2018 (5) TMI 953

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.... that the assessee company is a company incorporated under the Companies Act, 1956 and is a wholly owned subsidiary of TP USA Inc. The assessee, during the year under consideration, was engaged in the business of providing voice-based call centre services on behalf of US clients to the customers in USA. The return of income was filed declaring Nil income after claiming set off of brought forward losses of Rs. 46,19,840/- under normal provisions of the Income Tax Act, 1961 (hereinafter referred to as "the Act") and book profit of Rs. 4,16,46,936/- u/s 115JB of the Act. 2.1 During the relevant previous year, the assessee had entered into the following international transactions with the Associated Enterprises (AE):- i) Payment of royalty to M/s TP USA - Rs. 90,38,675/- by using TNMM method ii) Provision of Information Technology Enabled and related Services {ITES} (both outbound and inbound) to the customers/clients in USA - Rs. 44,72,17,544/- by using TNMM method. 2.2 In the transfer pricing documentation, the assessee determined Arm's Length Price (ALP) of the international transaction of provision of ITES services and payment of royalty by applying TNMM by ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....een derived from the assessee from the payment of such royalty expenses. 2.4 Aggrieved, the assessee approached the Hon'ble DRP. The Hon'ble DRP, however, did not accept the assessee's objection regarding adjustment of abnormal cost of Rs. 1,34,28,691/- on account of rent relating to unutilized capacity. In respect of foreign exchange fluctuation loss, the Hon'ble DRP directed the TPO to exclude the abnormal cost while calculating the profit level indicator of the assessee as well as the comparables. In respect of royalty, the Hon'ble DRP upheld the order of the TPO in determining the ALP of the royalty paid at Nil. 2.5 Now, the assessee has approached the ITAT and has challenged the final assessment order passed subsequent to the directions of the Hon'ble DRP. 3. At the outset, the Ld. AR submitted that ground nos. 2, 3 and 17 were the grounds which would be argued first and if these grounds were adjudicated in favour of the assessee, the other grounds would become academic in nature. 3.1 The Ld. AR submitted that ground no. 3 challenging the denial of adjustment of abnormal cost of Rs. 1,34,28,691/- on account of rent and other maintenance expenditure relating to unut....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....in of the comparable company at 21.90%. 3.2 With respect to ground no. 17 pertaining to royalty, Ld. AR submitted that the assessee had filed application for admission of additional evidence in terms of Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963 to further substantiate its claim regarding its ALP not being treated as nil. It was submitted that the assessee is challenging the action of the Hon'ble DRP/Assessing Officer in holding that in terms of intangible and proprietary property as well as agreement dated 2.1.2002 entered into by the assessee with the AE, royalty was required to be paid only on proportionate sales made to third parties. Ld. AR submitted that by moving the application for admission of additional evidence, the assessee seeks to place on record Addendum to Intangible and Proprietary property and Licensing Agreement as additional evidence. It was submitted that this Addendum was effective from 2.1.2002 and it sets out the understanding between the parties and the actual conduct of business as undertaken between them. It was submitted that this Addendum was being sought to be placed for the first time before the Tribunal as additional evidence and t....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....t the only effective ground in this appeal was pertaining to royalty and in support of this ground, in this year also, the assessee was seeking admission of additional evidence in terms of Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963. It was submitted that for this year also, the assessee was seeking to place on record the Addendum dated 2.1.2002 in support of the assessee's arguments regarding royalty. The Ld. AR also submitted that the arguments on this issue in assessment year 2009-10 were identical to the arguments and pleadings as made by him for assessment year 2008-09. 6. In response, the Ld. CIT DR opposed the assessee's application for admission of additional evidence. It was vehemently argued that this Addendum to the agreement which the assessee was seeking to file at this stage was dated 2002 and, therefore, there was no justifiable reason for the assessee to have not filed the same before the lower authorities during the course of proceedings before them. Ld. CIT DR also placed reliance on the findings of the lower authorities in respect of royalty. 7. We have heard the rival submissions and perused the material available on record. As far as the is....