TaxTMI 
TaxTMI 
TaxTMI 
2013 (5) TMI 905
X X X X Extracts X X X X
X X X X Extracts X X X X
....Resolution Panel (DRP) under section 143(3) read with Section 144C of the I.T. Act, 1961 is bad in law, violative of principles of natural justice and void ab-initio. 1.1 That Assessing Officer erred on facts and in law in computing the income of the appellant at Rs. 10,31,01,023/- against the income of Rs. 6,85,19,237/- returned by the appellant. Transfer Pricing:- 2. That the Assessing Officer erred on facts and in law in making addition to the income of the appellant to the extent of Rs. 2,22,54,524/- on account of the alleged difference in the arm's length price of international transactions. 2.1 That the Assessing Officer erred on facts and in law in holding the arm's length price for international transaction of payment of management fee as NIL as against management fee of Rs. 2,22,54,524/- paid by the appellant on the ground that no benefit was derived by the appellant from payment of such fee. 2.2 That the Assessing Officer /TPO erred on facts and in law in not appreciating that significant benefits were drawn by the appellant from payment of management fee in terms of increased revenue and high profitability, even in the initial years of it's business. 2.3 That....
X X X X Extracts X X X X
X X X X Extracts X X X X
....timated fee / cost for development of new products by the associated enterprises (Pages 582 to 589 of paper Book II) 3. List of employees on the pay roll of the appellant. (Page 591 of paper book II.) 3.2 With regard to the admission of the above evidences, the submissions of the assessee is as under:- "The appellant was incorporated on 9.3.2005 as a joint venture company between Talbros Automotive Components Ltd. (TACL or Talbros) and Nippon Leakless Corporation Japan (NLK Japan or the associated enterprise), and is engaged in the business of manufacture of automotive gaskets. NLK is a preferred supplier for automotive gaskets primarily designed and developed for 'Honda' vehicles manufactured by Honda group of companies. NLK is a preferred supplier for automotive gaskets primarily designed and developed for "Honda" vehicles manufactured by Honda group of companies. Honda Motors and all its plants globally source their gaskets from NLK or its affiliate companies in the respective jurisdiction. During the year under consideration, the appellant was primarily manufacturing and selling gaskets to Honda and Honda JVs in India. For the newer models of vehicles developed and i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o develop new models of gaskets as per specifications and requirements of the customers. The appellant, therefore, entered into an agreement dated 01-10-2007 with the associated enterprise, NLK Japan, for management services wherein the associated enterprise agreed to provide product development related services to the appellant: In consideration of the aforesaid services, the appellant agreed to pay the associated enterprise fee computed at 20% of profit before tax (PST). It is respectfully submitted that such an arrangement ensures that fee is payable only when the appellant earns profit and no fee is payable in a situation when there is a loss or where no profit is earned by the appellant. The appellant, while agreeing to the aforesaid mode of payment, thus ensured that fee was payable to the AE only when the product was successful and appellant was able to make profit. In order to benchmark the international transaction of payment of management fee, the appellant applied the Transactional Net Margin Method ("TNMM") as the most appropriate method. For the purpose of applying TNMM, 18 comparable companies were identified. The result of benchmarking analysis is summarized as u....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d it fit to make a payment of such large scale which was not made till last year i.e. FY 2006-07? Would it not be a prudent business practice that the payer demand and maintain such records from the service providers on the basis of which such a payment is made even if it is at a fixed basis". The TPO, concluded that an independent party would not have made such a payment in an arm's length situation. The TPO also held that since the appellant is also paying royalty for use of technology of the AE, there was no requirement to pay management fee. The TPO, applying CUP method determined the arm's length price of transaction of payment of management fee at 'Nil'. The TPO, accordingly, made an adjustment of Rs. 2,22,54,524. In order to rebut the aforesaid conclusion of the TPO, the appellant seeks leave of the Hon'ble Tribunal to place on record the aforesaid evidences / details by way of additional evidence to demonstrate the services rendered for development of products by the associated enterprises for the appellant. From the aforesaid, it would be noted that over a period of 6 years, the associated enterprise has developed a total number of 185 gaskets for....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ovisions and the case does require special consideration. The assessee is free to support his case in any manner it deems fit by filing any additional evidence or document before the AD. Further information may be gathered from the parent company, if possible. Fresh methods may be adopted to prove ALP. Our intention is that, the assessee should not be shut out in the second round of proceedings, on the ground that, certain documents were not filed in the first round or certain method was not adopted originally." (emphasis supplied) Attention is further invited to the decision of the Hon'ble Tribunal in the case of NIT Ltd. vs ACIT: (ITA No. 1871/Del/2009) wherein the fresh search submitted by the appellant even before the Tribunal was accepted. It is respectfully submitted that the aforesaid additional evidences sought to be placed on record, have bearing on the disputes involved in the appeal. Omission to file the aforesaid evidences / documents before the lower authorities is neither willful nor intentional. The aforesaid evidences / documents have now been placed on record to support the claim of the appellant pursuant to the observations noted by the assessing o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....employed for accounting activities at the JV company has no professional qualification. E-mail communications regarding finalization of balance sheet and appointment of internal auditors are placed at Pages 668 to 669 of paper Book II Financial Services - Dealing with banks and organizing necessary working capital limits were undertaken by TACL's accounts department. Mr. R. P. Grover, CFO, Talbros was authorized by the board for these activities. Copy of board resolution is placed at Page 670 of paper Book II Taxation Services - Appointment of and consultation with tax experts, attending to all the taxation matters (direct as well as indirect taxes) were attended by Talbros team. Copy of assessment order for assessment year 2008-09 mentioning the name of Ms. Madhu Ghiya, Sr. Manager Accounts, Talbros, along with copies of other communications is placed at Pages 671 to 676 of paper Book II. Commercial Activities - Dealing and coordinating with customers and costing of products, etc. were done by T ACL team as the JV company did not have any cost accountant or person for marketing activities. Business Development - Exploring possibilities of developing new business oppo....