TaxTMI 
TaxTMI 
2017 (10) TMI 1291
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....ade by Transfer Pricing Officer (TPO) u/s. 92CA(1) of the Act for computation of arm's length price in relation to the said international transactions. During transfer pricing proceedings, the TPO observed that assessee had paid royalty to the tune of Rs. 11,24,11,686/-. The TPO observed that though the amount of Rs. 11,24,11,686/- has been paid by the assessee as royalty to its AE, Dana Corporation, USA, however, documents on record does not suggest the fact that payment has been made in lieu of technical services or any other services received by the assessee. It was also noted that similar amount was paid as management services fees to another group concern i.e. Asia Investment Pvt. Ltd. The aforesaid company has 25.10% share holding in assessee company. On the basis of observation made by TPO, the Assessing Officer disallowed Rs. 11,24,11,686/- paid by assessee as management services fee to Asia Investment Pvt. Ltd. ( in short 'AIPL') as well as royalty payment of Rs. 11,24,11,686/- paid by assessee to its AE, Dana Corporation, USA. 3. Aggrieved by disallowance of management services fee and payment of royalty, the assessee carried the matter in appeal before the Commissione....
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....as made by Revenue for identical reasons in assessment year 2009-10. The assessee carried the matter in second appeal before Tribunal in ITA No. 251/PUN/2014. The Tribunal vide order dated 10.02.2017 decided the issue in favour of the assessee. The ld. AR further submitted that AIPL, a group concern, is providing management services to its group concern since Financial Year 2004-05. The assessee had entered into Corporate Services Agreement dated 14.12.2004 valid till 31.12.2010 with AIPL. The same is at pages 43 to 53 of the paper book. The services provided by AIPL under the said agreement include services in the area of Human Resources, Environment Health & Safety, Business development & Marketing, Finance, Legal and taxation, operations and corporate transactions etc. The assessee paid Management service fees to AIPL @ 2.85% of the sales. 6. Shri Rajeev Kumar, CIT- Sr. DR representing the Department vehemently supporting the findings of the Commissioner of Income Tax (Appeals) submitted that during the proceedings before Authorities below the assessee did not submit any material to show that assessee had received any kind of management support services from its group concern....
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.... sales as provided vide submission dated 26 March 2013 before the learned AO. • Finance: AIPL's strong corporate relationship with leading lending institutions, commercial banks, insurance companies supported SIPL in arranging and availing long term funds and short term working capital needs at competitive rates, covering foreign exchange exposure risk, negotiating quotes for Insurance as well as reviewing and advising for risk coverage etc. • Legal and taxation: In accordance with frequent changes in various Acts and Rules in Direct and Indirect Tax Laws and various other laws, AIPL supported in advising from time to time with regard to changes which helped SIPL to comply with all the laws and regulations. • Operational overview: AIPL conducted periodic operation review meetings to drive the performance of SIPL and supported for excelling the operations. In addition to that, advisors drawn from diverse fields were available for advising SIPL in the matters of strategic issues, key business decisions, organizational market development and global trend. • Operational Excellence Drive: As the main focus was on competence with gl....
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....sessee. The said benefits were for smooth carrying on of the business by the assessee and were incurred for the purpose of business. The assessee is the best judge to decide the expenditure it needs to incur for smooth carrying on of its business. The Assessing Officer cannot sit in judgment of businessman position in incurring any expenditure. The Hon'ble Supreme Court in Hero Cycles (P) Ltd. Vs. CIT (supra) have applied the ratio laid down by the Apex court in S.A. Builders Ltd. Vs. CIT(A) and another (2007) 288 ITR 1 (SC) and upheld the scope of commercial expediency, wherein it was held that The expression "commercial expediency" is an expression of wide import and includes such expenditure as a prudent businessman incurs for the purpose of business. The expenditure may not have been incurred under any legal obligation, but yet it is allowable as a business expenditure if it was incurred on grounds of commercial expediency. Where there is nexus between the expenditure incurred and the purpose of business, then the revenue cannot put itself in the arm chair of the businessman to decide how much of the expenditure is reasonable. Applying the above said proposition laid down by th....
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....ied personal was seconded by the AE for providing technical assistance to the assessee on his request? 4. Whether on the facts and circumstances of the case the Ld. CIT(A) was justified in deleting the addition on account of Royalty expenses, ignoring the findings of the TPO and the AO that assessee has separately charged expenses such as fees, travelling and living expenses of AE's personal to assessee and assessee's personal to AE and thus separately charged for providing technical assistance and thus there is duplication of charges levied by the AE on the assessee in the form of Royalty charges? 5. The appellant craves leave to add, amend or alter any of the above grounds of appeal. Though the Revenue has raised four grounds in appeal but all the grounds are with respect to single issue i.e. payment of royalty expenses to the tune of Rs. 11,24,11,686/-. 11. Shri R.D. Onkar appearing on behalf of the assessee submitted that the assessee has entered into Technology License Agreement with its parent AE for manufacturing light axles and drive shafts and components which are used in Sports Utility Vehicles and Light Commercial Vehicles manufactured by ....
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....s of agreements are placed at pages 116 to 158 of the Paper Book. The assessee also provided documentation, under which the assessee had received the benefits and assistance from its associate enterprises in relation to the Royalty transaction on account of technical assistance, design, process review and technical know-how, which are placed at pages 201 to 210 of the Paper Book. It was pointed out that associate enterprises supports the assessee in technology upgradation by bringing the latest technology in drive train systems to India. The Assessing Officer referred the issue of computation of arm's length price of the said international transaction to the TPO, who in his order treated the arm's length price at Nil. 49. In the facts and circumstances of the present case, the Royalty paid by the assessee to its associate enterprises had been approved by the Secretariat of Industrial Approval, Ministry of Industry, Government of India, vide letter dated 28/31.01.2003 and initially by the RBI @ 3%. However, subsequently, the RBI vide communication dated 21.07.2003 accorded automatic approval route to make the Royalty payment at 8% on exports and 5% on domestic sales....