TaxTMI 
TaxTMI 
2018 (3) TMI 954
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....Since the issues involved in all the appeals are common arising out of identical set of facts, therefore, same were heard together and are being disposed of by way of this consolidated order. 2. We will first take up cross appeals for the assessment year 2007-08. In the assessee's appeal, the assessee in various grounds of appeal has challenged mainly:- i) That the Ld. CIT (A) has erred in law and on facts in not accepting TNMM as the most appropriate method considering the business model and transaction of the assessee and thereby upholding the action of the TPO in separately analysing the payment made for various Intra Group Services by applying CUP method. ii). Ld. CIT(A) has erred in law and on facts in holding that no benefit was derived by the assessee in respect of various intra Group Services like; (a) sales commission of Rs. 1,08,48,310/- to Johnson Matthey, Japan; (b) Cost sharing charges of Rs. 73,36,991/- to Johnson Matthey Inorganics, Malaysia; and (c) SAP Maintenance charges of Rs. 27,12,007/- to Johnson Matthey Sdn Bhd, Malaysia; and thereby holding that the arm's length price of these international transactions is to be taken as NIL. ii....
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....es were arrived at 43.49% and accordingly, it was reported that since assessee's margin was higher than that of the comparables, the international transaction entered with the AE were at arm's length price. For the payment of 'royalty' and 'intra group' services (as mentioned at Sl. Nos. 5 to 11 of the aforesaid table), the assessee submitted that all the transactions should be aggregated and should be benchmarked under TNMM. Ld. TPO from the TP study report, first of all noted that assessee had excluded the cost of raw material for the purpose of computation of PLI and also the purchase of components from the AE which was higher than the sales of AE, accordingly, assessee was required to compute operating profit to operating revenue of the tested party and the comparables. In response, the assessee submitted the calculation of OP/OR at 11.19% and those comparables at 9.44%. However, TPO observed that assessee had included other income also in the calculation of OP/OR and if the same is excluded then PLI would be arrived in the following manner:- 1. Sales (Excluding other income) : Rs. 162,76,20,000 2. Total Cost (excluding Finance cost) : Rs. 147,11,66,000 ....
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.... "1. The taxpayer did not produce any evidence/documentation on how the royalty rate fixed. At an arm's length, party receiving technology would like to see the profitability from future revenue streams before fixing a royalty rate. 2. The taxpayer did not produce any cost benefit analysis at the time of entering into the agreement with its AE showing that the royalty rate is not fixed based on expected benefit. 3. There is no proof that the other group concerns or third parties are also charged identical royalty. 4. The taxpayer has also not been able to show that it derived any economic benefit from the alleged know how received the AE. 5. The profitability is below the arithmetical mean margin of the comparable companies considered by the TPO. 6. The profit that accrues to the licensee may not arise solely through the engine of the technology. There are returns from the mix of assets it employs such as fixed and working capital and the returns from intangible assets such as distribution system, trained workforce, etc. Allowances need to be made for them. In the absence of any data provided by the taxpayer, it is impossible to know....
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....K was duly approved by RBI and Foreign Investment Promotion Board (FIPB) and as per the terms of the agreement, royalty was required to be paid for the period of 10 years from the date of commencement of the commercial production or for a period of 13 years from the date of grant of approval from the RBI. Accordingly, the royalty was payable for the period between financial year 1999-2000 to financial year 2008-09. So far as the benefit derived to the assessee under the royalty agreement following facts was stated:- i) Access to latest technology in relation to manufacture of auto-catalysts in accordance with the latest emission norms prescribed in the relevant country; ii) Automatic right to receive updates relating to the technology of manufacture and related processes for auto-catalysts business; iii) Training of employees of the appellant in relation to the use of equipment and technology provided by JMUK; iv) Right to use the world renowned and established brand name "Johnson Matthey" in order to sell its products; It was submitted that entire business of the assessee was dependent upon its collaboration with JM UK due to supply of techno....
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....om independent third parties, assessee had to make the payments. It was reiterated that arms ALP analysis has been carried out by the assessee by selecting TNMM as a most appropriate method and in respect of all the international transactions; and accordingly, TP report demonstrating the entire transaction under TP analysis and why aggregation has been done should be accepted. Regarding nature and performance of the intra group services, following submissions have been made, which for the sake of understanding of facts and the nature of such services the same are reproduced hereunder :- The details regarding the various Intra Group Services received by the appellant from its associated enterprises is provided hereunder:- Payment of Sales Commission Rs. 1,08,48,310/-: The appellant had entered into an agreement dated March 16, 2004, with its associated enterprise (viz. JMJ)) a copy of which is enclosed herewith as Annexure 10. In accordance with the terms of the said agreement, JMJ is required to provide following services to the appellant: * Marketing and liaison services with Japanese customers in respect of sales by the appellant to all Japanes....
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....Matthey Group. The Asian region head quarter of Johnson Matthey Group was located at Malaysia. The said headquarter was managed by the personnel appointed by Johnson Matthey group and deputed at headquarter. During the year under consideration, the following were deputed at headquarter to manage the Asia region: * Managing Director - Asian Region * Finance Director - Asian Region * Sales Director - Asian Region * Common Secretary to Managing Director/Finance Director & Sales Director of Asia Region. The salary of these employees and other expenditure incurred on these employees was allocated to the group companies located in Asia region i.e. India, Japan, China and Malaysia. The basis for allocation of the expenses incurred to manage Asia region is the net revenue of respective countries located in Asia region i.e. the allocation of expense is based on the ratio of figures arrived at after reducing from the turnover of each country the cost of the raw material imported. With respect to the above mentioned cost allocation arrangement, it is submitted that such arrangements are required in order to have the benef....
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....eys. Thus, the argument of the Ld. TPO that the appellant has not derived any benefit from the Intra Group Services received from its associated enterprises is wholly incorrect and unsustainable. In this regard, it is further important to note that the Ld. TPO has completely lost sight of the business model and the nature of Intra Group Services availed by the appellant. The services provided by the associated enterprises (such as marketing, testing, server support, personnel support etc.) by their very nature are intangible. Thus, it is not possible to provide for proof regarding the receipt of such services. Further, the appellant has duly submitted before the Ld. TPO, copies of the agreements between the appellant and its associated enterprises along with copies of Invoices / debit notes raised by the associated enterprises in respect of such services. Therefore, considering the nature of services provided by the associated enterprises, the supporting documents submitted before the Ld. TPO should constitute sufficient evidence of receipt of such services by the appellant. Thus, considering the facts and circumstances of the case, the argument of the Ld....
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....egion. For this purpose, a server owned by an independent vendor has been set up in Chennai. The cost of operating and maintaining the server is being incurred by JMM which is subsequently recovered from the group entities located in the region i.e. India, Japan, China and Malaysia equally. However, the appellant has failed to demonstrate as to how the setting up a server in Chennai by an independent vendor has benefitted the appellant." 12. Ld. CIT (A) also referred to the following judgments of the Tribunal: - i) Gemplus India Pvt. Ltd. vs. ACIT in ITA No. 352/Bang/2009 A.Y. 2003-04; ii) Knorr-Bremse India Pvt. Ltd. vs. CIT (2012) 27 Taxmann. com 16 (Delhi). 13. Thus, so far as the transfer pricing adjustment is concerned, the Ld. CIT (A) deleted the adjustment made on account of royalty but confirmed the adjustment on account of intra group services. 14. Now coming to the issue of treating the sales tax subsidy of Rs. 2,41,93,000/- as revenue receipt taxable u/s 28(4) of the Act, the AO noted that sales tax subsidy was granted by the Haryana Government for the purpose of promoting investment in certain areas in Haryana and during the year assessee has claimed deduction ....
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....39;assessee is eligible and this cannot give it the colour of capital receipt. The treatment of a receipt as revenue or capital has to be seen with reference to the actual application being made by the recipient and not by any particular terminology used to describe the amount." 15. After relying upon the judgment of Hon'ble Supreme Court in the case of Sahney Steel and Press Works Ltd. vs. CIT (1997) 228 ITR 253 held that subsidy is to be treated as revenue receipt. Before the Ld. CIT(A), detailed submissions have been made and reliance was placed on catena of decisions including that of the Supreme Court in the case of CIT vs. Ponni Sugar & Chemicals Ltd. reported in (2008) 306 ITR 392 (SC). 16. The Ld. CIT(A), relying upon the judgment of Hon'ble P & H High Court in the case of CIT vs. Abhishek Industries Ltd. (2006) 156 taxman 257, upheld the action of the AO and held that subsidy has rightly been treated as revenue receipt. 17. Before us Ld. Counsel for the assessee, first of all submitted that so far as the issue of sales tax subsidy is concerned, whether it is revenue receipt of capital in nature, same has already been decided in favour of the assessee by the Tribun....
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....w and the principles laid down on the grant of subsidy. Ld. CIT (DR) further submitted that if there is any subsequent judgment of Hon'ble Delhi High Court and if it has taken a different view, then the judgment of the High Court in the case of assessee cannot be relied upon. In fact, he pointed out that there are two judgments of Hon'ble Delhi High Court which are in the favour of the revenue on this point, one is, CIT vs. Bhushan Steel (supra) and other one is CIT vs. Bougainvillea Multiplex Entertainment Centre Pvt. Ltd. 373 ITR 14. Thus, the latest judgements should be followed. Accordingly, he submitted that this issue has to be decided in favour of the revenue. 19. In the rejoinder, the Ld. Counsel for the assessee pointed out that, now the Hon'ble Supreme Court has stayed the operation of the order of the Hon'ble Delhi High Court in the case of Bhushan Steel in SLP No. 307832/2017, vide Oder dated 20.11.2017 and therefore, the said judgment does not have any binding precedent. When in assessee's own case in the immediate preceding assessment year there is a judgment of Hon'ble Delhi High Court in the case of the same subsidy which has attained finality, then same needs to....
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....l position under the transfer pricing law, which envisages that identification of comparable data is mandatory to benchmark the ALP. In support of, he relied upon the following judgments to canvass that 'intra group services' and 'royalty' cannot be determined at nil:- i) CIT v. EKL Appliances Ltd, [2012] 345 ITR 241 (Delhi) ii) SC Enviro Agro India Ltd. v. DC1T, [2013] 143 ITD 195 (Mumbai - Trib) iii) McCann Erickson India P. Ltd. v. ACIT, 20 I 2-TlI-59-ITAT-DEL-TP, 24 Taxman 21. 22. Lastly, he submitted that benefit test is not a prescribed method for which he referred to the judgment of Hon'ble Delhi High Court in the case of Sony Ericson Mobile Communications India (P) Ltd. vs. CIT(2015) 374 ITR 118; and CIT vs. Cushman and Wakefield (India) (P.) Ltd. (2014) 46 taxmann.com 317 and other decisions. 23. On the issue of various components of intra group payments, assessee has given following submissions and reference to corresponding documents to substantiate the payment:- S. No. Payment Nature of payments Benefits derived by the appellant Relevant Documents a. Sales commission JAPAN Paid to Johnson Matthey Japan ("JM Jap....
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....change in facts and circumstances of the case. In the absence of such payment, appellant would not be able to access the centralised system set up for the Asia region, which serves as a common e-mail and communication platform for Group entities. Considering the codependence between Group entities, lack of access to such system would be prejudicial. Additionally, if the appellant were to appoint an independent entity, it would have incurred significant costs. Affidavit by Johnson Matthey Hong Kong in respect of server charges - pg. 567 of the paper book for AY 2008-09 (Vol. II) c. SAP Maintenance charges (only for AY 2007-08) Paid to JM Malaysia ("JMM") for costs on SAP Program for the Asia region. An independent third party was appointed for this purpose and copies of invoices raised by such independent party were submitted before lower authorities. Cost was allocated among JM Asia entities, and such arrangement was more cost effective. The Asian region head quarter of the Johnson Matthey Group located in Malaysia implemented the SAP Program for the Asian Region. For this purpose, a server owned by an independent vendor was set up in Chennai. The cost of operatin....
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....s to JM Brussels for testing of sample catalysts for their conformity with the evolving environmental standards. CIT (A) deleted transfer pricing additions in respect of testing charges and Revenue has not filed an appeal on this issue before the Hon'ble Tribunal. 24. On the other hand Ld. CIT (DR) on the both the issue of 'royalty' and 'intra group services', submitted that the arguments of the Ld. Counsel that both cannot be analysed in isolation but same have to be aggregated, cannot be accepted in view of the decision of the Tribunal in the case of Gruner India (P.) Ltd. vs. DIT (2017) 77 taxmann.com 311 (Delhi), wherein the Tribunal after detailed discussion of the various provision of the law and also the judgment of Hon'ble jurisdictional High Court in the case of Sony Ericsson Mobile Communication India (P) Ltd. and other judgments have laid down that segregation of international transaction of payment of royalty and fees for technical services is justified as these are not linked with import of raw material etc. Thus, he submitted that royalty cannot be aggregated with other transactions because it is a separate and distinct transaction having a separate agreement for w....
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....Iran to whom the auto catalysts were exported. The claim of the assessee of the said export thus not verified. Just raising of the invoice to its AE Le ECT Royston (as per invoice raised) does not prove the service being passed on to the assessee. In absence of any evidence of such export to unknown Iranian customers to whom the auto catalyst were exported the same is liable to be disallowed. b. Server Charges: Paid to JM Hong Kong for maintaining a centralized server for the Asia region which serves as a common email and communication platform. Cost was allocated among JM Asia entities and such arrange are more cost effective. This too is liable to be disallowed as the assessee has failed to show that any service has actually been passed to it. c. SAP Maintenance: Paid to JM Malaysia for cost on SAP Program for Asia region. An independent third party was appointed for this purpose. For this purpose a server owned by an independent vendor was set up in Chennai. The cost of operating and maintaining the server was incurred by JM Malaysia which was subsequently recovered from group entities located in the region. The assessee has not explained the business rational ....
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.... JM India or in its capacity as shareholder in absence of any tangible benefit accruing to the assessee. The assessee has failed to corroborate with facts the benefit that has accrued to the assessee. Also the same set of functions performed by these same four people for other group entities in India Japan China and Malaysia indicates these activities being performed in capacity as shareholder. In this regard reference is made to the OECD Guidelines 2010 Chapter VII para 7.9 7.9 A more complex analysis is necessary where an associated enterprise undertakes activities that relate to more than one member of the group or to the group as a whole. In a narrow range of such cases, an intragroup activity may be performed relating to group members even though those group members do not need the activity (and would not be willing to pay for it were they independent enterprises). Such an activity would be one that a group member (usually the parent company or a regional holding company) performs solely because of its ownership interest in one or more other group members, i.e. in its capacity as shareholder. This type of activity would not justify a charge to the recipient companies.....
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....ussed above. First of all, we shall deal with the issue of 'sales tax subsidy' amounting to Rs. 2,42,93,000/- which has been taxed as revenue receipt. Before us, Ld. Counsel had pointed out that on similar subsidy issue, matter had been decided in the favour of the assessee by the Tribunal in assessment year 2006-07, which has been affirmed by the Hon'ble Delhi High Court in Revenue's appeal in a very elaborate and speaking order, vide judgment dated 13.3.2015, wherein the Hon'ble High Court after relying upon the judgment of Hon'ble Supreme Court in the case of CIT vs. Ponni Sugar and Chemicals (306 ITR 392) had held that the amount of subsidy is a capital receipt and thus, issue stands settled in favour of the assessee. Thus, on same sales tax subsidy which is a subject matter of issue in this year also, no different view can be taken. On the other hand the case of the Ld. CIT (DR) is that, post the judgment of the Hon'ble High Court in the case of the assessee, there is another decision of Hon'ble Delhi High Court in the case of CIT vs. Bhushan Steels (supra) wherein the Hon'ble High Court on similar type of scheme of UP Government had decided in favour of the Department holding....
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....ls Ltd. - reported as 306 ITR 392. The Revenue is, therefore, in appeal. At the outset, it is urged that the State had by order dated 07.06.2007 withdrawn the sales tax exemption, i.e. subsidy scheme and this was an important factor which should be taken note of. In response, the Revenue places on record a copy of the decision of the Punjab and Haryana High Court dated 27.11.2007 in CWP 12075/2007 Johnson Matthey India Pvt. Ltd v. State of Haryana and Ors. where even while holding that the withdrawal of subsidy was justified, the State of Haryana was directed to reconsider the matter. Urging that this decision stands even though the Supreme Court subsequently remitted the matter to the High Court which in turn confirmed its previous opinion and required consideration of the matter by the State Government, the Revenue urges that in the present case, the sales tax subsidy independently too cannot be treated as capital receipt but should be brought to tax as proposed by the AO. Learned counsel heavily relied upon Sahney Steel (supra), particularly the observations and judgment, referring to certain High Court decisions where subsidy schemes of different State governm....
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....n Steels (supra) has been stayed by the Hon'ble Supreme Court in SLP No. 30728- 30732/2017 vide judgment dated 20.11.2017. Whence judgment of Bhushan Steels has been stayed, then the said judgment cannot have a binding precedence especially when there is already a judgment in favour of the assessee by the same High Court in the case of the assessee itself against which no SLP has been filed and that judgment has attained finality. Thus, without entering into the semantics as to whether the subsequent order of the Tribunal in the case of Maruti Suzuki (supra) which in turn has relied upon the ratio laid down by the Hon'ble jurisdictional High Court in the case of Bhushan Steel will have pervasive value, we hold that the binding precedent of judgment of Hon'ble High Court in the case of assessee will hold; and accordingly, the sales tax subsidy amounting to Rs. 2,41,93,000/- is to be treated as capital receipt not chargeable to tax. Thus, ground No. 6 raised by the assessee is allowed. 29. Now coming to the issue whether the payment of 'royalty' should be benchmarked separately or the said transaction should be aggregated at entity level under TNMM and get subsumed in the PLI / ov....
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.... royalty has been paid to the AE is a separate transaction all together and it is neither linked or intertwined or interconnected with any other transactions. The assessee has carried out separate transactions for the import of raw material and for the provision of services with its AEs under various head of 'intra group services'. The 'royalty' paid is neither linked with the payment of import of raw material, nor with the intra group services or export of goods to AE or any other transactions highlighted above. The transaction of 'royalty' is exclusive of any other transactions. The question of aggregation of all the transactions are only desirable if the nature of transactions taken as a whole are so interrelated and interconnected that each transaction loses his character of being separately benchmarked so as to give proper arm's length price for the controlled transactions. When separate transactions are so intertwined and linked that it is impossible to evaluate on separate basis, then aggregation will get the desired result of ALP consideration. On the other hand, if the transactions are clubbed which by themselves are separate and distinct, then determining the arm's length....
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....goods and/or provision of services as separate transactions." 31. Again the issue of aggregation had come up for consideration before the Hon'ble Jurisdictional High Court in the case of Magneti Marelli Powertrain India (P) Ltd. vs. DCIT, judgment dated 25.1.2016 reported in (2016) 75 taxmann.com). In this case the precise question of law which was required to be answered by their Lordships was as under:- "1. Whether the Income Tax Appellate Tribunal was right in holding that royalty and technical assistance fee did not form part of a composite transaction and have to be treated as two separate transactions for the purpose of benchmarking and computing arm's length price?" The Hon'ble Court after referring to the judgment of Sony Ericsson Mobile Communications India (P) Ltd. and judgment of Denso India Ltd. vs. CIT (2016) 240 taxman 713, answered the question against the assessee. Though while answering the second question which was that, whether Tribunal was justified in holding that TNMM should be applied for benchmarking the transaction relating to technical assistance fee, the Hon'ble Court held that if the TPO had accepted TNMM as a most appropriate method then ....
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.... with the other transactions and needs to be benchmarked under TNMM. 34. Now coming to the issue as to whether the payment of royalty should be taken as 'Nil' as done by the TPO on the ground that no benefit has arisen to the assessee on payment of such royalty. The case of the revenue is that no cost benefit analysis has been done by the assessee and how the benefit has derived from such a payment of royalty to its AE. The assessee company is into manufacturing of specialised catalysts using technology provided by its AE which are used in automotive industry. One of the key drivers in such specialised automotive components industry is quality and technology brand name etc. Assessee has shown total turnover of Rs. 189.2 crores from sale of said components. The entire component has been manufactured by the assessee after using the trade name and patent of its AE and license to produce the patented products and host of other technical information. If assessee has used a trade name, licences and technical information for carrying out its manufacturing unit, at the outset it cannot be held that no benefit has derived to the assessee by entering into TCA with AE. In fact the entire e....
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....curred by him was also incurred out of necessity. It is also not necessary for the assessee to show that any expenditure incurred by him for the purpose of business carried on by him has actually resulted in profit or income either in the same year or in any of the subsequent years. The only condition is that the expenditure should have been incurred "wholly and exclusively" for the purpose of business and nothing more. It is this principle that inter alia finds expression in the OECD guidelines, in the paragraphs which we have quoted above. 22. Even Rule 10B (1) (a) does not authorise disallowance of any expenditure on the ground that it was not necessary or prudent for the assessee to have incurred the same or that In the view of the Revenue the expenditure was un-remunerative or that In view of the continued losses suffered by the assessee In his business, he could have fared better had he not incurred such expenditure. These are irrelevant considerations for the purpose of Rule 10B. Whether or not to enter into the transaction is for the assessee to decide. The quantum of expenditure can no doubt be examined by the TPO as per law but in judging the allowability thereof....
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....that the payment of royalty cannot be determined at 'NIL'. 37. Now coming to the issue whether any adjustment can be made on the facts of the present case or not. Ld. CIT (A) has deleted the adjustment made on account of royalty on the ground that, firstly, ITAT Delhi Bench in the case of Lumax Industries Ltd. has accepted the royalty rate of 5% to 8% of net sales; and secondly, RBI/FIPB approval on the rate fixed by the RBI in the case of 'royalty' should be taken for the purpose of arm's length analysis, because, it has huge pervasive value and for coming to this conclusion, he again referred to certain decisions, cited in his order. 38. Under the Transfer Pricing regulations as appearing in Chapter X under the Income Tax Act as well as in Rule 10B, it is imperative that an international transaction has to be benchmarked by using appropriate method as prescribed under the rules. A judgment or the decision of a Tribunal rendered on particular facts of the case, whereby a certain broad range of ALP has been given, then same cannot be followed in a blanket manner in all the cases, as benchmarking has to be done for the relevant financial year using a data for identifying compa....
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....into such transactions, which could materially affect the price in the open market; (iii) the adjusted price arrived at under sub-clause (ii) is taken to be an arm's length price in respect of the property transferred or services provided in the international transaction;" 40. The mandate of CUP method is the price charged or paid for the services provided in comparable uncontrolled transaction and its adjusted price paid for availing services which constitutes the benchmark for comparison with price paid for availing of any services in an international transaction. If the price paid for availing the service in a comparable uncontrolled transaction is compared with price paid in an international transaction, then it is reckoned to be at ALP. Since, there is no internal CUP, i.e., there is no similar payment of 'royalty' to an independent third party, therefore, it would be desirable that external CUP is to be applied. Here in this case neither the assessee nor the AO has searched for any external CUP; and therefore, we deem fit that the issue of benchmarking of 'royalty' payment should be remanded back to the file of the AO/TPO to benchmark 'royalty' payment separat....
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....een made. Ld. CIT (A) too has confirmed the finding of the TPO. The nature of "intra group services", benefit derived by the assessee, the relevant documents for these services, has already been summarised and incorporated above. 43. To examine the "intra group services" under the arm's length principle, it has to be seen vis-à-vis the activity provided by the respective group member with economic and commercial value to enhance its commercial position; and whether an independent enterprise in a comparable uncontrolled circumstances would have been willing to pay for the activities to perform by any independent enterprise or would have perform the activity by itself. If such an independent enterprise is not willing to perform for by itself or for the others, then such an activity ordinarily should not be considered as "intra group services" under the arm's length principle. One needs to identify the arrangements between the related parties and whether any tangible services have been provided which can be easily identified. Often cost allocation and apportionment methods which has some degree of remote approximation can be taken as a basis for calculating arm's length char....
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....ise with Suzuki Motor Corporation and also to market the products manufactured by the assessee in Japan and for procuring the orders for rendering of services, assessee has to pay JM Japan, fee @ 40% per month by the assessee to its Japanese customers. During the course of hearing, we specifically require the Ld. Counsel to show as to whether any service has been rendered by the AE JM Japan to any Japanese customer or there is any kind of evidence to show that these services have been rendered for any customer in Japan. However, neither before us nor before the authorities below any such evidence has been filed. Except for the agreement nothing is borne out from the records that AE Japan has carried out any such services to assessee or has assisted or benefited assessee in getting the orders for any customer in Japan and the basis for which the fee has been calculated. The Ld. Counsel also could not brought on record as to when the product manufactured by the assessee in India have been sold to any independent customers in Japan for which it has to carry out any marketing and liaisioning services and other inputs required from Japanese customers. In absence of any such details it c....
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....server is incurred by JM Malaysia which is subsequently recovered from the group entities located in India, Japan, China and Malaysia in equal proportion. In support the assessee has placed copies of invoices and debit notes raised by the JMM by independent vendor in respect of SAP maintenance charges. A detailed explanation has been given by the assessee in this regard which we have already incorporated in the earlier part of the order. There is no rebuttal by the Revenue or anything contrary has been brought on record that payment of SAP maintenance charges have not been equally allocated to various group entities and the assessee has been allocated/ loaded with extra expenses or the invoices and debit notes are non-genuine. Such SAP maintenance charges is linked with carrying out the business activities in a smooth and efficient manner and also to maintain quality standard uniformly all across the JM Group for uniform use of system of accounting, administration, marketing, sales, etc. Thus, this payment being a part of the operating cost has to be aggregated under the TNMM. Here in this case it is not in dispute that, assessee's profit margin vis-à-vis the comparables und....
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....ed in all years - JMIPL found to have derived significant benefits Revenue has challenged this before ITAT for all three years 2. Payment for intra group services a. Testing charges TPO accepted payment to be at ALP - no addition 15,58,390 6,56,878 Addition deleted in both the years - JMIPL found to have derived significant benefits Revenue has NOT challenged this before ITAT b. Sales commission 1,08,48,310 (To JM Japan) No payment to JMUK 1,34,90,396 (To JM Japan) No payment to JMUK 1,46,66,704 (To JM Japan) 52,78,522 (To JM UK) Addition sustained Addition sustained JMIPL has challenged this before ITAT c. Server charges TPO accepted payment to be at ALP - no addition 8,28,530 8,44,175 Addition sustained JMIPL has challenged this before ITAT d. SAP Maintenance charges 27,12,007 Cost not incurred Cost not incurred Addition sustained JMIPL has challenged this before ITAT e. Cost sharing charges 73,36,991 51,34,032 1,14,99,776 1,78,96,168 (Capitalised SAP ERP System cost) 3,60,845 (Double disallowance) Addition sustained Addition sustained Deleted JMIPL has challenged thi....