TaxTMI 
TaxTMI 
2016 (9) TMI 808
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....nd electrical products, electronic medical equipment, development of embedded software and services. For AY 2011-12, the Assessee filed its original return of income on 29 November 2011 and subsequently revised the return on 27 March 2013 determining total income of Rs. 158,03,51,221. The return was selected for scrutiny assessment under section 143(3) of the Income Tax Act, 1961 ( "the Act "). Reference was also made to the Transfer Pricing Officer ("TPO "). The scrutiny assessment was completed and the draft assessment order under section 143(3)/144C of the Act was passed on 27 March 2015. In the draft order, primarily the following adjustments/disallowances were made : Sl.No. Particulars Amount (Rs.) Total Amount (Rs.) 1. Management Support Services 2,02,71,59,959 2. Software Development Services 49,57,73,339 3. IT Services 3,55,26,652 4. AMP Expenses 35,19,21,583 Total Transfer Pricing Adjustments (A) 291,03,81,532 5. Payments to club 16,97,776 6. Pease rent on motor vehicles 5,74,52,965 7. Loan waived off 2,23,68,000 8. Depreciation on moulds 2,67,54,530 To....
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.... the draft order, primarily the following adjustments/disallowances were made : Sl.No. Particulars Amount (Rs.) 1. Transfer Pricing Adjustment 1,891,282,392 2. Payments to club 2,631,637 3. Excess of provision for replacement guarantee over actual payment 17,000,000 4. Lease rent 55,099,000 Total 1,966,013,029 9. The Assessee filed its objections with the Hon'ble Dispute Resolution Panel ("DRP ") as per the provisions of section 144C of the Act against the draft assessment order. The Hon'ble DRP confirmed the aforesaid adjustments/disallowances made by the Assessing Officer ("AO "). The only relief given by the DRP was excluding IT charges from the cost of Philips Software Centre ( "PSC "). This resulted in higher margin earned by PSC and reduction in adjustment amounting to Rs. 96,900,000. Giving effect to the DRP's direction, the transfer pricing adjustments was revised to Sl.No. Transfer Pricing Adjustments Amount (Rs.) 1. Management Support Services 1,252,730,863 2. IT Charges 239,351`,529 3. Rendering of Software Development Services 302,3000,000 Total 1,794,382,392 10. Based on the directions issued....
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....vices leading to direct and proximate benefit to the AE i.e., KPNV and therefore the Arm's Length Price (ALP) for services provided by the AE to the Assessee. The same stand was taken in AY 2009-10 as well. The Hon'ble ITAT in AY 2009-10, ultimately set aside the order of the AO on this issue and remanded to the DRP the issue for re-adjudication. On such remand proceedings, the DRP held that the service received by the Assessee from AE was not in the nature of stewardship services. The DRP however held that the Assessee has not established the benefit it received from the services claimed to have been provided by the AE and therefore the benefit test was not satisfied and therefore the ALP determined by the TPO at nil was to be upheld. 14. The learned counsel brought to our notice the voluminous evidence filed by the Assessee to substantiate the nature of services rendered by the AE and how the same benefited the Assessee and these have not been considered at all by the DRP. Similar is the position with regard to the provision of management of services in AY 2010-11 also. The DRP has without considering the evidence filed by the Assessee held that the Assessee has not established ....
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....d no addition can be made. According to him the position would be the same in AY 2009-10 in so far as it relates to adjustment on account of ALP for software development services. 18. The learned counsel for the Assessee submitted that the Assessee has made out a prima facie case. With regard to the balance of convenience the learned counsel brought to our notice the following facts with regard to the payment of taxes for both the AYs which is as follows: 19. The learned counsel submitted that the Assessee will have no objection if the adjustments available are also made. His submission was that more than 50% of the outstanding tax demand has already been paid by the Assessee and therefore the balance of convenience is in favour of granting an order of stay. It was highlighted that the Assessee would be put to hardship if order of stay is not granted as it would amount to making payment of tax the levy of which is prima facie unsustainable. 20. Lastly the learned counsel for the Assessee brought to our notice Instruction of the CBDT to its officers as contained in F.No.404/72/93-ITCC dated 29.2.2016 whereby the CBDT has instructed the AO's to grant stay of recovery of outstandin....