TaxTMI 
TaxTMI 
TaxTMI 
2019 (2) TMI 351
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....9;s length principle envisaged under the Income-tax Act, 1961 ('the Act'). The Appellant prays that the addition pertaining to payment for commission ought to be deleted. Ground No.2 2. On the facts and in the circumstances of the case, and in law, the Hon'ble DRP/Ld. AO, erred in rejecting the economic analysis conducted by the Appellant for demonstrating the arm's length nature of the commission paid to Associated Enterprises ('AEs'). The Appellant prays that the economic analysis conducted by the Appellant ought to be upheld. Ground No.3 3. On the facts and in the circumstances of the case, and in law, the Hon'ble DRP/Ld. AO, erred in re-computing the Arm's Length Price ('ALP') of the Appellant's international transaction pertaining to payment of commission to AE at 'Nil'. The Appellant prays that the said re-computation ought to be deleted. Ground No.4 4. On the facts and in the circumstances of the case, and in law, the Hon'ble DRP/Ld.AO, erred in contravening the principle of consistency in connection with determining the ALP of the Appellant's international transaction pertaining to payment of commis....
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....and amounting to Rs. 4,30,886. The Appellant prays that the addition pertaining to amortization of premium on leasehold land ought to be deleted and should be allowed as revenue expenditure. Ground No. 10 10. On the facts and in the circumstances of the case, and in law, the Hon'ble DRP/Ld.AO, has erred in disallowing the provision for expenditure of Rs. 38,93,287 in respect of provision under Bhavishya Kalyan Yojana (,BKY'), an employee welfare scheme. The Appellant prays that deduction in respect of the provision made for BKY expenses should be allowed as an ascertained liability. Ground No. 11 11. On the facts and in the circumstances of the case, and in law, the Hon'ble DRP/Ld. AO, has erred in invoking Rule 80 of the Income-tax Rules,1962 and thereby disallowing expenses amounting to Rs. 86,73,524 under section 14A by applying Rule 80 of the Act. The Appellant prays that addition made under Section 14A of the Act by applying Rule 80 should be deleted as the Appellant has suo-moto disallowed expenses of Rs. 17,43,743 directly attributable to the exempt income. Ground No. 12 12. On the facts and in the circumstances of the case and in law, the Hon&#....
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.... support services. TTPL has assisted the assessee in securing favourable terms from Dassault Systems U.K for procuring the software, in terms of the discounts received from Dassault is in the range of 20% to 35%. It is not that the TTPL is only procuring and providing marketing support services to assessee but to other third party also who are based outside Singapore and from them TTPL is charting higher rate of commission i.e. @15% of the sales whereas from the assessee TTPL is charging @6% of sales as commission. The assessee is also paying commission to third parties @ 6.5% and @7%. The assessee has entered into commission agreement with TTPL which operates as a centralized entity for provision of procurement and marketing support services to Tata Technologies Group for provision of procurement and marketing support services. Pursuant to the agreement, TTPL has rendered procurement and marketing support services which included the following activities: i) Assistance in procuring software at competitive prices and maintenance of vendor relationship. ii) Global Customer relationship iii) Lead Generation iv) After Sales support. These functions undertaken by the TTPL enabl....
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....ceived by the assessee and therefore, arm's length commission paid is 'Nil'. 7. At the time of hearing, the Ld. AR of the assessee first and foremost invited our attention to page 236 of the paper book wherein the commission agreement is there between the assessee and TTPL. That on the basis of the commission agreement, the Ld. AR demonstrated that there was an importance of service which was required by the TTPL to be rendered to the assessee in order to facilitate procurement of software licenses from Dassault UK in Singapore. This commission agreement demonstrated that TTPL has to look into over all transaction essentially maintenance of customer relation with the assessee and Dassault UK and also to provide discount for the same purchase from Dassault UK. The entire price negotiation and the final price of charge and everything is as per negotiation of assessee and Dassault UK. TTPL is only handling the procedure so that discount could be availed from Dasault UK and also to look into smooth functioning of the transaction. There are specific activities which the TTPL has to perform which is given in the said agreement. The commission was earlier fixed @ 4.25% which at the relev....
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....see by TTPL with respect to purchases made from Dassault UK. Therefore, comparables commission demonstrated by the Ld. AR of the assessee should not to be relied upon. 10. We have perused the case records and heard the rival contentions and analyzed the facts and circumstances in this regard. The facts on record shows that there is a commission agreement dated 01.12.2007 between the assessee and TTPL. That on examining the clauses contained therein and after giving considerable thought on those clauses, it is crystal clear that TTPL was facilitating the purchases in respect of the assessee from Dassault UK. It was the responsibility of TTPL to undertake marketing efforts through telemarketing and inbound inquiries through its dedicated support. TTPL also worked towards maintenance of relationship with the key global customers of the assessee. The agreement also specifies that the said service through TTPL was at arm's length commission @6%. Before us, it is demonstrated by the Ld. AR through a series of emails exchanges between the assessee, TTPL and Dassault UK. This evidence demonstrates that purchases of software licenses were done by the assessee from Dassault UK and TTPL was....
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....ielding exempt- income is Rs. 147 crores, interest expenditure of Rs. 1.54 crores and that assessee has made self disallowance of Rs. 17.44 lakhs u/s 14A. On these facts, the TPO has noted that suo moto disallowance made in adequate and therefore, requested the assessee to explain why disallowance apply Rule 8D should not be made. After considering the submissions made, the AO has applied Rule 8D and computed the disallowance u/s 14A Rs. 1,04,17,267/-. 7.2 It is submitted that during the year under consideration, the assessee has earned a dividend income of Rs. 16,47,19,200 from various mutual funds. The same was exempt as per provision of Section 10(35) of the Act. 7.2.1 The assessee has made investments in various mutual funds units out of its own funds i.e. through its internal accruals, available surplus funds & funds available from Investment made by Private Equity Investors by purchasing Equity shares of INR 141,05,99,720 issued to private equity investors during the year. It has not borrowed any funds for the purpose of making the above investments. Further, it did not incur any specific expenditure to earn aforesaid exempt income. 7.2.2 The assessee submits that it ha....
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.... and circumstances of the present case and heard the contentions. However, with regard to the interest income part as contemplated under Rule 8D(ii) and with regard to the investment which yielded exempt income which are to be considered while calculating disallowance under Rule 8D(2)(iii). These aspects have to be verified in detailed. Therefore, we are of considered view that this issue is restored back to the file of Assessing Officer for verification and re-adjudication of the same after providing reasonable opportunity of hearing to the assessee. Accordingly, ground No.11 raised in appeal by the assessee is allowed for statistical purposes. 20. With regard to ground No.12, it pertains to the provision for written back for Mediclaim Insurance Scheme (Medicare) for employees not to be considered as taxable income. The Ld. DRP has held as follows: "8.1........In terms of the Service Rules of the assessee, the employees are entitled for Mediclaim InsuranceCoverage. for hospitalization (up to prescribed limit) after retirement and for reimbursement of medical expenses upto Rs. 600 annually as domiciliary medical expenses. The scheme extends the benefit to all retired employees a....
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....ccordingly, the order is upheld and the objection in this respect is rejected." 21. That Before us, at the time of hearing the Ld. AR of the assessee submitted that during this year, provision for Medicare expenses is written back in books of account and offered to tax in return of income. It is humbly submitted that the same should not be taxed by the Assessing Officer as it will lead to double disallowance in view of the fact that when such provision was created in earlier years, the same was disallowed by the AO in those years. 22. We have perused the case records in this regard and heard the rival contentions. We find that if in the earlier year, the Assessing Officer has already disallowed such provision for those years, then in the present year when the assessee has specifically offered this to tax in return of income, the same should not be taxed again by the Assessing Officer. Therefore, this issue needs to be verified. Accordingly, this matter is restored back to the file of Assessing Officer for verification and re-adjudication after following the principles of natural justice. The Assessing Officer shall grant reasonable opportunity of hearing to the assessee. Thus, gr....