January 6th 2022

Hyundai Motor India Ltd. Vs ACIT (ITAT Chennai)

The following subject that got here up for consideration from floor No. 6 of Assessee attraction is disallowance u/s.43B(c) of the Act, in respect of efficiency incentive paid to staff. Details with regard to impugned dispute are that for the monetary 12 months related to the evaluation 12 months 2016-17, the assessee has paid efficiency reward to staff within the cadre of executives and senior executives. The assessee has offered for bills for the 12 months ended March, 2016. Nevertheless, cost was made solely after due date of submitting return of earnings for evaluation 12 months 2016-17. The Assessing Officer has disallowed efficiency incentive paid to employees u/s.43B(c) r.w.s. 36(1)(ii) of the Act, amounting to Rs.1,54,58,594/- on the bottom that as per part 43B(c), any sum referred to in clause (ii) of sub-section (1) of part 36, shall not be allowed as deduction, until the identical is paid on or earlier than due date for furnishing return of earnings u/s.139(1) of the Act. The Assessing Officer additional famous that as per part 36(1)(ii), any sum paid to an worker as bonus or fee for providers rendered, the place such sum wouldn’t have been payable to him as revenue or dividend, if it had not been paid as bonus or fee is roofed. Subsequently, he opined that any cost made to an worker which is within the nature of bonus or fee for providers rendered is roofed u/s. 36(1)(ii) of the Act, and thus, if such cost shouldn’t be made on or earlier than due date of submitting of return of earnings u/s.139(1) of the Act, then identical can’t be allowed as deduction, as per part 43B(c) of the Act. The assessee has filed objections earlier than discovered DRP and challenged additions made by the AO. The discovered DRP vide its instructions dated 23.03.2021 has rejected objections filed by the assessee and confirmed additions made by the AO.

The discovered A.R for the assessee submitted that the discovered DRP erred in sustaining additions made by the AO in the direction of disallowance of efficiency incentive paid to staff u/s.43B(c) of the Act, with out appreciating indisputable fact that mentioned cost is neither bonus nor fee and thus, identical can’t be introduced inside the ambit of provisions of part 36(1)(ii) r.w.s.43B(c) of the Earnings Tax Act, 1961.

The ld.DR however strongly supporting order of the ld.DRP submitted that this subject is roofed towards the assessee by the choice of ITAT., Chennai in assessee’s personal case for evaluation 12 months 2015-16 in IT(TP)A No.10/Chny/2020, whereby the Tribunal by following the sooner Tribunal order for evaluation 12 months 2013-14 in ITA No. 3192/Chny/2017, determined the problem towards the assessee.

We now have heard each the events, perused supplies obtainable on document and gone by means of orders of the authorities under. We discover that an an identical subject has been thought-about by the Tribunal in assessee’s personal case for evaluation 12 months 2015-16 in IT(TP)A No.10/Chny/2020, whereby the Tribunal by following the sooner Tribunal order for evaluation 12 months 2013-14 in ITA No. 3192/Chny/2017, the place below an identical circumstances, the Tribunal has held that cost made to an worker which is within the nature of bonus or fee for providers rendered is roofed u/s. 36(1)(ii) of the Act, and thus, if such cost shouldn’t be made on or earlier than due date of submitting of return of earnings u/s.139(1) of the Act, then identical can’t be allowed as deduction, as per part 43B(c) of the Act. The related findings of the Tribunal are as below:-

“23. We now have heard each the events, perused supplies obtainable on document and gone by means of orders of the authorities under. Admittedly, not one of the staff of the assessee are coated below cost of Bonus Act, as a result of all staff’ wage is above threshold restrict mounted below cost of Bonus Act. It’s also an admitted indisputable fact that the assessee is paying efficiency incentive/reward to staff usually and such incentive has been paid for providers rendered by the workers. Subsequently, it’s essential to look at efficiency incentive paid to staff in gentle of provisions of part 36(1)(ii) learn with part 43B(c) of the Earnings Tax Act, 1961. As per part 36(1)(ii) of the Act, any sum paid to an worker as bonus or fee for providers rendered, the place such sum wouldn’t have been payable to him as income or dividend, if it had not been paid as bonus or fee is allowable as deduction. The provisions of Part 43B(c) offers that any sum referred to in part 36(1)(ii) is not going to be allowed as deduction, until truly paid. Subsequently, from a mixed studying of provisions of part 36(1)(ii) learn with part 43B(c), it’s seen that provisions of part 36(1)(ii) shouldn’t be solely covers for cost of bonus to employees, but it surely additionally applies to fee paid to the workers for providers rendered. The assessee claims that expenditure incurred is in the direction of efficiency reward, which isn’t within the nature of bonus and therefore, is not going to be coated u/s. 36(1)(ii) of the Act.

24. We now have given our considerate consideration to info introduced out by the ld. AO in gentle of arguments of the ld. AR for the assessee and we don’t ourselves subscribe to the arguments of ld. AR for the assessee, for easy cause that when efficiency incentive is paid for rendering providers, then such cost is within the nature of bonus or fee which comes below the provisions of part 36(1(ii) of the Act. It’s immaterial whether or not the assessee phrases it as efficiency reward or bonus. However, what’s related is nature of cost and objective of cost. On this case, it’s within the nature of bonus or fee and such cost is for providers rendered by staff. Simply because nomenclature was modified to another identify, a selected expenditure wouldn’t change its authentic character. On this case, sum was paid to staff for providers rendered and additional, this sum wouldn’t have been paid as income or dividend had it not been paid as fee or efficiency reward. Subsequently, we’re of the thought-about view that provisions of part 36(1)(ii) of the Act is squarely relevant and consequently, mischief of part 43B(c) would come into play, if such cost shouldn’t be made on or earlier than due date of furnishing of return of earnings. On this case, admittedly, the assessee has paid efficiency incentive solely after due date of submitting of income-tax return. Insofar as case legal guidelines relied upon by the assessee, we discover that info these case legal guidelines are totally different from info of current case and has no utility to case of the assessee. Subsequently, we’re of the thought-about view that there isn’t a error within the causes given by the Assessing Officer in addition to discovered DRP to disallow efficiency reward u/s.43B(c) of the Act. Therefore, we’re inclined to uphold the order of Assessing Officer in addition to instructions of discovered DRP and reject floor taken by the assessee.”

On this view of matter and in keeping with view taken by the Co-ordinate Bench, we’re inclined to uphold the order of the AO in addition to the instructions of ld.DRP and reject floor taken by the assessee.

FULL TEXT OF THE ORDER OF ITAT CHENNAI

This attraction filed by the assessee is directed towards closing evaluation order handed by the Assessing Officer u/s.143(3) r.w.s 144C(13) r.w.s.144B of the Earnings Tax Act, 1961 (hereinafter the ‘Act’) dated 30.04.2021, in pursuant to the instructions of the discovered DRP-2, Bengaluru dated 23.03.2021 u/s.144C(5) of the Act for the evaluation 12 months 2016-17.

2. The assessee has raised following grounds of attraction:-

1. “The Appellant objects to the order dated 30 April 2021 issued below Part 143(3) r.w.s. 144C(13) of the Earnings Tax Act, 1961 (‘Act’) by the Nationwide e-Evaluation Middle (‘NeAC) for the aforesaid evaluation 12 months on the next grounds:

TRANSFER PRICING GROUNDS

The instructions of the Dispute Decision Panel (DRP), the Switch Pricing Order and the Last Evaluation order are misguided in as far as the next subject/adjustment:

2. Switch Pricing Order is barred by limitation

2.1 The NeAC/DRP failed to understand that the order handed by Switch Pricing Officer (TPO) dated 0 .11.2019 is marred by statutory limitation as prescribed below Part 92CA(3A) of the Act and as such it’s unhealthy in regulation, void ab initio and deserves to be quashed.

2.2 The NeAC/DRP didn’t cognizance of Central Motion Plan issued by Central Board of Direct Taxes (CBDT) for the steerage of officers within the Earnings Tax Division whereby in Chapter VII thereof, coping with Worldwide Taxation and Switch Pricing, the CBDT has explicitly said that completion of switch pricing audits will get time barred on 31 October 2019.

2.3 The NeAC/DRP failed to understand that the switch pricing proceedings below part 92CA is an unbiased evaluation akin to an everyday evaluation continuing below part 143(3) of the Act.

2.4 The NeAC/DRP has incorrectly interpreted the provisions of part 92CA(3) and concluded that interval of limitation specified below part 92CA(3) is just for inner comfort and failed to understand that the timelines specified below part 153 and part 92CA are necessary and should be independently complied with.

2.5 The NeAC/DRP didn’t take cognizance of the particular reference within the Memorandum whereas introducing sub-section (3A) to Part 92CA vide Finance Act 2007, whereby it’s explicitly talked about the TPO has to find out the Arm’s size value (ALP) not less than two months previous to limitation stipulated below part 153 of the Act.

2.6 The NeAC/DRP whereas figuring out the interval of limitation for passing the TPO order as per provisions of part 92CA(3A), which requires TPO to cross an order earlier than 60 days previous to the interval of limitation specified below part 153, has conveniently disregarded the phrases “earlier than” and prior” specified below the mentioned part and failed to understand the legislative intent behind specifying timeline for passing TPO order.

2.7 The NeAC/DRP failed to understand within the context of sub-section (3A) of part 92CA phrase might’ should be learn as shall’ because the Act signifies necessary compliance on the a part of TPO to cross order inside the stipulated time restrict.

2.8 The NeAC/DRP grossly erred in not following the binding jurisdictional Excessive Courtroom choice within the case of M/s Pfizer Healthcare India Non-public Restricted vs. DCIT [WP No. 32699 of 2019] whereby it was held that the Switch Pricing Orders handed below part 92CA are barred by limitation.

With out prejudice to the above authorized floor on limitation, the Appellant raises the next grounds in respect of TP adjustment:

3. Attribution of notional earnings in the direction of deemed model improvement

3.1 The NeAC/ DRP erred in info and circumstances of the case and in regulation in confirming the motion of the TPO in attributing notional earnings of Rs.237,51,90,000/- on the premise that the Appellant has undertaken model promotion/constructing exercise for its AE i.e., Hyundai Motor Company, Korea.

TPO exceeded jurisdiction

3.2 The NeAC/DRP failed to understand the truth that the TPO exceeded his jurisdiction by analysing model constructing as a separate worldwide transaction although the NeAC has not referred the identical for dedication of ALP as per Part 92CA of the Earnings Tax Act, 1961 (“the Act”).

3.3 The NeAC/DRP should have held that the order of the TPO is vitiated inasmuch since it’s primarily based on a present trigger discover that’s void ab initio, because it has not established a prima facie case of brand name promotion exercise undertaken by the Appellant.

3.4 The NeAC/DRP should have held that the TPO has acted in extra of jurisdiction by suo-motto contemplating the incurring of commercial bills as an “worldwide transaction”.

3.5 The NeAC/TPO erred in info and circumstances of the case and in regulation by stating that the Appellant didn’t report the “Commercial Advertising and Promotion (“AMP”) bills” within the Type 3CEB when the identical shouldn’t be per se a global transaction as per Part 92B of the Act.

Model promotion shouldn’t be a global transaction

3.6 The NeAC/DRP failed to understand that the Appellant has not rendered any model constructing service to its AE (i.e., Hyundai Motor Company, Korea) and as such there isn’t a worldwide transaction.

3.7 The NeAC/DRP failed to understand that within the absence of contract among the many events (i.e. Appellant and AE) deeming rendition of brand name constructing service is null and void.

3.8 The NeAC/TPO failed to understand that even an unbiased entity would have charged for model constructing service provided that the model constructing exercise has been truly agreed to/ undertaken as the first exercise and never the place the promotion of brand name identify is ancillary to the core enterprise exercise of manufacture and sale of automobiles.

3.9 The NeAC/DRP having acknowledged that the info and circumstances are much like the earlier Evaluation years erred in not following the binding judicial precedent within the Appellant’s personal case, for AYs 2009-10 to 2011-12 determined by the this Hon’ble Earnings Tax Appellate Tribunal (“ITAT”) [[2017] 81 taxmann.com 5 (Chennai – Trib.)] holding that there isn’t a “Worldwide transaction” between the Appellant and the AE and deleted the adjustment on Model constructing / AMP bills.

Separate benchmarking is void

3.10 The NeAC/TPO having accepted the Royalty transaction which is inclusive of proper to make use of “Model” is at arms size, is precludes from as soon as once more independently benchmarking the model utilization as separate worldwide transaction.

3.11The NeAC/TPO having accepted that the general internet margin of the Appellant below TNMM technique is at arms size as per Part 92C(2) of the Act learn with Rule 10B of the Earnings tax Guidelines, erred in independently benchmarking model utilization as separate worldwide transaction.

3.12 With out prejudice to the above, the NeAC/TPO failed to understand that the surplus margin earned by the Appellant over that of comparable firms signifies that it’s the Appellant who has benefited mother the usage of the model identify and has supplied extra earnings for tax in India.

3.13 The NeAC/TPO failed to understand that as per the rules laid down in Chapter VII of the OECD TP Pointers, 2017, the incidental/ancillary advantages, if any, arising out of the AMP bills incurred by the Appellant doesn’t require any separate compensation as it’s not within the nature of energetic service to AE.

NeAC/TPO failed to understand the enterprise prerogative of the Appellant

3.14 The NeAC/TPO failed to understand that in view of the rights granted within the settlement between the Appellant and the AE, the previous will get the suitable to make use of the “Model”

3.15 The NeAC/TPO has failed to understand that the Appellant shouldn’t be restricted from creating its personal model by means of the settlement and it’s the prudent enterprise choice of the Appellant to make use of the Model identify of the AE in order to extend its gross sales in India.

3.16 The NeAC/TPO failed to understand that the AMP bills incurred by the Appellant is only to advertise the gross sales of the vehicles manufactured and never in the direction of promotion of Model.

Financial Possession

3.17 The NeAC/TPO erred in info and circumstances of the case and in regulation in not appreciating that the Appellant is the financial proprietor of the model identify and makes use of the model for its personal profit.

3.18 With out prejudice to the above and assuming with out admitting that the Appellant has been offering model constructing service, the NeAC/TPO failed to understand that the earnings, if any, could be attributed solely when model is alienated at a future date and as sue h the query of attributing a notional earnings for the deemed model biii1ding service doesn’t come up for AY 2016-17.

Willpower of ALP of alleged model constructing service is grossly flawed

3.19The NeAC/DRP erred in info and circumstances of the case and in regulation in not appreciating that the TPO has incorrectly thought-about and utilized “Different Technique” because the Most Applicable Technique in violation of Part 92C(1) of the Act learn with Rule 10AB of the Earnings tax Guidelines whereas figuring out arm’s size value of deemed “Model Promotion”.

3.20 The NeAC/DRP erred in info and circumstances of the case and in regulation in not appreciating that the TPO has incorrectly thought-about and utilized “Different Technique” because the Mist Applicable Technique with out bringing on document uncontrolled comparable firms whereas benchmarking deemed “Model Promotion”.

3.21 The NeAC/DRP erred in info and circumstances of the case and in regulation in not appreciating that the TPO has not offered any cogent causes/foundation of allocating 50% of the AMP bills incurred by the Appellant to be recovered from the AE in the direction of model promotion.

3.22 With out prejudice to the above floor, the NeAC/DRP should have appreciated that the TPO’s motion of allocating a mark-up of 9.15% on 50% of the AMP bills is devoid of any benefit and unsustainable in regulation as it’s extremely arbitrary and unreasonable.

3.23 The NeAC/DRP erred in confirming the motion of the TPO in conducting a recent seek for figuring out the comparable firms for the restricted objective of quantifying the mark-up to be added to the 50% of AMP bills which was incorrectly thought-about to be incurred by the Appellant for the advantage of its AE.

3.24 With out prejudice to the above, the NeAC/DRP failed to understand that the comparables chosen by the TPO are functionally dissimilar as they’re engaged within the enterprise of commercial and media whereas the Appellant is engaged in manufacturing of passenger vehicles and never model promotion.

3.25 With out prejudice to our above grounds, NeAC/DRP should have appreciated that even when model promotion is taken into account as Worldwide Transaction, the TPO should have in contrast the AMP to gross sales ratio of the Appellant with that of the comparable compar.ies to find out the ALP of the transaction.

3.26 With out prejudice to our above grounds, the NeAC/DRP should have appreciated that the TPO hams reckoned incorrect quantum of commercial bills (i.e. bills not within the nature of Commercial).

CORPORATE TAX GROUNDS

4. Disallowance of expenditure below part 14A of the Act r.w.r 8D of the Guidelines

4.1 The NeAC / DRP erred in disallowing a sum of Rs.70,07,153 below part 14A of the Act by making use of the provisions of Rule 8D of the Guidelines.

4.2 The NeAC / DRP ought to not have made disallowance below part 14A of the Act when the Appellant has not claimed any exempt earnings being dividend earnings amounting to Rs.1,11,645, throughout the 12 months.

4.3 The NeAC / DRP should have appreciated that the Assessee has not incurred any expenditure which can be attributable in the direction of incomes of exempt earnings (no exempt earnings claimed throughout the topic AY).

4.4 The NeAC, having acknowledged the truth that the Assessee had adequate surplus funds in earlier AY’s to make the investments, ought to not have resorted to creating advert hoc disallowance below part 14A r.w.r 8D of the Guidelines.

4.5 The NeAC / DRP should have appreciated that merely as a result of there are investments (for strategic functions) and cost of curiosity (in the direction of buy of mounted belongings), it can’t be assumed that mortgage funds have been utilized for the aim of creating investments.

4.6 The NeAC / DRP erred in presuming that the Appellant had incurred a portion of personnel bills, hire, salaries, communication, journey, printing & stationery, curiosity, and so forth. debited throughout the topic AY in the direction of finishing up funding transactions / incomes earnings from investments with out appreciating that the character of Assessee’s investments (in wholly owned subsidiaries) doesn’t require any steady monitoring and as such the presumption of the NeAC is misconceived.

4.7 The NeAC / DRP erred in not following the binding choice of the Hon’b1e Tribunal within the Appellant’s personal case for AY 2007-08 whereby the Tribunal had held that no disallowance could be made below part l4A of the Act within the absence of exempt earnings.

4.8 With out prejudice to the above, the NeAC ought to not have thought-about curiosity on long run loans, working capital, sellers advances/deposits, and financial institution/monetary fees whereas computing the quantum of disallowance below clause (ii) of Rule 8D(2) of the Guidelines.

4.9 With out prejudice to the above, the NeAC / DRP should have excluded the investments which didn’t yield exempt earnings throughout the topic AY whereas computing the quantum of disallowance below Rule 8D(2)(ii) and (iii) of the Guidelines.

4.10 With out additional prejudice to the above, the disallowance below part l4A of the Act by making use of Rule 8D of the Guidelines is misguided, excessive and arbitrary.

4.11 With out prejudice to the above, the disallowance should be restricted to Rs.1,11,645 being the quantity of dividend acquired throughout the topic AY, which is already supplied to tax within the topic AY and as such there isn’t a requirement for any additional disallowance u/s 14A.

4.12 The NeAC / DRP should have appreciated that the provisions of part 14A of the Act r.w.r. 8D of the Guidelines shouldn’t be relevant whereas figuring out e-book income below part 115JB of the Act.

5. Disallowance of depreciation to the extent of subsidy

5.1 The NeAC / DRP erred in disallowing depreciation amounting to Rs.1,24,585 within the topic AY by contemplating the money subsidy granted by SIPCOT within the AY 2003-04 as capital earnings to be adjusted towards value of belongings.

5.2 The NeAC / DRP should have appreciated that SIPCOT had given the subsidy for organising the mega venture and never for the aim of assembly any legal responsibility in the direction of acquisition of belongings and as such the subsidy is a capital receipt, which can’t be adjusted towards the price of the asset.

5.3 The AO / DRP failed to understand that within the 12 months of receipt of subsidy, i.e. AY 2003-04 the AO has verified the declare and deleted the disallowance on depreciation by passing the order giving impact to the CIT(A) order and subsequently the query of disallowance of depreciation on subsidy in subsequent AY’s doesn’t come up.

6 Disallowance of efficiency reward below part 43B of the Act

6.1 The NeAC / DRP erred in disallowing efficiency reward amounting to Rs.1,54,58,594 below part 43B of the Act.

6.2 The NeAC / DRP should have appreciated that the expenditure incurred in the direction of efficiency reward shouldn’t be within the nature of “bonus” and subsequently the provisions of part 43B(c) of the Act shouldn’t be relevant.

6.3 The NeAC / DRP should have appreciated that the efficiency reward shouldn’t be on the character of “fee” for the reason that reward relies on the efficiency of the worker.

6.4 With out prejudice to the above, the NeAC / DRP should have appreciated that the Appellant shouldn’t be coated by the provisions of Cost of Bonus Act, 1965 and as such no disallowance could be made below part 43B r.w.s. 36(1)(ii) of the Act.

6.5 With out prejudice to the above, acceptable consequential instructions could also be issued to be NeAC to permit the expenditure within the 12 months in which the quantities are literally paid as in any other case the funds won’t ever be allowed as deduction.

6.6 With out prejudice to the above, acceptable consequential instructions could also be issued to NeAC to permit the precise cost made throughout topic AY.

7. Schooling cess and secondary & larger schooling cess is allowable as income expenditure

7.1 The NeAC/DRP should have appreciated that schooling cess and secondary & larger schooling cess is an allowable expenditure below part 37(1) of the Act.

7.2 The NeAC/DRP should have appreciated that the schooling cess and secondary & larger schooling cess paid by the Appellant shouldn’t be coated inside the provisions of part 40(a)(ii) of the Act and as such allowable below part 37(1) of the Act.

7.3 The NeAC/DRP should have appreciated that the CBDT vide Round No.91/58/66 ITJ (19) has clarified that omission of the phrase “cess ” is to disallow solely “taxes” part 40(a)(ii) of the Act and never schooling cess.

7.4 The NeAC/DRP should have appreciated that ‘schooling cess and secondary & larger schooling cess’ shouldn’t be within the nature of ‘tax’ as envisaged in part 40(a)(ii) of the Act and can’t be disallowed.

7.5 The NeAC/DRP outlet to have appreciated that taxes are levied on income whereas ‘cess’ is levied solely on taxes and never income and as such ‘cess’ shouldn’t be coated inside the that means of taxes below part 40(a)(ii) of the Act.

7.6 The NeAC/DRP should have appreciated that cess can’t be construed as tax since it’s levied for the particular objective of offering universa1ized high quality fundamental / secondary and better schooling whereas tax is in the direction of the final assortment of the Union of India.

8. Subsidy acquired from Govt. of Tamil Nadu within the type of refund of output/enter X AT is a capital receipt not chargeable to tax.

8.1 The NeAC/DRP ought to not have rejected the Appellant’s declare in limine to deal with output / enter VAT subsidy as a capital receipt not chargeable to tax.

8.2 The NEAC/DRP should have appreciated that the subsidy (refund of VAT) was granted for the aim of organising of Part II manufacturing facility and as such the mentioned subsidy needs to be handled as a capital receipt’ not chargeable to tax.

8.2 The NEAC/DRP should have appreciated that the thing of the subsidy (refund of VAT) was for the aim of organising the plant and to not improve the profitability of the Appellant or to fund the price of mounted belongings and as such the mentioned subsidy needs to be handled as a ‘capital receipt’ not chargeable to tax.

8.4 With out prejudice to the above, the Hon’b1e Tribunal ought to take into account and permit the declare of the Appellant in gentle of the Supreme Courtroom choice in Goetze (India) Restricted vs CIT (TS-21-SC-2006-O) (SC) for the reason that particulars are already obtainable on document.

9. Export incentives below the Focus Market Scheme is a capital receipt not chargeable to tax

9.1 The NeAC/DRP should have appreciated that the export incentives below the FMC earned throughout the 12 months is a capital receipt not chargeable to tax.

9.2 The NeAC/DRP should have appreciated that it’s a effectively settled precept that the “objective” for which an incentive is granted needs to be thought-about to find out whether or not the character of subsidy / incentive is income or capital and as such the character of export incentive can’t be decided primarily based on the merchandise of expenditure towards which the set-off is meant.

9.3 The NeAC/DRP should have appreciated that the export incentive below the FMS was offered to boost India’s export potential within the worldwide market and never for working the enterprise of the Appellant extra profitably and as such the export incentive is capital in nature.

9.4 The NeAC/DRP should have appreciated that the modification to the definition of earnings by the use of insertion of clause (xviii) to part 2(24) of the Act doesn’t apply to non-taxable capital subsidies as object of introduction as talked about in Notes on Clauses to Finance Act 2015 was solely to align with the provisions of Earnings Computation and Disclosure Requirements (ICDS).

9.5 The Hon’ble Tribunal might subject appropriate instructions to the NeAC to deal with the export incentive below the FMS / MEIS as a capital receipt not chargeable to tax and re-compute the full earnings by lowering the quantity of incentive for the topic AY 2016-17.

10. Non grant of deduction below part 80G of the Act

10.1 The NeAC erred in not granting deduction below part 80G of the Act amounting to Rs.3,79,50,000, being the sum whole of Chapter VI-A deductions, whereas assessing the full tax legal responsibility for the topic AY.

10.2 The NeAC should have appreciated that deduction below part 80G was not an issue of subject within the draft evaluation order and as such the NeAC is precluded from disallowing the identical within the Last Evaluation Order.

10.3 The Ne.AC can not disallow, deduction below Part 80G of that Act within the Last Evaluation Order within the absence of any particular course issued by DRP on this regard.

11. Miscellaneous

11.1 The NeAC erred in granting decrease TDS credit score amounting to Rs. 20,87,82,316 as towards Rs.20,93,08,739 claimed for the topic A Y.

11.2 The NeAC erred in levying extreme curiosity amounting to Rs.86,37,309 below part 234B of the Act.

12. The Appellant prays that instructions be given to grant all such aid arising from the grounds of attraction talked about supra as additionally all consequential aid thereto.

13. The Appellant craves so as to add, alter, amend, substitute, rescind, modify and / or withdraw in any method in any way all or any of the foregoing grounds at or earlier than the listening to of attraction.

4. Transient info of the case are that the assessee M/s. Hyundai Motor India Ltd., is wholly owned subsidiary of M/s. Hyundai Motor Firm Ltd., South Korea. The assessee is engaged within the enterprise of producing and promoting passenger vehicles in home and export market. The assessee firm has filed its return of earnings for evaluation 12 months 2016-17 on 29.11.2016 admitting whole earnings of Rs.1865,03,71,585/-under regular provisions of the Act and e-book revenue u/s.115JB of the Act at Rs.1918,63,89,313/-. The assessee had entered into varied worldwide transactions with its AEs and worldwide transactions have been duly reported in Type 3CEB filed in accordance with provisions of Indian Switch Pricing Rules contained in part 92, 92A to 92F of the Earnings Tax Act, 1961. The case was taken up for scrutiny and throughout the course of evaluation proceedings; a reference was made to JCIT (Switch Pricing) for dedication of arm’s size value of worldwide transactions of the assessee with its AEs. The discovered TPO vide its order dated 01.11.2019 has prompt upward adjustment for model improvement providers.

5. The Assessing Officer, in pursuant to TPO order, has handed draft evaluation order u/s.143(3) r.w.s 144C of the Act on 27.12.2019 and made switch value changes as prompt by the TPO at Rs.237,51,90,000/-. The Assessing Officer had additionally proposed sure company tax changes together with disallowances u/s.14A, r.w.r 8D of IT Guidelines, 1962, disallowance of subsidy acquired in the direction of capital expenditure, disallowance of focus advertising scheme bills, disallowance of further depreciation claimed on mounted belongings for regional workplaces and disallowance of bonus / efficiency reward u/s.43B of the Act. The assessee has filed objections earlier than discovered DRP towards draft evaluation order, however the discovered DRP vide its instructions dated 23.03.2021 has rejected objections filed by the assessee. The Assessing Officer in pursuant to the instructions of the discovered DRP has handed closing evaluation order incorporating instructions of the ld. DRP. Aggrieved, the assessee has filed current attraction earlier than the Tribunal.

6. The primary subject that got here up for our consideration from floor No.2 of assessee’s attraction is the order handed by TPO is barred by limitation. The ld.AR for the assessee on the time of listening to submitted that the assessee doesn’t need to press the bottom and thus, floor No.2 of assessee is dismissed as ‘not pressed’.

7. The following subject that got here up for consideration from floor no.3 of assessee attraction is switch pricing adjustment made in the direction of model improvement providers. Through the 12 months into consideration, the discovered TPO has made upward adjustment of Rs.237,51,00,000/- in relation to model charges receivable from its AEs in the direction of enhancement of brand name worth of assessee father or mother firm. The discovered TPO used Spearman’s Rank Correlation technique to conclude that there’s constructive correlation between the model worth of Hyundai Motor India Restricted and market capitalization of Hyundai market Company, South Korea. Subsequently, by making use of Spearman’s Rank Correlation technique, the ld. TPO has computed incremental model worth and attributed a portion of the identical to the assessee in proportionate to its gross sales.

7.1 The ld.AR for the assessee, on the time of listening to submitted that this subject is roofed in favour of the assessee by the choice of ITAT., Chennai in assessee’s personal case for the evaluation 12 months 2015-16 in IT(TP)A No.10/Chny/2020, whereby the Tribunal by following the sooner Tribunal order for evaluation 12 months 2013-14 in ITA No. 3192/Chny/2017, held that the problem is an identical to earlier years and accordingly deleted the model charge adjustment.

7.2 The ld. DR however, pretty agreed that this subject is roofed in favour of the assessee. However strongly supported ld. TPO/DRP order.

7.3 We now have heard each the events, perused materials obtainable on document and gone by means of orders of the authorities under. An an identical subject has been thought-about by Tribunal in assessee’s personal case for the evaluation 12 months 2015-16 in IT(TP) No.10/CHNY/2020, dated 17.09.2021, whereby the Tribunal following the sooner choice in assessee’s personal case for evaluation 12 months 2013-14 in ITA No.3192/Chny/2017, dated 01.09.2021, held that discovered TPO in addition to discovered DRP have been erred in making switch pricing changes in the direction of model providers by adopting Spearman’s Rank Correlation technique and concluded that there’s constructive accretion between model worth and market capitalization of HMC Korea and therefore, directed the AO/TPO to delete switch pricing adjustment made in the direction of model improvement providers. Subsequently, in keeping with the view taken by the coordinate Bench, we direct the AO to delete addition made in the direction of model charge adjustment.

8. The following subject that got here up for our consideration from floor no.4 of assessee attraction is disallowances u/s.14A r.w.r 8D of Earnings Tax Guidelines, 1962, amounting to Rs.70,07,153/-. The info with regard to impugned dispute are that throughout the 12 months into consideration, the assessee has earned dividend earnings from mutual funds, which is exempt from tax amounting to 1,11,645/-, nonetheless, didn’t made any suo-motto disallowance of expenditure relatable to exempt earnings. Subsequently, the Assessing Officer has invoked provisions of Rule 8D of Earnings Tax Guidelines, 1962, and decided disallowances of Rs.70,07,153/- u/s.14A of Earnings Tax Act, 1961.

8.1 The ld.AR for the assessee, on the time of listening to submitted that this subject can be coated in favour of the assessee by the choice of ITAT., Chennai in assessee’s personal case for the evaluation 12 months 2015-16 in IT(TP)A No.10/Chny/2020, whereby the Tribunal by following the sooner Tribunal order for evaluation 12 months 2013-14 in ITA No. 3192/Chny/2017, held that disallowance u/s.14A needs to be restricted to the extent of exempt earnings earned for the impugned evaluation 12 months.

8.2 The ld.DR however, pretty agreed that this subject is roofed in favour of the assessee.

8.3 We now have heard each the events, perused supplies obtainable on document and gone by means of orders of the authorities under. An an identical subject has been thought-about by Tribunal in assessee’s personal case for the evaluation 12 months 2015-16 in IT(TP) No.10/CHNY/2020, dated 17.09.2021, whereby the Tribunal following the sooner choice in assessee’s personal case for evaluation 12 months 2013-14 in ITA No.3192/Chny/2017, dated 01.09.2021 directed the AO to limit disallowances u/s.14A of the Act, to the extent of exempt earnings earned for the impugned evaluation 12 months. The related findings of the Tribunal in ITA No.3192/Chny/2017 are as below:-

“10. We now have heard each the events, perused supplies obtainable on document and gone by means of orders of the authorities under. It’s effectively settled rules of regulation that disallowances u/s.14A can not exceed quantity of exempt earnings. The Hon’ble Supreme Courtroom within the case of Pr.CIT Vs State Financial institution of Patiala (supra), whereas dismissing SLP filed by the Income towards order of the Hon’ble Punjab & Haryana Excessive Courtroom within the case of Pr.CIT Vs State Financial institution of Patiala, held that disallowance u/s.14A may very well be restricted to quantity of exempt earnings solely. The Hon’ble Jurisdictional Excessive Courtroom of Madras within the case of Marg Ltd Vs.CIT (2020) 120 Taxmann.com 84, has taken the same view and held that disallowances below Rule 8D r.w.s 14A can by no means exceed exempt earnings earned by the assessee throughout explicit evaluation 12 months. On this case, admittedly, exempt earnings for impugned evaluation 12 months was Rs.57,826/-, whereas the Assessing Officer has decided disallowance u/s.14A at Rs.86,54,491/- opposite to settled precept of regulation. Subsequently, contemplating info and circumstances of this case and in addition by following the selections of Hon’ble Supreme Courtroom and Hon’ble Madras Excessive Courtroom, we direct the Assessing Officer to limit disallowances u/s.14A to the extent of exempt earnings earned for the impugned evaluation 12 months.”

On this view of matter and in keeping with view taken by the Co-ordinate Bench, we direct the AO to limit disallowance u/s.14A to the extent of exempt earnings earned for the impugned evaluation 12 months.

9. The following subject that got here up for our consideration from floor no.5 of assessee attraction is disallowance of depreciation on capital subsidy. Through the monetary 12 months 2002-03, the State Industrial Promotion Company of Tamil Nadu (SIPCOT) had granted subsidy of Rs.100 lakhs to encourage and acknowledge enormous investments made for organising of mega venture viz., passenger automobile manufacturing unit in Irungattukottai. The assessee has handled subsidy acquired from SIPCOT as capital receipt and didn’t scale back the identical from value of belongings, because it was in a roundabout way or not directly used to buy any asset. The Assessing Officer has held that capital subsidy acquired from SIPCOT being utilized by the assessee for capital expenditure, identical should have been decreased from the price of asset added in that 12 months by contending that subsidy was immediately or not directly used to buy of asset and as per clarification (10) to part 43 the identical must be deducted from value of belongings and consequently, reworked depreciation by lowering quantity of subsidiary and disallowed a sum of Rs.1,24,585/-.

9.1 The discovered AR for the assessee submitted that this subject is roofed in favour of the assessee by the choice of ITAT., Chennai, in assessee’s personal case for evaluation 12 months 2015-16 in IT(TP)A No.10/Chny/2020, whereby the Tribunal by following the sooner Tribunal order for evaluation years 2006-07 & 2013-14 in IT(TP)A.No.14/Chny/2018 & ITA No. 3192/Chny/2017, held that subsidiary acquired from SIPCOT is capital receipt not chargeable for tax.

9.2 The discovered DR, however, pretty agreed that this subject is roofed in favour of the assessee, nonetheless strongly supported AO/DRP orders.

9.3 We now have heard each the events, perused supplies obtainable on document and gone by means of orders of the authorities under. An an identical subject has been thought-about by Tribunal in assessee’s personal case for the evaluation 12 months 2015-16 in IT(TP)A No.10/Chny/2020, whereby the Tribunal by following the choice of the Tribunal in assessee’s personal case for evaluation 12 months 2013-14 in ITA No.3192/Chny/2017, dated 01.09.2021 & 2006-07 in IT(TP)A No.14/Chny/2018 and after contemplating nature of subsidy has allowed declare of the assessee by observing that for earlier years, the CIT(A) has allowed declare of the assessee and the AO has accepted choice of the CIT(A) and deleted additions, whereas passing order giving impact to the order of the CIT(A). Subsequently, in keeping with the view taken by the coordinate Bench, we direct the AO to delete addition made in the direction of disallowance of depreciation on capital subsidy acquired from SIPCOT.

10. The following subject that got here up for consideration from floor No.6 of assessee attraction is disallowance u/s.43B(c) of the Act, in respect of efficiency incentive paid to staff. Details with regard to impugned dispute are that for the monetary 12 months related to the evaluation 12 months 2016-17, the assessee has paid efficiency reward to staff within the cadre of executives and senior executives. The assessee has offered for bills for the 12 months ended March, 2016. Nevertheless, cost was made solely after due date of submitting return of earnings for evaluation 12 months 2016-17. The Assessing Officer has disallowed efficiency incentive paid to employees u/s.43B(c) r.w.s. 36(1)(ii) of the Act, amounting to Rs.1,54,58,594/- on the bottom that as per part 43B(c), any sum referred to in clause (ii) of sub-section (1) of part 36, shall not be allowed as deduction, until the identical is paid on or earlier than due date for furnishing return of earnings u/s.139(1) of the Act. The Assessing Officer additional famous that as per part 36(1)(ii), any sum paid to an worker as bonus or fee for providers rendered, the place such sum wouldn’t have been payable to him as revenue or dividend, if it had not been paid as bonus or fee is roofed. Subsequently, he opined that any cost made to an worker which is within the nature of bonus or fee for providers rendered is roofed u/s. 36(1)(ii) of the Act, and thus, if such cost shouldn’t be made on or earlier than due date of submitting of return of earnings u/s.139(1) of the Act, then identical can’t be allowed as deduction, as per part 43B(c) of the Act. The assessee has filed objections earlier than discovered DRP and challenged additions made by the AO. The discovered DRP vide its instructions dated 23.03.2021 has rejected objections filed by the assessee and confirmed additions made by the AO.

10.2 The discovered A.R for the assessee submitted that the discovered DRP erred in sustaining additions made by the AO in the direction of disallowance of efficiency incentive paid to staff u/s.43B(c) of the Act, with out appreciating indisputable fact that mentioned cost is neither bonus nor fee and thus, identical can’t be introduced inside the ambit of provisions of part 36(1)(ii) r.w.s.43B(c) of the Earnings Tax Act, 1961.

10.3 The ld.DR however strongly supporting order of the ld.DRP submitted that this subject is roofed towards the assessee by the choice of ITAT., Chennai in assessee’s personal case for evaluation 12 months 2015-16 in IT(TP)A No.10/Chny/2020, whereby the Tribunal by following the sooner Tribunal order for evaluation 12 months 2013-14 in ITA No. 3192/Chny/2017, determined the problem towards the assessee.

10.4 We now have heard each the events, perused supplies obtainable on document and gone by means of orders of the authorities under. We discover that an an identical subject has been thought-about by the Tribunal in assessee’s personal case for evaluation 12 months 2015-16 in IT(TP)A No.10/Chny/2020, whereby the Tribunal by following the sooner Tribunal order for evaluation 12 months 2013-14 in ITA No. 3192/Chny/2017, the place below an identical circumstances, the Tribunal has held that cost made to an worker which is within the nature of bonus or fee for providers rendered is roofed u/s. 36(1)(ii) of the Act, and thus, if such cost shouldn’t be made on or earlier than due date of submitting of return of earnings u/s.139(1) of the Act, then identical can’t be allowed as deduction, as per part 43B(c) of the Act. The related findings of the Tribunal are as below:-

11. The following subject that got here up for our consideration from further floor no.7 of the assessee attraction is deduction in the direction of schooling and secondary schooling cess u/s.37(1) of the Act.

11.1 The ld.AR for the assessee submitted that this subject is roofed in favor of the assessee by the choice of ITAT., Chennai in assessee’s personal case for 2015-16 in IT(TP)A No.10/Chny/2020, whereby the Tribunal by following the sooner Tribunal order for evaluation 12 months 2013-14 in ITA No. 3192/Chny/2017, the place below an identical circumstances, the Tribunal has remanded the matter to the file of the AO to contemplate the problem in accordance with regulation.

11.2 The discovered DR, however, pretty agreed that this subject has been put aside to the file of AO for earlier years and therefore, this 12 months additionally the problem could also be remanded again to the file of Assessing Officer.

11.3 Having heard each the events and regarded materials on document, we discover that the Tribunal had thought-about an an identical subject for evaluation 12 months 2015-16 in IT(TP)A No.10/Chny/2020, whereby the Tribunal by following the sooner Tribunal orders 201314 in 3192/Chny/2017, the place the problem has been remanded again to the file of AO to contemplate the problem denovo on deserves in accordance with regulation, put aside subject to the file of Assessing Officer. Details being an identical for the 12 months into consideration, by following the choice of Tribunal in assessee’s personal case for evaluation 12 months 2015-16, we set-aside the problem to file of the AO to re-examine the problem as per the instructions given by the Tribunal.

12. The following subject that got here up for our consideration from floor no.8 of assessee attraction is addition in the direction of VAT incentive acquired from Authorities of Tamil Nadu. Through the 12 months into consideration, the assessee has acquired refund of output VAT amounting to Rs.90,95,09,568/- from Govt. of Tamil Nadu and credited to revenue and loss account below the pinnacle earnings from different sources. The assessee has handled above incentive as income receipt each for its books of account and its tax returns. Nevertheless, throughout the course of evaluation proceedings, the assessee has raised a recent declare to deal with incentive as capital receipts not chargeable to tax. The AO has not adjudicated recent declare made by the assessee. The discovered DRP has rejected objections filed by the assessee with out giving any particular course.

12.1 The discovered AR for the assessee submitted that this subject can be coated in favor of the assessee by the choice of ITAT., Chennai in assessee’s personal case for 2015-16 in IT(TP)A No.10/Chny/2020, whereby

Best Steam Irons in India
Lenovo Tab M11 Indian Launch Teased w…
The Impact of Benfotiamine on Managin…
A Massive Essential Store Now Continu…

This post first appeared on Stock Market News Today, please read the originial post: here