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04-07-2019, Mondelez India Foods, Section 250, 92CA(3), 92C(2), Tribunal Mumbai

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3 months 3 days ago #10008 by amit
Section - 250, 92CA(3), 92C(2), 32, 80-IC, 40(a)(ia), 43B
Order Date - 04-07-2019
Favouring - Assessee Partly
Court - Tribunal Mumbai
Appellant - Mondelez India Foods Pvt. Ltd.
Respondent - ACIT
Justice - Shamim Yahya (AM) & Ramlal Negi (JM)
Citation - 719Taxpundit102
Appeal No. - I.T.A. No. 4225/Mum/2014
Asstt. Year - 2007-08

Order

PER : Shamim Yahya (AM):

This appeal by the assessee is directed against the order of learned CIT(A) dated 19.3.2014 and pertains to A.Y. 2007-08.

2. Grounds of appeal read as under :-

Based on the facts and in the circumstances of the case and in law, Mondelez India Foods Limited (hereinafter referred to as 'the Appellant') craves leave to prefer an appeal against the order dated 19 March 2014 passed by the Hon'ble Commissioner of Income-tax (Appeals) -15, Mumbai [hereinafter referred to as the 'CIT(A)]' under section 250 of the Income-tax Act, 1961 (hereinafter referred to as 'the Act'), on the following grounds:

Based on the facts and in the circumstances of the case and in law, the Hon'ble CIT(A) has erred:

Transfer pricing adjustments

1. In making an adjustment of Rs 21,37,70,000 to the total income of the Appellant under section 92CA(3) of the Act on account of adjustment in the arm's length price of international transactions of the Appellant. Payment of Royalty

2. In not accepting the economic analysis undertaken by the Appellant using the Transactional Net Margin Method ('TNMM'), in accordance with the provisions of the Act read with the Income-tax Rules, 1962 ('the Rules'), for the determination of the arm's length price in connection with the international transaction of payment of royalty to its associated enterprises ('AE').

3. In determining the arm's length price for the trademark royalty paid to Cadbury Schweppes Overseas Limited at Rs NIL vis-a-vis the actual payment of Rs 10,74,54,000 on the ground that the same was subsumed in the technical assistance royalty paid by the Appellant.

4. In not considering the agreements submitted as Comparable Uncontrolled Price ('CUP') by the Appellant while determining the arm's length price.

5. In not considering the approvals received from Secretariat of Industrial Assistance/ Reserv Bank of India in respect of payments made by the Appellant while determining the arm's length price.

6. In restricting the payment of royalty to Cadbury Adams USA LLC at 1 percent on the ground that license to use the technology was not obtained directly from the licensor but from a sub-licensor and thereby making an adjus ment of Rs 71,12,000.

7. In not considering the +/- 5% variation from the arm's length price permitted to the Appellant under the proviso to section 92C(2) of the Act. Service fees to Cadbury Schweppes Asia Pacific Pte. Limited "

8. In concluding that the Appellant has failed to establish the basis for determining the consideration for services at the requisite amount.

9. In not accepting the economic analysis undertaken by the Appellant using the TNMM method, in accordance with the provisions of the Act read with the Rules, for the determination of the arm's length price in connection with the international transaction of payment of service fees to Cadbury Schweppes Asia Pacific Pte. Limited, Singapore.

10. In determining the value of the services received from Cadbury Schweppes Asia Pacific Pte. Limited, Singapore at Rs NIL vis-a-vis the actual payment of Rs 9,92,04,000, without undertaking any comparability analysis for the same based on provisions of section 92C of the Act.

11. In not considering the +/- 5% variation from the arm's length price permitted to the Appellant under the proviso to section 92C(2) of the Act. Corporate tax additions/ disallowances In confirming the adjustments made by the Additional Commissioner of Income-tax - 5(1) ('learned AC1') amounting to Rs 1 2,26,61 ,755 to the total taxable income of the Appellant on account of various additions/ disallowances under the provisions of the Act. Denial of depreciation on marketing know how

12. In upholding the disallowance of Rs 17,06,629 made by the learned AO with respect to depreciation on marketing know-how claimed by the Appellant under section 32 of the Act. Allocation of expenses in respect of Appellant's unit at Baddi

13. In upholding the action of the learned AO of arbitrarily allocating on basis of sales turnover, the expenditure incurred by the Appellant to its unit at Baddi and disregarding the allocation by the Appellant on scientific basis, for determining profits eligible for deduction under section 80-IC of the Act. Thus, reducing the said deduction claimed in the Return of Income from Rs 41 ,06,18,903 to Rs 28,96,63,777.

The above grounds are without prejudice to one another.

The Appellant craves leave to add, alter, omit or substitute any or all of the above grounds of appeal, at any time before or at the time of the appeal hearing.

Apropos issue relating to transfer pricing adjustment for payment of royalty.

Ground No. 2 to 5 relates to this issue.

3. The assessee in this case is a listed company engaged in manufacturing and marketing of malted food and drinks and chocolates. On this issue the Transfer Pricing Officer (TPO) noted that Cadbury India had entered into Technical Assistance and Royalty Agreement with AE M/s. CSOL on 9.3.1993

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