2018 (1) TMI 726

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....Officer (AO) are erroneous in law and on the facts of the case. 2. The Ld. DRP/AO are not legally justified in making an adjustment of Rs. 2,45,32,965/- as profit attributable to the appellant company under the Profit Split Method in connection with the absolute sale of intangible assets to AE when such revenue is generated by AE of the appellant company i.e., DQ Ireland which is the absolute owner of such intangible assets. 3. The Ld. DRP/AO is erroneous in not considering the fact that the Intangible assets were sold to its AE at Arm's length and accepted by the Ld.AO/TPO and therefore did not require any further additional adjustment. 4. The Ld. DRP/AO are not justified in questioning the commercial wisdom of the appellant&#....

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....gaged in the business of providing animation production services for Television and Film Production Companies from its inhouse animation studio facilities in Hyderabad, filed its return of income for the A.Y 2012-13 on 29.11.2011 admitting total income of Rs. 72,39,133. During the assessment proceedings u/s 143(3) of the Act, the AO observed that the assessee has entered into international transaction with its AE. Therefore, the case was referred to the TPO for determination of the Arms' Length Price. 3. The TPO passed an order u/s 92CA(3) of the Act on 30.01.2015 and in accordance with the same, the draft assessment order was passed by the AO. The assessee preferred its objection before the DRP and consequent to the DRP order, the final a....

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....te revenue immediately. As per ld. AR, "AE" was in a position to generate revenue in the last quarter of 2009-10 i.e. Jan- March, 2010. But TPO adopted the whole revenue generated by "AE" in the whole year to arrive the profit arithmetically to the Indian Entity. The main issue before us is, whether the TPO justified to determine the profit attributable to Indian entity (assessee) when he himself determined the sale consideration of IP (Jungle Book). When the TPO agreed that there is a outright sale, there ends the international transaction. Now, TPO is trying to go beyond sales and making TP adjustments. We are asking ourselves, whether there is any international transaction exists. In our considered view, there is no international transac....

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....international transaction during the relevant financial year. Grounds of appeal 2 & 3 are accordingly allowed. 8. As regards Ground of appeal No.4 relating to Management Consultancy Fee, the learned Counsel for the assessee submitted that this issue is also covered in favour of the assessee by the decision of the Coordinate Bench of the Tribunal in assessee's own case for the A.Y 2008-09. 9. The learned DR, however, supported the order of the DRP. 10. Having regard to the rival contentions and the material on record, we find that during the A.Y 2012-13, the assessee paid an amount of Rs. 2,14,06,307 to its AE at Mauritius towards Management Consultancy services received. The assessee had claimed that the payment was made to the Board of ....

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....US $ 1,99,174 on 25-10-2010 and US$ 3,00,000 on 04-01- 2011. It is noticed that even though invoice was raised on 31-03-2008 for whole year instead of quarterly billing, the payments were made from September, 2010 to January, 2011 with substantial delay. The reasons for such delayed payments were not explained. Therefore, we are of the view, that in the given circumstances, the foreign exchanges losses or gains in the hands of DQE Mauritius cannot be considered as services rendered by the DQE Mauritius to assessee which should be on it's own account. To the extent of the above amount, we are in agreement with the observation of the TPO in para 8.3 of his letter dt. 08- 11-2012, that foreign exchange loss does not pertain to any manageme....

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....ed as 'service charge' for the intra group and therefore, we after considering the facts of the case, restrict the amount to the actual management fees charged by the DQE Mauritius along with other cost of administration and audit and mark up at 5%". 11. Since the facts and circumstances are the same for the A.Y before us, respectfully following the decision of the Coordinate Bench (to which both of us are signatories), we allow the assessee's ground of appeal. 12. As regards grounds of appeal No. 5 to 8, the learned Counsel for the assessee submitted that without prejudice to his ground that this expenditure is not to be reduced from the export turnover, if a direction is given to exclude the same from export turnover as well, t....