TaxTMI 
TaxTMI 
2018 (5) TMI 1578
X X X X Extracts X X X X
X X X X Extracts X X X X
....e common issue urged in both the appeals relates to the Transfer Pricing adjustment made to the license fee paid by the assessee. The facts relating thereto are that the assessee is engaged in the business distribution of software developed by its parent company SAS Institute Inc, USA. The assessee paid 50% of the license fees collected by it as "royalty" to its parent company. The assessee adopted CUP method for benchmarking above said international transaction and for that purpose, it took the case of another distributor appointed in Israel as comparable. It was shown that the Israeli distribution has also paid 50% of license fees as royalty. The TPO did not accept CUP method and proceeded to determine arm's length price by using TNMM met....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ly distribution agreement of earlier years and did not furnish agreement relevant to the year under consideration. The Learned DR further submitted that distribution agreement provides for terms and condition for distribution, provision for various services and payment of royalty. Even though the assessee was providing different kind of services, it is necessary to adopt integrated approach for determining arm's length price as held by Hon'ble Punjab & Haryana High Court in the case of Knorr-Bremse India (P) Ltd vs. ACIT (2016) 380 ITR 307. Accordingly, the learned DR submitted that the issue may be restored to the file of the Assessing Officer/TPO for examining it afresh, as held by Coordinate Bench of Tribunal in assessee's own case f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssessee and the same is part of the submissions. But, either the Assessing Officer or the TPO/DRP is bothered to furnish the same. In fact, as seen from para 7.3 of the DRP order, the onus is kept on the assessee by mentioning that the assessee agreed for substituting the TNMM method as an appropriate method, which is not proper. Considering the above deficiencies, inaccurate and incompleteness, we are of the opinion the matter should be set aside to the file of the TPO/Assessing Officer for fresh adjudication of the above referred Ground Nos. 8,9 and 10. Assessing Officer/TPO shall grant a reasonable opportunity of being heard to the assessee as per the set principles of natural justice. In the set aside proceedings, the Assessing Officer/....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sallowance of Rs. 184.73 lakhs made u/s. 40(a)(ia) of the Act. The Assessing Officer noticed that the tax auditor has reported a sum of Rs. 375.83 lakhs as the amount disallowable u/s. 40(a) of the Act. The Assessing Officer noticed that the assessee has disallowed only Rs. 191.09 lakhs and did not disallow following amount paid to non-residents: Name of party Amount SAS Portugal 173.81 lakhs SAS Romania 3.12 lakhs SAS Institute Inc 7.80 lakhs 184.73 lakhs When questioned, the assessee submitted that the above said payments are in the nature of compensatory payments and they constitute business receipts in the hands of the recipient and hence the same is not taxable in India as they don't have permanent establishment, in ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....untant and in the said form it is clearly stated that the payments made to the foreign companies are in the nature of business receipts. Since the assessee has correctly reported nature of payment in Form No. 15CA & 15CB, which forms are specific forms given to report the details payments made to foreign companies, they should have more evidentiary value than the report of tax auditor. Accordingly the assessee submitted that the Assessing Officer was not correct in placing reliance on the tax audit report. 10. The Assessing Officer, however, took the view that the assessee has paid above said compensatory amount to non-resident in order to provide support services to the customers who use this software in their territory. Accordingly, the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... that on this ground also, the view taken by the Assessing Officer is liable to be rejected. 12. On the contrary, learned DR submitted that this issue may be set aside to the file of the Assessing Officer, since various contentions raised by the assessee were not examined by the Assessing Officer. 13. Having heard the rival submissions, we find merit in the contentions of the assessee. The assessee has made impugned payment to the foreign companies in the form of "compensatory payment" as per agreement entered by its parent company. Since the assessee has supplied software products beyond its territory, the business and profits of the foreign companies would get affected. In order to compensate the loss in business, the agreement provides....