TaxTMI 
TaxTMI 
2019 (1) TMI 107
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....keting operations in India after obtaining the approval of the Foreign Investment Promotion Board [FIPB] of the Government of India to undertake marketing and distribution of natural gas as well as LNG. 5. The assessment year under consideration was the first year of purchase and sale of LNG operations. The international transactions reported by the appellant company are as under: Sl. No Name of AE Nature of Transaction Value Method Adopted 1. BG LNG Trading LLC, USA Purchase of LNG 1,70,16,51,402 TNMM 2 BG Exploration and Production India Ltd., Cayman Islands, Project Office, India Receipt of support services 7,10,45,995 TNMM MSU charges 1,45,06,572 NA Reimbursement of expenses 11,30,776 NA 3 BG International Ltd. UK Reimbursement of expenses 32,43,124 NA 6. The international transactions mentioned hereinabove were accepted at Arm's length except Management Services Unit Charges [MSU] paid to the tune of Rs. 1,45,06,572/-. The TPO was of the opinion that TNMM cannot be used as the most appropriate method for bench marking the corporate intra group services and considere....
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....TP adjustment is required. 12. Per contra, the ld. DR strongly supported the findings of the DRP and reiterated that the MSU services are duplicative in nature. 13. We have carefully considered the orders of the authorities below and with the assistance of the ld. AR, we have considered the relevant documentary evidences brought on record in the form of Paper Book in light of Rule 18(6) of ITAT Rules. 14. It is true that the international transactions reported by the assessee have been accepted except for MSU charges amounting to Rs. 1,45,06,572/-. The same has not been accepted because the TPO/DRP were of the opinion that the payments for these services are duplicative and when the assessee has already paid for support services and the payments for which have been accepted by the TPO. 15. The agreement mentioned elsewhere explains the scope of work and in Article 2, it has been mentioned as under: "2.1 BGEPIL shall endeavour to provide the following services to BGIES (the "Services"): (a) assist BGIES to procure LNG and natural gas from International and domestic sellers. (b) assist BGIES to sell LNG and natural gas to various customers of BG....
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.... sales of LNG amounting to Rs. 2,27,37,88,338/- could not have been achieved without the aid of support staff and the same was provided by BGEPIL. Considering the facts in totality, Ground Nos. 2 to 4 taken together are allowed. 19. Ground No. 5 relates to the disallowance of the expenditure on account of time-writing charges amounting to Rs. 14 lakhs. 20. Facts relating to this issue are that during the year the assessee has debited Rs. 14,00,976/- to its profit and loss account under the head "other cost recharge". The assessee was asked to explain the same and vide reply dated 13.03.2014, the assessee explained that this debit is in the nature of provision for 'time writing charges' based on estimated time cost of employees of the assessee company's sister concern British Gas International Ltd. The assessee was further asked to explain the basis of making the said provision and to explain why TDS has not been deducted on the said provision. The assessee filed a detailed reply explaining that the said provision is based on the estimated time cost of employees of BGIL to be deployed for the purpose of business of the assessee. However, the same was reversed in April 2010. ....
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....eated in March 2009 based on 12,11,771 Total 14,00,976 27. As mentioned elsewhere, this is the first A.Y of the appellant company who is not an employee of its own. The invoice for the time writing charges were raised by BGIL on BGEPIL which were further allocated to the assessee. It would be pertinent to mention here that the amount received by BGIL from the assessee has already been taxed in India u/s 44BB of the Act and as mentioned elsewhere, taxes have been duly deducted from the payments made for the time writing charges to BGIL. Be that as it may, the time writing charges paid to BGIL cannot be termed as 'FTS" under the Act read with India UK DTAA. Article 13 of the India UK DTAA defines FTS as under: "4. For the purposes of paragraph 2 of this Article, and subject to paragraph 5, of this Article, the term "fees for technical services" means payments of any kind of any person in consideration for the rendering of any technical or consultancy services (including the provision of services of a technical or other personnel) which: (a) are ancillary and subsidiary to the application or enjoyment of the right, property or information for which a paym....