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09-01-2019, Nokia India, Section 115JB, 37(1), Tribunal Delhi

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4 days 19 hours ago #8332 by amit
Section - 115JB, 37(1), 145-A
Order Date - 09-01-2019
Favouring - Assessee
Court - Tribunal Delhi
Appellant - Nokia India P. Ltd.
Respondent - DCIT
Justice - PRASHANT MAHARISHI AM & K.NARASIMHA CHARY JM
Citation - 119Taxpundit128
Appeal No. - ITA No.5744/Del/2015
Asstt. Year - 2001-02

Order

PER : K. NARASIMHA CHARY

Challenging the order dated 17/08/2015 in appeal No. 168/13-14 passed by the learned Commissioner of Income Tax (Appeals)-6, Delhi (“Ld. CIT(A)”) assessee preferred this appeal.

2. Brief facts of the case are that the Nokia India private limited (assessee) is a wholly-owned subsidiary of Nokia Corporation, Finland. They have filed their return of income for the assessment year 2001-02 on 31/10/2001 declaring nil income, after setting off the unabsorbed business losses and depreciation. The assessee had the book profits and, therefore, liable to pay tax of Rs.3,499,284 as per section 115 JB of the Income Tax Act, 1961 (“the Act”). Assessment was completed under section 143(3) of the Act at a total income of Rs.12,20,00,470/-by order dated 29/03/2004 and the appeal against the said order was partly allowed by the 1st appellate authority.

3. The assessee claimed Rs.7,48,62,367/- as marketing expenses during the Financial Year 2000-01 which included Rs.59,38,347/- incurred on account of FOC handsets issued to employees, dealers and AMSCs. Details of such FOC handsets issued during the year is as under:

4. Ld. AO in his assessment order dated March 29, 2004 i.e., original order u/s 143 (3) of the Act held that these handsets were capital assets of the appellant and disallowed aforementioned expenditure after allowing depreciation @ 25%. Such an addition of the AO was upheld by the Ld. CIT(A) in his order. In the Second Appeal, a coordinate Bench of this Tribunal in its order dated December 5, 2008 summarily rejected the contentions of the appellant and upheld the order of the CIT(A). Matter was carried to the Hon’ble Delhi High Court and Hon’ble High Court, by order dated July 14, 2009, remanded the matter to the Tribunal for fresh consideration on the ground that ITAT summarily dismissed the arguments of the appellant. Subsequently, ITAT in its order dated 22/09/2011 remitted back the matter to the AO to consider the issues relating to the addition of Rs.44,53,700/- on account of disallowance of marketing expenses and Rs.80,03,258/-on account of closing stock afresh after providing an opportunity of being heard to the appellant. Ld. AO, however, in its order dated 31/03/2013 passed under section 143(3) of the Act and 254 of the Act repeated the following additions:

(i) Disallowance on account of handsets issued on FOC basis to employees, dealers and After Market Service Centers (“AMSCs”) amounting to INR 44,53,700 [ 1NR 59,38,347 - 25% depreciation].

(ii) Addition to closing stock amounting to INR 80 03,258 on account of FOC handsets issued to employees, dealers and AMSC’s as also damaged handsets, thus leading to double addition of INR 59,38,347, already disallowed at Sr. No. 1

5. When the assessee preferred an appeal against the above additions before the Ld. CIT(A), the Ld. CIT(A) vide impugned order confirmed the additions and dismissed all the grounds of appeal. The assessee, therefore, is in this appeal before us challenging those two additions.

6. Coming to the disallowance of marketing expenses incurred by way of issuance of handsets on Free of cost (“FOC”) basis to employees, dealers and AMSC’s - INR 44,53,700 (INR 59,38,347-25% depreciation) covered by Ground No. 2, 4,5 and 6, it is argued by the Ld. AR that the phones issued on a free of cost basis form part of the stock-in-trade of the appellant and cannot be considered as a capital asset. He submitted that the handsets issued on FOC basis by the appellant include the Handsets issued to employees for interaction with dealers and other service organizations; Handsets issued to AMSC’s for issuing new handsets to customers in the event handsets sold to customers are

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