authorities 2.3.1. The lower authorities had erred in the facts and circu case and in law, in considering companies engaged in the manufacture of commercial vehicles and two wheelers for benchmarking the Appellant's international transactions, which were in fact rejected by the Transfer Pricing Officer (TPO) himself to be non 2.3.2. The lower authorities had erred in the facts and circumstances of the case and in law, in undertaking a fresh search process using irrelevant parameters for determination of ALP of the Appellant's int transactions, and not providing the details of the search conducted and filters adopted in identifying comparable companies, which amounts to cherry picking of companies 2.4 Computation of net margins of the Appellant 2.4.1. The lower authoritie case and in law, in treating the Investment Promotion Subsidy ('IPS') incentive as a non-operating item and excluding the same in computing the net IT (TP) A No.29/Chny/201 M/s. Nissan Motor India Pvt. Ltd. :: 2 :: appeal raised by the assessee are as under: The grounds of appeal listed below are independent and without prejudice to 1.1. The lower authorities had, in the facts and circumstances of the case, erred in passing orders with unwarranted adjustments to the reported income of the Appellant by misapplying the provisions of the Act, by adopting faulty assessment procedure to finalize the adjustment, such as, but not limited to, rejection of transfer pricing study, analysis of the functions carried out by the Appellant and those of the comparable companies, selection of inappropriate comparables, erroneous accounting treatment of certain items, erroneous computation of profit margins of the comparable companies and not granting priate economic adjustments. 2. TRANSFER PRICING ADJUSTMENT-UPWARD ADJUSTMENT IN CARS SALES SEGMENT 21. The lower authorities had erred in the facts and circumstances of the case and in law, in making an upward adjustment to the Appellant's inter transactions in the Cars and After-Sales segment. 2.2 Segmentation between Export and Domestic Segment 2.2.1. The lower authorities had erred in the facts and circumstances of the case and in law, by not appreciating the fact that net margins of the Appellant in the exports segment is higher than the net margins of the comparables selected by the lower authorities and hence at arm's length. 2.2.2. The lower authorities had erred in the facts and circumstances of the case and in law, by erroneously rejecting the independent certification submitted in relation to the segmentation between the export and domestic profitability of the Appellant 3. Comparables adopted by the lower authorities 2.3.1. The lower authorities had erred in the facts and circumstances of the case and in law, in considering companies engaged in the manufacture of commercial vehicles and two wheelers for benchmarking the Appellant's international transactions, which were in fact rejected by the Transfer Pricing elf to be non-comparable in the subsequent year. 2.3.2. The lower authorities had erred in the facts and circumstances of the case and in law, in undertaking a fresh search process using irrelevant parameters for determination of ALP of the Appellant's international transactions, and not providing the details of the search conducted and filters adopted in identifying comparable companies, which amounts to cherry picking 2.4 Computation of net margins of the Appellant 2.4.1. The lower authorities had erred in the facts and circumstances of the case and in law, in treating the Investment Promotion Subsidy ('IPS') incentive operating item and excluding the same in computing the net /Chny/2019 (AY 2013-14) M/s. Nissan Motor India Pvt. Ltd. appeal raised by the assessee are as under: The grounds of appeal listed below are independent and without prejudice to 1.1. The lower authorities had, in the facts and circumstances of the case, nwarranted adjustments to the reported income of the Appellant by misapplying the provisions of the Act, by adopting faulty assessment procedure to finalize the adjustment, such as, but not limited to, unctions carried out by the Appellant and those of the comparable companies, selection of inappropriate comparables, erroneous accounting treatment of certain items, erroneous computation of profit margins of the comparable companies and not granting UPWARD ADJUSTMENT IN CARS 21. The lower authorities had erred in the facts and circumstances of the case and in law, in making an upward adjustment to the Appellant's international 2.2.1. The lower authorities had erred in the facts and circumstances of the he Appellant in the exports segment is higher than the net margins of the comparables 2.2.2. The lower authorities had erred in the facts and circumstances of the rejecting the independent certification submitted in relation to the segmentation between the export and domestic mstances of the case and in law, in considering companies engaged in the manufacture of commercial vehicles and two wheelers for benchmarking the Appellant's international transactions, which were in fact rejected by the Transfer Pricing 2.3.2. The lower authorities had erred in the facts and circumstances of the case and in law, in undertaking a fresh search process using irrelevant ernational transactions, and not providing the details of the search conducted and filters adopted in identifying comparable companies, which amounts to cherry picking s had erred in the facts and circumstances of the case and in law, in treating the Investment Promotion Subsidy ('IPS') incentive operating item and excluding the same in computing the net operating margins of the Appellant without appreciating th incentive. 2.4.2. Without prejudice to other grounds, the lower authorities had erred in the facts and circumstances of the case and in law by considering IPS incentive as non-operating in nature for computation of the net margin of the App and not excluding it from the computation of taxable income. 2.4.3. The lower authorities had erred in the facts and circumstances of the case and in law, in treating export incentives as a non excluding the same in computing the without appreciating the nature of the incentive 2.4.4. The lower authorities had erred in the facts and circumstances of the case and in law, in treating the write non-operating in nature, in computing its operating margins, without understanding the real nature of the said items. 2.5 Rejection of benchmarking analysis and computation of Arm's length price (ALP) 2.5.1. Without prejudice to the above grounds, the lower authorit in the facts and circumstances of the case and in law, in rejecting the 'one economic unit approach adopted by the Appellant for determining the ALP of its international transactions, without appreciating its business model and other economic aspects of its business. 2.5.2 Without prejudice to the above grounds, the lower authorities had erred in the facts and circumstances of the case and in law, in rejecting the overseas tested party approach used to benchmark the import as well as export re international transactions in the Transfer Pricing study maintained by the Appellant, despite accepting the entrepreneurial functions and risk of the appellant, and not appreciating that a similar approach for benchmarking the imports was accepted in 2.6 Economic Adjustment 2.6.1. The lower authorities had erred in the facts and circumstances of the case and in law, in not granting appropriate adjustments for customs duty and working capital as envisaged under Rule 100 of the I (IT Rules) in determination of ALP of the Appellant's international transactions 2.7 Corresponding relief 2.7.1. The lower authorities had erred in the facts and circumstances of the case and in law, in not understanding the business imputing an adjustment in the case of the Appellant's domestic related party (Renault Nissan Automotive India Private Limited), and not providing a corresponding relief in relation to its transactions with the Appellant, which was in fact provided by the TPO himself in the subsequent year. 2.8 Other grounds 2.8.1. The lower authorities erred in the facts and circumstances of the case and in law, by rejecting the Indian benchmarking analysis (using Indian comparable companies) subm pricing assessment proceedings. IT (TP) A No.29/Chny/201 M/s. Nissan Motor India Pvt. Ltd. :: 3 :: operating margins of the Appellant without appreciating the nature of IPS 2.4.2. Without prejudice to other grounds, the lower authorities had erred in the facts and circumstances of the case and in law by considering IPS incentive operating in nature for computation of the net margin of the App and not excluding it from the computation of taxable income. 2.4.3. The lower authorities had erred in the facts and circumstances of the case and in law, in treating export incentives as a non-operating item and excluding the same in computing the net operating margins of the Appellant without appreciating the nature of the incentive 2.4.4. The lower authorities had erred in the facts and circumstances of the case and in law, in treating the write-back of provisions no longer required as ing in nature, in computing its operating margins, without understanding the real nature of the said items. 2.5 Rejection of benchmarking analysis and computation of Arm's 2.5.1. Without prejudice to the above grounds, the lower authorities had erred in the facts and circumstances of the case and in law, in rejecting the 'one economic unit approach adopted by the Appellant for determining the ALP of its international transactions, without appreciating its business model and aspects of its business. 2.5.2 Without prejudice to the above grounds, the lower authorities had erred in the facts and circumstances of the case and in law, in rejecting the overseas tested party approach used to benchmark the import as well as export re international transactions in the Transfer Pricing study maintained by the Appellant, despite accepting the entrepreneurial functions and risk of the appellant, and not appreciating that a similar approach for benchmarking the imports was accepted in a previous year by TPO. 2.6 Economic Adjustment 2.6.1. The lower authorities had erred in the facts and circumstances of the case and in law, in not granting appropriate adjustments for customs duty and working capital as envisaged under Rule 100 of the Income Tax Rules, 1962 (IT Rules) in determination of ALP of the Appellant's international transactions 2.7 Corresponding relief 2.7.1. The lower authorities had erred in the facts and circumstances of the case and in law, in not understanding the business model of the Appellant, by imputing an adjustment in the case of the Appellant's domestic related party (Renault Nissan Automotive India Private Limited), and not providing a corresponding relief in relation to its transactions with the Appellant, which s in fact provided by the TPO himself in the subsequent year. 2.8.1. The lower authorities erred in the facts and circumstances of the case and in law, by rejecting the Indian benchmarking analysis (using Indian comparable companies) submitted by the Appellant as part of the transfer pricing assessment proceedings. /Chny/2019 (AY 2013-14) M/s. Nissan Motor India Pvt. Ltd. e nature of IPS 2.4.2. Without prejudice to other grounds, the lower authorities had erred in the facts and circumstances of the case and in law by considering IPS incentive operating in nature for computation of the net margin of the Appellant, 2.4.3. The lower authorities had erred in the facts and circumstances of the operating item and net operating margins of the Appellant 2.4.4. The lower authorities had erred in the facts and circumstances of the back of provisions no longer required as ing in nature, in computing its operating margins, without 2.5 Rejection of benchmarking analysis and computation of Arm's ies had erred in the facts and circumstances of the case and in law, in rejecting the 'one economic unit approach adopted by the Appellant for determining the ALP of its international transactions, without appreciating its business model and 2.5.2 Without prejudice to the above grounds, the lower authorities had erred in the facts and circumstances of the case and in law, in rejecting the overseas tested party approach used to benchmark the import as well as export related international transactions in the Transfer Pricing study maintained by the Appellant, despite accepting the entrepreneurial functions and risk of the appellant, and not appreciating that a similar approach for benchmarking the 2.6.1. The lower authorities had erred in the facts and circumstances of the case and in law, in not granting appropriate adjustments for customs duty and ncome Tax Rules, 1962 (IT Rules) in determination of ALP of the Appellant's international transactions 2.7.1. The lower authorities had erred in the facts and circumstances of the model of the Appellant, by imputing an adjustment in the case of the Appellant's domestic related party (Renault Nissan Automotive India Private Limited), and not providing a corresponding relief in relation to its transactions with the Appellant, which 2.8.1. The lower authorities erred in the facts and circumstances of the case and in law, by rejecting the Indian benchmarking analysis (using Indian itted by the Appellant as part of the transfer 3. DEDUCTIBILITY OF PROVISION FOR WARRANTY CREATED IN BOOKS OF ACCOUNTS 3.1 The lower authorities erred in the facts and circumstances of the case and in law, in not allowing accounted by the Appellant, stating that the same is not consistent on a year on year basis. 3.2 The lower authorities erred in the facts and circumstances of the case and in law, in not appreciating the Appellant in relation to creation of provision for warranty and erred in concluding that the quantum of provision is in excess, without demonstrating any reasons as to why the same is found to be excessive. 3.3 The lower authorities also erred in the facts and circumstances of the case and in law, in distinguishing the judicial precedents relied upon by the Appellant by stating that the same may not apply since the Appellant has engaged some other concern for appreciating that contractually, the Appellant is liable for any claim that arises on account of product warranty 3.4. The lower authorities erred in the facts and circumstances of the case and in law, in disregarding the computation adopted by the Appellant for arriving at the amount of provision and instead determining the quantum of provision as an average of the provision for 5 years on an adhoc basis 4. APPLICABILITY OF WITHHOLDING TAX ON PAYMENTS MADE FOR SOFTWARE CHARGES 4.1. The lower authorities erred in the facts and circumstances of the case and in law, in treating the payments made for software charges by the Appellant to tax resident of Japan to be in the nature of 'Royalty and thus, subject to withholding taxes under the provisions of the Income 4.2 The lower authorities erred in the facts and circumstances of the case and in law, in failing to appreciate that the Appellant has the option of availing of the provisions of the relevant tax trea than the provisions of the income 4.3. The lower authorities erred in the facts and circumstances of the case and in law, in failing to appreciate that the payment made by the Appellant towards software charges does not envisage the transfer of any right in the nature of copyright or similar nature in relation to the software. Consequently, the same would not be covered as 'Royalty' under the India 4.4 The lower authorities erred in the in law, in failing to appreciate that the payment by the Appellant is merely acquiring a copy of the computer programme and cannot be treated as a payment for the \"right to use the copyright in computer programme. 4.5. Further, the lower authorities failed to appreciate that the payment made by the Appellant to the non of business income which would be liable to tax in India only on the constitution of a PE of the non non-resident in India, the subject payment is not liable to withholding tax in India IT (TP) A No.29/Chny/201 M/s. Nissan Motor India Pvt. Ltd. :: 4 :: 3. DEDUCTIBILITY OF PROVISION FOR WARRANTY CREATED IN BOOKS OF ACCOUNTS 3.1 The lower authorities erred in the facts and circumstances of the case and in law, in not allowing deduction in respect of the provision for warranty accounted by the Appellant, stating that the same is not consistent on a year 3.2 The lower authorities erred in the facts and circumstances of the case and in law, in not appreciating the scientific and consistent basis followed by the Appellant in relation to creation of provision for warranty and erred in concluding that the quantum of provision is in excess, without demonstrating any reasons as to why the same is found to be excessive. .3 The lower authorities also erred in the facts and circumstances of the case and in law, in distinguishing the judicial precedents relied upon by the Appellant by stating that the same may not apply since the Appellant has engaged some other concern for the manufacturing of the goods without appreciating that contractually, the Appellant is liable for any claim that arises on account of product warranty 3.4. The lower authorities erred in the facts and circumstances of the case and the computation adopted by the Appellant for arriving at the amount of provision and instead determining the quantum of provision as an average of the provision for 5 years on an adhoc basis 4. APPLICABILITY OF WITHHOLDING TAX ON PAYMENTS MADE FOR E CHARGES 4.1. The lower authorities erred in the facts and circumstances of the case and in law, in treating the payments made for software charges by the Appellant to tax resident of Japan to be in the nature of 'Royalty and thus, subject to taxes under the provisions of the Income-tax Act, 1961. 4.2 The lower authorities erred in the facts and circumstances of the case and in law, in failing to appreciate that the Appellant has the option of availing of the provisions of the relevant tax treaty where the same are more beneficial than the provisions of the income-tax Act, 1961. 4.3. The lower authorities erred in the facts and circumstances of the case and in law, in failing to appreciate that the payment made by the Appellant charges does not envisage the transfer of any right in the nature of copyright or similar nature in relation to the software. Consequently, the same would not be covered as 'Royalty' under the India-Japan tax treaty. 4.4 The lower authorities erred in the facts and circumstances of the case and in law, in failing to appreciate that the payment by the Appellant is merely acquiring a copy of the computer programme and cannot be treated as a payment for the \"right to use the copyright in computer programme. 5. Further, the lower authorities failed to appreciate that the payment made by the Appellant to the non-resident for purchase of software is in the nature of business income which would be liable to tax in India only on the constitution of a PE of the non-resident. Therefore, in the absence of PE of the resident in India, the subject payment is not liable to withholding tax in /Chny/2019 (AY 2013-14) M/s. Nissan Motor India Pvt. Ltd. 3. DEDUCTIBILITY OF PROVISION FOR WARRANTY CREATED IN 3.1 The lower authorities erred in the facts and circumstances of the case and deduction in respect of the provision for warranty accounted by the Appellant, stating that the same is not consistent on a year 3.2 The lower authorities erred in the facts and circumstances of the case and scientific and consistent basis followed by the Appellant in relation to creation of provision for warranty and erred in concluding that the quantum of provision is in excess, without demonstrating .3 The lower authorities also erred in the facts and circumstances of the case and in law, in distinguishing the judicial precedents relied upon by the Appellant by stating that the same may not apply since the Appellant has the manufacturing of the goods without appreciating that contractually, the Appellant is liable for any claim that arises 3.4. The lower authorities erred in the facts and circumstances of the case and the computation adopted by the Appellant for arriving at the amount of provision and instead determining the quantum of provision as 4. APPLICABILITY OF WITHHOLDING TAX ON PAYMENTS MADE FOR 4.1. The lower authorities erred in the facts and circumstances of the case and in law, in treating the payments made for software charges by the Appellant to tax resident of Japan to be in the nature of 'Royalty and thus, subject to 4.2 The lower authorities erred in the facts and circumstances of the case and in law, in failing to appreciate that the Appellant has the option of availing of ty where the same are more beneficial 4.3. The lower authorities erred in the facts and circumstances of the case and in law, in failing to appreciate that the payment made by the Appellant charges does not envisage the transfer of any right in the nature of copyright or similar nature in relation to the software. Consequently, Japan tax treaty. facts and circumstances of the case and in law, in failing to appreciate that the payment by the Appellant is merely acquiring a copy of the computer programme and cannot be treated as a 5. Further, the lower authorities failed to appreciate that the payment made resident for purchase of software is in the nature of business income which would be liable to tax in India only on the resident. Therefore, in the absence of PE of the resident in India, the subject payment is not liable to withholding tax in 4.6. Further, the lower authorities failed to appreciate the applicability of the principles upheld by jurisdictional cou Appellant. 4.7 Also, the lower authorities erred in not taking cognizance of Hon'ble Chennai ITAT ruling in the Appellant's own case for AY 2014 the context of applicability of withholding on the subje 5. REVERSAL OF PROVISIONS DISALLOWED IN EARLIER FINANCIAL YEARS 5.1. The Appellant wishes to submit that certain provisions were reversed to the Profit and Loss Account and reported as income in the books of accounts during the subject Financia income. These reversals relate to provisions created in the prior financial years where such provisions were disallowed in computing the income of the Appellant for income-tax purposes. The Appellant prays in respect of these provision reversals since the same has inadvertently not been claimed by the Appellant in the return of income or during the assessment proceedings and has led to income tax being charged on the same income twice The Appellant prays that directions be given to grant all such relief arising from the grounds of appeal mentioned supra and all consequential relief thereto. The Appellant craves leave to add to and/or to alter, amend, rescind, modify the grounds herein above or produce further documents before or at the time of hearing of this Appeal. 3. Before us, the Ld. AR placed on record, issue wise chart along with written submissions. Having heard the rival submissions and upon perusal of the case records, the appeal is disposed off as under. 4. Ground No.2 relates to the action of the lower author the transfer pricing adjustment to the extent of Rs.338.52 crores. The facts as noted are that, the assessee is an Indian subsidiary of the Nissan Group. The assessee is noted to be engaged in the distribution of Nissan branded cars in India, apart from exporting the same to its Associated Enterprises (hereinafter in short ‘AE’), for resale in other international markets. The modus operandi of the assessee’s business is that it domestically sources the automobile parts and components, which IT (TP) A No.29/Chny/201 M/s. Nissan Motor India Pvt. Ltd. :: 5 :: 4.6. Further, the lower authorities failed to appreciate the applicability of the principles upheld by jurisdictional courts in the precedents relied on by the 4.7 Also, the lower authorities erred in not taking cognizance of Hon'ble Chennai ITAT ruling in the Appellant's own case for AY 2014-15, rendered in the context of applicability of withholding on the subject payment. 5. REVERSAL OF PROVISIONS DISALLOWED IN EARLIER FINANCIAL 5.1. The Appellant wishes to submit that certain provisions were reversed to the Profit and Loss Account and reported as income in the books of accounts during the subject Financial Year 2012-13 and offered to tax in the return of income. These reversals relate to provisions created in the prior financial years where such provisions were disallowed in computing the income of the tax purposes. The Appellant prays that relief be granted in respect of these provision reversals since the same has inadvertently not been claimed by the Appellant in the return of income or during the assessment proceedings and has led to income tax being charged on the same The Appellant prays that directions be given to grant all such relief arising from the grounds of appeal mentioned supra and all consequential relief thereto. The Appellant craves leave to add to and/or to alter, amend, rescind, modify above or produce further documents before or at the time of hearing of this Appeal. Before us, the Ld. AR placed on record, issue wise chart along with written submissions. Having heard the rival submissions and upon perusal of the case records, the appeal is disposed off as under. relates to the action of the lower author the transfer pricing adjustment to the extent of Rs.338.52 crores. The facts as noted are that, the assessee is an Indian subsidiary of the Nissan Group. The assessee is noted to be engaged in the distribution of Nissan ia, apart from exporting the same to its Associated Enterprises (hereinafter in short ‘AE’), for resale in other international markets. The modus operandi of the assessee’s business is that it domestically sources the automobile parts and components, which /Chny/2019 (AY 2013-14) M/s. Nissan Motor India Pvt. Ltd. 4.6. Further, the lower authorities failed to appreciate the applicability of the rts in the precedents relied on by the 4.7 Also, the lower authorities erred in not taking cognizance of Hon'ble 15, rendered in 5. REVERSAL OF PROVISIONS DISALLOWED IN EARLIER FINANCIAL 5.1. The Appellant wishes to submit that certain provisions were reversed to the Profit and Loss Account and reported as income in the books of accounts 13 and offered to tax in the return of income. These reversals relate to provisions created in the prior financial years where such provisions were disallowed in computing the income of the that relief be granted in respect of these provision reversals since the same has inadvertently not been claimed by the Appellant in the return of income or during the assessment proceedings and has led to income tax being charged on the same The Appellant prays that directions be given to grant all such relief arising from the grounds of appeal mentioned supra and all consequential relief thereto. The Appellant craves leave to add to and/or to alter, amend, rescind, modify above or produce further documents before or at the time Before us, the Ld. AR placed on record, issue wise chart along with written submissions. Having heard the rival submissions and upon perusal relates to the action of the lower authorities confirming the transfer pricing adjustment to the extent of Rs.338.52 crores. The facts as noted are that, the assessee is an Indian subsidiary of the Nissan Group. The assessee is noted to be engaged in the distribution of Nissan ia, apart from exporting the same to its Associated Enterprises (hereinafter in short ‘AE’), for resale in other international markets. The modus operandi of the assessee’s business is that it domestically sources the automobile parts and components, which is exported to its AEs as well. The assessee is noted to have benchmarked the transactions with the AEs by applying internal TNMM Method. The Transfer Pricing Officer( provided by the assessee and instead c the entity level and compared the same with the operating margins of comparable entities identified by him. The TPO is noted to have computed the PLI of the assessee comparables chosen by the TPO and their margins as computed, are noted to be as follows: 5. It is noted that, the Ld. DRP upheld the comparables chosen by the TPO and also rejected the objections raised by the assessee to the computation of its PLI. Aggrieved by the said in appeal before us. 6. The Ld. AR of the assessee had set out two different lines of arguments agitating the impugned transfer pricing adjustment. The first IT (TP) A No.29/Chny/201 M/s. Nissan Motor India Pvt. Ltd. :: 6 :: exported to its AEs as well. The assessee is noted to have benchmarked the transactions with the AEs by applying internal TNMM Method. The Transfer Pricing Officer(TPO) is noted to have rejected the segmental data provided by the assessee and instead computed the operating margin at the entity level and compared the same with the operating margins of comparable entities identified by him. The TPO is noted to have computed the PLI of the assessee viz., OP/OC at 6.23%. Against this, the n by the TPO and their margins as computed, are It is noted that, the Ld. DRP upheld the comparables chosen by the TPO and also rejected the objections raised by the assessee to the computation of its PLI. Aggrieved by the said order, the assessee is now The Ld. AR of the assessee had set out two different lines of arguments agitating the impugned transfer pricing adjustment. The first /Chny/2019 (AY 2013-14) M/s. Nissan Motor India Pvt. Ltd. exported to its AEs as well. The assessee is noted to have benchmarked the transactions with the AEs by applying internal TNMM Method. The is noted to have rejected the segmental data omputed the operating margin at the entity level and compared the same with the operating margins of comparable entities identified by him. The TPO is noted to have computed Against this, the n by the TPO and their margins as computed, are It is noted that, the Ld. DRP upheld the comparables chosen by the TPO and also rejected the objections raised by the assessee to the order, the assessee is now The Ld. AR of the assessee had set out two different lines of arguments agitating the impugned transfer pricing adjustment. The first line of argument of the Ld. AR was in support of the Study conducted by the assessee and the segmental workings as well as the application of internal TNMM. In the second alternative approach, the Ld. AR submitted that, some of the comparables identified by the TPO were functionally dissimilar and that if t and at the same time, the apparent infirmities made by th computation of the assessee’s PLI is considered, then the operating margins of the assessee would be higher than the operating margins of the comparables identified by the length test. Per contra, the Ld. CIT, DR supported the orders of the lower authorities. 7. Heard both the parties. Having considered the rival contentions placed before us, we first deem it fit to take up the second line of argument of the assessee for adjudication. The Ld. AR of the assessee had pointed out that, out of the above five (5) compa the TPO, three (3) comparables viz., M/s Ashok Leyland Limited, M/s Eicher Motors Ltd. and M/s VE Commercials Ltd., had been rejected by the TPO himself, holding it to be functionally dissimilar in the subsequent years. It is noted that, the TPO had conducted a broad base search during the year and had included companies engaged in manufacture of commercial vehicles viz., heavy trucks, heavy duty vehicles etc. According to us, the assessee has rightly pointed out that, these three compa IT (TP) A No.29/Chny/201 M/s. Nissan Motor India Pvt. Ltd. :: 7 :: line of argument of the Ld. AR was in support of the Transfer Pricing Study conducted by the assessee and the segmental workings as well as the application of internal TNMM. In the second alternative approach, the Ld. AR submitted that, some of the comparables identified by the TPO were functionally dissimilar and that if the said comparables are excluded and at the same time, the apparent infirmities made by th computation of the assessee’s PLI is considered, then the operating margins of the assessee would be higher than the operating margins of identified by the TPO and thus would satisfy the arm’s length test. Per contra, the Ld. CIT, DR supported the orders of the lower Heard both the parties. Having considered the rival contentions placed before us, we first deem it fit to take up the second line of argument of the assessee for adjudication. The Ld. AR of the assessee had pointed out that, out of the above five (5) comparables identified by the TPO, three (3) comparables viz., M/s Ashok Leyland Limited, M/s Eicher Motors Ltd. and M/s VE Commercials Ltd., had been rejected by the TPO himself, holding it to be functionally dissimilar in the subsequent t, the TPO had conducted a broad base search during the year and had included companies engaged in manufacture of commercial vehicles viz., heavy trucks, heavy duty vehicles etc. According to us, the assessee has rightly pointed out that, these three compa /Chny/2019 (AY 2013-14) M/s. Nissan Motor India Pvt. Ltd. Transfer Pricing Study conducted by the assessee and the segmental workings as well as the application of internal TNMM. In the second alternative approach, the Ld. AR submitted that, some of the comparables identified by the TPO he said comparables are excluded and at the same time, the apparent infirmities made by the TPO in the computation of the assessee’s PLI is considered, then the operating margins of the assessee would be higher than the operating margins of TPO and thus would satisfy the arm’s length test. Per contra, the Ld. CIT, DR supported the orders of the lower Heard both the parties. Having considered the rival contentions placed before us, we first deem it fit to take up the second line of argument of the assessee for adjudication. The Ld. AR of the assessee rables identified by the TPO, three (3) comparables viz., M/s Ashok Leyland Limited, M/s Eicher Motors Ltd. and M/s VE Commercials Ltd., had been rejected by the TPO himself, holding it to be functionally dissimilar in the subsequent t, the TPO had conducted a broad base search during the year and had included companies engaged in manufacture of commercial vehicles viz., heavy trucks, heavy duty vehicles etc. According to us, the assessee has rightly pointed out that, these three companies, which were engaged in manufacture of commercial vehicles were functionally dissimilar to the assessee’s operations/activities in consumer automobiles as they operate in different economic markets and thus making them incomparable. We also note that t comparables had been categorically rejected by the TPO himself in his orders passed u/s 92CA(3) of the Act for AYs 2014 of which have been placed before us at Page Nos. 624, 664 and 665 of the Paper-book. Having taken no the assessee that, when the Revenue itself has held these three companies to be functionally dissimilar in the subsequent years, then it would be unjustified to retain them as comparables in the relevant year. Accordingly, the TPO/AO is directed to exclude these three (3) comparables while computing the comparable PLI. 8. The next plea of the assessee was on the manner of computation of its PLI by the TPO. According to the assessee, the TPO had erred in treating the export incentives and the provisions written back as non operating in nature. We first take up the item of export incentives and subsidies received under the IPS Scheme. The assessee has pointed out that, these incentives/subsidies were received in the co purposes of business, and were also assessed to tax as business income being intrinsically related with the business operations of the assessee. It is observed that this Tribunal at Bangalore in the case of IT (TP) A No.29/Chny/201 M/s. Nissan Motor India Pvt. Ltd. :: 8 :: which were engaged in manufacture of commercial vehicles were functionally dissimilar to the assessee’s operations/activities in consumer automobiles as they operate in different economic markets and thus making them incomparable. We also note that these three (3) comparables had been categorically rejected by the TPO himself in his orders passed u/s 92CA(3) of the Act for AYs 2014-15 & 2015 of which have been placed before us at Page Nos. 624, 664 and 665 of book. Having taken note of the same, we are in agreement with the assessee that, when the Revenue itself has held these three companies to be functionally dissimilar in the subsequent years, then it would be unjustified to retain them as comparables in the relevant year. dingly, the TPO/AO is directed to exclude these three (3) comparables while computing the comparable PLI. The next plea of the assessee was on the manner of computation of its PLI by the TPO. According to the assessee, the TPO had erred in export incentives and the provisions written back as non operating in nature. We first take up the item of export incentives and subsidies received under the IPS Scheme. The assessee has pointed out subsidies were received in the course and for the and were also assessed to tax as business income being intrinsically related with the business operations of the assessee. It is observed that this Tribunal at Bangalore in the case of /Chny/2019 (AY 2013-14) M/s. Nissan Motor India Pvt. Ltd. which were engaged in manufacture of commercial vehicles were functionally dissimilar to the assessee’s operations/activities in consumer automobiles as they operate in different economic markets and thus hese three (3) comparables had been categorically rejected by the TPO himself in his 15 & 2015-16, copies of which have been placed before us at Page Nos. 624, 664 and 665 of te of the same, we are in agreement with the assessee that, when the Revenue itself has held these three companies to be functionally dissimilar in the subsequent years, then it would be unjustified to retain them as comparables in the relevant year. dingly, the TPO/AO is directed to exclude these three (3) The next plea of the assessee was on the manner of computation of its PLI by the TPO. According to the assessee, the TPO had erred in export incentives and the provisions written back as non- operating in nature. We first take up the item of export incentives and subsidies received under the IPS Scheme. The assessee has pointed out urse and for the and were also assessed to tax as business income being intrinsically related with the business operations of the assessee. It is observed that this Tribunal at Bangalore in the case of Reitzel India Pvt Ltd vs. DCIT (IT(TP) No.2341/Bang/2019 the export incentives and subsidies ought to be treated as operating income, for the purposes of computation of PLI. The relevant findings taken note of is as follows: “11. The issue relating to export incenti of operating income or not has since been settled by Hon'ble Bombay High Court in the case of Welspun Zucchi Textiles Ltd (supra). Accordingly, we direct the AO/TPO to consider export incentives as part of operating income. processing of gherkins, we do not find any reason not to consider it as part of operating profit. Accordingly, we direct the AO/TPO to take scrap sales as part of operating income, if the scrap is generated dur its business activities. 9. It is also noted that the TPO himself has treated such export incentives and subsidies to be an operating item of income, for the purposes of computing the operating margins of the assessee as well as the comparables, in the subsequent AYs 2014 regard to the above decision (supra) and the fact that the TPO in assessee’s own case has also treated the export incentives and subsidies to be an operating item of income in the later years, the AO directed to rework the PLI of the assessee as well as the comparables, after considering the export incentive and IPS subsidies to be as an operating item of income. 10. Now we take up the treatment of item of provisions written back in the P&L Account. It is observed that, for computing the operating margins, on the given facts of the case, the assessee had treated the IT (TP) A No.29/Chny/201 M/s. Nissan Motor India Pvt. Ltd. :: 9 :: IT(TP) No.2341/Bang/2019) has also held that, the export incentives and subsidies ought to be treated as operating income, for the purposes of computation of PLI. The relevant findings taken note of is as follows: 11. The issue relating to export incentives, i.e., whether they are part of operating income or not has since been settled by Hon'ble Bombay High Court in the case of Welspun Zucchi Textiles Ltd (supra). Accordingly, we direct the AO/TPO to consider export incentives as part of operating income. If scraps are generated during the course of processing of gherkins, we do not find any reason not to consider it as part of operating profit. Accordingly, we direct the AO/TPO to take scrap sales as part of operating income, if the scrap is generated dur its business activities. “ It is also noted that the TPO himself has treated such export incentives and subsidies to be an operating item of income, for the purposes of computing the operating margins of the assessee as well as s, in the subsequent AYs 2014-15 and 2015 regard to the above decision (supra) and the fact that the TPO in assessee’s own case has also treated the export incentives and subsidies to be an operating item of income in the later years, the AO directed to rework the PLI of the assessee as well as the comparables, after considering the export incentive and IPS subsidies to be as an operating item of income. Now we take up the treatment of item of provisions written back in t. It is observed that, for computing the operating margins, on the given facts of the case, the assessee had treated the /Chny/2019 (AY 2013-14) M/s. Nissan Motor India Pvt. Ltd. has also held that, the export incentives and subsidies ought to be treated as operating income, for the purposes of computation of PLI. The relevant findings ves, i.e., whether they are part of operating income or not has since been settled by Hon'ble Bombay High Court in the case of Welspun Zucchi Textiles Ltd (supra). Accordingly, we direct the AO/TPO to consider export incentives as part If scraps are generated during the course of processing of gherkins, we do not find any reason not to consider it as part of operating profit. Accordingly, we direct the AO/TPO to take scrap sales as part of operating income, if the scrap is generated during out of It is also noted that the TPO himself has treated such export incentives and subsidies to be an operating item of income, for the purposes of computing the operating margins of the assessee as well as 15 and 2015-16. Having regard to the above decision (supra) and the fact that the TPO in assessee’s own case has also treated the export incentives and subsidies to be an operating item of income in the later years, the AO/TPO is directed to rework the PLI of the assessee as well as the comparables, after considering the export incentive and IPS subsidies to be as an Now we take up the treatment of item of provisions written back in t. It is observed that, for computing the operating margins, on the given facts of the case, the assessee had treated the provisions written back as a part of operating income and the TPO also had accepted the same. The Ld. DRP however is noted to have enhanced the assessment by treating the provisions written non-operating item of income. Before us, the Ld. AR for the assessee showed us that the provisions were created in relation to the operating expenses/activities of the company. It w when these provisions were created in the earlier years, they were treated as an item of operating expense and the same was accepted by the Revenue as well. He thus contended that, when the same provisions have now been written back, it ought to be treated as an item of operating income, as a matter of parity. He further showed us that, though the Ld. DRP excluded the provisions written back as an item of operating income while computing the PLI of the assessee, but the provisions written back, in the case of comparables, was considered as an operating income by the Ld. DRP. This, according to the assesse the inconsistent stand taken by the Ld. DRP in as much as the Ld. DRP had arbitrarily disturbed the settled consistent position which was permeating through the years. Having regard to these peculiar facts of the case, and the fact that these provisions related to the operating expenses of the assessee, we direct the AO to rework the PLI o assessee as well as the comparables, after considering the provisions written back as an operating item of income, for the computation of PLI. IT (TP) A No.29/Chny/201 M/s. Nissan Motor India Pvt. Ltd. :: 10 :: provisions written back as a part of operating income and the TPO also had accepted the same. The Ld. DRP however is noted to have enhanced the assessment by treating the provisions written operating item of income. Before us, the Ld. AR for the assessee showed us that the provisions were created in relation to the operating activities of the company. It was brought to our notice that, when these provisions were created in the earlier years, they were treated as an item of operating expense and the same was accepted by the Revenue as well. He thus contended that, when the same provisions en back, it ought to be treated as an item of operating income, as a matter of parity. He further showed us that, though the Ld. DRP excluded the provisions written back as an item of operating income while computing the PLI of the assessee, but the ions written back, in the case of comparables, was considered as an operating income by the Ld. DRP. This, according to the assesse the inconsistent stand taken by the Ld. DRP in as much as the Ld. DRP disturbed the settled consistent position which was permeating through the years. Having regard to these peculiar facts of the case, and the fact that these provisions related to the operating expenses of the assessee, we direct the AO to rework the PLI o assessee as well as the comparables, after considering the provisions written back as an operating item of income, for the computation of PLI. /Chny/2019 (AY 2013-14) M/s. Nissan Motor India Pvt. Ltd. provisions written back as a part of operating income and the TPO also had accepted the same. The Ld. DRP however is noted to have suo-moto enhanced the assessment by treating the provisions written-back as a operating item of income. Before us, the Ld. AR for the assessee showed us that the provisions were created in relation to the operating as brought to our notice that, when these provisions were created in the earlier years, they were treated as an item of operating expense and the same was accepted by the Revenue as well. He thus contended that, when the same provisions en back, it ought to be treated as an item of operating income, as a matter of parity. He further showed us that, though the Ld. DRP excluded the provisions written back as an item of operating income while computing the PLI of the assessee, but the ions written back, in the case of comparables, was considered as an operating income by the Ld. DRP. This, according to the assessee, showed the inconsistent stand taken by the Ld. DRP in as much as the Ld. DRP disturbed the settled consistent position which was permeating through the years. Having regard to these peculiar facts of the case, and the fact that these provisions related to the operating expenses of the assessee, we direct the AO to rework the PLI of the assessee as well as the comparables, after considering the provisions written back as an operating item of income, for the computation of PLI. 11. In light of the above directions, we thus allow the alternate plea of the assessee for statistical purp raised by the assessee supporting its transfer pricing study in relation to application of internal TNMM based on their segmental results, has become academic in nature, and is therefore not being separately adjudicated upon. This ground is therefore allowed for statistical purposes. 12. Ground No.3 of the appeal relates to the disallowance of the provisions for warranty to the extent of Rs.45.77 crores. The facts as noted are that, the assessee had made a provision account of provision for warranties in relation to its domestic and export sales. In the course of assessment, the assessee is noted to have submitted the basis of arriving at the provision for warranty along with the granular level break 547 of the Paper Book. It was the regular contractual warranty for the year worked out to Rs.46.56 crores, but a further additional warranty of Rs.99.17 due to the global recall campaign of their Nissan Micra and Sunny Model cars due to the brake and oil pump fault found across their sales. For this, the assessee is also noted to have placed the news article covering this extraordinary event of their global recall campaign, which is found placed at Pages 545 to 546 of the Paper Book. The AO however is noted to have IT (TP) A No.29/Chny/201 M/s. Nissan Motor India Pvt. Ltd. :: 11 :: In light of the above directions, we thus allow the alternate plea of the assessee for statistical purposes. Accordingly, the primary contention raised by the assessee supporting its transfer pricing study in relation to application of internal TNMM based on their segmental results, has become academic in nature, and is therefore not being separately cated upon. This ground is therefore allowed for statistical Ground No.3 of the appeal relates to the disallowance of the provisions for warranty to the extent of Rs.45.77 crores. The facts as noted are that, the assessee had made a provision of Rs.145.73 crores on account of provision for warranties in relation to its domestic and export sales. In the course of assessment, the assessee is noted to have submitted the basis of arriving at the provision for warranty along with break-up, copy of which is found placed at Pages 536 to 547 of the Paper Book. It was inter alia explained therein that, ordinarily the regular contractual warranty for the year worked out to Rs.46.56 but a further additional warranty of Rs.99.17 crores was provided due to the global recall campaign of their Nissan Micra and Sunny Model cars due to the brake and oil pump fault found across their sales. For this, the assessee is also noted to have placed the news article covering this event of their global recall campaign, which is found placed at Pages 545 to 546 of the Paper Book. The AO however is noted to have /Chny/2019 (AY 2013-14) M/s. Nissan Motor India Pvt. Ltd. In light of the above directions, we thus allow the alternate plea of oses. Accordingly, the primary contention raised by the assessee supporting its transfer pricing study in relation to application of internal TNMM based on their segmental results, has become academic in nature, and is therefore not being separately cated upon. This ground is therefore allowed for statistical Ground No.3 of the appeal relates to the disallowance of the provisions for warranty to the extent of Rs.45.77 crores. The facts as of Rs.145.73 crores on account of provision for warranties in relation to its domestic and export sales. In the course of assessment, the assessee is noted to have submitted the basis of arriving at the provision for warranty along with up, copy of which is found placed at Pages 536 to explained therein that, ordinarily the regular contractual warranty for the year worked out to Rs.46.56 crores was provided due to the global recall campaign of their Nissan Micra and Sunny Model cars due to the brake and oil pump fault found across their sales. For this, the assessee is also noted to have placed the news article covering this event of their global recall campaign, which is found placed at Pages 545 to 546 of the Paper Book. The AO however is noted to have questioned the increased quantum of provision for warranty created during the year. The AO is found to have analyzed the per warranty created and utilized for the period 2011 observed that the provision created during the year was excessive. Taking the average of the provision made for the past five (5) financial years, the AO observed that the reaso Rs.99.96 crores and therefore disallowed the impugned sum of Rs.45.77 crores [Rs.145.73 minus during the year. On appeal, the Ld. DRP supported the order of the AO. Aggrieved by the order of the lower authorities, the assessee is now in appeal before us. 13. Heard both the parties. Before adverting to the facts of this issue, we first take note of the settled legal position. It is observed that the Hon’ble Apex Court in the (180 taxman 422) has held that the provision for warranty is an allowable item, only if the liability is measured using a substantial degree of estimation. According to the Hon’ble Supreme Court, the provision for warranty is to be allowed if the assessee is able to satisfy three (3) conditions, viz. (a) an enterprise has a present obligation as a result of a past event; (b) it is probable that an outflow of resources will be required to settle the obligation; and (c IT (TP) A No.29/Chny/201 M/s. Nissan Motor India Pvt. Ltd. :: 12 :: questioned the increased quantum of provision for warranty created during the year. The AO is found to have analyzed the per warranty created and utilized for the period 2011-12 to 2015 observed that the provision created during the year was excessive. Taking the average of the provision made for the past five (5) financial years, the AO observed that the reasonable provision for warranty ought to be Rs.99.96 crores and therefore disallowed the impugned sum of Rs.45.77 minus Rs.99.66] by way of excess provision made during the year. On appeal, the Ld. DRP supported the order of the AO. d by the order of the lower authorities, the assessee is now in Heard both the parties. Before adverting to the facts of this issue, we first take note of the settled legal position. It is observed that the Hon’ble Apex Court in the case of Rotorks Control (I) Ltd. vs. CIT has held that the provision for warranty is an allowable item, only if the liability is measured using a substantial degree of estimation. According to the Hon’ble Supreme Court, the provision for arranty is to be allowed if the assessee is able to satisfy three (3) (a) an enterprise has a present obligation as a result of a past event; (b) it is probable that an outflow of resources will be required o settle the obligation; and (c) a reliable estimate can be made of the /Chny/2019 (AY 2013-14) M/s. Nissan Motor India Pvt. Ltd. questioned the increased quantum of provision for warranty created during the year. The AO is found to have analyzed the percentage of 12 to 2015-16 and observed that the provision created during the year was excessive. Taking the average of the provision made for the past five (5) financial years, the nable provision for warranty ought to be Rs.99.96 crores and therefore disallowed the impugned sum of Rs.45.77 Rs.99.66] by way of excess provision made during the year. On appeal, the Ld. DRP supported the order of the AO. d by the order of the lower authorities, the assessee is now in Heard both the parties. Before adverting to the facts of this issue, we first take note of the settled legal position. It is observed that the Rotorks Control (I) Ltd. vs. CIT has held that the provision for warranty is an allowable item, only if the liability is measured using a substantial degree of estimation. According to the Hon’ble Supreme Court, the provision for arranty is to be allowed if the assessee is able to satisfy three (3) (a) an enterprise has a present obligation as a result of a past event; (b) it is probable that an outflow of resources will be required ) a reliable estimate can be made of the amount of the obligation conditions are not met, then the provision cannot be allowed. 14. Coming to the facts of the present case. It has been observed by us that, the assessee has been consistently providing warranty provision in relation to the cars sold by them. Upon enquiry from the Bench, it was gathered that the basis of the provision for warranty and the amount provided in all the past as well as the subsequent accepted by the Revenue and that no disallowance has been made on this issue in the assessments framed u/s 143(3) for the past as well as subsequent years. The case of the Revenue however for the relevant year is that, the assessee had made preceding and subsequent years. According to the Revenue, provision of Rs.145.78 crores was made, out of which, upon examination of the past and subsequent trend of provisions created in the books they had allowed provision of Rs.99.66 crores and the balance impugned sum of Rs.45.77 crores was held to be excessive and thus disallowed. We however note that, the assessee has provided the detailed break making the provision of Rs.145.78 crores during th granular bifurcation were which no specific defect or infirmity has been pointed out by them. It is observed that what the Revenue has done is that, they have aggregated the provisions made across the years, averaged the same, and thereafter IT (TP) A No.29/Chny/201 M/s. Nissan Motor India Pvt. Ltd. :: 13 :: amount of the obligation. According to the Hon’ble Apex Court, if these conditions are not met, then the provision cannot be allowed. Coming to the facts of the present case. It has been observed by us e assessee has been consistently providing warranty provision in relation to the cars sold by them. Upon enquiry from the Bench, it was gathered that the basis of the provision for warranty and the amount provided in all the past as well as the subsequent years, has been accepted by the Revenue and that no disallowance has been made on this issue in the assessments framed u/s 143(3) for the past as well as subsequent years. The case of the Revenue however for the relevant year is that, the assessee had made excessive provision in comparison to preceding and subsequent years. According to the Revenue, provision of Rs.145.78 crores was made, out of which, upon examination of the past and subsequent trend of provisions created in the books they had allowed ision of Rs.99.66 crores and the balance impugned sum of Rs.45.77 crores was held to be excessive and thus disallowed. We however note that, the assessee has provided the detailed break-up of the manner of making the provision of Rs.145.78 crores during the year and the detailed were also provided before the lower authorities, in which no specific defect or infirmity has been pointed out by them. It is observed that what the Revenue has done is that, they have aggregated made across the years, averaged the same, and thereafter /Chny/2019 (AY 2013-14) M/s. Nissan Motor India Pvt. Ltd. . According to the Hon’ble Apex Court, if these conditions are not met, then the provision cannot be allowed. Coming to the facts of the present case. It has been observed by us e assessee has been consistently providing warranty provision in relation to the cars sold by them. Upon enquiry from the Bench, it was gathered that the basis of the provision for warranty and the amount years, has been accepted by the Revenue and that no disallowance has been made on this issue in the assessments framed u/s 143(3) for the past as well as subsequent years. The case of the Revenue however for the relevant year excessive provision in comparison to preceding and subsequent years. According to the Revenue, provision of Rs.145.78 crores was made, out of which, upon examination of the past and subsequent trend of provisions created in the books they had allowed ision of Rs.99.66 crores and the balance impugned sum of Rs.45.77 crores was held to be excessive and thus disallowed. We however note up of the manner of e year and the detailed also provided before the lower authorities, in which no specific defect or infirmity has been pointed out by them. It is observed that what the Revenue has done is that, they have aggregated made across the years, averaged the same, and thereafter arrived at a figure, which in their view was a reasonable sum which ought to have been provided by the assessee. According to us, this analogy of the lower authorities was arbitrary in light of the scientific basis provided by the assessee giving the detailed computation of the provision created during the year, which has been placed at Pages 536 to 544 of the Paper to have justifiably explained the reason for the comparatively higher provision made during the year. It is observed that, a large batch of two specific consumer automobiles sold by the assessee in India as well as outside was found to be defective and a global recall conducted during the year. This fact is noted to have been well documented in the public domain as well, copies of which, as noted above, has been placed at Pages 545 to 546 of the Paper Book. The break-up of the manner of the computation of noted to inter alia comprise of the liability to be incurred due to this extraordinary event of the global recall of the cars sold by the assessee. The assessee also showed us, from Page 547 of the Paper Book, that the provision for warranty made during the year, in this regard, had been utilized to the extent of 85% in the immediately succeeding year itself and that the remaining sum was also utilized in the subsequent years thereafter. Accordingly, we find that, it was not a case provision made during the year remained unutilized in the subsequent IT (TP) A No.29/Chny/201 M/s. Nissan Motor India Pvt. Ltd. :: 14 :: arrived at a figure, which in their view was a reasonable sum which ought to have been provided by the assessee. According to us, this analogy of the lower authorities was arbitrary, whimsical and unjustified, particularly in light of the scientific basis provided by the assessee giving the detailed computation of the provision created during the year, which has been placed at Pages 536 to 544 of the Paper-Book. The assessee is also noted ifiably explained the reason for the comparatively higher provision made during the year. It is observed that, a large batch of two specific consumer automobiles sold by the assessee in India as well as outside was found to be defective and a global recall conducted during the year. This fact is noted to have been well documented in the public domain as well, copies of which, as noted above, has been placed at Pages 545 to 546 of the Paper Book. The up of the manner of the computation of provision for warranty is comprise of the liability to be incurred due to this extraordinary event of the global recall of the cars sold by the assessee. The assessee also showed us, from Page 547 of the Paper Book, that the or warranty made during the year, in this regard, had been utilized to the extent of 85% in the immediately succeeding year itself and that the remaining sum was also utilized in the subsequent years thereafter. Accordingly, we find that, it was not a case that the higher provision made during the year remained unutilized in the subsequent /Chny/2019 (AY 2013-14) M/s. Nissan Motor India Pvt. Ltd. arrived at a figure, which in their view was a reasonable sum which ought to have been provided by the assessee. According to us, this analogy of justified, particularly in light of the scientific basis provided by the assessee giving the detailed computation of the provision created during the year, which has been Book. The assessee is also noted ifiably explained the reason for the comparatively higher provision made during the year. It is observed that, a large batch of two specific consumer automobiles sold by the assessee in India as well as campaign was conducted during the year. This fact is noted to have been well documented in the public domain as well, copies of which, as noted above, has been placed at Pages 545 to 546 of the Paper Book. The provision for warranty is comprise of the liability to be incurred due to this extraordinary event of the global recall of the cars sold by the assessee. The assessee also showed us, from Page 547 of the Paper Book, that the or warranty made during the year, in this regard, had been utilized to the extent of 85% in the immediately succeeding year itself and that the remaining sum was also utilized in the subsequent years that the higher provision made during the year remained unutilized in the subsequent years, which would have raised provision for warranty. On these specific facts therefore, we find that the assessee had reasonably met t Apex Court in the case of demonstrated that, it had a present obligation as a result of this extraordinary event and that there was a probable outflow of resources which was required to settle the said obligation and that the same was utilized and settled as well a reliable basis for making such an estimate. We therefore find that the lower authorities were unjustified in disallowing the provision for warranty to the extent of Rs.45.77 crores and the same is directed to be This ground is therefore allowed. 15. Ground No. 4 relates to the disallowance of payment made for purchase of software due to non Act. The facts as noted are that, the assessee had made payments for acquiring ‘Consult III Plus Software DVD’ from their AE in Japan which was a system diagnostic tool, to be used for diagnosis and maintenance of electronic control system installed in Nissan vehicles. The AO is noted to have held that the impugned payment fell wi therefore, was liable to be taxed u/s 195 of the Act. Since, the assessee had remitted the payment without deducting tax, the AO disallowed the impugned sum by invoking Section 40(a)(ia) of the Act. The said IT (TP) A No.29/Chny/201 M/s. Nissan Motor India Pvt. Ltd. :: 15 :: would have raised doubt on the basis of making such provision for warranty. On these specific facts therefore, we find that the assessee had reasonably met the conditions laid down by the Hon’ble in the case of Rotorks Control (I) Ltd. (supra) and had demonstrated that, it had a present obligation as a result of this extraordinary event and that there was a probable outflow of resources which was required to settle the said obligation and that the same was utilized and settled as well and that the assessee has placed before us, a reliable basis for making such an estimate. We therefore find that the lower authorities were unjustified in disallowing the provision for warranty to the extent of Rs.45.77 crores and the same is directed to be This ground is therefore allowed. Ground No. 4 relates to the disallowance of payment made for purchase of software due to non-deduction of TDS u/s 40(a)(ia) of the Act. The facts as noted are that, the assessee had made payments for ng ‘Consult III Plus Software DVD’ from their AE in Japan which was a system diagnostic tool, to be used for diagnosis and maintenance of electronic control system installed in Nissan vehicles. The AO is noted to have held that the impugned payment fell within the ambit of royalty and therefore, was liable to be taxed u/s 195 of the Act. Since, the assessee had remitted the payment without deducting tax, the AO disallowed the impugned sum by invoking Section 40(a)(ia) of the Act. The said /Chny/2019 (AY 2013-14) M/s. Nissan Motor India Pvt. Ltd. basis of making such provision for warranty. On these specific facts therefore, we find that the he conditions laid down by the Hon’ble (supra) and had demonstrated that, it had a present obligation as a result of this extraordinary event and that there was a probable outflow of resources which was required to settle the said obligation and that the same was nd that the assessee has placed before us, a reliable basis for making such an estimate. We therefore find that the lower authorities were unjustified in disallowing the provision for warranty to the extent of Rs.45.77 crores and the same is directed to be deleted. Ground No. 4 relates to the disallowance of payment made for deduction of TDS u/s 40(a)(ia) of the Act. The facts as noted are that, the assessee had made payments for ng ‘Consult III Plus Software DVD’ from their AE in Japan which was a system diagnostic tool, to be used for diagnosis and maintenance of electronic control system installed in Nissan vehicles. The AO is noted to thin the ambit of royalty and therefore, was liable to be taxed u/s 195 of the Act. Since, the assessee had remitted the payment without deducting tax, the AO disallowed the impugned sum by invoking Section 40(a)(ia) of the Act. The said disallowance was confirmed by the Ld. DRP as well. Now, the assessee is in appeal before us. 16. Heard both the parties. At the onset, the Ld. AR for the assessee pointed out that the impugned issue was squarely covered in their favour by the decisions rendered by this Tri 1854/Chny/2017 for AY 2014 software payments made by the AO u/s 40(a)(ia) was deleted, by observing as under: “5.5 We have heard the rival submissions and carefully perused the materials on record. From the facts of the case it is apparent that the assessee has obtained license only for the usage of the software for a limited period and does not have the right to change or modify the software. This issue is squarely covered by the deci Bench of the Tribunal in the case DCIT Vs. Atmel R&D India (P) Ltd., cited by the Ld.AR wherein the Bench after relying on various decisions of the higher judiciary observed as follows: \"41. There is a clear distinction between royalty copyright rights and consideration for transfer of copyrighted articles. Right to use a copyrighted article or product with the owner retaining his copyright, is not the same thing as transferring or assigning rights in relation to the which the copyright owner has, is necessary to invoke the royalty definition. Viewed from this angle, a non transferable licence enabling the use of a copyrighted product cannot be construed as an authority to enjoy any or all of the enumerated rights ingrained in Article 12 of DTAA. Where the purpose of the licence or the transaction is only to restrict use of the copyrighted product for internal business purpose, it would not be legall to state that the copyright itself or right to use copyright has been transferred to any extent. The parting of intellectual property rights inherent in and attached to the software product in favour of the licensee/customer is what is contemplat authorizing or enabling a customer to have the benefit of data or instructions contained therein without any further right to deal with them independently does not, amount to transfer of rights in relation IT (TP) A No.29/Chny/201 M/s. Nissan Motor India Pvt. Ltd. :: 16 :: onfirmed by the Ld. DRP as well. Now, the assessee is Heard both the parties. At the onset, the Ld. AR for the assessee pointed out that the impugned issue was squarely covered in their favour by the decisions rendered by this Tribunal in their own case in ITA No. 1854/Chny/2017 for AY 2014-15 wherein identical disallowance of software payments made by the AO u/s 40(a)(ia) was deleted, by 5.5 We have heard the rival submissions and carefully perused the als on record. From the facts of the case it is apparent that the assessee has obtained license only for the usage of the software for a limited period and does not have the right to change or modify the software. This issue is squarely covered by the decision of the Chennai Bench of the Tribunal in the case DCIT Vs. Atmel R&D India (P) Ltd., cited by the Ld.AR wherein the Bench after relying on various decisions of the higher judiciary observed as follows: \"41. There is a clear distinction between royalty paid on transfer of copyright rights and consideration for transfer of copyrighted articles. Right to use a copyrighted article or product with the owner retaining his copyright, is not the same thing as transferring or assigning rights in relation to the copyright. The enjoyment of some or all the rights which the copyright owner has, is necessary to invoke the royalty definition. Viewed from this angle, a non- exclusive and non transferable licence enabling the use of a copyrighted product cannot trued as an authority to enjoy any or all of the enumerated rights ingrained in Article 12 of DTAA. Where the purpose of the licence or the transaction is only to restrict use of the copyrighted product for internal business purpose, it would not be legall to state that the copyright itself or right to use copyright has been transferred to any extent. The parting of intellectual property rights inherent in and attached to the software product in favour of the licensee/customer is what is contemplated by the Treaty. Merely authorizing or enabling a customer to have the benefit of data or instructions contained therein without any further right to deal with them independently does not, amount to transfer of rights in relation /Chny/2019 (AY 2013-14) M/s. Nissan Motor India Pvt. Ltd. onfirmed by the Ld. DRP as well. Now, the assessee is Heard both the parties. At the onset, the Ld. AR for the assessee pointed out that the impugned issue was squarely covered in their favour bunal in their own case in ITA No. 15 wherein identical disallowance of software payments made by the AO u/s 40(a)(ia) was deleted, by 5.5 We have heard the rival submissions and carefully perused the als on record. From the facts of the case it is apparent that the assessee has obtained license only for the usage of the software for a limited period and does not have the right to change or modify the sion of the Chennai Bench of the Tribunal in the case DCIT Vs. Atmel R&D India (P) Ltd., cited by the Ld.AR wherein the Bench after relying on various decisions paid on transfer of copyright rights and consideration for transfer of copyrighted articles. Right to use a copyrighted article or product with the owner retaining his copyright, is not the same thing as transferring or assigning rights copyright. The enjoyment of some or all the rights which the copyright owner has, is necessary to invoke the royalty exclusive and non- transferable licence enabling the use of a copyrighted product cannot trued as an authority to enjoy any or all of the enumerated rights ingrained in Article 12 of DTAA. Where the purpose of the licence or the transaction is only to restrict use of the copyrighted product for internal business purpose, it would not be legally correct to state that the copyright itself or right to use copyright has been transferred to any extent. The parting of intellectual property rights inherent in and attached to the software product in favour of the ed by the Treaty. Merely authorizing or enabling a customer to have the benefit of data or instructions contained therein without any further right to deal with them independently does not, amount to transfer of rights in relation to copyright or confermen transfer of rights in or over copyright or the conferment of the right of use of copyright implies that the transferee/licensee should acquire rights either in entirety or partially co owner/transferor who divests himself of the rights he possesses in his favour. 42. The license granted to the licensee permitting him to use the programme for its business purpose is only incidental to the facility extended to the licensee to make use of the copyri its internal business purpose. The said process is necessary to make the programme functional and to have access to it and is qualitatively different from the right contemplated by the said paragraph because it is only integral to the use incidental facility, the licensee has no right to deal with the product just as the owner would be in a position to do. 43. There is no transfer of any right in respect of copyright by the Assessee and it is a case The payment is for a copyrighted article and represents the purchase price of an article and cannot be considered as royalty either under the Income Tax Act or under the OTAA. 44. The licensees are not allowed to commercially, they have acquired under licence agreement, only the copy righted software which by itself is an article and they have not acquired any copyright in the software. In the case of the Assessee company, the licensee sold/licensed the software were allowed to make only one copy of the software and associated support information for backup purposes with a condition that such copyright shall include Intra Asia Trading (P) Ltd. copyright properties of Intra Asia Trading (P) Ltd. Licensee was allowed to use the software only for its own business as specifically identified and was not permitted to loan/rent/sale/sub of software to any third party without the consent of Intra Asia Trading (P) Ltd. 45. The licensee has been prohibited from copying, de assembling, or reverse engineering the software without the written consent of lntra Asia Trading (P) L the Assesseè company and its customers stipulates that all copyrights and intellectual property rights in the software and copies made by the licensee were owned by Intra Asia Trading (P) Ltd. and only Intra Asia Trading (P) Ltd. has the power to grant licence rights for use of the software. The licence agreement stipulates that upon termination of the agreement for any reason, the licencee shall return the IT (TP) A No.29/Chny/201 M/s. Nissan Motor India Pvt. Ltd. :: 17 :: to copyright or conferment of the right of using the copyright. The transfer of rights in or over copyright or the conferment of the right of use of copyright implies that the transferee/licensee should acquire rights either in entirety or partially co-extensive with the nsferor who divests himself of the rights he possesses in his 42. The license granted to the licensee permitting him to use the programme for its business purpose is only incidental to the facility extended to the licensee to make use of the copyrighted product for its internal business purpose. The said process is necessary to make the programme functional and to have access to it and is qualitatively different from the right contemplated by the said paragraph because it is only integral to the use of copyrighted product. Apart from such incidental facility, the licensee has no right to deal with the product just as the owner would be in a position to do. 43. There is no transfer of any right in respect of copyright by the Assessee and it is a case of mere transfer of a copyrighted article. The payment is for a copyrighted article and represents the purchase price of an article and cannot be considered as royalty either under the Income Tax Act or under the OTAA. 44. The licensees are not allowed to exploit the computer software commercially, they have acquired under licence agreement, only the copy righted software which by itself is an article and they have not acquired any copyright in the software. In the case of the Assessee company, the licensee to whom the Assessee company has sold/licensed the software were allowed to make only one copy of the software and associated support information for backup purposes with a condition that such copyright shall include Intra Asia Trading (P) Ltd. copyright and all copies of the software shall be exclusive properties of Intra Asia Trading (P) Ltd. Licensee was allowed to use the software only for its own business as specifically identified and was not permitted to loan/rent/sale/sub-licence or transfer the co of software to any third party without the consent of Intra Asia Trading (P) Ltd. 45. The licensee has been prohibited from copying, de-compiling, de assembling, or reverse engineering the software without the written consent of lntra Asia Trading (P) Ltd. The licence agreement between the Assesseè company and its customers stipulates that all copyrights and intellectual property rights in the software and copies made by the licensee were owned by Intra Asia Trading (P) Ltd. and only Intra P) Ltd. has the power to grant licence rights for use of the software. The licence agreement stipulates that upon termination of the agreement for any reason, the licencee shall return the /Chny/2019 (AY 2013-14) M/s. Nissan Motor India Pvt. Ltd. t of the right of using the copyright. The transfer of rights in or over copyright or the conferment of the right of use of copyright implies that the transferee/licensee should acquire extensive with the nsferor who divests himself of the rights he possesses in his 42. The license granted to the licensee permitting him to use the programme for its business purpose is only incidental to the facility ghted product for its internal business purpose. The said process is necessary to make the programme functional and to have access to it and is qualitatively different from the right contemplated by the said paragraph because of copyrighted product. Apart from such incidental facility, the licensee has no right to deal with the product 43. There is no transfer of any right in respect of copyright by the of mere transfer of a copyrighted article. The payment is for a copyrighted article and represents the purchase price of an article and cannot be considered as royalty either under exploit the computer software commercially, they have acquired under licence agreement, only the copy righted software which by itself is an article and they have not acquired any copyright in the software. In the case of the Assessee to whom the Assessee company has sold/licensed the software were allowed to make only one copy of the software and associated support information for backup purposes with a condition that such copyright shall include Intra Asia Trading and all copies of the software shall be exclusive properties of Intra Asia Trading (P) Ltd. Licensee was allowed to use the software only for its own business as specifically identified and licence or transfer the copy of software to any third party without the consent of Intra Asia compiling, de- assembling, or reverse engineering the software without the written td. The licence agreement between the Assesseè company and its customers stipulates that all copyrights and intellectual property rights in the software and copies made by the licensee were owned by Intra Asia Trading (P) Ltd. and only Intra P) Ltd. has the power to grant licence rights for use of the software. The licence agreement stipulates that upon termination of the agreement for any reason, the licencee shall return the software including supporting information and licence authorization device to lntra Asia Trading (P) Ltd.. 46. The incorporeal right to the software i.e. copyright remains with the owner and the same was not transferred by the Assessee. The right to use a copyright in a programme is totally different from the right to use a programme embedded in a software and the payment made for the same cannot be said to be received as consideration for the use of or right to use of any copyright to bring it within the definition of royalty as given in the DTAA. What the licensee has acquired is only a copy of the copyright article whereas the copyright remains with the owner and the Licensees have acquired a computer programme for being used in their business and no right is granted to them to utilize the copyright of a computer program payment for the same is not in the nature of royalty. 47. We have not examined the effect of the subsequent amendment to section 9 (1)(vi) of the Act and also whether the amount received for use of software would be royalty in terms thereof that the Assessee is covered by the DTAA, the provisions ot which are more beneficial. The amount received by the Assessee under the licence agreement for allowing the use of the software is not royalty under the DTAA. 48. What is transferr the use of the copyright in the software, but what is transferred is the right to use the copyrighted material or article which is clearly distinct from the rights in a copyright. The right that is transferre right to use the copyright but is only limited to the right to use the copyrighted material and the same does not give rise to any royalty income and would be business income. 49. In view of elaborate discussion and in the light of the judgment the Hon'ble Delhi High court in the case of DIT Vs. Infrasoft Ltd. (supra), on which reliance placed by the learned AR, in the present case, the assessee has acquired a readymade off computer programme to be used in their business and no ri granted to the assessee to utilize the copy right of the programme and, therefore, consideration cannot be treated as royalty. As held by the CIT(A), the payments made by the assessee company cannot be held as 'royalties' coming into the ambit of A for technical services' u/s 9(1 )(vii) of the IT Act and accordingly no tax need to be deducted u/s 195 of the IT Act. We, therefore, uphold the order of the CIT(A) on this count and dismiss the grounds raised by the revenue in th IT (TP) A No.29/Chny/201 M/s. Nissan Motor India Pvt. Ltd. :: 18 :: software including supporting information and licence authorization device to lntra Asia Trading (P) Ltd.. 46. The incorporeal right to the software i.e. copyright remains with the owner and the same was not transferred by the Assessee. The right to use a copyright in a programme is totally different from the a programme embedded in a software and the payment made for the same cannot be said to be received as consideration for the use of or right to use of any copyright to bring it within the definition of royalty as given in the DTAA. What the licensee has quired is only a copy of the copyright article whereas the copyright remains with the owner and the Licensees have acquired a computer programme for being used in their business and no right is granted to them to utilize the copyright of a computer programme and thus the payment for the same is not in the nature of royalty. 47. We have not examined the effect of the subsequent amendment to section 9 (1)(vi) of the Act and also whether the amount received for use of software would be royalty in terms thereof for the reason that the Assessee is covered by the DTAA, the provisions ot which are more beneficial. The amount received by the Assessee under the licence agreement for allowing the use of the software is not royalty under the DTAA. 48. What is transferred is neither the copyright in the software nor the use of the copyright in the software, but what is transferred is the right to use the copyrighted material or article which is clearly distinct from the rights in a copyright. The right that is transferre right to use the copyright but is only limited to the right to use the copyrighted material and the same does not give rise to any royalty income and would be business income. 49. In view of elaborate discussion and in the light of the judgment the Hon'ble Delhi High court in the case of DIT Vs. Infrasoft Ltd. (supra), on which reliance placed by the learned AR, in the present case, the assessee has acquired a readymade off computer programme to be used in their business and no ri granted to the assessee to utilize the copy right of the programme and, therefore, consideration cannot be treated as royalty. As held by the CIT(A), the payments made by the assessee company cannot be held as 'royalties' coming into the ambit of Article 12 of DTAA or 'fee for technical services' u/s 9(1 )(vii) of the IT Act and accordingly no tax need to be deducted u/s 195 of the IT Act. We, therefore, uphold the order of the CIT(A) on this count and dismiss the grounds raised by the revenue in this regard.\" /Chny/2019 (AY 2013-14) M/s. Nissan Motor India Pvt. Ltd. software including supporting information and licence authorization 46. The incorporeal right to the software i.e. copyright remains with the owner and the same was not transferred by the Assessee. The right to use a copyright in a programme is totally different from the a programme embedded in a software and the payment made for the same cannot be said to be received as consideration for the use of or right to use of any copyright to bring it within the definition of royalty as given in the DTAA. What the licensee has quired is only a copy of the copyright article whereas the copyright remains with the owner and the Licensees have acquired a computer programme for being used in their business and no right is granted to me and thus the 47. We have not examined the effect of the subsequent amendment to section 9 (1)(vi) of the Act and also whether the amount received for the reason that the Assessee is covered by the DTAA, the provisions ot which are more beneficial. The amount received by the Assessee under the licence agreement for allowing the use of the software is not royalty ed is neither the copyright in the software nor the use of the copyright in the software, but what is transferred is the right to use the copyrighted material or article which is clearly distinct from the rights in a copyright. The right that is transferred is not a right to use the copyright but is only limited to the right to use the copyrighted material and the same does not give rise to any royalty 49. In view of elaborate discussion and in the light of the judgment of the Hon'ble Delhi High court in the case of DIT Vs. Infrasoft Ltd. (supra), on which reliance placed by the learned AR, in the present case, the assessee has acquired a readymade off -- the shelf computer programme to be used in their business and no right was granted to the assessee to utilize the copy right of the programme and, therefore, consideration cannot be treated as royalty. As held by the CIT(A), the payments made by the assessee company cannot be rticle 12 of DTAA or 'fee for technical services' u/s 9(1 )(vii) of the IT Act and accordingly no tax need to be deducted u/s 195 of the IT Act. We, therefore, uphold the order of the CIT(A) on this count and dismiss the grounds raised In view of the above, we are inclined to allow the ground taken by the assessee. This ground is allowed.\" Since the issue is squarely covered by the decision of the Chennai Bench of the Tribunal, following the same, we hereby hold that in the c the assessee, the payment made for obtaining license to use the software cannot be held as royalties coming into the ambit of the DTAA or fees for technical services under Section 9(1)(vii) of the Act and accordingly tax need not be deducted at sour 17. The Ld. CIT, DR, on the other hand, supported the action of the lower authorities. Since, no change in facts or law could be pointed out, respectfully following the above decision (supra) in assessees’ own case, we direct the AO to delete the impugned disallowance made u/s 40(a)(ia) of the Act. This ground is therefore allowed. 18. The assessee has further raised the following additional grounds at the time of hearing, which are as under: “6.1 The appellant respectfully submits t made suo-moto disallowance under section 40(a) of the Act towards certain expenses on the premise that the same were not subject to tax deduction at source (‘TDS’) under the provisions of the Act, while in the same were duly s items. The appellant submits that the disallowances were unintentional, inadvertent errors which have resulted in assessment of a higher amount of income and prays for relief. 6.2 The Appellant respectfully s missed to claim deduction under section 40(a) of the Act towards certain expenses which were disallowed in earlier years on non TDS, however, TDS on the same is deducted and paid in the subject AY. 6.3 The App missed claiming as a deduction while computing income under the head ‘profits and gains from business or profession’ certain credits to the profit and loss account that are not taxable under the Act or already offered to tax in other assessment years resulting in excess income being subjected to tax. The Appellant prays for relief in respect IT (TP) A No.29/Chny/201 M/s. Nissan Motor India Pvt. Ltd. :: 19 :: In view of the above, we are inclined to allow the ground taken by the assessee. This ground is allowed.\" Since the issue is squarely covered by the decision of the Chennai Bench of the Tribunal, following the same, we hereby hold that in the c the assessee, the payment made for obtaining license to use the software cannot be held as royalties coming into the ambit of the DTAA or fees for technical services under Section 9(1)(vii) of the Act and accordingly tax need not be deducted at source U/s.195 of the Act. The Ld. CIT, DR, on the other hand, supported the action of the Since, no change in facts or law could be pointed out, espectfully following the above decision (supra) in assessees’ own case, to delete the impugned disallowance made u/s 40(a)(ia) of the Act. This ground is therefore allowed. The assessee has further raised the following additional grounds at the time of hearing, which are as under:- The appellant respectfully submits that it had inadvertently moto disallowance under section 40(a) of the Act towards certain expenses on the premise that the same were not subject to tax deduction at source (‘TDS’) under the provisions of the Act, while in the same were duly subjected to TDS/ TDS is not applicable on such items. The appellant submits that the disallowances were unintentional, inadvertent errors which have resulted in assessment of a higher amount of income and prays for relief. The Appellant respectfully submits that it had inadvertently missed to claim deduction under section 40(a) of the Act towards certain expenses which were disallowed in earlier years on non- TDS, however, TDS on the same is deducted and paid in the subject AY. The Appellant respectfully submits that it had inadvertently missed claiming as a deduction while computing income under the head ‘profits and gains from business or profession’ certain credits to the profit and loss account that are not taxable under the Act or already offered to tax in other assessment years resulting in excess income being subjected to tax. The Appellant prays for relief in respect /Chny/2019 (AY 2013-14) M/s. Nissan Motor India Pvt. Ltd. In view of the above, we are inclined to allow the ground taken by Since the issue is squarely covered by the decision of the Chennai Bench of the Tribunal, following the same, we hereby hold that in the case of the assessee, the payment made for obtaining license to use the software cannot be held as royalties coming into the ambit of the DTAA or fees for technical services under Section 9(1)(vii) of the Act and ce U/s.195 of the Act. The Ld. CIT, DR, on the other hand, supported the action of the Since, no change in facts or law could be pointed out, espectfully following the above decision (supra) in assessees’ own case, to delete the impugned disallowance made u/s 40(a)(ia) The assessee has further raised the following additional grounds at hat it had inadvertently moto disallowance under section 40(a) of the Act towards certain expenses on the premise that the same were not subject to tax deduction at source (‘TDS’) under the provisions of the Act, while in-fact ubjected to TDS/ TDS is not applicable on such items. The appellant submits that the disallowances were unintentional, inadvertent errors which have resulted in assessment of a higher ubmits that it had inadvertently missed to claim deduction under section 40(a) of the Act towards certain -deduction of TDS, however, TDS on the same is deducted and paid in the subject AY. ellant respectfully submits that it had inadvertently missed claiming as a deduction while computing income under the head ‘profits and gains from business or profession’ certain credits to the profit and loss account that are not taxable under the Act or were already offered to tax in other assessment years resulting in excess income being subjected to tax. The Appellant prays for relief in respect of the said amounts which have the resulted in the said sums being taxed twice.” 19. Relying upon the decisio cases of NTPC Ltd (229 ITR 383) (187 ITR 688),the assessee pleaded that these additional claims be admitted for adjudication. Per contra, the Ld. CIT, DR opposed the admission of these grounds on the premise that, these grounds were legal in nature but required factual verification as the details now being furnished by the assessee were never placed before the lower authorities. According to him therefore, such additional grounds now b deserves to be rejected. 20. We have heard the rival contentions. On the issue of admissibility of additional grounds, we observe that the Hon'ble Gujrat High Court in the case of CIT v. Mitesh Impex decisions rendered by the Hon'ble Apex Court in the case of NTPC v. CIT (229 ITR 383 ITR 323)has held that that, if a claim which is available in law is not raised either inadvertently or an account of erroneous legal position, such a relief cannot be shut up for all the times to come merely because it is raised for the first time absence of a revised return filed before the Assessing Officer. factual details now being filed before us, were not available at the time of assessment. However, for that reason, this Tribunal cannot be prevented IT (TP) A No.29/Chny/201 M/s. Nissan Motor India Pvt. Ltd. :: 20 :: of the said amounts which have the resulted in the said sums being ying upon the decisions of the Hon’ble Supreme Court in the NTPC Ltd (229 ITR 383)&Jute Corporation of India Ltd he assessee pleaded that these additional claims be admitted for adjudication. Per contra, the Ld. CIT, DR opposed the ounds on the premise that, these grounds were legal in nature but required factual verification as the details now being furnished by the assessee were never placed before the lower authorities. According to him therefore, such additional grounds now b deserves to be rejected. We have heard the rival contentions. On the issue of admissibility of e observe that the Hon'ble Gujrat High Court in the Mitesh Impex (367 ITR 85) after considering the decisions rendered by the Hon'ble Apex Court in the case (229 ITR 383) and Goetze (India) Ltd has held that that, if a claim which is available in law is not raised either inadvertently or an account of erroneous understanding legal position, such a relief cannot be shut up for all the times to come merely because it is raised for the first time in appellate proceedings in absence of a revised return filed before the Assessing Officer. factual details now being filed before us, were not available at the time of assessment. However, for that reason, this Tribunal cannot be prevented /Chny/2019 (AY 2013-14) M/s. Nissan Motor India Pvt. Ltd. of the said amounts which have the resulted in the said sums being on’ble Supreme Court in the Jute Corporation of India Ltd he assessee pleaded that these additional claims be admitted for adjudication. Per contra, the Ld. CIT, DR opposed the ounds on the premise that, these grounds were not legal in nature but required factual verification as the details now being furnished by the assessee were never placed before the lower authorities. According to him therefore, such additional grounds now being raised We have heard the rival contentions. On the issue of admissibility of e observe that the Hon'ble Gujrat High Court in the considering the decisions rendered by the Hon'ble Apex Court in the case Goetze (India) Ltd. v. CIT (284 has held that that, if a claim which is available in law is not understanding of legal position, such a relief cannot be shut up for all the times to come in appellate proceedings in absence of a revised return filed before the Assessing Officer. Indeed, the factual details now being filed before us, were not available at the time of assessment. However, for that reason, this Tribunal cannot be prevented from admitting an additional claim raised by the assessee, which it inadvertently omitted to raise in the return of income. For these reasons, we do not find any merit in the contention of the Ld. CIT, DR and therefore reject the same. At the same time, we n claims (supra) raised by the assessee requires factual verification and were not raised before any of the lower authorities. Accordingly, in the fitness of the matters, we admit these grounds and set aside the same to the AO for de novo consideration. Needless to say, the AO shall allow sufficient opportunity of hearing to the assessee in this regard. These grounds are therefore allowed for statistical purposes. 21. In the result, appeal filed by the assessee purposes. Order pronounced on the Sd/- (अिमताभशु\u0018ा) (AMITABH SHUKLA लेखासद\u0007य/ACCOUNTANT MEMBER चे\u0003ई/Chennai, \u0005दनांक/Dated: 23rd April, 20 TLN, Sr.PS आदेशक \u000eितिलिपअ\u0014ेिषत/Copy to 1. अपीलाथ /Appellant 2. \u000e\u000fथ /Respondent 3. आयकरआयु\u0015/CIT, Chennai / Madurai / Salem / Coimbatore. 4. िवभागीय\u000eितिनिध/DR 5. गाड फाईल/GF IT (TP) A No.29/Chny/201 M/s. Nissan Motor India Pvt. Ltd. :: 21 :: om admitting an additional claim raised by the assessee, which it inadvertently omitted to raise in the return of income. For these reasons, we do not find any merit in the contention of the Ld. CIT, DR and therefore reject the same. At the same time, we note that, the impugned claims (supra) raised by the assessee requires factual verification and were not raised before any of the lower authorities. Accordingly, in the fitness of the matters, we admit these grounds and set aside the same to consideration. Needless to say, the AO shall allow sufficient opportunity of hearing to the assessee in this regard. These grounds are therefore allowed for statistical purposes. In the result, appeal filed by the assessee is allowed for statist Order pronounced on the 23rd day of April, 2025, in Chennai. AMITABH SHUKLA) /ACCOUNTANT MEMBER Sd/ (एबीटी. (ABY T. VARKEY याियकसद\u0007य/JUDICIAL MEMBER , 2025. Copy to: , Chennai / Madurai / Salem / Coimbatore. /Chny/2019 (AY 2013-14) M/s. Nissan Motor India Pvt. Ltd. om admitting an additional claim raised by the assessee, which it inadvertently omitted to raise in the return of income. For these reasons, we do not find any merit in the contention of the Ld. CIT, DR and ote that, the impugned claims (supra) raised by the assessee requires factual verification and were not raised before any of the lower authorities. Accordingly, in the fitness of the matters, we admit these grounds and set aside the same to consideration. Needless to say, the AO shall allow sufficient opportunity of hearing to the assessee in this regard. These is allowed for statistical , in Chennai. Sd/- . वक ) ABY T. VARKEY) /JUDICIAL MEMBER , Chennai / Madurai / Salem / Coimbatore. "