TaxTMI 
TaxTMI 
TaxTMI 
2014 (9) TMI 517
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....t the assessing officer / TPO erred on facts and in law in considering the arms length price of international transactions of payment of corporate charges at Rs. 1,580,102 as against Rs. 1,50,81,012 incurred by the appellant, holding that (i) no such service has been received by the appellant (ii) cost are charged on allocation basis and therefore, some of the group cost may be loaded in appellant share of corporate charges. 2.2 That the assessing officer /TPO erred on facts and in law in not appreciating that the payment of corporate charges was validly benchmarked applying TNMM as most appropriate method and that no adverse inference could be drawn on this account. 2.3 That the assessing officer / TPO erred on facts and in law in computing adjustment on account of international transaction of payment of corporate charges without reasonably applying any prescribed methods, thereby, violating the basic principles of TP regulations. 2.4 That the assessing officer/TPO erred on facts and in law in undertaking cost benefit analysis to determine the arms length price of payment of corporate charges without appreciating that cost-benefit analysis is not a prescribed method under Rule ....
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.... in appeal before us. We shall first adjudicate the transfer pricing dispute and then the disallowance made u/s 14A of the Act. Transfer pricing adjustment of Rs. 1,42,20,920/- on account of international transaction of payment of corporate charges (grounds 2 to 2.6) 4. During the relevant year, the assessee in terms of agreement dated 20th October, 2006 for availing the technical, marketing and administrative support services has entered into, inter alia, international transaction of payment of corporate charges of Rs. 1,58,01,022/- with its associated enterprises. In the transfer pricing study of the assessee, the said transaction was, for the purpose of benchmarking, aggregated with other international transactions and benchmarked applying TNMM as the most appropriate method with OP/OC as the Profit Level Indicator ('PLI'). The operating profit margin to cost (OP/OC%) of the assessee was shown at 19% which being higher than the weighted average profit margin of 20 comparable companies at 12.48%, the international transactions undertaken by the assessee with associated enterprise was sought to be justified at arms length price. 4.1 The TPO, however, rejected the TNMM applied b....
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....for availing various technical, marketing and administrative support services. It was submitted in terms of agreement between the assessee and its AE, the corporate charges were only on actual basis and on personnel related expenses the AE had charged a mark up of 3% on cost. Accordingly , during the relevant previous year, the assessee had made a payment of a sum of Rs. 1,58,01,022/- to continental AG Germany for the various services in terms of the agreement dated 20th October, 2006. It was further submitted that the above said expenses were in the interest of assessee's business and commercial expediency and the same is to be allowed. 4.3.1 In order to rebut the conclusion arrived at by the TPO/DRP, the assessee by way of additional evidence in terms of application dated 4.7.2014 under rule 29 of the ITAT Rules, has placed on record, the following :- 4.3.2) It is submitted on perusal of the above evidence it can be appreciated that i) the actual expenditure/cost incurred by the associated enterprises in providing technical, marketing and administrative support services to its group companies (including assessee) is identifiable under various service heads, (ii) the allocatio....
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....e cost has been allocated could not be furnished before the completion of the proceedings before the TPO/DRP, since these details were to be obtained form its AE Germany. We find that the details now produced have an important bearing for resolving the transfer pricing dispute and therefore in the interest substantial justice and equity, we admit the same on record. Since the additional evidence is admitted on record the same needs to verified by the TPO/AO. Hence, the transfer pricing dispute of payment of corporate charges is restored to the TPO for denovo consideration. Needless to state the assessee shall be afforded reasonable opportunity of being heard before the matter is decided. It is ordered accordingly. 4.6 In the result, ground No. 2 to 2.9 are allowed for statistical purposes. Disallowance of Rs. 5,32,712/- as per section 14A of the Act read with rule 8D of the Income Tax Rule 1961. (ground No. 3 to 3.2) 5. During the previous year relevant to the concerned assessment year, assessee was in receipt of dividend income amounting to Rs. 56,83,646/-. The dividend income being exempt u/s 10(34) of the Act, the AO show caused the assessee as to why disallowance u/s 14A of t....