TaxTMI 
TaxTMI 
2016 (5) TMI 1284
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....ction 144(C) of the Income-tax Act, 1961 (the 'Act') confirming the Draft Assessment Order. On the facts and circumstances of the case and in law, the learned AO erred in assessing the income of the Appellant at Rs. 1,51,19,62,870/- as against the returned income of Rs. 99,70,75,770/-. 1.2 The Ld. AO erred in proposing and the Hon'ble DRP further erred in confirming the addition of Rs. 51,48,87,100/- to the Appellant's returned income of Rs. 99,70,75,770/-. 1.3 On the facts and circumstances of the case and in law, the order passed by the Ld. AO under the directions passed by the Hon'ble DRP under section 144C(5) of the Act is wrong and bad in law. B. Disallowance of depreciation on leased vehicles 2 On facts and circumstances of the case and in law, the Ld. AO has erred in proposing and the Hon'ble DRP has further erred in confirming the disallowance of depreciation of Rs. 2,90,56,780/- claimed by the Appellant u/s 32 of the Act on vehicles leased out to customers, by holding that the Appellant is not the beneficial owner of these vehicles. C. Addition on account of Interest on sticky loans 3.1 On facts and circumstances of the case and in law, ....
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....ces were in the nature of shareholder and stewardship activities, ignoring the fact that all the shareholder and stewardship activities were separately identified by the AEs and no amount for such activities had been paid by the Appellant. d) That the Appellant failed to satisfactorily explain the basis of allocation of expenses, not appreciating the details submitted by the Appellant. 5.3 On the facts and in the circumstances of the case and in law, the Ld. TPO and the Ld. AO erred in holding and the Hon'ble DRP further erred in confirming that the AEs did not have infrastructure and manpower situated in India for rendering such services, ignoring the fact that since the services were rendered from outside India, there was no requirement for the AEs to maintain any infrastructure and manpower in India. 5.4 On the facts and in the circumstances of the case and in law, the Ld. TPO and the Ld. AO erred in rejecting and the Hon'ble DRP further erred in confirming the rejection of Transfer Pricing documentation maintained by the Appellant as per Rule 10D of the Income-tax Rules, 1962 based on conjectures and surmises. 5.5 On the facts and in the circumstances of the ca....
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....CA (3) of the Act. In pursuance to the order of the Ld. TPO draft order u/s 144C of the Act was passed by the ld. AO on 09.12.2009. Against the draft order assessee filed objection on 18.01.2010 before Dispute Resolution Panel-I, New Delhi (In short 'DRP') who issued direction on 21.09.2010. Pursuant to those directions, the assessment order u/s 143(3) read with section 144C of the Act was passed by the ld. AO on 26.10.2010, which is in appeal before us on several counts. 5. Ground No.1.1 to 1.3 of the appeal are supportive and general in nature and no specific arguments by the parties were advanced on these grounds therefore these are dismissed. Corporate Tax Issues 6. The ground No. 2 of the appeal is against the disallowance of depreciation of Rs. 2,90,56,780/- claimed by the appellant u/s 32 of the Act for vehicles leased out to customers. The ld. AO disallowed the depreciation on vehicles as they were registered in the name of the respective lessees and not in the name of the lesser i.e. assessee company. Ld. AO was of the view that transaction is in effect a finance transaction i.e. Loan Transaction and not lease transaction. On perusal of relevant clauses of lease agreeme....
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....hat the claim of depreciation is not disallowed to both the lessor and the lessee. According to the provision of section 32 of the act the depreciation is allowable to the assessee who i. owns , wholly or partly, assets and ii. uses it for the purpose of its business. Regarding the (ii) condition of 'user of the assets' the issue is now no more in dispute in view of decision of Honourable Supreme court in ICDS Limited V CIT 350 ITR 527 where in it is held that :- "14. The Revenue attacked both legs of this portion of the section by contending: (i) that the assessee is not the owner of the vehicles in question and (ii) that the assessee did not use these trucks in the course of its business. It was argued that depreciation can be claimed by an assessee only in a case where the assessee is both, the owner and user of the asset. 15. We would like to dispose of the second contention before considering the first. Revenue argued that since the lessees were actually using the vehicles, they were the ones entitled to claim depreciation, and not the assessee. We are not persuaded to agree with the argument. The Section requires that the assessee must use the asset for the "purposes ....
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....article, and sub-section (2)(b)(iii) refers to the business of construction, manufacture or production of any article or thing other than that specified in the Eleventh Schedule. Sub-section 2(b), therefore, refers to the uses to which the machinery can be put. It does not specify that the assessee himself should use the machinery for these purposes. In the present case, the person to whom the machinery is hired does use the machinery for specified purposes under Section 32-A(2)(b)(iii). That person, however, is not the owner of the machinery. The High Courts of Karnataka and Madras have held that looking to the requirements specified in Section 32-A the assessees, in the present case, fulfil all the requirements of that section, namely, (1) the machinery is owned by the assessees; (2) the machinery is used for the purpose of the assessees' business and; (3) the machinery is as specified in sub-section (2). 10. We are inclined to agree with this reasoning of the High Courts of Karnataka and Madras." 17. The same judgment commented on the analogous nature of Section 33 on Development Rebate and clarified that the phrase "used for the purpose of business" does not necessarily....
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....sts of hiring out machinery and/or where the income derived by the assessee from the hiring of such machinery is business income, the assessee must be considered as having used the machinery for the purposes of its business. 13. A similar view has been taken by the Andhra Pradesh High Court in the case of CIT v. Vinod Bhargava [1988] 169 ITR 549 (AP) where Jeevan Reddy, J. (as he then was) held that where leasing of machinery is a mode of carrying on business by the assessee the assessee would be entitled to development rebate. The Court observed (p. 551): "Once it is held that leasing out of the machinery is one mode of doing business by the assessee and the income derived from leasing out is treated as business income it would be contradictory, in terms, to say that the machinery is not used wholly for the purpose of the assessee's business." 18. Hence, the assessee meets the second requirement discussed above. The assessee did use the vehicles in the course of its leasing business. In our opinion, the fact that the trucks themselves were not used by the assessee is irrelevant for the purpose of the section." In this case also assessee has offered lease rent which is....
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....y which a thing belongs to some one in particular, to the exclusion of all other persons.The exclusive right of possession, enjoyment or disposal; involving as an essential attribute the right to control, handle, and dispose." The same dictionary defines the term "own" as 'To have a good legal title'. These definitions essentially make ownership a function of legal right or title against the rest of the world. However, as seen above, it is "nomengeneralissimum, and its meaning is to be gathered from the connection in which it is used, and from the subject-matter to which it is applied." 22. A scrutiny of the material facts at hand raises a presumption of ownership in favour of the assessee. The vehicle, along with its keys, was delivered to the assessee upon which, the lease agreement was entered into by the assessee with the customer. Moreover, the relevant clauses of the agreement between the assessee and the customer specifically provided that: (i) The assessee was the exclusive owner of the vehicle at all points of time; (ii) If the lessee committed a default, the assessee was empowered to re-possess the vehicle (and not merely recover money from the custome....
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....s at the same rental and upon the same terms herein expressed and such tenancy may be terminated by the Lessor immediately upon default by the lessee hereunder or upon 7 days notice previously given.." 23. The Revenue's objection to the claim of the assessee is founded on the lease agreement. It argued that at the end of the lease period, the ownership of the vehicle is transferred to the lessee at a nominal value not exceeding 1% of the original cost of the vehicle, making the assessee in effect a financer. However we are not persuaded to agree with the Revenue. As long as the assessee has a right to retain the legal title of the vehicle against the rest of the world, it would be the owner of the vehicle in the eyes of law. A scrutiny of the sale agreement cannot be the basis of raising question against the ownership of the vehicle. The clues qua ownership lie in the lease agreement itself, which clearly point in favour of the assessee. We agree with the following observations of the Tribunal in this regard: "20. It is evident from the above that after the lessee takes possession of the vehicle under a lease deed from the appellant-company it (sic.) shall be paying lease r....
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.... the guardian of such minor, and in relation to a motor vehicle which is the subject of a hire-purchase agreement, or an agreement of lease or an agreement of a hypothecation, the person in possession of the vehicle under that agreement." 25. The general opening words of the Section say that the owner of a motor vehicle is the one in whose name it is registered, which, in the present case, is the lessee. The subsequent specific statement on leasing agreements states that in respect of a vehicle given on lease, the lessee who is in possession shall be the owner. The Revenue thus, argued that in case of ownership of vehicles, the test of ownership is the registration and certification. Since the certificates were in the name of the lessee, they would be the legal owners of the vehicles and the ones entitled to claim depreciation. Therefore, the general and specific statements on ownership construe ownership in favour of the lessee, and hence, are in favour of the Revenue. 26. We do not find merit in the Revenue's argument for more than one reason: (i) Section 2(30) is a deeming provision that creates a legal fiction of ownership in favour of lessee only for the purpose of the....
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....he certificate cancelled under this sub-section would have been in force." Therefore, the MV Act mandates that during the period of lease, the vehicle be registered, in the certificate of registration, in the name of the lessee and, on conclusion of the lease period, the vehicle be registered in the name of lessor as owner. The Section leaves no choice to the lessor but to allow the vehicle to be registered in the name of the lessee Thus, no inference can be drawn from the registration certificate as to ownership of the legal title of the vehicle; and (iii) if the lessee was in fact the owner, he would have claimed depreciation on the vehicles, which, as specifically recorded in the order of the Appellate Tribunal, was not done. It would be a strange situation to have no claim of depreciation in case of a particular depreciable asset due to a vacuum of ownership. As afore-noted, the entire lease rent received by the assessee is assessed as business income in its hands and the entire lease rent paid by the lessee has been treated as deductible revenue expenditure in the hands of the lessee. This reaffirms the position that the assessee is in fact the owner of the vehicle, in so fa....
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....wned' in wealth tax Act and its meaning as per section 32 of the Income Tax Act for claim of depreciation are different. It was further submitted that no disallowance has been made by the AO himself for Assessment Year 2011-12 where the claim of the assessee was made in the return of income. Therefore, in subsequent years revenue has accepted the claim of the assessee. This fact is also not controverted by ld. DR. We are of the view that if there being no change either in facts or in law, as compared to this year and later on years where the claim of the assessee of depreciation is accepted , the disallowance in this year cannot be sustained. In assesses' s own case for AY 2000-01 and 002-03 in ITA No 3192 & 2445/del 2007 dated 21/06/2013, ITAT decided this issue vide Para no 8 setting aside the issue back to the file of AO to examine the claim of the assessee with the terms of lease agreement entered into in light of decision of Honorable supreme court in case of ICDS limited. Further MA Nos 81 & 82/del/2013 preferred by assessee in those appeals were also dismissed by order dated 13/01/2014.In view of the decision of the Coordinate bench on this issue, we restore this issue back ....
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....be different in different statues unless specifically mentioned. Honorable; Supreme court in 358 ITR 295 in CIT V Excel Industries has held that Income accrues when it becomes due but it must also be accompanied by a corresponding liability of the other party to pay the amount. Only then can it be said that for the purposes of taxability that the income is not hypothetical and it has really accrued to the assessee. In case of Non performing assets even the principal amounts is also doubtful of recovery or has failed to serve the interest ion those loans. Now this issue in this case of the assessee has already been decided by ITAT in ITA No.4069/Del/2011 for the Assessment Year 2003-04 vide its order dated 31st October 2011 in that decision the coordinate Bench of this Tribunal has held as under:- "5. We have heard both the sides on this issue. This issue is squarely covered by the decision of ITAT in the case of GE Capital Service India, cited supra, wherein the ITAT has decided the issue as under :- "13. Admittedly the assessee is a non-banking financial company governed by the provisions of the RBI Act and the NBFCs Prudential Norms (Reserve Bank) Directions, 1998. Section 45....
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....t is also not in dispute that the assessee company being NBFC is bound by the aforesaid provisions. Therefore, under the aforesaid provisions, it was mandatory on the part of the assessee not to recognize the interest on the ICD as income having regard to the recognized accounting principles. The accounting principles which the assessee is indubitably bound to follow are AS-9. The relevant portion of the said accounting standard reads as under: 9. Effect of uncertainties on revenue recognition - 9.1 Recognition of revenue requires that revenue is measurable and that at the time of sale or the rendering of the service it would not be unreasonable to expect ultimate collection. 9.2 Where the ability to assess the ultimate collection with reasonable certainty is lacking at the time of raising any claim, e.g., for escalation of price, export incentives, interest etc., revenue recognition is postponed to the extent of uncertainty involved. In such cases, it may be appropriate to recognize revenue only when it is reasonably certain that the ultimate collection will be made. Where there is no uncertainty as to ultimate collection, revenue is recognized at the time of sale or renderi....
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....accrued". We are in agreement with the submission of Mr. Vohar on this count, supported by various decisions of different High Courts including this court which has already been referred to above. (2) In the instant case, the assessee-company being NBFC is governed by the provisions of the RBI Act. In such a case, interest income cannot be said to have accrued to the assessee having regard to the provisions of section 45Q of the RBI Act and Prudential Norms issued by the RBI in exercise of its statutory powers. As per these norms, the ICD had become NPA and on such NPA where the interest was not received and possibility of recovery was almost nil, it could not be treated to have been accrued in favour of the assessee. As noted above, Mr. Sabharwal, argued that the case of the assessee was to be dealt with for the purpose of taxability as per the provisions of the Act and not the RBI Act which was the accounting method that the assessee was supposed to follow. We have already held that even under the Incometax Act, interest income had not accrued. Moreover, this submission of Mr. Sabharwal is based entirely on the judgment of the Supreme Court in the case of Southern Technology [2....
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....nd the issue decided by ITAT in that order is identical. Further Now Honourable Delhi high court in case of CIT V Vishisth Chay Vyapar Co Limited 196 taxman 169 where in it is held as under (Head notes from taxmann. Com) "It was not in dispute that on the application of the provisions of the RBI Act and the 1998 Directions, the ICDs advanced to 'S' by the assessee had become NPA. It was also not in dispute that the assessee-company being NBFC was bound by the aforesaid provisions. Therefore, under the aforesaid provisions, it was mandatory on the part of the assessee not to recognize the interest on the ICDs as income having regard to the recognized accounting principles. The accounting principles, which the assessee was indubitably bound to follow, were AS-9. [Para 16] Therefore, it could not be said that income in the form of interest, though not received, had still accrued to the assessee under the provisions of the Incometax Act and was, therefore, exigible to tax. It was so for the reasons: (1) The assessee had not received any interest on the said ICDs placed with 'S' since the assessment year 1996-97 as it had become NPA in accordance with the Prudential Norms, which wa....
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....t by the customers, such assets are repossessed by assessee from the lessses. Since these are repossessed assets, it is included in the balance sheet in the current assets as stock and credit is passed to the account of borrowers. Therefore, by passing this entry the assessee replaced the debtors by repossessed assets. When these assets are sold, excess or shortfall is booked as profit or loss in the profit and loss account and it is claimed as loss as a revenue loss/ profit. During the year, the ld. AO has disallowed this loss holding that this loss has not been actually incurred by the assessee. For disallowing this AO relied on the decision of the Hon'ble Allahabad High Court in the case of Motor and General Sales Pvt. Ltd. vs. CIT 226 ITR 137. 20. The ld. AR submitted that this is real loss incurred by the assessee and not a hypothetical loss. It is just like writing off the bad debts in the books of the company. The ld. AR further submitted that this issue is squarely covered in the case of the assessee by the decision in the case of CIT Vs. Citicorps Maruti finance Limited In ITA No 1712& 1714/2010 dated 09-11-2010. He submitted that therefore loss is rightly allowable. 21.....
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....sp; OP/OC Consultancy24 28.60% 11% Administrative- 34 2.98% 5.7% 5. Provision of consultancy services 43,278,924 TNMM OP/OC 5 8.98% 11% 6. Interest paid on unsecured loan 59,623,221 CUP NA 1 Libor+10 0 -120BP Libor. +100BP 7. Availing Oracle support (data processing services) 16,351,785 NA NA NA NA NA 8 Reimbursement 24,028,546 NA NA NA NA 25. There is no dispute regarding the international transaction with respect to other items except for item at serial no. 4 which is Intra Group services. 26. However with respect to services availed by the assessee from AE amounting to Rs. 21,20,48,533/- for availing consulting and administrative and IT service, ld. TPO on following reasons determine the arm's length price of these service at Rs. NIL as under :- "7. Determination of arm's length price of international transaction: In view of above discussions and findings of the facts as recorded in paragraph 6.7 to paragraph 6.10 of this order, I have reached to following conclusions: (a) It is evident from above discussions that the assessee has not filed any evidence that alleged services in lieu of cost recharge or reimb....
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....re and activities carried on by the assessee for carrying out its business with nature of services allegedly rendered to the assessee has revealed that these AEs have provided duplicate services, business development, e-commerce, client relational management facilities mid operation which the assessee is already performing internally. The OECD guidelines in paragraph 7.1 1 of chapter VII has dealt with duplicate services us under: "7.11 In general, no mint-group service should in found for activities undertaken by one group member that merely duplicate a service that another group member is performing for itself, or that is being performed for such other group members by a third party. An exception may be whether the duplication of services is only temporary, for example, where an MNE group is reorganizing to centralize its management functioning. Another exception would be where the duplication is undertaken to reduce the risk of wrong business decision (e.g. by getting a second legal opinion on a subject. It is evident from the guidelines that as a general rule, where one group company provides a service to another which duplicates what the recipient is already performing; ....
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....rofit markup up the cost of services does arise this reason I have not tested the arms length price of mark up levied by the AE on these services." 27. Therefore on perusal of the order of Ld. TPO it is apparent that Ld. AO has alleged that :- i. Assessee could not establish whether such services were needed by the assessee (i.e. Need Test) ii. Whether such services are rendered to the assesse by AE (I.e. Rendition test) iii. Whether the assessee has derived any economic or commercial benefit from these services ( i.e. Benefit test ) iv. Basis of allocation v. These services are duplicative in nature vi. There is only incidental benefit from these services. 28. Against this the draft objection filed before DRP who confirmed the finding of the TPO as under:- "2.1 In the transfer pricing order passed u/s 92CA(3) of I.T. Act, the TPO has made an upward adjustment of Rs. 21,20,48,533/- in the arm's length price of international transactions. While making this adjustment, the Assessing Officer has observed that the assessee has made payment of Rs. 21,20,48,533/- under head "cost contributions to the AE's" for duplicate services and incidental benefit and not for ....
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.... on credit investigation and legal and professional charges, sales promotion and communication. As against to the same, the associated enterprises based abroad did not have sufficient infrastructure to satisfactorily prove rendering of services to the assessee. Looking into the nature of services, their adaptation and customization to suite domestic requirements and lack of required man power of the claimed AE's in India is a reasonable circumstantial evidence of not rendering of commensurate services. Relying on the OECD guidelines, the TPO has explained that the alleged services rendered by AE's are neither meant to reduce the risk of wrong business decisions nor related to business reorganization to be categorized as exceptional and temporary ones for which duplication of services is not objectionable. The assessee could also not satisfactorily prove that requisite FAR analysis was conducted in case of these services. The receipts of these services have also not been benchmarked under any of the prescribed methods of the I T Act. In the light of these facts, brought out by the TPO, we find no compelling reasons to interfere with the order of TPO and the Assessing Officer....
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....ssion, DRP came to the conclusion that some quantum can be attributed to the expenses incurred by the assesseeand since the payments are not cost based but allocation of expenses it was difficult to quantify them and therefore Ld. DRP held that 5 % of the total cost allocated to the assessee can be considered for the business purposes of the assessee for computing ALP. Therefore, it was submitted that when the DRP itself has computed ALP of the services received by the assessee against "Nil' Computed by Ld. TPO, the issue of rendering of services receipt of services cannot be doubted by ld. TPO. Therefore it was submitted that question whether the services were actually rendered or not does not survive any more as ld. DRP itself has accepted in its direction for AY 2008-09 that services have been rendered. iii. Regarding the allegation of Ld. AO regarding the services being duplicative in nature, he submitted that the services being rendered by AE and received by the assessee are not duplicative in nature as they are specific services which assessee is not performing. For this he took us to the various service wise details to show that these services were very specific and also s....
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....vices from GECG Asia Ltd. ("GECF Asia"] under a separate MSA. Both GECF Inc. and GECF Asia had provided services to the Assessee under three broad heads viz., Consulting, IT and Administrative Services. The Assessee had paid a sum of Rs. 35,85,80,010/- to the aforesaid two entities for availing the Consultancy, IT and Administrative services as per the following mark ups: i. IT :-Cost Plus 7% ii. Administrative Services :-Cost Plus 3.73% iii. Consulting Services :-Cost Plus 11% Therefore, it is submitted that mark up earned by AE on these services are also more than prescribed mark up Under Safe Harbor Rules farmed by CBDT. Therefore, they are appropriate and proper. vi. Further, the TPO has selectively applied OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administration without appreciating that in terms of para 7.14, the exact same services which the Transfer Pricing Officer has held to be in the nature of stewardship activity are treated by the OECD as substantial services which even an independent enterprise would have been willing to pay for. It is settled law that such selective application of commentaries and decisions is impermissible. (Refe....
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....f the cost is computed by Ld. DRP as ALP. ii. Regarding benefit test, he submitted that, before Ld. DRP a detailed presentation was submitted showing the benefit received from each of the services received by the assessee from its AE.These details he further referred filed before us vide page no 2847 to 2849 and further charts were shown filed in paper book no VI before us. iii. He further submitted that when the ld. DRP itself has accepted that there is rendering of service by AE and receipt of services by assessee and then computing ALP the decision of DRP is binding on ld. AO and ld. TPO both being the decision of higher Authorities of the revenue. iv. He also referred the order of Ld. TPO where he has admitted that there is a foreseeable benefit but not the immediate benefit. It was submitted that benefit analysis cannot be rejected on the ground that there would be foreseeable benefit. According to him benefit is to be seen from the eyes of the receiver and the provider of services and even future befit also satisfies the benefit test, even if it is applicable. v. He further submitted that according to OECD commentary at Para no 7.14 describes what is the intra group s....
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....all be determined having regard to the arm's length price of such benefit, service or facility, as the case may be. 36. According to the above provisions following principles emerge:- i. An international Transaction is entered in to between two or more associated enterprises for jointly acquiring or developing some property or for obtaining services. ii. The parties to transaction enter in to mutual agreement or arrangement to share cost or expenses incurred or to be incurred in respect of joint property. iii. The cost or expenses incurred should be in connection with a benefit or services of facility provided or to be provided to any one or more of such enterprise. The expectation of mutual benefit is important consideration for the acceptance of arrangement for pooling of resources by the enterprises. iv. The enterprises would require that each participant's proportionate share of the contribution is consistent with the proportionate share of overall benefits expected to be received from the arrangement. v. Transfer price of cost or expenses allocated or apportioned to such enterprise or contributed by such enterprise shall be determined having regard to Arm's leng....
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....rding HR Functions, it was submitted that human resource is the most vital asset. Human Resource function helps in developing strategies for recruitment, remuneration, promotion and training of personnel. Regarding E Commerce services assessee explained that it has tremendous opportunities for the growth of GE Money. It is expected to rapidly change how entities deal with vendors, partners, and customers. It focuses on how current products and practices can be redeveloped in light of the growing importance of the Internet and helps in setting up Internet platforms and strategies. For Legal & compliance services assessee submitted that it manages policy and compliance issues and works to ensure that, the GE Money businesses utilize the best practices and policies of GE's legal approach. It helps to identify, quantify and mitigate the risks of various legal matters. The Compliance function reviews local regulatory requirements and works with the local business to ensure that the legal entity is in compliance with all local regulatory requirements. Regarding risk management assessee explained that It helps in developing global credit risk strategies, coordinating risk assessment and r....
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....g budgets. An annual review of existing contracts is undertaken to determine whether deals are at market best. Regarding IT Services assessee justified the need submitting that Information Technology and Systems Support encompasses activities ranging from the strategic business use of IT to the systems support necessary for the hardware and software on which GE Money relies. It co-ordinates and support projects to ensure that the IT infrastructure is secure. Regarding communication and Public Relation services it justified that these services are required as It helps in enhancement of communication profile and brand protection which is necessary for existence of any business. On appreciation of the above facts it is apparent that looking to the size of the business of the assessee and also for the continuous growth of the services assessee has justified that such services are required. It is pertinent to note that requirement of the services should be judged from the viewpoint of the appellant as a businessman. Therefore in this regard we are of the view that assessee has substantiated that these services are required by it. As the company is one of the parties as service receiver ....
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....ich are owned and managed by HQ. The Domain Controllers hosted at the business locations are owned by the business. 3. Asia Network Hub (Collapsed with Global Network) The Asia Network hub provides MPLS (Multiprotocol Label Switching) & Internet connectivity in addition to providing a bridge to the GIS (Geographical Information System) Network and services in Asia for all Capital Businesses. MPLS is designed to be a reliable transport for Critical systems (currently Vision+ to Clayton). DIA internet connectivity is designed to provide the following services - Internet Hosting (inbound & outbound), internet GRE tunnels for low cost/backup WAN, Internet Proxy, 2 layer (internal & external firewalls) and 3rd Party connectivity. 4. Business Objects The SAP Business Objects portfolio provides comprehensive solutions that can empower businesses to optimize their business performance through intelligent reporting. The following licenses can be procured from the OTS License Support team: BOXI Enterprise Professional Licenses for Crystal Reports BOXI Enterprise Professional Licenses for OLAP Intelligence BOXI Enterprise Professional Web / Deski Intelligence Licen....
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.... while using Microsoft products, where there is a reasonable expectation that the problem is caused by the MS Product. - Support Assistance: Provides shortterm advice and guidance for problems not covered with PRS. It primarily is a consulting function to help projects in the design / development / deployment stage which involve Microsoft Technologies / products. Support assistance is provided 24x7. 16. OTS Offshore Technology Support (OTS) is support and maintenance for the support provided by Genpact and Satyam workforce. It also includes help for setting OHR ID and Email ID at active directory. 17. Postilion Support, Maintenance, Server Infrastructure & License for Postilion Application that is a data processing tool. 18. SAS SAS is an analytical reporting tool utilized by GE businesses globally. HQ maintains the SAS software on behalf of all businesses including India. 19. Vision Plus Vision Plus support provided by HQ includes license, maintenance, compliance, BAU support teams and Gold Source Hosting. 20. ITAM Infrastructure Hosting and maintenance for ITAM Shared infrastructure, including Production, preproduction and Testing environments for UAPM, ITAM T1, As....
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....r of IT assets. GEMFSL_Benefits Document_#5_V+ mannual VisionPlus (V+) is a platform that was developed by HQ and provided to all GE Money business including India. V+ is a one source global solution for credit cards, loans and payment processing. HQ got the system developed from PaySys Inc in the USA. V+ has multiple features and capabilities; which includes but not limited to offering new account processing, merchant administration, cardholder billing and management, collections, risk management, promotions and cobranding capabilities. It is a comprehensive tool that provides extensive loans functionality. HQ initially got the system developed; subsequently it provided detailed manuals to the businesses including India on implementation of the system and its usage. GEMFSL_Benefits Document_#6_VisionPl us For Finance Users.ppt September 2006 HQ conducted training for Indian business on the functionality and capabilities of the V+. The training would help GE Money India employee to quickly grab pace in relation to using and implementing V+ in their day-to-day operations. Few instances of IT support received from HQ in recent years. As the support fro....
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....more secure and compliant with various regulatory requirements. GEMFSL_Benefits Document_#14_!!!IMME DIATE ATTENTION!!! Firewall ports for Snare installation.msg December 3, 2010 HQ initiated and installed new firewall in the computer systems of the employees of GE Money India in order to make the systems more secure with the most updated security applications. GEMFSL_Benefits Document_#15_ Change Control Policy.msg December 7, 2010 HQ rolled out new change control policy for all businesses including India. This policy would ensure that all the systems used by business and any changes undertaken in them are secure and complaint with the regulatory requirements. GEMFSL_Benefits Document_#16_ NTP Re-configuration on OTS managed Proxy Servers.msg December 9, 2010 HQ introduced running sync for proxy servers multiple times a day. HQ proposed to change the sync process because the earlier system was not completely successful in syncing data, which resulted in information loss for business. GEMFSL_Benefits Document_#17_GE Security Services Blog - Post by Bradley Freeman (228012).msg December 18, 2010 HQ has created an online space where best practices, imp....
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....pts payable to NFO Worldwide Inc USA and at 4% to NFO Asia Pacific Ltd. Hongkong on the net revenues. These amounts are within the norms prescribed for payment of fees to various group companies of similar nature. There is no dispute with reference to services being provided by the group companies to assessee and assessee also paid various other amounts including royalty. As submitted by assessee, even though some correspondence was placed on record with reference to the advise given to assessee, providing a concrete evidence with reference to the services in the nature of specific activities is difficult, like proving the role of an anesthesian in an operation conducted by a surgeon. There may be an evidence of operation being performed by the Doctor in the form of sutures or scars etc, which can be proved later but the role of an anesthesian before operation and after gaining consciousness is difficult to prove as that is not tangible in nature. Likewise, for the advise given by various group centers to the group companies in day-to-day manner is difficult to place on record by way of concrete evidence but the way business is conducted, one can perceive the same. Assessee has giv....
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....has not held that the similar kind of services are already available with the assessee with any concrete evidence. Acceptably independent parties cannot remunerate these kinds of services if duplicative in nature. Howsoever in absence of any instances of services provided by the AE and services availed by the assessee from independent parties are similar in nature and it creates any redundancy, we rejected the viewpoint of Ld. TPO and Ld. DRP on duplicity test and we are of the view that services provide by the AE to the assessee are not duplicative services in nature. f. Further, in allocation sheet submitted by the assessee, the parts of the services have been stated to be shareholders activity and assessee in 5th column of the allocation chart has itself identified those services. Therefore the view of the ld. TPO and Ld. DRP that all these services other than those identified by the assessee are shareholder's activity cannot be accepted. This is clear from the submission of the assessee vide letter dated 7/11/2011. Generally shareholder services are those services which are not a. required by the assessee i.e. does not fulfill the need test but are required by the ownership....
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....lopment Advice and assistance on Best HR practices and policies Recruitment and coaching of top level executives Rendering due diligence support and harmonizing employment terms and conditions Management of incentive plans, share option schemes, appraisals etc. Management of employee secondments and transfers Illustrative summary of the services rendered and benefits derived 3 e-Commerce Management support in the use of search engines, emails, online marketing Advice on optimising website designs Development and maintenance of regional infrastructure (Asia) Development of local infrastructure (India), marketing tools and other applications Development of GE Money web design toolkit Sharing of best e-business practices 4 Legal and Compliance Development of Regulatory Compliance Program Execution of operational policies and procedures Advice and assistance in risk assessment exercise Sharing of best practices by exchange of business leaders across countries Liasoning with external counsels on legal and compliance matters Support in M&A deals Development of various policies and procedures to be followed across the operational region Development of training programmes on various ....
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....n development of common operating and business systems Ensuring compliance with global internal corporate standards Implementation of global IT best practices Developing and support appropriate infrastructure/framework Support in recruitment and development of IT staff Execution of Global, National and Regional IT contracts Licensing of various software and programs Illustrative summary of the services rendered and benefits derived 12 Communication and PR Advise and assistance on enhancement of communication profile Advise and assistance in brand protection Advise and sharing of best practices However ld. TPO as well as Ld. DRP has held that assessee has not demonstrated that it has received tangible , special, exclusive and direct benefit received from the above services. As we have already quoted the provision of section 92 (2) of the act which specifically speaks that Transfer price of cost or expenses allocated or apportioned to such enterprise or contributed by such enterprise shall be determined having regard to Arm's length price of such benefit, service or facility received by the enterprise. In view of this it is necessary that arms' length price is required to be dete....
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....usiness venture is not necessarily profitable or successful. All business ventures do not succeed equally or uniformly. Indeed, if an assessee is able to establish financial or other commercial benefits arising from a transaction, it would further strengthen its case. But if it cannot do so, it does not weaken it. 24. The profit earned by an assessee could be for reasons other than those relating to the international transactions or by virtue of international transactions as well as by virtue of other factors. In that event, the assessee having profited from the venture involving the international transactions, obviously, would not establish that the arm's length price was correct or justified. 25. It would make no difference even if the profit is entirely on account of the international transaction. In fact, even if it is established that on account of an international transaction an assessee's venture has profited, it does not necessarily establish that the transaction was entered into at an arm's length price. Mere profitability does not indicate that the transaction which was responsible for the enhancement of the profits was at an arm's length price. That an international ....
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....gitimate needs of the business or profession of the assessee or the benefit derived by or accruing to the assessee from such services is also to be kept in mind. After applying this test if it is found that the expenditure is excessive or unreasonable excess, excess or unreasonable portion of the expenditure is to be disallowed. We have also kept in mind the provisions of subsection 2(b) of section 40-A of the Act as per which the burden is upon the assessee to establish that the price paid by it is not excessive or unreasonable as in this case Mr. Sushil Pandit was holding substantial portion of share namely 65 per cent in the assessee company." "13. In CIT v. Edward Keventer (P.) Ltd. [1972] 86 ITR 370, the Calcutta High Court considering identical provision in 1922 Act, it was held that the section places two limitations in the matter of exercise of the power. The section enjoins the Assessing Officer in forming any opinion as to the reasonableness or otherwise of the expenditure incurred must take into consideration (i) the legitimate business needs of the company and (ii) the benefit derived by or accruing to the company. The legitimate business needs of the company mu....
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....ion to show that at the time of availing the services about benefits which were expected, foreseen, visualized, we are of the view that conditions of provision of section 92 (2) of the act Arms' length price of such payments for services are not satisfied because in such circumstances such services will not have any value and no independent party would pay for such services. All the decision cited by the assessee that benefit cannot be judged from the view point of the revenue also supports the above propositions. j. For the above proposition we also get support from the OECD Guidelines 2010 which provides as under: "7.6 Under the arm's length principle, the question whether an intra- group service has been rendered when an activity is performed for one or more group members by another group member should depend on whether the activity provides a respective group member with economic or commercial value to enhance its commercial position. This can be determined by considering whether an independent enterprise in comparable circumstances would have been willing to pay for the activity if performed for it by an independent enterprise or would have performed the activity in- house ....
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.... were competent enough to do this work. For example, the Transfer Pricing Officer had pointed out that the assessee has qualified accounting staff which could have handled the audit work and in any case the assessee has paid audit fees to external firm. Similarly, the Transfer Pricing Officer was of the view that the assessee had management experts on its rolls, and, therefore, global business oversight services were not needed. It is difficult to understand, much less approve, this line of reasoning. It is only elementary that how an Assessee conducts his business is entirely his prerogative and it is not for the revenue authorities to decide what is necessary for an Assessee and what is not. An Assessee may have any number of qualified accountants and management experts on his rolls, and yet he may decide to engage services of outside experts for auditing and management consultancy; it is not for the revenue officers to question Assessee's wisdom in doing so. The Transfer Pricing Officer was not only going much beyond his powers in questioning commercial wisdom of Assessee's decision to take benefit of expertise of Dresser Rand US, but also beyond the powers of the Assess....
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....d not pay any amount. However, this is different from the TPO stating that the assessee did not benefit from these services, which amounts to disallowing expenditure. That decision is outside the authority of the TPO. This aspect was made clear by the ITAT in Delloite Consulting India (P.) Ltd. v. Dy. CIT/ITO [2012] 137 ITD 21/22 taxmann.com 107 (Mum): '37. On the issue as to whether the Transfer Pricing Officer is empowered to determine the arm's length price at "nil", we find that the Bangalore Bench of the Tribunal in Gemplus India (P.) Ltd. v. Asstt. CIT [IT Appeal No. 352 (Bang.) of 2009, dated 20-10-2010] held that the assessee has to establish before the Transfer Pricing Officer that the payments made were commensurate to the volume and quality service and that such costs are comparable. When commensurate benefit against the payment of services is not derived, then the Transfer Pricing Officer is justified in making an adjustment under the arm's length price. 38. In the case on hand, the Transfer Pricing Officer has determined the arm's length price at "nil" keeping in view the factual position as to whether in a comparable case, similar payments would ha....
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....above we are of the view that benefit test for determination of Arms length Price is to be viewed from the perspective of the assessee and businessman and not from the perspective of revenue. In this case appellant has demonstrated the benefit which it is expected to derive from the various services rendered by its AE and ld. TPO has erred in replacing with its own judgment of the benefit derived by the assesse, we reject this approach. m. For determination of arms Length pricing assessee has adopted TNMM as the most appropriate method and has chosen the foreign AE as the tested party. Ld. TPO has rejected this approach and has held that as these services have been availed in India hence, assessee should be taken as tested party and secondly the method applied should be CUP method. For this ld. TPO has not given any reasoning. Before us the assessee has contested that the foreign AE should be taken as the tested party as the Foreign AEs are least complex and comparable data are available. We have also perused the reason given by the Ld. TPO that as the services are rendered in India then only the India party can be tested party. This reason is flawed and cannot be accepted. In fa....
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....evidence is on record, belies litigant's legitimate expectations and is to be deprecated. Having regard to aforesaid principle, it is necessary to look into records to see whether there is sufficient material on record to dispose of the issue on merit and there is no need to remand the issue to provide a fresh inning to the revenue." In this case, the issue is being set aside to follow the ratio laid down by the jurisdictional high courts and therefore there are adequate reasons, which are just and proper in this case to set aside this issue back to the file of AO. Further ld. TPO has not carried out the exercise of Comparability analysis, has adopted the Appellant as Tested party instead of claim of the assessee of foreign AEs as tested party and also adopted CUP as most appropriate method against the claim of the assessee as TNMM without given any reasons. Therefore, we reject the argument of the LD. AR against setting aside the above stated limited issues with respect to determination of ALP of International Transactions. 40. In the result ground no 5 of the appeal is allowed with above direction. 41. Ground No 6 and 7 are against charging of interest u/s 234D and withdrawal....
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....disallowance of depreciation of Rs. 44,62, 431/- claimed by the Appellant u/s 32 of the Act on vehicles leased out to customers, by holding that the Appellant is not the beneficial owner of these vehicles. C. Addition on account of Interest on sticky loans 3. On the facts and circumstances of the case and in law, the Ld. AO has erred in proposing and fee Hon'ble DRP has further erred in confirming the addition of Rs. 13,79, 24,461/- towards Merest on sticky loans and advances which was not recognised as income by the Appellant in accordance with the mandatory Prudential Norms issued by the Reserve Bank of India. D. Disallowance of loss on sale of Repossessed Assets 4. On the facts and circumstances of the case and in law, the Ld. AO has erred in proposing and tie Hon'ble DRP has further erred in confirming the disallowance of Rs. 21,64,06,930/- presenting actual loss on sale of repossessed assets, and forming an integral part of the banking financing activity of the Appellant. E. Transfer Pricing Adjustment 5. On the facts and in the circumstances of the case and in law, the learned Transfer Pricing (hereinafter referred to as 'Ld. TPO') and the Ld. AO ....
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....ave lodged their tax return in India on the taxable income derived re Appellant. F. Levy of Interest under Section 234Dof the Act 10. On the facts and circumstances of the case and in law, the Ld. AO erred in levying interest of Rs. 3,48,01,780/- under section 234D of the Act as a consequence to the above disallowances by the Hon'ble DRP. G. of Interest granted under section 244A of the Act 11. On the facts and circumstances of the case and in law, the Ld. AO erred in withdrawing interest of Rs. 2.40 56.534 granted to the Appellant under section 244A of the Act as a to the above disallowances confirmed by the Hon'ble DRP. H. Initiation of penalty proceedings under section 271(1)(c) of the Act 12. On the facts and circumstances of the case, the ld AO erred in initiating penalty proceedings under section 271(1)(c) of the Act for furnishing inaccurate particulars of the income, without appreciating the fact that the Appellant has made full disclosures in respect of its claims and did not furnish any inaccurate particulars of its income. 47. Ground No 1 is general and supportive in nature, no specific arguments were advanced for, and against this ground, and....
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....ies agreed that ground No 5 of this appeal is also identical in facts and circumstances as ground no 5 of the appeal of the assessee for AY 2006-07. We have already decided the ground no 5 of the appeal for AY 2006-07 by this common order. We have set aside the issue of TP adjustments back to the file of TPO/AO to determine the ALP of these transactions. Therefore, following our decision we set aside this ground of appeal on this score and remit the matter to the file of AO/TPO for deciding it in conformity with above direction. 56. Further, as ground no 6 to 9 of that appeal are also intertwined with ground no 5 of the appeal of the assessee for this year. Because of that reason , we also send them back to the file of the AO for deciding them afresh, as in the original assessment TPO has determined ALP at Nil only on the basis of qualitative test and not on the basis of comparability and availability of data. 57. In the result ground, no 5 to 9 are allowed accordingly with directions. 58. Ground No 10 and 11 are against the interest charged u/s 234D of the act and withdrawal of interest allowed u/s 244A of the act respectively. No separate arguments against and for of them are ....
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....tablishing that the conditions specified in clause (a) to (d) of Section 92C (3) of the Act have been satisfied before disregarding the arm's length price determined by the Appellant and proceeding to determine the arm's length price himself. 2.4 On the facts and circumstances of the case and in law, the DRP and AO/TPO have erred in determining the arm's length price for international transactions pertaining to availing of intra-group services, i.e. consulting, administrative and IT services at ad-hoc cost of only 5% of the total cost thereby making / upholding adjustment of Rs. 34,06,51,010/- without applying /following any prescribed method in complete disregard to transfer pricing regulations and judicial precedence. 2.5 That on the facts and circumstances of the case and in law, the DRP and AO/TPO have erred in observing that out of the total international transaction of intra-group services received by the appellant, ad-hoc cost of 5% can only be allowed to the Appellant despite acknowledging that services have been received by the Appellant and stewardship cost has not been allocated. 2.6 That on the facts and circumstances of the case and in law, the DRP an....
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....e and in law, the Ld. DCIT erred in levying interest of Rs. 22,89,108 under section 234D of the Act as a consequence to the above disallowance confirmed by the Hon'ble DRP F. Withdrawal of interest granted under Section 244A of the Act 6. On the facts and circumstances of the case and in law, the Ld. DCIT erred in withdrawing interest of Rs. 77,55,372/- under section 244A of the Act as a consequence to the above withdrawal confirmed by the Hon'ble DRP. G. Initiation of penalty proceedings under Section 271 (1 )(c) of the Act 7. On the facts and circumstances of the case and in law, the Ld. DCIT erred in initiating proceedings under Section 271(1)(c) of the Act for furnishing inaccurate particulars of the income, without appreciating the fact that the Appellant has made full disclosure in respect of its claims and did not furnish any inaccurate particulars of its income. 62. Ground No 1 is general and supportive in nature and no specific arguments were advanced for and against this ground therefore same is dismissed. 63. Ground No 2 is against the transfer pricing adjustment made by TPO on account of various Intra Group services amounting to Rs. 35,85,80,010....