AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2016 (11) TMI 201
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....e IT Act. 4. On the facts and circumstances of the case and in law, the CIT(A) has erred in deleting the addition of Rs. 3,19,22,989/- on account of transfer pricing addition u/s 92CA(3) of the IT Act." 2. Brief facts of the case are as under: 2.1 Ericsson India Private Limited (hereinafter referred as 'the assessee') is a company incorporated under the Indian Companies Act, 1956. The assessee is a wholly owned subsidiary of Telefonaktiebolaget LM Ericsson, Sweden ('LME'). LME is the ultimate holding company of all Ericsson Group Companies located in various countries across the globe. 2.2 During the relevant Assessment Year 2005-06 under consideration, the assessee was engaged in the business of manufacturing of electrical apparatus for line telephone or telegraphy including such apparatus for carrier current line system and parts thereof, marketing of telecommunication equipment, implementation and commissioning of telecommunication equipment meant for mobile telephony, internet services and rendering technical services in connection therewith and development of telecommunication related software. 2.3 For the year under consideration, the assessee filed its....
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....lity regarding liquidated damages is allowable liability during the year under consideration, hence, could not be added either under normal computation of income or while computing income u/s 115JB of the Act. These grounds raised by the assessee are allowed." Assessment Year 2003-04 & 2004-05: "25. In the assessment orders, the A.O. made disallowance of Rs. 252,679,327/- and Rs.156,071,161/- in Assessment Year 2003-04 and 2004-05 respectively, claimed as provision for liquidated damages by the assessee on the reasoning that it was in the nature of contingent liability and, therefore, was not allowable u/s 37(1) of the Act." 3.2 Ld. D.R. was fair enough to concede to the above submissions of Ld. A.R. 3.3 It is submitted that there is no change in the facts and circumstances of the case for the year under consideration vis-à-vis the previous / earlier years. Respectfully following the same, we are of the considered opinion that assessee is eligible for the deduction in respect of provision for liquidated damages as revenue expenditure allowable u/s 37(1) of the Act. 4. Ground No.2 stands covered by the orders passed for Assessment Years 2002-03, 2003-04 and 2004-05.....
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....accepted position appears to be that in determining whether there has in fact been "accrual" of liability or income. - the accountancy standards prescribed by the ICAI would have to be followed and applied. (ii) In the context of the revenue account cases, we affirm the decision of the ITAT in Oil & Natural Gas Corpn. Ltd.'s case (supra) which rightly follows the settled position as explained in the judgment of the Hon'ble Supreme Court which we have referred to. We, therefore, reject the submission of the appellant in these appeals that in the revenue account cases, the increase in liability on account of the fluctuation in the rate of foreign exchange prevailing on the last day of the financial year is notional or contingent and. Therefore, cannot be allowed as a deduction in terms of section 37 of the Act. (iii) In the capital account cases where the cost of asset has been either paid fully or in part prior to the fluctuation in the rate of foreign exchange, the cost of the asset would correspondingly be permitted to be reworked for purposes of repayment or depreciation or investment allowance as the case may be with reference to the rate prevailing on the last date....
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....ede to the above submissions of Id. AR for the assessee. 32. In this view of the matter and respectfully following the order (supra) of the Tribunal and the order of Hon'ble Delhi High Court in the case of Woodward Governor (supra) the issue relating to foreign exchange fluctuation loss is decided in favour of the assessee and against the Revenue. Consequently, the order of CIT(A) in this regard is upheld and ground no. 3 of the instant appeals of the Revenue are rejected." 4.1 Ld. D.R. was fair enough to concede to the above submissions of Ld. A.R. 4.2 It is submitted that there is no change in the facts and circumstances of the case for the year under consideration vis-à-vis the previous / earlier years. Respectfully following the orders of the Tribunal and Hon'ble Delhi High Court in the case of CIT Vs Woodward Governor reported in 294 ITR 451, the issue relating to foreign exchange fluctuation loss is decided in favour of the assessee and against the Revenue. Consequently, ground No.2 of the instant appeal of the Revenue is rejected. 5. Ground No.3 stands covered by order for Assessment Years 2003-04 and 2004-05. The relevant paragraphs are paras 41 to 43.....
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....s. 3,19,22,989/- contending that the transaction must be benchmarked separately. Ld. A.O. gave effect to the order of Ld. TPO. 6.4 Aggrieved by the adjustment made, the assessee preferred appeal before Ld. CIT(A). Ld. CIT(A) ongoing through the submissions, deleted the adjustment made by the Ld. TPO. Aggrieved by the order of Ld. CIT(A), the Revenue is in appeal before us. 6.5 Ld. D.R. submitted that cost pertaining to the purchase of ancillary equipments were reimbursed by its AE's on cost to cost basis without any markup. He submitted that such an arrangement between the assessee and its AE is not supported by any documentary evidence. He thus submitted that the TPO was correct in applying cost + 6% markup on the reimbursements made by the AE on purchase of ancillary equipments. 6.6 On the contrary, Ld. A.R. submitted that the Ld. TPO ha not appreciated the nature of services provide by the assessee to its AE in relation to supply of telecom ancillary equipment. Ld. A.R. elaborated upon the functions performed by the assessee. 6.7 In wireless segment, the assessee procures core telecommunication equipments from the AEs and sells the same to telecom Operators. Further he submi....
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....action. 37. The claim of the appellant is that with respect to the said transaction it has not undertaken any significant functions, employed significant assets and borne significant risks with respect to the cost reimbursement transaction. To explain the same the appellant has undertaken a detailed analysis of Functions performed, Assets employed and Risks assume (FAR) of the said international transaction of reimbursement of costs by the AEs and based on the FAR analysis it has concluded that with respect to the said international transaction the appellant has not undertaken any significant functions, employed significant assets and borne significant risks. The appellant in its submissions has submitted that the only function undertaken by it with respect to the sad international transaction was the supply of ancillary telecom equipment on which it had incurred transportation cost and personal cost. However, such cost was not significant and the same has been captured in the overall cost base of the Wireless segment, which the TPO has also accepted to be at arm's length 38. In my considered view a FAR analysis forms the bedrock of any transfer pricing analysis. In the ins....