TaxTMI 
TaxTMI 
2014 (2) TMI 1215
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....opriate 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) 'Further, placed in the above factual and legal scenario, the ....
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....cur 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 reports 3 3 Order execution 3 3 Risks Funding risk 3 3 Risk of non delivery 6 # 3 Operational ris....
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....rnover 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 Indirect cost 95,559 4,309 Funding cost 1,831 214 Total cost 200,896 9,190 Turnover 41,632,600 4,865,922 Cost as % of turnover 0.48% 0.19% Additional cost incurred for unrelated party trades : 0.48%-0.19%+0.29% Thus it was submitted that the transaction of the assessee, even under CUP method, after granting the aforementioned adjustment should be ....
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....ted 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 aforementioned tables submitted by the assessee to the TPO vide letter dated 29/11/2004. However, TPO did not discuss those figures in his order but these figures are discussed in the order of Ld. CIT(A). The TPO did not point out any defect in such calculation of the assessee. It has been described in the above submission that assessee had to incur additional cost to the tune of 0.29% in relation to servic....
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....e 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 (S.L.P. (C) No.29629/2009: Heard learned counsel on both sides. Leave granted. In this civil appeal, following two questions arise for determination: "(i) Whether advance custom duty paid by the assessee can be deducted under Section 43-B of the Income Tax Act, 1961? (ii) Whether club membership fee for employees incurred by the assessee is a business expense and liable to be deducted under Section 37(1) of the ....