Untenable disallowance under Section 14A due to the mechanical implementation of Rule 8D
Fact and issue of the case
These appeals of the assessee are directed against the order of the Assistant Commissioner of Income-tax, Central Circle-5(3), Mumbai passed under section 143(3) read with section 144C(13) dated 28/06/2022 and 28/07/2022 for the Assessment Years 2017-18 and 2018-19, respectively. Since identical issues are agitated in these appeals, both the appeals are disposed of by way of this common order.
The assessee, Unilever India Exports Limited (UIEL) is a wholly owned subsidiary of Hindustan Unilever Limited (HUL). The fast moving consumer goods (FMCG) exports business of HUL was transferred to UIEL under a court approved scheme of arrangement with the appointed date of April 1, 2011.
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.
I.T.A. No.2108/Mum/2022 for AY 2017-18
The assessee has e-filed its return of income for A.Y. 2017-18 declaring total income of Rs.156,38,060/- on 30/11/2017 Statutory notices along with questionnaire were issued by the Assessing Officer which have been complied with by the assessee by electronically submitting the details called for from time to time. Since the assessee had international transactions with its AE a reference was made to the Transfer Pricing Officer (TPO) for determination of Arms Length Price (ALP) of such transactions. The TPO made the following adjustments:-
|1.||Payment of royalty for technical documentation, information and technical know||Rs. 6,54,03,000/-|
|2.||Payment of royalty for central services||Rs. 11,65,31,532/-|
|3.||Purchase of raw material and the sale/ Export of HPC & P&B||Rs. 40,11,63,635/-|
Observation of the court
Excess Levy of interest u/s.234B and D (Ground No.14)
In this regard we direct the assessing officer to consider the facts afresh and rectify the errors in the calculation interest u/s.234B and 234D after giving a reasonable opportunity of being heard.
Ground 1 is general and Ground No.15 is consequential and these grounds do not warrant a separate adjudication.
The assessee also raised a legal issue through Ground No.2 with respect to the assessment order being issued without Department Identification Number (DIN). The ld AR during the course of hearing submitted that if the issues are considered on merits and held in favour of the assessee the ground no.1 will not be pressed. In view of our decision as given in this order, the legal issue contended has become academic and accordingly left open.
I.T.A. No.2107/Mum/2022 for A.Y. 2018-19
Ground No.1 is general and Ground No.8 is consequential and these grounds do not warrant a separate adjudication.
Through Ground No.2, the assessee is contending the TP adjustment made towards Central Services. For the year under consideration the ld AR and Ld DR made similar submissions. We have in the earlier part of this order, have considered the same issued and have held that the TP adjustment be deleted. The facts for AY 2018-19 being identical, we hold that the TP adjustment made towards central services for this year also be deleted.
Ground No.7 pertains to excess levy of interest u/s.234B. In this regard we direct the assessing officer to consider the calculation of interest afresh in accordance with law and rectify the errors in the computation of interest.
In the result, appeal of the assessee for AY 2017-18 and 2018-19 are allowed.
Order pronounced in the open court on 11/05/2023.
In the result, appeal of the assessee is allowed and ruled in favour of the assessee
You must be logged in to post a comment.