AI Drafter 
TaxTMI 
TaxTMI 
2014 (2) TMI 1215
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.... Transactional Net Margin Method as the most appropriate method and concluding that the Comparable Uncontrollable Price method may be applied to determine the arm's length price in respect of the broking services provided by the Appellant, if the appropriate adjustments are made to the rates charged by JPMIPL to related and unrelated parties. Grounds of Revenue's Appeal: 1) "On the facts and in the circumstances of the case and in law, the CIT(A) erred in deleting the disallowance of Rs. 13,76,355/- u/s. 14A as expenditure incurred for earning dividend on preference shares, on the grounds. irrelevant to the disallowance." 2) "On the facts and in he circumstances of the case and in law, the CIT(A) erred in deleting the disallowance of Rs. 6,54,000/- in respect of Club Membership Fees." 3) "On the facts and in the circumstances of the case and in law, the CIT(A) erred in deleting the addition of Rs. 33,61,974/- considered as capital in nature in respect of software, support services, repairs and maintenance." 4) "On the facts and in the circumstances of the case and in law, the CIT(A) erred in deleting the transfer pricing adjustment of Rs. 74,79,266/-." 5) '....
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.... assessee does not transact with other Indian brokers. Hence, the assessee would not need to incur marketing costs with respect to CMIL; Counter party credit risk is significant risk which arises to a broker and needs to be factored in while determining the brokerage rate. The assessee does not bear any credit risk with respect to its related parties; and The functions performed by the assessee with respect to its research activities is significantly lower for related party compared to those incurred for unrelated party." 2.3 However, TPO did not accept aforementioned submissions of the assessee. It was the case of the assessee that if internal CUP method is applied then adjustment for difference on account of functions performed, asset employed and risk assumed should be given to the assessee. Following table was described to say that there is a basic difference in the transaction entered into by the assessee with its related parties and unrelated parties." Particulars Related Parties Unrelated parties Functions Building client relationship 6 3 Marketing and order origination 3 * 3 Preparation and circulation of research r....
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.... Overseas Corporate Bodies Unrelated 387,625,536.82 1,543,713.51 0.40% Grand Total 50,787,393,607.18 184,767,259.20 DVP Type Client Type Turnover Brokerage Earned Brokerage as a % of turnover Corporates Unrelated party 845,908,450.00 2,959,427.25 035% Foreign Institutional investors Related party 2,999,190,384.43 10,249,561.47 0.34% Unrelated party 39,159,283,008.14 222,132,207.28 0.57% Local Mutual Funds Unrelated party 613,337,538.12 1,962,493.13 0.32% Overseas Corporate Bodies Related party 1,866,731,718.36 6,939,937.55 0.37% Unrelated party 1,005,095,230.62 4,138,025.36 0.41% Staff Unrelated party 8,636,958.25 27,073.80 0.31% House A/c. Bad delivery/Auctions 338,728.00 - Grand Total 46,498,522,015.92 248,408,725.84 Working of cost incurred for provision of broking services to unrelated and related parties for DVP trades Figures in 000s Details Unrelated party trades Related party trades Direct cost 103,506 4,667 Indir....
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....it has wrongly been rejected by Ld. CIT(A) and TPO. In the alternative it is the contention of the assessee that Ld. CIT(A) has rightly held that assessee was entitled to get relief on account of difference in the activities performed by the assessee in relation to services rendered by it to related and unrelated parties. Ld. AR submitted that all the submissions relying upon which Ld. CIT(A) has granted relief to the assessee were submitted to TPO also who has failed to appreciate the facts of the case and Ld. CIT(A) has rightly appreciated the facts of the case and has granted appropriate relief to the assessee on account of difference in activities. 3. We have heard both the parties and their contentions have carefully considered. The facts of the case have already been discussed in detail in the above part of this order. We are in agreement with the observations of Ld. CIT(A) that in case of availability of internal CUP method, TNMM could not be applied. What was necessary was that assessee should have been allowed the relief as per difference in the activities in the services rendered by it to related and unrelated parties. The said difference has been described in the afor....
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....ect expenses have to be considered for disallowance on a reasonable basis. Though the assessee in this case has received dividend only from one company some indirect expenses on collection of dividend and accounting of income etc. have to be incurred even though this may be only nominal. In our view on facts of the case it will be reasonable to estimate such expenses at Rs. 10,000/-. We accordingly set aside the order of CIT(A) on this point and confirm the addition to the above extent. 4.2 In this view of the situation, after hearing both the parties, respectfully following the order of the Tribunal in assessee's own case for A.Y 2001-02, we hold that Rs. 10,000/- should be disallowed under section 14A of the Act. Accordingly this ground of the revenue is partly allowed. 5. Apropos Ground No.2, we found that this issue is covered in favour of the assessee by the decision of Hon'ble Supreme Court in the case of CIT vs. United Glass Manufacturing Co. Ltd. Dated 12/9/2012 in Civil Appeal No.6447 of 2012 arising out of SLP(C) No.3016 of 2008, copy of this order is placed on our record. The observations of Their Lordship in this regard are as under: "Civil Appeal No.6449/2012 ....