In a major relief to Nokia India, the Delhi Bench of Income Tax Appellate Tribunal (ITAT) deleted the disallowance worth Rs. 41.6 Crores.
The assessee has contended that the AO and DRP have erred in disallowing an amount of INR 6,26,25,925 incurred by the appellant on account of trade price protection paid to distributors (other than HCL Infosysterns Ltd.) as compensation for reduction in prices of the handsets, and in ignoring all the evidence (including confirmations from dealers) submitted by the appellant in this regard, and further in ignoring the fact that on the basis of similar confirmations, trade price protection provided to BCL Infosystems Ltd. has been allowed.
During the course of assessment proceedings, the assessee was asked as to why the payment of Rs.3,77,92,00,000/- should not be disallowed in view of section 40(a)(i) of the Act on account of non-withholding of tax. In response thereto, the assessee filed its reply. However, the reply was not found to be acceptable hence, the Assessing Officer made disallowance of Rs.3,77,92,00,000/- u/s 40(a)(i) of the Act on account of non-deduction of tax. Further, the Assessing Officer noticed that during the year under consideration, the assessee had offered trade incentive to distributor of Rs.7,01,71,57,547/-. The assessee was asked as to why the tax is not deductible. The response of the assessee was not found acceptable to the Assessing Officer. Therefore, he made an addition of Rs.4,65,26,69,531/- on account of non-deduction of tax. Further, the expenditure related to the trade disallowed u/s 40(a)(i) of the Act for the same reasoning. Further, the Assessing Officer during the course of assessment proceedings, asked the assessee to furnish the details for trade discounts including the policy of trade discounts. The assessee in response to the show cause notice, stated that it had incurred expenditure of Rs.16,07,03,454/- as Trade Price Protection discount. The Assessing Officer further observed that in this case, an amount of Rs.9,80,77,529/- pertains to HCL Infosystems Ltd. which has been considered by the DRP. Therefore, no benefit of trade price protection of Rs.6,26,25,925/- was allowable to the assessee hence, he made disallowance of Rs.6,26,25,925/-. Further, the Assessing Officer made disallowance of marketing expenses of Rs.25,45,40,035/- hence, the Assessing Officer assessed the income at Rs.18,86,02,07,744/- against the returned income of Rs. 5,40,57,47,930/-.
The coram of Accountant Member, R.K.Panda and Judicial Member, Kul Bharat found that this issue is also squarely covered in favour of the assessee by the decision of the Coordinate Bench of the Tribunal in assessee’s own case vide ITA No.1883/Del/2017 for Assessment Year 2011-12 and also in ITA No. 6501/Del/2017 for Assessment Year 2012-13. Respectfully following the order of the Tribunal for Assessment Year 2011-12 and 2012-13, so deleted the disallowance.
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