D.C.I.T., CIRCLE - 10(1), KOLKATA, KOLKATA vs. M/S. BERGER PAINTS INDIA LTD.,, KOLKATA

ITA 740/KOL/2018Status: DisposedITAT Kolkata22 September 2026AY 2013-1428 pages
AI SummaryPartly Allowed

What were the facts?

The Revenue is in appeal against the order of the CIT(A) for Assessment Year 2013-14. The assessee, Berger Paints India Ltd., filed its return declaring total income of Rs. 2,27,80,67,420/-. A revised return was filed, declaring total income at Rs. 2,23,88,32,440/-. The Assessing Officer (AO), after referring the case to the Transfer Pricing Officer (TPO), made additions/disallowances totaling Rs. 22,36,71,009/-, including disallowance of deduction u/s. 80IB, disallowance u/s. 14A r.w. Rule 8D, and adjustments u/s. 92CA(3). The CIT(A) partly allowed the assessee's appeal, deleting several additions. The Revenue's appeal before the ITAT challenges the deletion of additions related to Section 80IB and Section 14A, and also raises additional grounds concerning corporate guarantee, interest on deemed loan, royalty income, technical support services, and allocation of expenses.

What did the Tribunal hold?

The Tribunal addressed the issues as follows: Regarding the receipt of Royalty income (issue 5), the Tribunal noted the assessee's concession that the TPO did not share the search strategy and requested the issue be set aside to the TPO for a fresh decision after providing the search strategy and an opportunity of being heard. The Tribunal accepted this submission and set aside the issue to the file of the Ld. TPO for fresh consideration. Additional grounds (vii) and (viii) concerning technical support services were dismissed as redundant because the TPO made no adjustment, and these issues were not before the CIT(A). The Tribunal held that the appeal of the Revenue is dismissed on all grounds except for the issue of royalty income, which has been set aside for fresh consideration. Therefore, the appeal of the Revenue is partly allowed for statistical purposes.

What were the issues?

1. Whether the CIT(A) erred in allowing deductions claimed by the assessee u/s. 80IB for Rs. 1,28,02,000/-, holding that the AO's apportionment was unjustified and the assessee's allocation basis was reasonable and scientific (Section 80IB). 2. Whether the CIT(A) erred in deleting the addition made u/s. 14A r.w. Rule 8D for Rs. 1,65,63,353/-, without considering the AO's findings regarding borrowed capital and investments yielding exempt income (Section 14A). 3. Whether the CIT(A) erred in deleting the arm's length price adjustment of Rs. 6,26,74,830/- made by the AO/TPO on account of Corporate Guarantee to the AE, and whether such provision is not a shareholder activity and an arm's length charge needs to be determined (Section 92CA). 4. Whether the CIT(A) erred in deleting the arm's length price adjustment of Rs. 23,28,065/- made by the AO/TPO on account of interest on deemed loan in respect of equity contribution at inflated price (Section 92CA). 5. Whether the CIT(A) erred in deleting the adjustment made by the AO/TPO for international transaction of payment of royalty of Rs. 1,20,27,761/- (Section 92CA). 6. Whether the CIT(A) erred in deleting the adjustment made by the AO/TPO on account of allocation of expenses of Rs. 11,72,75,000/- (Section 92CA). Assessee's Contention (for issue 5): The Ld. AR conceded that the TPO did not share the search strategy and cherry-picked comparables. The assessee requested the issue be set aside to the TPO for a fresh decision after providing the search strategy and an opportunity of being heard. The assessee also referred to an alternate search showing royalty income at 1.85% of comparable uncontrolled agreements. Revenue's Contention (for issue 1): The Ld. CIT(A) erred in allowing deductions u/s. 80IB by holding the AO's apportionment unjustified and the assessee's allocation basis reasonable. Revenue's Contention (for issue 2): The Ld. CIT(A) erred in deleting addition u/s. 14A r.w. Rule 8D without considering AO's findings on borrowed capital and investments yielding exempt income. Revenue's Contention (for issues 3, 4, 6, 7, 8, 9, 10, 11): The Ld. CIT(A) erred in deleting adjustments made by AO/TPO on account of Corporate Guarantee, interest on deemed loan, royalty, technical support services, and allocation of expenses, and that these were not shareholder activities or required arm's length charges.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 144C,Section 115JB,Section 32,Section 80IB,Section 142(1),Section 92CA,Section 14A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “C” BENCH, KOLKATA

Before: Shri Rajesh Kumar & Shri Pradip Kumar Choubey

Per Pradip Kumar Choubey, Judicial Member:

This appeal filed by the revenue is directed against the order dated 12.01.2018 of the Office of the National Faceless Appeal Centre (NFAC), Delhi passed under Section 143(3) read with Section 144C of the Assessment Year 2013-14 of the Income-Tax Act, 1961 (hereinafter referred to as “the Act”).

2.

The brief facts of the case of the assessee is that for the year under consideration the assessee filed its return of income on 29th November, 2013 i.e. within

The order continues below.

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