Asian Paints Ltd. Vs ACIT (ITAT Mumbai)
Summary: ITAT Mumbai partly allowed Asian Paints Ltd.’s appeal and partly allowed the Revenue’s appeal for statistical purposes for Assessment Year 2013-14. On Section 14A read with Rule 8D, the Tribunal held that the Assessing Officer proceeded to compute disallowance of Rs.1,82,91,196 without recording the requisite satisfaction regarding the correctness of the assessee’s suo-moto disallowance. Following the assessee’s own case and the principles in Maxopp Investment Ltd. and Godrej & Boyce Manufacturing Company Ltd., the disallowance was deleted. On transfer pricing for support and intragroup services, Axis Integrated Systems Ltd. and Inmacs Management Services Ltd. were directed to be excluded as comparables because the available material did not establish sufficiently comparable activities. As regards letters of comfort/support issued for subsidiaries, the Tribunal followed its decision for the preceding year and held that the letters constituted an international transaction, while sustaining the arm’s length rate of 0.04%.
In the Revenue’s appeal, the Tribunal upheld the CIT(A)’s directions concerning deduction under Section 35(2AB) and followed earlier orders in the assessee’s own case on valuation of damaged stock and additional depreciation. Dealer trip-scheme expenditure was allowed following earlier years, where the expenditure was treated as connected with the assessee’s business and the dealers/distributors were not shown to be agents attracting Section 194H. The Tribunal also dealt with waiver of royalty, CSR expenditure, sundry balances written off and subsidy received under Maharashtra’s Package Scheme of Incentives, 2007. CSR expenditure incurred before the prospective operation of Explanation 2 to Section 37(1) was allowed. The sundry-balance issue was restored to the AO for de novo adjudication. Applying the purpose test laid down in the subsidy decisions, the Tribunal held that the Maharashtra subsidy was capital in nature because its object was to encourage establishment of industries in less-developed areas rather than to enable profitable operation of an existing business. The assessee’s appeal was partly allowed and the Revenue’s appeal was partly allowed for statistical purposes.
