Case Law Details
Unilever India Exports Limited Vs ACIT (ITAT Mumbai)
ITAT Mumbai held that disallowance u/s 14A untenable as AO has mechanically applied rule 8D without having recorded his satisfaction or examining the nature of investments whether they have yielded any exempt income or not.
Facts- The assessee, Unilever India Exports Limited (UIEL) is a wholly owned subsidiary of Hindustan Unilever Limited (HUL). The assessee company is engaged in the manufacturing of branded FMCG products, namely Foods and Beverages and Home and Personal Care (HPC) products. These brands are owned either by Unilever Plc / Unilever NV, the ultimate parent companies of the Unilever Group of HUL.
Since the assessee had international transactions with its AE a reference was made to the Transfer Pricing Officer (TPO) for determination of Arm’s Length Price (ALP) of such transactions.
AO passed the draft assessment order incorporating adjustments towards payment of royalty for technical documentation, information and technical knowhow; payment of royalty for central services and payment of raw material and the sale/ export of HPC & P&B. Besides, AO also made a disallowance u/s. 14A for Rs.83,83,273/- and also disallowance of ESOP expenses to the tune of Rs.1,47,50,000/-.
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