Case Number: ITA 706/DEL/2021
Appellant: Hero Moto Corp Ltd., New Delhi
Respondent: NeAC, Delhi
Assessment Year: 2016-17
Case Filed On: 2021-06-14
Order Type: Final Tribunal Order
Date of Order: 2021-11-26
Pronounced On: 2021-11-26
Before: Shri Kul Bharat, Judicial Member and Shri Prashant Maharishi, Accountant Member
This appeal was filed by Hero Moto Corp Ltd. against the order dated 30.04.2021 passed by the National e-Assessment Centre, Delhi, for the assessment year 2016-17 under section 143(3) read with section 144C(13) and section 144B. The main issues raised involved the assessment of total income, transfer pricing adjustments, disallowance of deductions under section 80IC, and various other disallowances.
The appellant argued that the transfer pricing adjustments made for inter-unit transfer of goods were not justified. The tribunal found that the transactions were at arm’s length and directed the AO to reconsider the adjustments, relying on the appellant’s transfer pricing study report.
The appellant claimed a deduction under section 80IC for its manufacturing unit at Haridwar. The AO disallowed this deduction, but the tribunal upheld the appellant’s claim, finding that the profits derived were eligible for deduction under section 80IC.
The AO enhanced the value of closing inventory by including freight inward expenses and import clearing charges. The tribunal directed the AO to follow the consistent method of valuation adopted by the appellant and accepted by the revenue in the past.
The AO disallowed expenses claimed for services availed in the preceding year, alleging them to be prior period expenses. The tribunal directed the AO to reassess the disallowance, considering that the liability crystallized during the relevant year.
The AO disallowed provisions for advertisement expenses, alleging them to be excessive. The tribunal directed the AO to allow the deduction, noting that the provision was made on a reasonable and scientific basis.
The AO disallowed purchases from related parties, alleging them to be excessive. The tribunal found that the transactions were commercially expedient and directed the AO to delete the disallowance.
The AO added payments received on behalf of Hero Honda FinCorp Ltd. as deemed dividend. The tribunal held that these payments were not loans or advances and directed the AO to delete the addition.
The AO disallowed expenses for non-deduction of TDS on discounts and incentives. The tribunal directed the AO to delete the disallowance, relying on judicial precedents that such discounts were not commissions.
The AO treated gains from sale of investments as business income. The tribunal upheld the appellant’s treatment of these gains as capital gains, following the consistent position taken in earlier years.
The AO made an additional disallowance under section 14A, applying Rule 8D. The tribunal directed the AO to reassess the disallowance, considering the appellant’s substantial interest-free funds.
The AO attributed a portion of the model fee to closing stock and disallowed depreciation. The tribunal directed the AO to delete the disallowance, following earlier tribunal orders.
The AO disallowed reimbursement of foreign travel expenses, citing insufficient documentation. The tribunal found the expenses to be reasonable and directed the AO to delete the disallowance.
The AO treated royalty payments to Honda as capital expenditure. The tribunal held these payments to be revenue in nature and directed the AO to allow the deduction.
The ITAT allowed the appeal for statistical purposes, directing the AO to correctly compute the total income and reassess the disallowances and adjustments as per the tribunal’s findings. The case highlights the complexities involved in transfer pricing, deductions under section 80IC, and procedural aspects of income assessment.
This summary provides an overview of the key points and conclusions from the ITAT order in the case of Hero Moto Corp Ltd. vs. NeAC, New Delhi, for the assessment year 2016-17.
Hero Moto Corp Ltd. vs. NeAC, New Delhi – ITAT Tribunal Order Analysis
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