Honda Motorcycle And Scooter India Pvt. ... vs Assessee

M/s. Honda Motorcycle and Scooter India vs. ACIT, Circle 1 (1), Private Limited, Gurgaon. Plot No.1, Sector 3, IMT Manesar, Gurgaon.

(PAN : AAACH7467D)

(APPELLANT) (RESPONDENT)

ASSESSEE BY : Shri Vijay Iyer, CA REVENUE BY : Shri Judy James, Standing Counsel DR

Date of Hearing : 31.03.2015 Date of Pronouncement : .04.2015

ORDER

PER GEORGE GEORGE K., JM :

This appeal, at the instance of the assessee, is directed against the

final assessment order passed u/s 143(3) read with section 144C of the

Income-tax Act, 1961 (order dated 29.11.2012). The relevant assessment

year is 2008-09.

2. The assessee has primarily raised two grounds. The first ground

relates to transfer pricing adjustments amounting to Rs.8,09,08,657/- on

account of two international transactions, namely, the payment of export 2 ITA No.132/Del./2013

commission amounting to Rs.6,87,02,000/- and payment of royalty for

export to Associated Enterprises (AEs) of Rs.1,22,06,657/-. The second

ground is regarding corporate tax matters. We shall first adjudicate the

transfer pricing issue.

3. Briefly stated, the facts with reference to transfer pricing issue are as

follows. The assessee is a company engaged in manufacturing, sale and

service of two wheelers, parts and accessories thereof. The assessee is a

wholly owned subsidiary of M/s. Honda Motors Company Ltd., Japan.

The assessee had reported ten international transactions. On reference

made by the Assessing Officer, the Transfer Pricing Officer (TPO)

accepted eight international transactions at Arm's Length Price (ALP). As

regards the international transaction of payment of "export commission",

the TPO held that no services were rendered by the AEs to deserve the

export commission. It is in this context the TPO determined the ALP of

this international transaction at "nil". As regards international transaction

of payment of "royalty", the TPO accepted payment of royalty at ALP in

respect of domestic sales and export sales made to non-AE's. However, he

disputed the payment of royalty in respect of exports made to AE's. In

doing so, the TPO held that the assessee is a "contract manufacturer".

Accordingly, he opined that since assessee is making a part of its sales to

its related parties and benefit of producing components is reaped by the

AE, the payment of royalty did not conform to the arm's length principle. 3 ITA No.132/Del./2013

He, therefore, made the TP adjustment amounting to Rs.1,22,06,657/- in

respect of payment of royalty for exports to AEs. The Assessing Officer

adopted the above figures from TPO's order as such, without any further

evaluation.

4. Aggrieved, the assessee preferred an application before the Disputes

Resolution Panel (DRP). The DRP vide its directions dated 24.09.2012 u/s

144C(5) rejected the assessee's plea and confirmed the draft assessment

order with regard to the transfer pricing adjustment. The assessee being

aggrieved is in appeal before us.

5. As regards the issue with regard to payment of export commission, it

was submitted by the ld. Counsel for the assessee that the matter needs to

be restored to the AO/TPO for fresh consideration in the light of judgment

of Hon'ble jurisdictional High Court in the case of CIT-I Vs. Cushman

and Wakefield (India) (P.) Ltd. reported in [2014] 46 taxmann.com 317

(Delhi), since the export commission has been disallowed primarily by the

TPO for the reason that assessee has not received any benefit for the

payment of such sum. The ld. DR also did not have any objection with

regard to remanding of the issue of export commission to AO/TPO.

6. We have heard rival submissions and perused the material on record.

The Hon'ble Jurisdictional High Court in the case of CIT-I Vs. Cushman

and Wakefield (India) (P.) Ltd. (supra) held that TPO cannot determine

arm's length price of the payments made by the assessee to its 'AE' at 'nil' 4 ITA No.132/Del./2013

for the reason that assessee did not derive any benefit from services

rendered by AE. The relevant finding of the Hon'ble jurisdictional High

Court reads as under:-

"34. The Court first notes that the authority of the TPO is to conduct a transfer pricing analysis to determine the ALP and not to determine whether there is a service or not from which the assessee benefits. That aspect of the exercise is left to the AO. This distinction was made clear by the IT AT in Dresser- Rand India (P.) Ltd v. Addl. CIT (2011) 47 SOT 423/13 taxxmann. com 82 (Mum.):

"8. We find that the basic reason of the Transfer Pricing Officer's determination of ALP of the services received under cost contribution arrangement as 'NIL' is his perception that the assessee did not need these services at all, as the assessee had sufficient experts of his own who were competent enough to do this work. For example, the Transfer Pricing Officer had pointed out that the assessee has qualified accounting staff which could have handled the audit work and in any case the assessee has paid audit fees to external firm. Similarly, the Transfer Pricing Officer was of the view that the assessee had management experts on its rolls, and. therefore, global business oversight services were not needed. It is difficult to understand, much less approve, this line of reasoning. It is only elementary that how an Assessee conducts his business is entirely his prerogative and it is not for the revenue authorities to decide what is necessary for an Assessee and what is not. An Assessee may have any number of qualified accountants and management experts on his rolls, and yet he may decide to engage services of outside experts for auditing and management consultancy; it is not for the revenue officers to question Assessee's wisdom in doing so. The Transfer Pricing Officer was not only going much beyond his powers in questioning commercial wisdom of Assessee's decision to take benefit of expertise of Dresser Rand US, but also beyond the powers of the Assessing Officer. We do not approve this approach of the revenue authorities. We 5 ITA No.132/Del./2013

have further noticed that the Transfer Pricing Officer has made several observations to the effect that, as evident from the analysis of financial performance, the assessee did not benefit, in terms of financial results, from these services. This analysis is also completely irrelevant, because whether a particular expense on services received actually benefits an Assessee in monetary terms or not even a consideration for its being allowed as a deduction in computation of income, and, by no stretch of logic, it can have any role in determining arm's length price of that service. When evaluating the arm's length price of a service, it is wholly irrelevant as to whether the assessee benefits from it or not; the real question which is to be determined in such cases is whether the price of this service is what an independent enterprise would have paid for the same. Similarly, whether the AE gave the same services to the assessee in the preceding years without any consideration or not is also irrelevant. The AE may have given the same service on gratuitous basis in the earlier period, but that does not mean that arm's length price of these services is 'nil'. The authorities below have been swayed by the considerations which are not at all relevant in the context of determining the arm's length price of the costs incurred by the assessee in cost contribution arrangement. We have also noted that the stand of the revenue authorities in this case is that no services were rendered by the AE at all, and that since there is No. evidence of services having been rendered at all, the arm's length price of these services is 'nil'."

35. The TPO's Report is, subsequent to the Finance Act, 2007, binding on the AO. Thus, it becomes all the more important to clarify the extent of the TPO's authority in this case, which is to determining the ALP for international transactions referred to him or her by the AO, rather than determining whether such services exist or benefits have accrued. That exercise - of factual verification is retained by the AO under Section 37 in this case. Indeed, this is not to say that the TPO cannot - after a consideration of the facts - state that the ALP is 'nil' given that an independent entity in a comparable transaction would not pay any amount. 6 ITA No.132/Del./2013

However, this is different from the TPO stating that the assessee did not benefit from these services, which amounts to disallowing expenditure. That decision is outside the authority of the TPO. This aspect was made clear by the ITAT in Delloite Consulting India (P.) Ltd. v. Dy. CIT/ITO [2012] 137 ITD 21122 taxmann.com 107 (Mum):

"37. On the issue as to whether the Transfer Pricing Officer is empowered to determine the arm's length price at "nil", we find that the Bangalore Bench of the Tribunal in Gemplus India (P.) Ltd. v. Asstt. CIT [IT Appeal No. 352 (Bang.) of 2009, dated 20-10-2010] held that the assessee has to establish before the Transfer Pricing Officer that the payments made were commensurate to the volume and quality service and that such costs are comparable. When commensurate benefit against the payment of services is not derived, then the Transfer Pricing Officer is justified in making an adjustment under the arm's length price.

38. In the case on hand, the Transfer Pricing Officer has determined the arm's length price at "nil" keeping in view the factual position as to whether in a comparable case, similar payments would have been made or not in terms of the agreements. This is a case where the assessee has not determined the arm's length price. The burden is initially on the assessee to determine the arm's length price. Thus, the argument of the assessee that the Transfer Pricing Officer has exceeded his jurisdiction by disallowing certain expenditure, is against the facts. The Transfer Pricing Officer has not disallowed any expenditure. Only the arm's length price was determined. It was the Assessing Officer who computed the income by adopting the arm's length price decided by the Transfer Pricing Officer at "nil"."

This is a slender yet crucial distinction that restricts the authority of the TPO. Whilst the report of the TPO in this case ultimately noted that the ALP was 'nil', since a comparable entity would pay 'nil' amount for these services, this Court noted that remarks concerning, and the final 7 ITA No.132/Del./2013

decision relating to, benefit arising from these services are properly reserved for the AO.

36. In this case, the issue is whether an independent entity would have paid for such services. Importantly, in reaching this conclusion, neither the Revenue, nor this Court, must question the commercial wisdom of the assessee, or replace its own assessment of the commercial viability of the transaction. The services rendered by CWS and CWHK in this case concern liaising and client interaction with IBM on behalf of the assessee - activities for which, according to the assessee's claim - interaction with IBM's regional offices in Singapore and the United States was necessary. These services cannot - as the ITAT correctly surmised - be duplicated in India insofar as they require interaction abroad. Whether it is commercially prudent or not to employ outsiders to conduct this activity is a matter that lies within the assessee's exclusive domain, and cannot be second guessed by the Revenue.

37. At this point, it is noteworthy that the circumstance that the assessee had market research facilities in India does not correspond to the performance of services abroad, especially in relation to client interaction services located outside India - albeit for ultimately sourcing them into the Indian market. The e-mails considered by the ITA T from Mr. Braganza and Mr. Choudhary so far as they deal with specific interaction with IBM by those persons, and relate it to benefits obtained by the assessee, provide a sufficient basis to hold that benefit accrued to the assessee. However, this determination remains unclear and inchoate. The devil here lies in the details. The details of the specific activities for which cost was incurred by both CWS and CWHK (for the activities of Mr. Braganza and Mr. Choudhary), and the attendant benefit to the assessee, have not been considered till date. This must be provided, in addition to a consideration of the ALP vis-avis the total cost claimed by these AEs. To this extent, for the consideration of ALP in respect of these transactions, the matter is remanded back to the file of the concerned AO, for an ALP assessment by the TPO, followed by the AO's assessment order in accordance with law."

8 ITA No.132/Del./2013

7. The Hon'ble High Court categorically held that the TPO is to

conduct a Transfer Pricing analysis to determine the arm's length price

(ALP) and not to determine whether there is a service from which assessee

has derived benefit or not. The Hon'ble Court held that the exercise to

determine whether assessee had derived any benefit or not from payment

of such management fee is to be examined by the AO and appropriate

disallowance u/s 37 is called for. In the instant case, the TPO had

determined the ALP of payment of export commission at 'NIL' by holding

that the assessee did not derive any benefit from services rendered by the

AE. Therefore, keeping in view the dictum laid down by the judgment of

the Hon'ble Jurisdictional High Court, necessarily AO as to determine

whether the assessee has derived any benefit from payment of export

commission and if any benefit had derived, whether such payment is

commensurate to comparable transaction has to be examined by the TPO.

For the above said purpose, the Transfer Pricing issue is restored to

AO/TPO for denovo consideration. We order accordingly.

8. As regards the payment of royalty, the TPO disallowed the same,

primarily for the reason that the assessee is a contract manufacturer and the

benefit of producing the components is reaped by the AE. The relevant

findings of the TPO read as follows :-

"5.1 The position of the assessee company with regard to manufacturing for the AEs is that of a 'Contract Manufacturer', as discussed above. Goods are manufactured 9 ITA No.132/Del./2013

in India and then a part of it is exported to AEs. The royalty paid as a percentage of sales to the associated enterprise is not at arm's length because it amounts to collecting royalty on the sales to itself. All the AEs are typically within the broad umbrella of the multinational corporation. Even though, it appears that the technical knowhow is commercially exploited in India, in realty the price for these activities is not fixed by market forces. Whether the sales of the assessee are made within India to its AE or to the parent company does not make much difference to the principles of arm's length transactions. In this case the capacity and other parameters are tied to the AEs capacity and it cannot act like an entrepreneur. Therefore, both the risk and reward are like a contract manufacturer. No contract manufacturer would like to make this kind of transaction with an independent third party.

.....

5.4 In the present case where the assessee company is making a part of its sales to its related parties and the benefit of producing components is reaped by AE, the payment of charges for royalty does not conform to the arm's length principle. This view has been upheld in the recent case of ACIT v. Sono Okegawa Precision Forging Ltd. [2010-TII-41- ITAT-DEL-TP], where it was held that payment of royalty by a contract manufacturer is not at arm's length.

Based on the discussion above the ALP of the transaction related to payment of royalty for exports to AE of Rs.12,206,657 is held to be 'nil'."

9. The DRP confirmed the above transfer pricing adjustment made by

the TPO by observing as under :-

"4.3 As far as payment of Royalty is concerned, the TPO has determined the ALP of the same at NIL for the export sales made to AEs. Needless to say, the analysis has germinated from the above findings of the assessee being a contract manufacturer, which in our opinion is correct. The assessee has said that under independent circumstances no one would 10 ITA No.132/Del./2013

impart with the technology without a compensation. In our opinion this fact has to be examined under each situation. Though we are of the opinion that this statement holds good but at the same time, if an enterprise is imparting a technology for manufacture off shore and imports are made then the payment of royalty is not justified. In such a situation, the technology is reaped by the assessee for its own sales but only for exports to the entity or the group from whom the technology flows in. The TPO has correctly determined the ALP of royalty on export sales to its AEs at NIL."

10. Aggrieved, the assessee is in appeal before us. It was submitted by

the ld. Counsel that the AO/TPO has allowed the royalty payment on

domestic sales as well as export sales to the non-AEs. It was stated that

the assessee is not a contract manufacturer and on the contrary, it is a full

risk bearing independent manufacturer that also export its products to AE

and non-AEs. It was submitted that the same is also evident from the

financial results of the assessee that it has independent sales, both domestic

as well as exports. The assessee derives premium price of 30% on export

of some of the products, net of export commission for the assessment year

2008-09. The assessee has also earned a profit of 7% in export segment

against the profit of 2.7% in domestic segment during the relevant year.

The ld. AR has further submitted that the AO/TPO has not disputed at any

point of time the transfer of technology. The only question that is raised is

the transaction model, namely, principal manufacturer or the contract

manufacturer. It was submitted that the assessee is a principal

manufacturer and earns adjusted profit of 18% in the assessment year 11 ITA No.132/Del./2013

2008-09 against the routine returns as a contract manufacturer. It was

contended that as a principal, assessee is obliged to pay for technology in

respect of its sales including sales to its AEs. The ld. AR had submitted a

comparison chart of export sales made to AEs and non-AEs wherein it has

showed that the price of the exports to AEs is much higher than to the non-

AEs, even after considering the royalty and commission payments. The ld.

AR took us through the technical know-how agreement dated 13.07.2000

and the amendments to the agreements on December 2006 and November

2007. The ld. AR has also placed reliance on the order of the Tribunal in

assessee's own sister concern, namely, M/s. Hero MotoCorp Limited vs.

Addl.CIT in ITA No.5130/Del/2010 order dated 23.11.2012 wherein a

similar payment of royalty was allowed by the Tribunal and no adjustment

was made to the ALP.

11. On the other hand, the ld. DR strongly supported the assessment

order / TPO's order.

12. We have heard rival submissions and perused the material on record.

The assessee has made payment of royalty as per the technology know-

how agreement dated July 13, 2000. The relevant clauses of the

agreement, namely, Articles 2, 3 & 11 regarding payment of consideration

read as under :-

12 ITA No.132/Del./2013

"ARTICLE 2 - GRANT OF LICENSE

2.1 Subject to the terms and conditions herein contained, the LICENSOR hereby grants to the LICENSEE an indivisible and non-transferable exclusive right and license, without the right to grant sublicenses, to manufacture, use and sell the Products and the Licensed Parts within the Territory under the Intellectual Property Rights and by using the Technical Information and Technical Material provided by the LICENSOR to the LICENSEE hereunder.

2.2 Notwithstanding the provision of Article 2.1 above, the LICENSOR reserves the right to sell or otherwise supply even within the Territory to any third party the Parts for repair or replacement of the Products or other products of the LICENSOR.

ARTICLE 3 - FURNISHING OF TECHNICAL INFORMATION

3.1 During the term of this Agreement, the LICENSOR shall furnish the LICENSEE with the Technical Information and Technical Material to the extent deemed necessary by the LICENSOR, by disclosing it in a documentary form, and advising them as to the application of the Technical Information and/or otherwise, in the manner mentioned in this Article 3.

3.2 Furnishing of the Technical Information in documentary form, that is the Technical Materials, the items of which are described in Exhibit II hereto as written in the English language, shall be effected within one year after the Effective Date hereof, with regard to the Technical Information existing as of the Effective Date hereof, and shall be effected from time to time at the time when the LICENSOR deems it necessary to do so, or effected within one year from the day when the LICENSOR approves the LICENSEE's request, or effected within one year from the day when the LICENSOR and the LICENSEE agree to a Model Change of the Products pursuant to Article 1 (2) hereof.

13 ITA No.132/Del./2013 ARTICLE 11- CONSIDERATION

11.1 In consideration of the right and license granted to the LICENSEE under Article 2 hereof and upon furnishing of the Technical Information under Article 3.2 hereof, the LICENSEE shall pay to the LICENSOR the following :

a) the amount of lump-sum fee in respect of the initial model at the rate specified in the Exhibit I hereto .

b) the amount of additional lump-sum fee and the manner of payment thereof shall, for each additional model or type of product as agreed upon by the parties, be decided under New Model Agreement for each such additional model or type of product.

c) the amount of additional Jump-sum fee and the manner of payment thereof shall, for each model change as agreed upon by the parties, be decided under the change Model Agreement for each such model change.

Such lump sum fee shall be non-refundable to the LICENSEE non-creditable against any other payments made or to be made by the LICENSEE to the LICENSOR for any reason whatsoever.

11.2 The amount of lump-sum fee in respect of the initial model, two million U.S. dollars (US$ 2,000,000), shall be paid by the LICENSEE in U.S. dollars by bank transfer remittance to the bank account designated by the LICENSOR in three (3) installments in accordance with the following payment schedule;

(a) The first installment in the amount of six hundred sixty six thousand six hundred sixty six (US$666.666) shall be paid within sixty (60) days after the day on which the manufacture of the Products on a commercial basis has started;

14 ITA No.132/Del./2013

provided that such day shall be confirmed in writing by the parties hereto.

(b) The second installment in the amount of six hundred sixty six thousand six hundred sixty seven (US$666,667) shall be paid within one hundred twenty days (120) days after the day on which the manufacture of the Products on a commercial basis has started.

(c) The third installment in the amount of six hundred sixty six thousand six hundred sixty seven (US$666,667) shall be paid within one hundred eighty days (180) days after the day on which the manufacture of the Products on a commercial basis has started.

11.3 Payments and remittances by the LICENSEE hereunder shall be free and clear of any deductions for taxes or other charges in the Territory, except for the taxes and other governmental charges set forth in Article 12 hereof. Receipt by the LICENSOR of any payment tendered hereunder shall not constitute the LICENSOR's acceptance of any account, schedule or figure on which such payment is based. All payments made or to be made by the LICENSEE to the LICENSOR hereunder shall not be refundable to the LICENSEE, even if any of the Intellectual Property Rights licensed to the LICENSEE will have been extinguished or otherwise come into nonexistence for any reason whatsoever, or even if any of the Know- How contained in the Information furnished to the LICENSEE will have become public for any reason whatsoever. If the LICENSEE fails to make any payment hereunder on the due date, the LICENSEE agrees to pay a late payment fee in the amount equivalent to four percent (4%) per annum calculated on the basis of a 365-day year, subject to any regulatory approvals, that may be required."

15 ITA No.132/Del./2013

As per the agreement, the assessee is entitled to use the technology know-

how provided by the M/s. Honda Motors Company Ltd., Japan for manufacturer

and sale of two wheelers and parts. The assessee is liable to pay the

royalty of the goods manufactured whether the same is sold in India or

outside India. It is not in dispute that the goods which are exported by the

assessee were manufactured by using technical know-how provided by

M/s. Honda Motors Company Ltd., Japan under agreement dated July 13,

2000. The finding of the TPO that the position of the assessee with regard

to export was that of a contract manufacturer, is without any basis and is

contrary to the facts on record. It is evident from the financial results of

the assessee that it has independent sales both domestic as well as exports.

The assessee has sold the goods to the AEs on principal to principal basis

and has received the sales consideration. The royalty is payable on the

basis of manufacture of goods. Based on the submissions made before us

and also the chart showing the price earned by the assessee from exports of

goods to the AEs as well as non-AEs, the assessee has earned a premium

which would not be in the case of a contract manufacturer. In case of

sister concern of the assessee, identical payment of royalty was held to be

allowable by the Tribunal in the case of M/s. Hero MotoCorp Ltd. in ITA

No.5130/Del/2010. The relevant finding of the Tribunal reads as under :-

"92. We have heard both the parties and perused the material placed before us. We have already considered similar issue while considering the disallowance of royalty 16 ITA No.132/Del./2013

and the export commission. While considering the disallowance of the export commission, we have noted that the payment of royalty and the export commission are for two different purposes. The assessee is paying royalty as per technical know-how agreement dated 02.06.2004 with HMCL. As per this agreement, the assessee is entitled to use technical know-how provided by HMCL for manufacture and sale of two wheelers and parts. Royalty is to be paid for the goods manufactured by the assessee, whether sold within India or outside India. It is not in dispute that the 92 ITA- 5130/Del/2010 motorcycles which were exported by the assessee, were manufactured by using the technical know- how provided by HMCL under the technical know-how agreement dated 02.06.2004. Therefore, royalty is payable on such manufacturing of goods. The contention of the learned TPO that the goods are exported to subsidiaries of the Associate Enterprise i.e. AE of Honda Japan and the assessee also paid export commission, would be no ground for disallowance of the royalty or determining arm's length price of the royalty at nil.

The assessee is exporting goods to AE of Honda on principal to principal basis and the price at which export is made is higher than the domestic price. While discussing the disallowance of export commission, we have discussed this issue at length and have noted that even after reducing the export commission, the assessee derived the benefit of `13.05 crores by export. At the cost of repetition, we would like to mention that the export sale value was more than the domestic sale rate and the assessee has given a detailed working thereof, which is enclosed with this order in the form of Annexure-I. In the above working, the assessee has reduced the export commission. Therefore, by export to the AE of Honda Japan, the assessee has been benefited and was not at a loss. The further finding of the TPO that the position of the assessee company with regard to export was that of a contract manufacturer, in our opinion, is without any basis and in fact contrary to the facts on record. The raw materials have been purchased by the assessee in its own right. It is not the case of the TPO that the raw materials have been supplied by the AE.

The assessee has sold the goods to AE on principal to principal basis and has received the sale consideration. In view of the above, in our opinion, there is no justification for disallowance of the royalty on the export. We may reiterate that the Revenue has disallowed the 17 ITA No.132/Del./2013

entire royalty paid even on domestic sale which has been considered at length by us in the earlier paragraph of this order and we have arrived at the conclusion 93 ITA- 5130/Del/2010 that the payment or royalty was a revenue expenditure, incurred for the purpose of business. Accordingly, the addition made by the TPO by determining arm's length price of royalty on export at nil is deleted.

13. In view of the above reasoning, we are of the view that there is no

justification for disallowance of royalty on the export made to the AEs.

Accordingly, the addition made by the AO/TPO by determining the ALP

of royalty on exports to the AEs at "nil" is deleted.\

CORPORATE TAX MATTERS

14. The solitary ground raised in the corporate tax issue reads as

follows:-

"That the Learned AO has erred on facts and in law in disallowing an amount of INR 7,359,000 being sales tools expense incurred by the Assessee for subsidizing 50 percent of the basic cost of standard tools / fixtures for standardization of 'Honda Exclusive Authorized Dealers ['HEAD'] outlets, being expense incurred by Assessee wholly and exclusively for business purpose."

15. Briefly stated, the facts of the case are as follows. During the year,

the assessee company has claimed deduction for sales tools expenses

subsidy amounting to Rs.73,59,000/-. The assessee was asked during the

assessment proceedings as to why these expenses should not be

disallowed. The assessee vide letter dated 13.12.2011 has submitted that

the expenses were incurred for subsidizing 50% of the basic cost of 18 ITA No.132/Del./2013

standard sales tools/fixtures for standardization of 'HEAD' (Honda's

exclusive authorized dealer) outlets, thus it has been incurred wholly and

exclusively for business purpose. Following the view taken in the earlier

years, the AO disallowed this amount.

16. We have heard the rival submissions and perused the relevant

material on record. It is observed that position on this issue is similar to

that of the immediately preceding issue inasmuch as neither the ld. AR nor

the ld. DR is aware of the final position on this issue in the earlier years.

We, therefore, set aside the impugned order on this score and remit the

matter to the file of AO for deciding it in consonance with the final view

taken on it in earlier years.

17. In the result, the appeal is allowed for statistical purposes.

Order pronounced in open court on this 24th day of April, 2015.

Sd/- sd/- (R.S. SYAL) (GEORGE GEORGE K) ACCOUNTANT MEMBER JUDICIAL MEMBER

Dated the 24th day of April, 2015 TS

Copy forwarded to: 1.Appellant 2.Respondent 3.CIT 4.CIT(A) 5.CIT(ITAT), New Delhi. AR, ITAT NEW DELHI.